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HELICON GROUP LIMITED ABN: 12 107 903 159

Full Year Statutory Accounts For The Year Ended 30 June 2011

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Contents Page Corporate Information 3 Directors’ Report 4

- including Audited Remuneration Report 10 Auditor’s Independence Declaration 14 Corporate Governance Statement

15

Consolidated Statement of Comprehensive Income 16 Consolidated Statement of Financial Position 17 Consolidated Statement of Changes in Equity 18 Consolidated Statement of Cash Flows 19 Notes to the Financial Statements 20 Directors’ Declaration 49 Independent Audit Report 50 – 51 ASX Additional Information 52

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DIRECTORS’ REPORT _____________________________________________________________________________

Directors Mr Roderick Tomlinson Non-Executive Chairman Mr Fabio Pannuti Managing Director Mr Peter Abrahamson Non-Executive Director Mr Justyn Stedwell Company Secretary Registered Office & Principal Place of Business The Grain Store 7/21 Northumberland Street Collingwood VIC 3066 Telephone: +61 (0) 3 9417 5001 Facsimile: +61 (0) 3 8080 0796 Email: [email protected] Share Registry Security Transfer Registrars Pty Ltd PO Box 535 Applecross WA 6953 770 Canning Highway Applecross WA 6153 Telephone: 08 9315 2233 Facsimilie: 08 9315 2333 Email: [email protected] Bankers NAB St Kilda Road Level 2, 424 St Kilda Road Melbourne, Victoria 3000 Auditors HLB Mann Judd Level 1, 160 Queen Street Melbourne, Victoria 3000 Incorporated in Western Australia, February 2004 Listed on the Australian Securities Exchange (ASX) Home Exchange: Perth Code: HCG ordinary shares

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The directors present their report on the Company (also referred to as “HCG”) together with the financial report of the consolidated entity (also referred to as “the Group”) being the Company and its subsidiaries for the financial year ended 30 June 2011. 1. Directors The names of directors in office at any time during or since the end of the year are: Mr Roderick Tomlinson Non-Executive Chairman

Appointed as director on 12 April 2011. Mr Tomlinson is a qualified Industrial Chemist who was Chief Chemist of Smith + Nephew Australia and post this was head of research for Ensign Laboratories. He then started his own business, Soltec Group which he sold in 1996 to FH Faulding and Co Pharmaceuticals for more than $20million. Rod continued to advise Faulding on drug delivery systems prior to retiring in 1998. Rod has his own High Tech Investment Fund and has assisted in the funding of one of Helicons products, BreatheAssist™

Mr Fabio Pannuti Managing Director

Appointed as director on 24 February 2011. Mr Pannuti has extensive experience building technology and resources companies. He has had direct experience in many successful mergers and acquisitions, and has been involved with high profile deals such as the acquisition of oil bunkering stations on the Panama Canal, acquisition of the Van Diemen’s Land Company (a Royal Charter vehicle, incorporated in 1826 and one of the world’s oldest public companies) and the merger of the largest advertising and media agency in Eastern Europe. Many of the assets have been listed on public markets including NASDAQ and ASX. Listed company directorships held in the last three years are as follows:

Company Status Isonea Limited (formally KarmelSonix)

Director appointed 20 October 2010

Mr Peter Abrahamson FAICD Non-Executive Director

Appointed as director on 5th April 2005. Ceased as Executive Director 31st March 2010. Appointed as Non-Executive Director on 1st April 2010. Mr Abrahamson has held the positions of Vice President – Asia Pacific of AMO Asia Ltd (Hong Kong based), Managing Director – East Asia, of Allergan Asia Limited (Hong Kong based), Managing Director of Allergan Australia Pty Ltd, Marketing Director of Allergan Australia Pty Ltd, Director of Business Development – Faulding Pharmaceuticals for FH Faulding Pty Ltd, Director of Sales and Marketing – Faulding Pharmaceuticals for FH Faulding Pty Ltd and Marketing Manager – Prescription Products for Wellcome Australia Limited. Mr Abrahamson has extensive senior management experience in the pharmaceuticals industry in the Asia Pacific region, and in recent years he has also conducted a successful consultancy advising companies on strategic and operational issues. Mr Abrahamson is a Fellow of the Australian Institute of Company Directors (FAICD).

Dr Saliba Sassine BEc (Hons) PhD Non-Executive Chairman

Appointed as director 24th November 2005 and resigned on 12 April 2011. Dr Sassine is Chairman of S & A Capital Pty Ltd, a boutique investment advisory company specialising in the fields of biotechnology and natural resources. Dr Sassine has held positions at Chairman or CEO level in a number of listed and privately held technology and emerging companies and has directed and advised on the activities of a number of ‘start up’ and early stage enterprises at pre and post IPO. He has served as Chairman of the Western Australian State Branch of the Australia Biotechnology Association

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(now AusBiotech) and was previously a member of the Board of Directors of AusBiotech. Dr Sassine has also held positions as a senior ministerial and government adviser in Australia and represented the Western Australian Government on a number of state and national advisory boards and committees. Dr Sassine is an Affiliate Member of the Securities Institute of Australia.

Mr Graeme Boden B.Ec (Hons) FAICD Non- Executive Director Company Secretary

Appointed a director 27th May 2009 and resigned as a director on 6 May 2011. Appointed Secretary 16th March 2007 and resigned as Company Secretary on 22 June 2011. Mr Boden has more than 30 years experience in senior corporate of financial roles. He has been involved in the resources sector in some way throughout his career and with the biotechnology/ healthcare industry for the last 20 years. He held planning and evaluation roles with BHP, Rio Tinto and the Gwalia Group. With the Australian branches of Tenneco and Arco oil and minerals companies he held financial control and administration responsibilities. His roles in the biotechnology / healthcare sector have been as non- executive director or company secretary/CFO. Mr Boden is also a director of S & A Capital Pty Ltd and is the principal of Boden Corporate Services Pty Ltd, which provided company secretarial, accounting and administration services to Helicon. He has not held any directorships of listed companies in the last three years.

Mr Justyn Stedwell Bachelor of Business & Commerce (Management & Economics) – Monash University Graduate Diploma of Accounting - Deakin University Graduate Diploma in Applied Corporate Governance with Chartered Secretaries Australia Graduate Certificate of Applied Finance with Kaplan Professional Company Secretary

Appointed Company Secretary on 22 June 2011 Mr Stedwell is a professional Company Secretary with five years experience as a Company Secretary in ASX listed companies within various industries including IT & Telecommunications, Biotechnology, and Mining. He is currently also the Company Secretary of ASX listed companies Anittel Group Limited, Fortis Mining Limited, Motopia Limited and Solagran Limited.

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated. 2. Directors’ Meetings The numbers of directors’ and other meetings attended by each of the Directors during the financial year are: Directors’ Meetings Audit Committee

Meetings A B A B

Mr R Tomlinson 1 1 - - Mr F Pannuti 3 3 - - Mr P Abrahamson 8 8 - - Dr S Sassine 7 6 - - Mr G Boden 6 6 - - A= Number of meetings held while in office B= Meetings attended 3. Principal Activities The principal activities of the Company continue to be in the pharmaceutical area, of medical devices in particular.

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Helicon Group Limited’s purpose is to identify, acquire and commercialise late stage therapeutic delivery technologies. The Company targets high value markets and indications using an acquisition strategy driven by strategic value creation, patent protection and realisation criteria. The Company employs a low fixed overhead model with a panel of successful best in field regulatory, intellectual property and scientific advisors. 4. Operating Results The consolidated entity’s net loss for the financial year ended 30 June 2011 amounted to $1,128,712 (2010: $858,411). The consolidated entity’s net assets at 30 June 2011 were $15,245,076 (2010: $444,395). 5. Review of Operations, Likely Developments and Expected Results A review of operations, likely developments and expected results is included in the Chairman’s letter. 6. Significant Changes in the State of Affairs During the year Helicon Group acquired 81% of Leading Edge Instruments Limited (LEI). LEI controls two exciting, near-market medical device technologies, BreatheAssist™ and Vibrovein™. The following shares were issued during the year and up to the date of this report:

Date of Issue Purpose of the issue Number of Shares 3 September 2010 Rights Issue 36,542,133 4 October 2010 Placement of Rights Issue shortfall 112,972,547 24 February 2011 Acquisition of Leading Edge Instruments Limited 248,000,000 29 June 2011 Issued as consideration for fees payable 5,000,000 16 August 2011 Issued as consideration for fees payable 24,633,333 1 September 2011 Private placement 44,900,000

The following options were issued during the year and up to the date of this report:

Date of Issue Purpose of the issue Number of Options Exercise Price 11 November 2010 Private Placement 25,000,000 $0.01

The company has agreed to issue, subject to shareholders’ approval at the general meeting to be held on 25 October 2011, 44,900,000 options at the exercise price of $0.025 with the expiry date of 31/12/2014. During the year, the Company entered into two call option agreements (Call Option 1 and Call Option 2) with each of the Vendors of Leading Edge Instruments Limited (LEI), pursuant to which:

a) Either of the call options will be exercisable by the Board of Helicon in its sole and absolute discretion at any time up until 18 April 2012.

b) Upon exercise of Call Option 1 by Helicon, it will increase its shareholding in LEI by 9.5% through an offer to

LEI Shareholders in which each will transfer 50% of their Remaining Equity (or 9.5% of the entire issued share capital) held by them in LEI to Helicon in consideration across all LEI shareholders of 126,000,000 Shares.

c) Upon exercise of Call Option 2 by Helicon, it will increase its shareholding in LEI by 9.5% through an offer to

LEI Shareholders in which each will transfer 50% of their remaining equity (or 9.5% of the entire issued share capital) held by them in LEI to Helicon in consideration across all LEI Shareholders of 126,000,000 Shares.

During the year, the Company entered into two put option agreements (Put Option 1 and Put Option 2) with each of the Vendors of LEI, pursuant to which:

a) The Vendors, through its LEI shareholders’ representative group comprising Fabio Pannuti, Rod Tomlinson and Paz Maryanka (LEI Shareholders Representative Group), may exercise Put Option 1 if one of the following performance hurdles are met:

I. Signing of an agreement for commercialisation of the Vibrovein technology with a leading

pharmaceutical company within 18 months; or II. Receiving an option payment of at least $750,000 for a global licensing agreement for Vibrovein

within 18 months; or

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III. Receiving an option payment of at least $250,000 for a regional licensing agreement for Vibrovein within 18 months; or

IV. Launch of a Vibrovein product by a leading pharmaceutical company within 2 years.

b) Upon exercise of Put Option 1 by the LEI Shareholders’ Representative Group, Helicon will increase its

shareholding in LEI by 9.5% through an offer to LEI Shareholders in which each will transfer 50% of their remaining equity (or 9.5% of the entire issued share capital) held by them in LEI to Helicon in consideration across all LEI Shareholders of 126,000,000 Shares.

c) The LEI Shareholders’ Representative Group may exercise Put Option 2, if one of the following performance

hurdles are met:

I. Signing of an agreement for commercialisation of the BreatheAssist™ technology with a leading pharmaceutical company within 18 months; or

II. Receiving an option payment of at least $750,000 for a global licensing agreement for

BreatheAssist™ within 18 months; or III. Receiving an option payment of at least $250,000 for a regional licensing agreement for

BreatheAssist™ within 18 months; or IV. Launch of a BreatheAssist™ product by a leading pharmaceutical company within 2 years.

d) Upon exercise of Put Option 2 by the LEI Shareholders Representative Group, Helicon will increase its


The issue of up to 252,000,000 shares pursuant to the exercise of Call option 1 or 2 or Put option 1 or 2, was approved by the Company’s shareholders on 23 December 2010. ASX has granted a waiver from listing rule 7.3.2, to the extent necessary to permit the issue of up to 252,000,000 ordinary fully paid shares in the Company in two equal tranches to the shareholders of Leading Edge Instruments Limited (“LEI”) in consideration for the acquisition of a total of 19% of the shares of LEI (pursuant to the exercise of call options or put options exercisable upon the achievement of performance milestones) to allow those shares to be issued later than three months after the date shareholders approved the issue, on the following conditions:

• The securities are not to be issued any later than 25 months after the date of the shareholders’ meeting, 23 December 2010; and

• The Company includes in the annual report for each period during which the securities remain to be issued

a statement of the number of securities issued to LEI shareholders during the year, and the number that remain to be issued to them subject to satisfaction of the performance milestones.

7. Dividends No dividends have been paid or declared for payment by the Company since the end of the previous financial year and until the date of this report. 8. Events Subsequent to Reporting Date Acquisitions Aspen Medisys On 10 August 2011 Helicon Group Limited announced it had signed a letter of intent with Aspen Medisys LLC (AML), a US-based nanotechnology company, to acquire 100% of the issued capital of AML. AML’s patented technology enables very precise temperature increases to be targeted to diseased tissue using magnetically heated nanoparticles implanted in the diseased tissue. A particular application of AML’s magnetic nanoparticle technology is solid tumors. The types of tumors that may be treated by this nanotechnology include tumors associated with ovarian, lung and pancreatic cancers. A feature of AML’s nanotechnology is the ability to generate unusually high heating rates by using medium strength and safe magnetic fields to heat the injected proprietary magnetic nanoparticles. These nanoparticles can be energized remotely through externally applied energy: when placed in an alternating magnetic field (AMF) the nanoparticles are capable of generating heat in the tumor, thereby destroying it. The consideration for the acquisition will be $1.5 million in HCG scrip and a further $2 million in HCG scrip to be issued subject to certain success-based milestones being achieved as detailed below.

