In August I wrote Reasons for Optimism, outlining the acquisitions we were working on and why I thought the second half of the year could look different from the first.
Since then, I’ve had a lot of questions about where those deals stand, our cash position and what happens next. We also passed the October 1 closing target I’d mentioned without announcing a completed deal. So this is a good time to explain where things stand and what still needs to happen.
What happened to the October 1 deal?
We haven’t closed it yet. We’re still working toward closing, and since the last update we’ve finalized and signed the letter of intent, held kick-off calls with both teams and moved into final due diligence.
There is still diligence and legal work to complete. I’m not putting another closing date on it at this stage, but those are the concrete steps we’ve taken since I last wrote about it.
What about the other acquisitions?
The previously announced LOIs remain active, and one discussion that had gone quiet has restarted. That gives us reason to remain optimistic about the pipeline, although there is still work to do before these opportunities become completed acquisitions.
For those not familiar with the term, an LOI is a letter of intent. It’s the stage between “we’re doing due diligence and not committed to anything” and “we’ve signed and the deal is done.”
Here is a selection of businesses we are currently in conversation with.
LOI signed:
- $1M EBITDA B2B marketing agency: $1.5M cash required to close
- $800K EBITDA B2B marketing agency: $2.5M cash required to close
- $4M EBITDA platform (the October 1 deal): $0 cash required to close
- $1.1M EBITDA direct response eCommerce business: $1.7M cash required to close
The four businesses listed above represent $6.9M in EBITDA, with $5.7M in upfront cash required for the acquisitions. We’re discussing financing with lenders. The opportunity is meaningful, but we still need to secure the financing and complete the remaining work on each deal.
We have other interesting opportunities in our pipeline too, but none of them are at the LOI stage.
Is Onfolio going to survive?
This one came up more than any other, sometimes in almost exactly those words.
The parent company is short on cash. That’s in our 10-Q: across the whole company we ended June with about $250,000 in cash, and the parent has overhead the portfolio isn’t yet covering.
The answer comes down to closing the acquisitions above. They bring earnings with them from day one, and that changes the picture at the parent. In the meantime, our crypto holdings help keep the company funded while we get them done. That’s the plan and it’s where all of our attention is going.
Do you still hold the crypto?
Yes. As of June 30, we held about 5.3 BTC, 322 ETH and 6,972 SOL, worth about $1.33 million at the time. The full breakdown is in our latest 10-Q.
We plan to sell it sparingly over time to help keep the company funded while we close these acquisitions. Selling gradually means it supports the parent over a longer stretch, and we’re never forced to sell it all at once at whatever the price happens to be that week. Any sales will show up in our quarterly filings.
Why ask for a reverse split of up to 1-for-250?
The proxy for our upcoming special meeting asks shareholders to approve reverse split authority of up to 1-for-250.
It’s aggregate authority, not a single split. It lets the board do one or more splits up to that combined ratio if needed. The 1-for-50 split in August got us back above $1 and Nasdaq confirmed we’d regained compliance, but the price has since dropped below $1 again. We’d rather have the option to do a split and stay listed than find ourselves short a second time. I hope we don’t use anywhere near the full amount.
Why move to Nevada?
The main reason is cost. As a Delaware company, our franchise tax is expected to run about $200,000 a year. In Nevada, the equivalent fees are a few hundred dollars. For a company our size, that’s real money every year.
It also changes some governance rules, and the proxy lays them out in a comparison table. The ones people have asked about: Nevada law limits the personal liability of directors and officers for breaches of fiduciary duty to cases of intentional misconduct, fraud or a knowing violation of law, and the quorum for stockholder meetings is lower. The full comparison is in the proxy, and it’s worth reading before you vote.
The optimism in August rested on these deals, and they’re further along now than they were then.
If you have a question I haven’t covered, reply to the newsletter or email me. I’d rather answer it here, where everyone can see it, than one inbox at a time.
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Disclaimer: This post discusses Onfolio Holdings Inc. (Nasdaq: ONFO) and contains forward-looking statements about the company’s plans and expectations, including with respect to potential acquisitions, financing, Nasdaq compliance and the proposals in our special meeting proxy. Actual results may differ materially. This post is provided for informational purposes only and is not an offer to sell or a solicitation to buy any securities, and is not investment advice. For complete and authoritative information, refer to our filings with the SEC at sec.gov.
Additional information: Onfolio has filed a preliminary proxy statement with the SEC for its upcoming special meeting of stockholders and intends to file a definitive proxy statement. Stockholders are urged to read the definitive proxy statement and any other relevant documents filed with the SEC when they become available, because they will contain important information. These documents are available free of charge at sec.gov. Onfolio and its directors and executive officers may be deemed participants in the solicitation of proxies in connection with the special meeting; information about them is set out in the proxy statement.