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Annual Report 2012

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Contents	Page
Company Particulars	2
Directors’ and Remuneration Reports	3
Auditor’s Independence Declaration	17
Corporate Governance Statement	18
Financial report
Statement of Comprehensive Income	23
Balance Sheet	24
Statement of Changes in Equity	25
Statement of Cash flows	26
Notes to the Financial Statements	27
Directors’ Declaration	59
Independent Auditor’s Report to the Members	60
Additional ASX Information	62

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

Immuron Limited Company Particulars

Directors Chairman Professor Colin Chapman Non-Executive Directors Dr Elane Zelcer Dr Stewart Washer Dr Roger Aston Executive Director Joseph Baini 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 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 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 Options expiring 15 December 2013 – IMCO Options expiring 30 April 2015 - IMCOA Website Address www.immuron.com

Immuron Limited Directors’ Report

Your directors present their report on Immuron Limited for the year ended 30 June 2012.

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 (Resigned 7 February 2012) Simon Sallka (Resigned 7 February 2012)

Dr Elane Zelcer Dr Stewart Washer (Appointed 7 February 2012) Dr Roger Aston (Appointed 25 May 2012) Joseph Baini (Appointed 25 May 2012)

Principal activities

Immuron Limited is a 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 2012 was $2,297,520 (2011: $2,595,179) and the net cash outflows from operating activities for the same period was $2,462,659 (2011: $1,969,436).

.No dividends were paid or declared during the period.

Review of operations and results

During the 2012 financial year the Company’s focus was directed towards achieving the following objectives:

Travelan: increasing sales of Travelan through distribution agreements with significant partners for overseas markets.
In November 2011, Immuron received its first upfront licence fee of $480,215 ($CAD500,000) from Paladin Labs Inc. for an initial 15 year licence for the territories of Canada, Latin America and a number of subSaharan African countries.

In addition there was a significant increase in the revenues from Travelan sales in Australia with a volume increase of 112%, with a similar increase in revenues. There were no export sales in the current year.

Based on the current launch program for Travelan in Canada, revenues from first export sales to Paladin Labs Inc. are expected in the March 2013 quarter.

We are also anticipating that first orders for Travelan will be received in the March 2013 quarter from a number of the South Eastern Asian companies with whom we finalised distribution agreements during the current year.

NASH: obtaining FDA clearance for an IND (investigational new drug) enabling the Company to commence its Phase IIb clinical trial for its NASH product, IMM124E, once funds are available through a partnership and/ or strategic investor.
Initial planning for the Phase 11b trial has been completed; the trial will only commence when sufficient funds become available. Based on the proposed protocol for the trial, the cost is estimated to be $4.5M TO $5.0M.
Continuing the development of the influenza and Clostridium difficile products. While the main focus of product development during the current period was NASH, we continued our influenza and Clostridium difficile programs with our partners, University of Melbourne and Monash University respectively. Both projects are being conducted with Federal Government grants provided to the respective Universities with a small financial commitment required from the Company.
Controlling expenditures in respect of R & D costs incurred by our collaboration partners. A number of development projects being conducted at Hadassah Medical Center by our Medical Director, Professor Yaron Ilan, were put on hold.

The Company continued to engage the advisory services of the New York based firm, Roberts Mitani LLC to assist with identification and introductions to potential partners for the NASH/fatty liver product and Travelan. This firm specialises in the biotech sector and was instrumental in introducing and assisting with the Paladin licence transaction. Their fees and

Immuron Limited Directors’ Report

expenses for the current year were $200,729 (2011: $35,307) together with options to the value of $85,776 (2011: nil). Legal costs associated with the Paladin transaction were $55,196 with no comparable costs for the previous year.

There was a significant increase in corporate activity during the year in relation to license transactions, capital raisings and other issues which, in addition to the Annual General Meeting, necessitated the holding of two other meetings of shareholders for the approval of a number of resolutions. The associated legal and share registry costs for preparing the meeting documents for the three meetings and share registry requirements amounted to $ 208,492 (2011:$33,648).

During the year the Directors assessed the estimated useful life of the Company’s intellectual property assets and determined that the previous indefinite life should be changed to a finite life of two years commencing June 2012. Accordingly an amortisation charge of $60,000 was made in the current year with no corresponding charge for the previous year.

The Company applied the Accounting Standard AASB139 in valuing the embedded option derivative in the convertible debenture loan from Paladin Labs Inc. The movement in fair value from inception to year end resulted in an unrealised gain of $367,589 being taken direct to the profit and loss as income from other gains ( refer note 7). Details of the convertible debenture are set out in note 19 to the financial statements.

Note 8 to the statement of comprehensive income sets out the comparative level of expenses for the major expense categories for the current and previous year.

Other than the income received from the R & D tax offset rebate, no other income was earned from grant funds during the year. The Company’s two main research projects, influenza and Clostridium difficile, are being conducted in conjunction with the Melbourne and Monash Universities and the grant monies for those projects go directly to the universities.

Significant changes in the state of affairs

The significant changes in the state of affairs of the Company during the year were as follows:

(a) the net increase in contributed equity amounting to $2,478,028 through the issue of 88,381,757 fully paid ordinary shares for cash together with 17,712,230 attaching listed and unlisted options; and
(b) the Company entered into a convertible debenture with Paladin Labs Inc. for a total facility of $CAD 1,500,000 of which 4CAD1,000,000 ($AUD949,378) had been drawn as at 30 June 2012.

Details of the convertible debenture and the changes in contributed equity are disclosed in notes 19 and 20 respectively to the financial statements.

Matters subsequent to the end of the financial year

The Company issued 103,524.381 bonus options to all shareholders under the terms of the prospectus dated 6 July 2012. The options expire on 30 April 2015 and are exercisable into ordinary shares on the payment of $0.04 per share. No funds were raised from the issue of the options.

Likely developments and expected results of operations

Following extensive regulatory preparations the company will commence sales of Travelan to Paladin Labs in the Canadian market during the 2013 financial year. This is an important milestone for Immuron and the access to the Canadian market is expected to more than double Immuron’s income from Travelan sales in the 2013 year. With the recent distribution agreements in specific Asian countries we anticipate receiving the initial orders in the current financial year once the respective regulatory requirements have been finalised. It is expected that the initial revenues will be from Singapore and Thailand.

With respect to current research projects, the influenza program (IMM-255) in collaboration with the University of Melbourne will continue with the finalisation of the current animal trials in the March 2013 quarter. Should the data from those trials be positive we will plan to commence early stage human trials. It is anticipated that this first human trial will be conducted at the Hadassah Medical Center in Israel.

The NASH program (IMM-124E) is now ready for phase 11b commencement and awaits external funding. The Clostridium difficile product (IMM-529) continues to progress ahead of schedule through the collaboration with Monash University. Following the announcement on 19 September, additional validation trials are being conducted that, if they confirm the initial positive results will enable first man studies to be initiated.

Immuron Limited Directors’ Report

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 over ordinary shares

1,580,080 ordinary shares in Immuron Limited – direct interest. 382,520 options expiring 30 April 2015 – direct 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 and senior executive positions with start-up and multinational biotech companies, and Monash University’s commercialisation company. Dr Zelcer was independent director with the Dairy CRC, Chair of the Victorian State Government’s Bioeconomy Working Group, a component of the State Government’s Biotechnology Strategy, and has been a member of Federal Government committees focused on the biotech sector. She is the Executive Director of BioConsult Pty Ltd, providing strategic advisory and commercialisation services to companies and universities in the life sciences. Dr Zelcer is contracted by the Australian Government as a Case Manager for the Commercialisation Australia Program.

Other current directorships

None

Former directorships in last 3 years

None

Special responsibilities

Chair of Audit and Risks Committee

Interests in shares and options over ordinary shares

329,910 ordinary shares in Immuron Limited – direct interest 250,000 ordinary shares in Immuron Limited – indirect interest 4,440 options expiring 15 December 2013 – direct interest 82,478 options expiring 30 April 2015 – direct interest 62,500 options expiring 30 April 2015 – indirect interest

Immuron Limited Directors’ Report

Dr Stewart Washer

Independent non-executive Director Appointed 7 February 2012

Experience and expertise

Dr Washer has 20 years of senior executive and Board experience in medical device, drug development and agrifood companies. He was a founder of a $NZ 120 million New Zealand based life science fund. He is currently the Investment Director with Octa Phillip Bioscience Managers who manage Australian and UK life –science funds.

Dr Washer was previously the CEO of Calzada Limited (ASX;CZD), the founding CEO of Phylogica Limited (ASX:PYC) and prior to those two positions he was the CEO of Celentis which managed the commercialisation of intellectual property from AgResearch in New Zealand with 650 scientists and $130 million in revenues.

Dr Washer has held a number of Board positions in the past as the Chairman of Resonance Health Limited (ASX: RHT) and Hatchtech Pty Ltd, and as a Director of iCeutica Pty Ltd and AusBiotech Limited. Steward is currently the Chairman of iSonea Limited (ASZ: ISN) and is a former Senator of Murdoch University in Western Australia.

