Conditional Placing & Subscription to raise £1.52m

7 October 2016

Defenx PLC("Defenx" or the "Company")

Conditional Placing and Subscription to raise £1.52 million

Defenx PLC (AIM:DFX), the mobile security software solutions company, announces a conditional placing and subscription of 1,897,500 new ordinary shares of £0.018 each in the Company ("Ordinary Shares") (the "New Ordinary Shares") at a price of 80 pence per share, raising gross proceeds of approximately £1.52 million. The fundraise consists of a placing of, in aggregate, 1,647,500 New Ordinary Shares with certain existing and new institutional and other investors through the Company's joint brokers, WH Ireland and Beaufort Securities, (the "Placing") and a subscription of, in aggregate, 250,000 New Ordinary Shares by the Executive Directors (the "Subscription").

The net proceeds of the Placing and Subscription, together with existing cash resources, will be used to enable the Company to accelerate software development work (further details on which are set out below) and for general working capital purposes.

The Placing and Subscription are subject to, inter alia, the receipt of Shareholder approval of the necessary resolutions to enable the issue of the New Ordinary Shares. Accordingly, the Company will be sending out a circular to Shareholders (the "Circular") on Monday 10 October 2016 to convene the necessary General Meeting to seek Shareholders' approval to update the relevant Board authorities to allot shares in the Company.

The Company intends to convene the requisite General Meeting for 12.00 p.m. on 26 October 2016 at the offices of Taylor Vinters LLP, Tower 42, 33rd Floor, 25 Old Broad Street, London EC2N 1HQ to approve, inter alia, the necessary resolutions in respect of the Placing and Subscription. In the event that the requisite resolutions are not passed, the Placing and Subscription will not proceed, save for the issue of 600,000 New Ordinary Shares at a price of 80 pence per share which will still be issued to certain new investors pursuant to the Company's existing share authorities, raising gross proceeds of £480,000 (the "Minimum Placing").

The remainder of this announcement explains, inter alia, the background to and reasons for the Placing and Subscription, and why the Directors consider the Placing and Subscription to be in the best interests of the Company and its Shareholders as a whole and recommend that you vote in favour of the Resolutions to be proposed at the General Meeting, notice of which will be set out at the end of the Circular to be posted to Shareholders.

Andrea Stecconi, CEO of Defenx plc, commented:

"We are very pleased by the support shown by both existing and new shareholders in the Placing. These funds will enable us to accelerate the development of our software, both to enhance existing products and to develop and test new products. These products are being developed in response to customer demand and this fund raising will ensure we can bring new products and features to the market quicker than previously envisaged."

Enquiries:

Please see the Definitions section at the back of this announcement for an explanation of the capitalised terms used in this announcement, if not defined elsewhere in the announcement text.

This announcement contains inside information.

About Defenx

Founded in 2009, Defenx is a fast-growing and profitable security software company that offers a range of products for the mobile, PC and network security markets. Defenx security software is priced competitively, fully featured and efficient (reduced use of memory, processing capacity and therefore power).

A flexible marketing strategy, focused on white-label and profit-share arrangements with distributors, telecoms companies and hardware manufacturers, enables Defenx to compete with established industry incumbents. Since inception, Defenx has sold over 3.8 million security software licenses, primarily in Europe, the Middle East and Africa.

Defenx's global distribution partners currently include 3Italia, Seagate Technology, Türk Telecom and Western Digital, amongst others including telecoms operators, systems integrators and original equipment manufacturers. Defenx was admitted to trading on AIM on 3 December 2015, raising £2.1 million to accelerate its growth through new channel partners and product development.

Website

www.defenx.com/company/investors

BACKGROUND TO AND REASONS FOR THE PLACING AND SUBSCRIPTION AND USE OF NET PROCEEDS

The Company intends to use the net proceeds of the Placing and the Subscription to accelerate software development, both to enhance existing products and to develop and test new products, and for general working capital purposes.

A key benefit of the Company's business model is the market intelligence provided by its channel partners. Its software development plans therefore reflect the actual demand in the market for new products and features. As a result of this feedback, the Directors are satisfied that accelerating the Company's development plans is in the best interest of the Company and Shareholders. Doing so, will enable the Company to bring new products and features to market more quickly than previously envisaged and, in particular, in time for the peak 2017 sales season starting with the back-to-school market next summer, followed by the mobile hardware launch cycle and the run into the Christmas season.

