Immuron Ltd — Regulatory Filings 2006

Sep 12, 2006

13 September, 2006.

The Company Announcement Office. Australian Stock Exchange Limited, Sydney.

Subject: Preliminary Final Report 30 June, 2006 - Appendix 4E.

Dear Sir/Madam,

Anadis Limited, during the year to 30 June 2006, continued to invest heavily in the company's lead products Travelan, launched end 2004, and EV-71, scheduled for launch mid 2007. Both products are based on Anadis' unique methods of producing hyperimmune colostrum.

The 2006 result included; significant promotional expenditure on Travelan (Anadis first product), preparation of the EV71 antibody product, a decision to write off goodwill, and an explicable short fall in revenue. Consequently Anadis Limited incurred a loss of approximately \$3.5 million. (Previous year \$1.3 million loss)

However, Anadis has, since year end, entered into an agreement for overseas distribution of Travelan in South Africa, and is poised to sign agreements in Canada and the USA.

Additional clinical indications of Travelan use are being explored to value-add to our product. Respiratory, hospital super bugs, and bio-warfare research and product development programmes continue.

The company completed a successful capital raising in June this year accumulating approximately \$1.7 million from existing, new, institutional, and professional investors.

The year to 30 June 2006 has provided a significant challenge to the biotechnology sector. We believe the steps we have taken should result in a successful year in 2006/07.

Philip Molyneux Chairman

For further information contact

Conor Graham CEO Phone: 03 9358 6388 Email: info@anadis.com.au

ANADIS Limited. ABN 80 063 114 045

ASX Preliminary final report - 30 June 2006

Appendix 4E - Lodged with the ASX under Listing Rule 4.3A

Contents

Results for Announcement to the Market	3.
Preliminary Income Statements	4
Preliminary Balance Sheets	5.
Preliminary Statement of Changes in Equity	6.
Preliminary Cash Flow Statements
Notes to preliminary Financial Statements	8
Other Appendix 4E Information	21

ANADIS Limited Year ended 30 June 2006 (Previous corresponding period: Year ended 30 June 2005)

Results for Announcement to the Market

$N/A$

Revenue from ordinary activities	Down	17.8%	4,002,371
(Loss) from ordinary activities after tax attributable to members	Up	162.0%	(3,559,931)
Net (loss) for the period attributable to members	Up	162.0%	(3,559,93]

Dividends/distributions	Amount per security	Franked amount per security
Final dividend
Interim dividend

Record date for determining entitlements to the dividend

Explanation of revenue

Sale of goods $( $4,002,371)$ represented the largest contribution $(97.4\%)$ to revenue. Additional revenue was interest received on cash deposits of \$106,216. In addition, Other Income (grants received) totalled \$704,834

Explanation of Profit/(loss) from ordinary activities after tax

The increase in the loss (162%) from the previous year is mainly attributed to the costs associated with the launch of our first product (Travelan) onto the market, reduced manufacturing sales and the write off of Goodwill.

For further details concerning the revenue and loss, please refer to the covering letter from the Chairman.

ANADIS Limited Preliminary Income Statements For the year ended 30 June 2006

	Notes	2006	2005
		\$	\$
Revenue from continuing operations	2	4,108,587	5,102,385
Other income	2	704,834	687,375
Raw materials used		(2,577,171)	(3,065,639)
Employee benefits expense		(2,270,001)	(1,938,520)
Depreciation		(174, 187)	(171, 059)
Impairment charge	3.	(293,119)
Finance costs			(168)
Research and development - external		(762, 660)	(809,069)
Grant applications costs		(50,475)	(70, 110)
Factory overheads		(205,269)	(263, 208)
Directors' fees		(256,150)	(189, 387)
Travel expenses		(122, 863)	(93, 282)
Product marketing - external		(939, 601)	(377, 696)
Export development		(49,048)	(18,670)
Consultants costs		(178, 353)	(28,378)
Shareholder relations		(138, 838)	(96,270)
Corporate and administrative expenses		(355,617)	(326, 886)
Loss before income tax		(3,559,931)	(1,658,582)
Income tax benefit			299,879
Loss attributable to members of Anadis Limited		(3,559,931)	(1,358,703)
Loss from continuing operations		(3,559,931)	(1,358,703)
Net loss for the year		(3,559,931)	(1,358,703)
		Cents	Cents
Loss per share for loss from continuing operations attributable to the ordinary equity holders of the company
Basic earnings per share	6	(3.84)	(1.48)
Diluted earnings per share	6	(3.84)	(1.48)
Loss per share attributable to the ordinary equity holders of the company
Basic earnings per share	6	(3.84)	(1.48)
Diluted earnings per share	6	(3.84)	(1.48)

The above preliminary Income Statements should be read in conjunction with the accompanying Notes.

