0GCB Cognosec Ab

 
TIDMCYB1 
 
 
   Open Letter to CYBER1 Shareholders 
 
   London United Kingdom -- 06 May 2020 -- Cyber Security 1 AB (Publ) (the 
"Company") ("CYBER1") (Nasdaq First North: CYB1), has today published an 
open letter from the Group CEO, Daryn Stilwell. 
 
   "Dear fellow shareholders, 
 
   I am writing to you following the publication of our FY20 Q1 results and 
the recent announcement relating to the application for admission into 
company reorganisation process to specifically relay my thoughts and 
comments on my first 90 days as Group CEO, on how the Group progressed 
in 2019 and, what lies ahead for Cyber1 in these turbulent times. 
 
   Looking back for a moment, FY19 was another exceptional year in terms of 
progress with the overall strategic growth plans of Cyber1.  This 
progress was, as we are all too aware, overshadowed by the unexpected 
and tragic event of the passing of Kobus Paulsen in late December.  With 
this came a number of significant challenges for Cyber1, including a 
change in overall leadership, as well as a material narrowing of 
opportunities to obtain operating capital.  The latter being significant 
in that the Cyber1 strategy had been focused on expansionist M&A and 
dynamic organic revenue growth underpinning the Cyber1 platform, both 
requiring additional externally sourced growth capital. 
 
   The Group is responding to these, and other challenges, by sharpening 
its focus and strengthening its efforts to maximise its existing value 
as further detailed in this letter. 
 
   As context, Cyber1 had been set up as a Cyber Security growth platform 
to attract fragmented parts of the cyber security industry to, in a 
three phased approach, achieve a wholistic and end to end Cyber security 
product and service provider.  The strategy is briefly touched on below: 
 
   CYBER1 Strategy 
 
   The first phase was the acquisition of Value-Added Distributions (VAD) 
and Value-Added Resellers (VAR) networks, both to acquire vendor 
relationships and customer relationships, and to drive organic and 
inorganic revenues to achieve a critical mass.  These are the existing 
subsidiaries in the group (i) Credence Security, (ii) DRS, (iii) Protec 
and (iv) Cognosec.  As part of this phase, Cyber1 was then listed on 
Nasdaq First North Growth market to enhance transparency and to allow 
for exposure to investors to support its growth funding discussions and 
needs.  The first phase was complete as of January 2019. 
 
   The second phase to be implemented during 2019 was the acquisition of 
Cyber security advisory/consultancy business to overlay with the VAD and 
VAR business.  This was to provide a structured approach to the pure 
services element and to build on the profile and credibility of the 
Cyber1 platform as a truly holistic Cyber security business.  This 
second phase is also intended to support and address the margin pressure 
in the VAD and VAR businesses, experienced in the first phase, and bring 
the group into EBIDTA positive territory.  The respective acquisitions 
had been identified and were in the final stages of completion as of 
January 2020. 
 
   The third phase is the acquisition and/or organic build of the Group's 
existing Managed Service Offering to further drive margins, increase 
annual recurring revenues, and to support the scalability of the first 
two phases. 
 
   The vision for the Group was for Cyber1 to become the quintessential 
cyber security platform and to be at the forefront of reshaping the 
delivery of cyber security services for customers.  The strategy thus 
far has delivered revenues of just over EUR14m in FY16 for the Group, to 
revenues of just under EUR70m at the end of FY19, and with forecasted 
revenues, both from organic and M&A, in excess of EUR145m with the Group 
entering into profitability for the first time in the latter stages of 
FY20. 
 
   This strategy was highly dependent on the support of external parties to 
fund its operationally intensive and cost heavy implementation. 
 
   Refocus of the Strategy 
 
   In Q1, the Group has had to pause and take stock of the development of 
the second phase of the strategy and to specifically evaluate what would 
be in the best interests of shareholders moving forward.  Following an 
Extraordinary General Meeting at the end of January, a new board of 
directors was appointed and with that the appointment of myself to take 
on the role of Group CEO.  The change in leadership and the reflection 
on what is next for Cyber1 has resulted in a temporary shift in the 
strategic intent of the Group, away from the expansionist M&A and 
revenue growth to an extended period of stabilisation and integration. 
This extended period of stabilisation (referred internally as "Operation 
Atlas") will be earmarked by a move towards the streamlining of 
operations, maximising of synergies across the Group from integration 
activities, and a more towards profitability. 
 
