USCOM LIMITED — Interim / Quarterly Report 2012

Feb 22, 2012

Uscom Limited ABN 35 091 028 090

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Level 7, 10 Loftus Street Sydney NSW 2000 Australia T +612 9247 4144 F +612 9247 8157 www.uscom.com.au

Uscom Limited and its controlled entity ABN 35 091 028 090

ASX Appendix 4D Half yearly report – 31 December 2011

Contents

Results for announcement to the market	1
Dividends per share	1
Net Tangible Assets per ordinary share	1
Status of review	1
Commentary	1
Financial highlights	1
Half yearly report	5-14

Uscom 2012 Half yearly report

ABN 35 091 028 090

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Uscom Limited

Level 7, 10 Loftus Street Sydney NSW 2000 Australia T +612 9247 4144 F +612 9247 8157 www.uscom.com.au

Reporting period ended	31 December	2011
Previous corresponding reporting period:	31 December	2010
Results for announcement to the market
Revenues from ordinary activities	up	4.60%	to	$503,231
Lossfrom ordinary activities after tax attributable to members	up	8.03%	to	$1,137,019
Net Lossfor the period attributable to members	up	8.03%	to	$1,137,019

Dividends per Share

It is not proposed to pay a dividend.

Net Tangible Asset per Ordinary Share

	31	December	2011	31	December	2010
NTA backing			2.9c			6.0c

Status of review

The accounts have been reviewed.

Commentary
Refer Executive Chairman review of operations in page 2-3.
Financial highlights
Revenues from ordinary activities	$503,231
Loss from ordinary activities	($1,137,019)
Sales Revenue	$446,679
Net operating cash consumption	($867,850)
Net decrease in cash held	($918,903)
Cash held at end of the year	$1,206,253

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Appendix 4D Half yearly report

Interim Financial Report

DIRECTORS’ REPORT

Your directors present the financial report of Uscom Ltd for the half-year ended 31 December 2011.

Directors

The names of directors who held office during or since the end of the half-year:

Mr Rob Phillips Mr Bruce Rathie (Resigned on 30 August 2011) Mr Philip Milton Kiely (Ceased on 22 November 2011) Mr Jochen Bonitz (Ceased on 22 November 2011) Ms Sheena Jack (Appointed on 25 November 2011) Mr Christian Bernecker (Appointed on 25 November 2011)

Shareholdings of directors as at 31 December 2011

Name of directors	Balance 31 December 2011
Mr Rob Phillips	16,996,7331
Ms Sheena Jack	80,0002
Mr Christian Bernecker	-
Total	17,076,733

1 382,924 of these ordinary shares are held by NCS Pty Ltd as Trustee for Phillips Family Superannuation.

2

All these ordinary shares are held by family associate.

Review of operations

The results for the first half of financial year 2012 demonstrates a decrease in revenue from sale of goods from $476k in the corresponding 6 month period in the previous year, to $447k for the 6 months to 31[st] December 2011. However costs increased from $1,684k to $1,790k resulting in an increased net operating loss before tax from $1,203k to $1,287k for the first half of this financial year relative to the corresponding 2010 period.

The decrease in sales proved to be as a consequence of alienation of the US distributors and sales team, while increased costs were the result of spending on long term strategies that had no short or mid term results.

In response to the above performance shareholders voted at the AGM for a change in the Board, resulting in the failed re-election of Mr Phil Kiley and Mr Jochen Bonitz to the Board. In addition, Mr Joe Trygar, who was appointed Global Sales Manager in July 2011 and subsequently promoted to CEO in mid September, was terminated.

Mr Rob Phillips was appointed as CEO in mid December, and Ms Deb Johnson was appointed as VP Sales and Marketing with a specific focus on re-activating US operations.

As part of the reconstruction of Uscom Sheena Jack and Christian Bernecker joined the Company as new members of the Uscom Board and Tom Rowe was appointed as the new Company Secretary, while Rob Phillips resumed the Chair of the Board. A strategic change in Company direction is being implemented focusing on cost, sales, and incremental growth opportunities from strategic partnerships.

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Specifically these changes will focus on a re-vitalised and cost effective and global sales and distribution network. Importantly the Board will introduce a culture of respect for shareholder’s capital and will work hard to restore core value to the Company off the back of improved and sound operations. Meaningful budgets and projections have been developed that reflect realistic commercial scenarios in a complex, unpredictable and difficult global economic environment.

