TZ Limited
ABN 26 073 979 272
27 October 2008
Lodged by ASX Online - 65 pages
The Manager
Company Announcement Office
Australia Securities Exchange Ltd
Level 4, 20 Bridge Street
Sydney NSW 2000
2008 ANNUAL REPORT
Please find attached a copy of the 2008 annual report for TZ Limited
Limited which will be sent to shareholders today.
================================================================
Media Enquiries
Fraser Brown
Ph: +61 2 8233 6123
f.brown@tz.net
Investor Enquiries
John Falconer
Director/Company Secretary
Ph: +61 411 420 720
j.falconer@tz.net
Sydney (Registered Office)
Level 1, 37 Bligh Street
Sydney NSW 2000 Australia
Chicago (Operational Headquarters)
520 West Erie Street, Suite 210
Chicago, IL 60654, USA
TZL
ASX:
Web: www.tzlimited.com
info@tzlimited.com
Email:
Ph:
+612 8233 9229
Fax: +612 8211 5299
Ph:
+1 312 751 2800
Fax: +1 312 751 2801
Sydney
(Registered Office)
Level 1, 37 Bligh Street
Sydney NSW 2000
Australia
Chicago
(Operational HQ)
520 W. Erie Street
Suite 201
Chicago, IL 60654
United States
www.tz.net
2008
annual report
contents
directory
2
3
4
7
8
Chairman’s Letter
CEO’s Report
Technology Update
PDT Report
Directors’ Report
22
Income Statement
23
Balance Sheet
24
Statement of Changes in Equity
26
Cash Flow Statement
27
Notes to the Financial Statements
58
Directors’ Declaration
59
Independent Auditor’s Report
60
Corporate Governance
62
Stock Exchange Information
TZ Limited
& Controlled Entities
ABN 26 073 979 272
DIRECTORS
Mr. Andrew Sigalla
Mr. John Falconer
Mr. Michael Otten
COMPANY SECRETARY
Mr. John Falconer
REGISTERED OFFICE
Level 1, 37 Bligh Street
Sydney NSW 2000
Telephone +61 2 8233 9229
Facsimile +61 2 8211 5299
Website: www.tz.net
info@tz.net
Email:
BANKERS
National Australia Bank Limited
Level 18, 255 George Street
Sydney NSW 2000
AUDITORS
Taylor & Co
Chartered Accountants
Level 11
179 Elizabeth Street
Sydney NSW 2000
SOLICITORS
Kemp Strang Lawyers
55 Hunter Street
Sydney NSW 2000
SHARE REGISTRY
Computershare Investor Services Pty Limited
452 Johnston Street
Abbotsford VIC 3067
Telephone +61 3 9415 5000
Facsimile +61 3 9473 2500
STOCK EXCHANGE
Australian Securities Exchange Code: TZL
chairman’s letter
The year 2008 saw the continued development and
acceptance of TZ within the marketplace.
The Board has sought to redefine the Company’s strategy
by aggressively pursuing shorter–term revenue opportunities,
whilst continuing to service its longer–term early adopter
partners. A key element of this strategy was to utilise the
additional funding received in February by increasing the size of
the sales and engineering capabilities of the organisation so as
to meet the customer requirements and demand.
The Company has taken significant steps towards making TZ
technology a widely used platform across many industries with
multiple applications.
The results obtained by PDT were extremely pleasing and
the quality of their work continues to be validated by the ever
increasing backlog of work and the calibre of their client base.
PDT, even in this weak economic climate, is well positioned to
achieve further growth and profit for year 2009.
In late September, the Board, along with its advisors, was
forced to delay the proposed NASDAQ listing due to the
volatile market conditions in the US and world equity markets.
Considerable time and cost has been invested in achieving this
objective and the Company is looking to an improvement in
market sentiment before committing to a firm timeline in 2009.
The Board is extremely mindful of maintaining shareholder
confidence and creating value, and believes that securing
additional validation and more commercial purchase orders will
ultimately be more beneficial to the value of the Company when
it does list on NASDAQ.
On behalf of the Board, I would like to take this opportunity
to thank all of the employees of both Telezygology, Inc. and
PDT for their strong work ethic, dedication and commitment to
the Company.
I would also like to thank my fellow directors for their loyal
service and support.
Finally to fellow shareholders, I would like to thank you for
your ongoing interest, and support of the Company as it
continues to deliver on its vision of making TZ a widespread
industry standard.
Andrew Sigalla
Executive Chairman
2
TZ Limited 2008 Annual Report
ceo’s report
The 2008 financial year was a period of progress towards
the widespread commercialisation of TZ technology with
advancements made in all targeted sectors. Production or pre–
production products were delivered to customers in each end–
use segment and a major emphasis was placed on accelerating
products targeted at shorter–cycle industrial segments.
To enable this, technology development was focused on
establishing a standard set of communication hardware that
allows TZ Intevia fasteners to be controlled by software over the
Internet. The Company has continued to strengthen its unique
proprietary position during the year with advancements made
in developing high-temperature Shape Memory Alloy (HTSMA),
custom software and electronics.
Customer demand has continued to be strong for TZ
technology. With growth capital secured during the year, the
Company was able to aggressively focus its sales resources
on accelerating commercialisation in shorter–cycle industrial
segments such as enterprise, data centers, marine, PC’s, doors,
AV, and high–end furniture cabinets. Even with the global
economy at a challenged state, clear demand has emerged
from customers in all these sectors for remotely networked
intelligent devices. Management is confident that our focus
on these shorter–cycle segments, with sustained levels of
engineering and technology development, will translate to near–
term revenue streams.
The Company recently reached an exciting milestone with its
first high–volume commercial product being launched by Larson
Manufacturing. The TZ Intevia enabled eTouch Keyless Entry
System is available on Larson’s Tradewinds and Signature
series storm doors, and is currently being distributed at major
hardware retail locations throughout the US. This was the
first major conversion of an Early Adopter Customer into a
high–volume product, and while it is a significant achievement
for the Company, it is clear that a greater emphasis on shorter–
cycle industrial segments will produce revenue more quickly.
Accelerated sales efforts in these shorter–cycle areas will
continue throughout the 2009 fiscal year.
The Company’s management team was further upgraded this
year, with strategic appointments in engineering, manufacturing,
finance and marketing. The additional talent will bring
experience and focus to the Company as we concentrate our
efforts on generating near–term revenue, and as we undertake
the NASDAQ listing.
This year, the team has successfully overcome challenges
that are typical when delivering products at high volumes for
the first time and invariably, there will be more challenges to
overcome. Integrating our technology into some complex
end–use segments has taken longer to implement than originally
anticipated a year ago by TZ and its Early Adopter Customers.
This has been especially true in aerospace, defence and
automotive segments where the technical certification
and testing requirements for a leading–edge breakthrough
technology are more time consuming and onerous. However,
even with the challenges of commercialisation in these
demanding segments, our Early Adopter Customers in these
areas remain strongly commited to the technology. With the
continued customer interest and validation we have received
from customers throughout the year, and the advancements
made with the TZ technology platform, management is
confident that maintaining its commercialisation efforts in these
segments will be ultimately worthwhile.
The development that the organization has gone through this
year, combined with the accelerated achievement of a standard
set of TZ products targeting shorter–cycle segments, put TZ in
a very strong position to achieve even greater commercialisation
success with its products in the 2009 fiscal year.
In summary, I would like to thank the many talented employees
of TZ and PDT, whose dedication and hard work are making the
TZ vision a reality.
David Feber
Chief Executive Officer
tZ’s first high–volume commercial product is being
distributed at major Us hardware retail locations.
TZ Limited 2008 Annual Report
3
technology Update
During the course of the year, a significant number of new
TZ Intevia devices were brought into production phase,
close to production ready, or design phase complete; these
include a second generation radial fastener, a cost–reduced
and performance–enhanced version to serve as a standard
TZ Intevia offering, a high–strength aerospace radial variant,
a ruggedized latch targeted at military and aerospace
applications, a high–strength aerospace latch suitable for
overhead bin and stowage applications, and a low–energy
consumption design of the Beam fastener. Additionally, several
Shape Memory Alloy (SMA) actuator projects were undertaken;
most notable was the actuation engine for the Larson keyless
entry lockset, now shipping in significant volume, and the
others targeting high–volume applications in the consumer
products market.
A significant program commenced in the second half of the
year that will deliver by calendar year end, several TZ Intevia
interconnect modules, data protocols and communication
gateways. These enable deployments of local and wide–area
TZ networks. Additionally, development programs are in
place that will allow TZ Intevia fastening and sensing devices
to be supported by third party communication gateways and
controllers. This is a strategy to expand the market for TZ
Intevia devices through interoperability with popular third party
network systems.
The chart below depicts the various interconnect modules
in various configurations relative to the TZ Intevia control
electronics and operating system and will be ready for
manufacture in late 2008. These configurations enable
customers to implement TZ networks, which can be scaled
from just a few fasteners and sensors up to enterprise–wide
deployments.
Networking is a fundamental aspect of the TZ vision and
essential to realising the Company’s business objectives. The
development of the Cloudcom Enterprise™ bridge, based on
a third party product with substantial TZ specific modifications,
enabled the introduction of TZ Enterprise™ — a solution that
provides remote environmental monitoring, physical security
and access control to equipment down to the component
level. The first TZ solution is targeting operators of data
centers, computer rooms and telecommunication equipment;
however, this platform can also be extended across industry
segments to any application where remote physical monitoring,
system architectUre late 2008
TZ Intevia Interconnect and
Daisy Chain Modules for
serial data networking
TZ Enterprise™ system
for Web-enabled IP data
networking
Control by:
(cid:115) (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84) (cid:79)(cid:82) (cid:73)(cid:78)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84) (cid:48)(cid:35)
(cid:115) (cid:43)(cid:69)(cid:89)(cid:80)(cid:65)(cid:68)(cid:12) (cid:50)(cid:38)(cid:41)(cid:36)(cid:12) (cid:55)(cid:73)(cid:82)(cid:69)(cid:76)(cid:69)(cid:83)(cid:83)
(cid:115) (cid:51)(cid:84)(cid:79)(cid:82)(cid:69)(cid:68) (cid:76)(cid:79)(cid:71)(cid:73)(cid:67) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)
USB
Sensor set up and
Control via Cloudcom
Web client, Fastener
Control through TZ
GUI application.
Simple TZ Serial Data
Protocol to integrate Intevia
devices into third party
control systems, bridges
and software applications
(cid:115) (cid:51)(cid:69)(cid:78)(cid:83)(cid:79)(cid:82)(cid:83)
(cid:115) (cid:33)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83) (cid:50)(cid:69)(cid:65)(cid:68)(cid:69)(cid:82)(cid:83)
(cid:115) (cid:43)(cid:69)(cid:89)(cid:80)(cid:65)(cid:68)(cid:83)(cid:15)(cid:43)(cid:69)(cid:89) (cid:38)(cid:79)(cid:66)
(cid:115) (cid:36)(cid:35) (cid:48)(cid:79)(cid:87)(cid:69)(cid:82)
Internet &
Wireless Data
Internet &
Wireless Data
TCPIP, SNMP, Ethernet
Interconnect
Modules I & II
Cloudcom
Enterprise IP Bridge
Third Party Systems
Daisy Chain Module
Remote Interconnect Module
To other TZ Intevia Devices & Sensors
TZ Intevia Control
Electronics
Programming Interface
RS485
TZ Open Serial RS485 Protocol
Micro
SMA Powering
On Board Temp Sensor
IO Lines
TZ Intevia Fastener and
Sensor Mechanism
Power to drive Shape
Memory Alloy actuator
Input and Outpus for
sensor connection and
control of external devices
4
TZ Limited 2008 Annual Report
environmental control, and restricted access to multiple physical
levels is required. In late 2008, it is anticipated the Interconnect
and Daisy Chain Modules will be available to further enable a
range of networked applications, predominantly in the industrial
and marine market segments.
Additional enhancements as depicted in the chart below will be
progressively introduced in 2009. The TZ Enterprise™ platform
will have significant hardware upgrades in the form of a Mark
2 Cloudcom that is capable of supporting a broader range of
network protocols and interfaces, support for a unified RS 485
serial data protocol to optimise fastener and sensor control,
Power over Ethernet (PoE) to power TZ Intevia devices, and
optimised device form factors to facilitate easier installation and
maintenance. Additionally, the TZ Enterprise™ management
software will undergo a major upgrade. These projects are
underway and are based on customer feedback obtained during
the initial launch phase of the TZ Enterprise™ system.
A significant technological breakthrough was achieved during
the year that enabled a prototype of a Wireless Power Tool,
utilizing inductive power coupling, to be developed that is
capable of powering TZ Intevia fasteners wirelessly. This
is an important component of the TZ vision and means in
certain applications TZ Intevia fasteners without any wiring
can be embedded into manufactured objects, identified and
activated by the Wireless tool. Additionally, the Wireless Power
Tool will include Cloudcom–like functionality to communicate
wirelessly through the Internet to the Master Database to record
events, update log files, gain authorization codes and retrieve
information relevant to the service or installation procedure being
carried out. The Wireless Power Tool IP is well protected within
the Company’s IP portfolio.
The Company’s technology roadmap extends well beyond
2009. It contemplates continued improvements in the cost
and packaging size of micro–controllers and semi–conductors
and the consolidation of popular networking protocols and
interfaces, such as those powering the Internet, into tiny
chipsets. In time, the combination of these trends will allow TZ
Intevia devices to natively connect to the Internet through any
third party gateway, router or bridge, and eventually to fasteners
directly — a capability that the Company believes will drive very
large–scale adoption of its proprietary technology.
