ETHERSTACK PLC — Interim / Quarterly Report 2020

Etherstack plc | Sydney (GMT+10) 93A Shepherd Street Chippendale, NSW 2008 Australia Email :[email protected] P : +61 2 8399 7500 F : +61 2 8399 7507

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24 August 2020 ASX Announcement

ETHERSTACK PLC [ASX:ESK]

("Etherstack" or the "Company")

Results for the half year 30 June 2020

Etherstack plc, the developer, manufacturer and licensee of mission critical radio technologies across the globe, is pleased to announce results for the half year ended 30 June 2020.

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All amounts are in USD 000.

Results Highlights

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• Revenue Growth: revenue is $2,405 up 40% on the prior corresponding period (“pcp”)

• Strong Positive Operating Cashflow: the Company generated $1,354 net cash from operating activities ($919 for the pcp)

• Strong EBITDA result: EBITDA for the half year is $829 (loss of $66 for the pcp)

• Underlying profit after tax for the period is $99 (2019 loss of $874). This result excludes a $2,383 Non cash Finance charge.

• Non Cash Finance charge: as a result of the sharp increase in the Company share price on 30 June 2020 the market value of the convertible note liability increased requiring the Company to recognise a Non Cash finance charge of $2,383. The conversion of the convertible notes on 30 June 2020 and 1 July 2020 results in an increase in issued capital of $3,592. Importantly, the 2 conversion transactions reduce debt and increase net assets by $1,209 . This item is further detailed in the Directors Report and in Note 6 to the financial statements.

Strategic Wins:

• Etherstack entered into a strategic multi-year Global Teaming Agreement with consumer electronics giant, Samsung, to deliver next generation Mission Critical Push To Talk (MCPTT) over LTE solutions.

• The Company has also won a material deal to supply digital radio network equipment to a resources sector customer in Western Australia.

Authorised for release by David Carter

Enquiries

Etherstack Walbrook Investor Relations David Carter, Chief Financial Officer Mr. Ben Knowles T: +61 2 8399 7500 T: +61 426 277 760 www.etherstack.com [email protected]

English Registered Company No. 7951056 | ARBN 156 640 532

London (GMT)

New York (GMT-5) P : +1 917 661 4110

[email protected]

Yokohama (GMT +9) P : +81 45 342 9050 [email protected]

P : +44 207 734 0200 [email protected]

Etherstack plc | Sydney (GMT+10) 93A Shepherd Street Chippendale, NSW 2008 Australia Email :[email protected] P : +61 2 8399 7500 F : +61 2 8399 7507

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About Etherstack plc (ASX:ESK):

Etherstack is a wireless technology company specialising in developing, manufacturing and licensing mission critical radio technologies for wireless equipment manufacturers and network operators around the globe. With a particular focus in the public safety, defence, utilities, transportation and resource sectors, Etherstack's technology and solutions can be found in radio communications equipment used in the most demanding situations. The company has R&D facilities in London, Sydney, New York and Yokohama.

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English Registered Company No. 7951056 | ARBN 156 640 532

Yokohama (GMT +9) P : +81 45 342 9050 [email protected]

London (GMT) P : +44 207 734 0200 [email protected]

New York (GMT-5) P : +1 917 661 4110 [email protected]

Etherstack plc and controlled entities

Appendix 4D

Half Year report under ASX listing Rule 4.2A.3 Half Year ended on 30 June 2020

ARBN 156 640 532 Previous Corresponding Period: Half Year ended on 30 June 2019

Dividends

There were no dividends declared or paid during the period (30 June 2019:$nil) and the Directors do not recommend any dividend be paid.

Explanation of Results

A detailed review and analysis of operations and financial results is set out within the Directors’ Report. The interim financial report for the half year ended 30 June 2020 dated 21 August 2020, forms part of and should be read in conjunction with this Half Year Report (Appendix 4D). The unaudited condensed consolidated financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union.