A significant proportion of the anticipated development spend over the next year will be to bring all of the Company's products substantially within the control and ownership of the Group, with limited licensing of external IP. This will provide the Company with greater flexibility in managing the graphical user interface, user activation and license management and facilitate white-labelling where channel partners request this. There is also significant scope to integrate Defenx's security products and the Cloud products acquired with Memopal Srl in August 2016 (as announced on 2 August 2016).

As previously announced, the Company has debt facilities of €1.2 million, of which €0.4 million has been drawn. The Placing and the Subscription will therefore provide flexibility in the timing of and requirement to draw on these facilities and will also provide additional working capital.

DETAILS OF THE PLACING

The Placing Price represents a discount of approximately 19 per cent. to the closing middle market price of 99 pence per Ordinary Share on 6 October 2016, being the last business day prior to the announcement of the Placing and the Subscription.

The New Ordinary Shares to be issued pursuant to the Placing have been conditionally placed by WH Ireland and Beaufort Securities as agents of the Company, with certain existing and new institutional and other investors pursuant to the Placing Agreement, subject to the passing of Resolutions 1 and 2. In the event that Resolutions 1 and 2 are not passed, the Placing and Subscription will not proceed, save for the Minimum Placing.

Under the terms of the Placing Agreement, WH Ireland and Beaufort Securities will receive commission from the Company conditional on Admission and the Company will give customary warranties and undertakings to WH Ireland and Beaufort Securities in relation, inter alia, to its business and the performance of its duties.

The Company has conditionally agreed to issue WH Ireland and Beaufort Securities 101,000 and 63,750 Warrants respectively in consideration for their broking services in respect of the Placing. These Warrants will have an exercise price of 80 pence and an expiry date of five years from the date of issue. On the passing of the Resolutions, 60,000 Warrants shall be issued to Beaufort Securities and on Admission 101,000 Warrants shall be issued to WH Ireland and a further 3,750 Warrants will be issued to Beaufort Securities.. Separately, as part of Beaufort Securities appointment to act as Joint Broker to the Company (as announced on 19 September 2016), the Company will issue Beaufort Securities a further 40,000 Warrants, which have an exercise price of between 125 and 200 pence and an expiry date of five years from the date of issue. The issue of these Warrants is conditional on the passing of the Resolutions.

In addition, the Company has agreed to indemnify WH Ireland and Beaufort Securities in relation to certain liabilities that they may incur in undertaking the Placing. WH Ireland and Beaufort Securities have the right to terminate the Placing Agreement in certain circumstances prior to Admission, in particular, in the event that there has been, inter alia, a material breach of any of the warranties. The Placing is not being underwritten.

Application has been made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. Subject to, inter alia, the passing of Resolutions 1 and 2, it is expected that Admission will take place and that trading will commence on AIM at 8.00 a.m. on or around 27 October 2016.

Following the issue of the New Ordinary Shares, the Company will have 8,617,806 Ordinary Shares in issue and there are no shares held in treasury. This figure may be used by Shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FCA's Disclosure and Transparency Rules.

The New Ordinary Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing Ordinary Shares of the Company, including the right to receive all dividends or other distributions made, paid or declared in respect of such shares after the date of issue of the New Ordinary Shares.

DIRECTORS' PARTICIPATION IN THE SUBSCRIPTION AND RELATED PARTY TRANSACTION

The following Directors are subscribing for New Ordinary Shares pursuant to the Subscription. Their subscription for New Ordinary Shares is taking place on the same terms and conditions as the wider Placing.

Related Party Transaction

The Subscription by Philipp Prince and Andrea Stecconi is a related party transaction under the AIM Rules. The Directors, other than Philipp Prince and Andrea Stecconi, consider, having consulted with Strand Hanson, the Company's nominated adviser, that the terms of the Subscription are fair and reasonable insofar as Shareholders are concerned.

THE RESOLUTIONS

Set out below is an explanation of the Resolutions to be considered at the General Meeting. Resolutions 1 and 3 will be proposed as ordinary resolutions. This means that for Resolutions 1 or 3 to be passed, more than half of the votes cast must be in favour of the resolution. Resolutions 2 and 4 will be proposed as special resolutions. This means that for Resolution 2 or 4 to be passed, at least three-quarters of the votes cast must be in favour of the resolution.

