entertainment media & telecoms corporation limited and

Entertainment Media & Telecoms Corporation Limited and Subsidiaries ABN 81 071 275 253

Financial StatementsFor the year ended 30 June 2006

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CORPORATE DIRECTORY Board of Directors

Peter Dykes

Executive Chairman

Geoffrey Milne Executive Director

Colin Turner

Non Executive Director

Company Secretary

Vazrick Hovanessian (Resigned 20 December 2006)

Peter Dykes (Current)

Registered Office

Level 20, 99 Walker Street, North Sydney NSW 2060

Share Registry

Security Transfer Registrars Pty Ltd

770 Canning Highway,

Applecross WA 6153

Solicitors to the Company

Home Wilkinson Lowry

Level 21, 570 Bourke Street

Melbourne VIC 3000

Auditors

PKF

Level 10, 1 Margaret Street

Sydney, New South Wales 2000

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CONTENTS

Corporate Governance Statement 2

Directors’ Report 5

Auditors Independence Declaration under Section 307C of the Corporations Act 2001 13

Income Statement 14

Balance Sheet 15

Statements of Changes in Equity 16

Cash Flow Statement 17

Notes to the Financial Statements 18

Directors’ Declaration 42

Shareholder Information 43

Independent Audit Report 44

This financial report covers both Entertainment Media & Telecoms Corporation Ltd as an individual entity and the consolidated entity consisting of Entertainment Media & Telecoms Corporation Ltd and its subsidiaries. The financial report is presented in the Australian currency.

Entertainment Media & Telecoms Corporation Ltd is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:Entertainment Media & Telecoms Corporations Limited Level 20, 99 Walker St. North Sydney NSW 2060

The financial report was authorised for issue by the Directors on 09 March 2007. The company has the power to amend and reissue the financial report.

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COrpOrATE GOvErNANCE STATEMENT

Unless disclosed below, all of the best practice recommendations of the ASX Corporate Governance Council have been applied for the entire financial year ended 30 June 2006.

Board Composition

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 Director’s report.

The names of independent Directors of the company at the date of this report are :

vazrick Hovanessian (resigned 20 December 2006)

Greg Schratwieser Non Executive Director (resigned 27 July 2005)

Colin Turner Non Executive Director (resigned 31 March 2005 and re appointed 29 December 2006)

Dave Weisman Non Executive Director (resigned 27 July 2005)

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

• lessthan10%ofcompanysharesareheldbytheDirectorandanyentityorindividualdirectlyorindirectlyassociatedwiththeDirector;

• nosalesaremadetoorpurchasesmadefromanyentityorindividualdirectlyorindirectlyassociatedwiththeDirector;and

• noneoftheDirector’sincomeortheincomeofanindividualorentitydirectlyorindirectlyassociatedwiththeDirectorisderivedfrom a contract with any member of the economic entity other than income derived as a Director of the entity

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

Trading policy

The company has set a policy regarding Directors and employee trading in its securities. 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 to be reflected in the securities’ prices.

Board Committees

Audit and Compliance Committee

The Board has established an Audit and Compliance Committee which operates under a charter approved by the Board. It is the Board’s responsibility to ensure that an effective internal control framework exists within the Company to deal with the effectiveness and efficiency of business processes, the safeguarding of assets, the maintenance of proper accounting records and the reliability of financial information. The Board has delegated the responsibility for the establishment and maintenance of the internal control framework and ethical standards to the Audit and Compliance Committee. The committee’s responsibilities include the following:

- overseeandappraisetheindependence,qualityandextentofthetotalauditeffort;

- perform an independent overview of the financial information prepared by Company management for shareholders and prospective shareholders;

- evaluate the adequacy and effectiveness of the Company’s and the Group’s risk management and financial control, and other internal controlsystemsandevaluatetheoperationthereof;

- review and endorse the annual and half year attestation statements in accordance with regulatory requirements.

- appointment and monitoring of external auditors

- reviewandimplementriskmanagementandinternalcontrolstructuresappropriatetotheneedsoftheCompany;

- monitorcomplianceissues,applicablelawsandregulations,particularlycompliancewiththeStockExchangeListingRules;

- reviewallpublicreleasestotheASXofmaterialconsequence,priortoreleasetothemarket;and

- review of Corporate Governance Practices.

The members of the Audit and Compliance Committee since its inception were Messrs Vaz Hovanessian (Chairman) and Greg Schratwieser. There was 1 meeting held during the financial year.

The qualifications of audit and compliance committee members are as follows:

Mr. Vaz Hovanessian is Chairman of the Audit and Compliance Committee. He has accounting and finance qualifications and has significant experience in the management and administration of companies and knowledge in finance and accounting. He has served on other public company audit committees.

Mr. Greg Schratwieser has extensive knowledge of business procedures and management and has extensive experience in the area of promoting banking and financial services products.

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remuneration Committee

The Directors have decided not to appoint a Remuneration Committee due to the scale and nature of the Company’s activities. However, the Board actively researches appropriate remuneration for senior employees in particular and a significant decisions are generally made by all Board members at a Directors’ meeting.

It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality board by remunerating Directors fairly and appropriately with reference to relevant market conditions. To assist in achieving this objective, the Board attempts to link the nature and amount of Directors’ emoluments to the Company’s performance.

The outcome of the remuneration structure is:

- theretentionandmotivationofkeyexecutives;

- attractionofqualitypersonnelwithappropriateexpertise;and

- performance incentives that allow executives to share the rewards of the success of the Company.

For details of the amount of remuneration and all monetary and non-monetary components for each of the Directors during the financial year, refer to the Directors’ Report.

There is no scheme to provide retirement benefits, other than statutory superannuation for Directors who are paid a salary.

For further information in relation to the remuneration of Directors, refer to the Directors’ Report.

performance review/Evaluation

The Board intends to conduct an evaluation of its performance annually. There was no evaluation conducted during the financial year.

Nomination Committee

The Directors have decided not to appoint a Nomination Committee due to the scale and nature of the Company’s activities.

Subject to the provision of the Company’s Constitution, the issues of board composition and selection criteria for Directors are dealt with by the full board. The board continues to have the mix of skills and experience necessary for the conduct of the Company’s activities.

The Company’s Constitution provides for events whereby Directors may be removed from the board. Similarly shareholders have the ability to nominate, appoint and remove Directors. In addition, the Constitution provides for the regular rotation of Directors which ensures that Directors seek re-election by shareholders at least once every three years.

Given these regulatory requirements, Directors are not appointed for a specified term and Directors’ continuity of service is effectively in the hands of shareholders.

Company Code of Conduct

As part of its commitment to recognising the legitimate interests of stakeholders, the Company has established a Code of Conduct to guide compliance with legal and other obligations to stakeholders. These stakeholders include employees, clients, customers, government authorities, creditors and the community as a whole. This Code includes the following:

responsibilities to Shareholders and the Financial Community Generally

The Company complies with the spirit as well as the letter of all laws and regulations that govern shareholders’ rights. The Company has processes in place designed to ensure the truthful and factual presentation of the Company’s financial position and prepares and maintains its accounts fairly and accurately in accordance with the generally accepted accounting and financial reporting standards.

responsibilities to Clients, Customers and Consumers

Each employee has an obligation to use their best efforts to deal in a fair and responsible manner with each of the Company’s clients, customers and consumers. The Company for its part is committed to providing clients, customers and consumers with fair value.

Employment practices

The Company endeavors to provide a safe workplace in which there is equal opportunity for all employees at all levels of the Company. The Company does not tolerate the offering or acceptance of bribes or the misuse of Company assets or resources.

Obligations relative to Fair Trading and Dealing

The Company aims to conduct its business fairly and to compete ethically and in accordance with relevant competition laws. The Company strives to deal fairly with the Company’s customers, suppliers, competitors and other employees and encourages its employees to strive to do the same.

responsibilities to the Community

The Company is committed to conducting its business in accordance with applicable environmental laws and regulations and encourages all employees to have regard for the environment when carrying out their jobs.

COrpOrATE GOvErNANCE STATEMENT (Continued)

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responsibility to the Individual

The Company is committed to keeping private information collected during the course of its activities confidential and protected from uses other than those for which it was provided.

Conflicts of Interest

Employees and Directors must avoid conflicts as well as the appearance of conflicts between personal interests and the interests of the Company.

How the Company Complies with Legislation Affecting its Operations

Within Australia, the Company strives to comply with the spirit and the letter of all legislation affecting its operations. Outside Australia, the Company will abide by local laws in all countries. Where those laws are not as stringent as the Company’s operating policies, particularly in relation to the environment, workplace practices, intellectual property and the giving of “gifts”, Company policy will prevail

How the Company Monitors and Ensures Compliance with its Code

The Board, management and all employees of the Company are committed to implementing this code of conduct and each individual is accountable for such compliance. Disciplinary measures may be imposed for violating the code.

role of Shareholders

The Board aims to ensure that shareholders are informed of all major developments affecting the company’s state of affairs. Information is communicated to shareholders as follows:

- The Annual Financial Report is distributed to all shareholders (unless a shareholder has specifically requested not to receive the document). The Board ensures that the annual report includes relevant information about the operations of the Company during the financial year, changes in the state of affairs of the Company and details of future developments, in addition to other disclosures requiredbytheCorporationAct2001;

- Releaseofahalf-yearlyFinancialReporttotheAustralianStockExchangeLimited;and

- Proposed major changes in the economic entity, which may impact on share ownership rights, are submitted to a vote of shareholders.

