Immuron Ltd - Annual Report 2011 | FinancialReports.eu

Immuron Limited ABN 80 063 114 045 Annual Report –30 June 2011

Contents	Page
Company Particulars	2
Directors’ and Remuneration Reports	3
Auditor’s Independence Declaration	15
Corporate Governance Statement	16
Finance report
Statement of Comprehensive Income	21
Balance Sheet	22
Statement of Changes in Equity	23
Statement of Cash flows	24
Notes to the Financial Statements	25
Directors’ Declaration	51
Independent Audit Report to the Members	52
Additional ASX Information	54

This financial report covers Immuron Limited as an individual entity.

The financial report is presented in Australian currency.

Immuron Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is:

Immuron Limited, Level 1, 39 Leveson Street

North Melbourne Victoria 3051

A description of the nature of the entity’s operations and its principal activities is set out in the Directors’ Report on page 3.

The financial report was authorised for issue by the Directors on 28 September 2011.

The Company has the power to amend and reissue the financial report.

Immuron Limited Company Particulars

Directors
Chairman	Professor Colin Chapman
Non-Executive Directors	Professor Roy Robins – Browne
	Mr Simon Sallka
	Dr Elane Zelcer
Secretary	Mr Graeme Stevens
Principal registered office in	Level 1, 39 Leveson Street
Australia	North Melbourne VIC 3051
	Telephone: (61) 3 8637 1107
	Facsimile: (61) 3 9018 4881
	www.immuron.com
Country of incorporation	Australia
Share register	Computershare Registry Services Pty Ltd
	452 Johnston Street
	Abbotsford VIC 3067
	Telephone: 1300 850 505
Auditor	PricewaterhouseCoopers
	Freshwater Place
	2 Southbank Boulevard
	Southbank VIC 3006
Solicitors	Middletons
	Level 25 South Tower
	525 Collins Street
	Melbourne VIC 3000
	Lander & Rogers Lawyers
	Level 12, 600 Bourke Street
	Melbourne VIC 3000
Bankers	Australia and New Zealand Banking Group Limited
	222 Exhibition Street
	Melbourne VIC 3000
Investor Relations	Monsoon Communications Pty Ltd
	Level 37 530 Collins Street
	Melbourne 3000
Stock Exchange Listings	Immuron Limited shares are listed on the Australian Stock Exchange
	ASX Code: Ordinary Shares – IMC

Immuron Limited Directors’ Report

Your directors present their report on Immuron Limited for the year ended 30 June 2011.

Directors

The names and details of the Directors of the Company in office during the financial year and until the date of this report are:

Professor Colin Chapman Professor Roy Robins-Browne Simon Sallka Dr Elane Zelcer .

Principal activities

Immuron Limited is a research and product development driven biopharmaceutical Company focused on the research and development of polyclonal antibodies for the treatment and prevention of major diseases.

Operating results and dividends

The operating loss attributable to members of Immuron Limited for the year ended 30 June 2011 was $2,595,179 (2010: $1,902,425).

No dividends were paid or declared during the period.

Review of operations and results

Revenue

Revenue for the year from the sale of goods was $202,000 lower than the previous year. This was largely due to a reduced level of bulk sales of EV71 and rotavirus hyperimmune powder, together with a lack of export sales due to delays with the US distributor obtaining regulatory approval for Travelan sales in that country. Within Australia, there has been an overall increase in the volume of Travelan sales since the commencement of the product being distributed by Nycomed Australia with a significant increase in volumes budgeted for the 2012 financial year.

No income was earned from grant funds during the year as all research projects that were partially funded by direct grant fund have been completed. A number of current research projects are being conducted in conjunction with the University of Melbourne and Monash University and the grant monies in respect of those projects go direct to the respective universities.

Expenses

The increase in expenses of $381,000 is reflected in the following segments of the business:

R & D ( including commercialisation costs) Hyperimmune products Corporate	$’000 407 (77) 51
	381

The increase in R & D expenditures reflects the increased preclinical and clinical work being conducted at the Hadassah Medical Center in Israel together with ongoing preclinical work on influenza being performed in conjunction with the University of Melbourne. Following the successful results of the open label Phase 1/ 2(a) clinical trial for the treatment of NASH the Company had a PreIND meeting with the US Federal Drug Administration (FDA) in July 2011. The costs incurred in preparing the PreIND application for submission to the FDA amounted to $280,000 in the current financial year as against Nil for the previous year.

The Company has developed an aggressive commercialisation programme for the Travelan product in overseas markets and is in discussions with a number of parties regarding marketing and distribution rights in a number of key countries. This programme, along with seeking initial interest in our NASH product, IMM-124E following the successful phase 1 / 2(a) clinical trial, has required the engagement of consultants to develop the clinical and other ancillary data requirements to present to potential licensees and or distributors. The increase in those direct consultancy costs for the current year, together with associated travel and other costs amounted to approximately $263,000 for the year. There were no similar costs in the previous year.

Immuron Limited Directors’ Report

Significant changes in the state of affairs

The significant change in the state of affairs of the Company during the year was the net increase in contributed equity amounting to $958,039 through the issue of 14,662,852 fully paid ordinary shares for cash together with 3,315,928 attaching options.

Details of the changes in contributed equity are disclosed in note 18 to the financial statements.

Matters subsequent to the end of the financial year

Since 30 June 2011 the Company has successfully completed capital raisings through the issue of 7,380,000 fully paid ordinary shares, with 2,460,460 attaching options with the proceeds net of issue expenses amounting to $485,604.

Likely developments and expected results of operations

The Company’s major priority in the 2012 financial year is to aggressively expand its Travelan distributorship into global markets and thus the revenues from the Travelan product. This market expansion will also include the opportunity to extend the product range and indications beyond its current indications.

In respect of current research projects the influenza program will continue with the finalisation of the current animal trials and the commencement of the first human trial which will be conducted through the Hadassah Medical Center in Israel. Also following the PreIND meeting in respect of our NASH product with the Federal Drug administration (FDA) in July 2011 we are finalising the Investigational New Drug (IND) application and this is scheduled to be lodged with the FDA before the end of this calendar year.

Environmental regulation

Immuron Limited is not subject to any significant environmental regulations with its present operations.

Information on Directors

Professor Colin Chapman B Pharm B VSc (Hons) PhD FPS.

Appointed an Independent Director - 18 June 2008. Appointed Chairman - 17 December 2008.

Experience and expertise

Professor Chapman is a former Dean of the Faculty of Pharmacy and Pharmaceutical Sciences at Monash University (1991-2006) and is now an Emeritus Professor at Monash University and a Professorial Fellow at the Australian Health Workforce Institute, University of Melbourne. Professor Chapman’s research interests centre on drug development, immunology, dermatology and veterinary pharmacology. His PhD was obtained following research centred on immunology and immunoparasitology at the Walter and Eliza Institute for Medical Research in Melbourne and he has maintained a keen professional interest and involvement in all aspects of immunology ever since. During his period as Dean of the Faculty of Pharmacy and Pharmaceutical Sciences he played key roles in the commercialisation of a drug to prevent/treat influenza, Relenza®, and in the establishment of Acrux, a company formed to commercialise transdermal drug delivery techniques developed in the faculty.

Other current directorships

None

Former directorships in last 3 years

None

Special responsibilities

None

Interests in shares and options

1,280,080 ordinary shares in Immuron Limited – direct interest.

Immuron Limited Directors’ Report

Professor Roy Robins-Browne MB, BCh, PhD, FRCPA, FRCPath, FASM .

Independent non-executive director

Experience and expertise

Non-executive director for 13 years.

Professor Robins-Browne is Professor of Microbiology & Immunology at University of Melbourne. He is also Head of Microbiological Research, Murdoch Children’s Research Institute.

Other current directorships

None

Former directorships in last 3 years

None

Special responsibilities

None

Interests in shares and options

75,000 ordinary shares in Immuron Limited – direct interest 63,395 ordinary shares in the name of Anadis ESP Pty Ltd, as trustee for Professor Robins-Browne 262,640 Ordinary shares in Immuron Limited – indirect interest

Simon Sallka B.Bus (Econ.) Dip.SIA Dip. BA ISFA

Independent non-executive Director.

Experience and expertise

Mr Sallka brings to the Board over 25 years’ experience in investment management and investment analysis. Mr Sallka has worked for extended periods in the international investment markets of Japan, USA and Asia including leading hedge funds. Mr Sallka is currently the Chief Investment Officer of Falcon Capital Pty Ltd.

Other current directorships

None

Former directorships in last 3 years

None

Special responsibilities

Member of Audit and Risks Committee

Interests in shares and options

443,069 ordinary shares in Immuron Limited – direct interest 1,001,142 ordinary shares in Immuron Limited – indirect interest

Dr. Elane Zelcer BSc (Hons), PhD, Grad Dip Mktg, FAICD

Independent non- executive Director Appointed 19 November 2009

Experience and expertise

Dr Zelcer has considerable experience in the Biotechnology sector, including CEO positions with biotech companies and the commercialisation company at Monash University, and as an independent director with the Dairy CRC and Chair of the Victorian State Governments’s Bioeconomy Working Group, a component of the State Government’s Biotechnology Strategy. Dr Zelcer is currently the Executive Director of BioConsult Pty Ltd which focuses on assisting early stage companies in the life sciences sector to develop and commercialise their intellectual property through strategic partnering, capital raising and collaboration. BioConsult is contracted by the Australian Government to provide Case Manager services as part of the Commercialisation Australia Program.

Immuron Limited Directors’ Report

Other current directorships

None

Former directorships in last 3 years

None

Special responsibilities

Chair of Audit and Risks Committee

Interests in shares and options

66,591 ordinary shares in Immuron Limited – direct interest

Graeme Stevens

Company Secretary

Mr. Stevens is a qualified Chartered Accountant and was appointed in November 2007 and acts as Chief Financial Officer as well as Company Secretary. Before joining Immuron Limited he held a similar position in another listed public company for 4 years.

Meetings of directors

The number of Directors meetings held during the year and the number of meetings attended by each Director were as follows:

	Directors	Meetings	Audit & Risks Committee	Audit & Risks Committee
Non-executive Directors	a	b	a	b
Professor Colin Chapman	10	9	*	*
Professor Roy Robins-Browne	10	10	*	*
Simon Sallka	10	10	3	3
Dr Elane Zelcer	10	10	3	3

a = Number of meetings held during the time the director held office during the year. b = Number of meetings attended

= Not a member of the Audit & Risks Committee

Remuneration report

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

A Principles used to determine the nature and amount of remuneration

B Details of remuneration C Service agreements D Share-based compensation E Additional information

The information provided in this remuneration report has been audited as required by section 308(3C) of the Corporations Act 2001.

A. Principles used to determine the nature and amount of remuneration

Immuron is a research and development company specialising in products derived from hyperimmune bovine colostrum. As such, its funding mainly comes from capital raisings, sale of products commercialised from its research activities, and the receipt of government research and development grants.

Immuron is listed on the Australian Stock Exchange. It currently incurs losses as its research and commercialisation expenditure exceeds the cash inflow obtained from product sales.

The Board of Directors is responsible for determining and reviewing compensation arrangements for the Directors, the Chief Executive Officer and the executive team. The Board assess the appropriateness of the nature and amount of

Immuron Limited Directors’ Report

emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall objective of ensuring maximum stakeholder benefit from retention of a high quality Board and executive team.

The framework provides a mix of fixed and variable pay together with long-term incentives.

Non-executive Directors

Fees and payments to non-executive Directors reflect the demands which are made on, and the responsibilities of, the Directors. Non-executive Directors' fees and payments are reviewed annually by the Board. The Chairman's fee is determined independently to the fees of non-executive Directors and is based on comparative roles in the external market. Following approval by the members at the 2008 Annual General Meeting the Directors have the option to take up to 50% of their fees in shares in the Company. Directors are also eligible to receive share options when approved by shareholders.

Directors' fees

The current base remuneration was reviewed during the year with the increased fees becoming effective from 1 January 2011.The aggregate increase if fees amounted to $10,000 per annum, being $2,500 per director. The last increase in fees was in the 2006 financial year. The Chairman's remuneration is inclusive of committee fees while additional fees are also paid to non-executive Directors for their membership of Board committees. Bonuses are not paid.

Non-executive Directors fees are determined within an aggregate Directors' fee pool limit, which is periodically recommended for approval by shareholders. The pool, which was last varied by shareholders on 8 November 2005, stands at $350,000 for cash remuneration.

The following fees have been applied following approval by the Board for the financial year ended 30 June 2011:

	$
Base fee
Chairman	61,250
Other non-executive Directors	38,750
Additional fees
Committees - Member	5,000

Retirement allowances for Directors

Non-executive Directors’ retirement payments are limited to compulsory employer superannuation.

Executive pay

The executive pay and reward framework has three components:

Base pay and benefits, and
Long term incentives (LTI) are currently available under participation in the Immuron Limited Executive Officer Share Plan (Plan), and the Executive Share Option Plan(ESOP) that was approved by shareholders at the General Meeting held on 5 September 2011. (Refer Section D (i) of this report for details), and
Other remuneration such as incentive bonuses and superannuation.

