TETRA Technologies, Inc. Annual Report 2004

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FY2004 Annual Report · TETRA Technologies, Inc.

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Annual Report 2004

TRAFFIC TECHNOLOGIES LIMITED (formerly Infosentials Ltd)

ABN 21 080 415 407

FINANCIAL REPORT

FOR THE YEAR ENDED

30 JUNE 2004

TRAFFIC TECHNOLOGIES LIMITED (formerly Infosentials Ltd)

CHAIRMAN’S LETTER

Dear Shareholder,

I have pleasure in enclosing the Annual Report for Traffic Technologies Limited (formerly
Infosentials Limited) for the financial year ended 30 June 2004.

The Company was restructured following a shareholders’ meeting on 30 January 2004.
The Company’s activities were changed to the provision of traffic management systems,
its name was changed to Traffic Technologies Limited (formerly Infosentials Limited) and
it acquired Traffic Technologies Pty Ltd (now Traffic Technology International Pty Ltd). At
the same time I, together with Mr. Alan Brown and Mr. Cary Stynes, joined the Board as
Non Executive Directors.

The Company is currently involved in the development, marketing and sale of traffic lights
which utilise LED technology. The Company’s Smart Traffic Light system improves the
performance of traffic lights, reduces traffic lights’ power consumption and significantly
reduces the maintenance and operating costs for road traffic authorities. The Company
has already sold its Smart Traffic Lights to Malaysia and the Philippines and is currently
in discussions with traffic authorities in Australia and in South East Asia.

On 9 August 2004 the Company announced the acquisition of Traffic Services Australia
Holdings Pty Ltd (TSA) and that the Company intends to issue a prospectus as soon as
possible to raise additional capital to complete the acquisition and fund further
acquisitions. TSA provides temporary traffic management services. This is an emerging
market within the road construction industry. The acquisition delivers substantial scale to
Traffic Technologies in the traffic control industry and will give Traffic Technologies
access to a wider customer base which will assist in the ongoing commercialisation of the
Company’s Smart Traffic Light.

On completion of the capital raising and when the Company has satisfied the
requirements of the ASX it is the intention of the Directors to apply to have quotation of
the Company’s securities reinstated on the ASX. The Company’s securities have been
suspended since December 2000. Re-quotation will enable existing shareholders to
achieve liquidity if required and facilitate the opportunity to raise further capital to enable
the Company to further develop its business.

I, along with my fellow Directors, thank you for your support over the past year and look
forward to returning shareholder value to you as we develop the Company’s business in
the year ahead.

Yours faithfully,

Samuel Kavourakis
Chairman

TRAFFIC TECHNOLOGIES LIMITED (formerly Infosentials Ltd)
CORPORATE DIRECTORY

DIRECTORS

Mr. Sam Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown FAICD
Mr. Cary Peter Stynes LL.B (Melb), MAICD

COMPANY SECRETARY

Mr. Peter Kenneth Crafter LL.B, MBA, FCA, CA, MCT, FAICD

REGISTERED OFFICE

110 Stephenson Street
RICHMOND VIC 3121

LAWYERS

Middletons
Level 29
200 Queen Street
MELBOURNE VIC 3000

AUDITORS

Pitcher Partners
Level 6
161 Collins Street
MELBOURNE VIC 3000

SHARE REGISTRY

Computershare Registry Services
452 Johnston Street
ABBOTSFORD VIC 3067

Tel: 1300 137 328

STOCK EXCHANGE LISTING

Traffic Technologies Limited’s ordinary shares are currently suspended from quotation on the Australian Stock
Exchange Limited.
(Stock Code: TTI).

STATE OF INCORPORATION

Victoria

TRAFFIC TECHNOLOGIES LIMITED

FINANCIAL REPORT
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2004

Directors’ Report

Corporate Governance Statement

Consolidated Statement of Financial Performance

Consolidated Statement of Financial Position

Consolidated Statement of Cash Flows

Notes to the Financial Statements

Directors’ Declaration

ASX Additional Information

Auditor’s Report

Page No.

TRAFFIC TECHNOLOGIES LIMITED
DIRECTORS’ REPORT

Your directors present their report for the financial year ended 30 June 2004.

Directors

The names and details of the Company’s Directors in office during the financial year and until the date of this report are
as follows. Directors were in office for this entire period unless otherwise stated.

Name
Mr. Samuel Kavourakis

Mr. Constantine A Scrinis

Mr. Constantinos L Liosatos

Mr. Alan J Brown FAICD

Mr. Cary P Stynes
LL.B (Melb) MAICD

Qualifications, Experience and Special Responsibilities
(Age 59) Non-Executive Chairman. Appointed January 2004.
Mr. Kavourakis has had a distinguished career spanning 30 years with National Mutual,
including eight years as Managing Director of National Mutual Funds Management. Mr.
Kavourakis has an in-depth understanding of what institutional investors require of listed
companies. Since 1998, Mr. Kavourakis has been a Director of various companies and
associations. Current Directorships include Ticor Limited, Collins House Financial
Services, Australand Wholesale Investments Ltd, Centro Properties Ltd and the Rio Tinto
Staff Superannuation Fund. Mr. Kavourakis is an Associate of the Institute of Actuaries
and a graduate of the Harvard Business School Advanced Management Program. Mr.
Kavourakis was appointed Non Executive Chairman of Traffic Technologies Limited in
January 2004.

(Age 41) Joint Managing Director. Appointed April 2003.
Mr. Scrinis has over 20 years experience in the lighting industry. After spending several
years with Sunlighting and three years as owner and operator of various retail businesses,
he along with Mr. Liosatos established Moonlighting in 1991. Since 1991, he and Mr.
Liosatos built a manufacturing and distribution business in industrial and commercial
lighting employing approximately 140 people. Mr. Scrinis and Mr. Liosatos have been
involved in the development of the Smart Traffic Light since 1997 and achieved the first
commercial sales of the Company’s Smart Traffic Light product into Malaysia in 2000. Mr.
Scrinis is the Joint Managing Director of Traffic Technologies Limited. Mr. Scrinis was
appointed as a Director of Traffic Technologies in April 2003.

(Age 41) Joint Managing Director. Appointed April 2003.
Mr. Liosatos has over 20 years experience in the lighting industry. After spending 10 years
with Sunlighting, he and Mr. Scrinis established Moonlighting in 1991. Since 1991, he and
Mr. Scrinis built a manufacturing and distribution business in industrial and commercial
lighting employing approximately 140 people. Mr. Liosatos has been involved in the
development of the Smart Traffic Light since 1997 and achieved the first commercial sales
of the Smart Traffic Light into Malaysia in 2000. Mr. Liosatos has qualifications in
Mechanical Design and Lighting Engineering. Mr. Liosatos is the Joint Managing Director
of Traffic Technologies Limited. Mr. Liosatos was appointed as a Director of Traffic
Technologies Limited in April 2003.

(Age 58) Non-Executive Director. Appointed January 2004.
Mr. Brown has extensive experience in both the private and public sectors. He is a
Director of a range of private companies and has established several over a thirty-year
period. He has wide ranging public sector involvement including state and local
government, co-operative societies and statutory authorities. He was a Member of the
Victorian Parliament from 1979-97 and is a former Leader of the Victorian Liberal Party.
As Minister
transport
infrastructure. He has international business experience and as Agent General for Victoria
in London from 1997-2000 had key responsibility for identification, negotiation and
attraction of overseas investment to Victoria. Mr. Brown also had responsibility for
facilitation of exports for Victorian goods and services to overseas markets. He is
Chairman of Apprenticeships Plus and the Bass Coast Community Foundation. Mr. Brown
was appointed a non-executive director of Traffic Technologies Limited in January 2004.

implemented major reforms

for Transport he

to Victoria’s

(Age 40) Non-Executive Director. Appointed January 2004.
Mr. Stynes spent six years in a range of senior finance and management roles for a
number of international companies. He spent five years as a commercial lawyer with law
firm Minter Ellison specialising in commercial litigation, insolvency, media, mergers and
acquisitions and corporate advisory work. He is admitted to practice in the Supreme Court
of Victoria and the High Court of Australia. In 1993 he co-founded Point of Sale Media Pty
Ltd which was acquired in 1995 by ASX-listed Media Entertainment Group Limited. He
was a director of Media Entertainment Group Limited from September 1995 and was
Managing Director from July 1997 until June 1999. He was Managing Director and Chief
Executive Officer of ASX-listed Software Communication Group Limited from January 2000
to July 2001. He was Managing Director of ASX-listed CBD Energy Limited from June
2002 to June 2003 and has been Managing Director of ASX-listed The Swish Group
Limited since January 2003. He is principal of Stynes Consulting and Stynes and
Associates which are commercial and legal consulting practices. He is also a director of a
range of private companies. Mr. Stynes was appointed a non-executive director of Traffic
Technologies Limited in January 2004.

TRAFFIC TECHNOLOGIES LIMITED
DIRECTORS’ REPORT
(Continued)

The following Director resigned in January 2004:

Mr. Peter A Stedwell

Company Secretary

Mr. Peter K Crafter
LL.B, MBA, FCA, CA, MCT, FAICD

(Age 47) Chief Financial Officer and Company Secretary. Appointed March 2004.
Mr. Crafter is a Chartered Accountant in both Australia and the UK and qualified
Corporate Treasurer with extensive experience in financial management including
several years with KPMG and Touche Ross in the United Kingdom. He holds an
honours degree in Law from the University of London and an MBA from Heriot-Watt
University, Scotland. He migrated to Australia in February 1999 and joined Software
Communication Group Limited as Chief Financial Officer in May 1999. He was
subsequently promoted to the position of Acting Chief Executive Officer of that
Company in July 2001. He was Chief Financial Officer of ASX-listed CBD Energy
Limited from July 2002 to July 2003 and was appointed Finance Director of The Swish
Group Limited in January 2003. He was appointed Chief Financial Officer and
Company Secretary of Traffic Technologies Limited in March 2004.

