VOLT RESOURCES LIMITED — Annual Report 2007

Sep 26, 2007

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Level 11, Tower B 821 Pacific Highway Chatswood NSW 2067 Australia

PO Box 5335 Chatswood NSW 1515 Australia

Ph: +61 2 8448 8195 Fax: +61 2 8448 8196 www.ritract.com abn 28 106 353 253

27 September 2007

Manager Issuers Australian Stock Exchange Level 8, Exchange Plaza 2 The Esplanade Perth WA 6000

Dear Sir,

Please find attached the Annual Report for Ritract Limited for the year ended 30 June 2007.

The report differs from the Preliminary Final Report lodged on 31 August 2007.

As a result of the ongoing uncertainty surrounding the value of the Group’s investment in intellectual property, the directors have today resolved to write down the company’s investment in intellectual property to no value.

A reconciliation of loss for the year is therefore as follows:

Loss after income tax per Preliminary Final Report Additional impairment write down of intellectual property Loss after income tax per the Annual Report	$(3,223,747) (2,034,614) $(5,258,361)

Guy Robertson Company Secretary

RITRACT LIMITED (ABN 28 106 353 253)

ANNUAL REPORT 30 JUNE 2007

RITRACT LIMITED

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Corporate Directory

Directors

Mr. Michael Boyd – Non executive Chairman Mr. Rupert Northcott – Managing Director (Resigned 30 November 2006) Mr. Tony Fitzgerald – Non executive Director (Resigned 29 June 2007) Dr. Andrew Walker – Non executive Director Dr. Bruce Ingram – Non executive Director Mr. Bill Nicklin – Managing Director (Appointed 14 September 2006, Resigned 27 June 2007)

Company Secretary

Mr Guy Robertson

Registered Office

Level 11, Tower B, Zenith Centre, 821 Pacific Highway, Chatswood NSW 2067

Principal Place of Business

Level 11, Tower B, Zenith Centre, 821 Pacific Highway, Chatswood NSW 2067 Telephone: 61 2 8448 8195 Facsimile: 61 2 8448 8196

Postal Address

PO Box 5335 West Chatswood, NSW 2067

Auditors

HLB Mann Judd 15 Rheola Street WEST PERTH WA 6005

Share Registry

Advanced Share Registry Services Level 7, 200 Adelaide Terrace PERTH WA 6000 Telephone: 61 8 9221 7288

Bankers

National Australia Bank Limited

Stock Exchange Listing

RiTract Limited shares are listed on the Australian Stock Exchange. ASX Code: RTL

Solicitors

Steinepreis Paganin Lawyers and Consultants Level 14, Citibank House 37 St Georges Terrace Perth WA 6000

Website and e-mail address

www.ritract.com Email: admin@ritract.com

3 RITRACT LIMITED

Annual Report

Contents	Page
Chairman’s Report	4
Directors’ Report	5
Corporate Governance Statement	13
Financial Report
Income Statements	18
Balance Sheets	19
Statements of Changes in Equity	20
Cash Flow Statements	21
Notes to the Financial Statements	22
Directors’ Declaration	41
Independent Auditor’s Report	42
Auditor’s Independence Declaration	44
Shareholder Information	45

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Chairman’s report

Dear fellow shareholder,

The year ended 30 June 2007 has been a difficult one for Ritract Limited.

At the start of the year we were optimistic that one of the two large international companies we were talking to would take up a license to manufacture and distribute Ritract’s auto retractable syringe product.

Unfortunately we were advised in June 2007 that neither company wished to proceed. Reasons cited included concern over the size of the capital investment required for manufacturing scale up and the current market environment for retractable syringes in key international markets.

As a result of this development, the Ritract Board of Directors suspended trading of Ritract shares, and have taken steps to significantly cut the costs of operating the business. The Managing Director, Mr Bill Nicklin resigned from the company with the role being assumed by the previous Head of R&D/Engineering, Tom Davenport. All other employees left the company in July 2007.

The company further developed its pre filled safety syringe concept during the year and continues to hold discussions with interest parties with a view to licensing its technology for this product and the safety syringe.

The company raised $1.9m from a rights issue in December 2006, of which $700,000 was used to repay a loan from the major shareholder in January 2007. Financial support at present is being provided to the company by the major shareholder. A proposal for funding the company going forward will be put before shareholders at the Annual General Meeting to be held on or around the 28 November 2007.

As a result of the uncertainty surrounding the value of the Group’s investment in intellectual property we have taken a conservative view and written this off as at 30 June 2007.

It is proposed that the suspension in trading will remain in place until the strategic direction of the company and its funding are clear.

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Michael Boyd Chairman 27 September 2007

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DIRECTORS’ REPORT

The Board of Directors of Ritract Limited has pleasure in presenting its report in respect of the financial year ended 30 June 2007.

Directors

The names, qualifications and experience of directors in office during the financial year and until the date of this report are as follows:

Mr Michael Boyd Position : Chairman — Independent and Non-Executive (appointed 6 B.Com, C.A, A.S.I.A, F.I.C.D November 2003) Experience : Mr Boyd is a Chartered Accountant with substantial experience in business management and development. My Boyd has been instrumental in a number of business opportunities that have gone to list on Australian Stock Exchange Limited, including Sonic Healthcare Limited, Life Care Health Limited and Quadrant Iridium Limited. Mr Boyd also has substantial experience in the health sector from his involvement with the companies referred to above. Other current directorships: Chairman Quadrant Iridium Limited (Director since 2001). Former directorships in last three years: None Interests in shares and options Mr Boyd holds 12,504,553 ordinary shares. In addition Mr Boyd holds 500,000 Class C Performance Shares and pursuant to Mr Boyd’s engagement with the company he will be issued with a further 500,000 shares in the event he introduces a commercial transaction to the Company for use of its syringe with gross revenue of at least $500,000 over a 12 month period. Dr Andrew Walker Position: Director — Independent and Non-Executive (appointed 31 October B.Med, B.Med.Sci (Hons), 2003) FICS, MBA Experience : Dr Walker is currently the Chairman and CEO of Aspen Medical. Over the last 12 years he has led a team that has developed and commercialised a range of successful medical and health related businesses including the Australian Skin Cancer Clinics and Combined Pathology. Today, Aspen Medical is a substantial international business based in Sydney, Australia. Prior to the establishment of Aspen Medical, Dr Walker served in the Australian Defence Forces leading both airborne infantry and medical units. In 1998 he was awarded the Chief of Staff Commendation for service whilst in Borneo. Dr Walker is a graduate of the University of Newcastle and has won places at both Oxford and Harvard Universities. Dr Walker is also a Fellow of the International College of Surgeons. Other current directorships: Independent Non-Executive Director of Resonance Health Limited (director since 2003). Former directorships in last three years: None Interests in shares and options Mr Walker holds 100,000 ordinary shares and 1,000,000 unlisted options. In addition Mr Walker holds 150,000 performance shares which will only be issued on the achievement of certain milestones.

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DIRECTORS’ REPORT

Dr Bruce Ingram Position Director – Independent and Non-Executive (appointed 21 March B.Sc.(Hons), M.B., B.s.(Hons) 2006 ) Dr Ingram has extensive clinical knowledge and experience gained during his 20 years in General Practice which includes a special interest in the care and treatment of patients who use illicit drugs. Amongst his many achievements, is that Dr Ingram holds the position of Honorary Physician to the Governor of Victoria. He also serves as Deputy Director of Professional Services Review - an independent regulatory body operating under the Health Insurance Act. Dr Ingram is a major shareholder in Ritract Limited and brings an invaluable clinical perspective as the Company moves close to commercialisation of the Ritract syringe. Other current directorships: NIL Former directorships in last three years: None Interests in shares and options Mr Ingram holds 5,230,998 ordinary shares. Company Secretary Mr Guy Robertson Position: Company Secretary (appointed 2 December 2005 ) B.Com(Hons.) C.A Experience : Prior to joining Ritract, Mr Robertson held the positions of CFO, Director and Company Secretary of a number of companies in insurance, property and retail. His experience includes a wide range of international financial and operational positions with multinational companies and ASX listed companies, both in Australia and Internationally.

Principal activities

The principal activity of the consolidated entity during the year was marketing to international companies with the capacity to license the Ritract safety syringe technology for manufacture and global distribution and the development of prefilled safety syringe concepts and prototypes.

