Quarterly report pursuant to Section 13 or 15(d)

Residual Contracts Disclosure

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Residual Contracts Disclosure
9 Months Ended
Sep. 30, 2018
Notes  
Residual Contracts Disclosure

NOTE 7 - RESIDUAL CONTRACTS

 

To raise immediate cash, in 2017, we sold our remaining merchant processing portfolio to a larger merchant processor (the “Purchaser”) at industry standard multiples. We were paid a percentage of the net revenues generated by each merchant. As with any type of portfolio, there is attrition, which can come from (1) the merchant processing fewer dollars in sales, or (2) the merchant closing its business (i.e. going out of business), or (3) the merchant taking its processing business to another ISO/processor. The sales agreement with the Purchaser allows zero attrition.

 

From July 2017 to January 2018, the average monthly residual was less than half of the valuation of the original guaranteed portfolio monthly residual. Any uncured shortfall of the guaranteed residual may be requested by the Purchaser. The Agreement also stipulated that we board a minimum number of Merchant Accounts per year for two years with the Purchaser. The Purchaser may demand that we pay them a specific amount for the number of unacquired Merchant Accounts below the Minimum Requirement per month. From July 1, 2017 to November 1, 2018 (17 months) Spindle has not boarded any merchants on the Purchaser’s platform, and it is likely that we may not board a merchant in the remaining 7 months. As of December 31, 2017, Management recorded a contingent liability of $171,312 as a potential return for consideration received and $126,000 for not boarding merchants, totaling $297,312.