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**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

 

**FORM 20-F**

 

**(MarkOne)**

 

| **o**      | **REGISTRATION STATEMENT PURSUANT  TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934**                           |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                   |
| **OR**     |
| ** ** | ** **                                                                                                                                   |
| **x**      | **ANNUAL REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934  For the fiscal year ended June 30, 2008** |
| ** ** | ** **                                                                                                                                   |
| **OR**     |
| ** ** | ** **                                                                                                                                   |
| **o**      | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                      |
| ** ** | ** **                                                                                                                                   |
| **OR**     |
| ** ** | ** **                                                                                                                                   |
| **o**      | **SHELL COMPANY REPORT PURSUANT  TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**                                   |

 

Dateof event requiring this shell company report . . . . . . . . . . . . . . . . ... .

 

**For the transition period from                      to                        **

 

Commissionfile number 0-51504

 
| **GENETIC TECHNOLOGIES LIMITED**                                                                                                                                                        |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (Exact name of Registrant as specified in its charter)                                                                                                                                  |
|                                                                                                                                                                                    |
| **N/A**                                                                                                                                                                                 |
| (Translation of Registrant’s name into English)                                                                                                                                    |
|                                                                                                                                                                                    |
| **AUSTRALIA**                                                                                                                                                                           |
| (Jurisdiction of incorporation or organization)                                                                                                                                         |
|                                                                                                                                                                                    |
| **60-66 Hanover Street, Fitzroy, Victoria, 3065,  Australia**

**Telephone: 011 61 3 8412 7000; Facsimile: 011 61  3 8412 7040**                                                        |
| (Address of principal executive offices)                                                                                                                                                |
|                                                                                                                                                                                    |
| **Thomas G. Howitt**

**Telephone: 011 61 3 8412 7050; Facsimile: 011 61  3 8412 7040**

**Email: tom.howitt@gtg.com.au**

**60-66 Hanover Street, Fitzroy Victoria, 3065,  Australia** |
| (Name, Telephone, E-mail and/or Facsimile number and Address of  Company Contact Person)                                                                                                |

 

Securitiesregistered or to be registered pursuant to Section 12(b) of the Act.  **None**

 

| Title of each  class |   | Name of each  exchange on which registered |
|----------------------|--------|--------------------------------------------|
|                 |   |                                       |
|                 |   |                                       |

 

Securitiesregistered or to be registered pursuant to Section 12(g) of the Act.

 
| **American Depositary Shares each representing 30  Ordinary Shares and evidenced by American Depositary Receipts** |
|--------------------------------------------------------------------------------------------------------------------|
| (Title of Class)                                                                                                   |
|                                                                                                               |
| ** **                                                                                                         |
| (Title of Class)                                                                                                   |

 

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Securitiesfor which there is a reporting obligation pursuant to Section 15(d) ofthe Act.

 
| **None**         |
|------------------|
| (Title of Class) |

 

Indicatethe number of outstanding shares of each of the issuer’s classes of capital orcommon stock as of the close of the period covered by the annual report.
|   | **362,389,899 Ordinary Shares** |
|--------|---------------------------------|
|   |                            |

 

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405of the Securities Act.

o Yes   x No

 

Ifthis report is an annual or transition report, indicate by check mark if theregistrant is not required to file reports pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934.

o Yes   x No

 

Note— Checking the box above will not relieve any registrant required to filereports pursuant to Section 13 or 15(d) of the Securities ExchangeAct of 1934 from their obligations under those Sections.

 

Indicateby check mark whether the registrant (1) has filed all reports required tobe filed by Section 13 or 15(d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject tosuch filing requirements for the past 90 days.

x Yes   o No

 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the Exchange Act.(Check one):

 

| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer x |
|---------------------------|--------|---------------------|--------|-------------------------|

 

Indicateby check mark which basis of accounting the registrant has used to prepare thefinancial statements included in this filing:

 

| U.S. GAAP o |   | International Financial Reporting Standards as issued  by the International Accounting Standards Board x |   | Other o |
|-------------|--------|----------------------------------------------------------------------------------------------------------|--------|---------|

 

If“Other” has been checked in response to the previous question, indicate bycheck mark which financial statement item the registrant has elected to follow.

o Item 17   o Item 18

 

Ifthis is an annual report, indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes   x No

 

(APPLICABLEONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

 

Indicateby check mark whether the registrant has filed all documents and reportsrequired to be filed by Sections 12, 13 or 15(d) of the SecuritiesExchange Act of 1934 subsequent to the distribution of securities under a planconfirmed by a court.

 

o Yes   o No

 

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**TABLE OF CONTENTS**

 
| INTRODUCTION                                       | 1        |
|----------------------------------------------------|----------|
|                                               |     |   |
| FORWARD-LOOKING  STATEMENTS                        | 1        |
|                                               |     |   |
| ENFORCEMENT  OF LIABILITIES AND SERVICE OF PROCESS | 1        |
|                                               |     |   |
|                                               | ITEM 1.  | IDENTITY OF DIRECTORS,  SENIOR MANAGEMENT AND ADVISERS | 2 |
|                                               |     |   |
|                                               | ITEM 1.A | DIRECTORS AND SENIOR  MANAGEMENT | 2 |
|                                               |     |   |   |
|                                               | ITEM 1.B | ADVISERS | 3 |
|                                               |     |   |   |
|                                               | ITEM 1.C | AUDITORS | 3 |
|                                               |     |   |   |
|                                               | ITEM 2.  | OFFER STATISTICS AND  EXPECTED TIMETABLE | 3 |
|                                               |     |   |   |
|                                               | ITEM 3.  | KEY INFORMATION | 3 |
|                                               |     |   |   |
|                                               | ITEM 3.A | SELECTED FINANCIAL DATA | 3 |
|                                               |     |   |   |
|                                               | ITEM 3.B | CAPITALIZATION AND  INDEBTEDNESS | 5 |
|                                               |     |   |   |
|                                               | ITEM 3.C | REASONS FOR THE OFFER AND  USE OF PROCEEDS | 5 |
|                                               |     |   |   |
|                                               | ITEM 3.D | RISK FACTORS | 6 |
|                                               |     |   |   |
|                                               | ITEM 4.  | INFORMATION ON THE COMPANY | 13 |
|                                               |     |   |   |
|                                               | ITEM 4.A | HISTORY AND DEVELOPMENT OF THE  COMPANY | 13 |
|                                               |     |   |   |
|                                               | ITEM 4.B | BUSINESS OVERVIEW | 15 |
|                                               |     |   |   |
|                                               | ITEM 4.C | ORGANIZATIONAL  STRUCTURE | 38 |
|                                               |     |   |   |
|                                               | ITEM 4.D | PROPERTY,  PLANT AND EQUIPMENT | 38 |
|                                               |     |   |   |
|                                               | ITEM 5.  | OPERATING  AND FINANCIAL REVIEW AND PROSPECTS | 38 |
|                                               |     |   |   |
|                                               | ITEM 5.A | OPERATING RESULTS | 39 |
|                                               |     |   |   |
|                                               | ITEM 5.B | LIQUIDITY  AND CAPITAL RESOURCES | 49 |
|                                               |     |   |   |
|                                               | ITEM 5.C | RESEARCH  AND DEVELOPMENT, PATENTS AND LICENSES, ETC. | 51 |
|                                               |     |   |   |
|                                               | ITEM 5.D | TREND INFORMATION | 51 |
|                                               |     |   |   |
|                                               | ITEM 5.E | OFF-BALANCE  SHEET ARRANGEMENTS | 52 |
|                                               |     |   |   |
|                                               | ITEM 5.F | INFORMATION  ABOUT CONTRACTUAL OBLIGATIONS | 52 |
|                                               |     |   |   |
|                                               | ITEM 6.  | DIRECTORS,  SENIOR MANAGEMENT AND EMPLOYEES | 52 |
|                                               |     |   |   |
|                                               | ITEM 6.A | DIRECTORS  AND SENIOR MANAGEMENT | 52 |
|                                                    |          |  |  |  |

 

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|   | ITEM 6.B  | COMPENSATION                                                        | 55     |
|--------|-----------|---------------------------------------------------------------------|--------|
|   |      |                                                                |   |
|   | ITEM 6.C  | BOARD PRACTICES                                                     | 59     |
|   |      |                                                                |   |
|   | ITEM 6.D  | EMPLOYEES                                                           | 61     |
|   |      |                                                                |   |
|   | ITEM 6.E  | SHARE OWNERSHIP                                                     | 62     |
|   |      |                                                                |   |
|   | ITEM 7.   | MAJOR  SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                  | 62     |
|   |      |                                                                |   |
|   | ITEM 7.A  | MAJOR SHAREHOLDERS                                                  | 62     |
|   |      |                                                                |   |
|   | ITEM 7.B  | RELATED PARTY  TRANSACTIONS                                         | 62     |
|   |      |                                                                |   |
|   | ITEM 7.C  | INTERESTS  OF EXPERTS AND COUNSEL                                   | 62     |
|   |      |                                                                |   |
|   | ITEM 8.   | FINANCIAL  INFORMATION                                              | 63     |
|   |      |                                                                |   |
|   | ITEM 8.A  | CONSOLIDATED  STATEMENTS AND OTHER FINANCIAL INFORMATION            | 63     |
|   |      |                                                                |   |
|   | ITEM 8.B  | LITIGATION  AND OTHER LEGAL PROCEEDINGS                             | 63     |
|   |      |                                                                |   |
|   | ITEM 8.C  | DIVIDENDS                                                           | 63     |
|   |      |                                                                |   |
|   | ITEM 8.D  | SIGNIFICANT  CHANGES TO FINANCIAL INFORMATION                       | 63     |
|   |      |                                                                |   |
|   | ITEM 8.E  | SIGNIFICANT  OTHER CHANGES                                          | 64     |
|   |      |                                                                |   |
|   | ITEM 9.   | THE OFFER AND  LISTING                                              | 65     |
|   |      |                                                                |   |
|   | ITEM 9.A  | OFFER AND  LISTING DETAILS                                          | 65     |
|   |      |                                                                |   |
|   | ITEM 9.B  | PLAN OF DISTRIBUTION                                                | 66     |
|   |      |                                                                |   |
|   | ITEM 9.C  | MARKETS                                                             | 66     |
|   |      |                                                                |   |
|   | ITEM 9.D  | SELLING SHAREHOLDERS                                                | 67     |
|   |      |                                                                |   |
|   | ITEM 9.E  | DILUTION                                                            | 67     |
|   |      |                                                                |   |
|   | ITEM 9.F  | EXPENSES OF THE ISSUE                                               | 67     |
|   |      |                                                                |   |
|   | ITEM 10.  | ADDITIONAL INFORMATION                                              | 67     |
|   |      |                                                                |   |
|   | ITEM 10.A | SHARE CAPITAL                                                       | 67     |
|   |      |                                                                |   |
|   | ITEM 10.B | OUR CONSTITUTION                                                    | 68     |
|   |      |                                                                |   |
|   | ITEM 10.C | MATERIAL CONTRACTS                                                  | 69     |
|   |      |                                                                |   |
|   | ITEM 10.D | EXCHANGE  CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITY HOLDERS | 69     |
|   |      |                                                                |   |
|   | ITEM 10.E | TAXATION                                                            | 70     |

 

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|   | ITEM 10.F  | DIVIDENDS  AND PAYING AGENTS                                                  | 76     |
|--------|------------|-------------------------------------------------------------------------------|--------|
|   |       |                                                                          |   |
|   | ITEM 10.G  | STATEMENT BY  EXPERTS                                                         | 76     |
|   |       |                                                                          |   |
|   | ITEM 10.H  | DOCUMENTS ON  DISPLAY                                                         | 76     |
|   |       |                                                                          |   |
|   | ITEM 10.I  | SUBSIDIARY  INFORMATION                                                       | 76     |
|   |       |                                                                          |   |
|   | ITEM 11.   | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                   | 77     |
|   |       |                                                                          |   |
|   | ITEM 12.   | DESCRIPTION  OF SECURITIES OTHER THAN EQUITY SECURITIES                       | 77     |
|   |       |                                                                          |   |
|   | ITEM 12.A  | DEBT SECURITIES                                                               | 77     |
|   |       |                                                                          |   |
|   | ITEM 12.B  | WARRANTS AND RIGHTS                                                           | 77     |
|   |       |                                                                          |   |
|   | ITEM 12.C  | OTHER SECURITIES                                                              | 77     |
|   |       |                                                                          |   |
|   | ITEM 12.D  | AMERICAN  DEPOSITARY SHARES                                                   | 77     |
|   |       |                                                                          |   |
|   | ITEM 13.   | DEFAULTS,  DIVIDEND ARREARAGES AND DELINQUENCIES                              | 78     |
|   |       |                                                                          |   |
|   | ITEM 14.   | MATERIAL  MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 78     |
|   |       |                                                                          |   |
|   | ITEM 15.   | CONTROLS AND  PROCEDURES                                                      | 78     |
|   |       |                                                                          |   |
|   | ITEM 15.A  | DISCLOSURE  CONTROLS AND PROCEDURES                                           | 78     |
|   |       |                                                                          |   |
|   | ITEM 15.B  | MANAGEMENT’S  ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING | 79     |
|   |       |                                                                          |   |
|   | ITEM 15.C  | ATTESTATION  REPORT OF THE REGISTERED PUBLIC ACCOUNTING FIRM                  | 79     |
|   |       |                                                                          |   |
|   | ITEM 15.D  | CHANGES IN  INTERNAL CONTROL OVER FINANCIAL REPORTING                         | 80     |
|   |       |                                                                          |   |
|   | ITEM 16.A  | AUDIT  COMMITTEE FINANCIAL EXPERT                                             | 80     |
|   |       |                                                                          |   |
|   | ITEM 16.B  | CODE OF ETHICS                                                                | 80     |
|   |       |                                                                          |   |
|   | ITEM 16.C  | PRINCIPAL  ACCOUNTANT FEES AND SERVICES                                       | 81     |
|   |       |                                                                          |   |
|   | ITEM 16D.  | EXEMPTIONS  FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES                   | 81     |
|   |       |                                                                          |   |
|   | ITEM 16E.  | PURCHASES  OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS       | 81     |
|   |       |                                                                          |   |
|   | ITEM 17.   | FINANCIAL  STATEMENTS                                                         | 81     |
|   |       |                                                                          |   |
|   | ITEM 18.   | FINANCIAL  STATEMENTS                                                         | 81     |
|   |       |                                                                          |   |
|   | ITEM 19.   | EXHIBITS                                                                      | 82     |
|   |       |                                                                          |   |
|   | SIGNATURES | 84                                                                            |

 

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**INTRODUCTION**

 

Inthis Annual Report, the “Company,” “Genetic Technologies”, “we,” “us” and “our”refer to Genetic Technologies Limited and its consolidated subsidiaries.

 

Ourconsolidated financial statements are set out on pages F1 to F42 of thisAnnual Report (refer to Item 18 “Financial Statements”).

 

Referencesto the “ADSs” are to our ADSs described in Item 12.D, “American DepositaryShares,” and references to the “Ordinary Shares” are to our Ordinary Sharesdescribed in Item 10.A, “Share Capital.”

 

Ourfiscal year ends on June 30, and references in this Annual Report to anyspecific fiscal year are to the twelve month period ended on June 30 ofsuch year.

 

**FORWARD-LOOKING STATEMENTS**

 

ThisAnnual Report contains forward-looking statements that involve risks anduncertainties.  We use words such as “anticipates”,“believes”, “plans”, “expects”, “future”, “intends” and similar expressions toidentify such forward-looking statements. This Annual Report also contains forward-looking statements attributedto certain third parties relating to their estimates regarding the growth ofGenetic Technologies and related service markets and spending.  You should not place undue reliance on theseforward-looking statements, which apply only as of the date of this AnnualReport.  Our actual results could differmaterially from those anticipated in these forward-looking statements for manyreasons, including the risks faced by us described below under the caption “RiskFactors” and elsewhere in this Annual Report.

 

Althoughwe believe that the expectations reflected in such forward-looking statementsare reasonable at this time, we can give no assurance that such expectationswill prove to be correct.  Given theseuncertainties, readers are cautioned not to place undue reliance on suchforward-looking statements.  Importantfactors that could cause actual results to differ materially from ourexpectations are contained in cautionary statements in this Annual Reportincluding, without limitation, in conjunction with the forward-lookingstatements included in this Annual Report and specifically under Item 3.D, “RiskFactors.”

 

Allsubsequent written and oral forward-looking statements attributable to us areexpressly qualified in their entirety by reference to these cautionarystatements.

 

**ENFORCEMENT OF LIABILITIES ANDSERVICE OF PROCESS**

 

Weare incorporated under the laws of Western Australia, in the Commonwealth ofAustralia.  All of our directors andexecutive officers, and any experts named in this Annual Report, reside outsidethe U.S.  Substantially all of ourassets, our directors’ and executive officers’ assets and such experts’ assetsare located outside the U.S.  As aresult, it may not be possible for investors to affect service of processwithin the U.S. upon us or our directors, executive officers or such experts,or to enforce against them or us in U.S. courts, judgments obtained in U.S.courts based upon the civil liability provisions of the federal securities lawsof the U.S.  In addition, we have beenadvised by our Australian solicitors that there is doubt that the courts ofAustralia will enforce against us, our directors, executive officers andexperts named herein, judgments obtained in the U.S. based upon the civilliability provisions of the federal securities laws of the U.S. or will enterjudgments in original actions brought in Australian courts based upon thefederal securities laws of the U.S.

 

1

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**PART I**

 

**Item 1.            Identityof Directors, Senior Management and Advisers**

 

**Item 1.A         Directorsand Senior Management**

 

The Directors of the Companyas of the date of this Annual Report are as follows:

 

 
| **Name**       | ** ** | **Position/Function**  | ** ** | **Business  Address**                               |
|----------------|------------|------------------------|------------|-----------------------------------------------------|
| ** **     | ** ** | ** **             | ** ** | ** **                                          |
| Fred Bart      |       | Chairman               |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |
|           |       |                   |       |                                                |
| Sidney C. Hack |       | Non-Executive Director |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |
|           |       |                   |       |                                                |
| Huw D. Jones   |       | Non-Executive Director |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |

 

The members of SeniorManagement of the Company as of the date of this Annual Report are as follows:

 
| **Name**                  | ** ** | **Position/Function**                               | ** ** | **Business  Address**                               |
|---------------------------|------------|-----------------------------------------------------|------------|-----------------------------------------------------|
| ** **                | ** ** | ** **                                          | ** ** | ** **                                          |
| Thomas G. Howitt          |       | Chief Financial Officer  andCompany Secretary       |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |
|                      |       |                                                |       |                                                |
| Ross Barrow (note)        |       | Chief Operating Officer                             |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |
|                      |       |                                                |       |                                                |
| W. Ian Smith              |       | Business Development  Manager -DNA Profiling        |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |
|                      |       |                                                |       |                                                |
| Jonathan S. Whitty (note) |       | Business Development  Manager -Medical  Diagnostics |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |
|                      |       |                                                |       |                                                |
| M. Luisa Ashdown          |       | General Manager -  Licensing                        |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |
|                      |       |                                                |       |                                                |
| Catherine M. Barclay      |       | General Manager -Human Resources                    |       | 60-66 Hanover StreetFitzroy Victoria 3065 Australia |

 

Note:           Both Ross Barrow and Jonathan Whitty hadtendered their resignations as of the date of this Annual Report.

 

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**Item 1.B         Advisers**

 

Our principal bankers, accountants and legal advisers are as follows:

 
| **Name of Adviser**                 | ** ** | **Function**             | ** ** | **Business  Address**                                            | ** ** |
|-------------------------------------|------------|--------------------------|------------|------------------------------------------------------------------|------------|
| ** **                          | ** ** | ** **               | ** ** | ** **                                                       | ** ** |
| Ernst &  Young             |       | Auditors                 |       | 8 Exhibition  Street Melbourne Victoria 3000 Australia           |       |
|                                |       |                     |       |                                                             |       |
| St. George  Bank Limited            |       | Bankers -  Australia     |       | 530 Collins  Street Melbourne Victoria 3000 Australia            |       |
|                                |       |                     |       |                                                             |       |
| KeyBank  National Association       |       | Bankers -  USA           |       | 1130 Haxton  Drive Fort Collins Colorado 80525 USA               |       |
|                                |       |                     |       |                                                             |       |
| Baker &  McKenzie          |       | General  Counsel         |       | 525 Collins  Street Melbourne Victoria 3000 Australia            |       |
|                                |       |                     |       |                                                             |       |
| Hamilton,  DeSanctis & Cha |       | Licensing  Attorneys     |       | 225 Union  Boulevard, Suite 305 Lakewood Colorado 80228 USA |       |
|                                |       |                     |       |                                                             |       |
| Sheridan  Ross PC                   |       | Patent  Attorneys        |       | 1560  Broadway, Suite 1200 Denver Colorado 80202-5141 USA   |       |
|                                |       |                     |       |                                                             |       |
| Greenberg  Traurig, LLP             |       | U.S.  Securities Counsel |       | 200 Park  Avenue New York New York 10166 USA                     |       |

 

**Item 1.C         Auditors**

 

Theauditors of the Company’s financial statements for the years ended June 30,2008, 2007, 2006, 2005 and 2004 were Ernst & Young, whose address is 8Exhibition Street, Melbourne, Victoria, 3000, Australia.  Ernst & Young is the Company’scurrent independent registered public accounting firm, an appointment ratifiedat the Annual General Meeting held on November 28, 2003.

 

**Item 2.            OfferStatistics And Expected Timetable**

 

Notapplicable.

 

**Item 3.            KeyInformation**

 

**Item 3.A         SelectedFinancial Data**

 

Thefollowing selected financial data for the four years ended June 30, 2008is derived from the audited consolidated financial statements of GeneticTechnologies Limited, prepared in accordance with International FinancialReporting Standards (“IFRS”), which became effective for our company as ofour fiscal year ended June 30, 2006. Under IFRS 1, “*First-time Adoption ofInternational Financial Reporting Standards*,” or IFRS 1, a companyadopting IFRS for the first time is required to adopt accounting policies thatcomply with IFRS and related interpretations that are in effect at thereporting date of its first annual financial statements prepared in accordancewith IFRS, in our case June 30, 2006. IFRS 1 also requires that those policies be applied as of the date oftransition to IFRS, in our case July 1, 2004, and consistently throughoutall periods presented in the first annual financial statements prepared inaccordance with IFRS.  However, theCompany was not required to recast its financial statements prior to July 1,2004 in accordance with IFRS, and is therefore unable to provide the selecteddata for the year ended June 30, 2004 prepared in accordance withIFRS.  Accordingly, U.S. GAAP selecteddata for the 2004 financial year has been removed.  Our consolidated financial statementsappearing in this report comply with both the IFRS as issued by InternationalAccounting Standards Board and Australian equivalents to InternationalFinancial Reporting Standards, or A-IFRS.

 

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Thebalance sheet data as of June 30, 2008 and 2007 and the income statementdata for fiscal years 2008, 2007 and 2006 are derived from our auditedconsolidated financial statements included in this annual report.  Balance sheet data as of June 30, 2006and 2005 and income statement data for the 2005 and 2004 financial years arederived from our audited consolidated financial statements which are notincluded in this Annual Report.  The datashould be read in conjunction with the consolidated financial statements,related notes and other financial information included herein.

 

Allamounts are stated in Australian dollars as of June 30 as noted.

 

**GENETIC TECHNOLOGIES LIMITED**

 

**CONSOLIDATED INCOME STATEMENTSFOR 2008, 2007, 2006 AND 2005**

 

 
| ** **                                                               | ** ** | **Year ended  June 30, 2008** | ** ** | **Year ended  June 30, 2007** | ** ** | **Year ended  June 30, 2006** | ** ** | **Year ended  June 30, 2005** | ** ** |
|--------------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                                                               | ** ** | **AUD**                                      | ** ** | **AUD**                                      | ** ** | **AUD**                                      | ** ** | **AUD**                                      | ** ** |
| ** **                                                               | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                   | ** ** |
| **Revenue from operations**                                              |       | 15,702,336                                   |       | 14,978,819                                   |       | 10,048,703                                   |       | 9,607,237                                    |       |
| Other income                                                             |       | 276,606                                      |       | 340,486                                      |       | 708,411                                      |       | 782,714                                      |       |
| Employee benefits expenses                                               |       | (6,568,966                                   | )          | (5,556,644                                   | )          | (5,432,506                                   | )          | (4,853,853                                   | )          |
| Amortization and depreciation expenses                                   |       | (4,755,155                                   | )          | (4,602,992                                   | )          | (4,817,277                                   | )          | (4,411,685                                   | )          |
| Impairment losses and other write-downs                                  |       | (2,378,000                                   | )          | (1,306,960                                   | )          | (97,500                                      | )          | —                                       |       |
| Genetic testing expenses                                                 |       | (1,599,644                                   | )          | (1,989,098                                   | )          | (2,008,546                                   | )          | (1,752,495                                   | )          |
| Contract research and trial expenses                                     |       | (1,267,748                                   | )          | (1,247,775                                   | )          | (1,345,916                                   | )          | (873,501                                     | )          |
| Royalties, license fees and commissions  paid                            |       | (889,520                                     | )          | (580,122                                     | )          | (177,283                                     | )          | (921,548                                     | )          |
| Legal and patent fees                                                    |       | (873,854                                     | )          | (748,605                                     | )          | (1,440,929                                   | )          | (4,555,642                                   | )          |
| Administration expenses                                                  |       | (839,226                                     | )          | (901,380                                     | )          | (910,776                                     | )          | (1,068,232                                   | )          |
| Rent and outgoings                                                       |       | (533,644                                     | )          | (535,045                                     | )          | (511,050                                     | )          | (495,749                                     | )          |
| Net foreign exchange losses                                              |       | (254,954                                     | )          | (317,317                                     | )          | —                                       |       | (186,222                                     | )          |
| Marketing and promotion expenses                                         |       | (221,644                                     | )          | (437,087                                     | )          | (502,353                                     | )          | (504,974                                     | )          |
| Withholding tax                                                          |       | (94,524                                      | )          | (264,391                                     | )          | (90,500                                      | )          | (258,243                                     | )          |
| Finance costs                                                            |       | (66,763                                      | )          | (90,929                                      | )          | (112,082                                     | )          | (69,965                                      | )          |
| Other expenses                                                           |       | (1,086,938                                   | )          | (1,086,662                                   | )          | (1,218,519                                   | )          | (1,211,777                                   | )          |
|                                                                     |       |                                         |       |                                         |       |                                         |       |                                         |       |
| **Loss before income tax**                                               |       | (5,451,638                                   | )          | (4,345,702                                   | )          | (7,908,123                                   | )          | (10,773,935                                  | )          |
| Income tax expense                                                       |       | —                                       |       | —                                       |       | —                                       |       | —                                       |       |
| **Loss for the year**                                                    |       | (5,451,638                                   | )          | (4,345,702                                   | )          | (7,908,123                                   | )          | (10,773,935                                  | )          |
| Net loss / (profit) attributable to  minority interests                  |       | 5,549                                        |       | 17,159                                       |       | (10,650                                      | )          | (46,292                                      | )          |
| Net loss attributable to equity holders of  Genetic Technologies Limited |       | (5,446,089                                   | )          | (4,328,543                                   | )          | (7,918,773                                   | )          | (10,820,227                                  | )          |
|                                                                     |       |                                         |       |                                         |       |                                         |       |                                         |       |
| **Loss per share (cents per share)**                                     |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Basic and diluted net loss per ordinary  share                           |       | (1.5                                         | )          | (1.2                                         | )          | (2.2                                         | )          | (3.4                                         | )          |
|                                                                     |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Weighted-average shares outstanding                                      |       | 362,389,899                                  |       | 362,389,899                                  |       | 362,386,940                                  |       | 315,264,068                                  |       |

 

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**GENETIC TECHNOLOGIES LIMITED**

 

**CONSOLIDATED BALANCE SHEET DATAFOR 2008, 2007, 2006 AND 2005**

 

 
| ** **                      | ** ** | **Year ended  June 30, 2008** | ** ** | **Year ended  June 30, 2007** | ** ** | **Year ended  June 30, 2006** | ** ** | **Year ended  June 30, 2005** | ** ** |
|---------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| ** **                      | ** ** | **AUD**                                      | ** ** | **AUD**                                      | ** ** | **AUD**                                      | ** ** | **AUD**                                      | ** ** |
| ** **                      | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                   | ** ** | ** **                                   | ** ** |
| **Assets**                      |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Current assets                  |       | 15,893,852                                   |       | 14,600,846                                   |       | 13,960,666                                   |       | 19,693,325                                   |       |
| Non-current assets              |       | 8,200,726                                    |       | 14,848,181                                   |       | 19,756,241                                   |       | 23,805,732                                   |       |
|                            |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Total assets                    |       | 24,094,578                                   |       | 29,449,027                                   |       | 33,716,907                                   |       | 43,499,057                                   |       |
|                            |       |                                         |       |                                         |       |                                         |       |                                         |       |
| **Liabilities**                 |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Current liabilities             |       | (3,047,002                                   | )          | (3,248,763                                   | )          | (2,946,212                                   | )          | (4,871,674                                   | )          |
| Non-current liabilities         |       | (262,503                                     | )          | (97,455                                      | )          | (528,556                                     | )          | (944,144                                     | )          |
|                            |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Total liabilities               |       | (3,309,505                                   | )          | (3,346,218                                   | )          | (3,474,768                                   | )          | (5,815,818                                   | )          |
|                            |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Net assets                      |       | 20,785,073                                   |       | 26,102,809                                   |       | 30,242,139                                   |       | 37,683,239                                   |       |
|                            |       |                                         |       |                                         |       |                                         |       |                                         |       |
| **Shareholders’ equity**   |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Contributed equity              |       | 70,243,996                                   |       | 70,243,996                                   |       | 70,243,996                                   |       | 70,235,396                                   |       |
| Reserves                        |       | 1,588,804                                    |       | 1,456,895                                    |       | 1,237,524                                    |       | 779,101                                      |       |
| Accumulated losses              |       | (51,189,189                                  | )          | (45,743,100                                  | )          | (41,414,557                                  | )          | (33,495,784                                  | )          |
| Minority interests              |       | 141,462                                      |       | 145,018                                      |       | 175,176                                      |       | 164,526                                      |       |
|                            |       |                                         |       |                                         |       |                                         |       |                                         |       |
| Total shareholders’ equity |       | 20,785,073                                   |       | 26,102,809                                   |       | 30,242,139                                   |       | 37,683,239                                   |       |

 

**Exchange rates**

 

Thefollowing table sets forth, for the periods and dates indicated, certain informationconcerning the noon buying rate in New York City for Australian dollarsexpressed in U.S. dollars per $1.00 as certified for customs purposes by theFederal Reserve Bank of New York.

 
| **Period ended**     | ** ** | **At period end** | ** ** | **Average rate** | ** ** | **High**   | ** ** | **Low**    | ** ** |
|---------------------------|------------|-----------------------------|------------|-----------------------|------------|------------|------------|------------|------------|
| ** **                | ** ** | ** **                  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Yearly data**      | ** ** | ** **                  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                | ** ** | ** **                  | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| June 2004            |       | 0.6952                      |       | 0.7132                |       | 0.8005     |       | 0.6345     |       |
| June 2005            |       | 0.7618                      |       | 0.7564                |       | 0.7792     |       | 0.7498     |       |
| June 2006            |       | 0.7423                      |       | 0.7475                |       | 0.7781     |       | 0.7056     |       |
| June 2007            |       | 0.8491                      |       | 0.7899                |       | 0.8491     |       | 0.7407     |       |
| June 2008            |       | 0.9562                      |       | 0.8965                |       | 0.9644     |       | 0.7672     |       |
|                      |       |                        |       |                  |       |       |       |       |       |
| **Monthly data**          |       |                        |       |                  |       |       |       |       |       |
| ** **                |       |                        |       |                  |       |       |       |       |       |
| June 2008            |       | 0.9562                      |       | 0.9511                |       | 0.9610     |       | 0.9342     |       |
| July 2008            |       | 0.9415                      |       | 0.9620                |       | 0.9797     |       | 0.9415     |       |
| August 2008          |       | 0.8563                      |       | 0.8815                |       | 0.9317     |       | 0.8553     |       |
| September 2008       |       | 0.8211                      |       | 0.8168                |       | 0.8441     |       | 0.7831     |       |
| October 2008         |       | 0.6574                      |       | 0.6870                |       | 0.7937     |       | 0.6073     |       |
| November 2008        |       | 0.6546                      |       | 0.6591                |       | 0.7005     |       | 0.6191     |       |
| December 2008 (note) |       | 0.6985                      |       | 0.6636                |       | 0.6985     |       | 0.6343     |       |

 

Note:                   Data for December 2008 covers the period up to December 18,2008.

 

**Item 3.B         Capitalizationand Indebtedness**

 

Notapplicable.

 

**Item 3.C         Reasonsfor the Offer and Use of Proceeds**

 

Notapplicable.

 

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**Item 3.D****                         ****Risk Factors**

 

Before you purchase ourADSs, you should be aware that there are risks, including those describedbelow.  You should consider carefully theserisk factors together with all of the other information contained elsewhere inthis Annual Report before you decide to purchase our ADSs.

 

**Risks Related to Us**

 

**Our stockprice is volatile and can fluctuate significantly based on events not in ourcontrol and general industry conditions. As a result, the value of your investment may decline significantly.**

 

The biotechnology sector canbe particularly vulnerable to abrupt changes in investor sentiment.  Stock prices of companies in thebiotechnology industry, including ours, can swing dramatically, with littlerelationship to operating performance. Our stock price may be affected by a number of factors including, butnot limited to:

 

·                  product development events;

 

·                  the outcome of litigation;

 

·                  decisions relating to intellectual propertyrights;

 

·                  the entrance of competitive products ortechnologies into our market;

 

·                  new medical discoveries;

 

·                  the establishment of strategic partnershipsand alliances;

 

·                  changes in reimbursement policies or otherpractices related to the pharmaceutical industry; or

 

·                  other industry and market changes or trends.

 

Since our listing on theAustralian Securities Exchange in August 2000, the price of our OrdinaryShares has ranged from a low of $0.038 to a high of $1.05 per share.  Further fluctuations are likely to occur dueto events not within our control and general market conditions affecting thebiotechnology sector or the stock market generally.  The most significant such event of which wehave knowledge took place in August 2003 after a television report inAustralia on our company was broadcast. During that week, the price of our shares increased from $0.58 to $0.87on a volume of 26,000,000 shares traded, which was exceptionally high forus.  The share price subsequentlyretreated.

 

In addition, low tradingvolume may increase the volatility of the price of our ADSs.  Trading volume in our Ordinary Shares onother markets has not been historically high, and the trading volume of ourADSs on the NASDAQ Global Market has typically also been low.  Further, because each of our ADSs represents30 of our Ordinary Shares, trading volume in our ADSs is lower than that forour Ordinary Shares.  A thin tradingmarket could cause the price of our ADSs to fluctuate significantly more thanthe stock market as a whole.  Forexample, trades involving a relatively small number of our ADSs may have agreater impact on the trading price for our ADSs than would be the case if thetrading volume were higher.

 

The following chartgraphically illustrates the fluctuation in the price of our shares (inAustralian dollars) over the last five years:

 

 

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**The fact that we do not expect to pay cash dividends may leadto decreased prices for our stock.**

 

We have never paid a cashdividend on our Ordinary Shares and we do not anticipate paying a cash dividendin the foreseeable future.  We intend toretain future cash earnings, if any, for reinvestment in the development andexpansion of our business.  Whether wepay cash dividends in the future will be at the discretion of our Board ofdirectors and may be dependent on our financial condition, results ofoperations, capital requirements and any other factors our Board of directorsdecides is relevant.  As a result, aninvestor may only recognize an economic gain on an investment in our stock froman appreciation in the price of our stock.

 

**You mayhave difficulty in effecting service of legal process and enforcing judgmentsagainst us and our Management.**

 

We are a public companylimited by shares, registered and operating under the Australian *Corporations Act 2001*.  All of our directors and officers named inthis Annual Report reside outside the U.S. Substantially all, or a substantial portion of, the assets of thosepersons are also located outside the U.S. As a result, it may not be possible to affect service on such persons inthe U.S. or to enforce, in foreign courts, judgments against such personsobtained in U.S. courts and predicated on the civil liability provisions of thefederal securities laws of the U.S. Furthermore, substantially all of our directly-owned assets are locatedoutside the U.S., and, as such, any judgment obtained in the U.S. against usmay not be collectible within the U.S. There is doubt as to the enforceability in the Commonwealth ofAustralia, in original actions or in actions for enforcement of judgments ofU.S. courts, of civil liabilities predicated solely upon federal or statesecurities laws of the U.S., especially in the case of enforcement of judgmentsof U.S. courts where the defendant has not been properly served in Australia.

 

**Because weare not necessarily required to provide you with the same information as anissuer of securities based in the United States, you may not be afforded thesame protection or information you would have if you had invested in a publiccorporation based in the United States.**

 

We are exempt from certainprovisions of the Securities Exchange Act of 1934, as amended, commonlyreferred to as the Exchange Act, that are applicable to U.S. public companies,including (i) the rules under the Exchange Act requiring the filingwith the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;(ii) the sections of the Exchange Act regulating the solicitation ofproxies, consents or authorizations in respect of a security registered underthe Exchange Act; and (iii) the sections of the Exchange Act requiringinsiders to file public reports of their stock ownership and trading activitiesand liability for insiders who profit from trades made in a short period oftime.  The exempt provisions would beavailable to you if you had invested in a U.S. corporation.

 

However, in line with theAustralian Securities Exchange regulations, we will disclose our semi-annualresults, which, in accordance with Australian auditing standards, are requiredto have a limited review semi-annually and be fully audited annually.  The information, which may have an effect onthe stock price on the Australian Securities Exchange, will also be disclosedimmediately in the public media and to the Australian Securities Exchange.  Other relevant information pertaining to ourCompany will also be disclosed in line with the Australian Securities Exchangeregulations and information dissemination requirements for listedcompanies.  We will provide our semi-annualresults and other material information that we make public in Australia in theU.S. under the cover of an SEC Form 6-K. Nevertheless, you may not be afforded the same protection orinformation, which would be made available to you, were you investing in aUnited States public corporation because the requirements of a Form 10-Qand Form 8-K are not applicable to us.