ANADIS Limited Preliminary Balance Sheets As at 30 June 2006

	Notes	2006	2005
		\$	\$
ASSETS
Current Assets
Cash & cash equivalents		1,434,265	178,660
Receivables		815,670	967,985
Held to maturity investments		1,100,000	3,479,217
Inventories		1,589,705	1,288,980
Other assets		58,805	126,219
Total Current assets		4,998,445	6,041,061
Non-Current Assets
Property, plant and equipment		1,626,806	1,738,671
Intangible assets	$\mathfrak 3$		293,119
Total Non-Current Assets		1,626,806	2,031,790
TOTAL ASSETS		6,625,251	8,072,851
LIABILITIES
Current Liabilities
Accounts payable		1,181,920	924,664
Provisions		53,239	41,891
Other		151,325	125,000
Total Current Liabilities		1,386,484	1,091,555
Non-Current Liabilities
Provisions		60,120	22,898
Total Non-Current Liabilities		60,120	22,898
TOTAL LIABILITIES		1,446,604	1,114,453
NET ASSETS		5,178,647	6,958,398
EQUITY
Contributed equity	5	18,729,796	16,984,561
Reserves		78,205	43,260
Accumulated losses		(13,629,354)	(10,069,423)
TOTAL EQUITY		5,178,647	6,958,398

The above preliminary Balance Sheets should be read in conjunction with the accompanying Notes.

ANADIS LIMITED Preliminary Statements of Changes in Equity
For the year ended 30 June, 2006

	Notes	2006 \$	2005 S
Total equity at the beginning of the financial year		6,958,398	4,031,328
Net income recognised directly in equity Profit/(Loss) for the financial year		(3,559,931)	(1.358.703)
Total recognised income and expense for the year		(3,559,931)	(1.358.703)
Transactions with equity holders in their capacity as equity holders:
Contributions of equity, net of transaction costs Share options	5	1,745,235 34.945	4,242,513 43,260
		1,780,180	4,285,773
Total equity at the end of the financial year		5,178,647	6,958,398

The above preliminary Statements of Changes to Equity should be read in conjunction with the accompanying Notes.

ANADIS Limited Preliminary Cash Flow Statements For the year ended 30 June 2006

	2006 Inflow/ (Outflow)	2005 Inflow / (Outflow)
	S	s
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of goods and services
$\text{tax}$	4,517,234	5,041,619
Payments to suppliers and employees (inclusive of goods and services tax)	(8,257,036)	(8,107,640)
	(3,739,802)	(3,066,021)
Interest received	143,905	184,854
Grants received	789,371	825,657
R&D tax rebate		299,879
Interest paid		(168)
Net Cash (outflow) from Operating Activities	(2,806,526)	(1,755,799)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for plant and equipment	(62, 321)	(140,671)
Proceeds from maturing debentures Investments in debentures	2,379,217
		(2,479,217)
Net Cash inflow/(outflow) from Investing Activities	2,316,896	(2,619,888)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares & other equities	1,824,001	4,251,000
Share placement cost	(78,766)	(8,487)
Net Cash inflow from Financing Activities	1,745,235	4,242,513
Net increase/(decrease) in cash and cash equivalents	1,255,605	(133, 174)
Cash and cash equivalents at beginning of financial year	178,660	311,834
Cash and cash equivalents at end of financial year	1,434,265	178,660

The above preliminary Cash Flow Statements should be read in conjunction with the accompanying Notes.

ANADIS Limited Notes to preliminary Financial Statements For the vear ended 30 June 2006

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 equivalents to International Financial Reporting Standards (AIFRSs), other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001

Compliance with IFRSs

Australian Accounting Standards include AIFRSs. Compliance with AIFRSs ensures that the financial statements and notes of the Company comply with International Financial Reporting Standards (IFRSs).

