Down but not out

Down but not out

Digiliti Money may have gotten knocked down, but it’s not out, writes Paybefore (Banking Technology‘s sister publication). And neither is a revised bid from prospective buyer Urban FT.

After Urban FT’s initial proposal to buy the company was rejected, Digiliti’s latest filing to the US Securities and Exchange Commission (SEC) reveals a credit facility from UFT Equities – Urban FT’s associated investment arm – of up to $8 million for the mobile technology provider. The bulk of the funds ($6.5 million) would only be available upon a successful merger with Urban FT.

“We anticipate closing a transaction involving Digiliti on or around 29 September,” Urban FT CEO Richard Steggall tells Paybefore. “Concurrently the two businesses are working towards an integration plan that will allow for a seamless merger of the two, provided closing takes place.”

Although Steggall says he’s not at liberty to discuss the values being applied to Digiliti or UFT for the proposed merger, he says Digiliti’s last stock trading price prior to its Nasdaq suspension ($1.05) represents a fair market value for the company.

The Nasdaq suspended trading after Digiliti postponed its Q2 earnings report following an internal investigation related to concerns raised by its former auditing firm.

The most recent 8K filing with the SEC says Digiliti issued a secured promissory note to UFT for a principal sum of up to $1.5 million. Steggall confirmed that $450,000 has been advanced to the company so far under the terms of the note. Subsequent draws may be made in equal portions of $350,000 each over a 90-day period subject to certain conditions. The proceeds will be used to pay mutually agreed upon expenses, according to the filing.

The promissory note also gives UFT Equities the ability to name an executive to the Digiliti board. Steggall says the company has selected Urban FT’s own chairman Cliff Mason for the role.

Once Digiliti appoints new auditors to complete an audit review of 2016 and 2017 earnings to date, Steggall anticipates that the stock will resume trading. He expects a new firm will be appointed later this week.

As previously reported, Urban FT, which provides digital banking technology, saw Digiliti as a prime acquisition target largely because of its partners, which provide cross-sell opportunities for Urban FT’s “lifestyle” mobile banking app features.