DATADOT TECHNOLOGY LIMITED — Annual Report 2012

Aug 30, 2012

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DATADOT TECHNOLOGY LIMITED ABN: 54 091 908 726

APPENDIX 4E Preliminary Financial Report For the year ended 30 June 2012

Results for announcement to the market

		% change	30 June 2012	30 June 2011
Revenuesfromordinary activities	down	5%	7,143,493	7,487,425
Profit/ (Loss) from continuing operations after income tax	down	183%	(1,652,638)	(583,399)
Profit/(Loss) from ordinary activities after income taxattributable tomembers	down	193%	(1,436,875)	(489,639)
Net Profit/(Loss) for the period attributable to members	down	193%	(1,436,875)	(489,639)

Commentary on the financial results

• Despite a disappointing result for the full year, the directors of DataDot Technology Limited (DataDot) advise that the company traded profitably for the last four months of the financial year and generated positive cash flow during the last quarter. This is consistent with the prior advice to the ASX on 22 February 2012 where the Chairman stated that DataDot will “in the second half of this financial year, be profitable and the business will return to positive cash generation”.

• The Discussion and Analysis of Financial Results on pages 2 – 5 provide further commentary on the financial results.

• Net tangible assets per security decreased from 1.06 to 0.7 cents per share due to lower net tangible assets.

• No dividends have been declared or paid during the year.

Preliminary financial report – financial details

Refer to the attached financial information on pages 6 – 23. The financial information included in this document for the year ended 30 June 2012 is in the process of being audited and has been derived from the draft financial report of DataDot Technology Limited for the year ended 30 June 2012. The previous corresponding period was for the year ended 30 June 2011.

DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Discussion and Analysis of Financial Results

Group Overview

Revenues for DataDot Technology Limited (DataDot) in 2011/12 were $7,143,493, being 5% lower than 2010/11 revenues of $7,487,425. However, for the six month period from 1 January 2012 to 30 June 2012, revenues of $3,825,721 were $507,949 higher than revenues in the prior six months (July to December 2012) of $3,317,772.

The consolidated net loss after income tax for the 2012 year was $1,652,638 compared to an adjusted loss in 2011 of $1,105,533 (which excludes the $552,134 one-off gain for the revaluation of DataDot’s investment in DataTrace DNA Pty Limited). For the six month period from 1 January 2012 to 30 June 2012, the net loss after income tax (which included a research and development tax incentive benefit of $508,687) was $456,566 compared to a loss after income tax in the prior six months (July to December 2012) of $1,196,072.

During the second half of the financial year, DataDot:

• increased revenue, realising a $507,949 increase over revenues in the first half of the year in what is still a very difficult market, particularly in Italy; and

• reduced costs, both through a reduction in head count and closure of underperforming activities, with annual savings in excess of $900,000.

These initiatives included non-recurring restructuring costs of $315,297. Impairment of patents (where patents had been superseded or intentionally abandoned) accounted for a further nonrecurring cost of $194,703, accounted for as impairment losses.

The magnitude of the improved performance is indicated in the table below, which reconciles the first half-year result to the full year result. Net profit after tax (inclusive of a full year research and development (R&D) tax incentive benefit of $508,687) improved by $1,249,506, from a loss of $1,196,072 in the first half of the financial year to a pro-forma profit of $53,434 in the second half of the financial year, excluding non-recurring items. DataDot acknowledges that this is still a very disappointing result but the significant improvement shows that the company is taking steps to remediate the situation and improve performance.

FY2012 full year loss before tax Full year income tax benefit FY2012 full year loss after tax First half FY2012 loss after tax Second half FY2012 loss after tax Add back non-recurring items: Restructuring expenses Impairment of superseded patents Pro-forma second half profit after tax excl. non-recurring items	( $ 2,166,988) $ 514,350 ( $ 1,652,638) ( $1,196,072) ( $ 456,566) $ 315,297 $ 194,703 $ 53,434

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Discussion and Analysis of Financial Results (continued)

Outlook

Europe has been adversely affected by the economic environment which has, in turn, reduced DataDot’s returns from that market. All other continuing parts of the DataDot business improved during the second half of the financial year. We see those businesses continuing to grow this financial year, after the usual pause during the Northern Hemisphere holiday period, with initiatives in copper and asset theft markets expected to generate increasing sources of revenue later this calendar year. Particular focus is also being given to growing revenues from the auto sector through our distributor network in the high theft markets of Latin America, Mexico, Indonesia, Malaysia and China. DataTraceDNA continues to be a strong growth contributor with revenue from both existing and new clients.

Costs will continue to be reviewed and expenses closely controlled.

The company expects to see its financial performance continue to improve during FY2013. The speed of this improvement will be influenced to a large degree by economic conditions, especially in Europe.

