DATAWORKS GROUP LIMITED — Interim / Quarterly Report 2020

Apr 29, 2020

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30 April 2020

IXUP Third Quarter FY20 Update and Appendix 4C

IXUP Limited (ASX: IXU) (“IXUP” or the “Company”) , a leading technology company that secures data analytics and collaboration by using advanced encryption, today lodged its Appendix 4C Report and provided a review of the Company’s progress for the third quarter ended 31 March 2020 (Q3).

Q3 Highlights

• Entered into trial agreements with new customers

• Continued leadership in international encryption space

• New platform capabilities to support extensive use cases

• Structured operations to support client acquisition and retention while significantly reducing one-off and recurring expenses

IXUP’s privacy preserving analytics platform helps organisations that require the highest assurance of data privacy, security and control to share and analyse sensitive data sets from multiple sources.

IXUP’s secure software environment uses ground-breaking homomorphic encryption and compute techniques enabling collaborative analytics to be performed on data while it remains fully encrypted. This enables organisations to continue to focus on creating value from their data, while complying with privacy laws and maintaining customer trust.

Impact of COVID-19 Pandemic to sales pipeline

While IXUP is still experiencing strong interest in its product from current and prospective clients, signing customers to trials and completing those trials is taking longer than expected as client resources are being redirected to other activities brought on by COVID-19 impacts on those businesses.

IXUP secures key initial partnership in healthcare sector

IXUP entered into an agreement with nib New Zealand Limited (‘nib New Zealand’) to trial the IXUP platform in New Zealand for an initial three month period. The agreement’s term may be extended by mutual agreement of the parties after successful completion of the trial.

IXUP CEO Peter Leihn said: “We are delighted to partner with nib New Zealand. This partnership helps validate the importance of privacy preserving methods for data analytics and collaboration in the healthcare sector, where data privacy and security are paramount to protect patient data. We look forward to working with nib New Zealand to explore the breadth of use cases that are possible with the IXUP platform.”

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Continued leadership in homomorphic encryption commercialisation

IXUP joined leading technology companies such as Intel, Microsoft, IBM, and Google at the global Homomorphic Encryption Standardisation Workshop hosted by Microsoft Research in Washington in February. IXUP was the first Australian company to participate in this ongoing group which is developing a community standard for homomorphic encryption, a method that preserves privacy of sensitive data sets.

IXUP CEO Peter Leihn said: “Homomorphic encryption is a game changer for data privacy and security. By working closely with other leading technology companies to develop homomorphic encryption standards, we will be able to ensure this technology is commercialised faster. There’s an urgent need for privacy tools like homomorphic encryption as data risks like cyber threats, data breaches and privacy compliance obligations intensify.”

New platform capabilities boost co-marketing solution

IXUP deployed its latest release to help clients generate richer business insights. This deployment expanded IXUP’s data modelling and enrichment capabilities and adds to the already impressive security features that are underpinned by homomorphic encryption. Users can now explore a broader variety of use cases with an expanded tool suite for working with encrypted data. This is the fourth release for IXUP in the last 12 months and applies the learnings from the real world experiences of its customers.

Financial Update

In line with expectations, net cash outflows from operations were $1.33 million for the quarter. Following the issue of shares and receipt of proceeds (net of transaction costs), the Company completed the quarter with cash and term deposits of $3.26 million. During the quarter the Company rationalised costs via reductions in marketing, leases, staff costs and capital expenditure.

The Company has also been granted a waiver from ASX Listing Rules 10.13.3 and 10.13.5 allowing approval of the issue of up to $60,000 worth of shares to the Chairman, Grant Paterson (or his nominee) and up to $250,000 worth of shares to Dean Joscelyne (or his nominee) in consideration for director fees/executive remuneration.

Management estimates Q3 FY20 expenditure of $1.20 million, compared to estimated Q3 FY19 expenditure of $1.42 million for the previous corresponding period. The Company has a strong pipeline of sales opportunities and anticipates ongoing client growth.

-ENDS-

This announcement is authorised by Peter Leihn, IXUP CEO.

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Media Enquiries :

Sarah Aldridge, IXUP Tel: +61 418 962 233 sarah.aldridege@ixup.com

About IXUP

IXUP Limited (ASX:IXU) (pronounced ‘eyes up’) is a pioneering technology company that specialises in analytics over data that remains encrypted. IXUP’s privacy preserving analytics platform can help solve important research, business and policy problems by allowing data sets from different parties to be combined and analysed in a secure environment with full control. While conventional encryption techniques protect data when it is stored or in transit, they fail to protect data when it is in use. The IXUP platform uses advanced encryption and compute techniques including homomorphic encryption, that enables analytics over data without ever needing to decrypt it, preventing data from being vulnerable to loss and misuse.

To learn more, please visit: www.ixup.com. IXUP’s registered address is Level 3, 5-7 Ross Street, Parramatta NSW 2150.

