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ANNUA L R EP ORT 20 11 1 LONGR EAC H GR OUP LI MITED

TABLE OF CONTENTS

TABLE OF CONTENTS 1

COMPANY PARTICULARS 1

CHAIRMAN'S REPORT 2

DIRECTOR'S REPORT 4

LEAD AUDITORS INDEPENDENCE DEC 13

CORPORATE GOVERNANCE STATEMENT 14

FINANCIAL STATEMENTS 18

NOTES TO THE FINANCIAL STATEMENTS 23

DIRECTOR'S DECLARATION 70

INDEPENDENT AUDITORS REPORT 71

SHAREHOLDER INFORMATION 73

COMPANY PARTICULARS

DIRECTORS

L E Case - Chairman & Non-Executive Director

C R Bernecker - Non-Executive Director

P B Harrison - Executive Director

AUDITOR

Lawler Partners

763 Hunter Street

Newcastle West NSW 2302

COMPANY SECRETARY

C Riquelme

LAWYERS

Cooper Mills

Level 4, 459 Little Collin Street

Melbourne VIC 3000

PRINCIPAL PLACE OF BUSINESS AND

REGISTERED OFFICE IN AUSTRALIA

31 Market Street

South Melbourne Vic 3205

Telephone:(03) 9926 1155

Facsimile: (03) 9696 1411

Website: www.longreach.com

SHARE REGISTER

Advanced Share Registry Limited

150 Stirling Highway, NEDLANDS WA 6009

PO Box 1156, NEDLANDS WA 6909

Telephone: (08) 9389 8033

Facsimile: (08) 9389 7871

Level 6, 225 Clarence Street, SYDNEY NSW 2000

PO Box Q1736, Queen Victoria Building NSW 1230

Telephone: (02) 8096 3502

Website: www.advancedshare.com.au

LongReach Group Limited: ABN 57 010 597 672

STOCK EXCHANGE LISTING

LongReach Group Limited shares are listed on the Australian Stock Exchange. The trading code is LRG.

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CHAIRMAN'S REPORT

Dear Shareholder,

On behalf of the Board, I am pleased to submit the 2011 Annual Report for LongReach Group Limited. Consolidated revenues for

the year from continuing operations were $10.7 million, a decline of 12.7% from the previous year. Net profit from continuing

operations before tax was -$0.3M for the year. As foreshadowed in last year’s Annual Report we continued to invest heavily in our

U.S. subsidiary, C4i Inc, during the year building the infrastructure necessary to ensure we capture our share of this important

market. All of the costs associated with this investment have been expensed as incurred.

C4i business performance continues to be impacted by the Global Financial Crisis with governments internationally continuing to

delay issuing new contracts. The C4i export efforts were further impacted by the strong Australian dollar for most of FY2011.

Although the year represented no growth in revenues, C4i did further develop its sales pipeline which we expect to be realised over

the next two (2) financial years. Additionally C4i spent considerable effort in advancing its world leading SwitchplusIP product

allowing the business to explore new vertical markets and accelerate deployment of new contracts.

C4i Inc’s results once again were significantly behind budget for FY2011, however the board is encouraged by the positive start to

FY2012 with C4i Inc securing orders in the first quarter equal to the full FY2011 result.

2011 Highlights

From an operational point of view, the C4i business achieved a number of milestones during the year, notably:

1) C4i secured and executed a number of public safety projects in the USA. C4i Inc has actively been working on developing an

engineering and project management capability in the USA allowing contracts to be executed directly. This strategy will

allow C4i to provide natural hedging on US/AUD with work being executed in the currency quoted, along with providing its

customer base a more responsive supplier.

2) The company completed delivery of a niche command and control system for the Royal Australian Air Force. This mobile

Red/Black VoIP application and technology is unique to C4i, with C4i currently exploring a number of export opportunities.

C4i is currently scheduled to deliver another Air Defence application to the Middle East later this calendar year, following

successful contract award in April of this year.

3) The company also completed works on the Sydney Ports project, which provides a command and control system for vessel

management in and around Sydney ports and harbours. This is the second such system delivered by C4i with numerous

other opportunities currently being explored internationally.

4) The company continued the rollout of systems to airports associated with the Airservices Australia national IP based

communications system for the 20 Australian airports. C4i has successfully completed the commissioning of 17 airports,

with the final three scheduled to be complete early 2012. In parallel to this project, C4i successfully completed the

commissioning of a new Alarmon system for Dubai International airport. This system has now been in service for ten (10)

months and has received very positive feedback from Dubai Airports Corporation. C4i views this as a key reference site for

future airport opportunities in the region, as Dubai international Airport is one of the busiest international airports, and the

largest and most advanced in the region.

5) The company continued its internal refinement of core products through heavy investment in R&D resulting in reduced

delivery time frames of contracts and cost of goods. The benefits of this investment will continue to be realised in the

upcoming year as the C4i SwitchplusIP products are proven and reliable products that are both market and technology

leading. R&D investment for the year represented 25% of the revenues which demonstrates the commitment of

Longreach’s board to ensuring SwitchplusIP remains a world leading product in its niche markets. The product has been

developed to support more vertical markets, with contracts for this technology in Defence, Public Safety, Mining, and

Transportation industries. The mature C4i product lends itself to rapid development and tailoring to meet unique customer

requirements. This translates to C4i being able to secure and deliver products to customers within months of contract

award, providing a competitive edge both in terms of technology and rapid deployment.

6) C4i continued to successfully sell and deliver systems to the international community, with contracted work being

performed in over ten countries, and C4i receiving first orders in five different countries from Europe, the Middle East and

Asia. C4i is encouraged by its international reseller network securing new orders in these countries and independently

financing new business development activities as it believes C4i technology is “world leading”.

Objectives for 2012

C4i’s prime objective for FY2012 is to secure projects from the large sales pipeline developed over the last two years. C4i will

continue to look at new ways to generate more annuity revenues to complement the lumpy project work the business is currently

pursuing. Year to date C4i has successfully secured three new maintenance contracts which accounts for approximately 8% of 2011

revenues. C4i is actively looking at developing its product, engineering, and project management capability to meet the

requirements of a new vertical market, the Resources sector. C4i has had some success and has confirmed its engineering and

product suitability to this market. C4i sees this as key to FY2012 while other vertical markets continue to languish. C4i has now

exported to over 25 countries and continues to identify new geographic markets for future export. This work requires the ongoing

efforts of identifying, developing and appointing international resellers and representatives. C4i is actively focussing on geographic

regions where infrastructure development must continue regardless of financial constraints.

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CHAIRMAN'S REPORT


Corporate

At both the corporate and the C4i level we have continued to look for strategic partners and acquisitions both to bolster our

existing offerings and to expand and diversify our earnings stream. It is disappointing that we have not as yet found a suitable and

suitably priced opportunity, but we prefer to remain selective when considering acquisitions. C4i will also continue to invest in R&D

associated with its world class SwitchplusIP product to ensure it continues to be a market leader.

Summary and Outlook

The global recession has clearly resulted in a slowdown in government spending, but with many government contracts being

deferred rather than cancelled. C4i is positioned well with established proposals and developed opportunities in multiple vertical

and geographic markets waiting for governments to make available funds for these types of acquisitions. Although this work is still

in competition, the current C4i products and solutions are market leading providing a great technology edge over our traditional

competitors.

As these delays continue for a second year C4i has identified the Resource and Mining market as applicable to C4i technology and

skills. This market is still project based, however with the strong growth in the resource sector there are more opportunities all

with motivation to commence work sooner rather than delaying.

Because C4i currently derives most of its revenues from a relatively small number of large contracts and because of the long and

unpredictable lead times associated with these contracts, it is difficult to predict annual results with any reliability. The fact that

most governmental bodies around the world are looking to reduce or delay expenditure where possible compounds the problem.

C4i will continue efforts to grow and diversify both its vertical and geographic markets in FY2012.

Finally on behalf of the Board, I would like to thank the management and staff of C4i for their hard work and dedication during the

year. The C4i business depends heavily on the quality and reliability of its staff.

L E Case

Chairman

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DIRECTOR'S REPORT

Your directors submit their report for the year ended 30 June 2011.

DIRECTORS

The following persons were Directors of LongReach Group Limited (the “Group”) during the financial year and until the date of this

report. Directors were in office for this entire period unless otherwise stated.

L E Case B.Sc., MBA (Non-Executive Director)

Larry was appointed Chairman of the Company on 28 November 2008 and is also Chairman of the Nomination and Remuneration

Committee.

Larry is the Chairman of Nightingale Partners Pty Limited, an investment company that specialises in providing expansion capital to

small cap companies. He is currently a Non-Executive Director of Apostle Asset Holdings Pty Limited, Australia Music Group Pty

Limited, and Control Bionics Holding Pty Ltd.

He has over 30 years experience in the management of small listed and unlisted companies. He has an MBA from the Wharton

School of Finance, University of Pennsylvania and a BSc from the University of Illinois.

C R Bernecker, CA (Non-Executive Director)

Christian was appointed Non-Executive Director of the Company on 31 October 2008 and is also Chairman of the Audit & Risk

Committee.

Christian is a Director of Nightingale Partners Pty Limited, an investment company that specialises in providing expansion capital to

small cap companies. He is currently a Non-Executive Director of Unibic Australia Pty Limited, Catalogue Central Pty Limited, and

several other private companies.

Christian is a member of the Institute of Chartered Accountants in Australia and holds a Bachelor of Commerce from Ballarat

University.

P B Harrison, BIT,GDIT,GAICD (Executive Director)

Peter was appointed Director of the Company on 28 November 2008 and is a member of the Audit & Risk Committee and the

Nomination and Remuneration Committee. Peter has been with C4i Pty Limited since 1998, where he commenced as a Software

Development Manager and transitioned into the General Manager role of the business in 2002. Peter has broad experience in

business development, product and general management of the C4i business, with over 20 years in the defence and

communications industry both in Australia and overseas.

Directors Interests in the Share capital of the company

No. of relevant interests

over ordinary shares

L E Case 17,594,779

C Bernecker 16,432,279

P Harrison 1,950,000

Company Secretary - Claire Riquelme

Claire was appointed to the role of company secretary by the Longreach Group on 31 December 08 and also holds the role Shared

Services Manager as a full time employee of the subsidiary company C4i P/L. Claire brings to the role over ten years of experience

in the support of international business development, commercial and project management, and general business administration.

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DIRECTOR'S REPORT


PRINCIPAL ACTIVITIES

During the year the principal continuing activities of the Consolidated Entity encompassed the design, integration, installation and

maintenance of integrated information and communications technology based products and services to the defence, public safety

and security sectors, as well as to government, telecommunications and corporate customers, both locally and internationally.

The Group’s continuing operations are comprised of the operations of C4i Pty Ltd and its controlled entity (“C4i”). For over 20

years, C4i has specialised in delivering standard-setting communication solutions for mission-critical military and government

customers around the globe. In the areas of defence, homeland security, public safety and public infrastructure, C4i systems have

been used to improve decision-making capabilities by enhancing and extending the speed and flow of information. For command,

control, monitoring and management of mission-critical communications applications, C4i is a trusted partner to agencies and

departments worldwide. C4i is based in Melbourne, Australia and Reston, Virginia, USA.

DIVIDENDS

Dividend of 10 cents was paid in 2011 financial year. No dividends were paid in the previous financial year.

OPERATING AND FINANCIAL REVIEW

The Group’s continuing operations for the current year ending 30 June 2011 were comprised of the operations of C4i Pty Ltd

(“C4i”). For 20 years, C4i has specialised in delivering standard-setting communication solutions for mission-critical military and

government customers around the globe. In the areas of defence, homeland security, public safety and public infrastructure, C4i

systems have been used to improve decision-making capabilities by enhancing and extending the speed and flow of information.

The C4i business was further extended into new geographic and vertical markets during FY2011, which will continue into future

years.

As at 30 June 2011 the Group continued to be debt free with $2,345,122 cash reserves.

Results

The consolidated results of the economic entity, after providing for income tax for the year, amounted to a loss of $280,600 for the

year ended 30 June 2011 (2010: profit of $635,043).

This consolidated result is comprised of:

! a loss after tax from continuing operations of $277,147 (2010: profit of $635,043); and

! a loss after tax from discontinued operations of $3,453 (2010: $nil).

Continuing Operations

The revenues from continuing operations of $10,711,000 (2010: $12,246,084) are comprised of:

! the sale of goods and services of $10,641,780 (2010: $12,075,161) being decrease of 11.87% over the corresponding period last

year;

! interest received of $166,551 (2010: $119,417);

! Net foreign exchange loss of $97,331 (2010: gain of $51,507); and

! and other revenue of $1,291 (2010: $30,321).

The expenses from continuing operations of $11,019,981 (2010: $11,209,814) represents a 0.15% decrease over the corresponding

period last year.

Mergers and Acquisitions

There were no mergers or acquisitions in the current period.

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DIRECTOR'S REPORT


CAPITAL MANAGEMENT

Shares and Share Options

The Company announced a Share Buyback of unmarketable parcels on 17 September 2010. The buyback was completed on 23

November 2010 and as a consequence 2,083,951 shares were bought back and cancelled.

On 27 April 2011 an Extra Ordinary General meeting of shareholders approved a resolution to consolidate the Company's issued

ordinary shares into a smaller number of shares in the ratio of ten (10) to one (1). On 17 June 2011 shareholders holding

10,443,577 shares elected to reinvest their dividend in new shares in the company. Total ordinary shares on issue as at the date of

this report for the financial reporting purposes are 36,522,645.

No share options were issued during the year ended 30 June 2011. Certain options have lapsed or been cancelled before the end

of the financial year and as at 30 June 2011 there remained 160,556 (2010: 1,663,890) issued share options.

At the date of this report, the unissued ordinary shares of LongReach Group Limited under option are as follows:

Grant Date Date of Expiry Exercise Price Number under Option

19-Aug-05 31-Mar-12 $4.65 556

01-Dec-06 31-Dec-12 $2.35 160,000

160,556

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

On 02 February 2010, LongReach group issued 39,000,000 shares to its employees at a price of $0.03 per share. Total shares issued

after consolidations of shares under this plan are 3,100,000 (NOTE 28).

Grant Date Vesting Date Date of Expiry Exercise Price Number under

Employee Share Plan

02-Feb-10 30-Sep-10 31-Jan-14 $0.30 1,075,000

02-Feb-10 30-Sep-11 31-Jan-14 $0.30 675,000

02-Feb-10 30-Sep-12 31-Jan-14 $0.30 675,000

02-Feb-10 30-Sep-13 31-Jan-14 $0.30 675,000

3,100,000

For details of shares issued under Employee Share Plan to directors and executives as remuneration, refer to the Remuneration

Report.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

Other than the matters referred to in this report here were no other significant changes in the state of the affairs.

MATTERS SUBSEQUENT TO THE END OF THE FINANCIAL YEAR

There are no matters subsequent to the end of the financial year that required reporting.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

Indemnification

Pursuant to its Constitution, the Company indemnifies the Directors and all officers of the Company against a liability to a person

(other than the Company or a related body corporate), that may arise from their position as Directors or officers of the Company

and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. During the financial year,

LongReach group paid premiums to insure officers of LongReach Group Limited, and their controlled entities. The indemnity

includes liability for costs and expenses incurred in defending civil or criminal proceedings in which judgement is given in favour of

that person or in which that person is acquitted, or in connection with an application in relation to those proceedings in which the

court grants relief to that person under the Law.

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DIRECTOR'S REPORT


MEETINGS OF DIRECTORS

The numbers of meetings of the Company’s Board of Directors held and attended during the year ended 30 June 2011 and up to

the date of this report were:

Board Nomination & Remuneration

Committees

Audit & Risk

Management

Committee

Eligible Attended Eligible Attended Eligible Attended

L E Case 15 15 1 1 - -

C R Bernecker 15 14 1 1 5 5

P B Harrison 15 15 1 1 5 5

COMMITTEES

The Board has established three Committees, all of which operate pursuant to formal charters, namely - the Audit & Risk

Management Committee, the Nomination Committee and the Remuneration Committee.