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It is a condition precedent to the transaction that Helicon spends a minimum of $3 million, subject to milestones, on the further development of the technology over an 18 month period. This transaction is subject to HCG shareholder, regulatory and legal approval. The key milestones of the proposed transaction are as follows:

1. The execution of a Definitive Sale and Purchase Agreement, on or before October 7, 2011; 2. Satisfactory due diligence investigations being completed. 3. Subject to the above-mentioned conditions precedent and HCG shareholders’ approval at the forthcoming

General Meeting AUD $1.5 million in scrip is payable upon completion, which is expected to be 7 days after the later of execution of the definitive agreement or satisfactory of the conditions precedent;

4. The funding of further development of the AML technology in an amount of at least $3m, subject to attainment of project-specific milestones;

5. Scrip to the value of AUD $1 million upon the successful completion and submission of a final technology report into the safety and efficacy for use of the AML technology in animals to be conducted at the University of California, Davis; expected to transpire in Q42012;

6. Scrip to the value of AUD $0.5 million upon the first commercial sale of a product incorporating the Technology; expected within 6 months of completion of point 3 above; and

7. Scrip to the value of AUD $0.5 million upon cumulative sales of a product incorporating the Technology attaining AUD $10 million.

Linguet IP On 15 August 2011, Helicon Group Limited announced the completion of the due diligence and the subsequent acquisition of OzPharma Pty Ltd (OzPharma) Linguet™ patented buccal delivery IP by its newly incorporated wholly owned subsidiary Lingual Consegna Pty Ltd. Invented by Ernest Hewitt and Richard Stenlake of OzPharma, Linguet™ is a buccal (orodispersible) tablet delivery technology, which increases drug load capacity while reducing side effects commonly associated with other means of drug delivery. The Linguet™ buccal delivery system provides improved bioavailability of active agents and is able to deliver up to and sometimes more than 85% of the active ingredient as it circumvents the action of the liver in `first past metabolism`. This means that a small dose may be required to achieve the same or better results of the active ingredient compared with conventional tablets or capsules. According to the GBI Research Report, the Oral MR (modified release) drug delivery market was valued at $49b in 2009 and estimated to double by 2016. The distinctive patented Linguet™ technology has significant commercial upside, as it is potentially a patent extender for many pharmaceutical companies whose products face patent expiration. Under the terms of the agreement Helicon has the right to acquire the Linguet™ IP by paying OzPharma a consideration of: $50,000, 15% of Linguet™ royalties paid to Helicon, 1,370,000 Helicon shares and a call option (“Call Option”) over the new subsidiary company, Lingual Consegna Pty Ltd that holds the technology. OzPharma is not able to exercise the Call Option until one month after two key Linguet™ patents have been granted in the USA. Helicon may terminate the Call Option prior to it being capable of being exercised by the payment to OzPharma of 25,000,000 ordinary Helicon Shares. The agreement is subject to the following conditions:

• The $50,000 cash consideration being advanced to OzPharma by 5 August 2011 (completed); • The 1,370,000 share consideration being advanced to OzPharma by 5 November 2011; and • Any regulatory requirements under Australian Law.

With the initial proof-of-concept completed, the future plans include further product development and commencement of business development opportunities by 1Q2012, in particular targeting of specialist drug delivery technology providers as well as brand and generic pharma companies for licensing opportunities. Both acquisitions complement the existing portfolio of unique drug delivery systems of Helicon including Vibrovein™ and BreatheAssist™.

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Capital Raising On 1 September 2011, the Company announced the issue of 44,900,000 shares with an attaching option exercisable at $0.025 on or before 31 December 2014 to sophisticated investors at $0.02 per share raising $898,000 before costs. Funds raised will be used to support working capital requirement and to fund to pending acquisitions and working capital. This is pending approval at the general meeting to be held in October 2011. 9. Directors’ Interests At the date of this report the directors’ interests in shares and options of the Company are: Ordinary Shares Options Mr R Tomlinson 12,119,507 - Mr F Pannuti 36,859,135 - Mr P Abrahamson 5,069,040 4,000,000 10. Indemnification and Insurance of Directors and Officers 10.1 Indemnifying the auditor The Company has not given any indemnities or entered into any agreements to indemnify the auditor, or paid or agreed to pay insurance premiums in relation thereto, during or since the financial year. 10.2 Directors’ and Officers’ indemnity The Company has paid insurance premiums for annual cover in respect of directors’ and officers’ liability insurance contracts for officers of the Company. In accordance with usual commercial practice, the insurance contract prohibits disclosure of details of the nature of the liabilities covered by the insurance, the limit of indemnity and the amount of the premium paid under the contract. 11. Non Audit Services There were no non audit services provided by the Company’s auditor, HLB Mann Judd (Vic Partnership) during the 2011 financial year. 12. Interests in Contracts or Proposed Contracts with the Company As consideration for the acquisition of LEI, the Company entered into two call option agreements and two put option agreements with the vendors of LEI for the acquisition of the remaining 19% of LEI. The details of the option agreements entered into with LEI vendors and the performance milestones are set out in section 6 of this Directors’ Report. Inverness Group Holdings Pty Ltd and Ecosse Equities Pty Ltd are LEI vendors and companies associated with Helicon Group Managing Director, Fabio Pannuti. Fabio Pannuti is the sole director of and shareholder of Inverness Group Holdings Pty Ltd and Ecosse Equities Pty Ltd. In the event the call or put options are exercised upon achievement of performance milestones, Inverness Group Holdings Pty Ltd and Ecosse Equities Pty Ltd will be entitled to receive shares as set out in the table below.

Holder Number of Helicon Group Shares Option 1 Option 2 Inverness Group Holdings Pty Ltd 9,211,166 9,211,166 Ecosse Equities Pty Ltd 9,515,651 9,515,651

Taefu Pty Ltd, a company associated with Helicon Group Chairman, Rod Tomlinson, is a vendor of LEI. Rod Tomlinson is a director and shareholder of Taefu Pty Ltd. In the event the call or put options are exercised upon achievement of performance milestones, Taefu Pty Ltd will be entitled to receive shares as set out in the table below.

Holder Number of Helicon Group Shares Option 1 Option 2 Taefu Pty Ltd 6,157,492 6,157,492

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13. Unissued Shares Under Option At the date of this report, the unissued ordinary shares of Helicon Group Limited under option are as follows:

Grant Date Date of Expiry Exercise Price Number Under Option 12/09/2007 28/09/2011 $0.20 2,000,000 23/11/2009 31/05/2013 $0.20 4,000,000 11/11/2010 30/06/2015 $0.01 25,000,000

31,000,000 The issue of the 44.9 million options attached to the 44.9 million shares issued on 1 September 2011 is subject to shareholders’ approval at the general meeting to be held in October 2011. 252,000,000 shares remain under call or put option to LEI shareholders upon the achievement of performance milestones set out in section 6 of the report. No shares pursuant to call or put options have been issued to LEI shareholder during the year and up to the date of this report. No options were exercised during, or since the end of the financial year. No person entitled to exercise options has or had any right to by virtue of options to participate in any share issue of any other body corporate. 14. Environmental Regulations and Performance The consolidated entity is not subject to any significant environmental legislation in Australia. 15. Proceedings on Behalf of Company No person has applied for leave of Court to bring proceedings on behalf of the Company or intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or any part of those proceedings. The Company was not a party to any such proceedings during the year. 16. Audited Remuneration Report 16.1 Principles of Compensation The Board’s policies for determining the amount and nature of compensation of key management personnel of the Group are as follows:

The compensation structure for key management personnel is based on a number of factors, including length of service, specific experience of the individual, the individual’s performance and contribution to the Group, and the overall performance of the Group.

The compensation structure of individual key management personnel is embodied in individual service contracts that include incentives designed to reward key management personnel for results achieved and to retain their services. 16.2 Fixed Remuneration Fixed compensation consisted of a base salary (calculated on a total cost basis, including any fringe benefits tax related to employee benefits) as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the Board through a process that considers individual and company achievement.

16.3 Performance linked remuneration Performance linked compensation includes short term incentives (STI), in the form of cash bonuses paid only upon the achievement of predetermined Key Performance Indicators (KPI). Long term incentives (LTI) provided are options over ordinary shares in the Company or loans to fund purchase of shares in the Company. Performance remuneration is designed to align the targets of the business units with the targets of those executives in charge of meeting those targets. Incentive based payments may be granted to executives based on specific annual targets and KPI being achieved. KPI’s include financial and/or operational performance targets. In addition, equity payments in the form of share options may be issued to Key Management Personnel ('KMP') or non-executive directors to further align their interests with the performance of the company.

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Audited Remuneration Report 16.4 STI No STI bonuses were granted to KMP during the financial year ended 30 June 2011. 16.5 LTI

No Options were granted to KMP or non-executive directors during the financial year ended 30 June 2011. 16.6 Executive Service agreements Compensation and other terms of employment for the Managing Director are formalised in a service agreement. 2011 Name: Fabio Pannuti Title: Managing Director Term of agreement: Standard Rolling Agreement (No fixed term) Details: Mr Pannuti shall receive fixed remuneration of $22,000 per month plus GST. He may be entitled to additional performance based remuneration upon achievement of performance targets and key performance indicators to be agreed upon by the Board and Mr Pannuti in due course. Mr Pannuti may resign from his position and thus terminate the agreement by giving one-month notice to the company. The company may at any time terminate the contract by giving Mr Pannuti three months notice in writing or payment of fees in lieu of such notice. Upon termination, Mr Pannuti is entitled to any bonus accrued (where any bonus is payable subject to the terms of the contract). The company may terminate the contract at any time without notice if serious misconduct has occurred. Where serious misconduct has occurred there is no entitlement to any payment other than accrued salary and leave (if any). Name: Peter Abrahamson Title: Director Details: At a general meeting in August 2010, shareholders approved the forgiveness of the non-recourse loan amounting to $56,000 in respect of the 1,000,000 shares owned. Mr. Abrahamson is engaged on the company’s standard director retainer of $60,000 pa (2010 $26,160). The Company contracted the services of Mr Graeme Boden and other employees of Boden Corporate Services on a fee for service basis, on arm’s length commercial terms and at rates Boden Corporate Services normally charges its clients for similar services. Mr Boden does not receive additional compensation for his services as a director. 2010 On 13 June 2007, the Group entered into an Employment agreement with Mr Peter Abrahamson for the position of Managing Director and Chief Executive Officer. The term of the Agreement is for an initial period of three years with an option to extend for a further three years. The commencement date was from 21 September 2007. The Agreement provides for a base salary of $250,000, which was reduced by 50% from December 2008. Mr Abrahamson also receives work related allowances and contributions of $22,500 to a superannuation fund (again reduced by 50% from December 2008). The Group will also make available to the CEO, on each anniversary of commencement of the contract, a non-recourse interest free loan to buy 500,000 shares in the Group approved by shareholders at the general meeting held 28th November 2007. The remuneration shares are to be issued at an issue price per share equal to the volume-weighted-average price of the fully paid ordinary shares in the Company as traded on the Australian Securities Exchange for the 30 days prior to their date of issue. The maximum number of shares to be issued during the current three year term of the contract is 1,500,000. By mutual agreement this contract was terminated on 31 March 2010, during which term 1,000,000 of the shares had been issued. At a general meeting in August 2010, shareholders approved the forgiveness of the non-recourse loan amounting to $56,000 in respect of the 1,000,000 shares owned. The Company contracted with Sassine & Associates Pty Ltd for the part time management services of Dr Sassine, at an agreed fixed fee of $2,500 per month, to cover the first 10 hours per month and an hourly rate during his involvement on significant corporate transactions of $180 per hour for the next 40 hours per month. Chargeable hours will not exceed 50 hours per month. This agreement was terminated from 31 March 2010.

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Audited Remuneration Report The Company contracted the services of Mr Graeme Boden and other employees of Boden Corporate Services on a fee for service basis, on arm’s length commercial terms and at rates Boden Corporate Services normally charges its clients for similar services. Mr Boden does not receive additional compensation for his services as a director. 16.7 Non-executive Directors In accordance with best practice corporate governance, the structure of non-executive directors and executive remunerations is separate and distinct. Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. Non-executive directors' fees and payments are reviewed annually by the Board of Directors. The Board of Directors considers advice from external sources as well as the fees paid to non-executive directors of comparable companies when undertaking the annual review process. Each director receives a fee for being a director of the company. The Chairman's fees are determined independently to the fees of other non-executive directors based on comparative roles in the external market. The chairman is not present at any discussions relating to determination of his own remuneration. The base fee for a director is presently $60,000 pa (2010: $26,160) and for the chairman $84,000 pa (2010: 54,500), plus GST. Directors invoice the Company monthly for these amounts on a pro rata basis. Directors’ fees cover all main board activities and committee memberships. 16.8 Equity Instruments All options refer to options over ordinary shares of Helicon Group Limited which are exercisable on a one for one basis. (a) Options and rights over equity instruments granted as compensation Details on options over ordinary shares in the Company that have been granted as compensation to each key management person and details on options vested and exercisable are as follows:

No options were granted to key management personnel during or since the end of the year. (b) Exercise of options granted as compensation During the reporting period, no options granted as compensation were exercised, whether issued previously or in the current year. (c) Analysis of movements in options There were no movements during the reporting period of options over ordinary shares in the Company held by each Company director and other key management personnel. No options have lapsed unexercised since the end of the financial year. d) Payments to persons before taking office During the reporting period no payments were made to key management personnel as consideration for them agreeing to hold office.

