digital protection
Annual Report 2016
Defenx PLC
Security. Backup.
Protection.
Defenx PLC Annual Report 2016 Defenx digital 
protection: securing 
smartphones, data  
and privacy to keep  
the online world safe.
Company overview
Highlights 1
At a glance 2
Products and technology 4
Strategic report
Chairman's statement 6
Our business model 8
Our market and opportunity 10
Our strategy 12
Strategy in action 14
Chief Executive Officer's review 18
Financial review 20
Principal risks and uncertainties 24
Governance
Board of Directors 26
Chairman’s statement on governance 28
The Board 28
Audit committee report 30
Remuneration committee report 32
Directors’ report 37
Statement of Directors’ responsibilities 38
Independent auditors’ report 
to the members of Defenx PLC 39
Financial statements
Consolidated statement of 
comprehensive income 40
Consolidated statement 
of financial position 41
Consolidated statement 
of changes in equity 42
Consolidated statement of cash flows 43
Company statement of financial position 44
Company statement of changes in equity 45
Company cash flow statement 46
Notes to the consolidated financial 
statements 47
Other information
Notice of AGM 69
Company information 71
Five-year track record 72 Annual Report 2016 1 Defenx PLC
Governance Financial statements Company overview Strategic report
Highlights
Operational
• Acquisition of Memopal, a cloud-based backup 
and synchronisation business, was successfully 
completed and brings new IP customers and 
significantly increased internal development and 
customer support capacity.
• Enhanced product portfolio with the launch of 
Defenx Mobile Security Suite for Windows 10 
Mobile, Defenx Privacy Adviser, Defenx Parental 
Control and the acquisition of Memopal Cloud 
Backup.
• Eight new channel partners added in the year 
bringing many potential new end-users and driving 
our geographical expansion into key markets.
Financial
• Fifth year of profitable growth – 58% year-on-
year growth in revenue to €7 .09 million  
(2015: €4.49 million) with a 10% increase in 
average revenue per user (ARPU).
• 88% growth in operating profits (before 
transaction costs) to €1.84 million  
(2015: €0.98 million).
• Strong cash generation of €2.32 million in 
operating cash inflow (2015: €1.02 million 
outflow).
• Shareholder approved placing and subscription 
raised €1.53 million net of expenses.
Post year end
• Long-term strategic partnership with BV-Tech, 
a leading independent corporate IT and cyber 
security solutions provider in Italy, which the 
Directors believe will significantly enhance 
Defenx’s product portfolio and enable the 
Company to penetrate the corporate market to 
generate high-quality, recurring revenues in the 
medium-term.
€7.09m +58%
Revenue
€1.84m +88%
Operating profit
€2.32m
Operating cash flow
€0.185
Earnings per share
 See Chief Executive Officer’s review, page 18
“2016 has been a year of significant progress for 
Defenx, our first full year as a public company 
following our IPO in December 2015.
I believe that Defenx is in a strong position to 
continue its strategy to launch new products, 
enter new markets and broaden its management 
team in 2017; continuing to grow revenues and 
profits over the coming year in the ever-exciting 
mobile security software market.
I would like to take this opportunity to thank our 
people and shareholders whose hard work and 
support have facilitated the growth achieved  
in 2016.”
Andrea Stecconi / Chief Executive Officer 2 Defenx PLC Annual Report 2016
Security 
Complete security for you, your family and 
your business
Our mobile, desktop and server security 
suites provide complete protection from 
viruses, spyware and other malware, including 
ransomware.
Many users, particularly of mobile devices, are 
still unaware that a simple download of their 
favourite song, clicking on an email link and 
other, seemingly harmless, activity, can 
trigger an attack. Once in place, malware 
replicates, feeds on network bandwidth and 
causes systems to malfunction, in some 
cases bringing them to a complete halt.
Defenx Mobile Security Suite continues to be our 
best-selling product accounting for over 60% of 
2016 sales. 
Defenx Security Suite for PCs is also popular, 
typically in bundle with mobile apps, accounting 
for around 25% of 2016 sales.
Backup 
All your files in one place, secure  
in the Cloud
New to the Defenx portfolio in 2016, 
Memopal Cloud Backup combines automated 
backup and file synchronisation across 
multiple devices in 16 languages for all major 
operating systems. We also offer on-premise 
solutions for corporate partners like  
Türk Telekom. 
Built on Memopal’s proprietary Global File 
System (MGFS), we offer competitive cost 
per gigabyte storage while maintaining our 
margins. 
Channel partner interest has been strong and 
we anticipate strong growth during 2017. 
Integration of ‘zero knowledge’ 
authentication, advanced permissions and 
encryption through our partnership with 
BV-Tech will address corporate needs.
As we entered 2017 , our product portfolio, the 
reach of our channel partners and our delivery 
capacity were much enhanced on the year earlier.
Broad product portfolio
The Defenx proposition is to solve our end-users’ 
security needs on the devices they use, for their 
own protection and that of their data. 
Our products fit into three complimentary 
segments:
• Security – anti-malware software
• Backup – Cloud-based backup and 
synchronisation
• Protection – applications to monitor, manage 
and secure online activities
By developing a range of products within these 
three segments we now address the varied 
needs of consumer and corporate end-users.
B2B2C distribution strategy
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.
At a glance
Founded in 2009, Defenx is a fast-growing and profitable 
cyber security company that offers a range of products for the 
mobile, PC and network security markets.
Defenx was admitted to trading on AIM in December 2015, 
acquired Memopal SRL in August 2016 (see page 16) and 
announced a strategic partnership with BV- T ech SpA in April 
2017 (see page 1 4), which has allowed Defenx to diversify its 
product offering, grow its customer base and expand its team.
Corporates Families Individuals
Who we protect Annual Report 2016 3 Defenx PLC
Company overview Strategic report Governance Financial statements
Protection
Protecting you and your loved ones’ 
safety and privacy
Our new protection segment evolved from 
channel partner feedback: their end-users 
were asking for solutions to help manage and 
protect their online lives.
End-users are interested to know what the 
apps on the smartphones are doing – Defenx 
Privacy Adviser tells them.
Once they know, they are keen to manage 
this activity and protect their privacy – 
Defenx Parental Control helps them.
Defenx SOS goes one step further, using the 
smartphone to send alerts in an emergency 
to a parent or guardian.
What we protect
Mobile Desktop Network
Key driver for improved cyber protection
Ransomware
The rapid growth of ransomware, including more sophisticated attacks on businesses, is a 
key driver for the adoption of improved cyber protection. With the acquisition of Memopal, 
Defenx now offers Mobile Security and Cloud Backup which, when used together, reduce 
the risk of infection and, in the event of a successful attack, ensure data is never lost, 
even on the move.
Ransomware is malware for ‘data kidnapping’, an exploit in which the attacker encrypts the 
victim’s data and demands payment for the decryption key. Ransomware spreads through 
e-mail attachments, infected programmes and compromised websites. A ransomware 
malware programme may also be called a cryptovirus, cryptotrojan or cryptoworm.
Attackers may use one of several different approaches to extort money from their victims:
• After a victim discovers he cannot open a file, he receives an email ransom note 
demanding a relatively small amount of money in exchange for a private key. The 
attacker often warns that if the ransom is not paid by a certain date, the private key 
will be destroyed and the data will be lost forever.
• The victim is duped into believing he is the subject of a police inquiry. After being 
informed that unlicensed software or illegal web content has been found on his 
computer, the victim is given instructions for how to pay an electronic fine.
• The malware surreptitiously encrypts the victim’s data but does nothing else. In this 
approach, the data kidnapper anticipates that the victim will look on the Internet for 
how to fix the problem and makes money by selling anti-ransomware software on 
legitimate websites.
To protect against data kidnapping, experts urge users to backup data on a regular basis. If an 
attack occurs, do not pay a ransom. Instead, wipe the disk and restore data from the backup.
Source: TechTarget.com 4 Defenx PLC Annual Report 2016
Defenx Mobile Security Suite
Devices:
Use your smartphone with complete 
peace of mind
Defenx Mobile Security Suite includes 
antivirus, anti-phishing, anti-spam and 
anti-theft protection as well as SIM 
protection and safe browsing.
Available in nine languages for Android, iOS 
and Windows Mobile phones and tablets.
2016 highlights
• Windows 10 Mobile version launched 
resulting in coverage of more than 90% of 
mobile devices.
• Added new features: webcam protection, 
remote mic capture and phototaking.
2017 outlook
• With an effective and lightweight 
anti-virus engine, the focus is now on user 
experience and integration.
• Align the user interface across devices 
and operating systems to offer a 
seamless cross-platform experience.
Defenx Security Suite 
Devices:
All-round ‘worry-free’ protection for your 
computer
Defenx Security Suite includes antivirus, 
anti-spam, firewall, identity protection, safe 
browsing, privacy and parental controls.
Available in five languages for Windows 10, 8, 
7 , Vista and XP desktop and laptop PCs.
There is also a network version. 
VB100 certified by Virus Bulletin.
2016 highlights
• Launched a revamped product with 
improved features, better protection and 
reduced false positives.
• Successfully raised €1.5million from 
investors to accelerate the development 
of a new in-house PC security suite.
2017 outlook
• We expect to release the new Defenx 
Security Suite this summer built on the 
industry-leading anti-virus engine SDK. 
• Further language localisation.
Security 
Products and technology
Defenx has built a competitive product portfolio of 
security and protection solutions to which cloud-based 
backup was added with the acquisition of Memopal.
In 2016, we invested €4 million in software development 
including work on our new PC security suite. While our 
focus continues to be mobile users around the world, we 
recognise that many, particularly corporate users, require 
solutions that protect all devices and platforms.
Memopal Cloud Backup
Devices:
All your files securely in the Cloud
Memopal Cloud Backup protects files by 
securely saving a copy to the cloud.
Because it keeps all file changes forever, 
users always have a clean version to restore, 
for example, following a ransomware attack 
(see page 3). It also provides a sync folder 
allowing the latest version of saved files to be 
accessed from any computer, device and online.
Available in 16 languages for Windows, Apple, 
Linux, Android, iOS and various NAS platforms.
2016 highlights
• Corporate features to control multiple 
accounts added last autumn.
• Added a simple interface to restore prior 
versions of files at any date and time to 
provide ‘time machine’ features and facilitate 
recovery from ransomware attacks.
2017 outlook
• Integration of anti-malware scanning of files 
stored in the cloud protecting users and 
allowing us to cross-sell security products.
• Support for more NAS platforms.
Backup  Annual Report 2016 5 Defenx PLC
Company overview Strategic report Governance Financial statements
Defenx Privacy Adviser
Devices:
We care about your privacy
Defenx Privacy Adviser is a free app that 
allows users to monitor access to their 
personal data by installed apps.
A growing number of seemingly useful apps 
for smartphones can, in fact, invade your 
privacy, putting your personal information  
at risk.
Available for free on Android.
2016 highlights
• Launched last July, Defenx Privacy Adviser 
transforms the way mobile users 
understand what their apps know about 
them, providing a simple Red, Amber, 
Green visual indication of safety.
2017 outlook
• We use this free app to identify new 
end-users and generate brand awareness 
and trust.
• Feedback from the community of users will 
be reflected in updates to the app.
Defenx Parental Control
Devices:
Online safety for children
Defenx Parental Control protects under-age 
smartphone and tablet users from 
inappropriate content and enables parents to 
manage their children’s online activity. 
Parents can view call and messaging history, 
photos and be alerted when their child arrives 
or leaves specific locations. The app also 
includes some Defenx SOS features.
Available in five languages for Android.
2016 highlights
• Announced last December the exclusive 
launch and pre-order from Ukraine for 
distribution by Dr Komarovskiy using  
our SDK.
2017 outlook
• Add new features in response to user 
feedback and wider market developments.
• Additional platforms and language 
localisation.
Defenx SOS
Devices:
Send for help when you’re in danger
Defenx SOS keeps loved ones safe by alerting a 
designated parent or guardian by email, SMS or 
via a call centre in an emergency such as an 
unexpected fall or attack. 
The panic function, triggered by a Bluetooth-
connected button or simply by dropping the 
smartphone, triggers the alert.
Available in two languages for Android.
2016 highlights
• Launched last autumn, Defenx SOS has  
a simple proposition: to transform any 
smartphone into an SOS device.
2017 outlook
• Integration with more Bluetooth buttons.
• Additional platforms and language 
localisation.
 See Strategy in action, page 14
Protection  6 Defenx PLC Annual Report 2016
Chairman's statement
A year of product delivery
Much of 2016 was focused on 
strengthening Defenx’s endpoint security 
products, which have long been our core 
offering. As part of our strategy to offer 
‘360-degree’ solutions that protect the 
everyday digital life of our individual, family 
and SME end-users, Defenx also launched 
during 2016 products for personal privacy, 
safety and parental control.
We have also added products to address 
progressively larger customers – from our 
existing, largely, consumer base to SMEs 
and corporates in the near future. We 
expect that our end-point network security, 
mobile device management and corporate 
cloud storage solutions will support and 
de-risk our continued revenue growth.
The long-term strategic partnership 
announced today with BV-Tech SpA 
(BV-Tech), a leading independent corporate 
IT and cyber security solutions provider in 
Italy, is entirely consistent with this 
strategy. The Board firmly believes this will 
strengthen both our product portfolio and 
reach into the corporate market. We look 
forward to working together with the wider 
BV-Tech team.
Board and management
Since our AIM admission, we have doubled 
our headcount to add further quality and 
bandwidth at all levels. Our development 
team has been strongly reinforced with the 
acquisition of Memopal SRL (Memopal). We 
now maintain and support all our products 
exclusively with internal resources, 
outsourcing key aspects of new product 
development to trusted external partners. 
The Board was sad to say goodbye to  
Guido Branca, Chief Operating Officer, 
during the summer. We remain grateful for 
his significant contribution since joining 
Defenx in 2014, most notably establishing 
the parent company in the UK, the 
subsequent private placing and the 
successful IPO in 2015. 
Anthony Reeves / Chairman
I am pleased to report that, in our first full year on AIM, 
we have delivered significant revenue and profit growth, 
exceeding the Board’s expectations set at the start of 
the year. The year was marked by new challenges, new 
products, new channel partners and new people with 
our first acquisition in August 2016 of Memopal. Our 
first year on AIM has been transformational. Annual Report 2016 7 Defenx PLC
Governance Financial statements Company overview Strategic report
The appointment of Gianluca Granero as 
Group Development Director (non Board) 
follows the integration of Memopal into the 
Group. Gianluca’s broad-ranging technical 
and commercial experience has provided 
much needed management bandwidth and 
helped to accelerate business development.
Early in 2017 , Paolo Cellini was appointed as 
a strategic adviser to the Board. Paolo 
brings extensive experience and a track 
record of supporting growing companies 
within and beyond Italy and is already 
helping Defenx in its product portfolio and 
marketing strategy.
BV-Tech have the right to nominate two 
Directors, the first of whom, Franco 
Francione, was appointed today. His 
background is set out on page 27 .
The Board continues the search for the 
right senior sales executive to help drive 
the Group’s expansion.
Robust prospects
Following the €1.53 million placing and 
subscription last October, in which the 
Board was pleased to see participation by 
the Executive Directors, and last month's 
subscription by BV-Tech, Defenx is well 
positioned to deliver continued profitable 
growth in 2017 .
As a high growth and profitable security 
solutions group, I am confident that Defenx 
will have another exciting year and deliver 
positive returns for shareholders.
The Board looks forward to meeting 
shareholders at the AGM on Tuesday  
27 June 2017 , in accordance with the  
Notice of AGM on pages 69 and 70.
Anthony Reeves
Chairman
22 May 2017
Timeline 
•  Strategic partnership with BV-Tech announced 
raising €1.15 million
• Acquisition of encrypted voice and message 
software from BV-Tech 
•  Eight new channel partners secured
•  Placing to raise €1.53 million
•  Acquisition of Memopal SRL
•  Defenx Privacy Adviser/SOS apps launched
•  Defenx Mobile Security Suite launched for 
Windows 10 phone
•  AIM IPO raising €2.1 million after expenses
• Defenx Mobile Security Suite launched for iOS
•  Defenx PLC incorporated
•  Private placing raising €1.3 million after 
expenses
•  Mobile Security Suite for Android IP bought out 
from developer
•  Generated first profit on sales of €1.1 million
• Defenx Mobile Sucrity Suite launched for Android
•  Defenx SA launched in Switzerland
• Defenx Security Suite launched for Windows
'17
'16
'15
'13
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'09 Annual Report 2016 Defenx PLC 8
Our business model
Defenx sells to channel partners that already 
have relationships with potential end-users 
of our products and solutions.
FEEDBACK
Focus on mobile
The mobile security market is large and growing 
rapidly, particularly in secondary and emerging 
markets where many have simply skipped the 
desktop PC for the smartphone.
Proven expertise in cyber security
We have built the internal expertise and software 
development supply chain to deliver effective 
solutions, quickly and cost-effectively via our 
channel partners to end-users.
Defenx products
Security
Backup
Protection
Web sales (secondary route to market)
B2B2C via channel partners (primary route to market)
While our focus is via the channel, we also have direct 
B2B and B2C sales, primarily on the web. In April 2017 , 
our new website went live bringing all Defenx and 
Memopal products together in a single website. 
We will support this with: 
• Targeted web-based marketing to drive traffic 
to our website being careful not to 
disintermediate our primary B2B2C channel
• Professional and user product reviews to 
create trust in Defenx products and greater 
visibility in App stores and across the web
• Educational content to inform potential 
end-users of the risks in their digital lives and 
how they can protect themselves
Our channel partners include:  
telecoms operators, distributors/resellers, 
OEMs, system integrators and content 
aggregators.
This is not just about cost-effective distribution. 
We seek also to improve our channel partners’ 
revenues and margins by providing a value-adding 
proposition for their customers.
We do this by:
• Sharing revenue with channel partners not 
only on the initial sale, but also on subsequent 
renewals – we do not disintermediate our 
channel partners.
• White labelling to allow our channel partners 
to build their brands.
• Integrating with our channel partners’ sales 
and marketing, billing and other IT systems.
We help our channel partners discuss security 
issues with their customers, generating  
more trusting relationships, incremental sales and 
brand loyalty. In turn, we gain valuable insight into 
what our end-users want in their security 
solutions.
We call this our business-to-business-to-
consumer (B2B2C) strategy. It is not common in 
the industry and, we believe, provides Defenx 
with competitive advantages in speed to market, 
customer acquisition cost and retention.
Channel partners provide marketing support  
through sales force training, point-of-sale 
support, marketing activities, and display and 
advertising materials in order to protect and 
project the Defenx brand. 
What makes us unique Governance Financial statements Company overview Strategic report
9 Defenx PLC Annual Report 2016
Company overview Strategic report
FEEDBACK
Value proposition
B2B2C channel sales model
Our channel first strategy leverages channel 
partners’ established market access, knowledge 
of their markets and sales and support resources 
without the need to build a large in-house sales 
support team.
End-users
Individuals
Families
Corporates
Web sales (secondary route to market)
B2B2C via channel partners (primary route to market)
Our goal is to provide 3-way protection to individuals, families and corporates building trust in 
Defenx as a guardian of users’ security, data and safety:
• Device Security – anti-malware endpoint protection for mobile, PC and network devices
• Data Backup – Cloud-based backup and synchronisation solutions to protect data and 
securely share it
• Personal Protection – client, server and web-based applications to monitor, manage and 
secure the online activities of individuals, families and corporates
Increasingly this means solutions for smartphones, tablets, desktops and the rapidly 
proliferating world of connected devices, the Internet of Things (IoT). IoT includes everything 
from Smart TVs, set-top boxes and media streamers and servers, network attached storage 
(NAS), games consoles, broadband/cable modems, home automation such as NEST and Hive, 
smart light bulbs and so the list goes on.
Defenx solutions already cover many of these such devices and we regularly add to the range 
of devices protected.
Revenue generation
We generate revenue by selling licences, typically annual, for our software products. We expect the 
market shift from these ‘traditional’ licence sales towards a ‘Protection as a Service’ (PaaS) model, 
invoiced on a monthly or annually recurring basis, to continue. Memopal Cloud Backup is already sold 
this way.
Revenue growth in 2016 came primarily from new end-users and a modest increase in ARPU. In 2017 , 
we aim to continue to grow by adding new end-users (driven by new channel partners), but also by 
increasing ARPU (driven by our broader product offering).
Cash conversion
While licence sales are invoiced up-front, typical credit terms in our markets can result in long 
delays between invoicing and cash collection. The transition to PaaS revenue generation, 
which will likely result in more sales being deferred for accounting purposes, will narrow the 
gap between reported revenue and cash generation. As we grow the proportion of sales to 
corporate focused channel partners, we expect cash collection cycles to shorten.
Software assets
The Group’s software intellectual property underpins our revenue generation. As at 
31 December 2016, the aggregate value shown as an intangible asset on the balance  
sheet amounted to €6.5 million.
What makes us unique 10 Defenx PLC Annual Report 2016
Our market and opportunity
With Android overtaking Windows as the most common operating 
system, the mobile security market continues to grow rapidly.
Our goal is to protect individuals, families and corporates, building 
trust in Defenx as a guardian of users’ security, data and safety.
MarketsandMarkets forecasts the global mobile 
security market to grow from $1.5 billion in 
2014 to just under $5.8 billion by 2019. Growth 
is driven by the increasing number of connected 
devices, the volume and sophistication of 
cyber-attacks and the growth in users' 
willingness to use online services.
More connected devices
• According to the GSMA
1
, at the end of 2016, 
two-thirds of the world’s population had a 
mobile subscription – a total of 4.8 billion 
unique subscribers. By 2020, they forecast 
almost three-quarters of the world’s 
population will subscribe to mobile services. 
Smartphone penetration also continues to 
grow rapidly with an estimated 5.7 billion 
devices by 2020.
• It’s not just mobile devices, but IoT too. IHS
2
 
