MACH7 TECHNOLOGIES LIMITED — Interim / Quarterly Report 2018

Feb 25, 2018

Mach7 Technologies Limited

ACN 007 817 192

and controlled entities (Mach7 Technologies Group)

Appendix 4D and Half Year Report For the half year ended 31 December 2017

Provided to the ASX in accordance with listing rule 4.2A

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Mach7 Technologies Limited ASX Appendix 4D – Half Year Report FOR THE HALF YEAR ENDED 31 DECEMBER 2017

Results for announcement to the market

• 1 Current reporting period is 1 July 2017 to 31 December 2017

• Previous corresponding period is 1 July 2016 to 31 December 2016

			% Change from
			previous		Current
			corresponding		reporting period
			period		$’000
2.1	Revenues from ordinary activities	down	19%	to	3,861
2.2	Profit/(loss) from ordinary activities after tax	down	14%	to	(3,395)
	attributable to members
2.3	Net profit/(loss) for the period attributable to	down	14%	to	(3,395)
	members.
2.4	Dividends
	Interim dividend		-		-
	Final dividend		-		-
	Net Tangible Asset Backing
			31 December 2017		30 June 2017
3	Net tangible asset backing per ordinary share			3 cents	3 cents

Comments by directors

Please refer to the “Operating and Financial Review” in the directors’ report for a detailed explanation and analysis of the Group’s performance for the six months ended 31 December 2017.

Review opinion

This report is based on accounts which have been independently reviewed by the Company’s external auditors. A copy of the directors’ report and financial statements, together with the auditors’ review report, is attached.

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Mach7 Technologies Limited Directors’ Report FOR THE HALF YEAR ENDED 31 DECEMBER 2017

Your directors submit their report for the half year ended 31 December 2017.

Directors

The following persons were Directors or Company Secretary of Mach7 Technologies Limited (Company) during the whole of the six-month period ended 31 December 2017 and up to the date of this report, unless otherwise stated:

Director Damien Lim Non-Executive Chairman Mike Jackman CEO (appointed as a Director on 25 September 2017) Dr Nigel Finch Non-Executive Director Nobuhiko Ito Non-Executive Director A. Wayne Spittle Non-Executive Director Alyn Tai Company Secretary

Principal activities

The principal activity of the Company is the development and commercialisation of image data solutions for healthcare enterprises. The Mach7 data services platform enables the sharing, storage and workflows of all types of medical images data across any, and all, modalities thus enabling interoperability for the healthcare enterprise.

Operating and financial review

The operating and financial review section of the directors’ report is outlined in the following sections:

• Financial position

• Review of operations

The Directors' comments form an integral part of this Directors' Report.

Financial position

The Group’s financial position continues to strengthen. At 31 December 2017 the Group reported $3.7 million of net tangible assets (30 June 2017: $3.4 million). The Group reported total cash of $4.9 million, being cash & cash equivalents on hand of $4.5 million and cash on term deposit (> 3-month term) of $0.4 million as at 31 December 2017. This represents an increase of $2.1 million over the previous corresponding period (30 June 2017: $2.8 million). This increase is mainly due to a capital raise completed during the current period of $2.0 million. There were no broker or legal costs incurred for this transaction.

Cash-flows from operations

The Group reported a net cash inflow from operations for the current reporting period of $0.2 million. This is a significant improvement compared to the prior corresponding period net cash outflow of $2.4 million, and demonstrates the Group is making positive progress towards its target of being able to sustain positive cash flows from operations over time. Included in the cash flow from operations was receipts from customers of $6.0 million for the current reporting period, compared to $4.3 million for the previous corresponding period.

Review of operations

The Group reported a net loss after tax of $3.4 million for the half year ended 31 December 2017 (“H12018”). The net loss after tax for the previous corresponding period (“H12017”) was $3.9 million, and therefore an improvement in profitability of $0.5 million (+14%) was achieved for the current reporting period. This result is further explained in the following section of this report.

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Mach7 Technologies Limited Directors’ Report FOR THE HALF YEAR ENDED 31 DECEMBER 2017

Revenue from continuing operations

Revenue recognised for the current reporting period was $3.9 million. Revenue is lower by $0.9 million (-19%) compared to the previous corresponding period (H12017: $4.8 million).

