GENESIS BIOMEDICAL LTD

A.B.N. 48 083 274 024

ANNUAL FINANCIAL REPORT

for the year ended 30 June 2003

CORPORATE DIRECTORY	1
REVIEW OF OPERATIONS	$\mathbf{2}$
DIRECTORS' REPORT	4
STATEMENT OF FINANCIAL PERFORMANCE	9
STATEMENT OF FINANCIAL POSITION	11
STATEMENT OF CASH FLOWS	12.
NOTES TO THE FINANCIAL STATEMENTS	13
DIRECTORS' DECLARATION	50.
INDEPENDENT AUDIT REPORT	51
ASX ADDITIONAL INFORMATION	53
CORPORATE GOVERNANCE STATEMENT	56

CORPORATE DIRECTORY

GENESIS BIOMEDICAL LTD A.B.N. 48 083 274 024

Directors

Mr Rupert J Northcott Non-executive Director

Dr Robert F Gilmour Non-executive Director

Mr Emmanuel Correia Non-executive Director

Mr Adam Davey Non Executive Director

Joint Company Secretaries

Mr Michael A Musso Mr Shane Hartwig

Registered Office

Level 5, 52 Phillip Street SYDNEY New South Wales 2000 Telephone: 02 9252 8455 Facsimile: 02 9252 8466 e-mail: [email protected] Web: www.genbiomed.com

Share Registry

Computershare Investor Services Pty Ltd Level 2, 45 St George's Terrace PERTH Western Australia 6000 Telephone: 1300 557 010

Auditors

Ernst & Young 321 Kent Street SYDNEY New South Wales 2000

Solicitors

Steinepreis Paganin Level 14, Chancery House 37 St George's Terrace PERTH Western Australia 6000

Bankers

Westpac Bank Cnr Pitt & Bridge Streets SYDNEY New South Wales 2000

REVIEW OF OPERATIONS

Summary

The 2003 year for the company was a year of consolidation with the Directors completing the sale of the company's 80% interest in Bodyworks, completing the final stages of its expense reduction exercise and the commencement of the review of various commercial opportunities that have been presented to the company.

Operational Review

Cell Bionics

During the year Genesis announced the final results of its double blind clinical trial to assess the effectiveness of its Cell Bionics® technology in patients with osteoarthritis of the knee. The trial results were similar to some equivalent trials of this technology, and in some areas provide the opportunity for existing market participants to potentially improve their existing technology.

Genesis continued to explore opportunities for its Cell Bionics therapy and to that end announced that an evaluation of its CellGen treatment has commenced at the Pemex Hospital in Mexico City. The CellGen therapy will be evaluated for:

$\mathbf{L}$ The stimulation of bone growth and the healing of various fractures; and
The treatment for osteoarthritis of the knee under a three month therapy program. iì.

The Pemex Hospital in Mexico City is a major orthopaedic centre providing specialist orthopaedic services to the other Pemex hospitals throughout Mexico. The results of the evaluation are expected to be presented to the Company by March 2004.

The market in the USA for bone growth stimulation using this type of therapy is estimated to exceed US $200 million.

Bodyworks Receivable Update

During the year the Company completed the sale of its 80% interest in its US based orthopaedic bracing manufacturer subsidiary Bodyworks Inc.

The consideration for the sale of the Bodyworks interest was structured into two parts:

an initial agreed enterprise value for Bodyworks of $4.5 million which based on Genesis's 80% i. interest, resulted in net cash proceeds (including repayment of loans to Genesis) of approximately $3.2 million being paid to the Company; and
ii. further upside payments to a maximum of $6.6 million should the Bodyworks business achieve certain predefined EBITDA targets for the 24 months to 31st July 2004.

The rationale for the sale was based on the fact that the Directors had determined that Genesis was not in a position to provide further funding for the Bodyworks business and that the business was in need of further capital support if it was to capitalise on the opportunities then being presented.

The Directors believed the terms of the sale provided a solution for the funding of both Bodyworks and Genesis and also provided shareholders of Genesis with the ability to capitalise on any upturn in the performance of the Bodyworks business.

Whilst the Directors were initially encouraged by the performance of Bodyworks under the new ownership. particularly the progress in its OEM division and the development of its international distribution network, at this stage based on the information provided the Directors are unable to accurately determine the likelihood and quantum of any upside payment being received. Accordingly they have deemed it prudent to write down the value of the receivable to Nil.

Status of the Company and Activities going forward

Upon completion of the sale of the Bodyworks subsidiary, and having been successful in its application for a research and development tax refund the Company was in a position to repay all outstanding debt, and together with the results of the restructure of the Groups operating activities, leaves Genesis in a sound position whereby it maintains:

1. Cash and security deposits totalling approximately $1.4 million;
1. A greatly reduced overhead structure;
1. Potential to still receive an upside payment from the Bodyworks transaction;
1. DBC Clinic Equipment that it will look to resell;
1. Certain Patent and Trademark applications in process; and
1. Its proprietary CellGen asset.

The company's focus moving forward is to continue to assess other commercial opportunities including opportunities for its CellGen asset. Noting the previously announced Directors resolution to further commercialise this asset with partners that have the appropriate expertise and funding. The Directors consider that it has been a successful year in terms of re-establishing the company's foundations and look forward to the year ahead.

DIRECTORS' REPORT

Your directors submit their report for the Company and its controlled entities ("the consolidated entity") for the year ended 30 June 2003.

DIRECTORS

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

Mr Rupert J Northcott Non-executive Director Mr Northcott is an experienced pharmaceutical and healthcare executive with extensive Australasian and International marketing experience. During his career he has launched significant new products in the prescription. OTC and health food markets. He has worked for large multinational pharmaceutical companies as a senior marketing executive and has more recently been the chief executive of a medical publishing company, the Managing Director of a UK based electronic information distributor and the Managing Director of Australia's leading medical software company. Dr Robert F Gilmour Non-executive Director B.Sc., MDChD Dr Gilmour brings extensive experience in medical design and in the orthopedic, orthotic and prosthetic markets to the Genesis board. Dr Gilmour has taught anatomy at Monash Medical School and Stanford University, California, where he also worked in the Sports Medicine Clinic. Dr Gilmour began work in the area of medical design in 1987 and gained quick success in retail markets. Mr Emmanuel Correia Non-executive Director Mr Correia is an Associate of the Institute of Chartered Accountants of Australia. Over the last 10 years, Mr Correia has held a number of corporate finance positions in Europe and in Australia with international accounting firms and investment banks. Mr Correia works in the areas of corporate structuring and strategy, capital raising and mergers and acquisitions. Mr Adam S Davey Non-executive Director Mr Davey was appointed to the Board on $15th$ July 2003 and he has experience in merchant banking, stock broking and corporate advisory services. He is a Director of Montagu Pty Ltd, a member corporation of the Australian Stock Exchange and Chairman of Teen Challenge Foundation (WA) Inc.

PRINCIPAL ACTIVITIES

The principal activities of the consolidated entity during the course of the financial year were the development and commercial exploitation of medical technologies for the treatment of musculoskeletal disorders.

RESULTS

The consolidated entity's operating loss after tax for the year ended 30 June 2003 was $2,760,099 (2002: loss $5,828,228).

DIVIDENDS

The directors do not recommend the payment of a dividend for this financial year. No dividends have been paid or declared by the Company since the end of the previous financial year (2002: Nil).

REVIEW OF OPERATIONS, LIKELY DEVELOPMENTS AND FUTURE RESULTS

Other than as referred to in this report, further information as to likely developments in the operations of the consolidated entity would, in the opinion of the directors, be speculative and may hinder the consolidated entity in the achievement of its commercial objectives.

DIRECTORS' INTERESTS

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

	DIRECT		INDIRECT
	Ordinary Shares	Options	Ordinary Shares	Options
R F Gilmour		$\overline{\phantom{a}}$	4,000,000
E Correia	125,000	$\mathbf{H}$		$\overline{r}$
R J Northcott		3,000,000	200,000	$\overline{r}$
A S Davey	152,727	$\overline{\phantom{a}}$	1,851,427

SIGNIFICANT CHANGE IN STATE OF AFFAIRS

The state of affairs of the economic entity was not affected by any significant changes during the financial year other than the parent entity finalised the sale of its 80% interest in Bodyworks Inc as detailed in the 2002 Annual Report.

SIGNIFICANT EVENTS SUBSEQUENT TO BALANCE DATE

Since reporting date certain subsidiaries of Genesis being BTH Management Pty Ltd and St Kilda Clinic Pty Ltd, which both had no assets or no liabilities at 30 June 2003, were each sold for $1. The financial effect has not been recognised in the report. Similarly West Perth Clinic 2 Pty Ltd has been de-registered. Other than disclosed there are no other matters or circumstances that have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity in subsequent financial years.

OPTIONS

During the year, Nil options were issued and as at the date of this report the Company had 3,000,000 (2002: 6,750,000) unlisted options on issue. The unlisted options vested in the prior period.

No. of Options	Exercise Price	Expiry Date
1,000,000	0.30	23 November 2003
2,000,000	0.40	23 November 2004
3,000,000

During the year the following 3,750,000 unlisted options expired.

Holder	No. of Options	Exercise Price	Expiry Date
R Northcott	1,000,000	0.15	23 November 2002
E Correia	300,000	0.15	23 November 2002
R Northcott	1,000,000	0.25	30 June 2003
E Correia	700,000	0.25	30 June 2003
J Edwards	250,000	0.25	30 June 2003
R Gilmour	250,000	0.25	30 June 2003
D Kennedy	250,000	0.25	30 June 2003
	3,750,000

During the year, Nil (2002: Nil) fully paid ordinary shares were issued by the virtue of the exercise of options. Since the end of the financial year no shares have been issued by the virtue of the exercise of options.

Option holders do not have the right, by any virtue of the option, to participate in any share issue of the Company or any related body corporate, or in the interest issue of any other registered scheme. Since the end of the financial year no options have been issued.