The combination of these comprises the executive’s total remuneration. At the present time the Chief Executive Officer is the only executive with LTI arrangements as part of his total remuneration package, although other employees and consultants are eligible to participate in the LTI’s offered under the Plan and ESOP. Bonuses to other executives are payable at the discretion of the Board acting on the advice of the Chief Executive Officer.

Base pay

Executives are given the opportunity to receive the base emolument in a variety of forms including cash and benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Company.

The base pay is set to reflect the market for a comparable role and is reviewed annually to ensure the executive’s pay is competitive with the market.

There is no guaranteed base pay increases included in any senior executives’ contracts.

Retirement benefits

Retirement benefits are delivered by payments to an executive’s approved superannuation fund.

Executive Officer Share Plan and Executive Share Option Plan

Information on these two LTI’s is detailed in Section D of this report.

Immuron Limited Directors’ Report

Incentive Bonus

The Chief Executive Officer (CEO) is eligible to receive a combination of short term incentive (STI) and LTI’s as part of

his total remuneration if he achieves certain performance indicators as set by the Board. The STI can be paid, at the

option of the CEO, either by cash or a combination of cash and the issue of equity in the Company.

B. Details of remuneration

Amounts of remuneration

Details of the remuneration of the Directors and the key management personnel (as defined in AASB 124 Related Party Disclosures) of the Company are set out in the following table.

The key management personnel of the Company includes the Directors as per pages 4 to 6 above, and the following executive officers who have authority and responsibility for planning, directing and controlling the activities of the Company, and are also the highest paid executives of the Company.

Joe Baini Chief Executive Officer Amos Meltzer Vice President Business Development Dr Grant Rawlin Chief Scientific Officer Graeme Stevens Company Secretary and Chief Financial Officer

2011 Non –executive Directors Prof. Colin Chapman Prof. Roy Robins -Browne Simon Sallka Dr Elane Zelcer Total Non –executive Directors Other key management Personnel Joe Baini (1) Amos Meltzer Dr Grant Rawlin Graeme Stevens Total key management personnel compensation	Short term employee benefits Post employment benefits Long term benefits Share based payments Cash salary and fees $ Non monetary benefits $ Superannuation $ Long service leave $ Share based payments $ Total $ 52,070 - 5,512 - 9,188 66,770 38,750 - 3,482 - - 42,232 41,250 - 3,712 - - 44,962 41,250 - 3,712 - - 44,962
	173,320 - 16,418 - 9,188 198,926
	98,400 - - - 42,228 140,628 192,355 - - - 28,913 221,268 235,305 - 12,619 41,230 - 289,154 134,560 - - - - 134,560
	660,620 - 12,619 41,230 71,141 785,610

Joe Baini commenced as CEO on 17 January 2011.

Immuron Limited Directors’ Report

2010 Non –executive Directors Prof. Colin Chapman Prof. Roy Robins -Browne Simon Sallka Dr Elane Zelcer (1) Arie Nudel (2) Total Non –executive Directors Other key management Personnel Dr Grant Rawlin Graeme Stevens (3) Total key management personnel compensation	Short term employee benefits Post employment benefits Long term benefits Share based payments Cash salary and fees $ Non monetary benefits $ Superannuation $ Long service leave $ Shares $ Total $ 43,500 - 12,900 - 9,000 65,400 37,500 - 3,375 - - 40,875 37,500 - 3,375 - - 40,875 17,187 - 1,969 - 4,688 23,844 28,125 - 2,531 - - 30,656
	163,812 - 24,150 - 13,688 201,650
	250,986 - 21,389 6,328 17,784 296,487 146,040 - - - 17,784 163,824
	397,026 - 21,389 6,328 35,568 460,311

Dr Elane Zelcer appointed a Director on 19 November 2009.
Mr Aril Nudel resigned as a Director on 23 March 2010.
The services of Graeme Stevens are provided through a direct contract and a services contract with Flexpertise Pty Ltd, an executive contracting company not related to Mr Stevens.

Share based payments

Shares and options may be issued or granted to key management personnel under the various share based compensation plans as set out in section D of this report.

Details of shares and options provided as part of the total remuneration paid to key management personnel are set out below. When exercisable, each option is convertible into one ordinary share of Immuron Limited.

Non- executive Directors

The Directors elected to take a portion of their fees in shares in accordance with the approval given by members at the 2008 Annual General Meeting. Accordingly, for the 2011 financial year 131,257 shares were issued for a total value of $9,188.

Key management personnel and other executives of the Company

2011 Joe Baini Amos Meltzer Total	Shares issued in lieu of salary / consultants fee payment $ Shares issued under Executive Officer Share Plan $ Shares issued in lieu of bonus payment $ Stock option expense $ Total $ 36,000 - - 6,228 42,228 28,912 - - - 28,912
	64,912 - - 6,228 71,140

Immuron Limited Directors’ Report

2010 Dr GT Rawlin G N Stevens Former Director and Chief Executive Officer Dr Z Rosenberg (Note) Former other key management personnel Dr O Fuerst (Note) Total	Shares issued in lieu of salary / consultants fee payment $ Shares issued under Executive Officer Share Plan $ Shares issued in lieu of bonus payment $ Stock option expense $ Total $ - 17,784 - - 17,784 - 17,784 - - 17,784 - - - (31,661) (31,661) - - - (31,661) (31,661)
	- 35,568 - (63,322) (27,754)

Note. The above negative stock option expense represents the net of:

the write back of the value of contingent options that had been expensed in prior years, $92,694,and
the expense arising from the final options that vested on 1 October 2009, $29,372.

Additional information in respect of options

No options have been granted to Directors during the year to 30 June 2011.

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

Name	Fixed remuneration	Fixed remuneration	At risk – STI	At risk – STI	At risk - LTI
	2011	2010	2011	2010	2011 2010
Other key management personnel
Joe Baini	70%	-	4%	-	26%	-
Amos Meltzer	100%	-	-	-	-	-
Dr Grant Rawlin	100%	80%	-	20%	-	-
Graeme Stevens	100%	100%	-	-	-	-

C. Service agreements

Remuneration and other terms of engagement for the Chief Executive Officer, and other key management personnel are formalised in employment or consultancy agreements and are summarised as follows.

Joe Baini – Chief Executive Officer

The services of Mr Baini are provided through a consultancy agreement with eXec Factor Pty Ltd, a company associated with Mr Baini.
The terms of the contract are for Mr Baini’s services to be provided initially for a period of three (3) days a week to 31 May 2011 and four (4) days a week for the period to 31 December 2011 at which time an extension of the contract will be reviewed. The contract can be terminated by either party giving one (1) months’ notice.
Upon the commencement of the consultancy period Mr Baini was issued with 500,000 fully paid ordinary shares at a value of $36,000, together with the following options:
500,000 expiring 31 January 2012 at an exercise price of 8.5 cents per option’ and
750,000 expiring 31 May 2013 at an exercise price of 9.45 cents per option.

Immuron Limited Directors’ Report

The consultancy company is being paid $1,200 daily for Mr Baini’s services and will be entitled to a STI of $70,000 and LTI’s, in addition to the above shares and options, the following options if certain performance targets are achieved:
(i) 1,000,000 options having a term of three (3) years to be issued prior to 31 December 2011, and (ii) an additional 1,000,000 options having a term of three (3) years to be issued prior to 30 June 2012.
- Neither of the options in (i) and (ii) above have been granted to Mr Baini as at the date of this report

Amos Meltzer – Vice President Business Development

The services of Mr Meltzer are provided through a consultancy agreement with Biomeltzer Pty Ltd, a company associated with Mr Meltzer.
The terms of the consultancy arrangements with Biomeltzer Pty Ltd are ongoing and initially provided for the provision of Mr Meltzer’s services at an hourly rate, which was subsequently changed to a daily rate of $1,100 per day in March 2011. The consultancy arrangements can be terminated by either party giving one (1) months’ notice.
There are no other benefits or specified STI’s or LTI’s in the consultancy arrangements, however Mr Meltzer will be entitled to participate in the ESOP available to key executives.

Dr. G Rawlin B Sc (Vet) (Hons) B VSc - Chief Scientific Officer

Dr Rawlin was appointed to the role of Chief Scientific Officer having resigned as the Chief Executive Officer on 1 February 2011 at which time he was paid out all of his employee entitlements to annual leave and long service leave.
The services of Dr Rawlin are provided through a consultancy agreement with Immuno-Vet Pty Ltd, a company associated with Dr Rawlin. The terms of the consultancy agreement provide for Immuno-Vet Pty Ltd a daily rate of $700 for the provision of Dr Rawlin’s services. The contract can be terminated by either party giving one month’s notice.
There are no other benefits or specified STI’s or LTI’s in the consultancy arrangements, however Dr Rawlin will be entitled to participate in the ESOP available to key executives.

Graeme Stevens

Company Secretary and Chief Financial Officer .

The services of Mr Stevens are provided through contracts with Graeme Stevens and Flexpertise Pty Ltd, an executive contracting company not related to Mr Stevens at an agreed hourly rate.

D. Share-based compensation

(i) Shares .
(a) Employee Share Plan

All permanent employees (excluding executive directors) who have been continuously employed by the Company for a period of at least one year are eligible to participate in the Plan. Employees may elect not to participate in the Plan.

Under the Plan, eligible employees may be granted up to $1,000 worth of fully paid ordinary shares in Immuron Limited annually for no cash consideration. The market value of the shares issued under the scheme, measured as the weighted average price at which the Company’s shares are traded on the Australian Stock Exchange during the week leading up to and including the date of grant, is recognised as part of employee benefit costs in the period the shares are granted.

Offers under the Plan are at the discretion of the Company. Shares issued under the scheme may not be sold until the earlier of three years after issue or cessation of employment with the Company. In all other respects the shares rank equally with other fully-paid ordinary shares on issue.

The number of shares issued to participants in the Plan is the offer amount divided by the weighted average price at which the Company’s shares are traded on the Australian Stock Exchange during the week up to and including the date of grant.

Shares to the value of $1,000 were issued under this plan in the 2011financial year ( 2010 Nil ).

Immuron Limited Directors’ Report

(b) Executive Officer Share Plan

At the 2007 annual general meeting the members agreed to the establishment of the Immuron Limited Executive Officer Share Plan (Plan). The Plan may involve the Company providing financial assistance for the purchase of its own shares in that no eligible employees are required to pay application monies for the shares issued. Shares issued under this Plan are held in the name of a trustee on behalf of the eligible employees. A wholly owned subsidiary company was incorporated on 2 January 2008 for the sole purpose to act as the trustee under the Plan.

A brief summary of the Plan is as follows:

The Plan is available to all senior employees and Directors, both executive and non-executive, of Immuron Limited.
Eligible employees will be offered ordinary shares in the Company to be subscribed for, or acquired by the trustee on behalf of the employee. Shares held by the trustee for employees will be restricted shares in that the shares will not be transferred into the name of the employee until the earlier of, 10 years from date of issue, or the employee terminates their employment with the Company.
The shares issued under the Plan will rank equally with all other ordinary shares in the Company and are entitled to receive dividends and vote at general meetings of members.
No application monies are payable for shares issued under the Plan, unless the Board determine otherwise.

No shares were issued under this Plan in the 2011 financial year ( 2010 - 400,000 shares at a value of $35,568).

(c) Executive Share Option Plan (ESOP)

At a General Meeting of shareholders held on 5 September 2011 approval was given to the rules of the ESOP and authorised Directors to issue options at their discretion in accordance with the rules from time to time. As at the date of this report no options have been granted under the ESOP.

Under the rules of the ESOP the Board may offer options to key management staff and consultants and in special circumstances may provide financial assistance to an entitled option holder to assist in the exercise of the ESOP options.

The aggregate number of shares that may be issued upon the exercise of the ESOP options, together with all other share purchase plans for eligible persons, shall not at any time exceed 5% of the total number of the Company’s ordinary shares on issue.

( d) Options

The terms and conditions of each grant of options affecting remuneration in the current or future reporting period are as follows:

		Vesting and		Exercise	Value per option	Performance
	Grant Date	exercise date	Expiry date	price	at grant date	achieved	% vested
18	February 2011	18 February 2011	31 January 2012	$0.085	$0.0213	100%	100%
18	February 2011	31 May 2011	31 May 2013	$0.0945	$0.0227	100%	100%

The following options outstanding at 30 June 2010 were not exercised by their expiry date of 1 October 2010 and lapsed.