Uscom is consolidating its core strengths; great science and great people that know the technology and understand the product, the medical market and the nuances of working in and managing a publicly listed entity. The new Board and CEO are committed to sales and marketing via a global distribution model based on multiple partnerships with mid sized businesses with regional strengths and local connections.

Asia continues to be a success delivering on going growth in sales and increasing clinical adoption. The adoption of USCOM is a complex and time consuming process. However our distribution partners in Asia, Pacific Medical Systems, have been with the company since listing and have a strong network of advanced users. They have established an expanding network of regional sub-distributors which has generated steadily increasing sales.

The US remains complex with the Health Bill still in limbo and unlikely to be resolved until after the presidential elections in November. Regardless we have a substantial and competent US distribution into this large, costly and sophisticated market, and we have begun revitalising and re-motivating the alienated distributors who will be essential to our sales and adoption in this market. We are optimistic that this new approach will yield improved results over the coming 12mths.

Our strategy across the rest of the world remains to partner with outstanding regional distributors with good local knowledge and experience and provide them with the support they need to develop local sales.

Uscom has a strong global brand recognition and widely acknowledged excellence in science and an alternate path to market penetration and value for shareholders involves the licensing of Uscom technology. Uscom also has a large holding of untapped value in patents that can be developed as the foundation of a new platform of allied products. Market specific partnerships with current global healthcare leaders for development of new products based on Uscom patents is an important value path which we are developing in on going discussions. Uscom also remains alert to the opportunity to partner with other technologies to diversify the business and establish new paths to revenue and generate incremental growth.

In summary the strategy for the Company for the coming 12 months is improved performance off the back of realistic budgets combined with preservation of shareholder capital. Our objectives are to establish a viable business which can transition into a profitable medical device Company as the GFC resolves and world markets return to growth.

Sustainable operations, organic sales growth, and strategic partnerships to generate incremental growth form the foundation of our current business plan.

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Rob Phillips Executive Chairman

Sydney, 22 February 2012

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Lead auditor’s independence declaration under Section 307C of the Corporations Act 2001

To: the directors of Uscom Limited and the entity it controlled during the half year

I declare to the best of my knowledge and belief, in relation to the review of the financial half-year ended 31 December 2011 there have been:

• no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review, and

• no contraventions of any applicable code of professional conduct in relation to the review.

The declaration is in respect of Uscom Limited and the entity it controlled during the half year ended 31 December 2011.

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PKF

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John Bresolin Partner

22 February 2012 Sydney

Tel: 61 2 9251 4100 | Fax: 61 2 9240 9821 | www.pkf.com.au PKF | ABN 83 236 985 726 Level 10, 1 Margaret Street | Sydney | New South Wales 2000 | Australia

The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

Liability limited by a scheme approved under Professional Standards Legislation.

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Interim Financial Report

Uscom Limited and its controlled entities

Consolidated income statement

for the half year ended 31 December 2011

Continuing operations		31 Dec 2011	31 Dec 2010
	Note	$	$
Revenues from ordinary activities	2	503,231	481,089
Raw materials and consumables used		(127,658)	(96,052)
Expenses from ordinaryactivities,excludingfinance costs	3	(1,662,592)	(1,587,547)
Loss before income tax credit		(1,287,019)	(1,202,510)
Income tax credit		150,000	150,000
Loss after income tax credit		(1,137,019)	(1,052,510)
Earning per share (EPS)
Basic earnings per share (cents per share)		(2.2)	(2.5)
Diluted earnings per share (cents per share)		(2.2)	(2.5)
Consolidated statement of comprehensive income
for the half year ended 31 December 2011		31 Dec 2011	31 Dec 2010
		$	$
Loss for the period		(1,137,019)	(1,052,510)
Other comprehensive income
Foreign currencytranslation differences for foreign operations		3,374	341
Other comprehensive income for the period		3,374	341
Total comprehensive income for the period		(1,133,645)	(1,052,169)
Attributable to:
Owners of the Company		(1,133,645)	(1,052,169)
Minorityinterest		-	-
Total comprehensive income for the period		(1,133,645)	(1,052,169)

This Income statement and Statement of comprehensive income are to be read in conjunction with the annual financial report for the year ended 30 June 2011 and the attached notes.

