IONIC RARE EARTHS LIMITED — Interim / Quarterly Report 2004

Feb 29, 2004

Appendix 4D

Half Yearly Report Half Year Ended 31 December 2003

Name of entity
EZENET LTD
ABN or equivalent company reference		Half year ended ('current period')
84 083 646 477		31 December 2003
Results for announcement to the market
Extracts from this report for announcement to the market		Yc		\$A
Revenues from ordinary activities	Up	154.0	to	446,005
Profit (loss) from ordinary activities after tax attributable to members	Up	49.0	to	(584,065)
Net profit (loss) for the period attributable to members	down	49.0	to.	(584,065)
Dividends (distributions)	Amount per security			Franked amount per security
Final dividend * Interim dividend	Nil		Nil
* Ezenet Limited has not paid any dividends.
Previous corresponding period (30 June 2003)	Nil		Nil
Record date for determining entitlements to the dividend	N/A

Brief explanation of any of the figures reported above and short details of any bonus or cash issue or other item(s) of importance not previously released to the market:

Not applicable $\bullet$

Commentary on Results

For commentary on the results of Ezenet Limited refer to the Half-Year Report in conjunction with the details and explanations provided herewith.

$+$ See chapter 19 for defined terms.

Ratios and Other measures

NTA backing

Net tangible asset backing per ordinary security

Current period	Previous corresponding Period
$3.09$ cents	1.63 cents

⁺ See chapter 19 for defined terms.

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

HALF YEARLY REPORT

31 DECEMBER 2003

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

Directors

W G Martinick Executive Chairman

L H Chapman Executive Director

G R O'Dea Non-Executive Director

NTO'Loughlin Executive Director

Company Secretary

S M O Watson

Registered Office and Principal Place of Business

Unit 3 73 Troy Terrace Jolimont WA 6014 Telephone: 9388 2000 Fax: 9388 2999 Web Site: ezenet.com.au

Share Registry

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

Auditors

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

Bank

Challenge Bank 109 St George's Terrace Perth WA 6000

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

Contents

Page

Directors' Report
Directors' Declaration	2
Condensed Statement of Financial Performance	3
Condensed Statement of Financial Position	4
Condensed Statement of Cash Flows	5
Notes to the Financial Statements	6
Independent Review Report	Q

EZENET LIMITED DIRECTORS' REPORT

Your directors submit their report for the half year ended 31 December 2003.

DIRECTORS

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

W G Martinick, B.Sc, Ph.D, Environmental Scientist (Executive Chairman)

L H Chapman (Executive Director)

G R O'Dea (Non-executive Director)

N T O'Loughlin, B.Sc (Hons), M.Sc, M AuslMM, Geologist (Executive Director)

The directors were in office for this entire period unless otherwise stated.

REVIEW OF OPERATIONS, LIKELY DEVELOPMENTS AND EXPECTED RESULTS

The company has concentrated on developing and marketing its digital movie system into hotels, motels and mining camps throughout Australia. The company has raised additional capital of \$1,764,096 since the last financial year, including \$245,863 after 31 December 2003.

In order to enhance the existing digital movie system, the company has entered into a distribution agreement with the holding company of Airwave Europe Limited to distribute in Australia and New Zealand, Videojock and Smoovie hand pieces. These products will enhance the existing digital movie business and the company is presently assessing the programme for the application and operation of the new product.

On 12 February 2004, the Company entered into an Option to Purchase the VideoJock Technology.

	Dec 2003	Dec 2002
Operating revenue	462,160	175,541
Operating loss	(584,065)	(391, 399)

Signed in accordance with a resolution of the directors

W G Martinick Chairman Perth, 25 February 2004

EZENET LIMITED DIRECTORS' DECLARATION

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

• $1)$ In the opinion of the directors:
• the financial statements and notes of the consolidated entity are in accordance with the $(a)$ Corporations Act 2001, including:
  • giving a true and fair view of the consolidated entity's financial position as at 31 $(i)$ December 2003 and of its performance for the half-year ended on that date; and
  • complying with Accounting Standards AASB 1029 "Interim Financial Reporting" and $(ii)$ Corporations Regulations 2001; and
• $(b)$ there are reasonable grounds to believe that the company will be able to pay their debts as and when they become due and payable.