During the year Ritract was notified by two major companies who were evaluating its safety syringe technology that neither company intended to take up a license to manufacture and distribution citing concern at the size of the capital investment required and the current market environment. As a result the Board of Ritract suspended trading of Ritract shares and have implemented a restructure of the company with a significant reduction in its cost base. In addition the company has written down the investment in intellectual property to Nil as indicated below.

Operating Results

The net loss of the consolidated entity for the financial year after tax and outside equity interests was $5,258,361, (2006 net loss $6,051,818). The loss reflects the ongoing commercialisation of the Ritract Syringe and a write off of intellectual property of $2,474,635. To ensure that the company had no additional liability in relation to Needlesleeve the technology was handed back to the previous owners during the year.

Dividends Paid or Recommended

No dividend was paid or declared for the financial year.

Significant Changes in State of Affairs

The company made a decision during the year to discontinue with its development of the Needlesleeve technology. To ensure that the company had no additional liability in relation to Needlesleeve, the technology was handed back to the previous owners during the year. In addition, given uncertainty in relation to the value of its syringe technology, the Group has written off its investment in intellectual property in full.

On the 26 June 2007 the Company requested the ASX to suspend its trading while a restructure of the company was undertaken and its future funding and direction were determined.

There were no other significant changes in the state of affairs for the year.

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DIRECTORS’ REPORT

After Balance Date Events

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significant affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

Environmental Regulations

The consolidated entity’s operations are not subject to any significant environmental regulations under either Commonwealth or State legislation.

Likely developments and expected results of operations

Disclosure of information regarding likely developments in the operations of the company in future financial years and the expected results of those operations is likely to result in unreasonable prejudice to the company. Accordingly, this information has not been disclosed in this report.

Meetings of directors

The number of meetings of the company’s board of directors and each board committee held during the year ended 30 June 2007, and the numbers of meetings attended by each director were:

	Director Meetings	Director Meetings	Audit Meetings	Audit Meetings	Remuneration Committee	Remuneration Committee
	Number eligible To attend	Number attended	Number eligible To attend	Number attended	Number eligible To attend	Number attended
Mr M Boyd	11	10	2	2	-	-
Mr B Nicklin	11	11	-	-	-	-
Mr R Northcott	7	7	-	-	-	-
Mr T Fitzgerald	11	10	-	-	1	1
Dr A Walker	11	7	2	2	1	1
Dr B Ingram	11	11	-	-	-	-

REMUNERATION REPORT

The remuneration report is set out under the following main headings:

A Principles used to determine the nature and amount of remuneration

B Details of remuneration

C Employment contracts of Directors and key management personnel

D Share-based compensation

The information provided under headings A-D includes remuneration disclosures that are required under Accounting Standard AASB 124 Related Party Disclosures . These disclosures have been transferred from the financial report and have been audited.

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DIRECTORS’ REPORT (continued)

Remuneration report (continued)

A Principles used to determine the nature and amount of remuneration

The remuneration policy of Ritract Limited has been designed to align director and executive objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated entity’s financial results. The board of Ritract Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the consolidated entity, as well as create goal congruence between directors, executives and shareholders.

The board’s policy for determining the nature and amount of remuneration for board members and senior executives of the consolidated entity is as follows:

The Board of Directors of Ritract Limited is responsible for determining and reviewing compensation arrangements for directors, chief executive officer and the executive team. Remuneration levels for executives are competitively set to attract the most qualified and experienced directors and senior executive officers, in the context of prevailing market conditions, the particular experience of the individual concerned and the overall performance of the company with the objective of ensuring maximum stakeholder benefit from the retention of a high quality Board and executive team. The assistance of an external consultant or remuneration surveys are used where necessary.

Each of the non-executive directors receives a fixed fee for their services as directors. Non-executive directors' fees not exceeding an aggregate of $250,000 per annum have been approved by the Company in a general meeting. There is no direct link between remuneration paid to any of the directors and corporate performance such as bonus payments for achievements of certain key performance indicators other than the holders of Performance Shares which are not convertible to ordinary fully paid shares until various milestones are achieved.

The directors and executives receive a superannuation guarantee contribution required by the government, which is currently 9% and do not receive any other retirement benefits. Some individuals, however, have chosen to sacrifice part of their salary to increase payments towards superannuation.

All remuneration paid to directors and executives is valued at the cost to the company and expensed. Shares given to directors and executives are valued as the difference between the market price of those shares and the amount paid by the director or executive. Options are valued using the Black-Scholes methodology.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to nonexecutive directors is subject to approval by shareholders at the Annual General Meeting. Fees for nonexecutive directors are not linked to the performance of the consolidated entity.

Performance Based Remuneration

The Company has entered into an executive services agreement with Mr Tom Davenport, pursuant to which Mr Davenport is engaged as Chief Executive Officer of the Company.

The appointment may be terminated by either Mr Davenport or the Company by giving one months written notice to the other party.

The Company pays Mr Davenport a base salary of $200,000 per annum plus statutory superannuation, with effect from 1 July 2007. The salary is subject to an annual review on the anniversary of the appointment. The Company also pays all business related mobile telephone and home office expenses incurred by Mr Davenport.

Company Performance, Shareholder Wealth and Directors’ and Executives’ Remuneration

The remuneration policy has been tailored to increase goal congruence between shareholders and directors and executives. There have been two methods applied in achieving this aim, the first being a performance based bonus based on the achievement of key business milestones, and the second being the issue of options to the majority of directors and executives to encourage the alignment of personal and shareholder interests. The company believes this policy to have been effective in increasing shareholder wealth over the

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period since registration.

DIRECTORS’ REPORT (continued)

Remuneration report (continued)

B. Details of Remuneration for Year Ended 30 June 2007 (Audited)

Key management personnel of Ritract Limited

The remuneration for each director of the consolidated entity receiving the highest remuneration during the year was as follows:

year was as follows:
	Salary, Fees and	Superannuation	Options	Total
	Commissions	Contribution
	$	$	$	$
Non-executive directors
M Boyd	50,000	4,500	-	54,500
A Fitzgerald (resigned 29 June	30,000	2,700	-	32,700
2007)
A Walker	30,000	2,700	-	32,700
B Ingram	30,000	2,700	-	32,700
Sub-total non-executive	140,000	12,600	-	152,600
directors
Executive director
R Northcott (resigned 30	80,922	6,605	-	87,527
November 2006)
B Nicklin (resigned 27 June	207,327	17,780	-	225,107
2007)
Other key management personnel
T Davenport Head of	150,000	12,609	-	162,609
R&D/Engineering
T Kohut Global VP, Sales and	168,813	7,373	-	176,186
Marketing
Totals	747,062	56,967	-	804,029

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DIRECTORS’ REPORT (continued)

Remuneration report (continued)

Details of Remuneration for Year Ended 30 June 2006

	Salary, Fees and	Superannuation	Options	Total
	Commissions	Contribution
	$	$	$	$
Non-executive directors
M Boyd	50,000	4,500	-	54,500
A Fitzgerald	30,000	2,700	-	32,700
A Walker	30,000	2,700	-	32,700
B Ingram*	7,500	675		8,175
Sub-total non-executive	117,500	10,575	-	128,075
directors
Executive director
R Northcott	220,184	19,817	-	240,001
Other key management personnel
J Bell CFO/Secretary**	37,223	2,636	-	39,859
T Davenport Head of	130,604	10,863	-	141,467
R&D/Engineering
T Kohut Global VP, Sales and	172,121	16,203	-	188,324
Marketing
Total	677,632	60,094	-	737,726

• Dr Bruce Ingram – appointed 21 March 2006 ** Mr John Bell – resigned 30 September 2005.

Other key management personnel are those directly accountable and responsible for the operational management and strategic direction of the Company and the consolidated entity.

C. Employment Contracts of Directors and Key Management Personnel

Remuneration and other terms of employment for the Chief Executive Officer, and other key management personnel are formalised in service agreements. The major provisions of the agreements relating to remuneration are set out below.

Mr Tom Davenport, previously Head of R&D/Engineering, was appointed Chief Executive Officer with effect from 1 July 2007.

Mr Tom Davenport, Chief Executive Officer

Term of agreement – No set term, original agreement commencing 25 September 2004, revised on 1 July 2007.

Base salary, inclusive of superannuation, for the year ended 30 June 2007 of $163,500, to be reviewed annually by the remuneration committee. Remuneration revised to $200,000 plus superannuation on 1 July 2007.

The agreement is terminable by each party giving one months notice.

