DIMERIX LIMITED - Annual Report 2010

SUN BIOMEDICAL LIMITED

(A.B.N. 18 001 285 230)

And Controlled Entities

Annual Report 30 June 2010

	Page No.
Corporate Governance Statement	1
Report of the Directors	11
Auditor’s Independence Declaration	19
Statement of Comprehensive Income	20
Statement of Financial Position	21
Statement of Changes in Equity	22
Statement of Cash Flow	24
Notes to and forming part of the Financial Statements	25
Declaration by Directors	56
Independent Auditor’s Report	57
Other Information	59

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Corporate Governance Statement

The Board is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of the Company on behalf of the shareholders by whom it is elected and to whom it is accountable.

In accordance with the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations: 2nd Edition (Revised Principles) ( the Principles ), the Corporate Governance Statement must contain specific information and also report on the Company’s adoption of the Council’s best practice recommendations on an exception basis, whereby disclosure is required of any recommendations that have not been adopted by the Company and why. The Company’s corporate governance principles and policies are therefore structured with reference to the Principles, which are as follows:

1: Lay solid foundations for management and oversight.
2: Structure the board to add value.
3: Promote ethical and responsible decision making.
4: Safeguard integrity in financial reporting.
5: Make timely and balanced disclosure.
6: Respect the rights of shareholders.
7: Recognise and manage risk.
8: Remunerate fairly and responsibly.

A number of the Recommendations under the Principles recommend that certain governance documents should be made publicly available, ideally by posting such information on the company’s website. All corporate governance principles and policies, regarding the Company as required by the Principles are set out in this Corporate Governance Statement.

1. Lay Solid Foundations for Management and Oversight

Recommendation 1.1: Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

The Board is committed to maximising Company and management performance, thereby generating appropriate levels of shareholder value and financial return.

The Board, therefore, ensures that the Company is properly managed to protect and enhance shareholder interests and that the Company, its directors, officers and employees operate in an appropriate environment of corporate governance.

The Board is responsible for, inter alia, development of strategy, oversight of business and Company management, risk management and compliance systems and monitoring performance. The Board has established certain policies and protocols in relation to the Company’s operations, some of which are summarised in this Corporate Governance Statement.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Recommendation 1.2: Companies should disclose the process for evaluating the performance of senior executives.

The performance of the Board, individual Directors and key executives is reviewed regularly, and has taken place during this reporting period.

The Company has not established a Remuneration or Nomination Committee as subcommittees of the Board. Remuneration and nomination issues are discussed and resolved at Board meetings and accordingly, the Board is responsible for determining and reviewing the remuneration of the Directors. This process requires consideration of the levels and form of remuneration appropriate to securing, motivating and retaining executives with the skills to manage the Company’s operations. In making decisions regarding the appointment of Directors, the Board as a whole periodically assesses the appropriate mix of skills and experience represented on the Board. The Board may also obtain information from, and consult with management and external advisers, as it considers appropriate.

The remuneration policy for the Directors is disclosed in the Directors’ Report.

Recommendation 1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.

In accordance with the ‘Guide to Reporting on Principle 1’, the Company provides the following information:

as at the date of this Corporate Governance Statement, the Company is of the view that it has complied with each of the Recommendations under Principle 1; and
the Company has undertaken a performance evaluation for senior executives during the financial year in accordance with the process set out in Recommendation 1.2.

2. Structure the Board to Add Value

Recommendation 2.1: A majority of the Board should be independent directors

At the date of this statement, the Board comprises of four Directors, all of which are deemed as independent Non-Executive Directors as defined under the Board policy on Director independence:

Mr Terry Cuthbertson, who was appointed as the Non-Executive Chairman of the Company on 2 September 2009; and
Mr Peter King, who is a Non-Executive Director of the Company and who acted as independent Non-Executive Chairman until Mr Terry Cuthbertson’s appointment on 2 September 2009; and
Mr Peter Herd, who was appointed as a Non-Executive Director of the Company on 1 October 2009; and
Mr Gary Stewart who was appointed as a Non-Executive Director of the Company on 28 January 2010.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

During the reporting period the following Directors resigned:

Mr Jim Hallam who acted as a Non-Executive Director until his resignation on 1 October 2009; and
Mr Andrew Paice who acted as a Non-Executive Director from 1 March 2008 until his resignation on 2 September 2009. Prior to 1 March 2008, Mr Paice was an Executive Director of the Company.

Recommendation 2.2: The Chairperson should be an independent Director

The Chairman, Mr Terry Cuthbertson, has acted as an independent Non-Executive Chairman since his appointment on 2 September 2009. The previous Chairman, Mr Peter King, acted as Non-Executive Chairman until the appointment of Mr Terry Cuthbertson.

Recommendation 2.3: The roles of Chairperson and Chief Executive Officer should not be exercised by the same person

At the date of this Corporate Governance Statement Mr Terry Cuthbertson is the Chairman of the Board. The Company does not currently engage an Executive Officer due to the size of the Company and its current level of operations.

Recommendation 2.4: The Board should establish a nomination committee

Due to the small size of the Board and the Company’s current level of operations, the Company does not have a separate nomination committee.

Recommendation 2.5: Companies should disclose the process for evaluating the performance of the

board, its committees and individual directors.

The Board reviews and evaluates the performance of the Board and the Board committees. The process is to involve the assessment of all of the Board’s key areas of responsibility. The Board’s contribution as a whole is reviewed and areas where improvement can be made are noted. The performance evaluation process is as follows:

each Director will periodically evaluate the effectiveness of the Board and its committees and submit observations to the Chairman;
the Chairman of the Board will make a presentation incorporating his assessment of such observations to enable the Board to assess, and if necessary, take action;
the Board will agree on development and actions required to improve performance;
outcomes and actions will be minuted; and
the Chairman will assess during the year the progress of the actions to be achieved.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

This process aims to ensure that individual Directors and the Board as a whole contribute effectively in achieving the duties and responsibilities of the Board. The performance of the Board, individual Directors and key executives has taken place during this reporting period in accordance with the process set out above.

Recommendation 2.6: Provide the information indicated in Guide to Reporting on Principle 2

The Board takes the ultimate responsibility for corporate governance and operates in accordance with the following broad principles:

the Board shall comprise of between 3 and 10 Directors;
Directors shall have the power at any time to appoint any other suitably qualified person subject to election at the Company’s following annual general meeting;
in the interest of ensuring a continual supply of new talent to the Board, all Directors with the exception of the Managing Director (where appointed) will serve for a period of three years before they are requested to stand down for re-election; and
the Board should comprise Directors with a broad range of skills and experience.

The ‘Guide to Reporting on Principle 2’ provides that certain information should be included in the corporate governance section of the Company’s Annual Report or be made publicly available. In accordance with the ‘Guide to Reporting on Principle 2’, the Company provides the following information:

The skills, experience and expertise relevant to the position of Director held by each Director in office at the date of the Annual Report is detailed in the Director’s Report.
All the Directors are considered by the Board to constitute independent directors. In assessing whether a Director is independent, the Board has regard to the standards it has adopted that reflect the independence requirements of applicable laws, rules and regulations, including the Principles.
Whenever necessary, individual members of the Board may seek independent professional advice at the expense of the Company up to $5,000 per annum in relation to fulfilling their duties as Directors. All Directors are encouraged to actively participate in all decision making processes and are given every opportunity to have their opinion heard and respected on all matters.
The term of office held by each Director in office at the date of the Annual Report is detailed in the Director’s Report.
Due to the small size of the Board and the Company’s current level of operations, the Company does not have a separate nomination committee and therefore a charter or an appointment policy has not been created.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

The performance of the Board, individual Directors and key executives has taken place during the reporting period in accordance with the process set out in Recommendation 2.5.
As at the date of this statement, the Company is of the view that it has complied with each of the Recommendations under Principle 2, except for Recommendation 2.4. An explanation for the departure from Recommendation 2.4 is set out above.

3. Promote Ethical and Responsible Decision-making

Recommendation 3.1: Companies should establish a code of conduct and disclose the code or a summary of the code as to:

the practices necessary to maintain confidence in the company’s integrity
the practices necessary to take into account their legal obligations and the reasonable expectations of their stakeholders
the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

The Board has adopted a Code of Conduct that provides a framework in which the Company and its representatives conduct their business and activities in a fiscally efficient and socially responsible manner whilst seeking to maximise shareholder returns.

The Code of Conduct also outlines how the Company expects Directors, management and employees to behave and conduct business in a range of circumstances. In particular, the Code of Conduct requires awareness of, and compliance with laws and regulations relevant to the Company’s operations.

Recommendation 3.2: Companies should establish a policy concerning trading in company securities by directors, senior executives and employees, and disclose the policy or a summary of that policy.

The Company has a policy concerning trading in the Company’s securities by Directors, management and staff ( Trading Policy ). The Trading Policy restricts directors and employees from:

acting on material information until it has been released to the market and adequate time has been given for this to be reflected in the prices of securities; and
trading in securities other than in a trading window of four weeks following either:
the announcement of results; and
a General Meeting of shareholders.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

The Trading Policy requires that, in accordance with the ASX Listing Rules, a Director notify the ASX within five (5) business days after any dealing in the Company’s securities that results in a change in the relevant interests of the Director in the Company’s securities.

Recommendation 3.3: Companies should provide the information indicated in the Guide to reporting on Principle 3.

The ‘Guide to Reporting on Principle 3’ provides that certain information should be included in the corporate governance section of the Company’s Annual Report or be made publicly available. The Company notes that it has not made the Code of Conduct or Trading Policy publicly available as the Company currently does not have a website.

4. Safeguard Integrity in Financial Reporting

Recommendation 4.1: The Board should establish an Audit Committee

The Company has not established an Audit Committee as recommended under Recommendation 4.1 as the Board is of the view that, having regard to the Company’s current level of operations and the number of current Directors of the Company, the implementation of an Audit Committee is currently cost prohibitive. As the Company’s level of operations increases, the Company will consider establishing an Audit Committee

Accordingly, it is the Board’s responsibility to establish and maintain an effective internal control framework to examine the effectiveness and efficiency of the management of the Company and significant business processes such as the safeguarding of assets, the maintenance of proper accounting records and the integrity of financial information, the implementation of quality assurance practices and procedures and ensuring compliance with environmental regulations.

Recommendation 4.2, 4.3 and 4.4 Structure of the Audit Committee, Audit Committee Charter and information indicated in the Guide to Reporting on Principle 4

As recommendations 4.2, 4.3 and 4.4 relate to the composition and charter of the Audit Committee, they have not been implemented by the Company.

5. Make Timely and Balanced Disclosure

Recommendation 5.1: Companies should establish written policies designed to ensure compliance

with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

The Board and senior management are aware of the continuous disclosure requirements of the ASX and have written policies and procedures in place to disclose any information concerning the Company that a reasonable person would expect to have a material effect on the price of the Company’s securities. Furthermore, the Directors and senior management of the Company acknowledge that they each have an obligation to immediately identify and immediately disclose information that may be regarded as material to the price or value of the Company securities.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

The Directors are authorised to make statements and representations on the Company’s behalf. The Company Secretary is responsible for overseeing and coordinating the disclosure of information to the ASX, analysts, stockbrokers, shareholders, the media and the public.

The Directors of the Company ensure that the Secretary is aware of all information to be presented at briefings with analysts, stockbrokers, shareholders, the media and the public. Prior to being presented, information that has not already been the subject of disclosure to the market and is not generally available to the market is the subject of disclosure to the ASX. Only when confirmation of receipt of the disclosure and release to the market by the ASX is received may the information be presented.

If information that would otherwise be disclosed comprises of matters of supposition or is insufficiently definite to warrant disclosure, or if the effect of a disclosure on the value or price of the Company’s securities is unknown, the Company may request that the ASX grant a trading halt or suspend the Company’s securities from quotation. Management of the Company may consult the Company’s external professional advisers and the ASX in relation to whether a trading halt or suspension is required.

Recommendation 5.2: Provide the information indicated in Guide to Reporting on Principle 5

The ‘Guide to Reporting on Principle 5’ provides that certain information should be included in the corporate governance section of the Company’s Annual Report or be made publicly available. The Company notes that it has not made the Code of Conduct publicly available as the Company currently does not have a website.