INTERESTS IN CONTRACTS OR PROPOSED CONTRACTS WITH THE CONSOLIDATED ENTITY

During or since the financial year-end no director has had any interest in a contract or proposed contract with the consolidated entity, other than being an interest, the nature of which has been declared by the director below or elsewhere throughout this report:

Contracts of employment under normal commercial terms and conditions, noting that such contracts $(i)$ of employment ceased during the financial year.
The consolidated entity paid to Transocean Securities Ltd, a company of which Mr E Correia is a $(ii)$ director, fees totalling $378,574 (2002:$312,529) for fundraising and corporate advisory services including those relating to the disposition of Genesis's 80% interest in Bodyworks Inc. Genesis Biomedical Ltd have agreed to pay further fees of 5% of any contingent consideration received under the terms of the sale of the Bodyworks subsidiary;
During the year Genesis Biomedical Ltd disposed of its 80% interest in its US based subsidiary $(iii)$ Bodyworks Inc. Dr Gilmour is a Director of Bodyworks Inc and had a financial interest in that Company. (Refer to Note 30 for details of transactions between Dr Gilmour and Bodyworks Inc).

Item (i) is included in directors' and executives' emoluments in notes 27 and 28 to the Financial Statements accompanying this report.

DIRECTORS' AND EXECUTIVES' EMOLUMENTS

Details of the nature and amount of the emoluments paid to each director of Genesis Biomedical Ltd are set out below.

	Salary/Fee	Superannuation	Other*	Total
R.F. Gilmour	110,662	$\overline{a}$	10,903	121,565
E. Correia	15,829	$\overline{a}$	10,903	26,732
R.J. Northcott	93,845	7.321	10,903	112,069
A.S. Davey	$\blacksquare$	$\overline{r}$	$\mathbf{r}$	$\blacksquare$
Total	220,336	7.321	32,709	260,366

* Represents pro-rata apportionment of directors & officers insurance premium paid during the year.

During the financial year Dr Gilmour was employed as Managing Director of Genesis's US based, 80% subsidiary Bodyworks Inc as well as fulfilling his role as Non Executive Director of Genesis. Dr Gilmour's emoluments include salary paid for the period Genesis maintained ownership of the Bodyworks subsidiary as well as Non Executive Director fees for the remainder of the financial year.

During the financial year Mr Northcott resigned from his position as Managing Director of Genesis Biomedical Limited with Mr Northcott's emoluments representing salary and other benefits paid for the period he was employed in that role as well as Directors Fees paid in his capacity as Non Executive Director for the remainder of the financial year.

Currently two of the Directors Mr Correia and Dr Gilmour assume certain executive functions of the Company however all remuneration is restricted to the Directors Fees paid.

There are no executives of the Company other than the directors.

There is no direct relationship between the remuneration of directors and the financial performance of the consolidated entity, other than by the potential to gain from the exercise of options previously issued to the directors.

DIRECTORS' MEETINGS

During the year, directors' meetings were held. The number of meetings in which directors were in attendance is as follows:

	Directors' Meetings
	No. of meetings held
	while in office	Meetings attended

R. F. Gilmour
E. Correia
R. J. Northcott	₩

Mr A Davey was not eligible to attend any directors meetings during the financial year due to not being appointed until $15^{th}$ July 2003.

As at the date of this report, the consolidated entity did not have an audit committee, as the directors believe the size of the consolidated entity and the size of the Board do not currently warrant its existence.

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

During the financial year, the consolidated entity has paid premiums in respect of a contract insuring all the directors of Genesis Biomedical Ltd against a liability incurred in their role as directors of the consolidated entity, except where:

the liability arises out of conduct involving a wilful breach of duty; $(a)$
there has been a contravention of the relevant Sections of the Corporations Act; $(b)$
$(c)$ the conduct involves trading whilst insolvent;
the conduct involves an operation carried on outside Australia. $(d)$

The total amount of insurance contract premiums paid for Directors' and Officers' Liability and consolidated entity reimbursement cover was $32,709 (2002: $33,894). This amount has been included as part of directors' remuneration.

CORPORATE GOVERNANCE

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Genesis Biomedical Ltd support and have adhered to the principles of Corporate Governance.

The consolidated entity's Corporate Governance Statement is contained in the additional Australian Stock Exchange information section of this annual report.

ENVIRONMENTAL REGULATION AND PERFORMANCE

The consolidated entity does not hold any permits in relation to environmental discharge and does not handle or store hazardous materials.

SIGNED in accordance with a resolution of the directors

Emmanuel Correia Director

Sydney 26 September 2003

۰Ó,

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2003

	Notes	Consolidated2003	2002	Genesis Biomedical Ltd2003	2002
		$	S	$	$
REVENUES FROM ORDINARY
ACTIVITIES	2	4,229,651	3,972,828	2,386,260	226,911
Cost of materials	$\mathfrak{Z}$	(720, 754)	(1,313,816)	(11, 118)
Cost of investments sold	3		(1,000)		(1,000)
Depreciation and amortisation	$\overline{\mathbf{3}}$	(469, 108)	(3,310,492)		(48, 947)
Borrowing costs expense	3	(43,071)	(61,096)	(43,071)	(52, 531)
Salaries and employee benefits		(688,261)	(1,862,718)	(161,961)	(279, 434)
Rent		(177,999)	(1,083,429)	(70, 741)	(626,171)
Professional fees		(392, 340)	(824, 427)	(385, 658)	(802, 293)
Insurance		(104, 299)	(138, 820)	(40,704)	(66, 524)
Travel		(50, 472)	(107, 552)	(3,590)	(89,346)
Advertising		(93, 831)	(304, 513)		(657)
Research and developmentDecrement in the value of	3	(2,139)	(592, 014)
investments	3	(33, 428)	(82,034)	(33, 428)	(156, 570)
Provision for non-recovery of loans				(158, 856)	(802,989)
Other expenses from ordinary
activities		(92, 033)	(514, 231)	(141, 378)	(165, 949)
Foreign exchange gain /(loss)		48,750		48,750	(122, 189)
Cost of investment in controlled
entity disposed	3(e)(ii)	(4,295,496)		(3,805,234)
Share of net profits (losses) of
associate accounted for using the
equity method	14		(74, 536)
LOSS FROM ORDINARYACTIVITIES BEFORE INCOME
TAX EXPENSE		(2,884,830)	(6,297,850)	(2,420,729)	(2,987,689)
INCOME TAX EXPENSE
RELATING TO ORDINARY
ACTIVITIES	4
LOSS FROM ORDINARY
ACTIVITIES AFTER INCOME
TAX EXPENSE		(2,884,830)	(6,297,850)	(2,420,729)	(2,987,689)
NET LOSS ATTRIBUTABLE TO
OUTSIDE EQUITY INTEREST	21	124,731	469,622
NET LOSS ATTRIBUTABLE TO
MEMBERS OF GENESIS
BIOMEDICAL LTD		(2,760,099)	(5,828,228)	(2,420,729)	(2,987,689)

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2003

	ConsolidatedNotes			Genesis Biomedical Ltd
		2003$	2002$	2003$	2002$
Net exchange difference ontranslation of financial statements offoreign controlled entity	20		971,330
TOTAL REVENUES, EXPENSESAND VALUATIONADJUSTMENTSATTRIBUTABLE TO MEMBERSOF GENESIS BIOMEDICAL LTDAND RECOGNISED DIRECTLY
IN EQUITY			971,330
TOTAL CHANGES IN EQUITYOTHER THAN THOSERESULTING FROMTRANSACTIONS WITHOWNERS AS OWNERSATTRIBUTABLE TO MEMBERSOF GENESIS BIOMEDICAL LTD		(2,760,099)	(5,828,228)	(2,420,729)	(2,987,689)
Basic earnings per share (cents)Diluted earnings per share (cents)	2525	(3.8)(3.8)	(8.5)(8.1)

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2003

	Notes		Consolidated	Genesis Biomedical Ltd
		2003	2002	2003	2002
		S	$	$\mathbb S$	S
CURRENT ASSETS
Cash assets	22(b)	1,395,375	60,299	1,395,375	1,087
Receivables	5	5,044	584,449	5,044	1,148,102
Inventories	6		902,115
Other financial assets	7	9,429	42,857	9,429	42,857
Other	8	249,164	372,509	249,164	137,956
TOTAL CURRENT ASSETS		1,659,012	1,962,229	1,659,012	1,330,002
NON-CURRENT ASSETS
Plant and equipment	9		1,027,277
Intangible assets	10		4,016,301
Receivables	$\mathbf{1}$				447,337
Other financial assets	12	150,000	150,000	160,003	3,965,237
TOTAL NON-CURRENT ASSETS		150,000	5,193,578	160,003	4,412,574
TOTAL ASSETS		1,809,012	7,155,807	1,819,015	5,742,576
CURRENT LIABILITIES
Payables	15	25,898	1,405,656	25,898	367,939
Interest bearing liabilities	16		1,435,814		1,103,104
Provisions	17	134,053	249,222	134,053	249,222
TOTAL CURRENT LIABILITIES		159,951	3,090,692	159,951	1,720,265
NON-CURRENT LIABILITIESProvisions	18	142,440	259,960	142,440	259,960

TOTAL NON-CURRENTLIABILITIES		142,440	259,960	142,440	259,960
TOTAL LIABILITIES		302,391	3,350,652	302,391	1,980,225
NET ASSETS		1,506,621	3,805,155	1,516,624	3,762,351
EQUITY
Parent entity interest
Contributed equity	19	12,987,985	12,812,985	12,987,985	12,812,985
Reserves	$20,$		971,330
Accumulated losses	20	(11, 459, 975)	(11, 383, 652)	(11,471,361)	(9,050,634)
Total parent entity interest in equity		1,528,010	2,400,663	1,516,624	3,762,351
Total outside equity interest	21	(21,389)	1,404,492
TOTAL EQUITY		1,506,621	3,805,155	1,516,624	3,762,351

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2003

	Notes	Consolidated2003$	2002$	Genesis Biomedical Ltd2003$	2002$
CASH FLOWS FROMOPERATING ACTIVITIESReceipts from customersPayments to suppliers and employeesInterest receivedBorrowing costsResearch & Development tax refundNET CASH FLOWS USED IN		1,673,803(3,075,540)95,950(43,071)214,907	3,326,870(5,125,182)22,403(4,189)	50,841(1,501,087)88,079(43,071)	28,563(967,710)18,489(13,383)
OPERATING ACTIVITIES	22(a)	(1,133,951)	(1,780,098)	(1,405,239)	(934, 041)
CASH FLOWS FROM INVESTINGACTIVITIESPurchase of plant and equipment			(143, 244)
Proceeds from sale of plant and equip.Loan Repayment from AssociateAdvances to controlled entities		1,145,644	10,000	1,434,125	(1,125,709)
Proceeds from sale of investmentsProceeds from sale of BodyworksCash effect of the purchase/sale ofcontrolled entities	22(d)22(c)	2,293,505	100,001	2,293,505	100,001
Purchase of intangibles		(38, 228)	16,435(133,772)
NET CASH FLOWS FROM /(USED IN) INVESTINGACTIVITIES		3,400,921	(150, 580)	3,727,630	(1,025,708)
CASH FLOWS FROMFINANCING ACTIVITIESProceeds from issue of ordinary sharesProceeds from issue of convertible		175,000	1,133,000	175,000	1,133,000
notesCapital raising, costs set off againstshare capitalRepayment of borrowings		(1,106,895)	863,956(92,015)(9,921)	(1,103,104)	863,956(92,015)
NET CASH FLOWS FROMFINANCING ACTIVITIES		(931, 895)	1,895,020	(928, 104)	1,904,941
NET INCREASE/(DECREASE) INCASH HELDOpening cash brought forward		1,335,07660,299	(35,658)95,957	1,394,2881,087	(54,808)55,895
CLOSING CASH CARRIEDFORWARD	22(b)	1,395,375	60,299	1,395,375	1,087

13 GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2003

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.

