TZ LIMITED — Interim / Quarterly Report 2012

Feb 28, 2012

TZ Limited ABN 26 073 979 272

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29 February 2012

Lodged by ASX Online

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

Dear Sir/Madam

31 DECEMBER 2011 HALF YEARLY REPORT AND APPENDIX 4D

Please find attached an ASX Appendix 4D and half yearly report for the period ended 31 December 2011.

Yours faithfully, TZ LIMITED

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Mark Bouris Chairman

Sydney (Registered Office) Level 11, 1 Chifley Square Sydney, NSW 2000 Australia

Chicago (Operational Headquarters)

ASX: TZL Web: www.tz.net Email: info@tz.net

520 West Erie Street, Suite 210 Chicago, IL 60654 United States

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TZ Limited Half-year report

APPENDIX 4D HALF-YEAR REPORT

1. Company details Name of entity: TZ Limited ABN: 26 073 979 272 Reporting period: Half-year ended 31 December 2011 Previous corresponding period: Half-year ended 31 December 2010

2. Results for announcement to the market

Revenues from ordinary activities	down	7.5%	to	$ 9,528,000
Loss from ordinary activities after tax attributable to the owners of TZ
Limited	up	260.2%	to	$(12,419,000)
Loss for the period attributable to the owners of TZ Limited	up	260.2%	to	$(12,419,000)

Dividends

There were no dividends paid or declared during the current financial period.

Comments

The loss for the consolidated entity after providing for income tax amounted to $12,419,000 (31 December 2010: $3,448,000).

3. NTA backing

Reporting period Previous corresponding period Net tangible asset backing per ordinary security (14.82) cents (3.95) cents

4. Control gained over entities

Name of entities (or group of entities)

Not applicable.

Date control gained

Contribution of such entities to the reporting entity's profit/(loss) from ordinary activities during the period (where material)

(where material) $ - Profit/(loss) from ordinary activities after tax of the controlled entity (or group of entities) for the whole of the previous corresponding period (where material) $ -

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TZ Limited Half-year report

5. Loss of control over entities

Name of entities (or group of entities) Not applicable. Date control lost Contribution of such entities to the reporting entity's profit/(loss) from ordinary activities during the period (where material) $ - Profit/(loss) from ordinary activities after tax of the controlled entity (or group of entities) whilst controlled during the whole of the previous corresponding period (where material) $ -

6. Dividends

Current period

There were no dividends paid or declared during the current financial period.

Previous corresponding period

There were no dividends paid or declared during the previous financial period.

7. Dividend reinvestment plans

The following dividend or distribution plans are in operation:

Not applicable.

	The last date(s) for receipt of election notices for the	dividend or distribution plans:	dividend or distribution plans:	Not applicable.	Not applicable.
8.	Details of associates and joint venture entities
		Reporting entity's		Contribution	to profit/(loss)
		percentage holding		(where material)
			Previous		Previous
			corresponding		corresponding
	Name of associate / joint venture	Current period	period	Current period	period
	Intanova Pty Limited	50.00%	50.00%	$(62,735)	$(135,266)
	Group's aggregate share of associates and joint
	venture entities' profit/(loss) (where material)
	Profit(loss) from ordinary activities before income tax			$(62,735)	$(135,266)
	Income tax on operating activities			$ -	$ -

9. Foreign entities

Details of origin of accounting standards used in compiling the report:

Not applicable.

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TZ Limited Half-year report

10. Audit qualification or review

Details of audit/review dispute or qualification (if any):

The accounts were subject to a review by the auditors and the review report is attached as part of the Interim Report.

11. Attachments

Details of attachments (if any):

The Interim Report of TZ Limited for the half-year ended 31 December 2011 is attached.

12. Signed

Signed: ________ Date: 29 February 2012

Mark Bouris Director Sydney

TZ Limited ABN 26 073 979 272

Interim Report - 31 December 2011

TZ Limited Directors' report 31 December 2011

The directors present their report, together with the financial statements, on the consolidated entity (referred to hereafter as the 'consolidated entity') consisting of TZ Limited (referred to hereafter as the 'company' or 'parent entity') and the entities it controlled for the half-year ended 31 December 2011.

Directors

The following persons were directors of TZ Limited during the whole of the financial half-year and up to the date of this report, unless otherwise stated:

Mark Bouris - Chairman Kenneth Ting Dickory Rudduck

Principal activities

During the financial half-year the principal continuing activities of the consolidated entity consisted of:

• the development of intelligent devices and smart device systems that enable the commercialisation of hardware and software solutions for the management, control and monitoring of business assets and the provision of associated value added services through Telezygology Inc, ('TZI'); and

• providing a fee for service product design and engineering consulting (services) through Product Development Technologies Inc, ('PDT').

All of the operations of the consolidated entity are based in Australia, the United States of America, United Kingdom and Ukraine.

Review of operations

The loss for the consolidated entity after providing for income tax amounted to $12,419,000 (31 December 2010: $3,448,000).

TZ Limited (‘TZL’) recorded a half year revenue of AUD $9.5 million at 31 December 2011 achieving a similar top line revenue to the corresponding period from last year. Overall, the consolidated entity recorded an accounting loss of AUD $12.4 million which includes the negative impact of AUD $3.2 million for derivative liability in relation to the QVT convertible notes and AUD $2.4 million in finance costs. This represents a 260% increase in losses from last year’s result.

