DFX.L Regulatory News (DFX)

2 August 2016

Defenx PLC("Defenx", the "Company" or, together with its subsidiaries, the "Group")

Acquisition of Memopal Srl

Defenx PLC (AIM:DFX), the mobile security software solutions company, announces that it has acquired 95.2% of Memopal Srl ("Memopal"), a cloud backup and synchronisation business (the "Acquisition") from majority owners Pi Campus Srl, Translated Srl, Thesis Impianti SpA and a further 14 private investors (together, the "Sellers") for a total consideration of up to €1.78 million and the assumption of outstanding loans from certain Sellers of €0.56 million.

About Memopal

Memopal, founded in Rome, Italy in 2007, has developed and owns an innovative cloud storage platform and infrastructure. By combining predictive software with commodity hardware, Memopal's proprietary Global File System delivers highly competitive cost per gigabyte cloud storage plans. Memopal's cloud backup and synchronisation client software is available across all major operating systems, including Microsoft Windows, Apple OS X, Linux, Android and iOS and is available in 16 languages. Today, Memopal sells in 75 countries to end-users and channel partners such as Türk Telecom, HGST (a Western Digital company) and ZyXEL.

In the year ended 31 December 2015, Memopal generated revenues of €819,000, EBITDA of €370,000, a net profit of €67,000 and had gross assets of €1,304,000 as reported under Italian generally accepted accounting standards. These results would not have been materially different if reported under the Group's IFRS accounting policies.

Memopal is based in Rome on Pi Campus, a start-up district and venture fund built around Translated Srl and Memopal. Memopal will operate as a subsidiary of Defenx and will be managed jointly from Pi Campus by its existing management team, which includes its founder and CEO, Gianluca Granero, along with Andrea Stecconi and Philipp Prince, CEO and CFO respectively of Defenx.

Benefits to Defenx

The Acquisition is in line with Defenx's stated strategy of diversifying its product portfolio and growing its customer base by adding proprietary cloud backup and synchronisation technology as well as new channel partners to the Group. Memopal's team of 7 staff and 3 consultants will significantly increase the Group's internal development and customer support capacity that it would otherwise have needed to recruit.

In addition, bank facilities of €500,000 have been negotiated for working capital purposes and will be available within Memopal. UniCredit SpA has provided a three-year term loan of €400,000. Banca Sella SpA has provided a one-year overdraft facility of €100,000.

The Acquisition is expected to be earnings enhancing after sales and cost synergies in the first full financial year.

Consideration

The total consideration is up to €1.78 million, of which €0.38 million is deferred. The initial consideration of €1.40 million will be satisfied by:

· €0.44 million in cash payable to the Sellers in equal instalments over a period of up to 24 months ("Cash Consideration"); and

· the issue of 621,394 ordinary shares of 1.8p each in Defenx ("Ordinary Shares") to the Sellers ("Consideration Shares"), which based on the mid-market closing share price of £1.290 and a GBP:EUR exchange rate of 1.182 on 1 August 2016, are valued at €0.95 million.

The Company is also assuming €0.56 million of debts owed by Memopal to certain of the Sellers that will be repaid in equal instalments over a period of up to 24 months, which together with the unpaid Cash Consideration, will attract interest at 8.0% per annum.

The deferred consideration of up to €0.38 million will be satisfied by the issue of up to an additional 238,035 new Ordinary Shares ("Earn-out Shares"), subject to certain performance thresholds of the enlarged group being met for the year ending 31 December 2017 as set out below:

· the achievement of EBITDA of at least €4.2 million will result in the full value of Earn-Out Shares being issued to the Sellers;

· the achievement of EBITDA of between €3.4 million and €4.2 million will result in a pro rata value of Earn-Out Shares being issued to the Sellers;

· no Earn-Out Shares will be issued in the event that EBITDA does not exceed €3.4 million.

The number of Earn-Out Shares to be issued will be determined based on the average mid-market closing share price and the average GBP:EUR spot rate for each of the five business days up to 29 June 2018.

The implied enterprise valuation for 100% of Memopal is €2.49 million assuming payment of the full earn-out consideration.

Settlement, dealing and total voting rights

Application will be made for admission of the Consideration Shares to trading on AIM, which is expected to occur at 8.00 a.m. on 8 August 2016. Following admission of the Consideration Shares, the total number of Ordinary Shares in issue will be 6,720,306. Defenx does not hold any Ordinary Shares in treasury. The Consideration Shares will rank pari passu in all respects with the existing Ordinary Shares.

The aforementioned figure of 6,720,306 Ordinary Shares may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change to their interest in, Defenx under the Financial Conduct Authority's Disclosure and Transparency Rules.

This announcement contains inside information.

Andrea Stecconi commented:

"This is an extremely exciting development for Defenx and Memopal. The bundling of Defenx's security software with Memopal's cloud backup and sync product offers a compelling proposition to channel partners and end-users alike. With Memopal's location at the heart of Pi Campus in Rome, the Group will gain access to a great pool of talent and ideas. We look forward to integrating Memopal's products, customers and team into Defenx to further deliver shareholder value."

Enquiries

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 3.1 million security software licenses, primarily in Europe, the Middle East and Africa.

Defenx's global distribution partners currently include 3Italia, the fourth largest Italian mobile network operator, and Seagate Technology, a world-leader in disk drive manufacturing, 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.

About Memopal

Memopal's mission is to organize and protect digital data.

Memopal was founded in 2007 by Marco Trombetti and Gianluca Granero, two successful entrepreneurs in the IT sector. Marco Trombetti is the co-founder and CEO of Translated Srl, one of the web's most influential companies in translation and recently named in the Tech Tour Growth 50 of Europe's fastest growing companies, and Gianluca Granero, who at the time was head of the technology division at Thesis Impianti SpA, a company that builds and manages data centres used by companies such as IBM, Telecom Italia and Procter & Gamble.

Today, Memopal supports over 700,000 end users and channel partners in the telecommunications, information storage and IT security sectors in 75 countries.

About Pi Campus

Pi Campus in Rome is both a startup district and a venture fund that invests in talent. It provides startups with money, mentorship and the best possible work environment for growth. It started off in the basement of a single luxury residential villa where two companies were based: Translated Srl, the first internet-based translation service and Memopal, a backup technology used by storage manufacturers, telcos and anti-virus services. In 2013, Memopal moved to the nearby villa and reserved desks for new startups. Pi Campus now hosts 16 startups and companies across 5 villas. It is recognized as hub of innovation and has created over 170 jobs.

Websites

www.defenx.com/company/investors

www.memopal.com

www.picampus.it