Lodged by ASX Online For personal use onlyFor IXP, the most noticeable development has been the...

TZ Limited

ABN 26 073 979 272

Sydney (Registered Office) Chicago (Operational Headquarters) ASX: TZL Level 11, 1 Chifley Square 520 West Erie Street, Suite 210 Web: www.tz.net Sydney, NSW 2000 Australia Chicago, IL 60654 United States Email: [email protected]

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 Mark Bouris Chairman

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1. Company details

Name of entity:

ABN:

Reporting period:

Previous corresponding period:

2.

down 7.5% to

up 260.2% to

up 260.2% to

Dividends

3.

Net tangible asset backing per ordinary security

4.

Name of entities (or group of entities)

Date control gained

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) for the whole of

the previous corresponding period

(where material)

TZ Limited

Half-year report

APPENDIX 4D

HALF-YEAR REPORT

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

$3,448,000).

Revenues from ordinary activities $ 9,528,000

Results for announcement to the market

TZ Limited

26 073 979 272

Half-year ended 31 December 2011

Half-year ended 31 December 2010

Loss from ordinary activities after tax attributable to the owners of TZ

Limited

Loss for the period attributable to the owners of TZ Limited

$(12,419,000)

$(12,419,000)

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

Control gained over entities

$ -

Comments

$ -

Not applicable.

(14.82) cents (3.95) cents

NTA backing

Reporting period Previous corresponding period

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Half-year report

5.

Name of entities (or group of entities)

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.

Current period

Previous corresponding period

7.

8.

Name of associate / joint venture

Intanova Pty Limited

Group's aggregate share of associates and joint

venture entities' profit/(loss) (where material)

9.

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

$(135,266)

Loss of control over entities

Not applicable.

$ -

Dividends

$ -

$ -

Not applicable.

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

period

corresponding

Previous Previous

Current period period

corresponding

Current period

Dividend reinvestment plans

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

Not applicable.

Not applicable.

$(62,735)

$ -

Details of associates and joint venture entities

percentage holding

Contribution to profit/(loss)

(where material)

Reporting entity's

Profit(loss) from ordinary activities before income tax

Income tax on operating activities

50.00% 50.00% $(62,735)

Foreign entities

The following dividend or distribution plans are in operation:

$(135,266)

The last date(s) for receipt of election notices for the dividend or distribution plans:

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Half-year report

10.

11.

12. Signed

Sydney

Director

Mark Bouris

Signed: ________________________________ Date: 29 February 2012

Details of attachments (if any):

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

Audit qualification or review

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

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

Attachments

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TZ Limited

Interim Report - 31 December 2011

ABN 26 073 979 272

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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').

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.

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.

Review of operationsThe loss for the consolidated entity after providing for income tax amounted to $12,419,000 (31 December 2010:

$3,448,000).

TZ Limited

Principal activities

Dickory Rudduck

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:

Directors' report

31 December 2011

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.

Mark Bouris - Chairman

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

Kenneth Ting

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.

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

and Ukraine.

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TZ Limited

Directors' report

31 December 2011

• 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.

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.

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.

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:

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.

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.

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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

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.

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.

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.

Significant changes in the state of affairs

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.

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TZ Limited

Directors' report

31 December 2011

Auditor's independence declaration

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.

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.

Sydney

29 February 2012

DirectorDirector

________________________________

Kenneth Ting

________________________________

Mark Bouris

On behalf of the directors

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

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.

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.

Rounding of amounts

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Registered office

Level 11, 1 Chifley Square

Sydney NSW 2000

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.

PDT Inc, One Corporate Drive, Suite 110, Lake Zurich IL

60047, USA

Contents

Financial report

Notes to the financial statements

Directors' declaration

Independent auditor's review report to the members of TZ Limited

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

declaration.

Statement of comprehensive income

Statement of financial position

Statement of changes in equity

Statement of cash flows

TZ Limited

For the half-year ended 31 December 2011

Financial report

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.

TZ Limited, Level 11, 1 Chifley Square, Sydney NSW

2000

Telezygology Inc., 1017 W. Washington Blvd, Unit 2C,

Chicago IL 60607, USA

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.

