DATADOT TECHNOLOGY LIMITED — Interim / Quarterly Report 2008

Aug 28, 2008

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DATADOT TECHNOLOGY LIMITED ABN: 54 091 908 726

APPENDIX 4E Preliminary Financial Report 30 June 2008

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	10-13

Audit

The financial information included in this document for the year ended 30 June 2008 is unaudited and has been derived from the draft financial report of DataDot Technology Limited for the year ended 30 June 2008. The previous corresponding period was for the year ended 30 June 2007.

Annual General Meeting

The Company’s annual general meeting will be held on 26 November 2008. Further details will be provided to shareholders in due course.

Results for announcement to market

		% change	30 June 2008	30 June 2007
Revenues	up	9% to	13,174,849	12,069,743
Profit after tax attributable to members	up	*	1,305,436	(2,023,454)
Net profit for the period attributable to members	up	**	1,024,984	(2,023,454)

• A profit after tax attributable to members of $1,305,436 was recorded for the current year and a loss of $2,023,452 was recorded for the prior period.

** A net profit for the period attributable to members of $1,024,984 was recorded for the current year and a loss of $2,023,452 was recorded for the prior period.

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

• Net Profit improved by $3,328,888 from a loss of $2,023,452 to a profit of $1,305,436

• EBITDA improved by $2,510,939 from a loss of $1,281,378 to a positive EBITDA of $1,229,561

• EBIT improved by $2,491,772 from a loss of $1,729,882 to a positive EBIT of $761,890

• Total revenue increased 9% to $13,174,849;

• US profit from operations improved 102%

• UK sales revenue increased 53%

• Australasian sales revenue increased 21%;

• South African sales revenue increased 16%;

• Net tangible assets per security increased from 5.58 cents to 5.73 cents per share;

• Net assets increased 9%;

Overview

The Earnings before Interest, Tax, Depreciation and Amortisation (“EBITDA”) for the year was $1,229,561 (2007: negative $1,281,378). This represents an improvement of $2,510,939.

The group has had a growth of sales of goods of 7% on the previous year. The decline in the growth rate of the sales of goods is largely attributable to the appreciation of the Australian Dollar against the South African Rand, US Dollar and British Pound.

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USA Operations

As a result of a detailed review of the US subsidiary and the corrective action taken to stem the losses incurred by DataDot Technology USA, Inc in the previous year (2007 loss of $622,068) the USA operations have reported a segment result of $15,403. The net operating profit after tax was $891,108 due to the recognition of carried forward tax losses of $866,488.

Whilst product sales for the 2008 year were down by $527,621 from $1,700,864 to $1,173,243, a 31% decrease, the product sales for the second half of the 2008 financial year were up by 27% on the first half of the financial year. The appreciation of the Australian Dollar against the US Dollar accounted for 10% of the decline of the reported product sales downturn.

The results included some additional restructuring costs incurred during the 2008 financial year.

Since bedding down the restructuring in the first half of the financial year Management has been focussed on the dual tasks of improving the contribution margin and revenue growth. Part of this strategy has included more open dialogue and communication with customers. The results and revenue growth of the second half of the financial year indicates that the current strategy is working and further revenue growth and improved results are expected.

UK Operations

UK product sales increased by 69% from $382,992 to $647,271. The appreciation of the Australian Dollar against the British Pound deflated the reported growth by 9%.

The loss from operations reduced from $(427,547) to $(299,415), an improvement of 30%.

Whilst a significant improvement on last year, the results of the UK operations did fall short of internal targets. Management is seeking to realise more revenue growth from this large market segment.

South Africa Operations

The South African vehicle market experienced a downturn attributable to global slowdown, interest rates, introduction of the National Credit Act and the depreciation of the Rand. The result of these factors has been a decline in business and consumer confidence, which has impacted negatively on vehicle sales, particularly sales of passenger cars. Accordingly, whilst revenue from product sales were up by 15% from $ 3,064,914 to $ 3,538,704 for the full year, the sales for the second of half of the year were down on those obtained in the first half of the financial year. The South African motor vehicle industry believes that the slow down in sales will pass in the medium term. The company is seeking additional growth through adding additional customers to its current customer list.

