transformation
2005 Annual Report
contents
financial highlights
2
3
4
6
7
9
financial highlights
chairman’s letter
leadership group
ceo’s report
the TZ group structure
expanded group capability
the year ahead
3
operational review
27
intellectual property update
29
technology update
33
product development technologies
37
product development capability
TZ Limited’s proprietary
intelligent fastening technology
is creating an entirely
new standard for the way
manufactured products are
designed, assembled and
serviced.
The company posesses an
extensive and growing patent
portfolio, a fully integrated
product development capability
and proven expertise in
licensing technology to leading
global companies.
TZ Limited has developed a
range of intelligent fastening
solutions using its patented
devices and techniques
combined with a specially
designed proprietary operating
system.
Textron Fastening Systems has
licensed the exclusive rights to
commercialize the technology
in all industry sectors globally.
42.08
27.9
5.72
8.22
.9
4.08
2.44
2004
2004
2005
2005
.69
.8
2004
0.32
2005
2004
2005
2004
2005
diluted EPS
(in cents)
net profit
(in millions)
EBITDA
(in millions)
revenues
(in millions)
shareholder equity
(in millions)
’05 Annual Report
chairman’s letter
I am pleased to report that it has been a year
of transformation, rapid growth and exceeding
expectations, in this our first full year of trading with
our subsidiary Teleyzygology, Inc (TZ Inc).
The overall performance of our subsidiary companies
exceeded expectations and allowed us to record
better than expected earnings of $5.79M EBITDA
compared to a loss of $39,992 last year.
The year ended 30th June 2005 was the first full year
of operations in which TZ Inc operated as a wholly
owned subsidiary of TZ Limited. Revenue for TZ Inc
was $9,828,86. In March 2005, the Illinois-based
Product Development Technology Holdings, Inc. and
associated companies comprising the PDT Group
(PDT) was acquired and revenue included in the
consolidated entity from the date of acquisition to 30
June 05 was $8,390,277. Total revenue for the year
for TZ Limited was $8,28,463.
The board considers excellent progress is being
made against our stated objectives and the decision
to relocate the primary operations of TZ Limited
to the United States and expand our capability
through acquisition to have been the right one.
Significant steps forward have been taken towards
the commercialization of our Intelligent Fastening
Technology and
the Directors are particularly
pleased with the spirit of co-operation and shared
commitment evident in the new relationship with
Textron Fastening Systems. All in all we view these
as positive developments to support sustained
shareholder value creation.
The board is delighted with its strategic acquisition
of PDT, it is a tremendous company highly respected
within the USA design community and I would like to
take this opportunity to welcome the PDT team on
board.
TZ Limited has undergone a dramatic transformation
during the year, from a small visionary team to a full
scale profitable product development and intellectual
property (IP) licensing company with 45 people
around the world.
Transformations like this do not occur without the
committed focus of Directors, management and team
contributors at every level. Good companies become
great companies by attracting and developing the best
people and talent – this is a philosophy consistent in
our planning and evident in our execution.
We recently announced a restructure of TZ Limited
management and instituted a group CEO position, to
over see the growing number of entities in the group;
Chris Kelliher will move into this expanded role and has
already recruited some excellent new management
into the company. I would like to thank Chris and his
diligent team of John Wilson, Dickory Rudduck and
now Mark Schwartz for leading the company through
this exciting year of transition to be the company we
share today.
I invite you to read on about the exciting progress
made during the year, if you are a shareholder thank
you for your support, if you are thinking of becoming
a shareholder please read on about a great example
of an Australian company taking on the world.
Tony Leibowitz
Chairman
leadership group
expanding our executive capacity to meet expected growth
Pictured left to right; Mark Schwartz, Noel Gewarges, Bernard Perrine, Chris Kelliher, John Wilson and Dickory Rudduck.
Bernard Perrine
TZ Inc CEO
Noel Gewarges
TZ Group CFO
Mark Schwartz
PDT Inc CEO
Chris Kelliher
TZ Group CEO and
TZ Limited Executive Director
John Wilson
TZ Inc COO
Dickory Rudduck
TZ Inc CTO
2
’05 Annual Report
’05 Annual Report
3
ceo’s report
a year of change and rapid growth
In this year of transition, we have
moved our technology from concept
to commercial reality.
We started the year as a company of eleven people in
Sydney, new to life in a public company and with an
expanding horizon of opportunity.
(IFT) and converting
The first fiscal quarter we focused our commercial
priorities on securing applications for our Intelligent
Fastening Technology
the
subsequent market validation into an expanded
agreement with our partner, Textron Fastening
Systems (TFS) aimed at increasing their commitment
to commercialize IFT globally across multiple industry
segments. We executed the new agreement late in
2004 and in so doing set the course for the realization
of our vision to create a new fastening standard based
on our protected Intellectual property. In April 2005,
through a global promotional and media campaign,
TFS formally launched InteviaTM , based exclusively
on our IFT technology and received broad industry
recognition.
Our technical priority centered on implementing a
systematic approach to testing and validating fastener
and smart material actuator designs and commencing
a multi year Technology Development plan that will
deliver industrial grade verified fastener designs
supported within a common electronics and software
architecture. Early in 2005 we commissioned a state
of the art test and verification facility in Chicago that
is proving invaluable, not just in testing, but also in
optimizing fastener design and developing proprietary
software control algorithms. Our deepened knowledge
of smart materials and how to harness them represent
significant know-how.
As anticipated providing commercial, technical and
relationship support from Australia to the growing
momentum in the United States and Europe became
increasingly difficult, in late 2004 the decision was
made to accelerate the move to the USA and relocate
the whole TZ team, several with young families, to
Chicago to be closer to our partners, their customers
and the market.
To the TZ team who accepted the challenge, moved
from a Sydney summer to a mid-west winter, I
applaud your commitment and belief in yourselves
and our shared vision.
In March 2005 we completed the acquisition of PDT
a move that dramatically increased our ability to
develop commercial Applications and the underlying
intelligent
fasteners, software and electronics.
The PDT and TZ teams have integrated well and
our collective capability now covers all aspects of
product development from innovation of concept
through to manufactured product – a broad capability
fundamental to our future success. PDT under Marks
direction has proven to be an impressive organization,
the anticipated synergies are materializing and PDT is
on track to achieve its full year objectives.
To the outstanding PDT team thank you for easing
our transition and making us welcome.
Throughout the year IFT continued to receive recognition
as a commercially significant technology and in April
2005 Textron Fastening Systems introduced the
first commercial aerospace applications, receiving
strong interest and commercial orders from leading
companies in the sector. We anticipate a similar
response to the next two commercial applications
due to be released by the end of the year, with another
two to follow in the new calendar year.
In the past year we worked hard to win validation and
market acceptance. This required us to develop unique
solutions for diverse customer problems, each one
requiring a special fastener design, this is appropriate
to “bootstrap” and validate the technology but it
does not provide the leverage to engage hundreds
or even thousands of customers. A critical factor as
we go forward is to weight our efforts on the core
technology of IFT; smart materials actuation, fastener
concepts, software and proprietary electronics, it is
on this platform that future applications will be built.
Our top priority is to complete the series of fully tested
fastener families with commercial grade software and
a documented Application Programming Intereface
and evaluation kit. This will transition the proliferation of
the technology, volume manufacturing and customer
engagement
to our partner, Textron Fastening
Systems. This is the fundamental intention of the new
agreement and the past years work augers well this
planned shift in focus.
Our stated objective is to create and industry standard
based on our intelligent fastening technology and TZ
operating system. Industry standards are powerful
forces that can endure for decades. A well recognized
example is Microsofts’ Windows™ operating system
where today tens of thousands of companies create
software for literally millions of application needs.
This success was a combination of Microsoft’s
unwavering long term focus, sustained improvement
of the technology over many years (from MS-DOS
to Windows XP) and encouraging more and more
companies to use the technology as a platform on
which to build software products and systems.
For Microsoft the initiating force in their success
was IBM’s Industry leadership; a company with
an imperative to gain competitive advantage in
an emerging market (the Personal Computer) that
was threatening its core business, (the MainFrame
Computer).
Our relationship with Textron Fastening Systems
draws on these obvious lessons and references
the many parallels. Leveraging an Industry Leaders
credibility, access to markets and their need for
competitive differentiation, we believe will lead to broad
acceptance of our underlying game changing platform
and by progressively improving it over time hundreds
of companies can integrate it into their product
strategies leading ultimately to its commoditization
and adoption as an Industry Standard.
Consistent to delivering this goal we are bringing
management into the company with the relevant
background and experience. I am pleased to welcome
to the company Bernard Perrine who, until accepting
our offer, was the General Manager of marketing for
the Windows Mobile and Embedded Devices Division
at Microsoft. Bernard will join us in late October as
the CEO of TZ Inc and will be a valuable addition to
an already strong leadership team.
To John, Dickory and Mark and your outstanding
teams I thank you for a job brilliantly done in this year
of transformation.
And to our shareholders, I thank you for your ongoing
support and for your foresight investing in a small
Australian company with high aspirations, in so doing
you have allowed us to make the transformation
evident in the past year. Rest assured you have a
committed and talented team of results oriented
people building a company we can all be proud of.
Chirs Kelliher
TZ Group CEO
4
’05 Annual Report
’05 Annual Report
5
the TZ group structure
augmenting our operations
expanded group capability
deepening strategic execution competence
World leader in assembly
enabling technology
Fully integrated product
development services company
Technology licensor:
intellectual property creation
technology development
application development
system integration
technology licensing
Multi-disciplinary capability:
research
industrial design
mechanical & electrical engineering
software development
tooling and pilot production
TZ Limited Board
Tony Liebowitz, Chairman
Chris Kelliher, Executive Director
John Falconer, Company Secretary
Group CEO
Chris Kelliher
TZ Inc CEO
Bernard Perrine
Group CFO
Noel Gewarges
PDT CEO
Mark Schwartz
TZ Inc COO
John Wilson
TZ Inc CTO
Dickory Rudduck
Acquisitions
Smart Materials
Software
Other
New Business
Actuators
Intelligent Closures
Intelligent Packaging
Intelligent Containers
New IP
6
’05 Annual Report
’05 Annual Report
7
the year ahead
accelerating our plans for growth
The company anticipates undertaking
a number of strategic objectives in
the year ahead.
Textron Fastening Systems
Textron Inc announced in early September of this
year they were reviewing strategies to improve the
performance of its US$2B subsidiary, Textron Fastening
Systems (TFS) and as such may consider selling certain
or all TFS assets based on the determination of that
review. This announcement is consistent with TZ Inc
management’s understanding of Textron’s strategy to
focus on value based businesses, investment in new
products and technologies and to move away from
under performing commodity based assets.
featured
Intelligent
Fastening
in Textron’s
Technology
Intevia™
has constantly
investor
communications as an example of their future value
based growth strategies. In the light of the recent
Textron announcement, Textron and TFS have restated
their full commitment to Intevia™ and the future of the
TZ Limited relationship and other opportunities.
Since
the announcement, open and ongoing
communication between the senior management of
TZ Inc, TFS and Textron Inc are taking place. TZ Inc
management is fully informed and satisfied with the
direction that the strategic review process is taking
and is firm in its view that this development will present
opportunities to accelerate business growth and
support our stated objective of pursuing a NASDAQ
listing in the course of the next calendar year.
Commercialization of other
Intellectual Property
The company owns and is continuing to develop
significant Intellectual Property (IP) in technology outside
IFT and the license agreement with TFS. To date,
commercialization efforts have focused predominantly
on IFT and building the Textron relationship and
commercialization foundations. With the basic IFT
building blocks now in place, the company will explore
licensing opportunities for its other valuable IP and in
the course of next year, will implement a structured
program to target technology partners prospective
PDT
PDT continued to perform strongly this year and will
build on that momentum by continuing to scale the
business through the ongoing development and further
acquisition of branch offices. PDT has shown that this
model effectively leverages existing overhead and access
to the lower cost Ukrainian resource pool to drive strong
profitability. These offices also further expand the PDT
footprint to support existing strategic customers who
desire a local presence and will underpin future business
development efforts to win new and large strategic
clients who see value in full service capability and access
to low cost, high quality engineering (Ukraine) and Asian
manufacturing resources.
In line with this initiative, PDT has invested in the
development of a tightly controlled product innovation
and development process which was recently audited
for ISO 3485 Certification (medical device design).
This highly coveted certification is central to PDT’s
strategy of expanding into the highly lucrative medical
device market. Certification is expected in this
calendar year and when secured, PDT will be the first
product development firm to achieve this recognition
for its proprietary process.
PDT will continue to support the company’s drive to
bring intelligent fastening to market by supporting
development of core fastening technology, developing
applications and assisting in the commoditization of
the fasteners themselves.
Technology Development
Technology development will continue to focus on
delivering commercial grade fasteners supported
by software and electronics. By December, three
fastener families will be fully verified, tooled and in
pre-production manufacturing.
These three new fastener families, which will be
branded by TFS as the S, IL and R series will provide
a base technology offer enabling many application
opportunities to be pursued and underpin TFS
application solutions for security, rapid assembly,
rapid reconfiguration and maintainability.
These industrial strength fasteners will initially be
launched as part of an Evaluation Kit with remote
communications software that will allow prospective
customers and interested third parties to fully evaluate
applications of the technology and to better explore
and understand the full multi-functional capability that
these intelligent fastening devices can offer as part of
an assembled system.
TZ’s proprietary intelligent fastening operating system
allows for secure and rapid maintenance procedures
’05 Annual Report
9
the year ahead
Availability of these kits is planned for launch in
early 2006 and will be targeted at the design and
engineering community.
These Evaluation Kits will be upgradeable, by a software
release which will be made available later in the year,
that will provide for a full Engineering Development Kit.
It is anticipated that these Kits will support demand
creation for Intevia™ solutions as designers and
engineers embrace the capability of independently
engineering applications to meet specific needs. This
software will be the first commercial release of the TZ
Operating System (TZ-OS).
Futurewall
Futurewall was launched in Australia and gained
momentum in its first year with significant sales
volume being achieved well above initial expectations,
In recent months, the licensee has not been able to
sustain these levels of sales due to recent events
unrelated to the marketability of the product. The
company
to
restructure the current licensing arrangement to
ensure that the potential of the product is maximized
in the Australian market.
investigating options
is currently
In addition, a product extension is currently planned
to add additional functionality to the core system that
will capitalize on identified market opportunities and
increase the attractiveness of the offer.