6. Respect the Rights of Shareholders

Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

The Board aims to ensure in accordance with Recommendation 6.1, all shareholders are informed of relevant major developments affecting the affairs of the Company. Information is communicated to the shareholders through the annual and half year reports, disclosures made to the ASX, notices of meetings and occasional letters to shareholders where appropriate.

Recommendation 6.2: Companies should provide the information indicated in the Guide to reporting on Principle 6.

The ‘Guide to Reporting on Principle 6’ provides that certain information should be included in the corporate governance section of the Company’s Annual Report or be made publicly available. The Company notes that it has not made the Code of Conduct publicly available as the Company currently does not have a website.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

7. Recognise and Manage Risk

Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

The Board has procedures in place to recognise and manage risk in accordance with Recommendation 7.1. The risk oversight and management system covers:

operations risk;
financial reporting; and
compliance

The Company is committed to the proper identification and management of risk. The Company regularly undertakes reviews of its risk management procedures which include implementation of a system of internal sign-offs to ensure not only that the Company complies with its legal obligations, but that the Board and ultimately shareholders can take comfort that an appropriate system of checks and balances are in place regarding those areas of the business which present financial or operating risks.

The Company has also adopted a Code of Conduct which sets out the Company’s commitment to maintaining a high level of integrity and ethical standards in all business practices.

Recommendation 7.2: The board should require management to design and implement the risk management and internal control system to manage the company’s material business risks and report to it on whether those risks are being managed effectively. The board should disclose that management has reported to it as to the effectiveness of the company’s management of its material business risks.

The Company does not currently engage any executives due to the size of the Company and its current level of operations. Accordingly the Company’s Board is responsible for providing leadership and direction for the Company, for establishing a context which fosters a risk management culture and for ensuring business, financial and risk management approaches are integrated during the planning, implementation and reporting of major ventures at all levels within the organisation.

The Company regularly undertakes reviews of its risk management procedures, which include implementation of a system of internal approvals to ensure not only that it complies with its legal obligations, but that the Board and shareholders can take comfort that an appropriate system of checks and balances is in place in those areas of the business that present financial or operating risks. As part of this risk management process, the Company’s management has reported to the Board in relation to its management of the Company’s material business risks.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Recommendation 7.3: The board should disclose whether it has received assurance from the chief executive officer (or equivalent) and the chief financial officer (or equivalent) that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks.

As set out under Recommendation 2.3, since 30 April 2009, the Company has not had an Executive Officer because of the size of the Company and its current level of operations. Accordingly, the each of the Directors have reviewed the Financial Reports and the Chairman on behalf of the Board has declared that the Financial Reports are founded on a sound system of risk management, internal compliance and control which implements the policies adopted by the Board. The Chairman has also declared that the Company’s risk management, internal compliance and control system is operating efficiently and effectively in all material respects.

Recommendation 7.4: Companies should provide the information indicated in the Guide to reporting on Principle 7.

In accordance with the ‘Guide to Reporting on Principle 7’, the Company provides the following information:

The Company has not departed from Recommendations 7.1 and 7.2.
As the Company does not have a chief executive officer or chief financial officer, the Directors have given the assurances under Recommendation 7.3

8. Remunerate Fairly and Responsibly

Recommendation 8.1: The board should establish a remuneration committee

The performance of the Board, individual Directors and key executives is reviewed annually, and has taken place during this reporting period.

The Company has not established an Audit, Remuneration or Nomination Committee as subcommittees of the Board. Section 4 of this Statement sets out why the Company does not have an Audit Committee and discusses the processes the Company has in place as a result. Remuneration and Nomination issues are discussed and resolved at Board meetings and accordingly, the Board is responsible for determining and reviewing the remuneration of the Directors. This process requires consideration of the levels and form of remuneration appropriate to securing, motivating and retaining executive with the skills to manage the Company’s operations. In making decisions regarding the appointment of Directors, the Board as a whole periodically assesses the appropriate mix of skills and experience represented on the Board. The Board may also obtain information from, and consult with management and external advisers, as it considers appropriate.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

It is the Company’s objective to provide maximum shareholder benefit from the retention of high quality Board members having regard to the Company’s level of operations and financial resources. Directors are remunerated with reference to market rates for comparable positions. Remuneration policies for each Non-Executive Director are disclosed in the Directors’ Report.

The Remuneration policy for the Directors is disclosed in the Directors’ Report.

Recommendation 8.2: Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives.

Non-Executive Directors are paid a set fee as disclosed in the Director’s Report in this Annual Report. The remuneration of executives is dependent on the terms of the employment agreement with those executives. The remuneration structure of Non-Executive Directors and executives is clearly distinguishable.

There are no schemes for retirement benefits, other than statutory superannuation, in existence for the Non-Executive Directors.

Recommendation 8.3: Companies should provide the information indicated in the Guide to reporting on Principle 8.

In accordance with the ‘Guide to Reporting on Principle 8’, the Company provides the following information:

there are no schemes for retirement benefits, other than statutory superannuation, in existence for the Non-Executive Directors;
due to size of the Company and its current level of operations, the Company does not have a separate Remuneration Committee and therefore a charter or an appointment policy has not been created; and
as at the date of this statement, the Company is of the view that it has complied with each of the Recommendations under Principle 8, except for Recommendation 8.1. An explanation for the departure from Recommendation 8.1 is set out above.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

REPORT OF THE DIRECTORS – 30 JUNE 2010

Your Directors present their report on the Company and its controlled entities for the financial year ended 30 June 2010.

Directors

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

Mr. Terry Cuthbertson - Chairman appointed 2 September 2009; and. Mr. Peter King – Chairman resigned 2 September 2009 to be Non Executive Director; and. Mr. Andrew Paice – Non Executive Director resigned 2 September 2009; and. Mr. Jim Hallam – Non Executive Director resigned 1 October 2009; and Mr. Peter Herd - Non Executive Director appointed 1 October 2009; and Mr Gary Stewart – Non Executive Director appointed 28 January 2010.

Principal Activities

On 14 October 2009 the Company entered into an agreement to place 116,276,900 ordinary shares to sophisticated and professional investors at 0.1 cents per ordinary share to raise $116,277. Share placement issue costs being $28,953.

On the 19 November 2009 the Company closed a Renounceable Rights Issue of one New Ordinary Share for every Ordinary Share held at a price of 0.1 cents per ordinary share, raising $891,456 with the issue of 891,456,280 new shares. Rights issue costs being $142,005.

On the 17 May 2010 the Company announced the successful completion of the 2010 Share Purchase Plan (SPP) and the issue of 534,916,068 shares under the SPP. As a result the Company raised $855,866 under the SPP with costs of $129,490.

The Company is continuing with the process of identifying and assessing potential new investment opportunities for the Company’s future growth prospects.

Results for the Year

	Consolidated	Group	Parent	Entity
	2010	2009	2010	2009
	$	$	$	$
Loss after income tax	(347,767)	(4,128,738)	(347,767)	(3,900,445)

The major component of the loss for the head office sector was the working capital requirements in order for the company to maintain its listing on the Australian Stock Exchange.

Dividends

No dividends have been paid or proposed since the last Director’s Report dated 31 December 2009.

Review of Operations

The consolidated loss for the 12 months ended 30 June 2010 was $347,767 compared to a loss of $4,128,738 for the previous 12 months ended 30 June 2009. Some of the key features of the year ended 30 June 2010 include:

The Company completed a share placement to sophisticated and professional investors in October 2009 which raised a total of $116K with associated costs of $29K;
The Company closed a renounceable rights issue in November 2009 which raised $891K with associated costs of $142K;

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

The Company purchased an equity investment in Argus Business Systems Limited in February 2010 at a cost of $47k.
In March 2010 the Company entered into a Convertible Note Subscription Agreement with South American Iron and Steel Corporation Limited (“SAY”) with 4 convertible notes being issued at a face value of $100,000 at an interest rate of 12% and in consideration of the issue of each note SAY issued 400,000 ordinary fully paid shares to the Company. As at the 30 June 2010 3 Convertible Notes remained outstanding with one of the notes having been repaid and $14K of accrued interest received. As at 30 June 2010 the Company held 1,600,000 SAY ordinary shares.
In May 2010 the Company entered into a Deed of Company Arrangement (“DOCA”) with Occupational & Medical Innovations Limited (“OMI”) with a view to participating in the recapitalisation of OMI. SBN made an initial contribution of $15K to OMI, with an additional $115k payable to creditors’ trust contingent upon OMI completing a share consolidation and a capital raising which will see OMI raise sufficient funds to continue its operations. As at 30 June 2010, the Company had advanced $15K to OMI under the DOCA and paid $35K on behalf of OMI under a loan arrangement in respect to costs for its proposed recapitalisation.
In May 2010 the Company completed a share purchase plan which raised $856K with associated costs of $129K;

Financial Position

The net assets of the consolidated group have increased by $1,218,204 from 30 June 2009 to $1,560,180 as at 30 June 2010. This increase is reflected in the following Balance Sheet movements:

increase in Cash and Cash Equivalents of $792,326;
increase in Non Current Assets of $426,196;
increase in Trade and Other Payables of $2,991; and

As at 30 June 2010, the consolidated group has a working capital surplus, being current assets less current liabilities, of $1,131,391 (2009 surplus $339,383).

Significant Transactions

Significant transactions that occurred during the year included a share placement in October 2009, the successful completion of an underwritten Rights Issue in November 2009, and the successful completion of a share purchase plan in May 2010.

The table below summarises the sources and applications of the funds raised from capital raisings.

	$’000
Opening cash balance at 1 July 2009 Gross proceeds from October 2009 share placement Gross proceeds from November 2009 renounceable rights issue Gross proceeds from share option conversion Gross proceeds from May 2010 share purchase plan Costs associated withcapital issued	373 116 891 3 856 (301)
Available cash after capital raising	1,938
Investments in non current assets Australian legal, regulatory band compliance costs Othercosts of maintaininglisted entityin Australia	(400) (230) (144)
Closing cash balance as at 30 June 2010	1,164

Significant Changes in State of Affairs

The company continues to seek potential new investment opportunities for future growth prospects.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

Matters Subsequent to the End of the Financial Year

Except for the matters discussed above no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group, in subsequent financial years.

Likely Developments

Disclosure of detailed information on likely developments in the operations of the group and the expected results of operations have not been included in this annual financial report because the Directors believe it would be likely to result in unreasonable prejudice to the group. The group will continue with the process of identifying and assessing potential new investment opportunities for the company’s future growth prospects.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY

ACN 001 285 230

*Report of the Directors (Continued)*
*Information on Directors TERRY*	*Non Executive Chairman*
*CUTHBERTSON*
B.Bus, ACA
*Experience*	Mr. Cuthbertson is currently Chairman of South American Iron and Steel
	Limited, Montec International Limited, Austpac Resources N.L., My Net
	Fone Limited, S2 Net Limited and a Director of OMI Holdings Limited . He
	was also a partner of KPMG Corporate Finance and NSW Partner in Charge
	of Mergers and Acquisitions where he coordinated government privatization,
	mergers, acquisitions and divesture activities and public offerings on the
	Australian Stock Exchange for the NSW practice. Prior to this, he was the
	Group Finance Director of Tech Pacific Holding Limited, which was the one
	of the largest information technology distributors in Asia with a turnover in
	1999 of AUS2 billion and was a Director for Tech Pacific Limited‘s
	businesses in China, Hong Kong, Singapore, India, Philippines, Indonesia and
	Thailand.
	Directorships held in other listed entities: Montec International Limited,
	Austpac Resources N.L., My Net Fone Limited, S2 Net Limited and
	Occupational & Medical Innovations Limited.
	Directorships held in the past three years in other listed entities: Healthzone
	Limited.
*PETER KING*	*Non Executive Director*
BA (Hons Syd) MA (Oxon)
*Experience*	A barrister, Rhodes scholar and former Federal Member of Parliament and
	director of public and charitable institutions in the area of Aboriginal youth
	justice and the welfare of young children, with a breadth of international
	experience and contacts which are complimentary to the business. His
	knowledge and past involvement with government is seen as being of major
	benefit to the Company.
	Directorships held in other listed entities: Nil.
	Directorships held in the past three years in other listed entities: Nil.
*PETER HERD*	*Non Executive Director*
BEc (Hons), FAICD
*Experience*	Mr. Herd, since 2006, has been the Managing Director and previously a Non-
	Executive Director of Montec International Limited. Mr. Herd’s previous
	career positions include General Manager of Dairy Farmers Milk and
	Beverages Division, responsible for manufacturing, distribution and
	marketing operations across four Australian states. Prior to joining Dairy
	Farmers, Mr Herd held various general management and marketing positions
	with the Coca-Cola Company, including Regional Director of Australasia for
	Coca-Cola South Pacific, Division President of Coca-Cola Far East, located in
	the Philippines and Country Manager positions in Hong Kong, Taiwan and
	Indonesia
	Directorships held in other listed entities:- Montec International Limited.
	Directorships held in the past three years in other listed entities:- Nil.
*GARY STEWART*	*Non Executive Director*
LLB
*Experience*	Mr Stewart is company secretary of ASX Listed Company Mint Wireless and
	a Director of OMI Holdings Limited (“OMI”) and has been a director of
	public listed companies in Australia and the United States of America.
	Mr Stewart has a practice in Corporate Law and advises and works in a
	number of public listed companies in Australia. In addition he holds the
	position of Company Secretary in both public listed companies and private
	companies.
	Directorships held in other listed entities:- Occupational & Medical
	Innovations Limited (OMI).
	Directorships held in the past three years in other listed entities: Nil.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

Information on Company Secretary

ALFONSO GRILLO BA LLB

Company Secretary

Experience

Alfonso Grillo is a partner with Tress Cox Lawyers and has expertise in various aspects of commercial law, including company meeting practice and corporate governance procedures, fundraising and fundraising documentation, ASX Listing Rules and mergers and acquisitions.

