Elephant Talk To Acquire The Assets Of U.S. Based Telnicity

Executing on its strategy to enter the United States telecommunications market, Elephant Talk Communications ETAK, an international provider of software and services developed to manage network, billing and systems infrastructure for the telecommunication industry and a market leader in providing solutions to counter electronic fraud for the financial services industry, today announced plans to acquire 100% of the assets of Telnicity, LLC, a U.S. MVNE/MVNO enabler company headquartered in Oklahoma City, Oklahoma in an all-equity transaction. According to the acquisition agreement between Elephant Talk and Telnicity, which is subject to certain closing conditions and based on the closing price of Elephant Talk stock on January 8, 2013, the transaction value is approximately $1 million, with Elephant Talk issuing 1 million shares of common stock at closing. The shares will be subject to a lock-up agreement restricting sale or disposition of the shares for 18 months. The terms of the acquisition agreement also provides for a bonus arrangement applicable when revenue minus cost of sales is in excess of $1.00 per customer per month and payable once the cash flow from the Telnicity business is sufficient to cover the payments. The transaction is expected to close on or before March 8, 2013. "We will work on a seamless and efficient global platform for MNO's, MVNE's, and MVNO's to operate by taking advantage of the technologies of both companies," said Steven van der Velden, Chairman and Chief Executive Officer of Elephant Talk Communications. "Telnicity's relationships with several North American based telecommunications companies provide a head start for the launch of Elephant Talk's services into the U.S. mobile telecommunication market. In addition, Telnicity's existing customer base will be able to leverage Elephant Talk's technology and telecommunications relationships to offer more complete international calling and roaming packages." According to the terms of the acquisition agreement, Elephant Talk will acquire all of the assets of Telnicity, LLC, a U.S. MVNE/MVNO enabler company including the company's existing customer contracts, carrier agreements, and access to telSPACE and mCASH, Telnicity's propriety turnkey back office infrastructure and billing systems. Telnicity's 6 full-time equivalent employees will remain in their current positions. "The all-equity transaction will result in less than 1% dilution to existing Elephant Talk stockholders while providing Elephant Talk a United States market presence. We believe an all stock transaction is an efficient and lower risk approach to entering this important market," stated Mr. Van der Velden. "As we work to bring the Elephant Talk operations to the U.S., we expect the financial impact to be limited for at least the first several quarters. Elephant Talk remains on track to achieve its first month of positive operational cash flow in early 2013." "Telnicity is a one-stop shop for outsourced solutions for any company in any industry to become a reseller of mobile communication services," said Dane Gasio, Founder and Chief Executive Officer of Telnicity. "Joining forces with Elephant Talk will allow the combined company to bring an expanded product offering to the U.S. market to be driven by a strong U.S. based management team with substantial in-market sales, marketing, and technology development experience. Elephant Talk will give Telnicity the depth and breadth of product offerings that allow it to be more competitive and attractive to larger U.S. companies." Upon the close of this transaction, Dane Gasio will become President of Elephant Talk North America and will report directly to Elephant Talk Chief Executive Officer Steven van der Velden. In this capacity, Mr. Gasio will work closely with Elephant Talk's global mobile telecommunications operations to build, further integrate, and maximize the value of this global telecommunications company.