Profitability was also impacted by the previously announced restructuring at Product Development Technologies, Inc. (‘PDT’). During the half year, PDT invested in several initiatives to refocus its business to pursue multi-million dollar contracts and to position itself to engage strategically on large scale and complex multi-disciplinary projects. This investment will underpin on-going revenue growth and profitability at PDT and to position the business to better target new business opportunities in identified growth segments. The investment has already yielded positive results in December with an uplift in revenues, strong pipeline growth, improved branch office profitability and overall margin improvement. This has also continued through the start of the New Year with PDT winning several projects in the identified growth segments.

Telezygology, Inc. (‘TZI’) delivered strong growth over and above last year’s half year results with a top line revenue of USD $820,000 at its targeted margins starting from a low base. Although a number of purchase orders were secured during the half year, deliveries have been pushed out due to delays in customers’ implementation programs and have not been recognized in the results.

TELEZYGOLOGY, INC.

TZI started the fiscal year well securing sales to NextDC, Coles and the Australia Post Trial. These projects underpinned a strong first quarter result with over USD $1 million in purchase orders received. Despite this backlog, deliveries scheduled in the half year period were delayed due to a number of customers’ implementation programs running behind schedule. This also pushed out progressive orders that were originally anticipated within the half year period.

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TZ Limited Directors' report 31 December 2011

As a result, TZI was only able to recognise USD $820,000 in revenue during the half year, up 219% for the same period last year, and recorded an overall EBITDA loss of USD $3.8 million. Gross contribution margins remain very encouraging as a percentage of revenue and are in line with target expectations. Backlog and purchase order commitments remain strong with around USD $700,000 in the pipeline which should be recognised as revenue in the March quarter. Addressable opportunities also remain strong with a number of paid trials underway with major corporates and several major contracts under negotiation or in the tender assessment phase. If TZI is successful in its efforts, the scale of the projects that could potentially eventuate from these trials, on-going supply contracts and tenders, will transform the business and ensure sustainable profitability into fiscal 2013.

One of the major focuses for the business this last six months has been the deployment of intelligent parcel lockers as part of the Australia Post parcel ready trial. These deployments support a major initiative by Australia Post and demonstrate their commitment to invest in its parcel delivery business to keep up with the strong upsurge in parcel transactions due to the growth of on-line shopping.

As part of this new initiative Australia Post is launching its “post office of the future” which offers customers greater access, convenience and choice in the way they transact with Australia Post. The Brisbane GPO is an example of this and offers a 24/7 self-service zone where parcel lockers are located allowing customers to pick up their parcels at any time.

The success of the Brisbane GPO has led to an announcement by Australia Post that they will have around 30 of these ‘super stores’ planted across Australia by June this year, and eventually 300 nationwide. TZI management remains positive that the business is well positioned to support Australia Post with their requirements for parcel lockers.

The Australia Post Trial has also been the catalyst for TZI and Pitney Bowes to develop an end-to-end, fully integrated parcel locker and management solution. This is an exciting offering that supports an easy to implement B2C last mile delivery alternative. Since the start of the New Year, the parties have been actively promoting this solution to several major logistics and retail organisations in the US and Europe and as a result, are currently engaged in a number of prospective opportunities that could be significant for the business.

Coles refrigerated locker trials represent another customised B2C locker solution due for deployment at a number of trial locations, with roll-out commencing in mid-March across Queensland, NSW and Victoria. This expanded trial will assess whether the success of the initial Windsor site deployment in Victoria can be replicated on a broader scale and provide the commercial validation for a national roll-out.

Overall our PAD business continues to develop strongly across all sectors, including corporate, residential and most recently B2C offerings. A few achievements worth mentioning include the following:

• On-going scheduled deployments through the balance of this calendar year with early adopter corporate customers, who have established TZ intelligent lockers as an integral part of their agile workforce strategy and a specified utility for their facilities.

• Trials underway with a number of very large corporates in the financial services sector which could lead to future multi-unit, multi-location deployments.

• Focused promotion of the TZ Concierge residential offering leading to secured purchase order for a second residential complex. In addition, strategic discussions are currently underway with potential distribution partners to support a far more aggressive and accelerated roll-out.

• Establishment of a Letter of Intent with a leading global shopping centre management group to develop the potential for intelligent locker deployments at their shopping centres.

• Development of OurPAD, the intelligent mailbox concept which addresses the issue of missed home deliveries and facilitates the secure delivery of parcels at your home at any time of the day.

• Expansion of the Pitney Bowes relationship into new geographies as well as cross divisional opportunities providing for higher levels of business integration.

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TZ Limited Directors' report 31 December 2011

For IXP, the most noticeable development has been the establishment of the NextDC supply contract in Australia. This currently represents the largest committed deployment for our TZ Centurion System and a solid reference customer for endorsement and validation of our technology. Focus during the half year has been on the initial hardware and software deployments into NextDC’s Brisbane and Melbourne data centres and the integration with NextDC’s management software. With this now fully operational, we expect to see further orders as Brisbane and Melbourne continue their build-outs and new sites such as Canberra, Sydney and Perth progress.

