TZ Limited
Annual Report 2022

Plain-text annual report

Appendix 4E Preliminary final report 1 Company details 4 Control gained over entities Name of entity TZ Limited ABN 26 073 979 272 Reporting period For the year ended 30 June 2022 Previous period For the year ended 30 June 2021 Not applicable. 5 Loss of control over entities Not applicable. 6 Dividends 2 Results for announcement to the Current period market Revenues from ordinary activities up 31% to $21,428,560 the current financial period. There were no dividends paid, recommended or declared during Earnings before interest, tax, depreciation and amortisation, adjusted for impairment (‘adjusted EBITDA’) Profit from ordinary activities after tax attributable to the owners of TZ Limited Profit for the year attributable to the owners of TZ Limited up 831% to $1,278,529 Previous period There were no dividends paid, recommended or declared during the previous financial period. up 103% to $42,896 up 103% to $42,896 7 Dividend reinvestment plans Not applicable. Dividends 8 Details of associates and joint venture There were no dividends paid, recommended or declared during the current financial period. Comments The profit for the consolidated entity after providing for income tax amounted to $42,896 (30 June 2021: loss of $1,658,204). entities Not applicable. 9 Foreign entities Details of origin of accounting standards used in compiling the The earnings before interest, tax, depreciation and amortisation report: (‘EBITDA’), adjusted for impairment, was a profit of $1,278,529 (30 June 2021: $137,364). Not applicable. EBITDA is a financial measure which is not prescribed by Australian Accounting Standards (‘AAS’) and represents the profit under AAS adjusted for non-specific non-cash and significant items. The directors consider adjusted EBITDA to reflect the core earnings of the consolidated entity. Additional information supporting the Appendix 4E disclosure requirements can be found in the Annual Report which contains the Directors’ report and the 30 June 2022 Financial Statements and accompanying notes. 3 Net tangible assets 10 Audit qualification or review Details of audit/review dispute or qualification (if any): The financial statements have been audited and an unmodified opinion has been issued. 11 Signed As authorised by the Board of Directors Net tangible assets per ordinary security Reporting period Previous period Cents 1.36 Cents (1.74) Peter Graham Chairman As at 30 June 2022, the net tangible assets per ordinary security 31 August 2022, Sydney of 1.36 presented above is inclusive of right-of-use assets and lease liabilities. TZ Limited Appendix 4E 2022ANNUALREPORTContents Corporate directory Highlights and overview Chairmans message Chief Executive Officers’ message Directors’ report Remuneration report (audited) Auditor’s independence declaration 3 4 6 7 9 13 20 Statement of profit or loss and other comprehensive income 21 Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors’ declaration Independent auditor’s report Shareholder information 22 23 24 25 52 53 57 TZ Limited Annual Report 2022 2 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 30 June 2022. 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 Level 2, 40 Gloucester Street The Rocks NSW 2000 Principal Australia Level 2, 40 Gloucester Street place of business The Rocks NSW 2000 USA 999 E. Touhy Avenue, Suite 460 Des Plaines, IL 60018 Singapore Suntec Tower 2, 9 Temasek Boulevard #29-01 Singapore 038989 Europe New Road, Oxford OX11BY, United Kingdom 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 31 August 2022. The Directors have the power to amend and reissue the financial statements. Corporate Governance Statement The Directors and management are committed to conducting the business of TZ Limited in an ethical manner and in accordance with the highest standards of corporate governance. TZ Limited has adopted and substantially complied with the ASX Corporate Governance Principles and Recommendations ASX code TZL ABN 26 073 979 272 Directors Peter Graham John D’Angelo Simon White Company Mathew Watkins secretary Annual General Meeting Thursday, 17 November 2022 Share Computershare Investor register Services Pty Limited Yarra Falls 452 Johnston Street Abbotsford VIC 3067 T 1300 787 272 F +61 3 9473 2500 Auditor PKF Brisbane Audit Level 6, 10 Eagle Street Brisbane QLD 4000 Solicitors K&L Gates Level 31, 1 O’Connell Street Sydney NSW 2000 Bankers St George Bank Limited Level 3, 1 Chifley Square Sydney NSW 2000 Stock TZ Limited shares are listed exchange on the Australian Securities listing Exchange Website www.tz.net TZ Limited’s public website contains information regarding its products and the company, including an investor services (Fourth Edition) (‘Recommendations’) to the extent appropriate section to the size and nature of its operations. Email info@tz.net The Corporate Governance Statement, which sets out the corporate governance practices that were in operation during the financial year and identifies and explains any Recommendations that have not been followed, was approved at the same time as the annual report can be found at tz.net/investors/corporate-governance TZ Limited Annual Report 2022 3 Highlights and overview R E V E N U E $21.4 m 31% A D J U S T E D E B I T D A $1.3 m 831% P R O F I T $43 k 103% Revenue AUD$m EBITDA AUD$m Profit AUD$m 25 20 15 10 5 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 2 1 0 -1 -2 -3 -4 2018 2019 2020 2021 2022 5 0 -5 -10 -15 Profitable, scalable operations Broader growth positioning After several years focused on reducing operating costs, Revenue growth has been driven by effective conversion of more operational restructuring and product rationalisation, the focus focussed sales efforts initiated in FY21. has shifted in FY22 to more effectively and efficiently delivering customer-service expectations and clarifying customer value propositions. During FY22, the business has also begun the process of repositioning its core offer to leverage growing market awareness of the demand for Edge-related IT solutions – namely, Resolution of product and service performance issues has information management systems that capture and integrate resulted in both a substantial increase in client satisfaction and data at exchange points in geographically distributed digital substantial reductions in customer service costs associated with networks. problem resolution. Broadening and clarifying the potential value to be leveraged Product rationalisation has delivered a more standardised set from TZ’s core Edge Logistics IT capabilities, rather than focusing of software modules, framed around primary customer use- on the physical role of TZ lockers as edge interface exchange cases and readily customised to the customer-specific operating points, has created a much broader platform for future growth. environment. TZ Limited Annual Report 2022 4 TZ Edge Logistics solutions The new TZ Edge Logistics solutions positioning more clearly reflects customer demand drivers, Empowering the interface between person and object wider market growth potential, adjacent market opportunities and core business capabilities. While smart lockers remain a key element of TZ Edge Logistics solutions, the new positioning emphasises the opportunity for customers to leverage TZ’s proprietary information management and analysis capabilities to create value in a wide variety of innovative ways, justifying widespread integration of TZ software modules into customers’ logistics information management systems. The rapid development of digitally enabled management tools has enabled individual items, such as IT hardware, postal items, physical parts, stored documents and so on, to be identified and inventoried through automated tracking systems. This has opened the door to a wide variety of efficiency-creating innovations in enterprise resource and logistics management. Viewed from this perspective, TZ’s Smart Locker management systems represent important exchange points in the geographically diverse networks of places where items are deposited or collected by people, in their transition from businesses to buyers, postal senders to receivers, warehouses to distribution points, and so on. The core value of TZ Edge Logistics solutions lies in their proven, advanced capability to empower two key operational management capabilities: › Auditable tracking – the ability to capture auditable data that proves an individual has deposited or collected an item at a particular time. › Access management – the capacity to provide an identified individual with unique access to a particular item. These core capabilities underpin each of the distinct use-cases that now frame our customised customer solution offers, including: › › › Corporate personnel storage Corporate asset management Chain of custody › Distribution logistics › Postal logistics TZ Limited Annual Report 2022 5 Peter Graham Non-Executive Chairman Chairman’s message The TZ Limited Board embarked upon a restructuring three years ago aimed at removing the debt and making the operations profitable. The Board is pleased to report a second consecutive year of positive EBITDA in announcing FY22’s outcome of adjusted EBITDA of $1,278,529 (FY21 EBITDA $137,364). TZ intends to build on these results in FY23. Focus will be on increasing earnings and repaying the last remaining debenture ($2.5m), thus removing the security over the Company. It is the Company’s aim to achieve debt repayment within the near term. The challenging issues of “supply chain” remain. These issues led the company to increase inventory from circa $1m to nearly $3m – this was to avoid delays in deliveries and instalments through the period of supply chain disruptions. TZ maintains a healthy cash balance (over the past few months it ranges between $1.5m to $2m) and a surplus of Accounts Receivable over Accounts Payable (recent range $1.5m to $2m). The above, coupled with forecast positive cashflow, should see the company retire the debenture once satisfied that remaining liquidity would be “sufficient working capital”. The Board believes the biggest positive or step forward in FY22 was the building of the software platform income stream. The management team developed a product that is being positively accepted in the marketplace. The Monthly Recurring Revenue (MRR) has grown to circa $260,000 per month with another $26,000 per month to be added near term from the recently announced Ricoh agreement (23 August 2022). Management has the objective to grow this to around $500,000 per month over the next 18 months. The predominant risk going forward is the Company’s increased cost base. The Company needed to build a more robust infrastructure to cater for overall growth (revenue and earnings). This entailed an increase in the number of employees (especially the introduction of Operations in India) and significant software development costs. The Board and management decided the expansion necessary if the company was to grow without substantial issues along the way. Lastly, I want to conclude by acknowledging that the Board and management are acutely aware that shareholders want a return on their investment (especially given recent capital raises to reduce debt were done at 12 and 12.5 cents). This is driving the TZ team. In FY23 we are determined to reward shareholders with an appreciation in the company’s value, resulting in a higher share price. TZ Limited Annual Report 2022 6 Chief Executive Officer’s message At the end of my first year as Chief Executive Officer (CEO), I am pleased to report that we have made substantial progress towards mitigating operational risks and putting in place the systems and practices essential to restore scalable profitability to the global operations of TZ. A solid platform for growth The management team are assured that customer confidence and substantial simplification of our solution-based service offers provides the operational platform needed for sustained growth in coming years. To gain further competitive advantage, our aim is now to disrupt the traditionally hardware-focussed Smart Locker marketplace by reframing customer opportunities in terms of delivering significant operational advantages through TZ API integration into their enterprise management systems. A number of key initiatives, enabled by our centralised and efficient management systems, will be critical to the scalable development and realisation of new business opportunities – in relation to both cross-selling within existing customers and on-boarding of new customers. These include a broader, global approach to leveraging third party hardware and business management services, continued development of critical sales partnerships, increasing focus on selling our TZ Cloud subscriptions that generate monthly, recurring revenue streams, and further innovating the scalable adaptability of core software modules to address customer use-case opportunities. Scalable, customisable, quality outcomes In making the shift from Smart Locker hardware manufacturers and suppliers to Edge Logistics solutions. TZ looks forward to leveraging our hard-won reputation for innovative outcome delivery at the highest level of quality while substantially reducing the risks and costs associated with meeting or exceeding these outcome expectations. Focused sales delivery A primary driver of our successful turn-around in revenue growth during FY22 flowed from efforts invested to focus and streamline sales around profitable opportunities in core areas of existing strengths. This has seen an increase of 31% in customer sales revenue, from $16.4M in FY21 to $21.4M in FY22. Further effort has been invested during FY22 to frame our customer solution offers more clearly around use-case value propositions. These align with our standardised software modules, establishing client expectations that can be delivered more efficiently and reliably in a scalable way. Mario Vecchio Chief Executive Officer M O N T H L Y R E C U R R I N G R E V E N U E ( M R R ) MRR AU$k 500 400 300 200 100 0 Growth projection Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FY22 FY23 TZ Limited Annual Report 2022 7 Chief Executive Officer’s message continued Integrated global management systems and disciplines Outlook The staged process of operational management evolution The final step towards globally consistent, best-practice towards a sustainable and scalable level of performance Enterprise Resource Planning (ERP) and Customer Relationship consistent with globally competitive best practices will continue Management (CRM) systems has enabled substantial increases into the new financial year. It is anticipated that profit growth will in operating efficiencies, risk mitigation and improved increase through our software subscription revenue growth and management decision making. the scale out of TZ Cloud Services, secured in part by stronger For example, FY22 saw the first globally integrated introduction of: relationships with key selling partners. › › Integrated, real-time financial reporting Inventory management › MRR subscription tracking › Staff manage approvals (cost oversight) Improved product delivery experiences A critical project management shift in FY22 has been the move away from on-site assembly, programming and testing of customised locker systems, to production manufacturing and testing that enables functional installation with great efficient outcomes, in a client friendly way. This has effectively minimised many of the customer