Annual Report 08

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ABN 35 088 221 078
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Chairman’s Letter Company Highlights Review of Operations Corporate Review Corporate Governance Statement Directors’ Report Auditor’s Independence Declaratio Income Statements Balance Sheets Statements of Changes In Equity Cash Flow Statements Notes to the Financial Statements Directors’ Declaration Independent Auditor’s Report Shareholder Details	1 2 3 11 14 18 n 28 29 30 31 32 33 57 58 60

Chairman’s Letter

Dear Shareholder

We are pleased to report to you on the financial year ended 30 June 2008 which has been a year of significant achievement for the Company.

Our most notable achievement has been the successful commencement of a Phase II Human Clinical Trial of CardioCel bovine pericardial patches treated with the ADAPT[®] Tissue Engineering Process (TEP). Demonstrating efficacy in humans is an important step in our plans to commercialise our ADAPT technology. We are excited by the early data and expect to have full details of the trial available within the next financial year. Details of this human clinical trial are reported in the Review of Operations later in the Annual Report.

ADAPT TEP is now proven to achieve site specific, controlled tissue remodelling which is an exciting breakthrough in xenogeneic tissue engineering. Further pre-clinical studies are being undertaken using this knowledge to analyse the various surgical adaptations available for this technology.

The Company has maintained its patent portfolio for the Prefilled Syringe with patents granted in the US, Europe and Australia. Patents for the ADAPT TEP are undergoing examination in a number of countries, an important step in the approval process of the patent applications currently pending.

The past year has been a difficult market environment worldwide for biotechnology and healthcare companies, so it is with optimism that we look forward to the next financial year and implementing our commercialisation strategy.

The Board of Directors undertook a review of the Company’s business strategy. As a result of this review, the Company’s simple vision is on the commercialisation of biomaterial patches treated with the ADAPT TEP. It is anticipated that this will be by way of a co-development or licensing arrangement with an international medical device company, and the Company’s endeavours in the coming financial year will be towards moving forward on an international deal of this nature.

FINANCIAL RESULTS

The operating loss after tax of the Group for the year ended 30 June 2008 amounted to $1.3 million for the consolidated entity, compared to the previous year’s loss of $2.2 million. This year impairment losses amounted to $0.2 million. (2007: $1.3 million)

We wish to thank our shareholders for your continued support of this Company, and invite your participation at this year’s Annual General Meeting, which is to be held on Tuesday 12 November at The Terrace Room, Somerset St Georges Terrace Hotel, 185 St Georges Terrace, Perth commencing at 10.00am.

Finally, I extend my appreciation to my fellow directors, executive management, staff and the advisory team who are integral to the successful development of our Company over the past twelve months.

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Robert N. Scott Non-Executive Chairman

Company Highlights

2007/08 Highlights

Commenced Phase II Human Clinical Trial of cardiovascular patches treated with the ADAPT Tissue Engineering Process;
Signing of Services Agreement with Cell & Tissue Therapies WA, Royal Perth Hospital, for the provision of laboratory services to produce CardioCel patches;
Inclusion of CardioCel Bioimplant Tissue Patch on the Australian Register of Therapeutic Goods;
4 Pre-clinical Trials successfully completed;
CardioCel and Gynecel trademarks registered.

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Review of Operations

Introduction

During the past year, the Company has focussed on the exciting and emerging field of tissue engineering, and more specifically on the commercialisation and manufacture of ADAPT[®] treated biologic soft tissue repair products.

The ADAPT Tissue Engineering Process (TEP) is a new platform technology developed by Celxcel Pty Ltd, a subsidiary company of bioMD Limited. ADAPT TEP was developed over many years by Celxcel’s Chief Scientific Officer, Professor Leon Neethling, Chief Research Fellow, Fremantle Heart Institute at Fremantle Hospital.

ADAPT TEP is used for processing animal derived tissues to produce implantable biologic soft tissue repair materials that are biocompatible with the human body. These bioimplants are used in the reconstruction and regeneration of malfunctioning human tissue such as heart valves, hernias, pelvic floor muscle structures and orthopaedic soft tissues.

ADAPT TEP has been proven to significantly reduce calcification levels and to improve durability and functionality of implanted soft tissue repair products. Additionally, the process significantly improves the ability of the bioimplant to regenerate and remodel to that of its surrounding human soft tissue. ADAPT TEP allows “site specific” controlled remodelling where the bioimplant replicates the characteristics of the surrounding human tissue. These factors combine to significantly improve the overall performance of the bioimplant.

The Company now has confidence, based upon its preclinical evidence, that a solution is now available to address the long term durability, calcification and regenerative problems that have previously restricted wider use of animal derived bioimplants.

This data has enabled the Company to design a Phase II Human Clinical Trial of ADAPT treated bovine pericardial tissue patches for the repair of heart deformities. The clinical trial commenced earlier this year and is scheduled for completion in 2009.

ADAPT TEP is a proven breakthrough in xenogeneic tissue engineering and provides a new platform technology that achieves all the optimal long term objectives for soft tissue bioimplants in abdominal, cardiovascular and other surgical procedures:

allows site specific controlled tissue remodelling;
is resistant to infection;
is strong but not rigid;
provides permanent repair;
can communicate with the patient’s body via signals to the surrounding tissue;
can grow with the patient without stretching;
provides lasting repair obviating the need for reoperation.

Numerous pre-clinical studies confirm that the ADAPT Tissue Engineering Process works equally well with bovine, porcine and kangaroo derived tissues.

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ADAPT treated porcine peritoneum

Review of Operations (continued)

Phase II Clinical Trial

The Company has been active during the past year preparing for the Phase II Human Clinical Trial. This commenced in April 2008 with the first implant of the ADAPT “CardioCel” bovine pericardial patch bioimplant.

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Atrial septal defects
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Outflow tract deformities
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The primary objectives of this trial are to evaluate the safety, efficacy and clinical performance of the CardioCel patch in cardiovascular surgical repair procedures. Secondary endpoints are the evaluation of its design features, such as handling characteristics, shape and sizing requirements, as well as implant procedures.

The CardioCel patches will be implanted into 50 patients requiring bioprosthetic tissue substitution to support repair of atrial and ventricular septal defects, aortic root enlargements and outflow tract reconstructions.

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Ventricular
septal defects
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The trial is being conducted by Professor Francis Smit, Head of the Department of Cardiothoracic Surgery at the Universitas Hospital in Bloemfontein, South Africa. The trial is being conducted in South Africa because it has a high incidence of congenital heart disease that causes heart deformities. This is a key milestone in establishing the safety and efficacy of the ADAPT TEP CardioCel patches in humans.

Each patient will have a post-operative follow up period of 12 months. Follow-up procedures will include echocardiographic examinations at 6 and 12 months. Each echocardiographic examination will evaluate haemo compatibility, calcification status and the general efficacy and stability of the implant patch. Selected patients will also undergo magnetic resonance imaging (MRI) as part of their follow-up assessment.

During the year, an agreement was signed with Cell & Tissue Therapies WA (CTTWA) to use its multi-disciplinary facility for the manufacture of the CardioCel bioimplant patches. The CTTWA facility is both GMP and Therapeutic Goods Administration (TGA) licensed.

The first production run was undertaken in January and February to produce the CardioCel bioimplant patches for the Phase II Human Clinical Trial in South Africa.

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Review of Operations (continued)

The Market

The global market for biologic soft tissue repair products is experiencing high growth. This is due to a number of lifestyle choices, both positive and negative:

All of these factors are contributing to the growth in the number of surgical procedures which require the use of biologic soft tissue repair products.

The general population is living longer;
The rising level of obesity;
Both the ageing and obese populations are at an increased risk of illness, such as heart disease, diabetes and other chronic ailments;
Major technological advances, such as ADAPT TEP, being used in the development of new medical devices;
The “baby boomer” generation is living longer and embracing new interventional surgical technologies in order to maintain a more active lifestyle and improved quality of life.

In 2006 the US soft tissue repair market was valued at more than US$700 million, and it is forecast to grow by approximately 15% per annum through to 2011. Likewise, the European market (comprising France, Germany, Italy and the UK) is forecast to grow at greater than 11% per annum through to 2012.

The market will also be driven by global medical device companies adding biologic tissue products to their existing synthetic mesh products. As the size of this soft tissue repair market approaches the US$1 billion mark, it is anticipated that many more indications will be found and developed by the global medical device companies.

“[Because commercial soft tissue ] meshes are indicated for use in a wide variety of minimally invasive and open surgical procedures, rising procedure volumes will increase the size of the potential patient pool for commercial soft tissue devices.

Accordingly, unit sales will accelerate, thus driving revenue increases in the overall tissue market.”

Source: Millennium Research Group

Review of Operations (continued)

Product Development

The Company is continuing to evaluate the ADAPT Tissue Engineering Process for use in broader surgical applications. Pre-clinical studies have been targeted towards five surgical specialties identified as being appropriate to the technology.

General Surgery (Hernia) & Urogynaecology (Pelvic Floor)

Muscles in the human body weaken and degenerate with age, causing the internal organs to reposition and have reduced functionality. In addition to the ageing population, a number of lifestyle changes are having a significant effect on the human body. For instance, the increased level of obesity is contributing to a marked growth in the use of soft tissue repair products for ventral and inguinal hernia repair and pelvic floor reconstruction.

One of the Company’s pre-clinical studies, comparing two commercially available bioimplant patches and an ADAPT treated bioimplant patch, was extended to 12 months. Results indicated that the ADAPT TEP patch had advanced signs of site specific controlled remodelling with evidence of angiogenesis on both the outside and inside of the patch. Host fibroblasts were well distributed throughout the patch with early signs of cell transdifferentiation taking place.

Pre-clinical studies have been conducted using ADAPT treated bovine peritoneum tissue to assess the enzymatic degradation and cross-linked stability of this tissue. The peritoneum tissue is significantly larger than pericardial tissue and could be used for ventral hernia applications where larger patches are required. Peritoneum tissue is also thicker than pericardium and this additional thickness should provide supplementary strength in the abdominal and pelvic floor regions.

Significant results were obtained from a ventral hernia small animal study. The ADAPT treated bovine pericardial patches were explanted after 16 weeks and showed evidence of site specific controlled tissue remodelling. Host fibroblasts had infiltrated the bioimplant patch and had begun to change into skeletal muscle cells, which are muscle cells that are needed to replace the ventral hernia defect in the abdomen. This finding is a major development for tissue engineered bioimplant research.

Orthopaedics

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Development work is continuing on replacement ligaments for the repair of anterior cruciate ligaments (ACL) and rotator cuff repairs. More than 250,000 ACL repairs are performed annually in the US alone.

Pre-clinical trials using kangaroo tail tendons in a rat model were undertaken to assess the calcification potential of these tendons. Kangaroo tendon tissue is much thicker than both bovine pericardium and bovine peritoneum, and the explants showed no signs of calcification and no significant initial immune response.

Cardiovascular (Heart Valves)

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Heart valves have two important functions in the body:

(i) to allow the smooth flow of blood through the heart; and
(ii) to prevent blood from leaking back into the main pumping chambers of the heart.

These valves are delicate structures and can be damaged as a result of inflammation, often caused by diseases such as rheumatic heart disease, infections such as bacterial endocarditis, congenital birth malformations or valve leaflet degeneration due to calcification.

Open heart surgery is the traditional method for heart valve replacement and is undertaken to replace the defective heart valves – aortic, mitral or pulmonary valves. Today there is a trend towards less invasive techniques, and a significant opportunity exists to extend the current technology used in coronary artery stenting to introduce new and less invasive delivery methods such as percutaneous heart valve replacement. Pre-clinical studies are currently being undertaken by the Company in conjunction with other parties in the development of heart valve replacements with a percutaneous or less invasive placement method.

Development of a percutaneous stented bovine pericardial heart valve has commenced with a third party and a prototype has been constructed using ADAPT TEP bovine pericardium. This is currently being tested in a heart valve pulse simulator, and a large animal study is due to commence later in 2008.

Cardiovascular (Surgical Repair)

Cardiovascular disease is one of Australia’s biggest concerns. Coronary heart disease, stroke, heart failure and peripheral vascular disease are the major contributors to cardiovascular disease. In addition, congenital heart and vascular diseases are one of the primary causes of death in the first years of life.

Our current clinical trial in South Africa is studying the anti-calcification efficacy of ADAPT TEP treated bovine pericardial patches.

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Product Development
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Review of Operations (continued)

Pre-clinical Trials

1. Comparative Patch Study

Purpose

A comparative patch study of two commercially available biomaterial patches and an ADAPT treated biomaterial patch, conducted over a 12 month period. The earlier 24 week results of this trial were reported in the 2007 Annual Report.

The Results

The 12 months explanted ADAPT treated biomaterial patch showed evidence of remodelling. There was evidence of angiogenesis on the outside and the inside of the explants with well distributed fibroblasts. This was in contrast to the two commercially available biomaterial patches, which showed signs of calcification leading to a loss of elasticity.