Vested No. Granted

No. Grant Date

Value per Option at

Grant Date $

Terms & Conditions for Each Grant Director

Exercise Price

$

First Exercise

Date

Last Exercise

Date Mr Abrahamson 4,000,000 4,000,000 23/11/09 $0.015 $0.20 23/11/09 31/05/13 4,000,000 4,000,000

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Audited Remuneration Report 16.9 Details of Remuneration STI

Post Employment

Superannuation

Shared Based

Payments Total

Value of options as

proportion of remuneration

Salary &

fees Cash other

Non-monetary benefits

2011 Non-executive Directors Mr R Tomlinson 21,000 - - - - 21,000 Mr P Abrahamson 32,132 - - - - 32,132 Dr S Sassine 60,313 - - - - 60,313 Mr G Boden 72,809 - - - - 72,809 Executive Mr F Pannuti 237,661 - - - - 237,661 Total 423,915 - - - - 423,915

2010 Non-executive Directors Mr R Tomlinson - - - - - - Mr P Abrahamson 6,000 1,250 1,240 540 - 9,030 Dr S Sassine 96,938 - 4,960 - - 101,898 Mr G Boden 99,633 - 4,960 - - 104,593 Executive Mr P Abrahamson 108,814 3,750 3,721 8,438 84,000 208,723 40.24% Total 311,385 5,000 14,881 8,978 84,000 424,244 19.8 %

End of Audited Remuneration Report. 17. Auditor’s independence declaration The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 14 of the financial report. This Report of the Directors, incorporating the Audited Remuneration Report is signed in accordance with a resolution of the Directors. On behalf of the Directors Yours sincerely Rod Tomlinson

Fabio Pannuti

Chairman Managing Director 30 September 2011 30 September 2011

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Auditor’s Independence Declaration under Section 307c of the Corporations Act 2001 to the Directors of Helicon Group Limited In relation to our audit of the financial report of Helicon Group Limited (“the Company”) for the year ended 30 June 2011 (“the audit”), 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 Helicon Group Limited and the entities it controlled during the year.

HLB Mann Judd Chartered Accountants

Jude Lau Melbourne Partner 30 September 2011

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CORPORATE GOVERNANCE STATEMENT __________________________________________________________________________

Corporate Governance Statements Commensurate with the spirit of the ASX Corporate Governance Principles and Recommendations, the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for corporate governance practices, taking into account factors such as the size of the Company and the Board, resources available and activities of the Company. Where, after due consideration, the Company's corporate governance practices depart from the Principles and Recommendations, the Board has offered full disclosure of the nature of, and reason for, the adoption of its own practice. Unless disclosed below, all the ASX Corporate Governance Principles and Recommendations have been applied for the entire financial year ended 30 June 2011. Board Composition The skills, experience and expertise relevant to the position of each director who is in office at the date of the annual report and their term of office are detailed in Section 1 of the directors’ report. The Board does not have a majority of independent directors. The Board is presently comprised of three directors, of which one is deemed to be independent. Chairman, Rob Tomlinson is an independent director. Fabio Pannuti is a full time executive and Peter Abrahamson is a former full time executive and therefore they do not meet the independence criteria of the ASX Corporate Governance Council. The Board has reviewed its composition and considers that relationships which define directors as non-independent have been, and continue to be, of benefit to the company. It is not considered that the relationship of non-independent directors affects their capacity to bring independent judgement to bear on Board decisions. The whole Board sits as the nomination committee when that is required. The composition of the Board is reviewed in the context of changes in the Company’s circumstances. The present composition of the Board was in response to the objective of cost minimisation and will be reviewed as other drivers take priority. Statement concerning availability of independent professional advice If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his office as a director, then, provided the director first obtains approval for incurring such expense from the chairperson, the Company will pay the reasonable expenses associated with obtaining such advice. Ethical Standards The Board acknowledges and emphasises the importance of all directors and employees maintaining the highest standards of corporate governance practice and ethical conduct. A code of conduct has been established requiring directors and employees to: – act honestly and in good faith; – exercise due care and diligence in fulfilling the functions of office; – avoid conflicts and make full disclosure of any possible conflict of interest; – comply with the law; – encourage the reporting and investigating of unlawful and unethical behaviour; and – comply with the share trading policy outlined in the code of conduct. Directors are obliged to be independent in judgment and ensure all reasonable steps are taken to ensure due care is taken by the Board in making sound decisions. Diversity Policy Diversity includes, but is not limited to, gender, age, ethnicity and cultural background. The Company is aware of the Diversity Policy and will give it due consideration as and when required. Trading Policy The Company’s policy regarding directors and employees trading in its securities is set by the Board. The policy restricts directors and employees from acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the security’s prices. Audit Committee Subsequent to the composition of the Board being reduced to three members, the full Board decided to sit as the audit committee. The Board considers that this is the most appropriate method of operation for the present membership of the Board. The Board considers that the expertise of the directors enables them to fulfil the audit committee charter and does not consider the appointment of further or different directors to be desirable merely to change the composition of the audit committee. The Company has an audit committee charter, which is published on the Company’s website.

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Performance Evaluation An annual performance evaluation of the Board and all Board members was not conducted. The Board intends to appoint an independent consultant on consideration of the Board’s expansion in the short term. Board Roles and Responsibilities The Board is first and foremost accountable to provide value to its shareholders through delivery of timely and balanced disclosures. The Board sought external guidance to assist the drafting of its “Board Governance Document” which has been made publicly available on the company’s website. This document details the adopted practices and processes in relation to matters reserved for the Board’s consideration and decision-making and specifies the level of authorisation provided to other key management personnel. The Board is ultimately responsible for ensuring its actions are in accordance with key corporate governance principles. The specific responsibilities of the Board are set out in the Board charter, which is available on the Company’s website. Disclosure The Company has written policies to ensure compliance with disclosures required under the ASX Listing Rules. The Company Secretary is responsible for compliance. The continuous disclosure policy is available on the Company’s website. Shareholders’ Rights Shareholders are entitled to vote on significant matters impacting on the business, which include the election and remuneration of directors, changes to the constitution and receipt of annual and interim financial statements. Shareholders are strongly encouraged to attend and participate in the Annual General Meetings of Helicon Group Limited, to lodge questions to be responded by the Board and/or the CEO, and are able to appoint proxies. The Company has designed a communications policy for promoting effective communication with shareholders. The policy is available on the Company’s website. Risk Management The Board considers identification and management of key risks associated with the business as vital to maximise shareholders’ wealth. A yearly assessment of the business’ risk profile is undertaken and reviewed by the Board, covering all aspects of the business from the operational level through to strategic level risks. The CEO has been delegated the task of implementing internal controls to identify and manage risks for which the Board provides oversight. The effectiveness of these controls is monitored and reviewed regularly. The worsening economic environment has emphasised the importance of managing and reassessing its key business risks. The Company has established policies for the oversight of material business risks and the full Board is engaged in the management of those risks when the need arises. The terms of the risk management policies are disclosed on the Company’s website. The Board has received assurance from the CEO and CFO equivalent that the S 259A declaration is founded on a sound system of financial risk management and internal control and the system is operating effectively in all material respects in relation to financial risks. Remuneration Committee and Policies The Company does not have a Remuneration Committee because it is deemed to be more efficient to have the Full Board consider such matters in a broader context of the overall operations. The structure of remuneration of executive and non-executive directors is set out in the Audited Remuneration Report (or section 16 of the Directors’ report). A charter of the remuneration review process is available on the Company’s website. All executives receive a base salary, superannuation, fringe benefits, performance incentives and retirement benefits. The remuneration committee reviews executive packages annually by reference to company performance, executive performance, comparable information from industry sectors and other listed companies and independent advice. The performance of executives is measured against criteria agreed half yearly which is based on the forecast growth of the company’s profits and shareholders’ value. The policy is designed to attract the highest calibre executives and reward them for performance, which results in long-term growth in shareholder value.

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The amount of remuneration for all key management personnel for the company and the five highest paid executives, including all monetary and non-monetary components, are detailed in the Audited Remuneration Report (or section 16.9 of the Directors’ report). All remuneration paid to executives is valued at the cost to the company and expensed. Shares given to executives are valued as the difference between the market price of those shares and the amount paid by the executive. Options are valued using the Black-Scholes methodology. The Board expects that the remuneration structure implemented will result in the company being able to attract and retain the best executives to run the consolidated entity. It will also provide executives with the necessary incentives to work to grow long-term shareholder value. The payment of bonuses, options and other incentive payments are reviewed by the Board annually as part of the review of executive remuneration. All bonuses, options and incentives must be linked to predetermined performance criteria. There are no schemes for retirement benefits other than statutory superannuation for non-executive directors. Other Information Further information relating to the company’s corporate governance practices and policies has been made publicly available on the company’s website at http://www.helicongroup.com.au. The Company has placed the following information on its website:

• Statement of Board and Management Functions. • Policy and procedure for selection and appointment of new Directors. • Summary of code of conduct for Directors and key executives. • Summary of policy on securities trading. • Audit Committee Charter. • Policy and procedure for selection of external auditor and rotation of audit engagement partners. • Summary of policy and procedure for compliance with continuous disclosure requirements. • Summary of arrangement regarding communication with and participation of shareholders. • Summary of Company's risk management policy and internal compliance and control system. • Process for performance evaluation of the Board and Board committees. • Remuneration Committee Charter. • Corporate Code of Conduct.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 JUNE 2011 _______________________________________________________________________________________

Consolidated

Note 30 June 11

$ 30 June 10

$ Sales revenue - - Cost of goods sold - - GROSS PROFIT - - Employee benefits expense - (85,744) Depreciation and amortisation 3(a) (2,279) (3,174) Sales and marketing - (75) Accounting and secretarial services (119,534) (90,541) Travel and accommodation (55,133) (24,288) Consulting fees (367,473) (90,237) Directors’ fees (99,773) (60,500) Insurances (10,144) (44,523) Regulatory expenses (44,860) (25,684) Legal expenses (174,342) (46,318) Finance costs (6,901) - Other expenses from operating activities (340,974) (124,542) Share based payments 3(a) - (84,000) OPERATING RESULT (1,221,413) (679,626) Other Operating Income 2 33,720 - LOSS BEFORE INTEREST, TAXES & IMPAIRMENT (1,187,693) (679,626) Impairment 3(a) - (198,622) LOSS BEFORE INTEREST & TAXES (1,187,693) (878,248) Net financial income 2 58,981 19,837 LOSS BEFORE TAXES (1,128,712) (858,411) Income tax expense 4 - - NET LOSS (1,128,712) (858,411) OTHER COMPREHENSIVE INCOME - - COMPREHENSIVE LOSS FOR THE YEAR (1,128,712) (858,411) Attributable to the members of the parent entity 16(b) (1,076,250) (858,411) Attributable to non controlling interests (52,462) - EARNINGS PER SHARE Basic & Diluted Loss Per Share (cents) attributable to the ordinary equity holders of the parent company 6 (0.36) (1.00)

The accompanying notes form part of these financial statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2011 _______________________________________________________________________________________

Consolidated Note 2011 2010 $ $ ASSETS CURRENT ASSETS Cash and cash equivalents 7 961,503 454,358 Trade and other receivables 8 213,785 21,071 Other current assets 9 5,010 13,073 TOTAL CURRENT ASSETS 1,180,298 488,502

NON-CURRENT ASSETS Property, plant and equipment 10 20,299 5,323 Intangible assets 11 14,518,212 - TOTAL NON-CURRENT ASSETS 14,538,511 5,323 TOTAL ASSETS 15,718,809 493,825 CURRENT LIABILITIES Trade and other payables 13 454,694 49,430 Interest bearing liability 14 19,039 - TOTAL CURRENT LIABILITIES 473,733 49,430 TOTAL LIABILITIES 473,733 49,430 NET ASSETS 15,245,076 444,395

EQUITY Issued capital 16 (a) 19,058,343 4,841,926 Reserve 16 (c) 313,783 313,783 Accumulated losses 16 (b) (5,787,564) (4,711,314) EQUITY ATTRIBUTABLE TO MEMBERS 13,584,562 444,395 Non-controlling interests 1,660,514 - TOTAL EQUITY 15,245,076 444,395


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2011

Issued Capital

(Accumulated Losses)

Reserves Total Non Controlling

Interests

Total Equity

Note $ $ $ $ $ $

Consolidated

Balance at 1 July 2009 4,576,161 (3,852,903) 229,783 953,041 - 953,041 Loss attributable to members of parent entity

(858,411) - (858,411) - (858,411)

Other comprehensive Income - - - - -

Total comprehensive income/(loss) (858,411) - (858,411) - (858,411)

Shares issued during period 16 275,516 - - 275,516 - 275,516

Capital raising costs 16 (9,751) - - (9,751) - (9,751)

Share based payments - 84,000 84,000 - 84,000

Balance at 30 June 2010 4,841,926 (4,711,314) 313,783 444,395 - 444,395

Balance at 1 July 2010

4,841,926 (4,711,314) 313,783 444,395 - 444,395

Loss for the year - (1,076,250) - (1,076,250) (52,462) (1,128,712) Other comprehensive Income for the year

- - - - - -

Total comprehensive income/(loss) for the year

- (1,076,250) - (1,076,250) (52,462) (1,128,712)

Non-controlling interests on acquisition of subsidiary 24 - - - - 1,747,063 1,747,063

Shares issued during period 16 14,414,934 - - 14,414,934 - 14,414,934

Capital raising costs 16 (198,517) - - (198,517) (34,087) (232,604)

Share based payments - - - - - -

Balance at 30 June 2011 19,058,343 (5,787,564) 313,783 13,584,562 1,660,514 15,245,076 The accompanying notes form part of these financial statements.