system architectUre late 2009
TZ Intevia Interconnect and
Daisy Chain Modules for
serial data networking
Control by:
(cid:115) (cid:36)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84) (cid:79)(cid:82) (cid:73)(cid:78)(cid:68)(cid:73)(cid:82)(cid:69)(cid:67)(cid:84) (cid:48)(cid:35)
(cid:115) (cid:43)(cid:69)(cid:89)(cid:80)(cid:65)(cid:68)(cid:12) (cid:50)(cid:38)(cid:41)(cid:36)(cid:12) (cid:55)(cid:73)(cid:82)(cid:69)(cid:76)(cid:69)(cid:83)(cid:83)
(cid:115) (cid:51)(cid:84)(cid:79)(cid:82)(cid:69)(cid:68) (cid:76)(cid:79)(cid:71)(cid:73)(cid:67) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)
(cid:53)(cid:51)(cid:34)
Wireless Power Tool
(cid:115) (cid:38)(cid:65)(cid:83)(cid:84)(cid:69)(cid:78)(cid:69)(cid:82) (cid:48)(cid:79)(cid:87)(cid:69)(cid:82)
(cid:115) (cid:55)(cid:73)(cid:82)(cid:69)(cid:76)(cid:69)(cid:83)(cid:83) (cid:36)(cid:65)(cid:84)(cid:65)
(cid:115) (cid:51)(cid:69)(cid:78)(cid:83)(cid:79)(cid:82)(cid:83)
(cid:115) (cid:33)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83) (cid:50)(cid:69)(cid:65)(cid:68)(cid:69)(cid:82)(cid:83)
(cid:115) (cid:43)(cid:69)(cid:89)(cid:80)(cid:65)(cid:68)(cid:83)(cid:15)(cid:43)(cid:69)(cid:89) (cid:38)(cid:79)(cid:66)
(cid:115) (cid:36)(cid:35) (cid:48)(cid:79)(cid:87)(cid:69)(cid:82)
TZ Enterprise™ Platform
Master Control Database
(cid:115) (cid:50)(cid:69)(cid:77)(cid:79)(cid:84)(cid:69) (cid:70)(cid:65)(cid:83)(cid:84)(cid:69)(cid:78)(cid:69)(cid:82) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76) (cid:65)(cid:78)(cid:68) (cid:69)(cid:86)(cid:69)(cid:78)(cid:84) (cid:76)(cid:79)(cid:71)(cid:83)
(cid:115) (cid:50)(cid:69)(cid:77)(cid:79)(cid:84)(cid:69) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69) (cid:72)(cid:73)(cid:83)(cid:84)(cid:79)(cid:82)(cid:89) (cid:65)(cid:78)(cid:68) (cid:65)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83) (cid:82)(cid:69)(cid:67)(cid:79)(cid:82)(cid:68)(cid:83)
(cid:115) (cid:51)(cid:69)(cid:78)(cid:83)(cid:79)(cid:82) (cid:80)(cid:65)(cid:82)(cid:65)(cid:77)(cid:69)(cid:84)(cid:69)(cid:82) (cid:65)(cid:78)(cid:68) (cid:82)(cid:69)(cid:80)(cid:79)(cid:82)(cid:84)(cid:73)(cid:78)(cid:71) (cid:83)(cid:69)(cid:84)(cid:84)(cid:73)(cid:78)(cid:71)(cid:83)
(cid:115) (cid:51)(cid:69)(cid:67)(cid:79)(cid:78)(cid:68)(cid:65)(cid:82)(cid:89) (cid:70)(cid:85)(cid:78)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:80)(cid:82)(cid:79)(cid:71)(cid:82)(cid:65)(cid:77)(cid:77)(cid:73)(cid:78)(cid:71) (cid:65)(cid:78)(cid:68) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)
(cid:115) (cid:36)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69) (cid:41)(cid:36)(cid:12) (cid:83)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76) (cid:78)(cid:85)(cid:77)(cid:66)(cid:69)(cid:82)(cid:12) (cid:84)(cid:89)(cid:80)(cid:69) (cid:65)(cid:78)(cid:68) (cid:65)(cid:85)(cid:84)(cid:72)(cid:79)(cid:82)(cid:73)(cid:90)(cid:69)(cid:68)
(cid:65)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83) (cid:80)(cid:82)(cid:79)(cid:70)(cid:73)(cid:76)(cid:69)
Webserver, API and Com’s Interface
(cid:52)(cid:58) (cid:37)(cid:78)(cid:84)(cid:69)(cid:82)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69) (cid:51)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69) (cid:51)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83) (cid:48)(cid:76)(cid:65)(cid:84)(cid:70)(cid:79)(cid:82)(cid:77)
Internet &
Wireless Data
(cid:52)(cid:35)(cid:48)(cid:41)(cid:48)(cid:12) (cid:51)(cid:46)(cid:45)(cid:48)(cid:12) (cid:37)(cid:84)(cid:72)(cid:69)(cid:82)(cid:78)(cid:69)(cid:84)(cid:12)
(cid:58)(cid:41)(cid:39)(cid:34)(cid:37)(cid:37)(cid:12) (cid:55)(cid:44)(cid:33)(cid:46)
TZ Solutions
(cid:115) (cid:52)(cid:58) (cid:36)(cid:65)(cid:84)(cid:65) (cid:35)(cid:69)(cid:78)(cid:84)(cid:69)(cid:82)(cid:83)
(cid:115) (cid:52)(cid:58) (cid:40)(cid:79)(cid:83)(cid:80)(cid:73)(cid:84)(cid:65)(cid:76)(cid:83)
(cid:115) (cid:52)(cid:58) (cid:33)(cid:73)(cid:82)(cid:80)(cid:79)(cid:82)(cid:84)(cid:83)
(cid:115) (cid:52)(cid:58) (cid:50)(cid:69)(cid:84)(cid:65)(cid:73)(cid:76)
(cid:115) (cid:52)(cid:58) (cid:33)(cid:69)(cid:82)(cid:79)(cid:83)(cid:80)(cid:65)(cid:67)(cid:69)
Third party software
systems and
applications
(cid:115) (cid:40)(cid:79)(cid:77)(cid:69) (cid:83)(cid:69)(cid:67)(cid:85)(cid:82)(cid:73)(cid:84)(cid:89)(cid:15)(cid:65)(cid:85)(cid:84)(cid:79)(cid:77)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:115) (cid:41)(cid:48) (cid:82)(cid:79)(cid:85)(cid:84)(cid:69)(cid:82)(cid:83)
(cid:115) (cid:41)(cid:78)(cid:84)(cid:69)(cid:76)(cid:76)(cid:73)(cid:71)(cid:69)(cid:78)(cid:84) (cid:66)(cid:85)(cid:73)(cid:76)(cid:68)(cid:73)(cid:78)(cid:71)(cid:83)
(cid:115) (cid:33)(cid:67)(cid:67)(cid:69)(cid:83)(cid:83) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76)
(cid:115) (cid:33)(cid:54) (cid:67)(cid:79)(cid:78)(cid:84)(cid:82)(cid:79)(cid:76) (cid:83)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83)
(cid:115) (cid:50)(cid:69)(cid:77)(cid:79)(cid:84)(cid:69) (cid:77)(cid:79)(cid:78)(cid:73)(cid:84)(cid:79)(cid:82)(cid:73)(cid:78)(cid:71)
Third Party Systems
Interconnect
Modules 1 & 2
Cloudcom MK2
Cloudcom Lite
DCM
Wireless
Receiver
RIMs
DCM
(cid:52)(cid:79) (cid:79)(cid:84)(cid:72)(cid:69)(cid:82) (cid:52)(cid:58) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)
(cid:52)(cid:79) (cid:79)(cid:84)(cid:72)(cid:69)(cid:82) (cid:52)(cid:58) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)
TZ Intevia Control
Electronics
(cid:48)(cid:82)(cid:79)(cid:71)(cid:82)(cid:65)(cid:77)(cid:77)(cid:73)(cid:78)(cid:71) (cid:41)(cid:78)(cid:84)(cid:69)(cid:82)(cid:70)(cid:65)(cid:67)(cid:69)
(cid:50)(cid:51)(cid:20)(cid:24)(cid:21)
(cid:53)(cid:78)(cid:73)(cid:70)(cid:73)(cid:69)(cid:68) (cid:50)(cid:51)(cid:20)(cid:24)(cid:21)(cid:12) (cid:35)(cid:33)(cid:46)(cid:34)(cid:53)(cid:51) (cid:6) (cid:51)(cid:73)(cid:77)(cid:80)(cid:76)(cid:69) (cid:51)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76) (cid:50)(cid:51)(cid:20)(cid:24)(cid:21)
(cid:45)(cid:73)(cid:67)(cid:82)(cid:79)
(cid:51)(cid:45)(cid:33) (cid:48)(cid:79)(cid:87)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71)
(cid:47)(cid:78) (cid:34)(cid:79)(cid:65)(cid:82)(cid:68) (cid:52)(cid:69)(cid:77)(cid:80) (cid:51)(cid:69)(cid:78)(cid:83)(cid:79)(cid:82)
(cid:41)(cid:47) (cid:44)(cid:73)(cid:78)(cid:69)(cid:83)
TZ Intevia Fastener and
Sensor Mechanism
Power to drive Shape
Memory Alloy actuator
Input and Outpus for
sensor connection and
control of external devices
TZ Limited 2008 Annual Report
5
technology report (CONTINUED)
Shape Memory Alloy (SMA) is a critical actuator component of
TZ Intevia. An SMA validation, process and actuator design
laboratory has been established and staffed by experts in the
field. Investment in the SMA facility will give TZ the ability to
formulate and design SMA variants that are optimised to the
requirements of specific applications and products and to
extend SMA actuation into applications that are not suitable to
existing forms of the material. An additional benefit of the lab
is that it can serve as a production facility should TZ have to
manufacture its own actuator materials. The lab has already
facilitated collaborative research efforts with organisations such
as Boeing Phantom Works, NASA and several universities and
production companies.
To reduce cost, protect Intellectual Property and increase
functionality, TZ plans on producing its own integrated circuit
as the electronics engine for the control of TZ Intevia devices.
The IC provides for the control of networked actuators and
intelligent fasteners and will incorporate proprietary algorithms,
unique device identification, and the other circuitry needed
to interface with sensors, databases and various information
busses. The Company believes the combination of the IC
and specified SMA actuators will also be attractive to other
manufacturers wanting to embed TZ Intevia into their products,
and will likely give rise to future licensing and component sale
opportunities. TZ has completed the IC specification and
selected the design and fabrication company to manufacture it.
The chart below references the business evolution the
Company is focused on achieving. It depicts the shift over
time from manufacturing and selling products to licensing
distributors and manufacturers in key target markets and
generating new revenue opportunities by selling and renting TZ
management software. Leveraging market specific expertise,
infrastructure, manufacturing, customer relationships and
product qualification skills of third parties will allow TZ to
penetrate key markets at less cost in shorter time, particularly
in the aerospace, defence and automotive segments.
Key to winning these third party relationships is a well
differentiated product set, strong market validation of the
underpinning technology and a robust IP portfolio. TZ meets
all of these requirements.
Chris Kelliher
Director, Telezygology, Inc.
eVolUtion oF the BUsiness model
Revenue from:
(cid:115) (cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84) (cid:83)(cid:65)(cid:76)(cid:69)(cid:83)
(cid:115) (cid:65)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:69)(cid:78)(cid:71)(cid:73)(cid:78)(cid:69)(cid:69)(cid:82)(cid:73)(cid:78)(cid:71) (cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)
Revenue from:
(cid:115) (cid:83)(cid:69)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71) (cid:77)(cid:65)(cid:83)(cid:83) (cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:69)(cid:68) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83) (cid:65)(cid:78)(cid:68) (cid:78)(cid:69)(cid:84)(cid:87)(cid:79)(cid:82)(cid:75) (cid:73)(cid:78)(cid:84)(cid:69)(cid:82)(cid:67)(cid:79)(cid:78)(cid:78)(cid:69)(cid:67)(cid:84) (cid:77)(cid:79)(cid:68)(cid:85)(cid:76)(cid:69)(cid:83)
(cid:115) (cid:83)(cid:69)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71) (cid:77)(cid:65)(cid:78)(cid:85)(cid:70)(cid:65)(cid:67)(cid:84)(cid:85)(cid:82)(cid:73)(cid:78)(cid:71) (cid:82)(cid:73)(cid:71)(cid:72)(cid:84)(cid:83) (cid:65)(cid:78)(cid:68) (cid:76)(cid:73)(cid:67)(cid:69)(cid:78)(cid:83)(cid:69)(cid:83)
(cid:115) (cid:83)(cid:69)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71) (cid:68)(cid:69)(cid:83)(cid:73)(cid:71)(cid:78) (cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)
(cid:115) (cid:83)(cid:69)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71) (cid:52)(cid:58) (cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:82)(cid:79)(cid:73)(cid:78)(cid:67)(cid:83) (cid:83)(cid:72)(cid:73)(cid:80)(cid:12) (cid:79)(cid:80)(cid:69)(cid:82)(cid:65)(cid:84)(cid:73)(cid:78)(cid:71) (cid:83)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69) (cid:65)(cid:78)(cid:68) (cid:83)(cid:80)(cid:69)(cid:67)(cid:73)(cid:70)(cid:73)(cid:69)(cid:68) (cid:65)(cid:67)(cid:84)(cid:85)(cid:65)(cid:84)(cid:79)(cid:82)(cid:83)
(cid:115) (cid:83)(cid:69)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71) (cid:33)(cid:51)(cid:48) (cid:84)(cid:82)(cid:65)(cid:78)(cid:83)(cid:65)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78)(cid:83) (cid:15) (cid:83)(cid:69)(cid:82)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)
(cid:115) (cid:83)(cid:69)(cid:76)(cid:76)(cid:73)(cid:78)(cid:71) (cid:51)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:12) (cid:33)(cid:80)(cid:80)(cid:76)(cid:73)(cid:67)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78) (cid:65)(cid:78)(cid:68) (cid:45)(cid:65)(cid:83)(cid:84)(cid:69)(cid:82) (cid:36)(cid:65)(cid:84)(cid:65)(cid:66)(cid:65)(cid:83)(cid:69) (cid:83)(cid:79)(cid:70)(cid:84)(cid:87)(cid:65)(cid:82)(cid:69)
(cid:40)(cid:73)(cid:71)(cid:72)(cid:13)(cid:86)(cid:79)(cid:76)(cid:85)(cid:77)(cid:69) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69) (cid:83)(cid:65)(cid:76)(cid:69)(cid:83)
(cid:45)(cid:65)(cid:78)(cid:70)(cid:14)(cid:15)(cid:68)(cid:73)(cid:83)(cid:84)(cid:82)(cid:73)(cid:66)(cid:85)(cid:84)(cid:73)(cid:79)(cid:78) (cid:76)(cid:73)(cid:67)(cid:69)(cid:78)(cid:83)(cid:69)(cid:69)(cid:83)
(cid:52)(cid:58) (cid:41)(cid:78)(cid:84)(cid:69)(cid:86)(cid:73)(cid:65) (cid:41)(cid:78)(cid:84)(cid:69)(cid:71)(cid:82)(cid:65)(cid:84)(cid:69)(cid:68) (cid:35)(cid:73)(cid:82)(cid:67)(cid:85)(cid:73)(cid:84)
(cid:48)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:69)(cid:84)(cid:65)(cid:82)(cid:89) (cid:51)(cid:45)(cid:33) (cid:65)(cid:67)(cid:84)(cid:85)(cid:65)(cid:84)(cid:79)(cid:82)(cid:83)
(cid:47)(cid:84)(cid:72)(cid:69)(cid:82) (cid:83)(cid:77)(cid:65)(cid:82)(cid:84) (cid:77)(cid:65)(cid:84)(cid:69)(cid:82)(cid:73)(cid:65)(cid:76)(cid:83)
(cid:48)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:69)(cid:84)(cid:65)(cid:82)(cid:89) (cid:51)(cid:45)(cid:33) (cid:68)(cid:69)(cid:83)(cid:73)(cid:71)(cid:78)(cid:83)
(cid:52)(cid:58) (cid:51)(cid:89)(cid:83)(cid:84)(cid:69)(cid:77)(cid:83) (cid:70)(cid:79)(cid:82) (cid:69)(cid:65)(cid:67)(cid:72) (cid:83)(cid:69)(cid:71)(cid:77)(cid:69)(cid:78)(cid:84)
(cid:33)(cid:51)(cid:48)(cid:15)(cid:37)(cid:78)(cid:84)(cid:69)(cid:82)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69) (cid:51)(cid:55)
(cid:37)(cid:88)(cid:80)(cid:65)(cid:78)(cid:83)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:65)(cid:68)(cid:79)(cid:80)(cid:84)(cid:69)(cid:82) (cid:66)(cid:65)(cid:83)(cid:69)
(cid:39)(cid:69)(cid:78) (cid:41)(cid:41) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)
(cid:40)(cid:73)(cid:71)(cid:72)(cid:13)(cid:86)(cid:79)(cid:76)(cid:85)(cid:77)(cid:69) (cid:67)(cid:85)(cid:83)(cid:84)(cid:79)(cid:77) (cid:65)(cid:80)(cid:80)(cid:83)
(cid:54)(cid:79)(cid:76)(cid:85)(cid:77)(cid:69) (cid:80)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:84)(cid:73)(cid:79)(cid:78) (cid:79)(cid:70) (cid:39)(cid:69)(cid:78) (cid:41)(cid:41) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83)
(cid:46)(cid:69)(cid:84)(cid:87)(cid:79)(cid:82)(cid:75)(cid:73)(cid:78)(cid:71) (cid:65)(cid:78)(cid:68) (cid:41)(cid:48) (cid:69)(cid:78)(cid:65)(cid:66)(cid:76)(cid:69)(cid:77)(cid:69)(cid:78)(cid:84)
(cid:37)(cid:78)(cid:72)(cid:65)(cid:78)(cid:67)(cid:69)(cid:68) (cid:37)(cid:76)(cid:69)(cid:67)(cid:84)(cid:82)(cid:79)(cid:78)(cid:73)(cid:67)(cid:83) (cid:6) (cid:33)(cid:48)(cid:41)
(cid:48)(cid:82)(cid:79)(cid:80)(cid:82)(cid:73)(cid:69)(cid:84)(cid:65)(cid:82)(cid:89) (cid:51)(cid:45)(cid:33) (cid:68)(cid:69)(cid:83)(cid:73)(cid:71)(cid:78)(cid:83)
(cid:52)(cid:58) (cid:37)(cid:78)(cid:84)(cid:69)(cid:82)(cid:80)(cid:82)(cid:73)(cid:83)(cid:69) (cid:80)(cid:76)(cid:65)(cid:84)(cid:70)(cid:79)(cid:82)(cid:77)
(cid:52)(cid:58) (cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:82)(cid:79)(cid:78)(cid:73)(cid:67)(cid:83) (cid:67)(cid:72)(cid:73)(cid:80)
IP creation
& concept
development
(cid:52)(cid:69)(cid:88)(cid:84)(cid:82)(cid:79)(cid:78) (cid:6) (cid:77)(cid:65)(cid:82)(cid:75)(cid:69)(cid:84) (cid:86)(cid:65)(cid:76)(cid:73)(cid:68)(cid:65)(cid:84)(cid:73)(cid:79)(cid:78)
(cid:39)(cid:69)(cid:78) (cid:17) (cid:68)(cid:69)(cid:86)(cid:73)(cid:67)(cid:69)(cid:83) (cid:73)(cid:78)(cid:84)(cid:82)(cid:79)(cid:68)(cid:85)(cid:67)(cid:69)(cid:68)
(cid:52)(cid:58) (cid:69)(cid:76)(cid:69)(cid:67)(cid:84)(cid:82)(cid:79)(cid:78)(cid:73)(cid:67)(cid:83) (cid:86)(cid:69)(cid:82)(cid:83)(cid:73)(cid:79)(cid:78) (cid:17)
2003
2006
2008
2011
6
TZ Limited 2008 Annual Report
pdt report
2008 saw PDT continue its strong pattern of growth with
EBITDA approaching US$3.0M for the year.
PDT’s on–going efforts to strengthen its reputation as one of the
country’s premier design services companies continues to reap
benefits, not only significantly growing PDT revenues, but also
opening new avenues for the introduction of TZ technology to a
long and growing list of high–value, high–profile customers.
PDT continues its strategic sales focus on the medical and
military industries, where programs tend to be long–term, less
recession sensitive, and involve multiple product generations.
In 2008 alone, PDT’s stable of medical customers grew nearly
50%, making it one of the fastest–growing companies in the
design services industry in this area. As a result, PDT is well
positioned with a strong project pipeline well into 2009 and
beyond.
This includes incorporating TZ Intevia into the design of a
potential application for one of the world’s leading medical
product companies and a number of potential design
applications in the consumer electronics market segment.
In 2008, PDT also continued to attract top talent in industrial
design and engineering from both the consulting and corporate
sectors. To augment its medical products expertise, the
Company has added experienced medical design talent, and
it continues to strengthen its strategic partnerships with both
domestic and off–shore tooling and manufacturing suppliers.
On–going systems optimisation that began in 2007, have
yielded improvements in profitability across the board, as project
managers and management now have access to real–time data
on the financial status of every project. Budgetary issues can
now be spotted and resolved while projects are in progress,
providing the opportunity to correct issues to ensure projects
are profitable.
PDT was proud to be involved in the development of a truly
life changing device for the visually impaired for the Perkins
School for the Blind. It was an extremely satisfying project for all
concerned and an important accomplishment for the Company
because of its high–profile nature and potential for media
interest. Our superb design team rose to the highly–technical
challenges of the project, demonstrating their talents and
solidifying PDT’s reputation in the industry as a premier product
development consultancy.
With a robust roster of loyal clients, a well–stocked project
pipeline, and a growing reputation for exceptional client service,
PDT fully expects to generate increased revenues for its design
business, as well as increased opportunities to expand the TZ
brand into broader, more high–volume markets where visibility
and profitability tend to be greater.
In closing, I would like to thank all PDT staff around the world for
your hard work and commitment to making this company a true
world leader in product design and development.
Mark Schwartz
PDT President & CEO
The PDT designed Perkins Brailler
TZ Limited 2008 Annual Report
7
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 2008.
