TZ Limited : Shareholder Update and Appendix 4C - December Quarter 2013

TZ Limited

ABN 26 073 979 272

30 January 2014

Lodged by ASX Online

The Manager

Company Announcement Office

ASX Ltd

Level 4, 20 Bridge Street

Sydney, NSW 2000

Dear Sir/Madam

SHAREHOLDER UPDATE & APPENDIX 4C - DECEMBER QUARTER 2013

Please find attached the shareholder update and ASX Appendix 4C (unaudited) - Quarterly Report for entities admitted on the basis of commitments for TZ Limited for the quarter ended 31 December 2013.

Yours faithfully

TZ LIMITED

Kenneth Ting

Director

TZ Limited Level 11, 1 Chifley Square, Sydney, NSW 2000 Australia Phone: [phone] Fax: [phone]

TZ Limited

ABN 26 073 979 272

TZ LIMITED - SHAREHOLDER UPDATE

December Quarter 2013

TZ GROUP PERFORMANCE:

• Strong close to the half year with IXP and PAD businesses generating a combined unaudited revenue of A$2.9M. The Company has successfully secured additional purchase orders and entered into committed contracts to the value of AUD$5.3M for supply starting in the second half of the financial year ending 30 June 2014, which strongly positions the Company to meet its $8M revenue target for the 2014 fiscal year.
• In comparison to the same period last year, IXP sales are up 163% and PAD sales are up 267%.
Both businesses continue to exhibit significant growth fuelled by locked-in supply contracts and increasing enquiry levels for the Company's products. With the securement of a number of high profile projects, the Company is fielding a large number of new opportunities with tender participation at an all-time high.
• Manufacturing transition to an Asian based contract manufacturer is well underway with the identified supplier of choice currently in negotiation with the Company on pricing and supply terms. It is envisaged that there will be significant unit cost savings once the new supplier is in production which will improve overall product gross margins. The Company enjoys an advantage when negotiating in the Asian region given that one of our Executive Directors is fluent in Chinese dialects. The Board would particularly like to acknowledge Kenneth Ting's contribution in driving the sourcing initiative in Asia. The acquisition of Infinity Design has been significant in allowing the Company to prepare detailed manufacturing tender packages and undertake audit enquiries on new Asian suppliers.
• The Company has entered into an agreement with an Asian based 3PL (third party logistics) provider to support sourcing of non-proprietary components and to take responsibility for the overall management of consolidated freight and logistics of the Company's products ex-Asia. The Company should see savings not only in freight but should also see much better purchase prices due to improved buying power.
• The Company has also increased its resource base with new employee appointments in Sydney and the US. These new employees are predominantly software development, QA and technical service staff, and should therefore be able to provide the skills base needed to deliver several major projects, including functionality enhancements for the US PAD offering to the corporate and college sector in the US, customised workflow development for Poste Italiane and Pos Indonesia and on-going functionality and service upgrades for Singapore Post and the A.D.A.M Parcel Locker Network.

Infrastructure Protection (IXP):

• IXP sales received a significant boost with the receipt of an AUD$800,000 purchase order for a large scale TZ Centurion™ System deployment in the Americas scheduled for delivery in the first half of the 2014 calendar year. This is the largest purchase order received by the IXP business
to date.

Sydney (Registered Office)	Chicago	ASX:	TZL
Level 11, 1 Chifley Square	1017 W Washington Blvd, Suite 2C	Web:	www.tz.net
Sydney, NSW 2000 Australia	Chicago, IL 60607 United States	Email:	[e-mail]

