IONIC RARE EARTHS LIMITED - Annual Report 2007

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

ANNUAL REPORT

30 JUNE 2007

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

This annual report covers both Ezenet Limited as an individual entity and the consolidated entity comprising Ezenet Limited and its subsidiaries. The consolidated entity’s functional and presentation currency is AUD ($).

A description of the consolidated entity’s operations and of its principal activities is included in the review of operations and activities in the directors’ report.

Directors

W G Martinick (Executive Chairman)

G R O’Dea (Managing Director) – Appointed 1 September 2007

D H Ward (Non-Executive Director)

R A Burt (Managing Director) – Resigned 31 August 2007

R A Burt (Non-Executive Director) – Appointed 1 September 2007

Company Secretary

S M O Watson

Registered Office and Principal Place of Business

2 Bulimba Road Nedlands WA 6009 Telephone: 08 9389 9345 Fax: 08 9389 9749 Web Site: www.ezenet.com.au

Share Registry

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

Auditors

Ernst & Young The Ernst & Young Building 11 Mounts Bay Road Perth WA 6000

Bank

Westpac Banking Corporation 109 St George’s Terrace Perth WA 6000

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

Page

DIRECTORS’ REPORT....................................................................................................................2 DIRECTORS’ DECLARATION.....................................................................................................12 AUDITOR INDEPENDENCE DECLARATION ...........................................................................12 INCOME STATEMENT .................................................................................................................14 BALANCE SHEET..........................................................................................................................15 CASH FLOW STATEMENT..........................................................................................................16 STATEMENT OF CHANGES IN EQUITY ...................................................................................17 NOTES TO THE FINANCIAL STATEMENTS.............................................................................19 INDEPENDENT AUDIT REPORT ................................................ Error! Bookmark not defined. CORPORATE GOVERNANCE STATEMENT.............................................................................63 ASX ADDITIONAL INFORMATION ...........................................................................................67

EZENET LIMITED DIRECTORS’ REPORT

Your directors submit their report for the year ended 30 June 2007.

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 as follows. Directors were in office for this entire period unless otherwise stated.

W G Martinick

B.Sc, Ph.D. (Chairman)

Dr Wolf Martinick was appointed a director and chairman on 13 January 2003. He is an environmental scientist and has been involved with mineral exploration and mining projects around the world, especially Australasia, Africa, China, India and parts of the former Soviet Union. He is a Fellow of the Australian Institute of Mining and Metallurgy.

Dr Martinick is a founding director and the chairman of Weatherly International plc, a company listed on the Alternative Investment Market of the London Stock Exchange in which Ezenet has 18,281,200 shares. He was a founding director of Basin Minerals Limited, another ASX listed mineral exploration company that discovered a world-class mineral project in Victoria, Australia, that was acquired by Iluka Resources Limited in 2003.

He has been associated with the exploration and mining industry for over 35 years. He has particular experience in environmental, water, land access and indigenous people issues and has conducted due diligence on mining projects around the world on behalf of international financial institutions and resource companies for a variety of transactions including listings on international stock exchanges, mergers and debt financing. He has in recent years been active in identifying and investigating mineral projects and prospects in various parts of the world, especially Africa.

Dr Martinick is also a director of the following ASX listed companies: Sun Resources Limited; Uran Limited; Precious Metals Australia Limited; Azure Minerals Ltd and Carbine Resources Limited.

G R O’Dea

(Managing Director – Appointed 1 September 2007)

Mr Ross O’Dea was appointed a director on 7 March 2002. He is a former Business Development Manager for The West Australian Newspaper with 35 years media experience in radio, television, press and outdoor advertising. Ross was contracted to the TAB Western Australia as Manager, Media Services. This contract concluded on 11 June 2004.

D H Ward

Assoc. Admin., Assoc. Acctg., FTIA, ACA. (Non-Executive Director)

Mr David Ward was appointed a director on 22 July 2005. After service in the Australian Army, Mr Ward graduated from the WA Institute of Technology in Accounting and Business Administration, and trained as an Auditor and Tax Agent. Having established the “Tax Hut” tax and accounting centres in 1995, he practices in West Perth and participates in organisations providing commercial and social dispute resolution.

EZENET LIMITED DIRECTORS’ REPORT (Continued)

R A Burt

B.Bus (Ceased to be Managing Director on 31 August 2007) (Non-Executive Director)

Mr Richard Burt was appointed a director on 28 February 2005. He joined the company in April 2004 as Chief Executive Officer. Mr Burt has extensive experience in corporate management across Australia within industries including downstream petroleum retailing, industrial products distribution, hospitality manufacturing and most recently wagering services where in his last senior executive role at the TAB Western Australia, he had responsibility for the wagering division of TAB with an annual turnover in excess of $1 billion. Mr Burt has undertaken Advanced Management programs at Mt Eliza and Columbia Universities.

COMPANY SECRETARY

Simon Watson

LL.B., B.Ec.

Mr Watson was appointed the Company Secretary of Ezenet Limited in April 2003. Mr Watson holds degrees in Law and Economics. He is a Notary Public and practices as a specialist Solicitor in the field of international and national Commercial Law. His legal expertise supplements his role as Secretary and provides an important contribution to the Company.

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY

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

W G Martinick G R O’Dea D H Ward * R A Burt	Ordinary Shares 13,986,140 898,425 1,993,091 700,000	Options over Ordinary Shares
		- - - -

** Shares are held by W G Martinick and Martinick Investments Pty Ltd ATF The Martinick Superannuation Fund. * Shares are held indirectly by Blackwood Business Services Pty Ltd ATF Ward Superannuation Fund.

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.

CORPORATE INFORMATION

The financial report of Ezenet Limited for the year ended 30 June 2007 was authorised for issued in accordance with a resolution of the directors on 27 September 2007. The consolidated entity’s functional and presentation currency is AUD ($).

Ezenet Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange.

Principal Activities

The principal activity during the year of entities within the consolidated entity was the provision of digital movie services to the hospitality and mining industries.

EZENET LIMITED DIRECTORS’ REPORT (Continued)

CORPORATE INFORMATION (Continued)

There has been no significant change to this activity during the year.

The consolidated entity’s business is conducted from operations located in Australia. The company formed a new subsidiary, E-Resources Pty Ltd on 3 April 2007, the financial results of this new subsidiary have been included in the Group’s consolidated financial results.

Employees

The consolidated entity employed 10 people at 30 June 2007 (2006: 8 people).

OPERATING AND FINANCIAL REVIEW

Group Overview

Ezenet Limited is a company limited by shares and is incorporated and domiciled in Australia. It has prepared a consolidated financial report incorporating Ezestream Pty Ltd, a wholly owned entity incorporated on 12 May 2003, and E-Resources Pty Ltd incorporated on 3 April 2007.

Operating Results

The consolidated entity’s revenue was $3,340,360 and the loss was $266,900 for the financial year.

Operating revenue Operating profit (loss) Year in Review	2007 2006 $ $ 3,340,360 1,928,412
	(266,899) 1,980,825

Ezenet Limited made significant progress during the year in both its wholly-owned subsidiaries, Ezestream Pty Ltd and E-Resources Pty Ltd.

Consolidated Entity

The Consolidate Entity summarised financial results for the 2006/07 financial year:

Revenue of $3,340,360, up 73%.
Earnings before interest, tax, depreciation and amortization of $639,906, up $1,517,991 on 2005/06 net loss of ($878,085)
Net loss after tax of ($266,899), a deterioration of $2,247,724 on 2005/06 result of $1,980,825
Net operating cash flows of $720,947 an improvement of $804,727 on the 2005/06 result of ($83,780)
Growth in net assets of $2,740,604 from $6,474,765 (2005/06) to $9,215,369 (2006/07)

In August 2006, Ezenet Limited successfully raised $1,050,000 through placement of 7,500,000 fully-paid shares.

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued)

Ezestream Pty Ltd

Ezestream Pty Ltd - the company’s digital movie and high speed internet business, continued its path of rapid expansion with the addition of 9,797 new contracted rooms during the 12 month period. In addition to the significant sales growth the business also generated record financial results, which are summarised below.

Major milestones for the Ezestream Pty Ltd business during the 2007 financial year were:

July 2006 – Improve first quarter net operating cash flows by $166,000 Sept 2006 – Acquire ‘Guest Video’ VHS tape business

Oct 2006 – Sign Heads of Agreement with Mirvac Hotels & Resorts for up to 4,422 rooms Jan 2007 – Announce new properties contracted, totalling 22,055 rooms Mar 2007 – Announce six month results at 31 December 2006

Net operating cash flows up 240%
Earnings before interest, tax, depreciation, amortization of $426,412
Net assets up 51%

Ezestream Pty Ltd achieved sales for the 2006/07 financial year of $3,271,565, representing growth of 71% from the previous year of $1,374,916. This was achieved through continued expansion of the company’s free-to-guest movie systems into hotels and mining camps with new installations of the company’s video-on-demand and high speed internet system into hotels.

Ezestream Pty Ltd expanded the number of contracted rooms by 64% from 15,203 in June 2006 to 25,000 in June 2007. This figure was aided by the acquisition of the ‘Guest Video’ VHS tape business announced in September 2006. This acquisition provided approximately 3,500 new rooms.

Ezestream Pty Ltd financial results improved considerably in 2007; generating earnings before interest, tax, depreciation and amortization of $881,064 and a net profit of $426,000.

The company’s three year growth of contracted rooms is shown in the following graph.

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----- Start of picture text -----

Contracted Rooms
30000
25000
20000
15000
10000
5000
0
May-04 Dec-04 Nov-05 Jun-06 Sep-06 Jun-07
----- End of picture text -----

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

Ezenet Limited’s cash flow performance improved considerably during the financial year. The 12month result ending June 2007 was a net operating cash flow of $720,947; an improvement of $804,727 over the same period last year.

During the year, the company invested $1,267,377 in capital expenditure compared with expenditures of $993,709 last year. The majority of invested funds were directed towards new installations of the company’s digital video-on-demand and high speed internet system into hotel accommodation properties throughout Australia. The average contracted term for this type of installation is five years.

The company’s three year growth in net operating cash flows (prior to capital expenditure) is shown in the following graph

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Net Operating Cashflows
1000
800
600
400
200
0
-200
-400
Qtrly Receipts Qtrly Net Cashflow s from Operations
Dec-04 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07
----- End of picture text -----

Investments

During the year Ezenet Limited expanded its investment in resource-based companies with the purchase of shares in Carbine Resources Ltd and KP Renewables plc.

In January 2007, Ezenet Limited invested $50,000 (1m shares at $0.05 cents) in Carbine Resources Ltd, an ASX-listed company with interests in the gold mining industry around Kalgoorlie. The fair value of the Carbine Resources Ltd investment at June 30, 2007 was $360,000.

In April 2007, the company invested $73,386 in UK-based KP Renewables plc, an AIM-listed company with interests in renewable energy. Ezenet Limited received 3,000,000 shares at an issue price of 1 pence. The fair value of the KP Renewable plc investment at June 30 was $113,314.

