MACH7 TECHNOLOGIES LIMITED — Annual Report 2007

Aug 30, 2007

Safety Medical Products Limited ABN 26 007 817 192

Appendix 4E Preliminary final report Period ended 30 June 2007

The following information is provided to the ASX under listing rule 4.3A.

1. The reporting period is the financial year ended 30 June 2007 including comparative information for the year ended 30 June 2006

	information for the year ended 30 June 2006
2.	"Results for announcement to the Market".
2.1	The amount and percentage change up or	up by	$855,000	to	$855,000
	down from the previous corresponding period
	of revenue from ordinary activities.
2.2	The amount and percentage change up down	up by	1.0%	to	$(1,538,000)
	from the previous corresponding period of profit
	(loss) from ordinary activities after tax
	attributable to members.
2.3	The amount and percentage change up or	up by	1.0%	to	$(1,538,000)
	down from the previous corresponding period
	of net profit (loss) for the period attributable to
	members.
2.4	The amount per security and franked amount	nil
	per security of final and interim dividends.
2.5	The record date for determining	not applicable
	entitlements to the dividends (if any).
2.6	A brief explanation of any of the figures in 2.1	Please refer to the attached media
	to 2.4 necessary to enable the figures to be	release.
	understood.
3.	An income statement together with notes to the	Please refer to the attached financial
	statement, prepared in compliance with AASB	report.
	101 or the equivalent foreign accounting
	standard.
4.	A balance sheet together with notes to the	Please refer to the attached financial
	statement.	report.
5.	A cash flow statement together with notes to	Please refer to the attached financial
	the statement.	report.
6.	Details of individual and total dividends or	No dividends or distributions were
	distributions and dividend or distribution	made during the period.
	payments.
7.	Details of any dividend or distribution	Not applicable
	reinvestment plans in operation and the last
	date for the receipt of an election notice for
	participation in any dividend or distribution
	reinvestment plan.
8.	A statement of retained earnings showing	Please refer to the attached financial
	movements.	report.

Page 1 of 2

1. Net tangible assets per security with the 2006/07 – 3.47c comparative figure for the previous 2005/06 – 3.32c

corresponding period.

1. Details of entities over which control has been gained or lost during the period, including the following.

Name of the entity.

The date of the gain or loss of control.

Where material to an understanding of the report – the contribution of such entities to the reporting entity’s profit from ordinary activities during the period and the profit or loss of such entities during the whole of the previous corresponding period.

Baratex Pty Ltd – trading as ProControl Systems.

Control gained on 9 February 2007.

Please refer to the attached financial report and press release.

Name of the entity.

The date of the gain or loss of control.

Where material to an understanding of the report – the contribution of such entities to the reporting entity’s profit from ordinary activities during the period and the profit or loss of such entities during the whole of the previous corresponding period.

1. Details of associates and joint venture entities including the following.

2. Any other significant information needed by an investor to make an informed assessment of the entity’s financial performance and financial position.

3. For foreign entities, which set of accounting standards is used in compiling the report (e.g. International Accounting Standards).

4. A commentary on the results for the period.

5. A statement as to whether the report is based on accounts which have been audited or subject to review, are in the process of being audited or reviewed, or have not yet been audited or reviewed

Bagot Press Pty Ltd

Control gained on 1 May 2007. Please refer to the attached financial report and press release.

Not applicable

Please refer to the attached financial report and press release.

Not applicable

Please refer to the attached financial report and press release.

This report is based upon accounts that are currently in the process of being audited. The Directors do not anticipate any items arising that would give rise to a dispute or qualification.

==> picture [141 x 53] intentionally omitted <==

J Riemelmoser Managing Director 31 August 2007

Page 2 of 2

Safety Medical Products Limited FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2007

Income statements	1
Statements of changes in equity	2
Balance sheets	4
Cash flow statements	5

NOTES TO THE FINANCIAL STATEMENTS

Note	1	Reporting entity	6
Note	2	Basis of preparation	6
Note	3	Significant accounting policies	7
Note	4	Determination of fair values	12
Note	5	Segment reporting	13
Note	6	Acquisition of subsidiaries	15
Note	7	Revenue	17
Note	8	Other income	17
Note	9	Personnel expenses	17
Note	10	Financial income and expense	17
Note	11	Auditors’ remuneration	18
Note	12	Income tax expense	18
Note	13	Earnings per share	19
Note	14	Trade and other receivables	19
Note	15	Inventories	19
Note	16	Financial assets	19
Note	17	Tax assets and liabilities	20
Note	18	Property, plant and equipment	21
Note	19	Intangible assets	22
Note	20	Trade and other payables	22
Note	21	Loans and borrowings	23
Note	22	Share capital	24
Note	23	Reserves	24
Note	24	Employee benefits	25
Note	25	Financial instruments	27
Note	26	Capital and other commitments	29
Note	27	Consolidated entities	29
Note	28	Cash and cash equivalents	30
Note	29	Reconciliation of cash flows from operating activities	30
Note	30	Related parties	31
Note	31	Dividends	35
Note	32	Events subsequent to reporting date	35

Safety Medical Products Limited and its controlled entities Income statements For the year ended 30 June 2007

For the year ended 30 June 2007
	Consolidated	Company
Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
Revenue 7 Cost of sales Gross profit Other income 8 Research and development expenses Business development, marketing and intellectual property expenses Administrative expenses Results from operating activities Financial income 10 Financial expense 10 Loss before tax Income tax (expense)/benefit 12 Loss for the year Earnings per share for profit attributable to the ordinary equity holders of the company: Basic earnings per share (cents) 13 Diluted earnings per share (cents) 13	855 - (358) - 497 - 246 - (33) (57) (475) (670) (1,752) (968) (1,517) (1,695) 46 69 (178) (1) (1,649) (1,627) 111 104 (1,538) (1,523) (2.7) (3.6) (1.7) (2.3)	3 - (2) -
		1 - 244 - (33) (57) (470) (670) (1,012) (968)
		(1,270) (1,695) 45 69 (174) (1)
		(1,399) (1,627) 36 104
		(1,363) (1,523)

The income statements are to be read in conjunction with the attached notes to the financial statements.

