VINYL GROUP LTD - Annual Report 2008

2008

A N N U A L R E P O R T FOR THE YEAR ENDED 30 JUNE 2008

MOBILARM LIMITED ABN 15 106 513 580

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diREcTOR’s REPORT	1
AUdiTOR’s iNdEPENdENcE dEcLARATiON	6
diREcTOR’s dEcLARATiON	7
iNcOmE sTATEmENT	8
bALANcE shEET	9
cAsh fLOw sTATEmENT	10
sTATEmENT Of chANgEs iN EqUiTy	11
NOTEs TO ANd fORmiNg PART Of ThE AccOUNTs	12
iNdEPENdENT AUdiTOR’s REPORT	46
cORPORATE diREcTORy	48

DIRECTOR’S REPORT

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The Directors present their report together with the financial report of Mobilarm Limited (“the Company”) for the year ended 30 June 2008 and the auditor’s report thereon.

Directors

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

Mr Brenton Scott

Mr Lindsay Lyon

Mr Andrew Hill

Mr Kathal Spence

Mr Christian Lange (appointed July 2008)

Mr Rick Parish (appointed July 2008)

Directors Meetings

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

Director	Number of Meetings Attended	Number of meetings held during the time the Director held office

Mr Brenton Scott	8	8
Mr Kathal Spence	8	8
Mr Andrew Hill	8	8
Mr Lindsay Lyon	8	8

Interest in the shares of the company and related corporations :

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

Mobilarm Limited Ordinary Shares

Director	Number of Shares

Mr Brenton Scott	40,112,717
Mr Kathal Spence	13,927,960
Mr Andrew Hill	2,000,000
Mr Lindsay Lyon	Nil

Company Secretary

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

Mr Brenton Scott

DIRECTOR’S REPORT (CONTINUED)

The financial year ending 30 June 2008 has resulted in significant milestones being achieved toward the development of the company’s new commercial products.

Corporate Overview

The Mobilarm team has made excellent progress towards the completion and introduction of the world’s first commercial wireless man overboard safety platform.

The new Mobilarm Crewsafe® enables marine employers to remove significant identified risks from the work place, reducing the likelihood of related fatalities. It is an active crew monitoring and reporting system that immediately detects emergency events such as man overboard, providing GPS location and recovery information of the incident to enable a quick and effective rescue of the casualty. Additional features of the system include manual alarm activation and individual duress alarm to alert all crew should an emergency occur anywhere within the network’s coverage.

Crewsafe® provides an enhanced level of personnel safety and security through crew location monitoring and management, covert and overt alarm capability, individual paging and individual duress alarm, with future versions of the products planned to incorporate bio-metric monitoring. In addition, the system provides database management of rescue assets, safety equipment and personnel.

By providing a safer working environment for marine employees, Crewsafe® addresses many of the occupational health and safety risks identified within the commercial marine industry, thereby assisting employers to prevent loss of life or personal injury of their workers, and to maximise the company’s efficiency in emergency response procedures. Crewsafe® will be officially launched at the New Orleans International Work Boat Show on 3 December, 2008.

In addition to the Crewsafe® wireless man overboard system the company will be shipping in January 2009 its innovative Mobilarm V100 VPIRB (VHF Position Indicating Radio Beacon) which is the first fully-automated Maritime Survivor Locating Device designed specifically to use VHF DSC (Digital Selective Calling) and VHF voice to transmit an emergency distress signal in a man overboard (MOB) emergency. The V100 VPIRB was formally introduced at the 2008 Offshore Technology Conference (OTC) in Houston.

The Mobilarm V100 automatically transmits a “MAYDAY MAN OVERBOARD” alert via VHF DSC on marine channel 70 when the device detects the wearer has gone overboard. Once a GPS lock is acquired, typically in less than 30 seconds, the Mobilarm V100 transmits a “MAYDAY MAN OVERBOARD” alert again, including the latitude and longitude coordinates of the person in the water, via VHF DSC and also by a synthesized VHF voice message on channel 16. The distress signal is broadcast to all vessels in the vicinity, including the distressed mariner’s vessel and any onshore VHF receiver within range. Messages are repeated at regular intervals until the MOB is rescued.

2 MOBILARM LIMITED ANNUAL REPORT 2008

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The Mobilarm V100 provides instant notification to the mariner's vessel that one of the crew has been lost overboard, alerting the people who are in the best position to rescue the MOB - the crew onboard - and ensuring they are deployed as soon as possible to minimise the length of time the casualty spends in the water.

The company has received considerable global interest on both products from the target markets. The company has secured a number of firm orders, including written confirmation for the go ahead to install our Crewsafe and V100 products on a major loading facility. The company is also presenting the V100 to a number of international regulatory bodies considering the mandating of man overboard technology in the commercial fishing industry including those in Spain, Germany, France and Belgium. An excellent sales funnel exists and with the release of the new products the company will be now begin transferring its resource investments from development to demand generation.

Due to the market conditions the company has delayed its IPO plans and during FY2009 the company will continue to seek capital through alternative means to assist with the commercialization of our technologies, and the development of global sales channels to increase our speed to market. Now with product availability in calendar 2009 we are expecting a strong turnaround in the Company’s financial performance and will be seeking to reach a cash flow positive position during the 2009 financial year.

