BPH ENERGY LTD - Annual Report 2009

==> picture [596 x 383] intentionally omitted <==

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Bridging Biotechnology Borders




Chairman’s Letter 2 Company Focus and Developments 4 Directors’ Report 10 Auditor’s Independence Declaration 21 Corporate Governance Statement 22 Income Statement 29 Balance Sheet 30 Statement of Changes in Equity 31 Cash Flow Statement 33 Notes to the Financial Statements 34 Directors’ Declaration 68 Independent Auditor’s Report 69 Additional Securities Exchange Information 71 BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Bridging Biotechnology Borders

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Directors

David Breeze – Chairman/Managing Director Seng Yap – Non-Executive Director Greg Gilbert – Non-Executive Director Hock Goh – Non Executive Director

Scientific Advisors

==> picture [184 x 183] intentionally omitted <==

Auditor

PKF

Level 7 BGC Centre 28 The Esplanade, Perth Western Australia 6000

Professor Peter Klinken

Share Registry

Registered Office

14 View Street, North Perth Western Australia 6006

Principal Business Address

14 View Street, North Perth Western Australia 6006 Telephone: (08) 9328 8366 Facsimile: (08) 9328 8733 Website: www.biopharmica.com.au E-mail: [email protected]

Security Transfer Registrars Pty Ltd 770 Canning Highway, Applecross Western Australia 6153

Australian Securities Exchange Listing

Australian Securities Exchange Limited (Home Exchange: Perth, Western Australia) ASX Code: BPH

Australian Business Number

41 095 912 002

Chairman’s Letter

==> picture [35 x 86] intentionally omitted <==

Dear Shareholder,

The challenging year past has culminated in some excellent developments for BioPharmica.

Three of BioPharmica’s projects have advanced to a stage where discussions have been initiated on commercialisation with domestic and international companies.

The most recent development in the novel anti-mitotic cancer therapeutic area addresses a market valued in excess of one billion dollars (US) per year.

A team of expert cancer cell biology researchers at BioPharmica Limited have used state-of-the art technology to screen synthetic molecules and natural extracts for new anti-cancer drugs. Using highcontent imaging and computational analyses, these drug screening efforts have now yielded a new class of potential anti-cancer drugs. The new anti-cancer drugs potentially inhibit cell proliferation, resulting in pronounced killing of all human cancer cell lines tested to date. An exceptional opportunity exists for a drug development company to participate in this lead compound development programme.

Diagnostic Array Systems is working with BioPharmica and RMIT University to develop and commercialise BacTrak™, a diagnostic tool that will enable pathology laboratories and the emergency departments of hospitals to provide patients with fast and accurate identification of disease causing bacteria from a single sputum sample.

==> picture [59 x 77] intentionally omitted <==

==> picture [64 x 33] intentionally omitted <==

==> picture [92 x 19] intentionally omitted <==

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

During the year, Cortical Dynamics received and analysed a comprehensive dataset from a European clinical research centre from a study that used the same design as our latest opioid trial. The analysis of this European data set using the BAR methodology unambiguously indicates that the effects of remifentanil and propofol on brain electrical activity can be differentiated. These results underscore the significant potential of the BAR methodology to separately monitor hypnotic and analgesic state using brain electrical activity recorded during surgery. It is expected that this data sharing will lead to collaboration with a number of European centres of anaesthetic monitoring excellence.

I would like to thank Mr Seng Yap for his contributions to BioPharmica during his tenure on BioPharmica’s Board, and, since his recent departure, welcome Ms Deborah Ambrosini to the Board. Ms Ambrosini’s commitment and work ethic to date have benefitted BioPharmica immensely, and I am sure her continued contribution to the future direction and development of BioPharmica will be well received by shareholders.

I thank all the scientists, consultants and especially the BioPharmica team for their continued dedication and enthusiasm throughout a challenging year. As a result of their determination and commitment, BioPharmica is well positioned for excellent future developments.

==> picture [186 x 226] intentionally omitted <==

==> picture [186 x 138] intentionally omitted <==

Yours Sincerely,

==> picture [130 x 54] intentionally omitted <==

Mr David Breeze Chairman

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Company Focus and Developments

BioPharmica Limited [ASX: BPH] is an Australian Securities Exchange listed company developing biomedical research and technologies within Australian Universities and hospital institutes. In addition to its in-house drug discovery resources, BioPharmica provides early stage funding and research, project management and commercialisation strategies for proof of concept for a direct collaboration, a spin-out company or to secure a licence, whilst the institutional partner provides the infrastructure and the scientific research collaboration.

==> picture [35 x 86] intentionally omitted <==

Three of BioPharmica’s projects have advanced to a stage where discussions have been initiated on commercialisation with domestic and international companies. The most recent development in the anti-mitotic cancer therapeutics area addresses a market valued in excess of one billion dollars (US) per year.

BioPharmica currently partners with several academic institutions including the Western Australian Institute for Medical Research (WAIMR), Swinburne University of Technology (SUT) and The Royal Melbourne Institute for Technology (RMIT) University.

Project Portfolio

Novel Anti-Mitotic Cancer Therapeutics

==> picture [209 x 139] intentionally omitted <==

Dr Robin Scaife Principal Scientist

==> picture [209 x 180] intentionally omitted <==

Figure 1

This new class of anti-mitotic drugs, discovered by BioPharmica’s cancer cell biology researcher Dr Robin Scaife, has undergone extensive development toward pre-clinical testing of anticancer activity. Detailed analyses of chemical analogues of the new drug have yielded a new drug that exhibits nearly 1000 times the biological activity of the initial compound derived by the aforementioned screening process.

The new drug has also recently undergone testing in animals to rule out adverse toxic side effects. Animals exposed to very high levels of the new drug exhibited no signs of acute toxicity. BioPharmica’s new anti-mitotic drug is, therefore, primed for pre-clinical testing of anti-tumour activity.

The inhibition of cell proliferation and induction of cancer cell death is due to the anti-mitotic activity of these new drugs. Anti-mitotic drugs, such as

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T 5

Summary of the Opportunity

An exceptional opportunity exists for a drug development company to co-develop a drug candidate validation program in the field of anti-mitotic cancer therapeutics.

Background

Unregulated cell proliferation and evasion of cell death (apoptosis) are two of the fundamental hallmarks of cancer. While a number of pharmacological agents can target cell proliferation or apoptosis, antimitotic agents have proven to be among the most clinically effective anti-cancer drugs. The exceptional tumour inhibitory activity of anti-mitotic drugs is due to their unique ability to link perturbation of cell proliferation (metaphase arrest) with apoptosis (mitotic death and/or catastrophe) (Figure 1, page 4).

Data

In light of the clinical success of the anti-mitotic microtubule drug Taxol[®] , the identification of new and improved anti-mitotic pharmacophores remains one of the primary objectives of current oncology drug discovery. Indeed, in addition to improved microtubule drugs (Ixabepilone), inhibitors of Polo/Aurora kinases (BI-2536/VX-680) and mitotic kinesins (Ispinesib, GSK-923295) have recently emerged as highly promising new anti-cancer therapeutics.

Our Technology

BioPharmica has recently identified new anti-mitotic agents that induce mitotic arrest and apoptosis. While these actives do not affect the microtubule cytoskeleton in interphase cells, they perturb the function of the mitotic spindle (Figure 2), thereby selectively linking cell division with cell death.

==> picture [145 x 73] intentionally omitted <==

Figure 2

In addition to defining the molecular and cellular modes of action of these compounds, BioPharmica is also actively pursuing hit optimization through in silico and in vitro medicinal chemistry.

the blockbuster microtubule cancer drug Taxol[®] , are considered to be among the most clinically important cancer drugs discovered to date[1], generating revenue well in excess of one billion USD/yr[2],[3]. In light of this clinical success, the pharmaceutical industry has invested heavily in the discovery and development of new and improved anti-mitotic drugs. In addition to resulting in improved microtubule cancer therapeutics, such as the recently FDA approved anti-mitotic drug Ixabepilone (BMS-247550), these intensive drug

discovery efforts have also yielded several new classes of highly promising anti-cancer drugs that are currently undergoing clinical testing and development. The anti-mitotic compounds recently discovered by researchers at BioPharmica clearly have the potential to similarly become a new high value anti-cancer drug.

An exceptional opportunity exists for a drug development company to participate in this lead compound development program.

[1] “Taxol[®] has become one of the most valuable cytotoxic chemotherapeutic agents we have in clinical oncology. It has proven effective in ovarian, breast, lung, and head and neck cancer and it has contributed immensely to the quality of life of cancer patients,” (www. medicalnewstoday.com/articles/26471.php)

[2] “In 2000. BMS reported its annual sales of Taxol[®] was $1.592 billion - equal to excess $4.3 million per day” (www.21cecpharm.com/px)

[3] “A taxane is a type of chemotherapy that stops cell division in order to fight tumors. Sales of taxanes were approximately $2 billion in 2007,” (www.wikinvest.com/stock/Abraxis_BioScience_(ABII)

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Company Focus and Developments

==> picture [35 x 86] intentionally omitted <==

HLS5

BioPharmica is working with the Western Australian Institute for Medical Research (WAIMR) to develop and validate HLS5 as a novel tumour suppressor gene. A concerted research effort by leading Australian scientists has revealed that HLS5 works through multiple pathways that may target cancer as well as a range of other diseases such as Huntington’s, Parkinson’s and HIV infection. HLS5 has attracted over $1 million in research funding from the NHMRC, Cancer Council of WA, the National Breast Cancer Foundation and the Medical Research Foundation of Royal Perth Hospital.

Led by WAIMR Director Professor Peter Klinken, a collection of approximately 70,000 drug-like molecules have been screened, and a number of compounds have been identified that can increase activity Professor Peter Klinken levels of the HLS5 gene Director, WAIMR promoter.

The discovery is very encouraging and a great step forward in the quest to create new cancer treatments. We expect that these compounds will greatly slow down the growth of cancer cells considering the role HLS5 plays in keeping cell growth at a normal rate.

==> picture [199 x 94] intentionally omitted <==

BioPharmica has developed an extensive patent portfolio and has exclusive rights to the tumour suppressor gene HLS5, both as a potential therapeutic target and also underpinning its involvement in a variety of disease pathways. The patent portfolio of technology surrounding HLS5 is currently going through National Phase filings in Australia and Europe, and the patent “Tumour

==> picture [209 x 158] intentionally omitted <==

Suppressor Factor” No. 7560253 has been issued as a patent in the United States of America. The tumour suppressor gene HLS5 had has a large volume of data gathered with the continued support of the Western Australian Institute for Medical Research.

BioPharmica now owns 100% of the intellectual property of the HLS5 project and its derivatives developed during the research and development following on from the signing of a new agreement with the University of Western Australia (UWA). In exchange for the ownership of the intellectual property BioPharmica will pay the UWA an agreed net royalty upon commercialisation.

==> picture [144 x 100] intentionally omitted <==

Molecular Discovery Systems (MDSystems)

MDSystems was established to acquire high content information from cell and tissue based assays through image acquisition and analysis to create a range of direct and indirect commercial opportunities.

Research and development is focused on therapeutic and diagnostic discovery and validation using molecular imaging techniques.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

==> picture [210 x 139] intentionally omitted <==

InCell Analyser 1000

The MDSystems owned InCell Analyser 1000 combines high resolution imaging and high-content analysis to provide a technology that rapidly detects and quantifies components of the cell much faster than conventional methods.

MDSystems was contracted in December 2008 by Professor Kanti Bhoola of the Centre for Asthma, Allergy and Respiratory Research at the Lung Institute of Western Australia (LIWA) to assist in the characterisation of protein expression in human lung and mesothelioma cancer cells. The expression of five proteins within these cells and their response to treatment was required to support previous findings within Professor Bhoola’s research programme.

MDSystems was also contracted by Professor Nigel Laing (WAIMR) to screen for drugs that may reverse inherited neuromuscular diseases. A cell based assay of actin expression was used to screen a collection of pharmaceuticals using high content imaging.

Image capture and analysis of the prepared plates was conducted at the MDSystems laboratory, by BioPharmica scientist Rachel Ramsdale, and

provided analytical results documenting protein location and abundance. The first phase of the project concluded with highly satisfactory results and the second phase of the project ‘The effect of bradykinin on mitogenesis’ is underway.

==> picture [92 x 103] intentionally omitted <==

Rachel Ramsdale Research Scientist

As a result of this work, interest has been generated as to other potential applications of the InCell Analyser 1000 for research purposes. MDSystems and LIWA are currently negotiating the incorporation of MDSystems’ analysis technology into other research programmes.

Floppy Baby Syndrome

MDSystems is currently collaborating with The Laing Neuromuscular Diseases Group to screen medications that might increase heart actin in skeletal muscles, which could potentially offer a treatment for many patients born with Floppy Baby Syndrome.

In a world first, Western Australian scientists have recently cured mice of a devastating muscle disease that causes a Floppy Baby Syndrome, a congenital myopathy disorder that causes babies to be born without the ability to properly use their muscles. The research has been published online in the Journal of Cell Biology and reveals how the team’s efforts have cured mice born with the condition.

The currently incurable genetic disease renders most of the affected children severely paralysed and can take the lives of many of these children before the age of one.

==> picture [159 x 67] intentionally omitted <==

Diagnostic Array Systems (DAS)

Diagnostic Array Systems (DAS) is working with BioPharmica Limited and RMIT University to develop and commercialise BacTrak™, a diagnostic tool that will enable pathology laboratories and the emergency departments of hospitals to provide patients with fast and accurate identification of disease causing bacteria from a single sputum sample. The test has important implications for the clinical management of infectious diseases by identifying the specific bacteria responsible for a disease and suggesting the most effective therapy. Utilisation of the novel test is intended to provide more information, more quickly, than alternative

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Company Focus and Developments

==> picture [35 x 86] intentionally omitted <==

methods. It has the potential to accelerate therapeutic treatment, lead to a reduction in hospitalisations and help reduce the overuse of antibiotics.

The DAS project BacTrak™ was given clinical funding in 2007 with the award of an AusIndustry Commercial Ready Grant. DAS has completed the term of the grant and met its objectives to develop BacTrak™ - a diagnostic genetic microarray for the identification of microbial pathogens causing a range of lung diseases.

The grant, in conjunction with BioPharmica funding, has assisted in the development of BacTrak™ which includes a number of key features which underpin its commercial potential. These include:

Rapid simultaneous detection of 16 respiratory pathogens including Tuberculosis (TB), Legionella, and Methycillin Resistant Staphylococcus Aureus (MRSA).
Results within hours rather than days using the current culture gold standard.
Sensitivity and positive confirmation for the 16 pathogens from easily obtained clinical sputum samples.