relationship management issues TZ Cloud One of our top priorities for customer relationship management will be to convert existing and established customer arrangements from perpetual software licencing to recurring revenue-based subscriptions (MRR). This increasing familiar approach to servicing for software-driven solutions is both simpler and less costly to manage, and supports a deeper level of integration into customers’ recurring operating budgets (i.e. as opposed to CAPEX). This transition is supported by our rapidly developing Cloud- based deployment of information management software and API capabilities. We anticipate that the company’s MRR will grow experienced previously. at 50% per annum. Rebuild our core technology capabilities Partnerships to drive growth Cost reducing efforts over previous years had seen our technology capabilities reduced to a bare minimum. In 2022 we have begun the process of rebuilding a team capable of developing and maintaining an integrated stack of core software, and translating it in to use case-based application modules that are readily adaptable to each new client application. As the focus shifts to operational information management solutions, we are also strengthening our Application Programming Interface (API) capabilities to enable more efficient and painless integration into A key source of new business opportunity will be built on relationships with strategic partners who look to TZ to provide integrated capabilities in their own value-adding offers. The rapid simplification and standardisation of our core capability delivering modules will enable these partners to sell and integrate their benefits with more confidence, knowing that quality outcomes can be delivered while sustaining high-profit margins and/or customer satisfaction levels. For example: client’s own operational software systems. Asset management Reducing cost of inputs A focus on reducing the costs of hardware elements including locks and lockers was begun in FY22, which aims to realise significant reduction in cost of sales over the coming year. This effort reflects a more global approach to supply chain sourcing, which also includes off-shoring of business operations Many enterprises are now looking to integrate their IT asset management with flexible third party solutions providers. TZ’s Edge Logistics capabilities are integral for these solution providers’ ability to maintain constant, auditable records of hardware deployments, upgrades, repairs and maintenance processes. resourcing, including accounting some aspects of software Critical security development. Government-related agencies that support mission-critical management of physical assets with important legal provenance or security implications. For example, Police departments in the US are increasingly reliant on specialists to install systems that deliver a legally compliant chain of custody for physical evidence, as well as risk minimising management of firearms or other dangerous goods TZ Limited Annual Report 2022 8 Directors’ report The Directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the ‘consolidated entity’ or ‘TZ’) 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 2022. 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: John D’Angelo Peter Graham › Chairman › Non-Executive Director › Non-Executive Director Simon White (Appointed on 26 August 2021) Scott Beeton › Managing Director (Resigned on 17 September 2021) Principal activities During the financial year the principal continuing activities of the consolidated entity consisted of the development of intelligent devices and smart device systems that enable the commercialisation of hardware and software solutions for the management, control and monitoring of business assets and the provision of associated value added services through Telezygology Inc., TZI Australia Pty Limited (‘TZI’), TZI Singapore Pte Ltd and TZI UK Limited. All of the operations of the consolidated entity are based in Australia, the United States of America, United Kingdom and Singapore. Dividends Review of operations and significant changes in the state of affairs Review of operations The profit for the consolidated entity after providing for income tax amounted to $42,896 (30 June 2021: loss of $1,658,204). The financial highlights were the EBITDA result of $1.2m but even more encouraging the positive cashflow in the 2HFY22. TZ had what we referred to as a “transformative period” in the first half where there were several changes to the company, including new CEO, CFO, CTO and Head of Marketing. Therefore several personal left the company resulting in substantial redundancy payments. The redundancies, the new Sydney office, the expansion in India led to 1HFY22 of an EBITDA loss of $1.13m. The full year result of positive EBITDA of $1.2m illustrates the strong recovery and resulting positive cashflow in the second half. Capital In July 2021 $2m debt was agreed to be converted into equity with First Samuel and this was completed in August 2021 with the issue of 16,666,667 shares at a deemed notional price of 12 cents per share. Simultaneously, a new debenture facility of $2.5m with First Samuel was entered into with a maturity date of 31 July 2022 and carrying a coupon rate of BBSW + 4.5%. The facility was fully drawn and as at balance date 30 June 2022, the debenture is TZ’s only debt. The maturity date has subsequently been rolled to 31 October 2022. The company wants to be secure in “working capital’ before making this last debt repayment. Board and management changes There were no dividends paid, recommended or declared during Simon White joined the board in August 2021. Simon worked the current or previous financial year. in corporate advisory and equity capital markets, with significant exposure to IPO’s, equity placements and corporate restructuring. Simon is Director of Investor Relations with Paradigm Biopharma, an ASX Top 300 company. Simon is integral in improving Corporate Governance at TZ Limited. September 2021 saw Mario Vecchio appointed CEO to replace Scott Beeton. As with Simon White, Mario was a “targeted acquisition”. Vecchio tabled a strategic proposal centred on TZ developing a “cloud based software business”. Vecchio’s career was building software sales which he had demonstratively achieved at previous employments, Progility Technologies, APJC Bigswitch and Aryaka Networks. TZ Limited Annual Report 2022 9 Directors’ report continued Employee Incentive Scheme In March 2022, the Company issued 1,962,500 fully paid ordinary shares (‘Employee Shares’) to its employees pursuant to TZ Limited’s employee Equity Incentive Plan (‘EIP’) which was approved by shareholders during the Company’s 2021 Annual Matters subsequent to the end of the financial year No matter or circumstance has arisen since 30 June 2022 that has significantly affected, or may significantly affect the consolidated entity’s operations, the results of those operations, General Meeting held on 27 January 2022. The Employee Shares or the consolidated entity’s state of affairs in future financial were issued to incentivise talent retention. The Employee Shares years. are subject to a voluntary escrow until 27 January 2025 (the escrow can be waived by the Company in certain circumstances at the Directors discretion under the EIP). Operating risks and outlook Likely developments and expected results of operations Further information on the future strategies is detailed in the Managing Director’s report which precedes the Directors’ report The board and management perceive the main risk to be the and Annual Financial Statements. Environmental regulation The consolidated entity is not subject to any significant environmental regulation under Australian Commonwealth or State law. global economic situation. Supply chain issues are subsiding but the risk to general business conditions from an interest rate tightening cycle are yet to be determined. The company has a solid pipeline for 1H FY23 but like most businesses TZ is uncertain what business conditions will be like in 2H. Significant changes in the state of affairs In July 2021, the Company drew down the full value of a new facility established in June 2021 for $2.5 million and repaid $2.1 million of the previous facility that expired at the end of July 2021. The remaining $2 million of debt under the previous facility was converted into shares following shareholder approval. This resulted in 16,666,667 shares being issued to First Samuel Limited. In November 2021, the Company completed a capital raise through placement of shares. The Company issued 27,570,000 fully paid ordinary shares at the price of $0.125 (12.50 cents) per share. The raised funds were used for repayment of remaining debt and general working capital. In March 2022, the Company issued 1,962,500 fully paid ordinary shares (‘Employee Shares’) to its employees pursuant to TZ Limited’s employee Equity Incentive Plan (‘EIP’) which was approved by shareholders during the Company’s 2021 Annual General Meeting held on 27 January 2022. The Employee Shares were issued to incentivise talent retention. The Employee Shares are subject to a voluntary escrow until 27 January 2025 (the escrow can be waived by the Company in certain circumstances at the Directors discretion under the EIP). There were no other significant changes in the state of affairs of the consolidated entity during the financial year. TZ Limited Annual Report 2022 10 Directors’ report continued Information on the Directors in office as at the date of this report Peter Graham Non-Executive Chairman John D’Angelo Non-Executive Director Simon White Non-Executive Director Peter is an experienced corporate advisor John has vast international experience Post a successful AFL career, Simon with a unique financial background. From in the areas of Marketing, Finance and worked in corporate advisory and equity chartered accounting with Ernst and Engineering. He spent 15 years based capital markets, with initial experience Young early in his career, through Treasury in Singapore in senior management at Patersons Stockbroking before roles with Westpac and UBS, and roles in positions for JP Morgan and Hartree joining Sequoia Financial Group (SEQ) corporate finance and equities particularly Partners (part owned by the investment and then the Delcor Family office. In in the gold and base metal resources firm Oak-tree Capital). Prior to this, this time Simon worked on IPO’s, equity sector, Peter built a successful finance he held management positions at placements, corporate advisory and career before branching into corporate Chase Manhattan Bank and Mitsui restructuring. He has worked on a variety advisory in 1995. Commodities. of deals across many business sectors. As a corporate advisor for over 20 years, John began his career as an Engineer at Recently, Simon has been Director Peter developed an extensive institutional BHP before moving into the Marketing of Investor Relations with Paradigm client base for Tolhurst and Pattersons and Financial Risk Management areas for Biopharma, an ASX Top 300 company. before joining Sequoia in 2015. the company where he spent some time Simon’s skills in corporate governance Today, Peter is the Head of Delcor Corporate Advisory; Delcor Advisory based in the USA. John holds a Bachelor will be most beneficial to the TZ Limited of Engineering (Hons). Board. Investment Group Pty Ltd is a substantial Other current None directorships Other current None directorships shareholder of TZ Limited. Peter brings significant finance and capital market experience to the TZ Board. Other current None directorships Former Chairman of directorships Carpentaria (last 3 years) Resources Ltd (ASX: CAP) None Special responsibilities Interests in shares 14,041,704 fully paid ordinary shares Interests in options None Former None Former None directorships (last 3 years) Special None responsibilities Interests in shares 1,500,950 ordinary shares Interests in options None directorships (last 3 years) Special None responsibilities Interests in shares None 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 Annual Report 2022 11 Directors’ report continued Company Secretary Meetings of Directors Mathew Watkins was appointed Company The number of meetings of the company’s Board of Directors (‘the Board’) and of each Board committee held during the year Secretary on 25 November ended 30 June 2022, and the number of meetings attended by 2021. Mathew is a Chartered each Director were: Accountant who has extensive ASX experience within several industries including biotechnology, bioscience, resources and information technology. Mathew specialises in ASX statutory reporting, ASX compliance, corporate governance and board and secretarial support. He is appointed Company Secretary on a number of ASX listed companies. Mathew is employed at Vistra, a professional company secretarial and accounting firm. Vistra has vast experience working with listed entities and brings a strong background of working with growing companies within the technology hardware and equipment industry. Full Board Attended Held * Peter Graham Chairman John D’Angelo Simon White Scott Beeton 13 13 11 2 * Represents the number of meetings held during the time the Director held office. 13 13 11 3 TZ Limited Annual Report 2022 12 Remuneration report (audited) The remuneration report, which has been Non-Executive Directors’ remuneration audited, outlines the Director and key management personnel remuneration arrangements for the consolidated entity and the company, in accordance with the 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. The Board considers advice from shareholders and takes into account the fees paid to Non-Executive Directors of comparable companies, requirements of the Corporations Act 2001 when undertaking the annual review process. The Non-Executive 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. Directors receive Director’s fees only. The company adheres to the policy that Directors will not participate in any incentive program. 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 The remuneration report is set out under the following main to be approved by shareholders and the manner in which it is headings: › Principles used to determine the nature and amount of remuneration › Details of remuneration Service agreements Share-based compensation Additional information › › › › 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 Additional disclosures relating to key management responsibility, which is both fixed and variable. personnel Principles used to determine the nature and amount of remuneration The objective of the consolidated entity’s and company’s executive reward framework is to ensure reward for The executive remuneration and reward framework has four components: › › › Base pay and non-monetary benefits Short-term performance incentives Share-based payments performance is competitive and appropriate for the results › Other remuneration such as superannuation and long delivered. The framework aligns executive reward with the service leave 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: The combination of these comprises the executive’s total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Board, › › › Set competitive remuneration packages to attract and retain based on individual and business unit performance, the overall high calibre employees performance of the consolidated entity and comparable market Link executive rewards to shareholder value creation remunerations. Establish appropriate demanding performance hurdles for Executives can receive their fixed remuneration in the form of variable executive remuneration The Board reviews and is responsible for the consolidated entity’s remuneration policies, procedures and practices. TZ Limited’s employee Equity Incentive Plan (‘EIP’) was approved by shareholder during the Company’s 2021 Annual General Meeting held on 27 January 2022. The Plan was designed to attract, retain, motivate and reward eligible persons (employees and directors) of the Company (collectively the ‘Participants’) by issuing securities to the Participants. The vesting of those securities may be subject to certain performance criteria to be determined by the Board. 