DATADOT TECHNOLOGY LIMITED — Interim / Quarterly Report 2007

Aug 29, 2007

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DATADOT TECHNOLOGY LIMITED ABN: 54 091 908 726

APPENDIX 4E Preliminary Financial Report 30 June 2007

Contents	Page
Results for announcement to market	2
Discussion and analysis of the financial statements	2
Preliminary Consolidated Income statement	6
Preliminary Consolidated Balance sheet	7
Preliminary Consolidated Statement of changes in equity	8
Preliminary Consolidated Cash flow statement	9
Notes to preliminary consolidated financial statements	10

Audit

The financial information included in this document for the year ended 30 June 2007 is unaudited and has been derived from the draft financial report of DataDot Technology Limited for the year ended 30 June 2007.

Annual General Meeting

The Company’s annual general meeting will be held on 1 November 2007. Further details will be provided to shareholders in due course.

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Results for announcement to market

		% change	30 June 2007
Revenues from ordinary activities	up	28% to	12,069,743
Loss from ordinary activities after tax attributable to members	up	41% to	(2,023,454)
Net loss for the period attributable to members	up	41% to	(2,023,454)

Dividends

No dividends have been declared or paid during the year.

Control over entities

No control was gained or lost during the year.

Discussion and analysis of financial results

• Total revenue $12,069,743;

• Sale of goods increased 34%;

• South African sales revenue increased 135%;

• Australasian sales revenue increased 30%;

• Core EBITDA up 169%;

• Net tangible assets per security increased from 1.49 cents to 5.58 cents per share;

• Net assets increased 281%;

• Cash increased 304%;

Overview

The group has had a solid year of growth with sales of goods up 34% on the previous year. Graph 1.1 depicts the continuing trend of increasing revenues from the sale of goods.

Graph 1.1

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Sale of Goods
$12,000
$10,000
$8,000 $10,503
$'000 $6,000
$7,854
$4,000
$5,424
$2,000
$
2005 2006 2007
Financial Year Ending
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2

The growth in sale of goods is largely attributable to organic growth in 2 of the 4 market segments. South African sale of goods increased 135% from $1,302,535 to $3,064,914 and Australasian sales of goods increased 30% from $4,129,550 to $5,354,217.

To provide clarity in the core performance of our operations, we present the core EBITDA. Core EBITDA excludes all net finance costs and taxation, share based-payments, the contribution to profit / loss from the DataTrace DNA joint venture and any non-recurring items. The differences between Core EBITDA and EBITDA are set out in Table 1.1.

Table 1.1	2007 2006 $ $
Core EBITDA Interest Expense Income Tax Expense Depreciation & Amortisation Impact of equity accounting for statutory purposes Share of jointly controlled entity Share based payments Non-recurring items Loss after income tax	597,168 (862,104) (210,907) (231,480) (82,663) - (448,504) (495,892) (722,640) 154,891 (195,478) (745,515) (960,430) 750,000
	(2,023,454) (1,430,100)

The core EBITDA is $597,168 for the 2007 financial year. The Group has therefore increased its revenue and improved its core EBITDA on the previous year.

Summarised operating results by segment are disclosed in Table 1.2

Table 1.2	Total Revenues Results Total Revenues Results $ $ $ $ 2006 2007
Geographic segments Australasia USA Europe South Africa Consolidated entity adjustments Non-segment unallocated revenues and expenses Finance costs Share of profit / (loss) of joint venture Income tax expense Consolidated entity sales and loss from ordinary activites before income tax expense	6,944,692 1,640,973 4,888,260 789,452 1,854,093 (622,068) 2,096,745 (122,897) 426,114 (427,547) 398,403 (78,331) 3,064,914 615,774 1,302,535 25,288
	12,289,813 1,207,132 8,685,943 613,512 (511,284) - (92,765) - 291,214 (2,404,296) 870,399 (1,967,023) - (210,907) - (231,480) - (722,640) - 154,891 - (82,663) - -
	12,069,743 (2,213,374) 9,463,577 (1,430,100)

3

USA Operations

Management has completed a detailed review of the US subsidiary and has now taken corrective action to stem the losses (2007 DataDot Technology USA, Inc loss of $622,068). US operations have been restructured with flow on cost benefits. The dual locations of the US operations have been consolidated into one new purpose-built manufacturing facility. The yearly cost savings amount to approximately $375,000.