Direct benefits from the project development include:

Earlier, pathogen specific treatment;
Shorter length of hospital stay;
Earlier potential isolation of hospital patients; and
Reduction in the over-prescription of broadspectrum antibiotics.

==> picture [209 x 153] intentionally omitted <==

The ability of BacTrak™ to detect respiratory pathogens, including TB, Legionella and MRSA from a single sputum sample is of immense importance and potential value. Given the global significance of TB in particular it is hoped large volume manufacturing by a suitable IVD manufacturer should deliver a low cost diagnostic kit suitable for deployment in both developing and third world countries.

BioPharmica is now actively marketing BacTrak™ with a view to identifying a strategic partner to deliver a commercial version of this unique diagnostic tool.

DAS holds intellectual property for the BacTrak™ technology in Australia. International patent filing is currently progressing through national phase in Canada, China, Europe, Japan and United States (PCT/AU2006/001056).

==> picture [176 x 65] intentionally omitted <==

Cortical Dynamics

Cortical Dynamics is working with BioPharmica and Swinburne University of Technology (SUT) to develop and commercialise a unique depth of anaesthesia monitoring system for use during major surgery. The core technology is based on real time analysis of the patients electroencephalograph (EEG) using a proprietary algorithm based on a mathematically and physiologically detailed understanding of the brain’s rhythmic electrical activity. The theory, developed by Professor David Liley who heads the scientific team at Cortical Dynamics, for the first time provides a meaningful way of relating brain electrical activity to the underlying physiological processes that generate it. Cortical Dynamics is confident that the resulting Brain Anaesthesia Response (BAR) analysis methodology and index will be a more sensitive measure of the state of the brain during anaesthesia than the current alternatives. Alternative technologies are based on detecting empirical correlations between subjective assessments of the level of consciousness and a

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

range of parameters derived from the quantitative analysis of EEG. This brain activity monitor also has potential in neuro-diagnostic applications, including the detection of the early onset of neurodegenerative diseases such as Alzheimer’s and Parkinson’s, and in drug monitoring associated with these conditions.

Two clinical trials, utilising the BAR methodology, have been completed at the Royal Melbourne Hospital. These trials were designed to evaluate the BAR technology in the presence of agents that affect the level of anaesthesia which are known to be problematic to monitor using existing technology. To date, the results of both sets of trials have provided support for the increased sensitivity of the BAR algorithm enabling enhanced detection of anaesthetic drug effect.

The detailed results of one of these trials have now been published in the peer reviewed international journal Computers in Biology and Medicine, thereby providing scientific acceptance for the BAR analysis methodology. The paper entitled “Dissociating the effects of nitrous oxide on brain electrical activity using fixed order time series modeling” doi: 10.1016 / j.compbiomed.2008.08.011 by David T.J. Liley, Kate Leslie, Nicholas C Sinclair and Martin Feckie reports the significant results of a trial conducted to compare the sensitivity of the BAR algorithm to the market leading BIS Monitor (Aspect Medical Systems) in detecting the effects varying levels of adjuvant nitrous oxide had on measures of anaesthesia induced by the common inhaled agent sevoflurane.

The abstract states:

“A number of commonly used anaesthetics, including nitrous oxide (N2O), are poorly detected by current electroencephalography (EEG)-based measures of anaesthetic depth such as the bispectral index. Based on a previously elaborated theory of electrocortical rhythmogenesis we developed a physiologically-inspired method of EEG analysis that was hypothesised to be more sensitive in detecting and characterising N2O effect than the bispectral index, through its combined EEG estimates of cortical input and cortical state. By evaluating sevoflurane-

induced loss of consciousness in the presence of low brain concentrations of N2O in thirty eight elective surgical patients, N2O was associated with a statistically significant reduction in the input the frontal cortex received from other cortical and subcortical areas. In contrast the bispectral index responded only to low, but not to high, concentrations of N2O.”

“The acceptance for publication of the nitrous oxide trial results represents a major milestone in the BAR project as it signifies that the fundamental algorithmic approach is deemed to be valid and useful.

Six pre-production prototypes are now available for deployment in further trials and evaluations which BioPharmica is confident will further positively differentiate the BAR monitor from existing competition.

Cortical Dynamics received and analysed a comprehensive dataset from a European clinical research centre. This data is from a study which used the same design as our latest opioid trial and has now been analysed using the BAR analysis method. The analysis of this European data set using the BAR methodology unabiguously indicates that the effects of remifentanil and propofol on brain electrical activity can be differentiated. The detailed results of this analysis are in the process of being prepared for publication.

These results underscore the significant potential of the BAR methodology to separately monitor hypnotic and analgesic state using brain electrical activity recorded during surgery. It is expected that this data sharing will lead to collaboration with a number of European centres of anaesthetic monitoring excellence.

Cortical Dynamics’ intended securities exchange listing has been postponed until a suitable period. BioPharmica notes that the global financial crisis has seen a huge reduction in the availability of retail investment funds, and that only approximately eight intended securities exchange listings have commenced to the end of July 2009, compared with seventy four for all of 2008.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Directors’ Report

==> picture [35 x 86] intentionally omitted <==

The directors of BioPharmica Limited present their report on the company and its controlled entities for the financial year ended 30 June 2009.

Directors

The names of directors in office at any time during or since the end of the year are:

D L Breeze

S K Yap

G Gilbert

H Goh

Company Secretary

Ms Deborah Ambrosini continues in her role of Company Secretary. She also holds the position of Financial Controller of the Company and has over 10 years experience in Corporate accounting roles.

Principal Activities

BioPharmica’s Competitive Advantages

BioPharmica partners with academic institutions on projects that have excellent scientific merit, a strong intellectual property position and commercial potential.
Research is carried out by the acknowledged experts in the field while BioPharmica provides the commercial direction and focus.
BioPharmica has a balanced management system combining corporate and scientific expertise.
The company head office is based in Perth, Western Australia, giving it an ideal position for interactions with Asia.
BioPharmica facilitates the tech-transfer process from academia to the pharma / biotech industry and provides potential partners / licensees with attractive opportunities.

Summary of BioPharmica’s Value Proposition

Significant potential return for investors
Current licence and commercial opportunities in three areas of its project portfolio
Anti-cancer therapeutic and the Brain Anaesthesia Response (BAR) monitor both address product areas which has a potential $1 billion US market size
The Diagnostic Array Systems Pty Ltd (DAS) BacTrak™ product has global market application
Commercial outcomes have capacity to significantly impact on the company in the near term.

New Anti-Mitotic Drug Development

A new class of anti-mitotic drugs, discovered by BioPharmica’s cancer cell biology researcher Dr Robin Scaife, has undergone extensive development toward pre-clinical testing of anticancer activity. Detailed analyses of chemical analogues of the new drug have yielded a new drug that exhibits nearly 1000 times the biological activity of the initial compound derived by screening of a chemical library. This new drug has also recently undergone testing in animals to rule out adverse toxic side-effects. Animals exposed to very high levels of the new drug exhibited no signs of acute toxicity. BioPharmica’s new anti-mitotic drug is, therefore, primed for pre-clinical testing of anti-tumour activity.

HLS5 Project

A new agreement between the University of Western Australia and BioPharmica has been finalised to replace the HLS5 Collaborative Research and Technology Farmin Agreement.

Under the new agreement BioPharmica will own 100% of the intellectual property of the HLS5 project and its derivatives developed during the research and development. BioPharmica will continue to sole fund the development of the projects. In exchange for the ownership of the intellectual property BPH will pay the UWA an agreed net royalty upon commercialisation.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Biomarkers and Therapeutics

Developed around novel pathways involved in multiple, key disease processes, with the linked development of diagnostic, prognostic and treatment regimes. The current development pipeline involves pre-clinical molecules for use in oncology, metabolic, neurodegenerative and infectious disease.

BioPharmica has established the 100% owned entity, Molecular Discovery Systems Pty Ltd (MDS Systems) to acquire high content information from large scale sample analysis to create a range of direct and indirect commercial opportunities. Research and development is focused on theranostic discovery and validation linking therapeutics and diagnostics.

Drug Monitoring

Developing new technology that will provide clinicians and researchers with a substantially improved ability to detect and accurately quantify the effects of a wide range of drugs on brain function.

Diagnostic Arrays

Identification of multiple micro-organisms in biological samples. Simple, rapid and inexpensive characterisation of disease, facilitating correct diagnosis and treatment.

Nanoprobes

Fibre optic SERS (Surface-Enhanced Raman Spectroscopy) nanotechnology used in biosensors across a range of disciplines.

Operating Results

The consolidated loss of the economic entity after providing for income tax and accounting for minority interests amounted to $2,215,717 (2008 $1,614,219).

Dividends

The Directors recommend that no dividend be paid in respect of the current period and no dividends have been paid or declared since the commencement of the period.

Review of Operations

The major activities throughout the period were (a) Identification of new anti-mitotic agents that induce mitotic arrest and apoptosis, thereby presenting the opportunity for co-development of a drug candidate validation programme in the field of anit-mitotic cancer therapeutics (b) the successful conclusion of an AusIndustry Commercial Ready Grant for DAS to develop BacTrak™ - a diagnostic genetic microarray for the identification of microbial pathogens causing a range of lung diseases (c) Collaboration by MDSystems Research Scientist Rachel Ramsdale with The Laing Neuromuscular Diseases Group to screen medications that might increase heart actin in skeletal muscles, which could potentially offer a treatment for many patients born with Floppy Baby Syndrome (d) The Lung Institute of Western Australia contracted MDSystems to assist in the characterisation of protein expression in human lung and mesothelioma cancer cells, and (e) Cortical Dynamics Limited has commenced analysis with the BAR analysis method of a comprehensive dataset from a European clinical research centre. This is anticipated to lead to further collaboration with a number of European centres of anaesthetic monitoring excellence.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Directors’ Report

==> picture [35 x 86] intentionally omitted <==

Financial Position

The net assets of the economic entity decreased by $2,052,147 to $716,488 at 30 June 2009. This decrease has largely resulted from the following factors:

Cash balances decreasing by $473,398
Trade and other receivables decreasing by $667,407
The consolidated entity posting a net loss of $2,215,717 after accounting for minority interests

Significant Changes in State Of Affairs

A team of expert cancer cell biology researchers at BioPharmica Limited have used state-of-the art technology to screen synthetic molecules and natural extracts for new anti-cancer drugs. Using high-content imaging and computational analyses, these drug screening efforts have now yielded a new class of potential anti-cancer drugs. The new anti-cancer drugs potentially inhibit cell proliferation, resulting in pronounced killing of all human cancer cell lines tested to date.

In a world first, Western Australian scientists have recently cured mice of a devastating muscle disease that causes Floppy Baby Syndrome, a congenital myopathy disorder that causes babies to be born without the ability to properly use their muscles. The research has been published online in the Journal of Cell Biology and reveals how the team’s efforts have cured mice born with the condition.

After Balance Date Events

On 7th August 2009 BioPharmica Limited (BPH) signed a new agreement with the University of Western Australia (UWA) to replace the previous Research and Collaborative Technology and Farmin Agreement which was terminated on 24th April 2009. Under the new agreement BPH will own 100% of the intellectual property of the HLS5 project and its derivatives that have been developed during the research and development. BPH will continue to sole fund the development of the projects. In exchange for the ownership of the intellectual property BPH will provide UWA an agreed net royalty upon commercialisation. The Joint Venture has been accounted as 100% interest at 30 June 2009.

On 12th August 2009 Biopharmica Limited announced that it will be conducting a shareholder share purchase plan (SSPP) to raise capital for the continuing research and development of its projects. The SSPP will allow all eligible shareholders to purchase a maximum value of $15,000 worth of shares and will be limited to 30% of the current share capital.

Environmental Issues

The consolidated group’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a state or territory.

Future Developments

The entity will continue to commercialise breakthrough biomedical research developed in universities, medical institutes and hospitals.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Information on Directors

D L Breeze

Managing Director and Executive Chairman – Age 55 Shares held – 12,904,854 Unlisted Options held – nil

David is a Corporate Finance Specialist with extensive experience in the stock broking industry and capital markets. He has been a corporate consultant to Daiwa Securities; was formerly Manager of Corporate Services for Eyres Reed McIntosh and the State Manager and Associate Director for the stock broking firm BNZ North’s.

David has a Bachelor of Economics and a Masters of Business Administration, and is a Member of the Australian Institute of Management, an Associate Member of the Financial Services Institute of Australasia, and a Fellow of the Institute of Company Directors of Australia. He has published in the Journal of Securities Institute of Australia and has also acted as Independent Expert under the Corporations Act. He has worked on the structuring, capital raising and public listing of over 70 companies involving in excess of $250M. These capital raisings covered a diverse range of areas including oil and gas, gold, food, manufacturing and technology.

David is Chairman of Grandbridge Limited, a publicly listed investment and advisory company and an Executive Director of MEC Resources Ltd.

S K Yap

Non-Executive Director – Age 54 Shares held – 1,700,000 Unlisted Options held – 2,000,000

Seng is currently acting as a consultant for major companies in Japan and China and has extensive experience in Investment banking activities throughout the Asian region. Seng was formerly the CEO of a listed resort and gaming operator in the Philippines. He was also previously a Director for Victoria Co, the owner and operator of the Burswood Resort. Seng also served as Director for Daiwa Securities in Australia.

Seng has a Bachelor of Engineering (Information Engineering) Degree from Kyoto University as well as a Postgraduate Diploma from the Securities Institute of Australia and the Company Directors Diploma from the Australian Institute of Company Directors.

Seng is a Non-Executive director of ASX listed company MEC Resources Ltd.

G Gilbert

Non-Executive Director – Age 61 Shares held – 961,538 Unlisted Options held – 2,000,000

Greg is a specialist in strategy and planning and works in the health and aged care sector. He has a Master of Science from Cranfield University in the UK and, in addition, has a Master of Health Administration from La Trobe University, an MBA from Deakin University, a BA from the University of Queensland, and a Dip.App Sc from the Royal Military College Duntroon.

Greg has an extensive background in merchant banking and banking, having held the position Global Head of Strategy and Finance and Project Director Global Credit Review with the National Australia Bank, as well as having worked in executive roles with Capel Court Investment Bank, CIBC Australia Limited and Bentley and Chau.

Greg has also worked with the National Australia Bank as an Internal Consultant on strategic operational reviews with Mckinsey and Company and Booz Allen and Hamilton consultants.