Application of AASB 1 First-time Adoption of Australian Equivalents to International Financial Reporting Standards These financial statements are the first Anadis Limited financial statements to be prepared in accordance with AIFRSs. AASB 1 First time Adoption of Australian Equivalents to International Financial Reporting Standards has been applied in preparing these financial statements.

Financial statements of Anadis Limited until 30 June 2005 had been prepared in accordance with previous Australian Generally Accepted Accounting Principles (AGAAP). AGAAP differs in certain respects from AIFRS. When preparing the Company's financial report for the year ended 30 June 2006, management has amended certain accounting and valuation methods applied in the previous AGAAP financial statements to comply with AIFRS. With the exception of financial instruments, the comparative figures in respect of 2005 were restated to reflect these adjustments. The Company has taken the exemption available under AASB 1 to only apply AASB 132 and AASB 139 from 1 July 2005.

Reconciliations and descriptions of the effect of transition from previous AGAAP to AIFRSs on the Company's equity and its net income are given in Note 4

Historical cost convention

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

Critical accounting estimates

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

Going concern

At 30 June 2006 and 2005, the Company's cash and investments were approximately \$2.2 million and \$3.7 million, respectively, and for the year ended 30 June 2006 and 2005, the Company experienced operating losses of \$3.6 million and \$1.7 million, and operating net cash outflows of \$2.8 million and \$1.8 million, respectively. These outflows arose from expenses associated with the promotion of the company's first product on the market. Travelan, and research and development programs. As a result of the continuing losses and cash outflows from operations the Directors have assessed the Company's ability to continue as a going concern and to pay its debts as and when they fall due.

The Company's ability to fund its operations is dependent upon obtaining income from the commercialisation of its research and development projects, supplemented by contract manufacturing and grant incomes, and from the raising of additional capital through new sources of financing. Ultimately, the Company's continuation as a going concern is dependent upon achieving profitable operations through the successful commercialisation of its products and technology.

As a result of the difficulty in predicting the timing and quantum of income from the commercialization of its products and technology, including Travelan and EV71, there is significant uncertainty whether the Company will be able to continue as a going concern and realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial report.

Going concern (continued)

However, the Directors are confident that the Company's planned initiatives will be successfully achieved during the next 12 months providing access to adequate financial resources. Specifically, in July 2006 the company signed a further two year contract with Aussie Bodies ensuring a supplementary income flow from contract manufacturing and in August 2006 the company signed contracts for the distribution of Travelan internationally. Furthermore, the company has a history of successful capital raising, including the raising of \$1.6 million in June 2006, and the directors are confident of the company's ability to raise further capital if the need arises.

Accordingly, the Directors have prepared the financials 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

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment and is subject to risks and returns that are different from those of segments operating in other economic environments.

$\left( \mathbf{c} \right)$ Foreign currency translation

$\left( i\right)$ Functional and presentation currency

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

$(ii)$ Transactions and balances

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

$(d)$ Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and duties and tax paid. The following specific revenue criteria must be met before revenue is recognised:

Sale of Goods – Significant risks and rewards of ownership of goods has passed to the buyer.

Interest – Interest revenue is recognised using the effective interest rate method.

$(e)$ Government grants

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

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

$(f)$ 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 tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantially enacted for each jurisdiction. The relevant tax rates applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial

(f) Income tax (continued)

recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

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.

$(g)$ 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 that are subject to amortisation 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 eash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly líquid 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, less provision for doubtful debts. Trade receivables are due for settlement no more than 30 days from the date of recognition.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful 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. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows. The amount of the provision is recognised in the income statement.

Inventories $(i)$

Raw materials, work in progress and finished goods are stated at the lower of cost and net realisable value. 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

Buildings and 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 income statement during the financial period in which they are incurred.

Land is stated at historical cost and not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost or revalued amounts, net of their residual values, over their estimated useful lives, as follows:

- Buildings	50 years
- Building Improvements	$10-40$ years
- 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.

$(k)$ Property, plant and equipment (continued)

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 $1(e)$ ).

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

$\theta$ 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.

Research and development $(ii)$

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

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

$(m)$ 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.

Employee benefits $(n)$

(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 are provided to employees via the Anadis Executive Share Plan No 1 or No. 2.