ADAPT Tissue Engineered Patch

The ADAPT TEP biomaterial patch was predominantly intact with early signs of remodelling (adipogenesis on the edge of the matrix). Neocapillaries (angiogenesis) and host fibroblasts are well distributed in the matrix.

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Commercially Available Patch A

Commercial patch A showed gradual remodelling (adipogenesis) on the edge of the explant, with mild distribution of mast cells (inflammatory cells) inside the matrix as well as some adipose tissue.

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Commercially Available Patch B

Commercial patch B revealed numerous mast cells (inflammatory cells) inside a fibrous encapsulation, the remaining matrix as well as the remodelled adipose tissue.

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Conclusion

Extended 12 month explants confirmed the unstable nature of both of the commercially available biomaterials compared to the more stable ADAPT treated tissue engineered patch. Improved stability would ultimately improve the durability and longevity of biomaterials treated with the ADAPT TEP.

Review of Operations (continued)

2. ADAPT TEP Kangaroo Tail Tendon

Purpose

A small animal study assessing the potential of kangaroo tail tendons for use in orthopaedic applications.

The Results

The 6 months explanted ADAPT treated kangaroo tendons had evidence of host cells and newly formed capillaries well distributed within the tissue.

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Conclusion

The ADAPT treatment is therefore also applicable to different types of tissues from different animal species.

3. ADAPT TEP Bovine Peritoneum

Purpose

A small animal study assessing the potential of bovine peritoneum for use in orthopaedic applications and surgical applications where a larger bioimplant patch is indicated.

The Results

The 6 months explanted ADAPT treated bovine peritoneum showed host cells and newly formed capillaries, well distributed within the tissue. Tendons had evidence of host cells and newly formed capillaries, well distributed within the tissue.

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Conclusion

These findings clearly emphasised the versatility of the ADAPT technology and significantly open up the scope for application in different areas of the body.

4. Ventral Hernia Procedures

Purpose

A small animal comparative study of a commercially available ventral hernia patch with the ADAPT TEP bovine pericardium patch, explanted at 16 weeks.

The Results

The explanted ADAPT treated bovine pericardial patch had considerable cell growth, including macrophages, lymphocytes and adipose cells. There was also evidence of skeletal muscle development. This was in contrast to the commercially available patch which had evidence of adhesions and no muscle development.

Conclusion

Site specific controlled remodelling is evident from these findings even at an early stage of 16 weeks post implantation. The absence of host tissue in-growth into the ADAPT treated pericardial patch indicates the transdifferentiation of stem cells into site specific required cell types.

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Review of Operations (continued)

Ongoing R&D

Pre-clinical trials will continue with long-term implants in small animal models.

Pre-clinical trials are scheduled for 2008/09 to further evaluate the ADAPT TEP with tissues that will be used in the surgical disciplines of Orthopaedics and Plastic Surgery. The tissues will include bovine peritoneum and kangaroo tendons.

Partnering Opportunities

As previously stated, the Company’s strategy is to commercialise its ADAPT TEP via collaborations with major medical device companies.

The Company has been communicating with potential global medical device partners in relation to product codevelopment using the ADAPT TEP technology. Such discussions and subsequent negotiations are typically time-consuming and lengthy but are a necessary step in the commercialisation of the Company’s technology.

Regulatory

Australian Register of Therapeutic Goods

The CardioCel Bioimplant Tissue Patch is included as a Class I (export only) medical device on the Australian Register of Therapeutic Goods.

Quality Assurance

bioMD has Quality Assurance Certification to Australian Standard ISO 9001:2000, which was approved for renewal for a further three year period from July 2007.

The Quality Manual also complies with ISO 13485-2003 for the production of medical devices, and current activities are being directed towards Quality Assurance Certification to ISO 13485-2003 for the manufacture of medical device products.

The Company has established a management system consistent with these standards in order to meet the appropriate requirements for regulatory approvals both within Australia and overseas. Regular reviews are conducted by Certification Specialists to ensure compliance.

Preparations have commenced for lodgement of a 510(k) application with the US Food and Drug Administration (FDA). Section 510(k) of the US Food, Drug and Cosmetic Act requires device manufacturers to notify FDA, at least 90 days in advance, of their intent to market a medical device, and allows the FDA to determine whether the device is equivalent to a device already placed into one of the three classification categories.

All products brought to commercialisation will meet the appropriate Quality Standards that apply for products to be listed by regulatory authorities such as the Therapeutic Goods Administration (TGA) in Australia, the Federal Drugs Administration (FDA) in the United States and CE Mark Certification in Europe.

Intellectual Property Report

Patents

bioMD has the benefit of a strong intellectual property position, with core patents granted in the United States, Europe and Australia, and patent applications in various countries.

Invention/Technology	Australian Patent	Australian Application	International Patent	International Application
POP Safety Injection Needle			1
Preflled Safety Syringe	1		12	1
ADAPT Technology	1
An Implantable Biomaterial and a Method of Producing Same (ADAPT Technology)		1		18

Trademark Protection

Notice of Acceptance of the Trademarks for “CardioCel” and “Gynecel” were received during the year, which now affords the Company protection of product names for the bioimplant materials that the Company intends to produce using ADAPT TEP.

Corporate Review

New Issue of Securities

On 22 August 2007 a Prospectus was issued, offering existing Option holders of listed 30 August 2007 options the opportunity to acquire New Shares (fully paid ordinary shares) and attaching New Options.

Each Option holder was offered 1 New Share at 25 cents for every ten 30 August 2007 Options held on the Record Date. Each New Share received four New Options attached for free, exercisable at 25 cents into one Fully Paid Ordinary Share in the Company on or before 5.00pm WST on 30 August 2010.

A General Meeting of the Company was held on 2 October 2007 to approve the issue of New Shares and New Options.

bioMD issued 1,566,119 new fully paid Ordinary Shares and 6,264,476 New Options, which raised $313,224 for working capital.

Cash

The Group has consolidated cash assets of $1.45 million.

Changes to Capital Structure

30	August 2007	Expiry of Listed Options
		63,069,132 BODO Options exercisable at 20 cents
30	August 2007	Expiry of Listed Options
		1,000,000 BODAI Options exercisable at 20 cents
14	December 2007	Issue of 1,566,119 new BOD Fully Paid Ordinary Shares
14	December 2007	Issue of 6,264,476 new BODO Options
		Exercisable at 25 cents up to and including 30 August 2010

As a result, the Company has 85,909,969 Fully Paid Ordinary Shares quoted on the Australian Securities Exchange.

Corporate Review (continued)

Directors and Officers

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Robert N. Scott –
Non-Executive
Chairman
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ROBERT N. SCOTT – Non-Executive Chairman

Robert Scott is a Chartered Accountant with 35 years experience as an adviser on corporate services and taxation. He currently consults on corporate structuring and taxation planning for major accounting firm Gooding Pervan Chartered Accountants.

Mr Scott is a Director of ASX listed entities Amadeus Energy Limited (since 1996), Homeloans Limited (since 2000), Australian Renewable Fuels Limited (since 2002), New Guinea Energy Limited (since July 2006) and Neptune Marine Services (since May 2007).

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Michael C. Bennett –
Managing Director
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MICHAEL C. BENNETT – Managing Director

Michael Bennett has over 35 years sales and marketing experience working for United States and European medical device companies and has been involved in the introduction of many new medical and surgical device technologies to the Australian market.

After studies in medical science and commerce, Mr Bennett commenced work with Ramsay Surgical Ltd, an Australian medical/surgical supply and distribution company that had offices in all major capital cities. He remained with that company until 1979 during which time he managed their Canberra office and subsequently became General Manager for their NSW operation.

Since 1979, Mr Bennett has owned and operated his own private surgical supply company, Bennett Medical, and has exclusively represented some major overseas medical device manufacturing corporations such as Medicon Instrumente and Erbe Elecktromedizin from Germany and Valleylab Inc. from the United States. His company was involved in the introduction of many new surgical technologies to Australia and, in doing so, was involved in the regulatory processes that have to be followed for the sales of new products into the market. He sold the company in 2001.

Between 2001 and 2004 he was consulting to overseas surgical manufacturers and to the Australian medical industry in general.

His sales and marketing background at the corporate level will ensure that management’s focus will be on end-user requirements, their needs and product satisfaction.

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Robert E.T. Towner –
Executive Director
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ROBERT E.T. TOWNER – Executive Director

Robert Towner has 15 years experience in financial markets providing corporate advice to listed and unlisted public companies.

He has been instrumental in the formation, management and direction of bioMD since joining the Board in 2003.

In his capacity as Executive Director, Mr Towner is responsible for maintaining Board awareness of financial markets, corporate governance, capital structuring and working capital requirements.

Mr Towner is a Director and authorised representative of Capstone Capital Pty Ltd, an Australian-based Financial Services provider. Capstone has facilitated capital raisings and consulted to small to medium sized companies in the resources, energy and industrial sectors. He is currently a Director of Kratos Energy Limited.

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Caroline L. Bentley –
Company Secretary
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CAROLINE L. BENTLEY – Company Secretary

Caroline Bentley is a Chartered Accountant and CPA with 20 years experience and a working background in both commerce and public practice. She is currently an Executive Director and Company Secretary of ASX listed entity Amadeus Energy Limited.

Mrs Bentley’s previous experience includes Finance Manager with Ashton Mining Limited and in the Audit and Advisory Services division of KPMG Peat Marwick.

Corporate Governance Statement

bioMD Ltd (the Company) and the Board strongly support good corporate governance, but are mindful that the practices needed to implement good corporate governance vary considerably from company to company. The Board strongly agrees with the “Principles of Good Corporate Governance and Best Practice Recommendations” developed by the Australian Securities Exchange (ASX). Given the size and nature of the Company, however, the Directors have modified the best practice standards as laid down by the ASX.

This statement outlines the main corporate governance practices in place during the financial year. Where the Company’s practices depart from the ASX recommendations, the exceptions have been identified and the Board’s reasons for an alternate approach have been explained.

Structure and Role of the Board of Directors

The Board is responsible to the shareholders for the performance of the Company and takes responsibility for the overall operation and stewardship of the Company, including overseeing corporate governance matters. The Board guides and monitors the business of the Company on behalf of shareholders, by whom they are elected and to whom they are accountable. The Board is responsible for setting corporate direction, defining policies and monitoring the business of the Company to ensure that it is conducted appropriately and in the best interests of shareholders.

The Board’s key objectives are to:

increase shareholder value within an appropriate framework which safeguards the rights and interests of the Company’s shareholders; and
ensure the Company is properly managed.

The primary responsibilities of the Board are set out in a written policy and include:

supervising the Company’s framework of control and accountability systems to enable risk to be assessed and managed;
approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and divestitures;
monitoring the financial performance of the Company, adopting annual budgets and approving the Company’s financial statements;
overseeing corporate governance of the Company, including conducting regular reviews of the balance of responsibilities within the Company to ensure division of functions remain appropriate to the needs of the Company; and
nominating and monitoring the Company’s external auditors.

The Board evaluates these policies on an on-going basis.

The Board seeks to nominate persons for appointment to the Board who have suitable qualifications, experience and skills to augment the capabilities of the Board.

Directors’ qualifications, experience, expertise and attendance at Board meetings are outlined in the Directors’ Report.

As at the date of this report, the Company has three directors: one non-executive independent Chairperson, a Managing Director and one Executive Director.

A Director is deemed to be independent by the Board where they are:

A non-executive director;
Not a substantial shareholder, being a shareholder with a relevant interest of more than 5% of voting shares;
Not a director, officer or related party of a substantial shareholder;
Not in a material contractual relationship with the Company;
Free from any interest and any business or other relationship which could, or reasonably be perceived to, materially interfere with the Director’s ability to act in the best interests of the Company;
Not a director, officer or related party of a third party dealing with the Company or professional adviser or material consultant to the Company or a material supplier.

Based on disclosure provided by the Directors to the Board, the Chairman of the Board, Mr R. N. Scott is considered to meet the independence criteria.

Although the Company does not have a majority of independent directors, the Board considers that the current composition of the Board best suits the Company’s present activities and level of operations, and includes an appropriate mix of skills and expertise relevant to the Company’s business.

The Board will maximise the non-executive and independent representation on the Board within the constraints of prudent management practice.

Corporate Governance Statement (continued)

Board Committees

The Company has established an Audit Committee, which meets generally twice a year. Its role is to assist the Board in fulfilling its responsibilities for the Company’s financial reporting, audit, internal control and financial risks. The Managing Director, Chief Financial Officer and the external auditors are usually in attendance at Audit Committee meetings by invitation.

Mr Scott is the sole member of the Audit Committee. Therefore, the composition of the Company’s Audit Committee is less than the minimum three member composition required under the best practice recommendations. The Board considers that the current structure of the Audit Committee is appropriate given the current size and structure of the Company. Mr Scott possesses the requisite financial expertise necessary to effectively carry out the Audit Committee’s mandate (refer to the Directors’ Report for qualifications and attendance at Audit Committee meetings). Mr Scott is able to seek independent external advice on industry-related aspects in carrying out his duties on the Audit Committee to ensure the integrity of the financial statements. The Committee follows a formal Audit Committee Charter.

