COMPUMEDICS LIMITED — Annual Report 2008

Aug 31, 2008

COMPUMEDICS LIMITED

(ACN 006 854 897)

� ASX final report 30 June 2008 Lodged with the ASX under Listing Rule 4.3A

Contents

Results for Announcement to the Market (Appendix 4E item 2)

Consolidated income statement (Appendix 4E item 3)

Consolidated balance sheet (Appendix 4E item 4)

Consolidated statement of changes in equity (Appendix 4E item�.)

Consolidated cash flows (Appendix 4E item 5)

Notes to the consolidated financial information (Appendix 4E item )

Other Appendix 4E Information (Appendix 4E items 6 to 17)

Compumedics Limited Financial Report Year ended 30 June 2008 Results for Announcement to the Market

				$�000
Revenue from ordinary activities (Appendix 4E item 2.1)	Increased	5%	to	38,582
Profitsbefore interest, tax, depreciation and amortisation	Increased	515%	to	756
Profits from ordinary activities after tax attributable to members (Appendix 4E item 2.2)	Increased	515%	to	756
Net profits for the period attributable to members (Appendix 4E item 2.3)	Increased	515%	to	756
Dividends/distributions (Appendix 4E item 2.4)	Amount per security		Franked amount per security
Final dividend(Prior Year)	n/a		n/a
Record date for determining entitlements to the	dividend
			n/a

Record date for determining entitlements to the dividend (Appendix 4E item 2.5) N/a

Explanation of Revenue (Appendix 4E item 2.6)

The group achieved growth in revenues from ordinary activities of 5%, despite a further 15% appreciation of the Australian dollar against the US dollar year on year.

The US business revenues grew by about 10% year on year in US dollars, largely due to a very good year for the brain research (Neuroscan) business (up 77% year on year). In addition the annuity-style revenues for the American business, being for supplies and technical service, also grew year on year and now represent about 16% of total US revenues, where as two years ago these two areas represented less than 10% of total revenues for the US business.

The Australian business at $6.0m sales for the full year was more than 12% higher than the same time last year, reflecting the strong trading conditions in the Australian market this year where the sleep diagnostic business performed very strongly.

The DWL business achieved 4% revenue growth year on year, with total sales this year of $5.9m.

The European business (excluding DWL) however performed below expectations with revenues there declining some 14% year on year to $4.3m. The European business will be subject to intensified review and action to bring it back as a key contributor to the overall business.

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Compumedics Limited Final report Year ended 30 June 2008 Results for Announcement to the Market

Explanation of Earnings before interest, tax, depreciation and amortisation (EBITDA) (Appendix 4E item 2.6)

EBITDA at $1.9m for the year ended June 30, 2008 was a 46% improvement from the prior year EBITDA result of $1.3m. The continuing improvement in EBITDA in the current year has been achieved despite a strengthening Australian dollar to the US dollar and a significant $0.7m charge to the income statement for net foreign exchange losses, as a consequence of this.

The underlying turnaround in the EBITDA result reflects the on-going focus of the business to achieve efficiency gains and margin improvements where it can. It also reflects the increased level of sales achieved in the current financial year

The net foreign exchange losses are primarily related to the appreciation of the Australian dollar against the US dollar. Over the last two years the Australian dollar has risen from 74.8 US cents, at June 30, 2006 to 84.2 US cents at June 30, 2007 to 96.3 US cents at June 30 this year. Despite this the business has been able to continue to restore profitability through diligence, focus and hard work.

During the year ended June 30, 2008 the Company capitalised development costs of $1.2m associated with its SomniLink® SPAP® sleep treatment technology. The intangible asset carrying value at June 30, 2008 was $2.0m.

Explanation of Profit/(loss) from ordinary activities after tax (Appendix 4E item 2.6)

Profits from ordinary activities after tax at $0.8m for the year ended June 30, 2008 was a $0.7m improvement from the $0.1m profit recorded for the prior year.

The above explanation for the improvement in EBITDA reflects the underlying operational improvements in earnings and the sales growth achieved for the full year over the prior year.

Explanation of Dividends (Appendix 4E item 2.6 )

No dividends have been declared or paid in the period.