		Date vested and			Value per option at
	Grant date	exercisable	Expiry date	Exercise price	grant date
1	October 2007	1 October 2007	1 October 2010	$0.33	$0.0266
1	October 2007	1 October 2007	1 October 2010	$0.43	$0.0209
1	October 2007	1 April 2008	1 October 2010	$0.33	$0.0266
1	October 2007	1 April 2008	1 October 2010	$0.43	$0.0209
1	October 2007	1 October 2008	1 October 2010	$0.33	$0.0266
1	October 2007	1 October 2008	1 October 2010	$0.43	$0.0209
1	October 2007	1 April 2009	1 October 2010	$0.33	$0.0266
1	October 2007	1 April 2009	1 October 2010	$0.43	$0.0209
1	October 2007	1 October 2009	1 October 2010	$0.33	$0.0266
1	October 2007	1 October 2009	1 October 2010	$0.43	$0.0209

Immuron Limited Directors’ Report

The assessed fair value of options granted to personnel at their grant date is allocated equally over the period from grant date to vesting date, and the amount for the 2011 financial year is included in the remuneration table as set out in section B above. Fair values at grant date are determined using the Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option. The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publically available information.

All options when granted are granted for no consideration.

E

Additional information

Principles used to determine the nature and amount of remuneration: relationship between remuneration and Company performance

The full Board will exercise these responsibilities and set the policies for remuneration of key management personnel so as to comply with the Corporations Act, Accounting Standards and the ASX Listing Rules. Remuneration for key management personnel is determined by reference to market rates to attract qualified individuals essential for the delivery of Immuron’s strategy.

Due to the nature of the business the incentive programs are largely based on the achievement of value creating outcomes that could be reasonably expected to enhance shareholder value.

From time to time employees are offered Shares and Options under plans previously agreed by shareholders. In a company at this stage of its development, the only meaningful performance target is the share price and the exercise price for such options are set well in advance of where the shares are trading at the time of issue and, for executives, usually have a two year vesting period.

Loans to directors and executives.

No loans have been made to any Director, or any of their related entities, or any executive during the 2011 financial year. (2010 -Nil).

Shares under options

As at the date of this report, there were 7,025,929 unissued shares under option as follows:

Date options granted 18 February 2011 18 February 2011 31 May 2011 30 June 2011 31 August 2011	Number under option 500,000 750,000 2,657,144 658,785 2,460,000 7,025,929	Issue Price of Shares $ $0.085 $0.0945 $0.10 $0.10 $0.10	Expiry date
			31 January 2012 31 May 2013 31 May 2012 30 June 2012 31 August 2012

No option holder has any right under the options to participate in any other share issue of the Company.

No shares were issued from the exercise of options during the year.

Insurance of officers

During the financial year, the Company insured the Directors and officers of the Company under a Directors and Officers Liability policy. The premium paid is commercially sensitive and is not disclosed.

The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of the Company and any other payments arising from liabilities incurred by the officers in connection with such proceedings, other than where such liabilities arise out of conduct involving a wilful

Immuron Limited Directors’ Report

breach of d u ty by the off i cers or the i m proper use b y the officers o f their positi o n or of infor m ation to gai n advantage f o r themselves o r someone e l se or to caus e detriment to the Compan y . It is not possible to appo r tion the pre m ium between amounts rel a ting to the i n surance agai n st legal costs and those rel a ting to other liabilities.

Proceedings on behalf of the Company No proceed i ngs have bee n brought or i ntervened in o r on behalf o f the Compa n y with leave o f the court u n der section 2 37 of the C orp o rations Act 2 001.

Auditor

PwC contin u es in office i n accordance with section 3 27 of the Corporations A c t 2001.

Non-audit services

There were no non-audit services prov i ded during t h e financial y e ar.

Auditor’s Independence Declaration A copy of t h e Auditor’s i n dependence declaration, a s required un d er section 3 0 7C of the Co r porations Act 2001, is set o ut on page 15.

Signed in M elbourne on 2 8 September 2011 in acco r dance with a resolution of the Directors

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C B Chapman S Sallka Director Director

PricewaterhouseCoopers ABN 52 780 433 757

Auditor’s Independence Declaration

Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331 MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999 www.pwc.com/au

As lead auditor for the audit of Immuron Limited for the year ended 30 June 2011, I declare that to the best of my knowledge and belief, there have been:

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

This declaration is in respect of Immuron Limited during the period.

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Lisa Harker Partner PricewaterhouseCoopers

Melbourne 28 September 2011

Immuron Limited Corporate Governance Statement Corporate Governance

The Board of Immuron Limited is accountable to the shareholders and other stakeholders for the performance of the Company. To this end, the Board is committed to maintaining the highest ethical standards and best practice in the area of corporate governance to ensure that the Company's business is conducted in the best interests of all concerned.

The Company has prepared and implemented practices that address all the Principles set out by the 2[nd] edition of the ASX Corporate Governance Principles and Recommendations guidelines. These practices will be reviewed regularly to ensure their relevance and application to the Company's responsibilities and activities.

By adopting these Principles, the Board seeks to create value and provide accountability commensurate with the risks involved.

Principle 1: Lay solid foundations for management and oversight.

Role of the Board.

The primary role of the Board is to provide effective governance over the Company's affairs to ensure the interests of the shareholders are protected and the confidence of the investing market is maintained whilst having regard for the interests of all the stakeholders.

This role is exercised by the Board, as whole, and each Director exercising diligent attention to the affairs of the Company. In particular the Board is responsible for:

Setting the Company's values and standards of conduct and ensuring that these are adhered to.
Providing strategic direction and approving corporate strategic initiatives.
Oversight of the Company, including its control and accountability systems.
Appointing and removing the Chief Executive Officer.
Reviewing and ratifying systems of risk management and internal compliance and controls, codes of conduct and legal compliance.
Monitoring senior management performance and ensuring appropriate resources are available.
Approving and monitoring the progress of major capital expenditure, capital management and acquisitions and divestitures.
Approving and monitoring financial and other reporting to shareholders and regulatory authorities.

To ensure that all new Board members understand what is expected of them, in addition to their obligations under the Corporation Law, the Company provides them with a document setting out the key terms and conditions relating to their appointment.

Role of Management.

Through the Chief Executive Officer, management is responsible to the Board for the:

Development and implementation of agreed corporate strategy and performance objectives.
Undertaking the day to day activities of the Company.
Identifying all matters to be included in a risk profile of the Company and ensuring that effective risk management systems are implemented and adhered to.
Observing the code of conduct.
Ensuring that the Board is fully informed of all matters which may have a material impact on the ability of the Company to meet its obligations.

Principle 2: Structure the Board to add value.

Board Composition.

The Board determines its size and composition, subject to the limits imposed by the Company's Constitution, which requires a minimum of three and a maximum of ten. Currently there are four (4) directors.

All of the current Directors are independent Directors who act independent of management and free of any business or other relationship that could materially interfere with the exercise of their unfettered and independent judgment.

Immuron Limited Corporate Governance Statement

Notwithstanding this, the Board recognises that in a small, specialised industry such as biotechnology, it is very desirable that board members have some industry background and therefore may not be completely independent. However, all nonexecutive directors are considered to be independent.

The skills, experience and expertise of each Director is set out in the attached Directors’ Report.

The Board collectively and each Director individually may take, at the expense of the Company, such independent professional advice as is considered necessary to fulfil their relevant duties and responsibilities.

Board Committees

The Board operated two committees during the year to assist in the execution of its duties and to allow detailed consideration of complex issues. The respective committees were the Hadasit Steering Committee and the Audit and Risks Committee.

The Hadasit Steering committee was initially established to review the research and development activities undertaken by the Hadassah Medical Centre under the Services agreement entered into with Hadasit. The Steering committee comprises two (2) representatives from Immuron; being Professor Colin Chapman and Dr Grant Rawlin, and two (2) representatives from Hadasit; Dr Einat Zisman, Chief Executive Officer of Hadasit, and Professor Yaron Ilan, Director Department of Medicine Hadassah Medical Centre. Professor Yaron Ilan is also the medical director of the Company.

The functions of this committee ceased in the first half of the financial year with the responsibilities becoming part of the functions of the Chief Executive and Chief scientific Officers of the company.

During the year the Company established an Audit and Risks Committee which consists of the following non-executive Directors:

Elane Zelcer (Chair)
Simon Sallka

Details of the above Directors qualifications and attendance at audit committee meetings are set out in the Directors report on pages 4 to 6.

The Audit and Risks Committee operates in accordance with a charter established by the Board in February 2011. The main responsibilities of the Committee are to:

Determine the adequacy of the Company’s administrative, operating and accounting controls and policies including;
Systems of internal control and management of risks, including the risks associated with the Company’s R & D projects; and
The Company’s process for monitoring compliance with laws and regulations and its own code of business conduct.
Oversee and appraise the quality of the audits conducted by the Company’s external auditors.
Maintain open lines of communication among the Board, management and external auditors to exchange views and information, as well as confirm their respective authority and responsibilities.
Serve as an objective party to review the financial information presented by management to the Board, shareholders and regulators, and
Report to the Board on matters relevant to the Committee’s role and responsibilities

In fulfilling its responsibilities, the Committee:

Receives regular reports from management.
Meets with the external auditors at least twice a year and reviews any significant disagreements between the auditors and management irrespective of whether they have been resolved.
Review of the audit plan with the external auditors and evaluates the effectiveness of the external audit.
Reviews the process the Chief Executive Officer and Chief Financial Officer have in place to support their certifications to the Board.

The Committee has the authority, within the scope of its responsibilities, to seek and request any information it requires from any employee or external party.

Immuron Limited Corporate Governance Statement

The Company does not have separate committees covering nomination or remuneration matters as the tasks normally performed by these committees are carried out by the full Board. The Board believes that due to the size of the Company and its present stage of development, these functions are best handled by the full Board. The Board will establish other committees, either permanent or ad hoc, as required by the Company's future development.

In addition, and for the reasons mentioned, the Board does not currently have a formal policy on selecting new Directors.

Principle 3: Promote ethical and responsible decision making.

The Company has adopted the Australian National Health and Medical Research Council guidelines on ethical research practices.

Code of Conduct

Immuron is guided in all its activities by respect for all its stakeholders including employees, shareholders, contractors, customers and suppliers.

The Board has articulated the Company's requirements for standards of conduct, from Directors and senior management, based on the following principles;

Directors are subject to re-election every three years.
The Chairman must be independent.
Conflict of interest must be avoided wherever possible. If, for any reason, a potential conflict arises, the Director/employee must declare the conflict and absent themselves from all discussions and decisions on the relevant matter.
Employees, consultants and Directors must respect the confidentiality of the Company's assets, including intellectual property, both during and after employment.
The Company will comply with all relevant legislation and regulation.
The Company will deal fairly with all its stakeholders.
The Company will promote a culture of ethical behaviour, encouraging openness amongst employees, Directors and contractors.

Trading in Company Securities.

The Company reaffirmed its policy and procedures on securities trading in an announcement to the Australian Stock Exchange (ASX) on 29 December 2010. Briefly the policy states that in respect of any designated officer, either directly or indirectly, is not to deal in the Company’s securities at any time:

When a designated officer is in possession of inside information, or
Where the dealing is for short-term or speculative gain, or
Within a period commencing 72 hours prior to and 72 hours after any announcement, or
Within a period commencing 72 hours prior to and 72 hours after the announcement of the half year and annual financial results.

A designated officer includes Directors, key management employees, consultants, and their associates, and is not to communicate inside information or cause that information to be communicated to another person, or deal in securities of outside companies about which they may obtain inside information by virtue of their position at Immuron.

Each Director has entered into an agreement with the Company to provide information to allow the Company to notify the ASX of any share transaction within five business days.

The Audit and Risks Committee will periodically review the compliance with this policy and report any departures to the Board.

Principle 4: Safeguard integrity in financial reporting.

The Board regularly reviews the monthly financial reports and through the Audit and Risks Committee requires the Chief Executive Officer and the Chief Financial Officer, or other appropriate persons responsible for the management of the Company and financial matters, to provide written assurances in respect to the accuracy and compliance of the annual and half yearly published financial statements.

The auditor provides a certificate to the Company confirming their independence. Rotation of the auditor has proceeded as required by Law or Regulation. The Company currently has no intention of replacing the existing auditors; however should this arise it will make a selection following a competitive process. Non audit work is arranged based on cost and the needs of the Company.

Immuron Limited Corporate Governance Statement

Principle 5: Making timely and balanced disclosure.

As Immuron’s shares are traded on the ASX the Company is very conscious that it has an obligation to ensure that the market is both fully and accurately informed about material matters by timely and balanced disclosure.

The information disclosed will be factual and presented in a clear and balanced way. The Company has prepared and issued to all senior staff a written policy document on this matter and requires strict adherence to this policy. Continuous disclosure is a standard agenda item at all Board meetings.

Principle 6: Respect the rights of shareholders.

The Company is committed to respecting the rights of shareholders and facilitating the effective exercise of those rights.

This is achieved by;

Effective and regular communications.
Providing access to timely, balanced and understandable information about the Company and its current and future direction, and
Facilitating easy participation at general meetings.

The Company's external auditor attends each annual general meeting and is available to answer any questions with regard to the conduct of the audit and their report.

Principle 7: Recognise and managing risk.

In addition to the usual business risks, the particular risks associated with the Company's activities are:

Long lead times and high costs associated with biotech research, development and commercialisation.
The low success rate of biotech research in Australia.
Stringent health regulations which are subject to regular change.
The high level of funding required over a long period of time.
Securing and protecting the Company’s intellectual property.

