DATADOT TECHNOLOGY LIMITED — Interim / Quarterly Report 2009

Aug 20, 2009

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DATADOT TECHNOLOGY LIMITED ABN: 54 091 908 726

APPENDIX 4E Preliminary Financial Report 30 June 2009

Contents	Page
Results for announcement to market	2
Discussion and analysis of financial results	2
Preliminary Consolidated Income statement	9
Preliminary Consolidated Balance sheet	10
Preliminary Consolidated Statement of changes in equity	11
Preliminary Consolidated Cash flow statement	12
Notes to preliminary consolidated financial statements	13-24

Audit

The financial information included in this document for the year ended 30 June 2009 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 2009. The previous corresponding period was for the year ended 30 June 2008.

Annual General Meeting

The Company’s annual general meeting will be held on 16 October 2009. Further details will be provided to shareholders in due course.

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

Results for announcement to market

		% change	30 June 2009	30 June 2008 [1]
Revenues (with 2008 on a restated basis)	down	15% to	8,159,972	9,563,244
Profit/ (Loss) from continuing operations after income tax	down	[2]	(10,590,238)	536,938
Profit/(Loss) from ordinary activities after income tax attributable to members	down	[3]	(11,114,329)	1,024,984
Net Profit/(Loss) for the period attributable to members	down	[4]	(11,114,329)	1,024,984

• [1] Restated to reflect discontinued operations.

• [2] A loss from continuing operations after income tax of $10,590,238 was recorded for the current year and a profit of $536,938 was recorded for the prior period.

• [3] A loss from ordinary activities after income tax of $11,114,329 was recorded for the current year and a profit of $1,024,984 was recorded for the prior period.

• [4] A loss for the period attributable to members of $11,114,329 was recorded for the current year and a profit of $1,024,984 was recorded for the prior period.

Dividends

No dividends have been declared or paid during the year.

Control over entities

On 11[th] March 2009, DataDot Technology Limited (DDT) entered into an agreement with DataDot Technology South Africa (Proprietary) Limited (DDSA) to progressively dispose of DDT’s 42.5% equity interest in DDSA via a put and call agreement to the two South African shareholders who manage DDSA. The Board of DDT determined that the entire shareholding in DDSA was deemed to be fully disposed on 11[th] March 2009. Royalties from DDSA were increased from 5% to 7.5% through a new Licence Agreement between DDSA and DDT executed on the same date. Therefore DDSA is no longer included in the consolidated accounts and is shown as a discontinued operation.

Discussion and analysis of financial results

• Net profit/ (loss) decreased from a profit of $1,305,436 in 2008 to a loss of $10,985,322 in 2009.

• EBITDA (on a restated basis excluding discontinued operations) decreased from a positive EBITDA of $188,227 in 2008 to a loss of $8,960,005 in 2009.

• EBITDA for 2009 excluding one-off charges for restructuring expenses and impairment losses was a loss of $1,818,935.

• Share of loss of joint venture (DataTraceDNA Pty Ltd) increased from a loss of $586,430 in 2008 to a loss of $2,096,345 in 2009. The share of loss in 2009 included impairment losses of $3,234,437 (2008: $Nil) associated with the full impairment by DataTraceDNA Pty Ltd of capitalised research and development costs.

• Total revenue (on a restated basis) decreased 15% to $8,159,972.

• Europe customer revenue increased 171% and Europe net profit increased by $397,565.

• Australasian customer revenue decreased 27% and US customer revenue decreased 32%.

• Net tangible assets per security decreased from 5.73 cents to 1.09 cents per share.

• Net assets decreased 80%.

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

Overview

Global trading conditions deteriorated significantly over the reporting period, impacting all areas of the economy. For DataDot Technology Limited (DataDot) the impact from the global financial crisis has significantly reduced the sales of motor vehicles in the company’s major markets. This has caused a decline in product sales and revenue from the motor vehicle related channel, reflected in the revenues of continuing operations being lower than the prior financial year; a decrease of $1,403,272 (15%) from $9,563,244 in 2008 to $8,159,972.

During the year DataDot’s 42.5% equity interest in DataDot Technology South Africa (Proprietary) Limited (DDSA) was sold via a put and call agreement to the two South African shareholders who manage DDSA. The put and call agreement allows progressive payment and disposal of DataDot’s shares in DDSA. The put side of the agreement allows DataDot to force DDSA to complete the sale in 18 months from the date of execution. DDSA is now reflected in the financial statements as a discontinued operation and prior year income statements and segment information have been restated accordingly. The results shown in discontinued operations are for the period from 1 July 2008 to 11 March 2009, after which time only royalty revenue is received from South Africa.