Change of Name

The Company’s name was changed from Infosentials Limited to Traffic Technologies Limited on 30 January 2004.

Interests of Directors in Shares and Options of the Company and Related Bodies Corporate

As at the date of this report, the interests of the Directors in the shares and options of the Company were:

Director
Mr. Samuel Kavourakis
Mr. Constantine A Scrinis
Mr. Constantinos L Liosatos
Mr. Alan J Brown
Mr. Cary P Stynes

Ordinary Shares

Directly
40,601
-
-
40,601
-

Indirectly

-
2,293,945
2,293,945
-
-

Options
500,000
300,000
300,000
300,000
300,000

For more information relating to interests of directors refer to Note 21 of the Financial Statements

EARNINGS PER SHARE

Basic earnings per share

Diluted earnings per share

DIVIDENDS

Cents

(7.3)

(6.5)

The Directors do not recommend the payment of a dividend for the financial year ended 30 June 2004.

CORPORATE INFORMATION

Corporate structure

Traffic Technologies Limited is a Company limited by shares that is incorporated and domiciled in Australia. Traffic
Technologies Limited has prepared a consolidated financial report incorporating the entities that it controlled during the
financial year. The Company’s subsidiary entities are set out in Note 7 to the financial statements.

Employees

The consolidated entity employed 8 employees as at 30 June 2004 (2003: no employees).

Principal activities

The consolidated entity’s principal activity is the provision of traffic management systems.

TRAFFIC TECHNOLOGIES LIMITED
DIRECTORS’ REPORT
(Continued)

REVIEW AND RESULTS OF OPERATIONS

Review of operations

The results for the financial year ended 30 June 2004 are not comparable to the previous year. The Company was still
in Administration for most of the financial year ended 30 June 2003 and it was restructured in January 2004 following a
shareholders’ meeting which approved a change in the Company’s activities to the provision of traffic management
systems, a change of name to Traffic Technologies Limited and the acquisition of Traffic Technologies Pty Ltd (now
Traffic Technology International Pty Ltd).

The consolidated entity’s main activity has been research and development into and commercialisation of its Smart
Traffic Light system, which uses LED (light emitting diode) technology. To date the consolidated entity has sold its
Smart Traffic Lights to Malaysia and the Philippines.

Financial performance

Total revenue for the financial year ended 30 June 2004 was $114,866, compared to $4.2m in the financial year ended
30 June 2003 (which comprised a gain on effectuation of the Deed of Company Arrangement in May 2003).

Total costs for the financial year ended 30 June 2004 were $506,629, compared to $159,463 in the financial year
ended 30 June 2003. Costs incurred in the financial year ended 2004 largely comprise administrative costs incurred in
connection with restructuring the Company as a provider of traffic management systems and ensuring that the
Company continues to comply with ASX and ASIC requirements as a public company despite the fact that quotation of
its securities is currently suspended.

Costs of developing the Company’s Smart Traffic Light system have been capitalised and amortised where future
benefits are expected, beyond any reasonable doubts, to exceed those costs.

Financial position

Consolidated net assets as at 30 June 2004 were $30,677, compared to net liabilities of $77,560 as at 30 June 2003.
The consolidated statement of financial position as at 30 June 2004 included the Company’s subsidiary entity, Traffic
Technology International Pty Ltd. Net assets included $112,051 of inventory, $39,833 of plant and equipment and
$630,152 of intangible assets, largely comprising capitalised research and development expenditure.

Cash flows

The consolidated entity’s operations have been funded in the year ended 30 June 2004 by related party loans. The
consolidated entity’s main cash outflows have been incurred on continuing research and development expenditures on
the Smart Traffic Light system and administrative costs incurred in connection with restructuring the Company and
ensuring that the Company continues to comply with ASX and ASIC requirements as a public company.

Outlook for the next twelve months

On 9 August 2004 the Company announced the acquisition of Traffic Services Australia Holdings Pty Ltd and that the
Company intends to issue a prospectus as soon as possible to raise additional capital to complete the acquisition and
fund further acquisitions. On completion of the capital raising and when the Company has satisfied the requirements of
the ASX it is the intention of the Directors to apply to have quotation of the Company’s securities reinstated on the
ASX. The Board is not yet in a position to give an accurate forecast of revenue and profitability for the financial year
ending 30 June 2005.

TRAFFIC TECHNOLOGIES LIMITED
DIRECTORS’ REPORT
(Continued)

Risk management

The Company believes that it is crucial for all Board members to be a part of this process and, as such, the Board has
not established a separate risk management committee.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 30 January 2004 shareholders approved the consolidation of the Company’s share capital on the basis of one fully
paid ordinary share for every 80 shares previously held.

On 30 January 2004 shareholders approved a change in the activities of the Company to the development, integration
and supply of traffic management systems.

On 30 January 2004 shareholders approved the issue of 5,000,000 shares at $0.10 (10 cents) per share to the vendors
of Traffic Technologies International Pty Ltd as consideration for the acquisition of that company.

SUBSEQUENT EVENTS AFTER THE BALANCE DATE

Other than as stated above and detailed further in Note 18 to the financial statements, no matters or circumstances
have arisen since the end of the financial year which significantly affected or may significantly affect the operations,
results of those operations, or the state of affairs of the Company and the consolidated entity in subsequent financial
years.

ENVIRONMENTAL REGULATION AND PERFORMANCE

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

SHARE OPTIONS

At the date of this report there are 1,700,000 unissued ordinary shares in respect of which options are outstanding.

INDEMNIFICATION OF OFFICERS AND AUDITORS

The Company has not, during or since the financial year, in respect of any person who is or has been an officer or
auditor of the Company or a related body corporate, indemnified or made any relevant agreement for indemnifying
against a liability, including costs and expenses in successfully defending legal proceedings. The Company has not
taken out any insurance during or since the end of the year in respect of any person who is or has been a Director of
the Company.

DIRECTORS’ AND EXECUTIVES’ REMUNERATION

Remuneration policy

The Remuneration Committee is responsible for determining and reviewing remuneration arrangements for the
Directors, the Joint Managing Directors and the executive team. The Remuneration Committee assesses the
appropriateness of the nature and amount of remuneration of such officers on a periodic basis by reference to relevant
employment market conditions with the overall objective of ensuring maximum stakeholder benefit from the retention of
a high quality Board and executive team. Currently remuneration is paid in the form of cash remuneration,
superannuation contributions and share options where applicable. The Company paid no bonuses during the financial
year ended 30 June 2004. Further details of the remuneration of Directors and executives are provided in Note 21 to
the financial statements.

All Directors and executives have the opportunity to qualify for participation in the Company Share Option Plan. The
issue of options under this plan is at the discretion of the Board and is not currently based on Company performance.
Options are used by the Company as a non-cash form of remuneration and have the objective of aligning employee
interests with the objective of increasing shareholder wealth. Any issue of options under the plan to Directors is subject
to shareholder approval. Details regarding the issue of share options under the Company Share Option Plan during
the year are provided in Note 21 to the financial statements.

TRAFFIC TECHNOLOGIES LIMITED
DIRECTORS’ REPORT
(Continued)

Emoluments of Directors of the Company

Details of the nature and amount of each element of the emoluments of each Director of the Company for the financial
year ended 30 June 2004 are as follows:

Name

Mr. Samuel Kavourakis (appointed 30 Jan 2004)

Mr. Constantine Scrinis

Mr. Constantinos Liosatos

Mr. Alan Brown (appointed 30 Jan 2004)

Mr. Cary Stynes (appointed 30 Jan 2004

Mr. Peter Stedwell (resigned 30 Jan 2004)

Annual
Emoluments

Base
Salary
$
20,833

31,250

14,583

5,000

Long Term

Super-
annuation
Contributions
$
-

Number of
Options Granted
$
500,000

Emoluments
Value of
Options
Granted
$
19,500

300,000

11,700

Total
$
40,333

42,950

26,283

5,000

Although Directors’ fees have been accrued, this remuneration was not paid to the Directors during the financial year
ended 30 June 2004.

Emoluments of Executive Officers of the Company

Details of the nature and amount of each element of the emoluments of the officers of the consolidated entity for the
financial year ended 30 June 2004 are as follows:

Name

Mr. Peter Crafter

Annual
Emoluments

Base
Salary
$
10,740

Super-
annuation
Contributions
$
-

Long Term

Number of
Options Granted

Emoluments
Value of
Options
Granted
$
-

Total
$
10,740

For more information relating to interests of directors and executives refer to Note 21 of the Financial Statements.

Fair value of options

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used:

Dividend yield
Expected volatility
Historical volatility
Risk-free interest rate
Expected life of option

Nil
45%
45%
5.715%
5.0 years

The dividend yield reflects the assumption that no dividends will be paid by the Company for the foreseeable future.
The expected life of the options is based on the term of the options and is not necessarily indicative of exercise
patterns that may occur. The expected volatility reflects the assumption that the historical volatility is indicative of future
trends, which may not necessarily be the actual outcome.

