Interim Results

1 October 2018

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

Unaudited Interim Results for the six months ended 30 June 2018

Set out below are the interims results for Defenx for the six months ended 30 June 2018.

Chairman's Statement

We are releasing the unaudited interim results for the six months ended 30 June 2018 alongside our annual report and accounts for the year to 31 December 2017 ("2017 Accounts").

As documented in detail in the 2017 Accounts, the Group has been focused on addressing performance and back-end integration issues in respect of its products in the year to date. The Group has also been enhancing its product portfolio as part of its Defenx 2020 strategy, and we currently anticipate launching new products in Q1 2019.

This has resulted in there being minimal customer invoicing during H1 2018 and revenue for the period relates predominantly to the release of previously deferred income and this is expected to continue in H2 2018. Given this backdrop, we have sought to minimise operating overheads during the period.

The reduction in trading activity has also been accompanied by a cessation of marketing contributions to distributors. A as a result, at an operational level, the loss for the half year is very similar to the corresponding period in 2017. However, 2018 bears additional interest costs in relation to the bonds issued in August 2017, whilst there was a substantially larger tax credit in 2017.

The major changes in the statement of financial position are primarily attributable to the comprehensive impairment provisions made at 31 December 2017 as detailed in the 2017 Accounts. Following the period end, settlement agreements were reached with four of the Group's B2B2C customers. The agreements waive the parties' claims against each other, set out payment schedules for the collection over a period of up to 48 months of approximately 20.4% of the €4.41 million in dispute at 31 December 2017 and committed the Group to exchange specified unsold inventory held by the customers for new products, such new products being subject to normal commercial warranties. Accordingly, the Directors considered that no further provision were warranted as at 30 June 2018.

Board

In the year to date, there have been a number of changes to the Board and senior management. As previously announced, this has resulted in me becoming interim Executive Chairman in May and Raffaele Boccardo assuming the role of interim Executive Deputy Chairman in July. At the same time, Clive Eplett was appointed as interim Chief Financial Officer. Board departures in the period have resulted in one-off costs of, in aggregate, €250,000.

Following the period end, we were delighted to welcome Nic Hellyer and Giorgio Beretta, two high calibre individuals, as independent Non-executive Directors and chair of the Remuneration and Audit Committees respectively, filling the vacancies left by Leonard Seelig.

The Board are seeking to identify and recruit the right team to deliver our strategy and drive value for all stakeholders and we look forward to keeping shareholders updated on our progress particularly with regard to the appointment of a CEO and a permanent CFO.

Funding

During the period, the Company raised £1.2 million (gross) (approximately €1.38 million) for general working capital purposes by way of a subscription and open offer, pursuant to which the Company issued 14,962,899 new ordinary shares at a price of 8 pence per share. Following BV Tech SpA's ("BV Tech") participation in the fundraise, BV Tech's interest in the Company increased to 54.7% of the Company's issued share capital.

The Group has today secured further funding of €0.95 million via an unsecured loan from BV Tech. The loan, which accrues interest at a rate of 6% per annum, will be used for general corporate purposes. The Board anticipates that the loan will shortly be replaced by a convertible loan from BV Tech of the same quantum and on the same material terms. Conversion of the convertible loan into ordinary shares is subject to shareholders providing the Directors with authority at the upcoming annual general meeting on 31 October 2018 to allot such shares on a non pre-emptive basis.

Outlook

As a result of the issues raised above and detailed in the 2017 Accounts, the results for 2018 are expected to show minimal revenues and an operating loss. However, as a result of the initiatives put in place as part of Defenx 2020, the Board believes that the business will become cashflow positive during 2019.

Following the publication of the 2017 Accounts and these interims, the Company is pleased to announce that it is expected that trading in the Company's ordinary shares on AIM will be restored at 7:30 a.m. on 2 October 2018.

Anthony Reeves

Executive Chairman

1 October 2018

Enquiries

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014.

About Defenx

Founded in 2009, Defenx is a cyber-security software group that offers a range of Security, Backup and Protection solutions for smartphones, PCs and networks.

Website

www.defenx.com/company/investors

Unaudited Interim Condensed Consolidated Statement of Comprehensive Income

Unaudited Interim Condensed Consolidated Statement of Financial Position

Unaudited Interim Condensed Consolidated Statement of Changes in Equity

Unaudited Interim Condensed Consolidated Cash Flow Statement

Notes to the Unaudited Interim Condensed Consolidated Financial Statements

1. General information

Defenx PLC is a public limited company incorporated in England and Wales, registration number 08993398, which is quoted on AIM. Its principal activity is the design and sale of software solutions for the mobile, PC and network that provide privacy and security for an online world. Management and control is exercised from the UK and its main countries of operation are Italy and Switzerland.

