NEXTED GROUP LIMITED - Annual Report 2011

==> picture [47 x 48] intentionally omitted <==

	Chairman’s Letter About us CEO’s Report Corporate Governance Statement Directors’ Report	1 4 6 14 19
	Auditor’s Independence Declaration	34
	Independent Audit Report	35
	Directors’ Declaration	36
	Statement of Comprehensive Income	37
	Statement of Financial Position	38
	Statement of Changes in Equity	39
	Statement of Cash Flows	40
DIGISLIDE HOLDING	Notes to the Financial Statements Additional Information for Listed Public Companies	41 88

Chairman’s Letter

==> picture [47 x 48] intentionally omitted <==

==> picture [139 x 187] intentionally omitted <==

Leon Milford Chairman

Digislide was listed 2 years ago on 24th August, 2009, and was required for the first two years to lodge quarterly commitments tables showing how we were spending the $3M raised during the IPO.

As announced to the market in July, Digislide met all of its Commitments against the $3M raised as set down in the Prospectus (page 11). Furthermore, it met those commitments on time and to budget.

In addition, Digislide has been able to meet many of the Commitments set down had $4.5M been raised. This has been possible because of the ongoing support of several major shareholders.

Our Top 50 Shareholders now hold approximately 73.4% of the issued stock and our Top 20 Shareholders own 51.2%. Thus, the stock is tightly held.

The Board continued to meet frequently throughout FY2011, and has been pleased to witness the emergence from an R&D entity into a company now with global market reach for the diversity of products and technologies that the company has either direct or licensed interests in. The company’s financial position, the development of its technologies and opening up of commercial opportunities has steadily progressed in FY2011 and the losses for the year have been cut by half.

I want to pay tribute to the remarkable staff of Digislide, who have shown tremendous loyalty and dedication throughout what has been a very difficult but evolving year.

The Research and Development Department was downsized to core personnel in line with funding availability and product development, with external consultants engaged to manage the development cost commitment and the R&D Department has achieved

much. LED based optical engines now have a light output of 18 ansilumens up from 10 ansilumens, and we have designed and we are currently constructing the laser based projection system, suitable for embedding in mobile phones.

We have expressions of interest from three global brands, and an invitation to demonstrate to one of those in January, 2012.

Having tested the capacity and capabilities of our 3 licensed manufacturers we selected one mid year, and have been dealing exclusively with Advanced MicroDisplay Technologies (AMT) since that time. We continue to work closely with AMT, and envisage the establishment and co-location of a secure production facility for the assembly of our laser based projection systems.

Anyone watching the news realises US and European economies are still very vulnerable, but despite that, we have gained the attention and approval of Ingram Micro, the world’s largest distributor of consumer electronics, with a distribution licence agreement executed late in 2011FY, and products entering the US early October.

Navarre, another major US distributor advised their interest in distributing product in October, and Digislide now has a distribution agreement with them also.

Our Eastern European distributor is just coming back on line now, albeit very warily due to the European economic woes, and is now translating the User Guides and Marketing Collateral for XRAY™480, StingRAY™ and Sii™ gaming projectors.

And our Saudi Arabian distributor, whilst dealing in small volumes only, has continued to buy product.

Whilst we gained the SAIIF grant of $1.2M we were only able to access $231,714 of that because of protracted disputes with Austrade and the ATO over rebates.

VSDN Australia has attracted $501,400 in external investment for 9% of the company. Digislide is working in conjunction with VSDNet (Canada) – in which we hold 25% equity, towards commercializing the Virtual Streaming Distribution Network technologies in Canada, USA as well as Australia.

We have executed a licence agreement for the Sonora intelligent avatars and gained a licence with the Bencom Group, a Leading Mobile Technology and Near Field Communication Developer, for the use of their cryptographically secure data transfer and near field communication systems within both our projectors and the VSDN technologies.

We have gained an equity share in Sonora Technologies Inc the Canadian company with the intelligent avatar technologies and in Spinergy Pty Ltd, an Australian based clean energy entity, by providing R&D consultancy services to each.

==> picture [33 x 46] intentionally omitted <==

==> picture [39 x 30] intentionally omitted <==

==> picture [38 x 29] intentionally omitted <==

==> picture [43 x 29] intentionally omitted <==

Singapore MantaRay™ MantaRay™ 1st Miniature Patent National CeBIT engine Lodged Distribution Australia Prototype

2003 2004 Digislide MantaRay™ MantaRay™ MantaRay™ digiscope™ Incorporated Patent Trademarked Released Patent Lodged Lodged

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Chairman’s Letter

==> picture [47 x 48] intentionally omitted <==

The enormous effort put in by both our CEO and CFO/ Company Secretary must not go unheralded. Their dedication, creativity and all round conscientiousness during a very stressful period, has been well over and above the call. Much has been achieved by them that is not patently obvious from the various reports herein.

employees and other stakeholders, all of whom have contributed greatly with tremendous support to the companies continued growth.

To all these people, my unreserved thanks and appreciation.

Sincerely

I would also commend my fellow Non Executive Directors for their valuable efforts during this period. Their input and attitude has in no small way enhanced the progress we have achieved under very trying circumstances.

In summary, we have again been blessed with a loyal, enthusiastic and generous band of shareholders,

==> picture [92 x 77] intentionally omitted <==

Mr. Leon Milford Chairman

==> picture [433 x 242] intentionally omitted <==

==> picture [36 x 18] intentionally omitted <==

==> picture [33 x 46] intentionally omitted <==

Fast Growth Company

==> picture [34 x 13] intentionally omitted <==

2005

2006 Bartercard “ANZA Hottest SVGA digismart World Attended Top Trader Technology Engine Miniature Technology DEMO ‘06 Award” Projection Finalist

New Inventors SA Govt. Secrets of - Episode Recognition Aust. ICT Winner Innovation

QVGA Engine

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

About us

==> picture [47 x 48] intentionally omitted <==

Digislide is an Australian based company that has gained national, international and global awards for its innovative miniature projection technologies and products.

Digislide has built a strong and valuable Intellectual Property portfolio covering innovations and inventions in opto-electronics, projection, projection peripherals and telecommunications. Our patents have technical and commercial advantages and our registered designs and trade marks provide further protection of our products and technologies in fiercely competitive global markets.

The company’s branded products and technologies are world class, highly robust, and our LED and laser based projection systems have effective thermal and efficient power management systems.

The company outsources manufacturing to proven quality manufacturers, and after two years of distributing products through smaller retail channels, has, caught the attention of two of the world’s largest consumer electronics distributors.

In 2012FY Digislide is distributing product in North America through Ingram Micro, the world’s largest consumer electronics distributor, and has also contracted with Navarre, one of America’s largest distribution channels to distribute in US markets.

Digislide uses “best of breed” supply partners for critical components and a world leading design house on product aesthetics. With in-house specialists in the critical areas of precision optics, thermal design and audio systems, and accredited manufacturers in China, experienced in supplying for world brands, we are able to accelerate pre-production and production phases.

Our Vision:-

“to be the global pioneer of innovative display technologies”

To gain a 0.06% share of worldwide projection and telecommunications markets through the design, development and commercialisation of proprietary products and licensed technologies.

==> picture [26 x 9] intentionally omitted <==

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

2007
----- End of picture text -----

==> picture [51 x 28] intentionally omitted <==

$$ Hong Kong $1.94M digismart Australian Business Association AusIndustry Swap Grant Prototype

MPS Underwrites

Our Mission:-

“to excel in the design and manufacture of innovative digital convergence technologies and capture a significant share of global markets, through the careful management of our inventors’ dreams, investors’ assets and employees’ futures"

Our Core Values

Digislide’s Core Values can be summarised as:-

Respect
» All personnel, contractors, suppliers, customers and shareholders are people of equal value and worthy of equal respect
Diversity and Unity
» Everyone has a life story/narrative to be considered and respected, we join our life stories to make the Digislide meta narrative. Through unity we bring purpose, harmony and efficiency to Digislide.
Imagination and Creativity
» Imagination is the seedbed of creativity and the essence of innovation
Risk-Taking
» Is essential for development. Risk Management is essential for survival
Transparency and Integrity
» Leading to trust and understanding
Personal Accountability
» Promoting responsible action
Respect for Authority
» Ensuring safety, quality and compliance

Our Premises

Digislide’s Global Office is at 100-102 Cavan Road, Dry Creek in South Australia.

The premises have been customised for Digislide’s opto-electronics research and development, and are leased for 5 years with an 8 year renewable option.

2008 Hong Kong CeBIT Shenzen Hong Laptop ICT Expo Australia Electronics Kong prototype Expo Expo

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

About Us

==> picture [47 x 48] intentionally omitted <==

Offshore Operations

Market Entry and Expansion

China

==> picture [115 x 137] intentionally omitted <==

Digislide’s China Operations are undertaken from the Advanced MicroDisplay Technologies Limited (AMT) premises. AMT is Digislide’s preferred manufacturing partner, and we anticipate this location will remain the centre of Digislide’s China Operations.

It is Digislide’s intention to establish a secure and discrete laser and opto-electronics assembly line, to supply AMT and other manufacturers who may wish to licence and embed Digismart Miniature Projection Technologies™ technologies into their existing products.

United States of America

With the contracting of Ingram Micro and Navarre to manage the distribution of products across North America, Digislide Americas Inc’s Registered Office at the Plug and Play Centre, in Silicon Valley, California, became redundant, and was closed during 2011.

Whilst Digislide Americas Inc remains operational, it is managed from Australia. It is anticipated that as sales volume increase in the USA and Canada that personnel/ management will, once again, be appointed on an as needs basis.

The Board

Mr Leon Milford, who was initially Interim Chairman, accepted the permanent position on 25th November, 2010. He, together with Mr Malcolm Leahy, Mr Grant Chapman and Ms Luceille Outhred comprise the Digislide Board.

With sluggish economic growth and resultant slower than anticipated growth of the company’s revenues, and to contain costs, the Board postponed the appointment of additional Board Members in 2011.

Digislide has now released several products to market; digishow™, miniPRO™; and more recently, its three gaming projectors Sii™, StingRAY™ and XRAY™480.

Sluggish markets led to delays in the completion of WeSii™ and digiPRO™ pre-production prototypes and market entry, but it is anticipated these will be released to North American markets in Q3, 2012.

DIGIVISION™, featured on the front of this Annual Report, is a portable audiovisual docking station for MP4 players, and is specifically targeted as a companion for the Apple iPod™, iPhone™, iPad™ and iTouch™.

With touchscreen operation and housing an embedded projector, and digital TV tuner, DIGIVISION™, will allow the user to watch and listen to movies, TV shows, podcasts, music videos and view photos. Any digital content stored on the users dockable and connectable device can be projected, as a big image projected from the unit.

The DIGIVISION™ doubles as a bedside table companion as it also houses a digital clock and AM/FM radio. It is anticipated DIGIVISION™ will be released to market Q4, 2012.

Whilst we intend to expand our markets through sales of Digslide products, our key objective remains the sale of our core LED and laser based projection technologies and the licensing of our patents.

Digislide also aims to license synergistic technologies from other world class leaders, to undertake joint development activities with leaders of synergistic technologies, and to form joint ventures to maximise the benefits of convergence.

==> picture [81 x 54] intentionally omitted <==

==> picture [79 x 53] intentionally omitted <==

==> picture [85 x 57] intentionally omitted <==

==> picture [115 x 65] intentionally omitted <==

However, it is anticipated that a further strengthening of the company through the appointment of an additional Director with expertise in technology development and commercialisation, corporate law and compliance will occur in 2012FY.

2009 2010 Frost and Sullivan Award $ $ $$ $$ $3M Raised digishow™ $1.2M Digislide State National miniPRO™ Sales hit Top Trader and Listed Released SAIIF Grant Americas Winner Finalist Released $500,000 Operates

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

==> picture [47 x 48] intentionally omitted <==

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

==> picture [48 x 48] intentionally omitted <==

==> picture [222 x 151] intentionally omitted <==

==> picture [130 x 37] intentionally omitted <==

Luceille Outhred Chief Executive Officer

From December 2007 when Digislide finalised its AusIndustry Commercial Ready Grant program through to June 2010 an enormous amount of growth and change occurred within the company :-

Six new R&D engineering projects had been completed and six new products were ready for commercialisation
digishow™ and miniPRO™ had entered markets in Australia, South Africa, USA, Asia and Eastern Europe
Digislide’s staff had grown from 6 up to 17 and then down to 12 as products went through various stages of development
digiPRO™, WeSii™ and XRAY™ were in early commercialisation stage
Digislide had gone through a protracted IPO – had appointed a Chief Financial Officer who adjusted Digislide’s systems and implemented processes to meet the ongoing compliance and reporting requirements as an ASX listed company
Digislide had been invited to assist in the commercialisation of the VSDN technologies, and VSDN Australia Pty Ltd had been incorporated to that end.

For Digislide, 2011 was a Year of Rationalisation and Consolidation.

Why?

Digislide was the first company in the world to go public with a hand-held projector (ANZA Tech, Oct 2005). The projection industry’s response was to try to rapidly create competitive products, and the global market’s initial response from consumers and professionals was one of great excitement.

In 2007, leading global technology analysts predicted that the global demand for miniature projection products by end of 2008 would be well over 1.5 billion units, and that the figure by 2010, would be almost 2 billion[1] .

However, in 2010, with the benefit of hindsight, global technology analysts highlighted that 2009 had seen the “Projector business hit bottom due to Recession[2] ”.

They were calling 2010 “The Year of the Projector”, but they lowered their forecasts down significantly, to a total global demand of just over one million[3] .

From almost 2 billion unit sales forecast in 2007, to just over 1 million in actual unit sales, by 2010. This is a poignant reminder of the effect of the GFC on global purchases of discretionary items!

Thus, 2011 was a year of rationalisation, of engineering and commercialisation projects, which products to release, and when and which markets to enter.

2011 was also a year of consolidation – tight controls over costs, personnel numbers and contractors, and decisions as to which patents to strengthen and expand and which to allow to lapse.

In 2011 we decided to withhold the professional and executive products (digiPRO™ and DIGIVISION™) and also the “Home Theatre in Your Hand” (WeSii™ and XRAY™) companion projector and audio systems.

We decided to go to market with the Digislide Gaming Suite; the Sii™, StingRAY™ and XRAY™480. These products are primarily targeted at youth as companion projectors to their favourite games console. As youth have the highest discretionary income, we believed this should be our focus.

1 Insight Media, 2007™ Market Segment Analysis, 2007 LED & laser Projection systems, p24
2 Dr William Cogshall, Projector Summit 2010, Slide 2

3 Dr William Cogshall, Projector Summit 2010, Slide 7

==> picture [28 x 17] intentionally omitted <==

==> picture [50 x 16] intentionally omitted <==

==> picture [43 x 17] intentionally omitted <==

==> picture [38 x 17] intentionally omitted <==

==> picture [52 x 5] intentionally omitted <==

==> picture [53 x 13] intentionally omitted <==

==> picture [40 x 8] intentionally omitted <==

VSDN Spectralis $5M Equity Gaming US Licence Heads of Facility Projectors Distribution Agreement Released Licence

$$ Bencom Navarre Captial Licence Distribution Raising Licence

==> picture [54 x 26] intentionally omitted <==

2011

Laser Development

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

==> picture [47 x 48] intentionally omitted <==

In addition, as these ultra light projectors are equally suitable for executives and professionals, educators and home theatre users we knew that our secondary markets would also be well served.

On 20th May, Ingram Micro responded favourably to this decision, contracting to distribute Digislide’s gaming projectors across the USA. In September, Navarre did similarly. The first shipment was valued at approximately $160,000, additional orders have been placed since.

Digislide received $231,714 of the $1.2M Grant from the South Australian Innovation Investment Fund (SAIIF) program, unfortunately, we were not able to access the total grant as we could not provide the full 1:1 funding required.

Our protracted appeal through the Administrative Appeals Tribunal against Austrade’s decision to refuse Digislide’s rebate of $155,000 against funds expended by the company for export market development in 2009FY, was not only a very time consuming process, but it costs us in our ability to capitalise more fully on our SAIIF Grant.

Licensing Digislide’s technologies and patents
Licensing synergistic technologies to enable converged technical solutions
Forming strategic alliances for Joint Development and Joint Ventures

It has been said “Nothing stands in the way of an idea whose time has fully come” and when “disruptive technologies” and “time” coincide considerable upheaval results in industry and in the market place.

It is my firm belief that Digislide’s time has fully come.

Aligning 2010-2011 Performance with Stated Goals

In the last Annual Report I set out our future directions and goals for the 2010-2011 financial year.

Following I have set out a table which aligns what I committed to achieve with the outcomes we actually attained. Whilst we have not achieved all of the goals that I set, we have achieved many of them, and in several areas we have exceeded our expectations.

Similarly, the protracted results of a retrospective ATO audit of Research and Development Rebate claims for 2009 and 2010 – which was not completed until mid August 2011, also took up an inordinate amount of time, and ensured we could not capitalise on the funding opportunity through the SAIIF Grant.

The ATO audit is the subject of formal complaints to the General Inspector of Taxation and the Ombudsman lodged by this company. In addition, we have appealed to all South Australian State Senators to establish a Senate Enquiry to ascertain the experiences of other claimants from SME technology companies and SMEs in general, as we do not believe our situation would be atypical.

Despite a diminished working capital of approximately $800,000, Digislide continued to move forward. I thank the staff, suppliers, contractors and shareholders who enabled Digislide to progress over the last 12 months.