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DIRECTORS’ REPORT (continued)

REMUNERATION REPORT (continued)

D. Share-based compensation

Options granted under the Ritract Limited Employee Option Plan which was approved by shareholders at the 2004 annual general meeting.

The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting periods are as follows:

The terms and conditions of each grant of options affecting remuneration reporting periods are as follows:	in the previous, this or future
Granted to Grant date Expiry date Issue price of option Exercise price	Number of options Date exercisable
Dr Andrew Walker 30 November 2004 30 November 2007 $0.067 $0.40 Dr Andrew Walker 30 November 2004 30 November 2007 $0.006 $0.50	300,000 Anytime up to 30 November 2007 700,000 Subject to milestone 1,000,000

Movement in employee options for the year.

Grant Date Expiry Date Exercise Price $	Balance at start of the year Granted during the year Cancelled during the year Balance at end of the year Date Exercisable
30 November 2004 30 November 2007 $0.40 30 November 2004 30 November 2007 $0.50 30 November 2006 30 November 2009 $0.25 30 November 2006 30 November 2009 $0.35	300,000 - - 300,000 30 November 2007 700,000 - - 700.000 Subject to milestone - 1,500,000 (1,500,000) - - - 1,500,000 (1,500,000) - - 1,000,000 3,000,000 (3,000,000) 1,000,000

Options were granted over 3,000,000 shares as part of remuneration for the year ended 30 June 2007 and then cancelled before year end.

Directors’ Shareholdings and Executives Shareholdings

Disclosures relating to directors’ and executives’ shareholdings have been included in Note 19 to the financial statements.

Indemnifying Directors and Officers

During the year the company paid an insurance premium of $14,238 to insure the directors and secretary of the company and its controlled entities.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the consolidated entity, and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Options

Details of options that were granted over unissued shares during the financial year by the company and which remain outstanding at balance date and at the date of this report are disclosed at Note 14 to the financial statements.

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DIRECTORS’ REPORT (continued)

Corporate Governance

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Ritract Limited support and adhere to the principles of corporate governance. The company’s corporate governance statement is contained in the following section of this annual report.

Non-audit Services

The board of directors, in accordance with advice from the audit committee, is satisfied that the provision of non-audit services during the year is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the services disclosed below did not compromise the external auditor’s independence for the following reasons:

• all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and

• the nature of the services provided do not compromise the general principles relating to auditor independence as set out in the Institute of Chartered Accountants in Australia and CPA Australia’s Professional Statement F1: Professional Independence.

The following fees for were paid/payable to the external auditors during the year ended 30 June 2007:

Audit and review services Taxation services	2007 2006 $ $ 35,448 48,000
	9,702 6,817

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2007 has been received and can be found on page 42.

Signed in accordance with a resolution of the Board of Directors.

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Mr M Boyd Director Dated this 27th day of September 2007.

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CORPORATE GOVERNANCE STATEMENT

Ritract Limited is committed to protecting and enhancing shareholder value and adopting best practice governance policies and practices. This Corporate Governance Statement outlines the main Corporate Governance practices that were in place throughout the financial year, which comply with the Australian Stock Exchange (‘ASX’) Corporate Governance Council recommendations. Where a recommendation has not been followed, this is clearly stated along with an explanation for the departure.

During the year, Ritract Limited did not have a corporate governance section on its website. The website is under review and will allow for a new corporate governance section which will display all Corporate Governance Board Charters and policies that adhere to all ASX Corporate Governance Council Principles.

Principle 1

Lay solid foundations for management and oversight

The Board is the governing body of the Company. The Board and the Company act within a statutory framework – principally the Corporations Act and also the Constitution of the Company. Subject to this statutory framework, the Board has the authority and the responsibility to perform the functions, determine the policies and control the affairs of Ritract Limited.

The Board must ensure that Ritract Limited acts in accordance with prudent commercial principles, and satisfies shareholders – consistent with maximising the Company’s long term value.

The primary responsibilities of the Board include:

• Charting the direction, strategies and financial objectives of the company and ensuring appropriate resources are available

• • Monitoring the implementation of those policies and strategies and the achievement of those financial objectives

• Monitoring compliance with control and accountability systems, regulatory requirements and ethical standards

• • Ensuring the preparation of accurate financial reports and statements - Reporting to shareholders and the investment community on the performance and state of the company
• • Appoint the Chief Executive Officer and monitor performance of the Chief Executive Officer and senior executives
• • Establish proper succession plans for management of the company

Principle 2

Structure the Board to add value

The composition of the Board has been determined on the basis of providing the Company with the benefit of a broad range of technical, administrative and financial skills, combined with an appropriate level of experience at a senior corporate level. Details of each Director’s skills and experience are set out in the Directors’ report.

The ASX guidelines recommend that a listed company should have a majority of directors who are independent. The Board complies with the ASX Corporate Governance Council Principles 2.1 having three out of the four directors including the Chairman who are independent.

In the context of director independence, ‘materiality’ is considered from both the company and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is equal or less than 5% of the appropriate base amount. It is presumed to be material (unless there is evidence to the contrary) if it is equal or greater than 10% of the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors which point at the actual ability in question to shape the direction of the company’s loyalty.

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CORPORATE GOVERNANCE STATEMENT (Continued)

Principle 2 (Continued)

The roles of Chairman and Managing Director are exercised by different individuals, providing for clear division of responsibility at the head of the company. Their roles and responsibilities, and the division of responsibilities between them, are clearly understood and there is regular communication between them.

With the prior approval of the Chairman, each director has the right to seek independent legal and other professional advice at the company’s expense concerning any aspect of the company’s operations or undertakings in order to fulfil their duties and responsibilities as directors.

Directors are subject to re-election by rotation at annual general meetings as stipulated in the Corporations Act and the company’s constitution. There are no maximum terms for non-executive director appointments. Newly elected directors must seek re-election at the first general meeting of shareholders following their appointment.

The remuneration of the directors is determined by the board as a whole, with the director to whom a particular decision relates being absent from the meeting during the time that the remuneration level is discussed and decided upon. Further information and the components of remuneration for directors are set out in the Directors’ Report.

A remuneration and nomination committee was established by the Board on 1 September 2004. Its members are as follows:

-Dr A Walker (Chairman) -Mr A Fitzgerald (Resigned 29 June 2007)

-Mr M Boyd (Appointed 29 June 2007)

Principle 3

Promote ethical and responsible decision-making

The Company has adopted principles of appropriate conduct for employees and directors as part of its general Corporate Governance Policy. Through its oversight of Company activities, the board ensures that best practice standards of ethics and integrity in all business dealings and operations are maintained, including the company’s interactions with its shareholders, employees, business partners, customers, suppliers, and the community.

The Company has adopted a policy on Share Trading, for employees and directors or their related entities. Employees, executives and directors of the Company may not trade in the Company’s shares when in possession of inside information and outside of specified trading windows declared by the chairman and/or with permission of the chairman.

Principle 4

Safeguard integrity in financial reporting

The board has established an audit committee. It is the Board’s responsibility to ensure that an effective internal control framework exists within the entity. This includes internal controls to deal with both the effectiveness and efficiency of significant business processes, including the safeguarding of assets, the maintenance of proper accounting records, and the reliability of financial information. The Board has delegated responsibility for the establishment and framework of internal controls and ethical standards for the management of the consolidated entity to the audit committee.

The committee also provides the Board with additional assurance regarding the reliability of financial information for inclusion in the financial reports. All members of the audit committee are independent non-executive directors.

The members of the audit committee during the year were:

• Dr Andrew Walker (Chairman)

• Mr Michael Boyd

The audit committee generally invites the Chief Financial Officer and Company Secretary and external auditors to attend meetings.

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CORPORATE GOVERNANCE STATEMENT (Continued)

Principle 5

Make timely and balanced disclosure

The board has established written Company policies on Continuous Disclosure (including requirements for approval for release of information by the Company), and on Shareholder Communications, to promote effective communication with its shareholders.

In addition to its disclosure obligations under the ASX Listing Rules, the Company communicates with its shareholders through a number of means including:

• annual and half-yearly reports, including material presented at the Annual General Meeting

• quarterly shareholder updates released to the ASX, sent by email to shareholders and others who so request, and placed on the Company’s website; and

• media releases, public announcements and investor briefings.

The Managing Director and Company Secretary are authorised to communicate with shareholders and the market in relation to Board approved disclosures.

All announcements made to the ASX are placed on the Company’s web site immediately after public release.

