TZ LIMITED — Interim / Quarterly Report 2012

Apr 29, 2012

TZ Limited ABN 26 073 979 272

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• 30 April 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 – MARCH 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 31 March 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 - SHAREHOLDER UPDATE

March Quarter 2012

1. TZI Update:

• Unaudited accounts show USD$1.3M in shipped orders for the 9 months to 31 March 2012 and a backlog of USD$700K which will be shipped in the June quarter. While revenues are lower than planned and dependent on large infrastructure projects to be secured to support year-end projections, significant progress is being made in the business which is not immediately apparent in these results.

• With strong consumer response to the initial Australia Post trial lockers, we have been successful in securing additional orders for further deployments as Australia Post both extend and expand the trial program in advance of an anticipated national parcel locker roll-out that TZ believes is being contemplated by Australia Post.

• The trial program expansion represents a second generation design of Parcel Lockers and incorporates both functional and technological enhancements based on insights from the original trial and new requirements as specified by Australia Post. The first of the new locker deployments is at the Australia Post Superstore at 111 Bourke Street, Melbourne and demonstrates a flexible and modular solution designed by TZ for volume manufacture by our supply partner, Dexion.

• E-commerce and the associated increase in parcel delivery requirements is driving postal organisations and logistics companies to explore alternative delivery solutions that provide cost effective and convenient physical distribution of goods to the consumer. We are pleased to advise that we have entered into discussions with several postal organisations and logistics companies around the world for the expansion of their parcel locker initiatives. Although these discussions are at various stages, it is clear to us that parcel lockers will play a part in new last mile delivery initiatives that will be launched to the market over the next 24 months.

• As a relatively new entrant into this market, we believe that TZ is well placed to succeed in this segment because:

• We offer a compelling technology proposition that provides a scalable and flexible platform

• We offer the potential to customise solutions that address regulatory, market and customer specific design requirements

• We believe we can offer a better product at a lower manufactured cost

• We have a facilitating relationship with Pitney Bowes [for complimentary technology, distribution and services]

• Roll-out of the Coles refrigerated locker trial is awaiting finalisation of the deployment program. We are pleased to advise that, in addition to Coles, we now have engaged with two additional on-line grocery retailers to support development of similar solutions in two geographic regions. While these initiatives will progress through a structured process of solution development, business case analysis, trial then national roll-out, we are pleased to be positioned as the 'provider of choice'. As we formalize these relationships, we will make appropriate announcements to the market.

• In the on-line retailer space we are also making significant headway through engagements with major players considering alternative fulfillment strategies. While there has been significant innovation in e-commerce, local and social commerce platforms, a gap exists to

provide consumers with an efficient, convenient and time-sensitive delivery fulfillment option. This issue is now on the agenda of many major internet and on-line retail companies and TZ is positioned as a solution provider and potential enabling partner for their strategies.

• Our dealings with a major shopping centre management corporation are also progressing well and indications are positive that TZ may support an initiative in this area. Focus group studies and retailer surveys that will be conducted in May will assist in formalising the business case proposal for a GO/NO GO decision.

• These B2C opportunities are very large as last mile fulfilment strategies depend on broad infrastructure deployment to be successful and to offer consumers options. To provide some indication of scale, InPost recently announced a relationship with NeoPost to deploy 16,000 parcel terminals across Europe. Consider the potential in the US, Canada, Middle East, Asia and APAC – markets which are only just starting to move in this area.

• While these opportunities eclipse our traditional PAD business, this business is developing effectively:

• Our PAD offerings to the corporate market continue to gain traction as we add new corporate clients in the financial and technology sectors and map out solutions to suit their agile workforce programs. These engagements represent a constant base flow of sales as deployment spreads across multiple buildings and campuses – it’s steady growth with on-going annuity and maintenance revenues.

• Our marketing efforts in the high density residential sector has started to fuel opportunity growth in this sector and we should see new deployments starting to roll out in the next 120 days as trials with new properties progress.