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Compumedics Limited

Consolidated income statement for the year ended 30 June 2008

	2008	2007
	$�000	$�000
Revenue from continuing operations	38,582	36,734
Other income	379	137
Cost of sales	(16,574)	(15,384)
Administration	(4,852)	(4,277)
Sales & Marketing	(10,850)	(10,573)
Research & Development	(4,588)	(4,600)
Finance costs	(714)	(871)
Net foreign exchange gain / (loss)	(700)	(1,043)
Profit/(Loss) before income tax	683	123
Income tax(expense)/income	73	-
Profit/(Loss) for the full year	756	123
Profit/(Loss) attributable to members of Compumedics Limited	756	123
Earnings per share for profit/(loss) from
continuing operations attributable to the
ordinary equity holders of the company
(cents):
Basic earnings per share	0.5	0.1
Diluted earnings per share	0.5	0.1

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

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Compumedics Limited Consolidated balance sheet as at 30 June 2008

	2008 $�000 2007 $�000
ASSETS Current assets Cash and cash equivalents Receivables Inventories Total current assets	571 363 12,166 12,464 4,684 4,991
	17,421 17,818
Non current assets Property, plant and equipment Intangible assets Noncurrent assets	693 613 2,028 820
	2,721 1,433
Total assets	20,142 19,251
LIABILITIES Current liabilities Payables Borrowings Deferredtax liabilities Provisions Deferred revenue Total current liabilities	5,934 6,296 2,745 3,398 - 73 1,760 1,492 977 1,059
	11,416 12,318
Non-current liabilities Borrowings Provisions Deferred revenues	16 7 16 12 189 -
Total non-current liabilities	221 19
Total liabilities	11,637 12,337
Net assets	8,505 6,914
EQUITY Contributed equity Reserves Retained losses Total equity	30,750 29,492 (1,206) (783) (21,039) (21,795)
	8,505 6,914

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

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Compumedics Limited Consolidated statement of changes in equity for the full year as at 30 June 2008

	2008 $�000 2007 $�000
Total equity at the beginning of the financial year	6,914 6,717
Exchange differences on translation of foreign operations Net income/(loss) recognised directly in equity Profit/(Loss) for the year Total recognised income and expenses for year Transactions with equity holders in their capacity as equity holders:	(165) (198)
	(165) (198) 756 123
	591 (75)
Value of conversion rights on issue of Redeemable Convertible Notes (RCN�s) Deferred tax liability attributable to conversion rights on issue of RCN�s Conversion of RCN to equity	- - 1,000 345 (73) -
Total equity at the end of thefinancial year	8,505 6,914

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

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Compumedics Limited Consolidated cash flows statement for the year ended 30 June 2008

		2008	2007
		$�000	$�000
Cash flow from operating
activities
Receipts from customers		37,784	37,178
(inclusive of goods and services tax)
Payments tosuppliers and		(35,778)	(35,762)
employees (inclusive of goods and
services tax)
Interest and other costs of finance		(528)	(705)
paid
Interest received		6	84
Receipts from grants and other		379	52
income
Net cash inflow/(outflow) from	5	1,863	847
operating activities
Cash flows from investing
activities
Payments for property, plant and		(633)	(160)
equipment
Payments for intangible assets		(1,208)	(797)
Net cash inflow/(outflow) from		**(1,841) **	(957)
investing activities
Cash Flows from financial
activities
Proceeds from borrowings		2,857	-
Repayments of finance leases		(11)	(103)
Repayment of borrowings		(2,230)	(2,714)
Net cash inflow/(outflow) from		616	(2,817)
financing activities
Net decrease in cash and cash		638	**(2,927) **
equivalents
Cash and cash equivalents at the		(555)	2,354
beginning of the year
Effects of exchange rate changes on		7	18
cash
Cash and cash equivalents at the		90	(555)
end of the financial year
This is represented by:
Cash Assets		571	363
Bank Overdraft (Interest bearing liabilities)		(481)	(918)
Net Cash		90	(555)

The above consolidated cash flows statement should be read in conjunction with the accompanying notes.

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2008

1 Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below.

These policies have been consistently applied to all the periods presented, unless otherwise stated.