Principal Activities

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

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

Dividends

No dividends were paid or declared for the financial year.

Operating Results for the Year

The loss of the company after providing for income tax amounted to ($3,037,569) (2007: Loss of $1,813,363).

State Of Affairs

There were no changes to the state of affairs of the company.

Likely Developments and Expected Results

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

Environmental Issues

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

DIRECTOR’S REPORT (CONTINUED)

Directors' Benefits

Disclosure of benefits provided to directors during the financial year is made in notes 18 and 20 of the financial statements.

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

Indemnification and Insurance of Directors

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

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

The auditor’s independence declaration is set out on page 7 and forms part of the directors’ report for the year ended 30 June 2008.

Non-Audit Services

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

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

Tax compliance services $0 Other non audit services $15,000

4 MOBILARM LIMITED ANNUAL REPORT 2008

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Events subsequent to balance date

Since the end of the financial year the company;

a) Has issued a non-renounceable Rights Issue of approximately 52,793,849 ordinary fully paid shares at a price of 7 cents each, on the basis of 1 new share for every 4 ordinary shares held at record date. The aim of the Issue is to raise a total of $3.695 million. A total of $228,499 was raised to-date.
b) The company is currently seeking to raise up to $2M in a convertible note and to-date has raised $500K using this investment vehicle and is expecting to complete this raising in full.
c) The company has been approached by Kenda Capital representing the Shell Oil Company’s Venture Fund and early discussions have occurred on a potential 30% ownership in the company.
d) The company has completed the joint development with Jeppesen Marine (a Boeing Company) to integrate the Mobilarm man overboard system into their C-MAP marine cartography application. This integration will provide automatic MOB (man overboard) alarms and track back information on C-MAP compatible systems. Jeppesen’s C-MAP is the leading brand of marine cartography providing the world largest marine navigation electronic companies such as Navman and Furuno.
e) QuikTrak has been removed as a listed stock on the ASX. At the date of removal from the ASX the share price was 1.9 cents.

Signed in accordance with a resolution of the Directors.

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Brenton A Scott

Executive Chairman

Applecross, Western Australia 21 November 2008

AUDITOR’S INDEPENDENCE DECLARATION

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6 MOBILARM LIMITED ANNUAL REPORT 2008

DIRECTOR’S DECLARATION

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

a) The financial statements and notes set out on pages 8 to 45 are in accordance with the Corporations Act 2002, including:
I. Giving a true and fair view of the company’s financial position as at 30 June 2008 as represented by the results of its operations and cash flows for the year ended on that date; and
II. Complying with Accounting Standards in Australia and Corporations Regulations 2001; and
b) There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Signed in accordance with a resolution of the Directors

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Brenton A Scott

Executive Chairman

Applecross, Western Australia 21 November 2008

INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

Note REVENUE Sale of goods Government Grants Interest Rental income Other income 2(a) Changes in inventories of finished goods and consumables Employee benefits 2(d) Depreciation and amortisation 2(c) Advertising Audit and tax Accountancy Freight and cartage External consultants and contractors Rental Travel and accommodation Provision for doubtful debts 5 Payroll tax Legal fees Telephone and internet charges Insurance Printing, postage and stationery Motor vehicles Finance costs 2(b) Foreign exchange gain/(loss) Other expenses PROFIT/(LOSS) BEFORE INCOME TAX Income tax (expense)/credit 3(b) PROFIT/(LOSS) AFTER INCOME TAX FROM CONTINUING OPERATIONS 14	2008 2007
	116,047 157,023 - 14,434 81,150 28,594 59,717 66,885
	256,914 266,936
	488,992 738,990 (336,726) (592,095) (1,460,492) (833,013) (263,395) (772,852) (157,010) (140,615) (39,450) (49,035) (25,561) (22,966) (16,843) (17,797) (440,055) (339,067) (188,157) (187,131) (102,145) (96,950) - 34,329 (34,505) (3,378) (72,746) (10,805) (29,582) (27,610) (30,292) (28,942) (14,700) (8,593) (3,487) (11,706) (545,157) (158,591) 1,168 (108) (313,204) (131,258)
	(3,326,433) (2,392,257)
	288,864 578,894
	(3,037,569) (1,813,363)

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

8 MOBILARM LIMITED ANNUAL REPORT 2008

BALANCE SHEET AS AT 30 JUNE 2008

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Note CURRENT ASSETS Cash assets 17 Trade and other receivables 5 Inventories 6 Prepayments TOTAL CURRENT ASSETS NON-CURRENT ASSETS Available-for-sale investments 7 Plant and equipment 8 Intangible assets 9 TOTAL NON-CURRENT ASSETS TOTAL ASSETS CURRENT LIABILITIES Trade and other payables 10 Interest bearing loans and borrowings 11 Provisions 12 TOTAL CURRENT LIABILITIES NON-CURRENT LIABILITIES Provisions 12 Interest Bearing loans and borrowings 11 Deferred tax liability 3(c) TOTAL NON-CURRENT LIABILITIES TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 13 Accumulated Losses 14 Reserves 15 TOTAL EQUITY	2008 2007
	779,482 315,357 317,882 654,369 98,496 461,084 29,626 33,851
	1,225,486 1,464,661
	305,820 1,388,382 230,557 141,021 305,458 139,301
	841,835 1,668,704