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 can include profit contribution, customer satisfaction, leadership contribution and product management. TZ Limited Annual Report 2022 13 Remuneration report (audited) continued The long-term incentives (‘LTI’) includes long service leave and Details of remuneration share-based payments. As noted above, the EIP Plan has been set up to reward executives based on long term incentive measures in the form of restricted fully paid ordinary shares. These include increase in shareholders’ value relative to the entire market and the increase compared to the consolidated entity’s direct competitors. Amounts of remuneration The key management personnel of the consolidated entity consisted of the Directors of TZ Limited and the following persons: › Mario Vecchio Consolidated entity performance and link to remuneration Chief Executive Officer Remuneration for certain individuals is directly linked to the performance of the consolidated entity. Executives and other employees can be issued with restricted fully paid ordinary Resigned as Non-Executive Director on 6 October 2020 and appointed as Chief Executive Officer on 17 September 2021 shares in the company. The number and the terms of the shares › Simon Van Es issued are determined by the Board after consideration of the Chief Operating Officer of TZ Limited 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’). › John Wilson Vice President APAc and EMEA of TZ Limited › Brian Leary President of Telezygology Inc. Resigned on 10 August 2022 Voting and comments made at the company’s 2021 Annual › Craig Sowden General Meeting (‘AGM’) At the last AGM, 99.81% of the shareholders voted to adopt Chief Financial Officer of TZ Limited Resigned on 25 November 2021 the remuneration report for the year ended 30 June 2021. › Adam Forsyth The company did not receive any specific feedback at the Chief Technology Officer of TZ Limited AGM regarding its remuneration practices. Resigned on 25 February 2022 Peter Graham was re-elected as a Director while Simon White was elected as a Director, both with shareholder support of 99.85% of the votes cast on those resolutions. Shareholders, with 99.32% support, ratified the prior issue of 9,374,138 shares in the Company to sophisticated and prtofessional investors at a price of $0.132 (13.20 cents) per share for the purpose of reducing the debt owed to First Samuel. Shareholders, with 99.08% support, ratified the issue on 12 November 2021 of 27,570,000 fully paid ordinary shares in the Company (Shares) at a price of $0.125 (12.5 cents) per Share in relation to the placement conducted in November 2021 (November Placement) for the purpose of reducing the Company’s debt. Shareholders supported (with 99.52% of the vote) the adoption of a new Employee Incentive Plan (EIP). The approval for replenishing the 10% Placement Facility was also passed with shareholders approving with 99.53% of the vote. Lastly, the Resolution to replace the Company’s Constitution was also well supported with 99.87% voting in favour. The Board acknowledged and thank shareholders for their support in passing all resolutions at the 2021 AGM. TZ Limited Annual Report 2022 14 Remuneration report (audited) continued 2022 Short-term benefits Post- employment benefits Long-term benefits Share-based payments Other** Bonus Super- annuation Employee leave Options Share grants Cash salary and fees $ P Graham 105,000 Non-Executive Directors J D’Angelo S White* 67,500 57,500 Executive Directors S Beeton* 206,297 $ - - - - M Vecchio 235,385 18,106 S Van Es 229,545 6,250 Other Key Management Personnel J Wilson B Leary 248,182 11,748 213,892 23,955 C Sowden* 145,482 A Forsyth* 174,740 - - 1,683,523 60,059 Total $ 105,000 67,500 57,500 222,363 271,167 $ - - - - - - $ - - - - - - - - - $ - - - 16,066 17,676 22,239 22,256 3,809 8,951 - - 24,239 115,236 $ - - - - - - - - - - - 1,686 259,720 5,516 2,529 290,231 - - - 2,529 244,185 - 154,433 2,529 201,508 5,516 9,273 1,873,607 * Represents remuneration from date of appointment and/or to date of resignation ** Represents changes in the accrued amounts of annual leave over the year 2021 Short-term benefits Post- employment benefits Long-term benefits Share-based payments Cash salary and fees Other** Bonus Super- annuation Employee leave Options Share grants Non-Executive Directors P Graham J D’Angelo* M Vecchio* $ 61,250 75,545 23,494 $ - - - Executive Directors S Beeton 226,485 23,497 Other Key Management Personnel S Van Es J Wilson B Leary 198,068 - 296,752 (58,899) 207,497 4,908 C Sowden 221,747 (5,663) A Forsyth 219,311 9,014 1,530,149 (27,143) $ - - - - - - - - $ - - - 20,091 - 25,233 37,315 21,066 - - 26,964 130,669 $ - - - - - - - - - - $ - - - - - 10,599 9,250 9,250 9,250 38,349 * Represents remuneration from date of appointment and/or to date of resignation ** Represents changes in the accrued amounts of annual leave over the year TZ Limited Annual Report 2022 15 $ - - - - - $ - - - - - - - - Total $ 61,250 75,545 23,494 270,073 198,068 273,685 258,970 246,400 - - 264,539 1,672,024 Remuneration report (audited) continued The proportion of remuneration linked to performance and the fixed proportion are as follows: Fixed remuneration At risk - STI At risk - LTI Non-Executive Directors Executive Directors Name P Graham J D’Angelo S White S Beeton M Vecchio S Van Es Other Key Management Personnel B Leary J Wilson C Sowden A Forsyth Service agreements 2022 100% 100% 100% 100% 100% 99% 99% 99% 100% 99% 2021 100% 100% - 100% 100% 100% 96% 96% 96% 97% 2022 2021 2022 2021 - - - - - - - - - - - - - - - - - - - - - - - - - 1% 1% 1% - 1% - - - - - - 4% 4% 4% 3% Remuneration and other terms of employment for key management personnel are formalised in service agreements. Details of these agreements are as follows: Name Title Agreement commenced Term of agreement Details Mario Vecchio Simon Van Es John Wilson Chief Executive Officer Chief Operating Officer Vice President APAC and EMEA Brian Leary President of Telezygology Inc 20 September 2021 No fixed term 1 July 2021 No fixed term 8 September 2020 No fixed term 1 October 2018 renewal terms were Initial term of 2 years, amended subsequently Base salary of $300,000 plus superannuation and notice period of 3 months Remuneration of $250,000 plus superannuation and notice period of 3 months Remuneration of $240,000 including superannuation and notice period of 3 months Base salary of USD$155,000 and notice period of 3 months Key management personnel have no entitlement to termination payments in the event of removal for misconduct. TZ Limited Annual Report 2022 16 Remuneration report (audited) continued Share-based compensation Issue of shares Details of shares issued in accordance with the TZ Equity Incentive Plan to Directors and other key management personnel as part of compensation during the year ended 30 June 2022 are set out below: Name S Van Es J Wilson B Leary A Forsyth Date 11 March 2022 11 March 2022 11 March 2022 11 March 2022 Shares 125,000 187,500 187,500 187,500 Issue price $0.0920 $0.0920 $0.0920 $0.0920 $ 11,500 17,250 17,250 17,250 The shares are subject to escrow for a period of 36 months commencing on the date of the approval for the Employee Incentive Plan, being the 2021 Annual General Meeting of the company, which was held on 27 January 2022. 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: Name J Wilson B Leary C Sowden A Forsyth Number of options granted Grant date Expiry date Exercise price Fair value per option at grant date 165,000 165,000 165,000 144,000 144,000 144,000 144,000 144,000 144,000 144,000 144,000 144,000 6 August 2019 31 August 2024 6 August 2019 31 August 2025 6 August 2019 31 August 2026 6 August 2019 31 August 2024 6 August 2019 31 August 2025 6 August 2019 31 August 2026 6 August 2019 31 August 2024 6 August 2019 31 August 2025 6 August 2019 31 August 2026 6 August 2019 31 August 2024 6 August 2019 31 August 2025 6 August 2019 31 August 2026 $0.25 $0.40 $0.45 $0.25 $0.40 $0.45 $0.25 $0.40 $0.25 $0.25 $0.40 $0.25 $0.0605 $0.0579 $0.0654 $0.0605 $0.0579 $0.0654 $0.0605 $0.0579 $0.0654 $0.0605 $0.0579 $0.0654 Additional information The earnings of the consolidated entity for the five years to 30 June 2022 are summarised below: Sales revenue Adjusted EBITDA * 2022 $ 2021 $ 2020 $ 2019 $ 2018 $ 21,428,560 16,378,223 12,852,402 17,430,926 17,388,505 1,278,529 137,364 (3,739,568) (3,480,093) (2,636,165) Profit/(loss) after income tax 42,896 (1,658,204) (5,120,229) (4,359,688) (11,687,882) * Earnings before interest, tax, depreciation, amortisation and other non-operating items The factors that are considered to affect total shareholder remuneration (‘TSR’) are summarised below: Share price at financial year end ($) Basic earnings per share (cents per share) 2022 0.110 0.021 2021 0.110 1.549 2020 0.030 (6.360) 2019 0.090 (6.180) 2018 0.170 (18.450) TZ Limited Annual Report 2022 17 Remuneration report (audited) continued Additional disclosures relating to key management personnel 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: Ordinary shares Balance at the start of the year Additions Disposals Other* P Graham J D’Angelo S White S Van Es M Vecchio J Wilson B Leary S Beeton C Sowden A Forsyth 14,041,704 - - 1,400,000 400,950 (300,000) - - - 8,230 - 709,788 3,500 16,730 - 125,000 - 187,500 187,500 - - 187,500 - - - - - (709,788) (3,500) (15,206) 16,179,952 1,088,450 (1,028,494) - - - - - - - - - (189,024) (189,024) Balance at the end of the year 14,041,704 1,500,950 - 125,000 - 195,730 187,500 - - - 16,050,884 * Other represents no longer being designated as a KMP, not necessarily a disposal of holding. Option 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: Options over ordinary shares Balance at the start of the year Granted Expired Forfeited/other* Balance at the end of the year J Wilson B Leary C Sowden A Forsyth 495,000 432,000 432,000 432,000 1,791,000 - - - - - - - - - - - - (432,000) (432,000) (864,000) 495,000 432,000 - - 927,000 * Forfeited/other may represent no longer being designated as a KMP. It does not necessarily represent options that have been forfeited. No options were exercised during the year ended 30 June 2022. Other transactions with key management personnel and their related parties There were no other transactions with KMP personnel and their related parties during the year ended 30 June 2022. This concludes the remuneration report, which has been audited. TZ Limited Annual Report 2022 18 Directors’ report Shares under option Non-audit services Unissued ordinary shares of TZ Limited under option at the date Details of the amounts paid or payable to the auditor for non- of this report are as follows: Grant date 6 August 2019 6 August 2019 6 August 2019 Expiry date Exercise price Number under option 31 August 2024 31 August 2025 31 August 2026 $0.25 697,000 $0.40 697,000 $0.45 697,000 audit services provided during the financial year by the auditor are outlined in note 28 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 2,091,000 in note 28 to the financial statements do not compromise No 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. 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 objectivity of the auditor Shares issued on the exercise of options › None of the services undermine the general principles There were no ordinary shares of TZ Limited issued on the exercise of options during the year ended 30 June 2022 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 relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor’s own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards Officers of the Company who are former partners of PKF Brisbane Audit There are no officers of the Company who are former partners of PKF Brisbane Audit. Corporations Act 2001. The contract of insurance prohibits Auditor’s independence declaration 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 end of the financial year, indemnified or agreed to indemnify the auditor of the A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this Directors’ Report. This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Corporations Act 2001. company or any related entity against a liability incurred by the On behalf of the Directors 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 Peter Graham Chairman of the Company, or to intervene in any proceedings to which the 31 August 2022, Sydney Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. TZ Limited Annual Report 2022 19 Auditor’s independence declaration TZ Limited Annual Report 2022 20 U ’ C C UNDER SECTION 307C OF THE CORPORATIONS ACT 2001 TO THE DIRECTORS OF TZ LIMITED I declare that, to the best of my knowledge and belief, during the year ended 30 June 2022, there have been no contraventions of: (a) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and (b) any applicable code of professional conduct in relation to the audit. PKF BRISBANE AUDIT SHAUN LINDEMANN PARTNER BRISBANE 31 AUGUST 2022 Financial report For the year ended 30 June 2022 Statement of profit or loss and other comprehensive income Revenue Expenses Revenue Other income Interest income Raw materials and consumables used Employee benefits expense Occupancy expense Depreciation and amortisation expense Communications expense Professional and corporate services Travel and accommodation expense Net foreign currency exchange losses Other expenses Finance costs Profit/(loss) before income tax expense Income tax expense Profit/(loss) after income tax expense for the year attributable to the owners of TZ Limited Other comprehensive income Foreign currency translation Items that may be reclassified subsequently to profit or loss Other comprehensive income for the year, net of tax Note 4 5 6 6 7 Consolidated 2022 $ 2021 $ 21,428,560 16,378,223 1,117,895 1,318,107 128 5,030 (10,228,802) (8,710,112) (8,330,540) (6,789,554) (204,831) (975,644) (102,274) (922,483) (274,761) (28,743) (1,175,492) (235,315) (213,467) (852,463) (15,076) (757,021) (85,637) (41,343) (946,756) (883,004) 67,698 (1,593,073) (24,802) (65,131) 42,896 (1,658,204) 75,139 75,139 15,326 15,326 Total comprehensive income for the year attributable to the owners of TZ Limited 118,035 (1,642,878) Basic earnings per share Diluted earnings per share Note 34 34 2022 Cents 0.021 0.021 2021 Cents (1.549) (1.549) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes TZ Limited Annual Report 2022 21 Financial report continued As at 30 June 2022 Statement of financial position Cash and cash equivalents Trade and other receivables Current assets Contract assets Inventories Other Assets Total current assets Property, plant and equipment Non-current assets Right-of-use assets Intangibles Total assets Current liabilities Total non-current assets Trade and other payables Contract liabilities