TZ Limited

ABN 26 073 979 272

• Continued growth for all IXP regions is anticipated, particularly as the pipeline of opportunities are growing and a number of new data centres are scheduled to come on-stream this calendar year.
• The Payment Card Industries Data Security Standard Version 3 (PCI-DSS V3), which came into effect on 1 January 2014, has raised the bar considerably in terms of the physical security aspects required for the protection of cardholder information in the Financial Services sector. The Company expects that these increasing requirements will lead many organisations to consider more secure and sophisticated electronic cabinet level access control systems as part of their on-going compliance frameworks.
• The TZ SwingHandle™ offer will be launched in the coming weeks with a focus on cabinet manufacturers. Production samples are with our sales people and the promotion of the product should coincide with the upgrade to existing IXP sales collateral. A revamp of the IXP web-site is also scheduled. TZ SwingHandle™ has been designed to address the 90% of the cabinet
market who use mechanical locks offering a new solution with an electronic upgrade path. The input on the redesign of the mechanics and look of the new swing handle product has been provided mostly by Infinity Design, which was acquired by the Company last year.

Packaged Asset Delivery (PAD):

• Our PAD business continues to show strong growth, underpinned by sales to the corporate mail sector in the US and the progressive roll-out of Parcel Locker Banks in Singapore.
• With the securement of the Poste Italiane and Pos Indonesia business for pilot programme trials, the Company is in a great position to not only provide the underpinning systems supporting initial deployment but potentially to be in a strong position for continued roll-out, if those pilot programmes are successful. An unintended outcome of winning multiple South East Asian
postal tenders is that, with the right amount of goodwill, postal organisations can effectively network between themselves to build efficiencies. If so, TZ will potentially be able to start to underpin infrastructure roll-outs effectively making parcel delivery lockers seem contiguous.
• The Singapore Post roll-out continues in line with their stated objective of deploying 100 Locker Banks by the end of calendar year 2014. To put into perspective the scale of this deployment, as at the week ended 24 January 2014, TZ has supplied over 50 tonnes of Parcel Lockers to Singapore Post, which represents only 30 of the 100 Locker Banks that Singapore Post has stated is their objective to roll-out by 31 December 2014 under their deployment program.
• The Company is also pleased to say that it continues to be approached to engage in invitation only RFI (Request for Information) submissions, formal tenders and specific pricing proposals in the Postal parcel locker sector. The securement of the Poste Italiane business demonstrates that TZ is a serious contender not only in Asia but also in Europe where the majority of Parcel Locker providers are based.
• The A.D.A.M. Parcel Locker Network has received less management attention in the last few months with locker production and management attention focused on supporting Singapore Post supply requirements and tenders. To bring more focus to the A.D.A.M. Parcel Locker business,
a dedicated business manager was appointed in December.

Page | 2

TZ Limited

ABN 26 073 979 272

• The Company anticipates a total of 24 A.D.A.M. Locker Banks to be deployed between now and April 2014 predominantly at Westfield Shopping Centres and additional GPT properties. The deployment will coincide with new service offerings in conjunction with Fastway Couriers and targeted specifically at the retailers and consumers at these locations.

IN SUMMARY

• Strong half year result with significant back-log of purchase orders and secured supply contracts.
• The Company is on track to meet the stated objective of achieving AUD$8M in revenue for the fiscal year ending 30 June 2014.
• Strong wins in IXP and PAD with high profile customers demonstrate increasing awareness, demand and recognition that TZ's offerings are world leading.

Page | 3

Appendix 4C Quarterly report for entities

admitted on the basis of commitments

Appendix 4C

Quarterly report for entities admitted

on the basis of commitments

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

Name of entity

TZ Limited

ABN Quarter ended ("current quarter")

26 073 979 272 31 December 2013

Consolidated statement of cash flows

Cash flows related to operating activities

1.1

1.2

Receipts from customers

Payments for

(a) staff costs

(b) advertising and marketing (c) research and development (d) leased assets

(e) other working capital

1.3 Dividends received

1.4 Interest and other items of a similar nature received

1.5 Interest and other costs of finance paid

1.6 Income taxes refund/(paid)

1.7 Other Income

Net operating cash flows

+ See chapter 19 for defined terms.