	2,067,321 3,133,365
	506,570 343,006 408,466 788,165 99,526 41,487
	1,014,562 1,172,658
	14,102 9,423 46,964 17,198 7,532 332,300
	68,598 358,921
	1,083,160 1,531,579
	984,161 1,601,786
	8,219,919 5,042,182 (7,330,311) (4,292,742) 94,553 852,346
	984,161 1,601,786

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

CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

	2008	2007
		244,070 14,434 (1,908,665 28,594 (149,460) - (110,725) -

	112,358
	768,992
	(2,629,407
	81,150
	(500,739)
	59,718
	(121,999)
	578,894
	(1,651,033)	(1,881,752)
		(6,710) - 2,874,968 (1,097,250) 160,397

	(108,791)
	(20,017)
	-
	-
	-
	(128,808)	1,931,405
		(27,870) (88,000) - - 38,047

	(202,820)
	-
	(110,544)
	2,557,330
	-
2,243,966 (77,823)
		(28,170) 343,527
	464,125

	315,357

	779,482	315,357

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

10 MOBILARM LIMITED ANNUAL REPORT 2008

STATEMENT OF CHANGES OF EQUITY

AS AT 30 JUNE 2008

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COMPANY At 1 July 2006 Net (loss)/profit for the year Issue of equity Equity adjustment Changes in fair value of available-for- sale investments net of tax As at 30 June 2007 Net (loss)/profit for the year Changes in fair value of available-for- sale investments net of tax Issue of equity As at 30 June 2008	Attributable to equity holders of Mobilarm Limited
	Issued Capital Accumulated Losses Reserves (Note 15) Total Equity 4,981,037 (2,479,379) 1,585,668 4,087,326 (1,813,363) - (1,813,363) 60,000 - - 60,000 1,145 1,145 - - (733,322) (733,322)
	5,042,182 (4,292,742) 852,346 1,601,786
	- (3,037,569) - (3,037,569) - - (757,793) (757,793) 3,177,737 - - 3,177,737
	8,219,919 (7,330,311) 94,553 984,161

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

NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 30 JUNE 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Preparation

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

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

b) Going Concern

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

The Company has incurred a net loss after tax for the year ended 30 June 2008 of $3,037,569 (2007: $1,813,363) and experienced net cash outflows from operating activities of $1,490,976 (2007: $1,881,752). At 30 June 2008, the Company had net current assets of $210,924 (2007: $292,003). The directors have reviewed the business outlook and the assets and liabilities of the Company and are of the opinion that the use of the going concern basis of accounting is appropriate as they believe the Company will continue to be successful in securing additional funds through debt or equity issues as and when the need to raise working capital arises.

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

c) Statement of Compliance

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards (“IFRS”) as adopted by the International Accounting Standards Board.

The company has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the “AASB”) that are relevant to the operations of the Group and effective for reporting periods beginning on or after 1 July 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profit or loss or the financial position of the company.

The company has adopted AASB 7 Financial Instruments: Disclosures and all consequential amendments which became applicable on 1 July 2007. The adoption of this standard has only affected the disclosure in these financial statements. There has been no affect on profit or loss or the financial position of the company.

During the period, a number of Australian Accounting Standards and interpretations have been issued or amended but are not yet effective. These have not been adopted by the company for the annual reporting period ended 30 June 2008. The impact of these new or amended Accounting Standards is not expected to give rise to material changed in the company’s financial statements.

12 MOBILARM LIMITED ANNUAL REPORT 2008

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Significant accounting judgments, estimates and assumptions

(i) Significant accounting estimates and assumptions

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

Impairment of goodwill and intangibles with indefinite useful lives

The Company determines whether goodwill and intangibles with indefinite useful lives are impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash generating units to which the goodwill and intangibles with indefinite useful lives are allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles with indefinite useful lives are discussed in note 10.

Revenue recognition

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

(i) Sale of goods

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

(ii) Rendering of services

Revenue from the provision of engineering contracting services is recognised by reference to the stage of completion of a contract.

Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract.

When the contract outcome cannot be estimated reliably, revenue is recognised only to the extent of the expenses recognised that are recoverable.

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

Revenue recognition (continued)

(iii) Interest income

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

(iv) Rental income

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

Government grants

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

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

When the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual installments.

Borrowing costs

Borrowing costs are amortised over a five year period.

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Leases

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

(i) The Company as a lessee

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

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that the Company will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease incentives are recognised in the income statement as an integral part of the total lease expense.

Cash and cash equivalents

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

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

Trade and other receivables

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

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2008

Inventories

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

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

a) Raw materials – purchase cost on a first-in, first-out basis; and
b) Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads based on normal operating capacity but excluding borrowing costs.

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

Derivative financial instruments and hedging

Derecognition of financial assets and financial liabilities

(i) Financial assets

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

a) The rights to receive cash flows from the asset have expired;
b) The Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; or
c) The Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

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

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

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(ii) Financial liabilities

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

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

Impairment of financial assets

The Company assesses at each balance sheet date whether a financial asset or group of financial assets is impaired.

(i) Available-for-sale investments

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2008

Foreign currency translation

Both the functional and presentation currency of the Company is Australian dollars (“A$”). The Company determines its own functional currency and items included in the financial statements of the Company are measured using that functional currency.

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

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

Non monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date of the initial transaction.

