Z Squared to Acquire Skycore Digital for Up to $22 Million in Stock

Overview of the Acquisition#

Z Squared, Inc. (NASDAQ:ZSQR) has announced its intention to acquire Skycore Digital LLC, a company specializing in digital infrastructure, for up to $22 million. This acquisition is significant as it represents about 24% of Z Squared’s market capitalization of $93.4 million.

Details of the Transaction#

The deal will be executed entirely through Series B Convertible Preferred Stock, meaning no cash or debt will be involved. The base amount for the acquisition is set at $18 million, with an additional $4 million potentially available depending on the megawatts secured before closing. This structure allows Z Squared to expand its operations without immediate cash outlay.

Skycore's Operations#

Skycore operates three sites in North Carolina with a total power capacity of approximately 24 megawatts, which is connected to the Duke Energy grid. There is potential to increase this capacity to 42 megawatts through existing agreements. Additionally, Spectrum fiber internet service is expected to be activated at two of Skycore's sites soon, enhancing their operational capabilities.

Financial Insights#

The Series B Convertible Preferred Stock has a stated value of $1,000 per share and offers an 8% cash dividend or a 10% payment-in-kind option. Despite Z Squared reporting a negative EBITDA of $11.86 million, it maintains a strong current ratio of 4.16 and a very low debt-to-equity ratio of 0.02, indicating a solid financial position. The acquisition is expected to close within 60 days after a definitive purchase agreement is signed, with a 90-day exclusivity period in place.