RAIDEN RESOURCES LIMITED — Interim / Quarterly Report 2005

Feb 27, 2005

MEDICAL MONITORS LIMITED ABN 68 009 161 522 HALF-YEAR FINANCIAL REPORT 31 DECEMBER 2004

Directors' Report

The directors present their report together with the consolidated financial report for the half-year ended 31 December 2004, and the auditor's review report thereon.

Directors

The directors of the Company during or since the end of the half-year are:

Dr Allan Shell (Managing Director, Acting Chairman and Chief Medical Officer) Director since 18 June 2001

Mr John Genner (Non-Executive Director) Director since 18 June 2001

Mr Harry Platt (Operations Director) Director since 18 June 2001

Mr Boris Patkin (Non-Executive Director) Director since 16 February 2004

Mr Neville Buch (Non-executive Director) Director since 16 February 2004

Operating Results

The consolidated entity earned revenues of $118,957 for the half-year to 31 December 2004, and posted a loss after tax, of $2,801,238 (after amortisation and depreciation expenses of $703,028 and a write-down in the value of capitalised research and development costs and inventory totalling $721,301). This compares to a net loss of $2,162,706 for the corresponding period in 2003.

Review of Operations

• The Company has completed initial sales with major pharmaceutical companies and with established $\bullet$ clinical research units over the 2003 and 2004 financial vears. Company representatives are in discussion with these and other pharma companies in Australia, and expect that further major sales will be achieved in FY 2005 from these customers.
• The directors have announced that a new cardiac monitoring entity in the USA, iCardia Healthcare, has been operational since October, 2004, as part of plans to market the company's products through a new (UK based) channel. Primedical International. Discussions are now well advanced with strategic partners to capitalise this company to distribute the company's products and deliver monitoring services in these USA, the UK and European markets. The directors remain confident for the successful completion of this necessary capital raising.
• More recently, the Company announced the establishment of a business venture that will specifically $\bullet$ target the roll out of product and services into Canada. The directors remain confident that this project will be also be successful.

Review of Operations (cont)

The consolidated entity's ability to generate positive net cash flow in the twelve months from the date of this report as contemplated in the business plan, is dependent on a number of factors but primarily on its ability to successfully fund and develop its business in the US / Canada and UK / European markets, and the continued supply of monitoring devices from the manufacturer on a timely basis. The directors believe that the company has sufficient working capital arrangements in place to be able to achieve its objectives as contemplated in its business plan, however the company may need to raise further capital to fund the further development of its international operations.

Subsequent Events

Subsequent to balance date, the company has raised additional capital of $750,000, as approved at the Annual General Meeting, 29 November 2004. The shares have been issued from part of that approved allotments. The additional funds are for working capital and marketing expansion, particularly for the USA opportunity.

In February 2005, the repayment terms of loans received from Directors and Officers of the company totalling $527,524 ($539,873 including accrued interest) were amended such that these loans are no longer repayable for a period of at least 12 months from the date of this financial report.

Additionally, in February 2005, the company secured a new $1 million line of credit in order to provide working capital. The facility matures in June 2006.

Lead Auditor's Independence Declaration under Section 307C f the Corporations Act.

The lead auditor's independence declaration is set out on page 3 and forms part of the directors' report for the half year ended 31 December 2004.

Signed in accordance with a resolution of the Directors.

Dr Allan Shell Director

Sydney, 28th February 2005

Lead Auditor's Independence Declaration under Section 307C of the Corporations Act 2001

To the directors of Medical Monitors Limited

I declare that, to the best of my knowledge and belief, in relation to the review for the half-year ended 31 December 2004 there have been:

• no contraventions of the auditor independence requirements as set out in the Corporations Act $(i)$ 2001 in relation to the review; and
• $(ii)$ no contraventions of any applicable code of professional conduct in relation to the review.