The lower revenues for H12018 is due primarily to the change in sales mix of orders received during the current period compared to the prior corresponding period. A significant order received during the current period was predominantly for services, rather than software, and will be recognised as revenue in future periods as the services are performed. The prior period, by comparison, included one major software project in the Middle East that was completed and recognised, which contributed $0.8 million to software revenues in the prior period. There was no similar project in the current period in this region but the Group is progressing a strong pipeline of opportunities, including those with our existing customer base, and is confident of securing new projects and recognising revenues in this region going forward. Due to the nature of sales and contract cycles, the timing of revenue recognition will continue to be sporadic.

It should be noted that total revenue from the U.S. market grew by 17% (current vs prior period) and the U.S. pipeline continues to be further strengthened. In other regions (as well as the U.S.) the Group has engaged several distributors (e.g. Latin America, Europe) which it expects to generate software revenues in future financial years. Refer to note 3 to the financial statements for further information on revenue by region.

Revenue from professional services has grown by $0.4 million (+83%) demonstrating that the Group is completing many more implementations of Mach7 software compared to the prior period. Once these implementation services are complete, support services will commence and annual maintenance fee revenues will also increase. In addition to the reported service fee revenue, the Group secured a large data migration project with Sentara Healthcare (an existing customer) during the current period. This project will commence and associated service fee revenue will begin to be recognised in the second half of this financial year.

Revenue from annual maintenance fees were lower by $0.25 million (-16%) due to a gap in the provision of support services for one customer in the Middle East region. Support has re-commenced for this customer and associated support revenue will be recognised in the second half of this financial year. Support revenue for the U.S.A/Europe regions has grown by +26% and will continue to grow with every new customer who licenses the software.

Contracted annual recurring revenue (annual maintenance fees and subscription fees) totals $4.4 million at 31 December 2017 and has grown by +24% over the prior corresponding period. Certain contracts have yet to reach go-live stage and therefore annual maintenance fee revenue on these contracts is yet to be recognised.

The table below provides a breakdown of revenue recognised by product/service (table 1):	The table below provides a breakdown of revenue recognised by product/service (table 1):	The table below provides a breakdown of revenue recognised by product/service (table 1):
Revenue from continuing operations	Mach7 Group	Mach7 Group
	H1 2018	H1 2017
	6 months	6 months
	to 31 December	to 31 December
	2017	2016
	$	$	% Change
Software licence fees	1,478,082	2,475,713	(40%)
Professional service fees	865,375	500,364	73%
Annual maintenance fees	1,309,161	1,563,104	(16%)
Subscription, Pay-per-use	208,588	246,843	(15%)
Revenue from continuing operations	3,861,206	4,786,024	(19%)
Expenses from operations

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Mach7 Technologies Limited Directors’ Report FOR THE HALF YEAR ENDED 31 DECEMBER 2017

Operating expenditure for the current reporting period was $5.5 million. Operating expenditure has fallen by $1.2 million (-18%) compared to the previous corresponding period (H12017: $6.7 million). The fall in operating expenses is mainly due to the divestment of 3D Medical operations and other the cost-saving initiatives that have been undertaken across all areas of the Group.

The table below presents the operating expenses from operations (excluding interest expense, share-based payments expense, depreciation & amortisation (table 2):

Operating expenses	Mach7 Group	Mach7 Group
	H1 2018	H1 2017
	6 months	6 months
	to 31 December	to 31 December
	2017	2016
	$	$	% Change
Employee benefits expenses	4,329,306	4,572,115	(5%)
Corporate and professional fees	182,099	593,320	(69%)
Marketing expenses	236,194	369,543	(36%)
Travel and related expenses	229,019	405,611	(44%)
Administration, insurance and other	397,614	493,626	(19%)
Distributor expenses and license fees	139,866	278,872	(50%)
Expenses from operations*	5,514,098	6,713,087	(18%)

*excluding interest expense, depreciation and amortisation, and share based payments expenses

Loss after tax

EBITDA (Adjusted) loss increased by $0.2 million compared to the prior corresponding period. When excluding net other income (which mainly includes foreign exchange gains and losses, and doubtful debt expenses and recoveries), EBITDA (Adjusted) loss has improved (i.e. fallen) over the prior corresponding period by $0.4 million.

