IONIC RARE EARTHS LIMITED — Annual Report 2003

Feb 18, 2003

Ezenet Limited ABN 84 083 646 477

Annual Report

30 JUNE 2002

EZENET LIMITED CORPORATE DIRECTORY A.B.N. 84 083 646 477

Directors

P J Whyte Chairman

L H Chapman Managing Director

GRO'Dea Non-Executive Director

Company Secretary

W M Day

Registered Office and Principal Place of Business

Ground Floor, Zurich House 66 Kings Park Road West Perth WA 6005

Telephone: 9486 8598 Fax: 9486 8597 Web Site: ezenet.com.au

Share Registry

Computershare Registry Services Pty Ltd Level 2, Reserve Bank Building 45 St George's Terrace Perth WA 6000

Auditors

Ernst & Young Central Park 152 St George's Terrace Perth WA 6000

Bank

Challenge Bank 109 St George's Terrace Perth WA 6000

EZENET LIMITED A.B.N. 84 083 646 477

Contents Page Directors' Report $\mathbf{1}$ Independent Audit Report 6 Directors' Declaration $\overline{7}$ $\mathbb{R}^2$ Statement of Financial Performance $\bf{8}$ Statement of Financial Position 9 Statement of Cash Flows $10$ Notes to the Financial Statements 11 Corporate Governance Statement 27 ASX Additional information 29

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EZENET LIMITED DIRECTORS' REPORT

Your directors submit their report for the year ended 30 June 2002.

DIRECTORS

The names and details of the directors of the company in office during the financial year and until the date of this report are:

P J Whyte B.Ec., LL.B. (Non-Executive Chairman)	Mr Whyte was appointed a director on 16 April 1999. He is a commercial lawyer, practising in Subiaco, having degrees in Economics and Law. He tutored/lectured at both the University of Western Australia and Curtin University of Technology before commencing the practice of law. Mr Whyte has been a practicing solicitor for 24 years, focussing primarily on corporate matters and commercial litigation. His experience and expertise includes public company management.
L H Chapman (Managing Director)	Mr Chapman formed Ezenet Pty Ltd in 1998 and was appointed a director on 29 July 1998. He has considerable business experience particularly in sales and marketing. He was the founder of Movielink Corporation Ltd, a company which pioneered the movie supply business to hotels in Australia.
GRO'Dea (Non-Executive Director)	Mr O'Dea was appointed a director on 7 March 2002. He is a former business development manager for The West Australian Newspaper with 30 years media experience in radio, television, press and outdoor advertising.
M V Hogan (Non-Executive Director)	Mr Hogan is a stockbroker and acted as a non-executive director from 16 April 1999 until his resignation from the Board on 30 October 2001.
A L Milner (Non-Executive Director)	Mr Milner is a director of iiNet Ltd and acted as a non-executive director from 16 April 1999 until his resignation from the Board on 31 October 2001.
J Jansen (Non-Executive Director)	Mr Jansen is a businessman involved in the finance industry and acted as a non-executive director from 1 November 2001 to 28 February 2002.

PRINCIPAL ACTIVITIES

The principal activity during the year was setting up the digital quality video services to the hotel/motel industry. There has been no significant change to the company's activity during the year.

The company's business is conducted from operations located in Australia.

The company's revenue is earned predominately from the information technology sector.

CORPORATE INFORMATION

Ezenet Limited is a company limited by shares and is incorporated and domiciled in Australia.

The company employed 4 people at 30 June 2002 (2001: 3 people).

OPERATING RESULTS

The company's loss after providing for income tax for the financial year was \$832,515. $(2001:$ loss \$1,445,419).

EARNINGS PER SHARE	2002	2001
Basic loss per share (cents)	(2.8)	(6.00)

DIVIDENDS PAID OR PROPOSED

The company has not paid any dividends since the commencement of the financial year, and no dividends are proposed to be paid.

REVIEW OF OPERATIONS, LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The company has not been able to dispose of the balance of its stock of set top boxes and the stock has now been completely written off (2002: \$186,191, 2001: \$456,734).

After investigation of the potential market for the commercialisation of the poster display system it was decided not to proceed with its development in Australia.

The company has concentrated on developing and marketing its digital movie system into hotels, motels and mining camps throughout Australia. In order to achieve its targets the company will need to raise additional capital in the range of \$500,000 to \$750,000.

	2002 \$	2001 \$
Operating revenue	326,785	187,147
Operating loss	(832, 515)	(1,445,419)

ENVIRONMENTAL REGULATION AND PERFORMANCE

The company is not subject to any environmental regulations.

SHARE OPTIONS

Unissued shares

At the date of this report and at balance date, there were 29,000,000 unissued ordinary shares under options. Refer to note 12 of the financial statements for further details of the options outstanding.

There are no participating rights or entitlements inherent in the options to participate in any new issues of capital which may be offered to shareholders of the company from time to time prior to the expiry date of the options and they do not participate in any bonus issue of securities unless and until the options are exercised.

