DEFENX PLC AS AT 6 NOVEMBER 2014 TO THE PRIVATE PLACING MEMORANDUM (PPM) DATED 16 JUNE 2014

Transcription

1 DEFENX PLC SUPPLEMENTARY INFORMATION AS AT 6 NOVEMBER 2014 TO THE PRIVATE PLACING MEMORANDUM (PPM) DATED 16 JUNE 2014 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the contents of this Document or what action you should take, you should consult a person authorised for the purposes of the Financial Services and Markets Act 2000 ( FSMA 2000 ) who specialises in advising on the acquisition of shares and other securities. Charles Street Securities Europe LLP ( CSSE ), which is authorised and regulated by the Financial Conduct Authority ( FCA ), is the Company s financial adviser and agent to the Offer has approved the issue of this letter to Shareholders as a financial promotion in accordance with the provisions of section 21 of FSMA This Document is not a prospectus and has not been filed with the FCA or made available to the public as such. A prospectus complying with the Prospectus Rules (as amended) is not required where the total consideration of the offer and any other offer in the last 12 months is less than 5,000,000 or an equivalent amount. The Company and the Directors accept responsibility for the information contained in this Document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this Document is in accordance with the facts and there are no other facts the omission of which would be likely to affect the import of such information. This Document should be read in conjunction with the Private Placing Memorandum issued by the Company on 16 June 2014 a copy of which is enclosed with this Document for investors who are not already shareholders in the Company. 1

2 defense is the best attack Defenx Plc Lake View House Tournament Fields Wilton Drive Warwick CV34 6RG 6 November 2014 Dear Shareholder: Defenx Plc quarterly business report Three month period to September 30, Business overview Defenx is active in the creation and distribution of security software in three market segments: 1. Mobile for tablets and smartphones (covering Android operating systems only at present); 2. NAS for Network Attached Storage (specialized hardware storage systems that support cloud services); 3. IT for personal and business PCs and laptops. In the Mobile segment, end users numbers are growing for our Android Mobile Security Suite. As of September 30 it was used in its full featured configuration by 397,000 end users, which is approximately 23% ahead of our budget forecast for the period. In mid September we released a new anti phishing feature, thus positioning our product features on a par with the main competitors in mobile protection. 2

3 450, , , , , , , ,000 50,000 Active codes, fixed computing Budget Actual July August September 450, , , , , , , ,000 50,000 Active codes, mobile computing Two main marketing efforts are under way in Mobile: in Dubai and in Congo. These campaigns are carried out by a partnership agreement with local mobile carriers (Du and Etisalat in Dubai and MTN in Congo) who have released promotional electronic information ( , SMS) to their end user base inviting them to try the Mobile Suite. In the event that the customer activates an account at the end of the free trial period, Defenx receives a share (20%) of the price paid by the end user. In the NAS segment, we are waiting to receive the first installation report from our customer Seagate, one of the world s leading producers of mass memory and storage devices, which has selected the Defenx product to be the sole supplier of security software for its NAS products. The agreement with Seagate provides revenues for Defenx of US$ 0.99 per unit sold in the low end segment and US$ 2.60 per unit sold in the combined NAS products, payments quarterly starting from September plus a further expected revenue stream from renewals. In our legacy IT fixed computing segment, Defenx is still growing; as of September 30 over 145,000 end users were registered as actively using the software, approximately 17% greater than budget. We are expecting this segment to show reduced growth given declining sales of fixed computing devices and the high penetration rates of our main competitors, including Symantec, McAfee etc. Budget Actual July August September 2. Sales activity and pipeline In the Mobile segment, Defenx is currently negotiating an agreement with H3G, Italy s second largest carrier with more than 9 million users. When activated, this agreement will allow Defenx to be promoted on the end user base of H3G, with budgeted revenues of some US$ 1.30 per user per year. The agreement with H3G is expected to be signed during December Defenx is currently restructuring its presence in India, where brand awareness and a customer base has been created through the efforts of our former local partner, Softy. We are currently investigating potential local partnerships and/or a partnership with an IT distributor with established capacity in the Sub Continent. A number of initiatives are being negotiated with channel partners in Brazil, with a plan to start distribution of mobile product codes through local VARs (Value Added Resellers) using Defenx inhouse SRM code management and distribution system. In the NAS segment the Company has executed its agreement with Lenovo, a major producer of NAS devices, and is now delivering product. Sales are expected to begin in October with first revenues for Defenx expected in Q