forecasts that the IoT market will grow from 
an installed base of 15.4 billion devices in 
2015 to 30.7 billion devices in 2020 and 75.4 
billion in 2025, the implications of which are 
only just beginning to be felt.
More attacks and data breaches
• The number of mobile vulnerabilities reported 
again grew in 2016 to over 600, broadly split 
between Android and iOS. Android remains the 
key target for hackers because so many devices 
are not regularly updated to the latest software 
and retain unpatched vulnerabilities. Android’s 
dominant market share makes it our key focus.
• Ransomware continues to plague businesses 
and consumers with Symantec
3
 reporting a 36% 
increase in infections. Attackers are demanding 
more from victims with the average ransom 
demand in 2016 rising to $1,077 , up from $294 
a year earlier.
• While industry adopted Io T technology first, 
home and corporate use is beginning to 
increase. Few such devices have good security 
or endpoint protection. Once connected to 
home or corporate networks, they offer an easy 
way in for hackers. Symantec found that, at 
times of peak activity, the average Io T device 
was attacked once every two minutes. 
More data/online digital services
• As users, we seem more prepared to share 
data online than adopt secure behaviour, 
particularly on mobile devices.
• The rapid growth of messaging platforms 
continues, with a total user base of around 
3.6 billion at the end of 2016. Since most 
users are on mobile, the majority of the just 
under 5 billion mobile subscribers across the 
world are using messaging apps. Mobile 
devices are also used by many corporate 
workers to access the cloud and 
communicate with co-workers through 
collaborative tools and social networks. 
With a rapidly growing target market, we have a 
wealth of opportunities. The Board segments 
the market by channel and geography. The cost, 
timeframe and risk profile of investment varies 
significantly by market. 
The Board seeks to balance these attributes in 
growing sustainable sales and building long-term 
shareholder value. We continue to target 
telecoms operators worldwide for whom mobile 
security is a must-have that they can promote as 
a value added service to increase revenues and 
margins.
During 2016, we added eight distributors, with  
a focus on corporate markets. With our broader 
product portfolio and channel partner-friendly 
approach, we will continue to target high-quality 
distributors.
Our proposition for device manufacturers is to 
provide them with new ways to differentiate 
their, often commoditised, products. Major steps 
in IoT are likely some way ahead, but we do 
explore opportunities to add value and will 
support this by targeted investment.
Global drivers Opportunities
1.9 billion 
Number of smartphones worldwide
1
$5.8 billion
Global mobile security market forecast for 
2019
4
36% 
Increase in ransomware infections in 2016
3
Mobile devices worldwide
 Android  65%
 iOS  28%
 Other  7%
Source: netmarketshare.com
1  GSMA The Mobile Economy 2017
2 IHS Markit IoT platforms: enabling the Internet of Things, 
March 2016
3  Symantec Internet Security Threat Report 2017, 
April 2017
4  Markets & Markets Mobile Security Market Global 
Forecast to 2019 Annual Report 2016 11 Defenx PLC
Governance Financial statements Company overview Strategic report
EMEA
Our focus remains Europe, our natural home 
and the region with the strongest privacy 
regulations. We already sell through channel 
partners into selected Middle Eastern and 
African countries. Our geographic proximity, 
channel-friendly model and ability to price in 
line with local requirements, has provided a 
competitive advantage locally.
Opportunities
• With eight new channel partners added 
during 2016, we expect to see sustained 
revenue growth across Europe and, in 
time, the Middle East and Africa.
• Our new website, supported by targeted 
direct marketing, will ensure awareness of 
our enhanced product portfolio 
improvements creating end-user demand 
and cross-selling opportunities.
Asia Pacific Americas
North America is the most developed and 
competitive market for our products. The 
Bring Your Own Device (BYOD) trend is being 
adopted by many SMEs and, increasingly, larger 
organisations. This is a major driver for the 
adoption of mobile security software. Latin 
and South America is subject to the same 
trends albeit at a slower pace. Individuals and 
SMEs are more sensitive.
Opportunities
Our strategy is to enter market cautiously 
with high-quality channel partners and 
specific targets. For example:
• Existing OEM partners acquired with 
Memopal provide a lower risk starting 
point to test our proposition and delivery 
capacity locally.
• We are collaborating with a potential new 
partner to provide a Security and Cloud 
solution for Android set-top TV boxes.
Markets by region
Smartphone growth is now strongest across
the Asia Pacific region. As in the Middle East
and Africa, many users have simply skipped
fixed line telephony and broadband.
Awareness of and the need for mobile 
security is increasing rapidly, particularly  
with less advanced cyber security 
infrastructure locally.
Opportunities
• Many potential OEM partners are Asia 
Pacific based. Our willingness to move 
quickly, offer white label solutions and 
share revenue, makes us attractive 
suppliers of value-adding software for 
commodity hardware. 12 Defenx PLC Annual Report 2016
Build on our mobile-optimised platform
• With an installed Defenx app on a user’s mobile device we can 
cross-sell other products and services.
• Staying on a device is hard; users are fickle and apps can easily be 
deleted, so we add value by simplifying the user experience with 
clear and consistent interfaces, providing the right features without 
overload and building trust in Defenx as a guardian of users’ 
security, data and safety.
Integrate cloud-based backup and sync
• With the acquisition of Memopal, Defenx now provides protection 
from ransomware attacks by preventing the initial infection and 
ensuring data is always securely saved in the cloud in the event of 
an attack.
• Deeper integration will allow us to gather data on emerging threats 
and offer protection even to users with no installed security 
software.
Broaden security solutions
• The proportion of mobile devices with endpoint protection is still 
low, so our focus has been to provide simple, cost-effective and 
unobtrusive protection for mobile devices. 
• As awareness grows, endpoint protection coverage increases and 
our end-users’ devices become more powerful, we will add more 
sophisticated security features.
Enhance mobile device management tools
• As the number of connected devices grows, managing multiple 
devices is becoming more important since each device is a potential 
target and route into a home or corporate network.
• Adding features to enable users to understand what is happening 
to the data on each of their devices and to manage them remotely is 
now a core focus.
Broaden sales function
• During 2016, we added eight major new channel partners providing 
access to new corporate customers and their end-users, which 
underpins the revenue growth expected in 2017.
• We continue to build our channel sales and support team with the 
future focus on new geographical markets.
Target new geographical markets
• Defenx already sells indirectly through its channel partners into 
many countries, notably in secondary and emerging markets.
• Our growing reputation in the channel and brand recognition with 
end-users in these markets is enabling us to win new partners and 
end-users.
Target corporates
• It has always been part of our strategy to expand further into the 
corporate market where demand for cyber security is a major driver 
for IT investment. 
• BV-Tech's customer relationships and sales, support and technical 
staff will accelerate our expansion into the larger corporate market.
Developing our products Broaden our customer base
1 2
Our strategy
Defenx aims to be a top five cyber security company  
in its chosen markets.
We will achieve this through four clear strategic objectives:
• developing relevant new products;
• broadening the reach of our channel partner base;
• building an efficient operating platform; and 
• making targeted, earnings-enhancing, acquisitions. Annual Report 2016 13 Defenx PLC
Governance Financial statements Company overview Strategic report
Identify appropriate targets
• Our executive team and channel partners provide market 
intelligence on potential asset and corporate targets.
• All potential targets are carefully screened and, if appropriate, 
submitted to the Board before formal contact and specific 
negotiations start.
Build capacity to execute
• The acquisition of Memopal and strategic partnership with BV-Tech 
demonstrate the Board’s ability to identify and execute 
transactions quickly and effectively. 
• As Defenx headcount and experience grows, we will seek to use 
internal resources to assess strategic, commercial and technical 
aspects of any transaction to limit our reliance on external due 
diligence.
Deliver earnings enhancing transactions
• The Board’s goal is to use the Company’s equity to pay for 
acquisitions where there is a reasonable basis for the dilution to be 
matched by incremental profits in the medium-term. 
• Developing our integration skillset and resources is a priority to 
ensure we can maximise value from transactions.
Growing R&D spend to drive growth
• Our goal is to fund ‘maintenance’ software development work from 
operating cash flows to deliver positive free cash flow.
• Feedback from our channel partners is instrumental in prioritising 
our investment decisions and lowers risk.
• Where new products can accelerate profitable sales growth, we will 
raise additional finance to invest as we did in 2016.
Channel partner concentration
• We firmly believe that our B2B2C channel strategy will scale effectively 
to deliver profitable growth and we accept the elevated customer 
concentration this brings compared to a pure B2C sales model.
• Sales from additional channel partners will diversify our sectoral 
and geographical mix and mitigate customer concentration over 
time; we are targeting no channel partner to account for more than 
10% of sales in the medium-term.
Cash collection
• Extended collection terms of between 90 and 120 days are 
standard for the channel markets in which we operate.
• We manage our credit risk by assessing new channel partners before 
doing business, agreeing payment plans with them and maintaining 
regular contact. Our bad debt expense track record is good.
• The working capital burden of extended collection terms is managed 
with invoice discounting facilities. As the credit quality of our channel 
partners strengthens, we will increase the use of such facilities.
Management bandwidth
• The Memopal acquisition significantly increased the Group’s internal 
development and customer support capacity.
• The strategic partnership with BV-Tech brings access to 
experienced sales, support and technical staff and additional Board 
bandwidth with the appointment of two Directors.
Growth through acquisition Operational focus
3 4 Annual Report 2016 Defenx PLC 14
Strategy in action
 
With BV- T ech as a significant shareholder, Defenx will target corporate  
customers to add high-quality, recurring revenues in the medium-term.
About BV-Tech
Founded in 2005, BV- T ech SpA is a leading independent 
corporate IT solutions provider in Italy and the parent of a group 
of companies operating in the management consulting and 
information & communication technology sectors.
BV- T ech operates across multiple industry verticals including 
finance, telecoms, media, healthcare, defence and homeland 
security, local government and public administration and has 
gained significant experience in design, implementation and 
transformation projects of complex ICT infrastructures (10,000 
servers and more) with particular focus on information security 
management, fraud prevention and cyber security.
BV- T ech has grown rapidly, reporting revenues of €56 million  
in 2016 and employing over 600 engineers and IT experts. 
BV- T ech expects to invest over €30 million in R&D over the next 
three to four years. It is one of the founding partners of the 
Interdisciplinary Consortium for Improving Critical Infrastructure 
Cybersecurity (IC)3 promoted by the MIT Sloan Management 
School, aimed at improving and disseminating the cybersecurity 
culture for critical infrastructure.
Significant customers of BV- T ech include the Lombardy and 
Veneto Regional governments, the Italian Ministry of Justice,  
TIM (T elecom Italia Mobile), American Express, NATO, Leonardo, 
Bulgari, Eni and Saipem.
Strategic partnership
Defenx's strategy is to own and develop digital security solutions 
marketed to a broad range of customers and end-users. It has 
always been part of our strategy to expand further into the 
corporate market where the demand for cyber security is a major 
driver for IT investment. The strategic partnership with BV- T ech 
represents a significant step in pursuit of this strategy.
Defenx has acquired a bespoke version of BV- T ech's encrypted 
voice and messaging software with full rights over the source 
code for a consideration of €2.65 million in new Ordinary Shares.
Defenx and BV- T ech will shortly formalise each party's 
commitments to the long-term strategic partnership, which will 
include assisting Defenx to access the Italian corporate market, 
the services to be provided by each party and the financial and 
other considerations due in respect of such services.
As a demonstration of its long-term intent, BV- T ech also 
subscribed for €1.15 million in new Ordinary Shares in April 2017 . 
BV- T ech now owns 29.6% of Defenx's Ordinary Shares.
Rationale
BV- T ech has a sophisticated and integrated sales and distribution 
structure and close support relationships with its large corporate 
customers, many of whom have customers of their own that are 
or could be users of digital security products and solutions that 
Defenx offers. This provides the opportunity for BV- T ech to 
enhance and deepen its relationships by offering Defenx 
products to its existing and new customers. 
BV- T ech's sales, support and technical staff, with the experience 
to design, sell and integrate corporate technology solutions, will 
be available to assist Defenx in the development and delivery of 
an ever-wider range of cyber security solutions and accelerate 
Defenx's expansion into the larger corporate market.
Benefits
The Directors believe that, with the support of BV- T ech as a 
significant shareholder, Defenx will be able to target larger 
corporate customers more rapidly, more cost effectively and with 
lower risk, with a view to adding high-quality, recurring revenues 
in the medium-term.
 See www.bv-tech.it/en/ for more information
Areas of competence 
ICT Infrastructure Security Application 
Management
Web & Internet App 
Implementation
Business 
Intelligence
Audit & 
Compliance Governance Financial statements Company overview Strategic report
15 Defenx PLC Annual Report 2016
Company overview Strategic report
 
With BV- T ech as a significant shareholder, Defenx will target corporate  
customers to add high-quality, recurring revenues in the medium-term.
1 2 3
Built on the software acquired from BV-Tech, 
Defenx ECM, delivers Encrypted Calling & 
Messaging for Android, iOS and Blackberry 
smartphones.
In a highly competitive market, organisations will succeed or 
fail on their ability to capture, manage and communicate 
information effectively and securely. Existing mobile and 
fixed communication systems are not secure by design and 
possess many vulnerabilities as demonstrated by regular 
news of industrial and state sponsored espionage. 
Smartphones are increasingly widespread and increase the 
risk of illegal wiretapping. Therefore, the protection of 
communications has become strategically important.
Defenx ECM employs standard protocols, encryption 
algorithms and open-source software components to 
provide secure telephone conversations and encrypted 
messages and attachments.
Every year, new sectors find they need to protect their 
communications: financial institutions with price sensitive 
information, multinationals with commercially sensitive 
information, law enforcement with intelligence of interest to 
criminals, and government and intelligence agencies with 
classified information.
Defenx ECM (Encrypted 
Calling & Messaging)
Key features:
• Secure calls: conversation and history protection 
with in-call roaming (switching between WiFi and 
mobile networks).
• Secure messages: chat, SMS, attachments and 
self-destruction.
• Simplicity: software-only solution with the same 
user experience as a smartphone, using the existing 
mobile phone number, address book integration and 
1-click activation.
• Performance: low bandwidth, battery consumption 
and latency.
• Security: open protocols delivering end-to-end 
(ZRTP) and end-to-site (SDES) models with PIN, 
password or fingerprint access control.
In our first joint effort, we are now developing 
corporate solutions that combine Defenx  
products and BV-Tech expertise to address the 
implementation of the EU General Data Protection 
Regulation (GDPR) in 2018.
GDPR replaces the existing EU Data Protection Directive and 
is designed to harmonise data privacy laws across Europe, to 
protect and empower all EU citizens’ data privacy and to 
reshape the way organisations across the region approach 
data privacy.
For most businesses, GDPR will require investment in people, 
processes and systems to protect personal data. There are 
significant fines for breaches, particularly those that could 
have been prevented or mitigated with appropriate 
safeguards. The burden of proof that adequate steps had 
been taken falls on the business holding the data.
Cyber security
Any device used for data capture and processing is a 
potential data breach target or network attack entry point. 
Defenx Security software provides simple to use, but 
effective endpoint protection. It can be deployed on devices, 
both owned by the business or employees (used under BYOD 
policies), to significantly improve risk management.
Date encryption
GDPR does not proscribe specific processes or tools to  
be implemented, but the encryption of personal data is 
suggested practice. Forthcoming updates to Memopal Cloud 
Backup will offer appropriate corporate-grade encryption 
(end-to-end or end-to-site).
File management and audit
Organisations possess large volumes of unstructured data 
across different systems and departments. This data is 
often ‘contaminated’ by personal data. GDPR requires the 
identification of personal data, adequate safeguards and the 
reporting of any breaches.
We believe that cloud storage coupled with data analytics 
will facilitate the identification of personal data subject to 
GDPR, its potential misuse or loss. The logging of all file 
actions (e.g. create, delete, read, share, etc.), in an immutable 
form, will make it auditable.
General data 
protection regulation 16 Defenx PLC Annual Report 2016
Strategy in action continued
 
The acquisition of Memopal, a cloud-based 
backup and synchronisation business, was 
successfully completed in August 2016 bringing 
new IP , new customers and internal development 
and customer support capacity. Cloud storage is 
a door opener to new opportunities.
About Memopal 
Memopal, founded in Rome, Italy, in 
2007 , developed and owns an 
innovative cloud storage platform 
and infrastructure.
By combining predictive software 
with commodity hardware, Memopal’s 
proprietary Global File System (MGFS) 
delivers competitive cost per 
gigabyte cloud storage.
Memopal’s Cloud Backup and 
synchronisation client software is 
available in 16 languages across all 
major operating systems, including 
Microsoft Windows, Apple OS X, 
Linux, Android and iOS.
Rationale
The acquisition was in line with Defenx's 
stated strategy of diversifying its 
product portfolio and growing its 
customer base.
Memopal's team of seven staff and 
three consultants significantly 
increased the Group's internal 
development and customer support 
capacity that we would otherwise 
have needed to recruit.
The consideration was €1.78 million 
including up to €0.38 million in new 
Ordinary Shares contingent on 2017 
Group EBITDA. The Board believes 
the acquisition multiples – up to 3.0x 
revenue and 6.6x EBITDA on historic 
2015 results – represents good value 
for shareholders.
Impact so far
Defenx now offers effective 
protection against ransomware both 
reducing the risk of malware infection 
and, in the event of a successful 
attack, ensuring data is never lost, 
even on the move.
Memopal’s largest customer, Türk 
Telekom, renewed its contract during 
the year and we are working together 
to expand into their customer base 
and the wider regional market.
With the team from Memopal, the 
Group now maintains and supports  
its products with internal resources, 
outsourcing key aspects of new 
product development to trusted 
external partners.
With an EU subsidiary, the Group also 
has some protection against the 
potential impacts of Brexit and has 
been able to secure low cost debt 
finance to reduce its overall cost of 
capital. At the end of 2016, there was 
around €0.7 million in bank facilities, 
at interest rates at or below 4% per 
annum.
Memopal’s revenue and profit 
contribution in 2016 was modest as 
we integrated the business and 
started to build the sales pipeline for 
2017. We are confident that the keen 
interest from channel partners will 
translate into significant revenue 
growth and incremental profit. 
1 2 4
Memopal’s largest customer,  
Türk Telekom, renewed its 
contract during the year and we 
are working together to expand 
into their customer base and the 
wider regional market. Governance Financial statements Company overview Strategic report
17 Defenx PLC Annual Report 2016
 