 

**If a publicmarket does not develop for our ADSs, your ability to resell your ADSs could benegatively affected because there would be limited buyers for your interests.**

 

Historically, there wasvirtually no trading in our ADSs through the pink sheets after theestablishment of our Level I ADR Program. However, subsequent to the Level II listing of our ADSs on the NASDAQGlobal Market on September 2, 2005, the trading volumes of our ADSs haveincreased.  An active trading market forthe ADSs, however, may not be maintained in the future.  If an active trading market is notmaintained, the liquidity and trading prices of the ADSs could be negativelyaffected.

 

**In certain circumstances, holders of ADRs may have limitedrights relative to holders of Ordinary Shares**.

 

The rights of holders ofADSs with respect to the voting of Ordinary Shares and the right to receivecertain distributions may be limited in certain respects by the depositagreement entered into by us and The Bank of New York.  For example, although ADS holders areentitled under the deposit agreement, subject to any applicable provisions of Australianlaw and of our Constitution, to instruct the depositary as to the exercise ofthe voting rights pertaining to the Ordinary Shares represented by the AmericanDepositary Shares, and the depositary has agreed that it will try, as far aspractical, to vote the Ordinary Shares so represented in accordance with suchinstructions, ADS holders may not receive notices sent by the depositary intime to ensure that the depositary will vote the Ordinary Shares.  This means that the holders of ADRs may not beable to exercise their right to vote.  Inaddition, under the deposit agreement, the depositary has the right to restrictdistributions to holders of the ADSs in the event that it is unlawful orimpractical to make such distributions. We have no obligation to take any action to permit distributions toholders of our American Depositary Receipts, or ADRs.  As a result, holders of ADRs may not receivedistributions made by us.

 

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**Our Companyhas a history of losses and we expect to continue to incur costs.**

 

The business which is nowknown as Genetic Technologies Limited was founded in 1989.  We have incurred operating losses in everyyear of our existence.  We incurred netlosses of $10,820,227 for the year ended June 30, 2005, net losses of$7,918,773 for the year ended June 30, 2006, net losses of $4,328,543 foryear ended June 30, 2007 and net losses of $5,446,089 for year ended June 30,2008.  As of  June 30, 2008, we have accumulatedlosses of $51,189,189.  The extent offuture losses and the time required to achieve profitability remains uncertain.

 

**RisksRelated to our Industry**

 

**Our salescycle is typically lengthy.**

 

The sales cycle for ourtesting products and license generation is typically lengthy.  As a result, we may expend substantial fundsand management effort with no assurance of successfully selling our products orservices or granting new licenses.  Ourability to obtain customers for our genetic testing services dependssignificantly on the perception that our services can help accelerate effortsin genomics.  The sales cycle istypically lengthy.  Our sales effort requiresthe effective demonstration of the benefits of our services to, and significanttraining of, many different departments within a potential customer.  In addition, we sometimes are required tonegotiate agreements containing terms unique to each customer.  With respect to license generation, it iscommon for negotiations with licensees to take many months before a license iseventually granted.  Our business couldalso be adversely affected if we expend money without any return.

 

**If ourcompetitors develop more effective products, the results from our operationsand financial condition could be affected.**

 

We are subject to limitedcompetition from biotechnology and diagnostic companies, academic and researchinstitutions and government or other publicly-funded agencies that are pursuingproducts and services that are substantially similar to our genetic testingservices, or which otherwise address the needs of our customers and potentialcustomers.  Our competitors in thetesting market include private and public sector enterprises located inAustralia and elsewhere.  Many of theorganizations competing with us have greater experience in the areas offinance, research and development, manufacturing, marketing, sales,distribution, technical and regulatory matters than we do.  In addition, many current and potentialcompetitors have greater name recognition and more extensive collaborativerelationships.  However, because of ourpatents, we have virtually no competition in the licensing area.

 

Ourcompetitive position in the testing area is based upon our ability to:

 

·                  create and maintain scientifically-advancedtechnology and offer proprietary products and services;

 

·                  attract and retain qualified personnel;

 

·                  obtain patent or other protection for ourproducts and services;

 

·                  obtain required government approvals andother accreditations on a timely basis; and

 

·                  successfully market our services.

 

If we are not successful inmeeting these goals, our business could be adversely affected.  Similarly, our competitors may succeed indeveloping technologies, products or services that are more effective than anythat we are developing or that would render our technology and servicesobsolete, noncompetitive or uneconomical.

 

For a full discussion ofcompetition see Item 4.B, “Competition”.

 

**We relyheavily upon our patents and proprietary technology and any future claims thatour patents are invalid could seriously affect our licensing business andadversely affect our revenues and our financial condition.**

 

We rely upon our portfolioof patent rights, patent applications and exclusive licenses to patents andpatent applications relating to genetic technologies.  We expect to aggressively patent and protectour proprietary technologies.  However,we cannot be certain that any additional patents will be issued to us as aresult of our domestic or foreign patent applications or that any of ourpatents will withstand challenges by others. Patents issued to, or licensed by, us may be infringed or third partiesmay independently develop either the same or similar technologies.  Similarly, our patents may not provide uswith meaningful protection from competitors, including those who may pursuepatents which may prevent, limit or interfere with our products or will requirelicensing and the payment of significant fees or royalties by us to such thirdparties in order to enable us to conduct our business.  We may sue or be sued by third partiesregarding our patents and other intellectual property rights.  These suits are often costly and would divertvaluable funds and technical resources from our operations and causedistraction to Management.

 

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**We haveimportant relationships with external parties over whom we have limitedcontrol.**

 

We have relationships with anumber of academic consultants who are not employed by us.  Accordingly, we have limited control overtheir activities and can expect only limited amounts of their time to bededicated to our activities.  Thesepersons may have consulting, employment or advisory arrangements with otherentities that may conflict with or compete with their obligations to us.  Our consultants typically sign agreementsthat provide for confidentiality of our proprietary information and results ofstudies.  However, in connection withevery relationship, we may not be able to maintain the confidentiality of ourtechnology, the dissemination of which could hurt our competitive position andresults of operations.  To the extentthat our scientific consultants develop inventions or processes independentlythat may be applicable to our proposed products, disputes may arise as to theownership of the proprietary rights to such information, and we may not winthose disputes.

 

**If we areunable to protect our proprietary assets, we may not be able to commercializeproducts or services.**

 

Our commercial success willlargely depend on our ability to obtain patent protection for many aspects ofour business, including the products, methods and services we develop.  Patents issued to us may not provide us withsubstantial protection or be commercially beneficial to us.  The issuance of a patent is not conclusive asto its validity or its enforceability. In addition, our patent applications or those we have licensed, may notresult in issued patents.  If our patentapplications do not result in issued patents, our competitors may obtain rightsto commercialize our discoveries which could harm our competitiveposition.  We also may apply for patentprotection on novel genetic variations in known genes and their uses, as wellas novel uses for previously identified genetic variations discovered by thirdparties.  In the latter cases, we may needa license from the holder of the patent with respect to such genetic variationsin order to make, use or sell any related products.  We may not be able to acquire such licenseson terms acceptable to us, if at all.

 

Certain parties areattempting to rapidly identify and characterize genes and genetic variationsthrough the use of sequencing and other technologies.  To the extent that any patents are issued toother parties on such partial or full-length genes or genetic variations oruses for such genes or genetic variations, the risk increases that the sale ofproducts or services developed by us or our collaborators may give rise toclaims of patent infringement against us. Others may have filed and, in the future, are likely to file patentapplications covering many genetic variations and their uses.  Any such patent applications may havepriority over our patent applications and could further require us to obtainrights to previously issued patents covering genetic variations.  Any license that we may require under anysuch patent may not be made available to us on commercially acceptable terms,if at all.

 

We may be sued forinfringing on the intellectual property rights of others.  We could also become involved in interferenceproceedings in the United States Patent and Trademark Office to determine therelative priority of our patents or patent applications and those of the otherparties involved in the interference proceeding.  Intellectual property proceedings are costly,and could affect our results of operations. These proceedings can also divert the attention of managerial andtechnical personnel.  If we do notprevail in any intellectual property proceeding, in addition to any damages wemight have to pay, we could be required to stop the infringing activity, orobtain a license to or design around the intellectual property inquestion.  In interference proceedings,our patent rights could be invalidated and the scope of our patents could belimited.  If we are unable to obtainlicenses to intellectual property rights that we need to conduct our business,or are unable to design around any third party patent, we may be unable to sellsome of our products, which will result in reduced revenue.

 

We have in the past and maypossibly in the future become a party to litigation involving patents andintellectual property rights.  We havepreviously commenced litigation against a number of parties to protect ourrights pertaining to our intellectual property. We may in the future receive claims of infringement of intellectualproperty rights from other parties.  Ifwe do not prevail in any future legal proceedings, we may be required to paysignificant monetary damages.  Inaddition, we could also be enjoined from use of certain processes or preventedfrom selling certain configurations of our products or services that were foundto be within the scope of the patent claims. In the event we did not prevail in any future proceeding, we wouldeither have to obtain licenses from the other party, avoid certain productconfigurations or modify some of our products, services and processes to designaround the patents.  Licenses could becostly or unavailable on commercially reasonable terms.  Designing around patents or focusing effortson different configurations could be time consuming, and we may have to removesome of our products or services from the market while we were completingredesigns.  Accordingly, if we are unableto settle future intellectual property disputes through licensing or similararrangements, or if any such future disputes are determined adversely to us,our ability to market and sell our products and services could be harmed.  This would in turn reduce demands for ourservices and harm our financial condition and results of operations.

 

In addition, in order toprotect or enforce our patent rights or to protect our ability to operate ourbusiness, we may need to initiate other patent litigation against thirdparties.  These lawsuits could beexpensive, take significant time, and could divert Management’s attention fromother business concerns.  These lawsuitscould result in the invalidation  orlimitation in the scope of our patents or forfeiture of the rights associatedwith our patents.  We may not prevail inany such proceedings and a court may find damages or award other remedies infavor of our opposing party in any of these suits.  During the course of any future proceedings,there may be public announcements of the results of hearings, motions and otherinterim proceedings or developments in the litigation.  Securities analysts or investors may perceivethese announcements to be negative, which could cause the market price of ourstock to decline.

 

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**We may besubject to professional liability suits and our insurance may not be sufficientto cover damages.  If this occurs, ourbusiness and financial condition may be adversely affected.**

 

Our business exposes us topotential liability risks that are inherent in the testing, manufacturing,marketing and sale of genetic tests.  Theuse of our products and product candidates, whether for clinical trials orcommercial sale, may expose us to professional liability claims and possibleadverse publicity.  We may be subject toclaims resulting from incorrect results of analysis of genetic variations orother screening tests performed using our services.  Litigation of such claims could becostly.  We could expend significantfunds during any litigation proceeding brought against us.  Further, if a court were to require us to paydamages to a plaintiff, the amount of such damages could significantly harm ourfinancial condition.  Although we havepublic and products liability insurance coverage under broadform liability andprofessional indemnity policies, for an aggregate amount of $60,000,000, thelevel or breadth of our coverage may not be adequate to fully cover potentialliability claims.  To date we have notbeen subject to any claims, or ultimately liability, in excess of the amount ofour coverage.  In addition, we may not beable to obtain additional professional liability coverage in the future at anacceptable cost.  A successful claim orseries of claims brought against us in excess of our insurance coverage and theeffect of professional liability litigation upon the reputation andmarketability of our technology and products, together with the diversion ofthe attention of key personnel, could negatively affect our business.

 

**We use potentiallyhazardous materials, chemicals and patient samples in our business and anydisputes relating to improper handling, storage or disposal of these materialscould be time consuming and costly.**

 

Our research anddevelopment, production and service activities involve the controlled use ofhazardous laboratory materials and chemicals, including small quantities ofacid and alcohol, and patient tissue and blood samples.  We do not knowingly deal with infectious samples.  We, our collaborators and service providersare subject to stringent Australian federal, state and local laws andregulations governing occupational health and safety standards, including thosegoverning the use, storage, handling and disposal of these materials andcertain waste products.  However, wecould be liable for accidental contamination or discharge or any resultantinjury from hazardous materials, and conveyance, processing, and storage of anddata on patient samples.  If we, ourcollaborators or service providers fail to comply with applicable laws orregulations, we could be required to pay penalties or be held liable for anydamages that result and this liability could exceed our financialresources.  Further, future changes toenvironmental health and safety laws could cause us to incur additional expenseor restrict our operations.  We havenever had a reportable injury through the date of this Annual Report.

 

In addition, ourcollaborators and service providers may be working with these types ofhazardous materials, including hazardous chemicals, in connection with ourcollaborations.  In the event of alawsuit or investigation, we could be held responsible for any injury caused topersons or property by exposure to, or release of, these patient samples thatmay contain viruses and hazardous materials. The cost of this liability could exceed our resources.  While we maintain broadform liabilityinsurance coverage for these risks, in the amount of up to $40,000,000, thelevel or breadth of our coverage may not be adequate to fully cover potentialliability claims.  To date, we have notbeen subject to claims, or ultimately liability, in excess of the amount of ourcoverage.  Our broadform insurance coveragealso covers us against losses arising from an interruption of our businessactivities as a result of the mishandling of such materials.  We also maintain workers’ compensationinsurance, which is mandatory in Australia, covering all of our workers in theevent of injury.

 

**We dependon the collaborative efforts of our academic and corporate partners forresearch, development and commercialization of some of our products.  A breach by our partners of theirobligations, or the termination of the relationship, could deprive us ofvaluable resources and require additional investment of time and money.**

 

Our strategy for research,development and commercialization of some of our products involves enteringinto various arrangements with academic and corporate partners and others.  As a result, our strategy depends, in part,upon the success of these outside parties in performing theirresponsibilities.  Our collaborators mayalso be our competitors.  We cannotcontrol the amount and timing of resources that our collaborators devote toperforming their contractual obligations and we have no certainty that theseparties will perform their obligations as expected or that any revenue will bederived from these arrangements.

 

If our collaborators breachor terminate their agreement with us or otherwise fail to conduct theircollaborative activities in a timely manner, the development orcommercialization of the product candidate or research program under suchcollaborative arrangement may be delayed. If that is the case, we may be required to undertake unforeseenadditional responsibilities or to devote unforeseen additional funds or otherresources to such development or commercialization, or such development orcommercialization could be terminated. The termination or cancellation of collaborative arrangements couldadversely affect our financial condition, intellectual property position andgeneral operations.  In addition,disagreements between collaborators and us could lead to delays in thecollaborative research, development, or commercialization of certain productsor could require or result in formal legal process or arbitration forresolution.  These consequences could betime-consuming and expensive and could have material adverse effects on us.

 

Other than our contractualrights under our license agreements, we may be limited in our ability toconvince our licensees to fulfill their obligations.  If our licensees fail to act promptly andeffectively, or if a dispute arises, it could have a material adverse effect onour results of operations and the price of our Ordinary Shares and ADSs.

 

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We rely upon scientific,technical and clinical data supplied by academic and corporate collaborators,licensors, licensees, independent contractors and others in the evaluation anddevelopment of potential therapeutic methods. There may be errors or omissions in this data that would materiallyadversely affect the development of these methods.

 

We may seek additionalcollaborative arrangements to develop and commercialize our products in thefuture.  We may not  be able to negotiate acceptable collaborativearrangements in the future and, if negotiated, we have no certainty that theywill be on favorable terms or will be successful.  In addition, our collaborative partners maypursue alternative technologies independently or in collaboration with othersas a means of developing treatments for the diseases targeted by theircollaborative programs with us.  If anyof these events occurs, the progress of the Company could be adversely affectedand our results of operations and financial condition could suffer.

 

**Problemsassociated with international business operations could affect our ability tolicense our technology and our results of operations.**

 

We seek to license ourintellectual property on a global scale, including eventually in countries thatare considered to provide significantly less protection to intellectualproperty than the United States and Australia. In addition, a number of other risks are inherent in internationaltransactions and commerce, including political and economic instability,foreign currency exchange fluctuations and changes in tax laws.

 

**Governmentregulation of genetic research or testing may adversely affect the demand forour services and impair our business and operations.**

 

Apart from accreditationrequirements, we are generally not subject to regulation.  Federal, state and local governments,however, may adopt regulations relating to the conduct of genetic research andgenetic testing.  These regulations couldlimit or restrict genetic research activities as well as genetic testing forresearch or clinical purposes.  Inaddition, if state and local regulations are adopted, these regulations may beinconsistent with, or in conflict with, regulations adopted by other state orlocal governments.  Regulations relatingto genetic research activities could adversely affect our ability to conduct ourresearch and development activities.  Regulations restricting genetic testing couldadversely affect our ability to market and sell our services.  Accordingly, any regulations of this naturecould increase the costs of our operations or restrict our ability to conductour testing business and might adversely affect our operations and financialcondition.

 

In Australia, there is nolaw that prohibits the performing of a paternity test by using just a sampleobtained from a father and child.  In May 2003,the Australian Law Reform Commission (ALRC) released its report into HumanGenetic Testing in Australia.  Inrelation to paternity testing, it made various recommendations, the mostsignificant of which was that the testing of a child without the knowledge orconsent of both parents should be made illegal. In December 2005, the Australian Government formally responded tothe ALRC report.  Although it acceptedmost of the report’s recommendations, it did not accept its recommendation thatit should be illegal to test a child without the knowledge or consent of bothparents.  Instead, it recommended thatthe body that formally accredits laboratories, National Association of TestingAuthorities (NATA) should review its accreditation requirements for DNA parentagetesting to ensure that laboratories meet the highest technical and ethicalstandards, particularly in relation to consent to testing, protecting theintegrity of genetic samples, and providing information aboutcounselling.  As of December 2008, it is not clearwhat NATA has done in relation to the Government’s recommendation.

 

In November 2008, theFederal Government released a discussion paper on non-consensual genetictesting which it proposes to make illegal. The purpose of this paper is to obtain feedback from the public andindustry on this issue prior to formulating legislation in this area.  In the area of paternity testing, the paperdiscusses the issue of consent but makes no recommendation as to what therequired consent for taking a sample from a child would be.  For example, does this require the consent ofboth parents or just one?  If the testingof a sample eventually requires the consent of both parents, then this willhave a negative impact on our revenue as father/child testing is a substantialand growing market.

 

Responses to the discussionpaper must be submitted by the end of January 2009. It is not known howlong the Government will take to consider these submissions nor its timeframeto draft and then pass any proposed legislation.  If passed, this legislation will immediatelybecome law in the Australian Capital Territory and the Northern Territory.  All other States would then be required topass mirror legislation but are under no obligation to do so.  It is not clear how long it would take theStates to pass this legislation.

 

**We rely onthe services of individuals who possess special skills and experience.**

 

Much of the future successof the Company depends on the continued service and availability of skilledpersonnel, including members of its senior executive team, and those intechnical, marketing and staff positions. While we are actively recruiting new employees with such skills andexperience to reduce our reliance on these individuals, skilled personnel, withspecific experience in the biotechnology industry, are in high demand andcompetition for their talents is intense.

 

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**Ethical andother concerns surrounding the use of genetic information may reduce the demandfor our services.**

 

Public opinion regardingethical issues related to the confidentiality and appropriate use of genetictesting results may influence governmental authorities to call for limits on,or regulation of the use of, genetic testing. In addition, such authorities could prohibit testing for geneticpredisposition to certain conditions, particularly for those that have no knowncure.  Furthermore, adverse publicity orpublic opinion relating to genetic research and testing, even in the absence ofany governmental regulation, could reduce the potential markets for ourservices, which could materially and adversely affect our revenues.

 

Although we are a leader inthe field of genetics in Australia, we do not undertake any activities in thecontentious areas of cloning, stem cell research or other gene-alteringareas.  As such, many of the ethicalissues that may be relevant to other participants in the genetics industry arenot applicable to us.

 

**Licensing**

 

The patenting of genes andissues surrounding access to genetic knowledge are the subjects of extensiveand ongoing public debate in many countries. By way of example, the Australian Law Reform Commission conducted twoinquiries into the social uses of genetic information.  The patents we hold over uses of “non-coding”DNA have a broad scope and these have also been the subject of debate and somecriticism in the media.  A risk we mayface is that individuals or organisations in any of the countries in whichthese patents have issued could potentially take legal action to seek theiramendment, revocation or invalidation.

 

Furthermore, any time thatwe initiate legal action against parties that infringe our patents we face arisk that the infringer will defend itself through a counter-claim of patentinvalidity.  Subsequent legal actioncould potentially overturn, invalidate or limit the scope of our patents.

 

Under the relevant PatentAct in most, if not all, of the countries in which our non-coding patents haveissued, the relevant judicial system has rights to impose compulsorylicensing.  The relevant governmentstypically hold “march-in” rights by which they may unilaterally choose toexploit the technology.  To the extentthat the Company’s non-coding technology is used in the conduct of geneticresearch, we also face risks, uncertainty and controversy over the licensing ofour technology to those conducting research. Whether or not researchers should be exempted from obligations to takelicenses to the relevant patents was the subject of another government inquirybeing conducted by the Australian Council for Intellectual Property whorecommended the creation of a research exemption.

 

**Genetictesting**

 

There is a risk that amoratorium on genetic testing by the Australian Institute of Sport may impacton the commercialization of our sports performance genetic test for the elitecompetitor market in Australia.  However,this moratorium should not impact our ability to distribute this testthroughout the rest of the world.  Thereis also a view held by some elements of the medical and academic communitiesthat the marketing of some of our cancer predisposition tests is done solelywith a commercial objective in mind.  Inessence, some parties have indicated that, in their view, the risk ofinheriting certain types of cancer is too low to warrant the marketing ofgenetic testing services to the wider cancer community where such promotion mayincrease anxiety unnecessarily. Guidelines laid down by the Australian National Health Medical ResearchCouncil also prevent us from promoting our testing in a manner which may “causeany unnecessary alarm”.

 

In recent years, health carepayors as well as federal and state governments have focused on containing orreducing health care costs.  We cannotpredict the effect that any of these initiatives may have on our business.  In particular, gene-based therapeutics, ifsuccessfully developed and commercialized, are likely to be costly compared tocurrently available drug therapies. Health care cost containment initiatives focused either on gene-basedtherapeutics or on genetic testing could result in the growth in the clinicalmarket for genetic testing being curtailed or slowed.  In addition, health care cost containmentinitiatives could also cause pharmaceutical companies to reduce research anddevelopment spending.  In either case,our business and our operating results could be adversely affected.  Further, genetic testing in clinical settingsis often billed to third-party payors, including private insurers andgovernmental organizations.  If ourcurrent and future clinical products and services are not consideredcost-effective by these payors, reimbursement may not be available to users ofour services.  In this event, potentialcustomers would be much less likely to use our services and our business andoperating results could be harmed.

 

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**ITEM 4.****                            ****INFORMATION ON THE COMPANY**

 

**Item 4.A****                         ****History and Development ofthe Company**

 

We were incorporated underthe laws of Western Australia on January 5, 1987 as Concord MiningN.L.  On August 13, 1991, we changedour name to Consolidated Victorian Gold Mines N.L.  On December 2, 1991, we changed our nameto Consolidated Victorian Mines N.L.  On March 15,1995, we changed our name to Duketon Goldfields N.L.

 

On October 15, 1999,the type of company was changed from a No Liability Company to a companylimited by shares.      On August 29,2000, we changed our name to Genetic Technologies Limited, which is our currentname.  We were originally incorporated asa mining company and gradually phased out our mining activities and became abiotechnology company with the acquisition of GeneType AG in August 2000.  Our Australian Company Number (ACN) is 009212 328.  Our Australian Business Number(ABN) is 17 009 212 328.  We operatepursuant to our constitution, the Australian *CorporationsAct 2001*, the Australian Securities Exchange Listing Rules, theMarketplace Rules of NASDAQ and, where applicable, local legislation.

 

Our registered office,headquarters, laboratory and business activities are all located at 60-66Hanover Street, Fitzroy, Victoria, 3065 Australia.  Our telephone number is +61 3 8412 7000.  Our website address is www.gtg.com.au.  Information on our website and websiteslinked to it does not constitute part of this Annual Report.

 

On August 29, 2000, weacquired 100% of GeneType AG, including all of its valuable patents, and wechanged our focus exclusively to the area of biotechnology.  We also changed our name to GeneticTechnologies Limited to better reflect our new business.  In September 2000, our listing was dulytransferred from the mining board of the ASX to the industrial board and ourshares were thereafter classified under the industry group “Health andBiotechnology”, completing our transformation from a mining and resourcescompany into a biotechnology company. During 2001, we also acquired 10% of the issued and outstanding sharesin Cytomation Inc., based in Fort Collins, Colorado.  At that time, Cytomation was a leader in themanufacture and sales of flow cytometers and cell sorters.  Also, in December 2001, we acquired aninitial shareholding of less than 1% in the issued capital of XY, Inc., acompany also based in Fort Collins.  In July 2001,we acquired the business of DNA-ID Labs in Perth, Western Australia, as part ofour strategy of expanding our paternity testing business in Australia.  In March 2002, we formed AgGenomics Pty.Ltd., based in Melbourne, in order to expand our genetic testing services intothe field of plant genetics.  In May 2003,we acquired the fixed assets of the business Genetic Science Services inMelbourne, in order to further expand into the field of genetic testing.  In May 2007, we sold all of our sharesin XY, Inc.  The total proceedsreceived from the sale were $332,709 which resulted in a loss on sale of$33,307.  In July 2008, we acquiredall of the issued shares of Frozen Puppies Dot Com Pty. Ltd. based in Calga,New South Wales, which is Australia’s leading provider of canine reproductiveservices.

 

Since the acquisition ofGeneType AG, the directors have disposed of all remaining mining interests sothat our activities now focus solely on emerging opportunities in the field ofbiotechnology.  Our current activities inbiotechnology primarily concentrate on three clearly defined areas of activitywhich are covered under Item 4.B “Business Overview”.

 

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In early calendar year 2002,we commenced the process of out-licensing our non-coding patents, announcingseveral early successes.  Since then, wehave granted commercial licenses to a total of 38 licensees and 6 researchlicenses to the following parties, which are listed in reverse chronologicalorder of their effective dates:

 
| **Commercial  licensees**                                       | ** ** | **Research  licensees**                               |
|-----------------------------------------------------------------|------------|-------------------------------------------------------|
|                                                            |       |                                                  |
| 38. Millennium  Pharmaceuticals Inc., **USA**                   |       | 6.  Texas A&M University (Merlogen Inc.), **USA** |
| 37. GeneDx (Bio Reference  Laboratories Inc.), **USA**          |       | 5.  Colorado State University, **USA**                |
| 36. General Electric  Company, **USA**                          |       | 4.  University of Technology Sydney, **Australia**    |
| 35. Prometheus  Laboratories Inc. **USA**                       |       | 3.  King’s College, London, **England**          |
| 34. Kimball Genetics Inc.,  **USA**                             |       | 2.  University of Sydney, **Australia**               |
| 33. BioSearch Technologies  Inc., **USA**                       |       | 1.  University of Utah, **USA**                       |
| 32. Syngenta Crop Protection  AG, **Switzerland**               |       |                                                  |
| 31. Monsanto Company  (swine genetics), **USA**                 |       |                                                  |
| 30. Thermo Fisher  Scientific Inc., **USA**                     |       |                                                  |
| 29. Monsanto Company  (plant genetics) **USA**                  |       |                                                  |
| 28.  Sciona Inc., **USA**                                       |       |                                                  |
| 27.  Genosense Diagnostics GmbH, **Austria**                    |       |                                                  |
| 26. Innogenetics NV, **Belgium**                                |       |                                                  |
| 25. Bovigen LLC, **USA**                                        |       |                                                  |
| 24. Optigen LLC, **USA**                                        |       |                                                  |
| 23. Applera Corporation, **USA**                                |       |                                                  |
| 19 - 22. Four agriculture  groups, **New Zealand**              |       |                                                  |
| 18. Australian Genome  Research Facility Limited, **Australia** |       |                                                  |
| 17. Bionomics Limited, **Australia**                            |       |                                                  |
| 16. C.Y. O’Connor ERADE  Village Foundation, **Australia** |       |                                                  |
| 15. ViaLactia Biosciences  Limited, **New****Zealand**          |       |                                                  |
| 14. MetaMorphix  Inc., **USA**                                  |       |                                                  |
| 13.  Genzyme Corporation, **USA**                               |       |                                                  |
| 12. Ovita Limited, **New****Zealand**                           |       |                                                  |
| 11. Laboratory Corporation  of America Holdings, **USA**        |       |                                                  |
| 10. TM Biosciences  Corporation, **Canada**                     |       |                                                  |
| 9. Quest Diagnostics Inc.,  **USA**                             |       |                                                  |
| 8. Orchid Biosciences  Inc., **USA**                            |       |                                                  |
| 7. ARUP, **USA**                                                |       |                                                  |
| 6. Biotage AB, **Sweden**                                       |       |                                                  |
| 5. Myriad Genetics Inc., **USA**                                |       |                                                  |
| 4. Perlegen Sciences Inc.,  **USA**                             |       |                                                  |
| 3. Nanogen Inc., **USA**                                        |       |                                                  |
| 2. Sequenom Inc., **USA**                                       |       |                                                  |
| 1. Genetic Solutions Pty.  Ltd., **Australia**                  |       |                                                  |

 

It is a priority for theCompany to continue to identify additional parties who would benefit fromtaking a license to the Company’s non-coding patents.  We are now pursuing negotiations with anumber of companies and organizations in USA and Europe that would benefit fromtaking a license to our non-coding patents or from collaborations with ourservice testing business.

 

In order to increase therate at which these licenses can be secured, the licensing team at the Company’sheadquarters in Melbourne, Australia has been expanded in recent years by theappointment of additional staff to accelerate the preparation of dossiers onpotential licensees.  Internationally,independent licensing contractors were engaged to represent the Company “on theground” in our major markets.

 

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**Item 4.B****                         ****Business Overview**

 

We are a biotechnologycompany, now pursuing commercial opportunities in three main areas of activity:

 

(i)                     out-licensing our non-coding patentsglobally;

 

(ii)                  expanding our genetic service testingbusiness in the Asia-Pacific Region; and

 

(iii)               supporting certain late-stage research projectsin which we are already involved.

 

**Industry Background**

 

The Human Genome Projectannounced (in April 2003) the completion of the first draft of the entiresequence of the human genome.  Thebiotechnology industry is now working to build upon the vast amount ofknowledge generated by that program in order to develop a better understandingof the genetic basis of human health and disease.  Increasingly, genetics is being shown to playa key role in the diagnosis and treatment of many diseases in humans, as wellas diseases in animals and plants.  Ourgrowing understanding of genetics is now providing new information forunderstanding such predisposing or causative factors in many of these diseases.

 

Prior to the Human GenomeProject, the successful mapping of the Mouse Genome (published in December 2002)permitted, for the first time, a detailed comparison of human genes and mousegenes.  One of the key findings that hasarisen from this work is the significant role that non-coding DNA plays incontrolling gene function in both human genes and mouse genes.  For some scientists, but not for our company,these findings - of the great significance of non-coding DNA to gene function -were new, significant and totally unexpected.

 

A major focus in science isnow the identification and analysis of genetic variations anddisease-associated genes within the genome. These genetic variations, or polymorphisms, in the DNA sequences varybetween individuals.  The most commongenetic variations are Single Nucleotide Polymorphisms, or SNPs, which aremerely a difference in a single nucleotide. The first draft of the human genome identified over 1.4 million SNPsthat can be useful as positional signposts for disease-associated DNA sequencesin a gene or as markers to map genes along a chromosome.  A significant number of these SNPs (perhapsmore than 97%) are now known to be non-coding.

 

**Genomics**

 

A genome is an organism’scomplete set of DNA and the study of that DNA is called genomics.  Genomes vary in size, with bacteriadisplaying the smallest known genome at 600,000 DNA base pairs, while human andmouse genomes have over 3 billion.  TheDNA of the human genome is organized into 24 distinct chromosomes that containfrom 50 million to 250 million base pairs on each chromosome.  The DNA on each chromosome contains genesthat are specific sequences that encode proteins that actually perform the workwithin a cell and also make up the cell itself. Surprisingly, only about 2% to 5% of the human genome is organized intocoding DNA, with the remainder being considered to be non-coding DNA.  Our patent portfolio is centered onproprietary methods for utilizing the valuable information contained withinthese non-coding regions.

 

**Genetic Variability**

 

Almost 99.9% of anindividual’s genome is identical to that of every other individual’sgenome.  However, even slight variationsin sequence can drastically change how a gene functions.  Variations can lead to harmless changes, suchas blue eyes instead of brown, or to major diseases such as cancer, cysticfibrosis, or cardiovascular disease. Genetic variations can also be responsible for many of the differencesin the ways individuals respond to drug therapies.  As a result of this knowledge, routineanalysis of SNPs and other genetic variations is expected to play anincreasingly important role in the discovery and development of new drugs, aswell as in a variety of diagnostic therapeutic and other medical and lifescience applications.  Industry sourcesestimate there are millions of genetic variations in the human genome, creatingdemand for products and technologies that can quickly and accurately detect andanalyze these variations.  It is thoughtthat the medicine of the future will be dispensed to a patient based on his orher own specific DNA variations.  Thistype of “personalized medicine” will require sophisticated genetic tests todetermine the genetic composition of an individual, and it is now recognizedthat such genetic make-up depends not only on the form of the coding DNA, butalso the form of the associated non-coding DNA.

 

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**GeneticTests**

 

Most genes come in manydifferent forms, called alleles.  One ormore allele may be associated with a particular disease state.  Genetic testing involves the directexamination of an individual’s DNA for a DNA marker associated with the alleleof interest.  The determination of theparticular alleles an individual has within his or her DNA is calledgenotyping.

 

The most commonly testedmarker of a particular allele is a SNP. As much as 98% of the human genome is considered to be non-coding DNA,the majority of the identified 1.4 million SNPs are also located in non-codingregions of DNA.  We believe that alicense to our proprietary methods of analyzing non-coding regions of DNA willbe absolutely necessary for many of the genetic tests of the future.  Similarly, tests for genetic abnormalities ormutations may involve not just individual SNPs, but also groups of SNPs or evenlarger sequences of DNA, and such abnormal sequences - large or small - may belocated either in the coding region alone, or in the non-coding region alone,or in both the coding and non-coding regions of the gene (or genes) underexamination.  Clearly, the variationswithin genes that may be responsible for a disease are now known to be muchmore complicated than was previously understood, and the role of non-coding DNAis now being found to be highly relevant in a growing number of diseases.  This similarly applies to genetic disordersin animals and in plants.  Accordingly,more and more genetic testing will in future look not only at codingvariations, but also at the non-coding variations within a particular gene.

 

**Our Patent Portfolio**

 

The acquisition of GeneTypeAG gave our company ownership rights to a potentially significant portfolio ofissued patents.  The major families ofpatents in the portfolio include:

 

(a)          Intron Sequence Analysis;

 

(b)         Genomic Mapping;

 

(c)          Electrophoresis Standards;

 

(d)         Ancestral Haplotypes;

 

(e)          Sports Performance;

 

(f)            Immunotherapeutics;

 

(g)         Antiparasitics; and

 

(h)         Fetal Cell Recovery.

 

**(a)   The IntronSequence Analysis patents** - allow for the detection of specific motifs within the geneticmaterial in the non-coding regions of DNA which have been shown may be linkedto certain alleles or haplotypes within the coding region of the gene.  In other words, whereas most geneticistspreviously looked at the genetic information located within the coding region alone,our inventions have provided a means of also looking at additional usefulinformation which is located within the non-coding part of the gene, and whichis now known to also be important in influencing gene function and, inparticular, protein production.  Themethod is useful, for example, in the determination of tissue typing fortransplantation in order to test for possible likely acceptance or rejection ofbone marrow or tissue grafts.  The methodis also useful in the detection of genetic changes or mutations in thenon-coding region of certain genes associated with a higher incidence ofcertain genetic diseases, such as cystic fibrosis, susceptibility to breastcancer, multiple sclerosis, Alzheimer’s Disease, etc.  It is also now known that more than 100 humandiseases are associated with genetic changes in the non-coding part of aparticular gene and which are linked to the function of the coding part of thatgene.  Similar applications also exist inanimals and plants.  Several importantmarkers in livestock, for example, have been shown to be located in thenon-coding part of the DNA and also linked to particular coding function - forexample, marbling or tenderness.  It hasalso been shown that variations in the non-coding DNA of plants can influencetheir function, including the color of flowers and the timing of germinationand growth.

 

**(b)**   **The GenomicMapping patents** - describe methods for analyzing genetic materialcollected from various selected populations to identify and locate genes andmarkers of interest, by identifying highly polymorphic sites throughout thegenome and particular haplotypes associated with such sites, all based on areading of sequence information in both the coding and the non-coding portionsof the genome.

 

**(c)   TheElectrophoresis Standards patents**-****describe a method foridentifying band positions in an electrophoretic separation by also including acontrol, which serves as an internal standard.

 

**(d)**   **TheAncestral Haplotypes patents** - describe a method for determiningancestral haplotypes using haplospecific geometric elements within the majorhistocompatibility complex multi-gene cluster and methods of genetic analysisinvolving the amplification of complimentary duplicons.  These patents were acquired from the C.Y. O’ConnorERADE Village Foundation in Western Australia.

 

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**(e)**   **The SportsPerformance patents** - describe a method that enables aspects ofathletic performance to be predicted based on detection of various forms of thealpha actinin 3 (ACTN3) gene.

 

**(f)**    **TheImmunotherapeutics patents** - describe various methods aimed atimproving the efficacy of cancer therapy and treatment of HIV-AIDS and form thebasis of the ImmunAid project.

 

**(g)   The Antiparasiticpatents** - describemeans to identify and to control a variety of species of parasites.  The patent applications describe the use ofmodern genetic technologies to identify celluar targets for two novel classesof chemicals which can be used to control the major parasitic worms of sheepand cattle.  These nematodes areresponsible for extensive economic losses to the sheep and cattle industriesand are rapidly developing resistance to the existing chemicals.  The novel classes of chemical described inthese patents offer a safe and highly effective alternative.

 

**(h)**   **The FetalCell Recovery patents** - the older patents describe a novel and safemethod for the isolation and collection of fetal cells from the peripheralblood of a pregnant woman, utilizing various HLA or other markers plus flowcytometry - all without any invasive procedure that might endanger the motheror the child.  Together with more recentpatents, these form the basis of the intellectual property associated with theRareCellect project.

 

The many issued, allowed andpending patents claimed by GeneType AG, and which are now owned by our Company,distinguish us from competitors by giving us the legal right to claim ownershipof proprietary methods and compositions for analysis of DNA using informationcontained within non-coding regions and for isolation of fetal cells.  The methods and compositions for analysis ofDNA may be used to identify a particular form of a gene or to map the locationof a disease-associated gene along a chromosome.