Currently, a separate Nomination Committee has not been formed. The Board considers that based on the Company’s stage of development, no benefits or efficiencies are to be gained by delegating this function to a separate committee. The full Board carries out the duties of the Nomination Committee. If a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the services of a new Director with particular skills, the Board considers candidates with the appropriate expertise and experience. In so acting, the full Board follows the Nomination Committee Charter.

Remuneration Committee responsibilities are also carried out by the full Board. Due to the size of the Company, a separate remuneration committee has not been established. The Board determines the level of remuneration for Directors based on the provision of services to the Company. Remuneration levels are set with reference to industry and market conditions and with regard to the size, nature and volume of operations and overall market capitalisation of the Company.

Details of the Company’s remuneration policy are set out in the Remuneration Report included in the Directors’ Report in this Annual Report.

Additional Board Committees may be formed temporarily for specific purposes and/or to exercise specified authority of the Board.

The Board and all Committees have established formal charters, which are available on the Company’s website.

Ethical and Responsible Decision Making

The Board has adopted a Code of Conduct which provides guidance to directors and employees on the standards of behaviour expected in the discharge of their duties on behalf of the Company. The Code is based on respect for the law and acting accordingly, dealing with conflicts of interest appropriately and requires business affairs to be conducted ethically and with integrity. A copy of the Code is available on the Company’s website.

The Chairman is responsible for leading the Board, ensuring its activities are organised and efficiently conducted and for ensuring that directors are properly briefed for meetings and in all matters relevant to their roles and responsibilities.

The Managing Director and Company Secretary are responsible for implementing the Company’s strategies, funding and operating plans and policies.

With the prior approval of the Chairman, Directors have the right, in connection to their duties to seek independent professional advice at the Company’s expense.

The Board has adopted a written securities trading policy that applies to all Directors and employees. The policy provides a clear determination of when it is appropriate for Directors, officers and employees to trade in the securities of the Company. Trading in the Company securities is prohibited whilst in possession of price sensitive information.

Safeguard Integrity of Financial Reporting

The Company operates an Audit Committee, as described in the section titled “Board Committees”. The number of meetings held are detailed in the ‘Directors’ Report’ section of the Annual Report.

The Managing Director and the Chief Financial Officer sign off in a representation letter addressed to the Audit Committee as part of the financial reporting process. The statement states that the Company’s financial reports present a true and fair view, in all material respects, of the Company’s financial condition and operational results and are in accordance with relevant accounting standards in accordance with section 295A of the Corporations Act 2001 . The Audit Committee notes this written advice when considering the financial accounts of the Company.

The Company’s current audit firm is BDO Kendall. The appointment, replacement and remuneration of the Company’s auditor are a ‘retained power’ of the Board which is discharged by the Audit Committee.

Corporate Governance Statement (continued)

Timely and Balanced Disclosure

The Company has a continuous disclosure policy which aims to ensure timely compliance with the Company’s obligations under the ASX Listing Rules. Given the small size of the Board of Directors, all material announcements are approved for release by the Managing Director. The Company is committed to promoting investor confidence and ensuring that shareholders and the market have equal access to information and are provided with timely and balanced disclosure of all material matters concerning the Company.

The Company Secretary has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with continuous disclosure requirements of the ASX Listing Rules and overseeing and co-ordinating information disclosures.

In addition to periodic reporting, the Company ensures that all relevant information concerning the Company is available on its website.

The website also includes an option for interested parties to register their email address for direct email on Company matters.

Communications with Shareholders

The Board aims to ensure that shareholders are kept informed of all major developments affecting the Company.

Information is communicated to shareholders as follows:

regular announcements to the ASX;
copies of all announcements, reports and topical information are posted to the website;
newsletters are sent to shareholders periodically, providing an update of activities;
the Chairman of the Company always provides the opportunity for shareholders to ask questions at Annual General Meetings (“AGM”) and manages the question period to allow the maximum number of shareholders to do so;
the Company’s auditor attends the AGM and is also available to answer any questions on audit matters.

Risk Assessment and Management

The Board is responsible for ensuring that there are adequate policies in relation to risk management, compliance and internal control systems. The Company has developed a framework and Risk Management Policy designed to ensure financial, business and operational risks are regularly identified, assessed and monitored to enable achievement of the Company’s business objectives.

Given the small number of directors on the Board, oversight of the risk management system is retained as a full Board function. The Board has established a policy for risk oversight and management within the Company. This is periodically reviewed and updated.

There is no formal internal control function as the Company is not of a size to warrant the implementation of a separate internal control function.

Risk management is embedded in the Company’s policies and procedures which has enabled the Company to pro-actively identify and manage all types of risk within the organisation. The Board aims to continually evaluate and re-assess the risk management and internal control practices of the Company to ensure current good practice is maintained, and to preserve and create value within the organisation.

Adherence to the Code of Conduct is required at all times and the Board actively promotes a culture of quality and integrity.

bioMD Limited is Quality Assured to AS/NZS ISO 9001:2000 and risk assessment procedures are in place in relation to the planning, design and development of product, including Preliminary Risk Analysis Report and Essential Requirements Checklist (a TGA guideline). The Company also has a policy in relation to Procurement Management, for the procurement of products and services.

Performance Enhancement

The Board annually self assesses its collective performance and reviews each director’s attendance at and involvement in Board meetings, their performance and other matters identified by the Board or other directors. The Board has not formalised measures of a director’s performance.

The Company’s Constitution specifies that all directors must retire from office no later than the third annual general meeting following their last election. Where eligible, a director may stand for re-election.

Directors’ Report

Your Directors present their report on bioMD Limited (“the Company”) and the consolidated entity (referred to hereafter as the Group) for the year ended 30 June 2008.

Directors

The following Directors were in office for the entire period during the whole of the financial year and up to the date of this report:

Robert N. Scott Michael C. Bennett Robert E. T. Towner

Principal Activities

During the year, the principal activities of the Group consisted of:

Research and development of the ADAPT process used in the production of biomaterials derived from animal tissues for use as bioimplants for human use;
CSIRO collaboration; and
The development and commercialisation of medical therapy products.

Operating Result

The operating result for the year:

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CONSOLIDATED THE COMPANY
2008 2007 2008 2007
$ $ $ $
Loss before income tax (1,490,265) (2,797,904) (1,362,222) (2,010,261)
Income tax benefit 214,323 560,462 86,280 188,691
Loss for the year (1,275,942) (2,237,442) (1,275,942) (1,821,570)
----- End of picture text -----

Dividends

No dividend was paid during the year and the Board has not recommended the payment of a dividend.

Review of Operations

Information on the operations and financial position of the Group and its business strategies and prospects is set out in the Review of Operations contained in this Annual Report.

Significant Changes in the State of Affairs

In the opinion of the Directors, there were no significant changes in the state of affairs of the Group that occurred during the financial year, not otherwise disclosed in this report or the financial statements.

Matters Subsequent to the End of the Financial Year

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

Directors’ Report (continued)

Environmental Regulations

The Group is not currently subject to any environmental regulations.

Likely Developments

The likely developments in operations of the Group are covered in the Annual Report. Further information on likely developments in the operations of the Group and the expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudice to the consolidated entity.

Information on Directors

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Director Experience Special Particulars of Directors
Responsibilities Interest in Share and Options
of the Company
Ordinary Options over
shares unissued
ordinary
shares
----- End of picture text -----

			Ordinary shares	Options over unissued ordinary shares

R. N. Scott FCA, MAICD	Non-Executive Chairman (Age: 61) appointed 23 June 1999. Mr Scott has over 35 years experience in corporate structuring and taxation consulting. He is a Fellow of the Institute of Chartered Accountants in Australia and a Fellow of the Taxation Institute of Australia. Other current directorships Mr Scott holds several public company non-executive directorships including: - Amadeus Energy Limited since October 1996; - Homeloans Limited since November 2000; - Australian Renewable Fuels Limited since December 2002; - New Guinea Energy Limited since July 2006; and - Neptune Marine Services Ltd since May 2007. Former directorships in last 3 years Non-Executive Director of ETW Ltd from July 2005 to August 2007	Chairman Member of Audit Committee	381,750	1,027,000
M. C. Bennett	Executive Director (Age: 62) appointed 16 July 2003. Mr Bennett has over 35 years sales and marketing experience working for US and European medical device companies and has been involved in the introduction of many new medical and surgical device technologies to the Australian market. Since 1979 he owned and operated his own private surgical supply company and has exclusively represented some major overseas medical device manufacturing companies. Other current directorships None Former directorships in last 3 years None	Managing Director	8,170,000	600,000

Directors’ Report (continued)

Director	Experience	Special Responsibilities	Particulars of Directors Interest in Share and Options of the Company	Particulars of Directors Interest in Share and Options of the Company
			Ordinary shares	Options over unissued ordinary shares
R. E. T. Towner	Executive Director (Age: 39) appointed 16 July 2003. Mr Towner has spent over 15 years in fnancial markets as an authorised representative of Australian investment advisory frms and as a director of publicly listed and unlisted companies. Other current directorships None Former directorships in last 3 years Non-Executive Chairman of Brainytoys Ltd from August 2005 to May2006.		11,611,721	3,086,708

Company Secretary

The Company Secretary of bioMD Limited is Caroline L. Bentley. Mrs Bentley was appointed to the position in 2000. She has 20 years experience as a chartered accountant in public practice and commerce. She also holds the position of Company Secretary and Executive Director of Amadeus Energy Limited.

Meetings of Directors

The numbers of meetings of the Company’s Board of Directors and of each Board committee held during the year ended 30 June 2008, and the numbers of meetings attended by each Director were:

Directors	Full Meeting of Directors A B	Full Meeting of Directors A B	Meetings of Audit Committee A B	Meetings of Audit Committee A B
Robert N. Scott	11	11	2	2
Michael C. Bennett	11	11	**	**
Robert E. T. Towner	11	11	**	**

A = Number of meetings attended

B = Number of meetings held during the time the director held office or was a member of the committee during the year

** = Not a member of the relevant committee

The Board meets regularly on an informal basis in addition to the above meetings.

Details of the memberships of the committee of the Board are presented in the Corporate Governance Statement.

Retirement, Election and Continuation in Office of Directors

Mr Robert Towner is the Director retiring by rotation, who being eligible, offers himself for re-election.

Directors’ Report (continued)

Remuneration Report

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

A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Share based compensation

The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001 . There were no executives other than Directors of the Company during the financial year. Hence no executive disclosures are made in this report. The remuneration arrangements detailed in this report are for Non-Executive and Executive Directors as follows:

Robert Scott Non-Executive Chairman Michael Bennett Managing Director Robert Towner Executive Director

A Principles Used to Determine the Nature and Amount of Remuneration

The objective of the Company’s remuneration framework is to ensure reward for performance is competitive and appropriate for the results delivered and set to attract the most qualified and experienced candidates.

Remuneration levels are competitively set to attract the most qualified and experienced directors and senior executive officers, in the context of prevailing market conditions.

The Company embodies the following principles in its remuneration framework:

the Board seeks independent advice on remuneration policies and practices including recommendations on remuneration packages and other terms of employment for Directors; and
in determining remuneration, advice is sought from external consultants on current market practices for similar roles, the level of responsibility, performance and potential of the Director and performance of the bioMD Group.

In accordance with best practice corporate governance, the structure of non-executive and executive remuneration is separate and distinct. Remuneration Committee responsibilities are carried out by the full Board.

Non-Executive Director

Fees and payments to the Non-Executive Director reflect the demands which are made on, and the responsibilities of the Director. The Non-Executive Director’s fees and payments are reviewed annually by the Board. The Non-Executive Chairman’s fees are determined based on competitive roles in the external market. The Chairman is not present at any discussions relating to the determination of his own remuneration.

The current base remuneration was last reviewed in April 2008. The Chairman currently receives a fixed fee for his services as a Director.

The Company’s Non-Executive Director’s remuneration package contains the following key elements:

primary benefits – quarterly director’s fees; and
equity – share options under the bioMD Share Option Incentive Plan (as approved by shareholders at the 2004 Annual General Meeting).

Non-Executive Director fees are determined within an aggregate directors’ fee pool limit, which is periodically recommended for approval by shareholders. The maximum currently stands at $250,000 per annum and was approved by shareholders at the 2002 Annual General Meeting.

No retirement benefits are provided other than compulsory superannuation.

Share options under the bioMD Share Option Incentive Plan can also be offered to the Non-Executive Director as a long-term incentive.

Directors’ Report (continued)

Executive Directors

The Company’s Executive Directors’ remuneration packages contain the following key elements:

primary benefits – fees via base service agreements and a parking bay; and
equity – share options under the bioMD Share Option Incentive Plan (as approved by shareholders at the Annual General Meeting on 28 October 2004).

The combination of these components comprises the Executive Directors’ total remuneration.