Operating Results for the year

Summarised operating results are as follows:

Geographic segments Asia Pacific Americas Europe AgTechnix DataTraceDNA Consolidated entity adjustments Non-segment unallocated revenues and expenses Finance costs Share of loss of joint venture Income tax benefit/(expense) Consolidated entity sales and (loss)/profit	2012 2011 Total Revenues Results Total Revenues Results $ $ $ $
	4,882,839 614,704 4,654,264 472,437 976,343 76,975 937,901 (27,484) 1,625,453 (231,313) 1,834,256 223,283 89,235 (431,252) 123,278 (187,519) 1,101,912 (400,731) 690,599 71,372
	8,675,782 (371,617) 8,240,298 552,089 (1,604,386) - (852,869) - 72,097 (1,777,038) 99,996 (879,281) - (18,333) - (22,403) - - - (111,716) - 514,350 - (122,088)
	7,143,493 (1,652,638) 7,487,425 (583,399)

Asia Pacific

Revenues in Asia Pacific increased by $228,575 (5%) as automotive OEM customers recovered from disruption of supply caused by the earthquake and tsunami that devastated northern Japan and the flooding in Thailand. Net profit increased to $614,704 from $472,437, an increase of $142,267 (30%), in line with increased revenues.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Operating Results for the year (continued)

Americas

The Americas region increased revenue by 4% to $976,343, up from $937,901 in the previous year. Tight control of expenses led to a full year net profit of $76,975 compared to a prior year loss of $27,484.

Europe

In Europe, continuing economic uncertainty led to revenues for the year decreasing 11% from the prior year ($1,625,453 in 2012 compared to $1,834,256 in 2011). The continuing appreciation of the Australian dollar against the Pound Sterling and the Euro exacerbated this negative impact. Lower sales led to Europe making a loss of $231,313 in 2012, compared to a profit of $223,283 in 2011.

DataTraceDNA Pty Limited

DataTraceDNA revenues were $1,101,912 for the full 2012 financial year compared to $690,699 for the seven months from 1 December 2010 to 30 June 2011. Net profit for the same periods decreased from a profit for the seven months in 2011 of $71,372 to a loss of $400,731 in 2012. In December 2010, DataDot acquired the 50% shareholding in DataTrace DNA Pty Limited (DataTrace) owned by CSIRO, making DataTrace a wholly-owned subsidiary of DataDot. Had the acquisition of the remaining share of DataTrace occurred at the beginning of the reporting period, the consolidated operating results would have included revenues of $911,747 and a loss of ($152,060). The loss in 2012 was primarily due to an increased investment in reader technology initiatives and a higher level of reader sales (with a corresponding lower margin) compared to product sales.

AgTechnix Pty Limited

Revenues from AgTechnix Pty Limited (AgTechnix) in 2012 were $89,235 compared to revenues of $123,278 in 2011. The net loss increased from $187,519 in 2011 to $431,252 in 2012. On 29 June 2012, DataDot acquired the 49% of AgTechnix A class shares and 50% of AgTechnix B class shares owned by IPECO Pty Limited, so becoming the sole shareholder and owner of AgTechnix and making AgTechnix a fully integrated, wholly-owned subsidiary of DataDot. The acquisition was undertaken to better utilise existing product support capacity within DataDot and to rationalise operating costs, including the costs to DataDot and IPECO of maintaining a separate JV company. The shares were transferred for a nominal consideration. On a go-forward basis, AgTechnix will be operated utilising existing DataDot resources and as such AgTechnix will have no staffing or other operating costs.

Operating Expenses

DataDot’s operating expenses (excluding restructuring expenses and impairment losses) decreased by $183,922 (2%) from $5,938,576 in 2011 to $5,754,654 in 2012. A number of cost saving initiatives were implemented during the second half of the financial year, such that operating expenses (excluding restructuring expenses and impairment losses) for the second half of the year were $2,678,857 compared to $3,075,797 in the first half of the year. DataDot will continue to focus on cost control into the 2012/13 year through further reviews of staffing requirements and continuous assessments of more efficient and cost effective manufacturing processes.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Operating Results for the year (continued)

Restructuring Expenses and Impairment Losses

The cost saving measures implemented during the second half of the financial year of 2012 resulted in restructuring expenses of $315,297. The major components of the restructuring were termination payments associated with cessation of employment together with costs incurred in closing facilities surplus to requirements. A comprehensive review of patents identified patents that had been superseded or intentionally abandoned. The impairment of these patent costs accounted for a non-recurring cost of $194,703 in 2012.

Liquidity and Capital Resources

Owing to lower sales and higher costs in the first eight months of the financial year and an increase in inventory levels primarily associated with DataTrace reader components, there was a decrease in cash for the year of $2,119,226 to a closing balance of $1,409,367.