 

In total, we own 8 issuedpatents and 11 patent applications in the United States.  Reflecting our international businessstrategy, we have also sought and been granted foreign patents by many othermajor industrialized nations, corresponding to each of the major patentsalready issued in the United States.

 

Generally, United Statespatents filed with the United States Patent Office prior to June 8, 1995have a term of 17 years from the date of issuance, and 20 years from theapplication filing date or earlier claimed priority date in the case of patentsissued from applications filed on or after June 8, 1995.  For applications filed after May 29,2000, the term is 20 years from the date of filing.  A minimum term of 17 years is assured,provided the applicant causes no delays during prosecution.  Patents in most other countries have a termof 20 years from the date of filing the patent application.  Our issued United States patents will beginto expire in 2009.  We intend to continueto file patent applications as we develop new products, technologies andpatentable enhancements.  Prosecutionpractices have been implemented to avoid any applicant delays that couldcompromise the 17-year minimum term. There can be no guarantee that such procedures will prevent the loss ofa potential patent term.  This isparticularly true in the short-term as the patent rules implementing themost recent patent term changes are largely new and untested.

 

Complex legal and factualdeterminations and evolving law make patent protection uncertain.  As a result, we cannot be certain thatpatents will be issued from any of our pending patent applications or fromapplications licensed to us or that any issued patents will have sufficientbreadth to offer meaningful protection. In addition, our issued patents may be successfully challenged,invalidated, circumvented or rendered unenforceable so that our patent rightswould not create an effective competitive barrier.  Moreover, the laws of some countries may notprotect our proprietary rights to the same extent as do the United Statespatent laws.

 

In addition to patentprotection, we rely on trade secret protection of our intellectualproperty.  We attempt to protect ourtrade secrets by entering into confidentiality agreements with third parties,employees and consultants.  Our employeesand consultants are required to sign agreements to assign to us their interestsin discoveries, inventions, patents, trademarks and copyrights arising fromtheir work for us.  They are alsorequired to maintain the confidentiality of our intellectual property, andrefrain from unfair competition with us during their employment and for acertain period of time after their employment with us, which includessolicitation of our employees and customers. We cannot be certain these agreements will not be breached orinvalidated.  In addition, third partiesmay independently discover or invent competing technologies or reverse engineerour trade secrets or other technologies.

 

In the future, we may becomeinvolved in lawsuits in which third parties file claims asserting that ourtechnologies or products infringe on their intellectual property.  We cannot predict whether third parties will assertsuch claims against us or against the licensors of technologies licensed to us,or our licensees, or whether those claims will hurt our business.  We may be forced to defend against suchclaims, whether they are with or without merit or whether they are resolved infavor of or against our licensors or us and may face costly litigation anddiversion of Management’s attention and resources.  As a result of such disputes, we may have todevelop costly non-infringing technologies or enter into licensingagreements.  These agreements may obligeus to accept costly terms, which could seriously limit the ability to conductour operations and affect adversely our financial condition.

 

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In addition, we may becomeinvolved in lawsuits in which third parties file claims asserting that one ormore of our patents are invalid.  Wecannot predict whether third parties will assert such claims against us oragainst the licensees of such patents, or whether those claims will have anadverse impact on our business.  We maybe forced to defend against such claims, whether they are with or without meritor whether they are resolved in favor of or against our licensees or us and mayface costly litigation and diversion of Management’s attention.  During the period from February 2001through March 31, 2002, we had in place a patent insurance policy, placedwith GE Reinsurance Corporation through Dexta Corporation Limited, theirmanaging general agents in Australia. Although the policy was not renewed on its expiry, since we had advisedDexta of 13 companies prior to March 31, 2002 as potential infringers, asignificant portion of our expenses incurred to date relating to theprosecution of our claims have been covered by the policy.

 

Of those 13 so identified,we have secured licenses with six, relinquished our claims against four andcommenced proceedings against Applera, Covance and Nuvello.  The suits against Covance and Nuvello weresubsequently settled.  On December 12,2005, we announced the final settlement of our patent dispute with AppleraCorporation, further to a settlement conference held in San Francisco,California.  The parties had executed anumber of binding agreements, including a final Settlement Agreement pluslicense agreements and a supply agreement and, subsequently, they jointlyapplied to Northern California District Court requesting that all claims andcounterclaims in the legal action be dismissed forthwith.  The total value of the considerationreceivable by us is approximately $15 million, payable partly in cash andpartly in kind, including agreements supplying the Company with certain Appleraequipment, reagents and intellectual property rights.  Recognition of in-kind consideration asrevenue is subject to us meeting certain revenue recognition criteriaincluding, but not limited to, the measurement of fair value at the time ofreceipt.

 

**Our Patents**

 

Ourcurrent patent portfolio is described below. “Numbers” refers to either provisional, application, publication orpatent number.

 
| ** **                                                                                             | ** ** | **Country / region** | ** ** | **Numbers** | ** ** | **Granted** | ** ** | **Pending** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                                                                                             |       |                           |       |        |       |        |       |        |       |
| **INTRON SEQUENCE ANALYSIS**                                                                 |       |                           |       |        |       |        |       |        |       |
| ** **                                                                                             |       |                           |       |        |       |        |       |        |       |
| **Intron  sequence analysis method for detection of adjacent and remote locus alleles  as haplotypes** |       | Australia                      |       | AU654111    |       | ·      |       |        |       |
| Earliest priority August 25, 1989                                                                 |       |                           |       | AU672519    |       | ·      |       |        |       |
|                                                                                                   |       | Austria                        |       | AT144797    |       | ·      |       |        |       |
|                                                                                                   |       | Belgium                        |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | Canada                         |       | CA2023888   |       | ·      |       |        |       |
|                                                                                                   |       | Denmark                        |       | DK414469    |       | ·      |       |        |       |
|                                                                                                   |       | Europe                         |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | France                         |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | Germany                        |       | DE69029018  |       | ·      |       |        |       |
|                                                                                                   |       |                           |       | DD299319    |       | ·      |       |        |       |
|                                                                                                   |       | Great  Britain                 |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | Greece                         |       | GR3022410   |       | ·      |       |        |       |
|                                                                                                   |       | Hong Kong                      |       | HK1008053   |       | ·      |       |        |       |
|                                                                                                   |       | Israel                         |       | IL95467     |       | ·      |       |        |       |
|                                                                                                   |       | Italy                          |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | Japan                          |       | JP3206812   |       | ·      |       |        |       |
|                                                                                                   |       | Liechtenstein                  |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | Luxemburg                      |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | Netherlands                    |       | EP414469    |       | ·      |       |        |       |
| ** **                                                                                             |       | New Zealand                    |       | NZ235051    |       | ·      |       |        |       |
|                                                                                                   |       | Singapore                      |       | SG47747     |       | ·      |       |        |       |
|                                                                                                   |       | South Africa                   |       | ZA9006765   |       | ·      |       |        |       |
|                                                                                                   |       | Spain                          |       | ES2095859   |       | ·      |       |        |       |
|                                                                                                   |       | Sweden                         |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | Switzerland                    |       | EP414469    |       | ·      |       |        |       |
|                                                                                                   |       | United  States                 |       | US5192659   |       | ·      |       |        |       |
|                                                                                                   |       |                           |       | US5612179   |       | ·      |       |        |       |
|                                                                                                   |       |                           |       | US5789568   |       | ·      |       |        |       |

 

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| ** **                                                                                                                                             | ** ** | **Country / region** | ** ** | **Numbers**  | ** ** | **Granted** | ** ** | **Pending** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------|------------|--------------|------------|-------------|------------|-------------|------------|
| ** **                                                                                                                                             |       |                           |       |         |       |        |       |        |       |
| **GENOMIC MAPPING**                                                                                                                               |       |                           |       |         |       |        |       |        |       |
| ** **                                                                                                                                             |       |                           |       |         |       |        |       |        |       |
| **Genomic  mapping method by direct haplotyping using intron sequence analysis**                                                                       |       | Australia                      |       | AU647806     |       | ·      |       |        |       |
| Earliest priority July 11, 1990                                                                                                                   |       | Austria                        |       | AT185377     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Belgium                        |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Canada                         |       | CA2087042    |       | ·      |       |        |       |
|                                                                                                                                                   |       | Denmark                        |       | DK570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Europe                         |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | France                         |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Germany                        |       | DE69131691   |       | ·      |       |        |       |
|                                                                                                                                                   |       | Great  Britain                 |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Ireland                        |       | IE912426     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Israel                         |       | IL98793      |       | ·      |       |        |       |
|                                                                                                                                                   |       | Italy                          |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Japan                          |       | JP3409796    |       | ·      |       |        |       |
|                                                                                                                                                   |       | Luxemburg                      |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Netherlands                    |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | New Zealand                    |       | NZ238926     |       | ·      |       |        |       |
|                                                                                                                                                   |       | South Africa                   |       | ZA9105422    |       | ·      |       |        |       |
|                                                                                                                                                   |       | Sweden                         |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Switzerland                    |       | EP570371     |       | ·      |       |        |       |
|                                                                                                                                                   |       | United  States                 |       | US5851762    |       | ·      |       |        |       |
|                                                                                                                                                   |       |                           |       |         |       |        |       |        |       |
| **ELECTROPHORESIS STANDARDS**                                                                                                                          |       |                           |       |         |       |        |       |        |       |
| ** **                                                                                                                                             |       |                           |       |         |       |        |       |        |       |
| **Internal standard for electrophoretic  separations**                                                                                                 |       | Austria                        |       | AT159589     |       | ·      |       |        |       |
| Earliest priority July 11, 1990                                                                                                                   |       | Europe                         |       | EP466479     |       | ·      |       |        |       |
|                                                                                                                                                   |       | France                         |       | EP466479     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Germany                        |       | DE69127999   |       | ·      |       |        |       |
|                                                                                                                                                   |       | Great  Britain                 |       | EP466479     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Japan                          |       | JP4232850    |       | ·      |       |        |       |
|                                                                                                                                                   |       | Sweden                         |       | EP466479     |       | ·      |       |        |       |
|                                                                                                                                                   |       | United  States                 |       | US5096557    |       | ·      |       |        |       |
| ** **                                                                                                                                             | ** ** | ** **                     | ** ** | ** **   | ** ** | ** **  | ** ** | ** **  | ** ** |
| **ANCESTRAL HAPLOTYPES**                                                                                                                          | ** ** | ** **                     | ** ** | ** **   | ** ** | ** **  | ** ** | ** **  | ** ** |
| ** **                                                                                                                                             |       |                           |       |         |       |        |       |        |       |
| **Genetic  analysis**                                                                                                                                  |       | Europe                         |       | EP660877     |       | ·      |       |        |       |
| Earliest  priority November 1, 1991                                                                                                               |       | France                         |       | EP660877     |       | ·      |       |        |       |
|                                                                                                                                                   |       | Germany                        |       | DE69232726   |       | ·      |       |        |       |
|                                                                                                                                                   |       | Great  Britain                 |       | EP660877     |       | ·      |       |        |       |
|                                                                                                                                                   |       |                           |       |         |       |        |       |        |       |
| **Method  for determining ancestral haplotypes using haplospecific geometric elements  within the major histocompatability complex multigene cluster** |       | United  States                 |       | US6383747    |       | ·      |       |        |       |
| Earliest  priority November 1, 1991                                                                                                               |       |                           |       |         |       |        |       |        |       |
|                                                                                                                                                   |       |                           |       |         |       |        |       |        |       |
| **Methods  of genetic analysis involving the amplification of complementary duplicons**                                                                |       | Australia                      |       | AU2006214800 |       |        |       | ·      |       |
| Earliest  priority February 16, 2005                                                                                                              |       | Canada                         |       | CA2597947    |       |        |       | ·      |       |
|                                                                                                                                                   |       | Europe                         |       | EP06704883   |       |        |       | ·      |       |
|                                                                                                                                                   |       | Japan                          |       | JP2007555425 |       |        |       | ·      |       |
|                                                                                                                                                   |       | United  States                 |       | US11/816522  |       |        |       | ·      |       |
|                                                                                                                                                        |            |                                |            |              |            |             |            |             |            |  |

 

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| ** **                                          | ** ** | **Country / region** | ** ** | **Numbers**      | ** ** | **Granted** | ** ** | **Pending** | ** ** |
|-----------------------------------------------------|------------|--------------------------------|------------|------------------|------------|-------------|------------|-------------|------------|
| ** **                                          |       |                           |       |             |       |        |       |        |       |
| **SPORTS PERFORMANCE**                         |       |                           |       |             |       |        |       |        |       |
| ** **                                          |       |                           |       |             |       |        |       |        |       |
| **ACTN3 genotype screen for athletic  performance** |       | Australia                      |       | AU2003258390     |       | ·      |       |        |       |
| Earliest priority September 16, 2002           |       | Canada                         |       | CA2499084        |       |        |       | ·      |       |
|                                                |       | China                          |       | CN1732270        |       |        |       | ·      |       |
|                                                |       | Europe                         |       | EP1546403        |       |        |       | ·      |       |
|                                                |       | India                          |       | 599/KOLNP/2005   |       | ·      |       |        |       |
|                                                |       | Japan                          |       | JP2005538710     |       | ·      |       |        |       |
|                                                |       | New Zealand                    |       | NZ538890         |       | ·      |       |        |       |
|                                                |       | Russia                         |       | RU2005111236     |       |        |       | ·      |       |
|                                                |       | South Korea                    |       | KR20050053670    |       |        |       | ·      |       |
|                                                |       | United  States                 |       | US2006121478     |       |        |       | ·      |       |
|                                                |       |                           |       |             |       |        |       |        |       |
| **IMMUNOTHERAPEUTICS**                              |       |                           |       |             |       |        |       |        |       |
| ** **                                          |       |                           |       |             |       |        |       |        |       |
| **A retroviral immunotherapy**                      |       | Australia                      |       | AU2003200583     |       | ·      |       |        |       |
| Earliest priority August 18, 2000              |       | New Zealand                    |       | NZ524280         |       | ·      |       |        |       |
|                                                |       | Singapore                      |       | SG95523          |       | ·      |       |        |       |
|                                                |       | South Africa                   |       | ZA200301694      |       | ·      |       |        |       |
|                                                |       | Brazil                         |       | BR0113354        |       |        |       | ·      |       |
|                                                |       | Canada                         |       | CA2431954        |       |        |       | ·      |       |
|                                                |       | China                          |       | CN1469746        |       |        |       | ·      |       |
|                                                |       | Europe                         |       | EP1311267        |       |        |       | ·      |       |
|                                                |       | United  States                 |       | US20030228320    |       |        |       | ·      |       |
| ** **                                          |       |                           |       |             |       |        |       |        |       |
| **Cancer therapy**                                  |       | Singapore                      |       | SG105902         |       | ·      |       |        |       |
| Earliest priority February 14, 2002            |       | South Africa                   |       | ZA200407142      |       | ·      |       |        |       |
|                                                |       | Australia                      |       | AU2003203051     |       | ·      |       |        |       |
|                                                |       | Brazil                         |       | BR0307661        |       |        |       | ·      |       |
|                                                |       | Canada                         |       | CA2476366        |       |        |       | ·      |       |
|                                                |       | China                          |       | CN1646155        |       |        |       | ·      |       |
|                                                |       | Europe                         |       | EP1482970        |       |        |       | ·      |       |
|                                                |       | Japan                          |       | JP2005523277     |       |        |       | ·      |       |
|                                                |       | New Zealand                    |       | NZ554840         |       |        |       | ·      |       |
|                                                |       | United  States                 |       | US2005180971     |       |        |       | ·      |       |
|                                                |       |                           |       |             |       |        |       |        |       |
| **Strategy for retroviral immunotherapy**           |       | Singapore                      |       | SG105903         |       | ·      |       |        |       |
| Earliest priority February 20, 2002            |       | South Africa                   |       | ZA200407143      |       | ·      |       |        |       |
|                                                |       | Brazil                         |       | BR0307868        |       |        |       | ·      |       |
|                                                |       | Canada                         |       | CA2476956        |       |        |       | ·      |       |
|                                                |       | China                          |       | CN1646156        |       |        |       | ·      |       |
|                                                |       | China                          |       | CN200710199719   |       |        |       | ·      |       |
|                                                |       | Europe                         |       | EP1482971        |       |        |       | ·      |       |
|                                                |       | Japan                          |       | JP2005526729     |       |        |       | ·      |       |
|                                                |       | New Zealand                    |       | NZ554839         |       |        |       | ·      |       |
|                                                |       |                           |       |             |       |        |       |        |       |
| **Method of therapy**                               |       | Singapore                      |       | SG121609         |       | ·      |       |        |       |
| Earliest priority October 24, 2003             |       | Australia                      |       | AU2004283322     |       |        |       | ·      |       |
|                                                |       | Canada                         |       | CA2543490        |       |        |       | ·      |       |
|                                                |       | China                          |       | CN1898569        |       |        |       | ·      |       |
|                                                |       | Europe                         |       | EP1692516        |       |        |       | ·      |       |
|                                                |       | Israel                         |       | IL175141         |       |        |       | ·      |       |
|                                                |       | Japan                          |       | JP2007509078     |       |        |       | ·      |       |
|                                                |       | Mexico                         |       | PA/a/2006/004522 |       |        |       | ·      |       |
|                                                |       | New Zealand                    |       | NZ546873         |       |        |       | ·      |       |
|                                                |       | United  States                 |       | US2007202119     |       |        |       | ·      |       |

 

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| ** **                                                                                             | ** ** | **Country  / region** | ** ** | **Numbers**       | ** ** | **Granted** | ** ** | **Pending** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-------------------|------------|-------------|------------|-------------|------------|
| ** **                                                                                             |       |                  |       |              |       |        |       |        |       |
| **IMMUNOTHERAPEUTICS (cont.)**                                                                         |       |                  |       |              |       |        |       |        |       |
| ** **                                                                                             |       |                  |       |              |       |        |       |        |       |
| **Therapeutic  strategy for treating autoimmune and degenerative diseases**                            |       | Australia             |       | AU2005282218      |       |        |       | ·      |       |
| Earliest  priority September 8, 2004                                                              |       | Canada                |       | CA2579353         |       |        |       | ·      |       |
|                                                                                                   |       | Europe                |       | EP1805510         |       |        |       | ·      |       |
|                                                                                                   |       | Japan                 |       | JP2007530544      |       |        |       | ·      |       |
|                                                                                                   |       | New Zealand           |       | NZ553720          |       |        |       | ·      |       |
|                                                                                                   |       | Singapore             |       | SG130540          |       |        |       | ·      |       |
|                                                                                                   |       | United States         |       | US11/574911       |       |        |       | ·      |       |
|                                                                                                   |       |                  |       |              |       |        |       |        |       |
| **ANTIPARASITICS**                                                                                     |       |                  |       |              |       |        |       |        |       |
| ** **                                                                                             |       |                  |       |              |       |        |       |        |       |
| **Compounds,  composition and methods for controlling invertebrate pests**                             |       | World                 |       | PCT/AU2007/001762 |       |        |       | ·      |       |
| Earliest  priority November 15, 2006                                                              |       |                  |       |              |       |        |       |        |       |
|                                                                                                   |       |                  |       |              |       |        |       |        |       |
| **Invertebrate  control agents, compositions and methods of use**                                      |       | Australia             |       | AU2007906474      |       |        |       | ·      |       |
| Earliest  priority November 23, 2006                                                              |       |                  |       |              |       |        |       |        |       |
|                                                                                                   |       |                  |       |              |       |        |       |        |       |
| **FETAL  CELL RECOVERY**                                                                               | ** ** | ** **            | ** ** | ** **        | ** ** | ** **  | ** ** | ** **  | ** ** |
| ** **                                                                                             |       |                  |       |              |       |        |       |        |       |
| **Fetal  cell recovery method**                                                                        |       | Australia             |       | AU649027          |       | ·      |       |        |       |
| Earliest  priority March 27, 1990                                                                 |       | Austria               |       | AT194166          |       | ·      |       |        |       |
|                                                                                                   |       | Belgium               |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | Canada                |       | CA2059554         |       | ·      |       |        |       |
|                                                                                                   |       | Denmark               |       | DK521909          |       | ·      |       |        |       |
|                                                                                                   |       | Europe                |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | France                |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | Germany               |       | DE69132269        |       | ·      |       |        |       |
|                                                                                                   |       | Great  Britain        |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | Greece                |       | GR3034487         |       | ·      |       |        |       |
|                                                                                                   |       | Ireland               |       | IE910996          |       | ·      |       |        |       |
|                                                                                                   |       | Israel                |       | IL97677           |       | ·      |       |        |       |
|                                                                                                   |       | Italy                 |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | Japan                 |       | JP2965699         |       | ·      |       |        |       |
|                                                                                                   |       | Liechtenstein         |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | Luxemburg             |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | Netherlands           |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | New Zealand           |       | NZ237589          |       | ·      |       |        |       |
|                                                                                                   |       | Singapore             |       | SG79188           |       | ·      |       |        |       |
|                                                                                                   |       | South Africa          |       | ZA9102317         |       | ·      |       |        |       |
|                                                                                                   |       | Spain                 |       | ES2149760         |       | ·      |       |        |       |
|                                                                                                   |       | Sweden                |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | Switzerland           |       | EP521909          |       | ·      |       |        |       |
|                                                                                                   |       | United  States        |       | US5447842         |       | ·      |       |        |       |
|                                                                                                   |       |                  |       | US5153117         |       | ·      |       |        |       |
|                                                                                                   |       |                  |       |              |       |        |       |        |       |
| **Maternal  antibodies as fetal cell markers to identify and enrich fetal cells from  maternal blood** |       | Singapore             |       | SG108133          |       | ·      |       |        |       |
| Earliest  priority May 30, 2002                                                                   |       | Australia             |       | AU2003229397      |       |        |       | ·      |       |
|                                                                                                   |       | Canada                |       | CA2492631         |       |        |       | ·      |       |
|                                                                                                   |       | Europe                |       | EP1532453         |       |        |       | ·      |       |
|                                                                                                   |       | Hong Kong             |       | HK1075699         |       |        |       | ·      |       |
|                                                                                                   |       | Japan                 |       | JP2005528616      |       |        |       | ·      |       |
|                                                                                                   |       | New Zealand           |       | NZ537328          |       | ·      |       |        |       |
|                                                                                                   |       | United  States        |       | US2005287604      |       |        |       | ·      |       |

 

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| ** **                                                                          | ** ** | **Country / region** | ** ** | **Numbers**   | ** ** | **Granted** | ** ** | **Pending** | ** ** |
|-------------------------------------------------------------------------------------|------------|--------------------------------|------------|---------------|------------|-------------|------------|-------------|------------|
| ** **                                                                          |       |                           |       |          |       |        |       |        |       |
| **FETAL CELL RECOVERY**                                                   |       |                           |       |          |       |        |       |        |       |
| ** **                                                                          |       |                           |       |          |       |        |       |        |       |
| **Identification  of fetal DNA and fetal cell markers in maternal plasma or serum** |       | Australia                      |       | AU2004217872  |       |        |       | ·      |       |
| Earliest priority March 5, 2003                                                |       | United  States                 |       | US20070134658 |       |        |       | ·      |       |
|                                                                                |       |                           |       |          |       |        |       |        |       |
| **Methods of enriching fetal cells**                                                |       | Europe                         |       | EP06721493    |       |        |       | ·      |       |
| Earliest priority May 11, 2005                                                 |       | Japan                          |       | JP2008510361  |       |        |       | ·      |       |
|                                                                                |       | United  States                 |       | US11/914107   |       |        |       | ·      |       |
|                                                                                |       |                           |       |          |       |        |       |        |       |
| **Isolation of fetal cells**                                                        |       | United  States                 |       | US61/029496   |       |        |       | ·      |       |
| Earliest priority February 18, 2008                                            |       |                           |       |          |       |        |       |        |       |
|                                                                                |       |                           |       |          |       |        |       |        |       |
| **Using cell size to enrich fetal cells**                                           |       | United  States                 |       | US61/078230   |       |        |       | ·      |       |
| Earliest priority July 3, 2008                                                 |       |                           |       |          |       |        |       |        |       |

 

**Out-licensingour Non-coding Patents Globally**

 

The Company is currentlycommercializing and licensing its non-coding patents in the United States andelsewhere.

 

This strategy was initiatedin late 2000, soon after GeneType AG and its patents were acquired by theCompany.  The first step in the processwas to secure patent insurance, which we achieved in early 2001.  This meant that if we were forced to takelegal action against infringers, under that policy the cost would be largelycovered by our underwriter.  This policyhas since expired.

 

Thereafter, we progressivelymade contact with many companies in the United States and elsewhere, bringingthe patents to their attention and indicating how they might benefit from alicense to the Company’s non-coding patents. In late 2002, we hired a manager to manage the Australian end of thelicensing effort and to establish a central database of all prospectivelicensees, globally.

 

The plan initially was togrant a limited number of licenses focusing primarily on the up-front feecomponent, and then to progressively build recurring annuity or royaltycomponent of subsequent licenses.  Whenwe identified companies that seemed to be clearly infringing our patents, whilealso indicating they would not take a license, we put them on formal noticeunder our patent insurance policy. Overall, the strategy has unfolded as planned.

 

**Our Licenses and Commercial Collaborations**

 

The following sectiondescribes our existing commercial and research licenses, our collaborations andour collaborators.  We announced ourfirst license to the non-coding patents to the Australian livestock testingfirm Genetic Solutions Pty. Ltd., in February 2002.  Since then, we have formed several collaborationsand granted a number of additional licenses.

 

**CommercialLicenses and Collaborations:**

 

AgricultureVictoria Services Pty. Ltd.:  In February 2002, oursubsidiary GeneType Pty. Ltd. entered into a joint venture agreement withAgriculture Victoria Services Pty. Ltd. (“AVS”) for the formation of the jointventure company AgGenomics Pty. Ltd., to operate a joint venture business incommercial plant genotyping and genomics services.  Under the terms of the joint ventureagreement, we hold 50.1% of the shares of the joint venture company.  We have certain obligations under the jointventure agreement to loan money to the joint venture company, which is notexpected to exceed $500,000 at any given time. AVS is not required to provide further funding to the joint venturecompany.  The agreement is terminable bya party in the event of a breach by the other party that is not timely cured orupon the occurrence of an “adverse event” to the company or to eithershareholder.  Adverse events areinsolvency type events or discontinuation of business.  In the event of termination thenon-defaulting party can require liquidation of the company or purchase theother party’s interest, as it chooses.

 

Sequenom License: Also in April 2002, we granted alicense to bioinstrument maker Sequenom, Inc., who paid us anon-refundable license fee in cash and shares in return for a license to ournon-coding analysis and mapping patents. The license can be terminated by either party upon any material breachof any term or condition by the other party which has not been timely curedafter notice.  We may also terminate theagreement in the event of the bankruptcy of the licensee or discontinuation oftheir business.

 

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Nanogen License:  In April 2002we granted a license to Nanogen, Inc, of San Diego, USA, who specializes in thedevelopment of biochip applications in genetics diagnostics.  Nanogen paid us a non-refundable license feeand unlisted warrants in return for a license limited to genetic research andhuman diagnostics.  Specifically, Nanogenreceives no rights to the mapping patent nor any applications in animals orplants.  Since the date of the initiallicense, the warrants became “in the money” and we exercised them, acquiringNanogen shares which we disposed of in market transactions generating furtherincome.  The license can be terminated byeither party upon any material breach of any term or condition of the agreementnot timely cured.  We also can terminatethe agreement in the event the licensee becomes involved in insolvencyproceedings or if it discontinues its business for any reason.

 

Perlegen License:  In August 2002,we granted a license to US genome researcher, Perlegen Sciences, Inc.,which paid a non-refundable combination of cash and securities for an exclusivelicense limited to a specialized field known as “high resolution whole genomeanalysis”.  Either party can terminatethe license agreement upon any material breach of any term or condition by theother party that is not timely cured after notice.  We also have the right to terminate theagreement in the event of insolvency of the licensee or if it discontinues itbusiness for any reason.

 

Myriad Licenses:  In October 2002,we announced a licensing agreement with Myriad Genetics, Inc, under which wegranted Myriad broad rights to utilize our non-coding patents, in return forwhich Myriad agreed to pay us a non-refundable license fee plus future fees onan annual basis in lieu of royalties, plus the rights to bring Myriad’spredictive tests to Australia and New Zealand. These tests, which include genetic susceptibility tests for breastcancer, ovarian cancer, bowel cancer, melanoma and cardiac risk are now beingoffered by the Company in Australia and have resulted in the expansion of ourexisting genetic testing facilities in Melbourne.  The license can be terminated by either partyupon material breach by the other party that is not cured within 30 days ofnotice.  We also may terminate if thelicensee fails to make any payment required by the agreement.  Under the second of two agreements, we aregranted a license to use Myriad’s diagnostic services in Australia and NewZealand in exchange for an annual fee. We are obligated to use reasonable efforts to commercialize the licenseddiagnostic services in Australia and New Zealand.  Under the terms of this agreement, we havebeen granted an option in exchange for upfront payments and a continuingroyalty, to expand the license in respect of full sequence testing, which hasnot been exercised.  The term of thisagreement extends until 2012.  Eitherparty can terminate the agreement upon a material breach not timely cured afternotice.  In addition, Myriad canterminate if we fail to make any payment required under the agreement.

 

Pyrosequencing Licenses:  In March 2003,we announced a cross-licensing agreement with Pyrosequencing AB, of Sweden (nowknown as Biotage AB).  Pyrosequencingreceived a broad non-exclusive license to our non-coding DNA analysis andmapping patents but only when used in combination with Pyrosequencing’s “sequencingby synthesis” reagents.  In return, wereceived a non-refundable cash up front payment, plus royalties for the life ofthe non-coding patents, plus three state-of-the-art analytical instruments(Pyrosequencing systems), plus other IP rights and assays fromPyrosequencing.  Either party can terminatethe agreement upon material breach that is not timely cured by the other partyafter notice.  In addition, either partycan terminate the agreement if the other party becomes involved in insolvencyproceedings, or if the other party discontinues its business for any reason.

 

ARUP License:  In April 2003,we announced a license to Associated Regional & UniversityPathologists (ARUP) of Salt Lake City, Utah. ARUP is a laboratory system owned by the University of Utah, and thefirst service provider actually performing human genetic testing to take alicense from the Company.  The licensewas granted in return for a one-time non-refundable license issue fee.  The license is terminable by a party uponmaterial breach by the other party that is not timely cured after notice.  In addition, we have the right to terminateif the licensee becomes involved in an insolvency or discontinues its businessfor any reason.  In May, 2003, we hadalso granted the University of Utah a separate research license to show oursupport for their leading genetic research program into the non-coding regionsof many genomes.  This license isterminable upon material breach by the licensee not timely cured after notice.

 

OrchidLicense:  In May 2003, we reached agreement withOrchid BioSciences Inc. of Princeton, New Jersey, USA.  Under the terms of the agreement, we grantedOrchid an irrevocable option to obtain a non-exclusive license to ournon-coding analysis patents.  We alsogranted Orchid a covenant not to sue. The license is terminable by a party for material breach that is notcured by the other party, by licensee upon 30 days’ written notice to us and byeither party in the event of discontinuation of its business, an insolvencyevent or failure to pay amounts due and owing to the other.

 

Quest License:  In August 2003,we granted a license to our non-coding analysis patents to Quest DiagnosticsInc., based in New Jersey, USA.  Theterms included a non-refundable signing fee plus ongoing annual payments inlieu of royalties from Quest for services provided by it in genetic laboratorytesting in the United States, Canada and Mexico.  In addition, the license is terminable by oneparty in the event of a material breach by the other party not cured afternotice.  Either party may also terminatethe license in the event of an insolvency event affecting the other party orthe discontinuation of business by the other party.

 

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ViaLactiaLicense:  In September 2003, we reached agreementwith ViaLactia Biosciences (NZ) Limited of Auckland, New Zealand regarding theterms of a research and commercial license to the Company’s non-codingpatents.  ViaLactia is a wholly-ownedsubsidiary of Fonterra, New Zealand’s largest dairy cooperative.  The license was formally concluded in December 2003.  The purpose of the license is to permitViaLactia to conduct internal research activities and development ofapplications of our technology in the dairy industry, including newapplications concerning dairy cattle, pasture grasses, mice as models for dairycattle and yeast and bacteria as applied to the dairy industry.  The license is terminable by either partyupon material default of the other party that is not timely cured, withoutother penalty.

 

TM Bioscience License:  In December 2003,we granted a license to our non-coding analysis and mapping patents to TMBioscience Corporation of Toronto, Canada. The terms provide for a signing fee plus ongoing annual payments as anon-refundable license fee and an annual royalty on licensed products.  This was our first commercial license grantedto a Canadian company.  TM Bioscience isa leading provider of diagnostic kits for human genetic testing, exportedglobally.  The agreement is terminable bya party upon material breach by the other party that is not timely cured, andmay be terminated by us in the event of dissolution or sale of the business ofthe licensee.

 

LabCorp License:  In February 2004,we granted a license to our non-coding patents to Laboratory Corporation ofAmerica Holdings (known as “LabCorp”), a leading provider of human diagnosticservices in the U.S. and Canada.  It alsoperforms testing in Europe for other companies, including pharmaceuticalcompanies, for regulatory compliance purposes. The consideration received for the license, which covers both thenon-coding analysis and mapping patents, included a non-refundable signing feeplus annual license annuity payments for the life of the patents, through2015.  LabCorp also withdrew adeclaratory action in respect of our patents which had been initiated in NewJersey.  The license is terminable byeither party upon material breach by the other party that is not timelycured.  In addition, we are entitled toterminate the agreement in the event that the licensee intentionally andknowingly promotes the licensee’s reference testing to third party clinicallaboratories for the purpose of circumventing the need for such laboratories tolicense our patents.  The licensee isentitled to terminate the agreement at any time upon 30 days prior writtennotice (without prejudice to its accrued obligations thereunder) and we canterminate in the event of an insolvency event involving the licensee ordiscontinuation of its business.

 

Ovita License:  In June 2004,we entered into a license agreement with Ovita Limited of New Zealand, grantingthem a license to our non-coding patents to the extent required in order tocommercialize genetic marker tests and pedigree tests and to conduct researchand development activities for new applications of our technology in connectionwith testing of sheep and cattle.  Theagreement included the payment of an initial non-refundable research licensefee, a non-refundable commercial license fee and a royalty on licensed productsmade using our patents, payable calculated on gross sales.  The license is terminable by a party formaterial breach that is not cured by the other party, by licensee upon 30 days’written notice to us and by either party in the event of discontinuation of itsbusiness, an insolvency event or failure to pay amounts due and owing to theother.

 

C.Y.O’Connor ERADE Village Foundation:  In October 2003, weannounced that we had signed heads of agreement to establish a broad strategicalliance with the C.Y. O’Connor ERADE Village Foundation, a leader inbiotechnology innovation based in Perth, Western Australia.  Definitive documentation was concluded in June 2004.  Under the terms of the agreement, we acquiredall of the Foundation’s patents and other intellectual property in the fieldsof genetics and genomics, including the Foundation’s issued U.S. patent 6383747and foreign equivalents.  This extensivepackage of intellectual property has created additional opportunities for us insupport of licensing and service testing. As part of the arrangement, the Foundation acquired a license to ournon-coding patents for a fee, such that the net purchase price for us wassettled by the issuance of a total of 16,666,667 of our Ordinary Shares to theFoundation based on a market value of $0.39 per share.  The transaction closed in June 2004.  Under the arrangement, we support the ongoinggenetics and genomics programs of the Foundation.  Initially, five projects were selected forpriority attention and we will provide $4.5 million to the Foundation, spreadover five years, to help fund such research and development of new intellectualproperty.  On July 7, 2004, theCompany supplied a letter of credit for $450,000 for the term of theagreement.  Under the agreements, we arethe primary commercialization vehicle for all new inventions, patents,intellectual property and business opportunities arising at the Foundation inthe field of genetics or genomics.  Weare also obligated to pay royalties to the Foundation on gross revenue derivedfrom the Foundation IP.  We may terminatethe license following any breach of the license by the licensee, either partycan terminate following a material breach that is not timely cured or followingan insolvency event of the other party. As at June 30, 2008, a total amount of $450,000 remained payable bythe Company under the agreement.

 

Genzyme License: Effective as of September 17, 2004, we granted a license to ournon-coding patents to Genzyme Corporation, based in Cambridge, Massachusetts,in order for the licensee to perform preclinical and human research and humangenetic testing.  The grant of thelicense was in exchange for a non-refundable license issue fee consisting of acash component and an in-kind component. The in-kind component consisted of a license agreement in respect ofpatents owned by Johns Hopkins University and licensed by the licensee.  In addition, Genzyme is obligated to pay tous license annuity fees in lieu of a royalty for each year of the term.  Either party can terminate the agreement uponmaterial breach not timely cured, in the event of insolvency of the licensee,or by the licensee at any time upon 30 days written notice to us.

 

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MetaMorphix Agreements:  In September 2004,we executed two agreements with MetaMorphix, Inc., based in Maryland andspecializing in the genetics and genomics of certain animal species,particularly cattle and dogs.  Under thefirst such agreement, we granted a license to use our non-coding patents inorder to commercialize applications of diagnostic assays for use in the livestock,aquaculture and companion animal industries. The licensee is obligated to pay us annually increasing license annuityfees in lieu of a royalty, as well as a non-refundable license issue fee.  Either party can terminate the agreement upona material breach not timely cured, or by us upon the licensee’sdiscontinuation of its business for any reason. Under the second license, to which MMI Genomics, Inc. (a subsidiaryof MetaMorphix) is also a party, we were granted a license to the licensor’spatents and associated know-how in order to perform internal DNA-baseddiagnostic assays for use in our cattle and canine identity and parentageverification services.  We havesubsequently paid the licensor a non-refundable license fee.  The licensor’s obligations include ongoingsupport for the license and know-how. The agreement is terminable by either party upon material default by theother party that is not timely cured, or by the licensor in the event wediscontinue our cattle and canine identity and parentage verificationgenotyping services business for any reason.

