The Company announces that, as a result of the continuing regulatory challenges facing the Company’s traditional systems unit, the Company has taken the decision to make substantial adjustments to its operating structure and cost base while seeking to develop its newer blockchain based businesses.
On the operational front, the Company’s 51 per cent. owned B2C subsidiary, DragonFinancials has suffered from an increasingly challenging regulatory and business environment which has resulted in it incurring losses which started in 2018 and which have continued throughout H1 2019. As prospects for DragonFinancials have not improved in H2 2019, in conjunction with its joint-venture partners at DragonFinancials, the Company has decided to close DragonFinancials with immediate effect in order to stem further losses. Consequently, the Company will no longer operate any B2C business in its traditional systems unit.
The Company is continuing to support customers of its B2B division. However, this division of the Company has also seen declining revenues which will also suffer from losing DragonFinancials revenues, its major customer and the Company is reviewing the viability of the remaining B2B business and a further decision will be taken in due course.
In light of its decision to close DragonFinancials and the decline in revenues in its traditional B2B business, the board has undertaken a review of the benefits of being a quoted company on both the AIM Market of the London Stock Exchange (“AIM”) and the NEX Exchange Growth Market (“NEX”). Following this review, the TechFinancials board considers that NEX is a more appropriate market given TechFinancials’ currently reduced size and its focus on new business streams. A sole listing on NEX would also result in a reduction in total listing costs. Consequently, the Board has concluded that the cancellation of admission of its Ordinary Shares to trading on AIM (the “Cancellation”) is in the best interests of the Company and its Shareholders as a whole.
Company strategy update
In the past three years, changes in the regulatory environment related to the Company’s traditional systems businesses (both B2C and B2B) have adversely affected both the Company’s revenue streams and profitability. Unfortunately, the Company’s initiatives to diversify into other product areas such as FOREX and CFDs have met with limited success.
These changes have led the board to decide to make adjustment both the Company’s operating structure and cost base including the closing down of DragonFinancials, the Company’s subsidiary in which the Company holds a 51 per cent. interest, as a consequence of the downturn in operations.
During the year to 31 December 2018, the Company’s B2C Trading Platform (which principally comprised DragonFinancials) reported revenues of approximately US$2,683k, EBITDA of approximately US$261k and profit before tax of nil. For the half year to 30 June 2019, the B2C Trading Platform reported a loss before tax of US$169k and as at 30 June 2019 had net assets of US$482k. The closure of DragonFinancials will lead to an impairment in the Company’s accounts of approximately US$2,600k.
The board has decided that the Company will primarily focus its business efforts going forward on its initiatives in blockchain applications. The Company currently has two initiatives in this area: Footies Ltd. (“Footies”)and Cedex Holdings Limited (“Cedex”). Accordingly, the Company will reorganise its resources, including adjusting its headcount, closing non active subsidiaries and moving to new offices, in order to align its activities to the development of these and other blockchain based initiatives.
Proposed cancellation of admission to trading on AIM
The Company has taken the decision to seek Cancellation as it believes NEX is a more appropriate market given TechFinancials’ currently reduced size following the closure of DragonFinancials and its focus on new business streams as it prepares to move forwards with the opportunities it has in the blockchain arena.
The Company is therefore announcing its intention to seek Shareholders’ approval for the Cancellation. A circular will be published and sent to all Shareholders as soon as practicable setting out further details of the Cancellation, which the Company hopes will take place in January 2020, and the implications for Shareholders (“Circular”) along with a notice convening a general meeting at which the approval of Shareholders for the Cancellation will be sought (“General Meeting”). Pursuant to Rule 41 of the AIM Rules for Companies, cancellation is conditional upon the approval of not less than 75 per cent. of the votes cast by shareholders (whether in person or by proxy) at the General Meeting.
The Company’s shares will continue to be traded on NEX should Shareholders approve the Cancellation.
Update on Footies
Footies is a subsidiary incorporated in the UK in which TechFinancials has an interest of just over 75 per cent. It has been established to develop a digital ticketing and fan engagement solution for sports organizations and venues.
The Company’s strategy is to increase Footies’ value by closing sales contracts with its first customers.
Approximately a year from inception, the first version of the platform has become available for testing with potential clients. In the past three months, Footies started approaching potential customers with a ‘demo’ product.
Footies has now received feedback from potential customers and consequently will focus its product development on ticket control and integrating engagement. Footies initial sales efforts are focusing on mid-size clubs and other types of venues where knowing and caring for your customers through ticketing control and dedicated app is crucial for the business. The Company is considering providing Footies an additional credit line by way of a Convertible Loan of up to $225k.
Strategy for Cedex
The Company continues to hold an option to acquire 90 per cent. of Cedex at an exercise price of approximately £52,000. In the event that the option were to be exercised TechFinancials would hold 97.49% (85.92% on fully diluted basis) of Cedex . The Company remains positive about its investment in Cedex and will take a decision as to how to maximise the value from its investment in Cedex in 2020, after its proposed cancellation from AIM and sole listing on NEX and will provide further updates to the market in due course.
In the past year, Cedex has concentrated its business efforts on business development activities in order to create the eco-system for issuing advanced financial instruments based on diamonds as an underlying asset, such as ETP and futures contracts utilizing CEDEX’s proprietary technology, comprising the DEX algorithm, and the Cedex trading platform.
Cedex’s vision is to transform diamonds into a new financial asset class. In parallel, the CEDEX board will be looking for other opportunities to commercialise the CEDEX technology. The Company will consider selling all or part of its interest in CEDEX to a third party if it believes that to be in the best interests of the Company.
The information communicated within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.