KME has taken a 70% stake in the US based business Tutorfly.com. (‘Tutorfly’). McGrath will take a 70% stake in the business for an initial payment of USD 500,000 via its newly incorporated subsidiary, Tutorfly Holdings Inc. The remaining 30% will be held by the founders through their existing company, Tutorfly Inc. Kip McGrath will make a further payment of USD 500,000 to Tutorfly Inc. when Tutorfly achieves USD20,000 per month net revenue targets (calculated as revenue less tutor fees).
Under the Agreement Kip McGrath grants an option for Tutorfly Inc. to sell its remaining 30% stake to Kip McGrath for USD 2,000,000 in cash, an equivalent number of Kip McGrath shares or a mixture of cash and shares.
Tutorfly is an incubator tutoring business concentrating on the peer-to-peer section of the market, which achieved rapid growth during its initial start-up phase. The business has developed a scalable technology stack which demonstrated rapid growth in the 2020/21 US school year, increasing quickly from 1,300 to 5,500 active students, peaking at 3,200 hours of tutoring per month.
KME is dipping the toe into the US market which is considerably larger than the Australian market. This may or may not be a good move as I'm assuming that competition will be fierce. At least the bet is quite small and the upside potential large.