SUREFIRE RESOURCES NL — Annual Report 2004

Aug 26, 2004

GENESIS BIOMEDICAL LTD $(ACN 083 274 024)$

APPENDIX 4E

PRELIMINARY FINAL REPORT YEAR ENDED 30 JUNE 2004

• 1. Highlight of Results
• 1. Appendix 4E Financial Statements for the Year ended 30 June 2004

$27th$ August 2004

Results for announcement to market $\mathbf{1}$ .

Summary

The Company has spent the 2004 year focussing on furthering the evaluation of its CellBionics® therapy at the Pemex Hospital in Mexico as well as reviewing a large number of commercial opportunities for a potential merge or acquisition by Genesis.

The Board reached varying stages of due diligence and review on all of the potential transactions, however as at the date of this report, the Board has yet to identify a transaction that fully satisfies the defined investment criteria.

The Board is seeking an opportunity that will enable the Company to have a meaningful operation going forward, in a proven or potential for growth industry and most importantly with proven management. The attainment of such a transaction will hopefully set the platform for existing and new shareholders to benefit through an appreciation of the Company's share price.

The Board is disappointed that to date it is has yet to identify such a transaction, however firmly believes that it is far more prudent to wait for an appropriate opportunity that fully satisfies its defined criteria rather than completing the wrong transaction simply for the sake of getting a transaction completed.

The Board continues to review these opportunities and hopes to be able to make an announcement to the market in relation to one of these prior to the end of the calendar year.

The consolidated entity's operating loss after tax for the year ended 30 June 2004 was $336,877. This result included a write down of the value of the Company's holding in a DBC Clinic in Singapore offset by a write back to the "provision for surplus lease space" as a result of a sub-lessee agreeing to sub-let the entire portion of a particular premise for the remainder of the Genesis head lease.

Genesis continues to maintain cash and nett security deposits totalling approximately $1.18 million along with a minimal overhead structure.

Set out below is summary financial information for the company for the 2003/04 with full financial details being attached to this announcement.

	Consolidated				Genesis Biomedical Ltd
immary information	30-Jun-04	30-Jun-03	Inc/Dec	Inc/Dec	30-Jun-04	$30 - Jun - 03$	Inc/Dec	Inc/Dec
	Б	ч.	S	%	S.			%
svenue from Ordinary Activities	314,571	4,229,651	3,915,080	$-92.56%$	314,572	2,386,260	$-2,071,688$	$-86.82%$
ofit/(Loss) after Tax fromdinary Activities	$-336.877$	2.884,830	2,547,953	$-88.32%$	$-336.877$	$-2.420.729$	2.083.852	$-86.08%$
et Profit/(Loss) after Taxtributable to Members	$-336.877$	2.760,099	2,423,222	$-87.79%$	$-336.877$	$-2.420.729$	2.083.852	$-86.08%$
isic Earnings - Cents Per Share	$-0.44$	$-3.8$	3.4	$-88.42%$
et Tangible Assets - Cents Periare	$0.015	$0.020	$-$0.004$	22.36%	$\mathbf{u}_\mathbf{r}$
vidends Paid	Nit	Nil	44		Nil	Nil

The company's accounts are currently in the process of being audited by Ernst $&$ Young, Chartered Accountants.

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2004

$$$$REVENUES FROM ORDINARYACTIVITIES314,5714,229,651314,5712,386,2602$\overline{\mathbf{3}}$11,118(720, 754)11,118(11, 118)3(469, 108)(43,071)3(43,071)Salaries and Directors fees(101, 534)(688, 261)(161, 961)(101, 534)(24, 031)(177,999)(24,031)(70, 741)(148, 676)(392, 340)(148, 676)(385, 658)(45,065)(45,065)(104, 299)(40,704)(3,590)Travel(50, 472)Advertising(93, 831)Research and development(2,139)33(139, 599)(33, 428)(139, 599)(33, 428)(158, 856)(28,319)(92, 033)(28,319)(141, 378)48,75048,750Cost of investment in listedinvestment disposed(175, 342)(175, 342)Cost of investment in controlled(4,295,496)(3,805,234)3(e)(ii)LOSS FROM ORDINARYACTIVITIES BEFORE INCOMETAX EXPENSE(336,877)(2,884,830)(336,877)(2,420,729)RELATING TO ORDINARY4LOSS FROM ORDINARYACTIVITIES AFTER INCOME(2,884,830)(336,877)(336,877)(2,420,729)TAX EXPENSENET LOSS ATTRIBUTABLE TOOUTSIDE EQUITY INTEREST124,73118(336,877)(2,760,099)(336,877)(2,420,729)		Notes	Consolidated20042003		Genesis Biomedical Ltd2004	2003
	Cost of materials
	Depreciation and amortisation
	Borrowing costs expense
	Rent
	Professional fees
	Insurance
	Decrement in the value of
	investments
	Provision for non-recovery of loans
	Other expenses from ordinary
	activities
	Foreign exchange gain /(loss)
	entity disposed
	INCOME TAX EXPENSE
	ACTIVITIES
	NET LOSS ATTRIBUTABLE TO
	MEMBERS OF GENESIS
	BIOMEDICAL LTD