The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of accountability and identification with the Company’s strategy and goals.

Shareholders are responsible for voting on appointment of directors, appointment of auditors, level of remuneration of non-executive Directors and any matters of special business.

COrpOrATE GOvErNANCE STATEMENT (Continued)

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Your Directors present their report on the company and its subsidiaries for the financial year ended 30 June 2006.

Directors

The names of the Directors in office at any time during, or since the end of, the year are:

Names Appointed/Resigned

peter Dykes Executive Chairman


vazrick Hovanessian Non Executive Director (Resigned 20 December 2006)

Brad Schroeder Executive Director (Resigned 29 September 2005)

Greg Schratwieser Non Executive Director (Resigned 27 July 2005)

Colin Turner Non Executive Director (Resigned 31 March 2005 and re appointed 29 December 2006)

Dave Weisman Non Executive Director (Resigned 27 July 2005)

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

Company Secretary

As at the end of the financial year, Mr. Vazrick Hovanessian held the position of company secretary. Mr. Hovanessian resigned on 20 December 2006 and Mr. Peter Dykes was immediately appointed to the position.

Details of Mr Hovanessian’s and Mr Dykes’ qualifications and experience are provided below in the Information on Directors.

principal Activities

The principal activities of the company during the financial year were:

— the development and commercialisation of a Hospitality Entertainment Solution, including

* provision of Digital Video on Demand (DVOD)

* High Speed Internet Access (HSIA)

* Other services for In-room guests

— the sale of telecommunication services and products.

Significant changes in the nature of the principal activities occurred during the financial year as are set out below.

review of Operations

The consolidated loss after providing for income tax and eliminating minority equity interests amounted to $7,916,000 (2005: loss $6,962,000).

Dividends paid or recommended

During and since the twelve month period to 30 June 2006 there has not been any dividend or distribution reinvestment plan in operation. No dividends were paid or made payable during or since the twelve month period to 30 June 2006.

review of Operations

During the reporting period, all operations in USA, Australia and New Zealand have been sold and operating activities ceased. This cessation has resulted in substantial losses arising mainly from losses and write downs of asset values, including intangible assets. At year end the Canadian entity was not treated as a going concern due to its uncertain future.

Financial position

The net assets of the economic entity have decreased by $5,931,000 since 30 June 2005 to a net deficit of $8,933,000 at 30 June 2006. This decrease was largely arising from the loss of the Group in the year of $7,916,000(2005: loss $6,962,000).

DIrECTOrS’ rEpOrT

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Significant Changes in State of Affairs

The following significant changes in The Company’s state of affairs occurred during the financial year:

On 8 August 2005, EMT announced a restructure of Galavu Entertainment Network Inc. (a Canadian entity) quarantining approximately •$2M of legacy liabilities.

On 5 August 2005, GalaVu filed a Notice of Intention to make a proposal under the Bankruptcy and Insolvency Act (Canada) (“NOI”) •and coincident with the filing of the NOI, GalaVu engaged a Trustee to serve and assist in the proposal process. This NOI provided for a statutory “stay of proceedings” between GalaVu and its creditors, during which GalaVu developed a proposal to its creditors.

On 12 January 2006, the court approved EMT Corp (Canada)’s proposal with the following conditions:•

Payment of all the claims of all secured creditors shall be made in the usual manner or as agreed by GalaVu and the secured •creditors.

Claims of the Government of Canada at 15 August 2005 shall be paid within 6 months of court approval of the proposal.•

Claims of employees for services rendered during the six months immediately preceding the date of the filing of the NOI, to a •maximum of CA$2,000 per employee, together with, in the case of salaries, claims to a maximum of CA$1,000 for business-related disbursements incurred during the same period, shall be paid immediately after the court approval.

All other preferred claims, without interest, shall be paid in full in priority to all claims of ordinary creditors.•

All proper fees, expenses and disbursements of the Trustee, commencing with the filing of the proposal with the official receiver, •shall be paid in priority to all claims of creditors.

The amounts due to unsecured creditors, which amounted to CA$2,089,405, would be paid from the funds received by the Trustee. •The agreement stated that CA$350,000 would be paid to the Trustee on or before 31 July 2006. On 1 August 2006, no further extensions could be obtained so EMT Corporation (Canada) automatically reverted to the extended payment option alternative in the proposal to creditors. This option required a series of payments to the Trustee totaling CA$435,000. The series of payments are scheduled to be CA$7,500 monthly for a period of 10 months and thereafter CA$15,000 monthly for a period of 24 months. Based on the amount currently paid by EMT Corporation (Canada) to the Trustee, the due date for the next CA$15,000 payment is 12 February 2007. At year end, CA$319,982 of the CA$435,000 was still owed to the Trustee.

On9August2005,theCompanyissued24,560,548fullypaidordinarysharesat2.0centspershare;•

On 1 September 2005, the Company issued 9,250,000 fully paid ordinary shares at 2.0 cents per share and 13,500,000 shares at 1.3 cents •pershare;

On19September2005,SimsPartnerswereappointedasReceiverandManagersoftheEMTGroup;•

On 20 September 2005 shares of the company were suspended from quotation following the appointment of Tony Sims and Neil •SingletonofSimsPartnersasReceiversandManagersofthecompany;

On2November2005,SimsPartnerscompletedthesaleofEMT’sUSoperationstoKoolConnectTechnologiesInc.;•

On11November2005,SimsPartnerscompletedthesaleofEMT’sAustralian&NewZealandoperations;•

On4December2005thesaleoftheUS-basedbusinesswascompleted;•

On8December2005,SimsPartnersretiredasthereceiverandmangerofEntertainmentMedia&TelecomsCorporationLimited;•

On 8 December 2005, Livonia Pty Limited acquired a portion of the secured debt held by Alleasing Finance Australia Limited over •EntertainmentMedia&TelecomsCorporationLimited;

On 9 December 2005, Livonia Pty Limited appointed Lowe Lippmann as the receiver and manger of Entertainment Media & Telecoms •CorporationLimitedwiththeobjectiveofsettlingthecreditorsoftheEMTgroupandre-listingEMT;

A portion of the secured debt held by Alleasing Finance Australia Limited was assigned to Cardinal Communications, Inc. (“Cardinal”) in •the amount of A$2,668,250, which was secured by the assets of EMT Corporation (Canada). Cardinal also provided to EMT Corporation (Canada) a bridging loan of A$797,500, secured by the assets of the Company. As part of the agreement, Cardinal agreed to convert all of its debt to EMT shares, subject to shareholder approval. If shareholder approval was not forthcoming or EMT was not re-listed within 120 days of the date of the agreement, then Cardinal had the right to transfer all of the assets of Galavu in exchange for Cardinal’s secured debt.

Due to various assignments and pledges of security, EMT Corporation (Canada) owed Cardinal A$3,465,750 (CA$2,832,500) prior to the •notice of foreclosure on 7 January 2007.

On 9 Dec 2005 the secured creditors of Entertainment Media and Telecoms Corporation Limited assigned its security to a third party. A •receiver was appointed to the subsidiary companies.

On13December2005,theCompanyissued10,750,000fullypaidordinarysharesat2.0centspersharetoLivoniaPtyLimited;•

On 21 February 2006, EMT advised that the Galavu Restructure had resulted in creditors approving a settlement of 20 cents in the dollar, •effectivelyresultinginadisposalofcloseto$2MoflegacyliabilitiesowedbyGalavu;

On 24 February 2006, the Company issued 115,742,141 fully paid ordinary shares at 1.0 cent per share issued to reduce debt and satisfy •creditors;

DIrECTOrS’ rEpOrT (Continued)

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On 1 March 2006, EMT announced that it has entered into an agreement with Livonia Pty Limited and Cardinal Communications Inc. (a •listedUSentity)whichresultedintheGalavubusinessbeingretainedwithintheEMTGroupofcompanies;

On1March2006SimsPartnersretiredasreceiverandmanagersofallcompaniesintheGroup;•

On1May2006,theCompanyissued65,257,859fullypaidordinarysharesat1.0centpershare;•

On22May2006,LoweLippmannretiredasthereceiverandmanagerofEntertainmentMedia&TelecomsCorporationLimited;•

The financial effects of the above events have been reflected in the attached financial statements.•

Events After Balance Sheet Date

On 23 October 2006, EMT signed a Letter of Intent to acquire Interactive Telecoms Pty Limited and Fox Mobile Accessories Pty Limited •for$250,000cashand25,000,000fullypaidordinarysharesat1.0centpershare;

On14December2006,EMTsignedaLetterofIntenttoacquireaminimumof90.1%andupto100%ofSapioABforaminimumof•54,060,000 and up to 60,000,000 fully paid ordinary shares at 1.0 cent per share.