Encouraging progress is also being made in China for
manufacturing and distribution and the launch of the
product in the USA although slow to date, will receive
increased management focus with an injection of
dedicated and appropriate resources to build on the
identified opportunities. Management believes that an
opportunity exists to build a highly profitable global
Futurewall business by revisiting the current licensing
and distribution model and exploring avenues for TZ
to directly influence market outcomes and derive an
increased share of the proven profit potential.
Organisational Development
The company is deepening its talent base and execution
capability to fully capitalize on opportunities.
To manage the integration of a growing number of
entities in the TZ Group and ensure the planned
synergies, strategic integration and growth, the role of
Group CEO has been introduced and will be filled by
Chris Kelliher. Joining the leadership group as CEO
of TZ Inc is Bernard Perrine, will leave his current role
at Microsoft to take up this position in late October.
Until this appointment, Bernard was the General
Manager of Marketing for the Mobile and Embedded
Devices division responsible for global sales and
marketing teams for WindowsTM mobile software for
pocket PC’s, Smartphones and embedded devices.
Prior to joining Microsoft, Bernard was vice president
at Eastman Kodak responsible for their global retail
photofinishing business and prior to that, a founding
partner at Kinko’s Inc. Bernard’s proven success and
considerable experience make him well qualified for
this position. His experience at Microsoft will bring
an insightful dimension to the companies increasing
focus on software which is critical to establishing
IFT as an industry standard for remotely activated
assembly systems.
It is anticipated that another Group Role will be
established during the course of the year to bring
the appropriate focus to other IP platforms, licensing
opportunities and emerging new business.
for
intelligent
Acquisitions
Smart materials actuation is a fundamental enabling
technology
fastening devices.
Management believes the acquisition of a smart
materials supplier is strategically important to enable
TZ to produce proprietary actuator designs for high
temperature and high duty cycle actuators which
will provide competitive advantage, broaden the
application opportunities, produce incremental revenue
and guarantee the supply of these materials.
The company has identified a number of potential
acquisition targets and in September the company
entered into a Memorandum of Understanding
to acquire a leading smart materials supplier and
Technologist. Discussions are progressing and a
decision will be made in the near future.
There is a cross company requirement for additional
software development and electronic engineering
capability. These are currently being met by organic
growth within PDT and ramping up the deployment
of Ukraine based software engineers. It is possible
this growth will need to be supplemented through the
acquisition of appropriately skilled and established
Illinois based businesses, several of which have
already been identified.
TZ’s testing facilities in Chicago are used to ensure fasteners and actuators
meet the specified standard for a variety of commerical applications.
’05 Annual Report
introducing The Premier Global Multi-industry Company
2004 Revenue: USD$ 0.2 billion (NYSE: TXT)
operational review
securing our channel to market
22%
• bell helicopter
• textron systems
19%
24%
cessna
textron financial
5%5%
30%
industrial
• E-Z-GO
• Fluid & Power
• Greenlee
• Jacobsen
• Kautex
“We have secured a globally committed commercialisation partner in TFS with
the industry presence and global scale of sales, manufacturing, engineering
and distribution resources needed to build an extensive application sales base.”
John Wilson, COO and Co-founder of TZ Inc
Dickory Rudduck, TZ Inc CTO; John Wilson, TZ Inc COO; Rick Clayton, TFS President; Seshu Seshasai TFS EVP of Technology;
Maritn Schnurr, TFS EVP of Sales and Marketing; and Chris Kelliher, TZ Group CEO
reviewing
the various strategic
After
licensing
options available to the Company, TZ management
determined the most appropriate path forward and
commenced the structured negotiation process with
TFS executives.
The last quarter of 2004 saw heavy commercial
negotiation, substantive due diligence on TZ’s
intellectual property and robust modelling of the IFT
revenue opportunity. With new obligations for each
party agreed to, licensing terms defined and a formal
agreement signed, TFS secured the global rights to
commercialise IFT across all industry sectors.
A significant focus for management at the start of the
operational year in July 2004 was the development and
nurturing of the technology partnership relationship
with Textron Fastening Systems (TFS).
The original one-year agreement on which the parties
based their 2003/04 collaboration expired in August
2004 providing the impetus for both parties to
move forward to define an on-going and substantial
relationship.
Underpinned by the ground swell of market interest,
the initial launch of the technology to the aerospace
sector early in 2004, and significant awareness
building for Intelligent Fastening Technology (IFT)
through TFS’ public relations initiatives, it was clear
that an exclusive relationship would create a solid
platform for the broad commercialisation of IFT,
accelerate the Company’s growth plans and support
TZ’s stated objective to establish IFT as a new industry
standard.
2
’05 Annual Report
’05 Annual Report
3
operational review
deploying dedicated resources
“Our global presence, technology
resources and sales and
marketing network give the
wherewithall to establish this
technology as an industry
standard within a few years.”
Sesh Seshasai, EVP of Technology for TFS
On signing the agreement, TFS put into action
immediate steps to build a flexible and responsive
IFT organisation and allocate dedicated resources to
commercialisation.
Using the highly profitable and fast growing global
aerospace division as the structure to incubate the IFT
business, TFS appointed senior VP level executives
across the marketing and technical functions to lead
the IFT business, supported by high level senior
management appointments in product management,
application engineering and business development
roles.
The appointment of predominantly Six Sigma
Black Belt certified resources to the IFT business,
clearly demonstrated TFS’ commitment to the
technology and the push for successful execution of
commercialisation plans. Six Sigma is a disciplined,
data-driven approach and methodology for change
management and the achievement of quality and
near perfection in any process -- from manufacturing
to transactional and from product to service. Black
Belts are typically high performing senior managers
who are fully trained, certified and experienced in
the principles and practical application of Six Sigma
methodology.
As of June 2005, there were six dedicated full-time
IFT resources and a substantial compliment of shared
TFS resources across Europe, US and Asia sales
and marketing, application engineering, product
engineering and operations focused on supporting
IFT based activity.
In support of this new structure, TZ reallocated and
employed additional resources to compliment TFS’
organisation and provide a sound foundation for
competency and skill sharing.
We have a close working relationship with TFS
working through all the aspects of prod devt through
to commercial projects.
’05 Annual Report
5
At Textron Fastening Systems, some of our most exciting products are
hidden. Miniature fasteners for electronic applications, “blind” fasteners for
aircraft – even fasteners with microchips driven by remote devices.
These new Intevia “intelligent” fasteners are even replacing traditional lock
and key, enhancing both access and security. Isn’t that “smart”?
We’re making fasteners smart.
operational review
acheiving commercial validation
Several application development opportunities in the
Automotive, Aerospace, Defence and Security industries
are currently progressing through TFS’ new product and
services introduction process.
Secure Latching System for the
Aerospace Industry
Initiated in August 2004 and launched in April 2005,
the Secure Latching System represents the world’s
first commercial implementation of intelligent fastening
technology.
This product is an innovative secure electronic latching
solution for aircraft interiors, which meets the needs
of the aerospace industry for cost-effective security,
systems integration and management, and weight
reduction.
The initial customer for the secure latching system
is UK-based aircraft interiors company, MacCarthy
Interiors, who intend to apply the product to their first
and business class stowage systems. MacCarthy
Interiors takes pride in offering innovative, design led
production solutions to their customers who include
Virgin Atlantic Airways, British Airways, KLM and
Airbus.
The new intelligent latch has a slim-line profile to allow
flush mounting into aircraft monuments and offers
increased functionality and reduced weight compared
to the heavy electro-mechanical latching systems in
use currently.
The new mechanism comprises a dynamically
adjustable mechanical locking system, smart materials
actuation,
integrated sensors and embedded
microprocessors, which are software controlled,
allowing a hierarchy of secure control devices from
contact switches to touch screens. The potential to
network into the aircraft system extends local control
to centralised stations for single point lock down of
multiple units.
The latching system is controlled by an integrated
contact key mat door handle which, when touched,
instructs the latches to release and visually indicates
a locked or unlocked status via dual colour LED’s.
Concepts for the Security Market
Building on the enormous demand for security
products, TFS has developed concepts
to
showcase the potential of IFT as a breakthrough
platform in electronic system locking. The emerging
convergence between the physical security market
and the IT industry is seeing items such as locks
and entry systems being upgraded to work with the
same computing systems that control computer and
network sign-on and identity management. Spending
in 2005 on convergence projects in North America
and Europe is expected to be over USD$ . billion.
The remotely activated drawer and cabinet locking
system provides
improved operator efficiency,
ergonomics and ease of use and removes the issues
associated with the management of physical keys.
The integrated intelligent locking mechanism offers
improved aesthetics and security with no visible
locking points. Drawers and safe doors self eject
when unlocked providing easy access to users. The
concept has the potential for integration into a range
of other security systems including enterprise wide
access control systems.
Textron’s 2004 Annual Report (p3 shown above) showcased
a secure cabinet locking concept for the financial banking sector
3
’05 Annual Report
7
operational review
establishing early adopter relationships
operational review
targeting industry sectors
A concerted program is underway
working across all segments of
the aerospace industry including
commercial aviation, business
jet, helicopters and aerospace
defense, to secure relationships
with early technology adopters.
Stage 4: Proliferate Across Other Segments
Utilise these application platforms and proven track
record of performance to spring board into new
segments with a range of product variants to new
customers.
Stage 5: Expand the Engagement Model
Evaluate existing partner relationships to ensure they
do not hinder broader market penetration within
segments and expansion into new areas through
focused cost reduction, operational effectiveness and
industry demand.
Stage 6: Exploit Maturing Market Opportunities
Increase market acceptance will stimulate broader
market interest and accelerate adoption, leading to the
point where IFT becomes a base technology required
by the majority market as a means to compete with
early adopters of the technology.
While the early opportunities provide an encouraging
endorsement of the potential of the technology, since
the signing of the new agreement, TFS has embarked
on a more structured approach to commercialisation.
A six-stage business strategy
the broad
commercialisation of IFT has been developed. Since
the start of this year, focus has been on the successful
execution of Stages to 3:
for
Stage : Establish Internal Conditions
Establish the necessary internal conditions and
infrastructure to support early commercialisation of
IFT.
Stage 2: Form Early Adopter Relationships
Establish segment specific deal driven relationships
with ‘Early Adopters’ who see the potential for the
technology and provide initial application opportunities
for TFS in a controlled and structured rollout. These
partnership relationships are critical to successful
commercialisation as they provide the means for
technology introduction and to proving technical,
commercial and market viability.
these specific
Stage 3: Exploit Specific Segment Niches
Leverage
to drive
commercial opportunities within the segment to
establish a commercial platform of application
solutions and product offerings.
relationships
Concepts on display at the
2005 Hamburg Expo included a
biometrically controlled latching
system, remotely releasable
access panels and an aircraft
seat attachment system for rapid
reconfiguration.
Targeting Automotive
Building on the aerospace sector launch, preliminary
market scanning commenced in earnest in May 2005
in the automotive sector to identify the key value
drivers on which IFT can support a strong proposition
to the industry.
Targeting mainly the major European automotive
players, several initial application opportunities have
been identified and projects are currently being
progressed.
A systematic launch to the major automotive OEMs is
scheduled for rollout in late 2005.
’05 Annual Report
9
Targeting Aerospace
Building on the strong interest in IFT received at the
Hamburg Aircraft Interiors Expo 2004, TFS chose
the 2005 event for a major demonstration of Intevia™
capability. The presentation was underpinned
by a strong message promoting the benefits of
the technology in improved security, improved
maintainability and rapid reconfiguration.
With over 0,000 visitors from over 00 countries
and 50 airlines, the three day aircraft interiors event
provided TFS with an opportunity to unveil a series of
IFT concepts that it believes will bring fundamental
changes to the way aircraft interiors are designed,
serviced and adapted to market requirements.
The event exceeded expectations with significant
interest from major aerospace industry leaders who
see the technology as a key enabler for strategic
initiatives and product differentiation.
A concerted program is underway across all segments
of the aerospace industry including commercial aviation,
business jet, helicopters and aerospace defence, to
secure relationships with early technology adopters.
Given the nature of the aerospace industry, non-
disclosure undertakings prohibit TZ from outlining
these commercial engagements and application
opportunities, although significant traction with the
targeted major segment players is generating a
sound base of solid commercial opportunities.
operational review
launching the TFS Intevia™ brand
The industry standard for the
design, assembly, service and
recycling of products that will
completely change the dynamics
of manufacturing across all
industries.
To establish the foundations for marketing efforts,
TFS engaged an external marketing consultant to
support the creation of the Intevia™ brand and the
development of a branding strategy to correctly
position the technology in the market.
All market communications are aligned to establishing
Intevia™ as the recognized industry standard.
In addition, sub-brand messaging along four broad
based end-user benefits have also been articulated,
i.e rapid assembly, rapid reconfiguration, improved
security and improved maintainability, and promotional
material such as brochures, multi-media and video
format have been developed to support targeted
communication strategies for each market segment.
20
’05 Annual Report
A TFS promotion for the Intevia™ latch
’05 Annual Report
2
operational review
earning prestigious acclaim
Supporting public relations and awareness building activity
continued to be strong over the year. The technology was
featured in several cover stories and articles in leading
industry publications including Designfax, Surface Mount
Technology, Sensors and Design News.
Additionally, Intevia™ was selected as Product of the Month
in the June 2005 edition of NASA Tech Briefs magazine,
the largest U.S. circulated engineering magazine.
Subsequently, Intevia was nominated as a finalist
and contender for its Product of the Year
2005 award, representing significant industry
recognition and a substantial opportunity for
promotion and business development with
U.S. government agencies.
When the U.S. Congress
formed NASA in 958, it
mandated that NASA and its
contractors must report any
newly developed
commercially
significant
technologies to industry
so that engineers,
managers, and
scientists could improve
their competitiveness
and productivity. For more
than three decades, this has
been accomplished through
the publication of NASA Tech
Briefs. The Tech Briefs also
provide their readers with a
technology support package,
which explains the technology
in detail and provides contact
points for questions or licensing
discussions.
23
’05 Annual Report
22
’05 Annual Report
operational review
building systems and assembly enabling technology
Given the significant focus on TFS activity over the
year, the Company has not been able to dedicate
significant attention to other technology initiatives. In
addition, certain events have also limited the extent of
planned activity:
FutureWall Technology
The market acceptance of FutureWall as an integrated
office furniture and partitioning system and sales
to the professional office fit-out market in Sydney,
Melbourne and Perth showed strong growth in 2004
and early 2005 with the system clearly emerging as
the product of choice for the professional services
market. Successful fit-out implementations at Cutler
Hughes Harris, Corrs Chambers Westgarth and
Kemp Strang Lawyers clearly validated the product’s
strong value proposition and market potential.
