MACH7 TECHNOLOGIES LIMITED — Annual Report 2015

Aug 30, 2015

Appendix 4E Preliminary final report

Appendix 4E

Preliminary final report

1. Company details

3D MEDICAL LIMITED

	3D MEDICAL LIMITED
ABN or equivalent company reference 26 007 817 192	Financial year ended (‘current period’) 30 June 2015	Financial year ended (‘previous period’)
26 007 817 192	30 June 2015	30 June 2014

2. Results for announcement to the market

Results for announcement to the market	Results for announcement to the market	Results for announcement to the market
$A’000’s
2.1 Revenue [2014: Nil] Up - % to 167 2.2 Loss after tax [2014: ($302,272)] Up 2,188% to (6,910) 2.3 Net loss for theperiod attributable to members Up 2,188% to (6,910)
2.4Dividends	Amount per security	Franked amount persecurity
Final dividend proposed	Nil ¢	Nil ¢
Interim dividend	Nil ¢	Nil ¢
Record date for determining entitlements to the finaldividend	N/A	N/A

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• 2.5 Brief explanation of any of the figures in 2.1 to 2.4 above necessary to enable the figures to be understood.

Company overview

Historically the main activity of 3D Medical Limited (the Company ) (formerly Safety Medical Products Limited) has been the development of the SecureTouch Syringe. On 6 February 2015 the Company completed the acquisition of 100% of the shares in ThreeD Medical Limited (ACN 166 963 864) (the Acquisition ).

This Acquisition resulted in a significant change to the nature and scale of the Company’s activities as described in the Prospectus dated 24 November 2014. The company was reinstated to official quotation on the Australian Securities Exchange on 18 February 2015.

Since the Acquisition, the Company’s main activities are the 3D printing of customised medical products based on data captured by diagnostic imagining tools, and commercialising the rights it owns in selected territories to a range of technologies, including: Mach 7 Technologies data and image management solution; the GestSure sensor technology for in operating theatre diagnostic image interaction; and the EchoPixel holographic viewer for diagnostic images.

The Company is in its initial start-up stage and is laying down the foundations for future growth. Accordingly, the Directors anticipate making further losses in the foreseeable future.

Commentary on results for the period

The 2015 financial year represents the first financial report of 3D Medical Limited since the date of the Acquisition and reinstatement to official quotation on the Australian Securities Exchange in February.

The Company’s statement of profit and loss and other comprehensive income for the period recognised a loss of $6,909,809 and as described in Note 3.2 of the financial accounts, $5,434,359 of this loss was attributed to asset impairments including: the impairment of an intercompany loan upon consolidation ($610,000); and the impairment of an intangible asset created upon consolidation ($4,824,359). In the case of the impairment of the latter, this noncash write-off was necessary as this resulting intangible asset did not meet the definition of goodwill, or a separately identifiable intangible asset, in accordance with the Australian Accounting Standards and related pronouncements.

During the year, the Company successfully placed 81.772 million ordinary shares at $0.05 per share to raise $4.088 million before costs by way of a public offer.

Revenue for the period was $167,081 and cash expenses included a number of one-off items including costs related to the Acquisition, costs associated with the capital raising and reinstatement, and costs associated with establishing the Company in its Port Melbourne facility. At the end of the reporting period the Company had a cash balance of $2.751 million and had no debt.

Business Development

The Company is actively involved in business development as it seeks to identify favorable product and market opportunities. Given their early stage nature, these business development activities have been focused on a narrow set of medical modalities and have been confined principally to the Victorian geographic area. These activities have been focused on raising awareness of the Company’s products and services and assisting potential customers evaluate the Company’s value proposition.

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It is the intention of the Company to expand its business development activities across additional targeted medical modalities while it concurrently builds channel partners and direct sales interfaces with existing and new customers.

Governance initiatives

The Company has recently instituted a number of governance initiatives designed to assist it in rapidly identifying market opportunities and continuing the commercialisation of the Company’s strategy. These initiatives include:

• The establishment of a Strategic Review Committee to assist the Board in reviewing and evaluating the Company’s strategic plans and developing refinements to those strategic plans.

