IMPEDIMED LIMITED

Prospectus

Surviving cancer without compromising lifestyle

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Contents
IMPORTANT INFORMATION 1 Chairman’s letter 1 2 Investment highlights and risks 2 3 Offer summary 7 4 Details of the Offer 9 5 ImpediMed’s markets and regulatory environment 14 6 ImpediMed’s products 28 7 ImpediMed’s people 44 8 Financial Information 50 9 Best practice corporate governance 67 10 Patent Attorney’s report 68 11 Independent Accountant’s report 91 12 Risk factors 95 13 Additional information 99 14 Glossary 115 15 Directors’ statement 117 Application Forms Corporate directory
Lodgement with the Australian Securities and Investments Commission
This prospectus is dated 11 September 2007 and was lodged with ASIC on that date. ASIC and ASX take no responsibility for the contents of this
prospectus. No Shares or IPO Options will be allotted or issued pursuant to this prospectus later than 13 months after the date of this prospectus.
Prospectus available on the Internet
This prospectus is available in electronic form atwww.impedimed.com,www.abnamromorgans.com.auandwww.egcapital.com.
The electronic copy of this prospectus is available only to Australian residents who receive this prospectus in Australia. During the period
the Offer remains open, any person who receives this prospectus electronically will, on request, be sent a paper copy of the prospectus, with
Application Forms attached, free of charge.
KEY DATES*
Offer opens 9.00am AEST Tuesday, 25 September 2007
Closing Date for broker f rm applicants 5.00pm AEST Wednesday, 10 October 2007
Closing Date 5.00pm AEST Friday, 12 October 2007
Expected date of despatch of holding statements Friday, 19 October 2007
Expected date of listing on ASX Wednesday, 24 October 2007
*These dates are indicative only and are subject to change without notice.

Chairman’s letter 1

11 September 2007

Dear investor,

On behalf of the Board, it gives me great pleasure to offer you this opportunity to invest in ImpediMed Limited, an Australian-based medical device company that is committed to improving the quality of life of cancer survivors globally.

After successful early sales of products in Australia and Europe, and to research institutions in the United States, ImpediMed is poised to launch a suite of medical devices into international markets.

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ImpediMed’s primary product range consists of a number of medical devices that enable the early detection and monitoring of secondary lymphoedema in cancer survivors before the onset of symptoms that are detectable using the most commonly used clinical technique. The Company has the only medical device with an FDA clearance in the United States for the clinical assessment by Health Care Providers of secondary lymphoedema in the arm. This device is targeted to be launched internationally before the end of the year.

Secondary lymphoedema is a common side effect of cancer therapy and surgery (lymph node biopsy, dissection or removal) which can signifi cantly affect quality of life. It is estimated that approximately 10 million people have developed secondary lymphoedema as a result of breast and pelvic cancer therapy, recurrent infections, injuries or vascular surgery. Preliminary results of a prospective clinical research trial conducted over fi ve years (2001-2006) in the United States at the National Institutes of Health (NIH) and approved by the Institutional Review Board of the National Cancer Institute (NCI), indicated that progression of secondary lymphoedema in newly diagnosed breast cancer patients may be reversed if diagnosed and treated early in the course of their primary medical care. If left untreated however, lymphoedema can progress to an irreversible condition. This research supports the need for a product like ImpediMed’s that can detect lymphoedema earlier than the most commonly used clinical technique and before the onset of visible symptoms.

In the secondary lymphoedema market alone, the Company estimates that the potential global market for its products is worth US$4.4 billion in device sales and approximately US$500 million in annual consumables (see section 5.1 for further details). The Company’s products also have a wide range of potential commercial applications in the medical hydration and body composition markets including hydration monitoring, diagnosing metabolic disorder syndrome and monitoring in the fi elds of muscle wasting and drug dosing.

The secondary lymphoedema and hydration markets each offer ImpediMed signifi cant opportunities to capitalise on its expertise in technical innovation and commercialisation.

ImpediMed’s management team includes executives with international experience in successfully introducing innovative medical devices to global markets, and a track record in delivering growth and market share to create investor value.

The funds raised from the Offer will be used primarily to advance ImpediMed’s commercialisation program for its devices, and penetrate new medical markets in Australia and overseas. These funds are in addition to the $20 million that has already been received by the Company to date to develop its products to a market-ready state.

This prospectus contains information about ImpediMed’s technology, market opportunities, Board, management and strategy. My fellow Directors and I look forward to your support and participation in the Offer and to welcoming you as a shareholder of ImpediMed.

Yours sincerely

Mel Bridges Chairman

Investment highlights and risks 2

2.1 Investment highlights

ImpediMed, established in 1999, develops and sells internationally, medical devices for diagnosing and monitoring human disorders and diseases. The focus of the Company is to become the leading global supplier of non-invasive medical devices that:

Improve the quality of life for cancer survivors – a common side effect of many cancer treatments, and in particular breast cancer, is secondary lymphoedema. ImpediMed has developed medical devices that detect lymphoedema before the onset of visible symptoms and earlier than the most commonly used clinical technique. Detection at this early stage will allow earlier treatment and monitoring of secondary lymphoedema, which has the potential to prevent the condition from progressing to an irreversible stage.

Improve patient care through point of care hydration analysis – ImpediMed’s strategy is to develop medical devices that are designed to:

monitor muscle loss (cachexia)
assist in the optimal dosing of certain drugs
monitor the therapeutic ranges of certain drugs
rapidly determine fi ve compartment body composition in conjunction with Dual Energy X-ray (DEXA).

Improve general health through the early identifi cation of specifi c fat compartments in the abdomen – ImpediMed is in the early stages of developing a medical device for the determination of abdominal fatness that can differentiate visceral and subcutaneous fat levels. This may assist in the treatment of metabolic disorder related diseases such as hypertension, diabetes and heart disease.

In each of these markets, ImpediMed’s products offer a compelling alternative to existing approaches, better meeting the requirements of patients and Health Care Providers. ImpediMed’s products are designed to be non-invasive, compact and portable, accurate, fast and more simple to operate than currently available products and methodologies.

Large market opportunity

A large proportion of the estimated 2.4 million breast cancer survivors in the United States alone could benefi t from ImpediMed’s technology today, as ImpediMed’s device is the fi rst medical device cleared by the FDA for use by Health Care Providers to clinically assess secondary lymphoedema in the arm.
ImpediMed estimates that the Health Care Provider and home care market for its lymphoedema products is worth US$4.4 billion in device sales, and US$500 million in annual consumables (see section 5.1 for further details).
The potential for improved precision and effi ciency of ImpediMed’s medical technology over other commonly used point-of-care alternatives leads to opportunities in the assessment of muscle wasting, drug dosing and monitoring, and the diagnosis of metabolic disorder syndrome, which can lead to diseases such as hypertension, diabetes and heart disease.

Sales and marketing

Existing products sold on a test basis have generated in excess of $1.1 million in sales revenue in the fi nancial year ended 30 June 2007.
The launch by ImpediMed of the fi rst FDA cleared device for lymphoedema (the Imp XCA) in the United States and Europe is expected to occur by the end of calendar year 2007. In addition, in early calendar year 2008, ImpediMed intends to launch a non-invasive device for use in animal research of metabolic disorders.

Recent clinical data supporting the benefi ts of early intervention

Preliminary results of a prospective clinical research trial conducted over fi ve years (2001-2006) in the United States at the National Institutes of Health (NIH) and approved by the Institutional Review Board of the National Cancer Institute (NCI), indicated that progression of secondary lymphoedema in newly diagnosed breast cancer patients may be reversed if diagnosed at a sub-clinical level and treated early with a low cost pressure gradient compression sleeve. ImpediMed anticipates that this research, which supports a preventative approach to secondary lymphoedema, will have a signifi cant impact on women with breast cancer and will fuel demand for accurate methods of detecting the condition as early as possible.

Regulatory approvals

A portfolio of regulatory clearances and approvals in the United States, Australia, New Zealand and Europe provides a platform for initial product launches and generation of further revenue. In early April 2007 the Company received the fi rst FDA medical device clearance for clinical assessment of lymphoedema in the arm. This will help the Company to facilitate the reimbursement of users of this technology by health care insurers.
Key distribution partners have been appointed to support the United States and European launch of the Imp XCA and additional distribution agreements are currently being negotiated.

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Strategic United States acquisition

Experienced investor involvement

Following lodgement of this prospectus with ASIC, the Company expects to complete a small but strategic acquisition of Xitron Technologies, Inc (Xitron) based in San Diego. The Xitron acquisition will:

expand the Group’s intellectual property position around its primary technology focus of bioimpedance spectroscopy
introduce Fresenius Medical Care, Inc (Fresenius) the world’s largest dialysis company, as a major strategic partner for ImpediMed in the dialysis market
establish a local stocking branch for ImpediMed in the United States
enable the Company to offer domestic instrument service to United States customers and the potential to complete fi nal assembly of its devices in the United States if needed.

Reimbursement coding

ImpediMed has a clear strategy to increase its market penetration by targeting an expanded range of regulatory clearances and approvals for its products in key markets. Reimbursement by health care insurers is a powerful economic incentive for Health Care Providers and other targeted users to purchase and use ImpediMed’s devices, and the Company continues to identify possible existing reimbursement codes and will apply for new specifi c reimbursement codes that will assist it to facilitate reimbursement by health care payers (e.g. public and private health insurance funds) for tests conducted using its products.
Starfi sh Ventures, an established Australian venture capital company, has been an investor in the Company since June 2006. Immediately after the close of the Offer, and assuming the acquisition of Xitron, Starfi sh Ventures will hold approximately 30.6% of the Shares on issue.
Versant Ventures, a leading United States fund specialising in medical devices and biotechnology, has also been an investor in the Company since June 2006. Immediately after the close of the Offer, and assuming the acquisition of Xitron, Versant Ventures will hold approximately 6.5% of the Shares on issue.

Experienced, successful Board and management

CEO, Greg Brown, has over 10 years of international experience in managing the sales and marketing, and working with the regulatory and reimbursement operations, of Roche and Digene Corporation.
Chairman, Mel Bridges, has more than 30 years experience in the health care industry, and has developed a number of start-up enterprises into well recognised businesses.
ImpediMed has an experienced Board with the expertise and knowledge necessary to drive continued innovation and manage growth. It includes directors of Alchemia Limited, Campbell Brothers Limited, GWA International Limited, Peptech Limited, Peplin Limited and SuncorpMetway Limited.

Patented technology

ImpediMed has a suite of patent applications in connection with the diagnosis and monitoring of secondary lymphoedema and for the use of its technology in determining medical hydration and body composition.

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2.2 Recent key milestones

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ImpediMed’s achievements Date
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ImpediMed’s achievements	Date

Exclusive Australian/NZ agreement signed with Metagenics Australia (Health World) for distribution of the VLA50 (a variation of the Imp DF50) in the naturopathic market	May 2004
United Kingdom and United States off ces opened and local consultants employed	January/ February 2005
TGA & CE medical mark clearance obtained for Imp XCA and Imp DF50	March 2005
The f rst VLA50 (a variation of Imp DF50) supplied to Metagenics Australia (Health World)	May 2005
FDA clearance obtained for Imp DF50 (body composition only)	June 2005
FDA clearance obtained for the Imp SFB7 for body composition	April 2006
Approximately $20 million in total funds received by the Company since its inception	November 2006
NIH present preliminary clinical trial data that indicates that early diagnosis, coupled with timely treatment, may prevent secondary lymphoedema in the arm progressing to a stage where it is irreversible	March 2007
FDA clearance obtained for the Imp XCA	April 2007
Agreements with Lymphedema Products, LLC and Vodder signed for the distribution of Imp XCA in the United States	June 2007
Commercial ready grant of $1.6 million approved for Imp SFB9 development	June 2007
Xitron acquisition agreements executed	July 2007

2.3 Investment risk summary

Like any investment, an investment in Shares and IPO Options is subject to various risks not all of which can be managed by ImpediMed. Some of the material risks of investing in ImpediMed are summarised in section 12. A number of important risks are highlighted below.

Risk to intellectual property position

ImpediMed’s competitive advantage depends, in part, on the Company’s ability to protect its proprietary intellectual property and trade secrets, which it has sought to do through various patents, patent applications and other strategies.
Any action by competitors seeking to undermine the integrity of ImpediMed’s intellectual property position – for example, by claiming that ImpediMed’s patents are not valid, or that ImpediMed has infringed their intellectual property rights, or by reverse engineering ImpediMed’s products – would, if successful, weaken the Company’s competitive position and adversely affect its prospects.

Risk to secondary lymphoedema opportunity

ImpediMed has identifi ed the secondary lymphoedema market as its most promising commercial opportunity, and preliminary results of a prospective fi ve year clinical research trial conducted at the National Institutes of Health (NIH) indicated that early detection, coupled with timely treatment, may prevent secondary lymphoedema in the arm progressing to a stage where it is irreversible. It has been demonstrated that ImpediMed’s products can detect secondary lymphoedema in the arm earlier than the most commonly used clinical technique.
Establishing this conclusively for both lymphoedema of the arms and legs in larger clinical trials is crucial to the success of ImpediMed’s regulatory and reimbursement strategies (see sections 5.4 and 5.5), and to achieving its long-term revenue objectives. A large multi-centre clinical trial designed to confi rm this has not yet begun, and the results cannot be assured. If they are unfavourable, it will adversely affect the Company’s prospects.
The United States medical device market, the largest in the world, is a key target for ImpediMed. Driving adoption of its devices by successfully implementing its reimbursement strategy is vital to success in this market, and the Company intends to commit considerable resources to achieving this. The Company’s prospects may be adversely affected if its reimbursement strategy is not successful, or less successful than planned.
Future revenue growth will depend, in part, on ImpediMed obtaining a wider range of regulatory clearances and approvals for its devices in key markets. Though the Company has a focused regulatory strategy, and management with expertise in successfully implementing similar strategies, delays by regulatory authorities in granting clearances, or the failure to obtain additional clearances, will adversely affect ImpediMed’s prospects.

The Xitron acquisition may not proceed to completion

ImpediMed has entered into a contract to acquire Xitron. This contract has not yet completed and is subject to conditions and termination events, which are summarised in section 13.1. Though ImpediMed believes that the acquisition will proceed to completion, adverse events may occur as a result of which one or more conditions may not be satisfi ed or termination rights are exercised. If such a situation should occur, the Company still intends to proceed with the Offer, because it believes it can meet the business objectives set out in this prospectus, within the timeframe contemplated, without acquiring Xitron.

Clinical trials are required to drive adoption

Clinical trials supporting the clinical use of ImpediMed’s products and the economic rationale for their use are critical to the success of the Company’s business and the acceptance of its products by Health Care Providers and other users.
The Company proposes to fund the costs of clinical trials with capital raised under the Offer, from revenue generated from the sale of its products, and from other external sources (e.g., Government grants and contributions from trial partners). If the Company decides to commence the trials earlier than currently anticipated, if anticipated revenues are reduced or delayed, or if the cash requirements of operations are higher than anticipated, or if funding from external sources is not obtained or is less than expected, the Company will need to review its funding requirements and may need to raise further capital to fund its clinical trials. Alternatively, the Company may conduct smaller, less costly trials that still meet the Company’s regulatory objectives (see section 5.6). The Company’s revenues are subject to a number of factors including rates of market penetration, the outcome of clinical trials, and the achievement of product development, regulatory clearance and reimbursement milestones.

Offer summary 3

3.1 KEY OFFER DATES*

KEY OFFER DATES*
Prospectus lodged with ASIC	11 September 2007
Offer opens	9.00am AEST Tuesday, 25 September 2007
Closing date for broker f rm applicants	5.00pm AEST Wednesday, 10 October 2007
Closing Date	5.00pm AEST Friday, 12 October 2007
Expected date for despatch of holding statements	Friday, 19 October 2007
Expected date of quotation of Shares and IPO Options on ASX	Wednesday, 24 October 2007

These dates are indicative only and are subject to change. The Company expressly reserves the right to vary the Offer dates without notice. The Company, in consultation with the Underwriters, also reserves the right to withdraw this prospectus and not proceed with the Offer. If the Offer does not proceed, Application Money will be returned to Applicants without interest.

3.2 SUMMARY OF THE OFFER

Offer details	Assuming no oversubscriptions	Assuming maximum oversubscriptions1
Number of Shares offered under the Public Offer	12,200,000	13,600,000
Number of Shares to be issued under the Redemption Issue	11,400,000	11,400,000
*Total number of Shares*	*23,600,000*	*25,000,000*
Number of IPO Options offered under the Public Offer	6,100,000	6,800,000
Number of IPO Options to be issued under the Redemption Issue	5,700,000	5,700,000
*Total number of IPO Options*	*11,800,000*	*12,500,000*
Amount raised under the Public Offer	$8,784,000	$9,792,000
Amount raised under the Redemption Issue	$8,208,000	$8,208,000
*Total amount raised under the Offer*	*$16,992,000*	*$18,000,000*

Offer Price	$0.72	$0.72
Number of Shares on issue following completion of the Offer and assuming the acquisition of Xitron	79,401,969	80,801,969
Implied market capitalisation at Offer Price	$57,169,418	$58,177,418

Under the Public Offer the Company may accept oversubscriptions of up to an additional 1.4 million Shares and 700,000 IPO Options. There can be no guarantee that the maximum amount of oversubscriptions, or any oversubscriptions at all, will be achieved.

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3.3 USE OF FUNDS

The principal purpose of the Offer is to provide ImpediMed with the capital necessary to develop international markets for its products and thereby increase its revenue from sales, expand its product portfolio through targeted research and development, and enhance its capacity to service key markets.

The table below summarises the Company’s source and use of funds under two possible scenarios: the fi rst assumes that no oversubscriptions are accepted and that the funds available to the Company are approximately $17 million; the second scenario assumes that the Company accepts oversubscriptions of $1.008 million pursuant to the Public Offer and therefore has total funds available to it pursuant to the Offer of $18 million. The use of funds has been calculated without taking into account any additional funds that may be generated between the date of the prospectus and the date the funds raised under the Offer are exhausted.

Source of funds	Minimum capital raising (assuming no oversubscriptions) A$	Maximum capital raising (assuming maximum oversubscriptions) A$
Public Offer	8,784,000	9,792,000
Redemption Issue1	8,208,000	8,208,000
Total	16,992,000	18,000,000
Use of funds
Sales and marketing	3,952,000	4,227,000
Research and development2	4,275,000	4,570,000
Clinical trials3	720,000	770,000
Regulatory	275,000	295,000
General and administration	3,320,000	3,550,000
Xitron debt repayment and working capital4	770,000	770,000
Loan to Xitron to fund Fresenius licence agreement amendment4	1,185,000	1,185,000
Working capital	1,345,000	1,440,000
Cost of the Offer5	1,150,000	1,193,000
Total	16,992,000	18,000,000

The Redemption Issue involves an issue of Shares at the Offer Price (and IPO Options) to the holders of IPO Convertible Notes. The funds payable by the Company to the holders of IPO Convertible Notes upon their redemption will be used to satisfy the subscription amount payable by the IPO Convertible Note holders for the Shares and IPO Options that they will be issued under the Redemption Issue. The primary purpose of the IPO Convertible Note issue was to make it possible for Starfi sh Ventures to invest further funds in ImpediMed prior to the Public Offer and to secure additional capital for the Company from key investors.
The research and development expenditure includes, in the case of the minimum capital raising, approximately $1.93 million in outsourced or contracted design and development activities, $1.40 million in staff salaries and benefi ts, $0.32 million in costs for consulting research and development staff, and $0.62 million in intellectual property costs, travel and miscellaneous costs. In the case of the maximum capital raising, research and development expenditure includes $2.06 million in outsourced or contracted design and development activities, $1.50 million in staff salaries and benefi ts, $0.35 million in costs for consulting research and development staff, and $0.66 million in intellectual property costs, travel and miscellaneous costs.
This does not represent the total anticipated cost of clinical trials, which will be funded from a combination of capital raised under the Offer, revenue generated from the sale of products and from other external sources (e.g., Government grants and contributions from trial partners).
The Xitron debt repayment and working capital, and the loan to Xitron that it will pay to Fresenius (as consideration for a variation of an agreement between Fresenius and Xitron that returns to Xitron rights to technology developed by it in medical markets other than dialysis (see section 13.1)), will only be made in the event that the acquisition of Xitron proceeds as expected. In the event the acquisition does not proceed and these payments are not made, there will be a corresponding increase in the funds available to be spent on sales and marketing, research and development, regulatory and general and administrative costs and working capital.
The full costs of the Offer total $1,944,023 (assuming no oversubscriptions), as outlined in Note 2 (o) in section 8.5. The Company has funded $794,023 in Offer costs from previous fund raisings.

On completion of the Offer (and not taking into account any possible oversubscriptions), the Company will have suffi cient funds to carry out its stated objectives.

For each of the last two fi nancial years ImpediMed has generated revenue from the sale of goods of approximately $1.1 million. The Company’s business plan contemplates an increase in this revenue, taking into account the increased expenditure on marketing its products and the recent FDA clearance of the Imp XCA in the United States. The extent to which the Company needs to raise further funds in the future, and the size of any such capital raising, will depend on the quantum of any oversubscriptions under the Public Offer (which may be up to $1.008 million) and the level of additional revenue generated by it. Any additional funds raised through the acceptance of oversubscriptions, together with any gross profi t generated from sales, any interest earned on cash reserves, and any receipts of Government grants, will enable the Company to pay operating expenses and meet working capital requirements over and above those shown in the use of funds table. The Company believes the funds raised under the Offer, and revenue generated from anticipated sales, will be suffi cient to fund its operations for at least 18 months. If anticipated revenues are reduced or delayed, the cash requirements of operations (including the Company’s research and development activities) are higher than anticipated or the Company decides to commence certain initiatives earlier than currently anticipated (eg clinical trials), the Company will need to review its funding requirements and may need to raise further funds sooner than expected. The Company’s revenues are subject to a number of factors including rates of market penetration, the outcome of clinical trials, and the achievement of product development, regulatory clearance and reimbursement milestones.

See section 8 for further information on ImpediMed’s capital structure, source and use of funds, and fi nancial position.

Details of the Offer 4 ImpediMed’s focus is to become the leading supplier of medical devices that enable the non-invasive early detection and clinical assessment of secondary lymphoedema and the analysis of body hydration and composition.

4.1 DESCRIPTION OF THE OFFER

ImpediMed is seeking to raise up to $18 million through:

a fully underwritten public offer of 12.2 million Shares at $0.72 per Share to raise $8,784,000 (with one IPO Option for every two Shares issued), pursuant to the underwritten component of the Public Offer;
the non-underwritten public offer of a further 1.4 million Shares at $0.72 per Share (with one IPO Option for every two Shares issued) in oversubscriptions to raise up to $1,008,000; and
the issue of 11.4 million Shares at $0.72 per Share to raise $8,208,000 (with one IPO Option for every two Shares issued), pursuant to the Redemption Issue.

The Shares issued under the Offer (excluding oversubscriptions) will, immediately following the Company listing on the ASX, and after completion of the Xitron acquisition, collectively represent 29.7% of the issued capital of ImpediMed and will rank equally with all other Shares in the Company. The rights attaching to Shares are detailed in the Constitution. A summary of those rights is set out in section 13.1.

Under this prospectus the Company will issue 6.1 million IPO Options under the Public Offer and 5.7 million IPO Options pursuant to the Redemption Issue (on the basis of one IPO Option for very two Shares issued). If the Company accepts oversubscriptions under the Public Offer, the Company may issue up to a further 700,000 IPO Options. The IPO Options issued under the Offer (excluding IPO Options issued on oversubscriptions), will, immediately following the Company listing on the ASX, and assuming completion of the Xitron acquisition, represent 12.5% of the issued capital of ImpediMed on a fully diluted basis (ie, assuming all options, including employee options, are exercised). The Exercise Price of the IPO Options is $0.72. The IPO Options may be exercised at any time before 5.00pm AEST on the Expiry Date. The IPO Options will be quoted on ASX. A summary of the terms of the IPO Options is set out in section 13.1.

4.2 PRO FORMA SHAREHOLDINGS FOLLOWING COMPLETION OF THE OFFER

On completion of the Offer, and assuming completion of the acquisition of Xitron (but excluding oversubscriptions), the Company will have the shareholder groups set out in the table below:

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Shareholder [1] Shares [2] % of total Options Total diluted % of total
Shares interests [9] diluted interests
(excluding over- (excluding over-
subscriptions) subscriptions)
Starfi sh Ventures [3] 24,285,465 30.6 2,763,200 27,048,665 28.6
Tregoning entities [4] 6,249,925 7.9 6,249,925 6.6
Versant Ventures 5,179,281 6.5 173,600 5,352,881 5.6
Macquarie Investment Management 5,526,400 6.9 2,763,200 8,289,600 8.8
as trustee for the Macquarie
Alternative Investment Trust IV
Board and employees [5,6] 10,844,621 13.6 3,337,673 14,182,294 15.0
Other pre-Offer shareholders 12,983,768 16.4 12,983,768 13.7
Subscribers under the Public Offer 12,200,000 15.4 6,100,000 18,300,000 19.4
Subtotal 77,269,460 97.3 15,137,673 92,407,133 97.7
Xitron shareholders [7] 2,132,509 2.7 2,132,509 2.3
Total assuming completion of 79,401,969 100.0 15,137,673 94,539,642 100.0
the Xitron acquisition
Oversubscriptions [8] 1,400,000 700,000 2,100,000
Total assuming completion of 80,801,969 15,837,673 96,639,642
the Xitron acquisition (including
maximum oversubscriptions)
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The holdings of each class of pre-Offer shareholder have been calculated assuming they do not subscribe for additional Shares under the Public Offer. If any of these holders acquire additional Shares (and IPO Options) under the Public Offer, their holdings will differ from those set out in this table. Directors and senior management may apply for further Shares (and IPO Options) under the Public Offer. This table does not take into account further Shares or IPO Options they may be issued.
At the date of this prospectus ImpediMed has preference shares, S3 Convertible Notes and IPO Convertible Notes on issue. On the Closing Date the preference shares will convert automatically to Shares and the S3 Convertible Notes and IPO Convertible Notes will be redeemed. Upon their redemption, the holders of S3 Convertible Notes will be issued Shares, and the IPO Convertible Note holders will be issued Shares and IPO Options. This table assumes the conversion of the preference shares and the redemption of the S3 Convertible Notes and IPO Convertible Notes. See section 8 for further details.
The voting power of Starfi sh Ventures in the Company on completion of the Offer is set out in section 13.9.
Ian Tregoning, and entities associated with him, have been major investors in ImpediMed since 2004.
This does not include the Shares in which Michael Panaccio has a relevant interest but does not own. Mr Panaccio’s interests are described in section 13.10.
The options held by the Chief Executive Offi cer, and employees and consultants of the Company comprise options issued under the Option Plan, or on terms similar to the Option Plan and 1 million options issued to the Chief Executive Offi cer under this prospectus. See section 13.6 for details. All other options set out in the table are IPO Options, to be issued pursuant to the Offer.
The issue of these Shares is subject to, and conditional upon, completion of the acquisition of Xitron. This is expected to occur following lodgement of this prospectus with ASIC and no later than one month after the Company lists on ASX. Additional Shares may be issued to the vendors of Xitron if certain milestones related to the performance of the Xitron business are met. See section 13.1 for further details.
Under the Public Offer the Company may accept oversubscriptions of up to a maximum of an additional 1.4 million Shares and 700,000 IPO Options. There can be no guarantee that the maximum amount of oversubscriptions, or any oversubscriptions at all, will be achieved.
The Board has resolved to issue up to 469,500 Shares under a performance share plan, which is described in section 13.7. In calculating diluted interests, the Shares that may be issued under the Plan have not been included, as they are not issued Shares.

4.3 HOW TO APPLY FOR SHARES AND IPO OPTIONS – PUBLIC OFFER

The Public Offer opens at 9:00 am (AEST) on Tuesday, 25 September 2007 and closes at 5:00 pm (AEST) on Friday, 12 October 2007. These dates are indicative only and the Company may vary them without prior notice.

Applications for Shares (and attaching IPO Options) can be made only by completing and lodging a paper copy of an Application Form. Application Forms are attached to this prospectus, and to the electronic version of the prospectus that is available at www.impedimed.com , www.abnamromorgans.com.au and www.egcapital.com . Application Forms should be completed in accordance with the instructions in the guide to the Application Form. Applications must be received by the Closing Date.

Application Forms must be accompanied by a cheque or bank draft in Australian dollars drawn on an Australian fi nancial institution for the value of Shares applied for and made payable to ‘ImpediMed Limited Share Application Account’ and crossed ‘Not negotiable’. ImpediMed will not accept an Application Form electronically.

Applications must be for a minimum of 3,000 Shares and thereafter in multiples of 500 Shares.

Applicants should mail or deliver their completed Application Forms and accompanying cheques or bank drafts to:

Post
ImpediMed Share Offer	OR	ImpediMed Share Offer
C/- Link Market Services		C/- ABN AMRO Morgans Corporate Limited
Locked Bag A14		GPO Box 202
Sydney South NSW 1235		Brisbane QLD 4001
		ImpediMed Share Offer
		C/- Emerging Growth Capital Pty Ltd
		PO Box R417
		Royal Exchange NSW 1225
Delivery
ImpediMed Share Offer	OR	ImpediMed Share Offer
C/- Link Market Services		C/- ABN AMRO Morgans Corporate Limited
Level 12 680 George Street		Level 29 Riverside Centre
Sydney NSW 2000		123 Eagle Street
		Brisbane QLD 4001
		ImpediMed Share Offer
		C/- Emerging Growth Capital Pty Ltd
		Level 3 1 Castlereagh Street
		Sydney NSW 2000

Lodgement of an Application Form constitutes an irrevocable offer made in accordance with the terms set out in the Application Form.

No brokerage, commission or stamp duty is payable by Applicants who apply for Shares and IPO Options under the Public Offer using an Application Form.

4.4 IPO OPTIONS

For every two Shares issued to an Applicant they will be automatically issued with one IPO Option. It is not necessary for Applicants to separately apply for IPO Options.

The terms of IPO Options are summarised in section 13.1.

4.5 OVERSUBSCRIPTIONS

The Company reserves the right to accept oversubscriptions under the Public Offer of up to $1,008,000 (representing a further 1.4 million Shares at an issue price of $0.72 per Share and 700,000 IPO Options).

4.6 BROKER FIRM APPLICANTS

If an Applicant has received a fi rm allocation of Shares from their broker, they must lodge their Application Form and Application Money with their broker, in accordance with their broker’s instructions, in order to receive their allocation. The Closing Date for receipt of Application Forms and Application Money from broker fi rm applicants is 5:00 pm AEST Wednesday, 10 October 2007.

The Company, the Share Registry and the Underwriters take no responsibility for any acts or omissions by an Applicant’s broker in connection with a fi rm allocation of Shares, an Application Form or Application Money.

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4.7 HOW TO APPLY FOR SHARES AND IPO OPTIONS – REDEMPTION ISSUE

Holders of IPO Convertible Notes are required to lodge an application form for the Shares and IPO Options that will be issued to them under this prospectus as a result of the redemption of the IPO Convertible Notes, in the form provided to them with a copy of this prospectus.

No brokerage, commission or stamp duty is payable by holders of IPO Convertible Notes who are issued Shares and IPO Options under this prospectus.

4.8 ISSUE OF SHARES TO HOLDERS OF S3 CONVERTIBLE NOTES

A total of 19,915,588 Shares will be issued to the holders of S3 Convertible Notes under this prospectus. Holders of S3 Convertible Notes are required to lodge an application form in the form provided to them with a copy of this prospectus.

No brokerage, commission or stamp duty is payable by holders of S3 Convertible Notes who are issued Shares under this prospectus.

4.9 OFFER OF OPTIONS - CHIEF EXECUTIVE OFFICER

The Board has resolved to offer ImpediMed’s chief executive offi cer, Greg Brown, 1,000,000 options to subscribe for Shares on the terms described in section 13.6. This offer is made under this prospectus and may be accepted on an application form which will be provided to Greg Brown together with a copy of this prospectus.

4.10 ELECTRONIC PROSPECTUS

This prospectus is available in electronic form at www.impedimed.com , www.abnamromorgans.com.au and

www.egcapital.com . During the period of the Offer, ImpediMed will send a paper copy of the prospectus (and attached Application Forms) on request, and free of charge, to any person who has received this prospectus electronically.

Applications must be made by completing a paper copy of the Application Form. ImpediMed will not accept Application Forms electronically.

An Application Form may only be distributed attached to a complete and unaltered copy of the prospectus. The Application Form included with this prospectus contains a declaration that the Applicant has personally received a complete and unaltered copy of the prospectus prior to completing the Application Form.

ImpediMed will not accept a completed Application Form if it has reason to believe that the Applicant has not received a complete paper or electronic copy of the prospectus or if it has reason to believe that the Application Form or electronic copy of the prospectus has been altered or tampered with in any way.

While ImpediMed believes that it is extremely unlikely that during the period of the Offer the electronic version of the prospectus will be tampered with or altered in any way, the Company cannot give an absolute assurance that this will not occur. Any Applicant in doubt as to the validity or integrity of an electronic copy of the prospectus should immediately request a paper copy directly from ImpediMed or the Underwriters.

A paper copy of this prospectus has been provided to each holder of IPO Convertible Notes and S3 Convertible Notes and to Greg Brown.

4.11 UNDERWRITING

The Public Offer (excluding potential oversubscriptions) has been fully underwritten by ABN AMRO Morgans Corporate Limited and Emerging Growth Capital Pty Limited.

The Underwriting Agreement provides that the Underwriters may terminate the Underwriting Agreement in certain circumstances. The Underwriting Agreement, including the termination events, is summarised in section 13.1.

4.12 ALLOTMENT

The Shares and IPO Options to be issued pursuant to the Offer will be allotted as soon as possible after the Closing Date. The Company, in conjunction with the Underwriters, reserves the right to allocate to each Applicant under the Public Offer the total number of Shares and IPO Options applied for in their Application, or a lesser number, or to decline their Application. Where no allotment is made the amount tendered will be returned in full.

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Where the number of Shares and IPO Options allotted is less than the number of Shares and IPO Options applied for, surplus Application Money will be returned to Applicants within 21 days of the Closing Date. Interest will not be paid on refunded Application Money. Any interest earned on Application Money prior to allotment or return will belong to ImpediMed.

4.13 ASX LISTING

Within seven days of the date of this prospectus, ImpediMed will apply to ASX for admission to the offi cial list of ASX and for the quotation of its Shares and the IPO Options on ASX. The fact that ASX may admit ImpediMed to its offi cial list is not to be taken in any way as an indication of the value or merits of the Company or the Shares or IPO Options offered for subscription under this prospectus. Quotation, if granted, will commence as soon as practicable after the issue of holding statements to successful Applicants. If permission for quotation of the Shares and IPO Options is not granted within three months after the date of this prospectus, all Application Money will be returned, without interest, as soon as practicable in accordance with the Corporations Act. Any interest earned on Application Money prior to return will belong to ImpediMed.

