TZ LIMITED — Interim / Quarterly Report 2021

Apr 29, 2021

Suite 48, Level 35, International Tower One 100 Barangaroo Avenue Sydney NSW 2000 Australia Telephone (+61) 2 9137 7300

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TZ Limited ABN 26 073 979 272

www.tz.net

30 April 2021

ASX Announcement

Business Review for the Quarter ended 31 March 2021

TZ Limited (ASX: TZL) (“TZ” or “the Company”), the specialist in digital smart locking hardware and software, is pleased to release its Appendix 4C - Quarterly Cash Flow Report for the quarter ended 31 March 2021.

HIGHLIGHTS:

• The net cash from operating activities for this quarter was -$0.4M (Q3 FY20: -$1.2m), bringing the total net result for the first three quarters of FY21 to -$0.9M (Q1-3 FY20: -$3.5M). Operating cash flows are therefore much improved on the previous financial year.

• The significant cash flows for operating activities during the quarter were: o Receipts of $2.6 million.

• Payments of product manufacturing and operating costs of $1.0 million.

• o Payments for staff costs of $1.6 million.

• Payments for administration and corporate costs of $0.3 million.

• Several financing activities occurred during and following the quarter. o TZ drew down $250,000 against its First Samuel debenture facility, bringing the total amount owed under the facility, including capitalised interest, to $11.7 million. The facility matures on 31 July 2021 and the Company is considering various alternatives with regards to this maturing facility.

• On 28 April 2021, the Company announced that a placement of 21,500,000 shares was completed at a price of $0.12 to raise $2,580,000 before costs.

• The Company also announced a rights issue to raise a further $7.06 million through the issue of 58.8 million shares to eligible shareholders if fully subscribed. Shareholders can request their personalised Entitlement Offer - - -

• application form at https://tz.investorportal.com.au/request rights issue form/

BUSINESS UPDATE

The board and executive team of TZ have focused on building a sustainable business model for TZ as a premium technology leader in access control, smart lock & self-serve locker bank systems. This investment has supported the building of best-in-class hardware and software solutions and has attracted and retained an impressive global client base.

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The board and management team have a clear mandate including three key goals for the Company:

1. To create a sustainable business model.

2. The business has implemented structural changes to the business reducing annual ongoing fixed costs by approximately $2.5 million.

3. To grow everyday revenue.

4. Despite the significant disruption from COVID-19, the business has successfully grown sales in the first half of the year by 8% with revenue to the end of this period being approximately 10% higher than the first 3 quarters of FY2020. In addition, what’s more exciting is the growth in our recurring everyday revenue to over $2.5 million a year with our previously stated goal being over $10 million by FY2023.

5. To build operational efficiencies.

6. The business continues to invest in its core technology to maintain our competitive advantage with meaningful upgrades to our existing software platform. The business has also considerably invested in strengthening its operational foundations to enable and support business expansion by rolling out of a new global finance, inventory and sales system.

The company is now in a good position to address the next phase of its turnaround plan and that is to restructure the balance sheet and address the level of debt that TZ has. As such, the business has just completed a placement capital raise of approximately $2.58 million at a price of $0.12 per share (announced to the market 28 April).

The company has also announced a non-renounceable rights issue at $0.12 per share to raise up to $7.06 million. The combined funds raised through both initiatives – $9.64 million – will be used to pay down the company’s existing debt with major shareholder First Samuel and provide the company with capital for growth.

In addition, First Samuel has elected to convert $2 million of existing debt to equity, a clear demonstration of its support for TZ, the board and management.

Depending on the final amount raised by the rights issue, the current annual interest cost of circa $0.9 million will be reduced significantly, which will free up cash flow that can be reinvested into the company’s ongoing expansion.

Shareholders can request their personalised Entitlement Offer application form at – - - - https://tz.investorportal.com.au/request rights issue form/

Reach Markets are the advisers managing the Rights Issue – If you have any questions, please contact them on 03 8080 5795 or via advisers@reachmarkets.com.au

BUSINESS ACTIVITIES AND DIRECTOR REMUNERATION

During the reporting period, TZ Limited’s business activities continued to be the sale of smart locking solutions and supporting software. Per item 6.1 of the Appendix 4C, $93,000 was paid to directors for non-executive directors’ fees and salary for the executive director.

