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Zyber takes option agreement to acquire Iota Security

Published 07-APR-2016 11:46 A.M.


3 minute read

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Cybersecurity threats are set to grow in 2016.

A recent article by Derek Manky for CNBC states: “In the coming year, hackers will launch increasingly sophisticated attacks on everything from critical infrastructure to medical devices. We are facing an arms race in terms of security.”

The rise of cyber hacks correlates with the rise of companies with cyber security solutions.

One is ASX listed Zyber Holdings (ASX:ZYB), which listed on the ASX in February.

Zyber is building an extensive suite of security solutions to take a large and growing cybersecurity market.

According to the company the market is forecast to reach over US$155 billion globally by 2019.

Zyber was recently given an option to acquire 100% of Canadian-based Iota Security Inc.

Iota’s suite of mobile and Internet of Things (IoT) security products is highly complementary to Zyber’s existing secure file sharing solutions.

“Our strategic investment in Iota Security will significantly accelerate the growth of Zyber by opening new markets and presenting us with cross-selling opportunities as we engage with enterprise customers for the Zyber secure file sharing solution,” said Zyber CEO Clay Epstein.

“With Iota Security, we can offer a more complete extensive suite of security solutions to a large and growing cybersecurity market.”

The deal will not only give Zyber significant new revenue streams, but it will also give it a strong foothold in the IoT security market which is estimated to grow to US$28.9 billion annually by 2020.

Iota Security develops next generation ‘machine learning’ security solutions for mobile and IoT devices. It takes a patent pending approach that leverages machine-learning algorithms. These are trained to recognise the fundamental patterns of maliciousness, enabling Iota to detect 94.5% of threats including malware missed by other security companies that rely on human analysts and signatures.

Both Iota and Zyber have been working against the growing nature of cybercrime, the cost of which is estimated at $480 billion and growing.

Whilst attackers have been focused on the finance industry, hackers have spread their wings into other industries using almost undetectable polymorphic or obscured code.

As such, signature-based detection is becoming outdated.

Machine-learning technologies can now act as a stronger solution to combat cyber threats.

Under the terms of the deal, Zyber will advance Iota an initial loan of $500,000. A further $500,000 will be committed subject to Iota achieving agreed commercial outcomes.

The loan is convertible into Iota shares and carries an interest rate of 8% a year.

The companies have agreed to grant each other options that will result in ZYB acquiring Iota, if exercised, for a total consideration of $4.5 million upfront and $4.5 million in deferred – payable in escrowed shares (not cash).

Shares will be issued at the lower price of $0.05 each and the 10 day VWAP for ZYB’s shares immediately prior to settlement of the acquisition should it proceed.

“There are strong strategic reasons for Zyber and Iota Security to join forces,” said Iota CEO Yaron Vorona. “Our highly complementary cybersecurity technologies allow us to effectively address massive market opportunities. Together, we can create a group with significant intellectual property and growth potential, whilst leveraging significant synergies between the companies.

Iota is currently in discussions with multiple major banks in North America, South America and Asia, and has recently signed a first trial with a major bank in Asia.

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S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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