Shares issued as a result of the exercise of options

No options have been exercised either during the financial year or since the end of the financial year.

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY

As at the date of this report the interests of the directors in the ordinary shares of the company were:

	Ordinary Shares	Options over Ordinary
		Shares
L H Chapman	5,677,419	$\overline{\phantom{0}}$
P J Whyte	774.194	$\overline{\phantom{0}}$
G R O'Dea	66,000	$\overline{\phantom{a}}$

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

In November 2001, \$195,000 was raised by a placement of shares and in March 2002 a further \$529,000 was raised through the issue of shares and options to the public. These funds have been used in the acquisition of equipment and general working capital.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

No significant events have occurred since the balance date.

INTERESTS IN CONTRACTS OR PROPOSED CONTRACTS WITH THE COMPANY

During or since the end of the financial year, no director has had any interest in a contract or proposed contract with the company being an interest the nature of which has been declared by the director in accordance with Section $300(11)(d)$ of the Corporations Act 2001.

DIRECTORS' MEETINGS

During the year 13 directors' meetings were held. The number of meetings attended by each director was as follows:

	No. of meetings held while
	in office	Meetings attended
P J Whyte	13
L H Chapman	13	13
A L Milner	6	6
M V Hogan	6
J Jansen	າ	↑
G R O'Dea

As at the date of this report, the company did not have an audit committee, as the directors believe the size of the company does not warrant its existence.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, the company has not paid any premiums in respect of a contract insuring any the directors of Ezenet Limited against a liability incurred in their role as directors of the company.

DIRECTORS' AND OTHER OFFICER'S EMOLUMENTS

The Board of Directors is responsible for determining and reviewing compensation arrangements for the directors. The Board periodically assesses the appropriateness of the nature and amount of emoluments of the directors.

DIRECTORS' AND OTHER OFFICER'S EMOLUMENTS (Cont'd)

Details of the nature and amount of each element of the emoluments of each director and the executive officer of the company are as follows:

	Annual emoluments		Long-term emoluments		Total
	Office	Base Fee	Other	Super- annuation	Other
	\$	\$	\$		\$
LH Chapman *		137,000		10,000		147,000
AL Milner	6,666					6,666
MV Hogan	6,666			533		6,666
PJ Whyte	16,000			1,280		17,280
GR O'Dea	2,363			189		2,552

Emoluments of directors and executive officer

* LH Chapman is the only executive officer of the company.

No options have been granted over unissued shares in the company during and or since the end of the year to any director or officers of the company as part of their remuneration.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of the company support and have adhered to the principles of corporate governance.

The company's corporate governance statement is contained in the additional Australian Stock Exchange information section of this annual report.

Signed in accordance with a resolution of the directors

prima

L H Chapman Managing Director Perth, 26 September 2002

EU FRNST & YOUNG

INDEPENDENT AUDIT REPORT

To the members of Ezenet Limited

Scope

We have audited the financial report of Ezenet Limited for the financial year ended 30 June 2002, as set out on pages 7 to 26, including the Directors' Declaration. The company's directors are responsible for the financial report. We have conducted an independent audit of the financial report in order to express an opinion on it to the members of the company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the financial report is presented fairly in accordance with Accounting Standards, other mandatory professional reporting requirements and statutory requirements, so as to present a view which is consistent with our understanding of the company's financial position and performance as represented by the results of its operations and its cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Qualified Audit Opinion

In our opinion, the financial report of Ezenet Limited is in accordance with:

• $(a)$ the Corporations Act 2001 including:
• $(i)$ giving a true and fair view of the company's financial position as at 30 June 2002 and its performance for the year ended on that date; and
• $(ii)$ complying with Accounting Standards and the Corporations Regulations; and
• $(b)$ other mandatory professional reporting requirements.

Inherent Uncertainty Regarding Continuation of Going Concern

Without qualification to the opinion expressed above, attention is draw to the following matter. As a result of the matters described in Note 1, there is uncertainty whether the entity will be able to continue as a going concern without securing additional funding and therefore whether it will be able to pay its debts as and when they fall due and realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

hst & Young En

J P Dowling Partner Perth Date: 27 September 2002

61 8 9429 2222 $\blacksquare$ Tel Fax 61 8 9429 2436

GPO Box M939 Perth WA 6843

EZENET LIMITED DIRECTORS' DECLARATION

In accordance with a resolution of the directors of Ezenet Limited, I state that:

• $1)$ In the opinion of the directors:
• the financial statements and notes of the company are in accordance with the Corporations Act $(a)$ 2001, including:
  • giving a true and fair view of the company's financial position as at $(i)$ 30 June 2002 and of it's performance for the year ended on that date; and
  • complying with Accounting Standards and Corporations Regulations 2001; and $(ii)$
• $(b)$ subject to the matters referred to in note 1 to the financial statements "Going Concern Basis" there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