Shares options granted before 7 November 2002 and/or vested before 1 January 2005.

No expense is recognised in respect of these options. The shares are recognised when the options are exercised and the proceeds received allocated to share capital.

$(n)$ Employee benefits (continued)

Shares options granted after 7 November 2002 and vested after 1 January 2005.

The fair value of options granted under the Anadis Executive Share Plan No 1 or No. 2 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 independently 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 nontradeable nature of the option, the share price at grant date and expected price volatility of the underlying share, the expected dividend vield 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.

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

$(v)$ Termination benefits

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

$(0)$ Investments and other financial assets

From 1 July, 2004 to 30 June, 2005

The Company has taken the exemption available under AASB 1 to apply AASB 132 and AASB 139 only from 1 July. 2005. The Company has applied previous AGAAP to the comparative information on financial instruments within the scope of AASB 132 and AASB 139.

Adjustments on transition date: 1 July, 2005

Held-to-maturity investments and loans and receivables are measured at amortised cost.

At transition there has been no material adjustments. For further information concerning the adjustments on transition date reference should be made to held-to-maturity investments.

From 1 July, 2005

The Company classifies its debentures as held-to-maturity investments.

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments that are not fixed maturities that the Company's management has the positive intention and ability to hold to maturity.

$(p)$ Contributed equity

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

$(a)$ Earnings per share

$\ddot{a}$ 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.

$(a)$ Earnings per share (continued)

(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.

Fair value estimation $(r)$

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

The nominal value less estimated credit adjustments of trade receivables and pavables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial instruments.

Goods and Services Tax (GST) $(s)$

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.

$(t)$ New accounting standards and UIG interpretations

Certain new accounting standards and UIG interpretations have been published that are not mandatory for 30 June, 2006 reporting periods. The Company's assessment of the impact of these standards and interpretations is set out below.

UIG 4 Determining whether an Asset Contains a Lease. $\left( i \right)$

UIG 4 is applicable to annual periods beginning on or after 1 January 2006. The Company has not elected to adopt UIG 4 early. It will apply UHG 4 in its 2007 financial statements and the UIG 4 transition provisions. The Company will therefore apply UIG 4 on the basis of facts and circumstances that existed as of 1 July 2006. Implementation of UIG 4 is not expected to change the accounting for any of the Company's current arrangements.

$(ii)$ AASB 2005-9 Amendments to Australian Accounting Standards [AASB 4, AASB 1023, AASB 139 & AASB 132] AASB 2005-9 is applicable to annual reporting periods beginning on or after 1 January 2006. The amendments relate to the accounting for financial guarantee contracts. The Company has not elected to adopt the amendments early. It will apply the revised standards in its 30 June 2007 financial statements.

AASB 7 Financial Instruments: Disclosures and AASB 2005-10 Amendments to Australian Accounting (iii) Standards [AASB 132, AASB 101, AASB 114, AASB117, AASB 133, AASB 139, AASB 1, AASB 4, AASB 1023 & AASB 10381

AASB 7 and AASB 2005-10 are applicable to annual reporting periods beginning on or after 1 January 2007. The Company has not adopted the standards early. Application of the standards will not affect any of the amounts recognised in the financial statements, but will impact the type of information disclosed in relation to the Company's financial instruments.

Revenue and Other Income Note 2.

	2006	2005
	S	S
Revenue
Sale of goods	4,002,371	4,867,597
Interest	106,216	234,788
	4,108,587	5,102,385
Other income
Government grants	691,312	471,868
Other grants	13,522	215,507
	704,834	687,375

Government grants

The following government grants were recognised as other income by the Company during the financial year:

$\bullet$	National Food Industry Strategy Ltd.	\$224.437
$\bullet$	Dept. of Education, Science & Training	\$319.352
$\bullet$	Dept of Industry, Tourism & Resources	\$124.718
$\bullet$	AusTrade	\$22,805
	Total - 2006 -	\$691.312

There are no unfulfilled conditions or other contingencies attaching to these grants. The Company did not benefit directly from any other forms of government assistance.

Coodwill

Note 3. Non-Current Assets - Intangible Assets

358,921
(65, 802)
293,119
293,119
293,119
358,921
(65, 802)
293,119
293,119
(293.119)
358,921
(358.921)

Impairment test for goodwill

Goodwill is allocated to the Company's manufacturing cash-generating unit operating in Australia.