On29December2006,EMTsignedabindingagreementtoacquireaminimumof90.1%andupto100%ofSapioABforaminimumof•54,060,000andupto60,000,000fullypaidordinarysharesat1.0centpershare;

On5January2007,EMTcompletedtheacquisitionof90.1%ofSapioABfor54,060,000fullypaidordinarysharesat1.0centpershare;•

On5January2007,theCompanyissued317,525,000fullypaidordinarysharesat1.0centpershare;•

On12January2007,EMTcompletedtheacquisitionoffurther9.9%ofSapioABfor5,940,000fullypaidordinarysharesat1.0centper•share;and

On 15 January 2007, the company issued 472,165,000 fully paid ordinary shares at 1.0 cents.•

On 7 January 2007, EMT received a notice of foreclosure from Cardinal stating that it had decided to exchange Cardinal’s secured debt •for the assets of Galavu.

On 30 January 2007, EMT received confirmation that the foreclosure had been finalised and that all of the assets of Galavu have •successfully been transferred to Cardinal.

On 30 January 2007, EMT announced to the market that it was not proceeding with the acquisition of Interactive Telecoms Pty Limited •and Fox Mobile Accessories Pty Limited.

EMTdisposedof100%ofitssharesinEMTCorporationPtyLimited,effective18January2007.•

EMTdisposedof100%ofitssharesinEntertainmentMedia&TelecomsCorporation,Inc.andEMTCorporation(Singapore)PteLimited,•effective 31 January 2007.

Future Developments, prospects and Business Strategies

Other than as noted previously within this report, the Directors have excluded from this report any further information on the likely developments in the operations of the economic entity and the expected results of those operations in future financial years, as the Directors have reasonable grounds to believe that it would be likely to result in unreasonable prejudice to the economic entity given that any comment in that regard would be too speculative and uncertain to be accurate.

Environmental Issues

The economic entity has determined that there is no particular or significant environmental legislation which is relevant to it operations.

- On 15 January 2007, the Company issued 472,165,000 fully paid ordinary shares at 1.0 cent per share.

- On 7 January 2007, EMT received a notice of foreclosure from Cardinal stating that it had decided to exchange Cardinal’s secured debt for the assets of Galavu.

- On 30 January 2007, EMT received confirmation that the foreclosure has been finalised and that all of the assets of Galavu have successfully been transferred to Cardinal.

Adoption of Australian Equivalents to IFrS

As a result of the introduction of Australian equivalents to International Financial Reporting Standards (AIFRS), the company’s financial report has been prepared in accordance with those standards.


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Director Information

peter Dykes Executive Chairman

Qualifications Bachelor of Business (Accounting), Fellow of Tax Institute of Australia.

Interest in Shares and Options 10,000,000 Ordinary Shares in Entertainment Media & Telecoms Corporation Limited Corporation Limited.

Special Responsibilities Nil


Experience Has extensive background in Sales and Marketing and senior management and ownership roles within the hospitality industry.

Interest in Shares and Options 9,432,008 Ordinary Shares in Entertainment Media & Telecoms Corporation Limited Corporation Limited.


vazrick Hovanessian Non-Executive Director (Resigned 20 December 2006)

Qualifications Bachelor of Business (Accounting), Master of Applied Finance, Member Australian Society of CPA, Fellow Chartered Secretaries Australia

Experience Executive Director – E-Com-Multi Ltd and Broadtel Communications Limited. Has extensive management and ownership experience in Tourism and Hospitality and in Corporate Advisory.

Interest in Shares and options 13,500,000 Ordinary Shares in Entertainment Media & Telecoms Corporation Limited Corporation Limited Special Responsibilities Mr. Hovanessian is Chairman of the Audit Committee

Colin Turner Non Executive Director (Resigned 31 Mar 2005 & re-appointed 29 December 2006)

Experience Formerly Executive Director of subsidiary companies involved in EMT’s Direct Sales and Marketing Telecommunications Business and has extensive background in Sales, Marketing & Financial Management

Interest in Shares and Options 66,667 Ordinary Shares in Entertainment Media & Telecoms Corporation Limited Corporation Limited


Brad Schroeder Executive Director (Resigned 29 September 2005)

Experience Formerly Executive Director of Entertainment Media & Telecoms Corporation Limited subsidiary company involved in the provision of digital Video on Demand to the North American Hospitality Market



Greg Schratwieser Non Executive Director (Resigned 27 July 2005)

Experience President and Chief Executive Officer of International Consulting Inc. Previously held senior marketing roles for Unisys Corporation.

Interest in Shares and Options 3,072,000 Ordinary Shares in Entertainment Media & Telecoms Corporation Limited Corporation Limited


Dave Weisman Non Executive Director (Resigned 27 July 2005)

Experience Formerly Chief Executive Officer of Eagle Broadband Inc.




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Meetings of Directors

During the financial year 8 meetings of Directors (including committees of Directors) were held. Attendances by each Director during the year were as follows:

Directors’ name Directors’ meetings Committee Meetings

Audit and Compliance Committee

Number eligible to attend Number attended Number eligible to attend Number attended

Peter Dykes 8 8

Geoffrey Milne 8 8

Vazrick Hovanessian 8 8 1 1

Brad Schroeder 6 6

Greg Schratwieser 3 3 1 1

Colin Turner 0 0

Dave Weisman 3 3

rEMUNErATION rEpOrT

This report details the nature and amount of remuneration for each Director of Entertainment Media & Telecoms Corporation Limited and Subsidiaries, and for the executives receiving the highest remuneration.

remuneration policy

The company’s policy for determining the nature and amount of emoluments 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 Directors and executives are paid employee benefit entitlements accrued to date of retirement. The company may terminate the contracts without cause by providing 12 months written notice or making payment in lieu of notice based on the individual’s annual salary componenttogetherwitharedundancypaymentofbetween5%–10%oftheindividual’sfixedsalarycomponent.Terminationpaymentsaregenerally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Any options not exercised before or on the date of termination will lapse.


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Details of remuneration for year ended 30 June 2006

The remuneration for each Director and each of the five executive officers of the Company receiving the highest remuneration during the year was as follows:

Directors’ remuneration

2006 Post Other long employment term Share based Performance Short term benefits benefits benefits payments Total related

Cash, salary Cash & commissions profit share Options Equity Equity Options %

$ $ $ $ $ $ $ $ $

Peter Dykes - - - - - - 100,000 - 100,000 -

Geoffrey Milne - - - - - - 75,000 - 75,000 -

Vazrick - - - - - - 135,000 - 135,000 - Hovanessian

Brad - - - - - - - - - - Schroeder

Greg - - - - - - 20,000 - 20,000 - Schratwieser

Colin Turner - - - - - - - -

Dave Weisman - - - - - - - - - -

- - - - - - 330,000 - 330,000


Cash, salary Cash & commissions profit share Options Equity Equity Options %

$ $ $ $ $ $ $ $ $

Peter Dykes 181,914 - - - - - 137,500 - 319,414 -

Geoffrey Milne 134,600 - - - - - 110,000 - 244,600 -

Vazrick 41,000 - 67,500 - - - - - 108,500 - Hovanessian

Brad Schroeder 46,875 - - - - - 60,000 - 106,875 -

Greg 18,214 - - - - - 12,000 - 30,214 - Schratwieser

Colin Turner 12,500 - - - - - - - 12,500 -

Dave Weisman - - - - - - 12,000 - 12,000 -

502,603 - 67,500 - - 331,500 - 807,967


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Key Management personal Compensation


Cash, salary Cash & commissions profit share Options Equity % Equity Options %

$ $ $ $ $ $ $ $ $ $

Richard Street (Chief Technology Officer) 26,462 - - - 2,382 - 28,844 -

Edwin Reed Chief Financial Officer) - - - - - - - -

Kelly Sides (Chief Marketing Officer) - - - - - - 80,000 80,000 -

John Poon (Marketing Director - Singapore Operations) - - - - - - - - - -

Malcolm Brindley (Technical Officer) - - - - - - - - - -

26,462 - - - 2,382 - 80,000 - 108,844


Cash, salary Cash & commissions profit share Options Equity % Equity Options %

$ $ $ $ $ $ $ $ $ $

Richard Street (Chief Technology Officer) 151,593 - - - 12,968 - - - 164,561 -

Edwin Reed Chief Financial Officer) 66,667 - - - - - - - 66,667 -

Kelly Sides (Chief Marketing Officer) 203,088 - - - 4,565 - - - 207,653 -

John Poon (Marketing Director - Singapore Operations) 92,702 - - - - - - - 92,702 -

Malcolm Brindley (Technical Officer) 136,380 - - - 12,004 - - - 148,384 -

650,430 - - - 29,537 - - - 679,967

performance income as a proportion of total remuneration

No performance income has been paid as a proportion of total remuneration.


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remuneration report (Continued)

Options issued as part of remuneration for the year ended 30 June 2006

No options have been issued as part of remuneration for the year ended 30 June 2006

Employment contracts of Directors and senior executives

Employment contracts have been cancelled during the 1st half year. No employment contracts existed as at 30 June 2006.

Indemnifying Officers or Auditors

During or since the end of the financial year the company has not given any indemnity or entered into an agreement to indemnify, or paid or agreed to pay insurance premiums.

Options

At the date of this report, there is no un-issued ordinary shares of the Company under options.

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.