Mr Bernecker is the Chairman of the Audit & Risk Management Committee. Mr Case is Chairman of the Nomination Committee

and Remuneration Committee. Mr Harrison is a member to both the Nomination and Remuneration and Audit & Risk Management

committees.

REMUNERATION REPORT (AUDITED)

This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in

accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, key

management personnel of the Group are defined as those having authority and responsibility for planning, directing and controlling

the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of

the parent company, and includes the five executives in the Parent and the Group receiving the highest remuneration.

For the purposes of this report, the term “executive” encompasses the chief executive, senior executives, general managers and

secretaries of the Parent and the Group.

Remuneration policy

The Remuneration Committee is responsible for making recommendations on the remuneration policies and practices of the

Company and its controlled entities, on the remuneration packages of the Executive Directors and senior management, and on the

adequacy of fees paid to Non-Executive Directors.

The broad approach to remuneration is to ensure that remuneration packages properly reflect individuals’ duties and

responsibilities, are competitively set to attract, retain and motivate appropriately qualified and experienced Directors, senior

management and personnel, and uphold the interests of shareholders.

The remuneration policy aims to align Director and executive objectives with shareholder and business objectives by providing a

fixed remuneration component and offering specific long term incentives based on key performance areas affecting the

Consolidated Entity’s financial results. The Board believes the remuneration policy to be appropriate and effective in its ability to

attract and retain the best executives and directors to run and manage the Consolidated Entity.

Fixed remuneration

All Directors and executives receive a base salary (which is based on factors such as length of service and experience) and

superannuation guarantee contributions required by the government, currently at 9%. The base salary is calculated on a total cost

to Company basis and includes FBT charges related to employee benefits including motor vehicles. The Remuneration Committee

reviews executive packages annually by reference to the Consolidated Entity’s performance, executive performance and

comparable information from industry sectors and other listed companies in similar industries.

Performance based remuneration

The Board may exercise discretion in relation to approving incentives and bonuses. The policy is designed to attract the highest

calibre of executives and reward them for performance that results in long term growth in shareholder wealth.

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DIRECTOR'S REPORT


Employee Share Plan

Employees may be granted share options under the Company’s shareholder approved Employee Share Plan. The Company has

established this plan to encourage employees to share in the ownership of the Company, in order to promote the long term success

of Company as a goal shared by the Employees. The Shares granted to employees are conditional on performance hurdles, and

have a predetermined exercise price of $0.30 at vesting dates. The shares are issued to employees under an Employee Share Loan

Plan. The loan plan is non-recourse (i.e. employee has an option over the shares, because if the value of shares fall, the employee is

not obliged to keep the share and repay the loan) and will operate over a four year period, with a vesting date of 30 September

each year.

The condition of the loan is that at the end of the four year period, the loan is to be repaid in one of the following ways.

! Company buy-back of shares;

! Employee repays the loan with cash; or

! Should the share price be lower than share purchase price, the shares are forfeited and the employee is not required to repay

the loan.

No shares under Employee Share Plan were granted to any non executive directors during the current financial year.

Service contracts

It is the Consolidated Entity’s policy that service contracts for Executive Directors and senior management be in force for indefinite

periods. The agreements are capable of termination, acknowledging appropriate notice periods, and the Consolidated Entity

retains the right to terminate the contract immediately through contractual breach on the part of the executive or by making

payment in lieu of notice. The Executive Directors and senior management are also entitled to receive on termination of

employment their statutory entitlements of accrued annual leave and long service leave, together with any superannuation

benefits.

The service agreements outline the components of remuneration paid to the Executive Directors and senior executives and

prescribe that the remuneration levels are modified based on inflation or performance criteria individually agreed. Remuneration

levels are reviewed annually by the Remuneration Committee.

The service contracts currently entered into with key management personnel are as follows:

Mr Harrison has an employment agreement for an indefinite term and it is comprised of a basic salary plus a performance incentive

payable based on the achievement of key performance indicators. The termination provisions in the service contract cover

immediate termination for misconduct in the course of performing duties; upon bankruptcy and committing a criminal offence; and

termination with payment of one months notice. The key performance indicator on which Mr Harrison’s performance incentive is

payable, is the achievement of budgeted EBIT.

Mr Kay has an employment agreement for an indefinite term and it is comprised of a basic salary plus a performance incentive

payable based on the achievement of key performance indicators. The termination provisions in the service contract cover

immediate termination for misconduct in the course of performing duties; upon bankruptcy and committing a criminal offence; and

termination with payment of one months notice. The key performance indicator on which Mr Kay’s performance incentive is

payable, is the achievement of budgeted EBIT.

Non-executive Directors

The Company’s Constitution provides that the Non-executive Directors are each entitled to be paid such remuneration from the

Company as the Board decides for their services as Director, but the total amount provided to all Non-executive Directors for their

services must not exceed in aggregate in any financial year the amount fixed by the Company in general meetings. This amount is

currently fixed at $300,000. Non-executive Directors’ fees may be in the form of cash and superannuation contributions. They may

also be reimbursed for travelling and other expenses incurred in attending to the Company’s affairs. Non-executive Directors of the

Company are not provided with retirement benefits other than statutory superannuation. The remuneration of Non-executive

Directors must not include a commission on, or percentage of, profits or operating revenue and they do not receive options or

bonus payments. Fees for Non-executive Directors are not linked to the performance of the Consolidated Entity.

Names and positions held of Directors and Executives (Key Management Personnel) in office at any time during the financial year

are:

Directors

L E Case - Non-Executive Director (appointed 18-Jan-07)

C R Bernecker - Non-Executive Director (appointed 31-Oct-08)

P B Harrison - Executive Director (appointed 28-Nov-08)

Executives

B Kay - President, C4i Inc

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DIRECTOR'S REPORT


Remuneration of Key Management Personnel

Short-term Post

Employment

Share-based

payment

Termination

benefit

Total Performance

Related

Salary and

Fees

Cash

Bonus*

Non-Cash

Benefits

Superannuation Options

$ $ $ $ $ $ $ %

2011

Non-executive

Directors

L E Case 60,000 - - - - - 60,000 -

C Bernecker 60,000 - - - - - 60,000 -

120,000 - - - - - 120,000 -

Executive Directors

P Harrison 211,009 - - 18,991 - - 230,000 -

211,009 - - 18,991 - - 230,000 -

Executives

B Kay 180,650 - - - - - 180,650 -

180,650 - - - - - 180,650 -

2010

Non-executive

Directors

L E Case 60,000 - - - - - 60,000 -

C Bernecker 60,000 - - - - - 60,000 -

120,000 - - - - - 120,000 -

Executive Directors

P Harrison 211,009 84,404 - 26,587 - - 322,000 26.21

211,009 84,404 - 26,587 - - 322,000 26.21

Executives

B Kay 202,175 62,507 - - - - 264,682 23.62

202,175 62,507 - - - - 264,682 23.62

* Bonus includes provisions for bonuses payable in respect of the current financial year.

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DIRECTOR'S REPORT


Remuneration Options - Executive Share Options

Granted Total Vested Value of Options

Granted

Value of Options

Vested

Value of Options

Granted &

Vested

No. No. $ $ $

2011

Non-Executive Directors

L E Case - - - - -

C Bernecker - - - - -

Executive Directors

P Harrison - - - - -

Executives

B Kay - - - - -

2010


L E Case - - - - -


Executive Directors

P Harrison - - - - -

Executives

B Kay - - - - -

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DIRECTOR'S REPORT


Remuneration Options - Employee Loan Plan

Granted Total

Vested

Value of

Options

Granted

Value of

Options

Vested

Value of

Options

Granted &

Vested

No. No. $ $ $

2011


L E Case - - - - -


Executive Directors

P Harrison - 400,000 - $120,000 $120,000

Executives

B Kay - 400,000 - $120,000 $120,000

2010


L E Case - - - - -


Executive Directors

P Harrison 1,000,000 - $300,000 - $300,000

Executives

B Kay 1,000,000 - $300,000 - $300,000

Number of shares in above table represents the shares post consolidation. Shares were consolidated into smaller number of

shares in the ratio of ten (10) to (1). For more detail refer to section Capital Management on page 5 of Director's report.

SHARE OPTIONS

Un-issued shares

As at the date of signing this report, there were 160,556 (2010: 1,663,890) un-issued shares under options at balance date. Option

holders do not have the right, by virtue of the option, to participate in any share issue of the Company or any related body

corporate or in the interest issue of any other registered scheme.

Shares issued as a result of the exercise of options

During the financial year no options were exercised by employees and executives of the Group. No further options have been

exercised subsequent to the end of the financial year.

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DIRECTOR'S REPORT


ENVIRONMENTAL REGULATIONS

The consolidated operations are not regulated by any significant environmental regulations under a law of the Commonwealth or

State or Territory.

PROCEEDINGS ON BEHALF OF THE COMPANY

No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which

the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings.

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

NON-AUDIT SERVICES

The Directors are satisfied that the provision of non-audit services during the year by the auditor (or by another person or firm on

the auditor’s behalf) is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.

The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the

following reasons:

! all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not

adversely affect the integrity and objectivity of the auditor; and

! the nature of the services provided do not compromise the general principles relating to auditor independence in accordance

with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

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

$

Taxation Services 9,850

Other -

FUTURE DEVELOPMENTS

The Consolidated Entity will continue to pursue its policy of increasing the profitability and market share of its major business

sectors during the next financial year.

Further information about likely developments in the operations of the Group and the expected results of those operations in

future financial years has not been included in this report because disclosure of the information would be likely to result in

unreasonable prejudice to the Group.

AUDITOR’S INDEPENDENCE DECLARATION

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page

13.

This Directors’ statutory report is signed in accordance with a resolution of the Directors of LongReach Group Limited.

L E Case

Chairman

C R Bernecker

Director

Sydney

30 September 2011

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CORPORATE GOVERNANCE STATEMENT

The Company is committed to best practice in the area of corporate governance. This statement provides an outline of the main

corporate governance practices undertaken by the Company during the 2011 financial year. Except in regard to specific elements

of the ASX Corporate Governance Council’s principles and recommendations (“recommendations”) as disclosed below, the

Company considers its corporate governance practices achieve compliance with the recommendations in a manner appropriate for

smaller listed entities such as LongReach Group Ltd. All practices, unless otherwise stated, have been applied for the year to 30

June 2011.

PRINCIPLE 1: LAY SOLID FOUNDATIONS FOR MANAGEMENT AND OVERSIGHT

"Companies should establish and disclose the respective roles and responsibilities of board and management."

The roles and responsibilities of the board and management

The Board has the primary responsibility for guiding and monitoring the business and affairs of the Group, including compliance

with the Company’s corporate governance objectives.

The Board sets the strategic direction of the company and, through the Managing Director and Senior Management, have oversight

and monitor the implementation and progression by the Company f that strategic direction.

The responsibilities of the Board, the Managing Director and the Chairman are detailed in the Board Charter which is available on

the Company website (www.longreach.com).

Performance review

LongReach Group has process in place to review the performance of senior management. Each senior executive, including the

Managing Director, has personal objectives as well as objectives related to the performance of business or functional units and

LongReach as a whole. They are reviewed against those objectives at least annually. A performance review of senior management

has been conducted during the Reporting Period.

Performance evaluation of the Managing Director is handled by the Chairman with the assistance of the Remuneration committee.

Assessment and monitoring of the performance of other senior executives are handled by the Managing Director.

PRINCIPLE 2: STRUCTURE THE BOARD TO ADD VALUE

"Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and

duties."

Composition of the board

The Board is currently comprised of two non-executive directors and one executive director. The composition of the Board is

subject to review in the following ways:

! One-third (or if that is not a whole number, the whole number nearest to one-third) of the Directors retire each year, by

rotation, as required by the Company’s Constitution and the ASX Listing Rules. The Constitution also states that any Director

who has been appointed during the course of the year must retire at the next Annual General Meeting. Eligible Directors who

retire each year may offer themselves for re-election by the shareholders at the next Annual General Meeting.

! The Board has established a Board Nomination Committee which is charged with responsibility for periodically reviewing the

size and composition of the Board to ensure that it is structured to make appropriate decisions with a variety of perspectives

and skills in the best interests of the Company as a whole.

! An annual review of the Board as a whole, and individual members of the Board, is undertaken to assess the effectiveness of

the Board against the requirements of the Board’s Charter and the Constitution of the Company. In addition, a review is

conducted of the performance of each Director who retires from office and seeks to re-nominate for a Board position.

Short biographies of the Directors of the Company are set out on page 4 and details of their term of office are disclosed on page 62.

The biographies contain details of relevant skills, experience and expertise of each Director. For

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Independence

At this stage of development of the company, the Board considers it neither appropriate nor cost effective for there to be a

majority of independent directors.

This matter will be under review and as circumstances allow, consideration will be given to the appropriate time to move to

adopting the ASX Corporate Governance Council Recommendations.

Currently, the Board comprises three non-independent directors, one of whom is the Chairman. At the date of this report, the

Board comprises of one executive director and two non-executive directors.

Details of the members of the Board, their experience, expertise and qualifications are set out in the Directors’ Report on page 4.

The Board has assessed the independence status of the directors and has determined that there are no independent directors.

The Board has followed the CGC guidelines when assessing the independence of the directors which define an independent

director to be a director who:

! is non-executive;

! is not a substantial shareholder of the Company or an officer of, or otherwise associated, directly or indirectly, with a

substantial shareholder of the Company;

! has not within the last three years been employed in an executive capacity by the Company or another consolidated entity

member, or been a director after ceasing to hold such employment;

! within the last three years has not been a principal or employee of a material professional adviser or a material consultant to

the Company or another consolidated entity member;

! is not a significant supplier or customer of the Company or another consolidated entity member, or an officer of or otherwise

associated, directly or indirectly, with a significant supplier or customer;

! has no material contractual relationship with the Company or another consolidated entity member other than as a director of

the Company; and

! is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially

interfere with the director’s ability to act in the best interests of the Company.

Materiality for these purposes is determined on both quantitative and qualitative basis. An amount which is greater than five

percent of either the annual turnover of the consolidated entity or an individual director’s net worth is considered material for

these purposes. In addition, a transaction of any amount or a relationship is deemed material if knowledge of it impacts the

shareholders’ understanding of the director’s performance.

Access to information and independent advice

The Board, and each individual Director, is entitled to seek independent professional advice at the Company’s expense, subject to

the reasonableness of the costs and Board consent, in the conduct of their duties for the Group. In addition, the Board has full

access to Company records.

Board meetings

The Board’s business is largely conducted by a program of monthly meetings, together with such additional meetings as may be

required from time to time. Executives are required to attend and be present at Board meetings and answer questions from

Directors. Details of attendance at meetings of the Board can be found at page 7 of this Report.

Committees

The Board has established three Committees, all of which operate pursuant to formal charters;

! the Audit & Risk Management Committee,

! the Nomination Committee and

! the Remuneration Committee.

Mr Bernecker is Chairman of the Audit & Risk Management Committee and Mr Case is Chairman of the Nomination Committee and

the Remuneration Committee. Mr Harrison is a member of both committees. For

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PRINCIPLE 3: PROMOTE ETHICAL AND RESPONSIBLE DECISIONMAKING

"Companies should actively promote ethical and responsible decision-making."

Ethical Standards – Code of Conduct

The Board recognises the need to observe the highest standards of corporate practice and business conduct. Accordingly the Board

has adopted a formal Code of Ethics and a Code of Conduct which set out the standards in accordance with which each executive,

manager and employee of the Company is required to act. The Code of Conduct deals with standards of conduct for the Company’s

relationship with its shareholders, its customers, its staff and the community at large. The key aspects of this code are:

! to act with honesty, integrity and fairness

! to act in accordance with the law

! to use Company resources and property appropriately.

! comply with the share trading policy outlined in the Code of Conduct.