Page 1

Safety Medical Products Limited and its controlled entities

Statements of changes in equity For the financial year ended 30 June 2007

Consolidated

Consolidated 2007 Note	Issued Capital Accumulated losses $’000 $’000	Equity compensation reserve Total equity $’000 $’000
Opening balance at 1 July 2006 Total recognised income and expense for the period Shares Issued 22 Transaction costs Closing balance at 30 June 2007 Amounts are stated net of tax	2,887 (1,834) ~~-~~ (1,538) 6,993 - (59) -	742 1,795 - (1,538) - 6,993 - (59)
	9,821 (3,372)	742 7,191

2006 Note	Issued Capital Accumulated losses Equity compensation reserve Total equity $’000 $’000 $’000 $’000
Opening balance at 1 July 2005 Total recognised income and expense for the period Shares issued 22 Transaction costs Equity settled share based payment transactions 23 Closing balance at 30 June 2006 Amounts are stated net of tax	271 (311) - (40) ~~-~~ (1,523) - (1,523) 6,010 - - 6,010 (3,394) - - (3,394) - - 742 742 2,887 (1,834) 742 1,795

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

Page 2

Safety Medical Products Limited and its controlled entities

Statements of changes in equity For the financial year ended 30 June 2007

Company 2007 Note	Issued Capital Accumulated losses $’000 $’000	Equity compensation reserve Total equity $’000 $’000
Opening balance at 1 July 2006 Total recognised income and expense for the period Shares Issued 22 Transaction costs Closing balance at 30 June 2007 Amounts are stated net of tax	2,887 (1,834) ~~-~~ (1,363) 6,993 - (59) -	742 1,795 - (1,363) - 6,993 - (59)
	9,821 (3,197)	742 7,366

2006 Note	Issued Capital Accumulated losses Equity compensation reserve Total equity $’000 $’000 $’000 $’000
Opening balance at 1 July 2005 Total recognised income and expense for the period Shares issued 22 Transaction costs Equity settled share based payment transactions 23 Closing balance at 30 June 2006 Amounts are stated net of tax	271 (311) - (40) ~~-~~ (1,523) - (1,523) 6,010 - - 6,010 (3,394) - - (3,394) - - 742 742 2,887 (1,834) 742 1,795

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

Page 3

Safety Medical Products Limited and its controlled entities Balance sheets As at 30 June 2007

As at 30 June 2007
Note	Consolidated 2007 $’000 2006 $’000	Company 2007 $’000 2006 $’000
Assets Cash and cash equivalents 28 Trade and other receivables 14 Inventories 15 Current tax assets 17 Total current assets Non-current assets Financial assets 16 Net deferred tax assets 17 Property, plant and equipment 18 Intangible assets 19 Total non-current assets Total assets 5 Liabilities Trade and other payables 20 Loans and borrowings 21 Employee benefits 24 Total current liabilities Non-current liabilities Loans and borrowings 21 Employee benefits 24 Total non-current liabilities Total liabilities 5 Net assets Equity Issued capital 22 Reserves 23 Accumulated losses Total equity	476 1,709 615 52 460 42 18 104 1,569 1,907 - - 46 - 1,966 155 4,735 - 6,747 155 8,316 2,062 925 247 21 - 101 20 1,047 267 14 - 64 - 78 - 1,125 267 7,191 1,795 9,821 2,887 742 742 (3,372) (1,834) 7,191 1,795	363 1,709 7 52 229 42 36 104
		635 1,907
		5,850 - - - 1,107 155 - -
		6,957 155
		7,592 2,062
		189 247 - - 31 20
		220 267
		- - 6 -
		6 -
		226 267
		7,366 1,795
		9,821 2,887 742 742 (3,197) (1,834)
		7,366 1,795

The balance sheets are to be read in conjunction with the attached notes to the financial statements.

Page 4

Safety Medical Products Limited and its controlled entities Cash flow statements For the year ended 30 June 2007

For the year ended 30 June 2007
Note	Consolidated 2007 $’000 2006 $’000	Company 2007 $’000 2006 $’000
Cash flows from operating activities Cash receipts from customers Cash paid to suppliers and employees Cash generated from operations Interest paid Income taxes (paid) / received Net cash from operating activities 29 Cash flows from investing activities Interest received Dividends received Proceeds from sale of investments Acquisition of other investments Acquisition of subsidiary, net of cash acquired Acquisition of property, plant and equipment 18 Net cash from investing activities Cash flows from financing activities Proceeds from issue of share capital 22 Proceeds from borrowings Repayment of borrowings Net cash from financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at 1 July Cash and cash equivalents at 30 June 28	955 3 (2,563) (1,566) (1,608) (1,563) (4) (1) 65 76 (1,547) (1,488) 45 69 1 - 75 - (250) - (1,235) - (1,779) (162) (3,143) (93) 3,434 3,358 35 - (12) (53) 3,457 3,305 (1,233) 1,724 1,709 (15) 476 1,709	246 3 (1,674) (1,566)
		(1,428) (1,563) - (1) 104 76
		(1,324) (1,488)
		44 69 1 - 75 - (250) (2,350) - (976) (162)
		(3,456) (93)
		3,434 3,358 - - - (53)
		3,434 3,305
		(1,346) 1,724 1,709 (15)
		363 1,709

The cash flow statements are to be read in conjunction with the attached notes to the financial statements.

Page 5

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

1 Reporting entity

Safety Medical Products Limited (the "Company") is a company domiciled in Australia. The consolidated financial statements of the Company for the financial year ended 30 June 2007 comprise the Company and its subsidiaries (together referred to as the "consolidated entity"). The consolidated entity primarily is involved in the development, manufacture and commercialisation of medical products, printing and distribution of products for the pharmaceutical industry and the provision of industrial control and automation systems, machine vision, robotics and turn-key solutions.

2 Basis of preparation

(a) Statement of Compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (‘AASBs’) adopted by the Australian Accounting Standards Board (‘AASB’) including Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001 . The consolidated financial report of the consolidated entity also complies with the IRFSs and interpretations adopted by the International Accounting Standards Board.

(b) Basis of measurement

The financial report is prepared on the historical cost basis.

(c) Functional and presentation currency The financial report is presented in Australian dollars which is the Company’s functional currency and the functional currency of all subsidiaries.

(d) Use of estimates and judgements

The preparation of financial statements requires management to make judgements, estimates and assumptions that effect the application of accounting policies and the reported amount of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the financial statements are described in the following notes:

• Note 6 – business combinations

• Note 17 – utilisation of tax losses

• Note 23 – measurement of share based payments

Page 6

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in the consolidated financial report and have been applied consistently by all entities in the consolidated entity.

(a) Basis of consolidation (i) Subsidiaries

Subsidiaries are entities controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial report from the date that control commences until the date that control ceases.

