TZ LIMITED — Interim / Quarterly Report 2012

Jul 30, 2012

TZ Limited ABN 26 073 979 272

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• 31 July 2012

Lodged by ASX Online

The Manager Company Announcement Office ASX Ltd Level 4, 20 Bridge Street Sydney, NSW 2000

Dear Sir/Madam

SHAREHOLDER UPDATE & APPENDIX 4C – JUNE QUARTER 2012

Please find attached the shareholder update and ASX Appendix 4C (unaudited) – Quarterly Report for entities admitted on the basis of commitments for TZ Limited for the quarter ended 30 June 2012.

Yours faithfully, TZ LIMITED

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Kenneth Ting Director

TZ Limited Level 11, 1 Chifley Square, Sydney, NSW 2000 Australia Phone: +612 9222 8890 Fax: +612 8208 9937

TZ Limited ABN 26 073 979 272

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– TZ LIMITED SHAREHOLDER UPDATE

June Quarter 2012

1. TZI Update:

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• Strong quarter sales closed out the year with an unaudited year-end result of USD $2.1M along with a backlog of purchase orders of approximately $100,000 which did not ship before 30 June 2012. As at 30 June 2012, there was $500,000 of accounts receivables due for TZI. Targeted gross margins were achieved across both IXP and PAD businesses with sales split evenly between the US and Australia.

• Australian sales delivered close to plan expectations with parcel locker deliveries continuing to Australia Post and on-going IXP sales to NextDC and Macquarie Telecom.

• With regard to the Australia Post trial expansion, the TZI team has successfully deployed seven (7) of the anticipated ten (10) parcel locker sites in Victoria, New South Wales and Western Australia. The remaining three (3) sites are due for deployment in July and August.

• Coles refrigerated locker development was completed during the quarter and we understand that the lockers are scheduled for deployment later in the year. TZI had anticipated these units to be deployed early calendar 2012 however the program has been delayed to fit in with Coles on-line retail strategies. TZI understand that Coles is considering a broader roll-out in 2013 if this trial proves successful.

• IXP sales remain consistent with on-going supply to NextDC and Macquarie Telecom under structured supply agreements. Supply to NextDC’s Brisbane and Melbourne facilities are continuing, with Brisbane fully deployed and Melbourne still underway. TZI also saw initial sales to NextDC’s Canberra facility as NextDC expand IXP supply to their new sites. Macquarie Telecom is also in deployment mode with the first few hundred cabinets being installed at their IntelliCentre 3 facility. Additional trials are underway with other DC operators and government agencies which should help to build IXP sales in the new fiscal year.

• Since the ASX release in late May, TZI has been aggressively seeking partners to roll out a parcel locker delivery strategy. There have been a number of requests from key logistic providers, e-retailers, developers and property managers, some of whom we have engaged in discussions with, to join us in a solution for parcel delivery in Australia and other regions. We are currently working our way through those enquiries and should be in a position to outline a go forward plan in the next quarter.

• The business is also pursuing a number of large postal locker opportunities at various stages of engagement. The competition is very strong in this sector however the company continues to be considered for these opportunities due to its strong technology offering and development competency, particularly with the expectation of these organisations for software customisation and integration.

• In the US, our traditional Corporate PAD business continues to develop strongly with on-going supply agreements now finalised with existing adopters for 2012/2013 which should firm up revenue expectations for the next fiscal year. Successful trials that were completed this year with other corporates and government agencies should shore up sales potential in 2013 as they pursue their roll-out strategies. New trials are also underway with a number of other well respected high profile corporate organisations on the East and West Coast of the USA.

• The business is also pursuing a number of strategic initiatives in the smart locker space in the US and Canada across a number of sectors including working with a major on-line grocery retailer in the US, providing enabling technology to a large global logistics provider and progressing a high density residential play with two prospective channel partners.

TZ Limited Level 11, 1 Chifley Square, Sydney, NSW 2000 Australia Phone: +612 9222 8890 Fax: +612 8208 9937

ABN 26 073 979 272

TZ Limited

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• IXP sales in the US remain consistent with adopters continuing to roll-out at their sites. Sales should be boosted by a number of OEM and strategic partnerships which are currently being pursued together with the system integrator network which is starting to mobilise.

• The sales cycles have proven to be longer than the business had anticipated driven by capital appropriation constraints and the time taken to trial and verify the technology in the environment. Although the business has a number of high volume prospects which are aggressively being pursued, the recent structural and organisational changes in the U.S. will reduce operating costs in line with market penetration, and provide a foundation to scale the organisation on the back of new project based commercial deals as they come to fruition.