On behalf of the Board

L H Chapman Managing Director Perth, 26 September 2002

EZENET LIMITED STATEMENT OF FINANCIAL PERFORMANCE
FOR YEAR ENDED 30 JUNE 2002

$\mathcal{L}_{\mathcal{L}}$

	Notes	2002 \$	2001 \$
REVENUE FROM ORDINARY ACTIVITIES
Revenue from sales of goods	2(a)	172,833	14,061
Cost of sales		(144, 229)	(69, 118)
Gross profit (loss)		28,604	(55,057)
Other revenue	2(b)	153,952	174,198
EXPENSES FROM ORDINARY ACTIVITIES
Marketing expenses		(165, 914)	(78, 140)
Occupancy expenses		(34, 912)	(41,082)
Administrative expenses		(349, 333)	(682, 111)
Operating expenses	3	(464, 912)	(763, 227)
ACTIVITIES ORDINARY FROM LOSS BEFORE INCOME TAX EXPENSE		(832, 515)	(1,445,419)
RELATING TO TAX EXPENSE INCOME ORDINARY ACTIVITIES	4
NET LOSS	13	(832, 515)	(1,445,419)
Basic loss per share (cents)	19	(2.8)	(6.00)

The statement of financial performance should be read in conjunction with the accompanying notes.

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打印 计标准语言

EZENET LIMITED
STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2002

	Notes	2002 S	2001 \$
CURRENT ASSETS
Cash assets		678,817	752,308
Receivables	5	54,162	4,668
Inventories	6		186,172
Other	$\overline{7}$	23,619	36,245
TOTAL CURRENT ASSETS		756,598	979,393
NON-CURRENT ASSETS Plant and equipment	8	349,071	231,630
Intangible assets	9
TOTAL NON-CURRENT ASSETS		349,071	231,630
TOTAL ASSETS		1,105,669	1,211,023
CURRENT LIABILITIES Payables Provisions	10 11	135,461 11,137	125,983 8,044
TOTAL CURRENT LIABILITIES		146,598	134,027
TOTAL LIABILITIES		146,598	134,027
NET ASSETS		959,071	1,076,996
SHAREHOLDERS' EQUITY
Contributed equity Reserves	12 13	4,352,957	3,667,367
Accumulated losses	13	29,000 (3,422,886)	(2,590,371)
TOTAL EQUITY		959,071	1,076,996

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

EZENET LIMITED
STATEMENT OF CASH FLOWS
FOR YEAR ENDED 30 JUNE 2002

	Notes	2002 S	2001 \$
CASH FLOWS FROM OPERATING
ACTIVITIES		222,163	168,064
Receipts from customers Payments to suppliers and employees		(842, 691)	(975, 177)
Interest received		26,004	73,282
Goods and services tax received			34,475
NET CASH FLOWS FROM (USED IN)
OPERATING ACTIVITIES	14	(594, 524)	(699, 356)
CASH FLOWS FROM INVESTING
ACTIVITIES Payment for purchases of plant and equipment		(193, 557)	(223, 819)
NET CASH FLOWS (USED IN)
INVESTING ACTIVITIES		(193, 557)	(223, 819)
CASH FLOWS FROM FINANCING
ACTIVITIES Proceeds from issue of shares $\&$ options		724,000
Cost of raising share capital		(9, 410)
NET CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES		714,590
NET INCREASE / (DECREASE) IN CASH		(73, 491)	(923, 175)
HELD
Opening cash brought forward		752,308	1,675,483
		678,817	752,308
CLOSING CASH CARRIED FORWARD

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

在日本の中に キャンキ アール・コール しんかん しゅうしゅう しゅうしゅう しゅうしゅう

$1.$ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accounting

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 which includes applicable Accounting Standards. Other mandatory professional reporting requirements (Urgent Issues Group Consensus Views) have also been complied with.

The financial report has been prepared in accordance with the historical cost convention and does not take into account changing money values or, except where stated, current valuations of non current assets.

Going concern basis

The financial report has been prepared on the going concern basis. The ability of the company to pay its debts as and when they fall due is dependent on the successful development of the new business model which requires the securing of additional funds either by equity or borrowings. The directors are currently evaluating various options and sources of funding and on this basis believe the adoption of the going concern basis is justified. However, should sources of additional funding not become available the company may not be able to pay its debts as and when they fall due and may be required to realise assets and extinguish liabilities other than in the normal course of business and at amounts different from those stated in the financial statements.

Changes in accounting policies

The accounting policies adopted are consistent with those of the previous year except for the accounting policy with respect to earnings per share.

