DATAWORKS GROUP LIMITED — Interim / Quarterly Report 2021

Jan 31, 2021

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31 January 2021

IXUP Second Quarter FY21 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 second quarter ended 31 December 2020 ( Q2 ).

Q2 Highlights

• Successful $5.75 million capital raising (before costs), fully underwritten by Cygnet Capital

• Appointment of new Non-Executive Chairman – Julian Babarczy

• Appointment of new Managing Director/CEO – Marcus Gracey

• Strategic Collaboration with Tekkorp Capital to assess opportunities within the international digital gaming and wagering sector

• New initiatives with potential customers/partners utilising IXUP’s core data analytics technology being pursued, with a focus on opportunities within the international gaming and wagering sector as well as the international sports marketing and sports sponsorship sectors

• Continued building of the opportunity pipeline for IXUP technology.

• Release of platform update version 4.1 – extending capabilities and features and reducing operating costs.

Corporate

• Successful $5.75 million capital raising placement

During the quarter the Company completed its equity capital raising led by Cygnet Capital Pty Ltd. Placement proceeds are being used to accelerate the commercialisation of IXUP’s proprietary platform and position the Company to peruse an extension of its existing encrypted data analytics business.

Appointment of new Non-Executive Chairman

The Company announced on 11 November 2020 that Mr. Julian Babarczy was appointed as NonExecutive Chairman following the resignation of Grant Paterson.

Mr. Babarczy brings over 20 years finance and investment industry experience to the IXUP Board, having spent almost two-thirds of his career as a key member of the portfolio and leadership team of Australian hedge fund, Regal Funds Management (Regal). Regal has been a long-term shareholder in IXUP. Mr. Babarczy undertook a range of roles during his tenure at Regal, including Analyst & Portfolio Manager and Head of Australian Equities, and was responsible for investments across a range of sectors, in both listed and unlisted companies. Mr. Babarczy brings a

unique set of skills to the IXUP board, possessing a deep and trusted network spanning the Australian financial industry, as well as a depth of experience in investing and funding high growth companies. Mr Babarczy holds a Bachelor of Business degree from Monash University, among other qualifications. Mr. Babarczy is also currently a director of several public and private Australian companies in various high growths sectors.

Mr. Babarczy provides a further strengthening of the IXUP Board and adds to the recent appointment of Mr. Marcus Gracey. The timing of an enhanced board with significant commercial and capital markets experience coincides with what IXUP believes will be a rapid phase of growth for the company and ultimately the creation of strong shareholder value.

Appointment of new Managing Director/CEO

The Company also announced on 11 November 2020 that following the appointment of Mr. Marcus Gracey as an Executive Director on 22 October 2020, the Board agreed to appoint Mr. Gracey as Chief Executive Officer and Managing Director of the Company effective 11 November 2020.

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Mr. Gracey is an experienced corporate and legal executive with a diverse professional background in technology commercialisation, innovation, law and business with demonstrated experience that spans numerous industries, sectors and countries. Mr. Gracey’s previous roles and responsibilities have included regional and global positions in addition to having significant experience as a professional public company director and governance professional. Mr. Gracey’s sector experience includes gaming and wagering; gaming technologies; robotic; software; energy and resources; construction technologies; legal; litigation financing and prosecutions; e-commerce; consumer goods; action sports; fashion; media; and defence.

Strategic Collaborations

Tekkorp Capital LLC

Consistent with the Company’s expanded industry focus for its technology within the global digital gaming and wagering sector, IXUP announced on 11 November 2020 that it had executed a Strategic Collaboration Agreement ( Agreement ) with Tekkorp Capital LLC ( Tekkorp Capital ), a US-based digital gaming company founded by Mr. Matthew Davey. Tekkorp Capital provides specialist advisory services in relation to the international digital sports gaming and wagering sector and pursuant to the Agreement, Tekkorp Capital was engaged to provide sector specific services to IXUP, that included the following:

• Identification and assessment of applications and opportunities for the Company’s core technology;

• Formulation of strategy and facilitation of strategic meetings with industry stakeholders and participants in order to assess and progress identified opportunities; and

• Identification, assessment and recommendation of complementary technologies, partnerships, commercial opportunities and products (including consumer facing products) that align with IXUP’s technology, operations and growth strategy.

