TZ Limited
Annual Report 2015

Plain-text annual report

TZ Limited ABN 26 073 979 272  29 September 2015 Lodged by ASX Online The Manager Company Announcement Office ASX Limited Level 4, 20 Bridge Street Sydney, NSW 2000 Dear Sir/Madam ANNUAL REPORT FOR THE YEAR TO 30 JUNE 2015 Please find attached the Annual Report for TZ Limited for the year ended 30 June 2015. Yours faithfully TZ LIMITED Kenneth Ting Director Page | 1    Annual Report 20 15 Think SMArt Locking. Think TZ. Lightweight. Remotely Activated. Intelligent. Contents SECTION ONE Chairman’s Letter Directors’ Report SECTION TWO 2015 Financial Statements 01 05 14 Chairman’s Letter "This Company has had a rich history in innovation. Over the last five years we have launched over 15 new products or enhancements to complement and strengthen our offering to the market." Dear Shareholders, As I reflect on the results of this past year, I am immensely proud of our team and grateful for the dedication and collective effort that has been so instrumental in underpinning our achievements. We have certainly come a long way. Today, TZ is a smart locking device technology leader servicing a range of blue chip corporate customers globally with innovative and proprietary hardware, software and service offerings. We have delivered year-on-year growth, improved bottom line business performance, started to build a strong annuity revenue stream through software maintenance and service packages and remain sharply focused on maintaining this momentum. In numbers, our top line revenue hit $15.2M up 79% and our net loss this year reduced to $6.4M, an improvement of some 45% on last year. While we are not quite across the break-even line, the signals for this year and a turn to profitability are positive. While our revenue was short of our upgraded guidance, we finished the year with a significant backlog of secured orders, imminent contracts and a pipeline of high probability business. The volatility of the current share market has impacted our share price but the underlying fitness of our business remains unquestionable and focus should not be detracted from the significant progress that has been made. 01 TZ LIMITED / 2015 ANNUAL REPORT The Highlights are Notable: / Our PAD business continues to maintain an impressive growth performance with yet another year of exceptional growth – 130% on last year’s result to close at A$12.4M. / Our US business is growing strongly as we continue to penetrate the US corporate sector and add to the already impressive list of retained corporate customers. / We are winning in our targeted high growth sectors in the US such as in high density residential and in the educational sector. We have laid the foundations for future growth with a strongly differentiated offering as an integrated system solution provider. / Our Day Locker business grew to an impressive $4M from launch in the Australian market to be our most profitable and high growth segment with A grade customers such as Westpac and KPMG. With a pipeline of strong sales and the launching of the offer to the US market, the outlook for our Day Lockers is exceptional. / With our Postal Locker System taking out the award for the Best Retail Access Point for Singapore Post, our Postal business continues to gain momentum particularly as we tender for new business and our existing customers like Singapore Post move forward to expand their networks. Patience is the key, these large postal and logistics organisations typically move cautiously but we are confident we are well placed for future roll-outs. / Our IXP business continues to maintain a normalised growth rate of 20% to 30% despite a year end fall of 28% from our previous period. This is nothing to do with a drop off in demand but rather a distortion of our run rate due to last year’s major project sale of US$800,000. Market potential and demand remain positive, our products are specified on a number of new data centre projects and we are being sought out by major OEMs as their solution of choice. It’s a good high margin contributing business but we do depend heavily on infrastructure expansion and building cycles. TZ LIMITED / 2015 ANNUAL REPORT 02 Chairman's Letter 03 TZ LIMITED / 2015 ANNUAL REPORT > Post Expo 2014, Stockholm Sweden > Locker Install, Sydney Australia > TZ Limited, Sydney Australia > LinkedIn Accountable Mail Lockers, Silicone Valley USA / We have expanded our engagement teams across the US, Asia and in Australia. In Australia alone, it’s hard to believe that we have now over 40 employees from a base three years ago of only 5 people. As we’ve grown, we’ve worked hard to maintain our service levels and pride ourselves on delivering the value that our customers expect from a high end premium technology solution. To our technical teams across engineering, software and technical services who consistently work tirelessly to implement our solutions, thank you for your strong commitment to our customers and to the Company. / This Company has had a rich history in innovation and this last year has been no different with over $1.6M invested in new product development. In context, over the last five years we have launched over 15 new products or enhancements to complement and strengthen our offering to the market. From a very limited product starting point, we have built a comprehensive portfolio of proprietary hardware and software solutions which to our customers is world class and market leading. This investment underpins our future and allows us to stay ahead of the curve and maintain a technology edge that differentiates us from the competition. TZ continues to be a journey for management and staff – it has not been an easy journey. While perseverance and patience has been tested, consider the growth, our customer base, our large market opportunities and the progress that has been made. Today, the future is far more tangible and the outlook is extraordinarily bright. To our long standing Shareholders, I thank you for maintaining the belief and your on-going support for this Company. Mark Bouris Executive Chairman TZ LIMITED / 2015 ANNUAL REPORT 04 > TZ Praetorian™ Junction Installation Director's Report Review of Operations "2015 was an important, productive and successful year for TZ. In reviewing the Company’s operations this year, let’s start by discussing the key foundations we have put in place to underpin and drive growth and to support our pathway to profitability." Improving Our Operational Fitness First, we have developed a scalable operational structure. This structure can drive activities across three regional geographies, a diverse range of customer needs and requirements, and aligns priorities to ensure the delivery of our core objectives. As part of this structure, we have established a strong team of functional leaders. These leaders share in the Company’s core values of commitment, drive, entrepreneurialism, integrity and teamwork. Moreover, they are empowered to make smart decisions for the Company. This management team works collaboratively to improve business processes, and ensure we learn from our mistakes and successes to enable the organisation to continually improve. To support our team leaders, we’ve also implemented more disciplined business planning, cross functional operational reviews and put in place a clear framework of roles and responsibilities, 30/60/90 day work plans and granular reporting systems that provide high visibility on the key business and individual performance drivers. 05 TZ LIMITED / 2015 ANNUAL REPORT > Westpac Barangaroo Day Lockers, Sydney Australia > POSLaju Parcel Lockers Mobile App Building Our Sales Capability Improving Bottom Line Performance Second, over the course of the year, we have expanded our sales capability. We have recruited high calibre sales and technical services resources to support our businesses in each of the key regional markets. To complement our investment in resources, we have also invested in dedicated product sales training programs and the development of new marketing collaterals and sales tools to improve our selling effectiveness. We have institutionalised standard operating procedures across the Company that support successful commercial delivery of our products to the market and the servicing of those products. We have particularly focused on the customer experience and to addressing external facing activities such as customer relationship management, lead generation and sales procurement to ensure we set the right expectation at all customer touch points. Improving Our Offerings Third, we continue to maintain a strong commitment to product development. Importantly, we have proactively listened to the voice of our customers and driven our development to ensure our market offerings are the right trade- off between benefit and price. We continue to enhance and improve our various hardware and software offerings and deliver solutions that stand out amongst the competition. The large list of major corporate customers that have endorsed and adopted our technology and who continue to purchase our products is testimony to our strongly differentiated competitive position. As we cement our position as a technology and market leader, the next year signals a new horizon for TZ. We expect to invest and focus our development efforts on building the next generation of smart locking devices embracing the advancements in smartphone technologies, energy harvesting and wireless connectivity. The fourth part of strengthening TZ for growth and profitability is cash and cost controls. Expense control has always been a focus for the Company but a significant challenge in terms of balancing working capital needs given our infrastructure intensive business and the requirements to invest ahead of the growth curve. Over the year we have proactively sought to improve cash flow by implementing upfront payments on placement of order. This has only become more regular as our stature as a reliable and strategic supply partner has evolved. With our track record of high quality installations and corporate customer base, we have also been very selective on the business we now pursue. We strongly believe in the value we provide and we have vigorously protected our margins and focused on business that is highly profitable or strategically important for the future of the Company. Finally, our transition of manufacturing and sourcing to Asia has been a significant undertaking and investment of resources for the Company but the result promises to be a significant improvement to our cost base. While this major initiative has not been without its challenges with quality and production delays, this initiative will ultimately deliver a production platform that is scalable for the future. FY2015 Operations With these foundations in place, let’s turn to business performance. The 2015 fiscal year ending 30th June 2015 has been another year of tremendous growth. > TZ LIMITED / 2015 ANNUAL REPORT 06 Directors' Report Campus Lockers "Our PAD business continued on the growth trajectory of previous years delivering a 130% uplift in sales. Importantly for the business, growth was evenly spread across geographies and segment offerings." 