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HELICON GROUP LIMITED

ABN: 12 107 903 159 CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 30 JUNE 2011

Note 2011 2010

$ $

CASH FLOWS FROM OPERATING ACTIVITIES

Payments to suppliers and employees (967,420) (637,170) Interest received 58,981 20,306 Interest paid (6,551) - Receipts from customers 32,860 - Net cash provided by / (used in) operating activities 7 (ii) (882,130) (616,864)

CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment (1,463) - 1,582 Bank accounts acquired 24 12,570 - Net cash provided by / (used in) investing activities 11,107 - 1,582

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 1,868,934 275,516 Capital raising costs paid (198,517) Receipts from director-related entities (272,555) - Repayment of borrowings (19,694) (5,830) Net cash provided by / (used in) financing activities 1,378,168 269,686

Net increase/(decrease) in cash and cash equivalents held 507,145 - 348,760 Cash and cash equivalents at beginning of financial year 454,358 803,118

Cash and cash equivalents at 30 June 7 (i) 961,503 454,358


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NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2011

Helicon Group Limited, is a listed public company on ASX and is incorporated and domiciled in Australia. These consolidated financial statements and notes represent those of Helicon Group Limited and Controlled Entities (the “consolidated entity” or “Group”). The separate financial statements of the parent entity, Helicon Group Limited, have not been presented within this financial report as permitted by the Corporations Act 2001. The financial statements were authorised for issue on 30 September 2011 by the directors of the company. Note 1: Statement of Significant Accounting Policies Basis of Preparation

These financial statements are general purpose financial statements that have been prepared in accordance with Australian Accounting Standards, Australian Accounting Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. Australian Accounting Standards set out accounting policies that the AASB has concluded would result in financial statements containing relevant and reliable information about transactions, events and conditions. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards as issued by the IASB. Material accounting policies adopted in the preparation of these financial statements are presented below and have been consistently applied unless otherwise stated. The financial statements have been prepared on an accruals basis and are based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities. (a) Statement of Compliance The financial report complies with Australian Accounting Standards (AAS). Compliance with AAS ensures that the financial report, comprising the financial statements and notes thereto, complies with International Financial Reporting Standards (IFRS). (b) Basis of Consolidation The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by the Company at the end of the reporting period. A controlled entity is any entity over which the Company has the power to govern the financial and operating policies so as to obtain benefits from the entity's activities. Control will generally exist when the parent owns, directly or indirectly through subsidiaries, more than half of the voting power of an entity. In assessing the power to govern, the existence and effect of holdings of actual and potential voting rights are also considered. Where controlled entities have entered or left the Group during the year, the financial performance of those entities are included only for the period of the year that they were controlled. A list of controlled entities is contained in Note 21 to the financial statements. In preparing the consolidated financial statements, all inter-group balances and transactions between entities in the consolidated group have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted by the parent entity. Non-controlling interests, being the equity in a subsidiary not attributable, directly or indirectly, to a parent, are shown separately within the Equity section of the consolidated Statement of Financial Position and Statement of Comprehensive Income. The non-controlling interests in the net assets comprise their interests at the date of the original business combination and their share of changes in equity since that date. Business combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exemptions). When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date.

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ABN: 12 107 903 159 NOTES TO THE FINANCIAL STATEMENTS (continued)


Note 1: Statement of Significant Accounting Policies (continued) Goodwill Goodwill is carried at cost less accumulated impairment losses. Goodwill is calculated as the excess of the sum of:

(i) the consideration transferred; (ii) any non-controlling interest; and (iii) the acquisition date fair value of any previously held equity interest;

over the acquisition date fair value of net identifiable assets acquired. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. Fair value uplifts in the value of pre-existing equity holdings are taken to the statement of comprehensive income. Where changes in the value of such equity holdings had previously been recognised in other comprehensive income, such amounts are recycled to profit or loss. The amount of goodwill recognised on acquisition of each subsidiary in which the Group holds less than a 100% interest will depend on the method adopted in measuring the non-controlling interest. The Group can elect in most circumstances to measure the non-controlling interest in the acquiree either at fair value (full goodwill method) or at the non-controlling interest's proportionate share of the subsidiary's identifiable net assets (proportionate interest method). In such circumstances, the Group determines which method to adopt for each acquisition and this is stated in the respective notes to these financial statements disclosing the business combination. Under the full goodwill method, the fair value of the non-controlling interest is determined using valuation techniques, which make the maximum use of market information where available. Under this method, goodwill attributable to the non-controlling interests is recognised in the consolidated financial statements. Refer to Note 24 for information on the goodwill policy adopted by the Group for acquisitions. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is tested for impairment annually and is allocated to the Group's cash-generating units or groups of cash-generating units, representing the lowest level at which goodwill is monitored not larger than an operating segment. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity disposed of. Changes in the ownership interests in a subsidiary are accounted for as equity transactions and do not affect the carrying values of goodwill. All transaction costs incurred in relation to the business combination are expensed to the statement of comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. The acquisition date fair value of the consideration transferred for a business combination plus the acquisition date fair value of any previously held equity interest shall form the cost of the investment in the separate financial statements. (c) Income Tax The income tax expense (revenue) for the year comprises current income tax expense (income) and deferred tax expense (income). Current income tax expense charged to profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability where there is no effect on accounting or taxable profit or loss.

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Note 1: Statement of Significant Accounting Policies (continued) Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. Where temporary differences exist in relation to investments in subsidiaries, branches, associates and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (d) Property, Plant and Equipment Each class of property, plant and equipment is carried at cost or less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis and therefore carried at cost less accumulated depreciation and any accumulated impairment. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present. The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the asset’s employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets is depreciated on a straight-line basis over the asset’s useful life to the consolidated entity commencing from the time the asset is held ready for use. The depreciation rate used to depreciate office equipment is 10%. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. 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. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains and losses are included in the statement of comprehensive income. (e) Financial Instruments Initial recognition and measurement Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions to the instrument. For financial assets, this is equivalent to the date that the Group commits itself to either the purchase or sale of the asset (ie trade date accounting is adopted).

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Note 1: Statement of Significant Accounting Policies (continued) Financial instruments are initially measured at fair value plus transaction costs, except where the instrument is classified “at fair value through profit or loss”, in which case transaction costs are expensed to profit or loss immediately. Classification and subsequent measurement Finance instruments are subsequently measured at fair value, amortised cost using the effective interest rate method, or cost. Amortised cost is the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment, and adjusted for any cumulative amortisation of the difference between that initial amount and the maturity amount calculated using the effective interest method. Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models. The effective interest method is used to allocate interest income or interest expense over the relevant period and is equivalent to the rate that discounts estimated future cash payments or receipts (including fees, transaction costs and other premiums or discounts) through the expected life (or when this cannot be reliably predicted, the contractual term) of the financial instrument to the net carrying amount of the financial asset or financial liability. Revisions to expected future net cash flows will necessitate an adjustment to the carrying value with a consequential recognition of an income or expense item in profit or loss. The Group does not designate any interests in subsidiaries, associates or joint venture entities as being subject to the requirements of Accounting Standards specifically applicable to financial instruments. The Group’s financial instruments are limited to cash, accounts receivable, other financial assets and liabilities and interest bearing liabilities.

i) Financial assets at fair value through profit or loss Financial assets are classified at “fair value through profit or loss” when they are held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a Group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Loans and receivables are included in current assets, where they are expected to mature within 12 months after the end of the reporting period.

iii) Financial liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost.

Derivative instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to their fair value at the end of each reporting period. The accounting for subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. As the Group does not qualify for hedging accounting, changes in the fair value of all its derivative instruments are recognised immediately in profit or loss and are included in other income or other expenses. Impairment At the end of each reporting period, the Group assesses whether there is objective evidence that a financial instrument has been impaired.

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Note 1: Statement of Significant Accounting Policies (continued) Derecognition Financial assets are derecognised where the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are discharged, cancelled or expired. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. (f) Impairment of Assets At the end of each reporting period, the Group assesses whether there is any indication that an asset may be impaired. The assessment will include the consideration of external and internal sources of information, including dividends received from subsidiaries, associates or jointly controlled entities deemed to be out of pre-acquisition profits. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, to the asset’s carrying amount. Any excess of the asset’s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116). Any impairment loss of a revalued asset is treated as a revaluation decrease in accordance with that other Standard. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives and those not yet ready for use. (g) Intangibles Intangible assets that meet the recognition criteria of AASB138 Intangible Assets are capitalized at cost at the date of acquisition. Expenditure on intangible assets that does not meet the recognition criteria is charged against profits in the year in which the expenditure is incurred. Following initial recognition the cost model is applied to intangible asset classes. The useful life of intangible assets is assessed as either finite or infinite. Amortisation of intangible assets with finite useful lives is charged against profits in the income statement. The costs of intangible assets with an infinite life are not amortised. Intangible assets are tested for impairment where an indicator or impairment exists and in the case of indefinite lived intangibles annually, either individually or at the cash generating unit level. (i) Intellectual property Intellectual property acquired as part of a business combination is recognised separately from goodwill. Intellectual property is carried at coat, which is its fair value at the date of acquisition less accumulated amortisation and impairment losses. Intellectual property is amortised over its useful life commencing from the completion of development. The Company will carry its Intellectual property at cost whilst it is under development and it is subject to annual impairment testing. (ii) Patents and trademarks Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful lives. (iii) Research and development Expenditure during the research phase of a project is recognised as an expense when incurred. Development costs are capitalised only when technical feasibility studies identify that the project is expected to deliver future economic benefits and these benefits can be measured reliably. Development costs have a finite life and are amortised on a systematic basis based on the future economic benefits over the useful life of the project. Gains or losses arising from de-recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

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Note 1: Statement of Significant Accounting Policies (continued) (h) Foreign Currency Transaction and Balances Functional and presentation currency The functional currency of the Company is measured using the currency of the primary economic environment in which that entity operates. The financial statements are presented in Australian dollars which is the entity’s functional and presentation currency. Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity; otherwise the exchange difference is recognised in the income statement. (i) Equity settled transactions Options The Company does not currently conduct any formal share-based compensation plans and all equity-settled transactions entered into by the Company are done so, on an individual transaction basis at the discretion of the Company’s board of directors. Share-based payments to employees are measured at the fair value of the instruments issued and amortised over the vesting periods. Share-based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes pricing model. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognised for services received as consideration for the equity instruments granted is based on the number of equity instruments that eventually vest. Shares The Company established an Executive Incentive Scheme, under which the first allocation of shares was made to the CEO after shareholders’ approval in 2007. The scheme provides that 500,000 Remuneration Shares will be issued to the participating executive, financed by interest free, limited recourse loan, secured only by the proceeds from sale of the shares. The Remuneration Shares were issued on each anniversary of the Company’s admission to the ASX official list being on 21 September 2007 and 2008 and the price at which the Remuneration Shares were be issued was the volume-weighted price of shares traded on ASX in the 30 days prior to each anniversary date. The Remuneration Shares were recorded as being issued free until such time as the shares are sold, when the loan repayment proceeds will be recorded as issued capital. All shares issued under the Executive Incentive Scheme with non-recourse loans are considered to be options and are accounted for in accordance with the note above on options. The maximum number of shares to be issued during the current three year term of the executive’s contract was 1,500,000. (j) Provisions Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period.

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Note 1: Statement of Significant Accounting Policies (continued) (k) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, deposits available on demand with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are reported within short-term borrowings in current liabilities in the statement of financial position. (l) Revenue Revenue is measured at the fair value of the consideration received or receivable after taking into account any trade discounts and volume rebates allowed. When the inflow of consideration is deferred, it is treated as the provision of financing and is discounted at a rate of interest that is generally accepted in the market for similar arrangements. The difference between the amount initially recognised and the amount ultimately received is interest revenue. Interest revenue is recognised using the effective interest rate method. (m) Borrowing Costs All borrowing costs are expensed in the income in the period in which they are incurred. (n) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from, or payable to, the ATO are presented as operating cash flows included in receipts from customers or payments to suppliers. (o) Comparative Figures When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year. (p) Critical Accounting Estimates and Judgements The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company. Key Estimates – Share-based Payments The value attributed to share options and remuneration shares issued is an estimate calculated using an appropriate mathematical formula based on an option pricing model. The choice of models and the resultant option value require assumptions to be made in relation to the likelihood and timing of the conversion of the options to shares and the value and volatility of the price of the underlying shares. Key Estimates – Impairment The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using value-in-use calculations, which incorporate various key assumptions. Value-in-use calculations performed in assessing recoverable amounts incorporate a number of key estimates. Refer to note 11 for the impairment assessment undertaken in respect of the intangible balance. No impairment was recognised as at 30 June 2011. Key Estimates – Loan to Jess Mining / Gold Mines of Peru Limited The Board has determined that the fair value of the loan to Jess Mining at 30 June 2010 & 2011 to be nil (refer to note 8). The loan is of short-term nature, interest free, but in repayment the Group could receive up to $250,000

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Note 1: Statement of Significant Accounting Policies (continued) (q) Trade and other payables Trade payables and other payables are carried at cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services. (r) Earnings per share Basic earnings per share is calculated as net profit/(loss) attributable to members of the Company, adjusted to exclude any costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element. The diluted earnings per share is calculated as net profit/loss attributable to members of the Company, adjusted for: • costs of servicing equity (other than dividends) and preference share dividends; • the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been

recognised as expenses; and other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares; divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(s) Issued capital 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. (t) Application of the going concern basis The financial report has been prepared on a going concern basis, which assumes the settlement of liabilities and realisation of assets in the normal course of business. The directors believe that this basis of accounting is appropriate after considering the following factors:

• The Company has a demonstrated record of being able to raise fund to supplement its working capital as evident from the fact that the Company successfully raised approximately $1.67 million (after costs) during the financial year and additional $898,000 since 30 June 2011.

• The Directors have in place processes to control and monitor the Group’s costs structure via the manner in which the Group has been structured.

