The company operating binary options brokerage EZTrader, EZTD (OTCMKTS:EZTD) has reported its financial results for the second quarter ending on June 30th 2016. The firm has reported its financials deteriorated materially on a year-on-year basis. The decline in revenues is mainly attributed to a significant increase in withdrawals by customers as a result of new regulations imposed by the Cypriot regulator.
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For Q2 2016, the net loss at EZTrader's parent increased almost threefold to $4.935 million – or $0.99 per share - compared to a net loss of $1.285 million - $0.41 a share - for the three months ended June 30, 2015. Across a half year interval, the net loss for H1 2016 also reported a 227 percent increase YoY, coming in at $8.307 million compared to $2.537 million in H1 2015. Net loss per share from operations for the six months ended June 30, 2016 and June 30, 2015 was $1.88 and $0.80, respectively.
During the reported quarter, the company attributed its operating losses mainly to the binary options business, which incurred significant marketing and operational expenses primarily consisting of online advertising for binary options websites, and employee related expenses.
Unlike its net income, the brokerage group managed a better figure in its trading volumes, yielding $29,060,559 in in the last quarter, which reflects a YoY ascension of 67.3% YoY from $17,364,385 in Q2 2015. Revenues as a percentage of trading volume for the three months ending June 30, 2016 and 2015 was 17% and 31%, respectively.
Q2 2016 Financial Highlights
- Total revenues decreased by 8.9% to $4.920 million from $5.402 million in Q2 2015.
- Total sales and marketing expenses increased by 21.1% to $4,790,000 from $3,955,000 in Q2 2015.
- Average revenue per user (ARPU) was $468 compared with $588 in 2015. ARPU is calculated by dividing the total revenues for the period by the total number of current active users.
- The average user acquisition cost (ARPU) was $414 compared with $471 in Q2 2015. The Average User Acquisition Cost (AUAC) is calculated by dividing the total acquisition costs by the total number of active users for any given period.
- The ROI for the three months ended June 30, 2016 and 2015 was 1.72 and 2.05, respectively.
- The number of active users was 10,507 down from 9,188 in Q2 2015.
H1 2016 Financial Highlights
- Total revenues at EZTrader's parent in H1 2016 decreased by 4.6% to $11.964 million from $12.545 million in H1 2015.
- Selling and marketing expenses increased by 26.78% to $11.636 million compared to $9.178 million in H1 2015.
- Trading volume for the six months ended June 30, 2016 and 2015 was $81,886,559 and $41,643,385, respectively. Revenues as a percentage of trading volume was 15% and 30%, respectively.
- The AUAC was $272 compared with $286 in H1 2015.
- The ROI for the six months ending June 30, 2016 and 2015 was 1.52 and 2.02, respectively.
- The number of active users for those periods was 28,932 and 26,663, respectively.
EZTD conducts its operations and business through the wholly owned subsidiaries: Win Global Markets Inc. (Israel) Ltd., WGM Services Ltd., which is a CySEC regulated company, Japanese EZ Invest Securities Ltd., SCGP Investments Limited, which is based in Belize, EZTD Australia PTY Ltd. and EZ Trader, Ltd., a subsidiary registered in Vanuatu. Trading is being offered by WGM on https://www.eztrader.com, https://www.globaloption.com, and https://www.ezinvest.com.
Earlier in February, the CEO of EZTD, Shimon Citron, told Finance Magnates about his company’s interest in the U.S. market. Citron believes that binary options as a product is much easier for US investors to understand because there is no leverage. This contrasts with Forex brokers that have a harder story to explain to shareholders.
Citron stated in our exclusive interview: “To bring a company that is doing binary options to the United States was one of our greatest challenges”. Citron explained that the challenge to overcome was fulfilling
Shimon Citron, CEO, EZTD
the filing requirements from the SEC and explaining the story of binary options in a country where there aren’t any regulated brokers offering the product to retail customers (the exceptions are NADEX and CantorExchange that offer the product through an exchange model).
In February 2016, the board of directors and stockholders took the first steps toward listing in the U.S. market after deciding to reduce the company's authorized common stock and also approved a 1-for-30 reverse stock split. The step was part of EZTrader's intention to list the company's shares on the NASDAQ which initially requires its common stock to have a closing price of at least $3.00 per share. On August 15, 2016, the closing price of EZTD's stock was $3.25 per share.
According to the regulatory filing: “The Board is determined that it was in the best interests of the Company and its stockholders to reduce the number of outstanding shares of its Common Stock as part of its intention to list the Company’s shares of Common Stock on the NASDAQ and the corresponding requirements.”
Outlook
Adding to EZTD’s mounting financial problems, the company said that it needs cash to fund operations after the significant losses and negative cash flows in the recent past. However, there is no assurance that it will be successful in raising such funds, the company further states. Additionally, the independent auditors modified their report for the last two years to express substantial doubt as to the company’s ability to continue as a going concern.
As of June 30, 2016, the total current assets were $5,088,000 while total current liabilities amounted to $15,306,000, which leads to an accumulated deficit of $49,198,000. Although the current anticipated levels of revenues and cash flow are subject to many uncertainties and cannot be assured, the company believes that it has sufficient cash to fund its operations for at least the next 12 months.