07 TZ LIMITED / 2015 ANNUAL REPORT > UTS Campus Lockers, Sydney Australia Postal and Logistics > Singapore Post POPStation Parcel Lockers, Singapore The PAD sales momentum can be categorised by a number of significant trends that have delivered the growth this year and are expected to sustain growth in the coming years: > The expansion of the POPStation network beyond the original expectation of 100 Locker Banks to over 200 locations was announced by Singapore Post earlier in the year. These sales provide a consistent base flow of business that should underpin on-going sales through 2016. More importantly, Singapore Post’s aggressive growth plans, categorised by a number of major acquisitions and investments in the Asia Pacific region including Couriers Please in Australia, highlight the regional ambitions of this postal organisation and signal an exciting potential for future regional Locker deployments. The acquisition of the ADAM Parcel Locker network by Couriers Please is the first step and enabling foundations for on-going collaboration and a cooperative participation strategy for the Australian market. > Couriers Please Parcel Lockers, Sydney Australia TZ LIMITED / 2015 ANNUAL REPORT 08 Directors' Report Day Lockers > Westpac Barangaroo Day Lockers, Sydney Australia > Westpac Barangaroo Day Lockers, Sydney Australia > KPMG Day Lockers, Parramatta Australia > The impressive growth in Day Locker sales experienced through initial deployments with Westpac, KPMG and one other banking corporation heralds an exciting opportunity for the Company that should see on-going sales through 2016 and even 2017. The Day Locker offering is an example of being able to develop the right product at the right time and has flourished on the back of a significant number of Day Lockers being deployed into the three new commercial towers at Barangaroo. The expansion across multiple locations within these enterprise customers and the pipeline of new customers seeking a similar solution firmly puts our Day Locker business as an exciting corner stone to future growth. The expansion of our offering to new markets such as the USA, where we can leverage the already established corporate customer base, further fuels the potential for this business and the significance it could play in the coming years. 09 TZ LIMITED / 2015 ANNUAL REPORT > Vanderbilt University Campus Lockers, Nashville Tennessee USA Residential Lockers Campus Lockers Accountable Mail > Hearth North Residential Lockers, Santa Clara USA > Genentech Accountable Mail Lockers, San Francisco USA > Our US PAD business continued to grow solidly and is a growth priority for the Company. Although we have only started to scratch the surface in terms of US business opportunity, we have been able to establish leading positions in the Corporate Accountable Mail sector, High Density Residential sector and the Educational sector. Internal estimates put the overall addressable opportunity as over US $30M from our established customers alone, based purely on the number of buildings within their portfolio and the potential for Lockers. With an active direct customer engagement program and plans afoot for a substantial and strategic multinational distribution network, the US business is well positioned to deliver on its promise. > In the postal sector, although progress has been measured to date, we cannot ignore the significant potential of our existing customers. Pos Malaysia, Pos Indonesia, Poste Italiane and a major US logistics organisation all have embarked on first stage initiatives and have all invested in building back-end systems and integration services with our software platform. Each of these customers are currently contemplating the merits of a Parcel Locker network and working through the business case to justify expansion of the initial deployments. While we have limited influence on their internal investment hurdles and business case deliberations, we are well placed in the event they commit to a further roll-out. Each of these trends should continue to deliver strong revenue growth for the foreseeable future. TZ LIMITED / 2015 ANNUAL REPORT 10 Directors' Report "TZ PushLock™ is an intelligent locking device offering easy installation as a secondary electronic locking mechanism." > TZ PushLock™ 11 TZ LIMITED / 2015 ANNUAL REPORT > TZ SlideHandle™ Test Rig > Macquarie Telecom Data Centre, Sydney Australia > DCW Las Vegas 2015, Las Vegas USA Our IXP business continues to grow as well. Despite being impacted by the schedules of major infrastructure projects, the business reliably delivers a normalised year-on-year growth of at least 20% to 30% at healthy margins with resource light requirements supported by a distribution and system integrator network in the US, Europe, Africa, Asia and Australia. All markets are exhibiting solid sales momentum with South America and Asia anticipated to come through with major project sales in the 2016 fiscal year. As anticipated, we are starting to see our established OEM customer base develop existing deployments and take our products into new data centres and into geographies on the back of their expansion plans. New product initiatives such as SwingHandle™ are starting to gain momentum as positive feedback from initial production orders should drive new orders for larger volume production. Additional complementary products such as our new PushLock™, which is due for release in November, will round out the current range of Smart Locking Devices and ensure device compatibility across a large range of data cabinets, one our differentiated features. A planned upgrade of our Centurion™ Server platform will also help to solidify our integrated offering and maintain a competitive and differentiated edge over the increasing number of data centre cabinet solenoid locking options. TZ LIMITED / 2015 ANNUAL REPORT 12 Directors' Report Looking Forward The last few years has seen a determined focus and commitment to successfully grow and build our IXP and PAD businesses. From a limited starting point when the first IXP and PAD products were launched in 2011, we have now established a solid base of high margin sustainable business and achieved a strong leadership position in our chosen areas of participation. Moving forward, our focus must be to leverage these foundations and track record, and aggressively broaden our areas of participation. Pursuing strategic partnerships and licensing relationships with larger organisations will enable us to achieve far greater customer engagement, explore applications outside the current scope of participation and most importantly eliminate the tight coupling of revenue generation with increasing cost base. The Board and staff are excited and motivated to see the years of hard work translate to tangible results and to look forward to 2016 with confidence and optimism. 13 TZ LIMITED / 2015 ANNUAL REPORT  2015 Financial Statements TZ LIMITED / 2015 ANNUAL REPORT 14 15 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Corporate directory 30 June 2015 1 Directors Mark Bouris - Chairman KennethTing PaulCaseyCompany secretary Kenneth Ting Registered office Level 11, 1 Chifley Square Sydney NSW 2000 Head office Tel: +61 2 9222 8890 Principal place of business TZ Limited and TZI Australia Pty Limited Level 11, 1 Chifley Square Sydney NSW 2000 Australia TelezygologyInc. 1017 W. Washington Blvd Unit 2C, Chicago IL 60607 USA TZI Singapore Pte Limited Centennial Business Suites, Suntec Tower 2, 9 Temasek Boulevard #29-01 Singapore 038989 Share register Computershare Investor Services Pty Limited YarraFalls 452 JohnstonStreet Abbotsford VIC 3067 Tel: 1300 787 272 Fax: +61 3 9473 2500 Auditor Grant Thornton Audit Pty Ltd Level 17, 383 Kent Street Sydney NSW 2000 Solicitors Landerer & Company Level 31, 133 Castlereagh Street Sydney NSW 2000 Bankers 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 www.tz.net TZ Limited's public website contains information regarding its products and thecompany, including an investor services section E-mail:info@tz.netCorporate Governance Statement The Corporate governance statement which was approved at the same time as theannual report can be found at http://tz.net/investors/corporate-governance/ TZ LIMITED / 2015 ANNUAL REPORT 16 2015 Financial StatementsTZ Limited Directors' report 30 June 2015 2 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 at the end of, or during, the year ended 30 June 2015. 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 Paul Casey 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. and TZI Australia Pty Limited ('TZI'). All of the operations of the consolidated entity are based in Australia, the United States of America and Singapore. Dividends There were no dividends paid, recommended 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 $6,436,000 (30 June 2014: $11,798,000). Further information on the review of operations, financial position and future strategies is detailed in Section One of the Annual Report. Significant changes in the state of affairs There were no significant changes in the state of affairs of the consolidated entity during the financial year. Matters subsequent to the end of the financial yearNo matter or circumstance has arisen since 30 June 2015 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. Likely developments and expected results of operationsFurther information on the future strategies is detailed in Section One of the Annual Report. Environmental regulation The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. 17 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Directors' report 30 June 2015 3 Information on directors Name: MarkBourisTitle: ExecutiveChairmanQualifications: BCom (UNSW), MCom (UNSW), HonDBus (UNSW), HonDLitt (UWS), FCA Experience and expertise: Mark Bouris is the Executive Chairman of TZ Limited and has over 26 years’experience in the finance and property sectors. Mark is also the Executive Chairman of Yellow Brick Road, Non-Executive Chairman of Anteo Diagnostics Limited and a board member of the Sydney Roosters. He is an Adjunct Professor at the Universityof New South Wales Australian School of Business and he sits on boards for theUniversity of NSW Business Advisory Council and the University of Western SydneyFoundation Council. Mark is also the author of three business and finance books. Other current directorships: Executive Chairman of Yellow Brick Road Holdings Limited (ASX: YBR) and Non-Executive Chairman of Anteo Diagnostics Limited (ASX: ADO). Former directorships (last 3 years): Non-Executive Chairman of Serena Resources Limited. Special responsibilities: None Interests in shares: 2,968,314 ordinary shares Interests in options: 10,500,000 options over ordinary shares Name: KennethTingTitle: Executive Director and Company Secretary Qualifications: BCom, BLaw,CAExperience and expertise: Kenneth Ting has a background in accounting, law and investment banking with afocus on the commercialisation of technology and public and private equity raisings.Kenneth joined Deutsche Bank in 1997 after 4 years at PricewaterhouseCoopersCorporate Finance and Tax division. He was Vice President of TechnologyInvestment Banking at Deutsche Bank and worked in Deutsche Bank's Sydney, SanFrancisco and London offices. Kenneth has a passion for technology and has workedwith 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. Other current directorships: None Former directorships (last 3 years): Non-Executive Director of Serena Resources Limited. Special responsibilities: None Interests in shares: 3,527,809 ordinary shares Interests in options: 9,750,000 options over ordinary shares Name: PaulCaseyTitle: Non-ExecutiveDirectorExperience and expertise: Paul Casey brings over 31 years' experience in international travel and tourism andearly stage investing. Paul was President and Chief Executive Officer ('CEO') ofHawaiian Airlines, a New York Stock Exchange ('NYSE') listed company, from 1997until 2002. Prior to that he led the Hawaii Visitors and Convention Bureau ('HVCB') asPresident and CEO and he held a succession of senior management positions withContinental Airlines and Thomas Cook. Paul has run a travel software start-up in Bangkok, was the CEO of an investment firm focussed on rolling up travel-related businesses in China and was involved in restructuring a number of travel and tourism projects. He is also an investor and adviser to several Hawaii early stage companiesand since 2011 has been on the board of PDT. Other current directorships: None Former directorships (last 3 years): None Special responsibilities: None Interests in shares: 236,363 ordinary shares Interests in options: None '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. TZ LIMITED / 2015 ANNUAL REPORT 18 2015 Financial StatementsTZ Limited Directors' report 30 June 2015 4 Company secretary Kenneth Ting is the company secretary and also a director of the company. See 'Information on directors'. Meetings of directors The number of meetings of the company's Board of Directors ('the Board') held during the year ended 30 June 2015, and the number of meetings attended by each director were: Full Board Attended Held Mark Bouris 1212Kenneth Ting 1212Paul Casey 1212Held: 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 key management personnel remuneration arrangements for the consolidated entity and the company, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: ●Principles used to determine the nature and amount of remuneration●Details of remuneration● Service agreements● Share-based compensation●Additional information●Additional disclosures relating to key management personnelPrinciples 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. The consolidated entity established a Director and Executive Equity Plan in 2009 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. 