• The Group is presently implementing/executing strategies with a view to generating a sustainable source of royalty income.

It is recognised that should the Company not be able to monitor its costs, continue to raise funds or execute its strategy to generate royalty income, the Group may not be able to realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Group not continue as a going concern. (u) Adoption of new and revised standards The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 July 2010:

• AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project

• AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions

• AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues • AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments and AASB 2009-13

Amendments to Australian Accounting Standards arising from Interpretation 19, and • AASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvements

Project.

The adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods.

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Note 1: Statement of Significant Accounting Policies (continued) (v) New Accounting Standards for Application in Future Periods The AASB has issued new and amended Accounting Standards and Interpretations that have mandatory application dates for future reporting periods and which the Group has decided not to early adopt. A discussion of those standards which are applicable to the Group and their impact is as follows:

• AASB 9: Financial Instruments (December 2010) (applicable for annual reporting periods commencing on or after 1 January 2013) This Standard is applicable retrospectively and includes revised requirements for the classification and measurement of financial instruments, as well as recognition and derecognition requirements for financial instruments. The Group has not yet determined any potential impact on the financial statements.

The key changes made to accounting requirements include:

- simplifying the classifications of financial assets into those carried at amortised cost and those carried at fair value;

- simplifying the requirements for embedded derivatives; - removing the tainting rules associated with held-to-maturity assets;

- removing the requirements to separate and fair value embedded derivatives for financial assets carried at amortised cost;

- allowing an irrevocable election on initial recognition to present gains and losses on investments in equity instruments that are not held for trading in other comprehensive income. Dividends in respect of these investments that are a return on investment can be recognised in profit or loss and there is no impairment or recycling on disposal of the instrument;

- requiring financial assets to be reclassified where there is a change in an entity’s business model as they are initially classified based on: (a) the objective of the entity’s business model for managing the financial assets; and (b) the characteristics of the contractual cash flows; and

- requiring an entity that chooses to measure a financial liability at fair value to present the portion of the change in its fair value due to changes in the entity’s own credit risk in other comprehensive income, except when that would create an accounting mismatch. If such a mismatch would be created or enlarged, the entity is required to present all changes in fair value (including the effects of changes in the credit risk of the liability) in profit or loss.

• AASB 124: Related Party Disclosures (applicable for annual reporting periods commencing on or after

1 January 2011) This Standard removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifies the definition of a “related party” to remove inconsistencies and simplify the structure of the Standard. No changes are expected to materially affect the Group.

• AASB 2009–12: Amendments to Australian Accounting Standards [AASBs 5, 8, 108, 110, 112, 119, 133, 137, 139, 1023 & 1031 and Interpretations 2, 4, 16, 1039 & 1052] (applicable for annual reporting periods commencing on or after 1 January 2011) This Standard makes a number of editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. The Standard also amends AASB 8 to require entities to exercise judgment in assessing whether a government and entities known to be under the control of that government are considered a single customer for the purposes of certain operating segment disclosures. The amendments are not expected to impact the Group.

• AASB 2010–4: Further Amendments to Australian Accounting Standards arising from the Annual

Improvements Project [AASB 1, AASB 7, AASB 101 & AASB 134 and Interpretation 13] (applicable for annual reporting periods commencing on or after 1 January 2011). This Standard details numerous non-urgent but necessary changes to Accounting Standards arising from the IASB’s annual improvements project. Key changes include: - clarifying the application of AASB 108 prior to an entity’s first Australian-Accounting-Standards

financial statements; - adding an explicit statement to AASB 7 that qualitative disclosures should be made in the context of

the quantitative disclosures to better enable users to evaluate an entity’s exposure to risks arising from financial instruments;

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Note 1: Statement of Significant Accounting Policies (continued) - amending AASB 101 to the effect that disaggregation of changes in each component of equity

arising from transactions recognised in other comprehensive income is required to be presented, but is permitted to be presented in the statement of changes in equity or in the notes;

- adding a number of examples to the list of events or transactions that require disclosure under AASB 134; and

- making sundry editorial amendments to various Standards and Interpretations. This Standard is not expected to impact the Group.

• AASB 2010–5: Amendments to Australian Accounting Standards [AASB 1, 3, 4, 5, 101, 107, 112, 118, 119, 121, 132, 133, 134, 137, 139, 140, 1023 & 1038 and Interpretations 112, 115, 127, 132 & 1042] (applicable for annual reporting periods beginning on or after 1 January 2011) This Standard makes numerous editorial amendments to a range of Australian Accounting Standards and Interpretations, including amendments to reflect changes made to the text of IFRSs by the IASB. However, these editorial amendments have no major impact on the requirements of the respective amended pronouncements.

• AASB 2010–6: Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial

Assets [AASB 1 & AASB 7] (applicable for annual reporting periods beginning on or after 1 July 2011) This Standard adds and amends disclosure requirements about transfers of financial assets, especially those in respect of the nature of the financial assets involved and the risks associated with them. Accordingly, this Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards, and AASB 7: Financial Instruments: Disclosures, establishing additional disclosure requirements in relation to transfers of financial assets.

This Standard is not expected to impact the Group.

• AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (applies to periods beginning on or after 1 January 2013) This Standard makes amendments to a range of Australian Accounting Standards and Interpretations as a consequence of the issuance of AASB 9: Financial Instruments in December 2010. Accordingly, these amendments will only apply when the entity adopts AASB 9. As noted above, the Group has not yet determined any potential impact on the financial statements from adopting AASB 9.

• AASB 2010–9: Amendments to Australian Accounting Standards – Severe Hyperinflation and Removal of

Fixed Dates for First-time Adopters [AASB 1] (applies to periods beginning on or after 1 July 2011) This Standard makes amendments to AASB 1: First-time Adoption of Australian Accounting Standards. The amendments brought in by this Standard provide relief for first-time adopters of Australian Accounting Standards from having to reconstruct transactions that occurred before their date of transition to Australian Accounting Standards. Furthermore, the amendments brought in by this Standard also provide guidance for entities emerging from severe hyperinflation either to resume presenting Australian-Accounting-Standards financial statements or to present Australian-Accounting-Standards financial statements for the first time.

This Standard is not expected to impact the Group.

• AASB 2010–10: Further Amendments to Australian Accounting Standards – Removal of Fixed Dates for First-time Adopters [AASB 2009–11 & AASB 2010–7] (applies to periods beginning on or after 1 January 2013) This Standard makes amendments to AASB 2009–11: Amendments to Australian Accounting Standards arising from AASB 9, and AASB 2010–7: Amendments to Australian Accounting Standards arising from AASB 9 (December 2010). The amendments brought in by this Standard ultimately affect AASB 1: First-time Adoption of Australian Accounting Standards and provide relief for first-time adopters from having to reconstruct transactions that occurred before their transition date.

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Note 2: Revenues Consolidated 2011 2010 Revenues $ $ Operating activities Bank interest received 58,981 19,837 Reimbursements 33,720 - Total revenue 92,701 19,837 Note 3: Expenses (a) Loss before interest and taxes Loss from ordinary activities before income tax expense has been determined after charging the following items:

Depreciation of equipment and loss on disposal 2,279 3,174

Impairment of receivable - 125,000

Impairment of prepayments - 73,622

2,279 201,796 Share based payments expense - 84,000

Note 4: Income Tax expense

The Group has not commenced significant trading. At its current stage of operational development the Group is not in a position to satisfy the accounting criteria of AASB112: Income Taxes to bring to account the benefit of its tax losses. Accordingly no current or deferred income tax benefits have yet been brought to account. Consolidated 2011 2010 $ $ Accounting loss before tax (1,128,712) (858,411) Prima facie tax benefit on loss from ordinary activities before income tax at 30% (2010: 30%) (338,614) (257,523) Tax effect of: - Non-deductible expenses 6,805 (75) - Adjustment to prior year estimate - - (331,809) (257,598) Add: - Tax effect of capital raising costs no recognised (59,555) (24,380) (391,364) (281,978) Less: - income tax benefit not brought to account 391,364 281,978 - - The applicable weighted average effective tax rates: 0% 0% 2011 2010 Current income tax benefit not brought to account relates to items credited or charged to:

$ $

- Income statement 246,350 257,598 - Statement of changes in equity - 24,380 246,350 281,978 (a) Deferred tax Assets Temporary differences 59,555 64,605 Undeducted tax losses [operating losses] 1,619,697 1,390,340 1,679,252 1,454,945 The Company has no capital losses for income tax purposes and the undeducted tax losses referred to above are wholly comprised of operating losses.

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The amount of Unrecognised Tax Asset relating to items that have been charged or credited to Equity: Consolidated 2011

$ 2011

$ Charged to share capital; transaction costs 59,555 26,233 (b) Deferred Tax Liability Temporary differences - - The Group will only be able to realise a benefit against future taxable income if it passes tests in one of either “same business” or “continuity of ownership”. It is likely that the same business test will fail and possible that the underwritten rights issue might cause the continuity of ownership test to fail also. Note 5: Segment Reporting The Group has operated in one segment, being pharmaceutical since the 31 December 2009 financial year. The segment details are therefore fully reflected in the body of the financial report. Consolidated Note 6: Earnings Per Share

2011

$ 2010

$ Reconciliation of earnings to profit/(loss): (a) Loss attributable to the existing equity holders of the parent company (1,076,250) (858,411) (b) Loss used to calculate basic EPS (1,076,250) (858,411) (c) Weighted average number of ordinary shares outstanding during the year used to

calculate basic EPS. 298,594,960 85,919,880 Basis earnings per share (cents) (0.36) (1.00) Diluted earnings per share is not disclosed as the result is considered to be anti-dilutive for the year ended 30 June 2011. These options could potentially dilute basic earnings per share in the future. Note 7: Cash and Cash Equivalents Consolidated Cash at bank and on hand 961,503 454,358 Cash at bank earns interest at floating rates based on daily bank deposit rates. The effective interest rate was 4.75% (2010: 5.47%). (i) Reconciliation to Statement of Cash Flows: For the purposes of the consolidated statement of cash flows, cash and cash equivalents comprise cash on hand and at bank. Cash at the end of the financial year as shown in the consolidated statement of cash flows is reconciled to items in the consolidated statement of financial position as follows: Consolidated 2011

$ 2010

$ Cash and cash equivalents 961,503 454,358 ii) Reconciliation of loss for the year to net cash flows from operating activities $ $ (Loss) for the year (1,128,712) (858,411) Cash flows excluded from loss attributable to operating activities: Non-cash flows in loss:

Foreign exchange loss/ (gain) - 10,381 Depreciation 2,279 3,174 Impairment of receivables and prepayments - 198,622 Share based payments 146,000 84,000

Change in net assets and liabilities, net of effects from acquisition and disposal of businesses: (Increase)/decrease in assets:

Trade and other receivables (66,229) (6,020) Prepayments 97,963 4,653

Increase/(decrease) in liabilities: Current payables and accruals 66,569 (21,822)

Current provisions - (31,441) Net cash provided by / (used in) operating activities (882,130) (616,864)

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Note 8: Trade and Other Receivables 2011 2010 Current: Other receivables 14,576 10,729 Related party receivables (b) 24,159 4,538 Receivable from third party (a) 125,000 125,000 Provision for Impairment (a) (125,000) (125,000) GST receivable 175,050 5,804 213,785 21,071 a) During March to June 2009, the Company advanced $125,000 to Jess Mining, a Peruvian incorporated company in which Saliba Sassine had a 50% interest. The advance was made with the approval of the three non-associated directors of the Company at that time and was made on an arm’s length basis as set out in an information memorandum circulated to various parties, including the Company, offering investment into the Jess Mining venture. The advance is not secured by any of the assets of Jess Mining and is to be repaid from the proceeds of alluvial gold mining operations in Peru, to a maximum amount of $250,000, expected to be received during the 2011 financial year. During the 2009/10 financial year, JESS Mining was acquired by Gold Mines of Peru Ltd, a related party sharing common company directors Dr Saliba Sassine and Mr Graeme Boden. Gold Mines of Peru is an Australian company which plans to seek an ASX Listing. Gold Mines of Peru has undertaken to repay the advance from production. At 30 June 2010 Gold Mines of Peru Ltd did not have the means to make the repayment, so the directors made an impairment adjustment to record the receivable at nil value. Gold Mines of Peru anticipate that this amount will be repaid before the next balance date. b) refer to note 21 terms and conditions. All of the Group’s receivable is denominated in Australian Dollars and it does not carrying any foreign exchange risk. Due to the short-term nature of the current receivables, their carrying value is assumed to approximate their fair value.

Not Past Due Past Due But Not

Impaired Past Due and

Impaired Consolidated 2011

$ 2010

$ 2011

$ 2010

$ 2011

$ 2010

$ Current Other receivables 14,576 10,729 - - - - Related party receivables 24,159 4,538 - - - - GST receivable 175,051 5,804 - - - - Receivable from third party - - - - 125,000 125,000

213,785 21,071 - - 125,000 125,000 Note 9: Other Current Assets Consolidated 2011 2010 Prepayments: $ $

Purchases 5,010 13,073 Other - -

5,010 13,073

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Note 10: Property, Plant and Equipment

Office equipment

At cost 32,456 13,461 Accumulated depreciation (12,157) (8,138)

Total office equipment 20,299 5,323 Total Property, Plant and Equipment 20,299 5,323 Movement in Carrying Amount: Carrying amount at the beginning of the year Additions Depreciation

5,323 17,255 (2,279)

6,915 1,582

(3,174) Carrying amount at the end of the year 20,299 5,323 Note 11: Intangible assets 2011

$ 2010

$ Goodwill at cost (see note 24) 4,951,995 - Intellectual property at cost (see note 24) 9,566,217 -

14,518,212 - Movement in Carrying Amounts:

Goodwill Intellectual

property Total Carrying amount at the beginning of the year Additions Impairment/amortisation Acquisition via business combination

- - -

4,951,995

- - -

9,566,217

- - -

14,518,212 Carrying amount at the end of the year 4,951,995 9,566,217 14,518,212 The acquired intellectual properties (BreatheAssist™ and Vibrovein™) have been assessed to have an indefinite life as they are not yet available for use. Intellectual property with an indefinite useful life is subject to annual impairment testing. Goodwill has an indefinite useful life. The Board of Directors has formed the view that the acquired intellectual properties have indefinite useful life based on the following factors:

• The level of development of both the Vibrovein™ and BreathAssist™ products are still progressing with their utilisation having been demonstrated thus far.