UK Operations

The UK subsidiary loss of $427,547 is a reflection of an extended pre-growth phase. The Board is confident of the growth potential for DataDot Technology UK Ltd and believes that in the 2008 financial year significant revenues will begin to flow into this subsidiary from its expansion into Europe.

Operating Expenses

The Group’s operating expenses increased to $9,644,118 from $8,610,963 in the 2006 financial year, an increase in operating expenses of $1,033,155 (12%). This increase includes:

• Non-recurring costs • Increase in costs incurred on behalf of DataTrace DNA Total	$585,430 $501,570
	$1,087,000

Cash

There was an increase in cash in the year ended 30 June 2007 of $3,575,487 (2006: decrease of $2,838,198). There was a significant increase in cash flows from financing activities for the year ended 30 June 2007 due to share placement and exercise of options during the year.

Operating activities consumed $958,259 (2006: $1,542,338). This reduction is largely due to an increase in cash generated from sales.

Cash outflows from investing activities during the year ended 30 June 2007 increased to $3,275,884 (2006: $1,428,061), which was mainly attributable to investing in the joint venture, DataTrace DNA Pty Ltd and to a lesser extent the DataDot Robot.

4

DataDot “Robot”

The DataDot Robot is a fully automated DataDotDNA spray application system that will ultimately replace the time-consuming process of applying DataDotDNA to vehicles manually.

Using the DataDot Robot 7,000 DataDotDNA are applied to a vehicle in under 60 seconds, compared with manual application that takes up to 8 minutes. This allows the DataDot Robot to be introduced on vehicle assembly lines or in import pre-delivery centres for fullyimported cars, so improving significantly the economics of whole-of-vehicle-marking for vehicle manufacturers. This automated function overcomes one of the primary objections of vehicle manufacturers to whole-of-vehicle-marking, namely, the inability to date of DataDotDNA application to fit within the cycle time of the vehicle manufacturing process.

The DataDot Robot is now operating in the largest vehicle import centre in Australia, where it was launched to industry and government agencies by Victoria Police at an event convened by the National Motor Vehicle Theft Reduction Council.

The DataDot Robot was developed in conjunction with financial grants from the Australian Government’s AusIndustry and the National Motor Vehicle Theft Reduction Council. Recently the AusIndustry grant was increased by an additional $383,591 together with an extension of time for final development of both the “on line” version of the Robot, which will apply DataDotDNA to vehicles on assembly lines, and “off line” version, which will apply DataDotDNA after final assembly.

The DataDot Robot will greatly enhance the Group’s entry into OE vehicle fitment in all markets.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

DataDot Technology Limited Preliminary Consolidated Income Statement FOR THE YEAR ENDED 30 JUNE 2007

Note	CONSOLIDATED 2007 2006 $ $
Continuing operations Sale of goods Rendering of services Licence fees Finance revenue Revenue Cost of sales Gross profit Other income Employee benefits expense Administrative expenses Advertising and promotional expenses Occupancy expenses Travel expenses Finance costs Depreciation and amortisation expense Bad and doubtful debts Share of profit / (loss) of joint venture 3 Loss from continuing operations before income tax expense Income tax expense Loss from continuing operations after income tax Attributable to: Minority interest Members of the Parent Earnings per share (cents per share) - basic for loss attributable from continuing operations attributable to ordinary equity holders of the parent 1	10,502,986 7,854,457 1,219,218 717,648 56,325 771,123 291,214 120,349
	12,069,743 9,463,577 (3,816,137) (2,546,748)
	8,253,606 6,916,829 172,361 109,143 (5,810,255) (5,273,024) (1,736,399) (1,164,367) (417,152) (303,110) (472,048) (497,198) (535,297) (502,207) (210,907) (231,480) (448,504) (495,892) (13,556) (143,685) (722,640) 154,891
	(1,940,791) (1,430,100) (82,663) -
	(2,023,454) (1,430,100)
	189,922 - (2,213,376) (1,430,100) (1.56) (1.21)