Alfonso is currently also Company Secretary of ASX listed Ngami Mining Limited and Somerton Energy Limited. Alfonso has held the position of company secretary of Sun Biomedical Limited since 21 June 2007.

Directors’ Interests in Shares and Options

Directors Notes Existing Shares Existing Options Peter King 2,480,762 -

The number of directors meetings attended by each of the directors of the Company during the financial year was :

Director	Directors’ Meetings	Directors’ Meetings
	A	B
Mr Peter King	15	19
MrJim Hallam	6	6
Mr AndrewPaice	2	3
Mr Terry Cuthbertson	15	16
Mr Peter Herd	13	13
MrGary Stewart	9	9

A – Meetings attended

B – Meetings held whilst a director

Remuneration Report (audited)

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

The remuneration policy adopted by the Company 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, such as options, which are exercisable at levels in excess of the Company’s share price when granted.

The Directors believe 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 consolidated group, 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 consolidated group is as follows:

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

The remuneration policy, setting the terms and conditions for the executive directors and other senior executives, is developed and approved by the Directors after seeking professional advice from independent external consultants where deemed appropriate. The Directors will review executive packages annually by reference to the consolidated group’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries. The Directors seek ratification of Executive remuneration packages by shareholders at general meeting. In the current year the remuneration is not linked to performance due to the stage in the life cycle of the company.

All remuneration paid to Directors and Executives is valued at the cost to the company and expensed. Options are valued using the Black-Scholes methodology.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their 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. The aggregate amount of remuneration has been set at $100,000.

Fees for non-executive directors are not linked to the performance of the consolidated group. Currently, all directors are paid $10,000 per annum. Remuneration for Directors and Executives for the period is as follows:

Economic and Parent Entity

Short term employee	benefits	Equity compensation
Directors Directors Fees Consulting Fees	Salary	Value of options/shares Total
Non Executive $ $ Peter King 2010 10,000 - 2009 16,932 - Jim Hallam 2010 2,500 21,250 2009 12,509 85,000 Andrew Paice 2010 1,667 - 2009 17,500 - Terry Cuthbertson 2010 8,333 - 2009 - - Peter Herd 2010 7,500 - 2009 - - Gary Stewart 2010 4,167 -** 2009 - -	$ - - - - - - - - - - - -	$ $ - 10,000 8,750 25,682 23,750 4,999 102,508 - 1,667 12,334 29,834 - 8,333 - - - 7,500 - - - 4,167 - -
Total Directors 2010 34,167 21,250 2009 46,941 85,000	- -	- 55,417 26,083 158,024
Key Management Personnel Jack Kerins 2010 - - 2009 - -	- 266,363	- - 9,760 276,123
Total Key Management Personnel 2010 - - 2009 - -	- 266,363	- - 9,760 276,123
Total 2010 34,167 21,250 2009 46,941 85,000	- 266,363	- 55,417 35,843 434,147

*The company notes that $21,250 was paid to Turnberry Funds Management Pty Ltd, a company controlled by Jim Hallam for provision of accounting and administration services whilst he was a director of the company.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

Options issued as part of remuneration for the year ended 30 June 2010 (Audited).

During this financial year, no options over ordinary shares in the Company were issued to any Director or other key management personnel of the group, including their personally related parties.

This is the end of the Audited Remuneration Report.

Audit Committee

The Directors have taken the view that in light of the Company's size and stage of development, the full board would fulfill the functions of the Audit Committee. This involves maintaining a Code of Corporate Conduct for the consolidated group, and to ensure additional assurance with respect to the quality and reliability of the information provided is prepared or approved by third party providers. The board is responsible for the appointment of the external auditor. The Board is responsible for reviewing the effectiveness of the organisation’s internal control environment covering:

Effectiveness and efficiency of operations
Reliability of financial reporting
Compliance with applicable laws and regulations.

In fulfilling its responsibilities the Board receives monthly management accounts which are tabled at monthly board meetings.

Shares Issued

The following shares were issued by the company during the year:-

Issue of 116,276,900 shares at 0.1 cents per share in October 2009 per a Share Placement;
Issue of 141,000 shares at 2.0 cents via option conversion; and
Issue of 891,456,280 shares at 0.1.cents per share in November 2009 per a Rights Issue; and
Issue of 534,916,068 shares at 0.16 cents per share in May 2010 per a Share Purchase Plan.

Environmental Issues

The consolidated group’s operations are not subject to any significant environmental regulations.

Directors’ Benefits

Turnberry Funds Management Pty Ltd, a company controlled by Jim Hallam, and in which former substantial shareholder of the Company, Log Creek Pty Ltd, has a 33% shareholding, has entered into an agreement with the Company for the provision of accounting and administration services. The fee for the period whilst Mr. Hallam was a Director of the Company was $21,250.

Since 30 June 2010, no director of the Company has received or become entitled to receive a benefit (other than Directors’ Remuneration included above and in Note 21 of the Financial Statements) by reason of a contract made or proposed by the Company or a related corporation with the Directors or with a firm of which he has a substantial financial interest other than as disclosed.

Directors’ and Executive Officers’ Indemnification

After the balance date, the Company has paid insurance premiums in respect of directors’ and officers’ liability. A premium of $15,827.08 inclusive of GST was paid and the policy prevents the Company from further disclosure.

There is no indemnification in relation to the auditors.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

Non-audit Services

The Directors are 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 by the Board prior to commencement to ensure they do not adversely affect the integrity and objectivity of the auditor; and
The nature of the services provided does not compromise the general principles relating to auditor independence as set out in APES110 “Code of Ethics for Professional Accountants”.

Taxation services performed for the group by the auditor totaled $12,000 (2009: $12,000).

Options

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

Grant Date	Expiry Date	Exercise Price	Number of Options
8 September 2006 25 June2008	30 June 2011 15 September 2011	10 cents 2cents	20,000,000 2,000,000
			22,000,000

In addition, the Company also has 186,809,656 listed 2 cent options which expire on 30 November 2010. These were issued as part of the 2008 Rights Issue.

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.

Auditor’s Independence Declaration

The auditor’s independence declaration for the year ended 30 June 2010 has been received and can be found on page 19 of this financial report.

Signed in accordance with a resolution of directors.

==> picture [150 x 54] intentionally omitted <==

Terry Cuthbertson Director

Sydney 29 September 2010

Armstrong Partners

CHARTERED ACCOUNTANTS

AUDITOR’S INDEPENDENCE DECLARATION

As auditor for the audit of Sun Biomedical Limited for the year ended 30 June 2010, I declare that to the best of my knowledge and belief, there have been:

(i) no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
(ii) no contravention of any applicable code of professional conduct in relation to the audit.

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

Armstrong Partners

==> picture [149 x 40] intentionally omitted <==

David Armstrong Partner

Melbourne

29 September 2010

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

Note Revenues from continuing operations 2a Total Revenue from continuing operations Other Expenses 2b Equity based payments 20 Depreciation Loss before income tax Income tax expense 3 Loss for the year from continuing operations Loss for the year from discontinued operations after income tax 4 Loss for the year Other comprehensive income Total comprehensive (loss) attributable to members of the parent company Overall operations Basic and diluted earnings (loss) per share 7 Continuing operations Basic and diluted earnings (loss) per share Discontinued operations Basic and diluted earnings (loss) per share	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 57,646 33,332 57,646 33,332
	57,646 33,332 57,646 33,332
	(403,736) (476,586) (403,736) (476,586) - (35,843) - (35,843) (1,677) (2,013) (1,677) (2,013)
	(347,767) (481,110) (347,767) (481,110) - - - -
	(347,767) (481,110) (347,767) (481,110) - (3,647,628) - (3,419,335)
	(347,767) (4,128,738) (347,767) (3,900,445) - - - -
	(347,767) (4,128,738) (347,767) (3,900,445)
	Cents per share Cents per share (0.02) (0.53) (0.02) (0.06) - (0.47)

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

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010

Note Current Assets Cash and cash equivalents 8 Trade and other receivables 9 Total Current Assets Non Current Assets Property, plant and equipment 11 Investments 10(c) Total Non-Current Assets Total Assets Current Liabilities Trade and other payables 13 Total Current Liabilities Total Liabilities Net Assets Equity Contributed equity 14 Reserves 15 Accumulated losses Total Equity	Consolidated Group Parent Entity 2010 2009 2009 2009 $ $ $ $ 1,163,996 371,670 1,163,996 371,670 13,743 11,070 13,743 11,070
	1,177,739 382,740 1,177,739 382,740
	- 2,593 - 2,593 428,789 - 428,789 -
	428,789 2,593 428,789 2,593
	1,606,528 385,333 1,606,528 385,333
	46,348 43,357 46,348 43,357
	46,348 43,357 46,348 43,357
	46,348 43,357 46,348 43,357
	1,560,180 341,976 1,560,180 341,976
	29,399,862 27,833,891 29,399,862 27,833,891 22,600 59,600 22,600 59,600 (27,862,282) (27,551,515) (27,862,282) (27,551,515)
	1,560,180 341,976 1,560,180 341,976

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

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

CONSOLIDATED GROUP Balance at 1 July 2008 Shares issued during the year Cost of option based payments Transfers to/(from) reserves Transaction costs Sub total Currency translation differences Loss attributable to members of the consolidated group Sub-total Balance at 30 June 2009 Balance at 1 July 2009 Shares issued during the year Cost of option based payments Transfers to/(from) reserves Transaction costs Sub total Currency translation differences Loss attributable to members of the consolidated group Sub-total Balance at 30 June 2010	Share Capital Ordinary $ Accumulated Losses $ Share Based Payment Reserve $ Foreign Currency Translation Reserve $ Total $ 24,483,424 (23,503,662) 118,391 (89,994) 1,008,159 3,800,345 - 3,800,345 22,094 - 22,094 80,885 (80,885) - (449,878) - (449,878)
	3,350,467 80,885 59,600 - 3,372,561 - - - 29,196 29,196 - (4,128,738) - 60,798 (4,067,940)
	- (4,128,738) - 89,994 (4,038,744)
	27,833,891 (27,551,515) 59,600 - 341,976
	27,833,891 (27,551,515) 59,600 - 341,976 1,866,419 - - - 1,866,419 - - - - - 37,000 (37,000) - - (300,448) - - - (300,448)
	1,565,971 37,000 (37,000) - 1,565,971 - - - - - - (347,767) - - (347,767)
	- (347,767) - - (347,767)
	29,399,862 (27,862,282) 22,600 - 1,560,180

