TZ Limited
ABN 26 073 979 272
21 October 2011
Lodged by ASX Online
The Manager
Company Announcements Office
ASX Limited
Level 4, 20 Bridge Street
Sydney NSW 2000
Dear Sir/Madam
2011 ANNUAL REPORT
Please find attached the Annual Report for TZ Limited (ASX Code: TZL) for the year
ended 30 June 2011.
A copy of the 2011 Annual Report, as attached, has been dispatched to
shareholders who elected to receive a printed copy. Other shareholders are invited
to view the Annual Report online on the Company's website, www.tz.net.
Yours faithfully,
TZ LIMITED
Kenneth Ting
Company Secretary and Executive Director
TZ LimitedLevel 11, 1Chifley Square, Sydney, NSW 2000 AustraliaPhone: +612 9222 8890 Fax: +612 8208 9937
Limited
2011
annual report
contents
SECTION ONE
1
Chairman’s Welcome
A message from Mark Bouris,
Executive Chairman, TZ Limited.
5
2011 Highlights
9
Kenneth Ting
A message from Kenneth Ting, Executive
Director & Company Secretary, TZ Limited.
13
Dickory Rudduck
A message from Dickory Rudduck, Executive
Director & Founder / Inventor, TZ Limited.
17
John Wilson
A message from John Wilson,
President & CEO, Telezygology, Inc.
21
Mark Schwartz
A message from Mark Schwartz,
President & CEO, PDT, Inc.
SECTION TWO
1
2011 Financial Statements
“
I have never been
more excited
about the future
of this company
as I am today.”
1
mark
bouris CHAIRMAN’S
WELCOME.
I am often asked why I got involved with TZ Limited.
I have a keen interest in technology and the Internet of Things
(IOT), specifically with regards to how the exchange of information
is used to optimise efficiency and productivity in the workplace
and in life. When I was approached to join the Board at TZ Limited,
I did so because I saw uniqueness in the company’s philosophy
and a real possibility in the solutions it had created. I’m proud to
say that leading into 2012, that possibility I saw in the beginning of
my tenure with TZ Limited has become a reality. I have never been
more excited about the future of this company as I am today.
This past year was about creating an end-to-end solution that
could disrupt the market and deliver our products to customers
around the world. Whilst technology has always been our foremost
priority, 2011 became the year where we could focus on providing
the big picture. We had created the framework, built a demand
and now we are achieving what we set out to do.
Today, TZ Limited is not only developing and manufacturing
products, but we’re out there trading with some of the most
reputable and forward thinking companies in the world.
The best way to describe 2011 is to call it a year of progress.
TZ Limited is an innovator, which means that we often create the
solution before the problem is identified. This year, global business
and consumer demand finally caught up with TZ’s supply. In 2011,
data centre expansion and online shopping catapulted globally,
and today they are two of the most talked about sectors in the
technology world. This is the opportunity that TZ Limited and
specifically Telezygology, Inc (TZI) had been waiting for. We were
ready for the upsurge, and now we are selling these solutions on
an ever-growing international scale.
It goes without saying that 2011 was a difficult year,
specifically in TZ Limited’s two largest markets, North
America and Europe. Financial headwinds and government
uncertainty played a large part in the company’s capacity to
close a number of anticipated purchase orders, but these
impediments also revealed significant opportunities.
What we have learned from the current financial landscape
is that anything can happen, which is why we’ve put much
effort into increasing our presence in Asian markets that
have demonstrated economic resilience. We’re currently
working on licence agreements in China and India and we
will look to these markets for significant growth in 2012.
With regards to business in North America and Europe,
we expect that once economic uncertainty clears capital
expenditure budgets will open up, particularly in the security
and protection sectors.
I credit much of our success this year to the relationships
we have built with our distributors. Companies such
as Anixter and Pitney Bowes are globally recognised
influencers and this year we worked side-by-side to increase
our distribution in North America and Europe, and then
capitalised on that strength to progress into other markets.
We have built an impressive Australasian footprint in a short
amount of time and much of this growth can be credited to
our partners who believe in our technology and can identify
with our vision. TZ Limited is a disruptive software player
and sometimes our level of modernisation is not easy to
grasp, so I’d like to thank our partners who see where we
are headed and have supported us over this past year.
I expect TZ Limited is going to be the one to watch in 2012,
and we’re proud to have distributors of such a high calibre
standing beside us both today and in the future.
“
The best way
to describe 2011
is to call it a year
of progress.”
3
“
I expect TZ is
going to be the one
to watch in 2012.”
I believe 2012 will be a watershed year for TZ Limited.
We have laid the foundation, built the distribution
capacity and we are set up to align perfectly with two
of the biggest booms in technology.
TZ Limited has spent the past two years developing our
sales resource and now is the time to introduce our next
generation technology which will open the door for new
applications and opportunities. Strategic insight will be
crucial for TZ Limited’s evolution and I’d like to thank
Kenneth Ting for his leadership and direction this past
year. We have the greatest minds in the industry on our
team and these people will be vital to cement TZ Limited
as a global leader in our field.
This company would not be where it is today without
the determination of our team and the support of our
partners, shareholders and customers. On behalf of the
Whilst TZ Limited has spent much of 2011 introducing
Board of Directors, I would like to thank everyone who
our solutions to international markets, the company
has played a part in the evolution of this business.
has also been on the forefront of identifying new
opportunities for its design sector.
As I said earlier, 2011 was a year of progress for TZ
Limited, which came about because of the people
PDT had an explosive year of not only delivering top line
who believed in our capability and possessed a sheer
growth and revenue for the business, but also finding
dedication to see it ultimately succeed. There is still
ways in which to implement the company’s design and
plenty of work to be done, but I am so proud of what
innovation into previously unexplored sectors.
we have achieved and I look forward to heading into
the future with such an exceptional and inspiring team
PDT is working with entities in the military, consumer
alongside me.
and medical fields to engineer solutions that increase
both efficiency and precision, and the company is being
sought after for projects in the United States, Europe
and the Middle East. We expect that the demand
for PDT’s innovation will grow substantially as our
MARK BOURIS,
completed projects gain notoriety for their success.
EXECUTIVE CHAIRMAN, TZ LIMITED.
5
2011
highlights
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ongoing working capital requirements
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(cid:1)
(cid:1)
including TZ Centurion System (July 2010), TZ Centurion Server
Enterprise Software (release May 2011), TZ Courier (July 2010),
TZ Concierge (January 2011) and most recently TZ APX (June 2011)
(cid:116)(cid:1) (cid:52)(cid:86)(cid:81)(cid:81)(cid:77)(cid:90)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:37)(cid:74)(cid:84)(cid:85)(cid:83)(cid:74)(cid:67)(cid:86)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:34)(cid:72)(cid:83)(cid:70)(cid:70)(cid:78)(cid:70)(cid:79)(cid:85)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:49)(cid:74)(cid:85)(cid:79)(cid:70)(cid:90)(cid:1)(cid:35)(cid:80)(cid:88)(cid:70)(cid:84)(cid:1)(cid:34)(cid:86)(cid:84)(cid:85)(cid:83)(cid:66)(cid:77)(cid:74)(cid:66)(cid:1)(cid:9)(cid:49)(cid:35)(cid:34)(cid:10)
(cid:116)(cid:1) (cid:37)(cid:70)(cid:81)(cid:77)(cid:80)(cid:90)(cid:70)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:109)(cid:83)(cid:84)(cid:85)(cid:1)(cid:68)(cid:80)(cid:78)(cid:78)(cid:70)(cid:83)(cid:68)(cid:74)(cid:66)(cid:77)(cid:1)(cid:74)(cid:79)(cid:84)(cid:85)(cid:66)(cid:77)(cid:77)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:80)(cid:71)(cid:1)(cid:66)(cid:1)(cid:53)(cid:59)(cid:1)(cid:36)(cid:80)(cid:79)(cid:68)(cid:74)(cid:70)(cid:83)(cid:72)(cid:70)™
packaged asset delivery system at The Sterling Apartments in
downtown Chicago
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market through exclusive distribution partner Anixter
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the demand pipeline across the five major geographic jurisdictions
namely the US, Canada, Europe and the Middle East, Latin America
and Asia Pacific
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Institutions and Financial Services providers
(cid:116)(cid:1) (cid:37)(cid:70)(cid:87)(cid:70)(cid:77)(cid:80)(cid:81)(cid:70)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:105)(cid:53)(cid:59)(cid:1)(cid:51)(cid:70)(cid:66)(cid:69)(cid:90)(cid:119)(cid:1)(cid:81)(cid:83)(cid:80)(cid:72)(cid:83)(cid:66)(cid:78)(cid:1)(cid:85)(cid:80)(cid:1)(cid:66)(cid:68)(cid:85)(cid:74)(cid:87)(cid:70)(cid:77)(cid:90)(cid:1)(cid:85)(cid:66)(cid:83)(cid:72)(cid:70)(cid:85)(cid:1)(cid:68)(cid:66)(cid:67)(cid:74)(cid:79)(cid:70)(cid:85)(cid:1)(cid:1)
(cid:1)
manufacturers to support adoption of TZ’s intelligent locking systems
as part of their standard offering and to build broader distribution
of TZ’s IXP product line
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(cid:1)
privately-held logistics tracking software development company,
for the non-exclusive sale and distribution of TZ Courier in the USA
7
2011
highlights
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Australian integrated logistics service provider to supply TZ’s
intelligent locker systems for trial evaluation as part of a strategic
initiative to create and significantly enhance consumer options for
parcel distribution in Australia
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Limited and NEXTDC Limited for the supply of the TZ Centurion™
System for NEXTDC’s cabinet-level micro-protection solution for
its Brisbane and Melbourne data centres
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Journal for the 3-D CLEAN UV Disinfection & Sanitation Device,
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(cid:1) (cid:40)(cid:70)(cid:79)(cid:70)(cid:83)(cid:66)(cid:85)(cid:74)(cid:80)(cid:79)(cid:1)(cid:49)(cid:70)(cid:83)(cid:76)(cid:74)(cid:79)(cid:84)(cid:16)(cid:34)(cid:49)(cid:41)(cid:1)(cid:35)(cid:83)(cid:66)(cid:74)(cid:77)(cid:77)(cid:70)(cid:1)(cid:56)(cid:83)(cid:74)(cid:85)(cid:70)(cid:83)(cid:13)(cid:1)(cid:66)(cid:79)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:52)(cid:53)(cid:38)(cid:51)(cid:42)(cid:52)(cid:1)(cid:1) (cid:1)
(cid:1)
(cid:1)
Surgical Scrub Sink
(cid:116)(cid:1) (cid:49)(cid:37)(cid:53)(cid:8)(cid:84)(cid:1)(cid:83)(cid:70)(cid:87)(cid:70)(cid:79)(cid:86)(cid:70)(cid:84)(cid:1)(cid:72)(cid:83)(cid:70)(cid:88)(cid:1)(cid:84)(cid:74)(cid:72)(cid:79)(cid:74)(cid:109)(cid:68)(cid:66)(cid:79)(cid:85)(cid:77)(cid:90)(cid:1)(cid:74)(cid:79)(cid:1)(cid:39)(cid:58)(cid:19)(cid:17)(cid:18)(cid:18)(cid:1)(cid:69)(cid:86)(cid:70)(cid:1)(cid:85)(cid:80)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:72)(cid:83)(cid:80)(cid:88)(cid:85)(cid:73)
of the software team
(cid:116)(cid:1) (cid:49)(cid:37)(cid:53)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:77)(cid:70)(cid:85)(cid:70)(cid:69)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:88)(cid:70)(cid:77)(cid:77)(cid:1)(cid:81)(cid:86)(cid:67)(cid:77)(cid:74)(cid:68)(cid:74)(cid:84)(cid:70)(cid:69)(cid:1)(cid:69)(cid:70)(cid:71)(cid:70)(cid:79)(cid:68)(cid:70)(cid:1)(cid:81)(cid:83)(cid:80)(cid:72)(cid:83)(cid:66)(cid:78)(cid:1)(cid:71)(cid:80)(cid:83)(cid:1)(cid:36)(cid:80)(cid:80)(cid:77)(cid:109)(cid:83)(cid:70)(cid:1)(cid:1)
Solutions to develop SCOUT, a SATCOM Toolkit modelled after
a smartphone that combines 160 pounds of disconnected pieces
of equipment and applications into a robust, yet sleek, package
controlled by an Apple iPhone
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(cid:1)
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“
we have some of the most reputable
and innovative companies in the world
using our products.”
9
kenneth
ting
EXECUTIVE DIRECTOR &
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I have spent most of my working life commercialising
technology, and the two questions that are always at the
front of my mind are, “Will this technology be the next big thing?”
and “Can this technology make money?”
I often wonder how I would have answered these two questions if
I was introduced to TZ back some twelve years ago when Dickory
lodged the first TZ patents. At that time the Internet was slow, most
mobile phones were not web enabled and the microprocessors
proposed to run our SMArt Devices™ were large in size and very
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predicted that mobile phones would be used to communicate with
and control our SMArt Devices™.
Today, the Internet is fast and ubiquitous and microprocessors,
costing as little as 50 cents, are more powerful than super
computers the size of a small room were 30 years ago. Dickory’s
prediction is now a reality and our customers are using their smart
phones to communicate with TZ products to solve real world
problems. In 2011, we have some of the most reputable and
innovative companies in the world using our products because they
think that we can provide them with an edge over their competitors.
The technological advances in the last decade have created a world
where things and people are becoming increasingly inter connected.
This is the era of the Internet of Things (IOT). This is an era where
sensors on everyday things transmit information and statistics
about their environments and pre-programmed algorithms initiate
actions based on that transmitted information. Take for example an
intelligent fridge – if there is no milk in the fridge, the fridge senses
the need and will order more milk or send you an SMS reminding
you to pick up milk on the way home.
Consider that same capability in the
As economic conditions improve in North America and
scope of TZ’s data centre offering,
Europe, we will continue to build our sales pipeline,
sensors attached to TZ SlideHandle™
maintain a credible track record of high profile deployments
can tell a technician via SMS that he
and increase brand recognition for TZ technology.
needs to replace something in the
data cabinet and can also order the
There are many IOT companies attempting to establish
parts for him.
a footprint for their networked devices. For example, a
Californian based venture capital-backed company is
Technology pundits say that in the
addressing mass adoption by integrating and networking
next decade, IOT will be the most
with LED lighting — based on the principle that electric
disruptive and most important
lighting is needed everywhere. They believe their footprint
technological advancement for
of IOT devices can be rolled out quickly by attaching
mankind. Now that most of the
sensors to networked LED lights in new buildings.
technological challenges of IOT have
been resolved, the biggest challenge
Using smart locks and fastening devices, TZ has
facing the IOT movement is building
approached the IOT mass adoption problem from a
a large footprint of networked
different angle. Our approach is based on the principle
devices. Until there is a large global
that virtually everything needs to be fastened or locked
ecosystem of networked IOT devices,
together. With power and data infrastructure being
there cannot be mass adoption.
available in almost all environments today and with security
Anixter and Pitney Bowes are two
being an increasing driver for change, the spread and
of the largest distributors and most
potential application of our technology is significant. We are
respected companies in their sectors
also fortunate in that PDT provides a channel to introduce
and our partnerships with these
our technology into their customer’s new products.
two leading companies give me
great confidence that we have the
At the core of all TZ product offering is software and one
networks and distribution bandwidth
of TZ’s five patented types of fasteners. One of the five
to support mass deployment of our
fasteners that most shareholders will be familiar with to
IOT technology. We have seen that
date is the TZ Radial™ which is used in our IXP and PAD
with the help of our partners and the
product offering. Most IOT devices today are focused
relatively strong economy in Australia
around sensing and the communication of information with
in 2011, we were able to build an
other devices in the same IOT ecosystem but what makes
impressive footprint in Australia in a
our SMArt Devices™ unique is that in addition to sensing
relatively short period of time.
and communication capability, our devices also perform
a physical function through our unique SMA technology
11
3
“
we were able to build an impressive footprint in
Australia in a relatively short period of time.”
which enables remote actuation (physical movement).
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Without actuation to perform a responsive action at
they will invest their resources and attention to quickly
the remote location, there is limited utility in just having
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sensors and intelligence reporting on status.
their goal to become an IOT world leader and Chinese
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of sensors and intelligent objects with the plan to supply
globally. One of the reasons for Facebook’s quick mass
a growing market and establish global standards that
manufacturers have started focusing on the new world
adoption is the fact that is has opened its software API
aid interoperability.
so that other social networks and software platforms
can interact with it. The interoperability of TZ’s SMArt
Every day, more and more mobile phone manufacturers
Devices™ ecosystem with other IOT ecosystems could
such as Apple, Blackberry and Samsung are introducing
likewise fuel mass adoption of TZ technology.
improvements to their hardware and software, making
it easier for humans to interact with the IOT ecosystem.
All of TZ’s products have been built with an open
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architecture to ensure operability with as many third
dollars in building the environment for mass adoption of
party technologies as possible. Our goal is to create a
IOT devices, TZ technology is well placed to benefit from
permissions-based “Facebook of Things” in which other
this wave of market sentiment.
IOT ecosystems can seamlessly communicate with our
networked SMArt Devices™ ecosystem to ensure a rich
Our task ahead is to continue to be at the forefront
and intelligent environment.
of the IOT movement and to ensure that our SMArt
So how real is a global ecosystem of TZ SMArt
with other companies’ technologies and that we
Devices™? In the last year, several events have occurred
carefully select the right sectors to roll-out our SMArt
that facilitates the mass adoption of TZ technology.
Devices™. We also need to be vigilant in continuing to
Devices™ and software continue to interoperate
improve our core device technology and to keeping
abreast of advancements in sensor development and
communication protocol.
So with the technological advancements that have
occurred since we lodged our first patents and knowing
the robust platform for growth that we have taken the
time to build in the last two years, if I were asked today if
TZ technology is the next big thing and if this technology
can make money? I would respond with a resounding
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“This year’s technology
development push
was driven around
supporting the
TZ Infrastructure
Protection (IXP)
and TZ Packaged
Asset Delivery (PAD)
product lines.”
13
dickory
rudduck
DIRECTOR & FOUNDER / INVENTOR,
TZ LIMITED.
The past year’s focus on sales has given the technology
development team an unprecedented opportunity to listen
to customers and apply what we hear to successfully place
our devices in the real world. Every day we’re using this insight to
target the right devices on which to focus for growth and to choose
the right companies with which to align.
This year’s technology development push was driven around
supporting the TZ Infrastructure Protection (IXP) and TZ Packaged
Asset Delivery (PAD) product lines. As a result of that focus, both
product lines have been strengthened significantly at both the
hardware and software levels.
The hardware has, at its core, the TZ Radial™ device — one of
TZ’s five patented families of fasteners. Technical development has
continuously expanded the capability and functionality of this device
and its connecting system — due in large part by incorporating the
TZ Radial™ into more and more new products.
For the new IXP “TZ Ready” program, the TZ Radial™ — in the form
of the TZ SlideHandle™(cid:1)(cid:137)(cid:1)(cid:74)(cid:84)(cid:1)(cid:68)(cid:80)(cid:78)(cid:81)(cid:66)(cid:85)(cid:74)(cid:67)(cid:77)(cid:70)(cid:1)(cid:88)(cid:74)(cid:85)(cid:73)(cid:1)(cid:80)(cid:87)(cid:70)(cid:83)(cid:1)(cid:25)(cid:17)(cid:6)(cid:1)(cid:80)(cid:71)(cid:1)(cid:85)(cid:73)(cid:70)(cid:1)(cid:78)(cid:66)(cid:75)(cid:80)(cid:83)(cid:1)
cabinets supplied in the market. The TZ SlideHandle™ has also
successfully been adapted from cabinet locking to offering solutions
for sliding door locking on data centre cages. Many enhancements
have been added to this system, including improved bridge
capabilities and a Wiegand RFID reader, to name just two new
value-added features.
For PAD, the TZ Radial™ has been incorporated into a new locking
raceway that streamlines the system, reduces costs and strengthens
our intellectual property (IP) position. With this raceway system
approach and a complete re-engineering of the locker construction,
we are now able to deliver cost
TZ now has its devices connected to the outside world via
effective customisation of a modular
the Internet. Our devices, systems and software are clearly
system to meet specific customer
validating the Internet of Things (IOT) phenomena and the
requirements. The PAD program is in
power of connectivity with real customers. Our IP, much of it
a very competitive space and we have
put into place a decade ago, is now providing the platform for
implemented several market firsts,
participation in this movement, creating new niches every day.
such as recipient recognition through
OCR capabilities and using QR codes
Technology Looking Forward
for verified pickup that will keep us at
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the forefront of technology capability.
Communication would bring to our technology — a trend that
But it is our software that makes our
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devices and systems so uniquely
has enabled TZ’s devices to be SMArt Devices™ — actuating,
functional, and a significant effort
sensing and controlling things at the extreme reaches of the
a decade ago was symbolised by the cell phone. In addition
has been made in this area to enable
Internet.
the licencing of our software from a
“cloud-based” infrastructure. We have
This year, as TZ started to gain sales traction, the Board,
built support and testing capabilities
particularly through Kenneth Ting’s enthusiasm for the latest
with in-house server capability and
trends in technology and IOT, has encouraged the team to
we are rapidly moving towards an
look forward towards the next generation of product.
integrated software platform for all of
our technology.
Delivering More with Less through Modularity
The fundamental building blocks behind the future
Behind the advancements in TZ
development of our technology were debated and a plan was
hardware and software lies the
put into place. There are five areas of activity, which when
continuous process of IP protection.
joined together, define our technology:
Last year, we made five product
and system fillings, largely around
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software systems and PAD product
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innovations. In the U.S., three
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important patents were granted:
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“closures for a compartment”, “stud
fastener and stabilising device” and
In all of these areas, the key word is “modularity.” Through
“strip fasteners.”
modularity, we will be able multiply our opportunities, reduce
costs and scale up to the challenges of IOT.
15
3
In addition to the Internet of Things, Unification
“
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devices to be SMArt Devices™ – actuating,
sensing and controlling things at the extreme
reaches of the Internet.”
On Board Technology (electronics/sensors)
TZ’s systems use decentralised computing power
to harness the power of movement and sensing at
the extremes of the internet. Moore’s Law states that
processing power and sensing are exponentially
advancing, this offers tantalising new possibilities for
our devices. A modular approach will allow backward
integration to existing communication systems while
enabling TZ to expand into the latest technologies.
This approach will expand our current offers and at
the same time will enable wireless, battery-powered
connection to Internet and cellular systems.
Connectivity Systems Our sister company PDT has
been gaining tremendous experience in wireless and
cell phone architecture. The incredible rate at which
this has evolved and the fact that the capabilities this
architecture offers are exactly the things we visualised
a decade ago, makes it inevitable that this technology
Actuators Based on our existing granted IP,
will become dominant in TZ device connectivity.
specifically that which relates to the SMA networked
Again, modularity is the key word and serendipitously
beam devices, a second family of devices will be
PDT is exploring Modular Android Technology for its
developed using the inherent stroke amplification
own customer base.
and re-biasing of bending structures. SMA bending
structures are arguably the cheapest form of the
Software Overlaying all TZ products is software.
powerful actuator our devices require. A guiding
Moving from our existing TZ enterprise software base,
principle behind the design will be that the form
we simplify the user experience though the development
factor allows it to be embodied in multiple devices.
of TZ “apps.” Mobile applications streamline the user
experience, making advanced technologies accessible
Mechanisms TZ has discovered the importance
to the ordinary user. We believe this approach will
of device flexibility. That is, the ability to add “modular”
broaden TZ’s user base whilst strengthening our existing
mechanisms and accessories to create multiple
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products to satisfy market demand. This front-end
easily accessible to millions of end users via various
modularity will allow us to compete in completely
map applications. “Apps” will make TZ devices as part
new areas of electronic locking.
of the Internet of Things equally as user friendly.
“It feels like we’ve cast
a small stone into a big
pond and we are just
experiencing the first
ripples of activity.”
17
john
wilson
PRESIDENT & CEO,
(cid:53)(cid:38)(cid:45)(cid:38)(cid:59)(cid:58)(cid:40)(cid:48)(cid:45)(cid:48)(cid:40)(cid:58)(cid:13)(cid:1)(cid:42)(cid:47)(cid:36)(cid:15)
I remember Mark Bouris’ clear directive to me a month
after I took on the CEO role. “Build a new way of working
here,” he said. “We need a rhythm that defines what TZ is
all about.” When I asked him to explain what he meant by
“rhythm” he explained, “Band members rely on rhythm to play
tunes; a coxswain needs to establish rhythm to synchronise
his rowers and a successful CEO will create a unique operating
rhythm in the business that aligns and motivates its employees
to achieve the best.”
So with a newly formed and committed management
team, we set about to build a unique TZ rhythm in every
aspect of our business from sales and market development,
customer management, product development to production
implementation, aligning our employees to a very clear and
simple strategic intent; to create value for our shareholders,
to maintain a technology leadership position and to focus on
people, processes and performance.
Twelve months on, I believe we have built the right enabling
conditions for the business to succeed. We’ve created a great
team based culture, solid business systems that help us to
efficiently focus on the important things and new resources
with the right skills and single minded perseverance to drive
the business forward. Thank you to Will Leong, Vice President
of Operations, for building and leading our delivery capability.
Despite this, success for TZ means we need to fast-track
the adoption of our technology and prove that commercially
we can sell our offerings profitably and create value for our
shareholders.
At the best of times with new technology, even with greatest
of interest, customers often take an inordinate and unpredictable
amount of time to fully appreciate, internally promote and buy
new products.
Coupled with the sub-optimum economic conditions in the
US and Europe, which have not been conducive for major
corporates to making capital investment in infrastructure,
this has been by far our greatest challenge.