OUTLOOK

We remain confident that the changes that have been made will enable the business to achieve its stated goal of trading cash flow positive in the near term. Attention is now being given to exploring various strategic opportunities with the focus of shifting the business in new areas of participation which will support rapid expansion and growth.

This announcement is authorised for release by TZ Limited’s board of directors.

To stay up to date on company news, announcements and upcoming events, please register your details at the TZL Investor Centre.

For further information, please contact:

Warrick Lace Investor Relations Phone: +61 404 656 408 Email: warrick.lace@reachmarkets.com

Scott Beeton Managing Director Phone: +61 400 252 425 Email: s.beeton@tz.net

Rule 4.7B

Appendix 4C

Quarterly cash flow report for entities subject to Listing Rule 4.7B

Name of entity

Name of entity	Name of entity
TZ LIMITED
ABN 26 073 979 272	Quarter ended (“current quarter”)
26 073 979 272	31 March 2021

Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
1. Cash flows from operating activities 1.1 Receipts from customers 1.2 Payments for (a) research and development (b) product manufacturing and operating costs (c) advertising and marketing (d) leased assets (e) staff costs (f) administration and corporate costs 1.3 Dividends received (see note 3) 1.4 Interest received 1.5 Interest and other costs of finance paid 1.6 Income taxes paid 1.7 Government grants and tax incentives 1.8 Other (provide details if material) 1.9 Net cash from / (used in) operating activities	3,062 - (1,402) (89) (72) (1,637) (326) - - (3) (3) 61 -	11,161 - (6,096) (243) (151) (5,112) (1,240) - 5 (78) 1 871 -
	(409)	(882)
2. Cash flows from investing activities 2.1 Payments to acquire: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets	- - - - (103) -	- - (5) - (267) -

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
2.2 Proceeds from disposal of: (a) entities (b) businesses (c) property, plant and equipment (d) investments (e) intellectual property (f) other non-current assets 2.3 Cash flows from loans to other entities 2.4 Dividends received (see note 3) 2.5 Other (provide details if material) 2.6 Net cash from / (used in) investing activities		- - - - - - - - -	- - - - - - - - -
		(103)	(272)
3. Cash flows from financing activities 3.1 Proceeds from issues of equity securities (excluding convertible debt securities) 3.2 Proceeds from issue of convertible debt securities 3.3 Proceeds from exercise of options 3.4 Transaction costs related to issues of equity securities or convertible debt securities 3.5 Proceeds from borrowings 3.6 Repayment of borrowings 3.7 Transaction costs related to loans and borrowings 3.8 Dividends paid 3.9 Other (AASB16 leases) 3.10 Net cash from / (used in) financing activities		180 - - (3) 250 - - - (10)	180 - - (5) 500 - - - (39)
		417	636
4. 4.1 4.2 4.3	Net increase / (decrease) in cash and cash equivalents for the period Cash and cash equivalents at beginning of period Net cash from / (used in) operating activities (item 1.9 above) Net cash from / (used in) investing activities (item 2.6 above)	597 (409) (103)	1,043 (882) (272)

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Consolidated statement of cash flows	Current quarter $A’000	Year to date (3 months) $A’000
4.4 4.5 4.6	Net cash from / (used in) financing activities (item 3.10 above) Effect of movement in exchange rates on cash held Cash and cash equivalents at end of period	417 3	636 (20)
		505	505
5. Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts		Current quarter $A’000	Previous quarter $A’000
5.1 Bank balances 5.2 Call deposits 5.3 Bank overdrafts 5.4 Other (provide details) 5.5 Cash and cash equivalents at end of quarter (should equal item 4.6 above)		505 - - -	597 - - -
		505	597
6. Payments to related parties of the entity and their associates 6.1 Aggregate amount of payments to related parties and their associates included in item 1 6.2 Aggregate amount of payments to related parties and their associates included in item 2
			Current quarter $A'000
			93
			-

