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1 ASX ANNOUNCEMENT DRAGONTAIL SYSTEMS SUCCESSFULLY ROLLING OUT ITS GROWTH STRATEGY 31 August 2017 (Melbourne): Dragontail Systems Limited (ASX: DTS) is pleased to announce its inaugural results as a publicly listed company for the six months ended 30 June 2017 (H1 2017). Over the period, Dragontail Systems grew its international footprint, developed new products, and progressed several client relationships. A key growth metric validating Dragontail System s world leading proprietary Algo platform is the growth in number of paying customers. After commencing sales of the Algo in Q3 2016, stores installed and quantum of annualised revenue has begun to grow exponentially. Over H1 2017, the number of stores installed was up 125% to 155, and annualised revenue grew 130% to $285k. Business growing exponentially (at 30 June 2017) Stores installed, up 86 to 155; 125% growth over 6 months (31 Dec 2016: 69) Operating countries, up 4 to 7 (31 Dec 2016: 3) Operating cities, up 32 to 84 (31 Dec 2016: 52) Point of Sale [POS] joint ventures, up 4 to 6 (31 Dec 2016: 2). Doing what we said we would do Completed rollout of Algo platform to all corporate owned Pizza Hut stores in Canada; installation into franchisee stores commenced Agreed pilot with KFC Asia (division of Yum! Brands) in Malaysia and Singapore Chosen by Google Next as the use case example of business disruptive technology First customer referred by Google; in the fleet and fuel management segment Opened offices in Australia and Singapore, to complement existing offices in Israel, US and Canada Domino s Israel chooses to install Algo across all its stores; making the Algo the de facto standard platform in Israel for food delivery optimistion with the two largest pizza delivery companies now using the Algo Completed development of the unique proprietary, patent pending, QT a computer-vision artificial intelligence [AI] machine learning quality system for QSR chains. Commenting on the Company s rapid progress over H1 2017, Dragontail Systems CEO Ido Levanon said: The past six months have been extremely busy as we rolled out the Company s Algo optimisation and delivery platform. We completed the installation of the Algo across Yum! Canada s corporate owned Pizza Hut stores, and have expanded our relationship with Yum! into Asia, putting in place pilots with KFC in Malaysia and Singapore. In addition, Domino s Israel agreed to install the Algo across all its pizza restaurants. Dragontail Systems Limited 673 Bourke Street, Melbourne VIC 3000 T W 1

2 At the end of June, Dragontail Systems was being used by three of the largest QSR businesses globally Pizza Hut, KFC and Domino s. These expanding relationships led to the number of stores installed growing by 125% over the first half, with a substantial pipeline of stores yet to be installed, underpinning our continued exponential growth. At the heart of our technology is innovative, focused R&D, undertaken by a team that has substantial food industry and software experience. In addition to commencing the rollout of the Algo platform, we continued to invest substantial time and resources in R&D, leading to the development of our QT computer-vision machine learning camera system. The QT is a world first technology. Utilising artificial intelligence [AI], the QT monitors key elements in the kitchen during the preparation and cooking process to improve the quality and consistency of pizzas and other meals that a restaurant is producing. The QT s artificial intelligence [AI] is revolutionary. This, together with our Algo platform, will completely disrupt the QSR industry as well as several other industries with use cases for our technologies that assist businesses to manage costs and grow revenues. We are in advanced discussions with several new strategic customers globally, and are well placed to continue growing exponentially. Financial overview Dragontail Systems finished H with a cash balance of 2.5 million, following its Initial Public Offering (IPO) in December Unlike many other technology companies that compete in the last mile delivery segments of the market that Dragontail Systems operates in, the Company s new business strategy is to develop relationships with large franchise chains, and sign on paying users to its platform, as opposed to free trials. While this strategy may take a little longer to generate new business, it ensures that the business is sustainably revenue generating and the number of users can scale quickly given the size of client franchise networks. Over H1 2017, the Company generated 86k revenue, compared with 54k in H Operating overview Dragontail Systems is at a pivotal point in time as it commercialises its technologies. The Company is growing into new countries and cities, signing agreements with new strategic customers like Domino s Israel and KFC Asia, entering new market segments like fuel and fleet management, and expanding its range of world-leading products. The results of Dragontail Systems activities can be clearly seen in the rapidly scaling, exponentially growing, operations over the past two quarters (six months), as outlined in the table below. Dragontail Systems Limited 673 Bourke Street, Melbourne VIC 3000 T W 2

