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2009

MOBILARM LIMITED ABN 15 106 513 580

F I N A N C I A L R E P O R TFOR THE YEAR ENDED 30 JUNE 2009

®

CONTENTs

dIRECTOR’s REPORT 1

AudITOR’s INdEPENdENCE dECLARATION 6

dIRECTOR’s dECLARATION 7

INCOmE sTATEmENT 8

bALANCE shEET 9

CAsh FLOw sTATEmENT 10

sTATEmENT OF ChANgEs IN EquITy 11

NOTEs TO ThE FINANCIAL sTATEmENTs 12

INdEPENdENT AudITOR’s REPORT 47

CORPORATE dIRECTORy 49

1

DIRECTOR’S REPORT

The Directors present their report together with the financial report of Mobilarm Limited (“the Company”) for the year ended 30 June 2009 and the auditor’s report thereon.

DirectorsThe directors of Mobilarm Limited in office during or since the end of the financial year are:

Mr Brenton Scott – Executive Chairman Mr Christian Lange – Non Executive Director

Mr Lindsay Lyon – Chief Executive Officer Mr Richard Parish – Non Executive Director

Mr Andrew Hill* - Chief Operating Officer Mr Kathal Spence** – Non Executive Director

*Resigned as Director on 31 August, 2009, continues as Chief Operating Officer in the Company.

** Resigned as Director on 31 August, 2009.

Mr Brenton ScottMr Scott holds a Bachelor of Business degree and is a member of the Institute of Chartered Accountants in Australia. Mr Scott spent 14 years in the accounting profession. He spent 10 of these as a partner of firstly Walker Wayland, Perth then Scott Partners, in which he was the Managing Partner. Mr Scott then became the Chief Financial Officer of Electronic Banking Solutions Limited (EBS) which was a large independent deployer of ATM machines in Australia. A few years later, EBS merged with Cashcard Australia Limited who in turn was recently acquired by the US company First Data International. Mr Scott is currently the Managing Director of Cruisers Yachts Australia and the Executive Chairman of Mobilarm.

Mr Lindsay Lyon

Mr Lyon has over 25 years of experience as an entrepreneur and executive in the technology industry. Mr Lyon’s career includes 13 years with Hewlett-Packard, where he was responsible for the Australian commercial business, Asia Pacific consulting Partner at Siebel Systems, co-founder of Opdicom Pty Ltd and previous to Mobilarm, the founder and Executive Chairman of Datacatch Pty Ltd, a software storage company. Mr Lyon holds a Masters of Marketing from Melbourne University, a Diploma in Electronic Engineering, an Electrical Trade Certificate, and has attended the Hewlett-Packard INSEAD Executive Management Program in France.

Mr Andrew HillMr Hill has been managing the product and sales development of Mobilarm from its commercial inception. He has 20 years of extensive experience in product development, engineering, manufacturing and production.

Previous successful development projects have ranged from electronic data logging equipment for the oil and gas exploration industry to large scale sales and project management of complex communication infrastructure equipment at Scitec Australia. Mr Hill holds a Diploma in Electronic Engineering and over the years has received various national awards in product development and project management.

Mr Christian LangeMr Lange was formerly Vice President for the global oilfield services group, Schlumberger Limited. In a 16 year career with Schlumberger, Mr Lange held a range of senior executive positions responsible for operations, capital markets, market-ing, business strategy and general management. In his most recent Vice President’s position in New York and Paris with Schlumberger, Mr Lange was responsible for the group’s key capital markets, investor relations and merger and acquisitions advice. Mr Lange has also held senior management positions in operations, marketing and business strategy for the Middle East, North Africa and South America. As a former Managing Director and Chief Executive Officer of SDS Corporation Limited, Mr Lange successfully executed company restructure and turnaround strategies. Mr Lange is the Chief Executive Officer for the ASX-listed company Neptune Marine Services (ASX: NMS).

Mr Richard ParishMr Parish founded Marine and Offshore Group Pty Ltd in 1997 after a successful career in safety training, spanning more than 20 years in a variety of specialist areas including the military, maritime industries, emergency services and offshore oil and gas. He is responsible for all aspects of corporate strategy development, strategic alliance and joint venture development and has been instrumental in developing the global safety training company that is M&O today. Mr Parish’s experience in safety training started when he was a training specialist with the Special Air Services Regiment (SAS) of the Australian Army which led to his appointment as Manager of Pararescue Training with the National Safety Council of Australia, a position that he held for 5 years. Mr Parish then established his own safety training consultancy business in 1990, which operated profitably until it was sold in 1995. During this time Mr Parish gained valuable international experience which was built upon when Tidewater Port Jackson Marine contracted him as their Safety and Training Manager in 1995.

Mobilarm Ltd: Financial Report 20092

DIRECTOR’S REPORT (CONT.)

Mr Kathal SpenceMr Spence is a Chartered Accountant and Registered Company Auditor with over 20 years experience in Public Practice and as a director on several boards in varied industries ranging from technology to mining. He currently runs a Chartered Accounting practice, Port Accounting, and is on the boards of several propriety companies. Mr Spence holds a Bachelor of Business (Majoring in Accounting and Law) and a Post Graduate Diploma in Business (Major in Technological Entrepreneurship) from Curtin University. Mr Spence has a proven track record in taking start up companies to commercialisation.

Directors MeetingsThe number of directors’ meetings (including meetings of committees of directors) and number of meetings attended by each of the directors of the Company during the financial year are:

Director Number of meetings attended Number of meetings held during the time the Director held office

Mr Brenton Scott 4 4

Mr Christian Lange 2 4

Mr Richard Parish 2 4

Mr Kathal Spence 4 4

Mr Andrew Hill 4 4

Mr Lindsay Lyon 4 4

Interest in the shares of the company and related corporationsAs at the date of this report, the interests of the directors in the shares of the company and related corporations were:

Director Ordinary Shares* Performance Class A Performance Class B Performance Class C

Mr Brenton Scott 13,609,000 1,000,000 666,666 666,667

Mr Christian Lange 200,000 Nil Nil Nil

Mr Richard Parish 200,000 Nil Nil Nil

Mr Kathal Spence 4,747,031 Nil Nil Nil

Mr Andrew Hill 2,000,000 1,333,333 333,333 333,334

Mr Lindsay Lyon Nil 4,000,000 1,333,333 1,333,334

* After 1 for 3 consolidation

Company SecretaryThe following person held the position of company secretary at the end of the financial year:

Mr Jorge NigaglioniMr Nigaglioni holds a Bachelor of Business degree from Bryant University in Rhode Island United States and a Master of Business Administration from the University of Wisconsin Madison in Wisconsin United States. Mr Nigaglioni holds a Certificate of Corporate Governance from Chartered Secretaries Australia.

Mr Nigaglioni has over 14 years experience in public accounting and corporate finance. He has experience in public company reporting, start up ventures, technology systems and services integration, due diligence report preparation and the requirements of ASIC.

3

The financial year ending 30 June 2009 has been extremely busy with the company making significant progress in several key areas.

Corporate OverviewWhilst the past twelve months have been difficult with respect to the global financial crises (GFC), Mobilarm has successfully rode through this difficult period and has emerged in a strong position to achieve its long term financial goals. Despite the GFC the Company was successful in raising additional funds during 2009 allowing the completion of both the Crewsafe line of safety solutions, as well as the V100 Personal Locator Beacon. To June 30th 2009 the Company has taken orders for $167,457 of these products, with volume production of the V100 to commence towards the end of calendar 2009.

Global regulators continue to move towards legislating man overboard safety systems for commercial fishing. The Spanish government has already mandated the use of technology to address this safety issue in the commercial fishing industry, and the Western Australian government recently released a working document for the commercial fishing industry that specifically mentions the use of technology to prevent fatalities resulting from undetected man overboard events. This document names Mobilarm as a provider of such technology.

In March 2009 the US Department of the Navy issued a Sources Sought announcement seeking companies that could provide a Very High Frequency (VHF) Enabled Personal Location Device for Submarine Escape. In July 2009, the Navy confirmed that Mobilarm’s submission was the only one selected. The US Navy department responsible for issuing the Sources Sought has since requested Foreign Comparative Testing Funding to assist with the modification of Mobilarm’s current V100 product to meet their requirements for a Personal Locator Beacon for submarine escape survival. Subject to funding approval in October 2009 the Navy intends to enter into an arrangement with Mobilarm to supply test articles for delivery in May 2010.