Digislide’s business strategy remains flexible, meeting the needs of all stakeholders at each link of the value chain:-

Manufacturing through licensees for mass markets
• Distribution through licensed distribution channels for global markets

2012

==> picture [45 x 29] intentionally omitted <==

==> picture [46 x 28] intentionally omitted <==

==> picture [69 x 36] intentionally omitted <==

==> picture [38 x 43] intentionally omitted <==

==> picture [61 x 39] intentionally omitted <==

==> picture [49 x 16] intentionally omitted <==

==> picture [61 x 51] intentionally omitted <==

==> picture [53 x 14] intentionally omitted <==

==> picture [76 x 44] intentionally omitted <==

==> picture [54 x 22] intentionally omitted <==

==> picture [53 x 26] intentionally omitted <==

==> picture [52 x 21] intentionally omitted <==

Market Release

Ongoing Laser Development

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

==> picture [48 x 48] intentionally omitted <==

==> picture [505 x 702] intentionally omitted <==

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

Key 2011 Goals as Stated in 2010 Annual Results
Report
Strengthen the Board with the addition of two new It was decided to contain costs in 2011 and continue with the existing
members smaller board
Expand markets for licensing technologies and Several discussions are underway with regard to licensing Digislide’s
patents technologies and patents
Design, develop and market the leisure consumer As part of the rationalisation and consolidation, no further development
hardware for sports enthusiasts and develop strategic was undertaken with Digismart Swap™ or Digismart Commerce, the JV
alliances with software/gaming houses to create responsible for commercialisation of that suite of products.
synergistic products for Digismart Swap™
Attract investment into Digismart Commerce, the Late in 2011 preliminary discussions commenced with potential investors
Hong Kong Joint Venture into this entity. Discussions continue.
Development of 2cc optical engine This has been ongoing. Significant development has occurred. A 2cc
optical engine and 5cc projection system has been designed based on
laser technologies. Laser speckling has been addressed by two means and
patents are under preparation.
Undertaking joint development activities with laser A Heads of Agreement has been formalised with Spectralus, a leading green
manufacturers laser technology company. Joint development projects are now underway
for demonstrations to major mobile phone manufacturers.
Undertaking joint development activities with other Joint Developments with Sonora Technologies and Bencom Group with
Research and Development houses regards to intelligent avatars and encrypted securitisation technologies are
occurring.
Ongoing development with mobile phone designer Ongoing interaction with several global mobile phone developers. Formal
and manufacturers demonstrations will be made in January 2012 and beyond.
Undertaking joint development activities with Early discussions underway with mobile phone manufacturers and laptop
manufacturers of laptops, PDAs, cameras and GPS manufacturers
devices
Increase sales revenues through securing additional Whilst increased sales revenues were not seen, the strategic value of the
distribution channels who will open markets in USA, Ingram Micro distribution licence and the Navarre distribution licence have
Canada and Western Europe for digishow™, miniPRO®, now set the infrastructure for significant sales to be made into the USA,
WeSii® Canada and Europe.
Ingram Micro has initially contracted to distribute Sii™, StingRAY™
and XRAY™480. An interest in distributing the upgraded digishow™
and miniPRO® has also been expressed along with the distribution of
DIGIVISION™ and various peripherals.
Penetrate global markets with the second set of 3 These three products were put on hold due to the apparent downturn in
products to market, XRay® DigiPRO® and DIGIVISION® the global markets for projection products.
Additional Personnel No new personnel were added. Digislide reduced its staff to 7. These are
the core of Digislide, and as the company gains confidence in upward
market trends, it will hire additional staff as needed to commercialise
enhanced products.
VSDN Licence for Australia and New Zealand is secured. Attracted $501,480 in
Secure Licensing and commence Product Sales to investments, with investors being two of Digislide’s largest shareholders,
telcos, broadcasters, conference and convention International Equities Pty Ltd and AV Extraordinaire Pty Ltd; and two of
centres, universities, private colleges Digislide’s technology licensors, Sonora Technologies Inc and Bencom
• Licensing distribution channels Group.
• Sell ‘space’ to media production houses and
other content providers VSDNet Inc, a Canadian Joint Venture is now incorporated and Digislide
• Undertake demonstrations of VSDN owns 25% equity. VSDNet is located in Vancouver, Canada.
technologies in USA, invite investment,
establish management who can commercialise Demonstrations of VSDN have been held in Australia; information has
as above been provided to key parties in North America, Asia and Europe, with each
continuing to express interest.
Undertake demonstrations of VSDN technologies in
Canada, invite investment and establish management
Sonora Technologies Inc – Partial acquisition and Digislide has gained a licence to access the intelligent avatar technologies.
access to avatar technologies by way of licence “Kora” has been specifically designed for VSDN Australia.
----- End of picture text -----

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

==> picture [48 x 48] intentionally omitted <==

Additional Achievements

Additional patents for the laser optical engines have been prepared

1. SAIIF Funding

Of the potential $1.2M grant receivable only $231,714 was able to be utilised for the development of our opto-electronic and clean energy facilities.

2. Optical Engine Designs

Digislide’s precision optics team has enhanced the SVGA optical engine, and finalised the design for the 2cc laser based optical engine (which translates to a 5cc projection system). There are two configuration designs, for two discrete LCD/LCOS panels.

3. Spectralus

Development of laser projection systems continues, with the intent being a joint demonstration at CES Las Vegas, with Spectralus, our green laser supplier and Syndiant a global leader in LCD technologies. Syndiant has invited Digislide to join the Syndiant Expo Suite to co-present our technologies at CES Las Vegas in January 2012.

4. Syndiant

Syndiant Inc. is a fabless semiconductor company founded in 2004, and based in Dallas. Syndiant has designed light modulating panels for high resolution displays used in ultra-portable projectors small enough to embed in a cell phone.

Syndiant’s technical advantage lies in its patented architecture, which uses powerful but elegantly simple parallel processing to enable the world’s smallest and highest resolution light modulating chips used in ultra-portable or pico projectors.

Spinergy Pty Ltd (Spinergy)

Digislide’s engineers have provided out of hours support for the design and development of Spinergy’s clean energy generation technologies. This, coupled with the use of the R&D facilities has provided Digislide with a revenue stream of $125,000, which has been taken as an investment into Spinergy Pty Ltd.

Spinergy is an early stage technology company that is colocated with Digislide. Its core clean energy generation technologies, Spinergy® and Hydrospinergy®, generate power by Working With the Earth®.

From these core technologies, a range of new products, processes and services are created, which have domestic, commercial, industrial and infrastructural applications.

Spinergy’s renewable “clean energy” generation technologies provide in situ power to drive instrumentation and telemetry equipment. They can be pico (for domestic and agricultural use) or femto (for industry and infrastructural use), and are cheaper, safer, easier to install, have a smaller carbon footprint than alternative technologies, and are more reliable and robust once in operation.

Simplicity of design, robustness of construction and a longevity of 12-15 years make Spinergy products particularly appealing for remote sites. Minimizing maintenance and maximizing savings over alternative power generation systems.

7. IPTV and VSDN Australia Pty Ltd

5. Expanded Intellectual Property Portfolio

Part of our costs consolidation and IP rationalisation was to let three application patents lapse. When patents reach a particular point they become very expensive. The company consistently reviews its IP portfolio to ensure the wisest use of funds, and allowing some IP to lapse is part of that process.

Two additional registered designs were lodged for WeSii™ and XRay™ to protect these designs in Korea and Japan (major gaming markets) and in China, where they are being manufactured.

Other patents have been moved from Provisional to PCT, and from PCT to national phase, and many trade marks came up for renewal.

VSDN Australia Pty Ltd (VSDN) (ACN142 145 526) is a majority owned subsidiary of Digislide Holdings. VSDN is commercialising the Virtual Streaming Distribution Network technologies under licence from the Master Global Licensor, Wise Sight Technologies (China).

VSDN technologies are currently employed across the world’s largest telecommunications network, that of China Telecom. They have been tested, tried and proven technically and commercially.

VSDN is a readily deployed, innovative network video distribution technology, which solves the bandwidth bottleneck problem. VSDN greatly saves bandwidth in large scale video operations, eliminating buffering, improving streaming videos.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

==> picture [48 x 48] intentionally omitted <==

issued to industry alliance partners and/or investors.

It is a new network stream media distribution technology that combines telecommunication and internet functionalities.

With low cost and high efficiency; the deployed network can distribute thousands or millions of streams to multiple millions of video users.

VSDN can distribute large-scaled video services including network television, IPTV and other services, bringing new ideas and revolutionary value growth to internet.

VSDN is a comprehensive network solution with integration of video live broadcast, video-ondemand, triple-play, distribution and download of massive files

8. Bencom Group Licence (Bencom)

Sonora Technologies Inc (Sonora) has invented and developed leading-edge 3D graphics and speech recognition solutions, using custom designed applications that provide online customers the ability to communicate and interact directly with a “Virtual Person” - 24/7/365.

==> picture [93 x 59] intentionally omitted <==

The first of the “intelligent avatars”, designed for use by VSDN Australia is Kora a “virtual human” interface to be used with an Electronic Programming Guide (EPG).

==> picture [131 x 30] intentionally omitted <==

Luceille Outhred Chief Executive Officer

Digislide has secured a licence with Bencom for the use of their open platform mobile application technology and related intellectual property, for use in projection technologies and VSDN as required.

Bencom and its affiliated companies have invented and patented a variety of new technologies, and are identified leaders in the development of mobile commerce, involving digital phones, personal digital assistants, and smart cards to conduct wireless financial and retail transactions, as well as technologies enabling a broad variety of open platform mobile applications.

These can involve the use of digital phones, personal digital assistants, and smart cards to conduct wireless financial and retail transactions. Bencom offers a broad variety of open platform applications on mobile devices which are not subject to the control of the network operators.

Bencom have recently developed SQWIZZ®, the world’s first simple-to-use, crypto-secure, multiIO NFC reader/writer/viewer, built to US military specifications.

9. Sonora Technologies Inc (Sonora)

==> picture [115 x 47] intentionally omitted <==

Digislide, via VSDN Australia, has a licence with Sonora for the use of its intelligent avatar technologies.

Digislide and Sonora are also involved in a Joint Venture, VSDNet Canada, with Digislide owning 25% equity, Sonora owning 50%, 10% being held in trust for the Global Licensor and the balance to be

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

==> picture [48 x 48] intentionally omitted <==

Financial Statements

For the Year Ended 30 June 2011

Financial Statements

Corporate Governance Statement

Directors’ Report

Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001

Independent Audit Report

Directors’ Declaration

Statement of Comprehensive Income

Statement of Financial Position

Statement of Changes in Equity

Statement of Cash Flows

Notes to the Financial Statements

Additional Information for Listed Public Companies

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Corporate Governance Statement

==> picture [47 x 48] intentionally omitted <==

30 June 2011

This statement sets out the significant Corporate Governance policies and practices of Digislide Holdings Limited and Controlled Entities which comply with all the best practice recommendations of the ASX Corporate Governance Council unless otherwise discussed below.

Board roles and responsibilities

The Board is first and foremost accountable to provide value to its shareholders through delivery of timely and balanced disclosures.

The Board sought external guidance to assist the drafting of its ‘Board Governance Document’ which has been made publicly available on the company’s website. This document details the adopted practices and processes in relation to matters reserved for the Board’s consideration and decision making and specifies the level of authorisation provided to other key management personnel. The Board is ultimately responsible for ensuring its actions are in accordance with key corporate governance principles.

Specifically this includes providing strategic direction to the Group, approving and monitoring capital expenditure, recruitment of executive personnel, retention and remuneration of key management personnel, reviewing and monitoring risk management systems and other internal control systems and legal and other regulatory compliance.

Operational and administrative matters have been delegated to the Chief Executive Officer and the executive team as documented in the delegations policy.

The Board has established a number of committees to allow more discussion on certain issues, the current committees of the Board are the audit, remuneration and nomination committees.

Board composition

The Board is comprised of both executive and non executive Directors and a diverse range of skills, gender and age to maximise knowledge levels and experience as well as generating effective and efficient discussions and decision making processes.

The skills, experience and expertise relevant to the position of each director who is in office at the date of the annual report and their term of office are detailed in the Directors’ report.

The name of independent non executive Directors of the company are:

Grant Chapman

Leon Milford

When determining whether a non executive is independent the director must not fail any of the following materiality thresholds:

Less than 10% of company shares are held by the director and any entity or individual directly or indirectly associated with the director;
No sales are made to or purchase made from any individual or entity directly or indirectly associated with the director; and
None of the Directors’ income or the income of an individual or entity directly or indirectly associated with the director is derived from a contract with any member of the Group other than income derived as a director or the entity.

Directors have the right to seek independent professional advice in the furtherance of their duties as Directors at the company’s expense. Written approval must be obtained from the Chair prior to incurring any expense on behalf of the company.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Corporate Governance Statement

==> picture [48 x 48] intentionally omitted <==

30 June 2011

Ethical standards

The Board acknowledges and emphasises the importance of all Directors and employees maintaining the highest standards of corporate governance practice and ethical conduct.

A code of conduct has been established requiring Directors and employees to:

act honestly and in good faith;
exercise due care and diligence in fulfilling the functions of office;
avoid conflicts and make full disclosure of any possible conflict of interest;
comply with the law;
encourage the reporting and investigating of unlawful and unethical behaviour; and
comply with the share trading policy outlined in the Code of Conduct.

A copy of the code is available in the company’s website.

Directors are obliged to be independent in judgement and ensure all reasonable steps are taken to ensure due care is taken by the Board in making sound decisions.

Trading policy

The company’s policy regarding Directors and employees trading in its securities, is set by the Audit Committee. The policy restricts Directors and employees from acting on material information until it has been released to the market and adequate time has been given for this reflected in the security’s prices. The full policy is available on company’s website at www.digislide.com.au

Audit Committee

The Audit Committee of the company comprises members who are all financially literate. The Audit Committee assists the Board in fulfilling its corporate governance responsibilities in regard to:

The integrity of the Group’s financial reporting
Compliance with legal and regulatory obligations
The effectiveness of the Group’s risk management and internal control framework
Oversight of the independence of the external auditors.

The Audit Committee has a formal charter which has been approved by the Board.

The composition of the Audit Committee is not in accordance with the ASX CGC Recommendations, however it is deemed to be appropriate due to the size of the company and new members will be recruited onto the committee if deemed necessary.

The names and qualifications of those appointed to the Audit Committee and their attendance at meetings of the committee are included in the Directors’ report.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

30 June 2011

Corporate Governance Statement

==> picture [47 x 48] intentionally omitted <==

Shareholder communication

The company has established processes and policies to ensure that it is in compliance with ASX Listing Rule disclosure requirements.

The Company Secretary has been nominated as the person responsible for communications with the Australian Securities Exchange (ASX).

All Executive Management have an ongoing obligation to advise the Company Secretary of any material non public information which may need to be communicated to the market.

The Continuous Disclosure Policy is available on the company’s website.

The company has a Shareholder Communications Policy which promotes effective communication with shareholders and encourages participation at general meetings. The Shareholder Communications Policy is available on the company’s website.

The company makes all ASX announcements available via its website. In addition, shareholders who are registered receive email notification of announcements.

The Notice of Annual General Meeting (AGM) will be provided to all shareholders and posted on the company’s website.

For shareholders unable to attend, an AGM Question Form will accompany the Notice of Meeting, giving shareholders the opportunity to forward questions and comments to the company or the external auditor prior to the AGM.

Risk management

The Board considers identification and management of key risks associated with the business as vital to maximise shareholder wealth. A yearly assessment of the business’s risk profile is undertaken and reviewed by the Board, covering all aspects of the business from the operational level through to strategic level risks.

The CEO has been delegated the task of implementing internal controls to identify and manage risks for which the Board provides oversight. The effectiveness of these controls is monitored and reviewed regularly. The recent economic environment has emphasised the importance of managing and reassessing its key business risks.

The board is responsible for reviewing the company’s policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control.

The board requires management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board has received a report from management as to the effectiveness of the company’s management of its material business risks.

The board has received assurance from the Chief Executive Officer (or equivalent) and the Chief Financial Officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Corporate Governance Statement 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Remuneration policies

The remuneration policy, which sets the terms and conditions for the key management personnel, was developed by the Remuneration Committee after seeking professional advice from independent consultants and was approved by the Board. All executives receive a base salary, superannuation, fringe benefits, performance incentives and retirement benefits. The Remuneration Committee reviews executive packages annually by reference to company performance, executive performance, comparable information from industry sectors and other listed companies and independent advice.

The performance of executives is measured against criteria agreed half yearly which is based on the forecast growth of the company’s profits and shareholders value. The policy is designed to attract the highest calibre executives and reward them for performance which results in long term growth in shareholder value.

Executives are also entitled to participate in the employee share and option arrangements.

The amount of remuneration for all key management personnel for the company and all executives, including all monetary and non monetary components, is detailed in the Directors report under the heading key management personnel compensation. All remuneration paid to executives is valued at the cost to the company and expensed. Shares given to executives are valued as the difference between the market price of those shares and the amount paid by the executive. Options are valued using the Black Scholes methodology.

The Board expects that the remuneration structure implemented will result in the company being able to attract and retain the best executives to run the Digislide Holdings Limited and Controlled Entities. It will also provide executives with the necessary incentives to work to grow long term shareholder value.

The payment of bonuses, options and other incentive payments are reviewed by the Remuneration Committee annually as part of the review of executive remuneration and a recommendation is put to the Board for approval. All bonuses, options and incentives must be linked to predetermined performance criteria. The Board can exercise its discretion in relation to approving incentives, bonuses and options and can recommend changes to the committee’s recommendations. Any changes must be justified by reference to measurable performance criteria.

Remuneration Committee

The Remuneration Committee operates in accordance with its charter (available on the company website) to advise the board on remuneration packages and policies applicable to key management personnel.

The Remuneration Committee met once during the year and the attendance record is available in the Directors’ report.

Further information on key management personnel disclosure, including principles used to determine remuneration is provided in the ‘Remuneration Report’ section of the Directors’ report.

The names of the members of the Remuneration Committee and their attendance at meetings of the committee are detailed in the Directors’ report.