Rule 4.7B

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

IXUP Ltd ABN Quarter ended (“current quarter”) 85 612 182 368 Mar-20

Consolidated statement of cash flows	Current quarter $A	Year to date (9 months) $A
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities	- - - (21,684) (82,348) (740,833) (251,160) - 1,761 (764) - - -	15,000 - - (135,701) (178,431) (2,512,767) (1,122,750) - 5,946 (2,323) - 932,782 -
	(1,095,027)	(2,998,244)
2. Cash flows from investing activities 2.1 Payments to acquire: (a) entities (b) businesses (c) property, plant and equipment (d) investments (Term Deposits with maturity of 3 months or greater) (e) intellectual property	- - - (875,000) -	- - (6,261) (875,000) -

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A	Year to date (9 months) $A
(f) other non-current assets 2.2 Proceeds from disposal of: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities		- - - - - - - - - -	- - - - - - - - - -
		(875,000)	(881,261)
3. Cash flows from financing activities 3.1 Proceeds from issues of equity securities (excluding convertible debt securities) 3.2 Proceeds from issue of convertible debt securities 3.3 Proceeds from exercise of options 3.4 Transaction costs related to issues of equity securities or convertible debt securities 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material) 3.10 Net cash from / (used in) financing activities		- - - (44,540) - - - - -	3,168,872 - - (282,542) - - - - -
		(44,540)	2,886,329
4. 4.1 4.2 4.3	Net increase / (decrease) in cash and cash equivalents for the period Cash and cash equivalents at beginning of period Net cash from / (used in) operating activities (item 1.9 above) Net cash from / (used in) investing activities (item 2.6 above)	3,026,586 (1,095,027) (875,000)	2,005,194 (2,998,244) (881,261)

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A	Year to date (9 months) $A
4.4 4.5 4.6	Net cash from / (used in) financing activities (item 3.10 above) Effect of movement in exchange rates on cash held Cash and cash equivalents at end of period	(44,540) -	2,886,329 -
		1,012,018 (Refer 5.5 (1))	1,012,018
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts		Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (Term Deposits maturing before 30 June 2020) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above) (1) As at 31 March 2020 IXUP has $1.125m in Term Deposits maturing after 30 June 2020. Total cash on hand, on call deposit and in term deposits at end of current quarter totals $2,137,018.		212,018 - - 800,000	3,026,586 - - -
		1,012,018 (Refer 5.5 (1))	3,026,586
6. Payments to related parties of the entity and their associates 6.1 Aggregate amount of payments to related parties and their associates included in item 1 6.2 Aggregate amount of payments to related parties and their associates included in item 2 Notes
			Current quarter $A
			(196,370)
			-

6.1 Directors, being related parties of the Company, were paid remuneration in the amount of $114k during the March quarter. Also $82k was paid during the quarter to related parties for rent and office services. No other related party payments were made.

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

7. Financing facilities Note: the term “facility’ includes all forms of financing arrangements available to the entity. Add notes as necessary for an understanding of the sources of finance available to the entity. Total facility amount at quarter end $A 7.1 Loan facilities - 7.2 Other (Term Deposits maturing after 30 June 2020, excluding $250k TD which secures facilities) 875,000 7.3 Other (Overdraft and credit card facilities) 250,000 7.4 Total financing facilities 1,125,000 7.5 Unused financing facilities available at quarter end	Total facility amount at quarter end $A	Amount drawn at quarter end $A
	-	-
	875,000	-
	250,000	-
	1,125,000	-
		1,125,000

• 7.6 Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

St George Bank Overdraft ($200,000) and Credit Card facility ($50,000) secured by Term Deposit of $250,000. St George Term Deposit $450,000, interest rate 1.38% p.a., maturity date 13/07/2020, unsecured. St George Term Deposit $425,000, interest rate 1.35% p.a., maturity date 17/08/2020, unsecured.

8.	Estimated cash available for future operating activities	$A
8.1 8.2 8.3 8.4 8.5	Net cash from / (used in) operating activities (Item 1.9) Cash and cash equivalents at quarter end (Item 4.6) Unused finance facilities available at quarter end (Item 7.5) Total available funding (Item 8.2 + Item 8.3) Estimated quarters of funding available (Item 8.4 divided by Item 8.1)	(1,095,027) 1,012,018 1,125,000 2,137,018
		1.95
8.6	If Item 8.5 is less than 2 quarters, please provide answers to the following questions: 1. Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?
	Answer: No, due to the economic effects of COVID-19, since 31 March 2020 IXUP Ltd has restructured and lowered its cost base from the actual results in the 31 March 2020 quarter.
	2. Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?
	Answer: N/A
	3. Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?
	Answer: Yes, IXUP Ltd has restructured and lowered its cost base from the actual results in the 31 March 2020 quarter.

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

30 April 2020 Date: ...................................................................................

By the board Authorised by: ...................................................................................

(Name of body or officer authorising release – see note 4)

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. If this report has been authorised for release to the market by your board of directors, you can insert here: “By the board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert here: “By the [ name of board committee – eg Audit and Risk Committee ]”. If it has been authorised for release to the market by a disclosure committee, you can insert here: “By the Disclosure Committee”.

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations , the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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