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Interim Financial Report

Uscom Limited

Consolidated statement of financial position as at 31 December 2011

		31 Dec 2011	30 Jun 2011
	Note	$	$
Current assets
Cash and cash equivalents		1,206,253	2,125,156
Trade and other receivables		177,834	163,991
Inventories		192,906	213,882
Tax assets		150,000	344,896
Other assets		63,250	72,589
Total current assets		1,790,243	2,920,514
Non-current assets
Plant and equipment		85,687	93,289
Intangible assets		514,899	510,487
Total non-current assets		600,586	603,776
Total assets		2,390,829	3,524,290
Current liabilities
Trade and other payables		168,090	148,273
Short termprovisions		103,860	142,269
Total current liabilities		271,950	290,542
Non-current liabilities
Longtermprovisions		115,927	98,143
Total non-current liabilities		115,927	98,143
Total liabilities		387,877	388,685
Net assets		2,002,952	3,135,605
Equity
Issued capital	4	21,376,920	21,376,920
Options reserve	5	1,374,487	1,373,495
Accumulated losses		(20,823,226)	(19,686,207)
Foreign currencytranslation reserve		74,771	71,397
Total equity		2,002,952	3,135,605

This Statement of financial position is to be read in conjunction with the annual financial report for the year ended 30 June 2011 and the attached notes.

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Uscom Limited

Consolidated statement of changes in equity for the half year ended 31 December 2011

Note	31 Dec 2011 31 Dec 2010 $ $
Total equity at the beginning of the period Loss from continuing operations Other comprehensive income Foreign currency translation differences Total comprehensive income for the period Transactions with owners, recorded directly in equity Shares issued 4 Cost of raising capital Unissued share capital 5 Other equity movement Share-based payments Total transactions with owners Total equity at the end of the period	3,135,605 2,450,035
	(1,137,019) (1,052,510) 3,374 341
	(1,133,645) (1,052,169)
	- 1,567,500 - (21,710) - 407,373 992 4,021
	992 1,957,184
	2,002,952 3,355,050

This Statement of Changes in Equity is to be read in conjunction with the annual financial report for the year ended 30 June 2011 and the attached notes.

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Uscom Limited

Consolidated statement of cash flows for the half year ended 31 December 2011

	31 Dec 2011	31 Dec 2010
	$	$
Cash flows from operating activities
Receipts from customers	432,836	483,751
Grants and others received	3,987	581
Payments to suppliers and employees	(1,700,967)	(1,545,925)
Interest received	51,398	4,577
Income tax receipt	344,896	370,529
Net cash used in operatingactivities	(867,850)	(686,487)
Cash flows from investing activities
Purchase of plant and equipment	(363)	(5,289)
Purchase ofpatents and trademarks	(50,690)	(27,029)
Net cash used in investingactivities	(51,053)	(32,318)
Cash flows from financing activities
Proceeds from issue of shares and options	-	1,567,500
Share issue costs	-	(21,710)
Privateplacementproceeds received in advance	-	407,373
Net cashprovided byfinancingactivities	-	1,953,163
Net increase in cash and cash equivalents	(918,903)	1,234,358
Net cash and cash equivalents at the beginning of the period	2,127,408	1,373,541
Exchange rate adjustments to cash and cash equivalents at the beginning ofthe period	(2,252)	2,503
Net cash and cash equivalents at the end of the period	1,206,253	2,610,402

This Statement of Cash Flows is to be read in conjunction with the annual financial report for the year ended 30 June 2011 and the attached notes.

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Notes to the Interim Financial Report

Uscom Limited

Selected Explanatory Notes to the Financial Statements For the half year ended 31 December 2011

Note 1 – Statement of significant accounting policies

The half-year consolidated financial report was approved by the Board of Directors on 22 February 2012. This half-year consolidated financial report has been prepared in accordance with Accounting Standard AASB 134 and is to be read in conjunction with the annual financial report for the financial year ended 30 June 2011. This is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards, including Australian Accounting Interpretations and the Corporations Act 2001.

