DATADOT TECHNOLOGY LIMITED — AGM Information 2010

Nov 25, 2010

1

==> picture [265 x 110] intentionally omitted <==

Chairman’s Address - 2010 AGM

Ladies and Gentlemen,

There were significant developments in 2010 in the company’s operational performance, strategy, governance and shareholder base, all contributing to a stronger platform on which to build future revenues.

Today I will briefly review some of those developments and provide an update on the company’s strategic direction.

*********

With regard to financial performance, the DataDot Group recorded an annual net profit after tax in 2010 of $931,326, which compared with a loss in the previous year of $10.8 million, including restructuring and impairment effects, and a loss of $914,000 excluding those effects. This improved result was achieved through increasing revenue by 23% in a difficult trading climate and reducing operating costs by some 16% in the first full year of cost controls implemented under new management.

The disaggregated results for our different geographical and business units were:

In the Asia-Pacific region, an increase in net profit of 41%, from $1,404,361 to $1,982,874, driven substantially by disciplined cost control measures and production efficiencies implemented in 2009. Revenue in this region is closely tied to OEM automotive product sales, which were seriously affected by the financial crisis.

Revenues in the Americas increased by 3% to $1,166,970 in 2010 from $1,136,057 in 2009, with the increase occurring mostly in the second half of the financial year reflecting poor trading conditions in the region in the first half of the year. The net loss for 2010 was $82,621 a significant improvement on the prior year loss of $362,465.

Revenues in Europe increased by 112% to $1,970,032, due primarily to auto product sales in Italy but also increased sales in the UK, Poland and Scandinavia. The net profit of the European subsidiary company increased by 836% to $918,416.

South African operations also lifted profitability, leading to improved royalty revenue flows to DataDot Technology via a 7.5% royalty on every DataDot product sold by the South African licensee.

And while DataTraceDNA ended the year in negative territory, the trend was positive, with DataDot’s share of the operating loss falling from $479,127 before impairments in 2009 to $103,793.

---

2

May I now offer some remarks on our future direction.

In the face of substantial changes in the operating environment last year, especially the global downturn in vehicle sales which exposed the company’s reliance on revenue from one sector, the Board and management conducted a thorough review of strategy.

From that review emerged revenue targets for the next five years, not only revenue growth targets but also revenue diversification targets, recognising that a wider range of products and solutions across different sectors will reduce the concentration risk and seasonal effects that can arise from reliance on a narrow customer spectrum.

We have no intention, however, of pursuing diversification at the expense of growth in our core vehicle marking business, which, despite continuing economic uncertainty, has substantial growth potential globally. Indeed, I intend later in my remarks to announce the inclusion of several new customers in that market.

We have every intention of achieving both revenue growth and diversification targets over the next five years.

The fundamental strategic imperative now driving the business is therefore to grow the top line and in doing so to develop diversified revenue streams at an even faster rate than growth in our traditional vehicle market.

The Board and management believe that the strategies best suited to accomplish these targets are:

• First, to establish partnerships with other stakeholders, especially insurers, in our key auto, marine, plant and equipment markets that will enhance the value of the DataDot proposition to manufacturers, distributors, dealers and owners.

• Second, to establish strategic partnerships where the intellectual property contributed by both parties can be leveraged to provide innovative, profitable solutions to issues of product identification and authentication in other markets; and

• Third, to increase investment in strategic growth opportunities.

All the major developments now being undertaken by the company are being driven by one or more of these three key strategies.

• The item to be considered later in the meeting to acquire the half-share of DataTraceDNA Pty Limited currently owned by CSIRO and to assign the DataTrace technology from CSIRO to DataTrace, is founded on a recognition that significant additional value will be derived from owning and leveraging that intellectual property rather than remaining a licensee.

• And likewise, the Share Purchase Plan currently before shareholders to raise up to $4.5 million is being undertaken to fund specific investments that will generate accelerated revenue growth.

Other initiatives currently in development, or completed but not announced because individually they do not meet the continuous disclosure materiality test, are built on the same strategic footings. They include:

3

• The recent establishment of an alliance with Allianz Australia’s leading marine Insurance Brand, Club Marine, which was won by competitive tender, that we believe has the capacity to increase sales in the asset identification markets of motor vehicle, marine, plant & equipment and home & business. The operational details I will leave to Ben, but may I say that at the core of the marketing program jointly developed with Allianz is a recognition that asset marking works to reduce risk in asset insurance, especially where the insurance transaction itself is effectively structured and priced.

• Another significant partnership that I announce today is with Carsales.com Limited, with whom DataDot Technology executed a distribution agreement just two weeks ago. Under the agreement Carsales.com will promote and sell DataDot marking on the carsales.com website and through its several thousand affiliated dealerships into the vehicle, motorcycle, bicycle, boat, truck, agricultural and construction machinery and real estate markets. Roll out of the program will be a high priority in the second half.