The loss after tax for the half year has improved by $0.6 million compared to the prior corresponding period due to the above factors mentioned, and the following:

• Interest expenditure has fallen by 0.2 million due to external debt being repaid in full during the last financial year. The small interest charge for the current period relates to an equipment finance lease;

• Depreciation and amortisation expenses, together with the related income tax benefit, have fallen by $1.5 million due to the balance of intangible assets and associated deferred tax liability being written down in FY2017;

• Share-based payments (a non-cash item) have increased by $0.4 million due to CEO performance rights issued August 2017, options to employees issued October 2017, and options and shares issued to Directors in lieu of fees as approved by shareholders in December 2017.

The table below presents the Group’s loss after tax and EBITDA (Adjusted) from operations (table3):

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Mach7 Technologies Limited Directors’ Report

FOR THE HALF YEAR ENDED 31 DECEMBER 2017

Loss after tax, and EBITDA (adjusted)	Mach7 Group	Mach7 Group
	H1 2018	H1 2017
	6 months	6 months
	to 31 December	to 31 December
	2017	2016
	$	$	% Change
Revenue from continuing operations	3,861,206	4,786,024	(19%)
Operating expenses	(5,514,098)	(6,713,087)	(18%)
Other income (net of other expenses)	16,685	634,177	(97%)
EBITDA Adjusted* Loss (cash)	(1,636,207)	(1,292,886)	27%
Share-based payments expense (non-cash)	(443,222)	(67,097)	561%
Interest expense	(10,832)	(239,533)	(95%)
Depreciation and amortisation charges (non-cash)	(1,850,920)	(3,295,760)	(44%)
Income tax benefit (non-cash)	545,700	950,048	(43%)
Loss for the half-year	(3,395,481)	(3,945,229)	(14%)

*Earnings Before Interest, Tax, Depreciation and Amortisation expenses and non-cash share-based payments.

Significant events occurring after balance date

There were no significant events that occurred after 31 December 2017.

Outlook

The Group is in a solid financial position with approximately $4.9 million in free cash and no debt on its balance sheet. Mach7 has developed a technologically sound, highly competitive product. With the launch of version 12 of its software in 2018, its technology and financial position provides Mach7 with the perfect platform to take advantage of a buoyant global healthcare data services market. The Group is expanding its market reach through the engagement of new distributors/value added resellers in the U.S. and other markets such as Latin America. Revenues and profitability from the U.S. market continue to grow, although revenue and cash flow will continue to be lumpy for the foreseeable future. Overall, the Group is making progress towards profitability and building a long term sustainable business for its shareholders.

Significant changes in the state of affairs

There were no significant changes in the state of affairs of the Group during the financial half-year.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.

This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001.

On behalf of the directors

Damien Lim, Chairman 26 February 2018, Singapore

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AUDITOR’S INDEPENDENCE DECLARATION

As lead auditor for the review of the financial report of Mach7 Technologies Limited and its controlled entities for the half year ended 31 December 2017, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

• (i) the auditor independence requirements of the Corporations Act 2001 in relation to the review; and

• (ii) any applicable code of professional conduct in relation to the review.

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RSM AUSTRALIA PARTNERS

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R B MIANO Partner

Dated: 26 February 2018 Melbourne, Victoria

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Mach7 Technologies Limited Statement of Financial Position

AS AT 31 DECEMBER 2017

	CONSOLIDATED
Note	31 Dec 17 30 Jun 17
	$ $
ASSETS Current assets Cash and cash equivalents 5 Financial assets 5 Trade and other receivables 6 Other current assets Total current assets Non-current assets Plant and equipment Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Deferred revenue 7 Financial liabilities Interest bearing liabilities Total current liabilities Non-current liabilities Finance leases Deferred tax liability Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulated losses Total Equity	4,474,406 2,684,225 409,917 100,000 3,261,996 4,814,753 298,244 297,399
	8,444,563 7,896,377 150,634 184,912 16,020,881 17,843,215
	16,171,515 18,028,127
	24,616,078 25,924,504
	1,180,729 1,755,447 3,631,415 2,855,480 - 20,000 12,508 12,358
	4,824,652 4,643,285 6,493 13,009 4,783,731 5,329,432
	4,790,224 5,342,441 9,614,876 9,985,726
	15,001,202 15,938,778
	55,159,498 53,090,510 3,048,962 2,660,045 (43,207,258) (39,811,777)
	15,001,202 15,938,778

The above statement of financial position should be read in conjunction with the accompanying notes.