Defenx Parental Control protects under-age smartphone 
and tablet users from inappropriate content and enables 
parents to manage their children's online activity.
The problem
Children expect to have a smartphone because 
their friends have one too. Smartphones are a 
great way to stay connected with children. 
However, children don’t always display good 
judgment in the sites they visit and the content 
they share. They may not yet know how to stay 
safe online.
The solution
Defenx Parental Control enables parents and 
guardians to control their children’s online 
activities and device usage from their own 
smartphone or web browser. This control 
empowers parents to educate their children as 
they grow up, safe in the knowledge that they 
are protected.
Defenx Parental Control will shortly be available 
in five languages for Android, iOS and Windows 
10 Mobile.
Benefits
The addition of Defenx Parental Control 
broadens our product portfolio providing a 
different, value-adding, proposition for our 
channel partners to engage with their 
customers. We can cross-sell our Security 
products to new users of Protection products 
and vice versa.
Progress to date
We launched exclusively with a Ukrainian 
channel partner securing a 75,000 unit 
pre-order in December 2016. Our partner has an 
established network of long-term partnerships 
with telephone carriers and electronics retailers 
in Ukraine, Russia and neighbouring countries 
including Georgia and Azerbaijan.
It also acts as the web solution provider for  
Dr Eugene Komarovskiy (www.komarovskiy.
net), a paediatrician with a strong reputation in 
Russian-speaking countries who has published 
books dedicated to the wellbeing of children 
aged 0 – 14 and has a significant social media 
following. Dr Komarovskiy is supporting the 
product through his web and TV channels.
Both our own label Defenx Parental Control and 
the white-label version were built using our 
Parental Control SDK.
1 2
Defenx Parental Control
 See defenx.com for more information
Key features:
• Block inappropriate content: control 
which websites can and cannot be 
viewed by specific site and category  
e.g. pornography and other adult sites, 
known phishing sites, etc.
• Track calls and messages: see who is 
called or texted most and maintain a list 
of blocked contacts.
• Control games & apps: block undesired 
apps from running.
• Webcam control and photo browser: block 
access to the camera and remotely view 
photos taken.
• Time limiting: set time limits for how long 
children can be online and the time of 
day they can access the internet.
• Alerts and reporting: view online activity 
without blocking access and receive 
warning messages when specific sites 
are visited. View activity on the device, 
including surfing history, call/SMS 
history, social network usage, new 
contacts, and app, bandwidth and 
battery usage.
• Location tracking, check-in and panic 
button: track the device location by GPS, 
require regular checking-in from the app 
and, in an emergency, call for help with 
the panic button. Turn the camera and 
mic on remotely. 18 Defenx PLC Annual Report 2016
Chief Executive Officer's review
Growing with the market
Defenx has focused on the mobile security 
market since its outset. Today, Google’s 
Android has overtaken Microsoft’s Windows 
as the world’s most popular operating 
system. The number of mobile devices 
continues to grow towards an estimated 
5.7 billion by 2020. Internet activity 
increasingly revolves around mobile devices 
– email, messaging, web browsing, sharing 
photos and videos – particularly so in the 
secondary and emerging markets that we 
target. We therefore remain convinced that 
developing our product portfolio to 
securing mobile devices and protecting the 
data they contain is the right strategy.
The rapid growth of ransomware, including 
more sophisticated attacks on businesses, 
is a key driver for the adoption of improved 
cyber protection. With the acquisition of 
Memopal, Defenx now offers Mobile 
Security and Cloud Backup both reducing 
the risk of infection and, in the event of a 
successful attack, ensuring data is never 
lost, even on the move.
New channel partners
Our focus on mobile and a channel-friendly 
business model enabled us to add eight new 
channel partners in 2016, expanding our reach 
into retail, mobile operators and device 
manufacturers. Distribution continues to grow 
in 2017 with the launch of Defenx Mobile 
Security Suite on the Café Bazaar Playstore, an 
Iranian Android App marketplace, through one 
of our channel partners.
Our channel partners have not just 
increased in number, but also in the size of 
the target markets they address, driving our 
geographical expansion into key markets. 
The acquisition of Memopal brought Türk 
Telekom as a new channel partner. Their 
contract has been renewed and we are 
already working together to expand into 
their customer base and the wider regional 
market.
Andrea Stecconi / Chief Executive Officer
Defenx has successfully navigated its first full year on AIM. 
Our B2B2C strategy has again delivered significant revenue 
and profit growth. This growth comes through growing the 
team, growing our product portfolio and growing the 
number and quality of channel partners we now support. 
Y ear -on-year growth in revenue was 58% to €7 .09 million. 
Operating profits (before transaction costs) increased 88% 
to €1.84 million with strong cash generation. Earnings per 
share increased four - fold to €0.185. Annual Report 2016 19 Defenx PLC
Governance Financial statements Company overview Strategic report
Memopal acquisition completed
As announced on 2 August, we successfully 
completed the acquisition of 95.2% of 
Memopal, a cloud-based backup and 
synchronisation business based in Rome, Italy. 
Memopal’s team has significantly increased the 
Group’s internal development and customer 
support capacity that we would otherwise 
have needed to recruit during the year. The 
acquisition diversified and enhanced the 
Group’s product portfolio and added new 
channel partners, development and support 
staff.
Expanding the product portfolio
As we entered 2017 , our product portfolio 
was much enhanced since the IPO. In 
addition to Security (anti-malware end-
point protection), we have added Backup 
(cloud storage and sync to protect data and 
securely share it) and Protection (a suite of 
solutions to monitor and manage the online 
activity of family members and corporate 
staff). With these three product segments 
we now address the varied needs of 
consumer and corporate end-users.
Development work is now well advanced on 
our in-house PC and Network Security 
Suite, part of our strategy to 
comprehensively address the needs of 
corporate end-users. Together with the 
Defenx Mobile Device Management (MDM) 
portal and Defenx Encrypted Call & 
Messaging (ECM) Apps, we will soon have a 
compelling product portfolio with which to 
attack the corporate market.
We continue to explore profitable 
opportunities in the Io T domain. Our existing 
Security solution for NAS drives and the 
expertise from Memopal is being used to 
develop Security and Backup solutions for 
Smart TVs and set-top boxes.
Solid financial performance
Our B2B2C strategy again delivered 
significant revenue growth with full year 
revenues including the contribution from 
Memopal of €7 .09 million, a year-on-year 
increase of 58%. Thanks to strong cost 
control, we have also delivered a significant 
increase in operating profitability and 
earnings per share. Our financial 
performance is discussed in detail below in 
the Financial review.
In October, primarily to accelerate software 
development, we successfully sought 
shareholders’ approval for an equity placing 
and subscription raising €1.53 million net of 
fees. T ogether with strong operating cash 
flows of €2.32 million and the debt facilities 
secured following the acquisition of Memopal, 
we now have the funding to continue our 
mobile-led growth and expand into the 
lucrative corporate market.
Corporate and social responsibility
Much of our software is optimised for mobile 
devices running on battery power. We seek to 
maximise its efficiency by reducing the impact 
on processing capacity and memory. These 
products therefore have lower power 
consumption reducing the frequency of 
battery recharging: a small, but scalable 
contribution to the environment. In common 
with many businesses, our greatest impact on 
the environment comes from travel, notably air 
travel. We seek to use modern communications 
to limit air travel as far as possible. 
Current trading and outlook
Defenx is on track to launch new products, 
enter new markets and broaden its 
management team in 2017 . The Board of 
Defenx is confident that the Group will 
show continued growth in revenue and 
profit over the coming year in the ever-
exciting security software market. I firmly 
believe that our long-term partnership with 
BV-Tech, announced last month, will 
generate high-quality, recurring revenues in 
the medium-term.
I would like to personally thank our people 
and investors for their continued support 
and look forward to reporting further 
progress in 2017 .
Andrea Stecconi 
Chief Executive Officer
22 May 2017 20 Defenx PLC Annual Report 2016
Financial review
Philipp Prince / Chief Financial Officer
Defenx’s continued revenue growth and strong cost control 
translated into significantly increased operating profits and, 
importantly , positive operating cash flows. The reduction in 
our free cash outflow is welcome and shows a clear trend 
towards the Board’s goal of positive free cash flows. 
Following the acquisition of Memopal, we took advantage of 
low cost debt in Italy and completed an investor -supported 
placing to accelerate our investment plans.
Key performance indicators
2016 2015
Revenue €m 7.09 4.50
Revenue growth % 57.9% 88.5%
Operating profit (before transaction costs) €m 1.84 0.98
Operating margin (before transaction costs) % 26.0% 21.8%
Earnings per share € 0.185 0.042
Operating cash flow €m 2.32 (1.02)
Free cash flow (after capitalised development costs) €m (1.67) (2.37)
Revenues
Group revenues grew 58% to €7 .09 million 
(2015: €4.49 million) driven primarily by 
increased demand from new and existing 
channel partners following the launch of 
new products and upgrades. On an organic 
basis, excluding the acquisition of Memopal, 
revenue growth was 53%. The market  
sales seasonality continues to result in  
the majority of Group revenues, 67%  
(2015: 70%), falling into the second half  
of the financial year.
Mobile security revenues accounted for 
around 65% (2015: 70%) of our business 
with the balance from PC and Network 
security and our new Backup segment. 
Network security revenues increased 
substantially with the sale of our NAS 
security products to new channel partners.
ARPU was 10% higher than the prior year. 
As highlighted last year, the sale of security 
bundles – providing protection for multiple 
platforms – is increasingly important. With 
the addition of Backup and Protection 
segment products to our portfolio, we 
expect this trend to continue with a 
resultant increase in the Group’s ARPU.
The deferred revenue provision increased to 
€590,000 (2015: €315,000) representing 
the proportion of sales attributable to the 
provision of updates and support over the 
licence period outstanding at the year end. 
As our revenue model shifts towards 
‘Protection as a Service’ subscriptions, we 
expect deferred revenue to grow as a 
proportion of sales. The Board continues to 
monitor the likely impact of IFRS 15, due for 
first time adoption from January 2018, and 
emerging market practice. Annual Report 2016 21 Defenx PLC
Governance Financial statements Company overview Strategic report
Revenue (€ millions)
Operating profit margin (before 
transaction costs) (%)
Revenue and revenue growth provides the evidence that our software is 
purchased and used.
Growth in operating margins ensures sales, marketing and administrative costs 
are controlled to drive efficiency in the Group’s operations.
'16 7.09
'15 4.50
'14 2.38
Earnings per share (€)
Operating cash flow (€ millions)
Free cash flow (€ millions)
Earnings per share is the key indicator showing whether Defenx is delivering 
shareholder value.
Operating cash flow demonstrates that profits convert to cash on a timely basis.
Free cash flow shows whether Defenx is self-funding its investment activities.
'16 0.185
'16 2.32
(1.67) '16
'15 0.042
'15 (1.02) 
'14 0.167
'14 0.39
(0.82) '14
'16 26.0%
'15 21.8%
(2.37) '15
'14 33.8%
Gross margin
In line with guidance last year, gross profit 
margins fell to 82.5% (2015: 88.6%) with 
the launch of new products that increased 
amortisation charges to €1.01 million 
(2015: €477 ,000). Cost of sales also 
includes sales commissions, expensed 
customer integration and software 
maintenance costs.
The introduction of Memopal Cloud Backup 
in March 2016, for which there are additional 
storage, connectivity and labour costs of 
sales, also had a modest downward impact 
on margins. We expect this to continue in 
2017 as Memopal Cloud Backup sales grow.
Expenses
The Group now reports operating expenses 
by department, being sales & marketing; 
research, development & operations; and 
administration, with transaction costs 
separately itemised. Analysed by their 
nature, marketing, staff and AIM-related 
expenses account for the majority of the 
Group’s ongoing operating expenses (see 
note 6).
Marketing expenses, primarily contributions 
towards developing the Defenx brand that 
are generally paid to channel partners only 
upon the achievement of pre-agreed  
sales targets, increased to €2.22 million  
(2015: €1.45 million), a modest fall to 31.4% 
(2015: 32.3%) of sales against our target  
of 30%.
Overall staff costs increased to €943,000 
(2015: €691,000) with the addition of ten 
sales, support and development staff, largely 
following the acquisition of Memopal, and 
the full year effect of the Board additions 
and alignment of remuneration to market 
rates for the IPO. Performance-related 
bonuses of €191,000 (2015: €203,000) are 
included in these costs. We continue to 
engage sales and development resources as 
contractors at an additional cost during the 
year of €88,000 (2015: €114,000) excluding 
software development costs that have been 
capitalised. 22 Defenx PLC Annual Report 2016
The costs of maintaining our AIM listing were €168,000  
(2015: €6,000 from 3 December 2015). In addition, the share-
based payment charge in respect of the 204,750 warrants granted 
to our joint-brokers at the time of the placing in October 2016 was 
€59,000. Excluding these AIM expenses, administrative expenses 
fell during the year. On an annualised basis, Memopal adds around 
€300,000 to the Group’s operating expenses.
Operating profitability
Operating profits before transaction costs increased 88% to  
€1.84 million (2015: €979,000) resulting in an operating margin 
before transaction costs of 26.0% (2015: 21.8%). This increase 
reflects the tight control of overheads following the step change 
in the Group’s cost base prior to our IPO. Being largely fixed costs, 
we anticipate operating margins to continue to improve during 
2017 towards our target of 30%.
Transaction costs of €189,000 relating to the acquisition of 
Memopal and net interest expenses of €62,000 (2015: €3,000) 
resulted in profit before tax of €1.60 million (2015: €362,000). 
Additional transaction costs of €169,000 relating to the placing 
and subscription were charged to the share premium account.
Taxation
The Group’s effective tax rate for the year of 21.1% (2015: 64.6%) 
is in line with the 20% main rate in the UK. The loss incurred by the 
Company itself, for which we do not yet obtain tax relief, was 
offset by the release of excess provisions for Swiss tax from 2014. 
With the acquisition of Memopal, we expect our effective rate of 
tax to increase further above 20% during 2017 . We keep the 
Group’s operations under review to ensure taxes are paid that 
fairly reflect activities in the UK, Italy and Switzerland.
Net profit and EPS 
Profit after tax attributable to ordinary shareholders of Defenx 
was €1.23 million (2015: €192,000). This equates to earnings per 
share (EPS) of €0.185 (2015: €0.042) undiluted and €0.169  
(2015: €0.039) diluted.
The Board has reviewed the dividend policy in light of the Group’s 
strategy, available opportunities and anticipated funding 
requirements and has concluded that it is in the interests of 
shareholders to continue to reinvest profits in future growth.  
The medium-term intention remains to become a dividend paying 
business.
Cash flow 
The net cash inflow from operating activities was €2.32 million 
(2015: €1.02 million outflow) after an increase in receivables of 
€1.44 million (2015: €2.27 million) offset by an increase in 
payables and provisions of €1.04 million (2015: €347 ,000). We 
continue to work with our channel partners to accelerate the 
receipt of debtors, although extended terms are common in 
Southern Europe, the Middle East and Africa.
The cash outflow from investing activities reflects continued 
investment in our software assets, which accelerated following 
the placing and subscription in October 2016. During the year, 
capitalised software development costs were €4.89 million  
(2015: €1.35 million) including €900,000 for the Memopal Cloud 
Backup IP acquired with Memopal. Cash acquired upon the 
acquisition of Memopal was €354,000. 
The net cash inflow from financing activities reflects the placing 
and subscription in October 2016 that raised €1.53 million net of 
expenses, the drawdown of new debt facilities and the partial 
repayment of the vendor loans in respect of the acquisition of 
Memopal.
The free cash outflow, defined as net cash flow from operating 
activities less internally capitalised development costs, was  
€1.67 million (2015: €2.37 million). As revenues continue to grow, 
it is the Board’s expectation that free cash flow will turn positive.
Together with the net proceeds of €2.78 million from the IPO, 
Defenx has raised a total of €4.31 million since admission to AIM.  
A further €1.15 million was subscribed by BV-Tech after the  
year-end.
Intangible assets
The net book value of capitalised development costs increased to 
€6.54 million (2015: €2.61 million) reflecting the completion of 
work on Defenx Mobile Security for Windows 10 Mobile, Defenx 
Privacy Adviser and Defenx Parental Control; the start of work on 
Defenx Security Suite for Windows PCs and networks; integration 
with channel partners’ systems; and the acquisition of Memopal.
The acquisition of Memopal resulted in goodwill of €1.14 million 
and an intangible customer relationship asset relating to certain 
B2B customer contracts, which is being amortised over three 
years, of €305,000 (see note 23).
Having assessed the sales prospects for our software products, 
the Board is satisfied that carrying value of these intangible assets 
is appropriate.
Financial review continued Annual Report 2016 23 Defenx PLC
Governance Financial statements Company overview Strategic report
Current assets and liabilities
Current assets increased to €6.68 million (2015: €4.64 million) 
including year-end trade receivables of €5.33 million  
(2015: €2.83 million), of which 16% was overdue, and cash 
balances of €1.18 million (2015: €1.33 million).
Credit risk is managed by regular review of outstanding and 
overdue balances and dialogue with customers. Standard payment 
terms are typically between 90 and 120 days in our markets. The 
average age of outstanding invoices at the year-end was 58 days, 
somewhat below the average during the year due to our sales 
seasonality. Based on the strong relationships with our customers 
and their past collections experience, we are confident that trade 
debtors are fairly stated in the balance sheet.
Cash deposits are held in Euros, Sterling, Swiss Francs and US Dollars 
and placed on deposit in the UK and Switzerland. Minimal balances 
are held in Italy. Cash forecasts are updated monthly to ensure that 
sufficient cash is available for foreseeable requirements.
Current liabilities increased to €4.07 million (2015: €1.35 million) 
including trade creditors and accruals of €1.39 million  
(2015: €656,000), the current proportions of deferred revenue, 
loans and borrowings, and taxation of €773,000 (2015: €443,000).
Financing
The Group entered into new debt facilities of, in aggregate, €1.32 
million during the year. A €400,000 term loan, €150,000 invoice 
discounting facility and overdraft of €150,000 are available in 
Italy. A supply chain finance facility of £450,000 is available in the 
UK. The invoice discounting and supply chain finance facilities 
have allowed the Group to narrow the working capital gap 
between the extended debtor terms customary in its overseas 
markets and shorter supplier credit terms in the UK. In addition, 
€742,000 of the €1 million vendor loans (including the €438,000 
in cash consideration) in respect of the acquisition of Memopal 
were outstanding at the year-end.
Gross debt, including vendor loans, was €1.95 million (2015: €nil) 
at the year end (see note 18). Net debt was €774,000 (2015: €nil), 
equivalent to a debt-to-equity ratio of 8% compared to the Board 
limit of 25%. The weighted average interest rate payable for the 
year was 9.8%.
Defenx is in a strong financial position to continue to grow and 
exploit many exciting opportunities ahead. The Group ended the 
year with a significantly stronger balance sheet. Total equity 
attributable to ordinary shareholders of Defenx increased to  
€9.63 million (2015: €5.81 million) representing a net asset value 
per share of €1.120 (2015: €0.953).
Philipp Prince
Chief Financial Officer
22 May 2017 24 Defenx PLC Annual Report 2016
   
Principal risks and uncertainties
Technology
The industry in which Defenx operates is in the process of continual change 
reflecting technical developments as industry and government standards and 
practices change and emerge.
The markets in which Defenx operates are competitive and rapidly evolving. 
The Group’s existing products may become less competitive or even obsolete 
as competitors introduce new products and customer behaviour changes.
Certain of the Group’s competitors have greater scale with significant 
financial, technical, sales and marketing resource and may therefore be better 
able to generate sales.
Competition
The markets in which Defenx operates are competitive and rapidly evolving. 
The Group’s existing products may become less competitive or even obsolete 
as competitors introduce new products and customer behaviour changes.
Certain of the Group’s competitors have greater scale with significant 
financial, technical, sales and marketing resource and may therefore be better 
able to generate sales.
Cyber security and data protection
As a growing provider of security solutions, Defenx may become a high-
profile target and the Group’s networks and products may have vulnerabilities 
that have from time to time been, and may in future be, targeted by attacks 
designed to disrupt the Group’s business and harm its reputation.
As a custodian of increasing volumes of end-user data, the Group is exposed 
to data loss and breaches of data protection regulations in the markets in 
which it operates.
Such attacks and/or data loss could adversely affect the Group’s reputation, 
performance and operations.
New products and features are carefully assessed 
against their target markets and in response to channel 
partner feedback prior to development.
Defenx works with expert development partners who 
have a track record of producing high-quality software 
quickly and at highly competitive costs.
Defenx’s products have been optimised for mobile 
devices, the fastest growing product category, which the 
Board believes reduces the likelihood of obsolescence.
The Board further believes that our B2B2C strategy is 
more efficient with lower customer acquisition costs and 
higher ARPU. This efficiency, which is expected to 
increase with scale, will become a competitive advantage 
for Defenx.
The Group actively monitors its cyber exposure and its 
products effectiveness against emerging threats.
The Group’s IT team:
• monitors suspicious activities
• investigates and reports on any actual or suspected 
incidents
• regularly implements improvements in the Group’s 
security infrastructure.
All staff are trained to mitigate cyber risks by adopting 
appropriate best-practice.
Principal risk Mitigation Movement
The Board is responsible for developing a comprehensive 
risk framework and a system of internal controls. 
    Annual Report 2016 25 Defenx PLC
Governance Financial statements Company overview Strategic report
   
Retention of channel partners
Our B2B2C strategy relies on the attraction and retention of channel 
partners. These relationships are fundamental to achievement of our 
business objectives. If we do not retain channel partners whether by 
reason of competition, mismanagement or other cause, the Group’s 
financial performance could be significantly adversely impacted.
Operations overseas
A rising proportion of Defenx’s revenues are generated outside the 
European Union. The Group may be adversely affected by changes in local 
and regional economic, political and social conditions such as changes in 
law and regulation, taxation and currency restrictions. In addition, 
fluctuating exchange rates and the costs of conversion and exchange 
controls may have an unfavourable impact on profitability, particularly 
when reported in Sterling.
Working capital and funding
The Group has many investment choices in its fast growing markets. 
Growing sales, particularly in new and emerging markets, and new product 
development requires time and working capital. Poor investment choices 
may result in weaker or no sales growth, products with limited market 
potential and limited funding constraining our ability to grow.
The Group is also exposed to heightened credit risk due to customer 
concentration and extended credit terms resulting from its B2B2C 
business model and focus on secondary and emerging markets.
Recruitment and retention of staff
The success of Defenx depends upon high-quality staff with the relevant 
expertise and experience to broaden and sell the Group’s products and 
solutions. Failure to retain these staff and attract and retain other high 
calibre individuals may adversely affect the Group’s performance and 
profitability. 
Defenx seeks to attract and retain high-quality channel 
partners by:
• offering a growing range of security products and 
solutions that meet the needs of end-users
• providing tools to help partners manage renewals and 
generate recurring revenues rather than 
disintermediating them by selling direct to end-users
• pricing our products competitively and sharing 
revenues to give partners fair margins
By working with channel partners, Defenx leverages 
their expertise of overseas markets to trade more 
effectively than by operating directly in such markets.
The Group incurs the majority of its costs and generates 
most of its revenues in Euros. This natural hedging 
reduces the impact of fluctuations in foreign currencies.
The Group is profitable and invests its positive operating 
cash flows in sales, marketing and software 
development. It does not need to fund trading losses.
All software development and material sales generation 
activity, for example into new territories, is assessed and 
prioritised by market potential and risk.
Credit risk is mitigated by assessing the credit rating of 
new customers prior to entering into contracts and 
agreeing credit terms with customers.
The Board believes that the Group’s focus on the fast 
growing mobile security market, its recent IPO and 
strong leadership offers a compelling and refreshing 
employment proposition.
Principal risk Mitigation Movement
Key
Increase
Decrease
Stable
The principal risks and uncertainties presented below are those considered by the 
Board to have a potentially material impact on the Group’s ability to achieve its key 
objectives. They do not include all the risks associated with the Group’s activities.
 
   
   26 Defenx PLC Annual Report 2016
Anthony (Tony) Reeves
Chairman
Appointed to the Board: 7 October 2015
Committee Membership: A R*
Tony has over 45 years’ experience in the 
recruitment sector and was the executive 
chairman of Kellan Group plc, the AIM listed 
recruitment business. Prior to this, he was 
chairman and chief executive officer of the 
hotgroup plc from 2001 until its acquisition 
by Trinity Mirror Group plc in 2005. In 1986 
Tony formed Lifetime Corporation, an 
overseas recruitment agency operating 
primarily in the Middle East, which was 
reversed into a business listed on the 
American Stock Exchange and sold to Olsten 
for $660 million with $1 billion sales. He is 
also a private investor in various early stage 
companies and vice president of Chelsea 
Football Club.
Andrea Stecconi
Founder and Chief Executive Officer
Appointed to the Board: 3 June 2014
Committee Membership: None
Andrea established Defenx in 2009 to build 
on the marketing and channel development 
skills he developed through a career in 
technology marketing. From 1999 to 2009, 
Andrea was chief executive officer at Exa 
Media Spa a media software developer based 
in Ancona Italy. In 2005, as part of an effort 
to leverage the Exa Media distribution 
network, he successfully brought Kaspersky 
PC security software into Italy. He is 
specifically responsible for strategic 
direction, lead generation and customer 
engagement. Andrea holds a degree in 
accounting from the Istituto F. Corridoni in 
Osimo (Marche Region) and attended further 
studies in computer programming. He is 
presently based in Balerna, Switzerland and is 
fluent in Italian and English.
Philipp Prince
Chief Financial Officer
Appointed to the Board: 21 July 2015
Committee Membership: None
Philipp has 20 years’ experience as a 
chartered accountant, having qualified with 
Stoy Hayward (now BDO LLP) in 1995. He 
spent 16 years in corporate finance, 
becoming a partner in 2002, and spent two 
years building BDO’s government and 
infrastructure team. Prior to joining Defenx, 
he was CFO of Enecsys, a Silicon valley based 
solar micro-inverter business. Philipp is 
responsible for financial management, 
governance and investor relations. He has an 
MA in Natural Sciences from Corpus Christi 
College, Cambridge University, and he is a 
fellow of the Institute of Chartered 
Accountants in England & Wales. Philipp is 
currently based in London and is fluent in 
English and French and speaks German.
Board of Directors  Annual Report 2016 27 Defenx PLC
Strategic report Financial statements Governance Company overview
Leonard Seelig
Non-executive Director
Appointed to the Board: 7 October 2015
Committee Membership: A* R
Leonard has had a successful career in 
finance spanning over 25 years and including 
senior positions in the US and Europe with 
America’s largest banks. He is currently 
actively involved both at an operating and 
board level in several companies in the 
technology sector and was until recently 
non-executive chairman of APC Technology 
Group Plc, an AIM listed 'green-tech' company. 
Leonard’s educational background includes a 
Bachelor of Commerce from the University of 
Witwatersrand in South Africa, and a Master 
of Science in Agricultural Economics from 
Texas A&M University in America.
Franco Francione
Non-executive Director
Appointed to the Board: 22 May 2017
Committee Membership: A
Franco has 30 years’ experience in finance 
and administration. He started his career at 
an Italian business subsequently acquired by 
Johnson Controls Automotive where he was 
treasury manager reporting to the managing 
director. In 2001, he moved to Segesta SpA, 
now part of the Korian Group, a European 
leader in services to the elderly, listed on 
Euronext. At Segesta, Franco was CFO and 
real estate director responsible for finance, 
treasury, purchasing, administration, estates 
and M&A, and sat on 26 subsidiary boards. In 
March 2017 , Franco joined BV-Tech SpA as 
CFO. He is one of BV-Tech’s nominated 
directors. He speaks Italian and English.
Key:
A Member of the Audit Committee
R Member of the Remuneration Committee
* Denotes Chairman of Committee 28 Defenx PLC Annual Report 2016
Chairman’s statement 
on governance
The Board
Dear shareholder
As an AIM company we are not required to comply with the UK Governance 
code (UK Code). We are, however, committed to following the principles set 
out in the Quoted Companies Alliance Corporate Governance Code (QCA 
Code), widely accepted as being the industry standard for growing 
companies to which the UK Code does not apply to the extent considered 
appropriate having regard to the current size and stage of development of 
the Company.
The reports from the Committees' Chairmen are set out on pages 30 to 36 
and you will hear from them how Defenx is continuing to develop its 
governance framework. We see the evolution of good governance going 
hand in hand with the growth of the Group. We believe that high standards 
of governance make an important contribution to shareholder value now 
and in the future.
Future plans
Following the announcement of the strategic partnership with BV-Tech, 
which entitles them to nominate two Directors to the Board, any 
appointments are subject to approval by the Company’s independent 
Non-executive Directors and the satisfactory completion of the requisite 
due diligence procedures Franco Francione was appointed by the Board 
today as a Non-executive Director. I am working with BV-Tech to identify 
and approve their second nominee.
We do not currently anticipate any succession issues but recognise that it 
may be necessary to recruit either replacement or additional Directors and 
senior management. We will therefore consider the need to create a 
Nominations Committee to consider the suitability of any proposed 
Directors and make recommendations to the Board.
Anthony Reeves
Chairman
22 May 2017
The Board comprises a balanced mix of Executives and Non-executives 
with a combination of relevant skills and experience, designed to ensure 
there is effective leadership of the Group. Directors’ biographies appear on 
pages 26 and 27.
Both Anthony Reeves and Leonard Seelig continue to be considered by  
the Board to be independent, Anthony having fulfilled the test of 
independence on his appointment. In determining that they are 
independent the Board considered the individual’s interests in the 
Company’s shares and the share options granted to them. The Board 
determined that these interests aligned the Directors’ interests with those 
of the Group and bearing in mind the small percentages held, that they 
remained independent. Franco Francione is not considered to be 
independent by virtue of his employment as CFO of BV-Tech.
The Board is responsible for setting strategy, performance and for the 
stewardship of the Group, within the framework of effective controls 
which enable risk to be assessed and managed. Importance is placed on 
maintaining a robust control environment.
Anthony Reeves as Non-executive Chairman is responsible for the 
leadership of the Board, ensuring its effective operation and setting the 
agenda. Andrea Stecconi as Chief Executive Officer is responsible for 
day-to-day operations. The Directors have access to the services of a 
Company Secretary through Equiniti David Venus Limited who provides 
advice on company legal and corporate governance matters. In addition, 
the Directors are able to take independent legal advice at the Company’s 
expense if so required.
The Non-executive Directors are contracted to spend 24 days per annum 
on Defenx business.
Board meeting attendance
The Board normally meets on a monthly basis. During the year, the Board 
met on 10 scheduled occasions. 
Board meetings 
attended
Anthony Reeves Non-executive Chairman 10/10
Andrea Stecconi Chief Executive Officer 10/10
Guido Branca 
(resigned 15 June 2016) Chief Operating Officer 4/5
Philipp Prince Chief Financial Officer 10/10
Leonard Seelig Non-executive Director 10/10
  