Today, I’m pleased to say I believe we’ve made significant
headway. Firstly, we’ve strengthened our channel partner
relationships through consistently providing high levels
of support and commitment to drive lead generation and
opportunity creation.
We’ve now established a level of visibility across a broad range
of targeted early adopters that are significant corporations
across the US, Europe and Australia.
We’ve developed very close collaborative relationships with
these “lead end-user customers” and built trusted relationships
with internal “TZ champions” within these corporations that
understand and believe in our value proposition.
These customers provide a solid foundation for repeat
purchases and sales proliferation as well as validation of the
technology proposition. All this could not have been possible
without a committed sales team solely focused on making
things happen.
“
If someone
asked me how
to describe
the last twelve
months, I would
have to say
it’s been quite
a remarkable
journey.”
319
“
It’s great to be at a start on a journey to
what I believe will lead to great things.”
Our promotional and marketing initiatives with our
If someone asked me how to describe the last 12
credible channel partners have helped us build
months, I would have to say it’s been quite a remarkable
awareness with our targeted customers.
journey – a journey of systematically putting all the
pieces in place and to getting a glimpse of what this
This in turn has provided the opportunities to deploy
company is capable of.
our systems in phase one trials and we have actively
supported each and every pilot, managing every aspect
I’m excited by the growth opportunities for our company.
of deployment and committing resources to ensure that
With each and every passing day, new opportunities
we fully service our customers’ needs in training and
emerge that keep reinforcing the fact that we have
implementation. We’ve also actively worked with our
something special to offer.
customers to ensure both upstream and downstream
integration into their existing networks of other products
It feels like we’ve cast a small stone into a big pond and
and processes and as result earned credibility with
we are just experiencing the first ripples of activity.
our customers and increased the confidence of our
channel partners.
I am proud of our team, with what we’ve achieved so far
and look forward to what we are committed to achieving
Our Technical Services team has done a phenomenal
in these next 12 months. It’s great to be at a start on a
job in managing customer’s expectations and ensuring
journey to what I believe will lead to great things.
that the after sales experience delivers on the promise
of the technology.
To Mark, thanks for the words of wisdom and for setting
the pulse for the business, to Kenneth, thanks for
your active participation, contribution to business and
operational development and for keeping me on task,
and to Dickory, my good friend and co-founder, thank
you for having the vision.
Finally, to the shareholders, thank you for your belief,
trust and on-going support.
“
This is a strong
statement of our
business model
and the brand and
reputation we have
built at PDT.”
21
mark
schwartz
PRESIDENT AND CEO,
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I’m particularly proud of the PDT performance this
last year. Despite the blizzard of poor economic news and
employment data, PDT persevered and had another solid year.
This is a strong statement of our business model and the brand
and reputation we have built at PDT.
With this strong revenue growth came some challenges. We had
to ramp up quickly – investing in people, equipment and space.
Projects have gotten larger, more complex and more multi-
disciplined. In most cases we handled the extra load well, in others
our weaknesses were found and corrective action taken to shore
up our personnel, tools and processes. We have emerged as a
stronger and better equipped company that is well positioned to
handle the larger and more complex projects, particularly in the
military and medical device world.
PDT Medical continued to adapt and improve on our long-term
vision of developing the three separate but complimentary
vertical markets of Medical, Military and Consumer Products.
PDT Medical continued to grow its revenues as we created more
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a new lead position in the medical vertical designed to further
develop our processes to ensure ongoing compliance with the
Food and Drug Administration (FDA). These investments are
critical to the continued momentum we are building in this area.
It also further distances us from our competitors and positions
us for projects that have a high barrier to entry. Conversely, these
types of projects carry complex, more expensive and longer
sales cycles. PDT Medical also continues to develop strategic
alliances with industry leading partners were we recognise a gap
in our capabilities. These partnerships allow us to scale quickly
and offer the seamless, turnkey process our customers demand.
Exciting things are ahead for our medical business. It’s very
gratifying to be involved in these life-improving projects.
Similarly we also created a lead position within the PDT
Military business sector. This is also a regulated industry
that requires us to be diligent with our policies and
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complex programs, several of which are in the proof of
concept phase and we expect these programs to continue
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In addition, substantial investment has been made into sales
in the tight knit military community. We are building good
relationships through personal interaction and the word is
spreading with regard to our expertise in the area of military
communication devices. While many programs are slow to
get started, we believe we are in a good position to have
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convert to purchase orders.
Our software group has grown substantially in the last year.
We expect that the demand for these services will continue
to grow but will also be tied to specific project demands.
We are taking care to hire carefully and use partners and
temporary staff to fill the peak periods. This has proven to
be an effective strategy.
In the last annual report, we highlighted our growth into the
front end of the process, namely research and strategy.
Our goal was to get involved in product development
projects even earlier in the process to give us a leg up on
the downstream product development work. We were
immediately successful in getting engaged on a number
of strategically aligned programs, including a large medical
device program involving complex and extensive user
“
PDT Medical
also continues
to develop
strategic
alliances with
industry leading
partners.”
323
“
Our software group has grown
substantially in the last year.”
research. This global study encompassed nearly 300
This past year, PDT’s brand attracted significant
in-depth interviews and more than 20 stakeholder
recognition in the media with nearly 100 press
categories across 10 diverse health care markets –
mentions in print and online. Our talented team
with nearly a half terabyte of support data archived to
members were sought out as thought leaders by
support future development. On the strength of this
business media time and again, most notably in
research effort, we are confident this work will convert
publications whose distribution consists of valued
to a substantial amount of development work.
medical and defence prospects.
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revolutionary Satellite Communications Operational
User Toolkit (SCOUT), which packs 160 pounds of
equipment and applications into an intuitive, yet robust
six pound device, have propelled our work into
strategic publications.
PDT also continued its winning heritage with awards
for products that are truly making a difference in the
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Braille Writer, the 3-D CLEAN Ultraviolet Disinfection
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Sample Processor and the STERIS Surgical Scrub Sink
all won accolades for superior product development.
2011 financial statements
TZ Limited
ABN 26 073 979 272
Annual Report - 30 June 2011
TZ Limited
Corporate directory
30 June 2011
Directors
Mark Bouris - Chairman
Kenneth Ting
Dickory Rudduck
Company secretary
Kenneth Ting
Notice of annual general meeting
The annual general meeting of TZ Limited:
Registered office
Principal place of business
Share register
Auditor
Solicitors
Bankers
will be held at
time
date
Lower ground floor
Radisson Hotel
27 O’Connell Street
Sydney NSW 2000
10:00 AM
Tuesday 22 November 2011
Level 11, 1 Chifley Square
Sydney NSW 2000
Tel: +61 2 9222 8890
TZ Limited, Level 11, 1 Chifley Square, Sydney NSW 2000
Telezygology Inc., 1017 W. Washington Blvd, Unit 2C, Chicago IL
60607, USA
PDT Inc, One Corporate Drive, Suite 110, Lake Zurich IL 60047, USA
Computershare Investor Services Pty Limited
Yarra Falls
452 Johnston Street
Abbotsford VIC 3067
Tel: +61 3 9415 5000
Fax: +61 3 9473 2500
BDO Audit (NSW-VIC) Pty Limited
Level 19, 2 Market Street
Sydney NSW 2000
Landerer & Company
Level 31, 133 Castlereagh Street
Sydney NSW 2000
St George Bank Limited
Level 3, 1 Chifley Square
Sydney NSW 2000
Stock exchange listing
TZ Limited shares are listed on the Australian Securities Exchange
(ASX code: TZL)
Website address
www.tz.net
TZ Limited's public website contains information regarding its
products and the company, including an investor services section
E-mail: info@tz.net
1
TZ Limited
Review of operations
30 June 2011
The Board is pleased to advise that TZ Limited (‘TZL’ or the ‘company’) has delivered on its top line revenue
expectations for the financial year ending 30 June 2011 underpinned by a very strong and above plan performance
from Product Development Technologies Inc. (‘PDT’), our design and development services division, under the
stewardship of CEO, Mark Schwartz.
Telezygology, Inc. (‘TZI’), which develops and markets world-class patented SMArt Device Technology and
Systems, set its internal revenue target for the financial year assuming a recovery of the US economy and solid
infrastructure growth in the government and banking sectors. However, the US economy did not recover as
originally expected and as a result, TZI did not meet its internal revenue targets although TZI’s revenue shortfall
has however, been offset by PDT’s strong revenue performance. TZI sales targets were skewed towards the
second half of the 2011 financial year and we saw an increase in revenue in Q4.
Notwithstanding the continued economic softness of North America and Europe and acknowledging that we
cannot create infrastructure demand, TZI has shown significant progress under the management of Chief
Executive Officer (‘CEO’), John Wilson, and has improved business fitness, developed a solid opportunity
pipeline, cultivated strong customer relationships with major corporates and has a growing track record of
successful deployments. The business showed significant revenue growth in the last quarter of the 2011 financial
year and currently has a very healthy pipeline of trials with major customers globally which, if successful, will
translate into impressive sales in the short to medium term. The Board believes that this will place the business
unit in a strong position to generate revenue growth during the 2012 financial year.
Overall the results represent a year of establishing solid enabling conditions to support sustainable revenue growth
across the TZ Group.
Testimony to this has been the efforts to successfully recapitalise the company to support implementation of its
business growth plans through 2011 and 2012. To this end, TZL successfully raised US$4.1M via a secured loan
facility with major shareholder and creditor, QVT, in July 2010 (subsequently converted into secured convertible
notes in December 2010) followed by a $12.7M placement and rights issue in November and December 2010.
This investment has been invaluable and has made the significant difference between TZ being a viable company
going forward and being a company with limited options as it was at the end of the 2010 financial year.
TZ is currently in discussions with QVT in which, if agreement is reached, the terms of the convertible notes held by
QVT will be restructured to remove the requirement for TZ to have to pay the interest to QVT for the 2011 calendar
year and, in exchange, TZ will issue further securities to QVT, likely to be in the form of additional options to
acquire ordinary shares. No binding agreement has yet been reached between TZ and QVT and, even if
agreement is reached, any such arrangement will be subject to shareholder approval.
TELEZYGOLOGY, INC. (TZI)
Over the course of the year, TZI has focused its energies on delivering three high level objectives to build a
foundation for future growth:
1. We have transitioned from a predominant product development focus into a sales and marketing organisation
focused around specific product offers that deliver qualified value to defined market segments. Our clearly
defined IXP and PAD business offerings supported by dedicated regional sales resources and targeted
marketing and promotional programs are testimony to this cultural shift.
2. We have expanded sales geographically from the predominant US centric business focus into a global
business with regional sales strategies targeting the European and Asian Pacific markets. The
commercialisation activities in the US, Canada, Europe and Australia have generated sales across the globe
validating that we not only have a global addressable market but a universal value proposition.
3. We have shifted TZI’s product mix from proprietary hardware sales to a total system solution offering
comprising hardware sales, software licensing, annuity software maintenance contracts and service based
technical support and implementation. Our IXP and PAD system offerings and our turn-key and committed
approach to quality supply, responsive service and fault-free implementation ensures a holistic approach to
meeting customer’s expectations - a true solution provider mentality.
From an organisational perspective, we have developed and implemented the critical processes core to the
commercial delivery of our products to the market and the servicing of those products, including the back-end
business systems for production scheduling, inventory management, customer relationship management and
sales forecasting. New operational standards have also been institutionalised to significantly improve business
fitness to ensure an efficient customer focused sales orientation.
2
TZ Limited
Review of operations
30 June 2011
We have also invested in building a new sales capability by recruiting high calibre sales and technical services
resources to bring a strong sales culture to the business. In the last year, we have grown from an organisation
with only one full-time sales resource to a dedicated team of nine regional sales managers and four technical
service managers. These resources are located in the key regional markets where our channel partners have
established business.
We have also progressively updated our marketing presence including the development of new brand positioning
for each of our business streams reinforced by a substantial revamp of our web-sites, sales brochures, relevant
technical sales material and other collateral. A structured integrated marketing strategy has also been
implemented and this has generated a much broader based awareness about what we offer to the market which
will continue to help us drive customer take-up and drive sales proliferation.
In terms of market participation, we have strengthened and re-vitalised our relationships with our major channel
partners, Anixter and Pitney Bowes, and leveraged their global reach by replicating the US distribution model into
new markets outside of the USA. We now have distribution channels and sales initiatives in place in Canada,
Latin America, Europe, Middle East, Southeast Asia and Australia/New Zealand supported by in-market resources
in Canada, UK, Amsterdam and Australia.
Over the course of the year, we have segmented our markets and launched new product and service offerings to
these targeted sectors shifting our previously component sales oriented business into a business of selling total
system solutions.
Testimony to our product development and commercialisation efforts is the launch of a number of new products
across our business units including TZ Centurion System (July 2010), TZ Centurion Server Enterprise Software
(release May 2011), TZ Courier (July 2010), TZ Concierge (January 2011) and most recently TZ APX (June
2011). These new products all incorporate application specific software or signal our move into enterprise level
software, which have enabled us to establish an annuity based software licensing, service and maintenance
business.
These new offerings significantly expand our addressable market opportunities and are testimony to a
fundamental shift into high value system solutions that are built on our state-of-the-art SMArt Device Technology
platform with the unique attribute of being highly customisable through a rich software control layer.
IXP, Infrastructure Protection
With heightened regulations and compliance mandates, businesses across a wide variety of industries are being
compelled to look for new levels of security beyond just controlling access to buildings and spaces. Physical
security and environmental monitoring right down to the asset level are fast becoming standard requirements. As
a consequence of this market trend, we are starting to be recognised as a technology leader and provider of
micro-protection solutions that can open up new opportunities for asset and infrastructure protection. The
adoption of the company’s IXP products by credible fortune 100 corporations, major co-location data centre
service providers and government agencies in North America, Europe and Australia is a huge endorsement of the
product’s potential.
Over the course of the year, we have seen our business migrate from sales categorised as trial and system
evaluation deployments in a small number of data centre cabinets to major beach-head deployments that
establish TZ as the preferred micro-security solution. Our successful deployments of total hardware and software
solutions at major co-location facilities have not only provided influential credibility of TZ’s offering to the targeted
market segment but are also driving a demonstrable ground swell of interest and awareness of TZ as a leading
technology. This increased market awareness is also supporting strong specification sales into new private and
government contracts which will lay a solid foundation for future sales revenue.
Our sales opportunity pool has grown substantially as we expand our breadth and depth of market penetration
and are seeing a healthy conversion of these opportunities into purchase orders as we drive demand directly with
end-user customers. Although relatively early in the commercialisation phase, the quarter on quarter sales
revenue growth is very positive.
3
TZ Limited
Review of operations
30 June 2011
Part of the successful implementation has been our ability to better leverage the market strength of our major
channel partner, Anixter, working in each of its key regional markets facilitating product launches in several
regions including US, Canada, Latin America, Europe, Middle East and Asia Pacific. With dedicated TZ in-market
sales personnel, TZI has been able to pro-actively train Anixter sales operations and increase the awareness and
education of Anixter’s inside and outside sales teams on how to sell TZ’s products. A large proportion of Anixter
offices across the US, Canada, EMEA and APAC have now received initial training. This enabling activity has
greatly improved effectiveness of the Anixter sales operations and vastly increased TZ’s sales coverage. In
addition, Anixter has now launched specific promotional programs and demand creation initiatives in each of their
regions of North America, Latin America, EMEA and APAC and has established minimum holdings of TZI
products in stock in Europe and Australia to ensure product availability.
TZI is also expanding its channels to market to enable a far broader coverage through tier providers. The focus on
engaging with OEM cabinet manufacturers in all regions has enabled the offering of “TZ Ready” cabinets to the
market. This initiative delivers a high value added utility to customers providing for the installation of TZ
SlideHandles in the factory and for the cabinets to be deployed ready to use with the minimal amount of on-site
disruption.
In the upcoming financial years, we expect to extend our product portfolio with new value added offerings and to
expand into adjacent market segments. Traction has already been experienced in Health Care and Life Services,
Retail, Casinos, and Industrial Automation sectors.
PAD, Packaged Asset Delivery
The potential for the PAD business unit stretches across the Corporate Mail, High Density Residential and
Community Postal Service Industries and represents a significant market opportunity for TZI. The uplift in e-
retailer activity is driving substantial growth in the number of parcels and packages delivered to consumers and
the issue of last mile delivery is becoming a costly logistical problem. TZ’s PAD solutions effectively address
these emerging needs.
Although the sales cycle has been lengthy, a significant pipeline of opportunities and high level business
prospects has been developed for our PAD business and a number of corporate trials are currently underway in
the US with major IT and Financial Services corporations. Successful trials may lead to substantial sales as we
anticipate these major customers will seek to install TZ Courier in other buildings or departments that they control
and/or acquire additional locker banks to service a greater number of end-user recipients.
Outside of the US, TZ Courier trial deployments are underway with Pitney Bowes in the UK, in the Middle East,
and in Australia, where the company has formed an exclusive supply and distribution relationship with Pitney
Bowes Australia Pty Limited to support local commercialisation. The emerging Australian opportunities are
significant with well-respected national logistics providers.
During the 2011 financial year, the company successfully restructured its supply and distribution relationships and
now has properly structured channel and pricing strategies to support market penetration. These include new and
direct commercial relationships with Pitney Bowes Management Service (PBMS), IOPC and Bear River
Associates.
The formation of a direct relationship with Pitney Bowes has meant that the business now provides a total turn-key
solution instead of indirectly supplying hardware and software components through a third party intermediary.
This has significantly increased the dollars per order and the gross margin that TZI receives.
As a result of this direct working relationship, the company is working far closer with PBMS product management
and has rolled-out an extensive awareness and training program to all in-market sales resources to ensure broad
base coverage across all of PBMS corporate clients, although the launch of this program was substantially
delayed to early 2011 due to major restructuring of the Pitney Bowes sales organisation late last year.
TZI has also launched the APX System, for distribution by IOPC under a new agreement finalised in March 2011.
The product is now being rolled out through IOPC’s national dealer network of approximately 50 system furniture
dealers and we expect to see the first sales of this offering in the October to December 2011 quarter.
TZI has formed a strategic relationship with Bear River Associates, a privately-held logistics tracking software
development company located in Oakland, California, for the non-exclusive sale and distribution of TZ Courier in
the USA. Bear River markets software solutions and performance tools to Fortune 500 and large public sector
clients and will promote and market an integrated solution that combines the TZ Courier with their BearTracks
software to defined corporate and public sector customers. We have recently received the first purchase order
through this channel for a major government organisation.
4
TZ Limited
Review of operations
30 June 2011
We have also successfully developed and deployed our TZ Concierge offering to the residential market with our
first installation at the Sterling Private Residences, a 400+ apartment building in Chicago in January 2011. The
System has since received resounding support from tenants, the Condominium board and property management.
As a result of this successful deployment, we are generating significant interest for TZ Concierge from a number
of local Chicago property management groups and are aggressively promoting the offering to targeted prospects
in other major city centres.
With parcel delivery continuing to increase and last mile delivery becoming a major strategic consideration for
logistics providers, we are confident that our Packaged Asset Delivery solutions will be a substantial play for TZI
moving forward.
AAM, Aerospace Asset Maintainability
Due to the heavy compliance and regulatory requirements in the aerospace and defence industries, we are
pursuing a licensing partnership with a major OEM enabler to allow commercialisation of our technology in this
sector.
Despite a very tangible licensing opportunity with an interested party early in the 2011 financial year, the sale of
our prospect’s business in late 2010 has delayed the implementation of this initiative. We continue to monitor
progress in this sector and maintain contact and dialogue with identified prospects although it is clear that the
prospect of a near term licensing deal is unlikely.
PRODUCT DEVELOPMENT TECHNOLOGIES (PDT)
PDT posted strong top line growth as it continues to take advantage of its accumulated skills and decades of
design experience.
PDT is enjoying strong interest and growth from not only consumer product companies but increasingly large prime
contractors in the Defence and Military sector and also the medical device business. It is taking on more complex
projects which in some cases have a steep learning curve but the payoff is that PDT is recognised for innovation,
teamwork and cutting edge problem solving. International companies are also increasingly seeking PDT’s design
skills with especially strong demand in Europe and the Middle East.
To take advantage of this growth PDT reorganised its management structure into three main verticals:
Defense/Military, Consumer Products and Medical Devices. This realignment brings clarity to the organisation,
pushes down decision making to three senior people freeing up the CEO to create and drive the vision for the
company and show potential clients the types of skill sets that exist within the global family of PDT. The medical
device world is growing with the need for speed, remote access and smaller packaging, all skills PDT has but with
that comes more complex rules and guidelines from the US Federal Government. The reorganisation allows focus
on these new rules but also active participation in the Contiua Health Alliance which is a non-profit group of 200
technology, health care and medical device companies who joined together to improve personal health care.
Part of the realignment has been establishing a new and secure area to comply with Federal Government
mandates for bidding on sensitive projects where high levels of security clearances are needed. Given our history
in this field coupled with the new secure office we are getting the attention of the large global US Military
contractors. This combined with our ITAR credential present a significant barrier to entry for many would be
competitors.
PDT recently demonstrated its capabilities by taking on a very complex defence project which had a goal of
reducing 200 pounds of traditional military communications equipment to a small eight pound package. With PDT's
reputation for not only solving large problems but also using its experience in the cell phone, WiFi and GPS space,
the project was completed on time and within budget.
In another example PDT accepted the very difficult challenge of creating a new communication device in the
medical field using multiple communications platforms. It was Android based and as the Android software platform
becomes the dominant system used globally this project was needed to build PDT’s knowledge. Despite the benefit
of building new technical expertise the project and job proved to be a challenge. The project incurred losses
including a $195K non-cash expense that was accrued as of period end due to PDT’s percentage- of- completion
revenue recognition method. The knowledge and technical experience gained has enabled PDT to bid for Android
based contracts which it could not previously do.
5
TZ Limited
Review of operations
30 June 2011
One of PDT’s strengths often unseen by its clients is its laser focus on new and emerging technologies and
changes in the global economy. New technology causes very competitive companies to want to innovate to stay
ahead of competitors and with PDT has a partner who understands the global landscape and competitive
pressures. PDT will see change and initiate calls to customers anticipating their needs. In the same way PDT’s
attention to the global economy, especially the USA, allows it to sense a downturn in demand from one sector and
allow it to deploy its resources in other sectors. The US Military is a prime example, as the complexities of the US
political system affect Defence spending. PDT stays in touch with its major customers so we know in advance how
spending may be affected.
PDT’s operation in the Ukraine provides low cost and timely engineering skills that enable competitive pricing for
certain projects but also provides flexibility for rush projects.
PDT’s branch offices continue to push it into the global arena and source projects not normally associated with a
Chicago based company. To create a presence in the San Francisco/Silicon Valley area we are sharing office
space with TZI in downtown San Francisco. This will not only enable direct access to the large tech companies but
the medical device funds as well as the large teaching hospitals where much of the medical innovation comes from.
PDT is an ever changing workplace and an environment where engineers are challenged with new projects every
day which provides the challenges that engineers thrive on.
CONCLUSIONS
While not openly evident in our financials, it is important to recognise that there have been significant day-to-day
achievements and major accomplishments by our dedicated teams in TZI and PDT.
The Directors would like to thank the TZI and PDT operations teams lead by John Wilson and Mark Schwartz for
their significant efforts and contributions. Their commitment, passion and motivation have helped the Board put this
business back into the position of positive growth.
Special thanks are also extended to our shareholders for their on-going support and patience and confidence and
trust in the Board to do what it needed to do.
The Directors are also pleased to note that all matters of litigation with various parties have now been settled.
The Board is very excited about the future of the TZ Group notwithstanding the incredibly volatile time in our two
largest markets, North America and Europe, and because our product is not constrained by geographic territories
we are now making significant headway in the Asia Pacific region particularly Australia and in that regard we will
continue to invest in good outcomes in those strong regions. In relation to North America and Europe we will
continue to invest for the future and target clients and customers who have a need for our product, notwithstanding
budgetary constraints.
6
TZ Limited
Significant changes in the state of affairs
30 June 2011
Issue of Series IIIB Convertible Notes
On 24 December 2010 the company issued 4,275 secured Series IIIB Convertible Notes, each with a face value of
$1,000, to QVT Fund LP and Quintessence Fund L.P. (‘QVT Funds’). The Series IIIB Convertible Notes were
issued in repayment of all outstanding principal and interest owing under the loan facility between the QVT Funds,
the company and Telezygology, Inc. (‘TZI’) pursuant to which the QVT Funds lent US$4,100,000 to TZI. The
conversion price for each Series IIIB Convertible Note is the lesser of 42 cents and the lowest price at which shares
may be subsequently issued by the company while the Series IIIB Convertible Notes remain on issue. As of the
date of this report, the conversion price remains 42 cents.
Conversion of Series II Convertible Notes to Shares
During the year, all of the Series II Convertible Notes previously held by Sydcomp Pty Limited were converted into
ordinary fully paid shares (‘Shares’) or redeemed by the company. 10,229,760 Shares were issued as a result of
the conversion of all of the principal and interest owing on 4,008,500 Series II Convertible Notes at a conversion
price of $0.42 per Share, which was the conversion price determined under the original terms of issue of the Series
II Convertible Notes as of the relevant dates of conversion of those notes. A further 2,048,431 Shares were issued
upon the conversion of the principal and interest owing on 732,500 Series II Convertible Notes at the amended
conversion price of $0.3913 per Share in accordance with resolutions 8 and 9 passed by the company's
shareholders at the 2010 AGM. The remaining 500,000 Series II Convertible Notes were redeemed by the
company.