4.14 HOLDING STATEMENTS

After the allocation of Shares and IPO Options to successful Applicants and to the holders of IPO Convertible Notes, and the allocation of Shares to the holders of S3 Convertible Notes, shareholders will be sent an initial statement of holding that sets out the number of Shares and IPO Options that have been allocated and the shareholder’s holder identifi cation number (HIN), or in the case of issuer sponsored holders, the shareholder’s shareholder reference number (SRN).

Shareholders may also request ImpediMed to provide a statement at other times, however the Company may charge an administration fee in these circumstances.

4.15 FOREIGN INVESTORS

No action has been taken to register or qualify the Shares, the IPO Options or the Offer, or to otherwise permit a public offering of the Shares and the IPO Options, in any jurisdiction outside Australia.

This prospectus does not constitute an offer or invitation in any jurisdiction where, or to any person to whom, such an offer or invitation would be unlawful. The distribution of this prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this prospectus should seek advice on, and observe, any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws.

4.16 WITHDRAWAL

The Company, in consultation with the Underwriters, reserves the right to withdraw this prospectus and the Offer at any time before the allocation of Shares and IPO Options to successful Applicants. If the Offer does not proceed, ImpediMed will return all Application Money within 21 days of giving notice of the withdrawal. Any interest earned on Application Money prior to the withdrawal will belong to ImpediMed.

In the event that the Offer does not proceed, the Company’s preference shares, IPO Convertible Notes and S3 Convertible Notes will continue to exist, in accordance with their terms.

4.17 TAXATION CONSEQUENCES

The taxation consequences of an investment in the Company will depend on each Applicant’s particular circumstances. Applicants should make their own enquiries about the taxation consequences of an investment in ImpediMed and, if in any doubt, consult with their accountant, stockbroker, lawyer or other professional adviser.

4.18 GOVERNING LAW

This prospectus, and the contracts that arise on acceptance by the Company of Applications, are governed by the laws in force in Queensland and each Applicant submits to the non-exclusive jurisdiction of the courts of Queensland.

ImpediMed’s markets and regulatory environment 5 14

ImpediMed’s medical devices are non-invasive, portable, fast and simple to operate.

5.1 INTRODUCTION

The Company is focused on becoming the leading global supplier of non-invasive medical devices to two under-served health care markets:

assessment of individuals at risk of secondary lymphoedema – where ImpediMed’s products can help guide earlier treatment that has the potential to prevent the condition from progressing; and
monitoring of body hydration and composition – where ImpediMed is aiming to set a new standard in accuracy for rapid point-of-care analysis.

TARGET MARKETS

Total estimated market potential – Medical device sales of US$5.4 billion Consumables sales of US$600 million per annum

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Lymphoedema Medical hydration and body composition
Device sales: US$4.4 billion [1] Device sales: > US$1.0 billion [3]
Consumables: US$500 million per annum [2] Consumables: US$100 million per annum [4]
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Lymphoedema professional and home care markets Medical hydration and body composition
Targeting professional and home care markets for: Targeting scientifi c research, hospitals, primary care
> Prevention, through earlier detection physicians and pharmaceutical companies for:
> Assessment of ‘at risk’ patients > Muscle wasting (cachexia)
> Monitoring – clinical effi cacy of interventions > Hydration status
> Home care for cancer survivors > Five compartment body composition
> Diagnosis of metabolic disorder syndrome
> Drug dosing and monitoring composition models with DEXA
> >
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ImpediMed’s estimate of market potential for lymphoedema is based on the widespread adoption of a new pre-emptive care model in the monitoring and detection of secondary lymphoedema.

This estimate of the total potential of the lymphoedema market assumes a clinical market of US$3.1 billion, which assumes that there are 209,000 Health Care Providers (including 21,000 oncologists and surgeons, 134,970 physical therapists, and 3500 lymphoedema therapists (excluding occupational therapists)) who are potential users of the Imp SFB9 to monitor survivors of breast and pelvic region cancers, and that one Imp SFB9 at list price is provided to each such Health Care Provider.
It also assumes a home monitoring market of US$1.3 billion based on an estimate that approximately 1.4 million of the estimated 5.0 million breast or pelvic region cancer survivors (2.4 million breast and 2.6 million pelvic region) are at high risk of developing, or have already developed, lymphoedema, and who are therefore candidates for an ImpediMed home monitoring device supplied at list price.
The estimate of the market potential for consumables comprises US$154 million per annum in consumables sales for the clinical market (which assumes that 4.8 million patients undergo monitoring four times annually with 209,000 Health Care Providers, and that each reading requires a set of ImpediMed electrodes) and US$370 million per annum in consumables sales for the home care market (which assumes that 1.45 million home care devices are used twice per week, and that each use requires a set of ImpediMed electrodes).
The estimate of the total market potential for device sales assumes that an ImpediMed device at list price is provided to at least 80,000 (out of a potential 250,000) Health Care Providers for use in primary care for general health assessment.
The estimate of the total market potential for consumables sales assumes that each of the 80,000 devices supplied to Health Care Provides for general health assessment are used twice per day, fi ve days per week, for 50 weeks per year, and that each use requires a set of ImpediMed electrodes supplied at list price.

In each of these markets ImpediMed’s products aim to offer a compelling alternative to existing approaches, better meeting the requirements of Health Care Providers and patients.

Preliminary research

fi ndings presented by the NIH indicate that early diagnosis, coupled with timely treatment, may prevent the progression of lymphoedema in the arm of breast cancer survivors.

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5.2 SECONDARY LYMPHOEDEMA MARKET

MARKET OPPORTUNITY

Advances in screening and diagnostic techniques, and the development of new therapies, have signifi cantly improved cancer survival rates. In the United States, the NCI has reported that 9.8 million Americans are living after the diagnosis of cancer. A large number of these survivors, estimated to number 2.4 million, are breast cancer survivors.

A common side effect of cancer therapy including surgery (e.g. lymph node biopsy, dissection or removal) is a condition called lymphoedema. This is a chronic debilitating condition that is frequently under diagnosed, treated late, or not treated at all. It is described as either primary or secondary, depending on the cause of impairment to the transport of lymphatic fl uid.

Secondary lymphoedema is caused by injury to the lymphatic system as a consequence of cancer therapy (radiation), surgery or infection, while in the case of primary lymphoedema this impairment is related to congenital abnormalities. It is estimated that approximately 10 million people suffer from secondary lymphoedema as a result of therapy for breast and pelvic cancer, recurrent infections, injuries or vascular surgery.

A prospective clinical research trial conducted over fi ve years (2001-2006) at the National Institutes of Health (NIH) and approved by the Institutional Review Board of the NCI released preliminary results in March 2007 suggesting that early detection followed by timely treatment, may prevent the progression of secondary lymphoedema in the arm. However, until now there has not been available a portable, cost-effective medical device capable of detecting the condition before the sufferer or their Health Care Provider can actually observe it. This means that it is often diagnosed too late to prevent the onset of chronic, and sometimes very severe, symptoms.

Compared with the most commonly used clinical method of diagnosing and monitoring secondary lymphoedema, ImpediMed’s technology:

is faster and more accurate
is portable and will in the future be marketed for use by patients at home
enables Health Care Providers to intervene earlier and treat symptoms before they become obvious and/or severe.

ImpediMed is therefore ideally positioned to improve the lives of cancer survivors and others at risk of secondary lymphoedema at a time when:

the prevalence of secondary lymphoedema, and the number of people at risk of developing the condition, is increasing
a number of consumer groups, including breast cancer groups, are lobbying for a preventative, rather than a reactive approach to managing secondary lymphoedema.

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WHAT IS SECONDARY LYMPHOEDEMA?

Lymphoedema is the swelling of a person’s arms or legs (or less often their torso) caused by the build-up of lymph fl uid. This occurs when the volume of lymph fl uid exceeds the ability of damaged lymph vessels to transport it back into the vascular system. The presence of persistent swelling and stagnant lymph fl uid (a protein-rich material) eventually leads to fi brosis, and often repeated bouts of cellulitis and lymphangitis. Lymphoedema can begin insidiously at some stage after lymph nodes have been removed in the axilla, groin or neck, and the degree of swelling may range from mild to serious. In its most severe form (where the lymphatic system is damaged beyond repair), lymphoedema is a chronic and disabling condition which can result in a patient’s complete incapacitation – usually only after the condition has been present, and gone untreated, for an extended period.

Secondary lymphoedema most commonly arises as a result of surgical removal of lymph nodes or damage to, or destruction of, lymph nodes due to radiation therapy, trauma or parasites. ImpediMed’s devices are targeted at detecting lymphoedema early, before symptoms are visible, and for clinically assessing patients at risk of secondary lymphoedema for evidence of the early stages of the disorder.

THE INCIDENCE OF SECONDARY LYMPHOEDEMA

ImpediMed’s largest potential market for secondary lymphoedema is the United States, where the estimated number of lymphoedema sufferers ranges between three and fi ve million. However, the potential market also includes all patients who have undergone lymph node dissection in either the groin or arm pit as they are all targets for clinical assessment to establish if they are at risk of secondary lymphoedema, and early intervention if necessary.

In developed countries, women who have been treated for breast cancer are the largest group of people suffering secondary lymphoedema. Research fi ndings suggest that between 10 to 40% of treated breast cancer survivors in the United States will develop secondary lymphoedema in the arm. The NCI states there appears to be an overall incidence of lymphoedema after breast cancer therapy of 26%. Secondary lymphoedema of the leg as a result of treating pelvic cancers has a reported frequency of between 10 and 49%.

As lymph nodes can also be removed, or damaged or destroyed by radiation therapy, when treating other forms of cancer (e.g. melanoma, prostate, testicular and ovarian cancers), patients who have been treated in this way may also be at risk of developing secondary lymphoedema.

Due to advances in detection, and improvements in the effi cacy of anti-cancer therapies, the survival rate and life expectancy of people with cancer is increasing – the NCI estimates there are 8.5 million Americans now living after a diagnosis of cancer. Secondary lymphoedema is a common condition, the incidence of which is expected to increase over the next decade.

Early detection of the disorder may lead to effective treatments that potentially prevent the secondary effects of limb deformity, tissue atrophy, and increased susceptibility to recurrent infections. ImpediMed believes that a preventative approach offers a very cost-effective way of dealing with secondary lymphoedema, while signifi cantly improving the quality of life for survivors.

CURRENT METHODS OF DETECTION AND TREATMENT OF SECONDARY LYMPHOEDEMA

At present, lymphoedema is generally detected only when the patient or their Health Care Provider becomes aware that a limb is swollen. This is most commonly diagnosed by measuring the circumference of the limb, or by immersing it in water to monitor changes in its volume.

Both these methods are less accurate and more time consuming than diagnosis using ImpediMed’s products, and circumference measurement often fails to diagnose lymphoedema before noticeable swelling has occurred, which may increase the risk of permanent damage and disability.

5.3 MEDICAL HYDRATION AND BODY COMPOSITION MARKET

ImpediMed has identifi ed a number of opportunities for marketing medical devices that accurately and effi ciently measure and monitor body hydration and body composition (in particular, fl uid levels, fat mass and muscle mass, which are described as body ‘compartments’).

Current methods of measuring hydration and body composition that use different technology platforms suffer from a range of drawbacks. They are often expensive, time consuming and/or inaccurate whereas ImpediMed’s products are more portable, faster and easier to use, and can provide results comparable to the clinically accepted DEXA, a form of X-ray.

METHODS OF MEASURING BODY COMPOSITION

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ImpediMed’s devices will compete with a number of similar devices designed to measure body composition that do not use the same
technology platform and that are currently on the market.
Method Comment
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METHODS OF MEASURING BODY COMPOSITION	METHODS OF MEASURING BODY COMPOSITION
ImpediMed’s devices will compete with a number of similar devices designed to measure body composition that do not use the same technology platform and that are currently on the market.
Method	Comment

Scales	• Do not indicate which body compartment is increasing in weight
Anthropometric measurements (tape measurements/callipers)	• Typically require same operator to perform multiple measurements using standardised procedures to obtain accurate results • Results are often inconsistent and unreliable
DEXA	• Patients must visit specialist departments in a hospital or imaging centre • Requires specialist operators • Patients exposed to radiation • Expensive • Limited to measurement of bone, muscle and fat
Magnetic Resonance Imaging (MRI)	• Patients must visit specialist departments in a hospital or imaging centre • Requires specialist operators • Expensive • Provides information on which body compartment is increasing in weight

ImpediMed has developed a lower-cost device that it believes offers advantages over competing products (including other products that use a similar technology platform to ImpediMed’s products). ImpediMed also offers a body composition device, which uses more advanced technology, which directly measures hydration. See sections 6.2 and 6.3 for further details.

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ImpediMed’s products are designed to offer accurate and precise determinations of hydration and body composition for medical applications.

ImpediMed’s strategy will be to target Health Care Providers who can use the Company’s products for:

monitoring and managing muscle wasting
diagnosis and investigation of metabolic disorder syndrome and the related diseases such as hypertension, diabetes and heart disease
drug dosing and surgical applications
clinical research.

ImpediMed estimates that up to 250,000 Health Care Providers in the United States are potential users of its body composition products.

OPPORTUNITIES IN BODY COMPOSITION

METABOLIC DISORDER SYNDROME MARKET

Extensive research has been conducted on the relationship between fat distribution and health conditions – typically those associated with obesity. Metabolic disorder syndrome conditions include heart disease, hypertension, insulin resistance, and type II diabetes mellitus.

A number of studies have shown that there is a strong connection between abdominal obesity and these various health conditions. This has lead to further scientifi c investigations which appear to show that ’intra-abdominal’ or ‘visceral’ obesity (fat deposits around the viscera) are what actually affect health, and are usually, but not always, related to central obesity.

Currently Computed Tomography (CT), DEXA or MRI scans are the only ways to accurately measure this fat deposit. ImpediMed believes that its devices potentially offer a cheaper, portable means of accurately measuring abdominal fatness and proposes undertaking further research and development, in conjunction with Graz University of Technology, to seek to validate this.

MUSCLE WASTING (CACHEXIA) MARKET

Muscle wasting is a condition that can affect patients suffering from a wide range of prevalent chronic medical conditions including AIDS, advanced cancer, chronic heart failure, renal disease, lung disease and eating disorders.

If not identifi ed, muscle wasting can cause sufferers to become sick, and may increase the likelihood of premature death. It is therefore important to regularly assess and monitor the body composition of those at risk – which ImpediMed’s body composition products are designed to do easily, accurately, and quickly.

Given the prevalence of the conditions that can lead to muscle wasting, a signifi cant proportion of the population is at risk of developing cachexia, and may benefi t from using ImpediMed products in the treatment of their condition and its side effects. ImpediMed plans to seek clearance from the FDA, and obtain CE marking, for Health Care Providers to use its products to monitor the effectiveness of muscle wasting treatments.

ImpediMed plans to seek clearance from the FDA, and obtain CE marking, for Health Care Providers to use its products to monitor the effectiveness of muscle wasting treatments.

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DRUG DOSING AND SURGICAL APPLICATIONS

Many drug therapies typically prescribed by Health Care Providers such as chemotherapy, are dosed on the basis of body weight and body surface area. ImpediMed believes that the ability to potentially analyse the composition of body compartments more accurately may improve the accuracy of dosing certain therapies and therefore may assist in improving the safety and effi cacy profi le.

Certain drugs have a limited therapeutic window, and must be administered within a certain timeframe to be effective, while others can affect the body’s fl uid balance. Being able to monitor a patient’s fl uid balance may help Health Care Providers ensure they administer the right quantity of drugs at the optimal time, thereby improving the safety and/or effi cacy of the treatment.

ImpediMed’s body composition devices have been designed to deliver accurate body compartment analysis at a patient’s bedside. It is therefore anticipated that the growing need for Health Care Providers to be able to assess and monitor a patient’s fl uid levels accurately and promptly at the point of care will help drive the demand for ImpediMed’s body composition products. ImpediMed plans to seek clearance from the FDA, and obtain CE marking, for Health Care Providers for this application. The Company will seek to build strategic relationships with pharmaceutical companies to assist in funding and achieving this indication.

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SPORTS MEDICINE AND FITNESS

With increased professionalism in sport globally, there is an increased demand for technology to help athletes achieve and maintain peak performance.

Athletes who can monitor their body composition compartments will be better able to identify any signifi cant changes in them and to react accordingly. For example, professional athletes in contact sports can lose signifi cant muscle mass over a season, making them more prone to injury. Being able to monitor their body composition compartments, and thus detect muscle wasting, therefore has the potential to protect them from injury.

ImpediMed’s body composition products are portable devices currently available to athletes, coaches and managers seeking more detailed body composition compartment analysis and management. ImpediMed will target these products at the sports medicine and fi tness markets, and at professional sports markets including soccer, American football, basketball, ice hockey, rugby and Australian rules.

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CLINICAL RESEARCH MARKET

ImpediMed has identifi ed three important clinical research markets for its body composition products:

> Pharmaceutical companies: These companies are continually seeking new ways to gather additional data and information non-invasively from human subjects in clinical research trials. Because they are fast, portable and non-invasive, there is a potential market for ImpediMed’s body composition products in clinical research trials of drugs and other therapeutic interventions targeted at treating various diseases. ImpediMed will actively market its products to pharmaceutical companies conducting such research.

Academic centres: Universities with research centres conducting clinical trials directed at preventing or managing obesity-related disorders are a target market for ImpediMed. They are usually fi nancially supported with grants from government agencies, disease management foundations, and private sponsors (including commercial entities and individual or family endowments).
The United States Government: The NIH, the Veterans’ Affairs Medical Centres, the Agency for Health Care Policy and Research, and the Centres for Disease Control and Prevention often conduct large-scale research projects and clinical trials that require non-invasive body composition analysis. They therefore represent a signifi cant market opportunity for ImpediMed.

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5.4 REGULATORY OVERVIEW

Before a medical device can be commercialised, in most industrialised countries of the world it is necessary to apply for and receive regulatory approval to sell the device.

ImpediMed has a staged plan for obtaining the regulatory approvals necessary to achieve its objectives, especially in the United States.

To drive initial revenues, ImpediMed has obtained or applied for regulatory clearances and approvals for those of its products which it can more easily demonstrate are effective for clinical uses. ImpediMed’s current regulatory clearances and approvals will allow the Company to commence commercialising its products.

ImpediMed will progressively seek clearances and approvals for higher levels of clinical use for its products from regulatory authorities to assist in expanding the reimbursement coverage of its devices.

The use of devices is linked to their regulatory approved or cleared claims. For example, simply having an FDA clearance does not mean that no more approvals will be necessary to ensure widespread use (and sales) of a device.

Having higher level regulatory approvals and clearances can create signifi cant barriers for competitors with similar devices wanting to enter regulated markets.

ImpediMed has a staged plan for obtaining the regulatory approvals necessary to achieve its objectives and improve its competitive advantage.

UNITED STATES MARKET REGULATION

The FDA regulates medical devices to ensure that they are safe and effective for use in the United States. Different levels of FDA clearance and approval can be obtained for a medical device, and investors need to understand the signifi cance of these differences, which can have an important effect on the Company’s success.

The table below sets out the categories of FDA approval or clearance that may be required for a particular procedure using a device.

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FDA approval/clearance Comment
category
510(k) class II clearance • Typically 6–9 month approval process and relatively inexpensive
• Need to demonstrate that the device is substantially equivalent to an existing FDA 510(k)
cleared device
• Offers very limited (if any) protection from competition
513(F)(2) (de-novo) clearance • Typically 12–24 month clearance process
• Required where no other equivalent device is 510(k) cleared for the relevant clinical indications
for use, and the device is considered of little risk to human safety
• Can be expensive because of higher evidentiary burden necessary to establish safety and
clinical indications for use
• Offers limited protection from competition due to longer and potentially more expensive
application process compared to 510(k) class II clearance
Pre-market approval class 3 (PMA) • A complex approval process that can take many years (depending on the level of clinical
data required)
• Most stringent FDA approval process that is typically very expensive because of evidentiary
requirements necessary to establish safety and validate clinical claims for the intended use
• Offers signifi cant protection from competition – the time it takes a competitor to complete a PMA
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ImpediMed has applied, or will apply, for different levels of FDA clearance or approval for its products:

ImpediMed’s Imp DF50 and Imp SFB7 (which are described in section 6) have received FDA 510(k) class II clearance for general body composition claims.
ImpediMed’s Imp XCA has been under an FDA 513(F)(2) denovo process. In April 2007, ImpediMed received a 510(k) class II clearance for clinical assessment of lymphoedema in the arm for the Imp XCA.
ImpediMed is beginning a process to prepare applications for FDA 513(F)(2) denovo clearances of the Imp XCA and Imp SFB7 for lymphoedema diagnosis and risk assessment claims. For the Imp SFB7 the Company will apply for claims for both the arm and legs.

Though ImpediMed has not yet lodged an application for pre-market approval for any of its products, this may be necessary if the Company wishes to claim that its products can be used for purposes that may signifi cantly affect patient safety (e.g. monitoring the effi cacy of important treatments or therapies).

EUROPEAN, AUSTRALIAN AND NEW ZEALAND MARKET REGULATION

It is generally simpler to obtain regulatory approvals for medical devices in Europe, Australia and New Zealand than it is in the United States, although it is still time-consuming and expensive. In general terms, in these markets, if clinical evidence of safety and performance of the device can be demonstrated (as distinct from effectiveness) and the device performs in accordance with its labelling, it is left to the Health Care Providers to decide on the most appropriate diagnostic or therapeutic methodology within the labelled intended use.

PATH TO MARKET – TARGETING HIGH BARRIERS TO ENTRY

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STAGE ONE STAGE TWO
Initial Higher
regulatory regulatory
approvals approvals
Specifi c
Existing reimbursement
reimbursement coding –
codes expanded
coverage
Targeted Global
distribution supply
channels partners
Increasing investor value >
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5.5 REIMBURSEMENT OVERVIEW

REIMBURSEMENT

In the case of medical devices like ImpediMed’s, reimbursement involves, in general terms:

payment to Health Care Providers when the device is used to provide a particular approved service to a patient; and/or
reimbursement of all or part of the purchase price of the device (in the case of home care) when it is purchased by or on behalf of a patient for an approved purpose.

Reimbursement provides a powerful economic incentive to Health Care Providers and consumers to purchase and use a medical device. It occurs after regulatory approval has been obtained. For a Health Care Provider to change practice and adopt a new medical device it is extremely important that:

the device’s range of clinical applications for which reimbursement can be obtained is as broad as possible
the level of reimbursement for each application is as high as possible.

In some markets, notably the United States, if the reimbursement for a medical device is inadequate or non-existent, the device is less likely to be adopted by Health Care Providers and consumers, and may not be commercially viable, even if it is a demonstrable improvement on existing technology.

KEY ELEMENTS OF REIMBURSEMENT

In the United States, ImpediMed’s most important target market, there are three key elements to obtaining reimbursement for a medical device that can be crucial to its commercial acceptance.

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CODING
PAYMENT
COVERAGE
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Coding

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CODING
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To be eligible for reimbursement, a medical device must be accepted as being useful or benefi cial for a particular use or procedure that has been assigned a code by the AMA. Coding is the process of obtaining approval for the use of a medical device for particular procedures.

In general terms, the more codes (or procedures) that are approved for any one device, the more likely it is to be adopted by Health Care Providers and consumers.

A manufacturer can obtain two broad types of codes for its devices – existing general procedural codes, or technology specifi c codes. A general code relates to a procedure that may be conducted using a number of different devices (e.g. a general code for monitoring secondary lymphoedema may enable reimbursement under that code if a Health Care Provider used either a tape measure or ImpediMed’s product). A specifi c code relates to a procedure that can only be conducted using a particular medical device (e.g. a specifi c code using BIS technology applied to use for early detection of secondary lymphoedema – ImpediMed’s product). It is necessary to apply to the AMA in detail to obtain a technology-specifi c code.

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PAYMENT
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Payment

Once a code has been approved for a device, the reimbursement to which the user may be entitled for purchasing it, or for using it to provide a service or conduct a procedure, must be determined. Generally, the higher the reimbursement, the more attractive the device will be to Health Care Providers. CMS, an agency of the United States Department of Health, often sets the standard payment level for reimbursement for a device or procedure.

Coverage

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COVERAGE
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Once a device has received coding, and a level of payment has been established, the manufacturer or distributor must convince health care payers (e.g. the public and private health insurance funds) to cover the device for the approved use. This involves convincing them that they will gain demonstrable health and economic advantages by promoting use of the device.

The health care payer marketplace in the United States includes commercial insurers, Blue Cross/Blue Shield plans and Health Maintenance Organisations, Medicare, Medicaid and other federally-funded programs, and ‘self-pay’ plans. Each establishes its own coverage and payment policies, which results in a range of payments and coverage decisions for any device or use.

ImpediMed has a detailed plan to maximise the reimbursement payment levels for its products, using third party specialists, clinical trials, health economic modelling and direct sales resources to payers to establish coding, payment and coverage. However the Company can give no assurance that it will achieve adequate third party reimbursement.

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5.6 CLINICAL TRIALS OVERVIEW

Although ImpediMed is able to sell its products in accordance with its existing regulatory approvals, clinical trials are necessary, particularly in the United States, to:

support the clinical indications for regulatory approvals; and
drive sales and marketing efforts to promote adoption of new clinical practice.

The latter includes demonstrating how a new technology improves both clinical and economic outcomes.

An appropriately planned and conducted clinical trial can potentially be used for both purposes. To this end, the Company has engaged a full time global clinical trials manager to assist in ensuring all clinical trial investments can be utilised for both purposes where possible.

ImpediMed is committed to investing in clinical trials to clinically validate its products, expand their regulatory indications for use and support health economic models. Summarised below are several trials the Company is proposing to support and the strategic objectives of these trials:

A two to three year multi-site clinical trial in the United States to support early detection, diagnosis, and risk assessment indications for lymphoedema in the arm and legs utilising ImpediMed devices. The trial will also look at validating early detection/early intervention benefi ts both clinically and economically. The Company estimates that the trial, which is targeted to commence in calendar year 2008, will cost approximately A$1.7 million. The Company is looking to fund this trial in partnership with a compression sleeve company or through a Government grant. This trial is yet to commence and is presently in clinical protocol and funding discussions. If the Company does not fi nd a funding partner for this trial it may need to conduct a smaller, less costly trial that supports the minimum regulatory outcomes required, or it may need to raise further capital.
An hydration status monitoring trial in the United States to support hydration indications for the Company’s technology platform. This trial, which has commenced, has already been paid for out of the Company’s existing cash resources.
A clinical trial managed by ImpediMed, and involving the Graz University of Technology (Austria), to validate the accuracy of ImpediMed’s technology for differentiating visceral and subcutaneous fat in the abdomen. The objective of the trial is to provide the data necessary to support a regulatory claim that will enable ImpediMed’s products to be used for relevant clinical purposes. The trial, which is not targeted to commence until 2009, is presently expected to cost A$500,000 and to take up to two years.
One or more trials to support a muscle wasting claim for diagnosis and monitoring using ImpediMed devices. Any such trial would be estimated to cost A$250,000 and take up to two years.

The trials referred to above, other than the hydration status monitoring trial that has already commenced, are presently only proposals and the structure of the trials (eg, their nature, extent and duration) may change after input from medical advisors, consultation with the FDA, and selection of trial sites. They may also be modifi ed if further funding can be obtained from Government grants or other commercial sources.

The Company proposes to fund the costs of clinical trials with capital raised under the Offer, from revenue generated from the sale of its products and from other external sources (e.g., Government grants and contributions from trial partners). If the Company decides to commence the trials earlier than currently anticipated, if expected sales are reduced or delayed, or other cash requirements of operations are higher than anticipated, or if funding from external sources is not obtained or is less than expected, the Company may conduct smaller, less costly trials that support the minimum regulatory outcomes required and may need to raise further capital to fund its share of the costs of these trials.

Independently run and funded (preferably Government funded) trials can often be more powerful than Company-sponsored trials in causing clinical change and supporting health economic decisions. The Company therefore seeks to work closely with key academic centres involved with such studies.

An example of an independent government funded trial is a prospective fi ve year clinical research trial conducted at the NIH. The preliminary results of this trial, which indicated that progression of secondary lymphoedema in newly diagnosed breast cancer patients may be reversed if the condition is diagnosed and treated early in the course of their primary medical care, were recently released at a conference of breast cancer surgeons in Washington DC. The full results of this study are expected to be published in 2008. The Company anticipates that there will be a number of publications relating to the results of this study that address matters including clinical outcomes, health economics and patient quality of life. The independence of these studies will assist ImpediMed to establish reimbursement coverage for use of its technology, and for educating Health Care Providers on the new pre-emptive approaches to treating breast cancer survivors.

ImpediMed’s products 6

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ImpediMed’s products have
been successfully market
tested in Australia and
Europe and in research
centres in the United States.
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6.1 INTRODUCTION

The medical devices developed by ImpediMed use bioimpedance technology, which involves applying a very small electrical current to the body. As the current travels through the body it is resisted (impeded) by it. Using sophisticated electronics, it is possible to measure the level of impedance or total resistance of a body to the current, and convert this into clinically useful measurements such as fat mass, fat free mass

The accuracy and clinical benefi t of bioimpedance technology to detect and monitor secondary lymphoedema, and analyse body hydration and composition, has been, and continues to be, independently validated in numerous published scientifi c studies in peer reviewed journals.

6.2 IMPEDIMED’S TECHNOLOGY PLATFORMS

ImpediMed uses two different types of bioimpedance technology in its products:

bioimpedance analysis ( BIA )
bioimpedance spectroscopy ( BIS ).

WHAT IS BIA?

Bioimpedance analysis or BIA devices use either a single fi xed frequency electrical current, or a small number of electrical currents at different frequencies (seven or less), to measure impedance. Single frequency BIA devices are a lower cost alternative than BIS devices for estimating body hydration and composition.

WHAT IS BIS?

Bioimpedance spectroscopy or BIS devices measure impedance across a broad spectrum of frequencies (up to 496 discrete frequencies). This has the potential to determine the body’s hydration and composition more accurately, and is a valuable clinical tool, particularly for comparison of body compartments.

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Imp XCA Imp SFB7
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6.3 IMPEDIMED’S PRODUCTS

ImpediMed’s product portfolio is set out in the following tables:

SECONDARY LYMPHOEDEMA

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Product Technology Indications for use Targeted users Regulatory status
TGA FDA CE
Imp XCA Single, low Clinical assessment for Initial clearance obtained
frequency BIA lymphoedema in an arm [1] for Health Care Provider and
medical research markets
Diagnosis of lymphoedema Targeting higher approvals for Discussions with FDA
in an arm [1] and risk diagnosis and risk assessment planned in calendar year 2008
assessment under a prescription use
indication
Imp SFB7 Single channel Clinical assessment for Health Care Providers and File submission anticipated
BIS lymphoedema in an arm [1] medical research market calendar year 2008
Clinical assessment for Health Care Providers and File submissions anticipated
lymphoedema in the legs medical research market calendar year 2008
Diagnosis and risk Health Care Providers and Discussions with regulatory
assessment for lymphoedema medical research market authorities planned calendar
in an arm [1] and the legs year 2008
Imp SFB9 [2] Multi channel Clinical assessment for Health Care Providers File submission anticipated
BIS lymphoedema in an arm [1] and calendar year 2009
in the legs
Diagnosis and risk Health Care Providers File submission anticipated
assessment for lymphoedema calendar year 2010
in an arm [1] and the legs
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Lymphoedema in two arms is rare, and the market is correspondingly small. It is not ImpediMed’s current intention to seek regulatory approval for this indication for use.
This product is in development as an improvement on the Imp SFB7 that will simplify and accelerate the process of obtaining a reading. It is targeted to be commercially available in calendar year 2009.

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Imp DF50
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ImpediMed’s devices use microelectronics matched with software to deliver accurate and useful patient data.

BODY COMPOSITION

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Product Technology Indications for use Targeted users Regulatory status
TGA FDA CE
Imp DF50 Single frequency Initial clearance obtained for Health Care Providers, weight
BIA assessment of general body loss centres, sports medicine,
composition compartments fi tness centres and medical
in healthy subjects research market
Imp SFB7 Single channel Assessment of general body Health Care Providers and
BIS composition compartments medical research market
in healthy subjects
Targeting higher approvals Health Care Providers and Discussions with regulatory
for specifi c hydration and medical research market authorities planned in
muscle wasting claims calendar year 2008
Imp SFB9 [1] Multi channel Segmental assessment of Health Care Providers and Discussions with regulatory
BIS general body composition medical research market authorities planned in
compartments in healthy calendar year 2008
subjects
Targeting higher approvals Health Care Providers and Discussions with regulatory
for specifi c hydration and medical research market authorities planned in
muscle wasting claims calendar year 2008
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This product is in development as an improvement on the Imp SFB7 that will simplify and accelerate the process of obtaining a reading. It is targeted to be commercially available in calendar year 2009.

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IMP XCA

The Imp XCA is a device designed for the early detection and clinical assessment of patients at risk of secondary lymphoedema in the arm.

In the United States, the list price of the Imp XCA for Health Care Providers is approximately US$4,500.

This device uses patented technology that involves obtaining accurate readings at a single low frequency, and can be used to diagnose secondary lymphoedema earlier than the most commonly used detection method, and with a degree of accuracy substantially equivalent to a BIS device for one arm. In a two year study of high risk breast cancer (post surgical treatment/axillary dissection/radiation) patients, a less sophisticated version of the Imp XCA was able to detect secondary lymphoedema between one and ten months earlier on average than the most common existing detection method.

Compared to the most commonly used conventional method, diagnosis using low frequency bioimpedance technology employed by the Imp XCA:

is fast, taking 1–3 minutes to complete;
is more accurate, using a standardised and objective measurement;
enables the earlier detection of secondary lymphoedema in the arm; and
makes it possible for Health Care Providers to possibly intervene earlier with treatment for lymphoedema before symptoms become obvious and/or severe, which preliminary results from a prospective clinical research trial conducted over fi ve years at the NIH, indicate may prevent progression of the condition.

The markets targeted by ImpediMed for the Imp XCA pioneer new medical uses for BIA technology. As with the Imp SFB product series, ImpediMed’s strategy is to use its current and pending product approvals to develop its revenue and commercial position. It will also concurrently conduct trials to support applications for higher levels of regulatory approval for use of the product, and to substantiate its health economics. If the clinical trials are successful, it is anticipated that this will broaden the opportunity for increased reimbursement coverage and payment levels.

ImpediMed believes that the home care market has the potential to be a signifi cant one for the Imp XCA, so its ultimate objective is to obtain regulatory approval and reimbursement for the Imp XCA in this market.

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Key milestones in ImpediMed’s commercialisation strategy for the Imp XCA are summarised in the following table.