Principle 6

Respect the rights of shareholders

The Company has a positive strategy to communicate with shareholders and actively promote shareholder involvement in the Company. It aims to continue to increase and improve the information available to shareholders on its website. All company announcements, presentations to analysts and other significant briefings are posted on the company’s website after release to the Australian Stock Exchange. Whilst principle 6.1 requires a written communications strategy that promotes effective communication with shareholders, the company did not have a formal communication policy during the year. The board fully understands the requirements of shareholder communication and has guidelines in place for handling such matters.

Principle 7

Recognise and manage risk

The Board oversees the establishment, implementation and ongoing review of the Company’s risk management and internal control system. Recommendation 7.1 requires the establishment of a risk committee. During the year Ritract Limited did not have a separately established risk committee. However, the duties and responsibilities typically delegated to such a committee are expressly included in the role of the Audit Committee and the main Board. The board does not believe that any marked efficiencies or enhancements would be achieved by the creation of a separate risk committee.

Recommendation 7.1 also requires that the company has a formal risk management policy and internal compliance and control system. During the year, Ritract Limited did not have a formal risk management policy as such. However, the company carries out regular risk assessments in a timely manner and covers all aspects of the company. The company also has in place classes of insurance at levels which, in the reasonable opinion of the directors, are appropriate for it size and operations.

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CORPORATE GOVERNANCE STATEMENT (Continued)

Principle 8

Encourage enhanced performance

During the year the company did not conduct a performance evaluation of its board and members in accordance with recommendation 8.1. It was considered inappropriate as the company has a relatively new board with all members being appointed to the board in the few months prior to its listing on the Australian Stock Exchange in December 2003. The board is planning to adopt a formal process of assessing performance in the next reporting period.

To enable the performance of their duties, all directors:

• have access to management

• are provided with appropriate management information in a timely manner

• are able to seek independent professional advice at the company’s expense

• are entitled to request additional management information at any time

Principle 9

Remunerate fairly and responsibly

Recommendation 9.2 requires the establishment of a remuneration committee. A formal remuneration committee was established in September 2004 with the appointment of two independent non-executive directors appointed.

-Dr A Walker (Chairman)

• -Mr A Fitzgerald (Resigned 29 June 2007)

• -Mr M Boyd (Appointed 29 June 2007)

Director disclosure requirements are dealt with in the notes to the financial statements.

Principle 10

Recognise the legitimate interests of stakeholders

The Board recognises that the interests of all stakeholders will be best served when the company, its directors and staff adhere to high standards of business ethics and comply with the law.

The Board expects a high standard of ethical corporate behaviour from all directors and staff. As a result, the Company has developed a code of Business Ethics which outlines the policies and procedures which operate within the company to ensure its exemplary reputation is maintained.

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Financial Report

Contents	Page
Income Statements	18
Balance Sheets	19
Statements of Changes in Equity	20
Cash Flow Statements	21
Notes to the Financial Statements	22

RITRACT LIMITED

18

INCOME STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2007

OR THE YEAR ENDED 30 JUNE 2007
Note Revenues from continuing operations 4 Employee benefits expense Consulting and professional services Rent Research and development, other Amortisation of intellectual property and patents Statutory and compliance Marketing expenses Travel Directors’ fees Depreciation Impairment of assets Impairment of intellectual property and patents Impairment of loan to controlled entity Impairment of investment in controlled entity Impairment of investment in Needlesleeve Other expenses from ordinary activities Loss from ordinary activities before income tax Income tax benefit relating to ordinary activities 6 Loss from ordinary activities after income tax Net loss attributable to members of the parent entity Basic loss per share (cents per share) 22 Diluted loss per share (cents per share) 22	Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 23,624 76,828 23,624 76,828
	(949,035) (1,031,012) (488,469) (1,031,012) (526,847) (548,915) (526,847) (537,542) (144,484) (114,616) (144,484) (114,616) (333,667) (1,169,486) (11,861) (171,184) (364,143) (533,972) - (150,370) (89,071) (157,061) (89,071) (143,821) (11,662) (103,923) (11,662) (103,923) (123,320) (190,058) (123,320) (190,058) (152,600) (125,600) (152,600) (125,600) (76,431) (34,601) (76,431) (34,601) (100,000) - (100,000) - (2,474,635) - - - - - (853,747) (1,041,728) - - (2,807,853) (250,301) - (1,645,539) - (1,645,539) (252,142) (473,863) (180,767) (470,365)
	(5,574,413) (6,051,818) (5,543,488) (5,933,832) 316,052 - 316,052 -
	(5,258,361) (6,051,818) (5,227,436) (5,933,832)
	(5,258,361) (6,051,818) (5,227,436) (5,933,832)
	(5.0) (7.3) - - (5.0) (7.3) - -

The above income statements should be read in conjunction with the accompanying notes.

RITRACT LIMITED

BALANCE SHEETS

AS AT 30 JUNE 2007

AS AT 30 JUNE 2007
Note Current Assets Cash assets 7 Receivables 8 Other 9 Total Current Assets Non-Current Assets Property, plant and equipment 10 Investments 11 Intangible assets 12 Total Non-Current Assets Total Assets Current Liabilities Payables 13 Total Current Liabilities Total Liabilities Net Assets Equity Parent entity interest Contributed equity 14 Option reserve 15 Accumulated losses 15 Total Parent entity interest Total Equity	Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 48,537 415,695 48,537 415,695 1,920 10,445 1,920 10,445 61,046 35,653 61,046 35,653
	111,503 461,793 111,503 461,793
	143,433 279,842 143,433 279,842 - - - 2,807,853 - 2,838,778 - -
	143,433 3,118,620 143,433 3,087,695
	254,936 3,580,413 254,936 3,549,488
	460,462 516,617 460,462 516,617
	460,462 516,617 460,462 516,617
	460,462 516,617 460,462 516,617
	(205,526) 3,063,796 (205,526) 3,032,871
	16,103,484 14,114,445 16,103,484 14,114,445 385,269 385,269 385,269 385,269 (16,694,279) (11,435,918)(16,694,279) (11,466,843)
	(205,526) 3,063,796 (205,526) 3,032,871
	(205,526) 3,063,796 (205,526) 3,032,871

The above balance sheets should be read in conjunction with the accompanying notes.

RITRACT LIMITED

20

STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007

FOR THE YEAR ENDED 30 JUNE 2007
Note Total equity at the beginning of the year Minority interest acquired Loss for the year Transactions with equity holders in their positions as equity holders: Contributions of equity, net of transaction costs Total equity at the end of the year	Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 3,063,796 7,144,889 3,032,871 7,144,856
	- 148,878 - - (5,258,361) (6,051,818) (5,227,436) (5,933,832)
	(5,258,361) (5,902,940) (5,227,436) (5,933,832)
	1,989,039 1,821,847 1,989,039 1,821,847
	(205,526) 3,063,796 (205,526) 3,032,871

Total recognised income and expense for the year is attributable to:

Members of the parent entity (5,258,361) (6,051,818) (5,227,436) (5,933,832)

The above statements of changes in equity should be read in conjunction with the accompanying notes.

RITRACT LIMITED

21

CASH FLOW STATEMENTS

FOR THE YEAR ENDED 30 JUNE 2006

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Income tax credit Interest received Net cash used in operating activities 16 Cash flows from investing activities Cash paid on acquisition of controlled entity Payments for plant and equipment Payments for intellectual property Loan to controlled entity Net cash used in investing activities Cash flows from financing activities Proceeds from issue of shares Net cash provided by financing activities Net decreases in cash held Cash at the beginning of the financial year Cash at the end of the financial year 7	Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ Inflows/(Outflows) Inflows/(Outflows) 11,196 - 11,196 - (2,659,178) (3,683,428) (1,805,431) (2,641,700)
	(2,647,982) (3,683,428) (1,794,235) (2,641,700) 316,052 - 316,052 - 15,755 76,828 15,755 76,828
	(2,316,175) (3,606,600) (1,462,428) (2,564,872)
	- (25,000) - (25,000) (40,022) (283,662) (40,022) (283,662) - (100,000) - (100,000) - - (853,747) (1,041,728)
	(40,022) (408,662) (893,769) (1,450,390)
	1,989,039 1,318,916 1,989,039 1,318,916
	1,989,039 1,318,916 1,989,039 1,318,916
	(367,158) (2,696,346) (367,158) (2,696,346) 415,695 3,112,041 415,695 3,112,041
	48,537 415,695 48,537 415,695

The above cash flow statements should be read in conjunction with the accompanying notes.