There were also five ad-hoc Board meetings convened in relation to the 
acquisition of Memopal and the placing and subscription in October 2016, 
which were attended by the Directors by phone except for one where 
Anthony Reeves was overseas and unable to join.
Board performance evaluation
The Board is committed to undertaking reviews of Board and Committee 
performance and of individual Board members every year. The first review, 
which will include the identification of any training needs for the Board, 
was deferred and will be conducted during 2017 once the second 
appointment on behalf of BV-Tech has been approved. Annual Report 2016 29 Defenx PLC
Strategic report Financial statements Governance Company overview
Risk management and internal control
The Board is responsible for determining the nature and extent of major 
risks facing the Group and for establishing and maintaining a risk 
management framework and system of internal financial controls. 
A summary of the principal risks identified by the Group and how these are 
mitigated is set out on pages 24 and 25 The key elements of the Group’s 
risk framework and internal control systems are:
• A schedule of matters reserved for decision by the Board
• Defined responsibilities and authority limits
• Close involvement of the Executive Directors and other members of 
senior management in day-to-day operations
• Monthly management reporting
• Comprehensive annual budgeting process and monitoring of 
performance against budget
The Board discusses all business matters having regard to the risk for the 
Group and to the extent that risks inherent in a particular activity are 
considered significant, appropriate action is taken and steps taken to 
mitigate the issue.
Going concern
The Directors are satisfied that the Group has adequate resources to 
continue in operational existence for the foreseeable future and, 
accordingly, continue to adopt the going concern basis in preparing the 
Group and Company financial statements.
Relations with shareholders
The Directors are committed to regular engagement with existing 
shareholders and prospective investors and will make themselves available 
to meet existing and potential investors in London during the weeks in 
which Board meetings are held, which is generally the fourth week of the 
month.
In accordance with good governance, the Company entered into a 
relationship agreement with its major shareholder and Chief Executive 
Officer, Andrea Stecconi, to ensure the independent operation of the 
Group without undue influence. On 11 April 2017 , the relationship 
agreement terminated as a result of Andrea’s interest in the share capital 
falling below 20%.
Andrea Stecconi, Angelo Motti, Mauro Celentano, who in aggregate hold 
2,353,492 (20.0% of the) Ordinary Shares, agreed not to sell or otherwise 
dispose of any of their shares, subject to certain limited exceptions, during 
the 12 months to 2 December 2016 and such agreements have now 
therefore lapsed. Normal orderly market provisions apply until 2 December 
2017.
In total, BV-Tech holds 3,480,388 (29.6% of the) Ordinary Shares. BV-Tech 
is restricted, other than in certain limited circumstances, from transferring 
its Ordinary Shares for a period of 12 months, and for a further 12-month 
period any such transfers will need to be effected through the Company's 
broker.
The Company and BV-Tech have entered into a relationship agreement to 
ensure that the Company is capable at all times of carrying on its business 
independently of BV-Tech and its associates and for the benefit of the 
shareholders as a whole.
Information received by the Board
The Board receives information on, at least a monthly basis, to enable it to 
review operational and financial performance (including sales activity, 
software development progress and working capital management); 
forecasts (including comparison with market expectations); potentially 
significant transactions; and strategy.
Website
Our corporate website at investors.defenx.com and relevant social media 
platforms provide access to Company information, public announcements, 
published financial reports and contact details.
AGM
The forthcoming AGM on Tuesday 27 June 2017 will again be an 
opportunity to meet shareholders. The Chairman, other Directors and 
senior management will be available to meet shareholders and to answer 
any questions. 30 Defenx PLC Annual Report 2016
Audit committee report
Dear shareholder
As Chairman of Defenx’s Audit Committee, I am pleased to present the 
Audit Committee Report for the year ended 31 December 2016, which has 
been prepared by the Committee and approved by the Board.
The Committee is responsible for reviewing and reporting to the Board on 
financial reporting, internal control and risk management, and for reviewing 
the performance, independence and effectiveness of the external auditors 
in carrying out the statutory audit. The Committee advises the Board on 
the statement by the Directors that the Annual Report, when read as a 
whole is fair, balanced and understandable and provides the information 
necessary for shareholders to assess the Group’s performance, business 
model and strategy.
During the year, the Committee’s primary activity involved meeting with 
the external auditors, considering material issues and areas of judgement, 
and reviewing and approving the interim and year-end results and 
accounts.
In addition, the Committee reviewed the audit and tax services provided by 
haysmacintyre, the Group’s external auditors. The Committee concluded 
that haysmacintyre are delivering the necessary audit scrutiny and that 
the tax services provided did not pose a threat to their objectivity and 
independence. Accordingly, the Committee recommended to the Board 
that haysmacintyre be re-appointed for the next financial year.
In the coming year, in addition to our ongoing duties we will:
• Continue to consider the impact on the Group of the introduction of 
International Financial Reporting Standard (IFRS) 15 ‘Revenue from 
Contracts with Customers’
• Keep the need for an internal audit function under review, having 
regard to the Company’s strategy and resources.
Leonard Seelig
Chairman of the Audit Committee
22 May 2017
Audit committee and attendance
The Audit Committee comprises Anthony Reeves and Leonard Seelig who 
chairs the Committee. It is our intention to appoint a further member to 
the Committee upon the enlargement of the Board following the strategic 
partnership with BV-Tech. The Board considers that Leonard Seelig has 
sufficient relevant financial experience to chair the Audit Committee given 
his 25-year career in banking and finance.
The Committee is required by its terms of reference to meet at least twice 
a year. During the year, the Committee met twice and both members of the 
Committee attended on each occasion. In addition Philipp Prince, Chief 
Financial Officer, attended by invitation as did representatives of 
haysmacintyre, the Company’s external auditors.
Objectives and responsibilities
The Committee is responsible for monitoring the integrity of the Group’s 
financial statements, including its Annual and Interim Reports, preliminary 
result announcements and any other formal announcements relating to its 
financial performance prior to release.
The Committee’s main responsibilities can be summarised as follows:
• to review the Company’s internal financial controls and risk 
management systems;
• to monitor the integrity of the financial statements and any formal 
announcements relating to the Group’s financial performance, 
reviewing significant judgements contained in them;
• to make recommendations to the Board in relation to the appointment 
of the external auditors and to recommend to the Board the approval 
of the remuneration and terms of engagement of the external auditors;
• to review and monitor the external auditors’ independence and 
objectivity, taking into consideration relevant UK professional and 
regulatory requirements;
• to develop and implement policy on the engagement of the external 
auditors to supply non-audit services, taking into account relevant 
ethical guidance regarding the provision of non-audit services by the 
external auditors; and
• to report to the Board, identifying any matters in respect of which it 
considers that action or improvement is needed, and to make 
recommendations as to steps to be taken.
The terms of reference are reviewed annually and are available on the 
Company’s website at investors.defenx.com.
Significant issues considered during the year
During the year, the Committee:
• met with the external auditors to review and approve the annual audit 
plan and receive their findings and report on the annual audit;
• considered significant issues and areas of judgement with the potential 
to have a material impact on the financial statements;
• considered the integrity of the published financial information and whether 
the Annual Report and Accounts taken as a whole are fair, balanced and 
understandable and provide the information necessary to assess the Group’s 
position and performance, business model and strategy; and
• reviewed and approved the interim and year-end results and accounts. Annual Report 2016 31 Defenx PLC
Strategic report Financial statements Governance Company overview
The significant accounting areas and judgements considered by the 
Committee were:
Revenue recognition
The Committee discussed business developments in the sector, in 
particular the increasing frequency with which the Group’s channel 
partners adopt a ‘bundling’ strategy for selling software which gives rise 
to licences sold by Defenx not necessarily being activated. The Committee 
was satisfied that the consequential judgement taken on licences sold and 
not activated and therefore the timing of release of deferred revenue in 
the accounts was appropriate. The Committee also considered an initial 
appraisal of the impact of adopting IFRS 15 in subsequent years.
Recoverability of debtors
The Committee reviewed the track record of payments and after-date 
recoveries from slow-paying debtors. In light of this evidence and having 
regard to the payment profile being considered typical for the sector and 
the relevant geographical regions, the Committee was satisfied that trade 
receivables were fairly stated.
Share-based payments
The Committee discussed the assumptions which continue to be adopted 
in accounting for share-based payments and recognising that these 
involve a certain amount of judgement and complexity, concluded that in 
the absence of a track record of exercising options, the assumption that an 
effective life-span of five years, compared with an option period of up to 
10 years, was not an unreasonable assumption. Further details of the 
assumptions made are contained in note 21 to the financial statements.
Going concern
The Committee reviewed the cash flow forecasts for the Group and 
discussed the key assumptions and risks relevant to their achievement. 
The Committee was satisfied that the basis for adopting the going 
concern basis in preparing the Group and Company financial statements, 
set out in note 1 on page 47 , was reasonable.
Valuation of intangible assets
The Committee reviewed the basis of capitalisation and considered the 
intangible value attributed to its intangible software development costs. 
The Committee was satisfied that the cash flows from the anticipated 
level of future revenues, supported by customer interest and the sales 
pipeline, are sufficient to support the carrying values.
Acquisition of Memopal
The Group completed the acquisition of Memopal SRL in August 2016. 
Management completed the exercise to determine the fair value of 
intangible assets and other net assets acquired in accordance with IFRS3.
The Committee has reviewed the key assumptions adopted and discussed 
the accounting treatment and completeness of related disclosures with 
the external auditors.
Risk review process
The Audit Committee is responsible for reviewing the financial risks and 
the internal controls relating thereto but the Board as a whole has 
responsibility for reviewing the overall business risks and risk management 
framework. The Group’s principal risks and uncertainties are set out in the 
Strategic Report together with mitigating actions and the internal controls 
and risk management procedures are summarised in the Corporate 
Governance Report.
External auditor
The Committee reviewed the effectiveness of the audit process in respect 
of the year ended 31 December 2015 and immediately prior to publishing 
this report in respect of the year ended 31 December 2016. In doing so, 
the Committee considered the reports produced by haysmacintyre, met 
the audit engagement partner and discussed the audit with the Chief 
Financial Officer. The Committee continues to be satisfied that the 
external auditors are delivering the necessary scrutiny and robust 
challenge in their work. Accordingly the Committee recommended to the 
Board that it is appropriate to re-appoint haysmacintyre as the Group’s 
external auditors for the next financial year.
External audit and non-audit services
During the year, haysmacintyre provided tax advisory services. An analysis 
of the audit and non-audit fees is provided in note 6 to the financial 
statements. The Audit Committee considered the independence and 
objectivity of haysmacintyre in carrying out both tax and audit services. 
The Committee was satisfied with the written assurances received that 
the non-audit work undertaken by haysmacintyre did not pose a threat to 
their objectivity and independence. 32 Defenx PLC Annual Report 2016
Remuneration committee report
Dear shareholder
As Chairman of Defenx’s Remuneration Committee, I am pleased to present the Remuneration Committee Report for the year ended 31 December 2016, 
which has been prepared by the Committee and approved by the Board.
The Remuneration Committee is responsible for determining the remuneration policy for the Executive Directors and other members of senior 
management and for overseeing the Company’s long-term incentive plans. The Board as a whole is responsible for determining Non-executive Directors’ 
remuneration.
As an AIM company, the Directors’ Remuneration Report Regulations do not apply to Defenx and so the report that follows is disclosed voluntarily and 
has not been subject to audit. The Annual Report on remuneration will again be subject to an advisory vote by shareholders at our forthcoming AGM and 
we hope to receive your support.
The Committee will continue to monitor market trends and developments in order to assess those relevant for the Group’s future remuneration policy.
Remuneration decisions for 2016
Defenx delivered profitable growth in 2016, reporting a 58% increase in revenue to €7.09 million and operating cash flow of €2.32 million.
Andrea Stecconi and Philipp Prince will receive bonuses of £40,000 each representing 44% and 50% of their respective base salaries. There were no 
long-term incentive awards during the year.
Remuneration policy for 2017 and future years
Defenx has changed considerably since admission to AIM, with the acquisition of Memopal in August 2016 and the announcement of the strategic 
partnership with BV-Tech in April 2017.
Accordingly, we have reviewed the Group’s remuneration policies in detail to reflect the needs of a growing multi-national group. The Committee 
believes that executive salaries paid across the Group are now below market norms. Future salary increases will be set to bring them into line with 
relevant market levels.
The future policy table provides an appropriate balance between fixed remuneration and variable incentives. The performance elements will have clearly 
defined and challenging targets that link rewards to business performance in the short and medium-term. All variable elements of remuneration are 
subject to clawback or repayment in the event of serious financial misstatement or misconduct.
Following a review of Group performance and their personal contribution, Andrea Stecconi and Philipp Prince salaries will increase to £115,000 and 
£105,000 being increases of 28% and 31% respectively, effective 1 January 2017. In addition, Philipp Prince is now entitled to the same benefits 
package as offered to new employees in the UK.
There have been no long-term incentive awards since admission to AIM. It is our intention to make performance-based awards once the nominee 
Directors of BV-Tech have been appointed to the Board.
Anthony Reeves
Chairman of the Remuneration Committee 
22 May 2017 Annual Report 2016 33 Defenx PLC
Strategic report Financial statements Governance Company overview
Future policy table
The key components of Executive Directors’ remuneration are as follows:
Purpose and link to strategy Operation Maximum opportunity Performance metrics
Fixed pay
Base Salary
To attract, retain and motivate high 
calibre executives by setting base 
salaries in line with the relevant 
market.
Base salaries are reviewed annually 
with reference to individual and Group 
performance in line with the relevant 
market reflecting the individual’s 
experience, competence and 
importance to the business.
The Committee believes that the 
Executive Directors’ salaries are below 
the market norm for Defenx’s current 
size and resources. Salary increases 
will be set to bring their salaries into 
line with the relevant market as the 
business grows.
Individual and Group performance is 
taken into account in determining the 
rate of salary rises towards the 
relevant market norm.
Benefits
To provide appropriate benefits taking 
into account local state provision.
Benefits vary by country of operation 
but typically include private medical 
and life insurance cover.
Benefits are set against comparable 
market practice.
None
Pension
To provide post-retirement benefits for 
individuals in a cost-effective manner 
taking into account local state 
provision.
Pensions vary by country of operation 
and include contribution to state, 
personal and Group plans. There are no 
defined benefit plans in operation.
Defenx makes contributions to meet 
local requirements. In the UK 
contributions are up to 5% of salary 
plus up to a further 5% matching 
contribution.
None
Variable pay
Annual bonus
To focus executives on achieving 
operational and financial targets for 
the financial year.
Targets are set shortly after the start 
of the relevant financial year in the 
context of the Group’s budget and 
prior year financial performance.
The Committee determines the extent 
to which such targets have been met.
Bonuses are typically paid in cash, 
although the Committee has discretion 
to defer awards in cash or in shares.
The Committee has the discretion to 
reduce or clawback bonuses in the 
event of serious financial 
misstatement or misconduct.
The maximum bonus opportunity for 
Executive Directors is 100% of salary.
Up to 50% of the maximum bonus will 
vest for target performance. The 
Committee may award up to 25% for 
threshold performance
The annual bonus is based on the 
achievement of financial targets with 
personal performance contributing up 
to one half.
Revenue growth, free cash flow and 
EPS are considered the best measures 
of the Group’s performance. The 
Committee will review metrics annually 
to ensure they remain appropriate and 
reflect the Group’s strategy.
Long-Term Incentive Plan (LTIP)
To align the interests of executives 
with shareholders in growing the 
long-term value of Defenx.
The plan provides for annual awards of 
share options and performance shares 
to eligible individuals. Vesting for 
future awards will be based solely on 
performance, typically over three 
years.
The Committee has the discretion to 
reduce or clawback LTIP awards and to 
vary future awards in the event of 
serious financial misstatement or 
misconduct.
Awards may be made up to a maximum 
of 200% of salary in normal 
circumstances, although the 
Committee has discretion to vary this 
in exceptional circumstances.
No awards will vest below threshold. 
Up to 25% will vest on achievement of 
threshold performance, then increase 
on a straight-line basis to full vesting 
for stretch performance.
Future LTIP awards will vest on 
performance only with no further 
time-based awards.
The Committee’s intention is to set 
LTIP targets to encourage long-term 
growth and shareholder value. It is 
anticipated that this will be based on 
an appropriate shareholder return 
measure.
Other arrangements
Shareholding guidelines
To align Directors’ interests with the 
long-term interests of shareholders
Executive Directors are required to 
retain a minimum shareholding in the 
Company of 200% of their base 
salaries and retain at least 50% of 
shares vesting (after tax) under the 
LTIP until the guideline is met.
n/a n/a
Non-executive Directors’ fees
To reflect the time commitment in 
preparing for and attending meetings, 
in supporting the Executive Directors 
and the responsibilities of the role.
Annual base fee with additional fees 
for Committee chairs.
Additional fees if there is a material 
increase in the time commitment 
required.
The Board recognises that the 
Non-executive Directors' fees are 
currently set below market norms. The 
Board intends to increase fees towards 
such norms as Defenx grows.
None 34 Defenx PLC Annual Report 2016
Committee members and attendance
The members of the Committee are Anthony Reeves (Chairman) and Leonard Seelig. It is our intention to appoint a further member to the Committee 
upon the enlargement of the Board following the strategic partnership with BV-Tech. The Committee is aware that the Company Chairman should not 
chair the Remuneration Committee and intends to address this as soon as practicably possible.
The Committee is required by its terms of reference to meet at least twice a year. During the year, the Committee met twice and both members of the 
Committee attended on each occasion. Andrea Stecconi was in attendance for the relevant part of each meeting but this did not include that part of the 
meeting where his own remuneration was discussed.
The terms of reference are reviewed annually and are available on the Company’s website at investors.defenx.com.
Single total figure of remuneration for Executive Directors 
The table below sets out the total single figure remuneration received by each Director who served during the year ended 31 December 2016.
Salary or fees
€
Benefits
€
Pension
€
Annual bonus
€
Cash 
Total
€
Long-term
incentive
€
Total
€
Executive
Andrea Stecconi 113,892 – – 46,667 160,559 – 160,559
Guido Branca (resigned 15 June 2016) 85,425 1,989 – – 87,414 (12,467) 74,947
Philipp Prince 99,687 1,989 – 46,667 148,343 30,536 178,879
Sub-total 299,004 3,978 – 93,334 396,316 18,069 414,385
Non-executive
Tony Reeves 29,883 – – – 29,883 3,224 33,107
Leonard Seelig 29,883 – – – 29,883 2,588 32,471
Sub-total 59,766 – – – 59,766 5,812 65,578
Total 358,770 3,978 – 93,334 456,082 23,881 479,963
Guido Branca resigned as a Director on 15 June 2016. Included in his salary above is a termination payment of €20,871. There were no other termination 
payments during the year.
The table below sets out the total single figure remuneration received by each Director who served during the year ended 31 December 2015.
Salary or fees
€
Benefits
€
Pension
€
Annual bonus
€
Cash 
Total
€
Long-term
incentive 
€
Total
€
Executive
Andrea Stecconi 81,875 – – 57,077 138,952 – 138,952
Guido Branca 87,049 3,136 – 38,748 128,933 12,467 141,400
Philipp Prince (appointed 21 July 2015) 49,255 3,136 – 35,225 87,616 4,909 92,525
Marco Moschetta (resigned 19 February 2015) 36,078 – – – 36,078 – 36,078
Joyce Bigio (appointed 18 February 2015, 
resigned 28 May 2015) 14,090 – – – 14,090 – 14,090
Sub-total 268,347 6,272 – 131,050 405,669 17,376 423,045
Non-executive
Tony Reeves (appointed 7 October 2015) 8,454 – – 27,476 35,930 – 35,930
Leonard Seelig (appointed 7 October 2015) 8,454 – – 22,544 30,998 – 30,998
Sub-total 16,908 – – 50,020 66,928 – 66,928
Total 285,255 6,272 – 181,070 472,597 17,376 489,973
Base salary
The Executive Directors’ service agreements are as follows:
with Defenx PLC with Defenx SA
2016 2017 2016 2017
Group total
2017
Increase
%
Andrea Stecconi £10,000 £15,000 £80,000 £100,000 £115,000 28%
Philipp Prince £80,000 £105,000 – – £105,000 31%
The increases for both Andrea Stecconi and Philipp Prince are effective 1 January 2017.
Remuneration committee report continued Annual Report 2016 35 Defenx PLC
Strategic report Financial statements Governance Company overview
Benefits and pension
Philipp Prince receives medical and life insurance cover and is entitled to pension contributions of 5% of salary plus up to a further 5% of salary on a 
matched basis. This is consistent with other UK staff.
Both Guido Branca and Philipp Prince were entitled to an office allowance of £4,500 per annum in the period prior to the Company opening a London-
based head office in May 2016.
Annual bonus 
For the year ended 31 December 2016
In line with the variation to their service agreements following admission to AIM, Andrea Stecconi and Philipp Prince were entitled to a bonus of up to 
£40,000 each dependent on Group profit before tax exceeding 90% of the 2016 budget. This target having been met, the full bonus is due to each of 
them. Equivalent arrangements apply to other senior members of staff.
For the year ended 31 December 2017
The Group’s annual bonus scheme applies to senior employees including the Executive Directors. The maximum potential bonus is 100% of salary with 
up to 25% vesting for threshold performance. No bonus is awarded for performance below threshold.
Financial performance targets have been set primarily based on revenue growth and free cash flow consistent with the Group’s 2017 budget and market 
expectations. The Committee believes that the financial performance targets for 2017 are commercially sensitive and accordingly will only be disclosed 
in the 2017 Annual Report.
Remuneration policy for Non-executive Directors
The current annual fees together with the dates of the letters of appointment are: 
Date of letter 2015 2016 Increase %
Anthony Reeves 7 October 2015 £24,000 £30,000 25%
Leonard Seelig 7 October 2015 £24,000 £28,000 17%
Franco Francione 22 May 2017 – – –
The increases for both Anthony Reeves and Leonard Seelig are effective 1 January. Their letters of appointment allow for additional fees for material 
additional time committed to Defenx.
Long-term incentives for Executive and Non-executive Directors
EMI Option Scheme
The Company established an EMI Option Scheme to provide incentives to employees, including Directors, to achieve the longer-term objectives of the 
Group, to give suitable recognition to the ability and industry of the individuals concerned and to attract and retain suitably experienced and able people, 
by providing them with the opportunity to acquire ownership interests in the Company.
The vesting of the existing options is not conditional on performance conditions; the only condition being that the individual remains an employee of the 
Group. Future awards will vest solely on performance.
The following share option awards have been granted to Executive Directors under the EMI Option Scheme:
Date of grant Number of shares Exercise price Vesting period Expiry date
Philipp Prince 22 July 2015 42,000 £0.80 Over 36 months 22 July 2025
Philipp Prince 3 December 2015 125,000 £1.48 One third on first anniversary; 
balance over following 
24 months from grant
2 December 
2025
The Company established an Unapproved Share Option Scheme and the following options have been granted under this scheme:
Date of grant Number of shares Exercise price Vesting period Expiry date
Anthony Reeves 3 December 2015 15,625 £1.48 One third on first anniversary; 
balance over following 
24 months from grant
2 December 
2025
Leonard Seelig 3 December 2015 12,500 £1.48 One third on first anniversary; 
balance over following 
24 months from grant
2 December 
2025 36 Defenx PLC Annual Report 2016
Remuneration committee report continued
Directors’ interests in shares and share scheme interests
The Directors’ beneficial interests in shares, together with their respective families, as at 31 December 2016 are shown below together with their 
interests in share schemes.
Long-term incentives
Subject to continued 
employment only
Vested but not yet 
exercised Beneficially owned Total interest in shares
Required 
shareholding 
(% salary)
Current 
shareholding 
(% salary)
Current 
shareholding 
(% of capital)
Andrea Stecconi – – 1,826,836 1,826,836 200% 1469% 15.5%
Philipp Prince 105,500 61,500 71,255 238,255 200% 63% 0.7%
Anthony Reeves 10,417 5,208 31,250 46,875 – – 0.3%
Leonard Seelig 8,333 4,167 25,000 37,500 – – 0.3%
Franco Francione – – – – – – –
There have been no changes to the Directors’ shareholdings between 31 December 2016 and 22 May 2017. None of the Directors had an interest in the 
shares of any subsidiary undertaking of the Company or in any significant contracts of the Group save as set out in note 25 to the financial statements. 
Franco Francione is CFO of BV-Tech which holds 3,480,388 (29.6%) of the Ordinary Shares.
Terms of office for Executive and Non-executive Directors
Andrea Stecconi’s service agreement is subject to termination by either party on six-months’ notice. Philipp Prince’s service agreement is subject to 
termination by either party on three-months’ notice. The Chairman and Non-executive Director provide their services under letters of appointment.  
The appointments are terminable on three-months’ notice by either party. Annual Report 2016 37 Defenx PLC
Strategic report Financial statements Governance Company overview
Directors’ report
The Directors present their report together with the audited financial 
statements for the year ended 31 December 2016.
Principal activity
Defenx PLC is a public limited company incorporated in England and Wales, 
registered number 08993398, with its registered office at 42-50 Hersham 
Road, Walton-on- Thames, Surrey KT12 1RZ. Defenx PLC is quoted on the AIM 
market of the London Stock Exchange.
Its principal activity is to provide security solutions with a range of products 
for mobile devices and PCs, protecting them against hackers and data loss. 
Management and control is exercised from the UK and its main countries of 
operation are Italy and Switzerland.
Review of business
The Strategic Report on pages 6 to 25 provides a review of the business, the 
Group’s trading for the year ended 31 December 2016, key performance 
indicators and an indication of research and future developments as well as 
the principal risks and uncertainties facing the business.
Results and dividend
The results for the year ended 31 December 2016 are set out in the 
consolidated statement of comprehensive income on page 40. The Directors 
do not recommend the payment of a dividend, because the Board believes it 
is in the Company’s interests to retain earnings to fund working capital 
needs and achieve capital growth.
Directors
The Directors who served during the year ended 31 December 2016 and up to 
the date of signing the financial statements were as follows:
A Stecconi
G Branca (resigned 15 June 2016)
P Prince
A Reeves
L Seelig
F Francione (appointed 22 May 2017)
In accordance with the Articles of Association, each Director must retire from 
office at the third AGM after the AGM or general meeting, as the case may be, at 
which he was appointed or last re-appointed. Franco Francione, having been 
appointed since the last general meeting, will retire at the forthcoming AGM and, 
being eligible, will offer himself for re-election.
Directors’ interests
Details of the Directors’ interests in the shares of the Company and details of 
options granted under the Group’s share scheme are set out in the 
Remuneration Report on pages 32 to 36. No Director has any beneficial interest 
in the share capital of the subsidiary undertaking.
Qualifying indemnity provision
The officers of the Company are indemnified in respect of proceedings which 
might be brought by a third party. No cover is provided in respect of fraudulent or 
dishonest transactions.
Financial risk management policies and objectives
A summary of the Group’s key operating risks is set out on pages 24 and 25. 
The Group’s risk management policies and objectives including exposure to 
price risk, credit risk, liquidity and cash flow risk are contained in note 19 to 
the financial statements.
Share capital
Full details of changes in the Company’s share capital during the year and 
after the year end are set out in notes 20 and 26 to the financial statements 
respectively. Details of employee share options and warrants are set out in 
note 21. Following the conversion of all of the Company’s deferred shares on 
11 April 2017 , the Company has one class of Ordinary Shares of £0.018 each. 
Substantial shareholdings
At 22 May 2017 , the Company’s significant shareholders were:
Number of shares Holding
BV-Tech SpA 3,480,388 29.6%
Andrea Stecconi 1,826,836 15.5%
Defenx Nominees Limited 653,178 5.6%
Hargreave Hale Limited 510,000 4.3%
Angelo Motti 426,890 3.6%
Political donations
During the year ended 31 December 2016 the Group made no political 
donations.
Events after the reporting date
Details of significant events since the balance sheet date are contained in note 
26 to the financial statements.
Provision of information to the auditors
Each of the Directors who held office at the date of approval of this Directors’ 
Report confirms that:
• so far as he is aware, there is no relevant audit information of which the 
Company’s and Group’s auditor is unaware; and
• he has taken all the steps he ought to have taken as a Director in order to 
make himself aware of any information needed by the Company and the 
Group’s auditors in connection with their report and to establish that the 
auditors are aware of that information.
Auditor
haysmacintyre has expressed its willingness to continue in office as auditor to 
the Company. A resolution to reappoint haysmacintyre will be proposed at the 
forthcoming AGM.
AGM
The AGM will be held on T uesday 27 June 2017 . The notice of AGM and the 
ordinary and special resolutions to be put to the meeting are included on pages 
69 to 70.
Approval
The Directors’ report was approved on behalf of the Board on 22 May 2017 .
