VECTION TECHNOLOGIES LTD — Interim / Quarterly Report 2018

Oct 30, 2018

ASX Release

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31 October 2018 | Perth Australia

ServTech Global Quarterly Update and Appendix 4C

ServTech Global Holdings Ltd (ASX: SVT) (“ ServTech ” or the “ Company ”), a software development and Software as a Service (‘ SaaS ’) solutions provider, presents the following report for the quarter ended on 30 September 2018.

HIGHLIGHTS

• The successful launch of a software solution for the Real Estate Institute of WA (REIWA);

• Successful implementation of services and SaaS support to The Agency Group Australia Limited;

• The effective delivery of software development solutions and subsequent revenue generation;

• Reduction of overhead costs brings the Company close to a cash flow positive position from software development operations.

The Company is successfully developing and delivering software development solutions for renowned national and international businesses, cementing its industry position and capabilities.

The Company has successfully implemented an organisational structure capable of delivering results to its clients, leveraging the knowledge of its team consisting of 30 software development professionals, with skill sets including, but not limited to, back end and front-end PHP, database, native iOS and Android as well as UI/UX developing, designing and testing.

ServTech is now actively scoping a multitude of software development opportunities, increasing its pipeline and expects to drive further incremental revenue and value imminently.

Successful launch of REIWA App

On 9 August, ServTech announced that its wholly-owned development division Technobrave Pty Ltd (“ Technobrave ”) had successfully completed development of a mobile application for the Real Estate Institute of WA (“ REIWA ”): the REIWA.com Property App (the “ REIWA App ”).

REIWA is the peak body for the real estate profession in WA representing over 90 per cent of operating real estate agents in WA. ServTech was previously engaged by REIWA to develop a new consumer-focused mobile application (ASX: 18 September 2017). The successful launch of the REIWA App on both the Apple iOS and Google Play app stores represents the first phase of development. The Company expects to gain further incremental revenue from this engagement as well as other contracts in the pipeline which it expects to announce in due course.

Successful implementation of Services Contract with The Agency

On 10 July 2018, the Company advised that the real estate businesses sold to The Agency Group Australia Limited (“ The Agency ”) (ASX: 21 February 2018) have been successfully migrated and handed over to The Agency.

As part of the transaction, ServTech continues to deliver services and SaaS support to The Agency.

The Company confirmed that these services are being successfully provided to The Agency's Sell Lease Property brand, The Agency’s Mortgage and Finance Solutions and Property Management divisions. During the quarter, ServTech’s invoiced more than ~$30,000 each month for services to The Agency demonstrating that the offering has expanded beyond the scope of the initial engagement.

Notably, ServTech is currently piloting a roll out of its services for The Agency’s eastern states division. This division has more than 100 agents over 9 offices and since April 2017 has delivered over $400 million in sales from more than 500 settlements.

ServTech is currently in discussions with several real estate agencies and other corporates to provide these types of services. The Company expects to be able to report on these opportunities imminently.

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Revenue from Software Development Contract

In the previous quarter, the Company advised that Technobrave Pty Ltd was awarded a 2-year Services Contract Agreement with Emerge Gaming Solutions Pty Ltd (“ Emerge ”) to offer strategic insights and manage the development and maintenance of Emerge’s cutting-edge eSports platform Arcade X (ASX: 7 May 2018).

The agreement with Emerge is the largest development contract the Company has secured since its inception and profitably underpins the operations of the software development division for the long term. During the September quarter ~$154,000 was banked in relation to this contract.

Corporate

The Company held a General Meeting of shareholders on 10 August 2018 to approve the issue of 81,300,813 shares share as a result of the conversion of $1,000,000 worth of convertible notes under the convertible note facility. The Shares were issued to convertible note holders who were shareholders of Servnote Holding Pty Ltd (“ Servnote ”).

Servnote loaned $1,000,000 to the Company in a strong endorsement of the steps taken to date to refocus the Company on software development and control costs.

Approval of the convertible note conversion has brought sophisticated and professional investors onto the Company’s share register.

Company Financial Overview

Cash at the end of the quarter was ~$239,000.

Of the ~$282,000 in cash receipts (June 2018 quarter: $999,000) during the period. ~$154,000 related to the services contract with Emerge, ~$70,000 related to other contracts including The Agency and REIWA contracts and ~$58,000 related to finalisation of transactions of the legacy real estate businesses.

Of the ~$194,000 of operating costs in the current quarter, ~$93,000 relates to the legacy real estate businesses and will not be incurred in future periods. Of the ~$318,000 of staff costs, ~$147,000 relates to the legacy businesses and will not be incurred in future periods. Similarly, of the ~$199,000 of administration and corporate costs ~$124,000 relates to the legacy businesses including one-off legal fees and settlements with creditors and will not be incurred in future periods.

On 21 February 2018, the Company announced the successful completion of its transaction with The Agency to acquire the assets of each of the Company’s real estate subsidiaries in exchange for consideration of $950,000 payable to ServTech.

The outstanding balance of $550,000 was previously agreed to be received in $50,000 monthly instalments, however with The Agency holding a shareholder’s meeting to approve a share placement capital raising on 15 November, this repayment schedule will be accelerated.

Outlook

With substantially reduced overheads, most legacy issues resolved and a pipeline of agreements pending, the Company is well positioned to become cash flow positive in the short term.

ENDS

For more information: ServTech Global Holdings Limited +61 8 6380 2555 servtechglobal.com.au

About ServTech Global Holdings Limited

ServTech Global is an ASX listed public company (ASX: SVT) specialising in software development and Software as a Service (‘SaaS’) solutions.