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

In June 2007, Ezenet Limited announced the formation of E-Resources Pty Ltd, a wholly-owned subsidiary that aims to hold existing and progress new mineral investment opportunities.

In addition to the new investments in resource-based entities, Ezenet Limited holds 18.2m shares in Weatherly International plc, an AIM-listed mineral company with copper interests in Zambia and Namibia. The fair value of the Weatherly International plc investment at June 30 was $8,847,134.

The total fair value of the 3 mining investments at 30 June 2007 was $9,320,449.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There have been no significant changes in the state of affairs of the consolidated entity.

SIGNIFICANT CHANGES AFTER THE BALANCE DATE

With the resignation of Richard Burt as Managing Director on 31 August 2007, Brett Wiley has been appointed as General Manger of Ezestream Pty Ltd. Brett commenced this position on 6 August 2007.

All of the Convertible Note holders with the exception of Hocking Investment have notified the company of their intention to rollover the notes. Hocking Investments were repaid in full on 31 August 2007. The interest rate payable will increase on 1 August 2007 from 10% to 12%. This is paid to the holders on a quarterly basis in arrears.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During or since the financial year, the company has paid premiums in respect of a contract insuring all the directors of Ezenet Limited against legal costs incurred in defending proceedings for conduct involving:

(a) a wilful breach of duty; or
(b) a contravention of sections 182 or 183 of the Corporations Act 2001 , as permitted by section 199B of the Corporations Act 2001 .

The total amount of insurance contract premiums paid was $15,000.

REMUNERATION REPORT

Remuneration philosophy

The Board of Directors is responsible for determining and reviewing compensation arrangements for the directors. The Board assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and other non-cash payments. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company.

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

REMUNERATION REPORT (Continued)

To assist in achieving these objectives, the Board links the nature and amount of executive directors’ and officers’ emoluments on an annual basis based on individual performance and market conditions.

Compensation of Directors and Executive Officer

(i) Compensation Policy

The Board of Directors of Ezenet Limited is responsible for determining and reviewing compensation arrangements for the directors and the managing director. Currently there is no formal link to the performance of the company.

(ii) Non-Executive Director Compensation

Objective

The Board seeks to set aggregate compensation at a level that provides the company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

Structure

The Constitution and the ASX Listing Rules specify that the aggregate compensation on non-executive directors shall be determined from time to time by a general meeting. There has been no compensation awarded for this financial year.

The amount of aggregate compensation sought to be approved by shareholders and the manner in which it is apportioned amongst directors is reviewed annually. The Board considers advice from external consultants as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process.

Non-executives directors have long been encouraged by the Board to hold shares in the company (purchased by the director on market). It is considered good governance for directors to have a stake in the company on whose board they sit.

(iii) Executive Compensation

Objective

The entity aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the entity so as to:

align the interests of executives with those of shareholders; and
ensure total compensation is competitive by market standards.

Structure

The Board periodically assesses the appropriateness of the nature and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with overall objective of ensuring maximum stakeholder benefit from the retention of a high quality board and executive team. Such officers are given the opportunity to receive their base emolument in a variety of forms including cash and other non-cash benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the company.

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

REMUNERATION REPORT (Continued)

(iv) Fixed Compensation

Objective

Fixed compensation is reviewed annually by the Board. The process consists of a review of individual performance, relevant comparative compensation in the market and internally and, where appropriate, external advice on policies and practices.

Structure

Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and other non-cash benefits.

(v) Variable Compensation

Objective

The objective is to link the achievement of the company’s targets with the compensation received by the executives charged with meeting those targets.

Share-based compensation

Options or shares are issued to directors and executives as part of their remuneration. The options or shares are not issued based on performance criteria, but are issued to the directors and executive of Ezenet Limited to increase goal congruence between executives directors and shareholders. There were no options granted to or vesting with key management personnel during the year. A total of 500,000 shares were issued to Mr Burt.

Structure

Actual payments granted to each Key Management Personnel are determined by the board who meet periodically to assess the achievements of the company’s targets. The issue of options to the Directors in the 2006 financial year was granted in lieu of a monetary payment for Directors duties carried out until November 2007.

Employment contracts

The former Managing Director, Mr Burt was employed under contract. The employment contract commenced 14 April 2004 and terminated on 31 August 2007. This contract entitled Mr Burt to an annual fixed amount of $206,422 and $18,578 in superannuation. On termination, Mr Burt is only entitled to that portion of remuneration that is fixed and only up to the date of termination.

Compensation of Directors and Executive Officers

Compensation of each director and the executive officer of the parent and consolidated entity are as follows:

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

REMUNERATION REPORT (Continued)

Compensation of Directors and Executive Officers (Continued)

	Short term Post employment	Short term Post employment	Share based payments	Total	Total performance related
30 June 2007	Salaries and fees	Non Monetary Benefit1 Super- annuation	Shares
Directors W G Martinick G R O’Dea D H Ward R A Burt Executive Officer S M O Watson Total	$ - - 20,0002 188,0733 46,6505	$ 3,000 - 3,000 - 3,000 - 3,000 16,9273 3,000 -	$ - - - 75,0004 -	$ 3,000 3,000 23,000 283,000 49,650	- - - 27% -
	254,723	15,000 16,927	75,000	361,650

The Non Monetary Benefit relates to the Directors Indemnity Insurance
Professional services, relating to accounting and taxation advice, of $20,000 were provided by Young & Wilkinson, a partnership associated with D H Ward on normal commercial terms and conditions.
The salary and superannuation are paid to Mr Burt.
The share based payment made to Mr Burt in relation to meeting key targets. 500,000 shares valued at quoted price on the date of issue.
Professional services relating to legal and company secretarial fees, of $46,650 were provided by Mr Simon M O Watson.

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 9 directors’ meetings were held. The number of meetings attended by each director was as follows:

W G Martinick G R O’Dea D H Ward R A Burt	No. of meetings held while in office Meetings attended
	9 7 9 9 9 9 9 9

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

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.

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.

LIKELY DEVELOPMENTS

The company continues to acquire new contracts and install new video on demand and high speed internet systems in its core hospitality markets throughout Australia. The company expects the rate of new installations to remain at high levels throughout the financial year 2008 due to strong market demand for the system and the Heads of Agreement signed with Hotels & Resorts in October 2006. In addition, ongoing growth of the company's Digital Entertainment and Information System into mining camps is anticipated resulting from continued expansion of the Western Australian mining industry.

Whilst the company has not projected financial results for the 2008 period, Directors expect the financial results to improve with the increasing level of revenue from new installations.

SHARE OPTIONS

At the date of this report, there were no share options outstanding. (1,550 at reporting date).

AUDITOR’S INDEPENDENCE DECLARATION

We have obtained an independence declaration from our auditors, Ernst & Young, as presented on page 14 of this Annual report.

NON AUDIT SERVICES

There were no non-audit services provided by the entity’s auditor, Ernst & Young.

Signed in accordance with a resolution of the directors

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G R O’Dea Director Perth, 28 September 2007

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:
(a) the financial statements and notes of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:
- (i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their performance for the year ended on that date; and
- (ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the company and consolidated entity will be able to pay their debts as and when they become due and payable.
2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial period ending 30 June 2007.

On behalf of the Board

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G R O’Dea Director Perth, 28 September 2007

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EZENET LIMITED INCOME STATEMENT FOR YEAR ENDED 30 JUNE 2007

Notes Continuing operations Revenue 3(a) Cost of sales 3(b) Gross Profit Other income 4 Marketing expenses Occupancy expenses Administrative expenses Other operating expenses 5 Finance costs Expenses (LOSS)/PROFIT BEFORE INCOME TAX EXPENSE INCOME TAX (EXPENSE)/BENEFIT RELATING TO ORDINARY ACTIVITIES 6 NET (LOSS)/PROFIT ATTRIBUTABLE TO MEMBERS OF EZENET LIMITED 18 Basic earnings/(loss) per share (cents) 25 Diluted earnings/(loss) per share (cents)	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 3,340,360 1,928,412 61,602 14,173 896,812 540,259 - -
	2,443,548 1,388,153 61,602 14,173
	- 3,470,248 - 4,021,915 (449,727) (292,566) (1,210) - (58,507) (67,641) - - (298,833) (1,279,902) (227,600) (1,218,018) (1,568,037) (1,047,564) 130,573 (9,778) (244,382) (189,903) (244,205) (189,903)
	(2,619,486) (2,877,576) (342,442) (1,417,699)
	(175,938) 1,980,825 (280,840) 2,618,389 (90,961) - (99,600) (637,564)
	(266,899) 1,980,825 (380,440) 1,980,825
	(0.35) 3.0 (0.35) 3.0 (0.35) 2.0 (0.35) 2.0

The income statement should be read in conjunction with the accompanying notes.

EZENET LIMITED BALANCE SHEET AT 30 JUNE 2007

Notes CURRENT ASSETS Cash assets Receivables 7 Other 8 TOTAL CURRENT ASSETS NON-CURRENT ASSETS Available-for-sale financial assets 9 Plant and equipment 10 Intangible asset 11 Interest in associate 13 Interest in subsidiary 13 Receivables from subsidiary 13 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Payables 14 Provisions 15 Interest-bearing liabilities 16 TOTAL CURRENT LIABILITIES NON CURRENT LIABILITIES Deferred tax liability 6 Provisions 15 TOTAL NON CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS SHAREHOLDERS’ EQUITY Contributed equity 17 Reserves 18 Accumulated losses 18 TOTAL EQUITY	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 953,794 410,737 744,439 357,640 440,748 311,476 - - 4,194 63,032 10,184 3,205
	1,398,736 785,245 754,623 360,845
	9,320,449 7,051,096 9,320,449 7,051,096 2,550,693 1,825,024 - - 106,594 104,371 - - - - - - - - 573,200 573,199 - - 2,219,504 1,493,421
	11,977,736 8,980,491 12,113,153 9,117,716
	13,376,472 9,765,736 12,867,776 9,478,561
	527,026 427,809 184,693 173,493 50,897 35,938 - - 1,748,665 1,655,902 1,745,548 1,652,028
	2,326,588 2,119,649 1,930,241 1,825,521
	1,820,114 1,171,322 1,835,760 1,178,275 14,400 - - -
	1,834,514 1,171,322 1,835,706 1,178,275

	4,161,102 3,290,971 3,765,947 3,003,796
	9,215,370 6,474,765 9,101,829 6,474,765
	9,169,348 7,774,900 9,169,348 7,774,900 5,229,294 3,616,238 5,229,294 3,616,238 (5,183,272) (4,916,373) (5,296,813) (4,916,373)
	9,215,370 6,474,765 9,101,829 6,474,765

The balance sheet should be read in conjunction with the accompanying notes.