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Mach7 Technologies Limited Statement of Profit and Loss and Other Comprehensive Income

FOR THE HALF YEAR ENDED 31 DECEMBER 2017

	CONSOLIDATED
Note	31 Dec 2017 31 Dec 2016
	$ $
Revenue from continuing operations Revenue from sales 4a Other income 4b Employee benefits & staff related expenses Professional, consultancy, and corporate expenses Marketing expenses Travel and related expenses General administration expenses Distributor and license fees Other expenses 4c Finance costs Share based payment expense Depreciation and amortisation 4d Loss from continuing operations before income tax Income tax benefit Loss for the year Other comprehensive income Total comprehensive loss for the year, net of tax, attributable to equity holders of the parent Earnings per share (cents per share) - Basic earnings/(loss) per share - Diluted earnings/(loss) per share Dividends per share (cents)	3,861,206 4,786,024 292,467 634,176
	4,108,673 5,420,200 (4,329,306) (4,572,115) (182,099) (593,320) (236,192) (369,543) (229,020) (405,611) (397,615) (493,626) (139,866) (278,872) (275,782) - (10,832) (239,533) (443,222) (67,097) (1,850,920) (3,295,760)
	(3,941,181) (4,895,277) 545,700 950,048
	(3,395,481) (3,945,229) 25,145 (223,177)
	(3,370,336) (4,168,406)
	(3 cents) (4 cents) (3 cents) (4 cents) - -

The above statement of profit and loss and other comprehensive income should be read in conjunction with the accompanying notes.

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Mach7 Technologies Limited Statement of Changes in Equity FOR THE HALF YEAR ENDED 31 DECEMBER 2017

Consolidated	Share Capital Share Based Payments Reserve Foreign Exchange Translation Reserve Accumulated losses Total Equity $ $ $ $ $
At 1 July 2016 Loss for the half-year Other comprehensive income/(loss) for the year Total comprehensive loss for the half-year Issue of share capital Capital raising costs Share based payments At 31 December 2016 At 1 July 2017 Loss for the half-year Other comprehensive income/(loss) for the year Total comprehensive loss for the half-year Issue of share capital Share-based payment securities converted to ordinary fully paid shares Capital raising costs Share based payments Foreign exchange At 31 December 2017	43,856,377 1,897,267 (139,405) (22,152,680) 23,461,559 - - - (3,945,229) (3,945,229) - - (223,177) - (223,177)
	- - (223,177) (3,945,229) (4,168,406) 9,772,844 - - - 9,772,844 (516,039) - - - (516,039) - 67,097 - - 67,097
	53,113,182 1,964,364 (362,582) (26,097,909) 28,617,055 53,090,510 2,351,762 308,283 (39,811,777) 15,938,778 - - - (3,395,481) (3,395,481) - - 25,145 - 25,145
	- - 25,145 (3,395,481) (3,370,336) 2,000,000 - - - 2,000,000 79,450 (79,450) - - - (10,462) - - - (10,462) - 443,222 - - 443,222 - (1,957) 1,957 - -
	55,159,498 2,713,577 335,385 (43,207,258) 15,001,202

The above statement of changes in equity should be read in conjunction with the accompanying notes.