Issue of shares
During the year the company issued 59,882,750 Shares as follows:
12,278,191 Shares were issued upon the conversion of the Series II Convertible Notes;
1,480,000 Shares were issued upon the exercise of 1,480,000 Rights issued under the company's Director
and Executive Equity Plan;
1,198,196 Shares were issued to the QVT Funds in satisfaction of the company's liability to pay $1,198,196
to the QVT Funds in respect of moneys paid by the QVT Funds on behalf of the company in accordance
with resolution 9(a) passed at the 2009 AGM;
4,613,333 Shares were issued to the QVT Funds in payment of $4,613,333 in interest owing to the QVT
Funds under the Series I Convertible Notes for the period from the date of issue of the Series I Convertible
Notes to 31 December 2009 in accordance with resolutions 9(c) and (d) passed at the 2009 AGM;
3,795,121 Shares were issued to the QVT Funds in payment of $1,328,292.35 in interest owing to the QVT
Funds under the Series I, Series III and Series IIIB Notes for the 2010 calendar year
357,144 Shares were issued by way of placement to sophisticated investors at $0.42 per Share to raise
$150,000;
8,091,446 Shares were issued by way of placement to various professional and sophisticated investors at
$0.35 per Share to raise $2,832,009.10; and
28,069,319 Shares were issued under the company's 1 for 3 renounceable rights issue at an issue price of
$0.35 per share to raise $9,824,261.65.
Settlement of FutureWall Dispute and Incorporation of Intanova Pty Limited
As announced on 30 July 2010, the company successfully resolved a long standing dispute between TZI and
Techbuilt Interiors Pty Limited (‘Techbuilt’) in relation to a licence of rights pertaining to TZI's FutureWall System
granted by TZI to Techbuilt. As a consequence of the settlement, a joint venture was formed, Intanova Pty Limited,
to leverage the existing awareness and acceptance of the FutureWall System in the marketplace. Intanova carries
on the business of marketing, supply and interior fit-out solutions in Australia. TZI currently holds a 50% interest in
Intanova Pty Limited being the registered owner of 2,000,002 of the 4,000,004 ordinary class shares on issue.
Incorporation of TZI Australia Pty Limited
A new wholly owned subsidiary of the company, TZI Australia Pty Limited (‘TZIA’), was incorporated to facilitate the
sale and marketing of IXP and PAD solutions in the Australian and New Zealand markets through direct end-user
accounts and through the channel partnerships with Anixter Australia Pty Limited (‘Anixter Australia’) and Pitney
Bowes Australia Pty Limited (‘PBA’).
Agreement with Anixter Australia Pty Limited
On 6 August 2010, Telezygology Inc. entered into a distribution agreement with Anixter Australia for the distribution
of the company’s infrastructure protection products in Australia.
The agreement references the terms and conditions set out in the 2009 Distributor Agreement with Anixter Inc.
7
TZ Limited
Significant changes in the state of affairs
30 June 2011
Agreement with IOPC relating to PBMS supply
On 1 January 2011, Telezygology Inc. entered into a new supply agreement with International Office Products
Cooperative, Inc. (‘IOPC’) providing for the non-exclusive supply and manufacture of modular “millwork” locker
units. In addition to standard terms and conditions relating to locker fabrication, quality assurance and system
assembly, IOPC also undertook to terminate its existing contractual locker supply agreement with Pitney Bowes
Management Services, Inc. (‘PBMS’) to enable TZ to pursue a direct supply relationship with PBMS, subject to
commission being paid primarily on the TZ software and services provided.
Agreement with Pitney Bowes Australia
As announced by the company on 3 May 2011, TZIA entered into an exclusive supply and distribution agreement
with Pitney Bowes Australia Pty Limited for the supply and distribution of certain of TZI's Packaged Assets Delivery
solutions. Under the agreement PBA was appointed exclusive distributor of a range of standard configurations of
TZI's Intelligent Locker system offerings (such as TZ Automated Parcel Exchange and TZ Courier) in the corporate
mail services and postal markets in Australia and New Zealand until 31 December 2013, subject to certain
performance obligations being met by PBA.
8
TZ Limited
Directors' report
30 June 2011
The directors present their report, together with the financial statements, on the consolidated entity (referred to
hereafter as the 'consolidated entity') consisting of TZ Limited (referred to hereafter as the 'company' or 'parent entity')
and the entities it controlled for the year ended 30 June 2011.
Directors
The following persons were directors of TZ Limited during the whole of the financial year and up to the date of this
report, unless otherwise stated:
Mark Bouris - Chairman
Kenneth Ting
Dickory Rudduck
Principal activities
During the financial year the principal continuing activities of the consolidated entity consisted of:
the development of intelligent devices and smart device systems that enable the commercialisation of
hardware and software solutions for the management, control and monitoring of business assets and the
provision of associated value added services through Telezygology Inc, ('TZI'); and
providing a fee for service product design and engineering consulting (services)
Development Technologies Inc, ('PDT').
through Product
All of the operations of the consolidated entity are based in Australia, the United States of America, United Kingdom
and Ukraine.
Dividends
There were no dividends paid or declared during the current or previous financial year.
Review of operations
The loss for the consolidated entity after providing for income tax amounted to $8,784,000 (30 June 2010:
$26,347,000).
For a detailed review of the operations of the consolidated entity, please refer to the 'Review of operations' report
which precedes this directors report.
Significant changes in the state of affairs
For details of the significant changes in the state of affairs of the consolidated entity, please refer to the 'Significant
changes in the state of affairs' report which precedes this directors report.
There were no other significant changes in the state of affairs of the consolidated entity during the financial year.
9
TZ Limited
Directors' report
30 June 2011
Matters subsequent to the end of the financial year
Settlement of the dispute with former director and related parties
The company entered into a deed of settlement with Mr Andrew Sigalla and persons and entities associated with him,
including ZMS Investments Pty Limited ('ZMS') (Receivers and Managers Appointed - In Liquidation) and BZI Pty
Limited ('BZI'), to settle all legal proceedings between the parties (the 'Proceedings'), the hearing for which was due to
commence in the Supreme Court of New South Wales on 5 September 2011.
The deed of settlement was conditional on formal court orders being entered by the Supreme Court of New South
Wales to discontinue the Proceedings on a without prejudice basis and on the removal of ASIC's freezing orders
against Mr Sigalla and BZI. These conditions were satisfied on 23 August 2011.
Under the terms of the deed of settlement, the company has agreed to accept a sum of money in full and final
settlement of all claims that the company was alleging against Mr Sigalla, ZMS and BZI. The company and its related
corporations have released Mr Sigalla, ZMS and BZI from all claims that the company and its related corporations
were alleging in the Proceedings. Mr Sigalla has also released the company and its related corporations from all
claims he was alleging in the Proceedings.
It was represented to the company that the settlement moneys received by the company on 25 August 2011 came
from a third party and not from either Mr Sigalla, ZMS or BZI. The company had sought the consent of the trustee in
bankruptcy to Mr Sigalla’s bankrupt estate to the terms of the deed of settlement and the trustee's agreement that the
bankrupt estate will have no claim to any of the settlement moneys to be paid to the company. The company was
unable to obtain that consent or agreement from the trustee in bankruptcy to Mr Sigalla's bankrupt estate.
The settlement was reached on the basis that there were no admissions of liability made by any party to the
proceedings.
Participation in Joint Venture - Intanova Pty Limited
The company has an option to purchase 500,000 additional shares in Intanova Pty Limited. This option was
exercisable between 1 February 2011 and 15 March 2011. The option was not exercised, however, the shareholders
of Intanova Pty Limited have been in negotiations regarding numerous terms of the original shareholders agreement,
including an extension of the option exercise period until 31 December 2011. At the date of this report the new
agreement had not been finalised.
Distribution Agreement with Anixter International Limited
On 28 July 2011, Telezygology Inc. entered into a distribution agreement with Anixter International Limited for the
distribution of the company’s infrastructure protection products in Europe, the Middle East and Africa.
The agreement references the terms and conditions set out in the 2009 Distributor Agreement with Anixter Inc. with
specific amendments to address regional preferences for initial inventory and preferential payment terms.
Supply and Distribution Agreement with Bear River Associates
On 22 August 2011, Telezygology Inc. entered into a supply and distribution agreement with Bear River Associates, a
privately-held logistics tracking software development company, located in Oakland, California for the turn-key supply
and distribution of the company’s TZ Courier products.
Under the terms of the supply and distribution agreement, Bear River will promote and market an integrated solution
that combines the TZ Courier™ Intelligent Locker System with its BearTracks software to an exclusive and defined list
of established Bear River corporate and public sector customers in the United States.
Supply Agreement with NEXTDC Limited and Anixter Australia Pty Limited
On 7 September 2011, TZ Limited and its wholly owned subsidiary, Telezygology Inc. entered into a supply agreement
with TZI's distributor, Anixter Australia Pty Limited ('Anixter'), and NEXTDC Limited ('NEXTDC') for the supply of the
TZ Centurion™ System for NEXTDC’s cabinet-level micro-protection solution at its Brisbane and Melbourne data
centres in accordance with agreed purchase orders.
Under the terms of the supply agreement, TZ Limited agrees to guarantee the performance of TZI's and Anixter's
obligations under the supply agreement.
10
TZ Limited
Directors' report
30 June 2011
Likely developments and expected results of operations
Information on likely developments in the operations of the consolidated entity and the expected results of operations
have not been included in this report because the directors believe it would be likely to result in unreasonable
prejudice to the consolidated entity.
Environmental regulation
The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or
State law.
Information on directors
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (in the
last 3 years):
Special responsibilities:
Interests in shares:
Interests in options/rights:
Mark Bouris
Executive Chairman
BCom (UNSW), MCom, Adjunct Professor at the Australian School of Business
Mark Bouris is the Executive Chairman of Yellow Brick Road Wealth Management, a
financial services company that offers comprehensive products and advice for home
loans, financial planning, insurance, term deposits, accounting and tax through its
national branch network. Mark has over 25 years experience in the finance and
property sectors and was the founder of Wizard Home Loans, one of Australia’s
largest non-bank lenders. Under Mark’s direction, Wizard grew to approximately 300
branches across Australia, New Zealand and India before the company was sold to
General Electric in 2004. Mark is an Adjunct Professor for Banking & Finance and
Business Law & Tax at University of New South Wales Australian School of Business
and sits on the UNSW Australian School of Business Advisory Council Board. Mark
is the author of Wealth Wizard and The Yellow Brick Road to Your Financial Security,
and he writes a number of financial columns for some of Australia’s most recognised
publications. He’s a board member of the Sydney Roosters and the host of Channel
9’s 'The Apprentice Australia' and 'Celebrity Apprentice Australia'.
Executive Chairman of Yellow Brick Road Holdings Limited (previously known as ITS
Capital Investments Limited), Non-Executive Chairman of Anteo Diagnostics Limited
(appointed on 2 August 2011), Chairman of Serena Resources Limited and Board
Member of the Sydney Roosters.
None
None
1,087,967 ordinary shares
3,000,000 options and 800,000 rights over ordinary shares
11
TZ Limited
Directors' report
30 June 2011
Name:
Title:
Qualifications:
Experience and expertise:
Other current directorships:
Former directorships (in the
last 3 years):
Special responsibilities:
Interests in shares:
Interests in options/rights:
Name:
Title:
Experience and expertise:
Kenneth Ting
Executive Director and Company Secretary
Bachelor of Commerce and Bachelor of Law (First Class Honours) and a member of
the Institute of Chartered Accountants.
Kenneth Ting has a background in accounting, law and investment banking with a
focus on the commercialisation of technology and public and private equity raisings.
Kenneth joined Deutsche Bank in 1997 after 4 years at PricewaterhouseCoopers
Corporate Finance and Tax division. He was Vice President of Technology
Investment Banking at Deutsche Bank and worked in Deutsche Bank's Sydney, San
Francisco and London offices. Kenneth has a passion for technology and has worked
with technology companies throughout his career. He has been involved in the
completion of over $5 billion in M&A, private equity and IPO assignments in Australia,
USA and Europe. His industry specialisation is in the electronics manufacturing,
software, IT services, telecommunication and Internet sectors.
None
None
None
1,000,975 ordinary shares
2,250,000 options and 600,000 rights over ordinary shares
Dickory Rudduck
Executive Director
Dickory Rudduck is a prolific inventor and is the founder and source behind TZ
Limited's technology and thinking. An Architect by profession, Dickory established
and built a successful Sydney based industrial architectural practice over a 20-year
consulting career. He is recognised as a respected industrial and interior designer.
The success of his consulting practice enabled Mr Rudduck to focus on his interest
in innovation and invention, establishing Intellectual Exchange Pty Ltd in 1996, with
the objective of developing intellectual property with global relevance and application.
Since then, he has successfully commercialised many of his creations, the most
lucrative being patented furniture systems with revenues in excess of $40 million. He
has explored a diverse range of patented concepts from electronic hardware and
software developments, building and construction systems to even sporting
inventions.
Other current directorships:
Former directorships (in the
last 3 years):
Special responsibilities:
Interests in shares:
Interests in options/rights:
None
None
None
992,498 ordinary shares
10,000 options over ordinary shares
'Other current directorships' quoted above are current directorships for listed entities only and excludes directorships
in all other types of entities, unless otherwise stated.
'Former directorships (in the last 3 years)' quoted above are directorships held in the last 3 years for listed entities only
and excludes directorships in all other types of entities, unless otherwise stated.
Company secretary
Kenneth Ting is the company secretary and also a director of the company. See 'Information on directors'.
12
TZ Limited
Directors' report
30 June 2011
Meetings of directors
The number of meetings of the company's Board of Directors held during the year ended 30 June 2011, and the
number of meetings attended by each director were:
M Bouris
K Ting
D Rudduck
Full Board
Attended
14
14
14
Held
14
14
14
Held: represents the number of meetings held during the time the director held office.
Remuneration report (audited)
The remuneration report, which has been audited, outlines the director and executive remuneration arrangements for
the consolidated entity and the company, in accordance with the requirements of the Corporations Act 2001 and its
Regulations.
The remuneration report is set out under the following main headings:
A
B
C
D
E
Principles used to determine the nature and amount of remuneration
Details of remuneration
Service agreements
Share-based compensation
Additional information
A Principles used to determine the nature and amount of remuneration
The objective of
the consolidated entity's and company's executive reward framework is to ensure reward for
performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the
achievement of strategic objectives and the creation of value for shareholders, and conforms with the market best
practice for delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the
following key criteria for good reward governance practices:
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 consolidated entity’s remuneration policies, procedures and practices.
Remuneration policies have not been directly linked to the company’s performance in the past. However, at the 2009
Annual General Meeting ('AGM') approval was granted to establish the Director and Executive Equity Plan to attract,
retain, motivate and reward senior executives and directors (including non-executive directors) of the company
(collectively the 'Participants') by issuing either or both rights and options to the Participants to allow the Participants to
acquire fully paid ordinary class shares in the company upon exercising the rights or options, as the case may be. The
exercise of each right or option entitles the holder of that right or option, as the case may be, to acquire one fully paid
ordinary class share in the capital of the company.
Under the Director and Executive Equity Plan, the number of rights and options that may be issued to a Participant
and the performance criteria and hurdles to be met prior to the issue or exercise of such Rights and Options is to be
set by the board of directors of the company in reliance on the advice of an independent remuneration consultant.
13
TZ Limited
Directors' report
30 June 2011
Non-executive directors remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the
directors. Non-executive directors' fees and payments are reviewed annually by the Board. 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 chairman's fees are determined independently to the fees of other
non-executive directors based on comparative roles in the external market. The chairman is not present at any
discussions relating to determination of his own remuneration. Non-executive directors do not receive share options or
other incentives.
ASX listing rules require that the aggregate non-executive directors remuneration shall be determined periodically 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 most recent determination was at the AGM held
on 30 November 2006, where the shareholders approved an aggregate remuneration of $500,000.
Executive remuneration
The consolidated entity and company aims to reward executives with a level and mix of remuneration based on their
position and responsibility, which is both fixed and variable.
The executive remuneration and reward framework has four components:
base pay and non-monetary benefits
short-term performance incentives
share-based payments
other remuneration such as superannuation and long service leave
The combination of these comprises the executive's total remuneration.
Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by
the Board, based on individual and business unit performance, the overall performance of the consolidated entity and
comparable market remunerations.
Executives can receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle
benefits) where it does not create any additional costs to the consolidated entity and adds additional value to the
executive.
The short-term incentives ('STI') program is designed to align the targets of the business units with the targets of
those executives in charge of meeting those targets. STI payments are granted to executives based on specific
annual targets and key performance indicators ('KPI') being achieved. KPI’s include profit contribution, customer
satisfaction, leadership contribution and product management.
The long-term incentives ('LTI') includes long service leave and share-based payments. As noted above, a Director
and Executive Equity Plan has been set up to reward executives based on long term incentive measures in the form
of options and rights. These include increase in shareholders value relative to the entire market and the increase
compared to the consolidated entity's direct competitors.
Consolidated entity performance and link to remuneration
Remuneration for certain individuals is directly linked to the performance of the consolidated entity. Executives and
other employees can be issued with options and rights to acquire shares in the consolidated entity. The number and
the terms of the options and rights issued are determined by the directors after consideration of the employee's
performance and their ability to contribute to the achievement of the consolidated entity's objectives. Refer to section
E of the remuneration report for details of the last five years earnings and total shareholders return.
As the options and rights confer a right but not an obligation on the recipient of the options, the directors do 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 or rights.
14
TZ Limited
Directors' report
30 June 2011
B Details of remuneration
Amounts of remuneration
Details of the remuneration of the directors, other key management personnel (defined as those who have the
authority and responsibility for planning, directing and controlling the major activities of the consolidated entity) and
specified executives of TZ Limited are set out in the following tables.
The key management personnel of the consolidated entity consisted of the directors of TZ Limited and the following
executives:
Mark Schwartz - Chief Executive Officer of PDT Inc.
Paul Casey - Non-Executive Director of PDT Inc (appointed on 12 May 2011)
John Wilson - Chief Executive Officer of Telezygology Inc.
William Leong - Vice President of Operations of Telezygology Inc. (appointed on 1 October 2010)
Timothy Koehler - Chief Financial Officer of Telezygology Inc.
2011
Name
Executive
Directors:
M Bouris
K Ting
D Rudduck
Other Key
Management
Personnel:
M Schwartz
P Casey
(appointed 12
May 2011) *
J Wilson
W Leong
(appointed 1
October 2010)
T Koehler
Short-term benefits
Post-
employment
benefits
Share-based
payments
Cash salary
and fees
$
Other
$
Non-
monetary
$
Super-
annuation
$
Options
$
Rights
$
Total
$
368,647
289,651
218,764
10,200
6,000
-
-
-
-
-
-
-
843,175
632,381
-
472,601
354,451
-
1,694,623
1,282,483
218,764
364,890
302
6,947
6,994
83,657
390,000
-
-
-
-
-
-
-
-
-
-
379,133
-
-
83,657
390,000
141,479
121,630
1,978,718
283
174
16,959
6,947
5,966
19,860
2,122
3,041
12,157
-
-
1,475,556
-
-
827,052
150,831
130,811
4,330,302
*
P Casey's remuneration includes $71,567 in short term benefits received for the period prior to his appointment
as a Non-Executive Director of PDT Inc.
15
TZ Limited
Directors' report
30 June 2011
2010
Name
Non-Executive
Directors:
W de Vlugt
(resigned 31 May
2010)
Executive
Directors:
M Bouris
K Ting
D Rudduck
(appointed 14
May 2010) *
Other Key
Management
Personnel:
M Schwartz
J Wilson
(appointed 17
May 2010)
J Freese (COO
until 17 May
2010)
T Koehler
R Pagorek
(resigned 10
August 2009)
Short-term benefits
Post-
employment
benefits
Share-based
payments
Cash salary
and fees
$
Other
$
Non-
monetary
$
Super-
annuation
$
Options
$
Rights
$
Total
$
76,845
472,264
398,163
181,732
389,018
45,000
188,703
129,396
57,850
1,938,971
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,504
-
5,085
3,531
-
67,200
144,045
355,750
266,813
871,399
653,549
1,699,413
1,318,525
-
-
181,732
-
-
-
-
-
395,522
-
45,000
-
-
193,788
132,927
1,446
16,566
-
622,563
-
1,592,148
59,296
4,170,248
*
D Rudduck's remuneration includes $165,143 in short
appointment as an Executive Director.
term benefits received for the period prior to his
16
TZ Limited
Directors' report
30 June 2011
The proportion of remuneration linked to performance and the fixed proportion are as follows:
Name
Non-Executive Directors:
W de Vlugt
Executive Directors:
M Bouris
K Ting
D Rudduck
Other Key Management
Personnel:
M Schwartz
P Casey
J Wilson
W Leong
T Koehler
J Freese
R Pagorek
C Service agreements
Fixed remuneration
2011
2010
At risk - STI
At risk - LTI
2011
2010
2011
2010
- %
53%
22%
23%
100%
100%
100%
100%
100%
100%
- %
- %
28%
30%
100%
100%
- %
100%
- %
100%
100%
100%
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
- %
47%
78%
77%
- %
- %
- %
- %
- %
- %
- %
- %
72%
70%
- %
- %
- %
- %
- %
- %
- %
- %
Remuneration and other terms of employment for key management personnel are formalised in service agreements.
Details of these agreements are as follows:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Dickory Rudduck
Executive Director
1 June 2011
2 years with automatic renewal periods of one year.
Base salary of USD$210,000 per annum with a notice period of 30 days.
Mark Schwartz
Chief Executive Officer of PDT Inc.
1 December 2008
3 years
Base salary of US$360,000 and notice period of 6 months.
Paul Casey
Non-Executive Director of PDT Inc.
12 May 2011
No fixed term
Base salary of US$150,000 and notice period by negotiation.
John Wilson
Chief Executive Officer of Telezygology Inc.
17 May 2010
No fixed term
Base salary of $420,000 and notice period by negotiation.
17
TZ Limited
Directors' report
30 June 2011
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
Name:
Title:
Agreement commenced:
Term of agreement:
Details:
William Leong
Vice President Operations of Telezygology Inc.
1 October 2010
No fixed term
Base salary of US$150,000 and notice period by negotiation.
Tim Koehler
Chief Financial Officer of Telezygology Inc.
1 February 2008
No fixed term
Base salary of US$120,000 and notice period by negotiation.
Key management personnel have no entitlement to termination payments in the event of removal for misconduct.
D Share-based compensation
Issue of shares
Details of shares issued to directors and other key management personnel as part of compensation during the year
ended 30 June 2011 are set out below:
Name
M Bouris
K Ting
Date
No of shares
Issue price
$
19 July 2010
19 July 2010
800,000
600,000
$0.00
$0.00
-
-
The above shares were issued on the exercise of rights and were issued at nil consideration.
Options
There were no options issued to directors and other key management personnel as part of compensation that were
outstanding as at 30 June 2011.
18
TZ Limited
Directors' report
30 June 2011
Details of options over ordinary shares issued to directors and other key management personnel as part of
compensation during the year ended 30 June 2011 are set out below:
Name
W de Vlugt (resigned on 31 May 2010)
M Bouris
K Ting
Number of options granted
during the year
Number of options vested
during the year
2011
2010
2011
2010
-
-
-
450,000
3,000,000
2,250,000
-
1,000,000
750,000
-
-
-
Vesting conditions for options granted as compensation during the year ended 30 June 2010
The options are separated into three tranches and exercise periods:
(i) The first tranche of 1,750,000 options (1,000,000 Mark Bouris and 750,000 Kenneth Ting) will be exercisable in the
period from 1 July 2011 (or, if securities in the company or any related body corporate of the company are listed on
the NASDAQ prior to 1 July 2011, the date that is 30 days after the date of that listing) to and including 30 June 2016,
at an exercise price of $1.00 per option.
(ii) The second tranche of 1,750,000 options (1,000,000 Mark Bouris and 750,000 Kenneth Ting) will be exercisable in
the period from 1 July 2012 (or, if securities in the company or any related body corporate of the company are listed
on the NASDAQ prior to 1 July 2012, the date that is 30 days after the date of that listing) to and including 30 June
2017, at an exercise price of $2.00 per option.
(iii) The third tranche of 1,750,000 options (1,000,000 Mark Bouris and 750,000 Kenneth Ting) will be exercisable in
the period from 1 July 2013 (or, if securities in the company or any related body corporate of the company are listed
on the NASDAQ prior to 1 July 2013, the date that is 30 days after the date of that listing) to and including 30 June
2018, at an exercise price of $3.00 per option.
The options granted are not subject to the satisfaction of performance conditions. The grants were made under the
Director and Executive Equity Plan to attract, retain, motivate and reward senior executives and Directors (including
non-executive directors) of the company. The options will lapse if not exercised by the respective expiry date or if
employment ceases (apart from if due to death, incapacity or redundancy). There are no other vesting conditions in
respect of these options.
Performance rights
The terms and conditions of each grant of performance rights affecting remuneration in this financial year or future
reporting years are as follows:
Grant date
Vesting date and
exercisable date
Expiry date
Share price
target for
vesting
Fair value
per right
at grant date
26 February 2010
30 June 2011 / 1 July 2011 30 June 2012
$0.00
$0.840
Performance rights granted carry no dividend or voting rights.