Directors
The details of Directors of the Company during the year, and to
the date of this report are:
A Sigalla
Executive Chairman
J Falconer
Executive Director & Company Secretary
M Otten
Non–Executive Director
Principal Activities
The principal activities of the consolidated entity during the
financial year were:
•
•
The development and licensing of intellectual property,
particularly Intelligent Fastening, Assembly Enabling and
FutureWall technologies through Telezygology, Inc.
Providing a full service capability in product development
and engineering services through PDT Group. Additionally
a significant electronic and software engineering capability
has been established.
All of the operations of the consolidated entity are based in
Illinois, USA.
Operating Results
The operating loss after income tax for the year ended 30
June 2008 for the consolidated entity was $12,330,714
(2007: $10,806,516).
8
TZ Limited 2008 Annual Report
Review of Operations
Product and Application Development
It was an exciting year for TZ with the launch of the first high
volume commercial product to be distributed in the US in the
coming weeks, as a key component of the Larson door. This
will be a compelling proof point to sell TZ Intevia® applications
into other markets, particularly in the UK and Europe.
TZ has continued to aggressively pursue new customers and
refine the strategy to increase the pace of these customer
engagements, and realise the enormous potential in the key
market segments, particularly those that have the opportunity
for nearer–term revenues.
The 2008 financial year was a period of accelerated progress
towards our near term objectives.
During the year, TZ identified many more market opportunities
and continued to make tremendous progress with Early Adopter
Customers and accelerated the development of the Company’s
standard product offerings and underlying intellectual property
and core technologies that are the essential building blocks for
the Company’s growth and leadership position.
TZ also successfully restructured PDT and put in place a
more effective management system resulting in a strong profit
recovery and an increased customer base. There has also been
an increase in the number of PDT customers who have become
early adopters of TZ’s technology.
In February 2007, TZ acquired the Intevia business unit from
the former Textron Fastening Systems. This development
precipitated a much larger earnings opportunity but
necessitated significantly higher levels of up front capital
investment.
The growth capital funding secured in November 2007
and February 2008 has enabled the Company to invest in
accelerating its development and commercialisation efforts,
which are essential to achieving the future revenue aspirations
and creating shareholder value.
Specifically these investments fall into the following categories.
•
•
•
•
Product and Application Development
Commercialisation and Sales
Production and Manufacturing Engineering
Intellectual Property and Technology Development
A significant program commenced in the second half of the
year that will deliver by calendar year end, several TZ Intevia
interconnect modules, data protocols and communication
gateways. These enable customers to deploy standalone or
distributed TZ Intevia networks which can be scaled from just a
few fasteners and sensors up to enterprise–wide deployments
controlled from simple pin pad and RFID devices, to Internet–
connected client software. Additionally, development programs
are in place that will allow TZ Intevia fastening and sensing
devices to be supported by third party communication gateways
and controllers. This is a strategy to expand the market for
Intevia devices through interoperability with popular third
party network systems. This program develops products for
the market that make the TZ Intevia value proposition widely
achievable. These developments along with the introduction
of the next generation of TZ Intevia fasteners will complete a
standard product offering to drive near–term revenue.
In April, the Company introduced TZ Intevia Enterprise™,
a solution that provides remote environmental monitoring,
physical security and access control to equipment down
to the component level. It is a suite of products consisting
of an Internet gateway, PC client software, database, TZ
Intevia fasteners, various sensors, mounting and interconnect
hardware. The first version of TZ Intevia Enterprise is
targeting operators of data centres, computer rooms and
telecommunication equipment. This platform can also be
extended to any application where remote physical monitoring,
environmental control and restricting access to multiple physical
levels such as doors, equipment racks, access panels, cable
access points, cabinets and closets is required. A purchase
order was signed in May with the leading European provider of
carrier–neutral data centres for a secure cabinet application.
This order further validates the estimated $1.2 billion total
addressable TZ Intevia Enterprise market within the data
centre segment. The Company has now put in place the
resources and product set to capture a meaningful share of this
market and anticipates addressing the larger opportunity with
subsequent versions of TZ Intevia Enterprise.
Hafele America Co (one of the world’s largest producers of high
end architectural hardware) placed its first order for TZ Intevia
fasteners with additional orders anticipated. TZ Intevia products
are now featured in Hafele’s globally distributed product
catalogue.
TZ Limited 2008 Annual Report
9
directors’ report (CONTINUED)
Review of Operations (continued)
In the Defence segment, a contract under a joint development
agreement with BAE Systems was awarded to provide TZ
Intevia mechanisms to BAE for military qualification testing.
Ruggedised variants of TZ Intevia fasteners have been
manufactured and are currently undergoing conformance
testing, which if successful, will lead to the specific development
of TZ Intevia military applications.
The Company has completed work with Visteon Corporation for
the development of a TZ Intevia–enabled electronic glove box
latch. Visteon is one of the world’s largest automotive suppliers
and the Company’s first automotive Early Adopter Customer
and is known for its vehicle integration expertise and for its first–
to–market innovations. This latch application was developed in
a joint technology collaboration with Visteon and 3M to build a
demonstration vehicle showcasing state–of–the–art technology
to use as a centrepiece in discussions with automakers about
developing technology that addresses social trends and
meets consumer needs. TZ is one of 11 select companies
participating with Visteon and 3M on this innovative automotive
effort.
TZ Intevia products were sold and installed on several ultra–
luxury yachts with applications on deck head panels, map
drawers, door systems and flat screen mounting. Multiple
distributors are targeted in this market. In May, at Boat
International’s prestigious Neptune awards ceremony, TZ
was awarded the coveted Neptune award for the best new
technology expected to have the most impact on the design of
new luxury yachts.
A keyless entry product developed for Larson Storm Doors
is being launched through major hardware stores in the third
calendar quarter. Outsourced manufacturing has commenced
and was ramped up in August. Similar variants of this product
are suitable for installation on other types of aluminium and
hollow doors which opens up another large global addressable
market, and has the ability to bring TZ Intevia devices into the
home.
TZ developed an intelligent emergency release seat belt
device, targeting the automotive and school bus markets. The
initial development of this TZ Intevia device is being done in
collaboration with a leading automotive safety company and
a leading school bus manufacturer. The device is progressing
through the multiple design and integration stages. When
completed this will enable a safer seat belt system that has
never before been possible and is likely to drive much greater
seat belt adoption rates on school buses.
A TZ Intevia–based PC lock targeting the 10 million units
plus annual PC security lock market was developed. This is
a unique solution to create enterprise level security on a PC
with the physical lock controlled through software. TZ is in the
process of evaluating distribution partners and discussing cross
marketing opportunities with a major PC OEM.
The next generation radial fastener (GEN II) is entering
production. It is a cost–reduced, performance–enhanced
version to serve as the standard TZ Intevia platform for products
sold into the marine, enterprise, aerospace and cabinet
enclosure markets such as AV equipment and self service
kiosks. This is a high–strength device that is uniquely packaged
to create access control and intelligent fastening of panels in
areas not before possible. The GEN II radial can be configured
to work with multiple communication gateways and controllers
so that it could be easily integrated into numerous types of
networks. The GEN II platform opens up a total addressable
market for TZ Intevia in excess of $1 billion.
The GEN II platform has been designed to be compatible
with products targeted at high–end control and automation
solutions for corporate, residential and educational markets. It
has received certification from Crestron, the world’s leading
manufacturer of advanced control and automation systems for
compatibility with Crestron control systems and networks.
TZ has launched a specific production promotional program,
which will be marketed starting with CEDIA, the largest
custom electronics trade show held in Denver, Colorado on 5
September. Multiple distributors are also being targeted in this
segment.
In the aerospace segment, TZ is working with multiple suppliers
of major aerospace components to Integrate TZ Intevia
Technology into their products. TZ developed an electronic
latch for overhead bins in conjunction with the supplier of
the floor–to–ceiling interior of the next–generation wide body
aircraft for a major airframe manufacturer. This latch has met
initial testing requirements by the supplier. Additionally, TZ also
developed an Intevia device with a supplier of the passenger
service unit and oxygen box area of this same next generation
wide body aircraft. This device is also in the validation stage
with this supplier. Working directly with the aerospace tier
suppliers helps TZ more effectively integrate technology into
the aircraft. Additionally, in conjunction with this, TZ has
continued its direct involvement with multiple major airframe
manufacturers, such as Airbus through its MTTC, to develop the
next generation of aerospace products to enable benefits such
as predictive maintenance and rapid reconfiguration.
The company has developed several aerospace specific
products which have, in varying degrees, been tested against
aerospace requirements. The results are encouraging and it is
expected these products will obtain qualification. In addition to
this, and to broaden our offering in this segment, an aerospace
testing program will commence in the last quarter of 2008 to
seek appropriate aerospace qualification for several standard
TZ Intevia products such as the GEN II radial. Once obtained,
aerospace qualification will enable these products to be
distributed and sold as catalogue components to aerospace
manufacturers, tier suppliers and maintenance and repair
organisations.
10
TZ Limited 2008 Annual Report
directors’ report (CONTINUED)
Commercialisation and Sales Operations
The Company continues to optimise its sales and
commercialisation teams to ensure the right mix of focus on
shorter–cycle revenue opportunities, while building longer–term
strategic opportunities with key customers in each market
segment. During the year, sales coverage was effectively
doubled by adding resources in multiple locations targeting
marine, TZ Intevia Enterprise and general industrial markets, to
create product demand and ensure distribution channels and
customer relationships are established to drive sales of the new
products.
Manufacturing and Production Engineering
The Company is ramping up its production capability and has
put in place an outsourced contract manufacturing strategy
to use appropriately qualified third parties to manufacture TZ
Intevia products. This eliminates the need to take on board the
fixed costs associated with product manufacturing, however it
does require experienced people to manage and direct these
third party relationships to deliver the right outcomes in terms of
product quality and manufactured cost.
In line with this, the management team has been expanded with
the appointment of two new key executives. Jim Groteleuschen
has been hired as Vice President of Engineering. Jim was
formerly head of engineering at RIM (the company that makes
the Blackberry® Smartphone) and prior to that, a Vice President
responsible for contract manufacturing at Motorola. Jim has
put in place a very experienced team with excellent credentials
to oversee outsourced product manufacturing and ensure the
Company can ramp up production as the anticipated demand
builds. Additionally, Mike Mulins has been hired as the head
of manufacturing and supply chain. He was previously Vice
President responsible for contract manufacturing at Motorola.
Intellectual Property & Technology Development
Shape Memory Alloy (SMA) is a critical component of TZ
Intevia. Ensuring ongoing supply, material cost reduction and
overcoming its current limitations by developing proprietary
variants of this material are strategic imperatives for TZ. An
SMA validation, process and actuator design laboratory has
been established and staffed by experts in the field of SMA.
Recently one of the recognised world leaders in SMA actuation
has agreed to join TZ to lead and oversee the direction and
deliverables of the lab. The investment in the SMA facility will
give TZ the ability to formulate and design SMA variants that
are optimised to the requirements of specific applications
and products and to extend SMA actuation into applications
that are not suitable to existing forms of the material. An
additional benefit of the lab is that, if required, it can serve as
a production facility should TZ have to manufacture its own
actuator materials. This facility, and TZ’s growing reputation in
the field of SMA, has facilitated collaborative research efforts
with organisations such as Boeing Phantom Works, NASA and
several universities and production companies.
TZ Integrated Circuit (IC): To reduce cost, protect our
intellectual property and increase functionality, TZ is producing
its own integrated circuit as the electronics engine for the
control of TZ Intevia devices. The IC provides for the control
of networked actuators and intelligent fasteners and will
incorporate proprietary algorithms, unique device identification
and the other circuitry needed to interface with sensors,
databases and various information busses. The Company
believes the combination of the IC and specified SMA actuators
will also be attractive to other manufacturers wanting to embed
TZ Intevia into their products and will likely give rise to future
licensing and component sale opportunities. TZ has completed
the IC specification and selected the design and fabrication
company to manufacture it. Delivery of the first IC units is
expected in the fourth quarter of next year.
Software developments include application protocol interfaces
(API), graphic user interfaces (GUI) and serial data protocols
for networked fastener systems. Numerous fastener firmware
updates have been implemented. A project will be commenced
in the fourth calendar quarter to develop a master database
application and presentation manager for the TZ Intevia
Enterprise system. This provides enhanced device control and
connectivity through the Internet, storage of event and history
files, management reporting and integration into other software
systems.
Wireless Power Transmission: TZ has successfully
demonstrated the feasibility of wireless power transmission to
power Intevia Gen II fasteners through inductive coupling. This
is a major technological step realising a key part of the TZ Intevia
vision. The commercial implementation next year will greatly
increase the attractiveness of TZ Intevia systems, by simplifying
installation and operating methods which should accelerate
broader adoption of the technology.
Patent Portfolio and Know–How: TZ has over 260 active
patents under prosecution across 60 families. During the
course of the year, six patents proceeded to grant and 16 new
provisional patents were filed as Core IP, Reinforcing IP and
Application IP. The original Three Layer Strategy of IP protection
is being rigorously adhered to.
The original Core patents — Remote Fixing, Multifunction Tools
and On Board Technology — have been granted, and these
have been followed up with further Core patents around SMA
alloys process and actuators.
Numerous Reinforcing patents have been submitted, and a
number were granted around specific fastener families, like the
Beam, Ring, Linear, and Radial Fastener including systems and
control methods. These additional filings are driven by market
requirements.
TZ Limited 2008 Annual Report
11
directors’ report (CONTINUED)
Review of Operations (continued)
Significant Changes in State of Affairs
The early Application patents, filed originally as proof of the
technology, commonly known as, FutureShop, FutureSeal and
Closures for a Compartment have been granted. These in
themselves form excellent licensing opportunities which will pull
through additional TZ Intevia products. In addition, they have
the benefit of being cited to TZ’s advantage, as prior art to many
customer applications using the technology. It is a standard
procedure of the Company that the Application patents are
filed before customer contact. As commercial opportunity
evolves, research is being done into third party IP which will be
advantageous for the Company to own or license.
Considerable know–how is being developed through the
testing and manufacturing processes from the SMA lab.
Known internally as TZ DNA, the know–how is being carefully
sequenced and captured and is becoming a major asset
of the Company.
Product Development Technologies (PDT)
The Company’s decision to close its PDT Tooling division,
reduce staff and put in place a more effective project
management system has resulted in a strong profit recovery for
PDT with an EBITDA just $279,000 shy of $3.0M for the year.
PDT continues to add many new customers and projects are
becoming larger and more profitable, with the renewed focus on
the medical and military market segments. The current backlog
is very encouraging, and there continues to be solid growth in
projects from existing clients. Expectations are that an EBITDA
in excess of $3.0M will be achieved in the current fiscal year.
PDT is also gaining traction applying TZ Intevia to solve PDT
customer requirements and it is anticipated that there will be
an increased number of products developed by the end of the
calendar year based on the synergies of TZ technology and the
PDT customer base.
During the year the Company issued a total of 7,088,549 fully
paid ordinary shares on the part conversion of the $20 million
convertible notes the Group had on issue pursuant to the terms
and conditions of the convertible notes issued to DKR Oasis
Soundshore Oasis Holding Fund.
The Company issued a total of 2,665,500 fully paid ordinary
shares at a price of $4.50 each to raise a total of $11,994,750
during the year. As part of the shares issued the Company also
issued 2,665,500 options as part of the terms and conditions of
the Company placement which are exercisable at $4.50 at any
time before 23 October 2009.
On 19 February 2008, the Company announced that it had
finalised the placement of $24 million unsecured convertible
notes as approved at a shareholder meeting conducted on the
4 February 2008. As part of the terms and conditions of the
placement, 3,000,000 options were issued to the convertible
note holders exercisable at $4.00 per option at any time before
19 February 2013.
Likely Developments
The particular information required by s299 (1) 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.
12
TZ Limited 2008 Annual Report
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:
No. of
Meetings
Held
11
11
11
A. Sigalla
J. Falconer
M. Otten
No. of
Meetings
Attended
11
11
11
Other matters were dealt with during the year by way of circular
resolutions signed by all Directors.
directors’ report (CONTINUED)
Information on Directors
Mr Andrew Sigalla
Executive Chairman
Mr. Sigalla has extensive international experience in capital raising,
M&A, IPOs in global markets and corporate advisory. He has
played a key role in TZ’s history from its inception with critical
contributions made as Executive Director during the Company’s
initial start–up phase, its Australian public listing and continuing
strategic acquisitions. Mr. Sigalla will continue to play a pivotal role
as the Company lists on the NASDAQ exchange.
Mr. Sigalla was a Director of TZ when the Company first
listed on the ASX in 2004 and until he returned as Executive
Chairman of TZ in January 2007, he served on the Board of the
Company’s Chicago–based subsidiary, TZ Inc.
interests in shares and options
Ordinary shares:
Options:
1,518,950
Nil
Mr John Falconer
Executive Director and Company Secretary
Mr Falconer was appointed to the Board on 6 February 2004
and 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 Accounts in Sydney providing specialist services to
private and public company clients.
Other directorships of listed companies in the three years ending
30 June 2008:
•
Mr Falconer is a Director of Kingsgate Consolidated Limited
and formally a Director of Taragon Property Fund.
interests in shares and options
Ordinary shares:
Options:
551,273
200,000
Mr Michael Otten
Non–Executive Director
Mr Otten, as Managing and Marketing Director, has a proven
track record in helping build businesses in highly competitive
environments that require a deep understanding of consumers.
From 1994 to 1998 Mr Otten was Managing Director of
Singleton Advertising in Melbourne before taking the position
of Executive General Manager, Marketing at Crown and then
Executive Director of Pod TV. He is currently working with a
number of clients through his marketing consultancy business,
No Compromises, which he has owned for the past 16 years.
interests in shares and options
Ordinary shares:
Options:
38,640
200,000
TZ Limited 2008 Annual Report
13
directors’ report (CONTINUED)
Remuneration Report (audited)
The structure of Non–Executive Director and Executive
remuneration is separate and distinct as follows:
The Remuneration Report is set out under the following main
headings:
(a) Non–Executive Directors’ Remuneration
1. principles used to determine the nature and
amount of remuneration
2. details of remuneration
3. services agreements
4. share–based compensation
The information provided under headings 1 to 4 includes
remuneration disclosures that are required under Accounting
Standard AASB 124 Related Party Disclosures. These
disclosures have been transferred from the financial report and
have been audited.