All options issued to date have vested. Currently the fair values of options are not recognised as expenses in the
financial statements.

TRAFFIC TECHNOLOGIES LIMITED
DIRECTORS’ REPORT
(Continued)

DIRECTORS’ MEETINGS

The number of meetings of Directors (including meetings of committees of Directors) held during the financial year and
the number of meetings attended by each Director (while they were a Director) were as follows. During the financial
year, 7 Board meetings were held and 4 decisions were taken by all Directors who signed circular resolutions.

Mr. Samuel Kavourakis (appointed 30 January 2004)
Mr. Constantine A Scrinis
Mr. Constantinos L Liosatos
Mr. Alan J Brown (appointed 30 January 2004)
Mr. Cary P Stynes (appointed 30 January 2004)
Mr. Peter A Stedwell (resigned 30 January 2004)

Possible
4
7
7
4
4
2

Attended
4
7
7
4
4
1

No meetings of Board Committees were held during the financial year ended 30 June 2004. These committees were
not formed until after the reconstruction of the Board on 30 January 2004.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the Directors of the
Company support and have adhered to the principles of corporate governance. The Company’s corporate governance
statement is contained in the following section of this annual report.

Signed in accordance with a resolution of the Directors

Samuel Kavourakis
Chairman

16 August 2004

Melbourne

TRAFFIC TECHNOLOGIES LIMITED
CORPORATE GOVERNANCE STATEMENT

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

The format of the Corporate Governance Statement has changed in comparison to the previous year due to the
introduction of the Australian Stock Exchange’s Corporate Governance Council’s “Principles of Good Corporate
Governance and Best Practice Recommendations”. The Corporate Governance Statement must now contain specific
information and also report on the Company’s adoption of the Council’s best practice recommendations on an
exception basis, whereby disclosure is required of any recommendations that have not been adopted by the Company,
together with the reasons why they have not been adopted. The Company’s corporate governance principles and
policies are therefore structured with reference to the Corporate Governance Council’s best practice recommendations,
which are as follows:

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

Corporate Governance Committee

The Board has established a Corporate Governance Committee, which is responsible for reviewing the Company’s
compliance with best practice corporate governance requirements, including compliance with the Australian Stock
Exchange’s Corporate Governance Council’s “Principles of Good Corporate Governance and Best Practice
Recommendations”.

The Corporate Governance Committee comprises all Board members and is chaired by Mr. Samuel Kavourakis.

No meetings of the Corporate Governance Committee were held during the financial year ended 30 June 2004.

Board Responsibilities

The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they
are elected and to whom they are accountable. The Board acts on behalf of and is accountable to shareholders. The
Board seeks to identify the expectations of shareholders, as well as other regulatory and ethical expectations and
obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring
arrangements are in place to adequately manage those risks. The Board guides and monitors and fulfils its
responsibility to protect shareholder interests and enhance shareholder value by:

• Approving and periodically reviewing the business and financial objectives and strategies and plans of the

consolidated entity;

• Monitoring the financial performance of the consolidated entity, including approval of the consolidated entity’s

financial statements;

• Ensuring that adequate internal control systems and procedures exist and that compliance with these systems and

•

procedures is maintained;
Identifying areas of significant business or financial risk to the consolidated entity and ensuring management takes
appropriate action to manage those risks;

• Reviewing the performance and remuneration of Board members and key members of staff;
• Monitoring the operations of the consolidated entity and the performance of management;
• Establishing and maintaining appropriate ethical standards; and
• Reporting to the shareholders, the Australian Securities and Investments Commission and the Australian Stock

Exchange as required.

The Board delegates to the Joint Managing Directors and the executive team responsibility for the operation and
administration of the consolidated entity.

TRAFFIC TECHNOLOGIES LIMITED
CORPORATE GOVERNANCE STATEMENT
(Continued)

Structure of the Board

It is the intention of the Company that the composition of the Board will be determined having regard to the following
concepts:

•
•

That the Board will comprise a majority of Non-Executive Directors;
That the Board will comprise a minimum of five Directors and the actual number may be higher where additional
expertise is required in specific areas and an outstanding candidate is located;
That the Chairman of the Board will be a Non-Executive Director; and
That the Board members should represent a broad range of expertise and experience.

The Directors in office and the term in office of each Director at the date of this report are as follows:

Name

Position

Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes

Independent Non-Executive Chairman
Joint Managing Director
Joint Managing Director
Independent Non-Executive Director
Independent Non-Executive Director

Term in office

7 months
1 year 3 months
1 year 3 months
7 months
7 months

The skills, experience and expertise relevant to the position held by each Director in office at the date of the annual
report is included in the Directors’ Report. Directors are considered to be independent when they are independent of
management, are not a substantial shareholder and are free from any business or other relationship that could
materially interfere with, or could reasonably be perceived to materially interfere with, the exercise of their unfettered
and independent judgement.

In accordance with the definition of independence above, three of the five Directors of the Company as at 30 June
2004 and as at the date of this report are considered to be independent. The Company did not have a majority of
independent Directors before 30 January 2004 as required by Recommendation 2.1. The Company appointed an
independent chairman on 30 January 2004 as required by Recommendation 2.2, since when the roles of Chairman and
the Joint Managing Directors have been split in accordance with Recommendation 2.3.

Access to External and Independent Advice

The Company provides the capacity for any Director to obtain separate professional advice on any matter being
discussed by the Board and for the consolidated entity to pay the cost incurred. Before the engagement is made, the
Director is required to obtain the Chairman of the Board's approval. Approval will not be unreasonably denied and the
Director will be expected to provide the Board with a copy of that advice.

Terms of Appointment as a Director

The Company’s constitution provides that a Director other than the Managing Director may not retain office for more
than three calendar years or beyond the third annual general meeting following his or her election, whichever is longer,
without submitting for re-election. One third of the Directors retire each year and are eligible for re-election. The
Directors who retire by rotation at each annual general meeting are those with the longest length of time in office since
their appointment or last election. All Directors must be elected by the members. It is not a requirement for a person
who is a Director to own shares in the Company.

Nomination Committee

Recommendation 2.4 requires listed entities to establish a Nomination Committee. During the year ended 30 June
2004, the Company did not have a separately established Nomination Committee. However, the duties and
responsibilities typically delegated to such a committee are expressly included in the Board’s own charter as being the
responsibility of the full Board. The Board does not believe that any marked efficiencies or enhancements would be
achieved by the creation of a separate Nomination Committee.

Code of Conduct

The Board has drawn up a code of conduct to guide Board members, executives and employees in carrying out their
duties and responsibilities and to maintain confidence in the Company’s integrity. Executives and employees are
encouraged to report to Board members any concerns regarding potentially unethical practices.

TRAFFIC TECHNOLOGIES LIMITED
CORPORATE GOVERNANCE STATEMENT
(Continued)

Securities Trading

Dealings are not permitted in the Company’s securities at any time when Directors, officers or employees are in the
possession of price sensitive information not already available to the market. In addition, the Corporations Act 2001
prohibits the purchase or sale of securities whilst a person is in possession of inside information.

Certification of Financial Statements

With effect from the financial year ended 30 June 2004 Mr. Constantine Scrinis, the Joint Managing Director, and the
Chief Financial Officer have provided a written statement to the Board that the company’s financial reports present a
true and fair view of the company’s financial condition and operational results and are in accordance with relevant
accounting standards and that the company’s risk management and internal compliance and control systems are
operating efficiently and effectively.

Audit Committee

The Board has established an Audit Committee, which operates under a charter approved by the Board. The
committee, which is required by Recommendation 4.2, was not however formed until after the reconstruction of the
Board on 30 January 2004. It is the Board’s responsibility to ensure that an effective internal control framework exists
within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant 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 a framework of
internal control to the Audit Committee.

The Audit Committee also provides the Board with additional assurance regarding the reliability of financial information
for inclusion in the financial reports.

Corporate Governance Council Recommendation 4.3 requires that the Audit Committee consists of only non-executive
Directors and that a majority be independent Directors. However, in view of the size of the Board, all members of the
Board are members of the Audit Committee.

The Chairman of the Audit Committee is Mr. Alan Brown, who is an independent chairman and who is not chairman of
the Board.

No meetings of the Audit Committee were held during the financial year ended 30 June 2004.

Qualifications of Audit Committee members

Although none of the Audit Committee members have formal accountancy qualifications, all have extensive business
experience at Board level and in senior management positions. Audit Committee meetings are attended by the partner
responsible for the Company’s audit.

Continuous Disclosure

The Company has established written policies and procedures to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior management level for that compliance. All ASX announcements
are handled by Mr. Constantine Scrinis, the Joint Managing Director, and there are requirements within the Company
to ensure that the ASX’s continuous disclosure requirements are strictly followed and that unauthorised disclosure of
price sensitive information is not made other than through the ASX’s Company Announcements Office.

Communication to Market and Shareholders

The Board recognises its duty to ensure that its shareholders are informed of all major developments affecting the
Company’s state of affairs. Information is communicated to shareholders and the market through:

(cid:131) The Annual Report which is distributed to shareholders;
(cid:131) The Annual General Meeting and other shareholder meetings called to obtain approval for Board action as

appropriate;

(cid:131) The Half-Yearly Financial report; and
(cid:131) Other announcements made in accordance with ASX Listing Rules.

The Company’s reports and ASX announcements may be viewed and downloaded from the ASX website:
www.asx.com.au (stock code: TTI).