3 Quarterly Operating Metrics Sept 2016 Dec 2016 Mar 2017 Jun 2017 Operating countries Operating cities Number Stores installed Number of POS joint ventures Annualised Revenue $113k $124k $165k $285k Quarterly Growth n/a 10% 33% 73% Offices opened in Singapore and Melbourne (Australia) While growing the number of installed stores, Dragontail Systems is also focused on exciting pilots with large multi-country QSR operators, like KFC Asia, to continue building rapid momentum. As part of these pilots, the Company opened offices in Singapore and Melbourne (Australia) to provide R&D and operational support to these pilots. Growing local and global customer base Having been trialled by Pizza Hut Canada for over 12 months, over H the Algo was installed in all Pizza Hut Canada corporate owned stores. The Company has commenced installations in franchisee stores, and expects to undertake a significant rollout to a large number of Pizza Hut Canada franchisee stores over H Pizza Hut Canada has around 400 total stores across its corporate owned and franchisee network. Another strategic partnership has formed with KFC Asia, expanding on Dragontail Systems relationship with Yum! Brands. The Algo is being piloted in Malaysia and Singapore as a pre-cursor to a potential rollout through Asia. KFC Asia is the only KFC network globally that currently homedelivers, and has 3,400 total stores. Importantly, this was a relationship that was formed as a result of the significant operational benefits that Yum! Brands experienced using the Algo in their Pizza Hut Canada corporate owned stores. While the Company has been forming growing relationships with global QSR companies, it has also been building relationships with more local operations, as well as non-qsr companies. Early this year, Dragontail Systems Limited 673 Bourke Street, Melbourne VIC 3000 T W 3

4 the New York city based franchisee of US frozen yogurt brand 16 Handles concluded its trial of the Algo early and immediately rolled out the platform across all its stores due to stronger than expected trial results. Dragontail Systems also put in place an agreement with Monscierge, Inc to support Dragontail Systems entry into the hotel and resort market, where the platform can streamline the preparation and serving of room service and bar drinks. In addition, the Company expanded into fuel and fleet management services, signing its first customer from that industry Roseman Engineering that was the first client referred to the Company by Google. Google Next use case of disruptive technology In May, Dragontail Systems was selected by Google as a use case globally of key disruptive technologies. Dragontail System s selection was announced at the Cloud Next event in Tel Aviv, featuring the Google Cloud platform utilisation. As outlined above, the Company has already received its first referral from Google for a company in the fuel and fleet management industry. Leading edge technology incorporating artificial intelligence [AI] Dragontail Systems continues to progress the R&D of its unique patent pending QT a computervision artificial intelligence [AI] machine learning quality system for pizza and other QSR chains. This is a revolutionary technology that will provide significant benefits to QSR and other food operators, and clearly differentiates the Company from its competitors that largely operate in just last mile delivery systems. The QT is the world s first food preparation system that utilises machine learning to constantly improve its diagnostics. It monitors key elements in the kitchen during the preparation and cooking process to improve the quality and consistency of pizzas and other meals being produced. The QT not only revolutionises food preparation, it is an exciting marketing and operational tool, which upgrades the customer experience (eg allowing customers to see their actual pizzas when cooked) and reduces costs (through less wastage and efficient use of ingredients) without interfering with a kitchen's workflow. Events subsequent to 30 June 2017 Dragontail Systems has not slowed down Post the reporting period end, Dragontail Systems continues to make significant progress developing and commercialising the Algo System and QT platform. The Company has signed several new agreements as outlined below. Dragontail Systems Limited 673 Bourke Street, Melbourne VIC 3000 T W 4

5 Domino's Pizza Israel Domino's Pizza Israel selected the Algo dispatching system to manage the drivers and deliveries across all its more than 60 restaurants. The Algo provides Domino s Pizza Israel with complete visibility of, and control over, its delivery processes, improving management of its drivers and deliveries, and generating efficiencies that reduce delivery times and overall operating costs within their restaurants. As a result of this agreement, the Algo platform became the de-facto standard for food delivery optimisation in Israel, having been selected by the two largest pizza delivery companies in the country. Melbourne R&D facility opened and Chief Technology Officer appointed In July, Dragontail Systems opened a Research & Development facility in Melbourne to deepen technical and professional support for current and future clients. This builds on the Company s Singapore office, to accelerate its growth ambitions in the region. The Melbourne facility is led by Chief Technology Officer Simon Wilkson. His professional background and experience will support the Company's growth, providing the ability to manage direct contact with customers in the region, as well as lead regional strategic projects in terms of R&D and operations. Dragontail Systems views the Asia-Pacific region as a key global growth market. Positive outlook for continued exponential growth Over H1 2017, Dragontail Systems put in place the infrastructure necessary to drive continued exponential growth. With existing relationships with tier 1 global QSR operators like Pizza Hut, KFC and Domino s, several exciting new clients in the pipeline, and truly disruptive technology that solves key problems for QSR operators, restaurant operators, and other industries, the Company is well placed to continue its growth trajectory. Commenting on the outlook for Dragontail Systems, Mr Levanon said: Dragontail System s two flagship proprietary products, the Algo and AI driven QT, are truly unique and disruptive technologies. The global potential of these products is vast and we have only begun delivering on this potential. The exponential growth delivered over the first half of this year, is set to continue at an even faster pace as we roll out further agreements and install our systems in additional stores. - ENDS - Dragontail Systems Limited 673 Bourke Street, Melbourne VIC 3000 T W 5