 

Bionomics License: Effective November 5, 2004, we enteredinto two agreements with Bionomics Limited, a public company based in Adelaide,South Australia.  Under the first suchagreement, we granted a non-exclusive, royalty-free license to Bionomics to useour non-coding patents in order to (i) perform research and developmentactivities relating to and arising from the identification of genetic factorsthat may influence epilepsy and (ii) commercialize the results of thoseresearch and development activities including, without limitation, epilepsydiagnostic assays.  Bionomics paid us anon-refundable license fee on signing. Either party can terminate the agreement upon a material breach not timelycured.  Under the second agreement withBionomics, we were granted a license to use certain intellectual propertyrights, including patent rights and associated know-how, relating to epilepsygene discoveries and epilepsy diagnostic assays subject to minimum annualroyalties.  We paid Bionomics anon-refundable license fee.  Theagreement is terminable by either party upon material default by the otherparty that is not timely cured.

 

Australian Genome ResearchFacility License:  Effective December 31, 2004, we granteda license to the non-coding patents to Australian Genome Research Facility Ltd.(“AGRF”) pursuant to which AGRF can use the patents on a non-exclusive basisfor the purpose of performing genotyping services.  The license requires an advancenon-refundable license fee and an annual non-refundable annuity for the term ofthe license in lieu of a royalty, which continues until sooner terminated orthe licensee no longer utilizes the patent. The agreement is terminable by mutual agreement, or by us in the eventof a breach of a term or condition by the licensee or if it is subject to aninsolvency event.

 

New Zealand Licenses: Effective June 30, 2005, we entered into a license agreement withfour commercial parties in New Zealand: AgResearch Limited, The Horticultureand Food Research Institute of New Zealand Limited, New Zealand Forest ResearchLimited and Livestock Improvement Corporation Limited.  Under the terms of the agreement, the partieswere granted licenses to our non-coding patents in consideration for which theypaid us a non-refundable license issue fee.

 

Applera Corporation Licenses: Effective December 8, 2005, we entered into various agreements withApplera Corporation of Norwalk, Connecticut as part of a settlement of a patentdispute.  The binding agreements includea final Settlement Agreement plus license agreements and a supplyagreement.  The total considerationreceivable by us was paid partly in cash and partly in kind - includingagreements supplying the Company with certain Applera equipment, reagents andintellectual property rights. Recognition of in-kind consideration as revenue is subject to us meetingcertain revenue recognition criteria including, but not limited to, the measurementof fair value at the time of receipt.

 

Optigen License: Effective May 23, 2006, we executed an agreement with Optigen, LLCof Ithaca, New York.  Under theagreement, Genetic Technologies granted Optigen a non-exclusive license to ournon-coding patents for applications in dogs, and Optigen granted the Companythe exclusive right to offer and perform the complete range of Optigen genetictests for diseases in dogs in the Asia-Pacific region.  The addition of the Optigen testssubstantially expanded the range of genetic tests offered by us to the canineindustry in our region.  The licensegranted by us to Optigen provides Optigen with access to our non-codingtechnology, covering all relevant genetic tests and research activitiesconducted by Optigen, in dogs.

 

Bovigen License: Effective June 1, 2006, we granted a license to the non-codingpatents to Bovigen, LLC of Harahan, Louisiana. Under the agreement, Bovigen will use the Company’s non-codingtechnology to build its business of offering genetic tests to the Americanlivestock industry to determine the presence or absence of certain desirabletraits in individual cattle.  The rightsthat we licensed to Bovigen were granted non-exclusively, and are limited toapplications in cattle in the USA, Canada and South America.  In consideration for granting the license,Bovigen paid us an up-front signing fee and will pay ongoing royalties on thefuture sales by Bovigen for the life of the non-coding patents.

 

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Innogenetics License: Effective June 30, 2006, we granted a license to the Company’snon-coding patents to Innogenetics NV of Ghent, Belgium.  Innogenetics is a significant supplier ofgenetic testing kits in Europe and is listed on the Belgium and German stockexchanges.  In consideration for grantingthe license, Innogenetics paid us an up-front signing fee and will pay ongoingannuities for the life of the non-coding patents.  The agreement is terminable by mutualagreement, or by us in the event of a breach of a term or condition by thelicensee or if it is subject to an insolvency event.

 

GENOSENSE License: Effective December 1, 2006, we granted a license to the Company’snon-coding patents to GENOSENSE Diagnostics GmbH, a leading anti-aging andpreventive genetic diagnostics company based in Vienna, Austria.  In consideration for granting the license,GENOSENSE paid us an up-front signing fee and will pay ongoing annuities forthe life of the non-coding patents.  Theagreement is terminable by mutual agreement, or by us in the event of a breachof a term or condition by the licensee or if it is subject to an insolvency event.

 

Sciona License: Effective February 16, 2007, we granted a license to the Company’snon-coding patents to Sciona, Inc. based in Boulder, Colorado.  This license runs for nine years and is thefirst step in a progressive co-operation between us and Sciona in relation tothe emerging lifestyle and life-extension markets.  We received a signing fee plus annualpayments from Sciona, increasing with time. We were also granted the right to market the Sciona range of products inthe Asia-Pacific region, and to perform the relevant genetic tests at ourlaboratory in Melbourne.  Sciona is a leading provider of personalisedgenetic tests which focus primarily on lifestyle and nutritional adjustments toenhance health and longevity.  Theagreement is terminable by mutual agreement, or by us in the event of a breachof a term or condition by the licensee or if it is subject to an insolvencyevent.

 

Monsanto Licenses: Effective June 20, 2007, we granted a license to the Company’snon-coding patents to Monsanto Company, based in St. Louis, Missouri.  As part of the license, which covers Monsanto’swork in plants, Monsanto made an up-front cash payment which, under the termsof the license, cannot be disclosed. Effective August 22, 2007, we granted a second license to theCompany’s non-coding patents to Monsanto which, this time, covers its work inswine.  In respect of this secondlicense, Monsanto paid us a further up-front payment.

 

Thermo Fisher ScientificLicense:  Effective June 29, 2007, we granted alicense to the Company’s non-coding patents to Thermo Fisher Scientific Inc.,based in Waltham, Massachusetts.  ThermoFisher is the parent company of Athena Diagnostics, Inc, a genetic testinglaboratory based in Worcester, Massachusetts, with whom we had been indiscussions for some time.  As part of thelicense, Thermo Fisher made an up-front cash payment which, under the terms ofthe license, cannot be disclosed.

 

Syngenta License: Effective September 28, 2007, we granted a license to the Company’snon-coding patents to Syngenta Crop Protection AG, based in Basel,Switzerland.  Syngenta is a large plantand seed company, active in more than 90 countries, with more than 19,000employees.  As part of the license,Syngenta made an up-front cash payment which, under the terms of the license,cannot be disclosed.

 

BioSearch License: Effective September 30, 2007, we granted a license to the Company’snon-coding patents to BioSearch Technologies Inc., based in Novato,California.  As part of the license,pursuant to which BioSearch is permitted to distribute certain DNA structures,known as oligos or probes, to end users worldwide for research purposes only,BioSearch made an up-front cash payment which, under the terms of the license,cannot be disclosed.

 

Kimball License: Effective November 16, 2007, we granted a license to the Company’snon-coding patents to Kimball Genetics Inc., based in Denver, Colorado.  As part of the license, Kimball made anup-front cash payment which, under the terms of the license, cannot bedisclosed.

 

Prometheus License: Effective December 23, 2007, we granted a license to the Company’snon-coding patents to Prometheus Laboratories Inc., based in San Diego,California.  As part of the license,Prometheus made an up-front cash payment which, under the terms of the license,cannot be disclosed.

 

GE Settlement and License: Effective January 14, 2008, we executed a Settlement and LicenseAgreement with General Electric Company (and indirectly its subsidiary GEHealthcare Bio-Sciences Corp.), based in Piscataway, New Jersey.  GE Healthcare is a unit of General ElectricCompany that employs more than 46,000 people and which, in 2006, generatedrevenues of USD 17 billion from serving healthcare professionals and theirpatients in more than 100 countries around the world.  The agreement between the Company and GEHealthcare involves a settlement of all disputes between the parties and thegranting of a license to GTG’s non-coding patents.  As part of the agreement, GE Healthcare madean up-front cash payment which, under the terms of the agreement, cannot bedisclosed.

 

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GeneDx License: Effective October 1, 2008, we granted a license to the Company’snon-coding patents to GeneDx, a subsidiary of Bio Reference Laboratories Inc.,based in Gaithersburg, Maryland.  Thelicense granted permits GeneDx to perform PTEN testing until the patent expiresin March 2010.  As part of thelicense, GeneDx made an up-front cash payment which, under the terms of theagreement, cannot be disclosed.

 

Millennium License: Effective October 22, 2008, we granted a license to the Company’snon-coding patents to Millennium Pharmaceuticals Inc., based in Cambridge, Massachusetts.  As part of the license, Millennium made anup-front cash payment which, under the terms of the agreement, cannot bedisclosed.

 

**ResearchLicenses and Collaborations**

 

University of Melbourne:  On January 22,2003, we entered into a collaborative research agreement with the University ofMelbourne, Australia, concerning the so-called “ARC Linkage Project”: towardnovel approaches for the control of parasitic nematodes viagenomics/phenomics.  This agreement setsforth the terms of the collaboration between GeneType Pty. Ltd. and theuniversity for research under an Australian government Research Council LinkageProject.  Under the terms of thisagreement, GeneType Pty. Ltd. is obligated to use its best efforts to provideadditional funds for the project to make up the projected shortfall ascontemplated by the original proposal, over a term of three years.

 

University of Utah:  On April 30,2003, we granted a research license to the University of Utah, in Salt LakeCity, Utah.  This is a royalty-freelicense to permit the University to conduct research in exchange for a nominalfee.

 

Horticulture AustraliaLimited:  On June 18, 2003, AgGenomics Pty. Ltd.,a subsidiary of the Company, entered into a three-year Collaborative ResearchAgreement with Horticulture Australia Limited (HAL) to try and identify agenetic trait for day/night neutrality in strawberries which, if found, couldlead to an extension of the cultivation season and consequently higherproduction.  The research program,costing approximately $2.1 million, is funded by HAL as to 45% and AgGenomicsas to 55%.  Any and all intellectualproperty generated from the project will be owned in the same proportions.  This initial agreement was concluded in June 2006,following which it was agreed that it be extended for a period of a furtherthree years at a total cost of $2.1 million, to be funded 42.03% by HAL and57.97% by AgGenomics.  Once again, anyand all intellectual property generated from the project will be owned in thesame proportions.

 

University of Sydney License:  In July 2003,we granted a research license to the University of Sydney, in Australia.  We subsequently entered into a furtheragreement (dated September 4, 2003) with the University of Sydney pursuantto which we received the exclusive right to commercialize a new and potentiallysignificant genetic invention made by a professor in the Neurogenetics ResearchUnit and the University’s Faculty of Medicine. This Australian invention is intended to permit an improved understandingof the genetic factors underlying superior athletic and sports performance,based on the presence or absence of the ACTN3 gene.  Under the terms of this agreement, we made anupfront payment, agreed to pay a royalty on net sales of the invention by usand a fee on first grant of a patent for the invention or any patent rights inany country and a further payment of part of any consideration of whatever kindreceived by us under a license of the assigned intellectual property.

 

GENDIA Network:  In November 2003,we announced that we had joined the GENDIA diagnostic genetic testing networkas the sole GENDIA affiliated laboratory operating in Australia and NewZealand.  GENDIA is a network of some 20leading laboratories worldwide who work together and share with each otheraccess to highly sophisticated genetic testing procedures.  We are the sole GENDIA-affiliated laboratoryin Australia and New Zealand.

 

King’s College License:  In December 2003,we granted a license to our non-coding patents to King’s College, London, inthe United Kingdom.  Under the terms ofthe license, King’s College will be able to apply the non-coding patents to itsinternal research programs.  The licenseis terminable by either party upon any material breach not timely cured, withoutpenalty.  King’s College is considered aleader in the field of researching the genetic basis of various psychiatric andpsychological disorders, including schizophrenia, anxiety / depression andcertain attention deficit disorders. Future commercial applications arising from research at King’s Collegewould require an additional commercial license from us.  In March 2004, we initiated a jointresearch project in the United Kingdom to explore the functionality of certainnon-coding DNA elements, initially with special focus on the genetics of breastcancer susceptibility and the genetics of certain neuro-psychiatric conditions,such as schizophrenia.  The project wasfunded by us for a further period of six months, in an amount of GBP53,000 thatwas paid in two instalments.  In May 2005,we extended the project for the period from June 1, 2005 to December 31,2005 and agreed to fund the costs incurred by King’s College during that periodup to a maximum amount of GBP51,360.  InFebruary, 2006, the Company agreed to further extend its research agreementwith King’s College for the period from February 1, 2006 to August 31,2006 and agreed to fund the costs incurred by King’s College during that periodup to a maximum amount of GBP63,700. This project has now been terminated.

 

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University of Technology,Sydney:  Effective December 23, 2003, we granteda research license to the University of Technology, Sydney, to permit theUniversity to conduct internal research activities to research, identify, mapand develop tests for genetic markers and genes of interest.  Either party has the right to terminate theagreement upon the occurrence of a material breach that is not timely cured,without other penalty.

 

Colorado State University: Effective May 14, 2004, we granted a research license to theColorado State University.  This is aroyalty-free license to permit the University to conduct research in exchangefor a nominal fee.

 

Texas A&M University: Effective February 7, 2007, we granted a research license toMerlogen LLC, a company associated with Texas A&M University.  As part of the license, we received a nominalfee and received rights to use certain technologies in the field of animalgenetics.

 

In addition to the aboveagreements, we continue to negotiate licensing terms to grant licenses to ournon-coding patents to many companies, large and small, and also to governmentand private institutes, in many countries. To facilitate these negotiations, we have established a database of allprospective licensees, who we believe would benefit from a license to ournon-coding patents.

 

Given the large number ofpotential licensees, the Company decided to expand its licensing program during2006 by applying additional resources in this area.  As a result, the licensing team at theCompany’s headquarters in Melbourne, Australia was expanded by the appointmentof additional staff to accelerate the preparation of dossiers on potentiallicensees whilst, internationally, independent licensing contractors wereengaged to represent the Company “on the ground”, in our major markets.

 

In an effort to stimulatethe Company’s licensing program, preliminary discussions have been held with anumber of parties who specialize in the assertion of intellectual property inreturn for a share of the proceeds generated from any licenses that maysubsequently be granted.  As at the dateof this Annual Report, no agreements have been entered into with any suchparties.

 

**Building the Genetic Testing Business**

 

**Background and History of the Paternity Testing Business**

 

In the early 1990’s,GeneType AG established a small service testing laboratory in Melbourne,Australia, initially to show-case its non-coding inventions, but also togenerate revenue to help support and fund its ambitious research program inthose early days.  Following theacquisition of several other small DNA testing laboratories in Australia,GeneType AG consolidated the business such that the Company is now the largestprovider of paternity and related testing services in Australia.

 

In August 2000, weacquired 100% of GeneType AG, including control over all its patents and itsservice testing business.  Later, in July 2001,we acquired the paternity testing business of DNA-ID Labs, another smalltesting laboratory based in Perth, Western Australia.  Overall, we acquired several smallbusinesses, two based in Sydney, New South Wales, one based in Perth and onebased in Melbourne, eventually making our service testing laboratory inMelbourne the leading non-Government genetic testing service provider inAustralia.  We now have extensiveexperience in providing DNA-based individuality testing for the resolution ofdisputed paternity, the determination of familial relationships for immigrationpurposes and for forensic analysis.

 

The most common type of DNAtesting is paternity testing - where we determine the father of a givenchild.  In order to perform this test wetake a sample from the mother, alleged father and child.  The test can also be performed without themother’s sample but this makes the analysis somewhat more complex and the pricefor the test increases accordingly.

 

Other types of tests we canoffer include:

 

·                          Y chromosome testing - determines if twomales come from the same paternal line, i.e. have a common father orgrandfather.

 

·                          Mitochondrial DNA testing - determines if twopeople come from the same maternal line.

 

·                          Sibship testing - determines if people arefull siblings, i.e. have the same mother and father.

 

·                          Maternity testing - determines the mother ofa given child.

 

·                          DNA typing - reveals the DNA makeup of anindividual.

 

·                          Grandparent analysis - determines the grandparentsof a given child.  This is mainly usedwhen the father of a child is deceased and a will is being contested.

 

·                          Antenatal DNA testing - determines the fatherof an as-yet unborn child.

 

·                          Semen analysis - determines if semen ispresent on, for example, an article of clothing.  If it is, we can DNA type this sample andcompare it to a reference sample.

 

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We issue reports for theFamily Court in Australia and provide similar services internationally for theDepartment of Immigration and Citizenship (DIAC).  We are one of only two DNA testinglaboratories in Australia recognized by DIAC to provide DNA tests forimmigration purposes.

 

Over time, we have gained areputation as a leading genetic testing laboratory, and progressively, we havestarted to receive specimens for testing from other countries, most of whichare located in the Asia-Pacific region. In addition, we received requests to perform tests outside of humanpaternity, and this has caused us to consider and now plan a significantexpansion of our testing services.

 

**Expansionof Testing Services Beyond Paternity Testing**

 

**(1) PlantTesting**- in March 2002,we formed a joint venture with the Victorian State Government’s Department ofPrimary Industry, for the purpose of providing a high throughput genotypingservice for plant testing - in order to help plant breeders identify the genesresponsible for the detection of commercially relevant traits, such asresistance to disease, accelerated growth and the improvement of cropyields.  A new company, AgGenomics Pty.Ltd., was formed, with us as the majority shareholder and the State agency asthe minority partner.  AgGenomics islocated at the Victorian AgriBiosciences Centre at La Trobe University R&DPark in Melbourne, Victoria.

 

**(2) MolecularDiagnostic Testing**-the strategic alliance with Myriad Genetics Inc. delivered to the Companyexclusive rights in Australia and New Zealand to perform DNA testing forsusceptibility to a range of cancers.  InApril 2003, we established our cancer susceptibility testingfacility.  In June 2003, thisfacility was granted provisional accreditation by the National Association ofTesting Authorities, Australia (“NATA”). This important area of testing continues to build momentum, with theaddition of new equipment, new employees joining the Company and new technologybecoming available exclusively to us, such that the Australian community nowhas access to some of the latest technologies available for genetic testing.

 

In November 2003, theCompany joined the world-wide genetic testing network GENDIA as the solereference laboratory for the network in Australia and New Zealand.  GENDIA consists of more than 50 laboratoriesfrom around the world, each contributing expertise in their respectivedisciplines to create a network capable of providing more than 2,000 differentgenetic tests.  This has provided theCompany with the ability to offer comprehensive testing services to itscustomer base in the Asia-Pacific region as well as increasing our exposure toother markets.

 

In November 2004, theCompany announced a strategic alliance with Australian biotechnology companyBionomics Limited for the commercialisation of the diagnostic genetic test forthe condition Severe Myoclonic Epilepsy in Infancy.  This test was the first to expand the Company’shuman molecular diagnostics focus beyond cancer susceptibility testing.  In July 2006, we further cemented ourposition as Australia’s leading independent provider of complex genetic testingservices with NATA granting further accreditation of our Melbourne laboratoryto provide a wide range of complex genetic tests.  Genetic analysis for the predisposition anddiagnosis of a wide range of disease states is increasingly being used byclinicians in standard medical practice. We committed to providing the gold standard in testing technology, withsuperior turn-around times and a substantially more cost efficientservice.  Attainment of the furtheraccreditation by NATA in the area of complex gene sequencing testing serviceshas enabled numerous government funded genetics services to begin utilising theCompany’s testing service to improve patient care.

 

For the financial year endedJune 30, 2008, we generated revenue in the Molecular Diagnostic divisionof $1.12 million, representing an increase of more than 21% over the previousfinancial year.  Having established anexcellent laboratory service with significant excess capacity, the Companyannounced in July 2008 that a commercial decision had been made to enforcethe rights granted to it under an exclusive license from Myriad to performdiagnostic testing of the BRCA1 and BRCA2 genes in Australia and NewZealand.  However, following the removalof five Directors from the Board at the Company’s Annual General Meeting on November 19,2008, the new Board undertook a formal review of the Company’s decision toenforce its BRCA testing rights and subsequently resolved to immediately revertto its original decision to allow other laboratories in Australia to freelyperform BRCA testing.

 

**(3) AnimalTesting**- in May 2003,we acquired the assets of Genetic Science Services to expand the range of testswe can offer to include relevant genetic testing in animals - for example,progeny testing in horses, dogs, deer, sexing in birds, and animal diseaseidentification and susceptibility testing for a range of animals, includingexotic and zoo animals.  This acquisitionwill also allow the Company to support research projects involving, forexample, the Australian fur seal, and possibly the platypus and various frogsand reptiles.

 

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In addition to NATAaccreditation for complex genetic analysis mentioned above, in 2006 GTG alsoreceived NATA accreditation for the provision of canine forensic analysisservices.  We are the only laboratory inAustralia to receive such accreditation. This accreditation ensures that we will continue to be the laboratory ofchoice for all canine forensic analysis, especially where prosecutions are initiatedfor dog attacks.  In the state ofVictoria alone, there are in excess of 7,000 dog incidents reportedannually.  This accreditation, togetherwith the recent announcement of a genetic test to determine the breed of dogs,places the Company in a strong position to provide genetic analysis services tolocal councils around Australia.

 

During 2008, the Companydeveloped and launched:

 

·          Dog Attack Pack, a forensic tool enabling local government officers tocollect samples from dog attacks.

 

·          BITSATM, a breed identification test that uses DNA analysis to providean accurate history of a dog’s breed.

 

In July 2008, weacquired Frozen Puppies Dot Com Pty. Ltd., an Australian company specializingin canine reproductive services.

 

The Company has also madeexcellent progress into territories outside of Australia, developing strongrelationships with breeders and associations in China, Japan and NewZealand.  Staff have been employed tomanage these territories and a purpose-built facility is being established onthe outskirts of Beijing to support the Company’s expansion into the Chinesemarket.  This facility will becomeoperational in the first quarter of calendar 2009.

 

**(4) ForensicTesting** - recognisingthe increasing use of DNA analysis in forensics and the demand this would placeon existing government laboratories, in February 2004, the Companysuccessfully gained forensics accreditation from the National Association ofTesting Authorities, Australia (NATA). We were the first non-government laboratory in Australia to be awardedthis accreditation.  Since then, we havedeveloped a highly efficient and technologically advanced forensics laboratory.  This capability was substantially advanced byour recent non-coding licensing deal with Applera Corporation under which wesecured equipment and supplies essential to conducting forensics analysis.  Together with these resources and ourexperience in DNA analysis, the Company is becoming a major provider of DNAanalysis services to the forensics community.

 

In April 2006, weannounced that we had been awarded a contract to supply the New South Wales(NSW) Police Force with DNA analysis services.  Under the contract, we provided services foran initial trial period of three months. Following this successful trial, we executed a three year contract withthe NSW Police Force in January 2008 for DNA analysis services for theirvolume crime samples, such as burglary and motor vehicle theft.  This contract represented a majorbreakthrough for the Company and was the first time in Australia that anyPolice Force had awarded a long-term contract to outsource the testing of theircrime samples.

 

We believe that asignificant opportunity exists for the Company to assist other policingauthorities to expeditiously process DNA samples and is in discussions with anumber of these parties.  It is estimatedthat there is a substantial backlog of DNA samples currently waiting to beprocessed by police departments throughout Australia.  This is in addition to the processing of DNAsamples collected on an ongoing basis from crime scenes.

 

**(5) AthleticPerformance Testing** -the Company acquired the commercial rights from the University of Sydney for agenetic test, known as the ACTN3 Sports Gene TestTM, which is capable ofdetermining whether or not this gene is providing athletes with a geneticadvantage for sprint-power performance. In September 2005, we announced the official launch of this test inJapan with its Japanese distribution partner, Sportsstyle, to an audience ofover 100 sports specialists, including the President of the Japan Federation ofHealth and Sports.  The launch of theACTN3 SportsGene TestTM was widely reported in the Japanese press.  All commercial ACTN3 SportsGene Tests fromJapan are analysed at our laboratory in Melbourne.  In conjunction with Sportsstyle, we have heldmeetings with influential sporting bodies looking to use the ACTN3 SportsGeneTestTM as part of their training and assessment program.  Further discussions are also being held withother parties around the world with a view to marketing and licensing this testin other jurisdictions.

 

On January 7, 2008, the Company appointed Colorado-basedtalent identification company EPIC Athletic Performance Inc. (“EPIC”) as anon-exclusive distributor of the ACTN3 SportsGene Test® product in the UnitedStates.  It is anticipated that theCompany will receive its first samples for testing from EPIC in early calendar2009.

 

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**Our Support for Four Significant Research Projects**

 

We strongly support research and development.  Indeed, Genetic Technologies had itsfoundation as a research company when it was established some 18 yearsago.  Since then, the Company hasconsistently pursued research and, following its Australian listing in 2000when additional working capital became available, its research activities weresignificantly expanded.

 

We currently support four major research programs,details of which have been provided below. Some projects have arisen from new inventions made by the Company whilesome have been made by others who have approached the Company seekingcollaboration and support for their activities.

 

By its very nature, research is unpredictable andinvolves a considerable element of risk. Such risks may relate to scientific concepts, the implementation of thescience, the protection of any inventions made and the success or otherwise inpersuading others to respect the intellectual property acquired or created bythe Company.

 

Specifically, patents filed may not issue or may laterbe challenged by others.  Even if patentsissue, the methods described may, with time, be superseded by alternativemethods which may prove to be commercially more attractive.  Even if patents issue and the methodsdeveloped are successfully reduced to practice and can be shown to becommercially relevant, there is still no assurance that other parties willrespect the patents or will take licenses to use the intellectualproperty.  In such circumstances, it ispossible that legal action will be necessary to enforce the Company’srights.  Such action, in turn, raises anew series of risks including potentially significant legal costs and uncertainoutcomes.

 

To the extent that delays are encountered inconcluding the research projects, additional costs may be incurred.  Further, the projected revenues from theprojects may also be deferred, potentially impacting on the Company’sliquidity.  In such cases, the Companymay seek to partner with outside parties, who will contribute to the costs ofresearch in return for an interest in the project, or the Company may seek toraise additional working capital from the Market.  In a worst case scenario, if the Company’sresearch projects do not achieve their scientific objectives, the projects maywell be closed down with no valuable intellectual property having been created.

 

**(1) RareCellect®**

 

RareCellectPty. Ltd. was incorporated in March 2001 in Australia to develop andcommercialize patents held by GeneType AG, a subsidiary of GeneticTechnologies, relating to the recovery of fetal cells circulating in theperipheral blood of a pregnant woman. These patents, with an earliest priority date of March 27, 1990,have been granted or allowed in most countries where filed, including theUnited States, United Kingdom, France, Germany, Australia and Japan.

 

Ithas long been generally recognized that a simple, universally applicable,non-invasive means of obtaining fetal cells for prenatal diagnosis wouldrepresent a major advance over existing practice and would be widely adopted throughoutthe developed world.

 

Accordingly,the RareCellect**®**research is investigating non-invasive methods for the collection and isolationof fetal DNA at a purity and concentration suitable for clinical genetictesting.  To this end, several innovativepatent applications have recently been filed, as the methodology has undergonefurther substantial refinement in the laboratory.  If successful, the commercial potential ofthe RareCellect**®**technique is considerable, with some 9 million live births occurring annuallyin the USA and Europe.

 

Approximately0.65% of live births are affected by major chromosomal abnormalities includingTrisomy 21 (Down’s Syndrome, 0.12%). Prenatal screening for such disorders is now widely available indeveloped countries, but is neither standardized nor universal.  Even the best prenatal screening regimensfail to detect 5% of Down’s cases, and suffer from false positive rates ofabout 5%.  When screening based on pastobstetric history or advanced maternal age indicates an increased risk of fetalgenetic defects, the pregnant woman is generally subjected to a further,invasive procedure - amniocentesis, CVS, or fetal blood sampling - in order toobtain fetal cells for definitive prenatal diagnosis.  Such procedures are not without risk,resulting in miscarriage rates from 0.5% to 2.0% above the expected backgroundrate, and can lead to congenital abnormalities when performed too early ingestation. Accordingly, these tests are not recommended and consequently, some80% of Down’s syndrome babies are currently born to women under 35 years ofage.

 

Overthe next decade, it is predicted that there will be an enormous increase in thenumber of genetic tests available to identify fetal characteristics.  There will also be increased pressure toconduct those tests as soon as possible after conception.

 

TheRareCellect**®**project aims to eliminate the current risks to a mother and her unborn babyassociated with obtaining fetal cells for genetic testing by amniocentesis orchorionic villus sampling (CVS) during the second trimester of pregnancy.  The project focuses on the development ofnovel and safe processes for isolating fetal DNA from the mother during thefirst trimester of pregnancy while avoiding the need to disturb the developingfetus unnecessarily.

 

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Fromits inception, the RareCellect**®** project has focused on the recovery andisolation of fetal cells from peripheral blood samples of pregnant women.  Recently, the project abandoned this approachin favour of focusing solely on the recovery and isolation of fetal DNA fromcervical mucus samples.  During the pastyear, the project has made steady progress in optimizing the design andclinically evaluating a number of prototype collection devices to maximize theamount of fetal DNA collected from cervical mucus samples.  Two provisional patent applications have beenfiled over this period.

 

Preliminaryresults indicate that proof of principle of sampling and isolation methods forcervical mucus are expected to be established in the first quarter of calendar2009.

 

Thekey risk associated with this project is whether sufficient quantity of fetalDNA can be consistently collected and purified from cervical mucus to allow theapplication of standard genetic testing methods such as RT-PCR.

 

Markets and competition:  There are some four million pregnancies peryear in the United States alone.  It is alreadythe case that some form of antenatal screening is provided for most pregnanciesin developed countries.  The trendtowards increasing numbers of women becoming pregnant later in life isresulting in an increasing risk of chromosomal aberrations in thesepregnancies.  Given the expense,inconvenience and inaccuracy of current screening strategies, and the risksassociated with subsequent invasive diagnostic procedures, it seems probablethat a reliable, accurate, non-invasive, and relatively inexpensive diagnostictest would be rapidly adopted and applied in all pregnancies early in thepregnancy which would substantially increase the current markets.

 

Thisconclusion has, of course, been reached by a number of other parties.  There are currently several competing groupsactively pursuing different methods for the isolation of fetal DNA frommaternal blood.  The most advanced groupis Sequenom Inc. with its SEQureDxTM product which is undergoing clinical trialsand is forecast for release in the second quarter of calendar 2009.

 

Government regulation:  The provision of clinical testing servicesand in vitro diagnostic medical devices is subject to extensive regulatoryrequirements in most developed countries. In the United States, the Centers for Medicare & MedicaidServices (CMS) regulates all laboratory testing (except research) performed onhumans in the United States through the Clinical Laboratory ImprovementAmendments (CLIA).  The Food and Drug Administration (FDA)regulates clinical trials and medical devices. In Australia, the regulation of clinical trials and medical devices isperformed by the Therapeutic Goods Administration (TGA).  Accreditation of laboratories offeringpathology services is granted by the Health Insurance Commission, based on areport of assessment by the National Association of Testing Authorities,Australia (NATA).  In addition, in theState of Victoria, where the Company has its headquarters, accreditation mayalso be obtained from the Pathology Services Accreditation Board, again subjectto favorable assessment by NATA.

 

**(2) ImmunAid**

 

ImmunAid Pty. Ltd. wasestablished in March 2001 to develop and exploit the ImmunAidtechnology.  Genetic Technologiescurrently owns 69.2% of ImmunAid with the balance of shares owned by privateinvestors including the inventors of the ImmunAid technology.

 

The ImmunAid technologydescribes a method of leveraging a patient’s immune system to potentiallyimprove the efficacy of treatments for cancer, autoimmune and infectiousdiseases.  The method builds on adiscovery that the human immune system oscillates under chronic diseaseload.  This oscillation has been observedacross a range of cancer types and other chronic disease conditions (HIV, MS)and can be elucidated by serial measurements of acute phase inflammatorymarkers such as C-reactive protein (CRP) and other cytokines and antigenmarkers.  The central hypothesisunderlying ImmunAid is that timing the administration of treatment to aprescribed point on patient’s immune oscillation will increase the efficacy ofthe treatment.

 

In 2008, a pilot study wascompleted at a major cancer clinic involving 12 late-stage melanomapatients.  Whilst not definitive, theresults of the pilot study are suggestive that timing of therapy is correlatedto clinical outcomes.  Discussions are inprogress with this clinic on a further, definitive clinical study with bothparties aiming to commence the study in mid calendar 2009.

 

Recently, expressions ofinterest have been sought from third parties regarding their potentialparticipation in the ImmunAid project and, as of the end of calendar 2008,interest in the project has been expressed by several groups with discussionsnow at an early stage.

 

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**(3) Pathogens Program**

 

In March 2001,we entered into a Collaborative Research Agreement (“CRA”) with the Universityof Melbourne (Department of Veterinary Science) to conduct applied research onmethods for the diagnosis and control of parasitic diseases in animals andhumans.  Two scientists were employed viathe University and work commenced in mid-2001 under the direction of AssociateProfessor Robin Gasser.  Prof. Gasser isthe author of more than 120 papers in international peer-reviewed journals,mainly in classical and molecular parasitology.

 

Asubstantial portion of the costs associated with this project are paid for byinterested third parties, including relevant industry bodies such as Meat andLivestock Australia (“MLA”) and the Australian Research Council (“ARC”).  A summary of the project’s development costs,outcomes and further plans is summarized below:

 

**Project 1******(undertakenbetween April 2001 and March 2003) -*Cryptosporidium parvum*

 

Totalestimated costs paid by the Company: $400,000

 

Gasser*et al* developed a new, DNA-basedtest to identify and sub-type *Cryptosporidium*species and sub-species. Independent validation of sensitivity and specificity was conducted byRobin Gasser and Rachel Chalmers (PHLS *Cryptosporidium*Reference Unit, Swansea, UK) post our funding. Collectively, the Company and Gasser have transferred the test from gelsto capillary instruments.  Following areview of potential markets, GTG decided to terminate the project.

 

**Project 2******- Novel methodsfor the control of the major worm parasites of sheep and cattle including *Haemonchus contortus,**Trichostrongylus vitrinus* and *Ostertagia ostertagi.*

 

The project’s objective isto discover and develop novel compounds for the control of nematodes (principally*Haemonchus contortus* - the barber’spole worm) in sheep.  Parasitesthat affect livestock are a major cause of disease globally and the financiallosses they cause are substantial. Infestation of sheep and cattle with parasites is estimated to costAustralian producers approximately $1 billion annually.  To make matters worse, these parasites havegrown resistant to the drugs that are commonly used to treat them.  Left unattended, parasitic worms infest thegut of livestock, reducing their growth and leading to lower productivity andquality of wool.  Farmers typicallycontrol parasitic worms by drenching, but the efficacy of current treatments isbecoming progressively less due to the development of resistance.  This trend is likely to get worse, so thereis a major global drive to develop novel means to control parasites.

 

Thisproject is a collection of collaborative research projects involving GeneticTechnologies Limited and:

 

·                  Professor Robin Gasser’s group in theDepartment of Veterinary Science, University of Melbourne;

 

·                  Associate Professor Adam McClusky’s group inthe Department of Chemistry, University of Newcastle;

 

·                  Meat and Livestock Australia (“MLA”).

 

Professor Gasser’s group isworking on target identification by investigating the genome of parasites,target validation, assay development and compound screening.  Professor McClusky’s group is working onsynthesis of compounds directed against the targets identified by ProfessorGasser’s group.

 

Funding is provided by twoARC Linkage grants supplemented by direct and in-kind contributions from the Companyand MLA.  The Company’s total cashcommitment under ARC Linkage Project LP0667795 is $250,000 per year for threeyears ending June 30, 2009.  TheCompany has a further commitment under ARC Linkage Project LP0882285 of $90,000per year for the three years ending December 2010.  Project IP ownership is split between theCompany (as to 75%) and MLA (as to 25%).

 

During 2008, it becameapparent that the methods previously used to screen compounds synthesized bythe University of Newcastle were flawed. Consequently, an industry standard larvae development assay (LDA) wasdesigned and implemented by the University of Melbourne.  All compounds previously synthesized eitherhave been or are planned to be re-screened with the LDA.  Initial results from the re-screening haveidentified two lead compounds exhibiting highly promising nematocidalperformance.

 

It is anticipated that anumber of major livestock pharmaceutical companies will be invited to evaluatethese two lead compounds during calendar 2009.

 

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**(4) Sponsored Research Agreementwith C.Y. O’Connor**(previously reported as“Genomic Matching Technique”)

 

In June 2004,we entered into a series of agreements with the C.Y. O’Connor ERADE VillageFoundation, incorporating the Immunogenetics Research Foundation and theInstitute of Molecular Genetics and Immunology (“CYO” and the “Foundation”) under which (i) we acquired CYO’sentire patent estate in the field of genetics and genomics, known collectivelyas the “Genomic Matching Technique” (“GMT”) (ii) we granted a license toCYO to utilize our non-coding patents, and (iii) we agreed to provideresearch funding to the Foundation for a period of five years ending June 2009to develop novel, high-value genetic tests for commercialization by GTG.

 

Theprogram was formed upon the acquisition by the Company of all the genetics andgenomics intellectual property generated by the Foundation, which showedpromise in a number of important areas, including improved tissue typing andtransplantation techniques in human bone marrow transplantation, plus anextensive range of new opportunities in the field of human genetics and animalgenetics, including cattle, horses, dogs and fish.  The Company has certain rights to any and allintellectual property generated by the Foundation as part of the agreementbetween the parties.

 

Itis becoming increasingly apparent that the traditional genetic tests which havebeen developed to diagnose individuals susceptible to diseases, or identifyplants or animals that have desirable characteristics, provide limitedinformation.  As such, the Company isworking closely with the Foundation to develop a novel approach designed toovercome these shortcomings.  The GMTdeveloped by CYO, is an effective, yet relatively simple, method foridentifying genetic differences between individuals.  A large number of GMT clusters have now beenidentified which are being associated with genes that may be implicated withdiseases.

 

Onesuch potential disease association has been discovered with Age-related MacularDegeneration (“AMD”), an inflammatory disease of the eye which often results inblindness in the aged.  A proportion ofpatients diagnosed with the milder form of the disease develop to themore-advanced form which results in blindness. GMT may be used to effectively identify those susceptible to diseaseprogression, enabling early intervention with therapy.  This approach can potentially delay the onsetof the disease, or reduce its severity. A study was undertaken during 2006/07 by the Company into the utility ofthe application of GMT to AMD.  Uponcompletion of this study, the Company decided to terminate its support of thisproject.