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 •theintegrityandobjectivityoftheauditor;and

The nature of the services provided do not compromise the general principles relating to auditor independence. •

The following fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2006:

$

Taxation services Nil

Other Services Nil

Nil

Auditors Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2006 has been received and can be found on page 13 of the financial report.

rounding of amounts

The company is an entity to which ASIC Class order 98/100 applies and, accordingly, amounts in the financial statements and Directors’ report have been rounded to the nearest thousand dollars.

Signed in accordance with a resolution of the Board of Directors.

Peter Dykes

Director

Dated this 9th day of March 2007

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AUDITOr’S INDEpENDENCE DECLArATIONUNDEr SECTION 307C OF THE COrpOrATIONS ACT 2001

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Note 2006 2005 2006 2005

$000 $000 $000 $000

CONTINUING OpErATIONS $000 $000 $000 $000

revenue

Revenues from continuing operations 4 3,419 1,390 43 751

Other income 4 369 146 78 -

Expenses

Selling expenses (3,474) (1,254) (243) -

Marketing expenses (34) (9) - (1)

Occupancy expense (178) (40) (2) -

Administration expenses (1,293) (241) (512) (529)

Finance costs expense - (156) - (137)

Loss on Disposal of Assets - (454) (30) (1)

Depreciation (387) (304) (71) (19)

Amortisation - (149) - -

Operating Lease Expense (3,059) (1,281) (3,059) -

Write Down of Guarantee Charge (2,507) - - -

Write Down of Non recoverable investments - - - (2,325)

Write Down of Intangibles - - (79)

Write Down of Plant & Equipment (1,194) - - (117)

Provision for loans to subsidiaries - - (13) (7,175)

Other expenses from ordinary activities (291) - (55) (55)

Results from operating activities (8,629) (2,352) (3,864) (9,687)

profit/ (loss) before income tax expense (8,629) (2,352) (3,864) (9,687)

Income tax expense 6 - - - -

profit/(loss) from continuing operations (8,629) (2,352) (3,864) (9,687)

DISCONTINUED OpErATIONS

Profit /(loss from discontinued operations (net of income tax) 713 (4,610) - -

profit / (loss) for the period (7,916) (6,962) (3,864) (9,687)

Profit / (loss) attributable to minority interests - - - -

Profit/ (loss) attributable to members of the parent entity (7,916) (6,962) (3,864) (9,687)

EArNINGS pEr SHArE

Basic loss per share (5.15) (1.06) - -

Diluted loss per Share (5.15) (1.06) - -

The accompanying notes form part of these financial statements.

INCOME STATEMENTS FOr THE YEAr ENDED 30 JUNE 2006

Consolidated Parent Entity

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BALANCE SHEETS AS AT 30 JUNE 2006

Note 2006 2005 2006 2005

$000 $000 $000 $000

Assets

Current assets

Cash and cash equivalents 12 16 368 5 60

Trade and other receivables 13 433 820 36 -

Inventories 14 108 626 108 -

Financial assets 15 - - - 158

Other current assets 19 126 269 3 20

Total current assets 683 2,083 152 238

Non Current Assets

Property, plant and equipment 17 - 2,076 - -

Goodwill 18 - 871 - -

Financial assets 15 - - - -

Other Non Current Assets 19 - - - -

Total non current assets - 2,947 - -

Total assets 683 5,030 152 238

Liabilities

Current liabilities

Trade and other payables 20 3,440 6,152 303 100

Short term borrowings 21 6,176 1,795 2,701 1,776

Short term provisions 23 - 35 - -

Total current liabilities 9,616 7,982 3,004 1,876

Non current liabilities

Long term borrowings 21 - 50 - 32

Total non current liabilities - 50 - 32

Total liabilities 9,616 8,032 3,004 1,908

Net assets/(deficiency of net assets) (8,933) (3,002) (2,852) (1,670)

Equity

Contributed equity 27 16,603 13,921 16,603 13,921

Accumulated losses 24 (24,825) (16,909) (19,455) (15,591)

Foreign Currency Translation Reserve 25 (711) (15) - -

parent entity interest (8,933) (3,003) (2,852) (1,670)

Minority equity interest - 1 - -

Total equity (8,933) (3,002) (2,852) (1,670)



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STATEMENT OF CHANGES IN EQUITY FOr THE YEAr ENDED 30 JUNE 2006

Consolidated

2006 Ordinary Accumulated Foreign Currency MinorityEquity Shares Losses Translation Reserve Interests Total

Note $000 $000 $000 $000 $000

Balance at 1 July 2005 13,921 (16,909) (15) 1 (3,002)

Shares issued during the year 2,828 - - - 2,828

Profit attributable to members - (7,916) - - (7,916)

Adjustments from translation of foreign subsidiaries - - (696) (1) (697)

Transaction costs (146) - - - (146)

Balance at 30 June 2006 16,603 (24,825) (711) - (8,933)

2005 Ordinary Accumulated Foreign Currency Minority Equity Shares Losses Translation Reserve Interests Total

Note $000 $000 $000 $000 $000

Balance at 1 July 2004 10,001 (9,947) - 1 55

Shares issued during the year 3,920 - - 3,920

Profit attributable to members - (6,962) - - (6,962)

Adjustments from translation of foreign subsidiaries - - (15) - (15)

Balance at 30 June 2005 13,921 (16,909) (15) 1 (3,002)

parent Entity

2006 Ordinary Accumulated Shares Losses Total

Note $000 $000 $000

Balance at 1 July 2005 13,921 (15,591) (1,670)

Shares issued during the year 2,828 - 2,828

Profit attributable to members - (3,864) (3,864)

Adjustments from translation of foreign subsidiaries - - -

Transaction costs (146) - (146)

Balance at 30 June 2006 16,603 (19,455) (2,852)

2005 Ordinary Accumulated Shares Losses Total

Note $000 $000 $000

Balance at 1 July 2004 10,001 (5,904) 4,097

Shares issued during the year 3,920 - 3,920

Profit attributable to members - (9,687) (9,687)

Adjustments from translation of foreign subsidiaries - - -

Transaction costs - - -

Balance at 30 June 2005 13,921 (15,591) (1,670)

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CASH FLOW STATEMENTS FOr THE YEAr ENDED 30 JUNE 2006

Note 2006 2005 2006 2005

$000 $000 $000 $000

Cash flows from operating activities

Receipts from customers (inclusive of goods and services tax) 6,379 9,375 37 799

Payments to suppliers and employees (inclusive of goods and services tax) (10,066) (9,235) (370) (544)

Interest received 1 10 1 10

Finance costs - (156) - (137)

Net cash provided by / (used in) operating activities (3,686) (6) (332) 128

Cash flows from investing activities

Payment for acquisition of business and subsidiary, net of cash acquired - (2,303) - (2,303)

Payment / (Sale) for acquisition of property, plant and equipment - (2,689) - -

Loan granted by / (to) other entities - - - (6,006)

Repayment of loans by other entities - - - 2,500

Proceeds from sale of non-current assets - - - 17

Net cash provided by / (used in) investing activities - (4,992) - (5,792)

Cash flows from financing activities

Proceeds from issue of shares 2,682 3,589 2,682 3,589

Repayment of borrowings - (1,507) - (805)

Proceeds from borrowings 652 2,559 2,524

Payment for finance leases - (46) - (44)

Payment to related parties - - (2,405) -

Net cash provided by / (used in) financing activities 3,334 4,595 277 5,264

Net increase / (decrease) in cash held (352) (403) (55) (400)

Cash at 1 July 2005 368 786 60 460

Effects of exchange rates on cash holdings in foreign currencies - (15) - -

Cash at 30 June 2006 16 368 5 60



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1. Summary of Significant Accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Entertainment Media & Telecoms Corporation Limited, and for the parent entity and its subsidiaries (consolidated entity).

Basis of preparation of accounts

This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Compliance with International Financial reporting Standards (IFrS)

Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the consolidated financial statements and notes of Entertainment Media & Telecoms Corporation Limited and subsidiaries comply with IFRS. The parent entity financial statements and notes also comply with IFRS except that it has elected to apply relief provided to parent entities in respect of certain disclosure requirements contained in AASB 132 Financial Instruments: Presentation and Disclosure and AASB 3 Business Combination.

Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial reporting Standards

These financial statements are the first Entertainment Media & Telecoms Corporation Limited and subsidiaries financial statements to be prepared in accordance with AIFRS. AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these financial statements.

Financial statements of Entertainment Media & Telecoms Corporation Limited and subsidiaries until 30 June 2005 had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. As noted in note 2 there are no material impacts on the net assets and income statements as a result of adoption of AIFRS.

The company has elected to apply the exemption available under AASB 1 not to restate any past business combinations under AASB 3 that occurred before the date of transition.

Historical cost convention

These financial statements have been prepared under the historical cost convention.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies.

NOTES TO THE FINANCIAL STATEMENTS FOr THE YEAr ENDED 30 JUNE 2006

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a) Principles of consolidation

Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Entertainment Media & Telecoms Corporation Limited and the results of all subsidiaries for the year then ended. Entertainment Media & Telecoms Corporation Limited and its subsidiaries together are referred to in this financial report as the Group or the Consolidated entity.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Minority interests in the results and equity of subsidiaries are shown separately in the consolidated income statement and balance sheet respectively.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Entertainment Media & Telecoms Corporation Limited.

