Product authentication play YPB nabs $1m contract as shares climb off the mat

Product authentication company YPB Group (ASX:YPB) has signed a contract with a US clothing distributor in a deal it called a “major milestone”.

The Master Services Agreement with Legitifli.com will run for a period of five years, with a minimum contract value of $1m.

The contract is back-loaded, stipulating that Legitifli must order at least $33k of YPB product in the first year, scaling up to $528k in the fifth year.

It marks the first commercial outcome for YPB’s MotifMicro platform — a smartphone app that interacts with the “MM1” authentication technology embedded in products to provide a two-step certification of authenticity.

Speaking with Stockhead last October, YPB chairman John Houston said the rollout of MotifMicro had been delayed due to the impact of the pandemic.

But he hoped that over the next 6-12 months it would provide a “step-change” for the company.

Following news of the Legitifli deal, shares in YPB ticked higher by 50 per cent to 0.3c.

The US-based Legitifli operates an online reseller market for clothing and footwear products — an industry where product authentication solutions can provide a value-add for buyers and sellers.

YPB said the deal opens up the potential for further B2C distribution channels for product authentication, in addition to the B2B market.

Under the terms of the MSA, Legitifli will have “exclusivity to promote and sell YPB’s product authentication and consumer engagement solutions in its target reseller segment”, the company said.

The company flagged a two-step rollout for the partnership, starting with distribution of YPB’s anti-counterfeit labelling for Legitifli and its joint venture partner, footwear distributor Magnolia Park.

That will be followed by the release of YPB’s MM1 consumer app, which the company said is scheduled for completion by the June quarter of this year.

Through its partnerships, YPB said the incremental costs will be “negligible” and will form “a key plank in the company’s drive toward profitability” with its product authentication platform.

Commenting on the deal, Houston said the global sneaker reseller market “is an enormous industry with a major counterfeit problem, and its clear potential demands our further strategic focus”.

He said the terms of the MSA also reflect “a more determined pursuit of recurring income in our drive to profitability and, wherever achievable, it will be the template for future deals”.