$\overline{3}$

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL PERFORMANCE YEAR ENDED 30 JUNE 2004

	Notes	Consolidated		Genesis Biomedical Ltd
		2004	2003	2004	2003
		S	$	$	$
TOTAL CHANGES IN EQUITY
OTHER THAN THOSE
RESULTING FROM
TRANSACTIONS WITH
OWNERS AS OWNERS
ATTRIBUTABLE TO
MEMBERS OF GENESIS
BIOMEDICAL LTD		(336, 877)	(2,760,099)	(336,877)	(2,420,729)
Basic earnings per share (cents)	22	(0.44)	(3.8)
Diluted earnings per share (cents)	22	(0.44)	(3.8)

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF FINANCIAL POSITION AT 30 JUNE 2004

	Notes	Consolidated		Genesis Biomedical Ltd
		2004	2003	2004	2003
		S	$	$	$
CURRENT ASSETS
Cash assetsReceivables	19(b)	1,088,288	1,395,375	1,088,288	1,395,375
Other financial assets	5	14,488	5,0449,429	14,488	5,044
Other	67	226,954	249,164	226,954	9,429249,164
TOTAL CURRENT ASSETS		1,329,730	1,659,012	1,329,730	1,659,012
NON-CURRENT ASSETS
Plant and equipment	8
Intangible assets	9
Receivables	10
Other financial assets	$\mathbf{1}$		150,000	10,003	160,003
TOTAL NON-CURRENT ASSETS			150,000	10,003	160,003
TOTAL ASSETS		1,329,730	1,809,012	1,339,733	1,819,015
CURRENT LIABILITIES
Payables	13	9,381	25,898	9,381	25,898
Provisions	14	74,357	134,053	74,357	134,053
TOTAL CURRENT LIABILITIES		83,738	159,951	83,738	159,951
NON-CURRENT LIABILITIES
Provisions	15	76,250	142,440	76,250	142,440
TOTAL NON-CURRENT
LIABILITIES		76,250	142,440	76,250	142,440
TOTAL LIABILITIES		159,988	302,391	159,988	302,391
NET ASSETS		1,169,743	1,506,621	1,179,745	1,516,624
EQUITY
Parent entity interest
Contributed equity	16	12,987,985	12,987,985	12,987,985	12,987,985
Accumulated losses	17	(11,796,853)	(11, 459, 975)	(11,808,240)	(11, 471, 361)
Total parent entity interest in equity		1,191,132	1,528,010	1,179,745	1,516,624
Total outside equity interest	$18,$	(21, 389)	(21, 389)
TOTAL EQUITY		1,169,743	1,506,621	1,179,745	1,516,624

6

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES STATEMENT OF CASH FLOWS YEAR ENDED 30 JUNE 2004

	Notes	Consolidated2004${\mathbb S}$	2003Ŝ	Genesis Biomedical Ltd2004$	2003$
CASH FLOWS FROMOPERATING ACTIVITIESReceipts from customersPayments to suppliers and employeesInterest receivedBorrowing costsResearch & Development tax refund		12,202(463, 859)84,055	1,673,803(3,075,540)95,950(43,071)214,907	12,202(463, 859)84,055	50,841(1,501,087)88,079(43,071)
NET CASH FLOWS USED INOPERATING ACTIVITIES	19(a)	(367, 602)	(1,133,951)	(367, 602)	(1,405,239)
CASH FLOWS FROM INVESTINGACTIVITIESLoan Repayment from AssociatePurchase of SharesProceeds from sale of sharesProceeds from sale of BodyworksCash effect of the purchase/sale ofcontrolled entities	19(c)19 (c)	(170,000)230,517	1,145,6442,293,505(38, 228)	(170,000)230,517	1,434,1252,293,505
NET CASH FLOWS FROMINVESTING ACTIVITIES		60,517	3,400,921	60,517	3,727,630
CASH FLOWS FROMFINANCING ACTIVITIESProceeds from issue of ordinary sharesRepayment of borrowings			175,000(1,106,895)		175,000(1,103,104)
NET CASH FLOWS FROMFINANCING ACTIVITIES			(931, 895)		(928, 104)
NET INCREASE/(DECREASE) INCASH HELDOpening cash brought forward		(307,085)1,395,375	1,335,07660,299	(307,085)1,395,375	1,394,2881,087
CLOSING CASH CARRIEDFORWARD	19(b)	1,088,289	1,395,375	1,088,289	1,395,375

