Seeing Machines Group Update - June 2016 by Seeing Machines

Ken Kroeger CEO

momentum with the term sheet signing announced in May. We’re working tirelessly with our advisors to close the funding round whilst our pursuit to secure OEM customers and further develop our automotive-grade driver monitoring platform continues. Our aerospace market engagement has accelerated much faster than we had originally anticipated. As a result of our previous decade of work - intellectual property, brand equity, and collaborative projects; our team was able to initiate discussions and pilot programs with some of the world’s largest aviation companies.

Dear shareholder, Thank you for your time and patience awaiting the release of our first Seeing Machines Group Update. We are making big strides every day across all our chosen sectors of execution: automotive, commercial fleet, rail, mining (via Caterpillar), aerospace and research. This update will provide you with key milestones and operational highlights across our sectors - for readers of the ‘Fleet Update’, we have streamlined the content into this publication to give you a complete overview of our progress in pursuing our multi-sector strategy. Our continued execution of the multi-sector strategy is gaining momentum with recent news of our termsheet signing behind the fund raising of an automotive spin-off company. We are building an impressive roster of investors that will help position the new company to capitalise upon the market opportunity for driver monitoring. We’ve all seen and possibly experienced the first raft of ‘autonomous’ vehicles - which are truly incredible. Seeing Machines is positioned at the forefront of the revolution that’s happening on our roads and highways. Guardian is our largest direct to market product which has seen a recent overhaul in our branding and communication culminating in an intense series of tradeshows in the U.S. Our focus has been on securing assessments with enterprise-level commercial fleets whom share the goal of protecting all their drivers against the risks of drowsy driving. With over 30 active assessments globally in large carriers and the signing of a new distributor to expand into Asia, we are making solid progress. Our work in the automotive sector is continuing to gain

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Paul Angelatos, Chief Operations Officer, will update you on the work we’re pursuing with our partner, Electro-Motive Diesel and the successful transition of our DSS business to Caterpillar which is already yielding strong royalty payments as announced in the May trading update. We end the issue with an interview with Tim Crane from CAT Safety Services.

Our corporate communications continues to evolve. We are a dynamic company built upon a unique capability and technology with a strong commercialisation team around it. What has been achieved in just over 3 years is astonishing as we continue from strength to strength and turn the possible into reality. You can preview our corporate positioning here: www.seeingmachines.com/see Key Operational Highlights •

Term-sheet signed for automotive spin-out

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Major distribution deal for Guardian

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CAT licensing royalties exceed expectations

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Aerospace makes progress with key assessments

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Accelerating Automotive

Aerospace

In 2014 when we created the multi-sector transportation strategy for Seeing Machines, we had no idea that the journey towards automotive integration of our technology would happen so quickly.

The last quarter has seen significant growth in terms of capability, profile, activity and reach. We are continuing to provide our leading edge technology and solutions to support a major aircraft manufacturer in the development of a state of the art Aircrew Training capability.

Demand for ‘driver monitoring systems’ (DMS), a category that Seeing Machines created, is being driven by the largest automotive manufacturers needing a reliable and robust way to sense the driver’s attention state. We are working closely with most of the major car OEMs in one way or another. Our capacity to meet their demand has brought foward plans to finance and support our technical and market leadership. As announced on May 16, we have taken the first major step towards this end by signing a term sheet with a lead-investor.

Some of our new engagements across the aerospace industry include; carriers from within freight, commercial and helicopter, and potential engagements with air navigation services providers supporting training and operations within the high growth industry of air traffic control. We also have increased our exposure to military aerospace collaboration initially in support of training services in a simulated environment.

Technical work has only accelerated as we onboard new talent to work on our DMS platform that cements our value-proposition for the automotive OEMs and Tier 1s. Working closely with our manufacturing partners to miniturise our visual processing algorithms to provide the world’s only automotive grade eye-tracking solution, our vision is to become the de facto DMS platform for all automotive applications. Whilst we are working to spin-out the automotive business, it will remain closely aligned with the Seeing Machines Group with significant bi-directional transfer of IP, knowledge, data, and talent. This will be reflected in the commercial agreement for Seeing Machines to retain a significant stake in the new company. Building upon the successful 2nd generation contract with one of the largest US automotive manufacturers, we are working with Takata to adjust our commercial arrangement to explore the fastest and most costeffective commercial paths to getting our DMS technology into the broader automotive market whilst still supporting Takata’s DMS business.

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Seeing Machines’ eye-tracking installed in a 737 cockpit simulator

By the end of this calendar year we plan to have our capability and solutions in aircraft and air traffic simulators in the US, UK / Europe, UAE and Australia. As we continue to develop both our capability and our global footprint, we are working closely with the relevant regulators in each of our regions as we look to move through after market solutions, embedded solutions toward our ultimate target of mandated aerospace systems, both simulated and operational.

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Fleet Sector Update

Paul Angelatos,

Chief Operating Officer When Ken Kroeger and I visited London to speak with our institutional investors back in April of this year, I took away a couple of key things from these meetings: •

Our investors believe in and support our multisector transportation strategy;

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Investors recognise the challenges of bringing new technologies to a sector that operates on low margins and has an extended buying cycle;

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And, we need to share our progress with investors whilst respecting customer privacy and disclosure laws.