In the first full year of sales, volumes exceeded initial
expectations and with over $5Million in potential
sales under tender, the Company was anticipating
sustained growth through 2006. In recent months,
however, the licensee has not been able to realize
these opportunities due to events unrelated to the
marketability of the product.
The company is currently investigating options to
restructure the current licensing arrangement to
ensure that the potential of the product is maximized
in the Australian market, which will in turn provide a
solid platform for regional growth into Asia, the US
and Europe.
Preliminary steps have been taken to explore
identified opportunities in China for manufacturing
and distribution, and the Company has continued
to validate the potential for the system in the US
with structured presentations to various leading
architectural firms and market influencers.
Steps towards finalizing distribution relationships in
the US have been put on hold pending resolution
of the Australian business. Our ability to validate
the high growth potential and profitable nature of
the FutureWall business, which has until now been
successfully demonstrated in the Australian market,
will be fundamental to marketing the FutureWall
technology
in other
to prospective customers
territories.
Assembly Enabling Technology
Over the year, the Company has continued to
pursue a more substantial and expanded innovation
partnership with Alcoa Engineered Products to
underpin the commercialisation of the Company’s
other assembly enabling technology.
Until recently this was progressing positively with
a number of opportunities identified and a major
development project underway with a dedicated
launch customer for a major DIY residential building
product offering.
Unfortunately, the recent restructure of the Engineered
Products Division and the accompanying leadership
changes have now stalled these programs. We
are awaiting advice as to the future direction of the
Division under the new leadership and will re-engage
once the new executive team settles into the role.
We have continued to maintain our relationship with
the launch customer for the DIY product and are
currently exploring independently of Alcoa, other
quick-to-market product development opportunities
that can be driven through their established channels
to national retailers.
24
’05 Annual Report
A FutureWall installation in the Sydney offices of the law firm, Kemp Strang
’05 Annual Report
25
intellectual property update
protecting shareholder value
Ongoing intellectual property
creation and prosecution
is ensuring the creation of
sustainable value for our
shareholders and customers.
The significant portion of the IP portfolio has been
built to protect the landscape for Intelligent Fastening
Technology and the practical commercial application
of the technology across multiple market sectors.
Application Patents
This year, ten new application patents were generated
in several application areas in support of the significant
push into the aerospace industry, particularly in aircraft
reconfiguration, maintenance and security. Patents
targeting the automotive sector have primarily been
in the area of seat attachment and safety.
The total number of Application Patents at
the end of the financial year was 9.
Core Technology Patents
The various research and development projects
undertaken by the Company over the year has
generated several new actuator systems, fastening
mechanisms and electronic control algorithms for
SMA. Many of these new innovations have been
patented and collectively reinforce TZ’s core IP
position.
The total number of Core Technology
Patents at the end of the financial year was
5.
A New Well of Ideas
TZ’s recent acquisition of PDT has allowed the
Company to capitalise on a wealth of creative capability
that will support new initiatives in commercial product
development and future IP and technology licensing.
A new initiative designed to consolidate the combined
potential under a structured program, Informed
Innovation, will harness
the company’s unique
ability to generate new product ideas and product
creation opportunities. The program is intended to
deliver patented innovations of exceptional value and
relevance to targeted customers. The program builds
on the Company’s understanding of the technological
and business worlds, empathy with market needs,
and a capability that spans both creative and practical
implementation phases.
Currently seven new patents have been filed to
support defined opportunities in the medical, retail,
closures, and software industries.
combined with
IP Maintenance: A Core Business
Process
The commercialisation of IFT through the TFS
the Company’s
relationship
expansion through the acquisition of PDT has greatly
increased activity around IP and trademark creation,
confidentiality, and the protection of know-how and
trade secrets. Given the significant importance of
IP management to the Company’s future, TZ has
employed a U.S. Patent Attorney as in-house legal
counsel to develop administrative systems and robust
processes to support group activity and to improve
the ongoing management of the IP portfolio.
A significant advantage of this in-house capability is
the potential reduction in IP prosecution costs as TZ
now interfaces directly with the United States Patent
and Trademark Office for the lodgement, examination
and review of Provisional Patents and National
Phase Applications. For continuity of IP strategy, all
IP activity continues to be strategically overseen by
the Company’s original Australian patent lawyers,
Chrysiliou Law.
The Intevia™ Latch undergoing rigorous life-cycle and strength testing in the TZ Lab
’05 Annual Report
27
technology update
creating the next industry standard
“We’re taking the Company from
a research and custom solutions
phase to the commercial
production of fully engineered,
certified technology platforms
with broad application potential.”
Geoff Sizer, GM Technology Development
The TZ development team has grown from its initial
nucleus of a few clever engineers to a well structured
technology development team comprising senior
mechanical engineers, industrial designers, electronics
engineers, software developers and production
engineering specialists. In-house competencies are
further supplemented where needed by renowned
consultants and industry experts in specific fields
of interest to reinforce the Company’s technological
position and know-how. At the implementation level,
manufacturing is undertaken by a network of trusted
sub-contractors located in the U.S., Australia and
Asia.
Technology development has been undertaken as
part of a structured and planned process. Team
structure, facilities and development tools have been
established to support future plans for rapid growth
as the product commercialisation initiatives increase.
Specifically, development work has focused on the
investigation of smart material properties, the design
and development of mechanisms, electronics and
software development, production engineering and
the manufacture of production fasteners, software
tools and sensing systems. Collectively, this effort has
culminated in the realisation of:
• Several fastener product families
• A standard electronics platform
design
• An Intelligent Fastening operating
system destined to become the
industry standard.
Additionally, research and testing of Nickel Titanium
(NiTi) SMA and other smart materials is establishing
the foundations for an evolution of increasingly
advanced intelligent fastening solutions.
Work is also underway on the design and development
of an Application-Specific Integrated Circuit (ASIC or
custom microchip) to further reduce fastener size and
cost.
Some fasteners exceeded expectations for durability in the lab
’05 Annual Report
29
technology update
technology update
developing robust technology for broad application
adding to a family of intelligent fasteners
After extensive life-cycle
and strength testing, some
fasteners have exhibited
durability that far exceeds
specified requirements for a
range of specified applications.
Development
fundamental elements of
Technology which are:
initiatives stretch across
the five
Intelligent Fastening
• A fastening mechanism
• Smart materials actuation
• Embedded electronics
• Integrated sensors
• Software control
These elements create complete intelligent fastening
systems which can be designed to satisfy a wide
range of application requirements.
Over the past year, development efforts across all five
elements have led to a significant achievement with the
delivery of a sound platform for the commercialisation
of first generation IFT enabled products.
Additional fastener families are currently progressing
through their development phases, including linear
strip fastening and perimeter seals, linear and quarter
turn actuators, stressing fasteners, magnetically
actuated fasteners, temporary fasteners for aircraft
manufacture and a number of novel mechanisms
which may be incorporated into future fastening
designs.
family
fastener
Each
incorporates standard TZ
electronics and operating system designs, including
a communications network interface for monitoring
and control, internal sensing functionality, auxiliary
control outputs and auxiliary sensing inputs. Designs
are modular to allow configuration into a wide range
of situations.
A key aspect of fastener development is endurance
and verification testing of fastener designs. Purpose
designed test rigs and proprietary “SmartTest” PC-
based software has been developed to enable
a comprehensive design characterisation and
endurance testing program. Testing to date has shown
fastener families to exhibit durability that far exceeds
specified requirements for the range of commercial
applications currently under consideration.
Development to date has delivered four discreet
families of intelligent fastening mechanisms with each
configuration possessing inherent properties making
it suitable for certain practical applications.
The Radial Mechanism
The Radial Mechanism family consists of fasteners for
high load bearing, high life cycle applications, including
more robust versions for demanding aerospace and
automotive applications.
The Inline Mechanism
The Inline Mechanism family of fasteners can satisfy a
wide range of locking and latching applications, with
versions certified for use in the cabins of commercial
airliners.
The Overhang Clip
The Overhang Clip family consists of relatively
simple, inexpensive fasteners for panel attachment,
connector retention, PC security and other commercial
applications.
The Ring Grip
The Ring Grip family consists of medium load bearing
fasteners for panel attachment, part attachment and
low security locking applications.
30
’05 Annual Report
’05 Annual Report
3
product development technologies
providing new opportunities for growth
“The success and strong
growth we have acheived is
expected to continue as we
add new capabilities and move
into new areas of significant
potential such as medical devices.”
Mark Schwartz, CEO and President of PDT
The acquisition of the Chicago based PDT, was
completed on 8th of March 2005. This was an
important step in corporate development adding
substantial value to the Company as a core building
block for future strategic initiatives.
Headquartered in Chicago, Illinois, PDT employs
42 people in five international locations and offers
a total capability in product development including
competencies in research, product ideation, design
and engineering, electronic and software engineering,
model-making, rapid prototyping and tooling.
PDT’s reputation has always been stamped with a
theme of sustained and profitable growth. This year
has been no exception with the establishment of two
new offices to strategically expand the company’s
global footprint.
The United Kingdom office based in Oxford, will
provide access to the opportunities identified with the
growing base of European clients and will strengthen
the company’s position in the design industry through
a culturally diverse design team. Similarly, the newest
office, located in Plymouth, Minnesota, is a conduit
to Minneapolis’ rich medical device manufacturing
community and will offer a strong base to deliver the
company’s objective of expanding the client base in
the medical industry.
Scott Semenik and Mark Schwartz, founders of PDT
To further support the goal of increasing PDT’s
medical client base, the Company has applied for
ISO 3485 certification. This certification is a quality
management system created specifically for medical
devices. Upon completion of the audit process, PDT
will be the only design firm in the United States with
this qualification, making it uniquely qualified to serve
clients in this industry and giving the Company more
traction toward its growth plans.
This year, PDT has also added electrical engineering
and software capabilities to its already impressive list
of competencies. These departments are led by a
highly qualified manager based in Lincolnshire, Illinois
who directs a strong and competent team located in
the Ukraine. With the addition of these new electrical
engineers and software specialists, the Ukrainian
office has grown to house 38 high-level employees.
PDT applied its multi-disciplinary capabilities to research, design
and engineer an innovative concept phone for Qualcomm
’05 Annual Report
33
product development technologies
prototyping and engineering successful products
“We have a wealth of knowledge
and experience in capturing
complex design concepts to create
high quality tools in the quickest
and most cost-effective manner
using the latest technologies.”
Ray Wiltgen, GM PDT Tooling Production
The design end of PDT’s business has been growing
rapidly fuelled by large-scale turnkey development
agreements with new and existing customers. Cobra
Electronics continues to be a loyal client, entrusting
PDT’s design, engineering and user interface groups
to work with Cobra’s teams to develop several
products. Both companies have received accolades
from the Consumer Electronics Association for their
work in the form of a “Best of Innovation Award” for the
SkyNav 3000 Advanced Mobile Navigation System
and “Design and Engineering Showcase Awards” for
the SkyNav 2000 and 3000 Mobile Navigation as well
as the XRS 9700 Radar Detector.
from
In addition to the honours from the Consumer
Electronics Association, PDT has also received
accolades
the Chicago Athenaeum of
Architecture and Design for its work on Swingline’s
complete re-vamp of its stapler line. The products
recognised were: The Companion Desktop Stapler,
Invision Stapler, Speed Grip Electric Stapler, Optima
Desk Stapler and the Optima Grip Stapler. The
Swingline Optima Grip Stapler also received an
“ADEX” Silver Award. The ADEX Award (Design
Journal’s Award for Design Excellence) is the largest
and most prestigious awards program for product
design of furniture, fixtures and finishes marketed
to the design trade. In addition to the awards given
to the Swingline staplers, PDT has received another
“Good Design Award” from the Chicago Athenaeum
of Architecture and Design for its work on Fiskars’
2004 Back to School line of products.
Ray Wiltgen and Dave May, GM PDT Tooling Engineering
The access to PDT resources has provided a dramatic
increase in TZ’s capability to accommodate the many
application development and commercialisation
opportunities that are emerging as TFS continues to
launch its IFT business strategy across the various
participation sectors.
The integration of TZ and PDT resources and multi-
disciplinary capability has allowed TZ to work with TFS
and its customers at every level of the development
process, from concept ideation, product design and
high volume production engineering to commercially
integrate the technology into commercial, high value
solution based offerings.
