Seeing Machines Limited

("Seeing Machines" or the "Company")

INTERIM RESULTS FOR THE SIX MONTHS TO 31 DECEMBER 2011

Seeing Machines Limited (AIM: SEE), a leading developer of facial image processing software for applications that rely on understanding the movement of human faces and eyes, announces its interim results for the six months to 31 December 2011.

Financial Highlights

·     Revenue for the half year to 31 December 2011 of A$3,794,960 (2010 - A$4,019,515);

o  Revenue from customers in Australia up 464% to A$942,057 (2010 - A$165,807);

·     Net loss of A$936,801 for the half year to 31 December 2011 (2010 - A$748,934); and

·     Cash and cash equivalents of A$1,070,433 (2010 - A$1,648,786).

Operational Highlights

·    Revitalisation of leadership with the appointment of Ken Kroeger as CEO in July 2011 and 
subsequently Managing Director from January 2012;

·    Completion of the development of the DSS-IVS3 ruggedized hardware version;

·    Continued expansion of the DSS pipeline with new and existing customers across all regions;

·    New partnership opportunities identified for the DSS which will expand our routes to market;

·    Successful introduction of new service offerings for the DSS, further enhancing our overall value 
proposition and diversifying revenue opportunities;

·    Development of the next generation of our precision gaze Eye Tracking technology;

·    Progressing opportunities for faceAPI licensing , which could generate significant revenue;

·    New production licenses for faceAPI including Spatial View and Monster Media;

·    Significant progress of the TrueField analyser for additional disease coverage; and

·    Subsequent to the period end, DSS version 3 launched in January 2012 along with new services 
enabled by the DSSi platform.

Outlook

The directors are confident that the Company will see revenue growth across the DSS and API businesses and that this will provide a strong foundation for the remainder of 2012 and into 2013.

Ken Kroeger, Managing Director and CEO of Seeing Machines said:

"The first half of FY2012, whilst down on revenue compared to the prior year, actually represents a sequential increase over the previous half.  It's particularly pleasing to see the growth of the DSS business in Australia and the revenue that has resulted from that.  We expect that in this current period, a number of opportunities will be converted and that we will continue on our growth trajectory."

Extracts from the interim financial statements are set out below and a full copy is available from the Company website www.seeingmachines.com and is also available by request to the Company's Registered Office at Level 1, 11 Lonsdale St Braddon ACT 2612, Australia.

Enquiries:

DIRECTORS' REPORT EXTRACT

Review of the first half of the 2012 financial year

The Company achieved revenues of A$3,048,410 from the sale of goods and services and A$746,550 from other income resulting in total revenue for the half year to 31 December 2011 of A$3,794,960 (2010: A$4,090,515).

The first six months of the 2012 financial year were slow in comparison to the corresponding period in 2011.  It should be noted that in 2011 the Company had A$1 million in orders at the start of the period due to the rollout of the DSS to Freeport-McMoRan sites in North America. 

The Company made a net loss of A$936,801 for the six months to 31 December 2011 compared to a net loss of A$748,934 for the period to 31 December 2010. 

Operational highlights for the half-year include:

·    Revitalisation of leadership with the appointment of Ken Kroeger as CEO in July 2011 and Managing Director from January 2012;

·    Completion of the DSS 3 ruggedized hardware version;

·    Continued growth of the DSS pipeline with new customers and expansion at existing sites across 
customers and regions;

·    New partnership opportunities for the DSS which will increase channels to market;

·    Introduction of new services offerings for the DSS enhancing our overall DSS offering and 
diversifying revenue opportunities;

·    The expansion of our clientele in Australia as evidenced by the revenue of A$942,057 compared to A$165,807 for the corresponding period in 2010;

·    Development of the next generation of our precision gaze Eye Tracking technology;

·    Opportunities for faceAPI licensing being progressed which will generate significant revenue;

·    New production licenses for faceAPI including Spatial View and Monster Media; and

·    TrueField progress and potential for additional disease coverage.

Financial Results

The Company achieved revenues of A$3,048,410 (2010: A$4,019,515) from the sale of goods and services and A$746,550 (2010: A$70,932) from other income resulting in total revenue for the half year to 31 December 2011 of A$3,794,960 (2010: A$4,090,515).  The substantial increase in other income is due to the Company receiving a R&D Tax Offset for its Research &Development relating to the 2010 financial year. 

Revenue for the half year for each of the three products; DSS, faceAPI and faceLAB compared to the same period last year is shown in the following table.