(b) Comparative Figures

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

(c) 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.

(d) Property, Plant and Equipment

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

Freehold land and buildings are shown at their fair value (being the amount for which an asset could be exchanged between knowledgeable willing parties in an arm’s length transaction), based on periodic, but at least triennial, valuations by external independent valuers, less subsequent depreciation for buildings. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset.

Plant and equipment is measured on the cost basis less depreciation and impairment losses. The carrying amount of plant and equipment is reviewed annually by Directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

The depreciable amount of all fixed assets, including capitalised leased assets is depreciated over their useful lives to the Group commencing from the time the asset is held ready for use. Leasehold improvements are amortised over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The estimated economic lives underlying the depreciation rates used for each class of depreciable assets are:

Office equipment 3 to 20 years

Furniture and fittings 10 to 15 years

Motor Vehicles 6.6 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

NOTES TO THE FINANCIAL STATEMENTS FOr THE YEAr ENDED 30 JUNE 2006 (Continued)

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(e) Financial Instruments

Financial instruments are initially measured at cost on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

A financial asset is classified as at fair value through profit and loss if acquired principally for the purpose of selling in the short term or if so designated by management and within the requirements of AASB 139 Financial Instruments: Recognition and Measurement of Financial

Derivatives are also categorised as held for trading unless they are designated as hedges. Realised and unrealised gains and losses arising from changes in the fair value of such financial assets and liabilities are included in the income statement in the period in which they arise.

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market and are stated at amortised cost using the effective interest rate method. Loans payable by the Group at 30 June 2006 were a mixture of interest bearing and non interest bearing, refer Note 33.

Held-to-maturity investments have fixed maturities, and it is the company’s intention to hold these investments to maturity. Any held to maturity investments held by the company are stated at amortised cost using the effective interest rate method.

Available for sale financial assets include any financial assets not included in the above categories. Available for sale financial assets are reflected at fair value. Unrealised gains and losses arising from changes in fair value are taken directly to equity.

Non derivative financial liabilities are recognised at amortised cost, comprising original debt less principal payments and amortisation.

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

At each reporting date, the company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available for sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement.

The Group has taken exemption under AASB 1 to apply AASB 132 Financial Instruments: Disclosure and Presentation and AASB139 Instruments: Recognition and measurement from 1 July 2005.

(f) Intangible assets

Goodwill and goodwill on consolidation is initially recorded at the amount by which the purchase price for a business or for an ownership interest in a subsidiary exceeds the fair value attributed to its net assets at date of acquisition. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

(g) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short term borrowings in current liabilities on the balance sheet.

(h) Employee Benefits

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. 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, plus related on costs. Employee benefits payable later than one year have been measured at present value of the estimated future cash outflows to be made for those benefits.

(i) Share - Based Payments

The Group operates a number of share based compensation plans. These include both a share option arrangement and an employee share scheme. The fair value of instruments issued is recognised as an expense in the income statement. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares or the options granted. During the period Directors were renumerated in shares for services provided. In addition, various creditors were paid with shares for the year and brokerage fees were included in equity for these issues.

(j) Provisions

Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

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(k) Borrowings

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds of the borrowing and the redemption amount is recognised in the income statement over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities, which are not incremental cost relating to the actual draw-down of the facility, are recognised as prepayments and amortised on a straight-line basis over the term of facility.

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 balance sheet date.

(l) Borrowing costs

Borrowing costs are recognised as expenses in the period in which they are incurred.

(m) Business combinations

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

(n) Income Tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to the temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and attributable to unused tax losses.

Deferred tax assets and liabilities are recognised for the temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for the deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries where the parent entity is able to control the timing of the reversal of the temporary difference and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

Tax consolidation legislation

Entertainment Media & Telecoms Corporation Limited is not a member of a tax consolidated group.

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(o) Impairment of assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

(p) Leases

Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other long term payables.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period.

The property, plant and equipment acquired under finance leases are depreciated over the shorter of the asset’s estimated useful life and the lease term.

(q) Receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 30 days. Collectibility of trade receivables is reviewed on an ongoing basis.

Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the movement in the provision is recognised in the income statement.

(r) Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of financial year which had not been settled at balance date. The amounts are unsecured and are usually paid within 30 days of recognition.

(s) Rounding of Amounts

The company has applied the relief available to it under ASIC Class Order 98/100 and accordingly, amounts in the financial report and Directors’ report have been rounded off to the nearest $1,000.

(t) Revenue

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid. Revenue from the sale of goods is recognised upon the delivery of goods to customers. Revenue from the rendering of services is recognised upon the delivery of the service to the customers.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

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

(u) 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 Taxation 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 balance sheet are shown inclusive of GST.

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

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(v) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

(w) 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. The amounts of any capital returns are applied against contributed equity.

(x) Earnings per share

i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus element in ordinary shares issued during the year..

ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financial costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(y) Foreign Currency Transactions and Balances

i) Functional and presentation currency

The functional currency of each of the Group’s entities is determined 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.

ii) Transactions 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 income statement, 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 income statement.

iii) 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:

assetsandliabilitiesaretranslatedatyearendexchangeratesprevailingatthatreportingdate;•

incomeandexpensesaretranslatedataverageexchangeratesfortheperiod;and•

retained earnings are translated at the exchange rates prevailing at the date of the transaction.•

(z) Foreign Currency Transactions and Balances continued

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

Goodwill and fair value adjustments on the acquisition of a foreign entity are treated as assets and liabilities and translated at the closing rate.

(aa) Critical accounting estimates and judgments

The Directors evaluate estimates and judgments incorporated into the financial report 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.

The Group assesses impairment at each reporting date by evaluating conditions specific to the Group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. Value in use calculations performed in assessing recoverable amounts incorporate a number of key estimates.

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The Group is subject to income tax in Australia and Jurisdictions where it has foreign operations. Significant judgement is required in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcomes of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made. At 30 June 2006 there was no tax liability recognised, as a results of the Group making a substantial loss for the year.

(ab) Going Concern

Despite the current year net loss, and deficient of net assets as at 30 June 2006, the Directors believe that the going concern basis is appropriate for the preparation and presentation of the financial statements as the Company expects to deliver positive operating cash flows and operating profits in the future.

The company has recently raised $1,500,000 in cash and has eliminated all secured debts from the parent entity. In addition, via the receivership process the Entertainment Media & Telecoms Corporation Limited Group has eliminated all pre-receivership creditors via either the issue of shares or a cash settlement. The Directors believe that the company is now in a strong financial position and is debt free with in excess of $1,000,000 in cash.

In addition, the company has recently finalised the acquisition of Sapio AB, a mobile application software development business. The Directors believe that this business will deliver substantial positive cash flows and profits in the future.

Sapio has several ongoing development projects underway for third parties which the Directors believe will deliver substantial revenues, including the development of betting applications for mobile phones in Sweden, the development and ongoing deployment of mobile casino games for one of the leading casino operators in the world and the development of mobile applications for the public sector using Sapio’s bar code reader technology.

Further, the Directors believe that the Collaboration Agreement signed between Nokia and Sapio for the “Press to Print” project may also provide substantial revenues and profits in the future. This project involves the development, promotion and facilitation of mobile printing solutions and services across Scandinavia. The market for camera phones is booming with Nokia selling approximately 100 million camera phones in 2005.

The Directors and senior management have prepared a forecast over the next 12 months reflecting the abovementioned expectations and their affect on the economic entity. The achievement of the forecast is dependent upon the following matters, the outcomes of which are uncertain:

the ongoing ability of the company to successfully develop and support the abovementioned development projects for third party •customers;and

the ability of the company to commercially roll-out the “Press to Print” project in accordance with the proposed business plan and to Nokia’s •satisfaction.

In the unlikely event the matters noted above are unfavourable, the Directors believe that they will be able to contain operating costs and investment activities sufficiently to ensure that the Company can continue to meet its debts as and when they become due and payable.

If the current results continue and the abovementioned projects are a commercial failure, the going concern basis may not be appropriate with the result that the Company may have to realise its assets and extinguish its liabilities other than in the ordinary course of business and in amounts different from those stated in the Financial Report. Given the current confidence of the Directors in the future performance of the Company, no allowance for such circumstances has been made in the Financial Report.

2. First time Adoption of Australian Equivalents to International Financial reporting Standards

Economic Entity Reconciliation of Equity (start of prior year)

The impacts of adopting AIFRS on the total equity and loss after tax as reported under Australian accounting Standards applicable before 1 July 2005 (AGAAP) are illustrated below.

Reconciliation of total equity as presented under AGAAP to that under AIFRS

There are no differences between the total equity presented under AIFRS and those presented under AGAAP.

Reconciliation of loss after tax as presented under AGAAP to that under AIFRS

There are no differences between the loss after tax presented under AIFRS and those presented under AGAAP.

Explanation of material adjustments to the cash flow statements

There are no differences between the cash flow statements presented under AIFRS and those presented under AGAAP.

Note although it is required that all Goodwill amortised under AGAAP in years ended 30 June 2004 and 2005 should be reversed to retained earnings, given that the company has written off all goodwill as impaired at 30 June 2006, no adjustments to retained earnings were made.