Other current directorships

iSonea Limited (ASX: ISN)

Former directorships in last 3 years

Resonance Health Limited (ASX: RHT) - for the period 2007 to 2010 Healthlinx Limited (ASX: HTX) – for the period 2008 to 2012 Genesis Research and Development Limited (ASX: GEN) for the period 2006 to 2010

Special responsibilities

None

Interests in shares and options over ordinary shares

600,000 ordinary shares in Immuron Limited – indirect interest 150,000 options expiring 30 April 2015 – indirect interest

Dr. Roger Aston BSc (Hons), PhD

Independent non-executive Director Appointed 25 May 2012

Experience and expertise

Dr Aston has more than 20 years of experience in the pharmaceutical and biotech industries. Dr Aston was previously the Chief Executive Officer and a Director of Mayne Pharma Group Limited. Prior to his position at Mayne Pharma, some of his previous positions have included CEO of Peptech Limited (Australia), Director of Cambridge Antibody Technology Limited (UK) and Chairman of Cambridge Drug Discovery Limited (UK – now Bio Focus plc). Dr Aston was also founder and CEO of Biokine Technology Ltd (UK) prior to its acquisition by the Peptech Group. Dr Aston was also a director of pSivida Ltd. During the past 20 years of his career, Dr Aston has been closely involved in the development of many successful pharmaceutical and biotechnology companies. Dr Aston has extensive experience including negotiating global licence agreements, overseeing product registration activities with the FDA, the establishment and implementation of guidelines and operating procedures for manufacturing and clinical trials, overseeing manufacturing of human and veterinary products, private and public fund raising activities and the introduction of corporate governance procedures.

Other current directorships

IDT Limited – appointed a director

20[th] March 2012

Former directorships in last 3 years

Dr Aston has been a Director of the following companies during the previous three years.

Name of Company	Date appointed	Date ceased
Halcygen Limited/Mayne Pharma Group	18thAugust 2005	15thFebruary 2012
Ascent Pharmahealth Limited	4thFebruary 2008	31stAugust 2010
Clinuvel Pharmaceuticals Limited	4thApril 2005	31stAugust 2010

Special responsibilities

Member of Audit and Risks Committee

Immuron Limited Directors’ Report

Interests in shares and options over ordinary shares

200,000 ordinary shares in Immuron Limited – direct interest 50,000 options expiring 30 April 2015 – direct interest

Joseph Baini BSc, Post Grad Diploma of Business Management

Executive director Appointed 25 May 2012

Experience and expertise

Has more than 20 years’ experience in the pharmaceutical industry, focused on commercialisation, marketing and sales including partnership, government and licensing negotiations. Most notably, he is the former General Manager of Gilead Sciences Australia, New Zealand and Asia, one of the largest biopharmaceutical companies in the world. Prior to Gilead, he was Marketing Director for Bayer Australia, and also held management positions at Pharmacia & Upjohn and Merck Sharp & Dohme.

He is a Director and founder of eXec Factor Pty Limited, an executive leadership consulting company and is also on the Board of the BioMelbourne Network.

Other current directorships

Bluechiip Limited

Former directorships in last 3 years

Avexa Limited (Appointed 22 April 2009; Resigned 18 April 2011)

Special responsibilities

Chief executive Officer of Immuron Limited

Interests in shares and options over ordinary shares

2,160,000 ordinary shares in Immuron Limited – indirect interest

750,000 options expiring 31 May 2013 – indirect interest 33,334 options expiring 15 December 2013 – indirect interest 477,500 options expiring 30 April 2015 – indirect interest

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

Independent non-executive director

Resigned as a Director on 7 February 2012.

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

Independent non-executive Director.

Resigned as a Director on 7 February 2012

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.

Immuron Limited Directors’ Report

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	13	13	*	*
Professor Roy Robins-Browne	6	5	*	*
Simon Sallka	6	6	3	3
Dr Elane Zelcer	13	13	3	3
Dr Stewart Washer	7	7	*	*
Dr Roger Aston (Ʌ )	1	1	0	0
Joseph Baini	1	1	*	*

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

Ʌ= Appointed to Audit and Risks Committee on 18 July 2012

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. Remuneration policy and framework 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 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.

Immuron Limited Directors’ Report

Directors' fees

The current base remuneration was reviewed during the 2011 financial year with the increase in individual Directors fees being $2,500 per annum. 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 2012:

	$
Base fee
Chairman	62,500
Other non-executive Directors	40,000
Additional fees
Committees - Member	5,000

Retirement allowances for non-executive Directors

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

Executive remuneration

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.

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.

Immuron Limited Directors’ Report

Voting and comments made at the Company’s 2011 Annual General Meeting

The Company received 78% of the “yes” votes on its remuneration report for the 2011 financial year. There were no

specific comments raised at the Annual General Meeting or throughout the year on its remuneration practices.

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 5 to 7 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.

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

2012 Non –executive Directors Prof. Colin Chapman Prof. Roy Robins –Browne (1) Simon Sallka (2) Dr Elane Zelcer Dr Stewart Washer (3) Dr Roger Aston (4) Total Non-executive Directors Executive Director Joseph Baini (5) Total Directors Other key management Personnel Amos Meltzer Dr Grant Rawlin Graeme Stevens Total other key management Total key management personnel compensation	Short term employee benefits Post employment benefits Cash salary and fees $ Non monetary benefits $ Superannua tion $ 62,500 - 5,625 23,333 - 2,100 26,250 - 2,363 45,000 - 4,050 16,667 - 1,500 3,864 - 348	Long term benefits Share based payments Long service leave $ Share based payments $ Total $ - - 68,125 - - 25,433 - - 28,613 - - 49,050 - - 18,167 4,212
	177,614 15,986 313,400 - -	193,600 - 21,447 334,847
	491,014 - 15,986	- 21,447 528,447
	230,800 - - 102,900 - - 138,925 - -	- 15,500 246,300 - 4,440 107,340 - 4,440 143,365
	472,625 - -	- 24,380 497,005
	963,639 - 15,986	- 45,827 1,025,452

1 & 2 Resigned as directors on 7 February 2012 3 Appointed as a Non – Executive Director on 7 February 2012 4 and 5 Appointed as Non- Executive and Executive Directors respectively on 25 May 2012

Immuron Limited Directors’ Report

Immuron Limited Directors’ Report
2011 Non –executive Directors Prof. Colin Chapman Prof. Roy Robins -Browne Simon Sallka Dr Elane Zelcer Total Non –executive Directors Other key management Personnel Joseph Baini (1) Amos Meltzer Dr Grant Rawlin Graeme Stevens Total other key management 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 $ 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 - - - - 134560
	660,620 - 12,619 41,230 71,141 785,610
	833,940 - 29,037 41,230 80,329 984,536

Joseph Baini commenced as Chief Executive Officer on 17 January 2011.

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

In the previous year 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. No similar shares were issued to Directors in the 2012 financial year.

Key management personnel and other executives of the Company

2012 Joseph Baini Amos Meltzer Grant Rawlin Graeme Stevens 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 $ - - - 21,447 21,447 - - - 15,500 15,500 - - - 4,440 4,440 - - - 4,440 4,440
	- - - 45,827 45,827

Immuron Limited Directors’ Report

2011 Joseph 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 28,913 - - - 28,913
	64,913 - - 6,228 71,141

Additional information in respect of options

No options have been granted to Directors during the year to 30 June 2012.

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

Name	Fixed	remuneration	At risk – STI	At risk – STI	At risk - LTI	At risk - LTI
	2012	2011	2012	2011	2012	2011
Other key management personnel
Joseph Baini	79%	70%	15%	4%	6%	26%
Amos Meltzer	94%	100%	-	-	6%	-
Dr Grant Rawlin	96%	100%	-	-	4%	-
Graeme Stevens	97%	100%	-	-	3%	-

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.

Joseph 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.
For the period 1 July 2011 to 31 March 2012 the terms of the contract were for Mr Baini’s services to be provided for a period of four (4) days a week at a daily rate of $1,200 per day. From 1 April the services were provided for five (5) days a week at a monthly fee of $24,000. The contract can be terminated by either party giving three (3) months’ notice.
In addition to the above consultancy fees for Mr Baini’s services he was entitled to a STI of $70,000 and the following LTI’s if certain performance targets, including the raising of capital, 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.

In respect of the STI he was eligible to receive $50,000 out of the total STI of $70,000 and that amount is included in the cash salary and fees amount of $313,400 in section B of this report.

No options were issued during the year in respect of the LTI incentives.

Immuron Limited Directors’ 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. From 1 February 2012 his fees were fixed at $18,000 per month. 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

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 period to February 2012 and $7,000 per month from March 2012. 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.
The agreement 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 Mr Stevens will be entitled to participate in the ESOP available to key executives.

Details of remuneration: Bonuses and share based compensation benefits.

For each cash bonus or grant of options included in the table on page 14, the percentage of the available bonus or grant of options that were vested in the financial year, and the percentage that was forfeited because the person did not achieve the performance criteria are set out below. No part of the bonus is payable in future years.

	Cash	Bonus	Share based compensation	Share based compensation	benefits (Options)
Name	Paid %	Forfeited %	Year granted	Vested %	Forfeited %
Joseph Baini	71.5%	29.5%	2012	-	-
			2011	100	-
Amos Meltzer	-	-	2012	100	-
Grant Rawlin	-	-	2012	100	-
Graeme Stevens	-	-	2012	100	-

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.

Immuron Limited Directors’ Report

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.

No shares were issued under this plan in the 2012 financial year (2011 $10,00l).

(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 2012 financial year (2011 Nil).

(c) Executive Share Option Plan (ESOP)

At a General Meeting of shareholders held on 5 September 2011 shareholders approved the rules of the ESOP and authorised Directors to issue options at their discretion in accordance with the rules from time to time.

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.

During the year options were issued under the rules of the ESOP to the following key management personnel.

	Number of options		Number of options	Number of options
	granted during	Value of options at	vested during the	lapsed during the
Name	year	grant date	year	year
				-
Amos Meltzer	2,000,000	15,500	2,000,000
Grant Rawlin	500,000	4,440	500,000	-
Graeme Stevens	500,000	4,440	500,000	-

The terms of the above options are:

The options were issued on 19 December 2011. A proportion of the options vested on issue with the balance vesting in June 2012.
The options expire on 30 June 2014 and can be exercised at any date prior to their expiry date.
The exercise price for each option is $0.07(seven cents), however, for the options to be exercised the share price of the Company must achieve a VWAP of $0.14 (fourteen cents) for a period of 10 consecutive business days.