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David Deacon, Director 21 August 2020

AND CONTROLLED ENTITIES Etherstack plc

ARBN 156 640 532

INTERIM CONDENSED FINANCIAL REPORT FOR THE HALF YEAR ENDED 30 JUNE 2020

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Etherstack plc Interim Report 2020

CONTENTS

Etherstack is a wireless technology company specialising in licensing mission critical radio technologies to equipment manufacturers and network operators around the globe. With a particular focus in the public safety, defence, utilities, transportation and resource sectors, Etherstack's technology can be found in radio communications equipment used in the most demanding situations. The company has R&D facilities in London, Sydney, New York and Yokohama.

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Etherstack plc Interim Report 2020

DIRECTORS’ REPORT

The directors present the condensed consolidated interim financial report of Etherstack plc (“the Company” or “Etherstack”) and its controlled entities (together referred to as “the Group”) for the half year ended 30 June 2020. All amounts are in thousands of USD, unless otherwise specified.

Directors

The names of the Company’s directors in office during the half year and until the date of this report are set out below. Directors were in office for the entire period:

• Peter Stephens Non-Executive Chairman

• David Deacon Executive Director and Chief Executive Officer

• Paul Barnes Non-Executive Director

• Scott W Minehane Non-Executive Director

2020 First Half Highlights (USD $’000)

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• Revenue Growth: revenue for H1 2020, is $2,405, up 40% on the previous corresponding period (H1 2019), with a broad mix of equipment sales, support, technology licensing and royalty revenues.

• Strong Positive Operating Cashflow: the Company generated $1,354 net cash from operating activities for the half year and finished the half with $1,480 (~AU$2.0m) cash on hand.

• Strong EBITDA result: EBITDA for the half year is $829 (loss of $66 for the half year 30/06/2019).

• Strategic Wins: as previously announced in late June 2020, Etherstack entered into a strategic multi-year Global Teaming Agreement with consumer electronics giant, Samsung, to deliver next generation Mission Critical Push To Talk (MCPTT) over LTE solutions to telecommunications carriers and governments across the globe.

The Company has also won a material deal to supply digital radio network equipment to a resources sector customer in Western Australia.

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• Expansion Wins: the first half saw repeat business for the Company’s deployed large digital radio networks as used in the public safety and electric utilities industries, with material network expansion orders as previously announced.

• Recurring Revenue Growth: a combination of new and expansion orders continued to drive the Company’s recurring revenue growth from long term support revenue. This trend is expected to continue in the second half year of FY2020 and into FY2021 as additional networks and equipment is deployed.

• Debt Reduction through Convertible Note Conversion: On 30 June 2020 the Company issued 3,333,333 shares to convert Convertible Notes into fully paid ordinary share capital. On 1 July 2020 the Company issued a further 3,333,334 shares to convert Convertible Notes into fully paid ordinary share capital. By reducing debt, the effect of these conversions is to strengthen the Company’s net asset position.

• Reduced Borrowings: the Company continued to pay down other debt during the first half of FY2020

• Underlying profit after tax for the period is $99 (2019 loss of $874). This result excludes the $2,383 Non cash Finance charge. This item is further detailed below and in Note 6.

• 1 July 2020 Positive Net Assets: Underlying profit and debt reduction through Convertible Note conversion resulted in the Company in a positive net asset position of $680 on 1 July 2020, despite the non-cash Finance charge of $2,383 on 30 June 2020 as further detailed below and in Note 6.

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Etherstack plc Interim Report 2020

DIRECTORS’ REPORT Continued

Principal activities

The principal activities of the Group throughout the period were design, development and deployment of wireless communications software and products. The principal activity of Etherstack plc (the “Company”) is that of a holding company.

Etherstack has a substantial intellectual property portfolio that generates a diverse range of revenue from multiple technology areas and clients, and a mix of mature, new and emerging product lines. Etherstack derives revenues from:

• Mission critical radio network products; these products may carry Etherstack brands or be sold as “white labelled” equipment (where customer uses its own brand)

• Specialised communications equipment

• Technology licences and royalties

• System solution sales, where Etherstack sells its products and software and then provides ongoing support systems

• Customisation and Integration services; and

• Ongoing Support services.

Etherstack seeks to differentiate our Network offerings by:

• Focussing on specific industry sectors where our technology has a track record of uninterrupted performance

• Providing local support in North America, Asia and Europe with global back up

• Ongoing investment in developing new capabilities

Etherstack seeks to differentiate our Specialised Radio Product offerings by:

• Identifying and supplying market “gaps” where our products offer a competitive edge in terms of features, functions or price

• Leveraging small company agility to be first to market with innovative products – the Go Box and IVX products are current examples of this differentiation strategy.

Review of operations and financial results

The directors wish to draw attention to the following items which significantly impact the results for the half year to and the balance sheet as at 30 June 2020. These arise as a consequence of the sharp increase in the Etherstack share price on 30 June 2020 from AUD $0.12 to an intra-day high of AUD $2.00 and a closing price of AUD$1.75.

The net impact as a result of IFRS accounting standards and their application to the share price volatility and conversion of convertible notes saw the Company’s net assets decrease sharply on 30 June 2020 only to improve significantly the day following on 1 July 2020, resulting in an overall positive and improved net asset position.

Convertible note accounting and conversion into ordinary shares

While there are no changes to Etherstack IFRS-based accounting policies there is a significant increase in the amounts recognised under these policies as a consequence of the sharp increase in the share price on 30 June 2020.

• The initial impact is a non cash Finance charge of $2,383 and an increase in the convertible note liability of the same amount.

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Etherstack plc Interim Report 2020

DIRECTORS’ REPORT Continued

• On conversion of convertible notes on 30 June 2020, $1,792 of this liability is extinguished by the issue of shares.

• A second portion of this liability $1,800 is extinguished on 1 July 2020 by a second conversion of convertible notes and issue of ordinary shares.

The accounting concepts are detailed in Note 6 to the accounts.

The net effect of these transactions on the half year and 2020 year to date is:

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30 June 2020 1 July 2020 Year to date
half year 2020
Non Cash Finance (Charge)/Gain (2,383) - (2,383)
Liability extinguished 1,792 1,800 3,592
Shares issued – number 3,333,333 3,333,334 6,666,667
Share Capital issued 1,792 1,800 3,592
(Decrease)/Increase in Net assets (591) 1,800 1,209
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1 July 2020 summarised balance sheet

The two convertible note conversions have a significant impact on the balance sheet and the directors present below a summarised 1 July 2020 balance sheet which comprises the 30 June balance sheet and the 1 July convertible note conversion.

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30 June 2020 1 July 2020 pro forma
Non Current assets 3,220 3,220
Current assets 2,649 2,649
Total assets 5,869 5,869
Current Liabilities 4,681 4,681
Non Current Liabilities 2,300 508
Net (Liabilities)/Assets (1,112) 680
Shareholders Funds (1,112) 680
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Etherstack plc Interim Report 2020

DIRECTORS’ REPORT Continued

EBITDA and Underlying profit/(loss) after tax

The impact of the IFRS-based Convertible Note accounting is significant as shown in the reconciliation of Statutory profit/(loss) after to EBITDA and to Underlying profit/(loss) after tax. For comparative purposes, the non cash Finance charge recognised in H1 2019 was $10.

Revenues (USD$’000)

Revenues for the half year are $2,405 which is an increase of $687 or 40% from the prior half year.

The revenue increase is due to:

• Support revenue for first half of FY2020 grew 20% to $767 compared to $639 revenue for the first half of FY2019. This is attributable to growth in Etherstack’s installed support client base in particular from the network projects commissioned in 2018 and 2019 and follows 17.5% growth in these revenues in the first half of 2019. Growth in support revenues is particularly important as these revenues are not subject to the same volatility or timing risk as project revenues.

• Increased royalty revenues: royalty revenues for first half of FY2019 are $162 compared to $135 for the first half of FY2019 representing a 20% increase. The increase is due to increased sales achieved by licensed manufacturers

• Increased level of project activity in the first half of FY2020 relative to the first half of FY2019 resulting in project revenues of $1,476 compared to $944 for the first half of FY2019, a 56% increase. The nature of the Etherstack business means project revenues are driven by a small number of large contracts and can be volatile depending upon project activity within a particular period.

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Etherstack plc Interim Report 2020

DIRECTORS’ REPORT Continued

Cash flows

• Operating cash flows: Importantly, operating cash flows have improved from an inflow of $919 in FY2019 to an inflow of $1,354 for the first six months of FY2020. This is predominantly a reflection of higher revenues earned in FY2019 collected in 2020.

• Financing Cashflows : Strong operating cashflows have enabled repayments of borrowings to be made in the first half of FY2020 $212 (1st half FY 2019 $267).

• Investing cashflows: The Company has invested a further $483 (2019 $618) into our suite of intellectual property assets in developing new assets and enhancing existing assets.

The combination of these cashflows produces an increased cash balance of $1,480 (~A$2,000) at 30 June 2020 (30 June 2019 $24).

Future developments

As announced on 30 June 2020, The Group has entered a global teaming agreement with Samsung Electronics to deliver next generation Mission Critical Push To Talk (MCPTT) over LTE solutions to telecommunications carriers and governments across the globe, utilising Etherstack’s digital LMR (Land Mobile Radio) softswitching technologies embedded within Samsung’s advanced network solutions.

The Company looks forward to working with Samsung and generating significant revenues from the agreement as Samsung and Etherstack jointly supply technology to Samsung’s customers.

In addition, and as noted in previous Directors’ reports, the Group is continuing to take actions to improve cash generation and reduce revenue volatility by reducing dependence on large projects by:

• Developing products, especially tactical communications products, which can be sold separately from major network projects; and

• Increasing recurring revenues from support contracts and royalty arrangements.

Covid 19 impacts

Management and the Board of Directors are continuously monitoring the impact of Covid 19 on the business. In general, the impact on our business is expected to be at the lesser end of the range as:

• Alternative arrangements are being made for delivery of projects and to date effective workaround arrangements are in place for all projects in progress. Notwithstanding these current arrangements have been effective and Etherstack has engineers in Australia, North America, Europe and Japan, it is possible that an inability to travel or travel restrictions, will impact our ability and efficiency in the delivery of projects in the future.

• Our engineers and the broader Etherstack workforce already work from home regularly and the nature of the work, being software development, means the majority have transitioned to full time work from home with minimal impact upon productivity.

• Etherstack revenues may be negatively impacted if the Company or our suppliers are unable to procure components for some of our Tactical communications products or lead times become protracted.

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Etherstack plc Interim Report 2020

DIRECTORS’ REPORT Continued

• The impact of Covid 19 is inherently uncertain. As many of our projects are long term infrastructure projects often funded by governments or semi-government entities, with funding agreed, we are not expecting a significant impact on short term revenues although signing of certain new contracts could experience some delays. The outlook over the medium term is less certain however it is important to note that government stimulus spending on infrastructure projects and public safety in general may provide additional opportunities in the medium term.

Notwithstanding the above, a very high degree of caution will be exercised through this uncertain period. Management and the Board of Directors will continue to monitor the impact and take all necessary actions to protect the business and all stakeholders.

Rounding of amounts

Amounts in the Directors Report and the accompanying financial report have been rounded to the nearest thousand dollars, or in certain cases to the nearest dollar, unless otherwise expressly stated.

Signed in accordance with a resolution of the directors

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David Deacon, Director 21 August 2020

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Etherstack plc Interim Report 2020

Independent Auditor’s Review Report

To the members of Etherstack plc

We have reviewed the condensed set of financial statements in the half-yearly financial report of Etherstack plc for the six months ended 30 June 2020 which comprises the consolidated statement of comprehensive income, consolidated statement of financial position, consolidated statement of changes in equity, consolidated statement of cashflows and related notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company’s members, as a body, in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review 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 independent review 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 review work, for this report, or for the conclusion we have formed.

Directors’ responsibilities for the half-year financial report

The half yearly financial report is the responsibility of, and has been approved by, the directors.

As disclosed in Note 2, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report have been prepared in accordance with International Accounting Standard 34, Interim Financial Reporting as adopted by the European Union.

Our responsibility

Our responsibility is to express a conclusion on the condensed consolidated financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity'. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

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Independent Auditor’s Review Report - continued

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2020 is not prepared, in all material respects, in accordance with the accounting policies set out in Note 2, which comply with International Accounting Standard 34, Interim Financial Reporting as adopted by the European Union.

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Grant Thornton UK LLP

21 August 2020

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Etherstack plc Interim Report 2020

Consolidated Statement of Comprehensive Income For the period ended 30 June 2020

The results above relate to continuing operations.

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Etherstack plc Interim Report 2020

Consolidated Statement of Financial Position As at 30 June 2020

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Etherstack plc Interim Report 2020

Consolidated Statement of Changes in Equity For the period ended 30 June 2020

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Consolidated Statement of Cash Flows

For the period ended 30 June 2020

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Etherstack plc Interim Report 2020

Notes to the Condensed Consolidated Financial Statements

1. General information

Etherstack plc is a public company incorporated and domiciled in the United Kingdom under the Companies Act 2006. The registered office is 30-31 Friar Street Reading, Berkshire RG1 1DX, UK.

The condensed consolidated interim financial report of the Company as at and for the six months ended 30 June 2020 comprises the Company and its subsidiaries (together referred to as ‘the Group’). The principal activities of the Group throughout the period were design, development and deployment of wireless communications software and products. The principal activity of Etherstack plc (the “Company”) is that of a holding company. These financial statements are presented in US$ because the Group operates in international markets and the US$ provides the most comparable currency for peer companies. All amounts are in USD and $000 unless otherwise indicated.

2. Basis of preparation

The condensed consolidated interim financial report has been prepared in accordance with IAS 34 Interim Financial Reporting. Selected explanatory notes are included to explain events and transactions that are significant to gain an understanding of the changes in the financial position and performance of the Group since the last annual consolidated financial statements as at and for the year ended 31 December 2019.

This condensed consolidated interim financial report does not include all the information required for full financial statements prepared in accordance with International Financial Reporting Standards, (IFRS) as adopted by the European Union and should be read in conjunction with the consolidated financial statements at 31 December 2019. The condensed consolidated financial statements were authorised for issue in accordance with a resolution of the Directors on 21 August 2020.

2.1 Going concern

Management have considered the trading performance of the Group including underlying trends and expectations, which forms the basis of the Group’s current forecasts. The forecasts, which are stress tested for potential future influences and events, in addition to the resources available to the Group and the agreement of the Directors agreeing not to seek repayment of Director loans beyond the ability of the company to make the repayments, lead management to believe that the Group will continue for the foreseeable future for a period of not less than 12 months from date of approval of accounts.

2.2 Financial reporting period

The interim financial information for the period from 1 January 2020 to 30 June 2020 is unaudited. In the opinion of the Directors, the interim financial information for the period presents fairly the financial position, and results from operations and cash flows for the period in accordance with IAS 34. The accounts incorporate comparative figures for the interim period 1 January 2019 to 30 June 2019 and the audited financial year to 31 December 2019. The financial information contained in this interim report does not constitute statutory accounts as defined by section 435 of the Companies Act 2006.

The comparatives for the full year ended 31 December 2019 are not the Company’s full statutory accounts for that year. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditor’s report on those accounts was unqualified, but included a reference to going concern issues, which the auditors drew attention to, by way of an explanatory paragraph, without modifying their report.

3. Judgements and estimates

The preparation of these condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these condensed consolidated interim financial statements the significant judgements made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements for the year ended 31 December 2019, except as otherwise noted in Note 6.

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Etherstack plc Interim Report 2020

Notes to the Condensed Consolidated Financial Statements

4. Significant accounting policies

The accounting policies applied by the Group in this condensed consolidated interim financial report are the same as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2019.

5. Intangible assets

Intangible assets comprise costs incurred on the development of specific products that meet the criteria set out in IAS 38 Intangible Assets. The amortisation period for development costs incurred on the Group’s intellectual property developments is over the useful life estimate of 3 to 6 years or over the estimated delivery model, whichever is shorter. Amortisation does not take place until the asset is fully completed. Engineering software is amortised over its expected useful life of 5 years.

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Etherstack plc Interim Report 2020

Notes to the Condensed Consolidated Financial Statements

At 30 June 2020 there were 3,832,711 convertible notes on issue. The Convertible Notes shall convert into ordinary fully paid shares in the capital of Etherstack plc at a conversion price of AUD$0.30. The Notes are Convertible at the note holders’ option at any time prior to maturity on 27 August 2021 and bear interest at 8%.

Fair Value

The conversion rights attached to the convertible notes represent an embedded derivative and is the only financial liability measured at fair value. This financial liability as at 30 June 2020 is $1,406 (30 June 2019: $43). Derivative financial instruments are valued using internal models. The fair values are determined using option pricing models (Black Scholes), which use various inputs including current market prices for underlying instruments, time to expiry, current rates of return and volatility of underlying instruments. Prices are sourced from quoted market prices. Such instruments are classified within Level 3 valuation technique.

For all other financial assets and liabilities the fair value is not materially different to book value.

Significant transactions recognised on 30 June 2020 and 1 July 2020

While there are no changes to Etherstack accounting policies there is a significant increase in the amounts recognised under these policies as a consequence of the sharp increase in the share price on 30 June 2020 from AUD $0.12 to an intra-day high of AUD $ 2.00 and a closing price of AUD$1.75.

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Etherstack plc Interim Report 2020

Notes to the Condensed Consolidated Financial Statements

International Financial Reporting Standards (“IFRS”) consider convertible notes to be a compound instrument comprising a loan (the host contract) and an option (an embedded derivative) for the noteholder to acquire Etherstack equity. The embedded derivative is recognised as a liability at its market value determined using a Black Scholes valuation.

Two key inputs into the Black Scholes valuation are:

• the market price of the shares; In determining the appropriate market price of the shares to be included in the valuation, trading over the period 30 June 2020 to 2 July 2020 has been excluded on this basis that prices in this period were not sustained for more than 3 days and are considered to be an extreme/unusual trading pattern. Accordingly, these prices do not represent an appropriate market price for inclusion in the valuation. A market value of AUD $0.7665 based on trading after 3 July 2020 is considered the appropriate and orderly market price for use in the valuation; and

• the option strike price of AUD $0.30.

As a consequence of the sharply increased share price used in the valuation from AUD $0.255 at 31 December to AUD 0.7665 cents as at 30 June 2020 , the market value of the embedded derivative increased. Under IFRS, Etherstack recognises a finance charge equal to the increase in the valuation of the embedded derivative and as a result Etherstack has recognised a Noncash finance charge of USD $2,383 in half year (2019 $10).

30 June 2020 Convertible note conversion

As 3,333,333 convertible notes were converted into ordinary shares on 30 June 2020, there is a second significant transaction recognised on that date. On conversion of these notes, the liability for the host contract and embedded derivative is extinguished by the issue of 3,333,333 fully paid shares. The value assigned to the issue of shares is equal to the value of the liability for the host contract and embedded derivative. On 30 June 2020, Etherstack extinguished a liability of USD $1,792 and issued 3,333,333 shares for USD $1,792.

1 July 2020 Convertible note conversion

Post balance date, a further 3,333,334 convertible notes were converted into ordinary shares. Again, the value assigned to the issue of shares is equal to the value of the liability for the host contract and embedded derivative. On 1 July 2020, Etherstack extinguished a liability of USD $1,800 and issued 3,333,334 shares for $1,800.