6 For further information please contact: Corporate: Investors: Ido Levanon, CEO Ronn Bechler / Adrian Mulcahy, Market Eye P: P: Media: Georgie Morell, Market Eye P: About Dragontail Systems Dragontail is revolutionising the Quick Service Restaurant (QSR) industry with its Algo System and computer-vision QT quality system that uses artificial intelligence (AI) machine learning. The Algo System uses a sophisticated patented algorithm to optimise and manage the entire food preparation process from order to delivery. It is the first system in the world to fully automate and streamline the kitchen flow to deliver an immediate and significant return on investment to fast food and quick service restaurants. The QT system s sensor and camera automatically monitor the preparation and cooking process in the kitchen to improve the quality and consistency of meals. Using proprietary advanced AI machinelearning technology, the system keeps improving its diagnostics, becoming even more efficient. For more information, visit Dragontail Systems Limited 673 Bourke Street, Melbourne VIC 3000 T W 6

7 Dragontail Systems Limited and its Controlled Entities Interim Financial Report for period ending 30 June Name of entity APPENDIX 4D Half-year Report for the period ending 30 June 2017 DRAGONTAIL SYSTEMS LIMITED AND ITS CONTROLLED ENTITIES RULE 4.2A ABN Results for Announcement to the Market Reporting Period Half year ended 30 June 2017 Previous Corresponding Period Half year ended 30 June 2016 Financial Results 30 June 2017 Revenues from ordinary activities (item 2.1) Up 61% to 86,236 Profit from ordinary activities after tax attributable to members (item 2.2) Net profit for the period attributable to members (item 2.3) Down (297%) to (1,833,452) Down (297%) to (1,833,452) Final and interim dividends (item 2.4) Record date for determining entitlements to the dividend (item 2.5) Brief explanation of any of the figures reported above (item 2.6): It is not proposed that either a final or interim dividend be paid. N/A On 12 December 2016, DTS Australia acquired 100% of the issued capital of Dragontail Systems Limited (Company no ) ( DTS Israel ) in exchange for 130,000,000 ordinary shares. For accounting purposes, DTS Israel was identified as the controlling entity of the consolidated group. The accompanying consolidated financial statements represent a continuation of DTS Israel s financial statements. The 31 December 2016 comparatives are the consolidated entity on that date. The 30 June 2016 comparative period results reflect DTS Israel only. The prior year loss was incurred in the ordinary course of business. Following the public listing of the Group in December 2016, Dragontail Systems has extensively accelerated operations and therefore has incurred significant additional expenditure as part of operating activities.

8 Dragontail Systems Limited and its Controlled Entities Interim Financial Report for period ending 30 June NTA Backing Current Period Previous Corresponding Period Net tangible assets per ordinary share (Item 3) 1.31 cents 2.26 cents 4. Control gained over entities Details of entities over which control has been gained or lost (item 4) 5. Dividends paid and payable Details of dividends or distribution payments (item 5) 6. Dividend reinvestment plans Details of dividend or distribution reinvestment plans (item 6) N/A No dividends or distributions are payable. There is no dividend reinvestment program in operation for Dragontail Systems Limited. 7. Details of associates Details of associates and joint venture entities (item 7) 8. Foreign entities Foreign entities to disclose which accounting standards are used in compiling the report (item 8) N/A N/A 9. Review Opinion Details of any audit dispute or qualification (item 9) There are no audit disputes or qualifications to the review opinion.