The company has adopted the revised Accounting Standard AASB 1027 "Earnings Per Share" and has for the first time, determined basic and diluted earnings per share in accordance with the revised standard. Basic earnings per share (EPS) was previously calculated by dividing the loss from ordinary activities after tax by the weighted average number of ordinary shares outstanding during the financial year. In accordance with the revised AASB 1027, basic EPS is now calculated as the net loss adjusted to exclude cost of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted EPS was previously determined by dividing the loss from ordinary activities after tax adjusted for the effect of earnings on potential ordinary shares, by the weighted average number of ordinary shares (both issued and potentially dilutive) outstanding during the financial year. In accordance with AASB 1027, diluted EPS is now calculated as net loss adjusted for:

• Costs of servicing equity (other than dividends) and preference share dividends;
• $\bullet$ The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
• Other non-discretionary changes in revenues or expenses during the period that would result from $\bullet$ the dilution of potential ordinary shares;

Divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

The revised policy has had no effect on the EPS calculations.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) 1.

Cash and cash equivalents

Cash on hand and in banks and short-term deposits are stated at the lower of cost and net realisable value.

For the purpose of the Statement of Cash Flows, cash includes cash on hand and in banks, net of outstanding bank overdrafts.

Inventories

Inventories are valued at the lower of cost and net realisable value. The costs of bringing inventories to their present locations and condition are determined on a first-in-first-out basis.

Plant and equipment

Cost and valuation

Items of plant and equipment are brought to account at cost, less any accumulated depreciation.

Depreciation

Depreciation is provided on a reducing balance method on all plant and equipment from the time it is first used in the operations of the company.

Major depreciation periods are:	2002	2001
- Office equipment and fittings	2.5 to 5.0 years	2.5 to 5.0 years
- Equipment installed in hotels	4.0 years	-
- Digital film library	4.0 years	$\overline{\phantom{0}}$

Trade and other receivables

Trade receivables are recognised and carried at original invoice amount less a provision for any uncollectible debts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

Trade and other payables

Liabilities for trade creditors and other amounts are carried at cost, which is the fair value of the consideration to be paid in the future for goods and services received, whether or not billed to the company.

Share capital

Ordinary share capital is recognised at the fair value of the consideration received by the company.

Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)

Intangibles

Licence agreement

The licence to distribute internet set top boxes was written off at 30 June 2001.

Trademarks

Costs of registering trademarks are written off as incurred.

Revenue recognition

Revenue is recognised 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 Control of goods has passed to the buyer.

Rendering of services

The control of a right to be compensated for services has been attained.

Interest

Control of a right to receive consideration for the provision of, or investment in, assets has been attained.

Income tax

Tax-effect accounting is applied using the liability method whereby income tax is regarded as an expense and is calculated on the accounting profit after allowing for permanent differences. To the extent timing differences occur between the time items are recognised in the financial statements and when items are taken into account in determining taxable income, the net related taxation benefit or liability, calculated at current rates, is disclosed as a future income tax benefit or a provision for deferred income tax. The net future income tax benefit relating to tax losses and timing differences is not carried forward as an asset as its realisation cannot be regarded as virtually certain.

The income tax benefit relating to tax losses is calculated using the 30% corporate tax rate which is applicable for the year ending 30 June 2002 and subsequent years.

Goods and Services Tax (GST)

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

• Where 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 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 Statement of Financial Position.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd) 1.

Cash flows are included in the Statement of Cash Flows 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.

Earnings per share

Basic EPS is calculated as net loss attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted EPS is calculated as net loss attributable to members, adjusted for:

• costs of servicing equity (other than dividends) and preference share dividends;
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that $\bullet$ have been recognised as expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

Recoverable amount

Non-current assets are not carried at an amount above their recoverable amount and where carrying values exceed the recoverable amount assets are written down. In determining the recoverable amount, the expected net cash flows have not been discounted to their present value using a market determined risk adjusted discount rate.

Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating leases

The minimum lease payments of operating leases, where the lessor effectively retains substantially all of the risks and benefits of ownership of the leased item, are recognised as an expense on a straight-line basis.

Foreign currencies

Transactions in foreign currencies are converted to local currency at the rate of exchange ruling at the date of the transaction.

Balances denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. All resulting exchange differences are brought to account in determining the net profit and loss for the financial year.

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

	2002 S	2001 \$
2. REVENUE FROM ORDINARY ACTIVITIES
(a) Revenue from sales
Revenue from sale of goods	172,833	14,061
Total revenue from sales	172,833	14,061
(b) Other revenue from ordinary activities
Revenue from sale of services	129,708	99,521
Interest received	24,595	73,282
Cancellation and service fees		283
Net foreign currency gain	(351)	1,112
Total other revenue from ordinary activities	153,952	174,198
EXPENSES AND LOSSES 3.
Operating Expenses
Provision for write down of inventories	186,171	456,734
Amortisation of distribution licence		110,182
Depreciation on equipment and fittings	63,177	21,132
Provision for employee entitlements	3,093	8,044
Provision for doubtful debts	16,000	(12,500)
Operating lease rentals	19,192	20,280
Other expenses	177,279	159,355
	464,912	763,227