A former Lieutenant Colonel in the Australian Defence Force, he has extensive senior management experience in strategic planning, financial management, change management and project management as well as merchant banking and corporate advisory experience in mergers and acquisitions and valuations.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Directors’ Report

==> picture [35 x 86] intentionally omitted <==

H Goh

Non-Executive Director – Age 54 Shares held – 758,538 Unlisted Options held – 2,000,000

Hock was formerly President of Network and Infrastructure Solutions, a division of Schlumberger Limited, based in London with revenue in excess of US$1.5 billion. He had global responsibility of Schlumberger’s outsourcing services, security, business continuity and networked related business units.

Prior to that, Hock was President of Schlumberger Asia based in Beijing, China where he managed their Asian operations consisting of a broad range of services including oil field services, outsourcing, financial software and smartcards. Hock was responsible for US$800 million in revenue and more than 2,000 employees spread across 17 countries.

In his 25 year career with Schlumberger, Hock held several other field and management responsibilities in the oil and gas industry spanning more than ten countries in Asia, the Middle East and Europe. Hock started as an oil field service engineer in Indonesia in 1980 before moving to Australia where he worked on the rigs in Roma, Queensland, Bass Strait in Victoria and the Northwest Shelf, offshore Western Australia.

Hock is also an operating partner with Baird Capital Partners, the U.S. based buyout fund of Baird Private Equity, providing change-of-control and growth capital to middle-market companies. Baird Private Equity has raised and managed $1.7 billion in capital.

Hock is the Chairman of Netgain Systems, a network monitoring software provider. He also serves on the Board of Xaloy Holdings, a US based steel components manufacturer for the plastic industry, as well as an independent director of THISS Technologies Pte Limited, a Singapore based satellite communication provider. He received his B Eng (Hons) in Mechanical Engineering from Monash University, Australia. He also completed an Advanced Management Program at INSEAD/ France in 2004.

Hock is Chairman of ASX listed company MEC Resources Ltd.

Remuneration Report

This report details the nature and amount of remuneration for each director of BioPharmica Limited, and for the executives receiving the highest remuneration.

D L Breeze – Executive Chairman H Goh – Non-Executive Director S K Yap – Non-Executive Director G Gilbert – Non Executive Director C R Murphy – Non Executive Director (resigned 2nd October 2007) D Ambrosini – Company Secretary

Remuneration Policy

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

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

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, was developed by the remuneration committee and approved by the board after seeking professional advice from independent external consultants.
All executives receive a base salary (which is based on factors such as length of service and experience), superannuation, fringe benefits, options and performance incentives.
The remuneration committee reviews executive packages annually by reference to the economic entity’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

The performance of executives is measured against criteria agreed biannually with each executive and is based predominantly on the forecast growth of the economic entity’s profits and shareholders’ value. All bonuses and incentives must be linked to predetermined performance criteria. The board may, however, exercise its discretion in relation to approving incentives, bonuses and options, and can recommend changes to the committee’s recommendations. Any changes must be justified by reference to measurable performance criteria. The policy is designed to attract the highest calibre of executives and reward them for performance that results in long-term growth in shareholder wealth.

Executives are also entitled to participate in the employee share and option arrangements.

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

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

remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the economic entity. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company and are able to participate in the employee option plan.

Employment contracts of directors and senior executives

The employment conditions of the managing director, all of the executive directors and specified executives are formalised in contracts of employment. The directors are permanent employees of BioPharmica Limited. The employment contracts stipulate a six month resignation period. The company may terminate an employment contract without cause by providing six months written notice or making payment in lieu of notice, based on the individual’s annual salary component together with a redundancy payment of six months of the individual’s fixed salary component. Termination payments are generally not payable on resignation or dismissal for serious misconduct. In the instance of serious misconduct the company can terminate employment at any time. Any options not exercised before or on the date of termination will not lapse.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The remuneration committee determines payments to the non-executive directors and reviews their

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Directors’ Report

Details of Remuneration for the year ended 30 June 2009

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

2009

Key Management Person	Cash, Salary and fees	Short-term Benefits Cash profit share Non-cash benefit	Short-term Benefits Cash profit share Non-cash benefit	Other	Post employment Benefits Superannuation
D L Breeze	49,000	-	-	-	-
S K Yap	12,500	-	-	-	-
G Gilbert	-	-	-	-	-
H Goh	-	-	-	-	-
D Ambrosini	-	-	-	-	-

2009 (cont’d)

==> picture [35 x 86] intentionally omitted <==

Key Management Person	Long-term Benefits Other	Share-based payment Equity Options	Share-based payment Equity Options	Total $	Performance Related %
D L Breeze	-	74,000	-	123,000	-
S K Yap	-	-	-	12,500	-
G Gilbert	-	25,000	-	25,000	-
H Goh	-	25,000	-	25,000	-
D Ambrosini	-	-	-	-	-

2008

Key Management Person	Cash, Salary and fees	Short-term Benefits Cash profit share Non-cash benefit	Short-term Benefits Cash profit share Non-cash benefit	Other	Post-employment Benefits Superannuation
D L Breeze	123,000	-	-	-	-
S K Yap	25,000	-	-	-	-
C R Murphy	31,450	-	-	-	581
G Gilbert	18,748	-	-	-	-
H Goh	16,666	-	-	-	-
D Ambrosini	-	-	-	-	-

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

2008 (cont’d)

Key Management Person	Long-term Benefits Other	Share-based payment Equity Options	Share-based payment Equity Options	Total $	Performance Related %
D L Breeze	-	-	-	123,000	-
S K Yap	-	100,000	72,200	197,200	36.61
C R Murphy	-	-	-	32,031	-
G Gilbert	-	-	72,200	90,948	79.38
H Goh	-	-	72,200	88,866	81.25
D Ambrosini	-	-	1,181	1,181	100.0

Options and Rights Holdings

2009 Number of Options Held by Key Management Personnel

	Balance 1.7.2008	Granted as Compen- sation	Options Exercised	Net Change Other	Balance 30.6.2009	Total Vested 30.6.2009	Total Exercis- able 30.6.2009	Total Unexercis- able 30.6.2009
D L Breeze	2,000,000	-	-	(2,000,000)	-	-	-	-
S K Yap	4,000,000	-	-	(2,000,000)	2,000,000	2,000,000	2,000,000	-
G Gilbert	2,000,000	-	-	-	2,000,000	2,000,000	2,000,000	-
H Goh	2,000,000	-	-	-	2,000,000	2,000,000	2,000,000	-
D Ambrosini	1,000,000	-	-	-	1,000,000	333,333	333,333	666,667

2008 Number of Options Held by Key Management Personnel

	Balance 1.7.2007	Granted as Compen- sation	Options Exercised	Net Change Other	Balance 30.6.2008	Total Vested 30.6.2008	Total Exercis- able 30.6.2008	Total Unexercis- able 30.6.2008
D L Breeze	2,000,000	-	-	-	2,000,000	2,000,000	2,000,000	-
S K Yap	2,000,000	2,000,000	-	-	4,000,000	4,000,000	4,000,000	-
C R Murphy	4,000,000	-	-	(2,000,000)	2,000,000	2,000,000	2,000,000	-
G Gilbert	-	2,000,000	-	-	2,000,000	2,000,000	2,000,000	-
H Goh	-	2,000,000	-	-	2,000,000	2,000,000	2,000,000	-
D Ambrosini	-	1,000,000	-	-	1,000,000	-	-	1,000,000

The Net Change Other reflected above includes those options that have been forfeited by holders, options that have expired as well as options issued during the year under review.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Directors’ Report

Shareholdings

2009 Number of Shares Held by Key Management Personnel

==> picture [441 x 34] intentionally omitted <==

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

Balance Received as Options Net Change Balance
1.7.2008 Compensation Exercised Other 30.6.2009
----- End of picture text -----

D L Breeze	10,119,102	2,846,152	-	-	12,965,254
S K Yap	1,700,000	-	-	-	1,700,000
G Gilbert	-	961,538	-	-	961,538
H Goh	-	961,538	-	-	961,538
D Ambrosini	-	-	-	-	-

2008 Number of Shares Held by Key Management Personnel

==> picture [441 x 34] intentionally omitted <==

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

Balance Received as Options Net Change Balance
1.7.2007 Compensation Exercised Other 30.6.2008
----- End of picture text -----

D L Breeze	10,056,402	-	-	-	10,056,402
S K Yap	700,000	1,000,000	-	-	1,700,000
C R Murphy	700,000	-	-	(700,000)	-
G Gilbert	-	-	-	-	-
H Goh	-	-	-	-	-
D Ambrosini	-	-	-	-	-

Net Change Other refers to shares purchased or sold during the financial year.

==> picture [35 x 86] intentionally omitted <==

On 18 March 2009 the Directors were issued with shares as consideration for their 2009 Directors fees. The shares were issued at a value of 2.6 cents per share. The payment of Directors fees in shares was made after the Directors of BioPharmica voluntarily suspended cash payments to reduce current expenditure levels to ensure the company can develop its projects to a commercial status.

Company performance, shareholder wealth and director and executive remuneration

The following table shows the gross revenue and the operating result for the last 3 years for the listed entity, as well as the share price at the end of the respective financial years. Analysis of the actual figures shows a decrease in the revenue from the previous year with an increase in the loss in the current year. Actions to offset the increased loss have been taken and a series of measures have been put in place to reduce the expenditure levels of the entity. The board is of the opinion that the decline in the share price is wholly attributable to the recent share market fluctuations.

	2007	2008	2009
Revenue	578,436	1,103,422	176,477
Net Loss	(1,266,019)	(1,614,219)	(2,215,717)
Share price at Year end	$0.22	$0.046	$0.02

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Meetings of Directors

During the financial year, four meetings of directors (including committees of directors) were held.

	Directors’ Meetings Number eligible to attend Number attended
D L Breeze	4 4
S K Yap	4 4
G Gilbert	4 4
H Goh	4 4

Indemnifying Officers or Auditors

During or since the end of the financial year the company has given an indemnity or entered an agreement to indemnify, or paid or agreed to pay insurance premiums as follows:

The company has paid premiums to insure each of the following directors against liabilities for costs and expenses incurred by them in defending any legal proceedings arising out of their conduct while acting in the capacity of director of the company, other than conduct involving a wilful breach of duty in relation to the company. The amount of the premium was $13,540.

D Breeze
S K Yap
G Gilbert
H Goh

Options

At the date of this report, the unissued ordinary shares of BioPharmica Limited under option are as follows:

==> picture [441 x 22] intentionally omitted <==

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

Grant Date Date of Expiry Exercise Price Number Under Option
----- End of picture text -----

17 October 2006	17 October 2011	*	500,000
29 April 2008	29 April 2013	*	500,000
20 December 2007	31 October 2010	$0.15	6,000,000
1 June 2008	30 June 2013	$0.15	4,150,000
16 December 2008	16 December 2013	$0.15	1,000,000

The exercise price will be the average amount determined by the market price for the 5 days prior to exercise

On 16 December 2008 1,000,000 options were issued under the BioPharmica Limited Employee Incentive Option Plan. The options are exercisable at 15 cents with an expiry date of 16 December 2013. The options had a fair value of $11,900. The fair value of the options was determined using the Black Scholes option pricing model.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Directors’ Report

During the year ended 30 June 2009, no ordinary shares of BioPharmica Limited were issued on the exercise of options granted under the BioPharmica Limited Employee Option Plan. No amounts are unpaid on any of the shares.

No person entitled to exercise the option had or has any right by virtue of the option to participate in any share issue of any other body corporate.

Proceedings on Behalf of Company

No person has applied for leave of Court to bring proceedings on behalf of the company or intervene in any proceedings to which the company is a party for the purpose of taking responsibility on behalf of the company for all or any part of those proceedings. The company was not a party to any such proceedings during the year.

Non-audit Services

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

all non-audit services are reviewed and approved by the audit committee prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
the nature of the services provided do not compromise the general principles relating to auditor independence in accordance with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.

==> picture [35 x 86] intentionally omitted <==

No fees for non-audit services were paid/payable to the external auditors during the year ended 30 June 2009.

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the year ended 30 June 2009 has been received and can be found on page 21.

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

==> picture [130 x 54] intentionally omitted <==

David Breeze

Dated this 19th August 2009

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Auditor’s Independence Declaration

==> picture [101 x 40] intentionally omitted <==

==> picture [101 x 26] intentionally omitted <==

As lead auditor for the audit of BioPharmica Limited for the year ended 30 June 2009, I declare that to the best of my knowledge and belief, there have been:

(a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(b) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of BioPharmica Limited and the entities it controlled during the year.

==> picture [86 x 50] intentionally omitted <==

PKF Chartered Accountants

==> picture [140 x 51] intentionally omitted <==

Chris Nicoloff Partner

Dated at Perth, Western Australia this 19th day of August 2009.

PKF is a national association of independent chartered accounting and consulting firms, each trading as PKF. PKF Australia Ltd is also a member of PKF International, an association of legally independent chartered accounting and consulting firms.

Liability limited by a scheme approved under Professional Standards Legislation

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Corporate Governance Statement

The Board of Directors of BioPharmica Limited (“BPH” or “the Company”) is responsible for the corporate governance of the economic entity. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom they are elected and to whom they are accountable.

==> picture [35 x 86] intentionally omitted <==

To ensure that the Board is well equipped to discharge its responsibilities, it has established guidelines and accountability as the basis for the administration of corporate governance.

Corporate Governance Disclosures

BioPharmica Limited and the board are committed to achieving and demonstrating the highest standards of corporate governance. The board continues to review the framework and practices to ensure they meet the interests of shareholders. The company and its controlled entities together are referred to as the Group in this statement.

Composition of the Board

The composition of the Board is determined in accordance with the following principles and guidelines:

the Board should comprise a majority or at least 50% of the Board will be independent nonexecutive directors;
the Board should have at least one director with an appropriate range of qualifications and expertise; and
the Board shall meet at regular intervals and follow meeting guidelines set down to ensure all directors are made aware of, and have available all necessary information, to participate in an informed discussion of all agenda items.

When a vacancy exists, through whatever cause, or where it is considered that the Board would benefit from the service of a new director with particular skills, the Board selects a candidate or panel of candidates with the appropriate expertise.

The Board then appoints the most suitable candidate, who must stand for election at the next general meeting of shareholders. The Company does not have a formal Nomination Committee.