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

DataDot Technology Limited Preliminary Consolidated Balance Sheet AS AT 30 JUNE 2007

AS AT 30 JUNE 2007
Note	CONSOLIDATED 2007 2006 $ $
ASSETS Current Assets Cash and cash equivalents 2 Trade and other receivables Inventories Total Current Assets Non-Current Assets Receivables Other financial assets Investment accounted for using the equity method 3 Plant and equipment Intangible assets 4 Deferred tax assets Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Interest bearing loans and borrowings Income Tax Payable Provisions Total Current Liabilities Non-Current Liabilities Interest bearing loans and borrowings Other-non current liabilities 5 Provisions Total Non-Current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the parent Contributed equity 6 Accumulated losses Reserves Parent interests Minority interests TOTAL EQUITY	4,730,149 1,169,581 3,492,748 2,534,870 513,360 395,062
	8,736,257 4,099,513
	- 26,648 - - 2,983,344 1,209,997 1,219,356 965,087 2,045,641 907,831 39,677 -
	6,288,018 3,109,563
	15,024,275 7,209,076
	1,871,398 1,645,790 297,434 1,289,843 117,726 - 592,795 275,986
	2,879,353 3,211,619
	383,332 381,546 1,337,004 785,142 25,650 104,775
	1,745,986 1,271,463
	4,625,339 4,483,082
	10,398,936 2,725,994
	26,456,519 16,695,271 (16,210,047) (13,996,674) (37,457) 27,397
	10,209,015 2,725,994 189,921 -
	10,398,936 2,725,994

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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 2007

CONSOLIDATED	Attributable to equity holders of the parent Minority interest Total equity Issued Capital Accumulated losses Foreign currency translation reserve Total $ $ $ $ $ $
At 1 July 2005 Adjustment on application of AASB 132 and AASB 139 Currency translation differences Total income and expense for period recognised directly in equity (Loss) for the period Total income / expense for the period Issue of share capital Cost of share-based payments At 30 June 2006	15,127,788 (12,861,479) 44,682 2,310,991 - 2,310,991 - 294,905 - 294,905 - 294,905 - - (17,285) (17,285) - (17,285)
	- - (17,285) (17,285) - (17,285) - (1,430,100) - (1,430,100) - (1,430,100)
	- (1,430,100) (17,285) (1,447,835) - (1,447,835) 821,968 - - 821,968 - 821,968 745,515 - - 745,515 - 745,515
	16,695,271 (13,996,674) 27,397 2,725,994 - 2,725,994
Currency translation differences Total income and expense for period recognised directly in equity (Loss) for the period Total income / expense for the period Issue of share capital Transaction costs on shares issued Cost of share-based payments At 30 June 2007	- - (64,854) (64,854) - (64,854) - - (64,854) (64,854) - (64,854) - (2,213,374) - (2,213,374) 189,922 (2,023,452)
	- (2,213,374) (64,854) (2,278,228) 189,922 (2,088,306) 9,897,500 - - 9,897,500 - 9,897,500 (331,730) - - (331,730) - (331,730) 195,478 - - 195,478 - 195,478
	26,456,519 (16,210,048) (37,457) 10,209,014 189,922 10,398,936

