Z Squared to acquire membership interests of Skycore Digital

Z Squared (ZSQR) announced that it has entered into a binding letter of intent to acquire 100% of the membership interests of Skycore Digital, an operating digital infrastructure company with three active sites in North Carolina powered by Duke Energy (DUK). Skycore operates approximately 24 megawatts of energized power capacity currently connected to the Duke Energy grid, with an additional 18 MW available through existing Duke Energy letters of authorization. Together, the assets provide Z Squared with a defined path to up to 42 MW of total potential capacity. The transaction is structured entirely in Series B Convertible Preferred Stock, with no cash consideration and no debt financing. Total consideration consists of Series B convertible preferred stock with an $18M base aggregate liquidation preference at closing, plus up to an additional $4M, scaled pro rata based on additional MW secured prior to closing, with the full $4M payable upon securement of 18 MW. Maximum aggregate consideration is $22M. Key terms of the Series B convertible preferred stock include a $1,000 stated value per share; an 8% cash dividend or 10% payment-in-kind dividend, at the company’s election; conversion at a 10% premium to the 20-day VWAP at signing; a seven-year mandatory redemption; an annual holder put right beginning in year two, capped at 20% per year; and a $500,000 break-up fee payable by Z Squared. The parties have agreed to a 90-day exclusivity period. The acquisition is expected to close within 60 days following execution of a definitive purchase agreement, subject to customary closing conditions.