Non monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Income tax

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

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

Deferred income tax liabilities are recognised for all taxable temporary differences except when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

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

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

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

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

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

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

Other taxes

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

a) When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
b) Receivables and payables, which are stated with the amount of GST included.

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

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

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2008

Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation.

Land and buildings are measured at fair value less accumulated depreciation on buildings and less any impairment losses recognised after the date of the revaluation.

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

Plant and equipment – 2.5 to 20 years

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

(i) Impairment

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

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

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating unit to which the asset belongs, unless the asset's value in use can be estimated to be close to its fair value.

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

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

(ii) Derecognition and disposal

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

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

20 MOBILARM LIMITED ANNUAL REPORT 2008

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Investments and other financial assets

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

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

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

Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-tomaturity when Mobilarm has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period are not included in this classification. Investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and the maturity amount. This calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and losses are recognised in profit or loss when the investments are derecognised or impaired, as well as through the amortisation process.

(iii) Loans and receivables

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

Investments and other financial assets (continued)

(iv) Available-for-sale investments

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

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

Intangible assets

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

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

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cashgenerating unit level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a prospective basis.

22 MOBILARM LIMITED ANNUAL REPORT 2008

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Research and development costs

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

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

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

Patents and Licences AASB 138.118

Useful lives: 5 years Amortisation method used: Straight Line Internally generated or acquired: Acquired

Impairment testing AASB 136.10: Annually and more frequently when an indication of impairment exists (2007: Annually and more frequently when an indication of impairment exists).

Development Costs AASB 138.118 Useful lives: Finite (2007: Finite)

Amortisation method used: Amortised over the period of expected future sales from the related project on a straightline basis (2007: Amortised over the period of expected future sales from the related project on a straight-line basis). Internally generated or acquired: Internally generated

Impairment testing AASB 136.10: Annually for assets not yet available for use and more frequently when an indication of impairment exists. The amortisation method is reviewed at each financial year-end (2007: Annually for assets not yet available for use and more frequently when an indication of impairment exists. The amortisation method is reviewed at each financial year-end).

The patents and licences have been sought to be granted for a minimum of 5 years by the relevant government agency with the option of renewal without significant cost at the end of this period provided that the Company meets certain predetermined targets. The fact that patents and licences have previously been renewed and that the evidence supports the meeting of these targets has allowed the Company to determine that there is no forseeable limit to the period over which the assets are expected to generate net cash inflows for the Company.

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

Impairment of assets

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

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses relating to continuing operations are recognised in those expense categories consistent with the function of the impaired asset unless the asset is carried at revalued amount (in which case the impairment loss is treated as a revaluation decrease).

An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Trade and other payables

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

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method.

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

24 MOBILARM LIMITED ANNUAL REPORT 2008

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Provisions

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

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

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

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

Employee leave benefits

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

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

(ii) Long service leave

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

Contributed equity

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

2 REVENUE AND EXPENSES 2(a) Other income Net gain on disposal of available-for-sale investments Derivatives – mark to market Government Grants Other 2(b) Finance costs Interest – other parties Interest – related parties 2(c) Individually significant expenses included in profit/(loss) from ordinary activities before income tax expense Depreciation and amortisation of plant and equipment Amortisation of intangible assets Inventory \ written off during the year Doubtful debts Rental – operating leases Superannuation contributions 2(d) Employee benefits expense Wages and salaries and on-costs Directors fees Superannuation costs 2(e) Research and development costs Amortisation of capitalised development costs
	2008 2007
	- 632,936 - 100,000 482,855 - 6,137 6,054
	488,992 738,590
	517,833 110,725 27,324 -
	545,157 110,725
	115,381 133,465 148,014 639,387
	263,395 772,852
	275,505 461,890 - (34,329) 188,157 187,131 106,567 64,568
	570,229 679,260
	1,311,925 720,426 42,000 48,019 106,567 64,568
	1,460,492 833,013
	136,418 182,947
	136,418 182,947

26 MOBILARM LIMITED ANNUAL REPORT 2008

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2(f) Auditors’ remuneration Amounts received or due and receivable by Ernst & Young Australia for: An audit of the financial report of the entity Other services: - Accounting assistance - Tax (R & D Rebate) 3 INCOME TAX (a) The major components of the current income tax expense are: Prior year tax adjustment Tax refund received / receivable for claim of research and development activities Income tax expense/(benefit) reported in the income statement	2008 2007
	30,900 27,500 - 4,000 8,550 14,135
	39,450 45,635

	2008 2007
	(13,783) - (275,081) (578,894)
	(288,864) (578,894)

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

3 INCOME TAX (CONTINUED)

INCOME TAX (CONTINUED)
(b) A reconciliation between the income tax expense and the product of accounting profit/(loss) before income tax multiplied by the Company’s applicable income tax rate is as follows: Prima facie income tax expense/(benefit) calculated @ 30% (2007: 30%) on profit/(loss) from ordinary activities Add tax effect of: Non deductible entertainment Other non-deductible items Tax profit on sale of investments Accounting amortisation of fixed assets Amortisation of intangible assets Grant income received Less tax effect of: Accounting profit on sale of investments Accounting profit on revaluation of investments R&D capitalised Actual Bad Debts Tax depreciation on fixed assets Research and development claim income tax Accounting grant income received Current year income tax expenses/(benefit) Tax effect of losses not recognised Current year tax losses not recognised R&D claim not previously recognised Income tax expense/(Benefit)	2008 2007
	(997,930) (544,009) 656 393 13,487 13,246 - 723,933 38,093 37,913 40,925 184,423 230,698 -
	323,859 959,908
	- 219,881 - - 150,222 71,760 1,181 - 53,859 52,976 13,783 289,520 144,856 -
	363,901 634,137
	(1,037,972) (218,238) - 135,193 749,108 (206,475) - (289,374)
	(288,864) (578,894)