9 Dragontail Systems Limited & Controlled Entities CONSOLIDATED INTERIM FINANCIAL REPORT for the half-year ended 30 June 2017

10 Dragontail Systems Limited Interim Financial Report CONTENTS TO THE CONSOLIDATED INTERIM FINANCIAL REPORT Corporate information... 1 Directors report... 2 Auditor s independence declaration... 4 statement of profit or loss and other comprehensive income for the half-year ended 30 June statement of financial position as at 30 June statement of changes in equity for the half-year ended 30 June statement of cash flows for the half-year ended 30 June Notes to the consolidated interim financial statements... 9 Directors declaration Independent auditor s review report... 17

11 Dragontail Systems Limited Interim Financial Report Corporate information This consolidated interim financial report is for Dragontail Systems Limited and its controlled entities ( the Group ). Unless otherwise stated, all amounts are presented in US Dollars. A description of the Group s operations and of its principal activities is included in the review of operations and activities in the directors report on pages 2 to 3. The directors report is not part of the financial statements. Directors Dragontail Systems Australia Mr Paul Steele Mr Ido Levanon Mr Yehuda Shamai Mr Ron Zuckerman Mr Adam Sierakowski Company Secretary Ms Deborah Ho Registered and Principal Office Auditors 673 Bourke Street BDO Audit (WA) Pty Ltd Melbourne VIC Station St Subiaco WA 6008 Telephone: Israel Office Share Registry & Register 2 David Ben Gerion St Advanced Share Registry Limited BSR 1, Floor Stirling Highway Ramat Gan, Tel Aviv Nedlands WA Israel Telephone: Web Site Stock Exchange Listing Dragontail Systems Limited is listed on the Australian Securities Exchange ASX Code: DTS 1

12 Directors report Dragontail Systems Limited Interim Financial Report The directors of Dragontail Systems Limited ( the Company or DTS Australia ) and its controlled entities ( the Group ) submit herewith the financial statements of the Group for the half-year ended 30 June On 12 December 2016, DTS Australia acquired 100% of the issued capital of Dragontail Systems Limited (Company no ) ( DTS Israel ) in exchange for 130,000,000 ordinary shares. For accounting purposes, DTS Israel was identified as the controlling entity of the consolidated group. The accompanying consolidated financial statements represent a continuation of DTS Israel s financial statements. The 31 December 2016 comparatives are the consolidated entity on that date. The 30 June 2016 comparative period results reflect DTS Israel only. In accordance with the provisions of the Corporations Act 2001, the directors report is as follows: The names and particulars of the directors of the Company during or since the end of the half-year are: DTS Australia Paul Steele Non-Executive Chairman (Appointed 14 September 2016) Ido Levanon Managing Director (Appointed 14 September 2016) DTS Australia Yehuda Shamai Non-Executive Director (Appointed 14 September 2016) Ron Zuckerman Non-Executive Director (Appointed 14 September 2016) Adam Sierakowski Non-Executive Director (Appointed 14 September 2016) Principal activities The Group s principal activity is providing software solution in the QSR (quick service restaurant) field of activity for Management & Delivery Operations solutions. Operating results and financial position The net loss for the half-year ended 30 June 2017 was $1,833,452 (2016: $462,310). Following the public listing of the Group, Dragontail Systems has extensively accelerated operations and therefore has incurred significant additional expenditure as part of operating activities. Review of operations During the six months' ended 30 June 2017, DTS Israel continued its efforts to deepen the relationships and installations in existing markets (such as strategic clients as YUM! Canada), and has also channeled resources to recruit significant new customers and market leaders in various markets worldwide. This has led to a multi countries pilot conducted with KFC Asia (part of YUM Brands) in Malaysia and Singapore. During the period, the other significant milestones are as following: the successful completion of the Algo System rollouts to Pizza Hut Corporate Stores in Canada; the Company s first customer for fuel management services which was introduced by Google Partner GoGIS; and the strategic agreement signed with Domino s Israel to implement the Algo system across more than 60 Domino s restaurants in Israel. Also during this period, the Company completed the development of its unique patent (pending) for its product QT. QT is a computer-vision quality system for pizza and other QSR chains. The QT is the first in the world to monitor key elements in the kitchen during the preparation and cooking process to improve the quality and consistency of pizzas and other meals that the restaurant is producing. Significant changes in state of affairs Other than matters described above, there were no other significant changes in the state of affairs of the Group. 2

13 Directors report Dragontail Systems Limited Interim Financial Report Events occurring after the reporting period In July 2017, Dragontail Systems Limited appointed a Chief Technology Officer to be based in its new Research & Development facility in Melbourne. Other than matters described above, there has not been any other matter or circumstance that has arisen after the reporting date that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. Auditor s independence declaration The auditor s independence declaration is included on page 4 of the interim financial report. Signed in accordance with a resolution of the directors Ido Levanon Director Israel 31st day of August

