Binary platform provider and operator TechFinancials Inc (LON:TECH) is growing bigger in the Asian market.
The company has just reported that it has entered into a joint venture agreement with the owners of Hong Kong-registered Optionfortune Trade Limited, provider of binary options trading services. Under the terms of the agreement a new business entity will be established, to be owned 51% by TechFinancials and 49% by the Partner.
This new entity has been formed on the back of a two year partnership, whereby Optionfortune Trade established a binary options brand in 2013, using TechFinancials’ B2B software.
Structure of the JV
The Hong Kong partner will transfer its trading platform activity and all other intangible assets related to its operation to the JV.
Assuming the JV delivers US$2 million of net profit in calendar year 2016, TechFinancials will issue to the Partner’s shareholders a number of TechFinancials Inc. shares held in escrow worth US$1.54 million, at a price equal to the share price at the time of TechFinancials admission to AIM (27p), or the average price over 30 days prior to the closing date of the JV agreement, whichever the higher. If net profit in the JV is below US$2 million, the final number of TechFinancials Inc. consideration shares will be calculated and adjusted proportionally based on the audited profit of 2016.
If the JV’s net profit and revenue in 2016 exceeds US$2 million and US$4 million respectively, and provided profits in 2017 are at least 90% of net profit in 2016, TechFinancials will make an additional payment, at its option, in either shares or cash, worth 171.5% of the excess of net profit over US$2 million in 2016.
In the event that the net profit for the 2016 is less than US$600,000; and/or revenues are less than US$3 million, TechFinancials may elect to transfer to the shareholders of the Partner, effective on 1 January 2017, 38.5% of the shares in the JV, instead of payment in TechFinancials Inc. own shares.
In addition, TechFinancials will provide a loan of US$0.5 million to the JV whilst the Partner will provide a loan of US$0.3 million and will transfer the balances of its brand customers. The total loan of US$0.8 million is repayable on a quarterly basis, subject to cash in the JV increasing above the initial US$0.8 million of cash provided by the parties, until it’s fully repaid.
Commenting on the Joint Venture, Asaf Lahav, Group CEO of TechFinancials, said:
“The Company is very pleased to establish this Joint Venture with the owners of Optionfortune. We believe this to be a significant transaction, and it is in keeping with our strategy stated at IPO, which is to grow our business into new territories and markets. The Board believes that this JV will strengthen the long-term sustainability and consistency of our growth expectations while generating extra cash flow. Asian markets for binary options have considerable growth potential and we look forward to working with our new partners on this venture.”
The announcement of the Hong Kong JV comes as TechFinancials’ Cypriot binary options brand OptionFair is going through challenging times, with revenues falling and expenses rising.
To view the official announcement from TechFinancials on the new joint venture, click here.