28 MOBILARM LIMITED ANNUAL REPORT 2008

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(c) Deferred income tax Deferred income tax as at 30 June 2008 relates to the following:- Revaluation of available for sale investments to fair market value (refer note 15) Tax benefit from capital raising costs (d) Income tax losses Future income tax benefit arising from tax Losses not recognised at reporting date 4 DIVIDENDS PAID AND PROPOSED There were no dividends paid or declared for the financial year ended 30 June 2008 (30 June 2007: nil). 5 TRADE AND OTHER RECEIVABLES Trade debtors Less: provision for doubtful debts Goods and services tax Sundry receivables R & D Rebate	2008 2007
	40,523 365,291 (32,991) (32,991)
	7,532 332,300
	- - 1,253,952 504,844
	1,253,952 504,844

	2008 2007
	- -
	2008 2007
	13,883 62,094 (1,065) (5,000)
	12,818 57,094
	15,171 18,381 1,029 - 288,864 578,894
	317,882 654,369

(a) Allowance for impairment loss

Trade receivables are non-interest bearing and are generally on 30-60 day terms. A provision for impairment loss is recognized when there is objective evidence that an individual trade receivable is impaired. The company has not recognised any impairment loss for the year ended 30 June 2008.

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

5 TRADE AND OTHER RECEIVABLES (CONTINUED)

(b) Movement in provision for doubtful debts - Balance at beginning of year - Bad debts previously provided for written off during the year - Balance at end of year	2008 2007
	5,000 39,329 (3,935) (34,329)
	1,065 5,000

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

	Total	0-30 days	31-60 days	61-90 days	61-90 days	+91 days	+91 days
				PDNI*	CI*	PDNI*	CI*
2008	13,883	10,664	2,154	-	1,065	-	-
2007	62,094	21,040	3,703	1,540	-	30,811	5,000

Past due not impaired (‘PDNI’) Considered impaired (‘CI’)

Current assets – trade and other receivables

(a) Allowance for impairment loss

Receivables past due but not considered impaired are: $2,154 (2007: $36,054). Payment terms on these amounts have not been re-negotiated however credit has been stopped until full payment is made. Each operating unit has been in direct contact with the relevant debtor and is satisfied that payment will be received in full.

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

(b) Related party receivables

There are no related party receivables as at 30 June 2008. For terms and conditions of related parties transactions refer to note 21.

(c) Fair value and credit risk

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

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

30 MOBILARM LIMITED ANNUAL REPORT 2008

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6 INVENTORIES

6 INVENTORIES
At cost Raw materials and stores Finished goods Total inventories at lower of cost & net realisable value 7 AVAILABLE-FOR-SALE INVESTMENTS Shares in listed companies at fair value Impaired Value of Shares	2008 2007
	- 327,327 98,496 133,757
	98,496 461,084

	2008 2007
	305,820 1,388,382
	305,820 1,388,382

Available-for-sale investments consists of 12,072,888 ordinary shares in Quicktrak Networks Limited valued on 30 June 2008 at 2.5 cents and therefore have no fixed maturity date or coupon rate.

8 PLANT AND EQUIPMENT Leasehold improvements: At cost Accumulated amortization Plant and equipment: At cost Less: Grant contribution Less: Accumulated depreciation Motor vehicles: At cost Accumulated amortization Total plant and equipment
	2008 2007
	109,362 99,522 (99,740) (75,970)
	9,622 23,552
	889,783 614,868 (79,838) - (601,882) (514,589)
	208,063 100,279
	17,273 17,273 (4,401) (83)
	12,872 17,190

	230,557 141,021

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

8 PLANT AND EQUIPEMNT (CONTINUED)

8 PLANT AND EQUIPEMNT (CONTINUED)
Reconciliation Reconciliation of carrying values for each class of plant and equipment are set out below: Leasehold improvements: - Carrying amount at beginning of financial year - Additions - Amortisation - Carrying amount at end of financial year Plant and Equipment: - Carrying amount at beginning of financial year - Additions - Disposals -Grant contribution - Depreciation - Carrying amount at end of financial year Motor Vehicles: - Carrying amount at beginning of financial year - Disposals – non-cash - Additions - Depreciation - Carrying amount at end of financial year	2008 2007
	23,552 48,198 9,841 - (23,771) (24,646)
	9,622 23,552
	100,279 194,654 274,915 6,710 - - (79,838) - (87,293) (101,085)
	208,063 100,279
	17,190 - - - - 17,273 (4,318) (83)
	12,872 17,190