The adoption of our technology by companies like NextDC in Australia and IBM and others in the US, clearly establishes TZ’s offerings as a market leading cabinet level security system – a position that the business can now heavily leverage to accelerate adoption. With the anticipated big data growth over the next 5 to 10 years, we are seeing enormous investment into data centers (in consolidation, new build-outs and location upgrades). When you couple this growth with the new compliance and regulatory requirements that are driving a ‘Standard of Care’ liability for Boards of Directors, CEOs and CFOs for the physical protection of data, TZ IXP products are very well positioned for market penetration.

In North America, the IXP business continues to see increased system specification and positive sales progression from the trial and pilot phases to broader deployments. While TZI is constrained by the speed at which our customers’ roll-out the solution, the business is broadening its channels to markets to increase adoption rates through the establishment of a nation-wide Certified Integrator program and new distribution relationships with OEM partners and other prospective system resellers.

Moving into the New Year, TZI has reprioritized its markets, restructured its sales force and brought a much greater level of discipline and focus to implementation. Integral to this, is the appointment of Keith Schwartz and Bharath Ram to manage business growth in Asia, North America and Europe. This has already shown positive results and should continue to provide the company with more effective on-the-ground strategic business building experience. Both executives have over 20 years of sales and business management experience in relevant industries and bring with them the necessary competencies to drive new business growth.

PRODUCT DEVELOPMENT TECHNOLOGIES, INC. ('PDT')

Revenue in the half year period was USD $8.9 million impacted by restructuring and the focus on larger scale and more complex multi-disciplinary projects which have a longer sales cycle.

With the extraordinary revenue growth of the previous years, costs associated with trying to handle the growth including integrating new staff in large dimensions and managing culture and quality issues have also impacted profitability, leading to an overall reduction in business returns.

During the first quarter of the fiscal year, the Board and PDT management implemented a number of strategic initiatives to drive better efficiencies in resources, infrastructure and processes.

The initiatives implemented include the following:

1. A reduction in non-essential manpower, relocation of offices and a cut in overhead and administration costs resulting in an annual expense reduction of USD $900K as of October 2011.

2. Re-organizing the business to ensure alignment around the three target verticals of Medical, Military and Consumer Electronics and building the core competencies necessary to support the demands of the large scale engagement projects in the highly regulated Medical and Military sectors.

3. Building specific knowledge and expertise in identified growth areas such as the Android platform and the “appcessory” market. The Android platform has been recognized as being the dominant platform for handheld wireless technology, recently validated by the US military who declared Android as its preferred O/S. Appcessories are application specific accessories that use a smart device like a tablet or smart phone to enhance function.

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TZ Limited Directors' report 31 December 2011

For the half year, PDT recorded an EBITDA loss of around USD $600,000. However, the initiatives undertaken have already yielded positive results in December with an uplift in revenues, strong pipeline growth, improved branch office profitability and overall margin improvement. This has also continued through the start of the New Year.

The backlog of secured projects is solid and there is a strong pipeline of large scale opportunities developing on the horizon. Recent successful contracts include the development of hand held devices for a number of prime military contractors, a new range of revolutionary medical devices and a consumer product in the fast food business which has global application.

While concerns with the business climate, particularly with the 2012 US presidential elections looming, the prospect of budget cuts and increased taxes and the on-going economic concerns in Europe, the Directors believe that PDT is returning not only to improved business profitability on revenues consistent with last year, but is continuing to reinforce its positioning as one of the leading full service design firms in the USA.

OUTLOOK

With improved bottom line performance anticipated for PDT, the Board and management anticipates to see overall positive results from PDT for the balance of the year and for the PDT business to return to overall profitability by fiscal year end.

The TZI business continues to grow steadily delivering consistently with its business model, achieving targeted sales margins and receiving annuity income through its software and device access licensing and maintenance contracts. More importantly, this business is primed for growth with a number of large opportunities coming to fruition in the near term particularly in the on-line retail logistics space. These opportunities have the potential to transform the business and ensure sustainable profitability into fiscal 2013.

The Board and management remain confident in the Company’s prospects and look forward to an exciting six months to year end.

Significant changes in the state of affairs

TZL and QVT Fund LP and Quintessence Fund L.P. – Series IV Convertible Notes

TZ Limited ('TZL') entered into a Subscription Deed with QVT Fund LP and Quintessence Fund L.P ('QVT') on 23 December 2011. Under this Deed, TZL has agreed, Subject to shareholder’s approval, to issue 1,799 senior unsecured convertible notes with each having a face value of $1,000. These convertible notes are to be issued in consideration of QVT waiving the payment by TZL of all interest accruing in respect of the 2011 calendar year on all convertible notes currently held by QVT.

The key terms of the convertible notes are:

(a) interest at 10% pa accruing from 1 January 2012, and payable on 31 December each year;

(b) repayment of the convertible notes on the fifth anniversary of their issue date unless converted to ordinary shares at any time prior to the maturity date; and

(c) conversion price of $0.42 per share.