There are no schemes for retirement benefits other than statutory superannuation for non executive Directors.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Corporate Governance Statement 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Diversity policy

The company is aware of the benefits of a diverse group of Directors and Executives and has developed a diversity policy which considers areas such as age, sex, and cultural background. The Board is in the process of developing performance measures to monitor the company’s ability to achieve diversity and the process for an annual assessment of both the objectives and progress in achieving them.

==> picture [416 x 91] intentionally omitted <==

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

ASX Target % Digislide Actual %
Target %
Proportion of:
Women employees in the whole organisation 16.67 35.00 16.67
Women in senior executive positions 20.00 50.00 33.33
Women on the board 25.00 50.00 25.00
----- End of picture text -----

The Group considers key management personnel, excluding Directors, to be any staff with the title “Chief” i.e. Chief Executive Officer, Chief Innovator, Chief Financial Officer and Chief Technologist.

Other information

Further information relating to the company’s corporate governance practices and policies have been made publicly available on the company’s web site. (www.digislide.com.au)

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Your Directors present their report, together with the financial statements of the Group, being Digislide Holdings Limited and Controlled Entities (the company), for the financial year ended 30 June 2011.

1. General information

Information on Directors

The names of each person who has been a director during the year and to the date of this report are:

==> picture [457 x 465] intentionally omitted <==

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

Mr Leon Milford
Qualifications Diploma of Business (Frontline Management)
Advanced Diploma in Business Management
Advanced Diploma in Business Recordkeeping
Experience Victorian Secretary and Accountant for global organisation, Hills Industries Ltd
Director of Sharksafe Pty Ltd, Sharksafe International Pty Ltd, Outback Marble
Pty Ltd and AU Pacific Ltd
Held management positions in finance and sales, combined with Directorships
held in the automotive, real estate and aged care industries
Special responsibilities Chair
Responsible for signing off Research and Development Plans
Member of Rewards and Remuneration Committee
Member of Audit Committee
Ms Luceille Outhred
Qualifications Master of Distance Education
Master of Educational Studies
Advanced Diploma of Business Development
Advanced Diploma of Human Resources Development Management
Diploma of Teaching (Sec Comm); Diploma of Training and Assessment
Certificate of Teaching English as a Foreign Language
Experience Co founder of Digislide Holdings and one of its key inventors
Strategic leadership – evaluation of acquisition targets
Experienced in start up and business development
Corporate Leader of the Workright Group for 19 years
Finalist in the Telstra Business Woman of the Year (SA) in 2000 and 2007
The Global Leaders Group; The Global Leaders – Business Leaders
All Women Global Leaders; Global Leaders in Education;
Telstra Business Women’s Alumni; Member of Global Leadership
Special responsibilities CEO; Responsible Officer under the OHSW Act (1986).
Responsible for strategic management
Responsible for contractual issues, human resources, Intellectual
Property management, capital raising and investor relations.
Management of commercialisation of Digislide’s core technologies
Dealing with Government Departments
----- End of picture text -----

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [47 x 48] intentionally omitted <==

==> picture [457 x 396] intentionally omitted <==

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

Mr Malcolm Leahy
Qualifications Diploma of Business (Frontline Management)
Experience Significant manufacturing experience for and on behalf of major brand owners
and has ongoing business relationships with engineering firms and plastic
manufacturers in China
Director of Sharksafe Pty Ltd, Sharksafe International Pty Ltd and Is That So Pty
Ltd
Special responsibilities Advice on international manufacturing
Member of Rewards and Remuneration Committee
Chairman of Audit Committee
Mr Grant Chapman
Qualifications B. Arts with Honours
Experience Senator (SA) 1987 2008
Member of House of Reps 1975-1983
Chaired Joint Statutory Parliamentary Committee on Corporations and Financial
Services 1996 2007, and federal Government Industry, Resources and Small
business Committee 1995-1997
On two Senate Select Committees on the resources/energy sector
Appointed to the United Nations “Panel of Eminent Persons to Combat
Desertification in 2001
Australian Government representative on the Inter Parliamentary Union (world
body of parliament) Council 2002 2005
Awarded the Grand Cross, Orden Bernardo O’Higgins by the President of Chile
in 2003
Links with business and political leaders in Chile, Argentina, China, Thailand,
Taiwan, USA, UK and the European Community
Chairman of MyATM Ltd (ASX:MYA)
Special responsibilities Member of Rewards and Remuneration Committee
Member of Audit Committee
----- End of picture text -----

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [48 x 48] intentionally omitted <==

1. General information (Cont.)

Principal activities and significant changes in nature of activities

The principal activities of the Group during the financial year were research and development of precision optics for projection technologies; design and development of miniature projection technologies; design and development of consumer electronic products (pico projectors); commercialisation, marketing and sale of projection products.

Whilst research in the fields of precision optics, electronics, heat dissipation and use of laser technologies continue, 2011 saw a focus on the formation of strategic alliances with leading technology companies in North America and China, through licensing of Internet Protocol TV and Virtual Streaming Distribution Network technologies, intelligent avatars, securitised encryption technologies and green laser diodes.

The focus on product marketing, distribution and sales in the USA shifted, from working with smaller distribution channels, to executing a licence with the world’s largest distributor of consumer electronic goods, Ingram Micro. The company has proven its product, and strengthened its position to the extent that it is confident it can receive significant product orders and be able to secure working capital to supply large orders.

Ingram Micro supplies 180,000 stores worldwide, including Walmart and Best Buy and supplies online stores, including Amazon.com.

The licence with Ingram Micro was executed late in 2011 financial year, logistics and distribution finalised early in July, and the first batch of Digislide Gaming Projectors was shipped out to Ingram Micro early during the first quarter of the new financial year.

The transition from Research and Development to early market entry occurred successfully over the last two years, and access to the massive consumer electronics markets through the world’s largest consumer electronics distribution channel has been secured.

A summary of the Principal activities of the consolidated entity is:

Continuing Research and Development of Miniaturised Projection Technologies (LED and laser based)
Production of branded products digishow™, miniPRO®, XRAY®480, Sii® and StingRay®
digiPRO™, WeSii® and XRAY™ near production ready (only pending funding)
ongoing product development of DIGIVISION™
forging strategic alliances with leading technology companies to further enhance the viewing of projected images (IPTV/VSDN; intelligent avatars, encrypted securitised transmission of digital information and cryptographically secure peer:peer payment systems)

The company also formed:

a Joint Venture, Digismart Commerce Ltd (Hong Kong) with Allied Animation Technologies Pty Ltd;
licensed Internet Protocol TV and Virtual Streaming Distribution Network technologies from WiseSight Technologies (China);
incorporated and established VSDN Australia Pty Ltd, initially as a wholly owned subsidiary, and more recently as a majority owned subsidiary;
acquired a 25% equity stake in VSDNet (Canada);
licensed intelligent avatar technologies from Sonora Technologies Inc (Canada);
licensed securitised encryption technologies from Bencom Group;
licensed green laser diodes from Spectralus Ltd (USA), towards the design and development of laser based projection systems.

There were no other significant changes in the nature of the Group’s principal activities during the financial year.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Operating results and review of operations for the year

Operating results

The consolidated loss of the Group amounted to $ (2,412,894), after providing for income tax. This represented a 49% decrease on the loss reported for the year ended 30 June 2010.

Review of operations

Having gained market acceptance of branded products through smaller distribution channels in 2010 and 2011, in both domestic and international markets, the Company gained approval as a supplier to Ingram Micro, the world’s largest distribution channel of consumer electronics.

Research and Development with regard to LED and laser based projection systems continued. Several new patents were lodged.

Late in the year, Digislide executed an agreement with Global Marketing Partners, who have subsequently introduced the Company and its products to Ingram Micro, the world’s largest consumer electronics distribution channel. Ingram Micro has executed a distribution agreement for USA. It is anticipated this will be followed by a distribution agreement for Canada, and subsequently Europe as well. Global Marketing Partners also designed and are executing a national marketing campaign to complement Ingram Micro’s promotions.

Whilst products will continue to be sold through some of the existing smaller channels the focus is now on reaching mass markets swiftly, in particular through the Ingram Micro US licence. From the Digislide Gaming Projectors which were shipped to the USA, samples have now been forwarded to Canada by Ingram Micro’s Product Aggregator, for approval of securing a Canadian licence.

The Company is preparing for the commercialisation of its core technologies (vga, svga and wvga optical engines based on LED and laser technologies) through becoming a supplier to technology hungry manufacturers which have an objective of embedding projectors in their existing products.

Establishing the licence with Ingram Micro took longer than expected due to complex logistical processes and Ingram Micro’s discrete market collateral requirements. The first shipment of the Digislide Gaming Projectors, XRAY™ 480, Sii™ and StingRAY™ arrived in USA early in the new financial year. This resulted in the first sale being reflected in FY2012.

The Indian Distribution Channel, Rich International Pvt, is waiting for the release of the upgraded digishow™ before distribution to retail outlets. Their on line presence continues to promote digishow™.

Smaller distribution channels in Saudi Arabia and Eastern Europe also continue to promote digishow™. As political and economic situations allow in those Regions, these distributors will expand their product range to include the Digislide Gaming Projectors, XRAY™ 480, Sii™ and StingRAY™.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [48 x 48] intentionally omitted <==

3. Financial review

Financial position

The net assets of the Group have decreased by $511,367 from 30 June 2010 to $3,539,276 at 30 June 2011.

Total assets have increased from $7,705,007 to $8,401,126.

The Company continued to invest into high tech opto electronic equipment and secured licence agreements with Sonora Technologies (Canada) for their intelligent avatars, and the Bencom Group (Aust) for their encryption and securitisation software and data transfer systems.

The company also gained a licence agreement with WiseSight Technologies (China) to market their Virtual Streaming Distribution Network technologies (VSDN) which have been technically and commercially proven through use by the world’s largest telecommunications company, China Telecom.

VSDN is a comprehensive network solution with integration of video live broadcast, video on demand, triple play, distribution and download of massive files without buffering.

Current liabilities have increased from $3,587,554 to $4,805,733.

During the year ended 30 June 2011 the Company raised a total of $2,321,634 through Convertible Note issues, Equity and debt conversion. These funds were used to reduce debt, continue R&D, market expansion, and provide ongoing working capital whilst revenue channels developed.

A breakdown of these funds raised is as follows:

Equity subscriptions	$ 369,988
Convertible Notes	$ 950,000
Conversion of debt to equity	$1,001,646
Total Funds Raised	$2,321,634

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [47 x 48] intentionally omitted <==

4. Other items

Significant changes in state of affairs

During the year ended 30 June 2011, the Company significantly changed its status from an early market entry company with significant focus on Research and Development to a company with proven products and commercialisation ability, expanding into mass markets through alliance with Ingram Micro global distribution channel.

During the year the Company invested a further $759,398 into Intellectual Property being investment into designs, prototypes and the registration of commercial legal rights through the registration of patents, trademarks and designs. This expenditure relates to the registering designs for Wesii® and XRay™ in China, Taiwan, Korea, USA, Canada and Australia. Marketing collateral for the Sii™, XRAY™480 and StingRay™ was developed.

Two new websites were created; a new corporate website for Digislide with on line purchasing functionality and a sharp focus on products and sales, and a website for VSDN Australia.

DIGIPRO™, XRAY™ , Wesii® and DIGIVISION™ will enter the market during the year ending 30 June 2012.

Changes in the controlled entities and divisions:

On 18th February, 2010, the parent company incorporated VSDN Australia Pty Ltd for the purpose of gaining a licence to market and distribute the Virtual Streaming Distribution Network Technologies which had been developed and commercialised by Wise Sight Technologies Inc (China). The entity was thus a wholly owned subsidiary.

By January 2011, the company having proven its technical and management capabilities to the Global Licensor, was granted a valuable marketing licence for commercialising VSDN in the Australia and New Zealand markets. The agreement was executed in January 2011.

Since that time, VSDN Australia Pty Ltd has issued 412,500 shares for $412,500, and Digislide Holdings has sold 88,980 of its original shares for $88,980. The result is that Digislide has made a profit of $87,717 on its investment to date, and owns 90% of VSDN Australia Pty Ltd, which has a market capitalisation of $5.012M.

Dividends paid or recommended

No dividends were paid or declared during the year.

Events after the end of the reporting period

Since the end of the financial year the Company has entered into negotiations for an equity raising of up to $5M and $20M in debt and equity funding.

New market channels - Ingram Micro (Canada) has now received product samples from the Group and it is anticipated a discrete licence for that region, and marketing collateral requirements will follow quickly.

Navarre, a significant distribution channel in USA has formalised a request to become a distributor. Marketing collateral is now being prepared for them in conjunction with Global Marketing Partners.

Export Market Development Grant Appeal - (EMDG) During 2010 Digislide conducted a protracted appeal against Austrade’s decision to disallow Digislide’s 2009 EMDG expenditures. The matter was due to be heard in May, but Mr Paul d’Assumpcao, the Australian Government’s Solicitor advised Senior Member Dunn, of the Administrative Appeals Tribunal that he was “not ready” as he “had not had time to prepare.” Senior Member Dunn allowed additional time and set the proceedings for July. Digislide disputed Austrade’s assertion that the Company had “failed to meet the Australian Net Benefit Requirements”.

Mr Paul d’Assumpcao, subsequently citing a recent “Wizard Ruling”, argued that Digislide’s claim “was not valid in that it did not comply with s70(2C) of the Act in that it was not accompanied by ‘such information’ and ‘such documents’ as specified in the Determination”. Mr d’Assumpcao argued that Digislide had never lodged certain documents, and that Austrade did not have them on file, and that Austrade had never received them.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Digislide’s subsequently provided evidence to the Tribunal that Austrade had not only received those documents from Digislide but, in fact, had provided copies of those very documents to the Administrative Appeals Tribunal in December, 2010. Senior Member Dunn advised the Hearing would continue.

Mr d’Assumpcao then resurrected his argument that Digislide “had failed to meet the Australian Net Benefit Requirements”. After presentation of facts by Digislide over a three day period in August, he withdrew 7 of the 8 discrete contentions.

Senior Member Dunn acknowledged that the process had been protracted and committed to Digislide to have a Determination “within 8 weeks”. Ironically, it took Senior Member Dunn 14 weeks to provide his Determination that Digislide had failed to meet its projections within its own set timeframe. Senior Member Dunn dismissed international events (the Global Financial Crisis) as being a major factor for Digislide not achieving its projections within the timeframes, but again, ironically, the Administrative Appeals Tribunal had advised the company that Senior Member Dunn’s delayed Determination was due to an unexpected international matter (an immigration visa issue). Senior Member Dunn’s Determination failed to mention Austrade’s scurrilous assertion that Digislide had not provided essential documentation, nor Mr d’Assumpcao’s inferences that the company and their independent contractor may have since fabricated documents which the company insisted it had provided, and which Austrade insisted it had never received. Senior Member Dunn’s Determination also failed to mention that Mr d’Assumpcao, insisted Austrade had never received those documents, only to have it proven indisputably that they had not only received them, but that they had, themselves provided copies of those documents to the Tribunal 8 months earlier. Senior Member Dunn’s Determination supported “Digislide’s contention that it has the financial resources to maintain its international business activities” yet in a seemingly contradictory statement, stated “I am not satisfied that Digislide is financially viable.” Senior Member Dunn upheld Austrade’s decision to deny Digislide’s $155,000 in EMDG Rebates for the 2009FY.

Except for the above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or could significantly affect the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years

Future developments and results

To further improve the Group’s profit and maximise shareholder wealth, the following developments are intended for implementation in the year ending 30 June 2012:

Market entry of XRAY™ decouplable audio and projector system, and award winning WeSii™ companion product
Market entry of DIGIPRO™, upgraded digishow™ and upgraded miniPRO™
Market entry of DIGIVISION™ iPod™ compatible audio and projection system
An agreement to establish a Joint venture with Bencom Group for the development and commercialisation of embedded technologies and an exciting new projection peripheral

Environmental issues

The Group’s operations are not regulated by any significant environmental regulations under a law of the Commonwealth or of a state or territory of Australia.

Company secretary

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

Mr Jeff King, CA; Dip Bus Accounting

Meetings of Directors

During the financial year, 10 meetings of Directors (including committees of Directors) were held. Attendances by each director during the year were as follows:

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [47 x 48] intentionally omitted <==

	Directors’ Meetings Audit Committee Remuneration Committee
	Number eligible to attend Number attended Number eligible to attend Number attended Number eligible to attend Number attended
Ms Luceille Outhred	10 10
Mr Malcolm Leahy	10 10 1 1 1 1
Mr Leon Milford	10 10 1 1 1 1
Mr Grant Chapman	10 9 1 1 1 1

Indemnification and insurance of officers and auditors

The Group has paid premiums to insure each of the Directors against liabilities for costs and expenses incurred by them in defending legal proceedings arising from their conduct while acting in the capacity of director of the Group, other than conduct involving a wilful breach of duty in relation to the Group. The total premiums paid on behalf of the Directors amounted to $16,755.

During or since the end of the financial year, the Group has not entered into any agreement to indemnify, a former director or an auditor, to any amount against any liability arising from a claim brought against the Group and/or by a third party.

Options

At the date of this report, the unissued ordinary shares of Digislide Holdings Limited and Controlled Entities under option are as follows:

option are as follows:
Grant Date	Date of Expiry	Exercise Price	Number under Option
1 January2008	24 August 2014	$1.00	350,000
24 August 2009	24 August 2011	$1.25	6,000,000
24 September 2010	24 September 2012	$0.25	3,000,000
15 October 2010	15 October 2012	$0.25	1,800,000
30 November 2010	30 November 2012	$0.25	450,000
9 December 2010	9 December 2015	$0.16	913,000
9 December 2010	9 December 2012	$0.25	300,000
11 December 2010	11 December 2012	$0.25	600,000
11 March 2011	11 March 2013	$0.18	106,366
23 March 2011	23 March 2013	$0.14	115,385
			13,634,751

Option holders do not have any rights to participate in any issues of shares or other interests in the company or any other entity.