32 MOBILARM LIMITED ANNUAL REPORT 2008

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9 INTANGIBLE ASSETS

9 INTANGIBLE ASSETS
At 30 June 2008 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Borrowing Cost Incorporation cost Year ended 30 June 2008 At 1 July 2007 Net of accumulated amortisation Additions Grant contributions Amortisation At 30 June 2008 Net of accumulated amortisation Borrowing Cost Incorporation cost	Development Costs Intellectual Property Patents & Licences Computer Software 833,841 923,919 67,235 60,595 (545,025) (923,919) (67,235) (46,245)
		Total 1,885,590 (1,582,424)
	288,816 - - 14,350	303,166
	122,526 - - 14,198 500,739 - - 20,017 (198,031) - - (8,268) (136,418) - - (11,597)
		1,132

		1,160

		305,458
		136,724 520,756 (206,299) (148,015)
	288,816 - - 14,350	303,166

		1,132

		1,160

		305,458

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

9 INTANGIBLE ASSETS (CONTINUED)

At 30 June 2007 Cost (gross carrying amount) Accumulated amortisation Net carrying amount Borrowing Cost Incorporation cost	Development Costs Intellectual Property Patents & Licences Computer Software 531,133 923,919 67,235 48,846 (408,607) (923,919) (67,235) (34,648)
		Total 1,571,132 (1,434,408)
	122,526 - - 14,198	136,724

		1,417

		1,160

		139,301

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

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

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

No impairment losses were recognised for continuing operations in the 2007 and 2008 financial year.

34 MOBILARM LIMITED ANNUAL REPORT 2008

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10 TRADE AND OTHER PAYABLES

10 TRADE AND OTHER PAYABLES
Trade creditors Other creditors and accruals	2008 2007
	358,313 202,552 148,257 140,454
	506,570 343,006

Trade Payables Trade payables are non-interest bearing and are normally settled on 30-day terms. Other Payables Other payables are non-trade payables, are non-interest bearing and have an average term of six (6) months.

11 INTEREST BEARING LOANS AND BORROWINGS

11 INTEREST BEARING LOANS AND BORROWINGS
Current Convertible notes (i) Finance Leases Loans from related parties (ii) Non Current Finance Leases	2008 2007
	306,225 610,000 102,241 20,848 - 157,317
	408,466 788,165

	46,964 17,198

(i) At 30 June 2008, there was one (1) convertible note on issue $200,000. This note was originally issued for $500,000, but $300,000 of this note was converted to ordinary capital in October 2007. The balance of the convertible note plus accrued interest remains outstanding and will be redeemed at its maturity date.

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

12 PROVISIONS

Current Employee entitlements Non Current Employee entitlements

	2008	2007
	99,526	41,487

	14,102	9,423

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED)

FOR THE YEAR ENDED 30 JUNE 2008

13 CONTRIBUTED EQUITY

13 CONTRIBUTED EQUITY	13 CONTRIBUTED EQUITY
Issued and paid up capital: 211,175,399 (2007: 166,029,159) ordinary shares fully paid. 2008 2007 No. of shares No. of shares Reconciliation of Contributed Equity Equity at beginning of year 166,029,159 165,429,159 Issue of ordinary shares 45,146,240 600,000 Equity (issue costs)/ Adjustment - - Equity at end of year 211,175,399 166,029,159		2008 2007

		8,219,919 5,042,182

	2008 2007	2008 2007
	No. of shares No. of shares	$ $
		5,042,182 4,981,037 3,177,737 60,000 - 1,145

	166,029,159 165,429,159
	45,146,240 600,000
	- -
	211,175,399 166,029,159	8,219,919 5,042,182

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

14 ACCUMULATED LOSSES

14 ACCUMULATED LOSSES
Accumulated losses at beginning of financial year Net (loss)/profit for the year Accumulated losses at end of financial year	2008 2007
	(4,292,742) (2,479,379) (3,037,569) (1,813,363)
	(7,330,311) (4,292,742)

15 RESERVES

15 RESERVES
Available-for-sale reserve Balance at beginning of financial year Application of AASB 132 and AASB 139 Re-measurement of financial instruments - gross Tax effect of re-measurement Transfer to income - gross Tax effect of transfer to income Balance at end of financial year	2008 2007
	- - 852,346 1,585,668 - - (1,082,562) (422,551) 324,769 126,765 - (625,052) - 187,516
	94,553 852,346

36 MOBILARM LIMITED ANNUAL REPORT 2008

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6 COMMITMENTS AND CONTINGENCIES

Operating lease commitments

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

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

Within one year After one year but not more than five years More than five years	2008 2007
	- 140,890 - - - -
	- 140,890

Finance lease and hire purchase commitments

The Company has entered into financial lease commitments on certain motor vehicles and computer hardware with a carrying amount of $165,392 (2007:$28,268). These leases expire within 1 to 5 years. These leases have an option to purchase at the end of their term. There are no restrictions placed on the lessee by entering into these leases.