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. Non-executive directors do not receive share options or other incentives. 19 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Directors' report 30 June 2015 5 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 leaveThe 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 for 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 company. 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 the additional information section of the remuneration report for details of the last five years earnings and total shareholders return ('TSR'). Use of remuneration consultants During the financial year ended 30 June 2015, the company did not engage remuneration consultants to review its existing remuneration policies and provide recommendations on how to improve both the short-term incentives ('STI') and long-term incentives ('LTI') programs. Voting and comments made at the company's 2014 Annual General Meeting ('AGM') At the last AGM 89% of the shareholders voted to adopt the remuneration report for the year ended 30 June 2014. The company did not receive any specific feedback at the AGM regarding its remuneration practices. TZ LIMITED / 2015 ANNUAL REPORT 20 2015 Financial StatementsTZ Limited Directors' report 30 June 2015 6 Details of remuneration Amounts of remuneration The key management personnel of the consolidated entity consisted of the directors of TZ Limited and the following persons: ●William Leong - Chief Operating Officer of Telezygology Inc.●Benjamin Ford - Regional Technical Manager of TZI Australia Pty Limited (resigned on 28 August 2015)● Craig Holden - Chief Financial Officer TZ Limited (appointed as CFO on 26 March 2015)Short-term benefits Post-employment benefits Long-term benefits Share-based paymentsCash salary Non- Super- Employee and fees Other monetary annuation leave Options Total 2015 $ $ $ $ $ $ $ Non-Executive Directors: P Casey 89,616 -----89,616Executive Directors: M Bouris 440,917 10,200 --- 245,653 696,770 K Ting 346,435 6,000--- 245,653 598,088Other Key Management Personnel: W Leong 195,165 11,949 24,078 4,879 - -236,071 B Ford 160,000 5,000-15,200--180,200C Holden 58,385 --5,547- -63,932 1,290,518 33,149 24,078 25,626 -491,306 1,864,677 Short-term benefits Post-employment benefits Long-term benefits Share-based payments Cash salaryNon- Super- Employee and fees Other monetary annuation leave Options Total 2014 $ $ $ $ $ $ $ Non-Executive Directors: P Casey 81,708 -----81,708Executive Directors: M Bouris 440,917 10,200 --- 386,703 837,820 K Ting 346,435 6,000--- 386,703 739,138Other Key Management Personnel: W Leong 163,417 -12,161 4,085- -179,663B Ford 160,000 --14,800- -174,800 1,192,477 16,200 12,161 18,885 -773,406 2,013,129 21 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Directors' report 30 June 2015 7 The proportion of remuneration linked to performance and the fixed proportion are as follows: Fixed remuneration At risk - STI At risk - LTI Name 2015 20142015 2014 2015 2014Non-Executive Directors: P Casey 100% 100% -%-% -%-%Executive Directors: M Bouris65%54%-%-%35%46%K Ting59%48%-%-%41%52%Other Key Management Personnel: W Leong 95% 100% 5% -% -%-%B Ford 97% 100% 3% -% -%-%C Holden 100% -%-%-% -%-%Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name: PaulCaseyTitle: Non-ExecutiveDirectorAgreement commenced: 1 June 2013 Term of agreement: No fixed term Details: Base salary of US$75,000 and notice period by negotiation. Name: WilliamLeong Title: Chief Operating Officer of Telezygology Inc. Agreement commenced: 1 October 2010 Term of agreement: No fixed term Details: Base salary of US$170,000 and notice period by negotiation. Name: BenjaminFordTitle: Regional Technical Manager of TZI Australia Pty Limited Agreement commenced: 4 January 2013 Term of agreement: 2 years and annual renewal Details: Base salary of AU$160,000 and notice period by negotiation. Name: CraigHoldenTitle: Chief Financial Officer Agreement commenced: 26 March 2015 Term of agreement: No fixed term Details: Base salary of AU$ 220,000 and four week notice's period Key management personnel have no entitlement to termination payments in the event of removal for misconduct. Share-based compensation Issue of shares There were no shares issued to directors and other key management personnel as part of compensation during the year ended 30 June 2015. TZ LIMITED / 2015 ANNUAL REPORT 22 2015 Financial StatementsTZ Limited Directors' report 30 June 2015 8 Options The terms and conditions of each grant of options over ordinary shares affecting remuneration of directors and other key management personnel in this financial year or future reporting years are as follows: Fair value Vesting date and per option Grant date exercisable date *Expiry date Exercise priceat grant date15 January 2014 18 February 2014 30 June 2018 $0.25 $0.096 15 January 2014 18 February 201530 June 2019$0.40 $0.093 15 January 2014 18 February 2016 30 June 2020 $0.60 $0.092 *Not all options have vested.The number of options over ordinary shares granted to and vested by directors and other key management personnel as part of compensation during the year ended 30 June 2015 are set out below: Number of Number of Number of Number of options options optionsoptionsgranted granted vestedvestedduring the during the during the during the year year yearyearName2015 2014 20152014Mark Bouris -7,500,000 2,500,000 2,500,000 Kenneth Ting -7,500,000 2,500,000 2,500,000 Vesting conditions for options granted as compensation during the year ended 30 June 2014 The options are separated into three tranches and exercise periods: (a)The first tranche of 5,000,000 options (2,500,000 Mark Bouris and 2,500,000 Kenneth Ting) is exercisable in theperiod from 18 February 2014 to and including 30 June 2018, at an exercise price of $0.25 per option.(b)The second tranche of 5,000,000 options (2,500,000 Mark Bouris and 2,500,000 Kenneth Ting) will be exercisablein the period from 18 February 2015 to and including 30 June 2019, at an exercise price of $0.40 per option.(c)The third tranche of 5,000,000 options (2,500,000 Mark Bouris and 2,500,000 Kenneth Ting) will be exercisable inthe period from 18 February 2016 to and including 30 June 2020, at an exercise price of $0.60 per option.The options granted are not subject to the satisfaction of performance conditions. The grants were made under the Director and Executive Equity Plan to attract, retain, motivate and reward senior executives and Directors (including non-executive directors) of the company. The options will lapse if not exercised by the respective expiry date or if employment ceases (apart from if due to death, incapacity or redundancy). There are no other vesting conditions in respect of these options. Additional information The earnings of the consolidated entity for the five years to 30 June 2015 are summarised below: 201120122013 20142015$'000$'000$'000 $'000$'000Sales revenue 22,399 21,178 20,116 8,392 15,129 Adjusted EBITDA * (3,094) (5,837) (16,735) (8,552) (4,469) Loss after income tax (8,784) (12,361) (23,204) (11,798) (6,436) *Earnings before interest, tax, depreciation, amortisation and other one-off non-operating itemsPrior to 2014, the results of the consolidated entity included those of subsidiary, Product Development Technologies Inc. which was disposed of in May 2013. 23 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Directors' report 30 June 2015 9 The factors that are considered to affect TSR are summarised below: 201120122013 20142015Share price at financial year end ($) 0.24 0.10 0.12 0.14 0.09 Basic earnings per share (cents per share) (9.01) (9.60) (13.57) (4.39) (1.57) Additional disclosures relating to key management personnel In accordance with Class Order 14/632, issued by the Australian Securities and Investments Commission, relating to 'Key management personnel equity instrument disclosures', the following disclosure relates only to equity instruments in the company or its subsidiaries. Shareholding The number of shares in the company 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: Balance at Received Balance at the start of as part of Disposals/ the end of the year remunerationAdditions other the year Ordinary shares Mark Bouris 2,831,951 -136,363-2,968,314Kenneth Ting 3,391,446 -136,363-3,527,809Paul Casey 90,000 -146,363-236,363Benjamin Ford 250,000 ---250,000 6,563,397 -419,089 -6,982,486Option holding The number of options over ordinary shares in the company 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: Balance at Expired/ Balance at the start of forfeited/ the end of the year Granted Exercised other the year Options over ordinary shares Mark Bouris 10,500,000 -- -10,500,000 Kenneth Ting 9,750,000 -- -9,750,000 20,250,000-- -20,250,000Balance at Vested and Vested and the end of exercisable unexercisablethe year Options over ordinary shares Mark Bouris 8,000,000 -8,000,000Kenneth Ting 7,250,000 -7,250,00015,250,000 -15,250,000This concludes the remuneration report, which has been audited. TZ LIMITED / 2015 ANNUAL REPORT 24 2015 Financial StatementsTZ Limited Directors' report 30 June 2015 10 Shares under option Unissued ordinary shares of TZ Limited under option at the date of this report are as follows: Exercise Number Grant date Expiry date price under option26 February 2010 30 June 2016$1.00 1,750,000 26 February 2010 30 June 2017 $2.00 1,750,000 26 February 2010 30 June 2018 $3.00 1,750,000 15 January 2014 30 June 2018$0.25 5,000,000 15 January 2014 30 June 2019 $0.40 5,000,000 15 January 2014 30 June 2020 $0.60 5,000,000 20,250,000No person entitled to exercise the options had or has any right by virtue of the option to participate in any share issue of the company or of any other body corporate. Shares issued on the exercise of options There were no ordinary shares of TZ Limited issued on the exercise of options during the year ended 30 June 2015 and up to the date of this report. 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 the 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 No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the company, or to intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or part of those proceedings. 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 29 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 the opinion that the services as disclosed in note 29 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: ●all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivityof the auditor; and●none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code ofEthics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, includingreviewing 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.25 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Directors' report 30 June 2015 11 Officers of the company who are former partners of Grant Thornton Audit Pty LtdThere are no officers of the company who are former partners of Grant Thornton Audit Pty Ltd. 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. 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. AuditorGrant Thornton Audit Pty Ltd 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 29 September 2015 Sydney TZ LIMITED / 2015 ANNUAL REPORT 26 2015 Financial Statements Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of TZ Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of TZ Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M R Leivesley Partner - Audit & Assurance Sydney, 29 September 2015 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Auditor’s Independence Declaration To the Directors of TZ Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of TZ Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been: a no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b no contraventions of any applicable code of professional conduct in relation to the audit. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M R Leivesley Partner - Audit & Assurance Sydney, 29 September 2015 27 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Contents 30 June 2015 13 Contents Statement of profit or loss and other comprehensive income 28Statement of financial position 29 Statement of changes in equity 30 Statement of cash flows 31 Notes to the financial statements 32 Directors' declaration 62 Independent auditor's report to the members of TZ Limited 63 Shareholder information 66 General information The financial statements cover TZ Limited as a consolidated entity consisting of TZ Limited and the entities it controlled at the end of, or during, the year. The financial statements are presented in Australian dollars, which is TZ Limited's functional and presentation currency. 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 Principal place of business Level 11, 1 Chifley Square Sydney NSW 2000 TZ Limited and TZI Australia Pty Limited Level 11, 1 Chifley Square SydneyNSW2000Australia TelezygologyInc.1017 W. Washington Blvd, Unit 2C Chicago IL 60607, USA TZI Singapore Pte Limited, Centennial Business Suites, Suntec Tower 2, 9 Temasek Boulevard #29-01 Singapore 038989 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 statements. The financial statements were authorised for issue, in accordance with a resolution of directors, on 24 September 2015. The directors have the power to amend and reissue the financial statements. TZ LIMITED / 2015 ANNUAL REPORT 28 2015 Financial StatementsTZ Limited Statement of profit or loss and other comprehensive incomeFor the year ended 30 June 2015 ConsolidatedNote2015 2014$'000 $'000The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 14 Revenue 4 15,195 8,476 Other income 5233 1,508Expenses Raw materials and consumables used (8,666)(4,300)Employee benefits expense (6,976)(5,685)Occupancy expense (356)(311)Depreciation and amortisation expense 6(1,563)(1,145)Impairment of assets 6 (401)-Communications expense (242)(107)Professional and corporate services (1,157)(1,528)Travel and accommodation expense (984)(845)Loss on debt/equity conversion -(4,356)Other expenses (1,466)(1,356)Finance costs 6 -(2,112)Loss before income tax expense (6,383)(11,761)Income tax expense 7 (53)(37)Loss after income tax expense for the year attributable to the owners of TZ Limited24 (6,436)(11,798)Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation 1,603 (289)Other comprehensive income for the year, net of tax 1,603 (289)Total comprehensive income for the year attributable to the owners of TZ Limited(4,833)(12,087)Cents CentsBasic earnings per share 37 (1.57)(4.39)Diluted earnings per share 37 (1.57)(4.39)TZ Limited Statement of profit or loss and other comprehensive incomeFor the year ended 30 June 2015 ConsolidatedNote2015 2014$'000 $'000The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 14 Revenue 4 15,195 8,476 Other income 5233 1,508Expenses Raw materials and consumables used (8,666)(4,300)Employee benefits expense (6,976)(5,685)Occupancy expense (356)(311)Depreciation and amortisation expense 6(1,563)(1,145)Impairment of assets 6 (401)-Communications expense (242)(107)Professional and corporate services (1,157)(1,528)Travel and accommodation expense (984)(845)Loss on debt/equity conversion -(4,356)Other expenses (1,466)(1,356)Finance costs 6 -(2,112)Loss before income tax expense (6,383)(11,761)Income tax expense 7 (53)(37)Loss after income tax expense for the year attributable to the owners of TZ Limited24 (6,436)(11,798)Other comprehensive income Items that may be reclassified subsequently to profit or loss Foreign currency translation 1,603 (289)Other comprehensive income for the year, net of tax 1,603 (289)Total comprehensive income for the year attributable to the owners of TZ Limited(4,833)(12,087)Cents CentsBasic earnings per share 37 (1.57)(4.39)Diluted earnings per share 37 (1.57)(4.39)29 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Statement of financial position As at 30 June 2015 ConsolidatedNote2015 2014$'000 $'000The above statement of financial position should be read in conjunction with the accompanying notes 15 Assets Current assets Cash and cash equivalents 8 5,688 2,646 Trade and other receivables 9 5,007 3,045 Inventories 10 336 225 Other financial assets 11 -208Other 12 325 26Total current assets 11,356 6,150 Non-current assets Other financial assets 13 -191Property, plant and equipment 14 794 1,232Intangibles 15 9,310 7,253Other 16 -73Total non-current assets 10,104 8,749 Total assets 21,460 14,899 Liabilities Current liabilities Trade and other payables17 4,2011,978Provisions 18 266 154 Other 19 -122Total current liabilities 4,467 2,254 Non-current liabilities Deferred tax 20 110 129 Provisions 21 51 62 Total non-current liabilities 161 191 Total liabilities 4,628 2,445 Net assets 16,832 12,454 Equity Issued capital 22 200,998 192,278 Reserves 23 (3,530)(5,133)Accumulated losses 24 (180,636)(174,691)Total equity 16,832 12,454 TZ Limited Statement of financial position As at 30 June 2015 ConsolidatedNote2015 2014$'000 $'000The above statement of financial position should be read in conjunction with the accompanying notes 15 Assets Current assets Cash and cash equivalents 8 5,688 2,646 Trade and other receivables 9 5,007 3,045 Inventories 10 336 225 Other financial assets 11 -208Other 12 325 26Total current assets 11,356 6,150 Non-current assets Other financial assets 13 -191Property, plant and equipment 14 794 1,232Intangibles 15 9,310 7,253Other 16 -73Total non-current assets 10,104 8,749 Total assets 21,460 14,899 Liabilities Current liabilities Trade and other payables17 4,2011,978Provisions 18 266 154 Other 19 -122Total current liabilities 4,467 2,254 Non-current liabilities Deferred tax 20 110 129 Provisions 21 51 62 Total non-current liabilities 161 191 Total liabilities 4,628 2,445 Net assets 16,832 12,454 Equity Issued capital 22 200,998 192,278 Reserves 23 (3,530)(5,133)Accumulated losses 24 (180,636)(174,691)Total equity 16,832 12,454 TZ LIMITED / 2015 ANNUAL REPORT 30 2015 Financial StatementsTZ Limited Statement of changes in equity For the year ended 30 June 2015 The above statement of changes in equity should be read in conjunction with the accompanying notes 16 Issued AccumulatedTotalcapitalReserves losses equityConsolidated$'000$'000$'000 $'000Balance at 1 July 2013 158,942 (4,844) (163,666)(9,568)Loss after income tax expense for the year-- (11,798)(11,798)Other comprehensive income for the year, net of tax -(289)-(289)Total comprehensive income for the year -(289)(11,798)(12,087)Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 22) 33,336 - -33,336 Share-based payments (note 38) -- 773 773 Balance at 30 June 2014 192,278 (5,133) (174,691)12,454 Issued AccumulatedTotalcapitalReserves losses equityConsolidated$'000$'000$'000 $'000Balance at 1 July 2014 192,278 (5,133) (174,691)12,454 Loss after income tax expense for the year -- (6,436)(6,436)Other comprehensive income for the year, net of tax -1,603-1,603Total comprehensive income for the year -1,603 (6,436)(4,833)Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 22) 8,720 - -8,720 Share-based payments (note 38) -- 491 491 Balance at 30 June 2015 200,998 (3,530) (180,636)16,832 TZ Limited Statement of changes in equity For the year ended 30 June 2015 The above statement of changes in equity should be read in conjunction with the accompanying notes 16 Issued AccumulatedTotalcapitalReserves losses equityConsolidated$'000$'000$'000 $'000Balance at 1 July 2013 158,942 (4,844) (163,666)(9,568)Loss after income tax expense for the year-- (11,798)(11,798)Other comprehensive income for the year, net of tax -(289)-(289)Total comprehensive income for the year -(289)(11,798)(12,087)Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 22) 33,336 - -33,336 Share-based payments (note 38) -- 773 773 Balance at 30 June 2014 192,278 (5,133) (174,691)12,454 Issued AccumulatedTotalcapitalReserves losses equityConsolidated$'000$'000$'000 $'000Balance at 1 July 2014 192,278 (5,133) (174,691)12,454 Loss after income tax expense for the year -- (6,436)(6,436)Other comprehensive income for the year, net of tax -1,603-1,603Total comprehensive income for the year -1,603 (6,436)(4,833)Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs (note 22) 8,720 - -8,720 Share-based payments (note 38) -- 491 491 Balance at 30 June 2015 200,998 (3,530) (180,636)16,832 31 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Statement of cash flows For the year ended 30 June 2015 ConsolidatedNote2015 2014$'000 $'000The above statement of cash flows should be read in conjunction with the accompanying notes 17 Cash flows from operating activities Receipts from customers (inclusive of GST) 13,518 6,442 Payments to suppliers (inclusive of GST)(17,556)(13,008)Grants received 233 - Interest received 50 50 Other revenue 1614Interest and other finance costs paid -(185)Income taxes paid (71)(53)Net cash used in operating activities 36 (3,810)(6,740)Cash flows from investing activities Payment for purchase of business -(292)Payments for property, plant and equipment (259)(845)Payments for intangibles (1,637)(258)Proceeds from release of security deposits 10 - Proceeds from investment redemption -177Net cash used in investing activities (1,886)(1,218)Cash flows from financing activities Proceeds from issue of shares 22 9,000 6,712 Transaction costs on shares issued (280)(201)Net cash from financing activities 8,720 6,511 Net increase/(decrease) in cash and cash equivalents 3,024 (1,447)Cash and cash equivalents at the beginning of the financial year 2,646 4,146 Effects of exchange rate changes on cash and cash equivalents 18 (53)Cash and cash equivalents at the end of the financial year 8 5,688 2,646 TZ Limited Statement of cash flows For the year ended 30 June 2015 ConsolidatedNote2015 2014$'000 $'000The above statement of cash flows should be read in conjunction with the accompanying notes 17 Cash flows from operating activities Receipts from customers (inclusive of GST) 13,518 6,442 Payments to suppliers (inclusive of GST)(17,556)(13,008)Grants received 233 - Interest received 50 50 Other revenue 1614Interest and other finance costs paid -(185)Income taxes paid (71)(53)Net cash used in operating activities 36 (3,810)(6,740)Cash flows from investing activities Payment for purchase of business -(292)Payments for property, plant and equipment (259)(845)Payments for intangibles (1,637)(258)Proceeds from release of security deposits 10 - Proceeds from investment redemption -177Net cash used in investing activities (1,886)(1,218)Cash flows from financing activities Proceeds from issue of shares 22 9,000 6,712 Transaction costs on shares issued (280)(201)Net cash from financing activities 8,720 6,511 Net increase/(decrease) in cash and cash equivalents 3,024 (1,447)Cash and cash equivalents at the beginning of the financial year 2,646 4,146 Effects of exchange rate changes on cash and cash equivalents 18 (53)Cash and cash equivalents at the end of the financial year 8 5,688 2,646 TZ LIMITED / 2015 ANNUAL REPORT 32 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 18 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 adoptedThe 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. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity. Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. The following Accounting Standards and Interpretations are most relevant to the consolidated entity: ●AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities●AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets●AASB 2013-4 Amendments to Australian Accounting Standards - Novation of Derivatives and Continuation of HedgeAccounting●AASB 2013-5 Amendments to Australian Accounting Standards - Investment Entities●AASB 2014-1 Amendments to Australian Accounting Standards (Parts A to C)● Interpretation 21 LeviesGoing concern These financial statements have been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business. In making the assessment of the applicability of the going concern assumption, the directors conducted a comprehensive review of the consolidated entity’s affairs including, but not limited to: ●the consolidated entity’s financial position as at 30 June 2015;●the cash flow forecast for the consolidated entity for the period of 12 months from the date of the issuance of thesefinancial statements;●sales and profitability forecasts for the consolidated entity for not only the current financial year, but beyond 30 June2016; and●the continued support of the consolidated entity’s shareholders.For the year ended 30 June 2015, the consolidated entity incurred losses after income tax of $6,436,000 and net cash outflows from operating activities of $3,810,000. While the consolidated entity incurred losses for the financial year, in assessing the appropriateness of the going concern concept the following factors have been taken into consideration: ●the directors are of the view the consolidated entity is on track to meet revenue targets for the 2016 financial year andthat this is strongly supported by a substantial backlog of purchase orders and secured contracts. It is expected, as themonthly revenue levels increase, the consolidated entity’s operating business units will be in a position to contributepositive cash to the bottom line; and●the directors maintain a positive outlook on achieving profitability in the 2016 financial year based upon forward ordersand the strength of the sales pipeline.In making their assessment, the directors acknowledge that the ability of the consolidated entity to continue as a going concern is dependent on meeting sales and profitability forecasts, the generation of positive cash flows, the continued support of shareholders and the raising of additional share capital as and when required in the future. The financial statements have been prepared on the going concern basis for the above reasons. Accordingly, the financial statements do not include any adjustments relating to the recoverability and classification of recorded assets or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern. 33 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 19 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, as appropriate for for-profit oriented entities. 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 areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are 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 33. 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 2015 and the results of all subsidiaries for the year then ended. TZ Limited and its subsidiaries together are referred to in these financial statements as the 'consolidated entity'. Subsidiaries are all those entities over which the consolidated entity has control. The consolidated entity controls an entity when the consolidated entity is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. 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 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. 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. Foreign currency translation The financial statements are presented in Australian dollars, which is TZ Limited's functional and presentation currency. TZ LIMITED / 2015 ANNUAL REPORT 34 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 20 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 approximate the rates at the dates of the transactions, for the period. All resulting foreign exchange differences are recognised in other comprehensive income through 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. Project revenue Project revenues are recognised by reference to the stage of completion of the contracts. Stage of completion is measured by reference to costs incurred to date as a percentage of costs 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. 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 the changes in deferred tax assets and liabilities attributable to temporary differences, unused tax losses and the adjustment recognised for prior periods, where applicable. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to be applied 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 atransaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nortaxable profits; or●When the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and thetiming of the reversal can be controlled and it is probable that the temporary difference will not reverse in theforeseeable 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. 35 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 21 The carrying amount of recognised and unrecognised deferred tax assets are reviewed at 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 entities which intend to settle simultaneously. Reclassification Comparative figures in the statement of profit or loss and other comprehensive income and in the statement of financial position have been reclassified to conform to the current year presentation. Current and non-current classification Assets and liabilities are presented in the statement of financial position based on current and non-current classification. An asset is classified as current when: it is either expected to be realised or intended to be sold or consumed in the entity's normal operating cycle; it is held primarily for the purpose of trading; it is expected to be realised within 12 months after the reporting period; or the asset is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period. All other assets are classified as non-current. A liability is classified as current when: it is either expected to be settled in the entity's normal operating cycle; it is held primarily for the purpose of trading; it is due to be settled within 12 months after the reporting period; or there is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period. All other liabilities are classified as non-current. Deferred tax assets and liabilities are always classified as non-current. 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. Inventories Finished goods are stated at the lower of cost and net realisable value on a 'first in first out' basis. Cost comprises of purchase and delivery costs, net of rebates and discounts received or receivable. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale. TZ LIMITED / 2015 ANNUAL REPORT 36 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 22 Investments and other financial assets Investments and other financial assets are initially measured at fair value. Transaction costs are included as part of the initial measurement, except for financial assets at fair value through profit or loss. They are subsequently 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. 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 recognised had the impairment not been made and is reversed to profit or loss. 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 20 - 33% Plant and equipment 20% Office equipment 15 - 35% The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. 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. 37 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 23 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. Indefinite life intangible assets are not amortised and are subsequently measured at cost less any impairment. Finite life 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 intangible assets 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 Goodwill arises on the acquisition of a business. Goodwill is not amortised. Instead, 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. Patents Expenditure directly attributable to the registration of patents is capitalised at cost and is amortised over the useful life of 15 years. Royalties Royalties acquired through a business combination which have future economic benefits or service potential other than their heritage value are capitalised and are amortised over their expected useful life. 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 to 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 5 to 11 years. 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 of disposal 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 are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition. TZ LIMITED / 2015 ANNUAL REPORT 38 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 24 Employee benefits Short-term employee benefits Liabilities for wages and salaries and other employee benefits expected to be settled within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled. Other long-term employee benefits Employee benefits not expected to be settled within 12 months of the reporting date 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 corporate bonds with terms to maturity and currency that match, as closely as possible. 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 share-based compensation benefits are provided to employees. Equity-settled transactions are awards of shares, or options over shares, that are provided to employees in exchange for the rendering of services. The cost of equity-settled transactions are measured at fair value on grant date. Fair value is independently determined using the 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. 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. Fair value measurement When an asset or liability, financial or non-financial, is measured at fair value for recognition or disclosure purposes, the fair value is based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date; and assumes that the transaction will take place either: in the principal market; or in the absence of a principal market, in the most advantageous market. 39 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 25 Fair value is measured using the assumptions that market participants would use when pricing the asset or liability, assuming they act in their economic best interests. For non-financial assets, the fair value measurement is based on its highest and best use. Valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, are used, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Assets and liabilities measured at fair value are classified, into three levels, using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. Classifications are reviewed at each reporting date and transfers between levels are determined based on a reassessment of the lowest level of input that is significant to the fair value measurement. For recurring and non-recurring fair value measurements, external valuers may be used when internal expertise is either not available or when the valuation is deemed to be significant. External valuers are selected based on market knowledge and reputation. Where there is a significant change in fair value of an asset or liability from one period to another, an analysis is undertaken, which includes a verification of the major inputs applied in the latest valuation and a comparison, where applicable, with external sources of data. Issued capital 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. 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 acquisition-date fair values 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. 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 the 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. TZ LIMITED / 2015 ANNUAL REPORT 40 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 26 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. Goods and Services Tax ('GST') and other similar taxesRevenues, 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. 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 adoptedAustralian 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 2015. 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 9 Financial Instruments This standard is applicable to annual reporting periods beginning on or after 1 January 2018. The standard replaces all previous versions of AASB 9 and completes the project to replace IAS 39 ‘Financial Instruments: Recognition and Measurement’. AASB 9 introduces new classification and measurement models for financial assets. New simpler hedge accounting requirements are intended to more closely align the accounting treatment with the risk management activities of the entity. New impairment requirements will use an ‘expected credit loss’ (‘ECL’) model to recognise an allowance. The consolidated entity will adopt this standard from 1 July 2018 and expects the impact to be immaterial. 