$KRM$

KPMG

$\boldsymbol{a}$

John Wigglesworth Partner

Sydney 28th February 2005

Directors' Declaration

In the opinion of the Directors of Medical Monitors Limited ("the Company"):

• The financial statements and notes, set out on pages 5 to 23, are in accordance with the Corporations $(a)$ Act 2001, including:
  • $(i).$ Giving a true and fair view of the financial position of the Consolidated Entity as at 31 December 2004 and of its performance, as represented by the results of its operations and its cash flows, for the half-year ended on that date; and
  • Complying with Accounting Standard AASB 1029 "Interim Financial Reporting" and the $(ii).$ Corporations Regulations 2001; and
• $(b)$ There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Dated at Sydney, this 28th day of February, 2005

Signed in accordance with a resolution of the Directors.

Dr. A. SHELL Director

Appendix 4D

Half-Year Financial Report

Name of entity MEDICAL MONITORS LIMITED Financial period ended ('current period') ABN or equivalent company reference 68 009 161 522 31 DECEMBER 2004 For announcement to the market Six months to 31 December 2004 SAUD Revenues from ordinary activities down $16%$ 118,957 $\mathbf{t}$ Loss from ordinary activities after tax attributable 30 % $(2,801,238)$ $up$ $\mathbf{f}_0$ to members Loss from extraordinary items after tax attributable gain to members) $(doss)$ Net profit (loss) for the period attributable to 30 % to $(2,801,238)$ $up$ members Dividends (distributions) Amount per security Franked amount per security Final dividend Nil $\epsilon$ Nil $\acute{e}$ Nil $\acute{e}$ Nil $\acute{e}$ Previous corresponding period +Record date for determining entitlements to the $N/A$ dividend (in the case of a trust, distribution)

There are no dividend reinvestment plans in operation. No dividends have been declared or paid during the current or previous financial year.

Consolidated statement of financial performance

Revenue and expenses from ordinary activities	Six months to31 December 2004	Six months to31 December 2003
	SAUD	SAUD
Revenue from sales of goods	22,628	80,178
Revenue from rendering of services	71,678	51,254
Interest revenue	2,719	5,797
Other revenue	21,932
Government Grants
Discontinuing operations
Revenue from sale of mining interest		5,000
Total revenues from ordinary activities	118,957	142,229
Details of relevant expenses:
Continuing Operations
Changes in inventories of finished goods	(16,519)	(36, 130)
Write-down in value of inventory	(330, 873)
Occupancy expenses	(128, 838)	(89,035)
Staff expenses	(314, 421)	(331,222)
Administration expenses	(93, 454)	(96, 244)
Consulting and professional services fees	(451,900)	(432, 794)
Foreign exchange loss/(gain)	(22, 357)	5,839
International marketing expenses	(287, 857)	(332, 397)
Depreciation & amortisation	(703, 028)	(728, 400)
Write-down in value of capitalised R&D	(390, 428)
Borrowing costs	(45, 142)	(146, 441)
Other expenses	(135,377)	(113,111)
Discontinuing operations		(5,000)
Cost of mining interests sold
Total expenses from ordinary activities	(2,920,195)	(2,304,935)
Share of net profits (losses) of associates and
joint venture entities
Profit (loss) from ordinary activities before	(2,801,238)	(2,162,706)
tax
Income tax on ordinary activities

	Six months to	Six months to
	31 December 2004	31 December 2003
	SAUD	SAUD
Profit (loss) from ordinary activities after	(2,801,238)	(2,162,706)
taxProfit (loss) from extraordinary items aftertax
Net profit (loss)	(2,801,238)	(2,162,706)
Net profit (loss) attributable to outside
+ equity interests
Net profit (loss) for the period attributable
to members	(2,801,238)	(2,162,706)

There have been no non-owner transaction changes in equity during the current or previous corresponding period

Earnings per security (EPS)	Six months to31 December 2004SAUD	Six months to31 December 2003$AUD
Basic EPS	$(1.20)$ cents	$(1.15)$ cents
Diluted EPS	$(1.20)$ cents	$(1.15)$ cents

Profit (loss) from ordinary activities attributable to members

	Six months to	Six months to
	31 December 2004	31 December 2003
	$AUD	SAUD
Profit (loss) from ordinary activities after tax	(2,801,238)	(2,162,706)
Less (plus) outside $+$ equity interests
Profit (loss) from ordinary activities after	(2,801,238)	(2,162,706)
tax, attributable to members