Also during 2009, with the assistance of oil & gas offshore service provider Bond Helicopters, offshore testing was carried out with the Mobilarm V100 in the North Sea oil and gas fields. The purpose of the testing was to confirm the Mobilarm V100 device’s performance and suitability as an alternative to the analog 121.5MHz Personal Locator Beacons (PLB) temporarily banned during 209 employed by helicopter operators in the region for personnel transportation to and from offshore platforms. The tests were aimed at confirming the V100’s ability to resolve the safety issues surrounding the use of Personal Locator Beacons as identified in the Air Accident Investigation Branch (AAIB) report following two helicopter ditchings and sixteen fatalities in early 2009.

The successful trials confirmed that the Mobilarm V100 provided superior Search and Rescue (SAR) information over the older analog 121.5MHz PLB technology. SAR assets were able to detect the V100 at distances of 17 nautical miles and clearly define each device as an individual signal (simulating a casualty), thus enabling the SAR assets to plan the recovery of downwind casualties first. It was confirmed that the use of the V100 would enable faster recovery of casualties in the harsh North Sea environment, where time in the water is a major deciding factor between life and death.

During the latter half of calendar 2009 the Company will be commencing an initial public offering to raise $6,000,000 on the Australian Stock Exchange. These funds will be used to expand our global sales capabilities, move our production to our global contract manufacturer Sanmina in order to increase our manufacturing capacity, and to complete the development of the submariner version of the V100 product with the US Navy. This new version will not only open up opportunities on worldwide Naval surface fleets, but also open up the international professional dive market.

We continue to remain excited about the Company’s future, with the IPO speeding our path to profitability and building a sustainable business for our shareholders.

Principal ActivitiesThe principal activities of the company during the financial year were the development, manufacturing and sale of a Man Overboard Safety Systems.

There were no other significant changes in the nature of the activities of the company during the financial year.

DividendsNo dividends were paid or declared for the financial year.


DIRECTOR’S REPORT (CONT.)

Operating Results for the YearThe loss of the company after providing for income tax amounted to ($4,264,851) (2008: Loss of $3,037,569)

Net Tangible Asset/(Liability)The Company had a net tangible liability of $2,679,111 (2008: Asset of $678,703). The net tangible liability per weighted average share is $0.012 (2008: Asset of $0.004).

State Of AffairsThere were no changes to the state of affairs of the company.

Likely Developments and Expected ResultsThe directors have excluded from this report information on likely developments in the operations of the entity and the expected results of those operations in future financial years, since, in the opinion of the directors, it would prejudice the interests of the company if this information were included.

Environmental Regulation and PerformanceThe company’s operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a State of Territory.

Directors’ BenefitsDisclosure of benefits provided to directors during the financial year is made in notes 21 and 23 of the financial statements.

No options were granted over unissued shares or interests during or since the financial year by the company to directors or any of the five most highly remunerated officers as part of their remuneration.

Share Options and Unissued SharesAs at the date of this report, there were no unissued shares under options (0 as at the reporting date).

Indemnification and Insurance of Directors and OfficersDuring or since the end of the financial year the company has not given an indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums in relation to any directors, executive officers or auditor.

Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001The auditor’s independence declaration is set out on page 8 and forms part of the directors’ report for the year ended 30 June 2009.

Non-Audit ServicesThe following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

Tax compliance services $10,000

Other non audit services 0

5

Events subsequent to balance dateSince the end of the financial year:

The Company has collected $843,500 from $1,173,500 of signed commitments.•

$1,075,000 of the commitment was in the form of a convertible note agreements which convert at $0.05 per share »(pre share consolidation)

$98,500 was in the form of share purchase agreements at $0.05 per share (pre share consolidation) »

The Company issued 240,000 pre consolidation ordinary shares valued at $12,000 to other service providers for • services rendered post 30 June 2009;

The issue of 2,175,000 fully vested pre consolidation ordinary shares at a fair value of $0.067 per share to employees;•

The Company effected a 1 for 3 share consolidation that was approved at the extraordinary shareholders meeting on • 28 August 2009.

The Company issued the following sets of performance shares that were approved at the extraordinary shareholders • meeting on 28 August 2009:

6,666,667 shares of Performance Class A shares to convert to ordinary shares at $0.00 per share upon: »

Receiving conditional approval from ASX to be admitted to the official list; and y

Issuing and allotting the shares to the public following the initial public offering. y

3,166,666 shares of Performance Class B shares to convert to ordinary shares at $0.00 per share upon: »

The Company’s Market Capitalisation reaching $65,000,000 based on the five day weighted average share yprice on the ASX.

3,166,667 shares of Performance Class C shares to convert to ordinary shares at $0.00 per share upon: »

The Company’s Market Capitalisation reaching $100,000,000 based on the five day weighted average share yprice on the ASX.

The Company has issued the following ordinary shares to directors in lieu of cash for their services for the year ended • 30 June 2009 that were approved at the extraordinary shareholders meeting on 28 August 2009:

200,000 shares to Christian Lange (or his nominees) »

200,000 shares to Richard Parish (or his nominees) »

157,753 shares to Kathal Spence (or his nominees) »

The Company has entered into deeds of variation with all of its convertible noteholders to convert their notes to ordinary • shares at the time the Company receives conditional approval from ASX to be admitted to the official list.

As part of this deed, the conversion price on $1,130,562 of notes was amended from $0.21 cents per share »(post consolidation) to $0.165 cents per share.

Our Executive Chairman Mr Scott beneficially owns $100,000 of this total. Mr Scott beneficially owns y$608,000 of the total convertible notes outstanding as at the date of this report.

The Company issued 300,000 post consolidation shares to secure a standby letter of credit arrangement with its • Executive Chairman.

The Company is in the process of trying to list the Company’s shares on the Australian Stock Exchange (“ASX”). The Company has lodged a Prospectus with ASIC on 02 October 2009. The Company is seeking to raise $6,000,000 at a price per share of $0.20.

Signed in accordance with a resolution of the Directors.

Brenton A ScottExecutive Chairman Perth, Western Australia 2 October 2009


AUDITOR’S INDEPENDENCE DECLARATION

7

DIRECTOR’S DECLARATION

In the opinion of the directors of Mobilarm Limited (“the Company”):

The financial statements and notes set out on pages 10 to 49 are in accordance with the Corporations Act 2001, a) including:

Giving a true and fair view of the company’s financial position as at 30 June 2009 as represented by the results of i. its operations and cash flows for the year ended on that date; and

Complying with Accounting Standards in Australia and the Corporations Regulations 2001; andii.

Subject to the matter disclosed in note 2 to the financial statements, there are reasonable grounds to believe that the b) company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors.

Brenton A ScottDirector Perth, Western Australia 2 October 2009


INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2009

Mobilarm Limited

Note 2009 2008

Revenue

Sale of goods 69,039 116,047

Interest 16,601 81,150

Rental income 63,836 59,717

149,476 256,914

Other income 3(a) 42,981 488,992

Changes in inventories of finished goods and work in progress (76,302) (301,465)

Raw materials and consumables purchased (30,206) (35,261)

Employee benefits 3(d) (1,777,781) (1,460,492)

Depreciation and amortisation 3(c) (431,784) (263,395)

Advertising (129,605) (157,010)

Audit and tax (45,000) (39,450)

Accountancy (95,469) (25,561)

Freight and cartage (20,716) (16,843)

External consultants and contractors (604,438) (440,055)

Rental (197,009) (188,157)

Travel and accommodation (230,078) (102,145)

Allowance for doubtful debts 6 (19,188) -

Payroll tax (55,191) (34,505)

Legal fees (72,343) (72,746)

Telephone and internet charges (27,820) (29,582)

Insurance (29,915) (30,292)

Printing, postage and stationery (9,168) (14,700)

Motor vehicles (2,924) (3,487)

Finance costs 3(b) (192,965) (545,157)

Foreign exchange (loss)/gain (196,189) 1,168

Writedown of available-for-sale investments (169,945) -

Other expenses (340,861) (313,204)

Loss before income tax (4,562,440) (3,326,433)

Income tax benefit 4(a) 297,589 288,864

Loss after income tax from continuing operations 15 (4,264,851) (3,037,569)

Basic earnings per share (cents per share) 19 ($0.02) ($0.02)

Diluted earnings per share (cents per share) 19 ($0.02) ($0.02)

The income statement should be read in conjunction with the notes to the financial statements.