1. Principles Used To Determine The Nature
And Amount Of Remuneration
The performance of the consolidated Group depends upon the
quality of the Directors and Executives. The philosophy of the
Directors in determining remuneration levels is to:
•
•
•
Set competitive remuneration packages to attract and
retain high calibre employees;
Link executive rewards to shareholder value creation; and
Establish appropriate demanding performance hurdles for
variable executive remuneration.
The Board reviews and is responsible for the Group’s
remuneration policies, procedures and practices.
Fixed remuneration
The Board seeks to set aggregate remuneration at a level
that provides the Group with the ability to attract and retain
Directors of a high calibre, whilst incurring a cost that is
acceptable to shareholders.
The ASX Listing Rules specify that the aggregate remuneration
of Non–Executive Directors shall be determined from time-
to-time by a general meeting. The amount of aggregate
remuneration sought to be approved by shareholders and
the manner in which it is apportioned amongst Directors
is reviewed annually. The Board considers advice from
shareholders, and takes into account the fees paid to
Non–Executive Directors of comparable companies, when
undertaking the annual review process.
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 an amount of
$500,000 per annum, which had been set at the annual general
meeting of shareholders held on 30 November 2006.
The net annual fees of $60,000 (2007: $60,000) are paid to the
Non–Executive Director.
Variable remuneration:
The Group provides Directors with incentives designed to align
their remuneration with the interests of shareholders. This is
done through issuing options to acquire ordinary shares in the
Group. The number and the terms of the options issued are
determ ined by the Directors and approved by shareholders in
a general meeting of members.
14
TZ Limited 2008 Annual Report
directors’ report (CONTINUED)
(b) Group Executive and Executive Director
remuneration
2. Details of Remuneration
Details of the remuneration of the Key Management Personnel
(as defined in AASB 124 Related Party Disclosures) are set out
in Table 1 which follows.
The Key Management Personnel of TZ Limited, including the
Directors and the following consolidated Group Executives, have
authority and responsibility for planning, directing and controlling
the activities of the Group:
These Executives comprise the Group Executives who make
or participate in making decisions that affect the whole, or a
substantial part, of the business or who have the capacity to
affect significantly the Group’s financial standing.
Remuneration consists of fixed remuneration and variable
remuneration, which comprises short–term and long–term
incentive schemes.
Fixed remuneration
Fixed remuneration is reviewed annually by the Directors.
The process consists of a review of relevant comparative
remuneration in the employment market and within the Group
and, where appropriate, external independent advice on policies
and practices is obtained by the Board.
Senior managers are given the opportunity to receive their fixed
(primary) remuneration in a variety of forms and are offered the
opportunity to enter into “salary sacrifice” arrangements with
the Group where appropriate. It is intended that the manner of
payment chosen will be optimal for the recipient without creating
additional cost for the Group.
Variable remuneration
Long–Term Incentives
The Group provides long–term incentives to senior Executives
in a manner that aligns this element of remuneration with the
creation of shareholder value. Executives and other employees
can be issued with options to acquire shares in the Group
at no cost. The number and the terms of the options issued
are determined by the Directors after consideration of the
employee’s performance and their ability to contribute to the
achievement of the Group’s objectives.
As the options confer a right but not an obligation on the
recipient of the options, the Directors does not consider it
necessary to establish a policy in relation to the person
limiting his or her exposure to risk as a consequence of
owning the options.
TZ Limited 2008 Annual Report
15
directors’ report (CONTINUED)
Remuneration Report (continued)
Table 1: Details of Remuneration — Directors and Key Management Personnel
Short–Term Benefits
Cash Salary & Fees
Cash Bonuses
Super
60,000
110,092
110,092
502,878
409,267
342,005
300,180
90,000
60,000
50,000
663,799
190,605
428,546
340,859
–
–
–
–
66,707
55,589
–
–
–
–
252,488
–
–
–
–
9,908
9,908
–
–
–
–
–
–
–
–
–
–
–
year ended 30 June 2008
Non–Executive Directors
Michael Otten
Executive Directors
Andrew Sigalla
John Falconer
Other Key Management Personnel
Chris Kelliher
David Feber
Dickory Rudduck
Mark Schwartz
year ended 30 June 2007
Non–Executive Directors
John Falconer
Michael Otten
Executive Directors
Andrew Sigalla
Other Key Management Personnel
Chris Kelliher
David Feber
Dickory Rudduck
Mark Schwartz
16
TZ Limited 2008 Annual Report
directors’ report (CONTINUED)
Post–Employment
Benefits
Share–Based
Payments
Prescribed Benefits
Options
Total
Percentage
Performance–Based
Bonus Payments
Percentage
Share Option–
Based Payments
–
–
–
–
8,617
–
7,072
–
–
–
–
–
–
–
71,570
131,570
–
71,570
–
360,007
–
–
59,502
59,502
–
–
233,250
–
–
191,570
120,000
502,878
844,598
397,594
307,251
149,502
149,502
50,000
916,287
432,366
428,546
340,859
–
–
–
–
7.90%
13.98%
–
–
–
–
27.56%
–
–
–
54.40%
–
37.36%
–
42.62%
–
–
39.80%
49.79%
–
–
55.03%
–
–
TZ Limited 2008 Annual Report
17
directors’ report (CONTINUED)
3. Service Agreements
david Feber
The terms and conditions of the appointment and retirement
of Directors are set out in a letter of appointment which covers
remuneration, expectations, terms, the procedures for dealing
with conflicts of interest and the availability of independent
professional advice.
Remuneration and other terms of employment for the Managing
Director and the other Group Executives are formalised in
service agreements. Major provisions of the agreements relating
to remuneration are set out below.
Directors and Key Management Personnel
andrew sigalla — executive chairman
(25 January 2007 — 1 August 2008)
•
•
•
Fixed Term: 3 Years
Agreement commencement date: 25 January 2007
Remuneration package of: $120,000
andrew sigalla — executive chairman
(after balance date, reviewed by independent remuneration
specialist and lawyers for the Board)
•
•
•
•
Fixed Term: 3 Years
Agreement commencement date: 1 August 2008
Remuneration package of: US$400,000
Entitlements:
•
•
•
•
Term: 3 Years
Agreement commencement date: 11 February 2008
Base salary: US$400,000
Entitlements:
−
Financial performance–based bonuses as well as a
bonus based on the sale/listing of the Company.
mark schwartz
•
•
•
•
Term: 1 Year
Agreement Commencement Date: 11 March 2008
Base Salary: US$270,000
Entitlements:
−
Bonuses and options based upon financial
performance.
chris Kelliher
•
•
•
•
Term: 1 Year with a renewal term of another 1 Year
Agreement commencement date: 1 March 2008
Base salary: US$300,000
Entitlements:
−
Financial performance–based bonuses as well as a
bonus based on the sale/listing of the Company.
−
Overseas living allowance US$10,000 per month
dickory rudduck
−
NASDAQ listing bonuses
John Falconer — executive director and company
secretary
Fixed Term: 3 Years
Agreement commencement date: 25 January 2007
•
•
•
•
•
•
•
Term: 1 Year with continuous renewal terms of 1 Year
increments.
Agreement commencement date: 1 February 2008
Base salary: US$280,000
Entitlements:
Remuneration package of: $120,000
−
Signing bonus of $50,000.
michael otten — non–executive director
−
Salary increases to $320,000 if listed on the NASDAQ.
•
•
•
No fixed term
−
Options based upon financial performance.
Agreement commencement date: 7 July 2006
Quarterly retainer $15,000
18
TZ Limited 2008 Annual Report
directors’ report (CONTINUED)
4. Share–Based Compensation
(i) Options to Acquire Shares
Options are issued to Directors and Executives as part of
their remuneration. The options are not issued based on
performance criteria, but are issued to Directors and Executives
to increase goal congruence between Executives, Directors and
shareholders.
Each option entitles the holder to subscribe for one fully paid
ordinary share in the Group at the issue price specified, at any
time from the issue date until the expiry of the options subject
to any vesting requirements. The option holders are not entitled
as a matter of course to participate in any share issues of the
Group. Options carry no dividend rights or voting rights and are
issued for nil consideration.
Options issued to Non–Executive Directors are issued on terms
that are approved by shareholders in a General Meeting.
The issue of options is at the Board’s sole discretion. For each
option issue, the Board specifies the vesting period, exercise
price and exercise period in accordance with the provisions of
the scheme. The exercise price must not be less than 100% of
the share price immediately preceding the date of the invitation
to participate in the scheme. The exercise period cannot exceed
five years.
No options have been issued to Key Management Personnel,
including Directors, as remuneration during or since the end of
the financial year.
The number of options held by all Key Management Personnel
including Directors and the most highly remunerated Group
Executives, are as follows.
Opening
Balance
Granted as
Compensation
Options
Expired
Options
Exercised
Closing
Balance
Vested and
Exercisable
Unvested
2008
Non–Executive Directors
Michael Otten
200,000
Executive Directors
Andrew Sigalla
–
John Falconer
200,000
Key Management Personnel
Chris Kelliher
David Feber
Dickory Rudduck
Mark Schwartz
100,000
600,000
–
–
1,100,000
2007
Non–Executive Directors
–
–
–
–
–
–
–
–
–
–
–
(100,000)
–
–
–
(100,000)
–
–
–
–
–
–
–
–
200,000
100,000
100,000
–
–
–
200,000
100,000
100,000
–
–
–
600,000
300,000
300,000
–
–
–
–
–
–
1,000,000
500,000
500,000
John Falconer
1,388,182
Michael Otten
–
200,000
200,000
Executive Directors
Andrew Sigalla
1,491,125
Key Management Personnel
Chris Kelliher
4,327,812
–
–
–
–
–
(1,388,182)
200,000
–
200,000
(1,491,125)
–
–
–
–
(100,000)
(4,127,812)
100,000
100,000
200,000
200,000
–
–
David Feber
–
600,000
–
Dickory Rudduck
1,491,125
Mark Schwartz
–
–
–
(1,491,125)
–
–
–
–
600,000
–
–
–
–
–
600,000
–
–
8,698,244
1,000,000
(1,591,125)
(7,007,119)
1,100,000
100,000
1,000,000
TZ Limited 2008 Annual Report
19
directors’ report (CONTINUED)
(ii) Shares Issued on Exercise of Remuneration
Options
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 are
set out in the Corporate Governance section of these financial
statements.
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 Group 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 2008,
a copy of the declaration is attached to and forms part of the
Directors’ report.
Signed at Sydney this 30th day of September 2008 in
accordance with a resolution of the Board of Directors.
J Falconer
Director
No shares have been issued during the financial year ended
30 June 2008 (2007: Nil) on the exercise of previously issued
remuneration options. Key Management Personal have, during
the year ended 30 June 2007, exercised unlisted share options
which were granted as attached options to share placements
of fully paid ordinary shares, detailed in notes 13 & 15.
Indemnification and Insurance of Directors and
Officers
The Group has not taken out an insurance policy indemnifying
Directors and officers for the financial year nor has the Group
provided any indemnification during the year.
Significant After Balance Date Events
No matters or circumstances have arisen since the end of the
financial year which significantly affected or may significant
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.
Share Options
At the date of this report, options over unissued shares or
interests of the Company are as follows:
Expiry Date
Issue Price
of Shares
Number Under
Option
24 January 2010
23 January 2010
23 January 2010
31 December 2009
31 December 2009
23 October 2009
18 January 2011
19 January 2011
20 January 2011
19 February 2013
$3.75
$3.00
$3.75
$3.75
$5.00
$4.50
$3.75
$3.75
$3.00
$4.00
600,000
300,000
300,000
200,000
200,000
2,665,500
100,000
195,000
149,000
3,000,000
Complete details of the above options are in notes 13 and 24
to the Financial Statements
20
TZ Limited 2008 Annual Report
aUditor’s intependence declaration
TO THE MEMBERS OF tZ limited
In accordance with section 307c of the Corporation Act 2001, I am pleased to provide the following declaration of independence to the
Directors of TZ Limited.
As Auditor of the financial statements of TZ Limited for the financial year ended 30 June 2008, I declare that to the best of my
knowledge and belief, there have been no contraventions of:
•
•
The auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
Any applicable code of professional conduct in relation to the audit.
Yours faithfully,
stephen K. taylor
Principal, Taylor & Co.
30 September 2008
Sydney, Australia
TZ Limited 2008 Annual Report
21
income statement
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
Revenue
Cost of Sales
Gross Profit
Other Income
Employee Related Expenses
Occupancy Expenses
Communications Expenses
Depreciation
Amortisation of Intangibles
Professional & Corporate Services
Travel & Accommodation
Due Diligence & Related Cost
Foreign Exchange Loss
Finance Cost
Other Expenses
Loss Before Income Tax Expense
Income Tax Expense (Benefit)
Note
Consolidated Entity
Parent Entity
2008
$
2007
$
14,972,846
15,864,633
(9,745,273)
(12,304,965)
5,227,573
3,559,668
2008
2007
$
–
–
–
$
–
–
–
1,157,861
580,007
1,090,313
452,876
(7,536,321)
(4,870,373)
(1,420,485)
(693,508)
(340,858)
(332,764)
(568,580)
(252,905)
(343,437)
(298,118)
(716,518)
(1,048,636)
(94,339)
(51,936)
(6,354)
–
(34,536)
(43,840)
(448)
–
(2,352,535)
(894,293)
(1,671,853)
(353,722)
(2,298,495)
(1,630,165)
(1,011,136)
(477,342)
(1,145,094)
–
(1,145,094)
–
–
(1,150,131)
–
(1,119,958)
(2,259,050)
(1,401,934)
(2,164,209)
(1,170,573)
(1,165,933)
(1,090,024)
(78,391)
(51,810)
(12,330,714)
(8,840,341)
(6,553,484)
(3,492,861)
–
199,672
–
–
2
3
2
3
4
Loss From Continuing Operations
(12,330,714)
(9,040,013)
(6,553,484)
(3,492,861)
Loss From Discontinued Operations After Related
Income Tax Expense
–
(1,766,503)
–
–
Net Loss for the Year
(12,330,714)
(10,806,516)
(6,553,484)
(3,492,861)
Loss Attributable to Members of the Parent Entity
(12,330,714)
(10,806,516)
(6,553,484)
(3,492,861)
Continued Operations
Basic Loss Per Share (Cents)
Diluted Loss Per Share (Cents)
Discontinued Operations
Basic Loss Per Share (Cents)
Diluted Loss Per Share (Cents)
21
21
21
21
(29.04)
(29.04)
(25.30)
(25,30)
–
–
(4.94)
(4.94)
The accompanying notes form part of these financial statements.
22
TZ Limited 2008 Annual Report
Balance sheet
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
cUrrent assets
Cash & Cash Equivalents
Trade & Other Receivables
Work in Process
total cUrrent assets
non–cUrrent assets
Trade and Other Receivables
Financials Assets
Property, Plant & Equipment
Intangibles Assets
Deferred Tax Assets
Note
Consolidated entity
Parent entity
2008
$
2007
$
2008
$
2007
$
17
5
6
5
7
8
9
23,909,009
7,596,124
23,316,941
6,856,209
9,455,904
8,997,267
6,543,950
5,620,492
56,794
758,829
–
–
33,421,707
17,352,220
29,860,891
12,476,701
–
–
–
–
22,927,763
13,165,685
50,209,695
50,209,695
2,586,200
2,062,980
24,554
18,851
61,495,368
60,634,314
113,332
171,787
–
–
–
–
total non–cUrrent assets
64,194,900
62,869,081
73,162,012
63,394,231
total assets
97,616,607
80,221,301
103,022,903
75,870,932
cUrrent liaBilities
Trade & Other Payables
Provisions
Financial Liabilities
total cUrrent liaBilities
non–cUrrent liaBilities
Provisions
Financial Liabilities
Deferred Tax Liabilities
10
11
12
11
12
3,152,038
1,940,227
1,142,577
741,371
499,101
973,969
619,821
235,544
–
–
–
–
4,625,108
2,795,592
1,142,577
741,371
763,574
–
–
–
24,000,000
21,630,508
24,000,000
20,000,000
466,579
361,733
–
–
total non–cUrrent liaBilities
25,230,453
21,992,241
24,000,000
20,000,000
total liaBilities
29,855,561
24,787,833
25,142,577
20,741,371
net assets
eQUity
Issued Capital
Reserves
67,761,346
55,433,468
77,880,326
55,129,561
13
14
112,579,931
84,095,416
112,579,931
84,095,416
(841,073)
2,984,850
1,754,588
934,854
Accumulated Losses
(43,977,512)
(31,646,798)
(36,454,193)
(29,900,709)
total eQUity
67,761,346
55,433,468
77,880,326
55,129,561
The accompanying notes form part of these financial statements.
TZ Limited 2008 Annual Report
23
statement oF changes in eQUity
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
Consolidated Entity
Share
Capital
Reserves
Equity–
Based
Payment
Foreign
Currency
Translation
Accumulated
Losses
Ordinary
$
$
$
$
Total
$
Balance at 1 July 2006
67,780,998
78,000
1,025,289
(20,840,282)
48,044,005
Shares Issued During the Period
Share Issue Cost
Adjustment From Translation of Foreign
Controlled Entities
Share–Based Payment
Profit Attributable to Members of Parent Entity
18,558,600
(2,244,182)
–
–
–
–
–
–
856,854
–
–
–
1,024,707
–
–
–
–
–
–
18,558,600
(2,244,182)
1,024,707
856,854
(10,806,516)
(10,806,516)
Sub–Total
84,095,416
934,854
2,049,996
(31,646,798)
55,433,468
Dividends Paid or Provided For
–
–
–
–
–
Balance at 30 June 2007
84,095,416
934,854
2,049,996
(31,646,798)
55,433,468
Balance at 1 July 2007
84,095,416
934,854
2,049,996
(31,646,798)
55,433,468
Shares Issued During the Period
Share Issue Cost
Adjustment From Translation of Foreign
Controlled Entities
Share–Based Payment
Profit Attributable to Members of Parent Entity
32,020,997
(3,536,482)
–
–
–
–
–
–
819,734
–
–
–
(4,645,657)
–
–
–
–
–
–
32,020,997
(3,536,482)
(4,645,657)
819,734
(12,330,714)
(12,330,714)
Sub–Total
112,579,931
1,754,588
(2,595,661)
(43,977,512)
67,761,346
Dividends Paid or Provided For
–
–
–
–
–
Balance at 30 June 2008
112,579,931
1,754,588
(2,595,661)
(43,977,512)
67,761,346
The accompanying notes form part of these financial statements.