14 Tel: Fax: Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia DECLARATION OF INDEPENDENCE BY NEIL SMITH TO THE DIRECTORS OF DRAGONTAIL SYSTEMS LIMITED As lead auditor for the review of Dragontail Systems Limited for the half-year ended 30 June 2017, I declare that, to the best of my knowledge and belief, there have been: 1. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the review; and 2. No contraventions of any applicable code of professional conduct in relation to the review. This declaration is in respect of Dragontail Systems Limited and the entities it controlled during the period. Neil Smith Director BDO Audit (WA) Pty Ltd Perth, 31 August 2017 BDO Audit (WA) Pty Ltd ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

15 Dragontail Systems Limited Interim Financial Report statement of profit or loss and other comprehensive income for the half-year ended 30 June 2017 Note Half-Year ended 30 June 2017 Company Half-Year ended 30 June 2016 Revenue 86,236 53,719 Research and development expenses 5 (296,406) (421,849) Selling and marketing expenses 5 (236,577) (55,001) General and administrative expenses 5 (854,416) (39,951) Operating expenses 5 (589,798) - Total operating expenses (1,977,197) (516,801) Operating loss (1,890,961) (463,082) Net finance income 57, Loss before income tax (1,833,452) (462,310) Income tax benefit - - Loss for the half-year (1,833,452) (462,310) Other comprehensive income for the half-year - - Amount that will not be reclassified subsequently to profit or loss Adjustments arising from translating financial statements from functional currency to presentation 142,056 - Total comprehensive loss for the half-year (1,691,396) (462,310) Loss per share for the half-year attributable to members of Dragontail Systems Limited Loss per share (basic and diluted) (cents) 8 (1.05) (0.35) The accompanying notes form an integral part of this consolidated statement of profit or loss and other comprehensive income. 5

16 Dragontail Systems Limited Interim Financial Report statement of financial position as at 30 June 2017 Current Assets Note 30 June December 2016 Cash and cash equivalents 2,549,368 4,175,428 Trade receivables 24,418 20,367 Other receivables 130,550 97,428 Inventory 22,811 - Total Current Assets 2,727,147 4,293,223 Non-Current Assets Other receivables - 6,172 Plant and equipment 47,102 35,735 Total Non-Current Assets 47,102 41,907 Total Assets 2,774,249 4,335,130 Current Liabilities Short term credit from banks - 24,739 Trade and other payables 501, ,610 Total Current Liabilities 501, ,349 Total Liabilities 501, ,349 Net Assets 2,272,802 3,928,781 Equity Issued capital 6 7,910,540 7,875,123 Reserves 7 343, ,347 Accumulated losses (5,981,141) (4,147,689) Total Equity 2,272,802 3,928,781 The accompanying notes form an integral part of this consolidated statement of financial position. 6

17 Dragontail Systems Limited Interim Financial Report statement of changes in equity for the half-year ended 30 June 2017 Share Capital Foreign currency translation reserve Shares based payments reserve Accumulated losses 2017 Balance at 1 January ,875,123 83, ,240 (4,147,689) 3,928,781 Loss for the half-year (1,833,452) (1,833,452) Total comprehensive (loss) (1,833,452) (1,833,452) Transactions with owners, in their capacity as owners Costs directly attributable to issue of share capital 35, ,417 Foreign exchange movements - 142, ,056 35, , ,473 Balance at 30 June ,910, , ,240 (5,981,141) 2,592,802 Total 2016 Company Balance at 1 January , (1,398,607) (555,245) Loss for the half-year (462,310) (462,310) Total comprehensive (loss) (462,310) (462,310) Transactions with owners, in their capacity as owners Issue of shares 1,717, ,717,987 Share based payment transactions , ,887 Foreign exchange movements ,717, ,887-1,838,874 Balance at 30 June ,561, ,887 (1,860,917) 821,319 The accompanying notes form an integral part of this consolidated statement of changes in equity. 7

18 Dragontail Systems Limited Interim Financial Report statement of cash flows for the half-year ended 30 June 2017 Half-Year ended 30 June 2017 Company Half-Year ended 30 June 2016 Cash flows from operating activities Receipts from customers 82,185 43,898 Cash payments to suppliers and employees (1,857,170) (473,042) Interest paid - (3,111) Net cash flows (used in) operating activities (1,774,985) (432,255) Cash flows from investing activities Payments for property, plant and equipment (11,557) (4,147) Net cash flows (used in) investing activities (11,557) (4,147) Cash flows from financing activities Proceeds from issue of share capital - 355,682 Costs of capital raising 35,417 - Proceeds on account of shares - 939,846 Receipt/(Repayment) of short term credit from banks (24,739) (37,216) Net cash flows from financing activities 10,678 1,258,312 Exchange differences on cash balances and cash equivalents 149,804 (303) Net (decrease) in cash and cash equivalents (1,626,060) (821,607) Cash and cash equivalents at the beginning of the financial period 4,175, Cash and cash equivalents at the end of the financial period 2,549, ,058 The accompanying notes form an integral part of this consolidated statement of cash flows. 8