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

Within one year Unexpired interest After one year but not more than five years Unexpired interest More than five years	2008 2007
	110,470 22,801 (15,920) (1,952) 50,633 20,708 (3,669) (3,510) - -
	141,514 38,047

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

17 NOTES TO STATEMENT OF CASH FLOWS

NOTES TO STATEMENT OF CASH FLOWS
(a) Reconciliation of cash Cash balance comprises: - Cash on hand - Cash at bank Closing cash balance (b) Reconciliation of profit/(loss) from ordinary activities after tax to the net cash flows from operating activities Operating profit/(loss) after tax Amortisation Depreciation Grant Monies capitalized Other Provision for employee entitlements Net (gain)/loss on disposal of available-for-sale investments Unrealised gain on mark-to market of derivatives Provision for doubtful debts Borrowing costs credited to convertible notes Borrowing cost credited to equity Borrowing costs credited to related party borrowings Changes in Assets and Liabilities Trade and other receivables Inventories Prepayments Development costs Trade & other payables Net cash flows from/(used in) operating activities	2008 2007
	1,011 542 778,471 314,815
	779,482 315,357
	(3,037,569) (1,813,363) 126,978 133,465 136,418 639,387 286,137 - 32,790 - 62,718 4,457 - (632,935) - (100,000) - (34,329) 54,963 158,591 320,407 - - 88,377 336,487 (554,402) 362,588 512,608 4,225 6,740 (500,739) (149,460) 163,564 (140,888)
	(1,651,033) (1,881,752)

38 MOBILARM LIMITED ANNUAL REPORT 2008

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18 KEY MANAGEMENT PERSONNEL COMPENSATION

Key management personnel during the year were:

Mr Brenton Scott Executive Chairman Mr Lindsay Lyon Chief Executive Officer Mr Andrew Hill Chief Operating Officer

	Primary	Post Employment	Equity	Other	Total
	Salary and Fees Cash Bonus Non- Monetary benefits
		Super- annuation Retirement Benefits
Directors and Executives			Options


	$ $ $	$ $	$	$	$
30 June 2008 Total compensation	507,920 - -	52,870 -	-	27,324	585,114
30 June 2007 Total compensation	288,353 - 72,431	10,357 -	-	-	371,141

Remuneration practices

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

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

Shareholdings

Number of Shares held by Directors and Specified Executives:

	Balance 1 July 2007	Received as remuneration	Options exercised	Net change other	Balance 30 June 2008
Directors

Mr Brenton Scott	40,112,717	-	-	-	40,112,717
Mr Kathal Spence	13,927,960	-	-	-	13,927,960
Mr Andrew Hill	2,000,000	-	-	-	2,000,000
Mr Lindsay Lyon	-	-	-	-	-
Specified Executives	-	-	-	-	-

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

19 EMPLOYEE ENTITLEMENTS AND SUPERANNUATION COMMITMENTS

Employee Entitlements The aggregate employee entitlement liability is comprised of : Accrued wages, salaries and on costs Provisions (current) Provisions (non- current ) No. of Employees 16 (2007: 12)	2008 2007
	- - 99,526 41,487 14,102 9,423
	113,628 50,910

Superannuation Commitments

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

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

20 SEGMENT INFORMATION

The company operates in one geographical segment being Australia.

21 RELATED PARTY DISCLOSURES

a) The directors of MOBILARM Ltd during the financial period were:

Mr Brenton Scott

Mr Lindsay Lyon

Mr Kathal Spence

Mr Andrew Hill

Mr Richard Parish

Mr Christian Lange

40 MOBILARM LIMITED ANNUAL REPORT 2008

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

Brenton Scott did not receive a salary but charged for consultancy fees and expense reimbursments totaling $86,411.

Kathal Spence received director’s fees of $30,000. Additionally his firm, Port Accounting Pty Ltd was paid $22,620 for various accounting services.

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

A non secured loan totaling $202,819 due to Brenton Scott’s entity Jayden Investments Pty Ltd was settled during the year. Interest of $27,325 was also paid out.

22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

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

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

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

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

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (a) Risk Exposures and Responses

Interest rate risk

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

Financial Assets Cash and cash equivalents	2008 2007
	779,482 315,357
	779,482 315,357

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

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

At 30 June 2008, if interest rates had moved, as illustrated in the table below, with all other variables held constant, post tax profit and equity would have been affected as follows:

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

		Post Tax Profit
		Higher/(Lower
		2008	2007
+0.5% (50	basis points)	3,897	1,577
-0.5% (50	basis points)	(3,897)	(1,577)

The movements in profit from 2007 to 2008 are due to higher interest revenue from variable rate cash balances as a result of higher interest rates and higher financial asset balances.

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

42 MOBILARM LIMITED ANNUAL REPORT 2008

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Foreign currency risk

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

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

At 30 June 2008, the company had the following exposure to foreign currency:

Financial Assets Cash and cash equivalents Trade and other receivables Financial Liabilities Trade and other payables Net Exposure	2008 2007
	9,136 5,721 4,932 40,476
	14,068 46,197
	172,817 203,736
	172,817 203,736
	(158,749) (157,539)

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

NOTES TO AND FORMING PART OF THE ACCOUNTS (CONTINUED) FOR THE YEAR ENDED 30 JUNE 2008

22 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (CONTINUED) (a) Risk Exposures and Responses

Credit risk

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

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

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

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

With respect to credit risk arising from the other financial assets of the company, which comprises cash and cash equivalents, the company’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of these instruments.

Since the company only trades with recognised third parties, there is no requirement for collateral.

Liquidity risk

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

The table below reflects all contractually fixed pay-offs, repayments and interest resulting from financial liabilities, including derivative financial instruments as of 30 June 2008.

