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(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these investments.)

Spindle, Inc (OTCQB:SPDL) is three year old company that operates in the mobile commerce space offering payment solutions and a mobile marketing platform. Spindle is trying to capitalize on a developing space set to grow exponentially in the years to come. With an experienced management team, fantastic technology platform, patent protection, and share structure, should yield massive profits for investors.

Management

Spindle is led by a fantastic management team led by CEO Bill Clark, who has more than 20 years in the payment space. He was previously General Manager and Director at First Data Corp. Following First Data, Bill Clark was an Executive VP and GM for Apriva LLC, which grew to a leader in the space and $30M in annual revenues.

Tom Lineen EVP of Operations, who has 13+ years in the payment business with management positions at First Data, Authorize.Net and Cynergy Data. Mr. Lineen founded Parallel Solutions, which was acquired by Spindle in 2012.

Michael Stevens EVP of Marketing & Innovation, was the inventor and co-founder of MeNetwork, which was acquired by Spindle on March 8, 2013. He has 18+ years in the advertising space.

Business

Spindle, Inc is a provider of white-label mobile payment solutions for banks, financial institutions, and merchants. Spindle offers the first secure and scalable mobile payment solution that can be white-labeled to a customer's brand. Mobile payment transactions are projected to rise to $721B globally by 2017. As of August 2013 Spindle's approach has reached 20 countries, 6000 merchants, and 300,000+ mobile users. Spindle is well positioned to capitalize on the huge growth in mobile payments. Spindle generates its revenue by a fee they charge the merchants for the Spindle platform along with a transaction fee for every payment processed by the platform.

Spindle has developed relationships already with 8 channel partners, which Spindle customizes their mobile commerce solutions:

  • NCR
  • Slide
  • Zing Checkout
  • Utiba
  • Inspire Commerce
  • Elephant Talk (ETAK)
  • Forum mobile
  • Bancroft & Associates

With the acquisition of MeNetwork, Spindle can provide a mobile marketing solution for merchants, such as mobile coupons, merchant discovery, and loyalty rewards. MeNetwork can push content to Facebook (FB) & Twitter

The Bull Case

Spindle has generated over $700,000 in revenue through the first six months of 2013. I am estimating that revenue generated for FY2013 totals between $1.3-$1.6M. 2014 should be a banner year for Spindle, which I estimate FY2014 revenue to hit $6-$8M. The increase will be attributed to additional merchants adopting the Spindle solutions. Payment solution upgrades are usually not adopted during the holidays, as merchants are focused on processing a high volume of transactions. Bill Clark is set to present at a variety of conferences, which will increase brand exposure and eventually more merchants adopting the platform. The Spindle platform is cloud based, which is extremely cost effective as the system is highly scalable as merchant and transaction volume accelerates. It is a minimal cost to buy more server capacity. Spindle also should benefit to the consumer transition to LTE and LTE-A wireless services. The faster speeds and all IP network will facilitate more consumers that are able to use the Spindle platform along with receiving rich high quality offerings.

The company has been funding operations by selling stock in a private offering to accredited investors. I believe a small capital raise could be in the cards in the near term, which would benefit the company down the line. Heading into 2014 with revenues accelerating, I believe that Spindle will be cash flow positive sometime in Q2 or Q3 2014.

Share Structure

Spindle has avoided extremely dilutive financings and has raised capital in a private offering strictly of common stock to accredited investors. The share structure does not have toxic convertible notes or warrant overhead that is very common in development stage companies. The share structure is composed of the following as of 6/30/2013:

25,638,858 shares of common stock

250,000 warrants @ $1.00

2,265,000 options @ $.549

Total = 28,153,858, which represents a fully diluted value of roughly $20M.

Patent Portfolio

Spindle's platform is well protected with four issued patents, with the key patent being 5,822,737 Financial Transaction System. The patent has a priority date of 1996 and has been cited by 140 other financial patents. The patent portfolio grants the necessary protection as a defense in the competitive mobile payment space. I believe that Spindle will file additional continuation patents and brand new inventions in 2014 to further protect the Spindle and MeNetwork platform.

Acquisition Target

I believe that Spindle is a prime acquisition target as the mobile payment space becomes further consolidated. Braintree was just purchased by Ebay (EBAY) for $800M just last week. While I don't think Spindle will sell for $800M I could see it purchased for a nine figure number based on 8X 2014 revenue. This would be a fantastic reward for Spindle investors. My time frame for a potential deal is around 18-24 months if it was going to happen. Spindle's patent portfolio could be used as additional leverage in any such deal as it would be a prime asset in a larger entity.

Conclusion

Spindle will benefit from the adoption of consumers to mobile payments. Their scalable model should be a huge winner in the years to come. I believe that Spindle is an excellent and unique play in the mobile space and will provide fantastic shareholder returns as the mobile payment space blossoms.

Source: Massive Growth Potential In Spindle Inc

Additional disclosure: This article covers a micro-cap stock. Please be aware of the risks associated with these investments.