In the Company’s financial statements, investments in subsidiaries are carried at cost.

(ii) Transactions eliminated on consolidation

Intra-group balances, and any unrealised gains and losses or income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial report.

(b) Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Nonmonetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.

(c) Financial Instruments Share capital

Ordinary shares

Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any related income tax benefit.

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and impairment losses.

Costs include expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour and any other costs directly attributable to bring the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

(ii) Subsequent costs

The consolidated entity recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of such an item when that cost is incurred if it is probable that the future economic benefits embodied within the item will flow to the consolidated entity and the cost of the item can be measured reliably. All other costs are recognised in the income statement as an expense as incurred.

Page 7

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

3 Significant accounting policies (continued)

• (iii) Depreciation

With the exception of freehold land, depreciation is charged to the income statement using the diminishing value method over the estimated useful lives of each part of an item of property, plant and equipment. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The estimated useful lives in the current and comparative periods are as follows:

 plant and equipment 3 - 13 years

 fixtures and fittings 5 - 9 years  motor vehicles 5 years

The residual value, the useful life and the depreciation method applied to an asset are reassessed at least annually.

(e) Intangible assets

(i) Goodwill

Goodwill (negative goodwill) arises on the acquisition of subsidiaries, associates or joint ventures.

Goodwill represents the excess of the cost of the acquisition over the consolidated entity’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill) it is recognised immediately in the income statement. Goodwill is measured at cost less accumulated impairment losses.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the income statement as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalised if the product or process is technically and commercially feasible and the consolidated entity has sufficient resources to complete development.

The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the income statement as an expense as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses.

No development costs were capitalised during the year ended 30 June 2007 or 2006.

(ii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed as incurred.

(f) Leased assets

Leases in terms of which the consolidated entity assumes substantially all the risks and benefits of ownership are classified as finance leases.

Other leases are operating leases and the leases are not recognised on the consolidated entity’s balance sheet. Lease payments for operating leases are charged as an expense in the period in which they occur.

(g) Inventories

Inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

Page 8

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

3 Significant accounting policies (continued)

(h) Impairment

(i) Financial assets

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flow of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-forsale financial asset is calculated by reference to its current fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognised in the income statement. Any cumulative losses in respect of an available-for-sale financial asset recognised previously in equity is transferred to the income statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the income statement. For available-for-sale financial asset that are equity securities, the reversal is recognised directly in equity.

(ii) Non-financial assets

The carrying amounts of the consolidated entity’s assets, other than inventories (see accounting policy g), and deferred tax assets (see accounting policy n), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset's recoverable amount is estimated (see accounting policy h(i)). For goodwill assets that have indefinite lives, recoverable amount is estimated at each reporting date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets or groups. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. 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, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation and amortisation, if no impairment loss had been recognised.

(i) Employee benefits

(i) Defined contribution plans

Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement when they are due.

Page 9

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

3 Significant accounting policies (continued)

(ii) Long-term service benefits

The consolidated entity’s net obligation in respect of long-term service benefits, other than pension plans, is the amount of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is calculated using expected future increases in wage and salary rates including related on-costs and expected settlement dates, and is discounted using the rates attached to the Commonwealth Government bonds at the balance sheet date which have maturity dates approximating to the terms of the consolidated entity’s obligations.

• (iii) Wages, salaries, annual leave, sick leave and non-monetary benefits Liabilities for employee benefits for wages, salaries, annual leave and sick leave, that are expected to be settled within 12 months of the reporting date, represent present obligations resulting from employees' services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and salary rates that the consolidated entity expects to pay as at reporting date including related on-costs, such as workers compensation insurance and payroll tax.

(iv) Share-based payment transactions

The employee and officer share scheme allows Company employees to acquire shares of the Company. The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options granted is measured using a Black-Scholes option pricing model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share options that vest except where forfeiture is only due to share prices not achieving the threshold for vesting.

(j) Provisions

A provision is recognised in the balance sheet when the consolidated entity has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, when appropriate, the risks specific to the liability.

A provision for restructuring is recognised when the consolidated entity has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.

(k) Revenue

(i) Goods sold and services rendered

Revenue from the sale of goods is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue from services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, the costs incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing management involvement with the goods.

(ii) Government grants

Grants that compensate the consolidated entity for expenses incurred are recognised as revenue in the income statement on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the consolidated entity for the cost of an asset are recognised in the income statement as other income on a systematic basis over the useful life of the asset.

(l) Lease payments

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense and spread over the lease term.

Page 10

Safety Medical Products Limited 30 June 2007 Annual Financial Report

Notes to the financial statements

3 Significant accounting policies (continued)

(m) Finance income and expense

Finance income comprises interest income on funds invested. Interest income is recognised in the income statement as it accrues, using the effective interest rate method.

Finance expenses comprise interest expenses on borrowings. Interest expense is recognised in the income statement as it accrues, using the effective interest rate method.

(n) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay the related dividend.

(o) Goods and Services Tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(p) Earnings per share

The consolidated entity presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding of the effects of all dilutive potential ordinary shares, which comprise share options.

(q) Segment reporting

A segment is a distinguishable component of the consolidated entity that is engaged either in providing products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments.

Page 11

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

3 Significant accounting policies (continued)

(r) New standard and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial adoption. They are available for early adoption at 30 June 2007, but have not been applied in preparing this financial report.

• AASB 7 Financial Instruments: Disclosure (August 2005)

• AASB 2005-10 Amendments to Australian Accounting Standards (September 2005)

• AASB 8 Operating Segments

• AASB 2007-3 Amendments to Australian Accounting Standards

• Interpretation 10 Interim Financial Reporting and Impairment

• Interpretation 11 AASB 2 Share-based Payment – Group and Treasury Share Transactions

• AASB 2007-1 Amendments to Australian Accounting Standards

• Interpretation 12 Service Concession Arrangements

• AASB 2007-2 Amendments to Australian Accounting Standards

4

Determination of fair values

A number of the consolidated entity’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and / or disclosure purposes based upon the following methods. Where applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

(i) Property, plant and equipment

The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of items of plant, equipment, fixtures and fittings is based upon the quoted market prices of similar items.

(ii) Inventory

The fair value of inventory acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated cost of completion for sale, and a reasonable profit margin based on the effort required to complete and sell the inventory.

(iii) Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Page 12

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

5 Segment reporting

Segment information is presented in respect of the consolidated entity’s business segments. Business segments are based on the consolidated entity’s management and internal reporting structure.

Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise incomeearning assets and revenue, and corporate assets and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period.

Business segments

The consolidated entity comprises the following main business segments, based on the Company’s management reporting system:

Safety Medical Products Development, production and commercialisation of a range of medical products, focusing principally on the SecureTouch single use manual retractable safety syringe.

ProControl Systems The provision of specialist industrial control and automation systems, machine vision, robotics and turn-key solutions for large and small industrial businesses.

Bagot Press A manufacturer and supplier of specialist printing and general consumables to the pharmaceutical industry.

Geographical segments

The consolidated entity operates in only one geographical segment, Australia. As such, information is not presented on the basis of geographical segments.

Page 13

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

5 Segment reporting (continued)

Business segments	Safety Medical Products 2007 $’000 2006 $’000	ProControl Systems 2007 $’000 2006 $’000	Bagot Press 2007 $’000 2006 $’000	Eliminations 2007 $’000 2006 $’000	Consolidated 2007 $’000 2006 $’000
External revenues Inter-segment revenues Total segment revenue Segment result Unallocated expenses Results from operating activities Net financing revenue / (costs) Income tax benefit/(expense) Profit for the period Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Capital expenditure Depreciation	247 - - -	310 - 62 -	544 - 3 -	- - (65) -	1,101 - - -
	247 -	372 -	547 -	(65) -	1,101 -
	(1,270) (1,695)	(297) -	59 -	(9) -	(1,517) (1,695) - -
					(1,517) (1,695) (132) 68 111 104
					(1,538) (1,523)
					8,316 2,062 - -
	7,592 2,062	299 -	4,774 -	(4,349) -
					8,316 2,062
					1,125 267 - -
	226 267	517 -	4,732 -	(4,350) -
					1,125 267
					1,862 162
	976 162	83 -	812 -	(9) -
	24 8	8 -	19 -	- -	51 8

Page 14

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

6 Acquisition of subsidiaries

Business combinations

Baratex Pty Ltd (ProControl Systems)

On 9 February 2007 the Company acquired all of the shares in Baratex Pty Ltd, trading as ProControl Systems, for $1,500,000 through the issue of 1,500,000 shares in the Company. The company provides specialist industrial control and automation systems, machine vision, robotics and turn-key solutions for large and small industrial businesses. In the five months to 30 June 2007 the subsidiary contributed a loss of $211,000.

The acquisition had the following effect on the consolidated entity’s assets and liabilities on acquisition date:

In thousands of AUD

Property, plant and equipment Intangible assets Inventory Trade and other receivables Cash and cash equivalents Loans and borrowings Current tax liabilities Employee benefits – current Employee benefits – non current Trade and other payables Net identifiable assets and liabilities Goodwill on acquisition Consideration paid, satisfied in shares Cash acquired Net cash outflow	Note	Pre- acquisition carrying amounts Fair value adjustments	Recognised values on acquisition
		83 - 30 - 35 - 395 - (37) - (44) - (86) - (50) - (47) - (286) -	83 30 35 395 (37) (44) (86) (50) (47) (286)
		(7) -	(7) 1,507
			1,500 (37)
			(37)

Page 15

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

6 Acquisition of subsidiaries (continued)

Bagot Press Pty Ltd

On 1 May 2007 the Company acquired all of the shares in Bagot Press Pty Ltd for $6 and subsequently provided a loan of $4,000,000 to Bagot Press Pty Ltd, for it to acquire the business activities of Bagot Press. The acquisition was funded through the issue of 2,500,000 shares in the Company at $0.80 per share and $2,000,000 in cash. The company is a manufacturer and supplier of specialist printing and general consumables to the pharmaceutical industry. In the two months to 30 June 2007 the subsidiary contributed a profit of $42,000.

The acquisition had the following effect on the consolidated entity’s assets and liabilities on acquisition date:

In thousands of AUD

In thousands of AUD
Property, plant and equipment Inventory Trade and other payables Net identifiable assets and liabilities Goodwill on acquisition Consideration paid, satisfied in shares and cash	Note	Pre- acquisition carrying amounts Fair value adjustments	Recognised values on acquisition
		810 - 206 - (214) -	810 206 (214)
		802 -	802 3,198
			4,000

Pre-acquisition carrying amounts were determined based upon applicable AASBs immediately before the acquisition. The value of assets and liabilities recognised on acquisition are their estimated fair values (see note 4 for methods used to determine fair values).

The goodwill recognised on the acquisition is attributable mainly to the skills and technical talent of the acquired business’ work force and the synergies expected to be achieved from integrating the two companies into the consolidated entity’s existing businesses.

Page 16

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

7 8 9 10		Consolidated	Company
	Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
	Revenue Sales Services Other income Government grants Other income Personnel expenses Wages and salaries Commissions paid Other associated personnel expenses Contributions to defined contribution superannuation funds Increase in liability for annual leave Increase in liability for long service leave Financial income and expense Interest Income on bank deposits Dividend income from held-for-trading financial assets Financial income Loss on disposal of held-for-trading financial assets Interest expense on financial liabilities measured at amortised cost Financial expense	855 - - - 855 - 244 - 2 - 246 - 1,011 478 23 - 38 2 119 47 14 20 18 - 1,223 547 45 69 1 - 46 69 (174) - (4) (1) (178) (1)	3 - - -
			3 -
			244 - - -
			244 -
			515 478 - - 15 2 71 47 10 20 6 -
			617 547
			44 69 1 -
			45 69
			(174) - - (1)
			(174) (1)

Page 17

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

11 12		Consolidated	Company
	Note	2007 $ 2006 $	2007 $ 2006 $
	Auditors’ remuneration Audit services: Auditors of the Company – Bentleys MRI (2006: RSM Bird Cameron Partners) Audit and review of the financial reports Other services Auditors of the Company Bentleys MRI (2006: RSM Bird Cameron Partners) Due diligence services IFRS transition assistance services	16,000 25,000 16,000 25,000 - 19,000 - 4,000 - 23,000 2007 $’000 2006 $’000	16,000 25,000
			16,000 25,000
			- 19,000 - 4,000
			- 23,000
			2007 $’000 2006 $’000
	Income tax expense Recognised in the income statement Current tax expense Current year expense (103) (104) (36) (104) Adjustments for prior years - - - - (103) (104) (36) (104) Deferred tax expense Origination and reversal of temporary differences (8) - - - Benefit of losses recognised - - - - (8) - - - Total income tax expense/(benefit) in income statement (111) (104) (36) (104) Numerical reconciliation between tax expense and pre-tax net profit Profit before tax (1,649) (1,627) (1,399) (1,627) Income tax using the domestic corporation tax rate of 30% (2006: 30%) (494) (488) (419) (488) Increase/(decrease) in income tax expense due to: Non-allowable capital items 1 213 1 213 Tax losses carried forward 418 357 418 357 Research & Development (36) (21) (36) (21) S40-880 write-off regarding legal fees on capital raising - (165) - (165) Income tax expense/(benefit) on pre- tax net profit (111) (104) (36) (104)		(36) (104) - -
			(36) (104) - - - -
			- -
			(36) (104)
			(419) (488) 1 213 418 357 (36) (21) - (165)
			(36) (104)