On behalf of the Board

W G Martinick Chairman Perth, 25 February 2004

EZENET LIMITED CONDENSED STATEMENT OF FINANCIAL PERFORMANCE FOR YEAR ENDED 30 DECEMBER 2003

	CONSOLIDATED
	December 2003	December 2002
	\$	\$
REVENUE FROM ORDINARY
ACTIVITIES
Revenue from sales of goods	10,334	5,291
Cost of sales
Gross profit	10,334	5,291
Other revenue	451,826	170,250
EXPENSES FROM ORDINARY
ACTIVITIES
Marketing expenses	(137,742)	(158, 612)
Occupancy expenses	(35,623)	(25, 807)
Administrative expenses Operating expenses	(281, 640) (574, 818)	(212,970) (169, 551)
Borrowing expenses	(16, 402)
LOSS FROM ORDINARY ACTIVITIES BEFORE INCOME TAX EXPENSE	(584,065)	(391, 399)
INCOME TAX EXPENSE RELATING TO ORDINARY ACTIVITIES
NET LOSS ATTRIBUTABLE TO MEMBERS OF EZENET LIMITED	(584,065)	(391, 399)
TOTAL REVENUES, EXPENSES AND VALUATION ADJUSTMENTS ATTRIBUTABLE TO MEMBERS OF EZENET LIMITED AND RECOGNISED DIRECTLY IN EQUITY
TOTAL CHANGES IN EQUITY OTHER THAN THOSE RESULTING FROM TRANSACTIONS WITH OWNERS AS OWNERS	(584,065)	(391, 399)
Basic and diluted loss per share (cents)	(0.04)	(0.01)

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

EZENET LIMITED CONDENSED STATEMENT OF FINANCIAL POSITION AT 31 DECEMBER 2003

		CONSOLIDATED
	December 2003 \$	June 2003 \$
CURRENT ASSETS
Cash assets	1,141,542	319,008
Receivables	108,411	102,516
Other	93,162	50,856
TOTAL CURRENT ASSETS	1,343,115	472,380
NON-CURRENT ASSETS Plant and equipment	870,013	610,246
TOTAL NON-CURRENT ASSETS	870,013	610,246
TOTAL ASSETS	2,213,128	1,082,626
CURRENT LIABILITIES
Payables	179,093	420,063
Provisions	22,499	13,861
Interest-bearing liabilities	235,152	113,888
TOTAL CURRENT LIABILITIES	436,744	547,812
NON CURRENT LIABILITIES
Interest-bearing liabilities	82,367	20,757
TOTAL NON CURRENT LIABILITIES	82,367	20,757
TOTAL LIABILITIES	519,111	568,569
NET ASSETS	1,694,017	514,057
SHAREHOLDERS' EQUITY
Contributed equity	6,378,811	4,614,715
Reserves	29,000	29,000
Accumulated losses	(4,713,794)	(4,129,658)
TOTAL EQUITY	1,694,017	514,057

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

EZENET LIMITED CONDENSED STATEMENT OF CASH FLOWS FOR YEAR ENDED 31 DECEMBER 2003

	CONSOLIDATED
	December 2003 \$	December 2002 \$
CASH FLOWS FROM
OPERATING ACTIVITIES
Receipts from customers	493,112	146,396
Payments to suppliers and	(1,007,008)	(524, 898)
employees Interest received	16,155	8,282
NET CASH FLOWS USED IN
OPERATING ACTIVITIES	(497,741)	(370, 220)
CASH FLOWS FROM
INVESTING ACTIVITIES
Payment for purchases of plant
and equipment	(312, 231)	(171, 225)
NET CASH FLOWS USED IN
INVESTING ACTIVITIES	(312, 231)	(171, 225)
CASH FLOWS FROM
FINANCING ACTIVITIES
Proceeds from issue of shares $\&$
options Proceeds from borrowings	1,485,096 200,000	25,042
Repayment of borrowings	(52, 590)	(7,589)
NET CASH FLOWS FROM
FINANCING ACTIVITIES	1,632,506	17,453
NET INCREASE IN CASH	822,534	(523,992)
HELD
Opening cash brought forward	319,008	678,817
CLOSING CASH CARRIED FORWARD	1,141,542	154,825

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

EZENET LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 31 DECEMBER 2003

$\mathbf{1}$ . BASIS OF PREPARATION OF THE HALF-YEAR FINANCIAL REPORT

The half-year financial report does not include all notes of the type normally included with the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

The half-year financial report should be read in conjunction with the Annual Financial Report of Ezenet Limited as at 30 June 2003. It is also recommended that the half-year financial report be considered together with any public announcements made by Ezenet Limited and its controlled entities during the halfyear ended 31 December 2003 in accordance with the continuous disclosure obligations arising under the Corporations act 2001.

Basis of accounting

The half-year financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, applicable Accounting Standards including AASB 1029 "Interim Financial Reporting" and other mandatory professional reporting requirements (Urgent Issues Group Consensus Views).

The half-year financial report has been prepared in accordance with the historical cost convention.

Changes in accounting policies

The accounting policies adopted are consistent with the most recent annual financial report for the year ended 30 June 2003.

	CONSOLIDATED
	December 2003 \$	December 2002 \$
2. REVENUE FROM ORDINARY ACTIVITIES
(a) Revenue from sales
Revenue from sale of goods	10,334	5,291
Total revenue from sales	10,334	5,291
(b) Other revenue from ordinary activities
Revenue from sale of services	435,671	161,968
Interest received	16,155	8,282
Total other revenue from ordinary activities	462,160	175,541

EZENET LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 31 DECEMBER 2003

3. EXPENSES AND LOSSES	December 2003	December 2002
Operating Expenses
Depreciation on equipment and fittings	95,832	48,517
Amortisation of film library	20,121	13,845
Provision for employee entitlements	8,637	2,235
Provision for doubtful debts
Other expenses	450,228	104,954
	574,818	169,551

CONTINGENT ASSETS AND LIABILITIES $\boldsymbol{4}$ .