PDT’s rapid prototyping and tooling facility in Lincolnshire, Illinois
’05 Annual Report
35
product development capability
vertically integrated services and proven experience
research
user
interface
development
electrical
engineering
& software
tooling
industrial
design
mechanical
engineering
laser
scanning
asian
sourcing
PDT’s design for the Cobra XRS 9700 Radar Detector received the
“Design and Engineering Showcase” award from the Consumer Electronics Association
’05 Annual Report
37
(cid:48)(cid:36)(cid:52)(cid:0)(cid:80)(cid:79)(cid:82)(cid:84)(cid:70)(cid:79)(cid:76)(cid:73)(cid:79)
(cid:48)(cid:36)(cid:52)(cid:0)(cid:83)(cid:69)(cid:82)(cid:86)(cid:69)(cid:83)(cid:0)(cid:67)(cid:76)(cid:73)(cid:69)(cid:78)(cid:84)(cid:83)(cid:0)(cid:73)(cid:78)(cid:0)(cid:86)(cid:65)(cid:82)(cid:73)(cid:79)(cid:85)(cid:83)(cid:0)(cid:73)(cid:78)(cid:68)(cid:85)(cid:83)(cid:84)(cid:82)(cid:73)(cid:69)(cid:83)(cid:0)
(cid:83)(cid:85)(cid:67)(cid:72)(cid:0)(cid:65)(cid:83)(cid:26)
(cid:35)(cid:79)(cid:78)(cid:83)(cid:85)(cid:77)(cid:69)(cid:82)(cid:0)(cid:37)(cid:76)(cid:69)(cid:67)(cid:84)(cid:82)(cid:79)(cid:78)(cid:73)(cid:67)(cid:83)
(cid:52)(cid:69)(cid:76)(cid:69)(cid:67)(cid:79)(cid:77)(cid:77)(cid:85)(cid:78)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83)
(cid:47)(cid:70)(cid:70)(cid:73)(cid:67)(cid:69)(cid:0)(cid:51)(cid:85)(cid:80)(cid:80)(cid:76)(cid:73)(cid:69)(cid:83)
(cid:45)(cid:69)(cid:68)(cid:73)(cid:67)(cid:65)(cid:76)
(cid:50)(cid:69)(cid:67)(cid:82)(cid:69)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:51)(cid:67)(cid:72)(cid:79)(cid:79)(cid:76)(cid:0)(cid:51)(cid:85)(cid:80)(cid:80)(cid:76)(cid:73)(cid:69)(cid:83)
(cid:35)(cid:79)(cid:77)(cid:80)(cid:85)(cid:84)(cid:69)(cid:82)(cid:0)(cid:40)(cid:65)(cid:82)(cid:68)(cid:87)(cid:65)(cid:82)(cid:69)
(cid:49)(cid:85)(cid:65)(cid:76)(cid:67)(cid:79)(cid:77)(cid:77)(cid:0)
(cid:35)(cid:79)(cid:78)(cid:67)(cid:69)(cid:80)(cid:84)(cid:0)(cid:48)(cid:72)(cid:79)(cid:78)(cid:69)(cid:0)
(cid:36)(cid:69)(cid:76)(cid:76)(cid:0)(cid:45)(cid:85)(cid:76)(cid:84)(cid:73)(cid:77)(cid:69)(cid:68)(cid:73)(cid:65)(cid:0)(cid:43)(cid:69)(cid:89)(cid:66)(cid:79)(cid:65)(cid:82)(cid:68)
(cid:51)(cid:65)(cid:78)(cid:70)(cid:79)(cid:82)(cid:68)(cid:0)(cid:38)(cid:79)(cid:79)(cid:72)(cid:89)(cid:0)
(cid:34)(cid:82)(cid:65)(cid:78)(cid:68)(cid:0)(cid:48)(cid:65)(cid:73)(cid:78)(cid:84)(cid:0)(cid:48)(cid:69)(cid:78)(cid:83)
(cid:45)(cid:69)(cid:68)(cid:69)(cid:76)(cid:65)(cid:0)(cid:40)(cid:65)(cid:82)(cid:77)(cid:79)(cid:78)(cid:89)(cid:0)
(cid:45)(cid:65)(cid:78)(cid:85)(cid:65)(cid:76)(cid:0)(cid:34)(cid:82)(cid:69)(cid:65)(cid:83)(cid:84)(cid:80)(cid:85)(cid:77)(cid:80)
(cid:48)(cid:65)(cid:80)(cid:69)(cid:82)(cid:77)(cid:65)(cid:84)(cid:69)(cid:0)(cid:64)(cid:33)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:69)(cid:82)(cid:7)(cid:0)
(cid:51)(cid:69)(cid:76)(cid:70)(cid:13)(cid:33)(cid:68)(cid:86)(cid:65)(cid:78)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0)
(cid:45)(cid:69)(cid:67)(cid:72)(cid:65)(cid:78)(cid:73)(cid:67)(cid:65)(cid:76)(cid:0)(cid:48)(cid:69)(cid:78)(cid:67)(cid:73)(cid:76)(cid:0)
(cid:38)(cid:73)(cid:83)(cid:75)(cid:65)(cid:82)(cid:83)(cid:0)(cid:34)(cid:65)(cid:67)(cid:75)(cid:0)(cid:84)(cid:79)(cid:0)
(cid:51)(cid:67)(cid:72)(cid:79)(cid:79)(cid:76)(cid:0)(cid:48)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:83)
(cid:46)(cid:73)(cid:84)(cid:82)(cid:79)(cid:85)(cid:83)(cid:0)(cid:39)(cid:79)(cid:13)(cid:43)(cid:65)(cid:82)(cid:84)
38
(cid:48)(cid:36)(cid:52)(cid:0)(cid:41)(cid:78)(cid:84)(cid:69)(cid:76)(cid:76)(cid:69)(cid:67)(cid:84)(cid:85)(cid:65)(cid:76)(cid:0)(cid:48)(cid:82)(cid:79)(cid:80)(cid:69)(cid:82)(cid:84)(cid:89)(cid:26)(cid:0)
(cid:45)(cid:65)(cid:71)(cid:78)(cid:69)(cid:84)(cid:73)(cid:67)(cid:0)(cid:44)(cid:65)(cid:78)(cid:67)(cid:73)(cid:78)(cid:71)(cid:0)(cid:36)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)
’05 Annual Report
(cid:35)(cid:79)(cid:66)(cid:82)(cid:65)(cid:0)(cid:46)(cid:65)(cid:86)(cid:47)(cid:78)(cid:69)(cid:0)
(cid:20)(cid:21)(cid:16)(cid:16)(cid:0)(cid:45)(cid:79)(cid:66)(cid:73)(cid:76)(cid:69)(cid:0)
(cid:46)(cid:65)(cid:86)(cid:73)(cid:71)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)(cid:0)(cid:53)(cid:78)(cid:73)(cid:84)
’05 Annual Report
39
directors’ report
directors’ report
The directors of TZ Limited present their report together with the financial reports of the parent entity and its controlled entities for
the financial year ended 30 June 2005
Directors
The details of directors of the company during the year and to the date of this report are:
A Leibowitz
Chairman
A Sigalla
Resigned 5 July 2004
C Kelliher
J Falconer
Executive Director
Company Secretary - Appointed 5 July 2004
J Wilson
D Rudduck
M Hadaway
Resigned 5 July 2004
Resigned 5 July 2004
Resigned 5 July 2004
Operating Results
The operating profit after income tax for the year ended 30 June 2005 for the consolidated entity was $4,082,90 (2004: Loss
$,809,880). This operating profit is $403,000 more than the operating profit of $3,680,000 disclosed in the unaudited Preliminary
Final Report announced to the market on 3 September 2005 due principally to a recalculation of exchange rate differences and a
reassessment of accrued expenses.
Earnings Before Interest Taxation Depreciation and Amortisation (“EBITDA”) was $5,79,590 (2004: Loss $39,992)
Review of Operations
The year ended 30 June 2005 was the first full year of operations in which Telezygology Inc. operated as a wholly owned
subsidiary of TZ Limited. Revenue for Telezygology Inc was $9,828,86.
In March 2005 the PDT group in Illinois, USA, was acquired. Revenue included in the consolidated entity from the date of
acquisition to 30 June 2005 was $8,390,277.
Principal Activities
The principal activities of the consolidated entity during the financial year were the development and licensing of intellectual
property relating to fastening systems through the wholly owned subsidiary, Telezygology, Inc.
After the acquisition of the PDT group in March 2005, the activities of the consolidated entity included a full service capability in
product design, mechanical and software engineering, injection molding tooling and rapid and pre-production prototyping.
All of the operations of the consolidated entity are now based in Illinois, USA.
Significant Changes in State of Affairs
At a general meeting of shareholders held on 5 July 2004, and as foreshadowed in the Company's prospectus in March 2004,
the issue of 6,000,000 shares was approved to a company associated with a former director of the Company for services
rendered to the Company. The full amount of this accrued liability of $2,244,000 was included in the financial accounts for the year
ended 30 June 2004.
The Company completed a fully underwritten share issue in December 2004 and January 2005 to raise $8,078,000, before costs.
The Company acquired 00% of the PDT group in March 2005 for a cash and share consideration of $USD2 million
($5,584,000) with earn-out conditions for the 2005 calendar which may reduce the final consideration.
Likely Developments
The particular information required by s299() of the Corporations Act (2002) has not been included in this report, as the inclusion
of such information is likely to result in unreasonable prejudice to the Company.
Dividends
No dividend has been paid or declared since the commencement of the financial year. The directors do not recommend the
payment of a dividend.
Information on Directors
Mr Tony Leibowitz
Non Executive Chairman
Mr Tony Leibowitz is an investment banker, Chairman of Chandler McLeod Limited and NCML (Holdings) Limited and a director of
Babcock and Brown Environmental Investments Limited, all ASX-listed companies.
Mr Leibowitz is a former senior partner of PricewaterhouseCoopers, specialising in financial advisory services and is a Fellow of
the Institute of Chartered Accountants in Australia and an Affiliate of the Securities Institute of Australia.
As at the date of this report Mr Leibowitz had the following interest in securities in the Company:
Interest in shares ,493,748 Interest in options ,000,000
Mr Chris Kelliher
Executive Director of TZ Limited and the Chief Executive Officer of its wholly owned subsidiary, Telezygology Inc.
Mr Kelliher's role is to expand and strengthen execution capability, lead the USA business expansion and have overall
responsibility for the Company's operating entities.
Mr Kelliher has ov--er 9 years experience managing technology based companies ranging from startup ventures to subsidiaries
of large multinational companies. He was appointed Managing Director of Microsoft South Pacific Region in 996 after 3 years
as Managing Director of Microsoft's Australian subsidiary. Prior to this, he spent 3 years as the founding Managing Director of
Microsoft in New Zealand. Before this he held senior management positions with Digital Equipment Corporation and Philips.
As at the date of this report Mr Kelliher had the following interest in securities in the Company:
Interest in shares ,46,569 Interest in options 4,727,82
Mr John Falconer
Non Executive Director and Company Secretary
Mr Falconer is a Fellow of the Institute of Chartered Accountants in Australia and an Associate of the Securities Institute of
Australia. He is the principal of Carbone Falconer & Co, a small firm of Chartered Accountants in Sydney providing specialist
services to private and public company clients. He is a director and company secretary of Kingsgate Consolidated Limited and
Taragon Property Fund, and the company secretary of Tri Origin Minerals Ltd, all ASX-listed entities.
As at the date of this report Mr Falconer had the following interest in securities in the Company:
Interest in shares ,388,82 Interest in options ,388,82
Directors Meetings
The number of directors' meetings and number of meetings attended by each of the directors of the company during the financial
year were:
Directors Meetings
No. of Meetings Held
No. of Meetings Attended
A Leibowitz
C Kelliher
J Falconer
A Sigalla*
J Wilson*
D Rudduck*
M Hadaway*
3
3
3
-
-
-
-
3
3
3
-
-
-
-
40
‘05 Annual Report
‘05 Annual Report
41
directors’ report
directors’ report
* Each of these directors resigned as a director of the Parent Entity on 5 July 2004.
Other matters were dealt with during the year by way of circular resolutions signed by all Directors.
Directors and Executive Officers Remuneration Report
The company's policy for determining the nature and amount of emoluments of board members and senior executives of the
company is as follows:
Directors' Fees are paid to Non Executive Directors as approved from time to time by shareholders. The last increase was
approved by shareholders at the General Meeting held 5 July 2004 and allowed for a fixed sum not exceeding $250,000.
Emoluments paid to senior executives of the company are determined by the Executive Director and the Board of Directors. The
broad remuneration policy is to ensure the remuneration package properly reflects the person's duties and responsibilities and that
remuneration is competitive in attracting, retaining and motivating people of the highest quality.
Details of the nature and amount of each major element of the emoluments of each director of the company and the consolidated entity
are:
Role
Salary, Fees & Superannuation Non-Cash
Commissions
contribution
Options
Total
Parent Entity
A Leibowitz
J Falconer
Parent Entity
A Sigalla*
Non Executive Chairman
Non executive director
20,000
60,000
Executive Director
-
Executive Directors and Executive Officers
Economic Entity
C Kelliher**
J Wilson*
D Rudduck*
M Schwartz
R Wiltgen
S Semenik
D May
Total
Executive Director and
TZI Chief Executive Officer
TZI Chief Operations Officer
TZI Chief Technical Officer
PDT President and
Chief Executive Officer
PDT Vice President
PDT Vice President
PDT Vice President
473,89
385,3
307,992
03,855
03,855
03,855
03,855
-
-
-
-
-
-
-
-
39,000
59,000
-
-
60,000
-
39,000
52,89
9,000
9,000
7,84
7,84
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,35
324,76
03,855
03,855
03,855
03,855
1,762,434
18,000
14,368
78,000 1,872,802
* Each of these directors resigned as a director of the Parent Entity on 5 July 2004.
** Mr Kelliher's services are provided to the Company under an agreement with Mainland Air Services Ltd and all payments are
made to that company.
Directors' Benefits
Particulars of Directors' Benefits are disclosed in Note 5 of the Financial Statements.
Indemnification and Insurance of Directors and Officers
The parent entity has not taken out an insurance policy indemnifying directors and officers for the financial year nor has the
company provided any indemnification during the year.
Share Options
(i) Options that were granted over unissued shares or interests during or since the end of the financial year by the Company to
directors as part of their remuneration are as follows:
Director
A H Leibowitz
A H Leibowitz
C Kelliher
C Kelliher
Expiry Date
Issue price of shares
Number under option
3 December 2006
3 December 2007
3 December 2006
3 December 2007
$0.75
$.00
$0.75
$.00
500,000
500,000
500,000
500,000
All of the above options were issued on 5 July 2004 after approval by shareholders at a general meeting and were also reported
in the Directors Report for the year ended 30 June 2004.
(ii) At the date of this report, options over unissued shares or interests of the Company are as follows:
Expiry Date
29 August 2006
29 August 2006
29 August 2006
26 March 2007
30 March 2006
3 December 2006
3 December 2007
Issue price of shares
Number under option
$0.27
$0.34
$0.40
$0.45
$0.34
$0.75
$.00
,49,25
2,236,687
6,590,062
2,000,000
7,455,625
,000,000
,000,000
Complete details of the above options are in Note 5 to the Financial Statements
Environmental Issues
The consolidated entity's operations are not regulated by any significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
Corporate governance
The directors are responsible for the corporate governance practices of the Company. The main corporate governance practices
that were in operation during the financial year will be set out in the Corporate Governance section of the 2005 Annual Report.
Proceedings on Behalf of Company
No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which
the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.
The company was not a party to any such proceedings during the year.
Auditor's Independence Declaration
The Company's independent auditor has provided an independence declaration for the year ended 30 June 2005, a copy of the
declaration is attached to and forms part of the directors' report.
Signed at Sydney this 30th day of September 2005 in accordance with a resolution of the Board of Directors.
Significant After Balance Date Events
No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect
the operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in future
financial years.
J Falconer
Director
42
‘05 Annual Report
‘05 Annual Report
43
auditor’s independence declaration
to the directors of TZ Limited
statements of financial performance
for the year ended 30 june 2005
I declare that, to the best of my knowledge and belief, in relation to our audit of TZ Limited and the consolidated entity for the year
ended 30 June 2005 there have been:
i). no contraventions of the auditor independence requirements as set out in the Corporations Act 200; and
ii). no contraventions of any applicable code of professional conduct.