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

+Rule 4.7B

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

Name of entity

SERVTECH GLOBAL HOLDINGS LIMITED

ABN 93 614 814 041

Quarter ended (“current quarter”)

30 SEPTEMBER 2018

Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs1 (c) advertising and marketing (d) leased assets (e) staff costs2 (f) administration and corporate costs3 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid4 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities	282 - (194) (7) - (318) (199) - - (21) - - -	282 - (194) (7) - (318) (199) - - (21) - - -
	(457)	(457)

1. Includes one off costs of $93,000 including settlement of office leases and final creditor settlements 2. Includes one off costs of $147,000 which relate to historical commissions and employee on costs paid to real estate representatives who have transferred to The Agency or are otherwise no longer employed by the Company 3. Includes one off costs of $124,000 including legal fees and creditor settlements

2. Interest paid on facility which has since been converted to Shares in the Company. No interest to be incurred from this going forward.

2. Cash flows from investing activities

2. Cash flows from investing activities 2.1 Payments to acquire: (a) property, plant and equipment (b) businesses (see item 10)	2. Cash flows from investing activities 2.1 Payments to acquire: (a) property, plant and equipment (b) businesses (see item 10)
	2.1 Payments to acquire: (a) property, plant and equipment (b) businesses (see item 10)	- -	- -

• See chapter 19 for defined terms

1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
(c) investments (d) intellectual property (e) other non-current assets 2.2 Proceeds from disposal of: (a) property, plant and equipment (b) businesses (see item 10) (c) investments (d) intellectual property (e) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities*	- - - - - - - 196 - - -	- - - - - - - 196 - - -
	196	196

*On 21 February 2018, the Company announced that it had entered into a binding sale agreement with The Agency Group Limited (The Agency) for The Agency to acquire the assets of the Company’s real estate businesses for consideration of $950,000. To date $400,000 has been received of the consideration ($100,000 this quarter) with the balance of $550,000 to be received in monthly instalments of $50,000 until The Agency completes a capital raising (slated for November 2018) at which time an accelerated repayment plan will be agreed.

3. Cash flows from financing activities

3. Cash flows from financing activities
3.1 Proceeds from issues of shares 3.2 Proceeds from issue of convertible notes 3.3 Proceeds from exercise of share options 3.4 Transaction costs related to issues of shares, convertible notes or options 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (provide details if material) 3.10 Net cash from / (used in) financing activities	- - - - - - - - -	- - - - - - - - -
	-	-
4. Net increase / (decrease) in cash and cash equivalents for the period 4.1 Cash and cash equivalents at beginning of quarter/year to date 4.2 Net cash from / (used in) operating activities (item 1.9 above) 4.3 Net cash from / (used in) investing activities (item 2.6 above)	514 (457) 196	514 (457) 196

• See chapter 19 for defined terms

1 September 2016

Page 2

Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
4.4 Net cash from / (used in) financing activities (item 3.10 above) 4.5 Effect of movement in exchange rates on cash held 4.6 Cash and cash equivalents at end of quarter	- (14)	- (14)
	239	239
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts	Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)	239 - - -	514 - - -
	239	514
6. Payments to directors of the entity and their associates Current quarter $A'000 6.1 Aggregate amount of payments to these parties included in item 1.2 53 6.2 Aggregate amount of cash flow from loans to these parties included in item 2.3 - 6.3 Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2
		Current quarter $A'000
		53
		-

Item 6.1 includes aggregate amounts paid to directors including salaries and directors’ fees.

7.	Payments to related entities of the entity and their	Current quarter
	associates	$A'000
7.1	Aggregate amount of payments to these parties included in item 1.2		59
7.2	Aggregate amount of cash flow from loans to these parties included		-
	in item 2.3
7.3	Include below any explanation necessary to understand the transactions included in
	items 7.1 and 7.2

During the quarter, technical consultancy fees paid to a director related entity of ~$38,000, Interest paid to a director related entity of ~$21,000 in relation to the convertible note facility which has since been converted to shares (on 10 August 2018).

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

8. Financing facilities available Add notes as necessary for an understanding of the position 8.1 Loan facilities 8.2 Credit standby arrangements 8.3 Other (please specify)	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
	-	-
	-	-
	-	-

• 8.4 Include below a description of each facility above, including the lender, interest rate and whether it is secured or unsecured. If any additional facilities have been entered into or are proposed to be entered into after quarter end, include details of those facilities as well.

9. Estimated cash outflows for next quarter	$A’000
9.1 Research and development 9.2 Product manufacturing and operating costs 9.3 Advertising and marketing 9.4 Leased assets 9.5 Staff costs 9.6 Administration and corporate costs 9.7 Other (provide details if material) 9.8 Total estimated cash outflows	- 30 - - 50 80 -
	160

In terms of cash inflows, the Company has ~$370k in debtors at the end of the quarter which are due and payable and expected to be receipted during the next quarter. In addition, the Company will also invoice for work completed during the next quarter.

10. Acquisitions and disposals of business entities (items 2.1(b) and 2.2(b) above)	Acquisitions	Disposals
10.1 Name of entity	-	-
10.2 Place of incorporation or registration	-	-
10.3 Consideration for acquisition or disposal	-	-
10.4 Total net assets	-	-
10.5 Nature of business	-	-

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Sign here: ............................................................ Date: 31 October 2018

(Company Secretary)

Print name: Derek Hall

• See chapter 19 for defined terms 1 September 2016

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Appendix 4C Quarterly report for entities subject to Listing Rule 4.7B

Notes

1. The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity that wishes to disclose additional information is encouraged to do so, in a note or notes included in or attached to this report.

2. If this quarterly report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. See chapter 19 for defined terms 1 September 2016

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