	2002 S	2001 $\mathbf S$
INCOME TAX 4.
The prima facie tax on the loss from ordinary activities is reconciled to the income tax provided in the accounts as follows:
Prima facie tax benefit on loss from ordinary activities:	(249, 755)	(491, 442)
Tax effect of permanent differences:
Trademarks written off		2,683
Amortisation of licences		37,462
Non allowable capital expenses	10,654
Entertainment	1,961	1,195
Income tax attributable to operating loss	(237, 140)	(450, 102)
Future income tax benefit not bought to account	237,140	450,102
Income tax expense attributable to ordinary activities
Income tax losses
Future income tax benefit arising from tax losses at 30%, not bought to account at balance date as realisation of the benefit is not regarded as
virtually certain	710,376	538,566
This future income tax benefit will only be obtained if:
(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
(b) the conditions for deductibility imposed by tax legislation continue to be complied with;

legislation continue to be complied with;
(c) no changes in tax legislation adversely affect
the company in realising the benefit

	2002	2001
	S	\$
5. RECEIVABLES (Current)
Debtors	82,662	17,168
Less: Provision for doubtful debts	(28, 500)	(12, 500)
	54,162	4,668
INVENTORIES (Current) 6.
Finished goods at cost	792,999	792,999
Less: Provision for diminution in value	(792, 999)	(606, 827)
Total inventory at net realisable value		186,172
OTHER (Current) 7.
Other debtors	1,094	6,427
Prepayments	4,463	12,529
GST receivable	18,062	17,289
	23,619	36,245
8. PLANT AND EQUIPMENT
Office equipment and fittings at cost	104,554	79,348
Less: Provision for depreciation	(45, 451)	(25,097)
	59,103	54,251
Plant and equipment at cost	249,870	154,732
Less: Provision for depreciation	(42, 402)
	207,468	154,732
Digital film library at cost	95,439	22,647
Less: Provision for amortisation	(12, 939) 82,500	22,647
Total plant and equipment	349,071	231,630
Carrying amount at beginning of year	231,630	28,943
Additions	193,557	223,819
Disposals
Depreciation expense	(76, 116)	(21, 132)
	349,071	231,630

			2002 S	2001 $\mathbf S$
9.	INTANGIBLES (Non-current)
	Distribution licence at cost Less: Provision for amortisation				110,182 (110, 182)
10.	PAYABLES (Current)
	Trade creditors and accruals Other creditors		133,710 1,751		125,642 341
			135,461		125,983
11.	PROVISIONS (Current)
	Employee entitlements		11,137		8,044
12.	CONTRIBUTED EQUITY
	Issued and paid up capital 34,900,000 ordinary shares
	fully paid (2001: 26,000,000) Less: capital raising costs		4,757,195 (404, 238)	4,062,195	(394, 828)
			4,352,957	3,667,367
	(b) Movements in shares on issue
			2002	2001
		Number of shares	S	Number of shares	\$
	Beginning of the financial year	26,000,000	3,667,367	26,000,000	3,667,367
	Issued during the year - public equity raisings - less transaction costs	8,900,000	695,000 (9, 410)

34,900,000 4,352,957

26,000,000

3,667,367

End of the financial year

12. CONTRIBUTED EQUITY (Cont'd)

(c) Share Options

During the year there were 29,000,000 options exercisable at 10 cents per option from 18 December 2002 to 31 December 2002 and from 1 July 2003 to 31 July 2003, issued and outstanding at the end of the financial year.

2002	2001
-	$\overline{\phantom{0}}$
29,000,000	$\overline{\phantom{a}}$
29,000,000	-

(d) Terms and conditions of contributed equity

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

	2002 S	2001 \$
ACCUMULATED LOSSES AND RESERVES 13.
Accumulated Losses
Balance at beginning of year	(2,590,371)	(1,144,952)
Loss for the year	(832, 515)	(1,445,419)
Balance at end of year	(3,422,886)	(2,590,371)
	$\sim$
Option Reserve
Balance at beginning of year
Premium on 29,000,000 options issued
during the year	29,000
Balance at end of year	29,000

The amount credited to the Option Reserve relates to the premium paid for options.

$\sim$

$\sim$

	2002 \$	2001 \$
STATEMENT OF CASH FLOWS 14.
Reconciliation of the net loss to the net cash flows
from operations
Net loss	(832,515)	(1,445,419)
- Depreciation of plant and equipment	76,116	21,132
- Amortisation of licence fee		110,182
- Provision for diminution in value of inventories	186,171	456,734
- Provision for doubtful debts	16,000	(12,500)
Changes in assets and liabilities
- Trade receivables	(65, 494)	65,141
- Other receivables	4,560	(21,083)
- Prepayments	8,066	22,598
- Inventories		57,544
- Trade and other creditors	9,479	38,271
- Employee entitlements	3,093	8,044
Net cash flows used in operating activities	(594, 524)	(699, 356)

No financing facilities have been arranged to date.

15. EXPENDITURE COMMITMENTS

Operating lease (non-cancellable)
- not later than one year	38.244	19,452
- later than one year and not later than five years	11,155	$\overline{\phantom{a}}$
Aggregate lease expenditure contracted for at
balance date	49.399	19.452

These commitments reflect the cost to the company for entering into a non-cancellable operating lease for premises occupied by the company until 14 October 2003.