For details of options issued to Directors and other key management personnel as remuneration, refer to the remuneration report.

There were no options exercised during the year.

Proceedings on behalf of company

No person has applied for leave of court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings.

The company was not a party to any such proceedings during the year.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Non audit services

The Board of Directors, in accordance with advice from the Audit Committee, is satisfied that the provision of non audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

All non audit services are reviewed and approved by the Audit Committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
The nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

The following fees were paid or payable to the external auditors for non audit services provided during the year ended 30 June 2011:

ended 30 June 2011:
	2011	2010
	$	$
Taxation services	9,300	5,900
Other services	220	5,800
	9,520	11,700

Auditor’s independence declaration

The lead auditor’s independence declaration in accordance with section 307C of the Corporations Act 2001, for the year ended 30 June 2011 has been received and can be found on page 20 of the financial report.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Remuneration report

Remuneration policy

The remuneration policy of Digislide Holdings Limited and Controlled Entities has been designed to align key management personnel (KMP) objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long term incentives based on key performance areas affecting the Group’s financial results. The Board of Digislide Holdings Limited and Controlled Entities believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best key management personnel to run and manage the Group, as well as create goal congruence between Directors, executives and shareholders.

The Board’s policy for determining the nature and amount of remuneration for key management personnel of the Group is as follows:

The remuneration policy has been developed by the Remuneration Committee and approved by the Board following professional advice from independent external consultants.
All key management personnel receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, and performance incentives.
Performance incentives are based on predetermined key performance indicators.
Incentives paid in the form of options or rights are intended to align the interests of the Directors and the company with those of the shareholders.
The Remuneration Committee reviews key management personnel packages annually by reference to the Group’s performance, executive performance and comparable information from industry sectors.

The performance of key management personnel is measured against criteria agreed annually with each executive and is based predominantly on the objectives set out in the Group’s Strategic Business Plan, the forecast growth of the Group’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The Board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the Committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long term growth in shareholder wealth.

Key management personnel receive a superannuation guarantee contribution required by the law, which is currently 9%, and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation and some have done so by taking additional equity in the Group.

Upon retirement, key management personnel are paid employee benefit entitlements accrued to the date of retirement. Key management personnel have five year contracts of employment. Employees bearing the title “Chief” are eligible for bonuses ranging from 20% - 33.3% of their salary against set performance criteria.

The Chief Executive Officer, Chief Innovator, and Chief Financial Officer are paid a motor vehicle allowance to offset the considerable amount of travel they are required to undertake in the course of their duties.

In the event of redundancy, employees will receive a severance payment as determined by the Redundancy Policy except where am individual PSA staes otherwise. This policy presently provides a severance formula of two (2) weeks salary for each completed year of service, to a maximum of 26 weeks, at the then current salary rate.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Remuneration report (Cont.)

Remuneration policy (Cont.)

In the event of termination without cause, employees receive between a range of two weeks notice for junior personnel, one month for engineers, 3 months for the Chief Financial Officer and Chief Technologist and 12 months in the case of the Founders, who are the Chief Innovator and the Chief Executive Officer.

The Chief Executive Officer and the Chief Innovator each have a five year contract which has rolled over each subsequent year, retaining all conditions each year since commencement.

All remuneration paid to key management personnel is valued at the cost to the company and expensed.

The Board’s policy is to remunerate non executive Directors at market rates for time, commitment and responsibilities. The Remuneration Committee determines payments to the non executive Directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non executive Directors is subject to approval by shareholders at the Annual General Meeting, the current maximum is $ 70,000 which was approved at the 2010 AGM.

Key management personnel are also entitled and encouraged to participate in the employee share and option arrangements to align their interests with shareholders’ interests.

Options granted under these arrangements do not carry dividend or voting rights. Each option is entitled to be converted into one ordinary share once the interim or financial report has been disclosed to the public and is valued using the Black Scholes methodology.

Key management personnel who are subject to these arrangements are subject to a policy governing the use of external hedging arrangements. Such personnel are prohibited from entering into hedge arrangements, i.e. put options, on unvested shares and options which form part of their remuneration package. Terms of employment signed by such personnel contain details of such restrictions.

The following table shows the gross revenue, profits and dividends for the last five years for the company, as well as the share prices at the end of the respective financial years.

	2007	2008	2009	2010	2011
	$	$	$	$	$
Revenue Net Proft Share Price at Year end	527,877.00 (4,446,277.00) 1.25	2,016,317.00 (6,531,946.00) 1.25	1,733,526.00 (260,042.00) 1.25	1,099,282.00 (4,738,131.00) 0.15	1,383,672.00 (2,412,894.00) 0.06

Performance conditions linked to remuneration

The key performance indicators (KPIs) are set annually, with a certain level of consultation with key management personnel to ensure buy in. The measures are specifically tailored to the area each individual is involved in and over which he/she has a level of control.

The Board sets the KPIs for the Chief Executive Officer. The KPIs target areas the Board believes hold greater potential for Group expansion and profit, covering financial and non financial as well as short and long term goals. The Chief Executive Officer sets all KPIs for all other employees. The level set for each KPI is based on budgeted figures for the Group, respective industry standards and each discrete Department.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Remuneration report (Cont.)

Remuneration policy (Cont.)

Performance of employees in relation to the KPIs is assessed twice annually by the Chief Executive Officer and annually by the Rewards and Remuneration Committee, with bonuses being awarded depending on the number and deemed difficulty of the KPIs achieved. Following the assessment, a report is prepared by the Chief Executive Officer, on each employee, outlining the KPIs and submitted to the Rewards and Remuneration Committee together with a recommended bonus (or not). These are considered in light of the desired and actual outcomes, and their efficiency is assessed in relation to the Group’s goals and shareholder wealth, before bonuses are determined, and KPIs are set for the following year.

In determining whether or not a KPI has been achieved, the Rewards and Remuneration Committee base its assessment on patents granted; registered designs granted; revenues; and/or audited figures and so on. The Board does not believe that performance conditions should include a comparison with factors external of the Group at this time.

Employment details of members of key management personnel and other executives

Professional Service Agreements

On appointment to the Board, all non executive Directors enter into a service agreement with the company in the form of a letter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the office of director.

The remuneration and other terms of employment for the Managing Director and senior executives are set out in Professional Service Agreements as summarised below.

All Professional Service Agreements are for an unlimited duration. The agreements for non Key Management Personnel, other than Founders require three months notice. Other professional personnel may be terminated by giving six weeks notice (except in cases of termination for cause where termination is immediate).

Remuneration details for the year ended 30 June 2011

The following table of benefits and payment details, in respect to the financial year, the components of remuneration for each member of the key management personnel of the Group and, to the extent different, the five Group executives and five company executives receiving the highest remuneration:

Table of benefits and payments

	Short term Post employment Share based payments
	Salary fees pension and superannuation options and rights shares and units Total
2011	$ $ $ $ $
Directors
Mr Leon Milford	60,000 - - - 60,000
Ms Luceille Outhred	190,000 17,100 64,088 - 271,188
Mr Malcolm Leahy	50,000 - - - 50,000
Mr Grant Chapman	50,000 - - - 50,000
KMP
Kevin Soper	151,333 13,620 14,099 - 179,052
Jef King	150,000 13,500 48,066 - 211,566
Peter Rubinshtein	108,000 9,720 9,613 - 127,333
	759,333 53,940 135,866 - 949,139

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Remuneration report (Cont.)

Remuneration details for the year continued ended 30 June 2011

	Short term Post employment Share basedpayments
	Salary fees Pension and superannuation Options and rights Shares and units Total
2010	$ $ $ $ $
Directors
Mr Leon Milford	60,000 - - - 60,000
Ms Luceille Outhred	190,000 17,100 - - 207,100
Mr Malcolm Leahy	50,000 - - - 50,000
Mr Grant Chapman	10,740 - - - 10,740
KMP
Kevin Soper	108,000 9,720 - - 117,720
Jef King	101,096 9,099 - - 110,195
Tim English	136,360 11,899 - - 148,259
Peter Rubinshtein	108,000 9,720 - - 117,720
Mark Gafner	146,647 - - - 146,647
	910,843 57,538 - - 968,381

Description of options/rights granted as remuneration

Details of the options granted as remuneration to those key management personnel and executives during the year:

Share-based payments	$	Number of options	Grant date	% vested in period	% forfeited in period	Vesting date
Directors
Mr Leon Milford	-	-		-	-
Ms Luceille Outhred	64,088	400,000	9/12/2010	-	-	9/12/2010
Mr Malcolm Leahy	-	-		-	-
Mr Grant Chapman	-	-		-	-
KMP
Kevin Soper	14,099	88,000	9/12/2010	-	-	9/12/2010
Jef King	48,066	300,000	9/12/2010	-	-	9/12/2010
Peter Rubinshtein	9,613	60,000	9/12/2010	-	-	9/12/2010

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Directors’ Report 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Remuneration report (Cont.)

Description of options/rights granted as remuneration (Cont.)

	Granted as	Value of options	Vested during	Lapsed during	Value of
	remuneration	at grant date	the year	the year	lapsed
					options at
					lapse date
30 June 2011	No.	$	No.	No.	$
Directors
Mr Leon Milford	-	-	-	-	-
Ms Luceille Outhred	400,000	64,088	-	-	-
Mr Malcolm Leahy	-	-	-	-	-
Mr Grant Chapman	-	-	-	-	-
KMP
Kevin Soper	88,000	14,099	-	-	-
Jef King	300,000	48,066	-	-	-
Peter Rubinshtein	60,000	9,613	-	-	-

For the year ended 30 June 2011 and in accordance with new Australian Accounting Standard AASB 2, ESOP, executive and loan based options existing and issued during the year were independently valued by Bendzulla Actuarial Ltd resulting in a charge to the profit and loss of $116,130.

All options were issued by Digislide Holdings Limited and Controlled Entities and entitle the holder to ordinary shares in Digislide Holdings Limited and Controlled Entities for each option exercised.

There have not been any alterations to the terms or conditions of any share based payment arrangements since grant date.

This Directors’ report, incorporating the remuneration report, is signed in accordance with a resolution of the Board of Directors.

Director: ............................................................... Director: ............................................................... .

Dated this 28th day of November 2011

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Auditor’s Independance Declaration

==> picture [48 x 48] intentionally omitted <==

Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Stockholders Digislide Holdings Limited and Controlled Entities

==> picture [445 x 624] intentionally omitted <==

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES

Independant Audit Report

ABN 75 105 012 066

==> picture [47 x 48] intentionally omitted <==

Independent Audit Report to the members of Digislide Holdings Limited and Controlled Entities

==> picture [457 x 643] intentionally omitted <==

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES

ABN 75 105 012 066

Independant Audit Report Independent Audit Report to the members of Digislide Holdings Limited and Controlled Entities

==> picture [48 x 48] intentionally omitted <==

==> picture [458 x 643] intentionally omitted <==

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

30 June 2011

Directors’ Decleration

==> picture [47 x 48] intentionally omitted <==

The Directors of the company declare that:

the financial statements and notes, as set out on pages 34 to 75, are in accordance with the Corporations Act 2001 and:
a) comply with Accounting Standards, which, as stated in accounting policy note 1 to the financial statements, constitutes explicit and unreserved compliance with International Financial Reporting Standards (IFRS); and b) give a true and fair view of the financial position as at 30 June 2011 and of the performance for the year ended on that date of the company and consolidated group;
the Chief Executive Officer and Chief Finance Officer have each declared that:
a) the financial records of the company for the financial year have been properly maintained in accordance with
section 286 of the Corporations Act 2001; b) the financial statements and notes for the financial year comply with the Accounting Standards; and c) the financial statements and notes for the financial year give a true and fair view.
in the Directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

==> picture [183 x 8] intentionally omitted <==

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

Director ..................................................................
----- End of picture text -----

==> picture [177 x 37] intentionally omitted <==

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

Director ..................................................................
----- End of picture text -----

Dated this 28th day of November 2011

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Statement of Comprehensive Income

==> picture [48 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

		2011	2010
	Note	$	$
Sales revenue	16	325,904	614,118
Cost of sales		(250,626)	(493,040)
Grossproft		75,278	121,078
Other income	16	1,057,768	481,945
Distrubution expense		(3,932)	(36,719)
Marketingexpense		(389,214)	(645,678)
Occupancyexpense		(111,815)	(111,551)
Administrative expense		(1,607,861)	(577,509)
Employement expense		(428,711)	(1,128,281)
Consultancyandprofessional fees		(262,980)	(1,501,393)
Other expenses		(264,403)	(919,443)
Finance costs		(477,024)	(423,799)
Loss before income tax		(2,412,894)	(4,741,350)
Income tax expense	18	-	-
Loss for the period		(2,412,894)	(4,741,350)
Total comprehensive income for the period		(2,412,894)	(4,741,350)
Loss attributable to:
Members of the parent entity		(2,367,315)	(4,741,350)
Non-controlling interest		(45,579)	-
		(2,412,894)	(4,741,350)
Total comprehensive income attributable to:
Members of the parent entity		(2,367,315)	(4,741,350)
Non controlling interest		(45,579)	-
		(2,412,894)	(4,741,350)

Earningsper share
From continuing and discontinued operations:
Basic earnings per share (cents)		(4.16)	(9.88)

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Statement of Financial Position

==> picture [47 x 48] intentionally omitted <==

30 June 2011

		2011	2010
	Note	$	$
ASSETS
CURRENT ASSETS
Cash and cash equivalents	8	2,546	2,949
Trade and other receivables	3	1,449,764	645,437
Inventories	5	559,463	724,877
Other fnancial assets	6	-	100,000
Current tax receivables	20	29,420	72,719
Other assets	7	1,644,353	585,787
TOTAL CURRENT ASSETS		3,685,546	2,131,769
NON-CURRENT ASSETS
Investments accounted for usingthe equitymethod	24	25,000	-
Financial assets	6	292,500	292,500
Property,plant and equipment	4	923,879	831,148
Intagible assets	8	3,406,606	3,077,844
Other assets	7	67,595	1,371,746
TOTAL NON-CURRENT ASSETS		4,715,580	5,573,238
TOTAL ASSETS		8,401,126	7,705,007
LIABILITIES
CURRENT LIABILITIES
Trade and otherpayables	9	3,114,905	2,673,553
Borrowings	10	1,557,935	846,434
Employee benefts	11	132,893	67,567
TOTAL CURRENT LIABILITIES		3,539,276	3,587,554
NON-CURRENT LIABILITIES
Trade and otherpayables		38,706	44,706
Borrowings		17,411	22,104
TOTAL NON-CURRENT LIABILITIES		56,117	66,810
TOTAL LIABILITIES		4,861,850	3,654,364
NET ASSETS		3,539,276	4,050,643


EQUITY
Issued capital	12	24,584,059	22,845,413
Reserves		116,130	-
Retained earnings		(21,162,085)	(18,794,770)
Total equityattributable to equityholders of the company		3,538,104	4,050,643
Non-controlllinginterest		1,172	-
TOTAL EQUITY		3,539,276	4,050,643

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Statement of Changes in Equity

==> picture [48 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

2011
	Ordinary	Retained	Option	Subtotal	Non-
	Shares	Earnings	Reserve		controlling	Total
					Interests
	$	$	$	$	$	$
Balance at 1 July2010	22,845,413	(18,794,770)	-	4,050,643	-	4,050,643
Proft attributable to members of theparent body	-	(2,367,315)	-	(2,367,315)	-	(2,367,315)
Proft attributable to non- controllinginterests	-	-	-	-	(45,579)	(45,579)
Transactions with owners in their
capactiyas owners
Shares issued duringtheyear	1,738,646	-	-	1,738,646	-	1,738,646
Recognition of non-controlling interest	-	-	-	-	46,751	46,751
Option reserve on recognition of bonus element of options	-	-	116,130	116,130	-	116,130
Sub-total	1,738,646	(2,367,315)	116,130	(512,539)	1,172	(511,367)
Balance at 30 June 2011	24,584,059	(21,162,085)	116,130	3,538,104	1,172	3,539,276

2010

	Ordinary Shares	Retained Earnings	Option Reserve	Sub-total	Non- controlling Interests	Total
	$	$	$	$	$	$
Balance at 1 July2009	15,667,980	(14,056,639)	-	1,621,341	-	1,621,341
Proft attributable to members of theparent entity	-	(4,738,131)	-	(4,738,131)	-	(4,738,131)
Transactions with owners in their
capacityas owners
Shares issued duringtheyear	7,167,433	-	-	7,167,433	-	7,167,433
Sub-total	7,167,433	(4,738,131)	-	2,429,302	-	2,429,302
Balance at 30 June 2010	22,845,413	(18,794,770)	-	4,050,643	-	4,050,643

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Statement of Cash Flows

30 June 2011

==> picture [47 x 48] intentionally omitted <==

		2011	2010
	Note	$	$
CASH FROM OPERATING ACTIVITIES:
Receipts from customers		83,394	530,168
Payments to suppliers and employees		(1,711,667)	(6,630,706)
Grants and rebates received		-	730,590
Interestpaid		-	(395,769)
Finance costs		-	(135,277)
Net cashprovided by(used in) operatingactivities		(1,628,273)	(5,900,994)


CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition ofproperty,plant and equipment		(10,599)	(677,626)
Expenditure on intagible assets		(809,398)	(740,901)
Net cash used byinvestingactivites		(819,997)	(1,418,527)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issue of shares		606,566	7,167,433
Proceeds from (repayment of) borrowings		1,846,004	(286,677)
Payment of fnance lease liabilities		(4,693)	-
Net cash used byfnancingactivities		2,447,877	6,880,756


Net increase (decrease) in cash and cash equivalents held		(393)	(438,765)
Cash and cash equivalents at beginningofyear		2,939	441,704
Cash and cash equivalents at end of fnancialyear		2,546	2,939

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

==> picture [48 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

This financial report includes the consolidated financial statements and notes of Digislide Holdings Limited and Controlled Entities (the ‘Group’). The financial statements were authorised for issue by the Board of Directors on 8th November 2011.