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

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2010

Continued

PARENT ENTITY Balance at 1 July 2008 Shares issued during the year Cost of option based payments Transfers to/(from) reserves Transaction costs Sub total Currency translation differences Loss attributable to members of parent entity Sub-total Balance at 30 June 2009 Balance at 1 July 2009 Shares issued during the year Cost of option based payments Transfers to/(from) reserves Transaction costs Sub total Currency translation differences Loss attributable to members of parent entity Sub-total Balance at 30 June 2010	Share Capital Ordinary $ Accumulated Losses $ Share Based Payment Reserve $ Foreign Currency Translation Reserve $ Total $ 24,483,424 (23,731,955) 118,391 - 869,860 3,800,345 - - - 3,800,345 - - 22,094 - 22,094 - 80,885 (80,885) - - (449,878) - - - (449,878)
	3,350,467 80,885 (58,791) - 3,372,561 - - - - - - (3,900,445) - - (3,900,445)
	- (3,900,445) - - (3,900,445)
	27,833,891 (27,551,515) 59,600 - 341,976
	27,833,891 (27,551,515) 59,600 - 341,976 1,866,419 - - - 1,866,419 - - - - - - 37,000 (37,000) - - (300,448) - - - (300,448)
	1,565,971 37,000 (37,000) - 1,565,971 - - - - - - (347,767) - - (347,767)
	- (347,767) - - (347,767)
	29,399,862 (27,862,282) 22,600 - 1,560,180

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010

Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers Payments to suppliers and employees Interest received Interest paid Other income Net cash outflow from operating activities 20 CASH FLOWS FROM INVESTING ACTIVITIES Payment for investments Payment for property, plant and equipment Loan to controlled entity Net cash outflow from investing activities CASH FLOWS FROM FINANCING ACTIVITIES Issue of new shares 14 Repayment of borrowings Share issue costs 14 Net cash inflow from financing activities Net increase in cash held Cash at the beginning of the financial period NET CASH AT END OF PERIOD 19	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ - 726,639 - - (402,507) (2,607,256) (402,507) (504,956) 28,838 33,404 28,838 33,404 - (12,948) - (12,948) - 111,479 - -	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ - 726,639 - - (402,507) (2,607,256) (402,507) (504,956) 28,838 33,404 28,838 33,404 - (12,948) - (12,948) - 111,479 - -
	(373,669)	(1,748,682) (373,669) (484,500)
	(399,981) - -	- (399,981) - (119,175) - - - - (1,377,509)
	(399,981)	(119,175) (399,981) (1,377,509)
	1,866,419 - (300,443)	3,742,637 1,866,419 3,742,637 (1,174,454) - (1,174,454) (449,879) (300,443) (449,879)
	1,565,976	2,121,304 1,565,976 2,121,304
	792,326 371,670	253,447 792,326 259,295 118,223 371,670 112,375
	1,163,996	371,670 1,163,996 371,670

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

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 1: Summary of Significant Accounting Policies

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards (including Australian Accounting Interpretations), other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001. The financial statements were authorised for issue by the Board on 28 September 2010.

The financial report covers the consolidated group of Sun Biomedical Limited and controlled entities, except for Sun Biomedical Laboratories, Inc. and Sun Biomedical Limited as an individual parent entity. Sun Biomedical Limited is a listed public company, incorporated and domiciled in Australia.

The financial report of Sun Biomedical Limited and controlled entities, and Sun Biomedical Limited as an individual parent entity comply with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety. Compliance with AIFRS ensures that the financial report of Sun Biomedical Limited and controlled entities, and Sun Biomedical Limited as an individual parent entity complies with International Financial Reporting Standards (IFRS).

The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of Preparation

Reporting Basis and Conventions

The financial report has been prepared on an accruals basis and is based on historical costs.

Significant Estimates and Critical Judgments

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

The following significant judgments and critical estimates have been made in preparation of this financial report. If these judgments or estimates were to significantly change this could have a material effect on the financial statements.

1. Parent Entity – impairment of intercompany receivable During the year the recoverability from Sun Biomedical Laboratories Inc was considered to be impaired based on the recoverable amount assessed. Further information on the impairment can be found in Note 9.

2. Impairment of intangible assets During the year there were no intangible assets to be tested for impairment.

3. Non-recognition of deferred tax assets

A deferred tax asset has not been recognised due to the uncertainty of the recoverability of tax losses.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Accounting Policies

(a) Principles of Consolidation

A controlled entity is any entity controlled by Sun Biomedical Limited. Control exists where Sun Biomedical Limited has the capacity to dominate the decision-making in relation to the financial and operating activities of another entity so that the other entity operates with Sun Biomedical Limited to achieve the objectives of Sun Biomedical Limited.

All inter-company balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation.

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

Investments in subsidiaries are accounted for at cost less any impairment losses in the individual financial statements of Sun Biomedical Limited.

(b) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of manufactured products includes direct materials, direct labour and an appropriate portion of variable and fixed overheads where applicable. Overheads are applied on the basis of normal operating capacity.

(c) Property, Plant and Equipment

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

(i) Leases

Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership, are transferred to entities in the consolidated group are classified as finance leases. Finance leases are capitalised, recording an asset and a liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are depreciated on a straight line basis over their estimated useful lives where it is likely that the consolidated group will obtain ownership of the asset or over the term of the lease. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period.

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. Lease payments received reduce the liability.

(ii) 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.

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

Class of Fixed Asset Depreciation Rate Plant and equipment 5 - 22.5% Leased plant and equipment 25 - 33 %

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

(d) Financial Instruments

Recognition

Financial instruments are initially measured at fair value (which represents cost) on trade date, which includes transaction costs, when the related contractual rights or obligations exist. Subsequent to initial recognition these instruments are measured as set out below.

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 recognised initially at fair value and subsequently at amortised cost using the effective interest rate method.

Other Financial Assets

Other financial assets, including investments in controlled entities, are recognised at cost, less where applicable any impairment losses.

Financial liabilities

Non-derivative financial liabilities are recognised initially at fair value and subsequently at amortised cost, comprising original debt less principal payments and amortisation.

Trade and other payables

Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of these goods and services.

Fair value estimations

The fair value of Financial assets and Financial liabilities must be estimated for recognition and disclosure purposes. The nominal value less estimated credit adjustment of trade receivables and payables are assumed to approximate their fair values. The fair values of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rates that is available for similar financial instruments.

Impairment

At each reporting date, the Group assess whether there is objective evidence that a financial instrument has been impaired. If recoverable amount is assessed as lower than carrying amount, impairment losses are recognised in the income statement.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectable are written off. An allowance for doubtful receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorgansiation, and defaults or delinquent payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment losses is recognised in the income statement.

(e) Intangibles

Intellectual Property

Intellectual property is recognised at cost of acquisition and is amortised over the period in which its benefits are expected to be realised. The intellectual property is amortised over seven years. The balances are reviewed annually for impairment and any balance representing future benefits for which the realisation is considered to be no longer probable are recognised in the income statement as impairment losses.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

(f) Research and Development

Under AASB 138: Intangible Assets, costs associated with the research phase of the development of an asset must be expensed. Where no intangible asset can be recognised, research and development expenditure is recognised as an expense in the period as incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following are demonstrated:

the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;
the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
the ability to measure reliably the expenditure attributable to the intangible asset during its development.

(g) Income Tax

The consolidated group adopts the liability method of tax-effect accounting whereby the income tax expense is based on the profit from ordinary activities adjusted for any non-assessable or disallowed items.

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 recognised in the income statement except where it relates to items that may be recognised directly in 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 consolidated group will derive sufficient future assessable income to enable the benefit to be realised and the consolidated group will continue to comply with the conditions of deductibility imposed by the law.

(h) Cash & Cash Equivalents

For the purpose of the statements of cash flows, cash includes: • cash on hand and on call deposits with banks or financial institutions, net of overdrafts; and
investments in money market instruments with less than 3 months to maturity.

(i) Comparative Figures

Where necessary comparative figures are adjusted to conform with the changes in presentation of the current period.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

(j) Employee Entitlements

Provision is made for the company’s liability for employee entitlements arising from services rendered by employees to balance date. Employee entitlements expected to be settled within one year together with entitlements arising from wages and salaries and annual leave, which will be settled after one year, have been measured at their nominal amount. Other employee entitlements payable later than one year have not been measured at the present value of the estimated future cash outflows as the amounts involved are not material. Contributions are made by the company to an employee superannuation fund and are charged as expenses when incurred.

(k) Revenue

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

(l) 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.

(m) Foreign Currency Transactions and Balances

Functional and presentation currency

The functional currency of each of the group’s entities is measured using the currency of the primary economic environment in which that entity operates. The consolidated financial statements are presented in Australian dollars which is the parent entity’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Nonmonetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Non-monetary items measured at fair value are reported at the exchange rate at the date when fair values were determined.

Exchange differences arising on the translation of monetary items are recognised in the income statement, except where deferred in equity as a qualifying cash flow or net investment hedge.

Exchange difference arising on the translation of non-monetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the income statement.

Group companies

The financial results and position of foreign operations whose functional currency is different from the group’s presentation currency are translated as follows:

Assets and liabilities are translated at year-end exchange rates prevailing at that reporting date.
Income and expenses are translated at average exchange rates for the period.
Retained profits are translated at the exchange rates prevailing at the date of the transaction.
Exchange differences arising on translation of foreign operations are transferred directly to the group’s foreign currency translation reserve in the balance sheet. These differences are recognised in the income statement in the period in which the operation is disposed of.

(n) Investments in Associates

Investments in associated companies are recognised in the parent financial statements at cost and in the consolidated financial statements by applying the equity method of accounting. Associates are all entities over which significant influence is exercised over an investee. Significant influence exists where the investor has the power to participate in the financial and operating policy decisions of the investees but does not have

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

control or joint control over those policies, generally accompanying a shareholding of between 20% and 50% of the voting rights. The groups investment is associates includes goodwill (net of any impairment) identified on acquisition. The group’s share of its associates’ post acquisition profits or losses is recognised in the income statement and adjusted to the carrying amount of the investment. Unrealised gains or losses between the group and its associates are eliminated to the extent of the group’s interest in the associate.

(o) Equity based payment transactions

The Group provides benefits to officers (including directors) and some payments to consultants of the Group in the form of share-based payment transactions, whereby officers and consultants render services in exchange for shares or rights over shares (‘equity-settled transactions’).

The cost of these equity-settled transactions with officers and consultants is measured by reference to the fair value at the date at which they are granted. The fair value is determined by applying a Black Scholes pricing model.

In valuing equity-settled transactions, no account is taken of any performance conditions, but is linked to the price of the shares of Sun Biomedical Limited (‘market conditions’).

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled, ending on the date on which the relevant officers and consultants become fully entitled to the award (‘vesting date’).

The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the original award, as described in the previous paragraph.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings per share.

(p) Impairment of assets

At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.

Recoverable amount is the greater of fair value less costs to sell and value in use. It is determined for an individual asset, unless the assets value in use cannot be estimated to be close to its fair value less costs to sell and it does not generate cash inflows that are largely independent of those from other assets or groups of assets, in which case, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE

FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

(q) Contributed equity

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

(r) Loss per share

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

Diluted loss per share is calculated as net loss attributable to members of the parent, adjusted for:

costs of servicing equity (other than dividends);
the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as expenses; and
other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.

(s) New accounting standards and interpretations

The following accounting standards, amendments and interpretations have been issued by the Accounting Standards Board but are not yet effective, are expected to effect the group in the initial period of adoption and have not been applied in preparation of this financial report:

AASB 8 Operating Segments (Issued February 2008) and AASB 2007-3 Amendments to Australian Accounting Standards Arising from AASB 8

AASB 8 and AASB 2007-3 are effective for annual reporting periods commencing on or after 1 January 2009. AASB 8 will result in a significant change in the approach to segment reporting, as it requires adoption of a ‘management approach’ to reporting financial performance for segments. This information will be based on what the key decision makers use internally for evaluating segment performance and deciding how to allocate resources to segments. The adoption of AASB 8 when it becomes mandatory is expected to significantly change the way the segment information is presented, but is not expected to have an impact on any reported amounts.