 

Inthe area of tissue and marrow transplantation, CYO and independent laboratorieshave shown that transplant recipients who were matched to donors using thetraditional immune markers and by GMT had a substantially increased chance oflong term survival compared with patients matched for the immune markersalone.  This data demonstrates that theGMT is revealing information about the haplotype of the individuals as itapplies to transplantation that is over and above that provided by traditionalimmunological typing.  This principle canbe extended to a range of similar disorders.

 

CYOis currently in the process of investigating various applications of the GMTtechnology as they relate to immune-related diseases, including autoimmunediseases.  These include the early identificationof people who are susceptible to disorders such as Type I diabetes, multiplesclerosis, lupus and rheumatoid arthritis, thereby increasing their lifespanand quality of life by delaying the onset of disease, reducing the severity ofdisease or potentially eliminating the disease altogether.  Research is also being undertaken by CYOinvestigating whether this principle can be extended to diseases outside theimmune system, including diseases and desirable traits of plants andanimals.  The tests are rapid,inexpensive, can be performed on standard equipment and provide moreinformation than regular genetic tests.

 

*Impairmentof patents*

 

During 2007, in conjunctionwith work performed by an independent valuation expert, an impairment charge of$1,150,000 was calculated by Management and recorded against the carrying valueof the patents that were originally acquired from the Foundation.  The recoverable amount of the patents wasbased on value-in-use calculations.  Theestimated risk adjusted cashflows were discounted by the risk free rate of6.5%.  The 2007 financial year was thefirst year in which an indicator of impairment had arisen, requiring anassessment of the recoverable amount of the patents.  During 2008, following a further review of thecarrying value of the CYO patents, a second impairment charge of $2,378,000 wasmade.

 

The impairment loss for 2008resulted from a lack of progress with the research related to thecommercialisation of certain applications of the technology covered by thesepatents.

 

Following a detailedscientific review of the work that had been undertaken in respect of one of theapplications of the underlying technology, it was decided during the 2008financial year to terminate that aspect of the program.  Whilst work continues in respect of the useof the technology in relation to other related areas, the lack of progress madeas at balance date in relation to GMT and AMD gave rise to an impairment chargeof $2,378,000 during the year ended June 30, 2008.

 

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Given that the Company’sprevious attempts to commercialize the technology associated with the patentshave, so far, not delivered the anticipated revenues, the Company believes thatit is appropriate to base its assessment of the carrying value of theunderlying patents as at June 30, 2008 around a further product based onthe technology which has already been successfully completed and from the saleof which revenues have already been generated. Accordingly, the carrying value of the underlying patents as at June 30,2008 has been based on the anticipated net cash flows that the Company believeswill be generated from the future sales of this product.

 

The cashflow forecastsassociated with the impairment assessment of the patents have been projected to2012, being the first year in which the respective patents will expire, usingthe Company’s estimated weighted average cost of capital and conservativeprojections of anticipated sales volumes over the next four years.  Further, given the competitive advantageafforded to the Company in respect of this product, a termination value hasalso been included to reflect that sales of the product are expected tocontinue beyond the date of the patent expiry. The forecasts and associated recoverable amount has been determined byManagement taking into account the sales that have been generated to date andthe considerable interest arising from pre-launch market analysis.

 

Asthe Sponsored Research Agreement approaches its termination in June 2009,preliminary discussions have commenced between CYO and the Company about apossible ongoing association in the areas of plant and cattle genetics.

 

**Competition**

 

**Licensing**

 

Our licensing businessprincipally covers two families of “non-coding” patents.  As we are the sole owners of these patentsthere is, by definition, no direct competition in this activity.  However, to some degree, there are alternatetechnologies in the market place which can be used to perform genetic analysisand genomic mapping and so in this regard we do face indirect competition and apotential risk of technological obsolescence. A risk of patent invalidation always exists with the possibility of thediscovery of previously unknown prior art as well as patent re-examination. We are currently in legal proceedings with respect to a Nullity Actionin the German Patent Court regarding the equivalent to US Patent No. 5,612,179and we have recently become aware of a Request for Re-examination of US Patent No. 5,612,179.  Apart from these risks, the inevitable expiryof our non-coding family of patents in 2010 and 2015 remains, at which time ourability to generate future license revenues from these particular patents willcease.  It is anticipated that, overtime, however, licensing of additional patents filed by the Company in otherareas of genetics and our other research projects may replace revenuescurrently generated from the licensing of these non-coding patents.

 

**Genetic testing - paternity**

 

The size of the AustralianDNA paternity testing market can only be estimated, as the tests fall outsideof the Australian public health (Medicare) regime and hence no central recordsare kept.  Our best estimate is that thetotal size of the market is about 5,000 to 6,000 tests per year which, ifcorrect, would give the Company approximately a 50 percent total market share.  There are presently a number of otherlaboratories that offer these tests in Australia, all of which are NATAaccredited.

 

Sonic and Healthscope arethe two largest pathology companies in Australia.  Throughout Australia, Healthscope refersexclusively to DNALabs.  In Victoria, NewSouth Wales and Western Australia, Sonic refer exclusively to their ownlaboratories.  The Australian market forpaternity testing is now saturated and, since the entry of two of the threemajor pathology companies in the later part of 2003, our ability to generategrowing revenues from this market has reduced. As of December 2008, our market share appears to have stabilizedand is now trending up.  A brief outlineof each competitor in this area is listed below.

 

DNAlabs:  Thisis our largest competitor and is a wholly-owned subsidiary of Sydney IVF.  It obtains paternity testing referralsexclusively from Symbion Health (formerly Mayne Health) which has the largestshare of the Australian pathology market.

 

SonicHealth Care:  A division of Sonic, the second largestpathology provider in Australia.  Thelaboratory is Sydney-based and was established by the ex-head of DNAlabs.  Once accreditation was granted in July 2003,the referrals which the Company had previously received from Sonic ceased.

 

Healthscope (formerlyGribbles):  The third largest pathology provider inAustralia, which entered the paternity testing market in late 2003. Since entryinto the market, they aggressively discounted prices in order to obtain marketshare.  This strategy proved unsuccessfuland, in November 2007, they exited the paternity market.  All of their work is now referred to anewly-established laboratory called DNA Queensland.

 

Victorian Institute ofForensic Medicine:  This is the Coroner’s laboratory inVictoria.  We know from their annualreport that for the last five years their workload has been relatively staticat 150 cases per annum.

 

John Tonge Centre:  Thisis the Coroner’s laboratory in Queensland. It is NATA accredited but does not offer the test commercially.

 

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Medvet Science:  Thislaboratory is based in South Australia and its major shareholder is the StateGovernment.  Prior to the entry of Gribbles,it had a monopoly in South Australia and also controls the market in theNorthern Territory and Tasmania.

 

DNA Solutions:  Thiscompany was established in the late 1990’s and sells its services over theinternet.  The majority of their businessis generated via the web and they have sites in various countries.

 

DNA-Bioscience:  Aninternet based company which commenced trading in May 2005.

 

**Genetic testing - diagnostics**

 

Asthe sole licensee in Australia and New Zealand for the genetic test for thepredisposition for familial breast cancer, we do not have any commercialcompetitors in this area.  However, thetest is provided by the pathology departments of certain public hospitals.  They are not true competitors in that thenumbers of such tests that can be performed is restricted due to limitedGovernment funding.  Further, thehospitals use strict patient selection criteria such that only the top 10% ofhighest risk patients are tested.

 

**Genetic testing - forensics**

 

ForensicDNA testing is defined to include DNA tests, the results of which can be reliedupon as evidence in a court of law.  Tomeet the strict standards of court evidence, forensic testing can only beconducted through NATA accredited laboratories that have been approved for suchwork.  We are the first non-governmentowned, NATA accredited forensics laboratory in Australia.  At the moment, virtually all forensic testingis conducted through state government owned laboratories.  These laboratories have substantial backlogsand do not generally undertake private DNA forensic tests.  As such, we are one of a few accreditedlaboratory currently providing forensic testing services to the public.  To resolve the backlog problem, various stategovernments have already suggested that they plan to investigate thepossibility of outsourcing the testing of forensic samples to the privatesector.  In January 2008, theCompany announced that it had been awarded a three year contract to supply NewSouth Wales Police with DNA analysis services.

 

**Genetic testing - animals**

 

GTGoffers a DNA testing service across a number of animal species, particularlywith respect to establishing an animal’s pedigree and parentage.  This test is common across animal species andis not proprietary.  Accordingly, any laboratorythat can provide a DNA parentage / pedigree test is able to enter this market.

 

GTGhas also developed a large portfolio of genetic tests for the canine area.  Currently, GTG is the only provider of canineDNA services for the growing pedigree dog market in China.

 

Queensland Universitycurrently offers testing across animal species but particularly horses, whereit is currently the preferred laboratory for stud book recording.  Queensland University also provides a DNAservice testing for dogs and cattle. Genetic Solutions Pty. Ltd. is currently offering a range of genetictests for the cattle industry.  GeneticSolutions is a smaller laboratory which has also indicated that it may extendits testing services to sheep.

 

AgResearch is a research laboratoryin New Zealand used by Ovita, a company specializing in providing sheep herdmanagement systems that includes a genetic breeding scoring system.  Ovita has indicated that it would like toexpand its services into the cattle industry.

 

Some major pathologycompanies in Australia already have vet pathology businesses and almost allhave expertise in human DNA profiling. We expect that they will enter the animal testing market in the mediumterm.  Currently, the major caninepathology company in Australia has a relationship with GTG whereby it sends allof its canine genetic testing to GTG.

 

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**Genetic testing - plants**

 

There are no material levelsof commercial DNA service tests conducted in Australia for plants, other thancommissioned research conducted by public authorities (such as universities andCSIRO) or by commercial organisations that internally conduct DNA tests as partof the ordinary course of their operations. In recognition of this, we established AgGenomics Pty. Ltd., a jointventure between Genetic Technologies and the Victorian State Government.  The joint venture is controlled by GeneticTechnologies (owning 50.1%).  Thecommercial goal of AgGenomics is to offer the following services to plantbreeders and researchers:

 

·                  High throughput extraction of plasmid DNA andgenomic DNA;

 

·                  High throughput DNA sequencing;

 

·                  High throughput genotyping; and

 

·                  SNP discovery and analysis.

 

AgGenomics has focused onthe commercial species of greatest value to the Australian economy and alsospecies where the most substantial funding has been invested, including wheat,barley, canola, cotton, vegetable brassicas (e.g. cabbage, cauliflower, brusselsprouts and broccoli) and wine grapes. To date, AgGenomics has completed a number of commercial projects onbehalf of some of these industries.

 

In Australia, we have twomajor competitors.  The first is SouthernCross University, which specializes in tropical fruits and rice but, as theyare highly specialized and do not match AgGenomics’ testing capacity, they arenot seen as a major threat.  The second,South Australian Research & Development Institute (SARDI), is seen asour major threat as in the next few years there is a reasonable expectationthat they will have the capacity to match AgGenomics.  In addition to this, their expertise inplants is similar to ours.

 

Whilst we have few domesticcompetitors, our major commercial threat comes from offshore laboratories basedin the United States, England and Korea which have a higher throughput thanAgGenomics and enjoy greater economies of scale, thereby reducing theircosts.  To date, a few large Australianplant sequencing contracts have been lost offshore in cases where the clientsimply requires the return of the genetic data and does not require ourexpertise in its interpretation.

 

**Genetic testing - sports performance**

 

The Company has been grantedpatents in India, Japan, Australia and New Zealand over genotyping of the ACTN3gene for athletic performance.  Patentsare pending in the United States, Europe, China, Canada, Russia and SouthKorea.  Recently, ACTN3 has been offeredby the United States based lifestyle genetics company 23andMe Inc., as part ofits overall product involving the analysis of more than 500,000 geneticvariations.  While the ACTN3 SportsGeneTestTM provides an indication of an individual’s predisposition to sports/powersport performance as opposed to endurance sport performance, there are a rangeof other tests, genetic and non genetic that may also indicate a predispositionto particular sporting performance.  Noneof these, however, specifically relate to a genetic test on the ACTN3 genewhich, scientifically, has shown a very high correlation to sports performance.

 

**Research**

 

RareCellect Project

 

Sequenom, Inc. (NASDAQ:SQNM) is developing a non-invasive prenatal diagnostic platform based onanalysis of cell-free fetal nucleic acid obtained from maternal bloodsamples.  The Sequenom platform,SEQureDxTM, is being developed as a primary screening tool for Trisomy 21 (alsoknown as Downs Syndrome) as well as a broader menu of diagnostic tests.  It is currently unknown how the diagnosticperformance of SEQureDxTM will compare to RareCellect although the Companybelieves that RareCellect will have utility much earlier in the first trimesterof pregnancy than SEQureDxTM.  The Companyfurther believes that the sample collection and pre-processing aspects ofRareCellect are generic and therefore potentially highly complementary toSEQureDxTM.

 

According to a press releasein September 2008, Sequenom is expecting to launch their Trisomy 21diagnostic test on SEQureDxTM in the first half of calendar 2009.

 

Pathogens Program

 

Several groups are known tobe developing novel anthelmintic compounds for application to commercialruminants such as sheep.  These groupsinclude Novartis, Schering-Plough, Eli Lilly, Bayer, Merck and Pfizer.   The status of these development programs iscurrently unknown to the Company.

 

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**EnvironmentalRegulations**

 

The Company’s operations aresubject to environmental regulations under Australian State legislation.  In particular, the Company is subject to therequirements of the Environment Protection Act 1993.  A license has been obtained under this Act toproduce listed waste.

 

As of June 30, 2008,the Company held a 14.66% (2007: 16.36%) direct equity interest in the NorthLaverton Joint Venture with Regis Resources Limited (“Regis”) which hascontinuing minimal expenditure requirements as prescribed by the WesternAustralian Mines Department in respect of its prospecting and explorationlicenses and mining leases owned by the joint venture.  By agreement with the joint venture partner,the Company is not contributing any funding towards the project, as these costsare met by its joint venture partner.  Asof June 30, 2008, the Company had recorded a provision for $94,987 inrespect of its share of the estimated rehabilitation costs associated with theNorth Laverton project.  The amount ofthe provision was based on calculations provided to the Company by Regis asproject manager.  On August 27,2008, the Company sold its entire interest in the joint venture to Regis and,as part of this sale, has been fully indemnified by Regis against any futurerehabilitation liabilities which may arise from the exploration activities ofthe joint venture undertaken up until the date of sale.  This indemnification will enable the Company,during the year ending June 30, 2009, to fully reverse the provision of$94,987 in respect of such liabilities which had been recorded in the Company’sbalance sheet as of June 30, 2008.

 

**Item 4.C         OrganizationalStructure**

 

The table below shows thecorporate structure of Genetic Technologies and its subsidiaries as of the dateof this Annual Report:

 

 

Note:                   Frozen Puppies Dot Com Pty. Ltd. was acquiredon July 22, 2008, i.e. after balance date and its results have thereforenot been included in the financial statements as of June 30, 2008 - referNote 39 in the attached financial statements.

 

Genetic Technologies is theholding company of the group and is listed on the Australian SecuritiesExchange, under the code GTG and, via its ADRs, on the NASDAQ Global Market,under the ticker symbol GENE.

 

**Item 4.D         Property,Plant and Equipment**

 

GeneType Pty. Ltd., awholly-owned subsidiary of the Company, rents the offices and laboratorypremises located at 60-66 Hanover Street, Fitzroy, Victoria, Australia fromBankberg Pty. Ltd., a company associated with former Director, Dr. MervynJacobson.  The lease expires on June 30,2011, with an option for renewal for another 10 years, at a current annual costof approximately $440,000.

 

**Item 5.            Operatingand Financial Review and Prospects**

 

Youshould read the following discussion and analysis in conjunction with Item 3 “SelectedFinancial Data” and our financial statements, the notes to the financialstatements and other financial information appearing elsewhere in this AnnualReport.  In addition to historicalinformation, the following discussion and other parts of this Annual Reportcontain forward-looking statements that reflect our plans, estimates,intentions, expectations and beliefs. Our actual results could differ materially from those discussed in theforward-looking statements.  See the “RiskFactors” section of Item 3 and other forward-looking statements in this AnnualReport for a discussion of some, but not all, factors that could cause orcontribute to such differences.

 

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**Item 5.A         OperatingResults**

 

**Overview**

 

**Our Formation**

 

GeneTypeAG was incorporated in Zug, Switzerland on February 13, 1989 to exploitthe commercialization of the hypothesis that the non-coding region of the humanHLA gene complex of chromosome 6 is a valuable and highly ordered reservoir ofuseful genetic information, largely overlooked by the rest of the world.

 

Genetic Technologies Limitedwas incorporated on January 5, 1987 as Concord Mining NL in WesternAustralia.  On August 13, 1991, wechanged our name to Consolidated Victorian Gold Mines NL to better reflect theoperations of the Company at the time. On December 2, 1991, we again changed our name to ConsolidatedVictorian Mines NL.  On March 5,1995, we again changed our name to Duketon Goldfields NL.  On October 15, 1995, we changed ourstatus from a “No Liability” company to a company limited by shares and thename became Duketon Goldfields Limited. On August 29, 2000, we changed our name to  Genetic Technologies Limited, which is thecurrent name of the Company.

 

On August 29, 2000,Duketon Goldfields Limited received shareholder approval to change itsactivities from a mining company to a biotechnology and genetics company on theacquisition of all the issued capital of GeneType AG of Switzerland.  Following the acquisition of GeneType AG, thenew combination has been engaged in the researching, developing andcommercialization of genetic concepts primarily related to our intron sequencepatents and genomic mapping patents.  Weare also the largest accredited paternity testing laboratory in Australia whichGeneType has been operating since 1990. Over the past five years, the Company has granted licenses to itspatents and expects to derive revenue from further licensing of itspatents.  Prior to the merger withGeneType AG, the mining exploration activities had ceased and were beingprogressively disposed of by August 2000. The company was basically an investment shell and following thecompletion of the merger the old shareholders of GeneType AG were in control ofthe company which formed the basis for treating the acquisition of GeneType AGas a reverse acquisition.

 

**DevelopmentStage Enterprise**

 

Until 2002, we were adevelopment stage enterprise.  We had beendeveloping our technology that resulted in the granting of seven families ofpatents in the USA which we have now actively started to commercialize andenforce.  Since inception up to June 30,2008, we have incurred $51,189,189 in accumulated operating losses.  Our losses have resulted principally fromcosts incurred in research and development and from general and administrativecosts associated with our operations. Refer to the Consolidated Statements of Operations in our attachedfinancial statements.

 

The research and developmentcosts incurred prior to August 2000 were funded by shareholders ofGeneType AG.  On completion of the mergerof Duketon Goldfields Limited and GeneType AG in August 2000, to formGenetic Technologies Limited, existing funds of approximately $6 million withinGenetic Technologies Limited were applied towards research and development andgeneral and administrative expenses associated with our operations.  The Company also sold its investment inCytomation Inc. of Fort Collins, Colorado in November 2001 forapproximately $6 million.  The fundsrealized from this sale were applied towards research and development andgeneral and administrative expenses associated with our operations.  The Company has completed several placementsof shares, including one in August 2003, and there have been other amountsraised from the exercise of unlisted options. We have primarily depended on these sources of funds to meet ourfinancing needs.  However, we now licenseour non-coding technology and provide a series of genetic tests, both of whichgenerate revenue to fund our expenses.

 

The extent to which wecontinue to incur losses will depend on the quantum of license fees receivedfrom the licensing of our patents, the amount of annuities and royalties wereceive from past licenses, and the number of genetic tests we conduct.  We may not be able to license our technologysuccessfully or ever achieve or sustain profitability.

 

**Where WeDerive our Revenues**

 

Our major source of revenuesup to June 30, 2002 were grants received from the Australian Governmentunder the START Program licensing, fees from licensing the non-coding patents,DNA paternity testing services income in Australia and interest income from ourcash on deposit and other cash equivalents.

 

Since commencing ourlicensing program during the year ended June 30, 2002, the Company hasbeen successful in securing licenses for its technology from a total of 38commercial licensees and 6 research licensees (see Item 4A. for a completelist).  We have also received proceedsfrom the disposal of some of our remaining non-core mining assets which wereheld for resale in Australia and Canada during the year ended June 30,2003 and from the sales of various shares in other companies which we formerlyheld.  None of this income is recurring.

 

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**Fiscal Year**

 

As an Australian company,our fiscal, or financial, year ends on June 30 each year.  We produce audited consolidated accounts atthe end of June each year and provide reviewed six-monthly accounts at theend of December each year,  both ofwhich are prepared under Australian Accounting Standards which includeAustralian equivalents to International Financial Reporting Standards (“AIFRS”)and International Financial Reporting Standards (“IFRS”).

 

**Recent Accounting Pronouncements**

 

In respect of the year endedJune 30, 2008, Genetic Technologies and its subsidiaries (collectively,the “Group”) has adopted *IFRS7 Financial Instruments; Disclosures*, together with allconsequential amendments which became applicable on January 1, 2007.  The adoption of this standard has onlyaffected the disclosure in the financial statements which are attached as partof this Annual Report.  There has been noaffect on profit and loss or the financial position of the Group.

 

CertainInternational Financial Reporting Standards and interpretations have beenissued or amended that are not mandatory for the June 30, 2008 reportingperiod.  The assessment of the impact ofthese standards and interpretations which are considered to be of relevance tothe Group and the parent entity is set out below.

 

·          *Revised International Accounting Standard 23: BorrowingCosts*

 

IAS 23 (Revised) is applicable toannual reporting periods beginning on or after January 1, 2009.  These amendments to IAS 23 require that allborrowing costs associated with a qualifying asset be capitalized.  The Group has not determined the extent ofthe impact this amendment will have on the financial statements of the Group.

 

·          *Revised International Accounting Standard 1: Presentation ofFinancial Statements*

 

IAS 1 (Revised) is applicable toannual reporting periods beginning on or after January 1, 2009.  This Standard introduces a statement ofcomprehensive income.  Other revisionsinclude impacts on the presentation of items in the statement of changes inequity, new presentation requirements for restatements or reclassifications ofitems in the financial statements, changes in the presentation requirements fordividends and changes to the titles of the financial statements.  These amendments are only expected to affectthe presentation of the Group’s Financial Report and will not have a directimpact on the measurement and recognition of amounts disclosed in the FinancialReport.  The Group has not determined atthis stage whether to present a single statement of comprehensive income or twoseparate statements.

 

·          *Revised IFRS 2: Share-based Payments: Vesting Conditions and Cancellations*

 

IFRS2 (Revised) is applicable to annual reporting periods beginning on or after January 1,2009.  The amendments clarify thedefinition of “vesting conditions”, introducing the term “non-vestingconditions” for conditions other than vesting conditions as specificallydefined and prescribe the accounting treatment of an award that is effectivelycancelled because a non-vesting condition is not satisfied.  The Group has share-based payment arrangementsthat may be affected by these amendments.  However, the Group has not yet determined the extent of the impact, ifany.

 

·          *Improvements to IFRSs*

 

Certainimprovements to IFRS that are applicable to annual reporting periods beginningon or after January 1, 2009 except for amendments to IFRS 5, which areeffective from July 1, 2009.  Theimprovements project is an annual project that provides a mechanism for makingnon-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 dealswith changes the IASB identified resulting in accounting changes; Part IIdeals with either terminology or editorial amendments that the IASB believeswill have minimal impact.  The Group hasnot yet determined the extent of the impact of the amendments, if any.

 

·          *Revised IFRS 3: Business Combinations*

 

IFRS 3 (Revised) is applicable to annual reportingperiods beginning on or after July 1, 2009.  The revised standard introduces a number ofamendments to the accounting for business combinations, including: requiringacquisition costs to be expensed immediately; the fair value measurement ofcontingent consideration to be recognised in the balance sheet at acquisitiondate with subsequent changes reflected in the income statement; it providesfurther guidance on determining the fair value of certain assets andliabilities; as well as other changes. The majority of these changes will apply prospectively.

 

Asthis standard will mainly only impact business combinations entered into after July 1,2009, the Group has not yet fully assessed the impact of this standard,including which of the available accounting policy options it will adopt.

 

TheGroup has entered into a business combination during the financial year ended June 30,2009.  However, the Group has not yetassessed the impact of early adoption, including which accounting policy toadopt.

 

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·          *Revised International Accounting Standards 27: Consolidatedand Separate Financial Statements*

 

IAS27 (Revised) is applicable to annual reporting periods beginning on or after July 1,2009.  Under the revised standard, achange in the ownership interest of a subsidiary (that does not result in lossof control) will be accounted for as an equity transaction.  If the Group changes its ownership interestin existing subsidiaries in future, the change will be accounted for as anequity transaction.  This will have noimpact on goodwill, nor will it give rise to a gain or loss in the Group’sincome statement.

 

These are the only changes which are expected to be ofrelevance to the Group.

 

**CriticalAccounting Policies**

 

**(a)****             ****Basis of preparation**

 

Thefinancial statements which are attached as part of this Annual Report form partof a general purpose Financial Report has been prepared in accordance withInternational Financial Reporting Standards (“IFRS”) and other authoritativepronouncements of the International Accounting Standards Board (“IASB”).

 

*Compliance with IFRS*

 

TheFinancial Report complies with both IFRS, as issued by the InternationalAccounting Standards Board, and the Australian Accounting Standards, as issuedby the Australian Accounting Standards Board.

 

Theconsolidated entity changed its accounting policies on July 1, 2005 tocomply with IFRS.  The transition to IFRSis accounted for in accordance with *IFRS 1:First-Time Adoption of International Financial Reporting Standards* (“IFRS1”), with July 1, 2004 as the date of transition.

 

*Historical cost convention`*

 

Thesefinancial statements have been prepared under the historical cost convention,as modified by the measurement of certain available-for-sale investments atfair value.

 

*Significant accounting estimates*

 

Thepreparation of financial statements requires the use of certain criticalaccounting estimates.  It also requiresManagement to exercise its judgement in the process of applying the Group’saccounting policies.  The areas involvinga higher degree of judgement or complexity, or areas where assumptions andestimates are significant to the financial statements, are disclosed in Note 3.

 

**(b)****             ****Basis of consolidation**

 

Theconsolidated financial statements comprise the financial statements of GeneticTechnologies Limited and its subsidiaries (collectively the “Group”).  The financial statements of subsidiaries areprepared for the same reporting period as the parent, using consistentaccounting policies.  Adjustments aremade to bring into line any dissimilar accounting policies that may exist.  All intercompany balances and transactions,including unrealised profits arising from intra-group transactions, have beeneliminated in full.  Unrealised lossesare eliminated unless costs cannot be recovered.

 

Subsidiaries are consolidated fromthe date on which control is transferred to the Group and cease to beconsolidated from the date on which control is transferred out of theGroup.  Where there is loss of control ofa subsidiary, the consolidated financial statements include the results for thepart of the reporting period during which Genetic Technologies Limited hascontrol.  Minority interests representthe interests not held by the Group in Gtech International Resources Limited,ImmunAid Pty. Ltd. and AgGenomics Pty. Ltd.

 

**(c)****             ****Foreign currency translation**

 

Boththe functional and presentation currency of Genetic Technologies Limited andits Australian subsidiaries is the Australian dollar (AUD).  Transactions in foreign currencies are initiallyrecorded in the functional currency at the exchange rates ruling at the date ofthe transaction.  Monetary assets andliabilities which are denominated in foreign currencies are retranslated at therate of exchange ruling at the balance sheet date.  All differences are taken to the incomestatement.

 

Non-monetaryitems that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rate ruling at the date of the initialtransaction.  Non-monetary items measuredat fair value in a foreign currency are translated using the exchange ratesruling at the date when the fair value was determined.

 

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Thefunctional currencies of the Company’s three overseas subsidiaries are asfollows:

 

GtechInternational Resources Limited — Canadian dollars (CAD)

GeneType AG — Swiss francs (CHF)

GeneTypeCorporation — United States dollars (USD)

 

As at the reporting date, theassets and liabilities of these overseas subsidiaries are translated into thepresentation currency of Genetic Technologies Limited at the rate of exchangeruling at the balance sheet date and the income statements are translated atthe weighted average exchange rates for the period.  The exchange differences arising on theretranslation are taken directly to a separate component of equity.  On disposal of a foreign entity, the deferredcumulative amount recognised in equity relating to that particular foreignoperation is recognised in the income statement.

 

**(d)****             ****Fair value estimation**

 

Thefair value of financial instruments that are not traded in an active market(for example, non-listed equity securities classified as available-for-saleassets) is determined using valuation techniques, including the last price atwhich shares were issued to third parties, where amounts are reliablymeasured.  The Group uses a variety ofmethods and makes assumptions that are based on market conditions existing ateach balance date.  Information includingquoted market prices and details of recent capital raisings is used todetermine fair value for these remaining financial instruments.  Available-for-sale investments are measuredat approximate market value, where fair value cannot be reliablydetermined.  The carrying value lessimpairment provision of trade receivables are assumed to approximate their fairvalues due to their short-term nature.

 

**(e)****             ****Segment reporting**

 

An *operating segment* is a component of theGroup:

 

·             that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating totransactions with other components of the Group);

 

·             whose operating results are regularly reviewed by theGroup’s chief operating decision maker to make decisions about resources to beallocated to the segment and assess its performance; and

 

·             for which discrete financial information is available.

 

TheGroup elected to early adopt *IFRS 8: SegmentReporting* as from July 1, 2006.

 

**(f)****               ****Revenue recognition**

 

Revenuesare recognised to the extent that it is probable that the economic benefitswill flow to the entity and the revenues can be reliably measured.  Revenues are recognised at the fair value ofthe consideration received or receivable net of the amounts of goods andservices tax (GST).  The followingspecific recognition criteria must also be met before revenue is recognised:

 

*License fees received*

 

Licensefee income is recorded on the execution of a binding agreement where the Grouphas no future obligations, income is fixed and determinable, there is nospecific term clause, and collection is reasonably assured.  The Group does not grant refunds to its customers.  Refer also to Note 2(y).

 

*Rendering ofservices*

 

Revenues from the rendering ofservices are recognised when the services are provided and the fee for theservices is recoverable.  Servicearrangements are of short duration (in most cases less than three months).

 

*Royalties and annuities received*

 

TheCompany licenses the use of its patented genetic technologies.  Royalties and annuities arising from theselicenses are recognised when earned in accordance with the substance of theagreement, in cases where no future performance is required by the Company, andcollection is reasonably assured.

 

*Interest received*

 

Revenue is recognised as theinterest accrues using the effective interest method.  Interest charged on loans to related partiesis charged on commercial and arm’s-length terms and conditions.

 

*Research anddevelopment grants received*

 

TheCompany receives non-refundable grants that assist the Company to fund specificresearch and development projects.  Thesegrants generally provide for the reimbursement of approved costs incurred asdefined in the various agreements. Government grants are recorded as other income when they becomereceivable, i.e. when key milestones set within each agreement are achieved andaccepted by all parties to the grant, no performance obligation remains andcollectibility is reasonably assured.

 

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**(g)****            ****Share-based payment transactions**

 

TheGroup provides benefits to employees of the Group in the form of share-basedpayment transactions, whereby employees render services and receive rights overshares (“equity-settled transactions”). There is currently a Staff Share Plan in place to provide these benefitsto senior executives, consultants and employees.  The cost of these equity-settled transactionsis measured by reference to the fair value at the date they are granted.  The fair value is determined by an externalvaluer using a Black-Scholes option pricing model.

 

Invaluing equity-settled transactions, no account is taken of any performanceconditions.  The cost of equity-settledtransactions is recognised, together with a corresponding increase in equity,over the period in which the relevant vesting conditions are fulfilled, endingon the date that the relevant employees become fully entitled to the award (“vestingdate”).  The cumulative expenserecognised for equity-settled transactions at each reporting date until vestingdate reflects (i) the extent to which the vesting period has expired; and (ii) thenumber of awards that, in the opinion of the Directors of the Group, willultimately vest.  This opinion is formedbased on the best information available at balance date.

 

Noexpense is recognised for any awards that do not ultimately vest.  Where the terms of an equity-settled awardare modified, as a minimum an expense is recognised as if the terms had notbeen modified.  In addition, an expenseis recognised for any increase in the value of the transaction as a result ofthe modification, as measured at the date of modification.  Where an equity-settled award is cancelled,it is treated as if it had vested on the date of cancellation, and any expensenot yet recognised for the award is recognised immediately.  However, if a new award is substituted forthe cancelled award, and designated as a replacement award on the date that itis granted, the cancelled and new award are treated as if they were amodification of the original award, as described in the previous paragraph.  Where appropriate, the dilutive effect ofoutstanding options is reflected as additional share dilution in thecomputation of diluted earnings per share.

 

**(h)****            ****Income tax**

 

Theincome tax expense or revenue for the period is the tax payable on the currentperiod’s taxable income based on the national income tax rate for eachjurisdiction adjusted by changes in deferred tax assets and liabilitiesattributable to temporary differences and unused tax losses.  Deferred income tax is provided in full, usingthe liability method, on temporary differences arising between the tax bases ofassets and liabilities and their carrying amounts in the consolidated financialstatements.  However, the deferred incometax is not accounted for if it arises from initial recognition of an asset orliability in a transaction other than a business combination that, at the timeof the transaction, affects neither accounting nor taxable profit or loss.  Deferred income tax is determined using taxrates (and laws) that have been enacted or substantially enacted by the balancesheet date and are expected to apply when the related deferred income tax assetis realised or the deferred income tax liability is settled.  Deferred tax assets are recognised fordeductible temporary differences and unused tax losses only if it is probablethat future taxable amounts will be available to utilise those temporarydifferences and losses.

 

Deferredtax liabilities and assets are not recognised for temporary differences betweenthe carrying amount and tax bases of investments in controlled entities wherethe parent entity is able to control the timing of the reversal of thetemporary differences and it is probable that the differences will not reversein the foreseeable future.  Deferred taxassets and liabilities are offset when there is a legally enforceable right tooffset current tax assets and liabilities and when the deferred tax balancesrelate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has alegally enforceable right to offset and intends either to settle on a netbasis, or to realise the asset and settle the liability simultaneously.  Current and deferred tax balancesattributable to amounts recognised directly in equity are also recogniseddirectly in equity.

 

*Tax consolidationlegislation*

 

GeneticTechnologies Limited and its wholly-owned Australian-resident subsidiaries haveimplemented the tax consolidation legislation. The head entity, Genetic Technologies Limited, and the subsidiaries inthe tax consolidated group account for their own current and deferred taxamounts.  These tax amounts are measuredas if each entity in the tax consolidated group continues to be a stand alonetaxpayer in its own right.

 

Inaddition to its own current and deferred tax amounts, Genetic TechnologiesLimited also recognises the current tax liabilities (or assets) and thedeferred tax assets arising from unused tax losses and unused tax creditsassumed from subsidiaries in the tax consolidated group.

 

Assetsor liabilities arising under tax funding agreements with the tax consolidatedentities are recognised as amounts receivable from or payable to other entitiesin the Group.  Details about the taxfunding agreement are disclosed in Note 7. Any difference between the amounts assumed and amounts receivable orpayable under the tax funding agreements are recognised as a contribution to(or distribution from) wholly-owned tax subsidiaries.

 

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**(i)****               ****Cash and cash equivalents**

 

Cashand short-term deposits in the balance sheet comprise cash at bank and in handand short-term deposits with an original maturity of three months or less.  For the purposes of the cash flow statement,cash and cash equivalents consist of cash and cash equivalents as definedabove.  Cash at bank earns interest atfloating rates based on daily bank deposit rates.  Short-term deposits are made for varyingperiods of between one day and three months, depending on the immediate cashrequirements of the Group, and earn interest at the respective short-termdeposit rates.

 

**(j)****               ****Trade and other receivables**

 

Tradereceivables, which are non-interest bearing and generally have terms of between30 to 90 days, are recognised and carried at original invoice amount less anallowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidencethat a receivable is impaired.  Suchevidence includes an assessment of the debtor’s ability and willingness to paythe amount due.  The amount of theallowance/impairment loss is measured as the difference between the carryingamount of the trade receivables and the estimated future cash flows expected tobe received from the relevant debtors. No impairment charge has been recognised as an expense for the currentyear.  Details regarding interest rateand credit risk of current receivables are disclosed in Note 37.

 

**(k)****           ****Consumables**

 

Consumablesprincipally comprise laboratory and other supplies and are valued at the lowerof cost and net realizable value. Consumable costs are recognised as the purchase price of items fromsuppliers plus freight inwards and any applicable landing charges.  Costs are assigned on the basis of weightedaverage costs.

 

**(l)****               ****Restricted security deposits**

 

Restrictedsecurity deposits include cash deposits held as security for the performance ofcertain contractual obligations.

 

**(m)****         ****Investments and other financial assets**

 

Allinvestments are initially recognised at cost, being the fair value of theconsideration given plus directly attributable transaction costs.  After initial recognition, investments insubsidiaries are carried at cost, less any impairment disclosed in the separatefinancial statements of Genetic Technologies Limited.  Other investments, which are classified asavailable-for-sale,   are measured at fairvalue if this can reliably be determined or at cost where fair value cannot bereliably determined.  Gains or losses onavailable-for-sale investments are recognised as a separate component of equityuntil the investment is sold, or otherwise disposed of, or until the investmentis determined to be impaired, at which time the cumulative gain or losspreviously reported in equity is included in the income statement.

 

*Available-for-sale investments*

 

Available-for-saleinvestments consist of investments in ordinary shares which have no fixedmaturity date or coupon rate.  The fair valueof the unlisted available-for-sale investments has been estimated usingvaluation techniques based on assumptions that are not supported by observablemarket prices or rates.  Managementbelieves the estimated fair values (where reliably measured) resulting from thevaluation techniques and recorded in the balance sheet are reasonable and themost appropriate at the balance sheet date. Any related changes in fair values are directly recorded in equity.  Available-for-sale investments are measuredat approximate market value, where fair value cannot be reliably determined.

 

**(n)****            ****Property, plant and equipment**

 

Plantand equipment is stated at cost less accumulated depreciation and anyimpairment in value.  Depreciation iscalculated on either a straight-line or diminishing value basis over theestimated useful life of the respective asset as follows:

 

Laboratoryequipment – 3 to 5 years

Computerequipment – 2 to 5 years

Officeequipment – 2 to 5 years

Equipmentunder hire purchase – 3 years

Leaseholdimprovements – lease term, being between 4 and 10 years

 

Costsrelating to day-to-day servicing of any item of property, plant and equipment,which may include the cost of small parts, are recognised in profit or loss asincurred.  The cost of replacing largerparts of some items of property, plant and equipment are capitalized whenincurred and depreciated over the period until their next scheduledreplacement.

