First Global Data (FGD.V) is a fin-tech enterprise focused on mobile payments and remittances. Coverage was initiated on May 2017 with notes on May 2017, June 2017, September 2017, December 2017, April 2018, June 2018, and January 2018. Below is an update since our last note.
Jan. 17 - Resignation of Chairman and CEO Mr. Itwaru: "Circumstances have forced me to make this decision, and it is with a heavy heart that I resign from the Company. I am very proud of what we were able to achieve and very appreciative of the strong relationship I developed with our shareholders and other stakeholders. It is my intention to support the new management team and Board of Directors in the transition,"
Jan. 23 - The Board has appointed Mr. Jack Froese as a new Board member. Following this appointment, Dr. Naresh Singh and Mr. Kevin Price resigned from the Board. The Company sincerely appreciates the contributions of Dr. Singh and Mr. Price.
Mar. 5 - Receives Statement of Claim filed by a group of investors in the Company holding Series "G" Secured Debentures. The claim relates to the Debentures that were issued back in 2015 bearing 14% interest per annum. Series "G" Debenture holders are seeking an order for damages of $1,5M.
Feb. 11 - Appointment to its Board of Directors: Mr. Anil Saxena - Bell Media Inc. for 42 years.
Apr. 8 - Appointment to its Board of Directors: Mr. Krishnasamy Parthiban and Mr. Andrew Lozinski .
May 23 - First Global Provides Update on Sale of Assets and Go Forward Plan. Since January 2019, First Global has been in transition. It started with the resignations of its long time CEO and COO as well as the entire board that had run the Company for several years.
A group of shareholders and senior creditors, along with senior management, resolved to stabilize the organization and prepare for the next phase of the Company. In the interests of austerity, the Company over the last few months has dramatically reduced its workforce and operating expenses. It has reduced staffing from approximately sixty people in late 2018 to just four at present.
The Company has been cease-traded by order of the Ontario Securities Commission ("CTO") for over a year and, as a consequence of its resulting financial situation, has decided to sell assets to both meet obligations as well as to re-align its long-term business strategy into what it has concluded to be more sustainable, responsible and beneficial to shareholders and other stakeholders in the future.
To this end senior management, the board and senior lenders have been reviewing all strategic options, including but not limited to the sale of all assets. The Company has reached out to various parties that would have an interest in its domestic and international money remittance divisions as well as its technology platforms and hosted technology, and has entertained various negotiations and non-binding offers.
Sales of Assets
First Global is pleased to announce that it successfully completed, effective May 2, 2019, the sale of its existing international operations (i.e. all operations excluding Canada and US) to Nanpersaud & Company Ltd., an arm's-length third party purchaser. While the Company received some cash to address its immediate needs from this sale, more importantly, it will also continue to receive a royalty payment on a quarterly basis on gross revenue for the next eight years per the terms of the agreement. FGD.V anticipates that this royalty will take a few months to become meaningful, but also anticipates that such royalty could be significant if the purchaser commits the right resources and focus to develop those international markets. However, FGD.V has no control over the purchaser and, therefore, there can be no assurance.
First Global has also reached an agreement to sell its US licensed business to an arm's-length third party by the name of Azira Corporation, subject to any required regulatory approval. The terms of the agreement include that the aggregate purchase price will be $5.0M USD for 95% interest in FGMI, on an "as is, where is basis" with such price being paid as: (a) $1.0M USD in cash, with a minimum of $250,000 USD upon closing and the remaining outstanding amount of $750,000 USD being paid within 150 days, and (b) $4.0M USD being paid as a royalty, as eight percent of gross revenues from FGMI, on a monthly basis with reporting and payments being due within five business days of each month end. The buyer will assume day-to-day operations and all related costs and responsibilities, with any intercompany loans being forgiven, at the time of closing, which shall occur on or before May 30th, 2019 unless otherwise extended by agreement of the parties.
First Global intends to transform itself from a technology developer and vendor, as well as a bricks and mortar money transmitter in the USA and Canada, into a pure online money transmitter, eWallet, and hosted solutions provider focused on inbound and outbound money transmissions from and to (as well as within) Canada and the USA.
As a result of First Global being subject to the CTO for over a year, the Company has faced funding-related challenges. To pursue its new initiatives, the Company understands and anticipates that a major round of funding and capitalization will be required in the near term.
As such, the Company is currently considering options such as a significant debt-for-equity conversion program.
As a reminder, FGD.V over-reported revenues and had to restate both 2016 and 2017 earnings. From Mr. Itwaru's forecast of $140M to actual revenues of $1.4M for fiscal 2017, FGD.V has been on a year old Cease Trade Order which is still in effect despite having reported 2018 earnings for three quarters. However, the recent Series G debenture claims ($1.5M) was more than the FGD.V's reported revenues ($1.M) for 2018.
In retrospect, the resignation of Andre Itwaru (CEO), Dr. Naresh Sigh, and Kevin Price is easily explained as well as the appointment of new board members. However, The update of May 23 2019 states that the FGD.V went from sixty (in late 2018) to currently four employees.
FGD,V also announced the selling of assets. Nanpersaud & Company Ltd was the buyer of "all operations except US and Canada" for which the terms were not disclosed except for the mention of quarterly royalty payments which are not guaranteed. In addition, Azira Corporation was the buyer of "US Licensed Business". This is significant because Azira Corporation is Mr. Itwaru's new venture. The terms of this transaction: include that the aggregate purchase price will be $5.0M USD for 95% interest in FGMI. Also included under the terms: The buyer will assume day-to-day operations and all related costs and responsibilities, with any intercompany loans being forgiven, at the time of closing, which shall occur on or before May 30th, 2019.
As per Q3 2018 earnings: The Company's US subsidiary, First Global Money Inc. (“FGMI”) is required to meet State regulatory minimum capital requirements as applicable to continue operating in the various States in the United States. The Company did meet its regulatory thresholds in 2017 and as a result, gained 14 new State licenses in first quarter and 5 others in the second quarter of 2018. The Company maintains segregated bank accounts for customer funds and operational capital. Various controls are in place to monitor and manage capital. Management reviews its capital management approach on an ongoing basis.
Based on the above. how are "intercompany loans" defined? And to which extent have these benefited FGMI in the past? Details are certainly lacking.
As such the transaction involving FGMI to Azira Corporation needs further clarification. FGD.V's New Strategy is to be: "pure online money transmitter, eWallet, and hosted solutions provider focused on inbound and outbound money transmissions from and to (as well as within) Canada and the USA".
The question then becomes, how does the sales of "US Licensed Business" fit in achieving this goal?
Indeed, all these events are taking place while FGD.V is under a Cease Trade Order (CTO) - the last AGM has taken place over 18 months ago. Has FGD.V used the CTO to benefit its shareholders? Were shareholders able to exercise their right to vote on significant decisions impacting the company?
FGD.V is definitely one for the books.
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