( d) Options

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

Immuron Limited Directors’ Report

				Exercise	Value per option	Performance
	Grant Date	Vesting date	Expiry date	price	at grant date	achieved	% vested
18	February 2011	31 May 2011	31 May 2013	$0.0945	$0.0227	100%	100%
19	December 2011	19 December 2011	30 June 2014	$0.07	$0.0134	100%	100%
19	December 2011	28 June 2012	30 June 2014	$0.07	$0.0021	100%	100%

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 2012 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 2012 financial year. (2011 -Nil).

Shares under options

As at the date of this report, there were 128,293,076 unissued shares under option as follows:

Date options granted 18 February 2011 8 November 2011 19 December 2011 * 8 June 2012 29 June 2012 29 June 2012 18 July 2012 24 July 2012	Number under option 750,000 2,752,230 4,000,000 12,500,000 579,736 1,186,729 3,000,000 103,524,381 128,293,076	Issue Price of Shares $ $0.0945 $0.12 $0.07 $0.04 $0.0497 $0.048 $0.04 $0.04	Expiry date
			31 May 2013 15 December 2013 30 June 2014 30 April 2015 30 November 2021 17 January 2022 30 June 2015 30 April 2015

Immuron Limited Directors’ Report

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

*Included in these options are the options granted as part of the remuneration of the key management personnel during the year. Details of the options granted to the key management personnel are disclosed on pages 13 to 15 of this report.

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 breach of duty by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the Company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities.

Proceedings on behalf of the Company

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

Non-audit services

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

During the year the Company engaged the auditor to conduct added assurance work in respect of the research activities undertaken at the Hadassah Medical Center in Jerusalem on behalf of the Company. The fee for that service was $12,000. The Board of Directors is satisfied that the provision of the non-audit service was compatible with the general standard of independence for auditors imposed by the Corporations Act 2001in that it did not undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

All non-audit services have been reviewed by the Audit and Risks Committee to ensure that they do not impact the impartially of the Auditor.

Auditor’s Independence Declaration

A copy of the Auditor’s independence declaration, as required under section 307C of the Corporations Act 2001, is set out on page 17.

Auditor

PwC continues in office in accordance with section 327 of the Corporations Act 2001.

Signed in Melbourne on 28 September 2012 in accordance with a resolution of the Directors

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==> picture [211 x 90] intentionally omitted <==

C B Chapman Director

E Zelcer

Director

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Auditor’s Independence Declaration

As lead auditor for the audit of Immuron Limited for the year ended 30 June 2012, 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 .

==> picture [90 x 19] intentionally omitted <==

Lisa Harker Partner PricewaterhouseCoopers

Melbourne 28 September 2012

PricewaterhouseCoopers, ABN 52 780 433 757 2 Southbank Boulevard, Southbank VIC3006, GPO Box 1331, Melbourne VIC3001 T +61 3 8603 1000, F +61 3 8603 1999, www.pwc.com.au

Page 17

Liability limited by a scheme approved under Professional Standards Legislation

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.

A description of the Company’s main corporate governance practices is set out below. All these practices, unless otherwise stated, were in place for the entire year. They comply with the ASX Corporate Governance Principles and Recommendations.

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 five (5) directors.

The current Board comprises of four (4) non-executive Directors and one (1) executive Director. All of the non- executive 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 one committee during the year to assist in the execution of its duties and to allow detailed consideration of complex issues. That committee was the Audit and Risks Committee.

The Audit and Risks Committee consisted of the following non-executive Directors:

Elane Zelcer (Chair)
Simon Sallka up to the date of his resignation on 7 February 2012.

Subsequent to year end Roger Aston was appointed to the committee on 18 July 2012.

Details of the above Directors qualifications and attendance at audit committee meetings are set out in the Directors report on pages 5 to 8.

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 production and R & D projects.
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.

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.

Immuron Limited Corporate Governance Statement

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.

As the Company has less than ten employees or consultants engaged at any one time the Board does not have a policy in relation to gender diversity. A person is employed or contracted depending on the appropriate skills they have to meet the requirements of the Company.

At 30 June 2012 the details of the number of women employed or contracted to the Company were as follows:

Number of women employees/contractors in the Company (excluding Directors) Number of women in senior executive positions Number of women on the Board (Non-executive Directors)		Actual
		Number % 3 43% 1 14% 1 25%

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

Immuron Limited

Corporate Governance Statement

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.

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 company secretary has been nominated as the person responsible for communicating with the Australian Securities Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirement in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public.

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.

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.

The Company also manages ongoing risk through the Audit and Risks Committee and the functions and responsibilities of that Committee are outlined on page 19.

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.

Immuron Limited

Corporate Governance Statement

The full Board will exercise these responsibilities and set the policies for remuneration of non- executive and executive Directors and senior management 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 and consultants 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).
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 are set out in the Directors Report in the annual report.

Immuron Limited Statement of Comprehensive Income For the year ended 30 June 2012

Notes Revenue from continuing operations 5 Other income 6 Other gains/(losses) 7 Raw materials & consumables used Employee and consultants costs 8 Depreciation and amortisation 8 Research and commercialisation 8 Directors' fees Product marketing & export development Shareholder relations Finance costs 8 Corporate and administrative 8 Loss before income tax Income tax expense 9 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 27 Diluted earnings (loss) per share 27	2012 $ 463,261 734,723 367,589 (363,717) (1,039,235) (72,566) (850,625) (193,600) (145,339) (144,967) (111,111) (941,933) (2,297,520) - (2,297,520) (2,297,520) Cents (0.67) (0.67)	2011 $ 297,891 213,899 - (216,641) (985,793) (21,327) (1,143,187) (198,926) (104,688) (69,816) (3,735) (362,856)
		(2,595,179) -
		(2,595,179)
		(2,595,179)
		Cents (0.82) (0.82)

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

Immuron Limited Balance Sheet As at 30 June 2012

Notes ASSETS Current Assets Cash & cash equivalents 10 Trade & other receivables 11 Inventories 12 Other assets 13 Total Current assets Non-Current Assets Property, plant and equipment 14 Intangible assets 15 Investments 16 Total Non-Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade & other payables 17 Financial liabilities 19 Provisions 18 Total Current Liabilities Non-Current Liabilities Financial liabilities 19 Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Contributed equity 20 Reserves 21 Accumulated losses 21 TOTAL EQUITY	2012 $ 1,443,928 204,752 214,400 356,131 2,219,211 18,457 1,400,587 31 1,419,075 3,638,286 947,545 81,186 - 1,028,731 559,574 559,574 1,588,305 2,049,981 30,024,787 907,059 (28,881,865) 2,049,981	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

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 2012

Notes Balance at 30 June 2010 Total comprehensive loss for the year 21 Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 20 Employee and consultants share options – value of employee services Employee options costs written back to comprehensive loss for year 21 21 Balance at 30 June 2011 Total comprehensive loss for the year 21 Transactions with owners in their capacity as owners Contributions of equity, net of transaction costs 20 Employee and consultants share options – value of employee services 21 Balance 30 June 2012	Contributed equity $ 26,964,091 757,426	Reserves $ 388,366 200,613 6,228	Accumulated losses $ (23,989,166) (2,595,179)	Total $
				3,363,291 (2,595,179) 958,039 6,228
	27,721,517 2,303,270 30,024,787	595,207 171,009 140,843 907,059	(26,584,345) (2,297,520) (28,881,865)	1,732,379 (2,297,520) 2,474,279 140,843 2,049,981

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 2012

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 offset receipt Interest paid Net Cash (outflow) from Operating Activities 26 CASH FLOWS FROM INVESTING ACTIVITIES Payment for plant and equipment 14 Net Cash (outflow) from Investing Activities CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares & other equities Share issue transaction costs Funds received from convertible debenture borrowings 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 10	2012 Inflow / (Outflow) $ 802,970 (3,235,973) (2,433,003) 14,249 - (43,905) (2,462,659) (2,861) (2,861) 2,300,252 (90,996) 949,378 3,158,634 693,114 750,814 1,443,928	2011 Inflow / (Outflow) $ 386,215 (2,618,421)
		(2,232,206) 52,606 213,899 (3,735)
		(1,969,436)
		(18,197)
		(18,917)
		908,549 (52,326) -
		856,223
		(1,131,410) 1,882,224
		750,814

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

Immuron Limited Notes to the Financial Statements 30 June 2012

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. Immuron Limited is a for-profit entity for the purpose of preparing the financial statements.

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) as issued by the International Accounting Standards Board.

New and amended standards adopted by the Company

None of the new standards and amendments to standards that are mandatory for the first time for the financial year beginning on 1 July 2011 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods.

Early adoption of standards

The Company has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2011.

Historical cost convention

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

Critical accounting estimates

The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the 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 2012, the Company’s cash and cash equivalents amounted to $1,443,928 (2011:$750,814) and for the year ended 30 June 2012, the Company experienced an operating loss of $2,297,520 (2011: $2,595,179) and a net cash outflow of $2,462,659 (2011: $1,969,436) from operating activities and expenses associated with research and commercialisation programs.

During the 2012 financial year the Company entered into a Debenture Subscription Agreement with Paladin Labs Inc. for the issue of up to $CAD 1.5 million convertible debentures of which $CAD1.0 million was drawn down at 30 June 2012 and this is repayable on 23 December 2014 or are convertible at the option of the holder into fully paid ordinary shares of the Company at any time prior to maturity. A further $CAD500,000 of financing can be drawn down to meet future commitments if necessary.