GENESIS BIOMEDICAL LTD AND CONTROLLED ENTITIES NOTES TO THE FINANCIAL STATEMENTS 30 JUNE 2004

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 on a going concern basis.

Change in accounting policies

The accounting policies adopted are consistent with those of the previous year.

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 vear 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.

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 restatement are brought to account in determining the profit or loss for the financial year.

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

Cash

For the purpose of the statement of cash flows, cash includes cash on hand and in banks, net of bank overdrafts. Cash on hand and in banks and short term deposits are stated at nominal value.

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.

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
• $\ddot{\mathbf{i}}$ . 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.

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

Investments

Listed shares held for trading are carried at net market value. Changes in net market value are recognised as a revenue or expense in determining the net profit for the period.

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.

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 collectability 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.

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:

	2004	2003
Plant and equipment	27%	27%

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.

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

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.

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);
• 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.

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

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 consolidated 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 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.

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
	2004${\bf S}$	2003$	2004$	2003$
Revenues from operating activitiesRevenue from sale of goods		1,625,289		4,676
Total revenue from operatingactivities	$\overline{a}$	1,625,289		4,676
Revenues from non-operatingactivities
Interest – other corporations	84,054	95,950	84,054	88,079
Proceeds from sale of investments	230,517		230,517
Proceeds from sale of controlled entity		2,293,505		2,293,505
Research and Development tax refund		214,907
Total revenue from non - operatingactivities	314,571	2,604,362	314,571	2,381,584
Total revenues from ordinaryactivities	314,571	4,229,651	314,571	2,386,260
EXPENSES AND3.LOSSES/(GAINS)
(a) Cost of salesCost of goods soldCost of investments sold	(11,118)175,342	720,754	(11,118)175,342	11,118
(b) Depreciation and amortisation
Depreciation of non-current assets		265,402
Plant and equipmentOffice furniture and fittings		1,500
Total depreciation of non-current
assets		266,902

	Notes	Consolidated		Genesis Biomedical Ltd
		2004	2003	2004	2003
		$	$	$	$
EXPENSES AND3.LOSSES/(GAINS) (cont'd)
Amortisation of intangibles			202,206
Total amortisation of intangibles			202,206
Total depreciation and amortisationexpenses			469,108
Borrowing costs expensed(c)Interest expense			43,071		43,071
Total borrowing costs expensed			43,071		43,071
(d)Other expenses and losses/(gains)(Increment)/Decrement in value ofinvestments		(10,401)	33,428	(10,401)	33,428
Research and development costs			2,139
Foreign exchange (gain)/ lossWrite down in value of inventories			(48,750)248,610		(48,750)

		Notes	Consolidated		Genesis Biomedical Ltd
			2004	2003	2004	2003
			$	$	$	$
3.	EXPENSES AND
	LOSSES/(GAINS) (cont'd)
	(e) Significant item
	(i) 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 controlledentity disposed (80% ofBodyworks Inc) Refer Note
	19(c)(i).			(4,295,496)		(3,805,234)

During the previous 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 31 July 2004.

Genesis received the initial payment at settlement date and as at 31 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 that stage based on the information provided the Directors were unable to accurately determine the likelihood and quantum of any upside payment to be received. Accordingly they deemed it prudent to write down the value of this receivable to nil and this was fully reflected in the accounts of the consolidated entity as at 30 June 2003 as explained below.