RITRACT LIMITED

22

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 1: Statement of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for Ritract Limited as an individual entity and the consolidated entity consisting of Ritract Limited and its subsidiary.

(a) Basis of preparation

This general purpose financial report has been prepared in accordance with Australian equivalents to International Financial Reporting Standards (AIFRS), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include AIFRS. Compliance with AIFRS ensures that the consolidated financial statements and notes of Ritract Limited comply with International Financial Reporting Standards (IFRS). The parent entity financial statements and notes also comply with IFRS.

The financial report was authorised for issue in accordance with a resolution of the directors on 27 September 2007.

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 3.

Going concern

The consolidated entity incurred a loss before amortisation of intellectual property and patents, and impairment of intangible assets of $2,419,583 for the year ended 30 June 2007 and has available cash at balance date of $48,537, and net liabilities of $205,526. Notwithstanding this the financial report has been prepared on a going concern basis due to the following reasons:

• The company has an expectation of receiving additional funds from Research and Development Tax Offsets.

• The company has ongoing financial support being provided by the directors.

The consolidated entity is dependent on the funding outline above and further capital raisings as required, sufficient to enable it to increase its cash reserves to fund its operations in the future. To the extent that the consolidated entity is not successful in these initiatives there is uncertainty that the consolidated entity will continue as a going concern. The financial report does not include any adjustments relating to the recoverability and classification of asset amounts or to the amounts and classification of liabilities that might be necessary should the entity not continue as a going concern.

(b) Principles of consolidation

Subsidiary

The consolidated financial statements incorporate the assets and liabilities of the subsidiary of Ritract Limited (''company'' or ''parent entity'') as at 30 June 2007 and the results of the subsidiary for the year then ended. Ritract Limited and its subsidiary together are referred to in this financial report as the Group or the consolidated entity.

Subsidiaries are all those entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

RITRACT LIMITED

23

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 1: Statement of significant accounting policies

Principles of consolidation (continued)

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group (refer to note 1(h)).

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Ritract Limited.

(c) Segment reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

(d) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Ritract Limited’s functional and presentation currency.

(ii) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

(iii) Group companies

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• all resulting exchange differences are recognised as a separate component of equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

(e) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and taxes paid.

All revenue is stated net of the amount of goods and services tax (GST).

RITRACT LIMITED

24

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 1: Statement of significant accounting policies (Continued)

(f) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the notional income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.

(g) Leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.

(h) Business combinations

The purchase method of accounting is used to account for all acquisitions of assets (including business combinations) regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement, but only after a reassessment of the identification and measurement of the net assets acquired.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

RITRACT LIMITED

25

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007 NOTE 1: Statement of significant accounting policies (Continued)

(i) Impairment of assets

Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(j) Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short-term highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.

(k) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amount of the provision is recognised in the income statement.

(l) Investments and other financial assets

The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at each reporting date.

(i) Loans and receivables

Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of selling the receivable. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date which are classified as non-current assets. Loans and receivables are included in receivables in the balance sheet.

(ii) Available-for-sale financial assets

Available-for-sale financial assets, comprising principally marketable equity securities, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date.

Available-for-sale financial assets and financial assets at fair value through profit and loss are subsequently carried at fair value. Loans and receivables and held-to-maturity investments are carried at amortised cost using the effective interest method. Realised and unrealised gains and losses arising from changes in the fair value of the ‘financial assets at fair value through profit or loss’ category are included in the income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of non monetary securities classified as available-for-sale are recognised in equity in the available-for-sale investments revaluation reserve. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains and losses from investment securities.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include reference to the fair values of recent arm’s length transactions, involving the same instruments or other instruments that are substantially the same, discounted cash flow analysis, and option pricing models refined to reflect the issuer’s specific circumstances.

RITRACT LIMITED

26

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 1: Statement of significant accounting policies (Continued)

The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of a security below its cost is considered in determining whether the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss - measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit and loss - is removed from equity and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.

(m) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.

The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

(n) Property, plant and equipment

Plant and equipment is depreciated over its useful life using the straight line method. The expected useful life for office furniture and production equipment is 5 years.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1(i)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement. When revalued assets are sold, it is Group policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(o) Intangible assets

(i) Patents

Patents have a finite useful life and are carried at cost less accumulated amortisation and impaired losses. Amortisation is calculated using the straight line method to allocate the cost of patents over their estimated useful life of 10 years.

(ii) Research and development

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

Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial production or use, is capitalised if the product or service is technically and commercially feasible and adequate resources are available to complete development. Other development expenditure is recognised in the income statement as an expense when it is incurred.

(iii) Intangible assets – other intangibles

Costs incurred in acquiring intellectual property are capitalised and amortised on a straight line basis over the period of the expected benefit. Intellectual property held at the reporting date is amortised over its estimated useful life of 10 years, using the straight line method.

(p) Trade and other creditors

These amounts represent liabilities for goods and services provided to the company prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

RITRACT LIMITED

27

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 1: Statement of significant accounting policies (Continued)

(q) Employee benefits

(i) Wages and salaries and annual leave

Liabilities for wages and salaries and annual leave expected to be settled within 12 months of the reporting date are recognised in other creditors in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

(iii) Retirement benefit obligations

All employees of the Group are entitled to benefits on retirement, disability or death from the Group’s superannuation plan. The Group has a defined contribution plan. The defined contribution section receives fixed contributions from Group companies and the Group’s legal or constructive obligation is limited to these contributions.

Contributions to the defined contribution fund are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(iv) Share-based payments

Share-based compensation benefits are provided to employees via the Ritract Limited Employee Option Plan and an employee share scheme.

Shares options granted after 7 November 2002 and vested after 1 January 2005

The fair value of options granted under the Ritract Limited Employee Option Plan is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate.

The market value of shares issued to employees for no cash consideration under the employee share scheme is recognised as an employee benefits expense with a corresponding increase in equity when the employees become entitled to the shares.

(v) Profit-sharing and bonus plans

The Group recognises a liability and an expense for bonuses and profit-sharing based on a formula that takes into consideration the profit attributable to the company’s shareholders after certain adjustments. The Group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.

RITRACT LIMITED

28

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 1: Statement of significant accounting policies (Continued)

(r) Contributed equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares or options, or for the acquisition of a business, are included in the cost of the acquisition as part of the purchase consideration.

(s) Earnings Per Share

(i) Basic earnings per share

Basic earnings per share is calculated by dividing the profit/loss attributable to equity holders of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the year, adjusted for bonus elements in ordinary shares issued during the year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

Note 2. Financial risk management

The Board provides written principles for overall risk management, as well as written policies covering specific areas, such as mitigating foreign exchange, interest rate and credit risks, and investing excess liquidity.

(a) Market risk

Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the entity’s functional currency.

The group has outsourced the manufacturing of its product to a company in China and will sell its product worldwide. Given the low value of transactions designated in foreign currency to date the company has not hedged these transactions. However, the company will adopt appropriate risk management techniques as the value of these transactions increases.

(b) Credit risk exposures

The Group has no significant concentration of credit risk.

(c) Interest rate risk exposures

The Consolidated entity’s exposure to interest rate risk is small given that it has no debt and has limited funds on deposit.

Note 3: Critical accounting estimates and judgements

Critical accounting estimates and assumptions

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

Estimated impairment of intangible assets and other non-current assets

The Group tests annually whether intangibles have suffered any impairment, in accordance with the accounting policy stated in note 1(i). The recoverable amounts of cash-generating units have been determined based on value-in-use calculations.