Page 18

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

13	Note	2007 No. 2006 No.
	Earnings per share Weighted average number of shares Ordinary shares on issue at 1 July 22 Effect of shares issued Weighted average number of ordinary shares at 30 June Effect of share options on issue Weighted average number of ordinary shares (diluted) at 30 June	54,053,500 18,001,000 3,269,881 23,423,137
		57,323,381 41,424,137 34,037,641 23,249,925
		91,361,022 64,674,062

Basic earnings per share

The calculation of basic earnings per share at 30 June 2007 was based upon the loss attributable to ordinary shareholders of $1,538,000 (2006: $1,523,000) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2007 of 57,323,381 (2006: 41,424,137).

Diluted earnings per share

The calculation of diluted earnings per share at 30 June 2007 was based on loss attributable to ordinary shareholders of $ 1,538,000 (2006: $1,523,000) and a weighted average number of ordinary shares outstanding during the financial year ended 30 June 2007 of 91,361,022 (2006: 64,674,062).

14 15 16		Consolidated	Company
	Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
	Trade and other receivables Current Other trade receivables and prepayments Inventories Raw materials and consumables Work in progress Finished goods Financial assets Non-current financial assets Investments in subsidiaries	615 52 615 52 72 - 36 - 352 42 460 42 - - - -	7 52
			7 52
			- - - - 229 42
			229 42
			5,850 -
			5,850 -

Page 19

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

17 Tax assets and liabilities

Current tax assets and liabilities

The current tax asset for the consolidated entity of $18,000 (2006: $104,000) and for the Company of $36,000 (2006: $104,000) represent the amount of income taxes recoverable in respect of prior periods and that arise from the payment of tax in excess of the amounts due to the relevant tax authority.

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

	Consolidated	Company
Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
Deductible temporary differences Tax losses	- 18 1,390 1,157 1,390 1,175	- 18 1,390 1,157
		1,390 1,175

The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future tax profits will be available against which the consolidated entity can utilise the benefits therefrom.

Recognised deferred tax assets and liability

Deferred tax assets were recognised for the first time in 2007 and relate only to subsidiaries. No deferred tax liabilities have been recognised. The deferred tax assets of the consolidated entity are attributable to the following items:

Consolidated Employee benefits Creditors Tax value of loss carry-forwards recognised Net tax assets	Assets 2007 $’000 2006 $’000 16 - 2 - 28 -
	46 -

Movement in temporary differences during the year

2007 Employee benefits Creditors Tax value of loss carry-forwards not utilised Net deferred tax assets	Consolidated Balance 1 July 06 Recognised in Income Recognised in Equity Balance 30 June 07 $’000 $’000 $’000 $’000 - 16 - 16 - 2 - 2 - 28 - 28
	- 46 - 46

Page 20

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

$’000 Note 18 Property, plant and equipment Cost Balance at 1 July 2005 Other acquisitions Disposals Balance at 30 June 2006 Balance at 1 July 2006 Acquisitions through business combinations Other acquisitions Balance at 30 June 2007 Depreciation and impairment losses Balance at 1 July 2005 Depreciation charge for the year Balance at 30 June 2006 Balance at 1 July 2006 Depreciation charge for the year Balance at 30 June 2007 Carrying amounts At 1 July 2005 At 30 June 2006 At 1 July 2006 At 30 June 2007		Consolidated	Company	Total
	$’000 Note	Plant and equipment Fixtures and fittings Total	Plant and equipment Fixtures and fittings
		1 - 1 162 - 162 - - - 163 - 163 163 - 163 83 - 83 1,762 17 1,779 2,008 17 2,025 - - - 8 - 8 8 - 8 8 - 8 49 2 51 57 2 59 1 - 1 155 - 155 155 - 155 1,951 15 1,966	1 - 162 - - -	1 162 -
			163 -	163
			163 - - - 976 -	163 - 976
			1,139 -	1,139
			- - 8 -	- 8
			8 -	8
			8 - 24 -	8 24
			32 -	32
			1 -	1
			155 -	155
			155 -	155
			1,107 -	1,107

Page 21

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

$’000 Note 19 Intangible assets Cost Balance at 1 July 2006 Acquisitions through business combination Balance at 30 June 2007 Carrying amounts At 1 July 2006 At 30 June 2007		Consolidated	Consolidated	Company
	$’000 Note	Goodwill Patents & trademarks	Total	Goodwill Patents & trademarks	Total
		- - 4,735 -	- 4,735 4,735 - 4,735	- - - -	- -
		4,735 -		- -	-
		- -		- -	-
		4,735 -		- -	-

Intangible assets have been recognised for the first time in 2007 as a result of the acquisition of Baratex Pty Ltd (trading as ProControl Systems) and Bagot Press Pty Ltd. No amortisation or impairment losses have been recognised.

Impairment testing for cash-generating units containing goodwill

For the purpose of impairment testing, goodwill is allocated to the consolidated entity’s operating divisions which represent the lowest level within which the goodwill is monitored for internal management purposes. The aggregate carrying amounts of goodwill allocated to each unit are as follows:

20		Consolidated	Company
	Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
	ProControl Systems Bagot Press Impairment testing for both units was based on fair value less costs to sell. Trade and other payables Other trade payables and accrued expenses	1,537 - 3,198 - 4,735 - 925 247 925 247	- - - -
			- -
			189 247
			189 247

Page 22

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

	Consolidated	Company
Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
		- -
		- - - -
		- -
		10 10 - - - -
		10 10
		8 4 - - - -
		8 4
		2 6 - - - -

The credit card facility utilised at balance date for both 2007 and 2006 were included within trade payables and accrued expenses. The bank overdraft facility utilised at balance date in 2007 has been included within cash and cash equivalents.