Borrowings Lease liabilities Provisions Total current liabilities Non-current liabilities Lease liabilities Total non-current liabilities Total liabilities Liabilities Net assets/(liabilities) Issued capital Equity Reserves Accumulated losses Total equity/(deficiency) Note 8 9 10 11 12 13 14 15 16 17 18 19 20 19 22 23 Consolidated 2022 $ 2021 $ 2,051,162 373,926 4,130,232 2,607,518 2,609,521 1,672,307 2,686,840 1,555,395 1,233,935 697,632 12,711,690 6,906,778 219,132 378,325 173,524 591,012 991,716 1,571,725 1,589,173 2,336,261 14,300,863 9,243,039 3,252,005 3,120,538 3,510,546 1,692,768 2,500,000 4,725,884 200,032 609,877 199,045 613,291 10,072,460 10,351,526 206,050 397,290 206,050 397,290 10,278,510 10,748,816 4,022,353 (1,505,777) 227,279,703 221,876,795 (4,211,903) (4,232,391) (219,045,447) (219,150,181) 4,022,353 (1,505,777) The above statement of financial position should be read in conjunction with the accompanying notes TZ Limited Annual Report 2022 22 Financial report continued For the year ended 30 June 2022 Statement of changes in equity Consolidated Issued capital $ Reserves $ Accumulated losses $ Note Total deficiency in equity $ Balance at 1 July 2020 212,426,391 (4,275,193) (217,506,070) (9,354,872) Loss after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year - - - - (1,658,204) (1,658,204) 15,326 - 15,326 15,326 (1,658,204) (1,642,878) Transactions with owners in their capacity as owners: Contributions of equity, net of transaction costs Share-based payments Options cancelled during the period 22 35 9,450,404 - - - 41,569 - - 9,450,404 41,569 (14,093) 14,093 - Balance at 30 June 2021 221,876,795 (4,232,391) (219,150,181) (1,505,777) Consolidated Issued capital $ Reserves $ Accumulated losses $ Note Total deficiency in equity $ Balance at 1 July 2021 221,876,795 (4,232,391) (219,150,181) (1,505,777) Profit after income tax expense for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs Share-based payments Options cancelled during the period - - - 75,139 75,139 - 42,896 42,896 75,139 - 42,896 118,035 - - 5,187,033 223,062 22 35 5,187,033 - 215,875 7,187 - (61,838) 61,838 - Balance at 30 June 2022 227,279,703 (4,211,903) (219,045,447) 4,022,353 The above statement of changes in equity should be read in conjunction with the accompanying notes TZ Limited Annual Report 2022 23 Receipts from customers (inclusive of GST) 21,513,683 14,159,747 Payments to suppliers and employees (inclusive of GST) (23,357,466) (17,168,210) Note 2022 2021 $ $ Financial report continued For the year ended 30 June 2022 Statement of cash flows Consolidated Cash flows from operating activities Interest received Government grants received Interest and other finance costs paid Income taxes paid Net cash used in operating activities Cash flows from investing activities Net cash used in investing activities Payments for security deposits Payments for property, plant and equipment Payments for intangibles Cash flows from financing activities Proceeds from issue of shares Transaction costs on shares issued Proceeds from borrowings Repayment of borrowings Repayment of lease liabilities Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash and cash equivalents 33 13 15 22 128 5,030 476,411 1,391,668 (233,811) (920,531) (24,802) (65,131) (1,625,857) (2,597,427) - (9,158) (127,538) (5,484) (79,857) (404,933) (207,395) (419,575) 3,446,250 9,820,384 (259,217) (626,895) 2,500,000 - (2,000,000) (6,743,085) (191,032) (83,634) 3,496,001 2,366,770 1,662,749 (650,232) 373,926 1,043,158 14,487 (19,000) Cash and cash equivalents at the end of the financial year 8 2,051,162 373,926 The above statement of cash flows should be read in conjunction with the accompanying notes TZ Limited Annual Report 2022 24 Notes to the financial statements Note 1 Significant accounting policies Basis of preparation The principal accounting policies adopted in the preparation of These general purpose financial statements have been prepared the financial statements are set out below. These policies have in accordance with Australian Accounting Standards and been consistently applied to all the years presented, unless Interpretations issued by the Australian Accounting Standards otherwise stated. New or amended Accounting Standards and Interpretations adopted The consolidated entity has adopted all of the Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period. 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. Any new or amended Accounting Standards or Interpretations that are not yet mandatory have not been early adopted. Critical accounting estimates Going concern These financial statements have been prepared on a going concern basis, which assumes continuity of normal business 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 activities and the realisation of assets and settlement of liabilities involving a higher degree of judgement or complexity, or areas in the ordinary course of business. where assumptions and estimates are significant to the financial Although the consolidated entity generated a net profit for the year ended 30 June 2022 and recorded surplus net assets and net current assets, the consolidated entity incurred cash outflows from operating activities of $1,625,857 for the year (30 June 2021: $2,597,427), and has recorded a $2.5m loan payable to First Samuel Limited, with a maturity date of 31 October 2022. 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 assessing the appropriateness of the going concern concept the following factors have been taken into consideration by the in note 31. Directors: Principles of consolidation › The Directors are of the view the consolidated entity is on track to meet revenue targets for the 30 June 2023 financial year. It is expected that, as the monthly revenue levels increase, the consolidated entity’s operating business units will be in a position to contribute positive cash flow to the bottom line › The Directors maintain a positive outlook on achieving The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of TZ Limited (‘Company’ or ‘parent entity’) as at 30 June 2022 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’. profitability in the 30 June 2023 financial year based on the Subsidiaries are all those entities over which the consolidated 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 continuing to meet sales and profitability forecasts, the generation of positive cash flows, the continued support of shareholders and lenders 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. 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. 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. TZ Limited Annual Report 2022 25 Notes to the financial statements continued 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 Revenue recognition The consolidated entity recognises revenue as follows: Revenue from contracts with customers Revenue is recognised at an amount that reflects the consideration to which the consolidated entity is expected to be entitled in exchange for transferring goods or services to a customer. For each contract with a customer, the consolidated entity: identifies the contract with a customer; identifies the performance obligations in the contract; determines the transaction price which takes into account estimates of variable consideration and the time value of money; allocates the transaction price to the separate performance obligations on the basis of the relative stand-alone selling price of each distinct good or service to be delivered; and recognises revenue when or as each performance obligation is satisfied in a manner that depicts the transfer to the customer of the goods or services promised. approach’, where the information presented is on the same Variable consideration within the transaction price, if any, reflects basis as the internal reports provided to the Chief Operating concessions provided to the customer such as discounts, Decision Makers (‘CODM’). The CODM is responsible for the rebates and refunds, any potential bonuses receivable from allocation of resources to operating segments and assessing the customer and any other contingent events. Such estimates their performance. Foreign currency translation are determined using either the ‘expected value’ or ‘most likely amount’ method. The measurement of variable consideration is subject to a constraining principle whereby revenue will only be recognised to the extent that it is highly probable that The financial statements are presented in Australian dollars, a significant reversal in the amount of cumulative revenue which is TZ Limited’s functional and presentation currency. recognised will not occur. The measurement constraint Foreign currency transactions continues until the uncertainty associated with the variable consideration is subsequently resolved. Amounts received that are subject to the constraining principle are recognised as a Foreign currency transactions are translated into the entity’s refund liability. functional currency 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. Sale of software and hardware Sales of software and hardware are recognised at the point of sale, which is where the customer has taken delivery of the goods. Rendering of installation and commissioning services Rendering of installation and commissioning services revenue is recognised at the point in time when software and hardware has been installed. Rendering of maintenance services Revenue from maintenance services is typically paid in advance on an annual, quarterly or monthly basis. Revenue is recognised over the period the customer support/hosting relates to (the coverage period). Fees received in advance of the performance of services are deferred and recognised as contract liabilities. Rendering of professional services Rendering of professional services revenue is recognised when the service to the customer is completed. TZ Limited Annual Report 2022 26 Notes to the financial statements continued Interest revenue Interest revenue is recognised as it 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. Government grants Grants from the government are recognised at their fair value when there is reasonable assurance that the grant will be received and that the consolidated entity will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss as other income over 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. the periods necessary to match them with the costs that they are Reclassification intended to compensate. Income tax 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 The income tax expense or benefit for the period is the tax presentation. 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 a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting nor taxable profits; or › when the taxable temporary difference is associated with interests in subsidiaries, associates or joint ventures, and the timing of the reversal can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. 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. TZ Limited Annual Report 2022 27 Notes to the financial statements continued Trade and other receivables Property, plant and equipment Trade receivables are initially recognised at fair value and Plant and equipment is stated at historical cost less accumulated subsequently measured at amortised cost using the effective depreciation and impairment. Historical cost includes interest method, less any allowance for expected credit losses. expenditure that is directly attributable to the acquisition of the Trade receivables are generally due for settlement within items. 30- 60 days. Depreciation is calculated on a straightline basis to write off the The consolidated entity has applied the simplified approach to net cost of each item of property, plant and equipment over their measuring expected credit losses, which uses a lifetime expected expected useful lives as follows: loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognised at amortised cost, less any allowance for expected credit losses. Leasehold improvements Plant and equipment Office equipment 20 - 33% 20% 15 - 35% Contract assets Contract assets are recognised when the consolidated entity The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date. has transferred goods or services to the customer but where the Leasehold improvements are depreciated over the unexpired consolidated entity is yet to establish an unconditional right to period of the lease or the estimated useful life of the assets, consideration. Contract assets are treated as financial assets for whichever is shorter. impairment purposes. Inventories An item of property, plant and equipment is derecognised upon disposal or when there is no future economic benefit to the consolidated entity. Finished goods are stated at the lower of cost and net realisable value on an average cost basis. Cost comprises of purchase Right-of-use assets and delivery costs, net of rebates and discounts received or receivable. A right-of-use asset is recognised at the commencement date of a lease. The right-of-use asset is measured at cost, which Stock in transit is stated at the lower of cost and net realisable comprises the initial amount of the lease liability, adjusted value. Cost comprises of purchase and delivery costs, net of for, as applicable, any lease payments made at or before the rebates and discounts received or receivable. commencement date net of any lease incentives received, any 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. initial direct costs incurred, and, except where included in the cost of inventories, an estimate of costs expected to be incurred for dismantling and removing the underlying asset, and restoring the site or asset. Right-of-use assets are depreciated on a straightline basis over the unexpired period of the lease or the estimated useful life of the asset, whichever is the shorter. Where the consolidated entity expects to obtain ownership of the leased asset at the end of the lease term, the depreciation is over its estimated useful life. Right-of-use assets are subject to impairment or adjusted for any remeasurement of lease liabilities. The consolidated entity has elected not to recognise a right-of- use asset and corresponding lease liability for short-term leases with terms of 12 months or less and leases of low-value assets. Lease payments on these assets are expensed to profit or loss as incurred. TZ Limited Annual Report 2022 28 Notes to the financial statements continued Intangible assets Trade and other payables Intangible assets acquired as part of a business combination, Trade and other payables represent liabilities for goods and other than goodwill, are initially measured at their fair value at services provided to the consolidated entity prior to the end the date of the acquisition. Intangible assets acquired separately of the financial year and which are unpaid. Due to their short- are initially recognised at cost. Indefinite life intangible assets term nature they are measured at amortised cost and are not are not amortised and are subsequently measured at cost less discounted. The amounts are unsecured and are usually paid any impairment. Finite life intangible assets are subsequently within 30 days of recognition. 