41 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 1. Significant accounting policies (continued) 27 AASB 15 Revenue from Contracts with Customers This standard is currently applicable to annual reporting periods beginning on or after 1 January 2017 (however Exposure Draft 263 'Effective Date of AASB 15' proposes to defer the application date by one year to 1 January 2018). The standard provides a single standard for revenue recognition. The core principle of the standard is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services). It is expected that the consolidated entity will adopt this standard from 1 July 2018 (presuming ED 263 is passed) and expects that adoption will be immaterial. Note 2. Critical accounting judgements, estimates and assumptionsThe 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, contingent 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 (refer to the respective notes) within the next financial year are discussed below. 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 the 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. 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. 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 of disposal or value-in-use calculations, which incorporate a number of key estimates and assumptions. Impairment testing has been performed on definite life intangible assets. The key assumptions used in the testing model were as follows: ●Discount rate – 16.58% (2014: 15.20%)●Gross margins – budgeted gross profit margins are between 42% and 44%, historical gross margins ranged between46% to 47%●Revenue growth rates – 2016 (85%), 2017 (41%), 2018 (19%), 2019 (8%), 2020 (7%), 2021 (4%), 2022 (5%), 2023 (3%)and 2024 (3%)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. TZ LIMITED / 2015 ANNUAL REPORT 42 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 28 Note 3. Operating segments Identification of reportable operating segments The consolidated entity operates in one segment being the development and commercialisation of hardware and software products primarily in the US, Australian and Asian markets. This is based on the internal reports that are reviewed and used by the Board of Directors (being the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. The information reported to the CODM, on at least a monthly basis, is profit or loss and adjusted earnings before interest, tax, depreciation and amortisation and other one off-items ('Adjusted EBITDA'). Major customers During the year ended 30 June 2015 approximately 20% (2014: 30%) of the consolidated entity's external revenue was derived from sales to one customer. Geographical information Sales to external customers Geographical non-current assets201520142015 2014$'000$'000$'000 $'000Australia 5,525 2,042 1,2701,843United States of America 5,681 3,439 8,8326,902United Kingdom 475 244 --Canada -41--Singapore3,131 2,502 24Other * 317 124 --15,1298,392 10,104 8,749 *Other relates to Italy and MalaysiaThe geographical non-current assets above are exclusive of, where applicable, financial instruments, deferred tax assets, post employment benefits assets and rights under insurance contracts but include the PDT Holdings business for the period held. A reconciliation of the loss after income tax expense to adjusted EBITDA is as follows: Consolidated2015 2014$'000 $'000Loss after income tax expense (6,436)(11,798)Add: Loss on debt/equity conversion -4,356Less: Movements in fair value of derivatives -(1,508)Add: Impairment of assets 401 - Less: Interest income (50)(48)Add: Interest expense -2,112Add: Depreciation and amortisation 1,563 1,145Add: Income tax expense 53 37 Adjusted EBITDA (4,469)(5,704)43 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 29 Note 4. Revenue Consolidated2015 2014$'000 $'000Sales revenue Sale of goods and project revenue 15,129 8,392 Other revenue Interest 5048Royalty 15-Other revenue 1366684Revenue 15,195 8,476 Note 5. Other income Consolidated2015 2014$'000 $'000Government grants 233-Net gain on movement in fair value of derivative liabilities -1,508Other income 233 1,508TZ LIMITED / 2015 ANNUAL REPORT 44 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 30 Note 6. Expenses Consolidated2015 2014$'000 $'000Loss before income tax includes the following specific expenses:Depreciation Leasehold improvements 11 19 Plant and equipment 54 71 Office equipment 2044Total depreciation 85134Amortisation Trade names 111Re-acquired right (Intevia Licence) 775 707 Other intangible assets 692 303 Total amortisation 1,4781,011Total depreciation and amortisation 1,563 1,145 Impairment Plant and equipment 280 - Settlement of promissory note 121 -Total impairment 401-Finance costs Interest and finance charges paid/payable -2,112Net foreign exchange loss 92 65 Minimum lease payments 271 214 Defined contribution superannuation expense 332 180 Share-based payments expense 491 773 45 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 31 Note 7. Income tax expense Consolidated2015 2014$'000 $'000Income tax expense Current tax 7253Deferred tax - origination and reversal of temporary differences (19)(16)Aggregate income tax expense 53 37 Deferred tax included in income tax expense comprises: Decrease in deferred tax liabilities (note 20) (19)(16)Numerical reconciliation of income tax expense and tax at the statutory rate Loss before income tax expense (6,383)(11,761)Tax at the statutory tax rate of 30% (1,915)(3,528)Current year tax losses not recognised 2,034 3,680 Difference in overseas tax rates (66)(115)Income tax expense 53 37 The consolidated entity is in the process of determining its tax loss position to carry forward. Note 8. Current assets - cash and cash equivalentsConsolidated2015 2014$'000 $'000Cash and cash equivalents 5,688 2,646 Note 9. Current assets - trade and other receivablesConsolidated2015 2014$'000 $'000Trade receivables 3,2392,860Accrued revenue 1,728169Goods and services tax receivable 40 16 5,0073,045Past due but not impaired Customers with balances past due but without provision for impairment of receivables amount to $675,000 as at 30 June 2015 ($256,000 as at 30 June 2014). The consolidated entity did not consider a credit risk on the aggregate balances after reviewing the credit terms of customers based on recent collection practices. TZ LIMITED / 2015 ANNUAL REPORT 46 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 9. Current assets - trade and other receivables (continued) 32 The ageing of the past due but not impaired receivables are as follows: Consolidated2015 2014$'000 $'000Past due 0 - 30 days 261 75 Past due 30 - 60 days-84Past due 60 - 90 days 99 59Past due 90 days + 31538675256Note 10. Current assets - inventories Consolidated2015 2014$'000 $'000Finished goods - at cost 336 225 Note 11. Current assets - other financial assetsConsolidated2015 2014$'000 $'000Promissory note -208The promissory note was repayable by equal monthly repayments over a period of 33 months from 1 September 2013. Interest was charged at 4% per annum. Refer to note 13 for amount due after more than 12 months. During the financial year an impairment of $121,000 was incurred on settlement (refer note 6). Note 12. Current assets - other Consolidated2015 2014$'000 $'000Prepayments 222-Security deposits 63-Other deposits 402632526Note 13. Non-current assets -other financial assetsConsolidated2015 2014$'000 $'000Promissory note -19147 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 33 Note 14. Non-current assets -property, plant and equipmentConsolidated2015 2014$'000 $'000Leasehold improvements - at cost 418 415 Less: Accumulated depreciation (400)(389)1826Plant and equipment - at cost 1,995 2,458 Less: Accumulated depreciation (1,369)(1,317)626 1,141Office equipment - at cost 619 514 Less: Accumulated depreciation (469)(449)15065794 1,232Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Leasehold Plant and Office improvementsequipment equipment Total Consolidated$'000$'000 $'000$'000Balance at 1 July 2013 29 401 44474Additions16 764 65845Additions through business combinations -48-48Exchange differences -(1)-(1)Depreciation expense (19)(71)(44)(134)Balance at 30 June 2014 26 1,141 65 1,232Additions2 156 101259Exchange differences 1 2 47Impairment of assets -(280)-(280)Transfers in/(out) -(339)-(339)Depreciation expense (11)(54)(20)(85)Balance at 30 June 2015 18 626 150794TZ LIMITED / 2015 ANNUAL REPORT 48 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 34 Note 15. Non-current assets -intangibles Consolidated2015 2014$'000 $'000Goodwill - at cost 4,1554,155Less: Impairment (4,010)(4,010)145145Trade names - at cost 13 11 Less: Accumulated amortisation (13)(1)-10Re-acquired right (Intevia Licence) - at cost 10,118 9,238 Less: Accumulated amortisation (5,882)(5,107)4,2364,131Other intangibles - at cost 6,868 4,202 Less: Accumulated amortisation (1,939)(1,235)4,9292,9679,3107,253Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Trade Re-acquired Other Goodwill names right intangibles Total Consolidated$'000$'000$'000 $'000$'000Balance at 1 July 2013 -114,971 2,6087,590Additions--- 258258Additions through business combinations 145 -- 484 629 Exchange differences --(133) (80)(213)Amortisation expense -(1)(707)(303)(1,011)Balance at 30 June 2014 145 10 4,131 2,9677,253Additions--- 1,6371,637Exchange differences -1880 678 1,559Transfers in/(out) --- 339 339 Amortisation expense -(11)(775)(692)(1,478)Balance at 30 June 2015 145 -4,2364,9299,310* Other intangibles in the above reconciliation includes Patents and royalties, Development costs and Customerrelationships.Impairment of goodwill Goodwill is allocated to the following CGU: Consolidated2015 2014$'000 $'000Infinity Design Pty Limited 145 145 49 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 15. Non-current assets - intangibles (continued) 35 The company has assessed the goodwill balance and has determined that there is no impairment to goodwill at 30 June 2015 as Infinity Design Pty Limited's current year operations and business forecast for future years indicate the business will be in a profit making situation. Note 16. Non-current assets -otherConsolidated2015 2014$'000 $'000Security deposits -73Note 17. Current liabilities - trade and other payablesConsolidated2015 2014$'000 $'000Trade payables 3,1751,453Employee expense payables 143 80 Other payables 8834454,2011,978Refer to note 26 for further information on financial instruments. Note 18. Current liabilities - provisions Consolidated2015 2014$'000 $'000Employee benefits 266154Note 19. Current liabilities - other Consolidated2015 2014$'000 $'000Deferred revenue -122Note 20. Non-current liabilities - deferred taxConsolidated2015 2014$'000 $'000Deferred tax liability110129Movements: Opening balance 129-Charged to profit or loss (note 7) (19)(16)Additions through business combinations -145Closing balance 110129TZ LIMITED / 2015 ANNUAL REPORT 50 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 36 Note 21. Non-current liabilities - provisions Consolidated2015 2014$'000 $'000Employee benefits 5162Note 22. Equity - issued capital Consolidated 201520142015 2014SharesShares$'000 $'000Ordinary shares - fully paid 465,601,566 384,874,293 200,998 192,278 Movements in ordinary share capital Details DateSharesIssue price$'000Balance 1 July 2013 198,986,529 158,942Issue of shares for the acquisition of business 1 August 20131,719,690 $0.12200Issue of shares on exercise of option 23 October 2013 89 $0.14-Issue of shares on exercise of option 29 October 2013 22,722 $0.143Issue of shares on exercise of option 30 October 2013315,900 $0.1444Issue of shares on exercise of option 31 October 2013 6,819,527 $0.14955Issue of shares on exercise of option 1 November 2013 5,731,452 $0.14802Issue of shares on exercise of option 4 November 2013 322,787 $0.1445Issue of shares on exercise of option 5 November 2013 7,329,592 $0.141,026Issue of shares for shortfall units of options exercised13 November 2013 1,962,571 $0.14275Issue of shares on conversion of convertible notes (Series I) * 18 February 2014 66,666,667 $0.19 13,000 Issue of shares on conversion of convertible notes (Series III) * 18 February 2014 9,522,222 $0.191,857Issue of shares on conversion of convertible notes (Series IIIB) * 18 February 2014 23,750,000 $0.194,631Issue of shares on conversion of convertible notes (Series IV) * 18 February 2014 9,994,444 $0.191,949Issue of shares for interest accrued - 2012 calendar year * 18 February 2014 14,134,285 $0.192,756Issue of shares for interest accrued - 2013 