For the 2013 financial year the Company has budgeted for operating cash outflows to exceed operating cash inflows as it continues its global commercialisation of Travelan and its various research programs. Although the Company is projecting losses and a net cash outflow from operations for the 2013 financial year, the Directors have taken a number of steps to reduce the level of recurring expenses whilst it continues to seek additional licensing arrangements for its Travelan and other products. The continuing viability of the Company and its ability to continue as a going concern and meet its debts and its commitments as they fall due are dependent on Immuron’s current commercialisation program, and ability to raise additional capital from investors as required. In addition, the Company has the ability to reduce the level of recurring expenses if required.

Given the difficulty in predicting the timing and quantum of income from the commercialisation of its products and technology, the inherent uncertainties in raising funds from investors, and adherence to cash flow budgets, there is a material uncertainty whether the Company will be able to continue as a going concern and realise its assets and extinguish its liabilities and commitments in the normal course of business and at the amounts stated in the financial report.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 1. Summary of significant accounting policies (continued)

However, the Directors are confident that the Company will be successful in the above matters and 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.

Foreign exchange gains and losses that relate to borrowings are presented in the statement of comprehensive income, within finance costs. All other foreign exchange gains and losses are presented in the statement of comprehensive income on a net basis within other income or other expenses.

(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.
(iii) License fees – All conditions in respect of granting the license have been met by both the Company and licensee.

(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 2012

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 the 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 2012

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, 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.

(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 and costs can be measured reliably. Other development expenditure is recognised in the statement of comprehensive income as an expense as incurred.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 1. Summary of significant accounting policies (continued)

(iii) Intellectual property

The Company acquired certain provisional patent intellectual property from Hadasit Medical Research Services & Development Limited. The initial cost was capitalised and presented in the balance sheet as an intangible asset.

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. During the year the estimated useful life of the asset was reviewed and its estimated life changed from an indefinite life to a finite life of two years which represents a change in accounting estimates which is recognised in the current and future years. The net effect of that change is set out in note 15 to the accounts.

(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. Any options granted are made in accordance with the terms of the Company’s Executive Share Option Plan (ESOP).

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 contributed equity.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 1. Summary of significant accounting policies (continued)

(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 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) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Convertible debentures

The company issued convertible debentures denominated in Canadian dollars. The conversion option is an embedded derivative, the fair value of which is calculated on initial recognition using an option pricing model. The difference between the consideration received and the fair value of the embedded derivative represents the carrying value of the host debt. The embedded derivative is classified on the balance sheet as a derivative liability and is re-measured each reporting period at fair value. Changes in the fair value are recognised in the statement of comprehensive income. The host foreign currency debt is measured subsequent to initial recognition at amortised cost using the effective interest rate method and then retranslated at each subsequent reporting date.

(q) Contributed equity

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

(r) 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.

(s) 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.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 1. Summary of significant accounting policies (continued)

(t) 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 24). 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.

(u) New accounting standards and interpretations.

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2012 reporting periods. 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*)

AASB 9 Financial Instruments addresses the classification, measurement and de-recognition of 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. Fair value gains and losses on available-for-sale debt investments, for example, will therefore have to be recognised directly in profit or loss.

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 company does not have any such liabilities. The de-recognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The company has not yet decided when to adopt AASB 9.

In December 2011, the IASB delayed the application date of IFRS 9 to 1 January 2015. The AASB is expected to make an equivalent amendment to AASB 9 shortly.

(ii)AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, revised AASB 127 Separate Financial Statements and AASB 128 Investments in Associates and Joint Ventures and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards (effective 1 January 2013)

In August 2011, the AASB issued a suite of five new and amended standards which address the accounting for joint arrangements, consolidated financial statements and associated disclosures.

AASB 10 replaces all of the guidance on control and consolidation in AASB 127 Consolidated and Separate Financial Statements, and Interpretation 12 Consolidation - Special Purpose Entities. The core principle that a consolidated entity presents a parent and its subsidiaries as if they are a single economic entity remains unchanged, as do the mechanics of consolidation. However the standard introduces a single definition of control that applies to all entities. It focuses on the need to have both power and rights or exposure to variable returns before control is present. Power is the current ability to direct the activities that significantly influence returns. Returns must vary and can be positive, negative or both. There is also new guidance on participating and protective rights and on agent/principal relationships.

Based on the Company’s present corporate structure AASB 10 will not have any impact on its financial statements.

AASB 11 introduces a principles based approach to accounting for joint arrangements. The focus is no longer on the legal structure of joint arrangements, but rather on how rights and obligations are shared by the parties to the joint arrangement. Based on the assessment of rights and obligations, a joint arrangement will be classified as either a joint operation or a joint venture. Joint ventures are accounted for using the equity method, and the choice to proportionately consolidate will no longer be permitted. Parties to a joint operation will account their share of revenues, expenses, assets and liabilities in much the same way as under the previous standard. AASB 11 also provides guidance for parties that participate in joint arrangements but do not share joint control.

As the company does not have any investment in joint venture partnerships, AASB 11 will not have any impact on its financial statements.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 1. Summary of significant accounting policies (continued)

AASB 12 sets out the required disclosures for entities reporting under the two new standards, AASB 10 and AASB 11, and replaces the disclosure requirements currently found in AASB 127 and AASB 128.

Amendments to AASB 128 provide clarification that an entity continues to apply the equity method and does not remeasure its retained interest as part of ownership changes where a joint venture becomes an associate, and vice versa. The amendments also introduce a “partial disposal” concept but will have no impact on the Company’s financial statements.

The company currently does not have any subsidiaries or joint arrangements which are required to be consolidated. The timing of the adoption of the standards AASB10, AASB11, AASB 12 and AASB 128 will therefore depend upon changes in the Company’s structure.

(iii)AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 (effective 1 January 2013)

AASB 13 was released in September 2011. It explains how to measure fair value and aims to enhance fair value disclosures. The company has yet to determine which, if any, of its current measurement techniques will have to change as a result of the new guidance. It is therefore not possible to state the impact, if any, of the new rules on any of the amounts recognised in the financial statements. However, application of the new standard will impact the type of information disclosed in the notes to the financial statements. The company does not intend to adopt the new standard before its operative date, which means that it would be first applied in the annual reporting period ending 30 June 2014.

(iv)Revised AASB 119 Employee Benefits, AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) and AASB 2011-11 Amendments to AASB 119 (September 2011) arising from Reduced Disclosure Requirements (effective 1 January 2013)

In September 2011, the AASB released a revised standard on accounting for employee benefits. It requires the recognition of all remeasurements of defined benefit liabilities/assets immediately in other comprehensive income (removal of the so-called 'corridor' method) and the calculation of a net interest expense or income by applying the discount rate to the net defined benefit liability or asset. This replaces the expected return on plan assets that is currently included in profit or loss. The standard also introduces a number of additional disclosures for defined benefit liabilities/assets and could affect the timing of the recognition of termination benefits. The amendments will have to be implemented retrospectively. The Company has not yet decided when to adopt the new standard.

There are no other standards that are not yet effective and that are expected to have a material impact on the company in the current or future reporting periods and on foreseeable future transactions.

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), price 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.

(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 arising from currency exposure. This risk is primarily with the US ($USD) and Canadian dollars ($CAD). The level of exposure to foreign currency is not significant at year end as the Company holds cash funds in a $CAD bank account as a natural hedge against the fluctuations in the $CAD borrowing (refer Note 10). Management continue to monitor the level of foreign exchange risk and employ appropriate hedging strategies if considered appropriate.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 2. Financial risk management (continued)

Currency risk

The Company’s exposure to foreign currency risk, expressed in Australian dollars, as at 30 June was as follows:

Cash & cash equivalents Trade and other payables Financial liabilities	2012 $CAD $USD 722,871 - - (200,708) (640,760) -	2011
		$USD
		- (349,374) -

Sensitivity

Based on the above net currency exposure, if the Australian dollar weakened or strengthened by 10% against the respective currencies the loss for the year would have been reduced or increased by $2,500 and $3,100 respectively (2011 $31,800 and $38,800 respectively). As the cash funds held in the $CAD bank account are converted into Australian dollars for working capital purposes the exposure to net currency risks will increase.

(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’s only borrowing is its convertible debenture loan which is for a maximum period of three years on a fixed interest rate of 10% per annum. As the base loan on the convertible debenture is carried at amortised cost it is not subject to any interest rate risk. There are interest rate risks associated with the amount of interest receivable on its cash equivalents and this is reviewed by management on a regular basis.

(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 11 to the accounts.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to meet obligations when due. The Company regularly manages its liquidity risk by monitoring forecasted and actual cash flows.

(1) Financing arrangements The Company has access to an undrawn facility of $CAD 500,000 under the Debenture Subscription Agreement as at 30 June 2012. This facility is available for draw down up to 23 June 2013.

(2) 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.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 2. Financial risk management (continued )

2012 Non-derivatives Non – interest bearing - trade payables - other payables Interest bearing convertible debenture 2011 Non – interest bearing - trade payables - other payables	Less than 6 months $ 6-12 months $ Between 1 and 2 years $ Between 2 and 5 years $ Total contractual cash flows $ Carrying Amounts Liabilities $ 426,128 - - - 426,128 426,128 421,300 100,117 - - 521,417 521,417 48,026 48,026 96,052 1,008,549 1,200,653 559,574
	895,454 148,143 96,052 1,008,549 2,148,198 1,507,119
	329,040 88 - -- 329,128 329,128 455,416 140,292 - - 595,708 595,708
	784,456 140,380 - - 924,836 924,836

The face value of the convertible debenture at year end is $A960,522, $CAD1,000,000 (2011 nil). Details of the determination of the embedded derivative value in the convertible note is set out in note 19.