Operating activities consumed $1,584,695 of cash in 2012 (2011: $994,545). This increase in cash consumption was a result of lower sales to customers and higher inventory purchases. Cash inflows from financing activities for the 2012 year were $146,753, consisting mainly of proceeds from borrowings. This compares to inflows from financing activities in 2011 of $3,630,449, primarily from proceeds from the issue of shares. Cash outflows from investing activities were $669,921 in 2012 compared to outflows of $892,823 in 2011. The outflows were due to the upgrading of critical plant and equipment and development of new technologies in both DataDot and DataTrace.

DataDot has indicated that market volatility and economic slowdown in international markets in which it trades, particularly Italy, have negatively affected financial performance during FY2012. DataDot anticipates that these markets will improve during the course of FY2013 but as this is not guaranteed continued economic slowdown is possible. The company has reduced its annual cost base by more than $900,000 and rationalised under-performing activities. Despite these efforts, there is a risk as to whether European and other markets will stabilise and begin to recover during FY2013. If they do not, DataDot may need to raise additional working capital to fund its operations during the year.

Shares issued during the year

There were no shares issued under a share purchase plan during the 2012 financial year (2011: 73,170,732 shares issued). There were no shares issued through a share placement during the 2012 financial year (2011: 23,658,537 shares issued).

Profile of Debts

The amount of DataDot’s debt has increased by $204,104 from $563,343 at 30 June 2011 to $747,447 at 30 June 2012, due to an increase in funding for AgTechnix from IPECO Pty Limited, offset by partial repayment of the existing bank loan facility. The $315,151 debt owed to IPECO Pty Limited, unless repaid from revenue generated by AgTechnix over the next three years, is to be forgiven by IPECO at the end of that three year period as per the Share Purchase Agreement whereby DataDot acquired IPECO’s shares in AgTechnix.

Capital expenditure

There has been a decrease in cash used to purchase plant and equipment, down from $457,747 in 2011 to $148,193 in 2012.

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

DataDot Technology Limited Preliminary Consolidated Statement of Financial Position As at 30 June 2012

Note	2012 2011 $ $
ASSETS Current Assets Cash and cash equivalents 5 Trade and other receivables 6 Inventories Current tax assets Total Current Assets Non-Current Assets Plant and equipment Intangible assets 7 Deferred tax assets Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 8 Interest bearing loans and borrowings Income tax payable Provisions Other current liabilities 9 Total Current Liabilities Non-Current Liabilities Interest bearing loans and borrowings Provisions Other non-current liabilities 9 Total Non-Current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the parent Contributed equity 10 Accumulated losses Reserves Parent interests Non-controlling interests TOTAL EQUITY	1,409,367 3,528,593 1,333,620 1,672,123 1,483,912 1,084,729 567,388 -
	4,794,287 6,285,445
	836,211 867,455 2,961,847 2,805,860 - -
	3,798,058 3,673,315
	8,592,345 9,958,760
	1,061,917 969,065 60,082 49,787 20,148 78,223 455,573 357,650 688,822 141,873
	2,286,542 1,596,598
	- 57,085 4,407 8,274 - 456,471
	4,407 521,830
	2,290,949 2,118,428
	6,301,396 7,840,332
	33,102,482 33,102,482 (27,248,431)(25,857,705) 493,494 689,216
	6,347,545 7,933,993 (46,149) (93,661)
	6,301,396 7,840,332

The above Preliminary Consolidated Statement of Financial Position should be read in conjunction with the accompanying notes.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

DataDot Technology Limited Preliminary Consolidated Statement of Comprehensive Income For the Year Ended 30 June 2012

Note Continuing operations Sale of goods Rendering of services Licence fees Royalties Finance revenue Revenue Cost of sales Gross profit Other income 2 Employee benefits expense Administrative expenses Advertising and promotional expenses Occupancy expenses Travel expenses Finance costs Depreciation and amortisation expense Bad and doubtful debts Restructuring expenses Impairment losses Share of loss of joint venture Loss from continuing operations before income tax Income tax benefit / (expense) Net Loss for the period Other comprehensive income Foreign currency translation Other comprehensive income for the period net of tax TOTAL COMPREHENSIVE LOSS FOR THE PERIOD	2012 2011 $ $
	6,610,892 6,792,336 766 282,598 84,350 93,871 375,388 218,624 72,097 99,996
	7,143,493 7,487,425 (3,057,327) (2,548,578)
	4,086,166 4,938,847 11,500 650,134 (3,187,464) (3,128,928) (1,031,866) (1,208,058) (204,024) (383,713) (382,862) (473,601) (307,189) (326,300) (18,333) (22,403) (421,441) (350,387) (201,475) (45,186) (315,297) - (194,703) - - (111,716)
	(2,166,988) (461,311) 514,350 (122,088)
	(1,652,638) (583,399)
	(61,155) 35,128
	(61,155) 35,128
	(1,713,793) (548,271)