calendar year * 18 February 2014 10,993,333 $0.192,144Issue of shares for interest accrued - 2014 calendar year to conversion date * 18 February 2014 1,475,817 $0.19288Issue of shares 28 April 2014 25,126,666 $0.153,769Less: share issue costs -$0.00(408)Balance 30 June 2014 384,874,293 192,278Issue of shares 3 December 2014 8,000,000 $0.121,000Issue of shares 5 March 2015 14,840,780 $0.111,632Issue of shares 18 March 2015 57,886,493 $0.116,368Less: share issue costs -$0.00(280)Balance 30 June 2015 465,601,566 200,998*a total number of 136,536,768 shares issued on 18 February 2014 as a result of converting all convertible notes andaccrued interests to ordinary shares is taken to be issued at the market share price of $0.195 on the date of conversion.51 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 22. Equity - issued capital (continued) 37 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. Share buy-back There is no current on-market share buy-back. Unquoted options At 30 June 2015 there were 20,250,000 (2014: 20,250,000) options. Each option entitles the holder to subscribe for one fully paid share in the company at the exercise price per share at any time from the date of issue until expiry of the options subject to various vesting dates. Capital risk management The consolidated entity's objectives when managing capital are to safeguard its ability to continue as a going concern, so that it can provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, the consolidated entity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt. The consolidated entity would look to raise capital when an opportunity to invest in a business or company or invest in growth initiating was seen as value adding. The capital risk management policy remains unchanged from the 30 June 2014 Annual Report. Note 23. Equity - reserves Consolidated2015 2014$'000 $'000Foreign currency reserve (3,530)(5,133)Foreign currency reserve The reserve is used to recognise exchange differences arising from the 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. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: Foreign currency Total Consolidated $'000 $'000 Balance at 1 July 2013 (4,844)(4,844)Foreign currency translation (289)(289)Balance at 30 June 2014 (5,133)(5,133)Foreign currency translation 1,603 1,603 Balance at 30 June 2015 (3,530)(3,530)TZ LIMITED / 2015 ANNUAL REPORT 52 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 38 Note 24. Equity - accumulated losses Consolidated2015 2014$'000 $'000Accumulated losses at the beginning of the financial year(174,691)(163,666)Loss after income tax expense for the year (6,436)(11,798)Transfer from share based payments reserve 491 773 Accumulated losses at the end of the financial year (180,636)(174,691)Note 25. Equity - dividends There were no dividends paid, recommended or declared during the current or previous financial year. Note 26. 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, price 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, 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 ('the 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 is 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 2015 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 insignificant and therefore the risk was determined as immaterial. Price risk The consolidated entity is not exposed to any significant price risk. 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. 53 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 26. Financial instruments (continued) 39 The consolidated entity monitors its interest rate exposure continuously. As at the reporting date, the consolidated entity had the following variable rate borrowings and interest rate swap contracts outstanding: 20152014Weighted average interest rateBalance Weighted average interest rateBalance Consolidated%$'000%$'000Cash and cash equivalents 1.50% 5,688 1.02% 2,646 Net exposure to cash flow interest rate risk 5,688 2,646An analysis by remaining contractual maturities is shown in 'liquidity and interest rate risk management' below. The consolidated entity has a net cash surplus totalling $5,688,000 (2014: net cash surplus $2,646,000). An official increase/decrease in interest rates of one (2014: one) percentage point would have a favourable/adverse effect on profit before tax of $57,000 (2014: adverse/favourable $26,000) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts forecasts. Credit risk 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 2015 owed the consolidated entity $748,919 (23% of trade receivables) (2014: $664,048 (23% of trade receivables)). This balance was within its terms of trade and no impairment was made as at 30 June 2015. 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 most monies in Australia is with two financial institutions, St George Bank and YBR Funds Management Pty Limited. 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. TZ LIMITED / 2015 ANNUAL REPORT 54 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 26. Financial instruments (continued) 40 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. Weighted average interest rate1 year or lessBetween 1 and 2 years Between 2 and 5 years Over 5 yearsRemaining contractual maturities Consolidated - 2015 % $'000$'000$'000 $'000 $'000Non-derivatives Non-interest bearing Trade payables -%3,175 -- -3,175 Other payables -%883 -- -883 Total non-derivatives 4,058 -- -4,058 Weighted average interest rate1 year or lessBetween 1 and 2 yearsBetween 2 and 5 years Over 5 yearsRemaining contractual maturitiesConsolidated - 2014 % $'000$'000$'000 $'000$'000Non-derivatives Non-interest bearing Trade payables -%1,453 -- -1,453 Other payables -%445 -- -445 Total non-derivatives 1,898 -- -1,898 The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. Note 27. Fair value measurement Fair value hierarchy The following tables detail the consolidated entity's assets and liabilities, measured or disclosed at fair value, using a three level hierarchy, based on the lowest level of input that is significant to the entire fair value measurement, being: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly Level 3: Unobservable inputs for the asset or liability Level 1 Level 2 Level 3 Total Consolidated - 2014 $'000$'000 $'000$'000Assets Promissory note -399-399Total assets -399-399There were no transfers between levels during the financial year. There were no financial assets or liabilities measured at fair value as at 30 June 2015. Valuation techniques for fair value measurements categorised within level 2 and level 3 Derivative financial instruments have been valued using quoted market rates. This valuation technique maximises the use of observable market data where it is available and relies as little as possible on entity specific estimates. 55 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 41 Note 28. Key management personnel disclosuresCompensation The aggregate compensation made to directors and other members of key management personnel of the consolidated entity is set out below: Consolidated2015 2014$$Short-term employee benefits 1,347,745 1,220,838 Post-employment benefits 25,626 18,885 Share-based payments491,306773,406 1,864,677 2,013,129 Note 29. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Grant Thornton Audit Pty Ltd, the auditor of the company, and its network firms: Consolidated2015 2014$$Audit services - Grant Thornton Audit Pty Ltd Audit or review of the financial statements 137,000 133,500 Other services - Grant Thornton Audit Pty Ltd Independent advice on debt/equity conversion -30,000Independent tax advice 29,200 - 29,200 30,000 166,200 163,500 Audit services - network firms Audit or review of the financial statements 21,500 28,912 Note 30. Contingent liabilities The consolidated entity does not have any contingent liabilities at 30 June 2015 and 30 June 2014. TZ LIMITED / 2015 ANNUAL REPORT 56 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 42 Note 31. Commitments Consolidated2015 2014$'000 $'000Lease commitments - operating Committed at the reporting date but not recognised as liabilities, payable: Within one year 108261One to five years 57198165459The consolidated entity leases various premises under non-cancellable operating leases expiring between 1 and 5 years. All leases have annual CPI escalation clauses. The above commitments do not include commitments for any renewal options on leases. Lease conditions do not impose any restrictions on the ability of TZ Limited and its subsidiaries from borrowing further funds or paying dividends. Note 32. Related party transactions Parent entity TZ Limited is the parent entity. Subsidiaries Interests in subsidiaries are set out in note 34. Key management personnel Disclosures relating to key management personnel are set out in note 28 and the remuneration report in the directors' report. Transactions with related parties The following transactions occurred with related parties: Consolidated2015 2014$$Payment for other expenses: Accounting fees charged by Yellow Brick Road Accounting and Wealth Management Pty Limited, a company in which Mark Bouris is a director. 299,365 360,243 Rent and serviced office expenditure paid to Yellow Brick Road Group Pty Limited, a company in which Mark Bouris is a director. 143,300-Rent and serviced office expenditure paid to State Capital Property Pty Limited, a company in which Mark Bouris is a director. 28,660 186,263 Broker fees for insurance policies arranged by Yellow Brick Road Wealth Management Pty Limited (formerly YBR General Insurance Brokers Pty Limited), a company in which Mark Bouris is a director. 800575Administration fees and storage costs paid to YBR Services Pty Ltd, a company in which Mark Bouris is a director. 55,617 43,372 Marketing expenses paid to Yellow Brick Road Group Pty Limited, a company in which Mark Bouris is a director. 120,000 120,000 Phone expense paid to Baycall Pty Limited, a company in which Kenneth Ting is a director. -29857 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 32. Related party transactions (continued) 43 Receivable from and payable to related parties The following balances are outstanding at the reporting date in relation to transactions with related parties: Consolidated2015 2014$$Current payables: Accounting fees payable to Yellow Brick Road Accounting and Wealth Management Pty Ltd, a company in which Mark Bouris is a director. 12,447 78,012 Rent, serviced office expenditure and remaining rental bond payable to State Capital Property Pty Limited, a company in which Mark Bouris is a director. 31,526 53,390 Administration fees and storage costs payable to YBR Services Pty Ltd, a company in which Mark Bouris is a director. 10,284 15,903 Marketing expenses payable to Yellow Brick Road Group Pty Limited, a company in which Mark Bouris is a director. 22,000 44,000 Premium payable for insurance policies arranged by Yellow Brick Road Wealth Management Pty Limited, a company in which Mark Bouris is a director. -11,776Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Terms and conditions All transactions were made on normal commercial terms and conditions and at market rates. Note 33. Parent entity information Set out below is the supplementary information about the parent entity. Statement of profit or loss and other comprehensive income Parent2015 2014$'000 $'000Loss after income tax (4,493)(12,087)Total comprehensive income (4,493)(12,087)Statement of financial position Parent2015 2014$'000 $'000Total current assets 5,357 2,480 Total assets 17,584 12,907 Total current liabilities 412 453 Total liabilities 412453Equity Issued capital 200,998 192,278 Accumulated losses (183,826)(179,824)Total equity 17,172 12,454 TZ LIMITED / 2015 ANNUAL REPORT 58 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 33. Parent entity information (continued) 44 Guarantees entered into by the parent entity in relation to the debts of its subsidiaries The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2015 and 30 June 2014. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2015 and 30 June 2014. Capital commitments - Property, plant and equipment The parent entity had no capital commitments for property, plant and equipment at as 30 June 2015 and 30 June 2014. 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, in the parent entity.