As the likelihood of an Original Equipment Manufacturer (OEM) taking on production-line fitment of DataDots in the present market was determined to be low, the Board determined that the DataDot Automated Applicator Cell (DAAC) was fully impaired, resulting in an impairment loss of $2,607,394, which was offset to the extent of $1,357,797 of deferred income which was recognised. The Board also considered it prudent to fully impair the Laser X Project which incurred an impairment loss of $385,840.

Consistent with the decision of the DataTraceDNA Pty Limited (DataTrace) Board to fully impair the capitalised development costs of DataTrace, the Board of DataDot determined that the investment in DataTrace was fully impaired, incurring an impairment loss of $3,217,088 (2008: $Nil). In addition, the full impairment of DataTrace capitalised development led to a full year loss after tax in DataTrace of $4,192,691 of which DataDot’s 50% share of the joint venture equated to $2,096,345.

During the second half of the year, the Board and management undertook a major restructure to significantly reduce costs, improve the efficiencies of cost of goods sold and diversify the revenue base. This will reduce the Group’s reliance on auto OEM customers and re-focus the effort on revenue generated in non-vehicle channels.

The restructure focused on changing the remuneration structure of sales staff to performance based pay, transitioning to an NPAT-driven culture. It involved the cessation of employment for several senior executives and a restructuring charge of $930,748 was incurred in the second half of the year.

At 31 December 2008, in recognition of the poor financial performance of the United States subsidiary and the significant downturn in the US auto industry, the Board decided to write-down the carrying value of tax losses in the US operations. These carried forward tax losses had previously been recognised as a deferred tax asset during the 2008 financial year.

Table 1 below illustrates the underlying business operations after removing the restructuring impacts detailed above. After excluding discontinued operations (South Africa), the restructuring impacts and brought forward tax benefits from the 2008 results (so comparing like with like between 2008 and 2009) the real impact in the underlying net profit of the business has been a reduction of $564,943.

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

Table 1 Net profit /(loss) from total operations Profits (before disposal) from discontinued operations – South Africa Impairment losses (DAAC, Laser X) Impairment losses (write down of DataTrace investment) Impairment of DataTrace capitalised development (included in share of loss of joint venture) Restructuring charges Write-down of carrying value of tax losses in US operations Pro forma net loss from continuing operations	2009 2008 Change $ $ %
	(10,985,322)1,305,436 n/a
	173,071 768,498 (77%) 2,993,234 - n/a 3,217,088 - n/a 1,617,218 - n/a 930,748 - n/a 1,139,470 886,488 29%
	(914,493) (349,550) (162%)

Summarised operating results are as follows:

Table 2 Geographic segments Australasia USA Europe Discontinued Operations (South Africa) 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	2009 2008 Total Revenues Results Total Revenues Results $ $ $ $
	6,423,961 1,404,361 8,416,341 2,315,836 1,136,057 (362,465) 1,427,312 15,403 1,753,922 98,150 653,487 (299,374) 1,785,872 (319,227) 3,546,331 1,026,085
	11,099,812 820,819 14,043,471 3,057,949 (1,183,640) - (1,019,654) - 114,955 (8,392,441) 151,032 (1,709,630) - (66,012) - (87,047) - (2,096,345) - (586,430) - (1,251,343) - 630,594
	10,031,127 (10,985,322) 13,174,849 1,305,436

Going concern

The Consolidated Entity incurred an operating loss of $10,985,322 for the year ended 30 June 2009 (2008: profit of $1,305,436).

The Consolidated Entity’s ability to continue as a going concern and develop and operate its asset identification, protection and authentication solutions is dependent upon:

• (a) its ability to further expand both its vehicle and non-vehicle revenue base;

• (b) increasing revenues from existing and new distributorships;

• (c) the ability of management to control costs and increase production efficiencies; and

• (d) the ability to raise additional funds from the issue of new shares if required.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

In the event the expected revenue expansion, cost containment and/or additional capital raisings do not occur, there is a material uncertainty that gives rise to significant doubt whether the going concern basis is appropriate and as a result that the Consolidated Entity may have to realise its assets and extinguish its liabilities other than in the ordinary course of business and in amounts different from those stated in the preliminary consolidated financial report. No allowance for such circumstances has been made in the preliminary consolidated financial report.

The preliminary consolidated financial report for 2009 has been prepared on the basis of a going concern. This basis presumes that funds will be available to finance future operations, expenditure commitments and repay liabilities and that the realisation of assets and settlement of liabilities will occur in the normal course of business. The Directors believe that the Consolidated Entity can continue to meet its debts as and when they become due and payable.

With regard to point (a), Directors have put in place actions that have increased the value-proposition for OEM clients to use, or continue to use, DataDot protection systems. Directors have also placed a greater emphasis on non-automotive revenue particularly in heavy machinery, equipment, tools, retail and commercial market segments.