Supply for Australia Post Parcel Locker Trial

(Announced 18 August 2011) TZI Australia Pty Limited ('TZIA'), a wholly owned subsidiary of TZL, entered into a supply contract with Pitney Bowes Australia Pty Limited for the supply of intelligent parcel locker systems to Australia Post for trial evaluation as part of Australia Post’s Parcel Ready Program. The Intelligent Locker Trial was undertaken at three sites in Brisbane, Sydney and Melbourne over a period of 3 months from October 2011 to gauge consumer receptiveness to the increased convenience and accessibility of the system as an alternative means for parcel distribution. Subject to the success of the Trial, Australia Post will consider deploying additional locker units and a broader national roll-out.

NextDC Supply Relationship

(Announced 7 September 2011) TZL and Telezygology, Inc. ('TZI') entered into an agreement with distribution partner, Anixter Australia Pty Limited and NextDC Limited ('NextDC') for the supply of the TZ Centurion™System for NextDC’s cabinet-level micro-protection solution for its Brisbane and Melbourne data centres. Subject to successful deployment of the TZ Centurion™System at these initial sites, NextDC will consider using the TZ Centurion™System in each of its proposed new data centres, namely the balance of the Brisbane and Melbourne fit-outs, Sydney, Perth and Canberra.

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TZ Limited Directors' report 31 December 2011

Joint Venture with Terra Rossa Capital Limited - Establishment of TZ Incubator Investment Fund

(Announced 14 November 2011) TZL entered into Heads of Agreement ('HOA') with Terra Rossa Capital Limited ('TRC') on 11 November 2011. Under the HOA the parties will establish, manage and operate a proposed investment fund to invest in, monitor and support the commercialisation of early stage technology and information technology businesses. This venture proposes to use the expertise of TZL and its US based subsidiary, Product Development Technologies Inc. and TRC to offer a fast track route to market for Australia intellectual property. The proposed fund will seek additional matching funding sources through programs such as the Australian Government's Innovation Investment Fund.

TZIA and Coles Online – Click and Collect Lockers

(Announced 22 November 2011) TZIA received a purchase order from Coles Online for the supply of a customised SMArt Device system and TZ Courier™application software for integration with Coles Click and Collect refrigerated lockers to be deployed across Queensland, NSW and Victoria in early 2012. This represents an extension of the initial and successful trial of the Click and Collect lockers at Windsor, Victoria and a move by Coles to a more sophisticated electronic solution for future deployments.

There were no other significant changes in the state of affairs of the consolidated entity during the financial half-year.

Rounding of amounts

The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to 'rounding-off'. Amounts in this report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar.

Auditor's independence declaration

A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out on the following page.

This report is made in accordance with a resolution of directors, pursuant to section 306(3)(a) of the Corporations Act 2001.

On behalf of the directors

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_____ _____ Mark Bouris Kenneth Ting Director Director

29 February 2012 Sydney

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6

TZ Limited Financial report For the half-year ended 31 December 2011

Contents

Contents
	Page
Financial report
Statement of comprehensive income	8
Statement of financial position	9
Statement of changes in equity	10
Statement of cash flows	11
Notes to the financial statements	12
Directors' declaration	19
Independent auditor's review report to the members of TZ Limited	20

General information

The financial report covers TZ Limited as a consolidated entity consisting of TZ Limited and the entities it controlled. The financial report is presented in Australian dollars, which is TZ Limited's functional and presentation currency.

The financial report consists of the financial statements, notes to the financial statements and the directors' declaration.

TZ Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business are:

Registered office	Principal place of business
Level 11, 1 Chifley Square	TZ Limited, Level 11, 1 Chifley Square, Sydney NSW
Sydney NSW 2000	2000
	Telezygology Inc., 1017 W. Washington Blvd, Unit 2C,
	Chicago IL 60607, USA
	PDT Inc, One Corporate Drive, Suite 110, Lake Zurich IL
	60047, USA

A description of the nature of the consolidated entity's operations and its principal activities are included in the directors' report, which is not part of the financial report.

The financial report was authorised for issue, in accordance with a resolution of directors, on 29 February 2012. The directors have the power to amend and reissue the financial report.

7

TZ Limited Statement of comprehensive income For the half-year ended 31 December 2011

Note 3 4 5 5 10 10 Other comprehensive income Loss after income tax expense for the half-year attributable to the owners of TZ Limited Income tax expense Other income Revenue Depreciation and amortisation expense Travel and accommodation expense Communications expense Development costs Net loss on movement in fair value of derivative liabilities Expenses Impairment of joint venture Raw materials and consumables used Subcontractors costs Employee benefits expense Professional and corporate services Share of net losses of joint venture accounted for using the equity method Occupancy expense Other expenses Loss before income tax expense Finance costs Diluted earnings per share Basic earnings per share Other comprehensive income for the half-year, net of tax Total comprehensive income for the half-year attributable to the owners of TZ Limited Foreign currency translation	31 Dec 2011 31 Dec 2010 $'000 $'000 9,528 10,295 261 4,265 (1,041) (822) (3,610) (3,087) (6,750) (6,959) (391) (370) (887) (925) (160) (151) (1,422) (1,724) (564) (426) (710) (240) (3,293) - (63) (135) (203) - (729) (1,234) (2,371) (1,928) (12,405) (3,441) (14) (7) (12,419) (3,448) 892 (3,872) 892 (3,872) (11,527) (7,320) Cents Cents (10.08) (4.41) (10.08) (4.41) Consolidated	31 Dec 2011 31 Dec 2010 $'000 $'000 9,528 10,295 261 4,265 (1,041) (822) (3,610) (3,087) (6,750) (6,959) (391) (370) (887) (925) (160) (151) (1,422) (1,724) (564) (426) (710) (240) (3,293) - (63) (135) (203) - (729) (1,234) (2,371) (1,928) (12,405) (3,441) (14) (7) (12,419) (3,448) 892 (3,872) 892 (3,872) (11,527) (7,320) Cents Cents (10.08) (4.41) (10.08) (4.41) Consolidated
	(12,405) (14)	(3,441) (7)
	(12,419) 892	(3,448) (3,872)
	892	(3,872)
	(11,527)	(7,320)
	Cents (10.08) (10.08)	Cents (4.41) (4.41)