Anthony Reeves
Chairman  38 Defenx PLC Annual Report 2016
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual Report and the 
Group and Company financial statements in accordance with applicable UK 
law and those IFRSs as adopted by the European Union.
Under Company law the Directors must not approve the Group and 
Company financial statements unless they are satisfied that they present 
fairly the financial position, financial performance, and cash flows of the 
Group and Company for that period. In preparing those financial 
statements, the Directors are required to:
• Select suitable accounting policies.
• Present information, including accounting policies, in a manner that 
provides relevant, reliable, comparable and understandable information.
• Provide additional disclosures when compliance with the specific 
requirements in IRFSs is insufficient to enable users to understand the 
impact of particular transactions, other events and conditions on the 
Group’s financial position and financial performance.
• State that the Group and the Company have complied with IFRSs 
subject to any material departures disclosed and explained in the 
financial statements.
• Make judgements and estimates that are reasonable and prudent.
The Directors are responsible for keeping adequate accounting records 
that are sufficient to show and explain the Company’s transactions and 
disclose with reasonable accuracy at any time the financial position of the 
Company and the Group and enable them to ensure that the financial 
statements comply with the Companies Act 2006 and Article 4 of the IAS 
regulation. They are also responsible for safeguarding the assets of the 
Company and the Group and hence for taking reasonable steps for the 
prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the 
Company’s website. Legislation in the UK may differ from legislation in 
other jurisdictions.
Each of the Directors, whose names are listed in the Strategic Report 
above, confirms that, to the best of his knowledge:
• The Group financial statements which have been prepared in 
accordance with IFRSs as adopted by the EU, give a true and fair view 
of the assets, liabilities, financial position and profit of the Group.
• The Strategic Report includes a fair review of the development and 
performance of the business and the position of the Group and the 
Company, together with a description of the principal risks and 
uncertainties that it faces.
• The Directors consider that the Annual Report and Accounts, taken as a 
whole is fair, balanced and understandable.
This responsibility statement was approved by the Board on 22 May 2017.
Andrea Stecconi Philipp Prince
Chief Executive Officer Chief Financial Officer Annual Report 2016 39 Defenx PLC
Strategic report Financial statements Governance Company overview
Independent auditors’ report to the members of Defenx PLC
Independent auditors’ report to the members of Defenx PLC
We have audited the financial statements of Defenx PLC for the period 
ended 31 December 2016, which comprise the consolidated statement of 
comprehensive income, the Group and parent company statements of 
financial position, the Group and parent company statements of changes 
in equity, the Group and parent company cash flow statements and the 
related notes. The financial reporting framework that has been applied in 
their preparation is applicable law and International Financial Reporting 
Standards (IFRSs) as adopted by the European Union.
This report is made solely to the Company’s members, as a body, in 
accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our 
audit work has been undertaken so that we might state to the Company’s 
members those matters we are required to state to them in an auditors’ 
report and for no other purpose. To the fullest extent permitted by law, we 
do not accept or assume responsibility to anyone other than the Company 
and the Company’s members as a body, for our audit work, for this report, 
or for the opinions we have formed.
Respective responsibilities of Directors and auditors
As explained more fully in the statement of Directors’ responsibilities, the 
Directors are responsible for the preparation of the financial statements 
and for being satisfied that they give a true and fair view. Our 
responsibility is to audit and express an opinion on the financial 
statements in accordance with applicable law and International Standards 
on Auditing (UK and Ireland). Those standards require us to comply with 
the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided 
on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion:
• the financial statements give a true and fair view of the state of the 
Group’s and the parent company’s affairs as at 31 December 2016 and 
of the Group’s profit for the period then ended;
• the financial statements have been properly prepared in accordance 
with IFRSs as adopted by the European Union; and 
• the financial statements have been prepared in accordance with the 
requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies 
Act 2006
In our opinion, based on the work undertaken in the course of the audit, 
the information given in the Strategic report and Directors’ report for the 
financial year for which the financial statements are prepared is consistent 
with the financial statements and such reports have been prepared in 
accordance with applicable legal requirements.
In light of our knowledge and understanding of the Group and parent 
company and its environment obtained in the course of the audit, we have 
not identified material misstatements in the Strategic report and the 
Directors’ report.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the 
Companies Act 2006 requires us to report to you if, in our opinion: 
• adequate accounting records have not been kept by the parent 
company, or returns adequate for our audit have not been received 
from branches not visited by us; or
• the parent company financial statements are not in agreement with 
the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not 
made; or
• we have not received all the information and explanations we require 
for our audit.
Ian Cliffe (senior statutory auditor)
For and on behalf of haysmacintyre
26 Red Lion Square
London
WC1R 4AG
22 May 2017 40 Defenx PLC Annual Report 2016
Consolidated statement of comprehensive income
Note
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Revenue 5 7,088,162 4,489,557
Cost of sales 6 (1,240,462) (512,168)
Gross profit 5,847,700 3,977,389
Sales & marketing expenses 6 (2,587,518) (1,916,406)
Research, development & operations' expenses 6 (469,545) (162,155)
Administrative expenses 6
(950,346) (919,629)
Operating expenses before transaction costs 6 (4,007,409) (2,998,190)
Operating profit before transaction costs 1,840,291 979,199
Transaction costs 6 (188,590) (614,192)
Operating profit 1,651,701 365,007
Finance income 8 316 37
Finance expense 8 (62,165) (2,787)
Profit before tax 1,589,852 362,257
Income tax expense 9 (368,660) (170,339)
Profit and total comprehensive profit for the year 1,221,192 191,918
Attributable to:
Equity holders of the parent 1,232,656 191,918
Non-controlling interests (11,464) –
Profit and total comprehensive profit for the year 1,221,192 191,918
Earnings per share – profit for the year attributable to equity holders of the parent
Basic 10 €0.185 €0.042
Diluted 10 €0.169 €0.039
The profit for the year arises from the Group’s continuing operations.
There were no other items of comprehensive income. Accordingly, no consolidated statement of comprehensive income has been prepared. Annual Report 2016 41 Defenx PLC
Strategic report Company overview Financial statements Governance
Consolidated statement of financial position
Note
31 December 
2016
€
31 December
2015
€
Non-current assets
Property, plant and equipment 11 132,401 –
Intangible assets 12 7,979,534 2,607,400
8,111,935 2,607,400
Current assets
Trade and other receivables 14 5,503,927 3,305,604
Cash and short-term deposits 15 1,177,644 1,333,869
6,681,571 4,639,473
Total assets 14,793,506 7 ,246,873
Current liabilities
Trade and other payables 16 (1,393,382) (656,459)
Deferred revenue 17 (461,447) (248,975)
Loans and borrowing 18 (1,437,334) –
Income taxes payable (772,851) (442,690)
(4,065,014) (1,348,124)
Non-current liabilities
Deferred revenue 17 (128,812) (65,657)
Loans and borrowing 18 (514,793) –
Deferred consideration 23 (380,856) –
Deferred tax liabilities 9 (53,091) (20,650)
(1,077,552) (86,307)
Total liabilities (5,142,566) (1,434,431)
Net assets 9,650,940 5,812,442
Capital and reserves
Called up share capital 20 196,549 145,004
Share premium 20 5,542,365 4,051,322
Merger reserve 22 1,641,622 695,212
Share-based payment reserve 21 156,403 60,343
Retained earnings 2,093,217 860,561
Equity attributable to equity holders of the parent 9,630,156 5,812,442
Non-controlling interests 20,784 –
Total equity 9,650,940 5,812,442 42 Defenx PLC Annual Report 2016
Consolidated statement of changes in equity
Share
capital
€
Share
premium
account
€
Merger
reserve
€
Share-based
payment
reserve
€
Retained
earnings
€
Foreign
exchange
reserve
€
Total
€
Non-
controlling
interests
€
Total
equity
€
As at 1 January 2015 90,903 580,373 678,610 – 660,144 38,179 2,048,209 – 2,048,209
Change in functional currency 1,465 11,613 16,602 – 8,499 (38,179) – – –
Profit for the year – – – – 191,918 – 191,918 – 191,918
Shares issued 52,636 3,459,336 – – – – 3,511,972 – 3,511,972
Share-based payments – – – 60,343 – – 60,343 – 60,343
As at 31 December 2015 145,004 4,051,322 695,212 60,343 860,561 – 5,812,442 – 5,812,442
Profit for the year – – – – 1,232,656 – 1,232,656 (11,464) 1,221,192
Acquisition of Memopal SRL 13,322 – 946,410 – – – 959,732 32,248 991,980
Shares issued 38,223 1,491,043 – – – – 1,529,266 – 1,529,266
Share-based payments – – – 96,060 – – 96,060 – 96,060
As at 31 December 2016 196,549 5,542,365 1,641,622 156,403 2,093,217 – 9,630,156 20,784 9,650,940 Annual Report 2016 43 Defenx PLC
Strategic report Company overview Financial statements Governance
Consolidated statement of cash flows
Note
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Cash flows from operating activities
Profit for the year after tax 1,221,192 191,918
Income tax expense 368,660 170,339
Profit before tax 1,589,852 362,257
Adjustments to reconcile profit before tax to net cash flows:
Net interest expense 8 61,849 2,750
Depreciation of property, plant and equipment 11 22,482 –
Amortisation of intangible assets 12 1,009,849 476,623
Share-based payments expense 21 96,060 60,343
Operating cash flows before movements in working capital
2,780,092 901,973
Increase in trade receivables (2,297,367) (1,809,552)
(Increase)/decrease in other receivables 857,061 (456,513)
Increase/(decrease) in trade and other payables 847,193 177,521
Increase/(decrease) in provisions 191,081 169,138
(402,032) (1,919,406)
Interest received 316 37
Interest paid (55,175) (2,787)
Tax paid (924) (1,295)
Net cash flow from operating activities 2,322,277 (1,021,478)
Investing activities
Purchase of property, plant and equipment 11 (22,482) –
Development costs – internally developed 12 (3,988,821) (1,351,000)
Acquisition of intangible software assets 12 (900,000) –
Acquisition of a subsidiary, net of cash acquired 23 353,788 –
Net cash used in investing activities (4,557,515) (1,351,000)
Financing activities
Net proceeds from issue of share capital 20 1,529,265 3,511,972
Proceeds from borrowings 18 647,533 –
Repayment of borrowings 18 (260,525) –
Net cash from financing activities 1,916,273 3,511,972
Net increase in cash and cash equivalents (318,965) 1,139,494
Net foreign exchange difference – (11,620)
Cash and cash equivalents at 1 January 1,333,869 205,995
Cash and net cash equivalents at 31 December 15 1,014,904 1,333,869 44 Defenx PLC Annual Report 2016
Company statement of financial position
Company registration number: 08993398
Note
31 December 
2016
€
31 December
2015
€
Non-current assets
Investments in subsidiary company 13 1,844,407 65,603
Intangible assets 12 1,830,000 –
3,674,407 65,603
Current assets
Trade and other receivables 14 71,337 167,376
Loans to subsidiary company 25 2,735,226 2,130,013
Cash and short-term deposits 15 1,042,634 1,218,464
3,849,197 3,515,853
Total assets 7,523,604 3,581,456
Current liabilities
Trade and other payables 16 (672,651) (468,953)
Deferred revenue 17 (447) (1,605)
Loans and borrowing 18 (717,000) –
(1,390,098) (470,558)
Non-current liabilities
Loans and borrowing 18 (153,349) –
Deferred consideration 23 (380,856) –
(534,205) –
Total liabilities (1,924,303) (470,558)
Net assets 5,599,301 3,110,898
Capital and reserves
Called up share capital 20 196,549 145,004
Share premium 20 5,542,365 4,051,322
Merger reserve 22 946,410 –
Share-based payment reserve 21 156,403 60,343
Retained earnings (1,242,426) (1,145,771)
Equity attributable to equity holders 5,599,301 3,110,898
The Company's loss for the year ended 31 December 2016 was €96,655 (2015: €1,035,047). Annual Report 2016 45 Defenx PLC
Strategic report Company overview Financial statements Governance
Company statement of changes in equity
Share
capital
€
Share
premium
account
€
Merger
reserve
€
Share-based
payment
reserve
€
Retained
earnings
€
Foreign
exchange
reserve
€
Total
€
As at 1 January 2015 90,903 580,373 – – (108,227) 10,579 573,628
Change in functional currency 1,465 11,613 – – (2,499) (10,579) –
Total comprehensive loss for the 
year – – – – (1,035,045) – (1,035,045)
Shares issued 52,636 3,459,336 – – – – 3,511,972
Share-based payments – – – 60,343 – – 60,343
As at 31 December 2015 145,004 4,051,322 – 60,343 (1,145,771) – 3,110,898
Total comprehensive loss for the 
year – – – – (96,655) – (96,655)
Acquisition of Memopal SRL 13,322 – 946,410 – – – 959,732
Shares issued 38,223 1,491,043 – – – – 1,529,266
Share-based payments – – – 96,060 – – 96,060
As at 31 December 2016 196,549 5,542,365 946,410 156,403 (1,242,426) – 5,599,301 46 Defenx PLC Annual Report 2016
Company cash flow statement
Note
Year ended
31 December 
2016
€
Year ended
31 December 
2015
€
Cash flows from operating activities
Loss for the year before and after tax (96,655) (1,035,045)
Adjustments for:
Net interest (income)/expense (233,317) (25,809)
Share-based payments expense 21 96,060 60,343
Operating cash flows before movements in working capital
(233,912) (1,000,511)
(Increase)/decrease in trade receivables 8,188 (9,503)
(Increase)/decrease in other receivables 209,815 (156,927)
Increase/(decrease) in trade and other payables 351,719 365,505
Increase/(decrease) in provisions (1,158) 1,605
568,564 200,680
Interest paid (34,288) –
Net cash flow from operating activities 300,364 (799,831)
Investing activities
Development costs – internally developed 12 (1,830,000) –
Investment in subsidiary 23 (438,217) –
Loans to subsidiary (605,213) (1,509,823)
Net cash used in investing activities (2,873,430) (1,509,823)
Financing activities
Net proceeds from issue of share capital 20 1,529,266 3,511,972
Proceeds from borrowings 18 867,970 –
Net cash from financing activities 2,397,236 3,511,972
Net increase in cash and cash equivalents (175,830) 1,202,318
Net foreign exchange difference – (2,453)
Cash and cash equivalents at 1 January 1,218,464 18,599
Cash and net cash equivalents at 31 December 15 1,042,634 1,218,464 Annual Report 2016 47 Defenx PLC
Strategic report Company overview Financial statements Governance
Notes to the consolidated financial statements
Defenx PLC is a public limited company incorporated in the UK on 11 April 2014. The Company’s Ordinary Shares are traded on AIM. The consolidated 
financial statements comprise Defenx PLC and its subsidiaries, Defenx SA, a company incorporated in Switzerland, and Memopal SRL, a company 
incorporated in Italy (together referred to as the Group), for the year ended 31 December 2016.
The Company has taken advantage of the exemption available under section 408 of the Companies Act 2006 and has not presented the parent’s own 
income statement. The parent’s loss for the year ended 31 December 2016 amounted to €96,655 (2015: €1,035,047). 
1. Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards and Interpretations (collectively IFRSs) 
issued by the International Accounting Standards Board (IASB) as adopted by the European Union (adopted IFRSs).
The preparation of the financial statements in compliance with adopted IFRSs requires the use of certain critical accounting estimates. It also requires 
management to exercise judgement in applying the accounting policies. The areas where significant judgements and estimates have been made in 
preparing the financial statements and their effect are disclosed in this note.
Basis of consolidation: business combinations and merger accounting
The financial statements have been prepared on a consolidated basis in line with the principles laid out in IFRS 3: Business Combinations. The Group’s 
accounting policy on business combinations is set out in note 2a) below.
The standard states that in instances where Group reconstructions have taken place, such as in the case of a share for share exchange, guidance should 
be taken from the appropriate national GAAP in preparing the financial statements. The Directors have therefore considered the implications of UK FRS 
6: Acquisitions and Mergers and considered it appropriate to adopt merger accounting in respect of the acquisition of Defenx SA by the parent company 
in 2014. This resulted in a merger reserve in the consolidated statement of financial position, being the difference between the nominal value of new 
shares issued by the parent company for the acquisition of the shares and the subsidiary’s own issued share capital.
The merger reserve is also used where more than 90% of the shares in a subsidiary are acquired and the consideration includes the issue of new shares 
by the parent company, thereby attracting merger relief under the Companies Act 2006.
Going concern
The Chief Executive Officer’s review above outlines the activities of the Group along with factors which may affect its future development and 
performance. The Group’s financial position is discussed in the Financial Review above along with details of its cash flow and liquidity.
As at 31 December 2016 the Group had net assets of €9,650,940 (31 December 2015: €5,812,442) as set out in the consolidated statement of 
financial position. The Directors have prepared detailed forecasts of the Group’s performance for the next two years. The forecasts contain certain 
assumptions about the level of future sales, margins and the level of cash recovery from trading.
After considering the forecasts and the risks, the Directors are satisfied that the Group has adequate resources to continue in operational existence for 
the foreseeable future and, accordingly, continue to adopt the going concern basis in preparing the Group and Company financial statements.
2. Principal accounting policies
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies are consistent with those 
applied in the prior financial year and are applied by all Group entities unless otherwise stated.
a) Business combinations and goodwill
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration 
transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business 
combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the 
acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and are shown separately on the face of the statement of income.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance 
with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration 
classified as an asset or liability that is a financial instrument and within the scope of IAS39 Financial Instruments: Recognition and Measurement, is 
measured at fair value with the changes in fair value recognised in the statement of income.
Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling 
interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in 
excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the 
liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the re-assessment still results in 
an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the gain is recognised in the statement of income. 48 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
2. Principal accounting policies continued
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired 
in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units (CGU) that are expected to benefit from 
the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill has been allocated to a CGU and part of the operation within that unit is disposed of, the goodwill associated with the disposed 
operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is 
measured based on the relative values of the disposed operation and the portion of the CGU retained.
b) Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably measured. Revenue 
is measured at the fair value of the consideration received or receivable for the sale of goods or services provided in the normal course of business, net 
of all related discounts and sales taxes.
The Group’s revenues to date comprise sales of software licences, the majority of which are for 12 months with a limited number for two, three and five 
years. These term-based agreements include free upgrades and enhancements on a when-and-if-available basis. The Group recognises the software 
licence portion of revenue at the time of delivery while the portion attributable to upgrades and enhancements is deferred and recognised on a straight-line 
basis over the period of the relevant agreement. Customers have no right of return; once sold, licences are neither refundable nor returnable.
c) Foreign currency
The Directors reviewed the functional currency applied by the Group and determined that, with effect from 1 January 2015, the functional currency 
should be the Euro. This change arose due to the increasing proportion of the Group’s operational activities denominated in Euro such that a 
Sterling functional currency was no longer considered appropriate.
Transactions in foreign currencies are initially recorded at the respective functional currency rates ruling when the transactions occurred. Foreign 
currency monetary assets and liabilities are translated at the rates ruling on the reporting date. Differences arising on settlement or translation are 
recognised in the statement of income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the 
exchange rates at the dates of the initial transactions.
The Group’s presentation currency remains the Euro. As this now matches the functional currency applied by Defenx PLC, Defenx SA and Memopal SRL 
there are no currency translations on consolidation.
d) Trade and other receivables
Trade receivables are stated at fair value being the lower of their original invoiced value and recoverable amount. A provision for impairment is made 
where there is objective evidence that the Group will not be able to recover balances in full. Indications of impairment include customers in financial 
difficulty or seriously in default against agreed payment terms. There is no material variance between carrying and fair values.
e) Property, plant and equipment
Property, plant and equipment are recognised initially at cost. After initial recognition, these assets are carried at cost less any accumulated depreciation 
and impairment losses. Cost comprises the aggregate amount paid and the fair value of any other consideration given to acquire the asset.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets, and is applied separately to each identifiable component, 
as follows:
• Data centre servers and storage 3 to 7 years
• Office equipment   5 to 10 years
An item of property, plant and equipment and any significant part initially recognised is de-recognised upon disposal or when no future economic 
benefits are expected from its use or disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net 
disposal proceeds and the carrying amount of the asset) is included in the statement of income when the asset is de-recognised.
The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at each financial year end and adjusted 
prospectively, if appropriate.
f) Intangible assets
Identifiable intangible assets are recognised when the Group controls the asset, it is probable that future economic benefits attributable to the asset 
will flow to the Group and the cost of the asset can be reliably measured. Intangible assets acquired separately are measured on initial recognition at 
cost. The cost of intangible assets acquired in a business combination is their fair value at the date of acquisition.
Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses. Internally-generated 
intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in the statement of income in the period in 
which the expenditure is incurred. Annual Report 2016 49 Defenx PLC
Strategic report Company overview Financial statements Governance
Research costs are expensed as incurred. Development costs on an individual project are recognised as an intangible asset when the Group 
can demonstrate:
• The technical feasibility of completing the intangible asset so that the asset will be available for use or sale.
• Its intention to complete and its ability and intention to use or sell the asset.
• How the asset will generate future economic benefits.
• The availability of resources to complete the asset.
• The ability to measure reliably the expenditure during development.
Following initial recognition of the development costs as an asset, the asset is carried at cost less any accumulated amortisation and accumulated 
impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of 
expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.
Amortisation is calculated on a straight-line basis over the estimated useful lives of the assets, and is applied separately to each identifiable component, 
as follows:
• Development costs  3 to 5 years
• Customer relationships  3 years
g) Impairment of assets
At each balance sheet date, the Directors review the carrying amounts of property, plant, equipment and intangible assets to determine whether there is 
any indication that those assets have suffered an impairment. If any such indication exists, the recoverable amount of the asset, which is the higher of 
its fair value less costs to sell and its value in use, is estimated in order to determine the extent of the impairment loss. Where the asset does not 
generate cash flows that are independent from other assets, the Directors estimate the recoverable amount of the CGU to which the asset belongs.
Recoverable amounts are based on a calculation of expected future cash flows discounted to their present value using pre-tax discount rates that 
reflect market assessments of the time value of money and risks specific to the asset for which the expected future cash flows have not been adjusted. 
Any impairment charge is recognised in the statement of income in the period in which it occurs for assets carried at cost if the recoverable amount is 
less than the carrying value. Where an impairment loss subsequently reverses due to a change in the original estimate, the carrying amount of the asset 
is increased to the revised estimate of its recoverable amount.
h) Pension costs
The Group makes defined contributions to its employees’ pension plans according to the laws of the country of employment. The pension costs charged 
in the financial statements represents the contributions payable during the year.
i) Share-based payments
In accordance with IFRS 2 share-based payments reflects the economic cost of awarding shares and share options to employees and Directors by 
recording an expense equal to the fair value of the benefit awarded. The expense is recognised in the statement of income over the vesting period of 
the award.
Fair value is measured by the use of a Black-Scholes model, which takes into account conditions attached to the vesting and exercise of the options.  
The expected life used in the model is adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and 
behavioural considerations.
Where awards are granted to employees of a subsidiary, the fair value of the award at grant is recorded in the parent company’s financial statements as 
an increase in the value of the investment with a corresponding increase in equity via the share-based payment reserve.
The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
j) Leased assets and obligations
Leases are classified as finance leases when the terms of the lease transfer substantially all the risks and rewards of ownership to the Group. All other 
leases are classified as operating leases.
k) Operating leases
Assets leased under operating leases are not recorded on the statement of financial position. Rental payments are charged directly to the statement of 
income on a straight-line basis over the lease term. 50 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
2. Principal accounting policies continued
l) Current and deferred taxation
Current tax is the expected tax payable on taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and 
any adjustments to tax payable in respect of previous years.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial 
statements and the corresponding tax bases used in the computation of taxable profits (temporary differences) and is accounted for using the balance 
sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences.
Deferred tax assets are generally recognised to the extent that it is probable that taxable profits will be available against which deductible temporary 
differences can be utilised. Where there are deductible temporary differences arising in subsidiaries, deferred tax assets are recognised only where it is 
probable that they will reverse in the foreseeable future and taxable profits will be available against which the temporary differences can be utilised.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that 
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is 
charged or credited to the statement of income.
m) Cash and cash equivalents
Cash and cash equivalents includes cash in hand, deposits held with banks, other short-term highly liquid investments with original maturities of three 
months or less and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.
n) Trade and other payables
Trade payables are recognised at fair value. There is no material variance between book and fair values.
o) Borrowings
Bank loans and overdrafts are recorded initially at their fair value, net of direct transaction costs and finance charges and are recognised in the 
statement of income over the term of the instrument. There is no material variance between book and fair values.
3. Judgements and estimates
The Board makes judgements and assumptions concerning the future that affect the application of accounting policies and the reported amounts of 
assets, liabilities, income and expenses. The resulting accounting estimates calculated using these judgements and assumptions will, by definition, 
seldom equal the related actual results but are based on historical experience and expectations of future events. Actual results may differ from 
these estimates.
The judgements and key sources of estimation uncertainty that may have a significant effect on the amounts recognised in the financial statements 
are discussed below:
Revenue recognition (note 2b)
Judgement is required in the assessment of licence activation timing and the resultant period over which deferred revenue is released to the statement 
of income. Licences can be activated immediately upon sale (e.g. for online sales), sometime after sale (e.g. through our channel partners) or not at all 
(e.g. typically where our licences are sold as a bundle). Management has estimated the average period from which deferred revenues start to be released. 
The share of sales attributable to upgrades and enhancements that is deferred represents a small proportion of total sales. Therefore, although the 
period over which deferred revenue is released is uncertain, the impact on the financial statements is not materially dependent on this judgement.
Impairment of assets (note 12)
Judgement is required in the impairment assessment of assets, notably intangible software development costs. Recoverable amounts are based on a 
calculation of expected future cash flows, which require assumptions and estimates of future performance to be made. Cash flows are discounted to 
their present value using pre-tax discount rates based on the Directors' market assessment of risks specific to the asset. Annual Report 2016 51 Defenx PLC
Strategic report Company overview Financial statements Governance
4. Changes in accounting policies and disclosures
New standards adopted during the year
There were no new standards or interpretations effective for the first time for periods beginning on or after 1 January 2016 that had a significant 
effect on the Group’s financial statements.
New standards, interpretations and amendments not yet effective
The following new standards, interpretations and amendments, which are not yet effective and have not been adopted early in these financial 
statements, will or may have an effect on the Group’s future financial statements:
• IFRS 9 Financial Instruments (effective for accounting periods beginning or after 1 January 2018)
• IFRS 15 Revenue from Contracts with Customers (effective for accounting periods beginning on or after 1 January 2018)
• IFRS 16 Leases (effective for accounting periods beginning on or after 1 January 2019)
• Amendments to IAS 7 Statement of cash flow (effective for accounting periods beginning on or after 1 January 2017)
• Improvements to IFRS Standards 2012-2014 Cycle
• Improvements to IFRS Standards 2014-2016 Cycle
The Directors have considered the above new standards, interpretations and amendments to published standards that are not yet effective and 
concluded that, except for IFRS 15 Revenues from Contracts with Customers, they are either not relevant or that they would not have a significant 
impact on the Group’s and Company’s financial statements.
The Group intends to adopt IFRS15 for its accounting period starting 1 January 2018. This may require a restatement of the 2017 comparatives in the 
2018 results to the extent there is a material change in the Group’s revenue recognition policy under IFRS15.
 