SEGMENT INFORMATION 16.

Revenue is derived by the company from the information technology sector. The company operates predominantly within the one sector in Australia.

17. SUBSEQUENT EVENTS

There have been no specific events since 30 June 2002 which would have a material impact on the operations of the company.

18. ECONOMIC DEPENDENCY

The company does not have any economic dependency with any one client or group of clients.

19.	EARNINGS PER SECURITY	2002	2001
(a)	Basic loss per share (cents)	(2.8)	(6.0)

The following reflects the income (loss) and share data used in the calculations of basic and diluted earnings per share:

Net loss	(832,515)	(1,445,419)
Weighted average number of ordinary shares on issue
used in the calculation of basic earnings per share	29,911,233	26,00,000

There have been no conversions to, calls of, or subscriptions for ordinary shares or issues of potential ordinary shares since the reporting date and before the completion of this financial report.

20.		REMUNERATION OF DIRECTORS	2002 S	2001 S
		Income paid or payable, or otherwise made available, in respect of the financial year, to all directors of Ezenet Limited, directly or indirectly,
		from the company or any related party	180,164	276,760
		The number of directors whose remuneration (including superannuation contributions) falls within the following bands:
\$0		\$9,999	4
\$10,000		\$19,999
\$30,000		\$39,999
\$40,000		\$49,999
\$140,000		\$149,999
\$150,000		\$159,999

$\sim$

$\sim 10$

In the opinion of the directors remuneration paid to directors is considered reasonable.

$\bar{\bar{z}}$

	2002	2001
REMUNERATION OF EXECUTIVES 21.	\$	S
Remuneration received or due and receivable by executive officers of the company whose remuneration is \$100,000 or more, from the
company or any related party, in connection with the management of the affairs of the company or any related party, whether as an executive officer or otherwise.	147,000	152,440
The company has one executive whose whose remuneration falls within the following bands:
\$140,000 - \$149,999	1
\$150,000 - \$159,999		1
In the opinion of the directors remuneration paid to
the executive officer is considered reasonable.	2002 \$	2001 S
AUDITOR'S REMUNERATION 22.
Amounts received or due and receivable
by the auditors of Ezenet Limited for: - an audit or review of the financial report	23,000	39,500
- other services	6,500	750
	29,500	40,250
RELATED PARTY TRANSACTIONS 23.

The directors of Ezenet Limited during the financial year were: $(a)$

	Shares held	2002	2001
PJ Whyte (Chairman)		774,194	774,194
LH Chapman (Managing Director)		5,677,419	5,677,419
AL Milner		530,645	2,600,645
MV Hogan		2,000,000	3,000,000
J Jansen
G R O'Dea		66,000

Changes in shareholdings arose from normal on market transactions.

$(b)$ No related party transactions occurred during the year:

\$19,150 was paid to P J Whyte for legal fees in the year ended 30 June 2001.

24. RECONCILITATION OF NET LOSS	2002 S	2001 \$
Net loss as per preliminary final report (Appendix 4B)	784,015
Deposit written off and an additional provision raised against debtors.	48,500
	832,515

$\ddot{\phantom{a}}$

$25.$ FINANCIAL INSTRUMENTS

Terms, conditions and accounting policies $(a)$

The company's accounting policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at the balance date, are as follows:

	FINANCIAL INSTRUMENTS	NOTES	ACCOUNTING POLICIES	TERMS AND CONDITIONS
(i)	FINANCIAL ASSETS
	Cash at bank		Cash on hand and cash in bank are stated at the nominal value.	Cash is invested in bank accepted commercial bills for 30 to 90 day terms with an effective rate of 4.85%.
				Short-term deposits are held in a call deposit account with an effective interest rate of 4.40%.
	Trade debtors	5	Trade debtors are recognised and carried at original invoice amount less provision for any uncollectible debts. An estimate for doubtful debts is made when the collection of the full amount is no longer probable. Bad debts are written off as incurred.	Credit sales are normally on 30 to 60 day terms.
	Other debtors	7	Other debtors are recognised and carried at the amount receivable.	Other debtors are non- interest bearing and are normally received between 30 and 90 days.
(ii)	FINANCIAL LIABILITIES
	Trade creditors, accruals and other creditors	10	Liabilities are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the company.	Trade liabilities are normally settled on 30-day terms.
(iii)	EQUITY
	Ordinary shares	12	Ordinary share capital is recognised at the fair value of consideration received by the company.	Details of shares issued during the year and shares outstanding at balance date are set out in note 12.

FINANCIAL INSTRUMENTS (Cont'd) 25.

