According to SEC documents filed today by EZTD Inc., the group managing the binary options brands EZTrader.com, EZinvest.com, and EZInvest-sec.jp, the company has raised the second and last tranche of an aggregate equity investment of $3 million. The new capital comes from Compagnie Financière St. Exupéry and the overall $3 million sum is just one part of the total $11 million investment that the company committed to injecting into EZTD’s operations back in November 2011.
EZTD signed the three-year standby equity distribution agreement as the brokerage group has been facing tough times amidst weak performance, squeezed industry and endless regulatory overheads. EZTD has accumulated more than $11.5 million in losses in the first 9 months of 2016. For Q2 2016, the net loss at EZTrader’s parent increased almost threefold to $4.935 million compared to a net loss of $1.285 million in 2015.
On February 3, 2017, EZTD and the Yorkville closed on the $3 million investment, and entered into a material definitive agreement that could be seen a lifeline for the binary options provider which has been bleeding losses for more than a year.
Mr. Citron to forget the rosy days
According to its latest filing with the U.S. Securities and Exchange Commission (SEC), Compagnie Financiere St. Exupery, an affiliate of private hedge fund Yorkville Advisors Global LLC, has entered into a binding term sheet dated December 29, 2016 for the purchase of 500,000 shares of the EZTD’s common stocks, valued at $3,000,000.
The investment was made in two stages: upon execution of the first tranche agreement, Yorkville paid $800,000 for acquiring 133,333 of EZTD’s shares, and today it paid for the remaining 366,667 shares, valued at $2,200,000, upon the execution of a share purchase agreement which was subject to the satisfaction of certain specified conditions.
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Pursuant to the SEC’s filing, the aforementioned conditions included the obligation of EZTD’s existing debt holders to convert their convertible debt into common shares using conversion prices ranging from $5.7234 to $7.00 per share. In addition, Yorkville had the right to designate two directors to the EZTD board of directors and to each of its subsidiaries’ boards.
The most interesting part in the agreement concerns commitments made by directors of the company, namely its CEO Shimon Citron. Mr. Citron terminated all current agreements and forfeited any credits with the company, excluding minor credits due to his employment in 2013, and a consulting agreement with Citron Investments Ltd. in 2008.
Furthermore, Mr. Citron will continue as CEO of EZTD but only with receiving a monthly salary of $20,000, plus a bonus of 5% of the annual net income. He was required to acquire the shares of Winner Option Ltd. and Winner Option Ltd, as well as investing at least $500,000 in EZTD at a price of $6.00 per share by June 30, 2017.
No lid on rising overheads
The embattled binary options brokerages operator suffered from serious regulatory and operational drawbacks in 2016. Back in December, EZTD had its Chief Financial Officer (CFO) Itai Loewenstein leave the group. The circumstances surrounding his departure were unclear, especially considering his less than one-year stint at EZTD.
A few month earlier, the US Securities and Exchange Commission (SEC) ordered EZTD to pay a fine of $200,000 and return about $1.5 million of revenue generated from more than 4,000 Americans who lost their investment through its financial products between 2011 and 2014.
Finance Magnates reported on EZTD in August 2016 when the firm announced that its financials deteriorated materially on a year-on-year basis. The decline in revenues was mainly attributed to a significant increase in withdrawals by customers as a result of new regulations imposed by the Cypriot regulator.