TRAFFIC TECHNOLOGIES LIMITED
CORPORATE GOVERNANCE STATEMENT
(Continued)

External Auditor

It is the Company’s policy that the external auditor attends the Annual General Meeting of the Company and is
available to answer shareholder questions about the conduct of the audit and the preparation and content of the
auditor’s report.

Risk profile

The Board has adopted a proactive approach to risk management. The Board is responsible for ensuring that risks,
and also opportunities, are identified on a timely basis and that the Company’s objectives and activities are aligned with
the risks and opportunities identified by the Board. The Company believes that it is crucial for all Board members to be
a part of this process and, as such, the Board has not established a separate risk management committee.

The Board has drawn up a risk profile for the consolidated entity, which is regularly reviewed. The executive Directors
are closely involved in the day-to-day management of the Company’s operations and, given the current size of the
operations of the consolidated entity, are in a position to continually monitor risk with the assistance of the executive
team.

Board Performance

The performance of the Board and key executives is reviewed regularly by the Board against their contribution to the
performance of the Company. Directors whose performance is consistently unsatisfactory may be asked to retire.

Remuneration

The Remuneration Committee is responsible for determining and reviewing remuneration arrangements for the
Directors themselves, the Joint Managing Directors and the executive team. It is the Company’s objective to provide
maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating Directors
and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in
achieving this objective, the Remuneration Committee takes account of the Company’s financial and operating
performance in setting the nature and amount of executive Directors’ and executives’ remuneration. In relation to the
payment of bonuses, options or other incentive payments, discretion is exercised by the Remuneration Committee,
having regard to the overall performance of the Company and the performance of the individual during the period. The
expected outcomes of the remuneration structure are:

• Retention and motivation of key executives.
• Attraction of quality management to the Company.
• Performance incentives which allow executives to share the rewards of the success of the Company.

Further details of the Company’s remuneration policy, including details of the amount of remuneration and all monetary
and non-monetary components for each of the highest paid (non-Director) executives during the year and for all
Directors, are set out the Directors’ Report.

There is no scheme to provide retirement benefits, other than statutory superannuation, to non-executive Directors.

Shareholder approval is required for all equity-based remuneration payable to Board members.

Remuneration Committee

The Board has established a Remuneration Committee, as required by Recommendation 9.2, following the
reconstruction of the Board on 30 January 2004. The Remuneration Committee is responsible for determining and
reviewing remuneration arrangements for the Directors, the Joint Managing Directors and the executive team. The
Remuneration Committee assesses the appropriateness of the nature and amount of remuneration of such officers on
a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum
stakeholder benefit from the retention of a high quality Board and executive team.

The Remuneration Committee comprises all Board members, which includes a majority of independent Directors, and
is chaired by Mr. Samuel Kavourakis, who is an independent Director.

No meetings of the Remuneration Committee were held during the financial year ended 30 June 2004.

The Company’s corporate governance practices have been in place since the restructuring of the Company and of the
Board on 30 January 2004. With the exception of the departures from the Corporate Governance Council
recommendations detailed above, the corporate governance practices of the Company are compliant with the Council’s
best practice recommendations.

TRAFFIC TECHNOLOGIES LIMITED
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2004

Note

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

Revenues from ordinary activities

114,866

4,216,340

139

4,216,340

Cost of sales

Gross profit

Salaries and employee benefits expense

Occupancy expenses

Advertising and marketing expenses

(52,343)

62,523

4,216,340

139

4,216,340

(228,056)

(23,793)

(450)

(69,989)

Administrative costs

(168,809)

(159,463)

(133,989)

(159,463)

Depreciation and amortisation expenses

Borrowing costs expense

(33,031)

(147)

(1)

Profit/(loss) from ordinary activities
before income tax expense
Income tax expense relating to ordinary
activities
Profit/(loss) from ordinary activities
after income tax expense
Total changes in equity other than
those resulting from transactions with
owner as owners

Basic earnings per share
Diluted earnings per share

(391,763)

4,056,877

(203,840)

4,056,877

(391,763)

4,056,877

(203,840)

4,056,877

(391,763)

4,056,877

(203,840)

4,056,877

(0.073)
(0.065)

2.29
2.11

The above Statement of Financial Performance is to be read in conjunction with the attached notes.

TRAFFIC TECHNOLOGIES LIMITED
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2004

Note

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

15
5
6

8
9
7

10
11

40,221
132,682
112,051

284,954

39,833
630,152
-

669,985

954,939

-
-
-

7,382
11,976
-

19,358

-
-
500,000

500,000

519,358

-
-
-

922,559
1,703

77,560
-

300,758
-

77,560
-

Current Assets
Cash assets
Receivables
Inventory

Total current assets

Non-current assets
Plant and equipment
Intangible assets
Investments

Total non-current assets

Total assets

Current liabilities
Payables
Provisions

Total current liabilities

924,262

77,560

300,758

77,560

Total liabilities

924,262

77,560

300,758

77,560

Net assets/(liabilities)

30,677

(77,560)

218,600

(77,560)

Equity
Contributed equity
Accumulated losses

Total equity

12
13

35,324,475
(35,293,798)

34,824,475
(34,902,035)

35,324,475
(35,105,875)

34,824,475
(34,902,035)

30,677

(77,560)

218,600

(77,560)

The above Statement of Financial Position is to be read in conjunction with the attached notes.

TRAFFIC TECHNOLOGIES LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2004

Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Interest received
Interest paid

Net cash provided by
operating activities

(used

in)

Cash flows from investing activities
Purchase of plant and equipment
Net cash provided by (used in) investing
activities

Cash flows from financing activities

Proceeds from related parties

Advances to controlled entity

Net cash provided by (used in) financing
activities

Note

Consolidated
2004
$

Consolidated
2003
$

Company
2004
$

19,354
(384,065)
36
(147)

12,201
(285,796)
-
-

100
(197,712)
1
(1)

Company
2003
$

12,201
(285,796)
-
-

(364,822)

(273,595)

(197,612)

(273,595)

(11,791)

-
-
416,834
-
-

416,834

-
-
-
-
-

-
-
214,994
-
(10,000)

204,994

-
-
-
-
-

Net increase/ (decrease) in cash held

40,221

(273,595)

7,382

(273,595)

Opening cash brought forward

273,595

Closing cash carried forward

40,221

7,382

The above Statement of Cash Flows is to be read in conjunction with the attached notes.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

1. SUMMARY OF ACCOUNTING POLICIES

(a) Basis of accounting

The financial report is a general purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 including applicable Accounting Standards. Other mandatory professional
reporting requirements (Urgent Issues Group Consensus Views) have also been complied with.

The financial report covers the consolidated entity of Traffic Technologies Limited (formerly Infosentials Limited) and
controlled entities, and Traffic Technologies Limited as an individual parent entity. Traffic Technologies Limited is a
public company, incorporated and domiciled in Australia, whose securities are currently suspended from trading on the
Australian Stock Exchange.

The financial report has been prepared in accordance with the historical cost convention and, except where stated,
does not take into account changing money values or current valuations of non-current assets. Cost is based on the
fair values of the consideration given in exchange for assets.

(b) Significant accounting policies

The following significant accounting policies have been adopted in the preparation and presentation of the financial
report. The accounting policies have been consistently applied with those of the previous year,

(c)

Going concern basis of accounting

The continuing viability of the consolidated entity and its ability to continue as a going concern and meet debts and
commitments as they fall due is dependent upon continued financial support being maintained by Director-related
entities. Without such continued financial support, there is significant uncertainty as to whether the consolidated entity
will be able to continue as a going concern. It may become necessary for it to realise its assets and extinguish its
liabilities other than in the normal course of business and at amounts different from those stated in the financial
statements.

However, the Directors believe that the consolidated entity will be successful in the above matters and, accordingly,
have prepared the financial report on a going concern basis. The Directors consider that there are reasonable grounds
to believe that the consolidated entity, with the ongoing support of Director-related entities, can pay its debts as and
when they fall due.

(d)

Principles of consolidation

The consolidated financial statements are those of the consolidated entity, comprising Traffic Technologies Limited (the
parent entity) and all entities which Traffic Technologies Limited controlled from time to time during the year and at
balance date.

Information from the financial statements of subsidiaries is included from the date the parent company obtains control
until such time as control ceases. Where there is loss of control of a subsidiary, the consolidated financial statements
include the results for the part of the reporting period during which the parent company has control.

The financial statements are prepared for the same reporting period as the parent entity using consistent accounting
policies. Adjustments are made to bring into line any dissimilar accounting policies which may exist.

All intercompany balances and transactions, including unrealised profits arising from intra-group transactions, have
been eliminated in full.

(e)

Revenue recognition

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

Sale of Goods

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

1. SUMMARY OF ACCOUNTING POLICIES (Continued)

(e)

Revenue recognition (Continued)

Interest revenue

Interest revenue is recognised on a time proportionate basis that takes into account the effective yield on the financial
asset.

(f)

Taxes

Income Tax

The consolidated entity adopts the liability method of tax-effect accounting whereby the income tax expense is based
on the profit from ordinary activities adjusted for any permanent differences.

Timing differences, which arise due to the different accounting periods in which items of revenue and expense are
included in the determination of accounting profit and taxable income, are brought to account as either a provision for
deferred income tax or as a future income tax benefit at the rate of income tax applicable to the period in which the
benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond any reasonable
doubt. Future income tax benefits in relation to tax losses are not brought to account unless there is virtual certainty of
realisation of the benefit.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no
adverse change will occur in income tax legislation and the anticipation that the consolidated entity will derive sufficient
future assessable income and comply with the conditions of deductibility imposed by the law.