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MILESTONE SIGNIFICANCE PROGRESS
1. MAXIMISE INITIAL SALES USING CURRENT APPROVALS AND EXISTING REIMBURSEMENT CODING
Obtain FDA clearance, TGA approval and CE Allows for sale of the product for use by FDA cleared, TGA approved and CE marked.
marking for use of the product by Health Care Health Care Providers to clinically assess and
Providers to assist in the clinical assessment monitor lymphoedema in the arm in the United
of lymphoedema in the arm. States, Europe, Australia and New Zealand.
Enter into agreements with strategic The Company is targeting partners who Agreements signed with EDN (Europe) and
partners for the distribution of product to the will add value to the long-term distribution Lymphedema Products, LLC and Vodder
research market in the United States, Europe, strategy and assist in driving initial sales. (North America).
Australia and New Zealand.
Small United States based sales and marketing
team in place and continuing to pursue sales.
Discussions ongoing with other potential
United States strategic distribution partners.
Obtain market research report for the use Endorsement by payers for use of existing Boston Healthcare has been engaged as the
of the product with existing reimbursement reimbursement coding will assist in enabling Company’s reimbursement consultant. In this
coding for clinical assessment. Health Care Providers to be reimbursed for capacity, it will survey third party payers and
the use of the product. It is anticipated this work to assist the Company in identifying
will assist in driving adoption of the product existing coding.
by Health Care Providers.
Seek reimbursement for devices in the Inclusion of the use of ImpediMed devices The recent announcement by the
Australian market. in medical guidelines for lymphoedema Commonwealth Minister for Health
prevention and management is anticipated to regarding increased funding for management
help fuel demand for the Imp XCA of lymphoedema presents an exciting
in Australia. opportunity for ImpediMed. ImpediMed will
work with the appropriate authorities in an
effort to have the use of its devices included
in new medical guidelines (which may be
written in calendar year 2008 or 2009) for
lymphoedema prevention and management
in Australia.
2. OBTAIN HIGHER LEVEL APPROVALS
Obtain FDA clearance, TGA approval and The ultimate objective is to obtain labelling A two/three year clinical trial is scheduled
CE marking for the use of the product to so the product may be used for diagnosis and to commence in calendar year 2009 which, if
diagnose lymphoedema in an arm. risk assessment of lymphoedema. This will successful, will support these applications.
expose the Imp XCA to a signifi cant market
Various higher approvals will be sought
with potential revenues from both product
throughout the progress of the trial if
sales and sales of electrodes required to
appropriate data becomes available to
operate the product (recurring revenue).
support each of the claims.
This trial, if successful, will also deliver the
health economic support to improve reimbur-
sement coverage for the use of the product.
3. UTILISE EXISTING REIMBURSEMENT CODING FOR HIGHER LEVEL APPROVALS
Use existing generic durable medical goods If reimbursement for home care users can Durable medical goods codes may already
coding for the home care market. be achieved, this may accelerate adoption exist with large private payers in the United
of home care sales. Pricing for home care States. Favourable clinical data will be
devices will be infl uenced by this. required to support reimbursement for the
device by these payers.
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IMP SFB SERIES

The Imp SFB series devices are designed for the early detection and clinical assessment of individuals at risk of developing secondary lymphoedema in an arm or the legs, and for assessing body hydration and composition. They can do this because they employ BIS technology (unlike the Imp XCA which uses BIA technology). They are targeted at Health Care Providers and medical research markets globally. The targeted list price for the Imp SFB series devices in the United States is between US$14,500 (SFB7) to US$18,500 (SFB9) per device.

ImpediMed is marketing these products for applications where BIS technology has not previously been used. Its strategy is to use its current device approvals and clearances to develop its revenue and commercial position. Concurrently, the Company plans to conduct a clinical trial designed to support applications for higher levels of regulatory approval for use of the devices and to substantiate the devices’ health economics. If the clinical trials are successful, it is anticipated that this will broaden the opportunity for increased reimbursement coverage and payment levels. Unsuccessful trials would adversely affect the Company’s prospects.

IMP SFB7 – SECONDARY LYMPHOEDEMA MARKET

ImpediMed has identifi ed that the Health Care Provider market has the greatest potential for the Imp SFB7. Key milestones in the Company’s commercialisation strategy for the Imp SFB7 in the secondary lymphoedema market are summarised in the following table.

MILESTONE	SIGNIFICANCE	PROGRESS
1. MAXIMISE INITIAL SALES USING CURRENT APPROVALS
Research studies and clinical trials	By targeting clinical researchers in Australia and internationally, the Company can help drive early revenues.	In place
Enter into agreements with strategic partners for distribution of the product (once regulatory clearances obtained) to the markets in the United States, Europe, Australia and New Zealand.	The Company is targeting partners who will add value to both the long-term distribution strategy and initial sales.	Agreements signed with EDN (Europe) and Lymphedema Products, LLC and Vodder (North America). Small United States based sales and marketing team in place and continuing to pursue sales. Discussions ongoing with potential strategic global distribution partners.
2. OBTAIN HIGHER LEVEL APPROVALS AND INCREASE SALES UTILISING EXISTING REIMBURSEMENT CODING
Obtain FDA clearance, TGA approval and CE marking for the use of the product by Health Care Providers for the clinical assessment of secondary lymphoedema in the arm and the legs.	Allows for the sale of the product to the Health Care Provider markets in the United States, Europe, Australia and New Zealand for aiding in the clinical assessment of lymphoedema in the arm and the legs for earlier detection.	FDA and CE submissions targeted for calendar year 2008. TGA approval obtained.
Obtain higher FDA clearance, TGA approval and CE marking for the use of the product including approvals for diagnosis and risk assessment for the arms and legs by Health Care Providers.	Allows for the expanded use of the product in the United States, Europe, Australia and New Zealand. It is anticipated that these higher approvals will be sought throughout larger markets and increase the product’s appeal to Health Care Providers.	FDA and CE submission targetted for calendar year 2010. A two to three year clinical trial targeted to begin in calendar year 2008 will support these applications. If successful, this trial will also assist in delivering the health economic support necessary to achieve reimbursement coverage for the use of the product for its approved indications for lymphoedema in an arm and the legs.

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MILESTONE	SIGNIFICANCE	PROGRESS
2. OBTAIN HIGHER LEVEL APPROVALS AND INCREASE SALES UTILISING EXISTING REIMBURSEMENT CODING (CONT.)
Market research for use of existing reimbursement coding for approved indications.	It is anticipated that the capacity to reimburse Health Care Providers for readings using the product will assist in driving its adoption by this market.	Boston Healthcare has been engaged as the Company’s reimbursement consultant. In this capacity, it will work to assist the Company in expanding coverage from third party payers, and analyse and conf rm existing coding.
3. MAXIMISE LONG TERM SALES THROUGH TECHNOLOGY SPECIFIC REIMBURSEMENT CODING
Apply to AMA for a technology-specif c reimbursement code.	A technology-specif c reimbursement code is expected to facilitate arguments for higher reimbursement levels for Health Care Providers, and increase payer coverage for approved uses of the device. A new technology code will also provide greater protection of the product against competing technologies.	AMA application targeted for submission in October of calendar year 2008.
Establish payment level and coverage on technology-specif c code.	Establishing the health economics and improved clinical outcomes associated with the use of the product will assist the Company to obtain a technology- specif c reimbursement code. The new code will potentially increase the level of reimbursement for Health Care Providers, and encourage further adoption of the product.	Health economics data from the proposed clinical trial will be used when establishing the payment level in 2010. Independent health economics will also be used.
Seek further agreements with strategic partners for distribution of product in the United States on the basis of higher approvals and technology-specif c coding.	Obtaining technology-specif c reimbursement coding on the basis of higher approvals is expected to further drive adoption.	Targetting relationships with global companies in the cancer market to identify a long-term partner to help commercialise the product.

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ImpediMed’s range of instruments are capable of making measurements of impedance with a high degree of precision (within 1% error) and speed.

IMP SFB7 – BODY COMPOSITION MARKET

ImpediMed has obtained regulatory approval to use this product to assess general body composition compartments in healthy individuals. Subject to the Company’s other priorities, it also intends to apply for regulatory approval to use the Imp SFB7 in clinical applications that require higher claims which potentially include assessing dehydration, muscle wasting and drug dosing and monitoring. The timing for obtaining these approvals will depend on the validated size of the market opportunity and the Company’s available resources.

The targeted list price for the Imp SFB7 in the United States is US$14,500.

Key milestones in ImpediMed’s commercialisation strategy for the Imp SFB7 in the body composition market are summarised in the following table.

MILESTONE	SIGNIFICANCE	PROGRESS
1. MAXIMISE INITIAL SALES USING CURRENT APPROVALS
Obtain FDA clearance, TGA approval and CE marking for use of the product to assess and monitor general body composition compartments in healthy individuals.	Allows for sale of the product to assess and monitor general body composition of healthy individuals in the United States, Europe, Australia and New Zealand in healthy individuals.	In place
Enter agreements with strategic partners for distributing the product in the United States and Europe.	The Company is targeting partners who will add value to the long-term distribution strategy and drive initial sales.	Agreements signed with EDN (Europe) for distribution to the European consumer, Health Care Provider and research markets. Small United States based sales and marketing team in place and continuing to pursue sales. Discussions ongoing with potential United States distribution partners.
2. OBTAIN HIGHER LEVEL APPROVALS
Obtain FDA clearance, TGA approvals and CE marking for specif c claims relating to the assessment and monitoring of hydration and muscle wasting (cachexia).	Allows for sale and use of the product to assess and monitor hydration status and muscle wasting. The approval of these specif c claims is expected to expose the product to new and expanded markets.	Clinical trials to be conducted with the University of Wisconsin to support hydration claim submissions. Other clinical trials will, if the business case is established, be targeted to support cachexia and hydration claims.
3. MAXIMISE LONG-TERM SALES THROUGH TECHNOLOGY-SPECIFIC REIMBURSEMENT CODING
Seek coverage for these new higher claims in body composition with the new technology-specif c reimbursement code established for lymphoedema.	On the basis that a technology-specif c reimbursement code is granted for the use of the product in the secondary lymphoedema market, then ImpediMed can apply for extension of this coverage to other body composition claims for this new code.	Linkage to be sought after the granting of a technology-specif c reimbursement code by AMA in relation to secondary lymphoedema. AMA new code approval is targeted for calendar year 2010.
Seek further agreements with strategic partners for distributing the product in the United States on the basis of higher approvals and technology-specif c coding.	Obtaining technology-specif c reimbursement coding on the basis of the higher approvals is expected to attract the interest of major health care companies for the global distribution of the product.	Relationship discussions are currently being targeted with global healthcare companies – the Company wants to identify a long-term global partner for hydration and muscle wasting.

IMP DF50

The Imp DF50 is a single-frequency product that offers a less expensive option for general body composition than the Imp SFB7. It is ideally suited to general health assessment and for monitoring nutritional and naturopathic programs, however there are many competing BIA products on the market. The Imp DF50’s advantage over these is that it offers improved accuracy by using population-specifi c formulas. The Imp DF50 is battery-operated and portable.

The targeted list price of the Imp DF50 in the United States is US$2,500.

ImpediMed has obtained FDA clearance, TGA approval and CE marking for this product for assessing general body composition in healthy individuals, and has signed agreements for its distribution in Australia and New Zealand, North America and Europe. Discussions have commenced with the FDA aimed at agreeing protocols for approving higher regulatory claims for this product (the assessment of body cell mass and monitoring for muscle wasting). It is expected that obtaining approvals for these higher claims will facilitate broader distribution of this product in the United States.

It is anticipated that sales of the Imp DF50 will generate modest revenue, and the product completes a portfolio of options offered by ImpediMed for body composition.

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6.4 PIPELINE OPPORTUNITIES

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ImpediMed is in the process of developing several new products to extend the use of its technology across other market segments.

NEW PRODUCTS IN DEVELOPMENT

A modifi ed Imp SFB7 – a single-channel BIS device capable of determining whole body composition in mice and rat models for use in obesity research. This device is not expected to be launched before calendar year 2008.
The Imp SFB9 – a multi-channel BIS device designed to provide a reading faster than existing alternatives and intended to appeal to Health Care Providers interested in improving effi ciency. This device is not expected to be launched before calendar year 2009.
A modifi ed Imp SFB series device – a device designed to give a direct BIS reading for differentiating abdominal fat for the diagnosis of metabolic disorder syndrome. This device is not expected to be launched before calendar year 2010.
The Imp XCA home care – a new version of the Imp XCA will be targeted in its design to be more user-friendly and therefore better suited to the home care setting. This device is not expected to be launched before calendar year 2009.
Hydra 4200 – through the acquisition of Xitron, the Group will acquire a low cost BIS device, the Hydra 4200. This gives the Group an entry level hydration and general body composition device for the research market.

RESEARCH RELATIONSHIPS

ImpediMed has research being conducted at the Graz University of Technology (Austria), and in key leading medical institutions in the United States, which include Harvard University, Stanford University, University of Pennsylvania, NIH and MD Anderson.

ImpediMed also continues to maintain and build its close links with the Queensland University of Technology and the University of Queensland. Both institutions have internationally recognised and respected scientists who are continuing research in the fi eld of BIS and its application to secondary lymphoedema.

In addition, ImpediMed will work closely with the Queensland University of Technology and the University of Queensland to foster the development of the next generation of scientists specialising in bioimpedance through research grants of post doctoral studies undertaken by

ImpediMed intends to utilise the contacts and excellent reputations of both institutions with other universities around the world to cultivate relationships to progress new applications and approaches for the BIS platform outside Australia.

ImpediMed also has a research relationship with Mayo Clinic aimed at assisting them to validate new applications in secondary lymphoedema of the breast.

6.5 XITRON – STRATEGIC NORTH AMERICAN ACQUISITION

BACKGROUND

Xitron is a San Diego based fi rm founded in 1990 that designs and manufactures devices using bioimpedance technology for medical applications. It also supplies products for precision power analysis by manufacturers of industrial and consumer products such as lighting.

MEDICAL PRODUCTS BUSINESS

Xitron has granted a licence for the exclusive rights to its BIS technology in dialysis medical markets to Fresenius. Fresenius is the world’s largest integrated provider of products and services for individuals with chronic kidney failure and the world’s largest provider of dialysis products such as hemodialysis machines, dialysers and related disposable products. It uses Xitron technology to analyse hydration status in conjunction with the use of Fresenius’ dialysis devices.

In addition to licensing to Fresenius its bioimpedance technology, Xitron also manufactures Fresenius’ “Pod” device, a product used to estimate dry mass. The Pod will need FDA clearance prior to its commercial launch by Fresenius in the United States.

Xitron also manufactures under its own name a product known as the “Hydra 4200”, a low cost BIS device. This will provide the Group with an entry level hydration and general body composition device for the research market.

TEST AND MEASUREMENT BUSINESS

Xitron’s test and measurement business supplies industrial power analysis products that are used to verify product design standards and to monitor manufacturing processes. Xitron’s test and measurement products are also used to measure power usage for reporting Energy Star ratings to consumers. Its range of products includes power analysers, phase angle voltmeters, ballast test systems, and DC temperature calibrators. Its revenues for the year ended 31 December 2006 were US$1.48 million (unaudited).

The test and measurement business, which ImpediMed does not anticipate will require any major capital investment over the short to medium term, provides ImpediMed with a United States based business that is not expected to require signifi cant funding together with access to employees who already understand the Company’s technology. This business also provides ImpediMed with a United States domestic servicing capability and the potential to complete fi nal assembly of its devices in the United States if needed.

Whilst the test and measurement business is outside ImpediMed’s area of focus, it is the Company’s intention to continue to operate the business under its current brand and management and to undertake a strategic review of the business in the medium term.

STATUS

ImpediMed has executed a conditional agreement with the shareholders of Xitron to acquire their shares. ImpediMed expects that the acquisition will be completed following lodgement of this prospectus with ASIC and by no later than one month after its listing on ASX.

The consideration payable by ImpediMed to acquire Xitron is Shares. In addition to the issue of Shares to Xitron’s shareholders at completion, ImpediMed is required to issue them with further Shares over the next three years if certain milestones related to the Xitron business are achieved. As part of the acquisition, Xitron has agreed with Fresenius to amend the licence agreement between the parties, such that Fresenius has agreed to return to Xitron the rights for it to apply its BIS technology in medical markets other than dialysis and extracorporeal uses. The amount payable to Fresenius as a condition of it agreeing to vary the licence is US$1,000,000, which ImpediMed will lend to Xitron using funds raised from the Offer. Further details of the terms of the acquisition are contained in section 13.1.

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BENEFITS OF THE ACQUISITION

ImpediMed believes that the Xitron acquisition will:

expand the Group’s intellectual property position around its primary technology focus of bioimpedance spectroscopy
introduce Fresenius (the world’s largest dialysis company) as a major strategic partner for ImpediMed in the dialysis market
provide ImpediMed with a local stocking branch in the United States
enable ImpediMed to offer local customer and instrument service through a San Diego offi ce and to expand to local fi nal assembly if needed
provide ImpediMed with United States based management with manufacturing experience
introduce a small test and measurement business that is not expected to require signifi cant funding and which supports other aspects of the Xitron business.

IF THE ACQUISITION DOES NOT PROCEED

The acquisition of Xitron is not yet completed and is subject to conditions and termination events (see section 13.1). ImpediMed has no reason to believe that the acquisition will not proceed to completion, however adverse events may occur which may result in the conditions not being satisfi ed or termination rights being exercised.

If such a situation should occur, the Company still intends to proceed with the Offer, because it believes it can meet the business objectives set out in this prospectus, within the timeframe contemplated, without acquiring Xitron.

6.6 DISTRIBUTION AGREEMENTS

ImpediMed’s devices will be marketed in Australia, New Zealand, the United States and Europe.

ImpediMed has entered into agreements with several distributors for these markets, and intends to enter into further distribution agreements once it obtains additional regulatory approvals that allow it to enter new markets.

The distribution agreements cover distribution and sales, with ImpediMed taking responsibility for after-sales service in most cases.

ImpediMed has entered into the following distribution agreements:

A three-year, non-exclusive, global distribution agreement with Lymphedema Products, LLC for ImpediMed products for lymphoedema. Lymphedema Products, LLC is a company established by Steve Norton (the founder and executive director of the Norton School of Lymphatic Therapy), to provide products to the lymphoedema market. The Norton School of Lymphatic Therapy is a major provider, in the United States, of training to Health Care Providers in the treatment of pathologies related to the lymphatic system. In the United States alone there are approximately 143,000 physical therapists, 57,000 physical therapist assistants, 83,500 occupational therapists and 21,000 occupational therapist assistants who are potential candidates for lymphatic therapy education and validation.[1]
A three-year, non-exclusive, global distribution agreement with Vodder for ImpediMed lymphoedema related products. Vodder is a major US based educational institution that provides training to Health Care Providers in the treatment of pathologies related to the lymphatic system.
An exclusive agreement with EDN for distribution of the Imp XCA, Imp SFB7 and Imp DF50 for their approved regulatory uses in Germany, Austria, Italy, Spain, Switzerland, France, Ireland and the United Kingdom. This is a fi ve-year contract that specifi es minimum purchase requirements, which if not met allow ImpediMed to terminate the contract.
1 U.S. Department of Labor, Bureau of Labor Statistics, 2004

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An exclusive agreement with Metagenics Australia (Health World) for distributing the VLA50 (a variation of the Imp DF50) in Australia and New Zealand for the naturopathic market.
A non-exclusive agreement with FaCT Canada for distributing the Imp DF50 and Imp SFB7 in Canada for their approved regulatory uses.
A non-exclusive agreement with Unlimited Life Opportunities for distributing the Imp SFB7 and Imp DF50 for the assessment of general body composition in Australia and New Zealand.
A non-exclusive agreement with Sportstek for the distribution of the Imp XCA and Imp SFB7 for secondary lymphoedema in Australia and New Zealand.
A non-exclusive agreement with Pharmacy Health Solutions for distribution of the Imp DF50 for the assessment of general body composition in Australia and New Zealand.

6.7 MANUFACTURING AND SERVICE STRATEGY

With the acquisition of Xitron (expected to occur following lodgement of this prospectus with ASIC and no later than one month after ImpediMed’s listing on ASX), the Group will have a low volume United States manufacturing capability for its test and measurement business, which has the potential to be expanded to include fi nal assembly of medical products if required. Also within this facility is a service division capable of providing after sales service to the United States market.

ImpediMed contracts the manufacture of its other medical devices to a medical device quality approved, Australian based, manufacturing partner (Startronics) which has the ability to scale its manufacturing capacity up to 1,000 Imp SFB7 units per month if required. This is expected to meet the Company’s demands for this product for the foreseeable future.

For the European market, ImpediMed is capable of servicing its instruments through the service departments of its European distributor. All service strategy, manuals and preventative maintenance programs are formulated and managed centrally from ImpediMed’s Brisbane offi ce.

6.8 QUALITY SYSTEM

ImpediMed complies with a global standard quality system. The Company’s devices are manufactured under the internationally accredited quality system ISO 13485:2003. This is a standard specifi c to the requirements of medical device companies that supplements the ISO 9001 standard (which applies to many industries). Some of the additional requirements of the standard relate to design controls, risk management, validation, record retention and traceability, which are issues important to quality in the medical device industry.

6.9 ACHIEVEMENTS TO DATE

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ACHIEVEMENT DATE
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ACHIEVEMENT	DATE

ImpediMed established by founders Mel and Lucille Bridges	September 1999
Exclusive Australian/NZ agreement signed with Metagenics Australia (Health World) for distribution of the VLA50 (a variation of the Imp DF50) in the naturopathic market	May 2004
Obtains ISO 13485:2003 standard certif cation	June 2004
United Kingdom and United States off ces opened and local consultants employed	January/February 2005
TGA & CE medical mark clearance obtained for Imp XCA and Imp DF50	March 2005
The f rst VLA50 (a variation of the Imp DF50) supplied to Metagenics Australia (Health World)	May 2005
FDA clearance obtained for Imp DF50 (body composition only)	June 2005
Regulatory f les submitted for FDA for Imp SFB7 – body composition only	August 2005
European distributor agreement signed with EDN	August 2005
FDA clearance obtained for the Imp SFB7 for body composition	April 2006
Instrument translations completed for f rmware and software for European market launch	September 2006
Device for mice and rat research developed	November 2006
Approximately A$20 million in total funds received by the Company since its inception	November 2006
NIH present preliminary clinical trial data that indicates that early diagnosis, coupled with timely treatment, may prevent secondary lymphoedema in the arm progressing to a stage where it is irreversible	March 2007
FDA clearance obtained for the Imp XCA	April 2007
Harvard publishes an article on the use of the SFB7 for detection of lymphoedema in the arm and leg	May 2007
Lymphatic Research Foundation names Greg Brown as Business Person of the year	May 2007
Channel 9 Washington runs a segment on the use of the Imp SFB7 in the NIH trial for early detection and treatment of lymphoedema in breast cancer patients	May 2007
Agreements with Lymphedema Products, LLC and Vodder signed for the distribution of Imp XCA in the United States	June 2007
Commercial ready grant of $1.6 million approved for Imp SFB9 development	June 2007
Xitron acquisition agreements executed	July 2007
Agreement with Graz University of Technology (Austria) to collaborate on the further development of an application of BIS to the assessment of abdominal fatness	July 2007

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6.10 KEY MILESTONES FOR THE NEXT 18 MONTHS

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PLANNED MILESTONE SIGNIFICANCE TARGET DATE
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PLANNED MILESTONE	SIGNIFICANCE	TARGET DATE

Complete Xitron acquisition and commence integration into ImpediMed	Establish major manufacturing, servicing and stocking facility for the United States market	September – November 2007
First reimbursement report on coding available for use with the Imp XCA	It is an indication of effective United States reimbursement, a key driver of sales	March 2008
Key NIH publication on early detection/ intervention for breast cancer survivors available	Validation of the benef ts of the detection of lymphoedema before the onset of visible symptoms	July 2008
FDA submissions f led for the Imp SFB7 for the arm and leg	First step in having an approved device for diagnosis and risk assessment for lymphoedema in the arm and the legs	July 2008
Public relations roll-out in the United States of the Imp XCA and its use in clinical assessment and early detection of secondary lymphoedema in breast cancer patients	Increased awareness about the Imp XCA being the f rst device with FDA clearance for a lymphoedema claim in the United States market	August 2008
Arm and leg FDA clearance for the Imp SFB7	SFB7 cleared for use and eligible for reimbursement in the United States market	December 2008
Agreed protocol and selection of sites for the major lymphoedema trial for arm and legs	Data from the trial will be used to support diagnostic and risk assessment claims for the Imp SFB7/9	December 2008
Complete development of f rst Imp SFB9 prototype	First multi-channel BIS device for clinical use	June 2009

These dates are targets only and may not be achieved within the timeframe anticipated, or at all. In addition to these milestones, there are detailed product milestones that are set out in section 6.3.

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44
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7[ImpediMed’s people] 44

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ImpediMed has a clear and focused strategic vision and has assembled a Board and senior management team with the depth of experience in medical devices, health care and international commercialisation necessary to provide it with the best opportunity to implement this vision.

This section provides a snapshot of ImpediMed’s key people, their skills and their relevant experience.

7.1 BOARD OF DIRECTORS

Mel Bridges BSc FAICD – non executive Chairman

Mel Bridges has over 30 years of international business experience in the health care industry.

Mel Bridges’ career highlights include:

Founder and Chairman of ImpediMed
Current Chairman of ASX-listed company Alchemia Limited
Founder and, from 1998 to 2003, Chief Executive Offi cer of Panbio Limited
Founder and Managing Director of Pacifi c Diagnostics, sold to Baxter Corp, a United States Fortune 100 company, in 1986
Winner of prestigious national and state business awards including the 2005 AusBiotech Chairman’s Industry Medal and 2004 Queensland Entrepreneur of the Year.

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Mel Bridges is a major shareholder in ImpediMed.

Greg Brown BSc MBA – Chief Executive Offi cer and Managing Director

Greg Brown has over 20 years of business experience in the health care industry.

Greg Brown’s international experience includes:

13 years of internationally based experience in marketing positions, overseeing product development and global commercial launches. During this period he worked in international roles based in Switzerland (Basel), England (London), Germany (Goettingen) and the United States (New York/New Jersey/Maryland)
Sales Director for Baxter Diagnostics in Australia and later Sales and Marketing Director in the United Kingdom (Baxter seven years)
Senior Global Marketing Manager for Roche Molecular Systems (Roche three years)

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Vice President, Global Strategic Marketing for Digene Corporation (Digene eight years)
Leading sales, device product management, marketing and managed care teams in Europe and the United States
Past board member of NASDAQ-listed company, Trinity Biotech in 2000/2001.

Greg Brown is a major shareholder in ImpediMed.

The ImpediMed management team has extensive experience in the successful commercialisation of new medical applications.

Martin Kriewaldt BA LLB (Hons) FAICD – non executive Director

Martin Kriewaldt has more than 10 years experience on public company boards, including the following ASX-listed companies:

Suncorp-Metway Ltd
Oil Search Limited
GWA International Limited
Campbell Brothers Limited.

Martin Kriewaldt has expertise in patent, trademark and intellectual property disputes and in banking and insurance matters, having worked as a partner in litigation for more than 20 years at top tier legal fi rm, Allen Allen & Hemsley (now Allens Arthur Robinson).

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Martin Kriewaldt is Chair of the Board’s remuneration committee.

Cherrell Hirst AO MBBS BedSt D.Univ FAICD – non executive Director

Cherrell Hirst is a medical doctor and, until November 2001, was a leading practitioner in the area of breast cancer screening and diagnosis.

Cherrell Hirst holds directorships with:

Suncorp-Metway Ltd
Peplin Limited
Avant Mutual Limited and Avant Insurance Limited
Queensland Biocapital Funds
MBF Australia Group.

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Cherrell Hirst was previously the Director of the Wesley Breast Clinic, a director of the Breast Cancer Network Australia and Hutchison’s Child Care Services Ltd, a member of the Biological Committee of AusIndustry’s IR&D Board, and Chancellor of the Queensland University of Technology for a decade from 1994 to 2004.

Michael Panaccio Bsc (Hons), MBA, PhD FAICD – non executive Director

Michael Panaccio currently holds the following positions:

Co-founder and Investment Principal of leading Australian venture capital fi rm, Starfi sh Ventures, a fund with more than A$150 million in funds under management
Chairman of the Australian Biotechnology Advisory Committee
Director of a number of private technology companies.

Michael Panaccio’s experience also includes commercially focused research and development with the Victorian Institute of Animal Science for eight years and fi ve years with Singapore-based venture capital fi rm, Nomura/JAFCO Investment (Asia) Limited.

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James Hazel B.Ec, F Fin, FAICD – non executive Director

Jim Hazel has had an extensive career in banking and investment banking, including as Chief General Manager of Adelaide Bank Ltd. Until recently he was Managing Director of Primelife Corporation Limited, an ASX-listed retirement village and aged care company.

He is presently Chairman of Elders Rural Bank Limited, Chairman of Becton Living Pty Ltd, a subsidiary of Becton Property Group Limited and a director of Terramin Australia Limited.

Previous directorships held include the South Australian Government Financing Authority, Tourism SA, Peptech Limited and St Andrews Hospital Inc.

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7.2 SENIOR MANAGEMENT

AUSTRALIA

Phil Auckland – Chief Financial Offi cer and Chief Operating Offi cer

Phil Auckland has 26 years experience in fi nance and 17 years experience in management, including:

Chief Financial Offi cer and Company Secretary of ImpediMed since June 2004;
Chief Financial Offi cer of Panbio Limited from 1997 to 2003, a period in which the company listed on the ASX and grew revenue from A$3.8 million to A$17.1 million per annum (in the 2002 fi nancial year). Whilst at Panbio, Phil Auckland played key roles in that company’s two United States acquisitions and their subsequent integration;
Prior to 1997, he held various management roles in the new vehicle distribution and retail sector, including with Mazda Australia and various fi nance/accounting roles with JRA Limited, Suncorp Finance, Pioneer Concrete, Humes ARC, and KMG Hungerfords.

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Phil Auckland is an FCPA, and holds a Bachelor of Business Accountancy from QUT and a Graduate Diploma in Company Secretarial Practice from Chartered Secretaries Australia. In October 2002 he completed the Columbia University Senior Executive Program.

Belinda Robinson – Vice President International Sales

Belinda Robinson has more than 20 years sales experience with the medical and diagnostic industry.

Belinda Robinson has held territory management, product and training specialist, and senior sales management positions with market leading companies including Abbott Diagnostics, F.H. Faulding and Sanofi Diagnostics Pasteur.

Prior to joining ImpediMed, Belinda Robinson was Australasian Sales Manager for Panbio Limited.

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Roger Render – Vice President Quality and Regulatory

Roger Render worked with implantable medical device designer and manufacturer Telectronics Pacing Systems in Sydney from 1983 to 1996. His last position was as Telectronic’s Regulatory Affairs Executive, the company’s senior regulatory representative in the Asia Pacifi c region. The position covered both United States designed and manufactured pacemakers and Sydney designed and manufactured implantable cardioverter defi brillators.

From January 1997 until October 2002 Roger Render established and ran his own consulting company QRS Pty Ltd, whose clients included ResMed, Polartechnics and Sirtex.

From October 2002 to present he established his own company QRA Ltd based in Auckland, New Zealand and has assisted a number of New Zealand start up companies such as Adept Medical and Brainz.

Bernhard Kall – Group Finance Manager

Bernhard Kall joined ImpediMed in January 2005 as Corporate Accountant and moved to the position of Group Finance Manager in October 2006.

He has more than 20 years national and international fi nancial management and accounting experience.

Bernhard Kall holds a Master of Professional Accounting from QUT, a Master of Science Management (HEC) France, and a Bachelor of Mathematics from Aachen, Germany.

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Alan Edgecomb – Service and Technical Support Manager

Alan Edgecomb has 28 years of service experience, including 25 years in the medical device industry, working for General Electric, Siemens, Philips and Technicon.

He has experience in service engineering, service program management, quality systems management, environmental health and safety and regulatory affairs.

Alan Edgecomb has worked in Australia, South East Asia, Africa and Germany.

Alan Edgecomb holds a certifi cate in Business Marketing and Diploma in Electrical Engineering.

Brian Ziegelaar – Product Manager

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Dr Brian Ziegelaar has experience in biochemistry, physiology and biomaterials.

He spent fi ve years with the Ludwig Maximilians University in Munich, Germany where he completed his PhD in tissue engineering and went on to work as a post doctoral researcher.

Prior to his posting in Germany Brian Ziegelaar was a research assistant with the Lions Eye Institute for three years, while completing a masters degree in medical science specialising in biomaterial-tissue interfaces for an artifi cial cornea project. While doing his undergraduate degree Brian Ziegelaar also worked as a laboratory technician at the University of Western Australia in the Department of Biochemistry.

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Steve Denaro – consulting Company Secretary

Steve Denaro is a chartered accountant and has been Company Secretary since March 2003.

The role of Company Secretary has been shared with Phil Auckland, ImpediMed’s Chief Financial Offi cer, since September 2004, an arrangement which sees Steve Denaro responsible for board services and Phil Auckland as Executive Company Secretary.

UNITED STATES

Jack Butler – Vice President Business Development North America

Jack Butler has over 25 years of experience in diagnostics and medical devices working with such industry leaders as Roche Diagnostic Systems, Boehringer Mannheim Corporation and Digene Corporation, a molecular diagnostics company focused on women’s health and cancer. He has experience in sales, marketing, managed care, corporate accounts and sales management in the United States health care market. During his 13 years with Roche Diagnostic Systems, Jack Butler was a fi ve time recipient of Roche’s “President Achievement Award” and a recipient of the “Century Club Award.” At Digene Corporation, he was made Director of Sales within two years of joining the company and served in that capacity for fi ve years. He has also completed professional development programs at Northwestern University’s Kellogg Graduate School of Management.

Dennis Schlaht – Vice President Xitron Test & Measurement Division

Upon completion of the acquisition of Xitron, Dennis Schlaht will remain responsible for the Xitron Test and Measurement Division.

Dennis Schlaht has 24 years experience in electrical engineering, including the following professional and executive roles:

Vice President of Marketing and Product Development of Xitron since July 2004, with overall responsibility for the development and execution of marketing strategy for Xitron’s test and measurement business
Field Applications Engineer (April 1994 to June 1998) and Director of Technical Business (September 1998 to July 2004) for Insight Electronics.

Prior to 1994 he spent more than 10 years in professional engineering roles with aerospace and defence contractor Martin Marietta.

Dennis Schlaht has a Bachelor of Science in Electrical Engineering from Colorado State University, and has completed post graduate courses with UCLA and UCSD.

EUROPE

Sarah Edmonds – Vice President, Business Development Europe

Sarah Edmonds has been a marketing professional for over 20 years and has specialised in health care communications for the last 10 years.

As Director of Global Marketing Communications for Digene Corporation, Sarah Edmonds was responsible for strategy and execution of women’s health awareness initiatives in the United States and Europe focused on the creation of a market for Digene’s lead diagnostic product.

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Prior to this position, Sarah Edmonds was Marketing Manager at TDS Healthcare (formerly Technicon Data Systems), managing medical expert exchange programs. She then worked for Bel-Aire Associates Inc., a New York headquartered global communications agency, fi rst as General Manager of the United Kingdom operation and then as Head of Production for the main agency.

8 Financial information

8.1 INTRODUCTION

This section contains:

a summary of ImpediMed’s capital structure
details of the use of funds raised under the Offer
a discussion of ImpediMed’s recent sales and fi nancial performance
the Financial Information of ImpediMed together with a statement of signifi cant accounting policies and notes.

This section has been prepared on the assumption that the Offer proceeds. All information in this section should be read in conjunction with the risk factors set out in section 12 and the Independent Accountant’s report in section 11.

8.2 CAPITAL STRUCTURE

At the date of this prospectus ImpediMed has ordinary shares (Shares), preference shares, options and convertible notes on issue.