The strong appreciation of the Australian Dollar against the South African Rand during the year affected the translation of South Africa sales and results. The negative effect of the appreciation of the Australian Dollar against the South African Rand on sales was a 19% fall

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in sales. Therefore whilst South Africa actually experienced a 34% growth in actual sales in its functional currency the translated growth in Australian Dollars was only 15%.

South Africa results increased from $615,774 to $960,811, an improvement of 56%.

Australasian Operations

Australasia total segment revenue increased 21% from $6,944,692 to $8,416,340. The product sales to external customers increased by 10% from $5,354,217 to $5,866,141.

The segment results improved by 41% from $1,640,973 to $2,309,883 due to a combination of higher product sales and reduction of operating costs.

Whilst pleased with the results, the company is currently seeking to increase its customers base and improve sales through targeting non-automotive sale channels that enable greater sales and sales margins whilst focussing on reducing further operating costs.

DataTrace DNA Pty Limited

The share of the loss from the DataTraceDNA Pty Limited joint venture was $586,430 (2007: loss $722,640). Management has focussed on cost containment with savings to DataTrace DNA Pty Limited exceeding $500,000 per annum having been recently implemented.

Operating Expenses

The Group’s operating expenses decreased to $8,338,664 from $9,644,116 in the 2007 financial year, a decrease in operating expenses of $1,305,452 (14%).

Management is continuing its focus on cost reduction into the 2009 year.

Cash

There was a decrease in cash in the year ended 30 June 2008 of $2,090,686 (2007: increase of $3,575,487). 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 generated $748,962 (2007: consumed $958,259). This improvement is a result of a combination of costs reductions and increased revenues.

Cash outflows from financing activities totalled $226,442 (2007 inflow of $7,809,630). This movement is because of the share placement and exercise of options in the 2007 year.

Cash outflows from investing activities during the year ended 30 June 2008 decreased to $2,553,626 (2007: $3,275,884), which was mainly attributable to investing in the joint venture, DataTrace DNA Pty Ltd and to a lesser extent the DataDot Robot.

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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.

During the year commercial prove-out of the DataDot Robot was successfully completed across four vehicle brands at the largest vehicle import centre in Australia operated by Prixcar. From August 2008 it is being used to apply DataDotDNA to all vehicles imported by Audi Australia.

New Zealand Whole of Vehicle Marking (“WOVM”)

Mandatory WOVM did not commence in New Zealand from July 1 2008 due to legal proceedings launched in the New Zealand High Court by the Motor Industry Association challenging the validity of the Rule-making process. The action is being defended by the New Zealand Government. DataDot Technology Limited has been granted leave to join the proceedings as an additional respondent, so ensuring that the company’s interests can be directly represented. A trial date has been set for early February 2009.

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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 2008

Note	CONSOLIDATED 2008 2007 $ $
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 loss of joint venture Profit /(Loss) from continuing operations before income tax expense Income tax (expense) /benefit Profit /(Loss) from continuing operations after income tax Attributable to: Minority interest Members of the Parent Earnings per share from profit /(loss) from continuing operations attributable to the ordinary equity holders of the company 2 Basic earnings per share Diluted earnings per share	11,225,360 10,502,986 1,381,469 1,219,218 416,989 56,325 151,031 291,214
	13,174,849 12,069,743 (3,668,683) (3,816,137)
	9,506,166 8,253,606 162,515 172,361 (4,568,354) (5,810,253) (1,944,066) (1,736,399) (417,470) (417,152) (478,631) (472,048) (438,074) (535,297) (87,047) (210,907) (470,516) (448,504) (3,251) (13,556) (586,430) (722,640)
	674,842 (1,940,788) 630,594 (82,663)
	1,305,436 (2,023,452)
	280,452 189,921 1,024,984 (2,213,373)
	Cents Cents 0.69 (1.56) 0.65

Diluted earnings per share for the year ended 30 June 2007 are not disclosed because the options were not dilutive and therefore were not classified as potential ordinary shares.

