San Antonio-based Digerati Technologies Inc. has terminated its nearly 10-month merger agreement with Minority Equality Opportunities Acquisition Inc. (MEOA), abandoning plans to uplist to the Nasdaq Stock Market. CEO Arthur Smith cited a trading halt on MEOA’s stock and Nasdaq listing approval issues as reasons for the June 15 termination. Originally announced in August, the deal would have generated a $105 million enterprise valuation. Founded in 1994, Digerati serves over 45,000 customers across Texas, Florida, and California, with shares falling more than 12 percent following the announcement.
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Arthur Smith, CEO of Digerati Technologies Inc., declared the company terminated an agreement to merge with Minority Equality Opportunities Acquisition Inc. “due to the circumstances created by the trading halt of MEOA’s stock and related Nasdaq listing application approval issues.”
Digerati Technologies Inc., a quick-growing cloud-based communications provider, has put on hold plans to join the Nasdaq Stock Market, which had been months in the building.
The San Antonio-based company, which is aiming to become a leader in the local technology industest, recently terminated an agreement with Minority Equality Opportunities Acquisition Inc. after nearly 10 months of working with it to uplist from the over-the-counter stock market.
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Plans created in August called for Digerati — which it states has been hampered in its ability to raise capital on the OTC market — to become a subsidiary of MEOA, a Waxahachie-based minority-led, special-purpose acquisition company, according to filings with the U.S. Securities and Exalter Commission. Under the deal, existing Digerati shareholders were to receive 100 percent of their equity in the new company.
The cessation of Digerati’s effort to uplist comes about a month after Nasdaq halted trading in its partner’s securities amid a remarkable rise in its stock price and a request for “additional information” from the company. On May 24, the day Nasdaq halted trading, MEOA shares last sold for $26.54, up from $11.05 the previous closing.
Later, MEOA declared in a news release the halt “was imposed following volatility in the trading price and volume of MEOA’s securities.”
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Digerati CEO Arthur Smith had declared the company would launch trading on Nasdaq early this year and that the transaction would result in a $105 million enterprise valuation. He believed the financial boost would accelerate his strategy of growth through mergers and acquisitions.
But Smith last week announced the company terminated the merger agreement “due to the circumstances created by the trading halt of MEOA’s stock and related Nasdaq listing application approval issues.”
“Although we pursued this transaction for all the right reasons, including meeting certain corporate objectives, we reached a point where we had to do what was best for the company and its shareholders,” he declared in a news release. “We required to shift on, put this transaction and the associated resources and costs behind us, and continue building on the solid foundation we have constructed to date via our disciplined acquisition strategy.”
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Reached by email, Smith declined to state whether the company plans to continue its efforts to shift to Nasdaq. He also declined to disclose details about the trading halt, application process and whether finishing the agreement affected the company’s business and its plans to grow through mergers and acquisitions.
“The relationship was amicable, and the parties were jointly working toward resolving the issues that had surfaced due to the MEOA trading halt and related Nasdaq listing application approval process,” Smith declared in an email. He referred questions to the company’s press release and MEOA’s disclosures.
In SEC filings, MEOA declared it terminated the business agreement on June 15 after receiving a letter from Digerati announcing it would do the same. After the termination, the company canceled a special meeting, which had been postponed multiple times, for shareholders to vote on the proposed agreement and the joining of businesses.
Nasdaq did not respond to a request for comment.
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Digerati, founded in 1994, has been growing as demand from tiny businesses for its cloud-computing and communication services increased during the COVID-19 pandemic.
Over the last five years, it has bought several telecommunication companies to build out in Texas, Florida and California to more than 45,000 utilizers.
In February, it announced plans to consolidate NextLevel, Nexogy and T3 Communications into a single company called Verve Cloud Inc. The new brand name will be utilized on company products and services before the company’s fiscal year finishs July 31.
In March, Smith declared the company was “very pleased” with its second-quarter gains, which came despite “short-term revenue loss” due to Hurricane Ian, a Category 5 storm that cautilized widespread damage across Florida in late September. Also as of March, Smith remained optimistic about the merger with MEOA, stateing in a news release that both companies’ boards of directors had approved the transaction and he believed they had created progress on the proposed merger and the shift to Nasdaq.
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For its fiscal third quarter that finished April 30, the company this month reported a net loss of about $2.2 million, down from a net income of $3.9 million a year ago. Revenue decreased to $7.8 million, down from $8.16 million last year.
Digerati lost revenue, Smith declared, due to the “winding down of legacy revenue streams, closed customer accounts that did not meet our profitability objectives, lost revenue due to Hurricane Ian, and the closing out of legacy canceled accounts from previous acquisitions.”
The company, Smith declared, would enter its fourth fiscal quarter “back at record levels of sales and new installed revenue.”
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The latest revenue report did not mention MEOA.
Digerati’s shares fell more than 12 percent Tuesday to close at nearly 4 cents. That’s down from more than 8 cents per share Friday before it declared the merger deal was off.