No contingent assets or liabilities.

SEGMENT INFORMATION 5.

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

6. SUBSEQUENT EVENTS

A non renounceable entitlement was sent to shareholders in February 2004 for an issue of up to approximately 5,500,000 Ordinary Shares on the basis of 1 Share for every 10 Shares held as at 28 January 2004, at an issue price of \$0.20 each with every 2 new ordinary fully paid shares issued carrying an entitlement to 1 free option exercisable at \$0.15 on or before 30 June 2007. Shareholders have until no later than 5.00pm WST on 23 February 2004 to lodge their acceptance forms.

During January 2004 the Company increased its capital following the exercise of 1,639,088 options at \$0.15 each.

On 15 August 2003 the Company entered into a agreement with Airwave Europe Limited for the exclusive distribution rights to their VideoJock product in Australia and New Zealand. The Company is presently negotiating to purchase the whole of the intellectual property rights and assets comprising the VideoJock product. On 12 February 2004, the Company entered into an Option to purchase the VideoJock Technology.

7. TAX CONSOLIDATION

It is not, at the date of this report, the intention of Ezenet Limited and its wholly-owned subsidiary to form a tax consolidated group. However, if a tax consolidated group was formed, the deferred tax balances of the consolidated entity would not be materially impacted.

EZENET LIMITED NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS 31 DECEMBER 2003

		CONSOLIDATED		EZENET LIMITED
8.	CONTRIBUTED EQUITY	Dec 2003 \$	Jun 2003 \$	Dec 2003 \$	Jun 2003 \$
	(a) Issued and paid up capital 54,824,681 ordinary shares
	fully paid (June 2003: 40,135,000) Less: capital raising costs	6,783,049 (404, 238)	5,018,953 (404, 238)	6,783,049 (404, 238)	5,018,953 (404, 238)
		6,378,811	4,614,715	6,378,811	4,614,715
	(b) Movements in shares on issue
		Dec 2003		Jun 2003
		Number of shares	\$	Number of shares	\$
	Beginning of the financial year	40,135,000	4,614,715	34,900,000	4,352,957
	Issued during the year - public equity raisings	14,689,681	1,764,096	5,235,000	261,758
	End of the financial year	54,824,681	6,378,811	40,135,000	4,614,715

(c) Share Options

In the prior year 29,000,000 options were issued, at 0.1 cents per option, exercisable at 10 cents per option on or before 31 July 2003. These options expired on 31 July 2003.

Since the end of the financial period 1,639,088 options have been exercised at 15 cents per option.

Movement in Options	Dec 2003	Jun 2003
Beginning of the period	46,735,000	29,000,000
Forfeited	(29,000,000)	$\blacksquare$
Converted	(3,652,941)	$\sim$
Issued	18,813,588	17,735,000
End of the period	32,895,647	46,735,000

(d) Terms and conditions of contributed equity

Ordinary shares

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. The ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

Independent review report to members of Ezenet Ltd

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows and accompanying notes to the financial statements for the consolidated entity comprising both Ezenet Ltd (the company) and the entities it controlled during the half year ended 31 December 2003, and the directors' declaration for the company, for the period ended 31 December 2003.

The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the consolidated entity, and that complies with Accounting Standard AASB 1029 "Interim Financial Reporting", in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Review approach

We conducted an independent review of the financial report in order to make a statement about it to the members of the company, and in order for the company to lodge the financial report with the Australian Stock Exchange and the Australian Securities and Investments Commission.

Our review was conducted in accordance with Australian Auditing Standards applicable to review engagements, in order to state whether, on the basis of the procedures described, anything has come to our attention that would indicate that the financial report is not presented fairly in accordance with the Corporations Act 2001, Accounting Standard AASB 1029 "Interim Financial Reporting" and other mandatory professional reporting requirements in Australia, so as to present a view which is consistent with our understanding of the consolidated entity's financial position, and of its performance as represented by the results of its operations and cash flows.

A review is limited primarily to inquiries of company personnel and analytical procedures applied to the financial data. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance is less than given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

Independence

We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001. In addition to our review of the financial report, we were engaged to undertake taxation services. The provision of these services has not impaired our independence.

Statement

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the financial report of the consolidated entity, comprising Ezenet Ltd and the entities it controlled during the half year ended 31 December 2003 is not in accordance with:

• $(a)$ the Corporations Act 2001, including:
• $(i)$ giving a true and fair view of the financial position of the consolidated entity, at 31 December 2003 and of its performance for the half year ended on that date; and
• $(ii)$ complying with Accounting Standard AASB 1029 "Interim Financial Reporting" and the Corporations Regulations 2001; and
• $(b)$ other mandatory financial reporting requirements in Australia.

Ernst & Young

Jeff Dowling Partner Perth 25 February 2004