The separate financial statements and notes of the parent entity, Digislide Holdings Limited, have not been presented within this financial report as permitted by amendments made to the Corporations Act 2001. Parent entity summary is included in note 32.

1. Summary of Significant Accounting Policies

(a) Basis of preparation

The financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards.

Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non current assets, financial assets and financial liabilities.

(b) Comparative figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

When the Group applies an accounting policy retrospectively, makes a retrospective restatement or reclassifies items in its financial statements, a statement of financial position as at the beginning of the earliest comparative period will be presented.

(c) Principles of consolidation

The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Digislide Holdings Limited and Controlled Entities at the end of the reporting period. A controlled entity is any entity over which Digislide Holdings Limited and Controlled Entities has the power to govern the financial and operating policies so as to obtain benefits from its activities. Control will generally exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are also considered.

Where controlled entities have entered or left the Group during the year, the financial performance of those entities is included only for the period that they were controlled. A list of controlled entities is contained in Note 23 to the financial statements.

In preparing the consolidated financial statements, all inter group balances and transactions between entities in the Group have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(c) Principles of consolidation

Non controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are shown separately within the Equity section of the consolidated statement of financial position and statement of comprehensive income. The non controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date.

Business combinations

Business combinations occur where an acquirer obtains control over one or more businesses which results in the consolidation of its assets and liabilities.

A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The acquisition method requires that for each business combination one of the combining entities must be identified as the acquirer (i.e. parent entity). The business combination will be accounted for as at the acquisition date, which is the date that control over the acquiree is obtained by the parent entity. At this date, the parent shall recognise, in the consolidated accounts, and subject to certain limited exceptions, the fair value of the identifiable assets acquired and liabilities assumed. In addition, contingent liabilities of the acquiree will be recognised where a present obligation has been incurred and its fair value can be reliably measured.

The acquisition may result in the recognition of goodwill (refer Note 1(i)) or a gain from a bargain purchase. The method adopted for the measurement of goodwill will impact on the measurement of any non controlling interest to be recognised in the acquiree where less than 100% ownership interest is held in the acquiree.

The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Consideration comprises the sum of the assets transferred by the acquirer, liabilities incurred by the acquirer to the former owners of the acquiree and the equity interests issued by the acquirer.

Fair value uplifts in the value of pre existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss.

Included in the measurement of consideration transferred is any asset or liability resulting from a contingent consideration arrangement. Any obligation incurred relating to contingent consideration is classified as either a financial liability or equity instrument, depending upon the nature of the arrangement. Rights to refunds of consideration previously paid are recognised as a receivable.

Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or a liability is remeasured each reporting period to fair value through the statement of comprehensive income unless the change in value can be identified as existing at acquisition date.

All transaction costs when incurred in relation to the business combination are expensed to the statement of comprehensive income.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Summary of Significant Accounting Policies (Cont.)

(d) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads. Overheads are applied on the basis of normal operating capacity. Costs are assigned on the basis of weighted average costs. Costs of purchased inventory are determined after deducting rebates and discounts.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(e) Property, plant and equipment

Each class of property, plant and equipment is carried at cost or fair value as indicated less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis. Cost includes expenditure that is directly attributable to the asset.

Depreciation

The depreciable amount of all fixed assets including buildings and capitalised leased assets, but excluding freehold land, is depreciated on a reducing balance basis over the asset’s useful life to the Group commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. Land is not depreciated.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset	Depreciation Rate
Plant and Equipment	7.5 - 40%
Leasedplant and equipment	2.5 - 20%
Property, Plant and Equipment UD2	10%

The assets’ residual values, depreciation methods and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(f) Financial instruments

Initial recognition and measurement

Financial assets and financial liabilities are recognised when the entity becomes a party to the contractual provisions of the instrument. For financial assets, this is the equivalent to the date that the company commits itself to either the purchase or sale of the asset (i.e. trade date accounting is adopted).

Financial instruments are initially measured at fair value plus transactions costs, except where the instrument is classified ‘at fair value through profit or loss’ in which case transaction costs are expensed to profit or loss immediately.

Classification and subsequent measurement

Financial instruments are subsequently measured at either fair value, amortised cost using the effective interest rate method, or cost. Fair value represents the amount for which an asset could be exchanged or a liability settled, between knowledgeable, willing parties in arm’s length transaction. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted.

Amortised cost is calculated as:

a ) the amount at which the financial asset or financial liability is measured at initial recognition;
b ) less principal repayments;
c ) plus or minus the cumulative amortisation of the difference, if any, between the amount initially recognised and the maturity amount calculated using the effective interest method; and
d ) less any reduction for impairment.

The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that exactly discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense in profit or loss.

The classification of financial instruments depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and at the end of each reporting period for held to maturity assets.

(i) Financial assets at fair value through profit or loss

Financial assets are classified at ‘fair value through profit or loss’ when they are held for trading for the purpose of short term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(f) Financial instruments (Cont.)

(ii) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost .

Loans and receivables are included in current assets, except for those which are not expected to mature within 12 months after the end of the reporting period.

(iii) Held to maturity investments

Held to maturity investments are non derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost.

Held to maturity investments are included in non current assets, except for those which are expected to be realised within 12 months after the end of the reporting period, which will be classified as current assets.

If during the period the Group sold or reclassified more than an insignificant amount of the held to maturity investments before maturity, the entire held to maturity investments category would be tainted and reclassified as available for sale.

The Group did not hold any held to maturity investments in the current or comparative financial year.

(iv) Available for sale financial assets

Available for sale financial assets are non derivative financial assets that are either not suitable to be classified into other categories of financial assets due to their nature, or they are designated as such by management. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

Available for sale financial assets are included in non current assets, except for those which are expected to be realised within 12 months after the end of the reporting period.

(v) Financial liabilities

Non derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost. Fees payable on the establishment of loan facilities are recognised as transaction costs of the loan.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(f) Financial instruments (Cont.)

Derivative instruments

The Group designates certain derivatives as either:

(i) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); or
(ii) hedges of highly probable forecast transactions (cash flow hedges).

At the inception of the transaction the relationship between hedging instruments and hedged items, as well as the Group’s risk management objective and strategy for undertaking various hedge transactions is documented.

Assessments, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly effective in offsetting changes in fair values or cash flows of hedged items, are also documented.

(i) Fair value hedge

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the statement of comprehensive income, together with any changes in the fair value of hedged assets or liabilities that are attributable to the hedged risk.

(ii) Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is deferred to a hedge reserve in equity. The gain or loss relating to the ineffective portion is recognised immediately in the statement of comprehensive income.

Amounts accumulated in the hedge reserve in equity are transferred to the statement of comprehensive income in the periods when the hedged item will affect profit or loss.

(iii) Derivatives that do not qualify for hedge accounting

Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised immediately in profit or loss and are included in other income or other expenses.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Summary of Significant Accounting Policies (Cont.)
(f) Financial instruments (Cont.)

Impairment

Objective evidence that a financial asset is impaired includes default by a debtor, evidence that the debtor is likely to enter bankruptcy or adverse economic conditions in the stock exchange. At the end of each reporting period, the Group assess whether there is objective evidence that a financial asset has been impaired through the occurrence of a loss event. In the case of available for sale financial instruments, a significant or prolonged decline in the value of the instrument is considered to indicate that an impairment has arisen.

Where a subsequent event causes the amount of the impairment loss to decrease (e.g. payment received), the reduction in the allowance account (provision for impairment of receivables) is taken through profit and loss.

However, any reversal in the value of an impaired available for sale asset is taken through other comprehensive income rather than profit and loss.

Impairment losses are recognised through an allowance account for loans and receivables in the statement of comprehensive income.

Financial guarantees

Where material, financial guarantees issued which require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due, are recognised as financial liabilities at fair value on initial recognition.

The guarantee is subsequently measured at the higher of the best estimate of the obligation and the amount initially recognised less, when appropriate, cumulative amortisation. Where the entity gives guarantees in exchange for a fee, revenue is recognised under AASB 118 ‘Revenue’.’

The fair value of financial guarantee contracts has been assessed using a probability weighted discounted cash flow approach. The probability has been based on:

the likelihood of the guaranteed party defaulting in a period;
the proportion of the exposure that is not expected to be recovered due to the guaranteed party defaulting; and
the maximum loss exposed if the guaranteed party were to default.

Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options for immediate are recognised as a deduction from equity, net of any tax effects.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(f) Financial instruments (Cont.)

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non cash assets or liabilities assumed, is recognised in profit or loss.

When available for sale investments are sold, the accumulated fair value adjustments recognised in other comprehensive income are reclassified to profit or loss.

(g) Impairment of non financial assets

At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information and dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use to the asset’s carrying value. Value in use is calculated by discounting the estimated future cash flows of the asset or cash generating unit (CGU) at a pre tax discount rate reflecting the specific risks in the asset / CGU. Any excess of the asset’s carrying value over its recoverable amount is expensed to the statement of comprehensive income.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash generating unit to which the asset belongs.

Impairment losses recognised in respect of CGU’s are allocated first to reduce the carrying amount of goodwill to nil and then to the other assets in the unit in proportion to their carrying amount.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Assets, other than goodwill that have an allocated impairment loss are reviewed for reversal indicators at the end of each reporting period. After recognition of an impairment loss, the amortisation charge for the asset is adjusted in future periods to allocate the asset’s revised carrying amount on a systematic basis over its remaining useful life.

Impairment losses are recognised as an expense immediately, unless the relevant asset is property, plant and equipment held at fair value (other than investment property carried at a revalued amount) in which case the impairment loss is treated as a revaluation decrease as described in the accounting policy for property, plant and equipment.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(h) Interests in joint ventures

The Group’s shares of the assets, liabilities, revenue and expenses of joint controlled entities or assets have been included in the appropriate items of the consolidated financial statements. Details of the Group’s interests are shown in Note 25.

The Group’s interest in joint venture entities are brought to account using the equity method of accounting in the consolidated financial statements. The parent entity’s interest in joint venture entities are brought to account at cost.

Where the Group contributes assets to the joint venture or if the Group purchases assets from the joint venture, only the portion of the gain or loss that is not attributable to the Group’s share of the joint venture is recognised. The Group however will recognise the full amount of any loss when the contribution results in a reduction in the net realisable value of current assets or an impairment loss.

(i) Intangibles

Amortisation

Amortisation is based on the cost of an asset less its residual value.

Amortisation is recognised in profit or loss on a straight line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

(j) Cash and cash equivalents

Cash and cash equivalents includes deposits held at call with banks. Bank overdrafts are shown within short term borrowings in current liabilities on the statement of financial position.

(k) Employee benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled.

Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may satisfy vesting requirements. Those cashflows are discounted using market yields on national government bonds with terms to maturity that match the expected timing of cashflows.

Defined contribution schemes

Obligations for contributions to defined contribution superannuation plans are recognised as an employee benefit expense in profit or loss in the periods in which services are provided by employees.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(k) Employee benefits (Cont.)

Equity settled compensation

The Group operates equity settled share based payment employee share and option schemes. The fair value of the equity to which employees become entitled is measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account. The fair value of shares is ascertained as the market bid price. The fair value of options is ascertained using a Black Scholes pricing model which incorporates all market vesting conditions. The amount to be expensed is determined by reference to the fair value of the options or shares granted, this expense takes in account any market performance conditions and the impact of any non vesting conditions but ignores the effect of any service and non market performance vesting conditions.

Non market vesting conditions are taken into account when considering the number of options expected to vest. At the end of each reporting period, the Group revises its estimate of the number of options which are expected to vest based on the non market vesting conditions. Revisions to the prior period estimate are recognised in profit or loss and equity.

(l) Trade and other payables

Trade and other payables represent the liability outstanding at the end of the reporting period for goods and services received by the Group during the reporting period which remain unpaid. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability.

(m) Earnings per share

The Group presents basic and diluted earnings per share information for its ordinary shares. Basic earnings per share is calculated by dividing the profit attributable to owners of the company by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share adjusts the basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

(n) Income tax

The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income).

Current income tax expense charged to the profit or loss is the tax payable on taxable income calculated using applicable income tax rates enacted, or substantially enacted, as at the end of the reporting period. Current tax liabilities (assets) are therefore measured at the amounts expected to be paid to (recovered from) the relevant taxation authority.

Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses.

Current and deferred income tax expense (income) is charged or credited directly to equity instead of the profit or loss when the tax relates to items that are credited or charged directly to equity.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(n) Income tax (Cont.)

Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets also result where amounts have been fully expensed but future tax deductions are available. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates enacted or substantively enacted at the end of the reporting year. Their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability.

Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.

Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future.

Current assets and liabilities are offset where a legally enforceable right of set off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where a legally enforceable right of set off exists, the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled.

(o) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the Group, are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight line basis over the shorter of their estimated useful lives or the lease term.

Lease payments for operating leases, where substantially all of the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. The lease is not recognised in the statement of financial position.

Lease incentives under operating leases are recognised as a liability and amortised on a straight line basis over the life of the lease term.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(p) Revenue and other income

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as discussed below.

Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. Any consideration deferred is treated as the provision of finance and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue.

Sale of goods

Revenue from the sale of goods is recognised at the point of delivery as this corresponds to the transfer of significant risks and rewards of ownership of the goods and the cessation of all involvement in those goods.

Grant revenue

Grant revenue is recognised in the statement of comprehensive income when the entity obtains control of the grant, it is probable that the economic benefits gained from the grant will flow to the entity and the amount of the grant can be measured reliably.

Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight line basis.

Interest revenue

Interest revenue is recognised using the effective interest rate method, which for floating rate financial assets is the rate inherent in the instrument.

Provision of services

Revenue recognition relating to the provision of services is determined with reference to the stage of completion of the transaction at the end of the reporting period and where the outcome of the contract can be estimated reliably. Stage of completion is determined with reference to the services performed to date as a percentage of total anticipated services to be performed. Where the outcome cannot be estimated reliably, revenue is recognised only to the extent that related expenditure is recoverable.

All revenue is stated net of the amount of goods and services tax (GST).

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(q) Goods and services tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the statement of financial position are shown inclusive of GST.

Cash flows are presented in the statement of cash flows on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(r) Foreign currency transactions and balances

Functional and presentation currency

The functional currency of each of the Group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transaction and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year end exchange rate. Non monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange differences arising on the translation of non monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income.

Group companies

The financial results and position of foreign operations whose functional currency is different from the Group’s presentation currency are translated as follows:

assets and liabilities are translated at year end exchange rates prevailing at that reporting date;
income and expenses are translated at average exchange rates for the period where the average rate approximates the rate at the date of the transaction; and
retained earnings are translated at the exchange rates prevailing at the date of the transaction.

Exchange differences arising on translation of foreign operations are transferred directly to the Group’s foreign currency translation reserve in the statement of financial position. These differences are recognised in the statement of comprehensive income in the period in which the operation is disposed.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Summary of Significant Accounting Policies (Cont.)
(s) Going concern

The financial statements have been prepared on a going concern basis on the understanding that there is reasonable expectation that sufficient share proceeds and borrowings will continue to be forthcoming until trading revenues are strong enough to meet ongoing expenditure.

The business operated by Digislide Holdings Limited is transitioning into the commercialisation of its products and does not yet produce sufficient trading revenue to cover its on going costs and as such, there is some material uncertainty regarding the Group’s status as a going concern.

The going concern assumption is affected by:

The business currently does not generate sufficient trading revenue to meet its current cost structure and is reliant on shareholder loans and capital raising to fund cash flow; and
The current liabilities exceed the current assets; and
The yet to be received credit balance from the ATO, as acknowledge by the ATO, being the balance of R&D rebates payable less costs incurred (see Note 3); and
The nature of the liquidity of the company is limited by the ability of the Group’s stock to be readily converted to cash within a reasonable time to assist in repayment of debts as they fall due.

However, there are certain factors which mitigate the above as follows:

Currently the Group’s cash flow needs are being met by funds from investors ($1,738,846 share capital raised in the 12 months to 30 June 2011); and
The Group is able to draw down on a $4.86M standby equity facility; and
There is an increased range of products ready for sale; and
The Group is also in discussions for additional distribution contracts which are expected to enable the Group to increase sales sufficiently to cover its costs and operate as a going concern;
Digislide is in discussions with parties to raise up to $5M in equity and a further $20M comprising debt and equity funding.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(t) Critical accounting estimates and judgments

The Directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group.

Key estimates - impairment of plant and equipment

The Group assesses impairment at the end of each reporting period by evaluating conditions specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value in use calculations which incorporate various key assumptions.

Key judgments - provision for impairment of receivables

The value of the provision for impairment of receivables is estimated by considering the ageing of receivables, communication with the debtors and prior history.

(u) Adoption of new and revised accounting standards

During the current year, the Group adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations which became mandatory.

The adoption of these Standards has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation of the impact the adoption of these Standards and Interpretations has had on the financial statements of Digislide Holdings Limited and Controlled Entities.

