First Global Data (FGD.V) is a fin-tech enterprise focused on mobile payments and cross border remittances. Through its mobile app (VPayQwik), FGD.V enables electronic payments via numerous channels: Business to Customer (B2C), Business to Business (B2B), and Peer to Peer lending (P2P).
Coverage was initiated on May 3 with notes on May 10, June 15, September 20, December 17, and April 9, Since then, the following releases were issued.
Apr. 17 - Peter Lacey and Doug Smith resigned from the board. Audit Committee will have to be reconstituted (almost all board members). Revenue recognition issues with the company may not get all revenue as intended. As a result, the Company anticipates a delay in filing its audited Financial Statements The Board formally retained Miller Thomson LLP on April 16, 2018.
Apr. 24 - Reports Delay in Filing Financial Statements to June, 2018. The delay is due to a revenue recognition. The process for addressing such issue will include working with existing licensees to amend license agreements, where possible, to address revenue recognition concerns. FGD.V will seek a management cease trade order effective April 30, 2018 preventing all insiders of the Company from trading, directly or indirectly.
May 2 - IIROC Trading Halt
May 4 - Anticipates Cease Trade Order: Ontario Securities Commission (the "OSC") advised the Company that it will be issuing a failure-to-file cease trade order ("CTO") to the Company for the failure to file its annual audited consolidated financial statements and Management Discussion & Analysis for the Company's financial year ended December 31, 2017.
Once the CTO is revoked, the Company will be subject to a reinstatement to trade review by the TSX Venture Exchange. While the Company applied for a Management Cease Trade Order as announced in its news release of April 17, 2018, the OSC opted to exercise its discretion and not grant such order. The Company expects to file the 2017 Financial Disclosure within 90 days of the date of the CTO.
May 31 - Chairman and CEO provides update:
Cease Trade Order, Revenue Recognition and Late Filing of Financial Statements concern regarding recognition of revenue for its ISP licensing program ("ISPL Program"). sold licenses for use of its money remittance software, the proceeds of which were to be primarily used for its international mobile wallet deployments and business growth in key areas and markets.
FGD voluntarily suspend the ISPL Program until it could be amended and to halt the audit process so as to allow the Company to assess the impact of the revenue recognition concerns on its 2017 year end financial statements. FGD consider changing its auditor to a larger national firm and, given the anticipated delay in filing, to apply for a Management Cease Trade Order ("MCTO"). Management Cease Trade Order ("MCTO"). An MCTO is a voluntary request from the Company to submit its financial statements late, which can allow, depending on the precise terms of the order granted, certain of a company's shares to remain trading while financial disclosures remain outstanding.
Upon review, the Ontario Securities Commission chose to exercise its discretion to not grant the MCTO in favour of issuing a Failure-to-File Cease Trade Order ("FFCTO"). The Company expects that it will be in a position to finalize its 2017 Audit within the next two months and is working diligently with its auditor to accelerate this timeline where and if possible. Resumption of trading is expected to occur after the Company has filed its 2017 audited annual financial statements, which will only occur subsequent to the approval of the Ontario Securities Commission as well as that of the TSX-V.
Happy Transfer Service Interruption "Happy Transfer" service deployed in partnership with Lianlian has been temporarily suspended.
Our partner in China, Lianlian is in the process of securing new banking relationships and as a result have suspended service until such time. First Global is working with Lianlian to better understand the timing for service resumption.
Money Transmitter Licenses The Company continues to be engaged with the various regulators toward obtaining the balance of US State licenses.
Since January of 2017, the Company successfully obtained approximately 20 new licenses and now has 40 in total, making it one of the more broadly licensed money transmittors in the USA. FGD continues to work through the process of obtaining the balance of its US State licenses and we are actively exploring obtaining licenses in Europe and other key markets around the world.
CFO Position Working to retain a full-time CFO since the current interim CFO will depart once the 2017 Audit are concluded.
June 5 - State of Utah - Money License granted.
The FGD.V above chart reveals that the company finds itself in the same position it was two years ago; It was halted for months.
One can't summarize two years of market activity. However, looking at the Keltner Channels, it becomes evident that some releases (QwickPay milestones, partnership announcements, and non-audited earnings ) have pushed valuation outside of it, especially from Nov. 2016 to March 2017.
This period of "elation" in the stock price was anchored in commitment that were made by the CEO that were simply unsustainable.
From April 2017 to April 2018, FGD.V issued more than 50 press releases (almost one a week). About half of those were from April to June 2017 (3 months). During that time, FGD.V lost about half of its value. By then it was pretty clear that FGD.V would not meets its revenue targets.
Other than below expectation earnings, the CFO resignation, and Fountain Corp. (FA.V) Lawsuit were instrumental to the decline. While the lawsuit was unexpected, It is difficult to understand how FGD.V did not prioritize recruiting a new CFO given its filling history.
The successful recruiting Peter Lacey to the FGD.V's board was a definite accomplishment for the period. In fact, Mr. Lacey helped FGD.V maintain valuation through insiders purchases and participating in the last private placement (February 2018).
Hence, it comes to no surprise that the resignation of both Mr. Lacey and Mr. Smith (FGD.V's board audit committee) had a significant impact on valuation. Also, at the time FGD.V only fulfilled $1.8M of $5M (non-brokered) of which Mr. Lacey had contributed significantly in the first tranche.
From the Chairman and CEO update (May 31), the Cease Trade Order, and suspension of Happy Transfer were not positive news to shareholders. The question now is whether the revenue recognition exercise can be completed on time -was initially set for the end of June 2017, now revised for July 2017.
Then, FGD.V has to go through the reinstatement process with the Ontario Security Commission (OSC) and TSX Venture.
Ultimately, can FGD.V really surprise the market? The key will be how many of these revenue generating partners will agree to revision and amendments of license agreements, to address the revenue recognition concerns.
1) Vijaya Bank (India)- powers mobile transactions for 12 million potential bank customers.
2) Hidase Telecom (Ethiopia) - powers mobile transactions for 20 million potential users.
3) SelectCore (Canada)- Created a joint venture for Canada (FintechUnion).
4) Aamra (Bangladesh)- Agreement for mobile wallet and ecosystem for 14 potential local banks.
5) eGTCP.com (China)- MOU to provide mobile payment services >15,000 potential vendors.
6) Dill Capital and IBS (Nigeria) - build mobile payment services for 10 million potential users.
7) Zoompass (Canada & USA) - LOI for check processing services and loading mobile wallet.
8) Telkash (Canada, USA, UK, Philippines, Vietnam) - Partner to enable remittance and payment
9) Payability (Canada, USA) - Partner to enable remittance and payment.
10) Mobile Lads (USA) - Partner to enable remittance and payment (FGD,V has 36 US state licenses).
11) LianLian Pay (China) - Co-Branded Cross border remittance (Canada, US, to China) via WeChat.
12) Avenue Payment (India) - Agreement to provide remittance and payment via Avenue Payment.
13) AnalytixInsigth (AI) (Canada) LOI for inclusion of AI product and access to Italy and Samsung.
14) ImpalaPay (Kenya) White Label mobile wallet with addressable market of 50M users launched.
15) China Smart Pay Group Holding - MOU to enable remittance and payment in Canada and USA.
16) Mobi724 Global Solutions Inc - MOU for solution in Philippines and some Latin America countries.
As FGD.V is currently halted, we believe looking back is a worthwhile exercise. There are clearly some learnings for investors. Whether FGD.V survives, rebuilds, and prosper is to be determined. However, one thing is constant to this story, it continues to have a credibility gap.
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