Diversity Policy

Change made to the ASX Corporate Governance Council's Principles and Recommendation in 2010 include the recommendation

that companies establish a diversity policy that includes requirements for the board to establish measurable objectives for

achieving gender diversity and to assess annually both the objectives and progress in achieving them.

The company is committed to diversity and recognises the benefits arising from employee and board diversity and the importance

of benefiting from all available talent. Accordingly, the company is currently looking to establish a diversity policy which, once

complete, will be available at www.longreach.com.

Dealing in Company Shares

The Company has a formal Share Trading Policy for all Group personnel, including Directors, senior management, employees and

contractors. The policy reinforces the restrictions in the Corporations Act 2001 with respect to insider trading and use of price-

sensitive information.

Under the terms of the policy, Group personnel may only buy or sell Company shares, without needing to obtain prior approval,

during a trading window of four months commencing on the next trading day immediately following the half-yearly results

announcement and the period of four months commencing on the next trading day immediately following the preliminary final

profit announcement of the Company.

In all instances buying or selling Company shares is not permitted at any time by any person who possesses price-sensitive

information not available to the market.

PRINCIPLE 4: SAFEGUARD INTEGRITY IN FINANCIAL REPORTING

"Companies should have a structure to independently verify and safeguard the integrity of their financial reporting."

Audit committee

The names and qualifications of those appointed to the audit committee and their attendance at meetings of the committee are

included in the directors’ report.

Financial statements

The Company’s financial statements preparation and approval process for the 2011 financial year involved the Chief Executive

Officer providing a declaration to the Board that in his opinion:

! the financial records of the Consolidated Entity have been properly maintained in accordance with the Corporations Act 2001;

and

! the financial statements and notes thereto for the financial year comply with the accounting standards and provide a true and

fair view in all material respects of the Company’s financial condition and operational results.

In making this statement the Chief Executive Officer indicated to the Board that:

! the Company’s risk management and internal compliance and control systems are operating efficiently and effectively in all

material respects; and

! the statement is founded on a sound system of risk management and internal compliance and control which implements the

policies adopted by the Board.

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PRINCIPLE 5: MAKE TIMELY AND BALANCED DISCLOSURE

"Companies should promote timely and balanced disclosure of all material matters concerning the company."

Information disclosure and shareholder communication

The Company has in place a formal policy with respect to its continuous disclosure obligations and procedures. The Board seeks to

ensure that shareholders are provided with sufficient information to assess the performance of the Company.

PRINCIPLE 6: RESPECT THE RIGHTS OF SHAREHOLDERS

"Companies should respect the rights of shareholders and facilitate the effective exercise of those rights."

The Company has in placed a formal policy for communication with shareholders which enhances its strong culture of disclosure to

keep the shareholders and the relevant markets informed. The Policy reflects the Board’s requirement that shareholders should be

fully informed about the Company and that shareholders should have access to the latest information available utilising, where

practicable, electronic communications to keep shareholders and the relevant markets informed of relevant information from the

Company in a timely manner.

In addition to the Annual Report which is mailed to shareholders who have requested so, the Company uses its website to

communicate with its shareholders. The website provides electronic access to the latest and past Annual Reports and Financial

Statements, ASX releases, share price information, presentation material and analyst reports.

PRINCIPLE 7: RECOGNISE AND MANAGE RISK

"Companies should establish a sound system of risk oversight and management and internal control."

Risk management

The Board is responsible for overseeing the Group’s systems of internal control and risk management. The Board has delegated the

review of risk management to the Audit & Risk Management Committee which is comprised of two Directors. The primary

objective of that Committee is to assist the Board to fulfil its corporate governance and oversight responsibilities relating to

financial accounting practices, risk management, internal control systems, external reporting and the internal and external audit

function.

The executive management team has responsibility for implementing the risk management systems and internal controls within

the Group. The management team is integral in identifying the risks in the Group’s operations and activities. Regular monitoring of

risks, risk management and compliance is conducted by the Audit & Risk Management Committee and by management.

PRINCIPLE 8: REMUNERATE FAIRLY AND RESPONSIBLY

"Companies should ensure that the level and composition of remuneration is sufficient and reasonable and that its relationship to

performance is clear."

Remuneration

Details of the Company’s remuneration policies and practices for Non-executive Directors and Executive Directors are contained in

the Remuneration Report and in NOTE 27 to this Annual Report.

OTHER INFORMATION

Additional information with respect to the Company’s corporate governance approach can be found in the following policies and

charters on the Company’s website (www.longreach.com).

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FINANCIAL STATEMENTS

STATEMENT OF COMPREHENSIVE INCOME For the Year Ended 30 June 2011 19

STATEMENT OF FINANCIAL POSITION For the Year Ended 30 June 2011 20

STATEMENT OF CHANGES IN EQUITY For the Year Ended 30 June 2011 21

STATEMENT OF CASH FLOWS For the Year Ended 30 June 2011 22

These financial statements cover both LongReach Group Limited as an individual entity and the Consolidated Entity consisting of

LongReach Group Limited and its controlled entities.

LongReach Group Limited is a company limited by shares, incorporated and domiciled in Australia.

A description of the nature of the Consolidated Entity’s operations and its principal activities is included in the Directors’ Report on

pages 4-12. The Directors’ Report is not part of the Financial Statements.

For queries in relation to our reporting please call (03) 9926 1155 or e-mail [email protected]

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STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2011

Consolidated Entity Notes 2011

$

2010

$

CONTINUING OPERATIONS

Revenue NOTE 4(a) 10,711,000 12,246,084

Other income NOTE 4(a) 1,291 30,321

Changes in inventories of finished goods (3,037,070) (2,692,656)

Employee benefits expense NOTE 4(f) (5,122,705) (5,520,656)

Remuneration Employee Share Plan NOTE 28 - (32,383)

Legal and professional fees (86,690) (144,350)

Occupancy costs (418,650) (400,774)

Communication costs (102,711) (76,241)

Insurance expense (117,893) (117,159)

Travelling expense (53,472) (24,211)

Depreciation of property, plant and equipment NOTE 4(c) (220,611) (181,612)

Amortisation of intangible assets NOTE 4(d) (923,728) (824,166)

Impairment and scrapping of fixed assets NOTE 4(c) - -

Impairment of investment in subsidiary - -

Impairment of intangible assets NOTE 14 - (698,038)

Finance costs expense NOTE 4(b) (6,538) (63,568)

Other expenses (929,913) (227,320)

Profit/(loss) before income tax (307,690) 1,273,271

Income tax (expense) / benefit NOTE 5 30,543 (638,228)

Profit/(loss) after income tax from continuing operations (277,147) 635,043

DISCONTINUED OPERATIONS

Profit/(Loss) from discontinued operations before tax NOTE 6 1,958 -

Income tax (expense)/benefit on discontinued operations NOTE 5 (5,411) -

Profit/(Loss) after tax from discontinued operations (3,453) -

Net profit/(loss) for the period NOTE 25 (280,600) 635,043

Net profit/(loss) attributable to members of the parent

entity

(280,600) 635,043

OTHER COMPREHENSIVE INCOME

Reserves - Employee Share Plan NOTE 28 - 32,383

Foreign currency translation NOTE 24 (51,523) (106,052)

Other Comprehensive Income for the period (51,523) (73,669)

Total Comprehensive Income for the period (332,123) 561,374

EARNINGS / (LOSSES) PER SHARE FOR MEMBERS OF

PARENT ENTITY – CENTS

From continued and discontinued operations

- basic for profit/(loss) NOTE 7 (1.06c) 2.42c

- basic for profit/(loss) from continuing operations NOTE 7 (1.04c) 2.42c

- diluted for profit/(loss) NOTE 7 (1.06c) 2.42c

- diluted for profit/(loss) from continuing operations NOTE 7 (1.04c) 2.42c

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 JUNE 2011

Consolidated Entity Notes

2011

$

2010

$

01 July 2009*

$

CURRENT ASSETS

Cash and cash equivalents NOTE 9 2,345,122 5,220,544 3,736,037

Trade and other receivables NOTE 10 3,078,411 2,085,793 2,525,688

Inventories NOTE 11 2,573,580 3,283,774 4,222,549

Other NOTE 12 71,983 22,492 15,797

Total current assets 8,069,096 10,612,603 10,500,071

NON-CURRENT ASSETS

Other financial assets NOTE 36 - - -

Property, plant and equipment NOTE 13 265,907 359,132 358,194

Goodwill and other intangible assets NOTE 14 6,370,425 5,649,673 4,960,461

Deferred tax assets NOTE 16 359,043 420,448 460,358

Total non-current assets 6,995,375 6,429,253 5,779,013

Total assets 15,064,471 17,041,856 16,279,084

CURRENT LIABILITIES

Trade and other payables NOTE 17 1,366,816 1,908,421 1,962,101

Interest-bearing loans and borrowings NOTE 18 - - -

Income tax payable NOTE 19 - 306,229 577,089

Employee provisions NOTE 20 126,951 102,822 129,561

Provisions NOTE 20 184,799 201,746 245,287

Deferred revenue NOTE 22 823,579 982,979 576,157

Total current liabilities 2,502,145 3,502,197 3,490,195

NON-CURRENT LIABILITIES

Deferred tax liabilities NOTE 21 1,911,128 1,694,905 1,472,905

Employee provisions NOTE 20 197,057 168,858 152,278

Total non-current liabilities 2,108,185 1,863,763 1,625,183

Total liabilities 4,610,330 5,365,960 5,115,377

Net assets 10,454,141 11,675,896 11,163,707

EQUITY

Contributed equity NOTE 23 7,078,963 34,724,847 34,774,032

Reserves NOTE 24 649,108 700,631 774,300

Accumulated(losses)/Profit NOTE 25 2,726,070 (23,749,582) (24,384,625)

Total equity 10,454,141 11,675,896 11,163,707

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

* See NOTE 38 for details regarding prior period correction. For

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STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

Consolidated Entity 2011 Notes Issued

Capital

(Accumulated

Losses)

Other Reserves Reserves -

Employee Share

Plan

Total

At 1 July 2009 34,774,032 (24,384,625) 774,300 - 11,163,707

Restatement of Equity for the year 2010 * NOTE 38 - 206,680 - (206,680) -

Adjustment for correction of 2010 and prior years

Income Taxes *

NOTE 38 - 9,715 - - 9,715

Adjusted Equity as at 1 July 2009 34,774,032 (24,168,230) 774,300 (206,680) 11,173,422

Profit / (loss) for the period - 418,648 - - 418,648

Other Comprehensive Income - - (106,052) 239,063 133,011

Shares issued NOTE 23 - - - - -

Share cancelled during the year NOTE 23 (49,185) - - - (49,185)

At 30 June 2010 34,724,847 (23,749,582) 668,248 32,383 11,675,896

Profit / (loss) for the period - (280,600) - - (280,600)

Previous years losses write off (29,674,159) 29,674,159 - - -

Other Comprehensive Income - - (51,523) - (51,523)

Dividend paid NOTE 25 - (2,917,907) - - (2,917,907)

Shares issued NOTE 23 2,088,710 - - - 2,088,710

Share cancelled during the year NOTE 23 (60,435) - - - (60,435)

At 30 June 2011 7,078,963 2,726,070 616,725 32,383 10,454,141

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STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2011

Consolidated Entity Notes 2011

$

2010

$

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers 10,750,460 15,168,201

Payments to suppliers and employees (10,913,137) (10,543,162)

Income taxes paid (159,737) (647,178)

Interest received 166,551 119,417

Interest and other costs of finance paid (6,538) (63,568)

Foreign exchange translation gain/( loss) NOTE 24 (51,523) (106,052)

Net cash flows from / (used in) operating activities NOTE 35(a) (213,924) 3,927,658

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of property, plant and equipment NOTE 13 (127,385) (182,549)

Acquisition of subsidiaries - -

Proceeds from disposal of subsidiary NOTE 6 - -

Capitalised development costs (1,644,480) (2,211,417)

Net cash flows from / (used in) investing activities (1,771,865) (2,393,966)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issues of shares - -

Shares bought back during the year (60,435) (49,185)

Proceeds from borrowings - -

Repayment of borrowings - -

Dividend payments (829,198) -

Net cash flows from / (used in) financing activities (889,633) (49,185)

Net increase / (decrease) in cash and cash equivalents (2,875,422) 1,484,507

Cash and cash equivalents at beginning of period 5,220,544 3,736,037

Cash and cash equivalents at the end of the period NOTE 35(b) 2,345,122 5,220,544

This Statement of Cash Flows should be read in conjunction with the accompanying notes.

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NOTES TO THE FINANCIAL STATEMENTS

Contents Page

NOTE 1. Corporate information 24

NOTE 2. Statement of significant accounting policies 24

NOTE 3. Financial risk management objectives and policies 37

NOTE 4. Revenues and expenses 41

NOTE 5. Income tax 43

NOTE 6. Discontinued operations 46

NOTE 7. Earnings per share 46

NOTE 8. Dividends 47

NOTE 9. Cash and cash equivalents 47

NOTE 10. Trade and other receivables 48

NOTE 11. Inventories 48

NOTE 12. Other (current) 48

NOTE 13. Property, plant and equipment 49

NOTE 14. Intangible assets 50

NOTE 15. Impairment testing of goodwill and other identifiable intangibles 51

NOTE 16. Deferred tax asset 51

NOTE 17. Trade and other payables 51

NOTE 18. Interest bearing loans and borrowings 51

NOTE 19. Income tax payable 51

NOTE 20. Provisions 52

NOTE 21. Deferred tax liabilities 52

NOTE 22. Other liabilities 52

NOTE 23. Contributed equity 53

NOTE 24. Reserves 54

NOTE 25. Accumulated (losses)/profit 54

NOTE 26. Financial instruments 55

NOTE 27. Key Management Personnel 57

NOTE 28. Share-based payment plans 59

NOTE 29. Remuneration of auditors 61

NOTE 30. Contingent liabilities 61

NOTE 31. Commitments for expenditure 61

NOTE 32. Related parties 62

NOTE 33. Investments in controlled entities 63

NOTE 34. Events occurring after reporting date 63

NOTE 35. Reconciliation of profit/(loss) from ordinary activities after income

tax to net cash inflow from operating activities 64

NOTE 36. Parent entity disclosures 65

NOTE 37. Segment reporting 67

NOTE 38. Retrospective adjustments and restatement of errors 69

NOTE 39. Company details 69

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NOTE 1. CORPORATE INFORMATION

The financial statements of LongReach Group Limited (the Company) for the year ended 30 June 2011 was authorised for issue in

accordance with a resolution of the directors on 30 September 2011.

LongReach Group Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the

Australian Stock Exchange.

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

NOTE 2. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES

(A) BASIS OF PREPARATION

The financial statements are general purpose financial statements, which have been prepared in accordance with Australian

Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting

Standards Board (AASB) and the Corporations Act 2001.

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial statements

containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting

Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material

accounting policies adopted in the preparation of these financial statements are presented below and have been consistently

applied unless otherwise stated.

The financial statements have been prepared on an accruals basis and are based on historical costs, except for assets and liabilities

within a disposal group or those held for sales which are carried at fair value.

The financial report has been prepared on a going concern basis.

The financial statements are presented in Australian dollars.

(B) STATEMENT OF COMPLIANCE

The financial statements comply with Australian Accounting Standards as issued by the Australian Accounting Standards Board and

International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

The financial statements comprise the consolidated Financial Statements of the Group.

(C) ADOPTION OF NEW AND REVISED ACCOUNTING STANDARDS

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2011 reporting

period.

Standard Impact

AASB 2009:Financial instruments

(December 2010)

This standard is applicable for annual reporting periods commencing on or after 1 January 2013. This standard is

applicable retrospectively and includes revised requirement for the classification and measurement of financial

instruments. No changes are expected to materially affect the Group.

AASB 124: Related Party

Disclosures

This standard is applicable for annual reporting periods commencing on or after 1 January 2011. This standard

removes the requirement for government-related entities to disclose details of all transactions with the

government and other government-related entities and clarifies the definition of a "related party" to remove

the inconsistencies and simplify the structure for the standard. No changes are expected to materially affect the

Group.