The above Preliminary Consolidated Income Statement 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 Balance Sheet AS AT 30 JUNE 2008

AS AT 30 JUNE 2008
Note	CONSOLIDATED 2008 2007 $ $
ASSETS Current Assets Cash and cash equivalents 3 Trade and other receivables Inventories Total Current Assets Non-Current Assets Receivables Investment accounted for using the equity method Plant and equipment Intangible assets 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 Provisions Total Non-Current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Equity attributable to equity holders of the parent Contributed equity Accumulated losses Reserves Parent interests Minority interests TOTAL EQUITY	2,639,463 4,730,149 3,275,780 3,406,552 537,237 513,360
	6,452,480 8,650,061
	97,134 86,196 4,350,431 2,983,344 1,096,344 1,219,356 2,799,022 2,045,641 924,695 39,677
	9,267,626 6,374,214
	15,720,106 15,024,275
	2,115,006 1,871,398 191,926 297,434 41,652 117,726 505,764 592,795
	2,854,348 2,879,353
	142,691 383,332 1,316,883 1,337,004 33,113 25,650
	1,492,687 1,745,986
	4,347,035 4,625,339
	11,373,071 10,398,936
	26,456,519 26,456,519 (15,185,063) (16,210,047) (368,758) (37,457)
	10,902,698 10,209,015
	470,373 189,921
	11,373,071 10,398,936

The above Preliminary Balance Sheet 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 2008

CONSOLIDATED	Attributable to equity holders of the parent Minority interest Total equity Issued Capital Accumulated losses Foreign currency translation reserve Total $ $ $ $ $ $
At 1July 2006	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 Currency translation differences Total income and expense for period recognised directly in equity Profit / (Loss) for the period Total income / expense for the period At 30 June 2008	- - (64,854) (64,854) - (64,854) - - (64,854) (64,854) - (64,854)
	- (2,213,373) - (2,213,373) 189,921 (2,023,452) - (2,213,373) (64,854) (2,278,227) 189,921 (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 (16,210,047) (37,457) 10,209,015 189,921 10,398,936
	- - (331,301) (331,301) - (331,301)
	- - (331,301) (331,301) - (331,301) - 1,024,984 - 1,024,984 280,452 1,305,436
	- 1,024,984 (331,301) 693,683 280,452 974,135
	26,456,519 (15,185,063) (368,758) 10,902,698 470,373 11,373,071

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

Preliminary Consolidated Cash Flow Statement FOR THE YEAR ENDED 30 JUNE 2008

Note	CONSOLIDATED 2008 2007 $ $
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 provided by /(used in) operating activities 3 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 Net cash (used in) investing activities Cash flows from financing activities Proceeds from issue of shares Transaction costs from issue of shares Repayment of borrowings Proceeds from Joint Venture Loan repayment Loans to Joint Venture Advance to minority interest Proceeds/(payments) from/(to) related party loans Payment of finance lease liabilities Net cash provided by /(used in) 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 3	14,470,129 12,266,842 (13,425,303) (13,186,555) (55,756) (210,907) (330,498) - 90,390 172,361
	748,962 (958,259)
	22,111 - 138,235 291,214 (252,942) (453,952) (507,513) (1,239,946) (1,953,517) (2,495,186) - 621,986
	(2,553,626) (3,275,884)
	- 9,052,500 - (331,730) (204,294) (135,914) 528,103 - - (501,455) (457,044) - 108,928 (47,254) (202,115) (226,517)
	(226,422) 7,809,630
	(2,031,086) 3,575,487 4,730,149 1,169,581 (59,600) (14,919)
	2,639,463 4,730,149

The above Preliminary Consolidated Cash Flow Statement 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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Preliminary Consolidated Financial Statements of DataDot Technology Limited and subsidiaries for the year ended 30 June 2008 do not include all the notes of the type that would normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance and financial position of the Group as the full financial report.