Page 23

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

Note 22 Share capital Issued and paid-up capital 70,908,872 (2006: 54,053,500) ordinary shares fully paid Ordinary shares Balance at the beginning of year Shares issued: 1 August 2005 – 6,000,000 shares issued at $nil cost on the basis of one share for every three held 24 November 2005 – 20,552,500 shares issued at $0.20 as part of the Company’s IPO 24 November 2005 – 9,500,000 shares issued at $nil as part of the Company’s IPO 16 February 2007 – 1,500,000 shares issued at $1.00 as consideration for purchase of Baratex Pty Ltd 27 February 2007 – 1,360,500 shares issued at $0.20 following the exercise of options 28 April 2007 – 1,692,496 shares issued at $0.745 pursuant to the Share Purchase Plan 1 May 2007 – 2,500,000 shares issued at $0.80 as consideration for the purchase of Bagot Press Pty Ltd 3 May 2007 – 9,802,376 shares issued at $0.20 following the exercise of options Costs incurred in issuing shares Balance at end of year	Company 2007 $’000 2006 $’000 9,821 2,887
	2,887 271 - - - 2,616 - - 1,500 - 272 - 1,261 - 2,000 - 1,960 - (59)
	9,821 2,887

Terms and conditions

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

In the event of winding up of the Company, ordinary shareholders rank after all other shareholders and creditors and are fully entitled to any proceeds of liquidation.

No dividends were paid or proposed during the current or prior financial years.

23		Consolidated	Company
	Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
	Reserves Equity compensation reserve	742 742 742 742	742 742
			742 742

The option reserve records items recognised as expense on valuation of share options issued to directors, executives and advisory board members in connection with the capital raising during the year ended 30 June 2006.

Page 24

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

24		Consolidated	Company
	Note	2007 $’000 2006 $’000	2007 $’000 2006 $’000
	Employee benefits Current Salaries and wages accrued Liability for annual leave Non-current Liability for long service leave Total employee benefits	15 - 86 20 101 20 64 - 165 20	- - 31 20
			31 20 6 -
			37 20

a) Defined contribution superannuation funds

The consolidated entity makes contributions to a defined contribution superannuation fund. The amount recognised as expense was $119,000 for the financial year ended 30 June 2007 (2006: $47,000).

b) Share based payments

i) Share option schemes

The Company has previously issued options to provide incentives and to assist in attracting and retention of key employees. No options were issued during the year ended 30 June 2007. Options were issued to key management personnel during the year ended 30 June 2006 to provide an incentive for these individuals to join the Board and become executives of the Company.

Options were issued to key management personnel during the year ended 30 June 2007 as a result of the bonus option scheme implemented by the Company. These options were issued to key management personnel on the same basis as options issued to all other shareholders and not as a result of their employment with the Company. As such, the issue has not been treated as a share based payment.

Unissued ordinary shares of the Company under option, that have been issued to key management personnel in connection with their employment with the Company are:

Outstanding at the beginning of the year Granted Exercised Outstanding at 30 June Exercisable at 30 June	2007 2006 Number of options Weighted average exercise price $ Number of options Weighted average exercise price $ 3,500,000 0.20 - - - - 3,500,000 0.20 (1,000,000) 0.20 - -
	2,500,000 0.20 3,500,000 0.20
	2,500,000 0.20 3,500,000 0.20

The market value of shares under these options at 30 June 2007 was $0.55 (2006: $0.21).

Options issued to key management personnel who were also Directors of the Company were placed in escrow until 24 November 2007. The expiry date of the options detailed above is 31 December 2008.

Page 25

Safety Medical Products Limited 30 June 2007 Annual Financial Report

Notes to the financial statements

24 Employee benefits (continued)

The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted, based on the Black-Scholes option-pricing model. The contractual life of the option is used as an input into this model.

Fair value of share options and assumptions Fair value at measurement date Share price Exercise price Expected volatility (expressed as weighted average volatility used in the modelling under Black-Scholes option pricing model) Option life (expressed as weighted average life used in the modelling under Black-Scholes option- pricing model) Risk-free interest rate (based on national government bonds)

Directors Directors Other executives and employees Other executives and employees 2007 2006 2007 2006 - $0.082 - $0.082

- $0.20 - $0.20 - $0.20 - $0.20 - 53% - 53% - 3.08 years - 3.08 years - 5.38% - 5.38%

The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the share options), adjusted for any expected changes to future volatility due to publicly available information.

All share options vest at grant date and were granted for nil consideration.

Employee expenses

The value of options issued to key management personnel during the year ended 30 June 2006 was treated as a transaction cost as part of the initial public offering of the Company, and as such has been recorded directly in equity.

Page 26

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

25 Financial instruments

Exposure to credit, interest rate and currency risks arises in the normal course of the Company’s and the consolidated entity’s business.

(a) Foreign currency risk

The consolidated entity is exposed to foreign currency risk on sales and purchases that are denominated in a currency other than the AUD. The currencies giving rise to this risk is primarily U.S. Dollars. Given that the consolidated entity is currently developing the business activities that give rise to these risks, the risks involved are currently minimal and as such no hedging arrangements are currently in place.

(b) Credit risk exposures

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on all customers requiring credit over a certain amount. The consolidated entity does not require collateral in respect of financial assets.

At the balance sheet date there were no significant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheet.

(c) Net fair values of financial assets and liabilities

Valuation approach

The methods used in determining fair values of financial instruments are disclosed in note 4.

The carrying amounts and net fair values of financial assets and liabilities as at the reporting date are as follows:

Financial assets Cash assets Receivables Financial liabilities Payables Loans and borrowings	2007 Carrying amount $’000 Net fair value $’000 476 476 615 615 925 925 35 35	2006 Carrying amount $’000 Net fair value $’000
		1,709 1,709 52 52 247 247 - -

Page 27

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

25 Financial Instruments (continued)

(d) Interest rate risk

The consolidated entity’s exposure to interest rate risk and the effective interest rate for classes of financial assets and financial liabilities is set out below:

2007 Financial assets Cash assets Trade and other Receivables Financial liabilities Trade and other payables Loans and borrowings 2006 Financial assets Cash assets Trade and other Receivables Financial liabilities Trade and other payables	Note Effective interest rate	Floating interest rate $’000 1 year or less $’000	1 to 5 years $’000 more than 5 years $’000 Non- Interest Bearing $’000 Total $’000
	29 5% 14 - 20 - 21 8.2% 29 5% 14 - 20 -	476 - - -	- - - 476 - - 615 615
		476 -	- - 615 1,091
		- - - 21	- - 925 925 14 - - 35
		- 21	14 - 925 960
		1,709 - - -	- - - 1,709 - - 52 52
		1,709 -	- - 52 1,761
		- -	- - 247 247
		- -	- - 247 247

Page 28

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

26		Consolidated Company
		Note 2007 $’000 2006 $’000 2007 $’000 2006 $’000
	Capital and other commitments Capital expenditure commitments Plant and equipment Contracted but not provided for and payable: With one year One year or later and no later than five years	- 685 - 685 - - - -
		- 685 - 685

As at 30 June 2006, the consolidated entity was committed under the Alliance Agreement with Exelint International Co to a capital contribution of US$500,000 in respect of capital works and tooling. This expenditure was undertaken during the year ended 30 June 2007.