9

BALANCE SHEET AS AT 30 JUNE 2009

Mobilarm Limited

Note 2009 2008

Current Assets

Cash assets 18 104,263 779,482

Trade and other receivables 6 301,254 317,882

Inventories 7 97,014 98,496

Prepayments 18,563 29,626

Total Current Assets 521,094 1,225,486

Non-Current Assets

Available-for-sale investments 8 - 305,820

Plant and equipment 9 135,691 230,557

Intangible assets 10 429,838 305,458

Total Non-Current Assets 565,529 841,835

Total Assets 1,086,623 2,067,321

Current Liabilities

Trade and other payables 11 490,226 506,570

Interest bearing loans and borrowings 12 2,657,323 408,466

Provisions 13 133,661 99,526

Total Current Liabilities 3,281,210 1,014,562

Non-Current Liabilities

Provisions 13 14,102 14,102

Interest Bearing loans and borrowings 12 7,594 46,964

Deferred tax liability 4(c) 32,991 7,532

Total Non-Current Liabilities 54,687 68,598

Total Liabilities 3,335,897 1,083,160

Net Assets/(Liabilities) (2,249,274) 984,161

Equity

Contributed equity 14 9,192,597 8,219,919

Accumulated Losses 15 (11,595,162) (7,330,311)

Reserves 16 153,291 94,553

Total Equity/(Shareholder Deficit) (2,249,274) 984,161

The balance sheet should be read in conjunction with the notes to the financial statements.


CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2009

Mobilarm Limited

Note 2009 2008

Cash Flows from Operating Activities

Receipts from customers 134,389 112,358

Export market development grant 401,276 768,992

Payments to suppliers and employees (3,922,718) (2,629,407)

Interest received 16,601 81,150

Payment for research & development 10 (817,493) (500,739)

Rental income & recoveries 70,831 59,718

Interest and other borrowing costs paid (192,961) (121,999)

R&D tax rebate 288,864 578,894

Net Cash Flows used in Operating Activities 18 (4,021,211) (1,651,033)

Cash Flows from Investing Activities

Payments for plant and equipment (56,355) (108,791)

Purchase of intangible assets 10 (11,112) (20,017)

Net Cash Flows used in Investing Activities (67,467) (128,808)

Cash Flows From Financing Activities

Proceeds from / (Repayment of) borrowings – related parties 430,000 (202,820)

Lease and hire purchase repayments (140,402) (110,544)

Proceeds from return of deposit on equipment lease 193,023 -

Proceeds from issue of convertible notes 1,958,160 -

Proceeds from share issue 972,678 2,557,330

Proceeds from finance lease - -

Net Cash Flows provided by Financing Activities 3,413,459 2,243,966

Net Increase/(Decrease) in Cash Held (675,219) 464,125

Cash at the Beginning of the Financial Year 779,482 315,357

Cash at the End of the Financial Year 18 104,263 779,482

The cash flow statement should be read in conjunction with the notes to the financial statements.

11

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2009

Attributable to equity holders of Mobilarm Limited

Issued Capital Retained Earnings

Availble-for-Sale Reserve

(Note 16)

Convertible Note Reserve

(Note 16)

Total Equity

COMPANY

At 1 July 2008 5,042,182 (4,292,742) 852,346 - 1,601,786

Changes in fair value of available-for-sale investments, net of tax

- - (757,793) - (757,793)

Total income/(expense) recognised directly in equity

- - (757,793) - (757,793)

Net loss for the year - (3,037,569) - - (3,037,569)

Issue of equity 3,177,737 - - - 3,177,737

As at 30 June 2008 8,219,919 (7,330,311) 94,553 - 984,161

At 1 July 2008 8,219,919 (7,330,311) 94,553 - 984,161

Changes in fair value of available-for-sale investments, net of tax

- - (94,553) - (94,553)

Total income/(expense) recognised directly in equity

- - (94,553) - (94,553)

Net loss for the year - (4,264,851) - - (4,264,851)

Issue of equity 972,678 - - - 972,678

Equity component of convertible notes net of tax

- - - 153,291 153,291

As at 30 June 2009 9,192,597 (11,595,162) - 153,291 (2,249,274)

The statement of changes in equity should be read in conjunction with the notes to the financial statements.


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009

Corporate Information1. The financial report of Mobilarm Limited (the “Company”) for the year ended 30 June 2009 was authorised for issue in accordance with a resolution of directors on 2 October 2009.

Mobilarm Limited is a Company limited by shares incorporated in Australia. The nature of the operations and principal activities of the Company are described in the Director’s Report.

Summary of Significant Accounting Policies2.

Basis of Preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for available-for-sale investments, which have been measured at fair value.

The financial report is presented in Australian Dollars and all values are rounded to the nearest dollar.

Going Concern

This report has been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and settlement of liabilities in the normal course of business.

The Company has incurred a net loss after tax for the year ended 30 June 2009 of $4,264,851 (2008: $3,307,569) and experienced net cash outflows from operating activities of $4,021,211 (2008: $1,651,033). As 30 June 2009, the Company had net current assets/(liabilities) of ($2,760,116) (2008: 210,924). The directors have reviewed the business outlook and the assets and liabilities of the Company and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Company will continue to be successful in securing additional funds through debt or equity issue as and when the need to raise working capital arises. As at 30 June 2009, the Company had signed facilities for $1,025,000 to be paid to the company as part of a convertible note.

The Company is expecting to lodge a Prospectus for an Initial Public Offering (“IPO”) and listing into the Australian Stock Exchange (“ASX”) before the end of this calendar year. The expected placement is for $6,000,000 of capital funds to be used to accelerate the sales capacity of the Company on a worldwide basis. The ability of the Company to continue as a going concern is reliant on the successful IPO to raise $6,000,000. The Company would need to raise funds via other means if the IPO is not successful.

The financial report does not include any adjustments that may be necessary if the Company is unable to continue as a going concern.

Compliance with IFRS(a)

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (‘IFRS’) as issued by the International Accounting Standards Board.

New Accounting Standards and Interpretations(b)

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Company for the annual reporting period ended 30 June 2009. These are outlined in the table below:

13

Reference Title Summary Application date of standard*

Impact on Group financial report

Application date for Group*

AASB Int. 15

Agreements for the Construction of Real Estate

This Interpretation requires that when the real estate developer is providing construction services to the buyer’s specifications, revenue can be recorded only as construction progresses. Otherwise, revenue should be recognised on completion of the relevant real estate unit.

1 January 2009

1 July 2009

AASB Int. 16

Hedges of a Net Investment in a Foreign Operation

This Interpretation requires that the hedged risk in a hedge of a net investment in a foreign operation is the foreign currency risk arising between the functional currency of the net investment and the functional currency of any parent entity. This also applies to foreign operations in the form of joint ventures, associates or branches.

1 October 2008

1 July 2009

AASB Int. 17 and AASB 2008-13

Distributions of Non-cash Assets to Owners and consequential amendments to Australian Accounting Standards AASB 5 and AASB 110

The Interpretation outlines how an entity should measure distributions of assets, other than cash, as a dividend to its owners acting in their capacity as owners. This applies to transactions commonly referred to as spin-offs, split offs or demergers and in-specie distributions.

1 July 2009 1 July 2009

AASB Int. 18

Transfers of Assets from Customers

This Interpretation provides guidance on the transfer of assets such as items of property, plant and equipment or transfers of cash received from customers. The Interpretation provides guidance on when and how an entity should recognise such assets and discusses the timing of revenue recognition for such arrangements and requires that once the asset meets the condition to be recognised at fair value, it is accounted for as an ‘exchange transaction’.

Once an exchange transaction occurs the entity is considered to have delivered a service in exchange for receiving the asset.

Entities must identify each identifiable service within the agreement and recognise revenue as each service is delivered.

Applies prospectively to transfer of assets from customers received on or after 1 July 2009

1 July 2009


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2009 (CONT.)




AASB 8 and AASB 2007-3

Operating Segments and consequential amendments to other Australian Accounting Standards

New Standard replacing AASB 114 Segment Reporting, which adopts a management reporting approach to segment reporting.

1 January 2009

1 July 2009

AASB 1039 (revised)

Concise Reporting

AASB 1039 was revised in August 2008 to achieve consistency with AASB 8 Operating Segments. The revisions include changes to terminology and descriptions to ensure consistency with the revised AASB 101 Presentation of Financial Statements.

1 January 2009

1 July 2009

AASB 123 (Revised) and AASB 2007-6

Borrowing Costs and consequential amendments to other Australian Accounting Standards

The amendments to AASB 123 require that all borrowing costs associated with a qualifying asset be capitalised.

1 January 2009

1 July 2009

AASB 101 (Revised), AASB 2007-8 and AASB 2007-10

Presentation of Financial Statements and consequential amendments to other Australian Accounting Standards

Introduces a statement of comprehensive income.

Other revisions include impacts on the presentation of items in the statement of changes in equity, new presentation requirements for restatements or reclassifications of items in the financial statements, changes in the presentation requirements for dividends and changes to the titles of the financial statements.