Goods and Services Tax

All revenue and expenses are stated net of the amount of Goods and Services Tax (GST).

(g) Recoverable amounts

The carrying amounts of non-current assets do not exceed the net amounts that are expected to be recovered through
the cash inflows and outflows arising from continued use and subsequent disposal of the asset. The expected net cash
flows included in determining the recoverable amounts have not been discounted to their present value.

Where a group of assets work together to generate net cash inflows the recoverable amount test is applied to that
group of assets.

(h) Inventories

Inventories are measured at the lower of cost and net realisable value. Costs are assigned on a first-in first-out basis
and include direct materials, direct labour and an appropriate proportion of variable and fixed overhead expenses.

(i) Receivables

Trade accounts receivable, amounts due from related parties and other receivables represent the principal amounts
due at balance date plus accrued interest less, where applicable, any unearned income and provisions for doubtful
accounts.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

1. SUMMARY OF ACCOUNTING POLICIES (Continued)

(j)

Plant and equipment

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

(k)

Depreciation

The depreciable amount of all fixed assets is depreciated on a straight line basis over the useful lives to the economic
entity commencing from the time the assets are held ready for use.

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

Class of Fixed Asset

Depreciation Rate

Computer and communication equipment
Furniture and fixtures
Tooling

27%
13%
20%

(l) Intangibles

Goodwill

Goodwill on consolidation is initially recorded at the amount by which the purchase price for a business or for an
ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition.
Goodwill on consolidation is amortised on a straight-line basis over a period of 10 years. Balances are reviewed
annually and any balances representing future benefits for which realisation is considered to be no longer probable are
written off.

Patents and trademarks

Patents and trademarks are initially recorded at cost. Patents and trademarks are amortised on a straight-line basis
over a period of 10 years. Balances are reviewed annually and any balances representing future benefits for which
realisation is considered to be no longer probable are written off.

Research and development costs

Research and development costs are expensed as incurred, except where future benefits are expected, beyond any
reasonable doubt, to exceed those costs. Where research and development costs are deferred such costs are
amortised over a period of 10 years. Unamortised costs are reviewed at each balance date to determine the amount, if
any, that is no longer recoverable and any amounts identified are written off. The Company determined that as of 1
February 2004, the products related to the deferred research and development costs became ready for commercial
production. Therefore, at this date, the Company determined that commencing amortisation of the deferred costs was
appropriate.

(m) Foreign currency transactions and balances

Foreign currency transactions during the period are converted to Australian currency at the rates of exchange
applicable at the dates of the transactions. Amounts receivable and payable in foreign currencies at balance date are
converted to the rates of exchange ruling at that date.

The gains and losses from conversion of short-term assets and liabilities, whether realised or unrealised, are included
in profit/loss from ordinary activities as they arise.

(n)

Accounts payable

Accounts payable represent the principal amounts outstanding at balance date plus, where applicable, any accrued
interest.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

1. SUMMARY OF ACCOUNTING POLICIES (Continued)

(o) Employee benefits

The following liabilities arising in respect of employee benefits are measured at their nominal amounts:

• Wages and salaries and annual leave regardless of whether they are expected to be settled within twelve months

of balance date.

• Other employee benefits which are expected to be settled within twelve months of balance date.

All other employee benefits, including long service leave, are measured at the present value of the estimated future
cash outflows in respect of services provided up to balance date. Liabilities are determined after taking into
consideration estimated future increase in wages and salaries and past experience regarding staff departures. Related
on-costs are included.

(p)

Earnings per share

Basic earnings per share is calculated as net profit/loss attributable to members divided by the weighted average
number of ordinary shares. Diluted earnings per share is calculated as net profit/loss attributable to members divided
by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any non-
discretionary changes in revenues during the period that would result from the dilution of potential ordinary shares.

(q)

Comparative figures

Where necessary, comparatives have been reclassified and repositioned to conform with changes in presentation for
the current financial year.

(r)

Financial instruments

Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the
contractual arrangement.

Interest and dividends

Interest and dividends are classified as expenses or as distributions of profit consistent with the classification of the
related debt or equity instruments in the statement of financial position.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

2. REVENUE FROM ORDINARY ACTIVITIES

Revenues from operating activities
Revenue from sale of goods

Revenues from non-operating activities
Gain on effectuation of Deed of Company
Arrangement
Other revenue
Interest revenue from:
Financial institutions
Total revenues from ordinary activities

3. EXPENSES AND LOSSES/(GAINS)

Profit/(loss) from ordinary activities before income
tax has been determined after:

Expenses
Depreciation of non-current assets:
Plant and equipment
Total depreciation of non-current assets

Amortisation of non-current assets:
Patents and trademarks
Research and development
Goodwill
Total amortisation of non-current assets

Total depreciation and amortisation expenses

Borrowing costs
Interest:
Other entities
Total borrowing costs expense

Operating lease rentals
Employee entitlements
Doubtful debts
Bad debts expense
Loss on disposal of fixed assets

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

114,692

12,201

114,692

12,201

-
138

4,204,139
-

36
114,866

-
4,216,340

-
138

1
139

12,201

4,204,139
-

-
4,216,340

5,934
5,934

222
23,024
3,851
27,097

33,031

147
147

23,933
1,801
-
-
-

-
-

-
-
-
-

-
-

-
-
-
-
-

-
-

-
-
-
-

1
1

-
-
-
-
-

-
-

-
-
-
-

-
-

-
-
-
-
-

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

4. INCOME TAX

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

The amount provided in respect of income tax differs from
the amount prima facie attributable to the operating
profit/loss. The difference is reconciled as follows:

Prima facie tax payable on profit/(loss) from ordinary
activities before income tax at 30% (2003 – 30%)

(117,529)

1,217,063

(61,152)

1,217,063

Tax effect of permanent differences
Non assessable gain
Amortisation of intangibles

Timing differences and tax losses not brought to account
as future income tax benefits

Income tax attributable to operating profit/loss

Future income tax benefits not brought to account as
assets:
Tax losses – revenue
Timing differences

-
27,097
-
-

(1,261,242)
-
-
-

-
-
-
-

(1,261,242)
-
-
-

(90,432)

(44,179)

(61,152)

(44,179)

-
90,432

1,003,373
-

-
44,179

-
61,152

-
44,179

-
-

815,450
-

615,461
-

future assessable income is derived of a nature and of amount sufficient to enable the benefit from the deductions

The future income tax benefit will only be obtained if:
(a)
to be realised;
(b)
(c)

the conditions for deductibility imposed by the law are complied with; and
no changes in tax legislation adversely affect the realisation of the benefit from the deductions.

The group is currently considering whether or not to elect to consolidate and be treated as a single entity for income
tax purposes

5. RECEIVABLES (CURRENT)

Trade receivables
Provision for doubtful debts

Other receivables and prepaid expenses

Amounts receivable from related entities
Subsidiary entities

Total receivables

113,469
-
113,469

19,213

132,682

Related party receivables – subsidiary entities

Terms and conditions

Terms and conditions relating to the above financial instruments

-
-
-

1,976

10,000

11,976

10,000

-
-
-

(i)
(ii)

Trade receivables are non-interest bearing and are generally on 30-day terms.
Other receivables are non-interest bearing and have repayment terms between 30 and 90 days.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

6. INVENTORIES (CURRENT)

Components
Sub assemblies and finished goods

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

53,504
58,547
112,051

-
-
-

7. NON CURRENT INVESTMENTS

Interests in subsidiaries

Name of Entity

Country of
Incorporation

Percentage of equity interest
held by the consolidated entity

Investment

Traffic Technology International Pty Ltd

Australia

2004
%

100

2003
%

2004
$

2003
$

500,000

The parent entity acquired its interest in Traffic Technology International Pty Ltd on 30 January 2004 for a
consideration of $500,000. Traffic Technology International Pty Ltd is engaged in the development and
commercialisation of a Smart Traffic Light product based on LED (light emitting diode) technology. The Directors are
reviewing the carrying value of the parent entity's investment in Traffic Technology International Pty Ltd on an ongoing
basis. However it is currently too early to ascertain a meaningful carrying value of the investment and accordingly the
Directors have determined the carrying value be maintained at cost.

8. PLANT AND EQUIPMENT

(a) Carrying values

Plant and equipment:
At cost
Accumulated depreciation

Total plant and equipment

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

73,345
(33,512)

39,833

-
-

(b) Reconciliations

Consolidated entity

Balance at the beginning of the year
Acquisition of subsidiary entity
Additions
Depreciation expense
Balance at the end of the year

Parent entity

Plant and
Equipment
$

-
33,976
11,791
(5,934)
39,833

The parent entity did not own any plant and equipment.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

9. INTANGIBLE ASSETS

Patents and trademarks:
At cost
Accumulated amortisation

Research and development:
At cost
Accumulated amortisation

Goodwill:
At cost
Accumulated amortisation

Total intangible assets

10. PAYABLES (CURRENT)

Trade creditors
Other creditors
Due to related parties

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

6,545
(222)

6,323

558,276
(23,024)

535,252

92,428
(3,851)

88,577

630,152

-
-

86,494
39,964
796,101
922,559

54,209
-
23,351
77,560

16,764
19,000
264,994
300,758

54,209
-
23,351
77,560

Aggregate amounts payable to related parties

Payable to Directors and Director-related entities

796,101
796,101

23,351
23,351

264,994
264,994

23,351
23,351

Terms and conditions relating to the above financial instruments:

(i) Trade payables are non-interest bearing and are normally settled on 30-day terms.
(ii) Other creditors are non-interest-bearing and are normally payable within 30 and 90 days
(iii) Details of the terms and conditions of related party payables are set out in Notes 21 and 22.

