Final Results

Seeing Machines Limited
19 October 2006

19 October 2006


                            SEEING MACHINES LIMITED
                      ('Seeing Machines' or 'the Company')


           FINANCIAL RESULTS FOR THE YEAR ENDED 30 JUNE 2006 (AUDITED)


Seeing Machines Limited (AIM: SEE) today announces its audited financial results
for the year ended 30 June 2006.


Financial Highlights


  • Revenue from sale of goods up 70% to $2,407,228 (2005: $1, 414,903)

  • Total revenue (includes contract revenue and other income) increased 12%
    to $3,092,854 (2005: $2,768,162)

  • Net loss decreased 89% to $135,077 (2005: $1,228,908) through the increase
    in faceLABTM sales and tight control over expenditure.

  • Cash increased to $2,407,053 (2005: $663,213) following successful
    December 2005 IPO (raised £1.65million/A$3.8m) and highest ever faceLABTM
    sales figures of $2,407,228

Operational Highlights

  • two versions of flagship faceLABTM product released during the year;

  • significant progress on the glaucoma diagnostic device including
    completion of several scientific trials and clinical study; second clinical
    study commenced, prototype of production device and the software;

  • prestigious R&D award and Innovation award for the glaucoma project;

  • completion of the prototype driver monitoring system (for detection of
    fatigue) with Hella KGaA Heuck & Co;

  • first field trial of the Fatigue Detection System with Schlumberger Inc.,
    a leading global oilfield services provider;

  • May 2006: US patent granted for the 'facial image processing system' - the
    core technology underpinning many of the company's projects;

  • February 2006: US patent granted for 'assessing neural function by sparse
    stimuli' - one of the core technology patents underpinning the glaucoma
    testing device;

  • new patent filed in November 2005 relating to robust tracking of subjects
    wearing eye glasses;

  • commencement of the faceAPITM project which will make the company's key
    technologies available to third-party application developers for easy use
    and deployment in a wide variety of applications

  • first sales of the Noah Basketball System by Pillar Vision.


Commenting on the results Nick Cerneaz, Chief Executive of Seeing Machines,
said: 'These tremendous results are testament to the hard work of all our people
and the quality of the solutions that we provide to the market.  The outstanding
year for faceLABTM sales is a significant contributor along with very tight
control over expenditure.  This was all achieved whilst we vigorously pursued
our R&D projects particularly the glaucoma testing device and we look forward to
introducing new, revenue earning products in the coming year.'



The Annual Report for Seeing Machines for 2005-2006 including the Audited
Financial Statements is available for download from the Company website
www.seeingmachines.com.  The Annual Report will be mailed to all shareholders
later this month.



Enquiries:

Seeing Machines Limited            Insinger de Beaufort            Parkgreen Communications
Nick Cerneaz, CEO                  Simon Fox                       Justine Howarth /

                                                                   Victoria Thomas
[phone]                [phone]            [phone]
www.seeingmachines.com



The Director's Review of Operations, Income Statement, Balance Sheet, Cash Flow
Statement and Statement of Changes in Equity follow:


Director's Review of Results & Operations

Financial Results

The financial results include the impact of the transition to A-IFRS in both the
current and prior years.



Revenue from sale of goods was $2,407,228, an increase of $992,335 (70%) over
the previous year ($1,414,903).  This was an outstanding year for faceLABTM
sales and the increase follows the release of version 4 of faceLABTM in August
2004, version 4.1 in January 2005, version 4.2 in August 2005 and the Scene
Camera version in April 2006.  Seeing Machines has shipped over 100 systems
since the release of version 4 in August 2004.  Total revenue (also including
contract revenue and other income) for the year was $3,092,854, an increase of
$324,691 (12%) over the previous year ($2,768,162).  Contract Income of $56,785
represents a decrease of $67,925 from the prior year ($124,710), and other
income decreased to $628,841 by $599,709 due to a combination of increased
interest income following the increase in cash balances as detailed below,
offset by the deferral this year of government grant income relating to
development projects in line with accounting standards.



Net expenditure for the year was $3,227,930 down by $769,140 on the prior year
($3,997,069).  Research and development continued to be the main area of
expenditure as the company moved forward with the development of key projects
including the glaucoma diagnostic device, automotive applications in the areas
of fatigue and distraction detection, faceLABTM and the new faceAPITM  project
which commenced during the year.  Marketing costs including travel increased
during the year mainly in support of the faceLABTM business.  The cost of goods
sold increased in line with the increase in sales of the faceLABTM product.



The company has capitalised certain of its development costs in line with the
accounting standards.