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Mach7 Technologies Limited Statement of Cash Flows

FOR THE HALF YEAR ENDED 31 DECEMBER 2017

	CONSOLIDATED
Note	31 Dec 2017 31 Dec 2016
	$ $
Cash flows from operating activities Receipts from customers Payments to suppliers and employees Interest received Interest and other costs of finance paid Taxes paid Government grants and tax incentives received Other receipts (rental and reimbursements) Net cash used in operating activities Cash flows from investing activities Other investing receipts Proceeds from sale of plant and equipment Cash transferred to term deposits (financial assets) Payment for plant and equipment Net cash flows provided by / (used in) investing activities Cash flows from financing activities Proceeds from issues of shares, options etc Repayment of borrowings Capital raising costs Net cash flows provided by financing activities Net increase/ (decrease) in cash and cash equivalents Net foreign exchange difference relating to cash Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period 5	6,110,144 4,343,349 (6,126,078) (6,948,121) 13,371 2,597 - (134,967) - (7,700) 289 6,135 204,747 342,087
	202,473 (2,396,620)
	- 9,260 965 - (309,917) - (31,078) -
	(340,030) 9,260
	2,000,000 7,400,370 - (670,000) (9,486) (494,700)
	1,990,514 6,235,670
	1,852,957 3,848,310 (62,776) (55,506) 2,684,225 1,718,511
	4,474,406 5,511,315

The above statement of cash flows should be read in conjunction with the accompanying notes

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FOR THE HALF YEAR ENDED 31 DECEMBER 2017

Mach7 Technologies Limited Notes to the Financial Statements

1. CORPORATE INFORMATION

The financial report of Mach7 Technologies Limited (the “Company” or the “Parent”) for the half year ended 31 December 2017 was authorised for issue in accordance with a resolution of the directors on 26 February 2018.

Mach7 Technologies Limited is a company limited by shares incorporated and domiciled in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX:M7T).

The nature of the operations and principal activities of Mach7 Technologies Limited and its consolidated entities (the “Group”) are described in the Directors’ Report.

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The financial report is a general purpose financial report for the interim half-year reporting period ended 31 December 2017, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standard AASB 134 'Interim Financial Reporting' as appropriate for for-profit entities. Compliance with AASB 134 ensures compliance with International Financial Reporting Standard IAS 34 'Interim Financial Reporting'. The financial report has been prepared on a historical cost basis and is presented in Australian dollars unless otherwise stated.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2017 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, unless otherwise stated.

The consolidated entity has adopted all the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Going Concern

The financial statements have been prepared on the going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business.

As disclosed in the financial statements, the Group incurred losses of $3.4 million. However, the Group reported a positive cash flow from operations for the period of $0.2 million and cash on hand (including deposits) of $4.9 million, and has net current assets of $3.6 million at the end of the reporting period.

Due to the solid financial position at 31 December 2017 and the positive cash flow from operations during the period, the Directors believe that there are reasonable grounds to believe that the Group will be able to continue as a going concern, provided the Group continues to be successful in securing projected new revenue contracts and manages its operating cash flows effectively. Accordingly, the Directors believe that the Group will be able to continue as a going concern and that it is appropriate to adopt the going concern basis in the preparation of the financial report.

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Mach7 Technologies Limited Notes to the Financial Statements

FOR THE HALF YEAR ENDED 31 DECEMBER 2017

3. SEGMENT INFORMATION

The business operations of Mach7 Technologies is the commercialisation and sale of medical imaging software, predominantly throughout the United States, Asia-pacific, and the Middle East region. The operational segments of this business are determined with reference to how revenue is generated, that is, from software license fees, provision of services to customers and other segments. Services provided to customers includes customer training, software installation services, and maintenance and support services. Other segments include 3D medical printing operations, however this business was divested in the fourth quarter of 2017.

	CONSOLIDATED
	31 Dec 2017 (6 months) 31 Dec 2016 (6 months)
	$ $
Segment revenues Product segment revenues Software licenses Professional services & maintenance services Other segments Geographical segment revenues United States Middle East Asia/Pacific Other Segment adjusted EBITDA* Software licenses Professional services & maintenance services Product development Other segments Reconciliation to net loss after tax Segment adjusted EBITDA Administration and corporate expenses^ Net other income/(other expenses) not allocated to segments Group adjusted EBITDA Share based payments expense Depreciation and amortisation expense Finance & interest costs Income tax benefit Net loss after tax	1,686,670 2,722,556 2,174,536 2,054,752 - 8,716
	3,861,206 4,786,024
	3,454,036 2,961,405 262,731 1,398,016 87,115 331,432 57,324 95,171
	3,861,206 4,786,024
	293,701 1,095,182 1,105,552 677,914 (1,296,277) (1,139,895) - (207,731)
	102,977 425,470
	102,977 425,470 (1,778,521) (2,236,780) 39,337 518,423
	(1,636,207) (1,292,887)
	(443,222) (67,097) (1,850,920) (3,295,760) (10,832) (239,533) 545,700 950,048
	(3,395,481) (3,945,229)

*Segment Adjusted Earnings before Interest, Tax, Depreciation & Amortisation, and non-cash share-based payments expenses (Adjusted EBITDA).