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. Patents Expenditure directly attributable to the registration of patents is capitalised at cost and is amortised over the useful life of 15 years. Research and development costs Research costs are expensed as incurred. Development expenditure incurred on an individual project is capitalised if the product or service is technically feasible, adequate resources are available to complete the project, it is probable that future economic benefits will be generated and expenditure attributable to the project can be measured reliably. Expenditure capitalised comprises costs of materials, services, direct labour and an appropriate portion of overheads. Capitalised development expenditure is stated at cost less accumulated amortisation and any impairment losses and are amortised over the period of expected future sales from the related projects which vary from 3 to 5 years. Impairment of non-financial assets Contract liabilities Contract liabilities represent the consolidated entity’s obligation to transfer goods or services to a customer and are recognised when a customer pays consideration, or when the consolidated entity recognises a receivable to reflect its unconditional right to consideration (whichever is earlier) before the consolidated entity has transferred the goods or services to the customer. Borrowings Loans and borrowings are initially recognised at the fair value of the consideration received, net of transaction costs. They are subsequently measured at amortised cost using the effective interest method. Lease liabilities A lease liability is recognised at the commencement date of a lease. The lease liability is initially recognised at the present value of the lease payments to be made over the term of the lease, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the consolidated entity’s incremental borrowing rate. Lease payments comprise of fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, amounts expected to be paid under residual value guarantees, exercise price of a purchase option when the exercise of the option is reasonably certain to occur, and any anticipated termination penalties. Lease liabilities are measured at amortised cost using the effective interest method. The carrying amounts are re- Non-financial assets are reviewed for impairment whenever measured if there is a change in the following: future lease events or changes in circumstances indicate that the carrying payments arising from a change in an index or a rate used; amount may not be recoverable. An impairment loss is residual guarantee; lease term; certainty of a purchase option recognised for the amount by which the asset’s carrying amount and termination penalties. When a lease liability is remeasured, 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. an adjustment is made to the corresponding right-of-use asset, or to profit or loss if the carrying amount of the right-of-use asset is fully written down. TZ Limited Annual Report 2022 29 Notes to the financial statements continued Finance costs Finance costs attributable to qualifying assets are capitalised as part of the asset. All other finance costs are expensed in the period in which they are incurred. 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 are measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. 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 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 had 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. date on high quality corporate bonds with terms to maturity and If equity-settled awards are cancelled, they are treated as if 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 they had 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 are 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, Equity-settled share-based compensation benefits are provided the fair value is based on the price that would be received to sell 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 is 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, expected price volatility of the underlying share, the expected dividend yield, 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 is 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 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. 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. 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. TZ Limited Annual Report 2022 30 Notes to the financial statements continued Business combinations Earnings per share 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 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 acquiree. For each business combination, the non-controlling issued during the financial year. interest in the acquiree is measured at either fair value or at the proportionate share of the acquiree’s identifiable net assets. All Diluted earnings per share 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. 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 additional ordinary shares that would have been outstanding assuming conversion of all dilutive potential ordinary shares. Goods and Services Tax (‘GST’) and other similar taxes Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the tax authority. In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST Contingent consideration classified as equity is not remeasured receivable or payable. The net amount of GST recoverable from, or and its subsequent settlement is accounted for within equity. payable to, the tax authority is included in other receivables or other The difference between the acquisition date fair value of assets payables in the statement of financial position. acquired, liabilities assumed and any non-controlling interest in Cash flows are presented on a gross basis. The GST components the acquiree and the fair value of the consideration transferred of cash flows arising from investing or financing activities which and the fair value of any pre-existing investment in the acquiree are recoverable from, or payable to the tax authority, are is recognised as goodwill. If the consideration transferred and the pre-existing fair value is less than the fair value of the identifiable net assets acquired, being a bargain purchase to the acquirer, the difference is recognised as a gain directly in profit or loss by the acquirer on the acquisition date, but only after a reassessment of the identification and measurement of the net assets acquired, the non-controlling interest in the acquiree, if any, the consideration transferred and the acquirer’s previously held equity interest in the acquirer. Business combinations are initially accounted for on a provisional basis. The acquirer retrospectively adjusts the provisional amounts recognised and also recognises additional assets or liabilities during the measurement period, based on new information obtained about the facts and circumstances that existed at the acquisition date. The measurement period ends on either the earlier of (i) 12 months from the date of the acquisition or (ii) when the acquirer receives all the information possible to determine fair value. presented as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the tax authority. New Accounting Standards and Interpretations not yet mandatory or early adopted Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet mandatory, have not been early adopted by the consolidated entity for the annual reporting period ended 30 June 2022. The consolidated entity has not yet assessed the impact of these new or amended Accounting Standards and Interpretations. TZ Limited Annual Report 2022 31 Notes to the financial statements continued Note 2 Critical accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, 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 Allowance for expected credit losses The allowance for expected credit losses assessment requires a degree of estimation and judgement. It is based on the lifetime expected credit loss, grouped based on days overdue, and makes assumptions to allocate an overall expected credit loss rate for each group. These assumptions include recent sales experience, historical collection rates, the impact of the Coronavirus (COVID-19) pandemic and forward-looking information that is available. The allowance for expected credit losses, as disclosed in note 9, is calculated based on the information available at the time of preparation. The actual credit losses in future years may be higher or lower. assumptions that have a significant risk of causing a material Capitalised development costs adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below. Coronavirus (COVID-19) pandemic Judgement has been exercised in considering the impacts that the Coronavirus (COVID-19) pandemic has had, or may have, Distinguishing the research and development phases of a new project and determining whether the recognition requirements for the capitalisation of development costs are met requires judgement. After capitalisation, management monitors whether the recognition requirements continue to be met and whether there are any indicators that capitalised costs may be impaired. on the consolidated entity based on known information. This Impairment of non-financial assets other than goodwill and consideration extends to the nature of the products and services other indefinite life intangible assets offered, customers, supply chain, staffing and geographic regions in which the consolidated entity operates. Other than as addressed in specific notes, there does not currently appear to be either any significant impact upon the financial statements or any significant uncertainties with respect to events or conditions which may impact the consolidated entity unfavourably as at the reporting date or subsequently as a result of the Coronavirus (COVID-19) pandemic. 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 assessing the value of the asset at fair value less costs of disposal and using value-in-use models which incorporate a number of key estimates and assumptions. Revenue from contracts with customers Determining when to recognise revenues from maintenance Income tax services recognised over time is dependent on the extent to which the performance obligations have been satisfied. For maintenance service agreements, revenue recognition requires an understanding of the customer’s use of the related products, historical experience and knowledge of the market. Recognised amounts of contract revenues and related receivables reflect management’s best estimate of each The consolidated entity is subject to income taxes in the jurisdictions in which it operates. Significant judgement and estimates are required in recognising and measuring current and deferred tax amounts. For any uncertain tax treatment adopted relating to transactions or events, the consolidated entity recognises and measures tax related amounts having regard to both the probability that such amounts may be contract’s outcome and stage of completion. This includes the challenged by a tax authority and the expected resolution of assessment of the profitability of ongoing contracts and the such uncertainties. In such circumstances, tax balances are order backlog. For more complex contracts in particular, costs determined based on either most likely amount or expected to complete and contract profitability are subject to significant value probability based outcomes. Where final tax outcomes estimation uncertainty. vary from what is estimated, such differences will impact the current and deferred tax provisions recognised in the financial statements. TZ Limited Annual Report 2022 32 Notes to the financial statements continued Recovery of deferred tax assets Note 3 Operating segments 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. Lease term The lease term is a significant component in the measurement of both the right-of-use asset and lease liability. Judgement is exercised in determining whether there is reasonable certainty that an option to extend the lease or purchase the underlying asset will be exercised, or an option to terminate the lease will not be exercised, when ascertaining the periods to be included in the lease term. In determining the lease term, all facts and circumstances that create an economical incentive to exercise an extension option, or not to exercise a termination option, are considered at the lease commencement date. Factors considered may include the importance of the asset to the consolidated entity’s operations; comparison of terms and conditions to prevailing market rates; incurrence of significant penalties; existence of significant leasehold improvements; and the costs and disruption to replace the asset. The consolidated entity reassesses whether it is reasonably certain to exercise an extension option, or not exercise a termination option, if there is Identification of reportable operating segments The consolidated entity operates in four operating segments being Australia, United States of America (‘USA’), Europe (including the United Kingdom) Middle East and Africa (‘EMEA’) and Asia. The principal activities of each operating segment are identical, being the sale of hardware and software products. These segments are 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. Other segments represent the activities of the corporate headquarters. 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 specific items (‘Adjusted EBITDA’). For information about revenue from products and services, refer to note 4. Intersegment transactions a significant event or significant change in circumstances. Transactions between segments are carried out at arm’s length and are eliminated on consolidation. Incremental borrowing rate Where the interest rate implicit in a lease cannot be readily determined, an incremental borrowing rate is estimated to Intersegment receivables, payables and loans Intersegment receivables, payables and loans are eliminated on discount future lease payments to measure the present value consolidation. of the lease liability at the lease commencement date. Such a rate is based on what the consolidated entity estimates it would have to pay a third party to borrow the funds necessary to obtain an asset of a similar value to the right-of-use asset, with similar terms, security and economic environment. Major customers During the year ended 30 June 2022, 2 customers (2021: 2 customers) each contributed more than 10% to the external revenue of the consolidated entity. These 2 customers contributed 23% (2021: 2 customers contributed 31%) of the consolidated entity’s external revenue. TZ Limited Annual Report 2022 33 Notes to the financial statements continued Operating segment information Consolidated - 2022 Australia $ USA $ EMEA $ Asia $ Sales to external customers 6,180,310 13,660,466 688,069 899,715 Intersegment sales 661,657 968 - 3,222 Total sales revenue 6,841,967 13,661,434 688,069 902,937 Revenue Interest 128 - - - Total segment revenue 6,842,095 13,661,434 688,069 902,937 Intersegment eliminations Total revenue Other segments $ - - - - - Total $ 21,428,560 665,847 22,094,407 128 22,094,535 (665,847) 21,428,688 Adjusted EBITDA 1,265,890 2,237,984 (134,186) 381,421 (2,472,580) 1,278,529 Depreciation and amortisation Interest revenue Finance costs Profit before income tax expense Income tax expense Profit after income tax expense (975,644) 128 (235,315) 67,698 (24,802) 42,896 Consolidated - 2021 Australia $ USA $ EMEA $ Asia $ Sales to external customers 1,624,423 10,285,266 3,725,828 742,706 Other segments $ - Total $ 16,378,223 Revenue Interest Total revenue - - - - 5,030 5,030 1,624,423 10,285,266 3,725,828 742,706 5,030 16,383,253 Adjusted EBITDA 119,151 526,850 1,209,709 341,394 (2,059,740) 137,364 Depreciation and