The Chief Executive Officer and the Chief Financial Officer have provided a statement to the Board that, in addition to the requirements of section 295A of the Corporations Act, the financial and other statements are founded on a sound system of risk management, internal compliance and controls and in so far that it relates to financial risk the procedures are operating effectively in all material aspects.

Due to the size of the Company there is no internal audit function.

Principle 8: Remunerate fairly and responsibly.

The Board notes the Corporate Governance Council recognises that, for small companies, the efficiencies expected to flow from a formal committee structure may not be apparent. The Board agrees with this view.

The full Board will exercise these responsibilities and set the policies for remuneration of Directors and senior managers so as to comply with the Corporation Act, accounting standards and the ASX Listing Rules. Remuneration for executive Directors and staff is determined by reference to market rates. From time to time employees are offered shares and options under plans previously agreed by shareholders. In a company at this stage of its development, the only meaningful performance target is the share price and the exercise price for such options which are set well in advance of the price at which the shares are trading at the time of issue and, for executives, usually have a vesting period of up to three years.

As the number of options on issue at any one time is low and the price and exercise periods differ, the Board considers that the exercise of such options will have little or no effect on the Company's share price or Earnings per Share.

In setting remuneration for non-executive Directors, the Board will use the following principles;

Non-executive Directors shall be paid fees and superannuation plus supplements for committee work within the aggregate amount set by shareholders in general meeting (last set in 2005 at $350,000 for cash remuneration).

Immuron Limited

Corporate Governance Statement

Non-executive Directors may participate in options arrangements subject to shareholder approval. The Board does not accept that options should not be given to non-executive Directors as it believes (and shareholders have previously agreed) that in an R&D company their particular expertise is vital to the team effort and therefore options are a valid incentive.
Non-executive Directors retirement payments are limited to compulsory employer superannuation.
Bonuses will not be paid to non-executive Directors.

Details of remuneration paid to Directors and key management personnel is set out in the Directors Report in the annual report.

Immuron Limited Statement of Comprehensive Income For the year ended 30 June 2011

Notes Revenue from continuing operations 5 Other income 6 Raw materials & consumables used Employee benefits expense Depreciation and loss on disposal of plant & equipment Research and development – external Directors' fees Travel expenses Product marketing & export development - external Consultants costs Shareholder relations Finance costs Corporate and administrative expenses Loss before income tax 7 Income tax benefit 8 Loss for year attributable to members of Immuron Limited Total Comprehensive loss for year Loss per share attributable to the ordinary equity holders of the company Basic earnings (loss) per share 25 Diluted earnings (loss) per share 25	2011 $ 297,891 - (216,641) (205,886) (21,327) (1,560,892) (198,926) (153,288) (33,998) (426,714) (69,816) (3,735) (215,746) (2,809,078) 213,899 (2,595,179) (2,595,179) Cents (0.82) (0.82)	2010 $ 498,075 62,137 (275,430) (258,480) (39,591) (1,097,933) (201,650) (53,812) (16,864) (280,085) (97,993) (3,382) (401,149)
		(2,166,157) 263,732
		(1,902,425)
		(1,902,425)
		Cents (0.73) (0.73)

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

Immuron Limited Balance Sheet As at 30 June 2011

Notes ASSETS Current Assets Cash & cash equivalents 9 Trade & other receivables 10 Inventories 11 Other assets 12 Total Current assets Non-Current Assets Property, plant and equipment 13 Intangible assets 14 Investments 15 Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade & other payables 16 Provisions 17 Total Current Liabilities Non-Current Liabilities Provisions 17 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS/(LIABILITIES) EQUITY Contributed equity 18 Reserves 19 Accumulated losses 19 TOTAL EQUITY	2011 $ 750,814 33,594 290,900 96,127 1,171,435 28,162 1,460,587 31 1,488,780 2,660,215 924,836 3,000 927,836 - - 927,836 1,732,379 27,721,517 595,207 (26,584,345) 1,732,379	2010 $ 1,882,224 153,129 22,567 248,564
		2,306,484
		31,292 1,460,587 31
		1,491,910
		3,798,394
		393,503 39,500
		433,003
		2,100
		2,100
		435,103

		3,363,291
		26,964,091 388,366 (23,989,166)
		3,363,291

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

Immuron Limited Statement of Changes in Equity For the year ended 30 June 2011

Notes Balance at 30 June 2009 Total comprehensive loss for the year 19 Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 18 Employee share options – value of employee services Employee options costs written back to comprehensive loss for year 19 19 Balance at 30 June 2010 Total comprehensive loss for the year 19 Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 18 Employee share options – value of employee services 19 Balance 30 June 2011	Contributed equity $ 21,458,898 5,505,193	Reserves $ 442,972 8,716 29,372 (92,694)	Accumulated losses $ (22,086,741) (1,902,425)	Total $
				(184,871) (1,902,425) 5,513,909 29,372 (92,694)
	26,964,091 757,426 27,721,517	388,366 200,613 6,228 595,207	(23,989,166) (2,595,179) (26,584,345)	3,363,291 (2,595,179) 958,039 6,228 1,732,379

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

Immuron Limited Statement of Cash Flows For the year ended 30 June 2011

Note CASH FLOWS FROM OPERATING ACTIVITIES Receipts from customers (inclusive of goods and services tax) Payments to suppliers and employees (inclusive of goods and services tax) Interest received R&D tax rebate Interest paid Net Cash (outflow) from Operating Activities 24 CASH FLOWS FROM INVESTING ACTIVITIES Payment for plant and equipment 13 Net Cash (outflow) from Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares & other equities Share issue transaction costs Net Cash inflow from Financing Activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of financial year Cash and cash equivalents at end of financial year 9	2011 Inflow / (Outflow) $ 386,215 (2,618,421) (2,232,206) 52,606 213,899 (3,735) (1,969,436) (18,197) (18,197) 908,549 (52,326) 856,223 (1,131,410) 1,882,224 750,814	2010 Inflow / (Outflow) $ 382,599 (2,939,021)
		(2,556,422) 36,185 263,732 (3,382)
		(2,259,887)
		-
		-
		4,120,932 (128,491)
		3,992,441
		1,732,554 149,670
		1,882,224

The above Statement of Cash Flows should be read in conjunction with the accompanying notes

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 1. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

(a) Basis of preparation

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

Compliance with IFRS

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

New and amended standards adopted by the Company

The following new standards and amendments to standards are mandatory for the first time for the financial year beginning 1 July 2010:

AASB 2009-5 Further Amendments to Australian Accounting Standards arising from the Annual Improvements Project – adopted early by Immuron Limited in the 2010 financial report
AASB 2009-8 Amendments to Australian Accounting Standards- Group Cash–settled Share-based Payment Transactions
AASB2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issues
AASB Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments and AASB 2009-13 Amendments to Australian Accounting Standards arising from Interpreting 19, and
AAASB 2010-3 Amendments to Australian Accounting Standards arising from the Annual Improvement Project.
The adoption of these standards did not have any impact on the current period or any prior period and is not likely to affect future periods.

Historical cost convention

These financial statements have been prepared under the historical cost convention.

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

Going concern

At 30 June 2011, the Company’s cash and investments amounted to $750,814 (2010: $1,882,224) and for the year ended 30 June 2011, the Company experienced an operating loss of $2,595,179 (2010: $1,902,425) and a net cash outflow of $1,969,436 (2010: $2.259, 887) from operating activities and expenses associated with research and development programs. For the 2012 financial year the Company has budgeted for operating cash outflows to exceed operating cash inflows as it expands on the number of R & D projects programmed to be conducted in conjunction with Hadasit.

Although the Company is projecting losses and a net cash outflows from operations for the 2012 financial year, the Directors have made considerable changes to the management structure to focus on accelerating sales into new territories for the Company’s lead product, Travelan. The initial progress of these changes is very positive and the Directors anticipate entering into a number of licence arrangements with international pharmaceutical companies in the 2012 and 2013 financial years. Ultimately the ability of the Company to fund the expansion of the markets for Travelan, and continue with its other current research programs, will depend upon its current commercialisation program and its ability to raise additional capital from direct investment by investors as required.

Since the end of the financial year, the Company has raised additional capital of $485,604(net of costs) and will receive the proceeds from a non-renounceable rights issue to shareholders which will close on 28 October 2011, and will furthermore proceed with other capital raising initiatives during the 2012 financial year.

Given the difficulty in predicting the timing and quantum of income from the commercialisation of its products and technology, the inherent uncertainties involved in raising funds from investors, and adherence to cash flow budgets there is

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 1. Summary of significant accounting policies (continued)

significant uncertainty whether the Company will be able to continue as a going concern and realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

However, the Directors are confident that the Company's planned initiatives will be successfully achieved during the next twelve months and these will continue to provide adequate access to financial resources. The Directors are also confident of the Company’s ability to raise further capital if the need arises.

Accordingly, the Directors have prepared the financial statements on a going concern basis. As such, the financial statements do not include any adjustments as to the recoverability and classification of recorded asset amounts or to the amounts and classification of liabilities that might be necessary should the entity not continue as a going concern.

(b) Segment reporting

The Company determines and presents operating segments based on the information that is internally provided to the Company’s chief operating decision maker which has been identified as the Management Executive Team (MET). The MET consists of the Chief Executive Officer and other Senior Executives of the Company. The MET provides the strategic

direction and management oversight of the day to day activities of the entity in terms of monitoring results, providing approval for research and development expenditure decisions and challenging and approving strategic planning for the business.

(c) Foreign currency translation

(i) Functional and presentation currency

Items included in the financial statements are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The financial statements are presented in Australian dollars, which is the Company’s functional and presentation currency.

(ii) Transactions and balances

Transactions in foreign currencies are translated into the functional currency using the rates of exchange ruling at the date of each transaction. At balance date, amounts outstanding in foreign currencies are translated into the functional currency using the rate of exchange ruling at the end of the financial year. All gains and losses are brought to account in determining the profit or loss for the year.

(d) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances, rebates and amounts collected on behalf of third parties.

The Company recognises revenue when the amount of the revenue can be reliably measured, it is probable that the future economic benefits will flow to the entity and specific criteria have been met for each of the activities as described below. The amount of the revenue is not considered to be reliably measured until all contingencies relating to the sale have been resolved.

The following specific revenue criteria must be met before revenue is recognised:

(i) Sale of Goods and services – Significant risks and rewards of ownership of goods has passed to the buyer.
(ii) Interest – Interest revenue is recognised using the effective interest rate method.

(e) Government grants

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

Government grants relating to costs to be incurred are deferred or accrued such that they are recognised in the statement of comprehensive income over the period necessary to match them with the costs that they are intended to compensate.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 1. Summary of significant accounting policies (continued)

(f) Income tax

The income tax expense or revenue for the period is the tax payable or tax rebate receivable on the current period’s taxable income adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

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

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

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

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

(g) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units).

(h) Cash and cash equivalents

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

(i) Trade receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. Trade receivables are due for settlement no more than 30 days from the date of recognition.

Collectability of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for impairment of trade receivables is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payment (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short term receivables are not discounted if the effect of discounting is immaterial. The amount of the provision is recognised in the statement of comprehensive income.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 1. Summary of significant accounting policies (continued)

(j) Inventories

Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. Where appropriate, cost comprises direct materials, direct labour and an appropriate proportion of variable and fixed overheads expenditure, the latter being allocated on the basis of normal operating capacity. Costs are assigned to individual items of inventory on basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

(k) Property, plant and equipment

Plant and equipment are stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items.

Repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Depreciation on assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

- Plant & Equipment	3-15 years
- Computers	2-4 years
- Furniture and fittings	5-15 years

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, annually.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 1(g)).

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the statement of comprehensive income. When revalued assets are sold, it is the Company’s policy to transfer the amounts included in other reserves in respect of those assets to retained earnings.

(l) Intangible assets

(i) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Company’s share of the net identifiable assets of the acquired business at the date of acquisition. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses.

Goodwill is allocated to cash-generating units for the purpose of impairment testing.

(ii) Research and development

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

Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services before the start of commercial production or use, is capitalised if it is probable that the product or service is technically and commercially feasible, will generate probable economic benefits and adequate resources are available to complete development. Other development expenditure is recognised in the statement of comprehensive income as an expense as incurred.

(iii) Intellectual property

The Company acquired certain provisional patent intellectual property from Hadasit Medical Research Services & Development Limited (Hadasit) at a cost of $1,460,587 which has been capitalised and appears in the balance sheet as an

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 1. Summary of significant accounting policies (continued)

intangible asset. The acquisition cost of $1,460,587 represents the value attributed to the 56,484,023 fully paid ordinary shares issued to Hadasit in full satisfaction for the provisional patents.

The realisation of the value attributed to this intangible asset will depend on the successful commercialisation of Immuron’s potential products. The Directors note that there is always significant risk involved in the commercialisation of such products. The intellectual property is considered to have an indefinite useful life.

(m) Trade and other payables

These amounts represent liabilities for goods and services provided to the entity prior to the end of the financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method,

(n) Employee benefits

(i) Wages and salaries, annual leave and sick leave

Liabilities for wages and salaries, including non-monetary benefits and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.