EZENET LIMITED CASH FLOW STATEMENT FOR YEAR ENDED 30 JUNE 2007

Notes CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Research & development tax refund Interest received GST received Interest paid NET CASH FLOWS USED IN OPERATING ACTIVITIES 19 CASH FLOWS FROM INVESTING ACTIVITIES Payment for purchases of plant and equipment Payment for intangible assets Payment for investments Loan to related parties NET CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares & options Proceeds from borrowings raised Repayment of borrowings NET CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE (DECREASE) IN CASH HELD Opening cash brought forward CLOSING CASH CARRIED FORWARD 19	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 3,175,633 1,722,925 - - (2,347,716) (1,863,745) (148,122) (966,342) - 37,030 - 68,795 20,010 61,602 14,174 - - (6,979) - (175,765) - (175,765) -
	720,947 (83,780) (269,264) (952,168)
	(1,267,377) (993,709) - - (71,575) - - - (123,386) - (123,386) - - - (504,999) -
	(1,462,338) (993,709) (628,385) -
	1,234,448 300 1,234,448 300 475,000 1,748,791 475,000 1,710,000 (425,000) (568,909) (425,000) (530,636)
	1,284,448 1,180,182 1,284,448 1,179,664
	543,057 102,693 386,799 227,496 410,737 308,044 357,640 130,144
	953,794 410,737 744,439 357,640

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

EZENET LIMITED STATEMENT OF CHANGES IN EQUITY FOR YEAR ENDED 30 JUNE 2007

CONSOLIDATED At 1 July 2005 Profit for the period Total income and expense for the period Exercise of options Convertible notes – equity portion Available-for-sale asset reserve Share options reserve As at 30 June 2006	Attributable to equity holders of Ezenet Limited Issued Capital Accumulated Losses Other Reserves Total Equity $ $ $ $ 7,774,600 (6,897,198) 29,000 906,402 - 1,980,825 - 1,980,825
	- 1,980,825 - 1,980,825 300 - - 300 - - 111,484 111,484 - - 2,446,554 2,446,554 - - 1,029,200 1,029,200
	7,774,900 (4,916,373) 3,616,238 6,474,765

CONSOLIDATED At 1 July 2006 Loss for the period Total income and expense for the period Public equity raisings Exercise of options Shares issued in settlement of consulting fees Staff incentive placement Convertible notes – equity portion Available-for-sale asset reserve As at 30 June 2007	Attributable to equity holders of Ezenet Limited Issued Capital Accumulated Losses Other Reserves Total Equity $ $ $ $ 7,774,900 (4,916,373) 3,616,238 6,474,765 - (266,899) - (266,899)
	- (266,899) - (266,899) 1,120,000 - - 1,120,000 94,448 - - 94,448 20,000 - - 20,000 160,000 - - 160,000 - - 24,919 24,919 - - 1,588,137 1,588,137
	9,169,348 (5,183,272) 5,229,294 9,215,370

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

EZENET LIMITED STATEMENT OF CHANGES IN EQUITY (Con’t) FOR YEAR ENDED 30 JUNE 2007

PARENT At 1 July 2005 Profit for the period Total income and expense for the period Exercise of options Convertible notes – equity portion Available-for-sale asset reserve Share options reserve As at 30 June 2006	Attributable to equity holders of Ezenet Limited Issued Capital Accumulated Losses Other Reserves Total Equity $ $ $ $ 7,774,600 (6,897,198) 29,000 906,402 - 1,980,825 - 1,980,825
	- 1,980,825 - 1,980,825 300 - - 300 - - 111,484 111,484 - - 2,446,554 2,446,554 - - 1,029,200 1,029,200
	7,774,900 (4,916,373) 3,616,238 6,474,765

PARENT At 1 July 2006 Loss for the period Total income and expense for the period Public equity raisings Exercise of options Shares issued in settlement of consulting fees Staff incentive placement Convertible notes – equity portion Available-for-sale asset reserve As at 30 June 2007	Attributable to equity holders of Ezenet Limited Issued Capital Accumulated Losses Other Reserves Total Equity $ $ $ $ 7,774,900 (4,916,373) 3,616,238 6,474,765 - (380,440) - (380,440)
	- (380,440) - (380,440) 1,120,000 - - 1,120,000 94,448 - - 94,448 20,000 - - 20,000 160,000 - - 160,000 - - 24,919 24,919 - - 1,588,137 1,588,137
	9,169,348 (5,296,813) 5,229,294 9,101,829

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

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. CORPORATE INFORMATION

Ezenet Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Stock Exchange.

The nature of the operations and principal activities of the Group are described in the Director’s Report.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) 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 and Australian Accounting Standards. 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.

(b) Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). The financial report also complies with International Financial Reporting Standards (IFRS).

In the current year, the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) and the Urgent Issues Group that are relevant to its operations and effective for annual reporting periods beginning on 1 July 2006. The adoption of these new and revised Standards and Interpretations did not have any effect on the financial position or performance of the Group.

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the annual reporting period ending 30 June 2007. These are outlined in the table below.

Reference	Title	Summary	Application date of *standard **	Impact on financial report	Application *date for Group **
AASB 2005-10	Amendments to Australian Accounting Standards 132, AASB 101, AASB 114, AASB 11 AASB 133, AASB 13 AASB 1, AASB 4, AASB 1023 & AASB 1038]	Amendments arise from the release in August 2005 of AASB 7_Financial_ Instruments: Disclosures.	1 January 2007	AASB 7 is a disclosure standard so will have no direct impact on the amounts included in the Group’s financial statements. However, the amendments will result in changes to the financial instrument disclosures included in the Group’s financial report.	1 July 2007

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con’t)

(b) Statement of compliance (Continued)

Reference	Title	Summary	Application date of standard*	Impact on Group financial report	Application date for *Group **
AASB 2007-1	Amendments to Australian Accounting Standards arising from AASB Interpretation 11 [AASB 2]	Amending standard issued as a consequence of AASB Interpretation 11 Group and Treasury Share Transactions.	1 March 2007	This is consistent with the Group's existing accounting policies so will have no impact.	1 July 2007
AASB 2007-1	Amendments to Australian Accounting Standards arising from AASB Interpretation 11 [AASB 2]	Amending standard issued as a consequence of AASB Interpretation 11 Group and Treasury Share Transactions.	1 March 2007	This is consistent with the Group's existing accounting policies so will have no impact.	1 July 2007
AASB 2007-2	Amendments to Australian Accounting Standards arising from AASB Interpretation 12 [AASB 1, AASB 117, AASB 118, AASB 120, AASB 121, AASB 127, AASB 131 & AASB 139]	Amending standard issued as a consequence of AASB Interpretation 12 Service Concession Arrangements.	1 January 2008	As the Group currently has no service concession arrangements or public- private-partnerships (PPP), it is expected that this Interpretation will have no impact on its financial report.	1 July 2008
AASB 2007-3	Amendments to Australian Accounting Standards arising from AASB 8 [AASB 5, AASB 6, AASB 102, AASB 107, AASB 119, AASB 127, AASB 134, AASB 136, AASB 1023 & AASB 1038]	Amending standard issued as a consequence of AASB 8_Operating Segments_.	1 January 2009	AASB 8 is a disclosure standard so will have no direct impact on the amounts included in the Group’s financial statements.	1 July 2009
AASB 2007-4	Amendments to Australian Accounting Standards arising from ED 151 and Other Amendments	The standard is a result of the AASB decision that, in principle, all accounting policy options currently existing in IFRS should be included in the Australian equivalents to IFRS and the additional Australian disclosures should be eliminated, other than those considered particularly relevant in the Australian reporting environment.	1 July 2007	As the Group does not anticipate changing any of its accounting policy choices as a result of the issue of AASB 2007-4 this standard will have no impact on the amounts included in the Group’s financial statements. Changes to disclosure requirements will have no direct impact on the amounts included in the Group's financial statements. However the new standard may have an impact on the disclosures included in the Group’s financial report.	1 July 2007

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con’t)

(b) Statement of compliance (Continued)

Reference	Title	Summary	Application date of standard*	Impact on Group financial report	Application date *for Group **
AASB 2007-6	Amendments to Australian Accounting Standards arising from AASB 123 [AASB 1, AASB 101, AASB 107, AASB 111, AASB 116 & AASB 138 and Interpretations 1 & 12]	Amending standard issued as a consequence of AASB 123 (revised) Borrowing Costs.	1 January 2009	The accounting policy will change to capitalize borrowing costs.	1 July 2009
AASB 2007-7	Amendments to Australian Accounting Standards [AASB 1, AASB 2, AASB 4, AASB 5, AASB 107&AASB 128]	Amending standard issued as a consequence of AASB 2007-4.	1 July 2007	Refer to AASB 2007-4 above.	1 July 2007
AASB 8	Operating Segments	This new standard will replace AASB 114 _Segment Reporting_and adopts a management approach to segment reporting.	1 January 2009	Refer to AASB 2007-3 above.	1 July 2009
AASB 101 (revised October 2006)	Presentation of Financial Statements	Many of the disclosures from previous GAAP and all of the guidance from previous GAAP are not carried forward in the October 2006 version of AASB 101. The revised standard includes some text from IAS 1 that is not in the existing AASB 101 and has fewer additional Australian disclosure requirements than the existingAASB 101.	1 January 2007	AASB 101 is a disclosure standard so will have no direct impact on the amounts included in the Group’s financial statements. However, the revised standard may result in changes to the disclosures included in the Group’s financial report.	1 July 2007
AASB 123 (revised June 2007)	Borrowing Costs	AASB 123 previously permitted entities to choose between expensing all borrowing costs and capitalizing those that were attributable to the acquisition, construction or production of a qualifying asset. The revised version of AASB 23 requires borrowing costs to be capitalised if they are directly attributable to the acquisition, construction or production of a qualifyingasset.	1 January 2009	Refer to AASB 2007-6 above.	1 July 2009

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Con’t)

(b) Statement of compliance (Continued)

Reference	Title	Summary	Application date of standard*	Impact on financial report	Application *date for Group **
AASB Interpretation 10	Interim Financial Reporting and Impairment	Addresses an inconsistency between AASB 134_Interim_ Financial Reporting_and the impairment requirements relating to goodwill in AASB 136_Impairment of Assets and equity instruments classified as available for sale in AASB 139_Financial Instruments: _Recognition and Measurement	1 November 2006	The prohibitions on reversing impairment losses in AASB 136 and AASB 139 to take precedence over the more general statement in AASB 134 that interim reporting is not expected to have any impact on the Group’s financial report.	1 July 2007
AASB Interpretation 11	Group and Treasury Share Transactions	Specifies that a share-based payment transaction in which an entity receives services as consideration for its own equity instruments shall be accounted for as equity- settled.	1 March 2007	Refer to AASB 2007- 1 above.	1 July 2007
AASB Interpretation 12	Service Concession Arrangements	Clarifies how operators recognise the infrastructure as a financial asset and/or an intangible asset – not as property, plant and equipment.	1 January 2008	Refer to AASB 2007- 2 above.	1 July 2008
AASB Interpretation 129 (revised June 2007)	Service Concession Arrangements: Disclosures	The revised interpretation was issued as a result of the issue of Interpretation 12 and requires specific disclosures about service concession arrangements entered into by an entity, whether as a concession provider or a concession operator.	1 January 2008	Refer to AASB 2007- 2 above.	1 July 2008
IFRIC Interpretation 13	Customer Loyalty Programmes	Deals with the accounting for customer loyalty programmes, which are used by companies to provide incentives to their customers to buy their products or use their services.	1 July 2008	The Group does not have any customer loyalty programmes and as such this interpretation is not expected to have any impact on the Group's financial report.	1 July 2008
IFRIC Interpretation 14	IAS 19 - The Asset Ceiling: Availability of Economic Benefits and Minimum Funding Requirements	Aims to clarify how to determine in normal circumstances the limit on the asset that an employer's balance sheet may contain in respect of its defined benefit pension plan.	1 January 2008	The Group does not have a defined benefit pension plan and as such this interpretation is not expected to have an impact on the Group's financial report.	1 July 2008

*designates the beginning of the applicable annual reporting period

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(c) Basis of consolidation

The consolidated financial statements comprise the financial statements of Ezenet Limited and its subsidiaries as at 30 June each year (the Group).