Sales Revenue
Cost of Sales
Gross Profit
Note Consolidated Parent Entity
2005
$
2004
$
8,28,464
,88,293
(6,47,9)
2,07,345
(63,506)
556,787
2
2
2005
$
-
-
-
2004
$
633,084
(398,857)
234,227
Other Revenue from Ordinary Activities
2
225,442
2,36,48
33,799
2,09,258
Taylor & Co.
Stephen Taylor
Sydney, 30 September 2005
Employee related expenses
Occupancy expenses
Communications expenses
Depreciation
Amortisation of intangibles
Professional and corporate services
Travel and accommodation
Carrying value of subsidiary sold
Interest paid
Revenue from sale of investment
Cost of investment sold
Loss on close down of operating business
Foreign exchange losses
Write off non recoverable loan
(2,683,690)
(,96,596)
(307,89)
(298,048)
(8,304)
(420,957)
(,40,926)
(,94,445)
(,204,34)
-
(79,25)
-
-
-
-
-
(28,06)
(275,96)
(202,798)
(387,945)
(240,297)
(345,833)
(36,367)
(80,957)
324,926
(303,256)
(455,534)
(97,447)
(50,000)
-
(20,928)
-
-
(36,368)
(270,35)
(2,029)
-
-
-
-
-
-
(48,809)
(68,437)
(77,22)
(08,806)
(66,322)
-
(76,37)
(83,395)
(4,654)
98,494
(3,022)
-
-
(50,000)
(63,992)
Other Expenses from Ordinary Activities
(800,550)
(207,022)
(29,827)
Profit/(Loss) from ordinary activities
before income tax expense
Income tax expense relating to ordinary activities
Profit/(Loss) from ordinary activities
after related income tax expense
Profit/(Loss) from extraordinary items
after related income tax expense
Net Profit/(Loss)
3
4
4,293,58
(,809,880)
(857,893)
580,03
20,608
-
-
-
4,082,90
(,809,880)
(857,893)
580,03
-
-
-
-
4,082,90
(,809,880)
(857,893)
580,03
Net (Profit)/Loss attributable to outside equity interests
-
-
-
-
Net Profit/(Loss) attributable to members of the parent entity
4,082,90
(,809,880)
(857,893)
580,03
Total changes in equity other than those resulting from
transactions with owners as owners
3
4,082,90
(,809,880)
(857,893)
580,03
Basic Earnings Per Share (Cents)
Diluted Earning Per Share (Cents)
2
2
2.8
2.44
(.69)
(.69)
The above Statements of Financial Performance are to be read in conjunction with the attached notes.
44
‘05 Annual Report
‘05 Annual Report
45
statements of financial position
for the year ended 30 june 2005
statements of cash flows
for the year ended 30 june 2005
Note Consolidated Parent Entity
Note Consolidated Parent Entity
CURRENT ASSETS
Cash Assets
Receivables
Work in Process
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Receivables
Investments
Property, Plant and Equipment
Intangibles
Deferred tax Assets
2005
$
2004
$
2005
$
2004
$
7
5,63,544
5
6
9,6,456
423,82
7,40,963
3,295,6
-
,6,63
4,99,74
-
,206,36
3,233,322
-
5,98,82
0,706,24
6,52,805
4,439,638
5
7
8
9
-
-
-
0
2,385,760
7,998,532
33,203,229
20,52,257
4,7,40
90,997
30,796,382
9,934,669
36,025
-
-
-
-
-
-
-
TOTAL NON-CURRENT ASSETS
35,03,87
20,025,676
35,588,989
28,50,789
TOTAL ASSETS
CURRENT LIABILITIES
Payables
Provisions
Interest-bearing liabilities
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Payables
Interest-bearing liabilities
Deferred tax liabilities
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued Capital
Reserves
Accumulated Losses
Shareholders' equity attributable
to members of the parent entity
50,302,629
30,73,800
4,74,794
32,950,427
0
2
0
2
5,632,499
2,75,3
2,355,949
2,523,597
29,9
424,475
73,35
-
-
-
5,685
-
6,86,65
2,824,248
2,355,949
2,539,282
-
2,028,00
9,858
2,037,868
8,224,033
-
-
-
-
695,948
695,948
-
-
-
-
695,948
695,948
2,824,248
3,05,897
3,235,230
42,078,596
27,907,552
38,689,897
29,75,97
3
4
4
64,398,396
54,565,803
64,398,396
54,565,803
255,540
-
-
-
(22,575,340)
(26,658,25)
(25,708,499)
(24,850,606)
42,078,596
27,907,552
38,689,897
29,75,97
Outside equity interests in controlled entity
-
-
-
-
TOTAL EQUITY
4
42,078,596
27,907,552
38,689,897
29,75,97
The above Statements of Financial Position are to be read in conjunction with the attached notes.
Cash Flows from Operating Activities:
Receipts from customers
8,3,805
,098,463
2005
$
2004
$
2005
$
-
2004
$
675,594
Payments to suppliers and employees
(2,52,89)
(3,903,70)
(,068,425)
(,432,978)
Interest received
Interest paid
Income tax paid
Other income
3,36
(79,26)
69,962
(263,252)
227,583
(2,029)
(63,370)
3,975
(622)
-
-
-
49,44
(4,654)
(622)
-
Net Cash (Used in) Provided by Operating Activities
7(b)
6,232,4
(2,999,50)
(842,87)
(73,29)
Cash Flows from Investing Activities:
Proceeds from sale of investment securities
Payment made for investments securities
Payment for plant and equipment
Acquisition cost for controlled entity
Acquisition for controlled entity
Escrowed deposit
0
-
(29,524)
(479,774)
7(c)
(6,563,400)
7(c)
(5,287,85)
324,926
(303,256)
(2,287)
(20,050)
-
-
Payments for research and development
(2,955,32)
(389,89)
Repayment of loan from controlled entity
Loan to controlled entity
Loans to other person
Loans repaid other person
Aggregated cash flow from acquired entity
-
-
(34,609)
62,000
49,83
98,493
(3,022)
0
-
-
(479,774)
(20,050)
(6,563,400)
(5,287,85)
-
5,62,772
-
-
-
-
-
(8,086,7)
-
-
(,23,76)
(6,460)
(,22,66)
333,489
207,670
62,000
333,489
-
-
Net Cash Provided by (Used in) Investing Activities
(5,399,783)
(,37,503)
(6,572,037)
(9,7,373)
Cash Flows from Financing Activities:
Share Issues
Share Issue costs
Proceeds from issue of debt securities
Repayment of borrowing
8,077,629
3,522,52
8,077,629
3,522,52
(707,406)
(2,59,972)
(707,406)
(2,59,972)
-
-
,000,000
(600,000)
-
-
-
-
Net Cash Provided by Financing Activities
7,370,223
,402,80
7,370,223
,002,80
Net Increase (Decrease) in Cash Held
(,797,49)
7,03,527
(44,685)
,7,588
Cash at beginning of year
7(a)
7,40,963
478,585
,206,36
34,728
Effects of exchange rate fluctuations on the
balances of cash held in foreign currencies
-
(99,49)
-
-
Cash at end of year
7(a)
5,63,544
7,40,963
,6,63
,206,36
The above Statements of cash flows are to be read in conjunction with the attached notes.
46
‘05 Annual Report
‘05 Annual Report
47
notes to the financial statements
for the year ended 30 june 2005
Summary of Accounting Policies
The financial report is a general purpose financial report which has been drawn up in accordance with applicable Accounting
Standards and other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group
Consensus Views, and the Corporations Act 200.
The financial report has been prepared on the historical cost basis and does not take into account changing money values
or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given
in exchange for assets. Fair value means the amount for which an asset could be exchanged, or a liability settled, between
knowledgeable, willing parties in an arms length transaction. The recoverable amount of non current assets is assessed on the
basis of the expected net cash flows which will be received from the asset's employment and subsequent disposal. The expected
net cash flows have not been discounted to their present values in determining recoverable amounts, unless otherwise stated.
The accounting policies have been consistently applied and, except where stated, are consistent with those of the previous year.
Where necessary, comparative information has been reclassified to achieve consistency in disclosure with current financial year
amounts and disclosures.
notes to the financial statements for the year ended 30 june 2005
losses may be more readily recognised as deferred tax assets as the 'probable' recognition criteria is less stringent than the
'virtually certain' test of Australian GAAP.
(ii) Impairment of financial assets
Under AASB 36: Impairment of Assets, both current and non current assets are tested for impairment. The A-IFRS objective
is to ensure that an entity's assets are carried at no more than their recoverable amount. The recoverable amount of an asset
is determined as the higher of fair value less costs to sell, and value in use. Under AGAAP, non-current assets are written down
when the carrying value of non-current assets exceed its recoverable amount.
In determining value in use, projected future cash flows are discounted using a risk adjusted pre-tax discount rate and
impairment is assessed for the individual asset or at the 'cash generating unit' level. A 'cash generating unit' is determined as
the smallest group of assets that generates cash flows that are largely independent of the cash inflows from other assets or
groups of assets.
The economic entity assets held at July 2004 did not reveal any indicator to require impairment of the assets and, as a result,
no adjustment to non-current assets balance at July 2004 are expected to be made upon transition to A-IFRS.
The significant accounting policies which have been adopted in the preparation of this financial report are:
(iii) Research and development expenditure
(a) Principles of Consolidation
The consolidated financial statements comprise the financial statements of TZ Limited and all its controlled entities (refer note 7)
other then CAP Asia Pacific Pte Ltd for which the Company currently holds a 25% interest in the company. The consolidated entity
currently has no direct involvements in its Asian operations, has no board representation and has no commitments to provide
future funding. This investment currently is carried forward at a nil value.
The directors believe, as they are in no position to exert any significant influence over the operations of the company and it indirect
investments in CED Hong Kong Limited and CED Philippines Inc, they have been excluded from the principles of consolidation.
Entities have been consolidated in the financial statements from the date that control exists. All intercompany balances and
transactions between entities in the consolidated entity, including any unrealised profits or losses, have been eliminated on
consolidation.
Outside equity interest comprises the aggregate of the equity of controlled entities, other than that held either directly or indirectly
by the parent entity, after making adjustments for unrealised profits and losses of controlled entities and other adjustments
necessary to comply with Accounting Standards.
The directors consider that the net revenues and expenses omitted from the annual report are not significant.
(b) Impacts of adopting the Australian equivalents to International Financial Reporting Standards
TZ Limited will be required to prepare financial statements that comply with Australian equivalents to International Financial
Reporting Standards (“A-IFRS”) for reporting periods beginning on or after January 2005. Accordingly, the Company's first half-
year report prepared under A-IFRS will be for the half-year reporting period ended 3 December 2005, and its first annual financial
report prepared under A-IFRS will be for the year ended 30 June 2006.
At the date of this report, the directors of the Company have completed an assessment of accounting policy alternative on
transition to A-IFRS, the finalisation of the A-IFRS accounting policies that will be adopted from July 2005, and the determination
of the likely impact on the results and financial position of the Company.
The following proforma statement of financial performance and statement of financial position outline the likely impacts on the
current year result and financial position of the Company had the financial statements been prepared using A-IFRS, based on
the directors' accounting policy decisions current at the date of this financial report. Users of the financial report should note that
further developments in A-IFRS (for example, the release of further pronouncements by the Australian Accounting Standards
Board and the Urgent Issues Group), if any, may result in changes to the accounting policy decisions made by the directors to
date, and, consequently, the likely impacts outlined in the following proforma financial statements.
The Directors may, at any time until the completion of the Company's first A-IFRS compliant financial report, elect to revisit, and
where considered necessary, revise the accounting policies applied in preparing the proforma financial statements.
i)
Income tax
The Company currently recognises deferred taxes by accounting for the differences between accounting profits and taxable
income, which gives rise to 'permanent' and 'timing' differences. Pursuant to AASB 2 Income Taxes, deferred taxes are
measured by reference to the temporary differences determined as the difference between the carrying amount and the tax
base of assets and liabilities recognised in the statement of financial position.
The Company has carried forward tax losses which have not been recognised as deferred tax assets as they do not satisfy the
'virtually certain' criteria of current Australian Generally Accepted Accounting Principles (GAAP). Pursuant to AASB 2, tax
Under AASB 38: Intangible Assets, costs associated with the research phase of the development of an asset must be
expensed in the year its incurred. This will result in a change in the current accounting policy, which capitalises research costs
to the statement of financial position where it is expected beyond any reasonable doubt that sufficient future benefits will be
derived so as to recover these deferred costs.
On transition, the financial effect of this impact is assessed as nil (parent: nil), as no research cost were capitalised at July
2004 or 30 June 2005. The consolidated entity will undertake an annual impairment test for its current capitalised research and
development cost to ensure that the entity's assets are carried at no more than their estimated recoverable amount.
(iv) Goodwill on consolidation
Under AASB 3: Business Combinations, goodwill is capitalised to the statement of financial position and subjected to an
annual impairment test. Amortisation of goodwill is prohibited. Current accounting policy of the entity is to amortise goodwill on
a straight-line basis over a period of 20 years.
Impairment testing at July 2005 confirmed no impairment of the $8,608,927 goodwill less accumulated amortisation of
$,20,44 as disclosed in the economic entity's financial statements at 30 June 2005. The previously amortised goodwill of
$387,945 will, therefore, be reversed resulting in a corresponding increase of $387,945 in retained earnings at July 2004 and
an increase in profit amounting to $822,469 for the year ended 30 June 2005.
(v) Share-based Payments
Under AASB 2 Share based Payments, the Company must determine the fair value of equity instruments and options issued
to employees as remuneration and recognise a corresponding expense through statement of financial performance. This will
involve using a valuation technique as the shares and options issued are not quoted on a listed stock exchange. The Company
has decided to employ the Black-Scholes option pricing model. The Company currently does not recognise any costs
associated with Share Based Payments.
A transitional adjustment will be made against accumulated loss at July 2004 to recognise on a pro rate basis the fair value
of all share-based payments granted after 7 November 2002, which have not vested as at July 2004 and the comparative
figures in the Company's statement of financial performance relating to the year ended 30 June 2005 will be restated to
recognise on a pro rata basis the fair value of all share-based payments made during that year so as to comply with A-IFRS.