1 January 2009

1 July 2009

AASB 2008-1

Amendments to Australian Accounting Standard – Share-based Payments: Vesting Conditions and Cancellations

The amendments clarify the definition of “vesting conditions”, introducing the term “non-vesting conditions” for conditions other than vesting conditions as specifically defined and prescribe the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied.

1 January 2009

1 July 2009

15




AASB 2008-2

Amendments to Australian Accounting Standards – Puttable Financial Instruments and Obligations arising on Liquidation

The amendments provide a limited exception to the definition of a liability so as to allow an entity that issues puttable financial instruments with certain specified features, to classify those instruments as equity rather than financial liabilities.

1 January 2009

1 July 2009

AASB 3 (Revised)

Business Combinations

The revised Standard introduces a number of changes to the accounting for business combinations, the most significant of which includes the requirement to have to expense transaction costs and a choice (for each business combination entered into) to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree’s net assets. This choice will effectively result in recognising goodwill relating to 100% of the business (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively.

1 July 2009 1 July 2009

AASB 127 (Revised)

Consolidated and Separate Financial Statements

There are a number of changes arising from the revision to AASB 127 relating to changes in ownership interest in a subsidiary without loss of control, allocation of losses of a subsidiary and accounting for the loss of control of a subsidiary. Specifically in relation to a change in the ownership interest of a subsidiary (that does not result in loss of control) – such a transaction will be accounted for as an equity transaction.

1 July 2009 1 July 2009

AASB 2008-3

Amendments to Australian Accounting Standards arising from AASB 3 and AASB 127

Amending Standard issued as a consequence of revisions to AASB 3 and AASB 127. Refer above.

1 July 2009 1 July 2009






AASB 2008-5

Amendments to Australian Accounting Standards arising from the Annual Improvements Project

The improvements project is an annual project that provides a mechanism for making non-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 deals with changes the IASB identified resulting in accounting changes; Part II deals with either terminology or editorial amendments that the IASB believes will have minimal impact.

This was the first omnibus of amendments issued by the IASB arising from the Annual Improvements Project and it is expected that going forward, such improvements will be issued annually to remove inconsistencies and clarify wording in the standards.

The AASB issued these amendments in two separate amending standards; one dealing with the accounting changes effective from 1 January 2009 and the other dealing with amendments to AASB 5, which will be applicable from 1 July 2009 [refer below AASB 2008-6].

1 January 2009

1 July 2009

AASB 2008-6

Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

This was the second omnibus of amendments issued by the IASB arising from the Annual Improvements Project.

Refer to AASB 2008-5 above for more details.

1 July 2009 1 July 2009

17




AASB 2008-7

Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

The main amendments of relevance to Australian entities are those made to AASB 127 deleting the “cost method” and requiring all dividends from a subsidiary, jointly controlled entity or associate to be recognised in profit or loss in an entity's separate financial statements (i.e., parent company accounts). The distinction between pre- and post-acquisition profits is no longer required. However, the payment of such dividends requires the entity to consider whether there is an indicator of impairment.

AASB 127 has also been amended to effectively allow the cost of an investment in a subsidiary, in limited reorganisations, to be based on the previous carrying amount of the subsidiary (that is, share of equity) rather than its fair value.

1 January 2009

1 July 2009

AASB 2008-8

Amendments to Australian Accounting Standards – Eligible Hedged Items

The amendment to AASB 139 clarifies how the principles underlying hedge accounting should be applied when (i) a one-sided risk in a hedged item is being hedged and (ii) inflation in a financial hedged item existed or was likely to exist.

1 July 2009 1 July 2009

AASB 2008-9**

Amendments to AASB 1049 for consistency with AASB 101

Reflects the revised requirements of AASB 101 and AASB 2007-8 with clarification to apply the requirements in a government context.

1 January 2009

1 July 2009

AASB 2008-11

Amendments to Australian Accounting Standard – Business Combinations Among Not-for-Profit Entities [AASB 3]

The amendment requires not-for-profit entities to apply the revised AASB 3 except where there is common control.

1 July 2009 1 July 2009






AASB 2009-1**

Amendments to Australian Accounting Standards – Borrowing Costs of Not-for-Profit Public Sector Entities [AASB 1, AASB 111 & AASB 123]

This Standard amends AASB 123 to reintroduce the option to expense borrowing costs in the period in which they are incurred.

Subject to the requirements in AASB 1049 Whole of Government and General Government Sector Financial Reporting, an entity would therefore be able to choose whether it expenses or capitalises borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset.

AASB 111 is also amended to specify that costs that may be attributable to contract activity in general and that can be allocated to specific contracts include borrowing costs only when the contractor capitalises borrowing costs in accordance with AASB 123.

Annual reporting periods beginning on or after 1 January 2009 that end on or after 30 April 2009

1 July 2009

AASB 2009-2

Amendments to Australian Accounting Standards – Improving Disclosures about Financial Instruments [AASB 4, AASB 7, AASB 1023 & AASB 1038]

The main amendment to AASB 7 requires fair value measurements to be disclosed by the source of inputs, using the following three-level hierarchy:

Quoted prices (unadjusted) in • active markets for identical assets or liabilities (Level 1);

Inputs other than quoted prices • included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and

Inputs for the asset or liability • that are not based on observable market data (unobservable inputs) (Level 3).

These amendments arise from the issuance of Improving Disclosures about Financial Instruments (Amendments to IFRS 7) by the IASB in March 2009.

The amendments to AASB 4, AASB 1023 and AASB 1038 comprise editorial changes resulting from the amendments to AASB 7.

Annual reporting periods beginning on or after 1 January 2009 that end on or after 30 April 2009.

1 July 2009

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AASB 2009-4

Amendments to Australian Accounting Standards arising from the Annual Improvements Project

[AASB 2 and AASB 138 and AASB Interpretations 9 & 16]

The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting.

The main amendment of relevance to Australian entities is that made to IFRIC 16 which allows qualifying hedge instruments to be held by any entity or entities within the group, including the foreign operation itself, as long as the designation, documentation and effectiveness requirements in AASB 139 that relate to a net investment hedge are satisfied. More hedging relationships will be eligible for hedge accounting as a result of the amendment.

These amendments arise from the issuance of the IASB’s Improvements to IFRSs. The amendments pertaining to IFRS 5, 8, IAS 1,7, 17, 36 and 39 have been issued in Australia as AASB 2009-5 (refer below).

1 July 2009 1 July 2009






AASB 2009-5

Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

[AASB 5, 8, 101, 107, 117, 118, 136 & 139]

The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting.

The main amendment of relevance to Australian entities is that made to AASB 117 by removing the specific guidance on classifying land as a lease so that only the general guidance remains. Assessing land leases based on the general criteria may result in more land leases being classified as finance leases and if so, the type of asset which is to be recorded (intangible v property, plant and equipment) needs to be determined.

These amendments arise from the issuance of the IASB’s Improvements to IFRSs. The AASB has issued the amendments to IFRS 2, IAS 38, IFRIC 9 as AASB 2009-4 (refer above).

1 January 2010

1 July 2010

AASB 2009-Y

Amendments to Australian Accounting Standards

[AASB 5, 7, 107, 112, 136 & 139 and Interpretation 17]

These comprise editorial amendments and are expected to have no major impact on the requirements of the amended pronouncements.

1 July 2009 1 July 2009

21




Amend-ments to International Financial Report-ing Stan-dards***

Amendments to IFRS 2

The amendments clarify the accounting for group cash-settled share-based payment transactions, in particular:

The scope of AASB 2; and•

The interaction between IFRS 2 • and other standards.

An entity that receives goods or services in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash.

A “group” has the same meaning as in IAS 27 Consolidated and Separate Financial Statements, that is, it includes only a parent and its subsidiaries.

The amendments also incorporate guidance previously included in IFRIC 8 Scope of IFRS 2 and IFRIC 11 IFRS 2—Group and Treasury Share Transactions. As a result, IFRIC 8 and IFRIC 11 have been withdrawn.

1 January 2010

1 July 2010



Significant accounting judgments, estimates and assumptionsManagement has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect the financial results or the financial position reported in future periods.

Significant accounting judgements

Amortisation of intangibles with finite useful lives(i)

In relation to the amortisation of intangibles with finite usefuls lives, management’s judgements are used to determine the estimate useful life. Management’s judgements are based on historical information relating to specific assets. Details of the useful lives are detailed below.