Revised AASB 101 Presentation of Financial Statements and AASB 2007-8 Amendments to Australian Accounting Standards arising from AASB 101

A revised AASB 101 was issued in September 2007 and is applicable for reporting periods commencing on or after 1 January 2009. It requires changes to the way that the primary statements are presented but will not have any effect on reported amounts.

None of the other standards, amendments or interpretations issued which are not yet effective are expected to change any of the reported amounts of the Group.

(u) Business combinations

The purchase method of accounting is used to account for all business combinations, including business combinations involving entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised directly in equity.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

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

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 2: Profit and Loss

2 a) Revenue Interest received Unrealised Capital Gains 2 b) Other Expenses Consulting fees Travel and accommodation expense Insurance Administration expense Regulatory compliance expenses Legal expenses Rent Loss on disposal of non current assets	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 28,838 33,332 28,838 33,332 28,808 - 28,808 -
	57,646 33,332 57,646 33,332
	(72,342) (76,644) (72,342) (76,644) (9,961) (2,883) (9,961) (2,883) (14,681) (16,507) (14,681) (16,507) (77,176) (116,427) (77,176) (116,427) (147,822) (188,172) (147,822) (188,172) (80,009) (70,492) (80,009) (70,492) (829) (5,461) (829) (5,461) (916) - (916) - Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $
	(403,736) (476,586) (403,736) (476,586)

Note 3: Income tax expense

Note 3: Income tax expense
Numerical reconciliation of income tax expense (benefit) to prima facie tax payable (benefit): Prima facie tax benefit on loss before income tax at 30% (2009: 30%): Add: Tax effect of amounts which are not deductible in calculating taxable income: - equity based payments - tax losses for the year not recognised Income tax expense (benefit) Unrecognised deferred tax assets (Australian Entities): Deferred tax assets and liabilities not recognised relate to the following: Tax effect at 30% - Tax losses Gross: - Tax losses	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ (104,330) (143,729) (104,330) (143,729) - 10,753 - 10,753 104,330 132,796 104,330 132,976
	- - - -
	1,234,913 1,130,583 1,234,913 1,130,583
	1,234,913 1,130,583 1,234,913 1,130,583
	4,116,377 3,768,610 4,116,377 3,768,610
	4,116,377 3,768,610 4,116,377 3,768,610

Deferred tax assets of Australian Entities have not been brought to account as it is not probable within the immediate future that tax profits will be available against which deductible temporary differences and tax losses can be utilised. Given that the company will not be operating the ‘same business’ and is unlikely to satisfy the ‘continuity of ownership’ test given its changing share register, it is considered improbable that the company will be able to claim these tax losses. Should it be possible to do so after any return to profitability, the company will conduct a review of its share register and claim any tax losses where appropriate.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 4: Discontinued operations

On 30 April 2009, the consolidated group announced its decision to dispose of its USA manufacturing and distribution division, thereby discontinuing its operations in this business segment. Consequently, the parent company exercised its first ranking charge over all the assets of SBL which was held as security for the intercompany loan which amounted to US$3,088,806. The enforcement of security involved transferring the ownership of the patents to the parent company, the retrenchment of all SBL staff and the closure of the premises at Blackwood, New Jersey by the end of April 2009. The entire intercompany loan has been written off as at 30 June 2009.

Financial information relating to the discontinued operation to the date of disposal is set out below. The financial performance of the discontinued operation to the date of sale which is included in profit/(loss) from discontinued operations per the income statement is as follows:

Revenues from discontinued operations Other income from discontinued operations Raw materials and consumables used Employee benefits expense Consulting fees Insurance Advertising and marketing expense Administration expense Legal expenses Rent Impairment of loans Impairment of intangible assets Realised loss on Promissory Note Depreciation and amortisation expense Other Bad debts written off Loss on disposal of non current assets Loss before income tax Income tax expense attributable thereto Tax losses for the year not recognised Income tax expense Loss after income tax from discontinued operations attributable to members of the parent entity	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ - 736,089 - - - 100,258 - - - (1,007,570) - - - (636,031) - - - (115,940) - - - (12,562) - - - (102,779) - - - (268,342) - - - (106,187) - - - (119,578) - - - - - (1,487,214) - (1,382,407) - (1,382,407) - (150,297) - (150,297) - (399,417) - (399,417) - (60,798) - - - (52,132) - - - (69,935) - -
	- (3,647,628) - (3,419,335) - (1,094,892) - (1,026,404) - 1,094,892 - 1,026,404 - - - -
	- (3,647,628) - (3,419,335)

Revenues from discontinued
operations
Other income from discontinued
operations
Raw materials and consumables
used
Employee benefits expense
Consulting fees
Insurance
Advertising and marketing
expense
Administration expense
Legal expenses
Rent
Impairment of loans
Impairment of intangible assets
Realised loss on Promissory Note
Depreciation and amortisation
expense
Other
Bad debts written off
Loss on disposal of non current
assets
Loss before income tax
Income tax expense attributable
thereto
Tax losses for the year not
recognised
Income tax expense
Loss after income tax from
discontinued operations
attributable to members of the
parent entity

Consolidated Group
Parent Entity
2010
2009
2010
2009
$
$
$
$
-
736,089
-
-
-
100,258
-
-
-
(1,007,570)
-
-
-
(636,031)
-
-
-
(115,940)
-
-
-
(12,562)
-
-
-
(102,779)
-
-
-
(268,342)
-
-
-
(106,187)
-
-
-
(119,578)
-
-
-
-
-
(1,487,214)
-
(1,382,407)
-
(1,382,407)
-
(150,297)
-
(150,297)
-
(399,417)
-
(399,417)
-
(60,798)
-
-
-
(52,132)
-
-
-
(69,935)
-
-

-
(3,647,628)
-
(3,419,335)
-
(1,094,892)
-
(1,026,404)
-
1,094,892
-
1,026,404
-
-
-
-

-
(3,647,628)
-
(3,419,335)

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

The net cash flows of the discontinuing division which have been incorporated into the statement of cash flows are as follows:

Net cash inflow/(outflow) from operating activities Net cash inflow/(outflow) from investing activities Net cash inflow/(outflow) from financing activities Net cash increase in cash generated by the discontinuing division	Consolidated Group 2010 2009 $ $ - (1,231,850) - (119,175) - -
	- (1,351,025)

The division has not been disposed of as at 30 June 2010 and no gain or loss on disposal is recorded in the income statement.

Note 5: Auditor’s remuneration

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

(a) Audit Services Renumeration of the auditor of the parent entity for: - auditing or reviewing the financial reports (b) Non Audit Services - taxation services – paid to a related practice of the auditor Note 6: Dividends No dividends were paid or proposed during the financial year. Balance of franking account at year end adjusted for franking credits arising from payment of provision of income tax and dividends recognised as receivables, franking debits arising from payment of proposed dividends and franking credits that may be prevented from distribution in subsequent financial years:		Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 17,000 28,140 17,000 28,140 12,000 12,000 12,000 12,000 Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 325,572 325,572 325,572 325,572

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES

ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 7: Loss per share

Overall Operations Basic and diluted loss per share (cents per share) Loss used in the calculation of basic EPS ($) Continuing Operations Basic and diluted loss per share (cents per share) Loss used in the calculation of basic EPS ($) Discontinued Operations Basic and diluted loss per share (cents per share) Loss used in the calculation of basic EPS ($) Weighted average number of shares outstanding during the year used in calculations of basic earnings per share	Consolidated Group 2010 2009 $ $ (0.02) (0.53)
	(347,767) (4,128,738)
	(0.02) (0.06)
	(347,767) (479,097)
	- (0.47)
	- (3,649,641)
	2,317,969,628 728,559,844

There was no differential dilutive effect of options outstanding at balance sheet date. Information on options outstanding at the balance sheet date can be found in Note 21.

Note 8: Cash and cash equivalents

Cash at bank Reconciliation to cash at year end Cash at bank Cash and cash equivalents as per Statement of Cash Flows Note 9: Trade and other receivables Trade receivables Other receivables Prepayments Non-Current Amounts receivable from: - controlled entity (MDM Technologies Pty Ltd) - controlled entity (Sun Biomedical Australia Pty Ltd) - controlled entity (Sun Biomedical Laboratories, Inc) Less: Impairment	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 1,163,996 371,670 1,163,996 371,670
	1,163,996 371,670 1,163,996 371,670
	1,163,996 371,670 1,163,996 371,670
	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ - - - - 13,743 11,070 13,743 11,070 - - - -
	13,743 11,070 13,743 11,070
	- - - 13,512 - - - 49,209 - - - 4,333,950 - - - (4,396,671)
	- - - -

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 10: Investments

(a) Controlled entities and their contribution to consolidated loss

Country of Incorporation Percentage Owned 2010 2009 % % Parent Entity Sun Biomedical Limited Australia - - Controlled Entities MDM Technologies Pty Ltd Australia 100 100 Harrington Group USA Inc USA 100 100 Sun Biomedical Australia Pty Ltd Australia 100 100 Sun Biomedical Laboratories Inc. USA 100 100 Eliminations	Contribution to Consolidated Loss 2010 2009 $ $ (347,767) (3,900,445) - - - - - - - (2,466,804) (347,767) (6,367,249) - 2,238,511 (347,767) (4,128,738)

(b) Investment in controlled entities

Name of Entity Country of Incorporation Class of Shares Equity Holding 2010 2009 % % MDM Technologies Pty Ltd Australia Ordinary 100 100 Harrington Group USA Inc USA Ordinary 100 100 Sun Biomedical Australia Pty Ltd Australia Ordinary 100 100 Sun Biomedical Laboratories Inc. USA Ordinary 100 100 Less: Impairment	Cost of Parent Entity’s Investment 2010 2009 $ $ 2 2 - - 1,000 1,000 136,789 136,789
	137,791 137,791 (137,791) (137,791)
	- -

(c) Investment in listed entities

Name of Entity	Investment Type	Equity Holding Number	Parent Entity’s Investment Value	Parent Entity’s Investment Value
South American Iron and Steel Ltd South American Iron and Steel Ltd Argus Solutions Ltd Occupational&Medical InnovationsLtd	Convertible Notes Shares Shares DOCA	3 1,600,000 198,000 1	2010	2009
			300,000 68,800 17,820 50,169	- - - -
Totals			428,789	-

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 11: Property, plant and equipment

Plant and equipment Cost Accumulated depreciation Total property, plant and equipment Reconciliation of plant and equipment Carrying amount at the beginning of the year Additions Disposals Depreciation Carrying amount at the end of the year	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ - 8,050 - 8,050 - (5,457) - (5,457)
	- 2,593 - 2,593
	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 2,593 16,988 2,593 4,605 - 135,508 - - (916) (147,891) (916) - (1,677) (2,012) (1,677) (2,012)
	- 2,593 - 2,593

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 12: Intangible assets

Consolidated Group At 30 June 2009 Cost Accumulated amortisation and impairment Net book amount Movement Opening balance 1 July 2008 Additions Amortisation charge Impairment Closing balance 30 June 2009 At 30 June 2010 Cost Accumulated amortisation and impairment Net book amount Movement Opening balance 1 July 2009 Additions Amortisation charge Impairment Closing balance 30 June 2010	Shockrounds Sun Biomedical Laboratories Inc. Intellectual Property Total $ $ $ 8,110,484 3,851,323 11,961,807 (8,110,484) (3,851,323) (11,961,807)
	- - -
	- 1,832,410 1,832,410 - - - - (399,417) (399,417) - (1,432,993) (1,432,993)
	- - -
	- - - - - -
	- - -
	- - - - - - - - - - - -
	- - -

The intellectual property relates to patents for the design of drug testing products.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 12: Intangible assets (continued)

Parent Entity At 30 June 2009 Cost Accumulated amortisation and impairment Net book amount Movement Opening balance 1 July 2008 Amortisation charge Impairment Closing balance 30 June 2009 At 30 June 2010 Cost Accumulated amortisation and impairment Net book amount Movement Opening balance 1 July 2009 Amortisation charge Impairment Closing balance 30 June 2010	Sun Biomedical Laboratories Inc. Intellectual Property Total $ $ 3,799,202 3,799,202 (3,799,202) (3,799,202)
	- -
	1,781,824 1,781,824 (399,417) (399,417) (1,382,407) (1,382,407)
	- -
	- - - -
	- -
	- - - - - -
	- -

(a) Impairment tests for intangible assets – Sun Biomedical Laboratories Inc. Intellectual Property

The intellectual property capitalised through the acquisition of Sun Biomedical Laboratories Inc. related to five patents for device and proprietary technology. Following enforcement of the first ranking security over the loan to SBL and the closure of the US operations on 30 April 2009, these patents have been transferred back to the Parent entity. In light of the closure of the US operations, the directors have fully impaired the carrying value of the intellectual property.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 12: Intangible assets (continued)

(b) Impairment tests for intangible assets - Shockrounds

Shockrounds, being an intangible asset with an indefinite life has been tested for impairment annually by comparing its carrying amount with its recoverable amount. The fully impaired amount was recognised in the financial year ended 30 June 2007. There are no indications that impairment losses previously recognised should be reversed.