As a consequence, contributed equity will increase by $67,663 and an additional employee benefit expense of $67,663 will be
recognised in Statement of financial performance for the financial year ended 30 June 2005.
48
‘05 Annual Report
‘05 Annual Report
49
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
Economic Entity
Parent Entity
(ii) Goodwill
2005
$
2005
$
Goodwill, representing the excess of the purchase consideration over the fair value of the identifiable net assets acquired on
the acquisition of a controlled entity, is amortised on a straight line basis over 20 years being the minimum period of time during
which benefits are expected to arise.
Reconciliation of Net Profit
Net profit/(loss) reported under Australian Accounting Standards
4,082,90
(857,893)
Key transitional adjustments:
- Reversal of amortisation of goodwill (iv)
- Share-based Payments(v)
Total transitional adjustments
Net profit under A-IFRS
Reconciliation of Equity
822,469
(67,663)
754,806
4,837,76
-
(67,663)
(67,663)
(925,556)
(g) Receivables and Payables
Trade accounts receivable, amounts due from related parties and other receivables represent the principal amounts due at balance
date plus accrued interest less, where applicable, any provisions for doubtful accounts.
Accounts payable represent the principal amounts outstanding at balance date plus, where applicable, any accrued interest.
(h) Employee Entitlements
The provisions for employee entitlements to wages, salaries and annual leave represent the amount which the consolidated
entity has a present obligation to pay resulting from employees' services provided up to balance date. The provision has been
calculated at nominal amounts and includes related on-costs.
The liability for employee entitlements to long service leave represents the present value of the estimated future cash outflows to
be made by the employer resulting from employees' services provided up to the balance date.
Total equity reported under Australian Accounting Standards
42,078,596
38,689,897
(i) Income Tax
Retrospective adjustments to equity at 1 July 2004:
Increase/(Decrease) in current year profit/(loss) resulting from transition to A IFRS
- Reversal of amortisation of goodwill (iv)
- Share-based Payments(v)
Increase in contributed equity
Total equity under A-IFRS
(c) Inventories
-
822,469
(67,663)
-
-
(67,663)
67,663
67,663
42,90,065
38,689,897
Inventories are measured at the lower of cost and net realisable value. Costs are assigned on a first in first out basis.
(d) Investments
Investments are recognised in the financial statements at cost.
(e) Property, Plant and Equipment
Property, plant and equipment is included at cost, less where applicable, any accumulated depreciation or amortisation.
The carrying amount of property, plant and equipment is reviewed annually by directors to ensure it does not exceed the
recoverable amount.
The depreciation rates used for each class of asset are as follows:
◗ Office Furniture and Equipment 3% - 50%
◗ Leasehold Improvement 30%
◗ Motor Vehicle 37% - 50%
◗ Plant & Equipment 20% - 25%
The depreciable amount of all fixed assets is depreciated on a straight line basis over their estimated useful lives commencing
from the time the asset is held ready for use.
(f) Intangibles
The carrying value of all intangible assets are assessed at least each reporting date to ensure they do not exceed their recoverable
amount. Where the carrying value exceeds this recoverable amount the excess of the carrying value over the recoverable amount
of the intangible asset is immediately recognised as an expense, except to the extent to which the decrement reverses an
increment previously recognised in an Asset Revaluation Reserve.
(i) Trade Marks & Patents
Trademarks owned by the consolidated entity are valued in the accounts at cost and are not currently amortised and will be until
commercialisation of the IP and then will be amortised over their estimated useful life, subject always to the recoverable amount
test referred to above.
The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense for the period is
based on the operating result after adjusting for items which, as a result of their treatment under income tax legislation, create
permanent differences between that result and the taxable income or loss.
Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the
determination of operating result, income tax and taxable income are brought to account as either provision for deferred income
tax, or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will
be received, or the liability will become payable.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt.
Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the
benefit. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future
assessable income and comply with the conditions of deductibility imposed by the law to permit a future income tax benefit to be
realised.
(j) Leases
Lease payments under operating leases, where substantially all the risks and benefits remain with the lessor, are charged as
expenses in the period in which they are incurred.
Where assets are acquired by means of finance leases, the present value of minimum lease payments is established as an asset
at the beginning of the lease term and amortised on a straight line basis over the expected economic life. A corresponding liability
is also established and each lease payment is allocated between such liability and interest expense.
(k) Foreign Currency Transactions and Balances
Transactions in foreign currencies are initially measured and brought to account at the rate of exchange in effect at the date
of each transaction. Exchange differences relating to monetary items are brought to account in the Statements of Financial
Performance in the financial year in which the exchange rates change as exchange gains or losses.
(l) Revenue Recognition
(i) Sales Revenue
Sales Revenue comprises revenue earned from the provision of products or services to entities outside the consolidated entity.
Sales revenue is recognised when the goods or services are provided or, in relation to Membership Income.
(ii) Other Revenue - Direct Cost Recovery
Direct Cost Recovery revenue comprises revenue earned from the provision of services, the costs of which are directly
recoverable from the client as they are incurred.
(iii) Interest Revenue
Interest Revenue is recognised as it accrues.
50
‘05 Annual Report
‘05 Annual Report
51
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
(ii) Goodwill
Goodwill, representing the excess of the purchase consideration over the fair value of the identifiable net assets acquired on
the acquisition of a controlled entity, is amortised on a straight line basis over 20 years being the minimum period of time during
which benefits are expected to arise.
(g) Receivables and Payables
Trade accounts receivable, amounts due from related parties and other receivables represent the principal amounts due at balance
date plus accrued interest less, where applicable, any provisions for doubtful accounts.
Accounts payable represent the principal amounts outstanding at balance date plus, where applicable, any accrued interest.
(h) Employee Entitlements
The provisions for employee entitlements to wages, salaries and annual leave represent the amount which the consolidated
entity has a present obligation to pay resulting from employees' services provided up to balance date. The provision has been
calculated at nominal amounts and includes related on-costs.
The liability for employee entitlements to long service leave represents the present value of the estimated future cash outflows to
be made by the employer resulting from employees' services provided up to the balance date.
(i) Income Tax
The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense for the period is
based on the operating result after adjusting for items which, as a result of their treatment under income tax legislation, create
permanent differences between that result and the taxable income or loss.
Timing differences, which arise due to the different accounting periods in which items of revenue and expense are included in the
determination of operating result, income tax and taxable income are brought to account as either provision for deferred income
tax, or an asset described as future income tax benefit at the rate of income tax applicable to the period in which the benefit will
be received, or the liability will become payable.
Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt.
Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of realisation of the
benefit. The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income taxation legislation and the anticipation that the consolidated entity will derive sufficient future
assessable income and comply with the conditions of deductibility imposed by the law to permit a future income tax benefit to be
realised.
(j) Leases
Lease payments under operating leases, where substantially all the risks and benefits remain with the lessor, are charged as
expenses in the period in which they are incurred.
Where assets are acquired by means of finance leases, the present value of minimum lease payments is established as an asset
at the beginning of the lease term and amortised on a straight line basis over the expected economic life. A corresponding liability
is also established and each lease payment is allocated between such liability and interest expense.
(k) Foreign Currency Transactions and Balances
Transactions in foreign currencies are initially measured and brought to account at the rate of exchange in effect at the date
of each transaction. Exchange differences relating to monetary items are brought to account in the Statements of Financial
Performance in the financial year in which the exchange rates change as exchange gains or losses.
(l) Revenue Recognition
(i) Sales Revenue
Sales Revenue comprises revenue earned from the provision of products or services to entities outside the consolidated entity.
Sales revenue is recognised when the goods or services are provided or, in relation to Membership Income.
(ii) Other Revenue - Direct Cost Recovery
Direct Cost Recovery revenue comprises revenue earned from the provision of services, the costs of which are directly
recoverable from the client as they are incurred.
(iii) Interest Revenue
Interest Revenue is recognised as it accrues.
2 Revenues from Ordinary Activities
Sales Revenue
Total Sales Revenue
8,28,464
,88,293
8,28,464
,88,293
Consolidated Parent Entity
2005
$
2004
$
2005
$
2004
$
-
-
-
-
-
-
633,084
633,084
32,752
77,05
398,857
2,000,000
06,760
2,498
6,47,9
-
6,47,9
32,752
309,754
63,506
-
2,000,000
25,026
0,46
225,442
27,282
9,99
33,799
-
2,36,48
33,799
2,09,258
Cost of Sales
Cost of Goods Sold
Services Expenses (Benefits)
Total Cost of Sales
Non-operating revenue
Sale of Controlled entity
Interest
Sundry revenue items
Total non-operating revenue
3 Loss From Ordinary Activities
Profit/Loss from ordinary activities includes:
Net losses on disposals of property, plant & equipment
2,609
66,555
Amortisation of non-current assets
Intellectual Property
Goodwill
Bad and Doubtful Debts expense
49,80
822,469
93,8
-
387,945
-
-
-
-
-
66,322
-
-
-
4 Income tax
The amount provided in respect of income tax differs from
the amount prima facie payable on the operating result.
The difference is reconciled as follows:
Prima Facie Income Tax on the Operating Result
Before Income Tax at 30% (2004: 30%)
Tax Effect of Permanent Differences:
Amortisation of Intangibles
Other Non-Allowable Expenses
,224,873
(542,964)
(257,368)
74,004
342,278
-
6,383
(45,05)
47,596
-
-
-
-
36,63
257,368
(20,67)
-
-
Future Income Tax Benefit not brought to account
(,356,543)
Income Tax Expense/(Credit) Attributable to Operating Result
20,608
The potential future income tax benefit arising from tax losses
has not been recognised as an asset because recovery of tax
losses is not virtually certain.
4,68,999
5,975,542
,987,62
2,5,028
The taxation benefits of tax losses and timing differences not brought to account will only be obtained if:-
a) assessable income is derived of a nature and of amount sufficient to enable the benefit from the deductions to be realised;
b) conditions for deductibility imposed by the law are complied with; and
c) no changes in tax legislation adversely affect the realisation of the benefit from the deductions.
52
‘05 Annual Report
‘05 Annual Report
53
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
Consolidated Parent Entity
Consolidated Parent Entity
5 Receivables
Current:
Trade Debtors
Sundry Debtors
Sub-total
Other Debtors and Prepayments
Non-Current:
Amounts Receivable from:
Controlled Entities
6 Work in Process
Uncompleted/Unbilled jobs - at Cost
7 Investments
Shares in Controlled Entities - at Cost Note 7(a)
Shares - Other - unquoted at cost
(a) Controlled Entities
Parent Entity:
TZ Limited
Subsidiaries of TZ Limited
Telezygology Inc.
PDT Holdings, Inc.
Product Development Technologies, Inc.
PDT Tooling, Inc.
PDT Southeast Limited Liability Company (LLC)*
CJSC PDT Ukraine
CED Membership Services Pty Ltd
The Presidential Card Pty Ltd
CUC Australasia Pty Ltd
CED Online Pty Ltd
Golf Partners Australia Pty Ltd
Golf Partners International Pty Ltd
CED Asia Pacific Pte Ltd
CED Hong Kong Limited (i)
CED Philippines Inc (i)
2005
$
2004
$
2005
$
3,92,079
5,44,694
9,056,773
04,683
99,029
3,8,262
3,280,29
4,870
-
4,976,74
4,976,74
5,000
2004
$
-
3,233,322
3,233,322
-
9,6,456
3,295,6
4,99,74
3,233,322
-
423,82
-
-
-
-
-
-
0
0
2,385,760
7,998,532
-
-
33,203,229
20,52,247
-
0
33,203,229
20,52,257
Country of Incorporation Percentage Owned %
2005
2004
Australia
USA
USA
USA
USA
USA
Ukraine
Australia
Australia
Australia
Australia
Australia
Australia
Singapore
Hong Kong
Philippines
00
00
00
00
00
00
00
00
00
00
00
00
25
6.25
6.25
00
0
0
0
0
0
00
00
00
00
00
00
25
6.25
6.25
*(An LLC is treated as a partnership for US purposes)
(i) Owned by CED Asia Pacific Pte Ltd (the 6.25% represents TZ Limited indirect interest).
8 Property, Plant and Equipment
Property, Plant and Equipment
Cost
Accumulated Depreciation
Total Property, Plant and Equipment
Movements during the year:
Office Furniture and Equipment
Beginning of year
Additions
Disposals
Depreciation expense
End of year
Leasehold Improvements
Beginning of year
Additions
Depreciation expense
End of year
Motor Vehicles
Beginning of year
Additions
Depreciation expense
End of year
Plant and Equipment
Beginning of year
Additions
Depreciation expense
End of year
9 Intangibles
Goodwill on Consolidation
Intellectual Property
Trademarks
Total Intangibles
Movements during the year:
Intellectual Property
Beginning of year
Additions
Amortisation expense
End of year
2005
$
2004
$
2005
$
4,564,885
(393,475)
4,7,40
290,208
(99,2)
90,997
90,997
,420,694
(2,609)
(5,285)
,338,797
-
540,28
(3,765)
508,453
-
48,002
(0,860)
37,42
-
2,282,06
(95,088)
2,87,08
25,476
74,309
(27,503)
(7,285)
90,997
-
-
-
-
-
-
-
-
-
-
-
-
7,398,53
5,29,862
,795,855
4,775,230
,602,04
29,577
30,796,382
9,934,669
4,775,230
7,439,805
(49,80)
4,775,230
-
-
,795,855
4,775,230
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2004
$
-
-
-
66,320
-
(27,295)
(39,025)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54
‘05 Annual Report
‘05 Annual Report
55
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
9 Intangibles (cont.)
Trademarks
Beginning of year
Additions
End of year
Goodwill on Consolidation
Beginning of year
Additions
Amortisation expense
End of year
0 Payables
Current:
Trade Creditors
Other Accruals - refer to Note 22
Contingent Liability - refer to Note 7
Sundry Creditors
Total Current Payables
Non-Current:
Amounts Payable to:
- Controlled Entities
Included in the above are aggregate amounts payable to
Controlled Entities and are non-interest bearing
(2004: non-interest bearing)
Provisions
Current:
Employee Entitlements
Aggregate Employee Entitlements
2 Interest Bearing Liabilities
Current:
Bank loans - secured
Non-Current
Bank loans - secured
The bank loans are secured by a mortgage
over the assets of PTD Inc group
Consolidated Parent Entity
2005
$
2004
$
2005
$
2004
$
29,577
,572,437
,602,04
-
29,577
29,577
5,57,807
-
3,09,20
5,29,862
(822,469)
(387,945)
7,398,53
5,29,862
-
-
-
-
-
-
-
2,333,00
394,794
73,8
-
2,244,000
-
-
-
-
-
-
-
-
-
-
225,352
2,244,000
-
2,23,556
,067,933
5,632,499
2,39
2,282,768
54,245
2,75,3
2,355,949
2,523,597
-
-
-
-
695,948
695,948
695,948
695,948
29,9
29,9
73,35
73,35
424,475
2,028,00
-
-
-
-
-
-
5,685
5,685
-
-
Consolidated Parent Entity
2005
$
2004
$
2005
$
2004
$
3 Issued Capital
Issued and Paid Up Capital:
47,52,00 (2004: 28,435,77) Fully Paid Ordinary Shares 64,398,396
54,565,803
64,398,396
54,565,803
Movements during the year:
Opening balance
Shares issued during the year:
6,000,000 on the 6 July 2004
3,076,923 on the 2 December 2004
50,000,000 on the 29 August 2003
42,26 on the 30 September 2003
70,734,446 on the 8 January 2004
26,667,000 on the 26 March 2004
7,455,625 on the 30 March 2004
Share issue costs
Closing balance
Opening balance
54,565,803
25,420,00
54,565,803
25,420,00
2,040,000
8,500,000
-
-
2,040,000
8,500,000
-
-
-
-
-
-
-
,500,000
22,000
7,683,62
2,000,50
2,500,000
-
-
-
-
-
,500,000
22,000
7,683,62
2,000,50
2,500,000
(707,407)
(4,559,969)
(707,407)
(4,559,969)
64,398,396
54,565,803
64,398,396
54,565,803
No.