On the Closing Date of the Offer the preference shares will automatically convert into 10,964,511 Shares.
Approximately two working days after the Closing Date of the Offer the Company will allot 12,200,000 Shares and 6,100,000 IPO Options to Applicants under the Offer. There may be up to an additional 1,400,000 Shares and 700,000 IPO Options issued in the event that oversubscriptions are accepted.
As a result of the allotment of Shares pursuant to the Offer, the outstanding S3 Convertible Notes will convert to 19,915,588 Shares.
Further, as a result of the allotment of Shares pursuant to the Offer, the IPO Convertible Notes issued on the signing of the Underwriting Agreement will be redeemed and 11,400,000 Shares and 5,700,000 IPO Options issued.
Following lodgement of this prospectus with ASIC, and by no later than one month of the Company’s listing on ASX, the Company expects to complete the acquisition of Xitron and issue 2,132,509 Shares as purchase consideration, as more fully described in section 13.1.

The capital structure of ImpediMed on completion of the Offer, and assuming the acquisition of Xitron, will be as follows:

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Shares Percentage of Options Total diluted Percentage of
(number) total (%) interests [2] total (%)
Shares on issue as at the date of this
prospectus 22,789,361 28.7 22,789,361 24.1
Options issued to employees and
consultants as at the date of this prospectus 2,337,673 2,337,673 2.5
Options to be issued to the chief executive
offi cer under the prospectus 1,000,000 1,000,000 1.0
Shares to be issued on conversion of
preference shares 10,964,511 13.8 10,964,511 11.6
Shares to be issued on conversion of S3
Convertible Notes 19,915,588 25.1 19,915,588 21.0
Shares and IPO Options to be issued on
redemption of IPO Convertible Notes 11,400,000 14.4 5,700,000 17,100,000 18.1
Shares and IPO Options to be issued
pursuant to the Public Offer 12,200,000 15.4 6,100,000 18,300,000 19.4
Subtotal 77,269,460 97.3 15,137,673 92,407,133 97.7
Shares to be issued on completion of the
Xitron acquisition 2,132,509 2.7 2,132,509 2.3
Total assuming completion of the Xitron
acquisition 79,401,969 100.0 15,137,673 94,539,642 100.0
Oversubscriptions [1] 1,400,000 700,000 2,100,000
Total assuming completion of the
Xitron acquisition (including maximum
oversubscriptions) 80,801,969 15,837,673 96,639,642
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Under the Public Offer the Company may accept oversubscriptions of up to an additional 1.4 million Shares and 700,000 IPO Options. There can be no guarantee that the maximum amount of oversubscriptions, or any oversubscriptions at all, will be achieved.
The Board has resolved to issue up to 469,500 Shares under a performance share plan, which is described in more detail in section 13.7. The Shares that may be issued under the Plan are not included in the table above as they are not issued Shares.

As at the date of this prospectus, a total of 2,337,673 options over Shares were on issue and a further 1,000,000 options are being offered to the Chief Executive Offi cer, Greg Brown, under this prospectus. These options have been granted to ImpediMed staff and consultants and, assuming completion of the acquisition of Xitron (and assuming no oversubscriptions), will represent approximately 3.5% of the total diluted interests. The options on issue are as follows:

810,000 options issued to staff and consultants in 2004, exercisable at $0.87 per option and expiring as to one third per year between 2010 and 2012
747,673 options issued to Greg Brown in 2004, exercisable at $0.675 per option and expiring as to one third per year between 2011 and 2013
780,000 options issued to staff and consultants in 2007, exercisable at $0.716 per option and expiring as to one third per year between 2012 and 2014
500,000 options offered to Greg Brown under this prospectus, exercisable at $0.91 per option and expiring as to one third per year between 2012 and 2014
500,000 options offered to Greg Brown under this prospectus, exercisable at $1.03 per option and expiring as to one third per year between 2012 and 2014.

In addition to the options referred to above, under the Offer a further 11,800,000 IPO Options will be issued in the ratio of one IPO Option to every two Shares allotted under the Offer. If the Company accepts oversubscriptions under the Public Offer, up to a further 700,000 IPO Options will be issued on the same basis.

8.3 SALES PERFORMANCE

During the fi nancial year ended 30 June 2007 ImpediMed achieved revenue from sale of goods of $1,185,282, an increase of $132,236 compared to $1,053,046 achieved the previous fi nancial year.

A break down of revenue from sale of goods per product line is as follows:

FY 2007	A$
Instrument sales
Imp DF50 (body composition)	406,011
Imp XCA (lymphoedema)	93,465
Imp SFB7 (lymphoedema and body composition)	632,297
Total instrument sales	1,131,773
Other sales	53,509
Total sales	1,185,282

FY 2006	A$
Instrument sales
Imp DF50 (body composition)	492,782
Imp XCA (lymphoedema)	58,302
Imp SFB7 (lymphoedema and body composition)	474,991
Total instrument sales	1,026,075
Other sales	26,971
Total sales	1,053,046

Domestic sales represent a disproportionately large part of ImpediMed’s revenues in the last two years in comparison to sales to the international markets that ImpediMed is targeting. International sales have been constrained while the Company has been preparing for full product launches in international markets and attaining critical regulatory clearances. The Company anticipates that it will generate more export revenue in future years with the fi rst FDA clearance for the lymphoedema market now achieved, and with the European launch of products with fi rmware in seven languages.

The acquisition of Xitron will add a business with unaudited turnover in calendar year 2006 of US$1.48 million (A$1.7 million at an A$/US$ exchange rate of 0.84354). Completion of the acquisition is expected to occur following lodgement of this prospectus with ASIC and by no later than one month after the Company’s listing on the ASX and thus, for fi nancial year 2008, Xitron is expected to contribute for approximately eight to nine months.

For fi nancial year 2008 the Group expects organic revenue growth to be driven by the launch of the now FDA cleared Imp XCA.

8.4 USE OF FUNDS

ImpediMed expects that it will generate negative cash fl ows from operations as it builds the scale of its operations and invests in developing its products and international markets.

Under the Public Offer ImpediMed will raise $8.784 million, and may accept oversubscriptions of up to $1.008 million (or 1.4 million Shares). When added to cash received of $8.208 million in September 2007 from the issue of IPO Convertible Notes on the signing of the Underwriting Agreement, ImpediMed will have a minimum of $16.992 million to fund its activities, including the costs of the Offer. In the event that oversubscriptions are accepted, up to an additional $1.008 million may be available, providing the Company with up to $18 million to fund its activities.

On completion of the Offer (and not taking into account any possible oversubscriptions), the Company will have suffi cient funds to carry out its stated objectives.

There is no guarantee however that the Company will meet its budgeted objectives or that the assumptions underpinning the Company’s estimates will prove correct. For example, the Company’s revenues are subject to a number of assumptions relating to, among other things, rates of market penetration and the achievement of product development, clinical trials, regulatory clearance and reimbursement milestones. If anticipated revenues are reduced or delayed, the cash requirements of operations are higher than anticipated, or if circumstances otherwise vary signifi cantly from the assumptions in the Company’s fi nancial planning models, the Company will need to raise further capital sooner than anticipated.

Source of funds	Minimum capital raising (assuming no oversubscriptions) A$	Maximum capital raising (assuming maximum oversubscriptions) A$
Public Offer	8,784,000	9,792,000
Redemption Issue1	8,208,000	8,208,000
Total	16,992,000	18,000,000
Use of funds
Sales and marketing	3,952,000	4,227,000
Research and development2	4,275,000	4,570,000
Clinical trials3	720,000	770,000
Regulatory	275,000	295,000
General and administration	3,320,000	3,550,000
Xitron debt repayment and working capital4	770,000	770,000
Loan to Xitron to fund Fresenius licence agreement amendment4	1,185,000	1,185,000
Working capital	1,345,000	1,440,000
Cost of the Offer5	1,150,000	1,193,000
Total	16,992,000	18,000,000

The Redemption Issue involves an issue of Shares at the Offer Price (and IPO Options) to the holders of IPO Convertible Notes. The funds payable by the Company to the holders of IPO Convertible Notes upon their redemption will be used to satisfy the subscription amount payable by the IPO Convertible Note holders for the Shares and IPO Options that they will be issued under the Redemption Issue. The primary purpose of the IPO Convertible Note issue was to make it possible for Starfi sh Ventures to invest further funds in ImpediMed prior to the Public Offer and to secure additional capital for the Company from key investors.
The research and development expenditure includes, in the case of the minimum capital raising, approximately $1.93 million in outsourced or contracted design and development activities, $1.40 million in staff salaries and benefi ts, $0.32 million in costs for consulting research and development staff, and $0.62 million in intellectual property costs, travel and miscellaneous costs. In the case of the maximum capital raising, research and development expenditure includes $2.06 million in outsourced or contracted design and development activities, $1.50 million in staff salaries and benefi ts, $0.35 million in costs for consulting research and development staff, and $0.66 million in intellectual property costs, travel and miscellaneous costs.
This does not represent the total anticipated cost of clinical trials, which will be funded from a combination of capital raised under the Offer, revenue generated from the sale of products and from other external sources (e.g., Government grants and contributions from trial partners).
The Xitron debt repayment and working capital, and the loan to Xitron that it will pay to Fresenius (as consideration for a variation of an agreement between Fresenius and Xitron that returns to Xitron rights to technology developed by it in medical markets other than dialysis (see section 13.1)), will only be made in the event that the acquisition of Xitron proceeds as expected. In the event the acquisition does not proceed and these payments are not made, there will be a corresponding increase in the funds available to be spent on sales and marketing, research and development, regulatory and general and administrative costs and working capital.
The full costs of the Offer total $1,944,023 (assuming no oversubscriptions), as outlined in Note 2 (o) in section 8.5. The Company has funded $794,023 in Offer costs from previous capital raisings.

For further details on the Company’s commercialisation program and the initiatives to be funded under the Company’s plans refer to sections 5 and 6.

8.5 FINANCIAL INFORMATION

The most recent reporting period included in the actual Financial Information is the year ended 30 June 2007. The Company’s audited sales revenue for the year ended 30 June 2007 is outlined above in section 8.3. Earnings before interest and tax (EBIT) for the year ended 30 June 2007 was ($6,997,274), and the loss from continuing operations after income tax was ($17,014,748).

Set out below is ImpediMed’s Financial Information, which comprises:

the Restated Consolidated Income Statements for ImpediMed for the fi nancial years ended 30 June 2005 and 30 June 2006 and the Actual Consolidated Income Statement for the year ended 30 June 2007 (Restated and Actual Consolidated Income Statements); and
the actual Consolidated Balance Sheet of ImpediMed as at 30 June 2007 and a Pro Forma Consolidated Balance Sheet as at 30 June 2007 (Actual and Pro Forma Consolidated Balance Sheets),

and accompanying explanatory notes.

The Financial Information has been prepared in accordance with AIFRS, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Consensus Views, and the Corporations Act. The accounting policies of the Company, which are set out in note 3, have been consistently applied throughout the period.

The Restated Consolidated Income Statements have been extracted from ImpediMed’s audited fi nancial statements for the fi nancial years ended 30 June 2005 and 30 June 2006 and have been restated for illustrative purposes to refl ect the Company’s operations as if the cardiology business (de-merged in October 2006) had not existed in those periods. A reconciliation of the Audited Consolidated Income Statements to the Restated Consolidated Income Statements is presented in note 1.

The Pro Forma Consolidated Balance Sheet has been prepared for illustrative purposes at 30 June 2007 assuming that the pro forma transactions set out in note 2 had taken place at 30 June 2007.

Ernst & Young has conducted an independent audit of ImpediMed’s actual consolidated fi nancial statements for the years ended 30 June 2007, 30 June 2006 and 30 June 2005 and, in respect of the Financial Information, Ernst & Young has conducted:

an independent review of the restated Financial Information for the years ended 30 June 2006 and 2005; and
an independent review of the pro forma Financial Information as at 30 June 2007,

on the basis described in the Independent Accountant’s report, which is set out in section 11.

In reading the Financial Information and assessing ImpediMed’s fi nancial position and performance, investors may fi nd the results to EBIT level more refl ective of operating results, due to the following matters reported below EBIT which are non-cash and non-operating items:

As a consequence of the de-merger of the cardiology business, ImpediMed generated a one-off profi t of $6.9 million which has been recognised in the Income Statement for the year ended 30 June 2007 as a profi t from discontinued operations. As of 30 October 2006, the cardiology business is owned by a separate company “Impedance Cardiology Systems Inc” with separate management, which is owned by the Company’s shareholders at the time of de-merger. The business was de-merged from the Group because the Board considered that the funding requirements of the cardiology business were beyond the scale that could be funded by private equity in the early stage medical device sector in Australia, and the gross funding required from ImpediMed would have otherwise been too great.
ImpediMed recognised non-cash and non-operating expenses classifi ed as convertible note and preference share interest. These expenses relate to conversion discounts on convertible notes and preference shares issued by ImpediMed in 2005 and 2006. The series 1 convertible notes converted to ordinary shares, while the series 2 convertible notes converted to preference A2 shares, and the S3 Convertible Notes will convert to Shares, all using formulas that apply a discount to the price of the next share issue following the issue of the relevant convertible notes. The total expense recognised in the year ended 30 June 2007 was $7.56 million for convertible notes interest and $2.58 million for preference share interest. The interest expense did not involve the payment of cash. For the fi nancial year ending 30 June 2008 the convertible note interest expense is anticipated to be $0.45 million, and the preference share interest expense is anticipated to be $1.19 million. Investors should note that these expenses will relate to the period prior to the Company listing on ASX.

RESTATED AND ACTUAL CONSOLIDATED INCOME STATEMENTS

Year ended 30 June

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Restated Restated Actual
2005 2006 2007
(reviewed) (reviewed) (audited)
A$ A$ A$
Continuing operations
Sale of goods 275,965 1,053,046 1,185,282
Rendering of services 5,083 17,927 28,314
Other income 154,252 4,470 726,542
Total income 435,300 1,075,443 1,940,138
Cost of sales (154,822) (521,880) (628,653)
Operating and administrative expenses (3,282,477) (5,295,744) (8,145,128)
Depreciation and amortisation (226,222) (191,860) (163,631)
Earnings before interest and tax (3,228,221) (4,934,041) (6,997,274)
Interest income 88,497 33,082 205,236
Interest expense – convertible notes - (2,602,383) (7,564,999)
- -
Interest expense – preference shares (2,579,824)
Interest expense – other (44,796) (75,294) (63,516)
Loss from continuing operations before income tax (3,184,520) (7,578,636) (17,000,377)
Income tax - - (14,371)
Loss from continuing operations after income tax (3,184,520) (7,578,636) (17,014,748)
Discontinued operations
Loss from discontinued operations - - (346)
Gain on disposal of assets constituting the discontinued operations - - 6,888,517
Net loss for the year (3,184,520) (7,578,636) (10,126,577)
----- End of picture text -----

NOTES

1. RESTATEMENT OF THE INCOME STATEMENTS

The Restated Consolidated Income Statements have been prepared for illustrative purposes for the years ended 30 June 2005 and 30 June 2006, by adjusting the audited fi nancial statements for these years to present the Company’s fi nancial results as if the demerged cardiology business had never existed.

Reconciliation of net loss

A reconciliation of the Audited Consolidated Income Statements to the Restated Consolidated Income Statement is as follows:

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2005 2006
(reviewed) (reviewed)
A$ A$
----- End of picture text -----

2005 2006 (reviewed) (reviewed) A$ A$	2005 2006 (reviewed) (reviewed) A$ A$

Net loss for the year – actual (audited) Grant income1 Amortisation expense – patents2 Amortisation expense – licences3 Research and development expenses4 Cardiology business research and development salaries5 Cardiology business travel expenses6 Cardiology business insurance expenses6 Net loss for the year – restated (reviewed)	(3,210,870) (7,700,535) (96,171) (52,038) 329 5,000 - 1,923 114,465 - 7,727 125,753 - 39,718 - 1,543
	(3,184,520) (7,578,636)

The following cardiology business related transactions have been adjusted for:

Receipt of a Biotechnology Innovation Fund grant from the Commonwealth Government for cardiology project expenses in fi nancial years ended 30 June 2005 and 30 June 2006.
Amortisation expense for a patent purchased as part of the acquisition of Aorora Technologies Pty Ltd, a subsidiary of ICS, in June 2005.
Amortisation expense for a cardio patent licence with QUT dated May 2006.
Research and development expenses incurred in relation to the cardiology project in the fi nancial year ended 30 June 2005.
Salary costs for the Cardio Project Director who joined ImpediMed in June 2005.
Travel expenses and insurance expenses for the Cardio Project Director from June 2005.

Income tax

The Company has recorded income tax benefi ts totalling $450,610 and $343,415 for the years ended 30 June 2005 and 2006. These benefi ts relate to research and development refunds which the Company, being eligible, elected to receive as an immediate cash payment, rather than increasing tax losses for a future benefi t.

In regards to compliance with AIFRS, as these income tax benefi ts are not defi ned within AIFRS, the Company elected to classify these receipts as an income tax benefi t. The Company has now determined that although the tax incentive is described as a tax credit, its amount is not dependable on the taxable income of the Company and as a result, it would improve the relevance and reliability of the fi nancial statements if the tax credit is accounted for as a Government grant in accordance with AASB 120 Accounting for Government Grants and Disclosure of Government Assistance . As the Company charges its research and development expenditure directly to income, this tax credit should be credited against research and development expenditure rather than as an income tax benefi t. This reclassifi cation has a nil impact on the Company’s fi nancial results for the Restated Consolidated Income Statements for the years ended 30 June 2005 and 30 June 2006 and for the Audited Consolidated Income Statement for the year ended 30 June 2007.

The Group has tax losses arising in Australia of $10,800,412 as at 30 June 2007 that are available indefi nitely for offset against future taxable profi ts of the companies in which the losses arose, subject to satisfying the relevant income tax loss carried forward rules.

ACTUAL AND PRO FORMA CONSOLIDATED BALANCE SHEETS

	Actual Pro forma Pro forma 30 June 2007 adjustments2 30 June 2007 (audited) (reviewed) (reviewed) A$ A$ A$	Actual Pro forma Pro forma 30 June 2007 adjustments2 30 June 2007 (audited) (reviewed) (reviewed) A$ A$ A$
CURRENT ASSETS Cash and cash equivalents1 Trade and other receivables Inventories Prepayments Other f nancial assets Total current assets NON-CURRENT ASSETS Other f nancial assets Plant and equipment Intangible assets Total non-current assets TOTAL ASSETS CURRENT LIABILITIES Trade and other payables Interest-bearing loans Provisions Convertible Notes Preference Shares Total current liabilities NON-CURRENT LIABILITIES Interest-bearing loans Provisions Total non-current liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Shares to be issued Reserves Accumulated losses TOTAL EQUITY	1,643,162 14,622,358 16,265,520 754,186 224,939 979,125 415,673 566,778 982,451 844,844 (632,790) 212,054 117,129 - 117,129
	3,774,994 14,781,285 18,556,279
	93,550 - 93,550 204,316 43,735 248,051 184,785 2,706,277 2,891,062
	482,651 2,750,012 3,232,663
	4,257,645 17,531,297 21,788,942
	979,044 260,358 1,239,402 83,082 628,344 711,426 319,096 2,523 321,619 13,879,763 (13,879,763) - 6,672,018 (6,672,018) -
	21,933,003 (19,660,556) 2,272,447
	64,023 - 48,935 -	64,023 48,935
	112,958 -	112,958

	22,045,961 (19,660,556) 2,385,405

	(17,788,316) 37,191,853 19,403,537
	11,151,629 38,421,476 49,573,105 - 452,269 452,269 1,186,782 - 1,186,782 (30,126,727) (1,681,892) (31,808,619)
	(17,788,316) 37,191,853 19,403,537

Includes restricted cash of $30,700.
The pro forma entries exclude the receipt and acceptance of up to $1,008,000 in oversubscriptions pursuant to the Public Offer.

NOTES (CONTINUED)

2 PRO FORMA ADJUSTMENTS TO THE ACTUAL CONSOLIDATED BALANCE SHEET Details of pro forma adjustments

The Consolidated Pro Forma Balance Sheet as at 30 June 2007 has been prepared as if the following transactions had taken place at 30 June 2007:

a) IPO Convertible Notes: Issue of IPO Convertible Notes with a face value of $8,208,000, fully paid in cash.
b) Preference A1 and A2 shares: Recognition of deferred capital raising costs incurred in relation to the issue of preference A shares, classifi ed as amortisation expense of $36,143 and charged to the income statement from 1 July 2007 to the Closing Date, with a corresponding increase in the preference A1 and A2 share liability.
c) Preference A1 shares: Recognition of a conversion discount on the preference A1 shares, representing the difference between the Offer Price and the conversion price of $0.7160718, classifi ed as interest expense of $11,350 and charged to the income statement from 1 July 2007 to the Closing Date, with a corresponding increase in the preference A1 share liability.
d) Preference A1 shares: Recognition of bonus shares to be issued as a result of an initial public offer not occurring before 1 January 2007, classifi ed as a bonus share expense. Of the full $2,069,044 expense, the amount of $670,971 remains to be expensed to the income statement from 1 July 2007 to the Closing Date, with a corresponding increase in the preference A1 share liability.
e) Preference A2 shares: Recognition of a conversion discount on the preference A2 shares, representing the difference between the Offer Price and the conversion price of $0.69524, classifi ed as interest expense of $80,657 and charged to the income statement from 1 July 2007 to the Closing Date, with a corresponding increase in the preference A2 share liability.
f) Preference A2 shares: Recognition of bonus shares to be issued as a result of an initial public offer not occurring before 1 January 2007, classifi ed as a bonus share expense. Of the full $1,399,580 expense, the amount of $423,311 remains to be expensed to the income statement from 1 July 2007 to the Closing Date, with a corresponding increase in the preference A2 share liability.
g) Preference A1 Shares: On the Closing Date, all preference A1 shares will automatically convert into 5,763,108 Shares, thus eliminating the preference A1 share liability and increasing issued capital by $4,149,438.
h) Preference A2 Shares: On the Closing Date, all preference A2 shares will automatically convert into 5,201,403 Shares, thus eliminating the preference A2 share liability and increasing issued capital by $3,745,012.
i) IPO Convertible Notes: On the date of allotment of Shares under this prospectus, all IPO Convertible Notes will be redeemed and Shares and IPO Options will be issued to the holders of IPO Convertible Notes, thus eliminating the IPO Convertible Note liability and increasing issued capital by $8,208,000.
j) S3 Convertible Notes: Recognition of deferred capital raising costs incurred in relation to the S3 Convertible Notes capital raising, classifi ed as amortisation expense of $11,536 and charged to the income statement from 1 July 2007 to the allotment date, with a corresponding increase in the note liability.
k) S3 Convertible Notes: Recognition of a conversion discount on the S3 Convertible Notes, representing the difference between the Offer Price and the conversion price of $0.7160718, classifi ed as interest expense of $39,223 and charged to the income statement from 1 July 2007 to the allotment date, with a corresponding increase in the note liability.
l) S3 Convertible Notes: Recognition of a bonus share expense incurred as a result of the initial public offering not occurring before 30 June 2007, classifi ed as bonus share expense. Of the full $7,150,000 expense, the amount of $408,701 remains to be charged to the income statement from 1 July 2007 to the allotment date, with a corresponding increase in the note liability.
m) S3 Convertible Notes: On the date of allotment of Shares under this prospectus, all S3 Convertible Notes will be redeemed and 19,915,588 Shares will be issued to the holders of S3 Convertible Notes, thus eliminating the S3 Convertible Note liability and increasing issued capital by $14,339,223.
n) Completion of the Public Offer: Under the underwritten component of the Public Offer ImpediMed is seeking to raise $8,784,000 by issuing 12,200,000 Shares. Under the Public Offer the Company may accept oversubscriptions of up to $1,008,000, which have not been included in the pro forma entry.

NOTES (CONTINUED)

2 PRO FORMA ADJUSTMENTS TO THE ACTUAL CONSOLIDATED BALANCE SHEET (CONTINUED)
o) Costs of the Offer: Upon completion of the Offer a total of $1,944,023 in capital raising costs (assuming no oversubscriptions) will be charged as contra equity, comprising:
- costs of $423,280 relating to preparation for an initial public offer incurred in the half year ended 31 December 2006, deferred for capitalisation against the Offer and held in prepayments;
- costs of $219,022 relating directly to the Offer, incurred in the six months ended 30 June 2007, deferred for capitalisation against the Offer and held in prepayments;
- costs of $151,721 relating directly to the Offer, incurred after 30 June 2007 but prior to the date of the prospectus, funded through the cash on hand at 30 June 2007; and
- costs of $1,150,000 relating directly to the Offer, to be funded from proceeds of the Offer.
p) Xitron acquisition: following lodgement of this prospectus with ASIC, and no later than one month after the Company listing on ASX, the acquisition of Xitron under the agreement described in section 13.1 is expected to complete.

The consideration for the acquisition of Xitron that has been taken into account in determining the total cost of the business combination has two parts:

2,132,509 Shares to be issued on completion of the acquisition; and
a further 846,154 Shares to be issued at the beginning of calendar year 2008 if the fi rst of four milestones related to the performance of the Xitron business (which are described in section 13.1) is achieved.

The achievement of the fi rst milestone is considered highly probable by the Company. The Company does not consider it likely that the second, third and fourth milestones will be achieved, and accordingly the consideration payable if they are achieved has not been included in the purchase price. These contingent milestones are described in note 4.

IPO Options will not be attached to the Shares issued as consideration for the acquisition of Xitron (Consideration Shares). In estimating the fair value of the total 2,978,663 Consideration Shares for pro forma purposes, the value of an IPO Option has been determined using an options valuation model and 50% of this value has been deducted from the Offer Price of $0.72 to come to the value of the Consideration Shares. After this adjustment to the value of the 2,978,663 Consideration Shares, the total cost of the combination for pro forma purposes and hence the pro forma value of Consideration Shares comes to $1,592,095.

In accordance with AASB 3 Business Combinations (AASB 3), the allocation of the purchase price to the fair value of the identifi able net assets which have been acquired will be performed once the transaction is completed. The actual purchase price may change to that calculated for pro forma purposes, and hence the pro forma value of the Consideration Shares due to the following:

the calculation of the number of Shares to be issued may be subject to a working capital adjustment; and
the fair value of the Shares to be issued will be determined by the value of a Share at the closing date of the acquisition. In the event that the Company closes the acquisition after listing that value will be determined by reference to the market price, and in the event it occurs prior to listing the Company will need to make a determination of the fair value for a Share using an appropriate valuation methodology. The fair value of a Share may vary from the fair value used in the pro forma entry.

For pro forma purposes the unaudited carrying value of the assets and liabilities of Xitron, as at 31 May 2007, is set out in the following table. A balance sheet date of 31 May 2007 has been used as the acquisition agreement provides for an adjustment (up or down) to the purchase price payable by the Company to take account of any change in Xitron’s working capital from this date.

2 PRO FORMA ADJUSTMENTS TO THE ACTUAL CONSOLIDATED BALANCE SHEET (CONTINUED)

FORMA ADJUSTMENTS TO THE ACTUAL CONSOLIDATED BALANCE SHEET(CONTINUED)
	CONSOLIDATED Carrying value A$
Cash and cash equivalents Trade and other receivables Inventories Prepayments Fixed assets Intangible assets Total assets Trade and other payables Interest bearing loans Provisions (current) Total liabilities Fair value of identif able net assets Goodwill and intangibles arising on acquisition Cost of the combination: Shares issued at fair value (2,132,509 Shares) Shares to be issued on achievement of milestone 1 (846,154 Shares) Total cost of the combination (2,978,663 Shares) The cash inf ow on acquisition is as follows: Net cash acquired with the subsidiary Net consolidated cash inf ow	117,559 224,939 566,778 9,512 43,735 -
	962,523
	(260,358) (628,344) (2,523)
	(891,225)
	71,298 1,520,797
	1,592,095
	1,139,826 452,269
	1,592,095
	117,559
	117,559

Detailed below are the key accounting considerations which may arise on completion of the purchase price allocation in connection with ImpediMed’s acquisition of Xitron:

AASB 3 requires the identifi cation of all intangible assets. In preparing the Consolidated Pro Forma Balance Sheet, the purchase price has not been allocated to separately identifi able intangible assets that Xitron may have such as patents, customer relationships and contracts. To the extent that any intangible assets are identifi ed this will decrease the value of goodwill on consolidation. Those intangible assets with a fi nite useful life will be amortised, which will adversely impact any future earnings.
The fair value of Xitron’s net assets may differ from their unaudited carrying value as shown above for pro forma purposes. Any movement between unaudited carrying value and fair value will increase or decrease the value of goodwill on consolidation.
AASB 3 requires the recognition of the fair value of contingent liabilities. The fair value of a contingent liability is determined as the amount that a third party would charge to assume those contingent liabilities. Subsequent to the acquisition and assumption of management control and as part of the fi nal allocation of the purchase price, a detailed assessment of the fair value of Xitron’s identifi ed contingent liabilities will be performed by the Directors. The recognition of any fair value for possible contingent liabilities would lead to an increase in the value of goodwill on consolidation.
Consideration will need to be given to the tax implications of the purchase price allocation as deferred tax assets or liabilities may be identifi ed.
There may or may not be an impact on the future cash fl ows of ImpediMed and this will be dependent on the completion of the exercise above.
q) Loan to Xitron to fund Fresenius licence agreement: Following the completion of the Xitron acquisition, the Company will loan Xitron $US1,000,000 ($A1,185,480) which it will pay to Fresenius as consideration for an amendment to a licence agreement with Fresenius (described in more detail in section 13.1). The loan on consolidation is eliminated and thus the pro forma entry reduces cash, and correspondingly increases the intangible assets of the Group.

NOTES (CONTINUED)

2 PRO FORMA ADJUSTMENTS TO THE ACTUAL CONSOLIDATED BALANCE SHEET (CONTINUED) Reconciliation of cash

A reconciliation of cash as presented in the Audited Consolidated Balance Sheet as at 30 June 2007 to cash as presented in the Pro Forma Consolidated Balance Sheet as at 30 June 2007 is as follows:

	A$
Cash and cash equivalents – actual (audited) Issue of IPO Convertible Notes Public Offer Offer costs incurred post 30 June 2007 Xitron acquisition Loan to Xitron to fund Fresenius agreement amendment Cash and cash equivalents – pro forma (reviewed)1	1,643,162 8,208,000 8,784,000 (1,301,721) 117,559 (1,185,480)
	16,265,520

Excludes oversubscriptions of up to 1,400,000 Shares ($1,008,000) and 700,000 IPO Options that may be accepted by the Company.

The pro forma cash balance of $16,265,520 has been calculated by taking into account the pro forma entries outlined in note 2 and is based on the cash and cash equivalent balance of $1,643,162 at 30 June 2007. It is important to note that the pro forma accounting entries do not account for the operating loss and cash utilisation between 30 June 2007 and the date of the prospectus. At the date of the prospectus, cash is less than $1,000,000 prior to the receipt of the proceeds of the IPO Convertible Notes of $8,208,000.

Reconciliation of issued capital

A reconciliation of issued capital as presented in the Audited Consolidated Balance Sheet as at 30 June 2007 to issued capital as presented in the Pro Forma Consolidated Balance Sheet as at 30 June 2007 is as follows:

==> picture [441 x 13] intentionally omitted <==

----- Start of picture text -----

No of Shares A$
----- End of picture text -----

No of Shares A$	No of Shares A$

Issued capital – actual (audited)1 Conversion of preference A1 and A2 shares Issue of Shares following redemption of S3 Convertible Notes and IPO Convertible Notes Shares issued pursuant to the Public Offer2,3 Offer costs Shares issued to Xitron shareholders Issued capital – pro forma (reviewed)2	22,789,361 11,151,629 10,964,511 7,894,450 31,315,588 22,547,223 12,200,000 8,784,000 (1,944,023) 2,132,509 1,139,826
	79,401,969 49,573,105

Including 1,478,260 shares under escrow.
Excludes oversubscriptions of up to 1,400,000 Shares ($1,008,000) and 700,000 IPO Options that may be accepted by the Company.
Under the Public Offer 6,100,000 IPO Options will be issued on the basis of one IPO Option for every two Shares issued. Up to a further 700,000 IPO Options may be issued if oversubscriptions are accepted.

The pro forma issued capital of $49,573,105 includes:

cash subscribed for Shares;
assets subscribed for Shares; and
gains in value accruing to preference share and converting note holders following conversion to or issue of Shares on redemption (as relevant).

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The Financial Information has been extracted from the audited fi nancial reports for the years ended 30 June 2005, 30 June 2006 and 30 June 2007 and is prepared in accordance with the measurement and recognition (but not all the disclosure) requirements of applicable Accounting Standards and other mandatory professional reporting requirements in Australia.

This Financial Information has been prepared on the basis that ImpediMed is a going concern.

The consolidated entity had net liabilities of $17,788,316 at 30 June 2007
In September 2007 upon the signing of the Underwriting Agreement in connection with the Public Offer, the Company issued $8,208,000 in IPO Convertible Notes. On the date of allotment of Shares under the Public Offer, the IPO Convertible Notes will be redeemed and, under the Redemption Issue, holders will be issued Shares at the Offer Price, and the funds were on hand at the date of this document.
The Company will raise approximately $7,634,000 (net of transaction costs) under the underwritten component of the Public Offer. In the event the Company accepted the maximum amount of oversubscriptions of $1,008,000, after deducting additional transaction costs of $43,000, the Company would raise approximately a further $965,000.

In the Directors’ opinion, as a consequence of the IPO Convertible Notes issue, the Redemption Issue and the capital that will be raised under the Public Offer, there are reasonable grounds to believe that the Group is a going concern.

(b) Basis of consolidation

The fi nancial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

In preparing the consolidated fi nancial statements, all intercompany balances and transactions, income and expenses and profi t and loss resulting from intra-group transactions have been eliminated in full.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date on which control is transferred out of the Group.

Subsidiary acquisitions are accounted for using the purchase method of accounting.

(c) Signifi cant accounting judgements, estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a signifi cant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share based payment transactions

The Group measures the cost of equity-settled payments at fair value at the grant date using the Black-Scholes formula and the terms and conditions upon which the instruments were granted.

Make good provisions

Provision is made for the anticipated costs of future restoration of leased premises. The future cost estimates are discounted to their present value.

Maintenance warranty

In determining the level of provision required for maintenance warranties, the Group has made reference to historical experience and current knowledge of the performance of the products.

Long service leave

The liability for long service leave is recognised and measured at the present value of the estimated future cash fl ows to be made in respect of all employees at balance date. In determining the present value of the liability, attrition rates and pay increases have been taken into account.

NOTES (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefi ts will fl ow to the Group and the revenue can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue is recognised when the signifi cant risks and rewards of ownership have passed to the buyer and can be measured reliably.

Rendering of services

Revenue from the repair of instruments is recognised by reference to the stage of completion. Stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours spent on the repair service.

Interest

Revenue is recognised as the interest accrues to the net carrying amount of the fi nancial asset.

Dividends

Revenue is recognised when the shareholders’ right to receive the payment is established.