24
TZ Limited 2008 Annual Report
statement oF changes in eQUity
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
Parent Entity
Share
Capital
Ordinary
Reserves
Equity–
Based
Payment
Foreign
Currency
Translation
$
$
Balance at 1 July 2006
67,780,998
78,000
Shares Issued During the Period
Share Issue Cost
Share–Based Payment
Profit Attributable to Members of Parent Entity
Sub–Total
Dividends Paid or Provided For
Balance at 30 June 2007
18,558,600
(2,244,182)
–
–
–
–
856,854
–
84,095,416
934,854
–
–
84,095,416
934,854
Balance at 1 July 2007
84,095,416
934,854
Shares Issued During the Period
Share Issue Cost
Share–Based Payment
Profit Attributable to Members of Parent Entity
Sub–Total
Dividends Paid or Provided For
32,020,997
(3,536,482)
–
–
–
–
819,734
–
112,579,931
1,754,588
–
–
Balance at 30 June 2008
112,579,931
1,754,588
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Accumulated
Losses
$
Total
$
(26,407,848)
41,451,150
–
–
–
18,558,600
(2,244,182)
856,854
(3,492,861)
(3,492,861)
(29,900,709)
55,129,561
–
–
(29,900,709)
55,129,561
(29,900,709)
55,129,561
–
–
–
32,020,997
(3,536,482)
819,734
(6,553,484)
(6,553,484)
(36,454,193)
77,880,326
–
–
(36,454,193)
77,880,326
The accompanying notes form part of these financial statements.
TZ Limited 2008 Annual Report
25
cash FloW statement
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
Note
Consolidated Entity
Parent Entity
cash Flows from operating activities:
2008
$
2007
$
Receipts from Customers
16,229,851
16,287,857
2008
2007
$
–
$
–
Payments to Suppliers and Employees
(23,184,306)
(22,702,580)
(5,556,847)
(2,172,103)
Interest Received
Interest Paid
Deposit Paid
Income Tax Paid/(Refund)
614,069
536,721
589,378
452,876
(1,524,950)
(1,235,267)
(1,430,108)
(1,003,907)
(3,000)
(5,336)
–
(5,166)
(3,000)
(622)
–
–
net cash Used in operating activities
17(b)
(7,873,672)
(7,118,435)
(6,401,199)
(2,723,134)
Cash Flows from Investing Activities:
Payment for Plant and Equipment
(1,694,436)
(854,520)
(12,057)
(19,299)
Acquisition Cost for Controlled Entity
–
(2,383,290)
Payments for Research and Development
(5,900,035)
(4,643,070)
–
–
(2,105,251)
–
Loan to Controlled Entity
–
–
(9,762,079)
(9,802,000)
Net Cash Used in Investing Activities
(7,594,471)
(7,880,880)
(9,774,136)
(11,926,550)
cash Flows from Financing activities
Share Issues
Share Issue Costs
Repayment of Borrowing
Proceeds from Line of Credit Borrowing
11,994,750
3,867,628
11,994,750
3,867,628
(3,536,482)
(2,244,182)
(3,536,482)
(2,244,182)
(726,156)
(1,320,905)
–
189,366
–
–
–
–
Proceeds from Convertible Notes Issue
24,000,000
20,000,000
24,000,000
20,000,000
Net Cash Provided by Financing Activities
31,732,112
20,491,907
32,458,268
21,623,446
Net Increase in Cash Held
16,233,969
5,492,592
23,139,142
6,973,762
Cash at Beginning of Year
17(a)
7,596,124
3,403,156
6,856,209
1,002,405
Effects of Exchange Rate Fluctuations on the
Balances of Cash Held in Foreign Currencies
78,916
(1,299,624)
177,799
(1,119,958)
cash at end of year
17(a)
23,909,009
7,596,124
23,316,941
6,856,209
The accompanying notes form part of these financial statements.
26
TZ Limited 2008 Annual Report
notes to the Financial statements
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
1. SUMMARY OF ACCOUNTING POLICIES
Statement of Compliance
This financial report includes the consolidated financial
statements and notes of TZ Limited and controlled entities
(‘Consolidated Group or ‘Group), and the separate financial
statements and notes of TZ Limited as an individual parent entity
(‘Parent Entity’). TZ Limited is a public listed Company whose
shares and options are quoted on the Australian Securities
Exchange and is incorporated and is domiciled in Australia.
Basis of Preparation
The financial report is a general–purpose financial report that
has been prepared in accordance with Australian Accounting
Standards, Australian Accounting Standard Interpretations,
other authoritative pronouncements of the Australian Accounting
Standards Board and the Corporations Act 2001.
Australian Accounting Standards set out accounting policies
that the AASB has concluded would result in a financial report
containing relevant and reliable information about transactions,
events and conditions to which they apply. Compliance with
Australian Accounting Standards ensures that the financial
statements and notes also comply with International Financial
Reporting Standards. Material accounting policies adopted in
the preparation of this financial report are presented below. They
have been consistently applied unless otherwise stated.
The financial report has been prepared on an accruals basis
and is based on historical costs, modified, where applicable, by
the measurement at fair value of selected non–current assets,
financial assets and financial liabilities.
(a) Principles of Consolidation
A controlled entity is any entity controlled by TZ Limited whereby
the Company has the power to control the financial and
operating policies so as to obtain benefits from its activities.
In assessing the power to govern, the existence and effect of
holdings of actual and potential voting rights are considered. A
list of controlled entities is contained in Note 7 to the financial
statements.
All inter–company balances and transactions between entities in
the economic entity, including any unrealised profits or losses,
have been eliminated on consolidation. Accounting policies of
subsidiaries have been changed where necessary to ensure
consistencies with those policies applied by the parent entity.
Where controlled entities have entered or left the economic
entity during the year, their operating results have been included/
excluded from the date control was obtained or until the date
control ceased.
The consolidated financial statements comprise the financial
statements of TZ Limited and all its controlled entities (refer note 7)
(b) Business Combinations
Business combinations occur where control over another
business is obtained and results in the consolidation of its
assets and liabilities. All business combinations, including those
involving entities under common control, are accounted for by
applying the purchase method.
The purchase method requires an acquirer of the business
to be identified and for the cost of the acquisition and fair
values of identifiable assets, liabilities and contingent liabilities
to be determined as at acquisition date, being the date that
control is obtained. Cost is determined as the aggregate of fair
values of assets given, equity issued and liabilities assumed in
exchange for control together with costs directly attributable to
the business combination. Any deferred consideration payable
is discounted to present value using the entity’s incremental
borrowing rate.
Goodwill is recognised initially at the excess of cost over the
acquirer’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognised. If the fair value
of the acquirer’s interest is greater than cost, the surplus is
immediately recognised in profit or loss.
TZ Limited 2008 Annual Report
27
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(c) Income Tax
The income tax expense (revenue) for the year comprises current
income tax expense (income) and deferred tax expense (income).
Current income tax expense charged to the profit or loss is
the tax payable on taxable income calculated using applicable
income tax rates enacted, or substantially enacted, as at
reporting date. Current tax liabilities (assets) are therefore
measured at the amounts expected to be paid to (recovered
from) the relevant taxation authority.
Deferred income tax expense reflects movements in deferred
tax asset and deferred tax liability balances during the year as
well unused tax losses.
Current and deferred income tax expense (income) is charged or
credited directly to equity instead of the profit or loss when the
tax relates to items that are credited or charged directly to equity.
Deferred tax assets and liabilities are ascertained based
on temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial
statements. Deferred tax assets also result where amounts
have been fully expensed but future tax deductions are
available. No deferred income tax will be recognised from the
initial recognition of an asset or liability, excluding a business
combination, where there is no effect on accounting or taxable
profit or loss.
Deferred tax assets and liabilities are calculated at the tax rates
that are expected to apply to the period when the asset is
realised or the liability is settled, based on tax rates enacted or
substantively enacted at reporting date. Their measurement also
reflects the manner in which management expects to recover or
settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and
unused tax losses are recognised only to the extent that it is
probable that future taxable profit will be available against which
the benefits of the deferred tax asset can be utilised.
Where temporary differences exist in relation to investments in
subsidiaries, branches, associates, and joint ventures, deferred
tax assets and liabilities are not recognised where the timing of the
reversal of the temporary difference can be controlled and it is not
probable that the reversal will occur in the foreseeable future.
Current tax assets and liabilities are offset where a legally
enforceable right of set–off exists and it is intended that net
settlement or simultaneous realisation and settlement of the
respective asset and liability will occur. Deferred tax assets and
liabilities are offset where a legally enforceable right of set–off
exists, the deferred tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same
taxable entity or different taxable entities where it is intended
that net settlement or simultaneous realisation and settlement
of the respective asset and liability will occur in future periods in
which significant amounts of deferred tax assets or liabilities are
expected to be recovered or settled.
(d) Cash and Cash Equivalents
Cash and cash equivalents include cash on hand, deposits
held at call with banks, other short–term highly liquid
investments with original maturities of three months or less, and
bank overdrafts. Bank overdrafts are shown within short–term
borrowings in current liabilities on the balance sheet.
(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 13% — 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.
28
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(f) Receivables and payables
(j) Foreign Currency Transactions and Balances
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 Impaired accounts.
Accounts payable represent the principal amounts outstanding
at balance date plus, where applicable, any accrued interest.
Functional and Presentation Currency
The functional currency of each of the Group’s entities is
measured using the currency of the primary economic
environment in which that entity operates. The consolidated
financial statements are presented in Australian dollars which is
the parent entity’s functional and presentation currency.
(g) Accounts payable
Transaction and Balances
Trade payables and other accounts payable are recognised
when the Company becomes obliged to make future payments
resulting from the purchase of goods and services.
(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.
Foreign currency transactions are translated into functional
currency using the exchange rates prevailing at the date of the
transaction. Foreign currency monetary items are translated at
the year–end exchange rate. Non–monetary items measured
at historical cost continue to be carried at the exchange rate at
the date of the transaction. Non–monetary items measured at
fair value are reported at the exchange rate at the date when fair
values were determined.
Exchange differences arising on the translation of monetary items
are recognised in the income statement, except where deferred in
equity as a qualifying cash flow or net investment hedge.
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.
Exchange differences arising on the translation of non–monetary
items are recognised directly in equity to the extent that the gain
or loss is directly recognised in equity, otherwise the exchange
difference is recognised in the income statement.
(i) Leases
Group Companies
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. Lease
incentives under operating leases are recognised as a liability and
amortised on a straight–line basis over the life of the lease term.
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.
The financial results and position of foreign operations whose
functional currency is different from the Group’s presentation
currency are translated as follows:
•
•
•
Assets and liabilities are translated at year–end exchange
rates prevailing at that reporting date;
Income and expenses are translated at average exchange
rates for the period; and
Retained earnings are translated at the exchange rates
prevailing at the date of the transaction.
TZ Limited 2008 Annual Report
29
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(j) Foreign Currency Transactions and Balances
(continued)
Exchange differences arising on translation of foreign
operations are transferred directly to the Group’s foreign
currency translation reserve in the balance sheet. These
differences are recognised in the income statement in the
period in which the operation is disposed.
(k) Revenue Recognition
(i) sales revenue
Sales Revenue comprises revenue earned from the
provision of products or services to entities outside the
consolidated entity.
(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.
(l) Goods and Services Tax
Revenues, expenses and assets are recognised net of the
amount of goods and services tax (GST), except:
Where the amount of GST incurred is not recoverable from
the taxation authority, it is recognised as part of the cost of
acquisition of an asset or as part of an item of expense; or
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment
whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell
and value in use. For the purposes of assessing impairment,
assets are grouped at the lowest levels for which there are
separately identifiable cash flows (cash generating units).
(n) Share–Based Payments
The cost to the Company of share options granted to Directors
and Executive Officers is included at fair value as part of the
Directors’ and Executive Officers’ aggregate remuneration in
the financial year the options are granted. The fair value of
the share option is calculated using the Black Scholes option
pricing model, which takes into account the exercise price,
the term of the option, the vesting and performance criteria,
the impact of dilution, the non–tradable nature of the option,
the current price and expected price volatility of the underlying
share, the expected dividend yield and the risk–free interest rate
for the term of the option.
The fair value determined at the grant date of the equity settled
share based payment is expensed on a straight line basis over
the vesting period.
(o) Earnings Per Share
For receivables and payables which are recognised inclusive of GST.
(i) Basic earnings per share
The net amount of GST recoverable from, or payable to, the
taxation authority is included as part of receivables or payables.
Cash flows are included in the cash flow statement on a net
basis. The GST component of cash flows arising from investing
and financing activities which is recoverable from, or payable to,
the taxation authority is classified as operating cash flows.
(m) Impairment of Assets
At each reporting date, the Group reviews the carrying values
of its tangible and intangible assets to determine whether there
is any indication that those assets have been impaired. If such
an indication exists, the recoverable amount of the asset, being
the higher of the asset’s fair value less costs to sell and value
in use, is compared to the asset’s carrying value. Any excess
of the asset’s carrying value over its recoverable amount is
expensed to the income statement.
Basic earnings per share is determined by dividing the
operating profit/ (loss) after income tax by the weighted
average number of ordinary shares outstanding during the
financial year.
(ii) diluted earnings per share
Diluted earnings per share adjusts the figures used in
determining earnings per share by taking into account
amounts unpaid on ordinary shares and any reduction
in earnings per share that will probably arise from the
exercise of options outstanding during the financial year.
30
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(p) Intangible Assets
(i) goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary at the date of acquisition. Goodwill on the acquisition of subsidiaries is included in intangible assets.
Goodwill acquired in business combinations is not amortised. Instead, goodwill is tested for impairment annually or more frequently
if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment
losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash–generating units for the purpose of impairment testing. Each of those cash–generating units
represents the Group’s investment in each region of operation by each primary reporting segment.
(ii) trademarks and licences
Trademarks and licences have an indefinite useful life and are carried at cost less any impaired losses.
(iii) research and development
Research expenditure is expensed as incurred.
An intangible asset arising from development expenditure is only recognised when all recognition criteria can be demonstrated.
The recognition criteria for development activity are:
•
•
•
•
•
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
whether the intangible asset will generate probable future economic benefits. Among other things, the Company can
demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it to be used
internally, the usefulness of the intangible asset;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
•
the ability to measure reliably the expenditure attributable to the intangible asset during its development.
Development cost is carried at cost less accumulated amortisation and impaired losses. Where recognition criteria are not met
development costs are recognised in the income statement as incurred.
A summary of the amortisation policies applied to the consolidated entities intangible assets is as follows:
Useful lives
Method used
patents and licences
development cost
Indefinite
Finite
Not depreciated or revalued
20 year — Straight line
Internally generated / acquired
Acquired
Internally generated
Impairment test / recoverable amount
testing
Annually and where an indicator of
impairment exists
Amortisation method reviewed at each
reporting period;
Reviewed at each reporting period for indicator
of impairment
TZ Limited 2008 Annual Report
31
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
1. SUMMARY OF ACCOUNTING POLICIES (continued)
(q) Financial Instruments Issued by the Company
(i) debt and equity instruments
Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual
arrangement.
(ii) transaction costs on the issue of equity instruments
Transaction costs arising on the issue of equity instruments are recognised directly in equity as a reduction of the proceeds of the
equity instruments to which the costs relate. Transaction costs are the costs that are incurred directly in connection with the issue
of those equity instruments and which would not have been incurred had those instruments not been issued.
(iii) interest and dividends
Interest and dividends are classified as expenses or as distributions of profit consistent with the balance sheet classification of the
related debt or equity instruments or component parts of compound instruments.
(r) Critical Accounting Estimates and Judgements
The preparation of a financial report in conformity with Australian Accounting Standards requires management to make estimates,
judgements and assumptions based on historical knowledge and best available current information. Estimates assume a reasonable
expectation of future events and are based on current trends and economic data obtained both externally and within the Company.
Actual results may differ from the estimates.
2. REVENUES
Sales & Service Revenue
Other Revenue
Interest – Other Person
Foreign Exchange Gain
Consolidated
Parent Entity
2008
$
2007
$
14,972,846
15,864,633
2008
2007
$
–
$
–
1,002,429
580,007
913,758
452,876
155,432
–
176,555
–
total other revenue
1,157,861
580,007
1,090,313
452,876
3. EXPENSES
Loss from Continuing Activities Includes:
Cost of Goods Sold
Amortisation of Non–Current Assets:
Intellectual Property
Depreciation
Bad and Doubtful Debts Expense
Finance Cost — External
32
TZ Limited 2008 Annual Report
9,745,273
12,304,965
716,518
1,048,636
568,580
298,118
95,411
28,438
–
–
6,354
–
–
–
448
–
2,259,050
1,401,934
2,164,209
1,170,573
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
4. INCOME TAX
Consolidated
Parent Entity
2008
$
2007
$
2008
2007
$
$
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% (2007: 30%)
(3,699,214)
(3,241,955)
(1,966,045)
(1,047,858)
Tax effect of permanent differences:
Amortisation of intangibles
Other non–deductable expenses
214,955
509,276
314,591
91,276
–
–
509,707
91,276
Future Income Tax Benefit not brought to account
2,974,983
3,035,760
1,456,338
956,582
Income Tax Expense attributable to result
–
199,672
–
–
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.
