YPB Group secures first MotifMicro commercialisation deal through A$1 million contract with major US sportswear reseller
YPB Group Ltd (ASX:YPB) has secured a Master Services Agreement (MSA) with Legitifli, a product authentication solutions distributor focused on the US reseller market for sportswear apparel, sneakers, streetwear, accessories and collectables. Based on the size of the sportswear and streetwear reseller market, the value to consumers of authenticated product, with sneakers alone estimated to be worth over US$6 billion per annum, and with Legitifli’s business plan, there is ample scope for revenues beyond the minimum contract value of A$1 million. The agreement is a major milestone for YPB, marking the first commercialisation of YPB’s revolutionary smartphone-based authentication solution MotifMicroTM. Template for future deals YPB Group chief executive officer John Houston said: “The MSA with Legitifli is a tremendous, historic milestone for YPB, being the first monetisation of our investment into MotifMicroTM and an explicit acknowledgement of its commercial value, relevance and appeal. “In addition, the entry with a dynamic partner into a vibrant vertical with critical need for product authenticity and starting in the huge US market offers obvious revenue prospects. “The global sneaker reseller market is an enormous industry with a major counterfeit problem and its clear potential demands our further strategic focus. “I should also highlight the minimum contracted revenues in the MSA as reflecting a more determined pursuit of recurring income in our drive to profitability and, wherever achievable, it will be the template for future deals. Nw partner signings “We have had increasing success in recent new partner signings with multi-year, minimum-value contracts. “We look forward to working with Legitifli to implement YPB’s solutions and jointly grow both businesses. “Despite the delays and impediments of COVID-19, our new business pipeline is building and is expected to gather momentum as MM1’s launch progresses over 2021.” Terms of the deal Under the MSA, Legitifli will have exclusivity to promote and sell YPB’s product authentication and consumer engagement solutions in its target reseller segment in the territories of the US, Canada and Australia. Legitifli will implement YPB’s solutions in early 2021 with its joint venture partner Magnolia Park, a specialist sneaker and accessories reseller based in Los Angeles. Implementation will be conducted in two phases: ➢ Phase one – effective immediately, YPB will provide Legitifli and The Magnolia Park with a co-branded, anti-tamper and anti-counterfeit label embedded with YPB’s T2 original tracer-scanner technology. ➢ Phase two – MotifMicro1 (MM1) technology will roll out as soon as YPB releases the MM1 consumer app estimated to be completed by the second quarter of 2021. Simultaneously, The Magnolia Park will adopt YPB’s consumer engagement SaaS solution, CONNECT, allowing it to build its knowledge of and relationship with its consumer base. The MSA stipulates a minimum contract value over the five-year initial term of just over A$1 million, including GST, via progressive annual increases in minimum order quantities. To maintain exclusivity during the initial term, the licensee must order YPB product to the GST-included value of $33,000 in the first year, $115,000 in the second year, $165,000 in the third year, $264,000 in the fourth year and $528,000 in the fifth year. Legitifli is able to extend the MSA for a further three years after the initial term provided the minimum annual label quantities ordered are equal to or greater than those in the final year of the initial term. First commercial deal This will be the first mass implementation of the MotifMicroTM solution and it is expected to generate widespread interest in the sector, particularly in the US. It will also mark the entry of YPB, via its channel partner Legitfli, into a new, dynamic specialist vertical in the world’s largest consumer market. Incremental costs to YPB are negligible and the inherent profit leverage to this incremental revenue is a key plank in the company’s drive towards profitability. MotifMicroTM MotifMicroTM permits forensic quality self-authentication of products by consumers with unaided smartphones. Via a YPB-developed artificial intelligence (AI)-based software app, the smartphone interacts with YPB’s MM1 novel technology embedded in the product to give both physical and digital dual-security confirmation of authenticity. The ubiquity of the smartphone allowing rapid adoption, the ultra-high volumes of consumer goods markets, and YPB’s per-unit-volume pricing model, together imply rapid and significant revenue growth potential of MM1 as the value of proven authenticity is increasingly recognised by both brands and consumers.