(b) Interest rate risk exposure

The company's exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised at balance date, are as follows:

Fixed interest rate maturing in:

TIVEN IMPORTANCE INTO THE INTERNATION
INSTRUMENT FINANCIAL	INTEREST RATE FLOATING		OR LESS 1 YEAR		OVER 1TO5 YEARS		5 YEARS MORE THAN		NON-INTEREST BEARING		TOTAL		INTEREST RATE
	2002 S	2001 Ø	2002 $\leftrightarrow$	$\frac{2001}{9}$	2002 Ø	2001 $\leftrightarrow$	2002 $\bullet$	2001 $\boldsymbol{\varphi}$	2002 $\bullet$	2001 $\leftrightarrow$	$2002$ \$	2001 $\Theta$	$2002$ 2001 % %
FINANCIAL ASSETS
Cash	253,617	102,108	425,000	650,000				ı	200	200	678,817	752,308 4.62	4.75
Receivables-
trade					ı			I,	54,162	4,668	54,162	4,668
Other debtors								ī	1,094	6,427	1,094	6,427
Total Financial
Assets	253,617	102,108	425,000	650,000	I	J	ı	ı	55,456	11,295	734,073	763,403
LIABILITIES (ii) FINANCIAL
Trade creditors,
accruals and
other creditors					ı	ı	ı	ı	135,461	125,983	135,461	125,983
Total Financial

125,983

135,461

125,983

135,461

$\mathbf{I}$

Liabilities

$25.$ FINANCIAL INSTRUMENTS (Cont'd)

Net fair values of financial assets and liabilities $(c)$

The aggregate net fair values of financial assets and financial liabilities. both recognised and unrecognised, at balance date, are as follows:

		CARRYING AMOUNT		AGGREGATE NET FAIR VALUE
	2002	2001	2002	2001
	\$	\$	\$	\$
FINANCIAL ASSET
Cash	678,817	752,308	678,817	752,308
Debtors	54,162	4,668	54,162	4,668
Other debtors	1,094	6,427	1,094	6,427
Total financial assets	734,073	763,403	734,073	763,403
FINANCIAL LIABILITIES
Trade creditors and accruals and
other creditors	135,461	125,983	135,461	125,983

The following methods and assumptions are used to determine the net fair values of financial assets and liabilities

Cash and cash equivalent: The carrying amount approximates fair value because of their short-term to maturity.

Receivables and payables: The carrying amount approximates fair value.

Credit Risk Exposures $(d)$

The company's maximum exposure to credit risk at balance date in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the balance sheet.

EZENET LIMITED CORPORATE GOVERNANCE STATEMENT 30 JUNE 2002

The board of directors of Ezenet Limited is responsible for the corporate governance of the company. Its purpose is to guide and monitor the business and affairs of Ezenet Limited on behalf of the shareholders by whom the board was elected and to whom it is accountable.

To ensure the board can discharge its responsibilities it has adopted the following guidelines for the nomination and selection of directors and for the operation of the board.

Composition of the Board

The composition of the board is determined in accordance with the following principles and guidelines:

• The board should comprise of at least three directors and should maintain a majority of nonexecutive directors:
• The chairperson should be a non-executive director;
• The board should comprise directors with an appropriate range of qualifications and expertise; and
• The board shall meet as and when required but at least twelve times per year and follow usual meeting procedures and guidelines to ensure directors are made aware of and have necessary information to participate in informed discussions of agenda items.

The directors in office at the date of this report are:

PJ Whyte	Chairman, Non-Executive Director
LH Chapman	Executive Director
GR O'Dea	Non-Executive Director

$\mathcal{L}$

The company's constitution requires that one third of the directors, other than a director who is a managing director retire by rotation and may stand for re-election at each annual general meeting of the company.

The board has the power to appoint any person as a director, either to fill a casual vacancy or as an addition to the board, but that person only holds office until the next annual general meeting.

Remuneration Committee

The board has not established a remuneration committee in view of the size of the company and all executives have service agreements, which prescribe remuneration reviews by the board.

Audit Committee

Given the size of the company's operations, no formal audit committee is warranted. However, formal meetings are held between all the directors and the external auditor to discuss the findings of the half-year review and the year-end audit.

Internal Control

The company's financial management procedures provide for the separation of functional responsibilities for purchasing, invoicing and payment processes.

The company has set specific levels of authority for approval of capital expenditure between the managing director and the board.

EZENET LIMITED CORPORATE GOVERNANCE STATEMENT (Cont'd) 30 JUNE 2002

Board Responsibilities

As the board acts on behalf of and its accountable to shareholders, the board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to manage those risks.

The responsibility for the operation and administration of the company is delegated by the board to the managing director and company management staff.

The board is responsible for ensuring that management objectives and activities are in accordance with the policies and expectations set by them. The board has a number of mechanisms in place to ensure this is achieved including:

• board approval of the strategic business plan;
• board monitoring of performance indicators; and
• procedures to allow directors, in the performance of their duties, to seek independent professional advice at the company's expense.

Monitoring of the Board's Performance and Communication to Shareholders

The board of directors aims to ensure that shareholders are informed of all information necessary to assess the performance of the directors. Information is communicated to shareholders through:

• the annual report which is distributed to all shareholders;
• the half-yearly report circulated to the Australian Stock Exchange Limited and the Australian Securities Investment Commission; and
• the annual general meeting and other meetings so called to obtain approval of board action as appropriate.