The above Preliminary Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

DataDot Technology Limited

Preliminary Consolidated Statement of Comprehensive Income (cont’d) For the Year Ended 30 June 2012

Note LOSS FOR THE PERIOD IS ATTRIBUTABLE TO: Non-controlling interest Owners of the parent TOTAL COMPREHENSIVE LOSS FOR THE PERIOD IS ATTRIBUTABLE TO: Non-controlling interest Owners of the parent Earnings per share for loss from continuing operations attributable to the ordinary equity holders of the company Basic earnings/(loss) per share 3 Diluted earnings/(loss) per share Earnings per share for loss attributable to the ordinary equity holders of the company Basic earnings/(loss) per share 3 Diluted earnings/(loss) per share	2012 2011 $ $
	(261,912) (93,760) (1,390,726) (489,639)
	(1,652,638) (583,399)
	(261,912) (93,760) (1,451,881) (454,511)
	(1,713,793) (548,271)
	Cents Cents (0.29) (0.12) (0.29) (0.12) (0.29) (0.12) (0.29) (0.12)

The above Preliminary Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

DataDot Technology Limited Preliminary Consolidated Statement of Changes in Equity For the Year Ended 30 June 2012

At 1 July 2011 Loss for the period Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners Share-based payment Transaction with non-controlling interest At 30 June 2012 At 1 July 2010 Loss for the period Other comprehensive income Total comprehensive income for the year Transactions with owners in their capacity as owners Issue of share capital Transaction costs on shares issued Share-based payment At 30 June 2011	Attributable to equityholders ofthe parent Ordinary Shares Accumulated losses Foreign currency translation reserve Employee equity benefits reserve Other reserves Non- controlling interest Total equity $ $ $ $ $ $ $
	33,102,482 (25,857,705) 540,360 148,856 - (93,661) 7,840,332 - (1,390,726) - - - (261,912) (1,652,638) - (61,155) - - - (61,155)
	- (1,390,726) (61,155) - - (261,912) (1,713,793) - - 174,857 - - 174,857 - - - (309,424) 309,424 -
	33,102,482 (27,248,431) 479,205 323,713 (309,424) (46,149) 6,301,396
	28,034,195 (25,368,066) 505,232 - - - 3,171,361 - (489,639) - - - (93,760) (583,399) - - 35,128 - - - 35,128 - (489,639) 35,128 - - (93,760) (548,271)
	5,352,451 - - - - 99 5,352,550 (284,164) - - - - - (284,164) - - - 148,856 - - 148,856
	33,102,482 (25,857,705) 540,360 148,856 - (93,661) 7,840,332

The above Preliminary Consolidated Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

DataDot Technology Limited Preliminary Consolidated Statement of Cash Flows For the Year Ended 30 June 2012

Note	2012 2011 $ $
Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest paid Income tax paid Receipt of government grant Net cash used in operating activities 5 Cash flows from investing activities Interest received Purchase of plant and equipment Purchase of intangible assets Contributions to investment accounted for using the equity method Payment for acquisition of subsidiary, net of cash acquired Proceeds from related party loans Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Transaction costs from issue of shares Proceeds from borrowings Repayment of borrowings Payment of finance lease liabilities Net cash provided by financing activities Net (decrease) / increase in cash held Cash at beginning of year Effect of exchange rate on cash holdings in foreign currencies Cash at end of year 5	7,135,984 8,128,266 (8,593,470) (9,154,423) (13,789) (25,775) (124,920) (40,613) 11,500 98,000
	(1,584,695) (994,545)
	72,097 99,996 (148,193) (419,765) (593,824) (466,426) - (416,742) - 189,963 - 120,151
	(669,920) (892,823)
	- 3,970,000 - (284,164) 195,000 - (48,247) (43,128) - (12,259)
	146,753 3,630,449
	(2,107,862) 1,743,081 3,528,593 1,796,406 (11,364) (10,894)
	1,409,367 3,528,593

The above Preliminary Consolidated Statement of Cash Flows should be read in conjunction with the accompanying notes.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements For the Year Ended 30 June 2012

1. Summary of Significant Accounting Policies

The Preliminary Consolidated Financial Statements of DataDot Technology Limited and subsidiaries (DataDot) for the year ended 30 June 2012 have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The Preliminary Consolidated Financial Statements do not include all notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the last annual report for the year ended 30 June 2011, the half-year report for the period ended 31 December 2011 and any public announcements to the market made by DataDot during the reporting period in accordance with the continuous disclosure requirement of the Corporations Act 2001 and the listing rules of the Australian Stock Exchange.

The Preliminary Consolidated Financial Statements have been prepared on an accrual basis and are based on historical costs modified by the revaluation of certain non-current assets, financial assets and financial liabilities for which the fair value basis of accounting has been applied.

The accounting policies adopted are consistent with those of the previous year.