The net loss for the year was $135,077 a significant reduction (89%) on the net
loss of $1,228,908 for the year ended 30 June 2005.  The reduction in the loss
was achieved through the increase in faceLABTM sales and tight control over
expenditure.



The company had $2,407,053 in cash at 30 June 2006 compared to $663,213 at 30
June 2005.  The improvement in the company's cash position was due to the
capital raised in an Initial Public Offering (IPO) of the company completed in
December 2005 and the increase in faceLABTM sales.  Net assets increased to
$3,913,237 at 30 June 2006 compared to $442,817 at 30 June 2005.  This increase
is due to increased cash and capitalised development costs and a reduction in
trade and other payables.



faceLABTM



faceLABTM was the company's first product and remains the flagship product
today.  Since the release of version 4 in August 2004 more than 100 new systems
have been shipped.  Two releases - version 4.2 and the Scene Camera version -
were made during the year ended 30 June 2006.  A number of releases are planned
for this financial year including version 5 - a major upgrade introducing
significant new functionality for tracking specific facial features.



During the year faceLABTM was purchased by organisations such as the US National
Highway Transport Safety Administration (NHTSA), Daimler Chrysler, Ford, Toyota,
Fiat, Australian Defence Science Technology Organisation (DSTO), University of
Pennsylvania, John Hopkins University among others.



Medical Devices - Glaucoma Project



We have continued the focus on this key project throughout the year and
completed a number of key milestones including validation of the scientific
method underpinning the device in a number of scientific trials and the first
clinical trial at the Canberra Eye Hospital.



Progress was made across the broad range of activities required to bring the
device to market including:



  • scientific trials to confirm the underlying scientific method;
  • clinical studies to confirm the device in a real clinical environment;
  • industrial design including the first prototype of the production version
    of the device;
  • a number of iterations of the software for the device including the
    patient management software;
  • preparatory work required to submit an application for regulatory approval
    with the Food and Drug Administration (FDA) in the United States, the main
    market for the device;
  • marketing and branding including market research and trademark
    applications.



The progress made during the year has been very pleasing.  The iAwards were
another positive given the hard work that has been put in and we have also been
successful in recruiting a number of very good people into the project.  Our
strong collaboration on this project with the Australian National University
Research School of Biological Sciences continues and the efforts of Dr Ted
Maddess and Dr Andrew James have greatly assisted the progress that has been
made.



In March 2006 the company lodged an application for an Australian Government
Commercial Ready Grant to support the commercialization of the project.  The
company was advised on the 8th of August 2006 that the grant had been awarded
and on the 11th of September the contract for the grant was executed.  The grant
will provide matching funding over 2 years of up to $2.1 million.  The company
completed an earlier Biotechnology Innovation Fund (BIF) grant in February 2006.



The company will vigorously progress all aspects of this project during the
coming year and aims to release the first production version of the device in
2007.



Automotive



The past year has seen excellent progress in the automotive line of business
which is targeting the use of the company's core vision processing technologies
for driver safety applications.



The company successfully completed the prototype driver monitoring system (for
the detection of fatigue) with Tier 1 automotive industry supplier Hella KGaA
Heuck & Co (Hella).  The prototype was developed for a large European Original
Equipment Manufacturer (OEM) and together with Hella a number of marketing and
production studies are being undertaken to assess the optimal strategy to
deliver the technology into the market. The collaboration with Hella continues
today and we are looking at several opportunities with them to progress our
vision for driver safety products.



In March the company commenced a fleet trial of its fatigue detection system
with global oilfield services provider Schlumberger Inc.  The trial has enabled
us to test the technology in real world situations and the data and knowledge
derived from this trial has been used to make a number of improvements that will
further assist the development of the technology for the commercial vehicle
market.  The company and Schlumberger have recently agreed to an extension of
the trial to enable evaluation of the improvements that have been implemented.



A new product known as the Driver State Sensor Research version (DSS-R) is a by
product of both these projects.  The DSS-R is expected to be released
commercially in November 2006.  The DSS-R is a feature rich version of the
driver monitoring and fatigue detection system with many additional raw data
streams to facilitate driver performance research efforts.  The DSS-R is
targeted at government, university and fleet manager multi-car fleet trials /
research.



In addition the company is pursing other projects in the automotive area
including:



  • a project with National ICT Australia (NICTA) researching new driver
    fatigue metrics based on head pose and head motion measurements (which
    should greatly enhance the quality & robustness of the fatigue metrics of
    the DSS products mentioned above) ; and
  • vision based collision avoidance applications as an R&D participant in the
    AutoCRC along with industry participants including Holden and Australian
    Arrow.