Gross Proceeds from sale of controlled entity (Bodyworks Inc)(Refer Note 2, and	$2,293,505
19(c)(i)
Less Cost of Investment in controlled entity disposed of (Refer Note $19(c)$ )	(S3,805,234)
Value of write down of receivable Refer Note 10.	$1,511,729

	Consolidated		Genesis Biomedical Ltd
	2004S	2003$	2004$	2003S
INCOME TAX4.
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	(101,063)	(865, 449)	(101,063)	(762,219)
Tax effect of permanent differences:Research & development refundAmortisation of non-deductible		64,472
expenditures		60,662
Current period tax benefit notbrought to account	(101,063)	(740,315)	(101,063)	(762, 219)
Income tax expense attributable toordinary activities

As at 30 June 2004 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 2004 in respect of tax losses not brought to account is approximately $3,992,755 (2003: $3,928,511). 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
• $(c)$ no changes in tax legislation adversely affect the consolidated entity in realising the benefit.

Since the substantive enactment of the Tax Consolidation legislation the Genesis consolidated group has not yet entered the tax consolidation regime, however it is possible that an election to enter the tax consolidation regime will be made for the 2004 taxation year.

			Consolidated	Genesis Biomedical Ltd
		2004	2003	2004	2003
		$	$	$	$
	5. RECEIVABLES (CURRENT)
	Trade debtors		5,044		5,044
			5,044		5,044
	6. OTHER FINANCIAL ASSETS(CURRENT)
	Investments at cost comprise:Listed shares at costProvision for diminution	490,572(476, 084)	500,001(490, 572)	490,572(476, 084)	500,001(490, 572)
	Market value of shares at 30 June2004	14,488	9,429	14,488	9,429
	The investments at market value are listedon the Australian Stock Exchange Ltd andrelate to minority holdings in Sun CapitalGroup Limited and Earth EssenceInternational Limited
7.	OTHER CURRENT ASSETS
	Prepayments	29,344	60,411	29,344	60,411
	Security deposits in respect of operating
	leases	197,610	188,753	197,610	188,753
		226,954	249,164	226,954	249,164
	8. PLANT AND EQUIPMENT (NON-CURRENT )
	Plant and equipment
	- At cost		106,902
	Accumulated depreciation		(106,902)
	Total plant and equipment, net
year	ReconciliationReconciliation of the carrying amounts ofplant and equipment at the beginning andend of the current and previous financial
	Plant and equipment
	Carrying amount at beginningAdditions		1,027,277(920, 375)
	Disposals		(106,902)
	Depreciation expense

	Consolidated20042003		Genesis Biomedical Ltd2004	2003
	$	$	S	$
9. INTANGIBLES (NON-CURRENT)
Patents and trademarks - at cost		8,746,915
Accumulated amortisationIntangibles eliminated with sale of		(4,932,820)
Bodyworks		(3,814,095)
10. RECEIVABLES (NON- CURRENT)
Bodyworks Inc. Upside payment relating tosale of Bodyworks Inc		1,511,729		1,511,729
Less provision for non recovery ofreceivable (Refer Note 3(e)(ii))		(1,511,729)		(1,511,729)
11. OTHER FINANCIAL ASSETS(NON-CURRENT)
Investments at cost comprise:Shares - unlisted	547,862	547,862	547,862	547,862
Provision for diminution in value	(547, 862)	(397, 862)	(547, 862)	(397, 862)
		150,000	$\rightarrow$	150,000
Investment in controlled entities(Refer to note 12)			10,003	10,003
	$\blacksquare$	150,000	10,003	160,003

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. The directors resolved to write down the value of this holding to Nil at 31 December 2003.

12. INTERESTS IN SUBSIDIARIES

Name	Country ofIncorporation	Percentage of equityinterest held by theconsolidated entity
		2004	2003	2004	2003
Direct				S	$
Genovations Pty Ltd	Australia	100	100		Ŧ
NewMed Systems Ltd	Australia	100	100
Smart Chair Systems Pty Ltd	Australia	50	50	10,000	10,000
Indirect
Back to Health Australasia Ltd	Australia	100	100	www.
West Perth Clinic 1 Pty Ltd	Australia	100	100
St Kilda Clinic 1 Pty Ltd*	Australia		100
West Perth Clinic 2 Pty Ltd**	Australia		100
DBC Australia Pty Ltd	Australia	75	75
				10,003	10,003

* This company, which had no assets and no liabilities at 30 June 2003, was sold for $1 during the year.

** West Perth Clinic 2 Pty Ltd has been deregistered

(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.