Remuneration and Nomination Committees

The Company does not have a formal Remuneration or Nomination Committee. The full Board attends to the matters normally attended to by a Remuneration Committee and a Nomination committee. Remuneration levels are set by the Company in accordance with industry standards to attract suitable qualified and experienced Directors and senior executives.

Audit Committee

The Company does not have a formal Audit Committee. The full Board carried out the functions of an Audit Committee. Due to the status of the Company and the relatively straight forward accounts of the Company anticipated in the financial year, the Directors believe that at the moment there would be no additional benefits obtained by establishing such a committee. The Board follows the Audit Committee Charter, a copy of which is available on request.

Board Responsibilities

As the Board acts on behalf of and is accountable to the shareholders, it seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks. The Board seeks to discharge these responsibilities in a number of ways.

The responsibility for the operation and administration of the economic entity is delegated by the Board to the Chief Executive Officer. The Board ensures that the Chief Executive Officer is appropriately qualified and experienced to discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers, employees, contractors and consultants.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

The Board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the Board. It has a number of mechanisms in place to ensure this is achieved, including the following:

Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
Implementation of operating plans and budgets by management and Board monitoring progress against budget;
Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.

Monitoring of the Board’s Performance

In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance of all directors is to be reviewed annually by the chairperson. Directors whose performance is unsatisfactory are asked to retire.

Best Practice Recommendation

Outlined below are the 8 Essential Corporate Governance Principles as outlined by the ASX and the Corporate Governance Council. The Company has complied with the Corporate Governance Best Practice Recommendations except as identified below.

Action taken and reasons if not adopted

Principle 1: Lay solid foundations for management and oversight

The relationship between the board and senior management is critical to the Group’s long-term success. The directors are responsible to the shareholders for the performance of the Group in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the Group as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the Group is properly managed.

The responsibilities of the board include:

providing strategic guidance to the Group including contributing to the development of and approving the corporate strategy;
reviewing and approving business plans, and financial plans including major capital expenditure initiatives;
overseeing and monitoring:
organisational performance and the achievement of the Group’s strategic goals and objectives and
progress of major capital expenditures and other significant corporate projects including any acquisitions or divestments
monitoring financial performance including approval of the annual and half-year financial reports;
appointment, performance assessment and, if necessary, removal of the Managing Director;
ratifying the appointment and/or removal and contributing to the performance assessment for the members of the senior management team including the CFO and the Company Secretary;
ensuring there are effective management processes in place and approving major corporate initiatives;
enhancing and protecting the reputation of the organization;
overseeing the operation of the Group’s system for compliance and risk management reporting to shareholders;

Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy initiatives are formally delegated by the board to the Managing Director and senior executives.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 2: Structure the board to add value

The board operates in accordance with the broad principles set out in its charter. The charter details the board’s composition and responsibilities.

The board seeks to ensure that :

at any point in time, its membership represents an appropriate balance between directors with experience and knowledge of the Group and directors with an external or fresh perspective; and
the size of the board is conducive to effective discussion and efficient decision-making.

Directors’ independence

The board has adopted specific principles in relation to directors’ independence. These state that when determining independence, a director must be a non-executive and the board should consider whether the director:

is a substantial shareholder of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company;
is or has been employed in an executive capacity by the company or any other Group member within three years before commencing to serve on the board;
within the last three years has been a principal of a material professional adviser or a material consultant to the company or any other Group member, or an employee materially associated with the service provided;
has a material contractual relationship with the company or a controlled entity other than as a director of the Group;

==> picture [35 x 86] intentionally omitted <==

is free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s independent exercise of their judgement.

Materiality for these purposes is determined on both quantitative and qualitative bases. A transaction of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the director’s performance.

The board assesses independence each year. To enable this process, the directors must provide all information that may be relevant to the assessment.

Board members

Details of the members of the board, their experience, expertise, qualifications, term of office, relationships affecting their independence and their independent status are set out in the directors’ report under the heading ‘’Information on directors’’. At the date of signing the directors’ report, there are three non-executive directors and one executive director, two of whom have no relationships adversely affecting independence and so are deemed independent under the principles set out above.

Mr Breeze and Mr Yap both have business dealings with the Group as disclosed in note 25 to the financial report. However, these are not of a value or significance that adversely affect the directors’ independence.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Action taken and reasons if not adopted

Term of office

The company’s Constitution specifies that all non-executive directors must retire from office no later than the third annual general meeting (AGM) following their last election. Where eligible, a director may stand for re-election, subject to the following limitations:

on attaining the age of 72 years a director will retire, by agreement, at the next AGM and will not seek re-election.

Chair and Chief Executive Officer (CEO)

The Chair is responsible for leading the board, ensuring directors are properly briefed in all matters relevant to their role and responsibilities, facilitating board discussions and managing the board’s relationship with the company’s senior executives. In accepting the position, the Chair has acknowledged that it will require a significant time commitment and has confirmed that other positions will not hinder his effective performance in the role of Chair.

The CEO is responsible for implementing Group strategies and policies.

The Chairman does not satisfy the Independence test as the role of the Chairman and the CEO is exercised by the same person. The board is of the opinion that the Chairman’s role as Chairman of the Board is appropriate given his experience and knowledge of the business.

Committees

The number of meetings of the company’s board of directors and of each board committee held during the year ended 30 June 2009, and the number of meetings attended by each director is disclosed on page 19.

It is the company’s practice to allow its executive directors to accept appointments outside the company. No appointments of this nature were accepted during the year ended 30 June 2009.

The Company is not of a size at the moment that justifies having a separate Nomination Committee. However, matters typically dealt with by such a committee are dealt with by the Board of Directors.

Notices of meetings for the election of directors comply with the ASX Corporate Governance Council’s best practice recommendations.

Principle 3: Promote ethical and responsible decision making

The company has developed a statement of values a which has been fully endorsed by the board and applies to all directors and employees. The Statement is regularly reviewed and updated as necessary to ensure it reflects the highest standards of behaviour and professionalism and the practices necessary to maintain confidence in the Group’s integrity and to take into account legal obligations and reasonable expectations of the company’s stakeholders.

The Statement requires that at all times all company personnel act with the utmost integrity, objectivity and in compliance with the letter and the spirit of the law and company policies.

The purchase and sale of company securities by directors and employees is monitored by the Board.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 4: Safeguard integrity in financial reporting

Adopted except as follows:-

The Company does not have a separate Audit Committee. The full Board carries out the functions of an Audit Committee. The Board has the authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party.

Due to the status of the Company and the relatively straight forward accounts of the Company, the Directors at the moment can see no additional benefits to be obtained by establishing such a committee.

The Board follows the Audit Committee Charter, a copy of which is available on request.

External auditors

The Board’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually and applications for tender of external audit services are requested as deemed appropriate, taking into consideration assessment of performance, existing value and tender costs. PKF was appointed as the external auditor in 2008. It is PKF’s policy to rotate audit engagement partners on listed companies at least every five years.

An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in the directors’ report and in note 5 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the Board.

The external auditor will attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the audit report. The Company is not of a size at the moment that justifies having a internal audit division.

==> picture [35 x 86] intentionally omitted <==

Principle 5 & 6: Make timely and balanced disclosures and respect the rights of shareholders

Continuous disclosure and shareholder communication

The company has policies and procedures on information disclosure that focus on continuous disclosure of any information concerning the Group that a reasonable person would expect to have a material effect on the price of the company’s securities. These policies and procedures also include the arrangements the company has in place to promote communication with shareholders and encourage effective participation at general meetings.

The Company Secretary has been nominated as the person responsible for communications with the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Action taken and reasons if not adopted

All information disclosed to the ASX is posted on the company’s website as soon as it is disclosed to the ASX. When analysts are briefed on aspects of the Group’s operations, the material used in the presentation is released to the ASX and posted on the company’s web site. Procedures have also been established for reviewing whether any price sensitive information has been inadvertently disclosed and, if so, this information is also immediately released to the market.

All shareholders receive a copy of the company’s annual (full or concise) and half-yearly reports. In addition, the company seeks to provide opportunities for shareholders to participate through electronic means. Recent initiatives to facilitate this include making all company announcements, media briefings, details of company meetings, and financial reports available on the company’s website.

Principle 7: Recognise and manage risk

The board and senior executives are responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. In summary, the company policies are designed to ensure strategic, operational, legal, reputational and financial risks are identified, assessed, effectively and efficiently managed and monitored to enable achievement of the Group’s business objectives.

Considerable importance is placed on maintaining a strong control environment. There is an organisation structure with clearly drawn lines of accountability and delegation of authority. The board actively promotes a culture of quality and integrity.

The responsibility for the operation and administration of the economic entity is delegated by the board to the Chief Executive Officer. The board ensures that the Chief Executive Officer is appropriately qualified and experienced to discharge his responsibilities, and has in place procedures to assess the performance for the Company’s officers, employees, contractors and consultants. The board receives monthly updates as to the effectiveness of the company’s management of material risks that may impede meeting business objectives.

The board is responsible for ensuring that management’s objectives and activities are aligned with the expectations and risks identified by the board. It has a number of mechanisms in place to ensure this is achieved, including the following:

Board approval of a strategic plan, designed to meet shareholder needs and manage business risk;
Implementation of operating plans and budgets by management and board monitoring progress against budget;
Procedures to allow directors, in the furtherance of their duties, to seek independent professional advice at the Company’s expense.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Corporate Governance Statement

Action taken and reasons if not adopted

Principle 7: Recognise and manage risk (cont’d)

Control procedures cover management accounting, financial reporting, project appraisal, IT security, compliance and other risk management issues. The Chief Executive Officer is required to ensure that appropriate controls are in place to effectively manage the identified risks. This is monitored by the board on a monthly basis.

The environment

Information on compliance with significant environmental regulations is set out in the directors’ report.

Corporate reporting

The Managing Director and CFO have made the following certifications to the board:

that the company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the company and Group and are in accordance with relevant accounting standards;
that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the board and that the company’s risk management and internal compliance and control is operating efficiently and effectively in all material respects in relation to financial reporting risks.

Principle 8: Remunerate fairly and responsibly

The Company is not of a size at the moment that justifies having a separate Remuneration Committee. However, matters typically dealt with by such a committee are dealt with by the board.

==> picture [35 x 86] intentionally omitted <==

The board makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors.

Each member of the senior executive team signs a formal employment contract at the time of their appointment covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. The standard contract refers to a specific formal job description.

Further information on directors’ and executives’ remuneration, including principles used to determine remuneration, is set out in the directors’ report under the heading ‘’Remuneration report’’. In accordance with Group policy, participants in equity-based remuneration plans are not permitted to enter into any transactions that would limit the economic risk of options or other unvested entitlements.

The board with the Chief Executive Office also assumes responsibility for overseeing management succession planning, including the implementation of appropriate executive development programmes and ensuring adequate arrangements are in place, so that appropriate candidates are recruited for later promotion to senior positions.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Income Statement

for the year ended 30 June 2009

Note Revenue 2 Other income 2 Share of associates profit/(loss) Administration expenses Advertising and Promotion expenses Consulting and Legal expenses Research and Development expenses Depreciation and Amortisation expenses 3 Employee expenses Insurance expenses Impairment expenses 11 Mailing and Distribution expenses Service Fees Travelling expenses Other expenses from ordinary activities Operating Loss Before Income Tax Income tax expense *Operating Loss from continuing* *operations* Operating Loss for the year Operating Loss attributable to minority equity interest *Operating Loss attributable to* *members of the parent entity* Earnings Per Share – Basic and diluted earnings per share (cents per share) 6	Consolidated 2009 $ 2008 $ 46,792 119,206 129,685 984,216 - (34,428) (228,351) (273,709) (2,505) (13,882) (197,644) (294,032) (838,898) (1,010,344) (46,339) (44,618) (239,736) (749,304) (21,290) (24,214) (641,815) - - (42,079) (131,040) (131,040) (5,467) (21,596) (64,003) (96,424) (2,240,611) (1,632,248) - - (2,240,611) (1,632,248) (2,240,611) (1,632,248) 24,894 18,029 (2,215,717) (1,614,219) (3.04) (2.33)	Parent 2009 $ 2008 $
		137,628 168,767 (60,683) 654,538 - (34,428) (109,020) (198,857) (2,505) (13,882) (173,597) (239,621) (122,754) (441) (39,906) (37,754) (239,736) (716,379) (19,007) (23,602) (151,697) - - (42,079) (131,040) (131,040) (5,301) (15,205) (18,895) (14,415)
		(936,513) (644,398) - -
		(936,513) (644,398)
		(936,513) (644,398)
		- -
		(936,513) (644,398)

The accompanying notes form part of these financial statements.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Balance Sheet

as at 30 June 2009

==> picture [35 x 86] intentionally omitted <==

Note Current Assets Cash and cash equivalents 7 Trade and other receivables 8 Financial Assets 10 Other current assets 9 Total Current Assets Non-Current Assets Financial assets 10 Intangible assets 11 Property, plant & equipment 12 Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 14 Financial liabilities 15 Short-term provisions 16 Total Current Liabilities Total Liabilities Net Assets Equity Issued capital 17 Option Reserve 18 Accumulated losses Minority equity interest Total Equity	Consolidated 2009 $ 2008 $ 372,268 845,666 171,914 839,321 88,149 349,969 18,843 9,957 651,174 2,044,913 48,949 242,846 809,954 1,086,769 5,549 173,515 864,452 1,503,130 1,515,626 3,548,043 405,683 318,917 384,415 452,984 9,040 7,507 799,138 779,408 799,138 779,408 716,488 2,768,635 7,308,660 7,184,660 294,645 230,181 (6,905,542) (4,689,825) 18,725 43,619 716,488 2,768,635	Parent 2009 $ 2008 $
		334,955 705,290 115,052 659,909 2,196,413 2,124,914 17,009 8,342
		2,663,429 3,498,455
		901,228 901,228 737,500 524,197 3,536 8,297
		1,642,264 1,433,722
		4,305,693 4,932,177
		91,980 90,074 284,360 164,175 4,609 5,135
		380,949 259,384
		380,949 259,384

		3,924,744 4,672,793
		7,311,109 7,187,109 294,645 230,181 (3,681,010) (2,744,497) - -
		3,924,744 4,672,793

The accompanying notes form part of the financial statements.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Statement of Changes in Equity for the year ended 30 June 2009