(ii) Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity that match, as closely as possible, the estimate future cash flows.

(iii) Retirement benefit obligations

All employees of the Company are entitled to benefits on retirement from their own individual private superannuation plans.

( iv) Share-based payments

Share-based compensation benefits may be provided through the issue of fully paid ordinary shares under the Immuron Executive Officer Share Plan. Options are also granted to employees and consultants in accordance with the terms of their respective employment and consultancy agreements.

The fair value of options granted under employment and consultancy agreements are recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become unconditionally entitled to the options.

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

The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the statement of comprehensive income with a corresponding adjustment to equity.

Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.

(v) Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The Company recognises termination benefits when it is

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 1. Summary of significant accounting policies (continued)

demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after balance sheet date are discounted to present value.

(o) Investments and other financial assets

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Company's management has the positive intention and ability to hold to maturity.

(p) 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.

(q) Earnings per share

(ii) Basic earnings per share

Basic earnings per share is calculated by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the full year, adjusted for bonus elements in ordinary shares issued during the full year.

(ii) Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares.

(r) Goods and Services Tax (GST)

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

Receivables and payables are stated inclusive of the amount of GST recoverable or payable. The net amount of GST recoverable from, or payable to, the taxation authorities is included with other receivable or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flow arising from investing or financing activities which are recoverable for, or payable to, the taxation authorities are presented as operating cash flow.

(s) Leases

Leases in which a significant portion of the risk and reward of ownership are not transferred to the Company as lessee are classified as operating leases (note 22). Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

(t) New accounting standards and interpretations.

Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2011 reporting period. The company’s assessment of the impact of these new standards and interpretations is set out below.

(i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9 and AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) (effective from 1 January 2013)
(ii) AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and is likely to affect the group’s accounting for its financial assets and financial liabilities. The standard is not applicable until 1 January 2013 but is available for early adoption. When adopted, the standard will affect in particular the company’s accounting for its available-for-sale financial assets, since AASB 9 only permits the recognition of fair value gains and losses in other comprehensive income if they relate to equity investments that are not held for trading.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 1. Summary of significant accounting policies (continued)

There will be no impact on the company’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities.

(iii) Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures . It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment clarifies and simplifies the definition of a related party and removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities. The company will apply the amended standard from 1 July 2011. When the amendments are applied, the company will need to disclose any transactions between its subsidiaries and its associates. However, there will be no impact on any of the amounts recognised in the financial statements.

(iv) AASB 2009-14 Amendments to Australian Interpretation - Prepayments of a Minimum Funding Requirement (effective from 1 January 2011)

In December 2009, the AASB made an amendment to Interpretation 14 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction . The amendment removes an unintended consequence of the interpretation related to voluntary prepayments when there is a minimum funding requirement in regard to the entity's defined benefit scheme. It permits entities to recognise an asset for a prepayment of contributions made to cover minimum funding requirements. The company does not make any such prepayments and therefore the amendment is not expected to have any impact on the company’s financial statements.

(v) AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets (effective for annual reporting periods beginning on or after 1 July 2011)

Amendments made to AASB 7 Financial Instruments: Disclosures in November 2010 introduce additional disclosures in respect of risk exposures arising from transferred financial assets. The amendments will affect particularly entities that sell, factor, securitise, lend or otherwise transfer financial assets to other parties. They are not expected to have any significant impact on the company’s disclosures. The company intends to apply the amendment from 1 July 2011.

vi) AASB 2010-8 Amendments to Australian Accounting Standards - Deferred Tax: Recovery of Underlying Assets (effective from 1 January 2012)

In December 2010, the AASB amended AASB 112 Income Taxes to provide a practical approach for measuring deferred tax liabilities and deferred tax assets when investment property is measured using the fair value model. AASB 112 requires the measurement of deferred tax assets or liabilities to reflect the tax consequences that would follow from the way management expects to recover or settle the carrying amount of the relevant assets or liabilities that is through use or through sale. The amendment introduces a rebuttable presumption that investment property which is measured at fair value is recovered entirely by sale. This amendment will not impact on the current operations of the company.

Note 2. Financial risk management

The Company’s activities expose it to a variety of financial risks; market risk (including currency risk and fair value interest rate risk), credit risk and liquidity risk. The Company’s overall risk management program focuses on the financial markets and seeks to minimise potential adverse effects on the Company’s financial performance.

Risk management is carried out by management and reviewed by the Audit and Risks Committee of the Board following policies approved by the Board of Directors. Management identifies and evaluates financial risk. The Board provides guidelines for overall risk management.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 2. Financial risk management (continued)

(a) Market risk

(i) Foreign exchange risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are determined in a currency that is not the Company’s functional currency.

The Company operates internationally and is exposed to foreign exchange risk, primarily the US dollar, arising from currency exposure. The level of exposure to foreign currency is not significant in the present operations of the Company; however, management will monitor the level of foreign exchange risk and employ hedging strategies if considered appropriate.

(ii) Price risk

The Company does not have a significant exposure to commodity price risks in respect of its hyperimmune product requirements. Management has already taken steps to negotiate contracts for future supplies that will remove any inherent risks associated with significant price movements in hyperimmune colostrum prices.

(iii) Cash flow and fair value interest rate risk The Company does not have any borrowings and therefore is not exposed to cash flow interest rate risk. Its main interest rate risk arises from the rate receivable from its cash equivalents. The risk associated with the amount of interest receivable is considered to be immaterial in the overall operations of the Company.

(b) Credit risk

The Company’s major ongoing customers are the large pharmaceutical companies for the distribution of Travelan and other Hyperimmune products and Government bodies for the receipt of R & D grants. The Company has a policy that limits the credit exposure to customers and regularly monitors its credit exposure.

An analysis of the carrying amount of financial assets that is impaired, together with those that are past due but not impaired, are set out in note 10 to the accounts.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. The Company regularly manage liquidity risk by monitoring forecast and actual cash flows. The Company does not have access to any borrowing facilities.

(1) Maturity of financial liabilities

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

2011 Non – interest bearing - trade payables - other payables 2010 Non – interest bearing - trade payables - other payables	less than 6 months $ 6-12 months $ Between 1 and 2 years $ Total $ 329,040 88 - 329,128 455,416 140,292 - 595,708
	784,456 140,380 - 924,836
	269,902 5,757 - 275,659 96,034 21,810 - 117,844
	365,936 27,567 - 393,503

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 2. Financial risk management (continued)

(d) Fair value estimation

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

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

Note 3. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(i) Inventories

Raw materials and stores inventories, as set out in note 11, include a provision for impairment amounting to $268,892 (2010 $295,423). This reduction of $26,531 arose from the realisation of certain inventories during the year and is included in the raw materials and consumables used amount of $216,641 (2010 $275,430) in the statement of comprehensive income. The carrying value of inventory held for the Travelan products was reviewed at 30 June, 2011 and no adjustment was required.

(ii) Share based payments

The value attributed to the options granted to the Chief Executive Officer in February 2011 under the terms of his consultancy agreement amounted to $27,675, of which $6,228 was expensed in the 2011 financial year. The values attributable to the options were determined in accordance with Accounting Policy note 1(n).

(iii) Intangibles

The Company has acquired certain intellectual property at a cost of $1,460,587. The realisation of the value attributed to this intangible asset will depend on the successful commercialisation of Immuron’s potential products. The Directors note that there is always significant risk involved in the commercialisation of such products. The guidance in AASB 136 Impairment of Assets has been followed to determine whether the intellectual property is impaired. This determination requires significant judgement. In making this judgement, the Company evaluates, amongst other factors, the initial success of clinical trials already conducted and a phase 2/b clinical trial planned to commence in the 2012 calendar year together with the likelihood that patents to support the acquired intellectual property will ultimately be issued, and the value realised through the sale of future products or sale of intellectual property.

Note 4.

Segment Information

(a) Description of segments

Management has determined that the business segments of research, development and commercialisation (R & D) and hyperimmune products are the main business segments used for internal reporting purposes to the Management Executive Team. Other items of income and expense not directly attributable to those two segments are disclosed as a corporate cost segment.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 4. Segment Information (continued)

(b) Segment information provided to the management executive team

2011 Segment revenue Revenue from external customers Interest revenue Grant income Total segment revenue Adjusted EBITDA (loss) Depreciation expense Loss on disposal of fixed assets Interest expense Income tax benefit Total segment assets Total assets includes: Investment in associates Additions to non- current assets Total segment liabilities 2010 Segment revenue Revenue from external customers Interest revenue Grant income Total segment revenue Adjusted EBITDA Depreciation expense Loss on disposal of fixed assets Income tax benefit Total segment assets Total assets includes: Investment in associates Additions to non- current assets Total segment liabilities	R & D $ Hyper Immune Products $ Corporate $ Total $
	- 213,951 31,334 245,285 - - 52,606 52,606 - - - -
	- 213,951 83,940 297,891
	(1,889,852) (2,690) (937,852) (2,830,394)
	- 886 18,961 19,847 - - 1,480 1,480 - - 3,735 3,735 213,899 - - 213,899 1,461,920 361,408 836,887 2,660,215
	- - 30 30 - - 18,197 18,197
	516,660 88,074 323,102 927,836

	- 416,035 45,855 461,890 - - 36,185 36,185 62,137 - - 62,137
	62,137 416,035 82,040 560,212
	(1,446,687) 123,741 (899,745) (2,222,691)
	- 1,550 37,798 39,348 - 243 243 263,732 - - 263,732 1,616,494 193,222 1,988,678 3,798,394
	- - 30 30 1,460,587 - - 1,460,587
	190,452 73,705 170,946 435,103

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 4. Segment Information (continued)

(c)

Other segment information

The Company is domiciled in Australia. The revenues from external customers were derived as follows:

Within Australia Outside Australia (d) Adjusted EBITDA	2011 $ 245,285 - 245,285	2010 $ 401,310 60,580
		461,890

A reconciliation of earnings before interest, tax, depreciation and amortisation (EBITDA) to net loss for the financial year from continuing operations is as follows:

EBITDA loss (2,830,394) (2,222,691) Interest revenue 52,606 36,185 Finance costs ( 3,735) (3,382) Depreciation and loss on disposal of fixed assets ( 21,327) ( 39,591) Amortisation of share option costs ( 6,228) (29,372) Write back of option costs from options reserve - 92,694 Loss for the year before income tax (2,809,078) (2,166,157) Note 5. Revenue From continuing operations Sales revenue Sale of goods 213,951 416,035 Other revenue Interest Rental and other income 52,606 31,334 36,185 45,855 297,891 498,075 Note 6. Other income Government research and development grants - 62,137 Nil 62,137 Government grants The following government grants were recognised as other income by the Company during the financial year: Department of Industry, Tourism & Resources - 14,797 Victorian Department of Innovation , Industry and Regional Development - 47,340 Nil 62,137	(2,830,394) 52,606 ( 3,735) ( 21,327) ( 6,228) -	(2,222,691) 36,185 (3,382) ( 39,591) (29,372) 92,694
	(2,809,078)	(2,166,157)
		416,035 36,185 45,855
		498,075
		62,137
		62,137
		62,137

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 7. Expenses The loss before income tax includes the following specific expenses: Cost of sales of goods Depreciation Loss on disposal of plant & office equipment Research, development and product commercialization expenditure Rental expense relating to operating leases – minimum payment Finance costs – interest paid Defined contribution superannuation expense Note 8. Income tax expense (a) The major components of income tax expense are: Current Income tax charge (benefit) Income tax charge (benefit) reported in the income statement (b) Numerical reconciliation of income tax expense to prima facie tax payable (Loss) from continuing operations before income tax Tax at the Australian tax rate of 30% (2010 - 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Research & development cash rebate Expenditure not allowable as a tax deduction Temporary differences not recognised Tax losses not recognised Income tax expense/(benefit) reported in the income statement (c ) Tax losses Gross unused tax losses for which no deferred tax asset has been recognised Potential tax benefit @30% (d) Unrecognised temporary differences Temporary differences relating to various expenses not tax deductible in the current year Unrecognised deferred tax asset relating to the above temporary differences @ 30%	2011 $ 216,641 19,847 1,480 1,889,852 35,000 3,735 28,886 (213,899) (213,899) (2,809,078) (842,723) (213,899) 2,681 4,782 835,260 (213,899) 18,739,376 5,621,813 1,209,857 362,957	2010 $ 275,430 39,348 243 1,456,585 103,408 3,382 41,022
		(263,732)
		(263,732)
		(2,166,157)
		(649,847) (263,732) 18,107 (3,870) 635,610
		(263,732)
		15,955,175 4,786,553 1,277,853 383,356

Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 30 June, 2011 because the Directors do not believe that it is appropriate to regard realising of the deferred tax assets as probable.

Similarly, future income tax benefits attributable to net temporary differences have not been brought to account, as the Directors do not regard the realisation of such benefits as probable.

