– Non-GAAP Adjusted Operating EBITDA of $1.3 Million –
– Merger with MEOA SPAC Targeted to Close in First Quarter Calendar 2023 –

SAN ANTONIO, TX (GlobeNewswire) – December 16, 2022 – Digerati Technologies, Inc. (OTCQB: DTGI) (“Digerati” or the “Company”), a provider of cloud services specializing in UCaaS (Unified Communications as a Service) solutions for the small to medium-sized business (“SMB”) market, announced today financial results for the three months ended October 31, 2022, the Company’s first quarter for its Fiscal Year 2023.

Key Financial Highlights for the First Quarter Fiscal Year 2023 (Ended October 31, 2022)

  • Revenue increased by 115% to $8.1 million compared to $3.8 million for Q1 FY2022.
  • Gross profit increased 131% to $5.3 million compared to $2.3 million for Q1 FY2022.
  • Gross margin increased to 64.9% compared to 60.6% for Q1 FY2022.
  • Non-GAAP Adjusted EBITDA income increased by 161% to $0.8 million, excluding all non-cash items and one-time transactional expenses, compared to $0.3 million for Q1 FY2022.
  • Non-GAAP Adjusted Operating EBITDA (OPCO EBITDA) income increased by 86% to $1.3 million, excluding corporate expenses, non-cash items and one-time transactional expenses, compared to $0.7 million for Q1 FY2022.

Key Business Highlights for the First Quarter Fiscal Year 2023 (Ended October 31, 2022)

  • Announced business combination with Minority Equality Opportunities Acquisition Inc. (MEOA).
  • Appointed Derek Gietzen to President.
  • NextLevel Internet named one of the Fortune top 100 best small & medium workplaces for 2022.

Update on Plan to List on NASDAQ via Business Combination with Minority Equality Opportunities Acquisition Inc.

The Company and MEOA have made significant progress since the business combination agreement was executed on August 30, 2022. Key accomplishments include:

  • MEOA’s filing of the S-4 registration statement for the business combination on November 30, 2022.
  • Filing by MEOA of its Charter Amendment approved by the shareholders of MEOA on November 29, 2022.

The transaction results in a $105 million enterprise valuation for Digerati and has been approved by the board of directors of both Digerati and MEOA, with an expected closing in the first quarter of CY 2023, subject to shareholder, U.S. Securities and Exchange Commission (“SEC”) and NASDAQ approval. The S-4 registration statement for the business combination is currently under review by the SEC.

Arthur L. Smith, CEO of Digerati, commented, “We continue to demonstrate successful execution of our acquisition strategy through improved quarterly financial results that included achieving record quarterly profitability in Adjusted EBITDA and Adjusted OPCO EBITDA for the Company’s first quarter in FY2023. We look forward to carrying this financial momentum into subsequent quarters as we work towards closing our merger with MEOA and moving our listing to NASDAQ that we expect will greatly enhance our ability to replicate this success with additional targeted accretive acquisitions in the future.”

Antonio Estrada, CFO of Digerati, stated, “We had a very productive quarter in streamlining our business as we approach the one-year anniversary of closing the acquisitions of SkyNet and Next Level Internet. We successfully integrated the acquired businesses as demonstrated by the improved margins and profitability resulting from operating efficiencies and elimination of redundant costs. We recently closed on a $1.5 million financing which provides us with the capital necessary to close our NASDAQ listing transaction with MEOA that includes fees for extending the SPAC, as well as attorney and audit expenses.”

Three Months ended October 31, 2022 Compared to Three Months ended October 31, 2021

Revenue for the three months ended October 31, 2022 was $8.1 million, an increase of $4.4 million or 115% compared to $3.8 million for the three months ended October 31, 2021. The increase in revenue between periods is primarily attributed to the consolidation of the closed acquisitions of SkyNet Telecom and NextLevel Internet during the period. The total number of customers increased from 2,658 for the three months ended October 31, 2021, to 4,565 customers for the three months ended October 31, 2022. 

Gross profit for the three months ended October 31, 2022 was $5.3 million, resulting in a gross margin of 64.9%, compared to $2.3 million and 60.6% for the three months ended October 31, 2021. 

