After $323K revenue last quarter for a loss of $500K the first contract from an ASX100 company Tabcorp. Value of $70K is not going to keep the lights on. Further raise coming?

The Company is pleased to announce that a First Cyber Risk Program SaaS subscription has been contracted with an ASX 100 Company for an Independent Cyber Audit based on external, non-invasive continuous monitoring for 12-months to identify, prioritize, and validate cyber risks to an organization's revenue and reputation. Additional features have been scoped for implementation in 2024.

Terry Roberts, Executive Chair of WhiteHawk, commented, “ Although WHK has had contracts previously with small Australian Clients, we have now contracted with a large Australian Company for an annual subscription of our proven, AI-Based Cyber Risk Program, with the ability to add key features throughout 2024. Whilst Phase 1 revenues from this contract are A$70,800, there is an inbuilt ability to add fee paying additional services throughout the life of the contract. This is an important contract that gives us material visibility in the Australian market to complement our success in the US market over the past 5 years, enabling WHK to demonstrate the impact of our AI based Cyber Risk Program SaaS subscriptions across the Australian Large Cap Sector.”

Only $92K receipts for the quarter and a burn of $1.16M. $100K cash left and a $680K finance facility. Another CR coming and SP of 1.4c. Unless they can pull a big contract out it is not looking good.

Global Social Media Platform Company new contract for US$1.2M will be invoiced monthly. Payment for the invoice issued in December of US$120K was received in in January 2024.

Invoiced year to date is USD $1.7M, invoicing USD $188K in the fourth quarter. • USD $292K in receivables as of 31 December 2023.

Award expected no later than 1st qtr. 2024 for U.S. Department of Homeland Security, Cybersecurity and Critical Infrastructure Agency (CISA) ACTS 5YR Contract which Peraton responded to as Prime Contractor for all DHS cybersecurity capabilities. Contract scope is USD $2.4B per YR with teaming agreement for WhiteHawk, as a sub-contractor for Cyber Technology Insertion and Cyber Supply Chain Risk Management (CSCRM) capabilities.

WhiteHawk continues to manage expenses within planned budget, expending US$255K on average per month in total operating expenses over the last two quarters of 2023 prior to recent cost reductions

The Company is seeking shareholder approval at the General Meeting of the Company on 20 February 2024 to raise up to A$2,500,000 for future working capital

Company has access to additional A$1m from Lind Partners, which will be considered if and when appropriate. 

Held in RL value $500 time to take losses?

Contracts have not appeared and with cash running low WHK announced a non-renounceable Rights Issue. Could still turn around for the year but potential revenue is lumpy and winning contracts seems to be a very slow process

(1) fully paid ordinary share in the capital of the Company (Share) for every six (6) Shares held at an issue price of A$0.032 per Share, to raise up to A$1,368,323 (Rights Issue). The issue price of A$0.032 represents 15.79% discount to the closing share price on 18 July 2023 or 13.5% discount to the five day VWAP on 18 July 2023. Funds to be used as follows

Then announced contract renewal for its cyber risk radar. US Federal Government contract announced in July 2020 now extended for 4th year valued at USD $672K base, with option for additional USD $505K services.

4C showed a loss of $700k on revenue of $103K and $1.8M loss for 1st half.

Invoiced second quarter to date is USD $903K. • USD $173K in receivables as of 30 Jun 2023. • Finished the 2nd quarter of 2023 with a cash position of USD $311K and no debt.

Small position in RL

In Feb 21 WHK was trading at around 30c.

At the end of today they were 7.8c and from the updates I've seen, they are in a stronger position than before. I haven't had a chance to dig in deeper, but would like to given their improving revenue.

Either the market was very wrong before, or it's wrong now.

Bear Case

•Pay S3 Consortium to write articles promoting the company and have ads on marketindex.com.au

•Management is incentivised to increase share price

•Have relied on equity swaps with RiverFort Global Opportunities to raise cash resulting in some dilution to shareholders

•Spent 10% of revenue in 2020 & 20% in 2019 on marketing*

•Negative free cash flow of ~$1.1M FY 2020; however, trending positively since

•Gross margins of 49% aren’t particularly strong for a tech company

•Lack pricing power

•Is there a competitive advantage?

*No note is provided but some if not all of this would include payments to companies such as S3 Consortium (i.e. Next Tech Stock) for promotion.