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether a group controls another entity.

The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is obtained by the Group and cease to be consolidated from the date on which control is transferred out of the Group.

The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent liabilities assumed at the date of acquisition.

The investments in subsidiaries is carried at cost, less any impairment losses.

(d) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share-based payment transactions

The group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined by an external valuer using a binomial model.

Calculation of the equity component of convertible notes

The component of the convertible notes recognised as equity is determined as the residual amount of the note after deducting from the fair value of the note as a whole, the amount separately determined as the liability component.

The equity component of the convertible notes are not revised as a result of a change in the likelihood that a conversion option will be exercised, even if the exercise of the option appears to be economically advantageous to the holders.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(e) Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Rendering of services

Revenue is recognised as the services are provided.

Interest

Revenue is recognised as the 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.

Dividends

Revenue is recognised when the entity’s right to receive the payment is established.

(f) Borrowing costs

Borrowing costs are recognised as an expense when incurred.

(g) 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.

Finance leases, which transfer to the Group 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 charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as the lease income.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at the bank and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

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

(i) Trade and other receivables

Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for any uncollectible amounts.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written off when identified. An allowance for doubtful debts is raised when there is objective evidence that the group will not be able to collect debt.

(j) Foreign currency translation

Both the functional and presentation currency of Ezenet Limited and its Australian subsidiaries is Australian dollars (A$).

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

All resulting exchange differences in the consolidated financial report are taken to the income statement.

(k) 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 based on the current period's taxable income. 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 combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; or
when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(k) Income tax (continued)

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits 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; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

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.

Tax consolidation legislation

Ezenet Limited and its wholly-owned Australian controlled entities have implemented the tax consolidation legislation as of 1 July 2004.

The head entity, Ezenet Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred tax amounts. The Group has applied the group allocation approach in determining the appropriate amount of current taxes and deferred taxes to allocate to members of the tax consolidated group.

(l) Other taxes

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 balance sheet.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(l) Other taxes (continued)

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.

(m) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any impairment in value.

Depreciation is calculated on a reducing balance basis over the estimated useful life of the asset as follows:

Office equipment and fittings - 2.5 to 5.0 years
Equipment installed in hotels - 4.0 to 5.0 years

(n) 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 financial assets. 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 transaction costs. The Group 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 group 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 market place.

Available-for-sale investments

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 values of investments that are actively traded in organised financial markets are 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 values are 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 making as much use of available and supportable market data as possible and keeping judgemental inputs to a minimum.

(o) Impairment of financial assets

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 and its current 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.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(p) Intangible Assets

Acquired both separately and from a business combination

Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets.

The useful lives of these intangible assets are assessed to be either finite or indefinite.

Where amortisation is charged on assets with finite lives, this expense is taken to the income statement through the ‘other operating expenses’ line item.

Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profits in the period in which the expenditure is incurred.

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

Film library

Useful life 4 years (2006: 4 years) Amortisation method used Straight-line (2006: Straight-line) Internally generated or acquired Acquired

Guest video customer base

Useful life 1 year Amortisation method used Straight-line

Impairment testing

Intangible assets are tested for impairment where an indicator of impairment exists either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

(q) Impairment of non financial assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired.

Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the asset's value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Where 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.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(r) Trade and other payables

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

(s) 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.

(t) Convertible Notes

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

On the issue of the convertible note, the fair value of the liability component is determined using a market rate for an equivalent non-convertible bond. After initial recognition the liability component is subsequently measured at amortised cost using the effective interest method.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity, net of issue costs. The value of the conversion option is not changed in subsequent years.

(u) Provisions

Provisions are recognised when the Group 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.

Where the Group 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 determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

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

(v) Share-based payment transactions

The Group provides benefits to directors, employees and consultants of the Group (with shareholders approval) in the form of share-based payment transactions, whereby directors, employees and consultants render services in exchange for options over shares (‘equity-settled transactions’).

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

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(v) Share-based payment transactions (Continued)

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares of Ezenet Limited (‘market conditions’).

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

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition. Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where 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 earnings per share.

(w) Employee leave benefits

(a) Wages, salaries and annual leave

Liabilities for wages and salaries, including non-monetary benefits and annual 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.

(b) Long service leave

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.

(x) Contributed equity

Ordinary share 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.

Effective 1 July 1998, the corporations legislation abolished the concepts of authorized capital and par value shares. Accordingly the company does not have authorized capital nor par value in respect of its issued capital.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2007

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(y) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any 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 earnings per share is calculated as net profit attributable to members of the parent, 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 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.

3. REVENUE FROM ORDINARY ACTIVITIES (a) Revenue Revenue from services rendered Sale of goods Interest received Total other revenue from ordinary activities (b) Cost of sales Cost of sales from services rendered Cost of goods sold Total cost of sales 4. OTHER INCOME Impairment allowance on investment reversed Gain from sale of interest in associate Research & development rebate Total other income 5. EXPENSES AND LOSSES Other operating expenses Depreciation on equipment and fittings Amortisation of film library Amortisation of Guest Video Plant and equipment written off Salaries & wages expenses Research & development Other expenses	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 2,962,024 1,908,402 - - 309,541 - - - 68,795 20,010 61,602 14,173
	3,340,360 1,928,412 61,602 14,173
	762,070 497,340 - - 134,741 42,919 - -
	896,812 540,259 - -
	- - - 588,697 - 3,433,218 - 3,433,218 - 37,030 - -
	- 3,470,248 - 4,021,915
	570,549 340,019 - - 50,598 60,867 - - 18,754 - - 1,421 6,758 - - 792,070 509,251 - - 7,800 - - - 126,845 130,669 (130,573) 9,778
	1,568,037 1,047,564 (130,573) 9,778

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

5. EXPENSES AND LOSSES (CONTINUED)

Operating lease rentals Defined contribution superannuation plan expense Provision for employee entitlements Share-based payments Payments to consultants Salaries & wages expenses 6. INCOME TAX The major components of income tax expense are: Income Statement Deferred income tax benefit (expense) Income tax benefit/(expense) reported in the income statement Statement of recognised income and expense Deferred income tax related to items charged or credited directly to equity Unrealised gain on available-for-sale investments Income tax expense reported in equity A reconciliation between tax expense and the product of accounting profit before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting profit/(loss) before income tax At the Group’s statutory income tax rate of 30% (2006: 30%) Adjustments in respect of current income tax of previous years Expenditure not allowable for income tax purposes Tax losses (recognised)/not brought to account Income tax (benefit)/ expense reported in the consolidated income statement	53,739 43,832 - - 63,527 54,509 - - 29,359 16,453 - - 75,000 1,029,200 75,000 1,029,200 31,854 - 31,854 - 792,070 509,251 - - CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ (90,961) - (99,600) (637,564)
	(90,961) - (99,600) (637,564)
	557,831 1,085,363 557,831 1,085,363
	557,831 1,085,363 557,831 1,085,363
	(266,899) 1,980,825 (380,440) 2,618,389
	(80,070) 594,247 (114,132) 785,517 97,901 - 171,252 - 73,130 298,180 42,480 298,180 - (892,427) - (446,133)
	90,961 - 99,600 637,564

	90,961 - 99,600 637,564

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

6. INCOME TAX (Continued)

Deferred Income Tax Deferred income tax at 30 June relates to the following Deferred tax liabilities Revaluations of available-for-sale investments to fair value Deferred tax assets Losses available for offset against future taxable income Provision for future expenses Provision for employee benefits Gross deferred income tax assets Net deferred tax liabilities	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 2,760,008 2,115,329 2,759,120 2,115,329
	2,760,008 2,115,329 2,759,120 2,115,329
	903,825 926,273 923,414 930,101 16,480 6,953 - 6,953 19,589 10,781 - -
	939,894 944,007 923,414 937,054
	1,820,114 1,171,322 1,835,760 1,178,275

The Group has not recognised tax losses arising in Australia of $4,998,181 (2006: $4,998,181) that may be available for offset against future taxable profits of the companies in which the losses arose.

Tax Consolidation

Ezenet Limited and its 100% owned Australian subsidiaries have formed a tax consolidated group. Members of the group entered into a tax sharing arrangement in order to allocate the income tax expense to the wholly-owned subsidiaries on a pro-rata basis. The agreement provides for the allocation of income tax liabilities should the head entity default on its tax payment obligations. At the balance date, the possibility of default is remote.

Tax effect accounting by members of the tax consolidated group

The allocation of taxes under the tax sharing and funding agreement is recognised as an increase/decrease in the subsidiaries’ inter-company accounts with the tax consolidated group head company, Ezenet Limited. The group has applied the group allocation approach in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

7. RECEIVABLES (Current) Trade debtors Less: Allowance for doubtful debts	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 445,093 311,476 - - (4,345) - - -
	440,748 311,476 - -

Trade receivables are non-interest bearing and are generally on 30-60 day terms. An allowance for doubtful debts is made when there is objective evidence that a trade receivable is impaired. The amount of the allowance/impairment loss has been measured as the difference between the carrying amount of the trade receivables and the estimated future cash flows expected to be received from the relevant debtors.

Details regarding the effective interest rate and credit risk of current receivables are disclosed in note 29.

