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Virotec Intl Ld (VTI)

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Tuesday 31 August, 2004

Virotec Intl Ld

Preliminary final results

Virotec International Ld
31 August 2004

                            Preliminary final report

                        for the year ended 30 June 2004

           (previous corresponding period is year ended 30 June 2003)

                           VIROTEC INTERNATIONAL LTD
                               ABN 81 004 801 398

This report is prepared in accordance with ASX listing rule 4.3A, and is based
on accounts which are in the process of being audited. It is expected that the
audited accounts will be available on or about 30 September 2004 and the annual
report will be sent to shareholders on or about 25 October 2004.  

Please note this report all amounts noted in this report are expressed in 
Australian Dollars unless noted otherwise.  

1. Results for announcement to the market
                                                             % change    A$'000

Revenue from ordinary activities                                 10%     1,854
(Loss) from ordinary activities after tax attributable to
members                                                         152%   (14,173)
(Loss) for the period attributable to members                   152%   (14,173)
Final dividend per share                                          -        nil

For an explanation of the results please refer to the attached report from the

2. Statement of Financial Performance for the year ended 30 June 2004

                                              Note           2004         2003
                                                              A$            A$
Revenue from sale of goods                    5(a)              -       44,563
Revenue from rendering of services            5(a)      1,170,327    1,018,031
Other revenues from operating activities                  683,312      599,152
                                                        ---------     --------
Total Revenue                                 5(a)      1,853,639    1,661,746
                                                        ---------     --------
Depreciation and amortisation expenses        5(a)       (417,200)    (310,714)
Directors remuneration                        5(a)     (8,171,407)    (782,678)
Mining interests expense                      5(a)       (215,689)    (217,902)
Research and development expense              5(a)     (2,252,539)  (2,745,764)
Other expenses from operating activities               (4,970,276)  (3,223,412)
                                                        ---------     --------
Total Expenses                                5(a)    (16,027,112)  (7,280,470)
                                                        ---------     --------
Loss from ordinary activities before
income tax                                            (14,173,473)  (5,618,724)
Income tax related to operating loss                            -            -
                                                        ---------     --------
Net loss after income tax                             (14,173,473)  (5,618,724)
                                                        ---------     --------
Basic loss per share                                     ($0.076)      ($0.034)
                                                        ---------     --------

This statement should be read in conjunction with the accompanying notes.

3. Statement of Financial Position as at 30 June 2004

                                                     2004                2003
                                                      A$                  A$
Current Assets
Cash assets                                     7,666,699           6,453,845
Receivables                                       281,364             132,814
Other                                             278,666              52,407
                                                ---------           ---------
Total current assets                            8,226,729           6,639,066
                                                ---------           ---------
Non-Current Assets
Receivables                                       507,372             541,807
Other financial assets                             70,000                   -
Property, plant and equipment                   1,849,563           1,224,854
Intangibles                                             -             746,651
                                                ---------           ---------
Total non-current assets                        2,426,934           2,513,312
                                                ---------           ---------
Total assets                                   10,653,664           9,152,378
                                                ---------           ---------
Current Liabilities
Payables                                        1,035,744             633,263
Provisions                                      3,226,319             156,581
                                                ---------           ---------
Total current liabilities                       4,262,063             789,844
                                                ---------           ---------
Non-Current Liabilities
Provisions                                        790,000             790,000
                                                ---------           ---------
Total non-current liabilities                     790,000             790,000
                                                ---------           ---------
Total liabilities                               5,306,343           1,579,844
                                                ---------           ---------
Net assets                                     $5,601,600          $7,572,534
                                                ---------           ---------
Contributed equity                             75,880,823          63,678,284
Accumulated losses                            (70,279,223)        (56,105,750)
                                                ---------           ---------
Total equity                                   $5,601,600          $7,572,534
                                                ---------           ---------

This statement should be read in conjunction with the accompanying notes.