Service agreements are in place for Executive Directors which provide for a fixed base fee per annum. External remuneration information provides benchmark information to ensure the base pay is set to reflect the market for a comparable role. Base fees are reviewed annually to ensure the level is competitive with the market. There is no guaranteed base fee increases included in any Executive Director contracts. A parking bay is also provided as an additional benefit to Executive Directors.

The Company does not offer any variable remuneration incentive plans or bonus schemes to Executive Directors or any retirement benefits, and as such there are no performance related links to the existing remuneration policies.

The following table shows the gross revenue, losses and share price of the Group at the end of the respective financial years:

	30 June 2004	30 June 2005	30 June 2006	30 June 2007	30 June 2008
Revenue 71,820 205,887 165,309 115,308 147,977 Net loss (650,347) (1,767,760) (1,177,080) (2,237,442) (1,275,942) Share price 17 cents 4.5 cents 4.6 cents 14 cents 5.5 cents

B Details of Remuneration

Details of the remuneration of the Directors of the Group is set out below:

	Short-term benefts	Short-term benefts	Short-term benefts	Post-employment benefts	Non-	Share Based benefts
2008	Directors fees $	Consulting fees $	Salary $	Superannuation $	monetary benefts $	Equity options $
Non-Executive Director
R. N. Scott 42,200 - - 3,800 - - 46,000 -% Executive Directors
M. C. Bennett - 300,000 - - 7,560 - 307,560 -% R. E. T. Towner - 200,000 - - 7,560 - 207,560 -%
Total key management personnel compensation (Group) 42,200 500,000 - 3,800 15,120 - 561,120

Directors’ Report (continued)

	Short-term benefts	Short-term benefts	Short-term benefts	Post- employment benefts	Non-	Share Based benefts
2007	Directors fees $	Consulting fees $	Salary $	Superannuation $	monetary benefts $	Equity options $
Non-Executive Director
R. N. Scott - - - 38,150 - 30,660 68,810 45% Executive Directors
M. C. Bennett - 230,000 - - 6,360 30,660 267,020 11% R. E. Towner - 200,000 - - 6,360 30,660 237,020 13%
Total key management personnel compensation (Group) - 430,000 - 38,150 12,720 91,980 572,850

(1) Remuneration is not linked to the performance of the Company.

(2) There are no termination or retirement benefits for Non-Executive Directors (other than statutory superannuation).

(3) Company secretarial services are provided by Amadeus Energy Limited (refer to Note 25(d)).

C Service Agreements

On appointment, the Non-Executive Directors enter into a service agreement with the Company in the form of a letter of appointment. The letter outlines the Board policies and terms, including remuneration relevant to the office of director.

Remuneration and other terms of employment for the Managing Director and Executive Director are formalised in service agreements. The major provisions relating to remuneration are set out below.

All contracts may be terminated early by either party with six months notice, subject to termination payments as outlined below.

Michael Bennett, Managing Director

Term of agreement – 5 years from 1 July 2006;
Base fee of $300,000 for the year ended 30 June 2008, to be reviewed annually;
Payment of long service leave equal to 3 months of base fee upon completion of 7 years of continuous service;
No superannuation payable under the agreement;
No performance based benefits payable under the agreement.

Robert Towner, Executive Director

Term of agreement – 5 years from 1 July 2006;
Base fee of $200,000 for the year ended 30 June 2008, to be reviewed annually;
Payment of long service leave equal to 3 months of base fee upon completion of 7 years of continuous service;
No superannuation payable under the agreement;
No performance based benefits payable under the agreement.

Termination benefits

Post-employment benefits include accrued long service leave, which is due and payable after every seven consecutive years of service. The service agreements provide Executive Directors with three months of base fee in the event of redundancy. No other termination benefits are payable, unless the Company does not provide the required six month notice period of termination, then 3 months of base fee is payable.

An agreement is in place between the Company and Amadeus Energy Limited (Amadeus), a company in which Mr Scott is a Director, whereby Amadeus provides company secretarial and administration services to the Company. The agreement has been renewed to January 2010 at a rate of $30,000 per annum, reviewed annually.

Directors’ Report (continued)

	Agreement start date	Agreement end date	Notice period	Termination benefts if terminated by the Company
Executive Directors M. C. Bennett 1 July 2006 30 June 2011 6 months 3 months of base fee R. E. Towner 1 July 2006 30 June 2011 6 months 3 months of base fee

D Share Based Compensation

Options

Options over shares in the Company are granted under the bioMD Employee Share Option Plan (‘ESOP’) which was approved by shareholders at the 2004 Annual General Meeting. The Plan is used to reward Directors and employees for their performance and to align their remuneration with the creation of shareholder wealth. There are no performance requirements to be met before exercise can take place. The Plan is designed to provide long-term incentives to deliver longterm shareholder returns. Participation in the Plan is at the discretion of the Board and no individual has a contractual right to participate in the plan or to receive any guaranteed benefits. The issue of options is not linked to performance conditions because by setting the option price at a level above the current share price at the time the options are granted, provides incentive for management to improve the Company’s performance.

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

Grant date	Date vested and exercisable	Expiry date	Exercise price	Value per option at grant date
16 Nov 2006 16 Nov 2006 16 Nov 2010 10 cents 5.11 cents 19 Mar 2008 19 Mar 2008 19 Mar 2011 10 cents 5.27 cents

Options granted under the ESOP carry no dividend or voting rights. The grant date equals the vesting date for all options.

Details of options over ordinary shares in the Company provided as remuneration to each Director is set out below. When exercisable, each option is convertible into one ordinary share of bioMD Limited. Further information is set out in Note 26 to the financial statements.

	Number of options granted / vested during theyear	Number of options granted / vested during theyear
Name	2008	2007
Directors R. N. Scott M. C. Bennett R. E. Towner	- 600,000 - 600,000 - 600,000
Company Secretary C. L. Bentley	- 1,800,000 - 250,000

During the year no Plan options were issued to Directors. (2007: 1.8 million)

No shares have been issued to Directors as a result of the exercise of any Plan options in the current financial year. (2007: Nil)

Directors’ Report (continued)

Shares Under Option

Unissued ordinary shares of bioMD Limited under option as at the date of this report are as follows:

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Date options Expiry date Issue price Number under Value of option at
granted of shares option grant date
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1 Feb 2006	1 Feb 2009	15 cents	300,000	8.03 cents
16 Aug 2006	16 Aug 2010	10 cents	1,250,000	2.36 cents
16 Nov 2006	16 Nov 2010	10 cents	1,800,000	5.11 cents
24 Jul 2007	1 Nov 2008	15 cents	150,000	4.96 cents
14 Dec 2007	30 Aug 2010	25 cents	6,264,476	N/A
19 Mar 2008	19 Mar 2011	10 cents	600,000	5.27 cents
Total			10,364,476

No option holder has any right under the options to participate in any other share issue of the Company or any other entity. The options are exercisable at any time on or before the expiry date.

64,069,132 options lapsed on 30 August 2007 with an exercise price of 20 cents per option. (2007: 3,200,000 options lapsed on 16 July 2006 with an exercise price of $1.00 per option.)

During the period, 1,566,119 ordinary shares and 6,264,476 options were issued and listed on 14 December 2007 under a rights issue prospectus dated 22 August 2007. The funds raised of $311,224 were applied to working capital.

600,000 ESOP options were issued on 19 March 2008 to an employee of the Company.

During the period 35,494 ordinary shares were issued upon the exercise of options at 20 cents per option.

Insurance of Officers

During the year, bioMD Limited paid a premium of $21,634 to insure the Directors and officers of the Company and its controlled entity. No liability has arisen under these indemnities as at the date of this report.

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

Proceedings on Behalf of the Company

No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purposes of taking responsibility on behalf of the Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the Court under section 237 of the Corporations Act 2001 .

Non-audit Services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties, where the auditors’ expertise and experience with the Company are important.

Details of the amounts paid or payable to the auditor (BDO Kendalls Audit & Assurance (WA) Pty Ltd) for audit and non-audit services provided during the year are set out below.

The Board of Directors has considered the position and, in accordance with the advice received from the Audit Committee, is satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The Directors are satisfied that the provision of non-audit services by the auditor, as set out overleaf, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

Directors’ Report (continued)

All non-audit services have been reviewed by the Audit Committee to ensure they do not impact on the impartiality and objectivity of the auditor; and
None of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants, including reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risk and rewards.

During the year the following fees were paid or are payable for services provided by the auditor of the Company, its related practices and non-related audit forms:

Audit services BDO Kendalls Audit & Assurance (WA) Pty Audit and review of fnancial reports Non-audit services Other assurance services Related practices of BDO Kendalls: AIFRS accounting services Taxation services Related practices of BDO Kendalls: Taxation compliance services Other services Related practices of BDO Kendalls: Benchmarking services Total remuneration for non-audit servic	Ltd: es	2008 2007 $ $
		24,025 23,050
		2,311 13,600 26,200 22,450 1,545 -
		30,056 36,050

Directors’ Report (continued)

Auditor

BDO Kendalls Audit & Assurance (WA) Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001 .

Auditor’s Independence Declaration

A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is attached.

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

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Robert N. Scott Non-Executive Chairman

Perth, Western Australia Dated this 12th day of August 2008

Auditor’s Independence Declaration

==> picture [152 x 31] intentionally omitted <==

BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay St Subiaco WA 6008 PO Box 700 West Perth WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 [email protected] www.bdo.com.au

ABN 79 112 284 787

12th August 2008

The Directors BioMD Limited 11 / 225 St Georges Terrace Perth, Western Australia 6000

Dear Sirs

DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF BIOMD LIMITED

As lead auditor of BioMD Limited for the year ended 30 June 2008, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
any applicable code of professional conduct in relation to the audit.

This declaration is in respect of BioMD Limited and the entities it controlled during the period.

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Peter Toll Director

==> picture [109 x 23] intentionally omitted <==

BDO Kendalls Audit & Assurance (WA) Pty Ltd Perth, Western Australia

BDO Kendalls is a national association of separate partnerships and entities

Income Statements

For the year ended 30 June 2008

Revenue from continuing operations Administrative expenses Employee benefts Asset write-downs Impairment Depreciation expense Loss before income tax from continuing operations Income tax beneft Loss for the year Proft is attributable to Equity holders of bioMD Limited Minority interest Earnings per share (cents per share) Basic earnings per share Diluted earnings per share	Note 3 4 4 4 4 5 18 20	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $
		147,977 115,308 395,745 334,125
		(1,273,322) (1,332,676) (923,633) (1,008,295) (180,643) (253,302) (180,643) (253,302) - (6,990) - (6,990) (176,495) (1,309,280) (649,590) (1,068,153) (7,782) (10,964) (4,101) (7,646)
		(1,638,242) (2,913,212) (1,757,967) (2,344,386)
		(1,490,265) (2,797,904) (1,362,222) (2,010,261)
		214,323 560,462 86,280 188,691
		(1,275,942) (2,237,442) (1,275,942) (1,821,570)
		(1,126,607) (2,089,187) (1,275,942) (1,821,570) (149,335) (148,255) - -
		(1,275,942) (2,237,442) (1,275,942) (1,821,570)
		Cents Cents (1.50) (2.98) (1.50) (2.87)

The above Income Statements should be read in conjunction with the accompanying notes.

Balance Sheets

As at 30 June 2008

CONSOLIDATED	CONSOLIDATED	THE COMPANY	THE COMPANY
2008	2007 $ 2,146,964 191,384 219,635	2008	2007 $ 1,336,893 32,620 188,691
$		$


1,448,627		1,128,477
74,359		54,652
-		-
1,522,986	2,557,983	1,183,129	1,558,204
	25,756 - - -		11,067 936,628 - -
40,994		18,542
-		305,991
-		-
-		-
40,994	25,756	324,533	947,695
1,563,980	2,583,739	1,507,662	2,505,899
	221,242 20,013		163,415 -

126,720		90,415
20,013		-
146,733	241,255	90,415	163,415
	3,800 -		3,800 -

28,630		28,630
-		-
28,630	3,800	28,630	3,800
175,363	245,055	119,045	167,215
1,388,617	2,338,684	1,388,617	2,338,684
	7,848,502 145,570 (5,988,617)		7,848,502 145,570 (5,655,388)
8,135,317		8,135,317
184,630		184,630
(7,115,224)		(6,931,330)
1,204,723	2,005,455 333,229	1,388,617	2,338,684 -
183,894		-
1,388,617	2,338,684	1,388,617	2,338,684

The above Balance Sheets should be read in conjunction with the accompanying notes.