The Directors considered and concluded the Shockrounds Intangible Asset remains impaired.

Note 13: Trade and other payables

Current Trade creditors Accrued directors fees Sundry creditors and accrued expenses	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 34,016 22,257 34,016 22,257 3,332 5,000 3,332 5,000 9,000 16,100 9,000 16,100
	46,348 43,357 46,348 43,357

Note 14: Contributed equity

2,317,969,628 (June 2009: 775,179,380) fully paid ordinary shares (a) Ordinary shares – number At the beginning of the reporting period Issue of shares at 0.1 cents per share from a Share Placement in October 2009. Issue of shares from option conversions at 2.0 cents Issue of shares in lieu of payment of directors’ fees Issue of shares at 0.1 cents per share from a Rights Issue in November 2009 Issue of shares at 0.16 cents per share from a Share Purchase Plan in May 2010. Balance at end of reporting period (b) Ordinary shares – value At the beginning of the reporting period Issue of shares at 0.1 cents per share from a Share Placement in October 2009 Issue of shares from option conversions at 2.0 cents Issue of shares in lieu of payment of directors’ fees Issue of shares at 0.1 cents per share from a Rights Issue in November 2009 Issue of shares at 0.16 cents per share from a Share Purchase Plan in May 2010. Less share issue costs Balance at end of reporting period	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 29,399,862 27,833,891 29,399,862 27,833,891
	No. No. No. No. 775,179,380 397,370,388 775,179,380 397,370,388 116,276,900 374,082,527 116,276,900 374,082,527 141,000 90,608 141,000 90,608 - 3,635,857 - 3,635,857 891,456,280 - 891,456,280 - 534,916,068 - 534,916,068 -
	2,317,969,628 775,179,380 2,317,969,628 775,179,380
	27,833,891 24,483,424 27,833,891 24,483,424 116,277 3,740,825 116,277 3,740,825 2,820 1,812 2,820 1,812 - 57,708 - 57,708 891,456 - 891,456 - 855,866 - 855,866 - (300,448) (449,878) (300,448) (449,878)
	29,399,862 27,833,891 29,399,862 27,833,891

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 14: Contributed equity (continued)

Ordinary shares

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

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

Capital Risk Management

The Group’s and parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits to other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Given the nature of the business, the Group and the parent entity monitor capital on the basis of current business operations and cash flow requirements.

Note 15: Reserves

Foreign currency reserve Balance as at the beginning of the financial year Currency translation differences during the year Balance as at the end of the financial year Equity based payments Balance as at the beginning of the financial year Expiry of prior period options Cost of share based transactions Balance as at the end of the financial year Total Reserves	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ - (89,994) - - - 89,994 - -
	- - - -
	59,600 118,391 59,600 118,391 (37,000) (80,885) (37,000) (80,885) - 22,094 - 22,094
	22,600 59,600 22,600 59,600

	22,600 59,600 22,600 59,600

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 16: Segment Reporting

(a) Primary Reporting - Business Segments (i) Discontinued Operations Drug Screening Total Discontinued Operations (ii) Continuing Operations Drug Screening Unallocated Total Continuing Operations Total Operations (b) Secondary Reporting - Geographic Segments - Australia - USA Total Operations	Total Revenue Consolidated Group Profit/(loss) After Income Tax attributable to Members Total Assets Total Liabilities 2010 2009 2010 2009 2010 2009 2010 2009 $ $ $ $ $ $ $ $ - 836,347 - (3,649,641) - - - -	Total Revenue Consolidated Group Profit/(loss) After Income Tax attributable to Members Total Assets Total Liabilities 2010 2009 2010 2009 2010 2009 2010 2009 $ $ $ $ $ $ $ $ - 836,347 - (3,649,641) - - - -
	-	836,347 - (3,649,641) - - - -
	- 57,646	- - - - - - - 33,332 (347,767) (479,097) 1,606,528 385,333 46,348 43,357
	57,646	33,332 (347,767) (479,097) 1,606,528 385,333 46,348 43,357
	57,646	869,679 (347,767) (4,128,738) 1,606,528 385,333 46,348 43,357
	57,646 -	33,332 (347,767) (1,661,934) 1,606,528 385,333 46,348 43,357 836,347 - (2,466,804) - - - -
	57,646	869,679 (347,667) (4,128,738) 1,606,528 385,333 46,348 43,357

Drug Screening

Costs incurred to acquire segment assets were $Nil (2009:$119,175). Depreciation and amortisation by primary segment was $Nil (2009:$399,417). Impairment of intangible assets $Nil (2009: $1,432,993)

Secondary Segment

Cost incurred to acquire segment assets was:

Australia $Nil (2009: $Nil)
United States of America $Nil (2009: $119,175)

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 16: Statement of Operations by Segments (continued)

Accounting Policies

Segment revenues and expenses are those directly attributable to the segments. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories, intangibles and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. While most such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities consist principally of accounts payable, employee entitlements, accrued expenses, provisions and borrowings. Segment assets and liabilities do not include deferred income taxes.

Business Segment

Drug screening relates to the Sun Biomedical business and the development and sale of screening products for drugs of abuse. This business was discontinued during the 2009 financial year.

Geographic Segment

Although the consolidated entity’s divisions are managed on a global basis they operate in two main geographical areas:

Australia – the home country of the parent entity and the principal location of management and the financing of the operations.

United States – comprises operations for the manufacture and development of the company’s products. These operations were discontinued in prior financial year.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 17: Financial instruments

(a) General objectives, policies and processes

In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements.

There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from previous periods unless otherwise stated in this note.

The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Group’s risk management policies and objectives are therefore designed to minimise the potential impacts of these risks on the Group where such impacts may be material. The board receives monthly financial reports through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility.

(b) Credit risk

Credit risk is the risk that the other party to a financial instrument will fail to discharge their obligation resulting in the Group incurring a financial loss. This usually occurs when the debtors or counterparties to derivative contracts fail to settle their obligations owing to the Group.

The maximum exposure to credit risk at the balance sheet date is as follows:

Cash and cash equivalents Loans and receivables Convertible Notes – SAIS Deed of Company Arrangement - OMI Loans granted Less: Impairment of loans	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 1,163,996 371,670 1,163,996 371,670 13,743 11,070 13,743 11,070 300,000 - 300,000 - 50,169 - 50,169 - - - - 4,396,670 - - - (4,396,670)
	1,527,908 382,740 1,527,908 382,740

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 17: Financial instruments (continued)

The fair value of the current receivables approximates their carrying values. The fair value of the non-current receivables which have not been impaired is not material.

There are no allowances against trade receivables (2009: Nil)

Ageing

There are no allowances against trade receivables (2009: Nil)

Not past due Past due 0 – 30 days Past due 31 – 60 days Over 60 days	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 13,743 11,070 13,743 11,070 - - - - - - - - - - - -
	13,743 11,070 13,743 11,070

(c) Liquidity risk

Liquidity risk is the risk that the Group may encounter difficulties raising funds to meet commitments associated with financial instruments, e.g. borrowing repayments. It is the policy of the board of Directors that the Treasury maintain adequate committed facilities to be able to meet debts as they fall due.

The following maturity analysis is done on a contractual undiscounted cashflow basis:

Maturity Analysis – Consolidated Group 2010	Maturity Analysis – Consolidated Group 2010
Financial liabilities	Carrying	Contractual	< 6 months	6 – 12		1-3 years		> 3 years
	Amount	Cashflows		months
	$	$	$	$		$		$
Trade and other payables	46,348	46,348	46,348		-		-		-
	46,348	46,348	46,348		-		-		-
Maturity Analysis – Consolidated Group 2009
Financial liabilities	Carrying	Contractual	< 6 months	6 – 12		1-3 years		> 3 years
	Amount	Cashflows		months
	$	$	$	$		$		$
Trade and other payables	43,357	43,357	43,357		-		-		-
	43,357	43,357	43,357		-		-		-
Maturity Analysis – Parent	Entity 2010
Financial liabilities	Carrying	Contractual	< 6 months	6 – 12		1-3 years		> 3 years
	Amount	Cashflows		months
	$	$	$	$		$		$
Trade and other payables	46,348	46,348	46,348		-		-		-
	46,348	46,348	46,348		-		-		-

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 17: Financial instruments (continued)

(c) Liquidity risk (continued)

Maturity Analysis – Parent	Entity 2009
Financial liabilities	Carrying	Contractual	< 6 months	6 – 12		1-3 years		> 3 years
	Amount	Cashflows		months
	$	$	$	$		$		$
Trade and other payables	43,357	43,357	43,357		-		-		-
	43,357	43,357	43,357		-		-		-

The fair value of the current trade and other payables approximates their carrying values.

(d) Market rate risk

Market risk arises from the use of interest bearing and foreign currency financial instruments. It is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in interest rates (interest rate risk) or foreign exchange rates (currency risk). The Company and Group are not subject to other price risk on its financial instruments.

i. Interest rate risk

Interest rate risk arises on cash and cash equivalents, and receivables from related parties. The Group does not enter into any derivative instruments to mitigate this risk. As this is not considered a significant risk for the Group no policies are in place to formally mitigate this risk.

Sensitivity to changes in interest rates:

If interest rates were to move 100 bps up or down in the next 12 months, the following effect on reported profits or losses from all interest bearing financial assets and financial liabilities, is expected:

The profit effect on the consolidated group of an interest rate increase of 1% is $11,637 (2009:
$2,405) and the profit effect of an interest rate decrease is $(11,637) (2009:$(2,405)).
The profit effect on the parent entity of an interest rate increase of 1% is $11,637
(2009:$2,405) and the profit effect of an interest rate decrease is $(11,637) (2009:$(2,405)).

ii. Currency risk

The Company is not exposed to currency risk.

iii. Other Price risk

Price risk relates to the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices largely due to demand and supply factors. Equity securities price risk arises from investments in equity securities. The Group has the following investments in equity securities:

Name of Entity	Investment Type	Investment Value
South American Iron and Steel Ltd Argus SolutionsLtd	Shares Shares	68,800 17,820
		86,620

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 18: Related Parties

No director has entered into contracts with the Company since the end of the previous financial year.

Wholly-owned Group

The wholly-owned group consists of Sun Biomedical Limited and wholly-owned controlled entities MDM Technologies Pty Ltd, HGR USA Inc., Sun Biomedical Laboratories Inc., and Sun Biomedical Australia Pty Ltd.

Key management personnel

In May 2010 the Company entered into a Deed of Company Arrangement (“DOCA”) with Occupational & Medical Innovations Limited (“OMI”) in which Mr. Gary Stewart and Mr. Terry Cuthbertson hold director’s positions. SBN made an initial contribution of $15K to OMI, with an additional $115k payable to creditors’ trust contingent upon OMI completing a share consolidation and a capital raising which will see OMI raise sufficient funds to continue its operations. As at 30 June 2010, the Company had advanced $15K to OMI under the DOCA and paid $35K on behalf of OMI under a loan arrangement in respect to costs for its proposed recapitalisation.

In March 2010 the Company entered into a Convertible Note Subscription Agreement with South American Iron and Steel Corporation Limited (“SAY”) in which Mr. Terry Cuthbertson also holds the position of non executive chairman.

With the Convertible Note Subscription Agreement 4 convertible notes have been issued at a face value of $100,000 and an interest rate of 12%. In consideration of the issue of each note SAY issued 400,000 ordinary fully paid shares to the Company.