Capitalised development costs (ii)

Development costs are only capitalised by the Company when it can demonstrate the technical feasibility of completing the asset so that the asset will be available for use or sale, how the asset will generate future economic benefits and the ability to measure reliably the expenditure attributed to the intangible asset during its development.

Taxation(iii)

The Group’s accounting policy for taxation requires management’s judgements as to the types of arrangements considered to be a tax on income in contrast to an operating cost. Judgements are also required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised on the balance sheet. Deferred tax assets, including those arising from un-recouped tax losses, capital losses and temporary differences, are recognised only where it is considered more likely than not that they will be recovered, which is dependant on the generation of sufficient future taxable profits.

Judgements about the generation of future taxable profits and repatriation on retained earnings depend on management’s estimates of future cash flows. These depend on estimates of future cash sales, cost of sales, operating costs, capital expenditure, dividends and other capital management transactions. Judgements are also required about the application of income legislation. These judgements bad assumptions are subject to risk and uncertainty, hence there is a possibility that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised on the balance sheet and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or all of the carrying amount of recognised deferred tax assets and liabilities may require adjustment, resulting in a corresponding credit or charge to the Income Statement.

Revenue recognition

Revenue is recognised and measured at the fair value of the consideration received and receivable to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods(i)

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered passed to the buyer at the time of delivery of the goods to the customer.

Interest income(ii)

Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

Rental income(iii)

Rental income from the sub-lease of the Company’s rented premises is accounted for on a straight-line basis over the lease term. Contingent rental income is recognised as income in the periods in which it is earned.

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Government grants

Government grants are recognised when there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

When the grant relates to an asset, the fair value is credited against the capitalised cost of the asset recognised.

Borrowing costs

Borrowing costs are recognised as an expense when incurred.

Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

Finance leases, which transfer to the Company substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense.

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short term deposits with an original maturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Trade and other receivables

Trade receivables, which generally have 30-90 day terms, are recognised and carried at original invoice amount less an allowance for any uncollectible amounts.

An allowance for doubtful debts is made when there is objective evidence that the Company will not be able to collect the debts. Bad debts are written off when identified.

Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs incurred in bringing each product to its present location and condition is accounted for as follows:

Raw materials – purchase cost on a first-in, first-out basis; and(a)

Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads (b) based on normal operating capacity but excluding borrowing costs. Costs are assigned on the basis of weighted average costs.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Derivative financial instruments and hedging



Derecognition of financial assets and financial liabilities

Financial assets (i)

A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised when:

The rights to receive cash flows from the asset have expired;•

The Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full • without material delay to a third party under a ‘pass-through’ arrangement; or

The Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially • all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the Company could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar provision) on the transferred asset, the extent of the Company’s continuing involvement is the amount of the transferred asset that the Company may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on an asset measured at fair value, the extent of the Company’s continuing involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

Financial liabilities(ii)

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

Impairment of available for sale investments

If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to the income statement. Reversals of impairment losses for equity instruments classified as available-for-sale are not recognised in profit. Reversals of impairment losses for debt instruments are reversed through profit or loss if the increase in an instrument’s fair value can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

Foreign currency translation

Both the functional and presentation currency of the Company is Australian dollars (“A$”).

Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date.

All exchange differences in the financial report are taken to profit or loss.

Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

25

combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except;-

When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which • case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

Receivables and payables, which are stated with the amount of GST included. •

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash flows are included in the Cash Flow Statement on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred..

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows; -

Plant and equipment – 2.5 to 20 years•

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.

Impairment(i)

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with the recoverable amount being estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-



generating unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value.

An impairment exists when the carrying value of an asset or cash-generating units exceeds its estimated recoverable amount. The asset or cash-generating unit is then written down to its recoverable amount.

For plant and equipment, impairment losses are recognised in the income statement in the cost of sales line item.

Derecognition and disposal(ii)

An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

Investments and other financial assets

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale investments, as appropriate. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transactions costs. The Company determines the classification of its financial assets after initial recognition and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Company commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery of the assets within the period established generally by regulation or convention in the marketplace.

Loans and receivables(i)

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Available-for-sale investments(ii)

Available-for-sale investments are those non-derivative financial assets that are designated as available-for-sale or are not classified as any of the three preceding categories. After initial recognition available-for sale investments are measured at fair value with gains or losses being recognised as a separate component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or loss previously reported in equity is recognised in profit or loss.

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models.

Intangible assets

Intangible assets acquired are initially measured at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets, excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which the expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each

27

reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.

Research and development costs

Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is recognised only when the Company can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses. Any expenditure so capitalised is amortised over the period of expected benefits from the related project.

The carrying value of an intangible asset arising from development expenditure is tested for impairment annually when the asset is not yet available for use or more frequently when an indication of impairment arises during the reporting period.

A summary of the policies applied to the Company’s intangible assets is as follows:

Patents and Licences

Useful lives: 5 years

Amortisation method used: Straight Line

Internally generated or acquired: Acquired

Impairment testing: Annually and more frequently when an indication of impairment exists.

Development Costs

Useful lives: Finite (2008: 5 years)

Amortisation method used: Amortised over the period of expected future sales from the related project on a straight-line basis.

Internally generated or acquired: Internally generated

Impairment testing: Annually for assets not yet available for use and more frequently when an indication of impairment exists. The amortisation method is reviewed at each financial year-end.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in profit or loss when the asset is derecognised.

Impairment of assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Company makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the asset is tested for impairment as part of the cash generating unit to which it belongs. When the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset or cash-generating unit is considered impaired and is written down to its recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset.

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the



asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Trade and other payables

Trade payables and other payables are carried at amortised costs and represent liabilities for goods and services provided to the Company prior to the end of the financial year that are unpaid and arise when the Company becomes obliged to make future payments in respect of the purchase of these goods and services.

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

Gains and losses are recognised in profit or loss when the liabilities are derecognised.

Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

When the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as a borrowing cost.

Employee leave benefits

Wages, salaries, annual leave and sick leave(i)

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

Long service leave(ii)

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

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Earnings per Share

Basic earnings/(loss) per share are calculated by dividing the net profit/(loss) for the year attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year.

Dilluted earnings/(loss) per share are calculated by dividing the net profit/(loss) for the year attributable to ordinary equity holders (after deducting interest on convertible notes) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

Shared based payments

Equity settled transactions(i)

The Company at times provides benefits to its employees (including KMP) in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).

There is currently one plan in place to provide these benefits:

The Employee Share Option Plan (ESOP), which provides benefits to all employees, including KMP. •

The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the Black Sholes model and reviewed by an external valuer.

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting date).

At each subsequent reporting date until vesting, the cumulative charge to the income statement is the product of:

The grant date fair value of the award.i.

The current best estimate of the number of awards that will vest, taking into account such factors as the likelihood ii. of employee turnover during the vesting period and the likelihood of non-market performance conditions being met.

The expired portion of the vesting period.iii.

The charge to the income statement for the period is the cumulative amount as calculated above less the amounts already charged in previous periods. There is a corresponding entry to equity.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether or not that market condition is fulfilled, provided that all other conditions are satisfied.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. An additional expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.



Convertible notes

The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the balance sheet, net of transaction costs.

On issuance of the convertible notes, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond and this amount is carried as a long-term liability on the amortised cost basis until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised as a finance cost.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity, net of transaction costs. The carrying amount of the conversion option is not remeasured in subsequent years.

The corresponding equity dividends on those shares are recognised as a distribution. Interest on the liability component of the instruments is recognised as an expense in profit or loss.

Transaction costs are apportioned between the liability and equity components of the convertible non-cumulative redeemable preference shares based on the allocation of proceeds to the liability and equity components when the instruments are first recognised.

2009 2008

$ $

Revenue And Expenses3.