4. Statement of Cash Flows for the year ended 30 June 2004

                                          Note         2004         2003
Cash flows from operating activities                     A$           A$    
Cash receipts in the course of operations         1,021,776    1,063,652
Cash payments in the course of operations        (4,939,276)  (4,101,676)
Interest received                                   543,899      453,788
                                                  ---------    ---------
Net cash used in operating activities            (3,373,601)  (2,584,236)
                                                  ---------    ---------
Cash flows from investing activities
Payment for the acquisition of a business          (110,641)           -
Payments for property, plant and                 (1,202,025)    (254,309)
Proceeds from sale of property, plant and
equipment                                            20,090       68,464
Payment for the acquisition of a
controlled entity                                      (241)           -
Payment for exploration, evaluation &              (215,689)    (217,902)
Payments for research & development              (2,252,539)  (2,468,866)
Refund / payment for security deposits               34,435       13,974
                                                  ---------    ---------
Net cash used in investing activities            (3,726,610)  (2,858,639)
                                                  ---------    ---------
Cash flows from financing activities
Proceeds from issues of shares                    8,600,908            -
Share issue costs                                  (287,843)           -
                                                  ---------    ---------
Net cash provided by financing activities         8,313,065            -
                                                  ---------    ---------
Net increase/(decrease) in cash held              1,212,854   (5,442,875)
Cash at the beginning of the financial year       6,453,845   11,896,720
                                                  ---------    ---------
Cash at the end of the financial year            $7,666,699   $6,453,845
                                                  ---------    ---------

This statement should be read in conjunction with the accompanying notes.

5. Notes to the Financial Statements

5(a) Operating Loss from Ordinary Activities

                                                          2004           2003
                                                  Note      A$             A$
Revenue from operating activities
Sale of goods from operating activities                        -         44,563
Rendering of services from operating activities        1,170,327      1,018,031
Other revenue from operating activities
Interest received or due and receivable from other
parties                                                  543,899        453,788
Sundry                                                   119,323         76,900
Proceeds from sale of non-current assets                  20,090         68,464
                                                         --------     ---------                  
Total revenue from ordinary activities                 1,853,639      1,661,746
                                                         -------      ---------

Accounting and audit services                             94,003        86,166
Amortisation of intangibles                              103,262       102,984
Book value of non-current assets sold                     31,275        88,431
Depreciation of:
- plant and equipment                                    215,287       152,932
- motor vehicles                                           7,155         4,261
- computer equipment                                      56,451        23,707
- office furniture and equipment                          35,047        26,838
Write down of intangibles                                751,926             -
Write down of non-current assets to recoverable
amount                                                   494,070             -
Cost of goods sold                                             -        20,348
Cost of rendering services                             1,363,471       768,693
Directors remuneration                            (1)  8,171,407       782,678
Employee costs - administration and corporate            541,808       930,776
Amounts set aside to provision for employee
entitlements                                               6,435        46,750
Lease rentals                                            220,126        92,727
Legal Fees                                               339,793       363,742
Marketing expenses                                       209,287       259,633
Mining interests costs                                   215,689       217,902
Net foreign exchange loss                                107,862           131
Research & development expenditure                     2,252,539     2,745,764
Other administration and corporate costs                 810,220       566,007
                                                        -------       ---------
Total expenses from operating activities              16,027,113      7,280,470
                                                        --------      ---------
(1) Directors Remuneration is made up of the following charges:

   Remuneration paid in cash during the year              1,313,043    782,678
   Share issue pursuant to Executive Incentive Plans
    - Relating to the Year ended 2003                     3,789,474          -
    - Relating to the Year ended 2004                     2,577,662          -
    - Provision relating to future issues                   491,228          -
                                                           -------- ----------
   Total Directors remuneration                           8,171,407    782,678
                                                           -------- ----------

5(b) Earnings Per Share
                                                           2004          2003
Earnings reconciliation                                     $             $
Net loss                                            (14,173,473)   (5,618,724)
                                                      ----------     ---------
Basic earnings (loss)                               (14,173,473)   (5,618,724)
                                                      ----------     ---------
                                                    Number        Number
Weighted average number of ordinary shares used in
the calculation of basic earnings per share         186,091,162   163,193,841
Basic earnings per share                            ($0.076)      ($0.034)

The options outlined in note 5(c) are potential ordinary shares, however all
potential ordinary shares at the end of the period were not dilutive and
accordingly diluted earnings/ (loss) per share is not disclosed.