Basis of accounting

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

The financial report has been prepared in accordance with the historical cost convention.

The financial statements have been prepared in accordance with the going concern concept.

Change in accounting policies

The accounting policies adopted are consistent with those of the previous year except for the accounting policies with respect to foreign currency translation, employee benefits and provisions, contingent liabilities and contingent assets.

Provisions, Contingent Liabilities and Contingent Assets

The consolidated entity has applied the revised AASB 1044 "Provisions, Contingent Liabilities and Contingent Assets" for the first time from 1 July 2002.

There was no material impact on the consolidated financial report as at 1 July 2002 or on the profit or loss for the reporting period to 30 June 2003.

Employee Benefits

The consolidated entity has applied the revised AASB 1028 "Employee Benefits" (issued June 2001) for the first time from 1 July 2002.

There was no material impact on the consolidated financial report as at 1 July 2002 or on the profit or loss for the reporting period to 30 June 2003.

Principles of consolidation

The consolidated financial statements are those of the consolidated entity, comprising Genesis Biomedical Ltd (the parent company) and all entities that Genesis Biomedical Ltd controlled from time to time during the year and at reporting date.

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

Subsidiary acquisitions are accounted for using the purchase method of accounting.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) $\mathbf{L}$

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.

All inter-company balances and transactions, including unrealised profits arising from intra-group transactions, have been eliminated in full. Unrealised losses are eliminated unless costs cannot be recovered.

Foreign currencies

Translation of foreign currency transactions

Transactions in foreign currencies of entities within the consolidated entity are converted to local currency at the rate of exchange ruling at the date of the transaction.

Amounts payable to and by the entities within the consolidated entity that are outstanding at the reporting date and are denominated in foreign currencies have been converted to local currency using rates of exchange ruling at the end of the financial year. All resulting exchange differences arising on settlement or reinstatement are brought to account in determining the profit or loss for the financial year.

Translation of financial reports of overseas operations

All overseas operations are deemed self-sustaining as each is financially and operationally independent of Genesis Biomedical Ltd. The financial reports of overseas operations are translated using the current rate method and any exchange differences are taken directly to the foreign currency translation reserve.

Cash

For the purpose of the statement of cash flows, cash includes cash on hand and in banks, net of bank overdrafts.

Income tax

The consolidated entity adopts the liability method of tax effect accounting. Income tax expense is calculated on operating profit adjusted for permanent differences between taxable income and accounting profit. Income tax on timing differences, which arise from items being brought to account in different periods for income tax and accounting purposes, are carried forward in the balance sheet as a future income tax benefit or a provision for deferred income tax.

Future income tax benefits are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Future income tax benefits relating to tax losses are only brought to account when their realisation is virtually certain.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) $\mathbf{L}$

Goods and Services Tax

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

i. where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
ii. receivables and payables are stated with the amount of GST included.

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

Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.

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

Recoverable amount

Non-current assets measured using the cost basis are not carried at an amount above their recoverable amount, and where a carrying value exceeds this recoverable amount, the asset is written down where applicable. In determining recoverable amount, the expected net cash flows have been discounted to their present value using a market determined risk adjusted discount rate.

Investments

Investments in listed securities are valued at their recoverable amount and based on the final closing price of the security listed on the relevant exchange.

Investments in associates are carried at the lower of the equity accounted amount and recoverable amount in the consolidated financial report and the lower of cost and recoverable amount in the parent entity.

All other non-current investments are carried at the lower of cost and recoverable amount.

Receivables

Trade receivables and other receivables are carried at amounts due. The collectibility of debts is assessed continuously and specific provision is made for any doubtful accounts.

Plant and equipment

Items of plant and equipment are measured at cost.

$\mathbf{L}$ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Depreciation

Depreciation for tangible fixed assets is calculated on a straight-line basis over the estimated useful life of the asset. Major depreciation rates are:

	2003	2002
Furniture and fittings	10%	10%
Plant and equipment	27%	27%
Motor vehicles	15%	15%

Research and development

Research and development costs are expensed as incurred

Leases

Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so as to reflect the risks and benefits incidental to ownership.

Operating lease payments, where the lessors effectively retain substantially all of the risks and benefits of ownership of the leased items, will be included in the determination of the operating profit on a straight line basis over the lease term.

Intangible assets

Patents, licences and intellectual property acquired are carried at cost and amortised on a straight line basis over their anticipated useful lives, being 5 to 15 years.

Employee benefits

Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporting date. These benefits include wages and salaries and annual leave.

Liabilities arising in respect of wages and salaries, annual leave and any other employee benefits expected to be settled within twelve months of the reporting date are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled.

Employee benefit expenses arising in respect of the following categories:

wages and salaries, non-monetary benefits, annual leave, and other leave benefits; and
other types of employee benefits

are charged against profits on a net basis in their respective categories.

Payables

Liabilities are recognised for amounts to be paid in the future for goods or services received, whether or not billed to the company or consolidated entity.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) $\mathbf{L}$

Earnings per share

Basic earnings per share is calculated as net profit/ (loss) attributable to members, adjusted to exclude costs of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit/(loss) attributable to members, adjusted for:

costs of servicing equity (other than dividends); $\bullet$
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential shares, adjusted for any bonus element.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the consolidated entity and the revenue can be reliably measured.

Research and development revenue is recognised when received.

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

Sale of goods

Control of the goods has passed to the buyer.

Interest

Control of the right to receive the interest payment.

Surplus lease space

A provision for surplus leased office accommodation is recognised for the expected lease cost to be paid by the economic entity less any amounts to be recovered from sub-leasing. The provision is based on the best estimate of the expenditure to be incurred and sub-leasing income to be received, and is reviewed each reporting date to determine whether the provision is adequate.

Provisions

Provisions are recognised when the economic entity has a legal, equitable or constructive obligation to make a future sacrifice of economic benefits to other entities as a result of past transactions or other past events, it is probable that a future sacrifice of economic benefits will be required and a reliable estimate can be made of the amount of the obligation.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Inventory

Inventories are valued at the lower of cost and net realisable value.

Contributed equity

Issued and paid up capital is recognised at the fair value of the consideration received by the company. Any transaction costs arising on the issue of ordinary shares are recognised directly in equity as a reduction of the share proceeds received.

Comparatives

Where necessary, comparatives have been reclassified and repositioned for consistency with current year disclosures.

$2.$ REVENUE FROM ORDINARY ACTIVITIES

	Consolidated		Genesis Biomedical Ltd
	2003	2002	2003	2002
	$\mathbf S$	$	$	S
Revenues from operating activities
Revenue from sale of goods	1,625,289	3,850,424	4,676	28,563
Total revenue from operating
activities	1,625,289	3,850,424	4,676	28,563
Revenues from non-operatingactivities
Interest	95,950	22,403	88,079	98,347
Proceeds from sale of investments		100,001		100,001
Proceeds from sale of controlled entity	2,293,505		2,293,505
Research and Development tax refund	214,907
Total revenue from non - operatingactivities	2,604,362	122,404	2,381,584	198,348
Total revenues from ordinaryactivities	4,229,651	3,972,828	2,386,260	226,911
Share of net (losses) of associatesaccounted for using the equitymethodShare of associate's (losses)		(74, 536)
3. EXPENSES ANDLOSSES/(GAINS)
(a) Cost of sales
Cost of goods sold	720,754	1,313,816	11,118
Cost of investments sold		1,000		1,000
(b) Depreciation and amortisationDepreciation of non-current assets
Plant and equipment	265,402	482,221		20,875
Office furniture and fittingsMotor vehicle	1,500	93,0343,497		28,072
Total depreciation of non-current
assets	266,902	578,752		48,947

	Consolidated2003	2002	Genesis Biomedical Ltd2003	2002
3. EXPENSES ANDLOSSES/(GAINS) (cont'd)	$\mathbf S$	$\mathbf S$	$	$
Amortisation of intangiblesPatents and trademarksLicences	202,206	2,429,340302,400
Total amortisation of intangibles	202,206	2,731,740	$\overline{\phantom{a}}$
Total depreciation and amortisationexpenses	469,108	3,310,492		48,947
(c) Borrowing costs expensedInterest expenseTotal borrowing costs expensed	43,07143,071	61,09661,096	43,07143,071	52,53152,531
(d)Other expenses and losses/(gains)Decrement in value of investmentsOperating lease rentalResearch and development costsForeign exchange (gain)/ loss(Gain)/ loss from sale of investmentsWrite down in value of inventoriesDecrement in value of non-current assets	33,4282,139(48,750)248,610	82,034994,834592,014(220, 888)36,118131,769	33,428(48,750)	156,570568,612122,189(99,001)116,564
(e) Significant item(i) Loss from ordinary activities beforeincome tax expense included thefollowing material expense thedisclosure of which was relevant inexplaining the financial performance ofthe consolidated entity.Divestment of Bodyworks IncWritedown of intangibles		1,353,081

Included in total amortisation of intangibles for the prior year was a one-off writedown of $1,353,081. This adjustment was necessary to reduce the consolidated net assets of Bodyworks Inc. to reflect the estimated proceeds to be received on its sale subsequent to 30 June 2002. The final consideration for the sale of Bodyworks comprised a payment of $4.5 million on completion, followed by further payments to a maximum of $6.6 million which are contingent on Bodyworks achieving agreed earnings targets. In calculating the writedown to the consolidated net assets of Bodyworks the Directors estimated that minimum contingent proceeds of $1.3 million would be received.

