Ann: Response to ASX Price Query, page-9

Its all in the company's response to the ASX



Given ASX’s view, and to ensure a fulsome response to ASX’s questions, the Company provides the following update on the proposed transaction on information known to the Company as at the date of this response:

• The Company has been in confidential, non-binding discussions with a US based Data Centric Security company for the acquisition of its technology assets, personnel and customer contracts. Although final determination of the acquisition price is subject to ongoing due diligence and negotiation, the indicative/maximum price being considered would result in an accretive purchase for Company shareholders and would not be more than $25 million (US$16 million).

• Under a strict non-disclosure agreement, the Company has commenced, but is yet to complete, the necessary commercial, technical, financial or legal due diligence required to enable the Board to make an informed decision on whether or not to proceed with the transaction, as such the transaction current remains incomplete and uncertain;

• Entry into a binding agreement for this transaction is neither imminent nor certain;

• If ongoing due diligence ultimately supports the Company’s preliminary assessment of the assets proposed to be acquired, the accretive transaction is expected to offer the following strategic benefits:

o Acceleration of the Company’s U.S. market penetration, leveraging regulatory-driven demand, and diversifying end-market exposure across enterprise, government and defence sectors,

o Significant expansion of the Company’s annual recurring revenue base through acquisition of a high margin licensing model and existing commercial customer base,

o Creation of technical synergies and provision of a comprehensive and differentiated end-to-end data security offering with cross sell opportunities to the Company’s existing customers,

o Strengthening financial positioning, unlocking synergies, and enhancing annual recurring revenue potential, and

o Expansion of enterprise and government customer reach and increasing customer retention through extended offering;

• If the prospective transaction satisfies the necessary commercial, financial and legal criteria, the Company will look to finance the transaction by way of either cash from existing resources, cash injections from material customer contracts, a capital raising, debt financing or a combination of some or all of these options. Given the status of the transaction described above, no final decision on financing has been made;

• Whether the Company needs to raise money for the transaction at all, is highly dependent upon the outcome of due diligence, negotiation of the purchase price and the outcome of several significant, near-term commercial opportunities;