^Administration and corporate expenses are not allocated to a particular operating segment, but are reviewed by management separately. This category

includes expenses related to corporate/head office, ASX and governance, compliance costs (audit, tax etc), certain executive management costs, and occupancy costs.

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Mach7 Technologies Limited Notes to the Financial Statements

FOR THE HALF YEAR ENDED 31 DECEMBER 2017

3. SEGMENT INFORMATION (continued)

	CONSOLIDATED
	31 Dec 2017 30 June 2017
	$ $
Segment assets – by product Software licenses Professional services & maintenance services Product development Other segments Reconciliation to group assets Segment assets	2,130,375 3,565,232 1,109,774 1,123,365 122,233 78,443 147,493 1,301
	3,509,875 4,768,341
	3,509,875 4,768,341 4,884,323 2,784,225 276,108 607,166 15,945,772 17,764,772
Cash and deposits
Administration and corporate assets
Intangible assets arising on consolidation
Geographical non-current segment assets	24,616,078 25,924,504
	212,882 218,087 12,860 45,268
United States
Asia/Pacific
Segment liabilities – by product Software licenses Professional services & maintenance services Product development Other segments Reconciliation to group liabilities	225,742 263,355
	1,002,654 534,620 3,295,089 2,829,479 74,436 20,000 29,790 -
	4,401,969 3,384,099
	4,401,969 3,384,099 429,176 1,246,829 4,783,731 5,354,798
Segment liabilities
Administration and corporate liabilities
Deferred tax liability arising on consolidation
	9,614,876 9,985,726

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Mach7 Technologies Limited Notes to the Financial Statements

FOR THE HALF YEAR ENDED 31 DECEMBER 2017

4. REVENUE, OTHER INCOME AND EXPENSES

4. REVENUE, OTHER INCOME AND EXPENSES
	CONSOLIDATED
	31 Dec 2017 31 Dec 2016
	$ $
(a) Revenue Software licence fees Professional service fees Annual maintenance fees Subscription (pay-per-use) revenue Other sales revenues (b) Other income Interest income Rental income (sub-tenancy) R&D tax refund Bad & doubtful debt recovery Net foreign currency exchange gains Net gains on fixed asset disposals Other income (c) Other expenses Doubtful debt expenses Net foreign currency exchange losses Net losses on fixed asset disposals (d) Depreciation and amortisation Amortisation of intangible assets Depreciation of property, plant and equipment	1,478,082 2,475,713 851,460 407,975 1,309,161 1,563,104 208,588 246,843 13,916 92,389
	3,861,206 4,786,024
	17,923 12,917 - 54,904 - 23,325 147,493 326,104 - 179,402 - 26,622 127,051 10,902
	292,467 634,176
	192,006 - 52,006 - 31,770 -
	275,782 -
	1,821,249 3,171,750 29,671 124,010
	1,850,920 3,295,760

5. CASH AND CASH EQUIVALENTS & FINANCIAL ASSETS

5. CASH AND CASH EQUIVALENTS & FINANCIAL ASSETS
	CONSOLIDATED
	31 Dec 2017 30 Jun 2017
	$ $
Cash at bank and on hand Cash on deposit (< 3-month terms) (i) Cash and cash equivalents Financial assets - cash on deposit (> 3-month terms) (ii) Total cash reserves	2,268,064 1,317,994 2,206,342 1,366,231 4,474,406 2,684,225 409,917 100,000 4,884,323 2,784,225

(i) Cash on call deposits are made for varying periods of between one day and three months, depending on the immediate cash requirement of the Group, and earn interest at the respective cash on call deposit rates.

(ii) Includes all cash invested on term deposits that have a maturity date of at least three months since 31 December 2017.