==> picture [460 x 238] intentionally omitted <==

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

Standard Name Impact
AASB 2010 3 / AASB 2009 5 Amendments and further No significant changes on adoption of these
Amendments to Australian Accounting Standards standards.
Group Cash settled Share based Payment Transactions
AASB 2009 8 Amendments to Australian Accounting No significant changes on adoption of these
Standards – Group Cash settled Share based Payment standards.
Transactions
AASB 2009 9 Amendments to Australian Accounting No impact since the entity is not a first time adopter
Standards – Additional Exemption for First time of IFRS.
Adopters / AASB 2010 1 Limited exemption from
comparative AASB 7 disclosures for first time adopters
AASB 2009 10 Amendments to Australian Accounting No significant changes on adoption of this standard.
Standards – Classification of Rights Issues
Interpretation 19 Extinguishing liabilities with equity No significant changes on adoption of this standard.
instruments
----- End of picture text -----

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(v) New accounting standards for application in future periods

The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods. The Group has decided against early adoption of these standards. The following table summarises those future requirements, and their impact on the Group:

==> picture [464 x 542] intentionally omitted <==

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

Standard name Effective Requirements Impact
date for
entity
-Clarification of the definition of a
related party
AASB 124 Related Party
30 June -Requirement to disclose commitments Minimal impact
Disclosures and amending
2012 to related parties expected
standard AASB 2009 12
-Disclosure exemptions for government
related entities
-Changes to the classification and
AASB 9 Financial Instruments measurement requirements for financial The impact of
30 June
and amending standards assets and financial liabilities. AASB 9 has not yet
2014
AASB 2009 11 / AASB 2010 7 -New rules relating to derecognition of been determined.
financial instruments.
Changes where the entity is subject to
AASB 2009 14 Amendments
minimum funding requirements and
to Australian Interpretation – 30 June No significant
makes an early payment to cover these
Prepayments of a Minimum 2012 impact expected.
requirements in relation to defined
Funding Requirement
benefit plans.
AASB 2010 4 / 2010 5 Makes changes to a number of standards
Amendments and further / interpretations including:
amendments to Australian 30 June -Clarification of the content of the
Accounting Standards 2012 statement of changes in equity
arising from the Annual -Financial instrument disclosures
Improvements Project -Fair value of award credits
AASB 2010 6 Amendment Requires additional disclosures
to Australian Accounting 30 June regarding for example, remaining No impact
Standards – Disclosures on 2012 risks where an entity has transferred a expected.
transfers of financial assets financial asset
AASB 2010 8 Amendment Adds a presumption to AASB 112 that
to Australian Accounting 30 June the recovery of the carrying amount of No impact
Standards – Deferred tax: 2013 an investment property at fair value will expected.
Recovery of underlying assets be through sale.
AASB 2010 9 / 2010 10
Amendment to Australian No impact since
Accounting Standards – 30 June the entity is not a
Makes amendments to AASB 1
Severe hyperinflation and 2012 first time adopter
removal of fixed dates for first of IFRS.
time adopters
----- End of picture text -----

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(v) New accounting standards for application in future periods (Cont.)

==> picture [464 x 579] intentionally omitted <==

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

Little impact
AASB 1054 Additional since most of
Australian disclosures / Collates the Australian specific the disclosures
AASB 2011 1 Amendments 30 June disclosures into one Accounting required by AASB
to Australian Accounting 2012 Standard rather than including them 1054 are already
Standards arising from Trans within a number of different standards. included within
Tasman convergence the financial
statements.
AASB 2011 2 Amendments
The entity is not
to Australian Accounting
Highlights the disclosures not required adopting the RDR
Standards arising from 30 June
in AASB 1054 for entities applying the and therefore this
Trans Tasman convergence 2014
RDR. standard is not
– Reduced Disclosure
relevant.
Requirements
AASB 2011 3 Amendments Standard is applicable for whole of
Standard is not
to Australian Accounting government and general government
applicable and
Standards – Orderly 30 June financial statements only. AASB
therefore there will
Adoption of Changes to ABS 2013 2011 provides details of changes in
be no impact on
GFS Manual and Related accounting treatment due to the
adoption.
Amendments Government Finance Statistics manual.
The Group
will review its
controlled entities
AASB 10 includes a new definition of
to determine
control, which is used to determine
whether they
which entities are consolidated, and
should be
describes consolidation procedures. The
consolidated
Standard provides additional guidance
under AASB 10,
to assist in the determination of control
AASB 10 Consolidated no changes are
where this is difficult to assess.
Financial Statements / AASB anticipated
11 Joint Arrangements / AASB All joint ventures
AASB 11 focuses on the rights
12 Disclosures of Interests of the group are
and obligations of a joint venture
in Other Entities, AASB 127 equity accounted
30 June arrangement, rather than its legal form
Separate Financial Statements and therefore
2014 (as is currently the case). IFRS 11 requires
and AASB 128 Investments in minimal impact is
equity accounting for joint ventures,
Associates. expected due to
eliminating proportionate consolidation
[These are expected to be the adoption of
as an accounting choice.
released by the AASB in July / AASB 11.
August].
AASB 12 includes disclosure
Additional
requirements for all forms of interests
disclosures will be
in other entities, including joint
required under
arrangements, associates, special
AASB 12 but there
purpose vehicles and other off balance
will be no changes
sheet vehicles.
to reported
position and
performance.
----- End of picture text -----

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

1. Summary of Significant Accounting Policies (Cont.)

(v) New accounting standards for application in future periods (Cont.)

AASB 13 Fair Value 30 June Measurement [expected to 2014 be released by AASB in July / August 2011].

AASB 13 provides a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across Accounting Standards but does not change when fair value is required or permitted.

There are a number of additional disclosure requirements.

Fair value estimates currently made by the entity will be revised and potential changes to reported values may be required.

The entity has not yet determined the magnitude of any changes which may be needed.

Some additional disclosures will be needed.

2. Cash and Cash Equivalents

	2011	2010
	$	$
Cash at bank and in hand	2,546	2,949
Total cash and cash equivalents	2,546	2,949

Reconciliation of cash

Cash at the end of the financial year as shown in the statement of cash flows is reconciled to items in the statement of financial position as follows:

Cash and cash equivalents		2,546	2,949
Bank overdrafts	10	-	(10)
Balance asper statement of cash fows		2,546	2,939

3. Trade and Other Receivables

CURRENT	2011 2010
	$ $
Trade receivables	241,956 112,877
Government subsidies receivable	1,200,248 530,000
Other receivables	7,560 2,560
Total current trade and other receivables	1,449,764 645,437

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

3. Trade and Other Receivables

Credit risk

The Group has no significant concentration of credit risk with respect to any single counterparty or group of counterparties. The class of assets described as ‘trade and other receivables’ is considered to be the main source of credit risk related to the Group.

On a geographical basis, the Group only has significant credit risk exposures in Australia.

The following table details the Group’s trade and other receivables exposure to credit risk (prior to collateral and other credit enhancements) with ageing analysis and impairment provided for thereon. Amounts are considered as ‘past due’ when the debt has not been settled, within the terms and conditions agreed between the Group and the customer or counter party to the transaction. Receivables that are past due are assessed for impairment by ascertaining solvency of the debtors and are provided for where there is objective evidence indicating that the debt may not be fully repaid to the Group.

2011	Note Gross amount Past due and impaired < 30 31-90 > 90 Within initial trade terms
	$ $ $ $ $ $

Related party receivables	28(c) 248,086 - - - - 248,086
Other receivables	1,200,248 - - - 559,605 640,643
Total	1,448,334 - - - 559,605 888,729
2010
Trade and term receivables	112,877 - - - 112,877 -
Other receivables	532,560 - - - 155,000 377,560
Total	645,437 - - - 267,877 377,560

Also included in other receivables, is the amount of $559,605 relating to the 2010 ATO R&D rebate. The Company has been engaged with the ATO in an audit of the 2009 and 2010 R&D claims during the year. The 2009 claim was processed paid and settled whilst $559,605 of the $660,639 claimed for 2010 is still outstanding. During the audit, several matters were raised with respect to the treatment adopted by the external R&D Consulting Specialist engaged by Digislide to complete the 2009 claim. The Group has challenged the view being adopted by the ATO in regards to the treatment of external contractors and the inconsistencies being adopted by the ATO from one year to the next. The 2010 claim has also been amended by the ATO and the net result for the 2009 and 2010 financial years after GST penalties have been offset is a receivable of $19,783. The Group is contesting both the reversal of the 2009 claim and the amendment of the 2010 claim.

The remaining receivables are not impaired.

The Group does not hold any collateral over any receivables balances.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Property, Plant and Equipment

	2011	2010
	$	$
PLANT AND EQUIPMENT
Plant and equipment
At Directors’ valuation	58,749	58,749
At cost	27,315	27,315
Accumulated depreciation	(68,783)	(62,550)
Totalplant and equipment	17,281	23,514
Ofce equipment
At Directors’ valuation	44,002	44,002
At cost	158,656	40,677
Accumulated depreciation	(51,288)	(28,271)
Total ofce equipment	151,370	56,408
Computer software
At cost	95,356	7,191
Accumulated depreciation	(13,483)	(315)
Total computer software	81,873	6,876
Leasehold improvements
At cost	170,094	170,094
Accumulated amortisation	(19,621)	(1,149)
Total leasehold improvements	150,473	168,945
Manufacturing plant
At Directors’ valuation	147,775	147,775
At cost	463,000	463,000
Accumulated depreciation	(160,966)	(112,372)
Total manufacturing plant	449,809	498,403
Tooling
At Directors’ valuation	104,278	104,278
Accumulated depreciation	(67,914)	(63,985)
Total tooling	36,364	40,293
Artwork
At cost	36,709	36,709
Total artwork	36,709	36,709
Totalproperty, plant and equipment	923,879	831,148

The Group’s plant and equipment was revalued at 30 June 2008 by the Directors. The revaluation deficit was debited to an expense account.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

4. Property, Plant and Equipment (Cont.)

(a) Movements in Carrying Amounts

Movement in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year:

	Plant and Equipment	Ofce Equipment	Computer Software	Improvements	Manufacturing Plant	Tooling	Artwork	Total
Balance at 30 June 2011	$	$	$	$	$	$	$	$
Balance at the beginningofyear	23,514	56,408	6,876	168,945	498,403	40,293	36,709	831,148
Additions	-	117,979	88,165	-	-	-	-	206,144
Depreciation expense	(6,233)	(23,017)	(13,168)	(18,472)	(48,594)	(3,929)	-	(113,413)
Balance at 30 June 2011	17,281	151,370	81,873	150,473	449,809	36,364	36,709	923,879
Balance at 30 June 2010
Balance at the beginningofyear	33,531	31,667	-	2,336	87,206	44,626	36,709	236,075
Additions	-	40,677	7,191	170,094	463,000	-	-	680,962
Transfers	2,336	-	-	(2,336)	-	-	-	-
Depreciation expense	(12,353)	(15,936)	(315)	(1,149)	(51,803)	(4,333)	-	(85,889)
Balance at 30 June 2010	23,514	56,408	6,876	168,945	498,403	40,293	36,709	831,148

(b) Leased assets

Office Equipment and Computer Equipment include the following amounts where the Group is a lessee under a finance lease:

	2011 2010
	$ $
Cost	27,650 27,650
Accumulated depreciation	(13,464) (5,484)
Net book value	14,186 22,166

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

==> picture [47 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

5. Inventories

CURRENT	2011 2010
	$ $
At cost:
Work inprogress	128,741 137,067
Finishedgoods	129,008 286,096
	257,749 423,163
At net realisable value:
Merchandise	301,714 301,714
Total inventories	559,463 724,877

Other Financial Assets

CURRENT
Loans and receivables	-	100,000
Total current assets	-	100,000
NON CURRENT
Available for sale fnancial assets	292,500	292,500
Total non current assets	292,500	292,500

Available for sale financial assets comprise of investments in the ordinary issued capital of various entities. There are no fixed returns or fixed maturity dates attached to these investments.

The underlying value in these investments is primarily intellectual property. The value will be realised if/when the companies are able to sell their resultant products.

7. Intangible Assets

Licenses and franchises
Cost	50,000	-
Net carryingamount	50,000	-
Intellectualproperty
Cost	4,001,904	3,242,506
Accumulated amortisation	(645,298)	(164,662)
Net carryingamount	3,356,606	3,077,844
Total Intangibles	3,406,606	3,077,844

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

8. Other Assets

	2011	2010
CURRENT	$	$
Prepayments	305,787
Trade dollars	350,000	137,067
Provision for impairment	(70,000)	286,096
Total current other assets	585,787	423,163
NON CURRENT
Trade dollars	134,639	1,764,885
Provision for impairment	(67,044)	(393,139)
Total non current other assets	67,595	1,371,746

The Group has classified all of its BBX trade dollars as current as it plans to spend them investing in real estate opportunities. The investments will also depend on Digislide being able to raise further funds in increase revenue as only a portion of these purchases are payable by BBX trade dollars. Construction contracts will be entered into with non related parties with payments made directly to those entities, with overall project management undertaken by a related party entity

	Licences and franchises Intellectual property Total
	$ $ $
Year ended 30 June 2010
Balance at the beginningof theyear	- 2,501,604 2,501,604
Additions	- 740,902 740,902
Amortisation	- (164,662) (164,662)
Closingvalue at 30 June 2010	- 3,077,844 3,077,844
Year ended 30 June 2011
Balance at the beginningof theyear	- 3,077,844 3,077,844
Additions	50,000 759,398 809,398
Amortisation	- (480,636) (480,636)
Closingvalue at 30 June 2011	50,000 3,356,606 3,406,606

Intangible assets have finite useful lives. The current amortisation charges for intangible assets are included under depreciation and amortisation expense in the statement of comprehensive income.

Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably. Because the Group has commenced commercial production of its key products, costs of development have been capitalised since 1 July 2008. These costs are capitalised net of any AusIndustry Grants. The value of the patents and trademarks have been recognised at cost subject to the going concern criteria that the recoverable amounts of these intangible assets, as determined by value in use exceed their carrying amount.

The recoverability of the intangible assets is dependent on the successful development and exploitation of the intellectual property and no impairment losses have been brought to account. Amortisation of development costs has now commenced as development has reached final completion and sales are expected to reach commercial quantities

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

==> picture [47 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

Trade and Other Payables

		2011 $	2010
			$
CURRENT
Unsecured liabilities
Tradepayables		980,923	1,277,134
Employee benefts		612,030	151,797
Sundry payables and accrued expenses		192,171	138,233
Other relatedparties		-	(485)
Director Honoraria		160,000	167,192
Relatedparty payables	28(d)	1,169,783	939,682
Total current trade and otherpayables		3,114,907	2,673,553
NON CURRENT
Unsecured liabilities
Otherpayables		38,706	44,706
Total non current trade and otherpayables		38,706	44,706

10. Borrowings

CURRENT
Unsecured liabilities:
Bank overdraft		-
Bank loans		-
Other fnancial liabilities		1,552,602
		1,552,602
Secured liabilities:
Lease liabilitysecured	14	5,333
Total current borrowings		1,557,935
NON CURRENT
Secured liabilities:
Lease liabilitysecured	14	17,411
Total non current borrowings		17,411
Total borrowings		1,575,346
loyee Benefts
CURRENT
Longservice leave		28,000
Provision for employee benefts		104,893
Total employee benefts		132,893

11. Employee Benefits

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

==> picture [48 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

12. Issued Capital

	2011 2010
	$ $
66,134,340 (2010: 52,941,417) Ordinary	25,108,737 23,370,091
Share issue costs	(524,678) (524,678)
Total	24,584,059 22,845,413

(a) Ordinary shares

The holders of ordinary shares are entitled to participate in dividends and the proceeds on winding up of the company. On a show of hands at meetings of the company, each holder of ordinary shares has one vote in person or by proxy, and upon a poll each share is entitled to one vote.

(b) Options

(i) For information relating to the Digislide Holdings Limited and Controlled Entities employee option plan, including details of options issued, exercised and lapsed during the financial year and the options outstanding at year end, refer to Note 30 Share based payments.

(ii) For information relating to share options issued to key management personnel during the financial year, refer to Note 30.

(c) Capital Management

Management controls the capital of the Group in order to ensure the entity continues as a going concern as well as to maintain optimal returns to shareholders and benefits for other stakeholders. Capital consists of share capital, retained profit and non controlling interests of the Group.

The Group’s debt and capital includes those items shown in the table below.

There are no externally imposed capital requirements.

The Group monitors capital through the gearing ratio, which is calculated as net debt divided by total capital. Net debt is calculated as total borrowings less cash and cash equivalents. Total capital is defined as equity per the statement of financial position plus net debt.

There have been no changes in the strategy adopted by management during the year. The gearing ratios for the year ended 30 June 2011 and 30 June 2010 are as follows:

Total borrowings Trade and otherpayables Less Cash and cash equivalents Net debt Total equity Total capital Gearingratio	10 9 2	1,575,346 3,153,613 (2,546) 4,726,413 3,539,276 8,265,689 57	868,538 2,718,258 (2,949) 3,583,847 4,050,643 7,634,490 47

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

Earnings per Share
(a) Reconciliation of earnings to profit or loss from continuing operations

	2011	2010
	$	$
Loss from continuingoperations	(2,367,315)	(4,741,350)
Loss attributable to non controlling equity interest in respect of continuing operations	(45,579)	-
Earnings used to calculate basic EPS from continuingoperations	(2,,412,894)	(4,741,350)
(b) Earnings used to calculate overall earnings per share
Earnings used to calculate overall earningsper share	(2,412,894)	(4,741,350)

	No.	No.
Weighted average number of ordinary shares outstanding during the year used in calculatingbasic EPS	58,060,114	47,965,561

14. Capital and Leasing Commitments

(a) Finance lease commitments

	2011 2010
	$ $
Payable minimum leasepayments:
no later than 1year	8,311 7,672
between 1year and 5years	21,340 29,012
Minimum leasepayments	29,651 36,684
Less: fnance changes	(6,908) (10,533)
Present value of minimum leasepayments	22,743 26,151

A finance lease is in place for a photocopier and has a term of 5 years.