	Consolidated		Genesis Biomedical Ltd
	2003	2002	2003	2002
	$	S	$	S
EXPENSES AND3.
LOSSES/(GAINS) (cont'd)
(ii) Loss from ordinary activities
before income tax expense
included the following material
expense the disclosure of which
was relevant in explaining the
financial performance of the
consolidated entity.

- Cost of Investment in controlled
entity disposed during the year
(80% of Bodyworks Inc) Refer
Note $22(d)(i)$ .
	(4,295,496)		(3,805,234)

During the financial year Genesis announced the settlement of the sale of its 80% holding in its US based subsidiary Bodyworks Inc. The sale consideration comprised an agreed "initial payment" payable at settlement plus a further "upside payment" (up to a maximum of $6.6 million) payable to Genesis should the Bodyworks business achieve certain defined EBITDA targets for the 24 month period to 31st July 2004.

Genesis received the initial payment at settlement date and as at the 31st December 2002 had recorded an amount of $1,511,729 as a receivable which represented the Directors best estimate of the potential upside payment component of the sale consideration.

At this stage based on the information provided the Directors are unable to accurately determine the likelihood and quantum of any upside payment to be received. Accordingly they have deemed it prudent to write down the value of this receivable to nil and this is fully reflected in the accounts of the consolidated entity as at $30th$ June 2003 as explained below.

Gross Proceeds from sale of controlled entity (Bodyworks Inc)(Refer Note 2, and	$2,293,505
22(d)(i)
Less Cost of Investment in controlled entity disposed of (Refer Note $22(c)$ )	($3,805,234)
Value of provision for non recovery of receivable Refer Note 11.	$1,511,729

NOTES TO THE FINANCIAL STATEMENTS

30 JUNE 2003 (cont'd)

		Consolidated	Genesis Biomedical Ltd
	2003	2002	2003	2002
	S	S	$	S
4. INCOME TAX
The prima facie tax on the operatingloss is reconciled to the income taxprovided in the financial statements asfollows:
Prima facie tax payable on theoperating loss from ordinary activities	(865, 449)	(1,889,355)	(762, 219)	(896,306)
Tax effect of permanent differences:
Profit from sales of shares		(36, 566)
Research & development refundAmortisation of non-deductible	64,472
expendituresOther non-allowable/(assessable)	60,662	819,522
items		37,562		37,562
Equity accounted losses		22,360		22,360
Provision for non-recovery of
loans to controlled entities				240,897
Current period tax benefit not
brought to account	(740,315)	1,046,477	(762, 219)	595,487
Income tax expense attributable toordinary activities

As at 30 June 2003 future income tax benefits were available to the consolidated entity in respect of operating losses. The Directors estimate the potential income tax benefit at 30 June 2003 in respect of tax losses not brought to account is approximately $\text{$3,928,511}$ (2002: $\text{$3,747,708}$ ). The benefit of these losses has not been brought to account as realisation is not virtually certain.

The future income tax benefit will only be obtained if:

the consolidated entity derives future assessable income of a nature and of an amount sufficient to $(a)$ enable the benefit to be realised:
the consolidated entity continues to comply with the conditions for deductibility imposed by tax $(b)$ legislation; and
no changes in tax legislation adversely affect the consolidated entity in realising the benefit. $(c)$

Since the substantive enactment of the Tax Consolidation legislation the Genesis consolidated group has decided not to enter the tax consolidation regime for the 2003 taxation year. It is possible that an election to enter the tax consolidation regime will be made for the 2004 taxation year.

	Consolidated		Genesis Biomedical Ltd
	2003	2002	2003	2002
	$	$	$	S
RECEIVABLES (CURRENT)5.
Trade debtors	5,044	673,101	5,044	51,208
Provision for doubtful debts		(88, 652)
Amounts other than trade debts
receivable from related parties:
Wholly owned group
- controlled entities				1,096,894
	5,044	584,449	5,044	1,148,102
(a) Related party receivables
Wholly owned group
- controlled entities				1,096,894
Directors and director-related entities
- director-related		39,592		39,592
		39,592	$\overline{\phantom{a}}$	1,136,486

(b) Australian dollar equivalents
Australian dollar equivalents ofamounts receivable in foreign
currencies not effectively hedged:
- US dollars		533,241		1,096,894

INVENTORIES (CURRENT)6.
Raw materials - at cost		429,599
Work in progress $-$ at cost		169,567
Finished goods - at cost		329,544
Provision for diminution		(26, 595)
Total inventories at the lower of cost
and net realisable value		902,115
7. OTHER FINANCIAL ASSETS(CURRENT)
Investments at cost comprise:
Listed shares at cost	500,001	500,001	500,001	500,001
Provision for diminution	(490, 572)	(457, 144)	(490, 572)	(457, 144)
Market value of shares at 30 June
2003	9,429	42,857	9,429	42,857
The investments at market value are listed
on the Australian Stock Exchange Ltd and
relate to minority holdings in Sun Capital

Group Limited and Earth Essence International Limited

		Consolidated		Genesis Biomedical Ltd
	2003	2002	2003	2002
	$	S	$	$
OTHER CURRENT ASSETS8.
PrepaymentsSecurity deposits in respect of operating	60,411	178,211	60,411
leases	188,753	194,298	188,753	137,956
	249,164	372,509	249,164	137,956
9. PLANT AND EQUIPMENT (NON-CURRENT )
Plant and equipment
- At cost	106,902	1,605,559
- Accumulated depreciation	(106,902)	(578, 282)
		1,027,277	$\tilde{\phantom{a}}$
			$\overline{\phantom{a}}$	$_{\rm m}$
Total plant and equipment, net		1,027,277	$\tilde{}$
ReconciliationReconciliation of the carrying amounts ofplant and equipment at the beginning andend of the current and previous financialyear
Plant and equipment
Carrying amount at beginning	1,027,277	425,901		35,609
Additions		1,107,995
Disposals	(920, 375)	(24,398)		(24,398)
Depreciation expense	(106, 902)	(482, 221)		(11,211)
		,027,277	$_{\rm rec}$

	Consolidated		Genesis Biomedical Ltd
	2003	2002	2003	2002
10. INTANGIBLES (NON-CURRENT)	S	Б	S	S
Patents and trademarks - at cost	8,746,915	8,746,915
Accumulated amortisation	(4,932,820)	(4,730,614)
Intangibles eliminated with sale ofBodyworks	(3,814,095)
		4,016,301

At 30 June 2002 the consolidated entity wrote down the value of intangibles by $1,353,081. This writedown was required to reduce the net assets of Bodyworks Inc. to their recoverable amount, based on the estimated total proceeds to be received from the sale of Bodyworks Inc. subsequent to the 30 June 2002 year end. The sale of Bodyworks Inc subsequently settled with the carrying value of the upside payment of the transaction now accounted for as a receivable (refer note 11).

11. RECEIVABLES (NON- CURRENT)

Loans to controlled entities		$\blacksquare$	3,705,961
Provision for non-recovery of loans		$\blacksquare$	(3,258,624)
Bodyworks Inc. Upside payment relating to
sale of Bodyworks Inc	1,511,729	1,511,729
Less provision for non recovery of	(1,511,729)	(1,511,729)
receivable (Refer Note $3(e)(ii)$ )			447.337

		Consolidated	Genesis Biomedical Ltd
	2003	2002	2003	2002
	$	$	S	$
12. OTHER FINANCIAL ASSETS(NON-CURRENT)
Investments at cost comprise:
Shares - unlisted	547,862	547,862	547,862	547,862
Provision for diminution in value	(397,862)	(397,862)	(397, 862)	(397, 862)
	150,000	150,000	150,000	150,000
Investment in controlled entities
(Refer to note 13)			10,003	3,815,237
	150,000	150,000	160,003	3,965,237

The unlisted investment is the 15% shareholding the Company has in the Singapore based Back to Health Pte Ltd, a 50% shareholder in DBCI Asia Pacific Pte Ltd. This company holds the Master Licence for the DBC operations in Asia.

13. INTERESTS IN SUBSIDIARIES

Name	Country ofIncorporation	Percentage of equityinterest held by theconsolidated entity
		2003	2002	2003	2002
Direct				$	$
Genovations Pty Ltd	Australia	100	100
NewMed Systems Ltd	Australia	100	100
Smart Chair Systems Pty Ltd	Australia	50.	50.	10,000	10,000
Bodyworks Inc	USA		80		3,805,234
Indirect
Back to Health Australasia Ltd	Australia	100	100.		Į
BTH Management Pty Ltd *	Australia		100
West Perth Clinic 1 Pty Ltd	Australia	100	100.
St Kilda Clinic 1 Pty Ltd*	Australia	100	100.
West Perth Clinic 2 Pty Ltd**	Australia	100	100
DBC Australia Pty Ltd	Australia	75	75
				10,003	3,815,237

* Since reporting date these companies, which had no assets and no liabilities at 30 June 2003, were sold for $1. The financial effect has not been recognised in the financial report.

** West Perth Clinic 2 Pty Ltd has been deregistered

13. INTERESTS IN SUBSIDIARIES (cont'd)

(a) Entities subject to class order relief

Pursuant to Class Order 94/1418, relief has been granted to the wholly owned subsidiaries from the Corporations Act 2001 requirements for preparation, audit and lodgment of their financial reports.

As a condition of the Class Order, Genesis Biomedical Ltd and the controlled entities subject to the Class Order (the "Closed Group") entered into a Deed of Cross Guarantee on 29 May 2000. The effect of the deed is that Genesis Biomedical Ltd has guaranteed to pay any deficiency in the event of winding up of a controlled entity to which the class order applies. The controlled entities have also given a similar guarantee in the event that Genesis Biomedical Ltd is wound up.