• The establishment of a Mergers & Acquisitions Committee to assist the Board in reviewing and assessing potential mergers, acquisitions, divestments and other investments.

• The establishment of a Medical Advisory Board charter. When constituted, the Medical Advisory Board will provide advice and make recommendations to the Company’s Board of Directors on any relevant matters delegated and provide a broad perspective on trends in healthcare and medical research.

Corporate strategy

In readying the businesses to deliver profitable growth, the strategy of the Company is founded upon three core governance principles:

1. Fiscal management – to ensure control of the key revenue and cost drivers and the efficient and productive utilisation of available resources, and,

2. Sustainable growth – focusing on proven profitable market segments and building upon the base of existing product, service and customer opportunities, and,

3. Diversification and extension – identifying additional revenue streams that complement existing capabilities and expanding geographic and product reach.

Achievements to date

Highlights since listing include:

•  Successfully completed a capital raising of $4,088,600 under the prospectus

•  Reinstated the Company’s official quotation on the Australian Securities Exchange

•  Entered into an exclusive supply agreement with diagnostic imaging group, Capitol Health  Entered a software license and support agreement with Telstra Health that sees them become a reseller of the 3D Medical distributed Mach 7 image management software

•  Collaborated in the production of a medical implant in an pioneering Australian-first surgery

•  Entered into a manufacturing agreement for the supply of personalised medical prosthesis

•  Entered into a research collaboration agreement with Genesis Cancer Care for the design and production of medical consumables for use in radiotherapy treatments

•  Entered into a partnership agreement with Intelerad to build a direct sales interface

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Future planned developments

Planned near-term developments for the Company include:

• Obtaining industry specific accreditations including ISO 13485; an International Organization for Standardization (ISO) standard that represents the requirements for a comprehensive quality management system for the design and manufacture of medical devices. ISO 13485 accreditation is a necessary precursor for the Company’s ambition to be successful in building commercial scale as a trusted supply chain partner in delivering custom made medical devices to the healthcare sector.

• A staged investment of around $1 million in additional plant and equipment including the latest technology 3D printers capable of printing in a range of advanced materials as well as investment in post-production technologies designed to enhance the Company’s quality assurance procedures. This additional investment is required for the Company to build greater speed, agility and cost reductions as the Company scales its 3D printing activities.

Events subsequent to balance date

There are no events subsequent to balance date to report.

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3. Consolidated Statement of Profit or Loss and Other Comprehensive Income

Note Revenue from continuing operations Revenue 3.1 Cost of sales Gross profit Operating costs 3.2 Corporate costs 3.2 Finance costs 3.2 Selling and distribution 3.2 Employee and consultants costs (incl. directors fees and remuneration) 3.2 Profit/(loss) before tax Income tax expense 3.3 Profit/(loss) from continuing operations Loss for the year Other Comprehensive Income Items that may be reclassified to Profit or Loss Other comprehensive loss for the year, net of tax Total comprehensive loss for the year Loss for the period attributable to: Owners of the parent Total comprehensive loss for the year attributable to: Owners of the parent Loss per share Basic (cents per share) Diluted(centsper share)

2015 2014 $ $ 167,081 3,220 (133,889) - 33,193 3,220 (436,540) (106,101) (6,134,338) (198,664) (887) (727) (9,425) - (361,811) - (6,909,809) (302,272) - - (6,909,809) (302,272) (6,909,809) (302,272) - - - - (6,909,809) (302,272) (6,909,809) (302,272) (6,909,809) (302,272) (6,909,809) (302,272) (6,909,809) (302,272) (3.6) (0.5) (3.0) (0.5)

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Notes to the Consolidated Statement of Profit or Loss and Other Comprehensive Income

3.1 Revenue from continuing operations

Revenue from continuing	operations
	2015 $	2014 $
Revenue Sales Revenue InterestReceived	143,878 23,203	- 3,220
Total	167,081	3,220

