Sale of European business and asking shareholders to issue milestone shares despite 10% miss.

Cipherpoint as part of seeking to achieve efficiencies following the acquisition of Brace168, CPT has entered into an agreement to sell select assets of its software division to ArchTIS Limited (ASX:AR9) (archTIS or AR9).
The assets comprise the IP to cp.Protect (an advanced SharePoint protection solution) as well as cp.Discover, (a data discovery and classification platform) the benefit of certain customer contracts, technology and European operations. Both cp. products complement the AR9’s NC Protect solutions. Cipherpoint sales and development staff in Europe (Heilbronn, Germany) will join AR9.
CPT will have the right to resell both sets of cp. Products as part of its ongoing business operations however will no longer incur any future development, software marketing and/or support costs.
The purchase price consists of an initial $1,400,000 in cash payable at completion with $200,000 to be escrowed until the novation of certain contracts and potential deferred consideration of up to an additional $1,000,000 in AR9 shares based on total contract values of assigned contracts to AR9 as at 31 March 2022.
Cipherpoint Chairman Ted Pretty said: “This transaction is compelling. Following the sale, CPT’s annual operating costs will reduce by approximately $1,060,000 with a very modest impact on revenue. This significantly strengthens our cashflow position. Cipherpoint will now focus on its managed security services business including Brace168. Cash from the sale will be deployed to drive further growth in our managed services business both organically and by potential acquisitions.”

 Company reports the revenue for the 12-month period for Brace was $2,688,385, representing 90% of the targeted earn out of $3,000,000.
The revenue position of Brace has been materially impacted by the government imposed lockdown in NSW as a result of the COVID-19 outbreak .Company has agreed to seek shareholder approval to vary the terms of the milestones to provide a mechanism to allow for pro- rata issue of milestone shares and conversion of performance rights based on the proportion of the sales targets achieved.

Disc: I have sold out in SM

I have been watching CPT and SEN and hold WHK (no longer in SM but in RL) and for a period all three had a good lift in share price. Each holds a particular niche in the cybersecurity space but I think it is coming to the crunch for CPT.  

They recently completed another CR with the funding for

”Further enhancements to the Security Operations Centre in North Sydney.

• Acceleration of recruitment activities for new technical staff necessary to deliver on recently awarded contracts and near-term pipeline opportunities.

• Further investment into business development and customer acquisition to seek to enable the Brace168 business to achieve its Milestone 2 revenue target comprising of annual revenues of $5 million in the 12 months to 31 March 2022.

• Pursuit of additional acquisition opportunities to complement the Company’s core business.”

It raised under 3M which considering operating costs for the last quarter were 1.64M does not leave much for growth activity.

Financial highlights for the quarter were:

• Customer receipts of $739K for the quarter compared to $105K for the March 2021 quarter.

• Operating costs were $1.64M, compared to $737K in the March 2021 quarter.

• $1.98M was paid in settlement of the acquisition of Brace168

• Plant and equipment was acquired for $32K along with $16K invested in enhancements to the Sydney-based Security Operations Centre (SOC).

• $90K was paid in settlement of brokerage and underwriting fees in connection with the previous quarter’s capital raise.

• A facility of $300K was accessed during the period to meet short term capex requirements to  support growth

• The Group held $1.24M in cash as of 30 June 2021.

30M options at 8c expire Feb 23

So revenue increased 7x and costs 2.5x but the annual report stated that lockdowns had affected the ability to install 1 of their 3 products. This will affect AUS revenue but they also have significant overseas business which hopefully is reopening.

If they can continue the growth with apositive return from the brace168 acquisition things should improve but the Sydney lockdown can’t be helping.