19
TZ Limited
Directors' report
30 June 2011
Details of performance rights over ordinary shares issued to directors and other key management personnel as part of
compensation during the year ended 30 June 2011 are set out below:
Name
W de Vlugt (resigned on 31 May 2010)
M Bouris
K Ting
Number of rights granted
during the year
Number of rights vested
during the year
2011
2010
2011
2010
-
-
-
200,000
1,600,000
1,200,000
-
800,000
600,000
80,000
800,000
600,000
Terms of grant of rights
In accordance with resolutions 12, 13 and 15 of the 2009 Annual General Meeting ('AGM'), rights were granted to the
directors under the Director and Executive Equity Plan. The grant of rights formed part of the remuneration of the
directors and was based upon advice from an independent remuneration consultant.
the time that
A total of 3,000,000 rights were granted with a nil exercise price. Of the total, 1,480,000 were exercisable immediately
after approval was given at the AGM, and 120,000 were forfeited. This parcel of 1,480,000 rights was not subject to a
performance hurdle. At
the directors remuneration packages were reviewed the circumstances
confronting the company precluded it from being able to pay appropriate cash remuneration, and this issue of rights
was in recognition of the level of commitment they had shown since their appointment. The balance of 1,400,000 is
subject to the satisfaction of a performance hurdle and exercisable from and including 1 July 2011 to 30 June 2012
provided the performance hurdle is satisfied. The rights will lapse if not exercised by the respective expiry date or if
employment ceases (apart from if due to death, incapacity or redundancy). There are no other vesting conditions in
respect of these rights.
Performance hurdle
The performance hurdle that must be satisfied before the second tranche of rights can be exercised is satisfaction of
each of the following conditions:
(i) the company completing a capital raising during the year ended 31 December 2010 raising at least $5,000,000;
(ii) the effective management of the litigation to which the company is currently party;
(iii) the progressive development of the current Information Technology platforms of the consolidated entity and
effective engagement of the company's management located in the USA; and
(iv) expansion of the consolidated entity's market extension into Europe and other regions of the world over the period
to 30 June 2011.
20
TZ Limited
Directors' report
30 June 2011
E Additional information
The earnings of the consolidated entity for the five years to 30 June 2011 are summarised below:
Sales and services revenue
EBITDA
EBIT
Loss after income tax
2007
$'000
2008
$'000
2009
$'000
2010
$'000
2011
$'000
15,865
(8,438)
(9,785)
(10,807)
14,973
(9,787)
(11,073)
(12,331)
17,696
(18,277)
(20,317)
(24,408)
17,308
(19,264)
(21,682)
(26,347)
22,399
(1,390)
(3,246)
(8,784)
The factors that are considered to affect total shareholders return (TSR) are summarised below:
2007
2008
2009
2010
2011
Share price at financial year end ($A)
Basic earnings per share (cents per share)
2.40
(25.30)
3.55
(29.04)
0.96
(50.00)
0.44
(49.46)
0.24
(9.01)
This concludes the remuneration report, which has been audited.
Shares under option
Unissued ordinary shares of TZ Limited under option at the date of this report are as follows:
Grant date
January 2008 to August 2008
24 October 2008
24 October 2008
15 May 2009
26 February 2010
26 February 2010
26 February 2010
19 February 2008 *
24 December 2010 *
Expiry date
25 August 2011
24 October 2011
24 October 2011
15 May 2012
30 June 2016
30 June 2017
30 June 2018
19 February 2013
19 February 2013
Exercise
price
Number
under option
$6.00
$2.50
$2.50
$2.50
$1.00
$2.00
$3.00
$1.00
$0.42
116,666
850,000
150,000
65,000
1,750,000
1,750,000
1,750,000
3,000,000
3,000,000
12,431,666
*
These options were granted to QVT, a hedge fund in the USA.
Shares under performance rights
Unissued ordinary shares of TZ Limited under performance rights at the date of this report are as follows:
Grant date
26 February 2010
Expiry date
1 July 2012
Exercise
price
Number
under rights
$0.00
1,400,000
Shares issued on the exercise of options
There were no shares of TZ Limited issued on the exercise of options during the year ended 30 June 2011.
21
TZ Limited
Directors' report
30 June 2011
Shares issued on the exercise of performance rights
The following ordinary shares of TZ Limited were issued during the year ended 30 June 2011 on the exercise of
performance rights granted:
Date rights granted
26 February 2010
Vesting
price
Number of
shares issued
$0.00
1,480,000
Indemnity and insurance of officers
The company has indemnified the directors and executives of the company for costs incurred, in their capacity as a
director or executive, for which they may be held personally liable, except where there is a lack of good faith.
During the financial year, the company paid a premium in respect of a contract to insure the directors and executives
of the company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance
prohibits disclosure of the nature of liability and the amount of the premium.
Indemnity and insurance of auditor
The company has not, during or since the financial year, indemnified or agreed to indemnify the auditor of the
company or any related entity against a liability incurred by the auditor.
During the financial year, the company has not paid a premium in respect of a contract to insure the auditor of the
company or any related entity.
Proceedings on behalf of the company
Except for Mr Andrew Sigalla and persons and entities associated with him that is detailed in 'Matters subsequent to
the end of the financial year' no other matter or circumstance has arisen since 30 June 2011 that has significantly
affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the
consolidated entity's state of affairs in future financial years.
Non-audit services
Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the
auditor are outlined in note 35 to the financial statements.
The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by
another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001.
The directors are of
compromise the external auditor’s independence for the following reasons:
the opinion that the services as disclosed in note 35 to the financial statements do not
all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and
objectivity of the auditor, and
none of the services undermine the general principles relating to auditor independence as set out in APES
110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical
Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-
making capacity for the company, acting as advocate for the company or jointly sharing economic risks and
rewards.
Officers of the company who are former audit partners of BDO Audit (NSW-VIC) Pty Limited
There are no officers of the company who are former audit partners of BDO Audit (NSW-VIC) Pty Limited.
Rounding of amounts
The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
22
TZ Limited
Directors' report
30 June 2011
Auditor's independence declaration
A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set
out on the following page.
Auditor
BDO Audit (NSW-VIC) Pty Limited continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act
2001.
On behalf of the directors
________________________________
Mark Bouris
Director
________________________________
Kenneth Ting
Director
30 September 2011
Sydney
23
24
TZ Limited
Statement of Corporate Governance
This 2011 Corporate Governance Statement sets out the corporate governance principles adopted by the board of
directors (the ‘Board’) in governing TZ Limited (the ‘Company’) and its subsidiaries (collectively, the ‘Group’) and
reflects the corporate governance principles which have been adopted during the financial year ended 30 June
2011. In adopting the principles the Board formally reviewed the Corporate Governance Principles and
Recommendations issued by the ASX Corporate Governance Council. The Company is a small company and
accordingly the Board considers 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
The Board's primary responsibility is to oversee the Company's business activities and management for the benefit
of Company's 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; and
appointing senior executives and monitoring their 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 above, the Company has not formalised the functions reserved to the
Board and those delegated to management due to the relatively small size of the Company. Similarly, the
Company has not adopted a formal process for evaluating the performance of senior executives for the reasons
outlined above. The evaluation of the performance of senior executives takes place at meetings of the Board and
occurred during the current reporting period.
Principle 2: Structure the board to add value
Directors appointed by the Board by reason of a vacancy are subject to re-election by the Company's shareholders
at the following annual general meeting. Directors are subject to re-election by rotation at least every three years.
The names of the directors in office at the date of this Report, the date they were appointed, the date of their most
recent re-election by the Company's shareholders and their status as non-executive, executive or independent
directors are set out in the table below:
Director
Mark Bouris
Kenneth Ting
Dickory Rudduck
Appointed
18 June 2009
18 June 2009
14 May 2010
Re-Elected
17 November 2010
26 February 2010
17 November 2010
Non-Executive
No
No
No
Independent
No
No
No
Mr Ting is standing for re-election by rotation at the 2011 annual general meeting.
The skills and experience of each director are set out in the Director’s Report in the Company's 2011 Annual
Report. The Company's directors are appointed based on the specific governance skills required by the Company,
including an appropriate blend of relevant experience appropriate to the Company's field of operations, accounting
and financial management and following consideration of the Company's objectives with respect to diversity.
25
TZ Limited
Statement of Corporate Governance
The areas of divergence with recommended principles are set out below:
The majority of directors are not independent as they are all executive directors.
The Chairman is not independent and is an executive director
As the whole Board only consists of three directors, the Company does not have a formally constituted
Nomination Committee as the Board believes it would not be a more efficient mechanism than the full
Board focussing the Company on specific issues. Currently, the Board as a whole performs the roles and
functions of a Nomination Committee. These roles and functions include: devising criteria for Board
membership; regularly reviewing the need for various skills and experience on the Board; considering the
Company's objectives with respect to diversity when selecting candidates; and identifying specific
individuals for nomination as directors. The Board also oversees management succession plans and
evaluates the Chairman's and the Board's performance and makes recommendations for the appointment
and removal of directors. When a vacancy exists on the Board or where it is considered that a director with
particular skills or experience is required, the Board selects a panel of candidates with the appropriate
expertise and experience from which the most suitable candidate is appointed on merit.
The Company does not have a formal process for evaluating the performance of the Board and the
individual directors, other than as set out above.
The above areas of divergence are due to the relatively small size of the Company and its operations.
Each director of the Company has the right to seek independent professional advice at the expense of the
Company.
Principle 3: Promote ethical and responsible decision making
Board members, executive management and Company officers are made aware of the requirements to follow
corporate policies and procedures, to obey the law and to maintain appropriate standards of honesty and integrity
at all times.
The Company does not have a formal written 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 continues to review the situation to determine the most appropriate and effective operational
procedures.
The Board is committed to an inclusive workplace that embraces and promotes diversity. The Company is
committed to setting measurable objectives for attracting and engaging women at the Board level, in senior
management positions and across the Group as a whole. Progress against set diversity related targets will be
included in future annual reports.
The gender representation profile of the Company and the Group as a whole is as follows:
Board Level:
Key management personnel:
Group as a whole:
0 %
0 %
16 %
Principle 4: Safeguard integrity in financial reporting
The Company was not a company required by ASX Listing Rule 12.7 to have an Audit Committee during the year.
The Board has determined that, due to the relatively small size of the Company, it would not be efficient to appoint
a formal audit committee. Nevertheless, the Board has adopted procedures to adequately address issues related to
the integrity of the Company’s financial reporting and to oversee the independence of the external auditors. The
procedures include the following main responsibilities:
Monitor the integrity of the financial statements of the Company and review significant financial reporting
changes.
Review the Company’s internal financial control system and risk management systems.
Appoint the external auditor and to approve the remuneration and terms of engagement of the external
auditor.
Monitor and review the external auditor’s independence, objectivity and effectiveness, taking into
consideration relevant professional and regulatory requirements.
Develop and implement policy on the engagement of the external auditor to supply non-audit services,
taking into account relevant ethical guidance regarding the provision of non-audit services by the external
audit firm
The skills and experience of each director is set out in the Director’s Report in the annual financial report for the
year ended 30 June 2011.
26
TZ Limited
Statement of Corporate Governance
Principle 5: Make timely and balanced disclosure
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 has formal written policies regarding disclosure which is publicly available on the
Company’s website.
Principle 6: Respects the rights of shareholders
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:
despatch of the annual and half yearly financial reports;
despatch of all notices of meetings of shareholders; and
submitting to a vote of shareholders proposed major changes in the consolidated entity which may impact
on share ownership rights.
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 7: Recognise and manage risk
The Board has adopted the role of identification, assessment, monitoring and managing the significant areas of risk
applicable to the consolidated entity and its operations. The Board has not established a separate committee to
deal with these matters as the directors consider the size of the Company and its operations does not warrant a
separate committee at this time. The directors have identified the significant areas of risk applicable to the
consolidated entity and its operations and the Board considers the matter of risk management as a standing
agenda item at board meetings.
For the reasons set out above the Company has not established formal policies on risk management. The Board
endeavours to mitigate any risks by continually reviewing the activities of the Company in order to identify key
business and operational risks and ensuring that they are appropriately assessed and managed. The Company
has received assurances from the chief financial officers (or equivalents) and chief executive officers (or
equivalents) of the group that the declaration under section 295A of the Corporations Act is founded on a system of
risk management and internal control which is operating effectively in all material respects in relation to financial
reporting risks.
Principle 8: Remunerate fairly and responsibly
Because of the relatively small size of the Company and its operations, the Board does not consider it appropriate,
at this time, to form a separate committee to deal with executive remuneration. Accordingly, the Company does not
have a remuneration committee made up of a majority of independent members, chaired by an independent
member as recommended by the ASX Corporate Governance Council. Instead, the Board as a whole establishes
and reviews annually the remuneration of the executive directors and senior executives, as well as superannuation
arrangements, the remuneration framework for all directors and remuneration by gender.
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.
27
TZ Limited
Financial report
For the year ended 30 June 2011
Contents
Financial report
Statement of comprehensive income
Statement of financial position
Statement of changes in equity
Statement of cash flows
Notes to the financial statements
Directors' declaration
Independent auditor's report to the members of TZ Limited
Page
29
30
31
33
34
93
94
General information
The financial report covers TZ Limited as a consolidated entity consisting of TZ Limited and the entities it controlled.
The financial report is presented in Australian dollars, which is TZ Limited's functional and presentation currency.
The financial report consists of
declaration.
the financial statements, notes to the financial statements and the directors'
TZ Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office
and principal place of business are:
Registered office
Level 11, 1 Chifley Square
Sydney NSW 2000
Principal place of business
TZ Limited, Level 11, 1 Chifley Square, Sydney NSW
Telezygology Inc., 1017 W. Washington Blvd, Unit 2C,
Chicago IL 60607, USA
PDT Inc, One Corporate Drive, Suite 110, Lake Zurich IL
60047, USA
A description of the nature of the consolidated entity's operations and its principal activities are included in the
directors' report, which is not part of the financial report.
The financial report was authorised for issue, in accordance with a resolution of directors, on 30 September 2011. The
directors have the power to amend and reissue the financial report.
28
TZ Limited
Statement of comprehensive income
For the year ended 30 June 2011
Revenue
Other income
Expenses
Raw materials and consumables used
Subcontractors costs
Employee benefits expense
Occupancy expense
Depreciation and amortisation expense
Communications expense
Professional and corporate services
Travel and accommodation expense
Development costs
Net loss on movement in fair value of derivative liabilities
Net loss on conversion of convertible notes
Share of net losses of joint venture accounted for using the equity method
Other expenses
Finance costs
Loss before income tax (expense)/benefit
Income tax (expense)/benefit
Note
Consolidated
2011
$'000
2010
$'000
5
6
7
7
8
23,470
17,696
6,800
1,108
(1,471)
(7,833)
(14,599)
(767)
(1,856)
(349)
(3,322)
(1,504)
(904)
-
-
(217)
(2,025)
(4,098)
(975)
(4,577)
(12,139)
(934)
(2,228)
(247)
(4,894)
(971)
(114)
(6,158)
(5,627)
-
(1,446)
(5,006)
(8,675)
(26,512)
(109)
165
Loss after income tax (expense)/benefit for the year attributable to the
owners of TZ Limited
30
(8,784)
(26,347)
Other comprehensive income
Foreign currency translation
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to the owners of
TZ Limited
Basic earnings per share
Diluted earnings per share
Refer to note 3 for detailed information on restatement of comparatives.
(4,043)
(1,706)
(4,043)
(1,706)
(12,827)
(28,053)
Cents
Cents
45
45
(9.01)
(9.01)
(49.46)
(49.46)
The above statement of comprehensive income should be read in conjunction with the accompanying notes
29
TZ Limited
Statement of financial position
As at 30 June 2011
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Investment in short term deposit
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangibles
Deferred tax
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Provisions
Other
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other contributed equity
Reserves
Accumulated losses
Total equity
Note
Consolidated
2011
$'000
2010
$'000
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1,146
4,913
331
5,500
11,890
187
1,884
19,750
751
179
22,751
232
4,733
167
-
5,132
-
1,976
24,545
635
148
27,304
34,641
32,436
4,575
729
-
116
368
5,788
10,206
4,411
945
507
16,069
4,708
5,919
746
87
531
11,991
5,897
8,316
829
533
15,575
21,857
27,566
12,784
4,870
149,113
-
(6,997)
(129,332)
125,907
4,768
(2,954)
(122,851)
12,784
4,870
Refer to note 3 for detailed information on restatement of comparatives.
The above statement of financial position should be read in conjunction with the accompanying notes
30
TZ Limited
Statement of changes in equity
For the year ended 30 June 2011
Consolidated
Balance at 1 July 2009
Other comprehensive income
for the year, net of tax
Loss after income tax
(expense)/benefit for the year
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Contributions of equity, net of
transaction costs
Share-based payments
Conversion of convertible
notes
Shares to be issued to
extinguish liabilities
$'000
Contributed
equity
$'000
114,727
-
-
-
-
-
-
1,100
-
10,080
Other
contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Total
equity
$'000
-
-
-
-
-
-
-
999
(101,093)
14,633
(3,953)
2,247
(1,706)
-
(26,347)
(26,347)
(3,953)
(24,100)
(28,053)
-
-
-
-
-
2,342
-
-
1,100
2,342
10,080
4,768
-
4,768
Balance at 30 June 2010
-
125,907
4,768
(2,954)
(122,851)
4,870
The above statement of changes in equity should be read in conjunction with the accompanying notes
31
TZ Limited
Statement of changes in equity
For the year ended 30 June 2011
Contributed
equity
$'000
Contributed
equity
$'000
Other
contributed
equity
$'000
Reserves
$'000
Accumulated
losses
$'000
Total
equity
$'000
125,907
4,768
(2,954)
(122,851)
4,870
-
-
-
-
-
-
-
12,806
5,098
1,139
(605)
-
-
-
-
-
-
-
-
4,768
(4,768)
(4,043)
-
(4,043)
-
(8,784)
(8,784)
(4,043)
(8,784)
(12,827)
-
-
-
-
-
-
2,303
-
2,303
12,806
-
-
-
-
5,098
1,139
(605)
-
Consolidated
Balance at 1 July 2010
Other comprehensive income
for the year, net of tax
Loss after income tax
(expense)/benefit for the year
Total comprehensive income
for the year
Transactions with owners in
their capacity as owners:
Share-based payments
Contributions of equity
Conversion of convertible
notes
Conversion of liabilities to
equity
Less: transaction costs on
shares issued
Transfer to contributed equity
upon issue of shares
Balance at 30 June 2011
-
149,113
-
(6,997)
(129,332)
12,784
The above statement of changes in equity should be read in conjunction with the accompanying notes
32
TZ Limited
Statement of cash flows
For the year ended 30 June 2011
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Other revenue
Interest and other finance costs paid
Income taxes refunded
Income taxes paid
Net cash used in operating activities
Cash flows from investing activities
Payments for new joint venture capital invested
Payments for property, plant and equipment
Payments for intangibles
Investment in short term deposits
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Transaction costs on shares issued
Proceeds from borrowings
Repayment of borrowings
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash
Cash and cash equivalents at the end of the financial year
9
Note
Consolidated
2011
$'000
2010
$'000
44
14
15
27
21,130
(29,329)
16,465
(20,865)
(8,199)
264
514
(61)
-
(71)
(4,400)
63
-
(27)
12
-
(7,553)
(4,352)
(200)
(946)
(577)
(5,500)
8
-
(256)
(1,577)
-
3
(7,215)
(1,830)
12,806
(605)
5,301
(1,400)
50
-
6,662
(680)
16,102
6,032
1,334
232
(420)
1,146
(150)
566
(184)
232
The above statement of cash flows should be read in conjunction with the accompanying notes
33
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies
The principal accounting policies adopted in the preparation of the financial statements are set out below. These
policies have been consistently applied to all the years presented, unless otherwise stated.
New, revised or amending Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations
issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.
Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been
early adopted.
Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting
Standards and Interpretations are disclosed in the relevant accounting policy.
The adoption of these Accounting Standards and Interpretations did not have any impact on the financial performance
or position of the consolidated entity. The following Accounting Standards and Interpretations are most relevant to the
consolidated entity:
AASB 2 Share-based Payment Transactions - amendments for Group Cash-settled Share-based Payment
Transactions
The consolidated entity has applied the amendments to AASB 2 from 1 July 2010. The amendments clarified the
scope of AASB 2 by requiring an entity that receives goods or services in a share-based payment arrangement to
account for those goods or services no matter which entity in the consolidated entity settles the transaction, and no
matter whether the transaction is settled in shares or cash.
AASB 2009-5 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
The consolidated entity has applied AASB 2009-5 amendments from 1 July 2010. The amendments result in some
accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to
terminology and editorial changes had no or minimal effect on accounting. The main changes were:
AASB 101 'Presentation of Financial Statements' - classification is not affected by the terms of a liability that could be
settled by the issuance of equity instruments at the option of the counterparty;
AASB 107 'Statement of Cash Flows' - only expenditure that results in a recognised asset can be classified as a cash
flow from investing activities;
AASB 117 'Leases' - removal of specific guidance on classifying land as a finance or operating lease;
AASB 118 'Revenue' - provides additional guidance to determine whether an entity is acting as a principal or agent;
and
AASB 136 'Impairment of Assets' - clarifies that the largest unit permitted for allocating goodwill, acquired in a
business combination, is the operating segment as defined in AASB 8 'Operating Segments' before aggregation for
reporting purposes.
AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements Project
The consolidated entity has applied AASB 2010-3 amendments from 1 July 2010. The amendments result in some
accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to
terminology and editorial changes had no or minimal effect on accounting. The main changes were:
AASB 127 'Consolidated and Separate Financial Statements' and AASB 3 Business Combinations - clarifies that
contingent consideration from a business combination that occurred before the effective date of revised AASB 3 is not
restated; the scope of the measurement choices of non-controlling interest is limited to when the rights acquired
include entitlement to a proportionate share of net assets in the event of liquidation; requires an entity in a business
combination to account
transactions, unreplaced and
voluntarily replaced, by splitting between consideration and post combination expenses.
for the replacement of acquiree's share-based payment
34
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Basis of preparation
These general purpose financial statements have been prepared in accordance with Australian Accounting Standards
and Interpretations issued by the Australian Accounting Standards Board ('AASB') and the Corporations Act 2001.
These financial statements also comply with International Financial Reporting Standards as issued by the
International Accounting Standards Board ('IASB').
Historical cost convention
The financial statements have been prepared under the historical cost convention, except for derivative financial
instruments at fair value.
Critical accounting estimates
The preparation of the financial statements requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the consolidated entity's accounting policies. The
judgement or complexity, or areas where assumptions and estimates are
areas involving a higher degree of
significant to the financial statements, are disclosed in note 2.
Parent entity information
In accordance with the Corporations Act 2001, these financial statements present the results of the consolidated
entity only. Supplementary information about the parent entity is disclosed in note 40.
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of TZ Limited ('company'
or 'parent entity') as at 30 June 2011 and the results of all subsidiaries and special purpose entities for the year then
ended. TZ Limited, its subsidiaries and special purpose entities together are referred to in these financial statements
as the 'consolidated entity'.
Subsidiaries are all those entities over which the consolidated entity has the power to govern the financial and
operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The effects of
potential exercisable voting rights are considered when assessing whether control exists. Subsidiaries are fully
consolidated from the date on which control is transferred to the consolidated entity. They are de-consolidated from
the date that control ceases.
Special purpose entities ('SPEs') are those entities where the consolidated entity, in substance, controls the SPE so
as to obtain the majority of benefits without having any ownership interest.
Intercompany transactions, balances and unrealised gains on transactions between entities in the consolidated entity
are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of
the asset transferred. Accounting policies of subsidiaries and special purpose entities have been changed where
necessary to ensure consistency with the policies adopted by the consolidated entity.
The acquisition of subsidiaries is accounted for using the acquisition method of accounting. Refer to the 'business
combinations' accounting policy for further details. A change in ownership interest, without the loss of control, is
accounted for as an equity transaction, where the difference between the consideration transferred and the book
value of the share of the non-controlling interest acquired is recognised directly in equity attributable to the parent.
Where the consolidated entity loses control over a subsidiary, it derecognises the assets including goodwill, liabilities
and non-controlling interest in the subsidiary together with any cumulative translation differences recognised in equity.
The consolidated entity recognises the fair value of the consideration received and the fair value of any investment
retained together with any gain or loss in profit or loss.
Operating segments
Operating segments are presented using the 'management approach', where the information presented is on the
same basis as the internal reports provided to the Chief Operating Decision Makers ('CODM'). The CODM is
responsible for the allocation of resources to operating segments and assessing their performance.
35
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Foreign currency translation
The financial report is presented in Australian dollars, which is TZ Limited's functional and presentation currency.
Foreign currency transactions
Foreign currency transactions are translated into Australian dollars using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at financial year-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
Foreign operations
The assets and liabilities of foreign operations are translated into Australian dollars using the exchange rates at the
reporting date. The revenues and expenses of foreign operations are translated into Australian dollars using the
average exchange rates, which approximates the rate at the date of the transaction, for the period. All resulting
foreign exchange differences are recognised in the foreign currency reserve in equity.
The foreign currency reserve is recognised in profit or loss when the foreign operation or net investment is disposed
of.
Revenue recognition
Revenue is recognised when it is probable that the economic benefit will flow to the consolidated entity and the
revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable.
Sale of goods
Sale of goods revenue is recognised at the point of sale, which is where the customer has taken delivery of the
goods, the risks and rewards are transferred to the customer and there is a valid sales contract. Amounts disclosed
as revenue are net of sales returns and trade discounts.
Rendering of services
Revenue from engineering design services is recognised in accordance with the percentage of completion method.
Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated
labour hours for each contract. Where the contract outcome cannot be reliably estimated, revenue is only recognised
to the extent of the recoverable costs incurred to date.
Interest
Interest revenue is recognised as interest accrues using the effective interest method. This is a method of calculating
the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
Other revenue
Other revenue is recognised when it is received or when the right to receive payment is established.