• For both, there exists market need/desirability (albeit a competitive market for the BreathAssist™) and the Board considers that BreathAssist™ has the unique feature of adjustability which is the subject of granted patents and this will be the major differentiator in the marketplace and of interest to users of such devices.

• Vibrovein™, on the other hand, has no known competitors at this point in time but, as a disposable adjunct to inexpensive syringes, may face a price issue.

• The Board is confident that there is a high sales potential at the specialist end of the market where multiple injections in a single procedure are required, such as cosmetic treatments and sclerotherapy, and where pain is associated with injections as a consequence of the material to be injected.

• The Board is not aware of any known factors which would bring into question the Company’s claim to the patents and their validity thereof as at 30 June 2011.

(a) Impairment testing of goodwill and intellectual property (“IP”) Goodwill is allocated to cash-generating units, which are based on the group’s reporting segments. At 30 June 2011, the group had only a single reporting segment being pharmaceutical. The recoverable amount of the goodwill and intellectual property (“IP”) has been determined by the Board by preparing a value in use calculation. Value-in-use is calculated based on the present value of cash flow projections over the expected product life of the relevant IP with the period extending beyond five years extrapolated using an estimated growth rate. The cash flows were discounted using a discount rate ranging between 15 – 18% at the beginning of the budget period. The budgets reflected the Board’s best estimate of the products’ expected market share and the Company’s expected royalty revenue. Costs were determined taking into account the expected cost structure as well as estimated weighted average inflation rates over the period. Discount rates used were pre-tax rates.

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The Company also engaged the service an of external valuer which specialised in the appraisal and valuation of IP and knowledge-based intangible assets, including in-process R&D (“IPR&D”), which includes amongst other things medical devices, diagnostic systems, pharmaceuticals, genetic and recombinant DNA technologies, stem cell therapies and complementary and alternative medicines. The valuation report supported the Company’s assessment that the IP and goodwill had not been impaired at 30 June 2011. No impairment loss was recognised as a result of the impairment assessment undertaken by the Board of Directors as at 30 June 2011. Note 12: Share Based Payments a) Options The following share-based payment arrangements involving share options existed at 30 June 2011 and 2010.

• In September 2007, 2,000,000 share options were granted to the nominee of DJ Carmichael, the lead broker

in the Initial Public Offering of the company. These share options vested immediately and entitle the option holder to take up ordinary shares at an exercise price of $0.20 each on or before 21 September 2011. The options hold no voting or dividend rights, and are not transferable.

• In November 2009, 4,000,000 share options were granted to Mr Peter Abrahamson after being approved at the Annual General Meeting of the Company. These share options vested immediately and entitle the option holder to take up ordinary shares at an exercise price of $0.20 each on or before 31 May 2013. The options hold no voting or dividend rights, and are not transferable.

All options granted to key employees are for ordinary shares in Helicon Group Limited and confer a right of one ordinary share for every option held. At balance date no share options had been exercised. The expense recognised in the income statement in relation to share-based payments is disclosed in Note 16(c). The following table illustrates the number (No.) and weighted average exercise prices of and movements in share options issued during the year:

2011 2010 Options

No. Weighted Average

Exercise Price $

Options No.

Weighted Average

Exercise Price $

Outstanding at the beginning of the year 6,000,000 0.20 6,500,000 0.20 Granted - - 4,000,000 0.20 Forfeited - - - - Expired - - (4,500,000) - Outstanding at year-end 6,000,000 0.20 6,000,000 0.20 Exercisable at year-end 6,000,000 0.20 6,000,000 0.20

There were no options exercised during the years ended 30 June 2011 and 2010. All options outstanding at 30 June 2011 had a weighted average exercise of $0.20 (2010: $0.2) and a weighted average remaining contractual life of 1.36 years (2010: 2.36 years). There were no options granted during the year to effect share based payments. The life of the options is based on the assumption that all options will be exercised close to their expiry date, which may not eventuate. b) Shares On 29 June 2011, amounts payable to suppliers were settled via the issue of 5 million shares (2010: Nil). Note 13: Trade and Other Payables Consolidated Current

2011 $

2010 $

Unsecured Trade and other payables (i) 177,506 13,042 Accruals 31,752 25,751 Related party payables (ii) 245,436 10,637 454,694 49,430

i) Trade and other payables are non-interest bearing and are normally settled on 30-day terms. ii) For terms and conditions relating to related party payables refer to note 21.

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Note 14: Interest Bearing Liability Current Lumney finance – unsecured 19,039 - Note 15: Provisions Current Employee benefits At 1 July - 31,441 Arising during the year - 7,860 Utilised - (39,301) At 30 June - - Note 16 (a): Issued Capital

502,191,134 (2010: 99,676,454) Ordinary shares issued and fully paid 20,158,295 5,743,362 Cost of raising share capital (1,099,952) (901,436) 19,058,343 4,841,926 Ordinary shares participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. At all 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. 2011 2010 No. $ No. $ At 1 July 99,676,454 4,841,926 83,915,177 4,576,161 Shares issued during the 2010 financial year:

17/12/2009 @ $0.05 - - 2,260,000 113,000 17/06/2010 @ $0.0125 - - 13,001,277 162,516 Issued free- remuneration shares - - 500,000 -

Less: Costs of capital raising - - - (9,751) Shares issued during the 2011 financial year:

03/09/2010 Rights Issue @ $0.0125 36,542,133 456,777 - - 04/10/2010 Placement of Rights Issue Shortfall @ $0.0125 112,972,547 1,412,157 - -

24/02/2011 Acquisition of Leading Edge Instruments Limited 248,000,000 12,400,000 - -

29/06/2011 Issued for Services @ $0.022 500,000 11,000 - - 29/06/2011 Issued for Services @ $0.03 4,500,000 135,000 - - Less: Costs of capital raising - (198,517) - -

At 30 June 502,191,134 19,058,343 99,676,454 4,841,926

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Note 16 (a): Issued Capital (continued) Share options: In 2010, 4,000,000 share options and 500,000 remuneration shares were issued to Mr Peter Abrahamson (see note 12). Consolidated Note 16(b): Accumulated losses 2011 2010 Movements in accumulated losses were as follows: $ $ Balance at 1 July (4,711,314) (3,852,903) Net loss for the year (1,076,250) (858,411) Balance at 30 June (5,787,564) (4,711,314) Note 16(c): Reserves Movements in reserves were as follows: Balance at 1 July 313,783 229,783 Share based payments - employees/directors - 84,000 Balance at 30 June 313,783 313,783 This reserve is used to record the value of equity benefits provided to employees, directors and advisors as part of their remuneration. Refer to note 12 for further details of these payments.

Note 16 (d) Options 2011 2010 Movements in options were as follows: No. No. Balance at 1 July 6,000,000 6,500,000 Options issued 25,000,000 4,000,000 Options lasped/ expired - (4,500,000) Balance at 30 June 31,000,000 6,000,000

The options outstanding at 30 June 2011 have the following terms attached: • 2,000,000 options granted 12 September 2007 are exercisable at $0.20 per share on or before 21 September

2011. • 4,000,000 options granted 23 November 2009 are exercisable at $0.20 per share on or before 31 May 2013. • 25,000,000 options issued pursuant to the closing of the rights issue shortfall underwriting. They are

exercisable at $0.01 on or before 30 June 2015. The options were issued at $0.0001 each. Note 17: Financial Instruments, Risk Management Objectives and Policies As disclosed in Section 3 of the Directors’ report, it is the Company’s objective to identify, acquire and commercialise late stage therapeutic delivery technologies. The Company targets high value markets and indications using an acquisition strategy driven by strategic value creation, patent protection and realisation criteria. It has funded its activities from the proceeds of ordinary share capital raisings. Other then the outstanding Put and Call options on the remaining 19% of the issued shares of Leading Edge Instruments as disclosed in Note 20 a & b, the Group’s financial instruments are limited to cash at bank, interest bearing liabilities, receivables and payables. (i) Financial Management The Managing Director approves and monitors actual and budgeted expenditure on an ongoing basis. The Board is provided with monthly financial reports and the Board meets regularly to consider the Group’s financial affairs. Financial modelling of the Group’s future trading operations is an important prospective financial management tool used by the Group for the identification and assessment of potential future financial risks and the development of mitigation strategies. (ii) Financial Risks The main risks the Group is exposed to through its financial instruments are liquidity risk, credit risk and market risk (price risk and interest rate risk). Credit risk Exposure to credit risk relating to financial assets arises from the potential non-performance by counterparties of contract obligations that could lead to a financial loss to the Group. The Group has no significant concentrations of credit risk with any single counterparty or group of counterparties, with the exception of the GST amount owing as at 30 June 2011. Risk is also minimised through investing surplus funds in financial institutions that maintain a high credit rating.

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Note 17: Financial Instruments, Risk Management Objectives and Policies (continued) The maximum exposure to credit risk by class of recognised financial assets at the end of the reporting period, excluding the value of any collateral or other security held, is equivalent to the carrying value and classification of those financial assets (net of any provisions) as presented in the consolidated statement of financial position. Liquidity risk Liquidity risk arises from the possibility that the Group might encounter difficulty in settling its debts or otherwise meeting its obligations related to financial liabilities. The Group manages this risk through the following mechanisms:

• preparing forward-looking cash flow analysis in relation to its operational, investing and financing activities; • monitoring undrawn credit facilities; • obtaining funding from a variety of sources; • maintaining a reputable credit profile; • managing credit risk related to financial assets; and • only investing surplus cash with major financial institutions.

Refer to note 1(t) for further information. Market risk This is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income and expenses or the value of its holdings of financial instruments. The objectives of market risk management are to manage and control market risk exposures. The Group is not exposed to currency risk. Its main market risk exposure is to interest rate risk and price risk. Interest rate risk The Group’s exposure to interest rate risk, which is the risk that a financial instrument's value will fluctuate as a result of changes in market interest rates is limited to assets and liabilities bearing variable interest rates. In the context of the Group’s financial instruments, interest rate risk is limited to a potential opportunity cost in relation to returns on cash deposits bearing variable interest rate and is managed by the monitoring of short-term deposit rates offered by banks. The Group has minimal borrowings and such borrowing carry a fixed rate of interest. Accordingly, its exposure to interest rate is assessed to be minimal. The interest rate and maturity profile of the Company's financial instruments is as follows:

2011

Weighted Average Effective Interest

Rate

Floating Interest

Rate

Non Interest Bearing

Interest Bearing Total

% $ $ $ $ Financial Assets: Cash and cash equivalents 4.75 961,503 - - 961,503 Trade and other receivables - 213,785 - 213,785 Total Financial Assets 961,503 213,785 - 1,175,288 Financial Liabilities: Trade and other payables - 454,695 - 454,695 Interest bearing liabilities - - 19,039 19,039 Total Financial Liabilities - 454,695 19,039 473,734 Net Financial Assets/(Liabilities) 961,503 (240,910) (19,039) 701,554

2010

Weighted Average Effective Interest

Rate

Floating Interest

Rate Non Interest

Bearing Interest Bearing Total

% $ $ $ $ Financial Assets: Cash and cash equivalents 4.69 454,358 - - 454,358 Trade and other receivables - 21,071 - 21,071 Total Financial Assets 454,358 21,071 - 475,429 Financial Liabilities: Trade and other payables - 49,430 - 49,430 Total Financial Liabilities - 49,430 - 49,430 Net Financial Assets/(Liabilities) 454,358 (28,359) - 425,999

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Maturity profile: Carrying Amount Contractual Cash Flow Less than 6 Months Total

2011 2010 2011 2010 2011 2010 2011 2010 Financial Assets: $ $ $ $ $ $ $ $ Cash and cash equivalents 961,503 454,358 961,503 454,358 961,503 454,358 961,503 454,358 Trade and other receivables 213,785 21,071 213,785 21,071 213,785 21,071 213,785 21,071 Total Financial Assets 1,175,288 475,429 1,175,288 475,429 1,175,288 475,429 1,175,288 475,429

Financial Liabilities: Interest bearing liabilities 19,039 - 19,039 - 19,039 - 19,039 - Trade and other payables 454,695 49,430 454,695 49,430 454,695 49,430 454,695 49,430 Total Financial Liabilities 473,734 49,430 473,734 49,430 473,734 49,430 473,734 1,216,936

Price risk The Group is exposed to equity securities price risk through put and call options identified in note 20 a & b. The Group is not exposed to any commodity price risk. Net Fair Values The directors consider that the carrying amount of financial assets and liabilities recorded in the financial statements approximate their fair value. Financial Instruments measured at Fair Value The financial instruments recognised at fair value in the statement of financial position have been analysed and classified using a fair value hierarchy reflecting the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following levels: - quoted prices in active markets for identical assets or liabilities (Level 1); - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly

(as prices) or indirectly (derived from prices) (Level 2); and - inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3). In 2011 and 2010, none of the Group’s assets and liabilities had their value determined using the fair value hierarchy. Sensitivity Analysis The following table illustrates sensitivities to the Group’s exposures to change in interest rates and equity prices. The table indicates the impact on how profit and equity values reported at the end of the reporting period would have been affected by changes in the relevant risk variable that management considers to be reasonably possible. These sensitivities assume that the movement in a particular variable is independent of other variables. Interest rate risk Other price risk (1%) (1%) 1% 1% (5%) (5%) 5% 5% 2011 Net result Equity Net result Equity Net result Equity Net result Equity Cash 961,503 (9,615) (9,615) 9,615 9,615 - - - - Total increase/(decrease) (9,615) (9,615) 9,615 9,615 - - - - Interest rate risk Other price risk (1%) (1%) 1% 1% (10%) (10%) 10% 10% 2010 Net result Equity Net result Equity Net result Equity Net result Equity Cash 454,358 (4,543) (4,543) 4,543 4,543 - - - - Total increase/(decrease) (4,543) (4,543) 4,543 4,543 - - - - F

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Note 18: Commitments and Contingencies

There are no known significant liabilities or contingent assets as at the date of this report, other than as disclosed in this financial report.