RITRACT LIMITED

29

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 4: Revenue Revenue from continuing operations Sale of product Other revenue — Interest received Total Revenue from continuing operations NOTE 5: Expenses from ordinary activities Loss before income tax has been determined after charging as expenses: Depreciation of non-current assets Impairment of non-current assets Amortisation of intellectual property and patents Impairment of intellectual property Impairment of loan to controlled entity Impairment of investment in controlled entity Impairment of investment in Needlesleeve Insurance Rental expense on operating leases Superannuation NOTE 6: Income tax benefit The prima facie tax on loss before income tax is reconciled to the income tax benefit as follows: Loss before income tax Prima facie tax payable on loss before income tax at 30% Tax effect of amounts which are not deductible (taxable) in calculating taxable income: - Amortisation of intellectual property and patents - Impairment of intellectual property - Impairment of non-current assets - Impairment of loan to controlled entity - Impairment of investment in controlled entity - Impairment of investment in Needlesleeve - Other non deductible items Benefit of income tax losses not brought to account Research and development tax offsets received Income tax benefit attributable to loss	Consolidated Parent 2007 $ 2006 $ 2007 $ 2005 $ 7,869 - 7,869 - 15,755 76,828 15,755 76,828
	23,624 76,828 23,624 76,828
	76,431 34,601 76,431 34,601 100,000 - 100,000 - 364,143 533,972 - 150,370 2,474,635 - - - - - 853,747 1,041,728 - - 2,807,853 250,301 - 1,645,539 - 1,645,539 56,612 81,796 56,612 81,486 144,484 114,616 144,484 114,616 63,970 84,183 33,280 84,183
	(5,258,361) (6,051,818) (5,227,436) (5,933,832)
	(1,577,508) (1,815,545) (1,568,231) (1,780,150) 109,243 160,192 - 45,111 742,390 - - - 30,000 - 30,000 - - - 256,124 312,518 - 842,356 75,090 - 493,662 - 493,662 1,231 997 1,231 997 694,644 1,160,694 438,520 852,772 316,052 - 316,052 -
	316,052 - 316,052 -

The deferred tax benefit from tax losses amounting to consolidated $2,258,741(2006-$2,529,954); parent $1,883,413 (2006$2,359,849) is not brought to account at balance date as realisation of the benefit is not regarded as virtually certain.

The deferred tax benefit will only be obtained if:

(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;

(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and no changes in tax legislation adversely affect the company in realising the benefit.

[

RITRACT LIMITED

30

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 7: Current assets -cash assets Cash at bank and on hand Deposits at call NOTE 8: Current assets - receivables Current Other debtors Non Current Loan to controlled entity Provision for impairment Movement in provision for impairment - balance at the beginning of year - increase in provision during the year - balance at end of year NOTE 9: Current assets - other Prepayments Advances	Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 48,537 1,058 48,537 1,058 - 414,637 - 414,637
	48,537 415,695 48,537 415,695
	1,920 10,445 1,920 10,445
	- - 2,923,034 2,069,287 - - (2,923,034) (2,069,287)
	- - - -
	- - (2,069,287) (1,027,559) - - (853,747) (1,041,728)
	- - (2,923,034)(2,069,287)
	45,846 29,347 45,846 29,347 15,200 6,306 15,200 6,306
	61,046 35,653 61,046 35,653

RITRACT LIMITED

31

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 10: Property, plant and equipment

At 1 July 2006 Cost Accumulated depreciation Net book amount Carrying amount at 1 July 2005 Additions Disposals Depreciation expense (note 5) Carrying amount at 30 June 2006 Carrying amount at 1 July 2006 Additions Impairment write down Depreciation expense (note 5) Carrying amount at 30 June 2007 At 30 June 2007 Cost Accumulated depreciation and impairment Net book amount	Parent and Consolidated Entity Fixtures & Equipment $ Production equipment $ Total $ 71,400 249,427 320,827 (23,561) (17,424) (40,985)
	47,839 232,003 279,842
	30,780 - 30,780 34,236 249,427 283,663 - - - (17,177) (17,424) (34,601)
	47,839 232,003 279,842
	Fixtures & Equipment $ Production equipment $ Total $ 47,839 232,003 279,842 10,195 29,827 40,022 - (100,000) (100,000) (21,438) (54,993) (76,431)
	36,596 106,837 143,433
	81,595 279,254 360,849 (44,999) (172,417) (217,416)
	36,596 106,837 143,433

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

	Consolidated	Consolidated	Parent	Parent
NOTE 11: Investments	2007	2006	2007	2006
	$	$	$	$
Non current
Investment in controlled entity at cost (Note 23)	-	-	3,527,930	3,527,930
Less: Accumulated impairment	-	-	(3,527,930)	(720,077)
	-	-	-	2,807,853
The carrying value of the investment in the controlled entity was written off during		the year given	the uncertainty of the value
of the Group’s syringe technology.
NOTE 12: Intangible assets
Intellectual Property – at cost	5,679,612	5,679,612	2,038,182	2,038,182
Accumulated amortisation and impairment	(2,026,176)	(1,226,176)	(392,643)	(392,643)
Impairment of investment in Needlesleeve	(3,653,436)	(1,645,539)	(1,645,539)	(1,645,539)
	-	2,807,897	-	-
Patents – at cost	41,637	41,637	-	-
Accumulated amortisation	(14,920)	(10,756)	-	-
Impairment in patents	(26,717)	-	-	-
	-	30,881	-	-
Total	-	2,838,778	-	-

NOTE 13: Payables

Current
Trade creditors	204,069	302,021	204,069	302,021
Sundry creditors and accruals	256,352	214,596	256,352	214,596
	460,421	516,617	460,421	516,617

33 RITRACT LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 14: Contributed equity

OTE 14: Contributed equity
(a) Issued and paid up capital Issued and paid up capital Ordinary shares Performance shares Movements during the period Ordinary shares Balance at the beginning of the financial year Shares issued: 26,176,365 ordinary shares Costs of issue Balance at end of financial year Performance shares Balance at the beginning of the financial year Balance at end of financial year Total	2007 2006 Number $ Number 117,823,307 16,102,968 91,646,942 11,300,000 516 11,300,000 129,123,307 16,103,484 102,946,942 Number of shares Issue price 91,646,942 26,176,365 8 cents	2006 Number 91,646,942 11,300,000	$ 14,113,929 516
		102,946,942	14,114,445
			$ 14,113,929
			2,094,109 (105,070)
	117,823,307 11,300,000		16,102,968
			516
	11,300,000 -		516
	129,123,307		16,103,484

34 RITRACT LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Contributed equity (Continued)

(b) Share Options

Options over ordinary shares issued during the year and outstanding at balance date:

59,703,145 Listed Options Expiring 31 December 2006 (ASX Code: RTLO)

On 19 April 2004, 59,703,145 options were issued over ordinary shares, exercisable any time prior to their expiry date being 31 December 2006. These options were issued at an issue price of 0.5 cents each and total proceeds of $298,680 are included in the Option Reserve in note 15 (a). The options were issued on the basis of one option for every one share held as at 19 March 2004. The exercise price of the options is $0.75 cents per Share. If a shareholder exercised an option on or before 30 September 2004 they received (for free) one new Option for each option exercised. The terms of the new option provide for an exercise price of 75 cents and an expiry date of 31 December 2006.

The options lapsed on 31 December 2006.

No shares were issued during the year ended 30 June 2007 as a result of the exercise of options (2006 – 3,650,000).

From the end of the reporting period to the date of this report no options have been converted into fully paid ordinary shares.

(c) Terms and conditions of ordinary shares

Ordinary shares participate in dividends and the proceeds on winding up of the parent entity in proportion to the number of shares held.

At shareholders’ meetings each ordinary share is entitled to one vote when a poll is called, otherwise each shareholder has one vote on a show of hands.

(d) Terms and conditions of Performance Shares

Class A Performance Shares

The First Performance milestone was achieved on 20 July 2004 and consequently all the Class A Performance Shares have been converted to ordinary shares.

Class B Performance Shares

The Second Performance milestone was achieved on 18 May 2005 and consequently all the Class B Performance Shares have been converted to ordinary shares.

Class C Performance Shares

The material terms of the Class C Performance Shares are as follows:

(a) the Class C Performance Shares are a separate class of shares that will be convertible into Shares. They do not carry any voting rights in the Company;

(b) each Class C Performance Share will convert into one (1) Share upon the Company entering into a licence agreement in relation to the Glenord Technology with a value of at least $1.5 million (Third Performance Milestone). For the avoidance of doubt, the $1.5 million valuation trigger for achievement of the Third Performance Milestone shall mean:

(i) a licensing transaction that has a lump sum royalty payment for a minimum of $1.5 million;

(ii) an initial order from a single purchaser with a lump sum value of a minimum of $1.5 million;

(iii) a licensing transaction with a minimum purchase or royalty requirement in its first year of $1.5 million

or greater; or

(iv) aggregate royalty receipts in the prior 12 months of a minimum of $1.5 million;

(c) if the Third Performance Milestone has not been achieved within 5 years from the date the Company lists on

ASX, each 100,000 Class C Performance Shares will convert into one (1) Share (with any fractional entitlements

being rounded up to the nearest whole fully paid share); and

(d) the Class C Performance Shares are not transferable

RITRACT LIMITED

35

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 15: Reserves and accumulated losses (a) Reserves Option reserve (b) Accumulated losses Accumulated losses at the beginning of the financial year Net loss attributable to the members of Ritract Limited Accumulated losses at the end of the financial year	Consolidated Parent 2007 $ 2006 $ 2007 $ 2006 $ 385,269 385,269 385,269 385,269
	(11,435,918) (5,384,100)(11,466,843) (5,533,011) (5,258,361) (6,051,818) (5,227,436) (5,933,832)
	(16,694,279)(11,435,918)(16,694,279)(11,466,843)

The options reserve includes proceeds of $298,680 received from the issue of options noted at note 14 (b), together with an amount of $86,589 representing the value of options issued to Directors during the year ended 30 June 2005.