   The activities in relation to the second phase of the Cyber1 strategy 
are now, while the relationships with the various M&A targets remain 
open and good, on an indefinite hold until the completion of Operation 
Atlas.  This is anticipated to be at least until the end of FY20, at 
which time the board will reassess the situation.  This hiatus will 
specifically include all of the activities announced in relation to the 
exploration of a US listing through a Special Purpose Acquisition 
Company (SPAC). 
 
   A number of activities in terms of Operation Atlas have already 
commenced and with some of them already starting to have a significant 
effect for the Group.  By the end of the summer, head office operations 
for the Group will see up to a 70% reduction in operating costs as a 
result of the focus of resources on integration and profitability. 
 
   CYBER1 Challenges 
 
   At the end of FY19, the Group was left with a number of material 
challenges and as a consequence the board has taken a number of 
strategic decisions to address these.  At the end of FY19, the ITWAY 
acquisition of entities in Turkey and Greece remained in a state whereby 
a number of post completion conditions had not been fulfilled.  Despite 
last minute negotiation attempts on both sides, the parties were not 
able to come to a suitable way forward and parted ways.  This is a 
disappointment development, as the transaction was a long way down the 
path to integration into the Cyber1 Group. On a positive note, this 
development will allow the current resources to be focused on the 
delivery of Operation Atlas for the shareholders.  The departure of the 
ITWAY companies will not affect the long-term core strategy, nor affect 
Cyber1 in any of its key strategic markets. 
 
   In terms of further challenges, as a result of the previous M&A strategy, 
and the Group's anticipated move into the US with a SPAC, the Group 
incurred a significant amount of financial, legal and professional 
advisory support fees that remain a burden to the Group.  Cyber1 
maintain good relationships with these firms and are working with them 
to come to suitable terms. 
 
   In addition to the above, a number of non-commercial decisions were 
undertaken by the previous management of the Group, which resulted in 
the over-extension of the available Cyber1 commercial resources at a 
period of significantly reduced cashflow resulting from its M&A 
strategy.  The current Cyber1 executive team and management are in 
negotiations with vendors and customers with the specific aim to resolve 
this going forward and move towards profitability as part of Operation 
Atlas. 
 
   Despite the significant operational revenue growth displayed by the 
Group in each year since its listing on Nasdaq, and the unrelated 
performance in the Cyber1 share price despite the year on year growth, 
the Group has been unsuccessful in being able to raise material growth 
capital to support its strategic plans.  This has left little room to 
manoeuvre.  The board is considering a number of options to address both 
these challenges, which will be communicated to the shareholder basis at 
the appropriate time in due course. 
 
   None of these challenges are insurmountable. 
 
   COVID-19 
 
   In the current turbulent climate, I would like to update shareholders on 
the matters that relate to the COVD-19 outbreak and the Cyber1 response. 
 
 
   The first and immediate impact assessment undertaken by the Cyber1 
executives was to ensure the Cyber1 Group staff and their families are 
protected and well informed by repeating and asking them to follow the 
local advice from the governments in each jurisdiction. 
 
   We will continue to monitor the situation as it develops. 
 
   In the second impact assessment, we have been evaluating our business to 
see if this will affect any of our customers and considering how best to 
ensure they are not impacted from a service delivery perspective, as 
well as from additional exposure to risks from criminal and/or 
fraudulent activities.  This impact assessment is underway and 
fortunately given the industry we are in and the manner in which our 
staff operate, already for the most part working remotely will not have 
as much of an impact as it would with some of the other industries. 
 
   In terms of our wider business and customers, we can at this early stage 
report that some of the business has been positively affected with a 
surge in demand for products related to cyber security in a home working 
environment while other areas have potentially been negatively affected 
with budgets allocated for spend in Q2 being placed on hold.  This has 
been most prevalent with Credence Security (VAD) where most of its high 
revenue countries are under full lock down with fully restricted 
movement of its population.  Our South and East African operations have 
also felt the effect with the change in the local exchange rates, but 
this is being managed to mitigate any material effects. 
 
   The third impact assessment would be a strategic reaction to a 
longer-term plan resulting from a change in our customer behaviour 

and/or their needs as a direct response to how business may change in 
the future.  This is as yet unknown, and we will monitor this with our 
customers and vendors as the situation develops.  We have taken a number 
of anticipatory and precautionary measures into our planning and 
forecasting for the remainder of FY20. 
 
   Government funding opportunities -- COVID-19 
 
   We are exploring the various funding packages being offered by 
governments related to the COVID-19 pandemic and we have been in touch 
with our banks in the UK and Sweden for advice as well as within our 
network of advisors. 
 