12. 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	2004$	2003$
Operating loss before income tax	(336, 877)	(2,293,084)
Income tax attributable to operating loss
Operating loss after income tax attributable to
Members	(336, 877)	(2,293,084)
Accumulated losses at the beginning of thefinancial year	(10,222,908)	(7,929,822)
Accumulated losses at the end of the financialyear	(10, 559, 785)	(10, 222, 906)
(ii) Consolidated statement of financial position
Current assetsCash	1,088,288	1,395,375
Receivables and other	226,954	254,207
Total current assets	1,315,242	1,649,582
Non-current assets
Plant and equipment
Intangibles
Investments	1,147,388	1,292,329
Intercompany loans	125,558	125,558
Total non-current assets	1,272,946	1,417,887
Total assets	2,588,188	3,067,469
Current liabilities
Payables	9,380	25,898
Interest bearing liabilities
Provisions	74,357	276,493
Total current liabilities	83,737	302,391
Non Current liabilities
Provisions	76,250
Total non current liabilities	76,250
Total liabilities	159,987	302,391
Net assets	2,428,200	2,765,079
Equity
Contributed Equity	12,987,985	12,987,985
Accumulated losses	(10, 559, 785)	(10, 222, 906)
Total shareholders' equity	2,428,200	2,765,079

	Consolidate d		Genesis Biomedical Ltd
	2004	2003	2004	2003
	$	s	S	$
13. PAYABLES (CURRENT)
Trade creditors	(285)	25,898	(285)	25,898
Other creditors	9,666		9,666
	9,381	25,898	9,381	25,898
Refer to Note 23 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		6,250
PROVISIONS (CURRENT)14a.
Surplus lease space	60,357	110,962	60,357	110,962
Other provisions	14,000	23,091	14,000	23,091
Total	74,357	134,053	74,357	134,053

14b. MOVEMENTS IN PROVISIONS (CURRENT)

		Consolidated2004	Genesis Biomedical Ltd	2004
(i) Surplus Lease Space Provision
Carrying amount at the beginning of the financial year		110,962	110,962
Additional Provision
Amounts utilised during the year	(50,605)		(50,605)
Carrying amount at the end of the financial year	60.357		60,357
		Consolidated	Genesis Biomedical Ltd
	2004	2003	2004	2003
	S	S
15a. PROVISIONS (NON CURRENT)
Surplus lease space	76,250	142,440	76,250	142,440

15b. MOVEMENTS IN PROVISIONS (NON CURRENT)

	Consolidated2004	Genesis Biomedical Ltd2004
(i) Surplus Lease Space Provision
Carrying amount at the beginning of the financial year	142,440	142,440
Additional Provision	ш	$\overline{\phantom{a}}$
Amounts utilised during the year	(66, 190)	(66,190)
Carrying amount at the end of the financial year	76,250	76,250

	16. CONTRIBUTED EQUITY	Shares2004	Shares2003	$2004	$2003
(a)	Issued and paid up capitalFully paid ordinary shares	76,550,003	76,550,003	76,550,003	76,550,003
(b)	Movement in shares on issue- Issued capital at beginning of financialyear- Shares issued on 18 July 2002 pursuant	76,550,003	73,050,003	12,987,985	12,812,985
	to a placement by Directors at 5 cents perfully paid share		3,500,000		175,000
	Issued capital at the end of the financial year	76,550,003	76,550,003	12,987,985	12,987,985
(c)	Share Options

As at 30 June 2004, there are 2,000,000 $(2003: 3,000,000)$ unissued ordinary shares in respect of which options were outstanding and the details of these are as follows:

Number	Exercise	Expiry Date
2,000,000	Price0.40	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.

	Consolidated2004$	2003$	Genesis Biomedical Ltd2004$	2003S
RESERVES AND17.ACCUMULATED LOSSES(a) Accumulated losses
Balance at beginning of yearElimination due to sale of 80% ofBodyworksTransfer from Foreign Currency	(11, 459, 975)	(11, 383, 652)1,712,446	(11, 471, 361)	(9,050,632)
Translation Reserve due to sale ofBodyworks IncNet Loss attributable to members of		971,330
Genesis Biomedical LtdBalance at end of year	(336, 877)(11, 796, 852)	(2,760,099)(11, 459, 975)	(336,877)(11,808,238)	(2,420,729)(11,471,361
(b) Foreign Currency Translation(i) Nature and purpose of reserveThe foreign currency translation reserve is used to record exchange differences arising from thetranslation of the financial statements of self-sustaining foreign operations.(ii) Movements in reserveBalance at beginning of yearTransfer of reserve toaccumulated losses due to sale ofBodyworks Inc.Balance at end of year		971,330(971, 330)
18.OUTSIDE EQUITYINTEREST
Reconciliation of outside equityinterest in controlled entities:Balance at beginning of yearDeduct share of operating lossAdd share of equity acquiredduring the yearLess disposed during the yearBalance at end of year	(21,389)(21, 389)	1,404,492(124, 731)10,000(1,311,150)(21,389)