(d) Fair value estimation

The fair value of financial assets and financial liabilities are estimated for recognition and measurement or for disclosure purposes. AASB 7 Financial Instruments: Disclosures requires disclosure of fair value measurements by level of the following fair value measurement hierarchy.

(a) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(b) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (level 2), and
(c) Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).

The following table presents the company’s liabilities measured and recognised at fair value at 30 June 2012 (2011; nil)

2012 Financial liabilities	Level 1 Level 2 Level 3 Total - 81,186 - 81,186

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

The assessed fair value of the embedded derivative was 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 issued date and balance date, the expected price volatility of the underlying share (based on historical volatility), the expected dividend yield and the risk free interest rate for the term of the option.

The model inputs for determining the fair value of the embedded derivative value at issue date and 30 June 2012 were as follows:

		Issue date	30 June 2012
a)	Share price – cents per share	4.6 cents	1.8 cents
b)	Exercise price – cents per share	4.73 cents	4.73 cents
c)	Expiry date	23 December 2014	23 December 2014
d)	Expected volatility	70%	74%
e)	Risk –free interest rate	5%	5%
f)	Expected dividend yield	0%	0%

Immuron Limited Notes to the Financial Statements 30 June 2012

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 12, include a provision for impairment amounting to $52,573 (2011 $268,892). The reduction of $216,319 arose from the reduction in the level of certain inventories during the year and is included in the raw materials and consumables used amount of $363,717 (2011 $216,641) in the statement of comprehensive income. The carrying value of inventory held for the Travelan products was reviewed at 30 June, 2012 and no adjustment was required.

(ii) Share based payments

Shares and options to the value of $214,510 (2011 $6,228) were granted to a number of consultants and employees during the year. The values attributable to the options were determined in accordance with Accounting Policy note 1(n) and are set out in note 28.

(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. The identification of a useful life for the intellectual property also requires judgement. The Directors have reassessed the useful life in the current year and as a result the useful life has been changed from indefinite to finite. The useful life and resulting amortisation of acquired intellectual property will be considered to be for the period 1 June 2012 to the next GO/No-go decision point, which will be on the completion of phase iib trials which is estimated to be two years from 1 June 2012. The net effect of that change is set out in note 15 to the accounts.

(iv)Embedded derivative

The Company measured the fair value of the embedded derivative in the convertible debenture in accordance with Accounting Policy note 1 (p). A Black Scholes pricing model was used to determine the fair value of the embedded derivative as at the initial date and the reporting date. The embedded derivative will be re-measured each reporting date and changes in its fair value will be recognised in the profit and loss.

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. Income from license fees is classified as income from commercialisation activities and is included in the R & D segment. 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 2012

Note 4. Segment Information (continued)

(b) Segment information provided to the management executive team

2012 Segment revenue and other income Revenue from external customers License fees from external customers R & D tax offset receipt Interest revenue Other gains/(losses) Total segment revenue and other income Adjusted EBITDA (loss) Depreciation expense Amortisation Interest expense Total segment assets Total assets includes: Investment in associates Additions to non- current assets Total segment liabilities 2011 Segment revenue and other incomes Revenue from external customers R & D tax offset receipt Interest revenue Total segment revenue and other income Adjusted EBITDA Depreciation expense Loss on disposal of fixed assets Interest expense R & D tax offset receipt Total segment assets Total assets includes: Investment in associates Additions to non- current assets Total segment liabilities	R & D $ Hyper Immune Products $ Corporate $ Total $
	- 449,012 - 449,012 480,215 - - 480,215 254,508 - - 254,508 - - 14,249 14,249 - - 367,589 367,589
	734,723 449,012 381,838 1,565,573
	(777,761) 85,295 (1,662,372) (2,354,838)
	12,566 12,566 60,000 - - 60,000 - - 111,111 111,111 1,674,597 456,620 1,507,069 3,638,286
	- - 30 30 - - 2,861 2,861
	366,840 149,367 1,072,098 1,588,305
	- 213,951 31,334 245,285 213,899 - - 213,899 - - 52,606 52,606
	213,899 213,951 83,940 511,790
	(1,730,622) (2,690) (883,183) (2,616,495)
	- 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

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 4. Segment Information (continued)

(c) Other segment information The Company is domiciled in Australia. The revenues and other income from external customers were derived as follows:

Within Australia Outside Australia	2012 $ 449,012 480,215 929,227	2011 $ 245,285 -
		245,285

Licence fees in the R & D segment are derived from one transaction with one customer with approximately 98% of the revenues in the hyper immune segment also derived from one customer.

(d) Adjusted EBITDA

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 Interest revenue Finance costs Depreciation and amortisation Share option costs Unrealised financial instruments gain Loss for the year before income tax	(2,354,838) (2,616,495) 14,249 52,606 (111,111) ( 3,735) (72,566) ( 21,327) (140,843) ( 6,228) 367,589 -
	(2,297,520) (2,595,179)

Note 5. Revenue

From continuing operations Sales revenue Sale of goods Other revenue Interest Rental and other income Note 6. Other income License fees received R & D tax offset receipt Note 7. Other gains Fair value gain on convertible debenture derivative	449,012 14,249 - 463,261 480,215 254,508 734,723 367,589	213,951 52,606 31,334 297,891 - 213,899 213,899 -

Further details of the convertible debenture are contained in note 19 to the accounts.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 8. Expenses The loss for the year includes the following expenses items: Employee and consultants costs Employment and consultants costs Defined contribution superannuation expense Other employment related expenses Total employee and consultants costs Research and commercialisation Patent registration costs Research projects in - Australia - Israel International regulatory registrations NASH FDA IND application Other research and commercialisation costs Total research and commercialisation expenses Corporate and administrative Audit and taxation services Legal services Corporate and product development consultants Shares and options issued to external consultants Net foreign exchange losses (gains) Rental expense relating to operating leases Other corporate costs Total corporate and administrative expenses Depreciation and amortisation Depreciation of plant, equipment and furnishings Amortisation of intellectual property Loss on disposal of plant and office equipment Total depreciation and amortisation Finance Interest paid/payable on financial liabilities and other payables Exchange losses on foreign currency borrowings Total finance expenses	2012 831,852 9,406 197,977 1,039,235 294,251 56,119 151,736 60,300 191,964 96,255 850,625 107,431 152,026 324,233 130,713 21,415 43,442 162,673 941,933	2011 785,610 12,468 187,715
		985,793
		198,103 94,226 536,121 - 279,875 34,862
		1,143,187
		91,344 15,022 132,679 6,600 (22,527) 39,844 99,894
		362,856
	12,566 60,000 - 72,566 110,592 519 111,111	19,847 - 1,480
		21,327
		3,735 -
		3,735

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 9. Income tax (a) 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% (2011 - 30%) Tax effect of amounts which are not deductible or assessable in calculating taxable income: Research & development cash rebate Net gain on convertible debenture derivative Expenditure not allowable as a tax deduction Temporary differences not recognised Tax losses not recognised Income tax expense/(benefit) reported in the statement of comprehensive income (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%	2012 (2,297,520) (689,256) (76,352) (95,929) 61,620 (10,584) 810,501 Nil 20,758,156 6,227,447 1,359,036 407,711	2011 (2,595,179)
		(778,553) (64,170) - 2,681 4,782 835,260
		Nil
		18,739,376 5,621,813 1,209,857 362,957

Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 30 June, 2012 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:

(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.

Immuron Limited Notes to the Financial Statements 30 June 2012

2012 $ Note 10. Current assets – Cash & cash equivalents Cash at bank 1,443,928 Cash at bank represents; Cash funds held in - $A currency account 721,057 - $CAD currency account 722,871 1,443,928	2012 $ Note 10. Current assets – Cash & cash equivalents Cash at bank 1,443,928 Cash at bank represents; Cash funds held in - $A currency account 721,057 - $CAD currency account 722,871 1,443,928	2011 $ 750,814
		750,814 -
	1,443,928	750,814

The funds held in the $CAD account ($CAD 752,481) were converted at the year-end exchange rate

The Company’s exposure to interest rate risk and foreign exchange risk is discussed in note 2.

Note 11.
Trade receivables	208,252	37,094
Provision for impairment of receivables	(3,500)	(3,500)
	204,752	33,594

All trade receivables are non-interest bearing.

(a) Impaired trade receivables

As at 30 June 2012 current trade receivables with a nominal value of $3,500 (2011 $3,500) were impaired. The amount of the provision was $3,500 (2011 $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 2011 Balance 30 June 2012	- 3,500 3,500 3,500 3,500	- 3,500
		3,500
		3,500
		3,500

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

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 11. Current assets – Trade & other receivables (continued)

(b) Past due but not impaired	2012	2011
	$	$
At 30 June 2012, trade receivables amounting to $19,105 (2011- $28,161) were past due but not impaired. This amount
relates to customers who have had no recent history of default. The ageing analysis of these trade receivables is as follows:
Up to 3 months	-	-
3 to 6 months	-	-
Over 6 months	19,105	28,161
	19,105	28,161

The other classes within trade and other receivables do not contain impaired assets and are not past due. Based on the credit history of these other classes, it is expected that these amounts will be received when due.

(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 12. Current assets – Inventories Raw materials and stores – at net realisable value Work in progress – at cost	214,400 - 214,400	249,300 41,600
		290,900

Write down of inventories to net realisable value recognised as an expense during the year ended 30 June 2012 amounted to $12,500- (2011 $Nil) and is included in raw materials and consumables used in the statement of comprehensive income.

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 2012 amounted to $363,717 (2011 - $216,641).