In June 2006 the company successfully concluded an Australian Government R&D
Grant project for the development of its key automotive technology.  The goal of
this project was to develop Seeing Machines' face and eye tracking technology to
a level where production strength deployment in the automotive domain for the
detection of fatigue and distraction is feasible.



faceAPITM /SDK



Seeing Machines commenced a project to package its core head, eye and facial
tracking technology in an API/SDK for sale to third party developers and OEMs.
This product will allow third party developers to include the company's computer
vision technology in their applications without requiring special engineering
services from the company.  This will greatly increase the range of commercial
opportunities for the company's technology.  The first commercial release of
faceAPITM will be made in 2007.



Patents



The company continued its strategy to protect its core intellectual property
through patents.



In November 2005 the company filed a new patent application relating to the
robust tracking of subjects wearing eye glasses.  This will be a key patent for
the company as robust tracking of subjects wearing eye glasses is fundamental to
having a successful solution for many real world applications particularly those
in the automotive industry.



On the 9th of May 2006 the US Patent and Trademarks Office granted the companies
key patent 'Facial Image Processing System'.  This patent is the foundation
patent for the company's core technology for head and face tracking.



On the 28th of February 2006 the US Patent and Trademarks Office granted the
patent 'Method and apparatus for assessing neural function by sparse stimuli'.
On the 26th of May 2006 IP Australia granted the equivalent Australian patent.
This is the core technology underpinning the company's glaucoma diagnostic
device.  This patent is exclusively licensed from the Australian National
University.



Chief Executive Officer



The Company's Chief Executive Officer as at 30 June 2006 and at the date of this
report is Dr Nick Cerneaz.  Dr Cerneaz was appointed as Chief Executive Officer
from the 5 September 2005.  Tony Kinnear was Chief Executive Officer of Seeing
Machines until 2 September 2005.



Company Secretary



The Company Secretary of the Company as at 30 June 2006 and at the date of this
report is Belinda Burgess. Belinda has over 10 years experience as a Commercial
Manager of private and public corporations. She is currently Operations Manager
of Seeing Machines. Prior to this, she was General Manager Commercial Services
of a publicly listed technology company for four years.



Staff



Following the IPO the company has grown its staff numbers in order to progress
key projects and strengthen its financial management.



At 30 June 2006 the company had 34 employees up on the 24 at 30 June 2005.



Key recruits during the year included Lorrae Collins as Chief Financial Officer
and Paul Day as Product Manager for the glaucoma project.  The company has also
recruited a number of very talented staff for key R&D projects despite the
difficult conditions in the local market for IT and other skills.



The company has significantly improved its staff retention rate during the year.




In recognition of the key role played by staff in the success of our project the
Board implemented a new Employee Share Options Scheme in June 2006.  A large
number of staff were granted options under this scheme in July 2006.



Funding



The company achieved a significant milestone in December 2005 with the
successful completion of its Initial Public Offering (IPO) and listing on the
Alternative Investment Market (AIM) of the London Stock Exchange.  The company
raised £1.65 million / A$3.8 million in funds that are be used primarily to
progress key projects described in this report.



Income Statement


FOR THE YEAR ENDED 30 JUNE 2006                                                   30 June 2006       30 June 2005
                                                                   Note*                    A$                 A$


Sale of goods                                                                       2,407,228          1,414,903
Contract Income                                                                        56,785            124,710
Revenue                                                            4(a)             2,464,013          1,539,613

Other income                                                       4(b)               628,841          1,228,548

Change in inventories of finished goods and work in progress       4(c)             (713,770)          (483,775)
Employee benefits expense                                          4(d)           (1,548,728)        (1,685,761)
Depreciation and amortisation expense                              4(e)             (140,437)          (158,674)
Research costs written-off                                         4(f)                     0          (592,459)
Other expenses                                                     4(g)             (763,100)        (1,037,958)
Finance costs                                                      4(h)              (61,895)           (38,442)

Loss before income tax                                                              (135,077)        (1,228,908)

Income tax relating to operations                                    5                      -                  -

Loss after tax from operations attributable to members                              (135,077)        (1,228,908)

Loss per share (cents per share)                                     6
•         basic for loss for the year attributable to ordinary                        (0.059)            (0.710)
equity holders of the company
•         diluted for loss for the year attributed to ordinary                        (0.058)            (0.707)
equity holders of the company



Balance Sheet

AS AT 30 JUNE 2006                                                                      As at              As at
                                                                                 30 June 2006       30 June 2005
                                                                   Note*                   A$                 A$