36
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Income tax
The income tax expense or benefit for the period is the tax payable on that period's taxable income based on the
applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable
to temporary differences and unused tax losses and under and over provision in prior periods, where applicable.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when
the assets are recovered or liabilities are settled, based on those tax rates that are enacted or substantively enacted,
except for:
When the deferred income tax asset or liability arises from the initial recognition of goodwill or an asset or
liability in a transaction that is not a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
When the taxable temporary difference is associated with investments in subsidiaries, associates or
interests in joint ventures, and the timing of the reversal can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable
that future taxable amounts will be available to utilise those temporary differences and losses.
The carrying amount of recognised and unrecognised deferred tax assets are reviewed each reporting date. Deferred
tax assets recognised are reduced to the extent that it is no longer probable that future taxable profits will be available
for the carrying amount to be recovered. Previously unrecognised deferred tax assets are recognised to the extent
that it is probable that there are future taxable profits available to recover the asset.
Deferred tax assets and liabilities are offset only where there is a legally enforceable right to offset current tax assets
against current tax liabilities and deferred tax assets against deferred tax liabilities; and they relate to the same
taxable authority on either the same taxable entity or different taxable entity's which intend to settle simultaneously.
Cash and cash equivalents
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term,
highly liquid investments with original maturities of three months or less that are readily convertible to known amounts
of cash and which are subject to an insignificant risk of changes in value.
Trade and other receivables
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost using the
effective interest method, less any provision for impairment. Trade receivables are generally due for settlement within
30 days.
Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are
written off by reducing the carrying amount directly. A provision for impairment of trade receivables is raised when
there is objective evidence that the consolidated entity will not be able to collect all amounts due according to the
original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter
bankruptcy or financial reorganisation and default or delinquency in payments (more than 60 days overdue) are
considered indicators that the trade receivable may be impaired. The amount of the impairment allowance is the
difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at
the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of
discounting is immaterial.
Other receivables are recognised at amortised cost, less any provision for impairment.
37
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost comprises all direct materials, direct labour
and an appropriate portion of variable and fixed overheads. Fixed overheads are allocated on the basis of normal
operating capacity. Costs are assigned to inventories using the weighted average basis. Net realisable value is the
estimated selling price in the ordinary course of business, less the estimated selling cost of completion and selling
expenses.
Work in progress
Work in progress is recognised in accordance with revenue recognition policies and is based on the percentage of
completion method.
Derivative financial instruments
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured to their fair value at each reporting date. The accounting for subsequent changes in fair value depends
on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
Derivatives are classified as current or non-current depending on the expected period of realisation.
Joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is
subject to joint control. Investments in joint ventures are accounted for using the equity method. Under the equity
method, the share of the profits or losses of the joint venture is recognised in profit or loss and the share of the
movements in equity is recognised in other comprehensive income. Income earned from joint venture entities is
recognised as a reduction in the carrying amount of the investment.
Investments and other financial assets
Investments and other financial assets are measured at either amortised cost or fair value depending on their
classification. Classification is determined based on the purpose of the acquisition and subsequent reclassification to
other categories is restricted. The fair values of quoted investments are based on current bid prices. For unlisted
investments, the consolidated entity establishes fair value by using valuation techniques. These include the use of
recent arms length transactions, reference to other instruments that are substantially the same, discounted cash flow
analysis, and option pricing models.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or
have been transferred and the consolidated entity has transferred substantially all the risks and rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are carried at amortised cost using the effective interest rate method. Gains and losses are
recognised in profit or loss when the asset is derecognised or impaired.
Impairment of financial assets
The consolidated entity assesses at the end of each reporting period whether there is any objective evidence that a
financial asset or group of financial assets is impaired. Objective evidence includes significant financial difficulty of the
issuer or obligor; a breach of contract such as default or delinquency in payments; the lender granting to a borrower
concessions due to economic or legal reasons that the lender would not otherwise do; it becomes probable that the
borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for the
financial asset; or observable data indicating that there is a measurable decrease in estimated future cash flows.
The amount of the impairment allowance for loans and receivables carried at amortised cost is the difference
between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original
effective interest rate. If there is a reversal of impairment, the reversal cannot exceed the amortised cost that would
have been had the impairment not been recognised and is reversed to profit or loss.
38
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Property, plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and impairment. Historical cost
includes expenditure that is directly attributable to the acquisition of the items.
Depreciation is calculated on a straight-line basis to write off the net cost of each item of property, plant and
equipment over their expected useful lives as follows:
Leasehold improvements
Plant and equipment
Motor vehicles
Office equipment
20 - 33%
20%
20%
15 - 35%
The residual values, useful
reporting date.
lives and depreciation methods are reviewed, and adjusted if appropriate, at each
Leasehold improvements and plant and equipment under lease are depreciated over the unexpired period of the
lease or the estimated useful life of the assets, whichever is shorter.
An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit
to the consolidated entity.
Leases
Lease payments under operating leases, where substantially all the risks and benefits remain with the lessor, are
charged as expenses in the period in which they are incurred. 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.
Intangible assets
Intangible assets acquired as part of a business combination, other than goodwill, are initially measured at their fair
value at the date of the acquisition. Intangible assets acquired separately are initially recognised at cost. Intangible
assets are subsequently measured at cost less amortisation and any impairment. The gains or losses recognised in
profit or loss arising from the derecognition of intangible assets are measured as the difference between net disposal
proceeds and the carrying amount of the intangible asset. The method and useful lives of finite life intangibles are
reviewed annually. Changes in the expected pattern of consumption or useful life are accounted for prospectively by
changing the amortisation method or period.
Goodwill
Where an entity or operation is acquired in a business combination, the identifiable net assets acquired are measured
at fair value. The excess of the fair value of the cost of the acquisition over the fair value of the identifiable net assets
acquired is brought to account as goodwill. Goodwill
is tested annually for
impairment, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried
at cost less accumulated impairment losses. Impairment losses on goodwill are taken to profit or loss and are not
subsequently reversed.
is not amortised. Instead, goodwill
Trade names
Trade names have an indefinite useful life and are carried at cost less accumulated impairment losses. Trade names
are reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the
carrying value may be impaired
39
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Patents
Expenditure directly attributable to the registration of patents is capitalised at cost and is amortised over the useful life
of between 15 to 20 years.
Customer relationships
Customer relationships acquired as part of a business combination are recognised separately from goodwill and are
carried at their fair value at date of acquisition less accumulated amortisation and impairment losses. Amortisation is
calculated based on a straight line basis over the estimated useful life of between 10 - 15 years.
Research and development costs
Research costs are expensed as incurred. Development expenditure incurred on an individual project is capitalised if
the product or service is technically feasible, adequate resources are available to complete the project, it is probable
that future economic benefits will be generated and expenditure attributable to the project can be measured reliably.
Expenditure capitalised comprises costs of materials, services, direct labour and an appropriate portion of overheads.
Capitalised development expenditure is stated at cost less accumulated amortisation and any impairment losses, and
are amortised over the period of expected future sales from the related projects which vary from 3 to 11 years.
Re-acquired right (Intevia licence)
Re-acquired rights are initially recognised at cost, then amortised over their expected useful life of 13.5 years. The re-
acquired rights related to technology and know-how that is collectively referred to as the 'Intevia licence'. The right to
exploit this technology was re-acquired from Textron Inc on 22 January 2007.
Impairment of non-financial assets
Goodwill and other intangible assets that have an indefinite useful life are not subject to amortisation and are tested
annually for impairment, or more frequently if events or changes in circumstances indicate that they might be
impaired. Other non-financial assets 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.
Recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. The value-in-use is the
present value of the estimated future cash flows relating to the asset using a pre-tax discount rate specific to the
asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash flows are
grouped together to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of the
financial year and which are unpaid. Due to their short-term nature they are measured at amortised cost and not
discounted. The amounts are unsecured and are usually paid within 30 to 60 days of recognition.
40
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Borrowings
Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs.
They are subsequently measured at amortised cost using the effective interest method.
Where there is an unconditional right to defer settlement of the liability for at least 12 months after the reporting date,
the loans or borrowings are classified as non-current.
Convertible notes
The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the
statement of financial position, net of transaction costs.
On the issue of the convertible notes the fair value of the liability component is determined using a market rate for an
equivalent non-convertible bond and this amount is carried as a non-current liability on the amortised cost basis until
extinguished on conversion or redemption. The increase in the liability due to the passage of time, is recognised as a
finance cost. The remainder of the proceeds are allocated to the conversion option that is recognised and included in
shareholders equity as other contributed equity, net of transaction costs. The carrying amount of the conversion
option is not remeasured in the subsequent years. The corresponding interest on convertible notes is expensed to
profit or loss.
Under the terms of the Convertible Note Subscription Deed and the subsequent amendments, the conversion price is
the lower of (a) the agreed conversion price and (b) the issue price of any subsequent share issue during the term of
this clause the note holders equity risk is eliminated, and therefore the
the convertible notes. As a result of
instruments are treated as debt instruments with an embedded derivative.
The fair value of the debt portion of the convertible notes is determined after calculating the fair value of the
embedded derivative on inception. The debt portion is subsequently measured at amortised cost and the embedded
derivative financial
instrument is measured at fair value at each reporting date with any movement in fair value
reported in profit or loss. Issue costs are apportioned between the liability and equity components of convertible notes
based on the allocation of proceeds to the debt and equity components (if any) when the instruments are first
recognised.
Finance costs
Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are
expensed in the period in which they are incurred, including:
- interest on short-term and long-term borrowings
Provisions
Provisions are recognised when the consolidated entity has a present (legal or constructive) obligation as a result of a
past event, it is probable the consolidated entity will be required to settle the obligation, and a reliable estimate can be
made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration
required to settle the present obligation at
the risks and uncertainties
surrounding the obligation. If the time value of money is material, provisions are discounted using a current pre-tax
rate specific to the liability. The increase in the provision resulting from the passage of time is recognised as a finance
cost.
taking into account
the reporting date,
41
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Employee benefits
Wages and salaries and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12
months of the reporting date are recognised in current liabilities in respect of employees' services up to the reporting
date and are measured at the amounts expected to be paid when the liabilities are settled.
Long service leave
The liability for long service leave is recognised in current and non-current liabilities, depending on the unconditional
right to defer settlement of the liability for at least 12 months after the reporting date. The liability is measured as the
present value of expected future payments to be made in respect of services provided by employees up to the
reporting date using the projected unit credit method. Consideration is given to expected future wage and salary
levels, experience of employee departures and periods of service. Expected future payments are discounted using
market yields at the reporting date on national government bonds with terms to maturity and currency that match, as
closely as possible, the estimated future cash outflows.
Defined contribution superannuation expense
Contributions to defined contribution superannuation plans are expensed in the period in which they are incurred.
Share-based payments
Equity-settled and cash-settled share-based compensation benefits are provided to employees (including directors).
The Directors and Employee Equity Plan also gives directors and senior executives the opportunity to participate in
the consolidated entity's equity in exchange for their services.
Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange
for the rendering of services. Cash-settled transactions are awards of cash for the exchange of services, where the
amount of cash is determined by reference to the share price.
The cost of equity-settled transactions are measured at
fair value on grant date. Fair value is independently
determined using either the Binomial or Black-Scholes option pricing model that takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free interest rate for the term of the option, together with
non-vesting conditions that do not determine whether the consolidated entity receives the services that entitle the
employees to receive payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a corresponding increase in equity over the
vesting period. The cumulative charge to profit or loss is calculated based on the grant date fair value of the award,
the best estimate of the number of awards that are likely to vest and the expired portion of the vesting period. The
amount recognised in profit or loss for the period is the cumulative amount calculated at each reporting date less
amounts already recognised in previous periods.
42
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
The cost of cash-settled transactions is initially, and at each reporting date until vested, determined by applying either
the Binomial or Black-Scholes option pricing model, taking into consideration the terms and conditions on which the
award was granted. The cumulative charge to profit or loss until settlement of the liability is calculated as follows:
during the vesting period, the liability at each reporting date is the fair value of the award at that date
multiplied by the expired portion of the vesting period.
from the end of the vesting period until settlement of the award, the liability is the full fair value of the liability
at the reporting date.
All changes in the liability are recognised in profit or loss. The ultimate cost of cash-settled transactions is the cash
paid to settle the liability.
Market conditions are taken into consideration in determining fair value. Therefore any awards subject to market
conditions are considered to vest irrespective of whether or not that market condition has been met, provided all other
conditions are satisfied.
If equity-settled awards are modified, as a minimum an expense is recognised as if the modification has not been
made. An additional expense is recognised, over the remaining vesting period, for any modification that increases the
total fair value of the share-based compensation benefit as at the date of modification.
If the non-vesting condition is within the control of the consolidated entity or employee, the failure to satisfy the
condition is treated as a cancellation. If the condition is not within the control of the consolidated entity or employee
and is not satisfied during the vesting period, any remaining expense for the award is recognised over the remaining
vesting period, unless the award is forfeited.
If equity-settled awards are cancelled, it is treated as if it has vested on the date of cancellation, and any remaining
expense is recognised immediately. If a new replacement award is substituted for the cancelled award, the cancelled
and new award is treated as if they were a modification.
Contributed equity
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of
tax, from the proceeds.
43
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Business combinations
The acquisition method of accounting is used to account for business combinations regardless of whether equity
instruments or other assets are acquired.
The consideration transferred is the sum of
the assets transferred, equity
instruments issued or liabilities incurred by the acquirer to former owners of the acquiree and the amount of any non-
controlling interest in the acquiree. For each business combination, the non-controlling interest in the acquiree is
measured at either fair value or at the proportionate share of the acquiree's identifiable net assets. All acquisition
costs are expensed as incurred to profit or loss.
the acquisition-date fair values of
On the acquisition of a business, the consolidated entity assesses the financial assets acquired and liabilities
assumed for appropriate classification and designation in accordance with the contractual
terms, economic
conditions, the consolidated entity's operating or accounting policies and other pertinent conditions in existence at the
acquisition-date.
Where the business combination is achieved in stages, the consolidated entity remeasures its previously held equity
interest in the acquiree at the acquisition-date fair value and the difference between the fair value and the previous
carrying amount is recognised in profit or loss.
Contingent consideration to be transferred by the acquirer is recognised at the acquisition-date fair value. Subsequent
changes in the fair value of contingent consideration classified as an asset or liability is recognised in profit or loss.
Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within
equity.
The difference between the acquisition-date fair value of assets acquired, liabilities assumed and any non-controlling
interest in the acquiree and the fair value of the consideration transferred and the fair value of any pre-existing
investment in the acquiree is recognised as goodwill. If the consideration transferred and the pre-existing fair value is
less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference
is recognised as a gain directly in profit or loss by the acquirer on the acquisition-date, but only after a reassessment
of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any,
the consideration transferred and the acquirer's previously held equity interest in the acquirer.
Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the
provisional amounts recognised and also recognises additional assets or liabilities during the measurement period,
based on new information obtained about the facts and circumstances that existed at the acquisition-date. The
measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the
acquirer receives all the information possible to determine fair value.
Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to the owners of TZ Limited, excluding any
costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into
account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have been issued for no consideration in relation to
dilutive potential ordinary shares.
44
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
Goods and Services Tax ('GST') and other similar taxes
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not
recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as
part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST
recoverable from, or payable to, the tax authority is included in other receivables or other payables in the statement of
financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing
activities which are recoverable from, or payable to the tax authority, are presented as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax
authority.
Comparative information
Certain comparatives have been reclassified to be consistent with current year presentation.
Rounding of amounts
The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments
Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Class
Order to the nearest thousand dollars, or in certain cases, the nearest dollar.
New Accounting Standards and Interpretations not yet mandatory or early adopted
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June
2011. The consolidated entity's assessment of the impact of these new or amended Accounting Standards and
Interpretations, most relevant to the consolidated entity, are set out below.
AASB 10 Consolidated Financial Statements
This standard is applicable to annual reporting periods beginning on or after 1 January 2013. The standard has a new
definition of ‘control’. Control exists when the reporting entity is exposed, or has the rights, to variable returns (e.g.
dividends, remuneration, returns that are not available to other interest holders including losses) from its involvement
with another entity and has the ability to affect those returns through its ‘power’ over that other entity. A reporting entity
has power when it has rights (e.g. voting rights, potential voting rights, rights to appoint key management, decision
making rights, kick out rights) that give it the current ability to direct the activities that significantly affect the investee’s
returns (e.g. operating policies, capital decisions, appointment of key management). The consolidated entity will not
only have to consider its holdings and rights but also the holdings and rights of other shareholders in order to
determine whether it has the necessary power for consolidation purposes. The adoption of this standard from 1 July
2013 may have an impact where the consolidated entity has a holding of less than 50% in an entity, has de facto
control, and is not currently consolidating that entity.
AASB 11 Joint Arrangements
This standard is applicable to annual reporting periods beginning on or after 1 January 2013. The standard defines
which entities qualify as joint ventures and removes the option to account for joint ventures using proportional
consolidation. Joint ventures, where the parties to the agreement have the rights to the net assets will use equity
accounting. Joint Operations, where the parties to the agreements have the rights to the assets and obligations for
the liabilities will account
revenues and expenses separately, using proportionate
consolidation. The adoption of this standard from 1 July 2013 will not have a material impact on the consolidated
entity.
the assets,
liabilities,
for
45
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
AASB 12 Disclosure of Interests in Other Entities
This standard is applicable to annual reporting periods beginning on or after 1 January 2013. It contains the entire
disclosure requirement associated with other entities, being subsidiaries, associates and joint ventures. The
disclosure requirements have been significantly enhanced when compared to the disclosures previously located in
AASB 127 ‘Consolidated and Separate Financial Statements’, AASB 128 ‘Investments in Associates’, AASB 131
‘Interests in Joint Ventures’, Interpretation 12 'Service Concession Arrangements’ and Interpretation 13 'Customer
Loyalty Programmes. The adoption of this standard from 1 July 2013 will significantly increase the amount of
disclosures required to be given by the consolidated entity such as significant judgements and assumptions made by
the Consolidated Entity in determining whether it has a controlling or non-controlling interest in another entity and the
type of non-controlling interest and the nature and risks involved.
AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from
AASB 13
This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1
January 2013. The standard provides a single robust measurement framework, with clear measurement objectives,
for measuring fair value using the ‘exit price’ and it provides guidance on measuring fair value when a market
becomes less active. The ‘highest and best use’ approach would be used to measure assets, but not liabilities. As the
standard does not introduce any new requirements for the use of fair value, its impact on adoption by the consolidated
entity from 1 July 2013 should be minimal, although there will be increased disclosures where fair value is used.
AASB 119 Employee Benefits (September 2011)
This revised standard is applicable to annual reporting periods beginning on or after 1 January 2013. The
amendments eliminate the corridor approach for the deferral of gains and losses; streamlines the presentation of
changes in assets and liabilities arising from defined benefit plans,
including requiring remeasurements to be
presented in other comprehensive income; and enhances the disclosure requirements for defined benefit plans. The
adoption of the revised standard from 1 July 2013 will require increased disclosures by the consolidated entity.
AASB 9 Financial Instruments, 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and
2010-7 Amendments to Australian Accounting Standards arising from AASB 9
This standard and its consequential amendments are applicable to annual reporting periods beginning on or after 1
January 2013 and completes phase I of the IASB's project to replace IAS 39 (being the international equivalent to
AASB 139 'Financial Instruments: Recognition and Measurement'). This standard introduces new classification and
measurement models for financial assets, using a single approach to determine whether a financial asset
is
measured at amortised cost or fair value. To be classified and measured at amortised cost, assets must satisfy the
business model test for managing the financial assets and have certain contractual cash flow characteristics. All other
financial
instrument assets are to be classified and measured at fair value. This standard allows an irrevocable
election on initial recognition to present gains and losses on equity instruments (that are not held-for-trading) in other
comprehensive income, with dividends as a return on these investments being recognised in profit or loss. In addition,
those equity instruments measured at fair value through other comprehensive income would no longer have to apply
any impairment requirements nor would there be any ‘recycling’ of gains or losses through profit or loss on disposal.
The accounting for financial liabilities continues to be classified and measured in accordance with AASB 139, with one
exception, being that the portion of a change of fair value relating to the entity’s own credit risk is to be presented in
other comprehensive income unless it would create an accounting mismatch. The consolidated entity will adopt this
standard from 1 July 2013 but the impact of its adoption is yet to be assessed by the consolidated entity.
46
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
AASB 124 Related Party Disclosures (December 2009)
This revised standard is applicable to annual reporting periods beginning on or after 1 January 2011. This revised
standard simplifies the definition of a related party by clarifying its intended meaning and eliminating inconsistencies
from the definition. The definition now identifies a subsidiary and an associate with the same investor as related
parties of each other; entities significantly influenced by one person and entities significantly influenced by a close
member of the family of that person are no longer related parties of each other; and whenever a person or entity has
both joint control over a second entity and joint control or significant influence over a third party, the second and third
entities are related to each other. This revised standard introduces a partial exemption of disclosure requirement for
government-related entities. The adoption of this standard from 1 July 2011 will not have a material impact on the
consolidated entity.
AASB 127 Separate Financial Statements (Revised)
AASB 128 Investments in Associates and Joint Ventures (Reissued)
These standards are applicable to annual reporting periods beginning on or after 1 January 2013. They have been
modified to remove specific guidance that is now contained in AASB 10, AASB 11 and AASB 12. The adoption of
these revised standards from 1 July 2013 will not have a material impact on the consolidated entity.
AASB 1054 Australian Additional Disclosures
This Standard is applicable to annual reporting periods beginning on or after 1 July 2011. The standard sets out the
Australian-specific disclosures, which are in addition to International Financial Reporting Standards, for entities that
have adopted Australian Accounting Standards. The adoption of these amendments from 1 July 2011 will not have a
material impact on the consolidated entity.
AASB 2009-12 Amendments to Australian Accounting Standards
These amendments are applicable to annual reporting periods beginning on or after 1 January 2011. These
amendments make numerous editorial amendments to a range of Australian Accounting Standards and
Interpretations, which have no major impact on the requirements of the amended pronouncements. The main
amendment is to AASB 8 'Operating Segments' and requires an entity to exercise judgement in assessing whether a
government and entities known to be under the control of that government are considered a single customer for the
purposes of certain operating segment disclosures. The adoption of these amendments from 1 July 2011 will not
have a material impact on the consolidated entity.
AASB 2009-14 Amendments to Australian Interpretations - Prepayments of a Minimum Funding Requirement
These amendments are applicable to annual reporting periods beginning on or after 1 January 2011. These
amendments arise from the issuance of Interpretation 14 ‘AASB 119 - The Limit on Defined Benefit Asset, Minimum
Funding Requirements and their Interaction as a consequence of the issuance of Prepayments of a Minimum
Funding Requirements’ (Amendments to IFRIC 14). The amendments to IFRIC 14 meant that entities with minimum
funding requirements could not treat any surplus in a defined benefit pension plan as an economic benefit. The
amendments in AASB 2009-14 allow entities to treat the benefit of early payment as a pension asset. The adoption of
these amendments from 1 July 2011 will not have a material
impact on the consolidated entity as there are no
surpluses in the defined benefit scheme.
AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements
Project
These amendments are applicable to annual reporting periods beginning on or after 1 January 2011. These
amendments are a consequence of the annual improvements project and make numerous non-urgent but necessary
amendments to a range of Australian Accounting Standards and Interpretations. The amendments provide
clarification of disclosures in AASB 7 'Financial Instruments: Disclosures', in particular emphasis of the interaction
between quantitative and qualitative disclosures and the nature and extent of risks associated with financial
instruments; clarifies that an entity can present an analysis of other comprehensive income for each component of
equity, either in the statement of changes in equity or in the notes in accordance with AASB 101 'Presentation of
Financial Statements'; and provides guidance on the disclosure of significant events and transactions in AASB 134
'Interim Financial Reporting'. The adoption of these amendments from 1 July 2011 will not have a material impact on
the consolidated entity.
47
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
AASB 2010-5 Amendments to Australian Accounting Standards
These amendments are applicable to annual reporting periods beginning on or after 1 January 2011. These
amendments makes numerous editorial amendments to a range of Australian Accounting Standards and
Interpretations,
International Financial Reporting
Standards by the International Accounting Standards Board. The adoption of these amendments from 1 July 2011 will
not have a material impact on the consolidated entity.
including amendments to reflect changes made to the text of
AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets
These amendments are applicable to annual reporting periods beginning on or after 1 July 2011. These amendments
add and amend disclosure requirements in AASB 7 about transfer of financial assets, including the nature of the
financial assets involved and the risks associated with them. The adoption of these amendments from 1 July 2011 will
increase the disclosure requirements on the consolidated entity when an asset is transferred but is not derecognised
and new disclosure required when assets are derecognised but the consolidated entity continues to have a continuing
exposure to the asset after the sale.
AASB 2010-8 Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets
These amendments are applicable to annual reporting periods beginning on or after 1 January 2012 and a practical
approach for the measurement of deferred tax relating to investment properties measured at fair value, property, plant
and equipment and intangible assets measured using the revaluation model. The measurement of deferred tax for
these specified assets is based on the presumption that the carrying amount of the underlying asset will be recovered
entirely through sale, unless the entity has clear evidence that economic benefits of the underlying asset will be
to quantify the tax effect of adopting these
consumed during its economic life. The consolidated entity is yet
amendments from 1 July 2012.
AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project
The amendments are applicable to annual reporting periods beginning on or after 1 July 2011. They make changes to
a range of Australian Accounting Standards and Interpretations for the purpose of closer alignment to IFRSs and
harmonisation between Australian and New Zealand Standards. The amendments remove certain guidance and
definitions from Australian Accounting Standards for conformity of drafting with International Financial Reporting
Standards but without any intention to change requirements. The adoption of these amendments from 1 July 2011 will
not have a material impact on the consolidated entity.
AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel
Disclosure Requirement
These amendments are applicable to annual reporting periods beginning on or after 1 July 2013, with early adoption
not permitted. They amend AASB 124 ‘Related Party Disclosures’ by removing the disclosure requirements for
individual key management personnel ('KMP'). The adoption of these amendments from 1 July 2013 will remove the
duplication of relating to individual KMP in the notes to the financial statements and the directors report. As the
aggregate disclosures are still required by AASB 124 and during the transitional period the requirements may be
included in the Corporations Act or other legislation, it is expected that the amendments will not have a material
impact on the consolidated entity.
48
TZ Limited
Notes to the financial statements
30 June 2011
Note 1. Significant accounting policies (continued)
AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint
Arrangements Standards
The amendments are applicable to annual reporting periods beginning on or after 1 January 2013. The amendments
makes numerous consequential changes to a range of Australian Accounting Standards and Interpretations, following
the issuance of AASB 10, AASB 11, AASB 12 and revised AASB 127 and AASB 128. The adoption of these
amendments from 1 July 2013 will not have a material impact on the consolidated entity.
AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive
Income
The amendments are applicable to annual reporting periods beginning on or after 1 July 2012. The amendments
requires grouping together of items within other comprehensive income on the basis of whether they will eventually be
‘recycled’ to the profit or loss (reclassification adjustments). The change provides clarity about the nature of items
presented as other comprehensive income and the related tax presentation. The adoption of the revised standard
from 1 July 2012 will impact the consolidated entity’s presentation of its statement of comprehensive income.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions
that affect the reported amounts in the financial statements. Management continually evaluates its judgements and
estimates in relation to assets,
liabilities, revenue and expenses. Management bases its
judgements, estimates and assumptions on historical experience and on other various factors, including expectations
of
future events, management believes to be reasonable under the circumstances. The resulting accounting
judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
liabilities, contingent
Share-based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value
of the equity instruments at the date at which they are granted. The fair value is determined by using either the
Binomial or Black-Scholes model taking into account the terms and conditions upon which the instruments were
granted. The accounting estimates and assumptions relating to equity-settled share-based payments would have no
impact on the carrying amounts of assets and liabilities within the next annual reporting period but may impact profit
or loss and equity.
Provision for impairment of receivables
The provision for impairment of receivables assessment requires a degree of estimation and judgement. The level of
provision is assessed by taking into account the recent sales experience, the ageing of receivables, historical
collection rates and specific knowledge of the individual debtors financial position.
Estimation of useful lives of assets
The consolidated entity determines the estimated useful lives and related depreciation and amortisation charges for
its property, plant and equipment and definite life intangible assets. The useful lives could change significantly as a
result of technical innovations or some other event. The depreciation and amortisation charge will increase where the
useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been
abandoned or sold will be written off or written down.
Goodwill and other indefinite life intangible assets
The consolidated entity tests annually, or more frequently if events or changes in circumstances indicate impairment,
whether goodwill and other indefinite life intangible assets have suffered any impairment, in accordance with the
accounting policy stated in note 1. The recoverable amounts of cash-generating units have been determined based
on value-in-use calculations. These calculations require the use of assumptions, including estimated discount rates
based on the current cost of capital and growth rates of the estimated future cash flows.
49
TZ Limited
Notes to the financial statements
30 June 2011
Note 2. Critical accounting judgements, estimates and assumptions (continued)
Impairment of non-financial assets other than goodwill and other indefinite life intangible assets
The consolidated entity assesses impairment of non-financial assets other than goodwill and other indefinite life
intangible assets at each reporting date by evaluating conditions specific to the consolidated entity and to the
particular asset that may lead to impairment. If an impairment trigger exists, the recoverable amount of the asset is
determined. This involves fair value less costs to sell or value-in-use calculations, which incorporate a number of key
estimates and assumptions.
Income tax
The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement is
required in determining the provision for income tax. There are many transactions and calculations undertaken during
the ordinary course of business for which the ultimate tax determination is uncertain. The consolidated entity
recognises liabilities for anticipated tax audit issues based on the consolidated entity’s current understanding of the
tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will
impact the current and deferred tax provisions in the period in which such determination is made.
Recovery of deferred tax assets
Deferred tax assets are recognised for deductible temporary differences only if the consolidated entity considers it is
probable that future taxable amounts will be available to utilise those temporary differences and losses.
Valuation of embedded derivatives and convertible note debt portion
The terms of the Convertible Note Subscription Deed are such that the note holders are able to convert to equity at
the conversion date at the lower of: (a) the agreed conversion price; and (b) the issue price of any subsequent share
issue during the term of the convertible note. The convertible notes, as a result of this clause which eliminates the
note holder's equity risk, are therefore debt instruments which host an embedded derivative in accordance with AASB
132.
Upon inception, the derivative element of the convertible notes is separated and valued in accordance with AASB
139. Thereafter the derivative is designated as fair value through profit and loss, and accordingly is fair valued at the
end of each reporting period, with any movement in the fair value reported through profit and loss.
The convertible note debt portion is measured at fair value on inception and subsequently measured at amortised
cost.
To value the derivative, the Black-Scholes valuation method was used. In doing so, a judgement was made that the
conversion price, although impossible to predict due to the terms of the convertible note deed, could reasonably be
assumed to be the current conversion price at the date the valuation is performed. At 30 June 2011, under the terms
of the convertible notes, the current conversion price is $0.35 per share for Series I and III and $0.42 per share for
Series IIIB based on the most recent shares issued of TZ Limited. Judgement and estimation was also exercised
regarding other valuation inputs such as life of the derivative and share price volatility.
The carrying values at 30 June 2011 of the derivative and convertible note liabilities are $4,410,717 and $10,205,707
respectively (2010: derivative $9,061,958 and convertible note $11,075,075) as detailed in notes 23 and 24).
50
TZ Limited
Notes to the financial statements
30 June 2011
Note 3. Restatement of comparatives
Comparative reclassifications and restatements
Certain comparatives have been reclassified and restated in the prior year. The reclassifications and restatements
have had no effect on the prior year results for loss after tax or net assets of the consolidated entity. In the statement
of financial position the restatement has occured as a result of the entity now rounding its figures to the nearest
thousand dollars ($'000) or to reclassify items to be in line with current year disclosure requirements for the statement
of financial position or to restate prior period errors. In the statement of comprehensive income, the reclassification
was due to the entity previously disclosing its expenses by a mix of nature and function and in the current year moving
to disclose its expenses by nature only in line with accounting standards. The following tables highlight these
reclassifications.
In the statement of financial position the reclassifications and restatements are due to the following:
- $400,000 of unbilled revenue reclassified from work-in-progress to other receivables;
- $148,000 in relation to a security deposit reclassified from current to non-current receivables;
- $531,000 of deferred revenue split out into a separate note;
- $4,768,000 of other contributed equity split out into a separate note;
- $2,247,000 restatement of foreign currency translation reserve to opening retained earnings following a review of the
movements in the reserve. There is no impact on the net assets of the consolidated entity.
Third statement of financial position
When there is a restatement of comparatives, it is mandatory to provide a third statement of financial position at the
beginning of the earliest comparative period, being 1 July 2009. However, as there were no adjustments made as at 1
July 2009, the consolidated entity has elected not to show the 1 July 2009 statement of financial position. There was
also no impact on the comparative statement of financial position, due to the reclassification.
The following tables highlight these reclassifications.
51
TZ Limited
Notes to the financial statements
30 June 2011
Note 3. Restatement of comparatives (continued)
Statement of comprehensive income
Revenue
Other income
Expenses
Cost of sales
Raw materials and consumables used
Subcontractors costs
Employee benefits expense
Occupancy expense
Depreciation and amortisation expense
Communications expense
Professional and corporate services
Travel and accommodation expense
Development costs
Net loss on movement in fair value of derivative liabilities
Net loss on conversion of convertible notes
Share of net losses of joint venture accounted for using the equity
Other expenses
Finance costs
Loss before income tax (expense)/benefit
Income tax (expense)/benefit
2010
$'000
Reported
Consolidated
$'000
Adjustment
2010
$'000
Restated
17,696
1,108
(11,590)
-
-
(6,558)
(934)
(2,228)
(247)
(4,894)
(514)
(114)
(6,158)
(5,627)
-
(1,446)
(5,006)
(26,512)
165
-
-
17,696
1,108
11,590
(975)
(4,577)
(5,581)
-
-
-
-
(457)
-
-
-
-
-
-
-
-
-
(975)
(4,577)
(12,139)
(934)
(2,228)
(247)
(4,894)
(971)
(114)
(6,158)
(5,627)
-
(1,446)
(5,006)
(26,512)
165
Loss after income tax (expense)/benefit for the year attributable to
the owners of TZ Limited
(26,347)
-
(26,347)
Other comprehensive income
Foreign currency translation
Other comprehensive income for the year, net of tax
(1,706)
(1,706)
-
-
(1,706)
(1,706)
Total comprehensive income for the year attributable to the owners
of TZ Limited
(28,053)
-
(28,053)
Statement of financial position at the beginning of the earliest comparative period
When there is a restatement of comparatives, it is mandatory to provide a third statement of financial position at the
beginning of the earliest comparative period, being 1 July 2009. However, as there were no adjustments made as at 1
July 2009, the consolidated entity has elected not to show the 1 July 2009 statement of financial position.
52
TZ Limited
Notes to the financial statements
30 June 2011
Note 3. Restatement of comparatives (continued)
Statement of financial position at the end of the earliest comparative period
Assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Investment in short term deposit
Total current assets
Non-current assets
Investments accounted for using the equity method
Property, plant and equipment
Intangibles
Deferred tax
Other
Total non-current assets
Total assets
Liabilities
Current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Provisions
Other
Total current liabilities
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Other contributed equity
Reserves
Accumulated losses
Total equity
2010
$'000
Reported
Consolidated
$'000
Adjustment
2010
$'000
Restated
232
4,483
567
-
5,282
-
1,974
24,543
635
-
27,152
32,434
5,237
5,919
746
87
-
11,989
5,897
8,316
829
533
15,575
27,564
4,870
-
250
(400)
-
(150)
-
2
2
-
148
152
232
4,733
167
-
5,132
-
1,976
24,545
635
148
27,304
2
32,436
(529)
-
-
-
531
2
-
-
-
-
-
2
-
4,708
5,919
746
87
531
11,991
5,897
8,316
829
533
15,575
27,566
4,870
130,675
-
(707)
(125,098)
(4,768)
4,768
(2,247)
2,247
125,907
4,768
(2,954)
(122,851)
4,870
-
4,870
53
TZ Limited
Notes to the financial statements
30 June 2011
Note 4. Operating segments
Identification of reportable operating segments
The consolidated entity is organised into two operating segments. These operating segments are based on the
internal reports that are reviewed and used by the executive management committee (who are identified as the Chief
Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources.
There is no aggregation of operating segments.
The CODM comprises the executive directors, chief executive officer, chief financial officer and divisional managers.
The CODM reviews both adjusted earnings before interest, tax, depreciation and amortisation (segment result) and
profit before income tax.
The information reported to the CODM is on at least a monthly basis.
Types of products and services
The principal products and services of each of these operating segments are as follows:
PDT Holdings Inc ('PDT')
Telezygology Inc ('TZI')
PDT Group operates its engineering and design division predominantly in the USA,
whilst maintaining a presence in the UK and the Ukraine.
TZI’s primary role is the development and commercialisation of hardware and
software products primarily in the US market.
Intersegment transactions
Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.
Intersegment receivables, payables and loans
Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans
payable that earn or incur non-market
interest rates.
Intersegment loans are eliminated on consolidation.
interest are not adjusted to fair value based on market
Major customers
During the year ended 30 June 2011 approximately 35.10% (2010: 37.35%) of the consolidated entity's external
revenue was derived from sales to one customer of PDT.
Segment information
The consolidated entity has adopted AASB 8 Operating Segments from 1 July 2009 whereby segment information is
presented using a 'management approach', i.e. segment information is provided on the same basis as information
used for internal reporting purposes by the CODM.
54
TZ Limited
Notes to the financial statements
30 June 2011
Note 4. Operating segments (continued)
Operating segment information
2011
$'000
$'000
PDT
(USA)
$'000
TZI
(USA)
$'000
Intersegment
eliminations/
unallocated Consolidated
$'000
$'000
21,229
275
21,504
21
21,525
1,152
225
1,377
203
1,580
1,391
(5,837)
-
-
7,165
7,165
-
7,552
(5,827)
(1,856)
(4,098)
(4,229)
22,381
500
22,881
7,389
30,270
(4,446)
7,552
(5,827)
(1,856)
(4,098)
(8,675)
(109)
(8,784)
PDT
(USA)
$'000
TZI
(USA)
$'000
Intersegment
eliminations/
unallocated Consolidated
$'000
$'000
16,608
186
16,794
22
16,816
1,008
199
1,207
(18)
1,189
1,939
(2,565)
-
-
-
799
799
-
76
(18,728)
(2,228)
(5,006)
(25,886)
17,616
385
18,001
803
18,804
(626)
76
(18,728)
(2,228)
(5,006)
(26,512)
165
(26,347)
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other income
Total revenue
EBITDA
Head office revenue / income
Head office costs
Depreciation and amortisation
Interest expenses
Profit/(loss) before income
tax expense
Income tax expense
Loss after income tax
expense
-
-
-
-
-
-
-
-
-
-
-
2010
$'000
$'000
Revenue
Sales to external customers
Intersegment sales
Total sales revenue
Other income
Total revenue
EBITDA
Head office revenue / income
Head office costs
Depreciation and amortisation
Interest expenses
Profit/(loss) before income
tax benefit
Income tax benefit
Loss after income tax
benefit
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55
TZ Limited
Notes to the financial statements
30 June 2011
Note 4. Operating segments (continued)
Geographical information
Australia
United States of America
United Kingdom
Canada
Netherlands
Norway
Korea
Hong Kong
Denmark
Other *
Sales to external
customers
2011
$'000
2010
$'000
Geographical
non-current assets
2011
2010
$'000
$'000
78
17,483
649
3,679
65
-
-
-
398
136
162
13,332
1,083
2,675
-
70
46
95
-
153
-
27,586
317
-
-
-
-
-
-
-
-
33,072
41
-
-
-
-
-
-
-
22,488
17,616
27,903
33,113
The geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax
assets, post employment benefits assets and rights under insurance contracts.
* Other relates to Taiwan, China and Ireland
Note 5. Revenue
Sales revenue
Sales and services revenue
Other revenue
Management fees
Interest
Royalty
Other revenue
Revenue
Consolidated
2011
$'000
2010
$'000
22,399
17,308
8
264
89
710
1,071
-
20
308
60
388
23,470
17,696
-
-
-
-
56
TZ Limited
Notes to the financial statements
30 June 2011
Note 6. Other income
Net gain on disposal of property, plant and equipment
Net gain on issue of shares to extinguish liabilities
Net gain on movement in fair value of derivative liabilities
Consolidated
2011
$'000
2010
$'000
3
190
6,607
-
1,108
-
Other income
-
-
6,800
1,108
Note 7. Expenses
Loss before income tax includes the following specific
expenses:
Depreciation
Leasehold improvements
Plant and equipment
Motor vehicles
Office equipment
Total depreciation
Amortisation
Re-acquired right (Intevia Licence)
Other intangible assets
Total amortisation
Total depreciation and amortisation
Cost of sales
Direct material
Direct employment related expenses
Subcontractors
Company overheads
Other cost of sales
Consolidated
2011
$'000
2010
$'000
202
291
-
164
657
166
1,033
380
317
5
285
987
717
524
-
-
-
-
-
-
1,199
1,241
1,856
2,228
1,068
6,831
7,833
467
403
815
5,581
4,577
457
160
Total cost of sales
-
-
16,602
11,590
Finance costs
Interest and finance charges paid/payable
Net foreign exchange loss
Net foreign exchange loss
4,098
5,006
366
17
57
TZ Limited
Notes to the financial statements
30 June 2011
Note 7. Expenses (continued)
Net loss on disposal
Net loss on disposal of property, plant and equipment
Superannuation expense
Defined contribution superannuation expense
Share-based payments expense
Share-based payments expense
Note 8. Income tax expense/(benefit)
Income tax expense/(benefit)
Current tax
Deferred tax
Aggregate income tax expense/(benefit)
Deferred tax included in income tax expense/(benefit)
comprises:
Increase in deferred tax assets (note 16)
Increase in deferred tax liabilities (note 25)
Numerical reconciliation of income tax expense/(benefit) to
prima facie tax payable
Loss before income tax (expense)/benefit
Tax at the Australian tax rate of 30%
Current year tax losses not recognised
Difference in overseas tax rates
Consolidated
2011
$'000
2010
$'000
-
15
157
10
2,303
2,342
Consolidated
2011
$'000
2010
$'000
109
-
109
(116)
116
-
16
(181)
(165)
(227)
46
(181)
(8,675)
(26,512)
(2,603)
(7,954)
2,822
(110)
8,279
(490)
-
-
-
-
-
-
-
-
Income tax expense/(benefit)
-
-
109
(165)
Tax losses not recognised
The consolidated entity are in the process of determining their tax loss position to carry forward.
58
TZ Limited
Notes to the financial statements
30 June 2011
Note 9. Current assets - cash and cash equivalents
Cash at bank
Note 10. Current assets - trade and other receivables
Trade receivables
Less: Provison for impairment of receivables
Other receivables
Goods and services tax receivable
Prepayments
-
-
Consolidated
2011
$'000
2010
$'000
1,146
232
Consolidated
2011
$'000
2010
$'000
3,977
(165)
3,812
842
48
211
3,993
(153)
3,840
495
195
203
Impairment of receivables
The consolidated entity has recognised a loss of $83,000 (2010: $71,000) in profit or loss in respect of impairment of
receivables for the year ended 30 June 2011.
The ageing of the impaired receivables recognised above are as follows:
-
-
4,913
4,733
Past due 30 days
Past due 90 days +
Movements in the provision for impairment of receivables are as follows:
-
-
Opening balance
Additional provisions recognised
Foreign exchange
Receivables written off during the year as uncollectable
Closing balance
-
-
Consolidated
2011
$'000
2010
$'000
-
165
165
23
130
153
Consolidated
2011
$'000
2010
$'000
153
122
(27)
(83)
165
129
95
-
(71)
153
59
TZ Limited
Notes to the financial statements
30 June 2011
Note 10. Current assets - trade and other receivables (continued)
Past due but not impaired
Customers with balances past due but without provision for impairment of receivables amount to $748,000 as at 30
June 2011 ($622,000 as at 30 June 2010). The consolidated entity did not consider a credit risk on the aggregate
balances after reviewing agency credit
terms of customers based on recent collection
practices.
information and credit
The ageing of the past due but not impaired receivables are as follows:
Past due 0 - 30 days
Past due 30 - 60 days
Past due 60 - 90 days
Past due 90 days +
Note 11. Current assets - inventories
-
-
Inventories
Note 12. Current assets - investment in short term deposit
Term deposits
Note 13. Non-current assets - investments accounted for using the equity method
Investment in joint venture - Intanova Pty Limited
Refer to note 42 for detailed information on interests in joint ventures.
Consolidated
2011
$'000
2010
$'000
409
57
132
150
748
363
45
176
38
622
Consolidated
2011
$'000
2010
$'000
331
167
Consolidated
2011
$'000
2010
$'000
5,500
-
Consolidated
2011
$'000
2010
$'000
187
-
60
TZ Limited
Notes to the financial statements
30 June 2011
Note 14. Non-current assets - property, plant and equipment
Leasehold improvements - at cost
Less: Accumulated depreciation
Plant and equipment - at cost
Less: Accumulated depreciation
Motor vehicles - at cost
Less: Accumulated depreciation
Office equipment - at cost
Less: Accumulated depreciation
Consolidated
2011
$'000
2010
$'000
1,608
(893)
715
1,615
(886)
729
-
-
-
998
(558)
440
1,629
(691)
938
1,282
(595)
687
30
(30)
-
744
(393)
351
1,884
1,976
-
-
-
-
-
-
-
-
-
-
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Leasehold
improvements
$'000
Plant and
equipment
$'000
Motor
vehicles
$'000
Office furniture
and equipment
$'000
Total
$'000
$'000
1,023
124
(66)
(77)
(317)
687
364
(4)
(27)
(291)
729
6
-
-
(1)
(5)
-
-
-
-
-
-
554
136
(19)
(35)
(285)
351
385
-
(132)
(164)
3,028
339
(193)
(211)
(987)
1,976
950
(4)
(381)
(657)
440
1,884
Consolidated
Balance at 1 July 2009
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2010
Additions
Disposals
Exchange differences
Depreciation expense
Balance at 30 June 2011
-
-
-
-
-
-
-
-
-
-
-
1,445
79
(108)
(98)
(380)
938
201
-
(222)
(202)
715
61
TZ Limited
Notes to the financial statements
30 June 2011
Note 15. Non-current assets - intangibles
Goodwill - at cost
Trade names - at cost
Re-acquired right (Intevia Licence) - at cost
Less: Accumulated amortisation
Patents - at cost
Less: Accumulated amortisation
Development costs - at cost
Less: Accumulated amortisation
Customer relationships - at cost
Less: Accumulated amortisation
Consolidated
2011
$'000
2010
$'000
8,941
8,941
1,146
1,146
8,721
(3,195)
5,526
1,334
(229)
1,105
1,735
(277)
1,458
3,101
(1,527)
1,574
10,848
10,848
1,342
1,342
9,963
(2,537)
7,426
1,408
(180)
1,228
1,695
(259)
1,436
3,762
(1,497)
2,265
19,750
24,545
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Reconciliations
Reconciliations of the written down values at the beginning and end of the current and previous financial year are set
out below:
Consolidated
Balance at 1 July 2009
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2010
Additions
Exchange differences
Amortisation expense
Balance at 30 June 2011
$'000
Goodwill
$'000
Trade
names
$'000
Re-acquired
right
$'000
Other
intangibles *
$'000
Total
$'000
-
-
-
-
-
-
-
-
-
11,526
-
(678)
-
10,848
-
(1,907)
-
1,512
-
(170)
-
1,342
5
(200)
(1)
8,679
-
(536)
(717)
7,426
-
(1,242)
(658)
4,110
1,602
(259)
(524)
4,929
573
(825)
(540)
25,827
1,602
(1,643)
(1,241)
24,545
578
(4,174)
(1,199)
8,941
1,146
5,526
4,137
19,750
* Other intangibles in the above reconciliation includes Patents, Development costs and Customer relationships.
62
TZ Limited
Notes to the financial statements
30 June 2011
Note 15. Non-current assets - intangibles (continued)
Impairment testing of cash-generating units containing goodwill
Goodwill, trade names, re-acquired right and other intangible assets have been allocated to the following cash-
generating units:
Goodwill
- PDT Holdings Inc.
- Telezygology Inc.
Trade names
- PDT Holdings Inc.
- Telezygology Inc.
Re-acquired right
- Telezygology Inc.
Other intangible assets
- PDT Holdings Inc.
- Telezygology Inc.
Consolidated
2011
$'000
2010
$'000
5,016
3,925
1,134
12
6,087
4,761
1,328
14
5,526
7,426
1,828
2,309
2,563
2,366
19,750
24,545
The recoverable amount of all cash-generating units is based on value-in-use calculations which use cash flow
projections based on budgets approved by management covering a 5 year period in the case of PDT Holdings Inc.
and a 9 year period in the case of Telezygology Inc. The growth rate used in these budgets does not exceed the long-
term average growth rate for the business in which cash-generating units operate.
PDT Holdings Inc.('PDT')
Key assumptions for value-in-use calculations for PDT are as follows:
- Discount rate - 16.71%
- Gross margins - budgeted gross profit margins are between 25% and 31%, historical gross margins ranged between
21% to 30%
- Revenue growth rates - 2012 (1%) and 2013 to 2016 (5%).
Management believes these growth rates are conservative and they are confident the forecasted revenue growth can
be achieved. Revenue growth for the year ended 30 June 2011 was 38% (2010: 18%).
Management determined budgeted gross margin is based on past performance and its expectations for the future.
Discount rates used are pre-tax and are specific to relevant segments and countries in which they operate.
The recoverable amount of the goodwill, trade names, re-acquired right and other intangible assets of PDT is
estimated to be $15,753,995 (2010: $15,282,060) which exceeds the carrying amount at 30 June 2011 by $7,775,995
(2010: $7,854,037). If a discount rate of 28.9% was used instead of 16.71%, the recoverable amount of goodwill,
trade names, re-acquired right and other intangible assets would equal the carrying amount.
63
TZ Limited
Notes to the financial statements
30 June 2011
Note 15. Non-current assets - intangibles (continued)
Telezygology Inc.
Key assumptions for value-in-use calculations for Telezygology Inc. are as follows:
- Discount rate - 16.6%
- Gross margins - budgeted gross profit margins are between 57% and 60%, historical gross margins ranged between
57% to 64%
- Revenue growth rates - 2012 (445%), 2013 (62%), 2014 (57%), 2015 (37%) and 2016 through 2020 (5%).
The forecasted and projected revenues for upcoming financial years show significant growth, and an overall sales
level well above what TZI has experienced previously. There are several factors contributing to the workup of the
financial information, and the material points are noted below:
• TZI's products/solutions for these business units have only recently been commercialised, with sales in the last two
fiscal years representing lower levels that are accustomed to new products.
• The data centre micro-security market is estimated to be a $1.5 billion market that will grow at 4% - 6% annually in
the near term.
• Commercial partnerships with the signing of key distribution and reseller agreements.
• A strong sales pipeline is in place to support sales anticipated for the 2012 financial year and beyond.
• TZI has achieved positive results post year end in excess of those forecast.
Management believes these growth rates are achievable and they are confident the forecasted revenue growth can
be achieved.