Defenx currently sells products as conventional term, typically annual, licences and, in the case of Memopal Cloud Backup, on a renewing subscription 
basis. Over time, the Directors expect to sell all of the Group’s solutions on a PaaS subscription basis. PaaS subscription sales and related direct costs are 
already and will continue to be recognised over the subscription term whether sold directly or indirectly.
 
However, term licences requires the Directors to consider when delivery obligations are met, in order to determine when to recognise invoiced sales as 
revenue. Immediate recognition upon invoicing reflects the outright nature of the sale without any right of return or refund. However, the implicit 
obligation to provide virus definitions, other updates and cloud access during the term could suggest that the release of all or part of invoiced sales over 
the end-user’s licence term is more appropriate. In addition, for indirect sales through channel partners, the Group has limited visibility as to when each 
licence is activated, requiring the Directors to estimate the time period over which to release invoiced sales.
 
This results in two areas of judgement: (i) how to split invoiced sales between up-front licence and licence term service elements; and (ii) over which 
timeframe to release any service element. In line with many of our peers, the review of how these judgements should be made under IFRS has not yet 
been completed. The Directors continue to assess the methodology to be applied. Accordingly, the Directors are not yet in a position to provide detailed 
guidance on the potential impact of IFRS15 on our future results. The Directors intend to provide specific guidance in the Group’s interim results to be 
published before 30 September 2017.
5. Segmental analysis
The Group operates as a single endpoint division selling three main categories of product:
• Security – anti-malware endpoint protection for mobile, PC and network devices.
• Backup – Cloud-based backup and synchronisation solutions to protect data and securely share it.
• Protection – client, server and web-based applications to monitor, manage and secure the online activities of individuals, families and corporates.
Accordingly, the Group has a single reportable segment. This is consistent with the internal reporting provided to the chief operating decision-maker, 
identified as the management team including the Chief Executive Officer and the Chief Financial Officer.
The Group no longer considers its product hardware platforms (Mobile, PC and Network) as relevant to understanding performance since end-users 
increasingly purchase solutions for multiple platforms. The following disclosure is provided for comparison with prior period reporting. Revenue by 
product category and platform for the Group is as follows:
31 December 
2016
€
31 December
2015
€
Revenue by product category
Security
– Mobile 4,626,676 3,197 ,934
– PC 1,641,133 1,252,544
– Network 567,456 25,145
Backup 198,394 –
Other 54,503 13,934
7,088,162 4,489,557 52 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
5. Segmental analysis continued
Non-current assets (capitalised development costs) by product segment for the Group are as follows:
31 December 
2016
€
31 December
2015
€
Non-current assets by product category
Security
– Mobile 944,354 394,307
– PC 1,830,000 –
– Network 1,328,188 1,747,258
Backup 2,655,226 –
Protection 1,130,000 –
Other 224,167 465,835
8,111,935 2,607,400
The Group does not analyse costs or assets other than intangible assets by product category or platform.
Geographical segments
The Group is managed centrally and accordingly the Group does not analyse costs or assets by geographical region. Revenue by customer location is 
as follows:
31 December 
2016
€
31 December
2015
€
Revenue by geographic market (customer location)
Europe (EU including the UK) 4,697,889 3,725,222
Europe (Non-EU) 2,342,006 739,190
Other 48,267 25,145
7,088,162 4,489,557
6. Operating profit
The operating profit is stated after charging:
31 December 
2016
€
31 December
2015
€
Cost of sales
Amortisation of intangible assets (note 12) 1,009,849 476,623
Operating expenses before transaction costs 
Marketing contributions 2,223,550 1,451,965
Staff costs (note 7) 942,895 691,358
Share-based payment expense (note 21) 96,060 60,343
Bad debt (release)/expense (74,112) 69,485
Lease payments – land and buildings 62,053 29,588
Net foreign exchange (gains)/losses (21,061) 34,443
Depreciation of property, plant and equipment (note 11) 22,482 –
Transaction costs
Costs in respect of the AIM admission – 614,192
Costs in respect of the acquisition of Memopal SRL 188,590 –
Auditors’ remuneration (included within administrative expenses)
Audit services
 Parent company and Group audit 16,517 17,965
 Audit of the parent company’s subsidiary 26,662 11,272
Non-audit services
 Reporting accountant for the AIM admission – 113,706
 Tax compliance and other fees 13,456 32,003
Total auditors’ remuneration 56,635 174,946
In 2016, share issuance costs of €169,489 in respect of the placing and subscription were charged to the share premium account. In 2015, AIM 
admission costs of €366,817 , including auditors’ remuneration of €26,579, were charged to the share premium account. Annual Report 2016 53 Defenx PLC
Strategic report Company overview Financial statements Governance
7. Staff costs
Staff costs (including Directors’ emoluments) incurred in the year were as follows:
 
31 December 
2016
€
31 December
2015
€
Wages and salaries 801,154 616,727
Social security costs 95,732 46,424
Pension costs 9,202 9,126
Share-based payments expense 36,807 19,081
942,895 691,358
The average monthly number of permanent employees during the period in the Group was as follows:
31 December 
2016
Number
31 December
2015
Number
Executive Directors* 3 3
Sales & marketing 3 1
Research, development & operations 8 2
Administration* 1 –
15 6
* Employed by the Company
  € €
Directors’ emoluments 
Emoluments (including Non-executive Directors’ fees) 456,082 472,597
  € €
Highest paid Director
Emoluments 160,559 138,952
8. Finance income and expenses
31 December 
2016
€
31 December
2015
€
Finance income
Interest income 316 37
Finance expense
Interest expense 62,165 2,787
9. Taxation
No liability to UK or Italian income tax arose on ordinary activities for the year ended 31 December 2016. The tax charge for both 2016 and 2015 arose 
in respect of operations in Switzerland as follows:
 
31 December 
2016
€
31 December
2015
€
Current tax
Current tax on profits for the year 506,301 233,905
Adjustment for over provision in prior periods (170,082) –
336,219 233,905
Deferred tax
Origination and reversal of temporary differences 32,441 (63,566)
Total income tax expense 368,660 170,339 54 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
9. Taxation continued
The reasons for the difference between the actual income tax charge for the year and the standard rate of corporation tax in the UK applied to the 
profit for the year are as follows:
 
31 December 
2016
€
31 December
2015
€
Profit for the year 1,221,192 191,918
Tax expense 368,660 170,339
Profit before tax 1,589,852 362,257
Tax using Defenx PLC’s domestic tax rate of 20% (2015: 20%) 317,970 73,357
Expenses not deductible for tax purposes 90,054 121,041
Adjustment for over provision in prior periods (170,082) –
Temporary timing differences (46,272) (50,859)
Effect of higher tax rates in Italy and Switzerland 7 4,049
Other overseas taxation 10,408 1,296
Utilisation of previously unrecognised tax losses 90,322 –
Losses carried forward for future offset 43,812 85,021
At the effective income tax rate 336,219 233,905
The aggregate tax rate in Switzerland was 20.4% during the year (2015: 20.4%). The corporation tax rate in the UK was reduced from 21% to 20% 
effective April 2015 and will reduce to 19% effective April 2017 and 18% effective April 2020.
Deferred tax is calculated in full on temporary differences under the liability method using tax rates of 27.5% and 20.4% (2015: 20.4%) being the 
respective effective rates of tax applicable in Italy and Switzerland where the deferred tax arises.
Consolidated statement of 
financial position
Consolidated statement of 
income
31 December
2016
€
31 December
2015
€
31 December
2016
€
31 December
2015
€
Timing difference arising on standards conversion – – – 146,452
Accelerated depreciation for accounts purposes (79,939) (85,270) 5,331 (73,123)
Deferred revenue – 64,620 (64,620) 34,614
Disallowed bad debt provision (58,754) – (58,754) (44,377)
Other timing differences 7,150 – 7,150 –
Arising on acquisition of Memopal SRL 78,452 – 78,452 –
Deferred tax expense/(income) – – (32,441) (63,566)
Net deferred tax asset/(liability) (53,091) (20,650) – –
The accumulated tax losses available to the Group at 31 December 2016 were €720,389 (2015: €553,284). These losses relate to activities, and are 
available indefinitely for offsetting against future taxable profits, of Defenx PLC in the UK and Memopal SRL in Italy. No deferred tax asset is recognised 
in respect of these losses as it is not sufficiently certain that the Group will be able to utilise them in the near future. If the Group were able to recognise 
all unrecognised deferred tax assets, the retained profit would increase by €153,070 (2015: €110,657). Annual Report 2016 55 Defenx PLC
Strategic report Company overview Financial statements Governance
10. Earnings per share (EPS)
Basic EPS amounts are calculated by dividing the profit for the year attributable to ordinary equity holders of Defenx PLC by the weighted average 
number of Ordinary Shares outstanding during the year.
Diluted EPS amounts are calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of Ordinary Shares 
outstanding during the year plus the weighted average number of Ordinary Shares that would be issued on conversion of all the dilutive deferred shares 
(note 20), the exercise of options (note 21) and crystallisation of the contingent share consideration (notes 20 and 23).
The following reflects the income and share data used in the basic and diluted EPS calculations:
 
31 December 
2016
€
31 December
2015
€
Profit attributable to ordinary equity holders of Defenx PLC for basic and adjusted EPS 1,232,656 191,918
Weighted average number of Ordinary Shares for basic EPS 6,674,406 4,549,653
Effect of:
– dilution from deferred shares 300,000 300,000
– dilution from share options and warrants 62,245 86,571
– contingent shares on acquisition of Memopal SRL 238,035 –
Weighted average number of Ordinary Shares for diluted EPS 7,274,686 4,936,224
The weighted average numbers of shares above reflect the eight for one Ordinary Share consolidation implemented on 16 November 2015 as further 
disclosed in note 20. Relevant transactions involving Ordinary Shares or potential Ordinary Shares since 31 December 2016 are set out in note 26.
11. Property, plant and equipment
 