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

7. Financing facilities Note: the term “facility’ includes all forms of financing arrangements available to the entity. Add notes as necessary for an understanding of the sources of finance available to the entity. Total facility amount at quarter end $A’000 7.1 Loan facilities 12,338 7.2 Credit standby arrangements - 7.3 Other (please specify) - 7.4 Total financing facilities 12,338 7.5 Unused financing facilities available at quarter end	Total facility amount at quarter end $A’000	Amount drawn at quarter end $A’000
	12,338	12,338
	-	-
	-	-
	12,338	12,338
		-

7.6 Include in the box below a description of each facility above, including the lender, interest rate, maturity date and whether it is secured or unsecured. If any additional financing facilities have been entered into or are proposed to be entered into after quarter end, include a note providing details of those facilities as well.

At 31 March 2021, TZ had a fully drawn loan facility with First Samuel Limited of $11.25 million of principal and $0.476 million of capitalised interest costs. The interest rate of the facility is 90-day BBSW plus 6% p.a. on $6 million of the facility and 90-day BBSW plus 9% p.a. on the balance of the facility. TZ’s USA subsidiary, Telezygology Inc, has a PPP loan under the CARES Act for US$465,000.

8.	Estimated cash available for future operating activities	$A’000
8.1 8.2 8.3 8.4 8.5	Net cash from / (used in) operating activities (Item 1.9) Cash and cash equivalents at quarter end (Item 4.6) Unused finance facilities available at quarter end (Item 7.5) Total available funding (Item 8.2 + Item 8.3) Estimated quarters of funding available (Item 8.4 divided by Item 8.1)	(409) 505 - 505
		1.23
8.6	If Item 8.5 is less than 2 quarters, please provide answers to the following questions: 1. Does the entity expect that it will continue to have the current level of net operating cash flows for the time being and, if not, why not?
	Answer: The entity expects to continue to trade with net operating cash flows at a similar level to the average so far this financial year.
	2. Has the entity taken any steps, or does it propose to take any steps, to raise further cash to fund its operations and, if so, what are those steps and how likely does it believe that they will be successful?
	Answer: The entity completed a placement on 28 April 2021 that raised $2.58 million before costs. The entity also initiated a rights issue on 29 April 2021 that will raise $7.06 million before costs if fully subscribed.
	3. Does the entity expect to be able to continue its operations and to meet its business objectives and, if so, on what basis?
	Answer: The placement and rights issue will ensure that the entity is able to continue its operations and it also expects to meet its business objectives.

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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Appendix 4C Quarterly cash flow report for entities subject to Listing Rule 4.7B

Compliance statement

• 1 This statement has been prepared in accordance with accounting standards and policies which comply with Listing Rule 19.11A.

• 2 This statement gives a true and fair view of the matters disclosed.

Date: 30 April 2021

Authorised by: The Board of Directors

Notes

1. This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is encouraged to do so.

2. If this quarterly cash flow report has been prepared in accordance with Australian Accounting Standards, the definitions in, and provisions of, AASB 107: Statement of Cash Flows apply to this report. If this quarterly cash flow report has been prepared in accordance with other accounting standards agreed by ASX pursuant to Listing Rule 19.11A, the corresponding equivalent standard applies to this report.

3. Dividends received may be classified either as cash flows from operating activities or cash flows from investing activities, depending on the accounting policy of the entity.

4. If this report has been authorised for release to the market by your board of directors, you can insert here: “By the board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert here: “By the [ name of board committee – eg Audit and Risk Committee ]”. If it has been authorised for release to the market by a disclosure committee, you can insert here: “By the Disclosure Committee”.

5. If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations , the board should have received a declaration from its CEO and CFO that, in their opinion, the financial records of the entity have been properly maintained, that this report complies with the appropriate accounting standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the basis of a sound system of risk management and internal control which is operating effectively.

ASX Listing Rules Appendix 4C (01/12/19) + See chapter 19 of the ASX Listing Rules for defined terms.

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