No.
No.
No.
28,435,77
67,478,527
28,435,77
67,478,527
Share movement during the year before consolidation
30 May 2003
29 August 2003
30 September 2003
-
-
-
-
50,000,000
42,26
-
-
-
-
50,000,000
42,26
Total ordinary share before consolidation
28,435,77
7,890,743
28,435,77
7,890,743
23 December 2003 consolidation on a“5 for ” basis
-
(94,32,637)
-
(94,32,637)
Ordinary shares issued after consolidation
28,435,77
23,578,06
28,435,77
23,578,06
6 July 2004
2 December 2004
8 January 2004
26 March 2004
30 March 2004
Closing balance
(ii) Share Unquoted Options:
Opening balance
Options issued:
5 January 2004 (a)
5 January 2004 (b)
5 January 2004 (c)
26 March 2004 (d)
30 March 2004 (e)
6 July 2004 (f)
Closing balance
6,000,000
3,076,923
-
-
6,000,000
3,076,923
-
-
-
-
-
70,734,446
26,667,000
7,455,625
-
-
-
70,734,446
26,667,000
7,455,625
47,52,00
28,435,77
47,52,00
28,435,77
9,893,499
-
9,893,499
-
-
-
-
-
-
,49,25
2,236,687
6,70,062
2,000,000
7,455,625
-
-
-
-
-
2,000,000
-
2,000,000
,49,25
2,236,687
6,70,062
2,000,000
7,455,625
-
2,893,499
9,893,499
2,893,499
9,893,499
56
‘05 Annual Report
‘05 Annual Report
57
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
3 Issued Capital (cont)
(a) The Company issued ,49,25 options to acquire ordinary shares in consideration of the cancellation of TZ Inc. option
holder's options over shares in TZ Inc., as agreed to in the general meeting of shareholders on the 23 December 2003 in part
of the consideration for the purchase of TZ Inc. The options expire on the 29 August 2006 and are exercisable at 27 cents.
(b) The Company issued 2,236,687 options to acquire ordinary shares in consideration of the cancellation of TZ Inc. option
holder's options over shares in TZ Inc., as agreed to in the general meeting of shareholders on the 23 December 2003 in part
of the consideration for the purchase of TZ Inc. The options expire on the 29 August 2006 and are exercisable at 34 cents.
(c) The Company issued 6,70,062 options to acquire ordinary shares in consideration of the cancellation of TZ Inc. option
holder's options over shares in TZ Inc., as agreed to in the general meeting of shareholders on the 23 December 2003 in part
of the consideration for the purchase of TZ Inc. The options expire on the 29 August 2006 and are exercisable at 40 cents.
(d) The Company issued 2,000,000 options to acquire ordinary shares as part consideration for underwriting fees for the
Company's share capital raising as detailed in the prospectus lodged on the 4 March 2004. The options expire on the 26
March 2007 and are exercisable at 45 cents.
(e) The Company issued 7,455,625 options to acquire share in the Company as per the Convertible Notes Agreement entered
into, on the conversion of the convertible notes to ordinary share. The options expire on the 30 March 2006 and are
exercisable at 34 cents.
(f) The Company issued 2,000,000 options to acquire share in the Company as resolved at a general meeting of shareholders held
on 4 July 2005 to the Company Directors, Mr Chris Kelliher and Mr Anthony Leibowitz by way of two tranches. The first tranche
was vested on 3 December 2004 with a exercisable price of 75 cents, and the second tranche will vest on 3 December 2005
with a exercisable price of $.00 dollar. The options will expire on 3 December 2006 and 3 December 2007 respectively.
(iii) Employee Share Option Plan
No options have been issued during the year or to the date of this report under the Employee Share Option Plan.
(iv) Options Exercised
Other than 20,000 shares at $0.40 being issued on 3 August 2005 as a result of the exercise of 20,000 options, no shares
have been issued by virtue of an exercise of an option during the year or to the date of this report.
Consolidated Parent Entity
2004
$
2005
$
2005
$
2004
$
4 Reserves, Retained Profits and Total Equity
Foreign Currency Translation Reserve
Movements during the year:
Opening Balance
Adjustment arising from the translation of foreign controlled
entities' financial statements
Closing Balance
Retained Profits/(Losses)
Balance at beginning of year
Net Profit/(Loss) attributable to members of the parent entity
580,03
Balance at end of year
Total Equity
-
255,540
255,540
-
-
-
-
-
-
-
-
-
(26,658,250)
(24,848,37)
(24,850,606)
(25,430,69)
4,082,90
(,809,880)
(857,893)
(22,575,340)
(26,658,25)
(25,708,499)
(24,850,606)
Total Equity at beginning of year
27,907,552
57,639
29,75,97
(0,609)
Total Changes in Equity recognised in the
Statement of Financial Performance
Transactions with owners as owners
4,082,90
(,809,880)
(857,893)
580,03
Movements in Foreign Currency Translation Reserves
255,540
-
-
-
Contribution of Equity
Total Equity at end of year
9,832,594
29,45,793
9,832,593
29,45,793
42,078,596
27,907,552
38,689,897
29,75,97
5 Directors’ and Executives’ Remuneration
a) Names and position held by directors and specified executives in office at any time during the financial year are:
Directors
Anthony Leibowitz
Chairman - Non Executive Director
Chris Kelliher
John Falconer
Andrew Sigalla
John Wilson
CEO TZ Inc - Executive Director
Non executive Director (appointed 5 July 2004)
Executive Director (resigned 5 July 2004)
Executive Director (resigned 5 July 2004)
Dickory Rudduck
Executive Director (resigned 5 July 2004)
Martin Hadaway
Non Executive Director (resigned 5 July 2004)
Specified executives
John Wilson
TZ Inc. Chief Operating Officer
Dickory Rudduck
TZ Inc. Chief Technical Officer
Mark Schwartz
PDT Inc. President and CEO
Ray Wiltgen
Scott Semenik
David May
PDT Inc. Vice President
PDT Inc. Vice President
PDT Inc. Vice President
b) Directors' Remuneration
Primary
2005
A Leibowitz
C Kelliher
J Falconer
A Sigalla*
J Wilson*
D Rudduck*
Total
2004
A Leibowitz
C Kelliher
A Sigalla
J Wilson
D Rudduck
J Nissen
J Whiting
K Whiteman
Total
Salary, Fees &
Commissions
Superannuation Options
Total
contribution
20,000
473,89
60,000
-
-
-
653,89
-
-
-
-
-
-
-
39,000
39,000
-
-
-
-
59,000
52,89
60,000
-
-
-
78,000
73,89
47,66
-
33,332 -
6,663
-
56,000
23,000
30,000
6,667
56,667
679,945
9,000
9,000
-
,500
,500
2,000
-
-
-
-
-
-
-
-
-
47,66
33,332
6,663
65,000
32,000
30,000
8,67
58,67
700,945
* Each of these directors resigned as a director of the Parent Entity on 15 July 2004.
58
‘05 Annual Report
‘05 Annual Report
59
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
5 Directors’ and Executives’ Remuneration (cont)
c) Specified executives' remuneration
Primary
5 Directors’ and Executives’ Remuneration (cont)
e) Shareholdings
Number of shares held by directors and specified executives
2005
J Wilson**
D Rudduck**
M Schwartz
R Wiltgen
S Semenik
D May
Total
Salary, Fees & Superannuation Non-Cash Options
Commissions
contribution
Total
385,3
307,992
03,855
03,855
03,855
03,855
9,000
9,000
7,84
7,84
-
-
-
-
-
-
-
-
-
-
-
-
-
-
40,35
324,76
03,855
03,855
03,855
03,855
,08,543
8,000
4,368
- ,40,9
Directors
A Leibowitz
C Kelliher
J Falconer
A Sigalla*
Total
Balance
01/07/04
Granted as
Remuneration
Net change
other
Balance
30/06/05
372,78
,46,569
-
,092,249
2,88,599
-
-
-
-
-
,20,967
,493,748
-
,46,569
,388,82
,388,82
-
,092,249
2,509,49
5,390,748
* Resigned as a director of the Parent Entity on the 15 July 2004.
** Each of these executives resigned as directors of the Parent Entity on the 15 July 2004.
Specified executives
d) Options and Rights Holdings
Number of options held by directors and specified executives
Directors
A Leibowitz
C Kelliher
J Falconer
A Sigalla*
Total
Balance
Granted as
01/07/04 Remuneration (i)
Net change
other
Balance
30/06/05
-
3,727,82
-
,49,25
,000,000
,000,000
-
-
,000,000
4,727,82
-
-
,388,82
,388,82
-
,49,25
5,28,937
2,000,000
,388,82
8,607,9
* Resigned as a director of the Parent Entity on the 15 July 2004.
Specified executives
J Wilson
D Rudduck
M Schwartz
R Wiltgen
S Semenik
D May
Total
Balance
Granted as
01/07/04 Remuneration (i)
Net change
other
Balance
30/06/05
,49,25
,49,25
-
-
-
-
2,982,250
-
-
-
-
-
-
-
-
-
-
-
-
-
-
,49,25
,49,25
-
-
-
-
2,982,250
(i) The Company issued the options in the above tables as resolved at the general meeting of shareholder held on 15 July 2004
further detailed in Note 12 (ii) (f).
J Wilson
D Rudduck
M Swartz
R Wiltgen
S Semenik
D May
Total
f) Remuneration Practices
Balance
01/07/04
4,832,004
7,976,89
-
-
-
-
2,808,93
Granted as
Remuneration
Net change
other
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance
30/06/05
4,832,004
7,976,89
-
-
-
-
2,808,93
The company's policy for determining the nature and amounts of emoluments of directors and senior executives of the company
is as follows;
The remuneration structure for executive officers, including executive directors, is based on a number of factors, including the
length of service, particular experience of the individual concerned, and overall performance of the Company. The contracts
for service between the Company and specified directors and executives are on a continuing basis the terms of which are not
expected to change in the immediate future. Upon retirement specified directors and executives are paid employee benefit
entitlements accrued to date of retirement.
Executive directors and senior executives may receive bonuses based on the achievement of specific performance hurdles. There
is no separate profit-share plan.
The constitution provides that the remuneration of Non-executive Directors will not be more than the aggregate fixed sum
determined by a general meeting of shareholders. The aggregate remuneration has been set at the last general meeting of
shareholder held on the 5 July 2004 in the amount of $250,000 per annum.
Consolidated Parent Entity
6 Related Party Transactions
(a) Controlled Entities
Loan to Controlled Entities - Non-Current
Loan repaid from Controlled Entities - Non-Current
These loans are interest free.
There are no fixed terms of repayment.
2005
$
-
-
2004
$
2005
$
2004
$
-
-
7,754,927
,670,030
3,340,549
3,69,56
60
‘05 Annual Report
‘05 Annual Report
61
1251 TZ AR Financials V2 21/10/05 12:09 PM Page 22
1251 TZ AR Financials V2 21/10/05 12:09 PM Page 23
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
16 Related Party Transactions (cont)
(b) Transaction with Directors
During the financial year ended 30 June 2004, the consolidated entity purchased investment securities in a company that Mr J
Nissen was a director of for a total consideration of $300,000. These securities were sold on the market for a total consideration
of $Nil (2004: $324,925). In September 2003 a further $300,000 was loaned to the same entity secured against shares in a third
party. The loan could not be recovered and the security was exercised and realising $Nil (2004: $250,000.)
Mr A Leibowitz is a director of Tandem Corporate Pty Limited which provided services to the Company's reconstruction and
capital raising for the year ended 30 June 2004. Charges for services provided during the current year amounted to $Nil (2004:
$1,200,000).
Mr J Falconer is a director of Dunbar Associates Pty Ltd which provided corporate services to the Company during the year at
normal commercial rates which amounted to $67,245 (2004: $44,539)
Mr Sigalla resigned as a director of the Parent Entity on 15 July 2004 but continued as a director of Telezygology Inc. He is a
director of ZMS Investments Pty Limited which provided consultancy services to the Company during the year at normal
commercial rates and which totalled $220,000 (2004: $2,150,000)
Consolidated
Parent Entity
2005
$
2004
$
2005
$
2004
$
17 Notes to the Statements of Cash Flows
a). Reconciliation of Cash
For the purpose of the statements of cash flows, cash includes:
Cash at Bank and on Hand
Deposit on call
b). Reconciliation of Cash Flow from Operations
with Operating Result After Income Tax
5,349,625
263,919
5,613,544
6,146,577
1,264,386
7,410,963
1,161,631
-
1,161,631
7,011
1,199,305
1,206,316
Operating Profit/(Loss) after Income Tax
4,082,910
(1,809,880)
(857,893)
580,013
Non-Cash Flows in Operating Profit/(Loss):
Depreciation
Amortisation of Intangibles
Unrealised Exchange Loss(Gain)
Employee Entitlements
Doubtful Debts
Changes in Assets and Liabilities
(Increase)/Decrease in Trade Debtors
(Increase)/Decrease in Prepayments and Other Debtors
(Increase)/Decrease in Inventories
(Increase)/Decrease in Work in Process
(Decrease)/Increase in Creditors and Accruals
310,607
1,241,649
(4,114)
56,056
340,891
202,466
13,044
-
581,682
(593,050)
202,798
387,945
97,447
(578)
-
(59,018)
(2,098,314)
12,315
-
268,135
Cash Flows Provided by/(Used in) Operations
6,232,141
(2,999,150)
-
-
-
(15,685)
-
-
166,322
-
-
30,080
-
40,011
198,355
(2,075,941)
-
-
(167,648)
(842,871)
4,264
-
542,032
(713,219)
$
17 Notes to the Statements of Cash Flows (cont)
c). Acquisition of Entities
2005
2004
$
2005
$
2004
$
Consolidated
Parent Entity
During the year 100% of the controlled entity
PDT Holdings, Inc. was acquired.