The recoverable amount of a CGU is based on value-in-use calculations. These calculations use cash flow projections based on financial budgets approved by management. Cash inflows for the CGU derive from the manufacturing contract with Aussie Bodies (AB) and accordingly the key assumptions used for the value-in-use calculations are based on the terms of the contract: a) 2 year term, b) gross margin of $20\%$ , c) no assumed growth rate and d) $20\%$ discount rate. The discount rates used are pre-tax and reflect specific risks relating to the manufacturing segment.

The value-in-use calculations for the current year indicated that the recoverable amount of the unit is less than the carrying amount of the unit. This impairment loss was allocated to eliminate the carrying amount of goodwill allocated to the cash-generating unit. The recoverable amount of the unit supported the carrying value of the other assets of the unit.

Note 4. Segment Information

Business Segment: The Company operates in two business segments being the conduct of Research & Development activities and the manufacture of health products.

Geographical Segment: The Company operates in one geographical segment, Australia.

Primary reporting format - business segments	\$ Manufacturing	\$ Research &	$\mathbb S$ Unallocated	Ŝ Total
2006		Development
Sales to external customers	4,002,371			4,002,371
Interest revenue			106,216	106,216
Other income		704,834		704,834
Total segment revenue/income	4,002,371	704,834	106,216	4,813,421
Segment result	(667,102)	(1,091,508)	(1,801,321)	(3,559,931)
Taxation
Profit/(Loss) after tax	(667,102)	(1,091,508)	(1,801,321)	(3,559,931)
Segment assets	3,649,061	262,332	2,713,858	6,625,251
Segment liabilities	766,056	402,684	277,864	1,446,604
Depreciation & amortisation expense	94,726	51,424	28,037	174,187
Impairment charge	293,119			293,119
Other non-cash expenses	12,180	14,959	53,462	80,601
Acquisition of non-current segment assets	44,276	443	17,603	62,322
Primary reporting format - business segments	\$ Manufacturing	\$ Research &	$\mathbf S$ Unallocated	Ŝ Total
2005		Development
Sales to external customers	4,867,597			4,867,597
Interest revenue Other income			234,788	234,788
Total segment revenue/income	4,867,597	687,375 687,375	234,788	687,375 5,789,760
Segment result	503,604	(925, 114)	(1,237,072)	(1,658,582)
Taxation		299,879		299,879
Profit/(Loss) after tax	503,604	(625, 235)	(1,237,072)	(1,358,703)
Segment assets	3,769,633	466,913	3,836,305	8,072,851
Segment liabilities	446,852	315,975	351,626	1,114,453
Depreciation & amortisation expense	90,258	55,592	25,209	171,057
Other non-cash expenses	14,995	5,798	20,726	41,519
Acquisition of non-current segment assets	122,843		17,828	140,671

Segment information is prepared in conformity with the accounting policy set out in Note 1 (b) and the accounting standard AASB 114 Segment Reporting

		2006 S		2005 \$
(a)	Issued and Paid Up Capital
	98,267,403 (2005: 92,563,403) ordinary shares fully paid	18,729,796		16,984,561
(b)	Movements in ordinary share capital
Date	Details	Number of Shares	Issue Price	S
1/7/04	Opening balance	81,663,403		12,742,048
21/7/04	Share placement	800,000	0.39	312,000
30/7/04	Share placement	10,100,000	0.39	3,939,000
	Share placement costs			(8,487)
30/6/05	Balance	92,563,403		16,984,561
29/11/05	Option conversion	50,000	0.24	12,000
29/11/05	Option conversion	50,000	0.27	13,500
9/12/05	Option conversion	250,000	0.35	87,500
13/12/05	Cancelled shares	(644,277)
1/6/06	Option conversion	50,000	0.22	11,000
5/6/06	Share placement	3,448,276	0.28	960,949
5/6/06	Issue of share options			39,051
5/6/06	Share placement	2,500,001	0.28	700,000
5/6/06	Share placement costs			(78,765)
30/6/06	Balance	98,267,403		18,729,796

Contributed equity Note 5.

Earnings Per Share Note 6.