Selling, General and Administrative expenses (excluding legal and professional fees) for the three months ended October 31, 2022 increased by $2.4 million, or 133% to $4.1 million compared to $1.8 million for the three months ended October 31, 2021. The increase in SG&A is attributed to the consolidation of the closed acquisitions of SkyNet Telecom and NextLevel Internet, and the absorbed employees responsible for service delivery for the customer base, technical support, sales, customer service and administration.

Operating loss for the three months ended October 31, 2022, was $0.4 million, a decrease of $0.2 million or 31%, compared to $0.6 million for the three months ended October 31, 2021.

Adjusted EBITDA income for the three months ended October 31, 2022, was $0.8 million, an increase of $0.5 million, or 161%, compared to an adjusted EBITDA income of $0.3 million for the three months ended October 31, 2021. In accordance with SEC Regulation G, the non-GAAP measurement of Adjusted EBITDA has been reconciled to the nearest GAAP measurement, which can be viewed under the heading “Reconciliation of Net Loss to Adjusted EBITDA” in the financial table included in this press release.

Of note were the following non-cash expenses associated with the three months ended October 31, 2022: Company recognition of stock-based compensation and warrant expense of $0.02 million and depreciation and amortization expense of $1.0 million. Gain on derivative instruments was $3.1 million for the three months ended October 31, 2022.

Non-GAAP adjusted operating EBITDA (OPCO EBITDA) for the three months ended October 31, 2022, improved to income of $1.3 million, excluding corporate expenses, an increase of $0.6 million, or 86%, compared to a non-GAAP adjusted operating EBITDA of $0.7 million for the three months ended October 31, 2021.

Net loss for the three months ended October 31, 2022, was $5.0 million, an increase of $7.4 million, as compared to net income of $2.4 million, for the three months ended October 31, 2021. The resulting EPS for the three months ended October 31, 2022, was a loss of ($0.03), as compared to income of $0.01 for the three months ended October 31, 2021.

At October 31, 2022, Digerati had $1.0 million of cash. 

Use of Non-GAAP Financial Measurements

The Company believes that EBITDA (earnings before interest, taxes, depreciation and amortization) is useful to investors because it is commonly used in the cloud communications industry to evaluate companies on the basis of operating performance and leverage. Adjusted EBITDA provides an adjusted view of EBITDA that takes into account certain significant non-recurring transactions, if any, such as impairment losses and expenses associated with pending acquisitions, which vary significantly between periods and are not recurring in nature, as well as certain recurring non-cash charges such as changes in fair value of the Company’s derivative liabilities and stock-based compensation. The Company also believes that Adjusted EBITDA provides investors with a measure of the Company’s operational and financial progress that corresponds with the measurements used by management as a basis for allocating resources and making other operating decisions. Although the Company uses Adjusted EBITDA as one of several financial measures to assess its operating performance, its use is limited as it excludes certain significant operating expenses. Non-GAAP operating EBITDA (OPCO EBITDA) is useful to investors because it reflects EBITDA for the core operation of the business excluding corporate expenses, non-cash expenses and transactional expenses. EBITDA, Adjusted EBITDA, and Non-GAAP operating EBITDA are not intended to represent cash flows for the periods presented, nor have they been presented as an alternative to operating income or as an indicator of operating performance and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).   In accordance with SEC Regulation G, the non-GAAP measurements in this press release have been reconciled to the nearest GAAP measurement, which can be viewed under the heading “Reconciliation of Net Loss to Adjusted EBITDA” in the financial table included in this press release.

About Digerati Technologies, Inc.

Digerati Technologies, Inc. (OTCQB: DTGI) is a provider of cloud services specializing in UCaaS (Unified Communications as a Service) solutions for the business market. Through its operating subsidiaries NextLevel Internet (NextLevelinternet.com) T3 Communications (T3com.com), Nexogy (Nexogy.com), and SkyNet Telecom (Skynettelecom.net), the Company is meeting the global needs of small businesses seeking simple, flexible, reliable, and cost-effective communication and network solutions including, cloud PBX, cloud telephony, cloud WAN, cloud call center, cloud mobile, and the delivery of digital oxygen on its broadband network. The Company has developed a robust integration platform to fuel mergers and acquisitions in a highly fragmented market as it delivers business solutions on its carrier-grade network and Only in the Cloud™.