· Resolution 1 (to be proposed as an ordinary resolution): to authorise the Directors under section 551 of the Companies Act 2006 (the "Act") to allot shares and warrants up to an aggregate nominal amount of £37,841 for the purposes of the Placing and Subscription and the issue of, in aggregate, 204,750 Warrants to Beaufort Securities and WH Ireland. If passed, save for the authority reserved specifically for the exercise of the Warrants by Beaufort Securities and WH Ireland, this authority will expire on the earlier of the date of the next annual general meeting of the Company and 30 June 2017;

· Resolution 2 (to be proposed as a special resolution): to dis-apply the pre-emption rights pursuant to the provisions of section 570 of the Act in respect of the allotment of shares and warrants pursuant to the Placing and Subscription and the issue of, in aggregate, 204,750 Warrants to Beaufort Securities and WH Ireland. If passed, save for the authority reserved specifically for the exercise of the Warrants by Beaufort Securities and WH Ireland, this authority will expire on the earlier of the date of the next annual general meeting of the Company and 30 June 2017;

· Resolution 3 (to be proposed as an ordinary resolution): to authorise the Directors under section 551 of the Act to allot additional shares up to an aggregate nominal amount of £51,190 (representing approximately 33 per cent. of the nominal value of the Enlarged Issued Ordinary Share Capital). If passed, this authority will expire on the earlier of the date of the next annual general meeting of the Company and 30 June 2017 and will be in substitution for the authority granted by the Company at the annual general meeting held on 22 June 2016; and

· Resolution 4 (to be proposed as a special resolution): to dis-apply the pre-emption rights pursuant to the provisions of section 570 of the Act in respect of the allotment of additional equity securities up to an aggregate nominal amount of £15,510 (representing approximately 10 per cent. of the nominal value of the Enlarged Issued Ordinary Share Capital). If passed, this authority will expire on the earlier of the date of the next annual general meeting of the Company and 30 June 2017 and will be in substitution for the authority granted by the Company at the annual general meeting held on 22 June 2016.

The Board is proposing Resolutions 1 and 2 in order to effect the Placing and Subscription. The Placing and Subscription are conditional on the passing of Resolutions 1 and 2. Accordingly, if Resolutions 1 and 2 are passed, but Resolutions 3 and 4 are not passed, the Placing and Subscription will proceed.

Resolutions 3 and 4 will be conditional on the passing of Resolutions 1 and 2. The Board is proposing Resolutions 3 and 4 in order to seek Shareholder approval to grant the Board additional flexibility to issue Ordinary Shares up to a certain amount without the need to seek Shareholder approval at the relevant time. These proposed authorities are in the same proportions as those approved by Shareholders at the 2016 annual general meeting. If passed, this would give the Board flexibility to take advantage of, inter alia, future acquisition opportunities and/or to be able to raise funds on an expedited basis if such opportunities arise. The Board has no present intention of exercising these authorities, if granted, (other than in connection with the issue of options) and the Board will only exercise these authorities when it is satisfied that it is in the Company and Shareholders' interests to do so.

Shareholders are reminded that the Placing and Subscription is conditional, inter alia, on the passing of the necessary Resolutions to be proposed at the General Meeting. Should either of the necessary Resolutions, being Resolution 1 and 2, not be passed, the Placing and Subscription will not proceed and the associated subscription monies in respect of the New Ordinary Shares will be returned to investors. In such an event, the Company will issue 600,000 New Ordinary Shares, which will be issued pursuant to the Company's existing share authorities, at the Placing Price pursuant to the Minimum Placing, raising, in aggregate, £480,000.

Whilst the Minimum Placing will enable the Company to seek to accelerate a proportion of the development pipeline, the ability to accelerate all areas as desired will be dependent on the availability of further funding. There is no guarantee such funding would be forthcoming or on terms acceptable to Shareholders.

RECOMMENDATION

The Directors consider the passing of the Resolutions and the completion of the Placing and Subscription to be in the best interests of the Company and its Shareholders as a whole. Accordingly, the Directors unanimously recommend that all Shareholders vote in favour of the Resolutions, as they intend to do, or procure to be done, in respect of their own beneficial shareholdings, being at the Latest Practicable Date, in aggregate, 1,704,341 Ordinary Shares, representing approximately 25.4 per cent. of the Existing Issued Ordinary Share Capital.

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

PLACING AND SUBSCRIPTION STATISTICS

DEFINITIONS

The following definitions apply in this announcement, unless the context otherwise requires: