MACH7 TECHNOLOGIES LIMITED — Annual Report 2013

Sep 1, 2013

Safety Medical Products Limited ABN 26 007 817 192

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

			2013
Results for announcement to market	Up / Down	% Change	$
Revenue from ordinary activities	Down	78%	15,939
Loss after tax from ordinary activities attributable to	Up	122%	(938,813)
members
Loss attributable to members	Up	122%	(938,813)

	Amount	Franked Amount
Dividend Information	per share	per share
Dividend – current reporting period	Nil	Nil
Dividend – previous reporting period	Nil	Nil

Net Tangible Asset Backing per Ordinary Share	cents
Net tangible asset backing per ordinary share – current reporting period Net tangible asset backing per ordinary share – previous reporting period	0.12 0.35

Commentary on the Results for the Period

The loss for the year comprises working capital expenditure throughout the year. It also includes costs spent on the Three Rivers project, which was subsequently written off in the current year as the Company did not wish to proceed with the acquisition.

Audit

This Preliminary Final Report is based on the Annual Financial Report which is in the process of being audited.

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Stephen Hewitt-Dutton

Director

Dated at Perth this 30[th] day of August 2013.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Principal activities and review of operations

During the year, the Company disposed of all patents except in the key market of Australia and will continue to maintain the key patent associated with the Secure Touch syringe.

On 2 May 2013, the Company entered into a Share Sale and Purchase Agreement to acquire Kisara Gold Pty Ltd (“Kisara”), an Australian unlisted company, and its wholly owned Brazilian subsidiary Mineração Caiçara Ltda (“Caiçara”). The transaction provides the company access to various exploration tenements in the State of Bahia, Brazil. The tenements provide for three separate projects, Silvina Farm, Itapicuru Norte and Cristais. The latter two overlay greenstone belts and are considered prospective for gold due to the existence of gareimperos workings. Details of each of the project areas is provided below. The terms of the Agreement include issue of Ordinary and Performance shares upon the satisfaction of each milestone as detailed below:

Milestone	Performance Shares	OrdinaryShares
Vendor Equity		120,000,000
Milestone 1- A JORC compliant Inferred Mineral Resource of 1 million oz at 1.8g/t Au Eq	90,000,000
Milestone 2- A JORC compliant Inferred Mineral Resource of 1.5 million oz at 1.7g/t Au Eq	90,000,000
Milestone 3- A JORC compliant Inferred Mineral Resource of 2 million oz at 1.7g/t Au Eq	60,000,000
Total	240,000,000	120,000,000

NB – The Performance Shares noted above entitle the holder to acquire one share for every performance right held and will be subject to approval by the ASX.

Silvina Gold Project

The Silvina Gold Project, which includes the Silvina Farm lease, 6 adjoining exploration leases and a further 2 exploration lease applications, is located in the region of Rio de Contas, situated in southcentral portion of the Chapada Diamantina (see Figures 1 and 2). This part of Chapada Diamantina is known for hosting several types of gold mineralisation.

The Project was acquired through a Government Tender process conducted by CBPM, Companhia Baiana de Pesquisa Mineral. CBPM is an exploration company wholly owned by the state government of Bahia, established in the 1970s to promote mineral development in the state.

Silvina is a prospective gold property located in the southern portion of the São Francisco Craton in Bahia State, Brazil and has seen limited exploration work since the 1970s. The main target at Silvina is an outcropping gold-bearing quartz vein observed to be 370m long and up to 40m wide. The vein is hosted by a diabase dyke which has intruded what appears to be a regional scale shear structure. There is evidence to suggest this structure continues for several kilometres. Caiçara has staked additional claims along the strike of this feature though claim boundaries must be field checked to determine the length of this structure contained within the Caiçara leases. Artisanal mining has won gold from alluvial and eluvial sources close to outcrop and coarse gold has been observed in chip samples from within up to 30m of underground workings on the vein.

A technical review of the project highlighted that the work done by CBPM covered only a small part of the project area. The review also highlighted the existence of the quartz veining and historic mines, noting that the area has the potential to host gold deposits. During the Due Diligence process the Company will be given fuller access to the historical geological information regarding the Silvina Gold Project and will update the market in relation to such information.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Figure 1 - Location of the Silvina Gold Project

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Figure 2 – Tenement map

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Itapicuru Norte Gold Project

The property is composed of two mostly contiguous groups of claims overlying prospective stratigraphy in the northern portion of the Rio Itapicuru Greenstone Belt (“RIGB”). The RIGB is an economically significant sequence within a paleoproterozoic aged granite-greenstone terrane and comprises part of the Serrhina Block, one of four Achaean-aged crustal segments which collectively make up the basement of the Sao Francisco Craton, north-eastern Brazil.

The belt itself represents a low-grade metamorphic sequence of mafic to intermediate volcanic and sedimentary rocks. The entire belt measures roughly 180km long, 30km wide and has been divided into three general lithostratigraphic units by previous workers, a basal mafic volcanic unit, an intermediate to felsic volcanic unit and a metasedimentary unit.

The Deixaí group of claims includes roughly 16km of strike along greenstones on the western side of the RIGB. Deixai has been subject to a greater amount of historical work than the Tarugao block underlain primarily by metamorphosed mafic volcanics and lesser proportions of metasedimentary rocks.

Gold mineralisation at Deixai is associated with shear hosted quartz veins ranging up to 1.5m wide within carbonate altered wall rocks. Host rocks in the western portion of the Deixai block are often sheared, altered meta-gabbros. Mineralisation is found on the eastern side of Deixai within sheared metasediments including meta-pelites and meta-cherts. Gold grades in old workings are reportedly highest within smoky quartz veins and in silicified wallrock. Reported mineralised widths indicated by RC drilling in the 1990s range up to 32m (DRC16, approx 24m true width) of shear hosted quartz veins and veinlets.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Figure 3: Norte Location

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Figure 4 – CBPM Claims and Underlying Geology Deixaí block (West) and Tarugão (East)

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

The setting of Itapicuru Norte may be compared to that of Yamana Gold’s Fazenda Brasileiro mine and the C1 Santa Luz mine-in-development, both located within the RIGB. Fazenda Brasileiro is located on the Weber belt, trending east-west at the RIGB’s southern end. First mined in the early 1980s, Fazenda Brasileiro Gold Mine is some 80km south-east of the garimpo workings on Deixai block. The mine has been operating for over 20 years and has produced well over 1 milion ounces of gold to date and has consistently replaced its mineral reserves as they have been mined. As at December 31[st] , 2011, the mine held 359,000 oz Au proven & probable reserves at 2.42 g/t Au and 153,000 oz Au measured & indicated resources at 1.91 g/t Au. In 2011 the mine produced 55,163 oz Au at an average cash cost of $937 per oz as an underground operation. (Source – www.yamana.com).

The C1 Santa Luz project is being developed on a series of gold deposits and is scheduled to begin production in early 2013. C1 Santa Luz is composed of a series of structurally controlled deposits within carbonaceous metasediments of the RIGB, associated with small porphyritic dacite intrusions. These deposits are located some 30km south of Deixai. Yamana is planning to produce +100,000oz Au each year over an initial planned mine life of 10 years and currently boasts 1,460,000 oz Au proven & probable reserves at 1.49 g/t Au and 476,000 oz Au measured & indicated resources at 2.53 g/t Au. (source www.yamana.com)

Construction of a second mine within the RIGB reinforces the belt’s mineral potential. Yamana continues to drill aggressively in-mine and near-mine; in 2011 the company completed over 38,000m in diamond drilling at Fazenda Brasileiro, resulting in an increase of the mine’s mineral reserves by 104%.

Safety Medical and Minerãçao Caiçara are currently finalising plans for the 2013 exploration programme which will include airborne magnetic and EM survey and surface reconnaissance trenching and soil sampling. A first pass diamond drill programme totalling 2,500m in 16 holes has been programmed for completion during the first phase of work in order to test four of the most promising prospects while reconnaissance fieldwork and target generation activities are underway.

There are numerous active and historically worked garimpos at Norte. It has been lightly explored since 1986 by Companhia Baiana de Pesquisa Mineral (CBPM), then Barrick Mining in Brazil Ltda and subsequently Marubeni Brazil S.A. The combined work of these companies consists of soil sampling, trenching and limited drilling, with the vast majority of the work to date focussed on the Deixai Block.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Figure 5: Norte tenements on the Rio Itapicuru Greenstone Belt

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Notes to Figure 3:

1. The Norte award to Caiçara is limited to the Deixai and Taurago blocks as identified in blue circles and arrowed. There is a series of tenements identified in yellow to the west of Deixai and Taurago that are owned and controlled by CBPM but are not part of the Norte award.

2. Caiçara have also pegged ground to the north of Deixai and Taurago on the RIGB. These tenements will ultimately form part of the tenement package controlled by Safety Medical once they have been granted.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Cristais Project

The Cristais property is located approximately 430km west of Salvador in the State of Bahia, 35km northwest of the regional centre of Paramirim. The property is easily accessed by sealed roads to the claim boundaries and then by well-formed dirt tracks.

Figure 1: Cristais Location

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Cristais property covers roughly 9,840 hectares in fifteen mostly contiguous claim blocks all owned by CBPM.

The property is composed of fifteen mineral exploration claims overlying prospective stratigraphy within the “Cristais” (Crystals) unit, a geological unit within the Archaean aged Boquira complex. This complex occurs as a series of greenstone lenses within high-grade metamorphic rocks of the Paleoproterozoic Paramirim mobile belt located in central São Francisco craton, Bahia.

Rocks within the Cristais unit represent a greenschist-amphibolite facies metamorphosed volcanosedimentary sequence demonstrating considerable hydrothermal alteration, often in the form of tourmaline alteration. The greenstone sequence is elongate, north-south trending and bounded by sheared contacts with high grade metamorphic rocks.

Historical exploration on the belt was undertaken in the early 1980s. Many of the data have been lost although reports compiled by CBPM indicate previous explorers completed a programme of bulldozer and hand trenching, soil sampling and geological mapping as well as completion of diamond drilling. The drilling in the vicinity of the intensive bulldozer trenching still visible today, reportedly returned anomalous gold values from silicified sheared greenstones.

CBPM compilation work to date has identified three multi-element base metal soil anomalies in the northern portion of the property.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Three Rivers – Western Australia

During the prior year, the Company negotiated and finalised an option agreement to acquire tenements in the Three Rivers Area of north Western Australia from Brutus Constructions Pty Ltd. The option to acquire the project was allowed to lapse on 31st January 2013 as the Company did not wish to proceed with the acquisition.

Operating and financial review

The Statement of Profit or Loss and Other Comprehensive Income shows a net loss attributable to members of $938,813 compared with a loss of $423,674 for the previous period.

The Statement of Financial Position shows a decrease in net assets from $1,407,326 to net assets of $468,513.

The movement is largely due to the fact that costs spent on the Three Rivers project, which was subsequently written off in the current year as the Company did not wish to proceed with the acquisition. These amounts were recognised as deferred acquisition costs previously in the Statement of Financial Position.

Dividends

No dividends have been paid or declared by the Company to members since the end of the previous financial year.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Safety Medical Products Limited Statement of Profit or Loss and Other Comprehensive Income For the year ended 30 June 2013

Note	2013 $ 2012 $
Revenue Cost of sales Gross profit Other income Business development, marketing & intellectual property expenses Accounting and audit fees Directors’ and company secretarial fees Legal fees Consultancy and corporate advisors Administrative expenses Impairment of deferred acquisition costs 1 Other expenses Results from operating activities Financial income Financial expense Profit/(loss) before tax Income tax (expense)/benefit Profit/(loss) after tax from continuing operations Profit/(loss) from discontinued operations Profit/(loss) for the year Other comprehensive income Total comprehensive loss for the year Earnings per share Basic earnings per share (cents) 2	- - - -
	- - 2,492 - (15,522) (11,986) (62,537) (67,967) (160,000) (160,000) (82,325) (11,883) (223,379) (168,718) (53,706) (75,045) (330,000) - (26,836) -
	(951,813) (495,599) 13,447 72,454 (447) (529)
	(938,813) (423,674) - -
	(938,813) (423,674) - -
	(938,813) (423,674) - -
	(938,813) (423,674)
	(0.2) (0.1)

The statement of profit or loss and other comprehensive income should be read in conjunction with the notes to the financial statements.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Safety Medical Products Limited Statement of Financial Position As at 30 June 2013

Note	2013 $ 2012 $
Assets Cash and cash equivalents Trade and other receivables Total current assets Non-current assets Deferred acquisition cost 1 Total non-current assets Total assets Liabilities Trade and other payables Loans and borrowings Total current liabilities Total liabilities Net assets / (deficiency) Equity Issued capital 3 Reserves Accumulated losses Total equity	26,606 999,423 42,900 155,984
	69,506 1,155,407
	619,400 330,000
	619,400 330,000
	688,906 1,485,407
	195,393 78,081 25,000 -
	220,393 78,081
	220,393 78,081
	468,513 1,407,326
	2,779,628 2,779,628 - - (2,311,115) (1,372,302)
	468,513 1,407,326

The statement of financial position should be read in conjunction with the notes to the financial statements.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Safety Medical Products Limited Statement of Changes in Equity For the financial year ended 30 June 2013

	Note 2013	Note 2013	Note 2013
	Balance at 1 July 2012 2,779,628 (1,372,302) Loss for the year - (938,813) Total comprehensive income for the year - (938,813) Transactions with owners, in their capacity as owners, and other transfer Shares Issued - - Transaction costs - - Closing balance at 30 June 2013 2,779,628 (2,311,115) Amounts are stated net of tax 2012	2,779,628 (1,372,302) - (938,813)
		- (938,813)
			- - - -
			2,779,628 (2,311,115)
Balance at 1 July 2011 2,779,628 (948,628) Loss for the year - (423,674) Total comprehensive income for the year - (423,674) Transactions with owners, in their capacity as owners, and other transfer Shares Issued - - Transaction costs - - Closing balance at 30 June 2012 2,779,628 (1,372,302) Amounts are stated net of tax			2,779,628 (948,628) - (423,674)
			- (423,674)
			- - - -
			2,779,628 (1,372,302)

The statement of changes in equity should be read in conjunction with the notes to the financial statements.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

Safety Medical Products Limited Statement of Cash Flows For the year ended 30 June 2013

Note

2013 $ 2012 $ - - (993,711) (569,377) (993,711) (569,377) 13,447 72,454 (447) (529) (980,711) (497,452) (17,106) (50,000) (17,106) (50,000) - - - - 25,000 - - - 25,000 - (972,817) (547,452) 999,423 1,546,875 26,606 999,423

Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Interest received Interest paid Net cash used in operating activities Cash flows from investing activities Deferred acquisition costs Net cash from investing activities Cash flows from financing activities Proceeds from issue of share capital Capital raising costs paid Proceeds from borrowings Repayment of borrowings Net cash from financing activities Net increase in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June

The statement of cash flows should be read in conjunction with the notes to the financial statements.

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

1 Deferred acquisition costs

Deferred acquisition costs
	2013	2012
	$	$
Deferred acquisitions costs – Three Rivers	-	330,000
Deferred acquisitions costs – Kisara	619,400	-
	619,400	330,000

As the Company did not wish to proceed with the acquisition of tenement in the Three Rivers area of Western Australia, the costs previously capitalised, had been written off in the year.

During the year, the Company advanced funds to Kisara and is treated as deferred acquisition costs. The potential acquisition of Kisara is contingent upon a successful due diligence which is currently ongoing.

2 Earnings per share

Reconciliation of earnings to profit or loss: Earnings used to calculated basis EPS Profit/(loss) attributable to equity holders Weighted average number of shares Ordinary shares on issue at 1 July Effect of shares issued Weighted average number of ordinary shares at 30 June	$ $ (938,813) (423,674)
	No. No. 396,455,466 396,455,466 - -
	396,455,466 396,455,466

3 Share capital

Issued and paid-up capital	$	$
396,455,466 (2012: 396,455,466) ordinary shares fully paid, net of capital raising cost	2,779,628	2,779,628
Ordinary shares	No.	$
Balance at 30 June 2012:	396,455,466	14,084,763
No share transactions	-	-
Balance at 30 June 2013:	396,455,466	14,084,763

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Safety Medical Limited Listed Public Limited ABN 26 007 817 192 and Controlled Entities

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

4 Segment reporting

Identification of reportable segments

Segment information is presented in respect of the Company’s business segments. Business segments are based on the Company’s management and internal reporting structure.

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income-earning assets and revenue, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Types of products and services by segment

Medical technology

Development, production and commercialisation of a range of medical products, focusing principally on the SecureTouch™ single use manual retractable safety syringe.

Project evaluation

Assessment of potential mining tenement acquisitions.

Geographical segments

The Company operates in only one geographical segment, Australia. As such, information is not presented on the basis of geographical segments.

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Safety Medical Products Limited ABN 26 007 817 192

Appendix 4E – Preliminary Final Report For the Year Ended 30 June 2013

5[Segment reporting (continued)]

		Medical Technology	Medical Technology	Project Evaluation	Project Evaluation	Eliminations	Eliminations	Company	Company
	Business segments	2013 $ 2012 $		2013 $ 2012 $		2013 $ 2012 $		2013 $ 2012 $
	External revenues Inter-segment revenues Total segment revenue Segment result Unallocated expenses Results from operating activities Net financing revenue /(costs) Impairment Loss/Assets written off Gain on deconsolidation of subsidiaries Profit/(Loss) for the year Profit/(Loss) for the year	2,492 - - -		- - - -		-	- -	2,492	- -
						-		-
		2,492 -		- -		-	-	2,492	-
		(554,538) (471,881) - -		(400,214) (23,718) - -		-	- -	(954,752)	(495,599) -
						-		-
		(552,049) (471,881) 13,447 71,925 - - - -		(400,214) (23,718) - - - - - -		-	- - - -	(952,260)	(495,599) 71,925 - -
						-		13,447
						-		-
						-		-
		(538,599) (399,956)		(400,214) (23,718)		-	-	938,813	(423,674)
								938,813	(423,674)
		Medical Technology		Project Evaluation		Eliminations		Total
	Business segments	2013 $ 2012 $		2013 $ 2012 $		2013 $ 2012 $		2013 $ 2012 $
	Segment assets Unallocated assets	42,996	1,115,814 39,594	619,400	330,000 -	-	- - - -	662,396	1,445,814 39,594
		26,510		-		-		26,510
	Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation
		69,506	1,155,406	619,400	330,000	-	- -	688,906	1,485,407
			78,081 -		- -		- - - - -		78,081 -
		195,393		-		-		195,393
		25,000		-		-		25,000
		220,393	78,081	-	-	-	- -	220,393	78,081
		-	- -	619,400	330,000 -	-	- - - -	619,400	330,000 -
		-		-		-		-

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