• I also announce today that the company has agreed with our Taiwanese distributor to establish a joint venture company, which will be owned 51% by DataDot Technology and 49% by DataDot Taiwan, and will be funded by DataDot Taiwan. This joint venture company will be granted licences by both DataDot and DataTrace to commercialise their IP in nominated markets in China. This is a significant development with a business partner who has a proven track record marketing both Dot and Trace technologies, who is well connected in China and who already has a number of successful business operations in China. We have structured the arrangements so that in lieu of receiving single front end licence fees for their IP, DataDot and DataTrace will continuously derive 50% of distributed profits generated by the joint venture company and the early costs of the venture will be funded by the partner

This is one of the several developments that underline the company’s decision to acquire the DataTrace IP and acquire CSIRO’s half-share of DataTrace.

• I can also report that since release of the 2010 Annual Report, our overseas core vehicle business has grown with the addition of four OE vehicle accounts. In the last several weeks our relatively new distributor in Chile has secured the Subaru account in that country and our South African distributor has secured new OE accounts with Mercedes Benz, Renault and Suzuki, which collectively account for more than 50,000 vehicles a year. Financial return from the former is through our DDUSA business and from the latter by way of a 7.5% royalty payment from our Licensee, DataDot Technology (South Africa) Pty Limited.

• Another recent partnership development is with Crime Stoppers USA, with whom we have signed an agreement to launch the DataDot copper cable theft prevention program across US utility companies. This too is an agreement with significant upside potential but still in the early stages of implementation. Our US subsidiary will be allocating senior management resources to co-ordinate marketing through the many offices and outlets of Crime Stoppers USA.

These initiatives, each built on the key growth strategies I described earlier, do not include the material announcements already made to shareholders that are built on the same strategy foundations of smart alliances, leveraged IP and selective investment.

They include:

4

• Formation of AgTechnix Pty Limited, with joint venture partner Ipeco Pty Limited, to track and trace agricultural and horticultural seeds with both overt and covert authentication technologies.

• Our partnership with Relegen Pty Limited, owner of a unique asset management software system called baseLINE, to create “assetDNA”, an asset management system that has already been accepted by Customs to track and trace their firearms in Australia. We are confident this relationship will grow with additional joint customers coming on-line in 2011.

• Joint development through DataTraceDNA Pty Ltd with South African company Holomatrix in producing Authenticable, a patent pending cable protection solution combining metallic dots and DataTraceDNA in a linear asset management solution which, when combined with the baseline software from Relegen is a powerful asset management system for utilities globally. The system allows a utility to be able to identify each 2 cm section of cable as a unique asset and locate it within 3 dimensions to its exact location in the network. Here too we think it is likely that first sales will be recorded before year end.

• Successful commercialisation of the Verifi TT technology, incorporating DataTraceDNA, in a textile authentication project for Elders New Zealand and Primary Wool Co-operative.

• Further development funded by an Australian multi-national company of the DataTrace product authentication process announced in May, for which a patent application has been lodged in the US. This project has now completed Phase 1 – laboratory proof of concept and will next month complete Phase 2 – field testing, and will be ready for a commercial pilot from early 2011.

• Execution in July 2010 of a five year contract with a well-known European pharmaceutical company, under which DataTraceDNA will be used to authenticate the entire production of one of its most successful drugs.

As with the expected extension of DataTraceDNA sales to China, both this pharmaceutical project and completion of the Australian field trials in another product authentication application, further underline the company’s decision to acquire the DataTrace IP and acquire CSIRO’s half-share of DataTrace.

• And more recently the announcement via our European subsidiary and Italian distributor, that DataDot has entered into an agreement with Robert Bosch in Italy, increasing by 1,500 the number of service centres that will be equipped to fit DataDots in our planned expansion of vehicle aftermarket sales in that country.

Shareholders, I trust that this brief, high level overview and Ben’s presentation to follow will have clarified your understanding of the company’s strategic direction and operations.

I can assure you that the Board is very mindful of the challenges and risks involved in developing new export products, at a time when the economic climate in many prospective markets is harsh and uncertain, and competitiveness is limited by the high value of the Australian dollar. These factors and the volatility resulting therefrom should not be underestimated.

Despite this, however, the Board expects both revenue and earnings to grow over the full financial year, though there is potential for some first half expected revenue to roll over into the second half with the result that revenue may be down against revenue for the corresponding half last year.

5

Your Board and management are keenly aware of the need in this environment to operate within and report against a business plan based on sound strategy settings and underpinned by budget restraint and operational efficiency.

In conclusion, I would like to take this opportunity to thank the directors, management and staff of the company for their continuing hard work and of course shareholders whose support we also continue to enjoy