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

6 months or less 6 – 12 months 1 – 5 years	2008 2007
	406,829 209,407 365,306 778,719 50,634 20,708
	822,769 1,008,834

44 MOBILARM LIMITED ANNUAL REPORT 2008

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Maturity analysis of financial liabilities:

	6 months	6 months	1 year	Total	Total Carrying
	or less	to 1 year	to 5 years	Contractual	Amount
				Cash Flow

351,594 3,846 - 355,440 355,440 - 306,225 - 306,225 306,225 55,235 55,235 50,634 161,104 141,514
406,829 365,306 50,634 822,769 802,179
202,258 4,251 - 206,509 206,509 767,319 - 767,319 767,319 7,149 7,149 20,708 35,006 35,006
209,407 778,719 20,708 1,008,834 1,008,834

23 CONTINGENT LIABILITIES

As at reporting date there were no contingent liabilities.

24 SUBSEQUENT EVENTS

Since the end of the financial year the company:

a) Has issued a non-renounceable Rights Issue of approximately 52,793,849 ordinary fully paid shares at a price of 7 cents each, on the basis of 1 new share for every 4 ordinary shares held at record date. The aim of the Issue is to raise a total of $3.695 million. A total of $228,499 was raised to-date.
b) The company is currently seeking to raise up to $2M in a convertible note and to-date has raised $500K using this investment vehicle and is expecting to complete this raising in full.
c) The company has completed the joint development with Jeppesen Marine (a Boeing Company) to integrate the Mobilarm man overboard system into their C-MAP marine cartography application. This integration will provide automatic MOB (man overboard) alarms and track back information on C-MAP compatible systems. Jeppesen’s C-MAP is the leading brand of marine cartography providing the world largest marine navigation electronic companies such as Navman and Furuno.
d) QuikTrak has been removed as a listed stock on the ASX. At the date of removal from the ASX the share price was 1.9 cents. As at 30 June 2008, this investment was carried at $305,820 (2.5 cents per share).

INDEPENDENT AUDITOR’S REPORT

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46 MOBILARM LIMITED ANNUAL REPORT 2008

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CORPORATE DIRECTORY

DIRECTORS

Mr Brenton Scott Mr Lindsay Lyon Mr Andrew Hill Mr Kathal Spence Mr Christian Lange Mr Richard Parish

Executive Chairman

Chief Executive Officer Chief Operating Officer Non Executive Director Non Executive Director Non Executive Director

COMPANY SECRETARY

Mr Brenton Scott

REGISTERED OFFICE

C/- Port Accounting Pty Ltd 91 High Street Fremantle WA 6160

PRINCIPLE PLACE OF BUSINESS

768 Canning Highway Applecross WA 6153

CONTACT DETAILS

Web: www.mobilarm.com Tel: (08) 9315 3511 Fax: (08) 9315 3611

LAWYERS TO THE COMPANY

Price Sierakowski Level 24, St Martin’s Tower 44 St George’s Terrace Perth WA 6000

AUDITORS

Ernst and Young 152 St George’s Terrace Perth WA 6000

SHARE REGISTRY

Security Transfer Registrars Pty Ltd 770 Canning Highway Applecross WA 6153

48 MOBILARM LIMITED ANNUAL REPORT 2008

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www.mobilarm.com

AI assistant

VINYL GROUP LTD — Annual Report 2008

66014_rns_2010-09-15_f5edc99b-7329-433f-974c-3078ee5e3dea.pdf

cONTENTs

Directors

Mr Brenton Scott

Mr Lindsay Lyon

Mr Andrew Hill

Mr Kathal Spence

Directors Meetings

Interest in the shares of the company and related corporations :

Mobilarm Limited Ordinary Shares

Company Secretary

Mr Brenton Scott

Corporate Overview

Principal Activities

Dividends

Operating Results for the Year

State Of Affairs

Likely Developments and Expected Results

Environmental Issues

Directors' Benefits

Indemnification and Insurance of Directors

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

Non-Audit Services

Events subsequent to balance date

Brenton A Scott

Brenton A Scott

INCOME STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

CASH FLOW STATEMENT

FOR THE YEAR ENDED 30 JUNE 2008

STATEMENT OF CHANGES OF EQUITY

AS AT 30 JUNE 2008

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a) Basis of Preparation

b) Going Concern

c) Statement of Compliance

Significant accounting judgments, estimates and assumptions

(i) Significant accounting estimates and assumptions

Impairment of goodwill and intangibles with indefinite useful lives

Revenue recognition

(i) Sale of goods

(ii) Rendering of services

Revenue recognition (continued)

(iii) Interest income

(iv) Rental income

Government grants

Borrowing costs

Leases

(i) The Company as a lessee

Cash and cash equivalents

Trade and other receivables

Inventories

Derivative financial instruments and hedging

Derecognition of financial assets and financial liabilities

(i) Financial assets

(ii) Financial liabilities

Impairment of financial assets

(i) Available-for-sale investments

Foreign currency translation

Income tax

Other taxes

Property, plant and equipment

(i) Impairment

(ii) Derecognition and disposal

Investments and other financial assets

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

(ii) Held-to-maturity investments

(iii) Loans and receivables

Investments and other financial assets (continued)

(iv) Available-for-sale investments

Intangible assets

Research and development costs

Patents and Licences AASB 138.118

Impairment of assets

Trade and other payables

Interest-bearing loans and borrowings

Provisions

Employee leave benefits

VINYL GROUP LTD Annual Report 2008