The net effect of these transactions on the half year and 2020 year to date is:

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30 June 2020 1 July 2020 Year to date
half year 2020
Non Cash Finance (Charge) (2,383) - (2,383)
Liability extinguished 1,792 1,800 3,592
Shares issued – number 3,333,333 3,333,334 6,666,667
Share Capital issued 1,792 1,800 3,592
(Decrease)/Increase in Net assets (591) 1,800 1,209
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Etherstack plc Interim Report 2020

Notes to the Condensed Consolidated Financial Statements

7. Related party transactions

Balances and transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in these financial statements.

David Deacon is a director of the company. During the half year:

• Net advances of $3 were made to the company being the deferral of salary.

• Interest accrued in the period is nil.

At 30 June 2020, $158 remains owing to David Deacon. The loan amount due being $158 (31 December 2019 $187) represented by deferred wages and expenses is unsecured, not subject to specific repayment terms and interest free.

Paul Barnes is a director of the company. During the half year:

• Interest of $2 was accrued for the half year.

• No loans were advanced by the deferral of salary payments and expenses.

At 30 June 2020, USD $281 (31 December 2019 $281) is owing to Paul Barnes. The loan of $22 is unsecured, not subject to specific repayment terms and bears interest at 10% pa. The remainder of the amount due being $259 represented by deferred wages and expenses is unsecured, not subject to specific repayment terms and interest free.

Peter Stephens is a director of the company. During the half year:

• Interest of $36 (30 June 2019 $48) was accrued for the half year and $43 repayments were made.

• Loans of $Nil (30 June 2019 $17) were advanced by the deferral of salary payments and expenses.

At 30 June 2020, $956 (31 December 2018 $1,017) is owing to Peter Stephens. The loan of $399 is unsecured, not subject to specific repayment terms and bears interest is at 10% pa. The remainder of the amount due being $557 represented by deferred wages and expenses is unsecured, not subject to specific repayment terms and interest free.

8. Subsequent Events

As set out in Note 6, on 1 July 2020, 3,333,334 convertible notes were converted into ordinary shares. On this date, Etherstack extinguished a liability of USD $1,800 and issued 3,333,334 shares for $1,800.

The Directirs report includes a pro-forma balance sheet on 1 July which includes the conversion and share issue. The net asset position shown by the pro forma balace sheet is a positive net asset position of $680.

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Etherstack plc Interim Report 2020

Directors’ Declaration

In the opinion of the Directors:

• (a) The financial statements and notes set out on pages 10 to 18 :

(i) comply with Accounting Standard IAS 34 Interim Financial Reporting

• (ii) give a true and fair view of the consolidated entity’s financial position as at 30 June 2020 and of its performance for the six months ended on that date; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of Directors.

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David Deacon Director

21 August 2020

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Corporate Information

Company Registration No. 7951056

ARBN 156 640 532

Directors

Peter Stephens (Non-Executive Chairman) David Deacon (Executive Director and Chief Executive Officer) Paul Barnes FCCA (Non-Executive Director) Scott W. Minehane (Non-Executive Director)

Company Secretaries

Paul Barnes FCCA (United Kingdom) David Carter (Australia)

United Kingdom Registered Office

30-31 Friar Street Reading Berkshire RG1 1DX United Kingdom

Australian Registered Office

93 A Shepherd Street Chippendale, NSW, 2008 Australia

Auditor

Grant Thornton UK LLP Statutory Auditor Cambridge, United Kingdom

Stock Exchange Listing

Australian Securities Exchange (Code: ESK)

Share Registrars

Computershare Investor Services Pty Limited

452 Johnston Street Abbotsford, VIC, 3067 Australia

Computershare Investor Services plc

The Pavilions, Bridgwater Road Bristol BS99 6ZY United Kingdom

Website

www.etherstack.com

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