Note Balance at 1 July 2007 Shares issued during the financial year 17 Issue of employee options Expired options 18 Inspecie Distribution Loss attributable to members of consolidated entity Minority equity interest Balance at 30 June 2008 Balance at 1 July 2008 Shares issued during the financial year 17 Issue of employee options 18 Loss attributable to members of consolidated entity Minority equity interest Balance at 30 June 2009	Consolidated
	Ordinary Share Capital $ Accumu- lated losses $ Options $ Minority Interest $ Total $
	6,588,464 (3,075,606) 111,191 61,648 3,685,697 1,274,861 - - - 1,274,861 - - 221,841 - 221,841 102,851 - (102,851) - - (781,516) - - - (781,516) - (1,614,219) - - (1,614,219) - - - (18,029) (18,029)
	7,184,660 (4,689,825) 230,181 43,619 2,768,635
	7,184,660 (4,689,825) 230,181 43,619 2,768,635 124,000 - - - 124,000 - - 64,464 - 64,464 - (2,215,717) - - (2,215,717) - - - (24,894) (24,894)
	7,308,660 (6,905,542) 294,645 18,725 716,488

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Statement of Changes in Equity for the year ended 30 June 2009

Note Balance at 1 July 2007 Shares issued during the financial year 17 Issue of employee options 18 Expired options 18 Inspecie Distribution Loss attributable to members of parent entity Balance at 30 June 2008 Balance at 1 July 2008 Shares issued during the financial year 17 Issue of employee options 18 Loss attributable to members of parent entity Balance at 30 June 2009	Parent
	Ordinary Share Capital $ Accumulated losses $ Options $ Total $
	6,588,464 (2,100,099) 111,191 4,599,556 1,277,310 - - 1,277,310 - - 221,841 221,841 102,851 - (102,851) - (781,516) - - (781,516) - (644,398) - (644,398)
	7,187,109 (2,744,497) 230,181 4,672,793
	7,187,109 (2,744,497) 230,181 4,672,793 124,000 - - 124,000 - - 64,464 64,464 - (936,513) - (936,513)
	7,311,109 (3,681,010) 294,645 3,924,744

==> picture [35 x 86] intentionally omitted <==

The accompanying notes form part of these financial statements

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Cash Flow Statement

for the year ended 30 June 2009

Note *Cash Flows From Operating* *Activities* Receipts from customers Grant income Payments to suppliers and employees Interest received Net cash used in operating activities 20 *Cash Flows From Investing Activities* Amounts (to)/from other entities Payment for investments Payment for property, plant and equipment Net cash used in investing activities *Cash Flows From Financing* *Activities* Proceeds from capital raising Repayment of Borrowings Net cash provided by financing activities Net increase (decrease) in Cash Held Cash At the Beginning Of The Financial Year *Cash At The End Of The* *Financial Year* 7	Consolidated 2009 $ 2008 $ 33,474 24,333 750,380 514,295 (900,742) (2,143,503) 42,142 83,094 (74,746) (1,521,781) (249,212) (81,066) - (641,001) (144) (4,493) (249,356) (726,560) - 1,172,411 (149,296) (155,129) (149,296) 1,017,282 (473,398) (1,231,059) 845,666 2,076,725 372,268 845,666	Parent 2009 $ 2008 $
		41,250 371,624 461,266 - (563,183) (1,060,406) 25,046 81,910
		(35,621) (606,872)
		(334,570) (1,083,855) - (589,001) (144) (4,493)
		(334,714) (1,677,349)
		- 1,174,861 - -
		- 1,174,861
		(370,335) (1,109,360) 705,290 1,814,650
		334,955 705,290

The accompanying notes form part of these financial statements.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies

Corporate Information

The financial report includes the consolidated financial statements and the notes of BioPharmica Limited and controlled entities (‘Consolidated Group’ or ‘Group’), and the separate financial statements and notes of BioPharmica Limited as an individual parent entity (‘Parent Entity’).

Biopharmica Limited is a company incorporated and domiciled in Australia and listed on the Australian Securities Exchange.

The financial report was authorised for issue on 19th August 2009 by the board of directors.

Basis of Preparation

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

Australian Accounting Standards set out accounting policies that the AASB has concluded would result in a financial report containing relevant and reliable information about transactions, events and conditions to which they apply. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards. Material accounting policies adopted in the preparation of this financial report are presented below. They have been consistently applied unless otherwise stated.

==> picture [35 x 86] intentionally omitted <==

The financial report has been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement at fair value of selected non-current assets, financial assets and financial liabilities.

Going Concern

The consolidated entity and the parent entity has incurred losses for the year ended 30 June 2009 of $2,215,717 (30 June 2008: losses of $1,614,219) and $936,513 (2008: $644,398) respectively.

The consolidated entity has a working capital deficiency of $147,964 as at 30 June 2009 (30 June 2008: surplus of $1,265,505), the parent entity has a working capital surplus of $2,282,480 as at 30 June 2009 (30 June 2008: surplus of $3,239,071). Included in the working capital is a current loan payable to Grandbridge Limited of $305,010 (2008: $224,284), the directors have received a letter confirming that they are not actively seeking repayment for the loan payable.

The directors have reviewed their expenditure and have implemented methods of costs reduction. The directors as a part of their cash monitoring, have voluntarily suspended cash payments for their director’s fees. The director’s fees of the company are expected to be paid via shares (subject to shareholder approval).

The company is vigorously pursuing partnering opportunities so their key technology can be further developed in order for the commercialisation phase to commence. The company is also focusing on further developing its anti-mitotic drugs program toward pre-clinical trials.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

On the 12th August 2009, the directors announced its plans to conduct a shareholder share purchase plan for continuing its research and development, commercialisation and additional working capital.

The directors have prepared cash flow forecasts that indicate that the consolidated entity and the parent entity will have sufficient cashflows for a period of at least 12 months from the date of this report.

Based on the cash flow forecasts and the monitoring of operational costs, the directors are satisfied that, the going concern basis of preparation is appropriate. The financial report has therefore been prepared on a going concern basis, which assumes continuity of normal business activities and the realisation of assets and the settlement of liabilities in the ordinary course of business.

Accounting Policies

(a) Principles of Consolidation

A controlled entity is any entity BioPharmica Limited has the power to control the financial and operating policies of so as to obtain benefits from its activities.

A list of controlled entities is contained in Note 19 to the financial statements. All controlled entities have a June financial year-end.

As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the consolidated group during the year, their operating results have been included (excluded) from the date control was obtained (ceased). As at reporting date, the assets and liabilities of all controlled entities have been incorporated into the consolidated financial statements as well as their results for the year then ended. Where controlled entities have entered (left) the consolidated group during the year, their operating results have been included (excluded) from the date control was obtained (ceased).

All inter-company balances and transactions between entities in the economic entity, including any unrealised profits or losses, have been eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistencies with those policies applied by the parent entity.

Where controlled entities have entered or left the economic entity during the year, their operating results have been included/excluded from the date control was obtained or until the date control ceased.

Minority equity interests in the equity and results of the entities that are controlled are shown as a separate item in the consolidated financial report.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies (cont’d)

(b) Income Tax

The charge for current income tax expense is based on the profit for the year adjusted for any nonassessable or disallowed items. It is calculated using the tax rates that have been enacted or are substantially enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. No deferred income tax will be recognised from the initial recognition of an asset or liability, excluding a business combination, where there is no effect on accounting or taxable profit or loss.

Deferred tax is calculated at the tax rates that are expected to apply to the period when the asset is realised or liability is settled. Deferred tax is credited in the income statement except where it relates to items that may be credited directly to equity, in which case the deferred tax is adjusted directly against equity.

Deferred income tax assets are recognised to the extent that it is probable that future tax profits will be available against which deductible temporary differences can be utilised.

The amount of benefits brought to account or which may be realised in the future is based on the assumption that no adverse change will occur in income taxation legislation and the anticipation that the economic entity will derive sufficient future assessable income to enable the benefit to be realised and comply with the conditions of deductibility imposed by the law.

==> picture [35 x 86] intentionally omitted <==

BioPharmica Limited and its wholly-owned Australian subsidiaries have formed an income tax consolidated group under the tax consolidation regime. BioPharmica Limited is responsible for recognising the current and deferred tax assets and liabilities for the tax consolidated group. The group notified the Australian Taxation Office on 30 June 2006 that it had formed an income tax consolidated group to apply from 30 June 2006. The tax consolidated group has entered a tax sharing agreement whereby each company in the group contributes to the income tax payable in proportion to their contribution to the net profit before tax of the tax consolidated group.

(c) Property, Plant & Equipment

Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses.

Plant and equipment

Plant and equipment are measured on the cost basis.

The carrying amount of plant and equipment is reviewed annually by directors to ensure it is not in excess of the recoverable amount from these assets. The recoverable amount is assessed on the basis of the expected net cash flows that will be received from the assets employment and subsequent disposal. The expected net cash flows have been discounted to their present values in determining recoverable amounts.

The cost of fixed assets constructed within the economic entity includes the cost of materials, direct labour, borrowing costs and an appropriate proportion of fixed and variable overheads.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Increases in the carrying amount arising on revaluation of land and buildings are credited to a revaluation reserve in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against fair value reserves directly in equity; all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the asset charged to the income statement and depreciation based on the asset’s original cost is transferred from the revaluation reserve to retained earnings.

Depreciation

The depreciable amount of all fixed assets including building and capitalised lease assets, but excluding freehold land, is depreciated on a straight-line basis over their useful lives to the economic entity commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements.

The depreciation rates used for each class of depreciable assets are:

Class of Fixed Asset	Depreciation Rate
Computers	33 %
Office furniture	15 %

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 the carrying amount. These gains and losses are included in the income statement. When revalued assets are sold, amounts included in the revaluation reserve relating to that asset are transferred to retained earnings.

(d) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership that are transferred to entities in the economic entity are classified as finance leases.

Finance leases are capitalised by recording an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

Leased assets are depreciated on a straight-line basis over their estimated useful lives.

Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred.

Lease incentives under operating leases are recognised as a liability and amortised on a straight-line basis over the life of the lease term.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies (cont’d)

(e) Financial Instruments

Recognition and Initial Measurement

Financial instruments, incorporating financial assets and financial liabilities, are recognised when the entity becomes a party to the contractual provisions of the instrument. Trade date accounting is adopted for financial assets that are delivered within timeframes established by marketplace convention.

Financial instruments are initially measured at fair value plus transactions costs where the instrument is not classified as at fair value through profit or loss. Transaction costs related to instruments classified as at fair value through profit or loss are expensed to profit or loss immediately. Financial instruments are classified and measured as set out below.

Derecognition

Financial assets are derecognised where the contractual rights to receipt of cash flows expires or the asset is transferred to another party whereby the entity is no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss.

Classification and Subsequent Measurement

(i) Financial assets at fair value through profit or loss

==> picture [35 x 86] intentionally omitted <==

Financial assets are classified at fair value through profit or loss when they are held for trading for the purpose of short term profit taking, where they are derivatives not held for hedging purposes, or designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Realised and unrealised gains and losses arising from changes in fair value are included in profit or loss in the period in which they arise.

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method.

(iii) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the group’s intention to hold these investments to maturity. They are subsequently measured at amortised cost using the effective interest rate method.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are either designated as such or that are not classified in any of the other categories. They comprise investments in the equity of other entities where there is neither a fixed maturity nor fixed or determinable payments.

(v) Financial Liabilities

Non-derivative financial liabilities (excluding financial guarantees) are subsequently measured at amortised cost using the effective interest rate method.

Fair value

Fair value is determined based on current bid prices for all quoted investments. Valuation techniques are applied to determine the fair value for all unlisted securities, including recent arm’s length transactions, reference to similar instruments and option pricing models.

Impairment

At each reporting date, the group assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen. Impairment losses are recognised in the income statement.

(f) Impairment of Assets

At each reporting date, the group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Impairment testing is performed annually for goodwill and intangible assets with indefinite lives.

Where it is not possible to estimate the recoverable amount of an individual asset, the group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

(g) Investments in Associates

Investments in associate companies are recognised in the financial statements by applying the equity method of accounting. The equity method of accounting recognised the group’s share of postacquisition reserves of its associates.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

1. Statement of Significant Accounting Policies (cont’d)

(h) Intangibles

Goodwill

Goodwill and goodwill on consolidation are initially recorded at the amount by which the purchase price for a business or for an ownership interest in a controlled entity exceeds the fair value attributed to its net assets at date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisition of associates is included in investments in associates.

Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Research and Development

Expenditure during the research phase of a project is recognised as an expense when incurred.

Development costs are capitalised only when technical feasibility studies identify that the project will deliver future economic benefits and these benefits can be measured reliably.

Development costs have a finite life and are amortised on a systematic basis matched to the future economic benefits over the useful life of the project.

Patents and Trademarks

Patents and trademarks are recognised at cost of acquisition. Patents and trademarks have a finite life and are carried at cost less any accumulated amortisation and any impairment losses. Patents and trademarks are amortised over their useful life of 20 years.

(i) Employee Benefits

==> picture [35 x 86] intentionally omitted <==

Provision is made for the company’s liability for employee benefits arising from services rendered by employees to balance date. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled, plus related on-costs. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits.

Equity-settled compensation

The group operates a number of share-based compensation plans. These include both a share option arrangement and an employee share scheme. The bonus element over the exercise price of the employee services rendered in exchange for the grant of shares and options is recognised as an expense in the income statement. The total amount to be expensed over the vesting period is determined by reference to the fair value of the shares of the options granted. The fair value of options is measured using the Black Scholes calculation method.

(j) Provisions

Provisions are recognised when the group has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

(k) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, deposits held at call with banks, other shortterm highly liquid investments, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the balance sheet.

(l) Revenue and Other Income

Revenue from the sale of goods is recognised upon the delivery of goods to customers.

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Dividend revenue is recognised when the right to receive a dividend has been established. Dividends received from associates and joint venture entities are accounted for in accordance with the equity method of accounting.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

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

(m) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Tax Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense.

Receivables and payables in the balance sheet are shown inclusive of GST.

Cash flows are presented in the cash flow statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

(n) Government Grants

Government grants are recognised at fair value where there is reasonable assurance that the grant will be received and all grant conditions will be met. Grants relating to expense items are recognised as income over the periods necessary to match the grant to the costs they are compensating. Grants relating to assets are credited to deferred income at fair value and are credited to income over the expected useful life of the asset on a straight-line basis.

(o) Trade and other payables

Liabilities are recognized for amounts to be paid in the future for goods or services received, whether or not billed to the consolidated entity. The amounts are unsecured and are usually paid within 30 days.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements for the year ended 30 June 2009

1. Statement of Significant Accounting Policies (cont’d)

(p) Share based payments

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

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

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

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

(q) Earnings per share

==> picture [35 x 86] intentionally omitted <==

Basic earnings per share (EPS) is calculated as net profit/loss attributable to members, adjusted to exclude costs of servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares, adjusted for any bonus element.