27 Consolidated entities Particulars in relation to consolidated entities Parent entity Safety Medical Products Limited Controlled Entities Baratex Pty Ltd Bagot Press Pty Ltd	Ordinary Share Consolidated Entity Interest	Ordinary Share Consolidated Entity Interest
	2007 % 100% 100%	2006 %
		- -

As detailed in Note 6, Baratex Pty Ltd, operating as ProControl Systems, was acquired on 9 February 2007 and Bagot Press Pty Ltd was acquired on 1 May 2007.

Baratex Pty Ltd and Bagot Press Pty Ltd are both incorporated in Australia.

Page 29

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

28 29	Note	2007 $’000 2006 $’000 2007 $’000 2006 $’000
	Cash and cash equivalents Bank balances 524 1,709 363 1,709 Bank overdrafts (48) - - - 476 1,709 363 1,709 Reconciliation of cash flows from operating activities Cash flows from operating activities Profit for the period (1,538) (1,523) (1,363) (1,523) Adjustments for: Depreciation 18 51 8 24 8 Loss on disposal of available for sale financial assets 174 - 174 - Income tax expense 12 (111) - (36) - Interest Income 10 (46) (69) (45) (69) Operating profit before changes in working capital and provisions (1,470) (1,584) (1,246) (1,584) Change in assets and liabilities (Increase)/decrease in inventories (381) (42) (187) (42) (Increase)/decrease in trade and other receivables (226) (22) 21 (22) (Increase)/decrease in other current assets - (95) - (95) Increase/(decrease) in trade and other payables 417 235 (33) 235 Increase/(decrease) in provisions for employee benefits 48 20 17 20 (142) 96 (182) 96 Income tax (paid)/refunded 65 - 104 - Net cash from operating activities (1,547) (1,488) (1,324) (1,488)
		(1,470) (1,584) (1,246) (1,584) (381) (42) (187) (42) (226) (22) 21 (22) - (95) - (95) 417 235 (33) 235 48 20 17 20
		(142) 96 (182) 96 65 - 104 -
		(1,547) (1,488) (1,324) (1,488)

Page 30

Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

30 Related parties

The following were key management personnel of the consolidated entity of at any time during the reporting period and unless otherwise indicated were key management personnel for the entire period:

Non-executive directors

Dr Joseph Nicholas Executive directors

Mr John Darley (Chairman)

Executives

Mr Bruce Hocking (Company Secretary) Mr Robert Doley (General Manager ProControl Systems – commenced 9 February 2007) Mr Trevor Sharpe (General Manager Bagot Press – commenced 1 May 2007)

Mr John Riemelmoser (Managing Director and CEO) Mr Marcus Boland (ceased 27 June 2007)

Key management personnel compensation

The key management personnel compensation included in ‘personnel expenses’ (note 9) are as follows:

Short-term employee benefits Post-employment benefits Share-based payments	Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $
	754,000 478,000 677,000 478,000 69,000 44,000 62,000 44,000 - 588,000 - 588,000
	823,000 1,110,000 739,000 1,110,000

Individual directors and executives compensation disclosures

Apart from the details disclosed in this note, no director has entered into a material contract with the Company or the consolidated entity since the end of the previous financial year and there were no material contracts involving directors’ interests existing at year end.

Other key management personnel transactions

A number of key management personnel, or their related parties, hold positions in other entities that result in them having control or significant influence over the financial or operating policies of those entities.

A number of these entities transacted with the Company or its subsidiaries in the reporting period. The terms and conditions of the transactions with management persons and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-director related entities on an arm’s length basis.

Page 31

Safety Medical Products Limited 30 June 2007 Annual Financial Report

Notes to the financial statements

30 Related parties (continued)

The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows:

elated parties were as follows:
Note Key management personnel Transaction Mr M Boland Brokerage fees i Mr M Boland Advisory services ii Mr J Riemelmoser Patent / trademark costs iii Mr J Riemelmoser Patent / trademark costs iv Mr B Hocking Legal and professional services v Mr B Hocking Legal and professional services vi	Consolidated Company 2007 $ 2006 $ 2007 $ 2006 $
	- 410,000 - 410,000 - 2,129,000 - 2,129,000 - 258,000 - 258,000 - 42,000 - 42,000 - 22,000 - 22,000 - 46,000 - 46,000

• i. An arrangement was made with Resource Capital Australia Pty Ltd (RCA), a company associated with Mr Marcus Boland, pursuant to which RCA was paid a brokerage commission on the amount of application monies received, where RCA has introduced the applicant. These brokerage fees paid by Safety Medical Products Limited to RCA were substantially disbursed to other third party brokers and/ or sub-underwriters to perform this service.

• ii. The Company entered into an agreement with Resource Capital Australia Pty Ltd (RCA), a company associated with Mr Marcus Boland, on 5 April 2004 to list the company on the ASX on normal terms and conditions. In consideration of providing its services pursuant to the Company and for its role in identifying, enabling and carrying out the listing of the Company, RCA was issued shares and options equal to an amount of one-third of the consideration received by the original shareholders of the company. RCA was responsible for introducing the Company to Exelint International Co and enabling the transaction and terms of the Alliance Agreement pursuant to which the company will achieve its first revenue stream. RCA was issued 8,000,000 shares and 4,000,000 options in the Company, and received $200,000 cash in performing this mandate.

• iii. Payment for reimbursed costs in respect of patent/trademark application costs and product development was paid to existing shareholders. Included in this payment was an amount to John Riemelmoser and Concettina Riemelmoser as trustee for the John & Tina Riemelmoser Family Trust of which John Riemelmoser is a beneficiary.

