On December 31, 2021 Digerati (OTC:DTGI) bought the assets of Skynet Telecom LLC in an accretive deal expected to add $3.4 million to annual revenues and positive EBITDA. The acquisition price was $5.8 million and consisted of $4.1 million in cash (subject to a net working capital adjustment,) $1 million in restricted stock, a $600,000 earn out, and a $100,000 holdback. At a share price of $0.11, that would add 9.1 million shares to the primary share count. Shares are to be paid out on the earlier of (a) the effective date of its S-1 at the price set forth in the prospectus, or (b) 180 days after December 31, 2021 at a value of the average of the last transaction price on the OTCQB for each of the 10 trading days immediately preceding). The restricted stock will be locked up for 180 days. The cash portion of the deal was financed by the Post Road credit facility. At a purchase price of $5.8 million and expected revenues of $3.4 million, this puts the transaction at 1.7 times enterprise value to sales.
We expect Skynet’s financials should be filed and then the current S-1 amended with a capital raise and uplisting to follow. The subsequent uplisting would involve a reverse split of the stock at a ratio in a range of from 1 for 5 and up to 1 for 80 to reach compliance with NASDAQ’s minimum stock price and at that time the company plans to change its name to “Nexogy.” We expect both the acquisition and the deal to be accretive as the company plans to use proceeds to suppose the acquisition of Skynet making an addition to profits in excess of dilution.
Skynet is based in San Antonio, Texas and its acquisition increases Digerati’s customer base by 343 customers. Digerati now has a total of over 3,100 business customers and approximately 33,000 users.
We are raising our FY 2022 estimate to revenues of $17.6 million to reflect this acquisition equaling growth of 41% and keeping the net loss virtually the same until we see financials on Skynet. We are raising FY2023 estimated revenue to $20.6 million from $17.3 million showing growth of 17%.
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