(e) Government grants Government grants are recognised at their fair value where there is reasonable assurance that the grant will be received and all attaching conditions will be complied with.

When the grant relates to an expense item, it is recognised as income over the periods necessary to match the grant on a systematic basis to the costs that it is intended to compensate.

Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual instalments.

(f) Borrowing costs

Borrowing costs are recognised as an expense when incurred.

(g) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfi lment of the arrangement is dependent on the use of a specifi c asset or assets and the arrangement conveys a right to use the asset.

Finance leases

Leases which transfer substantially all the risks and benefi ts incidental to ownership of the leased item to the Group are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments.

Lease payments are apportioned between the fi nance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance costs are charged directly against income.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Operating leases

Leases where the lessor retains substantially all the risks and benefi ts of ownership of the asset are classifi ed as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

(h) Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an initial maturity of three months or less.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(i) Trade and other receivables

Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debts is made when collection of the full amount is no longer probable. Bad debts are written off when identifi ed.

Other receivables are recognised and carried at the nominal amount due.

(j) Inventories

Inventories are valued at the lower of cost and net realisable value.

Costs are assigned on the basis of current costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

(k) Income tax

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date.

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for fi nancial reporting purposes.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profi t will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profi t nor taxable profi t or loss; or
when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary difference will reverse in the foreseeable future and taxable profi t will be available against which the temporary difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that suffi cient taxable profi t will be available to allow all or part of the deferred income tax asset to be utilised.

Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date.

Income taxes relating to items directly in equity are recognised in equity and not in the income statement.

Deferred tax assets and liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same tax entity and the same taxation authority.

(l) Other taxes

Revenues, expenses and assets are recognised net of the amount of GST except:

where the GST incurred is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Cash fl ows are included in the cash fl ow statement on a gross basis and the GST component of cash fl ows arising from investing and fi nancing activities, which is recoverable from, or payable to, the taxation authority, are classifi ed as operating cash fl ows.

Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.

NOTES (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(m) Property, plant and equipment

Plant and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation.

Major depreciation and amortisation periods are:

Plant and equipment	2 to 15 years
Plant and equipment under f nance lease	3 years
Leasehold improvements	2 years

Impairment

The carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

For an asset that does not generate largely independent cash infl ows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash-generating units are written down to their recoverable amount.

The recoverable amount of plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessments of the time value of money and the risks specifi c to the asset.

(n) Investments and other fi nancial assets

All investments are initially recognised at cost, being the fair value of the consideration given and including acquisition charges associated with the investment.

Non-derivative fi nancial assets with fi xed or determinable payments and fi xed maturity are classifi ed as held-to-maturity when the Group has the positive intention and ability to hold to maturity. Other long-term investments that are intended to be held-to-maturity, such as bonds, are subsequently measured at amortised cost using the effective interest method.

Amortised cost is calculated by taking into account any discount or premium on acquisition, over the period to maturity. For investments carried at amortised cost, gains and losses are recognised in income when the investments are derecognised or impaired, as well as through the amortisation process.

(o)

Goodwill

Goodwill on acquisition is initially measured at cost being the excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

Goodwill is not amortised. Goodwill is reviewed for impairment, annually or more frequently, if events or changes in circumstances indicate that the carrying value may be impaired. Impairment is determined by assessing the recoverable amount of the cashgenerating unit to which the goodwill relates.

Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised. Impairment losses recognised for goodwill are not subsequently reversed.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(p) Intangible assets

Acquired separately or from a business combination

Intangible assets acquired separately are capitalised at cost and from a business combination are capitalised at fair value as at the date of acquisition. Following initial recognition, the cost model is applied to the class of intangible assets.

The useful lives of these intangible assets are assessed to be either fi nite or indefi nite. Intangible assets with fi nite useful lives are amortised over the useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a fi nite useful life are reviewed at least at each fi nancial year end. The amortisation expense on intangible assets with useful life is recognised in profi t or loss in the expense category consistent with the function of the intangible asset.

Patents and licences have a fi nite useful life. The useful lives of current patents are 20 years. Licence fees constituting intangible assets are amortised over the lesser of the life of the licence or the period over which the licence is expected to generate future economic benefi ts. The useful lives of licences are between 10 and 20 years.

Intangible assets, excluding development costs, created within the business are not capitalised and expenditure is charged against profi ts in the year in which the expenditure is incurred.

Intangible assets are tested for impairment where an indicator of impairment exists and in the case of intangible assets with indefi nite lives annually, either individually or at the cash generating unit level. Useful lives are also examined on an annual basis and adjustments, where applicable, are made on a prospective basis.

Research and development costs

Research costs are expensed as incurred. Development costs incurred on an individual project are carried forward when their future recoverability can reasonably be regarded as assured. Following initial recognition, the cost model is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.

The carrying value of development costs is reviewed for impairment annually when the asset is not yet in use or more frequently when an indicator of impairment arises during the reporting year indicating that the carrying value may not be recoverable.

Any development expenditure carried forward is amortised over the period of expected future sales from the related project.

A summary of the policies applied to the Group’s intangible assets is as follows:

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----- Start of picture text -----

Patents and Licence Development Costs
----- End of picture text -----

	Patents and Licence	Development Costs

Useful lives	Finite	Finite
Method used	Straight line amortisation	Straight line amortisation
Internally generated/ Acquired	Acquired	Internally generated
Impairment test/Recoverable amount test	Annually and when an indication of impairment exists	Amortisation method reviewed each year and reviewed annually for impairment indicators

(q) 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 at settlement.

Gains and losses are recognised in the income statement when the liabilities are derecognised and as well as through the amortisation process.

(r)

Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that an outfl ow of economic benefi ts will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

If the effect of time value of money is material, provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and, where appropriate, the risks specifi c to the liability.

Where discounting is used, the increase in the provision due to the passage of time is recognised as a fi nance cost.

NOTES (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(s) Employee benefi ts

Provision is made for benefi ts accumulated as a result of employees rendering services up to the balance sheet date. These benefi ts include salaries, post employment benefi ts (superannuation), leave benefi ts and share-based payments.

Employee benefi ts other than share-based payments

Liabilities arising in respect of salaries, annual leave and superannuation payments expected to be settled within twelve months are measured at their nominal amounts based on remuneration rates which are expected to be paid when the liability is settled.

All other liabilities are measured at the present value of the estimated future cash outfl ow to be made in respect of services provided by employees up to the balance sheet date. In determining the present value of future cash outfl ows, the market yield of national Government bonds at balance sheet date, which have maturity approximating the terms of the related liability, are used. Employee benefi ts are recognised against profi ts in the income statement.

Share-based payments

The Group provides benefi ts to employees in the form of share-based payments, whereby employees render services in exchange for shares or rights over shares (“equity-settled transactions”). There is currently an employee share option plan in place which provides benefi ts to executives and employees, plus a chief executive offi cer option arrangement outside the share option plan. The terms of the options are summarised in section 13.6, and Greg Brown’s employment arrangements, including the details of options issued to him, are summarised in sections 13.4 and 13.6 respectively.

The cost of these equity-settled transactions is measured by reference to the fair value at the date at which they are granted. The fair value is determined by an options pricing model. In valuing the options, no account is taken of any performance conditions, other than conditions linked to the share price of ImpediMed.

The cost of these equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the options vest, so that the cumulative expense recognised for the options at each reporting date until vesting date refl ects the extent to which the vesting period has expired, and the number of awards that, in the opinion of the directors of the Group, will ultimately vest.

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

Where the terms of an equity-settled award are modifi ed, as a minimum an expense is recognised as if the terms had not been modifi ed. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modifi cation, as

(t) Convertible notes

Convertible notes are recognised at amortised cost, net of transaction costs, as a liability as the holders of the notes are not exposed to changes on the fair value of the issuer’s equity instruments. In determining the fair value of the converting notes, the discount receivable at conversion date is taken into account. The increase in the liability due to the passage of time is recognised as a fi nance cost.

(u) Contributed equity

Ordinary shares are classifi ed 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.

4. COMMITMENTS AND CONTINGENT LIABILITIES

Contingent liabilities and commitments excluding the acquisition of Xitron

The Group has no further contingent liabilities and commitments than those disclosed in the audited fi nancial statements for the year ended 30 June 2007.

Contingent liabilities and commitments on acquisition of Xitron

With respect to the acquisition of Xitron, the Group has a commitment to issue 2,307,693 Shares, upon achievement of milestones 2, 3 and 4. The Company does not however consider it probable that milestones 2, 3 or 4 will be achieved and, as a result, the commitment has not been included in calculating the purchase consideration for the business combination.

At the date of this prospectus, the Group is not aware of any contingent liabilities and commitments of Xitron.

9 Best practice corporate governance

9.1 CORPORATE GOVERNANCE

The Board is responsible for the corporate governance of ImpediMed, including its strategic development and risk management. The Board reviews corporate strategy and fi nancial targets, establishes goals for management and monitors the achievement of these goals. In addition, the Board has established systems, processes and policies designed to ensure that the Company’s activities are subject to adequate and appropriate internal controls and that the risks associated with the Company’s operations are identifi ed, assessed and appropriately managed.

As a key component of the Company’s corporate governance regime the Board has established the following sub-committees:

the Nomination Committee – the role of the Nomination Committee is to ensure the Board comprises suitably qualifi ed and experienced individuals to act as Directors. The committee does so through its review of the composition of the Board and the tenure of Directors. The committee, which was recently established, will also conduct annual assessments of the performance of individual Directors;
the Audit and Risk Management Committee – the Audit and Risk Management Committee is responsible for monitoring current and emerging risks affecting the Company and overseeing risk mitigation activities. In fulfi lling its responsibilities the committee provides advice on the integrity of the Company’s fi nancial reporting process and fi nancial statements, the Company’s compliance with legal and regulatory requirements, the independence and effectiveness of the external auditor and the effective maintenance of internal controls;
the Remuneration Committee – the Remuneration Committee is responsible for setting and overseeing the application of the Company’s remuneration structure and policy. In performing this role the committee reviews the performance and remuneration levels of staff and assesses whether appropriate incentives are provided for management and employees.

The table below summarises the composition of the Board committees and the status of each Director:

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----- Start of picture text -----

Director Date Executive / Indep’t Committee membership
appointed non-executive Director Audit and risk Remuneration Nomination
management committee committee
committee
Mel Bridges September 1999 non-executive Yes Member Member Chair
Chair
Greg Brown December 2001 executive No
Martin Kriewaldt March 2005 non-executive Yes Member Chair Member
Cherrell Hirst August 2005 non-executive Yes Member Member Member
Jim Hazel November 2006 non-executive Yes Chair Member Member
Michael Panaccio January 2007 non-executive No Member Member Member
----- End of picture text -----

A copy of the Board’s charter, which defi nes the responsibilities of the Board, and the charters of each of the Board’s sub committees, is available from the Company’s website. Also available are the Company’s:

code of conduct, which applies to all Directors, offi cers, and staff
share trading policy, which applies to all Directors, offi cers, and staff
continuous disclosure policy
risk management policy.

9.2 IMPLEMENTATION OF ASX CORPORATE GOVERNANCE GUIDELINES

As part of its commitment to corporate governance, which the Board considers critical to long-term value creation, the Board has implemented the ASX Principles of Good Corporate Governance and Best Practice Recommendations (ASX guidelines). The Board is of the view that the Company complies with all ASX guidelines.

10 Patent Attorney’s report

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PATENT ATTORNEY REPORT

IMPEDIMED LTD 3[rd] September 2007

Overview

We provide the following Report on behalf of ImpediMed Ltd (hereinafter referred to as "ImpediMed").

The Report provides details of Australian and foreign patent applications, which have been prepared and filed by Davies Collison Cave or others, on behalf of ImpediMed, or otherwise acquired by ImpediMed (hereinafter referred to collectively as the “ImpediMed Applications”).

In addition to this, the Report covers patents or patent applications to which ImpediMed has rights by virtue of commercial agreements (hereinafter referred to collectively as the “Agreement Applications”).

This report about the ImpediMed and Agreement Applications is provided for information purposes only, and the status summary provided herein is correct to the best of our knowledge at the date of this Report.

Background

Davies Collison Cave is a well established firm of patent and trademark attorneys formed by the merger of Davies & Collison and Arthur S. Cave & Co., firms which were established over one hundred years ago. All partners and fully qualified staff members of Davies Collison Cave involved in patent prosecution matters are members of the Institute of Patent and Trade Mark Attorneys of Australia.

Neither Davies Collison Cave nor any of its partners has, or is, entitled to any shares in ImpediMed. Davies Collison Cave has no other interests in the promotion of ImpediMed. This report has been prepared at the request of ImpediMed, and Davies Collison Cave will be paid at commercial rates for the preparation of this report.

Davies Collison Cave has been responsible for the ImpediMed Applications since 29[th] October 2002 and has prepared and filed the patent applications set out in Schedules I and II. Davies Collison Cave has prepared all specifications to the best of its abilities based on the information provided, including information provided by the inventors in relation to their knowledge of the prior art.

While the members of Davies Collison Cave have extensive experience in prosecuting patent applications in foreign jurisdictions, Davies Collison Cave utilises the services of well established firms of foreign patent attorneys to assist in the handling of patents and patent applications in countries outside Australia and New Zealand.

Davies Collison Cave

3 September, 2007

Page 1

Patents

Patents are an intellectual property right that is granted separately by jurisdiction (generally by country) for “inventions”. Patents grant the patent owner a limited right to exclude others from practising (making, using, or selling) the patented invention throughout the relevant jurisdiction in exchange for a full disclosure of the invention to the public. Patents may be granted in respect of new or improved products, compositions or processes, and patents are applicable to almost all areas of current scientific, commercial and industrial activities, including genetic engineering, diagnostics, therapeutics and business methods.

Patents have a finite term, which in many countries of the world runs for 20 years from the date of the filing of a complete patent application, subject to the payment of regular maintenance, renewal or annuity fees. As the holder of a patent gains exclusive rights sanctioned by the relevant jurisdiction, patent owners have the rights, subject to the provisions of national law, to use their patents to stop competitors from infringing on the exclusive rights to the invention protected by the patent. A patent owner also has the power to grant a third party a licence to use the patented invention; often this is done in exchange for the payment of royalties to the patent owner. Remedies to the patent owner for infringement of a patent by a third party, which vary by country, may include money, damages and equitable remedies such as injunctions against the manufacture or importation of infringing goods.

Patents are property rights which, like real property, are capable of sale, transfer, licence, and the like. A patent and patent application may be in the name of one or more entities; this may be the result of more than one inventor being responsible for the invention. In most of the world, applications are filed in the name of companies/employers. In the United States, the inventor(s) are the applicants for, and recipients of, patents, but may be required contractually to assign their rights to their respective employers on grant. Generally, absent specific agreement to the contrary, joint patent owners are considered to hold equal undivided interests in a patent.

Patents need to be obtained in each country where rights are required. Whist there is no such thing as a “World Patent,” under an international treaty, the Paris Convention, the priority date established by the initial patent application filed in a convention country, like Australia, is recognised in all other convention countries. Further, a system established under the Patent Cooperation Treaty (PCT) allows for the filing of an international application which has the effect of deferring action in individual convention countries for about 2.5 years from the priority date. In Europe, the European Patent Convention allows for a single European patent application which covers a wide range of countries in Europe including countries both within the European Community and outside. Patents often take a long time before they are granted under the above system. Before grant, a patent is considered to be “pending.”

Patents in Australia are granted under the Patents Act 1990, which is a Commonwealth Act and is applicable throughout Australia. The Patents Act requires that the invention is novel and inventive at the priority date of the patent application.

Before a patent is granted in any jurisdiction, it must undergo examination by a national authority, or by a nationally approved authority, to ensure that it complies with the laws of that jurisdiction. Since the laws governing patents vary from country to country, there can be no assurance when a patent application is filed in any particular jurisdiction of the scope of its legal monopoly upon grant, the validity of the patent granted, or indeed whether it will be granted at all.

Davies Collison Cave

3 September, 2007

Page 2

Because of differences in patent laws, examination and local practices, the claims granted in one country may be different to those granted in another. While an Australian patent does not provide worldwide rights, the filing of an Australian patent application does establish a basic date for such rights. If equivalent patent rights are applied for overseas, the same priority date can apply provided that the overseas filings are made nationally, or under the PCT, within twelve months from the Australian application.

Davies Collison Cave

3 September, 2007

Page 3

Patent Strategy

ImpediMed's approach to patent applications includes the initial lodgement of an Australian provisional patent application in order to obtain an initial priority date, which is recognised around the world under the terms of the Paris Convention.

In some cases, ImpediMed has additionally filed a United States provisional application, to secure an early US filing date, which is the date on which a future United States patent that claims priority to the United States provisional application can be cited as prior art against competing applications filed by other parties.

The provisional applications have a lifespan of 12 months, and the end of this time period the provisional applications lapse. The next step in the patenting procedure is to file one or more national or international applications, which are related to the provisional applications by a priority claim. The priority claim means the subsequent national or international applications retain the filing date of the provisional application as a priority date, which is relevant for assessing the novelty and inventive step of the subject matter of the applications. Thus, the subsequent national or international applications replace or supersede the earlier provisional applications, whilst retaining the earlier provisional filing dates.

ImpediMed files PCT international applications claiming priority from the provisional application(s). The PCT system normally provides for an international search report and examination process to be undertaken over a further period of 18 months.

At the end of the international process, national/region phase applications are filed in countries/regions of interest. ImpediMed have filed applications in Australia, Europe, the United States, Canada, and Japan.

European Patents are examined by the European Patent Office (EPO), pursuant to the European Patent Convention (EPC). The following countries are members of the EPC:

Austria, Belgium, Bulgaria, Switzerland, Cyprus, Czech Republic, Germany, Denmark, Hellenic Republic, Hungary, Estonia, Spain, Finland, France, United Kingdom, Ireland, Iceland, Italy, Liechtenstein, Lithuania, Luxembourg, Latvia, Monaco, Malta, Netherlands, Poland, Portugal, Romania, Sweden, Slovenia, Slovakia, and, Turkey.

Davies Collison Cave

3 September, 2007

Page 4

Patent Subject Areas

ImpediMed Applications

Set out below in Schedule I are details of granted patents and pending patent applications owned by ImpediMed.

The portfolio of patents and patent applications listed below in Schedule I is divided by individual patents and applications and, where appropriate, the resultant family of corresponding foreign and international patents or applications based on the same priority document(s).

The ImpediMed patents and patent applications are broadly directed to technologies for performing and analysing impedance measurements, with a particular focus on the areas of determining body composition and diagnosing or monitoring oedema.

Currently eleven patent families are pending, with one family including granted patents.

It should be noted that families 1 and 3 were originally jointly owned by Queensland University of Technology (hereinafter referred to as "QUT") and the University of Queensland (hereinafter referred to as "UQ"), and subsequently by QUT's and UQ's respective research commercialisation entities. Rights in these patents and applications were transferred to ImpediMed by virtue of an assignment dated 3rd July 2007. However, the assignment has not yet been recorded in the countries in which rights have been applied for.

It should also be noted that Family 7 was originally owned by UQ and subsequently by UQ's research commercialisation entity. Rights in these patent applications were transferred to ImpediMed by virtue of an assignment dated 7th August 2007. However, the assignment has not been recorded in the countries in which rights have been applied for.

Agreement Applications

Set out below, in Schedules II and III are details of patent applications which we have been advised have been licensed by ImpediMed from third parties, or subject to an agreement between ImpediMed and a third party.

The portfolio of patent applications listed below in Schedules II and III are divided by individual applications and, where appropriate, the resultant family of corresponding Foreign and international applications based on the same priority document(s).

Schedule II

The applications listed in Schedule II are licensed from Impedance Cardiology Systems Inc (hereinafter referred to as "ICS").

The applications listed in Schedule II are broadly directed to technologies for performing and analysing impedance measurements, with a particular focus on the area of cardiac function.

We have been advised by ImpediMed that the applications in Families 14 to 16 were originally owned by ImpediMed and transferred to ICS by virtue of an agreement dated 7th July 2006, which in turn provided ImpediMed with an exclusive licence within defined fields.

Davies Collison Cave

3 September, 2007

Page 5

The applications in Family 12 are owned by Aorora Technologies Pty Ltd. We have been advised by ImpediMed that Aorora is an affiliate company of ICS, and that by virtue of an agreement dated 7th July 2006 ImpediMed has an exclusive licence within defined fields.

The applications in Family 13 "High Resolution Bioimpedance Device", were originally owned by QUT. We have been advised by ImpediMed that rights in these applications were transferred to ImpediMed by virtue of an agreement dated 22 May 2006, and then subsequently to ICS by virtue of the agreement dated 7th July 2006.

We have been advised by ImpediMed that the licence extends to any inventions necessary or useful for the development, manufacture or commercialization of products in the defined fields and explicitly lists the applications of Schedule II.

We have been advised by ImpediMed that the defined fields cover the measurement of, and provision of information to a user regarding:

body composition in humans and other animals;
total or regional body hydration in humans and other animals
the detection of peripheral oedema, including lymphoedema;
the detection of cancer in situ in humans and other animals;
the non-invasive measurement of, and provision of information to a user regarding, glucose levels in humans and other animals; and,
the measurement of, and provision of information to a user regarding, dry mass and hydration status in humans and other animals in connection with renal dialysis.

Schedule III

We have been advised by independent overseas attorneys that the patents listed in Schedule III are currently owned by Xitron Technologies Inc (hereinafter referred to as "Xitron").

We also been advised by ImpediMed that some rights in the patents are licensed to Fresenius Medical Care Holdings Inc (hereinafter referred to as "Fresenius") and that an amendment dated 5 July 2007 to the licence between Xitron and Fresenius will after payment by Xitron of the consideration due before 15[th] November 2007 limit the scope of Fresenius’s licence to renal, dialysis and extracorporeal therapies (including laboratory experimentation and research applications relating to renal disease and renal patients). All other rights in the Xitron patents revert to Xitron under the agreement.

We have been advised by ImpediMed that the pursuant to an agreement dated 5 July 2007, ImpediMed has agreed to acquire Xitron from that company’s current shareholders, and that the acquisition of Xitron is expected by ImpediMed to complete the following lodgement of its prospectus with the Australian Securities and Investments Commission, and no later than one month after its listing on the Australian Stock Exchange.

Davies Collison Cave

3 September, 2007

Page 6

Patentability, Patent Validity and Infringement of Third Party Rights

As is the case with all patent applications, there can be no assurance that each of the patent applications listed in the Schedules will result in the grant of a patent, or that the scope of protection provided by any patent which is granted will be valid or identical to the scope of the currently pending applications.

No assurance can be given that the exploitation of the inventions described and claimed in the ImpediMed applications will not infringe the rights of patents held by third parties.

Information regarding the status of the various patent applications referred to in Schedule I, other than for Family 1, was obtained directly from our in-house computer database. Information regarding the status of the various patent applications and patents in family 1 was obtained from publicly available databases. Information regarding the patent applications in Schedule II was obtained from ICS's patent attorney. Information regarding the patents in Schedule III was obtained from attorney's based in each respective country by checking the respective patent office official register.

Examination Results

Unless otherwise specified in the schedules below, the applications are still pending and awaiting the outcome of the examination procedure.

Yours sincerely, DAVIES COLLISON CAVE

==> picture [179 x 60] intentionally omitted <==

ANTHONY J COWLE [email protected] Partner *Encl.

==> picture [119 x 42] intentionally omitted <==

ALISTAIR SMITH [email protected]

Davies Collison Cave

3 September, 2007

Page 7

SCHEDULE I

APPLICATIONS OWNED BY IMPEDIMED LIMITED

Family	Title:	Nation:	Type:	Publication No.:	Lodgement Date:	Status:
1	Method and Device for Measuring Tissue Oedema	AU	Provisional	PQ01137	22/06/1999	Replaced byPCT
		PCT	International	WO00/79255	22/06/2000	Replaced by Nat Phase
		US	Complete via National Phase	US6760617	22/06/2000	Granted
		US	Continuation	US2004186392	29/01/2004	Pending
		AU	Complete via National Phase	AU769439B	22/06/2000	Granted
		EP	Complete via National Phase	EP1196766	22/06/2000	Pending
		CA	Complete via National Phase	CA2375249	22/06/2000	Pending

Family 1 is not currently handled by DCC. Accordingly, this section of the Schedule has been compiled from publicly available information.

Davies Collison Cave

3 September, 2007

Page 8

Family	Title:	Nation:	Type:	Publication No.:	Lodgement Date:	Status:
2	Impedance Determination	AU	Provisional	2002952840	22/11/2002	Replaced byPCT
		US	Provisional	60/429047	22/11/2002	Replaced byPCT
	Multifrequency bioimpedance determination	PCT	International	PCT/AU2003/001566	21/11/2003	Replaced by National Phase
		AU	National Phase	2003283079	21/11/2003	Pending
		CA	National Phase	2537451	21/11/2003	Pending
		EP	National Phase	03773351.6	21/11/2003	Pending
		JP	National Phase	2004-554066	21/11/2003	Pending
		US	National Phase	11/134824	21/11/2003	Pending
3	Oedema Detection	AU	Provisional	AU20040903314	18/06/2004	Replaced byPCT
		PCT	International	WO2005122888	17/06/2005	Replaced by National Phase
		AU	Complete via National Phase	2005253647	17/06/2005	Pending
		CA	Complete via National Phase	2578106	17/06/2005	Pending
		EP	Complete via National Phase	05750150.4	17/06/2005	Pending
		JP	Complete via National Phase	2007-515741	17/06/2005	Pending
		US	Complete via National Phase	Not yet available	17/06/2005	Pending

Davies Collison Cave

3 September, 2007

Page 9

Family	Title:	Nation:	Type:	Application No.:	Lodgement Date:	Status:
4	Monitoring System	AU	Provisional	2005903510	1/07/2005	Replaced byPCT
		US	Provisional	60/697100	7/07/2005	Replaced by PCT
		PCT	International	PCT/AU2006/000922	30/06/2006	Pending
5	R-Module Update	AU	Provisional	2005904569	23/08/2005	Replaced byPCT
	Monitoring System	AU	Provisional	2005903603	7/07/2005	Replaced byPCT
		US	Provisional	60/697101	7/07/2005	Replaced byPCT
		PCT	International	PCT/AU2006/000924	30/06/2006	Pending
6	Impedance Parameter Values	AU	Provisional	2005904125	02/08/2005	Replaced by PCT
		PCT	International	PCT/AU2006/001057	27/07/2006	Pending
7	Impedance Measurements	AU	Provisional	2006902907	30/05/2006	Replaced byPCT
		PCT	International	PCT/AU2007/000726	25/05/2007	Pending
8	Measurement Apparatus	AU	Provisional	2006906726	30/11/2006	Pending
9	Monitoring System	AU	Provisional	2007900175	15/01/2007	Pending
10	Monitoring System and Probe	AU	Provisional	2007902109	20/04/2007	Pending
11	Oedema Indicator	AU	Provisional	2007902540	14/5/2007	Pending

Davies Collison Cave

3 September, 2007

Page 10

FAMILY 1

Method and Device for Measuring Tissue Oedema

This invention is directed towards a Method and Device for Measuring Tissue Oedema.

In broad terms the invention is directed towards a method of assessing tissue oedema, in particular lymphoedema, by measuring bioelectrical impedance at a single frequency. Comparison of a single frequency bioelectrical impedance measurement taken at an anatomical region affected by tissue oedema to that taken at an anatomical region unaffected by tissue oedema is a reliable indicator of the presence or possible presence of lymphoedema. The present invention further provides an apparatus for determining the presence of tissue oedema.

At the date of this Report, patents have been granted in the US and Australia.

FAMILY 2

Multifrequency Bioimpedance Determination

This application is directed towards apparatus and methods for performing impedance measurements using a multiple frequency approach.

In broad terms, the invention is directed towards determining the impedance of a subject by applying an electrical signal representing a range of superposed frequencies, determining for a number of frequencies within the range, the current flow through the subject and the voltage across the subject, and determining the impedance of the subject at each of the number of frequencies.

During the international phase, the international application was examined and an international preliminary examination report issued indicating the claims are novel and inventive. However this finding is not binding on the national patent offices of the countries designated in the international application.

A single examination report has just been issued by the US Patent and Trademark Office, with a response to this being due on 30 November 2007. The examination report has identified relevant prior art which is currently under consideration.

These documents have been reviewed, and ImpediMed propose filing arguments/amendments with the US Patent and Trademark Office submitting that distinctions exist between the claimed invention and the cited documents.

Davies Collison Cave

3 September, 2007

Page 11

FAMILY 3

Oedema Detection

This application is directed towards apparatus and methods for performing oedema detection.

In broad terms the invention is directed to a method of detecting tissue oedema in a subject. The method includes determining a measured impedance for first and second body segments. An index indicative of a ratio of the extra-cellular to intra-cellular fluid is then calculated for each body segment, with these being used to determine an index ratio based on the index for the first and second body segments. The index ratio can in turn be used to determine the presence, absence or degree of tissue oedema, for example by comparing the index ratio to a reference or previously determined index ratios.

An international preliminary report on patentability issued on the international application indicating that all of the pending claims 1 to 32 are novel and inventive. However this finding is not binding on the national patent offices of the countries designated in the international application.

FAMILY 4

Monitoring System

This application is directed towards apparatus and methods for performing impedance measurements on a subject.

In broad terms, the invention is directed to a number of aspects of the technology, which can be summarised as follows:

A method and apparatus for performing impedance measurements (claims 1 to 27);
Apparatus for connecting measurement apparatus to an electrode in which a circuit is mounted in the connector housing (claims 28 to 37);
A method and apparatus for performing impedance measurements using a lead identifier (claims 38 to 49);
A method and apparatus for performing impedance measurements using an electrode identifier (claims 50 to 58);
A method and apparatus for performing remote configuration of a measuring device (claims 59 to 77);
A method and apparatus for performing impedance measurements using a controllable applied current (claims 78 to 85);
A method of constructing an electrode, and a constructed electrode (claims 86 to 96); and,
Methods of diagnosis using the above aspects (claims 97 to 101).

An international search report and international written opinion have now issued on the above mentioned application. The search, which was limited to the subject matter of claims 1 to 27, located six documents, but these were only deemed to be of background relevance. The examiner indicated that as a result, each of claims 1 to 27 are novel and inventive. However this finding is not binding on the national patent offices of the countries designated in the international application.

Davies Collison Cave

3 September, 2007

Page 12

FAMILY 5

Monitoring System

This application is directed towards apparatus and methods for assisting with the performance of impedance measurements and analysis of measured impedance results.

In broad terms, protection is sought for a number of aspects of the technology, which can be summarised as follows:

A method and apparatus for performing impedance measurements using a displayed electrode configuration (claims 1 to 30);
A method and apparatus for generating a representation of a measured impedance parameter value (claims 31 to 40);
A method and apparatus for performing impedance measurements using a measurement profile (claims 41 to 58);
A method and apparatus for performing remote configuration of a measuring device (claims 59 to 78);
Methods of diagnosis using the above aspects (claims 79 to 83).

An international search report and international written opinion have now issued on the above mentioned application. The search, which was limited to the subject matter of claims 1 to 30, located five documents, two of which are deemed to be relevant to the novelty and inventive step of the claims, whilst the remaining three documents are deemed to be of only background relevance. However this finding is not binding on the national patent offices of the countries designated in the international application.

These documents have been reviewed, and ImpediMed propose filing arguments/amendments on the national/regional phase application(s), submitting that distinctions exist between the claimed invention and the cited documents.

FAMILY 6

Impedance Parameter Values

This application is directed towards apparatus and methods for determining parameter values used in impedance analysis of a subject.

In broad terms the method includes using a processing system to determine a number of impedance measurements at a corresponding number of frequencies. The impedance measurements are used to determine estimates of parameter values, with the estimates being used to determine theoretical impedance values based on the parameter value estimates. The theoretical impedance values are compared to the measured impedance values to allow a modification direction to be determined for at least one of the parameter value estimates. This is then used to modify at least one parameter value estimate, with the parameter values being determined at least in part from one or more modified parameter value estimates.

An international search report and international written opinion have now issued on the above mentioned application. The search located two documents which are deemed to be of only background relevance. The Examiner indicated that as a result, each of claims 1 to 23 are novel and inventive. However this finding is not binding on the national patent offices of the countries designated in the international application.

Davies Collison Cave

3 September, 2007

Page 13

FAMILY 7

Impedance Measurements

This application is directed towards apparatus and methods for selecting frequencies for use in performing impedance measurements.

In broad terms protection is sought for a method of a method of determining frequencies for use in performing impedance measurements. The method includes determining estimates for parameter values representing an impedance response for at least one subject, using the estimated parameter values to determine a design and using the design to determine frequencies for use in impedance measurements.

An international search report and international written opinion have now issued on the above mentioned application. The search located ten documents, with eight of these documents being deemed to be relevant to the novelty and inventive step of the claims, whilst the remaining two documents are deemed to be of only background relevance. However this finding is not binding on the national patent offices of the countries designated in the international application.

FAMILY 8

Measurement Apparatus

This application is directed towards apparatus and methods for monitoring biological indicators using radiation attenuation and impedance measurements.

In broad terms, the invention is directed towards causing at least one radiation attenuation measurement to be performed, determining at least one first biological indicator using determined radiation attenuation, causing at least one impedance measurement to be performed and determining at least one second biological indicator using a determined impedance measurement.

Davies Collison Cave

3 September, 2007

Page 14

FAMILY 9

Monitoring System

This application is directed towards apparatus and methods performing impedance measurements so as to take into account magnetic coupling between device leads.

In broad terms, the invention is directed towards causing at least one electrical signal to be applied to the subject via first leads operatively connected to first electrodes provided on the subject, determining a first indication indicative of at least one first electrical signal measured via second leads operatively disconnected from second electrodes positioned on the subject, determining a second indication indicative of at least one second electrical signal measured via second leads operatively connected to second electrodes positioned on the subject and, determining from the indications and the at least one applied signal, at least one instantaneous impedance value.

FAMILY 10

Monitoring System and Probe

This application is directed towards apparatus and methods of using a probe to determine a limb impedance profile.

In broad terms, protection is sought for a probe formed from a housing configured to be held by an operator in use, a contact surface for contacting the subject and a connector for connecting the contact surface to a measuring device.

FAMILY 11

Oedema Indicator

This application is directed towards apparatus and methods for displaying an oedema indicator that can be used in determining the presence, absence or degree of oedema.

In broad terms, the invention is directed towards determining at least one impedance value, representing the impedance of at least one limb of the subject, determining an oedema indicator using the at least one impedance value and a reference and displaying a representation of the oedema indicator to thereby allow the oedema indicator to be used in determining a presence, absence or degree of oedema in the subject.