“The minute I hear executives focused on stock price my ears always perk up. You can’t serve two masters. Are you focused on your business or are you focused on the price of the equity?”

Zach Abraham – Bulwark Capital Management

I looked at WHK in 2020 and nearly invested. Despite the share price appreciation and subsequent fall, I’m glad I didn’t. Management appear focused on the equity (share price) as opposed to the business. CEO Roberts is entitled to as many as ~48M shares upon reaching certain milestones. There are 230M SOI for context. These milestones focus on share price appreciation and are easily achievable. In addition shareholders’ money is being used (up to 10-20% of total revenue) to promote the company in order to increase her stock compensation. I’d much rather management be incentivised to increase shareholder returns than line their own pockets at my expense.

WHK has some appealing aspects to it, in particular very strong tailwinds in the cybersecurity sector, expenses under control and approaching positive free cash flow and is founder led with skin in the game. However, my lack of trust in management means the bear case wins over the bull.

Bull Case

•Founder led with Ms Roberts owning 9.81%

•Modestly paid management and board – CEO earns $161,000

•No recent capital raise(s)

•Strong revenue growth; however, this is off a low base

•Expenses are growing much slower than revenue

•Cash from operating activities has improved over last 3 4Cs - $0.8M, $0.34M, & $0.176M

•CEO has a strong track record & is well regarded in the industry

•Strong balance sheet

•Strong tailwinds for cybersecurity industry fuelled by CMMC* being rolled out through to 2026 in the US

*Disclosure: not held

HIGHLIGHTS

• Invoiced US$2.1M in 2020 more than doubling invoiced US$1M in 2019.

• Collected US$953K relating to sales receipt from customers.

• Invoicing for the 4th quarter 2020 is US$273K.

• US$181K in receivables will be collected in January 2021.

• Executing on Phase 2 of current contract with U.S. Department of Homeland Security (DHS) CISA QSMO Cybersecurity Marketplace, as sub-contractor to Guidehouse (formerly PWC Federal), for $1.5 to $1.8M USD Fiscal Year 2021, starting October 2021.

• Executing on first Prime U.S. Federal Government CIO Cyber Risk Radar contract for base year and 4 option years, not to exceed $1.18M USD per year.

• Executing on next phase of Cyber Risk Program $400K USD contract via a Global Consulting Firm in direct support of a Global Manufacturer, including: advanced risk validation by Red-Team, prioritization and mapping to Company risk priorities and how to best mitigate top risks in 2021 via innovative best practices and solution options.

• Executing on and will be responding to new Task Orders, expected in 2021 first quarter, on second and third U.S. Federal Government Department CIO Contracts.

• Signed partnership agreement with a Global Insurance Group, with intent to tailor WhiteHawk online platform as a service for business clients has been delayed to March 2021.

• Engagement continues on two Proofs of Value (POV), one in the U.S. Financial Sector and one with a U.S. Government Agency.

• Sontiq/WhiteHawk Small Business Suite offerings to two U.S. Financial Institutions with 5,000- 10,000 current clients, as an annual SaaS contract, are under review by each institution’s new client services and risk teams respectively.

• New near term partnered opportunities with General Dynamics Information Technology (GDIT) and Red River.

• Developed, vetted and executing on new 2021 Strategy, to include growing Sales Pipeline across U.S. Federal Government, Defense Industrial Base and Industry, with broadened Go to Market Strategies in the U.S. and now including the Australian market. 

• Underwent the due diligence to become an ESG (Environment, Social, Governance) Registered company, a new standard in measuring the sustainability and ethical impact that a company makes.

• COVID-19 Impact Update: o No delays in product line development, execution and client delivery o Sales engagement and virtual demo’s underway continuously o Able to hire top talent to meet current contract requirements and work and collaborate virtually.

• Continue to experience contract scoping and completion delays of 60 to 90 days, with government and industry procurement teams. Welcoming the 2021 U.S. Administration’s renewed focus on Cyber Risk and Resilience and the US market heightened awareness following on the SolarWinds hack, affecting both US Federal Government and major corporates.

• WhiteHawk finishes the 4th quarter with a cash position of US$2.4M and no debt.

DISC: I have a small holding

App 4D - Half Year Report

Revenues up 106%
Loss down 23%
Loss $1.3M

https://asx.api.markitdigital.com/asx-research/1.0/file/2924-02273981-6A993418?access_token=83ff96335c2d45a094df02a206a39ff4

I do not hold WHK