8. OTHER (Current) Prepayments Other receivables 9. AVAILABLE-FOR-SALE FINANCIAL ASSETS Listed shares at fair value Weatherly International plc Carbine Resources Ltd KP Renewables plc	4,194 37,306 - - - 25,726 10,184 3,205
	4,194 63,032 10,184 3,205
	8,847,134 7,051,096 8,847,134 7,051,096 360,000 - 360,000 - 113,315 - 113,315 -
	9,320,449 7,051,096 9,320,449 7,051,096

Available-for-sale investments consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate. Carbine Resources Ltd is listed on the Australian stock exchange. Weatherly International plc and KP Renewables plc are listed on the London Alternative Investment Market. All the shares were valued as at 30 June 2007.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

10. PLANT AND EQUIPMENT

Year ended 30 June 2007 At 1 July 2006, net of accumulated depreciation and impairment Additions Additions not yet in use Write offs Depreciation expense for the year At 30 June 2007, net of accumulated depreciation and impairment At 30 June 2007 Cost Accumulated depreciation and impairment Net carrying amount	CONSOLIDATED EZENET LIMITED Office equipment and fittings Plant and equipment Total Office equipment and fittings Plant and equipment Total $ $ $ $ $ $ 32,334 1,792,690 1,825,024 - - - 11,314 898,244 909,558 - - - - 388,081 388,081 - - - - (1,421) (1,421) - - - (15,033) (555,516) (570,549) - - -
	28,615 2,522,078 2,550,693 - - -
	183,986 3,718,864 3,902,850 - - - (155,371) (1,196,786) (1,352,157) - - -
	28,615 2,522,078 2,550,693 - - -

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

10. PLANT AND EQUIPMENT (Continued)

Year ended 30 June 2006 At 1 July 2005, net of accumulated depreciation and impairment Additions Additions not yet in use Write offs Depreciation expense for the year At 30 June 2006, net of accumulated depreciation and impairment At 1 July 2005 Cost or fair value Accumulated depreciation and impairment Net carrying amount At 30 June 2006 Cost Accumulated depreciation and impairment Net carrying amount	CONSOLIDATED EZENET LIMITED Office equipment and fittings Plant and equipment Total Office equipment and fittings Plant and equipment Total $ $ $ $ $ $ 43,422 1,190,290 1,233,712 - - - 7, 018 561,734 568,752 - - - - 369,337 369,337 - - - - (6,758) (6,758) - - - (18,106) (321,913) (340,019) - - -
	32,334 1,792,690 1,825,024 - - -
	165,654 1,706,059 1,871,713 - - - (122,232) (515,769) (638,001) - - -
	43,422 1,190,290 1,233,712 - - -
	172,672 2,446,888 2,619,560 - - - (140,338) (654,198) (794,536) - - -
	32,334 1,792,690 1,825,024 - - -

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

11. INTANGIBLE ASSET

Year ended 30 June 2007 At 1 July 2006, net of amortisation Additions Amortisation expense for the year At 30 June 2007, net of amortisation At 1 July 2006 Cost or fair value Accumulated amortisation Net carrying amount At 30 June 2007 Cost or fair value Accumulated amortisation Net carrying amount	CONSOLIDATED EZENET LIMITED Guest Video Digital film library Total Total $ $ $ $ - 104,371 104,371 - 25,000 46,575 71,576 - (18,754) (50,598) (69,352) -
	6,246 100,348 106,594 -
	- 309,587 309,587 - - (205,216) (205,216) -
	- 104,371 104,371 -
	25,000 356,162 381,162 - (18,754) (255,814) (274,568) -
	6,246 100,348 106,594 -

Year ended 30 June 2006 At 1 July 2005, net of amortisation Additions Amortisation expense for the year At 30 June 2006, net of amortisation At 1 July 2005 Cost or fair value Accumulated amortisation Net carrying amount At 30 June 2006 Cost or fair value Accumulated amortisation Net carrying amount	CONSOLIDATED EZENET LIMITED Digital film library Total Total $ $ $ 109,618 109,618 - 55,620 55,620 - (60,867) (60,867) -
	104,371 104,371 -
	253,967 253,967 - (144,349) (144,349) -
	109,618 109,618 -
	309,587 309,587 (205,216) (215,216)
	104,371 104,371 -

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

13. INTEREST IN SUBSIDIARY (Non current) Country of Incorporation % equity held by consolidated entity Ezestream Pty Ltd Australia 100 Share capital E-Resources Pty Ltd Australia 100 Share capital Loan Provision for non recovery of loan The loan is unsecured, interest free and is repayable on demand. CONSOLIDATED 2007 2006 $ $ 14. PAYABLES (Current) Trade creditors and accruals 527,026 427,809	EZENET LIMITED Investment 2007 $ Investment 2006 $ 573,199 573,199
	1 -
	573,200 573,199
	3,571,069 2,981,070 (1,351,565) (1,487,649)
	2,219,504 1,493,421
	EZENET LIMITED 2007 2006 $ $ 184,693 173,493

Trade payables are non-interest bearing and are normally settled on 30-60 day terms. Information regarding the effective interest rate and credit risk of current payables is set out in note 29.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

30 JUNE 2007
15. PROVISIONS Current Employee annual leave entitlements Non-current Employee long service leave entitlements	CONSOLI DATED CONSOLI DATED EZENET LIMITED EZENET LIMITED 2007 2007 2006 2006 $ $ $ $ 50,897 35,938 - -
	14,400 - - -

16. INTEREST-BEARING LIABILITES (Current)

Convertible notes Unsecured loans Loan from Directors	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 1,745,548 1,227,028 1,745,548 1,227,028 3,117 3,874 - - - 425,000 - 425,000
	1,748,665 1,655,902 1,745,548 1,652,028

Convertible notes

Terms and Conditions

(a) Each convertible note entitles the convertible note-holder to acquire one (1) fully paid ordinary share in the capital of the company on the following terms and conditions:

i. The convertible note expires at 5.00pm on 30 September 2007, any unconverted portion to be redeemed, ii The convertible note may be transferred at any time before the expiry date.

iii The convertible note is divided into parcels of fifty thousand dollars ($50,000). All or any of the parcels may be converted in whole or in part from time to time by notice in writing to the company received before 31 August 2007,

iv The conversion price is A$0.15,

v The effective interest rate of the convertible note is ten percent (10%) per annum payable quarterly in arrears,

vi The shares issued upon conversion of the convertible note:-

(a) will rank equally with existing ordinary fully paid shares; and
(b) will be eligible for listing on the official list of the Australian Stock Exchange.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

30 JUNE 2007
17. CONTRIBUTED EQUITY (a) Issued and paid up capital 83,989,367 ordinary shares fully paid (2006: 62,242,717) Less: capital raising costs	2007 2006 2007 2006 9,573,586 8,179,138 9,573,586 8,179,138 (404,238) (404,238) (404,238) (404,238)
	9,169,348 7,774,900 9,169,348 7,774,900

Effective 1 July 1998, the Corporations Legislation in place abolished the concept of authorised capital and par value shares. Accordingly, the Parent does not have authorised capital or par value in respect of its shares.

(b) Movements in ordinary share capital

Beginning of the financial year Issued during the year - public equity raising - shares issued in settlement of consulting fees - staff shares issued - options exercised - options converted 4:1 - directors options converted 4:1 End of the financial year	2007 2006 Number of shares $ Number of shares $
	62,242,717 7,774,900 62,240,719 7,774,600 8,000,000 1,120,000 - - 200,000 20,000 - - 1,000,000 160,000 - - 628,100 94,448 1,998 300 7,423,816 - - - 4,493,184 - -
	83,987,817 9,169,348 62,242,717 7,774,900

(c) Share Options

15,500,000 options exercisable at 20 cents per option on or before 30 June 2010 were issued to directors and consultants of the company on 18 November 2005. Each option had been valued at 6.64 cents.

4,188,588 options exercisable at 15 cents per option on or before 30 June 2007 were issued to shareholders of the company on 15 July 2003. Each option had been valued at 4.51 cents.

1,000,000 options exercisable at 15 cents per option on or before 30 June 2007 were issued to an executive director and employee of the company on 31 July 2003. Each option had been valued at 4.49 cents.

11,295,000 options exercisable at 15 cents per option on or before 30 June 2007 were issued to shareholders of the company on 29 August 2003. Each option had been valued at 10.80 cents

2,330,000 options exercisable at 15 cents per option on or before 30 June 2007 were issued to employees and consultants on 29 August 2003. Each option had been valued at 10.80 cents.

2,750,022 options exercisable at 15 cents per option on or before 30 June 2007 were issued to shareholders on 11 March 2004. Each option had been valued at 21.66 cents.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

17. CONTRIBUTED EQUITY (Continued)

125,000 options exercisable at 40 cents per option on or before 31 December 2006 were issued to employees on 11 March 2004. These options expired 31 December 2006.

The options granted previously have been valued using the Black-Scholes option valuation methodology. The valuations reflected above do not necessarily represent the tax value for taxation purposes to the option holder.

At the end of the financial year there were 1,550 (2006: 49,520,078) unissued ordinary shares in respect of which options were converted on 15 July 2007.

Movement in Options Beginning of the year Exercised during the year Converted options to shares 4:1 during year Issue of new options Expired options 30 June 2007 Unlisted options expired 31 December 2006 End of the year	2007 2006 49,520,078 34,022,076 (628,100) (47,667,845) - (1,097,583) (125,000) (1,998) - 15,500,000 - -
	1,550 49,520,078

(d) Staff shares issued

1,000,000 shares were issued to staff on 15 December 2006 at no cost. The value of the shares is based on the quoted price on the date of issue.

(e) 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. The ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

Share options

The 1,550 options outstanding at 30 June 2007 were converted to shares on 15 July 2007.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

18. ACCUMULATED LOSSES AND RESERVES

Accumulated Losses Balance at beginning of year Profit (Loss) for the year Balance at end of year Share Option Reserve Balance at beginning of year Movement during the year – share options expensed during the period Balance at end of year Convertible Note Equity Reserve Balance at beginning of year Movement during the year, net of tax Balance at end of year Available-for-sale Assets Reserve Balance at beginning of year Movement during the year, net of tax Balance at end of year Total Reserves Balance at end of year	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ (4,916,373) (6,897,198) (4,916,373) (6,897,198) (266,899) 1,980,825 (380,440) 1,980,825
	(5,183,272) (4,916,373) (5,296,813) (4,916,373)
	1,058,200 29,000 1,058,200 29,000 - 1,029,200 - 1,029,200
	1,058,200 1,058,200 1,058,200 1,058,200
	111,484 - 111,484 - 24,919 111,484 24,919 111,484
	136,403 111,484 136,403 111,484

	2,446,554 - 2,446,554 - 1,588,137 2,446,554 1,588,137 2,446,554
	4,034,691 2,446,554 4,034,691 2,446,554
	5,229,294 3,616,238 5,229,294 3,616,238

Nature and purpose of reserves

Share option reserve

This reserve records the value of options issued to directors, employees and associates as part of their remuneration. Refer to notes 24 and 27.

Convertible note equity reserve

This reserve records the equity portion attributable to the convertible notes at the time of issue.