(r) Joint ventures

Interest in joint venture operation

The Group has an interest in a joint venture that is a jointly controlled operation.

The Group’s interest in its joint venture operation is accounted for by recognising its interest in the assets and liabilities from the joint venture, as well as expenses incurred by the Group and the Group’s share of income earned from the joint venture, in the consolidated financial statements.

(s) Comparative Figures

When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

(t) Critical accounting estimates and judgments

The directors evaluate estimates and judgments incorporated into the financial report based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the group.

Key estimates — Impairment

The group assesses impairment at each reporting date by evaluating conditions specific to the group that may lead to impairment of assets. Where an impairment trigger exists, the recoverable amount of the asset is determined. The goodwill has been impairment tested for the financial year. The directors believe that the goodwill associated with the SERS technology is fully impaired as there are currently no contracts in place to support this amount. The full amount of the goodwill has been recognised in the income statement.

Key judgements — Provision for Impairment of Receivables

Included in the accounts of Consolidated entity are amounts receivable from related entities of $305,010. The directors believe that the full amount of the debt will be recoverable from each entity and that no provision for impairment of receivables has been made at 30 June 2009.

Key Judgments —Impairment of Intangible Assets

No impairment has been recognised in respect of intangible assets for the year ended 30 June 2009. The directors believe that the carrying value of all intangibles is appropriate after reviewing the status of each entity’s developments. The directors are confident that the products will provide the necessary returns to the Company.

Revenue *Revenue* Interest revenue : other entities Cost recoveries *Total revenue* *Other income* Research & development rebate	Consolidated 2009 $ 2008 $ 42,142 94,873 4,650 24,333 46,792 119,206 129,685 984,216	Parent 2009 $ 2008 $
		25,046 81,910 112,582 86,857
		137,628 168,767
		(60,683) 654,538

2. Revenue

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

3. Profit for the year *a) Expenses* Finance costs: - related entities Depreciation and amortisation - Depreciation - Amortisation Employee expense - Salary - Superannuation - Director fees - Share based payments - Other payroll costs Total employee costs	Consolidated 2009 $ 2008 $ 16,827 31,823 11,339 14,618 35,000 30,000 175,349 346,425 18,843 31,974 106,247 377,016 64,464 5,242 2,172 (11,513) 367,075 749,144	Parent 2009 $ 2008 $
		- - 4,906 7,754 35,000 30,000 175,988 313,500 13,843 28,256 106,247 377,016 64,464 5,242 113 (7,635)
		360,655 716,379

4. Key Management Personnel Compensation

(a) Names and positions held of economic and parent entity key management personnel in office at any time during the financial year are:

==> picture [35 x 86] intentionally omitted <==

Key Management Personnel

D L Breeze – Executive Chairman H Goh – Non-Executive Director S K Yap – Non-Executive Director G Gilbert – Non Executive Director D Ambrosini – Company Secretary

Key management personnel remuneration, shareholdings and option holdings has been included in the Remuneration report section of the Directors Report.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Consolidated 2009 $ 2008 $ 5. Auditors’ Remuneration Remuneration of the auditor of the parent entity for: - auditing or reviewing the financial report 21,000 25,500 - other services - - Remuneration of other auditors of subsidiaries for: - auditing or reviewing the financial report of subsidiaries - - 21,000 25,500 6. Earnings per share For basic and diluted Earnings Per Share Net Loss attributable to members of the parent Weighted average number of ordinary shares outstanding during the year used in calculating basic EPS and diluted EPS	Parent 2009 $ 2008 $
	21,000 25,500 - - - -
	21,000 25,500 Consolidated 2009 $ 2008 $ (2,215,717) (1,614,219) No. 72,954,727 No. 69,144,857

Consolidated
2009
$
2008
$
5.
Auditors’ Remuneration
Remuneration of the auditor of the parent
entity for:
- auditing or reviewing the
financial report
21,000
25,500
- other services
-
-
Remuneration of other auditors of
subsidiaries for:
- auditing or reviewing the financial
report of subsidiaries
-
-
21,000
25,500
6.
Earnings per share
For basic and diluted Earnings Per Share
Net Loss attributable to members of the parent
Weighted average number of ordinary shares outstanding during the
year used in calculating basic EPS and diluted EPS

Parent
2009
$
2008
$

21,000
25,500
-
-
-
-

21,000
25,500
Consolidated
2009
$
2008
$
(2,215,717)
(1,614,219)
No.
72,954,727
No.
69,144,857

The Company’s potential ordinary shares, being its options granted, are not considered dilutive as the conversion of these options will result in a decreased net loss per share.

7. Cash and cash equivalents Cash at Bank and in hand Short-term bank deposits Reconciliation of cash	Consolidated 2009 $ 2008 $ 168,804 364,130 203,464 481,536 372,268 845,666	Parent 2009 $ 2008 $
		131,491 223,754 203,464 481,536
		334,955 705,290

Cash at the end of the financial year as shown in the cash flow statement is reconciled to items in the balance sheet as follows:

Cash and cash equivalents 372,268 845,666 334,955 705,290

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

==> picture [35 x 86] intentionally omitted <==

8. Trade and other receivables Current Trade receivables Research and development rebate receivable Other receivables 9. Other Assets Current Prepaid insurance Prepaid – other 10. Financial Assets Current Held-to-maturity financial assets (b) Unsecured Loans to other entities: Cortical Dynamics Limited Diagnostic Array Systems Pty Ltd Grandbridge Limited Molecular Discovery Systems Pty Ltd University of Western Australia JV Other Non Current (a) Available for sale financial assets (b) Held-to-maturity financial assets	Consolidated 2009 $ 2008 $ 740 24,510 145,000 779,371 26,174 35,440 171,914 839,321 6,334 9,957 12,509 - 18,843 9,957 32,132 - - - - - 55,645 54,023 - - - 295,946 372 - 88,149 349,969 48,949 48,949 - 193,897 48,949 242,846	Parent 2009 $ 2008 $
		- - 110,000 638,405 5,052 21,504
		115,052 659,909
		4,500 8,342 12,509 -
		17,009 8,342
		- - - - 150,803 117,065 55,645 54,024 1,423,019 1,378,960 566,574 574,865 372 -
		2,196,413 2,124,914
		901,228 901,228 - -
		901,228 901,228

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

(a) Available for sale Financial Assets Comprise: Comprise: Unlisted investments, at cost - shares in controlled entities - shares in other corporations Total available-for-sale financial assets	Consolidated 2009 $ 2008 $ - - 48,949 48,949 48,949 48,949	Parent 2009 $ 2008 $
		852,279 852,279 48,949 48,949
		901,228 901,228

Available-for-sale financial assets comprise investments in the ordinary share capital of various entities. There are no fixed returns or fixed maturity date attached to these investments.

The fair value of unlisted available-for-sale financial assets cannot be reliably measured as variability in the range of reasonable fair value estimates is significant. As a result, all unlisted investments are reflected at cost. Unlisted available-for-sale financial assets exist within active markets and could be disposed of if required.

(b) Held-to-maturity Investments
Comprise:
- Security Deposit	32,132	193,897	-	-

The security deposit is held as a special condition for the Leased Rental Equipment, GE In Cell Analyser, Rental Agreement with NAB dated 28 June 2006.

11. Intangible assets

Patent costs capitalised

Cost Accumulated amortisation and impairment Net carrying value Goodwill Cost Accumulated impaired losses Net carrying value Acquired intellectual property At cost (a) Accumulated impaired losses	72,454 72,454 - - 72,454 72,454 707,053 707,053 (707,053) (216,935) - 490,118 1,151,697 751,697 (151,697) -	- - - -
		- - - - - -
		- - 1,151,697 751,697 (151,697) -

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

11. Intangible assets (cont’d) Accumulated amortisation Net carrying value Total intangibles (a) Cost (i) Tumour Suppressor Gene - HLS5 (ii) BAR Index (b) Movements in Carrying Amounts Year ended 30 June 2009 Balance at the beginning of year Additions Disposals Amortisation charge Impairment losses Closing carrying value at 30 June 2009	Consolidated Parent 2009 $ 2008 $ 2009 $ 2008 $ (262,500) (227,500) (262,500) (227,500) 737,500 524,197 737,500 524,197 809,954 1,086,769 737,500 524,197 737,500 372,500 737,500 372,500 - 151,697 - 151,697 Intellectual Property Costs Capitalised Patent Costs Total $ $ $	Parent 2009 $ 2008 $
		(262,500) (227,500)
		737,500 524,197
		737,500 524,197
	1,014,315 72,454 1,086,769 400,000 - 400,000 - - - (35,000) - (35,000) (641,815) - (641,815)
	737,500 72,454 809,954

==> picture [35 x 86] intentionally omitted <==

Patent costs include all costs associated with the filing and maintenance of the patents for the company’s technologies.

Acquired intellectual property includes intellectual property acquired under the Research and Collaborative Technology and Farmin agreement. On 24 April 2009 BioPharmica Limited acquired further interest of 28.57% in the HLS5 project.

(c) Impairment

Intellectual Property

The acquired intellectual property of HLS5 has been reviewed and the directors are of the opinion that there have been no impairment triggers activated during the financial year. There has been no impairment charged to the profit and loss for the period.

The investment in the SERS technology has been reviewed and the directors are of the opinion that the investment amount is fully impaired. This amount has been fully written off to the income statement.

Goodwill

The goodwill has been impairment tested for the financial year. The directors believe that the goodwill associated with the SERS technology is fully impaired as there are currently no contracts in place to support this amount. The full amount of the goodwill has been written off to the income statement.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

12. Property, Plant and Equipment Plant and Equipment: At cost Accumulated depreciation Total Property, Plant and Equipment	Consolidated 2009 $ 2008 $ 515,732 526,582 (510,183) (353,067) 5,549 173,515	Parent 2009 $ 2008 $
		24,515 24,370 (20,979) (16,073)
		3,536 8,297

(a) Movements in Carrying Amounts

Movements in the carrying amounts for each class of property, plant and equipment between the beginning and the end of the current financial year.

Economic Entity: Balance at the beginning of the year Additions Disposals Adjustment to leased asset Depreciation expense Carrying amount at the end of the year Parent Entity: Balance at the beginning of the year Additions Disposals Depreciation expense Carrying amount at the end of the year	2009 Total $ $ 173,515 173,515 144 144 - - - - (168,110) (168,110) 5,549 5,549 8,297 8,297 144 144 - - (4,905) (4,905) 3,536 3,536	2008 Total $ $
		368,130 368,130 4,493 4,493 - - - - (199,108) (199,108)
		173,515 173,515
		11,558 11,558 4,493 4,493 - - (7,754) (7,754)
		8,297 8,297

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

==> picture [35 x 86] intentionally omitted <==

13. Income Tax Expense (a) The components of tax expense comprise: Current tax Deferred tax (b) The prima facie tax on profit from ordinary activities before income tax is reconciled to the income tax as follows: Prima facie tax payable on profit from ordinary activities before income tax at 30% (2008: 30%) Economic entity Parent entity Add tax effect of: Non deductible expenses Prior year tax loss used in Research and development clawback Tax benefit of revenue losses not recognised Temporary differences Less tax effect of: Research and development clawback income related to prior periods Income tax attributable to parent entity Weighted average rate of tax (c) Deferred Tax Assets Deferred tax assets not brought to account, the benefits of which will only be realised if the conditions for deductibility set out in Note 1b occur. Temporary difference Tax losses: - operating losses - capital losses	Consolidated 2009 $ 2008 $ - - - - - - (649,820) 489,674 - - 112,077 4,670 200,357 206,724 (1,577,917) (546,025) 1,915,302 - - (258,405) - - 30% 30% - - 5,112 1,046 1,577,917 1,258,196 26,342 26,342	Parent 2009 $ 2008 $
		- - - -
		- -
		- - 280,954 184,319 69,032 2,591 200,357 206,724 (1,034,975) (135,229) 1,046,540 - - (258,405) - -
		30% 30% - - 2,400 (962) 1,034,975 671,157 26,342 26,342

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Consolidated Note 2009 $ 2008 $ 14. Trade and other payables Trade payables 194,410 245,390 Sundry payables and accrued expenses 211,273 73,527 405,683 318,917 15. Financial Liabilities Current Secured Liabilities Lease Liability 22 79,405 228,700 Current borrowings – unsecured 305,010 224,284 384,415 452,984 Secured Liabilities: Consists of a GE IN CELL 1000 Analyser. Security consists of National Australia Bank (the lender) holding charge ov Current borrowings are unsecured, non interest bearing and repayable on 16. Provisions Employee entitlements: Opening balance at 1 July 7,507 19,020 Reduction/addition to provision 1,533 (11,513) Balance at 30 June 9,040 7,507	Parent 2009 $ 2008 $
	35,734 973 56,246 89,101
	91,980 90,074
	- - 284,360 164,175
	284,360 164,175
	er the asset. demand. 5,135 12,770 (526) (7,635)
	4,609 5,135

Provision for Employee Entitlements

A provision has been recognised for employee entitlements relating to annual leave. The measurement and recognition criteria relating to employee benefits has been included in Note 1 to this report

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

Consolidated 2009 $ 2008 $ 17. Issued Capital 74,980,016 (2008: 70,210,788) fully paid ordinary shares 7,308,660 7,184,660 The Company has no authorised capital and the issued shares do not have a par value. Consolidated 2009 $ 2008 $ No. No. (a) Ordinary Shares At the beginning of reporting period 70,210,788 61,311,560 Shares Issued during the year 4,769,228 8,899,228 At reporting date 74,980,016 70,210,788	Parent 2009 $ 2008 $
	7,311,109 7,187,109
	Parent 2009 $ 2008 $
	No. No. 70,210,788 61,311,560 4,769,228 8,899,228
	74,980,016 70,210,788

Capital Raising

There were no options exercised during the year (2008: 3,318,228).

Fully Paid Ordinary Share Capital

Fully paid ordinary shares carry one vote per share and carry the right to dividends.

(b) Options

==> picture [35 x 86] intentionally omitted <==

There were 12,150,000 employee options on issue at the end of the year:

Total number	Exerciseprice	Expiry date
500,000	*	17 October 2011
500,000	*	29 April 2013
6,000,000	$0.15	31 October 2010
4,150,000	$0.15	30 June 2013
1,000,000	$0.15	16 December 2013
12,150,000

The exercise price will be the average amount determined by the market price for the 5 days prior to exercise.