3(a) Other income

Government grants 27,653 482,855

Other 15,328 6,137

42,981 488,992

3(b) Finance costs

Interest – other parties 121,051 517,833

Interest – related parties 71,914 27,324

192,965 545,157

3(c) Individually significant expenses included in loss from ordinary activities before income tax benefit

Depreciation and amortisation of plant and equipment 107,018 115,381

Amortisation of intangible assets 324,766 148,014

431,784 263,395

Available-for-sale Investments written off 169,944 -

Inventory written off during the year 30,206 275,505

Doubtful debts 19,188 -

Minimum lease payments – operating leases 197,009 188,157

Superannuation contributions 120,122 106,567

3(d) Employee benefits expense

Wages and salaries and on-costs 1,547,659 1,311,925

Director fees 110,000 42,000

Superannuation costs 120,122 106,567

1,777,781 1,460,492

31

2009 2008

$ $

3(e) Research and development costs

Research and development costs charged directly to the income statement

Amortisation of capitalised development costs 309,443 136,418

3(f) Auditors’ remuneration

Amounts received or due and receivable by Ernst & Young Australia for:

An audit of the financial report of the entity 35,000 30,900

Other services:

- Accounting assistance - -

- Other services – Tax (R & D Rebate) 10,000 8,550

45,000 39,450

Income Tax4. The major components of the current income tax benefit (a) are:

Prior year tax adjustment (7,532) (13,783)

Tax refund received for claim of research and development activities

(290,057) (275,081)

Income tax benefit reported in the income statement (297,589) (288,864)

A reconciliation between the income tax benefit and the (b) product of accounting loss before income tax multiplied by the Company’s applicable income tax rate is as follows:

Prima facie income tax benefit calculated @ 30% (2008: 30%) on loss from ordinary activities

(1,368,732) (997,930)

Add tax effect of:

Non-deductible items 3,432 14,143

Tax profit on sale of investments 96,371 -

Accounting amortisation of fixed assets 32,105 38,093

Amortisation of intangible assets 92,933 40,925

Grant income received 120,383 230,698

Sub-total 345,224 323,859

Less tax effect of:

Accounting profit on sale of investments - -

Accounting profit on revaluation of investments - -

R&D capitalised 248,373 150,222

Actual bad debts - 1,181

Tax depreciation on fixed assets 51,352 53,859



2009 2008

$ $

Research and development claim income tax - 13,784

Accounting grant income received - 144,856

299,725 363,902

Current year income tax expenses/(benefit) (1,323,234) (1,037,972)

Tax effect of losses not recognised (51,225) -

Current year tax losses not recognised 1,076,870 749,108

Income tax benefit (297,589) (288,864)

Deferred income tax(c)

Deferred income tax as at 30 June 2009 relates to the following:-

Equity component of convertible notes 32,991 -

Revaluation of available for sale investments to fair market value (refer note 16) - 40,523

Tax benefit from capital raising costs - (32,991)

32,991 7,532

Deferred tax asset(d)

Tax benefit from capital raising costs - -

- -

Income tax losses(e)

Future income tax benefit arising from tax

losses not recognised at reporting date 2,330,822 1,253,952

2,330,822 1,253,952

Dividends Paid and Proposed5. There were no dividends paid or declared for the financial year ended 30 June 2009 (30 June 2008: nil).

- -

- -

Trade and Other Receivables6. Trade debtors 344 13,883

Less: provision for doubtful debts (2,131) (1,065)

(1,787) 12,818

Goods and services tax 34 15,170

Related party receivable (b) 10,000 -

Sundry receivables 4,909 1,029

R & D Rebate 288,098 288,864

301,254 317,882

33

2009 2008

$ $

Allowance for impairment loss(a)

Trade receivables are non-interest bearing and are generally on 30-60 day terms. A provision for impairment loss is recognised when there is objective evidence that an individual trade receivable is impaired. The company has recognized $18,122 of impairment loss for the year ended 30 June 2009.

Movement in provision for doubtful debts

-balance at beginning of year 1,065 5,000

-bad debts previously provided for written off during the year (18,122) (3,935)

-bad and doubtful debts provided for during the year 19,188 -

-balance at end of year 2,131 1,065

At 30 June 2009, the ageing analysis of trade receivables (b) is as follows:

Total 0-30 days 31-60 days 61-90 days PDNI*

61-90 days PDNI*

+91 days *PDNI

+91 days *CI

2009 344 - 344 - - - -

2008 13,883 10,664 2,154 - 1,065 - -

Current assets – trade and other receivables

Allowance for impairment lossa)

Receivables past due but not considered impaired are: $344 (2008: $2,154). Payment terms on these amounts have not been re-negotiated however credit has been stopped until full payment is made. Each operating unit has been in direct contact with the relevant debtor and is satisfied that payment will be received in full.

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these other balances will be received when due.

Related party receivablesb)

There are related party receivables of $10,000 (2008: nil). For terms and conditions of related party transactions refer to note 23.

Fair value and credit riskc)

Due to the short term nature of these receivables, their carrying value is assumed to approximate their value.

The maximum exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the company’s policy to transfer (on-sell) receivables to special purpose entities.



2009 2008

$ $

Inventories7. At cost

Raw materials and stores 28,744 -

Finished goods 68,270 98,496

Total inventories at lower of cost and net realisable value 97,014 98,496

Available-For-Sale Investments8. Shares in listed companies at fair value - 305,820

Impaired Value of Shares - 305,820

Available-for-sale investments consists of 12,072,888 ordinary shares in Quiktrak Networks Limited (“Quiktrak”) valued on 30 June 2009 at 0 cents and therefore have no fixed maturity date or coupon rate. Quiktrak was delisted from the ASX on 17 September 2008 and an application to wind up the company was filed with ASIC on 5 June 2009 and accordingly the investment is considered impaired to a $0 value.

Plant and Equipment9. Leasehold improvements

At cost 109,362 109,362

Accumulated amortisation (103,372) (99,740)

5,990 9,622

Plant and equipment

At cost 924,037 889,783

Less: Grant contribution (101,940) (79,838)

Less: Accumulated depreciation (701,033) (601,882)

121,064 208,063

Motor vehicles

At cost 17,273 17,273

Accumulated amortisation (8,636) (4,401)

8,637 12,872

Total Plant and Equipment 135,691 230,557

Reconciliation

Reconciliation of carrying values for each class of plant and equipment are set out below:

Leasehold improvements:

- Carrying amount at beginning of financial year 9,622 23,552

- Additions - 9,841

- Amortisation (3,632) (23,771)

- Carrying amount at end of financial year 5,990 9,622

35

2009 2008

$ $

Plant and Equipment:


- Additions 34,254 274,915

- Disposals - -

- Grant contribution (22,102) (79,838)

- Depreciation (99,151) (87,293)


Motor Vehicles:


- Disposals - -

- Additions - -

- Depreciation (4,235) (4,318)


Intangible Assets10.

Development Costs

Intellectual Property

Patents & Licenses

Computer Software

Total

At 30 June 2009

Cost (gross carrying amount) 1,272,160 923,919 67,235 71,707 2,335,021

Accumulated amortisation (854,467) (923,919) (67,235) (61,569) (1,907,190)

Net carrying amount 417,693 - - 10,138 427,831

Incorporation cost 2,007

429,838

Year ended 30 June 2009

At 1 July 2008, net of accumulated amortisation

288,816 - - 14,350 303,166

Additions 817,493 - - 11,112 828,605

Grant contributions (379,174) - - - (379,174)

Amortisation (309,442) - - (15,324) (324,766)

At 30 June 2009, net of accumulated amortisation

417,693 - - 10,138 427,831

Incorporation cost 2,007

429,838

At 30 June 2008



Development Costs

Intellectual Property

Patents & Licenses

Computer Software

Total

Cost (gross carrying amount) 833,841 923,919 67,235 60,595 1,885,590

Accumulated amortisation (545,025) (923,919) (67,235) (46,245) (1,582,424)

Net carrying amount 288,816 - - 14,350 303,166

Borrowing costs 1,132

Incorporation costs 1,160

305,458

Development costs have been capitalised at cost. The intangible asset has been assessed as having a finite life and is amortised using the straight line method over a period of 5 years. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying value.

Intellectual property costs have been capitalised at cost. The intangible asset has been assessed as having a finite life and is amortised using the straight line method over a period of 5 years. It was determined that the Intellectual Property which was being carried had no future economic benefit to the Company. Therefore, these amounts were fully amortised. If an impairment indication arises, the recoverable amount is estimated and an impairment loss is recognised to the extent that the recoverable amount is lower than the carrying value.

Patent and licenses costs have been capitalised at cost. These patent and licenses have been granted for a minimum of 5 years by the relevant government agency and have accordingly been amortised using the straight line method over this finite life. It was determined that the Patents and Licences which were being carried had no future economic benefit to the Company. Therefore, these amounts were fully amortised.

No impairment losses were recognised for continuing operation in the 2008 and 2009 financial year.

2009 2008

$ $

Trade and Other Payables11. Trade creditors 270,942 358,313

Other creditors and accruals 219,284 148,257

490,226 506,570

Trade payables: Trade payables are non-interest bearing and are normally settled on 30-day terms.

Other payables: Other payables are non-trade payables, are non-interest bearing and have an average term of six (6) months.