(b) Operating lease commitments premises rental

Non cancellable operating leases contracted for but not capitalised in the financial statements Payable minimum lease payments:

no later than 1year	113,400	93,864
between 1year and 5years	453,600	-
greater than 5years	75,600	-
Total operatinglease commitments	642,600	93,864

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

15. Financial Risk Management

The main risks the Group is exposed to through its financial instruments are credit risk, liquidity risk and market risk consisting of interest rate risk, foreign currency risk and equity price risk.

The Group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable, loans to and from subsidiaries and related parties and convertible notes.

The totals for each category of financial instruments, measured in accordance with AASB 139 as detailed in the accounting policies to these financial statements, are as follows:

accounting policies to these fnancial statements, are as follows:
		2011	2010
		$	$
Financial Assets
Cash and cash equivalents	2	2,546	2,949
Trade dollars	7	1,398,810	1,651,746
Loans and receivables	3	1,449,764	645,437
Available for sale fnancial assets:
- at cost
- unlisted investments	6	292,500	292,500
Total fnancial assets		3,143,620	2,592,632
Financial Liabilities
Financial liabilities at amortised cost
- Trade and otherpayables	9	3,153,613	2,718,258
- Borrowings	10	1,575,345	868,538
Total fnancial liabilities		4,728,958	3,586,796

Financial risk management policies

The Board of Directors has overall responsibility for the establishment of the Group’s financial risk management framework. This includes the development of policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk and the use of derivatives.

Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The day to day risk management is carried out by the Group’s finance function under policies and objectives which have been approved by the Board of Directors. The Chief Financial Officer has been delegated the authority for designing and implementing processes which follow the objectives and policies. This includes monitoring the levels of exposure to interest rate and foreign exchange rate risk and assessment of market forecasts for interest rate and foreign exchange movements.

The Board receives monthly reports which provide details of the effectiveness of the processes and policies in place.

The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options.

Mitigation strategies for specific risks faced are described below:

Financial Risk Management (Cont.)
.
(a) Credit risk

Exposure to credit risk relating to financial assets arises from the potential non performance by counterparties of contract obligations that could lead to a financial loss to the Group and arises principally from the Group’s receivables.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

It is the Group’s policy that all customers who wish to trade on credit terms undergo a credit assessment process which takes into account the customer’s financial position, past experience and other factors. Credit limits are then set based on ratings in accordance with the limits set by the Board, these limits are reviewed on a regular basis.

Goods are sold subject to retention of title clauses, so that in the event of non payment the Group may have a secured claim.

Credit risk exposures

The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period, excluding the value of any collateral or other security held, is equivalent to the carrying value and classification of those financial assets (net of any provisions) as presented in the statement of financial position.

The Group has no significant concentration of credit risk with any single counterparty or group of counterparties. Details with respect to credit risk of Trade and Other Receivables are provided in Note 3.

Trade and other receivables that are neither past due or impaired are considered to be of high credit quality. Aggregates of such amounts are as detailed at Note 3.

(b) Liquidity risk

Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:

preparing forward looking cash flow analysis in relation to its operational, investing and financial activities which are monitored on a monthly basis;
monitoring undrawn credit facilities;
obtaining funding from a variety of sources; and
comparing the maturity profile of financial liabilities with the realisation profile of financial assets.

Typically, the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days.

The available funds to the Group are discussed in note 29.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

15. Financial Risk Management (Cont.)

The tables below reflect an undiscounted contractual maturity analysis for financial liabilities.

Financial guarantee liabilities are treated as payable on demand since the Group has no control over the timing of any potential settlement of the liabilities.

The timing of cash flows presented in the table to settle financial liabilities reflects the earliest contractual settlement dates and does not reflect management’s expectations that banking facilities will be rolled forward. The amounts disclosed in the table are the undiscounted contracted cash flows and therefore the balances in the table may not equal the balances in the statement of financial position due to the effect of discounting.

Financial liability maturity analysis Non derivative

	Within 1 Year	Within 1 Year	1 to	5 Years	Total	Total
	2011	2010	2011	2010	2011	2010
	$	$	$	$	$	$
Financial liabilities due forpayment
Bank overdrafts and loans	-	286,416	-	-	-	286,416
Convertible notes	1,552,602	498,971	-	-	1,552,602	498,971
Trade and other payables (excluding estimated annual leave)	3,114,907	2,674,037	38,706	104,221	3,153,613	2,778,258
Finance lease liabilities	5,333	4,047	17,411	22,104	22,744	26,151
Total contractual outfows	4,672,842	3,463,471	56,117	126,325	4,728,959	3,589,796

The timing of expected outflows is not expected to be materially different from contracted cashflows.

Financial assets pledged as collateral

No financial assets have been pledged as security for any financial liability.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

15. Financial Risk Management (Cont.)

(c) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.

i. Interest rate risk

Exposure to interest rate risk arises on financial assets and financial liabilities recognised at the end of the reporting period, whereby a future change in interest rates will affect future cash flows or the fair value of fixed rate financial instruments. The Group is also exposed to earnings volatility on floating rate instruments.

Interest rate risk is managed by maintaining borrowings at fixed interest rates. There is therefore no exposure risk from interest rate fluctuation.

ii. Foreign exchange risk

Exposure to foreign exchange risk may result in the fair value or future cash flows of a financial instrument fluctuating due to movement in foreign exchange rates of currencies in which the Group holds financial instruments which are other than the AUD functional currency of the Group.

The following table shows the foreign currency risk on the financial assets and liabilities of the Group’s operations denominated in currencies other than the functional currency of operations.

	Net fnancial assets /(liabilities) in AUD $
	USD Yen Total AUD
	$ $ $
2011
Trade and otherpayables	63,036 163,586 226,622
2010
Trade and otherpayables	65,865 - 65,865

iii. Price risk

Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices of securities held being available for sale or fair value through profit and loss.

Given the nature of the Group’s investments, price risk is minimal.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

15. Financial Risk Management (Cont.)

Net fair values

Fair value estimation

The fair values of financial assets and financial liabilities are presented in the following table and can be compared to their carrying values as presented in the statement of financial position. Fair values are those amounts at which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm’s length transaction.

Fair values derived may be based on information that is estimated or subject to judgment, where changes in assumptions may have a material impact on the amounts estimated. Areas of judgment and the assumptions have been detailed below. Where possible, valuation information used to calculate fair value is extracted from the market, with more reliable information available from markets that are actively traded. In this regard, fair values for listed securities are obtained from quoted market bid prices. Where securities are unlisted and no market quotes are available, fair value is obtained using discounted cash flow analysis and other valuation techniques commonly used by market participants.

	2011 2010 2011 2010
	Net Carrying Value Net Fair Value Net Carrying Value Net Fair Value
Financial assets	$ $ $ $
Cash and cash equivalents	2,546 2,546 2,949 2,949
Trade and other receivables	1,449,764 1,449,764 818,156 818,156
Trade Dollars	1,398,810 1,398,810 1,651,746 1,651,746
Available-for-sale fnancial assets:
at fair value
- unlisted investments	292,500 292,500 292,500 292,500
Total available for sale fnancial assets	292,500 292,500 292,500 292,500
Total fnancial assets	3,143,620 3,143,620 2,765,351 2,765,351
Financial liabilities
Trade and otherpayables	3,153,613 3,153,613 2,778,258 2,778,258
Bank overdraft	- - 283,416 283,416
Convertible notes	1,552,602 1,552,602 498,971 498,971
Lease liability	22,744 22,744 26,151 26,151
Total fnancial liabilities	4,728,959 4,728,959 3,586,796 3,586,796

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

==> picture [47 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

16. Revenue and Other Income

	2011 2010
	$ $
Sales revenue
- sale ofgoods	187,268 614,118
-provision of services	138,636 -
	325,904 614,118
Other revenue
- interest received	- 3,219
Total revenue	325,904 617,337

For details of revenue from related parties, refer to note 28.

Other Income
Proft on sale of minority interest (1.7%) in VSDN	87,717	0
Other income	19,794	17,938
Governmentgrants	950,257	464,007
	1,057,768	481,945

17. Result for the Year

The result for the year includes the following specific expenses

Interest expense on fnancial liabilities at amortised cost
- external	5,559	1,829
- other relatedparties	471,464	421,969
Total fnance costs	477,023	423,798
Other expenses:
Depreciation, amortisation and impairments	342,100	423,549
Superannuation contributions	67,818	-
Bad debts	350,644	34,316
Rental expense on operatingleases:
- Minimum leasepayments	100,667	92,276

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

18. Income Tax Expense

(a) The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax expense as follows:

	2011	2010
	$	$
Prima facie tax payable on proft from ordinary activities before income tax at
30% (2010: 30%)
-parent entity	(553,334)	(1,422,384
- consolidatedgroup	(170,534)	945
Add:
Tax efect of:
- non deductible depreciation	34,024	24,766
- superannuationpayable	19,656	26,429
- non deductible entertainment	-	41
- amortisation of Intellectual Property	144,191	-
- fnes	16,376	-
- non deductible expenses	58,988	-
- Accountingexpenditure subject to R&D tax concession	162,816	-
- Debt written of	30,000	-
- movement in leaveprovisions	19,598	-
- R&D tax ofset	525,775	-
- tax losses carried forward	739,704	1,856,273
-	1,027,260	486,070
Less:
Tax efect of:
- deductible depreciation	51,604	48,916
- movement in leaveprovisions	-	25,808
- movement in impairment of trade dollars	74,455	59,580
- investment allowance	-	69,450
- blackhole expenditure - R&D tax concession - EMDGgrant receivable Income tax expense	132,002 769,199 - -	123,316 112,500 46,500 -

19. Operating Segments

The Group has no material operations outside Australia and operates wholly in the market for the development and commercialisation of miniature projection technologies.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

==> picture [47 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

20. Tax

	2011 2010
	$ $
GST receivable	29,420 72,719
Current tax receivable	29,420 72,719

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following:

Tax losses 4,854,687 4,161,482

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therein.

21. Dividends

No dividends were paid or declared during the year.

22. Interests of Key Management Personnel

The totals of remuneration paid to key management personnel of the company and the Group during the year are as follows:

Short term employee benefts	759,333	719,390
Post employment benefts	53,940	51,174
Share basedpayments	135,866	-
	949,139	770,564

The Remuneration Report contained in the Directors’ Report contains details of the remuneration paid or payable to each member of the Group’s key management personnel for the year ended 30 June 2011.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

22. Interests of Key Management Personnel (Cont.)

Key management personnel options and rights holdings

Details of options provided as remuneration and shares issued on the exercise of such options together with terms and conditions of the options can be found in the Remuneration Report within the Directors’ Report.

30 June 2011	Balance at	Granted	Exercised	Other	Balance	Vested	Vested and
	beginning	as remu-		changes	at the	during	exercisable
	of year	neration			end of	the year
					year
Directors
Ms Luceille Outhred	450,000	400,000	-	-	850,000	-	-
Other KMP
Jef King	-	300,000	-	-	300,000	-	-
Kevin Soper	-	88,000	-	-	88,000	-	-
Peter Rubinshtein	-	60,000	-	-	60,000	-	-
	450,000	848,000	-	-	1,298,000	-	-

30 June 2010	Balance at	Granted	Exercised	Other	Balance	Vested	Vested and
	beginning	as remu-		changes	at the	during	exercisable
	of year	neration			end of	the year
					year
Directors
Ms Luceille Outhred	450,000	-	-	-	450,000	-	-
	450,000	-	-	-	450,000	-	-

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

22. Interests of Key Management Personnel (Cont.)

Key management personnel shareholdings

The number of ordinary shares in Digislide Holdings Limited and Controlled Entities held by each key management person of the Group and/or their controlled entities during the financial year is as follows:

	Balance at	On exercise of		Other changes	Balance at end
	beginning of	options		during the	of year
	year			year
30 June 2011
Directors
Ms Luceille Outhred	8,050,539		-	1,679,879	9,730,418
Mr Malcolm Leahy	948,389		-	265,581	1,213,970
Mr Leon Milford	101,600		-	395,997	497,597
Mr Grant Chapman	-		-	321,242	321,242
Other KMP
Mr Kevin Soper	3,746,204		-	-	3,746,204
Mr Peter Rubinshtein	100,000		-	1,064,677	1,164,677
Mr Jef King	4,250		-	97,388	101,638
	12,950,982			3,824,764	16,775,746

	Balance at	On exercise of		Other changes	Balance at end
	beginning of	options		during the	of year
	year			year
30 June 2010
Directors
Ms Luceille Outhred	7,231,499		-	819,040	8,050,539
Mr Malcolm Leahy	622,378		-	286,.011	948,389
Mr Leon Milford	61,600		-	40,000	101,600
Other KMP
Mr Kevin Soper	3,580,872		-	165,332	3,746,204
Mr Peter Rubinshtein	100,000		-	-	100,000
Mr Jef King	-		-	4,250	4.250
	11,636,349		-	1,314,633	12,950,982

Other key management personnel transactions

For details of other transactions with key management personnel, refer to Note 28: Related Party Transactions.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

23. Controlled Entities

(a) Controlled entities

	Country of	Percentage	Percentage
	Incorporation	Owned (%)*	Owned (%)*
		2011	2010
Parent Entity:
Digislide Holdings Limited	Australia	100	100
Subsidiaries:
Digislide Americas	USA	100	100
Electronics Extraordinaire	Australia	100	100
VSDN Australia PtyLtd	Australia	90	100

Percentage of voting power is in proportion to ownership

(b) Acquisition of controlled entities

On 18 February 2010, the parent company incorporated VSDN Australia Pty Ltd for the purpose of gaining a licence to market and distribute the Virtual Streaming Distribution Network technologies which had been developed and commercialised by Wise Sight Technologies Inc (China). The Australia and New Zealand marketing licence was executed in January 2011.

Since that time,VSDN Australia Pty Ltd has issued 412,500 shares for $412,500, and Digislide Holdings has sold 88,980 shares for $88,980, resulting in Digislide now owning 90% of VSDN Australia Pty Ltd. Thus, subsequent investment in VSDN Australia Pty Ltd by other parties has decreased the parent company’s percentage of ownership.

Revenue of VSDN Australia Pty Ltd included in the consolidated revenue of the Group was NIL with a profit of $ (403,989).

24. Investments Accounted for Using the Equity Method

	2011	2010
Associated companies	$ 25,000 25,000	$ - -

25. Joint Venture

A controlled entity, Digislide Holdings Ltd, has a 50.0% interest in Digismart Commerce Limited, a Hong Kong registered company.

The joint venture, under license to utilise the intellectual property provided by the other venturer, will develop the “Digismart swap”. The company did not trade during the 2011 financial year.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

26. Associated Companies

Interests are held in the following associated companies:

Name	Principal Activity	Country	Share	Ownership	Ownership	Carrying Amount
		of Incorp		Interest*		of Investment
		oration
				2011	2010	2011 2010
				%	%	$	$
Unlisted:
	Commercialisation
	of virtual streaming
VSDNet Canada	distribution	Canada	25%	25	-	25,000	-
	network
	technologies
						25,000	-

Percentage of voting power in proportion to ownership
(a) Summarised presentation of aggregate assets, liabilities and performance of associates

	2011	2010
	$	$
Net assets	-	-
Revenues	-	-
Loss after income tax of associates	(100,000)	-

None of the Group’s equity accounted investee’s are publicly listed entities and consequently do not have published price quotations.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

27. Contingent Liabilities and Contingent Assets

Contingent Liabilities

As discussed in note 3, the Group has the following contingent liability.

During the 2011 financial year, the Company was subjected to two ATO audits on the 2009 and 2010 financial year R&D claims.

The 2009 financial year claim had previously been approved and processed, and had been paid to the Company in August 2010.

Furthermore, the initial audit advice stated “... the Commissioner did not identify any issues with the following expenditure and as such they are not disputed by the Commissioner”. However, the Company was subsequently notified that, contrary to both its initial findings and its subsequent interim audit advice, the ATO has disallowed the R&D claim in its entirety.

The 2009 financial year R&D claim had been unusual in that there was a $1.0M threshold on R&D expenditure imposed by the Government.

The ATO determined other operating expenses of the Company, as having been “eligible R&D expenditures”. The result of this determination is that the ATO claims a breach of the 2009 financial year $1.0M threshold on R&D has occurred, and that the Commissioner requires full reimbursement of the $349,098 which had previously been processed, approved and paid. The Company had utilised the services of external R&D specialists in its preparation of the 2009 financial year claim, and has subsequently lodged a complaint with the General Inspector of Taxation and with the Ombudsman. The Company will appeal this decision.

Conversely, in respect of the 2010 financial year claim, where there is no threshold, the ATO has elected to eliminate much of the Company’s eligible R&D expenditure claim, such that the entitlement has been reduced from $660,639 to $469,915. These figures exclude any penalties and interest chargeable by the ATO.

The Company has, since year end, lodged its R&D claim for the 2011 financial year in the amount of $525,774. Thus, the ATO’s net position of these R&D claims owing by the ATO to the Company less other amounts offset against the claims for superannuation guarantee and GST is $404,562 compared to the $1,085,380 included in the receivables balances and to which the Group believes it is entitled to.

The Company is appealing the decisions by the ATO for both the 2009 and 2010 financial years.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

28. Related Party Transactions

Related Parties

(a) The Group’s main related parties are as follows:

(i) Key management personnel:

Any person(s) having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity are considered key management personnel.

For details of remuneration disclosures relating to key management personnel, refer to Note 22: Interests of Key Management Personnel (KMP) and the remuneration report in the Directors’ Report.

Other transactions with KMP and their related entities are shown below.

(ii) Entities subject to significant influence by the Group:

An entity which has the power to participate in the financial and operating policy decisions of an entity, but does not have control over those policies, is an entity which holds significant influence. Significant influence may be gained by share ownership, statute or agreement.

For details of interests held in associated companies, refer to Note 26: Associated Companies.