5(c) Issued Capital

                                                           2004          2003
                                                           A$            A$
Opening balance 168,193,841 ordinary shares issued
(2003: 168,193,841 ordinary shares)                  63,678,284    63,678,284
Add the following share issues:-
25,000,000 ordinary shares issued at GBP£0.14
(A$0.338) per share pursuant to a placement
conducted in the United Kingdom                       8,443,908             -
Options exercised at A$0.21 per share resulting in
the issue of 300,000 ordinary shares                     63,000             -
200,000 ordinary shares issued at A$0.50 per shares
to directors following shareholder's approval           100,000
6,315,789 ordinary shares issued at A$0.60 per
shares pursuant to executive incentive schemes as
approved by shareholders                              3,789,474
Options exercised at A$0.47 per share resulting in
the issue of 200,000                                     94,000             -
Less share issue costs                                 (287,843)            -
                                                      ---------      --------
Closing balance 200,209,630 ordinary shares issued
and outstanding (2003: 168,193,841 ordinary shares)  75,880,823    63,678,284
                                                      ---------      --------

OPTIONS                                                    2004          2003
                                                          Number       Number
The following share options are on issue at 30 June 2003:-
Exercisable on or before 31 August 2003 at A$1.00 each          -     2,700,000
Exercisable on or before 30 November 2003 at A$1.00
each                                                            -       900,000
Exercisable on or before 30 November 2003 at A$0.56
each                                                            -       700,000
Exercisable on or before 28 February 2004 at A$0.47
each                                                            -       200,000
Exercisable on or before 30 July 2005 at A$1.00 each    1,100,000     1,100,000
Exercisable on or before 30 July 2005 at A$0.47 each      150,000       150,000
Exercisable on or before 31 October 2005 at A$0.61
each                                                      400,000       400,000
Exercisable on or before 31 March 2005 at A$0.30 each     100,000       100,000
Exercisable on or before 31 March 2006 at A$0.50 each     750,000       750,000
Exercisable on or before 31 October 2005 at A$0.21
each                                                      300,000             -
Exercisable on or before 30 September 2006 at A$0.50
each                                                    1,025,000             -
Exercisable on or before 31 March 2006 at A$0.50 each     102,500             -
                                                        ---------     --------
                                                        3,927,500    7,000,000
                                                        ---------     --------

5(d) Retained Earnings
                                                      2004             2003
                                                       A$               A$
Accumulated losses at beginning of year          (56,105,750)     (50,487,026)
Net loss after income tax                        (14,173,473)      (5,618,724)
                                                   ---------        ---------
Accumulated losses at end of year                (70,279,223)     (56,105,750)
                                                   ---------        ---------