(a) Basis of preparation of consolidated financial report

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

This preliminary consolidated financial report for the year ended 30 June 2008 does not include all the notes of the type normally included in an annual financial report. Accordingly, this report should be read in conjunction with the annual report for the year ended 30 June 2007 and any public announcements made by Compumedics Limited during the year in accordance with the continuous disclosure requirements of the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the consolidated financial statements and notes of Compumedics Limited comply with International Financial Reporting Standards (IFRS).

Historical cost convention

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

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group�s accounting policies.

This general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Going Concern

During the full year ended 30 June 2008 the consolidated entity (Compumedics) generated an operating profit of $0.8m and positive cash flows from operations of $1.8m. In the prior year Compumedics generated an operating profit of $0.1m and positive cash flows from operations of $0.8m.

The consolidated entity has implemented new funding arrangements with HSBC during January 2008, which the consolidated entity believes will continue to provide it with sufficient funding facilities. These facilities are currently subject to a scheduled annual review process that is to be completed by September 30, 2008. The Directors, at this point in time, believe the facilities will be rolled over, as an outcome of that review and that facilities appropriate to the needs of the business will be obtained.

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The continuing viability of the consolidated entity requires:

• The consolidated entity to achieve its budget and comply with its bank covenants

• Improvement in the terms under which receivables are collected

• The successful launch of the SomniLink® SPAP® product

• Obtaining increased flexibility of funding to better meet the cyclic cash flow requirements of the business

• Improvement in the performance of the European business

The Directors believe the consolidated entity will be successful in the above activities and accordingly have prepared the financial report on the basis that the Company will realise its assets and settle its liabilities and commitments in the normal course of business and for at least the amounts stated in the financial report.

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2008

Note 2. Segment information

Segment reporting � Primary For the year ended 30 June 2008

						$�000
		Brain	Clinical EEG &	Supplies &
		Research-	DWL-	Service-	Unallocated/
	Sleep	Neuroscan	Neuroscience	NMS	Elimination	Group
Sales to external
customers	15,618	10,921	7,698	4,345	-	38,582
Intersegment sales	-	-	-	-	-	-
Total sales revenue	**15,618 **	10,921	7,698	4,345	-	38,582
Otherincome/revenues	173	121	85	-	-	379
Net foreign exchange
gain	-	-	-	-	-	-
Total revenue/income	15,791	11,042	7,783	4,345	-	38,961
SEGMENT RESULT	849	1,191	(1,582)	939	-	**1,397 **
Finance costs						(714)
Tax (expense)/income						73
Profit for theyear						756
Segment assets	6,310	4,227	3,780	2,533	-	16,850
Unallocated assets						3,292
Tax assets						-
Total assets						20,142
Segment liabilities	2,402	1,680	1,184	668		5,934
Unallocated liabilities						5,703
Tax liabilities						-
Total liabilities						**11,637 **
Net assets						8,505
Acquisition of PPE					633	633
Depreciation &
Amortisation					(552)	(552)

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2008

Segment reporting � Primary For the year ended 30 June 2007

		Brain	Clinical EEG &	Supplies &
		Research-	DWL-	Service-	Unallocated/
	Sleep	Neuroscan	Neuroscience	NMS	Elimination	Group
Sales to external
customers	15,401	8,528	8,614	4,191		36,734
Intersegment sales	-	-	-	-	-	-
Total sales revenue	15,401	8,528	8,614	4,191	-	36,734
Other income/revenues	65	36	36	-	-	137
Net foreign exchange
gain	-	-	-	-	-	-
Total revenue/income	15,466	8,564	8,650	4,191	-	36,871
SEGMENT RESULT	391	214	(541)	930	-	994
Finance costs						(871)
Tax expense						-
Profit for theyear						123
Segment assets	7,206	3,664	3,994	2,590	-	17,454
Unallocated assets						1,797
Tax assets						-
Total assets						**19,251 **
Segment liabilities	2,946	1,640	1,656	806		7,048
Unallocated liabilities						5,289
Tax liabilities						-
Total liabilities						**12,337 **
Net assets						6,914
Acquisition of PPE	-	-	-	-	160	160
Depreciation &
Amortisation	-	-	-	-	(465)	(465)

Explanation of Primary business segments

The primary business segments are based on the significant areas in which the business operates. These include:

• (i) Sleep sleep diagnostic hardware and software for clinical application

• (ii) Neuroscan � neurological research hardware and software for research application

