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Sydney-based payments compliance technology company Identitii (ASX: ID8) has signed a $20 million convertible note facility with The Blackstone Mercantile Group Ltd as the company stares down just $68,000 in cash reserves.
The facility comprises a binding first commitment of $5 million, subject to shareholder approval, with up to $15 million in additional non-binding tranches available thereafter.
However, the net proceeds from the initial tranche will be significantly smaller than the headline figure as $1.5 million of the first $5 million must be paid to Fairfax Partners Inc. for investor relations and marketing services, leaving Identitii with $3.5 million before other costs.
The deal comes after the company failed to place a $2.5 million shortfall from its earlier rights issue and saw its quarterly net operating cash outflows hit $1.108 million, according to its most recent ASX filing.
Identitii plans to use the proceeds of the convertible note to drive growth of its flagship BNDRY platform as well as investor marketing communications to a global audience.
BNDRY is an enterprise AML/CTF (Anti-Money Laundering and Counter-Terrorism Financing) platform that creates a connected software ecosystem to allow risk and compliance teams to monitor transactions, verify customer identities and manage compliance obligations.
Under the terms of the convertible note, conversion will occur at a fixed price of 37.5c per share following a proposed 200-for-1 share consolidation, with the investor capped at 19.99 per cent ownership.
Blackstone Mercantile has also been granted a six-month exclusive funding period, during which Identitii cannot seek alternative capital from other parties without the investor's consent.
The convertible note is not the only financial pressure bearing down on the company.
Identitii faces a motion for US$4 million in attorneys' fees from JPMorgan Chase in the United States, following the dismissal of Identitii's patent infringement case against the banking giant.
The company's most recent interim financial statements flagged material uncertainty regarding its ability to continue as a going concern.
The company reported it held $68,000 in cash and cash equivalents at the end of the March quarter, down from $155,000 at the close of the prior quarter.
Identitii had previously attempted to shore up its balance sheet through a one-for-two pro rata non-renounceable rights issue at 0.7c per share, which raised approximately $380,000 from eligible shareholders.
A shortfall of about $2.5 million remained unplaced, and the company was unable to secure subscribers for those shares before turning to the Blackstone Mercantile facility.
The additional tranches beyond the initial $5 million are described as non-guaranteed and subject to further agreement between the parties.
“We are obviously very excited to share today's news with our shareholders, particularly because we are hopeful this is the last time the company will need to raise ordinary working capital,” says CEO John Rayment.
“We can now focus solely on growing BNDRY and recommit to our goal of achieving cashflow breakeven by the end of next year.”
Shares in Identitii were trading 33 per cent higher at 0.4c each.
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