19.	STATEMENT OF CASH FLOWS	Consolidated		Genesis Biomedical Ltd
		2004$	2003$	2004S	2003S
(a)	Reconciliation of cash flows fromoperations with operating loss afterincome tax
	Operating (loss) after income tax	(336, 877)	(2,884,830)	(336, 877)	(2,420,729)
	Depreciation of non-current assets		266,902
	Amortisation of intangibles		202,206
	Foreign exchange (gain)/ loss		(48,750)		(48,750)
	Profit on sale of investments	(55,175)		(55,175)
	Provision for diminution / (increment) in
	value of investments	139,599	33,428	139,599	33,428
	Changes in assets and liabilities
	(Increase)/decrease in receivables	5,044	1,560,243	5,044	1,557,893
	(Increase)/decrease in inventories		248,411
	(Increase)/decrease in prepayments &
	deposits	22,210	76,261	22,210	(111,208)
	(Decrease)/increase in creditors and
	accruals	(16, 517)	(355, 133)	(16,517)	(342,041)
	(Decrease)/increase in provisions	(125, 886)	(232, 689)	(125, 886)	(73, 832)
	Net cash flows used in operating
	activities	(367, 602)	(1,133,951)	(367, 602)	(1,405,239)
(b)	Reconciliation of cash
	Cash balances comprise
	- cash at bank	1,088,288	1,395,375	1,088,288	1,395,375

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

19. STATEMENT OF CASH FLOWS (Cont.)
	2003
	S
(c) (i) Sale of Controlled Entity
Sale of controlled Entity
On 8 th November 2002, Genesis Biomedical
Limited settled the sale of its 80% of the
voting share capital of Bodyworks Inc, amanufacturer of orthopaedic braces based in
the USA. The components of the sale were:
Consideration
Aggregate sale price of Bodyworks Inc
(100%) (excluding upside payment)	4,500,000
Less repayment of Bodyworks Inc debt
assumed by Purchaser	(1,633,119)
Net sale proceeds paid to Vendor's	2,866,881
Genesis Biomedical Ltd's share (80%)	2,293,505
Total initial consideration paid by Genesis	3,805,234
for its original 80% investment in
Bodyworks Inc
Net assets of Bodyworks Inc at 31st October 2002:
- 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
Net cash effect:
- cash consideration	$2,293,505
- cash included in net assets disposed	$38,288

		Consolidated		Genesis Biomedical Ltd
20.	EXPENDITURE COMMITMENTS	2004$	2003S	2004$	2003$
(a)	Lease expenditure commitmentsOperating leases (non-cancellable)Minimum lease payments
	- not later than one year	416,493	410,062	416,493	410,062
	- later than one year and not later thanfive years	180,262	582,741	180,262	582,741
	Aggregate lease expenditure contractedfor at balance date	596,755	992,803	596,755	992,803
	Aggregate expenditure commitments comprise:Amounts provided for:
	-Surplus lease space - current	60,357	110,962	60,357	110,962
	- non-current	76,250	142,440	76,250	142,440
		136,607	253,402	136,607	253,402
	Amounts not provided for:
	-rental commitments	460,148	739,401	460,148	739,401
	Total not provided for	460,148	739,401	460,148	739,401
	Aggregate lease expenditure contracted for atbalance date	596,755	992,803	596,755	992,803

Two operating leases relate to office accommodation, one expiring in September 2005 and the other expiring in April 2006. Amounts not provided for equate to the sub-lease commitments expected to be received by the Company from sub-tenants currently occupying the premises pertaining to the operating leases.

$21.$ SEGMENT INFORMATION

The consolidated entity operated in one business segment, being medical technology. The consolidated entity operated during the year in one geographical segment.

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 changes in segment accounting policies that had a material effect on the segment information.

Geographical Segment

Revenue	Australia		United States of America		Consolidated Group
	2004	2003	2004	2003	2004	2003
	$	S	S	s	S	S
Sales to customers outside
the consolidated entity		42,438	$\blacksquare$	1,578,785	$\blacksquare$	1,621,223
Other revenues from
customers outside the
consolidated entity		214,906				214,906
Total segment revenue		257,344	$\blacksquare$	1,578,785	$\blacksquare$	1,836,129
Non segment revenue
Proceeds from sale of
investments					230,517
Proceeds from sale of
controlled entity						2,293,508
Debts forgiven						4,068
Interest income					84,054	95,950
Total consolidated revenue					314,571	4,229,655
Assets
Total Segment and Group
Assets	1,329,730	1,977,870			1,329,730	1,977,870

EARNINGS PER SHARE 22.