Going concern

DataDot has indicated that market volatility and economic slowdown in international markets in which it trades, particularly Italy, have negatively affected financial performance during FY2012. DataDot anticipates that these markets will improve during the course of FY2013 but as this is not guaranteed continued economic slowdown is possible. The company has reduced its annual cost base by more than $900,000 and rationalised under-performing activities. Despite these efforts, there is a risk as to whether European and other markets will stabilise and begin to recover during FY2013. The directors are confident that DataDot is a going concern and able to pay its debts as and when they fall due. Furthermore, the directors have identified the ability to raise additional working capital to fund its operations during the year, should this become necessary.

2. Other income Gain on revaluation of investment in joint venture Government grants: - Export market development grants - Global growth funding grant - Australian apprenticeships employer incentives	2012 2011 $ $
	- 552,134 - 98,000 10,000 - 1,500 -
	11,500 650,134

The export market development and global growth funding grants are provided to assist the development of export sales.

There are no unfulfilled conditions or contingencies attaching to the grants.

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Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

3. Earnings Per Share

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year.

The following reflects the income and share data used in the basic earnings per share computations:

Net loss from continuing operations attributable to ordinary equity holders of the parent Net loss attributable to ordinary equity holders of the parent Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share rights Weighted average number of ordinary shares adjusted for the effect of dilution The following options are not treated as potential ordinary shares as their exercise price exceeds current market price	2012 2011 $ $
	(1,390,726) (489,639) (1,390,726) (489,639) Number Number 474,575,800 415,921,639 16,471,712 9,579,452
	491,047,512 425,501,091 - 500,000

There have been no transactions involving ordinary shares or potential ordinary shares that would significantly change the number of ordinary shares or potential ordinary shares outstanding between the reporting date and the date of completion of these financial statements.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

4. Operating Segments

Identification of reportable segments

DataDot has identified its operating segments based on the internal reports that are reviewed and used by the executive management team (the chief operating decision makers) in assessing performance and in determining the allocation of resources.

Three of the operating segments are identified by management based on the location of the selling segment. Two of the operating segments are identified by management based on the product offerings. Discrete financial information about each of these operating businesses is reported to the executive management team on at least a monthly basis.

Types of products and services

The three geographical regions of Asia Pacific, Americas and Europe each manufacture and distribute an asset identification system that includes:

• DataDotDNA[®] - polymer and metallic microdots containing etched data that is unique to the assets to which the microdots are attached;

• DataThreadDNA - a continuous strand of DataDotDNA integrated into fine thread; and

• DataBaseDNA - a global database that records asset identification data and is accessible by law enforcement agencies and insurance investigators.

The two operating segments that are identified by product offerings managed on a global basis are:

• DataTraceDNA[®] – a high speed, high security, machine readable system for authenticating materials, products and assets; and

• AgTechnix - IntelliSeed™ by AgTechnix is a frontier patent pending technology, supporting global agriculture and protecting investments in intellectual property across a diverse spectrum of agricultural activities, including seed and plant genetics.

Accounting policies and inter-segment transactions

The accounting policies used by DataDot in reporting segments internally is the same as those contained in the prior period.

Inter segment pricing is determined on an arm’s length basis.

The following tables present the revenue, profit / (loss) before tax, assets and liabilities information regarding operating segments for years ended 30 June 2012 and 30 June 2011.

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Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

4. Operating Segments (continued)

Asia Pacific Americas Europe AgTechnix DataTraceDNA Year ended 30 June 2012 $ $ $ $ $ Revenue Sales to external customers 3,172,344 835,845 1,621,669 89,235 976,825 Other revenues from external customers 374,711 766 - - - Inter-segment sales 1,335,784 139,732 3,784 - 125,087 Total segment revenue 4,882,839 976,343 1,625,453 89,235 1,101,912 Inter-segment elimination Other revenue Total revenue per the statement of comprehensive income Result Segment Results 614,704 76,975 (231,313) (431,252) (400,731) Unallocated expenses Loss before tax and finance costs Finance costs Share of loss of joint venture Loss before income tax per statement of comprehensive income Income tax benefit Loss after income tax per statement of comprehensive income Assets and liabilities Segment Assets 3,186,979 521,376 992,097 141,992 2,257,137 Investment in joint venture Unallocated assets Total assets Segment liabilities 1,015,361 111,948 161,996 134,312 98,276 Unallocated liabilities Total liabilities Other segment information Capital expenditure 135,666 2,051 9,039 1,261 176 Depreciation 127,837 16,700 8,376 5,669 18,544 Amortisation 145,484 - - 1,137 97,694	Asia Pacific Americas Europe AgTechnix DataTraceDNA $ $ $ $ $	Total Operations $
	3,172,344 835,845 1,621,669 89,235 976,825 374,711 766 - - - 1,335,784 139,732 3,784 - 125,087	6,695,918 375,477 1,604,387
	4,882,839 976,343 1,625,453 89,235 1,101,912	8,675,782 (1,604,386) 72,097
		7,143,493
		(371,617) (1,777,038)
		(2,148,655) (18,333) -
		(2,166,988) 514,350
		(1,652,638)
		7,099,581 - 1,492,764
		8,592,345
		1,521,893 769,056
		2,290,949
		148,193 177,126 244,315