During the year ended 30 June 2005 and year ended 30 June 2006, no options vested with Directors and key management personnel or have been exercised and all executive and general options have been either cancelled or have expired. The Directors of the consolidated entity are of the opinion that the share-based payment option expenses that would be required to be recognized under AASB 2 would not be material and no such expense has been recognised in either year

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3 Financial risk Management

TheGroup’sactivitiesexposeittoavarietyoffinancialrisks;marketrisk(includingcurrencyrisk,fairvalueinterestrateriskandpricerisk),creditrisk, liquidity risk and cash flow interest rate risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.

Risk management is carried out by the board of Directors under policies approved by the Board of Directors. The Board provides principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange, interest rate and credit risks, use of derivative financial instruments and investing excess liquidity.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency. The Group operates internationally and is exposed to foreign exchange risk arising from currency exposures to the US dollar and other currencies.

(b) Credit risk

The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The Group has policies that limit the amount of credit exposure to any one financial institution.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close-out market positions. Due to the dynamic nature of the underlying businesses, the Directors maintain flexibility in funding by keeping committed credit lines available.

(d) Cash flow and fair value interest rate risk

As the Group has no significant interest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates.

The Group’s interest-rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Group to fair value interest-rate risk.

Note 2006 2005 2006 2005

$000 $000 $000 $000

From continuing operations

Revenue from

- sale of goods 3,419 1,390 43 741

- interest received 1 10 1 10

- other revenue 368 136 77 -

Total Revenue 3,788 1,536 121 751

Consolidated Parent Entity4. revenue

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Note 2006 2005 2006 2005

$000 $000 $000 $000

5. Profit from Ordinary Activities

Expenses:

Cost of sales 1,114 566 243 -

Write-down of plant and equipment to recoverable amount (i) 1,194 - - 117

Write-down guarantee charge 2,507 - - -

Write down of inventory to Net Realisable Value (ii) 163 - - 199

Employee benefits 2,360 660 - 136

Finance Costs - 156 - 137

Rental expenses 178 40 - -

(i) At year end, the Canadian subsidiary assessed the fair value of the property, plant and equipment to be $1 Canadian due to doubts that the company may not be able to continue as a going concern and has therefore written down the carrying value of the property, plant and equipment to reflect this fair value. Total write down for the Canadian subsidiary is CDN $1,038,000 (AUD $1,194,000). The balance of AUD $873,000 represents the write down of plant and equipment in EMT Corporation Pty Limited due to the company’s restructure.

(ii) The write down of inventory was the result of the assessment of the management in the Canadian subsidiary that the going concern assumption may not be appropriate for that company.

6. Income Tax Expense

reconciliation of income tax expense to prima facie tax payable

Operation loss (7,916) (6,962) (3,864) (9,687)

Primafacietaxexpense/(credit)thereonat30%(2005:30%) (2,375) (2,089) (1,159) (2,906)

Tax effect of timing differences and tax losses not brought to account 2,375 2,089 1,159 2,906

Total income tax expense attributable to operating (loss)/profit - - - -

7. Discontinued Operations

On 1 November 2005 the Consolidated entity announced its decision to dispose of its USA operations, thereby discontinuing its operations in this geographic segment. This announcement was made subsequent to approval by the Group’s management and shareholders

On 11 November 2005, Sims Partners completed the sale of the group’s Australian & New Zealand operations.

At 30 June 2006 the Singapore operations had also ceased.

Financial information relating to the discontinued operations to the date of disposal is set out below and in Note 29.

On the disposal of Entertainment Media & Telecoms Corporation Limited’s business a debt forgiveness benefit of $1,058,000 arose. Sundry expenses related to the transaction were $124,000. The net debt forgiveness is $934,000 and is included as follows.


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Note 2006 2005 2006 2005

$000 $000 $000 $000

Financial performance Information

The financial performance of the discontinued operations in USA and Australia and Singapore to the date of sale which is included in profit / (loss) from discontinued operations in the income statement is as follows:

Revenue from ordinary activities 2,307 7,790 - -

Expenses from ordinary activities (1,594) (12,400) - -

Profit / (loss) before income tax 713 (4,610) - -

Income tax expense - - - -

Profit/(loss) attributable to members of the parent entity 713 (4,610) - -

Net Sales Price - - - -

Carrying Value of Net Assets Sold (7,874) (8,560) - -

Profit on sale before income tax - - - -

Income tax expense - - - -

Profit on sale after income tax - - - -

b Net Cash Flows

The net cash flows of the discontinuing operations which have been incorporated into the cash flow statement are as follows:

Net cash inflow (outflow) from ordinary activities 389 (806)

Net cash inflow (outflow) from investing activities (934) 2,783

Net cash inflow (outflow) from financing activities 517 (2,110)

Net cash increase in cash generated by the discontinuing division (28) (133)

8. Key Management personnel Compensation

The company’s policy for determining the nature and amount of emoluments 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 Directors and executives are paid employee benefit entitlements accrued to date of retirement. The company may terminate the contracts without cause by providing 12 months written notice or making payment in lieu of notice based on the individual’s annual salary componenttogetherwitharedundancypaymentofbetween5%–10%oftheindividual’sfixedsalarycomponent.Terminationpaymentsaregenerally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Any options not exercised before or on the date of termination will lapse.

Names and positions held of key management personnel in office at any time during the financial year are:

Key Management person position

Peter Dykes Executive Chairman


Vazrick Hovanessian (Non-executive Director), resigned 20 December 2006

Brad Schroeder (Non-executive Director), resigned 29 September 2005

Greg Schratwieser (Non-executive Director), resigned 27 July 2005

Collin Turner (Non-executive Director), resigned 31 March 2005 and re-appointed 29 December 2006

Dave Weisman (Non executive Director), resigned 27 July 2005

Options Granted As Compensation

No options were granted during the financial year.


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Key Management Personnel Compensation

Options and Rights Holdings

personnel Balance 1 July 2005 Cancelled during the year Balance 30 June 2006

Peter Dykes 36,000 36,000 -

Geoffrey Milne 360,000 360,000 -

Total 396,000 396,000 -

Shares Issued on Exercise of Compensation Options

No compensation options were exercised during the year.

Shareholdings

Number of Shares held by Key Management Personnel

Balance Received as Options Net Change Balance 1 July 2005 Remuneration Exercised Other* 30 June 2006

parent Entity Directors

Peter Dykes 4,690,000 10,000,000 - (4,690,000) 10,000,000

Geoffrey Milne 3,033,777 7,500,000 - (1,101,769) 9,432,008

Vazrick Hovanessian - 13,500,000 - - 13,500,000

Brad Schroeder 2,000,000 - - (1,200,000) 800,000

Greg Schratwieser 1,072,000 - - 2,000,000 3,072,000

Colin Turner 869,002 - - (802,335) 66,667

Dave Weisman 1,470,769 - - (1,199,999) 270,770

Executives

Richard Street 102,308 - - 1,750,790 1,853,098

Edwin Reed 40,000 - - - 40,000

Kelly Sides - 4,000,000 - (2,079,000) 1,921,000

John Poon - - - - -

Malcolm Brindley 112,000 - - - 112,000

Total 13,389,856 35,000,000 - (7,322,313) 41,067,543

* Net Change Other refers to shares purchased or sold during the financial year.

9. Auditors’ remuneration


2006 2005 2006 2005

$000 $000 $000 $000

Remuneration of the auditor of the parent entity for:

Auditing or reviewing the financial report 78 64 78 64

Other services - - - -

Remuneration of the auditors of subsidiaries for: - - - -

Auditing or reviewing the financial report 88 - 88 -

Other services - - - -

166 64 166 64

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10. Dividends

During and since the twelve month period to 30th June 2006 there has not been any dividend or distribution reinvestment plan in operation. No dividends were paid or made payable during or since the twelve month period to 30 June 2006.

11. Earnings per Share


2006 2005 2006 2005

$000 $000 $000 $000

(a) reconciliation of Earnings to profit or Loss

Profit/(Loss) (7,916) (6,962)

Earnings used to calculate basic EPS (7,916) (6,962)

Earnings used in calculation of dilutive EPS (7,916) (6,962)

(b) reconciliation of Earnings to profit or Loss from Continuing Operations

Profit/(Loss) from Continuing operations (8,629) (2,352)

Earnings used to calculated basic EPS from Continuing operations (8,629) (2,352)

During the year the Company had no earnings from continuing operations.