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

	2004S	2003S
Net Loss	(336, 877)	(2,884,830)
Adjustments:
Net loss attributable to outside equity
interest		124,731
Earnings used in calculating basic earningsper share	(336, 877)	(2,760,099)
Earnings used in calculating diluted
earnings per share	(336, 877)	(2,760,099)
	Number ofShares	Number ofShares
Weighted average number of ordinary
shares outstanding during the period usedin calculation of basic EPS	76,550,003	76,377,400
Effect of dilutive securities:
Share optionsAdjusted weighted average number of
ordinary shares used in calculating diluted
earnings per share	76,550,003	76,377,400
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 thecalculation of diluted earnings per share	2,000,000	3,000,000

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

23. EMPLOYEE BENEFITS AND SUPERANNUATION COMMITMENTS

			Genesis Biomedical Ltd
2004	2003	2004	2003
	э	S	S
$\blacksquare$	4.599	$\rightarrow$	4.599
	4.599		4.599
		Consolidated

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.

24. DIRECTOR AND EXECUTIVE DISCLOSURES

(a) Details of Specified Directors and Specified Executives

(i) Specified directors
E Correia	Chairman (non-executive)
R Gilmour	Director (non-executive)
A Davey	Director (non-executive): elected $15^{th}$ July 2003
R Northcott	Director (non-executive): resigned 24 th October 2003

(ii) Specified executives Nil

(b) Remuneration of Specified Directors and Specified Executives

(i) Remuneration Policy

As at the date of this report, the consolidated entity did not have a remuneration committee as the directors believe the size of the consolidated entry and the size of the Board do not currently warrant its existence. Remuneration to the Directors is by way of Directors Fees, with the level of such fees, having been set by the Board to an amount it considers to be commensurate for a company of Genesis's size and level of activity.

24. DIRECTOR AND EXECUTIVE DISCLOSURES CONTD...

(ii) Remuneration of Specified Directors and Specified Executives

	PrimarySalaryand Fees	CashBonus	NonMonetarybenefits	Post EmploymentSuperan-nuation	RetirementBenefits	EquityOptions	OtherDirectorsandOfficersInsurance	Total
Specified Directors
E Correia
2004	$25,000						$11,291	$36,291
2003	$15,829						$10,903	$26,732
R Gilmour
2004	$25,000					w.	$11,291	$36,291
2003	$110,662						$10,903	$121,565
A Davey
2004	$24,024						$10,858	$34,882
2003
R Northcott
2004	$7,854						$3,527	$11,381
2003	$93,485			$7,321			$10,903	$111,709
Total Remuneration: Specified Directors2004	$81,878						$36,967	$118,845
2003	$219,976			$7,321			$32,709	$260,006

(c) Option holdings of specified directors

	Balanceаtbeginningof period	GrantedasRemuneration	OptionsExercised	NetChangeOther	Balance atend ofperiod	Total	Vested at 30 June 2004
	1 July2003			30 June#2004		Total	NotExercisable	Exerciseable
Specified
Directors
E Correia		$\blacksquare$	-
R Gilmour		$\ddot{\phantom{1}}$		٠
A Davey	$\overline{\phantom{a}}$	$\blacksquare$	$\rightarrow$
R Northcott	3,000,000	$\blacksquare$	$\overline{\phantom{a}}$	(1,000,000)	2,000,000	2,000,000	$\blacksquare$	2,000,000
Total	3,000,000	$\blacksquare$		(1,000,000)	2,000,000	2,000,000		2,000,000

24. DIRECTOR AND EXECUTIVE DISCLOSURES (contd...)

(d) Shareholdings of Specified Directors

	Balance at 1July 2003	Granted asRemuneration	On Exercise ofOptions	Net ChangeOther	Balance at 30June 2004
Specified
Directors
E Correia	125,000	$\ddot{\phantom{1}}$	$\overline{\phantom{a}}$	$\ddot{\phantom{1}}$	125,000
R Gilmour	4,000,000	٠	$\overline{\phantom{a}}$	٠	4,000,000
A Davey	2,004,154	٠	$\overline{\phantom{a}}$	$\ddot{}$	2,004,154
R Northcott	$\blacksquare$	$\rightarrow$	$\overline{\phantom{a}}$	$\overline{a}$	$\overline{\phantom{a}}$
Total	6,129,154	$\rightarrow$	$\overline{\phantom{a}}$		6,129,154

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.