37

2009 2008

$ $

Interest Bearing Loans and Borrowings12. Current

Convertible notes (i) 2,222,097 306,225

Finance Leases 5,226 102,241

Loans from related parties (ii) 430,000 -

2,657,323 408,466

(i) At 30 June 2009, there are 27 convertible notes on issue. The convertible notes are convertible at the option of holder into ordinary shares between October 2009 and June 2010 on the basis of one ordinary share for every 5-7 cents. Any convertible note not converted will be redeemed at the end of their respective periods. These convertible notes represent 16,724,397 ordinary shares upon conversion. One of the convertible notes has a fixed and floating charge over the Company’s assets as a security of the Company’s obligations under this note. The lender will release the charge upon repayment in full of the monies owed under the convertible note.

(ii) These loans are unsecured and repayable on call.

Non Current

Finance Leases 7,594 46,964

Provisions13. Current

Employee entitlements 133,661 99,526

Non-Current

Employee entitlements 14,102 14,102

Contributed Equity14. Issued and paid up capital:

264,425,398 (2008 – 165,429,159) ordinary shares fully paid. 9,192,597 8,219,919

2009 2008 2009 2008

No. of Shares No. of shares $ $

Reconciliation of Contributed Equity

Equity at beginning of year 211,175,399 166,029,159 8,219,919 5,042,182

Issue of ordinary shares 53,249,999 45,146,240 972,678 3,177,737

Equity at end of the year 264,425,398 211,175,399 9,192,597 8,219,919

Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholder meetings.



2009 2008

$ $

Accumulated Losses15. Accumulated losses at the beginning of the financial year (7,330,311) (4,292,742)

Net loss for the year (4,264,851) (3,037,569)

Accumulated losses at the end of the financial year (11,595,162) (7,330,311)

Reserves16. Available-for-sale Reserve

Balance at the beginning of the financial year 94,553 852,346

Remeasurement of financial instruments - gross (135,076) (1,082,562)

Tax effect of remeasurement 40,523 324,769

Transfer to income - gross - -

Tax effect of transfer to income - -

Balance at the end of the financial year - 94,553

Convertible Notes Reserve

Balance at the beginning of the financial year - -

Equity portion of convertible notes issued 153,291 -

Balance at the end of the financial year 153,291 -

Nature and purpose of reserve

Available-for-sale reservei.

This reserve records movement in the fair value of available-for-sale investments

Convertible note reserveii.

This reserve is used to record the equity portion of the convertible notes.

2009 2008

$ $

Commitments and Contingencies17. Operating lease commitments

The Company has entered into commercial leases as follows.

There are no restrictions placed upon the lessee by entering into these leases.

Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

Within one year 223,542 209,016

After one year but not more than five years 186,285 348,360

More than five years - -

409,827 557,376

39

2009 2008

$ $

The Company has entered into financial lease commitments on certain motor vehicles and computer software with a carrying amount of $12,820 (2008:$165,392). These leases expire within 1 to 5 years. These leases have an option to purchase at the end of their term. There are no restrictions placed on the lessee by entering into these leases.

Future minimum amounts payable under non-cancellable finance leases as at 30 June are as follows:

Within one year 5,176 110,470

Unexpired interest (1,478) (15,920)

After one year but not more than five years 10,498 50,633

Unexpired interest (1,377) (3,669)

More than five years - -

12,820

Notes to Statement of Cash Flows18. Reconciliation of cash(a)

Cash balance comprises:

- Cash on hand 505 1,011

- Cash at bank 103,758 778,471

Closing cash balance 104,263 779,482

Reconciliation of loss from ordinary activities after tax to (b) the net cash flows from operating activities

Operating loss after tax (4,264,851) (3,037,569)

Amortisation 309,443 126,978

Depreciation 122,342 136,418

Grant Monies Capitalised 401,276 286,137

Other (49,338) 32,790

Provision for employee entitlements 34,135 62,718

Available-for-sale investments written off 169,945 -

Borrowing costs credited to convertible notes - 54,963

Borrowing costs credited to equity 60,500 320,407

Changes in Assets and Liabilities

Trade and other receivables 16,629 336,487

Inventories 1,482 362,588

Prepayments 11,063 4,225

Development costs (817,493) (500,739)

Trade and other payables (16,344) 163,564

Net cash flows used in operating activities. (4,021,211) (1,651,033)



2009 2008

$ $

Earnings per Share19. The following reflects the income and share data used in the basic and diluted loss per share computations:

Losses used in calculating loss per share(a)

For basic loss per share

Net loss attributable to ordinary equity holders (4,264,851) (3,037,569)

2009 2008

Weighted average number of shares(b) Number

Weighted average number of ordinary shares outstanding during the year for basic earnings/(loss) per share 221,618,776 188,602,279

Potential ordinary shares are not considered dilutive and accordingly earnings per share is the same as basic earnings per share.

Segment Information20. The company operates solely in the development, manufacturing and sale of man overboard safety systems. The Company operates in one geographical location being Australia.

Key Management Personnel Compensation21. Key management personnel during the year were:

Name Title

Mr Brenton Scott Executive Chairman

Mr Lindsay Lyon Chief Executive Officer

Mr Jorge Nigaglioni Chief Financial Officer

Mr Andrew Hill Chief Operating Officer

Primary Post Employment Equity Other Total

Directors and Executives

Salary & Fees

Cash Bonus

Non Monetary Benefits

Super-annuation

Retirement Benefits

Options

$ $ $ $ $ $ $ $

30 June 2009

Total compensation 698,351 - - 38,416 - - - 646,767

30 June 2008

Total compensation 507,920 - - 52,870 - - 27,324 585,114

41

Remuneration practices

The company’s policy for determining the nature and amount of emolument of board members and senior executives of the company is as follows:

The remuneration structure for executive officers, including executive directors, is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the company. The contracts for service between the company and specified directors and executives are on a continuing basis the terms of which are not expected to change in the immediate future, Upon retirement specified directors and executives are paid employee benefits entitlements accrued to date of retirement.

Shareholdings

Number of Shares held by Directors and Specified Executives:

Balance 1 July 2008

Received as remuneration

Options exercised

Net change other

Balance 30 June 2009

Directors

Brenton Scott 40,112,717 - - 714,286 40,827,003

Christian Lange - - - - -

Richard Parish - 1,428,571 - - 1,428,571

Kathal Spence 13,827,960 - - - 13,827,960

Lindsay Lyon - - - - -

Jorge Nigaglioni - - - - -

Andrew Hill 2,000,000 - - - 2,000,000

Specified Executives

2009 2008

$ $

Employee Entitlements and Superannuation 22. CommitmentsEmployee Entitlements

The aggregate employee entitlement liability is comprised of :

Accrued wages , salaries and on costs - -

Provisions (current) 133,661 99,526

Provisions ( non- current ) 14,102 14,102

147,763 113,628

No. of Employees 15 (2008: 16)

Superannuation Commitments

No specific superannuation fund has been established for staff. As per the requirements of Superannuation Legislation Amendment (Choice of Superannuation Funds) Act 2005, we provide our staff with full choice of fund.

The company contributes on behalf of the employees at the superannuation guarantee levels of employee’s salaries and wages. The company does not contribute over and above these amounts other than contracted amounts under service contracts of relevant employees.



Related Party Disclosures23. The Directors of Mobilarm Ltd during the financial period were:(a)

Mr Brenton Scott

Mr Christian Lange

Mr Richard Parish

Mr Kathal Spence

Mr Lindsay Lyon

Mr Andrew Hill

The following related party transactions occurred during the financial period:(b)

Mr Brenton Scott did not receive a salary but a consultancy fee of $120,000 was paid to Jayden Investment Trust. Mr Scott has received 714,286 shares during the year as part of funds contributed in placements of convertible notes and equity capital. Mr Scott also received $60,500 in finders fees for capital raising efforts. A payment of $10,000 was made to Port Accounting on behalf of Mr Scott, this payment was repaid in July 2009. Any other transactions throughout the year relate to reimbursements for expenses incurred by Mr Scott or his related entities on behalf of the Company. Mr Scott also holds $608,000 in convertible notes with the Company as of the date of this report. These notes carry the same terms as those convertible notes issued to other noteholders.

Mr Christian Lange accumulated director’s fees of $30,000. This amount has not been paid or issued in shares as at 30 June 2009.

Mr Richard Parish accumulated director’s fees of $30,000. This amount has not been paid or issued in shares as at 30 June 2009.

Mr Kathal Spence was paid director’s fees of $20,000 and accumulated a further $10,000. In addition to this his firm Port Accounting (Formerly Power Spence) was paid $33,626 for accounting services.

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Financial Risk Management Objectives and Policies24. The company’s principal financial instruments comprise receivables, payables, bank loans, finance leases and hire purchase contracts, cash, short-term deposits and derivatives.