Details of this transaction are:
Purchase Consideration
Cash consideration
Amount due under contact of sale - cash
Amount due under contact of sale - shares
Cash outflow/inflow
Assets and liabilities held at acquisition date:
Cash
Receivable
Property, Plant and equipment
Work in Process
Intangibles
Payables
Interest bearing liabilities
Goodwill on consolidation
During the year 100% of the controlled entity
Telezygology, Inc. was acquired.
Details of this transaction are:
Purchase Consideration
Cash consideration
Share issue consideration
Cash outflow/inflow
Assets and liabilities held at acquisition date:
Cash
Receivable
Property, Plant and equipment
Intangibles
Payables
Interest bearing liabilities
Goodwill on consolidation
12,211,207
6,563,400
3,416,251
2,231,556
12,211,207
47,835
4,262,434
3,930,372
976,619
6,027,540
(4,767,954)
(2,453,280)
8,023,566
4,187,641
12,211,207
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,183,612
-
20,183,612
-
207,670
1,231,756
53,897
4,414,987
(460,210)
(782,295)
4,665,805
15,517,807
20,183,612
12,211,207
6,563,400
3,416,251
2,231,556
12,211,207
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,183,612
-
20,183,612
-
-
-
-
-
-
-
-
-
-
62
‘05 Annual Report
‘05 Annual Report
22
23
‘05 Annual Report
‘05 Annual Report
63
1251 TZ AR Financials V2 21/10/05 12:09 PM Page 24
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
17 Notes to the Statements of Cash Flows (cont)
On the 11 March 2004 the year the Company finalised an agreement to purchase all the shares in PDT Holding Inc, for a cash
and share consideration of US$12 million on a going concern basis. The full purchase price is only payable on PDT achieving its
2005 forecasted EBITDA figure of US$3.0 Million.
Under the sale agreement, the Company is required to pay the following consideration
(a) US$5,000,000 cash on the signing of the contract.
(b) A further US$1,000,000 to be placed in an escrow account until after the preparation of audited consolidated financial
statements as at 31 December 2004.
(c) The remaining US$6,000,000 will be paid by from USD$3,000,000 current held in escrow and US$3,000,000 shares in TZ
Limited with an ascribed value of USD$1.00 per TZ Limited share, on achieving its 2005 forecasted EBITDA figure.
The Company has estimated that under current trading activities, PDT might not achieve its estimated EBITDA forecasts under the
agreement. This will have the effect of reducing the final purchase consideration for PDT to approximately USD$9.6M. Therefore
the Company has only provided for an additional USD$1.7M (AU$2,231,556) as the amount outstanding for shares to be issued
as part of the final acquisition cost.
Consolidated
Parent Entity
2005
$
2004
$
2005
$
2004
$
d). Disposal of Entities
During the year the controlled entity Golf Link Partners Pty Limited was sold. Aggregate details of this transaction are:
Consideration received
Amount due under contact of sale
Cash inflow/(outflow)
Assets and liabilities held at disposal date:
Investment in controlled entity
Cash
Debtors
Inventory
Investments
Plant and Equipment
Trade Creditors
Net Gain/(loss) on disposal
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
(2,000,000)
-
-
-
-
-
-
-
267,968
(788,145)
(520,177)
2,520,177
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
(2,000,000)
-
-
481,809
-
-
-
-
-
-
481,809
1,518,191
2,000,000
e). Non Cash Financing and Investing Activities
Share Issued.
- On the 8 January 2004, the Company issued 70,734,446 ordinary shares issued at 25 cents as part consideration for the
purchase of Telezygology Inc.
- On the 30 March 2004, the Company issued 7,455,625 ordinary shares on the conversion of the Convertible Notes that have
been issued as part consideration for the purchase of Telezygology Inc.
- On the 16 July 2004, the Company issued 6,000,000 ordinary shares as approved in the general meeting of shareholders held
on the 15 July 2005 to the Company former director for service provided in the Company recent restructure and capital rising
under the prospectus conducted in March 2004.
8 Segment Information
Segment Revenues
Engineering and Design
Membership Business
Investments
Total of all segments
Unallocated
Consolidated
(i)All sales were to customers outside the consolidated entity
Segment Results
Engineering and Design
Membership Business
Investments
Total of all segments
Eliminations
Unallocated
Profit from ordinary activities before income tax expense
Income tax expense relating to ordinary activities
Profit from ordinary activities after related income tax expense
Extraordinary items
Net profit
2005
$
2004
$
8,222,578
-
25,026
8,437,604
6,302
40,026
,048,267
2,454,556
3,642,849
6,85
8,443,906
3,649,700
5,52,62
(,665,224)
-
(,027,473)
(857,893)
925,845
4,294,79
(,766,852)
-
-
(,20)
(43,028)
4,293,58
(,809,880)
(20,608)
-
4,082,90
(,809,880)
-
-
4,082,90
(,809,880)
Segment Assets and Liabilities
Engineering and Design
Membership Business
Investments
Total of all segments
Unallocated
Consolidated
Geographical Segments
Assets Liabilities
2005
$
2004
$
2005
$
2004
$
43,566,770
20,025,666
5,992,477
284,53
-
-
6,674,83
9,40,973
50,24,60
29,436,639
6,028
,295,6
-
2,23,556
8,224,033
-
50,302,629
30,73,800
8,224,033
-
-
284,53
2,539,77
2,824,248
The Investment segment is carried on in Australia. All other segments are operated and controlled from the USA.
9 Financial Instruments
(a) Interest rate risk exposure
The Company is exposed to interest rate risk through primary financial assets and financial liabilities. The following table
summarises the interest rate risk for the Company, together with the effective weighted average interest rate for each class of
financial assets and liabilities.
64
‘05 Annual Report
‘05 Annual Report
24
‘05 Annual Report
65
notes to the financial statements for the year ended 30 june 2005
notes to the financial statements for the year ended 30 june 2005
9 Financial Instruments (cont)
Floating Fixed Interest maturing in
2005
Weighted Average
Interest Rates
interest rate
$
1year or less over 1 to 5 years
$
$
Non
interest bearing
$
Total
$
2005 2004
2005
2004
2005
2004
2005 2004
2005
2004
2005
2004
Financial assets
Cash
3.50 2.84 5,60,488 6,43,435
- ,264,386
Receivables
2.54
- ,834,468
-
-
-
Total financial assets
7,444,956 6,43,435
- ,264,386
Financial liabilities
Bank Loan
6.25
- ,476,760
Bills/Instalment
Notes
Lease Liabilities
Trade and
sundry creditors
Total financial
liabilities
7.50
7.5
-
-
-
-
-
-
-
-
- ,476,760
-
-
-
-
-
-
-
62,4
-
-
-
-
-
-
- 975,725
-
-
-
-
-
3,056
3,42 5,63,544 7,40,963
- 7,326,988 3,295,6 9,6,456 3,295,6
- 7,330,044 3,298,303 4,775,000 0,706,24
-
-
-
-
-
-
- ,476,760
-
-
975,725
62,4
-
-
-
- 5,469,088 2,75,3 5,469,088 2,75,3
62,4
- 975,725
- 5,469,088 2,75,3 8,083,984 2,75,3
Net financial assets
5,968,96 6,43,435
(62,4) ,264,386 (975,725)
- ,860,956
547,90 6,69,06 7,955,0
Reconciliation of net financial assets to net assets:
Net financial assets above
Non-financial assets and liabilities:
Inventories
Investments
Property, plant and equipment
Intangibles
Deferred tax Assets
Provision for employee entitlements
Deferred tax liabilities
Net assets per statement of financial position
2005
$
2004
$
6,690,06
7,955,0
423,82
-
-
0
4,7,40
90,997
30,796,382
9,934,669
36,025
(29,9)
(9,858)
-
(73,35)
-
42,078,596
27,907,552
(b) Net fair values of financial assets and liabilities
(i) The net fair values of cash and cash equivalents and non-interest bearing monetary financial assets and liabilities approximate
their carrying values as disclosed in the statement of financial position and the notes to the financial statements.
(ii) The carrying amounts and estimated net fair values of equity investments approximate their carrying values as disclosed in the
statement of financial position and the notes to the financial statements.
(c) Credit risk exposure
The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial
assets is the carrying amount, net of any provision for doubtful debts, as disclosed in the statement of financial position and notes
to the financial statements.
The Company does not have any material credit risk exposure to any single debtor or group of debtors under financial instruments
entered into by the Company.
Receivables due from major debtors are not normally secured by collateral, however the credit worthiness of debtors is monitored.
Consolidated Parent Entity
2005
$
2004
$
2005
$
2004
$
20 Commitments for Expenditure
Operating Lease Commitments
Payable:
- Not later than one year
- Later than one year but not later than five years
- Later than five years
68,097
,8,727
-
09,640
54,820
-
,799,824
64,460
-
-
-
-
-
-
-
-
Parent
Entity
2004
(.69)
(.69)
Consolidated
Entity
2005
2.8
2.44
45,44,867
06,854,322
2,893,499
-
67,308,366
06,854,322
4,082,90
($,809,880)
2 Earning per Share
Basic Earnings Per Share (cents per share)
Diluted Earnings Per Share (cents per share)
Weighted average number of ordinary shares on issue used in the
calculation of basic earnings per share:
Weighted average number of options outstanding
Weighted average number of ordinary shares outstanding used in
calculation of dilutive earnings per share
Earnings used in the calculation of basic and dilutive earnings per share:
22 Events Subsequent to Reporting Date
No other matter or circumstance has arisen since the end of the financial year which has not been dealt with in the financial
statements that has significantly affected or may significantly effect:
(i) the operations of the Company;
(ii) the results of those operations; or
(iii) the state of affairs of the Company.
23 Auditor’s Remuneration
Operating Lease Commitments
Auditors of the Parent Entity - Taylor's & Co
Other Services from Auditors of the Parent Entity
Other Auditors
Other Services from Other Auditors
The auditors received no other fees or benefits
Consolidated Parent Entity
2005
$
2004
$
2005
$
49,455
-
-
84,382
8,650
46,254
20,000
9,050
49,455
-
-
-
2004
$
-
46,254
20,000
9,050
66
‘05 Annual Report
‘05 Annual Report
67
directors’ declaration
The directors of the TZ Limited declare that:
The financial statements and associated notes of the company and of the economic entity for the financial year ended 30 June
2005:
(a) are in accordance with the Corporations Act 200;
(b) comply with Accounting Standards and the Corporations Act 200; and
(c) give a true and fair view of the company's and consolidated entity's financial position as at 30 June 2005 and the
performance for the year ended on that date;
2 the Executive Director and Chief Financial Officer have each declared that:
(a) the financial records of the company for the financial year have been properly maintained in accordance with section 286
of the Corporations Act 200;
(b) the financial statements and notes for the financial year comply with the Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view.
3
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.
J Falconer
Director
Dated this 30th day of September 2005
Sydney
independent audit report
to the members of TZ Limited
Scope
The Financial Report and Directors' Responsibility
The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows,
accompanying notes to the financial statements, and the directors' declaration for TZ Limited (the Company) and the consolidated entity
for the year ended 30 June 2005. The consolidated entity comprises both the company and the entities it controlled during the year.
The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position
and performance of the company and the consolidated entity, and that complies with accounting standards in Australia, in
accordance with the Corporations Act 200. This includes responsibility for the maintenance of adequate accounting records and
internal controls that are designed to prevent and detect fraud and error and for the accounting policies and accounting estimates
inherent in the financial report.
Audit Approach
We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company.
Our audit was conducted in accordance with Australia Auditing Standards in order to provide reasonable assurance as to
whether the report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional
judgment selective testing the inherent limitations of internal control, and the availability of persuasive rather than conclusive
evidence. Therefore an audit cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial report presents fairly in accordance with the
Corporations Act 200, including compliance with Accounting Standards in Australia and other mandatory financial reporting
requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entities
financial position and their performance as represented by the results of their operations and cash flows.
We formed our audit opinion on the basis of these procedures which included:
◗ examining on a test basis information to provide evidence supporting the amounts and disclosures in the financial report; and
◗ assessing the appropriateness of the accounting procedures and disclosures used and reasonableness of significant accounting
estimates made by the directors.
While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and
extent of our procedures, our audit was not designed to provide assurances on internal controls.
We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial
report. These and our other procedures did not include consideration or judgment of the appropriateness or reasonableness of
the business plans or strategies adopted by the directors and management of the company.
Independence
In conducting our audit, we followed applicable independence requirements of Australian professional ethical pronouncements and
the Corporations Act 200.
In accordance with ASIC Class Order 05/83, we declare to the best of our knowledge and belief that the auditor's independence
declaration set out on page 5 of the financial report has not changed as at the date of providing our audit opinion.
Audit Opinion
In our opinion the financial report of TZ Limited is in accordance with:
a) the Corporations Act 200 including:
i) giving a true and fair view of the financial position of TZ Limited and the consolidated entity at 30 June 2005 and of their
performance for the year ended on that date; and
ii) complying with Accounting Standards in Australia and the Corporations Regulations 200; and
b) other mandatory financial reporting requirements in Australia.
Taylor & Co.
Stephen Taylor
Sydney, 30th September 2005
68
‘05 Annual Report
‘05 Annual Report
69
Sydney (Registered Office)
Level 2, 92 Pitt St
Sydney NSW 2000 AUSTRALIA
Chicago (Operational Headquarters)
350 N LaSalle St, Suite 00B
Chicago, IL 6060 USA
www.tzlimited.com