10,106,36
7,131,377
4,516,290
3,059,952
The taxation benefits of tax losses and timing differences not brought to account and will only be obtained if:
(a)
(b)
(c)
assessable income is derived of a nature and of amount sufficient to enable the benefit from the deductions to be realised;
conditions for deductibility imposed by the law are complied with; and
no changes in tax legislation adversely affect the realisation of the benefit from the deductions.
5. RECEIVABLES
Current:
Trade debtors
Sundry debtors
Sub–total
2,365,060
2,655,640
–
–
6,853,133
5,857,106
6,530,325
5,589,178
9,218,193
8,512,746
6,530,325
5,589,178
Other debtors and prepayments
237,711
484,521
13,625
31,314
The above assets are not subject to interest and the full amounts are expected to be received in the ordinary course of business and
usually within 60 days.
9,455,904
8,997,267
6,543,950
5,620,492
Non–current:
Amounts receivable from:
Controlled entities
–
–
22,927,763
13,165,685
Receivables due from controlled entities are for loans made in the ordinary course of business for an indefinite period. Interest–bearing
amounts owing by controlled entities are at normal market terms and conditions.
6. WORK IN PROCESS
Uncompleted/unbilled jobs — at cost
56,794
758,829
–
–
TZ Limited 2008 Annual Report
33
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
7. INVESTMENTS
Shares in Controlled Entities — at Cost (a)
Consolidated
Parent Entity
2008
2007
2008
2007
$
–
$
–
$
$
50,209,695
50,209,695
(a) Shares in controlled entities are valued at cost as fair value is unable to be determined.
Controlled Entities
Country of Incorporation
% Owned
2008
2007
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
*(An LLC is treated as a partnership for US purposes)
Australia
USA
USA
USA
USA
USA
Ukraine
100
100
100
100
100
90
100
100
100
100
100
90
34
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
8. PROPERTY, PLANT AND EQUIPMENT
$
$
$
$
Consolidated
Parent Entity
2008
2007
2008
2007
Net Foreign Currency Adjustment on Translation
(88,391)
(179,427)
–
property, plant and equipment
Cost
Accumulated Depreciation
Total Property, Plant & 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
Disposals
Depreciation Expense
4,924,571
3,769,150
(2,338,371)
(1,706,170)
2,586,200
2,062,980
31,356
(6,802)
24,554
19,299
(448)
18,851
996,027
1,426,568
164,173
517,288
–
(111,896)
19,299
11,609
–
(513,363)
(656,509)
(6,354)
–
19,299
–
(448)
–
558,443
996,024
24,554
18,851
292,305
491,003
1,196,832
(52,829)
97,924
(66,348)
(172,693)
(168,518)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
TZ Limited 2008 Annual Report
35
Net Foreign Currency Adjustment on Translation
(90,366)
(61,756)
End of Year
motor Vehicle
Beginning of Year
Additions
Disposals
Depreciation Expense
Net Foreign Currency Adjustment on Translation
End of Year
plant & equipment
Beginning of Year
Additions
Disposals
Depreciation Expense
1,173,248
292,305
56,006
104,998
–
(26,998)
(4,671)
–
(4,517)
(31,268)
(13,207)
24,337
56,006
718,645
2,244,156
397,051
–
–
(1,150,345)
(192,922)
(425,597)
Net Foreign Currency Adjustment on Translation
(92,601)
50,431
End of Year
830,171
718,645
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
Consolidated
Parent Entity
8. INTANGIBLES
Goodwill on Consolidation
Intellectual Property
Trademarks
2008
$
2007
$
37,100,575
37,100,575
23,113,013
21,888,810
1,281,780
1,644,929
Total Intangibles
61,495,368
60,634,314
Movements During the Year
goodwill on consolidation
Beginning of year
Additions
End of Year
intellectual property
Beginning of Year
Additions
Amortisation Expense
37,100,575
22,679,131
–
14,421,444
37,100,575
37,100,575
21,888,810
15,374,642
5,652,942
7,562,804
(988,643)
(1,048,636)
Net Foreign Currency Adjustment on Translation
(3,440,096)
–
End of Year
trademarks
Beginning of Year
Additions
Net Foreign Currency Adjustment on Translation
23,113,013
21,888,810
1,644,531
1,644,531
4,895
(367,646)
398
–
End of Year
1,281,780
1,644,929
2008
2007
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
$
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
10. PAYABLES
current
Trade Creditors
Sundry Creditors
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
1,901,841
1,374,590
257,080
386,611
1,250,197
565,637
885,497
354,760
Total Current Payables
3,152,038
1,940,227
1,142,577
741,371
The above amounts all relate to normal unsecured creditors incurred in the normal course of the Company’s business operations and
are within the credit terms of each relevant supplier or service provider.
11. PROVISIONS
current
Employee Entitlements
non–current
Lease Liability
12. FINANCIAL LIABILITIES
current
Bank Loans — Secured (i)
non–current
Convertible Note Issue (ii)
Convertible Note Issue (iii)
Bank Loans – Secured (i)
499,101
619,821
763,574
–
973,969
235,544
–
–
–
–
–
–
–
20,000,000
–
20,000,000
24,000,000
24,000,000
–
1,630,508
–
–
–
24,000,000
21,630,508
24,000,000
20,000,000
(i)
(ii)
(iii)
The bank loans are secured by a mortgage over the assets of PDT Inc Group assets.
The convertible notes issued are interest bearing convertible into fully paid ordinary shares and secured interest bearing over
the assets of the Company and its subsidiaries.
The convertible notes issued are interest bearing convertible into fully paid ordinary shares and secured interest bearing over
the assets of the Company and its subsidiaries.
13. ISSUED CAPITAL
(i)
issued & paid Up capital
2008 48,479,325 (2007: 38,725,276) Fully Paid
Ordinary Shares
112,579,931
84,095,416
112,579,931
84,095,416
TZ Limited 2008 Annual Report
37
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
13. ISSUED CAPITAL (continued)
(i)
issued & paid Up capital (continued)
Movements during the year:
opening Balance
Shares Issued During the Year:
4 August 2006 (a)
29 January 2007 (c)
29 January 2007 (d)
To 31 March 2007 (b)
23 October & 6 November 2008 (f)
To 30 June 2008 (g)
Share Issue Costs
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
84,095,416
67,780,998
84,095,416
67,780,998
–
–
–
–
3,258,384
10,804,221
500,000
3,995,995
–
–
–
–
11,994,750
20,026,247
–
–
11,994,750
20,026,247
3,258,384
10,804,221
500,000
3,995,995
–
–
(3,536,482)
(2,244,182)
(3,536,482)
(2,244,182)
closing Balance
112,579,931
84,095,416
112,579,931
84,095,416
opening Balance
4 August 2006 (a)
29 January 2007 (c)
29 January 2007 (d)
To 31 March 2007 (b)
23 October & 6 November 2008 (f)
To 30 June 2008 (g)
Sub Total
no.
no.
no.
no.
38,725,276
157,212,045
38,725,276
157,212,045
–
–
–
–
5,569,887
19,362,404
847,458
10,560,157
–
–
–
–
2,665,500
7,088,549
–
–
2,665,500
7,088,549
5,569,887
19,362,404
847,458
10,560,157
–
–
48,479,325
193,551,951
48,479,325
193,551,951
1 April 2007 share consolidation (e)
–
(154,826,675)
–
(154,826,675)
closing Balance
48,479,325
38,725,276
48,479,325
38,725,276
(a)
The Company issued 5,569,887 fully paid ordinary shares (pre consolidation) as final settlement for the purchase consideration PDT Group of companies and
business, as per the signed agreed in March 2005.
(b)
(c)
During the year the Company issued fully paid ordinary shares on the exercise of unlisted options held by employees and consultants.
The Company issued 19,362,404 fully paid ordinary shares (pre consolidation) as final settlement for the purchase consideration of the Intevia Business Unit
from Acument Group Technologies Inc. USA.
(d)
The Company issued 847,458 fully paid ordinary shares (pre consolidation) in lieu of a final payment to external advisors in respect of the recent convertible
note issue and purchase of the Intevia Business Unit.
(e)
At the Company general meeting held on the 23 March 2007, the Company Shareholders approved the Consolidation of Company Securities on a 1–for–5
basis subject to rounding.The Company placed a total of 2,665,500 fully paid ordinary shares at a price of $4.50 per share to raise a total of $11,994,750
before costs.
(f)
The Company issued a total of 7,088,549 fully paid ordinary shares on the conversion of $20,000,000 Convertible notes pursuant to the terms and conditions
of the Convertible notes issued.
38
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
13. ISSUED CAPITAL (continued)
(ii) share Unquoted options
opening Balance
options issued
22 December 2006 (a)
29 January 2007 (b)
29 January 2007 (c)
23 October & 6 November 2008 (d)
18 January 2008 (e)
19 February 2008(f)
options exercised
4 August 2006
17 August 200
25 August 2006
1 September 2006
31 March 2007
options expired
29 August 2006
31 December 2006
31 December 2007
Sub–Total
Consolidated
Parent Entity
2008
No.
2007
No.
2008
No.
2007
No.
1,800,000
14,053,176
1,800,000
14,053,176
–
–
–
2,000,000
3,000,000
3,000,000
–
–
–
2,000,000
3,000,000
3,000,000
2,665,500
444,000
3,000,000
–
–
–
2,665,500
444,000
3,000,000
–
–
–
–
–
–
–
–
–
–
(491,169)
(470,139)
(2,652,112)
(4,946,737)
(2,000,000)
(1,493,019)
(1,000,000)
–
–
–
–
–
–
–
(491,169)
(470,139)
(2,652,112)
(4,946,737)
(2,000,000)
(1,493,019)
(1,000,000)
(200,000)
–
(200,000)
–
7,709,500
9,000,000
7,709,500
9,000,000
1 April 2007 Share Consolidation 1–for–5 Basics
–
(7,200,000)
–
(7,200,000)
closing Balance
7,709,500
1,800,000
7,709,500
1,800,000
(a)
The Company issued 2,000,000 (pre consolidation, 400,000 post) options to acquire shares in the Company as approved in the general meeting of
shareholders held on the 22 December 2006 to the Company Directors or their associates, Mr John Falconer and Mr Michael Otten by way of two tranches.
The first tranche was vested on 22 December 2007 and exercisable price at 75 cents (pre consolidation, $3.75 post), and the second tranche will vest on 22
December 2008 at exercisable price of $1.00 (pre consolidation, $5.00 post). The options will expire on 22 December 2009.
(b)
The Company issued 3,000,000 (pre consolidation, 600,000 post) options to acquire shares in the Company in lieu of final payment to external advisors in
respect for the capital raising and acquisition of the Intevia business unit. The options vested on the date of issue with an exercisable price of 75 cents (pre
consolidation, $3.75 post). The options will expire on 24 January 2010.
(c)
The Company issued 3,000,000 (pre consolidation, 600,000 post) options to acquire shares in the Company to Mr David Feber on his appointment as the
CEO of Telezygology Inc. by way of two tranches. 1.5 million (300,000) options are exercisable at 60 cents (pre consolidation, $3.00 post) and the reminding
are exercisable at 75 cents (pre consolidation, $3.75 post). Half of both types of tranches vest on the 23 January 2008 and the balance vest on the 23 July
2008. The options will expire on 23 January 2010.
(d)
The Company issued 2,665,500 free options that were attached to 2,665,500 fully paid shares placed during the year . Each option on issue entitles the
holder to one fully paid ordinary share by the payment of the exercise price $4.50 per option at any time before the expiry date of 23 October 2009.
(e)
The Company issued 444,000 options to acquire 444,000 fully paid shares in the Company to staff of the Group on the competition and successful
achievement of their 2007 calendar targets. Of the 444,000 options issued, 295,000 options entitle the holder to one fully paid ordinary share by the payment
of the exercise price $3.75 per options at any time before the expiry date of 19 January 2011, the balance 149,000 options are exercisable at $3.00 per share
at any time before 20 January 2011.
(f)
The Company issued 3,000,000 options to acquire 3,000,000 fully paid shares in the Company on the recent $24 million dollar Convertible note placement as
approved at the Company general meeting held on the 4 February 2008. The options holders are entitled to one fully paid ordinary share by the payment of
the exercise price $4.00 per option at any time before the expiry date of 19 February 2013.
TZ Limited 2008 Annual Report
39
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
13. ISSUED CAPITAL (continued)
(iii) Employee Share Option Plan
No shares have been issued by virtue of an exercise of an option during the year or to the date of this report.
(iv) Uncalled Capital
No calls are outstanding at year end. All issued shares are fully paid.
(v) Terms and Conditions of Unquoted Options
All unquoted options are held by prior or current Directors, employees and consultants to the Company or their associates. Each
option entitles the holder to subscribe for one fully paid share in the Company at the exercise price per share at any time from the date
of issue until expiry of the options subject to various vesting dates.
(vi) Capital Management
Management controls the capital of the Group in order to ensure that the Group can fund its operations and continue as a going
concern. Its capital includes ordinary share capital; share options and reserves; and financial liabilities, supported by financial assets.
Consolidated
Parent Entity
14. RESERVES
2008
$
2007
$
Foreign Currency Translation Reserve
(2,595,661)
2,049,996
2008
2007
$
–
$
–
Share–Based Payment Reserve
1,754,588
934,854
1,754,588
934,854
Total Reserves
(841,073)
2,984,850
1,754,588
934,854
Movements During the Year:
Foreign Currency Translation Reserve
Opening Balance
2,049,996
1,025,289
Adjustment Arising from the Translation of Foreign
Controlled Entities’ Financial Statements
(4,645,657)
1,024,707
Closing Balance
(2,595,661)
2,049,996
–
–
–
–
–
–
40
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
14. RESERVES (continued)
Share Based Payment Reserve
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
opening Balance
Share Based Payment
934,854
819,734
78,000
856,854
934,854
819,734
78,000
856,854
closing Balance
1,754,588
934,854
1,754,588
934,854
15. KEY MANAGEMENT PERSONNEL DISCLOSURES
(a) Directors
The names of persons who were Directors of the Company at any time during the year are:
(i) Non–Executive Director
Mr. Michael Otten
(ii) Executive Directors
Mr. Andrew Sigalla
Mr. John Falconer
(b) Other Key Management Personnel
The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or
indirectly, during the financial year:
Mr. Chris Kelliher
Mr. David Feber
Mr. Dickory Rudduck
Mr. Mark Schwartz
President of TZ Group
CEO TZ Inc.
TZ Inc. Chief Technical Officer
PDT Inc. President and CEO
(c) Key Management Personnel Compensation
Short–Term Benefits
Other Benefits
Share–Based Payments
total
1,956,810
2,076,297
35,505
503,147
–
352,254
1,992,314
2,467,062
280,184
19,816
143,140
300,000
200,000
–
119,004
349,004
The Group has applied the exemption in relation to compensation disclosures under Corporation Amendments Regulation 2006
which exempts listed companies from providing compensation disclosures in relation to KMP in their annual financial reports normally
required by AASB 124 Related Party Disclosures paragraphs Aus 25.4 to 25.7.2. These remuneration disclosures are provided in the
Remuneration Report included in the 2008 Directors’ Report. These transferred disclosures have been audited.
TZ Limited 2008 Annual Report
41
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
15. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
(d) Equity Instrument Disclosures Relating to Key Management Personnel
(i) Options provided as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions
of the options, can be found in section 4 of the remuneration report on pages 10 of the Director report.
(ii) Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each Director of Company and
other Key Management Personnel of the Group, including their personally related parties, are set out below.
(ii) Option holdings
The numbers of options over ordinary shares in the Company held during the financial year by each Director of Company and
other Key Management Personnel of the Group, including their personally related parties, are set out below.
Opening
Balance
Granted as
Compensation
Options
Expired
Options
Exercised
Closing
Balance
Vested &
Exercisable
Unvested
2008
Non–Executive Directors
Michael Otten
200,000
Executive Directors
Andrew Sigalla
–
John Falconer
200,000
Key Management Personnel
Chris Kelliher
David Feber
Dickory Rudduck
Mark Schwartz
100,000
600,000
–
–
1,100,000
2007
Non–Executive Directors
–
–
–
–
–
–
–
–
–
–
–
(100,000)
–
–
–
(100,000)
–
–
–
–
–
–
–
–
200,000
100,000
100,000
–
–
–
200,000
100,000
100,000
–
–
–
600,000
300,000
300,000
–
–
–
–
–
–
1,000,000
500,000
500,000
John Falconer
1,388,182
Michael Otten
–
200,000
200,000
Executive Directors
Andrew Sigalla
1,491,125
Key Management Personnel
Chris Kelliher
4,327,812
–
–
–
–
–
(1,388,182)
200,000
–
200,000
(1,491,125)
–
–
–
–
(100,000)
(4,127,812)
100,000
100,000
200,000
200,000
–
–
David Feber
–
600,000
–
Dickory Rudduck
1,491,125
Mark Schwartz
–
–
–
(1,491,125)
–
–
–
–
600,000
–
–
–
–
–
600,000
–
–
8,698,244
1,000,000
(1,591,125)
(7,007,119)
1,100,000
100,000
1,000,000
All vested options are exercisable at the end of the year.
42
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
15. KEY MANAGEMENT PERSONNEL DISCLOSURES (continued)
(e) Shareholdings
The numbers of shares in the Company held during the financial year by each Director of Company and other Key Management
Personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting
period as compensation.
Opening Balance
Granted as
Compensation
Other
Changes(ii)
Closing Balance
2008
Non–Executive Directors
Michael Otten
Executive Directors
Andrew Sigalla
John Falconer
Key Management Personnel
Chris Kelliher
David Feber
Dickory Rudduck
Mark Schwartz
2007
Non–Executive Directors
John Falconer
Michael Otten
Executive Directors
Andrew Sigalla
Key Management Personnel
Chris Kelliher
David Feber
Dickory Rudduck
Mark Schwartz
38,640
1,266,450
395,273
413,035
–
1,340,000
251,016
3,704,414
1,388,182
208,197
3,500,000
1,416,569
–
7,976,189
–
14,489,137
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
38,640
96,500
1,362,950
–
–
–
–
(125,000)
395,273
413,035
–
1,340,000
126,016
(29,500)
3,675,914
(992,909)
(169,557)
395,273
38,640
(2,233,550)
1,266,450
(1,003,534)
413,035
–
–
(6,636,189)
1,340,000
251,016
251,016
(11,784,773)
3,704,414
(ii)
Included in ‘Net change other’ is the adjustment required to take effects of the share consolidation that was approved at the
Company general meeting held on the 26 March 2007.