Note 13. Current assets – Other assets Prepayments Security bond Other debtors	33,537 6,417 316,177 356,131	41,880 6,417 47,830
		96,127

Risk exposure

Information about the Company’s exposure to credit risk is provided in notes 2 and 11.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 14. Non-current assets – Property plant and equipment

Year ended 30 June, 2012 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 30 June, 2012 - Cost - Accumulated depreciation Year ended 30 June, 2011 Opening net book amount Additions Disposals Depreciation charge Closing net book amount At 30 June, 2011 - Cost - Accumulated depreciation	Plant and equipment $ Computer equipment $ Furniture & Fittings $ Total $ 4,930 12,957 10,275 28,162 - 2,861 - 2,861 - - - - (1,606) (8,085) (2,875) (12,566)
	3,324 7,733 7,400 18,457
	339,785 25,808 45,437 411,030 (336,461) (18,075) (38,037) (392,573)
	3,324 7,733 7,400 18,457
	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

(a) Non-current assets pledged as security

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

Note 15. Intangible assets

Intellectual property, at cost Amortisation charge	2012 $ 2011 $ 1,460,587 1,460,587 (60,000) -
	1,400,587 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.

During the year the estimated useful life of the intellectual property was reviewed and its estimated life changed from an indefinite life to a finite life of two years. The net effect of that change in the current financial year was to increase the depreciation and amortisation expense by $60,000 commencing June 2012. Assuming that the asset is held to the end of its currently assessed useful life, the amortisation charge for future years will be increased by the following amounts:

Year ended 30 June 2013 Year ended 30 June 2014	$720,000 $680,587
	$1,400,587

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 16. Non-current assets – Investments accounted for using the equity method

Shares in subsidiary company – at cost Shares in associate – at cost	2012 $ 1 30 31	2011 $ 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 2012.

Note 17. Current liabilities – Trade & other payables Trade payables 426,097 Other payables 521,448 947,545 Risk exposure Information on the Company’s risk exposure is contained in note 2. Note 18. Current liabilities - Provisions Current liabilities Employee benefits – long service leave - Note 19. Current and Non-Current liabilities - Financial liabilities Secured Convertible debenture Current liability -Value of convertible debenture derivative 81,186 Non- current liability –Host debt borrowings 559,574 Total secured financial liabilities 640,760		329,128 595,708
		924,836
		3,000
		- - -

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 19. Non-Current liabilities – Financial liabilities (continued)

The Company entered into a Debenture Subscription Agreement on 23 December 2011 for the issue of senior secured convertible interest bearing debentures up to a value of $1.5 million Canadian Dollars (CAD). On 17 January 2012 the Company drew down $CAD1million ($AUD 949,378) of that facility. The balance of $CAD 500,000 can be drawn down, if required, at any time before 23 June 2013.

The maturity date for repayment of the borrowings, or the conversion into equity, is no later than 23 December 2014 for both the initial drawn down of $CAD 1 million and for the subsequent draw down of $CAD500,000, if that drawdown is made. Interest is payable on the borrowings at a fixed rate of 10% per annum.

T he holder of the convertible debenture has the right to convert the borrowings into equity at any time prior to the maturity date of 23 December 2014. The debenture agreement also allows for an automatic conversion if the capitalised value of the Company exceeds $AUD100 million prior to the maturity date. The conversion price is AUD 4.73 cents which is higher than the share price as at 30 June 2012.

The convertible debenture and derivative have been accounted for in accordance with AASB 132: Financial Instruments, Presentation and AASB 139: Financial Instruments, Recognition and Measurement. The derivative on the convertible bond is carried at fair value. The movement in fair value from inception to year end resulted in an unrealised gain of $367,589 which has been taken direct to the profit and loss as income from other gains (refer note 7).

Based on the face value of the debenture outstanding at 30 June 2012$AUD 960,522 ($CAD 1.0 M), approximately 20,307,000 fully paid ordinary shares would be issued on the full conversion of that borrowing into equity which would approximate 4.9% of the ordinary shares on issue at 30 June 2012.

Assets pledged as security

The convertible debenture is secured by a fixed and floating charge over certain of the Company’s assets and future milestone and royalty receipts under existing and future licence and distribution agreements. The respective values of the assets pledged as security as at 30 June 2012 are as follows:

Fixed charge Cash and cash equivalents Floating charge Trade receivables and other assets (excluding IP) Inventories	1,443,928
	527,346 214,400
	741,746

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 20. Contributed equity

( a ) Issued and Paid Up Capital 414,096,557 (2011: 325,714,800) ordinary shares fully paid (b) Movements in ordinary share capital Date of Issue Shares on Issue at 1 July 2010 02/07/2010 Shares issued for cash 02/08/2010 Shares issued for cash 18/02/2011 Issued to consultants in lieu of fees Issued to Chief Executive Officer 13/05/2011 Shares and options issued for cash Value of options issued transferred to options reserve Issued to consultants in lieu of fees Shares issued to Directors in lieu of Directors fees 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 25/08/2011 Issued for cash Value of options issued transferred to options reserve 8/11/2011 Issued for cash and offset against payables 30/11/2011 Issued to consultants in lieu of fees Value of options issued transferred to options reserve 27/04/2012 Issued for cash 8/06 2012 Issued for cash Value of options issued transferred to options reserve 18/06/2012 Issued for cash Share Purchase Plan 29/06/2012 Issued to consultant in lieu of fees Less costs associated with issuing shares Shares on issue at 30 June 2012		2012 $30,024,787 Number of Shares Issue Price 311,051,948 2,523,076 $0.065 843,142 $0.065 465,952 $0.0696 500,000 $0.072 7,877,143 $0.07 - - 301,643 $0.07 131,257 $0.07 14,285 $0.07 1,976,354 $0.07 - - 30,000 $0.07 - - 325,714,800 7,380,000 $0.07 - - 7,613,663 $0.07 1,010,504 $0.069 - - 30,725,000 $0.02 19,275,000 $0.02 - - 22,102,500 $0.02 275,090 $0.027 - - 414,096,557	2011 $27,721,517
			$ 26,964,091 164,000 54,804 32,413 36,000 551,400 (160,757) 21,115 9,188 1,000 138,345 (39,856) 2,100 (52,326)
			27,721,517 516,600 (27,552) 532,957 70,000 (50,956) 614,500 385,500 (96,250) 442,050 7,417 (90,996)
			30,024,787

(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.

Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 20. Contributed equity (continued)

(d) Options

Details of the options outstanding at 30 June 2012 are as follows:

Date options granted 18 February 2011 25 August 2011 8 November 2011 19 December 2011 8 June 2012 29 June 2012 29 June 2012	Number under option 750,000 2,460,000 2,752,230 4,000,000 12,500,000 579,736 1,186,729 24,228,695	Exercise price $ $0.0945 $0.10 $0.12 $0.07 $0.04 $0.0497 $0.048	Expiry date
			31 May 2013 31 August 2012 15 December 2013 30 June 2014 30 April 2015 30 November 2021 17 January 2022

The options due to be exercised on 31 August 2012 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 28.

(e) Convertible debenture

The Company has issued a convertible debenture to the value of for $A960,522 ($CAD1.0M) as at 30 June 2012, which, at the option of the holder, can be converted into fully paid ordinary shares in the Company. Refer note 19 for details of the conversion price and the number of shares that would be issued as at 30 June 2012 if the conversion took place at that date.

(f) Cancelled Shares

No shares were cancelled in the current or previous year.

(g) Share buy-back

There is no current on-market buy-back.

(h) Employee share plan

Information relating to the employee share plans, including details of shares issued under the plans is set out in note 28.

(i) Capital risk management

The Company’s objectives when managing capital is to safeguard its ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 21. Reserves and accumulated losses

(a) Reserves Share-based payments reserve Movements: Balance 1 July 2011 Value attributable to options attaching to shares issued during the year Option expense Options issued to consultants and staff Balance 30 June 2012 (b) Accumulated losses Movements in accumulated losses were as follows: Balance 1 July 2011 Net loss for the year Balance 30 June 2012	2012 $ 907,059 595,207 171,009 140,843 907,059 (26,584,345) (2,297,520) (28,881,865)	2011 $
		595,207
		388,366 200,613 6,228
		595,207
		(23,989,166) (2,595,179)
		(26,584,345)

Nature and purpose of reserves

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 22. Key management personnel disclosures

(a) Directors

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

Non-executive Chairman –Professor Colin Chapman

Non-executive Directors

Professor Roy Robins-Browne (Resigned 7 February 2012) Simon Sallka (Resigned 7 February 2012)

Dr Elane Zelcer

Dr Stewart Washer (Appointed 7 February 2012) Dr Roger Aston (Appointed 25 May 2012)

Executive Director and Chief Executive Officer

Joseph Baini (Appointed 25 May 2012)

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 22. Key management personnel disclosures (continued)

(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

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

(c) Key management personnel compensation ( including Executive Director and Chief Executive Officer)

Short-term employee benefits Post-employment benefits Share based payments Long-term benefits	2012 $ 963,639 15,985 45,827 - 1,025,451	2011 $ 833,940 29,037 80,329 41,230
		984,536

Detailed remuneration disclosures are provided in sections A-C of the remuneration report on pages 8 to 13.

(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 13 to 15.

Option holdings

Set out below are the movements on the options over ordinary shares issued to the Chief Executive Officer and key management personnel, including their personally related parties, during the 2012 financial year.

2012 Name J M Baini (1) A Meltzer G T Rawlin G N Stevens	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
	1,250,000 - - (500,000) 750,000 750,000 - - 2,000,000 - - 2,000,000 2,000,000 - - 500,000 - - 500,000 500,000 - - 500,000 - - 500,000 500,000 -
	1,250,000 3,000,000 - (500,000) 3,750,000 3,750,000 -

Note 1. The 500,000 options expiring on 31 January 2012 were not exercised and lapsed.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 22. Key management personnel disclosures (continued)

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

Share and listed option holdings

The number of shares and listed options held in the Company (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).