The half-year report does not include full disclosures of the type normally included in an annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

Accordingly, it is recommended that this financial report be read in conjunction with the annual financial report for the year ended 30 June 2011 and any public announcements made by Uscom Limited during the half-year in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

The same accounting policies have been followed as those applied and discussed in the financial report for the financial year ended 30 June 2011.

(a) Going Concern

The consolidated entity incurred a total comprehensive loss of $1,133,645 during the period ended 31 December 2011 (2010: $1,052,169) and incurred operating cash outflows of $867,850 (2010: $686,487).

These conditions indicate the existence of a material uncertainty which may cast significant doubt about the consolidated entity’s ability to continue as a going concern.

The consolidated entity's forecasts and projections for the next twelve months take account the current status and future trading performance and indicate that in the directors' opinion the consolidated entity will be able to operate as a going concern.

As noted in the review of operations in the directors' report the consolidated entity has been recently restructured and existing sales channels are currently being re-vitalised. The consolidated entity is confident that once the current distributors are revitalised the forecasts and projections will be able to be met.

In addition to the current distributors, the consolidated entity will have enhanced its position by extending the sales coverage into currently unallocated territories.

The re-vitalisation process is expected to take some time. The consolidated entity needs to provide training and sales support to the distributors to ensure success. The consolidated entity is also assisting the distributors in designing and implementing various sales targeting strategies to specific regional markets.

The timing and sales volumes associated with the regional strategies and targets may vary from those forecast by management. As such the directors believe that this may give rise to material uncertainty and significant doubt in the timing of operating cash flows. Should the timing of operating cash flows be significantly different to those forecast the consolidated entity may need to seek alternative financing options to enable it to settle its liabilities as they fall due.

The Directors are satisfied that adequate plans and strategies have been formulated and will be adopted as required to allow the company to have sufficient cash to meet its obligations through to 28th of February 2013 (12 months from date on audit report). On this basis the financial report has been prepared on the going concern basis.

Should the company be unable to continue as a going concern it may be required to realise its assets and discharge its liabilities other than in the normal course of business and at amounts different to those stated in the financial statements. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount of liabilities that might result should the company be unable to continue as a going concern and meet its debts as and when they fall due.

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Notes to the Interim Financial Report

Note 2 – Revenue Sale of goods Other income Interest received Grants received Exchange gain Miscellaneous income Total other income Total revenue Note 3 – Expenses from ordinary activities Depreciation and amortisation expenses Employee expenses Research and development expenses Advertising and marketing expenses Occupancy expenses Regulatory expenses Administrative expenses Exchange losses Total expenses from ordinary activities Note 4 – Issued capital Ordinary shares Fully paid ordinary shares Total contributed equity Movement in issued capital Shares on issue at the beginning of the period Private Placement in December 2010 to April 2011 Share Purchase Plan in February 2011 Share issue cost Ordinary shares at the end of the period Ordinary shares at the beginning of the period Ordinary shares issued during Private Placement Ordinary shares issued during Share Purchase plan Total fully paid ordinary shares at the end of the period Note 5 – Options reserve Options reserve balance at the beginning of the period Expenses arising from share-based payment Options reserve balance at the end of the period Movement in option number Options at the beginning of the period Granted during the period Lapsed during the period Options at the end of the period	31 Dec 2011 31 Dec 2010 $ $ 446,679 475,930 51,398 4,577 1,259 127 1,168 - 2,727 455
	56,552 5,159
	503,231 481,089
	63,651 56,498 548,392 462,975 259,337 255,223 378,195 307,964 79,482 74,741 27,777 41,770 305,758 248,050 - 140,326
	1,662,592 1,587,547
	31 Dec 2011 30 June 2011 $ $ 21,376,920 21,376,920
	21,376,920 21,376,920
	21,376,920 18,345,462 - 2,831,350 - 264,782 - (64,674)
	21,376,920 21,376,920
	Number Number 52,124,488 41,804,047 - 9,437,835 - 882,606
	52,124,488 52,124,488
	$ $ 1,373,495 1,041,613 992 331,882
	1,374,487 1,373,495
	Number Number 7,710,000 3,780,000 - 4,400,000 (1,000,000) (470,000)
	6,710,000 7,710,000

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Notes to the Interim Financial Report

Note 6 – Operating segments

Segment information

The Consolidated Entity operates in the global health and medical products industry. Globally the company has 5 geographic sales and distribution segments as shown below. For each segment, the CEO and CFO review internal management reports on at least a monthly basis.