TZ Limited 2008 Annual Report
43
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
16. RELATED PARTY TRANSACTIONS
(a) Subsidiary
Interests in Subsidiaries are set out in Note 7.
Loan to Controlled Entities — Non–Current
–
–
9,762,078
10,233,971
These loans are interest free.
There are no fixed terms of repayment.
(b) Transactions with Related Parties
The following transactions occurred with related parties:
Transactions between related parties are on normal commercial terms and conditions unless otherwise stated.
Mr J Falconer, a Director of Dunbar Associates Pty Ltd has provided corporate services to the Company and charged for these
services at normal commercial rates which amounted to $249,111 (2007: $108,685).
Mr A Sigalla, a Director of ZMS Investment Pty Limited has provided management services to the Company and charged for these
services at normal commercial rates which amounted to $300,000 (2007: $241,667). The Company has signed a consultancy
agreement with ZMS Investment Pty Limited with a commencement date 25 January 2007 for a fixed three year, with a base salary of
$25,000 monthly retainer.
Mr M Otten, a Director of No Compromises Pty Ltd has provided consulting services during the year to the Company and charged for
these services at normal commercial rates which amounted to $36,833 (2007: $24,800).
44
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
17. NOTES TO THE CASH FLOW STATEMENT
(a) Reconciliation of Cash
Consolidated
Parent Entity
2008
$
2007
$
2008
$
2007
$
For the purpose of the cash and cash equivalents in the balance sheet and cash
flow statement, cash includes:
Cash at Bank
Deposit on Call
2,598,317
2,854,521
2,006,248
2,114,606
21,310,692
4,741,603
21,310,693
4,741,603
23,909,009
7,596,124
23,316,941
6,856,209
(b) Reconciliation of ‘Net Cash Flow in Operations Activities’
with ‘Net Loss from Continuing Operations’
Loss after Income Tax
(12,330,714)
(10,806,516)
(6,553,484)
(3,492,861)
non–cash Flows in loss
Depreciation
Amortisation of Intangibles
Unrealised Exchange Loss/(Gain)
Share–Based Payments
Employee Entitlements
Doubtful Debts
Changes in Assets and Liabilities
568,580
1,281,892
716,518
1,048,636
6,354
–
448
–
(155,432)
1,150,131
(176,555)
1,119,958
819,735
304,254
819,735
304,254
120,720
(255,423)
95,411
28,438
–
–
–
–
–
–
(Increase)/Decrease in Trade Debtors
290,579
3,153,544
(Increase)/Decrease in Prepayments and Other Debtors
58,455
457,624
(898,455)
(1,367,979)
(Increase)/Decrease in Work in Process
702,035
58,373
–
–
(Decrease)/Increase in Creditors and Accruals
1,210,441
(3,539,388)
401,206
713,046
Cash Flows Used in Operations
(7,903,672)
(7,118,435)
(6,401,199)
(2,723,134)
TZ Limited 2008 Annual Report
45
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
17. NOTES TO THE CASH FLOW STATEMENT (continued)
(c) Non–Cash financing and investing activities
shares issued
•
•
•
On 4 August 2006, the Company issued 5,569,887 pre consolidation fully paid ordinary shares at an issue price of 58.5 cents per
share as final settlement of the consideration for the purchase of PDT entered into in March 2005.
On 23 January 2007, the Company successfully negotiated the acquisition of the Intevia® Business unit from Acument Global
Technologies, Inc. The deal is valued at approximately AUD $24.6 Million with the purchase consideration consisting of the issue of
19,362,404 pre consolidation fully paid ordinary shares at an implied value of AUD $1.27 per share.
On 24 January 2007, the Company issued 847,458 pre consolidation fully paid ordinary shares at 59 cent per share as part of final
payment to external advisors in respect of recent Intevia acquisition and Convertible note issue.
18. SEGMENT INFORMATION
Segment Revenues
Segment Results
segment revenues and results
Engineering and Design
Investments
Total of All Segments
Discontinued Operations
Consolidated
All sales were to customers outside the consolidated entity
2008
$
2007
$
2008
$
2007
$
15,040,394
15,991,764
(5,777,230)
(5,547,152)
1,090,313
452,876
(6,553,484)
(3,492,861)
16,130,707
16,444,640
(12,330,714)
(9,040,013)
–
4,345,667
–
(1,766,503)
16,130,707
20,790,307
(12,330,714)
(10,806,516)
segment assets and liabilities
2008
$
Assets
2007
$
2008
$
Liabilities
2007
$
Engineering and Design
67,617,830
67,553,962
4,246,405
3,684,729
Investments
Total of all segments
Discontinued operations
Consolidated
accounting policies
29,885,445
12,495,552
25,142,577
20,741,371
97,503,275
80,049,514
29,388,982
24,426,100
–
–
–
–
97,503,275
80,049,514
29,388,982
24,426,100
Segment revenues and expenses are to external customers/suppliers and those directly attributable to the segments and include any
joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and
consist principally of cash, receivables, mineral exploration and property, plant and equipment, net of allowances and accumulated
depreciation and amortisation. While most of such assets can be directly attributed to individual segments, the carrying amount of
certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist
principally of payables, employee benefits, accrued expenses, and provisions. Segment assets and liabilities do not include deferred
income taxes.
46
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
18. SEGMENT INFORMATION (continued)
Financial Risk Exposures and Management
Business and Geographical Segments
The Consolidated entity’s predominant activities are the licensing
of its patented intellectual property and operating software,
as well as providing application engineering and technology
development services to manufacturers in the automotive,
aerospace and construction industries.
The Company operates its engineering and design division
predominantly in the USA, while maintaining a presence
in the UK and the Ukraine. The Company operates these
geographical locations with the USA operation and is not
significant to be reported separately. The Company investments
division is predominantly in Australia.
During the year ended 30 June 2007, the Company finalised
the closure of the tooling operations within the engineering and
design division, as detailed in the Company Announcement on
the 1 August 2007.
The main risks the Company is exposed to through its financial
instruments are interest rate risk, foreign currency risk, liquidity
risk, credit risk and price risk.
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.
Sensitivity analysis of reasonable possible variances of +/- 100
basis points in the above risks is disclosed in the following table,
all other variables held constant, the estimated impact on the
post–tax profit and equity would have been:
Consolidated Parent Entity
2008
$
2008
$
Impairment Losses
change in net profit
The Group did not record any impairment loss for the financial
year ended 30 June 2008 (2007: Nil).
Increase in interest rate by 10%
(129,633)
(145,045)
Decrease in interest rate by 10%
129,633
105,045
change in equity
Increase in interest rate by 10%
(129,633)
(145,045)
Decrease in interest rate by 10%
129,633
105,045
19. FINANCIAL INSTRUMENTS
Financial Risk Management Policies
The Company’s financial instruments consist mainly of current
accounts with banks, accounts receivable and payable and loan
to and from subsidiaries.
Treasury Risk Management
Management considers on a regular basis the financial risk
exposures and evaluates treasury management strategies in the
context of the most recent economic conditions and forecasts.
The overall risk management strategy seeks to meet the
Company’s financial targets, whilst minimising potential adverse
effects on financial performance.
Management operates under policies approved by the Board of
Directors who approve and review Risk management policies on
a regular basis. These include future cash flow requirements.
TZ Limited 2008 Annual Report
47
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
19. FINANCIAL INSTRUMENTS (continued)
The following table summarises the interest rate risk and
liquidity risk for the Group, together with the effective weighted
average interest rate for each class of financial assets and
liabilities.
Financial assets
Cash
Receivables
Total Financial Assets
Financial liabilities
Bank Loan
Bills/Installment Notes
Convertible Note
Trade and Sundry Creditors
Weighted Average
Interest Rates
Floating
Interest Rate
2008
2007
2008
$
2007
$
6.79
–
4.94
–
2,598,317
2,854,522
–
–
2,598,317
2,854,522
7.25
5.63
10.00
–
8.25
7.91
10.00
–
771,287
235,544
–
–
–
–
–
–
Total Financial Liabilities
(771,287)
(235,544)
Net Financial Assets
1,827,030
2,618,978
48
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
19. FINANCIAL INSTRUMENTS (continued)
Fixed Interest Maturing in
1 Year or Less
Over 1 to 5 Years
Non
Interest Bearing
2008
2007
2008
2007
2008
$
2007
$
21,310,692
4,741,602
–
–
21,310,692
4,741,602
$
–
–
–
–
$
–
–
–
–
Total
2007
$
2008
$
23,909,009
7,596,124
$
–
$
–
9,455,904
8,997,267
9,455,904
8,997,267
9,455,904
8,997,267
33,364,913
16,593,391
–
–
–
–
–
–
771,287
235,544
202,682
1,630,508
24,000,000
20,000,000
202,682
1,130,508
500,000
–
–
–
–
24,000,000
20,000,000
–
–
3,152,038
1,940,227
3,539,606
1,940,227
(202,682)
(1,130,508)
(24,000,000)
(20,500,000)
(3,152,038)
(1,940,227)
(28,513,575)
(23,806,279)
21,108,010
3,611,094
(24,000,000)
(20,500,000)
6,303,866
7,057,040
4,851,338
(7,212,888)
TZ Limited 2008 Annual Report
49
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
19. FINANCIAL INSTRUMENTS (continued)
The following table summarises the interest rate risk for the
Parent Entity, together with the effective weighted average
interest rate for each class of financial assets and liabilities.
Financial assets
Cash
Receivables
Weighted Average
Interest Rates
Floating
Interest Rate
2008
2007
2008
$
2007
$
6.80
–
5.25
–
2,006,249
2,114,607
–
–
Total Financial Assets
2,006,249
2,114,607
Financial liabilities
Convertible Note
Trade & Sundry Creditors
Total Financial Liabilities
Net Financial Assets
10.00
–
10.00
–
–
–
–
–
–
–
2,006,249
2,114,607
50
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
19. FINANCIAL INSTRUMENTS (continued)
Fixed Interest Maturing in
1 Year or Less
Over 1 to 5 Years
Non
Interest Bearing
2008
$
2007
$
21,310,692
4,741,602
–
–
21,310,692
4,741,602
–
–
–
–
–
–
2008
2007
2008
2007
Total
2007
$
2008
$
23,316,941
6,856,209
$
–
$
–
6,543,950
5,620,492
6,543,950
5,620,492
6,543,950
5,620,492
29,860,891
12,476,701
$
–
–
–
$
–
–
–
24,000,000
20,000,000
–
–
24,000,000
20,000,000
–
–
1,142,577
741,371
1,142,577
741,371
(24,000,000)
(20,00,000)
(1,142,577)
(741,371)
(25,142,577)
(20,741,371)
21,310,692
4,741,602
(24,000,000)
(20,000,000)
5,401,373
4,879,121
4,718,314
(8,264,670)
TZ Limited 2008 Annual Report
51
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
19. FINANCIAL INSTRUMENTS (continued)
Management monitors credit risk by actively assessing the rating
quality and liquidity of counter parties:
Foreign exchange risk exposure
The Group and the parent entity operate internationally and are
exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the US dollar.
Foreign exchange risk arises from future commercial
transactions and recognised assets and liabilities denominated
in a currency that is not the entity’s functional currency and net
investment in foreign operations. The risk is measured using
sensitivity analysis and future cash flow requirement.
The Group foreign exchange risk is managed to ensure sufficient
funds are available to meet US financial commitments in a timely
and cost–effective manner. The Group will continually monitor
this risk with a view of entering into forward foreign exchange,
foreign currency swap and foreign currency option contracts.
•
•
only banks and financial institutions with an ‘A’ rating are
utilised; and
all potential customers are rated for credit worthiness
taking into account their size, market position and financial
standing;
Receivables due from major debtors are not normally secured by
collateral, however the credit worthiness of debtors is monitored.
In the US, trade receivables are monitored monthly and credit
worthiness of customers are continually assessed to determine
the credit risk exposed, bad debts are written off to the income
statement only when all possibility of collection and enforcement
been undertaken.
liquidity risk
The following table demonstrates the estimated sensitivity to a
10% increase/decrease in the US dollar exchange rate, with all
other variables held constant, on post–tax profit and equity:
Liquidity risk is the inability to access funds, both anticipated and
unforeseen, which may lead to the Group being unable to meet
its obligations in an orderly manner as they arise.
change in net profit
Consolidated Parent Entity
2008
$
2008
$
The Group liquidity position is managed to ensure sufficient
funds are available to meet financial commitments in a timely and
cost–effective manner. The Group is primarily funded through
on–going cash flow, debt funding and capital raisings, as and
when required.
Increase in Foreign Ex. by 10%
(739,236)
(181,619)
Decrease in Foreign Ex. by 10%
779,595
221,978
change in equity
Increase in Foreign Ex. by 10%
3,920,342
(181,619)
Decrease in Foreign Ex. by 10% (3,879,983)
221,978
credit risk exposure
Credit risk is the potential that the Group will suffer a financial
loss due to the unwillingness or inability of the counterparty to
fully meet their contractual debts and obligations. Credit risk
arises from both lending and trading activities.
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 provisions
for impairment of those assets, as disclosed in the balance
sheet and notes to the financial statements.
In respect of the parent entity it does not have any material
credit risk exposure to any single debtor or group of debtors
under financial instruments entered into by the Company.
The Group recently obtained $24 million via the placement of
convertible notes, with a deemed interest rate of 10% pa, to fund
the ongoing development of the Group projects. It is anticipated
that the convertible note holder will convert the convertible notes
into shares under the terms and conditions of their issue.
market risk
The Company is subject to the normal economic factors
including volatility of stock market prices and interest rates,
both of which impact the availability of equity and debt capital
respectively.
net Fair Values of Financial assets and liabilities
The fair value of financial assets and financial liabilities must be
estimated for recognition and measurement or for disclosure
purposes.
(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.
52
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
Consolidated
Parent Entity
2008
2007
2008
2007
20. COMMITMENTS FOR EXPENDITURE
$
$
Operating Lease Commitments Payable:
Not Later Than One Year
1,107,323
805,437
Later Than One Year but Not Later Than Five Years
2,105,692
426,705
Later Than Five Years
849,392
–
4,062,407
1,232,142
$
–
–
–
–
$
–
–
–
–
21. EARNINGS PER SHARE
continuing operations
Consolidated
Entity
Consolidated
Entity
2008
2007
Earnings used in the calculation of basic and dilutive from continuing operations
(12,330,715)
(9,040,013)
Basic earnings per share (cents per share) from continuing operations
Diluted earnings per share (cents per share) from continuing operations (i)
(29.04)
(29.04)
(25.30)
(25.30)
discontinuing operations
Earning used in the calculation of basic and dilutive from discontinuing operations
Basic earnings per share (cents per share) from discontinuing operations
Diluted earnings per share (cents per share) from discontinuing operations (i)
–
–
–
(1,766,503)
(4.94)
(4.94)
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
42,466,774
35,729,151
4,809,444
1,568,601
47,276,218
37,297,752
(i) Diluted earnings per share are not reflected, as the result is anti–dilutive in nature.
TZ Limited 2008 Annual Report
53
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
22. EVENTS SUBSEQUENT TO REPORTING DATE
No 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)
(ii)
(iii)
the operations of the Company;
the results of those operations; or
the state of affairs of the Company.
23. AUDITOR’S REMUNERATION
Auditors of the Parent Entity — Taylor’s & Co
Other services from other Auditors
The auditors received no other fees or benefits.
24. SHARE–BASED PAYMENTS
Consolidated
Parent Entity
2008
2007
2008
$
$
$
2007
$
59,979
91,047
45,467
89,633
59,979
45,467
–
–
The following share–based payment arrangements existed at 30 June 2008:
•
•
•
•
On 22 December 2006, 2,000,000 pre consolidation share options were granted to Directors or their associates as approved
by shareholders at the annual general meeting held on 30 November 2006. The first 1,000,000 (200,000 consolidated) of these
options will vest on 22 December 2007 and are exercisable at 75 cents ($3.75 dollars consolidated) per share option at any time
after the vesting date until their expiry on 22 December 2009. The other 1,000,000 (200,000 consolidated) options vest on 22
December 2008 and are exercisable at $1.00 dollar ($5.00 dollars consolidated) per share option at any time after the vesting date
until their expiry on 22 December 2009. The options hold no voting or rights to any dividend and are not transferable. At balance
date, the first tranche of options have vested and at reporting date none of the vested options had been exercised.
On 29 January 2007, 3,000,000 pre consolidation share options were granted to the David Feber on his appointment as
CEO of TZ Inc by a way of two tranches. 1,500,000 options (300,000 consolidated) are exercisable at 60 cents ($3.00
dollars consolidated) and the balance of 1,500,000 options (300,000 consolidated) are exercisable at 75 cents ($3.75 dollars
consolidated) per share option at any time prior to their expiry on 23 January 2010, half of both tranches vest on the 23 January
2008 and the balance of both half vest on the 23 July 2008. The options hold no voting or rights to any dividend and are not
transferable. At balance date, the first tranche of options have vested and at reporting date the second tranche have also vested,
but none of the options have been exercised.
On 29 January 2007, 3,000,000 pre consolidation share options were granted to the Company consultants in lieu of final payment
in relation to the convertible note issue and acquisition of the Intevia Business unit. The 3,000,000 options (600,000 consolidated)
are exercisable at 75 cents ($3.75 dollars consolidated) per share option at any time prior to their expiry on 24 January 2010. The
options hold no voting or rights to any dividend and are not transferable. At reporting date, none of the vested options had been
exercised.
