Decimal Software : Quarterly Report and Update - September 2018

31 October 2018

Decimal Report and Update - QTR ending 30 September 2018

•  Proposed Sargon Acquisition continues to progress

•  Court approves convening of Scheme Meeting

•  Annual Recurring Revenue and Expenses steady

Decimal Software Limited (ASX: DSX; "Decimal" or "the Company") is pleased to provide this update on its financial and operational performance for the quarter ended 30 September 2018.

Appendix 4C quarterly cash flow report follows this update.

1. PROPOSED ACQUISITION OF DECIMAL BY SARGON

During the quarter, Decimal Software Limited (ASX:DSX; "Decimal" or "the Company") undertook a strategic review to assess the various potential commercial and financial options available to Decimal to fund the continued development of its automated on-line digital advice platform.

As part of that strategic review, Decimal and its advisers engaged with a wide range of parties in a competitive process to determine their potential interest in financing or acquiring Decimal and considered a range of potential opportunities. As part of that strategic review process, Sargon Capital Pty Ltd ("Sargon") made a proposal to acquire 100% of the issued shares in the Company for 1.41 cents cash per share by way of a Court approved scheme of arrangement.

After assessing the Sargon proposal against other alternative opportunities identified via the strategic review, the Decimal's Directors determined that the potential benefits that could be realised through implementation of Sargon's proposal provided a superior and more certain outcome for Decimal Shareholders than any of the other alternative opportunities identified. Further, Decimal's Directors determined that none of the other alternative opportunities identified via the strategic review were likely to be able to be implemented within a timeframe that would enable Decimal to remain financially viable.

As such, during the quarter, Decimal entered into a binding Scheme Implementation Agreement with Sargon under which Sargon has agreed to acquire 100% of the issued shares in the Company for 1.41 cents cash per share by way of a Court approved scheme of arrangement ("Scheme").

Sargon is a private company that provides financial institutions and entrepreneurs with the technology and infrastructure they need to successfully build and grow investment funds and financial products.

On 30 October 2018, the Federal Court of Australia approved the issue of the scheme booklet in relation to the Scheme and has ordered that a meeting of Decimal shareholders be convened to consider and vote on the Scheme. The meeting of Decimal shareholders to consider and vote on the Scheme, which is expected to be held at 10.00 am (Perth time) on Thursday, 6 December 2018 at the offices of Fogarty Partners, 65 Hay Street, Subiaco, Western Australia.

Please refer the separate ASX announcement dated 30 October 2018 regarding the Court approval to issue the Scheme booklet for further details.

1/174 Hampden Road, Nedlands WA 6009

Phone: [phone] Fax: [phone]

ACN: 009 235 956

2. REVENUE

Total revenue for the quarter remained steady with cash receipts from customers coming in around $304,000.

The Company's preferred measure, Annual Recurring Revenue ("ARR") was also in line with previous quarters. In practice this measure will only change with new client wins or losses, or where there are material changes in a clients' contracted revenue profile. Ad hoc and non-recurring professional services revenues are excluded from this measure.

3. EXPENSES

Even though material expenses have been incurred in relation to both the strategic review announced previously, and in relation to the proposed Scheme, the Company has held expenses steady over the quarter at $872,307.

Decimal Annualised Quarterly Expenditure

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000 -

Q4 - Jun-17

Q1 - Sep-17

Q2 - Dec-17

Q3 - Mar-18

Q4 - Jun-18

Q1 - Sep-18

1/174 Hampden Road, Nedlands WA 6009

Phone: [phone] Fax: [phone]

ACN: 009 235 956

Decimal expects the December 2018 quarter expenses to be higher than recent quarters due to the transaction costs associated with implementing the Scheme.

4. FUNDING

On 3 July 2018, the Company drew down $600,000 under an R&D rebate funding facility entered into with Rocking Horse Nominees Pty Ltd. Decimal's R&D claim has been finalised and we expect funds to be received during the December 2018 quarter.

Two further loan facilities totalling $600,000 have been entered into with Sargon to assist the Company to fund its activities during the implementation of the Scheme. Whilst neither of these facilities were drawn during the September 2018 quarter, the Company has now drawn down $300,000 under these facilities, with that amount being due for repayment by 31 January 2019.

5. OPERATIONS AND OUTLOOK

Decimal is starting to see a number of new clients begin to review and assess digital advice technologies. Whilst these evaluations are preliminary in nature and are typically not a formal 'procurement' process, it is indicative of clients starting to turn their mind to executing their longer term advice strategies, which Decimal considers positive.

Whilst Decimal is not aware that it has been precluded from any market assessment over the course of 2018, it is reasonable to assume that the Company's future financial viability would have acted as an increasing source of vulnerability going forward. In that regard and should the proposed acquisition of Decimal by Sargon be approved, Decimal is confident that it will continue to be well positioned to respond to market assessments and Request for Proposals (RFP) as they are issued by institutions looking for digital solutions.

Decimal's immediate focus over the December 2018 quarter is to continue to progress the implementation of the Scheme, whilst ensuring that the Company remains focussed on both the sales and operational aspects of Decimal's business.

-ENDS-

For Investor enquiries:

Damon Watkins

Chief Executive Officer Decimal Software [e-mail] [phone]

About Decimal:

Decimal Software Limited (ASX:DSX) is an ASX listed fintech company that delivers financial advice solutions via the world's first enterprise-focused omni channel advice delivery technology, developed in-house. Decimal partners with banks, superannuation funds and fund administrators already entrusted with customers' retirement savings, to deliver advice to the community as a whole. Decimal's platform provides consistent, fully compliant financial advice to client organisations'

1/174 Hampden Road, Nedlands WA 6009

Phone: [phone] Fax: [phone]

ACN: 009 235 956

customers across multiple platforms of digital, phone or face-to-face, across numerous topics such as savings, superannuation, insurance and retirement, as well as investments.

About Sargon:

Sargon provides financial institutions and entrepreneurs with the technology and infrastructure they need to successfully build and grow investment funds and financial products. Operating across Australia, New Zealand and Hong Kong, Sargon's powerful combination of technology and industry experts navigate regulatory complexity, security and compliance to ensure our clients can focus on what matters most: building a better future.

1/174 Hampden Road, Nedlands WA 6009

Phone: [phone] Fax: [phone]

ACN: 009 235 956

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Appendix 4C

+Rule 4.7B

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

DECIMAL SOFTWARE LIMITED

ABN

31 009 235 956

Quarter ended ("current quarter")

30 SEPTEMBER 2018

Consolidated statement of cash flows

Current quarter

$A'000

Year to date (3 months)

$A'000

1.
1.1	Receipts from customers	304	304
1.2	Payments for
(a) research and development	(226)	(226)
(b) product manufacturing and operating	-	-
costs
(c) advertising and marketing	(32)	(32)
(d) leased assets	-	-
(e) staff costs	(342)	(342)
(f) administration and corporate costs	(171)	(171)
1.3	Dividends received (see note 3)	-	-
1.4	Interest received	2	2
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	(464)	(464)
activities
2.	Cash flows from investing activities
2.1	Payments to acquire:
(a) property, plant and equipment	-	-
(b) businesses (see item 10)	-	-
(c) investments	-	-
Page 1

+ See chapter 19 for defined terms 1 September 2016

Cash flows from operating activities