2012 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
Shareholdings Directors C B Chapman R Robins-Browne (1) S Sallka (2) E Zelcer S J Washer (3) R Aston (4) J M Baini (5) Other key management personnel A Meltzer Dr G T Rawlin G N Stevens Option holdings Directors E Zelcer - listed options J M Baini - listed options - unlisted options Other key management personnel A Meltzer - unlisted options G T Rawlin - listed options - unlisted options G N Stevens - listed options - unlisted options	1,280,080 - 401,035 - 1,444,211 - 66,591 - - - 500,000 - 417,342 - 1,283,643 - 2,312,781 -	250,000 1,530,080 (401,035) - (1,444,211) - 513,319 579,910 600,000 600,000 200,000 200,000 450,000 950,000 905,000 1,322,342 71,428 1,355,071 808,000 3,120,781
	- - - - 1,250,000 - - - - - - - - - - -	4,440 4,440 33,334 33,334 (500,000) 750,000 2,000,000 2,000,000 23,810 23,810 500,000 500,000 102,667 102,667 500,000 500,000

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 22. Key management personnel disclosures (continued)

Note

1 Resigned as director on 7 February 2012. 2 Resigned as director on 7 February 2012 3 Appointed a director on 7 February 2012 4 Appointed a director on 25 May 2012 5 Appointed a director on 25 May 2012.

2011 Name Directors C B Chapman R Robins-Browne S Sallka E Zelcer Other key management personnel J M Baini - shares (1) - unlisted options A Meltzer G T Rawlin G N Stevens	Balance at the start of the year Received during the year on the exercise of options 1,148,823 - 401,035 - 1,444,211 - 66,591 - - - - - - - 1,283,643 - 2,257,142 -	Other changes during the year Balance at the end of the year 131,257 1,280,080 - 401,035 - 1,444,211 - 66,591 500,000 500,000 1,250,000 1,250,000 417,342 417,342 - 1,283,643 55,639 2,312,781

1. Appointed Chief Executive Office on 17 January 2011.

(e) Loans to key management personnel.

There are no loans to any director or other key management personnel, including their personally related parties (2011 -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 their respective superannuation plans.

(g) Other transactions with key management personnel

Other than the transactions listed below there were no other transactions with Directors or other key management personnel

during the year.

Shares and options issued on 8 November 2011 under the non-renounceable offer to shareholders. The Options expire on 15 December 2013 E Zelcer J M Baini G T Rawlin G N Stevens	Shares 13,319 100,000 71,428 308,000	Options
		4,440 33,334 23,810 102,667

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 22. Key management personnel disclosures (continued)

Shares issued on 18 June 2012 under the shareholder Share Purchase Plan
C B Chapman
E Zelcer
S J Washer
J M Baini
A Meltzer
On market purchases during the year
E Zelcer
S J Washer
R Aston
J M Baini
A Meltzer
G N Stevens
Note 23.
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
Other assurance services
Total remuneration for audit services

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

All non-audit services have been reviewed by the Audit and Risks Committee to ensure that they do not impact the impartially of the Auditor.

Note 24. 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

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 24. Commitments and Contingencies (continued)

The key points of the lease are:

(i) Term – The current lease expires in August 2012.
(ii) Transferable – Immuron can assign the lease with the consent of the landlord, which consent will not be unreasonably withheld.

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 $US5,000 per month. The maximum future commitment under this agreement is $A9,800 ($US10,000). The agreement can be terminated by providing one month’s notice.

The Company entered into an ARC linkage research agreement with Monash University under which the Company has agreed to contribute to the C. difficile research project. The total amount of the contribution is $268,901 over a three year period of which $43,625 has been expensed in the current year.

c) Contingent liability $ 142,016

The Company received grant funds in previous years 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.

Note 25.

Events occurring after balance sheet date

Subsequent to 30 June 2012 the following significant events have occurred:

The Company issued 103,524.381 bonus options to all shareholders under the terms of the prospectus dated 6 July 2012. The options expire on 30 April 2015 and are exercisable into ordinary shares on the payment of $0.04 per share. No funds were raised from the issue of the options.

Note 26. Reconciliation of net cash outflow from operating activities to loss after income tax

Loss for the year Depreciation and amortisation Fair gain on debenture derivative Effective interest rate adjustment on borrowings Increase in share based payment equity Change in operating assets & liabilities: Decrease/(Increase) in inventories Decrease/(Increase) in debtors and prepayments (Decrease)/Increase in trade and other payables (Decrease)/Increase in employee benefits provisions Net cash (outflow) from operating activities	2012 $ (2,297,520) 72,566 (367,589) 47,827 214,510 76,500 (431,162) 222,209 - (2,462,659)	2011 $ (2,595,179) 21,327 - - 108,042 (268,333) 271,972 560,635 (67,900)
		(1,969,436)

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 27.
Earnings Per Share

(a) Basic earnings per share
Loss from continuing operations attributable to the ordinary equity holders of
the company
(b) Diluted earnings per share
Loss from continuing operations attributable to the ordinary equity holders of
the company
(c) Reconciliation of earnings used in calculating earnings per share
Basic earnings per share
Loss for year attributable to members of Immuron Limited
There are no reconciling items to the above two loss amounts in calculating the
(d) Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in
calculating basic earnings per share
Weighted average number of ordinary shares and potential ordinary shares
used as the denominator in calculating diluted earnings per share

2012
2011
Cents
Cents
(0.67)
(0.82)
(0.67)
(0.82)
(2,297,520)
(2,595,179)

(2,297,520)
(2,585,179)

earnings per share.
2012
2011
344,688,598
315,683,833
344,688,598
315,683,833

(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 28. Share based payments

(a) Directors and employee option plans

Shareholders approved the adoption of the Immuron Executive Share Option Plan (ESOP) at a general meeting held on 5 September 2011. Under the rules of ESOP selected management and consultants are eligible to participate in the ESOP at the absolute discretion of the company’s Board of Directors.

Directors are eligible to participate in the ESOP however no options will be issued to Directors or any related party without the prior approval of shareholders.

The ESOP is designed to provide long term incentives to senior executives, employees and consultants with the opportunity to participate in the company’s future growth and to contribute to that growth.

Options are granted under the ESOP for no consideration and do not provide any rights to dividends or voting at general meetings of shareholders.

Upon the exercise of options each option is convertible into one fully paid ordinary share.

Prior to the adoption of the ESOP 1,250,000 options had been granted to the Chief Executive Officer under the terms of his consulting agreement as set out below

A summary of the current options issued to the Chief executive Officer, together with options granted during the year under the terms of the ESOP, are set out below.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 28. Share based payments (continued)

		Balance	Granted	Exercised	Forfeited/	Balance at	Vested &
		at start	during	during	lapsed	the end of	Exercisable
Date	Expiry	Exercise of the	the year	the year	during the	the year	at end of
granted	date	price year			year	Number	the year
		$ Number	Number	Number	Number		Number
2012
Options issued to CEO under terms of his consultancy agreement
18/02/2011	31/01/2012	0.085 500,000	-	-	(500,000)	-
18/02/2011	31/05/2013	0.0945 750,000	-	-	-	750,000	750,000
		1,250,000	-	-	(500,000)	750,000	750,000
Options issued during year		under the ESOP
19/12/2011	30/06/2014	0.07 -	4,000,000	-	-	4,000,000	4,000,000

Total options	on issue	1,250,000	4,000,000	-	(500,000)	4,750,000	4,750,000
Weighted average exercise		price $0.091	$0.07		$0.085	$0.074	$0.074
2011
1/10/2007	1/10/2010	0.33 4,913,370	-	-	(4,913,370)	-	-
1/10/2007	1/10/2010	0.43 4,913,370	-	-	(4,913,370)	-	-
18/02/2011	31/01/2012	0.085 -	500,000	-	-	500,000	500,000
18/02/2011	31/05/2013	0.0945 -	750,000	-	-	750,000	750,000
		9,826,740	1,250,000	-	(9,826,740)	1,250,000	1,250,000
Weighted average exercise		price $0.38	$0.91		$0.38	$0.91	$0.91

The weighted average remaining contractual life of options outstanding at 30 June 2012 is 1.83 years (2011 –1.56 years)

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 (based on historical volatility), the expected dividend yield and the risk free interest rate for the term of the option.

The model inputs for options granted during the year ended 30 June 2012 included:

a) Share price at grant date: $0.041 (2011 $0.07 and $0.08)
b) Exercise price: $0.07, however options can only be exercised if share price has a VWAP of $0.14 for 10 consecutive business days. (2011 $0.085 and $0.0945)
c) Expiry date : 30 June 2014
d) Expected price volatility of the Company’s shares – 100% (2011 70%) e) Risk-free interest rate- 3.25% (2011 4.75%)
f) Expected dividend yield – 0% (2011 0 %)

For further details relating to options granted, refer to the Remuneration Report on pages 14 to 15.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 28. 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 during the year was Nil (2011 $1,000)

(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.

No shares were issued under this plan in either the 2012 or 2011 financial years.

(d) Other equity securities issued during the 2012 financial year in lieu of payments to consultants were as follows.

Date of issue Issue price cents per share/options Number Shares and options issued to consultants in lieu of consulting fees were as follows: Issued to corporate advisors 3 November 2011 6.93 1,010,504 30 November 2011 0.0175 214,286 Issued to other consultants 29 June 2012 2.70 275,090 Options issued to consultants 29 June 2012 4.86 1,766,465	Total value $ 66,250 3,750 7,417 85,776
	163,193

The number and value of the shares and options issued to consultants in lieu of consulting fees were based on the direct cost associated with the provision of those services and were issued in lieu of payment for those services.