Since executing the Agreement, and consistent with its objectives, IXUP and Tekkorp Capital have taken significant steps to progress the assessment of various opportunities for IXUP’s technology within the international digital sports gaming and wagering sector. In this regard, IXUP and Tekkorp Capital are presently progressing a number of industry level consultations and discussions in relation to potential opportunities for IXUP’s technology in addition to associated opportunities presented as a result of the Tekkorp Capital relationship.

New Initiatives in the International Digital Sports Gaming and Wagering Sector & Sports

Marketing and Sponsorship Sectors

During the quarter, IXUP has been actively pursuing potential new global customer/partner initiatives that would utilise IXUP’s core data analytics technology, with a focus on opportunities within the international digital sports gaming and wagering, sports marketing and sports sponsorship sectors. These sectors are considered a prime focus of the Company due to the large number of potential identified use cases of IXUP’s core data analytics technology. These sectors also reflect high growth rates underpinned by the deregulation of the US sports betting sector and the increase in gaming and wagering activity during global lockdowns and work from home scenarios, which is expected to continue into the future.

While IXUP has identified a number of specific near-term potential use cases and partners that are being actively pursued, the commercial outcome of these discussions remains uncertain. IXUP will update the market when and if these discussions progress to a stage that warrants disclosure.

Market Opportunity Pipeline

During the quarter the Company continued to work with its channel partners to extend the sales pipeline opportunities in new sectors, including health and the government sector.

Technology and Product

IXUP has successfully completed a significant upgrade of its technology platform through the development of its custom column-based data storage and retrieval mechanism that has significantly improved its performance and scalability while reducing the operating costs by 90%. Incremental

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improvements to the overall useability of the platform based on client feedback were also included in this upgrade.

Financial Update

In line with expectations, net cash outflows from operations were $0.62 million for the quarter. The material expense items of Staff Costs and Administration & Corporate Costs, being $0.33 million and $0.35 million respectively, were proportionally in line with the prior period run rate.

During the quarter $27k in JobKeeper Wage Subsidy, $12.5k Government cash flow boost and a $47k Export Market Development Grant was received.

Including the capital raising (net of transaction costs) totalling $5.34 million and realisation of net term deposits of $0.33 million, the Company completed the quarter with cash and term deposits (with less than 3 months maturity) of $9.2 million. In addition, the Company held one term deposit (with greater than 3 months maturity) of $0.1 million.

Directors, being related parties of the Company, were paid remuneration in the amount of $19k during the June quarter. In addition, $16k was paid during the quarter to related parties for rent and office services. No other related party payments were made.

The Board and management remain focussed on disciplined cash management and tightening of operational expenses to position IXUP to capitalise on opportunities and deliver growth.

During the quarter, the Company lodged its 2019-20 R&D claim. In January 2021, the company received a rebate from the Australian Tax Office under the R&D tax incentive program of $0.56 million related to the costs of research and development during the 2020 financial year. For clarity, this refund is not included in the December 2020 quarter Appendix 4C.

-ENDS-

Enquiries: Marcus Gracey, IXUP Tel: +61 407 069 011 marcus.gracey@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 Dec-20

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter	Year to date (6
		$A	months)
			$A
1.	Cash flows from operating activities
1.1	Receipts from customers	750	45,950
1.2	Payments for
	(a) research and development	-	-
	(b) product manufacturing and operating	-	-
	costs
	(c) advertising and marketing	(7,701)	(7,701)
	(d) leased assets	(16,444)	(32,889)
	(e) staff costs	(336,764)	(628,733)
	(f) administration and corporate costs	(342,398)	(617,468)
1.3	Dividends received (see note 3)	-	-
1.4	Interest received	1,106	6,931
1.5	Interest and other costs of finance paid	(873)	(1,617)
1.6	Income taxes paid	-	-
1.7	Government grants and tax incentives	86,656	232,156
	(JobKeepers Rebate and Cash Boost)
1.8	Other (provide details if material)	-	-
1.9	Net cash from / (used in) operating	(615,668)	(1,003,371)
	activities
2.	Cash flows from investing activities
2.1	Payments to acquire or for:
	(a) entities	-	-
	(b) businesses	-	-
	(c) property, plant and equipment	-	-
	(d) investments (Term Deposits with	(550,000)	(975,000)
	maturity of 3 months or greater)
	(e) intellectual property	-	-