13. INTERESTS IN CONTROLLED ENTITIES (cont'd)

The consolidated statement of financial performance and statement of financial position of the entities which are members of the "Closed Group" are as follows:

(i) Consolidated statement of financialperformance	2003$	2002$
Operating loss before income tax	(2, 293, 084)	(792, 744)
Income tax attributable to operating loss
Operating loss after income tax attributable to
Members	(2,293,084)	(792, 744)
Accumulated losses at the beginning of thefinancial year	(7,929,822)	(7,137,078)
Accumulated losses at the end of the financialyear	(10,222,906)	(7,929,822)
(ii) Consolidated statement of financial position
Current assets
Cash	1,395,375	1,087
Receivables and other	254,207	2,700,226
Total current assets	1,649,582	2,701,313
Non-current assetsPlant and equipment
Intangibles
Investments	1,292,329	3,965,234
Intercompany loans	125,558	196,841
Total non-current assets	1,417,887	4,162,075
Total assets	3,067,469	6,863,388
Current liabilities
Payables	25,898	367,939
Interest bearing liabilitiesProvisions		1,103,104
Total current liabilities	276,493302,391	249,2221,720,265

Non Current liabilitiesProvisions		259,960
Total non current liabilities		259,960
Total liabilities	302,391	1,980,225
Net assets	2,765,079	4,883,163
Shareholders' equity
Share capital	12,987,985	12,812,985
Accumulated losses	(10,222,906)	(7,929,822)
Total shareholders' equity	2,765,079	4,883,163

Notes	Consolidated2003$	2002S	2003$	Genesis Biomedical Ltd2002$
14. INVESTMENTS ACCOUNTED FORUSING THE EQUITY METHOD
Up to 31 st August 2001Genesis Biomedical Ltdheld 35.6% of the issued capital of Bodyworks Inc,a manufacturer of orthopaedic braces based in theUSA. The Company also held a convertible notefor $US750,000, which if converted to equity,would take the shareholding in Bodyworks Inc to80% of the issued capital.
The date of acquisition of the equity interest was 14February 2000 and the balance date of BodyworksInc is 31 March.
On 1 August 2001 Genesis Biomedical Ltdincreased its shareholding in Bodyworks Inc to80% by exercising its option under the convertiblenote. Therefore Bodyworks Inc was an associatefrom 1 July 2001 to 1 August 2001 at which pointBodyworks Inc became a subsidiary.
(i) Share of losses of Bodyworks Inc
Operating loss before income tax		(74, 536)
Income tax attributable to operating loss
Share of associate's operating loss after income tax		(74, 536)
(ii) Carrying amount of investment inBodyworks Inc
Balance at beginning of year		2,434,683
Share of net loss		(74, 536)
Transfer to controlled entity		(2,360,147)
Carrying amount of investment in associate at
Balance at end of financial year
(iii)Share of the assets and liabilities of BodyworksInc
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
(iv) Retained losses of the consolidated entityattributable to Bodyworks Inc
Balance at beginning of year		(1,235,629)
Share of associate's net losses		(74, 536)
Balance at end of year		(1,310,165)

	Consolidated20032002$$		2003$	Genesis Biomedical Ltd2002S
15. PAYABLES (CURRENT)
Trade creditorsOther creditors	25,898	1,389,12916,527	25,898	351,41216,527
	25,898	1,405,656	25,898	367,939
Refer to Note 26 for details of employeeentitlements included in trade creditors amount.Aggregate amounts payable to related parties:Directors and director-related entities- director related entities	6,250	329,317	6,250	176,082
Australian dollar equivalents of amounts payable inforeign currencies not effectively hedged:
- US dollars		1,024,625
16. INTEREST BEARING LIABILITIES(CURRENT)
Convertible notes		1,053,104		1,053,104
Hire purchase contract		3,790
Unsecured loans		378,920		50,000
The terms of the convertible notes (which havesubsequently been fully repaid) were asfollows:Repayable on 31 December 2002$\blacksquare$Convertible to ordinary shares at $0.13 at the$\blacksquare$direction of the noteholdersInterest rate 8% pa$\overline{a}$Secured by a fixed and floating charge over the$\overline{a}$assets of Genesis Biomedical Ltd (sincereleased).		1,435,814	$\frac{1}{2}$	1,103,104
17. PROVISIONS (CURRENT)
Surplus lease spaceOther Provisions	110,96223,091	238,590	110,96223,091	238,590
Total	134,053	238,590	134,053	238,590
18. PROVISIONS (NON CURRENT)Surplus lease space	142,440	259,960	142,440	259,960

	19. CONTRIBUTED EQUITY	Shares2003	Shares2002	S2003	$2002
(a)	Issued and paid up capitalFully paid ordinary shares	76,550,003	73,050,003	76,550,003	12,812,985
(b)	Movement in shares on issue- Issued capital at beginning of financialyear- Shares issued on 18 July 2002 pursuantto a placement by Directors at 5 cents per	73,050,003	62,750,002	12,812,985	11,772,000
	fully paid share- Shares issued on 15 September 2001	3,500,000		175,000
	pursuant to a placement by directors at11 cents per share fully paid- Shares issued on 2 April 2002 pursuantto a placement of shares at 11 cents per		9,300,001		1,023,000
	share fully paid- Less capital raising costs		1,000,000		110,000(92,015)
	Issued capital at the end of the financial year	76,550,003	73,050,003	12,987,985	12,812,985

$(c)$ Share Options

As at 30 June 2003, there are 3,000,000 $(2002: 6,750,000)$ unissued ordinary shares in respect of which options were outstanding and the details of these are as follows:

Number	Exercise	Expiry Date
	Price
1,000,000	0.30	23 November 2003
2,000,000	0.40	23 November 2004

These options are exercisable at any time up to their expiry date.

Terms and conditions of contributed equity $(d)$

Ordinary shares

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

		Consolidated		Genesis Biomedical Ltd
	2003$	2002$	2003٩	2002$
RESERVES AND ACCUMULATED20.
LOSSES
Accumulated losses(a)
Balance at beginning of year	(11, 383, 652)	(5,555,424)	(9,050,632)	(6,062,943)
Elimination due to sale of 80% of Bodyworks	1,712,446
Transfer from Foreign Currency Translation
Reserve due to sale of Bodyworks Inc	971,330
Net Loss attributable to members of Genesis
Biomedical Ltd	(2,760,099)	(5,828,228)	(2,420,729)	(2,987,689)
Balance at end of year	(11, 459, 975)	(11,383,652)	(11, 471, 361)	(9,050,632)
(b) Foreign Currency Translation(i) Nature and purpose of reserve

The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of self-sustaining foreign operations.

(ii) Movements in reserve Balance at beginning of year 971,330 Gain/(loss) on translation of overseas controlled interest. 971,330 $\overline{a}$ Transfer of reserve to accumulated losses due to sale of Bodyworks Inc. $(971, 330)$ Balance at end of year 971,330 $\blacksquare$ $\overline{a}$ $\overline{a}$

$21.$ OUTSIDE EQUITY INTEREST

Reconciliation of outside equity interest incontrolled entities:
Balance at beginning of year	1,404,492	(108, 877)
Deduct share of operating loss	(124, 731)	(469, 622)
Add share of equity acquired during the year	10,000	249,300
Less disposed during the year	(1,311,150)	1,733,691
Balance at end of year	(21, 389)	1,404,492

			Consolidated	Genesis Biomedical Ltd
		2003$	2002$\mathbf S$	2003$	2002$
(a)	Reconciliation of cash flows fromoperations with operating loss afterincome tax
	Operating (loss) after income tax	(2,884,830)	(6,297,850)	(2,420,729)	(2,987,689)
	Depreciation of non-current assets	266,902	578,752		48,947
	Amortisation of intangibles	202,206	2,731,740
	Foreign exchange (gain)/ loss	(48,750)		(48,750)	122,189
	Provision for non-recovery of loans				802,989
	Loans to controlled entities forgiven				155,274
	Provision for diminution in value of
	investments	33,428	82,034	33,428	156,570
	Decrement in value of non-current assets		131,769		116,662
	Decrement in value of inventories		36,118
	Borrowing costs capitalised		56,907		39,148
	Share of associates loss		74,536
	Profit on sale of investments		(220, 888)		(99,001)
	Change in outside equity interests
	Changes in assets and liabilities
	(Increase)/decrease in receivables	1,560,243	30,449	1,557,893	(25, 452)
	(Increase)/decrease in inventories	248,411	(115,744)
	(Increase)/decrease in prepayments $&$
	deposits	76,261	(38,609)	(111,208)	79,296
	(Decrease)/increase in creditors and
	accruals	(355, 133)	695,061	(342, 041)	181,399
	(Decrease)/increase in provisions	(232, 689)	475,627	(73, 832)	475,627
	Net cash flows used in operatingactivities	(1,133,951)	(1,780,098)	(1,405,239)	(934, 041)
(b)	Reconciliation of cash

	Cash balances comprise- cash at bank	1,395,375	60,299	1,395,375	1.087

At balance date the company and the consolidated entity had no financing facilities available.