AASB 2010-6:Amendments to

Australian Accounting Standards -

Disclosure on Transfers of Financial

Assets (AASB 1 and AASB 7)

This standard is applicable for reporting periods commencing on or after 1 January 2011. This standard adds and

amends disclosure requirements about transfers of financial assets, especially those in respect of the nature of

the financial assets involved and the risks associated with them. Accordingly, this Standard makes amendments

to AASB 1: First-time Adoption of Australian Accounting Standards, and AASB 7: Financial Instruments:

Disclosures, establishing additional disclosure requirements in relation to transfers of financial assets.

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NOTE 2 (CONTINUED)


Standard Impact

AASB 2009–12: Amendments to

Australian Accounting Standards

[AASBs 5, 8, 108, 110, 112, 119,

133, 137, 139, 1023 & 1031 and

Interpretations 2, 4, 16, 1039 &

1052] (applicable for annual

reporting periods commencing on

or after 1 January 2011).

This Standard makes a number of editorial amendments to a range of Australian Accounting Standards and

Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. The Standard

also amends AASB 8 to require entities to exercise judgment in assessing whether a government and entities

known to be under the control of that government are considered a single customer for the purposes of certain

operating segment disclosures. The amendments are not expected to impact the Group.

AASB 1053: Application of Tiers of


and AASB 2010–2: Amendments to


arising from Reduced Disclosure

Requirements [AASB 1, 2, 3, 5, 7, 8,

101, 102, 107, 108, 110, 111, 112,

116, 117, 119, 121, 123, 124, 127,

128, 131, 133, 134, 136, 137, 138,

140, 141, 1050 & 1052 and

Interpretations 2, 4, 5, 15, 17, 127,

129 & 1052] (applicable for annual

reporting periods commencing on

or after 1 July 2013).

AASB 1053 establishes a revised differential financial reporting framework consisting of two tiers of financial

reporting requirements for those entities preparing general purpose financial statements:

Tier 1: Australian Accounting Standards; and

Tier 2: Australian Accounting Standards – Reduced Disclosure Requirements.

Tier 2 of the framework comprises the recognition, measurement and presentation requirements of Tier 1, but

contains significantly fewer disclosure requirements.

The following entities are required to apply Tier 1 reporting requirements (ie full IFRS):

for private sector entities that have public accountability; and

the Australian Government and state, territory and local governments .

Since the Group is a for-profit private sector entity that has public accountability, it does not qualify for the

reduced disclosure requirements for Tier 2 entities.



arising from AASB 9 (December

2010) [AASB 1, 3, 4, 5, 7, 101, 102,

108, 112, 118, 120, 121, 127, 128,

131, 132, 136, 137, 139, 1023 &

1038 and Interpretations 2, 5, 10,

12, 19 & 127] (applies to periods

beginning on or after 1 January

2013).

This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a

consequence of the issuance of AASB 9: Financial Instruments in December 2010. Accordingly, these

amendments will only apply when the entity adopts AASB 9.

As noted above, the Group has not yet determined any potential impact on financial statements from adopting

AASB 9.


Australian Accounting Standards –

Deferred Tax: Recovery of

Underlying Assets [AASB 112]

(applies to periods beginning on or

after 1 January 2012).

This Standard makes amendments to AASB 112: Income Taxes

The amendments brought in by this Standard introduce a more practical approach for measuring deferred tax

liabilities and deferred tax assets when investment property is measured using the fair value model under

AASB 140: Investment Property.

Under the current AASB 112, the measurement of deferred tax liabilities and deferred tax assets depends on

whether an entity expects to recover an asset by using it or by selling it. The amendments introduce a

presumption that an investment property is recovered entirely through sale. This presumption is rebutted if the

investment property is held within a business model whose objective is to consume substantially all of the

economic benefits embodied in the investment property over time, rather than through sale. The amendments

brought in by this Standard also incorporate Interpretation 121 into AASB 112. The amendments are not

expected to impact the Group.

(D) STANDARDS AND INTERPRETATIONS ADOPTED WITH NO EFFECT ON THE FINANCIAL STATEMENTS

The following new and revised Standards and Interpretations have also been adopted in these Financial Statements. Their adoption

has not had any significant impact on the amounts reported in these Financial Statements but may affect the accounting for future

transactions or arrangements.

Standard Impact Effective for annual

reporting periods beginning

on or after

AASB 2009-14 Amendments to

Australian Interpretation -

Prepayments of a Minimum

Funding requirement

This amendment applies when an entity is subject to minimum funding

requirements and makes an early payment of contributions to cover those

requirements, permitting the benefit of such an early payment to be recognised as

an asset. This is not expected to impact the Group.

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Standard Impact Effective for annual

reporting periods beginning

on or after

AASB 2010–4: Further

Amendments to Australian

Accounting Standards arising from

the Annual Improvements Project

[AASB 1, AASB 7, AASB 101 & AASB

134 and Interpretation 13]

This Standard details numerous non-urgent but necessary changes to Accounting

Standards arising from the IASB’s annual improvements project. Key changes

include:

clarifying the application of AASB 108 prior to an entity’s first Australian-

Accounting-Standards financial statements;

adding an explicit statement to AASB 7 that qualitative disclosures should be made

in the context of the quantitative disclosures to better enable users to evaluate an

entity’s exposure to risks arising from financial instruments;

amending AASB 101 to the effect that disaggregation of changes in each

component of equity arising from transactions recognised in other comprehensive

income is required to be presented, but is permitted to be presented in the

statement of changes in equity or in the notes;

adding a number of examples to the list of events or transactions that require

disclosure under AASB 134; and

making sundry editorial amendments to various Standards and Interpretations.

This Standard is not expected to impact the Group.

1 January 2011



[AASB 1, 3, 4, 5, 101, 107, 112, 118,

119, 121, 132, 133, 134, 137, 139,

140, 1023 & 1038 and

Interpretations 112, 115, 127, 132

& 1042].

This Standard makes numerous editorial amendments to a range of Australian

Accounting Standards and Interpretations, including amendments to reflect

changes made to the text of IFRSs by the IASB. However, these editorial

amendments have no major impact on the requirements of the respective

amended pronouncements.

1 January 2011


Australian Accounting Standards –

Disclosures on Transfers of

Financial Assets [AASB 1 & AASB 7]

This Standard adds and amends disclosure requirements about transfers of financial

assets, especially those in respect of the nature of the financial assets involved and

the risks associated with them. Accordingly, this Standard makes amendments to

AASB 1: First-time Adoption of Australian Accounting Standards, and AASB 7:

Financial Instruments: Disclosures, establishing additional disclosure requirements

in relation to transfers of financial assets.

This Standard is not expected to impact the group.

1 January 2011

(E) BASIS OF CONSOLIDATION

The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by LongReach Group

Limited at the end of reporting period. A controlled entity is an entity over which LongReach Grop Limited has the ability and right

to govern the financial and operating policies so as to obtain benefits from the entity activities. The financial statements of the

subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profit

and losses resulting from intra-group transactions have been eliminated in full on consolidation.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from

the date on which control is transferred out of the Group.

The acquisition of subsidiaries is accounted for using the purchase method of accounting. The purchase method of accounting

involves allocating the cost of the business combination to the fair value of the assets acquired and the liabilities and contingent

liabilities assumed at the date of acquisition.

(F) SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

(i) Significant accounting judgements

Impairment

The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that

may be indicative of impairment triggers. These include product performance, technology, economic and political environment and

future product expectations. If an impairment trigger exists the recoverable amount of asset is determined.

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Considering the above, management tested the assets for impairment at the end of reporting period. The group assessed the value

in use of assets in accordance with NOTE 2(u), and considered also whether there existed any market indicators of fair value less

costs to sell, to compare with value in use. This was performed by comparison to a determination of the fair value less costs to sell

which was determined by reference to recent contractual exchanges for the sale of identical or similar assets between

knowledgeable parties.

As a result, no impairment has been determined to be required in respect of the intangible assets at the end of reporting period.

(ii) Significant accounting estimates and assumptions

The carrying amount of certain assets and liabilities are often determined based on estimates and assumptions of future events.

Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both

externally and within the Group. Key estimates are:

Employee Leave Benefits

Liability for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settle

within 12 months of the reporting date are recognised in other payable in respect of employee’s service up to the reporting date.

They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave

are recognised when the leave is taken and are measured at the rates paid or payable.

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of

expected future benefits. Expected future payments are discounted using market yields at the reporting date on national

government bonds with terms to maturity and currencies that match.

Share – based payment transactions

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instrument

at the date at which they are granted. The fair value is determined using the binomial model with the assumptions detailed in NOTE

28.

Work in Progress

Work-in-progress is valued at cost, plus profit recognised to date less any provision for anticipated future losses. Cost includes both

variable and fixed costs relating to specific contracts, and those costs that are attributable to contract activity in general and that

can be allocated on a reasonable basis. Profits are recognised at the stage of completion basis and measured using the proportions

of costs incurred to date as compared to expected actual costs. Where losses are anticipated they are provided for in full. Major

contract revenue has been recognised on the basis of the terms of the contract adjustment for any variations or claims allowable

under the contract.

(G) REVENUE RECOGNITION

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be

reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of goods have passed to the buyer and the cost incurred

or to be incurred in respect of the transaction can be measured reliably. Risk and rewards of ownership are considered passed to

the buyer at the time of delivery of the goods to the customer.

(ii) Rendering of services

Revenue from rendering of services is recognised by reference to the stage of the completion of a contract. Stage of completion is

measured by reference to the labour hours and total cost incurred to date as a percentage of total estimated labour hours and total

cost for each contract.

(iii) Integrated goods and services contracts

Revenue from contracts where the goods and rendering of services are integrated as a single design and build product, is

recognised by reference to the stage of the completion of a contract. Stage of completion is measured by reference to the total

contract costs incurred to date as a percentage of total estimated contract cost for each contract.

(iv) Interest income

Revenue is recognised as interest accrues using the effective interest method which is the rate that exactly discounts estimated

future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset.

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(v) Dividends

Revenue is recognised when the Groups’ right to receive the payment is established.

(H) BORROWING COSTS

Borrowing costs are recognised as an expense when incurred, or if related to a qualifying asset, are capitalised.

(I) LEASES

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an

assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement

conveys a right to use the asset.

(i) Group as a lessee

Finance leases which effectively transfer to the Group substantially all the risk and benefits incidental to the ownership of the

leased terms, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of

the minimum lease payments. Lease payments are apportioned between the finance charges and the reduction of the lease liability

so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense

in Statement of Comprehensive Income.

Capitalised leases are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no

reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the Statement of Comprehensive Income on a straight-line basis over

the lease term. Lease incentives are recognised in the Statement of Comprehensive Income as an integral part of the total lease

expense.

(J) CASH AND CASH EQUIVALENTS

Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short-term deposits with

an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an

insignificant risk of changes in value.

For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above,

net of outstanding bank overdrafts. Bank overdrafts are included within interest-bearing loans and borrowings in current liabilities

on the Statement of Financial Position.

(K) TRADE AND OTHER RECEIVABLES

Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value and subsequently measured at

amortised cost using the effective interest method, less an allowance for any uncollectible amounts.

An allowance for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts. Bad

debts are written off when identified.

(L) INVENTORIES AND WORK IN PROGRESS

Inventories including raw materials, work in progress and finished goods are valued at the lower of cost and net realisable value.

Costs are assigned to individual items of stock on a weighted average cost basis.

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

! Raw materials and finished goods are carried at cost.

! Work-in-progress is valued at cost, plus profit recognised to date less any provision for anticipated future losses. Cost includes

both variable and fixed costs relating to specific contracts, and those costs that are attributable to contract activity in general

and that can be allocated on a reasonable basis. Profits are recognised at the stage of completion basis and measured using the

proportions of costs incurred to date as compared to expected actual costs. Where losses are anticipated they are provided for

in full. Major contract revenue has been recognised on the basis of the terms of the contract adjustment for any variations or

claims allowable under the contract.

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

estimated costs necessary to make the sale.

(M) FOREIGN CURRENCY TRANSLATION

Items included in the financial statements of each of the consolidated entities are measured using the currency of the primary

economic environment in which the entity operates ('the functional currency'). The consolidated financial statements are

presented in Australian dollars, which is LongReach Group's functional and presentation currency.

Each entity in the consolidation entity determines its own functional currency and items included in the financial statements each

entity are measured using the functional currency.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at dates of the

transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year

end exchange rates of monetary assets liabilities denominated in foreign currencies are recognised in profit or loss.

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

the date of the initial transaction.

Resulting exchange differences, including those when payment is made, are recognised in the net profit or loss for the year.

The functional currency of the overseas subsidiary C4i Inc is US dollars.

(N) DERECOGNITION OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

(i) Financial assets

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

! the rights to receive cash flows from the asset have expired;

! the Group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without

material delay to a third party under a ‘pass-through’ arrangement; or

! The Group has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks

and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has

transferred control of the asset.

(ii) Financial liabilities

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

When the Group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially

all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s

continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is

measured at the lower of the original carrying amount of the asset and the maximum amount of consideration received that the

Group could be required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash-settled option or similar

provision) on the transferred asset, the extent of the Group’s continuing involvement is the amount of the transferred asset that

the Group may repurchase, except that in the case of a written put option (including a cash-settled option or similar provision) on

an asset measured at fair value, the extent of the Group’s continuing involvement is limited to the lower of the fair value of the

transferred asset and the option exercise price.

When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an

existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability

and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.

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(O) IMPAIRMENT OF FINANCIAL ASSETS

The Group assesses at each Statement of Financial Position date whether a financial asset or group of financial assets is impaired.

(i) Financial assets carried at amortised cost

If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the

amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future

cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest

rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or

through use of an allowance account. The amount of the loss is recognised in profit or loss.

The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually

significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no

objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included

in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for

impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised

are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event

occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of

an impairment loss is recognised in profit or loss, to the extent that the carrying value of the asset does not exceed its amortised

cost at the reversal date.

(ii) Financial assets carried at cost

If there is objective evidence that an impairment loss has been incurred on an unquoted equity instrument that is not carried at fair

value (because its fair value cannot be reliably measured), or on a derivative asset that is linked to and must be settled by delivery

of such an unquoted equity instrument, the amount of the loss is measured as the difference between the asset’s carrying amount

and the present value of estimated future cash flows, discounted at the current market rate of return for a similar financial asset.

(iii) Available-for-sale investments

If there is objective evidence that an available-for-sale investment is impaired, an amount comprising the difference between its

cost (net of any principal repayment and amortisation) and its current fair value, less any impairment loss previously recognised in

profit or loss, is transferred from equity to the Statement of Comprehensive Income. Reversals of impairment losses for equity

instruments classified as available-for-sale are not recognised in profit. Reversals of impairment losses for debt instruments are

reversed through profit or loss if the increase in an instrument’s fair value can be objectively related to an event occurring after the

impairment loss was recognised in profit or loss.

(P) INCOME TAX

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or

paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the

amount are those that are enacted or substantively enacted by the Statement of Financial Position date.

Deferred income tax is provided on all temporary differences at the Statement of Financial Position date between the tax bases of

assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

! when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction

that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable

profit or loss; or

! when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures,

and the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference

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Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused

tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences

and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

! when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an

asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the

accounting profit nor taxable profit or loss; or

! when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint

ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference

will reverse in the foreseeable future and taxable profit will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each Statement of Financial Position date and reduced to the

extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset

to be utilised.

Unrecognised deferred income tax assets are reassessed at each Statement of Financial Position date and are recognised to the

extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is

realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the

Statement of Financial Position date.

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

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against

current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority.

(Q) GOODS AND SERVICES TAX (GST)

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

! when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the

GST is recognised as part of the cost of acquisition of the asset or as part of the expense items as applicable; and

! receivables and payables, which are stated with the amount of GST included.

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

Statement of Financial Position.

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing

and financing activities, which is recoverable from, or payable to, the taxation authority, are classified as operating cash flows.