Consolidated retained profits

	Six months to	Six months to
	31 December 2004	31 December 2003
	SAUD	SAUD
Retained profits (accumulated losses) at the	(27,551,407)	(23,410,285)
beginning of the financial period
Net profit (loss) attributable to members	(2,801,238)	(2,162,706)
Net transfers from (to) reserves
Net effect of changes in accounting policies
Dividends and other equity distributions paid
or payable
Retained profits (accumulated losses) at	(30, 352, 645)	(25, 572, 991)
end of financial period

Consolidated statement of financial position	As at	As at
	31 December	30 June 2004
	2004 $AUD	SAUD
Current assets
Cash	214,168	341,800
Receivables	93,433	187,407
Prepayments	222,949	434,240
Inventories	373,170	390,557
Total current assets	903,720	1,354,004
Non-current assets
Other property, plant and equipment (net)	293,398	328,181
Intangibles (net)	4,644,640	5,204,591
Capitalised Research & Development costs		696,334
(net)
Other	6,775	153,138
Total non-current assets	4,944,813	6,382,244
Total assets	5,848,533	7,736,248
Current liabilities
Payables	1,260,817	1,010,156
Deposits for undelivered sales	295,714
Interest bearing liabilities	1,272,304	448,425
Provisions for employee entitlements	64,604	49,005
Total current liabilities	2,893,439	1,507,586
Non-current liabilities
Interest bearing liabilities	44,947	712,369
Total non current liabilities	44,947	712,369
Total Liabilities	2,938,386	2,219,955
Net Assets	2,910,147	5,516,293

Consolidated statement of financial position	As at	As at
	31 December 2004	30 June 2004
	$AUD	SAUD
Equity
Capital/contributed equity	32,769,640	32,574,548
Reserves	493,152	493,152
Retained profits (accumulated losses)	(30, 352, 645)	(27, 551, 407)
Equity attributable to members of the parententityOutside $+$ equity interests in controlled entities	2,910,147	5,516,293
Total equity	2,910,147	5,516,293

w. .ъu.	.

Consolidated statement of cash flows

Cash flows related to operating activities	Six months to31 December 2004SAUD	Six months to31 December 2003SAUD
Receipts from customers	515,235	139,183
Payments to suppliers and employees	(979, 223)	(1,421,492)
Interest and other items of similar naturereceived	2,011	5,797
Interest and other costs of finance paid	(95, 533)	(146, 441)
Income taxes paid
Net operating cash flows	(557, 510)	(1, 422, 953)
Cash flows related to investing activities
Payment for purchases of property, plant	(69, 492)	(22,957)
and equipment
Investment proceeds from sale of mining		5,000
interests
Payment for Security Deposits		939
Proceeds from Government Grants	281,737	289,076
Net investing cash flows	212,245	272,058

	Six months to	Six months to
Cash flows related to financing activities	31 December 2004	31 December 2003
	SAUD	SAUD
Proceeds from issues of securities (shares,
options, etc.)	200,000	1,722,039
Payments for share buyback	(189,214)
Proceeds from borrowings	527,525
Repayment of borrowings	(320, 678)	(306,308)
Net financing cash flows	217,633	1,415,731

Net increase (decrease) in cash held	(127, 632)	264,836
Cash at beginning of period	341,800	89,773
(see Reconciliation of cash)
Exchange rate adjustments	$\overline{r}$
Cashat end of period(see Reconciliation of cash)	214,168	354,609

Non-cash financing and investing activities

Reconciliation of cash

Reconciliation of cash at the end of the period (as	Six months to	Six months to
shown in the consolidated statement of cash flows) to	31 December 2004	31 December 2003
the related items in the accounts is as follows.	$AUD	$AUD
Cash on hand and at bank	214,168	354,609
Deposits at call
Bank overdraft
Other (provide details)	$\blacksquare$
Total cash at end of period	214,168	354,609

Earnings per security (EPS)

÷. Details of basic and diluted EPS reported separately in accordance with paragraph 9 and 18 of AASB 1027: Earnings Per Share has been calculated as follows: Weighted average of 234,095,206 fully paid ordinary shares over 183 days to 31 December 2004.