CIPHERPOINT ANNOUNCES STRATEGIC RESELLER AND MANAGED SERVICES SECURITY PROVIDER AGREEMENT WITH ISRAEL BASED XM CYBER

Cipherpoint Limited (ASX:CPT), Sydney, Australia 17 March 2021 - Cipherpoint is pleased to announce that it has signed a Reseller and Managed Services Security Provider Agreement with Israel based XM Cyber. The Agreement will enable CPT to offer XM Cyber solutions, which are intended to be offered through its proposed subsidiary Brace168.(Note: only signed off on this acquisition 16/3/21 see below)

XM Cyber’s ability to automate and systemise attack simulation provides a unique and cost-effective approach to identify and mitigate security risks before they are exploited. Attack simulation is now a critical part of Enterprise cyber defences and is rapidly growing to be a billion dollar market within the much larger cyber security market.

The system-based capability is ideally suited for integration with the managed services of Brace168. CPT intends that Brace168 will offer XM Cyber capability as an enhanced service on its cyber security platform across the financial property, manufacturing, infrastructure, technology and health sectors (including both ASX50 and ASX200 companies).

Brace was established in 2017 and offers managed detection and response services to medium and large-scale businesses and enterprises, based in North Sydney. The functionality of the managed detection and response platform of XM Cyber is intended to be deployed widely by Cipherpoint through the Brace168 business. It represents an opportunity for Brace to market to new clients or extend current offerings to existing clients to generate incremental managed service revenue.

XM Cyber is the global leader in Attack-Centric Exposure Prioritization that closes gaps in cloud and physical network security. Customers can rapidly identify and respond to cyber risks affecting their business-sensitive systems because the platform continuously calculates every potential attack path. Detailed remediation options are prioritized based on the potential impact, including exploitable vulnerabilities and credentials, misconfigurations, and user activities.

XM Cyber was founded by top executives from the Israeli cyber intelligence community and has offices in the US, UK, and Israel. In July 2020 XM Cyber closed a $17 Million Series B Funding Round with Macquarie Capital, Nasdaq Ventures, Our Innovation Fund, and Swarth Group. XM Cyber has been recognised by numerous industry awards including Named a Top 100 Cybersecurity Startup for 2020.

Uri Levy, XM Cyber SVP Worldwide Sales and Field Operation said ‘This partnership with Cipherpoint is an exciting development for XM Cyber to extend its platform through a managed service offering initially in the Australian market then beyond. Both parties have already identified some clear opportunities they will actively pursue. We welcome the CPT/Brace168 to the XM Cyber partner network.”

16/3/21

CIPHERPOINT ANNOUNCES SATISFACTORY COMPLETION OF BRACE168 DUE DILIGENCE, SIGNING OF THE SALE PURCHASE AGREEMENT AND PROVIDES BUSINESS UPDATE

.....The Board believes that the acquisition of Brace168 will create new momentum for CPT and, in respect of the proposed acquisition, provides the following update:

• 1 The Brace168 team has advised it is on track to achieve strong year on year growth in recurring revenues. Key top ASX50 and ASX200 listed customers have agreed to renewals with upside from an expansion of services revenue. Additional team members are being recruited for business development and customer success. The Brace168 sales pipeline continues to build.
•  CPT has commenced the process of establishing an additional managed security service operation in Europe by leveraging its existing presence in Germany and capitialising on the strong desire for localised service providers in this market. It intendsto host its services within the scalable data center space of Stackit a member of the Schwarz Gruppe - one of Europe’s largest family owned companies. Following completion of the acquisition, CPT intends to expand the reach of Brace168 services. Further details of the proposed expansion will be released post completion of the Brace168 transaction.
• 3 Brace168 continues to augment its core managed services by expanding its partner program through relationships with Checkpoint, Skybox Security and Micro Focus and reseller relationships with Cisco, Juniper, and Meraki, to name a few. CPT hopes to be able to make further announcements regarding this expansion in the short term.
•  The core existing CPT software business sales pipeline for both the cp.Protect and cp.Discover products continues to show potential notwithstanding the continuing lockdowns in Europe and longer sales cycles. CPT continues to progress discussions with key potential channel partners and will provide updates in due course.

see attached

Disc: On my watchlist since latchdrgon's post 4 months ago