With regard to point (b), Directors have instructed management to work on expanding DataDot’s overseas distribution network, with a particular focus on selecting, training and supporting new Distributors. Directors expect that by selecting quality distributors in new, targeted countries, and by better management and support of existing distributors, the Company will have greater success in securing new automotive and non-automotive clients.

With regard to point (c), Directors and Management have implemented major cost reductions in the past seven months and as a result of the Group’s restructure expect significant additional sustained savings to result.

With regard to point (d), if Directors consider that a strengthening of the working capital position of the Consolidated Entity is necessary, if the release of provisions that have been made in the current period are required in a more accelerated time-frame than budgeted, or if the Consolidated Entity seeks to make any acquisitions in the 2009/2010 financial year, then additional funds from the issue of new shares may be required during the year.

Australasia

Product sales decreased by $1,015,741 (17.3%) from $5,866,142 to $4,850,401, primarily due to the global downturn in the automotive industry. DataDot ceased to supply BMW Group Australia as an OEM customer during the first half of the year. Increased sales in the heavy machinery and commercial market segments helped to offset this decline. Net profit decreased by $911,475 (39.4%) from $2,315,836 to $1,404,361.

United States

Product sales decreased by $433,703 (37.0%) from $1,173,243 to $739,540 and the net profit of $15,403 decreased by $377,868 to a net loss of $362,465.

At 31 December 2008, in recognition of the half year performance and the significant downturn in the US auto industry, the Board no longer considered it was probable that the United States subsidiary would generate sufficient current period taxable profits against which tax losses could be utilised and determined that the carried forward tax losses would be derecognised.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Europe

Product sales increased by $1,106,651 (171%) from $647,271 to $1,753,922, due mainly to a new agreement executed in March 2009 with Federperiti Gest S.r.l, (a service provider for insurance companies), to supply DataDot microdots as a security measure to mark motor vehicles insured with insurance policies sold on the Italian market by Assimoco Assicurazioni S.p.A. in partnership with Fiat Sava, a subsidiary of FGA Capital.

South Africa

As stated above, the Group decided to progressively dispose of DataDot’s 42.5% equity interest in DataDot Technology South Africa (Proprietary) Limited (DDSA) to the two South African shareholders who manage DDSA. Effective 11 March 2009, DDSA became a deconsolidated entity and DDSA results are shown as a discontinued operation.

For the period from 1 July 2008 to 11 March 2009, product sales decreased by $1,791,122 (50.6%) from $3,538,704 to $1,747,582. Net profit before loss on disposal decreased $595,427 (77.5%) from $768,498 to $173,071.

Joint Venture – DataTraceDNA Pty Limited

The decision of the DataTraceDNA Pty Limited (DataTrace) Board to fully impair the capitalised development costs of DataTrace led the Board of DataDot to further review the impairment loss that had been recognised in December 2008. The DataDot Board determined that the investment in DataTrace should be fully impaired, reducing the carrying value of the investment to $Nil and incurring an impairment loss of $3,217,088 (2008: $Nil). In addition, the full impairment of DataTrace capitalised development led to a full year loss after tax in DataTrace of $4,192,691 of which DataDot’s 50% share of the joint venture equated to $2,096,345.

New Zealand

As outlined in DataDot’s December 2008 Financial Report for the Half Year, in early February 2009 the New Zealand Government gave notice that it would revoke the Vehicle Standards Compliance (Whole-ofVehicle-Marking) (WOVM) Rule and the WOVM Notice, which together formed the regulatory framework establishing mandatory whole-of-vehicle-marking. The immediate effect of this decision was to terminate the judicial review proceedings in the NZ High Court, under which the Motor Industry Association had challenged the validity of the Rule and Notice. DataDot had successfully applied to be joined as a respondent in these proceedings.

The NZ Government has since confirmed that it does not intend to retain the mandatory WOVM policy.

However, DataDot’s New Zealand Distributor will continue to be actively seeking additional sales in channels similar to that made in Australia. A particular focus in the next 12 months will be in commercial equipment and tools and also business to business asset protection solutions.

Operating Expenses

The Group’s operating expenses (on a restated basis and excluding restructuring expenses and impairment losses) decreased to $6,602,389 from $7,023,394, a decrease in operating expenses of $421,005 (6%).

Management is continuing its focus on cost control into the 2010 year through further reviews of staffing requirements as well as assessment of more efficient and cost effective manufacturing processes.