NTA backing	As at	As at
	31 December	30 June 2004
	2004 $AUD	SAUD
Net tangible asset backing per ordinary security	$(0.74)$ cents	$(0.89)$ cents

Control gained over entities having material effect

Name of entity (or group of entities)

N/A

Loss of control of entities having material effect

Name of entity (or group of entities)

'NT.N/A

Details of investments in associates and joint venture entities

Medical Monitors Limited has a 50% interest in Care Medical Limited, a company incorporated in the UK. Care Medical Limited did not trade during the period.

$\blacksquare$ Statement of significant accounting policies

Basis of preparation of half-year financial report a)

The half-year consolidated financial report is a general purpose financial report which has been prepared in accordance with Accounting Standard AASB 1029 "Interim Financial Reporting". the recognition and measurement requirements of applicable AASB standards, Urgent Issues Group Consensus Views and other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. This half-year financial report is to be read in conjunction with the 30 June 2004 Annual Financial Report and any public announcements by Medical Monitors Limited and its controlled entities during the half-vear in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

It has been prepared on the basis of historical costs and except where stated, does not take into account changing money values or current valuations of non-current assets.

These accounting policies have been consistently applied by each entity in the economic entity and, except where there is a change in accounting policy, are consistent with those applied in the 30 June 2004 Annual Financial Report.

This half-year financial report does not include full note disclosures of the type normally included in an annual financial report.

$\mathbf{b}$ Going concern

The financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and settlement of liabilities in the ordinary course of business. The consolidated entity incurred an operating loss of $2,801,238 for the half-vear ended 31 December 2004, which included depreciation and amortisation charges of $703,028 and the write-down in the value of capitalised research and development costs and inventory totalling $721,301. The Statement of Financial Position at 31 December 2004 shows a deficiency of net current assets of $1,989,719. The directors nevertheless believe that it is appropriate to prepare the financial statements on a going concern basis for the following reasons:

• Subsequent to balance date, the company has raised additional capital of $750,000 and re- $\bullet$ negotiated the repayment terms of loans from directors and officers totalling $539,873 such that these loans will not be repayable until at least 12 months from the date of this financial report. Additionally, the company has also obtained a new $1 million line of credit to provide additional working capital. Refer to Note 4.
• The directors understand that the proposed capital raising of its strategic partner, Primedical $\bullet$ International Plc ('PMI''), is progressing. PMI has exclusive distribution rights for the company's products and services in the USA, UK and European Community countries. The directors understand that the successful completion of this capital raising will allow PMI to make substantial orders under the agreement. PMI has commenced distribution of the Company's PER heart monitor product (the suPER) in the US through its subsidiary company, iCardia Inc.

$\mathbf{1}$ Statement of significant accounting policies (cont)

• The directors are in discussions with interested parties in relation to the distribution rights of $\bullet$ the company's products in Asia and Canada.
• As discussed in Note 2, the Company has applied to the Commonwealth for a waiver of its R&D Start Concessional Loan ("R&D Loan"). The Directors understand that the application for waiver is currently being considered and the Company has been advised that the Commonwealth is unlikely to seek recovery of the $R&D$ Loan until the request for waiver has been finally determined. In the event that the waiver is not granted, the directors will seek to agree re-scheduled repayment terms with the Commonwealth.
• The directors believe that the company has sufficient working capital arrangements in place $\bullet$ to be able to achieve its objectives as contemplated in its business plan, however the company may need to raise further capital to fund the further development of its international operations.

The consolidated entity's ability to generate positive net cash flow in the twelve months from the date of this report as contemplated in the business plan, is dependant on a number of factors but primarily on its ability to successfully fund and develop its business in both the US and UK / European markets, and the continued supply of monitoring devices from the manufacturer on a timely basis.

If the Company is unable to successfully develop the business as contemplated in the business plan, alternative strategies may be employed to either raise additional capital or debt funding, or reduce expenditure through a scale back of the international marketing strategies.