ASX Listing Rules Appendix 4C (17/07/20) + 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	Year to date (6
		$A	months)
			$A
	(f) other non-current assets	-	-
2.2	Proceeds from disposal of:
	(a) entities	-	-
	(b) businesses	-	-
	(c) property, plant and equipment	600	1,240
	(d) investments (Term Deposits with	875,000	875,000
	maturity of 3 months or greater
	realised during quarter)
	(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	325,600	(98,760)
	activities
3.	Cash flows from financing activities
3.1	Proceeds from issues of equity securities
	(excluding convertible debt securities)	5,750,000	9,478,402
3.2	Proceeds from issue of convertible debt	-	-
	securities
3.3	Proceeds from exercise of options	-	-
3.4	Transaction costs related to issues of	(409,507)	(704,049)
	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	5,340,493	8,774,353
	activities
4.	Net increase / (decrease) in cash and
	cash equivalents for the period
4.1	Cash and cash equivalents at beginning of
	period	4,159,162	1,537,365
4.2	Net cash from / (used in) operating	(615,668)	(1,003,371)
	activities (item 1.9 above)

ASX Listing Rules Appendix 4C (17/07/20) + 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	Year to date (6
		$A	months)
			$A
4.3	Net cash from / (used in) investing activities	325,600	(98,760)
	(item 2.6 above)
4.4	Net cash from / (used in) financing activities	5,340,493	8,774,353
	(item 3.10 above)
4.5	Effect of movement in exchange rates on	-	-
	cash held
4.6	Cash and cash equivalents at end of	9,209,587	9,209,587
	period
5.	Reconciliation of cash and cash	Current quarter	Previous quarter
	equivalents	$A	$A
	at the end of the quarter (as shown in the
	consolidated statement of cash flows) to the
	related items in the accounts
5.1	Bank balances	8,334,587	3,454,247
5.2	Call deposits	-	-
5.3	Bank overdrafts	-	-
5.4	Other (Term Deposits maturing before 31	875,000	704,915
	March 2021)
5.5	Cash and cash equivalents at end of	9,209,587	4,159,162
	quarter (should equal item 4.6 above).
	As at 31 December 2020 IXUP has $100k
	in Term Deposits maturing 08/07/2021.
	Total cash on hand, on call deposit and in
	term deposits at end of current quarter
	totals $ 9,309,587
6.	Payments to related parties of the entity and their		Current quarter
	associates		$A
6.1	Aggregate amount of payments to related parties and their		(35,306)
	associates included in item 1
6.2	Aggregate amount of payments to related parties and their		-
	associates included in item 2
Notes

6.1 Directors, being related parties of the Company, were paid remuneration in the amount of $19k during the December quarter. Also $16k 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 (17/07/20) + 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 Total facility	Amount drawn at
	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. amount at quarter end $A	quarter end $A
7.1	Loan facilities -	-
7.2	Credit standby arrangements -	-
7.3	Other (Term Deposits maturing after 31 100,000	-
	March 2021)
7.4	Total financing facilities 100,000	-
7.5	Unused financing facilities available at quarter end	100,000.00
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 Term Deposit $100,000, interest rate 0.35% p.a., maturity date 08/07/2021,
	unsecured.
8.	Estimated cash available for future operating activities	$A
8.1	Net cash from / (used in) operating activities (item 1.9)	(615,668)
8.2	Cash and cash equivalents at quarter end (item 4.6)	9,209,587
8.3	Unused finance facilities available at quarter end (item 7.5)	100,000
8.4	Total available funding (item 8.2 + item 8.3)	9,309,587
8.5	Estimated quarters of funding available (item 8.4 divided by item 8.1)	15.12
	Note: if the entity has reported positive net operating cash flows in item 1.9, answer item 8.5 as “N/A”. Otherwise, a
	figure for the estimated quarters of funding available must be included in item 8.5.
8.6	If item 8.5 is less than 2 quarters, please provide answers to the following questions:
	8.6.1 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:
	N/A
	8.6.2 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
	8.6.3 Does the entity expect to be able to continue its operations and to meet its business
	objectives and, if so, on what basis?
	Answer:
	N/A
	Note: where item 8.5 is less than 2 quarters, all of questions 8.6.1, 8.6.2 and 8.6.3 above must be answered.

ASX Listing Rules Appendix 4C (17/07/20) + 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.

31 January 2021

Date: ...................................................................................

Authorised by: ....By the Board...........................................................

(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 (17/07/20) + See chapter 19 of the ASX Listing Rules for defined terms.

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