Statements of Changes in Equity

For the year ended 30 June 2008

	CONSOLIDATED
	Share Capital $ Reserves $ Retained Earnings $ Total $ Minority Interest $ Total Equity $
Balance at 1 July 2006 Loss for the year Total recognised income and expense for the year Contributions of equity (net of transaction costs) Employee share options Minority interest on acquisition of subsidiary Balance at 1 July 2007 Loss for the year Total recognised income and expense for the year Contributions of equity (net of transaction costs) Employee share options Balance at 30 June 2008	6,663,270 24,090 (3,899,430) 2,787,930 584,388 3,372,318 - - (2,089,187) (2,089,187) (148,255) (2,237,442)
	- - (2,089,187) (2,089,187) (148,255) (2,237,442) 1,185,232 - - 1,185,232 - 1,185,232 - 121,480 - 121,480 - 121,480 - - - - (102,904) (102,904)
	1,185,232 121,480 - 1,306,712 (102,904) 1,203,808 7,848,502 145,570 (5,988,617) 2,005,455 333,229 2,338,684 - - (1,126,607) (1,126,607) (149,335) (1,275,942)
	- - (1,126,607) (1,126,607) (149,335) (1,275,942) 286,815 - - 286,815 - 286,815 - 39,060 - 39,060 - 39,060
	286,815 39,060 - 325,875 - 325,875 8,135,317 184,630 (7,115,224) 1,204,723 183,894 1,388,617
	THE COMPANY Share Capital $ Reserves $ Retained Earnings $ Total $ 6,663,270 24,090 (3,833,818) 2,853,542 - - (1,821,570) (1,821,570) - - (1,821,570) (1,821,570) 1,185,232 - - 1,185,232 - 121,480 - 121,480 1,185,232 121,480 - 1,360,712 7,848,502 145,570 (5,655,388) 2,338,684 - - (1,275,942) (1,275,942) - - (1,275,942) (1,275,942) 286,815 - - 286,815 - 39,060 - 39,060 286,815 39,060 - 325,875 8,135,317 184,630 (6,931,330) 1,388,617


Balance at 1 July 2006 Loss for the year Total recognised income and expense for the year Contributions of equity (net of transaction costs) Employee share options Balance at 1 July 2007 Loss for the year Total recognised income and expense for the year Contributions of equity (net of transaction costs) Employee share options Balance at 30 June 2008

The above Statements of Changes in Equity should be read in conjunction with the accompanying notes.

Cash Flow Statements

For the year ended 30 June 2008

CONSOLIDATED	CONSOLIDATED	THE COMPANY
2008	2007 $ 12,000 (1,617,802)	2008 2007 $ $ 419,725 286,420 (937,775) (1,208,430)
$

251,404
(1,264,087)
	(1,605,802) 99,898	(518,050) (922,010) 53,347 73,465
(1,012,683)
91,046
(921,637)	(1,505,904)	(464,703) (848,545)
	(6,458) (98,682) -	(11,575) (5,835) (18,953) (28,975) - (1,047,105)
(23,020)
(40,495)
-
(63,515)	(105,140)	(30,528) (1,081,915)
	1,050,000 (26,583) (10,671)	320,203 1,050,000 (33,388) (26,583) - -

320,203
(33,388)
-
286,815	1,012,746	286,815 1,023,417
(698,337)	(598,298)	(208,416) (907,043)
2,146,964	2,745,262	1,336,893 2,243,936
1,448,627	2,146,964	1,128,477 1,336,893

The above Cash Flow Statements should be read in conjunction with the accompanying notes.

Notes to the Financial Statements

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for bioMD Limited (the ‘Company’) and the consolidated entity consisting of bioMD Limited and its subsidiary (together referred to as the ‘Group’). bioMD Limited is a Company limited by shares incorporated in Australia, whose shares are publicly traded on the Australian Securities Exchange.

The financial report was authorised for issue in accordance with a resolution of the Directors on 12 August 2008.

(a) Basis of Preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with Australian Accounting Standards (‘AASB’), other authoritative pronouncements of the Australian Accounting Standards Board, Interpretations and the Corporations Act 2001 .

The financial report has been prepared on the basis of the historical cost convention and is presented in Australian dollars.

Statement of Compliance

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (‘AIFRS’). Compliance with AIFRS ensures that the consolidated financial statements and notes of bioMD Limited comply with International Financial Reporting Standards (‘IFRS’). The parent entity financial statements and notes also comply with IFRS except that it has elected to apply the relief provided to parent entities in respect of certain disclosure requirements contained in AASB 132 Financial Instruments: Disclosure and Presentation.

New accounting standards and interpretations

Certain new accounting standards have been published that are not mandatory for 30 June 2008 reporting periods. The Group has not applied any of the following in preparing this financial report:

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Nature and Impact of Change to
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Accounting Policy
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AASB 8: Operating Segments and AASB 2007-3 Amendments to Australian Accounting Standards arising from AASB 8	No impact on accounting policy or amounts recognised in the fnancial statements, but will require change to disclosures in relation to ‘management approach’ of segment reporting	1 January 2009
AASB 123 : Borrowing Costs	No impact on fnancial statements as no borrowing costs incurred by the Groupto date	1 January 2009
AASB 101: Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101	Introduces a statement of comprehensive income and makes changes to the statement of changes in equity, but will not affect any of the amounts recognised in the fnancial statements.	1 January 2009
AASB 3 : Business Combinations	As there is no requirement to retrospectively restate comparative amounts for business combinations undertaken before this date, there is unlikely to be any impact on the fnancial statements when this revised standard is frst adopted.	1 July 2009
AASB 127 : Consolidated and Separate Financial Statements	As there is no requirement to retrospectively restate the effect of these revisions, there is unlikely to be any impact on the fnancial statements when this revised standard is frst adopted. Celxcel Pty Ltd is incurring losses. To the extent that Celxcel incurs losses for the fnancial year ending 30 June 2010, such losses will be attributed to the non-controlling interest. No adjustment will be made to comparatives for losses not previously attributed to the non-controllinginterest.	1 July 2009

Applicable to reporting periods commencing on or after the given date.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (continued)

(b) Principles of Consolidation

Subsidiaries

Subsidiaries are entities controlled by the Company. The consolidated financial statements are prepared by combining the financial statements of all the entities that comprise the Consolidated Entity, being bioMD Limited (“Company” or “Parent Entity”) and its subsidiary as defined in AASB 127:Consolidated and Separate Financial Statements. Consistent accounting policies are employed in the preparation and presentation of the consolidated financial statements.

The consolidated financial statements include the information and results of the subsidiary from the date on which the Company obtains control and until such time as the Company ceases to control such entity. Acquisitions of entities are accounted for using the purchase method of accounting.

In preparing the consolidated financial statements, all inter-company balances and transactions, income and expenses and profit and losses resulting from intra-group transactions are eliminated in full.

Investments in subsidiaries are accounted for at cost in the financial report of bioMD Limited.

(c) Segment Reporting

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

(d) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable.

Interest income

Interest income is recognised on a time proportion basis using the effective interest method. When a receivable is impaired, the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at the original effective interest rate of the instrument and continues unwinding the discount as interest income. Interest income on impaired loans is recognised using the original effective interest rate.

Lease income

Lease income from operating leases is recognised in income on a straight-line basis over the lease term.

(e) Government Grants

Grants from the Government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate.

(f) Income Tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction, adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary difference arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from the initial recognition of an asset or liability in a transaction other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the deferred income tax asset is realised or the deferred income tax liability is settled.

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

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

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (continued)

(f) Income Tax (continued)

Deferred tax liabilities and assets are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

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

bioMD Limited and its Australian controlled entity have not implemented the tax consolidation legislation.

(g) Operating Leases

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases are charged to the income statement in a straight line basis over the period of the lease.

Lease income from operating leases, where the Group is lessor, is recognised in income on a straight line basis over the lease term.

(h) Business Combinations

The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, equity instruments issued or assumed at the date of exchange plus costs directly attributable to the acquisition. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

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

(i) Impairment of Assets

Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which they are separately identifiable cash flows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). Non-financial assets other than goodwill are reviewed for possible reversal of the impairment at each reporting date.

(j) Cash and Cash Equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value and bank overdrafts. Bank overdrafts are shown in current liabilities on the balance sheet.

(k) Investments and Other Financial Assets

The Group has no financial assets with exception of cash and cash equivalents (refer to note 1(j)), receivables and the parent company investment in a subsidiary. The parent entity investment in subsidiary is carried at cost.

(l) Derivatives and Hedging Activities

The Group does not undertake any derivative or hedging activities.

(m) Property, Plant and Equipment

Items of property, plant and equipment are stated at historical cost less accumulated depreciation. Cost is measured as the fair value of the assets given, shares issued or liabilities incurred at the date of acquisition plus costs directly attributable to the acquisition. 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 reliably measured. The carrying amount of the replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the reporting period in which they are incurred.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (continued)

(m) Property, Plant and Equipment (continued)

Depreciation is calculated using the straight line method to allocate cost over the estimated useful life of an item of property, plant and equipment.

The estimated useful lives for each class of assets in the current and comparative periods are as follows:

Plant and equipment 3 years

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

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the income statement.

(n) Intangible Assets

Intellectual property

Costs incurred on intellectual property (IP) are recognised at cost of acquisition. IP has an indefinite life and is carried at cost less any accumulated amortisation and any impairment losses.

Patents

Costs associated with patents are recognised at cost of acquisition. Patents have an indefinite life and are carried at cost less any accumulated amortisation and any impairment losses.

Research and development

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

Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial production or use, is capitalised if the product or service is technically and commercially feasible and adequate resources are available to complete the development. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overhead. Other development expenditure is recognised in the income statement as an expense as incurred. To date, no development costs have been capitalised.

(o) Trade and Other Payables

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

(p) Borrowings

Borrowings are initially measured at the principal amount. Interest is charged as an expense as it accrues. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

(q) Employee Benefits

General

Employee benefits expenses arising in respect of wages and salaries, annual leave, long service leave and other types of employee benefits are charged to the income statement in the period in which they are incurred. Contributions to superannuation funds by the Company are charged to the income statement when due. A superannuation scheme is not maintained on behalf of employees.

Wages, salaries, annual leave and sick leave

Liabilities for employee benefits for wages, salaries and annual leave expected to be settled within 12 months of the reporting date represent present obligations resulting from employee’s services provided to reporting date, are measured at undiscounted amounts based on remuneration wage and salary rates that the entity expects to pay at reporting date.

Long service leave

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

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (continued)

Retirement benefit obligations

The Group makes statutory superannuation guarantee contributions in respect of each employee to their nominated complying superannuation plan. In certain circumstances, pursuant to an employee’s employment contract the Group may also make salary sacrifice superannuation contributions in addition to the statutory guarantee contribution.

Contributions to the employees’ superannuation plans are recognised as an expense as they become payable.

Share based payments

Share based compensation benefits are provided to employees via the bioMD Employee Share Option Plan (ESOP).

The fair value of options granted under the ESOP is recognised as an employee expense with a corresponding increase in equity. The fair value is measured at grant date and recognised on that date.

The fair value is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the non-tradeable nature of the option, the share price and expected price volatility of the underlying shares, the expected yield and the risk-free interest rate for the term of the option.

(r) Contributed Equity

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

(s) Earnings Per Share

Basic earnings per share

Basic earnings per share is determined by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share by taking into account amounts unpaid on ordinary shares and any reduction in earnings per share that will probably arise from the exercise of options outstanding during the financial year.

Options granted under the bioMD Share Option Plan are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The options have not been included in the determination of basic earnings per share. Details relating to the options are set out in Note 26.

(t) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case, it is recognised as part of the cost of acquisition of the asset or as part of the expense.

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 taxation authority is included with other receivables or payables in the balance sheet.

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 taxation authority, are presented as operating cash flow.

(u) Trade Receivables

Trade receivables are recognised initially at fair value and then subsequently measured at amortised cost. Trade receivables are due for settlement within 30 days from the date of the sale.

Collectability of trade debtors is reviewed on an on-going basis. Debts which are known to be uncollectible are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivable.

(v) Accounting Estimates and Judgements

In the process of applying the accounting policies, management has made certain judgements or estimations which have an effect on the amounts recognised in the financial statements.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

1. Summary of Significant Accounting Policies (continued)

(v) Accounting Estimates and Judgements (continued)

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share based payment transactions

The cost of Share based payments to employees is measured by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using the Black-Scholes model, taking into account the terms and conditions upon which the options were granted.

2. Financial Risk Management

The Group’s activities expose it to a variety of financial risks: (including interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of the financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group does not use derivative financial instruments, however, the Group uses different methods to measure different types of risk to which it is exposed. These methods include sensitivity analysis in the case of interest rate and other price risks, ageing analysis for credit risk and at present are not exposed to price risk.

Risk management is carried out by the Board of Directors with assistance from suitably qualified external advisors. The Board provides written principles for overall risk management and further policies will evolve commensurate with the evolution and growth of the Company.

The Group and the Company hold the following financial instruments:

Financial assets Cash and cash equivalents Trade and other receivables Financial liabilities Trade and other payables Borrowings		CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 1,448,627 2,146,964 1,128,477 1,336,893 74,359 191,384 54,652 32,620
		1,522,986 2,338,348 1,183,129 1,369,513
		126,720 221,242 90,415 163,415 20,013 20,013 - -
		146,733 241,255 90,415 163,415

The Group’s principal financial instruments comprise cash and short-term deposits. The Group does not have any borrowings, other than loans from external shareholders of Celxcel Pty Ltd, which are payable at call and interest-free.