In the event that the Company does not meet its planned revenue and cash flow targets, or does not successfully adopt alternative strategies in the period to 28 February 2006, the Company may not be able to realise its assets and extinguish its liabilities in the normal course of business at the amounts stated in the financial report. Accordingly, the going concern basis used in the preparation of the financial report would not be appropriate.

Recoverable amount of Non Current Assets $\mathbf{c}$

In assessing the recoverable amount/recoverability of non-current assets, including intangibles, capitalised research and development, loans and investments in controlled entities, the directors have assessed the market potential of the Company's products and related sales forecasts, and the status of negotiations with other potential strategic partners including parties interested in developing sales and distribution channels for the company's products in Canada and Asia.

The directors have also considered the key assumptions underlying the cash flow forecasts and believe them to be reasonable based on information available at the date of this report. As disclosed in Note 1 b), the company's cash flow forecasts assume that the company's strategic partner. Primedical International Plc, will successfully complete its proposed UK capital raising and successfully establish sales and distribution networks for the company's products in the USA, UK and Europe.

$\overline{2}$ Restated presentation of R&D Start Concessional Loan

In preparing the accounts for the year ending 30 June 2004 and in prior periods subsequent to 30 June 2002, the directors have considered amounts payable to the Commonwealth under the R&D Start Concessional Loan ("R&D Loan") to be a non-current liability. In 2001, the Company commenced negotiations with AusIndustry in relation to the re-structuring of the repayment terms of the Ioan. The Executive Directors representing the company have advised that they received representations received from AusIndustry that repayment terms could be re-scheduled and that no payment would be demanded until such time as the formal re-scheduling was agreed. During these discussions AusIndustry representatives also recommended that the Company could consider applying for a waiver of the debt.

The directors understand that the application for waiver is currently being considered by the Commonwealth and the Company has been advised that the Commonwealth is unlikely to seek recovery of the R&D Loan until the request for waiver has been finally determined. In the event that the waiver is not granted, the directors will seek to agree re-scheduled repayment terms with the Commonwealth.

The Commonwealth has advised that, notwithstanding the representations received from AusIndustry and the application for waiver of debt, that the R&D Loan is due and payable. Subsequent to the finalisation of the June 2004 financial report, the company has obtained its own legal advice that has confirmed the Commonwealth's position that the loans are technically due and payable. Accordingly, the R&D Loan and accrued interest totaling $539,071 has been classified as a current liabilities at 31 December 2004. Had the R&D loan been presented as a current liability as at 30 June 2004, current interest bearing liabilities would have increased by $519,759 whilst non current interest bearing liabilities would have decreased by the same amount. A re-stated statement of financial position as at 30 June 2004 is set out below:

Consolidated statement of financial position	As at 30 June 2004
	SAUD
Current assets
Cash	341,800
Receivables	187,407
Prepayments	434,240
Inventories	390,557
Total current assets	1,354,004
Non-current assets
Other property, plant and equipment (net)	328,181
Intangibles (net)	5,204,591
Capitalised Research & Development costs (net)	696,334
Other	153,138
Total non-current assets	6, 382, 244
Total assets	7,736,248

Restated presentation of R&D Start Concessional Loan (cont) $\overline{2}$

Consolidated statement of financial position	As at 30 June2004
	$AUD
Current liabilities
Payables	1,010,156
Interest bearing liabilities	968,184
Provisions exc. tax liabilities	49,005
Total current liabilities	2,027,345
Non-current liabilities
Interest bearing liabilities	192,610
Total non current liabilities	192,610
Total Liabilities	2, 219,955
Net Assets	5,516,293
Equity
Capital/contributed equity	32,574,548
Reserves	493,152
Retained profits (accumulated losses)	(27, 551, 407)
Equity attributable to members of the	5,516,293
parent entityOutside $+$ equity interests in controlled
entities
Total equity	5,516,293