(c) reconciliation of Earnings to profit or Loss from Discontinuing Operations

Profit/(Loss) from discontinuing operations 713 (4,610)

Earnings used to calculated basic EPS from discontinuing operations 713 (4,610)

(d) Weighted average number of ordinary shares (diluted):

Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS 153,674,820 656,763,640

Weighted average number of options outstanding - -

Weighted average number of ordinary shares outstanding during the year used in calculating dilutive EPS 153,674,820 656,763,640

12 Cash and Cash Equivalents

Cash at bank 16 320 5 11

Short-term bank deposit - 48 - 49

16 368 5 60

Theeffectiveinterestrateonshorttermbankdepositswas4%(20054%).

reconciliation of Cash

Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows:

Cash and cash equivalents 16 368 5 60

Bank overdraft (17) - - -

(1) 368 5 60

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2006 2005 2006 2005

$000 $000 $000 $000

13. Trade and Other receivables

CUrrENT

Trade receivables 433 820 36 -

Amounts receivable from:

Wholly-owned subsidiaries - - - -

Partly-owned subsidiaries - - - -

433 820 36 -

14. Inventories

CUrrENT At Cost

Work in progress - 198 - -

Stock 108 428 108 -

108 626 108 -

15. Financial Assets

CURRENT

Unlisted investments, at cost

Entertainment Media & Telecoms Corporation, Inc.* - - - -

EMT Corporation Pty Ltd * - - - -

EMT Services Pty Ltd - - - 158

EMT Corporation (Singapore) Pte Limited* - - - -

Total - - - 158

* Rounds to Nil

NON-CURRENT

Loans to subsidiaries - - 9,562 9,562

Less: Provision for non-recoverable amount - - (9,562) (9,562)

- - - -

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16. Subsidiaries

Details of Subsidiaries

Country of Incorporation PercentageOwned(%)

2006 2005

Name

parent Entity:

Entertainment Media & Telecoms Corporation Limited

Subsidiaries of parent entity:

EMT Corporation Pty Ltd Australia - 100

EMT Corporation (Singapore) Pte Limited Singapore 100 100

Entertainment Media & Telecoms Corporation, Inc. USA 100 100

Entertainment Media & Telecoms Corporation (Canada), Inc. Canada 100 100

GalaVu Entertainment Network, Inc. Canada 100 100

(b) Acquisition of Subsidiaries

There was no acquisition of Subsidiaries during the year.

(c) Disposal of Subsidiaries

Theparententitydisposedofits90%interestinEMTServicesPtyLtd(10%disposedofin2005).Anoperatingprofitof$Nilafterincometaxwasattributable to members of the parent company from the disposal. No remaining interest in the entity was held by any member of the Group.

The parent entity also disposed of its USA business within Entertainment Media & Telecoms Corporation, Inc. which operated the Hospitality Business. No gain or loss was generated from that transaction after the balance of goodwill carried forward from 2005 was written off.

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17. property plant and Equipment


2006 2005 2006 2005

pLANT AND EQUIpMENT

Plant and equipment

At Directors’ valuation - - - -

At cost - 7,182 - -

Less accumulated depreciation - (5,109) - -

Less accumulated impairment losses - - - -

Total plant and equipment - 2,073 - -

Leased plant and equipment -

Capitalised leased assets - 22 - -

Less accumulated amortisation - (19) - -

Less accumulated impairment losses - - - -

Total leased plant and equipment - 3 - -

Total - 2,076 - -

At year end, the Canadian subsidiary assessed the fair value of the property, plant and equipment to be a nominal value of $1 due to doubts that the company may be unable to continue as a going concern and has therefore written down the carrying value of the property, plant and equipment to reflect this fair value. The write down amounting to $1,203,000 and was accounted for in the Income Statement and the balance $873,000 represented the sale of the assets at cost.

Movements in Carrying Amounts

Plant and Equipment $000

Consolidated

Current Year

Balance at the beginning of year 2,076

Write-off and sale of asset to recoverable amount (2,076)

Balance at 30 June 2006 -

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2006 2005 2006 2005

Notes $000 $000 $000 $000

18. Intangible Assets

Goodwill Cost 871 1,020 - -

Accumulated impaired losses (871) (149) -

Net carrying amount - 871 - -

Intellectual property -

Cost - 1,608 - -

Accumulated impaired losses - (1,608) - -

Net carrying amount - - - -

- - -

19. Other Assets

CUrrENT Prepayments 119 235 - -

Other debtors 7 34 3 20

126 269 3 20

NON CUrrENT

Rydges and General Dynamics deferred costs - 201 - -

Accumulated amortisation - (201) - -

- - - -

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2006 2005 2006 2005

Notes $000 $000 $000 $000

20. Trade and Other payables

Current payables CURRENT Unsecured liabilities

Trade payables 2,854 3,983 125 101

Other payables - 1,160 - -

Accrued expenses 191 945 178 -

GST/PAYG Payable - 44 (1)

Superannuation Liabilities - 20 - -

Deferred revenue 395 - - -

3,440 6,152 303 100

21. Borrowings

CUrrENT Unsecured liabilities - 37 - 18

Bank overdraft 17 - - -

Secured liabilities

Finance lease obligation 21 - - -

Secured Loan:

Livonia Pty Limited * 2,701 - 2,701 -

Cardinal Communications, Inc 3,437 - - -

Alleasing Finance Australia Ltd - 1,758 - 1,758

6,176 1,795 2,701 1,776

*On 8 December 2005, Livonia Pty Limited acquired the secured loan payable to Alleasing Finance Australia Limited (Formerly Rentworks Ltd) by Entertainment Media & Telecoms Corporation Limited.

Subsequent to balance date, the full amount owing to Livonia Pty Limited has been satisfied by the issue of shares.

Bank Loan Facility

No bank loan facility existed at balance date.

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2006 2005 2006 2005

Notes $000 $000 $000 $000

21. Borrowings Continued

NON CUrrENT Unsecured liabilities

Lease liabilities - 50 - 32

- 50 - 32

22. Current tax liabilities

No current taxation has been provided in the financial statements as the Group has significant tax losses which would offset taxable income for the current financial year.

23. provisions

Employee benefit (i) - 35 - -

- 35 - -

Relates to annual leave provision, all employees were made redundant during the financial year, and at 30 June 2006 there were no employees in the Group.

24. Accumulated losses

Opening balance at beginning of the year (16,909) (9,947) (15,591) (5,904)

Profit / (loss) for the year (7,916) (6,962) (3,864) (9,687)

(24,825) (16,909) (19,455) (15,591)

25 Foreign Currency Translation reserve

The foreign currency translation reserve records exchange differences arising on translation of the financial report a foreign controlled subsidiary.

Movements in reserves are as follows

Balance at the beginning of the year (15) - - -

Add/ less movement relating to current year (696) (15) - -

Balance at the end of the year (711) (15) - -

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26. Capital and Leasing Commitments

Operating Lease Commitments

Non cancellable operating leases contracted for but not capitalised in the financial statements


2006 2005 2006 2005

Notes $000 $000 $000 $000

Payable minimum lease payments - not later than 12 months 54 1,959 - 1,743

- between 12 months and 5 years 35 4,981 - 4,495

- greater than 5 years 17 - - -

106 6,940 - 6,238

The Canadian Subsidiary is committed to operating leases for rental of premises and equipment for various periods to fiscal 2009.

27. Contributed Equity

a Share Capital

Opening share capital 13,921 10,001 13,921 10,001

Issue of shares 2,828 3,920 2,828 3,920

Transaction costs (146) - (146) -

16,603 13,921 16,603 13,921

b Ordinary Shares parent entity

No. No.

At the beginning of the reporting period 56,439,452 629,761,983

Shares issued during the year 502,098,706

09 August 2005 24,560,548

01 September 2005 9,250,000

01 September 2005 13,500,000

13 December 2005 10,750,000

24 February 2006 115,742,141

01 May 2006 65,257,859

Decrease in share capital - (1,075,421,237)

Balance at reporting date 295,500,000 56,439,452

In May 2005 a 25 for 1 consolidation of share capital occurred.

28 Contingent Liabilities

An action has commenced against the Canadian subsidiary GalaVu Entertainment Network, Inc by a terminated employee who claims to have been wrongfully dismissed. The amount of the claim is $550,000, plus interest and legal costs. The Company will vigorously defend this claim and no provision has been made with respect to this claim in the financial statements as the likelihood of loss is not determinable at this time.

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NOTES TO

THE FINANCIAL STATEMENTS FO

r THE YEAr ENDED 30 JUNE 2006 (Continued)

Entertainment M

edia & Telecoms Corporation Lim

ited and Subsidiaries

ABN 81 071 275 253

29 Segment Inform

ation

Australia

Asia USA

Canada Consolidated

Less Discontinued Continuing

O

perations

2006

2005 2006

2005 2006

2005 2006

2005 2006

2005 2006

2005 2006

2005

$000

$000 $000

$000 $000

$000 $000

$000 $000

$000 $000

$000 $000

$000

Total sales revenue 199

6,144 45

41 938

2,162 3,419

969 4,601

9,316 1,189

7,791 3,419

1,525

Other incom

e 1,169

1,169

1,127

- 265

Total segment revenue

1,368 6,144

45 41

938 2,162

3,419 969

5,770 9,316

2,316 7,791

3,684 1,525

Segment result

(3,388) (3,932)

(19) (338)

256 (531)

(5,040) (2,161)

(7,916) (6,962)

713 (4,610)

(8,629) (2,352)

Loss from ordinary activities

before Income Tax

(3,388) (3,932)

(19) (338)

256 (531)

(5,040) (2,161)

(7,916) (6,962)

713 (4,610)

(8,629) (2,352)

Income tax expense

Net loss (3,388)

(3,932) (19)

(338) 256

(531) (5,040)

(2,161) (7,916)

(6,962) 713

(4,610) (8,629)

(2,352)

Assets

Segment assets

124 496

26 22

1 2,338

516 2,174

683 5,030

34 1,566

649 3,464

Total assets 124

496 26

22 1

2,338 516

2,174 667

5,030 34

1,566 649

3,464

Liabilities

Segment liabilities

(19,175) (4,123)