22. STATEMENT OF CASH FLOWS (Cont.)

	2002
(c) Acquisition of Controlled Entity	$\overline{\mathbf{z}}$
On 1 August 2001, Genesis Biomedical
Limited acquired a further 44.4% of the
voting share capital of Bodyworks Inc, a
manufacturer of orthopaedic braces based in
the USA. This brought Genesis Biomedical
Limited's total voting share capital of
Bodyworks Inc to 80%. The components of
the acquisition cost were:
Consideration
Carrying value of equity investment prior to
acquisition	2,360,147
Conversion of convertible note	1,445,087
Total consideration for 80% investment	3,805,234
Net assets of Bodyworks Inc at 1 August 2001:
- cash-	16,435
- receivables	572,156
- inventories	596,091
- other assets	69,245
- plant and equipment	964,751
- intangibles	6,530,806
	8,749,484
- payables	(589, 586)
- interest bearing liabilities	(1,005,393)
	(1, 594, 979)
Net assets	7,154,505
- translation reserve at acquisition	(1,934,697)
- outside shareholders interest	(1,414,574)
	3,805,234
Net cash effect:
- cash consideration
- cash included in net assets acquired	16,435
Cash acquired on purchase of controlled
entity as reflected in the consolidated
financial report.	16,435

22. STATEMENT OF CASH FLOWS (Cont.)	Consolidated		Genesis Biomedical Ltd
	2003$	2002S	2003$	2002$
(d) (i) Sale of Controlled EntitySale of controlled EntityOn 8 th November 2002, GenesisBiomedical Limited settled the sale of its80% of the voting share capital ofBodyworks Inc, a manufacturer oforthopaedic braces based in the USA. Thecomponents of the sale were:
ConsiderationAggregate sale price of Bodyworks Inc(100%) (excluding upside payment)Less repayment of Bodyworks Inc debt	4,500,000
assumed by Purchaser	(1,633,119)
Net sale proceeds paid to Vendor's	2,866,881
Genesis Biomedical Ltd's share (80%)Total initial consideration paid by Genesisfor its original 80% investment inBodyworks Inc	2,293,5053,805,234
Net assets of Bodyworks Inc at 31st October2002:
- cash	38,228
- receivables	783,618
- inventories	682,787
- other assets	201,998
- plant and equipment	986,524
- intangible assets	7,389,107
	10,082,262
- payables	(997, 344)
- interest bearing liabilities	(2,225,121)
	(3,222,465)
Net assets	6,859,797
Genesis share is 80%	5,487,837
Consolidation adjustment at acquisition	(1,853,061)
Elimination of inter company/other loans	2,013,801
Net Assets in Genesis group accounts	5,648,577
Less write off of intangibles 30/6/02	(1,353,081)
Carrying value of Bodyworks Investment	4,295,496
- translation reserve at disposal
- outside shareholders interest

100,001

Net cash effect:
- cash consideration	$2,293,505
- cash included in net assets disposed	$38,288

(d) (ii) Sale of Controlled Entity

On 31 March 2002, Genesis Biomedical Limited sold its 47.6% shareholding in Iecis Health Limited for $100,001. Sale consideration Net assets of Iecis Health Limited at date of

sale $-Cash$

- Cash	145
- Receivables	18,153
- Other assets	8,589
	26,887
- Payables	(87,019)
- Unsecured loan	(193,903)
Net assets	(254, 035)

(e) Non-cash Financing and Investing

Activities

Loans During the financial year, Genesis Biomedical Limited repaid loans from Transocean Nominees and Westgate Technology with an aggregate fair value of $210,939 by issuing convertible notes.

		Consolidated		Genesis Biomedical Ltd
23.	EXPENDITURE COMMITMENTS	2003S	2002S	2003$	2002S
(a)	Lease expenditure commitmentsOperating leases (non-cancellable)Minimum lease payments
	- not later than one year	410,062	597,821	410,062	404,220
	- later than one year and not later thanfive years	582,741	1,099,475	582,741	1,005,870
	Aggregate lease expenditure contractedfor at balance date	992,803	1,697,296	992,803	1,410,090
	Aggregate expenditure commitments comprise:Amounts provided for:
	-Surplus lease space - current	110,962	238,590	110,962	238,590
	- non-current	142,440	259,960	142,440	259,960
		253,402	498,550	253,402	498,550
	Amounts not provided for:
	-rental commitments		1,198,746		911,540
	Total not provided for		1,198,746	$\blacksquare$	911,540
	Aggregate lease expenditure contracted for atbalance date	992,803	1,697,296	992,803	1,410,090

Two operating leases relate to office accommodation, one expiring in September 2005 and the other expiring in April 2006.

24. SEGMENT INFORMATION

The consolidated entity operated in one business segment, being medical technology. The consolidated entity operated during the year in two geographical segments, Australia and the United States.

The group generally accounts for intersegment sales and transfers as if the sales or transfers were to third parties at current market prices. Revenues are attributed to geographic areas based on the location of the assets producing the revenues.

Segment accounting policies are the same as the consolidated entity's policies described in Note 1. During the financial year, there were no charges in segment accounting policies that had a material effect on the segment information.

Geographical Segment

Revenue	Australia		United States of America		Consolidated Group
	2003	2002	2003	2002	2003	2002
	$	S	S	S	S	S
Sales to customers outside.
the consolidated entity	42,438	115,631	1,578,785	3,734,793	1,621,223	3,850,424
Other revenues from outside.
the consolidated entity	214,906	100,001			214,906	100,001
Share of net profit of equity
accounted investments		(74, 536)				(74, 536)

Total segment revenue	257,344	141,096	1,578,785	3,734,793
Proceeds from sale of
controlled entity					2,293,508
Debts forgiven					4,068
Interest income					95,950	22,403
Total consolidated revenue					4,229,655	3,898,292

Assets
Total Segment and Group
Assets	1,977,870	847,328		6,308,479	1,977,870	7,155,807

24. SEGMENT INFORMATION (cont'd)

Geographical Segment

	Australia		United States of America		Consolidated Group
	2003	2002SS	2003	2002	2003S	2002
			S	S		S
Other segment information:- Acquisition of property,plant and equipment,intangible assets and othernon-current assets	$\blacksquare$		$\blacksquare$$\overline{\phantom{a}}$	143,244	$\blacksquare$	143,244

EARNINGS PER SHARE 25.

The following reflects the income and share data used in the calculations of basic and diluted earnings per share:

	2003S	2002S
Net Loss	(2,884,830)	(6,297,850)
Adjustments:
Net loss attributable to outside equity
interest	124,731	469,622
Earnings used in calculating basic earningsper share	(2,760,099)	(5,828,228)

Interest saving on conversion of
convertible notes		22,874

Earnings used in calculating dilutedearnings per share	(2,760,099)	(5,805,354)

	Number of	Number of
	Shares	Shares
Weighted average number of ordinary
shares outstanding during the period used
in calculation of basic EPS	76,377,400	68,354,777
Effect of dilutive securities:
Share options
Convertible notes		3,142,255
Adjusted weighted average number of
ordinary shares used in calculating diluted
earnings per share	76,377,400	71,497,032

Options on issue at year end not dilutive
(based on the difference between thecurrent share price and the exercise price
of the options) and hence not used in the
calculation of diluted earnings per share	3,000,000	6,750,000

No ordinary shares have been issued since the reporting date and up to completion of this financial report.

26. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS

	Consolidated		Genesis Biomedical Ltd
	2003	2002	2003	2002
	S	S	S	S
Employee Benefits
The aggregate employee entitlements
liability is comprised of:
Provision for annual leave (current)	4.599	10,632	4.599	10,632
	4,599	10,632	4.599	10,632

Superannuation Commitments

The employer contributes to complying accumulation funds, nominated by employees, at the rate specified by the Superannuation Act. The assets of the funds are believed to be sufficient to satisfy all benefits that would have vested under the plan in the event of termination of the plan and voluntary or compulsory termination of employment of the employee.

$27.$ REMUNERATION OF DIRECTORS

	2003	2002	2003	2002
Income paid or payable, or otherwise made
available, in respect of the financial year,
to all directors of the consolidated entity,
directly or indirectly by the entities of
which they are directors or any related
party.	$260,366	$718,394	$168,454	$493,284

These numbers are disclosed in aggregate as the directors believe that the provision of full particulars would be unreasonable, having regard to the number of persons involved.

The number of directors of Genesis Biomedical Ltd whose remuneration (including superannuation contributions) fell within the following bands is:

- $9,999	$\sim$	2
$-$ $19,999	$\sim$	₩
$-$ $29,999
$-$ $59,999	$\overline{r}$
$$110,000 - $119,999$		$\overline{\phantom{a}}$
$$260,000 - $269,999$	$\overline{\phantom{a}}$
$340,000$-$ $349,000	$\overline{\phantom{a}}$

27. REMUNERATION OF DIRECTORS (contd)

The following options to acquire ordinary shares in the Company were held by the following current and former directors at the commencement and end of the financial year.

Holder		No. of optionsheld at 1 July2002	No of optionsissued duringfinancial year	No of optionsexpired duringthe year	2003	No. of optionsheld at 30 June
	R Northcott	5,000,000		2,000,000		3,000,000
	E Correia	1,000,000		1,000,000
	J Edwards	250,000		250,000
	R Gilmour	250,000		250,000
	D Kennedy	250,000		250,000
		6,750,000	$\overline{\phantom{a}}$	3,750,000		3,000,000
28.	REMUNERATION OFEXECUTIVES			Consolidated			Genesis Biomedical Ltd
				2003	2002	2003	2002
	otherwise	Remuneration received or due andreceivable by executive officers of theconsolidated entity whose remunerationwas $100,000 or more in connectionwith the management of the affairs ofthe consolidated entity or any relatedparty, whether as an executive officer or		$233,634	$615,206	$112,069	$347,798
hands:	The number of executives whose	remuneration fell within the following
	$$110,000 -$$119,999			1		1
	$$120,000 -$$129,999
	$$260,000$ -$269,999$340,000$349,999

Please refer to the Directors and Emoluments section of this report for details on the changes in executive positions for the consolidated entity during the financial year.

	Consolidated		Genesis Biomedical Ltd
	2003	2002	2003	2002
29. AUDITOR'S REMUNERATION
Amounts received or due and receivable
by Ernst & Young Australia for:
- An audit or review of the financial report
of the entity and any other entity in the
consolidated entity	40,000	86,913	40,000	86,913
Amounts received or due and receivable by
auditors other than Ernst & Young for:
- An audit or review of the financial
report of subsidiary entities		14,500
	40,000	101.413	24,000	86.913

30. RELATED PARTY DISCLOSURES

(a) The directors of Genesis Biomedical Ltd during the financial year were:

Dr R F Gilmour Mr E Correia Mr R J Northcott

(b) Transactions with director-related entities

The consolidated entity paid to Transocean Securities Ltd, a company of which Mr E Correia is a director, corporate advisory and underwriting fees totalling $378,574 (2002:$312,529) for corporate advice. A significant component of this amount related to a success based fee paid to Transocean Securities Limited for services performed in relation to the disposition of Genesis's 80% holding in Bodyworks Inc. A further fee of 5% of any upside payment (see Note 11) of this contingent consideration received by Genesis in relation to this sale is also payable should Genesis receive any further consideration. These amounts have not been included in director's remuneration.

During the current financial year Dr Gilmour provided a loan totalling $50,000 to Genesis Biomedical Limited, this amount plus interest of $848.03 was subsequently repaid by Genesis on the $8h$ November 2002.

Genesis Biomedical Ltd advances funds to controlled entities except Bodyworks Inc on an interest free basis. At balance date the amount outstanding was $3,417,480 (2002: $3,705,961) and a provision for non-recovery of $3,417,480 (2002: $3,258,624).