About Minority Equality Opportunities Acquisition Inc.

Minority Equality Opportunities Acquisition Inc. is a blank check company, also commonly referred to as a special purpose acquisition company, or SPAC, organized under the laws of the Delaware and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with companies that are minority owned, led or founded.

INVESTMENT IN ANY SECURITIES DESCRIBED HEREIN HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY OTHER REGULATORY AUTHORITY NOR HAS ANY AUTHORITY PASSED UPON OR ENDORSED THE MERITS OF THE OFFERING OR THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

No Offer or Solicitation

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction.

Important Information and Where to Find It

As mentioned above, the parties have filed a registration statement on Form S-4 with the SEC (the “Registration Statement”), which includes a preliminary proxy statement for MEOA and Digerati shareholders and also serves as a prospectus related to offers and sales of the securities of the combined entity. MEOA will also file other documents regarding the proposed transaction with the SEC. A definitive proxy statement/prospectus will also be sent to the stockholders of MEOA and Digerati, seeking required stockholder approval. Before making any voting or investment decision, investors and security holders of MEOA and Digerati are urged to carefully read the entire registration statement and proxy statement/prospectus, when they become available, and any other relevant documents filed with the SEC, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. The documents filed with the SEC may be obtained free of charge at the SEC’s website at www.sec.gov.

In addition, the documents filed with the SEC may be obtained from MEOA’s website at https://www.meoaus.com.

Participants in the Solicitation

MEOA, Digerati and their respective directors, executive officers, other members of management, and employees, under SEC rules, may be deemed to be participants in the solicitation of proxies of Digerati’s stockholders in connection with the Business Combination. Investors and security holders may obtain more detailed information regarding the names and interests in the Business Combination of Digerati’s directors and officers in MEOA’s filings with the SEC, including the Registration Statement filed with the SEC by MEOA, which includes the proxy statement of Digerati for the Business Combination. Free copies of these documents may be obtained as described above.

Forward-Looking Statements

This press release includes certain statements that are not historical facts but are forward-looking statements for purposes of the safe harbor provisions under the applicable securities laws. Forward-looking statements generally are accompanied by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “would,” “plan,” “predict,” “potential,” “seem,” “seek,” “future,” “outlook,” and similar expressions that predict or indicate future events or trends or that are not statements of historical matters.

These forward-looking statements include, but are not limited to, statements regarding the terms and conditions of the proposed business combination and related transactions disclosed herein, the timing of the consummation of such transactions, assumptions regarding shareholder redemptions and the anticipated benefits and financial position of the parties resulting therefrom. These statements are based on various assumptions and/or on the current expectations of MEOA or Digerati’s management. These forward-looking statements are provided for illustrative purposes only and are not intended to serve as and must not be relied on by any investor or other person as, a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Actual events and circumstances are difficult or impossible to predict and will differ from assumptions. Many actual events and circumstances are beyond the control of MEOA and/or Digerati. These forward-looking statements are subject to a number of risks and uncertainties, including but not limited to general economic, financial, legal, political and business conditions and changes in domestic and foreign markets; the amount of redemption requests made by MEOA’s public shareholders; NASDAQ’s approval of MEOA’s initial listing application; changes in the assumptions underlying Digerati’s expectations regarding its future business; the effects of competition on Digerati’s future business; and the outcome of judicial proceedings to which Digerati is, or may become a party.

If the risks materialize or assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that Digerati and MEOA presently do not know or currently believe are immaterial that could also cause actual results to differ materially from those contained in the forward-looking statements. In addition, forward-looking statements reflect expectations, assumptions, plans or forecasts of future events and views as of the date of this press release. Digerati and MEOA anticipate that subsequent events and developments will cause these assessments to change. However, while Digerati and/or MEOA may elect to update these forward-looking statements at some point in the future, each of Digerati and MEOA specifically disclaims any obligation to do so, except as required by applicable law. These forward-looking statements should not be relied upon as representing Digerati’s or MEOA (or their respective affiliates’) assessments as of any date subsequent to the date of this press release. Accordingly, undue reliance should not be placed upon the forward-looking statements.

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ClearThink
Brian Loper
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