Food and wellness eCommerce company RooLife Group (ASX: RLG) has executed a binding term sheet agreement with Fujian Jushi Supply Chain Management, a China-based eCommerce and supply chain business. Fujian Jushi will market and sell RooLife’s portfolio of products and other requested products it orders from the Company. 

Per the agreement, Fujian Jushi Supply Chain will purchase products from RLG via a particular purpose vehicle, a wholly-owned subsidiary of RLG – NewCo – to sell through its channels. Profits from selling RLG’s products to Fujian Jushi Supply Chain will be recognised by the provision of 210 million Performance Rights, which vest and are convertible into ordinary fully paid RLG shares based on the profit value delivered to RLG.

RooLife CEO, Bryan Carr, said, “This new sales and distribution partnership comes out of the business development with our recently announced strategic investor, Guizhou Yuanzhuang Jiangjiu, to identify opportunities for RLG’s products with their retail distribution client base and suppliers, and we are excited to have appointed and agreed terms with an established online and offline sales distribution channel such as Fujian Jushi Supply Chain.” 

RooLife’s technology and services platforms manage selling food, beverages and health and wellness products. In H1 FY24, its revenue increased by 11% to $7.1 million against a loss of $946.7k. Moreover, RooLife and The Calmer Co (ASX: CCO) terminated their contract last month before the initial five-year term ended. After an ASX inquiry, CCO revealed that the fees and charges due under the agreement, compared to the sales revenue generated, efficiencies could only be generated by exiting this arrangement. 

For the Fujian Jushi agreement, the vesting of performance rights is tied directly to the profitability of its sales. So for every $85,000 in net profit RooLife earns from these sales, 5 million performance rights will vest. This translates to a vesting threshold of $3.57 million in net profit from Fujian Jushi for RooLife to fully vest all 210 million performance rights.

The issued performance rights have a vesting period of three years commencing from their issuance date. Any rights that remain unvested after this period will expire. Additionally, vested rights must be converted into RLG shares within four years of issuance, or they will also lapse.

To further solidify the partnership and align financial interests, Fujian Jushi Supply Chain Management has expressed its interest in acquiring $100,000 worth of RooLife shares at a premium of 42% above the current market price ($0.0085 per share). 

Carr added, “The fact that Fujian Jushi Supply Chain has expertise in digital marketing, eCommerce and supply chains – all the things required to sell our products in China – and we have the aligned objective to drive sales and maximise the net profit for RLG, which rewards both parties, makesthis a perfect partnership that we expect will be extremely valuable for our business and our shareholders.”

This share placement and the issuance of performance rights will be subject to shareholder and any necessary regulatory approvals.