• iv. Payment for reimbursed costs in respect of patent/trademark application costs and product development was paid to existing shareholders. Included in this payment was an amount to Johann Riemelmoser and Janet Riemelmoser as trustee for the Riemelmoser Family Trust of which John Riemelmoser is a beneficiary, and Johann Riemelmoser and Janet Riemelmoser are related parties to John Riemelmoser.

• v. Legal and professional services fees paid to Bruce Hocking in connection with the listing of the Company.

• vi. Legal fees paid to Bruce Hocking to perform the role of legal counsel for the Company, and be paid at the normal commercial rate.

• Mr M Boland ceased to be Director and a member of key management personnel with the Company on 27 June 2007.

No amounts are receivable from or payable to key management personnel at reporting date arising from these transactions.

Page 32

Safety Medical Products Limited 30 June 2007 Annual Financial Report

Notes to the financial statements

30 Related parties (continued)

Options over equity instruments

The movement during the reporting period in the number of options over ordinary shares in Safety Medical Products Limited held, directly, indirectly or beneficially, by each key management personnel, including their related parties, is as follows:

							Vested and
						Held at	exercisable
	Held at	Granted as	Other net			30 June	at 30 June
	1 July 2006	remuneration	changes (3)	Exercised	Lapsed	2007	2007 (1)
Directors
Mr John Darley and related parties	1,030,000	-	305,068	(30,000)	-	1,305,068	1,305,068
Mr John
Riemelmoser and	6,115,000	-	6,536,947	(105,000)	-	12,546,947	12,546,947
related parties
Dr Joseph Nicholas	1,025,000	-	300,000	-	-	1,325,000	1,325,000
Mr Marcus Boland
and related parties (ceased 27 June 2007) (2)	4,197,500	-	4,337,706	(200,000)	-	8,335,206	8,335,206
		-		-
Executives		-		-
Mr B Hocking	1,500,000	-	673,750	(1,000,000)	-	1,173,750	1,173,750
Mr Robert Doley and related parties	-	-	1,475,000	(250,000)	-	1,225,000	1,225,000
Mr Trevor Sharpe	-	-	-	-	-	-	-
							Vested and
						Held at	exercisable
	Held at	Granted as	Other net			30 June	at 30 June
	1July 2005	remuneration	changes (1)	Exercised	Lapsed	2006	2006
Directors
Mr John Darley and related parties	-	1,000,000	30,000	-	-	1,030,000	1,030,000
Mr John
Riemelmoser and	4,230,000	-	1,885,000	-	-	6,115,000	6,115,000
related parties
Dr Joseph Nicholas	-	1,000,000	25,000	-	-	1,025,000	1,025,000
Mr Marcus Boland
and related parties (ceased 27 June 2007) (2)	-	-	4,197,500	-	-	4,197,500	4,197,500
Executives
Mr B Hocking	-	1,500,000	-	-	-	1,500,000	1,500,000

No options held by key management personnel are vested but not exercisable at 30 June 2006 or 2007.

• 1) Options issued under a bonus issue which occurred on 1 August 2005. All shareholders were issued one free option for every three shares held.

• 2) Four million options issued to Resource Capital Australia Pty Limited, a company associated with Marcus Boland, for carrying out and completing the listing of the company.

• 3) Options issued under a bonus issue which occurred on 26 April 2007. All shareholders were issued one free option for every two shares held.

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Safety Medical Products Limited 30 June 2007 Annual Financial Report

Notes to the financial statements

30 Related parties (continued)

Movement in shares

The movement during the reporting period in the number of ordinary shares of Safety Medical Products Limited held, directly, indirectly or beneficially, by each key management personnel, including their related parties is as follows:

			Received on		Held at
	Held at	Granted as	exercise of	Other net	30 June
	1 July 2006	remuneration	options	changes (1)	2007
Directors
Mr John Darley and related parties	560,000	-	30,000	20,133	610,133
Mr John Riemelmoser and related parties	12,155,470	-	105,000	813,422	13,073,892
Dr Joseph Nicholas	550,000	-	-	50,000	600,000
Mr Marcus Boland and related
parties (ceased 27 June 2007) (2)	8,285,000	-	200,000	(151,500)	8,333,500
Executives
Mr B Hocking	512,500	-	1,000,000	(165,000)	1,347,500
Mr Robert Doley and related parties	-	-	250,000	2,200,000	2,450,000
Mr Trevor Sharpe	-	-	-	-	-
			Received on		Held at
	Held at	Granted as	exercise of	Other net	30 June
	1 July 2005	remuneration	options	changes (2)	2006
Directors
Mr John Darley and related parties	-	500,000	-	60,000	560,000
Mr John Riemelmoser and related parties	8,460,470	-	-	3,695,000	12,155,470
Dr Joseph Nicholas	-	500,000	-	50,000	550,000
Mr Marcus Boland and related
parties (ceased 27 June 2007) (2)	-	-	-	8,285,000	8,285,000
Executives
Mr B Hocking	-	500,000	-	12,500	512,500

• 1) Mr R Doley received 1,500,000 shares in the Company as consideration for the sale of Baratex Pty Ltd, trading as ProControl Systems, to the Company.

• 2) 8 million shares were issued to Resource Capital Australia Pty Limited, a company associated with Mr M Boland, for carrying out and completing the listing of the Company on ASX. Mr J Riemelmoser and related parties received 3,695,000 shares in the Company on 1 August 2005 as part of a bonus issue to all shareholders at that date.

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Notes to the financial statements

Safety Medical Products Limited 30 June 2007 Annual Financial Report

30 Related parties (continued)

Non-key management personnel disclosures

Subsidiaries

Loans are made by the Company to wholly owned subsidiaries for working capital and capital purchases. The loans outstanding between the Company and its subsidiaries have no fixed date of repayment and are non-interest bearing. During the financial year ended 30 June 2007, such loans to subsidiaries totalled $4,350,000 (2006: $nil). These loans have been recognised as an additional investment in the subsidiaries.

Other related parties

Key management persons related parties

For details of these transactions refer to key management personnel related disclosures.

31 Dividends

No dividends were paid or proposed in the current or prior financial years.

32 Events subsequent to reporting date

Other than as detailed above, there has not been any matter or circumstance, other than that referred to in the financial statements or notes thereto, that has arisen since the end of the financial year, that has significantly affected, or may significantly affect, the operations of the Company and the consolidated entity, the results of those operations, or the state of affairs of the Company and the consolidated entity in future financial years.

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