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

(R) PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses.

Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred.

Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a

replacement only if it is eligible for capitalisation.

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

! Property – 1-5 years

! Plant and equipment – 3-4 years

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

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(i) Impairment

The carrying values of plant and equipment are reviewed for impairment at each reporting date, with recoverable amount being

estimated when events or changes in circumstances indicate that the carrying value may be impaired.

The recoverable amount of plant and equipment is the higher of fair value less costs to sell and value in use. In assessing value in

use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market

assessments of the time value of money and the risks specific to the asset.

For an asset that does not generate largely independent cash inflows, recoverable amount is determined for the cash-generating

unit to which the asset belongs, unless the asset’s value in use can be estimated to be close to its fair value.

An impairment exists when the carrying value of an asset or cash-generating unit exceeds its estimated recoverable amount. The

asset or cash-generating unit is then written down to its recoverable amount.

For property, plant and equipment, impairment losses are recognised in the Statement of Comprehensive Income.

(ii) Derecognition and disposal

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

from its use or disposal.

Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the

carrying amount of the asset) is included in profit or loss in the year the asset is derecognised.

(S) INVESTMENTS AND OTHER FINANCIAL ASSETS

Financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement are classified as either financial

assets at fair value through profit or loss, loans and receivables, or available for sale investments, as appropriate. When financial

assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair value through profit or

loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition

and, when allowed and appropriate, re-evaluates this designation at each financial year-end.

All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to

purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under contracts that require delivery

of the assets within the period established generally by regulation or convention in the market place.

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

Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit or loss'.

Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term with the intention of

making a profit. Derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Gains or losses on investments held for trading are recognised in profit or loss.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active

market. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit or

loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

(iii) Available for sale investments

After initial recognition available for sale investments are measured at fair value with gains or losses being recognised as a separate

component of equity until the investment is derecognised or until the investment is determined to be impaired, at which time the

cumulative gain or loss previously reported in equity is recognised as profit or loss.

The fair value of investments that are actively traded in organised financial markets is determined by reference to quoted market

bid prices at the close of business on the Statement of Financial Position date. For investments with no active market, fair value is

determined using valuation techniques. Such techniques include using recent arm’s length market transactions; reference to the

current market value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. For

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(T) GOODWILL

Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination

over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is carried at cost less any accumulated impairment losses.

Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying

value may be impaired.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each

of the Group’s cash-generating units, or groups or cash-generating units, that are expected to benefit from the synergies of the

combination, irrespective of whether other assets or liabilities of the Group are assigned to those units or groups of units.

Each unit or group of units to which goodwill is so allocated:

! represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

! is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in

accordance with AASB 8 Operating Segments.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to

which the goodwill relates. When the recoverable amount of the cash-generating unit (group of cash-generating units) is less than

the carrying amount, an impairment loss is recognised. When goodwill forms part of a cash-generating unit (group of cash-

generating units) and an operation within that unit is disposed of, the goodwill associated with the operation disposed of is

included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill

disposed of in this manner is measured based on the relative values of the operation disposed of and the portion of the cash-

generating unit retained.

Impairment losses recognised for goodwill are not subsequently reversed.

(U) INTANGIBLE ASSETS

Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset

acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are

carried at cost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets,

excluding capitalised development costs, are not capitalised and expenditure is charged against profits in the year in which the

expenditure is incurred.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised

over the useful life and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The

amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least at each

financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits

embodied in the asset are accounted for by changing the amortisation period or method, as appropriate, which is a change in

accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense

category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit

level. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting

period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life

assessment from indefinite to finite is accounted for as a change in an accounting estimate and is thus accounted for on a

prospective basis.

(i) Research and development costs

Research costs are expensed as incurred. An intangible asset arising from development expenditure on an internal project is

recognised only when the Group can demonstrate the technical feasibility of completing the intangible asset so that it will be

available for use or sale, its intention to complete and its ability to use or sell the asset, how the asset will generate future

economic benefits, the availability of resources to complete the development and the ability to measure reliably the expenditure

attributable to the intangible asset during its development. Following the initial recognition of the development expenditure, the

cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment

losses. Any expenditure so capitalised is amortised over the period of expected benefits from the related project.

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(V) IMPAIRMENT OF ASSETS

At the end of each reporting period, the group assesses whether there is any indication that an asset may be impaired. The

assessment will include the consideration of external and internal sources of information including the dividend received from

subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profit. If such an indication exists an

impairment test is carried out on the asset by comparing the recoverable amount of the asset, being higher of the asset’s fair value

less costs to sell and value in use, to asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable

amount is recognised immediately in profit or loss unless the asset is carried at a revalued amount in accordance with another

standard (e.g. in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a

revaluation decrease in accordance with that other Standard.

Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of

the cash-generating unit to which the asset belongs.

(W) INTEREST-BEARING LOANS AND BORROWINGS

All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction

costs.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective

interest method.

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

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at

least 12 months after the Statement of Financial Position date.

(X) PROVISIONS

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable

that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be

made of the amount of the obligation.

When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement

is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is

presented in the Statement of Comprehensive Income net of any reimbursement.

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

specific to the liability.

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

(Y) PROVISION FOR WARRANTIES

Provision is made in respect of the consolidated group’s estimated liability on all products and services under warranty at balance

date. The provision is measured as the present value of future cash flows estimated to be required to settle the warranty

obligation. Management estimates the related provision for future warranty claims based on historical warranty claim information,

as well as recent trends that might suggest that past cost information may differ from future claims. For comparative of warranty

provisions please refer to NOTE 20(ii)

(Z) EMPLOYEE LEAVE BENEFITS

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

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled

within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date.

They are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave

are recognised when the leave is taken and are measured at the rates paid or payable.

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NOTE 2 (CONTINUED)


(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of

expected future payments to be made in respect of services provided by employees up to the reporting date using the projected

unit credit method. Consideration is given to expect future wage and salary levels, experience of employee departures, and

periods of service. Expected future payments are discounted using market yields at the reporting date on national government

bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

(AA) SHARE BASED PAYMENT TRANSACTIONS

The Group provides benefits to employees (including key management personnel) of the Group in the form of share-based

payment transactions, whereby employees render services in exchange for shares or rights over shares (‘equity-settled

transactions’).

In addition to share options granted under the share option scheme, share options and other security related discretionary

incentives may be offered to directors, key management personnel - executives and third parties, subject to any necessary

shareholder, ASX and other statutory or regulatory requirements.

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which they

are granted. The fair value is determined by using a binomial model.

In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price

of the shares of LongReach Group Limited (‘market conditions’).

The cost of equity–settled transactions is recognised, together with a corresponding increase in equity, over the period in which the

performance conditions are fulfilled ending on the date on which the relevant employees become fully-entitled to the award

(‘vesting date’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects

7) the extent to which the vesting period has expired; and

8) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based

on the best available information at balance date. No adjustment is made for the likelihood of market performance

conditions being met as the affect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market

condition.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet

recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and

designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a

modification of the original award.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(BB) DERIVATIVE FINANCIAL INSTRUMENTS

Subsidiaries of the Consolidated Entity use derivative financial instruments to hedge exposure to foreign exchange rate risks arising

from operational activities. In accordance with its treasury policy, the Consolidated Entity does not hold or issue derivative

financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as

trading instruments. There are no derivatives at balance date.

The fair value of foreign exchange forward contracts is the estimated amount that the subsidiary would receive or pay to terminate

the forward contract at the Statement of Financial Position date, taking into account current foreign exchange rates and the

current creditworthiness of the forward exchange counterparties. The fair value of forward exchange contracts is their quoted

market price at the Statement of Financial Position date, being the present value of the quoted forward price.

(CC) CONTRIBUTED EQUITY

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in

equity as a deduction, net of tax, from the proceeds.

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(DD) EARNINGS PER SHARE

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing

equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares,

adjusted for any bonus element.

Diluted earnings per share are calculated as net profit attributable to members of the parent, adjusted for:

! costs of servicing equity (other than dividends) and preference share dividends;

! the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as

expenses; and

! other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential

ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for

any bonus element.

(EE) BUSINESS COMBINATIONS

Business combinations occur where an acquirer obtains control over one or more businesses.

The purchase method of accounting is used to account for all business combinations regardless of whether equity instruments or

other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at

the date of exchange plus costs directly attributable to the combination. Where equity instruments are issued in a business

combination, the fair value of the instruments is their published market price as at the date of exchange unless, in rare

circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator or fair value and

that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of

equity instruments are recognised directly in equity.

Except for non-current assets or disposal groups classified as held for sale (which are measured at fair value less costs to sell), all

identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at

their fair values at the acquisition date, irrespective of the extent of any minority interests. The excess of the cost of the business

combination over the net fair value of the Group’s share of the identifiable net assets acquired is recognised as goodwill. If the cost

of acquisition is less than the Group’s share of the net fair value of the identifiable net assets of the subsidiary, the difference is

recognised as a gain in the Statement of Comprehensive Income, but only after reassessment of the identification and

measurement of the net assets acquired.

Where settlement of any part of the consideration is deferred, the amounts payable in the future are discounted to their present

value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a

similar borrowing could be obtained from an independent financier under comparable terms and conditions.

(FF) COMPARATIVE FIGURES

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

current financial year.

Where the Group has retrospectively applied in accounting policy, made a retrospective restatement of items in the financial

statements, an additional statement of financial position as at the beginning of the earliest comparative period will be disclosed.

(GG) DISPOSAL GROUP HELD FOR SALE AND DISCONTINUED OPERATIONS

Non-current assets and disposal groups are classified as held for sale and measured at the lower of their carrying amount and fair

value less costs to sell if their carrying amount will be recovered principally through a sale transaction. They are not depreciated or

amortised. For an asset or disposal group to be classified as held for sale, it must be available for immediate sale in its present

condition and its sale must be highly probable or in the event that it is held as a disposal group, the decision to dispose of or close

down the business must have been taken.

An impairment loss is recognised for any initial or subsequent write-down of the asset (or disposal group) to fair value less costs to

sell. A gain is recognised for any subsequent increases in fair value less costs to sell of an asset (or disposal group), but not in

excess of any cumulative impairment loss previously recognised. A gain or loss not previously recognised by the date of the sale of

the non-current asset (or disposal group) is recognised at the date of derecognition.

A discontinued operation is a component of the entity that has been disposed of or is classified as held for sale and that represents

a separate major line of business or geographical area of operations, is part of a single coordinated plan to dispose of such a line of

business or area of operations, or is a subsidiary acquired exclusively with a view to resale. The results of discontinued operations

are presented separately on the face of the Statement of Comprehensive Income.

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NOTE 3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial instruments comprise receivables, payables, cash and short-term deposits.

The Group enters into derivative transactions, principally forward currency contracts, with the purpose of managing currency risk

arising from the Group’s foreign currency denominates sales. Forward currency contracts are only entered into when the timing of

the receivable can be predicted with reasonable certainty.

The main risks arising from the Group’s financial instruments are foreign currency risk, credit risk and liquidity risk. The Group uses

different methods to measure and manage different types of risks to which it’s exposed. These include monitoring levels of

exposure to foreign exchange risk and assessments of market forecasts for foreign exchange. Ageing analyses and monitoring of

specific credit allowances and the establishment of letters of credit are undertaken to manage credit risk and liquidity risk is

monitored through the development of future rolling cash flow forecasts.

(i) Risk Exposures and Responses

Interest rate risk

The Group has limited exposure to market interest rates as it doesn't have any long-term debt obligations.

At balance date, the Group had the following mix of financial assets and liabilities exposed to Australian Variable interest rate risk

that are not designated in cash flow hedges:

Consolidated Entity 2011

$

2010

$

FINANCIAL ASSETS

Cash and cash equivalents (NOTE 9) 2,345,122 5,220,544

Financial assets included in assets of disposal group - -

2,345,122 5,220,544

FINANCIAL LIABILITIES

Financial liabilities included in liabilities of disposal group - -

- -

Net exposure 2,345,122 5,220,544

At 30 June 2011, if interest rates had moved, with all other variables held constant, post tax profit would have been affected as

follows:

! + 1% (100 basis points) increase in interest rate: Consolidated profit after tax would increase by $11,200per annum (2010:

$50,900) and

! - .5% (50 basis points) decrease in interest rate: Consolidated profit after tax would decrease by $5,600 per annum (2010:

$25,450).

Foreign currency risk

As a result of C4i Inc, the sales and marketing office in the United States of America for C4i Pty Ltd’s products, and due to a

significant proportion of C4i Pty Ltd’s sales occurring to international customers, the Group’s Statement of Financial Position can be

affected by movements in US$ / A$ exchange rates.

The Group also has transactional currency exposures. Such exposures arise from sales, purchases or operating expenses by an

operating entity in currencies other than the functional currency.

Approximately 31% of the Group’s sales are denominated in currencies other than the functional currency of the operating entity

making the sale, whilst almost 95% of costs are denominated in the Group's functional currency.

Where there is a high level of certainty with respect to the commitment and timing of foreign currency transactions, the Group

requires its operating entity to use forward currency contracts to eliminate the currency exposures.

It is the Group’s policy not to enter into forward contracts until a firm commitment is in place and until the transactional payment

terms are assured with a high degree of confidence.

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NOTE 3 (CONTINUED)


At 30 June 2011, the Group had the following exposures to US$ foreign currency that is not designated in cash flow hedges:


$

2010

$

FINANCIAL ASSETS

Cash and cash equivalents 1,074,021 124,454

Trade and other receivables 974,917 467,168

Inventories 100,525 114,981

2,149,463 706,603


Trade and other payables (107,983) (223,243)

Interest bearing loans and borrowings - -

(107,983) (223,243)

Net exposure 2,041,480 483,360

At 30 June 2011, the Group had hedged nil % of its foreign currency purchases and nil % of its foreign currency sales as there was

not a high level of certainty with respect to the commitment and timing of these foreign currency transactions.

The following sensitivity is based on the foreign currency risk exposures in existence at the Statement of Financial Position date. At

30 June 2011, had the Australian Dollar moved, as illustrated in the table below, with other variables held constant, post tax profit

and equity would have been affected as follows:

Judgements of reasonably possible movements Post Tax Profit

Higher / (Lower)

Equity

Higher / (Lower)

Consolidated 2011

$

2010

$

2011

$

2010

$

AUD/USD +10% (186,244) (43,942) (186,244) (43,942)

AUD/USD -5% 102,535 19,388 102,535 19,388

Management believe the balance date risk exposures are representative of the risk exposure inherent in the financial instruments.

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NOTE 3 (CONTINUED)


Credit risk

Credit risk arises from the financial assets of the Group, which comprises cash and cash equivalents, trade and other receivables

and other financial assets. The Group’s exposure to credit risk arises from potential default of the counter party, with a maximum

exposure equal to the carrying amount of these instruments. Exposure at balance date is addressed in each applicable note.

The Group does not hold any credit derivatives to offset its credit exposure.

The Group trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it the Group’s

policy to securitise its trade and other receivables.

It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures, including

an assessment of their financial position, past experience and industry reputation.

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

significant.

There are no significant concentrations of credit risk within the Group and financial instruments are spread amongst a number of

financial institutions to minimise the risk of default of counter parties.

At 30 June, the ageing of trade receivables is as follows:

Consolidated Total 0-30 days 31-60 days 61-90 days +91 days Impaired

receivables

2011 2,922,144 2,713,681 144,194 - 64,269 -

2010 2,102,117 1,558,985 204,666 - 322,142 16,324

Receivables past due are not considered impaired are: Consolidated $64,269 (2010: $322,142). The operating entities have been in

direct contact with the relevant debtor as is satisfied that payment will be received in full.

Receivable past due considered impaired are: Consolidated $Nil.

Other balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these

other balances will be received when due.

Liquidity risk

The Group’s current objective is to have sufficient funding available to meet its financial commitments without requiring the use of

bank overdraft or credit line facilities.