11. PROVISIONS

The aggregate employee entitlement liability recognised
and included in the financial statements is as follows:
Provision for employee entitlements:
Current
Provision for annual leave
Provision for long service leave

1,703
-

1,703

-
-

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

12. CONTRIBUTED EQUITY

(a) Issued and paid up capital

Ordinary shares fully paid

35,324,475

34,824,475

35,324,475

34,824,475

(b) Movements in shares on issue

2004

Number of
shares

2003

Number of
shares

Beginning of the financial year

260,492,611

34,824,475

130,492,611

34,824,475

Shares issued during the year

1. Issue of shares on 30 May 2003

2. Consolidation of shares on 30 January 2004

(257,235,695)

130,000,000
-

3. Issue of shares on 30 January 2004

5,000,000

500,000

-
-

As at 30 June 2004

8,256,916

35,324,475

260,492,611

34,824,475

1. On 30 May 2003 shareholders approved the issue of 130,000,000 fully paid ordinary shares to Moonlighting
International Pty Ltd for their continued support of the Company.

2. On 30 January 2004 shareholders approved the consolidation of the Company’s share capital on the basis of one
fully paid ordinary share for every 80 shares previously held.

3. On 30 January 2004 shareholders approved the issue of 5,000,000 shares at $0.10 (10 cents) per share to the
vendors of Traffic Technology International Pty Ltd as consideration for the acquisition of that company.

100,000 employee options expired on 31 December 2003, which conferred the right to acquire one ordinary share per
option at $0.20 (20 cents) per share.

12,500,000 ordinary options expired on 31 December 2003, which conferred the right to acquire one ordinary share per
option at $0.20 (20 cents) per share.

On 30 January 2004 shareholders approved the issue of 1,700,000 options to the Directors exercisable at $0.20 (20
cents) per share expiring on 30 January 2009 (see Note 21 for further details).

(d) Terms and conditions of contributed equity

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

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

13. ACCUMULATED LOSSES

Accumulated losses at the beginning of the
financial year

Consolidated
2004
$

Consolidated
2003
$

Company
2004
$

Company
2003
$

(34,902,035)

(38,958,912)

(34,902,035)

(38,958,912)

Total changes in equity other than those resulting from
transactions with owner as owners

(391,763)

4,056,877

(203,840)

4,056,877

Accumulated losses at the end of the
financial year

(35,293,798)

(34,902,035)

(35,105,875)

(34,902,035)

14. EXPENDITURE COMMITMENTS

Operating lease commitments

(a)
Non-cancellable operating leases contracted for but
not capitalised in the financial statements

Premises
No later than one year

28,122

Operating lease payments are recorded as expense payments.

(b) Capital expenditure commitments

There were no capital expenditure commitments at the reporting date.

15. STATEMENT OF CASH FLOWS

(a) Reconciliation of operating profit/(loss) after
income tax to net cash flows from operating
activities:

Operating profit/(loss) after income tax

(391,763)

4,056,877

(203,840)

4,056,877

Non-cash items:
Depreciation and amortisation of non-current assets
Gain on effectuation of Deed of Company
Arrangement
Bad and doubtful debts

33,031

-
-

(4,204,139)
-

-
-

(4,204,139)
-

Changes in assets and liabilities:
(Increase)/decrease in trade receivables
(Increase)/decrease in inventories
Increase/(decrease) in accounts payable
Increase/(decrease) in provisions
Net cash used in operating activities

(132,682)
(112,051)
236,940
1,703
(364,822)

-
-
(126,333)
-
(273,595)

(11,976)
-
18,204
-
(197,612)

-
-
(126,333)
-
(273,595)

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

Consolidated
2004
$

Consolidated
2003
$

Company
2004
$

Company
2003
$

-
-

7,382
-

7,382

1,000,000

-
-

15. STATEMENT OF CASH FLOWS

(b) Reconciliation of cash

For the purpose of the statement of cash flows, cash
includes cash on hand and in banks and investments
in money market instruments, net of outstanding bank
overdrafts. Cash at the end of the financial year as
shown in the statement of cash flows is reconciled to
the related items in the statement of financial position
as follows:

Cash at bank and in hand
Security deposit

At reporting date, the following financing facilities had
been negotiated and were available:
- Convertible Note facility – related party

Facilities used at reporting date
- Convertible Note facility – related party

Facilities unused at reporting date
- Convertible Note facility – related party

Acceptance of the convertible note and its terms is
subject to shareholders’ approval.

(d) Businesses acquired

During the 2004 financial year the consolidated entity
acquired the business and certain assets and
liabilities of Traffic Technologies International Pty Ltd
as follows:

Consideration:

Fully paid Ordinary Shares

Fair value of net assets acquired:

Assets
Cash
Receivables
Inventory
Plant and equipment
Intangible assets
Total assets acquired

Liabilities
Trade creditors and accruals
Payable to Director-related entity
Provision for employee entitlements
Total liabilities acquired

Fair value of net assets acquired

Goodwill on acquisition

35,065
5,156

40,221

1,000,000

500,000

16,969
21,628
101,830
33,975
552,426
726,828

(173,617)
(143,416)
(2,223)
(319,256)

407,572

92,428

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

16. EMPLOYEE ENTITLEMENTS

On 30 January 2004 shareholders approved a new Company Share Option Plan for Directors, employees and
contractors of the Company under which the Board can issue options at no cash consideration to purchase fully paid
ordinary shares in the Company on the basis of one option for one share at an exercise price to be determined by the
Board at the time the options are issued. Options will be exercisable from the time of issue and will lapse on the fifth
anniversary of the date of grant if they have not been exercised before that time. Options can be issued up to a
maximum of 10% of the issued share capital of the Company. The options cannot be transferred and will not be
quoted on the ASX.

Eligible persons under the Company Share Option Plan are Directors, employees and contractors of the Company. If
the directorship, employment or contract of the participant terminates, the participant may, within 28 days after the date
of termination, exercise all or part of those of the participant’s options, which the participant is then entitled to exercise.
Any option not exercised within that 28-day period will lapse.

Options outstanding

Balance at beginning of year

Granted

Expired

2004
Number of
Options

12,600,000

1,700,000

(12,600,000)

2004
Weighted
Average
Exercise
Price
$0.20

$0.20

2003
Number of
Options

12,600,000

2003
Weighted
Average
Exercise
Price
$0.20

Balance at end of year

1,700,000

$0.20

12,600,000

$0.20

Exercisable at end of year

1,700,000

$0.20

12,600,000

$0.20

Options granted

Options granted during
the financial year ended
30 June 2004

Number
of
Options

Grant Date

Vesting Date

Expiry Date

Weighted
Average
Exercise Price

Directors

1,700,000

30 Jan 2004

30 Jan 2009

$0.20

No options have been issued since 30 June 2004. No options were exercised during the financial year or until the date
of this report.

Options expired

The following options expired during the financial year:

•

100,000 employee options expired on 31 December 2003 conferring the right to acquire one ordinary share
per option at $0.20 (20 cents) per share.

12,500,000 options expired on 31 December 2003 conferring the right to acquire one ordinary share per
option at $0.20 (20 cents) per share.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

16. EMPLOYEE ENTITLEMENTS (Continued)

(b) Superannuation commitments

The consolidated entity contributes 9% of employees’
wages and salaries to superannuation plans which
provides various benefits on retirement, disability or
death. Such contributions at the rate of 9% are legally
enforceable in Australia.

The aggregate employee entitlement liability recognised
and included in the financial statements is as follow:
Provision for employee entitlements:
Provision for annual leave
Provision for long service leave

1,703
-
1,703

(d) Employee Numbers

The number of employees at year end

17. CONTINGENT LIABILITIES

There were no contingent liabilities at balance date or as at the date of this report.

-
-
-

18. SUBSEQUENT EVENTS

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

19. EARNINGS PER SHARE

Basic earnings per share
Diluted earnings per share

Consolidated
2004

Consolidated
2003

Dollars per sharee

$(0.073)
$(0.065)

$2.29
$2.11

Earnings used in calculating basic and diluted earnings
per share

$(391,763)

$4,056,877

Weighted average number of ordinary shares used
In calculating basic earnings per share
Dilutive potential ordinary shares
Share options

Adjusted weighted average number of ordinary shares
used in calculating diluted earnings per share

Number of shares
2004

Number of shares
2003

5,333,418

1,769,171

706,011

157,500

6,039,429

1,926,671

The 2003 comparatives have been adjusted to take effect of the share consolidation that occurred in 2004 to enable
effective comparison

Consolidated Consolidated
2003
$

2004
$

Company
2004
$

Company
2003
$

20. AUDITORS REMUNERATION

Amounts received or due and receivable by
Pitcher Partners for:

Auditing or reviewing the financial report
Other services

10,000
15,000
25,000

9,500
-
9,500

4,000
15,000
19,000

9,500
-
9,500

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

21. DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of Specified Directors and Specified Executives

(i) Specified Directors

Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes
Mr. Peter Stedwell

(ii) Specified Executives

Non-Executive Chairman (appointed 30 January 2004)
Joint Managing Director
Joint Managing Director
Non-Executive Director (appointed 30 January 2004)
Non-Executive Director (appointed 30 January 2004)
Non-Executive Director (resigned 30 January 2004)

The Company had one Specified Executive during the financial year ended 30 June 2004, as follows:

Mr. Peter Crafter

Chief Financial Officer and Company Secretary

(b) Remuneration of Specified Directors and Specified Executives

(i) Remuneration Policy

The Company has entered into executive service agreements with Mr. Constantine Scrinis and Mr. Constantinos
Liosatos. Under the agreements, Mr. Constantine Scrinis and Mr. Constantinos Liosatos agreed to act as Joint
Managing Directors of Traffic Technologies Limited for a remuneration of $75,000 per annum each in the financial year
ending 30 June 2004, increasing to $200,000 per annum each in the financial year ending 30 June 2005, with a review
in the financial year ending 30 June 2006. On 30 January 2004 shareholders approved the issue of 300,000 options
each to Mr. Scrinis and Mr. Liosatos.