The above statement of comprehensive income should be read in conjunction with the accompanying notes

8

TZ Limited Statement of financial position As at 31 December 2011

Consolidated

Note 6 Reserves Property, plant and equipment Intangibles Other Total liabilities Liabilities Other Total non-current assets Current assets Assets Cash and cash equivalents Accumulated losses Trade and other receivables Inventories Deferred tax Total current liabilities Derivative financial instruments Current liabilities Non-current assets Total current assets Investments accounted for using the equity method Investment in short term deposit Total equity Total non-current liabilities Net assets Other Deferred tax Borrowings Trade and other payables Borrowings Provisions Total assets Contributed equity Equity Non-current liabilities	31 Dec 2011 $'000 508 3,808 443 500	30 Jun 2011 $'000 1,146 4,913 331 5,500
	5,259	11,890
	121 1,801 20,038 783 180	187 1,884 19,750 751 179
	22,923	22,751
	28,182	34,641
	4,558 759 53 441	4,575 729 116 368
	5,811	5,788
	11,544 7,704 984 495	10,206 4,411 945 507
	20,727	16,069
	26,538	21,857
	1,644	12,784
	149,113 (6,105) (141,364)	149,113 (6,997) (129,332)
	1,644	12,784

The above statement of financial position should be read in conjunction with the accompanying notes

9

TZ Limited

Statement of changes in equity For the half-year ended 31 December 2011

$'000 - - - - $'000 - - - - Transactions with owners in their capacity as owners: Balance at 31 December 2011 Share-based payments Other comprehensive income for the half-year, net of tax Loss after income tax expense for the half-year Total comprehensive income for the half-year Balance at 1 July 2011 Other comprehensive income for the half-year, net of tax Loss after income tax expense for the half-year Total comprehensive income for the half-year Contributions of equity, net of transaction costs Share-based payments Balance at 31 December 2010 Consolidated Transactions with owners in their capacity as owners: Consolidated Balance at 1 July 2010	$'000 125,907 - - equity Contributed	$'000 4,768 - - Other contributed equity	$'000 (706) (3,872) - Reserves	Total equity $'000 $'000 (125,099) 4,870 - (3,872) (3,448) (3,448) (3,448) (7,320) - 17,299 1,161 1,161 (127,386) 16,010 Total equity $'000 $'000 (129,332) 12,784 - 892 (12,419) (12,419) (12,419) (11,527) 387 387 (141,364) 1,644 losses Accumulated Accumulated losses	Total equity $'000 $'000 (125,099) 4,870 - (3,872) (3,448) (3,448) (3,448) (7,320) - 17,299 1,161 1,161 (127,386) 16,010 Total equity $'000 $'000 (129,332) 12,784 - 892 (12,419) (12,419) (12,419) (11,527) 387 387 (141,364) 1,644 losses Accumulated Accumulated losses
	- 18,306	- (1,007) -	(3,872) - -	(3,448) - 1,161	(7,320) 17,299 1,161
	144,213	3,761	(4,578)	(127,386)	16,010
	$'000 149,113 - - Contributed equity	$'000 - - - equity Other contributed	$'000 (6,997) 892 - Reserves
	- -	- -	892 -	(12,419) 387	(11,527) 387
	149,113	-	(6,105)	(141,364)	1,644

The above statement of changes in equity should be read in conjunction with the accompanying notes