amortisation Interest revenue Finance costs Loss before income tax expense Income tax expense Loss after income tax expense (852,463) 5,030 (883,004) (1,593,073) (65,131) (1,658, 204) All assets and liabilities, including taxes are not allocated to the operating segments as they are managed on an overall group basis. Geographical information Geographical non-current assets Australia United States of America EMEA Asia (Singapore) 2022 $ 2021 $ 1,333,307 2,125,005 251,899 205,204 3,011 956 4,626 1,426 1,589,173 2,336,261 TZ Limited Annual Report 2022 34 Notes to the financial statements continued Note 4 Revenue Consolidated Note 5 Other Income 2022 $ 2021 $ Consolidated Sale and service revenue 21,428,560 16,378,223 Forgiveness of loan Disaggregation of revenue The disaggregation of revenue from contracts with customers is as follows: Consolidated 2022 $ 2021 $ Government grant Major product and service lines Sale of hardware and software 17,555,924 12,909,081 Installation and commissioning services 1,417,886 819,137 Other Research and development incentive JobSaver JobKeeper Cash Boost Export market development Other 2022 $ 641,484 2021 $ - 245,822 1,004,020 217,668 - 192,112 50,000 61,841 12,921 - 8,695 1,439 Maintenance and support services 2,441,734 2,279,654 Professional services 13,016 370,351 Other income 1,117,895 1,318,107 21,428,560 16,378,223 Forgiveness of loan Timing of revenue recognition Goods and services transferred at a point in time 18,986,826 14,098,569 Business Administration Paycheck Protection Programme (‘PPP’) In May 2020, the Company’s USA subsidiary, Telezygology Inc., secured a PPP loan of US$464,862 under the US Small Services transferred over time 2,441,734 2,279,654 established by the Coronavirus Aid, Relief and Economic Security (‘CARES’) Act. The loan term had a two years term and carried an 21,428,560 16,378,223 interest rate of 1% per annum. During the year ended 30 June 2022, the loan was forgiven in full. Refer to note 3 for details of revenue disaggregated by geographical regions. Government grant – Research and Development Incentive Government grant – Research and Development Incentive represents reimbursements received from the Australian Government for eligible research and development expenditure incurred by the consolidated entity. Government grant – JobSaver Government grant – JobSaver represents JobSaver support payments received from the New South Wales Government during the Coronavirus (‘COVID-19’) pandemic to assist eligible businesses cover their payroll costs. These have been recognised as government grants in the financial statements and recorded as other income over the periods in which the related employee benefits are recognised as an expense. TZ Limited Annual Report 2022 35 Notes to the financial statements continued Government grant – JobKeeper Note 7 Income tax expense Government grant – JobKeeper represents JobKeeper support payments received from the Australian Government which are passed on to eligible employees during the Coronavirus (‘COVID-19’) pandemic. These have been recognised as government grants in the financial statements and recorded as other income over the periods in which the related employee benefits are recognised as an expense. Government grant – Cash Boost Government grant – Cash Boost represents cash boost support payments received from the Australian Government as part of its ‘Boosting Cash Flow for Employers’ scheme in response to the Coronavirus (‘COVID-19’) pandemic. These non-tax amounts have been recognised as government grants and recognised as income once there is reasonable assurance that the consolidated entity will comply with any conditions attached. Note 6 Expenses Consolidated Profit/(loss) before income tax includes the following specific expenses: 2022 $ 2021 $ Leasehold improvements - 109 Consolidated Income tax expense 2022 $ 2021 $ Current tax 24,802 65,131 Aggregate income tax expense 24,802 65,131 Numerical reconciliation of income tax expense and tax at the statutory rate Profit/(loss) before income tax expense 67,698 (1,593,073) Tax at the statutory tax rate of 25% (2021: 26%) Current year tax losses not recognised Difference in overseas tax rates/ refunds 16,925 (414,199) - 495,730 7,877 (16,400) Income tax expense 24,802 65,131 The consolidated entity is in the process of determining its tax loss position to carry forward. Change in corporate tax rate The corporate tax rate applicable to base rate entities reduced from 26% to 25% for the 2021-22 income year. The consolidated entity qualifies as a base rate entity as it has a turnover of less Plant and equipment 74,200 81,449 than $50 million and less than 80% of its assessable income is Depreciation Office equipment 11,699 21,610 Right-of-use assets 212,959 85,659 derived from base rate entity passive income. The consolidated entity has remeasured its deferred tax balances, and any unrecognised potential tax benefits arising from carried forward Total depreciation 298,858 188,827 tax losses, based on the effective tax rate that is expected to Patents - 8,078 Amortisation Development costs 676,786 655,558 apply in the year the temporary differences are expected to reverse or benefits from tax losses realised. The impact of the change in tax rate on deferred tax balances has been recognised Total amortisation 676,786 663,636 as tax expense in profit or loss or as an adjustment to equity to Total depreciation and amortisation 975,644 852,463 the extent to which the deferred tax relates to items previously recognised outside profit or loss. Finance costs Interest and finance charges paid/payable on borrowings Interest and finance charges paid/payable on lease liabilities Leases Short-term lease payments Defined contribution superannuation expense 201,472 872,970 33,843 10,034 Note 8 Current assets – cash and cash equivalents 203,427 203,756 Consolidated 342,059 347,386 Cash and cash equivalents 2,051,162 373,926 2022 $ 2021 $ Finance costs expensed 235,315 883,004 Share-based payments Options 7,187 41,569 Share grants 20,148 - 27,335 41,569 TZ Limited Annual Report 2022 36 Notes to the financial statements continued Note 9 Current assets – trade and other receivables Consolidated Trade receivables 2022 2021 $ $ 4,130,232 2,555,515 Goods and services tax receivable - 52,003 4,130,232 2,607,518 Allowance for expected credit losses The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Expected credit loss rate 2022 % 2021 % Consolidated Not overdue 0 to 3 months overdue 3 to 6 months overdue Over 6 months overdue - - - - - - - - Carrying amount 2022 $ 2021 $ 2,542,333 1,293,396 1,227,797 907,570 334,439 179,573 25,663 174,976 4,130,232 2,555,515 Allowance for expected credit losses 2022 2021 $ - - - - - $ - - - - - Note 10 Current assets – contract assets Note 11 Current assets – inventories 2022 2021 $ $ Consolidated 2022 2021 $ $ 2,609,521 1,672,307 Finished goods - at cost 2,979,362 1,709,385 Consolidated Contract assets Reconciliation Reconciliation of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Opening balance Additions 2022 2021 $ $ 1,672,307 325,042 11,540,623 1,672,307 Transfer to trade receivables (10,603,409) (325,042) Closing balance 2,609,521 1,672,307 Less: Provision for impairment (292,522) (282,259) Stock in transit - at cost 128,269 2,686,840 1,427,126 2,686,840 1,555,395 Note 12 Current assets – other Consolidated 2022 2021 $ $ Prepayments and deferred expenses 1,079,140 546,834 Security deposits 154,795 150,798 Allowance for expected credit losses 1,233,935 697,632 The allowance for expected credit losses on contract assets for the year ended 30 June 2022 is $nil (2021: $nil). TZ Limited Annual Report 2022 37 Notes to the financial statements continued Note 13 Non-current assets – property, plant and equipment Consolidated 2022 2021 $ $ Leasehold improvements - at cost 418,955 418,955 Less: Accumulated depreciation (418,955) (418,955) - - Plant and equipment - at cost 2,115,249 2,114,214 Less: Accumulated depreciation (2,040,409) (1,966,209) 74,840 148,005 Office equipment - at cost 941,505 811,033 Less: Accumulated depreciation (797,213) (785,514) 144,292 25,519 219,132 173,524 Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Additions Transfers in/(out) Exchange differences Depreciation expense Balance at 30 June 2021 Additions Exchange differences Depreciation expense Balance at 30 June 2022 Leasehold improvements Plant and equipment Office equipment $ 109 - - - (109) - - - - - $ 202,525 - 26,995 (66) (81,449) 148,005 1,035 - (74,200) 74,840 $ 73,317 5,484 (26,995) (4,677) (21,610) 25,519 126,503 3,969 (11,699) 144,292 Total $ 275,951 5,484 - (4,743) (103,168) 173,524 127,538 3,969 (85,899) 219,132 TZ Limited Annual Report 2022 38 Notes to the financial statements continued Note 14 Non-current assets – right-of-use Note 15 Non-current assets – intangibles assets Consolidated 2022 $ 2021 $ Land and buildings - right-of-use 614,921 703,493 Less: Accumulated depreciation (236,596) (112,481) 378,325 591,012 The consolidated entity leases various premises under non- cancellable operating leases expiring between 1 and 5 years, in some cases, with options to extend. All leases have annual CPI escalation clauses. The above commitments do not include commitments for any renewal options on leases. Lease Consolidated 2022 $ 2021 $ Re-acquired right (Intevia Licence) - at cost 10,138,090 10,138,090 Less: Accumulated amortisation (8,035,887) (8,035,887) Less: Impairment (2,102,203) (2,102,203) - - Patents - at cost 2,748,670 2,720,617 Less: Accumulated amortisation (765,810) (765,810) Less: Impairment (1,786,542) (1,786,542) 196,318 168,265 conditions do not impose any restrictions on the ability of TZ Development costs - at cost 10,892,660 10,823,936 Limited and its subsidiaries from borrowing further funds or paying dividends. Reconciliations Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Less: Accumulated amortisation (5,596,262) (4,919,476) Less: Impairment (4,501,000) (4,501,000) 795,398 1,403,460 991,716 1,571,725 Right-of-use assets Reconciliations Consolidated Balance at 1 July 2020 Additions Depreciation expense Balance at 30 June 2021 Exchange differences Depreciation expense Balance at 30 June 2022 $ 62,350 614,321 (85,659) 591,012 272 (212,959) 378,325 Reconciliations of the written down values at the beginning and end of the current and previous financial year are set out below: Consolidated Balance at 1 July 2020 Additions Exchange differences Amortisation expense Balance at 30 June 2021 Additions Exchange differences Amortisation expense Balance at 30 June 2022 Development costs Patents $ $ Total $ 164,891 1,680,689 1,845,580 26,604 378,329 404,933 (15,152) - (15,152) (8,078) (655,558) (663,636) 168,265 1,403,460 1,571,725 11,133 68,724 79,857 16,920 - 16,920 - (676,786) (676,786) 196,318 795,398 991,716 TZ Limited Annual Report 2022 39 Notes to the financial statements continued Impairment testing At 30 June 2022, the cash generating units (‘CGU’) to which intangible assets belong was tested for impairment. For the purpose of impairment testing, the Package Asset Delivery (‘PAD’) CGU is determined to be the sole CGU that benefits from the core patented technology and product development costs. The net carrying value of the CGU is as follows: Consolidated 2022 $ 2021 $ Package Asset Delivery - PAD 991,716 1,571,725 Impairment test performed The recoverable value of the CGU was assessed on a fair value basis (less likely costs of disposal). The fair value was determined by management, through the assistance of a third party valuations specialist. The fair value hierarchy within which the fair value measurement of the asset is categorised in its entirety is Level 3. The valuation techniques used to measure the fair value less likely costs of disposal were the Relief from Royalty Method and Multi Period Excess Earnings Method. Management used the following key estimates and assumptions in the valuation calculation: Note 16 Current liabilities – trade and other payables Consolidated Trade payables 2022 $ 2021 $ 1,840,073 2,159,131 Employee expense payables 322,942 118,966 Goods and services tax payable 289,616 - Other payables 799,374 842,441 3,252,005 3,120,538 Refer to note 25 for further information on financial instruments. Note 17 Current liabilities – contract liabilities Consolidated 2022 $ 2021 $ Contract liabilities 3,510,546 1,692,768 Reconciliation Reconciliation of the carrying values at the beginning and end of the current and previous financial year are set out below: Key items Growth rate Discount rate Royalty rate 2022 1.50% 2021 2.25% 2022 $ 2021 $ 10.60% 11.50% Opening balance 1,692,768 2,293,752 5.00% 5.00% Amounts invoiced in advance 16,443,141 760,217 Customer attrition rate 10.00% 10.00% EBITDA margin 50.00% 50.00% Impairment test results Based on the testing performed, the recoverable amount of the CGU exceeded the carrying value and no impairment existed at 30 June 2022 (30 June 2021: no impairment). Impairment test sensitivity A reasonable possible change in the key assumptions used to determine the recoverable amount of the CGU would not cause the remaining carrying value of the CGU to exceed its recoverable amount. Transfer to revenue - included in the opening balance Transfer to revenue - performance obligations satisfied in the current period Transfer to revenue - other balances (1,692,768) (1,361,201) (13,085,474) 152,879 - - Closing balance 3,510,546 1,692,768 Unsatisfied performance obligations The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $3,510,546 as at 30 June 2022 ($1,692,768 as at 30 June 2021) and is expected to be recognised as revenue in future periods as follows: Consolidated Within 6 months 2022 $ 2021 $ 3,245,546 1,641,848 Greater than 6 months 265,000 50,920 3,510,546 1,692,768 TZ Limited Annual Report 2022 40 Notes to the financial statements continued Note 18 Current liabilities – borrowings Total secured liabilities Consolidated 2022 $ 2021 $ The total secured current liabilities are as follows: 2022 $ 2021 $ Loan - First Samuel 2,500,000 4,000,000 Consolidated Loan - First Samuel - capitalised interest Loan - PPP - - 111,044 614,840 2,500,000 4,725,884 Loan - First Samuel 2,500,000 4,000,000 Loan - First Samuel - capitalised interest - 111,044 2,500,000 4,111,044 Refer to note 25 for further information on financial instruments. Loan – First Samuel On 1 July 2021, the consolidated entity drew down the full debenture facility of $2,500,000 that was established with First Samuel on 30 June 2021, and which matures on 31 October 2022. This facility carries a coupon rate of BBSW + 4.5% per annum and a facility fee of 1% per annum payable in advance. The drawn funds were used to repay $2,111,044 of debt due under the previous facility which existed at 30 June 2021 and matured on 31 July 2021 as well as the facility fee of the new debenture facility. Of the total facility drawn down at 30 June 2021: › › $2,111,044 was repaid on the 1 July 2021, from funds drawn from the new loan facility $2,000,000 was converted into ordinary shares of the Company at a price of $0.12 per share on 16 August 2021 (refer to note 22) Loan – PPP In May 2020, the Company’s USA subsidiary, Telezygology Inc., secured a PPP loan of US$464,862 under the US Small Business Administration Paycheck Protection Programme (‘PPP’) established by the Coronavirus Aid, Relief and Economic Security (‘CARES’) Act. The loan term is two years and carries an interest rate of 1% per annum. This PPP loan was treated as forgiven by the