CURRENT ASSETS
Cash and cash equivalents                                          8(b)             2,407,053            663,213
Trade and other receivables                                          9                639,373            292,396
Inventories                                                         10                129,370             99,099
Other                                                               11                 39,381            485,718
TOTAL CURRENT ASSETS                                                                3,215,176          1,540,426

NON-CURRENT ASSETS
Property, plant and equipment                                       12                251,648            174,335
Intangible assets                                                   13                221,240            242,203
Capitalised development costs                                       13              1,404,971                  0
Other                                                                                   3,312              2,454
TOTAL NON-CURRENT ASSETS                                                            1,881,170            418,992
TOTAL ASSETS                                                                        5,096,346          1,959,418

CURRENT LIABILITIES
Trade and other payables                                            15                705,966          1,031,290
Deferred revenue                                                                      408,450             10,454
TOTAL CURRENT LIABILITIES                                                           1,114,417          1,041,744

NON-CURRENT LIABILITIES
Interest bearing loans and borrowings                                                       0            471,526
Provisions                                                          16                 68,693              3,331
TOTAL NON-CURRENT LIABILITIES                                                          68,693            474,857
TOTAL LIABILITIES                                                                   1,183,109          1,516,601
NET ASSETS                                                                          3,913,237            442,817

EQUITY
Contributed equity                                                                  6,528,748          3,394,946
Accumulated losses                                                                (3,138,272)        (3,003,195)
Other reserves                                                                        522,761             51,066
TOTAL EQUITY                                                                        3,913,237            442,817



Cashflow Statement


FOR THE YEAR ENDED 30 JUNE 2006                                                  30 June 2006       30 June 2005
                                                                   Note*                   A$                 A$

CASH FLOWS FROM /(USED IN) OPERATING ACTIVITIES
Receipts from customers                                                             2,367,014          1,487,628
Grants received                                                                       930,843          1,155,409
Payments to suppliers and employees                                               (2,561,378)        (3,715,822)
Interest received                                                                      59,168             20,879
Finance costs paid                                                                   (83,421)                  0
NET CASH FLOWS FROM/(USED IN) OPERATING ACTIVITIES                 8(a)               712,226        (1,051,906)

CASH FLOWS USED IN INVESTING ACTIVITIES
Purchases of plant and equipment                                                    (179,057)           (90,171)
Payments for intangible assets                                                              0           (91,652)
Payments for research and development costs                                       (1,444,768)                  0
NET CASH FLOWS (USED IN) INVESTING ACTIVITIES                                     (1,623,825)          (181,823)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of borrowings                                                                     0           (84,645)
Exercise of options                                                                    41,769                  0
Issue of shares                                                                     3,848,550          1,099,799
Costs of listing on AIM                                                           (1,234,880)                  0
NET CASH FLOWS FROM FINANCING ACTIVITIES                                            2,655,439          1,015,154

NET INCREASE IN CASH AND CASH EQUIVALENTS                                           1,743,840          (218,575)
Cash and cash equivalents at beginning of period                                      663,213            881,788
CASH AND CASH EQUIVALENTS AT END OF PERIOD                         8(b)             2,407,053            663,213


Statement of Changes in Equity


                                                  Issued Capital    Accumulated       Employee      Total Equity
                                                                         Losses          Equity
                                                                                       Benefits
                                                                                        Reserve
                                                              A$             A$              A$              A$

At 1 July 2004                                        2,295,146      (1,774,287)         37,960          558,819

Loss for the year                                                    (1,228,908)                     (1,228,908)
Issues of ordinary shares during the year
            Issue of share capital                    1,099,800                                        1,099,800
Cost of share based payment                                                              13,106           13,106

At 30 June 2005                                       3,394,946      (3,003,195)         51,066          442,817

Loss for the year                                                      (135,077)                       (135,077)
Exercise of options                                      70,131                        (28,363)           41,768
Issues of ordinary shares during the year
            Issue of share capital                    3,848,550                                        3,848,550
            Transaction costs                       (1,234,880)                                      (1,234,880)
Conversion of Convertible Notes                         450,000                                          450,000
Cost of share based payment                                                             500,058          500,058

At 30 June 2006                                       6,528,748      (3,138,272)        522,761        3,913,237


FOR THE YEAR ENDED 30 JUNE 2006                                                   30 June 2006       30 June 2005
                                                                                            A$                 A$

Net income recognised directly in equity                                                     0                  0
Loss for the year                                                                    (135,077)        (1,228,908)
Total recognised income and expense for the year                                     (135,077)        (1,228,908)

Attributable to equity holders of the company                                        (135,077)        (1,228,908)



* Notes to the Audited Financial Statements are available for download from the
  Company website www.seeingmachines.com as part of the full Statements and 
  Annual Report.


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