The table below reflects all contractually fixed pay-offs and receivables for settlement, repayments and interest resulting from

recognised financial assets and liabilities. Cash flows for financial assets and liabilities without fixed amount or timing are based on

the conditions existing at 30 June 2011.

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

Consolidated 2011

$

2010

$

6 months or less (1,366,816) (2,214,630)

6 -12 months - -

1 – 5 years - -

Over 5 years - -

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NOTE 3 (CONTINUED)


Maturity analysis of financial assets and liability based on management’s expectation.

The risk implied from the values shown in the table below, reflects a balanced view of cash inflows and outflows.

Consolidated Entity 2011 < 6 months

$

6 -12 months

$

1 – 5 years

$

> 5 years

$

Total

$

FINANCIAL ASSETS

Cash and cash equivalents 2,345,122 - - - 2,345,122

Trade and other receivables 3,078,411 - - - 3,078,411

Other financial assets 71,983 - - - 71,983

5,495,516 - - - 5,495,516


Trade and other payables 1,366,816 - - - 1,366,816

Income tax payable - - - - -

Interest bearing loans and borrowings - - - - -

1,366,816 - - - 1,366,816

Net maturity 4,128,700 - - - 4,128,700

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NOTE 4. REVENUES AND EXPENSES


$

2010

$

REVENUE AND EXPENSES FROM CONTINUING OPERATIONS

(A) REVENUE

Sale of goods and rendering of services 10,641,780 12,075,161

Finance revenue 166,551 119,417

Net realised foreign exchange gain/loss (22,848) 67,271

Net unrealised foreign exchange gain (74,483) (15,765)

10,711,000 12,246,084

Other income 1,291 30,321

Other income – net gain on buyback of convertible notes - -

1,291 30,321

(B) FINANCE COSTS

Interest expense and overdrafts 6,538 63,568

Convertible notes - -

Total finance costs 6,538 63,568

(C) DEPRECIATION, AMORTISATION, IMPAIRMENT AND

SCRAPPING OF PROPERTY, PLANT AND EQUIPMENT

INCLUDED IN THE STATEMENT OF COMPREHENSIVE

INCOME

Depreciation 220,611 181,612

Impairment - -

220,611 181,612

(D) AMORTISATION AND IMPAIRMENT OF INTANGIBLE

Amortisation 923,728 824,166

Impairment - 698,038

923,728 1,522,204

(E) OPERATING LEASE PAYMENTS INCLUDED IN

STATEMENT OF COMPREHENSIVE INCOME

Minimum lease payments – operating lease 261,788 258,492

(F) EMPLOYEE BENEFITS EXPENSE

Wages, salaries and fees 4,511,451 4,970,930

Defined contribution superannuation expense 323,722 305,734

Long service and annual leave provision 269,428 236,515

Other employee provisions 18,104 7,477

5,122,705 5,520,656

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NOTE 4 (CONTINUED)



$

2010

$

REVENUE AND EXPENSES FROM DISCONTINUING OPERATIONS

(G) REVENUE

Sale of goods and rendering of services - -

Gain on sale of subsidiary - -

Profit on derecognition of discontinued operation - -

Finance income 1,116 -

Other revenue 3,478 -

Total revenue from discontinuing operations (NOTE 6) 4,594 -

(H) EXPENSES

Changes in inventories of finished goods - -

Employee benefits expense - -

Occupancy costs - -

Insurance expense - -

Travelling expense - -

Communication expenses - -

Consultants - -

Depreciation and amortisation - -

Impairment of property, plant and equipment - -

Finance costs - -

Other expenses 2,635 -

Total expenses from discontinuing operations (NOTE 6) 2,635 -

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NOTE 5. INCOME TAX


$

2010

$

The major components of income tax expense are:


Current income tax

Current income tax charge - (376,318)

Current income tax charge discontinued operations (514) -

Adjustments in respect of current income tax of previous

years

303,273 -

Deferred income tax

Relating to origination and reversal of temporary differences (277,628) (261,910)

Deductible temporary differences transferred in - -

Income tax benefit / (expense) reported in the Statement of

Comprehensive Income

25,131 (638,228)

Statement of changes in equity

Deferred income tax related to items charged or credited

directly to equity

Compound financial instruments - -

Income tax benefit / (expense) reported in equity - -

A reconciliation between tax expense and the product of

accounting profit / (loss) before income tax multiplied by

the Group’s applicable income tax rate is as follows:

Accounting profit/(loss) before tax from continuing

operations

(307,690) 1,273,271

Profit / (loss) before tax from discontinued operations 1,958 -

Accounting profit / (loss) before income tax (305,732) 1,273,271

At the Group’s statutory income tax rate of 30% (2010: 30%) 91,720 (381,981)

Unrecognised tax losses – current year (271,356) (373,045)

Prior year tax losses not previously brought to account now

utilised

- 238,580

Expenditure not allowable for income tax purposes (3,992) (13,239)

Non-taxable income - -

Timing differences not brought to account - -

Other 208,759 (108,543)

25,131 (638,228)

Income tax benefit / (expense) reported in the consolidated

Statement of Comprehensive Income

30,543 (638,228)

Income tax benefit / (expense) attributable to discontinued

operations

(5,411) -

25,131 (638,228)

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NOTE 5 (CONTINUED)


Consolidated Entity Statement of Financial Position Statement of Comprehensive

Income

2011

$

2010

$

2011

$

2010

$

DEFERRED INCOME TAX

Deferred income tax at 30 June relates to the following:

Deferred tax liabilities

Unamortised development costs (1,911,128) (1,694,905) (216,223) (206,767)

Non-current assets not tax depreciated - - - -

Convertible note charged to equity - - - -

Unrealised foreign exchange losses - - - (15,233)

Other - - - -

(1911,128) (1,694,905)

Deferred tax assets

Provisions 328,271 389,676 (61,405) (15,049)

Other - -

Capital expenses not yet deductible 30,772 30,772 - (24,861)

Lease liabilities - - - -

359,043 420,448

Included in assets held for sale / assets of disposal group

(discontinued operations)

- - - -

359,043 420,448

Deferred tax benefit / (expense) (277,628) (261,910)

The tax rate used in above reconciliation is corporate tax rate of 30% payable by Australian corporate entities on taxable profits

under Australian tax law. There has been no change in the corporate tax rate when compared with the previous reporting period.

The Group has tax losses of $4,097,548 (2010: $3,070,007) potentially available for offset against future taxable profits of the

Longreach tax consolidated group. Future use of the losses is subject to continued satisfaction of the statutory loss rules. In

addition, the rate at which losses are available will be limited to the relevant Available Fraction. The available fraction at 30 June

2011 was 39% of annual taxable income but this is subject to change on the occurrence of certain events. These tax losses have not

been recognised and brought to account in the current financial year as it is not considered that the future recovery of the losses

against taxable income is more likely than not. It is considered probable that these tax losses will not be able to be offset against

future taxable profits in the event that the Group has a change of control in the future.

At 30 June 2011, there is no recognised or unrecognised deferred income tax liability for taxes that would be payable on the

unremitted earnings of certain of the Group’s subsidiaries as the Group has no liability for additional taxation should such amounts

be remitted.

(i) Tax consolidation

LongReach Group Limited and its 100% owned Australian resident subsidiaries have formed a tax consolidated group with effect

from 1 July 2004. LongReach Group Limited is the head entity of the tax consolidated group. Members of the group have entered

into a tax sharing arrangement in order to allocate income tax expense to the wholly owned subsidiaries on a pro-rata basis. In

addition the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on

its tax payment obligations. At the balance date, the possibility of default is remote. For

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NOTE 5 (CONTINUED)


(ii) Tax effect accounting by members of the tax consolidated group

Members of the tax consolidated group have entered into a tax funding agreement. The tax funding agreement provides for the

allocation of current taxes to members of the tax consolidated group in accordance with their accounting profit for the period,

while deferred taxes are allocated to members of the tax consolidated group in accordance with the principles of AASB 112 Income

Taxes. Allocations under the tax funding agreement are made at the end of each year.

The allocation of taxes under the tax funding agreement is recognised as an increase/decrease in the subsidiaries’ inter-company

accounts with the tax consolidated group head company, LongReach Group Limited. Because under Australian Accounting

Interpretation 1052 Tax Consolidation Accounting the allocation of current taxes to tax consolidated group members on the basis of

accounting profits is not an acceptable method of allocation given the group’s circumstances, the difference between the current

tax amount that is allocated under the tax funding agreement and the amount that is allocated under an acceptable method is

recognised as a contribution/distribution of the subsidiaries’ equity accounts. The Group has applied the group allocation approach

in determining the appropriate amount of current taxes to allocate to members of the tax consolidated group. There were no

contributions / distributions during the year.

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NOTE 6. DISCONTINUED OPERATIONS

2011

$

2010

$

Revenue 4,594 -

Expenses (2,636) -

Profit/(loss) attributable to members 1,958 -

Income tax expense (5,411) -

Profit/(loss) on disposal after income tax (3,453) -

Net cash inflow on disposal:

Cash and cash equivalents consideration (net after costs) - -

Less: cash and cash equivalents disposed of - -

Reflected in the consolidated Statement of Cash Flows - -

During the year ended 30 June 2011, Allied Group Pty Ltd was deregistered. The total loss resulting from the disposal of Allied

Group Pty Ltd is included in the statement of comprehensive income.

NOTE 7. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing net profit / (loss) for the year attributable to ordinary equity holders of

the parent by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit / (loss) attributable to ordinary equity holders of the

parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of

ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following reflects the income and share data used in the basic and diluted earnings per share computations:


$

2010

$

Net profit attributable to ordinary equity holders of the parent from continuing operations (277,147) 635,043

(Loss) attributable to ordinary equity holders of the parent from discontinued operations (3,453) -

Net profit / (loss) attributable to ordinary equity holders (280,600) 418,648

2011 2010

Weighted average number of ordinary shares for basic earnings per share 26,550,441 26,289,259

Effect of dilution:

Share options - -

Weighted average number of ordinary shares adjusted for the effect of dilution 26,550,441 26,289,259

The Company announced a Share Buyback of unmarketable parcels on 17 September 2010. The buyback was completed on 23

November 2010 and as a consequence 2,083,951 shares were bought back and cancelled. On 27 April 2011 an Extraordinary

General Meeting of shareholders approved a resolution to consolidate the Company's issued ordinary shares into a smaller number

of shares in the ratio of ten (10) to one (1). Weighted average numbers of ordinary shares for financial year 2010 are restated to

reflect the share consolidations. On 17 June 2011 shareholders holding 10,443,577 shares elected to reinvest their dividend in new

shares in the Company. Total ordinary shares on issue as at the date of this report for the financial reporting purposes are

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NOTE 8. DIVIDENDS

A fully franked dividend of 10 cents per share was paid in financial year 2011.Through the Dividend Reinvestment Plan

approximately 72% of the dividend was reinvested in the Company.


$

2010

$

Fully franked dividend paid 2,917,907 -

Total franked dividend paid 2,917,907 -

The amounts of franking credits available for subsequent financial years are:

! Franking account balance as at the end of the financial year at 30% is in the order of $7,845,254 (2010: $8,939,522), which are

available for distribution to the shareholders.

NOTE 9. CASH AND CASH EQUIVALENTS


$

2010

$

Cash at bank and on hand 1,620,784 1,172,648

Deposits at call 724,338 4,047,896

2,345,122 5,220,544

Cash on hand included in assets of disposal group - -

Interest bearing overdrafts included in liabilities of disposal

group

- -

2,345,122 5,220,544

Cash at bank earns interest based on daily bank deposit rates.

Short term deposits can be for varying periods up to three months, depending on the immediate cash requirements of the Group,

and earn interest at the respective short term deposit rates.

At 30 June 2011 the Group had available $nil (2010: $nil) of undrawn committed borrowing facilities in respect of which all

conditions precedent have been met.

The fair value of cash and cash equivalents is $2,345,122 (2010: $5,220,544).

(i) Disclosure of reconciliation to Statement of Cash Flows

Refer NOTE 35.

(ii) Disclosure of reconciliation of net profit / (loss) after tax to net cash flows from operations

Refer NOTE 35.

(iii) Disclosure of financing facilities

Refer NOTE 18.

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NOTE 10. TRADE AND OTHER RECEIVABLES


$

2010

$

CURRENT

Trade debtors 2,922,144 2,102,117

Allowance for doubtful debts - (16,324)

2,922,144 2,085,793

Other debtors 156,267 -

3,078,411 2,085,793

NON-CURRENT

Loans to controlled subsidiaries - -

- -

1) Trade debtors are non-interest bearing and are generally on 30 - 90 day terms. An allowance for doubtful debts is made

when there is objective evidence that a trade receivable is impaired. The amount of the allowance/impairment loss has

been measured as the difference between the carrying amount of the trade receivables and the estimated future cash

flows expected to be received from the relevant debtors. An allowance of $nil (2010: $nil) has been recognised as an

expense for the current year.

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

3) Details regarding foreign exchange and interest rate risk exposure are disclosed in NOTE 3.

NOTE 11. INVENTORIES


$

2010

$

Work in progress 2,148,075 2,222,105

Finished goods 425,505 1,061,669

2,573,580 3,283,774

Inventories included in assets held for sale:

Work in progress - -

Finished goods - -

2,573,580 3,283,774

Inventories are recorded at the lower of cost and net realisable value. Refer NOTE 2(l) for further detail.

NOTE 12. OTHER (CURRENT)


$

2010

$

Other - -

Prepayments 71,983 22,492

71,983 22,492

All amounts are receivable in Australian Dollar and are not considered past due or impaired.

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NOTE 13. PROPERTY, PLANT AND EQUIPMENT


$

2010

$

PLANT AND EQUIPMENT

At 1 July net of accumulated depreciation and impairment 359,132 358,194

Additions 127,385 182,550

Disposals - -

Disposals – discontinued operation (NOTE 6) - -

Assets included in discontinued operation held for sale (NOTE 6) - -

Assets included in disposal group - -

Acquisition of subsidiaries - -

Impairment - -

Depreciation charge for the year (220,611) (181,612)

Depreciation charge for the year included in discontinued operations - -

Other - -

At 30 June net of accumulated depreciation and impairment 265,907 359,132

DEPRECIATION & IMPAIRMENT

Cost 3,132,444 3,153,033

Accumulated depreciation and impairment (2,866,537) (2,793,901)

Net carrying amount 265,907 359,132

(i) Impairment of property, plant and equipment

An impairment loss of $nil (2010: $nil) was recognised to reduce the carrying amount of assets to recoverable amounts. The

recoverable amount estimation was based on fair value less costs to sell and was determined at the cash-generating unit level. The

basis for determining the fair value is the Directors’ assessment of the ongoing value in use of the assets.

The useful life of the assets was estimated as follows both for 2010 and 2011:

Property 1 - 5 years

Plant and equipment 3 - 4 years

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NOTE 14. INTANGIBLE ASSETS

Consolidated Entity Goodwill

$

Development Costs &

Intellectual Property Rights

$

2011

At 1 July 2010

Cost (gross carrying amount) - 8,688,312

Accumulated amortisation and impairment - (3,038,639)

Net carrying amount - 5,649,673

Year ended 30 June 2011

At 1 July 2010, net of accumulated amortisation and impairment - 5,649,673

Additions – acquisition - 1,644,480

Acquisition of a subsidiary - -

Impairment – discontinued operations - -

Impairment – continuing operations - -

Amortisation at 30 June 2011 - (923,728)

- 6,370,425

At 30 June 2011




2010

At 1 July 2009




Year ended 30 June 2010

At 1 July 2009, net of accumulated amortisation and impairment - 4,960,461

Additions – acquisition - 2,211,416

Acquisition of a subsidiary - -

Impairment – discontinued operations - -

Impairment – continuing operations - (698,038)

Amortisation at 30 June 2010 - (824,166)

- 5,649,673

At 30 June 2010




As at 30 June 2011, the Group conducted an internal review of all active Research and Development projects to confirm the

activities remained current and relevant to future business opportunities. As a result of the review, no impairment was recognised

(2010:$698,038). Refer to NOTE 2(f)(ii) for details of impairment.