		2006	2005
		Cents	Cents
(a)	Basic earnings per share
	Loss attributable to the ordinary equity holders of the Company	(3.84)	(1.48)
(b)	Diluted earnings per share
	Loss attributable to the ordinary equity holders of the Company	(3.84)	(1.48)
		2006	2005
		Number	Number
(c)	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	92,820,926	91,687,239
	Weighted average number of ordinary shares and potential ordinary
	shares used as the denominator in calculating diluted earnings per
share		92.820.926	91.687.239

Reconciliation of earnings used in calculating earnings per share $(d)$

The numerator used in calculation of both Basic EPS and Diluted EPS is a loss of \$3.559,931 (2005 - \$1,358,703) and there are no reconciling items to the loss from ordinary activities before income tax expense.

$(e)$ 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.

Explanation of transition to Australian equivalents to IFRSs Note 7

$(1)$

Reconciliation of equity reported under previous Australian Generally Accepted Accounting Principles (AGAAP) to equity under Australian equivalents to IFRSs (AIFRS)

$\bf(a)$	At the date of transition to AIFRS: 1 July, 2004
		Notes	Previous AGAAP	Effect of transition to AIFRS	AIFRS
			\$	\$	\$
	EQUITY
	Share capital		12,742,048		12,742,048
	Accumulated losses		(8,710,720)		(8,710,720)
	TOTAL EQUITY		4,031,328		4,031,328
(b)	At the end of the last reporting period under previous AGAAP: 30 June, 2005
		Notes	Previous	Effect of	AIFRS
			AGAAP	transition
				to AIFRS
			S	\$	\$
ASSETS
Cash	CURRENT ASSETS		178,660		178,660
	Receivables		967,985		967,985
	Held to maturity investments		3,479,217		3,479,217
	Inventories		1,288,980		1,288,980
	Other assets		126,219		126,219
	TOTAL CURRENT ASSETS		6,041,061		6,041,061
	NON-CURRENT ASSETS
	Plant and equipment		1,738,671		1,738,671
	Intangibles	(a)	275,173	17,946	293,119
	TOTAL NON-CURRENT ASSETS		2,013,844	17,946	2,031,790
	TOTAL ASSETS		8,054,905	17,946	8,072,851
	LIABILITIES
	CURRENT LIABILITIES
	Accounts payable		924,664		924,664
	Interest bearing liabilities
	Provisions		41,891		41,891 125,000
Other			125,000
	TOTAL CURRENT LIABILITIES		1,091,555		1,091,555
	NON-CURRENT LIABILITIES
	Provisions		22,898		22,898
	TOTAL NON-CURRENT LIABILITIES		22,898		22,898
	TOTAL LIABILITIES		1,114,453		1,114,453
	NET ASSETS		6,940,452	17,946	6,958,398
	EQUITY
	Share capital		16,984,561		16,984,561
	Reserves	(b)		43,260	43,260
	Accumulated losses	(a)(b)	(10,044,109)	(25,314)	(10,069,423)
	TOTAL EQUITY		6,940,452	17,946	6,958,398

Note 7 Explanation of transition to Australian equivalents to IFRSs (continued)

(2) Reconciliation of loss for the year ended 30 June, 2005
	Notes	Previous AGAAP	Effect of transition to AIFRS	AIFRS
		\$	\$	\$
Revenue from continuing operations	$\left( \text{c} \right)$	5,789,760	(687,375)	5,102,385
Other income	$\left( \mathrm{c}\right)$		687,375	687,375
Raw materials used		(3,065,639)		(3,065,639)
Employee benefits expense	(b)	(1,915,260)	(23,260)	(1,938,520)
Depreciation and amortisation expenses	(a)	(189,005)	17,946	(171,059)
Borrowing costs		(168)		(168)
Research and development - external	(b)	(789,069)	(20,000)	(809,069)
Grant application costs		(70, 110)		(70,110)
Factory overheads		(263,208)		(263,208)
Directors' fees		(189, 387)		(189, 387)
Travel expenses		(93,282)		(93,282)
Product promotion		(377, 696)		(377, 696)
Export development costs		(18,670)		(18,670)
Consultants		(28,378)		(28, 378)
Shareholder relations		(96,270)		(96,270)
Corporate and administrative expenses		(326, 886)		(326, 886)
Profit/ (loss) before income tax		(1,633,268)	(25,314)	(1,658,582)
Income tax benefit		299,879		299,879
Profit/ (loss) for the year attributable to		(1,333,389)	(25,314)
members				(1,358,703)

$(3)$ Reconciliation of cash flow statement for the year ended 30 June, 2005.