Available-for-sale asset reserve

This reserve records fair value changes on available-for-sale investments.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

19. CASH FLOW STATEMENT

19. CASH FLOW STATEMENT
Reconciliation of the net profit/(loss) after tax to the net cash flows from operations Net profit/(loss) - Depreciation of plant and equipment - Amortisation of Film Library - Amortisation of Guest Video - Plant & equipment written off - Provision for Diminution in Investment - Convertible note finance cost - Consultants share option expense - Taxation - Directors share issue expense - Employee share issue expense - Convertible Note reserve - Gain on sale of interest in associate - Other Changes in assets and liabilities - Trade receivables - Other receivables - Prepayments - Trade and other creditors - Employee entitlements - Due to transfer to controlled entities Net cash flows used in operating activities a. Reconciliation of cash Cash balance comprises: Cash at bank Short term deposit Closing cash balance	CONSOLIDATED 2007 2006 $ $ (266,899) 1,980,825 570,549 340,019 50,598 60,867 18,754 - 1,420 6,758 - - 68,439 53,512 - 199,200 90,963 - 75,000 830,000 85,000 - - - - (3,433,218) (30,240) - (129,272) (184,276) 27,886 550 30,953 43,404 98,436 2,126 29,359 16,453 - -	EZENET 2007 $ (380,440) - - - - (136,084) 68,439 - 99,600 75,000 - - - - - (6,979) 11,201 - (1)	LIMITED 2006 $ 1,980,825 - - - - - 53,512 199,200 - 830,000 - - (3,433,218) - - (1,059) - 37,968 - (619,396)
	(720,946) (83,780)	(269,264)	(952,168)
	213,794 110,737 740,000 300,000	54,439 690,000	57,640 300,000
	953,794 410,737	744,439	357,640

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short tem deposits are made at various periods on call, depending on the immediate cash requirements of the Group and earn interest at the respective short term deposit rates.

At 30 June 2007, the Group had no committed borrowing facilities.

The fair value of cash and cash equivalents is $953,794 (2006: $410,737).

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

20. EXPENDITURE COMMITMENTS

a) Commitments

(i) Leasing commitments

Operating lease commitments – Group as lessee

The Group has entered into a commercial lease on the building in which the business operates from. This lease has an average life of 5 years with no renewal option included in the contracts.

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

Within one year After one year but not more that five years After more than five years Total minimum lease payments	*CONSOLIDATED* *PARENT* 2007 2006 2007 2006 $ $ $ $ 68,796 44,748 68,796 44,748 303,825 147,253 303,825 147,253 - - - - 372,621 192,001 372,621 192,001

21. SEGMENT INFORMATION

The Group’s primary segment reporting format is business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced.

Operational Segment

The Operational segment includes revenue derived by the consolidated entity primarily from the information technology sector. With the majority of the revenue coming from the supply of digital movie supply to the hospitality, mining camps and health care clients.

Investment Segment

The Investment segment relates the holding of it’s three holdings in Weatherly plc, Carbine Resources Limited and KP Renewables plc.

Business Segment

The following table presents revenue and profit information and certain asset information regarding business segment for the year ended 30 June 2007.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

21. SEGMENT INFORMATION (Con’t)

Year ended 30 June 2007 Revenue Sales to clients Other revenue Total segment revenue Total consolidated revenue Result Segment results Profit / (loss) before income tax and finance costs Finance costs Profit / (loss) before income tax Income tax expense Net profit / (loss) for the year Assets and liabilities Segment assets Total assets Segment liabilities Total liabilities Other segment information Depreciation and amortisation Increase in fair value of investments Write offs Cash flow information Net cash flow from operating expenses Net cash flow from investing activities Net cash flow from financing activities	Continuing operations Investments Operational - 3,271,565 - 68,795	Total 3,271,565 68,795
	- 3,340,360	3,340,360
	- 68,444 9,320,449 3,597,181 2,760,008 2,340,988 - (639,901) 2,145,968 - - (1,421) - 720,947
		3,340,360
		68,444
		68,444 (244,382) (90,962)
		(266,900)
		12,917,630
		12,917,630
		5,100,996
		5,100,996
		(639,901) 2,145,968 (1,421) 720,947
	(123,386) (1,338,952)	(1,462,388)
	- 1,284,448	1,284,448

In prior years, the consolidated entity derived its business from the information technology sectors only.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

22. SUBSEQUENT EVENTS

With the resignation of Richard Burt as Managing Director on 31 August 2007, Brett Wiley has been appointed as General Manger of Ezestream. Brett commenced this position on 6 August 2007.

23. ECONOMIC DEPENDENCY

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

24. EMPLOYEE BENEFITS

24. EMPLOYEE BENEFITS
Employee Benefits The aggregate employee benefit liability is comprised of: Accrued wages, salaries and on-costs Provisions (current) Provisions (non-current)	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ - - - - 50,897 35,938 - - 14,400 - - -
	65,297 35,938 - -

Superannuation contributions by the consolidated entity of up to 9% of employees’ wages and salaries are legally enforceable in Australia.

Employee Share Incentive Scheme

Ezenet Limited does not have an employee share scheme. Shareholders approved a resolution at the General Meeting for management of the company, to grant options over the ordinary shares of Ezenet Limited to consultants, contractors and certain members of staff of the consolidated entity, to allow them the mechanism to participate in the future development of the company and as an incentive for their past and future involvement and commitment. The options, issued for nil consideration, are granted in accordance with performance guidelines established by the directors and management of Ezenet Limited and are issued at the discretion of the directors and management of Ezenet Limited. These options vest on the grant date.

the grant date.
	2007		2006
	Number of options	Weighted average exerciseprice	Number of options	Weighted average exercise price
Balance at beginningofyear	18,830,000	0.19	3,330,000	0.15
-granted			15,500,000	0.20
- forfeited	125,000	0.15	-	-
- converted	18,705,000	0.19	-	-
Balance at end ofyear	0		18,830,000	0.19

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

24. EMPLOYEE BENEFITS (Cont)

a. Remuneration options granted during the reporting period:

There were no options granted by Ezenet Limited to employees during the year.

b. Remuneration options exercised :

A total 125,000 share options expired. 12,780,000 options were converted to 3,195,000 shares during year ended 30 June 2007.

c. Remuneration options held as at the end of the reporting period: There were no options held by the employees as at 30 June 2007.

d. Remuneration shares issued:

On 15 December 2006, 1,000,000 shares were issued to staff at no cost. The fair value of $160,000 was based on the quoted price on the date of issue.

25. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the parent, adjusted to exclude any costs of servicing equity, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares 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.

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

Net profit /(loss) after tax Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share Effect of dilution Convertible notes Share options Weighted average number of ordinary shares in issued adjusted for the effect of dilution	2007 2006 (266,899) 1,980,825 Number Number 76,530,297 62,242,690 11,733,333 8,566,667 - 43,533,179
	88,263,630 114,342,535

There is no impact of dilutive shares as the consolidated entity made a loss for the year, hence any dilution would reduce the loss per share. Diluted earnings per share is therefore the same as basic loss per share.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

26. AUDITOR’S REMUNERATION

The auditor of Ezenet Limited is Ernst & Young Amounts received or due and receivable by Ernst & Young (Australia) for: Amounts received or due and receivable By the auditors of Ezenet Limited for: - an audit or review of the financial report - other services	CONSOLIDATED EZENET LIMITED 2007 2006 2007 2006 $ $ $ $ 40,800 41,715 40,800 41,715 - - - -
	40,800 41,715 40,800 41,715

27. DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of Director’s and Executive officer:

(i) Directors

W G Martinick Chairman (executive) G R O’Dea Director (non-executive) D H Ward Director (non-executive) R A Burt Director (non-executive) - Resigned as Managing Director on 31 August 2007

(ii) Executives

S M O Watson Company Secretary

There were no other specified executives during the year.

(b) Remuneration Committee

The board has not established a remuneration committee in view of the size of the company and all executives have service agreements. The board is responsible for determining and reviewing compensation arrangements for the directors themselves.

(c) Remuneration structure

In accordance with best practice corporate governance, the structure of non-executive director and senior manager remuneration is separate and distinct.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

27. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

(i) Compensation Policy

(ii) Non-Executive Director Compensation

Objective

Structure

(iii) Executive Compensation

Objective

The entity aims to reward executives with a level and mix of compensation commensurate with their position and responsibilities within the entity so as to:

align the interests of executives with those of shareholders; and
ensure total compensation is competitive by market standards.

Structure

(iv) Fixed Compensation

Objective

Structure

Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and other non-cash benefits.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

27. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

(d) Compensation of Key management Personnel (Continued)

(v) Variable Compensation

Objective

The objective is to link the achievement of the company’s targets with the compensation received by the executives charged with meeting those targets.

Share-based compensation

Structure

(e) Employment contracts

Compensation of Directors and Executive Officers (Consolidated and Parent)

Compensation of each director and the executive officer of the parent and consolidated entity are as follows:

follows:
	Short term		Post employment	Share based payments	Total	Total performance related
30 June 2007	Salaries and fees	Non Monetary Benefit1	Super- annuation	Shares
Directors W G Martinick G R O’Dea D H Ward R A Burt Executive Officer S M O Watson Total	$ - - 20,0002 188,0733 46,6505	$ 3,000 3,000 3,000 3,000 3,000	$ - - - 16,9273 -	$ - - - 75,0004 -	$ 3,000 3,000 23,000 283,000 49,650	- - - - -
	2254,723	15,000	16,927	75,000	361,650

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

27. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

Compensation of Directors and Executive Officers (Continued)

The Non Monetary Benefit relates to the Directors Indemnity Insurance
Professional services, relating to accounting and taxation advice, of $20,000 were provided by Young & Wilkinson, a partnership associated with D H Ward on normal commercial terms and conditions.
The ordinary salary and superannuation paid to Mr Burt.
The share based payment made to Mr Burt, 500,000 shares issued on 15 December 2006 at no cost. Fair value is based on quoted price on the date of issue.
Professional services relating to legal and company secretarial fees, of $46,650 were provided by Mr Simon M O Watson.

(vi) Compensation of Key Management Personnel (Consolidated and Parent)

	Short term	Post employment	Share based payments	Total	Total performance related
30 June 2006	Salaries and fees	Super- annuation	Options
Directors W G Martinick G R O’Dea D H Ward N T O’Loughlin R A Burt Executive Officer S M O Watson	$ 15,000 15,000 15,000 - 169,725 60,000	$ - - - - 15,275 -	$ 232,400 199,200 199,200 - 199,200 199,200	$ 247,400 214,200 214,200 - 384,200 259,200	- - - - - -
Total	274,725	15,275	1,029,200	1,319,200

(vii) Compensation

During the financial year shares were granted as equity compensation benefits under the long-term incentive plan to certain Key Management Personnel. The shares were issued free of charge. The fair value is based on the quoted price of $0.15 on 15 December 2006, with the value of shares issued amounting $75,000.

On 14 February 2007, 18,705,000 director’s employee share options were converted to 4,676,250 shares, in accordance to the arrangements approved at the annual general meeting. At the date of the conversion, each option had a fair value of $0.071 and each share was valued at $0.15.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

27. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

Compensation Options Granted in 2006

	Vested and Granted			Terms and conditions	Terms and conditions	for each grant
30 June 2006	No.	Grant date	Fair Value per option at grant date ($)	Exercise price per option ($)	Expiry date	First Exercise date	Last exercise date
Directors
WGMartinick	3,500,000	18-Nov05	0.0664	0.20	30 June 2010	18Nov2005	30 June 2010
GRO’Dea	3,000,000	18-Nov05	0.0664	0.20	30 June2010	18 Nov2005	30 June2010
D HWard	3,000,000	18-Nov05	0.0664	0.20	30 June2010	18 Nov2005	30 June2010
R A Burt	3,000,000	18-Nov05	0.0664	0.20	30 June 2010	18 Nov 2005	30 June 2010
Executive officer
S M O Watson	3,000,000	18-Nov05	0.0664	0.20	30 June 2010	18 Nov 2005	30 June 2010

Total	15,500,000

(e) Shares issued on exercise of remuneration options

There were no shares issued on exercise of remuneration options.