Note 19: Parent Entity Disclosures

The financial information for the parent entity, as disclosed in this note has been prepared on the same basis as the consolidated financial statements, except as set out below:

(i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiary are accounted for at cost in the financial statements of Company. Dividends received from subsidiary are recognised in the parent entity’s profit or loss, rather than being deducted from the carrying amount of these investments.

(i) Financial position 2011 2010 Assets $ $ Current assets 1,634,675 389,434 Current other financial assets Note 20 (a) 5,544,000 - Total current assets 7,178,675 389,434 Non-current assets 12,405,242 105,323 Total assets 19,583,917 494,757 Liabilities Current liabilities 224,574 49,346 Current other financial liabilities Note 20 (b) 5,544,000 - Total current liabilities 5,768,574 49,346 Total liabilities 5,768,574 49,346 Net Assets 13,815,343 445,411 Equity Issued capital 19,058,343 4,841,926 Accumulated losses (5,556,783) (4,710,298) Reserves:

Share-based payments 313,783 313,783 Total equity 13,815,343 445,411 Year Ended (ii) Financial performance 30 June 11 30 June 10 $ $ Profit / (Loss) for the year (846,485) (857,398) Other comprehensive income - - Total comprehensive income / (loss) for the year (846,485) (857,398) Note 20 (a): Other financial Assets The following disclosure relates to the parent entity as disclosed in note 19. $ $ Call options (i) 5,544,000 - These options have been recognised and recorded at their fair value at initial recognition and recorded at their fair value as at year-end with the movement in fair value recognised in profit or loss. i) On 24 February 2011, the company completed the acquisition of 81% of the voting shares of Leading Edge Instruments Ltd (LEI) an unlisted public company that controls two near-market medical device technologies, BreatheAssist™ and Vibrovein™. As outlined in the Directors’ report, the Company entered into two call option agreements (Call Option 1 and Call Option 2) with each of the Vendors of Leading Edge Instruments Limited (LEI), pursuant to which:

a) Either of the call options will be exercisable by the Board of Helicon in its sole and absolute discretion at any time up until 18 April 2012.

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b) Upon exercise of Call Option 1 by Helicon, it will increase its shareholding in LEI by 9.5% through an offer to

LEI Shareholders in which each will transfer 50% of their Remaining Equity (or 9.5% of the entire issued share capital) held by them in LEI to Helicon in consideration across all LEI shareholders of 126,000,000 Shares.

c) Upon exercise of Call Option 2 by Helicon, it will increase its shareholding in LEI by 9.5% through an offer to

LEI Shareholders in which each will transfer 50% of their remaining equity (or 9.5% of the entire issued share capital) held by them in LEI to Helicon in consideration across all LEI Shareholders of 126,000,000 Shares.

Note 20 (b): Other financial Liabilities $ $ Put options (i) 5,544,000 - These options have been recognised and recorded at their fair value at initial recognition and recorded at their fair value as at year-end with the movement in fair value recognised in profit or loss. i) During the year, the Company entered into two put option agreements (Put Option 1 and Put Option 2) with each of the Vendors of LEI, pursuant to which:

a) The Vendors, through its LEI shareholders’ representative group comprising Fabio Pannuti, Rod Tomlinson and Paz Maryanka (LEI Shareholders Representative Group), may exercise Put Option 1 if one of the following performance hurdles are met:

I. Signing of an agreement for commercialisation of the Vibrovein technology with a leading pharmaceutical

company within 18 months; or II. Receiving an option payment of at least $750,000 for a global licensing agreement for Vibrovein within

18 months; or III. Receiving an option payment of at least $250,000 for a regional licensing agreement for Vibrovein

within 18 months; or IV. Launch of a Vibrovein product by a leading pharmaceutical company within 2 years.

b) Upon exercise of Put Option 1 by the LEI Shareholders’ Representative Group, Helicon will increase its


c) The LEI Shareholders’ Representative Group may exercise Put Option 2, if one of the following performance

hurdles are met:

I. Signing of an agreement for commercialisation of the BreatheAssist™ technology with a leading pharmaceutical company within 18 months; or

II. Receiving an option payment of at least $750,000 for a global licensing agreement for BreatheAssist™

within 18 months; or III. Receiving an option payment of at least $250,000 for a regional licensing agreement for

BreatheAssist™ within 18 months; or IV. Launch of a BreatheAssist™ product by a leading pharmaceutical company within 2 years.

d) Upon exercise of Put Option 2 by the LEI Shareholders Representative Group, Helicon will increase its


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Note 21: Related Party Disclosure The consolidated financial statements include the financial statements of Helicon Group Limited and the subsidiaries listed in the following table.

Name

Country of Incorporation

Equity Interest %

Investment $

2011 2010 2011 2010 Helicon (Asia) Pty Ltd* Australia 100 100 1 1 Helicon (China) Pty Ltd* Australia 100 100 1 1 Helicon (Korea) Pty Ltd* Australia 100 100 1 1 Helicon International Limited* Australia 100 100 350,000 350,000 Leading Edge Instruments Ltd (LEI)* Subsidiaries of LEI:

Australia 81 - 12,400,000 -

- Vibrovein Pty Ltd ** Australia 81 - 6,422,675 - - ASAP BreatheAssist Pty Ltd ** Australia 81 - 3,000,000 -

* Helicon Group Limited is the ultimate Australian parent entity and ultimate parent of the Group. ** represents the carrying value recognised by LEI. Listed below are the balances owing to the Company at 30 June 2011 & 2010.

(i) Name of Entity Loans 2011

$ 2010

$ Helicon (Korea) Pty Ltd 117,814 117,596 Helicon (Asia) Pty Ltd 160,195 159,977 Helicon (China) Pty Ltd 390,309 389,710 Helicon International Limited - - Leading Edge Instruments Ltd 625,121 - ASAP BreatheAssist Pty Ltd 20,161 Total 1,313,600 667,283 Helicon International Limited was incorporated as a wholly owned subsidiary of Helicon Group Limited on 5 May 2010. On this date 100% ownership of Helicon (Korea) Pty Ltd, Helicon (Asia) Pty Ltd and Helicon (China) Pty Ltd was transferred to Helicon International Limited. The loans owing from Helicon (Korea) Pty Ltd, Helicon (Asia) Pty Ltd and Helicon (China) Pty Ltd to Helicon Group Limited were also transferred to Helicon International Limited. The loans to Helicon (Korea) Pty Ltd, Helicon (Asia) Pty Ltd, and Helicon (China) Pty Ltd have been impaired to nil. The investment in Helicon International has been impaired to $nil in the books of Helicon Group. The following table provides the total amount of transactions that were entered into with related parties for the relevant financial year (for information regarding outstanding balances at year-end, refer to notes 8 & 13). Unless otherwise stated, transactions with director related entities are on normal commercial terms and conditions no more favourable than those available to other parties.

Related Party Year Transactions with Related parties *

(Payable)/Receivable at 30 June

Sassine & Associates (i) 2011 60,313 - 2010 96,938 (4,996) Boden Corporate Services (ii) 2011 72,809 - 2010 99,633 (5,640) MV Anderson (iii) ** 2011 64,652 (64,652) 2010 - - Inverness Group Holdings Pty Ltd (iv) 2011 237,661 (227,412)

24,159 2010 - - Fabio Pannuti (v) 2011 - (18,024) 2010 - - Lockley Services Pty Ltd (vi) 2011 21,000 (7,000) 2010 - - Dynametics Pty Ltd (vii) 2011 32,132 - 2010 - -

* excludes costs incurred by the Directors and their related on behalf of the Group which were subsequently reimbursed to the Directors & related entities.

** included as part of trade and other payables in note 13. Loans to/from Key Management Personnel There were no loans to Key Management Personnel, other than as disclosed in Note 8 & 13.

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Note 21: Related Party Disclosure (continued)

i. S & A Capital Pty Ltd, a company associated with Dr Saliba Sassine, provided the Company with management consulting and administrative services at an agreed rate per month of $250 per hour for the first 10 hours and $180 per hour thereafter. This arrangement ceased from 31 March 2010. Dr Sassine was also paid a fee for his role as Chairman of $50,000 pa plus the statutory minimum rate of superannuation to his nominated fund. He was paid $60,313 in his capacity of a non-executive director in the 2010/11 financial year.

ii. Boden Corporate Services Pty Ltd has provided services of company secretary, accounting and

administration since March 2007 and is paid fees on an hourly basis, at rates which vary according to the staff involved. Mr Boden was also appointed as a director on 27 May 2009, but did not receive fees in relation to that role 2009/10. In 2010/11, Boden Corporate Services Pty Ltd charged $72,809 for these services (2010: $99,633). Boden Corporate Services Pty Ltd has paid rental, parking and outgoings in relation to three employees occupying part of the Company’s office space. The amount charged to Boden Corporate Services Pty Ltd during 2011 under this arrangement was $11,600 (2010. $21,681).

iii. The Company has engaged MV Anderson, Chartered Accountants, to provide taxation, corporate and business advisory services on a normal commercial fee for services basis. Some of the partners own shares in Leading Edge Instruments Ltd and as a consequence own shares in Helicon Group Ltd.

iv. Inverness Group Holdings, a company associated with Mr Fabio Pannuti, provided corporate consulting, administration and executive services, office premises in Melbourne, and office equipment to Leading Edge Instruments Limited and Helicon Group during the year. Inverness was remunerated $237,661.

v. Fabio Pannuti a Director of Inverness Group was reimbursed $16,326 during the year for expenses incurred.

He also loaned Vibrovein Pty Ltd $18,024.

vi. Lockley Services Pty Ltd a company associated with Mr. Roderick Tomlinson was paid $21,000 during the year for services. This is a fixed monthly fee arrangement.

vii. Dynametics Pty Ltd a company associated with Mr. Peter Abrahamson was paid $32,132. This was for

services rendered to the company.

Mr. Peter Abrahamson was also reimbursed expenses totalling $3,377 for expenses incurred on behalf of the company.

viii. Gold Mines of Peru Limited, a company associated with Dr Saliba Sassine and Mr Graeme Boden owes to Helicon Group at 30 June 2010 $250,000 from the advance made to Jess Mining in 2009. At year end Gold Mines of Peru also owed to Helicon Group nil (2010: $2,713.68) for rental and outgoings for occupying part of the Company’s office space.

Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash.

Note 22: Auditors’ Remuneration Consolidated The auditors for Helicon Group Limited are HLB Mann Judd

2011 $

2010 $

An audit or review of the financial report of the entity and any other entity in the consolidated group Half year Full year Under provision previous year

13,000 30,000

-

8,542 16,000

1,056 43,000 25,598

Note 23: Key Management Personnel Compensation (a) Details of Key Management Personnel i) Directors Dr Saliba Sassine Non-Executive Chairman (resigned 12 April 2011) Mr Peter Abrahamson Executive Director and Chief Executive Officer (resigned 31 March 2010)

Non- Executive Director (appointed 1 April 2010) Mr G Boden Non- Executive Director (resigned 6 May 2011)

Company Secretary (resigned 22 June 2011) Dr Rod Tomlinson Non- Executive Chairman (appointed 12 April 2011) Dr Fabio Pannuti Managing Director (appointed 24 February 2011)

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Note 23: Key Management Personnel Compensation (continued) There were no changes to the key management personnel between the reporting date and the date the financial report was authorised for issue. Compensation policy and details of remuneration of Key Management Personnel are included in the Remuneration Report, as part of the Directors’ Report. Consolidated 2011 2010 (b) Aggregate compensation of key management personnel $ $ Salary & Fees 423,915 311,385 Cash Other - 5,000 Non- Monetary Benefits - 14,881 Post- employment Benefits - 8,978 Share Based Payments - 84,000 423,915 424,244 (c) Number of Options Held by Key Management Personnel

* Net Change Other includes those options that have lapsed as well as options issued during the year under review.

(d) Shareholdings of Key Management Personnel Balance

30/06/09 Received as

Compensation Options

Exercised Net Change

Other*

Balance At Date of

Resignation

Balance 30/06/10

Dr S Sassine 25,635,000 - - 500,000 n/a 26,135,000 Mr P Abrahamson 1,396,000 500,000 - 137,616 n/a 2,033,616 Mr G Boden 250,000 - - 500,000 n/a 750,000 27,281,000 500,000 - 1,137,616 n/a 28,918,616 Balance

30/06/10 Received as

Compensation Options

Exercised Net Change

Other* Balance At

Date of Resignation

Balance 30/06/11

Dr S Sassine 26,135,000 - - 8,775,000 34,910,000 n/a Mr P Abrahamson 2,033,616 - - 3,035,424 n/a 5,069,040 Mr G Boden 750,000 - - 1,250,000 2,000,000 n/a Mr R Tomlinson - - - 12,119,507 n/a 12,119,507 Mr F Pannuti - - - 36,859,135 n/a 36,859,135 28,918,616 - - 62,039,066 36,910,000 54,047,682 * Net Change Other refers to shares purchased or sold during the financial year.