Additional notes to Appendix 4D

Segment reporting $\overline{\mathbf{3}}$

Primary Segment Reporting: - Business Segment	Consolidated
	Six months to	Six months to
	31 Dec 2004	31 Dec 2003
	$AUD	$AUD
Segment Revenue:
	118,957	131,432
Medical Monitoring and Diagnostic Services		5,000
Mining Exploration
	118,957	136,432
Total Segment Revenue
Unallocated Revenue		5,797
	118,957	142,229
Total Revenue (There are no inter-segment revenues)
Segment Result:
	(2,801,238)	(2,162,706)
Medical Monitoring Diagnostic Services
Mining Exploration (discontinuing operation)
	(2,801,238)	(2,162,706)
Segment result:
Unallocated corporate expenses

Additional notes to Appendix 4D

Segment reporting (continued) $\overline{\mathbf{3}}$

Primary Segment Reporting: - Business Segment	Consolidated
	Six months to31 Dec 2004$AUD	Six months to31 Dec 2003SAUD
Loss from ordinary activities before income tax	(2,801,238)	(2,162,706)
Income tax benefit
Net loss	(2,801,238)	(2,162,706)
Depreciation and amortisation of fixed assets - MedicalMonitoring and Diagnostic Services	104,275	90,824
Amortisation of intangibles - Medical Monitoring andDiagnostic Services	598,753	637,576
Write-down in value of inventory-Medical Monitoringand Diagnostic Services	330,873
Write-down in value of capitalised R&D- MedicalMonitoring and Diagnostic Services	390,428
Segment Assets:
Medical Monitoring Diagnostic Services	5,848,533	8,237,110
Mining Exploration (discontinuing operation)
Total Assets	5,848,533	8,237,110
Segment Liabilities:
Medical Monitoring Diagnostic Services	2,938,386	2,418,411
Mining Exploration
Unallocated corporate liabilities
Total Liabilities	2,938,386	2,418,411

Additional notes to Appendix 4D

Segment reporting (continued) $\overline{\mathbf{3}}$

Secondary Segment Reporting:- Geographical		Consolidated
	Six months to31 Dec 2004$AUD	Six months to31 Dec 2003SAUD
Segment Revenue:
Australia	114,047	72,714
Italy*		16,395
$USA*$	4,910	53,120
UK
Total Revenue	118,957	142,229
Segmented Assets by Location of Assets
Australia	5,812,415	8,216,042
UK	17,527	6,489
USA	18,591	14,579
Total Assets	5,848,533	8,237,110

$\boldsymbol{4}$ Subsequent Events

International Financial Reporting Standards

The Company will be required to prepare financial statements using Australian Standards that comply with International Financial Reporting Standards (IFRS), beginning with the half year ending 31 December 2005.

The Board of Directors has obtained professional advice in relation to the significant differences between Australian Accounting Standards and International Financial Reporting Standards (IFRS) affecting the company and is monitoring the IFRS reporting implications of proposed transactions. Based on advice received, no significant changes to systems or policies are expected, except as noted below.

Significant differences between Australian Accounting Standards and IFRS

The half-year financial report has been prepared in accordance with Australian Accounting Standards and other financial reporting requirements (Australian GAAP). The differences between Australian GAAP and IFRS identified to date as potentially having a significant effect on the Consolidated Entity's financial performance and financial position are summarised below.

The summary should not be taken as an exhaustive list of all the differences between Australian GAAP and IFRS. No attempt has been made to identify all disclosures, presentation or classification differences that would affect the manner in which transactions or events are presented.

The consolidated entity has not quantified the effects of the differences discussed below. Accordingly, there can be no assurances that the consolidated financial performance and financial position as disclosed in this financial report would not be significantly different if determined in accordance with IFRS.

Regulatory bodies that promulgate Australian GAAP and IFRS have significant ongoing projects that could affect the differences between Australian GAAP and IFRS described below and the impact of these differences relative to the consolidated entity's financial reports in the future. The potential impacts on the consolidated entity's financial performance and financial position of the adoption of IFRS, including system upgrades and other implementation costs which may be incurred, have not been quantified as at the transition date of 1 July 2004 as further work required to complete this assessment. The impact on future years will depend on the particular circumstances prevailing in those years.