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

Preliminary Consolidated Cash Flow Statement FOR THE YEAR ENDED 30 JUNE 2007

Note	CONSOLIDATED 2007 2006 $ $
Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest paid Receipt of government grant Net cash (used in) operating activities 2 Cash flows from investing activities Proceeds from sale of plant and equipment Interest received Purchase of plant and equipment Purchase of intangible assets Purchase of investment accounted for using the equity method Receipt of government grant Loans to controlled and jointly controlled entities 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 Repayment of related party loans Repayment of finance lease payments Net cash provided by financing activities Net increase / (decrease) in cash held Cash at beginning of year Effect of exchange rate on cash holdings in foreign currencies Cash at end of year 2	12,266,842 8,445,147 (13,186,555) (9,828,555) (210,907) (197,208) 172,361 38,278
	(958,259) (1,542,338)
	- 348,701 291,214 120,349 (453,952) (361,408) (1,239,946) (828,217) (2,495,186) (1,055,106) 621,986 347,620 -
	(3,275,884) (1,428,061)
	9,052,500 412,500 (331,730) - - 219,392 (135,914) (548,709) (157,202) (226,517) (342,489)
	7,809,630 132,201
	3,575,487 (2,838,198) 1,169,581 4,024,831 (14,919) (17,052)
	4,730,149 1,169,581

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

NOTES TO THE FINANCIAL STATEMENTS

1. 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 (after deducting interest on the convertible redeemable preference shares) 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:

	CONSOLIDATED	CONSOLIDATED
	2007	2006
	$	$
Net loss attributable to ordinary equity holders of the parent from continuing
operations	(2,213,376)	(1,430,100)
	Number	Number
Weighted average number of ordinary shares for basic earnings per share	142,322,122	118,340,733
The following potential ordinary shares are not dilutive and are therefore
excluded from the weighted average number of ordinary shares for the
purposes of diluted earnings per share:
Convertible Notes	-	3,591,648
Share options	19,745,000	25,795,000
The following options are not treated as potential ordinary shares as their	1,000,000
exercise price exceeds current market price.
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 FINANCIAL STATEMENTS

2. CASH ASSETS

Reconciliation to Cash Flow Statement

Reconciliation to Cash Flow Statement
	CONSOLIDATED 2007 2006 $ $
For the purposes of the Cash Flow Statement, 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 from ordinary activities after income tax Add / (less) items classified as investing / financing activities: (Profit) / loss on sale of plant and equipment Share of joint venture profit Interest received Add / (less) non-cash items: Depreciation and amortisation Share options expensed Inventory write down Provision for: – doubtful debts Net cash used in operating activities before change in assets and liabilities (Increase) / decrease in trade and other debtors (Increase) / decrease in other assets (Increase) / decrease in inventory (Increase) / decrease in deferred tax assets (Decrease) / increase in creditors and accruals (Decrease) / increase in current tax liability (Decrease) / increase in provisions Net cash used in operating activities	4,730,149 1,169,581
	(2,023,454) (1,402,079) - (617) 722,640 (154,891) (291,214) (120,349) 448,504 495,892 195,477 745,515 7,170 18,191 7,835 140,961
	(933,042) (277,377) (423,966) (1,506,529) 9,387 (70,100) (125,469) (38,933) (39,677) - 195,282 254,181 122,340 - 236,886 96,420
	(958,259) (1,542,338)

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

NOTES TO THE FINANCIAL STATEMENTS

	CONSOLIDATED 2007 2006 $ $
3. INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD Investment in an joint venture
	2,983,344 1,209,997

The Company has a 50% interest in DataTrace DNA Pty Ltd, which is involved in the high security authentication solutions for bulk products. The joint venture agreements were executed on the 31[st] of October 2005.

DataTrace DNA Pty Ltd is a small proprietary company incorporated in Australia.

Pursuant to a shareholder agreement the company has the right to cast 50% of the votes at shareholder meetings.

There were no impairment losses relating to the investment in the joint venture.