4 3. Technology investments and product update In the mobile segment, Defenx plans to release two additional features during 2014: safe browsing (which permits the blocking of certain potentially dangerous or inappropriate websites) and SIM protection (notification of any changes to SIM in case of lost or stolen device it sends a warning SMS). With those new features, the Defenx Mobile Suite will be aligned with the product profile of the full featured premium charging competitors. The Company is now working on the specifications of a mobile security app for ios and for Windows Mobile. Release of the first ios version expected in December 2014, while the Windows Mobile version is currently on hold as Microsoft is updating its operating system. In the NAS segment new work is under way on a corporate version of the software, intended to protect NAS devices used as cloud backup units for data storage solutions. A first test version of this NAS v2 product is expected Q Furthermore to improve tracking of sold license inventory and active license users, Defenx has implemented an industry leading SRM (Sales Resources Management) distribution platform enabling channel partners that buy products in bulk from Defenx to manage their product inventory on our system, and Defenx, as administrator, can assign and activate (and de activate) products of end users, and help Defenx better manage the aftersales and renewal processes. 4. Web marketing efforts Defenx is actively managing communication with a database of followers on Facebook. A test promotional effort was conducted during September, allowing the Company to be signaled to over 250,000 Facebook users located in India and Eastern Europe and collecting over 18,000 page likes. 5. Financials year to date to 30 September 2014 Revenues: Including sales to distributors and end users. Distributors make up the large majority of sales at the moment (98%). As of September 30, Defenx is 5% ahead of budget, with sales of US$ 1.93 million. Purchase of goods and services: this includes a total of U$ 520,000 of technical, marketing and promotional activity related mainly to the MTN Africa and Middle East accounts that have been launched in Q1 of Costs related to mobile engine software: On an YTD basis they include US$ 210,000 out of a total expected acquisition and set up costs related to the mobile engine of US$ 500,000; an additional payment of US$ 50,000 is due in November 2014 as agreed with the vendor. Costs related to NAS development: US$ 137,000 has been spent for coding and set up work on the security software for NAS devices. 4

5 Salaries and related: currently Defenx has a permanent work force of 5 executives and 3 sales people, generating costs of US$ 34,000 per month. Other expenses: are related to the software updates for the malware database, and to the fixed costs of the office. Exceptional charges: We have reviewed our accounting policies in respect of recognition of income and we are adopting a policy which is in line with IFRS accounting standards. We have previously been on a Swiss GAAP standard. As a result we are writing down the value of certain receivables by US$ 356,068. These receivables are due by the Italian distributor, LAB. While the company believes that at least a substantial part of those amounts will be collected, our new accounting policy provides for a 50% writedown if an account is unpaid after 240 days. Invoices unpaid by more than 240 days are also outstanding by Softy, the Indian distributor, but the management of Defenx believes that they will be paid in full (US$ 128,454) by the end of November 2014 and further provision is not considered necessary at this time. Our new accounting policy is slightly more stringent than we had anticipated in our private placing memorandum dated 16 June 2014 (see private placing document p 28.) Defenx PLC, Monthly PLs, Consolidated, Year to date (Unaudited, USD) July August September Revenues Purchase of goods and services Salaries + expenses coverage Travel Others (sw updated, sundry, etc) Rent & services Costs, total Ebitda Depreciations & Amortizations Ebit Interest charges Exceptional charges PBT Taxes (estimate for period) Net P/L Fund raising and administration As of Oct the Company s equity raising has placed 9,800,000 shares for a value of 980,000 pounds. After reaching the minimum as required under the terms of the Offer, the Company executed a first closing on August for 5,224,000 shares or a value of 524,000 pounds. The Board has extended the Offer and we hope to complete full subscription to the Placing. 5

6 The Board has agreed to create an Employee Stock Option Program with an allocation of 1 million shares. 7. Final remarks In closing, let me welcome our new shareholders and we ask you to please share the progress we have summarized above. The Company is growing in several major markets with its Mobile offering and has now cemented strategic relations with Seagate, a world leader in mass storage. Seagate has adopted the security protection offer by Defenx as their solution to the growing malware threat spreading at many levels of the IT structure. We have also signed an agreement with another NAS producer, the Lenovo Corporation, a world leader in hardware, which we expect will also lead to new opportunities for us. Please find below summary and unaudited Balance Sheet and Profit and Loss Statement for the six months as of 30 Sept Thank you for your support. Andrea Stecconi Chairman and CEO Note: As we stated in the Supplement to our private placing memorandum the Company has obtained preliminary EIS approval. We are submitting 1st and 2nd closing shareholder names and details to HMRC at this time for EIS 3 certificate applications. And expect positive results from HMRC in a matter of weeks. 6

7 Unaudited Management Accounts as at 30 September 2014 Defenx PLC, Monthly PLs, Consolidated, Year to date (Unaudited, USD) September Revenues Purchase of goods and services Salaries + expenses coverage Travel Others (sw updated, sundry, etc) Rent & services Costs, total Ebitda Depreciations & Amortizations Ebit Interest charges Exceptional charges PBT Taxes (estimate for period) 0 Net P/L Year to date B/S, Defenx Plc (Consolidated) (Unaudited, USD) September Cash and equivalents Trade receivables Share offering receivable Long term assets Assets, total Trade payables Other payables Share capital (paid in) Share capital (under subscription) Liabilities, total