In addition to development costs capitalised the Group expensed $1,173,566 of research and development costs during the year

(2010:$nil).

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NOTE 15. IMPAIRMENT TESTING OF GOODWILL AND OTHER IDENTIFIABLE INTANGIBLES

Goodwill

All Goodwill acquired through business combinations has been fully impaired and written off in years prior to the current financial

year.

Other identifiable intangible assets

Internally generated capitalised development intangible assets are stated at cost less accumulated amortisation and impairment

losses. Amortisation of these assets is based on lifetime revenues of the products for which the development costs relate. These

intangible assets have been assessed as having a finite life and are amortised using the straight line method over a period of 10

years. Management believes that this method accurately reflects the consumption of the economic benefit derived from the

capitalised development. Management will review this amortisation method on an annual basis or more frequently if it appears

that the rate of economic consumption has changed.

NOTE 16. DEFERRED TAX ASSET


$

2010

$

Deferred tax assets 359,043 420,448

Less: Assets classified as held for sale / assets of disposal

group

-

-

359,043 420,448

NOTE 17. TRADE AND OTHER PAYABLES


$

2010

$

Current

Trade creditors 533,526 665,737

Other creditors and accruals 833,290 1,242,684

1,366,816 1,908,421

Trade and other creditors are non-interest bearing and are normally settled on 30 day terms.

Details regarding foreign exchange and interest rate risk exposure are disclosed in NOTE 3.

NOTE 18. INTEREST BEARING LOANS AND BORROWINGS

(i) Fair value disclosure

Details of fair value of the Group’s interest bearing liabilities are set out in NOTE 26.

(ii) Financing facilities available

No credit facilities are currently established.

NOTE 19. INCOME TAX PAYABLE


$

2010

$

CURRENT

Income tax - 306,229

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NOTE 20. PROVISIONS

Consolidated Entity Make good

provision

$

Employee

entitlements

$

Warranty

provision

$

Total

$

At 1 July 2010 154,800 271,680 46,946 473,426

Arising during the year - 66,447 51,184 117,631

Utilised - - (36,758) (36,758)

Unused amounts reversed - (14,119) (31,374) (45,493)

Acquired as part of business combination - - - -

Disposal discontinued operations - - - -

At 30 June 2011 154,800 324,008 29,998 508,806

Current 2011 154,800 126,951 29,998 311,750

Non-current 2011 - 197,057 - 197,057

154,800 324,008 29,998 508,806

Current 2010 154,800 102,822 46,946 304,568

Non-current 2010 - 168,858 - 168,858

154,800 271,680 46,946 473,426

(i) Make good provision

In accordance with the lease agreements of the principal places of business, the Group must restore the leased premises to its

original condition at the end of the lease term. Because of the long-term nature of the liability, the greatest uncertainty in

estimating the provision is the costs that will ultimately be incurred.

(ii) Warranty provision

The warranty provision relates to the ongoing support and services of the hardware and software associated with projects

completed by Group entities.

NOTE 21. DEFERRED TAX LIABILITIES


$

2010

$

NON-CURRENT

Deferred tax liabilities 1,911,128 1,694,905

NOTE 22. OTHER LIABILITIES


$

2010

$

CURRENT

Deferred revenue 823,579 982,979

823,579 982,979

NON-CURRENT

Deferred revenue - -

- -

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NOTE 23. CONTRIBUTED EQUITY


$

2010

$

ORDINARY SHARES

At the beginning of the reporting period 34,724,847 34,774,032

Previous years losses write off (29,674,159) -

Share options exercised - -

Shares issued during the year 2,088,710 -

Shares cancelled during the year (60,435) (49,185)

At reporting date 7,078,963 34,724,847

PRE SHARE CONSOLIDATION NO. NO.

At the beginning of the reporting period 262,876,348 266,154,962

Share options exercised - -

Shares issued during the year - -

Shares cancelled during the year (2,083,951) (3,278,614)

260,792,397 262,876,348

POST SHARE CONSOLIDATION NO. NO.

Shares after consolidation 26,079,068 -

Shares issued after consolidation 10,443,577 -

36,522,645 -

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares

held. On 27 April 2011, issued ordinary shares were consolidated into a smaller number of shares in the ratio of ten (10) to one (1).

On 17 June 2011 shareholders holding 10,443,577 shares elected to reinvest their dividend in new shares in the Company.

At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one

vote on a show of hands.

Refer to NOTE 28 for details of options.

(i) Capital Management

When managing capital, management’s objective is to ensure the entity continues as a going concern as well as to maintain optimal

returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the

lowest cost of capital available to the entity.

Management are constantly adjusting the capital structure to take advantage of favourable costs of capital or high returns on

assets. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders, return

capital to shareholders, issue new shares or sell assets to reduce debt. Directors have not authorised any Share Capital raising as at

of 30 September 2011.

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NOTE 24. RESERVES


$

2010

$

EQUITY BENEFITS RESERVE

Balance at beginning of Financial Year 791,350 791,350

Cost of share based payments - -

791,350 791,350

FOREIGN CURRENCY TRANSLATION

Balance at beginning of Financial Year (123,102) (17,050)

Translation of subsidiary financial statements (51,523) (106,052)

(174,625) (123,102)

RESERVES EMPLOYEE SHARE PLAN

Balance at beginning of Financial Year 32,383 -

Reserve share plan - 32,383

32,383 32,383

Total 649,108 700,631

(i) Nature and purpose of equity benefits reserve

This reserve is used to record the value of equity benefits provided to employees and directors as part of their remuneration and to

third parties as part of their fees for services rendered.

Refer to NOTE 28 for further details of these plans and equity benefits.

(ii) Nature and purpose of foreign currency transaction reserve

The translation reserve comprises all foreign currency differences arising from the monetary items receivable from or payable to

foreign operations for which settlement is neither planned nor likely to occur and which are recognised in the foreign currency

translation reserve.

(iii) Nature and purpose of employee share plan reserve

The share plan reserve compromise the value of share based payment plans recognised as an expense in the Statement of

Comprehensive Income.

NOTE 25. ACCUMULATED (LOSSES)/PROFIT


$

2010

$

Accumulated losses at the beginning of the financial year (23,749,582) (24,384,625)

Accumulated losses write-off 29,674,159 -

Net profit/(loss) attributable to me6mbers of LongReach Group Limited (280,600) 635,043

Effect of settlement of convertibles notes (net of tax) - -

Dividends for or paid (2,917,907) -

Accumulated profit/(losses) at the end of the financial year 2,726,070 (23,749,582)

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NOTE 26. FINANCIAL INSTRUMENTS

(i) Fair values

All assets and liabilities recognised in the Statement of Financial Position, whether they are carried at cost or at fair value, are

recognised at amounts that represent a reasonable approximation of fair value.

(ii) Credit risk exposures

The credit risk on financial assets of the Consolidated Entity which have been recognised in the Statement of Financial Position,

other than investments in shares, is generally the carrying amount, net of any allowance for doubtful debts.

(iii) Foreign currency risk exposure

Exposure to foreign currency risk arises from sales and purchased by an operating unit with the group in currencies other than its

functional currency. Forward contracts are utilised to reduce this exposure. There were no open forward contracts in existence at

year end.

(iv) Interest rate risk exposures

Exposures arise predominantly from assets and liabilities bearing variable interest rates as the Consolidated Entity intends to hold

fixed rate assets and liabilities to maturity. The Consolidated Entity's exposure to interest rate risk and the effective weighted

average interest rate by maturity periods is set out in the following table.

Floating interest

maturing in:

Fixed interest

maturing in:

Notes Weighted

average

interest rate

1 year

or less

Over 1 to 5

years

1 year

or less

Over 1

to 5 years

Non-interest

bearing

Total

$ $ $ $ $ $

2011

Financial assets

Cash and deposits NOTE 9 1.63% 2,345,122 - - - - 2,345,122

Receivables NOTE 10 - - - - - 3,078,411 3,078,411

2,345,122 - - - 3,078,411 5,423,533

Financial liabilities

Payables NOTE 17 &

NOTE 19

- - - - - 1,366,816 1,366,816

- - - - 1,366,816 1,366,816

Weighted average

interest rate

- - - - - -

Net financial assets

(liabilities)

2,345,122 - - - 1,711,595 4,056,717

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NOTE 26 (CONTINUED)


Floating interest

maturing in:

Fixed interest

maturing in:

Notes Weighted

average

interest rate

1 year

or less

Over 1 to 5

years

1 year

or less

Over 1

to 5 years

Non-interest

bearing

Total

$ $ $ $ $ $

2010

Financial assets

Cash and deposits NOTE 9 3.34% 5,220,544 - - - - 5,220,544

Receivables NOTE 10 - - - - - 2,085,793 2,085,793

5,220,544 - - - 2,085,793 7,306,337

Financial liabilities

Payables NOTE 17 &

NOTE 19

- - - - - 2,214,630 2,214,630

- - - - 2,214,630 2,214,630

Weighted average

interest rate

- - - - - -

Net financial assets

(liabilities)

5,220,544 - - - (128,837) 5,091,707

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NOTE 27. KEY MANAGEMENT PERSONNEL

(i) Remuneration of directors and executives

Compensation by category : key management personnel


$

2010

$

Short-term 391,659 680,095

Post employment 18,991 26,587

Share-based payments - -

Termination benefits - -

Total 410,650 706,682

Options and rights holdings

Number of unissued ordinary shares of LongReach Group Ltd under option held by key management personnel– directors and

executives:

Balance Granted as

Remuneration

Options

Exercised

Net Change

Other*

Balance Total Vested Total

Exercisable

Total

Unexercisable

2011 01-JUL-10 30-JUN-11 30-JUN-11


C R Bernecker - - - - - - - -

L E Case - - - - - - - -

Executive Directors

P Harrison - - - - - - - -

Executives

B Kay - - - - - - - -

- - - - - - - -

2010 01-JUL-09 30-JUN-10 30-JUN-10


C R Bernecker - - - - - - - -

L E Case - - - - - - - -

Executive Directors

P Harrison - - - - - - - -

Executives

B Kay - - - - - - - -

- - - - - - - -

* Options which lapsed during the reporting period.

Shares issued on Exercise of Compensation Options

No compensation options were exercised.

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NOTE 27 (CONTINUED)


(ii) Shareholdings

Number of ordinary shares of LongReach Group Ltd held by key management personnel - directors and executives:

Balance Consolidation* Post

consolidation

Shares issued

under Employee

Share Plan

Net Change

Other**

Balance

2011 01-JUL-10 30-JUN-11


L E Case - - - - - -

C Bernecker 500,000 (450,000) 50,000 - 25,000 75,000

Executive Directors

P Harrison 13,000,000 (11,700,000) 1,300,000 - 650,000 1,950,000

Executives

B Kay 16,600,000 (14,940,000) 1,660,000 - 664,000 2,324,000

Total 30,100,000 (27,090,000) 3,010,000 - 1,339,000 4,349,000

2010 01-JUL-09 30-JUN-10


L E Case - - - - - -

C Bernecker - - - - 500,000 500,000

Executive Directors

P Harrison 3,000,000 - - 10,000,000 - 13,000,000

Executives

B Kay 6,600,000 - - 10,000,000 - 16,600,000

Total 9,600,000 - - 20,000,000 500,000 30,100,000

*For detail refer to section Capital Management on page 5 of Director's report.

** "Net Change Other" refers to shares purchased, acquired under the Company’s dividend reinvestment plan or sold during the

financial year.

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NOTE 28. SHARE-BASED PAYMENT PLANS

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of and movements in share options

during the year:

2011

No.

2011

WAEP ($)

2010

No

2010

No.(Post

consolidation)*

2010

WAEP ($)

Outstanding at the beginning of the year 166,389 2.44 3,330,558 333,055 2.14

Granted during the year - - - - -

Exercised during the period - - - - -

Forfeited during the year (5,833) 4.65 (1,666,668) (166,666) 1.84

160,556 2.36 1,663,890 166,389 0.244

Options exercisable (No.) 160,556 1,663,890 166,389

The weighted average remaining contractual life for the share options outstanding as at 30 June 2011 is between 9 months and 1

year 6 months (2010: 9 months and 1 year 6 months).

* For more detail refer to section Capital Management on page 5 of Director's report.

The range of exercise prices for options outstanding at the end of the year was $2.35 - $4.65 (2010: $0.235 - $0.465).

The weighted average fair value per option granted during the year was $nil (2010: $nil).

The fair value of the equity-settled share options granted is estimated as at the date of grant using a binomial model taking into

account the terms and conditions upon which the options were granted.

The weighted average share price at the date of exercise was $0.087.

The following table lists the inputs to the model used for the years ended 30 June 2011 and 30 June 2010:

2011 2010

Dividend yield (%) 0 0

Expected volatility (%) 66-70 66 – 70

Risk-free interest rate (%) 5.11-5.96 5.11 – 5.96

Expected life of options (years) 0.35-5 0.35 – 5

Option exercise price ($) $3.00-$4.65 $0.03 - $0.465

Average share price at grant date ($) $0.12-$0.32 $0.12 - $0.32

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The

expected volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of

options granted were incorporated into the measurement of fair value.

(i) LongReach Group Limited Employee Option Plan

On 4 June 2004, in conjunction with the entering into of executive service agreements, the Company granted to its Executive

Directors a total of 4,000,000 options. Remaining options as at report date is 160,000 with the remainder having expired or

cancelled due to employee resignations.

(ii) Share option in terms of merger scheme

On 21 November 2006 the Company issued 1,100,145 share options as part of the merger scheme with LongReach Group Limited

(former ASX Code: LRX) to replace share options already on issue to their employees prior to date of merger, which are now held by

LongReach Group (LRG).

The number of un-issued ordinary shares under these options at 30 June 2011 was 556 (2010: 63,890).

(iii) LongReach Group Limited Employee Share Loan Plan

The Employee Share Plan was established to enable employees the opportunity to participate in the acquisition of shares in the

Company at a price of weighted average market price for the five days prior to allocation of the shares with an interest free loan

from the Company to finance the acquisition. Under the Share Plan, loan is non-recourse and will operate over a four year period

with vesting date of 01 September each year. The loan is repaid through the application of the sales proceeds of the shares, the

employee purchasing the shares, or via company buy-back at the conclusion of the Plan.

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NOTE 28 (CONTINUED)


Shares issued under this plan are considered fully paid ordinary shares with voting and dividend rights. The shares issued under

this plan are restricted and therefore, unquoted, until performance hurdles are met and loan repaid.

On 02 February 2010, LongReach group issued 39,000,000 shares to its employees at a price of $0.03 per share. Due to the non-

recourse nature of the loan, the loan is considered to be an option for accounting purposes and no loan receivable is recognised as

non-recourse loan doesn't satisfy the definition of financial instruments. The shares granted to employees under the plan are

conditional on the performance hurdles and predetermined exercise price. During the financial year shares were consolidated into

smaller number of shares in the ration of ten (10) to one (1).The exercise prices after consolidation of shares is $0.30 at vesting

dates. There were no other issues of fully paid ordinary shares pursuant to Employee Share Plan during the financial period.

In accordance with para 10 and 11 of AASB 2, the Company have recognised the remuneration expense of $nil (2010: $32,383)

associated with the 'in-substance' options issuance to employees under the Plan. The vesting period is 4 years and remuneration

expense will be recognised over this period. Total of 1,075,000 shares vested during the year under this plan.

The number and weighted average exercise price (WAEP) of these options is as follows.

2011

No.

2011

WAEP ($)

2010

No.