On 18 January 2008, 315,000 share options were granted to a selected number of the Group employees on the completion
of their 2007 objectives, as part of a long–term employee incentive offered by the Group. Of the total 315,000 options issued
295,000 are exercisable at $3.75 per share option at any time prior to their expiry on 19 January 2011. The balance of 20,000
options is exercisable at $3.75 per share option at any time prior to their expiry on 20 January 2011. The options hold no voting or
rights to any dividend and are not transferable. At reporting date, none of the vested options had been exercised.
54
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
24. SHARE–BASED PAYMENTS (continued)
The following share–based payment arrangements were in existence during the period:
Options
Series
Number
Grant Date
Expiry Date
Exercise
Price $
Fair Value at
Grant Date $
1
2
3
4
5
6
7
8
9
10
11
12
200,000
15/07/04
31/12/07
200,000
30/11/06
22/12/09
200,000
30/11/06
22/12/09
300,000
29/01/07
23/01/10
300,000
29/01/07
23/01/10
600,000
29/01/07
24/01/10
34,000
33,000
33,000
97,500
97,500
20,000
18/01/08
18/01/11
18/01/08
18/01/11
18/01/08
18/01/11
18/01/08
19/01/11
18/01/08
19/01/11
18/01/08
20/01/11
5.00
3.75
5.00
3.00
3.75
3.75
3.75
3.75
3.75
3.75
3.75
3.00
0.15
0.83
0.64
1.09
0.92
0.92
1.05
1.79
1.89
1.61
1.53
2.35
The weighted average fair value of the share options granted during the financial year is $1.62 (2007: 84 cents). Options were priced
using a Black Scholes option pricing model. Expected volatility is based on the historical share price volatility.
inputs into the model
1
2
3
4
5
6
7
8
9
10
11
12
Options Series
Grant Date Share Price
Exercise Price Per Option
Expected Volatility
Option Life
Dividend Yield
Risk–Free Interest Rate
$
$
%
Mths
%
%
2.10
2.45
2.45
2.60
2.60
2.60
4.80
4.80
4.80
4.80
4.80
4.80
5.00
3.75 5.00 3.00 3.75 3.75 3.75 3.75 3.75 3.75 3.75 3.00
39
36
–
62
36
–
62
36
–
62
36
–
62
36
–
62
36
–
64
36
–
64
36
–
64
36
–
64
36
–
64
36
–
64
36
–
5.8
6.0
6.0
6.0
6.0
6.0
5.8
5.8
5.8
5.8
5.8
5.8
TZ Limited 2008 Annual Report
55
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
24. SHARE–BASED PAYMENTS (continued)
The following reconciles the outstanding share options granted at the beginning and end of the financial year:
2008
2007
Number of
Options
Weighted Average
Exercise Price $
Number of
Options
Weighted Average
Exercise Price $
1,800,000
6,109,500
(200,000)
–
7,709,500
7,346,000
4.22
4.18
(5.00)
–
4.10
4.08
400,000
1,600,000
(200,000)
–
1,800,000
800,000
4.37
4.00
(3.75)
–
4.22
4.58
Balance at Beginning of Financial Year
Granted During the Financial Year
Lapsed During the Financial Year
Exercised During the Financial Year
Balance at End of the Financial Year
Exercisable at End of the Financial Year
exercised during the year
No share options granted as remuneration were exercised during the financial year:
recognition of share–Based payments expense
The total value of options included in remuneration for the year is calculated in accordance with Accounting Standard AASB 2 ‘Share–
based Payment’. The Standard requires the value of the options to be determined at grant date and to be recognised as an expense in
the income statement over the vesting period. Consequently a share option expense of $819,735 (2007: 856,854) was recognised and
expensed for the year, $819,735 (2007: 304,254) directly in the income statement while the balance $Nil (2007: 552,600) was capitalised
to the balance sheet on the business unit acquired during the year as final payment and part consideration to external adviser.
25. PENDING APPLICATION OF ACCOUNTING STANDARDS
56
TZ Limited 2008 Annual Report
notes to the Financial statements (CONTINUED)
FOR THE FINANCIAL YEAR ENDED 30 JUne 2008
The following Australian Accounting Standards have been issued or amended and are applicable but are not yet effective. They have
not been adopted in preparation of the financial statements at the reporting date:
AASB Amendment
Title
Application Date of
Standard
AASB 2007–3 Amendments to Australian Accounting
Standards; & AASB 81
AASB 6, 8, 107,119,
127, 114
AASB 2007–6 Amendments to Australian Accounting
Standards& AASB 1232
AASB 101,107, 111,
116, 138, 123
1 July 2009
1 July 2009
AASB 2007–8 Amendments to Australian Accounting
Standards& AASB 1013
AASB 101
1 July 2009
Notes:
1.
2.
3.
The disclosure requirements of AASB 114: Segment Reporting have been replaced due to the issuing of AASB 8: Operating
Segments in February 2007. These amendments will involve changes to segment reporting disclosures within the Financial
Report.
The revised AASB 123: Borrowing Costs issued in June 2007 has removed the option to expense all borrowing costs.
This amendment will require the capitalisation of all borrowing costs directly attributable to the acquisition, construction
or production of a qualifying asset. At balance date the Group has no borrowing costs attributable to the acquisition,
construction or production of a qualifying asset.
The revised AASB 101: Presentation of Financial Statements issued in September 2007 requires the presentation of a
statement of comprehensive income and makes changes to the statement of changes in equity.
26. GROUP DETAILS
the registered office of the group is:
TZ Limited (TZL)
Level 1, 37 Bligh Street,
Sydney, NSW 2000 Australia
the principal place of business is:
Telezygology Inc. (TZI)
520 W. Erie Street
Suite 210
Chicago, Illinois 60654
PDT Holdings, Inc. (PDT Group)
One Corporate Drive
Suite 110
Lake Zurich, Illinois 60047
3021 Harbor Lane
Suite 205
Plymouth, Minnesota 55447
4661 Johnson Road
Suite 3
Coconut Creek, Florida 33073
2900 W. Maple Rd.
Suite 210
Troy, Michigan 48084
520 W. Erie Street
Suite 100
Chicago, Illinois 60654
71 Chuprynky Street
Lviv 79044
Ukraine
503 Neches Street
Austin, Texas 78701
9701 Wilshire Boulevard
Suite 900
Beverly Hills, California 90212
Ives Gate Lane
Great Milton
Oxford, OX44 7NJ
United Kingdom
TZ Limited 2008 Annual Report
57
directors’ declaration
The Directors of TZ Limited declare that:
1.
The financial statements and associated notes of the Company and of the economic entity for the financial year ended 30 June
2008:
(a)
(b)
(c)
Are in accordance with the Corporations Act 2001;
Comply with Accounting Standards and the Corporations Act 2001; and
Give a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June 2008 and the
performance for the year ended on that date;
2.
The Chief Executive Officer and Chief Finance Officer have each declared that:
(a)
(b)
(c)
The financial records of the Company for the financial year have been properly maintained in accordance with section 286 of
the Corporations Act 2001;
The financial statements and notes for the financial year comply with the Accounting Standards; and
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
30 September 2008
Sydney, Australia
58
TZ Limited 2008 Annual Report
independent aUditor’s report
TO THE MEMBERS OF tZ limited
Report on the Financial Report
We have audited the accompanying financial report of TZ
Limited, which comprises the balance sheet as at 30 June
2008, and the income statement, statement of changes
in equity and cash flow statement for the year ended on
that date, a summary of significant accounting policies and
other explanatory notes and the Directors’ declaration of the
consolidated entity comprising the Company and the entities
it controlled at the year’s end or from time to time during the
financial year.
directors’ responsibility for the Financial report
The Directors of the Company are responsible for the
preparation and fair presentation of the financial report in
accordance with Australian Accounting Standards (including the
Australian Accounting Interpretations) and the Corporations Act
2001. This responsibility includes establishing and maintaining
internal controls relevant to the preparation and fair presentation
of the financial report that is free from material misstatement,
whether due to fraud or error; selecting and applying
appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
auditor’s responsibility
Our responsibility is to express an opinion on the financial report
based on our audit. We conducted our audit in accordance
with Australian Auditing Standards. These auditing standards
require that we comply with relevant ethical requirements
relating to audit engagements and plan and perform the audit to
obtain reasonable assurance whether the financial report is free
from material misstatement.
Report on the Remuneration Report
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial report.
The procedures selected depend on the auditor’s judgement,
including the assessment of the risks of material misstatement
of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity’s preparation and fair presentation of the
financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity’s internal
control. An audit also includes evaluating the appropriateness of
accounting policies used with the reasonableness of accounting
estimates made by the Directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
auditor’s opinion
In our opinion, the financial report of TZ Limited is in accordance
with the Corporations Act 2001, including:
(a)
giving a true and fair view of TZ Limited’s and
consolidated entity’s financial position as at 30 June
2008 and of their performance for the year ended on
that date; and
(b)
complying with Australian Accounting Standards
(including the Australian Accounting Interpretations)
and the Corporations Regulations 2001.
We have audited the Remuneration Report included in the Director’s report for the year ended 30 June 2008. The Directors of the
Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the
Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
auditor’s opinion
In our opinion with Remuneration Report of TZ Limited for the year ended 30 June 2008 complies with Section 300A of the
Corporations Act 2001.
Stephen Taylor
Principal, Taylor & Co.
30 September 2008
Sydney, Australia
TZ Limited 2008 Annual Report
59
corporate coVernance
The Board has formally reviewed the ASX Corporate Governance Council paper entitled “Principles of Good Corporate Governance
and Best Practice Recommendations” which was published in March 2003. The Company is a small company and accordingly the
Directors consider that many of the corporate governance guidelines intended to apply to larger companies are not practical.
The Company’s position on those recommendations is set out below;
Principle 1: Lay Solid Foundations for Management and Oversight
role of the Board
The Board’s primary responsibility is to oversee the Company’s business activities and management for the benefit of shareholders
which it accomplishes by:
•
•
•
•
•
•
establishing corporate governance, and ethical, business standards;
setting objectives, goals and strategic direction with a view to maximise shareholder value;
approving and monitoring budgets and major investments;
ensuring adequate internal controls exist and are appropriately monitored;
ensuring significant business risks are identified and appropriately managed;
appointing the CEO and monitoring the CEO’s performance;
The Board has delegated responsibilities and authorities to management to enable management to conduct the Company’s day to day
activities. Matters which are not covered by these delegations, such as approvals which exceed certain limits, require Board approval.
Apart from the statements on responsibility the Company has not formalised the functions reserved to the Board and those delegated
to management for the reasons noted above.
Principle 2: Structure the Board to Add Value
The composition of this Board is determined using the following principles:
•
Directors appointed by the Board are subject to election by shareholders at the following annual general meeting and thereafter
Directors are subject to re–election at least every three years.
The names of the Directors in office at the date of this Report, the date they were appointed, their status as Non–Executive, Executive
or Independent Directors, whether they are retiring by rotation and seeking re–election by shareholders at the 2007 Annual General
Meeting, are set out in the table below:
Director
Appointed
Non–
Executive
Independent
Retiring at
2008 AGM
Seeking Re–Election
at 2008 AGM
John Falconer
6 February 2004
Michael Otten
7 July 2006
Andrew Sigalla
29 January 2007
No
Yes
No
No
No
No
Yes
No
No
Yes
No
No
The main areas of divergence with recommended principles are:
•
•
•
The Chairman is not independent and is an Executive Director.
The Company does not have a formally constituted Audit Committee, Board Nominations Committee or Remuneration Committee.
The majority of Directors are not independent.
Each Director of the Company has the rights to seek independent professional advice at the expense of the Company.
60
TZ Limited 2008 Annual Report
corporate goVernance (CONTINUED)
Principle 3: Promote ethical and responsible
decisions–making
The Company does not have a formal code of conduct reflecting
the Company’s small size and the close interaction of the small
number of individuals throughout the organisation. However the
Directors are aware of their legal responsibilities and adhere to
the following policy.
The Directors will not deal in Company shares:
•
Except between three and 30 days after either the release
of the Company’s half year and annual results to the
Australian Securities Exchange, the annual general meeting
or any major announcement.
•
Whilst in possession of price sensitive information.
In accordance with the Corporations Act 2001 and the Listing
Rules of the Australian Securities Exchange, Directors advise
the ASX of any transactions conducted by them in shares in the
Company.
The Board encourages full participation of shareholders at the
annual general meeting to ensure high level of accountability
and identification of the consolidated entity’s strategic goals.
Important issues are presented to the shareholders as single
resolutions.
The Company requests the external auditor to attend the
general meeting.
Principle 6: Recognise and Manage Risk
The Company is a small company and does not believe that
there is significant need for formal policies on risk oversights and
management. However, the Board considers risk exposure and
management as a standing agenda item at board meetings.
Risk management arrangements are the responsibility of the
Board of Directors.
Principle 7: Encourage Enhanced Performance
The Company does not have a Remuneration Committee.
Principle 4: Safeguard Integrity in Financial Reporting
There has been no formal performance evaluation of the Board
during the past financial year.
The Company Secretary is responsible for producing the
financial results and has stated in writing to the other members
of the Board that the Company’s consolidated year end financial
statements present a true and fair view, in all material respects,
and are in accordance with relevant accounting standards.
The Company and its Directors are aware of continuous
disclosure requirements under the Listing Rules and
Corporations Act and operate in an environment where strong
emphasis is placed on full and appropriate disclosure. The
Company does not have formal written policies regarding
disclosure, but uses strong informal systems underpinned by
experienced individuals.
Principle 9: Remunerate Fairly and Responsibly
There are no formal remuneration policies maintained by the
Company. Details of the Company’s policy for determining
the nature and amount of emoluments of Board members
and senior Executives of the Company are contained in the
Directors’ report.
In accordance with Corporations Act requirements, the
Company discloses the fees or salaries paid to all Directors, and
Executive Officers of the Company.
Principle 5: Respects the Rights of Shareholders
Principle 9: Recognise the Legitimate Interests of
Stakeholders
The Company does not have a communications strategy to
promote effective communication with shareholders, as it
believes this is excessive for small companies. The Company
maintains a website which is used in conjunction with timely
announcements to the ASX to ensure shareholders are kept fully
informed.
The Company also aims to ensure that the shareholders are
informed of all major developments through:
The Company does not have a formal Code of Conduct to
guide compliance with legal and other obligations. This reflects
the Company’s size which makes its legal compliance a less
onerous task than with larger companies.
The Board of Directors continues to review the situation to
determine the most appropriate and effective operational
procedures.
•
•
•
Despatch of the annual and half yearly financial reports.
Despatch of all notices of meetings of shareholders.
Submitting to a vote of shareholders proposed major
changes in the consolidated entity which may impact on
share ownership rights.
TZ Limited 2008 Annual Report
61
stocK exchange inFormation
Statement of Quoted Securities as at 29 August 2008
•
•
•
There are 3,021 shareholders holding a total of 48,479,325 ordinary fully paid shares.
The twenty largest shareholders between them hold 52.74% of the total shares on issue.
Voting rights are that on a show of hands each member present in person or by proxy or attorney or representative shall have one
vote and upon a poll every member so present shall have one vote for every fully paid share held and for each partly paid share
held shall have a fraction of a vote pro–rata to the amount paid up on each partly paid share relative to its issue price.
Distribution of Quoted Shares and Options as at 29 September 2008
Shares Range
Number of Holders
1 — 1,000
1,001 — 5,000
5,001 — 10,000
10,001 — 100,000
100,001 — and over
total holders
1,151
1,148
300
363
59
3021
There were 116 shareholders whose total holding had a market value of less than $500 at 29 September 2008.
Substantial Shareholdings as at 29 September 2008
The following shareholders have notified the Company that, pursuant to the provisions of section 671B of the Corporations Act 2001,
they are substantial shareholders.
Substantial
Shareholder
Total Relevant
Interest
% of Total Voting Rights
at 29 September 2008
Acument Global Technologies INC
3,613,637ordinary shares
7.45
Directors’ Shareholdings
As at 29 September 2008 Directors of the Company held a relevant interest in the following securities on issue by the Company.
Director
J Falconer
M Otten
A Sigalla
Ordinary
Shares
551,273
38,640
1,518,950
Unquoted
Options
200,000
200,000
Nil
On–Market Buy–Backs
There is no on–market buy back currently in place.
62
TZ Limited 2008 Annual Report
stocK exchange inFormation (CONTINUED)
Top Twenty Holders of Ordinary Shares at 29 September 2008
Shareholder Name
National Nominees Limited
Acument Global Technologies Inc.
Merril Lynch (Australia) Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited
ANZ Nominees Limited
Citicorp Nominees Pty Limited
Mr Lindsay James Gallagher & Mrs Esme Gallagher
Merril Lynch (Australia) Nominees Pty Limited
Dr Patrick Chee Hing Chew
Mr John Michael Bouwman & ms Amanda Louise Mitchel
Mr Patrick Chew
Mr Ramon Karangis & Mrs Julie Karangis
HSBC Custody Nominees (Australia) Limited–Gsi Ecsa
Lippo Securities Nominees (BVI) Ltd
Joyeagle Limited
Profit Pearl Holdings Ltd
Mr Lindsay James Gallagher
Dr Patrick Chew
Forbar Custodians Limited
Mr Patrick Chee Hing Chew
Number of Shares Held % of total
9,763,259
20.14
3,613,637
2,465,651
2,176,220
1,282,648
636,612
577,393
550,286
500,000
475,807
475,771
445,000
437,275
396,228
354,992
312,983
310,029
268,501
264,635
260,000
7.45
5.08
4.49
2.65
1.31
1.19
1.14
1.03
0.98
0.98
0.92
0.90
0.82
0.73
0.65
0.64
0.55
0.55
0.54
total held by top twenty holders of ordinary shares
25,563,927
52.74
Note the above list does not identify related party holdings, readers should have regards to substantial shareholders notices and
Directors declarations.
Voting Rights
All shares have equal voting rights.
TZ Limited 2008 Annual Report
63