VECTION TECHNOLOGIES LTD — Interim / Quarterly Report 2018

Jan 31, 2018

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ASX Announcement 31 January 2018

ServTech Global Quarterly Review – Q2 FY2018

ACTIVITY HIGHLIGHTS

• Up to $1M of new funding secured from sophisticated investors, $500k banked to date;

• Board restructure brings new directors with significant experience in the corporate and technology sectors further enabling ServTech in its core software and technology services business;

• ServTech executes binding term sheet agreement to sell its real estate, finance and settlements businesses to The Agency Group Australia Ltd (ASX: AU1) for up to $950,000 ;

• ServTech implements a lean cost structure and refocuses on core offerings.

ServTech Global Limited (ASX: SVT) (‘ ServTech ’ or ‘ the Company ’), provides the following report of its activities for the quarter ended on 31 December 2017.

Strategic Review, New Funding and Board Changes

On 22 November 2017, the Company announced that it had entered into a binding convertible loan facility agreement with Servnote Holding Pty Ltd (‘Servnote’), a private consortium, to invest up to $1M in cash into the Company. A constituent of this private consortium was integrated real estate and financial services company The Agency Group Australia Limited (‘The Agency’) (ASX: AU1) who, as a result of participating in the convertible note, made an indirect investment in ServTech.

The entry of the Company into the convertible loan facility was one of the outcomes from a detailed strategic review of its business including its operating costs and cash burn. The impact of changing market conditions resulted in slower than expected revenue growth which resulted in an unsustainable rate of cash burn. This, together with funds from the sale of the rent roll business falling substantially short of expectations, demanded the Company implement rapid cost cutting and sourcing new funding. To date, $500,000 has been received from Servnote. Conversion of the Servnote convertible loan facility to ordinary shares in the Company is subject to shareholder approval.

As a consequence of this transaction, Mr Bert Mondello and Mr Gianmarco Orgnoni were appointed NonExecutive Directors. These new directors bring significant experience in the corporate and technology sectors further enabling ServTech in its core software and technology services business and their initial focus was to formalise a mutually beneficial strategic partnership between The Agency and ServTech.

Agreement with The Agency and Refocus on ServTech Technology Offerings

Subsequent to these appointments, on 14 December 2017 the Company announced that it had entered into a binding term sheet agreement (‘The Agency Agreement’) with The Agency. Per the terms of The Agency Agreement, The Agency will acquire ServTech subsidiaries Sell Lease Property Pty Ltd (real estate agency); Complete Settlements Pty Ltd (conveyancing business) and Value Finance Pty Ltd (mortgage broking business)

Efficient Services Effective Technology

www.servtechglobal.com.au

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for maximum consideration of $950,000 in cash. As well as monetising these operations, moving their substantial payroll, real estate licensing and other compliance obligations to The Agency; a company specialising in that sector, makes sense for both parties.

ServTech Strategy

These divestments enable the Company to refocus on its core value offering – scalable and adaptable Software as a Service (‘SaaS’) technology which conducts back-office transactions on behalf of its customers. ServTech has proven ability to develop and successfully implement total back office transaction management solutions. Sell Lease Property (SLP) was built as the proof of concept for ServTech’s technology offering. Starting from zero with no inhouse real estate expertise, the framework provided by ServTech allowed SLP to:

• expand its property consultant base to over 200 nationwide;

• become the Number 1 Agency in Western Australia by Listings Sold at the 2015/16 REIWA Awards; and

• be awarded 8th place on BRW’s 2016 Fast 100 Companies in Australia.

In this regard, The Agency Agreement also provides for a further back-office support agreement whereby ServTech will continue to maintain the administration services of the previous ServTech entities for a fee of no less than $25,000 per month.

In addition, ServTech will conduct an efficiency assessment of The Agency with a view to ultimately managing back-office support for the whole of The Agency – the potential result being a substantial recurring revenue stream for ServTech. This review will commence in the coming days.

The Company has two significant divisions – an onshore/offshore IT development division and an outsourced back office support division. The IT development division, led by an Australian based team and supported by an Indian based team, designs and develops technology solutions for any business, in any transaction focused industry. The experienced outsourced back office services division facilitates cost effective and efficient business operations. Consisting of a centre based in the Philippines and managed from Australia, this division has the capacity to sit and charge out up to 200 employees for back office support.