   CYBER1 Group Swedish reorganisation / reconstruction process 
 
   Further to the recent announcement, the Cyber1 board has, during the 
course of its evaluation of the Group for purposes of Operation Atlas, 
considered a number of options available to it to allow for a period of 
stability and confidence to be restored to its investors and internal 
and external stakeholders. 
 
   It has been decided to apply for a Corporate Reorganisation Proceedings 
(företagsrekonstruktion) in Sweden, which will allow the company a 
period of up to 3 months (which may be extended) to agree a compromise 
with its creditors and a suitable payment plan of up to 12 months going 
forward. 
 
   Throughout the period of reorganisation, the Cyber1 Group will continue 
to trade as normal (with some actions requiring the consent of the 
administrator where the position of existing creditors may be concerned) 
and such the process does not affect the day to day operations of Cyber1 
or any of its subsidiaries. 
 
   It is the belief of the board of directors that the application for 
Corporate Reorganisation Proceedings (företagsrekonstruktion) is 
the best option, given the stable underlying business operations, to 
provide Cyber1 with the stable platform to encourage investment, to 
address the challenges identified above and to allow the management of 
the Group to implement Operation Atlas. 
 
   In summary 
 
   Through Operation Atlas and beyond, we will be focusing on investing in 
the capabilities we need, the knowhow and the talent to continue to 
create value for you, our shareholders. 
 
   We also want to thank you for your continuing support, your confidence 
and above all for your trust. 
 
   Rest assured that our passion for Cyber security, and our passion to 
fulfil the initial strategic intent for the Group in a sustainable 
manner will lead us to generate the sustainable, profitable returns you 
rightfully expect from us." 
 
   Daryn Stilwell 
 
   Group CEO 
 
   This information is information that CYBER1 is obliged to make public, 
pursuant to the EU Market Abuse Regulation. The information was 
submitted for publication, through the agency of the contact person set 
out above, on 6 May 2020 at 19:00 CET. 
 
   Certified Adviser 
 
   Mangold Fondkommission AB is the Company's Certified Adviser. 
 
   Telephone: +46 (0)8 5030 1550 E-mail: 
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info@mangold.se 
 
   FOR FURTHER INFORMATION, PLEASE CONTACT: 
 
   European Investor Relations Contact: 
 
   Tim Metcalfe / Zach Cohen 
 
   CYBER1 Email: 
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cyber1@investor-focus.co.uk 
 
   US-Investor Relations contact, CYBER1 
 
   Matt Glover: U.S Investor Relations contact, CYBER1 
 
   Email: 
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cyber1@gatewayir.com 
 
   ABOUT CYBER1 
 
   CYBER1 is engaged in providing cyber resilience solutions and conducts 
its operations through physical presences in UK, Sweden, Kenya, South 
Africa, United Arab Emirates and the United States. Listed on Nasdaq 
First North Growth Market (Nasdaq: CYB1.ST) and as an American 
Depositary Receipt (OTCQX: CYBNY), the Group delivers services and 
technology licenses to enhance clients' protections against unwanted 
intrusions, to provide and enhance cyber resilience and to prevent 
various forms of information theft. CYBER1 had revenues of 68.73m EUR in 
2019. For further information, please visit 
https://www.globenewswire.com/Tracker?data=-vMoywxOxvWPh7tANUbaogJzpMyfJJRg-PGY_b3TgK1MEP9d-4dicquYd6yOK80XGsV8byXteaWSusZaxXiRYuHtnRTZNNuHCxAnf5XXhrUPEUn5Oe0AjmFmrGWBG_Q4r1BEKmufclA3XXRiovVTd8CD8P__87vSuP_JraLHiu1C9RVF8WLgLdhzPhocf2opFglqAl5Om9Wz1odIorxio27Ma5aCz48K8_aeWzH2mBGYwu1hSayfnwNaLkCx9LwBcROsaQijVkgi9I8kZTuAd2pmEmjjBYI3HZ5zHMljCATGao41joRBfebbQ70dq1ajadxzWj60fQGfax3OkfpgUc2DQon2ZZWh0m4MP8cqaDtZge5QxO34d0nJSYv8dAetNidfFYEhtYL8VnU1d-x4eBKbgsrq3csfIj0lw7sngD_jqbUquf8GQhkfdlVpqbwXNGperzmjmmU5Z720oCM-kZ91cyPSZf0Flx_9GoDiqcHMM1625UMMShPwxkGJsAla 
www.cyber1.com/investors. 
 
   For further information please visit: 
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www.cyber1.com 
 
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https://cyber1.com/cyber1-investor-information/ 
 
 
 
 

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