2010

No.(Post

consolidation)

2010

WAEP ($)

Outstanding at the beginning of the year - - - - -

Granted during the year 3,900,000 0.30 39,000,000 3,900,000 0.30

Exercised during the period - - - - -

Forfeited during the year (800,000) 0.30 - - -

3,100,000 0.30 39,000,000 3,900,000 0.30

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NOTE 29. REMUNERATION OF AUDITORS


$

2010

$

Remuneration of the auditor of the parent entity for:

- auditing and reviewing the financial statements - Lawler Partners 54,455 58,925

- other services being tax compliance - Lawler Partners 9,850 46,500

- other consulting services - Lawler Partners - 6,500

64,305 111,925

NOTE 30. CONTINGENT LIABILITIES

Details and estimates of maximum amounts of contingent liabilities are as follows:


$

2010

$

Guarantees

Secured guarantees by the controlled entities in respect of:

Performance guarantees 27,450 244,450

Indemnity guarantee - -

27,450 244,450

NOTE 31. COMMITMENTS FOR EXPENDITURE

(i) Operating leases

The Group has also entered into commercial operating property leases for its places of business. These property leases have an

average life of between 1 month and 5 years. There are no restrictions placed upon the lessee by entering into these leases.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:


$

2010

$

Within one year 278,584 268,504

Later than one year but not later than 5 years - -

Later than 5 years - -

278,584 268,504

(ii) Finance Leases

There is no finance leases currently established and there is no liability.

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NOTE 32. RELATED PARTIES

(i) Directors

The names of persons who were directors of LongReach Group Limited at any time during the financial year are as follows:

Director Appointed Resigned

L E Case (Chairman & Non-Executive Director) 18-Jan-07 Current

C R Bernecker (Non-Executive Director) 31-Oct-08 Current

P B Harrison (Director) 28-Nov-08 Current

(ii) Remuneration benefits

Information on remuneration benefits of Directors is disclosed in NOTE 27.

(iii) Other transactions with directors and director-related entities

There are no transactions with directors and director-related entities.

(iv) Directors’ interests in shares, options and contracts

L E Case, is also a director of Nightingale Partners Pty Ltd and trustee of Notron (No.91) Pty Ltd and accordingly has an indirect

interest in this substantial shareholder group which collectively holds 17,594,779 ordinary shares at 30 June 2011 (2010:

116,298,525).

C R Bernecker is also a Director of Nightingale Partners and accordingly has an indirect interest in this substantial shareholder which

holds 16,357,279.

(v) Details of other directors’ interests in shares, options and contracts

Details of Directors’ interests in shares and options of the Company are disclosed in NOTE 28. No Director had any interest in

contracts with the Consolidated Entity other than as disclosed.

(vi) Transactions with related parties / wholly-owned group

The wholly owned Group consists of LongReach Group Limited and its wholly owned controlled entities, LongReach Group Staff

Holdings Pty Ltd, C4i Pty Ltd, C4i Systems Pty Ltd and C4i Inc.

Transactions between LongReach Group Limited and entities in the wholly owned Group consisted of the provision of loan funds by

and to the Company, charges in respect of expenditure incurred by the Company on behalf of those other entities, and, where

appropriate, the payment of management fees to the Company by its controlled entities. Intergroup loan funds are unsecured and

at call. Interest on these loans has been waived. Investments in wholly owned controlled entities are disclosed in 0.

Aggregate amounts receivable from, and payable to, each class of related entity at balance date: Transactions and balances

between the Company and its subsidiaries were eliminated in full in preparation of Consolidated Financial Statements of the Group.


$

2010

$

CURRENT RECEIVABLES

Controlled entities (loans) - -

NON-CURRENT RECEIVABLES


- -

CURRENT PAYABLES


NON-CURRENT PAYABLES


- -

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NOTE 33. INVESTMENTS IN CONTROLLED ENTITIES

The consolidated financial statements include the financial statements of LongReach Group Limited and its subsidiaries listed in the

following table:

Name of entity Country of

incorporation

Class of shares Equity Holding Deregistration

2011

%

2010

%

Date

Ghamin Exploration Ltd ** Ghana Ordinary - 100 -

Access Mining (Pty) Ltd ** Namibia Ordinary - 100 -

LongReach Defence Pty Ltd * Australia Ordinary 100 100 10-Aug-2011

Allied Group Pty Limited ** Australia Ordinary - 100 22-Apr-2011

Allied Properties Unit Trust * Australia Ordinary 100 100 -

Allied Investments (ACT) Pty Ltd ** Australia Ordinary - 100 22-Apr-2011

LongReach Communications Pty Limited* Australia Ordinary 100 100 -

LongReach Networks Pty Limited* Australia Ordinary 100 100 -

LongReach Wireless Pty Limited* Australia Ordinary 100 100 -

LongReach Group Staff Holdings Pty Limited Australia Ordinary 100 100 -

C4i Pty Limited Australia Ordinary 100 100 -

C4i Systems Pty Ltd Australia Ordinary 100 100 -

C4i Inc United States Ordinary 100 100 -

Woodther Pty Limited ** Australia Ordinary - 100 14-Feb-2011

* These entities are dormant and do not trade.

** These entities are deregistered.

NOTE 34. EVENTS OCCURRING AFTER REPORTING DATE

There are no matters subsequent to the end of the financial year.

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NOTE 35. RECONCILIATION OF PROFIT/(LOSS) FROM ORDINARY ACTIVITIES

AFTER INCOME TAX TO NET CASH INFLOW FROM OPERATING ACTIVITIES


$

2010

$

(A) RECONCILIATION OF NET PROFIT / (LOSS) AFTER TAX TO

NET CASH FLOWS FROM OPERATIONS

Net profit / (loss) (280,600) 635,043

Adjustments for:

Depreciation and amortisation 1,144,339 1,005,778

Impairment of goodwill and other intangible assets - 698,038

Foreign exchange translation (gain) loss (51,523) (106,052)

Share Plan-based payments expensed - 32,383

Changes in assets and liabilities:

Change in inventories 710,195 938,775

Change in trade and other receivables (680,085) 439,895

Change in prepayments (49,490) (6,695)

Change in deferred tax assets 61,405 39,910

Change in deferred tax liabilities 216,223 222,000

Change in trade and other payables (541,605) (53,680)

Change in other current liabilities (159,400) 406,822

Change in provisions 35,380 (53,699)

Change in tax liabilities (618,763) (270,860)

Net cash inflow/(outflow) from operating activities (213,924) 3,927,658

(B) RECONCILIATION OF CASH

Cash at bank 1,620,784 1,172,648

Deposits at call 724,338 4,047,896

2,345,122 5,220,544

Funds invested in commercial bills and included in other assets - -

Cash on hand included in assets of disposal group - -

Interest bearing overdrafts included in liabilities of disposal group - -

2,345,122 5,220,544

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NOTE 36. PARENT ENTITY DISCLOSURES

Parent Entity 2011

$

2010

$

FINANCIAL POSITION

Assets

Current assets 244,598 644,592

Non-current assets 5,565,963 5,550,577

Total Assets 5,810,561 6,195,169

Liabilities

Current liabilities 74,465 88,735

Non-current liabilities (607,519) (409,484)

Total liabilities (533,054) (320,749)

Net assets 5,277,507 5,874,420

EQUITY

Contributed equity 7,078,963 34,724,847

Reserves 823,732 823,732

Accumulated (losses)/profit (2,625,188) (29,674,159)

Total equity 5,277,507 5,874,420

FINANCIAL PERFORMANCE

Loss for the year 292,719 (754,609)

Share Capital 7,078,963 34,774,032

SHARES IN CONTROLLED ENTITIES

At 1 July

Cost (gross carrying amount) 5,501,728 12,801,041

Accumulated impairment - (7,299,313)

Net carrying amount 5,501,728 5,501,728

Year ended 30 June

Opening balance, net of accumulated impairment 5,501,728 5,501,728

Acquisition of a subsidiaries - -

Disposal of a subsidiary * - -

Impairment – discontinued operations (disposal group) - -

Impairment – continuing operations - -

5,501,728 5,501,728

At 30 June

Cost (gross carrying amount) 5,501,728 12,801,041

Accumulated impairment - (7,299,313)

Net carrying amount 5,501,728 5,501,728

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NOTE 36 (CONTINUED)


(i) Guarantees entered into by the parent entity

There have been no guarantees entered into by the parent entity in relation to the debts of its subsidiaries.

(ii) Contingencies of the parent entity

There were no contingent assets or liabilities as at 30 June 2011 related to the parent entity

(iii) Commitments for acquisition of property, plant and equipment by the parent entity

The parent entity had no commitments at 30 June 2011 for the acquisition of property, plant and equipment.

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NOTE 37. SEGMENT REPORTING

(i) Business Segments:

The Group operates predominantly in one industry sector, the Information and Communications Technology (ICT) sector.

(ii) Geographical Segments:

The consolidated entity operated in two geographical areas, being Australia and the United States of America. Pursuant to AASB 8

operating segments, the results in operating segments being reported in a manner consistent with internal reporting to chief

operating decision maker.

An operating segment's operating results are reviewed regularly to make decisions about resources to be allocated to the segment

and assess its performance. Comparatives for 2009 have been restated to reflect prior year income tax adjustments.

Australia USA Elimination Consolidated

30-JUN-11

Revenue

Revenue from external customers:

Sales 7,180,095 1,847,937 - 9,028,032

Services 1,613,748 - - 1,613,748

Other 70,238 273 - 70,511

Total revenue from external customers 8,864,081 1,848,210 - 10,712,291

Total revenue 8,864,081 1,848,210 - 10,712,291

Result

Segment results 552,183 (904,518) 44,645 (307,690)

Results from continuing operating activities (307,690)

Income tax expense on continuing operations 30,543

Results from discontinued operations (net of tax) (3,453)

Profit for the year (280,600)

Assets

Segment assets 19,555,104 605,123 (5095,757) 15,064,470

Unallocated assets -

Total assets 15,064,470

Liabilities

Segment liabilities (4,211,124) (5,434,987) 5,035,782 (4,610,329)

Unallocated liabilities -

Total liabilities (4,610,329)

Capital Assets

Capital expenditure 260,626 5,281 - 265,907

Depreciation 220,410 201 - 220,611

Amortisation of intangible assets 923,728 - - 923,728

Impairment losses on intangible assets - - - - For

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NOTE 37 (CONTINUED)


Australia USA Elimination Consolidated

30-JUN-10

Revenue

Revenue from external customers:

Sales 9,478,980 1,250,368 - 10,729,348

Services 1,345,813 - - 1,345,813

Other 200,904 340 - 201,244

Total revenue from external customers 11,025,696 1,250,709 - 12,276,405

Total revenue 11,025,696 1,250,709 - 12,276,405

Result

Segment results 2,569,065 (1,243,484) (52,310) 1,271,271

Results from continuing operating activities 1,273,271

Income tax expense on continuing operations (638,228)

Gain on sale of discontinued operations (net of tax) -

Profit for the year 635,043

Assets

Segment assets 19,789,065 302,393 (3,049,602) 17,041,856

Unallocated assets -

Total assets 17,041,856

Liabilities

Segment liabilities (5,086,953) (3,276,300) 2,997,293 (5,365,960)

Unallocated liabilities -

Total liabilities (5,365,960)

Capital Assets

Capital expenditure 182,549 - - 182,549

Depreciation 181,612 - - 181,612

Amortisation of intangible assets 824,166 - - 824,166

Impairment losses on intangible assets 698,038 - - 698,038

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NOTE 38. RETROSPECTIVE ADJUSTMENTS AND RESTATEMENT OF ERRORS

The Company has followed the requirements of AASB 108 'Accounting Policies, Changes in Accounting Estimates and Errors' and

has retrospectively restated the comparative amounts for the prior period(s) in which error occurred.

Retrospective adjustments

During the year company adopted the Black-Schole model for accounting for cost of the Employee Share Plan(ESP). Consequently,

the change in accounting policy has made impact on prior year balances. Due to the materiality of the adjustments, these have

been recognised as a prior period error.

The following table summarises the retrospective adjustment.

2010

Previously Stated Adjustments Restated


Remuneration employee share plan (239,063) 206,680 (32,383)

Income Tax Expense (647,943) 9,715 (638,228)

Profit Attributable to members 418,648 216,395 635,043

STATEMENT OF FINANCIAL POSITION

Non-current assets

Deferred tax assets 410,733 9,715 420,448

Total non- current assets 6,419,538 9,715 6,429,253

STATEMENT OF CHANGES IN EQUITY

Profit Attributable to members 418,648 216,395 635,043

Reserves 907,311 (206,680) 700,631

Total equity 11,666,181 9,715 11,675,896

NOTE 39. COMPANY DETAILS

The registered office is:

LongReach Group Limited

31 Market Street

South Melbourne Vic 3205

The principal places of business are:

C4i Pty Limited

31 Market Street

South Melbourne VIC 3205

C4i Inc

1840 Michael Faraday Drive

Suite 210

Reston VA 20190 USA

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DIRECTOR'S DECLARATION

In accordance with a resolution of the Directors of LongReach Group Limited, I state that:

1) In the opinion of the Directors:

a) the financial statements and notes of the Company and of the Consolidated Entity are in accordance with the

Corporations Act 2001, including:

i. giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June 2011 and

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

ii. complying with Accounting Standards and Corporations Regulations 2001;

b) the financial statements also complies with International Financial Reporting Standards as disclosed in NOTE 2(b);

c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become

due and payable.

2) This declaration has been made after receiving the declarations required to be made to the Directors in accordance with

sections 295A of the Corporations Act 2001 for the financial period ended 30 June 2011.

Signed in accordance with a resolution of the directors:

L E Case

Chairman

C R Bernecker

Director

Sydney

30 September 2011

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SHAREHOLDER INFORMATION

The shareholder information set out below was applicable as at 19 September 2011.

DISTRIBUTION OF EQUITY SECURITIES

Analysis of numbers of equity security holders by size of holding:

Ordinary

Shares*

Number of

Holders

Number of Units Percentage of

issued shares

1 - 1,000 221 69,240 0.17%

1,001 - 5,000 261 727,634 1.84%

5,001 - 10,000 88 681,101 1.72%

10,001 - 100,000 159 5,201,377 13.13%

100,001 - And over 32 32,943,293 83.14%

761 39,622,645 100.000%

*Total number of ordinary shares includes 3,100,000 unquoted shares issued under Employee Share Plan.

EQUITY SECURITY HOLDERS

Twenty largest quoted equity security holders

Rank Name Units % of Units

1 NIGHTINGALE PARTNERS PTY LTD 16,457,279 41.54

2 JP MORGAN NOMINEES AUSTRALIA LIMITED 1,512,561 3.82

3 PETER HARRISON 1,500,000 3.79

4 DONWOOD PTY LTD 1,467,660 3.70

5 BRADLEY KAY 1,400,000 3.53

6 MR ANDREW ROY NEWBERRY SISSON 1,350,000 3.41

7 NOTRON (NO 91) PTY LTD CASE 1,237,500 3.12

8 ESSZED FAMILY A/C 950,000 2.40

9 BRAD KAY + CHRISTINA KAY 924,000 2.33

10 SULEISA NOMINEES PTY LTD 525,000 1.32

11 MR EUGENE UGUCCIONI & MR BARRY ALLAN DE CRUMMERE 489,066 1.23

12 ARMADA TRADING PTY LTD 474,059 1.20

13 PETER BRUCE HARRISON 450,000 1.14

14 MR JOHN CARTHEW WILLIAM BURSTON 448,129 1.13

15 M J H NIGHTINGALE & CO PTY LTD 388,500 0.98

16 MR JAMIE R STUART 345,000 0.87

17 HSBC CUSTODY NOMINEES 334,182 0.84

18 PERPETUAL TRUSTEE COMPANY LIMITED 300,000 0.76

19 BRINDLE HOLDINGS PTY LTD 265,205 0.67

20 ABN AMRO CLEARING SYDNEY 242,532 0.61

31,060,673 78.39

SUBSTANTIAL SHAREHOLDERS Number Percentage

Nightingale Partners Pty Ltd 16,457,279 41.54%

Brad Kay 2,324,000 5.86%

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SHAREHOLDER INFORMATION


VOTING RIGHTS

The voting rights attaching to each class of equity securities are set out below:

Share Class Voting Rights

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

share shall have one vote.

Options No voting rights.

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