YPB to Supply Breakthrough Technology To China’s Leading Security Label Supplier, PanPass Inc.

YPB Group Limited (ASX: YPB) is a provider of revolutionary anti-counterfeit and retail engagement solutions, with offices in Australia, China, Singapore, Thailand and the USA. On 16 September 2019, YPB’s stock zoomed up by over 33% on ASX by close of trade, owing to news of YPB signing its first client for its breakthrough Motif Micro 1 (MM1) smartphone authentication technology.

Only last week, the company had announced that it had achieved smartphone readability of a high security authentication mark under “real world” conditions, opening the doors of mass consumer good markets to YPB. Prior to this announcement, the company had announced regarding a new three-year Master Supply Agreement (MSA) with PT Combiphar, a leading Indonesian pharmaceutical and wellness company.

First Client for Motif Micro

The company has roped in PanPass Inc., China’s leading security label supplier (Panpass Inc.’s market share exceeds the total of the second to fourth companies combined), to become its first client for the Motif Micro technology. The company has signed a supply agreement with PanPass, under which YPB’s first “initial adopter” has agreed to use YPB’s solution to protect its security labels for 6 months period, making it the first commercial client for the MM1 authentical solution.

YPB Executive Chairman John Houston highlighted several merits of its smartphone authentication technology, which are as follows:

• It greatly expands the company’s addressable market by shifting from its historical B2B sales to a B2C consumer marketing sales
• It will provide brands with a direct, personal, low-cost channel to a willingly engaged consumer, which can be extremely valuable to brands

PanPass Inc. Overview

Established in the year 1996, PanPass Inc. is the largest product data identity management service provider in China with 6 service centers and 48 branches. PanPass offers a range of security label solutions to its customers and prints around 15 billion security documents each year. Panpass prints around three billion product security labels each year largely with “QR” codes.

PanPass is planning to use YPB’s revolutionary solutions to safeguard its own product security QR codes.

Main Highlights of Supply Agreement

• YPB’s first “initial adopter” has agreed to use YPB’s solution to protect its security labels for 6 months;
• The supply agreement contemplates a further minimum 2-year licence agreement either at the end of the Initial Program or at PanPass’ request including an upfront license fee, a supply fee and a minimum order quantity;
• At this stage, it is not possible to determine the likely annual revenues from the contract.

What is Motif Micro technology?

Motif Micro is an MIT patented technology which involves nanoparticles that can be applied to or embedded in a range of materials that allows the smartphone to determine the presence of the Motif Micro material.

Recent key technical advances that have been made in relation to the Motif Micro technology are:

• Successful confirmation of authentication mark with an unmodified smartphone;
• Smartphone readability under normal artificial lighting;
• Capability to scan at a distance; and
• Readability even when printed on curved surfaces, such as bottle caps and lab.

Recent Updates

A major technical breakthrough of Motif Micro: YPB recently achieved smartphone readability of a high-security authentication mark under “real world” conditions, a major technical breakthrough that greatly increases YPB’s addressable market and its commerciality.

This breakthrough technology will help YPB to create a next-generation digital marketing channel to every consumer’s pocket or purse and by combining this with YPB’s next-generation rare earth tracer material, Motif Micro1, and the ProtectCode smartphone app, YPB will also be able to empower mass market consumer engagement.

Extension of Combiphar Agreement: YPB recently signed a new three-year Master Supply Agreement (MSA) with PT Combiphar, an important YPB client since September 2016 and the leading user of YPB’s ProtectCode^TM product authentication solution.

Major highlights of MSA:

• Extension of both product authentication and consumer engagement solutions
• Life-of-contract revenues expected to be circa A$1m
• Covers expansion to additional SKUs beyond cough syrup currently covered

Progress made in the first half of FY19:

• Engagement with prominent brands in all focus sectors is high;
• Access partners such as Orora (ASX:ORA) and Impact Tubes are advancing plans with targeted customers; New channel partners are actively working with YPB in presenting solutions to their customers;
• ProtectCode has become a readily understood and thus more saleable product;
• Connect is now a robust software platform capable of recording authentication scans and engaging directly with consumers globally (anywhere there is a mobile network), including behind the technically challenging great firewall of China.

On 16 September 2019, YPB’s stock closed the day’s trade at a price of A$0.008 with a market capitalisation of circa A$6.9 million.

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