 

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**(o)****             ****Intangible assets**

 

*Patents*

 

Patentsheld by the Group are used in the licensing, testing and research areas and arecarried at cost and amortised on a straight-line basis over their useful lives,being from 5 to 10 years.  External costsincurred in filing and protecting patent applications, for which no futurebenefit is reasonably assured, are expensed as incurred.

 

*Research costs*

 

Costsrelating to research activities are expensed as incurred.

 

**(p)****            ****Goodwill**

 

Goodwillon acquisition is initially measured at cost, being the excess of the cost ofthe business combination over the acquirer’s interest in the net fair value ofthe identifiable assets, liabilities and contingent liabilities.  Following its initial recognition, goodwillis measured at cost less any accumulated impairment losses.  Goodwill is not amortised but is reviewed forimpairment at each reporting date, or more frequently if events or changes incircumstances indicate that the carrying value may be impaired.  Impairment is determined by assessing therecoverable amount of the cash-generating unit to which the goodwillrelates.  Where the recoverable amount ofthe cash-generating unit is less than the carrying amount, an impairment lossis recognised.

 

Wheregoodwill forms part of a cash-generating unit and part of the operation withinthat unit is disposed of, the goodwill associated with the operation disposedof is included in the carrying amount of the operation when determining thegain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis ofthe relative values of the operation disposed of and the portion of thecash-generating unit retained.  For thepurpose of impairment testing, goodwill acquired in a business combination is,from the acquisition date, allocated to each of the Group’s cash-generatingunits, or groups of cash-generating units, that are expected to benefit fromthe synergies of the combination, irrespective of whether other assets orliabilities of the Group are assigned to those units or groups of units.  Each unit or group of units to which thegoodwill is so allocated represents the lowest level within the Group at whichthe goodwill is monitored for internal management purposes; and is not largerthan an operating segment in accordance with *IFRS8 Operating Segments*.

 

**(q)****             ****Impairment of assets (other than goodwill)**

 

TheGroup assesses at each reporting date whether there is an indication that anasset may be impaired.  If any suchindication exists, the Group makes an estimate of the asset’s recoverableamount.  An asset’s recoverable amount isthe higher of its fair value less costs to sell and its value in use and isdetermined for an individual asset, unless the asset does not generate cashinflows that are largely independent of those from other assets or groups ofassets and the asset’s value-in-use cannot be estimated to be close to its fairvalue.  In such cases, the asset istested for impairment as part of the cash-generating unit to which itbelongs.  When the carrying amount of anasset or cash-generating unit exceeds its recoverable amount, the asset orcash-generating unit is considered impaired and is written down to itsrecoverable amount.

 

Inassessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to theasset.  Impairment losses relating tooperations are recognised in those expense categories consistent with thefunction of the impaired asset unless the asset is carried at its revaluedamount (in which case the impairment loss is treated as a revaluationdecrease).

 

Anassessment is made at each reporting date as to whether there is any indicationthat previously recognised impairment losses may no longer exist or may havedecreased.  If such indication exists,the recoverable amount is estimated.  Apreviously recognised impairment loss is reversed only if there has been achange in the estimates used to determine the asset’s recoverable amount sincethe last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased toits recoverable amount.  That increased amountcannot exceed the carrying amount that would have been determined, net ofdepreciation, had no impairment loss been recognised for the asset in prioryears.  Such reversal is recognised inprofit or loss unless the asset is carried at revalued amount, in which casethe reversal is treated as a revaluation increase.  After such a reversal, the depreciationcharge is adjusted in future periods to allocate the asset’s revised carryingamount, less any residual value, on a systematic basis over its remaininguseful life.

 

**(r)****             ****Trade and other payables**

 

Tradepayables and other payables are carried at amortised cost and represent futureliabilities for goods and services provided  to the Group prior to the end of the financial year that are unpaid andarise when the Group becomes obliged to make future payments in respect of thepurchase of these goods and services. Trade payables and other payables generally have terms of between 30 and60 days.

 

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**(s)****             ****Deferred revenue**

 

*License revenues and annuities*

 

Licenserevenues received in respect of future accounting periods are deferred untilthe Company has fulfilled its obligations under the terms of theagreement.  Where deferred revenuerelates to a license agreement with a specific term but the Company has nofuture performance obligations, the revenue is recognised on a straight-lineaccruals basis over the term in accordance with the agreements.  Where revenue has been deferred because theCompany has future performance obligations, revenue is recognized as theCompany’s performance obligations are satisfied.  Costs incurred relating to this futurerevenue are also deferred.

 

Wherea licence agreement provides for the payment of regular annuities to theCompany and the licencee has the right to terminate the agreement prior to thepayment of those annuities with no penalty, the Company does not recogniserevenue until such time as the associated cash payments are received, as it isnot considered probable that the benefits of the transaction will flow to theCompany until cash collection is made. Where such annuities are paid in advance, the revenue is allocated on apro-rata basis with the balance being reflected in the balance sheet as adeferred revenue liability.

 

*Genetic testing revenues*

 

TheCompany operates testing laboratories which provide genetic testingservices.  The Company recognises revenuefrom the provision of testing services when the testing services have beencompleted.  Fees received in advance ofthe testing process are deferred until such time as the Company completes itsperformance obligations.

 

*Grant revenues*

 

Governmentgrants are recognised when there is reasonable assurance that the grant will bereceived and all attaching conditions will be complied with.  When the grant relates to an expense item, itis recognised as income over the periods necessary to match the grant on asystematic basis to the costs that it is intended to compensate.  When the grant relates to an asset, the fairvalue is credited to a deferred income account and is released to the incomestatement over the expected useful life of the relevant asset by equal annualinstalments.

 

**(t)****               ****Provisions**

 

Provisionsare recognised when the Group has a present obligation (legal or constructive)as a result of a past event, it is probable that an outflow of resourcesembodying economic benefits will be required to settle the obligation and areliable estimate can be made of the amount of the obligation.  Where the Group expects some or all of aprovision to be reimbursed, the reimbursement is recognised as a separate assetbut only when the reimbursement is virtually certain.  The expense relating to any provision ispresented in the income statement net of any reimbursement.

 

Ifthe effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflectscurrent market assessments of the time value of money and, where appropriate,the risks specific to the liability. Where discounting is used, the increase in the provision due to thepassage of time is recognised as a finance cost.

 

**Comparison of theyear ended June 30, 2008 to the year ended June 30, 2007**

 

**License revenues**

 

Ourtotal license revenue generated for the 2008 financial year was $10,825,267, adecrease of 5% on the previous year.  Themajority of this revenue was generated from new licenses granted to a number ofcompanies including Syngenta Crop Protection AG, Monsanto Company, GEHealthcare Bio-Sciences Corp., Biosearch Technologies Inc. and PrometheusLaboratories Inc.  As with the 2007financial year, we continued to receive income from the Applera settlement($1,057,135), in the form of equipment and reagent credits, representing adecrease of $84,951 on the previous year. Included in the total license revenues is royalty and annuity income of$921,076, which fell by $1,737,919, or 65%, during 2008 as we had received amajor payment.  License revenues formpart of the Australian geographic segment.

 

**Service testing revenues**

 

Ourservice testing income rose 26% on the 2007 financial year, an increase of$799,561.  Breast cancer testing (up$227,574), forensics testing (up $549,479) and canine disease testing andprofiling (up $196,104) contributed significantly to the increase, though fallsin livestock testing (down $163,574) reduced the overall increase.  However we can see promising increases in thenumber of tests conducted in future periods. We expect this progress to continue as additional marketing initiativescontinue to be introduced.  The income weearned from paternity testing remained stable, which we had anticipated as morecompetitors enter the market, however we are satisfied that we are able tomaintain our market position, despite fierce price cutting in some areas.  We have since secured further considerablework in the area of forensics and are working with political lobbyists to tenderfor work that certain Australian State Governments are now seeking tooutsource.  Service testing revenues formpart of the Australian geographic segment.

 

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**Grant income**

 

Grantincome effectively fell by $136,488 in a year on year comparison which was duelargely to a delay in receipt of the income due under the Export MarketDevelopment Grant which the Company hopes to receive during 2009.  Grant income forms part of the Australiangeographic segment.

 

**Interest income**

 

Interestincome increased by $431,319, or 88%, over the 2007 financial year due to sharpincreases in the deposit interest rates applicable to the Company’s cashbalances during the 2008 year and the fact that a significant proportion of theCompany’s cash assets were transferred from accounts in the United States,where interest rates were typically lower, to the accounts in Australia, whereinterest rates were typically higher.

 

**Employee benefitsexpenses**

 

Totalemployee benefits expenses for 2008 increased by $1,012,322, or 18%.  Apart from increases due to generalinflation, this increase was attributable to increases in salaries and wages($682,243) as a result of additional staff being employed to expand the Company’sbusiness and Directors’ fees ($127,586) as a result of additional Directorsbeing added to the Board.

 

**Impairment lossesand other write-downs**

 

Overall, impairment losses increased by$1,071,040, or 82%, from the preceding 2007 financial year.  During 2008, the Company recognized animpairment loss of $2,378,000 in respect of certain patents obtained from theC.Y. O’Connor ERADE Village Foundation in 2004 due to delays and uncertaintysurrounding the commercialization of the underlying technology.

 

**Genetic testingexpenses**

 

Genetic testing expenses decreased by$389,454, or 20%, during the 2008 financial year.  This fall was due partly to the first-timerecognition of consumables and improvements in laboratory practices which haveresulted in overall efficiencies delivering reduced consumption of reagents.

 

**Contract researchand trial expenses**

 

Contract research and trial expenses incurred during2008 of $1,267,748 remained in line with the previous year ($1,247,775) as theCompany’s various research and development projects continued.

 

**Royalties, licensefees and commissions paid**

 

Royalties, license fees and commissions paid increasedby $309,398, or 53%, during the 2008 financial year.  This increase was due to the payment ofcommissions to licensing contractors in respect of new licenses granted by theCompany during the year.

 

**Legal and patentfees**

 

Legal and patent fees increased by$125,249, or 17%, during the 2008 financial year.  This increase was due to fees associated withthe acquisition of Frozen Puppies Dot Com Pty. Ltd., the lodging of new patentapplications around the world and general growth of the business.

 

**Administrationexpenses**

 

Administration expenses decreased by$62,154, or 7%, during the 2008 financial year due principally to lower auditfees offset by general inflationary increases in other administrative expenses.

 

**Net foreignexchange losses**

 

Net foreign exchange losses decreased by$62,363, or 20%, during the 2008 financial year due principally to morefavourable movements in the Australian / US dollar exchange rates than in thepreceding 2007 year.

 

**Marketing andpromotion expenses**

 

Marketing and promotion expenses decreased by$215,443, or 49%, during the 2008 financial year.  This fall was due to a focus on the use ofin-house personnel to promote the Company’s interests and the fact that asignificant amount had been incurred by the Company during the previousfinancial year as part of its sponsorship of the International Congress onHuman Genetics.

 

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**Withholding tax**

 

Withholding tax decreased by$169,867, or 64%, during the 2008 financial year.  This fall was due to two factors: firstly, astrengthening of the Australian dollar against the US dollar, being thecurrency in which most of the Company’s licenses are denominated; and,secondly, changes to the Company’s licensing documents that ensures that themajority of license fees generated from new licenses are received net of anyassociated withholding tax obligation.

 

**Comparison of theyear ended June 30, 2007 to the year ended June 30, 2006**

 

**License revenues**

 

Ourtotal license revenue generated for the 2007 financial year was $11,337,079,representing a significant increase of 70% on the previous year.  The majority of this revenue was generatedfrom new licenses granted to a number of companies including Monsanto Companyand Thermo Fisher Scientific Inc.  Aswith the 2006 financial year, we continued to receive income from the Applerasettlement ($1,142,086), in the form of equipment and reagent credits,representing an increase of $105,975 on the previous year.  Included in the total license revenues isroyalty and annuity income of $2,658,995, which increased by $1,098,094, or70%, during 2007 as we had brought forward the receipt of a major annuitypayment during the 2007 year which was not due to be received until 2008.  License revenues form part of the Australiangeographic segment.

 

**Service testing revenues**

 

Ourservice testing income rose 22% on the 2006 financial year, an increase of$568,910.  Breast cancer testing (up$396,900) and canine disease testing and profiling (up $642,265) contributedsignificantly to the increase, though falls in paternity testing (down$218,556) reduced the overall increase. However, we can see promising increases in the number of tests conductedin future periods.  We expect thisprogress to continue as additional marketing initiatives continue to beintroduced.  The income we earned onpaternity testing fell as new competitors entered the marketplace, creatingfierce price cutting in some areas.  Wehave since secured additional in the area of forensics testing and havetendered for work that certain Australian State Governments are now seeking tooutsource.  Service testing revenues formpart of the Australian geographic segment.

 

**Grant income**

 

Grantincome effectively fell by $255,181, or 45%, in a year on year comparison whichwas due largely to a delay in receipt of the income due under the Export MarketDevelopment Grant which the Company hopes to receive during 2009.  Grant income forms part of the Australiangeographic segment.

 

**Interest income**

 

Interestincome decreased by $316,108, or 39%, over the 2007 financial year due to fallsin the deposit interest rates applicable to the Company’s cash balances duringthe 2007 year.

 

**Employee benefitsexpenses**

 

Totalemployee benefits expenses for 2007 increased by $124,138, or only 2%, whichwas due to general inflation.

 

**Impairment lossesand other write-downs**

 

Overall, impairment losses increased by$1,209,460, or 1,240%, from the preceding 2006 financial year due largely to theCompany recognizing an impairment loss of $1,150,000 in respect of certainpatents obtained from the C.Y. O’Connor ERADE Village Foundation in 2004 due todelays and uncertainty surrounding the commercialization of the underlyingtechnology.

 

**Genetic testingexpenses**

 

Genetic testing expenses decreased by$19,448, or only 1%, during the 2007 financial year.  This modest fall was due to improvements inlaboratory practices which have resulted in overall efficiencies deliveringreduced consumption of reagents, offset by inevitable inflationary priceincreases.

 

**Contract researchand trial expenses**

 

Contract research and trial expenses incurred during2007 of $1,247,775 fell by $98,141, or 7%, due to the termination of theaddictive states project that was formerly undertaken at King’s College,London.

 

**Royalties, licensefees and commissions paid**

 

Royalties, license fees and commissions paid increasedby $402,839, or 327%, during the 2007 financial year.  This increase was due to the payment ofcommissions to licensing contractors in respect of new licenses granted by theCompany during the year.

 

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**Legal and patentfees**

 

Legal and patent fees decreased by$692,324, or 48%, during the 2007 financial year.  This considerable fall was due primarily to asettlement of the legal dispute with Applera Corporation which had occurredduring the previous financial year.

 

**Administrationexpenses**

 

Administration expenses incurred during 2007 of$901,380 were in line with similar expenses incurred during the previous yearof $910,776.

 

**Net foreignexchange losses**

 

Net foreign exchange losses of $317,317 were incurredduring 2007 which compared unfavourably to the net foreign exchange gain of$123,616 which was incurred during the preceding year.  This movement was principally due to asignificant movement in the Australian dollar / US dollar exchange rate duringthe year which moved from 0.7423 as of June 30, 2006 to 0.8491 as of June 30,2007.

 

**Marketing andpromotion expenses**

 

Marketing and promotion expenses decreased by$65,266, or 13%, during the 2007 financial year.  This fall was due to several factorsincluding the termination of the Company’s investor relations firm in theUnited States, a focus on the use of in-house personnel to promote the Company’sinterests and the fact that a significant amount had been incurred by theCompany during the previous financial year as part of its sponsorship of theInternational Congress on Human Genetics.

 

**Withholding tax**

 

Withholding tax increased by$173,891, or 192%, during the 2007 financial year.  This increase was due to the execution of newlicenses for which a withholding tax obligation may potentially arise infuture.

 

**Item 5.B         Liquidity and Capital Resources**

 

**Summary**

 

Ouroverall cash position depends on numerous factors, including the success oflicensing our non-coding patents, the numbers of genetic tests processed by ourlaboratory, completion of our product research and development activities,ability to commercialize our products, market acceptance of our products andservices and how we choose to commercially exploit our technology**.**  Weexpect to devote additional capital resources to the expansion of our licensingprogram on a worldwide basis, continue our research and development programswith a view to commercializing our technology in our target markets, hire andtrain additional staff, expand our research and development activities andacquire or make investments in businesses that are complementary to ourexisting business.  Each of theseactivities will inevitably involve the outflow of cash reserves.

 

Duringthe years ended June 30, 2008, 2007 and 2006, we have incurred net lossesof $5,446,089, $4,328,543 and $7,918,773, respectively.  We anticipate incurring additional costs overat least the next several years as we expand our research and developmentactivities and conduct further trials of our technology.  The extent to which we will incur losses infuture years depends largely on the success of the licensing of our non-codingtechnologies and the expansion  of ourgenetic testing business.

 

Sinceinception, our operations have been financed primarily from capital contributionsby our stockholders, licensing and service testing revenues, grants, andinterest earned on cash and cash equivalents.

 

Duringthe years ended June 30, 2008 and 2007, the Company generated positivecash flows from operations of $422,770 and $2,579,246, respectively.  We believe that our cash and cash equivalentsof approximately $12.9 million as of June 30, 2008, will provide us withsufficient capital to fund a base level of operations for the next two years asfrom that date.  During this period, weexpect to be able to continue to adequately fund our research and developmentactivities, licensing program, product development and commercializationefforts and other operations.  Further,as these activities continue to expand, we anticipate that the revenuesgenerated should assist the Company to once again achieve a cash positiveresult from operations.

 

Ournet cash provided by / (used in) operating activities was $422,770, $2,597,246and $(5,957,322) for the years ended  June 30,2008, 2007 and 2006, respectively. Importantly, as stated above, the Company generated positive cash flowsfrom operations for the first time in 2007 and again in 2008.  Cash used in operating activities for eachperiod consisted primarily of losses incurred in operations reduced bydepreciation and amortization expenses, exchange movements and unrealizedprofits and losses relating to investments. In approximate order of magnitude, cash outflows typically consist ofstaff-related costs, service testing expenses, general and administrativeexpenses, research and development costs and legal/patent fees.

 

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Ournet cash provided by / (used in) investing activities was $(47,399), $94,010and $(155,247) for the years ended June 30, 2008, 2007 and 2006,respectively.  Typically, cash used ininvesting activities related to the acquisition of laboratory equipment.  During the 2005 financial year, theestablishment of the equipment finance facility described below reduced cashoutflows for that year and future years. In addition, the agreement reached with Applera Corporation in December 2005has provided us with significant credits for laboratory equipment and reagentsproduced by that company.

 

Ournet cash provided by / (used in) financing activities was $(528,899),$(502,505) and $(450,892) for the years ended June 30, 2008, 2007 and2006, respectively.  These outflowsrelated to the repayment of hire purchase principal in respect of various itemsof laboratory equipment.

 

Apartfrom the purchase of laboratory equipment of $118,010 in 2008, $158,699 in 2007and $159,716 in 2006, we had no material capital expenditures for the years endedJune 30, 2008, 2007 and 2006.

 

OnJanuary 14, 2005, the Company executed a Master Asset Finance Agreementwith National Australia Bank Limited in respect of a $2.5 million asset hirepurchase facility (the “Facility”).  Asat June 30, 2008, the Company had financed the acquisition of laboratoryequipment under the Facility with a total value of $1,966,312.  It is expected that other purchases oflaboratory equipment will be financed under this Facility in the future, to theextent that sufficient credit is available. The use of this Facility enables the Company to better match the cost ofthe equipment with the future revenues to be generated from it in acost-effective manner and minimizes the outflow of valuable cash.

 

**Future Cash Needs**

 

Weexpect that operating expenses and, to a lesser extent, capital expenditureswill be a material use of our  cashresources in future.  As of June 30,2008, we had cash and cash equivalents totaling approximately $12.9million.  We believe that this workingcapital is sufficient for our anticipated needs for the next two years as fromthat date.  We do not have any lines ofcredit apart from the equipment finance facility with National Australia BankLimited and a nominal credit card facility with St. George Bank Limited which,as of June 30, 2008, had available credit of $145,000.  We anticipate generating additional cash infuture years from our licensing activities and the continued expansion of ourservice testing business.

 

**Operating Leases**

 

Weare obligated under various operating leases for periods expiring through2011.  Payments under non-cancelableoperating lease arrangements for office premises and laboratory facilitiesexpire on various dates through June 30, 2011, resulting in the leasecommitments over that period which are stated in the following table.

 

Thefollowing is a schedule of future minimum lease payments for operating leasesthat had initial or remaining non-cancellable lease terms in excess of one yearas of June 30, 2008:

 
| **Year ending,**         | ** ** | ** ** | ** ** |
|-------------------------------|------------|------------|------------|
| 2009                          |       | $          | 466,412    |   |
| 2010                          |       | 477,715    |       |
| 2011                          |       | 488,110    |       |
| Total minimum  lease payments |       | $          | 1,432,237  |   |

 

Rentexpense totaling $501,239, $445,384 and $399,274 for the years ended June 30,2008, 2007 and 2006, respectively, was paid to Bankberg Pty. Ltd., a company associatedwith former Director, Dr. Mervyn Jacobson.

 

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Thefollowing is a schedule of future minimum hire purchase payments for equipmentfinance that had initial or remaining non-cancelable lease terms in excess ofone year as of June 30, 2008:

 
| Minimum hire  purchase payments                                          |   |    |    |
|--------------------------------------------------------------------------|--------|---------|---------|
| Year ending 2009                                                         |   | $       | 134,027 |   |
| Year ending 2010                                                         |   | 106,793 |    |
| Year ending 2011                                                         |   | 97,739  |    |
|                                                                     |   |    |    |
| Total minimum  hire purchase payments                                    |   | $       | 338,559 |   |
| Less: future  finance charges                                            |   | (40,360 | )       |
|                                                                     |   |    |    |
| Aggregate hire  purchase expenditure contracted for as at reporting date |   | $       | 298,199 |   |
|                                                                     |   |    |    |
| Aggregate  expenditure commitments comprise:                             |   |    |    |
| Current liability                                                        |   | $       | 111,117 |   |
| Non-current  liability                                                   |   | 187,082 |    |
| Total expenditure  commitments                                           |   | $       | 298,199 |   |

 

**Item 5.C         Research and Development, Patents andLicenses, etc.**

 

Ourprincipal business is biotechnology, with the emphasis on genomics andgenetics, the licensing of the non-coding patents, reduction to practice of ourfetal cell patents and expansion of the related service testing business.

 

Thefollowing table details historic R&D expenditure by project.  All projects are described at Item 4.B above.

 
| ** **                           | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|--------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                           | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** |
| RareCellect                          |       | $          | 775,662    |       | $          | 1,081,101  |       | $ | 1,193,098 |   |
| ImmunAid                             |       | 278,175    |       | 421,032    |       | 282,884    |       |
| Pathogens                            |       | 359,184    |       | 406,855    |       | 179,710    |       |
| Genomic Matching  Technique (note 1) |       | 4,038,061  |       | 2,476,800  |       | 1,648,876  |       |
| Addictive States  (note 2)           |       | —     |       | 52,113     |       | 253,250    |       |
| Other general  R&D               |       | 218,007    |       | 419,147    |       | 209,144    |       |
| Total R&D  expense               |       | $          | 5,669,089  |       | $          | 4,857,048  |       | $ | 3,766,962 |   |
| Other expenditure                    |       | 15,761,491 |       | 14,807,959 |       | 14,898,275 |       |
| Total expenditure                    |       | $          | 21,430,580 |       | $          | 19,665,007 |       | $ | 18,665,237 |   |
| R&D as a % of  total expenditure |       | 26         | %          | 25         | %          | 20         | %          |

 

| Notes: | 1.     | The figure for 2008 of $4,038,061 includes an impairment  loss of $2,378,000. The figure for 2007 of $2,476,800 includes an impairment  loss of $1,150,000. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                        |
|   | 2.     | The addictive states project was terminated during the  2007 financial year.                                                                                |

 

Dueto the nature of the Company’s business, it is important that any intellectualproperty in the form of new discoveries be protected.  The table described in Item 4.B hereinaboveprovides the status of all patent applications the Company has filed.

 

**Item 5.D         Trend Information**

 

**The Direction of Genetic Research**

 

Followingupon the original non-coding inventions made by GeneType AG and the publicationand dissemination of this work in the early 1990’s, research groups world-wideincreasingly have sought to investigate and, if possible, establish non-codingassociations in a great number of diseases which were hitherto unexplained.

 

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In 2002, Nature Publishing Groupproduced a summary of some 284 separate research projects which sought toestablish non-coding associations in relation to either the cause or the outcomeof many human diseases.  Within thatgroup, more than 100 human conditions have since been shown to be linked tonon-coding genetic variations.  In 1999,an international collaboration, known as the “SNP Consortium” was establishedto identify all single nucleotide polymorphisms (SNPs) of relevance to acomplete understanding of human genetics. More recently, the international “HapMap” project was launched toidentify relevant human haplotypes.

 

Allof these projects depend significantly on the basic inventions owned by ourCompany.  It remains our corporateobjective to encourage all such research which we expect will, in time, lead toa great number of new commercial licensing opportunities for Genetic Technologies.  Such opportunities are also not limited tohuman applications, given the recent expansion of interest in the genetics ofanimals, plants and lower forms of life, including parasites and many organismsthat contribute to either disease or to recuperative environmental systems ofour planet.  Such research is likely toexpand significantly in the coming years. Our ability to secure licensing agreements from  these areas of research as they develop intocommercial operations will determine the level of revenue in the future.

 

**The Direction of Genetic Testing**

 

Furtherto the completed first phase of the Human Genome Project in mid-2001, and thenthe Mouse Genome Project in December 2002, there is now a greatly improvedgeneral understanding of gene structure, gene function and gene expression.  This is likely to lead to new genetic testsand new genetic treatments - perhaps even tailored to an individual’s uniquegenetic code.  DNA testing for forensicpurposes has already been shown to be extremely reliable in matters of criminaljustice, disputed paternity and family relationships.  Genetic testing will also be increasinglyrelied upon to assist with disease diagnosis, and also in the improvedassessment disease risk factors.  Inaddition, genetic testing will be applied more and more to help identifyspecific animal and plant traits that are either desirable or undesirable, inorder to help breeders better select their future seed stock.  We believe the demand for an expansion ofgenetic testing will grow substantially in the coming years.

 

**Item 5.E         Off-balance sheet arrangements**

 

Apartfrom our settlement arrangements with Applera Corporation, pursuant to which weare entitled to draw down certain items of equipment and reagents (refer Note29 of the attached financial statements for details), we have no off-balancesheet arrangements that have or are reasonably likely to have current or futureeffect on our financial condition, changes in financial condition, revenues orexpenses, results of operations, liquidity, capital expenditures or capitalresources that are material to investors.

 

**Item 5.F         Information about ContractualObligations**

 

Thetable below shows the contractual obligations and commercial commitments as at June 30,2008:

 
| ** **                                 | ** ** | **0-1 year** | ** ** | **>1-<3 years** | ** ** | **>3-<5 years** | ** ** | **>5 years** | ** ** |
|--------------------------------------------|------------|-------------------|------------|----------------------------|------------|----------------------------|------------|----------------------|------------|
| Minimum research  and development payments |       | $                 | 762,500    |                       | $          | 490,000                    |       | $                    | —     |   | $ | — |   |
| Operating lease  commitments               |       | $                 | 466,412    |                       | $          | 477,715                    |       | $                    | 488,110    |   | $ | — |   |
| Hire purchase  commitments                 |       | $                 | 134,027    |                       | $          | 106,793                    |       | $                    | 97,739     |   | $ | — |   |

 

TheCompany’s purchase obligations are in respect of its subcontracted research anddevelopment activities and equipment purchases.

 

**Item 6.            Directors, Senior Management andEmployees**

 

**Item 6.A         Directors and Senior Management**

 

TheDirectors of the Company as of the date of this Annual Report are:

 

**Fred Bart**, *(Chairman)*

 

Mr. Bart,54, has been involved in the textile industry for the last 25 years as well asbeing a significant investor in the resource and property sectors in Australiaand overseas.  He brings to the Companyextensive commercial experience from his involvement in the manufacturing andtextile industries.  He is also Chairmanof Electro Optic Systems Holdings Limited and Global Properties Limited and isa member of the Australian Institute of Company Directors.  He was appointed to the Board on October 26,1996 and also serves as a Director of the Company’s Canadian-listed subsidiary,Gtech International Resources Limited, and as a member of the Company’s AuditCommittee.

 

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**Sidney C. Hack**,CPA *(Non-Executive)*

 

Mr. Hack, 70, is a CertifiedPractising Accountant and registered Company Auditor having recently retiredafter 30 years as a senior partner in a Melbourne-based Chartered AccountingPractice.  He has extensive experience incompany audits, finance and taxation.  Hewas appointed to the Board on November 19, 2008, serves on the Company’sCorporate Governance Committee and is Chairman of the Company’s AuditCommittee.

 

**Huw D. Jones**,BEng, MBA *(Non-Executive)*

 

Mr. Jones,45, brings broad commercial experience from the healthcare and environmentalservices industries.  He has beeninvolved in the healthcare market for over 15 years and has held executivepositions with leading corporations including Managing Director ofDatex-Ohmeda, Australasia (now GE Healthcare, Australasia).  Mr. Jones is currently CEO and ExecutiveDirector of Aeris Environmental Limited, an emerging environmental technologyand services company, and co-owner of Nascor Pty. Ltd., a developer ofspecialist medical devices targeting the global neonatal and maternitymarkets.  He was appointed to the Company’sBoard of Directors on November 19, 2008 and also serves on the Company’sAudit Committee.

 

During the 2008 financial year, Mr. Henry BoschAO, Mr. John Dawkins AO, Dr. Leanne Rowe AM, Mr. DavidCarruthers and Mr. Michael Ohanessian also served as Directors of theCompany until their removal on November 19, 2008 at the Company’s 2008Annual General Meeting.  During the 2008year, Dr. Mervyn Jacobson also served as a Director of the Company untilhis resignation on December 12, 2008.

 

**Senior Management**

 

Wehave a professional team of qualified and experienced research and developmentscientists and technicians.  The Companycurrently employees 74 people, of which seven have PhD qualifications.

 

Asof the date of this Annual Report, we do not have a Chief Executive Officerfollowing the removal of Mr. Michael Ohanessian on November 19, 2008.  An international recruitment agent has sincebeen appointed to conduct a global search in order to identify potentialcandidates who may subsequently be appointed to fill this vacancy.

 

Themembers of Senior Management, and a brief summary of their relevant experience,is as follows:

 

**Thomas G. Howitt**,BCom, ACA, FTIA, ACIS, AICPA *(ChiefFinancial Officer and Company Secretary)*

 

Mr. Howitt,44, was appointed as the group’s first full-time Chief Financial Officer in June 2004and as Company Secretary in June 2005. During his 20-plus year career, he has served as CFO and CompanySecretary for a number of companies, listed on both the ASX and foreign stockexchanges.  His wide experience coversall facets of financial management and control across a variety of industries,including resources and technology (domestic and international), having beeninstrumental in the successful development, patenting and commercialisation ofseveral innovative technologies.  He hasplayed key roles in the raising of bank debt and equity capital and themanagement of complex due diligence programs and has worked as a seniorTaxation Consultant for Ernst & Young and in the investment bankingindustry.  He also serves as President ofthe Company’s Canadian-listed subsidiary, Gtech International ResourcesLimited.

 

**Ross Barrow**,BSc Hons, MBA *(Chief Operating Officer)*

 

Mr. Barrow, 46, joined Genetic Technologies asits Chief Operating Officer in April 2008. Prior to joining the Company, Mr. Barrow was Director, Technologyand Melbourne Operations for Leica’s Biosystems Division, a subsidiary ofNYSE-listed Danaher Corporation.  Priorto that, he was Chief Operating Officer and a Director of Vision BioSystemsLimited, one of Australia’s most successful, global biotechnology and medicaldevice companies.  Before Vision, Mr. Barrowspent 11 years with BHP Company Limited (now BHP Billiton) in a variety ofroles managing major R&D and technology development programs.  Mr. Barrow has extensive seniormanagement experience in the clinical in-vitro diagnostics industry as well asbroad experience in managing global business units and operations.  As of the date of this Annual Report, Mr. Barrowhad tendered his resignation.

 

**W. Ian Smith**,BEc *(Business Development  Manager - DNA Profiling)*

 

Mr. Smith,45, was appointed Business Development Manager - DNA Profiling in 2005 aftersix years as the Company’s Financial Controller.  Prior to joining the Company, he had anextensive career in corporate banking, having worked for National AustraliaBank Corporate Banking Division and, later, as a domestic money marketdealer.  Subsequently, a move to BarclaysBank Australia Limited as Corporate Banking Manager saw him focus on newbusiness development and management of medium-to-large corporatecustomers.  Prior to joining GeneticTechnologies, he was involved in the customer retention and acquisition of highnet wealth individuals as a Manager of Corporate Banking for the State Bank ofNew South Wales.  While at GeneticTechnologies, he has overseen the merger and integration of a number ofacquisitions.

 

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**Jonathan S. Whitty**,BSc, GradDip Genetic Counseling *(BusinessDevelopment  Manager - MedicalDiagnostics)*

 

Mr. Whitty,33, was appointed Business Development Manager - Medical Diagnostics in April 2007after working in business development for the division since July 2004.  He has previously worked for five years inMolecular Pathology at the Peter MacCallum Cancer Institute where, ascoordinator of molecular testing for gastrointestinal disease, he gainedextensive experience and technical knowledge in diagnostic laboratoryoperations.  Subsequently trained inGenetic Counseling and employed by Genetic Health Services Victoria in thedivision of Rural & Regional services, he has broad experience in thesocial and ethical aspects of clinical genetics services.  Having served as Secretary of the HumanGenetics Society of Australasia - Victorian Branch from 2004 to 2006, and as acurrent member of the Hereditary Bowel Cancer Group in Victoria, he hasin-depth knowledge of genetic testing policy in Australia.  As of the date of this Annual Report, Mr. Whittyhad tendered his resignation.

 

**M. Luisa Ashdown**,MSc *(General Manager - Licensing)*

 

Ms. Ashdown,52, is a Senior Scientist and currently serves as the Company’s General Manager- Licensing.  She has extensiveexperience gained in over 20 years combined employment at Royal Women’sHospital and Royal Melbourne Hospital and at Genetic Technologies.  Areas of expertise include moleculargenetics, immunology, tissue typing, DNA profiling and now intellectualproperty management.  After joining theCompany in 1989, she was responsible for building the laboratory’s capabilityand managing the DNA service testing including fulfilling government statutoryregulatory requirements.  In addition toLaboratory Manager, she was Research Project Manager, author on various companypublications and a Director of several subsidiary companies.  In addition to managing its licensingactivities, she is currently actively contributing to the Company’s businessdevelopment and research activities.

 

**Catherine M.Barclay**, BA, PGDipHRM *(GeneralManager - Human Resources)*

 

Mrs. Barclay,41, was appointed as General Manager - Human Resources in December 2007.  During her 20 year career,   she has served in a variety of managementroles, including managing human resources, customer service and accountingsupport functions, in both Australia and New Zealand.  Her experience covers all aspects of humanresources including organizational development, employee and industrialrelations, change management and development and implementation of humanresources policies and processes.  Shehas been responsible from a human resources perspective for acquisitions anddivestitures and has played    a key rolein developing corporate HR strategy whilst working for AXA Asia PacificHoldings Ltd.

 

**ScientificAdvisors**

 

Itis vital to the success of a company seeking to commercialize research, such asGenetic Technologies Limited, to have access to pre-eminent scientists toadvise and critically review its research projects and the progress it makes overtime.  As such, in August 2003, weestablished an outstanding Scientific Advisory Committee, consisting ofindependent scientists with expertise and reputations for excellence in theirrespective fields of endeavor that complement the major projects beingundertaken by the Company.  However, dueto external time commitments of the members, we decided during 2007 to disbandthe formal Committee and, instead, avail ourselves of the services of eachformer Committee member on an “as needs” basis. We believe that this approach will provide all concerned with a moreefficient use of everyone’s available time.