The largest customer group which operates in Asia accounts for 48 % of the total sales revenue.

	Australia Asia USA Europe Other region Unallocated Total $ $ $ $ $ $
31 Dec 2011 Sales to external customers Other revenues Total segment revenue Segment expenses Segment result before income tax 31 Dec 2010 Sales to external customers Other revenues Total segment revenue Segment expenses Segment result before income tax	220 214,698 104,605 112,232 14,924 - 446,679 55,293 - - 1,259 - - 56,552
	55,513 214,698 104,605 113,491 14,924 - 503,231 115 75,197 474,725 112,704 17,898 1,109,611 1,790,250
	55,398 139,501 (370,120) 787 (2,974) (1,109,611) (1,287,019)
	715 117,559 340,793 16,863 - - 475,930 5,032 - - 127 - - 5,159
	5,747 117,559 340,793 16,990 - - 481,089 326 30,271 359,861 109,016 - 1,184,125 1,683,599
	5,421 87,288 (19,068) (92,026) - (1,184,125) (1,202,510)

Note 7 – Contingent assets

There were no contingent assets as at 31 December 2011.

Note 8 – Contingent liabilities

There were no contingencies as at 31 December 2011.

Note 9 – Significant events

During the year, the following significant events occurred:

1. Joe Trygar appointed SVP Global Sales July 2011

2. 45% increase in losses for 2011 announced

3. Joe Trygar appointed CEO 16th September 2011

4. Change of Board of Directors 25th November 2011

5. New Board and management. Joe Trygar terminated 7th December 2011 6. New business strategy initiated 7th December 2011

Note 10 – Events after Balance Sheet date

There were no events subsequent to 31 December 2011 that are required to be reported in this note.

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DIRECTORS’ DECLARATION

The directors of Uscom Ltd declare that:

• 1 the half-year financial statements and notes of Uscom Ltd are in accordance with the Corporations Act 2001, including:

• (a) giving a true and fair view of the company’s financial position as at 31 December 2011 and of its performance as represented by the results of its operations, changes in equity and cash flows for the half year ended on that date; and

• (b) complying with Accounting Standard AASB 134 “Interim Financial Reporting” and the Corporations Regulations 2001 and other mandatory professional reporting requirements.

• 2 In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay it debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the board of directors.

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Rob Phillips

Executive Chairman

Sheena Jack

Director

Sydney, 22 February 2012

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INDEPENDENT AUDITOR’S REVIEW REPORT TO THE MEMBERS OF USCOM LIMITED

Report on the Half-Year Financial Report

We have reviewed the accompanying consolidated half-year financial report of Uscom Limited which comprises the statement of financial position as at 31 December 2011, the statement of comprehensive income, statement of changes in equity and 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 of the consolidated entity. The consolidated entity comprises Uscom Limited (the company) and the entities it controlled at 31 December 2011 or from time to time during the half-year ended on that date.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company 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 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 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 2011 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 Uscom 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.

Tel: 61 2 9251 4100 | Fax: 61 2 9240 9821 | www.pkf.com.au PKF | ABN 83 236 985 726 Level 10, 1 Margaret Street | Sydney | New South Wales 2000 | Australia

The PKF East Coast Practice is a member of the PKF International Limited network of legally independent member firms. The PKF East Coast Practice is also a member of the PKF Australia Limited national network of legally independent firms each trading as PKF. PKF East Coast Practice has offices in NSW, Victoria and Brisbane. PKF East Coast Practice does not accept responsibility or liability for the actions or inactions on the part of any other individual member firm or firms. Liability limited by a scheme approved under Professional Standards Legislation.

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Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

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 the consolidated entity 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 2011 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 .

Emphasis of Matter

Without qualifying our opinion, we draw attention to Note 1 in the financial report, which indicates that the company incurred a net loss of $1,133,645 during the half year ended 31 December 2011 and, as of that date, the consolidated entity incurred net operating cash outflows of $867,850. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the company’s ability to continue as a going concern and therefore, the company may be unable to realise its assets and discharge its liabilities in the normal course of business.

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PKF

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John Bresolin Partner

22 February 2012 Sydney

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