24/10/2005 Appendix 4C Page 1

Appendix 4C Quarterly report for entities

admitted on the basis of commitments

	Current quarter $A'000	Year to date (6 months) $A'000
1.8 Net operating cash flows (carried forward)	(1,835)	(3,656)
Cash flows related to investing activities 1.9 Payment for acquisition of: (a) businesses (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.10 Proceeds from disposal of: (a) businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.11 Loans to other entities 1.12 Loans repaid by other entities 1.13 Other - Investment in cash trust Net investing cash flows 1.14 Total operating and investing cash flows	(154) - (244) (232) - - - - - - - - -	(304) - (400) (240) - - - - - - - - -
Cash flows related to investing activities 1.9 Payment for acquisition of: (a) businesses (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.10 Proceeds from disposal of: (a) businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.11 Loans to other entities 1.12 Loans repaid by other entities 1.13 Other - Investment in cash trust Net investing cash flows 1.14 Total operating and investing cash flows	(630)	(944)
Cash flows related to investing activities 1.9 Payment for acquisition of: (a) businesses (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.10 Proceeds from disposal of: (a) businesses (item 5) (b) equity investments (c) intellectual property (d) physical non-current assets (e) other non-current assets 1.11 Loans to other entities 1.12 Loans repaid by other entities 1.13 Other - Investment in cash trust Net investing cash flows 1.14 Total operating and investing cash flows	(2,465)	(4,600)
Cash flows related to financing activities 1.15 Proceeds from issues of shares, notes, etc. 1.16 Proceeds from sale of forfeited shares 1.17 Proceeds from borrowings 1.18 Repayment of borrowings 1.19 Proceeds from investment redemption 1.20 Other Net financing cash flows	3,151 (189) - - 70 -	3,151 - 189 - - 70 -
Cash flows related to financing activities 1.15 Proceeds from issues of shares, notes, etc. 1.16 Proceeds from sale of forfeited shares 1.17 Proceeds from borrowings 1.18 Repayment of borrowings 1.19 Proceeds from investment redemption 1.20 Other Net financing cash flows	3,032	3,032
Net increase (decrease) in cash held 1.21 Cash at beginning of quarter/year to date 1.22 Exchange rate adjustments to item 1.21 1.23 Cash at end of quarter/year to date	567 2,006 (60)	(1,568) 4,146 (65)
Net increase (decrease) in cash held 1.21 Cash at beginning of quarter/year to date 1.22 Exchange rate adjustments to item 1.21 1.23 Cash at end of quarter/year to date	2,513	2,513

+ See chapter 19 for defined terms.

24/10/2005 Appendix 4C Page 2

Appendix 4C Quarterly report for entities

admitted on the basis of commitments

Payments to directors of the entity and associates of the directors

Payments to related entities and associates of the related entities

Current quarter

$A'000

1.24

1.25

Aggregate amount of payments to the parties included in item 1.2

Aggregate amount of loans to the parties included in item 1.11

523

-

1.26

Explanation necessary for an understanding of the transactions

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

Non-cash financing and investing activities

2.1

2.2

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

N/A

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

N/A

Financing facilities available

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

3.1 Loan facilities

3.2 Credit standby arrangements

+ See chapter 19 for defined terms.

24/10/2005 Appendix 4C Page 3

Reconciliation of cash

Appendix 4C Quarterly report for entities

admitted on the basis of commitments

Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts is as follows.

Acquisitions and disposals of business entities

5.1 Name of entity/business

5.2 Place of incorporation or registration

5.3 Consideration for acquisition or disposal

5.4 Total net assets

5.5 Nature of business

Compliance statement

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

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

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

Print name: Kenneth Ting

Date: 30 January 2014

+ See chapter 19 for defined terms.

24/10/2005 Appendix 4C Page 4

Notes

Appendix 4C Quarterly report for entities

admitted on the basis of commitments

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

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

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

9.2 - itemised disclosure relating to acquisitions

9.4 - itemised disclosure relating to disposals

12.1(a) - policy for classification of cash items

12.3 - disclosure of restrictions on use of cash

13.1 - comparative information

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

+ See chapter 19 for defined terms.

24/10/2005 Appendix 4C Page 5