All transactions with directors and other executives, other than those arising from the exercise of remuneration options, are entered into under terms and conditions no more favourable than those the Company would have adopted if dealing at arms length. (e) Other interest As consideration for the acquisition of LEI, the Company entered into two call option agreements and two put option agreements with the vendors of LEI for the acquisition of the remaining 19% of LEI. The details of the option agreements entered into with LEI vendors and the performance milestones are set out in section 6 of this Directors’ Report.

Balance 30/06/09

Granted

Options Exercised

Net Change Other*

Balance 30/06/10

Balance At Date Of

Resignation

Totals at 30/06/10

Vested Exercisable Mr P Abrahamson 4,000,000 4,000,000 - (4,000,000) 4,000,000 n/a 4,000,000 4,000,000

4,000,000 4,000,000 - (4,000,000) 4,000,000 n/a 4,000,000 4,000,000

Balance 30/06/10

Granted

Options Exercised

Net Change Other*

Balance 30/06/11

Balance At Date Of Resignation

Totals at 30/06/11 Vested

Exercisable Mr P Abrahamson 4,000,000 - - - 4,000,000 n/a 4,000,000 4,000,000

4,000,000 - - - 4,000,000 n/a 4,000,000 4,000,000

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Note 23: Key Management Personnel Compensation (continued) Inverness Group Holdings Pty Ltd and Ecosse Equities Pty Ltd are LEI vendors and companies associated with Helicon Group Managing Director, Fabio Pannuti. Fabio Pannuti is the sole director of and shareholder of Inverness Group Holdings Pty Ltd and Ecosse Equities Pty Ltd. In the event the call or put options are exercised upon achievement of performance milestones, Inverness Group Holdings Pty Ltd and Ecosse Equities Pty Ltd will be entitled to receive shares as set out in the table below.

Number of Helicon Group Shares Option 1 Option 2 Inverness Group Holdings Pty Ltd 9,211,166 9,211,166 Ecosse Equities Pty Ltd 9,515,651 9,515,651

Taefu Pty Ltd, a company associated with Helicon Group Chairman, Rod Tomlinson, is a vendor of LEI. Rod Tomlinson is a director and shareholder of Taefu Pty Ltd. In the event the call or put options are exercised upon achievement of performance milestones, Taefu Pty Ltd will be entitled to receive shares as set out in the table below.

Number of Helicon Group Shares Option 1 Option 2 Taefu Pty Ltd 6,157,492 6,157,492

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Note 24: Business combination Acquisition of Leading Edge Instruments Ltd On 24 February 2011 the company completed the acquisition of 81% of the voting shares of Leading Edge Instruments Ltd (LEI), an unlisted public company that controls two near-market medical device technologies, BreatheAssist™ and Vibrovein™ by issuing 248,000,000 shares in HCG. The fair value of the consideration paid was determined with reference to the Company’s share price on 24 February 2011, which was assessed as the acquisition date. The remaining 19% of LEI may be acquired provided key performance indicators are met for a further issue of 252,000,000 Shares contingent on the exercise of the put options held by the shareholders of LEI or call option held by Helicon Group Limited. The company has 2 further call options to exercise to acquire the remaining 19% of the voting shares of Leading Edge Instruments Limited. Each option is exercisable for 9.5% of the voting shares. Refer to Note 21 for further details about the options. The fair value of the identifiable assets and liabilities of LEI as at the date of acquisition are calculated as follows: Fair Value Current Assets Cash and Cash Equivalents 12,570 Trade and Other Receivables 106,864 Prepayments 89,900 Total Current Assets 209,334 Non Current Assets Intellectual Property 9,566,217 Plant & Equipment 15,792 Total Non Current Assets 9,582,009 Total Assets 9,791,343 Current Liabilities Trade and Other Payables (557,542) Interest Bearing Liability (38,733) Total Current Liabilities (596,275) Net identifiable assets acquired 9,195,068 Less: Non-controlling Interest (1,747,063) Add: Goodwill 4,951,995 Net Assets Acquired 12,400,000

Had the results relating to Leading Edge Instruments Limited been consolidated from 1 July 2010, the consolidated loss of the consolidated group would have been $1,577,912, however total revenue would have not changed. The loss has been calculated using the group’s accounting policies. The goodwill is attributable to the knowledge and experience of key management personnel of LEI. There were no business combinations during the year ended 30 June 2010. F

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Note 25: Subsequent Events

Acquisition of Aspen Medisys LLC

On 10 August 2011 Helicon Group Limited announced it had signed a letter of intent with Aspen Medisys LLC (AML) to acquire 100% of the issued capital of AML. The consideration for the acquisition will be $1.5 million in HCG scrip and a further $2 million in HCG scrip to be issued subject to certain success-based milestones being achieved as detailed in the ASX announcement dated 22 September 2011. It is a condition precedent to the transaction that Helicon spend a minimum of $3 million, subject to milestones, on the further development of the technology over an 18-month period. This transaction is subject to HCG’s shareholders, regulatory and legal approval. Aspen Medisys LLC is a US-based company that has developed its nanoparticle technology in association with Aduro BioTech, Inc, a significant shareholder in AML and longstanding investor and scientific developer in this field. Acquisition of Linguet IP On 15 August 2011, Helicon Group Limited announced the completion of the due diligence and the subsequent acquisition of OzPharma Pty Ltd (OzPharma) Linguet™ Patented Buccal Delivery IP by its newly incorporated, wholly owned subsidiary Lingual Consegna Pty Ltd. Under the terms of the agreement Helicon has the right to acquire the Linguet™ IP by paying OzPharma a consideration of: $50,000, 15% of Linguet™ royalties paid to Helicon, 1,370,000 Helicon shares and a call option (“Call Option”) over the new subsidiary company, Lingual Consegna Pty Ltd that holds the technology. OzPharma are not able to exercise the Call Option until one month after two key Linguet™ patents have been granted in the USA. Helicon may terminate the Call Option prior to it being capable of being exercised by the payment to OzPharma of 25,000,000 ordinary Helicon Shares. The agreement is subject to the following conditions:

• The $50,000 cash consideration being advanced to OzPharma by 5 August 2011 (completed); • The 1,370,000 share consideration being issued to OzPharma by 5 November 2011; and • Any regulatory requirements under Australian Law.

With the initial proof-of-concept completed, the future plans include further product development and commencement of business development opportunities by 1Q2012. In particular targeting of specialist drug delivery technology providers as well as brand and generic Pharma companies for licencing opportunities. Capital Raising On 1 September 2011, the Company announced the issue of 44,900,000 shares with an attaching option exercisable at $0.025 on or before 31 December 2014 to sophisticated investors at $0.02 per share raising $898,000 before costs. Funds raised will be used to support working capital requirement and to fund to pending acquisitions and working capital. The company announced its intention to change its name to Consegna Group Limited, which is subject to shareholders’ approval at the upcoming general meeting to be held on 25 October 2011.

Note 26: Contingent Liabilities and Contingent Assets

There are no known significant liabilities or contingent assets as at the date of this report, other than as disclosed in 18.F

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DIRECTORS’ DECLARATION FOR THE YEAR ENDED 30 JUNE 2011

Directors’ declaration In accordance with a resolution of the directors of Helicon Group Limited, I state that:

1. In the opinion of the directors:

a. The financial statements, notes and the additional disclosures included in the directors’ report designated as audited, of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

i. Giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and

ii. Complying with Accounting Standards and Corporations Regulations 2001;

iii. Complying with International Reporting Financial Standards as disclosed in note 1(a); and

iv. There are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable taking into account the factors outlined note 1 (t) of the financial statements.

2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2011.

Fabio Pannuti Managing Director Dated this 30th day of September 2011.

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Independent Auditor’s Report to the Members of Helicon Group Limited Report on the Financial Report We have audited the accompanying financial report of Helicon Group Limited (“the Company”), which comprises the consolidated statement of financial position as at 30 June 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows for the year then ended, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity. The consolidated entity comprises the Company and the entities it controlled at the year’s end or from time to time during the financial year. Directors’ Responsibility for the Financial Report The directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note 1(a), the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that the consolidated financial statements of the Company comply 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. Those 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. 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, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company’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 company’s internal control.

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. 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 2011, provided to the directors of the Company on 30 September 2011, would be in the same terms is provided to the directors as at the time of this auditor’s report. F

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Auditor’s Opinion In our opinion: (a) the financial report of Helicon Group Limited is in accordance with the Corporations Act 2001,

including: (i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2011

and of its performance for the year ended on that date; and (ii) complying with Australian Accounting Standards and the Corporations Regulations 2001;

and (b) the financial report also complies with International Financial Reporting Standards as disclosed

in Note 1(a). Report on the Remuneration Report We have audited the Remuneration Report included in pages 10 - 13 of the directors’ report for the year ended 30 June 2011. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s Opinion In our opinion the Remuneration Report of Helicon Group Limited for the year ended 30 June 2011 complies with section 300A of the Corporations Act 2001. Matters relating to the electronic presentation of the audited financial and remuneration reports This auditor’s report relates to the financial report and remuneration report of the Company for the financial year ended 30 June 2011 included on the Company’s website. The Company’s directors are responsible for the integrity of its website. We have not been engaged to report on the integrity of this web site. The auditor’s report refers only to the financial report and remuneration report identified above. It does not provide an opinion on any other information which may have been hyperlinked to/from the financial and remuneration reports. If users of the financial and remuneration reports are concerned with the inherent risks arising from publication on a website, they are advised to refer to the hard copy of the audited financial report and remuneration report to confirm the information contained in this website version of the financial and remuneration reports.

HLB Mann Judd Chartered Accountants

Jude Lau Melbourne Partner 30 September 2011

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ABN: 12 107 903 159 ASX ADDITIONAL INFORMATION

1. Ordinary Shares

The security holders information set out below was applicable as at 25 August 2011. (i) Distribution of Security Numbers

Ordinary Shares Category (size of holding) Shareholders Shares

1 – 1,000 9 1,758 1,001 – 5,000 8 36,307

5,001 – 10,000 95 917,751 10,001 – 100,000 277 14,839,845 100,001 and over 371 511,028,806

Total 760 526,824,467 There were 168 shareholders holding less than a marketable parcel at a price of $0.021, totalling 1,895,486 shares. (ii) Voting Rights

On a show of hands every person present who is a member or a proxy, attorney or representative of a member has one vote and upon a poll every person present who is a member or a proxy, attorney or representative of a member shall have one vote for each share held. (iii) Twenty Largest Security Holders

The names of the twenty largest holders of ordinary shares are listed below:

Name Number of Ordinary Shares

% of Issued Capital

HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 37,978,135 7.21% MR PAZ MARYANKA 18,021,532 3.42% CELTIC CAPITAL PTY LTD (THE CELTIC CAPITAL A/C) 16,500,000 3.13% KENSINGTON AND PARK GROUP HOLDINGS PTY LTD (THE SNEDDON FAMILY A/C)

14,926,887 2.83%

TAEFU PTY LTD 12,119,507 2.3% MR GERRARD O'BRIEN & MS HELEN O'BRIEN 11,237,532 2.13% STICTION PTY LTD 10,930,218 2.07% AJG PTY LTD 9,154,843 1.74% DR SALIBA SASSINE & MRS YVONNE MAREE SASSINE (SASSINE SUPER FUND A/C) L

9,120,000 1.73%

S&A CAPITAL PTY LTD 8,275,000 1.57% CELEBRITY AGENT PTE LTD 8,000,000 1.52% MR JOHN DELLA BOSCA (JA&JG DELLA BOSCA FAMILY A/C) 7,400,000 1.4% RHONDA (AUST) PTY LTD 7,241,964 1.37% GILDA INVESTMENTS PTY LTD 7,236,308 1.37% ASEA CONSULTING & CAPITAL PTY LTD 7,050,000 1.34% BRIDGER INVESTMENTS PTY LTD (BRIDGER SUPER FUND A/C)

6,742,519 1.28%

PINK INVESTMENTS PROPIETARY LTD 6,450,652 1.22% MEGABAY HOLDINGS PTY LTD 6,000,000 1.14% MR CARL A HOWELL 5,993,350 1.14%

CUSTODIAL SERVICES LIMITED (BENEFICIARIES HOLDING A/C)

5,442,328 1.03%

Total 215,820,775 40.94%

(iv) Substantial Shareholders The names of the substantial shareholders listed in the Company’s share register as at 16th September 2010 were:

Name Number of

Ordinary Shares % of Issued

Capital HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 37,978,135 7.21 Total 37,978,135 7.21

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ABN: 12 107 903 159 ASX ADDITIONAL INFORMATION

(v) On market buy back There is no on-market buy-back scheme in operation for the company’s listed shares.

2. Unquoted Option holder Information

The information on quoted option holders set out below was applicable as at 25 August 2011.

(i) Distribution of unquoted option holder numbers

Category (size of holding) No of option holders No of options 100,001 and over 11 31,000,000 Total 11 31,000,000

(ii) Voting Rights Unlisted options do not entitle the holder to any voting rights. (iii) Holders of more than 20% of unquoted options

No of options % CELEBRITY AGENT PTE LTD 10,000,000 32.3 MR JASON PETERSON & MRS LISA PETERSON <J & L PETERSON S/F A/C>

7,500,000 24.2

Total 17,500,000 56.5%

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