(iii) Joint venture entities that are accounted for under the equity method:

The Group has a 50% interest in the joint venture entity, Digismart Commerce Limited. The interest in joint venture is accounted for in these consolidated financial statements of the Group, using the equity method of accounting. For details of interests held in joint venture entities, refer to Note 25: Joint Venture.

(iv) Subsidiaries:

The consolidated financial statements include the financial statements of Digislide Holdings Limited and Controlled Entities and the following subsidiaries:

	%	%
	ownership	ownership
	interest	interest
	2011	2010
Name of subsidiary
Digislide Americas	100.0	100.0
Electronics Extraordinaire PtyLtd	100.0	100.0
VSDN Australia PtyLtd	90.0	100.0

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

28. Related Party Transactions (Cont.)

(b)Transactions with related parties

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

The following transactions occurred with related parties:

				Balance outstanding	Balance outstanding
	Purchases	Sales	Other	Owed to the	Owed by the
			transactions	company	company
Associates
The Group provided consultancy services to VSD Canada in exchange for shares in the company	-	25,000	-	-	-
KMP related parties
Allied Animation Technologies Pty Ltd, a joint venture
partner, and related party, signifcantly infuenced by Luceille Outhred, a Director, purchased stock from the	-	105,821	-	116,403	-
Group on 30 June 2011 at book value
The Group provided consulting services at commercial rates
to Spinergy Pty Ltd, a company signifcantly infuenced
by Luceille Outhred, a Director, Kevin Soper, a member
of key management personnel, Brains Incorporated Pty	-	113,636	-	125,000	-
Ltd, a company controlled by Luceille Outhred, a Director
and Rubitek, a company signifcantly infuenced by Peter
Rubinshtein, a member of key management personnel
AV Extraordinaire Pty Ltd, a company controlled by Luceille
Outhred, a Director, transferred an amount owing to it into	-	-	59,853	-	-
a capital injection in VSDN Australia Pty Ltd
Benefcial Plastics, a company directed by Malcolm Leahy, a
Director, rented plant and equipment from the Group and
provided machining services to the Group at commercial	9,746	5,573	-	-	4,591
rates, as audited and approved by the Australian Taxation
Ofce
Rubitek, a company directed by Peter Rubinshtein,
a member of key management personnel, supplied
fxed assets and consultancy services to the Group at	123,621	-	-	-	66,171
commercial rates, as audited and approved by AusIndustry
and SAIIF auditors
TThe Group received loans from Kevin Soper, a member
of key management personnel. A portion of the loaned
amount was paid directly to Rubitek (see above) as	-	-	271,699	-	181,204
consideration for fxed assets.
The Group, paid wages and superannuation on behalf
of Workright Australia Pty Ltd, a company controlled by Luceille Outhred, a Director, against loans owed by the	-	-	27,998	-	-
Company to it
The Group received a loan from the JOLU Superannuation	-	-	98,000	-	98,000
Fund, a superannuation fund of which Luceille Outhred, a
Director and her husband are members of, at the standard
rate of interest required of self managed superannuation
funds by the Australian Taxation Ofce

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

==> picture [47 x 48] intentionally omitted <==

For the Year Ended 30 June 2011

(c) Balances from related parties
	2011 2010 $ $ 241,403 -
CURRENT
Amounts receivable from:
- keymanagementpersonnel related entities
(d) Balances to related parties
	2011 2010
	$ $
CURRENT
Amount payable to:
- key management personnel related entities	1,574,829 1,167,764
h Flow Information (a) Reconciliation of result for the year to cashfows from operating activities Reconciliation of net income to net cash provided by operating activities:
Proft for the year	(2, 412,894) (4,738,131)
Cash fows excluded from proft attributable to operating activities
Non-cash fows in proft:
- amortisation	480,636 164,662
- depreciation	113,413 82,552
- net (gain)/loss on disposal of investments	(87,717) -
- share options expensed	116,130 -
Share of associated companies net proft	(25,000) -
Changes in assets and liabilities, net of the efects of purchase and disposal of subsidiaries:
- (increase)/decrease in trade and other receivables	(761,028) 161,476
- (increase)/decrease in other assets	345,584 (490,622)
- (increase)/decrease in inventories	165,414 (675,780)
- increase/(decrease) in trade and other payables	371,863 (319,413)
- increase/(decrease) in employee benefts	65,326 (85,728)
Cashfow from operations	(1,628,273) (5,900,984)

Cash Flow Information

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

29. Cash Flow Information (Cont.)

(b) Loan facilities

	2011	2010
	$	$
Loan facilities	5,000,000	-
Amount utilised	(137,593)	-
	4,862,407	-

Finance will be provided under all facilities provided the company and the Group have not breached any borrowing requirements and the required financial ratios are met.

30. Share based Payments

At 30 June 2011 the Group has the following share based payment schemes:

(i) The Digislide Holdings Limited and Controlled Entities Employee Options Plan is designed as an incentive for senior managers and above. Under the plan, participants are granted options which only vest if certain performance standards are met. Once granted the options have a vesting period of 5 years. There are no cash settlement alternatives.

Where a participant ceases employment prior to the vesting of their share options, the share options are forfeited unless cessation of employment is due to death.

On 9 December 2010, options were granted to all employees under the Digislide Holdings Limited and Controlled Entities Employee Option Plan, to take up ordinary shares at an exercise price of $0.16 each. The options hold no voting or dividend rights and are not transferable.

(ii) The Group established the Digislide Holdings Limited and Controlled Entities Employee Option Plan on 9 December 2010.

A summary of the company options issued is as follows:

Grant Date	Expiry Date	Exercise price	Start of the	Granted	Balance at the
			year	during the	end of the
				year	year
1 January2008 24 August 2009 24 September 2010 15 October 2010 30 November 2010 9 December 2010 9 December 2010 11 December 2010 11 March 2011 23 March 2011	24 August 2014 24 August 2011 24 September 2012 15 October 2012 30 November 2012 9 December 2015 9 December 2012 11 December 2012 11 March 2013 23 March 2013	1.00 1.25 0.25 0.25 0.25 0.16 0.25 0.25 0.18 0.14	350,000 6,000,000 - - - - - - - -	- - 3,000,000 1,800,000 450,000 913,000 300,000 600,000 106,366 115,385	350,000 6,000,000 3,000,000 1,800,000 450,000 913,000 300,000 600,000 106,366 115,385

The weighted average remaining contractual life of options outstanding at year end was 4.22 years (2010: 4.75). The weighted average exercise price of outstanding shares at the end of the reporting period was $116,300.00.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

31. Events after the end of the Reporting Period

The financial statements were authorised for issue on 8 November 2011.

Since the end of the financial year the Company has entered into negotiations for an equity raising of up to $5m and$20M in debt and equity funding.

New market channels

Ingram Micro (Canada) has now received product samples from the Group and it is anticipated a discrete licence for that region, and market collateral requirements will follow quickly.

Navarre, a significant distribution channel in USA has formalised a request to become a distributor. Marketing collateral is now being prepared for them in conjunction with Global Marketing Partners.

Export Market Development Grant - Appeal

Throughout 2010 Digislide conducted a protracted appeal against Austrade’s decision to disallow Digislide’s 2009 Export Market Development expenditures. Digislide disputed Austrade’s assertion the Company had “failed to meet the Australian Net Benefit Requirements”, and appealed to Administrative Appeals Tribunal.

Mr Paul d’Assumpcao, the Australian Government’s Solicitor, subsequently argued that Digislide’s claim “was not valid in that it did not comply with s70(2C) of the Act in that it was not accompanied by ‘such information’ and ‘such documents’ as specified in the Determination”. Mr d’Assumpcao argued that Digislide had never lodged certain documents, and that Austrade did not have them on file, and that Austrade had never received them.

Digislide’s subsequently provided evidence to the Tribunal that Austrade had not only received those documents from Digislide but, in fact, that Austrade had provided copies of those very documents to the Administrative Appeals Tribunal in its earlier submission. Senior Member Dunn advised the Hearing would continue.

The Australian Government’s Solicitor subsequently resurrected his argument that Digislide “had failed to meet the Australian Net Benefit Requirements”. After presentation of facts by Digislide to the Administrative Appeals Tribunal, the Australian Government Solicitor withdrew 7 of his 8 contentions against Digislide.

Senior Member Dunn acknowledged that the process had been protracted and committed to Digislide to have a Determination “within 8 weeks”. Ironically, it took Senior Member Dunn 14 weeks to provide his Determination that Digislide had failed to meet its projections within its own set timeframe. Senior Member Dunn dismissed international events (the Global Financial Crisis) as being a major contributing factor for Digislide not achieving its projections within given timeframes, but again, ironically, the Administrative Appeals Tribunal had advised the company that Senior Member Dunn’s delayed Determination was due to an unexpected international matter (an immigration visa issue). Senior Member Dunn’s Determination failed to mention Austrade’s scurrilous assertion that Digislide had failed to provide essential documentation, nor Mr d’Assumpcao’s inferences that the company and their independent contractor may have since fabricated the documents which the company had insisted it had provided to Austrade, and Austrade insisted it had never received. Senior Member Dunn’s Determination failed to mention that Mr d’Assumpcao, speaking on behalf of Austrade, had insisted they had never received those documents, only to have it proven indisputably that they had not only received them, but that they had, in fact, provided copies those documents themselves to the Tribunal 8 months earlier. Senior Member Dunn’s Determination supported “Digislide’s contention that it has the financial resources to maintain its international business activities” yet in a seemingly contradictory statement, he said “I am not satisfied that Digislide is financially viable.” Senior Member Dunn upheld Austrade’s decision to deny Digislide’s claim. This decision related to $155,000 in Export Market Development Rebates for the 2009 financial year.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

32. Parent entity

The following information has been extracted from the books and records of the parent, Digislide Holdings Limited and Controlled Entities and has been prepared in accordance with Accounting Standards.

The financial information for the parent entity, Digislide Holdings Limited and Controlled Entities has been prepared on the same basis as the consolidated financial statements except as disclosed below.

Investments in subsidiaries, associates and joint ventures

Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of the parent entity. Dividends received from associates are recognised in the parent entity profit or loss, rather than being deducted from the carrying amount of these investments.

	2011	2010
	$	$
Statement of Financial Position
Assets
Current assets	3,686,870	2,029,665
Non current assets	4,883,245	5,799,653
Total Assets	8,570,115	7,829,318
Liabilities
Current liabilities	4,805,239	3,095,734
Non current liabilities	56,117	668,141
Total Liabilities	4,861,356	3,763,875
Equity
Issued capital	24,217,048	22,845,413
Retained earning/proft	(20,624,419)	(18,779,970)
Option reserve	116,130	-
Total Equity	3,708,759	4,065,443
Statement of Comprehensive Income
Totalproft or loss for theyear	(1,844,449)	(4,741,279)
Total comprehensive income	(1,844,449)	(4,741,279)

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [47 x 48] intentionally omitted <==

32. Parent entity (Cont.)

Contingent Liabilities

During the 2011 financial year, he Company was subjected to two ATO audits on the 2009 and 2010 financial year R&D claims

The 2009 financial year claim had previously been approved and processed, and had been paid to the company in August 2010

Furthermore, the initial audit advice stated “...the Commissioner did not identify any issues with the following expenditure and as such they are not disputed by the Commissioner”. However, the Company was subsequently notified that, contrary to both its initial findings and its subsequent interim audit advice, the ATO has disallowed the R&D claim in its entirety.

The 2009 financial year R&D claim has been unusual in that there was a $1.0M threshold on R&D expenditure imposed by the Government.

The ATO determined other operating expenses of the Company, as having been “eligible R&D expenditures”. The result of this determination is that the ATO claims a breach of the 2009 financial year $1.0M threshold on E&D has occurred, and that the Commissioner requires full reimbursement of the $349,098 which had previously been processed, approved and paid. The Company had utilised the services of external R&D specialists in its preparation of the 2009 financial year claim, and has subsequently lodged a complaint with the General Inspector of taxation and with the Ombudsman. The Company will appeal this decision.

The Company is appealing the decisions by the ATO for both the 2009 and 2010 financial years.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Notes to the Financial Statements

For the Year Ended 30 June 2011

==> picture [48 x 48] intentionally omitted <==

Contractual commitments

Parent entity capital commitments

The following items have been contracted for by the parent, but have not yet been provided for:

==> picture [460 x 127] intentionally omitted <==

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

2011 2010
$ $
Operating lease
Payable:
no later than 1 year 63,400 43,864
between 1 year and 5 years 253,600 -
greater than 5 years 42,267 -
359,267 43,864
----- End of picture text -----

33 Company Details

The registered office and principal place of business of the company is:

Digislide Holdings Limited and Controlled Entities 100 - 102 Cavan Road Dry Creek SA 5094

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Additional Information For Listed Public Companies

==> picture [47 x 48] intentionally omitted <==

ASX Additional Information

Additional information required by the ASX Limited Listing Rules and not disclosed elsewhere in this report is set out below. This information is effective as at 27 October 2011.

Substantial shareholders

The number of substantial shareholders and their associates are set out below:

Voting rights

Ordinary Shares

On a show of hands, every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Options

No voting rights.

Distribution of equity security holders

	Ordinaryshares
Holding	Number
1 - 1,000	9
1,001 - 5,000	177
5,001 - 10,000	67
10,001 - 100,000	168
100,000 and over	92

There were 223 holders of less than a marketable parcel of ordinary shares.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Additional Information For Listed Public Companies

==> picture [48 x 48] intentionally omitted <==

Twenty largest shareholders

	Ordinaryshares
	Number held % of issued shares
International Equities PtyLtd	8,065,670 11.75
Alcardo Investments Ltd	5,050,596 7.36
Projected Investments	2,440,566 3.56
Mr Kevin and Mrs Irene Soper	2,316,592 3.38
Brains Incorporated	1,934,762 2.82
Martin Place Securities Staf Superannuation Fund	1,829,613 2.67
Four SqVendingMcCaigSuperannuation Fund	1,759,254 2.56
Ms Luceille Outhred	1,520,927 2.22
Mr Harrison X McFall King	1,500,000 2.19
Banks Retirement Fund	1,417,933 2.07
Estate of Georgina E Bradshaw	1,270,244 1.85
JOLU Superannuation Fund	1,205,273 1.76
AV Extraordinaire PtyLtd	1,121,903 1.64
Crown Credit Corporation	1,105,666 1.61
National Nominees Ltd	1,000,692 1.46
Mr Peter, Mrs Lyudmila and Mr Natan Rubinshtein	946,513 1.38
Bigfeats Investments PtyLtd	880,000 1.28
Martin Place Securities Nominees PtyLtd	863,649 1.26
Mr Daryl Lindon Hall	815,000 1.19
GC & DS Campbell Superannuation Fund	750,000 1.13

Unissued equity securities

Options issued 13,634,751.

Securities exchange

The Company is listed on the Australian Securities Exchange.

DIGISLIDE HOLDINGS LIMITED AND CONTROLLED ENTITIES ABN 75 105 012 066

Corporate Directory

Digislide Holdings Limited ABN 75 105 012 066

100-102 Cavan Road Dry Creek, Sa 5094

Chairman (Non-Executive) Leaon Milford

Executive Director Luceille Outhred (CEO)

Non-Executive Directors Malcolm Leahy Grant Chapman

Company Secretary Jeff King

==> picture [47 x 48] intentionally omitted <==

Auditors

Hayes Knight (SA) Pty Ltd 269 Pulteney Street Adelaide, SA 5000 Australia

Share Registry Boardroom Pty Ltd Level 7, 207 Kent Street Sydney, NSW 2000 Australia

Legal Counsel - Corporate HWL Ebsworth Lawyers Level 14, Australia Square 264-278 George Street Sydney, NSW 2000 Australia

Intellectual Property Attorney Dr Drazen Lesicar 58 Rundle Street Kent Town, SA 5067 Australia

AI assistant

NEXTED GROUP LIMITED — Annual Report 2011

65463_rns_2011-11-27_f34f9843-e366-4193-b8c5-3470d766c052.pdf

Contents

Our Vision:-

Our Mission:-

Our Core Values

Our Premises

Offshore Operations

Market Entry and Expansion

China

United States of America

The Board

Luceille Outhred Chief Executive Officer

Why?

Additional Achievements

1. SAIIF Funding

2. Optical Engine Designs

3. Spectralus

4. Syndiant

7. IPTV and VSDN Australia Pty Ltd

5. Expanded Intellectual Property Portfolio

8. Bencom Group Licence (Bencom)

9. Sonora Technologies Inc (Sonora)

Financial Statements

Corporate Governance Statement

30 June 2011

Board roles and responsibilities

Board composition

Grant Chapman

Leon Milford

Corporate Governance Statement

Ethical standards

Trading policy

Audit Committee

Corporate Governance Statement

Shareholder communication

Risk management

Remuneration policies

Remuneration Committee

Diversity policy

Other information

1. General information

Information on Directors

1. General information (Cont.)

Operating results

3. Financial review

4. Other items

Future developments and results

Environmental issues

Company secretary

Meetings of Directors

Options

Remuneration policy

Remuneration policy (Cont.)

Directors’ Decleration

Statement of Changes in Equity

2010

For the Year Ended 30 June 2011

1. Summary of Significant Accounting Policies

(a) Basis of preparation

(b) Comparative figures

(c) Principles of consolidation

1. Summary of Significant Accounting Policies (Cont.)

(c) Principles of consolidation

Business combinations

(d) Inventories

(e) Property, plant and equipment

Plant and equipment

Depreciation

1. Summary of Significant Accounting Policies (Cont.)

(f) Financial instruments

1. Summary of Significant Accounting Policies (Cont.)

(f) Financial instruments (Cont.)

(ii) Loans and receivables

(iii) Held to maturity investments

(iv) Available for sale financial assets

(v) Financial liabilities

1. Summary of Significant Accounting Policies (Cont.)

Impairment

NEXTED GROUP LIMITED Annual Report 2011