The Company has accrued Director’s fees in respect of each of the Non-Executive Directors (see below), which were
not however paid during the financial year ended 30 June 2004. Shareholders have also approved the issue of options
to each of the Non-Executive Directors (see below).

Each executive has an employment or contractor agreement with notice periods varying between seven days and one
month.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

21. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

(ii) Remuneration of Specified Directors and Specified Executives

Primary
Salary & Fees
$

Post
Employment
Superannuation
$

Specified Directors
Mr. Samuel Kavourakis

Mr. Constantine Scrinis

Mr. Constantinos Liosatos

Mr. Alan Brown

Mr. Cary Stynes

2004
2003

20,833
-

31,250
-

14,583
-

Total Remuneration: Specified
Directors

Specified Executives
Mr. Peter Crafter

2004
2003

112,499
-

2004
2003

10,740
-

Total Remuneration: Specified
Executives

2004
2003

10,740
-

-
-

Equity
Options
$

19,500
-

11,700
-

66,300

-
-

Other

Total

Options
As % of
Remuneration
%

-
-

40,333
-

42,950
-

26,283
-

178,799
-

10,740
-

48%
-

27%
-

45%
-

37%
-

-
-

Although Directors’ fees have been accrued, this remuneration was not paid to the Directors during the financial year
ended 30 June 2004.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

21. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

During the financial year options were granted as equity compensation benefits to Specified Directors as set out below.
The options were issued at no cash consideration. Each option entitles the holder to subscribe for one fully paid
ordinary share in the entity at an exercise price of $0.20 (20 cents) per share. The options vest immediately on grant
and expire five years after vesting. The issue of options was at the discretion of the Board and was not based on
specified performance criteria. No options have been issued to specified Executives.

Vested
Number

Granted
Number

Grant
Date

Terms &
Value per
option at
grant date
$

Conditions
Exercise
price per
share
$

For Each Grant
First
Exercise
Date

Last
Exercise
Date

500,000
300,000
300,000
300,000
300,000

30 Jan 04
30 Jan 04
30 Jan 04
30 Jan 04
30 Jan 04

$0.20
$0.20
$0.20
$0.20
$0.20

30 Jan 04
30 Jan 04
30 Jan 04
30 Jan 04
30 Jan 04

30 Jan 09
30 Jan 09
30 Jan 09
30 Jan 09
30 Jan 09

Specified Directors
Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes

Total

1,700,000

(d) Shares issued on exercise of remuneration options

No shares have been issued as a result of the exercise of remuneration options.

(e) Option holdings of Specified Directors and Specified Executives

Balance at beginning
of period
1 July 2003
Number of
options

Specified Directors
Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes

Total

-
-
-
-
-

Granted
as
remuneration
Number of
options

500,000
300,000
300,000
300,000
300,000

Balance at end of
period
30 June 2004
Number of
options

500,000
300,000
300,000
300,000
300,000

Vested
at
30 June 2004
Number of
options

500,000
300,000
300,000
300,000
300,000

1,700,000

No options have been issued to or are held by Specified Executives.

Fair value of options

The fair value of each option is estimated on the date of grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used:

Dividend yield
Expected volatility
Historical volatility
Risk-free interest rate
Expected life of option

Nil
45%
45%
5.715%
5.0 years

All options issued to date have vested. Currently the fair values of options are not recognised as expenses in the
financial statements.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

21. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

(f) Shareholdings of Specified Directors and Specified Executives

Balance at
beginning of
period
1 July 2003
Number of
shares

Consolidation
of share
capital
Number of
shares

Purchased
during year
Number of
shares

Issued during
year
Number of
shares

Balance at
end of period
30 June 2004
Number of
shares

Specified Directors

Mr. Samuel Kavourakis
Mr. Constantine Scrinis
Mr. Constantinos Liosatos
Mr. Alan Brown
Mr. Cary Stynes

Specified Executives

796,720
45,013,266
45,013,266
796,720
-

(786,761)
(44,450,600)
(44,450,600)
(786,761)
-

Mr. Peter Crafter
Total

-
91,619,972

-
(90,474,722)

-
-
-
-
-

-
-

30,642
1,731,279
1,731,279
30,642
-

40,601
2,293,945
2,293,945
40,601
-

-
3,523,842

-
4,669,092

(g) Loans to Specified Directors and Specified Executives

There were no loans made to Specified Directors or Specified Executives during the financial year and none are
outstanding as at the date of this report.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

21. DIRECTOR AND EXECUTIVE DISCLOSURES (Continued)

(h) Other transactions and balances with Specified Directors and Specified Executives

Loans with Directors or Director-related entities

Moonlighting Australasia Pty Ltd (a company associated with Directors, Mr. Constantine Scrinis and Mr. Constantinos
Liosatos) has made interest free loans to the consolidated entity during the financial year to provide working capital.
The loans are unsecured and are repayable on demand. The balance at 30 June 2004 was $583,601.

Astra Glen Pty Ltd (a company associated with Director, Mr. Constantine Scrinis) was owed $81,250 at balance date in
respect of accrued Directors’ fees and other advances made to the Company during the year ended 30 June 2004.

Contelite Pty Ltd (a company associated with Director, Mr. Constantinos Liosatos) was owed $81,250 at balance date
in respect of accrued Directors’ fees and other advances made to the Company during the year ended 30 June 2004.

Springbuild Pty Ltd (a company associated with Directors, Mr. Constantine Scrinis and Mr. Constantinos Liosatos) has
provided an equity facility of up to $1,000,000, which can be drawn down by the Company on agreed terms and as
required by the Company. The facility is to be provided by way of a convertible loan to the Company and secured by
way of a fixed and floating charge over the Company. The loan is convertible into shares in the Company at $0.20 (20
cents) per share for a period of 12 months from 26 February 2004, subject to shareholders’ approval. The convertible
note facility bears interest at 8.95% to the extent that it is not converted. As at 30 June 2004 this facility was undrawn.

Other unpaid Directors’ fees totalling $50,000 at balance date comprised $20,833 due to Mr. Samuel Kavourakis,
$14,583 due to Mr. Alan Brown and $14,583 due to Mr. Cary Stynes.

Other transactions with Directors or Director-related entities:

A number of directors of the Company, or their director-related entities, hold positions in other entities that result in
them having control or significant influence over the financial or operating policies of these entities.

On 30 January 2004 shareholders approved the acquisition of Traffic Technology International Pty Ltd from
Moonlighting Australasia Pty Ltd (a company associated with Mr. Constantine Scrinis, Mr. Constantinos Liosatos, Mr.
Samuel Kavourakis and Mr. Alan Brown) for $500,000 in consideration for the issue of 5,000,000 fully paid ordinary
Shares in the Company.

The terms and conditions of the transactions with directors and their director-related entities were no more favourable
than those available, or which might reasonably be expected to be available, on similar transactions to non-director
related entities on an arm’s length basis.

The aggregate amounts recognised during the year relating to directors and their director-related entities were as
follows:

Director
C Stynes

Transaction
Legal and business consulting
fees

Consolidated
2004
$
31,570

Consolidated
2003
$
-

Company
2004
$
31,570

Company
2003
$
-

Amounts recognised at the reporting date in relation to loans from Director-related entities

Payables (Current)
Payable to Moonlighting Australasia Pty Ltd
Payable to Astra Glen Pty Ltd
Payable to Contelite Pty Ltd
Unpaid Directors’ fees

Other transactions

Consolidated
2004
$
583,601
81,250
81,250
50,000
796,101

Consolidated
2003
$
23,351
-
-
-
23,351

Company
2004
$
214,994
-
-
50,000
264,994

Company
2003
$
23,351
-
-
-
23,351

There were no other transactions or balances receivable from or payable to Specified Directors or Specified Executives
during the financial year or at the date of this report.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

22. RELATED PARTY TRANSACTIONS

Ultimate parent

Traffic Technologies Limited is the ultimate parent company.

Wholly-owned group transactions

Loans

During the financial year ended 30 June 2004 Traffic Technologies Limited made interest-free advances to its wholly-
owned subsidiary entity Traffic Technology International Pty Ltd of $10,000. This amount is repayable on demand.