19 Dragontail Systems Limited Interim Financial Report Notes to the consolidated interim financial statements 1. REPORTING ENTITY This interim financial report includes the financial statements and notes of Dragontail Systems Limited ( the Company ) and its legal subsidiaries ( the Group ). The Company is a for-profit entity and is domiciled in Australia. 2. NEW ACCOUNTING STANDARDS FOR APPLICATION IN FUTURE PERIODS Other than the new policy below, the same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial statements. Inventory Inventories are stated at the lower of cost and net realisable value on a 'first in first out' basis. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. 3. SIGNIFICANT ACCOUNTING POLICIES Basis of preparation These financial statements include the financial statements of Dragontail Systems Limited (the Company ), and its legal subsidiaries (the Group ). These general purpose financial statements have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act Australian Accounting Standards are equivalent to International Financial Reporting Standards ( IFRS ). Compliance with Australian Accounting Standards ensures that these financial statements comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated. Except for the cash flow information, the financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. Basis of measurement and reporting convention On 12 December 2016 Dragontail Systems Limited ("DTS Australia") completed a capital reorganisation transaction with the shareholders of various entities under common control (Common Controlled Entities); being; Dragontail Systems Limited (Company no ) ( DTS Israel ), Dragontail Systems USA, Inc ( DTS USA ) and Dragontail Systems Canada, Inc ( DTS Canada ) to acquire 100% of the share capital of the various Common Controlled Entities in exchange for 130,000,000 shares in the Company. In accordance with the Australian Accounting Standards, the transaction does not meet the definition of a business combination as DTS Australia was established for the sole purpose of acquiring the Common Controlled Entities by way of issue of equity. The shareholders of the Common Controlled Entities received the same proportion of equity instruments in DTS Australia. The comparative financial information included in the Company's financial information is that of DTS Israel, not the Company. The accounting policies adopted are consistent with the accounting policies of DTS Israel's last annual financial report for the year ended 31 December These financial statements are presented in United States dollars and the controlling entity, DTS Australia, has a functional currency of the Australian Dollar (AUD). The functional currency of DTS USA is the United States Dollar. The functional currency of DTS Canada is the Canadian Dollar (CAD). The following significant accounting policies have been adopted in the preparation and presentation of the financial report: 9

20 Dragontail Systems Limited Interim Financial Report Notes to the consolidated interim financial report a) Reporting basis and conventions The half-year statements have been prepared on an accruals basis and is based on historical costs modified by the revaluation of selected non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied. Going concern This consolidated interim financial report has been prepared on the basis that the consolidated entity will continue normal business activities and realise assets and settle liabilities in the ordinary course of business. During the period ended 30 June 2017, the consolidated entity incurred losses of $1,833,452 (30 June 2016: $462,310), net cash outflows from operating activities of $1,774,985 (30 June 2016: $432,255), and at that date had cash on hand of $2,549,368 (31 December 2016: $4,175,428). The consolidated entity s ability to continue as a going concern and to continue to fund its planned expanded activities is dependent on raising further capital and / or generating additional revenues from its operations and / or reducing operational costs. These conditions indicate a material uncertainty that may cast a significant doubt about the consolidated entity s ability to continue as a going concern and, therefore, that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The Directors believe the consolidated entity will continue as a going concern, after consideration of the following factors: The consolidated entity has recent successful experience in raising capital having listed on the ASX in December 2016 raising $5.8 million before costs; and The consolidated entity has successfully completed the planned first phase of its commercial strategy and now requires additional capital for its next phase. Initial discussions have commenced with a number of Australian stock brokers and the directors are confident of a successful outcome within the next 12 months; and The consolidated entity is continuing efforts to secure key customers in key markets and are similarly confident of generating additional sales revenue within the next 12 months. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or liabilities that might be necessary should the consolidated entity not continue as a going concern 4. INVESTMENT The consolidated interim financial report of Dragontail Systems Limited and the following subsidiaries: Country of % Equity Interest Name Incorporation 30 June June 2016 Dragontail Systems Limited ( DTS Israel ) Israel 100% 100% DragonTail Systems USA Inc. ( DTS USA ) USA 100% 100% DragonTail Systems Canada Inc. ( DTS Canada ) Canada 100% 100% Dragontail Systems Limited is the ultimate Australian parent entity and legal parent of the Group. On 24 June 2016 DTS Israel established a fully owned subsidiary registered in USA, DragonTail Systems USA Inc., and on 30 June 2016 a fully owned subsidiary registered in Canada, DragonTail Systems Canada Inc. The consolidated results for the current period include all group companies. The comparative period results reflect DTS Israel and DTS USA from its date of incorporation. On 12 December 2016, Dragontail Systems Limited ("DTS Australia") issued 130,000,000 fully paid ordinary shares to the Vendors of Dragontail Systems Limited (Company no ) ( DTS Israel ) as consideration for the acquisition of 100% of all the rights and title to DTS Israel. As a result, the shareholders of DTS Israel held at the date of acquisition 75% of the issued share capital of DTS Australia, prior to the issue of shares under the prospectus. 10