Cloud
equipment
€
Office
equipment
€
Total
€
Cost
At 1 January 2015 – – –
At 31 December 2015 – – –
Acquired through business combinations 178,082 270,504 448,586
Additions 15,307 4,211 19,518
At 31 December 2016 193,389 274,715 468,104
Accumulated depreciation
At 1 January 2015 – – –
At 31 December 2015 – – –
Acquired through business combinations 105,009 208,212 313,221
Charge for the year 9,831 12,651 22,482
At 31 December 2016 114,840 220,863 335,703
Net book value
At 31 December 2015 – – –
At 31 December 2016 78,549 53,852 132,401
There was no property, plant and equipment held under finance leases. No borrowings are secured on the Group’s assets. There was no property, plant 
and equipment in the statement of financial position of the Company. 56 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
12. Intangible assets
Group
Goodwill
€
Development
costs
€
Customer 
relationships
€
Total
€
Cost
At 1 January 2015 – 1,881,711 – 1,881,711
Change in functional currency – 11,619 – 11,619
Additions – internally developed – 1,351,000 – 1,351,000
At 31 December 2015 – 3,244,330 – 3,244,330
Additions – internally developed – 3,988,821 – 3,988,821
Additions – purchased – 900,000 – 900,000
Arising on business combinations 1,139,229 – 353,933 1,493,162
At 31 December 2016 1,139,229 8,133,151 353,933 9,626,313
Accumulated amortisation
At 1 January 2015 – 160,307 – 160,307
Amortisation charge – 476,623 – 476,623
At 31 December 2015 – 636,930 – 636,930
Amortisation charge – 960,692 49,157 1,009,849
At 31 December 2016 – 1,597,622 49,157 1,646,779
Net book value
At 31 December 2015 – 2,607,400 – 2,607,400
At 31 December 2016 1,139,229 6,535,529 304,776 7,979,534
Development costs represent qualifying expenditure on the development of software products for resale less accumulated amortisation and 
impairment costs.
During the year and before its acquisition, Memopal SRL sold a perpetual licence allowing Defenx SA to use, modify and sell its cloud-based backup and 
synchronisation software for a consideration of €900,000. Goodwill relates to the acquisition of Memopal SRL and the customer relationships intangible 
asset relates to certain B2B customer contracts in Memopal SRL. The recognition and treatment of these assets in the financial statements is further 
described in note 23.
Development costs of €1.13 million (2015: €140,000) for products under development at the year end have not yet been launched or amortised. The 
Group has no contractual commitments for development costs (2015: €nil).
There were no intangible assets in the statement of financial position of the Company.
Impairment
The Group is required to test, on an annual basis, whether goodwill and intangibles have suffered any impairment or when there are indications that the 
value of the assets might be impaired. The recoverable amount is determined based on value in use calculations. The use of this method requires the 
estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows.
If the recoverable amount is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. An 
impairment loss is recognised as an expense immediately in the statement of income. Goodwill is considered impaired if the carrying value of the CGU to 
which it relates is greater than the higher of fair value less costs of disposal and the value in use. Goodwill is allocated to the Group’s Backup segment CGU. Annual Report 2016 57 Defenx PLC
Strategic report Company overview Financial statements Governance
The Group has assessed the net present value of individual products held as development costs 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. The key assumptions in the value in use calculations are:
31 December 
2016
31 December
2015
Gross margin 70-90% 80-95%
Marketing contributions 0-35% 0-35%
Discount rate 20% 20%
Gross margins have been based on past experience and future expectations in the light of anticipated economic and market conditions. Discount rates 
are based on the Group’s weighted average cost of capital (WACC) adjusted to reflect management’s assessment of specific risks related to the CGU. 
Growth rates beyond the first two years are based on economic data pertaining to the region concerned.
Future events may cause these assumptions to change, which could have an adverse effect on the future results of the Group. The discount rate would 
need to increase to around 30% (2015: 60%) or the gross margin and marketing contribution assumptions would need to fall by over 15% (2015: 50%) 
before affecting the carrying value of intangible assets.
Company
The Company’s intangible assets all relate to capitalised software development costs.
 
Development 
costs
€
Total
€
Cost
At 1 January 2015 – –
At 31 December 2015 – –
Additions – internally developed 1,830,000 1,830,000
At 31 December 2016 1,830,000 1,830,000
Accumulated amortisation
At 1 January 2015 – –
At 31 December 2015 – –
At 31 December 2016 1,830,000 1,830,000
Net book value
At 31 December 2015 – –
At 31 December 2016 1,830,000 1,830,000
13. Investment in subsidiaries
The following subsidiary undertakings have been included in the financial statements:
Name Country of incorporation and principal place of business Ownership
Non-controlling 
interests
Defenx SA Via Caslaccio 4, Balerna 6828, Switzerland 100.0% –
Memopal SRL Via Nepal 16, 00144 Rome, Italy 95.2% 4.8%
Both subsidiaries’ principal activity is that of the parent, namely the development, provision and distribution of software solutions.
The movement in investments in the parent company’s statement of financial position is:
 
31 December 
2016
€
31 December
2015
€
Opening balance 1 January 65,603 63,148
Change in functional currency – 2,455
Additions 1,778,804 –
Closing balance at 31 December 1,844,407 65,603 58 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
14. Trade and other receivables
Group Company
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Gross trade receivables 5,528,661 3,099,697 1,314 9,503
Provision for impairment (196,248) (270,360) – –
Net trade receivables 5,332,413 2,829,337 1,314 9,503
Other receivables 171,514 162,161 70,023 157 ,873
Payments on account – 314,076 – –
Total trade and other receivables 5,503,927 3,305,604 71,337 167,376
Provisions for impairment
Opening balance at 1 January (270,360) (417,354) – –
Utilised during the year 25,372 200,193 – –
Net increase/(decrease) during the year 48,740 (53,199) – –
Closing balance at 31 December (196,248) (270,360) – –
All amounts shown under receivables are due within one year. The payments on account represent advances to an established software developer with 
whom the Group had agreed detailed specifications for work that had been started, but not invoiced prior to the year-end.
The movement in the impairment provision for trade receivables has been included in administrative expenses in the statement of income. Other classes 
of financial assets included within trade and other receivables do not contain impaired assets.
At 31 December 2016, €149,000 (2015: €nil) of trade receivables had been sold to providers of invoice discounting services. The Group is committed to 
underwrite any of the debts transferred and therefore continues to recognise the debts sold within trade receivables until the debtors repay or default. 
The proceeds from transferring the debts are included in loans and borrowing until the debts are collected or the Group makes good any losses incurred 
by the lender.
15. Cash and cash equivalents
Cash and cash equivalents comprise cash in hand, deposits held with banks and cash in transit. Finance charges are accounted for on an accruals basis 
and charged to the statement of income when payable.
Cash and cash equivalents are held in Euros, Sterling, Swiss Francs and US Dollars and placed on deposit in the UK, Italy and Switzerland.
For the purpose of the statement of cash flows, cash and cash equivalents comprise the following:
Group Company
31 December 
2016
€
31 December
2015
€
31 December 
2016
€
31 December
2015
€
Cash at bank 1,177,644 1,333,869 1,042,634 1,218,464
Bank overdrafts (162,740) – – –
1,014,904 1,333,869 1,042,634 1,218,464
16. Trade and other payables
Group Company
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Trade payables 1,056,067 440,241 665,750 419,113
Other payables and accruals 337,315 216,218 6,901 49,840
Total trade and other payables 1,393,382 656,459 672,651 468,953
Trade and other payables shown above are payable within one year. The carrying value of trade and other payables classified as financial liabilities 
measured at amortised cost approximates to fair value. Annual Report 2016 59 Defenx PLC
Strategic report Company overview Financial statements Governance
17. Deferred revenue
Group Company
2016
€
2015
€
2016
€
2015
€
At 1 January 314,632 145,494 1,605 –
Deferred during the year 524,608 285,439 15,316 1,605
Released to the statement of income (248,981) (116,301) (16,474) –
At 31 December 590,259 314,632 447 1,605
Current 461,447 248,975 447 1,605
Non-current 128,812 65,657 – –
18. Loans and borrowing
The book and fair value of interest-bearing loans and borrowings was:
Group Company
Ultimate
maturity
31 December 
2016
€
31 December
2015
€
31 December 
2016
€
31 December
2015
€
Current
Overdrafts On demand 20,035 – – –
On demand 142,705 – – –
Invoice discounting facility Up to 120 days 149,288 – – –
Supply chain facility Up to 90 days 498,245 – 498,245 –
Bank loans – unsecured 30 June 2019 97,770 – – –
Vendor loans from business combinations 31 July 2018 529,291 – 218,755 –
1,437,334 717,000 –
Non-current
Bank loans – unsecured 30 June 2019 302,230 – – –
Vendor loans from business combinations 31 July 2018 212,563 – 153,349 –
514,793 – 153,349 –
Total loans and borrowing 1,952,127 – 870,349 –
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 three-month EURIBOR and at 8% fixed per annum respectively.
The average effective interest rate for the year ended 31 December 2016 was 9.8% (2015: nil).
The currency profile of loans and borrowings was:
Group Company
31 December 
2016
€
31 December
2015
€
31 December 
2016
€
31 December
2015
€
Euro 1,433,847 – 372,104 –
Sterling 498,245 – 498,245 –
Swiss franc 20,035 – – –
1,952,127 – 870,349 –
At 31 December 2016, the Group had available €111,000 (2015: €nil) of undrawn committed borrowing facilities. 60 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
19. Financial instruments and risk management
The Group is exposed through its operations to the following financial risks:
• Credit risk
• Fair value or cash flow interest rate risk
• Foreign exchange risk
• Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s 
objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these 
risks is presented throughout these financial statements.
Other than the new finance facilities entered into during the year, there have been no substantive changes in the Group’s exposure to financial 
instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless 
otherwise stated in this note.
General objectives, policies and processes
The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness 
and flexibility.
The Board receives quarterly reports from the Chief Financial Officer through which it reviews the effectiveness of the processes put in place and the 
appropriateness of the objectives and policies it sets. 
The Group does not use derivative financial instruments such as forward currency contracts, interest rate swaps or similar instruments. The Group does 
not issue or use financial instruments of a speculative nature.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: 
• Trade receivables
• Cash and cash equivalents
• Trade and other payables
• Bank overdrafts
• Floating rate bank loans
Group Company
Financial assets
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Gross trade receivables 5,528,661 3,099,697 1,314 9,503
Less: provision for impairment (196,248) (270,360) – –
Net trade receivables 5,332,413 2,829,337 1,314 9,503
Other receivables 171,514 476,267 70,023 157 ,873
Net receivables 5,503,927 3,305,604 71,337 167,376
Cash and cash equivalents 1,177,644  1,333,869 1,042,634 1,218,464
Trade receivables principally comprise amounts outstanding for sales to customers and are typically payable between 90 and 120 days. The year-
end average age of trade debtors was 58 days (2015: 91 days). An impairment review of outstanding trade receivables is carried out at each period 
end and a specific amount provided for. A general provision is maintained reflecting the fact that some customers are small and do not have strong 
credit histories. Annual Report 2016 61 Defenx PLC
Strategic report Company overview Financial statements Governance
Group Company
Financial liabilities
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Trade payables 1,056,067 440,241 665,750 419,113
Other payables and accruals 337,315 216,218 6,901 49,840
Loans and borrowing 1,952,127 – 870,349 –
Total payables 3,345,509 656,459 1,543,000 468,953
Trade and other payables and accruals comprise amounts outstanding for trade purchases and ongoing costs and are typically payable within 90 days. The 
year-end average age of trade creditors was 29 days (2015: 28 days). Where there is a contractual right of set-off with a customer that is also a supplier, 
notably in relation to marketing contributions payable to channel partners, relevant receivable and payable balances are set against one another.
Financial instruments not measured at fair value
Financial instruments not measured at fair value include trade and other receivables, cash and cash equivalents, trade and other payables, and loans 
and borrowings.
Due to their short-term nature, the carrying value of trade and other receivables, cash and cash equivalents, trade and other payables approximates their fair 
value. Book values and expected cash flows are reviewed by the Board and any impairment charged to the statement of income in the relevant period.
There were no changes to the valuation techniques during the period.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. The 
Group is mainly exposed to credit risk from credit sales.
The Group is exposed to credit risk in respect of these balances such that, if one or more customers encounter financial difficulties, this could materially 
and adversely affect the Group’s financial results. The Group attempts to mitigate credit risk by assessing the credit rating of new customers prior to 
entering into contracts and by entering contracts with customers with agreed credit terms. The analysis below shows the ageing of trade and other 
receivables and the movement in bad debt provision in the year:
Group Company
Ageing of trade & other receivables
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Not due at reporting date 4,651,921 1,215,070 284 –
Up to 3 months 463,478 460,132 1,030 9,503
3 to 6 months 341,934 943,742 – –
Above 6 months 71,328 480,753 – –
Gross receivables 5,528,661 3,099,697 1,314 9,503
Less: allowance for receivables (196,248) (270,360) – –
Net receivables 5,332,413 2,829,337 1,314 9,503
Sales to two customers based in Italy amounted to approximately 52% (2015: three for 65%) of Group revenue. Sales to two customers based in 
Switzerland amounted to 30% (2015: one for 16%) and one customer based in Malta amounted to 15% (2015: 14%) of Group revenue. No other 
individual customer accounted for more than 5% of Group revenue.
Customer credit risk is managed in accordance with the Group’s established policy and procedures. Customer credit quality is assessed and periodically 
reviewed based on available information and individual credit limits are defined based on this assessment. Outstanding customer receivables are actively 
monitored and reviewed at least quarterly. At 31 December 2016, the Group had five customers (2015: four) that owed more than €500,000, 
accounting for 92% (2015: 92%) of trade receivables outstanding.
As at 31 December 2016, trade receivables of €463,478 (2015: €923,853) were past due but not impaired. 62 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
19. Financial instruments and risk management continued
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. 
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s debt obligations with floating interest rates.
The Group manages its interest rate risk while balancing the fixed and variable rates available as its loans and borrowings are renewed. The Group does 
not enter into interest rate swaps. At 31 December 2016, approximately 64% of the Group’s borrowings were at a fixed rate of interest (2015: nil).
The following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and borrowings affected. 
With all other variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings, as follows:
Increase/decrease in basis points Effect on profit before tax
31 December
2016
31 December
2015
31 December
2016
€
31 December
2015
€
Increase in Euro rates +100 – 7,120 –
Decrease in Euro rates –50 – (3,560) –
The assumed movement in basis points for the interest rate sensitivity analysis is based on the currently observable market environment.
Foreign exchange risk
Foreign exchange risk arises when the Group enters into transactions denominated in a currency other than its functional currency. The Group’s policy is, 
where possible, to allow customers to settle liabilities denominated in the customer’s functional currency, primarily the Euro and Swiss franc.
The Group is predominantly exposed to currency risk on sales and purchases made from customers and suppliers based outside the Eurozone. Sales and 
purchases from customers and suppliers are made on a central basis and the risk is monitored centrally, but not hedged utilising any forward exchange 
contracts. Apart from these particular cash flows the Group aims to fund expenses in the respective currency and to manage foreign exchange risk at a 
local level by matching the currency in which revenue is generated and expenses are incurred. As at 31 December 2016, the Group’s net exposure to 
foreign exchange risk was as follows:
 
Euro
€
Sterling
€
Swiss Franc
€
US Dollar
€
Total
€
As at 31 December 2016
Trade and other receivables 5,383,108 95,383 1,118 24,318 5,503,927
Cash and cash equivalents 590,887 586,757 – – 1,177,644
Trade and other payables (1,243,626) (129,959) (16,375) (3,422) (1,393,382)
Loans and borrowings (1,433,847) (498,245) (20,035) – (1,952,127)
Deferred consideration (380,856) – – – (380,856)
Net current assets 2,915,666 53,936 (35,292) 20,896 2,955,206
As at 31 December 2015
Trade and other receivables 3,153,671 148,773 2,957 203 3,305,604
Cash and cash equivalents 588,808 736,378 8,657 26 1,333,869
Trade and other payables (126,877) (379,984) (146,297) (3,301) (656,459)
Net current assets 3,615,602 505,167 (134,683) (3,072) 3,983,014
The following table demonstrates the sensitivity to a reasonably possible change in Euro exchange rates, with all other variables held constant. The Group’s 
exposure to foreign currency changes for all other currencies is not material.
Increase/decrease in basis points Effect on profit before tax
31 December
2016
31 December
2015
31 December
2016
€
31 December
2015
€
Sterling +20 +10 (10,787) (50,517)
-10 -10 5,394 50,517
Swiss franc +10 +10 3,529 13,468
-10 -10 (3,529) (13,468)
US Dollar +10 +10 (2,090) 307
-10 -10 2,090 (307) Annual Report 2016 63 Defenx PLC
Strategic report Company overview Financial statements Governance
Liquidity risk 
Liquidity risk arises from the Group’s management of working capital. The risk is that the Group will encounter difficulty in meeting its financial 
obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. 
To achieve this aim, it seeks to maintain cash balances to meet expected requirements for a period of at least 90 days.
The Board receives rolling 12-month cash flow projections on a quarterly basis as well as information regarding cash balances. At the end of the 
financial year, these projections indicated that the Group expected to have sufficient liquid resources to meet its obligations under all reasonably 
expected circumstances.
The liquidity risk of each Group entity is managed centrally. Budgets are set locally and agreed by the Board in advance, enabling the Group’s cash 
requirements to be anticipated. Where facilities of Group entities need to be increased, approval must be sought from the Chief Finance Officer.  
Where the amount of the facility is above a certain level, agreement of the Board is needed.
The table below analyses the Group’s financial liabilities by contractual maturities. Amounts disclosed in the table are the contractual undiscounted 
cash flows.
Group Company
 
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Ageing of trade & other payables
Up to 3 months 1,393,382 656,459 672,651 468,953
3 to 6 months – – – –
Above 6 months – – – –
1,393,382 656,459 672,651 468,953
Ageing of loans and borrowing
Up to 3 months 645,974 – 553,167 –
Between 3 to 12 months 791,360 – 163,833 –
Between 1 and 2 years 412,541 – 153,349 –
Between 2 to 5 years 102,252 – – –
Over 5 years – – – –
1,952,127 – 870,349 –
Capital management
The Group’s capital is made up of share capital, share premium, merger reserve, non-controlling interests and retained profits totalling €9,650,940 at  
31 December 2016 (2015: €5,812,442) as set out in the statement of changes in equity.
The Group’s objectives when maintaining capital are: 
• to safeguard the ability to continue as a going concern, so that the Group can continue to provide returns for shareholders and benefits for other 
stakeholders; and 
• to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk. 
The Group sets the amount of capital it requires in proportion to risk. The Group manages its capital structure and makes adjustments to it in the light of 
changes in economic conditions and the risk characteristics of the underlying assets. The Group’s strategy is to finance working capital requirements 
from existing cash resources and debt facilities while investment activity is financed wherever possible with surplus cash resources or through the issue 
of new shares where an acceptable return can be generated. 64 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
19. Financial instruments and risk management continued
The Group monitors capital on the basis of its debt-to-equity ratio. This ratio is calculated as net debt to total equity as defined above. Net debt is 
calculated as total debt (as shown in the consolidated statement of financial position) less cash and cash equivalents. The Group’s strategy is to limit the 
debt-to-equity ratio to 25% to balance leverage with the availability of low cost debt, notably working capital facilities in Italy. Any increase over this 
limit requires Board approval. The debt-to-equity ratio at 31 December 2016 was 8% (2015: nil) as set out below:
 