Sun Biomedical Ltd has used the services of Tress Cox Lawyers for legal advice on various corporate and capital raising matters. The company secretary, Mr. Alfonso Grillo, is a partner in Tress Cox Lawyers and the company has paid $105,079 in 2010 ($60,954 in 2009) for legal services provided by Tress Cox.

All transactions between the related parties are on normal commercial terms and conditions no more favourable than those available to other parties.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 19: Notes to the statements of cash flows

(a) For the purposes of the statements of cash flows, cash includes cash on hand and in banks net of bank overdrafts. Cash and cash equivalents at the end of the financial year as shown in the statements of cash flows is reconciled to the relevant items in the Balance Sheet as follows:

Cash on hand Cash at bank Cash as per Statement of Cash Flows	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 1,163,996 371,670 1,163,996 371,670
	1,163,996 371,670 1,163,996 371,670

(b) Reconciliation of operating loss after income tax to net cash outflow from operating activities:

Loss after income tax Non cash flows in loss for the year Depreciation and amortisation Equity based payments Share options expensed Loss on disposal of non-current assets Bad debts written off Impairment write downs Impairment of loans Write off of inventory Write off of FX reserve Foreign exchange loss Unrealised foreign exchange gain (loss) Sub total Change in operating assets and liabilities (Increase)/decrease in trade debtors (Increase)/decrease in other debtors (Increase)/decrease in prepayments (Increase)/decrease in inventories Increase/(decrease) in trade creditors and accruals Net cash outflow from operating activities	2010 2009 2010 2009 $ $ $ $ (347,767) (4,128,738) (347,767) (3,900,445) 1,677 401,430 1,677 401,430 - 13,749 - 13,749 - 22,094 - 22,094 916 69,935 916 - - 52,132 - - - 1,382,407 - 1,382,407 - - - 1,487,214 - 242,494 - - - 60,798 - - - 118,022 - 150,297 (28,813) - (28,813) -
	(373,987) (1,765,677) (373,987) (443,254) (2,673) 7,732 (2,673) 6,153 - 8,611 - 8,264 - 191,344 - 151,755 (32,398) - 2,991 (158,294) 2,991 (207,418)
	(373,669) (1,748,682) (373,669) (484,500)

Loss after income tax
Non cash flows in loss for the year
Depreciation and amortisation
Equity based payments
Share options expensed
Loss on disposal of non-current assets
Bad debts written off
Impairment write downs
Impairment of loans
Write off of inventory
Write off of FX reserve
Foreign exchange loss
Unrealised foreign exchange gain (loss)
Sub total
Change in operating assets and liabilities
(Increase)/decrease in trade debtors
(Increase)/decrease in other debtors
(Increase)/decrease in prepayments
(Increase)/decrease in inventories
Increase/(decrease) in trade creditors and
accruals
Net cash outflow from operating activities

2010
2009
2010
2009
$
$
$
$
(347,767)
(4,128,738)
(347,767)
(3,900,445)
1,677
401,430
1,677
401,430
-
13,749
-
13,749
-
22,094
-
22,094
916
69,935
916
-
-
52,132
-
-
-
1,382,407
-
1,382,407
-
-
-
1,487,214
-
242,494
-
-
-
60,798
-
-
-
118,022
-
150,297
(28,813)
-
(28,813)
-

(373,987)
(1,765,677)
(373,987)
(443,254)
(2,673)
7,732
(2,673)
6,153
-
8,611
-
8,264
-
191,344
-
151,755
(32,398)
-
2,991
(158,294)
2,991
(207,418)

(373,669)
(1,748,682)
(373,669)
(484,500)

(c) Non-cash Financing and Investing Activities

Share Issues

The are no non cash financing and investing activities.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 20: Equity Based Payments

Options may not be offered to a director or associates except where approval is given by shareholders at a general meeting.

In the reporting period no options were offered to directors or associates. Options issued as part of remuneration to directors and key management personnel are included in the Directors’ Report.

On exercise, each option is convertible to one ordinary share on receipt of the exercise notice and payment of the exercise price in Australian dollars. Amounts received on the exercise of options are recognised as share capital.

Summary of share based payments expense for the year.

Share based payments - Key Management Personnel Option based payments - Key Management Personnel	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ - 13,749 - 13,749 - 22,094 - 22,094
	- 35,843 - 35,843

No share based payments to directors or associates have been made this year (2009: $35,843).

No share based payments to external consultants have been made this year (2009: $Nil).

Set out below is a summary of options granted.

Grant Date	Expiry Date	Exercise Price	Number of Options
8 September 2006 25 June 2008	30 June 2011 15 September 2011	10 cents 2 cents	20,000,000 2,000,000
			22,000,000

Outstanding at the beginning of the year Granted Forfeited Exercised Expired Outstanding at year end Exercisable at year end	Economic and Parent Entity 2010 2009 Number of options Weighted Average Exercise Price Number of options Weighted Average Exercise Price $ $ 23,000,000 0.09 78,914,938 0.23 - - - - - - (4,000,000) 0.045 - - - - (1,000,000) 0.09 (51,914,938) 0.19
	22,000,000 0.09 23,000,000 0.09
	22,000,000 0.09 23,000,000 0.09

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 20: Equity Based Payments (continued)

The options outstanding at 30 June 2010 had a weighted average exercise price of $0.09 (2009: $0.09) and a weighted average remaining contractual life of 0.9 years (2009: 1.9 years). Exercise prices range from $0.02 to $0.10 in respect of options outstanding at 30 June 2010.

No options were granted during the year. In 2010, the price was calculated using a Black-Scholes option pricing model applying the following inputs at grant date:

	2010	2009
Weighted average exercise price	-	-
Weighted average life of the option	-	-
Underlying share price	-	-
Expected share price volatility	-	-
Risk free interest rate	-	-

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 expiry date, which may not eventuate in the future.

Included under equity based payments expense in the income statement relating to share based payment is $Nil (2009: $35,843). This amount included for 2010 $Nil (2009: $13,749) in fully paid ordinary shares and $Nil (2009: $22,094) in options expense.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 21: Key Management Personnel

(i) Details of Key Management Personnel

Chairman – non-executive

Mr P King (from 24 February 2005 to 2 September 2009); and Mr T Cuthbertson (from 2 September 2009).

Non-Executive directors

Mr J Hallam (from 24 October 2007 to 1 October 2009); and Mr A Paice (from 29 February 2008 to 2 September 2009); and Mr P Herd (from 1 October 2009); and Mr G Stewart (from 28 January 2010).

(ii) Compensation of Key Management Personnel

These remuneration disclosures are provided in the Directors’ Report under Remuneration Report and designated as audited.

Short term employees benefit Share based payments	Consolidated Group Parent Entity 2010 2009 2010 2009 $ $ $ $ 34,167 313,304 34,167 46,941 - 35,843 - 35,843
	- 349,147 - 82,784

The amounts owing at balance date are disclosed in Note 13.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 21: Key Management Personnel (continued)

(iii) Shareholdings of Key Management Personnel

Shares held directly and indirectly in the Company:

2010 Directors Mr Peter King1 Mr Andrew Paice2 2009 Directors Mr Peter King1 Mr Jim Hallam1,3 Mr Andrew Paice2	Balance at the start of the year Granted as renumeration Other changes during the year Balance at the end of the period 2,480,762 - - 2,480,762 9,209,250 - - 9,209,250
	11,690.012 - - 11,690,012
	Balance at the start of the year Granted as renumeration Other changes during the year Balance at the end of the period - 2,480,762 - 2,480,762 - 1,155,095 (1,155,095) - 5,116,250 - 4,093,000 9,209,250
	5,116,250 3,635,857 2,937,905 11,690,012

Note:

Acquired in lieu of payment of directors fees
4,093,000 shares were acquired as part of Company’s Rights Issue in August 2008
Mr Hallam’s shares were transferred to Log Creek Pty Ltd

All equity transactions with key management personnel, which relate to the Company’s listed ordinary shares, have been entered into on an arms length basis.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 21: Key Management personnel (continued)

(iv) Option holdings of Key Management Personnel

Options held directly and indirectly in the Company:

2010 Directors Mr Andrew Paice Other Key Management Personnel 2009 Directors Mr Peter King Mr Andrew Paice Other Key Management Personnel Jack Kerins1	Balance at the start of the year Granted during the year as compensation Lapsed/ Expired during the period Balance at the end of the period Vested and exercisable at the end of the period 500,000 - - 500,000 500,000
	500,000 - - 500,000 500,000
	- - - - -
	500,000 - - 500,000 500,000
	Balance at the start of the year Granted during the year as compensation Lapsed/ Expired during the period Balance at the end of the period Vested and exercisable at the end of the period 750,000 - (750,000) - - 500,000 - - 500,000 500,000
	1,250,000 - (750,000) 500,000 500,000
	6,000,000 - (4,000,000) 2,000,000 2,000,000
	6,000,000 - (4,000,000) 2,000,000 2,000,000

Note:

Resigned or ceased to be key management personnel on 30 April 2009. The 4,000,000 options were linked to the attainment of a sales target which will not be met following the closure of the US operations in April 2009.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2010

Note 22: Company Details

The registered office and principal place of business of the parent company is:

Sun Biomedical Limited c/o Tress Cox Lawyers Level 9 469 La Trobe Street Melbourne Victoria, Australia 3000

Note 23: Subsequent Events

Except for the matters discussed above, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the consolidated group, the results of those operations, or the state of affairs of the consolidated group, in subsequent financial years.

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

DECLARATION BY DIRECTORS

The directors of the company declare that:

the financial statements and notes for the financial year ended 30 June 2010 are in accordance with the Corporations Act 2001 and:

(a) comply with Accounting Standards applicable in Australia, International Financial Reporting Standards and Interpretations, and Corporations Regulations; and

(b) give a true and fair view of the financial position as at 30 June 2010 and of the performance for the year ended on that date of the company and consolidated group;

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; and
the audited remuneration disclosures on pages 15 to 17 of the directors’ report (the audited Remuneration Report) for the year ended 30 June 2010, comply with section 300A of the Corporations Act 2001.

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

==> picture [163 x 59] intentionally omitted <==

Terry Cuthbertson Chairman

Melbourne 29 September 2010

CHARTERED ACCOUNTANTS

Armstrong Partners

INDEPENDENT AUDIT REPORT TO THE MEMBERS OF SUN BIOMEDICAL LIMITED

Report on the financial report

We have audited the accompanying financial report of Sun Biomedical Limited (the company), which comprises the statement of financial position as at 30 June 2010, and the statement of comprehensive income, statement of changes in equity and the statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration for both Sun Biomedical Limited and the Sun Biomedical limited Group (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year.

Directors’ Responsibility for the financial report

The directors of the company are responsible for the preparation 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 Standards AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with the 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 judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making these 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 purposes 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.

Armstrong Partners

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 Sun Biomedical Limited is in accordance with the Corporations Act 2001 , including:
i. giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2010 and of their performance for the year ended on that date; and
ii. complying with the Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and

b. the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1.

Report on the Remuneration Report

We have audited the Remuneration Report on pages 15 to 17 of the directors’ report for the year ended 30 June 2010. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion, the Remuneration Report of Sun Biomedical Limited for the year ended 30 June 2010, complies with section 300A of the Corporations Act 2001.

Armstrong Partners

==> picture [150 x 40] intentionally omitted <==

David Armstrong Partner

Melbourne

29 September 2010

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

OTHER INFORMATION

STATEMENT OF SHAREHOLDING AS AT 3 SEPTEMBER 2010

The following additional information is required by the Australian Securities Exchange Ltd in respect of listed public companies only.