5(e) Segments


              Environmental Mining      Research and  Unallocated   Consolidated
              Consulting    Interests   Development
 2004                A$            A$          A$            A$            A$
revenue          1,080,327      90,000             -             -    1,170,327
income                   -           -             -       543,899      543,899
Other income             -           -             -       139,413      139,413
                 ---------    --------      --------      --------     --------
Total revenue    1,080,327      90,000             -       683,312    1,853,639
                 ---------    --------      --------      --------     --------
amortisation      326,518      12,603             -        78,079       417,200
                ---------    --------      --------      --------      --------
results          (193,144)   (125,689)   (2,252,539)  (11,602,100)  (14,173,473)
                ---------    --------      --------      --------      --------
of non-current
assets          1,453,984       1,375             -        27,029     1,482,388
                ---------    --------      --------      --------      --------
Segment assets  2,183,735      36,910             -     8,433,018    10,653,663
                ---------    --------      --------      --------      --------
liabilities      (800,945)   (840,000)            -    (3,411,120)   (5,052,065)
                ---------    --------      --------      --------      --------
revenue         1,018,031      44,563             -             -     1,062,594
income                  -           -             -       453,788       453,788
Other income            -           -             -       145,364       145,364
                ---------    --------      --------      --------      --------
Total revenue   1,018,031      44,563             -       599,152     1,661,746
                ---------    --------      --------      --------      --------
amortisation      244,734      11,181             -        54,806       310,722
                ---------    --------      --------      --------      --------
results             4,604    (204,868)   (2,745,764)   (2,672,696)   (5,618,724)
                ---------    --------      --------      --------      --------
of non-current
assets            220,010           -             -        33,299       254,905
                ---------    --------      --------      --------      --------
Segment assets  1,965,896      51,360             -     7,135,122     9,152,378
                ---------    --------      --------      --------      --------
liabilities      (165,495)   (840,000)            -      (574,349)   (1,579,844)
                ---------    --------      --------      --------      --------

                  Australia and Asia  North America    Europe     Consolidated

 2004                       A$                  A$           A$           A$
External customer
revenue                     760,757          9,640      399,930      1,170,327
Interest income             543,899              -            -        543,899
Other income                139,413              -            -        139,413
                           ---------        -------     --------       --------
Total revenue             1,444,069          9,640      399,930      1,853,639
                           ---------        -------     --------       --------
Depreciation and
amortisation                383,004          1,587       32,609        417,200
                           ---------        -------     --------       --------
Segment operating
results                 (12,564,994)      (393,676)  (1,214,803)   (14,173,473)
                           ---------        -------     --------       --------
Acquisitions of
assets                      846,419         21,496      614,473      1,482,388
                           ---------        -------     --------      --------
Segment assets            9,757,944         45,406      850,313     10,653,663
                           ---------        -------     --------      --------
liabilities              (4,555,786)       (26,285)    (469,994)    (5,052,065)
                           ---------        -------     --------      --------

External customer 
revenue                     809,143         43,010      210,441      1,062,594
Interest income             453,788              -            -        453,788
Other income                144,587            777            -        145,364
                            --------        -------     --------      --------
Total revenue             1,407,518         43,787      210,441      1,661,746
                            --------        -------     --------      --------
Depreciation and
amortisation                 309,076           873         773        310,722
                            --------        -------    --------       --------
Segment operating
results                   (4,641,856)      (440,427)  (536,441)    (5,618,724)
                            --------         -------   --------       --------
Acquisitions of
assets                       242,963         4,805       6,137        253,905
                            --------         -------   --------       --------
Segment assets             9,132,117        16,034      4,228       9,152,379
                            --------         -------   --------       --------
liabilities               (1,433,122)      (16,283)      (440)     (1,449,845)
                            --------         -------   --------       --------

5(f) Notes to the Statements of Cash Flows

                                                         2004            2003
RECONCILIATION OF CASH                                     A$              A$
Cash at bank                                          7,666,699       6,453,845
                                                       --------        --------
Operating loss after income tax                      (14,173,473)  (5,618,724)
Add non cash items:
Depreciation and amortisation                            435,535      310,722
Loss on disposal of assets                                11,334       19,966
Write down of non-current assets to recoverable
amount                                                   494,070            -
Write down of intangibles to recoverable amount          751,926            -
Shares received as income                                (70,000)           -
Shares issued for services rendered                    3,889,474            -
Add/(less) items classified as investing/financing activities
Net exploration expenditures written off during
the year                                                 215,689      217,902
Net research and development costs written off
during the year                                        2,252,539    2,468,866
Non-current assets acquired but not yet settled         (278,106)           -
Changes in assets and liabilities:
Decrease/(increase) in receivables                      (148,550)      45,621
Decrease/(increase) in prepayments                      (226,259)      54,860
Decrease/(increase) in inventories                             -       16,884
Increase/(decrease) in trade creditors                   402,482       93,078
Increase/(decrease) in provisions                      3,069,738     (193,411)
                                                       --------     --------
Net cash used by operating activities                 (3,373,601)  (2,584,236)
                                                       --------     --------
5(g) Subsequent Events

Since the end of the financial period there has not arisen any transaction or
event that is likely to significantly effect the operations or state of affairs
of the consolidated entity.