	Consolidated			Genesis Biomedical Ltd
	2004	2003	2004	2003
25. AUDITOR'S REMUNERATION
Amounts received or due and receivable
by Ernst $&$ Young for:
- An audit or review of the financial report
of the entity and any other entity in the
consolidated entity	24,000	40.000	24,000	40,000
	24,000	40,000	24,000	24,000

26. RELATED PARTY DISCLOSURES

Other related party transactions

Transactions with director-related entities

The consolidated entity paid to Cardrona Capital Pty Ltd, a company of which Mr E Correia is a director, Company secretarial financial control and due diligence review fees totalling $72,000 (2003: Nil).

27. SUBSEQUENT EVENTS

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.

28. 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)	FINANCIALASSETSCash at Bank	19(b)	Carried at nominal amount.Interest is recognised in thestatement of financialperformance when earned.	Available on call at effectiveinterest rates of 5.08% pa$(2003: 4.3%pa)$ .
	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.
	Security deposits	7	Security deposits are lodgedwith the Bankers to theconsolidated entity, securingbank guarantees provided.Deposits are carried atnominal value.	Average Interest rate of 5.02%pa (2002: 3.8% pa)
	Shares and options	6	Listed shares and options arerecorded at the lower of costor recoverable amount	No dividends are expected tobe received.
(ii)	FINANCIAL LIABILITIES
	Payables (current)	13	Liabilities are recognised foramounts to be paid in the	Trade liabilities are normallysettled on 30-day terms.

future for goods and services received, whether or not billed to the consolidated

entity.

16

EQUITY $(iii)$

Ordinary shares

Ordinary share capital is recognised at the value of the amount received. less direct costs incurred in raising the funds.

The consolidated entity has issued 76,550,003 ordinary shares fully paid and 2.000,000 options. Details of shares issued and the terms and conditions of options issued over ordinary shares at balance date are set out in Note 16.

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.

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

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

28. 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	LESS	1 YEAROR	1T05YEARS		NON-INTERESTBEARING		TOTAL		WEIGHTEDAVERAGEEFFECTIVEINTERESTRATE
(i) FINANCIALASSETS	2004	2003	2004	2003	2004	2003	2004	2003	2004	2003
Cash	49,204	368,729	1,039,084	1,026,645	$\overline{\phantom{a}}$	$\blacksquare$		$\sim$	1,088,288	1,395,374	5.08%
Receivables	$\cdot$	$\cdot$		$\overline{r}$	$\cdot$			$\cdot$	$\overline{a}$	$\cdot$	N/A
Security deposits	197,610	249,164		$\tilde{\phantom{a}}$	$\overline{a}$	$\cdot$		$\sim$	197,610	249,164	5.02%
Shares & options	$\tilde{\phantom{a}}$	$\mathbf{r}$		$\overline{r}$		$\cdot$	14,488		14,488	$\cdot$	NA
Total Financial Assets	246,814	617,893	1,039,084	1,026.645	$\overline{\phantom{a}}$	$\overline{\phantom{a}}$	14,488	$\mathbf{r}$	1,300.386	1,644,538
(ii) FINANCIALLIABILITIES
Payables (current)		$\cdot$	8,744	25,898					8,744	25,898	N/A
Total Financial Liabilities			8,744	25,898					8,744	25,898

(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 Position.

29. IMPACT OF ADOPTING AASB EQUIVALENTS TO IASB STANDARDS

Genesis Biomedical Limited (Genesis) has commenced transitioning its accounting policies and financial reporting from current Australian Standards to Australian equivalents of International Financial Reporting Standards (IFRS). The company has allocated internal resources to conduct impact assessments to isolate key areas that will be impacted by the transition to IFRS. As a result of these procedures the company believes that the impact of the introduction of IFRS will be minimal to the financial statements in their present form. As Genesis has a 30 June year end, priority has been given to considering the preparation of an opening balance sheet in accordance with AASB equivalents to IFRS as at 1 July 2004. This will form the basis of accounting for Australian equivalents of IFRS in the future, and is required when Genesis prepares its first fully IFRS compliant financial report for the year ended 30 June 2006.