10

TZ Limited Statement of cash flows For the half-year ended 31 December 2011

Note 6 Effects of exchange rate changes on cash Proceeds from borrowings Proceeds from short term deposit redemptions Cash flows from operating activities Receipts from customers (inclusive of GST) Interest received Investments in short term deposits Payments to suppliers and employees (inclusive of GST) Interest and other finance costs paid Net cash used in operating activities Other revenue Cash and cash equivalents at the beginning of the financial half-year Cash and cash equivalents at the end of the financial half-year Cash flows from investing activities Net cash from financing activities Proceeds from sale of property, plant and equipment Payment for convertible note redemption Payments for new joint venture capital invested Payments for property, plant and equipment Income taxes paid Payments for intangibles Repayment of borrowings Proceeds from issue of shares Net increase/(decrease) in cash and cash equivalents Cash flows from financing activities Net cash from/(used in) investing activities	31 Dec 2011 31 Dec 2010 $'000 $'000 10,762 9,661 (15,549) (13,326) (4,787) (3,665) 90 2 254 - (693) (48) (14) (6) (5,150) (3,717) (200) (200) (177) (258) (35) (533) - (5,500) - 1 5,000 - 4,588 (6,490) - 12,201 - (500) 423 4,976 (423) (206) - 16,471 (562) 6,264 1,146 232 (76) (567) 508 5,929 Consolidated	31 Dec 2011 31 Dec 2010 $'000 $'000 10,762 9,661 (15,549) (13,326) (4,787) (3,665) 90 2 254 - (693) (48) (14) (6) (5,150) (3,717) (200) (200) (177) (258) (35) (533) - (5,500) - 1 5,000 - 4,588 (6,490) - 12,201 - (500) 423 4,976 (423) (206) - 16,471 (562) 6,264 1,146 232 (76) (567) 508 5,929 Consolidated
	(4,787) 90 254 (693) (14)	(3,665) 2 - (48) (6)
	(5,150)	(3,717)
	(200) (177) (35) - - 5,000	(200) (258) (533) (5,500) 1 -
	4,588	(6,490)
	- - 423 (423)	12,201 (500) 4,976 (206)
	-	16,471
	(562) 1,146 (76)	6,264 232 (567)
	508	5,929

The above statement of cash flows should be read in conjunction with the accompanying notes

11

TZ Limited Notes to the financial statements 31 December 2011

Note 1. Significant accounting policies

These general purpose financial statements for the interim half-year reporting period ended 31 December 2011 have been prepared in accordance with Australian Accounting Standard AASB 134 'Interim Financial Reporting' and the Corporations Act 2001.

These general purpose financial statements do not include all the notes of the type normally included in annual financial statements. Accordingly, these financial statements are to be read in conjunction with the annual report for the year ended 30 June 2011 and any public announcements made by the company during the interim reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001.

The principal accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period.

New, revised or amending Accounting Standards and Interpretations adopted

The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board ('AASB') that are mandatory for the current reporting period.

Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed in the relevant accounting policy. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity.

The following Accounting Standards and Interpretations are most relevant to the consolidated entity:

AASB 2010-4 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

The consolidated entity has applied AASB 2010-4 amendments from 1 July 2011. The amendments made numerous non-urgent but necessary amendments to a range of Australian Accounting Standards and Interpretations. The amendments provided clarification of disclosures in AASB 7 'Financial Instruments: Disclosures', in particular emphasis of the interaction between quantitative and qualitative disclosures and the nature and extent of risks associated with financial instruments; clarified that an entity can present an analysis of other comprehensive income for each component of equity, either in the statement of changes in equity or in the notes in accordance with AASB 101 'Presentation of Financial Instruments'; and provided guidance on the disclosure of significant events and transactions in AASB 134 'Interim Financial Reporting'.

AASB 124 Related Party Disclosures (December 2009)

The consolidated entity has applied AASB 124 (revised) from 1 July 2011. The revised standard simplified the definition of a related party by clarifying its intended meaning and eliminating inconsistencies from the definition. A subsidiary and an associate with the same investor are related parties of each other; entities significantly influenced by one person and entities significantly influenced by a close member of the family of that person are no longer related parties of each other; and whenever a person or entity has both joint control over a second entity and joint control or significant influence over a third party, the second and third entities are related to each other. The adoption of this revised standard from 1 July 2011 has not had a material impact on the consolidated entity.

Going concern

The financial report has been prepared on a going concern basis. Convertible notes with a face value of $12,000,000 are due to mature on 18 February 2013. Unless those notes are converted to shares by the holder prior to maturity the principal and interest outstanding on maturity will be payable in cash by TZ Limited. The ability of the consolidated entity to continue as a going concern is dependent on the generation of sufficient profits and positive cash flows, the conversion of the notes to shares or the raising of additional share capital. TZ Limited has previously raised capital when required. The directors expect the company will be successful in raising additional capital in future, if required.

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TZ Limited Notes to the financial statements 31 December 2011

Note 2. Operating segments

Identification of reportable operating segments

The consolidated entity is organised into two operating segments. These operating segments are based on the internal reports that are reviewed and used by the executive management committee (who are identified as the Chief Operating Decision Makers ('CODM')) in assessing performance and in determining the allocation of resources. There is no aggregation of operating segments.

The CODM comprises the executive directors, chief executive officer, chief financial officer and divisional managers. The CODM reviews both adjusted earnings before interest, tax, depreciation and amortisation (segment result) and profit before income tax.

The information reported to the CODM is on at least a monthly basis.

Types of products and services

The principal products and services of each of these operating segments are as follows:

PDT Holdings Inc ('PDT') PDT Group operates its engineering and design division predominantly in the USA, whilst maintaining a presence in the UK and the Ukraine. Telezygology Inc ('TZI') TZI’s primary role is the development and commercialisation of hardware and software products primarily in the US and Australia markets.

Intersegment transactions

Intersegment transactions were made at market rates. Intersegment transactions are eliminated on consolidation.

Intersegment receivables, payables and loans

Intersegment loans are initially recognised at the consideration received. Intersegment loans receivable and loans payable that earn or incur non-market interest are not adjusted to fair value based on market interest rates. Intersegment loans are eliminated on consolidation.