• (iii) Neuroscience � neurological and trans cranial Doppler hardware and software for clinical application

• (iv) NMN � neuro medical supplies for use in all three areas above. The section also includes service contracts

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2008

Segment reporting � Secondary For the year ended 30 June 2008

$�000

USA Asia/Pac EUR Elimination	Group
Sales to external customers 15,426 16,407 6,749 - Intersegment sales 1,347 2,862 435 (4,644)	38,582 -
Total sales revenue 16,773 19,269 7,184 (4,644)	38,582
Other income/revenue 7 369 3 -	379
Total segment revenue 16,780 19,638 7,187 (4,644)	38,961
Segment Assets 5,181 22,360 3,750 (11,149)	20,142
Tax assets Total assets	-
	20,142

Explanation of changed secondary segment reporting

Sales to external customers are recorded based on the geographical location of the customer.

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2008

Segment reporting � Secondary For the year ended 30 June 2007

USA Asia/Pac EUR Elimination	Group
Sales to external customers 15,197 10,762 10,775 - Intersegment sales 1,182 2,125 811 (4,118)	36,734 -
Total sales revenue 16,379 12,887 11,586 (4,118)	36,734
Other income/revenue 1 78 58 -	137
Total segment revenue 16,380 12,965 11,644 (4,118)	36,871
Segment Assets 5,081 19,624 3,925 (9,379)	**19,251 **
Tax assets Total assets	-
	**19,251 **

Explanation of changed secondary segment reporting

Following the acquisition of the DWL business in September, 2004 the European based business has grown to represent a material component of the overall group in terms of revenues.

Sales to external customers are recorded based on the geographical location of the customer.

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2008

Note 3. Dividends (Appendix 4E, Item 6)

No dividend has been declared or paid in the current or prior period

Dividend/distribution reinvestment plans (Appendix 4E item 7) NOT APPLICABLE

Note 4. Events occurring after reporting date

The company is not aware of any material matters that would impact the financial performance of the company at this time.

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Compumedics Limited Notes to the consolidated financial statements for the year ended 30 June 2008

Note 5 - Reconciliation of profit after income tax to net cash flow from operating activities

activities
	2008 $�000 2007 $�000
Profit / (Loss) for the year Depreciation & amortisation Property lease benefit amortisation Change in deferred tax RCN equity taken as interest Net exchange differences Change in operating assets and liabilities, net of effects from purchase of controlled entity Decrease (Increase) in receivables Decrease (Increase) in inventories (Decrease) Increase in payables (Decrease) Increase in deferred revenues (Decrease) Increase in other provisions Net cash inflow/(outflow) from operating activities	756 123 552 465 (9) (84) (73) - 154 1 (139) (91) 298 648 307 (164) (362) (146) 107 (40) 272 51
	1,863 763

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Compumedics Limited Supplementary Appendix 4E information for the year ended 30 June 2008

Net Tangible Asset Backing (Appendix 4E item 9)

Net Tangible Asset Backing (Appendix 4E it	em 9)
	2008	2007
Net tangible asset backing per ordinaryshare	4.1cents	4.4 cents

Controlled entities acquired or disposed of (Appendix 4E item 10)

No control was gained over any new entities nor control lost over any existing entities of the group.

Associates and Joint Venture entities (Appendix 4E item 11)

The company has no interest in any joint ventures at the date of this report.

Commentary on results (Appendix 4E item 14)

Earnings per share

Earnings per share improved with the underlying improvement in earnings for the Company already discussed.

Returns to shareholders

As per earnings per share commentary.

Significant features of operating performance

Comments already noted.

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Compumedics Limited Supplementary Appendix 4E information for the year ended 30 June 2008

Results of segments

Primary Segments:

Most primary business segments showed improvement consistent with the underlying performance of the group.

Trends in performance

The focus for the Company will be on the continuing restoration of earnings and the consistent achievement of such earnings over time. The Company will also continue to logically expand its market penetration in each of its existing key markets as the financial capacity of the Company allows for this.

Other factors that affected results in the period or which are likely to affect results in the future

All material matters have been discussed.

Foreign Accounting standards (Appendix 4E item 13)

Not applicable.

Audit (Appendix 4E items 15 - 17)

This report is based on accounts that are in the process of being audited.

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