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Mach7 Technologies Limited Notes to the Financial Statements

FOR THE HALF YEAR ENDED 31 DECEMBER 2017

6. TRADE AND OTHER RECEIVABLES

6. TRADE AND OTHER RECEIVABLES
	CONSOLIDATED
	31 Dec 2017 30 Jun 2017
(a) Trade receivables and accrued revenue	$ $
Trade receivables(i) Less provision for trade doubtful debts Net trade receivables Accrued revenue(Ii) Total trade receivables and accrued revenue Other receivables (non-trade) Less provision for other doubtful debts Goods and services tax receivable Interest receivable Total other receivables	1,367,145 1,837,340 (191,932) -
	1,175,213 1,837,340 1,803,406 2,941,796
	2,978,619 4,779,136 270,728 253,649 - (231,188) 5,519 10,575 7,130 2,581
	283,377 35,617
	3,261,996 4,814,753

• (i) Trade receivables typically have 0-45day payment terms;

(ii) Accrued revenue represents software license fees which have been recognised as revenue which are yet to be invoiced to the customer in accordance with the payment terms pursuant to the customer contract;

7. DEFERRED REVENUE

7. DEFERRED REVENUE
	CONSOLIDATED
	31 Dec 2017 30 Jun 2017
	$ $
Software support revenue (i) Advances from customers (ii)	1,396,399 1,500,312 2,235,016 1,355,168
	3,631,415 2,855,480

Terms and conditions relating to the above financial instruments:

(i) Software support revenue represents annual maintenance contracts where payment has been received by the customer in advance (typically customers are billed annually in advance) and revenue is yet to be recognised (revenue is recognised evenly through-out the year).

(ii) Advances from customers represent software licence fees that have been paid for but the revenue is yet to be recognised. This usually relates to services and implementation projects which are still in progress.

Due to the short-term nature (less than one year) of the above deferred revenue balances, their carrying value is assumed to approximate their fair value.

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Mach7 Technologies Limited Notes to the Financial Statements FOR THE HALF YEAR ENDED 31 DECEMBER 2017

8. FAIR VALUE MEASUREMENT

The carrying amounts of financial assets and financial liabilities approximate their fair values at reporting date. The Group did not measure any financial assets or financial liabilities at fair value on a non-recurring basis at 31 December 2017 (30 June 2017: Nil).

9. CONTINGENT LIABILITIES

During the previous financial year, the Company novated a finance lease to a third party. The Company continues to act as guarantor for this lease through to the expiry of 15 July 2019. The Company’s maximum exposure as guarantor (in the event the third-party defaults on all future lease payments since 31 December 2017) is $210,363.

Effective 1 July 2017, the Group assigned an operating lease of premises in Australia to a third party (assignee). Under the terms of the lease, the Group remains liable for any terms and conditions in the lease agreement in the event the assignee defaults or is in breach of the lease agreement. This obligation expires on 7 September 2018. The Company’s exposure in the case of default of rent and outgoings from 1 January 2018 to 7 September 2018 is $114,252.

10. SUBSEQUENT EVENTS

The Company is not aware of any subsequent events that have occurred since 31 December 2017 that may materially affect the financial information in this report.

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Mach7 Technologies Limited Directors’ Declaration

DIRECTORS’ DECLARATION

In the directors' opinion:

• the attached financial statements and notes comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes give a true and fair view of the Group's financial position as at 31 December 2017 and of its performance for the financial half-year ended on that date; and

• there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of directors made pursuant to section 303(5)(a) of the Corporations Act 2001.

On behalf of the directors

Damien Lim Chairman 26 February 2018 Singapore

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INDEPENDENT AUDITOR’S REVIEW REPORT

TO THE MEMBERS OF

MACH7 TECHNOLOGIES LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Mach7 Technologies Limited and its controlled entities (“the consolidated entity”) which comprises the consolidated statement of financial position as at 31 December 2017, the consolidated statement of profit and loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the consolidated entity are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2017 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Mach7 Technologies Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report 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 Australian Auditing Standards 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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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations act 2001 , which has been given to the directors of Mach7 Technologies Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Mach7 Technologies Limited and its controlled entities is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2017 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

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RSM AUSTRALIA PARTNERS

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R B MIANO

Partner

Dated: 26 February 2018 Melbourne, Victoria

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