The MyFiziq Ltd (ASX: MYQ) share price is racing higher on Friday morning.
At the time of writing, the dimensioning technology provider's shares are up 3.5% to $1.24.
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Why is the MyFiziq share price racing higher?
Investors have been buying MyFiziq shares after it provided an update relating to a funding agreement entered into with Bearn LLC.
Bearn provides a multi-sided vendor backed platform that allows for the gamification and engagement of health with its users. Bearn users can earn actual cash for improving their health, fitness and wellness. It reportedly has 56 million pre-registered users.
According to the release, MyFiziq and Bearn have been working together over the past 60 days to formulate a marketing and expansion plan. This plan is targeting both the delivery of 1 million active monthly users to MyFiziq and the required expansion to the Bearn platform to allow for the volume provisions required to support the large already existing pre-registered users.
The company explained: "Bearn approached MyFiziq wanting to execute on a large-scale campaign to their pre-registered users. It was outlined by Bearn management that the scale of which they had received pre-registrations would not be possible based on the existing specifications of the Bearn platform. To achieve this outcome, Bearn required a small injection of development capital and then a further joint amount to execute on a direct to preregistration onboarding campaign."
In light of this, MyFiziq has agreed to fund a total of US$500,000 to Bearn over four tranches. This comprises an initial US$200,000 paid for the platform scale to be implemented, followed by three US$100,000 payments for the direct onboarding campaign.
The loan is secured over Bearn's software and separately a pledge over the membership interests of Bearn's founder, Mr Aaron Drew.
Why doesn't Bearn get funding elsewhere?
With apparently 56 million pre-registered users, it is quite odd that Bearn was unable to get funding from other sources. Traditionally, you would expect private equity to be champing at the bit to inject cash given those numbers.
However, MyFiziq's CEO Vlado Bosanac, who the ATO is reportedly pursuing for more than $9.34 million in unpaid taxes, explained that this was due to its inability to roadshow and source new capital because of COVID-19.
He commented: "Bearn is a great company, and it was roadblocked due to the US COVID lockdowns and inability to roadshow and source new capital. I saw this as an opportunity to work with an already established partner and to enable Bearn to reach our joint goals."
"With 56,000,000 potential users, it would be a shame to not empower Bearn to onboard a number that is significant to MyFiziq and a substantive move forward for Bearn. The sheer number of pre-registrations Bearn has confirmed across all of the partnerships demonstrates they have an audience with an immediate desire for the Bearn product offering. Due to the exponential growth over the recent months, it has caused Aaron Drew CEO of Bearn more concern than joy."
"MyFiziq understands the requirement for uninterrupted scale for the users and I was happy to act on the needs of our partner and the potential it brings to MyFiziq. Aaron is very confident on the ability to deliver the number once the platform has the depth required to support the proposed influx. The launch of new improved Bearn app has been targeted for April 2021, giving Bearn ample time to make the platform improvements and engage the marketing campaign for the onboarding process," Mr Bosanac concluded.