$\boldsymbol{\Delta}$ Subsequent Events (continued)

(a) Research and development costs

The Consolidated Entity currently expenses all development expenditures as incurred through the statement of financial performance except to the extent that its recovery is assured beyond reasonable doubt, in which case it is capitalised. IFRS requires that development costs be capitalised to the statement of financial position to the extent they meet certain recognition criteria including the ability to demonstrate the technical feasibility of developing an asset so that it will be available for use or sale and whether the development costs will generate probable economic benefits.

The company is still completing its assessment of development costs incurred in the period to 1 July 2004 to determine whether their costs meet the criteria for deferral under IFRS. Depending on the outcome of this assessment, an initial adjustment may be made to retained profits at 1 July 2004 to the extent that previously expensed development costs are capitalised, or alternatively, previously capitalised costs are expensed. After the transitional adjustment, development costs that satisfy the criteria for deferral will be capitalised to the statement of financial position and amortised to net profit over the period that the benefits are expected to be realised.

(b) Options and share based payments

Equity based compensation in the form of shares and options will be recognised as an expense in the period during which the employee provides related services. The consolidated entity does not currently recognise an expense for options issued to employees, unless the options were issued in consideration for past services performed. On adoption of IFRS the consolidated entity will recognise an expense for options and will amortise the expense over the relevant vesting period

(c) Goodwill

Goodwill will be tested for impairment annually with decrements in carrying value recognised in the statement of financial performance. Goodwill will no longer be amortised, resulting in a change in accounting policy as goodwill is currently amortised over a period not exceeding 5 years.

(d) Income tax

The Consolidated Entity currently applies the "income statement" approach to account for income tax. Under IFRS, a "balance sheet" approach will be adopted, whereby deferred tax balances are recognised in the statement of financial position when there is a difference between the carrying value of an asset or liability and its tax cost base. The impact on the statement of financial position and earnings is not expected to be material.

$\boldsymbol{\Delta}$ Subsequent Events (continued)

(e) Asset Impairment

Under AASB 136, the recoverable amount of Property, Plant and Equipment and Intangibles is determined as the higher of fair value less cost to sell and value in use. This will result in a change in the group's current accounting policy which determines the recoverable amount of an asset on the basis of undiscounted cash flow. Under the new policy it is likely that impairment of assets will be recognised sooner and that the amount of write downs will be greater. Reliable estimation of the future financial effects of this change in accounting policy is impracticable because the conditions under which impairment will be assessed are not yet known.

(f) Business Combinations

Under the IFRS transition rules prescribed by AASB 1, the company can elect to restate previous business combinations in accordance with AASB 3 Business Combinations. Application of AASB 3 could result in changes to the value of Goodwill and Intangibles recognised on the statement of financial position, potentially reducing the level of future amortisation charges and the stated value of intangible assets. The Company is currently assessing the potential impacts of restating its previous business combinations. As at the date of this report, no determination has been made as to whether previous business combinations will be restated.

Capital Raising

Subsequent to balance date, the company has raised additional capital of $750,000, as approved at the Annual General Meeting, 29 November 2004. The shares have been issued from part of that approved allotments. The additional funds are for working capital and marketing expansion. particularly for the USA opportunity.

Directors and officers loans

In February 2005, the repayment terms of loans received from Directors and Officers of the company totalling $527,524 ($539,873 including accrued interest) were amended such that these loans are no longer repayable for a period of at least 12 months from the date of this financial report.

Line of credit

In February 2005, the company has obtained a new $1 million line of credit. The facility expires on 30 June 2006. Interest is payable at the Westpac Banking Corporation overdraft rate for business accounts plus a premium of $1.5%$ .

$\overline{5}$ Contingent Assets and Liabilities

The Company is in negotiation with its strategic partners in relation to the repayment of $181.663 of monies advanced to those parties to fund the establishment of international sales and distribution businesses, principally in the US and UK. These costs have been expensed as International Marketing Expenses during the period.

As reported in the financial report for the year ended 30 June 2004, the Company is in dispute with the Directors of a UK based company, Primary Care Group plc (PCG), which has a 50% joint venture interest in Care Medical Limited (UK). There have been no further developments in relation to this matter. The Directors are of the opinion that the matter will be resolved favourably in due course and with no significant further cost to the Company.