Davies Collison Cave

3 September, 2007

Page 15

SCHEDULE II

APPLICATIONS LICENCED FROM IMPEDANCE CARDIOLOGY SYSTEMS INC

Family	Title:	Nation:	Type:	Application No.:	Lodgement Date:	Status:
12	High Resolution Bioimpedance Device	AU	Provisional	20020951925	09/10/2002	Replaced byPCT
		PCT	International	PCT/AU2003/01333	09/10/2003	Replaced by National Phase
		AU	Complete via National Phase	2003266844	09/10/2003	Pending
		EP	Complete via National Phase	03747728.8	09/10/2003	Pending
		JP	Complete via National Phase	2004-542097	09/10/2003	Published
		US	Complete via National Phase	10/530860	09/10/2003	Published
13	Cardiac monitoring system	AU	Provisional	20040903334	21/06/04	Replaced byPCT
		AU	Provisional	20040906181	26/10/04	Replaced byPCT
		PCT	International	WO2005AU00893	21/06/2005	Replaced by National Phase
		AU	Complete via National Phase	2005253651	21/06/2005	Pending
		CA	Complete via National Phase	2572206	21/06/2005	Pending
		EP	Complete via National Phase	05752412.6	21/06/2005	Published
		JP	Complete via National Phase	Not yet available	21/06/2005	Pending
		US	Complete via National Phase	11/629,804	21/06/2005	Pending

Davies Collison Cave

3 September, 2007

Page 16

Family	Title:	Nation:	Type:	Application No.:	Lodgement Date:	Status:
14	Pulmonary monitoring system	AU	Provisional	2005903887	20/07/2005	Replaced byPCT
		US	Provisional	60/703270	28/07/2005	Replaced by PCT
		PCT	International	PCT/AU2006/000923	30/06/2006	Pending
15	Ventricular mass determination	AU	Provisional	2005903886	20/07/2005	Replaced byPCT
		US	Provisional	60/703324	28/07/2005	Replaced byPCT
	Index Determination	PCT	International	PCT/AU2006/001022	19/07/2005	Published
16	Hydration Status Monitoring	AU	Provisional	2005905603	11/10/2005	Replaced byPCT
		PCT	International	PCT/AU2006/001491	10/10/2006	Pending

Families 12 to 16, other than the Australian national phase applications, are not currently handled by DCC. Accordingly, this section of the Schedule has been compiled from information provided by ICS's US patent attorney, Jim Shay, of Shay Law Group, independent of DCC.

Davies Collison Cave

3 September, 2007

Page 17

FAMILY 12

High Resolution Bioimpedance Device

This application is directed towards apparatus and methods for performing non-invasive impedance measurements.

In broad terms protection is sought for a method and apparatus for the non-invasive measurement of cardiac function. A signal is applied between a pair of electrodes on a patient. The signal delivers a constant alternating current at multiple simultaneous frequencies. A second pair of electrodes measures a voltage signal. The impedance at each frequency is obtained by demodulating the current signal and the voltage signal using techniques such as Fast Fourier Transform (FFT). The FFT gives a phase and amplitude which is converted to an impedance value. The impedance values are fitted to a theoretical frequency dependent impedance locus and the locus is extrapolated to obtain a value at zero frequency. The steps are repeated to obtain a time-varying plot of impedance and measures of cardiac function are calculated from the time-varying plot

During the international phase, the application was examined and an international preliminary examination report issued indicating the pending claims are novel and inventive. However this finding is not binding on the national patent offices of the countries designated in the international application.

FAMILY 13

Cardiac Monitoring System

This application is directed towards apparatus and methods for analysing cardiac function in a subject.

In broad terms protection is sought for a method and apparatus for analysing cardiac function in a subject. The method includes causing one or more electrical signals to be applied to the subject using a first set of electrodes, the one or more electrical signals having a plurality of frequencies. The method includes determining an indication of electrical signals measured across a second set of electrodes applied to the subject in response to the applied one or more signals. Following this and for a number of sequential time instances, the method includes determining from the indicating data and the one or more applied signals, an instantaneous impedance values at each of the plurality of frequencies and determining using the instantaneous impedance values an intracellular impedance parameter. The intracellular impedance parameter over at least one cardiac cycle is used to determine one or more parameters relating to cardiac function.

Davies Collison Cave

3 September, 2007

Page 18

FAMILY 14

Pulmonary Monitoring System

This application is directed towards apparatus and methods for performing impedance measurements on a subject and in particular for monitoring pulmonary oedema.

In broad terms, the invention is directed for a number of aspects of the technology, which can be summarised as follows:

A method and apparatus for monitoring pulmonary oedema (claims 1 to 30);
Apparatus for connecting measurement apparatus to an electrode in which a circuit is mounted in the connector housing (claims 31 to 40);
A method and apparatus for performing impedance measurements using a lead identifier (claims 41 to 52);
A method and apparatus for performing impedance measurements using an electrode identifier (claims 53 to 61);
A method and apparatus for performing impedance measurements using a controllable applied current (claims 62 to 69);
A method of constructing an electrode, and a constructed electrode (claims 70 to 80); and,
Methods of diagnosis using the above aspects (claims 81 to 85); and,
A method and apparatus for performing remote configuration of a measuring device (claims 86 to 105).

An international search report and international written opinion have now issued on the above mentioned application. The search, which was limited to the subject matter of claims 1 to 30, located seven documents, four of which were deemed to be relevant to the novelty and inventive step of the claims, whilst one was deemed relevant to inventive step only. However this finding is not binding on the national patent offices of the countries designated in the international application.

Davies Collison Cave

3 September, 2007

Page 19

FAMILY 15

Index Determination

This application is directed towards apparatus and methods for determining an index indicative of the presence, absence or degree of left ventricular hypertrophy in a subject.

In broad terms protection is sought for a method of determining an index indicative of the presence, absence or degree of left ventricular hypertrophy in a subject. The method includes using a processing system to determine a measured impedance value for at least one body segment. For each body segment the measured impedance values are used to determine at least one impedance parameter, which are then used to determine a fat-free mass for the subject. The fat free mass can then be used as the index.

An international search report and international written opinion have now issued on the above mentioned application. The search located eight documents, three of which were deemed to be relevant to the novelty and inventive step of the claims, one was deemed relevant to inventive step only, whilst the remaining four documents were deemed to be of background information only. However this finding is not binding on the national patent offices of the countries designated in the international application.

FAMILY 16

Hydration Status Monitoring

This application is directed towards apparatus and methods for determining an indication of the hydration status relating to a subject.

In broad terms the invention directed is sought for a method that includes determining a measured impedance value for at least one body segment, and for each body segment, and using the measured impedance values, determining at least one indicator, the indicator being at least partially indicative of a level of extracellular fluid. The indicator is compared to either a predetermined reference or an impedance parameter determined for at least one other body segment, allowing an indication of the hydration status to be determined.

Davies Collison Cave

3 September, 2007

Page 20

SCHEDULE III

PATENTS OF ENTITY BEING ACQUIRED - XITRON

Family	Title:	Nation:	Type:	Publication No.:	Lodgement Date:	Status:
17	Method and Apparatus for Displaying Multi- Frequency Bio- Impedance	US	Complete	07/693,364	30/04/91	Granted in force
		PCT	International	WO9219153	27/04/92	Replaced by national phase
		CA	National Phase	2102231	27/04/92	Granted in force
		JP	National Phase	4-510922	27/04/92	Granted in force
		EP	National Phase	0587646	27/04/92	Replaced by regional phase
		DE	Regional Phase	6922363.2	27/04/92	Granted in force*
		ES	Regional Phase	0587646	27/04/92	Granted in force
		FR	Regional Phase	0587646	27/04/92	Granted in force
		UK	Regional Phase	0587646	27/04/92	Granted in force
		IT	Regional Phase	0587646	27/04/92	Granted in force

Family 17 is not currently handled by DCC. Accordingly, this section of the Schedule has been compiled from information provided by independent attorneys in each of the jurisdictions.

Davies Collison Cave

3 September, 2007

Page 21

FAMILY 17

Method and Apparatus for Displaying Multi-Frequency Bio-Impedance

This patent is directed towards apparatus and methods for performing multiple frequency bioimpedance measurements.

In broad terms protection has been granted for a method and apparatus for detecting the complex impedance of biological tissue. This method involves selecting a sinusoidal frequency value, selecting a first sampling rate no less than 400% of the sinusoidal frequency; selecting a second sampling rate no less than first the sampling rate; generating a series of excitation pulses at the first sampling rate to form an excitation signal comprising a component at the sinusoidal frequency having a predetermined magnitude; spanning the biological tissue with at least one pair of electrically conductive terminals; applying the excitation signal across the at least one pair of terminals to the biological tissue; detecting a response signal comprising the response of the biological tissue to the applied excitation signal; sampling the excitation signal at the second sampling rate to form a series of excitation samples; sampling the response signal at the second sampling rate in synchronism with the excitational sampling step to form a series of response samples; delaying the excitation samples by a delay time substantially equal to one-fourth cycle of the sinusoidal frequency to form a series of delayed excitation samples; multiplying each the excitation sample by the simultaneous the response sample to form a first impedance sample; multiplying each the delayed excitation sample by the simultaneous the response sample to form a second impedance sample; averaging the first and second impedance samples over time to form first and second mean impedance signals, respectively; and providing an output comprising the first and second means impedance signals representative of the complex impedance of the biological tissue.

The above patents are granted and currently in force.

*It should be noted that the German patent lapsed through failure to pay a fee, but has since been reinstated.

Davies Collison Cave

3 September, 2007

Page 22

11 Independent Accountant’s report

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11 September 2007

The Directors ImpediMed Limited Building 4B Garden City Office Park 2404 Logan Road EIGHT MILE PLAINS QLD 4113

Dear Sirs

Independent Accountant’s Report

1. Introduction

We have prepared this Independent Accountant’s Report (“Report”) at the request of the Directors of ImpediMed Limited and its controlled entities, hereafter referred to as the Company, for inclusion in a prospectus to be dated on or about 11 September 2007 to raise up to $18 million by:

an underwritten public offer of 12.2 million shares (with one IPO option for every two shares issued);
a non-underwritten public offer of up to a further 1.4 million shares in oversubscriptions (with one IPO option for every two shares issued); and
an issue to the holders of IPO convertible notes of 11.4 million shares (with one IPO option for every two shares issued).

Expressions defined in the prospectus have the same meaning in this Report.

2. Scope

We have been requested to prepare a Report covering the following financial information:

Historical Financial Information comprising the actual Balance Sheet as at 30 June 2007 and the actual Income Statement and applicable notes to these statements for the year ended 30 June 2007 as set out in section 8.5 of the prospectus;
Restated Historical Financial Information comprising the restated Income Statement for the years ended 30 June 2005 and 30 June 2006; and
Pro Forma Financial Information comprising the pro forma Balance Sheet as at 30 June 2007, which assumes completion of the contemplated transactions as at that date as set out in section 8.5 of the prospectus.

Liability limited by a scheme approved under Professional Standards Legislation.

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The Historical Financial Information and Restated Historical Financial Information have been extracted from the audited statutory financial statements of the Company, which were audited by Ernst & Young and on which unqualified audit opinions were issued. The independent audit reports included emphasis of matter paragraphs on the inherent uncertainty regarding the Company’s continuation as a going concern. No adjustments have been made to the Historical Financial Information. Adjustments have been made to the Restated Historical Financial Information and these adjustments are set out at section 8.5 note 1 of the prospectus.

The Directors have prepared and are responsible for the Historical Financial Information, Restated Historical Financial Information and Pro Forma Financial Information. We disclaim any responsibility for any reliance on this Report or on the Financial Information to which it relates for any purposes other than that for which it was prepared. This Report should be read in conjunction with the full prospectus.

Audit of Historical Financial Information

We have conducted an independent audit of the Historical Financial Information in order to express an audit opinion. Our audit has been conducted in accordance with Australian Auditing and Assurance Standards applicable to audit engagements to provide reasonable assurance whether the Historical Financial Information is free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the Historical Financial Information, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, the Historical Financial Information is presented fairly in accordance with the measurement and recognition requirements (but not all the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia, so as to present a view which is consistent with our understanding of the Company’s financial position as at 30 June 2007, and of its performance as represented by the results of its operations for the year ended 30 June 2007.

Review of Restated Historical Financial Information

We have conducted an independent review of the Restated Historical Financial Information in order to state whether on the basis of the procedures described, anything has come to our attention that would cause us to believe that the Restated Historical Financial Information is not presented fairly, in all material respects, in accordance with the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia.

Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements and has been limited to reading of relevant Board minutes, inquiries of management personnel, analytical procedures applied to the financial data and certain limited verification procedures. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Restated Historical Financial Information.

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Review of Pro Forma Financial Information

We have conducted an independent review of the Pro Forma Financial Information in order to state whether on the basis of the procedures described, anything has come to our attention that would cause us to believe that:

a) the pro forma Balance Sheet has not been prepared on the basis of the assumptions set out in section 8.5 of the prospectus; and
b) is not applying the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia as if the pro forma transactions set out above had occurred at 30 June 2007.

Our review has been conducted in accordance with Australian Auditing Standards applicable to review engagements and has been limited to reading of relevant Board minutes, reading of contracts and other legal documents, inquiries of management personnel and analytical procedures applied to the financial data. We have also determined whether the pro-forma transactions form a reasonable basis for the preparation of the pro forma Balance Sheet. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Pro Forma Financial Information.

3. Opinion and Statement

Audit Opinion on Historical Financial Information

In our opinion, the Historical Financial Information of the Company as set out in section 8.5 of the Prospectus presents fairly, in all material respects, in accordance with the measurement and recognition requirements (but not all the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia, the financial position of the Company as at 30 June 2007 and its performance as represented by the results of its operations for the year ended 30 June 2007.

4. Review Statements

Restated Historical Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the Restated Historical Financial Information of the Company as set out in section 8.5 of the prospectus is not presented fairly, in all material respects, in accordance with the measurement and recognition requirements (but not all the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia, the financial performance of the Company as represented by the results of its operations for the years ended 30 June 2005 and 30 June 2006 on the basis of the adjustments described in section 8.5 note 1 of the prospectus.

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Pro Forma Financial Information

Based on our review, which was not an audit, nothing has come to our attention which would cause us to believe the Pro Forma Financial Information as set out in section 8.5 of the prospectus:

a) has not been prepared on the basis of the assumptions as set out in section 8.5 of the prospectus of the Company as at 30 June 2007, and
b) is not applying the measurement and recognition requirements (but not all of the disclosure requirements) of applicable Accounting Standards and other mandatory professional reporting requirements in Australia as if the pro forma transactions set out in section 8.5 had occurred on that date.

5. Subsequent Events

Apart from the matters dealt with in this Report and having regard to the scope of our Report, to the best of our knowledge and belief, no material transactions or events outside the ordinary business of the Company subsequent to 30 June 2007 have come to our attention which require comment on or adjustment to, the information referred to in our Report or that would cause such information to be misleading or deceptive.

6. Disclosure

Ernst & Young does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased opinion in this matter. Ernst & Young provides audit services to the Company, and will receive a professional fee for the preparation of this Report.

Consent to the inclusion of the Independent Accountant’s Report in the prospectus in the form and context in which it appears, has been given. At the date of this Report, this consent has not been withdrawn.

Yours faithfully

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Ernst & Young

12 Risk Factors

12.1 GENERAL COMMENTS

The business activities of ImpediMed are subject to risks and there are many factors that may affect its future fi nancial and operating performance. Some of these risks may be mitigated, however many are outside the control of the Company. There are also general risks associated with any investment in the securities of a listed company. The risks associated with an investment in ImpediMed fall into the following broad categories:

stock market related risks
risks associated with ImpediMed’s activities
general business risks.

The future fi nancial and operational performance of ImpediMed, the value of ImpediMed’s assets and the market price of the Shares and IPO Options quoted on ASX, may be infl uenced by any or a combination of these risk factors.

A summary of these risks is set out below. This summary is not an exhaustive list of the risks associated with an investment in Shares and IPO Options. You should read this prospectus in full and are encouraged to seek professional advice before deciding whether to invest in ImpediMed.

12.2 STOCK MARKET RISKS

An active and liquid market for Shares or IPO Options may not develop. Although the Shares and IPO Options are expected to be listed on ASX there is a risk that an active and liquid market for the Shares or IPO Options will not develop. If insuffi cient liquidity exists, investors who wish to sell their Shares or IPO Options may be unable to do so at an acceptable price, or at all.
The market price of Shares may fl uctuate. The market price of Shares may fl uctuate, including trading below the issue price, due to various factors outside the Company’s control, including changes in:
Australian and international economic and political conditions
the legal and regulatory environment in which the Company operates
investor sentiment
Changes in the market price of Shares may not necessarily refl ect the Company’s underlying fi nancial or operating performance.
The market price of Shares may not exceed the Exercise Price of IPO Options. The market price of Shares may not rise above, or remain above, the Exercise Price of IPO Options during the Exercise Period.

12.3 RISKS ASSOCIATED WITH IMPEDIMED’S ACTIVITIES

Outcome of clinical trial. ImpediMed has identifi ed the secondary lymphoedema market as its most promising commercial opportunity. ImpediMed’s products have been demonstrated to enable the detection of secondary lymphoedema earlier than the most commonly used method and preliminary results from a clinical research trial conducted over fi ve years at the NIH indicate that early detection of this condition in the arm of newly diagnosed breast cancer patients (followed by timely treatment) can prevent its progression. Establishing that earlier detection can result in improved patient outcomes in a larger clinical trial is important to the success of ImpediMed’s regulatory and reimbursement strategies. A large multi centre clinical trial designed to confi rm the results of initial trials has not yet commenced and the results of this trial cannot be assured. If the results of this trial are not favourable this will have a material adverse effect on ImpediMed’s prospects.
Uncertainty of market acceptance of ImpediMed’s products. The level of demand for ImpediMed’s products depends to a large extent on their market acceptance by Health Care Providers, which is uncertain. Factors infl uencing the market acceptance of ImpediMed’s products include:
the level of reimbursement ImpediMed is able to achieve for its products
acceptance among Health Care Providers of the advantages of the pre-emptive model in the monitoring and detection of secondary lymphoedema
the level of awareness among Health Care Providers of ImpediMed’s products and their acceptance of the apparent advantages
the extent to which Health Care Providers are trained to use ImpediMed’s products
the availability of comparable competing products.

If the Company is unable to achieve suffi cient market acceptance for its products this will have a material adverse effect on the Company’s prospects.

Government regulation. ImpediMed is required to comply with regulations regarding product approval and performance imposed by governments and regulatory bodies in each market in which it operates including Australia, New Zealand, the United States and Europe. There is a risk that:
it may take considerably longer than expected to obtain necessary regulatory approvals and clearances for new products or new market opportunities
regulatory authorities may only grant some of the approvals or clearances sought by the Company or make the grant of an approval subject to further additional requirements or conditions
those products in respect of which a regulatory approval or clearance has already been obtained may subsequently be found not to comply with existing regulations
ImpediMed may not be able to comply (or may decide that it is not economically feasible to comply) with any new regulations or requirements that may be introduced.

In such circumstances ImpediMed may be unable to sell its products in a particular market or markets.

Clinical trials. ImpediMed is committed to investing in clinical trials to further clinically validate its products and expand their regulatory indications for use and economic models. There is a risk that should a longer, more extensive or otherwise more costly clinical trial program be required than is presently anticipated, the Company may need to modify the trials to reduce costs, seek further funding from trial partners or other sources, or raise additional capital.
The Company proposes to fund the costs of clinical trials with capital raised under the Offer, from revenue generated from the sale of its products and from other external sources (e.g., Government grants and contributions from trial partners). If the Company decides to commence the trials earlier than currently anticipated, if anticipated revenues are reduced or delayed, the cash requirements of operations are higher than anticipated, or if funding from external sources is not obtained or is less than expected, the Company will need to review its funding requirements and may need to raise further capital to fund its clinical trials. Alternatively, it may conduct smaller, less costly trials that support reduced regulatory outcomes.
Loss or independent discovery of trade secrets. ImpediMed believes that it has a competitive advantage that depends, in part, on certain information and know-how that is a trade secret. There is a risk that the confi dentiality of this information and know-how could be lost as a result of:
unauthorised or inadvertent disclosure
reverse engineering of ImpediMed’s products by competitors
competitors independently developing technologies that are substantially equivalent to those owned or to be acquired or developed by ImpediMed.
Issue of patents to competitors. Patents may exist or be issued in the future to other companies covering elements of ImpediMed’s technology. The existence or issuance of such patents may require ImpediMed to make changes in the design of its products that may have a material adverse effect on the performance and success of the Company’s products.
Challenge to validity of ImpediMed’s patent portfolio or claim of patent infringement. ImpediMed has endeavoured to protect its competitive position through patents and patent applications where possible. However the granting of a patent does not guarantee that the patent is valid or that the rights of others have not been infringed. There is therefore a risk that competitors may:
challenge the validity of ImpediMed’s patents
claim that ImpediMed is infringing their patents.

The complex nature of the Company’s technology platform increases the risk of such actions.

Even though the Company has obtained insurance to cover the costs of defending such a claim (which is described in section 13.2), any such claim may nevertheless consume signifi cant management time and Company resources. This may have a material adverse impact on the performance of the Company.

Technological obsolescence. ImpediMed operates in a market characterised by rapid and signifi cant technological change. There is a risk that the Company’s products will be rendered less competitive or obsolete by the development of new devices using new or existing technologies, although the Company is not presently aware of any such developments.
Legal liability. The research and development, testing, manufacture and sale and distribution of medical devices exposes ImpediMed to the risk of product liability and other legal claims. This risk is mitigated by insurance although there remains a risk that:
existing or future insurance coverage may not be adequate
that the Company will not be able to obtain appropriate insurance cover in the future, or at an acceptable cost.
Management of growth. ImpediMed’s anticipated growth may place a signifi cant strain on its managerial, operational and fi nancial resources and will require the Company to further develop its operational and fi nancial systems. If the Company is unable to manage growth effectively this could have a material adverse effect on the Company’s business, results of operations and
Health care funding and reimbursement. Section 5.5 contains an overview of reimbursement practices in ImpediMed’s key market, the United States, and explains its strategic signifi cance. Sales of the Company’s products will, to a large degree, be dependent on levels of reimbursement provided by governments and private health insurers to the users of the Company’s products. The Company’s business and prospects may be adversely affected if one or more aspects of the Company’s reimbursement strategy (i.e., coding, payment and coverage) is unsuccessful or less successful than expected.
Sales and distribution. ImpediMed has entered into distribution agreements with certain distributors, some of which are exclusive. Although some of these arrangements have minimum sale obligations the level of sales required are relatively low and additional sales will depend upon the success of the distributors’ marketing efforts. The Company’s rights where a distributor fails to meet purchase minimums are limited to terminating the agreement. The Company will need to identify additional distributors in order to offer its products in all of its target markets. There is no guarantee that distribution partners will meet sales forecasts or that additional distribution partners will be secured.
Supply and manufacturing. ImpediMed’s products are manufactured by a specialist manufacturer under contract. This exposes the Company to a number of risks including:
ImpediMed does not have direct control over the manufacturing process and product quality
if ImpediMed’s manufacturing partner breaches the terms of its contract with ImpediMed, or becomes unable to supply ImpediMed with contracted quantities, ImpediMed may be unable to meet device orders. In such circumstances it could take some months for ImpediMed to identify and engage an alternative manufacturer. Such disruptions could have a signifi cant adverse impact on the Company’s prospects.
Research and development activities. Medical research and development is capital intensive, involves long lead times and there is no guarantee of a successful or timely outcome.
The Xitron acquisition may not complete. ImpediMed has entered into a contract to acquire Xitron. This contract has not yet completed and is subject to outstanding conditions and termination events. These conditions and termination events are summarised in section 13.1. ImpediMed believes that the acquisition will proceed to completion however adverse events may occur which may result in the condition not being satisfi ed or termination rights being exercised. In these circumstances, the Company intends to proceed with the Offer and believes it can meet its business objectives set out in this prospectus without acquiring Xitron.

Xitron has a patent granted in the United States, Canada, Japan and Europe (Xitron Patent). The Xitron Patent claims certain methods and apparatus for measuring bioimpedance. The Company has considered the terms of the Xitron Patent and formed the view that it does not infringe it. However, there remains a risk that, if Xitron is not acquired by the Company, it or its licensees may take infringement proceedings against the Company based on the Xitron Patent.

12.4 GENERAL BUSINESS RISKS

Competition. The markets in which ImpediMed operates are fragmented and highly competitive. The actions of competitors or the entry of new competitors may adversely impact ImpediMed ’s fi nancial performance or operating margins where the Company is unable to effectively respond in a timely manner.
International markets. There are certain risks inherent in ImpediMed’s existing and proposed international operations, such as:
unexpected changes in regulatory requirements
fl uctuations in currency exchange rates
technology export and import restrictions or prohibitions
seasonal reductions in business
political instability or war
other economic and political risks.

Such events could adversely impact on the success of the Company’s international operations.

Future capital needs. It may be necessary for the Company to raise additional funds in order to further develop the markets for its products or pursue additional product research and development. There is no assurance that such funding will be available to the Company in the future or that it will be able to be obtained on acceptable terms.
Dependence on key personnel. The operations and future success of ImpediMed will depend upon the efforts and abilities of certain key executives set out in section 7.2. The loss of the services of any of these individuals could adversely affect the Company.
Recruitment of new staff. Successful ongoing development and the marketing of existing and new devices will require the services of additional personnel. There can be no assurance that ImpediMed will be able to attract and retain such persons as employees.
Performance of agreements. ImpediMed is reliant on third party organisations for research, reimbursement, distribution, manufacturing, clinical trials, electronic design and development and manufacturing. Any default in the performance of obligations by counterparties to these arrangements may adversely affect the profi tability of ImpediMed, the value of its assets or the market price of Shares.

13 Additional Information

13.1 MATERIAL CONTRACTS

This section outlines, in summary form, the main provisions of the material contracts that relate to ImpediMed. This summary does not purport to be a complete description of those contracts.

Constitution

The rights and liabilities attaching to securities issued by the Company, including Shares, are detailed in the Constitution which may be inspected during normal business hours at the registered offi ce of the Company or downloaded from the Company’s website at www.impedimed.com. The following is a summary of the major provisions of the Constitution and assumes ImpediMed is admitted to

Share issues

Subject to the Corporations Act, the Constitution and the Listing Rules, the Board may issue securities in ImpediMed or grant options on such terms and conditions as the Board determines.

The Board may determine that securities are to be issued with preferred, deferred or other special rights, obligations or restrictions, whether in regard to dividends, voting, return of share capital, payment of calls or otherwise.

Transfer of securities

Subject to the Constitution, a shareholder may transfer securities. The Directors may decline to register a transfer of securities where the Company is required to do so under the Listing Rules or the Constitution.

Restricted securities

Restricted securities cannot be disposed of during an escrow period except as permitted by the Listing Rules or ASX.

Lien and forfeiture

The Company has a lien on every Share for due and unpaid calls and instalments. The Company may forfeit or sell any Share on which the Company has a lien. The holder of the Share remains liable to pay to the Company all outstanding moneys, costs and interest.

General meetings

General meetings of the Company may be called by the Board and held in the manner determined by the Board. Each shareholder must be given notice of general meetings of ImpediMed.

Voting rights

At a general meeting every shareholder entitled to vote may vote in person or by proxy, attorney or representative. On a show of hands each shareholder present has one vote. On a poll each shareholder present has one vote for each fully paid ordinary share held and a fraction of a vote for each partly paid ordinary share they hold. The Chairman does not have a casting vote.

Variation of rights

If the share capital of the Company is divided into classes, the rights attaching to any class can only be altered by a special resolution passed at a separate meeting of the holders of the class of shares concerned, or with the written consent of the holders of at least three quarters of the issued shares of that class.

Dividends

The Board may pay dividends to shareholders, as determined by the Board, subject to the rights of, or any restrictions on, the holders of securities that have any special arrangement as to dividends. Interest is not payable on any dividend. The Board may establish and maintain dividend plans.

During a breach of the Listing Rules, or of any escrow agreement entered into by the Company under the Listing Rules in relation to restricted securities, the holder of those securities is not entitled to any dividend in respect of them.

Proportional takeover provisions

The registration of any transfer of voting securities giving effect to an offer made under a proportional takeover scheme (i.e., an offer for some but not all of the holders’ Shares in ImpediMed) is prohibited until the persons holding the securities in a class for which the offer is made under the takeover have passed an ordinary resolution approving the scheme.

To remain effective the proportional takeover provisions must be renewed by the Company in general meeting every three years.

100

Directors

The Company must have at least three Directors and no more than seven. Questions arising at a meeting of Directors will be decided by majority vote. The Chairman has a casting vote.

Indemnity

Subject to the law, the Company indemnifi es each Director, company secretary and executive offi cer to the maximum extent permitted by law against any liability or legal costs incurred by them by virtue of their holding offi ce as, and acting in the capacity of, Director, company secretary or executive offi cer of the Company. The Company may extend the indemnity to employees.

Winding up

The liquidator may divide among all or any of the contributories as the liquidator thinks fi t, in specie or in kind, any part of the assets and may vest any part of the assets of the Company in trustees upon any trusts for the benefi t of all or any of the contributories as the liquidator thinks fi t.

IPO Option terms

The IPO Options issued under this prospectus will be issued on the following terms:

each IPO Option will entitle the holder to subscribe for one Share upon exercise of the IPO Option and payment of the Exercise Price;
the IPO Options expire on the Expiry Date;
the Company must give the holder of each IPO Option a holding statement;
an IPO Option may be exercised at any time prior to the Expiry Date;
IPO Options may only be exercised by delivery to the Share Registry of an exercise notice (available from the Share Registry) and a cheque for the Exercise Price for the IPO Options being exercised;
the exercise by the holder of IPO Options of a portion of their options will not affect their rights in respect of the balance of the IPO Options held by them;
IPO Options will not confer on a holder an entitlement to receive dividends declared, nor an entitlement to vote at general meetings of the Company, unless the IPO Options have been exercised by the holder before the record date for determining these entitlements;
if, in the opinion of the Board, a Change of Control Event has occurred, or is likely to occur, the Board may give written notice to holders of IPO Options specifying a period of not less than fi ve days during which IPO Options may be exercised. A Change of Control Event means:
the Company entering into a scheme of arrangement with its members or any class thereof pursuant to section 411 of the Corporations Act;
a takeover bid being made to acquire some or all of the Shares; or
a person or a group of associated persons obtaining, subsequent to the issue of the IPO Options, a relevant interest in suffi cient Shares to give it or them the ability, in general meeting, to replace all or a majority of the Board in circumstances where such ability was not already held by that person or a person associated with such person or group of associated persons.
Shares issued on exercise of an IPO Option will rank equally in all respects with other Shares and be issued as fully paid;
the Company will apply to ASX for offi cial quotation of the IPO Options and Shares issued upon exercise of IPO Options;
the IPO Options may be transferred at any time in accordance with the Corporations Act;
a holder of IPO Options does not have the right to participate in bonus issues or new issues of securities offered to shareholders until Shares are allotted to the holder pursuant to the exercise of the relevant IPO Options;
in the event of a reorganisation of the capital of the Company, the rights of the holders of IPO Options will be changed (as appropriate) in accordance with the Listing Rules applying to a reorganisation of capital at the time of the reorganisation;
if the Company makes a pro rata issue (other than a bonus issue) to existing shareholders and no Share has been issued in respect of an IPO Option before the record date for determining entitlements to the issue, the Exercise Price of each IPO Option will be reduced in the manner permitted by the Listing Rules applying at the time of the pro rata issue; and

101

if the Company makes a bonus issue to existing shareholders and no Share has been issued in respect of an IPO Option before the record date for determining entitlements to the issue, then the number of Shares over which that IPO Option is exercisable will be increased in the manner permitted by the Listing Rules applying at the time of the bonus issue.

The full terms of the IPO Options may be inspected during normal business hours at the registered offi ce of the Company or downloaded from Impedimed’s website at www.impedimed.com.

Underwriting Agreement

The Company and the Underwriters have entered into the Underwriting Agreement. The following is a summary of the material terms of the Underwriting Agreement.

Underwriting

The Company appoints the Underwriters to:

arrange and manage the Public Offer and the Redemption Issue; and
underwrite the subscription of 12,200,000 million shares pursuant to the Public Offer.

The Underwriters obligations to underwrite the subscription of shares pursuant to the Public Offer are several obligations to be borne by the Underwriters in equal proportions.

The Underwriters may appoint sub-underwriters to underwrite all or any of the underwritten Shares on terms consistent with the Underwriting Agreement.

Payments

The Company must pay to the Underwriters:

an underwriting fee of 4% of the funds raised pursuant to the underwritten component of the Public Offer;
a management fee of 1% of the funds raised pursuant to the underwritten component of the Public Offer;
a management fee of 2% of the funds raised pursuant to the Redemption Issue;
a management fee of 1% of the funds raised pursuant to oversubscriptions for Shares;
a selling fee of 3% of the funds raised pursuant to oversubscriptions for Shares; and
a retainer of $30,000 per month at the end of each complete calendar month.

All fees stated are exclusive of GST.

In addition to the fees described above, the Company has agreed to pay the Underwriters for certain agreed costs and expenses incurred by the Underwriters in relation to the Offer.