Management determined budgeted gross margin is based on expectations for the future after redetermining the
product strategy for TZI and securing commercial partnerships for distribution. Discount rates used are pre-tax and
are specific to relevant segments and countries in which they operate.
the goodwill, trade names, re-acquired right and other intangible assets of TZI is
The recoverable amount of
estimated to be $22,004,976 (2010: $22,620,537) which exceeds the carrying amount at 30 June 2011 by
$10,232,976 (2010: $8,044,351). If a discount rate of 30.1% was used instead of 16.6%, the recoverable amount of
goodwill, trade names, re-acquired right and other intangible assets would equal the carrying amount.
64
TZ Limited
Notes to the financial statements
30 June 2011
Note 16. Non-current assets - deferred tax
The balance comprises temporary differences attributable
to:
Amounts recognised in profit or loss:
Tax losses
Property, plant and equipment
Intangible assets
Doubtful debts
Allowance / reserve
Research and development credit
Other liabilities
Deferred tax asset
Movements:
Opening balance
Credited to profit or loss (note 8)
Closing balance
-
-
Note 17. Non-current assets - other
Security deposits
Note 18. Current liabilities - trade and other payables
Trade payables
Employee expense payables
Lease incentive liability
Interest payable
Other payables
Consolidated
2011
$'000
2010
$'000
43
200
-
64
(354)
480
318
751
635
116
751
686
155
115
59
(380)
-
-
635
408
227
635
Consolidated
2011
$'000
2010
$'000
179
148
Consolidated
2011
$'000
2010
$'000
1,739
173
61
899
1,703
2,349
299
111
952
997
Refer to note 33 for detailed information on financial instruments.
-
-
4,575
4,708
65
TZ Limited
Notes to the financial statements
30 June 2011
Note 19. Current liabilities - borrowings
Bank loans
Convertible notes payable
Consolidated
2011
$'000
2010
$'000
729
-
729
741
5,178
5,919
-
-
Refer to note 23 for further information on assets pledged as security and financing arrangements and note 33 for
detailed information on financial instruments.
Note 20. Current liabilities - derivative financial instruments
Consolidated
2011
$'000
2010
$'000
-
746
Consolidated
2011
$'000
2010
$'000
116
87
Consolidated
2011
$'000
2010
$'000
368
531
Consolidated
2011
$'000
2010
$'000
10,206
5,897
Derivative instrument liabilities
Refer to note 33 for detailed information on financial instruments.
Note 21. Current liabilities - provisions
Employee benefits
Note 22. Current liabilities - other
Deferred revenue
Note 23. Non-current liabilities - borrowings
Convertible notes payable
Refer to note 33 for detailed information on financial instruments.
66
TZ Limited
Notes to the financial statements
30 June 2011
Note 23. Non-current liabilities - borrowings (continued)
Total secured liabilities
The total secured liabilities (current and non-current) are as follows:
Bank loans
Consolidated
2011
$'000
2010
$'000
729
741
The credit facility has a limit of USD$1,200,000, however, the capacity is decreased as the amount of security
decreases below USD$1,200,000. Security consists of accounts receivable less than 60 days old, and eligible
receivables are subject to a 20% reduction in value. A breakdown of the credit facility is shown in the financing
arrangements table below.
Assets pledged as security
The bank overdraft and loans are secured by a mortgage over the assets of PDT Inc Group.
Financing arrangements
Unrestricted access was available at the reporting date to the following lines of credit:
Total facilities
Bank loans
Used at the reporting date
Bank loans
Unused at the reporting date
Bank loans
Consolidated
2011
$'000
2010
$'000
1,132
1,374
729
741
403
633
67
TZ Limited
Notes to the financial statements
30 June 2011
Note 23. Non-current liabilities - borrowings (continued)
Convertible notes
Series I
The convertible notes were issued under the terms of a Convertible Note and Option Subscription Deed dated 24
December 2007. 24,000 notes were issued each with a face value of $1,000. The notes have a 5 year term, are
convertible at the lower of: (a) the agreed conversion price; and (b) the issue price of any subsequent share issue
during the terms of the convertible notes. At the time of issue the conversion price was $4.00 per share. The notes
pay interest at a rate of 10%.
The 24,000 convertible notes were reorganised so that the conversion price was reduced from $4.00 per ordinary
share in the company to $1.00 per ordinary share for 12,000 convertible notes and to $1.20 per ordinary share for the
remaining 12,000 notes which was approved by the company’s shareholders at the 2009 annual general meeting.
Series II
The convertible notes were issued under the terms of the convertible note subscription deed dated 16 July 2009 and
amended 13 October 2009. 5,241,000 were issued each with a face value of $1. The notes were convertible at the
lesser of: (a) $1.00; and (b) the lowest price at which ordinary shares may be issued by TZL after 15 July 2009 and
prior to conversion. Interest accrues on each Series II Convertible Note at 10% per annum, payable annually in
arrears or on the date the Convertible Note is redeemed.
On 15 July 2010, 3,918,500 convertible notes plus an outstanding interest of $281,888 were converted into
10,000,924 ordinary shares at an issue price of $0.42 per share.
On 22 July 2010, 90,000 convertible notes plus an outstanding interest of $6,111 were converted into 228,836
ordinary shares at an issue price of $0.42 per share.
On 25 November 2010, 732,500 convertible notes plus an outstanding interest of $69,051 were converted into
2,048,431 ordinary shares at an issue price of $0.39 per share.
The remaining 500,000 notes were fully redeemed at $1 each by the note holders on 18 November 2010 and 29
November 2010. A total amount of $33,194 representing the outstanding interest was paid upon the redemptions.
Series III
1,714 Series III convertible notes with a face value of $1,000 each were issued under the terms of an Issue and
Amendment Deed with QVT Funds dated 23 April 2010. The notes have a five year term and are convertible at a
variable rate, being the lesser of: (i) $1.00; and (ii) the issue price of any subsequent share issue during the terms of
the convertible notes. Interest will accrue on each Series III note at 10% per annum, payable on 31 December each
year.
Series IIIB
4,275 Series IIIB convertible notes with a face value of $1,000 each were issued on 24 December 2010 as a result of
shareholders’ approval of Resolution 5 at the company’s 2010 annual general meeting held on 17 November 2010.
The notes have a five year term and are convertible at a variable rate, being the lesser of: (i) $0.42; and (ii) the lowest
issue price of any subsequent share issues during the term of the convertible notes. Interest will accrue on each
Series IIIB note at 10% per annum, payable on 31 December each year.
Under the terms of the convertible notes, the current conversion price is $0.35 per share for Series I & III and $0.42
per share for Series IIIB based on the most recent share issues of TZ Limited.
68
TZ Limited
Notes to the financial statements
30 June 2011
Note 24. Non-current liabilities - derivative financial instruments
Derivative instrument liabilities
Refer to note 33 for detailed information on financial instruments.
Note 25. Non-current liabilities - deferred tax
The balance comprises temporary differences attributable
to:
Amounts recognised in profit or loss:
Goodwill
Other intangibles
Deferred tax liability
Movements:
Opening balance
Charged to profit or loss (note 8)
Closing balance
-
-
Note 26. Non-current liabilities - other
Lease incentive liability
Note 27. Equity - contributed
Consolidated
2011
$'000
2010
$'000
4,411
8,316
Consolidated
2011
$'000
2010
$'000
815
130
945
829
116
945
829
-
829
783
46
829
Consolidated
2011
$'000
2010
$'000
507
533
Ordinary shares - fully paid
122,731,123
62,848,373
149,113
125,907
Consolidated
Consolidated
2011
Shares
2010
Shares
2011
$'000
2010
$'000
69
TZ Limited
Notes to the financial statements
30 June 2011
Note 27. Equity - contributed (continued)
Movements in ordinary share capital
Details
Date
No of shares Fair value
$'000
Balance
Issue of shares
Issue of shares on conversion of convertible
notes
Issue of shares
1 July 2009
7 January 2010
26 March 2010
30 June 2010
Balance
Issue of shares
Issue of shares on conversion of convertible
note
Issue of shares on exercise of rights
Issue of shares on conversion of convertible
note
Transfer to contributed equity
Issue of shares
Issue of shares on conversion of convertible
note
Issue of shares
Issue of shares on conversion of liabilities to
equity
Transfer to contributed equity
Less: share issue costs
30 June 2010
1 July 2010
15 July 2010
19 July 2010
22 July 2010
11 October 2010
20 November 2010
25 November 2010
21 December 2010
14 April 2011
24 May 2011
49,479,325
1,250,000
12,000,000
119,048
62,848,373
357,144
10,000,924
1,480,000
228,836
1,198,196
8,091,446
2,048,431
28,069,319
3,795,121
4,613,333
$0.84
$0.84
$0.42
$0.42
$0.42
$0.00
$0.42
$0.84
$0.35
$0.39
$0.35
$0.27
$0.84
114,727
1,050
10,080
50
125,907
150
4,200
-
96
1,007
2,832
802
9,824
1,025
3,875
(605)
Balance
30 June 2011
122,731,123
149,113
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in
proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
Share buy-back
There is no current on-market share buy-back.
Unquoted options and rights
At 30 June 2011 there were 12,431,666 (2010: 10,643,041) options. 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.
At 30 June 2011 there were 1,400,000 (2010: 2,880,000) performance rights outstanding. Each performance right
entitles the holder to subscribe for one fully paid share in the company at the exercise price of $nil per share at any
time from the date the performance hurdle has been achieved.
70
TZ Limited
Notes to the financial statements
30 June 2011
Note 27. Equity - contributed (continued)
Capital risk management
The consolidated entity monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided
by total capital. Net debt is calculated as total borrowings (including 'trade and other payables' and 'borrowings' as
shown in the statement of financial position) less 'cash and cash equivalents' as shown in the statement of financial
position. Total capital is calculated as 'total equity' as shown in the statement of financial position (including non-
controlling interest) plus net debt.
The gearing ratio at the reporting date was as follows:
Current liabilities - trade and other payables (note 18)
Current liabilities - borrowings (note 19)
Non-current liabilities - borrowings (note 23)
Total borrowings
Current assets - cash and cash equivalents (note 9)
Net debt
Total equity
Total capital
Gearing ratio
Consolidated
2011
$'000
2010
$'000
4,575
729
10,206
15,510
(1,146)
14,364
12,784
27,148
4,708
5,919
5,897
16,524
(232)
16,292
4,870
21,162
53%
77%
-
-
-
-
0%
-
-
-
-
0%
The gearing ratio has decreased significantly as a result of (a) the decrease in trade and other liabilities; (b) the
conversion of accrued interest on all convertible notes up to 31 December 2010 to equity; (c) the conversion of the
convertible notes (Series II) to equity; and (d) the share capital raised during the year.
There are no externally imposed capital requirements the consolidated entity has to comply with.
Note 28. Equity - other contributed equity
Other contributed equity
Consolidated
2011
$'000
2010
$'000
-
4,768
Other contributed equity represents shares that were issued during the current financial year in respect of the
extinguishment of liabilities of interest and other expenses on 26 February 2010.
Note 29. Equity - reserves
Foreign currency reserve
Consolidated
2011
$'000
2010
$'000
(6,997)
(2,954)
71
TZ Limited
Notes to the financial statements
30 June 2011
Note 29. Equity - reserves (continued)
Consolidated
Balance at 1 July 2009
Foreign currency translation
Restatement of foreign
currency translation
Balance at 30 June 2010
Foreign currency translation
Balance at 30 June 2011
Revaluation
surplus
$'000
Available-
for-sale
$'000
Share-based
payments
$'000
Foreign
currency
$'000
Total
$'000
$'000
-
-
-
-
-
-
-
-
999
(1,706)
999
(1,706)
(2,247)
(2,247)
(2,954)
(4,043)
(2,954)
(4,043)
(6,997)
(6,997)
Foreign currency reserve
The reserve is used to recognise exchange differences arising from translation of the financial statements of foreign
operations to Australian dollars. It is also used to recognise gains and losses on hedges of the net investments in
foreign operations.
Note 30. Equity - accumulated losses
Accumulated losses at the beginning of the financial year
Loss after income tax (expense)/benefit for the year
Transfer from share based payments reserve
Transfer from foreign currency reserve
-
-
Consolidated
2011
$'000
2010
$'000
(122,851)
(8,784)
2,303
-
(101,093)
(26,347)
2,342
2,247
Accumulated losses at the end of the financial year
-
-
(129,332)
(122,851)
Note 31. Equity - dividends
There were no dividends paid or declared during the current or previous financial year.
72
TZ Limited
Notes to the financial statements
30 June 2011
Note 32. Performance rights
Performance rights
Opening balance
Issued
Exercised
Expired/forfeited
Closing balance
Consolidated
2011
$'000
2010
$'000
2,880
-
(1,480)
-
-
3,000
-
(120)
-
-
1,400
2,880
In accordance with resolutions 12, 13 and 15 of the 2009 Annual General Meeting, rights were granted to the
directors under the Director and Executive Equity Plan. The grant of rights formed part of the remuneration of the
directors and were based upon advice from an independent remuneration consultant. A total of 3,000,000 rights were
granted with a zero exercise price. Of the total, 1,480,000 were exercisable immediately after approval was given at
the AGM, and 120,000 were forfeited. The balance of 1,400,000 is subject to the satisfaction of a Performance Hurdle
and exercisable from and including 1 July 2011 to 30 June 2012 provided the Performance Hurdle is satisfied.
Note 33. Financial instruments
Financial risk management objectives
The consolidated entity's activities expose it to a variety of financial risks: market risk (including foreign currency risk
and interest rate risk), credit risk and liquidity risk. The consolidated entity's overall risk management program
focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial
performance of the consolidated entity. The consolidated entity uses different methods to measure different types of
risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and foreign
exchange, and ageing analysis for credit risk.
Risk management is carried out by senior finance executives ('finance') under policies approved by the Board of
Directors ('Board'). These policies include identification and analysis of the risk exposure of the consolidated entity
and appropriate procedures, controls and risk limits. Finance identifies, evaluates and hedges financial risks within
the consolidated entity's operating units. Finance reports to the Board on a monthly basis.
Market risk
Foreign currency risk
The consolidated entity undertakes certain transactions denominated in foreign currency and are exposed to foreign
currency risk through foreign exchange rate fluctuations.
Foreign exchange risk arises from future commercial transactions and recognised financial assets and financial
liabilities denominated in a currency that is not the entity’s functional currency. The risk is measured using sensitivity
analysis and cash flow forecasting.
The consolidated entity's foreign exchange risk is managed to ensure sufficient funds are available to meet US
financial commitments in a timely and cost-effective manner. The consolidated entity will continually monitor this risk
and consider entering into forward foreign exchange, foreign currency swap and foreign currency option contracts if
appropriate.
Creditors and debtors as at 30 June 2011 were reviewed to assess currency risk at year end. The value of
transactions denominated in a currency other than the functional currency of
the respective subsidiary was
insignifcant and therefore the risk was determined as immaterial.
73
TZ Limited
Notes to the financial statements
30 June 2011
Note 33. Financial instruments (continued)
Price risk
The consolidated entity has derivative liabilities, the fair value of which is linked to the share price of TZ Limited. Price
fluctuations that are inherent in such a share market impact the value of the liabilities.
Based on this exposure, had the share price weakened by 10%/strengthened by 10% (2010: weakened by
10%/strengthened by 10%) and all other variables held constant, the consolidated entity's profit after tax for the year
would have been $466,455 higher/$766,481 lower (2010: $3,522,250 lower/$801,934 higher) and equity would have
been $466,455 higher/$766,481 lower (2010: $3,522,250 lower/$801,934 higher).
Interest rate risk
The consolidated entity's main interest rate risk arises from long-term borrowings. Borrowings issued at variable rates
expose the consolidated entity to interest rate risk. Borrowings issued at fixed rates expose the consolidated entity to
fair value interest rate risk.
The consolidated entity invests surplus cash in term deposits with fixed returns. The Board makes investment
decisions after considering advice received from professional advisors.
The consolidated entity monitors its interest rate exposure continuously.
As at the reporting date, the consolidated entity had the following variable rate cash and borrowings outstanding:
Consolidated
Cash and cash equivalents
Bank loans
Net exposure to cash flow interest rate risk
2011
2010
Weighted
average
interest rate
%
3.16
6.25
Weighted
average
interest rate
%
3.04
3.25
Balance
$'000
1,146
(729)
417
Balance
$'000
232
(741)
(509)
An analysis by remaining contractual maturities in shown in 'liquidity and interest rate risk management' below.
The consolidated entity has net cash and cash equivalents and bank loans assets totalling $417,000 (2010: liabilities
of $509,000). An official
increase/decrease in interest rates of one (2010: one) percentage point would have an
adverse/favourable affect on profit before tax of $4,000 (2010: $5,000) per annum. The percentage change is based
on the expected volatility of interest rates using market data and analysts forecasts.
74
TZ Limited
Notes to the financial statements
30 June 2011
Note 33. Financial instruments (continued)
Credit risk
Credit risk is managed on a consolidated entity basis. Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the consolidated entity. The consolidated entity has a strict code of
credit, including obtaining agency credit information, confirming references and setting appropriate credit limits. The
consolidated entity obtains guarantees where appropriate to mitigate credit risk. The maximum exposure to credit risk
at the reporting date to recognised financial assets is the carrying amount, net of any provisions for impairment of
those assets, as disclosed in the statement of
financial position and notes to the financial statements. The
consolidated entity does not hold any collateral.
The consolidated entity has a credit risk exposure with one customer, which as at 30 June 2011 owed the
consolidated entity $1,247,491 (33% of trade receivables) (2010: $1,352,343 (35% of trade receivables)). This
balance was within its terms of trade and no impairment was made as at 30 June 2011. There are no guarantees
against this receivable but management closely monitors the receivable balance on a monthly basis and is in regular
contact with this customer to mitigate risk.
There is a concentration of credit risk for cash at bank and cash on deposit as all monies in Australia (including Term
Deposit) is with one financial institution, St George Bank.
Liquidity risk
Vigilant liquidity risk management requires the consolidated entity to maintain sufficient liquid assets (mainly cash and
cash equivalents) and available borrowing facilities to be able to pay debts as and when they become due and
payable.
The consolidated entity manages liquidity risk by maintaining adequate cash reserves and available borrowing
facilities by continuously monitoring actual and forecast cash flows and matching the maturity profiles of financial
assets and liabilities.
The consolidated entity raises capital in the form of ordinary shares and convertible notes, as and when needed to
fund its cash flow requirements. The consolidated entity also negotiates, where applicable,
for the conversion of
convertible notes into equity (refer to note 21) and debt for equity swaps in relation to capitalised interest and
expenses reimbursement.
Financing arrangements
Unused borrowing facilities at the reporting date:
Bank loans
Consolidated
2011
$'000
2010
$'000
403
633
Subject to the continuance of satisfactory credit ratings, the bank loan facilities may be drawn at any time.
75
TZ Limited
Notes to the financial statements
30 June 2011
Note 33. Financial instruments (continued)
Remaining contractual maturities
The following tables detail the consolidated entity's remaining contractual maturity for its financial instrument liabilities.
The tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date
on which the financial liabilities are required to be paid. The tables include both interest and principal cash flows
disclosed as remaining contractual maturities and therefore these totals may differ from their carrying amount in the
statement of financial position.
Consolidated - 2011
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Interest-bearing - fixed rate
Convertible notes
Interest payable on
convertible notes
Total non-derivatives
Consolidated - 2010
Non-derivatives
Non-interest bearing
Trade payables
Other payables
Interest-bearing - variable
Bank loans
Interest-bearing - fixed rate
Convertible notes
Interest payable on
convertible notes
Total non-derivatives
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
-
-
1,739
2,602
6.25
729
-
-
-
-
-
-
10.00
-
12,000
5,989
-
1,799
6,869
1,368
13,368
1,358
7,347
-
-
-
-
-
-
Weighted
average
interest rate
%
1 year or
less
$'000
Between 1
and 2 years
$'000
Between 2
and 5 years Over 5 years
$'000
$'000
-
-
2,349
1,369
3.25
741
-
-
-
-
-
-
10.00
5,241
-
13,714
-
2,918
12,618
1,371
1,371
514
14,228
-
-
-
-
-
-
Remaining
contractual
maturities
$'000
1,739
2,602
729
17,989
4,525
27,584
Remaining
contractual
maturities
$'000
2,349
1,369
741
18,955
4,803
28,217
The cash flows in the maturity analysis above are not expected to occur significantly earlier than disclosed.
76
TZ Limited
Notes to the financial statements
30 June 2011
Note 33. Financial instruments (continued)
Fair value of financial instruments
The following tables detail the consolidated entity's fair values of financial instruments categorised by the following
levels:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices)
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)
Consolidated - 2011
Liabilities
Derivative instrument liabilities
Total liabilities
Consolidated - 2010
Liabilities
Derivative instrument liabilities
Total liabilities
Level 1
$'000
Level 2
$'000
Level 3
$'000
Total
$'000
-
-
4,411
4,411
Level 1
$'000
Level 2
$'000
Level 3
$'000
-
-
9,062
9,062
-
-
-
-
4,411
4,411
Total
$'000
9,062
9,062
There were no transfers between levels during the financial year.
Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. The carrying amounts of
trade receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The
fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market
interest rate that is available for similar financial instruments.
Note 34. Key management personnel disclosures
Directors
The following persons were directors of TZ Limited during the financial year:
Mark Bouris
Kenneth Ting
Dickory Rudduck
Executive Chairman
Executive Director and Company Secretary
Executive Director
Other key management personnel
The following persons also had the authority and responsibility for planning, directing and controlling the major
activities of the consolidated entity, directly or indirectly, during the financial year:
Mark Schwartz
Paul Casey (appointed on 12 May 2011)
John Wilson
William Leong (appointed on 1 October 2010)
Timothy Koehler
Chief Executive Officer of PDT Inc.
Non-Executive Director of PDT Inc.
Chief Executive Officer of Telezygology Inc.
Vice President Operations of Telezygology Inc.
Chief Financial Officer of Telezygology Inc.
77
TZ Limited
Notes to the financial statements
30 June 2011
Note 34. Key management personnel disclosures (continued)
Compensation
The aggregate compensation made to directors and other members of key management personnel of
consolidated entity is set out below:
the
Short-term employee benefits
Post-employment benefits
Share-based payments
Consolidated
2011
$
2010
$
2,015,537
12,157
2,302,608
1,938,971
16,566
2,214,711
-
-
4,330,302
4,170,248
Shareholding
The number of shares in the parent entity held during the financial year by each director and other members of key
management personnel of the consolidated entity, including their personally related parties, is set out below:
2011
Ordinary shares
M Bouris
K Ting
D Rudduck
M Schwartz
P Casey *
J Wilson
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
-
72,725
992,498
80,016
-
58,142
1,203,381
800,000
600,000
-
-
-
-
1,400,000
287,967
328,250
-
-
90,000
-
706,217
-
-
-
(80,016)
-
-
(80,016)
Balance at
the end of
the year
1,087,967
1,000,975
992,498
-
90,000
58,142
3,229,582
*
Additions represent existing shareholding at
necessarily a purchase of shares in the year
time of apppointment as key management personnel, not
The number of shareholdings held nominally are as follows:
M Bouris - 1,066,667;
K Ting - 1,000,975;
D Rudduck - 978,596;
P Casey - 90,000; and
J Wilson - 58,142.
Balance at
the start of
the year
Received
as part of
remuneration
Additions
Disposals/
other
72,725
1,100,000
80,016
58,142
5,000
1,315,883
-
-
-
-
-
-
-
-
-
-
-
-
-
(107,502)
-
-
(5,000)
(112,502)
Balance at
the end of
the year
72,725
992,498
80,016
58,142
-
1,203,381
represents individuals who are no longer key management personnel, not a disposal of
2010
Ordinary shares
K Ting
D Rudduck
M Schwartz
J Wilson
J Freese *
*
Disposal/other
shareholding.
78
TZ Limited
Notes to the financial statements
30 June 2011
Note 34. Key management personnel disclosures (continued)
Option holding
The number of options over ordinary shares in the parent entity held during the financial year by each director and
other members of key management personnel of the consolidated entity, including their personally related parties, is
set out below:
2011
Options over ordinary shares
M Bouris
K Ting
D Rudduck
M Schwartz
W Leong *
T Koehler
Balance at
the start of
the year
3,000,000
2,250,000
10,000
85,000
-
35,000
5,380,000
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
10,000
-
10,000
-
-
-
-
-
-
-
-
-
-
(75,000)
-
(5,000)
(80,000)
3,000,000
2,250,000
10,000
10,000
10,000
30,000
5,310,000
*
Granted relates to option holding at time of appointment to key management personnel, not necessarily a grant
of options during the year.