Year ended
31 December 
2016
€
Year ended
31 December
2015
€
Loans and borrowing 1,952,127 –
Less: cash and cash equivalents (1,177,644) (1,333,869)
Net debt 774,483 (1,333,869)
Total equity 9,650,940 5,812,442
Debt-to-equity ratio 8.0% 0%
The increase in the debt-to-equity ratio during 2016 resulted primarily from the decision by the Board to enter into low cost debt facilities in Italy and 
the UK.
20. Share capital
Number
of shares
Share capital
€
Share premium
€
As at 1 January 2015 32,021,160 90,608 580,373
Change in functional currency – 1,453 11,613
Issue of new Ordinary Shares – private placing 5,364,904 16,068 762,325
Equity issue costs – – (43,490)
37,386,064
8 for 1 consolidation 4,673,258 –
Issue of new Ordinary Shares – AIM placing and subscription 1,425,654 36,568 2,970,136
Equity issue costs – – (229,635)
As at 31 December 2015 6,098,912 144,697 4,051,322
Issue of new Ordinary Shares – Memopal SRL 621,394 13,322 –
Issue of new Ordinary Shares – placing 1,647 ,500 33,176 1,441,284
Equity issue costs – – (169,489)
Directors’ subscription for new Ordinary Shares 250,000 5,047 219,248
As at 31 December 2016 8,617,806 196,242 5,542,365
Ordinary 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.
On 1 August 2016, 621,394 new Ordinary Shares were allotted at £1.2968 per share as part the consideration for the acquisition of Memopal SRL. No 
share premium has been recognised in the parent company’s financial statements since more than 90% of Memopal’s shares were acquired thereby 
attracting merger relief under the Companies Act 2006. A total of €946,410 was credited to the merger reserve in the statement of financial position.
Contingent equity consideration, comprising up to 238,035 new Ordinary Shares, will be allotted on 30 June 2018, subject to Group performance in the 
year ending 31 December 2017 as further disclosed in note 23. The fair value of this contingent obligation is shown under non-current liabilities.
On 26 October 2016, 1,897 ,500 new Ordinary Shares at £0.80 per share, raising gross proceeds of £1.52 million (€1.53 million net of expenses), were 
allotted pursuant to a placing of 1,647 ,500 Ordinary Shares and subscription of 250,000 Ordinary Shares approved at an EGM held that day. The 
subscription was taken up by the Executive Directors of the Company as further disclosed in note 25.
Also on 26 October 2016, a total of 164,750 warrants over Ordinary Shares were issued to the Company’s brokers, WH Ireland Limited and Beaufort 
Securities Limited, as part consideration for their broking services. These five-year warrants have an exercise price of £0.80. Separately, as part of 
Beaufort Securities Limited appointment to act as joint-broker to the Company, a further 40,000 five-year warrants with exercise prices of between 
£1.25 and £2, were issued (note 21).
Share issue costs of €169,489 (2015: €366,817) have been charged against the share premium account. Annual Report 2016 65 Defenx PLC
Strategic report Company overview Financial statements Governance
Deferred share capital (see note 26)
The deferred shares of £0.0001 carry no right to vote, no right 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. Deferred shareholders have the right for five years 
from issue to convert their shares into Ordinary Shares for a consideration of £0.10 per share less the amount paid for each deferred share on an eight 
for one basis. The Company must give prior notice to deferred shareholders in the event of a sale.
Number
of shares
Share capital
€
Share premium
€
As at 1 January 2015 2,400,000 295 –
Change in functional currency – 12 –
As at 31 December 2015 2,400,000 307 –
As at 31 December 2016 2,400,000 307
The Company has not issued any partly paid shares nor any convertible securities or exchangeable securities. The Company does not hold any 
treasury shares.
21. Share-based payments
Defenx has established EMI and Unapproved Option Schemes as part of the Group’s incentive and retention strategy.
Under the option schemes, the Group has granted share options over the Ordinary Shares of Defenx PLC to employees and Directors. The share options 
vest over 36 months, either from inception or from the first anniversary of grant, provided the holder remains in employment. There are currently no 
performance conditions. The exercise price of the share options was equal to the market price of the underlying shares on the date of grant. The 
contractual term of the share options is 10 years and there are no cash settlement alternatives.
The Company also issued 60,989 warrants to advisers as part of its admission to AIM and 204,750 warrants as part of the placing and subscription 
completed during 2016.
The fair value of the options and warrants is estimated at the grant date using a Black-Scholes pricing model, taking into account the terms and 
conditions upon which the options were granted, and the estimated share price volatility of the Company relative to that of its competitors. 
The fair value of options and warrants issued was estimated on the date of grant using the following assumptions:
31 December 
2016
31 December
2015
Weighted average share price £0.910 £1.319
Weighted average exercise price £0.943 £1.319
Expected volatility 40% 34%
Risk free rate of return 1.50% 1.76%
Expected life (years) 5 5
Expected dividend yield 0% 0%
The expected life of the share options is based on current expectations and is not necessarily indicative of exercise patterns that may occur. The full 
contractual life of options is 10 years and warrants is five years. The expected volatility reflects the assumption that the historical volatility over a 
period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome. Expected volatility was 
determined by referring to the share prices of a selection of comparable AIM quoted companies.
Year ended 31 December 2016 Year ended 31 December 2015
Number WAEP* Number WAEP*
Outstanding at 1 January 526,614 £1.319 – –
Granted during the year 204,750 £0.943 526,614 £1.319
Forfeited during the year (208,000) £1.209 – –
Exercised during the year – – – –
Expired during the year – – – –
Outstanding at 31 December 523,364 £1.215 526,614 £1.319
Vested at 31 December 357,447 £1.135 94,489 £1.023
Exercisable at 31 December 357,447 £1.135 94,489 £1.023
* Weighted average exercise price 66 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
21. Share-based payments continued
The weighted average remaining contractual life for the share options outstanding as at 31 December 2016 was 6.7 years (2015: 9.3 years).
The range of exercise prices for options outstanding at the end of the year was £0.80 to £2.00 (2015: £0.80 to £1.48).
In the year ended 31 December 2016, 204,750 warrants were issued on 26 October at £0.80, £1.25 and £1.50 and £2.00 each. No options were 
granted during the year. The aggregate of the estimated fair values of the warrants issued is €59,253 (2015: €316,756). The total share-based 
payment expense recognised was €96,060 (2015: €60,343) related to equity-settled share-based payment transactions in 2016.
National Insurance is payable on gains made by employees on exercise of share options granted to them. The Company has entered into a reciprocal 
arrangement with employees such that the employees will reimburse any National Insurance liability.
22. Reserves
The following describes the nature and purpose of each reserve within equity:
Share premium The amount of capital contributed in excess of the nominal value of each Ordinary £0.018 Share.
Merger reserve The amount arising from the use of merger accounting (as set out in note 1) being the difference between the parent’s 
cost of investment in Defenx SA and the issued share capital of Defenx SA.
The merger reserve is also used where more than 90% of the shares in a subsidiary are acquired and the consideration 
includes the issue of new shares by the parent, thereby attracting merger relief under the Companies Act 2006.
Foreign exchange reserve Foreign exchange translation reserve resulting in the translation of the financial information from the functional to the 
presentation currency. Upon the adoption of the Euro as the Group’s functional currency, the balance on the foreign 
exchange reserve was eliminated. 
Retained earnings All other net gains and losses and transactions with owners (e.g. dividends) not recognised elsewhere.
23. Business combinations
Acquisition of Memopal SRL
On 1 August 2016, the Group acquired 95.2% of the voting equity of Memopal SRL (Memopal), an unlisted company whose principal activity is the 
development and sale of cloud-based backup and synchronisation software. The principal reason for this acquisition was to diversify the Group’s product 
portfolio with proprietary technology and grow the Group’s customer base with the addition of Memopal’s channel partners. In addition, Memopal’s team 
of seven staff and three consultants significantly increased the Group’s internal development and customer support capacity that the Group would 
otherwise have needed to recruit. Memopal is based in Rome, Italy.
Since the acquisition date, Memopal has contributed €198,394 to Group revenues and a net loss of €238,830 to Group profits. If the acquisition had 
occurred on 1 January 2016, Group revenue would have been €611,240 higher and Group net profit would have been €293,230 higher.
Net assets acquired
Details of the fair value of identifiable assets and liabilities acquired are as follows:
Book value
€
Adjustment
€
Fair value
€
Intangible assets 639,212 (285,279) 353,933
Tangible assets 135,364 – 135,364
Current assets 1,252,156 (70,190) 1,181,966
Cash 353,788 – 353,788
Current liabilities (469,897) – (469,897)
Loans (961,783) – (961,783)
Deferred tax – 78,452 78,452
Total identifiable net assets 948,840 (277,017) 671,823
Non-controlling interest measured at 4.8% (32,248)
Total identifiable net assets attributable to the Group 639,575
The Group has elected to measure the non-controlling interests in Memopal at the proportionate share of net assets of the acquiree. Annual Report 2016 67 Defenx PLC
Strategic report Company overview Financial statements Governance
Fair value adjustments
As at the acquisition date, the fair value of certain B2B customer contracts in Memopal was estimated to be €353,933 with a related deferred tax 
liability of €97 ,331. The fair value is determined using the DCF method. Significant unobservable valuation inputs were:
• Contracted contribution to profit per annum of €264,000.
• Contract renewal probabilities of 75%, 50% and 25% in years 1, 2 and 3 respectively.
• Discount rate of 10.3% being the estimated WACC of the Group.
Upon consolidation, the Group held two assets representing essentially the same underlying source code: a perpetual licence in Defenx SA and the net 
book value of €639,212 capitalised development costs in Memopal. On the basis that the €900,000 consideration, shown within current assets above, 
was negotiated prior to the acquisition of Memopal on an arms-length basis, the Directors have chosen to eliminate the net book value in Memopal, 
which resulted in deferred tax asset of €175,783, both at the date of acquisition. In addition, post-acquisition amortisation of €136,878 relating to the 
acquired development costs has also been reversed leaving the licence amortisation of €75,000 in Defenx SA and post-acquisition capitalised 
development costs in Memopal.
As at the acquisition date, Memopal held trade receivables with a book value of €270,357. Whilst the Group will make every effort to collect all 
contractual receivables, it considers it unlikely that the €70,190 will ultimately be received.
Consideration and goodwill
Fair value
€
Cash payable over two years 438,217
Shares issued at fair value 959,731
Contingent equity consideration 380,856
Total consideration 1,778,804
Net assets acquired (639,575)
Goodwill arising on acquisition 1,139,229
Acquisition costs of €188,590 were expensed and are shown separately on the face of the statement of income.
The main factors leading to the recognition of goodwill are: 
• the presence of certain intangible assets, such as the Memopal brand, a portfolio of B2C web customers and the development team within Memopal, 
that do not qualify for separate recognition;
• overhead cost savings that result in the Group being prepared to pay a premium; and
• the fact that a lower cost of capital is ascribed to the expected future cash flows of Memopal’s entire operations than might be to individual assets.
The goodwill arising on the acquisition of Memopal will not be deductible for tax purposes.
Contingent equity consideration
Contingent equity consideration of up to €380,856 is payable on 30 June 2018 in up to 238,035 Ordinary Shares based on the average mid-market 
closing share price and the average GBP:EUR spot rate for each of the previous five business days or, at the Company’s option, in cash.
The contingent equity consideration is payable if Group EBITDA for the year ending 31 December 2017 exceeds €3.4 million and is calculated as 50% of 
the excess group EBITDA up to the maximum consideration of €380,856.
Based on current market expectations for the Group’s 2017 results, the Directors believe that the full contingent equity consideration will be payable. 
The fair value of this contingent obligation is shown under non-current liabilities.
24. Commitments and contingencies
Operating lease commitments – Group as lessee
The Group has operating leases on office premises in London (UK), Balerna (Switzerland) and Rome (Italy) on three, six and three months’ notice respectively. 
Future minimum rentals receivable under non-cancellable operating leases as at 31 December are €30,403 (2015: €13,453) within one year.
Finance lease and hire purchase commitments
The Group has no finance lease or hire purchase commitments.
Other commitments
At 31 December 2016, the Group had commitments of €1.42 million (2015: €1.30 million) relating to software development. 68 Defenx PLC Annual Report 2016
Notes to the consolidated financial statements continued
25. Related-party transactions
On 26 October 2016, the Executive Directors, Andrea Stecconi and Philipp Prince, subscribed for 218,750 and 31,250 Ordinary Shares respectively 
pursuant to the placing and subscription approved by shareholders at an EGM that day. The issue price for the placing and subscription was 
£0.80 per share.
Key management personnel – Group
In the opinion of the Board, only the Executive Directors of the Company are regarded as key management personnel. The Executive Directors have service 
agreements that require three-months’ notice of termination from either party, except Andrea Stecconi, for whom the notice period is six months.
Key management personnel compensation, including social security, comprised the following:
 
31 December 
2016
€
31 December
2015
€
Wages and salaries 381,988 349,229
Benefits 14,328 6,272
Share-based payments expense 18,069 17,376
414,385 372,877
The remuneration of key management personnel is determined by the Remuneration Committee having regard to the performance of individuals and 
market trends.
Other related-party transactions – Group
Defenx SA entered into a rental agreement with Andrea Stecconi in respect of its offices in Switzerland. Defenx SA paid Andrea Stecconi €21,769 
(2015: €22,003). There was no balance outstanding at the year end (2015: €nil).
All transactions were on arm’s-length terms.
Other related-party transactions – Company
 
31 December 
2016
€
31 December
2015
€
Transactions between Defenx PLC and Defenx SA
Income – invoiced by Defenx PLC 366,133 356,487
Expenses – invoiced by Defenx SA (4,320) (24,374)
Interest receivable – invoiced by Defenx PLC 269,984 25,809
Long-term loans from Defenx PLC to Defenx SA 2,735,226 2,130,013
Transactions between Defenx SA and Memopal SRL
Income – invoiced by Defenx SA 566,352 –
Expenses – invoiced by Memopal SRL (118,256) –
Net trade receivables in Defenx SA with Memopal SRL 448,096 –
26. Events after the reporting date
On 3 January 2017 , MBooster Srl (MBooster) was appointed as strategic adviser to the Company. MBooster will receive a semi-annual fee of €37 ,500 
to be settled by the issue of new Ordinary Shares at the average mid-market price for the last five business days of each half year. The engagement 
commenced on 1 January 2017 and may be cancelled with three-months’ notice by either party.
On 11 April 2017 , the Company announced a long-term strategic partnership with BV-Tech SpA, a leading independent Italian corporate IT and cyber 
security solutions provider, initially comprising a conditional software acquisition for €2.65 million (£2.26 million) and an equity subscription for 861,666 
new Ordinary Shares to raise €1.15 million (£0.98 million) before expenses. The software was formally accepted on 3 May 2017 and the consideration 
settled through the issue of 1,982,222 new Ordinary Shares at 114 pence per share.
 
Also on 11 April 2017 , valid conversion notices were received from the holders of 2,400,000 deferred shares. Accordingly, all deferred shares were 
converted into new Ordinary Shares on an eight for one basis for a consideration of 79.92 pence per resultant Ordinary Share (£239,760 in aggregate), 
following which, there are no deferred shares in issue. Annual Report 2016 69 Defenx PLC
Strategic report Company overview Governance Financial statements
Notice of AGM
DEFENX PLC
(the Company)
(Company number 8993398)
Notice is given that the AGM of the members of the Company will be held at the offices of Taylor Vinters LLP at 12pm on Tuesday 27 June 2017 , to 
consider and, if thought fit, pass the following resolutions, of which resolutions 1 to 6 (inclusive) will be proposed as ordinary resolutions and resolutions 
7 and 8 will be proposed as special resolutions:
Ordinary resolutions:
Report and accounts
1. To receive the audited Accounts and Reports of the Directors and auditors for the year ended 31 December 2016.
Remuneration report
2. To approve the report on Directors’ remuneration for the year ended 31 December 2016.
Re-election of Director
3.  To re-elect as a Director Mr. Franco Francione who is retiring in accordance with Article 25.8 of the Company's Articles of Association and, being 
eligible, is offering himself for re-election.
Re-appointment of auditor
4. To re-appoint haysmacintyre as auditor until the conclusion of the next AGM of the Company at which accounts are laid.
Auditor’s remuneration
5. To authorise the Directors to determine the remuneration of the auditor.
Directors’ authority to allot shares
6.  That in substitution for all existing authorities, the Directors be generally and unconditionally authorised in accordance with section 551 of the 
Companies Act 2006 (the Act) to exercise all the powers of the Company to allot shares in the Company or to grant rights to subscribe for or convert 
any security into shares in the Company up to an aggregate nominal amount of £70,570.15 during the period from the date of the passing of this 
resolution and expiring on the date of the next AGM or on 30 June 2018, whichever is earlier, but so that this authority shall allow the Company to 
make offers or agreements before the expiry of this authority which would, or might, require shares to be allotted or rights to subscribe for or convert 
security into shares to be granted after such expiry.
Special resolutions
Authority to dis-apply pre-emption rights
7. That, subject to resolution 6 above being passed and Section 551 of the Act, the Directors be empowered, pursuant to Section 570 of the Act, to 
allot equity securities (as defined in Section 560 of the Act) as if Section 561(1) of the Act did not apply to any such allotment, provided that this 
power shall be limited to the allotment of equity securities:
(a) during the period expiring on the date of the next AGM of the Company or, if earlier, on 30 June 2018 but so that this power shall enable the 
Company to make offers or agreements which would or might require equity securities to be allotted after the expiry of this power;
(b)  up to an aggregate nominal amount of £21,171.04 representing the nominal value of 10% of the Company’s issued share capital at the date of 
this notice; and
(c) shall include the power to sell treasury shares under Section 727 of the Act.
Purchase of own shares
8.  That the Company be generally and unconditionally authorised to make one or more market purchases, within the meaning of Section 693(4) of the 
Act, of Ordinary Shares of 1.8p each in the Company (Shares) and to hold such Shares as treasury shares, provided that:
(a)  the maximum number of Shares to be repurchased shall be 588,084 Shares representing the nominal value of 5% of the Company’s issued share 
capital at the date of this notice;
(b) the minimum price (exclusive of expenses) which may be paid for a Share shall be 1.8p per share;
(c)  the maximum price (exclusive of expenses) which may be paid for a Share shall be an amount equal to 105% of the average market value of the 
Shares (as derived from the mid-market price) for the five business days immediately preceding the date on which the Share is purchased;
(d)  any purchase of Shares will be made in the market for cash at prices below the prevailing net asset value per Share as determined by the Directors;
(e)  the authority hereby conferred shall expire at the conclusion of the next AGM of the Company or, if earlier, on 30 June 2018; and
(f)  the Company may make a contract to purchase Shares under the authority hereby conferred prior to the expiry of such authority and may make a 
purchase of Shares pursuant to any such contract notwithstanding such expiry.
22 May 2017
Registered office:
Ashley Park House
42-50 Hersham Road
Walton-on-Thames, Surrey KT12 1RZ 
By order of the Board
Tim Hughes
A duly authorised signatory of David Venus & Company LLP 
Company Secretary 70 Defenx PLC Annual Report 2016
Notice of AGM continued
Notes:
1. A member entitled to attend and vote at the above meeting has the right to appoint a proxy or proxies to attend and vote in his place. A proxy need 
not be a member of the Company.
2. The form of proxy and the power of attorney or other authority, if any, under which it is signed, or a copy of such power or authority certified by a 
notary, must be completed and returned to the offices of the Company’s registrars, SLC Registrars, Ashley Park House, 42-50 Hersham Road, 
Walton-on-Thames, Surrey KT12 1RZ, to arrive no fewer than 48 hours before the date set for the meeting or adjourned meeting.
3. In accordance with regulation 41 of the Uncertificated Securities Regulations 2001, (as amended) only those persons entered in the register of 
members of the Company as the holders of Ordinary Shares at 6.00pm on the pre-penultimate day of the AGM, are entitled to attend and vote at the 
meeting in respect of the Shares held by them at the relevant time. Any changes made to the register of members of the Company after that time 
will be disregarded in determining the right of any person to attend or vote at the meeting.
4. Resolution 3 – Under Article 25.8 of the Company's Articles of Association, any person who is appointed as a Director holds office only until the 
next AGM following his/her appointment and, if eligible, may offer himself/herself for re-election.
5. Resolutions 4 and 5 – The auditors are required to be reappointed at each AGM at which accounts are presented. The Board on the 
recommendation of the Audit Committee, which has evaluated the effectiveness and independence of the external auditors, is proposing the 
re-appointment of haysmacintyre. Resolution 5 is proposed to authorise the Board to fix the remuneration of the auditors.
6. Resolution 6 – This resolution is to renew the authority given to the Directors to allot Shares or rights to subscribe for or convert security into 
Shares in the capital of the Company subject to the conditions of the Act. The authority to be given by this resolution is limited to the allotment of 
3,920,564 Ordinary Shares representing one third of the issued Share capital at the date of this notice and shall be in substitution for all existing 
authorities but shall be without prejudice to any allotment of Shares or grant of rights to subscribe for or convert security into Shares already made 
or offered or agreed to be made pursuant to such authorities. The authority shall expire at the next AGM or on 30 June 2018, whichever is earlier.
7. Resolution 7 – When Shares are to be allotted for cash, section 561(1) of the Companies Act 2006 provides that existing shareholders have 
pre-emption rights and that any new Shares are offered first to such shareholders in proportion to their existing shareholdings. This resolution is 
seeking to authorise the Directors to allot Shares of up to an aggregate nominal amount of £21,171.04 otherwise than on a pro-rata basis. This 
represents 10% of the Company’s issued Share capital on the date of this document. This authority shall expire at the next AGM or on 30 June 2018, 
whichever is earlier.
  Whilst the Directors have no intention at the present time of issuing relevant securities, other than pursuant to existing rights under employee share 
schemes, they are seeking annual renewal of this authority in accordance with best practice and to ensure the Company has maximum flexibility in 
managing capital resources.
8. Resolution 8 – This resolution is to authorise the Company to make market purchases of up to 5% of its own Shares in issue as set out in the 
resolution. The authority shall expire at the next AGM or on 30 June 2018, whichever is earlier.
 The Directors consider that in certain circumstances it may be advantageous for the Company to purchase its own Shares at a discount to net asset 
value. Purchases will only be made on the London Stock Exchange within guidelines established from time to time by the Board.
 The Directors would only consider exercising this authority if it is considered that such purchases would be to the advantage of the Company and its 
shareholders as a whole. The principal aim of this Share buyback facility is to enhance shareholder value by acquiring Shares at a discount to net asset 
value, as and when the Directors consider this to be appropriate. The purchase of Shares when they are trading at a discount to net asset value per 
Share, and their cancellation, should result in an increase in the resulting net asset value per Share for the remaining Ordinary Shares. The Company 
will also be in a better position to address any imbalance between supply and demand for the Shares that may be reflected in the discount to net 
asset value at which the Company’s Shares trade on the London Stock Exchange.
 The Directors intend that any Shares purchased under this authority will be held by the Company as treasury shares, within the limits allowed by the 
law, unless the Directors consider that purchasing the Shares and cancelling them would be to the advantage of the Company and its shareholders. 
The Directors may dispose of treasury shares in accordance with relevant legislation and the authority relating to rights of pre-emption granted by 
shareholders in general meeting (see Resolution 8 and the note thereto).
Documents
9. The following documents, which are available for inspection during normal business hours at the registered office of the Company on any business 
day, will also be available for inspection on the day of the meeting until the Company’s normal close of business:
(a) copies of Executive Directors’ service contracts with the Company;
(b) copies of Non-executive Directors’ letters of appointment; and
(c)  a copy of the Company’s current Articles of Association. Annual Report 2016 71 Defenx PLC
Strategic report Company overview Governance Financial statements
Company information
Directors
Anthony Reeves
Andrea Stecconi
Philipp Prince
Leonard Seelig
Franco Francione
Secretary
David Venus & Company LLP
42–50 Hersham Road 
Walton-on-Thames 
Surrey KT12 1RZ
Registrars
SLC Registrars
42–50 Hersham Road 
Walton-on-Thames 
Surrey KT12 1RZ 
Registered office
42–50 Hersham Road 
Walton-on-Thames 
Surrey KT12 1RZ 
Registered number
08993398
Share capital
The Ordinary Share capital of Defenx PLC is  
listed on AIM, a market operated by London  
Stock Exchange Group plc. The shares are  
listed under the trading ticker DFX.  
The ISIN number is GB00BYNF4J61  
and SEDOL number is BYNF4J6.
Auditors
haysmacintyre
6 Red Lion Square 
London WC1R 4AG
Nominated adviser
Strand Hanson Limited
26 Mount Row 
London W1K 3SQ 
Joint brokers
WH Ireland Limited
11 St James’s Square 
Manchester M2 6WH 
Beaufort Securities Ltd
63 St Mary Axe
London EC3A 8AA
Solicitors
Taylor Vinters LLP
Tower 42, 33rd Floor
25 Old Broad Street
London EC2N 1HQ 
Bankers
National Westminster Bank
135 Bishopsgate
London EC2M 3UR
Credit Suisse AG
SGCT 1
Viale Stazione 19
6501 Bellinzona
Switzerland
Website
investors.defenx.com 72 Defenx PLC Annual Report 2016
Five-year track record
  2016 2015 2014 2013 2012
As at 31 December
Revenue unit €000s 7,088 4,490 2,382 2,077 891
Revenue growth +58% +88% +15% +33% –
Gross profit €000s 5,848 3,977 2,034 1,557 4.39
Gross margin % 82.5% 88.6% 85.4% 75.0% 44.3%
Operating profit (before transaction costs) €000s 1,840 979 805 410 114
Operating profit margin (before transaction costs) % 26.0% 21.8% 33.8% 19.7% 12.8%
Profit before tax €000s 1,590 362 761 409 113
Earnings per share
Basic €0.185 €0.042 €0.167 €0.115 €0.045
Diluted €0.169 €0.039 €0.159 €0.115 €0.045
Net cash flow from operating activities €000s 2,322 (1,022) 388 661 (149)
Free cash flow (after capitalised development 
costs) €000s (1,667) (2,372) (823) 3 (135)
Net cash used in investing activities €000s (4,558) (1,351) (1,211) (658) 69
Net cash from financing activities €000s 1,916 3,512 1,026 – 75
Net increase in cash and cash equivalents €000s (319) 1,139 203 3 (5)
Cash and cash equivalents at year end €000s 1,015 1,334 206 2 1
Net assets €000s 9,651 5,812 2,048 457 129
Net assets per share €1.120 €0.953 €0.512 €0.160 €0.045 digital protection
Defenx PLC Annual Report 2016
Defenx PLC
42-50 Hersham Road
Walton-on-Thames
Surrey KT12 1RZ
www.defenx.com