Table 3 below compares the decreases /(increases) in expenditure by function (excluding restructuring items) and highlights the reduction in expenditure of $421,005 (6%) over the previous year:

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

Table 3 Consolidated Expenditure, by function Employee benefits expense Administrative expenses Advertising and promotional expenses Occupancy expenses Travel expenses Finance costs Depreciation and amortisation expense Bad and doubtful debts Total operating expenses	2009 2008 Movt Movt $ $ $ %
	3,005,9013,645,622 639,721 18% 1,684,5221,662,276 (22,246) (1%) 513,256 358,115 (155,141) (43%) 464,013 416,129 (47,884) (12%) 274,631 400,376 125,745 31% 65,212 85,354 20,142 24% 388,736 452,423 63,687 14% 206,118 3,099 (203,019) (6,551%)
	6,602,3897,023,394 421,005 6%

Restructuring

The Board and Management have implemented major cost reductions in the past seven months and as a result of the Group’s restructure expect significant additional sustained savings. The major cost components of the restructuring are termination payments associated with cessation of employment together with legal and accounting fees.

Impairment Losses

In light of the global downturn in auto sales and particularly the auto industry’s focus on cost reduction, a number of impairment indicators are present. These include a reducing number of auto sales and there being no present customer for the DataDot Automated Applicator Cell (DAAC). As a consequence, the Board assessed that the future income potential for this technology was uncertain and the Board therefore determined to fully impair the project, effective 31 December 2008.

The impairment losses net of government grants of $1,357,797 represented impairment, in full, of capitalised development costs of $2,607,394 for the DAAC net of government grants of $1,138,533 received in relation to the development of the DAAC and a further claim to be received of $219,264. Government grants provided to the Group to assist with the development of the DAAC technology were to be released to the income statement over the expected useful life of the asset upon completion of the development. The total value of the deferred grant income was fully recognised at 31 December 2008 given the Group’s decision over the commercialisation of the DAAC.

There were also a number of impairment indicators being present to create sufficient uncertainty as to the future commercial potential of the Laser X Project, such that the Board has assessed that the commercialisation of the project is not certain. As a consequence, the Board decided to fully impair the project, effective 31 December 2008, incurring an impairment loss of $385,840.

Liquidity and Capital Resources

There was a decrease in cash in the year ended 30 June 2009 of $1,886,425 (2008: decrease of $2,031,086). There was an increase in cash flows from financing activities for the year ended 30 June 2009 due to a share placement and a rights issue during the year.

Operating activities consumed $2,383,349 (2008: generated $748,962). This decrease is a result of lower sales to customers along with restructuring costs.

Cash inflows from financing activities totalled $1,506,733 (2008 outflow of $406,409). This movement is a result of a share placement and a 1:1 rights issue in the 2009 year.

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DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

Cash outflows from investing activities during the year ended 30 June 2009 decreased to $1,009,809 (2008: $2,373,639). The cash outflows were mainly attributable to investing in the joint venture DataTrace DNA Pty Ltd and to a lesser extent the DataDot Robot.

Asset and capital structure

The asset and capital structure is provided in table 4 below:

Table 4 Debts: Interest bearing loans and borrowings Other loans – non interest bearing Cash and short term deposits Net Debt / (Cash) Total equity Total equity employed Gearing	2009 2008 $ $
	236,796 334,617 379,446 351,871 (761,490) (2,639,463)
	(145,248)(1,952,975) 2,251,569 11,373,071
	2,106,321 9,420,096
	- -

Shares issued during the year

There were 194,450,724 shares issued during the year (2008: nil shares issued). 22,436,622 shares were issued through a share placement and 172,014,102 shares were issued through a rights issue. There were no shares issued on the exercise of options during the year (2008: nil option exercises).

Profile of Debts

Table 5 Current Obligations under finance leases and hire purchase contracts Bank loan Deferred GST liability Non-current Obligations under finance leases and hire purchase contracts Bank loan Other loans – non interest bearing Total Debt	2009 2008 $ $
	128,562 119,744 19,484 72,182 84,017 -
	232,063 191,926
	4,733 122,780 - 19,911 379,446 351,871
	384,179 494,562
	616,242 686,488

The amount of the Group’s debt has decreased by $70,246 due to repayment of chattel mortgage and repayment of finance leases.

Capital expenditure

There has been a decrease in cash used to purchase plant and equipment for 30 June 2009 to $103,706 from $252,942 in 2008.

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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 2009

ataDot Technology Limited reliminary Consolidated Income Statement OR THE YEAR ENDED 30 JUNE 2009
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 3 Impairment losses 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 Discontinued operations Profit/(Loss) from discontinued operations after income tax 4 Net profit for the period Attributable to: Minority interest Members of the Parent Earnings per share for profit /(loss) from continuing operations attributable to the ordinary equity holders of the company Basic earnings per share 5 Diluted earnings per share Earnings per share for profit /(loss) attributable to the ordinary equity holders of the company Basic earnings per share 5 Diluted earnings per share	CONSOLIDATED 2009 2008 $ $
	7,343,862 7,679,029 707,223 1,381,469 79,215 416,989 - - 29,672 85,757
	8,159,972 9,563,244 (3,371,570) (2,463,360)
	4,788,402 7,099,884 1,637,449 160,390 (3,005,901) (3,645,622) (1,684,522) (1,662,276) (513,256) (358,115) (464,013) (416,129) (274,631) (400,376) (65,212) (85,354) (388,736) (452,423) (206,118) (3,099) (930,748) - (6,210,322) - (2,096,345) (586,430)
	(9,413,953) (349,550) (1,176,285) 886,488
	(10,590,238) 536,938 (395,084) 768,498
	(10,985,322) 1,305,436
	129,007 280,452 (11,114,329) 1,024,984
	Cents Cents (5.93) 0.36 (5.93) 0.34 (6.22) 0.69 (6.22) 0.65