Basis of Preparation

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

Unless otherwise detailed in this note, accounting policies have been consistently applied by the entities in the Group and are consistent with those applied in the 30 June 2007 annual report.

Changes in Accounting Policy

Since 1 July 2007 the Group has adopted the following Standards and Interpretations, mandatory for annual periods beginning on or after 1 January 2007. The Group has assessed the impact of adopting these Standards and Interpretations and do not believe that there is an effect on the financial position or performance of the Group. These Standards and Interpretations will be disclosed in the 2008 financial report.

• AASB 7 Financial Instruments: Disclosures

• AASB 2005-10 Amendments to Australian Accounting Standards (AASB 132, 101, 114, 117, 133, 139, 1, 4, 1023 and 1038).

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (Cont’d)

2. 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
	2008	2007
	$	$
Net Profit / (loss) attributable to ordinary equity holders of the parent from
continuing operations	1,024,984	(2,213,373)
	Number	Number
Weighted average number of ordinary shares for basic earnings per share	149,577,480	142,322,122
Effect of dilution:
Share Options	7,995,000	-
Weighted average number of ordinary shares adjusted for the effect of dilution	157,572,480	-
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:
Share options	-	19,418,000
The following options are not treated as potential ordinary shares as their
exercise price exceeds current market price	12,173,000	1,000,000
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)

3. CASH ASSETS

Reconciliation to Cash Flow Statement	CONSOLIDATED 2008 2007 $ $
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 profit /(loss) after tax to net cash flows from operations Profit/(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 Share options expensed Inventory impairment Impairment of trade receivable Net cash used in operating activities before change in assets and liabilities (Increase) / decrease in trade and other receivables (Increase) / decrease in inventories (Increase) / decrease in deferred tax assets (Decrease) / increase in trade and other payables (Decrease) / increase in current tax liabilities (Decrease) / increase in provisions Net cash provided by /(used in) operating activities	2,639,463 4,730,149
	1,305,436 (2,023,452) 586,430 722,640 (138,235) (291,214) 470,515 448,504 - 195,478 (16,149) 7,170 - 7,835
	2,207,997 (933,039) (155,460) (414,579) (7,728) (125,469) (885,018) (39,677) (260,111) 195,282 (76,074) 122,340 (74,644) 236,883
	748,962 (958,259)

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

NOTES TO THE PRELIMINARY CONSOLIDATED FINANCIAL STATEMENTS (Cont’d)

4. SEGMENT INFORMATION Year ended 30 June 2008 Revenue Sales to external customers Other revenues from external customers Inter-segment sales Total segment revenue Inter-segment elimination Non segment revenue Total consolidated revenue Result Segment Results Unallocated expenses Profit before tax and finance costs Finance costs Share of loss of joint venture Profit before income tax Income tax revenue Net profit for the year Assets and liabilities Segment Assets Investment in joint venture Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Other segment information Capital expenditure Depreciation Amortisation Impairment of trade receivables	Australasia USA Europe South Africa $ $ $ $	Total $
	5,866,141 1,173,243 647,271 3,538,704 1,762,880 35,577 - - 787,319 218,491 6,216 7,627	11,225,360 1,798,458 1,019,654
	8,416,340 1,427,311 653,487 3,546,331	14,043,471 (1,019,654) 313,547
	2,309,883 15,403 (299,415) 960,811 1,742,753 1,649,134 490,515 1,529,487 833,174 225,650 475,936 208,008 219,777 2,105 6,833 63,709 486,439 5,086 11,670 15,248 - - - - - 3,098 - 152
		13,337,364
		2,986,682 (1,638,362)
		1,067,867 (87,047) (586,430)
		674,842 630,594
		1,305,436
		5,411,888 4,350,431 5,957,787
		15,720,106
		1,742,769 2,604,266
		4,347,035
		292,423 518,443 116,672 3,251

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