The main purpose of these financial instruments is to fund the Group’s operations.

It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Group are cash flow (interest rate risk, liquidity risk and credit risk). The Board reviews and agrees policies for managing each of these risks and they are summarised below:

a) Market Risk

(i) Foreign exchange risk

The Company does not currently operate internationally and therefore its exposure to foreign exchange risk arising from currency exposures is limited.

(ii) Price risk

The Group is not exposed to equity securities price risk and holds no equity investments. The Group is not exposed to any price risks as the Group is carrying out development/commercialisation stage of the technology and no sales of product have been made to date.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

2. Financial Risk Management (continued)

(iii) Cash flow and interest rate risk

The Group’s only interest rate risk arises from cash and cash equivalents held. Term deposits and current accounts held with variable interest rates expose the group to cash flow interest rate risk. The Company does not consider this to be material to the Group and has therefore not undertaken any further analysis of risk exposure.

The following sets out the Group’s exposure to interest rate risk, including the effective weighted average interest rate by maturity periods:

30 June 2008 Consolidated Note Weighted average interest rate	1 year or less $ 2-5 years $ Total $
Financial assets Cash and cash equivalents 22 6.88% Financial liabilities Borrowings 12 0% Total	1,448,627 - 1,448,627 (20,013) - (20,013)
	1,428,614 - 1,428,614

30 June 2007 Consolidated Note Weighted average interest rate	1 year or less $ 2-5 years $ Total $
Financial assets Cash and cash equivalents 22 5.89% Financial liabilities Borrowings 12 0% Total	2,146,964 - 2,146,964 (20,013) - (20,013)
	2,126,951 - 2,126,951

b) Credit Risk

The Group does not have any significant concentrations of credit risk. Credit risk is managed by the Board and arises from cash and cash equivalents as well as credit exposure, including outstanding receivables and committed transactions.

All cash balances held at banks are held at internationally recognised institutions. The majority of receivables are immaterial to the Group. Given this, the credit quality of financial assets that are neither past due or impaired can be assessed by reference to historical information about default rates.

The maximum exposure to credit risk at reporting date is the carrying amount of the financial assets as summarised at the start of Note 2.

c) Liquidity Risk

Prudent liquidity risk management implies maintaining sufficient cash balances and access to equity funding.

The Group’s exposure to the risk of changes in market interest rates relates primarily to cash assets and floating interest rates. The Group does not have significant interest-bearing assets and is not materially exposed to changes in market interest rates.

The Directors monitor the cash-burn rate of the Group on an on-going basis against budget and the maturity profiles of financial assets and liabilities to manage its liquidity risk.

As at reporting date the Group had sufficient cash reserves to meet its requirements. The Group has no access to credit standby facilities or arrangements for further funding or borrowings in place.

The financial liabilities the Group had at reporting date were trade payables incurred in the normal course of the business. These were non interest bearing and were due within the normal 30-60 days terms of creditor payments. Borrowings consist of loans from external shareholders of Celxcel Pty Ltd, which are payable at call and interest-free.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

2. Financial Risk Management (continued)

Maturities of financial liabilities

The table below analyses the Group’s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Group – At 30 June 2008	Less than 6 months 6-12 months 1-2 years 2-5 years Over 5 years Total contractual cash fows Carrying amount (assets)/ liabilities
	$ $ $ $ $ $ $
Non-derivatives Non-interest bearing Variable rate Fixed rate Total non-derivatives	146,733 - - - - 146,733 146,733 - - - - - - - - - - - - - -
	146,733 - - - - 146,733 146,733

Group – At 30 June 2007	Less than 6 months 6-12 months 1-2 years 2-5 years Over 5 years Total contractual cash fows Carrying amount (assets)/ liabilities
	$ $ $ $ $ $ $
Non-derivatives Non-interest bearing Variable rate Fixed rate Total non-derivatives	241,255 - - - - 241,255 241,255 - - - - - - - - - - - - - -
	241,255 - - - - 241,255 241,255

d) Fair Value Estimation

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

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short term nature.

The consolidated entity’s principle financial instruments consist of cash and deposits with banks, accounts receivable, trade payables and loans payable. The main purpose of these non-derivative financial instruments is to finance the entity’s operations.

Note 3. Revenues Revenue from continuing operations Interest from other parties Administration services income Sub-lease rental income Grant income Other income Total revenue from continuing operations	CONSOLIDATED THE COMPANY
	2008 2007 2008 2007 $ $ $ $ 103,788 103,308 71,645 78,125 - - 312,000 244,000 12,000 12,000 12,000 12,000 32,089 - - - 100 - 100 -
	147,977 115,308 395,745 334,125

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

4. Expenses Loss before income tax includes the following specifc expenses: Consultancy costs Rental expense relating to operating leases Depreciation Plant & equipment Research and development Write-down of plant & equipment Impairment of assets: Intangibles – patents Intangibles – intellectual property Investment in subsidiary Employee benefts expense Wages and salaries Leave provisions Other benefts Share Based payments – equity settled 5. Income Tax Expense/(Beneft) (a) Income Tax Expense/(Beneft) Current tax Deferred tax R and D tax rebate Deferred income tax (revenue)/expense included in income tax expense comprises: Decrease/(Increase) in deferred tax assets (Decrease)/Increase in deferred tax liabilities	Note 8 9 7 26 Note	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 774,249 675,598 571,160 516,140 26,070 26,010 26,070 26,010 7,782 10,964 4,101 7,646 16,445 233,222 12,614 210,610 - 6,990 - 6,990 176,495 173,190 18,953 145,861 - 1,136,090 - - - - 630,637 922,292
		176,495 1,309,280 649,590 1,068,153
		54,218 48,828 54,218 48,828 48,139 18,214 48,139 18,214 46,666 64,780 46,666 64,780 31,620 121,480 31,620 121,480
		180,643 253,302 180,643 253,302
		CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ - - - - - (340,827) - - (214,323) (219,635) (86,280) (188,691)
		(214,323) (560,462) (86,280) (188,691)
		- 1,582 - 1,399 - (342,409) - (1,399)
		- (340,827) - -

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

5. Income Tax Expense/(Be (continued) (b) Numerical Reconciliation of In Beneft to Prima Facie Tax Pay Loss from continuing operations before inc expense Tax at the Australian tax rate of 30% (2007: Tax effect of amounts that are not deductib in calculating taxable income: Share Based payments Sundry non-assessable/deductible items Sundry non-deductible items Under/(over) provision in prior years Income tax beneft not recognised R and D tax rebate Income tax expense/(beneft) (c) Tax Losses Unused tax losses for which no deferred ta assets have been recognised Potential tax beneft at 30% All unused tax losses were incurred by Aust (d) Unrecognised Temporary Differ Deferred tax assets and liabilities not recog to the following: Deferred tax assets Tax losses Other temporary differences Deferred tax liabilities Other temporary differences Net deferred tax assets No franking account credits are available.	Note neft) come Tax able ome tax 30%) le/(taxable) x ralian entities. ences nised relate	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ (1,490,265) (2,797,904) (1,362,222) (2,010,261)
		(447,080) (839,371) (408,667) (603,078) 11,718 36,444 11,718 36,444 (13,736) - 126,838 - 825 636 733 596
		(448,273) (802,291) (269,378) (566,038) - - - - 448,273 461,464 269,378 566,038 (214,323) (219,635) (86,280) (188,691)
		(214,323) (560,462) (86,280) (188,691)
		5,106,269 4,024,443 4,245,811 3,301,698
		1,531,881 1,207,333 1,273,743 990,509
		1,531,881 1,207,333 1,273,743 990,509 107,030 1,045,474 560,482 531,189 (8,693) (419,515) 7,994 (416,911)
		1,630,218 1,833,292 1,842,219 1,104,787

(e) Tax Consolidation Legislation

bioMD Limited and its Australian controlled entity have not implemented the tax consolidation legislation.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

6. Other Receivables Other receivables Accrued interest Prepayments	Note	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 52,937 46,704 36,354 32,620 21,422 8,680 18,298 - - 136,000 - -
		74,359 191,384 54,652 32,620

Other receivables arise from GST refunds expected from the ATO for June 2008.

There are no impaired trade receivables for both the Group and the parent entity in 2007 or 2008. There are no trade receivables past due but not impaired.

Refer to Note 2 for information on the risk management policy of the Group.

7. Other Financial Assets Shares in subsidiary Provision for impairment	Note 15	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ - - 1,858,920 1,858,920 - - (1,552,929) (922,292)
		- - 305,991 936,628

The shares in subsidiary are carried at cost.

For further information in relation to the subsidiary – refer to Note 15.

8. Property, Plant & Equipment Plant & equipment Cost Accumulated depreciation Net book amount Reconciliation Opening net book amount Additions Disposals Asset write-down Depreciation charge Closing net book amount	Note	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 84,890 61,870 54,240 42,665 (43,896) (36,114) (35,698) (31,598)
		40,994 25,756 18,542 11,067
		25,756 37,252 11,067 19,868 23,020 6,458 11,576 5,835 - - - - - (6,990) - (6,990) (7,782) (10,964) (4,101) (7,646)
		40,994 25,756 18,542 11,067

No non-current assets are pledged as security by the Group.

(2007: The asset write-down related to items of equipment no longer used in the usual operating activities of the Group.)

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

9. Intangible Assets Intellectual Property Patents Intellectual Property Opening net book value Additions - acquisition Impairment charge Closing net book value Patent costs Opening net book value Additions - acquisitions Impairment charge Closing net book value	Note	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ - - - - - - - -
		- - - -
		- 970,353 - - - 165,737 - - - (1,136,090) - -
		- - - -
		- 142,501 - 116,886 176,495 30,689 18,953 28,975 (176,495) (173,190) (18,953) (145,861)
		- - - -

All intangible assets have been assessed to have an indefinite useful life, as the assets are at a point too early to determine the length of their useful life reliably. The recovery of patents remains dependent upon future successful commercial application of the entity’s intellectual property. The recoverable amount of each cash-generating unit is determined based on fair value less costs to sell. As a result, both intellectual property and patent costs have been fully impaired at the date of this financial report.

No third party contracts have been signed to date. This does not in anyway reflect the Directors’ opinion as to the future potential of the ADAPT technology.

10. Deferred Tax Assets Opening balance at 1 July Credited/(charged) to income statement Credited/(charged) to equity Closing balance 30 June	Note	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ - 1,582 - 1,399 - (1,582) - (1,399) - - - -
		- - - -

The deferred tax asset attributable to tax losses does not exceed taxable amounts arising from the reversal of existing assessable temporary differences.

11. Current Liabilities – Trad Other Payables Trade payables Other payables	Note e and	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 71,586 86,917 39,281 31,090 55,134 134,325 51,134 132,325
		126,720 221,242 90,415 163,415

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

12. Current Liabilities - Borrowings Loans payable	Note	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 20,013 20,013 - -

(a) Financing Arrangements

The loans are unsecured, interest-free and repayable at call to third-party shareholders in Celxcel Pty Ltd.

The Group does not have any lines of undrawn credit and no liabilities or assets are pledged as security.

(b) Fair Value

The fair value of the loans payable equals their carrying amount, as the impact of discounting is not significant.

No off-balance sheet liabilities are reported as at 30 June 2008. (2007: Nil)

(c) Risk Exposure

Information about the Group’s and parent entity’s exposure to interest rate risk is provided in Note 2.

13. Non Current Liabilities - Provisions Long service leave provision 14. Non-Current Liabilities Deferred Tax Liabilities Opening balance at 1 July Charged/(credited) to income statement Credited/(charged) to equity Purchase of subsidiary Prior period adjustment - intangible assets Closing balance 30 June	Note Note	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 28,630 3,800 28,630 3,800
		CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ - 292,688 - 1,399 - (342,409) - (1,399) - - - - - 49,721 - - - - - -
		- - - -

15. Subsidiaries

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiary in accordance with the accounting policy described at Note 1(b).

Name of entity Celxcel Pty Ltd The proportion of ownership interest is equal to the proport 2007: During the previous year, additional holdings were ac Date % $ 10 July 2006 21.5% 308,920 3 May 2007 4.82% 900,000	Country of Incorporation Class of Shares Equity Holding % % 2008 2007
	Australia Ordinary 76.32 76.32 ion of voting power held. quired in Celxcel Pty Ltd as follows:

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

16. Contributed Equity (a) Share Capital Ordinary shares Fully paid (b) Movements in Ordinary Share Details Opening balance Issue of shares for 21.5% purchase of addi interest in Celxcel Pty Ltd Share purchase plan Share placement Transaction costs Balance Conversion of options Rights issue Transaction costs Balance	Capital tional	Date 1/07/06 10/07/06 7/05/06 12/07/07	SHARES $
			2008 2007 2008 2007 85,909,969 84,308,356 8,135,317 7,848,502
			Notes No. shares Issue Price $ 70,866,251 - 6,663,270 (c) 2,942,105 0.055 161,815 (d) 6,725,000 0.10 672,500 (c) 3,775,000 0.10 377,500 (26,583)
		30/6/07 4/09/07 12/07/07	84,308,356 7,848,502 (e) 35,494 0.20 6,979 (f) 1,566,119 0.20 313,224 (33,388)
		30/6/08	85,909,969 8,135,317

(c) Ordinary Shares

On 10 July 2006 2,942,105 shares in bioMD were issued for the purchase of additional equity in Celxcel Pty Ltd.