What I would like to share with you is a summary of a recent visit to the U.S. Following up the successful launch activities where we exhibited at three of the major trucking shows; I met with a number of customers, prospective customers and partners. My aim is to leave you with confidence that considerable progress is being made, the strategy is being executed as planned and that the results will follow. The foundations are being laid for success. Platform Integration

a compounded annual growth rate of 19% as more countries introduce mandates for this technology. All the providers we are currently engaged with believe in our technology, are not currently offering fatigue and distraction capability, and have large existing customer bases that they believe will want to adopt this technology providing the solution is integrated, simple to use and affordable. Discussions with a number of these providers are well progressed with MoU’s in place to advance the development of an integrated platform. This reaffirms that we are on the correct technology and commercial path. Customer Validation While we build the capability to integrate our technology with telematics partners we also continue to engage directly with transport companies. I was fortunate to be able to spend time with three large customers in the U.S. who have all recently signed up to conduct assessments of our technology as well as better understand their own current risk exposure to driver fatigue. Three of the customers I met with have a combined fleet of more than 25,000 vehicles and are absolutely focussed on providing the safest environment possible for their drivers. These meetings were also an opportunity for me to personally test our assumptions and to understand the safety issues that are pertinent to our customers. We are an organisation that listens and we are also nimble enough to adapt and incorporate customers’ feedback into our product and services offering. At last count we have 34 customers undergoing assessments of the Guardian Solution (all in various stages). This positions us strongly for the new financial year and is a great basis for achieving our own high expectations. The challenge for me and the sales team is to convert these assessments (or a significant percentage of them) into sales. The signs are positive.

Our strategy to address the volume commercial fleet market is largely dependant on our ability to integrate the Guardian Solution with existing fleet telematics providers. Fleet telematics technologies are helping companies track their vehicles, monitor diagnostics, and ensure drivers are not engaging in risky behaviours while driving. Market research estimates Contact Seeing Machines

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USA The past quarter has seen a huge amount of activity for the US sales team with a strong presence at three major trucking shows: Truckload Carriers Association in Las Vegas, the Mid-America Trucking Show in Louisville, and the National Private Truck Carriers Association in Cinncinatti. Combined with an effective lead-generation campaign, Seeing Machines generated significant interest in Guardian. This joint effort by our sales and marketing teams has led to an unprecedented number of assessments in the region. The most promising assessment is with one of the world’s largest freight logistics providers with both an aviation and ground transport requirement.

Experimentation and Road Safety Mexico (CESVI), an organisation funded by all of the major insurance companies in México. They test and accredit automotive technologies. With this certification, Seeing Machines has gained access to commercial departments of GNP, Atlas, MAPFRE, AXA, Inbursa and Qualitas, all insurance companies that work with CESVI in identifying ways to prevent accidents and determining costs involved in vehicle accidents. Seeing Machines is also extending its relationship with global key accounts like DP World and Praxair into LATAM with initial assessments. Building upon the successful assessments with DP World Korea & Phillipines, Seeing Machines is making a strong case with multi-national companies to protect every driver, every truck. Asia-Pacific Announced on16th June 2016, we are extremely pleased to welcome Guardian South-East Asia (SEA) as a regional distributor with an initial order for 1,000 units in anticipation of significant demand from the public transport sector. We look forward to working with the team at Guardian SEA.

Seeing Machines’ SVP Sales, Mirza Kozarcanin demonstrating the Guardian Solution at MATS

Middle East and Europe The Public Transport Authority of Dubai has progressed Seeing Machines’ technology from capability trial (Nov. 2015) to tender. The process takes several months as they establish future technology platforms for their public bus networks. We are in the final stages of negotiation with a local distributor of vehicle technology. A local presence is required to market and sell any technology in the region and we look forward to finalising this partnership shortly. Latin America With the help of our distributor in the region, Seeing Machines Andes (formerly Seeing Machines LATAM), we have sold and are installing 40 units at Transportes EME BUS in Chile.

Continued success in Australia with recent sales to Kalari (150 systems) and contracts for over 200 units to Pacific National; our first customer to install units in service vehicles (4WDs) that perform track maintenance and shuttle drivers to and from their shifts. We continue to encourage companies to think about where fatigue is often overlooked and to protect every driver, every shift. Other regional assessments include Fonterra in New Zealand, a safety conscious dairy goods distributor and Kiattana, a hazardous materials transporter in Thailand. We are proud to be working with NZI Insurance, one of New Zealand’s largest insurance brands. NZI will be offering their fleet customers Guardian System units for trial - covering the installation, hardware and SafeGuard program cost for 6 weeks. If the customer then implements for their entire fleet, NZI will broker a discounted rate. Our continued work with insurance partners is an example of how we are proving the value of our lifesaving technology.