Major customers

During the half year ended 31 December 2011 approximately 48.01% (2010: 37.10%) of the consolidated entity's external revenue was derived from sales to one customer of PDT.

13

TZ Limited Notes to the financial statements 31 December 2011

Note 2. Operating segments (continued)

Operating segment information

$'000 $'000 - - - - - - - - - - - - - - - - - - - - $'000 $'000 - - - - - - - - - - - - - - - - - - - - - - - - Intersegment sales 31 Dec 2010 Income tax expense Profit/(loss) before income tax expense Total sales revenue Interest revenue Revenue Sales to external customers Other income Depreciation and amortisation Head office costs Finance costs Interest revenue Total revenue Head office revenue/income Loss after income tax expense Income tax expense Finance costs Revenue Other income Segment result 31 Dec 2011 Depreciation and amortisation Loss after income tax expense Intersegment sales Total sales revenue Loss from Joint Venture - Intanova Impairment of Joint Venture - Intanova Loss before income tax expense Sales to external customers Head office costs Total revenue Segment result	$'000 8,606 183 PDT	$'000 793 - TZI	unallocated $'000 - (183) Intersegment eliminations/	Consolidated $'000 9,399 -
	8,789 42	793 58	(183) 290	9,399 390
	8,831	851	107	9,789
	(601) (357) - (24) - - -	(3,747) (523) 1 - (63) (203) -	- (7) 89 (2,347) - - (4,623)	(4,348) (887) 90 (2,371) (63) (203) (4,623)
	(982)	(4,535)	(6,888)	(12,405) (14)
	$'000 9,894 123 PDT	$'000 383 93 TZI	unallocated $'000 - (216) Intersegment eliminations/
				(12,419)
				Consolidated $'000 10,277 -
	10,017 3	476 206	(216) 4,074	10,277 4,283
	10,020	682	3,858	14,560
	1,024 - - - - -	(2,414) - - - - -	- (925) 18 (1,928) 4,304 (3,520)	(1,390) (925) 18 (1,928) 4,304 (3,520)
	1,024	(2,414)	(2,051)	(3,441) (7)
				(3,448)

14

TZ Limited Notes to the financial statements 31 December 2011

Note 3. Revenue

Consolidated

- - - - Revenue Interest Other revenue Royalty Sales revenue Sales and services revenue	31 Dec 2011 $'000 9,399	31 Dec 2010 $'000 10,277
	90 39	18 -
	129	18
	9,528	10,295

Note 4. Other income

Net foreign exchange gain Net gain on movement in fair value of derivative liabilities Other income Other income

- -	31 Dec 2011 31 Dec 2010 $'000 $'000 6 - - 4,052 255 213 261 4,265 Consolidated	31 Dec 2011 31 Dec 2010 $'000 $'000 6 - - 4,052 255 213 261 4,265 Consolidated
	261	4,265

Note 5. Expenses

Consolidated

- - - - - - Total depreciation and amortisation Office furniture and equipment Amortisation Total depreciation Plant and equipment Re-acquired rights Depreciation Total amortisation Other intangibles Leasehold improvements Loss before income tax includes the following specific expenses:	31 Dec 2011 $'000 113 148 91	31 Dec 2010 $'000 114 164 58
	352	336
	314 221	333 256
	535	589
	887	925

15

TZ Limited Notes to the financial statements 31 December 2011

Note 5. Expenses (continued)

Interest and finance charges paid/payable Finance costs Net foreign exchange loss Share-based payments expense Net foreign exchange loss Share-based payments expense	31 Dec 2011 31 Dec 2010 $'000 $'000 2,371 1,928 - 367 387 1,161 Consolidated	31 Dec 2011 31 Dec 2010 $'000 $'000 2,371 1,928 - 367 387 1,161 Consolidated
	-	367
	387	1,161

Note 6. Equity - contributed

31 Dec 2011 30 Jun 2011 Shares Shares 124,131,123 122,731,123 No of shares 122,731,123 1,400,000 124,131,123 Consolidated Date Balance 1 July 2011 Movements in ordinary share capital Ordinary shares - fully paid Balance 31 December 2011 Issue of shares on exercise of rights Details 28 October 2011	31 Dec 2011 30 Jun 2011 Shares Shares 124,131,123 122,731,123 No of shares 122,731,123 1,400,000 124,131,123 Consolidated Date Balance 1 July 2011 Movements in ordinary share capital Ordinary shares - fully paid Balance 31 December 2011 Issue of shares on exercise of rights Details 28 October 2011	31 Dec 2011 30 Jun 2011 $'000 $'000 149,113 149,113 Issue price $'000 149,113 $0.00 - 149,113 Consolidated	31 Dec 2011 30 Jun 2011 $'000 $'000 149,113 149,113 Issue price $'000 149,113 $0.00 - 149,113 Consolidated
	No of shares 122,731,123 1,400,000	Issue price $0.00	$'000 149,113 -
	124,131,123		149,113

Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value.

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Note 7. Equity - dividends

There were no dividends paid or declared during the current or previous financial half-year.

Note 8. Related party transactions

Parent entity

TZ Limited is the parent entity.