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 2009

DataDot Technology Limited Preliminary Consolidated Balance Sheet AS AT 30 JUNE 2009
Note	CONSOLIDATED 2009 2008 $ $
ASSETS Current Assets Cash and cash equivalents 7 Trade and other receivables 8 Inventories Total Current Assets Non-Current Assets Receivables Investment in subsidiaries Investment accounted for using the equity method 9 Plant and equipment Intangible assets 10 Deferred tax assets Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables 11 Interest bearing loans and borrowings Income tax payable Provisions Total Current Liabilities Non-Current Liabilities Interest bearing loans and borrowings Other non-current liabilities 12 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	761,490 2,639,463 2,214,732 3,275,780 631,191 537,237
	3,607,413 6,452,480
	- 97,134 - - - 4,350,431 759,472 1,096,344 300,347 2,799,022 - 924,695
	1,059,819 9,267,626
	4,667,232 15,720,106
	1,044,340 2,143,291 232,063 191,926 - 41,652 747,818 501,493
	2,024,221 2,878,362
	4,733 142,691 379,446 1,316,883 7,263 9,099
	391,442 1,468,673
	2,415,663 4,347,035
	2,251,569 11,373,071
	28,151,106 26,456,519 (26,299,392) (15,185,063) 399,855 (368,758)
	2,251,569 10,902,698
	- 470,373
	2,251,569 11,373,071

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 2009

CONSOLIDATED	Attributable to equity holders of the parent Minority interest Total equity Issued Capital Accumulated losses Foreign currency translation reserve Total $ $ $ $ $ $
At 1July 2007	26,456,519 (16,210,047) (37,457) 10,209,015 189,921 10,398,936
Currency translation differences Total income and expense for period recognised directly in equity Profit / (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 2008 Currency translation differences Total income and expense for period recognised directly in equity Profit / (loss) for the period Total income / (expense) for the period Issue of share capital Transaction costs on shares issued Loss from realisation of translation reserve on closure of discontinued operations At 30 June 2009	- - (331,301) (331,301) - (331,301)
	- - (331,301) (331,301) - (331,301) - 1,024,984 - 1,024,984 280,453 1,305,436
	- 1,024,984 (331,301) 693,683 280,453 974,135
	- - - - - - - - - - - - - - - - - -
	26,456,519 (15,185,063) (368,758) 10,902,698 470,373 11,373,071
	- - 538,232 538,232 - 538,232
	- - 538,232 538,232 (599,380) (61,148) (11,114,329) - (11,114,329) 129,007 (10,985,322)
	- (11,114,329) 538,232 (10,576,097) (470,373) (11,046,470)
	1,944,507 - - 1,944,507 - 1,944,507 (249,920) - - (249,920) - (249,920) - - 230,381 230,381 - 230,381
	28,151,106 (26,299,392) 399,855 2,251,569 - 2,251,569

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 2009

Note	CONSOLIDATED 2009 2008 $ $
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 7 Cash flows from investing activities Proceeds from sale of plant and equipment Proceeds from sale of investment Interest received Purchase of plant and equipment Purchase of intangible assets Purchase of investment accounted for using the equity method Proceeds from Joint Venture Loan repayment Advance to minority interest Proceeds/(payments) from/(to) 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 Repayment of borrowings 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 7	12,027,459 14,470,129 (14,508,362) (13,425,303) (33,035) (55,756) (145,710) (330,498) 276,299 90,390
	(2,383,349) 748,962
	110,883 22,111 - - 98,253 138,235 (103,706) (252,942) (576,925) (507,513) (963,003) (1,953,517) - 528,103 - (457,044) 424,689 108,928
	(1,009,809) (2,373,639)
	1,944,507 - (249,920) - (78,625) (204,294) (109,229) (202,115)
	1,506,733 (406,409)
	(1,886,425) (2,031,086) 2,639,463 4,730,149 8,452 (59,600)
	761,490 2,639,463

The above Preliminary Consolidated Cash Flow Statement should be read in conjunction with the accompanying notes

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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 2009 have been prepared in accordance with the recognition and measurement requirements of Australian Accounting Standards, International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The Preliminary Consolidated Financial Statements do not include all the 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 and any public announcements to the market made by the Company 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.