21 Dragontail Systems Limited Interim Financial Report Notes to the consolidated interim financial report 5. EXPENSES Following the public listing of the Group in December 2016, Dragontail Systems has extensively accelerated operations and therefore has incurred significant additional expenditure as part of operating activities. 30 June December 2016 Operating expenses: Salaries and related expenses 309,343 - Travel expenses 280, ,798 - General and Administrative expenses: Salaries, related expenses and other expenses 397,399 20,457 Travel expenses 457,017 19, ,416 39, ISSUED CAPITAL As at 30 June 2017 As at 31 December 2016 No. No. Ordinary Shares 173,500,000 7,910, ,500,000 7,875,123 Fully paid ordinary shares carry one vote per share and carry the right to dividends. Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At the shareholders meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands. 11

22 Dragontail Systems Limited Interim Financial Report Notes to the consolidated interim financial report 6. ISSUED CAPITAL (CONTINUED) A reconciliation of the movement in capital and reserves for the Group can be found in the Statement of Changes in Equity. No Opening balances as at 1 January , ,213 Conversion of convertible loans 1 38, ,336 April Issue 2 43, ,569 Additional April Issue 3 6,379 - July Issue 4 68,884 1,104,841 August Issue 5 1,187 19,965 Less: share issued cost - (75,565) Total at time of acquisition of DTS Israel by DTS Australia 655,379 2,743,359 Completion of acquisition of DTS Israel by DTS Australia (655,379) - Issue of shares acquisition of DTS Israel 6 130,000,000 - Issue of shares Public Offer 6 30,000,000 4,318,260 Issue of shares Facilitation Offer 6 6,000, ,652 Issue of shares Conversion of Convertible Notes 7 7,500, ,750 Less: share issued cost - (670,898) Closing balance 31 December ,500,000 7,875,123 Add: movement in share issued cost 8-35,417 Closing balance 30 June ,500,000 7,910,540 Notes: 1 In April 2016, convertible loans from shareholders were converted into 38,424 ordinary shares. 2 In April 2016, 43,387 ordinary shares were issued for a total amount of approximately 383, In April 2016, the Company issued 6,379 ordinary shares to 3 Shareholders at no cost, due to exercise of pre-emptive rights. 4 During 2016, the Company signed Share Purchase Agreements with Shareholders and other investors (Hereinafter- "the Investors"). As at year end 2016, the Company received from the investors a total amount of 1,104,841and 68,884 ordinary shares value were issued. 5 In August 2016, 1,187 ordinary shares issued for a total amount of approximately 20, Pursuant to the Company s Prospectuses and on 12 December 2016, 130,000,000 Vendor shares were issued, 30,000,000 Public Officer shares were issued and 6,000,000 Facilitation shares were issued. 7 On 12 December 2016, 7,500,000 shares were issued on conversion of convertible notes at AUD$0.115 per share. 8 During the half year ended 30 June 2017, the Company was successfully registered for GST. As such, capital raising costs has been reduced by the amount of GST claimable by the Company. 12

23 Dragontail Systems Limited Interim Financial Report Notes to the consolidated interim financial report 7. RESERVES 30 June December 2016 Share based payments reserve 118, ,240 Foreign currency translation reserve 225,163 83,107 Closing balance 343, , LOSS PER SHARE The loss and weighted number of ordinary shares used in the calculation of basic loss per share are as follows: 2017 Company 2016 Loss attributable to ordinary equity holders (1,833,452) (462,310) Balance before transaction - - Total number of shares 173,500, ,000, ,500, ,000,000 Basic loss per share calculation (cents) (loss/weighted average shares) (1.05) (0.35) (i) Includes the effect of the transaction (under continuation accounting) for the purposes of the comparative loss per share 9. FAIR VALUE OF FINANCIAL INSTRUMENTS Due to their short-term nature, the carrying amounts of the current receivables and current payables are assumed to approximate their fair value. 10. RELATED PARTY TRANSACTIONS Transactions with related parties during the half-year were on the same basis as stated in the 31 December 2016 Annual Report. 11. CONTINGENT LIABILITIES & COMMITMENTS As at the date of the report, the Directors of the Group are not aware of any material contingent liabilities or commitments that would require disclosure. 13