(f) Option holdings

	Balance at beginning ofperiod	Granted as remunerati on	Options cancelled	Net Change Other	Balance at end of period	Vested at 30June 2007	Vested at 30June 2007	Vested at 30June 2007
	1July 2006				30 June 2007	Total	Not Exercisable	Exercisable
Specified Directors
W G Martinick **	11,561,033	-	11,561,033	-	-	-	-	-
G R O’Dea	6,003,300	-	6,003,300	-	-	-	-	-
D H Ward ***	3,706,652	-	3,706,652	-	-	-	-	-
R A Burt	3,000,000	-	3,000,000	-	-	-	-	-
Specified Executives
S M O Watson ****	10,219,147	-	10,219,147	-	-	-	-	-

Total	34,490,132	-	34,490,132	-	-	-	-	-

** Options are held by W G Martinick and Martinick Investments Pty Ltd ATF The Martinick Superannuation Fund.

***Options are held indirectly by D H Ward and Blackwood Business Services Pty Ltd.

****Options are held by SMO Watson and Kings Park Nominees Pty Ltd.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

27. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

	Balance at beginning ofperiod	Granted as remunerati on	Options Exercised	Net Change Other	Balance at end of period	Vested at 30June 2006	Vested at 30June 2006	Vested at 30June 2006
	1July 2005				30 June 2006	Total	Not Exercisable	Exercisable
Specified Directors
W G Martinick **	8,061,033	3,500,000	-	-	11,561,033	11,561,033	-	11,561,033
G R O’Dea	3,003,300	3,000,000	-	-	6,003,300	6,003,300	-	6,003,300
D H Ward ***	706,652	3,000,000	-	-	3,706,652	3,706,652	-	3,706,652
N T O’Loughlin	3,204,668	-	-	-	3,204,668	3,204,668	-	3,204,668
R A Burt	-	3,000,000	-	-	3,000,000	3,000,000	-	3,000,000
Specified Executives
S M O Watson ****	7,219,147	3,000,000	-	-	10,219,147	10,219,147	-	10,219,147

Total	22,194,800	15,500,000	-	-	37,694,800	37,694,800	-	37,694,800

** Options are held by W G Martinick and Martinick Investments Pty Ltd ATF The Martinick Superannuation Fund. *Options are held indirectly by D H Ward and Blackwood Business Services Pty Ltd.

****Options are held by SMO Watson and Kings Park Nominees Pty Ltd.

(g) Shareholdings of Key Management Personnel

	Balance 1July 06	Granted as Remuneration	On Exercise of Options	Net Change Other	Balance 30June 07
Specified Directors
W G Martinick **	11,020,444	-	2,830,659	135,037	13,986,140
G R O’Dea	72,600	-	825,825	-	898,425
D H Ward ***	796,128	-	926,663	270,300	1,993,091
R A Burt	200,000	500,000	-	-	700,000

Specified Executives
S M O Watson	2,210,059	-	2,554,787	-	4,764,846

Total	14,299,231	500,000	7,137,934	405,337	22,342,502

** Shares are held by W G Martinick and Martinick Investments Pty Ltd ATF The Martinick Superannuation Fund. *Shares are held by Blackwood Business Services Pty Ltd.

****Shares are held by SMO Watson and Kings Park Nominees Pty Ltd.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

27. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

	Balance 1July 05	Granted as Remuneration	On Exercise of Options	Net Change Other	Balance 30June 06
Specified Directors
W G Martinick **	11,020,444	-	-	-	11,020,444
G R O’Dea	72,600	-	-	-	72,600
D H Ward ***	796,128	-	-	-	796,128
N T O’Loughlin	3,549,591	-	-	-	3,549,591
R A Burt	200,000	-	-	-	200,000

Specified Executives
S M O Watson	2,210,059	-	-	-	2,210,059

Total	17,848,822	-	-	-	17,848,822

** Shares are held by W G Martinick and Martinick Investments Pty Ltd ATF The Martinick Superannuation Fund. *Shares are held by Blackwood Business Services Pty Ltd.

****Shares are held by SMO Watson and Kings Park Nominees Pty Ltd.

(h) Loans to/from Key Management Personnel

On 3 February 2006, the company borrowed $300,000 from W G Martinick Superannuation Fund. Interest is payable at the rate of 12% per annum. On 14 July 2006 this loan was converted to convertible notes.

On 20 February 2006, the company borrowed $125,000 from G R O’Dea. Interest was payable at the rate of 12% per annum. On 14 July 2006 this loan was converted to convertible notes.

(i) Other transactions and balances with Key Management Personnel

Services

Professional services, relating to accounting and taxation advice, of $20,000 (2006: $12,042) were provided by Young & Wilkinson, a partnership associated with D H Ward on normal commercial terms and conditions. Professional services relating to legal and company secretarial fees, of $54,291 were provided by Mr Simon M O Watson.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

28. RELATED PARTY DISCLOSURE

(a) Subsidiaries

The consolidated financial statements include the financial statement of Ezenet Limited and the subsidiaries listed in the following table.

Name Country of incorporation % Equity interest 2007 2006	Investment 2007 2006
Ezestream Pty Ltd Australia 100 100 E-Resources Pty Ltd Australia 100 -	573,199 573,199 1 -
	573,200 573,199

(b) Ultimate parent

Ezenet Limited is the ultimate parent entity.

(c) Key management personnel

Details relating to key management personnel, including remuneration paid, are included in note 27.

(d) Transactions with related parties

The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year.

Relatedparty	Sales to related parties Purchases from related parties Other transactions with related parties
PARENT Intercompany loan to Ezestream Pty Ltd 2007 Intercompany loan to Ezestream Pty Ltd 2006 Provision for non-recovery of loan 2007 Provision for non-recovery of loan 2006 Total 2007 2006	- - 3,571,070 - - 2,981,070 - - (1,351,565) - - (1,487,649)
	- - 2,219,505 - - 1,493,421

Loan provided to subsidiary is interest free, unsecured and repayable on demand.

EZENET LIMITED

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

29. FINANCIAL INSTRUMENTS

(a) Financial Risk Management

The Group’s main risks arising from the financial instruments are interest rate risk, liquidity risk and credit risk.

The board has no formal risk management committee due to the size of the company and the number of directors, however the board does recognise that all directors and employees have a responsibility to recognise risks and actively apply controls to manage the risk. All controls in place are considered appropriate for the current position of the Group.

Interest Rate Risk

The Group’s exposure to interest risk is minimal.

Liquidity Risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of term deposits.

Credit Risk

The Group’s exposure to credit risk arises from default of counter party, with a maximum exposure equal to the carrying amount of the financial assets of the Group, which comprises of cash and cash equivalents.

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

29. FINANCIAL INSTRUMENTS (Continued)

(b) Interest rate risk exposure - consolidated entity

The consolidated entity’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:

									MORE	MORE
FINANCIAL	FLOATING		1 YEAR		OVER	1 TO 5			THAN			NON-INTEREST				INTEREST
INSTRUMENT	INTEREST RATE		OR	LESS	YEARS			5	YEARS			BEARING		TOTAL		RATE
	2007	2006	2007	2006	2007	2006		2007		2006		2007	2006	2007	2006	2007	2006
	$	$	$	$	$	$		$		$		$	$	$	$	%	%
(i) FINANCIAL
ASSETS
Cash	953,594	410,537	-	-	-		-			-	-	200	200	953,794	410,737	5.15	5.15
Receivables – trade	-	-	-	-	-		-			-	-	455,096	311,476	455,096	311,476	-	-
Other debtors	-	-	-	-	-		-			-	-	(2,159)	25,726	(2,159)	25,726	-	-
Available-for-sale
financialassets	-	-	-	-	-		-			-	-	9,320,449	7,051,096	9,320,449	7,051,096
Total Financial
Assets	953,594	410,537	-	-	-		-			-	-	9,773,586	7,388,498	10,727,180	7,799,035
(ii) FINANCIAL
LIABILITIES
Trade creditors,
accruals and other
creditors	-	-	-	-	-		-			-	-	527,026	427,809	527,026	427,809	-	-
Loans –Insurance
Finance	-	-	3,117	3,874	-		-			-	-	-	-	3,117	3,874	5.66	5.66
Loans – other	-	-	-	425,000	-		-			-	-	-	-	-	425,000	12.0	12.0
Convertible Notes	-	-	1,745,548	1,227,028	-		-			-	-	-	-	1,745,548	1,227,028	13.8	13.8
Total Financial
Liabilities	-	-	1,748,665	1,655,902	-		-			-	-	527,026	427,809	2,275,691	2,083,711

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

29. FINANCIAL INSTRUMENTS (Continued)

(c) Interest rate risk exposure - parent company

The parent 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:

									MORE	MORE
FINANCIAL	FLOATING		1 YEAR		OVER	1 TO 5			THAN			NON-INTEREST				INTEREST
INSTRUMENT	INTEREST RATE		OR	LESS	YEARS			5	YEARS			BEARING		TOTAL		RATE
	2007	2006	2007	2006	2007	2006		2007		2006		2007	2006	2007	2006	2007	2006
	$	$	$	$	$	$		$		$		$	$	$	$	%	%
(i) FINANCIAL
ASSETS
Cash	744,439	357,640	-	-	-		-			-	-	-	-	744,439	357,640	6.00	5.15
Receivables – trade	-	-	-	-	-		-			-	-	-	-	-	-	-	-
Other debtors	-	-	-	-	-		-			-	-	4,213	3,205	4,213	3,205	-	-
Loan to subsidiary	-	-	-	-	-		-			-	-	2,219,504	1,493,421	2,219,504	1,493,421
Available-for-sale
financial assets	-	-	-	-	-		-			-	-	9,320,449	7,051,096	9,320,449	7,051,096
Total Financial
Assets	744,439	357,640	-	-	-		-			-	-	11,544,166	8,547,722	12,288,605	8,905,362
(ii) FINANCIAL
LIABILITIES
Trade creditors,
accruals and other
creditors	-	-	-	-	-		-			-	-	60,316	565	60,316	565	-	-
Loans – hire
purchase	-	-		-	-		-			-	-	-	-	-	-	5.66	5.66
Loans – other	-	-		425,000	-		-			-	-	-	-	-	425,000	12.0	12.0
Convertible Notes	-	-	1,745,548	1,227,028	-		-			-	-	-	-	1,745,548	1,227,028	13.8	13.8
Total Financial
Liabilities	-	-	1,745,548	1,652,028	-		-			-	-	60,316	565	1,805,864	1,652,593

EZENET LIMITED NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

29. FINANCIAL INSTRUMENTS (Continued)

(d) Net fair values of financial assets and liabilities – consolidated entity

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

	CARRYING AMOUNT	CARRYING AMOUNT	AGGREGATE NET FAIR	AGGREGATE NET FAIR
				VALUE
	2007	2006	2007	2006
	$	$	$	$
FINANCIAL ASSET
Cash	953,794	410,737	953,794	410,737
Debtors	440,748	311,476	440,748	311,476
Other debtors	(2,159)	25,726	(2,159)	25,726
Available-for-sale financial assets	9,320,449	7,051,096	9,320,449	7,051,096
Total financial assets	10,712,832	7,799,035	10,712,832	7,799,035
FINANCIAL LIABILITIES
Trade creditors and accruals and other
creditors	527,026	427,809	527,026	427,809
Loans – short term	3,117	3,874	3,117	3,874
Loans – other	-	425,000	-	425,000
Convertible Notes	1,745,548	1,227,028	1,745,548	1,227,028
Total financial liabilities	2,275,691	2,083,711	2,275,691	2,083,711

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.