The benefit for tax losses and net temporary differences will only be obtained if:

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 8. Income tax expense (continued)

(a) the Company derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions for the losses to be realised;
(b) the Company continues to comply with the conditions for deductibility imposed by the tax legislation; and
(c) no changes in tax legislation adversely affect the Company in realising the benefit from the deductions for the losses.

2011 $ Note 9. Cash & cash equivalents Cash at bank and on hand 750,814 Cash held on deposit - 750,814 Cash at bank interest rate at 30 June 2011 was 3.75% (2010 3.25%). The Company’s exposure to interest rate risk is discussed in note 2. Note 10. Current assets – Trade & other receivables Trade receivables Provision for impairment of receivables 37,094 (3,500) 33,594 All trade receivables are non-interest bearing.	2010 $ 882,224 1,000,000
	1,882,224
	156,629 (3,500) 153,129

(a) Impaired trade receivables

As at 30 June 2011 current trade receivables with a nominal value of $3,500 (2010 $3,500) were impaired. The amount of the provision was $3,500 (2010 $3,500). The ageing of the impaired receivables is as follows:

3 to 6 months Over 6 months Movements in the provision for impairment of receivables are as follows: Balance 1 July 2010 Provision for impairment recognised during the year Receivables written off during the year as uncollectible Balance 30 June 2011	- 3,500 3,500 3,500 - - 3,500	- 3,500
		3,500
		12,000 244 (8,744)
		3,500

The creation of the provision for impaired receivables has been included as an expense in determining the loss arising from continuing operations.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 10. Current assets – Trade & other receivables (continued)

(b) Past due but not impaired	2011	2010
	$	$
At 30 June 2011, trade receivables amounting to $28,161 (2010- $42,994)	were past due but not impaired. This amount
relates to customers who have had no recent history of default.
Up to 3 months	-	9,166
3 to 6 months	-	13,750
Over 6 months	28,161	20,078
	28,161	42,994

(c) Fair value and credit risk

Due to the short term nature of the receivables, their carrying amount is assumed to approximate their fair value. Refer to note 2 for more information on the risk management policy of the company.

Note 11. Current assets – Inventories Raw materials and stores – at net realisable value Work in progress – at cost Finished Goods – at net realisable value	249,300 41,600 - 290,900	19,017 2,638 912
		22,567

Write down of inventories to net realisable value recognised as an expense during the year ended 30 June 2011 amounted to $Nil- (2010 $Nil).

Refer to note 3(a) (i) for further details on the provision for impairment in determining the values applicable to raw materials and stores.

Inventory expense

Inventories recognised as expense in determining the loss for the year from ongoing operations for the year ended 30 June 2011 amounted to $216,641 (2010 - $275,430).

Note 12. Current assets – Other assets Prepayments Security bond Grant monies due Other debtors	41,880 6,417 - 47,830 96,127	194,807 6,417 47,340 -
		248,564

Risk exposure

Information about the Company’s exposure to credit risk is provided in notes 2 and 10.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 13. Non-current assets – Property plant and equipment

Year ended 30 June, 2011 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 30 June, 2011 - Cost - Accumulated depreciation Year ended 30 June 2010 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 30 June 2010 - Cost - Accumulated depreciation Net book amount	Plant and equipment Computer equipment Furniture & Fittings Total
	$ $ $ $
	15,110 1,345 14,837 31,292 - 18,197 - 18,197 - - (1,480) (1,480) (10,180) (6,585) (3,082) (19,847)
	4,930 12,957 10,275 28,162
	339,785 22,947 45,437 408,169 (334,855) (9,990) (35,162) (380,007)
	4,930 12,957 10,275 28,162
	47,600 5,069 18,214 70,883 - - (243) (243) (32,490) (3,724) (3,134) (39,348)
	15,110 1,345 14,837 31,292
	339,785 46,401 49,454 435,640 (324,675) (45,056) (34,617) (404,348)
	15,110 1,345 14,837 31,292

(a) Non-current assets pledged as security

The Company has not pledged any of its non-current assets as security.

Note 14. Intangible assets

Intellectual property, at cost	2011 $ 1,460,587	2010 $ 1,460,587

The intellectual property was acquired from Hadasit Medical Research Services & Development Limited. The consideration for the acquisition was the issue of 56,484,023 fully paid shares. Notes 1 (g), (l) ( iii ) and (3) ( iii) refer to the accounting policies adopted in considering if there has been any impairment in the value of this asset.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 15. Non-current assets – Investments accounted for using the equity method

Shares in subsidiary company – at cost Shares in associate – at cost	2011 $ 1 30 31	2010 $ 1 30
		31

(a) Shares in subsidiary company – Anadis ESP Pty Ltd

This company is a wholly owned subsidiary of Immuron Limited and was formed for the sole purpose to act as trustee for the Immuron Limited Executive Officer Share Plan Trust. All costs associated with the operations of this company are borne by Immuron Limited. Consolidated accounts have not been prepared as the net assets of Anadis ESP Pty Ltd are not material.

(b) Shares in Associate Company

This investment represents a 50% holding in Immuron Ltd, a company incorporated in Israel. The other 50% shareholder is Hadasit Medical Research Services & Development Ltd. The company was formed as a special purpose vehicle to apply for specific research grants. No grants have been obtained up to 30 June 2011.

Note 16. Current liabilities – Trade & other payables Trade payables 329,128 Other payables 595,708 924,836 Risk exposure Information on the Company’s risk exposure is contained in note 2. Note 17. Current liabilities - Provisions Current liabilities Employee benefits – long service leave 3,000 Amounts not expected to be settled within 12 months	275,659 117,844
	393,503
	39,500

The current provision for long service leave includes all unconditional entitlements where employees have completed the required period of service and also those where employees are entitled to pro-rata payments in certain circumstances. The entire amount is presented as current since the Company does not have an unconditional right to defer settlement. However, based on past experience, the Company does not expect all employees to take full account of accrued long service leave or require payment within the next 12 months.

The following amounts reflect leave that is not expected to be taken or paid within the next 12 months. Non-current liabilities Employee benefits – long service leave 2,100

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 18. Contributed equity

( a ) Issued and Paid Up Capital 2011 325,714,800 (2010: 311,051,948) ordinary shares fully paid $27,721,517 (b) Movements in ordinary share capital Date of Issue Number of Shares Issue Price Shares on Issue at 1 July 2009 144,569,108 21/08/2009 Shares issued for cash under shareholder share purchase plan 43,370,625 $0.03 27/08/2009 Shares issued to Hadasit Medical Research Services & Development Limited in accordance with the Acquisition and Licence Agreement 46,966,139 $0.0259 1/09/2009 Shares issued for cash 3,600,000 $0.0494 8/09/2009 Shares issued for cash 34,200,000 $0.025 Shares Issued to Directors in lieu of Directors fees 337,500 $0.03 Shares issued to Hadasit Medical Research Services & Development Limited in accordance with the Deed of Variation 8,745,625 $0.0259 14/01/2010 Shares issued for cash 4,545,455 $0.055 Shares issued to Hadasit Medical Research Services & Development Limited in accordance with the Deed of Variation 772,259 $0.0259 Shares issued to Director in lieu of Directors fees 60,729 $0.0741 28/01/2010 Shares issued for cash 275,000 $0.055 Shares and options issued for cash 950,000 $0.08892 Value of options issued transferred to options reserve Shares issued under Immuron Executive Share Plan 400,000 $0.08892 11/05/2010 Shares issued to Directors in lieu of Directors fees 79,291 $0.0804 22/06/2010 Shares issued for cash under shareholder share purchase plan 10,636,702 $0.065 30/06/2010 Shares issued for cash 11,477,168 $0.065 Shares issued to consultant in lieu of consultants fees 23,077 $0.065 30/06/2010 Shares issued to Director in lieu of Directors fees 43,270 $0.065 Less costs associated with issuing shares Shares on Issue at 30 June 2010 311,051,948 02/07/2010 Shares issued for cash 2,523,076 $0.065 02/08/2010 Shares issued for cash 843,142 $0.065 18/02/2011 Issued to consultants in lieu of fees 465,952 $0.0696 Issued to Chief Executive Officer 500,000 $0.072 13/05/2011 Shares and options issued for cash 7,877,143 $0.07 Value of options issued transferred to options reserve Issued to consultants in lieu of fees 301,643 $0.07 Shares issued to Directors in lieu of Directors fees 131,257 $0.07	2010 $26,964,091
	$ 21,458,898 1,301,119 1,214,470 177,811 855,000 10,125 226,148 250,000 19,969 4,500 15,125 84,474 (8,716) 35,568 6,375 691,387 746,016 1,500 2,813 (128,491)
	26,964,091
	164,000 54,804 32,413 36,000 551,400 (160,757) 21,115 9,188

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 18. Contributed equity (continued)

Shares issued to staff 28/06/2011 Shares and options issued for cash Value of options issued transferred to options reserve Issued to consultant in lieu of fees Less costs associated with issuing shares Shares on issue at 30 June 2011	14,285 $0.07 1,976,354 $0.07 30,000 $0.07 325,714,800	1,000 138,345 (39,856) 2,100 (52,326)
		27,721,517

(c) 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 amount paid on the shares held.

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

(c) Options

Details of the options outstanding at 30 June 2011 are as follows:

Date options granted 28 January 2010 18 February 2011 18 February 2011 31 May 2011 30 June 2011	Number under option 237,500 500,000 750,000 2,657,144 658,785 4,803,429	Exercise price $ $0.08892 $0.085 $0.0945 $0.10 $0.10	Expiry date
			19 July 2011 31 January 2012 31 May 2013 31 May 2012 30 June 2012

The options due to be exercised on 19 July 2011 were not exercised and lapsed.

Information relating to the employees options issued, exercised and lapsed during the financial year, together with options outstanding at the end of the financial year, is set out in Note 26

(e) Cancelled Shares

No shares were cancelled in the current or previous year.

(f) Share buy-back

There is no current on-market buy-back.

(g) Employee share plan

Information relating to the employee share plans, including details of shares issued under the plans is set out in note 26.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 19. Reserves and accumulated losses

(a) Reserves Share-based payments reserve Movements: Balance 1 July 2010 Value attributable to options attaching to shares Option expense options issued to consultants and former employees write back of employee option costs that had been expensed in prior years. Balance 30 June 2011 (b) Accumulated losses Movements in accumulated losses were as follows: Balance 1 July 2010 Net loss for the year Balance 30 June 2011 Nature and purpose of reserves	2011 $ 595,207 388,366 200,613 6,228 - 595,207 (23,989,166) (2,595,179) (26,584,345)	2010 $ 388,366
		442,972 8,716 29,372 (92,694)
		388,366
		(22,086,741) (1,902,425)
		(23,989,166)

Share-based payments reserve

The share-based payments reserve is used to recognise the fair value of options issued to employees, contractors and investors, but not exercised.

Note 20. Key management personnel disclosures

(a) Directors

The following persons were Directors of Immuron Limited during the financial year:

Non-executive Chairman –Professor C Chapman Non-executive directors

Professor R Robins-Browne S Sallka Dr E Zelcer

(b) Other key management personnel

The following persons were the executives with the greatest authority and responsibility for planning, directing and controlling the activities of the Company, directly or indirectly, during the financial year:

Name Position Joe Baini Chief Executive Officer Amos Meltzer Vice President Business Development Dr Grant Rawlin Chief Scientific Officer Graeme Stevens Company Secretary and Chief Financial Officer

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 20. Key management personnel disclosures (continued)

(c) Key management personnel compensation

Short-term employee benefits Post-employment benefits Share based payments Long-term benefits	2011 $ 701,850 12,619 71,141 - 785,610	2010 $ 397,026 21,389 35,568 6,328
		460,311

Detailed remuneration disclosures are provided in sections A-C of the remuneration report on pages 6 to 11.

(d) Equity instrument disclosures relating to key management personnel

(i) Options provided as remuneration and shares issued on exercise of such options

Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the options, can be found in section D of the Remuneration Report on pages 11 to 13.

Option holdings

The following options were issued over ordinary shares in the Company to key management personnel, including their personally related parties, during the 2011 financial year.

The number of options over ordinary shares in the Company held during the year by a former Director of the Company and current and former other key management personnel of the Company, including their personally related parties, are set out below.

2011 Name Former Director Dr Z Rosenberg Current and Joe Baini Dr O Fuerst	Balance at the start of the year Granted during the year as remuneration Exercised during the year Other changes during the year (lapsed) Balance at the end of the year Vested and exercisable at the end of the year Not vested at end of the year
	4,913,370 - - (4,913,370) - - -
	former key management personnel - 1,250,000 - - 1,250,000 1,250,000 - 4,913,370 - - (4,913,370) - - -

2010 Former director

Dr Z
Rosenberg	4,913,370	-	-	-	4,913,370	4,913,370	-
Former other	key management	personnel
Dr O Fuerst	4,913,370	-	-	-	4,913,370	4,913,370	-

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 20. Key management personnel disclosures (continued)

Shareholdings

The number of shares in the Company held (either directly, indirectly or beneficially) during the year by each director of the Company, and other key management personnel, including their personally related parties, are set out below. ( * includes: spouses, relatives of the individual, spouses of the relatives and any entity under the joint or several control or significant influence of the individual, relatives of the individual or spouses of the relatives).