6. Net tangible assets per security

The net tangible asset backing per security as at 30 June 2004 was 2.7 cents per
share compared with 4.1 cents per share in the previous corresponding period.

7. Details of entities over which control has been gained or lost during the

On 31 October 2003, Virotec incorporated a wholly owned subsidiary, Virotec EPT
Limited, in the United Kingdom. On 14 November 2003, Virotec EPT purchased the
business of Environmental Performance Technologies Ltd (EPT), an environmental
consultancy based in Oxford, England which provides consultancy services in the
wastewater industry, principally in the United Kingdom and Ireland. The business
is also expected to provide technical support for the planned European partners
as well as promoting the consolidated entity's technologies to the UK water
companies and industry.

The assets and liabilities acquired were as follows:

Non-current assets   $103,582
Goodwill             $108,537
Payables            ($101,478)
Consideration paid   $110,641

During the period from 14 November 2003 to 30 June 2004, Virotec EPT Ltd
contributed revenue of A$399,930 and a loss of $763,026 to the consolidated

8. Details of associates and joint venture entities.

Not applicable.

9. Report from Directors on the results

Research and development

The consolidated entity continued its commitment to further research, develop
and commercialise its technologies.

The BauxsolTM Technology is able to bind trace metals and reduce acidity in
water and soils and is platform in nature as it applies to industries where
contamination by trace metals occurs and/or acidity is a concern. Work in the
period has focussed on developing and refining products and procedures related
to the range of BauxsolTM Products.

During the year a new patent application was lodged in relation to a
Pelletisation Technology that will allow for the BauxsolTM Product range to be
produced and distributed as porous pellets.

During the year the Company committed to the refurbishment of the HydroDecTM
pilot plant for which the Company has a licence from the Commonwealth Scientific
and Industrial Research Organisation ('CSIRO'). The HydroDecTM Technology was
developed and patented by CSIRO with the assistance of industry partners and is
a technology for the refurbishment of dielectric fluids (in particular used
transformer oil), and/or the dechlorination of chlorinated hydrocarbons
specifically and the dehalogination of polyhalogenated hydrocarbons more
generally. Since the end of the year, the refurbishment of the plant has been
completed, and it has now commenced processing commercial orders. This
technology has been with the consolidated entity since May 2002.

Research, development and commercialisation of the consolidated entity's
technologies will be ongoing. The total expenditure incurred for research and
development (including commercialisation activities) during the period was
$2,252,539, which was expensed in accordance with the consolidated entity's
accounting policy. In addition to this, $565,851 was expended on the
construction of the HydroDecTM pilot plant and this amount was capitalised and
is included in plant and equipment.

Environmental services

Environmental services are provided broadly in accordance with the following
product range and/or services:-

a)   ViroMine Products - product range developed for the mining
industry. This range of products have been successfully trialled by the US EPA
over the past three years, they have been used to remediate a tailings dam in
Portugal and are set to be applied to contaminated water in Tasmania. There are
a number of other submissions being considered and trialled by potential clients
throu ghout the world.

b)   ViroFlow Products - product range developed for the treatment
of wastewater from industrial sites. In Australia the products are currently
being provided to a number of tanneries, and successful trials have been
completed in the electroplating, timber preservation and trade waste industries.

c)   ViroSoils Products - product range developed for the
agricultural, fertiliser and aquaculture industries. In Australia the products
are currently being provided to a number of prawn farms, a fertiliser producer
and successful trials have been completed in other agricultural applications. In
Europe trials are also underway with a number of companies in these industries.

d)   ViroSewage Products - product range developed for the sewage
industry. In Australia two commercial contracts have been entered into for the
ongoing supply of the Technology and in the United Kingdom and elsewhere in
Australia commercial trials with major water companies are being planned for the
next six months.