On 12 June 2007 a private placement was made which raised $377,500. The purpose of the placement was for funding the development of the ADAPT advanced tissue process and general working capital purposes.

Ordinary shares entitle the holder to participate in dividends and the proceeds of winding up of the Company in proportion to the number of and amounts paid on the shares held.

On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

(d) Share Purchase Plan

On 28 March 2007 the Company invited its shareholders to subscribe to its Share Purchase Plan (“SPP”), whereby eligible shareholders could subscribe for either $2,500 or $5,000 worth of bioMD shares, representing either 25,000 or 50,000 ordinary shares. The SPP sought to raise $1 million. Shareholders subscribed for 6.725 million shares.

The purpose of the SPP and the placement were used for funding the development of the ADAPT advanced tissue process and for general working capital purposes.

(e) Shares Under Options

On 4 September 2007 35,494 listed options were converted into ordinary shares.

Information in relation to the bioMD Employee Share Option Plan, including details of options issued, exercised or lapsed during the financial year is set out in Note 26.

Options over ordinary shares:

6,264,476 listed options on issue as at 30 June 2008. (2007: 63,104,626 listed options)

(f) Rights Issue

On 12 December 2007 a Rights Issue to all eligible listed option holders was finalised with 1,566,119 ordinary shares issued with attaching 6,264,476 options at 20 cents per share. The Rights Issue Prospectus was dated 22 August 2007, offering one share (with attaching 4 options) for every ten expiring options held by option holders. Funds were used for working capital.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

16. Contributed Equity (continued)

(g) Capital Risk Management

The Company’s objective when managing capital is to safeguard the ability to continue as a going concern and to provide returns for shareholders and benefits for other stakeholders and to maintain capital structure to reduce the cost of capital.

The Board of Directors monitors capital on an ad-hoc basis. No formal targets are in place for return on capital, or gearing ratios as the Group has not derived any income from the developing technology and currently has no debt facilities in place.

17. Reserves and Accumulated Losse (a) Reserves Share Based payments reserve Movements: Share Based payments reserve: Balance 1 July Option expense Balance 30 June (b) Accumulated Losses Movements in accumulated losses were as follows: Balance 1 July Net loss attributable to members of the Company Balance 30 June	s	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 184,630 145,570 184,630 145,570
		145,570 24,090 145,570 24,090 39,060 121,480 39,060 121,480
		184,630 145,570 184,630 145,570
		5,988,617 3,899,430 5,655,388 3,833,818 1,126,607 2,089,187 1,275,942 1,821,570
		7,115,224 5,988,617 6,931,330 5,655,388

(c) Nature and Purpose of Reserves

The Share Based payments reserve is used to recognise the fair value of options issued to employees and consultants.

18. Minority Interest Interest in: Share Capital Accumulated losses		CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 584,389 584,389 - - (400,495) (251,160) - -
		183,894 333,229 - -

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

19. Remuneration of Auditor During the year the following fees were paid services provided by the auditor of the pare practices and non-related audit frms: (a) Audit Services BDO Kendalls Audit & Assurance (WA) Pty Audit and review of fnancial reports a under the Corporations Act 2001 (b) Non-audit Services Taxation services Related entities to BDO Kendalls (WA) Pty L Tax compliance services Other services Benchmarking services AIFRS accounting services Total remuneration for non-audit services It is the Group’s policy to employ BDO Kenda experience with the Group are important. The 20. Earnings Per Share (a) Weighted Average Number of Weighted average number of ordinary shar denominator in calculating basic earnings p Adjustment for calculation of diluted earning Options Weighted average number of ordinary shar denominator in calculating diluted earnings	CONSOLIDATED THE COMPANY 2008 2007 2008 2007 $ $ $ $ s or payable for nt entity, its related Ltd nd other audit work 24,025 23,050 16,512 15,547 td 26,200 22,450 15,600 13,850 1,545 - 1,545 - 2,311 13,600 2,311 13,600 30,056 36,050 19,456 27,450 lls on assignments additional to their statutory audit duties where BDO’s expertise and se assignments are principally tax advice and accounting assistance under AIFRS. CONSOLIDATED 2008 2007 Number Number Shares Used as the Denominator es used in the er share 85,206,186 74,960,559 s per share: - 3,050,000 es used in the per share 85,206,186 78,010,559	CONSOLIDATED THE COMPANY	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 24,025 23,050 16,512 15,547
		26,200 22,450 15,600 13,850 1,545 - 1,545 - 2,311 13,600 2,311 13,600
		30,056 36,050 19,456 27,450
			2008 2007 Number Number 85,206,186 74,960,559 - 3,050,000
			85,206,186 78,010,559

(b) Earnings Used in Calculating E Basic earnings per share Diluted earnings per share	arnings Per Share	CONSOLIDATED
		2008 2008 $ $ 1,275,942 2,237,442 1,275,942 2,237,442

(c) Information Concerning Classification of Securities

Options:

No listed or unlisted options of bioMD Limited have been included in the determination of basic earnings per share because all options on issue have an exercise price above the market share price of the Company as at year end.

Details relating to options granted under the bioMD Employee Share Option Plan (ESOP) are outlined in Note 26.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

21. Commitments Total expenditure commitments at balance date not provid for in the fnancial statements (a) Operating Lease Commitments Future operating lease commitments not provided for in the fnancial statements and payable: Within one year Later than one year but no later than fve years The Company leases offce space under an operating leas expiring in November 2009. The lease has escalation clauses and renewal rights. On renewal, the terms of the lease were renegotiated. (b) Other Commitments - CSIRO Within one year Later than one year but no later than fve years The Company is party to a research agreement with CSIRO (c) Remuneration Commitments Commitments for the payment of salaries and other remun under long term employment contracts in existence at the date but not recognised as liabilities payable: Within one year Later than one year but no later than fve years	ed e . eration reporting	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 27,997 26,985 27,997 26,985 14,300 42,297 14,300 42,297
		42,297 69,282 42,297 69,282
		117,000 117,000 117,000 117,000 - - - -
		117,000 117,000 117,000 117,000
		- - - - - - - -

22. Reconciliation of Loss After Incom Tax to Net Cash Outfow From Operating Activities (a) Reconciliation to Cash at the End of the Ye Cash at bank and in hand Deposits at call Total cash at the end of the year	e ar	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ 244,621 1,446,964 138,471 1,336,893 1,204,006 700,000 990,006 -
		1,448,627 2,146,964 1,128,477 1,336,893

(b) Cash at Bank and On Hand

These are interest bearing accounts held at bank with average interest rates of 3.85%. (2007: 3.30% to 5.25%)

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

22. Reconciliation of Loss After Income Tax to Net Cash Outflow From Operating Activities (continued)

(c) Deposits At Call

The deposits bear floating interest rates in the range of 7.3% to 7.85%. (2007: 6.2%) The deposits have an average maturity of 90 days.

(d) Interest Rate Risk Exposure

The Group’s and the parent entity’s exposure to interest rate risk is discussed in Note 2.

(e) Reconciliation of Loss After In Cash Outfow from Operating Loss for the year Depreciation expense Asset write-down Impairment charge Long service leave Straight line lease rental Accrued interest Income tax beneft Non-cash employee benefts expense - Sh (Increase)/decrease in receivables Increase/(decrease) in creditors Increase/(decrease) in other provisions Net cash outfow from operating activities (f) Non-cash Investing and Finan Acquisition of additional interest in subsidiar	come Tax to Net Activities are Based payments cing Activities y	CONSOLIDATED THE COMPANY
		2008 2007 2008 2007 $ $ $ $ (1,275,942) (2,237,442) (1,275,942) (1,821,570) 7,782 10,964 4,101 7,646 - 6,990 - 6,990 176,495 1,309,280 649,590 1,068,153 - - 24,828 - (916) - (916) - (12,741) 7,478 (18,298) 4,661 219,635 (560,462) 188,691 (188,691) 39,060 121,480 39,060 121,480 (6,233) (161,231) (3,734) (16,706) (116,916) (21,173) (95,393) (48,720) 48,139 18,212 23,310 18,212
		(921,637) (1,505,904) (464,703) (848,545)
		- 161,815 - 161,815

(Prior year: On 10 July 2006, an additional 21.5% was acquired in Celxcel Pty Ltd for a combination of cash plus the issue of 2,942,105 ordinary shares in bioMD Limited, valued at 5.5 cents per share for a total of $161,815.)

23. Segment Reporting

(a) Description of Segments

Business Segments

The Group operates in two primary business segments:

the development of bioimplants; and
the development and commercialisation of medical therapy products.

Geographical Segments

The Group operates in one geographical area - Australia.

No secondary reporting format is disclosed as the Group only operates in one geographical segment.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

23. Segment Reporting (continued)

(b) Primary Reporting Format - Business Segments

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Medical therapy
products Bioimplants Eliminations Consolidated
2008 $ $ $ $
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Consolidated revenue	395,745	64,232	(312,000)	147,977
Segment result
Loss before tax	1,362,222	758,679	(630,636)	1,490,264
Income tax beneft	(86,280)	(128,043)	-	(214,323)
Loss for year	1,275,942	630,636	(630,636)	1,275,942
Segment assets	1,507,662	373,835	(317,517)	1,563,980
Segment liabilities	119,045	67,844	(11,526)	175,363
Other information
Acquisition of non-current assets	11,575	11,445	-	23,020
Depreciation	4,101	3,681	-	7,782
Asset write-down	-	-	-	-
Impairment of intangibles	649,590	157,542	(630,637)	176,495

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Medical therapy
products Bioimplants Eliminations Consolidated
2007 $ $ $ $
----- End of picture text -----

Consolidated revenue	334,125	25,183	(244,000)	115,308
Segment result
Loss before tax	2,010,261	573,845	213,798	2,797,904
Income tax beneft	(188,691)	(30,944)	(340,827)	(560,462)
Loss for year	1,821,570	542,901	(127,029)	2,237,442
Segment assets	2,505,899	1,014,469	(936,629)	2,583,739
Segment liabilities	167,215	77,840	-	245,055
Other information
Acquisition of non-current assets	5,835	623	-	6,458
Depreciation	7,646	3,318	-	10,964
Asset write-down	6,990	-	-	6,990
Impairment of intangibles	1,068,153	27,328	213,799	1,309,280

(c) Notes To and Forming Part of Segment Information

(i) Accounting policies

Segment information is prepared in conformity with the accounting policies as disclosed in Note 1 and Accounting Standard AASB 114: Segment Reporting.

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis. Segment assets include all assets used by the segment and consist primarily of operating cash, receivables, property, plant and equipment and other intangible assets. Segment liabilities consist primarily of creditors, employee benefits and borrowings. Segment assets and liabilities do not include income taxes.

(ii) Inter-segment transfers

Segment revenues, expenses and results include transfers between segments. Such transfers are priced on an ‘arms-length’ basis and are eliminated on consolidation.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

24. Key Management Personnel Disclosures

(a) Key Management Personnel

The following persons were key management personnel of bioMD Limited during the financial year:

(i) Chairman – Non-Executive
Mr Robert Scott
(ii) Executive Directors
Mr Michael Bennett
Mr Robert Towner

(b) Key Management Personnel Compensation Short-term employee benefts Post employment benefts Non monetary benefts Share Based payments	CONSOLIDATED THE COMPANY
	2008 2007 2008 2007 $ $ $ $ 542,200 430,000 542,200 430,000 3,800 38,150 3,800 38,150 15,120 12,720 15,120 12,720 - 91,980 - 91,980
	561,120 572,850 561,120 572,850

(c) Equity Instrument Disclosures Relating to Key Management Personnel

(i) Options provided as remuneration and shares

Details of options provided as remuneration and shares issued on the exercise of options, together with terms and conditions of the options can be found in Section D of the Remuneration Report.

(ii) Option holdings

The number of options over ordinary shares in the Company held during the financial year by each director of bioMD Limited, including their personally related parties, are set out below:

2008 Name	Balance at the start of theyear	Granted as compensation	Exercised	Other changes #	Balance at the end of theyear	Unvested	Vested and exercisable
Directors of bioMD	Limited
R. Scott	1,667,500	-	-	(640,500)	1,027,000	-	1,027,000
M. Bennett	5,653,219	-	-	(5,053,219)	600,000	-	600,000
R. Towner	10,866,770	-	-	(7,780,062)	3,086,708	-	3,086,708

Note: During the period, on 30 August 2007, listed options in bioMD Limited lapsed. The Directors may have taken up their rights to acquire new options under the Rights Issue outlined in Note 16(f).