6 Analysis of Current Liabilities

	31 December 2004	30 June 200(restated)
Payables
- trade creditors	589,109	186,739
- Director and officer related entities	214,258	463,232
- accruals	269,076	309,077
- deposits collected on future share issues	181,407	24,304
- unearned income	6,967	26,804
Deposits for undelivered sales	295,714
Interest bearing liabilities
- R&D Start concessional loan	539,071	519,759
- Loans from directors and officers	539,873
- Unsecured third party loans		284,405
- Lease liabilities	193,360	164,020
Provisions for employee entitlements	64,604	49,005
Total current liabilities	2,893,439	2,027,345

Independent review report to the members of Medical Monitors Limited

Scope

The financial report and directors' responsibility

The financial report in the form of Appendix 4D of the Australian Stock Exchange Listing Rules. comprises the statement of financial performance, statement of financial position, statement of cash flows, accompanying notes as set out on pages 5 to 23, and the directors' declaration, for Medical Monitors Limited and its controlled entities ("the Consolidated Entity), for the half-year ended 31 December 2004. The Consolidated Entity comprises Medical Monitors Limited ("the Company") and the entities it controlled during that half-year.

The directors of the Company are responsible for the preparation and true and fair presentation of the financial report in accordance with the Corporations Act 2001. This includes responsibility for the maintenance of adequate accounting records and internal controls that are designed to prevent and detect fraud and error, and for the accounting policies and accounting estimates inherent in the financial report.

Review approach

We have conducted an independent review of the financial report of Medical Monitors Limited ("the Company") for the half-year ended 31 December 2004 in the form of Appendix 4D of the Australian Stock Exchange Listing Rules, consisting of the statement of financial performance, statement of financial position, statement of cash flows, accompanying notes as set out on pages 5 to 23, and the directors' declaration, but excluding the following section:

(a) NTA backing (page 11).

This review has been conducted in order for the Company to lodge the financial report with the Australian Securities and Investments Commission. Our review was conducted in accordance with the Australian Auditing Standards applicable to review engagements.

We have performed procedures in order to state whether, on the basis of procedures described, anything has come to our attention that would indicate that the financial report does not present fairly in accordance with the Corporations Act 2001, Australian Accounting Standard AASB 1029 "Interim Financial Reporting" and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the Consolidated Entity's financial position and of its performance as represented by the results of its operations and its cash flows.

We formed our statement on the basis of the review procedures performed, which were limited primarily for.

• Enquiries of company personnel; and $\blacksquare$
• Analytical procedures applied to the financial data.

While we considered the effectiveness of management's internal controls over financial reporting when determining the nature and extent of our procedures, our review was not designed to provide assurance on internal controls.

The procedures do not provide all the evidence that would be required in an audit, thus the level of assurance is less than given in an audit. We have not performed an audit, and accordingly, we do not express an audit opinion.

ABCD

A review cannot guarantee that all material misstatements have been detected.

Independence

In conducting our review, we followed applicable independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Statement

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Medical Monitors Limited is not in accordance with:

• the Corporations Act 2001, including: a)
  • i. giving a true and fair view of the Consolidated Entity's financial position as at 31 December 2004 and of its performance for the half-year ended on that date; and
  • $ii$ complying with Australian Accounting Standard AASB 1029 "Interim Financial Reporting" and the Corporations Regulations 2001; and
• $\mathbf{b}$ other mandatory financial reporting requirements in Australia.

Inherent uncertainty regarding continuation as a going concern

Without qualification to the opinion expressed above, attention is drawn to the following matter. As a result of matters described by the Directors in Additional Note 1(b), there is inherent uncertainty surrounding the ability of the consolidated entity to continue as a going concern and therefore realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

Should the consolidated entity be unable to achieve the matters referred to in Additional Note 1(b), the consolidated entity may not be able to realise the full value of its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

${\cal X}$ PM

KPMG

John Wigglesworth Partner Sydney, 28th February 2005