TZ Limited is a listed public company limited by shares, incorporated and domiciled in Australia. Its registered office

and principal place of business are:

Principal place of business

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Note 31 Dec 2011 31 Dec 2010

$'000 $'000

3 9,528 10,295

4 261 4,265

(1,041) (822)

(3,610) (3,087)

(6,750) (6,959)

(391) (370)

5 (887) (925)

(160) (151)

(1,422) (1,724)

(564) (426)

(710) (240)

(3,293) -

(63) (135)

(203) -

(729) (1,234)

5 (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 (10.08) (4.41)

10 (10.08) (4.41)

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

Consolidated

Expenses

Impairment of joint venture

TZ Limited


Statement of comprehensive income

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

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

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Note 31 Dec 2011 30 Jun 2011

$'000 $'000

508 1,146

3,808 4,913

443 331

500 5,500

5,259 11,890

121 187

1,801 1,884

20,038 19,750

783 751

180 179

22,923 22,751

28,182 34,641

4,558 4,575

759 729

53 116

441 368

5,811 5,788

11,544 10,206

7,704 4,411

984 945

495 507

20,727 16,069

26,538 21,857

1,644 12,784

6 149,113 149,113

(6,105) (6,997)

(141,364) (129,332)

1,644 12,784

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

TZ Limited

Statement of financial position

As at 31 December 2011

Consolidated

Trade and other payables

Borrowings

Provisions

Total assets

Contributed equity

Equity

Non-current liabilities

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

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Total

equity

$'000 $'000 $'000 $'000 $'000 $'000

125,907 4,768 (706) (125,099) 4,870

- - - (3,872) - (3,872)

- - - - (3,448) (3,448)

- - - (3,872) (3,448) (7,320)

18,306 (1,007) - - 17,299

- - 1,161 1,161

- 144,213 3,761 (4,578) (127,386) 16,010

Total

equity

$'000 $'000 $'000 $'000 $'000 $'000

149,113 - (6,997) (129,332) 12,784

- - - 892 - 892

- - - - (12,419) (12,419)

- - - 892 (12,419) (11,527)

- - - 387 387

- 149,113 - (6,105) (141,364) 1,644

Transactions with owners in

their capacity as owners:

Balance at 31 December 2011

Share-based payments


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

TZ Limited


Statement of changes in equity


for the half-year, net of tax

equity

Contributed

Other

contributed

equity


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

Reserves losses

Accumulated

Contributed

equity equity

Other

contributed

Reserves

Accumulated

losses

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

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Note 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)

6 - 12,201

- (500)

423 4,976

(423) (206)

- 16,471

(562) 6,264

1,146 232

(76) (567)

508 5,929

Effects of exchange rate changes on cash

Proceeds from borrowings

Proceeds from short term deposit redemptions

Consolidated

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

TZ Limited


Statement of cash flows

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

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

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31 December 2011

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.

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.

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.

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

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.

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.


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

TZ Limited

Note 1. Significant accounting policies

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.

Going concern

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)

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31 December 2011


TZ Limited

TZI’s primary role is the development and commercialisation of hardware and

software products primarily in the US and Australia markets.

PDT Group operates its engineering and design division predominantly in the USA,

whilst maintaining a presence in the UK and the Ukraine.

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.

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.

Telezygology Inc ('TZI')

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.

Intersegment transactions

Major customers

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

Intersegment receivables, payables and loans

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

Types of products and services

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.

PDT Holdings Inc ('PDT')

Note 2. Operating segments

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31 December 2011


TZ Limited

unallocated Consolidated

$'000 $'000 $'000 $'000 $'000 $'000

8,606 793 - 9,399

183 - (183) -

- - 8,789 793 (183) 9,399

42 58 290 390

- - 8,831 851 107 9,789

- - (601) (3,747) - (4,348)

- - (357) (523) (7) (887)

- - - 1 89 90

- - (24) - (2,347) (2,371)

- - - (63) - (63)

- - - (203) - (203)

- - - - (4,623) (4,623)

- - (982) (4,535) (6,888) (12,405)

(14)

(12,419)

unallocated Consolidated

$'000 $'000 $'000 $'000 $'000 $'000

- - 9,894 383 - 10,277

- - 123 93 (216) -

- - 10,017 476 (216) 10,277

- - 3 206 4,074 4,283

- - 10,020 682 3,858 14,560

- - 1,024 (2,414) - (1,390)

- - - - (925) (925)

- - - - 18 18

- - - - (1,928) (1,928)

- - - - 4,304 4,304

- - - - (3,520) (3,520)

- - 1,024 (2,414) (2,051) (3,441)

(7)

(3,448)

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

Intersegment

PDT

eliminations/

Total revenue

TZI

Head office revenue/income


expense

Intersegment

Income tax expense

Finance costs

Revenue

Other income

Note 2. Operating segments (continued)