• To clarify, a “trial” does not mean a “free demo”. All our trials represent paying customers who have committed to a limited deployment to evaluate the potential of the solution in support of building a business case for broad deployment. To date, we have not participated in any trial that has not led to further sales.

• Our IXP business also continues to develop strongly:

• In Australia, the NextDC and Macquarie Telecom deals demonstrate the validity of the offering to the data centre and cloud hosting market. The selection of TZ's solution as their solution of choice for their new data centres secures us a long term supply relationship and constant annuity revenue.

• Also during the quarter a top tier North American city entered phase two of a major datacenter initiative that, when completed, will consolidate more than 40 city Agency Datacenters into two facilities, with several hundred cabinets being deployed when completed. With increased mandates for security in the post September 11 environment, protecting a major city’s IT infrastructure requires best of breed systems that must pass stringent evaluation criteria before being selected. It is significant validation for TZ’s IXP technology that TZ Praetorian was chosen as the physical security system, that it has performed well during the initial production phase of protecting around 140 cabinets and in the coming year its use will expand further as the project progresses.

• In Canada, a smaller project was commissioned for a Federal Government agency, again consolidating Government IT infrastructure into a shared facility. We have observed this as an increasing trend with Government and Enterprise customers alike as they seek the cost savings and efficiencies of locating IT equipment and assets in large open facilities where security, access and environmental factors can be more efficiently controlled and managed. This trend augers well for the IXP value proposition as cabinet level microsecurity, environmental awareness and compliance with regulatory physical security mandates is essential to operations in shared environments.

The Centurion System was chosen for this facility as it was the only system that could be retro-fitted into the broad range of cabinet types being deployed in the facility (7 in total, including high density Hitachi SAN data storage), it is easy to set-up and manage and has the added benefit of being able to provide facility wide environmental monitoring. Also it is noteworthy to mention that the TZ Slidehandle has been approved by the manufacturer, Hitachi Data Systems, for retro-fitting to existing and new SAN cabinets without invalidating the manufacturer’s warranty, which would be the case using traditional electromagnetic (solenoid or motor) based locking mechanisms as used by our competitors.

• With new legislation driving a focus on data security and compliance, we are seeing significant interest in our IXP solutions. Although it will be hard for shareholders to see the significant progress we are making in this area, as the sales value of an evaluation trial is usually not substantial (<$20,000), these trial sites represent an opportunity of several hundreds to thousands of cabinets. It’s about laying the foundations for steady sales growth based on increasing awareness and confidence in our solutions.

• To scale the business more aggressively we are expanding our distribution channels including a number of selective OEM deals and a network of system integrators. Our Certified Integrator program helps us to more effectively provide coverage across North America, Europe and Australia and offer a skilled support network to our end-user customers. The benefit of this program won’t be appreciated until Q1 or Q2 of the next financial year.

• To round off this March update, we are pleased to advise that we will be launching additional product extensions in IXP to support our OEM offerings and to provide the potential for higher volume sales transactions. The new product extensions include:

• Two new Centurion Bridge variants will be released this month. These units are based on the existing 32 device Centurion Bridge form factor but will be capable of supporting 8 and 70 devices respectively.

The 8 device Centurion Bridge is ideal for smaller server room deployments and will enable us to cost effectively target applications such as retail networks or medical providers with PCI-DSS (Payment Card Industry Data Security Standard), HIPAA (Health Insurance Portability and Accountability Act) obligations to secure and monitor access to branch network and server equipment, particularly where there may only be one or two cabinets at each location. We believe this offering will be very attractive to IT managers of small/medium Server rooms and will underpin our planned push into this market segment where simplicity of installation and management is a critical requirement.

The 70 device Bridge underpins our offering for large scale data centre deployments such as at NextDC and Macquarie Telecom which cover pod configurations of up to 32 cabinets per pod. The ability to manage a significant number of devices from one Bridge represents a unique and differentiating capability that also significantly reduces implementation costs.

• A new modular TZ SwingHandle to provide an upgradeable cabinet locking platform from mechanical lock to TZ SMA actuated electronic lock is also in development.