NOTE 16: Reconciliation of loss after Income tax with net	Consolidated	Consolidated	Parent	Parent
cash outflow from operating activities	2007	2006	2007	2006
	$	$	$	$
Loss after income tax	(5,258,361)	(6,051,818)	(5,227,436)	(5,933,832)
Non-cash flows in loss from ordinary activities:
Depreciation	76,431	34,601	76,431	34,601
Impairment of non-current assets	100,000	-	100,000	-
Impairment of intellectual property	2,474,635	-	-	-
Amortisation of intellectual property and patents	364,143	533,972	-	150,370
Other non cash items:
Write down of investment in Needlesleeve	-	1,645,539	-	1,645,539
Provision for non-recoverability of loan to controlled entity	-	-	853,747	1,041,728
Provision for diminution of investment in controlled entity	-	-	2,807,853	250,301
Changes in operating assets and liabilities:
(Increase)/decrease in receivables	-	28,554	-	28,554
(Increase)/decrease in other current assets	(16,868)	4,765	(16,868)	4,765
Increase/(decrease) in creditors and borrowings	(56,155)	197,787	(56,155)	213,102
Net cash used in operating activities	(2,316,175)	(3,606,600)	(1,462,428)	(2,564,872)

NOTE 17: Segment reporting

Business and Geographical Segments

The sole activity of the company is that of commercialisation of a range of specialised syringes to meet the growing worldwide demand for safe, single use, automatically disabling and retractable syringes. The company through its acquisition of compatible medical device technology and intellectual property is also developing and marketing innovative patented products and technologies, and as such represents only one reportable business and geographical segment.

36 RITRACT LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

NOTE 18: Events subsequent to reporting date

There are no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significant affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

Note 19: Key management personnel disclosures

(a) Directors

The following persons were directors of Ritract Limited during the financial year:

(i) Chairman – non-executive Mr Michael Boyd

(ii) Executive directors

Mr Bill Nicklin (Resigned 27 June 2007)

Mr Rupert Northcott (Resigned 30 November 2007)

(iii) Non-executive directors

Dr Andrew Walker

Mr Anthony Fitzgerald (Resigned 29 June 2007) Dr Bruce Ingram

(b) Other key management personnel

The following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly, during the financial year:

Name	Position	Employer
Mr Troy Kohut	Global Vice President Sales and	Ritract Limited
	Marketing
Mr Tom Davenport	Head of Research &	Ritract Limited
	Development/Engineering

All of the above persons were also key management persons during the year ended 30 June 2006.

(c) Key management personnel compensation

Short-term employee benefits Post employment benefits	Consolidated Parent entity 2007 2006 2007 2006 $ $ $ $ 747,062 677,632 747,062 677,632 56,96760,094 359,967 60,094
	804,029737,726 804,029737,726

The company has taken advantage of the relief provided by ASIC Class Order 06/50 and has transferred the detailed remuneration disclosures to the directors’ report. The relevant information can be found in sections A-C of the Remuneration Report on pages 7 to 11.

37 RITRACT LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

(d) Equity instrument disclosures relating to key management personnel

(i) Options provided as remuneration and shares issued on exercise of such options

Granted to Grant date Expiry date Issue price of option Exercise price	Number of options Date exercisable
Dr Andrew Walker 30 November 2004 30 November 2007 $0.067 $0.40 Dr Andrew Walker 30 November 2004 30 November 2007 $0.006 $0.50	300,000 Anytime up to 30 November 2007 700,000 Subject to milestone 1,000,000

Options were granted over 3,000,000 share to Bill Nicklin during the financial year and then cancelled on his termination.

(ii) Option holdings

The numbers of options over ordinary shares in the company held during the financial year by each director of Ritract Limited and other key management personnel of the Group, including their personally related parties, are set out below.

2007

2007
		Granted				Vested and
		during the	Exercised		Balance at	exercisable at
	Balance at the	year as	during the		the end of	the end of the
Name	start of the year	compensation	year	Cancelled	the year	year
Directors of Ritract Limited
Mr Michael Boyd	2,000,000	-	-	(2,000,000)	-	-
Mr Bill Nicklin*	-	3,000,000	-	(3,000,000)	-	-
Mr Rupert Northcott	3,410,000	-	-	(3,410,000)	-	-
Mr Tony Fitzgerald**	80,000	-	-	(80,000)	-	-
Dr Andrew Walker	1,010,000	-	-	(10,000)	1,000,000	310,000
Dr Bruce Ingram	3,653,000	-	-	(3,653,000)	-	-
	10,153,000	3,000,000	-	(12,153,000)	1,000,000	310,000
Other key management personnel of the Group

• Resigned 27 June 2007, ** Resigned 29 June 2007

No options are vested and unexercisable at the end of the year.

2006		Granted				Vested and
		during the	Exercised		Balance at	exercisable at
	Balance at the	year as	during the		the end of	the end of the
Name	start of the year	compensation	year	Cancelled	the year	year
Directors of Ritract Limited
Mr Michael Boyd	2,000,000	-	-	-	2,000,000	2,000,000
Mr. Rupert Northcott	4,910,000	-	-	(1,500,000)	3,410,000	410,000
Mr Tony Fitzgerald	80,000	-	-	-	80,000	80,000
Dr Andrew Walker	1,010,000	-	-	-	1,010,000	310,000
Dr Bruce Ingram	3,653,000	-	-	-	3,653,000	3,653,000
	11,653,000	-	-	(1,500,000)	10,153,000	6,453,000
Other key management personnel of the Group

There were no options held by other key management personnel of the Group.

38 RITRACT LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

(iii) Share holdings

The numbers of shares in the company held during the financial year by each director of Ritract Limited and other key management personnel of the Group, including their personally related parties, are set out below.

2007

Name	Balance at the start of the year Entitlement issue Other changes during the year Balance at the end of the year
Directors of Ritract Limited Ordinary shares Mr Michael Boyd Mr. Rupert Northcott Mr Tony Fitzgerald* Dr Andrew Walker Dr Bruce Ingram	3,016,502 9,488,051 - 12,504,553 926,403 - - 926,403 180,000 - - 180,000 100,000 - - 100,000 5,230,998 - - 5,230,998
	9,453,903 9,488,051 - 18,941,954

• Resigned 29 June 2007

Other key management personnel of the Group

There are no shares in the Company held by other key management personnel of the Group.

2006

	Balance at the	Converted from	Other changes during	Balance at the end of
Name	start of the year	Performance shares	the year	the year
Directors of Ritract	Limited
Ordinary shares
Mr Michael Boyd	2,500,000	-	516,502	3,016,502
Mr. Rupert Northcott	660,000	-	266,403	926,403
Mr Tony Fitzgerald	180,000	-	-	180,000
Dr Andrew Walker	100,000	-	-	100,000
Dr Bruce Ingram	5,060,338	-	170,660	5,230,998
	8,500,000	-	953,565	9,453,903

Other key management personnel of the Group

There are no shares in the company held by other key management personnel of the Group.

(e) Loans to key management personnel

There are no loans to key management personnel.

39 RITRACT LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Note 20 Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the parent entity, its related practices and non-related audit firms: Assurance services Audit services Fees paid to HLB Mann Judd Australian firm: Audit and review of financial reports and other audit work under the Corporations Act 2001 Total remuneration for audit services Taxation services Fees paid to HLB Mann Judd Australian firm: Tax compliance services, including review of company income tax returns Total remuneration for taxation services	Consolidated Parent entity 2007 $ 2006 $ 2007 $ 2006 $ 35,448 48,000 35,448 48,000
	35,448 48,000 35,448 48,000
	9,702 6,817 9,702 6,817
	9,702 6,817 9,702 6,817

Note 21 Related party transactions

Transactions with related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Transactions with related parties:

Specified Directors’ and Specified Executives’ Remuneration

Details of specified directors’ and specified executives’ remuneration are disclosed on pages 12 to 14 of the directors report.