Segment result

31 Dec 2011

PDT

Depreciation and amortisation


expense

Intersegment sales

Total sales revenue

Loss from Joint Venture -

Intanova

Impairment of Joint Venture -

Intanova

Operating segment information

Loss before income tax

expense

eliminations/

Sales to external customers

TZI

Head office costs

Total revenue

Segment result

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31 December 2011


TZ Limited

31 Dec 2011 31 Dec 2010

$'000 $'000

9,399 10,277

90 18

39 -

- - 129 18

- - 9,528 10,295

31 Dec 2011 31 Dec 2010

$'000 $'000

6 -

- 4,052

255 213

- - 261 4,265

31 Dec 2011 31 Dec 2010

$'000 $'000

113 114

148 164

91 58

- - 352 336

314 333

221 256

- - 535 589

- - 887 925

Other income

Total depreciation and amortisation

Office furniture and equipment

Amortisation

Total depreciation

Plant and equipment

Re-acquired rights

Net gain on movement in fair value of derivative liabilities

Note 4. Other income

Revenue

Depreciation

Total amortisation

Consolidated

Other intangibles

Leasehold improvements

Interest

Loss before income tax includes the following specific

expenses:

Note 5. Expenses

Consolidated

Other revenue

Royalty

Sales revenue

Sales and services revenue

Note 3. Revenue

Other income

Consolidated

Net foreign exchange gain

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31 December 2011


TZ Limited

31 Dec 2011 31 Dec 2010

$'000 $'000

2,371 1,928

- 367

387 1,161

31 Dec 2011 30 Jun 2011 31 Dec 2011 30 Jun 2011

Shares Shares $'000 $'000

124,131,123 122,731,123 149,113 149,113

No of shares Issue price $'000

122,731,123 149,113

1,400,000 $0.00 -

124,131,123 149,113

Interest and finance charges paid/payable

Finance costs

Consolidated

Consolidated Consolidated

Date

Balance

Note 6. Equity - contributed

1 July 2011

Net foreign exchange loss

Note 5. Expenses (continued)

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.

Movements in ordinary share capital

Ordinary shares - fully paid

Balance

Note 7. Equity - dividends

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

Ordinary shares

Share-based payments expense

Net foreign exchange loss

Share-based payments expense

31 December 2011

Issue of shares on exercise of rights

Details

28 October 2011

Note 8. Related party transactions

Parent entity

TZ Limited is the parent entity.

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31 December 2011


TZ Limited

31 Dec 2011 31 Dec 2010

$ $

129,153 72,398

19,879 18,535

245,950 260,176

1,219 1,159

55,000 38,500

31 Dec 2011 30 Jun 2011

$ $

3,976 -

29,381 36,183

11,000 -

- 38,500

89 47,183

Marketing expenses paid to Yellow Brick Road Group Pty

Limited, a company in which

Mark Bouris is a director.

Receivable from and payable to related parties

The following transactions occurred with related parties:

Accounting fees paid to Yellow Brick Road Accounting and

Wealth Management Pty Limited, a company in which


The following balances are outstanding at the reporting date in relation to transactions with related parties:

Business Insurance Policy arranged by Yellow Brick Road

Wealth Management Pty Limited, a company in which


Payment for other expenses:

Transactions with related parties

Rent and serviced office expenditure paid to State Capital

Property Pty Limited, a company in which Mark Bouris is a

director.

Consolidated

Note 8. Related party transactions (continued)

Administration fees and storage costs paid to YBR

Services Pty Limited, a company in which Mark Bouris is a

director.

Consultancy fee payable to IX Consulting Pty Limited, a

company in which John Wilson is a director.

Administration fees and storage costs paid to YBR

Services Pty Limited, a company in which Mark Bouris is a

director.

Loans to/from related parties

There were no loans to or from related parties at the reporting date.

Terms and conditions

Consolidated

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

Rent, phone expense and service office expenditure

payable to State Capital Property Pty Limited, a company

in which Mark Bouris is a director.

Marketing expenses paid to Yellow Brick Road Group Pty

Limited, a company in Which Mark Bouris is a director.

Current payables:

Accounting fees paid to Yellow Brick Road Accounting

and Wealth Management Pty Limited, a company in which


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31 December 2011


TZ Limited

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)

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.

Note 9. Events after the reporting period

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.

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.

Weighted average number of ordinary shares used in calculating basic earnings per

share

Consolidated

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

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.

Note 10. Earnings per share

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Directors' declaration

TZ Limited

there are reasonable grounds to believe that the company will be able to pay its debts as and when they

become due and payable.

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

Kenneth Ting

Sydney

29 February 2012

Mark Bouris

Director

________________________________

Director

________________________________

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

On behalf of the directors

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