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TZ Limited Notes to the financial statements 31 December 2011

Note 8. Related party transactions (continued)

Transactions with related parties

The following transactions occurred with related parties:

	Consolidated	Consolidated	Consolidated	Consolidated
	31 Dec	**2011 **	31	Dec	2010
	$			$
Payment for other expenses:
Rent and serviced office expenditure paid to State Capital
Property Pty Limited, a company in which Mark Bouris is a
director.	129,153			72,398
Administration fees and storage costs paid to YBR
Services Pty Limited, a company in which Mark Bouris is a
director.	19,879			18,535
Accounting fees paid to Yellow Brick Road Accounting
and Wealth Management Pty Limited, a company in which
Mark Bouris is a director.	245,950			260,176
Business Insurance Policy arranged by Yellow Brick Road
Wealth Management Pty Limited, a company in which
Mark Bouris is a director.	1,219			1,159
Marketing expenses paid to Yellow Brick Road Group Pty
Limited, a company in which
Mark Bouris is a director.	55,000			38,500
Receivable from and payable to related parties
The following balances are outstanding at the reporting date in relation to transactions with related		parties:
	Consolidated
	31 Dec	2011	30	Jun	2011
	$			$
Current payables:
Administration fees and storage costs paid to YBR
Services Pty Limited, a company in which Mark Bouris is a
director.	3,976				-
Accounting fees paid to Yellow Brick Road Accounting and
Wealth Management Pty Limited, a company in which
Mark Bouris is a director.	29,381			36,183
Marketing expenses paid to Yellow Brick Road Group Pty
Limited, a company in Which Mark Bouris is a director.	11,000				-
Consultancy fee payable to IX Consulting Pty Limited, a
company in which John Wilson is a director.		-		38,500
Rent, phone expense and service office expenditure
payable to State Capital Property Pty Limited, a company
in which Mark Bouris is a director.		89		47,183
Loans to/from related parties
There were no loans to or from related parties at the reporting date.

Terms and conditions

All transactions were made on normal commercial terms and conditions and at market rates.

17

TZ Limited Notes to the financial statements 31 December 2011

Note 9. Events after the reporting period

TZL Loan Facility with QVT Fund LP and Quintessence Fund L.P. ('QVT Funds')

On 31 January 2012, TZ Limited ('TZL') and Telezygology, Inc. ('TZI') entered into a loan agreement with QVT Funds under which QVT Funds provided a stand-by loan facility in an amount of USD$3.0 million to TZI. TZL has provided an unconditional and irrevocable guarantee in respect of any amounts due and payable by TZI under the stand-by loan facility. As at 23 February 2012, no funds have been drawn down under the facility and the facility remains subject to a number of pre-drawdown conditions.

TZL Capital Raising

On 15 and 16 February 2012 TZL undertook a capital raising by private placement ('Placement') to institutions and other exempt investors who qualify under sections 708(8), (10) and (11) of the Corporations Act 2001 (Cth). The Placement successfully raised $4,552,089 by the issue of 14,225,279 ordinary shares at $0.32 per share. The Placement was completed on 23 February 2012. The funds raised are to be used for working capital to position the company for anticipated supply contracts and new business.

The conversion prices applying to each of the Series I Convertible Notes, Series III Convertible Notes, Series IIIB Convertible Notes, and to any Series IV Convertible Notes to be issued will not be affected by the Placement.

No other matter or circumstance has arisen since 31 December 2011 that has significantly affected, or may significantly affect the consolidated entity's operations, the results of those operations, or the consolidated entity's state of affairs in future financial years.

Note 10. Earnings per share

Weighted average number of ordinary shares used in calculating basic earnings per share Basic earnings per share Loss after income tax attributable to the owners of TZ Limited Weighted average number of ordinary shares used in calculating diluted earnings per share Diluted earnings per share	31 Dec 2011 31 Dec 2010 $'000 $'000 (12,419) (3,448) Number Number 123,225,688 78,254,345 123,225,688 78,254,345 Cents Cents (10.08) (4.41) (10.08) (4.41) Consolidated	31 Dec 2011 31 Dec 2010 $'000 $'000 (12,419) (3,448) Number Number 123,225,688 78,254,345 123,225,688 78,254,345 Cents Cents (10.08) (4.41) (10.08) (4.41) Consolidated
	Number 123,225,688	Number 78,254,345
	123,225,688	78,254,345
	Cents (10.08) (10.08)	Cents (4.41) (4.41)

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TZ Limited Directors' declaration

In the directors' opinion:

• the attached financial statements and notes thereto comply with the Corporations Act 2001, Australian Accounting Standard AASB 134 'Interim Financial Reporting', the Corporations Regulations 2001 and other mandatory professional reporting requirements;

• the attached financial statements and notes thereto give a true and fair view of the consolidated entity's financial position as at 31 December 2011 and of its performance for the financial half-year ended on that date; and

• there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of directors made pursuant to section 303(5) of the Corporations Act 2001.

On behalf of the directors

==> picture [147 x 48] intentionally omitted <==

==> picture [79 x 48] intentionally omitted <==

_____ _____ Mark Bouris Kenneth Ting Director Director

29 February 2012 Sydney

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