2. PDT Update:

• PDT’s internal re-engineering efforts drove a good 3rd quarter performance with quarterly revenues of $5,680,695 against a budget of $5,225,000. By instituting stronger internal controls, PDT was able to lower costs and improve productivity to also achieve much anticipated margin returns.

• Among the positive changes this quarter, PDT strengthened its service offering with a number of new strategic partnerships. These partnerships will supplement PDT’s already formidable capabilities with some of the best electrical, software and medical device experts in the world,

including: global software development powerhouse SoftServe, Inc.; Garrett Technologies, whose development and FDA regulatory expertise is recognized as the gold standard by many of America’s top medical device manufacturers; and Aerotek, a leading technical staffing and recruitment company, whose broad client roster provides PDT access to leading technical professionals and companies around the country.

In the future, these partnerships will allow the company to add complementary technical expertise without incurring additional overhead, as well as supporting business development efforts and access to a new client database.

• Over the quarter, PDT secured a number of major deals:

• PDT has been chosen as development partner for one of America’s largest, publiclytraded medical device companies. PDT has completed several large projects with them over the past 5 years with billings in excess of $20 million over that 5 year period, and PDT has now been appointed as the preferred partner for a substantial medical device development initiative.

• PDT was also been successful in securing a number of Defense/Military contracts specifically in Android-based O/S application development. To meet the security requirements of ITAR, PDT recently completed the build-out of a secure workspace at its Lake Zurich headquarters and is upgrading its IT capabilities with new servers and firewalls dedicated to military projects.

• PDT was also recently awarded a contract for the design of an android-based cell phone for private aircraft and a contract for the detailed engineering of a second generation scientific device that analyses proteins and nuclei acids. In the latter, the contracting company is a global company that deals with pharmaceutical and biotech corporations, as well as government agencies.

• We are currently bidding on several large multi-million dollar projects that validate our market approach and our focus on the Android platform in both military and commercial applications.

• Going forward, the outlook for PDT is positive. PDT has a strong sales pipeline, a repurposed and re-organized engineering team, and a new partnership matrix that is driving new business opportunities involving larger and more complex projects. While PDT will make up some of the lost ground in performance that occurred in first half of this financial year and PDT should still achieve greater than USD$20M in top-line revenue this financial year, it is unlikely that PDT will not be able to recover the lost profitability from the first half of the year.

3. TZ Group:

• Unaudited accounts puts the year-to-date revenue at over USD$16M with TZI delivering healthy gross margins and PDT realising much better returns as a result of the restructuring. Expenditure has also been closely managed delivering over 30% reduction in costs this quarter against planned expenditure.

• While these results are not up to the levels previously targeted, both TZI and PDT are making good progress with their execution strategies and, the Directors believe, are building a solid foundation for future growth.

• Please note that while there is significant anticipation about the large TZI opportunities at hand, shareholders need to be cognisant that full disclosure to the market, in accordance with our ASX listing obligations, will only be made if and when these contracts are awarded.

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	31 March 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 (9 months) $A’000
	4,734 (3,479) (107) (282) (227) (3,395) - 13 (24) - -	15,558 (10,191) (328) (793) (639) (11,150) - 103 (717) (14) 251
	(2,767)	(7,920)

• 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 (9 months) $A’000
1.8 Net operating cash flows (carried forward)	(2,767)	(7,920)
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 Total operating and investing cash flows 1.9 Cash flows related to investing activities	- - (22) (55) - - - - - - - - -	(200) - (57) (232) - - - - - - - - -
	(77)	(489)
	(2,844)	(8,409)
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	4,552 - 213 - - -	4,552 - 637 (420) - -
	4,765	4,769
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	1,921 1,008 (32)	(3,640) 6,646 (109)
	2,897	2,897

• 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 1.2 386 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, expense reimbursments, accounting fees, marketing, insurance 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
	1,155	961
	-	-

• 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	1,136 1,500 - 261	431 500 - 77
Total: cash at end of quarter(item 1.23)	2,897	1,008

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)

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Date: 30 April 2012
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Print name: Kenneth Ting

• See chapter 19 for defined terms.

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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

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