US Small Business Administration and recorded as “paid in full” in May 2022. Assets pledged as security The facilities are secured by first ranking security interest over the assets of the consolidated entity. Financing arrangements Unrestricted access was available at the reporting date to the following lines of credit: Consolidated Loan - First Samuel (expired facility) Loan - First Samuel (current facility) 2022 $ - 2021 $ 4,000,000 2,500,000 2,500,000 Loan - PPP - 614,840 Loan - First Samuel (expired facility) Loan - First Samuel (current facility) 2,500,000 7,114,840 - 4,000,000 2,500,000 - Loan - PPP - 614,840 2,500,000 4,614,840 Total facilities Used at the reporting date Loan - First Samuel (expired facility) Loan - First Samuel (current facility) Loan - PPP Unused at the reporting date - - - - - 2,500,000 - 2,500,000 TZ Limited Annual Report 2022 41 Notes to the financial statements continued Note 19 Current liabilities – lease Note 21 Non-current liabilities – lease liabilities liabilities Consolidated Lease liability 2022 $ 2021 $ Consolidated 2022 $ 2021 $ 200,032 199,045 Lease liability 206,050 397,290 Refer to note 21 for further information. Refer note 25 for details of the undiscounted future lease Note 20 Current liabilities – provisions Consolidated 2022 $ 2021 $ Employee benefits 609,877 613,291 commitments. Reconciliations Reconciliations of the lease liability (current and non-current) at the beginning and end of the current financial year are set out below: Consolidated Opening balance Additions 2022 $ 2021 $ 596,335 65,648 - 614,321 Accretion of interest 33,834 10,034 Payments - principal (191,032) (83,634) Payments - interest (33,834) (10,034) Exchange differences 779 - Closing balance 406,082 596,335 TZ Limited Annual Report 2022 42 Notes to the financial statements continued Note 22 Equity – issued capital Consolidated Ordinary shares - fully paid Movements in ordinary share capital Details Balance Issue of shares Issue of shares Issue of shares Issue of shares Less: share issue costs Balance Issue of shares Issue of shares Less: share issue costs Balance 2022 Shares 2021 Shares 2022 $ 2021 $ 22,708,114 176,508,947 227,279,703 221,876,795 Date Shares Issue price $ 1 July 2020 91,725,605 212,426,391 26 November 2020 2,446,807 7 January 2021 2,000,000 29 April 2021 21,500,000 11 June 2021 58,836,535 - $0.1050 $0.0900 $0.1200 $0.1200 256,915 180,000 2,580,000 7,060,384 (626,895) 30 June 2021 176,508,947 221,876,795 16 August 2021 16,666,667 12 November 2021 27,570,000 $0.1200 $0.1250 $0.1100 2,000,000 3,446,250 215,875 (259,217) - 30 June 2022 222,708,114 227,279,703 Issue of shares – equity incentive plan 11 March 2022 1,962,500 Ordinary shares Capital risk management Ordinary shares entitle the holder to participate in any dividends The consolidated entity’s objectives when managing capital are declared and any proceeds attributable to shareholders should to safeguard its ability to continue as a going concern, so that the company be wound up, in proportions that consider both the it can provide returns for shareholders and benefits for other number of shares held and the extent to which those shares are stakeholders and to maintain an optimal capital structure to paid up. The fully paid ordinary shares have no par value and the reduce the cost of capital. company does not have a limited amount of authorised capital. In order to maintain or adjust the capital structure, the On a show of hands every member present at a meeting in consolidated entity may adjust the amount of dividends paid to person or by proxy shall have one vote and upon a poll each shareholders, return capital to shareholders, issue new shares share shall have one vote. or sell assets to reduce debt. Share buy-back The consolidated entity would look to raise capital when an opportunity to invest in a business or company or invest in There is no current on-market share buy-back. growth was seen as value adding. Unquoted options At 30 June 2022, there were 2,091,000 (2021: 2,091,000) options on issue associated with share-based payment arrangements (see note 35). Each option entitles the holder to subscribe for one fully paid share in the company upon exercise at any time from the date the vesting conditions have been satisfied until expiry of the options. The capital risk management policy remains unchanged from the 30 June 2021 Annual Report. Capital is regarded as total equity, as recognised in the statement of financial position, plus net debt. Net debt is calculated as total borrowings less cash and cash equivalents. TZ Limited Annual Report 2022 43 Notes to the financial statements continued Note 23 Equity – reserves Note 25 Financial instruments Consolidated 2022 $ 2021 $ Financial risk management objectives Foreign currency reserve (4,246,674) (4,321,813) Share-based payments reserve 34,771 89,422 (4,211,903) (4,232,391) Foreign currency reserve 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 The reserve is used to recognise exchange differences arising of the consolidated entity. The consolidated entity uses different from the translation of the financial statements of foreign operations to Australian dollars. It is also used to recognise methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest gains and losses on hedges of the net investments in foreign rate and foreign exchange risks and ageing analysis for credit operations. risk. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and Directors as part of their remuneration, and other parties as part of their compensation for services. Movements in reserves Movements in each class of reserve during the current and previous financial year are set out below: 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 Foreign currency Share-based payments Consolidated $ $ Total $ The consolidated entity undertakes certain transactions denominated in foreign currency and is exposed to foreign currency risk through foreign exchange rate fluctuations. Balance at 1 July 2020 (4,337,139) 61,946 (4,275,193) Foreign currency translation Share-based payments Cancelled options transferred to accumulated losses Balance at 30 June 2021 Foreign currency translation Share-based payments Cancelled options transferred to accumulated losses Balance at 30 June 2022 15,326 - 15,326 - - 41,569 41,569 (14,093) (14,093) (4,321,813) 89,422 (4,232,391) 75,139 - 75,139 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 foreign currency 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 - - 7,187 7,187 and foreign currency option contracts if appropriate. (61,838) (61,838) assess currency risk at year end. The value of transactions Creditors and debtors as at 30 June 2022 were reviewed to denominated in a currency other than the functional currency of (4,246,674) 34,771 (4,211,903) the respective subsidiary was insignificant and therefore the risk was determined as immaterial. Price risk Note 24 Equity – dividends The consolidated entity is not exposed to any significant price There were no dividends paid, recommended or declared during risk. the current or previous financial year. TZ Limited Annual Report 2022 44 Notes to the financial statements continued Interest rate risk The consolidated entity’s main interest rate risk arises from long- term borrowings. Borrowings issued at variable rates expose the consolidated entity to interest rate risk. Borrowings issued at fixed rates expose the consolidated entity to fair value interest rate risk. The consolidated entity invests surplus cash in term deposits with fixed returns. The Board makes investment decisions after considering advice received from professional advisors. The consolidated entity monitors its interest rate exposure continuously. As at the reporting date, the consolidated entity had the following variable rate exposures: Consolidated Cash and cash equivalents Loan – First Samuel 2022 2021 Weighted average interest rate % - Balance $ 2,051,162 Weighted average interest rate % 0.10 5.38% (2,500,000) 7.48% Net exposure to cash flow interest rate risk (448,838) Balance $ 373,926 (4,111,044) (3,737,118) An analysis by remaining contractual maturities is shown in ‘liquidity and interest rate risk management’ below. The consolidated entity has a net cash deficit totalling $448,838 (2021: net cash deficit $3,737,118). An official increase/decrease in interest rates of 100 basis point (2021: 100 basis point) percentage point would have an adverse/favourable effect on profit before tax of $4,488 (2021: adverse/favourable $37,371) per annum. The percentage change is based on the expected volatility of interest rates using market data and analysts’ forecasts. Credit risk The consolidated entity has adopted a lifetime expected loss allowance in estimating expected credit losses to trade receivables through the use of a provisions matrix using fixed rates of credit loss provisioning. These provisions are considered representative across all customers of the consolidated entity based on recent sales experience, historical collection rates and forward-looking information that is available. The consolidated entity has a concentration of credit risk exposure with 1 customer (2021: 1 customers), which as at 30 June 2022 owed the consolidated entity $594,880 (2021: $278,096) representing 14% (2021: 11%) of trade receivables. Of this balance, $nil (2021: $210,678) was outside the customer’s respective terms of trade, as a result management is confident Credit risk refers to the risk that a counterparty will default of collection and no impairment was made as at 30 June on its contractual obligations resulting in financial loss to 2022. There are no guarantees against these receivables but the consolidated entity. The consolidated entity has a strict management closely monitors the receivable balance on a code of credit, including obtaining agency credit information, monthly basis and is in regular contact with this customer to confirming references and setting appropriate credit limits. mitigate risk. 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. There is a concentration of credit risk for cash at bank and cash on deposit as most monies in Australia are held with one financial institution, St George Bank. Generally, trade receivables are written off when there is no reasonable expectation of recovery. Indicators of this include the failure of a debtor to engage in a repayment plan, no active enforcement activity and a failure to make contractual payments for a period greater than one year. TZ Limited Annual Report 2022 45 Notes to the financial statements continued 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. Financing arrangements Unused borrowing facilities at the reporting date: Consolidated Loan – First Samuel (current facility) Remaining contractual maturities 2022 $ - 2021 $ 2,500,000 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. 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years Consolidated - 2022 Non-derivatives Non-interest bearing Weighted average interest rate % Trade payables Other payables GST payable - - - $ 1,840,073 1,122,316 289,616 Interest-bearing – variable Loan – First Samuel 5.38 2,500,000 $ - - - - Interest-bearing – fixed rate Lease liability 6.87 200,032 206,050 Total non-derivatives 5,952,037 206,050 $ - - - - - - $ - - - - - - Consolidated - 2021 Non-derivatives Non-interest bearing Trade payables Other payables Interest-bearing – variable Loan – First Samuel Interest-bearing – fixed rate Total non-derivatives Loan – PPP Lease liability Weighted average interest rate % - - 7.48 1.00 7.57 1 year or less Between 1 and 2 years Between 2 and 5 years Over 5 years $ 2,159,131 961,407 4,111,044 614,840 $ - - - - $ - - - - 199,045 218,238 179,052 8,045,467 218,238 179,052 $ - - - - - - The cash flows in the maturity analysis above are not expected to occur significantly earlier than contractually disclosed above. TZ Limited Annual Report 2022 46 Remaining contractual maturities $ 1,840,073 1,122,316 289,616 2,500,000 406,082 6,158,087 Remaining contractual maturities $ 2,159,131 961,407 4,111,044 614,840 596,335 8,442,757 Notes to the financial statements continued Note 26 Fair value measurement Note 29 Contingent liabilities Unless otherwise stated, the carrying amounts of financial The consolidated entity does not have any contingent liabilities at instruments reflect their fair value. The carrying amounts of trade 30 June 2022 and 30 June 2021. receivables and trade payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities is estimated by discounting the remaining contractual maturities at the current market interest rate that is available for similar financial instruments. Note 30 Related party transactions Parent entity TZ Limited is the parent entity. Note 27 Key management personnel disclosures Subsidiaries Compensation The aggregate compensation made to Directors and other members of key management personnel of the consolidated entity is set out below: Interests in subsidiaries are set out in note 32. Key management personnel Disclosures relating to key management personnel are set out in note 27 and the remuneration report included in the Directors’ Consolidated 2022 $ 2021 $ Report. Short-term employee benefits 1,743,582 1,503,006 Transactions with related parties Post-employment benefits 115,236 130,669 The following transactions occurred with related parties: Share-based payments 14,789 38,349 1,873,607 1,672,024 Consolidated Payment for other expenses: Interest paid/(payable) to First Samuel Limited - an entity with significant influence 2022 $ 2021 $ 134,449 848,795 Note 28 Remuneration of auditors During the financial year the following fees were paid or payable for services provided by PKF Brisbane Audit, the auditor of the Company: Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Consolidated Audit services - PKF Brisbane Audit Audit or review of the financial statements Other services - PKF Brisbane Tax services 2022 $ 2021 $ Loans to/from related parties 90,250 85,500 relation to loans with related parties: The following balances are outstanding at the reporting date in 10,550 10,000 Consolidated Current borrowings: 100,800 95,500 Loan from First Samuel Limited - an entity with significant influence 2022 $ 2021 $ 2,500,000 4,111,044 Terms and conditions Refer to note 18 for details of terms and conditions on the First Samuel Limited loan facility. TZ Limited Annual Report 2022 47 Notes to the financial statements continued Note 31 Parent entity information Set out below is the supplementary information about the parent entity. Guarantees entered into by the parent entity in relation to the debts of its subsidiaries Statement of profit or loss and other comprehensive income Parent 2022 $ 2021 $ Loss after income tax (937,073) (849,470) Total comprehensive income (937,073) (849,470) Statement of financial position Parent 2022 $ 2021 $ The parent entity had no guarantees in relation to the debts of its subsidiaries as at 30 June 2022 and 30 June 2021. Contingent liabilities The parent entity had no contingent liabilities as at 30 June 2022 and 30 June 2021. Capital commitments – property, plant and equipment The parent entity had no capital commitments for property, plant and equipment as at 30 June 2022 and 30 June 2021. Total current assets 8,606,957 6,128,239 Significant accounting policies Total assets 10,220,093 7,700,842 The accounting policies of the parent entity are consistent with Total current liabilities 6,295,769 8,187,702 those of the consolidated entity, as