The market price of the company’s ordinary shares at 30 June 2009 was 2 cents.

The holders of options do not have the right, by virtue of the option, to participate in any share issue or interest issue of any other body corporate or registered scheme.

The difference between the total market value of options issued during the period, at the date of issue, and the total amount received from executives and employees is not recognised in the financial statements except for the purposes of determining directors’ and executives’ remuneration in respect of that period.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

(c) Capital risk management

The Group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they may continue to provide returns for shareholders and benefits for other stakeholders.

The focus of the Group’s capital risk management is the current working capital position against the requirements of the Group to meet corporate overheads. The Group’s strategy is to ensure appropriate liquidity is maintained to meet anticipated operating requirements, with a view to initiating appropriate capital raisings as required. The working capital position of the Group and the parent entity at 30 June 2009 and 30 June 2008 are as follows:

Cash and cash equivalents Trade and other receivables Trade and other payables Working capital position	Consolidated 2009 $ 2008 $ 372,268 845,666 171,914 839,321 (405,683) (318,917) 138,499 1,366,070	Parent 2009 $ 2008 $
		334,955 705,290 115,052 659,909 (91,980) (90,074)
		358,027 1,275,125

18. Reserves

Options Reserve 294,645 230,181 294,645 230,181

(a) Option Reserve

The option reserve records items recognized as expenses on the valuation of Director and Employee share options.

Reconciliation of movement Opening balance Options charges during the year Expired options Closing balance	2009 $ 2008 $ 230,181 111,191 64,464 221,841 - (102,851) 294,645 230,181	2009 $ 2008 $
		230,181 111,191 64,464 221,841 - (102,851)
		294,645 230,181

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

19. Controlled Entities

==> picture [441 x 65] intentionally omitted <==

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

Name of Entity Principal Country of Ownership
Activity Incorporation Interest
%
2009 2008
----- End of picture text -----

==> picture [35 x 86] intentionally omitted <==

Parent Entity BioPharmica Ltd Investment Australia	Parent Entity BioPharmica Ltd Investment Australia	Parent Entity BioPharmica Ltd Investment Australia
Subsidiaries of BioPharmica Ltd Molecular Discovery Systems Pty Ltd Diagnostic Array Systems Pty Ltd BioMedical Research BioMedical Research Australia Australia 100.00 100.00 51.82 51.82
20. Cash Flow Information (a) Reconciliation of Cash Flow from Operations with Profit after income tax Operating loss after income tax Non-cash flows in profit: Loss on acquisition of joint venture Depreciation and amortisation Impairment Share based payment expense Management Fee Share of Associates Loss Changes in net assets and liabilities, net of effects of purchase and disposal of subsidiaries (Increase)/decrease in trade and other receivables (Increase)/decrease in other assets Increase/(decrease) in provisions Increase/(decrease) in trade payables and accruals Cash flow from operations	Consolidated 2009 $ 2008 $ (2,240,611) (1,632,248) 49,651 - 208,943 229,108 641,815 - 188,464 324,291 170,685 - - 34,428 643,792 (384,704) 152,902 10,581 1,533 (11,513) 108,080 (91,724) (74,746) (1,521,781)	Parent 2009 $ 2008 $
		(936,513) (614,398) - - 39,906 7,754 151,697 - 188,464 321,841 (16,746) (32,274) - 34,428 528,405 (254,467) (8,667) 21,173 (527) (15,551) 18,360 (75,378)
		(36,621) (606,872)

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Non-cash Financing and Investing Activities i) In Specie Distribution 69,160,788 ordinary shares were redistributed to shareholders during the prior year as part of the In Specie distribution undertaken by the Company. The share value was based on the fair value at the time of the distribution. Financing Facilities Credit card facility (limit)	Consolidated 2009 $ 2008 $ - 781,516 20,000 20,000	Parent 2009 $ 2008 $
		- 781,516 - -

(b) Non-cash Financing and Investing Activities

(c) Financing Facilities

21. Financial Risk Management

(a) Financial Risk Management

The group’s financial instruments consist mainly of deposits with banks, short-term investments, accounts receivable and payable, and loans to and from subsidiaries. The main purpose of nonderivative financial instruments is to raise finance for group operations policies.

i. Financial Risk Exposures and Management

The main risks the group is exposed to through its financial instruments are interest rate risk, liquidity risk and credit risk.

Interest rate risk

Interest rate risk is managed with a mixture of fixed and floating rate debt.

Liquidity risk

The group manages liquidity risk by monitoring forecast cash flows.

Credit risk

The maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

Credit risk for derivative financial instruments arises from the potential failure by counter-parties to the contract to meet their obligations.

The economic entity does not have any material credit risk exposure to any single receivable or group of receivables under financial instruments entered into by the economic entity.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements for the year ended 30 June 2009

21. Financial Risk Management (cont’d)

b) Financial Instruments

i. Interest rate risk

The economic entity’s exposure to interest rate risk, which is the risk that a financial instrument’s value will fluctuate as a result of changes in market interest rates and the effective weighted average interest rates on classes of financial assets and financial liabilities, is as follows:

Consolidated Group

==> picture [35 x 86] intentionally omitted <==

2009 Weight Effective Interest Rate %	Floating Interest Rate $ Fixed Interest Rate 1 Year of less Fixed Interest Rate 1 to 5 Years Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 2.75 Trade and other receivables - Other financial assets 4.20 *Total Financial Assets* *Financial Liabilities* Trade and sundry payables - Lease liabilities 11.38 Financial liabilities *Total Financial Liabilities*	372,268 - - - 372,268 - - - 171,914 171,914 32,132 - - 56,017 88,149
	404,400 - - 227,931 632,331
	- - - 405,683 405,683 - 79,405 - - 79,405 - - - 305,010 305,010
	- 79,405 - 710,693 790,098

2008 Weight Effective Interest Rate %	Floating Interest Rate $ Fixed Interest Rate 1 Year of less Fixed Interest Rate 1 to 5 Years Non- Interest Bearing $ Total $
*Financial Assets* Cash and cash equivalents 3.85 Trade and other receivables - Other financial assets - *Total Financial Assets* *Financial Liabilities* Trade and sundry payables - Lease liabilities 11.38 Financial liabilities *Total Financial Liabilities*	845,666 - - - 845,666 - - - 839,321 839,321 193,897 - - 349,969 543,866
	1,039,563 - - 1,189,290 2,228,853
	- - - 318,917 318,917 - 228,700 - - 228,700 - - - 224,284 224,284
	- 228,700 - 543,201 771,901

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Parent Entity

==> picture [440 x 65] intentionally omitted <==

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

Effective
Average
Interest Rate Floating Non-Interest
Payable Interest Rate Bearing Total
2009 % $ $ $
----- End of picture text -----

*Financial Assets* Cash and cash equivalents 2.75 Trade and other receivables - Other financial assets - *Total Financial Assets* *Financial Liabilities* Trade and sundry payables - Lease liabilities - Financial liabilities *Total Financial Liabilities*	334,955 - 334,955 - 115,052 115,052 - 2,196,413 2,196,413
	334,955 2,311,465 2,646,420
	- 91,980 91,980 - - - - 284,360 284,360
	- 376,340 376,340

==> picture [440 x 65] intentionally omitted <==

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

Effective
Average
Interest Rate Floating Non-Interest
Payable Interest Rate Bearing Total
2008 % $ $ $
----- End of picture text -----

*Financial Assets* Cash and cash equivalents 3.85 Trade and other receivables - *Other financial assets* - *Total Financial Assets* Financial Liabilities Trade and sundry payables - Lease liabilities - *Financial liabilities* Total Financial Liabilities	705,290 - 705,290 - 659,909 659,909 - 8,342 8,342
	705,290 668,251 1,373,541
	- 90,074 90,074 - - - - 164,175 164,175
	- 254,249 254,249

ii. Net Fair Values

The net fair values of:

Term receivables are determined by discounting the cash flows, at the market interest rates of similar securities, to their present value.
Other loans and amounts due are determined by discounting the cash flows, at market interest rates of similar borrowings to their present value.
Other assets and liabilities approximate their carrying value.

No financial assets and financial liabilities are readily traded on organised markets in standardised form other than listed investments.

Financial assets where the carrying amount exceeds net fair values have not been written down as the economic entity intends to hold these assets to maturity.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

21. Financial Risk Management (cont’d)

b) Financial Instruments (cont’d)

*Financial Assets* Available-for-sale financial assets at fair value Loans and receivables Financial Liabilities Other loans and amounts due Trade payables	2009 Carrying Amount Net Fair Value 48,949 48,949 260,063 260,063 309,012 309,012 384,415 384,415 405,583 405,583 789,998 789,998	2008 Carrying Amount Net Fair Value
		48,949 48,949 1,189,290 1,189,290
		1,238,239 1,238,239
		452,984 452,984 318,919 318,919
		771,903 771,903

iii. Sensitivity Analysis

Interest Rate Risk

The group has performed sensitivity analysis relating to its exposure to interest rate risk at balance date. This sensitivity analysis demonstrates the effect on the current year results and equity which could result from a change in these risks

Interest Rate Sensitivity Analysis

The effect on profit and equity as a result of changes in the interest rate, with all other variables remaining constant would be as follows:

==> picture [35 x 86] intentionally omitted <==

Change in profit — Increase in interest rate 1% — Decrease in interest rate by 0.5% Change in Equity — Increase in interest rate by 1% — Decrease in interest rate by 0.5%	Consolidated Group 2009 2008 6,897 12,459 (3,449) (6,229) 6,897 12,459 (3,449) (6,229)	Parent Entity 2009 2008
		9,108 21,275 (4,504) (10,638) 9,108 21,275 (4,504) (10,638)

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Consolidated 2009 $ 2008 $ Capital and Leasing Commitments Finance Lease Commitments Payable – minimum lease payments - not later than 12 months 79,404 228,700 - between 12 months and 2 years - - - greater than 2 years - - Minimum lease payments 79,404 228,700 Less future finance charges - (16,616) Present value of minimum lease payments (note 22) 79,404 212,084	Parent 2009 $ 2008 $
	- - - - - -
	- - - -
	- -

22. Capital and Leasing Commitments

23. Segment Information

The economic entity operates predominantly in one industry, namely the biomedical research sector through its wholly owned subsidiary Molecular Discovery Systems Pty Limited. These activities are predominantly in Australia.

24. Events after the Balance Sheet Date

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

25. Related Party Transactions

(a) Equity interests in controlled entities

Details of the percentage of ordinary shares held in controlled entities are disclosed in note 19 to the financial statements.

(b) Directors’ Remuneration

Details of the directors’ remuneration and retirement benefits is located in the Directors Report.

(c) Directors’ Equity Holdings

Ordinary Shares Held as at the date of this report by directors and their director-related entities in: BioPharmica Ltd Other Equity Instruments Options Held as at the date of this report by directors and their director-related entities in: BioPharmica Ltd	Parent 2009 2008 No. No.
	16,588,330 11,756,402
	6,000,000 12,000,000

(d) Directors

==> picture [35 x 86] intentionally omitted <==

The Company has agreements with Kanou Pty Limited and Trandcorp Pty Limited on normal commercial terms procuring the services of Seng Yap and David Breeze respectively to provide product development services. $123,000 (2008: $123,000) was paid during the year.

(e) Controlling Entities

The parent entity in the economic entity is BioPharmica Limited. Management fees were charged to Diagnostic Array Systems for the period ending 30 June 09 of $71,332 (2008 :$32,274)

Related party loans exist between BioPharmica and its subsidiaries 2009:$1,402,203 (2008:$2,013,421). The loans are unsecured and have no fixed repayment date.

(f) Interest in Joint Venture

A loan receivable exists between BioPharmica and the Joint Venture $524,363. This amount is repayable to BioPharmica upon commercialisation of the HLS5 project or any of its associated technologies.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

26. Share-Based Payments

The following share-based payment arrangements existed at 30 June 2009:

On 18 March 2009 Mr David Breeze, Mr Hock Goh and Mr Greg Gilbert were issued shares in the company as consideration for their 2009 director fees. A total of 4,769,228 shares were issued having a total value of $124,000.

At balance date, no share option has been exercised.

All options granted to key management personnel are ordinary shares in BioPharmica Limited, which confer a right of one ordinary share for every option held.

Consolidated Group

	Consolidated Group
Outstanding at the beginning of the year Granted Granted Forfeited Exercised Expired Outstanding at year- end Exercisable at year- end	2009 2008 Number of Options Weighted Average Exercise Price $ Number of Options Weighted Average Exercise Price $
	11,150,000 - 5,000,000 - 1,000,000 0.15 11,150,000 0.15 - - - - - - (5,000,000) - - - - - - - - -
	12,150,000 - 11,150,000 -
	8,383,333 - 6,000,000 -

No options were exercised during the year ended 30th June 2009.

The weighted average fair value of the options granted during the year was $11,900.

This price was calculated by using a Black-Scholes option pricing model applying the following inputs:

Weighted average exercise price	$0.15
Weighted average life of the option	60 months
Underlying share price	$0.025
Expected share price volatility	95%
Risk free interest rate	7.25%

Historical volatility has been the basis for determining expected share price volatility as it is assumed that this is indicative of future tender, which may not eventuate.

The life of the options is based on the historical exercise patterns, which may not eventuate in the future.

Included under employee benefits expense in the income statement is $139,464 (2008: $321,841), and relates, in full, to equity.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements for the year ended 30 June 2009

27. Contingent Liabilities

A claim for outstanding consulting fees has been brought against the parent entity. The case is currently in pre trial stages with the first discussions to resolve the matter taking place in June 09. The claim is being vigorously defended by the parent entity as they believe all fees have been paid in accordance with the agreed contracts.

28. Interests in Joint Ventures

(a) Jointly controlled operations

BioPharmica Limited has a joint venture operation with the University of Western Australia, for the research and development of the intellectual property of HLS5 project and its derivatives. During the year ended 30 June 2008, BioPharmica had a 55% interest in the joint venture. As detailed in Note 24, on the 7th August 2009, BioPharmica Limited and UWA signed a new agreement, in which BioPharmica Limited owns 100% of the joint venture, effective 24 April 2009. Therefore for the year ended 30 June 2009, the joint venture has ceased and it is now a 100% owned unincorporated entity of BioPharmica Limited.

(b) Accounting for Jointly controlled operations

The Group’s interest is accounted for in accordance with its accounting policy disclosed in Note 1 (r).