EZENET LIMITED ASX ADDITIONAL INFORMATION 30 JUNE 2002

Additional information required by the Australian Stock Exchange Ltd and not disclosed elsewhere in this report is as follows. The information is current as at 24 September 2002.

		Ordinary Shares
Range	Names of 20 largest shareholders		Fully paid
		No of holders	No. of shares held	% held	No. of shares in escrow
100,001	Marketlane Pty Ltd	$\mathbf{1}$	5,677,419	16.27
or more	Wakeford Holdings Pty Ltd	1	3,975,000	11.39
	Greywood Holdings Pty Ltd	$\mathbf{I}$	1,854,645	5.32
	Seaward Holdings Pty Ltd	1	1,550,000	4.44
	G Ngadino	1	859,718	2.46
	Amhurst Management Corporation Pty Ltd	1	774,194	2.22
	Gybson Pty Ltd	1	468,455	1.34
	Walsec Pty Ltd	1	400,000	1.15
	Tovela Pty Ltd		386,994	1.11
	The Old Brewery Company Pty Ltd		356,452	1.02
	W M & M Day		354,000	1.01
	North City Holdings Pty Ltd		350,862	1.01
	G M Cottle	1	350,000	1.00
	Rene Investments Pty Ltd		345,161	0.99
	Grandi Pty Ltd		300,000	0.86
	Nicholls Nominees Pty Ltd		300,000	0.86
	Jorach Pty Ltd		298,000	0.85
	Rbevo Pty Ltd		250,000	0.72
	Penryth Pty Ltd		210,161	0.60
	Ramaree Pty Ltd		203,732	0.58
	Various	25	4,012,556	11.50
10,001		45	23,277,349	66.70	Nil
100,000	Various	243	8,765,428	25.11	Nil
$5,001 -$	Various	170	1,512,749	4.33
10,000
1,001 5000	Various	403	1,236,221	3.54
1 1,000	Various	138	108,253	0.32
Total		999	34,900,000	100.00	Nil

(a) Statement of shareholdings

EZENET LIMITED
ASX ADDITIONAL INFORMATION (Cont'd)
30 JUNE 2002

(b) Statement of optionholdings

		Options
Range	Names of 20 largest optionholders
		No of Holders	No of Options Held	% Held
100,001	Pine Valley Enterprises Pty Ltd	$\mathbf{1}$	6,140,000	21.17
or more	Greywood Holdings Pty Ltd	1	4,200,000	14.48
	Wakeford Holdings Pty Ltd	1	3,390,000	11.69
	R M J Skidmore	$\mathbf{1}$	2,000,000	6.90
	Scawbasch Investments Pty Ltd
	& Gybson Pty Ltd	$\mathbf{1}$	1,500,000	5.17
	Gremar Pty Ltd	1	1,200,000	4.14
	Jorach Pty Ltd		1,148,000	3.96
	Pentode Pty Ltd		800,000	2.76
	Tovela Pty Ltd		700,000	2.41
	W M & M Day		500,000	1.72
	MF & K R O'Halloran		400,000	1.38
	J L Andreou		350,000	1.21
	M F O'Halloran		300,000	1.03
	R J Steele		300,000	1.03
	Kahl Nominees Pty Ltd		293,848	1.01
	S J Walsh		248,967	0.86
	Aintree Holdings Pty Ltd		200,000	0.69
	L Beer		200,000	0.69
	Hamson Discount Co Pty Ltd	1	200,000	0.69
	A. Hewett	1	200,000	0.69
	Various	12	1,868,970	6.46
		32	26,139,785	90.14
$10,001-$
100,000	Various	48	2,856,750	9.85
$5,001 -$
10,000		Nil	Nil
$1,001 -$
5,000	Various	$\mathbf{1}$	3,465	0.01
$1 - 1000$
		Nil	Nil
Total		81	29,000,000	100.00

$\ddot{\psi}$

(c) Voting Rights

All ordinary shares carry one vote per share without restriction.

EZENET LIMITED ASX ADDITIONAL INFORMATION (Cont'd) 30 JUNE 2002

(d) Restricted Securities

There are no shares held in escrow.

(e) Market buy-back

There is no current on-market buy-back of shares.

(f) Use of Funds

In the time between admission to the ASX and the balance date, the company used the cash that it had at the time of admission in a way that was consistent with its business objectives as set out in its prospectus. Also refer to review of operations in the directors' report.

(g) Marketable Parcels

Number of holders of less than a marketable parcel of ordinary shares 461 (2001: 843). Number of holders of less than a marketable parcel of options 1 (2001: Nil)

Substantial Shareholders

Beneficial Owner	No of Shares
Marketlane Pty Ltd	5,677,419
Wakeford Holdings Pty Ltd	3.975.000

÷.