The company is exposed to financial risks which arise directly from its operations. The company has policies and measures in place to manage financial risks encountered by the business.

Primary responsibility for the identification of financial risks rests with the Board. The Board determines policies for the management of financial risks. It is the responsibility of the Chief Financial Officer and senior management to implement the policies set by the Board and for the constant day to day management of the Group’s financial risks. The Board reviews these policies on a regular basis to ensure that they continue to address the risks faced by the company.

The main risks arising from the company’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The company’s policy to minimise risk from fluctuations in interest rates is to utilise fixed interest rates in its bank loans, finance leases and hire purchase contracts. Cash and short term deposits are exposed to floating interest rate risks. Analysis is performed on customers’ credit rating prior to signing contracts and analysis is performed regularly of credit exposures and aged debt to manage credit and liquidity risk.

The policies in place for managing the financial risks encountered by the company are summarized below.

43

Risk Exposures and Responses(a)

Interest rate risk

The company’s exposure to variable interest rates is as follows

2009 2008

$ $

Financial Assets

Cash and cash equivalents 104,263 779,482

104,263 779,482

The company's policy is to manage its exposure to movements in interest rates by fixing the interest rate on financial instruments, including bank loans, finance leases and hire purchase liabilities, where possible. In addition, the company utilises a number of financial institutions to obtain the best interest rate possible and to manage its risk. The company does not enter into interest rate hedges.

The following sensitivity analysis is based on the variable interest rate risk exposures in existence at the balance sheet date:

At 30 June 2009, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

Judgements of reasonably possible movements relating to financial assets and liabilities of floating rates:

2009 2008

Post Tax Profit Higher/(Lower)

Financial Assets

+0.5% (50 basis points) 521 3,897

-0.5% (50 basis points) (521) (3,897)

The movements in profit from 2008 to 2009 are due to higher interest revenue from variable rate cash balances as a result of higher interest rates and higher financial asset balances.

The periodic effects are determined by relating the hypothetical changes in the floating interest rates to the balance of financial instruments at reporting date. It is assumed that the balance at the reporting date is representative for the year as a whole.

Foreign currency risk

As a result of operations internationally the company’s balance sheet can be affected by movements in the various exchange rates.

The company also has transactional currency exposures. Such exposure arises from sales or purchases in currencies other than the functional currency. The company’s policy is to naturally manage foreign exchange exposure by contracting with customers to receive sales revenue in the currency that the expenses have been incurred.



2009 2008

$ $

As at 30 June 2009 the company had the following exposure to foreign currency:

Financial Assets

Cash and cash equivalents 3,954 9,136

Trade and other receivables 440 4,932

4,394 14,068

Financial Liabilities

Trade and other payables 190,754 172,817

190,754 172,817

Net Exposure (186,360) (158,749)

A sensitivity analysis has been performed based on the foreign currency risk exposures in existence at the balance sheet date and the impact on post tax profit is not material.

Credit risk

The company trades only with recognised, creditworthy third parties. It is the company’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Publicly available credit information from recognised providers is utilised for this purpose where available.

In addition, receivable balances are monitored on an ongoing basis with the result that the company’s exposure to bad debts is not significant.

There are no significant concentrations of credit risk within the company. The company minimises concentrations of credit risk in relation to accounts receivable by undertaking transactions with a large number of customers within the resources, energy and infrastructure industries.

For transactions that are not denominated in the functional currency of the relevant operating unit, the company does not offer credit terms without the specific approval of the Head of Credit Control.

With respect to credit risk arising from the other financial assets of the company, which comprises cash and cash equivalents, the company’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments. Since the company only trades with recognised third parties, there is no requirement for collateral.

45

Liquidity risk

The Company objective is to manage the liquidity of the business by monitoring project cash flows and through the use of financing facilities.. The company currently utilises financing facilities in the form of bank loans and hire purchase liabilities.. The liquidity of the company is managed by the company’s Finance and Accounting department.

The table below reflects all contractually fixed pay-offs, repayments and interest resulting from financial liabilities, including derivative financial instruments as of 30 June 2009.

The remaining contractual maturities of the company’s financial liabilities are:

2009 2008

$ $

6 months or less 490,226 406,829

6-12 months 2,602,097 365,306

1-5 years 15,533 50,634

3,107,856 822,769

6 months or less

6 months to 1 year

1 year to 5 years

Total Contractual Cash Flow

Total Carrying Amount

Financial Liabilities


Trade and other payables 490,226 - - 490,226 490,226

Convertible Notes & Other 842,000 2,177,589 - 3,019,589 2,602,097

Hire purchase liability 2,588 2,588 10,357 15,533 12,820

Net Maturity 1,334,814 2,180,177 10,357 3,525,348 3,105,143


Trade and other payables 351,594 3,846 - 365,440 355,440

Convertible Notes & Other - 306,225 - 306,225 306,225

Hire purchase liability 55,235 55,235 50,634 161,104 141,514

Net Maturity 406,829 365,306 50,634 822,769 803,179

Contingent Liabilities25. As at reporting date there were no contingent liabilities.



Subsequent Events26. Since the end of the financial year the company

The issue of 2,175,000 fully vested pre consolidation ordinary shares at a fair value of 6.67c per share to • employees

The Company has collected $843,500 from $1,173,500 of signed commitments.•

$1,075,000 of the commitment was in the form of a convertible note agreements which convert at $0.05 »per share (pre share consolidation)

$98,500 was in the form of share purchase agreements at $0.05 per share (pre share consolidation) »

The Company issued 240,000 pre consolidation ordinary shares valued at $12,000 to other service providers • for services rendered post 30 June 2009;

The Company effected a 1 for 3 share consolidation that was approved at the extraordinary shareholders • meeting on 28 August 2009.

The Company issued the following sets of performance shares that were approved at the extraordinary • shareholders meeting on 28 August 2009:

6,666,667 shares of Performance Class A shares to convert to ordinary shares at $0.00 per share upon: »

Receiving conditional approval from ASX to be admitted to the official list; and y

Issuing and allotting the shares to the public following the initial public offering. y

3,166,666 shares of Performance Class B shares to convert to ordinary shares at $0.00 per share upon: »

The Company’s Market Capitalisation reaching $65,000,000 based on the five day weighted average yshare price on the ASX.

3,166,667 shares of Performance Class C shares to convert to ordinary shares at $0.00 per share upon: »

The Company’s Market Capitalisation reaching $100,000,000 based on the five day weighted yaverage share price on the ASX.

The Company has issued the following ordinary shares to directors in lieu of cash for their services for the year • ended 30 June 2009 that were approved at the extraordinary shareholders meeting on 28 August 2009:

200,000 shares to Christian Lange (or his nominees) »

200,000 shares to Richard Parish (or his nominees) »

157,753 shares to Kathal Spence (or his nominees) »

The Company has entered into deeds of variation with all of its convertible noteholders to convert their notes • to ordinary shares at the time the Company receives conditional approval from ASX to be admitted to the official list.

As part of this deed, the conversion price on $1,130,562 of notes was amended from $0.21 cents per »share (post consolidation) to $0.165 cents per share.

The Executive Chairman Mr. Scott beneficially owns $100,000 of this total. Mr. Scott beneficially yowns $608,000 of the total convertible notes outstanding as at the date of this report.

The Company issued 300,000 post consolidation shares to secure a standby letter of credit arrangement with • its Executive Chairman.

47

AUDITOR’S REPORT


AUDITOR’S REPORT (CONT.)

49

Corporate Directory

Directors

Mr Brenton Scott Executive Chairman

Mr Lindsay Lyon Chief Executive Officer

Mr Andrew Hill Chief Operating Officer

Mr Christian Lange Non Executive Director

Mr Richard Parish Non Executive Director

Mr Kathal Spence Non Executive Director

Company Secretary

Mr Jorge Nigaglioni Chief Financial Officer

Registered Office

768 Canning Highway

Applecross WA 6153

Principle Place of Business

768 Canning Highway

Applecross WA 6153

Contact Details

Web: www.mobilarm.com

Tel: (08) 9315 3511

Fax: (08) 9315 3611

Lawyers to the Company

Price Sierakowski

Level 24, St. Martin’s Tower

44 St. George’s Terrace

Perth WA 6000

Auditors

Ernst and Young

11 Mounts Bay Road

Perth WA 6000

Share Registry

Security Transfer Registrars Pty Ltd

770 Canning Highway

Applecross WA 6153


NOTES

www.mobilarm.com

Mobilarm Limited

PO Box 1533 Applecross 6953 Western AustraliaTel: +61 (0)8 9315 3511 • Fax: +61 (0)8 9315 3611 • Email: [email protected]

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