disclosed in note 1, except for Total liabilities 6,295,769 8,187,702 the following: Issued capital 227,279,703 221,876,795 › Investments in subsidiaries are accounted for at cost, less Equity Share-based payments reserve 34,771 89,422 any impairment, in the parent entity. › Dividends received from subsidiaries are recognised as Accumulated losses (223,390,150) (222,453,077) other income by the parent entity and its receipt may be an Total equity/(deficiency) 3,924,324 (486,860) indicator of an impairment of the investment. Note 32 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 interest 2022 2021 Name Telezygology, Inc TZ Holdings Inc Principal place of business / Country of incorporation United States of America United States of America TZ Development Technologies Inc United States of America TZ Tooling Inc TZI Australia Pty Limited TZ Administration Services Pty Ltd TZI Singapore Pte Ltd TZI UK Limited United States of America Australia Australia Singapore United Kingdom % 100 100 100 100 100 100 100 100 % 100 100 100 100 100 100 100 100 TZ Limited Annual Report 2022 48 Notes to the financial statements continued Note 33 Cash flow information Reconciliation of profit/(loss) after income tax to net cash used in operating activities Consolidated Profit/(loss) after income tax expense for the year Depreciation and amortisation Share-based payments Adjustments for Foreign exchange differences Forgiveness of loan Interest accrued on borrowings Increase in trade and other receivables 2022 $ 42,896 975,644 27,335 62,917 (641,484) 112,548 (1,522,714) 2021 $ (1,658,204) 852,463 41,569 (6,993) - (37,527) (486,816) Change in operating assets and liabilities Increase in contract assets (937,214) (1,347,265) Decrease/(increase) in inventories Decrease/(increase) in other operating assets Increase/(decrease) in trade and other payables Increase/(decrease) in contract liabilities Decrease in employee benefits (1,131,445) (336,579) (92,125) 1,817,778 (3,414) 42,361 71,070 582,604 (600,984) (49,705) Net cash used in operating activities (1,625,857) (2,597,427) Non-cash investing and financing activities Consolidated Additions to the right-of-use assets Shares issued under employee share plan Shares issued on conversion of loan Forgiveness of loan Changes in liabilities arising from financing activities 2022 $ - 215,875 2,000,000 641,484 2,857,359 Consolidated Balance at 1 July 2020 Net cash used in financing activities Shares issued on conversion of loan Lease additions Exchange differences Balance at 30 June 2021 Net cash from/(used in) financing activities Shares issued on conversion of loan Forgiveness of loan Exchange differences Balance at 30 June 2022 Loan – First Samuel Loan –º PPP Lease liabilities 11,000,000 (6,743,085) (256,915) - - 4,000,000 500,000 (2,000,000) - - 676,054 - - - (61,214) 614,840 - - (641,483) 26,643 65,648 (83,634) - (256,915) 614,321 596,335 (191,032) - - 614,321 (61,214) 5,211,175 308,968 (2,000,000) (641,483) 779 27,422 2,500,000 - 406,082 2,906,082 2021 $ 614,321 - 256,915 - 871,236 Total 11,741,702 (6,826,719) TZ Limited Annual Report 2022 49 Notes to the financial statements continued Note 34 Earnings per share Consolidated Profit/(loss) after income tax attributable to the owners of TZ Limited Consolidated Weighted average number of ordinary shares used in calculating basic earnings per share Weighted average number of ordinary shares used in calculating diluted earnings per share Consolidated Basic earnings per share Diluted earnings per share 2022 $ 2021 $ 42,896 (1,658,204) 2022 2021 Number Number 209,125,760 107,057,626 209,125,760 107,057,626 2022 Cents 0.021 0.021 2021 Cents (1.549) (1.549) For the purpose calculating the diluted earnings per share the denominator has excluded 2,091,000 options (2021: 2,091,000 options) as the effect would be anti-dilutive. TZ Limited Annual Report 2022 50 Notes to the financial statements continued Note 35 Share-based payments TZ Limited’s employee Equity Incentive Plan TZ Limited’s employee Equity Incentive Plan (‘EIP’) was approved by shareholders during the Company’s 2021 Annual General Meeting held on 27 January 2022. The Plan was designed to attract, retain, motivate and reward eligible persons (employees and directors) of the Company (collectively the ‘Participants’) by issuing securities to the Participants. The vesting of those securities may be subject to certain performance criteria to be determined by the Board. Set out below are summaries of options granted under the plan: 2022 Grant date 06/08/2019 06/08/2019 06/08/2019 Expiry date Exercise price Balance at the start of the year Granted Exercised Forfeited/ Expired Balance at the end of the year 31/08/2024 31/08/2025 31/08/2026 $0.25 $0.40 $0.45 697,000 697,000 697,000 2,091,000 - - - - - - - - - - - - 697,000 697,000 697,000 2,091,000 Weighted average exercise price $0.3667 $0.0000 $0.0000 $0.0000 $0.3667 2021 Grant date 06/08/2019 06/08/2019 06/08/2019 Expiry date Exercise price Balance at the start of the year Granted Exercised 31/08/2024 31/08/2025 31/08/2026 $0.25 $0.40 $0.45 787,000 787,000 787,000 2,361,000 - - - - - - - - Forfeited/ Expired Balance at the end of the year (90,000) 697,000 (90,000) 697,000 (90,000) 697,000 (270,000) 2,091,000 Weighted average exercise price $0.3667 $0.0000 $0.0000 $0.3667 $0.3667 Note 36 Events after the reporting period No matter or circumstance has arisen since 30 June 2022 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. TZ Limited Annual Report 2022 51 Directors’ declaration In the Directors’ opinion: › The attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements › The attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements › The attached financial statements and notes give a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the financial year ended on that date › There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable The Directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of Directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the Directors Peter Graham Chairman 31 August 2022, Sydney TZ Limited Annual Report 2022 52 Independent auditor’s report TZ Limited Annual Report 2022 53 INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF TZ LIMITED Report on the Financial Report Opinion We have audited the accompanying financial report of TZ Limited (the company), which comprises the consolidated statement of financial position as at 30 June 2022, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the company and 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. In our opinion the financial report of TZ Limited is in accordance with the Corporations Act 2001, including: a) Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2022 and of its performance for the year ended on that date; and b) Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for Opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the consolidated entity in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. Independent auditor’s report continued TZ Limited Annual Report 2022 54 Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. 1. Carrying amount of intangible assets with finite useful lives Why significant How our audit addressed the key audit matter As at 30 June 2022 the carrying value of intangible assets with finite useful lives was $991,716 (2021: $1,571,725), as disclosed in Note 15. The group’s accounting policy in respect of intangible assets with finite useful lives is outlined in Note 1. The carrying amount of intangible assets with finite useful lives is a key audit matter due to: • the significant audit effort required to test the carrying amount of intangible assets with finite useful lives; and • the level of judgement applied in evaluating management’s assessment of impairment. As outlined in Notes 1 and 15, management assessed the carrying amount of intangible assets with finite useful lives through impairment testing utilising a fair value less costs of disposal model in which significant judgements are applied in determining key assumptions. The judgements made in determining the underlying assumptions in the model have a significant impact on the carrying amount of intangible assets with finite useful lives, and accordingly the amount of any impairment charge, to be recorded in the current financial year. In assessing this key audit matter, we involved senior audit team members who understand the industry. Our audit procedures included, amongst others: • evaluating management’s methodology for determining the carrying amount of intangible assets with finite useful lives by comparing the fair value less costs of disposal model with generally accepted valuation methodology and accounting standard requirements; • conducting sensitivity analysis on key assumptions such as weighted average cost of capital (WACC) and growth rates, within reasonable foreseeable ranges; • challenging the key assumptions used in the value in use model by: - assessing growth rates used in comparison to historical results - evaluating the WACC rate used in comparison to market and industry information available - assessing yearly revenue forecasts in comparison to historical results and approved budgets, and - assessing the impact of the COVID-19 pandemic on all key assumptions; • assessing the appropriateness of the group’s accounting policy for the capitalisation of development costs; • obtaining a list of additions to intangible assets and assessing against the recognition criteria of AASB 138 Intangible Assets; • assessing management’s estimate of future economic benefits related to the costs capitalised; and • assessing the appropriateness of the related disclosures in Note 1 and 15. Independent auditor’s report continued TZ Limited Annual Report 2022 55 Other Information The Directors are responsible for the other information. The other information comprises the information included in the consolidated entity’s Annual Report, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Directors’ Responsibilities 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 and for 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. In preparing the financial report, the Directors are responsible for assessing the consolidated entity’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the consolidated entity or to cease operations, or have no realistic alternative but to do so. Auditor’s Responsibilities for the Audit of the Financial Report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. As part of an audit in accordance with Australian Auditing Standards, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial report, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit 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 consolidated entity’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Directors. • Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the consolidated entity’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial report or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our Independent auditor’s report continued TZ Limited Annual Report 2022 56 auditor’s report. However, future events or conditions may cause the consolidated entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the financial report, including the disclosures, and whether the financial report represents the underlying transactions and events in a manner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the consolidated entity to express an opinion on the group financial report. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Directors, we determine those matters that were of most significance in the audit of the financial report of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Remuneration Report We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2022. 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. Opinion In our opinion, the Remuneration Report of TZ Limited for the year ended 30 June 2022 complies with section 300A of the Corporations Act 2001. PKF BRISBANE AUDIT SHAUN LINDEMANN PARTNER BRISBANE 31 August 2022 Shareholder information The shareholder information set out below was applicable as at 31 July 2022. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: Ordinary shares Options over ordinary shares Number of holders % of total shares issued Number of holders % of total options issued 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel 1,314 371 174 417 189 2,465 1,652 Equity security holders Twenty largest quoted equity security holders 0.14 0.45 0.62 7.66 91.13 100.00 0.50 - - - 2 5 7 - - - - 7.17 92.83 100.00 - The names of the twenty largest security holders of quoted equity securities are listed below: Ordinary shares Number held % of total shares issued First Samuel Ltd ACN 086243567 (ANF ITS MDA Clients A/C) HSBC Custody Nominees (Australia) Limited Delcor Advisory Investment Group Pty Ltd One Managed Investment Funds Limited (TI Growth A/C) Mr Scott Joseph Bogue National Nominees Limited Mr David Frederick Oakley (DFO Investment A/C) Mr Philip Anthony Feitelson One Managed Investment Funds Limited (TI Absolute Return A/C) Briar Place Pty Limited (MJ Family A/C) Mr David Frederick Oakley Mr Erich Gustav Brosell Exelmont Pty Ltd Mr Peter Howells Guthrie CAD/GIS Software Pty Ltd Surflodge Pty Ltd (JE Lynch Staff Super FD A/C) Guthrie CAD/GIS Software Pty Ltd (Guthrie Super Fund A/C) Jalsu Pty Ltd (The Fisher Assets A/C) Technical Investing Pty Limited (TI Family Wealth A/C) Bourse Securities Pty Ltd 53,786,356 18,036,428 14,041,074 9,194,403 6,100,000 5,650,003 4,748,174 3,801,500 3,701,993 2,970,460 2,963,684 2,750,000 2,443,545 2,228,571 2,080,000 1,995,670 1,700,000 1,699,236 1,642,016 1,625,570 143,158,683 24.15 8.10 6.30 4.13 2.74 2.54 2.13 1.71 1.66 1.33 1.33 1.23 1.10 1.00 0.93 0.90 0.76 0.76 0.74 0.73 64.27 TZ Limited Annual Report 2022 57 Shareholder information continued Unquoted equity securities Options over ordinary shares 2,091,000 7 Number on issue Number of holders Substantial holders Substantial holders in the Company, as disclosed in substantial holding notices given to the Company, are set out below: Ordinary shares Number held % of total shares issued First Samuel Ltd ACN 086243567 (ANF ITS MDA Clients A/C) Delcor Advisory Investment Group Pty Ltd Technical Investing Pty Limited 53,032,227 14,041,074 11,818,412 23.81 6.36 6.10 Voting rights Securities subject to voluntary escrow The voting rights attached to ordinary shares are set out below: Ordinary shares Class Expiry date Number of shares Ordinary shares 27 January 2025 1,962,500 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 Buy-backs share shall have one vote. Unquoted options There are no voting rights attached to unquoted options. There are no other classes of equity securities. The Company is not currently undertaking any on-market buy- backs. Closing date for Director nominations for Annual General Meeting An election of Directors will be held at the Company’s 2022 Annual General Meeting on 17 November 2022. Notice is hereby given in accordance with ASX Listing Rules 3.13.1 and Clause 14.7 of the Company’s constitution that the closing date for receipt of nominations from persons wishing to be considered for election as a Director is Thursday, 29 September 2022 (‘Closing Date’). Nomination must be received in writing no later than 5.00pm (AEST) on the Closing Date at the Company’s registered office. TZ Limited Annual Report 2022 58 www.tz.net www.tz.net 

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