3.2 Expenses from continuing operations

	2015 $	2014 $
Intangible impairment costs Impairment of intercompany loan Marketing, distribution & selling Employee benefits expense Costs associated with acquisition Directors fees Occupancy costs Depreciation Other	4,824,359 610,000 77,579 193,696 595,361 168,114 89,737 7,624 376,531	- - - - - - - - 305,492
Total	6,943,001	305,492

3.3 Income tax (expense)/benefit from continuing operations

	2015 $	2014 $
Profit before income tax Income tax (expense)/benefit at the Australian tax rate 30% (2014: 30%) Tax effect of impairment expenses Non-deductible expenses (Under)/over provision of income tax in prior years Tax effect of deferred tax asset not brought to account Other	(6,909,809) 2,072,943 (1,630,445) - - (442,498) -	(302,272) (90,682) - - - 69,857 20,825
Total income tax (expense)/benefit	-	-

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4. Consolidated Statement of Financial Position

Note ASSETS Current assets Cash and cash equivalents Trade and other receivables Other receivables Total current assets Non-current assets Plant and equipment Total non-current assets TOTAL ASSETS LIABILITIES Current liabilities Trade and other payables Total current liabilities Non-current liabilities Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity Options Reserve Accumulated losses TOTAL EQUITY

2015 2014 $ $ 2,751,420 566,836 170,996 7,469 243,979 50,000 3,166,395 624,305 522,563 - 522,563 - 3,688,958 624,305 592,270 85,799 592,270 85,799 - - 592,270 85,799 3,096,688 538,506 11,078,442 3,151,893 1,541,442 - (9,523,196) (2,613,387) 3,096,688 538,506

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Consolidated Statement of Changes in Equity

Balance at 1 Jul 2013 Loss for the year Total comprehensive loss for the year	Share capital $ 2,779,628 - -	Reserves Accumulated losses Total equity $ $ $ - (2,311,115) 468,513 - (302,272) (302,272) - (302,272) (302,272)
Issue of share capital Capital raising costs Reduction of capital Balance at 30 June 2014	1,067,063 (30,751) (664,047)	- - 1,067,063 - - (30,751) - - (664,047)
	3,151,893	- (2,613,387) 538,506
Balance at 1 July 2014 Loss for the year Total comprehensive loss for the year	3,151,893 - -	- (2,613,387) 538,506 - (6,909,809) (6,909,809) - (6,909,809) (6,909,809)
Issue of share capital Capital raising costs Issue of share options Balance at 30 June 2015	8,229,207 (302,658) -	- - 8,229,207 - - (302,658) 1,541,442 - 1,541,442
	11,078,442	1,541,442 (9,523,196) 3,096,688

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5. Consolidated Statement of Cash Flows

5.Consolidated Statement of Cash Flows
Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest and other items of similar nature paid Interest received Income taxes paid Net cash provided by / (used in) operating activities Cash flows from investing activities Payment for plant and equipment Proceeds from sale of plant and equipment Cash acquired through business acquisition Net cash provided by / (used in) investing activities Cash flows from financing activities Proceeds from borrowings Repayment of borrowings Proceeds from issues of securities Other - share issue costs Net cash provided by / (used in) financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Cash and cash equivalents at the end of the financial period	$ $ 103,088 - (1,893,244) (252,240) - - 23,203 3,220 - - (1,766,952) (249,020) (508,188) - - - 33,176 - (475,012) - - - - - 4,426,549 820,000 - (30,750) 4,426,549 789,250 2,184,585 540,230 566,836 26,606 2,751,420 566,836

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6.1 Non-cash financing and investing activities

Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows are as follows:

Consideration for the acquisition of all the shares in ThreeD Medical Limited was by way of issuing 175,000,000 ordinary shares in 3D Medical Limited and 116,432,447 options to acquire ordinary shares in 3D Medical Limited at $0.05 per share.

A total of 11,595,224 ordinary shares (value $200,607) were issued in lieu of fees for services provided to the company.