Termination

An Underwriter may terminate its obligations under the Underwriting Agreement at any time by notice to the Company and the other underwriter if one or more of the events which are summarised below occurs:

the Company provides a certifi cate which is false, incomplete, inaccurate or otherwise misleading in a material respect;
any material adverse change occurs in the assets, liabilities, fi nancial position or operations, profi ts, loss or prospects of the Company or the Group (insofar as the change affects the overall position of the Company);
the Company undertakes or takes any steps to undertake a proposal contemplated under section 257A Corporations Act, or takes any steps to pass a resolution under section 260B Corporations Act without prior written consent of the Underwriters;
judgment for more than $50,000 is obtained against the Company or a related body corporate of the Company and is not set aside or satisfi ed within 10 business days;
any distress, attachment, execution or other competent process for an amount exceeding $50,000 is issued against the assets of the Company or a related body corporate of the Company and not challenged, set aside or satisfi ed within 10 business days;
a receiver or similar offi cial is appointed or steps are taken for such appointment over any signifi cant asset or undertaking of the Company or a related body corporate of the Company;
the Company or a related body corporate of the Company suspends payment of its debts generally, or the Company or a related body corporate of the Company is or becomes insolvent pursuant to the Corporations Act or is presumed to be insolvent under the Corporations Act;

102

the Company or a related body corporate of the Company enters into any agreement, composition or compromise with, or assignment for the benefi t of its creditors;
the Company or a related body corporate of the Company ceases or threatens to cease to carry on business;
an application or order is made or a resolution is passed for the winding up or dissolution of the Company or a related body corporate of the Company, and the winding up is not set aside within 10 business days excluding for the purpose of an amalgamation or reconstruction which is by the Underwriters’ prior written consent;
the ASX Health and Biotech Index or the S&P/ASX 200 Index is for two consecutive Business Days or more 10% or more below its level at the close of business on the last business day immediately before the date of the Underwriting Agreement;
ASX advises that listing of the Company or offi cial quotation of Shares will not be granted (upon the usual conditions);
a matter is omitted from the prospectus (having regard to sections 710, 711, 715A and 716 of the Corporations Act) or there is a statement in the prospectus that is or becomes misleading or deceptive;
in the Underwriters’ reasonable opinion there has been a signifi cant change affecting any matter included in the prospectus or a signifi cant new matter has arisen the inclusion in the prospectus of information which would have been required to be in the prospectus if the matter had arisen when the prospectus was prepared or a new circumstance as referred to in section 719(1) of the Corporations Act arises;
the Company withdraws the prospectus or the Public Offer or any person (other than the Underwriters) who consented to being named in the prospectus withdraws that consent;
the Due Diligence Report or any other information supplied by or on behalf of the Company to the Underwriters in relation to the Company or any related body corporate or the Public Offer is misleading or deceptive;
there is a signifi cant outbreak of hostilities (whether or not war has been declared) not presently existing, involving any of Australia, New Zealand, Japan, Indonesia, the United Kingdom or other member of the European Union, the United States of America or other member of the North Atlantic Treaty Organisation, the Peoples Republic of China or North Korea or a major act of terrorism is committed in one of these countries;
the Company repays any Application Money or gives Applicants rights to withdraw their Applications under section 724(2) of the Corporations Act;
the Company fails to lodge a supplementary or replacement prospectus in a form acceptable to the Underwriter in circumstances where the Underwriter reasonably believes that the Company is prohibited by section 728(1) of the Corporations Act from offering Shares under the Prospectus and in the opinion of the Underwriter it is exposed to potential liability under the Corporations Act (which opinion must be formed on reasonable grounds);
lodgement of the Prospectus does not occur on the specifi ed lodgement date or such other date agreed between the Underwriters and the Company except where the sole reason for failing to lodge is an act or omission of an Underwriter;
ASIC makes a fi nal stop order in relation to the Prospectus or gives notice of its intention to hold a hearing under section 739 of the Corporations Act;
ASIC makes an interim stop order in relation to the prospectus under section 739 of the Corporations Act;
any material contract of the Company is terminated or materially amended;
a change in senior management or the board of directors of the Company occurs without the prior written consent of the Underwriters;
any of the following occurs:
a Director of the Company is charged with an indictable offence;
a claim is threatened, made, notifi ed, commenced or escalated against the Company or any Director; or
any Director of the Company is disqualifi ed from managing a corporation under the Corporations Act;
any person gives a notice under Section 719 or Section 730 of the Corporations Act in relation to the prospectus with the effect that any Application must be returned to the relevant Applicant;

103

the Company (including its employees or consultants) or any Director of the Company infringes, or receives a notice or claim in relation to infringement, or there is any escalation of a prior notice or claim in relation to infringement, of any other party’s intellectual property rights (howsoever described);
a charge over all or any of the assets of the Company or any related body corporate is created or comes into existence without the prior written approval of the Underwriters;
the Company or a related body corporate of the Company passes or takes any steps to pass a resolution under section 260B of the Corporations Act without the prior written consent of the Underwriters;
the Company being prevented from issuing or transferring, as the case may be, the New Shares within the time required by the Listing Rules, by ASX, any statute, regulation or order of a court of competent jurisdiction or by any governmental or semi governmental agency or authority;
without the prior approval of the Underwriters a material public statement is made by the Company in relation to the Public Offer or the Prospectus;
the Prospectus or any aspect of the Public Offer does not comply with the Corporations Act, the Listing Rules or any other applicable law or regulation;
the Company being prohibited by section 728(1) of the Corporations Act from offering shares under the Prospectus lodges a supplementary or replacement prospectus in relation to the Offer;
the Takeovers Panel makes a declaration of unacceptable circumstances, or an application for such declaration is made to the Takeovers Panel (and not dismissed within 14 days or longer period agreed by the Underwriters), or ASIC commences, or gives notice of an intention to commence a prosecution or proceedings against the Company, a director or key employee of the Company, or a related body corporate*;
the Company or any related body corporate, Director or key employee of the Company is charged with a criminal offence*;
ASIC commences or announces its intention to commence an investigation or hearing under Part 3 of the ASIC Act 2001 in relation to the Offer, the prospectus or any supplementary prospectus*;
an application is made by ASIC for an order under section 1324B of the Corporations Act in relation to the Prospectus and that application has not been dismissed or withdrawn;
ASIC notifi es the Company of a material defi ciency in the Prospectus during the waiting period referred to in section 727(3) of the Corporations Act or extends that waiting period;
the Company is in default of any of the terms and conditions of the Underwriting Agreement including any warranty, representation or undertaking*;
the Company fails to comply with its Constitution, the Corporations Act or any other appropriate legislation of any requirement of ASIC or ASX*;
there is new legislation introduced, a public announcement of prospective legislation or policy or the adoption by ASX or ASIC or the Reserve Bank of Australia of any regulations or policy*;
there occurs any material change in fi nancial, economic or political conditions in Australia, Japan, the United Kingdom, the United States of America, the Peoples Republic of China or in securities trading or capital markets conditions generally in Australia*; or
the Constitution or any other Constituent document of the Company or any related body corporate is amended, or the Company or any related Body Corporate takes any steps to alter its capital structure in a manner not contemplated by the prospectus without the prior written consent of the Underwriters*.
If one of these events occurs, the Underwriters may not terminate unless in their reasonable opinion the event:
gives rise (or could reasonably be expected to give rise) to a potential liability of the Underwriter under the Corporations Act (which opinion must be formed on reasonable grounds);
results in (or could reasonably be expected to result in) a material reduction in the level or likely level of Applications after the date of the Underwriting Agreement; or
gives rise (or could reasonably be expected to give rise) to an actual material or, in the opinion of the Underwriter, potential material deterioration in the business, condition, fi nancial position or fi nancial prospects of the Company or any related body corporate of the Company (which opinion must be formed on reasonable grounds).

104

Representations and warranties in the Underwriting Agreement

The Company has provided certain customary representations and warranties to the Underwriters in relation to the prospectus, the Company and the Offer.

Company Indemnity

The Company has indemnifi ed the Underwriters, their offi cers, employees, advisers and related bodies corporate and the offi cers, employees and advisers of the related bodies corporate against any claim, action, demand, suit, proceeding, damages, losses, costs, expenses and liabilities incurred directly or indirectly as a result of or in connection with the Offer, this Prospectus, the Underwriting Agreement, and in certain other related circumstances.

The indemnity does not extend to and is not taken to be an indemnity against any losses that result from any fraud, wilful misconduct, negligence or breach of contract by the indemnifi ed party.

Xitron acquisition

Pursuant to an agreement dated 5 July 2007, ImpediMed will acquire Xitron from that company’s current shareholders (Acquisition Agreement). The consideration for the acquisition is Shares. Set out below is a summary of the material terms of the Acquisition Agreement to acquire Xitron.

Consideration

Upon completion of the acquisition, which is expected to occur following lodgement of this prospectus with ASIC and no later than one month after completion of the Offer, ImpediMed must issue approximately 2,132,509 Shares. The number of Shares to be issued is subject to adjustment (up or down) for any change in Xitron’s working capital between the date of execution and the date of completion of the acquisition.

The Acquisition Agreement provides that the Xitron shareholders are entitled to receive up to an additional 3,153,847 Shares, contingent on certain milestones relating to the performance of Xitron being met:

Milestone 1: For the 12 month period ending 31 December 2007, if Xitron achieves sales (after certain adjustments) of US$1,600,000 or more and has achieved a breakeven or net profi t position, ImpediMed must issue a further 846,154 Shares. If Xitron achieves sales (after certain adjustments) of less than US$1,600,000 but US$1,250,000 or more, the number of Shares that ImpediMed must issue will be calculated by multiplying 846,154 by the percentage of actual revenue divided by target revenue. If Xitron does not achieve sales revenue (after certain adjustments) of at least US$1,250,000, Milestone 1 will not be satisfi ed and ImpediMed will not be required to issue any additional Shares in respect of it.

Milestone 2: For the 12 month period ending 30 June 2008, if Xitron achieves sales of US$3,500,000 or more, ImpediMed must issue 538,462 Shares.

Milestone 3: For the 12 month period ending 30 June 2009, if Xitron achieves sales of US$5,000,000 or more, ImpediMed must issue 769,231 Shares.

Milestone 4: For the 12 month period ending 30 June 2010, if Xitron achieves sales of US$6,500,000 or more, ImpediMed must issue 1,000,000 Shares.

The satisfaction, or failure to satisfy, a particular milestone does not affect the entitlement of Xitron shareholders to be issued Shares if a subsequent milestone is achieved. Based on Xitron’s current performance, ImpediMed presently considers it likely that the fi rst milestone will be achieved.

Obligations

Completion of the Acquisition Agreement is subject to a number of conditions including that no conditions exist, or events have occurred, which would have a material adverse effect on Xitron, its business, assets or properties.

ImpediMed is not presently aware of any reason why completion will not occur.

Termination

The Acquisition Agreement may be terminated by either party prior to completion in certain circumstances including if the acquisition has not been completed by 30 November 2007.

Either party may also terminate the Acquisition Agreement if the other has failed to comply with its obligations under the Acquisition Agreement, which has not been remedied after written notice of the breach has been given by the other party.

105

Representations:

The parties have made customary representations and warranties regarding their business, operations and fi nancial status including representations and warranties regarding intellectual property (ownership, non-infringement etc), and compliance with regulations and laws.

Fresenius licence agreement amendment

On 26 March 2001, Xitron and Fresenius entered into a licence agreement (Licence Agreement) pursuant to which Xitron agreed to license certain owned technologies to Fresenius. On 5 July 2007, the Licence Agreement was amended by the parties as described below. The execution of this amendment (Amendment) satisfi es a condition precedent to the Company’s obligation to complete its acquisition of Xitron.

The licenced technologies covered by the Licence Agreement relate to bioelectric impedance analysis covered by Xitron’s patented digital signal processing and hydra bioimpedance device technology (Licenced Technology).

Pursuant to the Amendment:

Fresenius retains exclusive worldwide rights in the renal, dialysis and extracorporeal therapy medical fi elds; and
Xitron agreed to pay Fresenius US$1,000,000 for the return of all right, title and interest to use the Licenced Technology in other medical fi elds. The payment must be made by Xitron by no later than 15 November 2007 or as otherwise agreed by the parties.

The revision of the licence contemplated by the Amendment becomes effective upon Fresenius’ receipt of the payment described above.

Deeds of insurance, indemnity and access

The Company has entered into deeds of insurance, indemnity and access with certain Directors and proposes to enter into revised deeds with each of the Directors shortly after lodgement of this prospectus.

Under each deed, the Company will undertake to:

maintain offi cers’ insurance cover in favour of the Director whilst an offi cer and for seven years after the Director has ceased to be an offi cer of the Company;
indemnify each Director in certain circumstances, subject to the Corporations Act; and
maintain a complete set of the Company’s board papers and to make them available to the Director whilst an offi cer and for seven years after the Director has ceased to be an offi cer.

13.2 OTHER CONTRACTUAL ARRANGEMENTS

Cross License

On 7 July 2006 the Company and Impedance Cardiology Systems, Inc (ICS) entered into an asset purchase agreement under which the Company sold certain assets to ICS. As part of that transaction, the Company and ICS also entered into a cross license agreement (Cross Licence) dated 7 July 2006, which governs the ongoing relationship between the Company and ICS.

Pursuant to the Cross Licence, the Company and ICS each granted to the other:

an exclusive, fi eld-limited, royalty-free licence of such of its patent rights and know-how (existing as at the effective date of the Cross Licence) as is necessary or useful for the development, manufacture or commercialisation of products in the fi eld of the other party (as described below);
a non-exclusive, fi eld-limited, royalty-free licence of such of its patent rights and know-how necessary or useful for the development, manufacture or commercialisation of products in the fi eld of the other party that claim inventions made by the granting party or are generated by the granting party during the fi rst fi ve years of the term of the Cross Licence. This licence may be converted to an exclusive royalty-free licence at the licensee’s election, subject to the reimbursement of a proportion of the licensing party’s costs of developing or acquiring the patents or know-how; and
a fi rst right of negotiation to obtain a licence of such of the other party’s patents or know-how as is considered necessary or useful for the development, manufacture or commercialisation of products in the requesting party’s fi eld that claim inventions made or generated by the other party during years six to ten of the Cross Licence term, on commercially reasonable terms to be agreed.

106

The licences granted by the Company to ICS are limited to the fi eld of bioimpedance analysis in connection with the measurement of one or more physiological parameters of the cardiovascular and/or pulmonary systems in humans and other animals.

The licences granted by ICS to the Company are limited to the fi eld of bioimpedance analysis in connection with the measurement and/ or detection of body composition, body hydration, peripheral oedema, cancer, and glucose levels in humans and other animals.

For the fi rst fi ve years of the term of the Cross Licence neither party is entitled to sell, promote, or otherwise commercialise products for use in the other party’s fi eld.

The Company also has a time-limited right of fi rst negotiation to obtain an exclusive distribution right or a supply arrangement with respect to products or technology developed by ICS that are useful for monitoring renal dialysis patients. If an agreement between the parties cannot be reached with respect to such distribution or supply arrangement, ICS, at the Company’s request, must grant to the Company a royalty-bearing, exclusive licence of ICS’s technology to develop and commercialise products for monitoring renal dialysis patients on commercially reasonable terms to be agreed.

The Cross Licence is perpetual, although if either party materially breaches the terms of the Cross Licence, subject to a 60 day cure period, the elective rights described above of the breaching party will terminate.

Technology Transfer Agreement

As part of the ICS sale transaction, the Company and ICS also entered into a technology transfer and services agreement (Technology Transfer Agreement) dated 7 July 2006 which governs the ongoing relationship between the Company and ICS.

Pursuant to the Technology Transfer Agreement:

the Company agreed to transfer to ICS certain information, documents and materials relating to ICS’s business; and
each party agreed to transfer to the other certain future technology that is licensed to the other party under the Cross Licence.

In addition, until 7 July 2008 the Company must provide ICS with use of part of the Company’s facilities, subject to ICS paying the Company a rent in proportion to the number of ICS personnel using the facility. During this period the Company must also provide ICS with:

various information, technology, telecommunications, fi nancial, human resources, insurance, procurement and other administrative and transition assistance services; and
consulting services with respect to the research and development activities of ICS in the Company’s fi eld under the Cross Licence.

Each party must reimburse the other for services provided by that other party under the agreement. The agreement is for an

IP infringement insurance

The Company has obtained a policy of intellectual property infringement liability insurance. The policy will respond to the Company’s (and its specifi ed subsidiaries’) liability for legal expenses incurred in defending proceedings relating to an alleged infringement of another person’s intellectual property rights. The policy will also respond to the Company’s (and its specifi ed subsidiaries’) liability to pay damages as a result of defending such a claim or proceedings. The policy is subject to certain exclusions and limitations. In particular, proceedings other than in a Court are excluded, as are proceedings between a licensor and licensee. Liability arising from the deliberate disregard of intellectual property rights is also excluded, as are claims for loss of profi t resulting from an alleged infringement. The limit of indemnity is A$2 million in total, and there is an excess of A$50,000 per claim (but the excess is A$250,000 for claims brought in the United States or Canada, and A$250,000 for claims brought by Xitron or Fresenius).

Patent Assignment Deed

ImpediMed is a party to a Deed of Assignment of Intellectual Property (Patent Assignment Deed) with UATC Pty Ltd (UATC), Qutbluebox Pty Ltd (Qutbluebox) and Uniquest Pty Ltd (Uniquest).

The Patent Assignment Deed relates to intellectual property rights identifi ed as Patent Families 1 and 3 in the attached Patent Attorney report. In particular, the deed relates to the inventions described in Australian patent 769439 (“A Method and Device for Measuring Tissue Oedema”) (Family 1) and Australian patent application 2004903314 (“A Bioimpedence Method and Device for Indicating Tissue Oedema”) (Family 3), including those and any derivative patents, and developments to the inventions since the patents were fi led (the Family 1 & 3 IP).

Under the Patent Assignment Deed, UATC and Qutbluebox assign their respective interests in the Family 1 & 3 IP to ImpediMed. UATC and Qutbluebox also agree to provide to ImpediMed all of the scientifi c and patent prosecution records relating to the IP.

107

Each of UATC and Qutbluebox warrants that it is the owner of its respective interest in the Family 1 & 3 IP and that their respective interests are unencumbered. UATC and Qutbluebox also warrant that the Family 1 & 3 IP does not infringe any third party rights and is not subject to any litigation, claim or demand. Those warranties are made to the best of those parties’ actual knowledge, and subject to anything that might be discovered from patent database searches, and subject to any other research activity in the same fi eld of which they are unaware.

In return for the assignment, ImpediMed agrees to pay the following amounts to UATC and Qutbluebox (in equal shares):

0.75% of the sale price of all products* sold by ImpediMed or its related corporations after 1 January 2005;
35% of the consideration received by ImpediMed in any transaction in which the Family 1 & 3 IP is assigned or licensed (including third party license fees or royalties, but excluding consideration from the sale of all or a substantial part of ImpediMed’s assets); and
1% of the consideration from the sale of all or a substantial part of ImpediMed’s assets (except where ImpediMed agrees with UATC and Qutbluebox that the Patent Assignment Deed will be novated to the asset purchaser).
Product in this context means any product sold by ImpediMed in the course of its business, whether or not involving the Family 1 & 3 IP, but excludes products sold as a result of ImpediMed acquiring a new business.

ImpediMed also grants each of UATC, Qutbluebox (and, through them, UQ and QUT) a licence to use the Family 1 & 3 IP to conduct noncommercial research.

ImpediMed releases and indemnifi es both UATC and Qutbluebox, their offi cers, employees and agents, from any claim arising out of the exploitation and use of the Family 1 & 3 IP or any products derived from it.

13.3 ESCROW RESTRICTIONS

ASX mandatory escrow

ASX may, as a condition of granting ImpediMed’s application for offi cial quotation of the Shares, require that certain Share and option holders enter into a restriction agreement with the Company under which the holder’s right to dispose of or otherwise deal with some or all of their Shares or options is restricted for a specifi ed period. The restriction period can be up to 24 months from the date of quotation of the Shares on ASX. Based on preliminary discussions with ASX, the Company currently believes that the following holders will be required to enter into mandatory escrow agreements:

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Holder No. of Shares No. of options Shares escrowed until
Candlegrove Pty Ltd 16,331 - 24 months [2]
Cherrell Hirst 69,826 - 24 months [2]
Colin and Lynette Brown 6,364 - 24 months [2]
Greg Brown 3,123,324 1,747,673 [1] 24 months [2]
Klemzig Pty Ltd 86,791 - 24 months [2]
Mel Bridges 69,826 - 24 months [2]
Parma Corporation Pty Ltd 4,137,664 - 24 months [2]
Total 7,510,126 1,747,673
----- End of picture text -----

This includes the 1,000,000 options to be issued to Greg Brown under this prospectus (see sections 8.2 and 13.6).
From the date of quotation of Shares on ASX.

In addition to the mandatory escrow restrictions summarised above, ASX has advised that, as a condition of granting the relief summarised in section 13.12, each of the shareholders in Xitron will be required to enter into a mandatory escrow agreement in respect of all of the approximately 2,132,509 Shares to be issued to them on completion of the acquisition. These Shares will be subject to mandatory escrow restrictions for a period of 12 months from the date they are issued, or the date the mandatory escrow restrictions are entered into, whichever is the later. Any additional Shares issued to Xitron’s current shareholders pursuant to the acquisition agreement during this 12 month period will be subject to mandatory escrow for the balance of the period remaining on the date those Shares are issued.

The escrow restrictions imposed by ASX may differ from those outlined above. In particular, ASX may decide that more or less Shares should be subject to escrow or that additional holders be required to enter into mandatory escrow agreements.

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Voluntary escrow

In addition to the Shares that may be subject to mandatory ASX escrow as described above, some of ImpediMed’s shareholders as at the date of this prospectus have entered into voluntary escrow agreements with the Company pursuant to which they have agreed not to transfer effective ownership or control of any (or in some cases, some) of their Shares for a period of six months from the date of quotation of the Shares on ASX or 12 months from this date. The restrictions do not otherwise restrict the rights attaching to the Shares (including voting rights, dividend rights and the right to attend general meetings). The restrictions will not preclude the relevant shareholders from accepting a takeover offer where holders of at least 50% of the bid class securities (that are not subject to escrow) have accepted the offer. In the case of a takeover offer the restrictions will continue if the takeover bid does not become unconditional. The restricted Shares may also be transferred or cancelled as part of a merger by way of a scheme of arrangement or share buy-back.

The vendors of Xitron may be required to enter into similar voluntary escrow agreements in relation to the Shares issued to them under the acquisition agreement described in section 13.1. Roxanne Pty Ltd and Biophys Pty Ltd were each issued 1,260,870 Shares in connection with the acquisition by the Company of certain assets. They entered into voluntary escrow agreements with the Company on similar terms to the voluntary escrow agreements described above (other than the escrow period) in respect of a large proportion of these Shares. A combined total of 1,478,260 Shares held by Roxanne Pty Ltd and Biophys Pty Ltd remain subject to these restrictions. The restrictions attaching to these Shares will be progressively released after the date of this prospectus. The release of these Shares from escrow is currently dependent on the satisfaction of performance-based milestones.

Summary of mandatory and voluntary escrow

Set out in the table below is a summary of the mandatory and voluntary escrow restrictions that the Company presently anticipates will apply. As noted above, ASX has not formally determined which seed shareholders of ImpediMed will be required to enter into ASX mandatory escrow agreements, the number of shares that will be subject to those agreements or the period of the relevant escrow restrictions.

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Shareholder No. of escrowed % of issued Anticipated escrow period (from the date of quotation
Shares capital (post Offer of Shares on ASX)
and post Xitron 0-6 months 7-12 months 13-24 months
acquisition) [1]
Board and management [2] 8,819,487 11.1 8,819,487 8,819,487 7,510,126
Starfi sh Ventures 6,395,783 8.1 6,395,783 6,395,783 nil
Versant Ventures 4,832,081 6.1 4,832,081 4,832,081 nil
Other pre-Offer shareholders 13,126,947 16.5 13,126,947 1,833,092 nil
Subscribers under the Offer nil 0 nil nil nil
Xitron shareholders 2,132,509 2.7 2,132,509 2,132,509 nil
Total 35,306,807 44.5 35,306,807 24,012,952 7,510,126
----- End of picture text -----

This percentage does not take into account possible oversubscriptions and assumes no options are exercised.
This includes Shares held by entities controlled by Directors (other than Michael Panaccio), and Shares held by the parents of Greg Brown.
13.4 CHIEF EXECUTIVE OFFICER’S EMPLOYMENT AGREEMENT

The Company has entered into an executive employment agreement relating to the appointment of Greg Brown as the chief executive offi cer and managing director of the Company. Under the executive employment agreement, Mr Brown is entitled to:

a base salary of $415,500 per annum (with a base salary car sacrifi ce of $96,000) plus superannuation contributions; and
performance pay of up to $83,100 per annum based on the achievement of agreed performance milestones plus superannuation contributions.

Mr Brown’s salary may be reviewed annually by the Board. A review will not result in a decrease, but will not necessarily result in an increase in salary.

Mr Brown’s employment may be terminated by either party giving 12 months notice, or by the Company paying Mr Brown 12 months salary in lieu of notice. Further, the Company may terminate Mr Brown’s employment immediately if he:

becomes bankrupt or compounds with his creditors or any of them or assigns his estate for the benefi t of his creditors or any of them;
is convicted of any offence involving fraud or dishonesty or any other serious offence which is punishable by imprisonment (whether or not he is imprisoned); or
fails to remedy, to the reasonable satisfaction of the Board, a serious or persistent breach of the executive employment agreement within 21 days of receiving notice of such breach from the Board.

The executive employment agreement contains provisions to protect the Company’s confi dential information and intellectual property, and contains a prohibition on the solicitation of offi cers, employees, consultants and customers of the Group that operates during Mr Brown’s employment and for a period of 12 months thereafter.

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13.5 REMUNERATION OF KEY EXECUTIVES

To prosper ImpediMed must attract, motivate and retain highly skilled executives. To this end, the Group provides competitive rewards and links executive rewards to meeting pre-determined performance benchmarks.

The Board’s remuneration committee periodically reviews remuneration policies for the organisation, along with the remuneration for the chief executive offi cer. Salaries and performance are reviewed annually in February, with any changes to salary backdated to take effect from 1 January.

In addition to their base remuneration all executives are entitled to annual bonuses payable upon the achievement of individual performance objectives. The table below sets out the remuneration details of the Company’s key executives. The table does not include the value of options or Shares granted to executives. See section 13.6 for details of the options granted to executives and other staff of the Company.

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As at listing [1] Base Cash bonus Other Super Total cash Performance
remuneration remuneration [2] remuneration shares 2007 [3]
-
Greg Brown [4] A$319,500 A$83,100 A$96,000 A$44,874 A$543,474
Phillip Auckland A$159,000 A$48,750 A$36,000 A$21,938 A$265,688 100,000
Jack Butler US$187,100 US$46,775 US$9,168 US$9,355 US$252,398 100,000
Belinda Robinson A$115,000 A$35,000 A$25,000 A$15,750 A$190,750 50,000
Roger Render A$66,800 A$16,360 A$44,744 A$8,834 A$136,738 20,000
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The remuneration packages disclosed in this table are those approved for calendar year 2007 by the Board’s Remuneration Committee in February 2007. The implementation of the revised remuneration has been deferred subject to completion of the Offer. The Company will backpay increases to 1 January 2007, as is the normal practice when implementing rises for a calendar year.
The other remuneration includes vehicle benefi ts for Greg Brown, Phil Auckland, Belinda Robinson, and Roger Render; a living away from home allowance of A$29,744 for Roger Render, and health cover for Jack Butler.
This is the maximum number of Shares that may be issued to the named executives in respect of the 2007 calendar year under offers made under the Plan, which is summarised in section 13.7. No Shares have yet been issued under the Plan.
Details of Greg Brown’s current salary are summarised in section 13.4.

13.6 OPTIONS

ImpediMed has granted options over Shares to certain employees, executives and consultants to the Company and the Board has resolved to offer an additional 1,000,000 options to Greg Brown under this prospectus. All of these options are summarised in the table below.

Each option entitles the holder to subscribe for one Share at a specifi ed exercise price. The options vest proportionally as follows: one third of the options (fi rst tranche) become exercisable on the fi rst vesting date, a further one third (second tranche) become exercisable one year after the fi rst vesting date and the fi nal third (third tranche) become exercisable two years after the fi rst vesting date. In some cases the fi rst vesting date was concurrent with the grant date, while in other cases the fi rst vesting date was on the fi rst anniversary of the grant date. No option can be exercised until it has vested.

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As at No. granted No. Vested Grant date First Vesting Exercise price Expiry date
31 August 2007 Date per Share ($) (fi rst tranche) [1]
Senior management
Greg Brown 747,673 747,673 Nov 04 Nov 04 0.675 Dec 2011
500,000 0 Oct 07 Oct 07 [2] 0.91 Oct 2012
500,000 0 Oct 07 Oct 07 [2] 1.03 Oct 2012
Phillip Auckland 50,000 50,000 Jul 04 Jul 05 0.87 Jul 2010
100,000 66,666 Oct 04 Oct 05 0.87 Oct 2010
200,000 66,667 May 07 May 07 0.716 May 2012
Jack Butler 150,000 100,000 Nov 04 Nov 05 0.87 Nov 2010
150,000 50,000 May 07 May 07 0.716 May 2012
Belinda 50,000 50,000 Jul 04 Jul 05 0.87 Jul 2010
Robinson
40,000 13,333 May 07 May 07 0.716 May 2012
Roger Render 100,000 33,333 May 07 May 07 0.716 May 2012
Other employees and consultants
160,000 160,000 Jul 04 Jul 05 0.87 Jul 2010
50,000 33,334 Oct 04 Oct 05 0.87 Oct 2010
100,000 66,666 Nov 04 Nov 05 0.87 Nov 2010
150,000 100,000 Dec 04 Dec 05 0.87 Dec 2010
290,000 96,666 May 07 May 07 0.716 May 2012
Total 3,337,673 [3] 1,634,338
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The expiry date of the second tranche is one year after, and the expiry date of the third tranche is two years after, the date of expiry of the fi rst tranche.
One third of the options issued to Greg Brown under this prospectus will vest when the options are issued.
An additional 35,000 options granted to employees have been forfeited.

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All of the options have been granted either under the Option Plan or on the same terms as the terms of the Option Plan. The options offered to Greg Brown under this prospectus are offered on the same terms as options issued under the Option Plan.

The Company must not issue any options under the Option Plan if the aggregate of the number of Shares issued during the preceding fi ve years under any Company employee incentive scheme (but disregarding excluded Shares) and the number of Shares which would be issued if each outstanding option issued under an employee incentive plan were exercised would exceed 5% of the total number of Shares on issue at the time of the proposed offer. Excluded Shares include Shares issued under offers which do not require disclosure under section 708 of the Corporations Act.

Options may be offered under the Option Plan on terms, including exercise price, exercise period and any exercise conditions determined by the Board.

Options issued under the Option Plan will not be quoted on ASX. Shares issued on the exercise of the options will be quoted on ASX, but may be subject to a holding lock which will prevent Shares issued on the exercise of options being transferred for a period determined by the Company.

The terms of options issued under the Option Plan are subject to adjustment in the event of a rights issue, bonus issue or reconstruction in accordance with the Listing Rules. Holders may only participate in new issues of shares following exercise of the options.

Options issued under the Option Plan will vest (whether or not the exercise period has commenced) in the event of a takeover or scheme of arrangement which results in a change in control of the Company.

Options issued under the Option Plan which have not vested lapse in the circumstances described in the Option Plan, including where the exercise period expires or where the option holder dies, becomes permanently disabled or is no longer employed by the Group. Options which have vested at those times may be exercised within the time limits set out in the Option Plan.

The Option Plan is administered by the Board and may be amended or terminated at any time by the Board. Any amendment or termination will not prejudice the existing rights of participants in the plan.

13.7 PERFORMANCE SHARE PLAN

The Company has established the Plan to assist in the attraction, motivation and retention of employees.

The Board may at any time invite an employee of the Group to participate in the Plan, by specifying the number of Shares being made available to the employee, the issue price payable (if any) and whether salary sacrifi ce is available, the dates on which the Shares will be issued if the offer is accepted, the acceptance date, performance conditions, details of restrictions on disposal of the Shares and any other specifi c terms and conditions of issue of the Shares. The Board has the discretion to determine the specifi c terms and conditions relating to each offer. Directors who are not employees are not eligible to participate in the Plan.

No Shares have yet been issued under the Plan. The Board has however resolved to issue up to 469,500 Shares under the Plan to specifi ed employees in respect of the 2007 calendar year.

An employee who has been provisionally allocated Shares under the Plan for calendar year 2007 will be entitled to one third of the total number of Shares allocated to them if they are employed by the Company on 31 December 2007 and have satisfi ed applicable performance criteria. A further one third of the allocated Shares will vest if the employee is employed by the Company on 31 December 2008, and a further one third if they remain employed on 31 December 2009, and in respect of each of these years, they have also satisfi ed applicable performance criteria.

The Company must not issue any Shares under the Plan if the aggregate of the number of Shares issued during the preceding fi ve years under the Plan or any other Company employee incentive scheme (but disregarding excluded Shares) and the number of Shares which would be issued if each outstanding option issued under an employee incentive plan were exercised would exceed 5% of the total number of Shares on issue at the time of the proposed offer. Excluded Shares include Shares issued to people outside Australia and Shares issued under offers which do not require disclosure under section 708 of the Corporations Act.

111

Shares issued under the Plan will rank equally with all other Shares.

The Board intends to issue Shares under the Plan only on the satisfaction of performance conditions.

Shares acquired under the Plan will be subject to a holding lock to prevent the Shares being sold or transferred during the restriction period.

The restriction period is the period commencing on the date the Shares are acquired by the employee and ending on the earlier of:

the employee ceasing to be an employee of the Company;
the 10 year anniversary of the acquisition date; or
the Board determining that the restrictions will cease to apply, for example, as a result of a change of control event,

subject to any minimum restriction period stated in the offer of the Shares.

During that time, the Shares are subject to disposal restrictions such that the employee cannot sell or grant a security interest over or otherwise dispose of the Shares.

Where the Company is subject to a change of control event, notwithstanding the performance conditions have not been met, the Board may determine that all or a portion of the Shares vest or that disposal restrictions cease to apply. A change of control event is where a takeover bid, scheme of arrangement or other offer is made to acquire substantially all of the Shares or a person, or a group of associated persons, obtains a relevant interest in suffi cient Shares to give it or them the ability, in general meeting, to replace all or a majority of the Board in circumstances where such ability was not already held by a person associated with such group of associated persons.

The Board may suspend or terminate the operation of the Plan at any time by resolution of the Board. Any suspension or termination will not prejudice the existing rights of participants in the Plan.

13.8 CONSENTS AND DISCLAIMERS OF RESPONSIBILITY

None of the parties referred to below has made any statement that is included in this prospectus or any statement on which a statement made in this prospectus is based, other than as specifi ed below. Each of those parties, to the maximum extent permitted by law, expressly disclaims, and takes no responsibility for any part of, this prospectus, other than the reference to its name and a statement included in this prospectus with the consent of that party, as specifi ed below.

ABN AMRO Morgans Corporate Limited has given, and has not withdrawn before this prospectus was lodged with ASIC, its written consent to be named as underwriter to the underwritten component of the Public Offer in the form and context in which it is named.

Emerging Growth Capital Pty Limited has given, and has not withdrawn before this prospectus was lodged with ASIC, its written consent to be named as underwriter to the underwritten component of the Public Offer in the form and context in which it is named.

Corrs Chambers Westgarth has given, and has not withdrawn before this prospectus was lodged with ASIC, its written consent to be named as lawyers to the Offer in the form and context in which it is named.

Ernst & Young has given, and has not withdrawn before this prospectus was lodged with ASIC, its written consent to be named as Independent Accountant in the form and context in which it is named and for the inclusion of the Independent Accountant’s report in section 11 in the form and context in which it is included.

Ernst & Young has given, and has not withdrawn before this prospectus was lodged with ASIC, its written consent to be named as auditors in the form and context in which it is named and to the inclusion of extracts from the audited accounts of ImpediMed and references its audit opinion in section 11 and section 8.5 in the form and context in which they are included.

Davies Collison Cave has given, and has not withdrawn before this prospectus was lodged with ASIC, its written consent to be named as patent attorney to the Company in the form and context in which it is named and for the inclusion of its report on patents in section 10 in the form and context in which it is included.

Link Market Services Limited has given, and has not withdrawn before this prospectus was lodged with ASIC, its written consent to be named as Share Registrar in the form and context in which it is named.

112

13.9 INTERESTS OF EXPERTS, ADVISERS AND STARFISH VENTURES

Except as set out below, no person named in this prospectus as having performed a function in a professional, advisory or other capacity in connection with the preparation or distribution of this prospectus, a promoter of the Offer or underwriter to the Public Offer or a fi nancial services licensee named in this prospectus as a fi nancial services licensee involved in the Offer:

holds, or has at any time during the last two years held, any interest in the formation or promotion of ImpediMed, or in any property proposed to be acquired by ImpediMed in connection with its formation or promotion of the Offer, or in the Offer itself; or
has been paid or agreed to be paid any amount, or received or agreed to receive any benefi t, for services provided in connection with the formation or promotion of ImpediMed, or the Offer.

ABN AMRO Morgans Corporate Limited is acting as underwriter to the Public Offer in respect of which it is entitled to receive the fees outlined in section 13.1.

Emerging Growth Capital Pty Limited is acting as underwriter to the Public Offer in respect of which it is entitled to receive the fees outlined in section 13.1.