2007 Name	Balance at the start of theyear	Granted as compensation	Exercised	Other changes ^	Balance at the end of theyear	Unvested	Vested and exercisable
Directors of bioMD	Limited
R. Scott	157,500	600,000	-	910,000	1,667,500	-	1,667,500
M. Bennett	5,023,344	600,000	-	29,875	5,653,219	-	5,653,219
R. Towner	10,866,770	600,000	-	(600,000)	10,866,770	-	10,866,770

^ Note: On 16 July 2006 unlisted options lapsed upon expiry date.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

24. Key Management Personnel Disclosures (continued)

(iii) Share holdings

The number of shares in the Company held during the financial year by each Director of the Company, including their personally related parties, are set out below.

There were no shares granted during the reporting period as compensation.

2008	Balance at the start of the year Received during the year on exercise of options	Other changes during the year	Balance at the end of the year
Directors of bioMD Limited
Ordinary shares
R. Scott	275,000 -	106,750	381,750
M. Bennett	8,125,938 -	44,062	8,170,000
R. Towner	10,651,080 -	960,641	11,611,721
2007	Balance at the start of the year Received during the year on exercise of options	Other changes during the year	Balance at the end of the year
Directors of bioMD Limited
Ordinary shares
R. Scott	175,000 -	100,000	275,000
M. Bennett	8,025,938 -	100,000	8,125,938
R. Towner	9,062,130 -	1,588,950	10,651,080

There are no loans or other transactions at the end of the current year and prior year to Directors of bioMD Limited.

25. Related Party Transactions

(a) Parent Entity

The parent entity within the Group is bioMD Limited.

(b) Subsidiary

Interest in subsidiary is set out in Note 15.

(c) Key Management Personnel

Disclosures relating to Directors and specified executives are set out in Note 24.

(d) Transactions and Balances with Related Parties

Amadeus Energy Ltd, a company in which Mr R. Scott is a Director, has an agreement with the Company to provide company secretarial and administration services commencing from 27 November 2006 and also a sub-lease for office space for a period of 3 years from 27 November 2006. As at 30 June 2008 bioMD owes Amadeus Energy Ltd a balance of $9,740. (2007: $6,954)

During the current year, bioMD Limited renewed an agreement in place with Celxcel Pty Ltd to provide management and administration services for a further year from 1 April 2008. As at 30 June 2008 Celxcel owes bioMD a balance of $28,600 (2007:$24,801).

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

25. Related Party Transactions (continued)

Capstone Capital Pty Ltd, a company in which Mr R. Towner is a Director, has an agreement with the Company to sub-lease office space for a period of 1 year from 1 April 2008. As at 30 June 2008 Capstone owes bioMD Ltd a balance of $5,516. (2007: $2,208)

The above transactions are on commercial arms-length basis.

The following transactions occurred with related parties:

Other transactions Remuneration paid to directors of the paren Company secretarial and administration fee Offce recharge costs paid to Amadeus Ene Administration and management services t Reimbursement of expenses by Celxcel to Reimbursement of expense by bioMD to C Sub-lease offce rental from Capstone Capi	t entity s paid to Amadeus Energy Limited rgy Limited o Celxcel Pty Ltd bioMD elxcel tal Pty Ltd	THE COMPANY
		2008 2007 $ $ 561,120 480,870 30,000 27,500 46,747 43,395 312,000 244,000 20,287 28,071 11,525 - 12,000 12,000

26. Share Based Payments

(a) Employee Share Option Plan

The bioMD Employee Share Option Plan (ESOP) was approved by shareholders at the 2004 Annual General Meeting. Eligible Employees (as defined in the Plan and which includes Directors, employees and consultants) are able to participate in the Plan.

The terms of the ESOP include:

Options are issued to selected Eligible Employees for free;
The allotment of options is at the discretion of the Board of Directors;
Shares allotted on the exercise of the options are to be issued at an exercise price determined by the Board in its absolute discretion, which price shall not be less than the minimum exercise price permitted by the Listing Rules;
Options expire 4 years after the grant date;
Options are unlisted and not transferable unless the Directors in their absolute discretion agree to a transfer; and
Options carry no dividend rights or voting rights.

The Company has a total of 3,950,000 staff options over ordinary shares in the Company as at 30 June 2008. (2007: 3,350,000)

During the current financial year 600,000 options were issued to employees with an exercise price of $0.10 and an expiry date of 19 March 2011. (2007: 3,050,000)

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

26. Share Based Payments (continued)

Set out below are summaries of options granted under the Plan:

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----- Start of picture text -----

Grant date Expiry date Exercise Balance at Granted Exercised Cancelled Vested and
price start of the during the during the during the exercisable at
year year year year end of year
$ Number Number Number Number Number
2008
16-Aug-06 08-Nov-08 0.10 1,250,000 - - - 1,250,000
16-Nov-06 30-Nov-09 0.10 1,800,000 - - - 1,800,000
19-Mar-08 19-Mar-11 0.10 - 600,000 - - 600,000
Total 3,050,000 600,000 - - 3,650,000
Weighted average exercise price $0.10 $0.10 $0.10
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.175 years.
2007
16-Aug-06 08-Nov-08 0.10 - 1,250,000 - - 1,250,000
16-Nov-06 30-Nov-09 0.10 - 1,800,000 - - 1,800,000
Total - 3,050,000 - - 3,050,000
Weighted average exercise price $0.10 $0.10
The weighted average remaining contractual life of share options outstanding at the end of the period was 1.99 years.
CONSOLIDATED THE COMPANY
2008 2007 2008 2007
$ $ $ $
(b) Expenses Arising from Share Based Payment
Transactions
Total expenses arising from Share based payment transactions
recognised during the period as part of employee benefit expense
were as follows:
Options issued under employee option plan 31,620 121,480 31,620 121,480
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(c) Fair Value of Options Granted

The assessed fair value at grant date of options granted during the year ended 30 June 2008 was 5.27 cents per option (2007: 4.64). The fair value at grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the option term, the share price at grant date and expected price volatility of the underlying share and the risk-free interest rate for the term of the option.

The model inputs for options granted during the year ended 30 June 2008 included:

options granted for no consideration, have a four year life and exercisable at any time prior to expiry date;
exercise price: $0.10;
grant date: 19 March 2008;
expiry date: 19 March 2011;
share price at grant date: 11.1 cents;
expected price volatility of the company’s shares: 90%;
expected dividend yield: 0% (based on historic volatility);
risk-free interest rate: 6.08%.

Notes to the Financial Statements (continued)

For the year ended 30 June 2008

27. Events Occurring After the Balance Sheet Date

There have been no subsequent events to balance sheet date which would have a material effect on the Group’s financial statements at 30 June 2008.

28. Dividends

No dividends have been declared or paid during the period.

Directors’ Declaration

For the year ended 30 June 2008

The Directors of the Company declare that:

The financial statements, comprising the income statement, balance sheet, cash flow statement, statements of changes in equity and accompanying notes, are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards, the Corporations Regulations 2001 ; and
(b) give a true and fair view of the financial position as at 30 June 2008 and of the performance for the year ended on that date of the Company and the consolidated entity.
In the Directors’ opinion, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
The remuneration disclosures included on pages 21 to 24 of the Director’s Report (as part of the Remuneration Report) for the year ended 30 June 2008, comply with section 300A of the Corporations Act 2001 .
The Directors have been given the declarations by the Managing Director and Chief Financial Officer required by section 295A.

This declaration is made in accordance with a resolution of the Board of Directors and is signed for and on behalf of the directors by:

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ROBERT N. SCOTT Non-Executive Chairman

Perth, Western Australia Dated this 12th day of August 2008

Independent Auditor’s Report

For the year ended 30 June 2008

==> picture [152 x 31] intentionally omitted <==

BDO Kendalls Audit & Assurance (WA) Pty Ltd 128 Hay St Subiaco WA 6008 PO Box 700 West Perth WA 6872 Phone 61 8 9380 8400 Fax 61 8 9380 8499 [email protected] www.bdo.com.au

ABN 79 112 284 787

INDEPENDENT AUDITOR’S REPORT

To the members of BioMD Limited

We have audited the accompanying financial report of BioMD Limited, which comprises the balance sheet as at 30 June 2008, and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising 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 and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Responsibility

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

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 entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal 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.

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

BDO Kendalls is a national association of

separate partnerships and entities

Independent Auditors’ Report (continued)

For the year ended 30 June 2008

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Auditor’s Opinion

(a) the financial report of BioMD Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 21 to 24 of the directors’ report for the year ended 30 June 2008. 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 BioMD Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001.

Yours faithfully

BDO Kendalls Audit & Assurance (WA) Pty Ltd

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Peter Toll Director

Perth, Western Australia Dated this 12th day of August 2008

Shareholder Details

The number of shares held by the substantial shareholders as at 7 August 2008:

Name	No. ordinary shares held	% of issued capital held
Mandolin Pty Ltd	11,215,044	13.05
Victoria Park Investments Pty Ltd	10,457,500	12.17
Parerg Pty Ltd	8,050,000	9.37

Voting rights

The shares carry the right to one vote for each share held.

Distribution of shareholders

Number of ordinary shareholders: 846

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Number of ordinary shares No. of shareholders
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1 - 1,000	152
1,001 - 5,000	154
5,001 - 10,000	126
10,001 - 100,000	323
100,001 and over	91
Total	846

Twenty Largest Shareholders

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No. ordinary % of issued
Name shares held capital held
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Mandolin Pty Ltd	11,215,044	13.05
Victoria Park Investments Pty Ltd	10,457,500	12.17
Parerg Pty Ltd	8,050,000	9.37
Torwood Resources Limited	3,211,333	3.74
J Towner	2,821,127	3.28
T. Hooker & Associates Pty Ltd	1,651,410	1.92
Spinifex Holdings Pty Ltd	1,650,330	1.92
Idobee Superannuation Fund Pty Ltd	1,574,600	1.83
F and A Popovsky	1,5000.00	1.75
I Neethling	1,3000.00	1.51
J O’Shea	1,300.000	1.51
Carter Capital Limited	1,200,000	1.40
Amadeus Energy Limited	1,149,750	1.34
Ord Western Biomedical S/F A/c	1,050,000	1.22
Jaldara Star Pty Ltd	903,873	1.05
Patria Pty Ltd	800,000	0.93
M Grove	701,453	0.82
Samyue Super Fund A/c	700,000	0.81
Pateman Super Fund A/c	664,026	0.77
Fuloughby Pty Ltd	600,000	0.70

The 20 largest shareholders hold 61.09% of the Company’s issued capital.

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ABN 35 088 221 078

Registered Office Level 11, 225 St Georges Terrace Perth, Western Australia 6000 Telephone: +61 8 9262 6777 Facsimile: +61 8 9322 3433 Email: [email protected]

AI assistant

Anteris Technologies Global Corp. — Annual Report 2008

33869_rns_2008-10-06_e35c039a-fd51-4cc9-bde2-3328163b792a.pdf

Annual Report 08

Contents

Chairman’s Letter

Dear Shareholder

FINANCIAL RESULTS

Company Highlights

2007/08 Highlights

Review of Operations

Introduction

Review of Operations (continued)

Phase II Clinical Trial

Review of Operations (continued)

The Market

Review of Operations (continued)

Product Development

General Surgery (Hernia) & Urogynaecology (Pelvic Floor)

Orthopaedics

Cardiovascular (Heart Valves)

Cardiovascular (Surgical Repair)

Review of Operations (continued)

Pre-clinical Trials

1. Comparative Patch Study

Purpose

The Results

ADAPT Tissue Engineered Patch

Commercially Available Patch A

Commercially Available Patch B

Conclusion

Review of Operations (continued)

2. ADAPT TEP Kangaroo Tail Tendon

Purpose

The Results

Conclusion

3. ADAPT TEP Bovine Peritoneum

Purpose

The Results

Conclusion

4. Ventral Hernia Procedures

Purpose

The Results

Conclusion

Review of Operations (continued)

Ongoing R&D

Partnering Opportunities

Regulatory

Australian Register of Therapeutic Goods

Quality Assurance

Intellectual Property Report

Patents

Trademark Protection

Corporate Review

New Issue of Securities

Cash

Changes to Capital Structure

Corporate Review (continued)

Directors and Officers

ROBERT N. SCOTT – Non-Executive Chairman

MICHAEL C. BENNETT – Managing Director

ROBERT E.T. TOWNER – Executive Director

CAROLINE L. BENTLEY – Company Secretary

Corporate Governance Statement

Corporate Governance Statement

Structure and Role of the Board of Directors

Corporate Governance Statement (continued)

Board Committees

Ethical and Responsible Decision Making

Safeguard Integrity of Financial Reporting

Corporate Governance Statement (continued)

Timely and Balanced Disclosure

Communications with Shareholders

Risk Assessment and Management

Performance Enhancement

Directors’ Report

Directors’ Report

Directors

Principal Activities

Operating Result

Anteris Technologies Global Corp. Annual Report 2008