Available-for-sale financial assets: Market values have been used to determine the fair value of listed available-for-sale investments.

(e) Credit Risk Exposures – consolidated entity

The consolidated entity’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 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 30 JUNE 2007

29. FINANCIAL INSTRUMENTS (Continued)

(f) Net fair values of financial assets and liabilities – parent company

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

	CARRYING AMOUNT	CARRYING AMOUNT	AGGREGATE NET FAIR	AGGREGATE NET FAIR
				VALUE
	2007	2006	2007	2006
	$	$	$	$
FINANCIAL ASSET
Cash	744,439	357,640	744,439	357,640
Debtors	-	-	-	-
Other debtors	10,184	3,205	10,184	3,205
Loan to subsidiary	2,219,504	1,493,421	2,219,504	1,493,421
Available-for-sale financial assets	9,320,449	7,051,096	9,320,449	7,051,096
Total financial assets	12,284,576	8,905,362	12,284,576	8,905,362
FINANCIAL LIABILITIES
Trade creditors and accruals and other
creditors	184,693	565	184,693	565
Loans – hire purchase	-	-	-	-
Loans – other	-	425,000	-	425,000
Convertible Notes	1,745,548	1,227,028	1,745,548	1,227,028
Total financial liabilities	1,930,241	1,652,593	1,920,849	1,588,455

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.

Available-for-sale financial assets: Market values have been used to determine the fair value of listed available-for-sale investments.

Loans: The carrying amount approximates fair value.

(g) Credit Risk Exposures – parent company

The parent 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.

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EZENET LIMITED CORPORATE GOVERNANCE STATEMENT 30 JUNE 2007

The Board of Directors of Ezenet Limited is responsible for the corporate governance of the consolidated entity. 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.

In accordance with the Australian Stock Exchange Corporate Governance Council’s (the Council’s) “Principles of Good Corporate Governance and Best Practice Recommendations” (the Recommendations), the Corporate Governance Statement must now contain specific information, and must disclose the extent to which the company has followed the guidelines during the period. Where a recommendation has not been followed, that fact must be disclosed, together with the reasons for the departure. Ezenet Limited’s Corporate Governance Statement is now structured with reference to the Corporate Governance Council’s principles and recommendations, which are as follows:

Principle 1. Lay solid foundations for management and oversight
Principle 2. Structure the board to add value
Principle 3. Promote ethical and responsible decision making
Principle 4. Safeguard integrity in financial reporting
Principle 5. Make timely and balanced disclosure
Principle 6. Respect the rights of shareholders
Principle 7. Recognise and manage risk
Principle 8. Encourage enhanced performance
Principle 9. Remunerate fairly and responsibly

Principle 10. Recognise the legitimate interests of stakeholders.

Ezenet Limited’s corporate governance practices were in place throughout the year ended 30 June 2006 and were fully compliant with the Council’s best practice recommendations.

Structure of the Board

The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors’ Report.

As the board acts on behalf of and is 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 appropriate company staff and consultants.

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 and operational business plans;
board monitoring of key performance indicators;
identification of risks and strategies put in place to mitigate key risks; and
there are procedures in place, agreed by the board, to enable directors, in furtherance of their duties, to seek independent professional advice at the company’s expense.

EZENET LIMITED CORPORATE GOVERNANCE STATEMENT (Con’d) 30 JUNE 2007

Independence

Corporate Governance Council Recommendation 2.1 requires a majority of the board to be independent directors. In addition, Recommendation 2.2 requires the chairperson of the company to be independent. The Corporate Governance Council defines independence as being free from any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of unfettered and independent judgement. In accordance with this definition, the following directors are not considered to be independent.

W G Martinick Chairman, Executive Director R A Burt Managing Director

Of the four board members in total, the two directors listed above are not considered to be independent when applying the Council’s definition of independence. Therefore only half of the board are independent. Ezenet Limited considers industry experience and specific expertise to be important attributes of its board members.

The chairman, W G Martinick, is not considered to be independent using the Council’s definition of independence by virtue of the fact that he is a substantial shareholder of Ezenet Limited. However, he has been appointed to this position as he has the relevant skills, experience and expertise.

The term in office held by each director in office at the date of this report is as follows:

Name	Term in office
W G Martinick	4.5 years
G R O’Dea	5.3 years
D H Ward	2.0 years
R A Burt	2.3 years

Nomination Committee

Due to the size of the board, the board has not established a nomination committee.

Remuneration Committee

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. The managing director regularly attends board meetings to present the company’s financial reports and advises the board on strategic and operational areas and any material risks or issues.

EZENET LIMITED CORPORATE GOVERNANCE STATEMENT (Continued) 30 JUNE 2007

Performance Evaluation

The performance of the board and key executives is reviewed regularly against both measurable and qualitative indicators. The performance criteria against which directors and executives are assessed is aligned with the financial and non-financial objectives of Ezenet Limited.

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 and Investments Commission;
the quarterly reports and periodical announcements to the Australian Stock Exchange Limited;
the annual general meeting and other meetings called to obtain approval of board action as appropriate; and
other meetings called to generally communicate key performance areas of the business.

EZENET LIMITED ASX ADDITIONAL INFORMATION 30 JUNE 2007

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 23 August 2007.

(a) Statement of shareholdings

			Ordinary Shares	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 or more	Martinick Wolf Gerhard Hsbc Custody Nom Aust Lim Martinick Inv Pl Martinick S/F A/C O'loughlin Neil Thomas Hope James Wallace Jwh A/C Godsell David Blackwood Business Svcs P Kings Park Nom Pl Hope James Wallace + N E N & J S/F A/C Watson Simon Maxwell O Hillbrow Inv Ltd Kings Park Nom Pl Watson S/F A/C Whaleview Pl Davies S/F A/C Van Rooyen Reinier Kelly Michelle Anne Wakeford Hldgs Pl Godsell David John Bond Street Custs Ltd Jwalk1 - O04504 A/ Reeb Inv Pl O'Dea Graham Ross	1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1	10,044,020 7,500,000 3,942,120 3,774,198 2,583,623 2,369,813 1,993,091 1,756,202 1,685,750 1,612,500 1,540,000 1,396,144 1,349,788 1,262,500 1,193,980 1,182,155 1,078,851 1,057,520 1,027,500 798,425	11.96% 8.93% 4.69% 4.49% 3.08% 2.82% 2.37% 2.09% 2.01% 1.92% 1.83% 1.66% 1.61% 1.50% 1.42% 1.41% 1.28% 1.26% 1.22% 0.95%
	Various	20 85	49,148,180 22,621,126	58.51% 26.94%
		105	71,769,306	85.45%	Nil
10,001 - 100,000	Various	278	10,300,908	12.26%	Nil
5,001 – 10,000	Various	124	1,010,670	1.23%	Nil
1,001 – 5000	Various	277	822,275	0.98%	Nil
1 – 1,000	Various	138	86,208	0.1%	Nil
Total		922	83,989,367	100.00	Nil

EZENET LIMITED ASX ADDITIONAL INFORMATION 30 JUNE 2007

(b) Statement of option holders

Names	No of holders	No of options held	% held
Various		1,550	100.00
Total		1,550	100.00

The terms of the issued options are

(c) Voting Rights

All ordinary shares carry one vote per share without restriction.

(d) Market buy-back

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

Substantial Shareholders, as at 30 June 2007 , who have notified the company in accordance with section 671B of the Corporations Act 2001

Beneficial Owner	No of Shares
W G Martinick and Martinick Investments Pty Ltd ATF The Martinick	13,986,140
Superannuation Fund
Wildhorn Master Fund	7,500,000
N T O’Loughlin	3,774,198
J W Hope	2,583,623

AI assistant

IONIC RARE EARTHS LIMITED — Annual Report 2007

65151_rns_2007-09-27_7d3b138a-40ce-489f-968c-95bfb4390bcd.pdf

Directors

Company Secretary

Registered Office and Principal Place of Business

Share Registry

Auditors

Bank

Contents

Page

EZENET LIMITED DIRECTORS’ REPORT

DIRECTORS

W G Martinick

G R O’Dea

D H Ward

EZENET LIMITED DIRECTORS’ REPORT (Continued)

R A Burt

COMPANY SECRETARY

Simon Watson

INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY

DIVIDENDS PAID OR PROPOSED

CORPORATE INFORMATION

Principal Activities

EZENET LIMITED DIRECTORS’ REPORT (Continued)

CORPORATE INFORMATION (Continued)

Employees

OPERATING AND FINANCIAL REVIEW

Group Overview

Operating Results

Consolidated Entity

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued)

Ezestream Pty Ltd

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

Investments

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

SIGNIFICANT CHANGES AFTER THE BALANCE DATE

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

REMUNERATION REPORT

Remuneration philosophy

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

REMUNERATION REPORT (Continued)

Compensation of Directors and Executive Officer

(i) Compensation Policy

(ii) Non-Executive Director Compensation

Objective

Structure

(iii) Executive Compensation

Objective

Structure

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

REMUNERATION REPORT (Continued)

(iv) Fixed Compensation

Objective

Structure

(v) Variable Compensation

Objective

Share-based compensation

Structure

Employment contracts

Compensation of Directors and Executive Officers

EZENET LIMITED DIRECTORS’ REPORT (Continued)

REMUNERATION REPORT (Continued)

INTERESTS IN CONTRACTS OR PROPOSED CONTRACTS WITH THE COMPANY

DIRECTORS’ MEETINGS

EZENET LIMITED DIRECTORS’ REPORT (Continued)

OPERATING AND FINANCIAL REVIEW (Continued) .

CORPORATE GOVERNANCE

LIKELY DEVELOPMENTS

SHARE OPTIONS

AUDITOR’S INDEPENDENCE DECLARATION

NON AUDIT SERVICES

EZENET LIMITED DIRECTORS’ DECLARATION

EZENET LIMITED INCOME STATEMENT FOR YEAR ENDED 30 JUNE 2007

IONIC RARE EARTHS LIMITED Annual Report 2007