(c) Share of Assets, Liabilities and Expenses of the Joint Venture

==> picture [35 x 86] intentionally omitted <==

Current Assets Cash and cash equivalents Receivables Total current assets Total Assets Trade and other payables Financial liabilities Total current liabilities Total liabilities Share of expenses	Consolidated 2009 2008 $ $
	At 100% At 55% 2,408 9,535 16,455 4,378
	18,863 13,913

	18,863 13,913
	279,175 59,366 570,127 296,892
	849,302 356,258

	849,302 356,258
	488,093 423,298

(d) Commitments and Contingencies

There are no capital commitments or contingencies noted in relation to the jointly controlled operations.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

29. Prior Period Error

During the financial year, management undertook a review of the Research and Collaborative Technology and Farmin Agreement between BioPharmica Limited and the University of Western Australia. It was determined that this agreement was an interest in a joint controlled operation in accordance with the requirements of AASB 131 ‘Interest in Joint Ventures’.

Therefore in accordance with AASB 131, BioPharmica Limited is required to recognise its share of assets, liabilities, expenses and income in respect of the joint controlled operation in proportion to their holdings.

The omission has had the effect of understating the total assets and loss of the business by a net amount of $423,355 at 30 June 2008.

The correction of this error has had the following effect on the balance sheet:

==> picture [441 x 53] intentionally omitted <==

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

Consolidated
Effect of Changes as at 30 June 2008 Prior to Required Post Adjustment
Adjustment Adjustment
----- End of picture text -----

Financial assets	646,862	(296,893)	349,969
Intangibles	1,086,769	0	1,086,769
Total assets	3,831,022	(282,979)	3,548,043
Total liabilities	720,042	59,366	779,408
Total loss	(1,208,893)	(423,355)	(1,632,248)
Total retained earnings	(4,347,480)	(342,345)	(4,689,825)
Total Equity	3,110,980	(342,345)	2,768,635
Basic Earnings Per Share	(1.72)	(0.61)	(2.33)

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements for the year ended 30 June 2009

30. Changes in Accounting Policies

The consolidated group changed its accounting policy for the year ending 30 June 2009 relating to the amortisation of intangibles. Patents associated with the HLS5 Tumour Suppressor Gene were previously considered to have an indefinite life and no amortisation charge was recognized. The group has now reassessed the life of these patents as being 20 years from the grant date of 24th November 2000.

The aggregate effect of the change in the accounting policy on the financial report for the year ending 30 June 2008 is as follows :

==> picture [35 x 86] intentionally omitted <==

==> picture [440 x 263] intentionally omitted <==

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

30 June 2008 30 June 2008
Consolidated Parent
Previously Adjustment Restated Previously Adjustment Restated
Stated Stated
Income statement
Amortisation charge 199,108 30,000 229,108 7,754 30,000 37,754
Loss Before
Income Tax (1,178,893) (30,000) (1,208,893) (614,398) (30,000) (644,398)
Basic Earnings
per share (1.68) (0.04) (1.72) - - -
Diluted Earnings
per share (1.68) (0.04) (1.72) - - -
30 June 2008 30 June 2008
Balance sheet
Intangible Assets 1,314,269 (227,500) 1,086,769 751,697 (227,500) 524,197
Retained Earnings (4,119,980) (227,500) (4,347,480) (2,516,997) (227,500) (2,744,497)
----- End of picture text -----

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

The following Australian Accounting Standards have been issued or amended and are applicable to the parent and consolidated group but are not yet effective. They have not been adopted in preparation of the financial statements at reporting date.

==> picture [440 x 60] intentionally omitted <==

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

New or revised requirement Effective for More Impact on
annual reporting information Group
periods beginning/
ending on or after
----- End of picture text -----

New or revised requirement	Effective for annual reporting periods beginning/ ending on or after	More information	Impact on Group

AASB 101 Presentation of Financial Statements (Revised September 2007), AASB 2007-8 Amendments to Australian Accounting Standards & Interpretations and AASB 2007-10 Further Amendments to AASBs arising from AASB 101 The revised standard affects the presentation of changes in equity and comprehensive income. It does not change the recognition, measurement or disclosure of specific transactions and other events required by other AASB standards.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	This is a disclosure standard, so will have no direct impact on amounts in the financial report, other than amendments to disclosures.
AASB 123 Borrowing Costs (Revised), AASB 2007-6 Amendments to Australian Accounting Standards 1, 101, 107, 111, 116, 138 and Interpretations 1 & 12 This revision eliminates the option to expense borrowing costs on qualifying assets and requires that they be capitalised. The Amending Standard eliminates reference to the expensing option in various other pronouncements.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The adoption of this standard will have no impact on the group.
AASB 3 Business Combinations (Revised), AASB 127 Consolidated and Separate Financial Statements (Amended), AASB 2008-3 Amendments to AASBs arising from AASB 3 and AASB 127 This revision changes the application of acquisition accounting for business combinations and accounting for non- controlling interests. The revised and amended standards incorporate many changes which will have a significant impact on the profit and loss for entities entering into business combinations.	Beginning 1 July 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Notes to the Financial Statements

for the year ended 30 June 2009

==> picture [440 x 60] intentionally omitted <==

==> picture [35 x 86] intentionally omitted <==

New or revised requirement	Effective for annual reporting periods beginning/ ending on or after	More information	Impact on Group

AASB 8 Operating Segments, AASB 2007- 3 Amendments to Australian Accounting Standards 5, 6, 102, 107, 119, 127, 134, 136, 1023 & 1038 arising from AASB 8 This standard supersedes AASB 114 Segment Reporting, introducing a US GAAP approach of management reporting as part of the convergence project with FASB.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	AASB 8 is a disclosure standard, so will have no direct impact on amounts in the financial report, other than amendments to disclosures.
AASB 2008-1 Amendments to Australian Accounting Standards: Share-Based Payments: Vesting Conditions and Cancellations This clarifies that vesting conditions comprise service conditions and performance conditions only and that other features of a share-based payment transaction are not vesting conditions. It also specify that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.
AASB 2008-5: Amendments to Australian Accounting Standards arising from the Annual Improvements Project The amendments to some Standards result in accounting changes for presentation, recognition or measurement purposes, while some amendments that relate to terminology and editorial changes are expected to have no or minimal effect on accounting.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.
AASB 2008-6: Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project AASB 2008-6 amends AASB 1 and AASB 5 to include requirements relating to a sale plan involving the loss of control of a subsidiary.	Beginning 1 July 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

==> picture [440 x 60] intentionally omitted <==

New or revised requirement	Effective for annual reporting periods beginning/ ending on or after	More information	Impact on Group

AASB 2008-7 Amendments to Australian Accounting Standards – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate This amends and clarifies the following standards AASB 101, AASB 118, AASB 127 and AASB 136 for the treatment of determining the cost of an investment in a subsidiary, jointly controlled entity or associate.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.
Interpretation 17 Distributions of Non-cash Assets to Owners This Interpretation provides guidance on how an entity should measure distributions of assets other than cash when it pays dividends to its owners, except for common control transactions.	Beginning 1 January 2009	This will be adopted for the year ended 30 June 2010	The impact of this standard on the group has not yet been determined.

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Directors’ Declaration

The directors of the company declare that:

the financial statements and notes, as set out on pages 29 to 67 are in accordance with the Corporations Act 2001 and:
(a) comply with Accounting Standards and the Corporations Regulations 2001; and
(b) give a true and fair view of the financial position as at 30 June 2009 and of the performance for the year ended on that date of the company and economic entity;
the financial statements and notes comply with International Financial Reporting Standards as disclosed in Note 1.
the Chief Executive Officer and Chief Finance Officer have each declared that:
(a) the financial records of the company for the financial year have been properly maintained in accordance with section 286 of the Corporations Act 2001;
(b) the financial statements and notes for the financial year comply with the Accounting Standards; and
(c) the financial statements and notes for the financial year give a true and fair view.
in the directors’ opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

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

==> picture [35 x 86] intentionally omitted <==

==> picture [130 x 54] intentionally omitted <==

David Breeze Executive Chairman

Dated this 19th day of August 2009

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Independent Auditor’s Report

==> picture [101 x 40] intentionally omitted <==

==> picture [101 x 26] intentionally omitted <==

To the Members of BioPharmica Limited

Report on the Financial Report

We have audited the accompanying financial report of BioPharmica Limited, which comprises the balance sheet as at 30 June 2009, 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 and other explanatory notes and the directors’ declaration for both BioPharmica Limited and the consolidated entity. The consolidated entity comprises the entity 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 Australian Accounting Standards ensures that the financial report, comprising the financial statements and notes, complies with International Financial Reporting Standards.

Auditor’s Re s ponsibility

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 opinion.

Liability limited by a scheme approved under Professional Standards Legislation

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Independent Auditor’s Report

==> picture [101 x 40] intentionally omitted <==

==> picture [101 x 26] intentionally omitted <==

Independence

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

Auditor’s Opinion

In our opinion:

(a) the financial report of BioPharmica Limited is in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the entity’s and consolidated entity’s financial position as at 30 June 2009 and of its 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 consolidated financial statements and notes or 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 on pages 14 to 17 of the financial report for the year ended 30 June 2009. 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.

==> picture [35 x 86] intentionally omitted <==

Auditor’s Opinion

In our opinion the Remuneration Report of BioPharmica Limited for the year ended 30 June 2009, complies with section 300A of the Corporations Acts 2001.

==> picture [86 x 51] intentionally omitted <==

PKF Chartered Accountants

==> picture [140 x 50] intentionally omitted <==

Chris Nicoloff Partner

Dated at Perth, Western Australia this 19th day of August 2009

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

==> picture [35 x 35] intentionally omitted <==

Additional Securities Exchange Information

Additional information required by Australian Securities Exchange Limited and not shown elsewhere in this report as follows.

The information is made up to 13th August 2009

1. Substantial Shareholder

The name of the substantial shareholder listed in the company’s register is:

Shareholder	Shares	%
Trandcorp Pty Ltd	12,728,852	16.98

2. Distribution of Shareholders

==> picture [411 x 34] intentionally omitted <==

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

Number Ordinary
Range of Holding Shareholders Shares %
----- End of picture text -----

Range of Holding	Shareholders Number Ordinary Shares %
1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	155 89,807 0.12 256 771,887 1.03 227 2,024,504 2.70 767 27,459,620 36.62 102 44,634,198 59.53
	1,507 74,980,016 100.00

The number of shareholders with less than a marketable parcel is 171, holding in total 103,195 shares.

3. Voting Rights - Shares

All ordinary shares issued by BioPharmica Limited carry one vote per share without restriction.

4. Voting Rights - Options

The holders of employee options do not have the right to vote.

5. Restricted Securities

The Company does not have any restricted securities.

Number of Shares free of escrow 74,980,160

BioPharmica Limited 2 0 0 9 A N N U A L R E P O R T

Additional Securities Exchange Information

6. Twenty Largest Shareholders as at 13 August 2009

The names of the twenty largest shareholders of the ordinary shares of the company are:

==> picture [411 x 34] intentionally omitted <==

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

Name Number of ordinary % held of issued
fully paid shares ordinary capital
----- End of picture text -----

==> picture [35 x 86] intentionally omitted <==

Name	Number of ordinary fully paid shares % held of issued ordinary capital
Trandcorp Pty Ltd Grandbridge Limited Trandcorp Pty Ltd Comsec Nom PL S Yap Goh Hock Gregory Gilbert Mac Tech Aust PL Lee Madam Biau Luan Abourizk Pauline Lantzke Hugh William Kinetas PL Superfold PL Miglas Eugene Etrade Aust Nom PL Teitzel Gilbert and Sally Paticoa Nom PL Cheal Stephen James Batras One PL Breeze Cliff	9,545,000 6,778,200 3,183,852 2,100,296 1,700,000 961,538 961,538 700,000 477,700 469,000 465,000 424,000 400,000 400,000 389,370 350,000 333,338 321,700 317,500 303,000 12.73 9.04 4.25 2.80 2.27 1.28 1.28 0.93 0.64 0.63 0.62 0.57 0.53 0.53 0.52 0.47 0.44 0.43 0.42 0.40
	30,581,032 40.78

ACN 095 912 002

www.biopharmica.com.au

==> picture [596 x 220] intentionally omitted <==

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

2 0 0 9 A N N U A L R E P O R T
----- End of picture text -----

14 View Street, North Perth Western Australia 6006 Telephone: (08) 9328 8366 Facsimile: (08) 9328 8733 Email: [email protected]

AI assistant

BPH ENERGY LTD — Annual Report 2009

64555_rns_2009-09-29_a9f78d03-02e1-47fc-8a60-5e96320726e7.pdf

contents

Directors

Scientific Advisors

Auditor

PKF

Share Registry

Registered Office

Principal Business Address

Australian Securities Exchange Listing

Australian Business Number

company information

Chairman’s Letter

Dear Shareholder,

Company Focus and Developments

Project Portfolio

Novel Anti-Mitotic Cancer Therapeutics

Summary of the Opportunity

Background

Data

Our Technology

Company Focus and Developments

HLS5

Molecular Discovery Systems (MDSystems)

Floppy Baby Syndrome

Diagnostic Array Systems (DAS)

Company Focus and Developments

Cortical Dynamics

The abstract states:

Directors’ Report

Directors

Company Secretary

Principal Activities

BioPharmica’s Competitive Advantages

Summary of BioPharmica’s Value Proposition

New Anti-Mitotic Drug Development

HLS5 Project

Biomarkers and Therapeutics

Drug Monitoring

Diagnostic Arrays

Nanoprobes

Operating Results

Dividends

Review of Operations

Directors’ Report

Financial Position

Significant Changes in State Of Affairs

After Balance Date Events

Environmental Issues

Future Developments

Information on Directors

D L Breeze

S K Yap

G Gilbert

Directors’ Report

H Goh

Remuneration Report

Remuneration Policy

Employment contracts of directors and senior executives

Directors’ Report

Details of Remuneration for the year ended 30 June 2009

2009

2009 (cont’d)

2008

2008 (cont’d)

Options and Rights Holdings

2009 Number of Options Held by Key Management Personnel

2008 Number of Options Held by Key Management Personnel

Directors’ Report

Shareholdings

2008 Number of Shares Held by Key Management Personnel

Company performance, shareholder wealth and director and executive remuneration

Meetings of Directors

Indemnifying Officers or Auditors

Options

Directors’ Report

Proceedings on Behalf of Company

Non-audit Services

BPH ENERGY LTD Annual Report 2009