6.2 Reconciliation of cash

.2 Reconciliation of cash
Reconciliation of cash at the end of the period (as shown in the condensed consolidated cash flow statement) to the related items in the accounts is as follows.	2015 $	2014 $
Cash on hand and at bank Total cash at end of financial year	2,751,420	566,836
	2,751,420	566,836

6.3 Reconciliation of profit after income tax to net cash inflow from operating activities

operating activities
	2015 2014 $ $
Operating profit after income tax Non cash items Depreciation & amortisation Intangibles impairment Assets written off Debt to equity conversion Change in operating assets and liabilities (Increase)/ decrease in trade & other receivables (Increase)/ decrease in other assets (Increase)/ decrease in inventory Increase /(decrease) in provisions Increase /(decrease) in accounts payable and other payables Increase/(decrease) in current tax provision Increase/(decrease) in deferred tax asset Net cash outflows from operatingactivities	(6,909,809) (302,272) 7,624 - 4,824,359 - - 636,853 - (247,063) (40,790) 35,431 52,888 - - - - - - - 298,776 (371,969) - - - - (1,766,952) (249,020)

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7. Dividends

7.1 Individual dividends per security

No dividends were paid or provided during the year-ended 30 June 2015 (2014: Nil).

7.2 Total dividend per security (interim plus final)

Ordinary securities	2015 $	2014 $
	-	-

7.3 Dividend Reinvestment Plans

The dividend or distribution plans shown below are in operation:

.

NIL

The last date(s) for receipt of election notices for the dividend N/A or distribution plans

8. Consolidated retained profits

	2015	2014
	$	$
Retained profits at the beginning of the financial period	(2,613,387)	(2,311,115)
Net profit attributable to members	(6,909,809)	(302,272)
Dividends paid or payable	-	-
Retained earnings at end of financial period	(9,523,196)	(2,613,387)

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9. NTA backing

9.NTA backing
	2015	2014
Net tangible asset backing per ordinary security (adjusted for effect of 1:10 share consolidation)	0.8 cents	0.6 cents

10. Control gained over entities

Name of entity (or group of entities) ThreeD Medical Limited 6 February 2015 Date Control gained Contribution of such entities to the reporting entity’s Nil profit / (loss) from ordinary activities during the On acquisition the business of ThreeD period (where material). Medical Limited was transferred to the parent 3D Medical Limited Profit / (loss) from ordinary activities and extraordinary items after tax of the controlled entity (or group of entities) for the whole of the previous corresponding period. Nil

10.1 Loss of control over entities

Name of entity (or group of N/A entities) Date control lost Contribution of such entities to the reporting entity’s $ profit / (loss) from ordinary activities during the period (where material). Consolidated profit / (loss) from ordinary activities of $ the controlled entity (or group of entities) whilst controlled during the whole of the previous corresponding period (where material).

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11. Details of associates and joint venture entities

Name of associate/joint venture	Reporting entity’s percentage holding	Reporting entity’s percentage holding	Contribution to Net profit/(loss) (wherematerial)	Contribution to Net profit/(loss) (wherematerial)
N/A	Current Period	Previous corresponding period	Current Period	Previous corresponding period

2015 2014 Group’s aggregate share of associates’ and joint $ $ venture entities’ profits/(losses) (where material):

Profit/(loss) from ordinary activities before tax

Income tax on ordinary activities

Profit/(loss) from ordinary activities after tax

Extraordinary items net of tax

Net profit/(loss)

Adjustments

Share of net profit/(loss) of associates and joint venture entities

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This report is based on accounts to which one of the following applies. (Tick one)

 The[+] accounts have been The +accounts have been  audited. subject to review. The[+] accounts are in the  process of being reviewed. The accounts are in the The[+] accounts have not yet   process of being audited. been audited or reviewed.

If the accounts have not yet been audited or subject to review and are likely to be subject to dispute or qualification, details are described below

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N/A
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If the accounts have been audited or subject to review and are subject to dispute or qualification, details are described below

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N/A
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Sign here: ______

Chairman and Non-Executive Director

Date: 31 August 2015

Print name: Dr Nigel Finch

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