2. PDT Update:

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• Unaudited management accounts show that the full year revenue for PDT was US$20.2M against a plan of US$21.3M. Approximately USD$3M in accounts receivables was due as of 30 June 2012 for PDT.

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• The June quarter showed continued growth in the business in spite of economic uncertainty in the US although profitability has been significantly impacted this fiscal year. The rapid sales growth of the previous years and the associated organisational expansion has led to operational inefficiencies which have been and continue to be addressed by the restructuring.

• To highlight the issue, while PDT has secured substantial software related medical device business the need to scale its software engineering capability to service these contracts has led to scaling the software capability from 4 software engineers to over 72 at its peak over the last year with a substantial proportion of consulting or sub-contracted staff. The restructuring that has been implemented is addressing the operational inefficiencies inevitably due to this rapid scaling. Specifically, PDT is in the process of right sizing and offering full time positions to some of the key contractors, reducing our contracting costs while increasing our internal knowledge base and capability. This has also been supplemented by expanding our operations in Ukraine with active recruitment of software engineers to bring overall operating costs down. Ukraine is not only a very cost effective source of well-educated and capable engineering resources but it also adds to PDT’s work day being 7 hours ahead of Chicago.

• Over the year, PDT has been able to create a strong reputation in the medical device business for transparency, partnership and excellence in execution which will lead to more sales prospects. PDT was recently awarded two major projects by companies on the cutting edge of the medical device and bio science world. Both projects are profitable and will lead to on-going projects, but most importantly they have management and boards of directors with deep roots in Silicon Valley, which is PDT’s next target market.

• PDT continue to be asked to participate and quote on Android projects and are making inroads into the highly classified areas of the defense and military business. Android has become the Operating System of choice for the US Military and with PDT’s expertise and security clearances now established, the business can bid on these projects whereas previously PDT did not qualify.

• With POs received in excess of US$6M at 30 June 2012, PDT is starting the 2013 fiscal year with a strong base of business, a more effective resource cost structure and a growing list of well-respected and high profile customers.

3. TZ Group:

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• This quarter Group cash receipts increased 27% over the prior period while restructuring delivered a reduction in cash outgoings for staff, advertising and R&D over the prior quarter of approximately $500,000. Overall, the Group delivered an unaudited year-end sales result of USD$22M pending year-end adjustments which is in line with last year’s performance.

TZ Limited Level 11, 1 Chifley Square, Sydney, NSW 2000 Australia Phone: +612 9222 8890 Fax: +612 8208 9937

ABN 26 073 979 272

TZ Limited

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• The TZI business achieved solid sales growth with a strong base of reference corporate customers and early adopters that demonstrate clearly the strong proposition of the IXP and PAD technology offerings. Over the year, the business significantly grew PAD sales four fold from around USD$300,000 last year to over USD$1.2M. IXP sales also grew to over USD$1.4M (about USD$400,000 of which was booked last year and drawn from the available Anixter stock at the start of the fiscal year). Anixter no longer holds large quantities of IXP stock but purchases products on a project-by-project basis as required in minimum order quantities. With stock movement and direct project sales this year, the IXP business grew by over three fold.

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• The sales growth anticipated for TZI which was based on a number of targeted project opportunities has not come to fruition this period with several initiatives being pushed out more than six (6) to twelve (12) months, largely due to companies being slower in their deployment strategies coupled with more tempered commitment to investing in capital infrastructure. These projects still remain prospective and in the Company’s pipeline, with TZI well positioned to convert these to sales.

• PDT delivered for the first time an overall year-end loss, although this has been offset somewhat by the high margin sales growth in the TZI business. Overall financial performance was consistent with that of the previous year.

• Consistent with the announcement made to the market recently, the Company’s 2012 results also reflect the one off restructuring changes that the Company has implemented.

TZ Limited Level 11, 1 Chifley Square, Sydney, NSW 2000 Australia Phone: +612 9222 8890 Fax: +612 8208 9937

Appendix 4C Quarterly report for entities admitted on the basis of commitments

Appendix 4C

Quarterly report for entities admitted on the basis of commitments

Introduced 31/3/2000. Amended 30/9/2001, 24/10/2005

Name of entity
TZ Limited
ABN 26 073 979 272	Quarter ended(“currentquarter”)
26 073 979 272	30 June 2012

Consolidated statement of cash flows

Receipts from customers Payments for (a) staff costs (b) advertising and marketing (c) research and development (d) leased assets (e) other working capital 1.3 Dividends received 1.4 Interest and other items of a similar nature received 1.5 Interest and other costs of finance paid 1.6 Income taxes refund/(paid) 1.7 Other (proceeds from settlement of litigation announced to ASX on 17 August 2011) Net operating cash flows Cash flows related to operating activities 1.2 1.1	Current quarter $A’000	Year to date (12 months) $A’000
	6,010 (3,225) (92) (49) (225) (4,249) - 22 (10) (5) -	21,546 (13,418) (420) (847) (863) (15,383) - 125 (727) (19) 251
	(1,823)	(9,755)

• See chapter 19 for defined terms.