Immuron Limited Notes to the Financial Statements 30 June 2012

Note 28. Share based payments (continued)

(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 and consultants Directors’ fees Research and product commercialisation Corporate and administration	2012 $ 51,317 - 93,193 70,000 214,510	2011 $ 43,228 9,188 49,026 6,600
		108,042

Note 29. Related party transactions

Key management personnel

Disclosures relating to key management personnel are set out in Note 28.

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

Directors’ Declaration for the year ended 30 June 2012.

In the directors’ opinion:

(a) the financial statements and notes set out on pages 23 to 58 are in accordance with the Corporations Act 2001 including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Company’s financial position as at 30 June 2012 and of its performance for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

Note 1(a) confirms that the financial statements also comply with the International Financial Reporting Standards as issued by the International Accounting Standards Board.

The directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer as required by section 295A of the Corporations Act 2001 .

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

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C B Chapman E Zelcer Director Director

Melbourne

28 September 2012.

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Independent auditor’s report to the members of Immuron Limited

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 2012, and the statement of comprehensive income, the 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 Note 1, 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 opinion.

Independence

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

PricewaterhouseCoopers, ABN 52 780 433 757 2 Southbank Boulevard, Southbank VIC3006, GPO Box 1331, Melbourne VIC3001 T +61 3 8603 1000, F +61 3 8603 1999, www.pwc.com.au

Liability limited by a scheme approved under Professional Standards Legislation

Page 60

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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 2012 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 company’s financial report also complies 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 programs and further investments by investors as required. 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 8 to 16 of the directors’ report for the year ended 30 June 2012. 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 2012, complies with section 300A of the Corporations Act 2001 .

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PricewaterhouseCoopers

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Lisa Harker Partner

Melbourne 28 September 2012

Page 61

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, 2012.

a) Distribution of equity securities

Analysis of numbers of equity security holders by size of holding

Class of equity security

1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over		Shares 93 349 250 638 524			Options
				Expiring 15/12/2013 69 44 21 39 3		Expiring 30/04/2015 357 532 197 588 206 1,880
		1,854		176

There were 974 holders of less than a marketable parcel of ordinary shares.

b) Equity security holders

Twenty largest quoted equity security holders

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)
Alaven Consumer Healthcare Inc.
Hallam Drainage Pty Ltd
Rakio Pty Ltd (Piekarski Footscray A/C)
Dr Russell K. Hancock
Mr Hamish Salmon & Mrs Brigette McGuire (Salmon Family Super Fund A/C)
David Hamilton
Blau Holdings Pty Ltd ( Blau Holdings Property A/C)
Sandhurst Trustees Ltd (JMFG Consol A/C)
G & N Lord Superannuation Pty Ltd (GNR Superannuation Fund A/C)
Advance Publicity Pty Ltd (The Izmar Family A/C)
Dr Kuen Seng Chan
Insync Investments Pty Ltd (Weekly Super Fund No 1 A/C)
Mrs Jaclyn Stojanovski, Mr Chris Retzos & Mrs Susie Retzos (Retzos Executive
S/F A/C)
Mr Mark Henry Coombe-Tennant
Mr David Leroy Boyles
Trevor Meyer Management Pty Ltd (Meyer S/F A/C)
Mrs Maria Lorandi
I E Properties Pty Ltd

Number
held
Percentage
of Issued
Shares
59,164,094
14.29
24,627,723
5.95
9,017,229
2.18
6,300,000
1.52
5,750,168
1.39
5,600,000
1.35
5,432,550
1.31
4,795,043
1.16
4,740,000
1.14
4,000,000
0.97
3,500,000
0.85
3,471,000
0.84
3,272,621
0.79
3,200,000
0.77
3,076,471
0.74
3,025,000
0.73
3,000,000
0.72
2,884,410
0.70
2,800,000
0.68
2,500,000
0.60

160,156,309
38.68

c) Voting rights

All ordinary shares carry one vote per share without restriction.

d) Quoted options
Options issued to take up ordinary shares
The twenty largest holders of quoted options expiring 15 December 2013 at 31 August ar
Hadasit Medical Research Services & Development Limited
CCZ Corporate Finance Pty Ltd
Navigator Australia Ltd (MLC Investment Sett A/C)
Yimboon Pty Ltd (Stevens Retirement Fund A/C)
Mr John Speedie
Kroeger Enterprises Pty Ltd 9Kevt Unit A/C)
R B Keenan Superannuation Pty Ltd 9RB Keenan Super Fund A/C)
Roger George Davis
Mt Lloyd D’Souza
Mr Donald Logan & Mr David Logan 9Swanhill Compserv Pty Ltd A/C)
Mrs Maria Lorandi
Deavin Family Super Fund Pty Ltd (Deavin Family S/F A/C)
Pastis Pty Ltd (Superannuation Fund A/C)
Mr Keith Peter Guiney & Mr Christopher Peter McLoughlin
A S Munn (Consultants9 Pty Ltd (Super Fund Account)
Chris Roberts Enterprises Pty Ltd (Nason Super Fund A/C)
Exec Factor Pty Ltd
Perpetual Trustee Company Limited
Springfield (PT) Pty Ltd (Tomamichel Family A/C)
Mrs Gloria Pay Chapman & Mr Athol Murray Chapman (GF & AM Chapman S/F A/C)

Number
held
% of
options held
e as follows:
893,357
32.46
214,286
7.79
106,667
3.88
100,000
3.63
88,172
3.20
72,528
2.64
71,433
2.60
66,667
2.42
59,167
2.15
58,718
2.13
50,385
1.83
40,100
1.46
37,911
1.38
36,667
1.33
33,334
1.21
33,334
1.21
33,334
1.21
28,510
1.04
26,667
0.97
26,048
0.95

2,077,285
75.48

The names of the twenty largest holders of quoted options expiring 30 April 2015 at 31 August are as follows:

Hadasit Medical Research Services & Development Limited
Capital Concerns Pty Ltd ( Logue Family Super Fund A/C)
Mr Hamish Salmon
Alaven Consumer Healthcare Inc.
Hallam Drainage Pty Ltd
Rakio Pty Ltd (Piekarski Footscray A/C)
Dr Russell K. Hancock
David Hamilton
Blau Holdings Pty Ltd ( Blau Holdings Property A/C)
Sandhurst Trustees Ltd (JMFG Consol A/C)
G & N Lord Superannuation Pty Ltd (GNR Superannuation Fund A/C)
Mr Mark Henry Coombe-Tennant
Advance Publicity Pty Ltd (The Izmar Family A/C)
Insync Investments Pty Ltd (Weekly Super Fund No 1 A/C)
Mrs Jaclyn Stojanovski, Mr Chris Retzos & Mrs Susie Retzos (Retzos
Executive S/F A/C)
Greenhatch Superannuation Pty Ltd (Greenhatch Super Fund A/C)
Howzed Pty Ltd (RCS Super Fund A/C)
Mr Peter Philip & Mrs Yvette Philip
RWD Nominees Pty Ltd (RWD Super Fund A/C)
Mr Dennis Gregory Scott & Mrs Colette Theresa Scott (Scotts Super Fund A/C)
e) Substantial holders
Substantial holders in the Company are set out below:
Ordinary Shares
Hadasit Medical Research Services & Development Limited
Capital Concerns Pty Ltd (Logue Family Super Fund A/C)

14,791,024
8,656,931
2,500,000
2,254,308
1,550,000
1,437,542
1,400,000
1,198,761
1,185,000
1,000,000
875,000
818,750
800,000
800,000
769,118
750,000
750,000
750,000
750,000
750,000
12.75
7.46
2.15
1.94
1.34
1.24
1.21
1.03
1.02
0.86
0.75
0.71
0.69
0.69
0.66
0.65
0.65
0.65
0.65
0.65

43,786,434
37.74

Number
held
Percentage of
Issued Shares
59,164,094
14.29%
24,627,723
5.95%

AI assistant

Immuron Ltd — Annual Report 2012

35121_rns_2012-09-27_f1266d26-10d0-458c-ab70-c98334e93a07.pdf

Annual Report 2012

Immuron Limited Directors’ Report

Directors

Principal activities

Operating results and dividends

Review of operations and results

Immuron Limited Directors’ Report

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.

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options over ordinary shares

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

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options over ordinary shares

Immuron Limited Directors’ Report

Dr Stewart Washer

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options over ordinary shares

Dr. Roger Aston BSc (Hons), PhD

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options over ordinary shares

Joseph Baini BSc, Post Grad Diploma of Business Management

Executive director Appointed 25 May 2012

Experience and expertise

Other current directorships

Former directorships in last 3 years

Special responsibilities

Interests in shares and options over ordinary shares

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

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

Graeme Stevens

Immuron Limited Directors’ Report

Meetings of directors

Remuneration report

A. Remuneration policy and framework used to determine the nature and amount of remuneration

Non-executive Directors

Immuron Limited Directors’ Report

Directors' fees

Retirement allowances for non-executive Directors

Executive remuneration

Base pay

Retirement benefits

Executive Officer Share Plan and Executive Share Option Plan

Incentive Bonus

Immuron Limited Directors’ Report

Voting and comments made at the Company’s 2011 Annual General Meeting

B. Details of remuneration

Amounts of remuneration

Immuron Limited Directors’ Report

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

Joseph Baini – Chief Executive Officer

Amos Meltzer – Vice President Business Development

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

Graeme Stevens

Details of remuneration: Bonuses and share based compensation benefits.

D. Share-based compensation

Immuron Ltd Annual Report 2012