Corrs Chambers Westgarth has acted as the legal adviser to ImpediMed in connection with the Offer. Corrs Chambers Westgarth is entitled to receive professional fees of approximately: $290,000 for work performed in connection with the prospectus, the Underwriting Agreement, corporate governance and escrow arrangements; $40,000 for work associated with the ASIC relief and ASX advice; and $15,000 in connection with the IPO Convertible Note investment. Further amounts may be paid to Corrs Chambers Westgarth in accordance with its normal time-based charges.

Ernst & Young has prepared the Independent Accountant’s report set out in section 11 and is entitled to receive approximately $100,000 in respect of this work.

Davies Collison Cave has prepared the report on patents in section 10 and is entitled to receive approximately $14,000 in respect of this work.

Link Market Services Limited acts as registrar to ImpediMed’s Share Registry and is entitled to receive approximately $14,000 in connection with the Offer.

Starfi sh Ventures has been an investor in the Company since June 2006. On completion of the Offer, it will hold 24,285,465 Shares and 2,763,200 IPO Options. It will also have a relevant interest in a total of 1,478,260 Shares held by Roxanne Pty Ltd and Biophys Pty Ltd (which are subject to escrow restrictions and in which Starfi sh Ventures will derive a relevant interest indirectly as a result of its holding in ImpediMed). At the date of this prospectus it has a relevant interest in the 20,000 S3 Convertible Notes held by Westscheme Pty Ltd (10,000) and Statewide Superannuation Pty Ltd (10,000) (see section 13.10 for further details) as a result of a power of attorney they have granted it, which will convert into 2,785,397 Shares each on completion of the Offer. Starfi sh Ventures is restricted by investment mandates from investing in the Company under the Public Offer. It has received approximately $119,370 in fees in relation to the issue of IPO Convertible Notes.

On completion of the Offer (assuming no oversubscriptions), Starfi sh Ventures, Starfi sh Technology Fund I, LP and Michael Panaccio will have voting power in the Company of 33.3% (32.4% following the acquisition of Xitron). Starfi sh Ventures proposes to terminate the power of attorney with Westscheme Pty Ltd and Statewide Superannuation Pty Ltd prior to the issue of Shares under the Prospectus. If it has not, (and assuming no oversubscriptions), Starfi sh Ventures, Starfi sh Technology Fund I, LP and Michael Panaccio will have voting power in the Company of 40.6% (39.5% following the acquisition of Xitron). If Starfi sh Ventures exercised all of its IPO Options (and none of the other holders of options did), its voting power in the Company would increase to 36.9% (35.9% following the acquisition of Xitron) (assuming the power of attorney from Westscheme Pty Ltd and Statewide Superannuation Pty Ltd is terminated) or 44.1% (42.9% following the acquisition of Xitron) if it is not terminated.

All of the amounts referred to in this section are exclusive of GST.

13.10 INTERESTS OF DIRECTORS

Except as set out below or elsewhere in this prospectus:

no Director or proposed Director holds, or has at any time during the past two years held, any interest in the formation or promotion of ImpediMed, or in any property proposed to be acquired by ImpediMed in connection with its formation or promotion of the Offer, or in the Offer itself; and
no one has paid or agreed to pay any amount, and no one has given or agreed to give any benefi t, to any Director or proposed Director:
to induce them to become, or qualify as, a Director; or

– for services provided by a Director or proposed Director in connection with the formation or promotion of ImpediMed, or the Offer.

113

Payments to Directors

Under the Constitution, the Directors are entitled to be paid the remuneration that is authorised by the Company in a general meeting, excluding remuneration of managing or executive Directors. As at the date of this prospectus, the maximum remuneration payable to all Directors, other than managing or executive Directors, is $600,000, as approved by shareholders at the annual general meeting on 16 October 2006. Current Directors’ fees are as follows:

Chairman $100,000 per annum plus 9% super
Audit Committee Chair $60,000 per annum plus 9% super
Remuneration Committee Chair $55,000 per annum plus 9% super • Other non-executive Directors $50,000 per annum plus 9% super

The chairman is the chair of the Board’s nomination committee and will not receive any additional fee for acting in this capacity. The remuneration of the Board has been set in accordance with the recommendations of external remuneration consultants engaged by the Board and is designed to bring the Company’s practices into line with those of other comparable ASX listed companies.

A Director is entitled to be reimbursed for all reasonable costs and expenses incurred when the Director is engaged on the business of the Company.

Interests in securities

The Directors have a relevant interest in securities issued by ImpediMed as set out in the table below. The table has been prepared on the basis that no Director acquires Shares under the Public Offer. Directors may apply for Shares (and IPO Options) under the Public Offer, and if they do so and are alloted Shares and IPO Options, their interests in the Company will differ from those set out in the table.

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As at the date of this prospectus As at the
Closing Date
Name No. of Shares No. of No. of S3 No. of IPO No. of No. of Shares
preference Convertible Convertible options over
shares Notes Notes Shares
Mel Bridges 4,235,000 [1] - 500 [2] - - 4,374,270
- -
Greg Brown 3,035,000 814,386 [3] 1,747,673 [4] 4,335,349
Martin Kriewaldt 41,148 [5] - 500 [5] - - 180,418
Michael Panaccio [6] 1,478,260 [7] 2,666,297 [8] 70,000 [9] 3,979,008 [10] - 31,334,515
Dr Cherrell Hirst - - 500 [11] - - 139,270
Jim Hazel 171,098 [12] - - - - 171,098
----- End of picture text -----

Interest is held by Parma Corporation Pty Ltd, a company controlled by Mel Bridges.
Mel Bridges, as trustee of the Bridges Family Superannuation Fund, was issued 500 S3 Convertible Notes with a face value of $100 on 27 October 2006. The S3 Convertible Notes held by Mel Bridges will be redeemed and he will be issued 139,270 Shares under this prospectus.
Greg Brown holds 814,386 preference shares. On the Closing Date these preference shares will convert automatically into 1,300,349 Shares.
This fi gure includes the 1,000,000 options offered to Greg Brown, under this prospectus.
Interest is held by Klemzig Pty Ltd, a company controlled by Martin Kriewaldt. Klemzig Pty Ltd was issued 500 S3 Convertible Notes with a face value of $100 on 27 October 2006. These S3 Convertible Notes will be redeemed and it will be issued 139,270 Shares under this prospectus.
Michael Panaccio is a director of, and controls, Starfi sh Ventures. Starfi sh Ventures, and therefore Michael Panaccio has a relevant interest in 2,666,297 preference shares, 50,000 S3 Convertible Notes, and IPO Convertible Notes with a face value of $3,979,008, all of which are benefi cially owned by Starfi sh Technology Fund I, LP (STFI). Starfi sh Ventures is the manager and a general partner of STFI.
Following the issue to Starfi sh Ventures of Shares under the prospectus it will be deemed, under the Corporations Act to have the same relevant interests in Shares that ImpediMed has, as it will have voting power of more than 20%. It will therefore have a relevant interest in the combined total of 1,478,260 shares held by Roxanne Pty Ltd and Biophys Pty Ltd which are subject to escrow agreements with the Company (see section 13.3).
On the Closing Date these preference shares will convert automatically into 4,832,081 Shares.
Starfi sh Ventures holds 50,000 S3 Convertible Notes. The S3 Convertible Notes held by Starfi sh Ventures will be redeemed and it will be issued 13,926,984 Shares under this prospectus. At the date of this prospectus Starfi sh Ventures has a relevant interest in 20,000 S3 Convertible Notes benefi cially owned by Westscheme Pty Ltd (10,000) and Statewide Superannuation Pty Ltd (10,000) as a result of a power of attorney they have granted it. As a result, Michael Panaccio has this relevant interest. The S3 Convertible Notes will be redeemed and each entity will be issued 2,785,395 Shares under this prospectus. Starfi sh Ventures proposes to terminate the power of attorney prior to the issue of Shares under the prospectus. If it does, Starfi sh Ventures, Starfi sh Technology Fund I, LP and Michael Panaccio will not have a relevant interest in these Shares.
Starfi sh Ventures, and therefore Michael Panaccio, has a relevant interest in 3,979,008 IPO Convertible Notes. These IPO Convertible Notes will be redeemed and 5,526,400 Shares and 2,763,200 IPO Options will be issued to STFI under this prospectus pursuant to the Redemption Issue.
Cherrell Hirst was issued 500 S3 Convertible Notes with a face value of $100 on 27 October 2006. These S3 Convertible Notes will be redeemed and she will be issued 139,270 Shares under this prospectus.
Interest is held by Candlegrove Pty Ltd, a company controlled by Jim Hazel.

Options

No Director, other than Greg Brown, holds options in the Company. For details of the options issued and proposed to be issued to Greg Brown, see section 13.6.

114

13.11 ASIC RELIEF

ASIC has granted relief from the takeover provisions of the Corporations Act in respect of the voluntary escrow agreements described in section 13.3 (other than those which may be entered into in respect of the Shares which may be issued to the Xitron vendors subject to the satisfaction of milestones and the existing agreements with Roxanne Pty Ltd amd Biophys Pty Ltd). The Company applied for this relief because the takeover provisions would otherwise apply as the Company is a party to those voluntary escrow agreements which give the Company the right to enforce the restrictions on the transfer of the shares which are subject to the agreements.

ASIC has also granted relief from the secondary trading provisions of the Corporations Act for Shares issued on the automatic conversion of preference shares on issue in the Company on the date of this prospectus.

13.12 ASX ADVICE

The Company has obtained from ASX in-principle advice that it is likely to grant a waiver of Listing Rule 7.1 to the extent necessary to permit the Company to issue Shares in connection with the acquisition of Xitron (in accordance with the Acquisition Agreement described in section 13.1) without seeking shareholder approval. As a result, the number of Shares issued in connection with that acquisition may be excluded from the calculation under that rule of the maximum number of Shares the Company may issue in a 12 month period without shareholder approval.

13.13 INSPECTION OF DOCUMENTS

During the Offer period copies of the following documents will be available for inspection, free of charge, during normal business hours at the registered offi ce of the Company or can be downloaded from ImpediMed’s website at www.impedimed.com:

the Constitution;
IPO Option terms;
Board charter;
charters of the nomination committee, audit and risk management committee and the remuneration committees of the Board;
ImpediMed code of conduct;
share trading policy;
continuous disclosure policy; and
risk management policy.

115

14 Glossary

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----- Start of picture text -----

$, A$ Currency of Australia
Actual Consolidated The actual consolidated income statement for ImpediMed for the year ended 30 June 2007, as set out in
Income Statement section 8.5
Actual and Pro Forma The actual consolidated balance sheet of ImpediMed as at 30 June 2007 and the pro forma consolidated
Consolidated Balance balance sheet of ImpediMed as at 30 June 2007, as set out in section 8.5
Sheets
AEST Australian Eastern Standard Time
AIFRS The Australian equivalents to International Financial Reporting Standards
AMA American Medical Association
Applicant A person who submits an Application
Application An application to subscribe for a specifi ed number of Shares (and one attaching IPO Option for every two Shares
applied for) under the Public Offer
Application Form The application form attached to this prospectus or the prospectus available electronically
Application Money The Offer Price multiplied by the number of Shares applied for in an Application
ASIC Australian Securities and Investments Commission
ASX ASX Limited or the stock market conducted by it, as the context requires
BIA Bioimpedance analysis, which is more fully explained in section 6.2
BIS Bioimpedance spectroscopy, which is more fully explained in section 6.2
Board The board of Directors
Boston Healthcare Boston Healthcare Associates, Inc
CE Means CE marking, a mandatory marking on certain products that indicates conformity with applicable European
health and safety requirements set out in directives of the European Union
CHESS Clearing House Electronic Subregister System
Closing Date The date the Offer closes, being 5.00pm AEST on Friday, 12 October 2007, unless varied by the Company
CMS Centres for Medicare and Medicaid Services, an agency of the United States Department of Health and
Human Services
Company or ImpediMed ImpediMed Limited ABN 65 089 705 144
Constitution The constitution of ImpediMed
Corporations Act Corporations Act 2001 (Cth)
Cross Licence The cross licence agreement between the Company and Impedance Cardiology Systems, Inc, the terms of which
are summarised in section 13.2
Directors The directors of ImpediMed
DEXA Dual energy x-ray absorptometry, a technique that uses two x-ray beams of differing energy to measure
bone and fat density
EDN European Diagnostic Network, a distributor of ImpediMed products in Europe
Exercise Price The exercise price of an IPO Option, being $0.72
Expiry Date The date which is fi ve years from the date the Company is admitted to the offi cial list of ASX
FDA Food and Drug Administration, an agency of the United States Department of Health and Human Services
Financial Information The Actual and Pro Forma Consolidated Balance Sheets and the Restated and Actual Consolidated
Income Statements, and accompanying notes
Fresenius Fresenius Medical Care, Inc, the world’s largest dialysis company and a strategic partner of Xitron
Group ImpediMed and each of its subsidiaries
GST Goods and services tax
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116

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Health Care Provider A trained medical or health care professional including but not limited to doctors, nurses, naturopaths
and therapists
Independent Accountant Ernst & Young, who has prepared the report set out in section 11
IPO Convertible Notes Convertible notes issued in September 2007 with a total face value of $8,208,000, that will convert into Shares
and IPO Options (which will be issued under the Redemption Issue) on the allotment of the Shares and IPO
Options under the Public Offer
IPO Option An option to subscribe for one Share that is offered and issued under the Prospectus, the terms and conditions
of which are summarised in section 13.1
Listing Rules The listing rules of ASX
NCI The National Cancer Institute of the United States, part of the NIH
NIH The National Institutes of Health, an agency of the United States Department of Health and Human Services,
which is responsible for conducting and supporting medical research
Offer The offer of Shares and IPO Options pursuant to the Public Offer and the Redemption Issue
Offer Price $0.72 per Share
Option Plan The option plan described in section 13.6
Patent Attorney Davies Collison Cave, who has prepared the report set out in section 10
Plan The performance share plan described in section 13.7
PMA A pre-market approval class 3 granted by the FDA that is more fully described in section 5.4
Public Offer The fully underwritten offer to the public of 12,200,000 Shares (with 6,100,000 attaching IPO Options) and the
non-underwritten offer of a further 1,400,000 Shares (with 700,000 attaching IPO Options) in oversubscriptions
Redemption Issue The issue of 11,400,000 Shares and 5,700,000 IPO Options to the holders of IPO Convertible Notes under this
prospectus
Restated and Actual The Restated Consolidated Income Statements and the Actual Consolidated Income Statement
Consolidated Income
Statements
Restated Consolidated The restated consolidated income statements for ImpediMed for the fi nancial years ended 30 June 2005 and
Income Statements 30 June 2006, as set out in section 8.5
S3 Convertible Notes Convertible notes issued in October 2006 with a total face value of $7,150,000, that will convert into Shares on
allotment of Shares under the Public Offer
Share A fully paid ordinary share in ImpediMed
Share Registry Link Market Services Limited
Starfi sh Ventures Starfi sh Ventures Pty Ltd, the manager and general partner of Starfi sh Technology Fund I, L.P. ARBN 112 405 044,
a major venture investor in ImpediMed
Technology Transfer The technology transfer agreement between the Company and Impedance Cardiology Systems, Inc, the terms of
Agreement which are summarised in section 13.2
TGA Therapeutic Goods Administration, an agency of the Commonwealth Department of Health and Ageing
Underwriters ABN AMRO Morgans Corporate Limited ACN 010 539 607 and Emerging Growth Capital Pty Ltd ACN 093 677 180
Underwriting Agreement The underwriting agreement between the Underwriters and the Company, the terms of which are summarised in
section 13.1
US$ Currency of the United States
Versant Ventures Versant Venture Capital III, L.P. and Versant Side Fund III, L.P., collectively an important United States based
venture investor in ImpediMed
Vodder The Dr. Vodder School - North America, a distributor of ImpediMed products in North America
Xitron Xitron Technologies, Inc, a company that ImpediMed has agreed to acquire and which is more fully described in
section 6.5
----- End of picture text -----

117

15 Directors’ statement

Each Director has given, and not withdrawn as at the date of this prospectus, their consent to the lodgement of this prospectus with ASIC. This prospectus is signed by Greg Brown, Chief Executive Offi cer and Managing Director of ImpediMed.

Greg Brown

Chief Executive Offi cer and Managing Director ImpediMed Limited

118

Notes

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119

Notes

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120

Notes

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Broker Code

Adviser Code

Pin cheque(s) here (do not staple)

ABN 65 089 705 144

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Public Offer Application Form

This is an Application Form for Shares (and attaching IPO Options), which are to be issued by ImpediMed Limited pursuant to the Public Offer on the terms set out in the prospectus dated 11 September 2007. You may apply for a minimum of 3,000 Shares and multiples of 500 Shares thereafter. For every two Shares issued to an Applicant, they will be automatically issued with one IPO Option. You do not need to separately apply for IPO Options or specify in this Application Form the number of IPO Options you are applying for.

This Application Form and your cheque or bank draft must be received by 5:00pm (AEST) on Friday, 12 October 2007 (or Wednesday,

10 October 2007 for broker firm Applicants).

Shares applied for	Shares applied for	Shares applied for	Shares applied for			Price per Share				Application Money	Application Money
A	,		,		at	A$0.72		B	A$	,	,	.
(minimum		3,000, thereafter		in multiples of	500)
PLEASE COMPLETE YOUR DETAILS BELOW(refer overleaf for correct forms								of registrable names)				+
Applicant
Surname/Company name
C
Title			First name				Middle name
Joint Applicant			#2
Surname
Title			First name				Middle name
Designated account e.g. (or Joint Applicant #3)
	TFN/ABN/Exemption code
	First Applicant					Joint Applicant #2				Joint Applicant #3
D
	TFN/ABN	type	– if NOT an individual, please mark the appropriate box				Company			Partnership	Trust	Super Fund

PLEASE COMPLETE ADDRESS DETAILS

PO Box/RMB/Locked Bag/Care of (c/-)/Property name/Building name (if applicable)

E

Unit number/Level	Street number	Street name
Suburb/City or Town			State	Postcode
Email address (only for purpose of electronic communication of shareholder information)

CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here)

F X

Please note: that if you supply a CHESS HIN but the name and address details on your Application Form do not correspond exactly with the registration details held at CHESS, your Application will be deemed to be made without the CHESS HIN and any Shares issued pursuant to the Public Offer will be held on the issuer sponsored sub-register.

Telephone number where you can be contacted during business hours Contact name (PRINT)

G ( )

Cheques or bank drafts should be made payable to “ImpediMed Limited Share Application Account” in Australian currency and crossed “Not Negotiable”.

H

Cheque or bank draft number	BSB	-	Account number

I/we declare that this Application Form has been completed in accordance with the declaration, and pursuant to the agreement, I on the reverse of this form. NO SIGNATURE IS REQUIRED.

LODGEMENT INSTRUCTIONS You must return your application to one of the addresses listed overleaf so it is received before 5:00pm (AEST) on Friday, 12 October 2007 (or Wednesday, 10 October 2007 for broker firm Applicants).

IDM IPO001

Your Guide to the Application Form

IMPORTANT NOTICE

This is an Application Form for Shares (and attaching IPO Options) which are to be issued by ImpediMed Limited pursuant to the Public Offer on the terms set out in the prospectus dated 11 September 2007. The prospectus contains further details concerning, and important information about investing in, Shares and IPO Options. You should read the prospectus before submitting an Application. The prospectus will expire on the allotment of Shares and IPO Options to Applicants under the Offer (expected to occur on 19 October 2007) but no later than 13 months after 11 September 2007. While the prospectus is current, any person who receives the prospectus electronically will, on request, be sent a paper copy of the prospectus with Application Forms attached, and any supplementary document, free of charge.

The Australian Securities and Investment Commission requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant prospectus. This Application Form is included in the prospectus.

COMPLETING THE APPLICATION FORM

Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form.

  - **F**

A Insert the number of Shares you wish to apply for. The Application must be for a minimum of 3,000 Shares and thereafter in multiples of 500. You may be issued
all of the Shares applied for or a lesser number. For every two Shares you are issued you will be issued with one IPO Option.You do not need to seperately apply for IPO Options or specify in this Application Form the number of IPO Options you are applying for.
G
H
B Insert the relevant amount of Application Money. To calculate your Application Money, multiply the number of Shares applied for by the Offer Price ($0.72). Amounts should be in Australian dollars. Please make sure your cheque or bank draft equals this amount.
C Write the full name you wish to appear on the register of members. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title.
D Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of I TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, ImpediMed will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments.
E Please enter your postal address for all correspondence. All communications to you from ImpediMed and the Share Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.
If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. If the name or address recorded on CHESS for this HIN is different to the details given on this form, your Shares will be issued to ImpediMed’s issuer sponsored subregister.
Please enter a telephone number (including, if applicable, the area code) and a contact name in case we need to contact you in relation to your Application.
Please complete the details of your cheque or bank draft in this section.
Make your cheque or bank draft payable to “ImpediMed Limited Share Application Account” in Australian currency and cross it “Not Negotiable”. Your cheque or bank draft must be drawn on an Australian bank. Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your Application being rejected. Pin (do not staple) your cheque or bank draft to the Application Form where indicated.

If you receive a firm allocation of Shares from your broker make your cheque payable to your Broker in accordance with their instructions.

The Applicant(s) declare(s) that, before completing the Application Form, they have read the prospectus and that all details and statements made in the Application Form are complete and accurate. The Applicant(s) agree(s) that this Application is for Shares and IPO Options upon and subject to the terms of the prospectus, agree(s) to take such number of Shares equal to or less than the number of Shares indicated in Box A (and the number of IPO Options referable to those Shares) as may be allotted to the Applicant(s) pursuant to the prospectus, and agree(s) to be bound by the constitution of ImpediMed.

LODGEMENT INSTRUCTIONS

This Application Form and your cheque or bank draft must be mailed or delivered so that it is received before 5:00pm (AEST) on Friday, 12 October 2007 (or Wednesday, 10 October 2007 for broker firm Applicants) at:

10 October 2007 for broker firm Applicants)	at:
Post
ImpediMed Share Offer	OR	ImpediMed Share Offer	ImpediMed Share Offer
C/- Link Market Services Limited		C/- ABN AMRO Morgans Corporate Limited	C/- Emerging Growth Capital Pty Ltd
Locked Bag A14		GPO Box 202	PO Box R417
Sydney South NSW 1235		Brisbane QLD 4001	Royal Exchange NSW 1225
OR
Delivery
ImpediMed Share Offer	OR	ImpediMed Share Offer	ImpediMed Share Offer
C/- Link Market Services Limited		C/- ABN AMRO Morgans Corporate Limited	C/- Emerging Growth Capital Pty Ltd
Level 12 680 George Street		Level 29 Riverside Centre	Level 3 1 Castlereagh Street
Sydney NSW 2000		123 Eagle Street	Sydney NSW 2000
		Brisbane QLD 4001

Link Market Services Limited advises that Chapter 2C of the Corporations Act 2001 requires information about you as a shareholder (including your name, address and details of the shares you hold) to be included in the public register of the entity in which you hold shares. Information is collected to administer your shareholding and if some or all of the information is not collected then it might not be possible to administer your shareholding. Your personal information may be disclosed to the entity in which you hold shares. You can obtain access to your personal information by contacting us at the address or telephone number shown on this form. Our privacy policy is available on our website (www.linkmarketservices.com.au).

CORRECT FORMS OF REGISTRABLE NAMES

Note that ONLY legal entities are allowed to hold Shares. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below.

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual Use given names in full, not initials	Mrs Katherine Clare Edwards	K C Edwards
Company Use Company’s full title, not abbreviations	Liz Biz Pty Ltd	Liz Biz P/L or Liz Biz Co.
Joint Holdings Use full and complete names	Mr Peter Paul Tranche & Ms Mary Orlando Tranche	Peter Paul & Mary Tranche
Trusts Use the trustee(s) personal name(s)	Mrs Alessandra Herbert Smith	Alessandra Smith Family Trust
Deceased Estates Use the executor(s) personal name(s)	Ms Sophia Garnet Post & Mr Alexander Traverse Post	Estate of late Harold Post or Harold Post Deceased
Minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation	Mrs Sally Hamilton	Master Henry Hamilton
Partnerships Use the partners’ personal names	Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith	Fred Smith & Son
Long Names	Mr Hugh Adrian John Smith-Jones	Mr Hugh A J Smith Jones
Clubs/Unincorporated Bodies/Business Names Use of�ce bearer(s) personal name(s)	Mr Alistair Edward Lilley	Vintage Wine Club
Superannuation Funds Use the name of the trustee of the fund	XYZ Pty Ltd	XYZ Pty Ltd Superannuation Fund

Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

Broker Code

Adviser Code

Pin cheque(s) here (do not staple)

ABN 65 089 705 144

==> picture [82 x 54] intentionally omitted <==

ImpediMed Limited

Public Offer Application Form

This Application Form and your cheque or bank draft must be received by 5:00pm (AEST) on Friday, 12 October 2007 (or Wednesday,

10 October 2007 for broker firm Applicants).

Shares applied for	Shares applied for	Shares applied for	Shares applied for			Price per Share				Application Money	Application Money
A	,		,		at	A$0.72		B	A$	,	,	.
(minimum		3,000, thereafter		in multiples of	500)
PLEASE COMPLETE YOUR DETAILS BELOW(refer overleaf for correct forms								of registrable names)				+
Applicant
Surname/Company name
C
Title			First name				Middle name
Joint Applicant			#2
Surname
Title			First name				Middle name
Designated account e.g. (or Joint Applicant #3)
	TFN/ABN/Exemption code
	First Applicant					Joint Applicant #2				Joint Applicant #3
D
	TFN/ABN	type	– if NOT an individual, please mark the appropriate box				Company			Partnership	Trust	Super Fund

PLEASE COMPLETE ADDRESS DETAILS

PO Box/RMB/Locked Bag/Care of (c/-)/Property name/Building name (if applicable)

E

Unit number/Level	Street number	Street name
Suburb/City or Town			State	Postcode
Email address (only for purpose of electronic communication of shareholder information)

CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here)

F X

Telephone number where you can be contacted during business hours Contact name (PRINT)

G ( )

Cheques or bank drafts should be made payable to “ImpediMed Limited Share Application Account” in Australian currency and crossed “Not Negotiable”.

H

Cheque or bank draft number	BSB	-	Account number

I/we declare that this Application Form has been completed in accordance with the declaration, and pursuant to the agreement, I on the reverse of this form. NO SIGNATURE IS REQUIRED.

IDM IPO001

Your Guide to the Application Form

IMPORTANT NOTICE

COMPLETING THE APPLICATION FORM

Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form.

  - **F**

A Insert the number of Shares you wish to apply for. The Application must be for a minimum of 3,000 Shares and thereafter in multiples of 500. You may be issued
all of the Shares applied for or a lesser number. For every two Shares you are issued you will be issued with one IPO Option.You do not need to seperately apply for IPO Options or specify in this Application Form the number of IPO Options you are applying for.
G
H
B Insert the relevant amount of Application Money. To calculate your Application Money, multiply the number of Shares applied for by the Offer Price ($0.72). Amounts should be in Australian dollars. Please make sure your cheque or bank draft equals this amount.
C Write the full name you wish to appear on the register of members. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title.
D Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of I TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, ImpediMed will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments.
E Please enter your postal address for all correspondence. All communications to you from ImpediMed and the Share Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered.
If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. If the name or address recorded on CHESS for this HIN is different to the details given on this form, your Shares will be issued to ImpediMed’s issuer sponsored subregister.
Please enter a telephone number (including, if applicable, the area code) and a contact name in case we need to contact you in relation to your Application.
Please complete the details of your cheque or bank draft in this section.
Make your cheque or bank draft payable to “ImpediMed Limited Share Application Account” in Australian currency and cross it “Not Negotiable”. Your cheque or bank draft must be drawn on an Australian bank. Sufficient cleared funds should be held in your account, as cheques returned unpaid are likely to result in your Application being rejected. Pin (do not staple) your cheque or bank draft to the Application Form where indicated.

If you receive a firm allocation of Shares from your broker make your cheque payable to your Broker in accordance with their instructions.

LODGEMENT INSTRUCTIONS

10 October 2007 for broker firm Applicants)	at:
Post
ImpediMed Share Offer	OR	ImpediMed Share Offer	ImpediMed Share Offer
C/- Link Market Services Limited		C/- ABN AMRO Morgans Corporate Limited	C/- Emerging Growth Capital Pty Ltd
Locked Bag A14		GPO Box 202	PO Box R417
Sydney South NSW 1235		Brisbane QLD 4001	Royal Exchange NSW 1225
OR
Delivery
ImpediMed Share Offer	OR	ImpediMed Share Offer	ImpediMed Share Offer
C/- Link Market Services Limited		C/- ABN AMRO Morgans Corporate Limited	C/- Emerging Growth Capital Pty Ltd
Level 12 680 George Street		Level 29 Riverside Centre	Level 3 1 Castlereagh Street
Sydney NSW 2000		123 Eagle Street	Sydney NSW 2000
		Brisbane QLD 4001

CORRECT FORMS OF REGISTRABLE NAMES

Type of Investor	Correct Form of Registration	Incorrect Form of Registration
Individual Use given names in full, not initials	Mrs Katherine Clare Edwards	K C Edwards
Company Use Company’s full title, not abbreviations	Liz Biz Pty Ltd	Liz Biz P/L or Liz Biz Co.
Joint Holdings Use full and complete names	Mr Peter Paul Tranche & Ms Mary Orlando Tranche	Peter Paul & Mary Tranche
Trusts Use the trustee(s) personal name(s)	Mrs Alessandra Herbert Smith	Alessandra Smith Family Trust
Deceased Estates Use the executor(s) personal name(s)	Ms Sophia Garnet Post & Mr Alexander Traverse Post	Estate of late Harold Post or Harold Post Deceased
Minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation	Mrs Sally Hamilton	Master Henry Hamilton
Partnerships Use the partners’ personal names	Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith	Fred Smith & Son
Long Names	Mr Hugh Adrian John Smith-Jones	Mr Hugh A J Smith Jones
Clubs/Unincorporated Bodies/Business Names Use of�ce bearer(s) personal name(s)	Mr Alistair Edward Lilley	Vintage Wine Club
Superannuation Funds Use the name of the trustee of the fund	XYZ Pty Ltd	XYZ Pty Ltd Superannuation Fund

Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

Corporate directory

REGISTERED OFFICE

Building 4B Garden City Offi ce Park 2404 Logan Road Eight Mile Plains Brisbane Qld 4113

Ph: 07 3423 1777

LAWYERS

Corrs Chambers Westgarth Waterfront Place 1 Eagle Street Brisbane Qld 4000

Ph: 07 3228 9333

INDEPENDENT ACCOUNTANT

& AUDITOR

Ernst & Young Waterfront Place 1 Eagle Street Brisbane Qld 4000

UNDERWRITERS

ABN AMRO Morgans Corporate Limited Level 29, Riverside Centre 123 Eagle Street Brisbane Qld 4000

Ph: 07 3334 4888

Emerging Growth Capital Pty Limited Level 3, 1 Castlereagh Street Sydney NSW 2000

Ph: 02 9251 0300

SHARE REGISTRY

Link Market Services Limited Level 12, 300 Queen Street Brisbane Qld 4000

Ph: 1300 554 474

RESERVED ASX CODE

IPD

Ph: 07 3011 3333

PATENT ATTORNEY

Davies Collison Cave 255 Elizabeth Street Sydney NSW 2000

Ph: 02 9293 1000

==> picture [76 x 80] intentionally omitted <==

www.impedimed.com

AI assistant

IMPEDIMED LIMITED — Capital/Financing Update 2007

65135_rns_2007-09-24_6a280959-af69-4137-bf20-347ce929075a.pdf

Prospectus

Chairman’s letter 1

11 September 2007

Dear investor,

Investment highlights and risks 2

2.1 Investment highlights

Large market opportunity

Sales and marketing

Recent clinical data supporting the benefi ts of early intervention

Regulatory approvals

Strategic United States acquisition

Experienced investor involvement

Reimbursement coding

Experienced, successful Board and management

Patented technology

2.2 Recent key milestones

2.3 Investment risk summary

Risk to intellectual property position

Risk to secondary lymphoedema opportunity

The Xitron acquisition may not proceed to completion

Clinical trials are required to drive adoption

Offer summary 3

3.1 KEY OFFER DATES*

3.2 SUMMARY OF THE OFFER

3.3 USE OF FUNDS

4.1 DESCRIPTION OF THE OFFER

4.2 PRO FORMA SHAREHOLDINGS FOLLOWING COMPLETION OF THE OFFER

4.3 HOW TO APPLY FOR SHARES AND IPO OPTIONS – PUBLIC OFFER

4.4 IPO OPTIONS

4.5 OVERSUBSCRIPTIONS

4.6 BROKER FIRM APPLICANTS

4.7 HOW TO APPLY FOR SHARES AND IPO OPTIONS – REDEMPTION ISSUE

4.8 ISSUE OF SHARES TO HOLDERS OF S3 CONVERTIBLE NOTES

4.9 OFFER OF OPTIONS - CHIEF EXECUTIVE OFFICER

4.10 ELECTRONIC PROSPECTUS

4.11 UNDERWRITING

4.12 ALLOTMENT

4.13 ASX LISTING

4.14 HOLDING STATEMENTS

4.15 FOREIGN INVESTORS

4.16 WITHDRAWAL

4.17 TAXATION CONSEQUENCES

4.18 GOVERNING LAW

ImpediMed’s markets and regulatory environment 5 14

5.1 INTRODUCTION

TARGET MARKETS

ImpediMed’s estimate of market potential for lymphoedema is based on the widespread adoption of a new pre-emptive care model in the monitoring and detection of secondary lymphoedema.

Preliminary research

5.2 SECONDARY LYMPHOEDEMA MARKET

MARKET OPPORTUNITY

WHAT IS SECONDARY LYMPHOEDEMA?

THE INCIDENCE OF SECONDARY LYMPHOEDEMA

CURRENT METHODS OF DETECTION AND TREATMENT OF SECONDARY LYMPHOEDEMA

5.3 MEDICAL HYDRATION AND BODY COMPOSITION MARKET

METHODS OF MEASURING BODY COMPOSITION

OPPORTUNITIES IN BODY COMPOSITION

METABOLIC DISORDER SYNDROME MARKET

MUSCLE WASTING (CACHEXIA) MARKET

DRUG DOSING AND SURGICAL APPLICATIONS

SPORTS MEDICINE AND FITNESS

CLINICAL RESEARCH MARKET

ImpediMed has identifi ed three important clinical research markets for its body composition products:

5.4 REGULATORY OVERVIEW

UNITED STATES MARKET REGULATION

EUROPEAN, AUSTRALIAN AND NEW ZEALAND MARKET REGULATION

PATH TO MARKET – TARGETING HIGH BARRIERS TO ENTRY

5.5 REIMBURSEMENT OVERVIEW

REIMBURSEMENT

KEY ELEMENTS OF REIMBURSEMENT

Coding

Payment

Coverage

5.6 CLINICAL TRIALS OVERVIEW

6.1 INTRODUCTION

6.2 IMPEDIMED’S TECHNOLOGY PLATFORMS

WHAT IS BIA?

WHAT IS BIS?

IMPEDIMED LIMITED Capital/Financing Update 2007