 

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**Item 6.B         Compensation**

 

Detailsof the nature and amount of each major element of the compensation of eachdirector of the Company and each of the named officers of the Company and itssubsidiaries, for services in all capacities during the financial year ended June 30,2008 are listed below.  All figures arestated in Australian dollars (AUD).

 
| **Name and title of    Directors** | ** ** | **Year**   | ** ** | **Short-term  Salary/fees** | ** ** | **Other** | ** ** | **Post-employment  Superannuation** | ** ** | **Long-term  Long service leave** | ** ** | **Share-based  Options** | ** ** | **Totals** | ** ** |
|---------------------------------------------------|------------|------------|------------|-----------------------------|------------|-----------|------------|-------------------------------------|------------|---------------------------------------------|------------|--------------------------|------------|------------|------------|
| ** **                                        | ** ** | ** ** | ** ** | **$**                       | ** ** | **$**     | ** ** | **$**                               | ** ** | **$**                                       | ** ** | **$**                    | ** ** | **$**      | ** ** |
| Henry Bosch AO                                    |       | 2008       |       | 126,846                     |       | —    |       | —                              |       | —                                      |       | 12,921                   |       | 139,767    |       |
| Non-Executive  Chairman                           |       | 2007       |       | 90,000                      |       | —    |       | —                              |       | —                                      |       | 74,025                   |       | 164,025    |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Fred Bart                                         |       | 2008       |       | 42,282                      |       | —    |       | 3,805                               |       | —                                      |       | —                   |       | 46,087     |       |
| Non-Executive Director                            |       | 2007       |       | 30,000                      |       | —    |       | 2,700                               |       | —                                      |       | —                   |       | 32,700     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| David Carruthers                                  |       | 2008       |       | 50,000                      |       | —    |       | 4,500                               |       | —                                      |       | —                   |       | 54,500     |       |
| Non-Executive  Director                           |       | 2007       |       | —                      |       | —    |       | 18,795                              |       | —                                      |       | —                   |       | 18,795     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| John S. Dawkins  AO                               |       | 2008       |       | 42,282                      |       | —    |       | 3,805                               |       | —                                      |       | 12,921                   |       | 59,008     |       |
| Non-Executive  Director                           |       | 2007       |       | 30,000                      |       | —    |       | 2,700                               |       | —                                      |       | 74,025                   |       | 106,725    |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Dr. Mervyn  Jacobson (note)                  |       | 2008       |       | 138,461                     |       | —    |       | —                              |       | —                                      |       | —                   |       | 138,461    |       |
| Non-Executive  Director                           |       | 2007       |       | 300,000                     |       | —    |       | —                              |       | —                                      |       | —                   |       | 300,000    |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Dr. Leanne  Rowe AM (note)                   |       | 2008       |       | —                      |       | —    |       | 11,353                              |       | —                                      |       | —                   |       | 11,353     |       |
| Non-Executive  Director                           |       | 2007       |       | —                      |       | —    |       | —                              |       | —                                      |       | —                   |       | —     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Robert J. Edge (note)                             |       | 2008       |       | —                      |       | —    |       | —                              |       | —                                      |       | —                   |       | —     |       |
| Non-Executive  Director                           |       | 2007       |       | 11,414                      |       | —    |       | 1,027                               |       | —                                      |       | —                   |       | 12,441     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Prof. Deon J.  Venter (note)                      |       | 2008       |       | —                      |       | —    |       | —                              |       | —                                      |       | —                   |       | —     |       |
| Non-Executive  Director                           |       | 2007       |       | 17,500                      |       | —    |       | 399                                 |       | —                                      |       | —                   |       | 17,899     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Sub-totals for  Directors                         |       | 2008       |       | 399,871                     |       | —    |       | 23,463                              |       | —                                      |       | 25,842                   |       | 449,176    |       |
|                                              |       | 2007       |       | 478,914                     |       | —    |       | 25,621                              |       | —                                      |       | 148,050                  |       | 652,585    |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| **Executives**                                    |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| ** **                                        |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Michael B.  Ohanessian (note)                     |       | 2008       |       | 232,546                     |       | 6,706     |       | 20,769                              |       | 356                                         |       | 68,175                   |       | 328,552    |       |
| Chief Executive  Officer                          |       | 2007       |       | —                      |       | —    |       | —                              |       | —                                      |       | —                   |       | —     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Thomas G. Howitt (note)                           |       | 2008       |       | 200,000                     |       | 35,000    |       | 21,150                              |       | 8,284                                       |       | 30,759                   |       | 295,193    |       |
| Chief Financial  Officer and Company Secretary    |       | 2007       |       | 190,000                     |       | —    |       | 17,100                              |       | 3,881                                       |       | 35,050                   |       | 246,031    |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Ross Barrow (note)                                |       | 2008       |       | 54,006                      |       | —    |       | 4,860                               |       | —                                      |       | —                   |       | 58,866     |       |
| Chief Operating  Officer                          |       | 2007       |       | —                      |       | —    |       | —                              |       | —                                      |       | —                   |       | —     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Dr. Gary  Cobon (note)                       |       | 2008       |       | 66,047                      |       | 82,500    |       | 74,619                              |       | —                                      |       | —                   |       | 223,166    |       |
| Chief Scientific  Officer                         |       | 2007       |       | 93,741                      |       | —    |       | 80,659                              |       | 877                                         |       | 50,512                   |       | 225,789    |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Geoffrey E.  Newing (note)                        |       | 2008       |       | —                      |       | —    |       | —                              |       | —                                      |       | —                   |       | —     |       |
| Fmr. Chief  Operating Officer                     |       | 2007       |       | 188,333                     |       | 87,500    |       | 16,630                              |       | —                                      |       | —                   |       | 292,463    |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Ian N.  Christensen (note)                        |       | 2008       |       | —                      |       | —    |       | —                              |       | —                                      |       | —                   |       | —     |       |
| Group General  Manager - IP                       |       | 2007       |       | 23,358                      |       | —    |       | 1,380                               |       | —                                      |       | —                   |       | 24,738     |       |
|                                              |       |       |       |                        |       |      |       |                                |       |                                        |       |                     |       |       |       |
| Sub-totals for  Executives                        |       | 2008       |       | 552,599                     |       | 124,206   |       | 121,398                             |       | 8,640                                       |       | 98,934                   |       | 905,777    |       |
|                                              |       | 2007       |       | 495,432                     |       | 87,500    |       | 115,769                             |       | 4,758                                       |       | 85,562                   |       | 789,021    |       |
| Total  remuneration of                            |       | 2008       |       | 952,470                     |       | 124,206   |       | 144,861                             |       | 8,640                                       |       | 124,776                  |       | 1,354,953  |       |
| Key Management  Personnel                         |       | 2007       |       | 974,346                     |       | 87,500    |       | 141,390                             |       | 4,758                                       |       | 233,612                  |       | 1,441,606  |       |

 

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Notes:             TheCompany and the Group had only four Executives, as defined, during the yearended June 30, 2008.

 

Thecolumn above entitled “Other” of $124,206 (2007: $87,500) comprises terminationbenefits of $82,500 (2007: $87,500), bonuses of $35,000 (2007: $nil) and motorvehicle allowances of $6,706 (2007: $nil).

 

Dr. Jacobsonserved as the Company’s Chief Executive Officer from July 1, 2007 to September 24,2007.  He resigned as a Director of theCompany on December 12, 2008.

 

Dr. Rowewas appointed as a Director of the Company on April 16, 2008.

 

Mr. Edgeretired as a Director of the Company on November 17, 2006.

 

Prof.Venter resigned as a Director of the Company on August 23, 2006.

 

Mr. Ohanessianwas appointed as a Director of the Company and its Chief Executive Officer on September 24,2007.  He was removed as a Director andits CEO on November 19, 2008.

 

Mr. Ohanessianreceived $6,706 during the year ended June 30, 2008 in respect of a motorvehicle allowance.

 

Mr. Howittreceived an STI payment of $35,000 during the year ended June 30, 2008 inrespect of the prior year.

 

Mr. Barrowwas appointed as the Company’s Chief Operating Officer on April 14, 2008.

 

Dr. Cobonresigned as the Company’s Chief Scientific Officer on March 28, 2008.

 

Dr. Cobonreceived $82,500 during the year ended June 30, 2008 in respect of atermination benefit.

 

Mr. Newingresigned as the Company’s Chief Operating Officer on July 1, 2007.

 

Mr. Newingreceived $87,500 during the year ended June 30, 2007 in respect of atermination benefit.

 

Mr. Christensenresigned as the Company’s Group General Manager - IP on August 12, 2006.

 

Executiveofficers are those officers who were involved during the year in the strategicdirection, general management or control of the business at a company oroperating division level who received the five highest annualized compensationamounts.  The remuneration paid toExecutives is set with reference to prevailing market levels and comprises afixed salary, various short term incentives (which are linked to agreed keyperformance indicators), and an option component.  Options are granted to Executives in linewith their respective levels of experience and responsibility.

 

**Options**

 

Weintroduced a Staff Share Plan on November 30, 2001.  The Plan establishes the eligibility of ouremployees and those of any subsidiaries, and of consultants and independentcontractors to a participating company who are declared by the Board to beeligible, to participate.  Broadlyspeaking, the Plan permits us, at the discretion of the Board, to issue traditionaloptions (with an exercise price).  ThePlan conforms with the IFSA Executive Share and Option Scheme Guidelines and,where participation is to be made available to staff who reside outsideAustralia, there may have to be modifications to the terms of grant to meet orbetter comply with local laws or practice.

 

OnAugust 29, 2000, shareholders approved the grant of 3,000,000 options toDirectors.  Each option granted toDirectors was exercisable into one Ordinary Share at any time on or before April 14,2005 at a fixed price of $0.45 per share. On August 12, 2003, Mr. Ian Dennis exercised 1,000,000 optionsat $0.45 by paying $450,000 and simultaneously sold the resulting 1,000,000shares.  The remaining 2,000,000 lapsedunexercised on April 14, 2005.

 

OnNovember 30, 2001, under our Constitution, shareholders approved thecreation of a Staff Share Plan (the “Plan”). Under the Plan, the Directors may at their discretion, grant optionsover our Ordinary Shares to Directors, executives and members of staff of theconsolidated entity.  The options, issuedfor nil consideration, are granted in accordance with guidelines established bythe Directors.  The options are generallyissued for a term of up to six years.  Inaccordance with the terms of the Plan, options generally vest on the basis of25% per annum and can be exercised at any time after vesting prior to the dateof their expiry.  The options are nottransferable and are not quoted on the ASX.

 

Thereare currently three executives, two consultants and 20 staff who have beengranted options under the Plan.  Optionsissued under the Plan carry no rights to dividends and no voting rights.

 

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Optionsissued under the Plan during the following financial years are as follows:

 

Yearended June 30, 2006:

 
| **Grant date**     | ** ** | **Expiry date**   | ** ** | **Number granted** | ** ** | **Exercise price** | ** ** |
|-------------------------|------------|------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **              | ** ** | ** **             | ** ** | ** **              | ** ** | ** **              | ** ** |
| August 12,  2005   |       | August 12, 2011   |       | 1,450,000               |       | $                       | 0.43       |   |
| August 12,  2005   |       | August 12, 2011   |       | 1,000,000               |       | $                       | 0.53       |   |
| November 23,  2005 |       | November 23, 2011 |       | 1,000,000               |       | $                       | 0.56       |   |
| January 17,  2006  |       | January 17, 2012  |       | 400,000                 |       | $                       | 0.45       |   |
| June 22,  2006     |       | February 1, 2012  |       | 750,000                 |       | $                       | 0.46       |   |
| June 22,  2006     |       | May 31, 2012      |       | 700,000                 |       | $                       | 0.40       |   |
|                    |       | Total                  |       | 5,300,000               |       |                    |       |

 

OnAugust 12, 2005, we issued 750,000 options under the Plan to Geoff Newing,our Chief Operating Officer, and a further 250,000 options to Tom Howitt.  These options are exercisable at $0.53 andexpire on August 12, 2011.  On November 23,2005, we issued 500,000 new options under the Plan to each of two Directors,Henry Bosch AO and John Dawkins AO. These options are exercisable at $0.56 and expire on November 23,2011.  The remaining 3,300,000 optionswere issued to various employees.  Atotal of 6,666,667 options were forfeited during the year ended June 30,2006 and a further 2,630,000 options that had been issued under the Plan werecancelled.

 

Yearended June 30, 2007:

 

Therewere no options granted during the year ended June 30, 2007.

 

Atotal of 1,175,000 of the options issued under the Plan were forfeited duringthe year ended June 30, 2007 and a further 1,525,000 options werecancelled.

 

Yearended June 30, 2008:

 
| **Grant date**      | ** ** | **Expiry date**    | ** ** | **Number granted** | ** ** | **Exercise price** | ** ** |
|--------------------------|------------|-------------------------|------------|-------------------------|------------|-------------------------|------------|
| ** **               | ** ** | ** **              | ** ** | ** **              | ** ** | ** **              | ** ** |
| September 24,  2007 |       | September 24, 2012 |       | 3,650,602               |       | $                       | 0.17       |   |
| October 23,  2007   |       | October 23, 2012   |       | 3,500,000               |       | $                       | 0.22       |   |
| June 30,  2008      |       | June 30, 2013      |       | 1,000,000               |       | $                       | 0.13       |   |
|                     |       | Total                   |       | 8,150,602               |       |                    |       |

 

OnSeptember 24, 2007, we issued 3,650,602 options under the Plan to MichaelOhanessian, our former Chief Executive Officer. These options are exercisable at $0.17 and expire on September 24,2012.  On October 23, 2007, weissued 3,500,000 new options under the Plan to a number of employees.  These options are exercisable at $0.22 andexpire on October 23, 2012.  Theremaining 1,000,000 options were issued to Ross Barrow, our Chief OperatingOfficer.  These options are exercisableat $0.13 and expire on June 30, 2013. A total of 2,900,000 options were forfeited during the year ended June 30,2008 and a further 6,052,500 options that had been issued under the Plan werecancelled.

 

Asof the date of this Annual Report, there was a total of 11,175,602 optionsoutstanding.

 

OnAugust 2, 2001, the Company announced that it had entered into anagreement with GTH Capital of New York to pursue its listing on the NationalAssociation of Securities Dealers Automated Quotations (“NASDAQ”).  This agreement was assigned by GTH Capital toGMCG, LLC, the successor of GTH Capital, on April 1, 2002.  In accordance with the agreement, GeneticTechnologies issued 150,000 shares to GTH Capital on October 10, 2001 andagreed to issue 900,000 options at an exercise price of $0.70 to GTH Capitalwithin three years, subject to it meeting certain performance criteria.  On January 14, 2002, GTH were entitledto receive 540,000 of the options. During the year ended June 30, 2004, GMCG, LLC became entitled to afurther 60,000 options.  We have nowissued to GMCG, LLC the 600,000 options that have met specific performancecriteria.  Subsequent to June 30,2005, the parties agreed not to proceed with the issue of the 300,000 remainingoptions, notwithstanding the successful listing of the Company’s Level II ADR’son NASDAQ on September 2, 2005, as certain performance criteria were notmet by GMCG, LLC.  The 600,000 optionsgranted to GMCG, LLC lapsed on September 7, 2007.

 

OnMay 22, 2001, Gtech International Resources Limited, a controlled entityissued 130,000 directors options to Dr. Mervyn Jacobson at an exerciseprice of CAD0.38 which vested immediately. These options lapsed unexercised on May 22, 2006.  On February 3, 2005, Fred Bart and IanDennis exercised a total of 158,500 options in Gtech International at anexercise price of CAD0.20 each.  On August 26,2005, 100,000 options in Gtech International were granted to each of Tom Howittand Elizabeth Sy, both Directors of Gtech, at an exercise price of CAD0.45each.

 

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OnSeptember 4, 2003, as part of the placement of 13,333,333 shares at $0.75,we issued the subscriber with 6,666,667 options exercisable at $1.00 on orbefore September 30, 2005.  Theseoptions subsequently lapsed on September 30, 2005.

 

Options granted under the StaffShare Plan (the “Plan”) carry no rights to dividends and no voting rights.  In accordance with the terms of the Plan,options granted prior to June 2007 generally vest on the basis of 25% perannum and can be exercised at any time after vesting to the date of theirexpiry.  The options generally have anexpiry date of six years from the date of grant.  Options granted after July 2007,generally vest on the basis of 100% after three years from the date of grantand can be exercised at any time after vesting to the date of theirexpiry.  These later options generallyhave an expiry date of five years from the date of grant.

 

During the years ended June 30,2008, 2007 and 2006, the Company recorded a share-based payments expense inrespect of the options granted of $164,533, $257,906 and $431,875,respectively.

 

Thefollowing is additional information relating to the options granted under thePlan as of June 30, 2008:

 
| ** **                                | ** ** | **Options outstanding**      | ** ** | **Options exercisable**                     | ** ** |
|-------------------------------------------|------------|-----------------------------------|------------|--------------------------------------------------|------------|
| **Range of   exercise  prices** | ** ** | **Number of   options** | ** ** | **Weighted  average exercise   price** | ** ** | **Remaining weighted  average contractual  life (years)** | ** ** | **Number of   options** | ** ** | **Weighted average  exercise price** | ** ** |
| $0.11 - $0.20                             |       | 4,650,602                         |       | $                                                | 0.16       |   | 4.62 |   | — |   | N/A |   |
| $0.21 - $0.30                             |       | 2,800,000                         |       | $                                                | 0.22       |   | 4.32 |   | — |   | N/A |   |
| $0.31 - $0.40                             |       | 625,000                           |       | $                                                | 0.39       |   | 3.07 |   | 400,000 |   | $ | 0.39 |   |
| $0.41 - $0.50                             |       | 2,650,000                         |       | $                                                | 0.46       |   | 1.94 |   | 2,112,500 |   | $ | 0.46 |   |
| $0.51 - $0.60                             |       | 450,000                           |       | $                                                | 0.54       |   | 0.47 |   | 325,000 |   | $ | 0.53 |   |
|                                      |       | 11,175,602                        |       | $                                                | 0.27       |   | 3.73 |   | 2,837,500 |   | $ | 0.46 |   |

 

Thefollowing is additional information relating to the options granted under thePlan as of June 30, 2007:

 
| ** **                                      | ** ** | **Options outstanding**      | ** ** | **Options exercisable**                     | ** ** |
|-------------------------------------------------|------------|-----------------------------------|------------|--------------------------------------------------|------------|
| **Range of   exercise   prices** | ** ** | **Number of   options** | ** ** | **Weighted   average exercise  price** | ** ** | **Remaining weighted  average contractual  life (years)** | ** ** | **Number of  options** | ** ** | **Weighted average  exercise price** | ** ** |
| $0.31 - $0.40                                   |       | 875,000                           |       | $                                                | 0.40       |   | 4.32 |   | 350,000 |   | $ | 0.39 |   |
| $0.41 - $0.50                                   |       | 4,652,500                         |       | $                                                | 0.46       |   | 2.87 |   | 2,827,500 |   | $ | 0.47 |   |
| $0.51 - $0.60                                   |       | 3,950,000                         |       | $                                                | 0.55       |   | 2.48 |   | 2,900,000 |   | $ | 0.56 |   |
| $0.61 - $0.70                                   |       | 2,500,000                         |       | $                                                | 0.61       |   | 0.42 |   | 2,500,000 |   | $ | 0.61 |   |
|                                            |       | 11,977,500                        |       | $                                                | 0.52       |   | 2.34 |   | 8,577,500 |   | $ | 0.54 |   |

 

Thefollowing is additional information relating to the options granted under thePlan as of June 30, 2006:

 
| ** **                          | ** ** | **Options outstanding** | ** ** | **Options exercisable**               | ** ** |
|-------------------------------------|------------|------------------------------|------------|--------------------------------------------|------------|
| **Range of  exercise  prices** | ** ** | **Number of  options**  | ** ** | **Weighted  average exercise  price** | ** ** | **Remaining weighted   average contractual  life (years)** | ** ** | **Number of  options** | ** ** | **Weighted average  exercise price** | ** ** |
| $0.31 - $0.40                       |       | 875,000                      |       | $                                          | 0.40       |   | 5.66 |   | 131,250 |   | $ | 0.38 |   |
| $0.41 - $0.50                       |       | 7,152,500                    |       | $                                          | 0.46       |   | 3.66 |   | 3,465,000 |   | $ | 0.47 |   |
| $0.51 - $0.60                       |       | 4,150,000                    |       | $                                          | 0.55       |   | 3.49 |   | 2,200,000 |   | $ | 0.56 |   |
| $0.61 - $0.70                       |       | 2,500,000                    |       | $                                          | 0.61       |   | 1.47 |   | 2,500,000 |   | $ | 0.61 |   |
|                                |       | 14,677,500                   |       | $                                          | 0.52       |   | 3.35 |   | 8,296,250 |   | $ | 0.53 |   |

 

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Thefair value for the options issued to employees was estimated at the date ofgrant using a Black-Scholes option-pricing model with the followingweighted-average assumptions for June 30:

 
| ** **                        | ** ** | **2008**       | ** ** | **June 30,  2007** | ** ** | **2006**       | ** ** |
|-----------------------------------|------------|----------------|------------|-------------------------|------------|----------------|------------|
| Risk Free  Interest Rate          |       | 5.99% to 6.50% |       | N/A                     |       | 5.62%          |       |
| Expected Dividend  Yield          |       | —         |       | N/A                     |       | —         |       |
| Historic and  Expected Volatility |       | 75%            |       | N/A                     |       | 53%            |       |
| Option Exercise  Prices           |       | $0.17 to $0.22 |       | N/A                     |       | $0.38 to $0.61 |       |
| Weighted Average  Exercise Price  |       | $0.19          |       | N/A                     |       | $0.53          |       |
| Expected Lives                    |       | 3 to 5 years   |       | N/A                     |       | 5 years        |       |

 

Nooptions were granted during the year ended June 30, 2007.

 

**Indemnification and Insurance with Respect to Directors**

 

Weare obligated pursuant to an indemnity agreement, to indemnify the currentDirectors and executive officers and former Directors against all liabilitiesto third parties that may arise from their position as Directors or officers ofthe Company and our controlled entities, except where to do so would beprohibited by law.  Under the terms ofthis agreement, we are obligated to meet the full amount of any such liabilities,including costs and expenses.  Inconnection with the GeneType AG acquisition, Fred Bart and Ian Dennis providedcounter-indemnities to us and to GeneType AG shareholders in respect of theexistence of undisclosed liabilities as at May 15, 2000.  These counter-indemnities lapsed on May 15,2005.

 

Inaddition, we currently carry insurance in respect of Directors’ and officers’liabilities for current and former Directors, Company Secretary and executiveofficers or employees.

 

**Item 6.C         Board Practices**

 

**The Board of Directors**

 

Underour Constitution, our Board of Directors is required to comprise at least threeDirectors.  As of the date of this AnnualReport, our Board comprised three Directors.

 

The role of the Board includes:

 

(a)                  Reviewingand making recommendations in remuneration packages and policies applicable todirectors, senior executives and consultants.

 

(b)                 Nominationof external auditors and reviewing the adequacy of external audit arrangements.

 

(c)                  Establishingthe overall internal control framework over financial reporting, quality andintegrity of personnel and investment appraisal.  In establishing an appropriate framework, theboard recognized that no cost effective internal control systems will precludeall errors and irregularities.

 

(d)                 Establishingand maintaining appropriate ethical standards in dealings with businessassociates, suppliers, advisers and regulators, competitors, the community andother employees.

 

(e)                  Identifyingareas of significant business risk and implementing corrective action as soonas practicable after a risk is identified.

 

(f)                    Nominatingof audit and nomination and remuneration committee members.

 

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TheBoard meets to discuss business regularly throughout the year, with additionalmeetings being held when circumstances warrant. Included in the table below are details of the meetings of the Board andthe committees of the Board that were held during the 2008 financial year.

 
| ** **                      | ** ** | ** **                        | ** ** | **Committees of the Board** | ** ** |
|---------------------------------|------------|-----------------------------------|------------|--------------------------------------------|------------|
| ** **                      | ** ** | **Directors’ meetings** | ** ** | **Audit**                                  | ** ** | **Corporate Governance** | ** ** |
| ** **                      | ** ** | **Eligible**                      | ** ** | **Attended**                               | ** ** | **Eligible** | ** ** | **Attended** | ** ** | **Eligible** | ** ** | **Attended** | ** ** |
| Henry Bosch AO                  |       | 11                                |       | 11                                         |       | 9 |   | 9 |   | 5 |   | 5 |   |
| Michael B.  Ohanessian (note)   |       | 8                                 |       | 8                                          |       | — |   | — |   | 3 |   | 3 |   |
| Fred Bart                       |       | 11                                |       | 10                                         |       | — |   | — |   | — |   | — |   |
| David Carruthers                |       | 11                                |       | 11                                         |       | 9 |   | 9 |   | — |   | — |   |
| John S. Dawkins  AO             |       | 11                                |       | 11                                         |       | 9 |   | 6 |   | 5 |   | 5 |   |
| Dr. Mervyn  Jacobson       |       | 11                                |       | 10                                         |       | — |   | — |   | 5 |   | 4 |   |
| Dr. Leanne  Rowe AM (note) |       | 2                                 |       | 2                                          |       | — |   | — |   | — |   | — |   |

 

Notes:   During the year ended June 30,2008, a total of four Unanimous Consent Resolutions of the Directors were alsopassed.

 

Mr. Ohanessianwas appointed as a Director of the Company on September 24, 2007.

 

Dr. Rowewas appointed as a Director of the Company on April 16, 2008.

 

Inaccordance with the Charter, the auditor attended three meetings of the AuditCommittee at the request of the Committee.

 

**Committees of the Board**

 

The Board has established an AuditCommittee which operates under a specific Charter approved by the Board.  It is the Board’s responsibility to ensurethat an effective internal control framework exists within the entity.  This includes internal controls to deal withboth the effectiveness and efficiency of significant business processes, thesafeguarding of assets, the maintenance of proper accounting records, and thereliability of financial information as well as non-financial considerationssuch as the benchmarking of operational key performance indicators.

 

The Board has delegated theresponsibility for the establishment and maintenance of a framework of internalcontrol and ethical standards for the management of the Group to the AuditCommittee.  The Audit Committee also providesthe Board with assurance regarding the reliability of financial information forinclusion in the financial reports.  Allmembers of the Audit Committee are independent Non-Executive Directors.

 

**Committee membership**

 

Asat the date of this Report, the Company had an Audit Committee and a CorporateGovernance Committee of the Board of Directors (the latter being formerly knownas the Nomination and Remuneration Committee).

 

Theindividuals who served as members of these Committees during the financial yearwere:

 
| ** **                | ** ** | ** **                                   | ** ** | ** **                                                       | ** ** |
|---------------------------|------------|----------------------------------------------|------------|------------------------------------------------------------------|------------|
| ** **                | ** ** | **Audit Committee  Period served** | ** ** | **Corporate Governance Committee  Period served** | ** ** |
| Henry Bosch AO  (note)    |       | July 1, 2007  to June 30, 2008     |       | July 1, 2007  to June 30, 2008                         |       |
| Michael B.  Ohanessian    |       | Not applicable                               |       | September 26,  2007 to June 30, 2008                   |       |
| Fred Bart                 |       | Not applicable                               |       | Not applicable                                                   |       |
| David Carruthers  (note)  |       | July 1, 2007  to June 30, 2008     |       | Not applicable                                                   |       |
| John S. Dawkins  AO       |       | July 1, 2007  to June 30, 2008     |       | July 1, 2007  to June 30, 2008                         |       |
| Dr. Mervyn  Jacobson |       | Not applicable                               |       | July 1, 2007  to June 30, 2008                         |       |
| Dr. Leanne  Rowe AM  |       | Not applicable                               |       | Not applicable                                                   |       |

 

Notes:   Mr. Bosch served as theChairman of the Corporate Governance Committee for the entire year ended June 30,2008.

 

Mr. Carruthersserved as the Chairman of the Audit Committee for the entire year ended June 30,2008.

 

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As of the date of this AnnualReport, the members of the Audit Committee were:

 

Sidney C. Hack *(Chairman)*

**Fred Bart

Huw D. Jones

 

During the 2005 financial year, theBoard established a Nomination and Remuneration Committee, which meets at leastthree times annually to ensure that the Board continues to operate within theestablished guidelines including selecting candidates for the position ofDirector.  During the 2006 financialyear, the role of the Committee was expanded to include matters related to theCompany’s Corporate Governance affairs and its name changed to the CorporateGovernance Committee to reflect that additional role.  The members of the Committee have the rightto appoint an independent consultant to attend meetings of the Committee, asappropriate.

 

As of the date of this AnnualReport, the members of the Corporate Governance Committee were:

 

Huw D. Jones*(Chairman)*

Sidney C. Hack

 

**Compliance with NASDAQ Rules**

 

NASDAQlisting rules require that we disclose the home country practices that wewill follow in lieu of compliance with NASDAQ corporate governance rules.  The following describes the home countrypractices and the related NASDAQ rule:

 

Majorityof Independent Directors: We follow home country practice rather than NASDAQ’s requirement inMarketplace Rule 4350(c)(1) that the majority of the Board of eachissuer be comprised of independent directors as defined in Marketplace Rule 4200.  As of the date of this Annual Report, ourBoard of Directors comprises of a majority of independent directors.

 

Compensationof Officers:  We follow homecountry practice rather than NASDAQ’s requirement in Marketplace Rule 4350(c)(3) thatchief executive compensation be determined or recommended to the Board by themajority of independent directors or a compensation committee of independentdirectors.  Similarly, compensation ofother officers is not determined or recommended to the Board by a majority ofthe independent directors or a compensation committee comprised solely ofindependent directors.  These decisionsare made by our corporate governance committee and it is not comprised of amajority of independent directors.  TheASX does not have a requirement that each listed issuer have a remunerationcommittee or otherwise follow the procedures embodied in NASDAQ’s MarketplaceRule.  Furthermore, no law, rule orregulation of the ASIC has such a requirement nor does the applicable corporatelaw legislation.  Such home countrypractices are not prohibited by the laws of Australia.

 

Nomination:  We follow home country practice rather thanNASDAQ’s requirement in Marketplace Rule 4350(c)(4) that directornominees be selected or recommended by a majority of the independent directorsor by a nominations committee (in our case, the Corporate Governance Committee)comprised of independent directors. These decisions are made by the nomination and remuneration committeeand it is not comprised of a majority of independent directors.  The ASX does not have a requirement that eachlisted issuer have a nominations committee or otherwise follow the proceduresembodied in NASDAQ’s Marketplace Rule. Furthermore, no law, rule or regulation of the ASIC has such arequirement nor does the applicable corporate law legislation.  Accordingly, selections or recommendations ofdirector nominees by a committee that is not comprised of a majority ofdirectors that are not independent is not prohibited by the laws of Australia.

 

Quorum:  We follow home country practice rather thanNASDAQ’s requirement in Marketplace Rule 4350(f) that each issuerprovide for a quorum of at least 33 1/3 percent of the outstanding shares ofthe issuer’s ordinary stock (voting stock). Pursuant to our Constitution we are currently required to have a quorumfor a general meeting of three persons holding at least 10% of our OrdinaryShares.  The practice followed by us isnot prohibited by Australian law.

 

**Item 6.D         Employees**

 

TheCompany currently employees 74 people, including executive Directors.  The number of employees as at the end of eachrespective financial year ended June 30 are as follows:

 
| 2008 |   | 60 |   |
|------|--------|----|--------|
| 2007 |   | 54 |   |
| 2006 |   | 49 |   |

 

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**Item 6.E         Share Ownership**

 

Therelevant interest of each director in the share capital of the Company asnotified by the directors to the Australian Securities Exchange in accordancewith section 205G(1) of the *CorporationsAct 2001* as of December 18, 2008 is as follows:

 
| **Director**     | ** ** | **Ordinary shares** | ** ** | **Percentage of Capital held** | ** ** |
|------------------|------------|--------------------------|------------|-----------------------------------------------|------------|
| Fred Bart (note) |       | 25,918,214               |       | 6.92                                          | %          |
| Sidney C. Hack   |       | —                   |       | N/A                                           |       |
| Huw D. Jones     |       | —                   |       | N/A                                           |       |

 

Notes:             Mr. Bartalso controls 88,500 ordinary shares in Gtech International Resources Limited.

 

Asof the date of this Annual Report, no options over Ordinary Shares are held bythe Directors.

 

**Item 7.            Major Shareholders and Related PartyTransactions**

 

**Item 7.A         Major Shareholders**

 

Thetable below sets forth the beneficial owners of 5% or more of our votingsecurities as of December 18, 2008:

 
| **Name**                  | ** ** | **Number of Ordinary Shares held** | ** ** | **Percentage of Capital held** | ** ** |
|---------------------------|------------|--------------------------------------------------------|------------|-----------------------------------------------|------------|
| Dr. Mervyn  Jacobson |       | 151,631,900                                            | (a)        | 40.47                                         | %          |
|                      |       |                                                   |       |                                          |       |
| Mr. Fred  Bart       |       | 25,918,214                                             | (b)        | 6.92                                          | %          |

 

----

| (a)    |    includes shares held by  Mervyn Jacobson ApS and JGT ApS.                       |
|--------|---------------------------------------------------------------------------------------------------|
|   |                                                                                              |
| (b)    |    shares registered in the  name of Security & Equity Resources Limited. |

 

Thenumber of Ordinary Shares on issue in Genetic Technologies as of the date ofthis Annual Report was 374,644,801.   Thenumber of holders of Ordinary Shares in Genetic Technologies as of the date ofthis Annual Report was approximately 3,100.

 

TheCompany is not aware of any direct or indirect ownership or control of it byanother corporation(s), by any foreign government or by any other natural orlegal person(s) severally or jointly. Principal shareholders do not enjoy any special or different votingrights from those to which other holders of Ordinary Shares are entitled.

 

TheCompany does not know of any arrangements, the operation of which may at asubsequent date result in a change in control of the Company.

 

**Item 7.B         Related Party Transactions**

 

Duringthe year ended June 30, 2008:

 

·                  GeneTypePty. Ltd. paid a total of $501,239 (2007: $445,384) to Bankberg Pty. Ltd., acompany associated with former Director Dr. Mervyn Jacobson, for rent inrespect of the office and laboratory premises in Fitzroy, Victoria that areleased by the Group.

 

·                  TheCompany paid a total of $79,936 (2007: $nil) to Government Relations AustraliaAdvisory Pty. Ltd., a company associated with former Director Mr. JohnDawkins AO, in respect of consulting services provided to the Group.

 

·                  TheCompany paid a total of $414,133 (2007: $nil) to Transmedia Inc., a companyassociated with former Director Dr. Mervyn Jacobson, in respect oflicensing services provided to the Group.

 

·                  FormerDirector Dr. Mervyn Jacobson acquired a total of 522 ordinary shares in ImmunAidPty. Ltd., a subsidiary of the Company. As at June 30, 2008, Dr. Jacobson held a total of 522 ordinaryshares in ImmunAid Pty. Ltd., representing approximately 4.0% of that company’stotal issued capital.

 

All transactions with directors areundertaken on normal commercial terms and conditions.  All management fees weredisclosed as general and administrative expenses in the respective years.

 

**Item 7.C         Interests of Experts and Counsel**

 

Notapplicable.

 

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** **

**Item 8.****                                  ****Financial Information**

 

**Item 8.A****                         ****Consolidated Statements and Other Financial Information**

 

Theinformation included in Item 18 of this Annual Report is referred to andincorporated by reference into this Item 8.A.

 

**Item 8.B****                         ****Litigation and Other Legal Proceedings**

 

**BioscentiaInstitut fur Medizinische Diagnostik GmbH**

 

Anullification action was filed by Bioscentia Institut fur MedizinischeDiagnostik GmbH of Ingelheim in the German Federal Patent Court in relation toGerman Patent No. 69029018.7, which had been assigned to the Company.  Dr. Christof Keussen of Glawe Delfs Mollin Hamburg has been engaged by the Company to defend the action, supported by Mr. RobertBrunelli of Sheridan Ross PC, of Denver, Colorado.

 

**Application forpatent re-examination**

 

Itrecently came to the attention of the Company that a “Request forRe-examination” of US Patent No. 5,612,179 had been filed with the UnitedStates Patent and Trademark Office on October 15, 2008 by the law firm ofFoley & Lardner LLP, of Chicago, Illinois.  The request relates to one independent claimcontained in that patent.  The law firmof Sheridan Ross PC, of Denver, Colorado, has now filed a first response onbehalf of the Company.

 

Wedo not express an opinion as to the probable outcome of any of the pending orthreatened litigation or disputes referred to above or to estimate thepotential amount or range of any loss, but do not believe any amounts to be materialto the Company.

 

Withthe exception of these proceedings, we are unaware of any material proceedingsinvolving us.

 

**Item 8.C****                         ****Dividends**

 

Untilour businesses are profitable beyond our expected research and developmentneeds, our Directors will not be able to recommend that any dividend be paid toour shareholders.  Our Directors will notresolve a formal dividend policy until we generate profits.  Our current intention is to reinvest ourincome in the continued development and operation of our business.

 

**Item 8.D****                         ****Significant Changes to Financial Information**

 

Ourconsolidated financial statements are set out on pages F1 to F42 of thisAnnual Report (refer to Item 18 “Financial Statements”).

 

*Adoption of IFRS*

 

Wepreviously filed our Annual Report with the SEC in a Form 20-F whichincluded consolidated financial statements that were prepared in accordancewith U.S. GAAP.

 

Followingthe publication of SEC Release 33-8879, “*AcceptanceFrom Foreign Private Issuers of Financial Statements Prepared in AccordanceWith International Financial Reporting Standards Without Reconciliation to U.S.GAAP*,” we have decided to file our consolidated financial statementsin this Form 20-F in accordance with International Financial ReportingStandards as issued by the International Accounting Standards Board.

 

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Anexplanation of the significant differences between IFRS and U.S. GAAP that arerelevant to our consolidated financial statements is presented below togetherwith tabular reconciliations for the financial years ended June 30, 2007and June 30, 2006 for consolidated net income and consolidatedshareholders’ equity previously reported in accordance with U.S. GAAP to theequivalent measures restated in accordance with IFRS.

 
| ** **                                    | ** ** | ** ** | ** ** | **Years ended June 30,** | ** ** |
|-----------------------------------------------|------------|------------|------------|-----------------------------------------|------------|
| ** **                                    | ** ** | **Note**   | ** ** | **2007  AUD**                           | ** ** | **2006  AUD** | ** ** |
| **Income statement**                          |       |       |       |                                    |       |   |   |
| **Net income / (loss) under U.S. GAAP**       |       |       |       | (1,788,506                              | )          | (5,378,359 | ) |
| IFRS adjustments:                             |       |       |       |                                    |       |   |   |
| Amortization of  patent costs                 |       | (a)        |       | (2,762,482                              | )          | (2,937,720 | ) |
| Stock  compensation expenses                  |       | (b)        |       | 222,445                                 |       | 385,306 |   |
| Other                                         |       | (d)        |       | —                                  |       | 12,000 |   |
| Income tax on  IFRS adjustments               |       |       |       | —                                  |       | — |   |
| Net IFRS  adjustments                         |       |       |       | (2,540,037                              | )          | (2,540,414 | ) |
| **Net income / (loss) under IFRS**            |       |       |       | (4,328,543                              | )          | (7,918,773 | ) |
|                                          |       |       |       |                                    |       |   |   |
| **Shareholders’ equity**                 |       |       |       |                                    |       |   |   |
| ** **                                    |       |       |       |                                    |       |   |   |
| **Shareholders’ equity under U.S. GAAP** |       |       |       | 16,737,828                              |       | 18,259,694 |   |
| IFRS adjustments:                             |       |       |       |                                    |       |   |   |
| Patent costs                                  |       | (a)        |       | 8,550,553                               |       | 11,313,035 |   |
| Government loan                               |       | (c)        |       | 700,000                                 |       | 700,000 |   |
| Other                                         |       | (d)        |       | (30,590                                 | )          | (30,590 | ) |
| Income tax on  IFRS adjustments               |       |       |       | —                                  |       | — |   |
| **Shareholders’ equity under IFRS**      |       |       |       | 25,957,791                              |       | 30,242,139 |   |

 

----

(a)          **Capitalization of patent costs** -Under U.S. GAAP, the Company expensed patent costs as incurred whereas underIFRS the Company had capitalized these patent costs and amortized them overtheir useful life.

 

(b)         **Stock compensation expenses** - Certain differencesbetween IFRS 2 and FAS 123(R) arise in relation to the phasing of stockcompensation expenses over each accounting period.  The Company has recognized compensationexpense on a straight line basis in accordance with FAS 123(R) and on agraded basis under IFRS 2.  Thisdifference resulted in differences in expense during the year.