2011
Options over ordinary shares
M Bouris
K Ting
D Rudduck
M Schwartz
W Leong
T Koehler
2010
Options over ordinary shares
W de Vlugt
M Bouris
K Ting
D Rudduck
M Schwartz
T Koehler
J Freese *
R Pagorek *
Vested and
exercisable
Vested and
unexercisable
-
-
10,000
10,000
10,000
30,000
60,000
1,000,000
750,000
-
-
-
-
1,750,000
Vested at
the end of
the year
1,000,000
750,000
10,000
10,000
10,000
30,000
1,810,000
Balance at
the start of
the year
Granted
Exercised
-
-
-
10,000
85,000
35,000
172,500
66,666
369,166
450,000
3,000,000
2,250,000
-
-
-
-
-
5,700,000
-
-
-
-
-
-
-
-
-
Expired/
forfeited/
other
Balance at
the end of
the year
(450,000)
-
-
-
-
-
(172,500)
(66,666)
(689,166)
-
3,000,000
2,250,000
10,000
85,000
35,000
-
-
5,380,000
*
Expired/forfeited/other represents individuals who are no longer key management personnel, not a physical
disposal
79
TZ Limited
Notes to the financial statements
30 June 2011
Note 34. Key management personnel disclosures (continued)
2010
Options over ordinary shares
D Rudduck
M Schwartz
T Koehler
J Freese
R Pagorek
Vested and
exercisable
Vested and
unexercisable
10,000
85,000
35,000
172,500
66,666
369,166
-
-
-
-
-
-
Vested at
the end of
the year
10,000
85,000
35,000
172,500
66,666
369,166
Performance rights holding
The number of performance rights over ordinary shares in the parent entity held during the financial year by each
director and other members of key management personnel of the consolidated entity, including their personally
related parties, is set out below:
2011
Performance rights over ordinary shares
M Bouris
K Ting
2011
Performance rights over ordinary shares
M Bouris
K Ting
2010
Performance rights over ordinary shares
W de Vlugt *
M Bouris
K Ting
Balance at
the start of
the year
1,600,000
1,200,000
2,800,000
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
(800,000)
(600,000)
(1,400,000)
-
-
-
800,000
600,000
1,400,000
Vested and
exercisable
Vested and
unexercisable
Vested at
the end of
the year
-
-
-
800,000
600,000
1,400,000
800,000
600,000
1,400,000
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
-
-
-
-
200,000
1,600,000
1,200,000
3,000,000
-
-
-
-
(200,000)
-
-
(200,000)
-
1,600,000
1,200,000
2,800,000
*
Expired/forfeited/other represents individuals who are no longer key management personnel, not a physical
disposal
2010
Performance rights over ordinary shares
M Bouris
K Ting
Vested and
exercisable
Vested and
unexercisable
Vested at
the end of
the year
800,000
600,000
1,400,000
-
-
-
800,000
600,000
1,400,000
80
TZ Limited
Notes to the financial statements
30 June 2011
Note 34. Key management personnel disclosures (continued)
Related party transactions
Related party transactions are set out in note 39.
Note 35. Remuneration of auditors
During the financial year the following fees were paid or payable for services provided by BDO Audit (NSW-VIC) Pty
Limited, the auditor of the company, and its related practices:
Audit services - BDO Audit (NSW-VIC) Pty Limited
Audit or review of the financial report
Other services - BDO Audit (NSW-VIC) Pty Limited
Corporate advisory
Audit services - related practices
Audit or review of the financial report
Other services - related practices
Audit of the benefit plan
Related practices above relate to BDO USA LLP.
Consolidated
2011
$
2010
$
110,000
149,205
12,000
-
-
-
122,000
149,205
96,452
71,887
13,177
-
-
-
109,629
71,887
81
TZ Limited
Notes to the financial statements
30 June 2011
Note 36. Contingent assets
Litigation proceedings - Australia (i)
Reimbursement from QVT of withholding tax (ii)
Consolidated
2011
$'000
2010
$'000
-
760
760
14,056
582
14,638
-
-
(i) A hearing was scheduled in the Supreme Court of New South Wales for 5 September 2011. The consolidated
entity was seeking to recover $13,230,536 loans to and receivables from directors and related entities, plus costs to
30 June 2010 of $826,407. Settlement has been reached with the defendants on 17 August 2011, and the hearing will
not be proceeding at this time. Refer also to note 36 for details of the contingent liability in respect of this.
(ii) Under the terms of the Convertible Note Subscription Deed, in the event that withholding tax is payable on any
interest payments to QVT, TZ Limited is required to gross up the interest payments such that QVT receives the same
amount of interest that would have been received if withholding tax was not applicable. Furthermore, the Deed
provides that in the event that QVT receives a benefit, in the form of a tax credit, QVT will reimburse TZ Limited for
this amount.
Note 37. Contingent liabilities
A Sigalla Claim
A claim was received during the 2010 financial year by the consolidated entity from former director Andrew Sigalla in
the amount of $1,160,000 plus health care and related Visa costs which Mr Sigalla claims is owing to him and ZMS
Investments Pty Limited. The claim is made in respect of Mr Sigalla's resignation as an employee in June 2009. As
part of a settlement deed entered with Mr Sigalla on 17 August 2011, Mr Sigalla has abandoned this claim.
Participation in joint venture – Intanova Pty Limited
Under the shareholders agreement between TZ Limited (‘TZL’), Telezygology Inc ('TZI'), Interco Pty Limited (‘Interco’)
and Yatabi Australia Pty Limited (‘Yatabi’), TZI had the option to subscribe to a further 500,000 shares in Intanova Pty
Limited (‘the company’) at a price of $0.80. This option has now expired. By choosing not to exercise the option by the
due date, under clause 19.3(v) of the Deed and until such time as a Reversionary Notice is served, the status quo
shall continue unaltered.
If a Reversionary Notice is served and provided that such a notice is not subsequently overturned in accordance with
the procedure set out in clause 19.3(b) to (d) of the Deed, then the following shall occur:
• TZI must transfer all of its shares in Interco to Yatabi and Interco for $1.00.
• TZI must pay $81,657.80 to each of Interco and Yatabi.
• TZI must grant the royalty-bearing Reversionary License to the company and make available the TZI Manufacturing
Assets (the Traditional License will automatically terminate).
• TZI must appoint the company as non-exclusive distributor of New Products (products which are specifically
designed by TZI to integrate with Future Wall) in Australia, NZ and the UK.
82
TZ Limited
Notes to the financial statements
30 June 2011
Note 38. Commitments for expenditure
Lease commitments - operating
Committed at the reporting date but not recognised as
liabilities, payable:
Within one year
One to five years
More than five years
Consolidated
2011
$'000
2010
$'000
749
2,009
700
750
1,868
-
-
-
3,458
2,618
The consolidated entity leases various premises under non-cancellable operating leases expiring between one and
six years. All leases have annual CPI escalation clauses. The above commitments do not include any turnover rentals
which are contingent upon the consolidated entity achieving defined sales levels. Nor do they include commitments
for any renewal options on leases. Lease terms usually run for 5 years with a 5 year renewal option. Lease conditions
do not impose any restrictions on the ability of TZ Limited and its subsidiaries from borrowing further funds or paying
dividends.
Note 39. Related party transactions
Parent entity
TZ Limited is the parent entity.
Subsidiaries
Interests in subsidiaries are set out in note 41.
Joint ventures
Interests in joint ventures are set out in note 42.
Key management personnel
Disclosures relating to key management personnel are set out in note 34 and the remuneration report in the directors'
report.
83
TZ Limited
Notes to the financial statements
30 June 2011
Note 39. Related party transactions (continued)
Transactions with related parties
The following transactions occurred with related parties:
Payment for other expenses:
Accounting fees charged by Yellow Brick Road Accounting
and Wealth Management Pty Limited, a company in which
Mark Bouris is a director.
Consultancy fees charged by IX Consulting Pty Limited, a
company in which John Wilson is a director.
Rent and serviced office expenditure paid to State Capital
Property Pty Limited, a company in which Mark Bouris is a
director.
Directors and Officers Insurance Policy was arranged by
Yellow Brick Road Wealth Management Pty Limited
(formerly YBR General Insurance Brokers Pty Limited), a
company in which Mark Bouris is a director.
Total booking fees paid to The Surf Travel Company
Holdings Pty Ltd, a company in which Mark Bouris is an
associate.
Administration fees and storage costs paid to YBR
Services Pty Ltd, a company in which Mark Bouris is a
director.
Marketing expenses paid to Yellow Brick Road Group Pty
Limited, a company in which Mark Bouris is a director.
Consolidated
2011
$
2010
$
431,699
335,087
390,000
107,526
127,408
140,931
7,500
7,500
360
1,571
39,670
100,000
-
-
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current payables:
Accounting fees payable to Yellow Brick Road Accounting
and Wealth Management Pty Ltd, a company in which
Mark Bouris is a director.
Consultancy fee payable to IX Consulting Pty Limited, a
company in which John Wilson is a director.
Phone expense and remaining rental bond payable to
State Capital Property Pty Limited, a company in which
Mark Bouris is a director.
Loans to/from related parties
There were no loans to or from related parties at the reporting date.
Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates.
Consolidated
2011
$
2010
$
36,183
50,145
38,500
47,183
-
-
84
TZ Limited
Notes to the financial statements
30 June 2011
Note 40. Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of comprehensive income
Loss after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Contributed equity
Other contributed equity
Accumulated losses
Total equity
Parent
2011
$'000
2010
$'000
(14,634)
(27,564)
(14,634)
(27,564)
Parent
2011
$'000
2010
$'000
6,095
287
29,428
47,563
2,028
7,998
16,644
22,211
149,113
-
(136,329)
125,907
4,768
(105,323)
12,784
25,352
Contingent liabilities
The parent entity had no contingent liabilities as at 30 June 2011.
Capital commitments - Property, plant and equipment
The parent entity had no capital commitments for property, plant and equipment at as 30 June 2011 and 30 June
2010.
Significant accounting policies
The accounting policies of the parent entity are consistent with those of the consolidated entity, as disclosed in note 1,
except for the following:
Investments in subsidiaries are accounted for at cost, less any impairment.
Investments in joint ventures are accounted for in the parent entity financial statements using the cost
method, less any impairment. Income earned from joint venture entities is recognised as revenue in the
parent entity’s profit or loss.
85
TZ Limited
Notes to the financial statements
30 June 2011
Note 41. Subsidiaries
The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in
accordance with the accounting policy described in note 1:
Name of entity
Telezygology, Inc.
PDT Holdings, Inc.
Product Development
Technologies, Inc
PDT Tooling, Inc.
PDT Southeast Limited
Liability Company (LLC) *
CJSC PDT Ukraine
TZI Australia Pty Limited
Country of
incorporation
United States of America
United States of America
United States of America
United States of America
United States of America
Ukraine
Australia
*
An LLC is treated as a partnership for US purposes.
Note 42. Interests in joint ventures
Equity holding
2011
%
2010
%
100.00
100.00
100.00
100.00
100.00
90.00
100.00
100.00
100.00
100.00
100.00
100.00
90.00
-
Interests in joint ventures are accounted for using the equity method of accounting. Information relating to joint
ventures is set out below:
Joint venture
Principal activities
Consolidated
Percentage interest
2011
2010
%
%
Intanova Pty Limited
Marketing, supply and interior fit-out
solutions in Australia
50.00
-
Intanova Pty Limited is a joint venture formed between Telezygology Inc. ('TZI'), Yatabi Australia Pty Ltd and Interco
Pty Ltd to leverage the existing awareness and acceptance of the FutureWall System in the marketplace. TZI
currently holds a 50% interest in Intanova Pty Limited. Intanova carries on the business of marketing, supply and
interior fit-out solutions in Australia.
86
TZ Limited
Notes to the financial statements
30 June 2011
Note 42. Interests in joint ventures (continued)
Information relating to the joint venture partnership is set out below.
Share of assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Total liabilities
Net assets
Share of revenue, expenses and results
Revenue
Expenses
-
-
-
-
-
-
Loss before income tax
-
-
Consolidated
2011
$'000
2010
$'000
94
31
125
41
41
84
63
(280)
(217)
-
-
-
-
-
-
-
-
-
87
TZ Limited
Notes to the financial statements
30 June 2011
Note 43. Events occurring after the reporting date
Settlement of the dispute with former director and related parties
The company entered into a deed of settlement with Mr Andrew Sigalla and persons and entities associated with him,
including ZMS Investments Pty Limited ('ZMS') (Receivers and Managers Appointed - In Liquidation) and BZI Pty
Limited ('BZI'), to settle all legal proceedings between the parties (the 'Proceedings'), the hearing for which was due to
commence in the Supreme Court of New South Wales on 5 September 2011.
The deed of settlement was conditional on formal court orders being entered by the Supreme Court of New South
Wales to discontinue the Proceedings on a without prejudice basis and on the removal of ASIC's freezing orders
against Mr Sigalla and BZI. These conditions were satisfied on 23 August 2011.
Under the terms of the deed of settlement, the company has agreed to accept a sum of money in full and final
settlement of all claims that the company was alleging against Mr Sigalla, ZMS and BZI. The company and its related
corporations have released Mr Sigalla, ZMS and BZI from all claims that the company and its related corporations
were alleging in the Proceedings. Mr Sigalla has also released the company and its related corporations from all
claims he was alleging in the Proceedings.
It was represented to the company that the settlement moneys received by the company on 25 August 2011 came
from a third party and not from either Mr Sigalla, ZMS or BZI. The company had sought the consent of the trustee in
bankruptcy to Mr Sigalla’s bankrupt estate to the terms of the deed of settlement and the trustee's agreement that the
bankrupt estate will have no claim to any of the settlement moneys to be paid to the company. The company was
unable to obtain that consent or agreement from the trustee in bankruptcy to Mr Sigalla's bankrupt estate.
The settlement was reached on the basis that there were no admissions of liability made by any party to the
proceedings.
Participation in Joint Venture - Intanova Pty Limited
The company has an option to purchase 500,000 additional shares in Intanova Pty Limited. This option was
exercisable between 1 February 2011 and 15 March 2011. The option was not exercised, however, the shareholders
of Intanova Pty Limited have been in negotiations regarding numerous terms of the original shareholders agreement,
including an extension of the option exercise period until 31 December 2011. At the date of this report the new
agreement had not been finalised.
Distribution Agreement with Anixter International Limited
On 28 July 2011, Telezygology Inc. entered into a distribution agreement with Anixter International Limited for the
distribution of the company’s infrastructure protection products in Europe, the Middle East and Africa.
The agreement references the terms and conditions set out in the 2009 Distributor Agreement with Anixter Inc. with
specific amendments to address regional preferences for initial inventory and preferential payment terms.
Supply and Distribution Agreement with Bear River Associates
On 22 August 2011, Telezygology Inc. entered into a supply and distribution agreement with Bear River Associates, a
privately-held logistics tracking software development company, located in Oakland, California for the turn-key supply
and distribution of the company’s TZ Courier products.
Under the terms of the supply and distribution agreement, Bear River will promote and market an integrated solution
that combines the TZ Courier™ Intelligent Locker System with its BearTracks software to an exclusive and defined
list of established Bear River corporate and public sector customers in the United States.
Supply Agreement with NEXTDC Limited and Anixter Australia Pty Limited
On 7 September 2011, TZ Limited and its wholly owned subsidiary, Telezygology Inc. entered into a supply
agreement with TZI's distributor, Anixter Australia Pty Limited ('Anixter'), and NEXTDC Limited ('NEXTDC') for the
supply of the TZ Centurion™ System for NEXTDC’s cabinet-level micro-protection solution at its Brisbane and
Melbourne data centres in accordance with agreed purchase orders.
Under the terms of the supply agreement, TZ Limited agrees to guarantee the performance of TZI's and Anixter's
obligations under the supply agreement.
88
TZ Limited
Notes to the financial statements
30 June 2011
Note 44. Reconciliation of loss after income tax to net cash used in operating activities
Loss after income tax (expense)/benefit for the year
-
-
(8,784)
(26,347)
Consolidated
2011
$'000
2010
$'000
Adjustments for:
Depreciation and amortisation
Share-based payments
Foreign exchange differences
Interest accrued on convertible notes
Net fair value loss/(gain) of derivatives
Net fair value loss on convertible notes
Loss/(gain) on debt for equity swap
Change in operating assets and liabilities:
Increase in trade and other receivables
(Increase)/decrease in inventories
Increase in deferred tax assets
Increase in prepayments
Increase in trade and other payables
Increase in provision for income tax
Increase in deferred tax liabilities
Increase/(decrease) in employee benefits
Decrease in other operating liabilities
1,856
2,303
-
3,899
(6,607)
-
(190)
(172)
(164)
(116)
(8)
410
38
116
29
(163)
2,228
2,342
17
4,978
6,158
5,627
(1,108)
(1,648)
120
(227)
-
3,467
-
47
(6)
-
Net cash used in operating activities
-
-
(7,553)
(4,352)
Note 45. Earnings per share
Consolidated
2011
$'000
2010
$'000
Loss after income tax attributable to the owners of TZ Limited
(8,784)
(26,347)
Weighted average number of ordinary shares used in calculating basic earnings per
share
97,532,407
53,268,007
Weighted average number of ordinary shares used in calculating diluted earnings per
share
97,532,407
53,268,007
Number
Number
Basic earnings per share
Diluted earnings per share
Cents
Cents
(9.01)
(9.01)
(49.46)
(49.46)
For the purpose calculating the diluted earnings per share the denominator has excluded the number of options as
the effect would be anti-dilutive.
89
TZ Limited
Notes to the financial statements
30 June 2011
Note 46. Share-based payments
Director and Executive Equity Plan
The Director and Executive Equity Plan ('DEEP') was approved by shareholders at 2009 Annual General Meeting that
was held on 26 February 2010. It gives directors and senior executives the opportunity to participate in the plan.
There were three tranches of options and two tranches of rights granted to the directors during the year. Each tranche
of options has a fixed number granted with vesting periods from 1 to 3 years.
The rights granted to the directors are at a zero exercise price, which entitle the holder to acquire fully paid ordinary
shares in the company, without payment. Each right entitles the holder to acquire one fully paid ordinary share in the
company. The first tranche of rights vested immediately. In the case of the second tranche of rights, the satisfaction of
a performance hurdle must be achieved before the rights can be exercised.
There were three tranches of options granted to the directors during the year ended 30 June 2010. Each option, when
validly exercised, entitles the holder to received one fully paid share in the company. The first tranche of options will
be exercisable in the period from 1 July 2011 to 30 June 2016 at an exercise price of $1.00 per option. The second
tranche of options will be exercisable in the period from 1 July 2012 to 30 June 2017 at an exercise price of $2.00 per
option. The third tranche of options will be exercisable in the period from 1 July 2013 to 30 June 2018 at an exercise
price of $3.00 per option.
There were no share options or performance rights granted in the current financial year.
Set out below are summaries of options granted under the plan:
2011
Grant date Expiry date
02/07-01/08 31/05/11
01/08-08/08 25/08/11 *
01/08-11/08 11/11-12/11
01/01/08 31/12/10
18/01/08 18/01/11
18/01/08 19/01/11
20/01/08 20/01/11
08/02/08 07/02/11
24/10/08 24/10/11 *
24/10/08 24/10/11 *
15/05/09 15/05/12 *
26/02/10 30/06/16
26/02/10 30/06/17
26/02/10 30/06/18
05/03/10 05/03/11
Exercise
price
Balance at
the start of
the year
Granted
Exercised
Expired
$4.88
$6.00
$6.00
$6.00
$3.75
$3.75
$3.00
$6.00
$2.50
$2.50
$2.50
$1.00
$2.00
$3.00
$1.00
90,000
116,666
142,250
310,125
100,000
195,000
149,000
75,000
850,000
150,000
65,000
1,750,000
1,750,000
1,750,000
150,000
7,643,041
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(90,000)
-
(142,250)
(310,125)
(100,000)
(195,000)
(149,000)
(75,000)
-
-
-
-
-
-
(150,000)
(1,211,375)
Balance at
the end of
the year
-
116,666
-
-
-
-
-
-
850,000
150,000
65,000
1,750,000
1,750,000
1,750,000
-
6,431,666
90
TZ Limited
Notes to the financial statements
30 June 2011
Note 46. Share-based payments (continued)
2010
Grant date Expiry date
02/07-01/08 31/05/11 *
01/08-08/08 01/11-08/11 *
01/08-11/08 11/11-12/11 *
01/01/08 31/12/10 *
18/01/08 18/01/11 *
18/01/08 19/01/11 *
20/01/08 20/01/11 *
08/02/08 07/02/11 *
24/10/08 24/10/11 *
24/10/08 24/10/11 *
15/05/09 15/05/12 *
26/02/10 30/06/16
26/02/10 30/06/17
26/02/10 30/06/18
05/03/10 05/03/11 *
Other options **
Exercise
price
Balance at
the start of
the year
Granted
Exercised
$4.88
$6.00
$6.00
$6.00
$3.75
$3.75
$3.00
$6.00
$2.50
$2.50
$2.50
$1.00
$2.00
$3.00
$1.00
90,000
116,666
142,250
310,125
100,000
195,000
149,000
75,000
850,000
150,000
65,000
-
-
-
-
1,260,833
3,503,874
-
-
-
-
-
-
-
-
-
-
1,900,000
1,900,000
1,900,000
150,000
-
5,850,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Expired/
forfeited
-
-
-
-
-
-
-
-
-
-
-
(150,000)
(150,000)
(150,000)
-
(1,260,833)
(1,710,833)
Balance at
the end of
the year
90,000
116,666
142,250
310,125
100,000
195,000
149,000
75,000
850,000
150,000
65,000
1,750,000
1,750,000
1,750,000
150,000
-
7,643,041
* These options were fully exercisable at the end of the financial year.
** Of the expired/forfeited other options in the 2010 financial year, 1,000,000 expired and the remaining 260,833 were
forfeited.
The weighted average remaining contractual life of options outstanding at the end of the financial year was 4.96 years
(2010: 5.09 years).
Set out below are summaries of performance rights granted under the plan:
2011
Grant date Expiry date
Share price
target for
vesting
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
26/02/10 30/06/12
$0.00
2,880,000
2,880,000
-
-
(1,480,000)
(1,480,000)
-
-
1,400,000
1,400,000
2010
Grant date Expiry date
Share price
target for
vesting
Balance at
the start of
the year
Granted
Exercised
Expired/
forfeited/
other
Balance at
the end of
the year
26/02/10 30/06/12
$0.00
-
-
3,000,000
3,000,000
-
-
(120,000)
(120,000)
2,880,000
2,880,000
The weighted average remaining contractual life of performance rights outstanding at the end of the financial year
was 1 year (2010: 2 years).
91
TZ Limited
Notes to the financial statements
30 June 2011
Note 46. Share-based payments (continued)
The following table highlights the share-based payment expense per categories:
Share-based payment expense recognised during the
financial year:
Options issued to employees
Options issued under Director & Executive Equity Plan
Rights issued under Director & Executuve Equity Plan
Options issued for other compensation
Consolidated
2011
$'000
2010
$'000
-
1,476
827
-
93
623
1,592
34
-
-
2,303
2,342
92
TZ Limited
Directors' declaration
In the directors' opinion:
the attached financial statements and notes thereto comply with the Corporations Act 2001, the Accounting
Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
the attached financial statements and notes thereto comply with International Financial Reporting Standards
as issued by the International Accounting Standards Board as described in note 1 to the financial
statements;
the attached financial statements and notes thereto give a true and fair view of the consolidated entity's
financial position as at 30 June 2011 and of its performance for the financial year ended on that date; and
there are reasonable grounds to believe that the company will be able to pay its debts as and when they
become due and payable.
The directors have been given the declarations required by section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of directors made pursuant to section 295(5) of the Corporations Act 2001.
On behalf of the directors
________________________________
Mark Bouris
Director
________________________________
Kenneth Ting
Director
30 September 2011
Sydney
93
94
95
96
TZ Limited
Shareholder information
30 June 2011
The shareholder information set out below was applicable as at 9 September 2011.
Distribution of equitable securities
Analysis of number of equitable security holders by size of holding:
Number
of holders
of options
over
ordinary
shares
Number
of holders
of ordinary
shares
875
920
295
474
136
2,700
956
-
2
104
3
4
113
-
-
-
-
-
-
-
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Holding less than a marketable parcel
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest security holders of quoted equity securities are listed below:
Ordinary shares
% of total
shares
issued
Number held
Deutsche Bank AG London
National Nominees Limited
Deutsche Bank AG London
HSBC Custody Nominees (Australia) Limited
NGP Investments (No 2) Pty Limited
NEFCO Nominees Pty Ltd
Colbern Fiduciary Nominees Pty Ltd
Surflodge Pty Ltd
JP Morgan Nominees Australia Limited
Mr John Michael Bouman + Ms Amanda Louise Mitchell
Harrolds at Toorak Pty Ltd
Deutsche Bank AG London
Mr Patrick Chew
Penson Australia Nominees Pty Ltd
Mr Vincent Hua Kae Tan
Mark Leigh Bouris
Mr Edward Saxon Reeve + Ms Debbie Lynette Winfield
Mr Martin Patrick McManus
Mr Kenneth Ting
Mr Lindsay James Gallagher + Mrs Esme Gallagher
14,399,999
13,919,807
11,971,769
7,118,027
4,649,087
2,398,708
2,341,998
2,248,600
1,499,691
1,404,022
1,366,218
1,300,947
1,197,055
1,127,185
1,100,000
1,066,667
948,108
891,938
850,000
809,657
11.73
11.34
9.75
5.80
3.79
1.95
1.91
1.83
1.22
1.14
1.11
1.06
0.98
0.92
0.90
0.87
0.77
0.73
0.69
0.66
72,609,483
59.15
97
TZ Limited
Shareholder information
30 June 2011
Unquoted equity securities
Performance rights over ordinary shares issued
Substantial holders
Substantial holders in the company are set out below:
Deutsche Bank AG London
National Nominees Limited
Deutsche Bank AG London
HSBC Custody Nominees (Australia) Limited
Voting rights
The voting rights attached to ordinary shares are set out below:
Number
on issue
Number
of holders
1,400,000
2
Ordinary shares
% of total
shares
issued
11.73
11.34
9.75
5.80
Number held
14,399,999
13,919,807
11,971,769
7,118,027
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
There are no other classes of equity securities.
98
Limited
TZ Limited
Level 11, 1 Chifley Square
Sydney, NSW 2000
Australia
Telezygology, Inc.
1017 W. Washington Blvd, Unit 2C
Chicago, Illinois, 60607
United States
PDT, Inc.
One Corporate Drive, Suite 110
Lake Zurich, Illinois, 60047
United States
www.tz.net