Appendix 4C Page 1

24/10/2005

Appendix 4C Quarterly report for entities admitted on the basis of commitments

	Current quarter $A’000	Year to date (12 months) $A’000
1.8 Net operating cash flows (carried forward)	(1,823)	(9,755)
Payment for acquisition of: (a) businesses (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.10 Proceeds from disposal of: (a) businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.11 Loans to other entities 1.12 Loans repaid by other entities 1.13 Other (provide details if material) Net investing cash flows 1.14 1.9 Cash flows related to investing activities Total operating and investing cash flows	- - (11) (67) - - - - - - - - -	(200) - (69) (299) - - - - - - - - -
	(78)	(568)
	(1,901)	(10,323)
1.15 1.16 1.17 Proceeds from borrowings 1.18 Repayment of borrowings 1.19 Dividends paid 1.20 Other - Share issue Cost Net financing cash flows Cash flows related to financing activities Proceeds from issues of shares, notes, etc. Proceeds from sale of forfeited shares	- - - (16) - -	4,552 - 641 (439) - -
	(16)	4,754
1.21 Cash at beginning of quarter/year to date 1.22 Exchange rate adjustments to item 1.21 1.23 Cash at end of quarter/year to date Net increase (decrease) in cash held	(1,917) 2,897 (76)	(5,569) 6,646 (173)
	904	904

• See chapter 19 for defined terms.

Appendix 4C Page 2

24/10/2005

Appendix 4C Quarterly report for entities admitted on the basis of commitments

Payments to directors of the entity and associates of the directors

Payments to related entities and associates of the related entities

• Current quarter $A'000

• 1.24 Aggregate amount of payments to the parties included in item 1.2 464 1.25 Aggregate amount of loans to the parties included in item 1.11 -

• 1.26 Explanation necessary for an understanding of the transactions

Being directors' fees & allowances, accounting fees, marketing and rent paid to the directors and their related entities during the period.

Non-cash financing and investing activities

• 2.1 Details of financing and investing transactions which have had a material effect on consolidated assets and liabilities but did not involve cash flows

• N/A

• 2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest

• N/A

Financing facilities available

Add notes as necessary for an understanding of the position. (See AASB 1026 paragraph 12.2).

3.1 Loan facilities 3.2 Credit standbyarrangements	Amount available $A’000	Amount used $A’000
	968	966
	-	-

• See chapter 19 for defined terms.

Appendix 4C Page 3

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Appendix 4C Quarterly report for entities admitted on the basis of commitments

Reconciliation of cash

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.	Current quarter $A’000	Previous quarter $A’000
4.1 Cash on hand and at bank 4.2 Deposits at call 4.3 Bank overdraft 4.4 Other – Foregin currencies held overseas	842 - - 62	1,136 1,500 - 261
Total: cash at end of quarter(item 1.23)	904	2,897

Acquisitions and disposals of business entities

5.1 Name of entity/business 5.2 Place of incorporation or registration 5.3 Consideration for acquisition or disposal 5.4 Total net assets 5.5 Nature of business	Acquisitions	Disposals
	(Item 1.9(a))	(Item 1.10(a))
	N/A	N/A
	N/A	N/A
	N/A	N/A
	N/A	N/A
	N/A	N/A

Compliance statement

• 1 This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act (except to the extent that information is not required because of note 2) or other standards acceptable to ASX.

• 2 This statement does ~~/does not*~~ (delete one) give a true and fair view of the matters disclosed.

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Sign here: ................................................................ (Director/Company secretary)

Date: 31 July 2012

Print name: Kenneth Ting

• See chapter 19 for defined terms.

Appendix 4C Page 4

24/10/2005

Appendix 4C Quarterly report for entities admitted on the basis of commitments

Notes

• 1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2 The definitions in, and provisions of, AASB 1026: Statement of Cash Flows apply to this report except for the paragraphs of the Standard set out below.

• 6.2 - reconciliation of cash flows arising from operating activities to operating profit or loss

• 9.2 532

• 9.4 - itemised disclosure relating to disposals

• 12.1(a) - policy for classification of cash items 12.3 - disclosure of restrictions on use of cash 13.1 - comparative information

• 3 Accounting Standards. ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

• See chapter 19 for defined terms.

Appendix 4C Page 5

24/10/2005