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Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

4. Operating Segments (continued)

Asia Pacific Americas Europe AgTechnix DataTraceDNA Year ended 30 June 2011 $ $ $ $ $ Revenue Sales to external customers 3,416,741 800,590 1,834,256 123,278 617,471 Other revenues from external customers 586,268 8,825 - - - Inter-segment sales 651,255 128,486 - - 73,128 Total segment revenue 4,654,264 937,901 1,834,256 123,278 690,599 Inter-segment elimination Other revenue Total revenue per the statement of comprehensive income Result Segment Results 472,437 (27,484) 223,283 (187,519) 71,372 Unallocated expenses Loss before tax and finance costs Finance costs Share of loss of joint venture Loss before income tax per statement of comprehensive income Income tax expense Loss after income tax per statement of comprehensive income Assets and liabilities Segment Assets 1,044,237 481,938 1,019,648 87,857 2,044,934 Investment in joint venture Unallocated assets Total assets Segment liabilities 799,310 118,528 515,707 275,178 205,243 Unallocated liabilities Total liabilities Other segment information Capital expenditure 371,401 5,128 8,870 23,645 48,703 Depreciation 169,836 17,698 6,649 2,027 9,396 Amortisation 90,911 - - 562 56,903	Asia Pacific Americas Europe AgTechnix DataTraceDNA $ $ $ $ $	Total Operations $
	3,416,741 800,590 1,834,256 123,278 617,471 586,268 8,825 - - - 651,255 128,486 - - 73,128	6,792,336 595,093 852,869
	4,654,264 937,901 1,834,256 123,278 690,599	8,240,298 (852,869) 99,996
		7,487,425
		552,089 (879,281)
		(327,192) (22,403) (111,716)
		(461,311) (122,088)
		(583,399)
		4,678,614 - 5,280,146
		9,958,760
		1,913,966 204,462
		2,118,428
		457,747 205,606 148,376

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Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

5. Current Assets - Cash And Cash Equivalents

Reconciliation to statement of cash flows

	2012 2011 $ $
For the purposes of the statement of cash flows, cash and cash equivalents comprise the following at 30 June: Cash on hand and at bank Reconciliation of net loss after tax to net cash flows from operations Loss after income tax Add / (less) items classified as investing / financing activities: Share of joint venture loss / (profit) Interest received Add / (less) non-cash items: Depreciation and amortisation Non-cash borrowing costs Share based payments Gain on revaluation of investment Impairment of inventory Impairment of superseded patents Warranty provision Impairment for doubtful debts Loss on disposal of property, plant & equipment Net cash used in operating activities before change in assets and liabilities (Increase) / decrease in trade and other receivables (Increase) / decrease in other assets (Increase) / decrease in inventories (Decrease) / increase in trade and other payables (Decrease) / increase in current tax liabilities (Decrease) / increase in other liabilities (Decrease) / increase in provisions Net cash provided by /(used in) operating activities	1,409,367 3,528,593
	(1,652,638) (583,399) - 111,716 (72,097) (99,996) 421,442 353,982 33,940 25,804 174,857 148,856 - (552,134) - (63,012) 194,703 - - 20,000 201,475 45,186 3,990 -
	(694,328) (592,997) (403,684) (78,927) - 65,950 (476,325) (106,275) 97,139 (255,407) (59,345) 78,223 (141,872) (144,854) 93,720 39,742
	(1,584,695) (994,545)

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

6. Current Assets - Trade And Other Receivables

Trade receivables Allowance for impairment loss (a) Prepayments Other	2012 2011 $ $
	1,169,858 1,277,826 (92,859) (9,797)
	1,076,999 1,268,029 161,722 224,415 94,899 179,679
	1,333,620 1,672,123

(a) Allowance for impairment loss

Trade receivables are non-interest bearing and are generally on 30-60 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. An impairment charge of $201,475 (2011: $45,186) has been recognised by DataDot. These amounts have been included in the bad and doubtful debt expense item.