2011 Name	Balance at the start of the year Received during the year on the exercise of options	Other changes during the year Balance at the end of the year
Directors C Chapman 1,148,823 - R Robins-Browne 401,035 - S Sallka 1,444,211 - E Zelcer 66,591 - Other key management personnel Joe Baini (1) - - Amos Meltzer - - Dr Grant Rawlin 1,283,643 - Graeme Stevens 2,257,142 - 1. Appointed Chief Executive Office on 17 January 2011. 2010 Directors Z Rosenberg (1) 805,000 - A Nudel (2) 6,873,427 - R Robins-Browne 178,395 - C Chapman S Sallka 730,638 1,109,071 - - E Zelcer (3) - - Other key management personnel Dr Grant Rawlin 711,440 - Graeme Stevens 484,170 -	1,148,823 - 401,035 - 1,444,211 - 66,591 -	131,257 1,280,080 - 401,035 - 1,444,211 - 66,591 500,000 500,000 417,342 417,342 - 1,283,643 55,639 2,312,781
		(805,000) Nil (6,873,427) Nil 222,640 401,035 418,185 335,140 1,148,823 1,444,211 66,591 66,591 572,203 1,283,643 1,772,972 2,257,142

Resigned as a Director on 17 July 2009.
Resigned as a Director on 23 March 2010. 3. Appointed a Director on 19 November 2009.

(e) Loans to key management personnel.

There are no loans to any director or other key management personnel, including their personally related parties (2010 - Nil).

(f) Superannuation commitments

All employees are entitled to various levels of benefits on retirement, disability or death. The superannuation plans are accumulation plans. The Company contributes a percentage of the directors’ fees and salaries of employees to the superannuation plans.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 20. Key management personnel disclosures (continued)

(g) Other transactions with key management personnel

There are no other transactions with Directors or other key management personnel except the following:

Shares were also issued to the following Director in lieu of Director’s fees during the year: o Professor Colin Chapman - 131,257 shares at a total cost of $9,188
Other key management personnel acquired the following shares in the Company during the year:
Joe Baini issued 500,000 shares at $0.072 per share upon his appointment as Chief Executive Officer.
o Amos Meltzer issued 417,342 shares in lieu of payment of consultant’s fees amounting to $28,913. º Graeme Stevens and related parties acquired 55,639 shares through on market purchases.

Note 21. Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the Company: Audit services Fees paid to PricewaterhouseCoopers Australian firm: Audit and review of financial reports and other audit work under the_Corporations Act 2001_ Total remuneration for audit services	2011 $ 75,000 75,000	2010 $ 69,000
		69,000

The Company’s policy on the engagement of auditors is set out in the Corporate Governance Statement (Principle 4) in this Report.

Note 22. Commitments and Contingencies

Lease commitments not recognised in the financial statements Within one year Later than one year but not more than five years Later than five years	5,834 - - 5,834	35,004 5,834 -
		40,838

The key points of the lease are:

(i) Term – The lease terminated in August 2011 and a new lease entered into for three years to August 2014 at an annual rental of $43,255 with annual increases of 3% from August 2012.
(ii) Transferable – Immuron can assign the lease with the consent of the landlord, which consent will not be unreasonably withheld.

(d) Other commitments

The Company has a commitment to pay consulting fees to Professor Yaron Ilan (the Company’s Medical Director) in accordance with a consultancy agreement. The agreement commenced in September 2009 and is for a maximum period of three years at a monthly fee of $US5000 per month. The maximum future commitment under this agreement is $A66,500 ($US70, 000). The agreement can be terminated by providing one month’s notice.

(e) Contingent liability $ 142,016

The Company has received grant funds totalling $142,016 from the State Government of Victoria under the terms of the Vistec Grant. Under the terms of the grant agreement, the Company has the obligation to repay the grant monies received upon the receipt of any funds from the commercial exploitation of the technology developed under the grant project. Therefore, a contingent liability exists in respect of the amount up to $142,016 if the Company receives any future proceeds from the commercialisation of the grant technology of the same amount.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 23. Events occurring after balance sheet date

Subsequent to 30 June 2011 the following significant events have occurred:

 The Company has issued 7,380,000 fully paid ordinary shares for cash together with 2,460,460 options. The options expire on 31 August 2012 and may be converted into ordinary shares by the payment of $0.10 per option. The funds raised net of issue costs amounted to $485,604 Note 24. Reconciliation of net cash outflow from operating activities to loss after income tax 2011 2010 $ $ Loss for the year (2,595,179) (1,902,425) Depreciation and amortisation 21,327 39,591 Increase /(decrease) in share based payment reserve (63,322) Increase in share based payment equity 108,042 60,882 Change in operating assets & liabilities: Decrease/(Increase) in inventories (268,333) 73,809 Decrease/(Increase) in debtors and prepayments 271,972 (225,624) (Decrease)/Increase in trade and other payables 560,635 (319,888) Increase/(Decrease) in other liabilities - 70,865 (Decrease)/Increase in employee benefits provisions (67,900) 6,225 Net cash (outflow) from operating activities (1,969,436) (2,259,887) Note 25. Earnings Per Share 2011 2010 Cents Cents (a) Basic earnings per share Loss from continuing operations attributable to the ordinary equity holders of the company (0.82) (0.73) (b) Diluted earnings per share Loss from continuing operations attributable to the ordinary equity holders of the company (0.82) (0.73) (c) Reconciliation of earnings used in calculating earnings per share Basic earnings per share Loss for year attributable to members of Immuron Limited (2,595,179) (1,902,425) (2,595,179) (1,902,425) There are no reconciling items to the above two loss amounts in calculating the earnings per share. (d) Weighted average number of shares used as the denominator 2011 2010 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 315,683,833 263,066,911 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 315,683,833 263,066,911	 The Company has issued 7,380,000 fully paid ordinary shares for cash together with 2,460,460 options. The options expire on 31 August 2012 and may be converted into ordinary shares by the payment of $0.10 per option. The funds raised net of issue costs amounted to $485,604 Note 24. Reconciliation of net cash outflow from operating activities to loss after income tax 2011 2010 $ $ Loss for the year (2,595,179) (1,902,425) Depreciation and amortisation 21,327 39,591 Increase /(decrease) in share based payment reserve (63,322) Increase in share based payment equity 108,042 60,882 Change in operating assets & liabilities: Decrease/(Increase) in inventories (268,333) 73,809 Decrease/(Increase) in debtors and prepayments 271,972 (225,624) (Decrease)/Increase in trade and other payables 560,635 (319,888) Increase/(Decrease) in other liabilities - 70,865 (Decrease)/Increase in employee benefits provisions (67,900) 6,225 Net cash (outflow) from operating activities (1,969,436) (2,259,887) Note 25. Earnings Per Share 2011 2010 Cents Cents (a) Basic earnings per share Loss from continuing operations attributable to the ordinary equity holders of the company (0.82) (0.73) (b) Diluted earnings per share Loss from continuing operations attributable to the ordinary equity holders of the company (0.82) (0.73) (c) Reconciliation of earnings used in calculating earnings per share Basic earnings per share Loss for year attributable to members of Immuron Limited (2,595,179) (1,902,425) (2,595,179) (1,902,425) There are no reconciling items to the above two loss amounts in calculating the earnings per share. (d) Weighted average number of shares used as the denominator 2011 2010 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 315,683,833 263,066,911 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 315,683,833 263,066,911	 The Company has issued 7,380,000 fully paid ordinary shares for cash together with 2,460,460 options. The options expire on 31 August 2012 and may be converted into ordinary shares by the payment of $0.10 per option. The funds raised net of issue costs amounted to $485,604 Note 24. Reconciliation of net cash outflow from operating activities to loss after income tax 2011 2010 $ $ Loss for the year (2,595,179) (1,902,425) Depreciation and amortisation 21,327 39,591 Increase /(decrease) in share based payment reserve (63,322) Increase in share based payment equity 108,042 60,882 Change in operating assets & liabilities: Decrease/(Increase) in inventories (268,333) 73,809 Decrease/(Increase) in debtors and prepayments 271,972 (225,624) (Decrease)/Increase in trade and other payables 560,635 (319,888) Increase/(Decrease) in other liabilities - 70,865 (Decrease)/Increase in employee benefits provisions (67,900) 6,225 Net cash (outflow) from operating activities (1,969,436) (2,259,887) Note 25. Earnings Per Share 2011 2010 Cents Cents (a) Basic earnings per share Loss from continuing operations attributable to the ordinary equity holders of the company (0.82) (0.73) (b) Diluted earnings per share Loss from continuing operations attributable to the ordinary equity holders of the company (0.82) (0.73) (c) Reconciliation of earnings used in calculating earnings per share Basic earnings per share Loss for year attributable to members of Immuron Limited (2,595,179) (1,902,425) (2,595,179) (1,902,425) There are no reconciling items to the above two loss amounts in calculating the earnings per share. (d) Weighted average number of shares used as the denominator 2011 2010 Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 315,683,833 263,066,911 Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating diluted earnings per share 315,683,833 263,066,911
		(2,259,887)
		2010 Cents (0.73) (0.73) (1,902,425)
	(2,595,179)	(1,902,425)
		2010 263,066,911 263,066,911

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 25. Earnings Per Share (continued)

(e) Information concerning the classification of securities

Options

Options that have been granted are considered to be potential ordinary shares, however their conversion to ordinary shares does not increase the loss per share, as such the options are not dilutive and have not been included in the determination of diluted earnings per share. The options have not been included in the determination of basic earnings per share.

Note 26. Share based payments

(a) Directors and employee option plans

As at 30 June 2011 there are no current option plans for the issue of options to Directors and/or employees.

Other than options that had been granted to the Chief Executive Officer under the terms of his consulting agreement, there are no other outstanding options that had been previously granted to Directors or employees.

A summary of the current options issued to the Chief executive Officer and to former senior employees under the terms of their employment agreements are set out below.

Date granted Expiry date Exercise price $ 1/10/2007 01/10/2010 0.33 1/102007 01/10/2010 0.43 18/02/2011 31/01/2012 0.085 18/02/2011 31/05/2013 0.0945 Total Weighted average exercise price:	Balance at start of the year Number Granted during the year Number Exercised during the year Number Forfeited during the year Number Balance at the end of the year Number Vested & Exercisable at end of the year Number 4,913,370 - - 4,913,370 - - 4,913,370 - - 4,913,370 - - - 500,000 - - 500,000 500,000 - 750,000 - - 750,000 750,000
	9,826,740 1,250,000 - 9,826,740 1,250,000 1,250,000
	$0.38 $0.091 $0.091

Date
granted
Expiry
date
Exercise
price
$
1/10/2007
01/10/2010
0.33
1/102007
01/10/2010
0.43
18/02/2011
31/01/2012
0.085
18/02/2011
31/05/2013
0.0945
Total
Weighted average exercise price:

Balance
at start
of the
year
Number
Granted
during
the year
Number
Exercised
during
the year
Number
Forfeited
during the
year
Number
Balance at
the end of
the year
Number
Vested &
Exercisable
at end of
the year
Number
4,913,370
-
-
4,913,370
-
-
4,913,370
-
-
4,913,370
-
-
-
500,000
-
-
500,000
500,000
-
750,000
-
-
750,000
750,000

9,826,740
1,250,000
-
9,826,740
1,250,000
1,250,000

$0.38
$0.091
$0.091

The weighted average remaining contractual life of options outstanding at 30 June 2011 is 1.56 years (2010 – 0.25 years)

Other than the options granted to the Chief Executive Officer upon his appointment on 17 January 2011, as set out in note 20, no other staff options were issued during the 2011 financial year (2010 Nil).

Fair value of options granted

The assessed fair value at grant date when options are issued is determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, and the risk free interest rate for the term of the option. The model inputs for options granted during the year ended 30 June 2011 included:

a) Share price at grant date $0.07 and $0.08
b) Expected price volatility of the Company’s shares – 70%
c) Risk-free interest- 4.75%

For further details relating to options granted, refer to the Remuneration Report on page 12.

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 26. Share based payments (continued)

(b) Employees share plan.

A Plan under which shares may be issued by the Company to employees for no cash consideration was approved by the Board on 12 December, 2006. All permanent employees (excluding executive directors) who have been continuously employed by the Company for a period of at least one year are eligible to participate in the Plan. Employees may elect not to participate in the Plan.

Under the Plan, eligible employees may be granted up to $1,000 worth of fully paid ordinary shares in Immuron Limited annually for no cash consideration. The market value of the shares issued under the scheme, measured as the weighted average price, at which the Company’s shares are traded on the Australian Stock Exchange during the week leading up to and including the date of grant, is recognised as part of employee benefit costs in the period the shares are granted. Offers under the Plan are at the discretion of the Company. Shares issued under the scheme may not be sold

until the earlier of three years after issue or cessation of employment with the Company. In all other respects the shares rank equally with other fully-paid ordinary shares on issue.

Shares issued under the Plan were 14,185 fully paid ordinary shares at an issue price of $0.07 per share	2011 1,000	2010 Nil

(c) Executive officer share plan.