●Investments in associates are accounted for at cost, less any impairment, in the parent entity.●Dividends received from subsidiaries are recognised as other income by the parent entity and its receipt may be anindicator of an impairment of the investment.Note 34. Interests in 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: Ownership interestPrincipal place of business /2015 2014Name Country of incorporation%%Telezygology, Inc. United States of America 100.00% 100.00% PDT Holdings, Inc. United States of America 100.00% 100.00% Product Development Technologies, Inc. United States of America 100.00% 100.00% PDT Tooling, Inc. United States of America 100.00% 100.00% TZI Australia Pty Limited Australia 100.00% 100.00%Infinity Design Pty Limited * Australia 100.00% 100.00%TZI Singapore Pte Ltd Singapore 100.00% 100.00% *Formerly known as Product Development Technologies Australia Pty Limited. Name changed on 26 July 2013.Note 35. Events after the reporting period No matter or circumstance has arisen since 30 June 2015 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. 59 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 45 Note 36. Reconciliation of loss after income tax to net cash used in operating activities Consolidated2015 2014$'000 $'000Loss after income tax expense for the year(6,436)(11,798)Adjustments for: Depreciation and amortisation 1,563 1,145 Impairment of property, plant and equipment 280 - Share-based payments 491 773 Foreign exchange differences 19 -Interest accrued on convertible notes -2,112Net fair value loss/(gain) of derivative liabilities -(1,508)Loss on debt/equity conversion -4,356Impairment of assets 121 - Change in operating assets and liabilities: Increase in trade and other receivables (1,962)(2,076)Decrease/(increase) in inventories (111)8Decrease in other operating assets 163 16 Increase in trade and other payables 2,101 178 Increase/(decrease) in deferred tax liabilities (18)129Increase in employee benefits 101 121 Decrease in other operating liabilities (122)(196)Net cash used in operating activities (3,810)(6,740)Note 37. Earnings per share Consolidated2015 2014$'000 $'000Loss after income tax attributable to the owners of TZ Limited (6,436)(11,798)NumberNumberWeighted average number of ordinary shares used in calculating basic earnings per share 410,883,317 268,623,495 Weighted average number of ordinary shares used in calculating diluted earnings per share 410,883,317 268,623,495 Cents CentsBasic earnings per share (1.57)(4.39)Diluted earnings per share (1.57)(4.39)For the purpose calculating the diluted earnings per share the denominator has excluded the number of options as the effect would be anti-dilutive. Note 38. 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 in 2010 and three tranches of options granted to the directors in 2014 TZ LIMITED / 2015 ANNUAL REPORT 60 2015 Financial StatementsTZ Limited Notes to the financial statements 30 June 2015 Note 38. Share-based payments (continued) 46 The rights granted to the directors were at a zero exercise price, which entitle the holder to acquire fully paid ordinary shares in the company, without payment. Both tranches of rights were exercised in the 2010 and 2012 financial years respectively. Each tranche of options had a fixed number granted with vesting periods from one to three years. Each option, when validly exercised, entitles the holder to receive one fully paid share in the company. Set out below are summaries of options granted under the plan: 2015 Balance at Expired/ Balance at Exercise the start of forfeited/ the end of Grant date Expiry date price the year Granted Exercised other the year 26/02/2010 30/06/2016 $1.00 1,750,000 -- -1,750,000 26/02/2010 30/06/2017 $2.00 1,750,000 -- -1,750,000 26/02/2010 30/06/2018 $3.00 1,750,000 -- -1,750,000 15/01/2014 30/06/2018 $0.25 5,000,000 -- -5,000,000 15/01/2014 30/06/2019 $0.40 5,000,000 -- -5,000,000 15/01/2014 30/06/2020 $0.60 5,000,000 -- -5,000,000 20,250,000---20,250,0002014 Balance at Expired/ Balance at Exercise the start of forfeited/ the end of Grant date Expiry date price the year Granted Exercised other the year 26/02/2010 30/06/2016 $1.00 1,750,000 -- -1,750,000 26/02/2010 30/06/2017 $2.00 1,750,000 -- -1,750,000 26/02/2010 30/06/2018 $3.00 1,750,000 -- -1,750,000 26/10/2012 31/10/2013 $0.14 11,312,209 -(11,312,209)-- 04/12/2012 31/10/2013 $0.14 4,060,725 -(4,060,725)-- 15/01/2014 30/06/2018 $0.25-5,000,000--5,000,00015/01/2014 30/06/2019 $0.40-5,000,000--5,000,00015/01/2014 30/06/2020 $0.60-5,000,000--5,000,00020,622,934 15,000,000 (15,372,934)-20,250,000Set out below are the options exercisable at the end of the financial year: 2015 2014 Grant date Expiry date Number Number 26/02/2010 30/06/2016 1,750,0001,750,00026/02/2010 30/06/2017 1,750,0001,750,00026/02/2010 30/06/2018 1,750,0001,750,00015/01/2014 30/06/2018 5,000,0005,000,00015/01/2014 30/06/2019 5,000,000 - 15,250,000 10,250,000 The weighted average remaining contractual life of options outstanding at the end of the financial year was 3.48 years (2014: 4.48 years). Share-based payment expense recognised during the financial year: 61 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Notes to the financial statements 30 June 2015 Note 38. Share-based payments (continued) 47 Consolidated2015 2014$'000 $'000Options issued under Director and Executive Equity Plan491 773 TZ LIMITED / 2015 ANNUAL REPORT 62 2015 Financial StatementsTZ Limited Directors' declaration 30 June 2015 48 In the directors' opinion: ●the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, theCorporations Regulations 2001 and other mandatory professional reporting requirements;●the attached financial statements and notes comply with International Financial Reporting Standards as issued by theInternational Accounting Standards Board as described in note 1 to the financial statements;●the attached financial statements and notes give a true and fair view of the consolidated entity's financial position as at30 June 2015 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 dueand 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)(a) of the Corporations Act 2001. On behalf of the directors ______________________________ Mark Bouris Director 29 September 2015 Sydney 63 TZ LIMITED / 2015 ANNUAL REPORT Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report to the Members of TZ Limited Report on the financial report We have audited the accompanying financial report of TZ Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. The Directors’ responsibility also includes such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389 ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited. Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies. Level 17, 383 Kent Street Sydney NSW 2000 Correspondence to: Locked Bag Q800 QVB Post Office Sydney NSW 1230 T +61 2 8297 2400 F +61 2 9299 4445 E info.nsw@au.gt.com W www.grantthornton.com.au Independent Auditor’s Report to the Members of TZ Limited Report on the financial report We have audited the accompanying financial report of TZ Limited (the “Company”), which comprises the consolidated statement of financial position as at 30 June 2015, the consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information and the directors’ declaration of the consolidated entity comprising the Company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001. The Directors’ responsibility also includes such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. The Directors also state, in the notes to the financial report, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require us to comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. TZ LIMITED / 2015 ANNUAL REPORT 64 2015 Financial Statements An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial report that gives a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. Auditor’s opinion In our opinion: a the financial report of TZ Limited is in accordance with the Corporations Act 2001, including: i giving a true and fair view of the consolidated entity’s financial position as at 30 June 2015 and of its performance for the year ended on that date; and ii complying with Australian Accounting Standards and the Corporations Regulations 2001; and b the financial report also complies with International Financial Reporting Standards as disclosed in the notes to the financial statements. Emphasis of matter Without qualification to the audit opinion expressed above, we draw attention to the following matters that are described in Note 1 to the financial report. For the year ended 30 June 2015 the consolidated entity incurred losses after income tax of $6,436,000 and net cash outflows from operating activities of $3,810,000. 65 TZ LIMITED / 2015 ANNUAL REPORT The ability of the consolidated entity to continue as a going concern is dependent upon it achieving sufficient profitability and operating cash flows to enable it to maintain working capital and the raising of additional share capital or borrowings in the future to support the working capital needs of the consolidated entity, when and if required. These conditions, along with other matters set out in Note 1, indicate the existence of a material uncertainty that may cast significant doubt about the consolidated entity’s ability to continue as a going concern and therefore, the consolidated entity may be unable to realise its assets and discharge its liabilities in the normal course of business. The financial report does not include any adjustments relating to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the consolidated entity not continue as a going concern. Report on the remuneration report We have audited the remuneration report included in pages 18 to 23 of the directors’ report for the year ended 30 June 2015. The Directors of the Company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion on the remuneration report In our opinion, the remuneration report of TZ Limited for the year ended 30 June 2015, complies with section 300A of the Corporations Act 2001. GRANT THORNTON AUDIT PTY LTD Chartered Accountants M R Leivesley Partner - Audit & Assurance Sydney, 29 September 2015 TZ LIMITED / 2015 ANNUAL REPORT 66 2015 Financial StatementsTZ Limited Shareholder information 30 June 2015 51 The shareholder information set out below was applicable as at 31 August 2015. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: Numberof holders Numberof holders of ordinary shares1 to 1,000 726 1,001 to 5,000 726 5,001 to 10,000 305 10,001 to 100,000 758 100,001 and over 338 2,853 Holding less than a marketable parcel 1,552 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 Number heldissuedNATIONAL NOMINEES LIMITED (DB A/C) 161,905,279 34.77 UBS NOMINEES PTY LTD 39,460,909 8.48 HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 18,297,041 3.93 J P MORGAN NOMINEES AUSTRALIA LIMITED 15,093,571 3.24 NATIONAL NOMINEES LIMITED 14,138,410 3.04 RBC INVESTOR SERVICES AUSTRALIA NOMINEES P/L (WAM ACCOUNT) 13,348,433 2.87 ROD INVESTMENTS (VIC) PTY LTD (GRONOW SUPER FUND A/C) 7,444,200 1.60 SURFLODGE PTY LTD (JE LYNCH STAFF SUPER FD A/C) 6,256,828 1.34 MR DAVID FREDERICK OAKLEY 4,596,363 0.99 LSR AUTOBODY PTY LTD 4,000,000 0.86 SURFLODGE PTY LTD 3,509,264 0.75 MR KEN TUDER + MS THUY LE (TUDER LE S/F A/C) 3,483,626 0.75 MR DAVID FREDERICK OAKLEY (DFO INVESTMENT A/C) 3,386,363 0.73 LEE SMASH REPAIRS PTY LTD (LSR SUPERANNUATION FUND A/C) 2,780,793 0.60 NEFCO NOMINEES PTY LTD 2,674,757 0.57 NGP INVESTMENTS (NO 2) PTY LIMITED 2,649,087 0.57 MR SCOTT JOSEPH BOGUE 2,550,000 0.55 CITICORP NOMINEES PTY LIMITED 2,503,553 0.54 MR KENNETH TING 2,341,876 0.50 MARK LEIGH BOURIS 2,336,363 0.50 312,756,716 67.18 67 TZ LIMITED / 2015 ANNUAL REPORT TZ Limited Shareholder information 30 June 2015 52 Unquoted equity securities NumberNumberon issueof holdersOptions over ordinary shares issued 20,250,000 2 Substantial holders Substantial holders in the company are set out below: Ordinary shares % of total shares Number heldissuedNATIONAL NOMINEES LIMITED (DB A/C) 161,905,279 34.77 Voting rights The voting rights attached to ordinary shares are set out below: 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. > Singapore Post P-POP 69 TZ LIMITED / 2015 ANNUAL REPORT 

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