e)   Laboratory and Analytical Services - analytical service
provided to industry testing organic contaminants.

f)   Alumina Services - service to the alumina industry relating
to the treatment of their refinery residue. Trials for the use of the BaseconTM
Technology at a number of refineries throughout Asia are currently being

During the period, the consolidated entity's BauxsolTM Technology was part of
the successful tender for the Remediation of a hazardous arsenic contaminated
site located in the Nitrate Fertilizer Plant of Fier, Albania. The tender is an
initiative of the Commission of the European Union under its Phare Programme.
The initial contract sum is €1 Million (approx $AUD1.62 Million) of which
Virotec's share is approx 30%. Virotec will provide its Bauxsol Technology,
products and associated technical support and the balance of the initial
contract will be allocated to site management, engineering works and overall
administration of the project to be arranged and overseen by Selca S.p.A, our
regional strategic partner.

The strategic plan provides for each of the applications to be trialled to
demonstrate the capacity and viability of the Technologies on a commercial
basis. These trials are important steps in the commercialisation process. Once
the trials are completed the products are then rolled out to industry to
demonstrate their customer acceptance. The consolidated entity's strategy is to
use the results of these trials to attract the appropriate strategic partners in
the relevant industries to market the Technologies throughout the world.

During the period the consolidated entity acquired the business of Environmental
Performance Technologies Ltd as noted in paragraph 7 above.

During the period total revenue earned by the Environmental Services segment was
$1,080,327 and the net result for this segment was a loss of $193,144.

Mining and exploration

During the period the consolidated entity provided to Cazaly Resources Ltd an
option to acquire all of the consolidated entity's mining tenements in the Drake
region of Northern New South Wales. The option is subject to a number of
conditions with any exercise of the option now required by September 2005.

In addition to these mining tenements, the consolidated entity also holds a
number of mining leases on tenements in North Queensland. These areas are at
different stages of evaluation and planning. Work on these areas has been, and
is planned to remain at the minimum required to protect the Company's interest
in the leases whilst the tenements are sold and or relinquished where they are
considered to have little or no value.

During the financial period revenue of $90,000 was generated by the mining and
exploration division, with a loss of $125,689.

Other Matters

Director's remuneration for the period is reported as A$8,171,407. As explained
in note (1) to Item 5(a) above, this amount includes amounts that are or may
become payable, in the form of shares in the Company, as a result of the Short
Term and Long Term Incentive Plans which were approved by shareholders at the
Annual General Meeting held on 28 November 2003. Specifically, an amount of
$3,789,474 relates to the prior financial year, $2,577,662 relates to the
current financial year and $491,228 relates to future financial years. The
amounts for the current and future financial years are estimates based on the
maximum possible awards being made under the incentive plans using the current
market price of Virotec's shares. Both of these factors may change when the
Board determines the actual awards to be made under the plans for the year ended
30 June 2004 which is expected to occur in September 2004.

Looking forward

The consolidated entity will continue its research and development of further
applications of its BauxsolTM Technology, BaseconTM Technology and other
technologies related to environmental management and remediation.

The consolidated entity plans to expand its network of strategic alliances
throughout the world to allow for the marketing of its Technologies in the most
efficient and cost effective manner.

The consolidated entity will seek to retain a passive interest in its mining
assets by finding joint venture partners to assist in the exploitation of the
assets or by selling the assets and retaining an interest by way of royalty

10. Basis of preparation

These financial reports have been compiled in accordance with Australian
Accounting Standards. There has been no change in accounting policies, and these
reports are prepared on a consistent basis with the 2003 annual financial
reports. The financial reports are currently in the process of being audited.
These financial reports are unlikely to be the subject to dispute or
qualification. The numbers presented are for the consolidated entity namely the
consolidation of Virotec International Ltd and its wholly owned subsidiaries.

Signed:.......................................... Date: 31 August 2004
        Angus Craig
        Company Secretary

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