(d) Transactions with Bodyworks Inc

Genesis Biomedical Ltd invested $5,115,399 in Bodyworks Inc and this investment was recorded at cost less provision for diminution of $1,310,162 in the Company accounts and was equity accounted on consolidation until it became a controlled entity on I August 2001. Genesis Biomedical Ltd subsequently sold its 80% holding in Bodyworks Inc during the financial year (Refer note 11).

Dr Gilmour is a director of Bodyworks Inc. and has a financial interest in that Company. At 30 June 2002 a company controlled by Dr Gilmour had made advances to Bodyworks Inc totalling $262,768, whereupon upon settlement of the sale of Bodyworks Inc (8 November 2002) these amounts were repaid in full.

(e) Interests in shares and options of entities within the consolidated entity by directors of the reporting entity and their director related entities as at 30 June 2003 are.

	Ordinary Shares		Options
	2003	2002	2003	2002
R F Gilmour	4,000,000	4,000,000	$\blacksquare$	250,000
E Correia	125,000	125,000	$\sim$	1,000,000
R J Northcott	200,000	200,000	3,000,000	5,000,000

30. RELATED PARTY DISCLOSURES (Cont.)

All equity dealings have been entered into with terms and conditions no more favourable that those that the entity would have adopted if dealing at arm's length.

(f) Genesis Biomedical Ltd is the ultimate Australian holding company and is a company limited by shares and is incorporated and domiciled in Australia.
(g) The consolidated entity employed 1 employee at 30 June 2003 (2002: 21).

$31.$ SUBSEQUENT EVENTS

32. FINANCIAL INSTRUMENTS

Terms, conditions and accounting policies $(a)$

The consolidated entity's accounting policies, including the terms and conditions of each class of financial asset, financial liability and equity instrument, both recognised and unrecognised at the balance date, are as follows:

	RECOGNISEDFINANCIALINSTRUMENTS	BALANCESHEETNOTES	ACCOUNTING POLICIES	TERMS AND CONDITIONS
(i)	FINANCIALASSETS
	Cash at Bank	22(b)	Carried at nominal amount.Interest is recognised in thestatement of financialperformance when earned.	Available on call at effectiveinterest rates of 3.3% pa.
	Term Deposit		Carried at normal amount $&$interest is recognised in thestatement of financialperformance when earned.	Available on a month's noticeat effective interest rates of4.66%
	Receivables	5	Receivables are carried atnominal amounts due lessany provision for doubtfuldebts. A provision fordoubtful debts is recognisedwhen collection of the fullnominal amount is no longerprobable.	Credit sales are normally on30-day terms.

FINANCIAL INSTRUMENTS (contd) 32.

$(ii)$

Security deposits	8	Security deposits are lodgedwith the Bankers to theconsolidated entity, securingbank guarantees provided.Deposits are carried atnominal value.	Average Interest rate of 3.8%
Shares and options	7, 12	Listed shares and options arerecorded at the lower of costor recoverable amount	No dividends are expected tobe received.
FINANCIAL LIABILITIES
Payables (current)	15	Liabilities are recognised foramounts to be paid in thefuture for goods and servicesreceived, whether or notbilled to the consolidatedentity.	Trade liabilities are normallysettled on 30-day terms.

	Interest bearingliabilities (current and	16	Liabilities are recognised forprincipal amount owed at	Average interest rate of 8%
	non-current)		balance date.	Amounts are due within 12months
(iii)	EQUITY
	Ordinary shares	19	Ordinary share capital isrecognised at the value of theamount received, less directcosts incurred in raising thefunds.	The consolidated entity hasissued $76,550,003$ ordinaryshares fully paid and 3,000,000options. Details of sharesissued and the terms andconditions of options issuedover ordinary shares at balance

date are set out in Note 19.

32. FINANCIAL INSTRUMENTS (Cont)

Net fair values of financial assets and liabilities $(b)$

There is no difference between the aggregate net fair values of financial assets and financial liabilities, both recognised and unrecognised, recorded at balance date and the carrying values of the financial assets and financial liabilities recorded at balance date.

The following methods and assumptions are used to determine the net fair values of financial $\left( \mathrm{e}\right)$ assets and liabilities

Recognised Financial Instruments

Cash and cash equivalent: The carrying amount approximates fair value because of their short-term to maturity.

Security deposits are held by the consolidated entity's bank, securing bank guarantees in relation to leased office space. The carrying amount approximates fair value.

Receivables and payables: The carrying amount approximates fair value.

Inventories: The carrying amount approximates fair value.

Loan to associates: The carrying amount approximates fair value.

Listed and unlisted shares: The carrying amount approximates fair value.

32. FINANCIAL INSTRUMENTS (Cont)

$(d)$ Interest rate risk exposure

$1000000000000000000000000000000000000$

The consolidated entity's exposure to interest rate risks and the effective interest rates of financial assets and financial liabilities, both recognised and unrecognised at balance date, are as follows:

				FIXED INTEREST RATE	MATURING IN
FINANCIALINSTRUMENT		FLOATINGINTEREST RATE	1 YEAROR.LESS		1T05YEARS			NON-INTERESTBEARING	TOTAL		WEIGHTEDAVERAGEEFFECTIVEINTERESTRATE
(i) FINANCIALASSETS	2003	2002	2003	2002	2003	2002	2003	2002	2003	2002
Cash	368,729	60,299	1,026,645	$\overline{\phantom{a}}$		$\tilde{\phantom{a}}$	$\overline{\phantom{a}}$	$\sim$	1,395,374	60,299	4.3%
Receivables	$,$		$\overline{\phantom{a}}$	$\overline{r}$		$,$	$\pmb{\pi}$	584,449	$\blacksquare$	584,449	N/A
Security deposits	249,164	194,298	$\tilde{\phantom{a}}$	$\overline{\phantom{a}}$		$,$	$\cdot$	$\sim$	249.164	194,298	$4%$
Shares & options	$\tilde{\phantom{a}}$	$\cdot$	$\overline{r}$	$\mathbf{r}$		$\cdot$	$\overline{\phantom{a}}$	42,857	$\overline{ }$	42,857	N/A
Total Financial Assets	617,893	254,597	1,026,645	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	627,306	1,644,538	881,903
(ii) FINANCIALLIABILITIES
Payables (current)	÷		$\overline{r}$				$\cdot$	1,405,656	$_{\star}$	1,405,656	N/A
Interest bearing liabilities	$\cdot$	$\cdot$	$\sim$	435,814	$\cdot$	$\scriptstyle\star$	$\overline{\phantom{a}}$	$\cdot$	$\overline{a}$	1,435,814	8%
Total Financial Liabilities	$,$	$\cdot$	$\sim$	1,435,814		$_{\star}$	$\pmb{\cdot}$	1,405,656	$\tilde{\phantom{a}}$	2,841,470

(e) The consolidated entity's maximum exposures to credit risk at reporting date in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the Statement of Financial Po

33. DISCONTINUING OPERATION

On 30 May 2002, the company announced the sale of its 80% shareholding in Bodyworks Inc, a manufacturer of orthopaedic braces, subject to due diligence. On 16 September 2002, the company announced that a Sale and Purchase agreement had been signed with settlement of the agreement being announced to the market on $12^{th}$ November 2002.

The sale consideration was structured into two parts and comprised an agreed "initial payment" payable at settlement plus a further "upside payment" (up to a maximum of $6.6 million) payable to Genesis should the Bodyworks business achieve certain defined EBITDA targets for the 24 month period to 31st July 2004.

Genesis received the initial payment at settlement date and as at the 31st December 2002 had recorded an amount of $1,511,729 as a receivable which at that time represented the Directors best estimate of the potential upside payment component of the sale consideration.

Bodyworks Inc is reported in Note $24$ – Segment Information as part of the groups US segment.

The financial information for Bodyworks Inc as at 30 June 2002 was as follows:

Financial Performance information for the eleven months ended 30 June 2002

Revenue from ordinary activities	3,722,961
Expenses from ordinary activities	(6,363,411)
Loss before income tax	(2,640,450)
Income tax expense
Net loss	(2,640,450)

Financial Position information as at 30 June 2002

Assets	6,308,469
Liabilities	(1,353,544)
Net Assets	4,954,925

Cash Flow information for the eleven months ended 30 June 2002

Cash inflow (outflow) from operating	(125,980)
activitiesCash inflow (outflow) from investing	(248,309)
activities
Cash inflow (outflow) from financing
activities	418,910
Total cash inflow (outflow)	$44,621

34. RECONCILIATION OF APPENDIX 4B ANNOUNCEMENT TO FINAL LOSS

	Consolidated
	2003	2002
Net loss attributable to members as outlined in Appendix 4B	$\mathcal{M}$	(S4,396,000)
Writedown of intangibles	$\sim$	(S1,353,081)
Sundry accruals	$\mathbf{r}$	(S79.147)
Net loss attributable to members per statement of financial performance	$\overline{\phantom{a}}$	$($5,828,228)$

DIRECTORS' DECLARATION

In accordance with a resolution of the directors of Genesis Biomedical Ltd, I state that:

$(1)$ In the opinion of the directors:
- the financial statements and notes of the Company and of the consolidated entity are in $(a)$ accordance with the Corporations Act 2001 including:
  - $(i)$ giving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2003 and of their performance for the year ended on that date; and
  - $(ii)$ complying with Accounting Standards and 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.
$(2)$ In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified in Note 13 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed of Cross Guarantee.

On behalf of the Board

Emmanuel Correia Director

Sydney $26th$ September 2003

EII FRANCT & VOI INIC

B The Ernst & Young Building 321 Kent Street Sydney NSW 2000 Australia.

■ Tel 61 2 9248 5555 $\frac{61}{2}$ 61 2 9262 6565DX Sydney Stock Exchange 10172

GPO Box 2646 Sydney NSW 2001

Independent audit report to members of Genesis Biomedical Limited

Scope

The financial report and directors' responsibility

The financial report comprises the statement of financial position, statement of financial performance, statement of cash flows, accompanying notes to the financial statements, and the directors' declaration for Genesis Biomedical Limited (the company) and the consolidated entity, for the year ended 30 June 2003. The consolidated entity comprises both the company and the entities it controlled during that year.