Basis of Preparation

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 value basis of accounting has been applied.

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

Going concern

The Consolidated Entity incurred an operating loss of $10,985,322 for the year ended 30 June 2009 (2008: profit of $1,305,436).

The Consolidated Entity’s ability to continue as a going concern and develop and operate its asset identification, protection and authentication solutions is dependent upon:

• (a) its ability to further expand both its vehicle and non-vehicle revenue base;

• (b) increasing revenues from existing and new distributorships;

• (c) the ability of management to control costs and increase production efficiencies; and

• (d) the ability to raise additional funds from the issue of new shares if required.

In the event the expected revenue expansion, cost containment and/or additional capital raisings do not occur, there is a material uncertainty that gives rise to significant doubt whether the going concern basis is appropriate and as a result that the Consolidated Entity may have to realise its assets and extinguish its liabilities other than in the ordinary course of business and in amounts different from those stated in the preliminary consolidated financial report. No allowance for such circumstances has been made in the preliminary consolidated financial report.

The preliminary consolidated financial report for 2009 has been prepared on the basis of a going concern. This basis presumes that funds will be available to finance future operations, expenditure commitments and repay liabilities and that the realisation of assets and settlement of liabilities will occur in the normal course of business. The Directors believe that the Consolidated Entity can continue to meet its debts as and when they become due and payable.

With regard to point (a), Directors have put in place actions that have increased the value-proposition for OEM clients to use, or continue to use, DataDot protection systems. Directors have also placed a greater emphasis on non-automotive revenue particularly in heavy machinery, equipment, tools, retail and commercial market segments.

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DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Going concern (continued)

With regard to point (b), Directors have instructed management to work on expanding DataDot’s overseas distribution network, with a particular focus on selecting, training and supporting new Distributors. Directors expect that by selecting quality distributors in new, targeted countries, and by better management and support of existing distributors, the Company will have greater success in securing new automotive and nonautomotive clients.

With regard to point (c), Directors and Management have implemented major cost reductions in the past seven months and as a result of the Group’s restructure expect significant additional sustained savings to result.

With regard to point (d), if Directors consider that a strengthening of the working capital position of the Consolidated Entity is necessary, if the release of provisions that have been made in the current period are required in a more accelerated time-frame than budgeted, or if the Consolidated Entity seeks to make any acquisitions in the 2009/2010 financial year, then additional funds from the issue of new shares may be required during the year.

2. OTHER INCOME Government grants: - AusIndustry commercial ready grant - Export market development grant Write off of related party loans Net gain on disposal of subsidiary	CONSOLIDATED 2009 2008 $ $
	1,357,797 77,334 15,426 83,056 37,328 - 226,898 -
	1,637,449 160,390

The AusIndustry Commercial Ready grant was awarded for the development of a robotic cell applicator.

The Export market development grant is receivable to assist the development of export sales.

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

3. RESTRUCTURING EXPENSES

The Board and Management have implemented major cost reductions in the past seven months and as a result of the Group’s restructure expect significant additional sustained savings. The major cost components of the restructuring are termination payments associated with cessation of employment together with legal and accounting fees.

The restructure focused on changing the remuneration structure of sales staff to performance based pay, transitioning to an NPAT-driven culture. It involved the cessation of employment for several senior executives and a restructuring charge of $930,748 was incurred in the second half of the year.

14

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

4. DISCONTINUED OPERATIONS

(a) Details of discontinued operations

On 11[th] March 2009, the Board entered into a sale agreement to exit DataDot’s 42.5% equity interest in DataDot Technology South Africa (Proprietary) Limited (DDSA) by selling the interest to the two South African shareholders who manage DDSA. DDSA will continue to manufacture and distribute DataDot products under licence from DataDot. Under the terms of the sale agreement, DataDot will receive an immediate cash payment in loans and royalties owed to DataDot plus progressive cash payments over a period not exceeding 24 months.

Based on the put and call agreement conditions, DataDot has an option to put (sell) the remaining DDSA shares it still owns as at 10 March 2011 to DDSA, or sell the shares to a third party or retain the shares.

Disposal of the 42.5% equity interest in the subsidiary has been deemed effective on 11 March 2009 and the subsidiary is reported in this financial report as a discontinued operation.

Financial information relating to the discontinued operation for the period to the date of disposal is set out below. Further information is set out in Note 6 Segment information.