The following table illustrates summarised financial information relating to the Group's investment in DataTrace DNA Pty Ltd:

Pty Ltd:
Summarised financial information of jointly controlled entity: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Income Expenses Share of the jointly controlled entity’s profit: Profit / (Loss) before income tax Income tax expense Profit / (Loss) after income tax	CONSOLIDATED 2007 2006 $ $
	2,328,354 1,211,400 2,426,784 1,127,903
	4,755,138 2,339,303
	(1,931,775) (974,414) - -
	(1,931,775) (974,414)
	2,823,363 1,364,889
	256,725 1,118,410 1,702,005 808,628 (722,640) 154,891 - -
	(722,640) 154,891

No dividends were received by the Company during the year from the joint venture entity.

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

4 INTANGIBLE ASSETS

4 INTANGIBLE ASSETS
	CONSOLIDATED Development costs $ Patent costs $ Total $
At 1 July 2006 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Year ended 30 June 2007 At 1 July 2006, net of accumulated amortisation Additions Additions – internal development Disposals Amortisation At 30 June 2007, net of accumulated amortisation At 30 June 2007 Cost Accumulated depreciation Net carrying amount	968,217 - 968,217 (60,386) - (60,386)
	907,831 - 907,831
	907,831 - 907,831 1,055,202 98,633 1,153,,835 86,111 - 86,111 - - - (98,209) (3,927) (102,136)
	1,950,935 94,706 2,045,641
	2,109,530 98,633 2,208,163 (158,595) (3,927) (162,522)
	1,950,935 94,706 2,045,641)

Development costs have been capitalised at cost. The intangible assets have been assessed as having a finite life. Development costs relating to the DataDot Automated Applicator Cell (DAAC) of $1,795,296 will be amortised once the project has been completed. All other intangible assets are amortised using the straight line method over a period of 3 years. 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.

No impairment loss was recognised for continuing operations in the 2007 financial year. The recoverable amount of the DAAC has been determined based on a value in use calculation using cash flow projections based on financial budgets approved by senior management covering a five-year period. The average discount rate applied to cash flow projections is 23%.

	CONSOLIDATED Development costs $
Year ended 30 June 2006 At 1 July 2005, net of accumulated amortisation Additions Additions – internal development Disposals Amortisation At 30 June 2006, net of accumulated amortisation At 30 June 2006 Cost Accumulated depreciation Net carrying amount	350,000 663,557 164,660 (210,000) (60,386)
	907,831
	968,217 (60,386)
	907,831

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

CONSOLIDATED	CONSOLIDATED
2007	2006
$	$

5. OTHER NON-CURRENT LIABILITIES

Unearned revenue Unsecured loans from: Amounts payable to other parties (i) Government grant (ii)	- - 367,398 437,522 969,606 347,620
	1,337,004 785,142

(i) Included in payables to other parties is an amount of £155,630 ($367,398) which DataDot Technology (UK) Ltd (DDUK) has borrowed on an interest free basis. The loan, which is guaranteed by the Company, 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.

(ii) The grant relates to an asset and will be release to the income statement over the expected useful life of the relevant asset by equal annual instalments upon completion of the grant project.

	CONSOLIDATED 2007 2006 $ $
6 CONTRIBUTED EQUITY Ordinary Shares Issued and fully paid
	26,456,519 16,695,271

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

	Number	$
Movement in ordinary shares on issue
At 1 July 2005	115,684,556	15,127,788
Shares issued:
Conversion of convertible notes	3,751,276	409,468
Exercise of share options	2,550,000	412,500
Cost of share-based payments	-	745,515
At 1 July 2006	121,985,832	16,695,271
Shares issued:
For cash at $0.42 per share	18,250,000	7,665,000
Less :cost of capital raisings	-	(331,729)
Conversion of convertible notes	3,591,648	845,000
Exercise of share options	5,750,000	1,387,500
Cost of share-based payments	-	195,477
At 30 June 2007	149,577,480	26,456,519

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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