As well as pursuing the agreements ServTech currently has on foot (Davey Real Estate, DVG Automotive Group etc.) the new Board members will be looking to execute more conventional service type agreements for call centre and IT development services for various companies to utilise ServTech’s substantial outsourced teams.

Financial

During the December Quarter, cash receipts were $3.4 million (Q1 FY2018: $3.1 million) and net cash used in operating activities was ~$608,000 (Q1: $2,146,000). With the sale of the real estate businesses, revenue will fall but staff, advertising and administrative costs are anticipated to fall proportionately further.

As at 31 December 2017, the cash balance on hand was ~$847,000.

The final proceeds of the sale of the rent roll business are anticipated to be banked in the March 2018 quarter. To date, only $460,000 has been received in this regard. The Company remains conscious of the need to strengthen its capital position while it builds its recurrent cash flow and establishes a sustainable base to fund its growth. This recurrent cash flow begins with the ongoing agreement with The Agency.

Efficient Services Effective Technology

www.servtechglobal.com.au

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Corporate

Since the appointment of the new directors, the Company has:

• gained funding of up to $1M;

• executed a strategic agreement with The Agency with a cash component of up to $950,000 in addition to a $25,000 per month ongoing support agreement and scope to expand; and

• substantially cut its costs.

The Company will focus on monetising its substantial back office support and IT development resources without the compliance and monetary obligations of maintaining a 200+ representative real estate agency.

--ENDS--

Further information:

Bert Mondello Chairman ServTech Global Holdings Limited Tel: +618 6380 2555

About ServTech Global Holdings Limited

ServTech Global is an ASX listed public company (ASX: SVT) specialising in outsourced office, custom software development and Software as a Service (‘SaaS’) solutions that aim to reduce the cost and administrative burdens of running a business.

These solutions allow business owners, franchisees and small to medium sized business operators to spend more time growing their business, servicing the needs of their customers and increasing their profitability by removing the time and cost burden of recording and reporting transactions, administrative tasks and back office functions.

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Efficient Services Effective Technology

www.servtechglobal.com.au

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 31 DECEMBER 2017

Quarter ended (“current quarter”)

Consolidated statement of cash flows	Current quarter $A’000	Year to date (6 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 costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 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	3,408 (357) (11) (3,011) (619) - (7) (11) -	6,508 (780) (71) (6,998) (1,380) 4 (15) (22) -
	(608)	(2,754)
2. Cash flows from investing activities 2.1 Payments to acquire: (a) property, plant and equipment (b) businesses (see item 10) (c) investments	(38) - -	(198) - -

• 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 (6 months) $A’000
(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	- - 2 - - - 156 - - 13	- - 2 - - - 156 - - 37
	133	(3)
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	- 500 - - (147) - - 7	- 500 (21) - (156) - - 14
	360	337
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) 4.4 Net cash from / (used in) financing activities (item 3.10 above)	992 (608) 133 360	3,300 (2,754) (3) 337

• 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 (6 months) $A’000
4.5 Effect of movement in exchange rates on cash held 4.6 Cash and cash equivalents at end of quarter	(30)	(33)
	847	847
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)	847 - - -	992 - - -
	847	992
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 1.2 149 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
		149
		-
Director fees and superannuation of ~$103,000, legal fees paid to a director related entity of ~$31,000, office rent paid to a director related entity of ~$15,000 and interest paid to a director related entity of ~$8,000 for a convertible note facility.

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		-
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

• 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
	497	282
	-	-
	1,000	500

• 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.

The facility is with National Australia Bank, has an interest rate of 6.015% and is unsecured. Since quarter end, this facility has been paid down with part proceeds of the rent roll sale. As a result, no amount is drawn down as at the date of this report.

*On 22 November 2017, the company announced that it had secured a convertible note facility of up $1M from a sophisticated investor consortium. At as the date of this report, $500,000 had been drawn down on this facility.

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	- - 20 20 450 80 -
	570

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	-	-

• 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

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: ............................................................ (Company Secretary)

Date: 31 January 2018

Print name: Derek Hall

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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