As reported last week, World Audio has been going through a challenge to its financial affairs recently and this week’s section 40 decision (see earlier story) will present even more challenges. The following information from the company’s annual report was presented to shareholders last week at the AGM:

“The directors have prepared the financial report on a going concern basis. However, the company’s operations are still in a
start-up phase and as such the company does not yet have an established level of revenue sufficient to cover operating costs.

Subsequent to the 30 June 2003 $7 million of equity and convertible notes was raised. $5.8 million of the $7 million capital
raised is to fund future capital investment in the rollout of additional radio licences, planning for digital test broadcasting and the
repayment of short term funding. As only $1.2million relates to funding working capital, in the absence of increasing revenue
the company may be dependant on negotiating further funding, within twelve months of this report.

Goodwill

Goodwill on consolidation is initially recorded at the amount by which the purchase price for an ownership interest
in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. Goodwill on consolidation
is amortised on a straight line basis over the period of 20 years. The balance is reviewed annually and any balance
representing future benefits for which the realisation is considered to be no longer probable is written off.

Radio Licenses
Apparatus licenses are valid for periods of between one and five year. Although the practice of the Australian
Communications Authority is to renew such licenses as a matter of course there is no preferential right of renewal given to
the license holder. The directors have no reason to believe the licenses will be revoked or not renewed and consequently
believe that licenses have an indefinite life. The directors believe the residual value of the licenses exceeds their carrying
amounts. Notwithstanding this, for the purposes of the financial statements, the directors believe that it is appropriate that
the cost is amortised over a period of 10 years.