(16) (12)

(37) (1,309)

(6,574) (2,588)

(9,616) (8,032)

(59) (713)

(9,542) (7,319)

Total liabilities (19,175)

(4,123) (16)

(12) (37)

(1,309) (6,574)

(2,588) (9,616)

(8,032) (59)

(713) (9,542)

(7,319)

Others

Acquisition of property plant and Equipm

ent -

517 -

- -

701 -

1,471 -

2,689 -

- -

-

Depreciation and amortisation

of segment assets

123 80

- -

- 133

316 91

439 304

53 304

387 -

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2006 2005 2006 2005

Notes $000 $000 $000 $000

30. Cash Flow Information

(a) reconciliation of Cash Flow from Operations with Loss after Income Tax Reconciliation of Cash Flow from Operations with Loss from ordinary activities after Income Tax

Profit / (loss) from ordinary activities after income tax (7,916) (6,962) (3,864) (9,687)

Non-cash flows in profit from ordinary activities

Amortisation - 149 - -

Depreciation 387 304 71 19

Write-down of investments - - - 2,325

Write-down of intangible assets - 1,618 - 79

Write-down of non-current assets to recoverable amount 1,194 461 - 117

Provision for non-recoverability of loans to subsidiaries - - 13 7,175

Operating Lease Adjustment 3,059 - 3,059 -

Write-down of Inventory 163 - - -

Guarantee Charge 2,507 - - -

Gain/(loss) on disposal of asset (1,381) - 313 -

Changes in assets and liabilities, net of the effects of purchase and disposal of subsidiaries

(Increase)/decrease in trade and term debtors 387 (633) (19) -

(Increase)/decrease in other assets 143 1,556 - 75

(Increase)/decrease in inventories 518 (625) (108) -

Increase/(decrease) in trade creditors and accruals (2,712) 4,146 203 25

Increase/(decrease) in provision (35) (20) - -

(3,686) (6) (332) 128

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31. Events after the balance sheet date

Subsequent to the end of the financial year the following material events occurred.

On 23 October 2006, EMT signed a Letter of Intent to acquire Interactive Telecoms Pty Limited and Fox Mobile Accessories Pty Limited •for$250,000cashand25,000,000fullypaidordinarysharesat1.0centspershare;and

On14December2006,EMTsignedaLetterofIntenttoacquireaminimumof90.1%andupto100%ofSapioABforaminimumof•54,060,000 and up to 60,000,000 fully paid ordinary shares at 1.0 cents per share.

On29December2006,EMTsignedthebindingagreementtoacquire90.1%ofthesharesinSapioABfor54,060,000.EMTshares(tobe•issued at 1.0 cents per share) with settlement on 31 December 2006.

On5January2007,EMThasacquiredtheremaining9.9%ofthesharesinSapioABinexchangefor5,940,000EMTSharestobeissued•at 1.0 cent per share.

On15January2007,EMTissuesharesfortheremaining9.9%ofSapioABandinrelationtothereductionofdebtandinrespectofa•capital raising of $1.5M in cash.

On 7 January 2007, EMT received a notice of foreclosure from Cardinal stating that it had decided to exchange Cardinal’s secured debt •for the assets of Galavu.

On 30 January 2007, EMT received confirmation that the foreclosure had been finalised and that all of the assets of Galavu have •successfully been transferred to Cardinal.

On 30 January 2007, EMT announced to the market that it was not proceeding with the acquisition of Interactive Telecoms Pty Limited •and Fox Mobile Accessories Pty Limited.

EMTdisposedof100%ofitssharesinEMTCorporationPtyLimited,effective18January2007.•

EMTdisposedof100%ofitssharesinEntertainmentMedia&TelecomsCorporation,Inc.andEMTCorporation(Singapore)PteLimited,•effective 31 January 2007.

32. related party transactions

(a) parent entity

The ultimate parent entity within the Group is Entertainment Media & Telecoms Corporation Limited. (incorporated in Australia).

(b) Subsidiaries

Interests in subsidiaries are set out in note 16.

(c) Key Management personnel

Disclosures relating to Directors and specified executives are set out in note 8.

(d) Transactions with related parties

There were no other related party transactions during in the financial year.

33. Financial Instruments

a Net Fair value

The net fair values of other assets and other liabilities approximate their carrying value.

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b Interest rate risk

The economic entity’s exposure to interest rate risk, which is the risk that a financial instruments value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

Fixed Interest Floating Non-Interest rate Maturing Total Average Fixed Interest 2006 Interest rate Bearing in 1 to 5 years $000 Interest rate rate

$000 $000 $000 Floating % Fixed %

Financial Assets

Cash 16 - - 16 4% -

Trade debtors - 433 - 433 - -

Other receivables - - - - - -

16 433 - 449

Financial Liabilities

Payables - 2,854 - 2,854 - -

LoansowingtoCardinalandLivonia - 3,437 2,701 6,138 15% -

Interestbearingliabilities - - 17 17 - 10%

- 6,291 2,718 9,009

TheLivoniaPtyLimitedloanisfixedat15%perannum.AstheloantoCardinalwasextinguishedinJanuary2007aneffectiveinterestratecalculation has not been applied.

Fixed Interest Floating Non-Interest rate Maturing Total Average Fixed Interest 2005 Interest rate Bearing in 1 to 5 years $000 Interest rate rate

$000 $000 $000 Floating % Fixed %

Financial Assets

Cash 368 - - 368 4% -

Trade debtors - 820 - 820 - -

Other receivables - 35 - 35 - -

368 855 - 1,223

Financial Liabilities

Payables - 5,207 - 5,207 - -

Loans 1,795 - - 1,795 - -

Interestbearingliabilities - - 50 50 - 9.5%

1,795 5,207 50 7,052

c) Credit risk exposures

Credit exposure represents the extent of credit related losses that the economic entity may be subject to on amounts to be received from financial assets.

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34. New Accounting Standards and UIG Interpretations

Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June 2006 accounting periods. Amendments include those relating to AASB 139, AASB 132, AASB 1023, AASB 1038, AASB 1, AASB 3, UIG 8 and UIG 9.

These standards and interpretations have not been adopted early by the group. Application of the standards will have not effected any of the amounts recognized in the financial statements, but may impact future financial statements.

35. Company Details

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

Level 20,

99 Walker St.

North Sydney NSW 2060

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DIrECTOrS’ rEpOrT

The Directors of the company declare that:

1. The financial statements and notes, as set out on pages 14 to 41, are in accordance with the Corporations Act 2001 and:

(a)complywithAccountingStandardsandtheCorporationsRegulations2001;and

(b) give a true and fair view of the financial position as at and of the performance for the year ended on that date of the company and economicentity;

2. The Chief Executive Officer and Chief Financial 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 CorporationsAct2001;

(b)thefinancialstatementsandnotesforthefinancialyearcomplywiththeAccountingStandards;and

(c) the financial statements and notes for the financial year give a true and fair view.

3. 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.

Peter Dykes

Director

Dated 9th March 2007

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SHArEHOLDEr INFOrMATION

As at 27 February 2007

Corporate Ownership – Ordinary Shares

Number of ordinary shareholders 1,751 (2005: 1,751)

voting rights

- on show of hands: one vote for each member

- on poll: one vote for each share held

Distribution of Shareholders as at 27 February 2007

Category (size of holding)

1 to 1,000 700

1,001 to 5,000 273

5,001 to 10,000 161

10,001 to 100,000 451

100,001 and over 166

1,751

Top Twenty Shareholders at 27 February 2007

Madam Tong Yee Tin 160,776,188

Chua Yaw Huei 160,776,188

Ingenious Investment Limited 123,979,974

Perfect Wealth Synergy Corporation Limited 120,932,625

Questdale Holdings Limited 78,950,025

Fenkie Investments Limited 54,060,000

Jerrold Pty Limited 53,250,000

The Bimm Corporation Pty Limited 49,000,000

Billion Win Group Limited 49,000,000

Mayona Pty Limited 33,350,000

Confidante Assets Limited 33,175,000

Kuching Investment Holdings Limited 33,000,000

Nanyang Holdings Limited 25,000,000

PD Funds Management Pty Limited 14,125,000

NOA 8338 Pty Limited 13,838,462

Technology Advisory Corporation Pty Limited 10,000,000

Oliver Heights Pty Limited 8,000,000

GJ & MH Investments Pty Limited 7,575,770

MD Nominees Pty Limited 5,156,484

Eagle Broadband, Inc. 4,878,779

Total 1,038,824,495

Percentageofissuedordinarysharesheldbytwentylargestholders 91.17%

Substantial Shareholders

Madam Tong Yee Tin 160,776,188

Chua Yaw Huei 160,776,188

Ingenious Investment Limited 123,979,974

Perfect Wealth Synergy Corporation Limited 120,932,625

Questdale Holdings Limited 78,950,025

Non-Marketable parcels

Non-marketable securities which are holdings of less than 38,462 ordinary shares are held by 1,415 Shareholders. (2005 parcels: 1,415)

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INDEpENDENT AUDITOr’S rEpOrT

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INDEpENDENT AUDITOr’S rEpOrT (Continued)

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