The high value of the Australian dollar against the US, Euro and Great Britain currencies has had a negative impact on revenue earnt from those regions over the period.  Cost of sales at A$1,209,167 (2010: A$1,403,134) was down due to lower revenues though was up 4% at 39% of revenue as opposed to 35% of revenue for the corresponding period in 2010.  Net expenditure for the half-year was A$3,624,458 up from A$3,436,247 for the period to 31 December 2010.  Costs in the period have been tightly controlled to preserve cash and much of the increase relates to non-cash items including the salary sacrifice share arrangement under the Executive Share Plan. 

The net loss for the six months to 31 December 2011 was A$936,801 compared to a net loss of A$748,934 for the period to 31 December 2010.

Cash at 31 December 2011 was A$1,070,433 compared to A$2,478,641 at 31 December 2010.

Operational Highlights

DSS

DSS achieved revenue of A$1,981,396 for the six months to 31 December 2011, down from A$2,601,968 achieved for the six months to 31 December 2010.  However, this revenue was up 17% sequentially from the second half of the year ending 30 June 2011.  Revenue was generated from:

·    sales of DSS units;

·    software licensing;

·    installation services;

·    maintenance and support fees;

·    field support services; and

·    DSSi services including event classification and reporting services.

We have seen growth in the customer base and diversification in revenue types generated by the DSS which provides a solid foundation for recurring revenue into the future. 

Revenue came from a number of existing and new customers, and from locations in North and South America, Africa, Australia, Mongolia and Indonesia.  Notably we saw a significant expansion in sites in Australia and we now have several installations in Queensland and Western Australia across a number of customers.  This includes Toll Mining Services with four sites, two in Queensland and two in WA.  As a result, there has been significant growth in Australian derived revenue to A$965,807 for the half year to 31 December 2011 an increase of 468% over the corresponding period in 2010 and almost entirely due to these DSS sales. 

The Company has recently relocated its Queensland team to larger premises to accommodate the growth and the Arizona team will relocate to larger premises this month in order to offer a full service, inventory storage and maintenance facility for the DSS platform across the Americas.

A number of opportunities for alternate ways to bring the DSS to market are also being pursued.  These opportunities include mining, on the road transport and OEM opportunities for the wider automotive market.

In terms of R&D. the major advance has been the completion of the development for the new DSS-IVS 3 - the ruggedized hardware version for the mining industry.  This new product is designed for the harshest of environments and we expect this version to lead to an expansion in roll-outs with existing customers and faster uptake of the product elsewhere. 

DSS version 3 was launched in January 2012 along with new services offerings for the DSS enabled by the DSSi platform. 

For the remainder of this financial year we will focus our energies on expansion of the DSS business through:

·    closing a number of significant deals that will further entrench the DSS as the superior product for the mining industry;

·    delivering, installing and supporting customers implementing DSS in their businesses;

·    further build the DSS team to support our customers in their use of the product;

·    further R&D aimed at keeping the technology ahead of its competitors, expand the markets we can target and incorporating feedback and features that our existing customers need; and

·    Progressing the partnership opportunities that will expand our routes to market. 

faceAPI

faceAPI achieved revenue of A$205,317 (2010: A$220,358) for the six months to 31 December 2011. 

The Company has signed additional production license deals for faceAPI with Spatial View and Monster Media which deliver annual royalties to Seeing Machines.  The Company is progressing faceAPI licensing opportunities with significant ongoing royalty streams which will support this part of the business and provide resources to support ongoing investment in research and development of the core technology platform.

The Company is currently developing the next generation of its gaze technology which will support existing and future products and which will provide further options for monetising the technology across numerous applications and delivery platforms.

The Directors believe that the Company is well placed with faceAPI to take advantage of the many opportunities that will arise now that EyeTracking has progressed from the limited province of researchers and into mainstream.

faceLAB

faceLAB achieved revenue of A$861,697 (2010: A$1,197,189) for the six months to 31 December 2011, a reduction of 28% over the six months to 31 December 2010.

The Company is working with its partner EyeTracking Inc on the next generation of its offering for the EyeTracking research market.  The precision gaze technology mentioned above will also feature in this new offering.

TrueField

The Company's focus continues to be to support the work of our partners at the Australian National University (ANU) who are refining and proving the scientific methods on which the product is based.  Indications are that results will be known during the latter half of the 2012 calendar year.

The ANU researchers believe that the product will have applicability beyond glaucoma the initial eye disease targeted. 

Statement of Financial Position

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

Statement of Comprehensive Income

Statement of Changes in Equity

Statement of Cash Flows