The Company operates the Immuron Limited Executive Officer Share Plan (Plan). The Plan may involve the Company providing financial assistance for the purchase of its own shares in that no eligible employees are required to pay application monies for the shares issued. Shares issued under this Plan are held in the name of a trustee on behalf of the eligible employees. A wholly owned subsidiary company, Anadis ESP Pty Ltd, was established for the sole purpose to act as the trustee under the Plan.

A brief summary of the Plan is as follows:

(ii) The Plan is available to all senior employees and Directors, both executive and non-executive, of Immuron Limited.
(ii) Eligible employees will be offered ordinary shares in the Company to be subscribed for, or acquired by, the trustee on behalf of the employee. Shares held by the trustee for employees will be restricted shares in that the shares will not be transferred into the name of the employee until the earlier of, 10 years from date of issue, or the employee terminates their employment with the Company.
(iii) The shares issued under the Plan will rank equally with all other ordinary shares in the Company and are entitled to receive dividends and vote at general meetings of members.
(iv) No application monies are payable for shares issued under the Plan, unless the Board determine otherwise.

During the 2011 financial year no shares were issued to senior employees in accordance with the terms of the plan, (2010 400,000 shares, at a cost of $35,368). No shares were issued to Directors under the terms of this plan in the 2011 and 2010 financial years.

(d) Other shares issued during the 2011 financial year in lieu of payments to consultants were as follows.

Date of issue Issue price per share cents Shares issued to consultants in lieu of consulting fees were as follows: Issued to Chief Executive Officer 18 February 2011 7.20 Issued to other consultants 18 February 2011 6.96 13 May 2011 7.00 28 June 2011 7.00	Number 500,000 465,952 301,643 30,000 1,297,595	Total value $ 36,000 32,412 21,115 2,100
		91,627

Immuron Limited Notes to the Financial Statements 30 June 2011

Note 26. Share based payments (continued)

The shares issued to consultants in lieu of cash payments in the 2010 financial year amounted to 23, 077 shares at a total value of $1,500.

(e) Expenses arising from share-based payment transactions.

Total expenses arising from share-based payment transactions recognised during the year as part of the following expenses are as follows:

Employee benefits expense Directors’ fees Research and product commercialisation Consultants	2011 $ 7,228 9,188 49,026 42,600 108,042	2010 $ (45,538) 13,688 1,500 17,784
		(12,566)

In the 2010 financial year the negative employee benefits expense of $45,538 is due to the write back of amortised option costs amounting to $92,694 from the options reserve.

Note 27. Related party transactions

Key management personnel

Disclosures relating to key management personnel are set out in Note 20.

There are no other related party transactions loans or outstanding balances.

Directors’ Declaration for the year ended 30 June 2011.

In the direct o rs’ opinion:

(a) the fi n ancial state m ents and not e s set out on p ages 21 to 50 are in accordance with the Corporation s Act 2001 inclu d ing: (i) complying wi t h Accounting Standards, t h e Corporatio n s Regulatio n s 2001 and o t her mandato r y profession a l r e porting requ i rements; and
(ii) g iving a true a nd fair view o f the Compa n y’s financial position as a t 30 June 201 1 and of its p e rformance fo r the f inancial year ended on tha t date; and

(b) there are reasonabl e grounds to b elieve that t h e Company w ill be able to pay its debts a s and when t hey become d ue and p a yable.

Note 1(a) co n firms that th e financial st a tements also c omply with t he Internatio n al Financial R eporting St a ndards as iss u ed by the Inter n ational Acco u nting Standa r ds Board.

The director s have been g i ven the decl a rations by th e Chief Executive Officer a n d the Chief F inancial Officer as required by section 295 A of the Corp o rations Act 2001 .

This declara t ion is made i n accordance with a resolu t ion of the dir e ctors.

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C B Chapman S Sallka Director Director

Melbourne

28 September 2011.

5 1

PricewaterhouseCoopers ABN 52 780 433 757

Independent auditor’s report to the members of Immuron Limited

Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331 MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999 www.pwc.com/au

Report on the financial report

We have audited the accompanying financial report of Immuron Limited (the company), which comprises the balance sheet as at 30 June 2011, the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration.

Directors’ responsibility for the financial report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that is free from material misstatement, whether due to fraud or error. In Note1, the directors also state, in accordance with Accounting Standard 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 Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

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

Independence

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

Liability limited by a scheme approved under Professional Standards Legislation

Independent auditor’s report to the members of Immuron Limited (continued)

Auditor’s opinion

In our opinion:

(a) the financial report of Immuron Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the company’s financial position as at 30 June 2011 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
(b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1.

Material Uncertainty Regarding Continuation as a Going Concern

Without qualifying our opinion, we draw attention to Note 1 in the financial report. Note 1 comments on the company being dependent on commercialisation of its research and development projects and further investment by investors. These conditions, along with other matters as set forth in Note 1, indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern, and therefore the entity may be unable to realise its assets and discharge its liabilities in the normal course of business and at the amounts stated in the financial report.

Report on the Remuneration Report

We have audited the remuneration report included in pages 6 to 13 of the directors’ report for the year ended 30 June 2011. 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 Immuron Limited for the year ended 30 June 2011, complies with section 300A of the Corporations Act 2001 .

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PricewaterhouseCoopers

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Lisa Harker Partner

Melbourne 28 September 2011

Immuron Limited Additional ASX Information

Additional information required by the Australian Stock Exchange not shown elsewhere in this report is as follows. The information was applicable at 31 August, 2011.

a) Distribution of equity securities

Analysis of numbers of equity security holders by size of holding

1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over	Class of equity Shares 94 366 276 676 447	Class of equity Shares 94 366 276 676 447	security Options - 1 - 18 13
		1,859	32

There were 539 holders of less than a marketable parcel of ordinary shares.

b) Equity security holders

Twenty largest quoted equity security holders

The names of the twenty largest holders of fully paid ordinary shares at 31 August are listed below:

Hadasit Medical Research Services & Development Limited Capital Concerns Pty Ltd ( Logue Family Super Fund A/C) Drill Investments Pty Ltd Alaven Consumer Healthcare Inc Mr James Barry Drill & Mrs Elizabeth Curtis Drill Rakio Pty Ltd (Piekarski Footscray A/C) Hallam Drainage Pty Ltd Mark Henry Coombe-Tennant David Hamilton Blau Holdings Pty Ltd ( Blau Holdings Property A/C) Samuel Cyril Driver & Joanne Leonie Driver (SC Driver Super Fund A/C) Dr Kuen Seng Chan Tzar Superannuation Nominees Pty Ltd Mrs Kimberley Mustow (The MFT No 1 Family A/C) Mr Ali Salko Salmon Investments Pty Limited (Salmon Investments A/C) Mr Peter McClure & Mrs Denise McClure (Peter McClure S/F A/C) Tatura Milk Industries Limited Mrs Maria Lorandi Suburban Holdings Pty Ltd (The Suburban Super Fund A/C)	Number held Percentage of Issued Shares 56,484,023 16.96 14,627,723 4.39 13,300,000 3.99 9,017,229 2.71 8,700,000 2.61 5,750,168 1.73 5,700,000 1.71 5,670,000 1.71 4,795,043 1.44 4,740,000 1.42 2,994,640 0.90 2,272,621 0.68 2,153,846 0.65 2,147,244 0.64 2,050,718 1.62 2,028,255 0.61 2,000,000 0.60 2,000,000 0.60 1,898,846 0.57 2,520,455 0.54
	150,160,811 45.08%

Hadasit Medical Research Services & Development Limited
Capital Concerns Pty Ltd ( Logue Family Super Fund A/C)
Drill Investments Pty Ltd
Alaven Consumer Healthcare Inc
Mr James Barry Drill & Mrs Elizabeth Curtis Drill
Rakio Pty Ltd (Piekarski Footscray A/C)
Hallam Drainage Pty Ltd
Mark Henry Coombe-Tennant
David Hamilton
Blau Holdings Pty Ltd ( Blau Holdings Property A/C)
Samuel Cyril Driver & Joanne Leonie Driver (SC Driver Super Fund A/C)
Dr Kuen Seng Chan
Tzar Superannuation Nominees Pty Ltd
Mrs Kimberley Mustow (The MFT No 1 Family A/C)
Mr Ali Salko
Salmon Investments Pty Limited (Salmon Investments A/C)
Mr Peter McClure & Mrs Denise McClure (Peter McClure S/F A/C)
Tatura Milk Industries Limited
Mrs Maria Lorandi
Suburban Holdings Pty Ltd (The Suburban Super Fund A/C)

Number held
Percentage of
Issued Shares
56,484,023
16.96
14,627,723
4.39
13,300,000
3.99
9,017,229
2.71
8,700,000
2.61
5,750,168
1.73
5,700,000
1.71
5,670,000
1.71
4,795,043
1.44
4,740,000
1.42
2,994,640
0.90
2,272,621
0.68
2,153,846
0.65
2,147,244
0.64
2,050,718
1.62
2,028,255
0.61
2,000,000
0.60
2,000,000
0.60
1,898,846
0.57
2,520,455
0.54

150,160,811
45.08%

c) Voting rights

All ordinary shares carry one vote per share without restriction.

d) Unquoted equity securities	Number on	Number of
	issue	holders
Options issued to take up ordinary shares	7,025,929	32
The names of the twenty largest holders of unquoted options at 31 August are listed below:
		% of options
	Number held	held
James Barry Drill and Elizabeth Curtis Drill	2,233,333	31.79%
eXec Factor Pty Ltd	1,250,000	17.79%
Anne Runhardt	476,190	6.78%
Drill Investments Pty Ltd	333,333	4.74%
Kroeger Enterprises Pty Ltd	285,714	4.07%
RBC Dexia Investor Services Australia Nominees Pty Ltd	266,667	3.80%
Dr Jamie Daniel Taylor	238,096	3.39%
Thomas Richard O’Brien	238.095	3.39%
Elect Equity Pty Limited	166,667	2.37%
Peter McClure and Denise McClure	166,667	2.37%
Roger George Davis	133,333	1.90%
Maria Lorandi	133,333	1.90%
Carole Saikaly	114,286	1.63%
A S Munn (Consultants) Pty Ltd	100,000	1.42%
Pumpa Holdings Pty Ltd ( RGT Superannuation Fund A/C)	100,000	1.42%
Francis Alan Hutchinson	73,333	1.04%
Robert Oliphant	71,429	1.02%
Peter James Bolton & James Andrew Sloan Bolton	66,667	0.95%
Chris Roberts Enterprises Pty Ltd	66,667	0.95%
George Roksandic	66,667	0.95%
	6,580,477	93.66%

e) Substantial holders

Substantial holders in the Company are set out below:
	Number held	Percentage
Ordinary Shares
Hadasit Medical Research Services & Development Limited	56,484,023	16.96%
Drill Investments Pty Ltd & J B Drill & EC Drill	22,000,000	6.60%

AI assistant

Immuron Ltd — Annual Report 2011

35121_rns_2011-09-28_d8cbb81a-3d98-4e24-96ca-3c764657a695.pdf

Immuron Limited Directors’ Report

Directors

Principal activities

Operating results and dividends

Review of operations and results

Revenue

Expenses

Significant changes in the state of affairs

Matters subsequent to the end of the financial year

Likely developments and expected results of operations

Environmental regulation

Information on Directors

Professor Colin Chapman B Pharm B VSc (Hons) PhD FPS.

Appointed an Independent Director - 18 June 2008. Appointed Chairman - 17 December 2008.

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options

Professor Roy Robins-Browne MB, BCh, PhD, FRCPA, FRCPath, FASM .

Independent non-executive director

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options

Simon Sallka B.Bus (Econ.) Dip.SIA Dip. BA ISFA

Independent non-executive Director.

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options

Dr. Elane Zelcer BSc (Hons), PhD, Grad Dip Mktg, FAICD

Experience and expertise

Immuron Limited Directors’ Report

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options

Graeme Stevens

Meetings of directors

Remuneration report

A. Principles used to determine the nature and amount of remuneration

Immuron Limited Directors’ Report

Non-executive Directors

Directors' fees

Retirement allowances for Directors

Executive pay

Base pay

Retirement benefits

Executive Officer Share Plan and Executive Share Option Plan

Incentive Bonus

B. Details of remuneration

Amounts of remuneration

Share based payments

Non- executive Directors

Key management personnel and other executives of the Company

Additional information in respect of options

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

C. Service agreements

Joe Baini – Chief Executive Officer

Immuron Limited Directors’ Report

Amos Meltzer – Vice President Business Development

Dr. G Rawlin B Sc (Vet) (Hons) B VSc - Chief Scientific Officer

Graeme Stevens

Company Secretary and Chief Financial Officer .

D. Share-based compensation

Immuron Limited Directors’ Report

(b) Executive Officer Share Plan

(c) Executive Share Option Plan (ESOP)

( d) Options

Immuron Limited Directors’ Report

E

Additional information

Loans to directors and executives.

Shares under options

Immuron Ltd Annual Report 2011