24 Dragontail Systems Limited Interim Financial Report Notes to the consolidated interim financial report 12. EVENTS OCCURRING AFTER THE REPORTING PERIOD In July 2017, Dragontail Systems Limited appointed a Chief Technology Officer to be based in its new Research & Development facility in Melbourne. Other than matters described above, there has not been any other matter or circumstance that has arisen after the reporting date that has significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial periods. 13. SEGMENT NOTE The operating segments are identified on the basis of information that is reviewed by the chief operating decision maker ("CODM") to make decisions about resources to be allocated and assess its performance. Accordingly, for management purposes, the Company is organised into operating segments based on the services of the business units. The company recognises activities of software for customers in the field of QSR (quick service restaurant) as the only reporting segment. Segment revenue Half-Year ended 30 June 2017 Company Half-Year ended 30 June 2016 Segment expenses Half-Year ended 30 June 2017 Company Half-Year ended 30 June 2016 Sale of software in development 86,236 53,719 (296,406) (421,849) Total for continuing operations 86,236 53,719 (296,406) (421,849) Finance expenses (net of finance income) 57, Selling and marketing expenses - - (236,577) (55,001) General and administrative expenses - - (854,416) (39,951) Operating expenses (589,298) Total revenue/(expenses) before tax (continuing operations) 143,745 54,491 (1,977,197) (516,801) 30 June December 2016 Segment Assets 2,689,516 4,335,130 Unallocated assets 84,732 - Total assets 2,774,248 4,335,130 14

25 Dragontail Systems Limited Interim Financial Report Notes to the consolidated interim financial report 13. SEGMENT NOTE (CONTINUED) 30 June December 2016 Segment Liabilities 307, ,350 Unallocated liabilities 193,857 - Total Liabilities 501, ,350 Geographic information Revenues reported in the financial statements derive from the Company's country of domicile (Israel) and foreign countries based on the location of the customers, are as follows: Half-Year ended 30 June 2017 Company Half-Year ended 30 June 2016 Israel 14,278 28,075 Europe - - Canada 69,738 25,644 USA 2,220 - Total revenues 86,236 53,719 15

26 Directors declaration Dragontail Systems Limited Interim Financial Report The Directors of the Group declare that: 1. The financial statements and notes, as set out on pages 5 to 15: (a) (b) comply with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and give a true and fair view of the economic entity s financial position as at 30 June 2017 and of its performance for the half-year ended on that date. 2. In the Directors opinion there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Ido Levanon Director Israel 31 August

27 Tel: Fax: Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia INDEPENDENT AUDITOR S REVIEW REPORT To the members of Dragontail Systems Limited Report on the Half-Year Financial Report We have reviewed the accompanying half-year financial report of Dragontail Systems Limited, which comprises the consolidated statement of financial position as at 30 June 2017, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the half-year ended on that date, notes comprising a statement of accounting policies and other explanatory information, and the directors declaration of the consolidated entity comprising the company and the entities it controlled at the half-year s end or from time to time during the half-year. Directors Responsibility for the Half-Year Financial Report The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity s financial position as at 30 June 2017 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations As the auditor of Dragontail Systems Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Dragontail Systems Limited, would be in the same terms if given to the directors as at the time of this auditor s review report. BDO Audit (WA) Pty Ltd ABN is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN , an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under Professional Standards Legislation, other than for the acts or omissions of financial services licensees.

28 Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Dragontail Systems Limited is not in accordance with the Corporations Act 2001 including: (i) Giving a true and fair view of the consolidated entity s financial position as at 30 June 2017 and of its performance for the half-year ended on that date; and (ii) Complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations Emphasis of matter Material uncertainty relating to going concern We draw attention to Note 3(a) in the financial report which describes the events and/or conditions which give rise to the existence of a material uncertainty that may cast significant doubt about the consolidated entity s ability to continue as a going concern and therefore the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business. Our conclusion is not modified in respect of this matter. BDO Audit (WA) Pty Ltd Neil Smith Director Perth, 31 August 2017