The directors of the company are responsible for preparing a financial report that gives a true and fair view of the financial position and performance of the company and the consolidated entity, and that complies with Accounting Standards in Australia, 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.

Audit approach

We conducted an independent audit of the financial report in order to express an opinion on it to the members of the company. Our audit was conducted in accordance with Australian Auditing Standards in order to provide reasonable assurance as to whether the financial report is free of material misstatement. The nature of an audit is influenced by factors such as the use of professional judgement, selective testing, the inherent limitations of internal control, and the availability of persuasive rather than conclusive evidence. Therefore, an audit cannot guarantee that all material misstatements have been detected.

We performed procedures to assess whether in all material respects the financial report presents fairly, in accordance with the Corporations Act 2001, including compliance with Accounting Standards in Australia, and other mandatory financial reporting requirements in Australia, a view which is consistent with our understanding of the company's and the consolidated entity's financial position, and of their performance as represented by the results of their operations and cash flows.

We formed our audit opinion on the basis of these procedures, which included:

examining, on a test basis, information to provide evidence supporting the amounts and ٠ disclosures in the financial report, and
assessing the appropriateness of the accounting policies and disclosures used and the reasonableness of significant accounting estimates made by the directors.

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

We performed procedures to assess whether the substance of business transactions was accurately reflected in the financial report. These and our other procedures did not include consideration or judgement of the appropriateness or reasonableness of the business plans or strategies adopted by the directors and management of the company.

Independence

We are independent of the company, and have met the independence requirements of Australian professional ethical pronouncements and the Corporations Act 2001.

Audit opinion

In our opinion, the financial report of Genesis Biomedical Limited is in accordance with:

$(a)$ the Corporations Act 2001, including:

$\ddot{\Omega}$ giving a true and fair view of the financial position of Genesis Biomedical Limited and the consolidated entity at 30 June 2003 and of their performance for the year ended on that date; and
$(ii)$ complying with Accounting Standards in Australia and the Corporations Regulations $200I$ ; and
other mandatory financial reporting requirements in Australia. $(b)$

Ernst & Young

Christopher George Partner Sydney 26th September 2003

ASX ADDITIONAL INFORMATION

The following additional information is required by the Australian Stock Exchange Limited and was the status on 29 August 2003.

Shareholding

Distribution of ordinary shareholders and option holders: $(a)$

Category (size of Holdings)		Number ofOrdinaryShareholders	Number ofOption holders
	$\blacksquare$	1,000	23	$\mathbf{r}$
1,001	$\blacksquare$	5,000	192	$\mathbf{r}$
5,001	$\blacksquare$	10,000	272	$\overline{\phantom{a}}$
10,001	$\blacksquare$	100,000	492	$\overline{\phantom{a}}$
100,001		and over	123
			,102

$(b)$ The number of shareholders holding less than marketable parcels is 487.

20 largest shareholders at 29 August 2003 - fully paid ordinary share capital. $(c)$

Name	Number ofOrdinary Shares	% of IssuedOrdinary SharesHeld
1. Aquarius Fund Managers Pty Ltd	6,000,000	7.84
2. Biomed Trust Limited	4,000,000	5.23
3. Regent Projects Holdings Ltd	3,250,000	4.25
4. Each Nominees Pty Ltd	3,202,000	4.18
5.Mr Chris Carr and Mrs Betsy Carr	3.000,000	3.92
6. Yin Lin Kok	1,250,000	1.63
7. Kwan Tee Holdings Pty Ltd	1,250,000	1.63
8. Russkar Pty Ltd	1,123,328	1.47
9. Westmed Development Capital Limited	1,028,147	1.34
10. Amber Management Pty Ltd	924,500	1.21
11. NJP Nominees Pty Ltd	820,000	1.07
12. Camira Holdings Pty Ltd	800,000	1.05
13. McMillan Nominees No 2 A/C Pty Ltd	750,000	0.98
14. Finance Capital Fund No 1 Limited	672,000	0.88
15. Earth Essence Holdings Pte Ltd	525,000	0.69
16. Keyjade Holdings Pty Ltd	517,500	0.68
17. Mr Nat Bosa	500,000	0.65
18. Connoisseur Holdings Pty Ltd	500,000	0.65
19. Mr Alan John Maloulf & Mrs Sandee Ann Malouf	500,000	0.65
20. Mr John M Snowden	500,000	0.65
	31,112,475	40.65%

ADDITIONAL INFORMATION (cont'd)

(d) The names of the substantial shareholders listed in the Genesis Biomedical Ltd register as at $29th$ August 2003 were:

Shareholder	Ordinary Shares	% Held
Aquarius Fund Managers Pty Ltd	6,000,000	7.84%
Biomed Trust Limited	4,000,000	5.23%
	10,000,000	13.07%

(e) Option holders

The names of the holder of unlisted options, exercisable at 30 cents per share on or before 23 November 2003.

	Option holder	Options	% Held
$\mathbf{1}_{\cdot}$	- R J Northcott	1,000,000	100.00____

The names of the holder of unlisted options, exercisable at 40 cents per share on or before 23 November 2004.

Option holder		Options	% Held
	1. R J Northcott	2,000,000	100.00

(f) Restricted securities

There are no longer any restricted securities on issue by the company.

(g) Voting rights

No restrictions. On a show of hands every member or proxy present shall be entitled to one vote unless a poll is called in which case every share shall have one vote.

(h) On market buy back

There has been no on market buy back of the Company's shares during the financial year

(i) Stock Exchange Listing

Quotation has been granted for all the ordinary shares, of the consolidated entity on all Member Exchanges of the Australian Stock Exchange Limited.

$\overline{55}$

ADDITIONAL INFORMATION (Cont'd)

(i) Director's Interest in Equity

The interests of each director in the share capital of Genesis Biomedical Ltd as disclosed by the register of director's shareholdings.

	Beneficially Held		Non Beneficially Held
	Ordinary Shares	Options	Ordinary Shares	Options
R F Gilmour			4.000.000
E Correia	125,000
R J Northcott	200,000	3,000,000	-

CORPORATE GOVERNANCE STATEMENT 30 JUNE 2003

The Board of Directors of Genesis Biomedical Ltd is responsible for the corporate governance of the consolidated entity. The board guides and monitors the business and affairs of Genesis Biomedical Ltd on behalf of the shareholders by whom they are elected and to whom they are accountable. In considering the issue of corporate governance the board are cognisant of the recent formation of the consolidated entity and, consequently, the size of its operations and the fact that the board consists presently of only three members.

Composition of the Board

The composition of the board is determined in accordance with the following principles and guidelines:

the board should comprise directors with an appropriate range of qualifications and expertise; and
the board shall meet at least every second month and follow meeting guidelines set down to ensure all directors are made aware of, and have available all necessary information, to participate in an informed discussion of all agenda items.

The directors in office at the date of this statement are:

Position
Non-executive Director
Non-executive Director
Non-executive Director

Committees

The Board has not established any committees at this point in the consolidated entity's development, because it is considered that the size of the Board renders this impractical and the full Board considers in detail all of the matters for which the directors are responsible. Although there is no Audit Committee, formal meetings are held between nominated directors and the external auditor, to discuss the findings of the half year review and the year end audit.

Board Responsibilities

As the board acts on behalf of the shareholders and is accountable to the shareholders, the board seeks to identify the expectations of the shareholders as well as other regulatory and ethical expectations and obligations. In addition, the board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks.

Monitoring of the Board's Performance and Communication to Shareholders

In order to ensure the board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is reviewed annually by the chairperson.

The Board of Directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of the directors. Information is communicated to the shareholders through:

the annual report which is distributed to all shareholders;
the half-yearly report circulated to the Australian Stock Exchange Limited and the Australian Securities Investment Commission;
announcements made to the Australian Stock Exchange Limited, under the continuous disclosure requirements of the listing rules;
the annual general meeting and other meetings called to obtain approval of board action as appropriate; and
occasional newsletters to shareholders when the board considers that an update on the Company's activities is appropriate.

AI assistant

SUREFIRE RESOURCES NL — Annual Report 2003

65857_rns_2003-09-28_fcb640f7-82d2-4e8f-a818-ad70db5e8867.pdf

GENESIS BIOMEDICAL LTD

ANNUAL FINANCIAL REPORT

TABLE OF CONTENTS

CORPORATE DIRECTORY

GENESIS BIOMEDICAL LTD A.B.N. 48 083 274 024

Directors

Joint Company Secretaries

Registered Office

Share Registry

Auditors

Solicitors

Bankers

REVIEW OF OPERATIONS

Summary

Operational Review

Cell Bionics

Bodyworks Receivable Update

Status of the Company and Activities going forward

DIRECTORS' REPORT

DIRECTORS

PRINCIPAL ACTIVITIES

RESULTS

DIVIDENDS

REVIEW OF OPERATIONS, LIKELY DEVELOPMENTS AND FUTURE RESULTS

DIRECTORS' INTERESTS

SIGNIFICANT CHANGE IN STATE OF AFFAIRS

SIGNIFICANT EVENTS SUBSEQUENT TO BALANCE DATE

OPTIONS

INTERESTS IN CONTRACTS OR PROPOSED CONTRACTS WITH THE CONSOLIDATED ENTITY

DIRECTORS' AND EXECUTIVES' EMOLUMENTS

DIRECTORS' MEETINGS

INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS

CORPORATE GOVERNANCE

ENVIRONMENTAL REGULATION AND PERFORMANCE

۰Ó,

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2003

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2003

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2003

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2003

13

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2003

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1.

Basis of accounting

Change in accounting policies

Provisions, Contingent Liabilities and Contingent Assets

Employee Benefits

Principles of consolidation

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) $\mathbf{L}$

Foreign currencies

Translation of foreign currency transactions

Translation of financial reports of overseas operations

Cash

Income tax

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) $\mathbf{L}$

Goods and Services Tax

Recoverable amount

Investments

Receivables

Plant and equipment

$\mathbf{L}$ SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Depreciation

Research and development

Leases

Intangible assets

Employee benefits

Payables

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd) $\mathbf{L}$

Earnings per share

Revenue recognition

Surplus lease space

Provisions

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Inventory

Contributed equity

Comparatives

$2.$ REVENUE FROM ORDINARY ACTIVITIES

NOTES TO THE FINANCIAL STATEMENTS

SUREFIRE RESOURCES NL Annual Report 2003