(b) Financial performance of discontinued operations

Revenue Expenses Profit before income tax Loss on disposal Profit/(Loss) before tax from discontinued operations Income tax - related to pre-tax profit - related to disposal Profit/(Loss) for the year from discontinued operations Earnings per share - cents per share: - Basic from discontinued operations - Diluted from discontinued operations	DataDot South Africa DataDot South Africa 2009 2008 $ $
	1,871,155 3,611,605 (1,623,026) (2,587,213)
	248,129 1,024,392 (568,155) -
	(320,026) 1,024,392 (75,058) (255,894) - -
	(395,084) 768,498
	($0.22) $0.51 ($0.22) $0.49

15

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

4. DISCONTINUED OPERATIONS (continued)

(b) Financial performance of discontinued operations (continued)

Consideration received or receivable:

Cash Present value of deferred sales proceeds Total disposal consideration Less net assets disposed of Loss on disposal before income tax Income tax expense Loss on disposal after income tax	- 302,400 302,400 545,663 (243,263) - (243,263)

(c) Assets and liabilities and cash flow information of discontinued operations

The major classes of assets and liabilities of DataDot South Africa as at date of disposal are: Assets Property, plant and equipment Trade and other receivables Cash and cash equivalents Liabilities Trade and other payables Interest-bearing loans and borrowings Capitalised legal costs relating to DDSA divestment Minority interest Net assets attributable to discontinued operations The net cash flows of DataDot South Africa are as follows: Operating activities Investing activities Financing activities Net foreign exchange difference Net cash inflow

2009 $ 85,624 613,116 610,116 1,308,856 (169,740) (32,662) (202,402) 75,420 (636,211) 545,663 345,207 (10,997) (124,750) 45,150 254,610

16

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

5. 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 Profit / (loss) from continuing operations attributable to ordinary equity holders of the parent Loss attributable to discontinued operations (excluding minority interests) Net Profit / (loss) attributable to ordinary equity holders of the parent Weighted average number of ordinary shares for basic earnings per share Effect of dilution: Share Options 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 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.

CONSOLIDATED 2009 2008 $ $

(10,590,238) 536,938 (524,091) 488,046 (11,114,329) 1,024,984 Number Number 178,632,393 149,577,480 - 7,995,000 178,632,393 157,572,480 14,295,000 12,173,000

17

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

6. SEGMENT INFORMATION

Year ended 30 June 2009 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/(Loss) before tax and finance costs Finance costs Share of loss of JV Profit/(Loss) before income tax Income tax expense Net Profit/(Loss) 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 Allowance for doubtful debt	Australasia $	Continuing Operations USA Europe $ $	Discontinued Operations Total Operations Total South Africa $ $ $
	4,850,401 700,307 873,253	739,540 1,753,922 86,131 - 310,386 -	7,343,862 1,747,582 9,091,444 786,438 - 786,438 1,183,640 38,290 1,221,930
	6,423,961	1,136,057 1,753,922	9,313,940 1,785,872 11,099,812 (1,183,640) - (1,183,640) 29,672 85,283 114,955
	1,404,361 (2,096,345)	(362,465) 98,150 - -
			8,159,972 1,871,155 10,031,127
			1,140,046 (319,227) 820,819 (8,392,442) - (8,392,442)
			(7,252,396) (319,227) (7,571,622) (65,212) (799) (66,012) (2,096,345) - (2,096,345)
	1,873,764 567,181 47,875	534,888 1,157,855 87,681 619,841 882 646	(9,413,953) (320,026) (9,733,979) (1,176,285) (75,058) (1,251,343)
			(10,590,238) (395,084) (10,985,322)
			3,566,507 - 3,566,507 - - - 1,110,725 - 1,110,725
			4,667,232 - 4,667,232
			1,274,703 - 1,274,703 1,140,960 - 1,140,960
			2,415,663 - 2,415,663
			49,403 10,997 60,400
	250,661 76,742 171,180	56,108 5,225 - - 34,938 -	311,994 17,700 329,694 76,742 - 76,742 206,118 37,743 243,861

18

DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

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

7. CURRENT ASSETS - CASH AND CASH EQUIVALENTS

Reconciliation to Cash Flow Statement

Reconciliation to Cash Flow Statement
	CONSOLIDATED 2009 2008 $ $
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) Loss on disposal of investment Impairment & write-off of non-current assets Interest received Add / (less) non-cash items: Depreciation and amortisation Net loss on foreign exchange Inventory impairment Impairment for doubtful debts 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 (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	761,490 2,639,463
	(10,985,322) 1,305,436 2,096,345 586,430 341,257 - 6,215,946 (98,253) (138,235) 406,436 470,515 222,590 - 59,803 (16,149) - (3,841)
	(1,741,198) 2,204,156 (607,628) (131,011) 259,597 (20,878) (153,757) (7,728) 924,695 (885,018) (956,496) (226,902) (41,652) (76,074) (66,910) (107,853)
	(2,383,349) 748,962

19

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

8. CURRENT ASSETS - TRADE AND OTHER RECEIVABLES

Trade receivables Allowance for impairment loss (a) Prepayments Government grant receivable Other Related party receivables Advance to outside equity interest Loans to key management personnel	CONSOLIDATED 2009 2008 $ $
	1,632,263 2,427,914 (152,784) (3,994)
	1,479,479 2,423,920
	82,366 191,979 219,264 84,792 433,623 98,028 - 457,061 - 20,000
	2,214,732 3,275,780