2. Basis of preparation

The unaudited interim condensed consolidated financial statements for the six months ended 30 June 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting and do not constitute statutory financial statements. They do not include all the information and disclosures required for a complete set of IFRS financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2017. However, selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last financial statements.

These unaudited interim financial statements were authorised for issue by Defenx's Board on 1 October 2018.

3. Accounting policies

There have been no changes to the accounting policies and methods of computation in these financial statements compared with those of the previous full year.

Note: IFRS 15 Revenue from contracts with customers, became effective for annual periods beginning on or after 1 January 2018. Having assessed the commercial arrangements with customers in the context of IFRS15, the Board concluded that the existing accounting policy and methodology continues to be equally appropriate under the new accounting standard. Accordingly, no change in accounting treatment arises or has been applied as a consequence of IFRS 15 and no adjustment made to either sales or deferred revenue.

4. Seasonality

Historically, the Group's revenue generated by and marketing contributions paid to channel partners was subject to seasonal trends.

A larger proportion of the annual marketing contributions arose in the first half of the year to support channel partners, who in turn generated higher sales in the second half of the year driven by the back-to-school market, annual hardware release cycles and Christmas trading. This typically lowered revenues and profits for the first half of the year. The Group sought to mitigate the seasonal impact by incentivising sales in the first half of the year.

Changes in the trading relationships with those distributors resulted in marketing contributions not being made in 2018, negating most of this seasonal characteristic.

5. Revenue

Revenue for the full year was impacted by the return of €1.03 million in invoiced sales from the first half of 2017, as a consequence of delays in the delivery of product updates to address performance issues in the Group's security products.

6. Loss from operations

7. Loss per share (EPS)

Basic EPS amounts are calculated by dividing the profit for the period attributable to ordinary equity holders of Defenx by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders of Defenx by the weighted average number of ordinary shares outstanding during the period plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive deferred shares, the exercise of options and crystallisation of the contingent share consideration.

The following reflects the income and share data used in the basic and diluted EPS computations:

8. Intangible Assets

The intangible assets booked represent qualifying expenditure on the development of software for resale less accumulated amortisation and impairment costs. The carrying value of these intangible assets is tested for impairment on a half yearly basis, or when there are indications that the value of the assets might be impaired.

The Directors have assessed development projects' individual net present value against forecasts of future sales of the related products, unit sales prices and costs over a five-year period. No sales beyond five years have been included in the calculations. The impairment tests are sensitive to changes in these forecasts and changes could result in impairment; however, the varying bases indicate a net present value in excess of the carrying value of the intangible assets at the balance sheet date.

9. Trade and other receivables

10. Loans and borrowing

The book and fair value of interest bearing loans and borrowings was:

Overdrafts and other short term facilities, excluding the supply chain facility, attract variable interest at between 3% and 6% per annum. The supply chain facility, denominated in Sterling, attracts a fixed rate of interest of 1.65% per month. The bank and vendor loans, both denominated in Euros, attract interest at 3% over 3-month EURIBOR and at 8% fixed per annum respectively.

The average effective interest rate for the period ended 30 June 2018 was 7.5% (30 June 2017: 10.2%).

At 30 June 2018, the Group had available €270,000 (30 June 2017: €123,331) of undrawn committed borrowing facilities. Of this amount, €250,000 relates to supply chain facility, use of which is dependent on applicable sales invoicing.

11. Share capital

The ordinary shares of £0.018 carry the right to one vote per share at general meetings of the Company and the rights to share in any distribution of profits or returns of capital and to share in any residual assets available for distribution in the event of a winding up. The shares are denominated in Sterling.

12. Events after the reporting date

During October 2018, settlement agreements were reached with four B2B2C customers. These agreements waived the parties' claims against each other, set out payment schedules for the collection over a period of up to 48 months of approximately 20.4% of the €4.41 million in dispute at 31 December 2017 and committed the Group to exchange specified unsold inventory held by the customers for new products, such new products being subject to normal commercial warranties.

On 1 October 2018, the Company entered into a €0.95 million unsecured loan agreement with BV Tech. The loan will incur an interest rate of 6% per annum, payable quarterly in arrears, and is repayable in full on 1 January 2020, or earlier at the Company's election. Under the terms of the Loan, €150,000 can be drawn down immediately, with the remainder being available to be draw down in full, or in part, after 45 days. It is intended that the proceeds of the loan will be used for general corporate purposes. As BV Tech is a substantial shareholder of the Company as defined in the AIM Rules for Companies, the loan is classified as a related party transaction pursuant to AIM Rule 13. The Board expects that the loan will, shortly following publication of the Company's annual report and accounts for the year ended 31 December 2017 and the interims for the six months ended 30 June 2018, be replaced by a convertible loan from BV Tech of the same quantum and on the same material terms.

13. Availability of the interims

The Interim Report will shortly be available on the Company's website at www.investors.defenx.com.