We have recently been certified with the Center for

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Rail Sector Progress The rail sector continues to evolve country-by-country in response to economic change, freight volumes and passenger transport preferences. Safety requirements and train monitoring systems are key topics within the industry. Technology is being used to address both railroad operator driven safety and efficiency improvements, as well as legislative requirements. Seeing Machines is engaging actively with the rail industry as opportunities for the technology emerge. We estimate that today’s total accessible rail market comprises close to 200,000 freight and passenger locomotives worldwide. To address the sector, Seeing Machines has initially partnered with Progress Rail, one of the largest suppliers of railroad and transit system products and services worldwide. With their ownership of Electro-Motive Diesel (EMD), Progress Rail is the world’s largest builder of diesel-electric locomotives for freight, intercity passenger, commuter, switching, industrial and mining applications. In discussions with industry experts, preliminary technology trials point to fatigue representing a significant operational risk to the sector and fatigue is considered by authorities as a contributing factor in 21% of rail incidents. Remember that train drivers are often forced to “push through” fatigue while working, as they are not afforded the same opportunity that road drivers are: to pull over and nap in order to restore alertness. Fatigue is confirmed to have contributed to at least four of the United States’ major rail accidents in the past 10 years. Our initial focus has been on exploratory trials and human factors research efforts designed to assess the applicability of our current technologies and the acceptance levels for in-cab operator monitoring by rail workers and their labor unions. We are pleased to report that our findings are encouraging and that our software, with high-accuracy levels, low false-positive rates and ultra-fast acquisition is performing well and as result the technology is now being put forward in tenders by Progress Rail.

that is being offered. EMD will know later this year if the bid is successful. I also had an opportunity to work through the broader Seeing Machines Rail business plan with EMD. Although there is a downturn in new locomotive sales in the U.S., EMD are ramping up their efforts to provide services and technology upgrades to existing customers. The forecast over the next few years is extremely encouraging and we look forward to continuing our push into this market.

Caterpillar Handover We are very pleased with the progress of the handover of DSS in all aspects – logistics, product knowledge transfer, joint marketing and most importantly – sales, with over 170 units sold and over half a dozen assessments underway or completed. These early sales have exceeded expectations as announced in the May trading update. CAT’s healthy pipeline has them placing additional orders to replenish stock. Currently, Caterpillar dealers in over 180 countries have exclusive access to DSS technology. Additionally, Caterpillar have engaged in the commercial fleet market ahead of schedule with their branded product, DSS-H, and we look forward to soon securing their first order. Background Since an exclusive partnership agreement in September 2015, Caterpillar has exclusivity of Seeing Machines’ DSS technology in their fields of use. These are: mining, construction, cement & quarry, paving, forestry, and marine & industrial relations. Seeing Machines receives a licensing fee on every unit connected and works closely with Caterpillar on joint product development.

Finally, on my recent trip to the US, I was able to spend a day in Chicago with EMD. As previously advised, EMD are responding to a request for tender from a major urban transit authority, with the Seeing Machines fatigue and distraction capability core to the solution © Copyright 2016 Seeing Machines Limited

Interiew with Tim Crane

CAT Safety Services Manager

What is the key driver behind Caterpillar Safety Services customer offering? With the power to harvest data and analytics that reveal the impact of safety on productivity, Caterpillar Safety Services’ engagement with customers has transformed from a purely consultative relationship to one that delivers a full solution leveraging people, processes and technology. How important has Seeing Machines’ DSS been in CAT’s strategic repositioning? The inclusion of DSS technology into our offerings has repositioned Caterpillar Safety Services in all the markets we serve and is allowing us to provide customers unprecedented insight into their operations. Beyond the obvious benefits of incident prevention, we now have the exclusive opportunity to maximize heavy equipment performance by protecting the primary influencer of machine productivity, the operator behind the controls. This insight is changing the way we manage risk, as well. It’s becoming less about training risk out of employees, and more about anticipating risky behaviours and buildings systems to help guide employees to make safer choices.

The economic conditions have been difficult for the mining industry, how does this impact customer investment in safety? We’re finding that economic challenges in the mining industry are compelling customers to seek new ways to optimize their operations, so the connection we’re now able to draw between safety and productivity is generating great interest in the DSS. Given that the transition to your monitoring and data center is complete, can you discuss any correlations between DSS data and other areas of a customer operation? By combining data from the DSS, with MineStar and Product Link, we are able to demonstrate that where fatigue and distraction are causing incidents, operations are suffering. Seeing Machines is already seeing traction in the commercial fleet market, what are Caterpillar’s aspirations for capturing value outside of the heavy mining market? Caterpillar is in the process of standing up our global supply chain to support the DSS-H product. We have multiple customers who have piloted the product with favourable outcomes and are interested in utilising the solution. With Caterpillar’s exclusive rights in the vocational truck market we expect significant demand for this solution. You can expect a more formal release of this solution later this year. The companies investing in the power to see, mitigate and manage fatigue and distraction risk, are reducing waste, maximizing profitability without increasing risk.

Can you discuss some of your early customer engagements? We’re working with two large customers who recently achieved 75-90% reduction in fatigue and distraction incidents with the installation of the DSS along with change management efforts. As a result, we are in the process of finalizing deals for full-fleet installations.

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