(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 $206,118 (2008: $3,251) has been recognised by the Group. 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 2008 Charge for the year Amount written off (included in bad and doubtful debt expense) At 30 June 2009	3,994 7,835 206,118 3,251 (57,328) (7,092)
	152,784 3,994

20

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

9. NON-CURRENT ASSETS - INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD

(a) Investment details DataTrace DNA Pty Ltd	2009 2008 $ $ - 4,350,431

The Company has a 50% interest in DataTrace DNA Pty Ltd (DataTrace), which is involved in the development of high security authentication solutions. DataTrace 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.

Consistent with the decision of the DataTrace Board to fully impair the capitalised research and development costs of DataTrace, the Board of DataDot determined that the investment in DataTrace was fully impaired, incurring an impairment loss of $3,217,088.

(b) Summarised financial information

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

Extract from the joint venture balance sheet: Current assets Non-current assets Total assets Current liabilities Non-current liabilities Total liabilities Net assets Share of joint venture net assets Extract from the joint venture income statement: Revenue Expenses Impairment loss Net Loss Share of the jointly controlled entity’s loss:	CONSOLIDATED 2009 2008 $ $
	648,296 1,102,754 81,546 3,086,305
	729,842 4,189,059
	(221,052) (450,581) - -
	(221,052) (450,581)
	508,790 3,738,478
	254,395 1,869,239
	396,870 905,745 (1,355,124) (2,078,606) (3,234,437) -
	(4,192,691) (1,172,861)
	(2,096,345) (586,430)

The Board of DataTrace, in the context of the present economic conditions, determined it was prudent to fully impair the capitalised research and development costs incurred since inception.

21

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

10. NON-CURRENT ASSETS - INTANGIBLE ASSETS

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

At 1 July 2008 Cost Accumulated depreciation Net carrying amount Year ended 30 June 2009 At 1 July 2008, net of accumulated amortisation Additions Additions – internal development Amortisation Impairment charge At 30 June 2009, net of accumulated amortisation At 30 June 2009 Cost Accumulated depreciation Net carrying amount	CONSOLIDATED Development costs $ Patent costs $ Total $
	2,842,763 235,453 3,078,216 (267,230) (11,964) (279,194)
	2,575,533 223,489 2,799,022
	2,575,533 223,489 2,799,022 201,128 55,619 256,746 320,178 - 320,178 (65,600) (16,676) (82,276) (2,993,324) - (2,993,324)
	37,915 262,432 300,347
	365,211 291,072 656,283 (327,296) (28,640) (355,936)
	37,915 262,432 300,347

(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. 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.

(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.

22

DataDot Technology Limited ABN 54 091 908 726 Appendix 4E

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

10. NON-CURRENT ASSETS - INTANGIBLE ASSETS (continued)

CONSOLIDATED 2009 2008 $ $

(c) Impairment losses

DataDot Automated Applicator Cell (DAAC)

• (2,607,394)

In light of the global downturn in auto sales and particularly the auto industry’s focus on cost reduction, a number of impairment indicators are present. These include a reducing number of auto sales and there being no present customer for the DAAC. As a consequence, the Board assessed that the future income potential for this technology is uncertain and the Board therefore determined to fully impair the project, effective 31 December 2008.

The impairment losses net of government grants of $1,357,797 (2008: $nil) represent impairment, in full, of capitalised development costs of $2,607,394 for the DataDot Automated Applicator Cell (DAAC) net of government grants of $1,138,533 received in relation to the development of the DAAC and a further claim to be received of $219,264.

Government grants provided to the Group to assist with the development of the DAAC technology were to be released to the income statement over the expected useful life of the asset upon completion of the development. Given the Group’s decision over the commercialisation of the DAAC, this grant income has now been fully realised.

Laser X Project

There were also a number of impairment indicators being present to create sufficient uncertainty as to the future commercial potential that the Board has assessed that the commercialisation of the project is not certain. As a consequence, the Board decided to fully impair the project, effective 31 December 2008.

• (385,840) $2,993,234 -

23

DataDot Technology Limited ABN 54 091 908 726

Appendix 4E

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

11. CURRENT LIABILITIES - TRADE AND OTHER PAYABLES

Trade payables Sundry creditors and accruals Amounts payable to other parties	CONSOLIDATED 2009 2008 $ $
	681,273 1,419,614 306,065 936,060 57,002 57,617
	1,044,340 2,143,291

12. NON-CURRENT LIABILITIES - OTHER

Amounts payable to other parties Government grant	379,446 351,871 - 965,012
	379,446 1,316,883

24