23. SEGMENT INFORMATION

The consolidated entity has the following two geographical segments:

Geographical segments:

2004

Revenue
External sales
Other segments
Total segment revenue
Unallocated revenue
Total revenue from ordinary activities

Result
Segment result
Unallocated expenses net of unallocated revenue
Loss from ordinary activities before income tax
Income tax expense
Loss from ordinary activities after income tax

Segment assets and liabilities
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Net assets

Asia
$

Australia
$

Total
$

74,570
-
74,570

40,296
-
40,296

44,570

(436,333)

74,205

880,734

(924,262)

114,866
-
114,866
-
114,866

(391,763)
-
(391,763)
-
(391,763)

954,939
-
954,939
(924,262)
-
(924,262)
30,677

Acquisition of non current segment assets

Depreciation and amortisation of segment assets

Other non cash segment expenses

Net cashflow from operating activities

(11,791)

(33,031)

(364,822)

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

23. SEGMENT INFORMATION (Continued)

2003

Revenue
External sales
Other segments
Total segment revenue
Unallocated revenue
Total revenue from ordinary activities

Result
Segment result
Unallocated expenses net of unallocated revenue
Profit from ordinary activities before income tax
Income tax expense
Profit from ordinary activities after income tax

Segment assets and liabilities
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Net liabilities

Acquisition of non current segment assets

Depreciation and amortisation of segment assets

Other non cash segment expenses

Net cashflow from operating activities

Business segment

Asia
$

Australia
$

Total
$

-
-
-

4,216,340
-
4,216,340

4,056,877

(77,560)

4,216,340
-
4,216,340
-
4,216,340

4,056,877
-
4,056,877
-
4,056,877

-
-
-
(77,560)
-
(77,560)
(77,560)

(273,595)

The company has one business segment being the provision of traffic management systems.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

24. FINANCIAL INSTRUMENTS: INTEREST RATE RISK AND CREDIT RISK EXPOSURES

(a)

Significant accounting policies

Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which revenues and expenses are recognised, in respect of each class of financial
asset, financial liability and equity instrument are disclosed in Note 1 to the financial statements.

(b)

Interest rate risk and exchange rate risk

The consolidated entity manages its exposure to interest rate and foreign currency fluctuations through a formal set of
policies and procedures approved by the Board of Directors. The consolidated entity does not engage in any
significant transactions that are speculative in nature.

Exposures of the consolidated entity to interest rate risks on financial assets and liabilities are summarised as follows:

2004

Financial Assets:

Cash

Receivables

Financial Liabilities:

Payables

Weighted average interest rate

Net financial assets/ (liabilities)

(789,877)

Weighted average interest rate

2003

Financial Liabilities:

Payables

Non-
interest
Bearing
$

77,560

Net financial assets/ (liabilities)

77,560

Weighted average interest rate

(c)

Credit Risk

Non-
interest
Bearing
$

Floating
Interest
Rate
$

40,221

132,682

40,221

922,559

40,221

1.52%

Floating
Interest
Rate

Total
$

40,221

132,682

172,903

922,559

(749,656)

Total

77,560

Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the
consolidated entity. The consolidated entity has adopted the policy of only dealing with creditworthy counter-parties and
obtaining sufficient “collateral” or other security, where appropriate, as a means of mitigating the risk of financial loss from
default. The consolidated entity measures risk on a fair value basis. The carrying amount of financial assets recorded in
the financial statements, net of any provision for losses, represents the consolidated entity’s maximum exposure to credit
risk, without taking account of the value of any collateral or other security obtained. The consolidated entity had no
significant concentrations of credit risk with any single counterparty or group of counterparties.

(d)

Net Fair Value

The carrying amount of financial assets and financial liabilities recorded in the financial statements represents their
respective net fair values, determined in accordance with the accounting policies disclosed in Note 1 of the financial
statements.

TRAFFIC TECHNOLOGIES LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2004

25. IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS

The Company has commenced transitioning its accounting policies and financial reporting from current Australian
standards to Australian equivalents of International Financial Reporting Standards (IFRS). The Company has, in
consultation with its professional advisers, performed an assessment to identify key areas that will be impacted by the
transition to IFRS. Set out below are the key areas where accounting policies will change and may have an impact on the
consolidated entity’s financial report. At this stage the Company has not been able to reliably quantify the impact on the
financial report.

Classification of financial instruments

Under AASB 139 Financial Instruments: Recognition and Measurement, financial instruments will be required to be
classified into one of five categories which will, in turn, determine the accounting treatment of the item. This will result in a
change in the current accounting policy that does not classify financial instruments. The future financial effect of this
change in accounting policy is not yet known as the classification and measurement process has not yet been completed.

Goodwill

Under the Australian equivalent to IFRS 3 Business Combinations goodwill will no longer be able to be amortised but
instead will be subject to annual impairment testing. This will result in a change in the group’s current accounting policy
under which goodwill is amortised on a straight-line basis over 10 years. Under the new policy, amortisation will no
longer be charged, but goodwill will be written down to the extent it is impaired. Reliable estimation of the future
financial effects of this change in accounting policy is impracticable because the conditions under which impairment will
be assessed are not yet known.

Impairment of assets

Under the Australian equivalent to IAS 36 Impairment of Assets the recoverable amount of an asset is determined as
the higher of net selling price and value in use. This will result in a change in the group’s current accounting policy
under which non-current assets are written down to recoverable amount where the carrying value of any non-current
asset exceeds the recoverable amount. Under the new policy it is likely that impairment of assets will be recognised
sooner and that the amount of write-downs will be greater. Reliable estimation of the future financial effects of this
change in accounting policy is impracticable because the conditions under which impairment will be assessed are not
yet known.

Share based payments

Under AASB 2 Share Based Payments, the Company will be required to determine the fair value of options issued to
employees as remuneration and recognise an expense in the Statement of Financial Performance. Effects of this change
in accounting policy is impracticable as the details of future equity based remuneration plans are unknown.

Income taxes

Under the Australian equivalent to IAS 12 Income Taxes, the consolidated entity will be required to use a balance sheet
liability method which focuses on the tax effects of transactions and other events that affect amounts recognised in either
the Statement of Financial Position or a tax-based balance sheet. It is not expected that there will be a material impact as
a result of adoption of this standard.

TRAFFIC TECHNOLOGIES LIMITED
DIRECTORS’ DECLARATION
FOR THE FINANCIAL YEAR ENDED 30 JUNE 2004

In accordance with a resolution of the Directors of the Company, the Directors declare that:

1. The financial statements and notes of the Company and of the consolidated entity are in accordance with the

Corporations Act 2001, including:

a) giving a true and fair view of the Company’s and the consolidated entity’s financial position as at 30 June 2004

and of their performance for the financial year ended on that date; and

b) comply with Accounting Standards in Australia and the Corporations Regulations 2001; and

2. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.

On behalf of the board

Samuel Kavourakis
Chairman

Melbourne
16 August 2004

TRAFFIC TECHNOLOGIES LIMITED
ASX ADDITIONAL INFORMATION
(AS AT 9 AUGUST 2004)

Additional information required by the Australian Stock Exchange Limited and not shown elsewhere in this report is as
follows.

(a) Distribution of Equity Securities

The number of shareholders, by size of holding, in each class of share are:

1
1,001
5,001
10,001

-
-
-
-

1,000
5,000
10,000
100,000

100,001 and over

Ordinary Shares

Number of
Holders
2,624
141
10
43
9

Number of
Shares
481,040
279,075
73,245
1,750,747
5,672,809

2,827

8,256,916

Holdings less than a marketable parcel

(b) Twenty Largest Holders

The names of the twenty largest holders of quoted shares are:

Ordinary Shares

Intersuisse Issues Pty Ltd
Schil Investments Pty Ltd

Name
Astra Glen Pty Ltd
Contelite Pty Ltd
A & S Whiting Holdings Pty Ltd
Axe Holdings Pty Ltd
Cantoll Pty Ltd
Darren Simpson & Associates Pty Ltd

1.
2.
3.
4.
5.
6.
7. Mr. Michael & Mrs. Monica Nicholls
8.
9.
10. Mr. Scott Amos
11. Cordell Nominees Pty Ltd
12. Pricewaterhouse Coopers
13. Commonwealth Custodial Services Limited
14. Nigel Huggett & Associates Pty Ltd
15. Mr. A. Scrinis
16 Mr. Dawson N. Johns
17. Mr. Anthony J Oxley
18. Ms. Anne M. Gillies
19. Joard Pty Ltd
20. Mr. Bert Beijnon

Total

Number
2,293,945
2,293,945
203,005
203,005
195,426
159,697
111,518
107,728
104,540
95,548
83,334
79,610
74,116
72,270
72,107
56,980
56,980
56,730
55,108
43,368

6,422,960

Percentage
27.78
27.78
2.46
2.46
2.37
1.93
1.35
1.30
1.27
1.16
1.01
0.96
0.90
0.88
0.87
0.69
0.69
0.69
0.67
0.57

77.79

TRAFFIC TECHNOLOGIES LIMITED
ASX ADDITIONAL INFORMATION
(AS AT 9 AUGUST 2004)

The names of substantial holders who have notified the Company in accordance with section 671B of the Corporations
Act 2001 are:

Ordinary Shareholders
Astra Glen Pty Ltd
Contelite Pty Ltd

(d) Voting Rights

Ordinary Shares

Number
2,293,945
2,293,945

Percentage
27.78%
27.78%

All ordinary shares carry one vote per share without restriction.

(e) Options

There were 1,700,000 options held by the Directors exercisable at $0.20 (20 cents) per share expiring on 30 January
2009.

110 Stephenson Street Richmond Vic 3121 Australia

Phone: +61 3 9427 7411 Fascimile: +61 3 9427 7455

ABN 21 080 415 407