Movements in the provision for impairment loss were as follows:

At 1 July Charge for the year Amount written off (included in bad and doubtful debt expense) At 30 June	9,797 117,459 201,475 45,186 (118,413) (152,848)
	92,859 9,797

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

7. Non-Current Assets - Intangible Assets

(a) Reconciliation of carrying amounts at the beginning and end of the period

At 1 July 2011 Cost Accumulated amortisation Net carrying amount Year ended 30 June 2012 At 1 July 2011, net of accumulated amortisation Additions Amortisation Impairment At 30 June 2012, net of accumulated amortisation and impairment losses At 30 June 2012 Cost Accumulated amortisation and impairment losses Net carrying amount	Development costs $ Patent costs $ Goodwill $ Computer software $ Total $
	1,128,310 957,649 1,258,864 69,611 3,414,434 (504,819) (95,543) - (8,212) (608,574)
	623,491 862,106 1,258,864 61,399 2,805,860
	623,491 862,106 1,258,864 61,399 2,805,860 449,812 140,896 - 3,116 593,824 (183,275) (44,749) - (15,110) (243,134) - (194,703) - - (194,703)
	890,028 763,550 1,258,864 49,405 2,961,847
	1,578,121 1,098,545 1,258,864 72,727 4,008,257 (688,093) (334,995) - (23,322) (1,046,410)
	890,028 763,550 1,258,864 49,405 2,961,847

(b) Description of the Group’s intangible assets

(i) Development costs

Development costs are carried at cost less accumulated amortisation and accumulated impairment losses. The intangible assets have been assessed as having finite lives. All intangible assets are amortised using the straight line method over a period of 3 to 5 years. The amortisation has been recognised in the statement of comprehensive income in the line item “depreciation and amortisation expense”. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.

In 2012, $449,812 of development costs associated with development of Project Thor (next generation DataDots), Beacon DataDot system, DataDot silicone tip pen applicator, DataTrace authenticators and tracers were incurred with $183,275 of associated amortisation being expensed during the period. There were no indicators that the development costs are impaired.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

7. Non-Current Assets – Intangible Assets (continued)

(ii) Patents

Patent costs are carried at cost less accumulated amortisation and accumulated impairment losses. These intangible assets have been assessed as having a finite life and are amortised using the straight line method over the period of the patent. The amortisation has been recognised in the income statement in the line item ‘depreciation and amortisation expense’. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying amount.

In 2012, $140,896 of costs associated with the lodging, renewal and maintenance of patents were incurred with $44,749 of associated amortisation being expensed during the period. A comprehensive review of patents identified patents that had been superseded or intentionally abandoned. An impairment charge of $194,703 was incurred to reflect the reduced value of these patents.

(iii) Goodwill

After initial recognition, goodwill acquired in a business combination is measured at cost less any accumulated impairment losses. Goodwill is not amortised but is subject to impairment testing on at least an annual basis or whenever there is an indication of impairment.

(iv) Impairment testing of Goodwill

Goodwill arising from the acquisition of DataTraceDNA Pty Limited has been allocated to the cash-generating unit of DataTraceDNA, which is also a discrete operating segment of DataDot.

The recoverable value of the DataTraceDNA cash-generating unit is determined based on value-in-use calculations. Value-in-use is calculated based on the present value of cash flow projections over a 5 year period with the terminal value calculated on the year 5 projected cashflows divided by the discount rate less the growth rate. The cash flows are discounted using the yield of 10 year government bonds adjusted for market risk and inherent uncertainty across the periods.

Management has based the value-in-use calculations on the DataTrace budget approved by the DataDot Board. The budget uses estimated growth rates to project revenue. Costs are calculated taking into account historical gross margins as well as estimated inflation rates over the period.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

8. Current Liabilities - Trade and Other Payables

Trade payables Sundry creditors and accruals	2012 2011 $ $
	621,191 440,650 440,726 528,415
	1,061,917 969,065

9. Other Liabilities

Current: Unsecured loans from: Amounts payable to other parties Unearned revenues Non-current: Unsecured loans from: Amounts payable to other parties	688,822 - - 141,873
	688,822 141,873
	- 456,471

Included in current liabilities is an amount payable to other parties of £239,457 ($373,671) which DataDot Technology (UK) Limited (DDUK) borrowed on an interest free basis in 2002 for the establishment of the UK business. The loan, which is guaranteed by DataDot, is repayable on the earlier of the termination of the DDUK shareholders agreement, the DDUK licence agreement and 15 December 2012. This financial liability is carried at amortised cost using the effective interest method. In 2011, this amount was treated as a non-current liability. In August 2012, £100,000 of the loan was repaid by DDUK in conjunction with the share sale agreement, with the remaining £150,000 to be repaid over in December 2012, July 2013, December 2013 and June 2014, as outlined in note 12.