The adoption of AIFRSs has not resulted in any material adjustments to the cash flow statement.

$(4)$ Notes to the reconciliations.

$(a)$ Goodwill amortisation

The Company acquired the assets of Shannon Bioscience Pty. Ltd. On 22 November, 2000 and has taken the exemption provided by AASB 1 to not restate this acquisition as it occurred prior to 1 July, 2004.

There has been no effect on the date of transition. There have been no subsequent acquisitions.

Under AIFRS goodwill is not amortised.

The effect of this is:

At 1 July, 2004. $(a)$ There has been no effect on the date of transition.

$(ii)$ At 30 June, 2005.

There has been an increase in intangible assets of \$17,946 and a corresponding decrease in accumulated losses.

(iii) For the year ended 30 June 2005.

For the Company amortisation expense has decreased by \$17,946.

Note 7 Explanation of transition to Australian equivalents to IFRSs (continued)

Notes to the reconciliations (continued). $(4)$

(b) Share based payments

Employees

Under AASB 2 share-based Payments from 1 July 2004 the Company is required to recognise an expense for those options that were issued to employees under the Anadis Executive Share Plan No.1 No 2 after 7 November 2002 but that had not vested by 1 January, 2005.

The effect of this is:

(a) At I July, 2004. There has been no effect on the date of transition.

(ii) At 30 June, 2005. There has been an increase in accumulated losses of \$23,260 and a corresponding increase in reserves.

(iii) For the year ended 30 June, 2005 There has been an increase in employee benefits expense of \$23,260.

Contractors

Under AASB 2 share-based Payments from 1 July 2004 the Company is required to recognise an expense for those options that were issued to contractors (in relation to research and development) and vested after 1 January, 2005.

The effect of this is:

(a) At 1 July, 2004. There has been no effect on the date of transition.

(ii) At 30 June, 2005. There has been an increase in accumulated losses of \$20,000 and a corresponding increase in reserves.

(iii) For the year ended 30 June, 2005 There has been an increase in research and development expense of \$20,000.

(c) Reclassification of other income

Under AIFRS Other Income includes grant income which is not a part of the continuing operations of the business is classified as Other Income. This is in contrast to Australian GAAP treatment under which such items were classified as revenue

The effect of this is: (b) At 1 July, 2004. There has been no effect on the date of transition.

$(ii)$ At 30 June, 2005 There has been no effect

(iii) For the year ended 30 June, 2005. There has been a reclassification of \$687,375 from Other income to Revenue

$\tilde{\mathbf{q}}$ Effect of transition to AASB 132 Financial Instruments: Disclosure and Presentation and AASB 139 Financial Instruments: Recognition and Measurement from 1 July 2005

The effect of transition to AASB 132 and AASB 139 at 1 July, 2005 has not resulted in any material adjustments to the financial statements.

Note 8 Events occurring after balance sheet date

• A distribution with Pharmaco Distribution Pty. Ltd. of South Africa has been signed on 24 July, 2006 $1.$ appointing it exclusive distributor for Travelan across the African continent.
• The Company successfully received approval from the government authorities for the commercial $2.$ scale use of the Anadis Enterovirus-71 vaccine in cattle.
• $\overline{3}$ . The Company signed a two year toll manufacturing agreement with Aussie Bodies Pty. Ltd. effective 1 July, 2006.

ANADIS Limited Supplementary Appendix 4E information

NTA Backing

ł

	2006	2005
Net ordinary backing per share $\pi$ tangible $\gamma$ asset	a kritikan an c MUJU.	934.

Commentary on results

Refer to 'Explanation of Profit/(loss) from ordinary activities after tax' on page 3 and the covering letter from the Chairman.

Annual Meeting

The annual meeting will be held as follows;
---------------------------------------------	--	--	--

Place:	ASX Theatrette, 530 Collins Street Melbourne.
Date:	14 November, 2006.
Time:	2.00 pm
Approximate date the Annual
Report will be released:	10 October, 2006

Audit

This preliminary final report is based on accounts which are in the process of been audited. The Audit Report, which is expected to be unqualified, will be made available with the Company's financial report.