Twenty Largest Shareholders

Shareholder 1. FULLERTON PRIVATE CAPITAL PTY LIMITED 2. ACM CONSULTING SERVICES PTY LTD 3. INTERCORP PTY LTD 4. AUSTOCK INVESMENTS PTY LTD 5. CELTIC CAPITAL PTY LTD 6. MR JASON PETERSON &MRS LISA PETERSON 7. INTERCORP PTY LTD 8 DOMINION INVESTMENTS 9 FORBAR CUSTODIANS LIMITED 10 MURDOCH CAPITAL PTY LTD 11 SYRACUSE CAPITAL PTY LTD 12 BLU BONE PTY LTD 13 KOBIA HOLDINGSPTY LTD 14 MR ANDREW MCMILLIAN & MRS SALLY MCMILLAN 15 MRS NATHA SUSAN EVANS 16 MR TERENCE PETER WILLIAMSON & MS JONINE MAREE JANCEY 17 PENINSULA INVESTMENTS (WA) PTY LTD 18 MR ROBERT RAYMOND ROGET AND MRS MARINA ROGET 19 MR MARK EVANS AND MR COLIN EVANS 20 MR LAWRENCE KEITH PAYNE	Number of Shares Held % Holding 196,428,450 8.47 150,314,014 6.48 134,847,172 5.82 112,500,000 4.85 62,598,001 2.70 59,776,300 2.58 48,077,469 2.07 48,057,840 2.07 47,316,936 2.04 46,875,000 2.02 46,875,000 2.02 43,214,948 1.86 43,214,948 1.86 37,337,302 1.61 34,884,517 1.50 30,769,580 1.33 30,000,000 1.29 21,450,000 0.93 19,968,381 0.86 19,562,254 0.84
	1,234,068,112 53.24

Shareholder
1.
FULLERTON PRIVATE CAPITAL PTY
LIMITED
2.
ACM CONSULTING SERVICES PTY LTD
3.
INTERCORP PTY LTD
4.
AUSTOCK INVESMENTS PTY LTD
5.
CELTIC CAPITAL PTY LTD
6.
MR JASON PETERSON &MRS LISA
PETERSON
7.
INTERCORP PTY LTD
8
DOMINION INVESTMENTS
9
FORBAR CUSTODIANS LIMITED
10
MURDOCH CAPITAL PTY LTD
11
SYRACUSE CAPITAL PTY LTD
12
BLU BONE PTY LTD
13
KOBIA HOLDINGSPTY LTD
14
MR ANDREW MCMILLIAN & MRS SALLY
MCMILLAN
15
MRS NATHA SUSAN EVANS
16
MR TERENCE PETER WILLIAMSON & MS
JONINE MAREE JANCEY
17
PENINSULA INVESTMENTS (WA) PTY LTD
18
MR ROBERT RAYMOND ROGET AND MRS
MARINA ROGET
19
MR MARK EVANS AND MR COLIN EVANS
20
MR LAWRENCE KEITH PAYNE

Number of Shares Held
% Holding
196,428,450
8.47
150,314,014
6.48
134,847,172
5.82
112,500,000
4.85
62,598,001
2.70
59,776,300
2.58
48,077,469
2.07
48,057,840
2.07
47,316,936
2.04
46,875,000
2.02
46,875,000
2.02
43,214,948
1.86
43,214,948
1.86
37,337,302
1.61
34,884,517
1.50
30,769,580
1.33
30,000,000
1.29
21,450,000
0.93
19,968,381
0.86
19,562,254
0.84

1,234,068,112
53.24

Distribution of Shareholdings

Category (size of holding) 1- 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	Number of Ordinary Shares Number of Holders 29,326 69 278,813 88 809,755 93 26,105,215 538 2,290,746,519 894
	2,317,969,628 2,872

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

OTHER INFORMATION

Stock Exchange Listing – Listing has been granted for all the ordinary shares and listed options of the company on all Member Exchanges of the Australian Securities Exchange Limited.

Voting Rights

The voting rights attached to Ordinary shares are as follows:

Each ordinary share is entitled to one vote when a poll is called, otherwise each member present at a meeting or by proxy has one vote on a show of hands.

Unmarketable parcels

There are 1,190 shareholdings held in less than the marketable parcels.

Substantial shareholders

The names of the substantial shareholders listed in the holding company’s register as at 3 September 2010 are:

Shareholder	Shareholder	Number of shares	% Holding
1.	FULLERTON PRIVATE CAPITAL PTY LIMITED	196,428,450	8.47
2.	ACM CONSULTING SERVICES PTY LTD	150,314,014	6.48
3.	INTERCORP PTY LTD	134,847,172	5.82

Listed Option holders

The Company has listed 186,809,656 options with an exercise price of $0.02 and an expiry date of 30 November 2010.

Twenty Largest Option Holders

Option Holder 1. MR MING SUN + MRS ALICE SUN 2. LOG CREEK PTY LTD 3. MS SIHOL MARITO GULTOM 4. MR SAM CHRISTOPHER SLANEY 5. MR MARTIN MELOV 6. MR DAVID COX 7. MR ROBERT PARSONSON 8. MR PAUL MARTEN 9. MR ADAM JOHN VILLANI 10. MR FRANCESCO ANTONIO CUSCUNA 11. MRS JAYNE BIRD 12. MRS PAULINE ANNE HAKALA + MR TIMO HAKALA 13. CHETAN ENTERPRISES PTY LTD 14. ALOUISUS PTY LTD 15. MR ANDREW JOHN PAICE 16. MR MARK EDWARD MCFARLANE 17. MR TIMOTHY MICHAEL JONES 18. FOWEY PTY LTD 19. PEAK ELECTRICAL SERVICES PTY LTD 20. INVIA CUSTODIAN PTY LIMITED	Units % 37,565,331 20.11 25,000,000 13.38 12,602,184 6.75 10,000,000 5.35 10,000,000 5.35 6,000,000 3.21 4,124,800 2.21 3,700,000 1.98 3,441,469 1.84 3,000,000 1.61 2,985,334 1.60 2,950,000 1.58 2,194,696 1.17 2,125,000 1.14 2,046,500 1.10 2,000,000 1.07 1,944,318 1.04 1,875,000 1.00 1,850,000 0.99 1,700,000 0.91
	137,104,632 73.39

Option Holder
1.
MR MING SUN + MRS ALICE SUN
2.
LOG CREEK PTY LTD
3.
MS SIHOL MARITO GULTOM
4.
MR SAM CHRISTOPHER SLANEY
5.
MR MARTIN MELOV
6.
MR DAVID COX
7.
MR ROBERT PARSONSON
8.
MR PAUL MARTEN
9.
MR ADAM JOHN VILLANI
10.
MR FRANCESCO ANTONIO CUSCUNA
11.
MRS JAYNE BIRD
12.
MRS PAULINE ANNE HAKALA + MR TIMO
HAKALA
13.
CHETAN ENTERPRISES PTY LTD
14.
ALOUISUS PTY LTD
15.
MR ANDREW JOHN PAICE
16.
MR MARK EDWARD MCFARLANE
17.
MR TIMOTHY MICHAEL JONES
18.
FOWEY PTY LTD
19.
PEAK ELECTRICAL SERVICES PTY LTD
20.
INVIA CUSTODIAN PTY LIMITED

Units
%
37,565,331
20.11
25,000,000
13.38
12,602,184
6.75
10,000,000
5.35
10,000,000
5.35
6,000,000
3.21
4,124,800
2.21
3,700,000
1.98
3,441,469
1.84
3,000,000
1.61
2,985,334
1.60
2,950,000
1.58
2,194,696
1.17
2,125,000
1.14
2,046,500
1.10
2,000,000
1.07
1,944,318
1.04
1,875,000
1.00
1,850,000
0.99
1,700,000
0.91

137,104,632
73.39

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITIES ABN 18 001 285 230

OTHER INFORMATION

Distribution of Option holders

Category (size of holding) 1- 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	Number of Listed Options Number of Holders 5,002 9 113,711 35 337,124 42 6,041,537 137 180,312,282 120
	186,809,656 343

ASX Corporate Governance and Best Practice Recommendations

Directors have reviewed the ASX Corporate Governance and Best Practice Recommendations and the principles as set out hereunder:

1:	Lay solid foundations for management and oversight.
2:	Structure the board to add value.
3:	Promote ethical and responsible decision making.
4:	Safeguard integrity in financial reporting.
5:	Make timely and balanced disclosure.
6:	Respect the rights of shareholders.
7:	Recognise and manage risk.
8:	Encourage enhanced performance.
9:	Remunerate fairly and responsibly.
10:	Recognise the legitimate interests of stakeholders.

These principles have been adopted by the Board where practicable and an outline of the Corporate Governance practices adopted by the Company is set out in the Directors’ Report.

CORPORATE DIRECTORY

DIRECTORS

Terry Cuthbertson Non Executive Chairman

Peter King Non-Executive Director

Peter Herd Non-Executive Director

Gary Stewart Non – Executive Director

COMPANY SECRETARY

Alfonso Grillo

AUDITORS

Armstrong Partners

BANKERS

ANZ

SHARE REGISTRY

Computershare Investor Services Pty Ltd

Yarra Falls, 452 Johnston Street Abbotsford, Victoria, 3067

REGISTERED AND PRINCIPAL OFFICE

Tress Cox Lawyers Level 9 469 La Trobe Street Melbourne, Victoria, 3000 Ph: 1 300 728 275 Fax: (03) 9473 2500 Email: [email protected]

AI assistant

DIMERIX LIMITED — Annual Report 2010

64804_rns_2010-09-28_a4e48f05-9009-40a3-8c15-0de3f00054ec.pdf

SUN BIOMEDICAL LIMITED

And Controlled Entities

Table of Contents

Corporate Governance Statement

1. Lay Solid Foundations for Management and Oversight

Recommendation 1.1: Companies should establish the functions reserved to the board and those delegated to senior executives and disclose those functions.

Recommendation 1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.

2. Structure the Board to Add Value

Recommendation 2.1: A majority of the Board should be independent directors

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Recommendation 2.2: The Chairperson should be an independent Director

Recommendation 2.3: The roles of Chairperson and Chief Executive Officer should not be exercised by the same person

Recommendation 2.4: The Board should establish a nomination committee

Recommendation 2.5: Companies should disclose the process for evaluating the performance of the

board, its committees and individual directors.

Recommendation 2.6: Provide the information indicated in Guide to Reporting on Principle 2

3. Promote Ethical and Responsible Decision-making

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Recommendation 3.3: Companies should provide the information indicated in the Guide to reporting on Principle 3.

4. Safeguard Integrity in Financial Reporting

Recommendation 4.1: The Board should establish an Audit Committee

5. Make Timely and Balanced Disclosure

with ASX Listing Rule disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies.

Recommendation 5.2: Provide the information indicated in Guide to Reporting on Principle 5

6. Respect the Rights of Shareholders

Recommendation 6.1: Companies should design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose their policy or a summary of that policy.

Recommendation 6.2: Companies should provide the information indicated in the Guide to reporting on Principle 6.

7. Recognise and Manage Risk

Recommendation 7.1: Companies should establish policies for the oversight and management of material business risks and disclose a summary of those policies.

Recommendation 7.4: Companies should provide the information indicated in the Guide to reporting on Principle 7.

8. Remunerate Fairly and Responsibly

Recommendation 8.1: The board should establish a remuneration committee

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Recommendation 8.2: Companies should clearly distinguish the structure of non-executive directors’ remuneration from that of executive directors and senior executives.

Recommendation 8.3: Companies should provide the information indicated in the Guide to reporting on Principle 8.

REPORT OF THE DIRECTORS – 30 JUNE 2010

Directors

Principal Activities

Results for the Year

Dividends

Review of Operations

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

Financial Position

Significant Transactions

Significant Changes in State of Affairs

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

Matters Subsequent to the End of the Financial Year

Likely Developments

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY

ACN 001 285 230

Report of the Directors (Continued)

Information on Company Secretary

Company Secretary

Directors’ Interests in Shares and Options

Remuneration Report (audited)

Report of the Directors (Continued)

Economic and Parent Entity

Report of the Directors (Continued)

Options issued as part of remuneration for the year ended 30 June 2010 (Audited).

Audit Committee

Shares Issued

Environmental Issues

Directors’ Benefits

Directors’ and Executive Officers’ Indemnification

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

Report of the Directors (Continued)

Non-audit Services

Options

Auditor’s Independence Declaration

Terry Cuthbertson Director

Armstrong Partners

AUDITOR’S INDEPENDENCE DECLARATION

Armstrong Partners

SUN BIOMEDICAL LIMITED AND CONTROLLED ENTITY ACN 001 285 230

STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010

DIMERIX LIMITED Annual Report 2010