Also included in current liabilities is an amount of $315,151 which is funding that has been received from IPECO Pty Limited for AgTechnix Pty Limited. The funding will be repaid from profits generated by AgTechnix over the next three years. If insufficient profits are generated during the three years then the remaining balance will be extinguished at the end of the three year period.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

10. Contributed Equity

	2012	2011
Ordinary Shares	$	$
Issued and fully paid	**33,102,482 **	33,102,482
ully paid ordinary shares carry one vote per share and carry the right to dividends.
	Number	$
Movement in ordinary shares on issue
At 30 June 2010	344,028,204	28,034,195
Shares issued:
Shares issued for purchase of CSIRO 50% interest
in DataTraceDNA Pty Limited at $0.041 per share
(net of half-share of cost of independent valuation)	24,083,804	987,436
Shares issued for assignment of DataTraceDNA
intellectual property from CSIRO at $0.041 per share	9,634,523	395,015
Share purchase plan at $0.041 per share	73,170,732	3,000,000
Share placement at $0.041 per share	23,658,537	970,000
Less cost of capital raisings	-	(284,164)
At 30 June 2011	474,575,800	33,102,482
Shares issued:	-	-
At 30 June 2012	474,575,800	**33,102,482 **

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

11. Commitments

(a) Finance Lease Commitments

DataDot has finance leases and hire purchase contracts for various items of plant and machinery with a carrying amount of $3,271 (2011: $4,565). The leases have terms of renewal but no purchase options and escalation clauses. Renewals are at the option of the specific entity that holds the lease. Included in the finance lease commitments are finance leases entered into after 30 Jun 2012 for the purchase of production equipment with a value of $149,612.

Payable - minimum lease payments: - not later than 12 months - between 12 months and 5 years Minimum lease payments	2012 $ 2011 $ 51,328 2,498 99,741 1,457 151,069 3,955

(b) Operating Lease Commitments

DataDot leases property under non-cancellable leases expiring from 12 months to 52 months. Lease payments comprise a base amount plus an incremental allowance for inflation.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

Payable - minimum lease payments: not later than 12 months between 12 months and 5 years	127,816 231,906 15,798 141,190
	143,614 373,096

(c) Remuneration Commitments

Commitments for the payment of salaries and other remuneration under long-term employment contracts in existence at the reporting date but not recognised as liabilities, payable:

- not later than 12 months - greater than 5 years	176,435 343,944 - -
	176,435 343,944

Amounts disclosed as remuneration commitments include commitments arising from the service contracts of executives referred to in the Remuneration Report of the Directors Report that are not recognised as liabilities and are not included in the compensation of Key Management Personnel. There are no remuneration commitments for Directors as their remuneration under the DataDot Constitution is on a day to day basis.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Notes to the Preliminary Consolidated Financial Statements (cont’d) For the Year Ended 30 June 2012

12. Acquisition of Minority Shareholding in AgTechnix Pty Limited

On 29 June 2012, DataDot acquired the 49% of AgTechnix Pty Limited (AgTechnix) A class shares and 50% of AgTechnix B class shares owned by IPECO Pty Limited, so becoming the sole shareholder and owner of AgTechnix and making AgTechnix a fully integrated, whollyowned subsidiary of DataDot. The acquisition was undertaken to better utilise existing product support capacity within DataDot and to rationalise operating costs, including the costs to DataDot and Ipeco of maintaining a separate JV company. AgTechnix will be operated utilising existing DataDot resources and as such AgTechnix will have no staffing or other operating costs going forward. The shares were transferred for a nominal consideration.

Over the past two years, DataDot and IPECO Pty Limited have each provided funding to AgTechnix for a total of $315,151 for each entity. This funding is classified as Other Current Liabilities and described in note 9 above. No additional funding will be provided to AgTechnix. The funding will be repaid to DataDot and IPECO equally from profits generated by AgTechnix over the next three years. If insufficient profits are generated during the three years then the remaining balance will be extinguished at the end of the three year period.

13. Events after the Balance Date

On 15 August 2012, a share sale agreement was executed between DataDot Technology Limited (DataDot) and the twenty per cent shareholder of DataDot Technology UK Limited (DDUK). Under the agreement, all the shares owned by the minority shareholder were purchased by DataDot for an agreed consideration of £150,000. The minority shareholder is also a director of the company that provided DDUK with the interest free loan. This interest free loan is classified as Other Current Liabilities and described in note 9 above. As part of the share sale agreement, £100,000 of the £250,000 loan balance that is due and payable by 15 December 2012 was paid to the minority shareholder, with payment of the remaining £150,000 extended to be due and payable in December 2012 (£5,000), July 2013 (£50,000), December 2013 (£50,000) and June 2014 (£45,000).

DataDot has also executed a share sale agreement with the other minority shareholder who owns eight per cent of DDUK. Under the agreement, all the shares owned by the minority shareholder will be purchased by DataDot for an agreed consideration of £60,000, payable during FY2013. This agreement will be effective on 30 August 2012, at which point DataDot will own 100% of DDUK.

Apart from the matters disclosed above, no matter or circumstance has arisen since 30 June 2011 that has significantly affected, or may significantly affect DataDot’s operations in subsequent financial years, the results of those operations in subsequent years or DataDot’s state of affairs in subsequent financial years.

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