Transactions with Specified Directors

Mr Fitzgerald is a principal of HealthTec Growth Partners Pty Ltd which provided corporate advisory services and financial management services to the consolidated entity, during the year ended 30 June 2007, on normal commercial terms amounting to $83,180. As at 30 June 2007 there were no amounts outstanding to HealthTec Growth Partners.

Transaction with Controlled Entities

At balance date the company had provided interest free loans to Glenord Pty Ltd totalling $2,923,034 with no fixed repayment date.

Included in profit and loss for the year were the following expenses:

	Consolidated			Parent
	2007	2006	2007		2006
	$	$	$		$
Impairment of loan to controlled entity	-	-	853,747		1,041,728
Impairment of investment in controlled	-	-	2,807,853		250,301
entity

40 RITRACT LIMITED

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

	Consolidated	Consolidated
	2007	2006
NOTE 22: Earnings per share	$	$
Reconciliation of earnings used in calculating earnings per share
Net loss	(5,258,361)	(6,051,818)
Earnings used in the calculation of basic and dilutive earnings per share	(5,258,361)	(6,051,818)
Weighted average number of shares used as the denominator	Number	Number
Weighted average number of ordinary shares used as the
denominator in calculating basic and dilutive earnings per share	104,914,415	82,751,793
Classification of securities
Diluted earnings per share will not be any different to basic earnings per share, as it is not considered that the
options on issue as disclosed in Note 14 will have a dilutive effect on EPS (as the company incurred		a loss for the
year).

NOTE 23: Investments in controlled entities

Name of entity	Country of incorporation	Class of shares	Class of shares		Equity holding
Glenord Pty Ltd	Australia	Ordinary			100%
NOTE 24: Commitments for expenditure
Operating leases			Consolidated		Parent
			2007	2006	2007	2006
			$	$	$	$
Commitments for minimum lease payments in relation to
non-cancellable operating leases for office premises are
payable as follows:
Within one year			28,400	-	28,400	-
Total commitments not recognised in the financial statements			28,400	-	28,400	-

41 RITRACT LIMITED

DIRECTORS’ DECLARATION

In the opinion of the directors of the company :

1. the financial statements and notes, as set out on pages 18 to 40 are in accordance with the Corporations Act 2001; and

2. a. comply with Accounting Standards in Australia and the Corporations Regulations 2001; and

3. b. give a true and fair view of the financial position as at 30 June 2007 and of the financial performance for the year ended on that date of the Company and the consolidated entity; and

4. the Managing Director and Company Secretary have each declared that:

5. a. the financial records of the company for the financial year have been properly maintained in accordance with Section 286 of the Corporations Act 2001;

6. b. The financial statements and notes for the financial year comply with the Accounting Standards; and

7. c. The financial statements and notes for the financial year give a true and fair view.

8. In the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

On behalf of the Board

==> picture [136 x 78] intentionally omitted <==

Mr M Boyd Managing Director

Place: Sydney, NSW Dated 27th day of September 2007

42

==> picture [175 x 74] intentionally omitted <==

INDEPENDENT AUDITOR’S REPORT

To the members of

RITRACT LIMITED

We have audited the accompanying financial report of RiTract Limited (“the company”), which comprises the balance sheet as at 30 June 2007, the income statement, statement of changes in equity, cash flow statement and notes to the financial statements for the year then ended and the directors’ declaration for both the company and the consolidated entity. The consolidated entity comprises the company and the entities it controlled at the end of the financial year or from time to time during the financial year.

As permitted by the Corporations Regulations 2001, the company has disclosed information about the remuneration of directors and executives (“remuneration disclosures”), required by Accounting Standard AASB 124: Related Party Disclosures, under the heading “remuneration report” in the directors’ report and not in the financial report. We have audited these remuneration disclosures.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. Our responsibility is to also express an opinion on the remuneration disclosures contained in the directors’ report based on our audit.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, and the remuneration disclosures contained in the directors’ report, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report and the remuneration disclosures contained in the directors’ report.

HLB Mann Judd (WA Partnership)

15 Rheola Street West Perth 6005. PO Box 263 West Perth 6872 Western Australia. DX 238 (Perth) Telephone +61 (08) 9481 0977. Fax +61 (08) 9481 3686.

Email: hlb@hlbwa.com.au. Website: http://www.hlb.com.au

Partners: Terry M Blenkinsop, Litsa Christodulou, Wayne M Clark, Lucio Di Giallonardo, Colin D Emmott, Trevor G Hoddy, Norman G Neill, Peter J Speechley

HLB Mann Judd (WA Partnership) is a member of International and the HLB Mann Judd National Association of independent accounting firms

43

Our audit did not involve an analysis of the prudence of business decisions made by directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, provided to the directors of RiTract Limited and included in the Directors’ Report, would be on the same terms if provided to the directors as at the date of this auditor’s report.

Auditor’s Opinion

In our opinion:

• (a) the financial report of RiTract Limited is in 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 2007 and of their performance for the year then ended; and

• (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

• (b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1(a).

Auditor’s Opinion on the AASB 124 Disclosures Contained in the Directors’ Report

In our opinion the remuneration disclosures that are contained in the directors’ report comply with Accounting Standard AASB 124.

Inherent Uncertainty Regarding Continuation as a Going Concern

Without qualification to the opinions expressed above, attention is drawn to the following matter:

As discussed in Note 1(a) to the financial report, the consolidated entity is dependent on certain income generation strategies and the successful funding strategy outlined in the financial report sufficient to enable it to increase its cash reserves to fund its operations in the future. To the extent that the consolidated entity is not successful in these initiatives, there is significant uncertainty that the consolidated entity will continue as a going concern.

==> picture [175 x 37] intentionally omitted <==

HLB MANN JUDD Chartered Accountants

==> picture [187 x 63] intentionally omitted <==

Perth, Western Australia 27 September 2007

L DI GIALLONARDO Partner

44

==> picture [175 x 74] intentionally omitted <==

Auditor’s Independence Declaration

As lead auditor for the audit of the financial report of RiTract Limited for the year ended 30 June 2007, I declare that to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

• b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of RiTract Limited.

==> picture [187 x 63] intentionally omitted <==

Perth, Western Australia 27 September 2007

L DI GIALLONARDO Partner, HLB Mann Judd

45 RITRACT LIMITED

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

The following additional information is disclosed in accordance with Section 4.10 of the Australian Stock Exchange Ltd Listing rules in respect of listed public companies only.

The following information is supplied as at

1. Analysis of Shareholdings

a. Distribution of Shareholders

Distribution of Shareholders Number of Ordinary Shares Held 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 – and over	Ordinary Shares Number of holders Number of shares 26 8,746 306 973,093 296 2,504,524 950 33,548,505 198 80,755,579
	1,776 117,790,447

2. Voting Rights

The voting rights attached to each class of equity security are as follows:

Ordinary shares

— Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

Options

— No voting rights.

ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES

3. Twenty Largest Shareholders of quoted Ordinary Shares

Name	Number of Ordinary Shares Percentage of Total
1. Covenant Nominees Pty Limited 2. Fifth Glenmar Pty Limited 3. Dr Bruce Wallace Ingram 4. ANZ Nominees Limited 5. Advance Publicity Pty Limited 6. Miss Catherine Rowan 7. Five Tigers Investment 8. Mr Jason Eric Constable 9. Mr Trevor Crittle 10. Lacemore Arch Pty Limited 11. Mr Andrew Frederick Theakstone 12. Honsho Pty Limited 13. The Health Information Service Pty Limited 14. Samp Pty Ltd 15. Kefu Underwriters Pty Ltd 16. Dorney Nominees Pty Limited 17. Mr Neil Armstrong 18 Chata Holdings Pty Limited 19. Mr Sihamudin Waja 20. Metro Coach Australia Pty Limited	12,504,553 10.62% 5,637,378 4.79% 4,414,362 3.75% 4,021,155 3.41% 1,401,093 1.19% 1,300,000 1.10% 1,182,858 1.00% 1,175,000 1.00% 1,000,490 0.85% 889,463 0.76% 800,000 0.68% 750,000 0.64% 750,000 0.64% 712,632 0.60% 710,424 0.60% 695,000 0.59% 664,074 0.56% 664,074 0.56% 663,044 0.56% 628,715 0.54%
	40,564,315 34.44%