 

(c)          **Government loans** - Differences exist betweenIAS 20 and ARB 43 related to the accounting for government loans.  Notwithstanding that the loan did not need tobe recognized under IFRS, under U.S. GAAP, the Company determined it was stillrequired to recognize the loan as a liability of the Company.

 

(d)         **Other** - immaterial differences.

 

**Item 8.E****                           ****Significant Other Changes**

 

OnMarch 8, 2007, the Company announced that the Australian Securities andInvestments Commission (“ASIC”) had sought information from the Companyregarding certain past trading in its shares. The Company has cooperated fully with ASIC.  The Company later clarified to the Marketthat, whilst the information being sought by ASIC did not relate to anysuspected wrongdoing by the Company itself, it did relate to the activities ofcertain individuals who were Executives of the Company at the time.  On December 12, 2008, a former Directorof the Company, Dr. Mervyn Jacobson, was charged with 319 counts of marketmanipulation regarding his involvement in the trading of shares in GeneticTechnologies between April 22, 2005 and November 2, 2006.

 

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Following the Company’s decision toenforce its rights to perform testing of the BRCA 1 and BRCA2 genes inAustralia and New Zealand, a Notice issued under section 155(1) of theTrade Practices Act has been received by the Company from the AustralianCompetition and Consumer Commission (“ACCC”). The ACCC has sought information from the Company in order to establishwhether or not Genetic Technologies has contravened any section of theAct.  The Company has cooperated fullywith the ACCC’s request.  On November 24,2008, the Company announced to the Market its intention to reverse its decisionto enforce its BRCA testing rights.  TheACCC was advised of this decision but, as at the date of this Annual Report, itis unknown how the ACCC will respond to the Company’s change in direction.

 

On October 26, 2007, the Company received aletter from the Australian Taxation Office (“ATO”) regarding a “Comprehensivereview” of the Company.  In the letter,the ATO requested the Company to provide it with extensive documents inrelation to its taxation affairs.  TheCompany has complied fully with the ATO’s request.  On October 30, 2008, the Companyreceived a further letter from the ATO advising that the ATO was proceeding toaudit.  As at the date of this AnnualReport, the audit had not yet commenced.

 

OnJuly 22, 2008, the Company acquired 100% of the issued capital of FrozenPuppies Dot Com Pty. Ltd. (“FPDC”), Australia’s foremost provider of caninereproductive services.  Under the termsof the Agreement between the Company and FPDC, Genetic Technologies acquired100% of the issued share capital of FPDC in return for the issue to the FPDCshareholders of 12,254,902 ordinary shares in Genetic Technologies and thepayment of $153,160 in cash.  In other termsof the acquisition, Genetic Technologies advanced $346,840 in loan funds toFPDC to enable shareholder loans to be repaid and Employment Agreements wereexecuted between the Company and the five principals of FPDC.  Voluntary Restriction Agreements were alsoexecuted with all former FPDC shareholders. As a result, 80% of the 12,254,902 Genetic Technologies’ shares thatwere issued as part of the acquisition are subject to voluntary escrow and willbe released from escrow in four equal tranches after the expiration of 6, 12,18  and 24 months from the date of issue,respectively.

 

SinceJune 30, 2008, there has not been any matter or circumstance, other thanas referred to elsewhere in this Annual Report, Note 39 of the attachedFinancial Statements or the notes thereto, that has arisen that hassignificantly affected, or may significantly affect our operations, results ofthose operations or the state of our affairs in future years.

 

**Item 9.****                                  ****The Offer and Listing**

 

**Item 9.A****                         ****Offer and Listing Details**

 

TheCompany’s Ordinary Shares were listed on the Australian Securities Exchange(the “ASX”) in July 1987 (under the name of Concord Mining NL).  The following table sets forth, for theperiods indicated, the highest and lowest market quotations for the OrdinaryShares reported on the Daily Official List of the ASX since that acquisition.

 
| **Financial Year** | ** ** | **Period Covered**               | ** ** | **High**       | ** ** | **Low**    | ** ** |
|-------------------------|------------|---------------------------------------|------------|----------------|------------|------------|------------|
| ** **              | ** ** | ** **                            | ** ** | **(in $0.00)** | ** ** |
| **Yearly data**         | ** ** | ** **                            | ** ** | ** **     | ** ** | ** ** | ** ** |
| 2004                    |       | Year ended June 30, 2004         |       | 0.87           |       | 0.34       |       |
| 2005                    |       | Year ended June 30, 2005         |       | 0.67           |       | 0.305      |       |
| 2006                    |       | Year ended June 30, 2006         |       | 0.595          |       | 0.315      |       |
| 2007                    |       | Year ended June 30, 2007         |       | 0.42           |       | 0.12       |       |
| 2008                    |       | Year ended June 30, 2008         |       | 0.26           |       | 0.09       |       |
| ** **              | ** ** | ** **                            | ** ** | ** **     | ** ** | ** ** | ** ** |
| **Quarterly data**      | ** ** | ** **                            | ** ** | ** **     | ** ** | ** ** | ** ** |
| 2007                    |       | Quarter ended September 30, 2006 |       | 0.37           |       | 0.33       |       |
|                    |       | Quarter ended December 31, 2006  |       | 0.42           |       | 0.31       |       |
|                    |       | Quarter ended March 31, 2007     |       | 0. 35          |       | 0.14       |       |
|                    |       | Quarter ended June 30, 2007      |       | 0.30           |       | 0.12       |       |
| 2008                    |       | Quarter ended September 30, 2007 |       | 0.185          |       | 0.13       |       |
|                    |       | Quarter ended December 31, 2007  |       | 0.26           |       | 0.145      |       |
|                    |       | Quarter ended March 31, 2008     |       | 0.175          |       | 0.10       |       |
|                    |       | Quarter ended June 30, 2008      |       | 0.125          |       | 0.09       |       |
| ** **              | ** ** | ** **                            | ** ** | ** **     | ** ** | ** ** | ** ** |
| **Monthly data**        | ** ** | ** **                            | ** ** | ** **     | ** ** | ** ** | ** ** |
| 2008 and 2009           |       | Month ended June 30, 2008        |       | 0.105          |       | 0.09       |       |
|                    |       | Month ended July 31, 2008        |       | 0.097          |       | 0.084      |       |
|                    |       | Month ended August 31, 2008      |       | 0.10           |       | 0.085      |       |
|                    |       | Month ended September 30, 2008   |       | 0.09           |       | 0.06       |       |
|                    |       | Month ended October 31, 2008     |       | 0.065          |       | 0.038      |       |
|                    |       | Month ended November 30, 2008    |       | 0.084          |       | 0.045      |       |

 

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Asof the date of this Annual Report, we had 374,644,801 Ordinary Shares on issue,without par value.  See Item 10B “OurConstitution” for a detailed description of the rights attaching to our sharesand Item 12D “American Depositary Receipts” for a description of the rightsattaching to the American Depositary Shares.

 

TheCompany’s securities are also listed on NASDAQ Global Market (under the tickerGENE) in the form of American Depositary Shares.  Each American Depositary Share evidencesthirty Ordinary Shares.  Since listing onthe NASDAQ Global Market on September 2, 2005, the ADRs have traded in arange from a low of USD0.35 to a high of USD13.85.  The most recent sale of the ADRs occurred ata price of USD1.02.

 

Followingthe listing of the Company’s ADRs in September 2005, our Ordinary Sharesare registered under Section 12 of the Securities Exchange Act of 1934 andwe file an Annual Report with the Securities and Exchange Commission on Form 20-F.  As a foreign private issuer, we are not besubject to the proxy rules under Section 14 of the SecuritiesExchange Act of 1934, and our officers, Directors and principal stockholdersare not be subject to the insider short-swing profit disclosure and recoveryprovisions of Section 16 of that Act.

 

Startingin January 14, 2002, the ADSs have traded in the USA over-the-countermarket under the symbol “GNTLY” and dealers’ prices for the ADSs have beenquoted in the “pink sheets” published by the National Quotations Bureau, Inc.  Commencing on September 2, 2005, ourADSs were listed on the NASDAQ Global Market under the ticker “GENE”.

 

TheCompany has registered one class of American Depositary Shares (ADSs) on Form F-6pursuant to the U.S. Securities Act of 1933, as amended.  One ADS represents thirty Ordinary Shareswithout par value.  As of June 30,2008, there were 201,720 ADSs outstanding.

 

Thetable below sets forth the high and low sales prices for the ADSs during theperiods indicated:

 
| **Financial Year** | ** ** | **Period Covered**           | ** ** | **High**          | ** ** | **Low**    | ** ** |
|-------------------------|------------|-----------------------------------|------------|-------------------|------------|------------|------------|
| ** **              | ** ** | ** **                        | ** ** | **(in USD 0.00)** | ** ** |
| **Yearly data**         | ** ** | ** **                        | ** ** | ** **        | ** ** | ** ** |       |
| 2004                    |       | Year ended  June 30, 2004         |       | —            |       | —     |       |
| 2005                    |       | Year ended  June 30, 2005         |       | 13.85             |       | 8.00       |       |
| 2006                    |       | Year ended  June 30, 2006         |       | 13.85             |       | 7.25       |       |
| 2007                    |       | Year ended  June 30, 2007         |       | 10.00             |       | 3.50       |       |
| 2008                    |       | Year ended  June 30, 2008         |       | 5.21              |       | 2.26       |       |
| ** **              | ** ** | ** **                        | ** ** | ** **        | ** ** | ** ** |       |
| **Quarterly data**      | ** ** | ** **                        | ** ** | ** **        | ** ** | ** ** |       |
| 2007                    |       | Quarter  ended September 30, 2006 |       | 9.00              |       | 6.50       |       |
|                    |       | Quarter  ended December 31, 2006  |       | 10.00             |       | 6.65       |       |
|                    |       | Quarter  ended March 31, 2007     |       | 8.15              |       | 3.75       |       |
|                    |       | Quarter ended  June 30, 2007      |       | 8.99              |       | 3.50       |       |
| 2008                    |       | Quarter  ended September 30, 2007 |       | 4.29              |       | 3.55       |       |
|                    |       | Quarter  ended December 31, 2007  |       | 5.21              |       | 3.55       |       |
|                    |       | Quarter  ended March 31, 2008     |       | 4.50              |       | 3.03       |       |
|                    |       | Quarter  ended June 30, 2008      |       | 3.39              |       | 2.26       |       |
| ** **              | ** ** | ** **                        | ** ** | ** **        | ** ** | ** ** |       |
| **Monthly data**        | ** ** | ** **                        | ** ** | ** **        | ** ** | ** ** |       |
| 2008 and 2009           |       | Month ended  June 30, 2008        |       | 3.18              |       | 2.26       |       |
|                    |       | Month ended  July 31, 2008        |       | 2.67              |       | 2.20       |       |
|                    |       | Month ended  August 31, 2008      |       | 2.55              |       | 1.80       |       |
|                    |       | Month ended  September 30, 2008   |       | 2.44              |       | 1.45       |       |
|                    |       | Month ended  October 31, 2008     |       | 1.69              |       | 0.70       |       |
|                    |       | Month ended  November 30, 2008    |       | 2.09              |       | 0.66       |       |
|                         |            |                                   |            |                   |            |            |            |  |

** **
| **Item 9.B** | **Plan of Distribution** |   |
|--------------|--------------------------|--------|
| ** **   | ** **               |   |
| ** **   | Not applicable.          |   |
| ** **   |                     |   |
| **Item 9.C** | **Markets**              |   |

 

EffectiveSeptember 2, 2005, our ADSs were listed on the NASDAQ Global Market underthe ticker “GENE”.  Our Ordinary Sharesare listed and trade on the ASX under the code “GTG”.

 

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| **Item 9.D**  | **Selling Shareholders**   |   |
|---------------|----------------------------|--------|
|          |                       |   |
|          | Not applicable.            |   |
|          |                       |   |
| **Item 9.E**  | **Dilution**               |   |
|          |                       |   |
|          | Not applicable.            |   |
|          |                       |   |
| **Item 9.F**  | **Expenses of the Issue**  |   |
|          |                       |   |
|          | Not applicable.            |   |
|          |                       |   |
| **Item 10.**  | **Additional Information** |   |
|          |                       |   |
| **Item 10.A** | **Share Capital**          |   |

 

Asof June 30, 2008, we had a total of 362,389,899 Ordinary Shares onissue.  With the exception of 3,333,333such Shares which were the subject of a voluntary escrow arrangement, all ofthese Ordinary Shares were listed on the Australian Securities Exchange andwere freely tradable.  As of the date ofthis Annual Report, we had a total of 374,644,801 Ordinary Shares on issue, ofwhich a total of 13,137,255 such Shares which were the subject of a voluntaryescrow arrangement.

 

Based on our review of shareholderrecords (based solely on the addresses), as of June 30, 2008 there are 48U.S. resident shareholders of our Ordinary Shares holding 8,575,036 sharesrepresenting 2.3% of the total issued and outstanding Ordinary Shares.  Our Ordinary Shares do not have a par value.  These figures do not include any OrdinaryShares which may held by U.S. residents in the form of American DepositaryReceipts (ADRs).

 

Duringthe last four years, our capital has increased, in connection with acquisitiontransactions and the exercise of options. In 2001, we issued 9,754,080 Ordinary Shares to owners of shares ofCytomation Inc. resulting in a total of 257,793,804 Ordinary Shares being onissue as of June 30, 2001.  On July 30,2001, we acquired the business of DNA-Id Labs of Perth, Western Australia, bypayment of consideration that included 94,340 Ordinary Shares, with furtherconsideration being paid on August 1, 2002, following fulfillment ofperformance warranties.  On September 4,2000, our shares were transferred from the mining board of the ASX to theindustrial board under the new symbol of “GTG”.

 

BetweenJuly 1, 2001 and June 30, 2003, we issued a total of 4,440,621Ordinary Shares resulting from the exercise of vendor options, the exercise ofoptions granted under the Staff Share Plan, a small placement for cash of1,000,000 shares, two exchanges of our shares for shares in XY, Inc., andthe issuance of shares in lieu of legal fees to our counsel, all of whichresulted in 262,234,425 Ordinary Shares being outstanding as of June 30,2003.  Subsequently, on September 4,2003, we completed a brokered private placement to professional Australianinvestors of 13,333,333 Ordinary Shares at $0.75 each, raising$10,000,000.  As part of the placement,we also issued 6,666,667 options to the subscribers to the placement with anexercise price of $1.00 on or before September 30, 2005.

 

OnJune 15, 2004, we issued 16,666,667 Ordinary Shares to the C.Y. O’ConnorERADE Village Foundation, as consideration under our licensing agreement withthat Foundation (see point 17).  Duringthe year ended June 30, 2005, we issued a further 65,561,338 OrdinaryShares resulting from the exercise of vendor options and a small number ofoptions granted under the Staff Share Plan. During the year ended June 30, 2006, we issued a further 20,000Ordinary Shares as consideration for the acquisition of certain intellectualproperty, all of which resulted in 362,389,899 Ordinary Shares beingoutstanding as of June 30, 2006. There were no shares issued during the years ended June 30, 2007and June 30, 2008.

 

OnJuly 22, 2008, we issued 12,254,902 Ordinary Shares to the five formerowners of Frozen Puppies Dot Com Pty. Ltd. in part consideration for theacquisition of that company by Genetic Technologies Limited (refer Note 39 ofthe attached financial statements).  As aresult, there is a total of 374,644,801 Ordinary Shares on issue as of the dateof this Annual Report.

 

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Asat June 30, 2008 and 2007, the following outstanding unlisted options,together with their respective ASX codes and expiry dates, were convertibleinto Ordinary Shares.  The exerciseprices are quoted in Australian dollars.

 
| **Option description**               | ** ** | **2008**   | ** ** | **Weighted ave.  exercise price** | ** ** | **2007**   | ** ** | **Weighted ave.  exercise price** | ** ** |
|-------------------------------------------|------------|------------|------------|---------------------------------------------|------------|------------|------------|---------------------------------------------|------------|
| ** **                                | ** ** | ** ** | ** ** | ** **                                  | ** ** | ** ** | ** ** | ** **                                  | ** ** |
| GTGAA (expiring 6  September 2010)   |       | 750,000    |       | $                                           | 0.48       |       | 750,000    |                                        | $          | 0.48 |   |
| GTGAD (expiring  12 August 2011)     |       | 700,000    |       | $                                           | 0.43       |       | 850,000    |                                        | $          | 0.43 |   |
| GTGAE (expiring  12 August 2011)     |       | 250,000    |       | $                                           | 0.53       |       | 1,000,000  |                                        | $          | 0.53 |   |
| GTGAF (expiring  23 November 2011)   |       | —     |       | —                                      |       | 1,000,000  |       | $                                           | 0.56       |   |
| GTGAG (expiring 1  February 2012)    |       | —     |       | —                                      |       | 750,000    |       | $                                           | 0.46       |   |
| GTGAH (expiring  31 May 2012)        |       | 450,000    |       | $                                           | 0.40       |       | 700,000    |                                        | $          | 0.40 |   |
| GTGAI (expiring  30 June 2013)       |       | 1,000,000  |       | $                                           | 0.13       |       | —     |                                        | —     |   |
| GTGAI (expiring  30 November 2007)   |       | —     |       | —                                      |       | 1,750,000  |       | $                                           | 0.56       |   |
| GTGAK (expiring  11 June 2009)       |       | 200,000    |       | $                                           | 0.45       |       | 200,000    |                                        | $          | 0.45 |   |
| GTGAM (expiring  30 November 2007)   |       | —     |       | —                                      |       | 2,500,000  |       | $                                           | 0.61       |   |
| GTGAO (expiring  30 November 2007)   |       | —     |       | —                                      |       | 802,500    |       | $                                           | 0.49       |   |
| GTGAQ (expiring  20 May 2009)        |       | 700,000    |       | $                                           | 0.44       |       | 700,000    |                                        | $          | 0.44 |   |
| GTGAS (expiring  20 May 2009)        |       | 175,000    |       | $                                           | 0.38       |       | 175,000    |                                        | $          | 0.38 |   |
| GTGAU (expiring  17 January 2012)    |       | —     |       | —                                      |       | 200,000    |       | $                                           | 0.45       |   |
| GTGAW (expiring  24 September 2012)  |       | 3,650,602  |       | $                                           | 0.17       |       | —     |                                        | —     |   |
| GTGAY (expiring  23 October 2012)    |       | 2,800,000  |       | $                                           | 0.22       |       | —     |                                        | —     |   |
| GTGAZ (expiring  27 February 2010)   |       | 200,000    |       | $                                           | 0.56       |       | 200,000    |                                        | $          | 0.56 |   |
| GTGAZ (expiring  27 February 2010)   |       | 300,000    |       | $                                           | 0.49       |       | 400,000    |                                        | $          | 0.49 |   |
|                                      |       |       |       |                                        |       |       |       |                                        |       |
| Balance at the  end of the financial year |       | 11,175,602 |       | $                                           | 0.27       |       | 11,977,500 |                                        | $          | 0.52 |   |

 

**Item 10.B****                  ****Our Constitution**

 

Atthe Annual General Meeting of the Company held on November 23, 2005, theshareholders resolved to replace the existing Constitution with a revisedversion.  A copy of the new Constitutionhas been posted on the Company’s website: www.gtg.com.au.  The principal changes which have beenimplemented in the new Constitution may be summarized as follows:

 

·                  Generalchanges – general changes are proposed to make the Constitution consistent withbest practice, update legal matters under the existing Constitution consistentwith legislative and regulatory developments and to address certain content andlanguage aspects.

 

·                  ASX Listing Rules – it provides that theListing Rules prevail in the event of any inconsistency.

 

·                  Shares – it allows the Directors to issueshares subject to the Corporations Act and the Listing Rules.

 

·                  Proportionate takeover power – the existingConstitution has a clause in it requiring shareholder approval to be obtainedbefore any proportionate takeover is made. However, that clause is ineffective because it needs to have beenrenewed at least every three years in accordance with the requirements of theCorporations Act.  The new Constitutiondoes not include this clause on the basis that it offers no real benefit.

 

·                  Unmarketable parcels – the new Constitutionpermits the Company to sell holdings of less than a marketable parcel inaccordance with the procedural and timing requirements of the ListingRules.  This only applies if ashareholder has an opportunity to opt out of any proposed sale arrangement anddoes not do so.

 

·                  Notice of shareholders’ meetings – the newConstitution enables notice of shareholders’ meetings to be given by electronicmeans.

 

·                  Changes to general meetings – the newConstitution enables the Directors to change the venue for, and postpone orcancel a general meeting if such meeting is unnecessary, in the interests ofshareholders, if the venue would be unreasonable or impractical, or for reasonsof efficiency.  This does not apply inthe event of a meeting requisitioned by shareholders.

 

·                  Quorum for shareholders’ meetings – a quorumof three shareholders represents a quorum for shareholders’ meetings, whetherby way of being personally present, attorney, proxy or corporaterepresentative.

 

·                  Casting vote – the Chairman of ashareholders’ meeting does not have a casting vote.

 

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·                  Number of Directors – it contemplates thatthe number of Directors need to be not less than three nor more than the numberdetermined by the Directors which, until otherwise determined, is ten.

 

·                  Share qualification – a Director need nothold any shares in the Company in order to be a Director.

 

·                  Alternate directors – there are no provisionsentitling the Directors to appoint alternate directors, on the basis that thisis an outdated and undesirable approach.

 

·                  Directors’ tenure of office – a Director mustretire from office or seek re-election by no later than the third AnnualGeneral Meeting following his or her appointment or re-election or three years,whichever is longer (other than the Managing Director).

 

·                  Vacation of office – the office of a Directoris automatically vacated if the Director is an Executive Director under anemployment agreement and that agreement terminates, unless the Board otherwisedetermines.

 

·                  Powers of Directors – the Directors have ageneral power to manage the Company’s business.

 

·                  Meetings of Directors – the Directors maymeet in person or by electronic means.

 

·                  Quorum for Directors’ meetings – the quorumfor Directors’ meetings is three, unless otherwise determined.

 

·                  Casting vote – the Chairman has a castingvote at Directors’ meetings.

 

·                  Indemnity – the new Constitution contains anupdated indemnity clause in favour of the current and former Directors,Secretaries indemnifying them from liability consistent with the CorporationsAct provisions and to the maximum extent permitted by law.

 

·                  Insurance – the Company must maintain and payinsurance premiums with respect to its current and former Directors,Secretaries and other officers to the extent permitted by law.

 

·                  Access – current and former Directors mayaccess the financial and other records of the Company for the purposes of legalproceedings involving the person.

 

**Item 10.C****                          ****Material Contracts**

 

Apartfrom the acquisition of Frozen Puppies Dot Com Pty. Ltd. on July 22, 2008(refer Note 39 of the attached Financial Statements), there were no materialcontracts entered into during the two years preceding the date of this AnnualReport which were outside the ordinary course of business.  See also Item 4B “Our Licenses and CommercialCollaborations”.

 

**Item 10.D****                  ****Exchange Controls and Other Limitations Affecting SecurityHolders**

 

Underexisting Australian legislation, the Reserve Bank of Australia does not inhibitthe import and export of funds, and, generally, no permission is required to begiven to Genetic Technologies for the movement of funds in and out ofAustralia.  However, payments to or from(or relating to) Iraq, its agencies or nationals, the government or a publicauthority of Libya, or certain Libyan undertakings, the authorities in theFederal Republic of Yugoslavia (Serbia and Montenegro) or their agencies, theTaliban (also referred to as the Islamic Emirate of Afghanistan), or theNational Union for the Total Independence of Angola (also known as UNITA), itssenior officials or the adult members of their immediate families, may**not be made without the specific approvalof the Reserve Bank of Australia.

 

Accordingly,at the present time, remittances of any dividends, interest or other payment byGenetic Technologies to non-resident holders of Genetic Technologies’securities in the US are not, subject to the above, restricted by exchangecontrols or other limitations.

 

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**Takeovers Act**

 

Thereare no limitations, either under the laws of Australia or under the Company’sConstitution, to the right of non-residents to hold or vote GeneticTechnologies Ordinary Shares other than the Commonwealth Foreign Acquisitionsand Takeovers Act 1975 (the “Takeovers Act”). The Takeovers Act may affect the right of non-Australian residents,including US residents, to hold Ordinary Shares but does not affect the rightto vote, or any other rights associated with, any Ordinary Shares held incompliance with its provisions. Acquisitions of shares in Australian companies by foreign interests aresubject to review and approval by the Treasurer of the Commonwealth ofAustralia under the Takeovers Act.  TheTakeovers Act applies to any acquisition of outstanding shares of an Australiancompany that exceeds, or results in a foreign person or persons controlling thevoting power of more than a certain percentage of those shares.  The thresholds are 15% where the shares areacquired by a foreign person, or group of associated foreign persons, or 40% inaggregate in the case of foreign persons who are not associated.  Any proposed acquisition that would result inan individual foreign person (with associates) holding more than 15% must benotified to the Treasurer in advance of the acquisition.  As of the date of this Annual Report,approximately 52.2% of the outstanding Ordinary Shares in the Company were heldby shareholders whose registered addresses were located outside Australia.  In addition to the Takeovers Act, there are statutorylimitations in Australia on foreign ownership of certain businesses, such asbanks and airlines, not relevant to the Company.  However, there are no other statutory orregulatory provisions of Australian law or Australian Securities Exchange requirementsthat restrict foreign ownership or control of Genetic Technologies.

 

**Corporations Act 2001**

 

Asapplied to Genetic Technologies Limited, the *CorporationsAct 2001* (the “*Corporations Act2001*”) prohibits any legal person (including a corporation) fromacquiring a relevant interest in Ordinary Shares if after the acquisition thatperson or any other person’s voting power in Genetic Technologies Limitedincreases from 20% or below to more than 20%, or from a starting point that isabove 20% and below 90%.

 

Thisprohibition is subject to a number of specific exceptions set out in section611 of the Corporations Act 2001 which must be strictly complied with to beapplicable.

 

Ingeneral terms, a person is considered to have a “relevant interest” in a sharein Genetic Technologies if that person is the holder of that share, has thepower to exercise, or control the exercise of, a right to vote attached to thatshare, or has the power to dispose of, or to control the exercise of a power todispose of that share.

 

Itdoes not matter how remote the relevant interest is or how it arises.  The concepts of “power” and “control” aregiven wide and extended meanings in this context in order to deem certainpersons to hold a relevant interest.  Forexample, each person who has voting power above 20% in a company or a managedinvestment scheme which in turn holds shares in Genetic Technologies is deemedto have a relevant interest in those Genetic Technologies shares.  Certain situations (set out in section 609 ofthe *Corporations Act 2001*) whichwould otherwise constitute the holding of a relevant interest are excluded fromthe definition.

 

Aperson’s voting power in Genetic Technologies Limited is that percentage of thetotal votes attached to Ordinary Shares in which that person and its associates(as defined in the *Corporations Act 2001*)holds a relevant interest.

 

**Item 10.E****                    ****Taxation**

 

Thissummary of material tax consequences is based on the tax laws of the UnitedStates (including the Internal Revenue Code of 1986, as amended, itslegislative history, existing and proposed regulations thereunder, publishedrulings and court decisions) and on the Australian tax law and practice as ineffect on the date hereof.  In addition,this summary is based on the income tax convention between the United Statesand Australia (the “Treaty”).  Theforegoing laws and legal authorities as well as the Treaty are subject tochange (or changes in interpretation), possibly with retroactive effect.  Finally, this summary is based in part uponthe representations of our ADR Depositary and the assumption that eachobligation in the Deposit Agreement and any related agreement will be performedin accordance with its terms.

 

Thediscussion does not address any aspects of U.S. taxation other than federalincome taxation or any aspects of Australian taxation other than federal incometaxation, stamp duty and goods and services tax.  This discussion does not address all aspectsof U.S. or Australian federal tax considerations that may be important toparticular investors in light of their individual investment circumstances orinvestors subject to special tax regimes, like broker-dealers, insurancecompanies, banks or other financial institutions, tax-exempt organizations,regulated investment companies, real estate investment trusts or financialasset securitization investment trusts, persons who actually or constructivelyown 10% or more of our ADRs or Ordinary Shares, persons who hold ADRs orOrdinary Shares as part of a straddle, hedge, conversion or constructive saletransaction or other integrated transaction, persons who have electedmark-to-market accounting, U.S. holders whose functional currency is not theU.S. dollar, U.S. expatriates, investors liable for the alternative minimumtax, partnerships and other pass-through entities, or persons who acquiredtheir ADRs or Ordinary Shares through the exercise of options or similarderivative securities or otherwise as compensation.  Prospective investors are urged to consulttheir tax advisers regarding the U.S. and Australian federal, state and localtax consequences and any other tax consequences of owning and disposing of ADRsand shares.

 

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**Australian Tax Consequences**

 

Inthis section, we discuss Australian tax considerations that apply tonon-Australian tax residents who are residents of the United States withrespect to the ownership and disposal by the absolute beneficial owners ofADRs.  This summary does not discuss anyforeign or state tax considerations, other than stamp duty.

 

**Nature of ADRs for Australian Taxation Purposes**

 

ADRsheld by a U.S. holder will be treated for Australian taxation purposes as beingheld under a “bare trust” for that holder. Consequently, the underlying Ordinary Shares will be regarded as ownedby the ADR holder for Australian income tax and capital gains taxpurposes.  Dividends paid on theunderlying Ordinary Shares will also be treated as dividends paid to the ADRholder, as the person beneficially entitled to those dividends.  Therefore, in the following analysis, wediscuss the tax consequences to non-Australian resident holders of OrdinaryShares which, for Australian taxation purposes, will be the same as to U.S.holders of ADRs.

 

**Taxation of Dividends**

 

Australiaoperates a dividend imputation system under which dividends may be declared tobe “franked” to the extent of tax paid on company profits.  Fully franked dividends are not subject todividend withholding tax.  Dividendspayable by our company to non-Australian resident stockholders will be subjectto dividend withholding tax, to the extent the dividends are unfranked.  Dividend withholding tax will be imposed at30%, unless a stockholder is a resident of a country with which Australia has adouble taxation agreement.  Under theprovisions of the Treaty, the Australian tax withheld on unfranked dividendspaid by us to which a resident of the United States is beneficially entitled isgenerally limited to 15% if the U.S. resident holds less than 10% of the votingrights of our company, unless the shares are effectively connected to apermanent establishment or fixed base in Australia through which thestockholder carries on business or provides independent personal services,respectively.  Where the U.S. residentholds 10% or more of the voting rights of our company, the withholding tax rateis reduced to 5%.

 

**Tax on Sales or other Dispositions of Shares - Capital GainsTax**

 

Non-Australianresident stockholders will not be subject to Australian capital gains tax onthe gain made on a sale or other disposal of our shares, unless they, togetherwith their associates, hold 10% or more of our issued capital at any timeduring the five years before the disposal of the shares.  If a non-Australian resident stockholder did,together with his or her associates, own a 10% or more interest, thatstockholder would be subject to Australian capital gains tax to the same extentas Australian resident stockholders.  TheAustralian Taxation Office maintains the view that the Double TaxationConvention between the United States and Australia does not limit Australiancapital gains tax. Australian capital gains tax applies to net capital gains chargedat a taxpayer’s marginal tax rate but, for certain stockholders, a discount ofthe capital gain may apply if the shares have been held for 12 months ormore.  For individuals, this discount is50%.  For superannuation funds, thediscount is 33%.  There is no discountfor a company that derives a capital gain. Net capital gains are calculated after deducting capital losses, whichmay only be offset against such gains.

 

**Tax on Sales or other Dispositions of Shares - StockholdersHolding Shares on Revenue Account**

 

Somenon-Australian resident stockholders may hold shares on revenue rather than oncapital account, for example, share traders. These stockholders may have the gains made on the sale or other disposalof the shares included in their assessable income under the ordinary incomeprovisions of the income tax law, if the gains are sourced in Australia.  Non-Australian resident stockholdersassessable under these ordinary income provisions in respect of gains made onshares held on revenue account would be assessed for those gains at theAustralian tax rates for non-Australian residents, which start at a marginalrate of 29%.  Some relief from theAustralian income tax may be available to non-Australian resident stockholdersunder the Double Taxation Convention between the United States and Australia,for example, because the stockholder does not have a permanent establishment inAustralia.

 

Tothe extent an amount would be included in a non-Australian resident stockholder’sassessable income under both the capital gains tax provisions and the ordinaryincome provisions, the capital gain amount would generally be reduced, so thatthe stockholder would not be subject to double tax on any part of the incomegain or capital gain.

 

**Dual Residency**

 

Ifa stockholder were a resident of both Australia and the United States underthose countries’ domestic taxation laws, that stockholder may be subject to taxas an Australian resident.  If, however,the stockholder is determined to be a U.S. resident for the purposes of theDouble Taxation Convention between the United States and Australia, theAustralian tax would be subject to limitation by the Double TaxationConvention.  Stockholders should obtainspecialist taxation advice in these circumstances.

 

**Stamp Duty**

 

Anytransfer of shares through trading on the Australian Securities Exchange,whether by Australian residents or foreign residents, is not subject to stampduty within Australia.

 

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**Australian Death Duty**

** **

Australiadoes not have estate or death duties.  Nocapital gains tax liability is realized upon the inheritance of a deceasedperson’s shares.  The subsequent disposalof inherited shares by beneficiaries, may, however, give rise to a capitalgains tax liability.

 

**Goods and Services Tax**

** **

Theissue or transfer of shares will not incur Australian goods and services taxand does not require a stockholder to register for Australian goods andservices tax purposes.

 

**United States Federal Income Taxation**

** **

As used below, a “U.S. holder” is abeneficial owner of an ADR that is, for U.S. federal income tax purposes, (i) acitizen or resident alien individual of the United States, (ii) acorporation (or an entity treated as a corporation) created or organized underthe law of the United States, any State thereof or the District of Columbia, (iii) anestate the income of which is subject to U.S. federal income tax without regardto its source or (iv) a trust if (1) a court within the United Statesis able to exercise primary supervision over the administration of the trust,and one or more United States persons have the authority to control allsubstantial decisions of the trust, or (2) the trust has a valid electionin effect under applicable U.S. Treasury Regulations to be treated as a UnitedStates person.  For purposes of thisdiscussion, a “non-U.S. holder” is a beneficial owner of an ADR that is (i) anonresident alien individual, (ii) a corporation (or an entity treated asa corporation) created or organized in or under the law of a country other thanthe United States or a political subdivision thereof or (iii) an estate ortrust that is not a U.S. Holder.  If apartnership (including for this purpose any entity treated as a partnership forU.S. federal tax purposes) is a beneficial owner of an ADR, the U.S. federaltax treatment of a partner in the partnership generally will depend on thestatus of the partner and the activities of the partnership.  A holder of an ADR that is a partnership andpartners in that partnership should consult their own tax advisers regardingthe U.S. federal income tax consequences of holding and disposing of ADRs.

 

Wehave not sought a ruling from the Internal Revenue Service (“IRS”) or anopinion of counsel as to any U.S. federal income tax consequence describedherein.  The IRS may disagree with thedescription herein, and its determination may be upheld by a court.

 

**GIVEN THE COMPLEXITY OF THE TAX LAWS AND BECAUSE THE TAXCONSEQUENCES TO ANY PARTICULAR INVESTOR MAY BE AFFECTED BY MATTERS NOTDISCUSSED HEREIN, PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAXADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE ACQUISITION,OWNERSHIP AND DISPOSITION OF ADRs, INCLUDING THE APPLICABILITY AND EFFECT OFSTATE, LOCAL AND NON-U.S. TAX LAWS, AS WELL AS U.S. FEDERAL TAX LAWS.**

** **

**TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE IRSUNDER TREASURY CIRCULAR 230, WE INFORM YOU THAT (1) ANY DISCUSSION OFU.S. FEDERAL INCOME TAX ISSUES CONTAINED HEREIN (INCLUDING ANY ATTACHMENTS),UNLESS OTHERWISE SPECIFICALLY STATED, WAS NOT INTENDED OR WRITTEN TO BE USED,AND CANNOT BE USED, FOR THE PURPOSE OF AVOIDING PENALTIES UNDER THE UNITEDSTATES INTERNAL REVENUE CODE, AND (2) EACH U.S. HOLDER SHOULD SEEK ADVICEBASED UPON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.**

** **

**Nature of ADRs for U.S. Federal Income Tax Purposes**

** **

Ingeneral, for U.S. federal income tax purposes, a holder of an ADR will betreated as the owner of the underlying shares. Accordingly, except as specifically noted below, the tax consequencesdiscussed below with respect to ADRs will be the same as for shares in theCompany, and exchanges of shares for ADRs, and ADRs for shares, generally willnot be subject to U.S. federal income tax.

 

**Taxation of Dividends**

** **

**U.S. holders.**  In general, subject to the passive foreigninvestment company rules discussed below, a distribution on an ADR willconstitute a dividend for U.S. federal income tax purposes to the extent thatit is made from our current or accumulated earnings and profits as determinedunder U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings andprofits, it will be treated as a non-taxable reduction of basis to the extentof the U.S. holder’s tax basis in the ADR on which it is paid, and to theextent it exceeds that basis it will be treated as capital gain.  For purposes of this discussion, the term “dividend”means a distribution that constitutes a dividend for U.S. federal income taxpurposes.

 

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Thegross amount of any dividend on an ADR (which will include the amount of anyAustralian taxes withheld) generally will be subject to U.S. federal income taxas foreign source dividend income, and will not be eligible for the corporatedividends received deduction.  The amountof a dividend paid in Australian dollars will be its value in U.S. dollarsbased on the prevailing spot market exchange rate in effect on the day the U.S.holder receives the dividend or, in the case of a dividend received in respectof an ADR, on the date the Depositary receives it, whether or not the dividendis converted into U.S. dollars.  A U.S.holder will have a tax basis in any distributed Australian dollars equal to itsU.S. dollar amount on the date of receipt, and any gain or loss realized on asubsequent conversion or other disposition of Australian dollars generally willbe treated as U.S. source ordinary income or loss.  If dividends paid in Australian dollars areconverted into U.S. dollars on the date they are received by a U.S. holder, theU.S. holder generally should not be required to recognize foreign currency gainor loss in respect of the dividend income.

 

Subjectto certain exceptions for short-term and hedged positions, a dividend that anon-corporate holder receives on an ADR in a taxable year beginning before January 1,2011 will be subject to a maximum tax rate of 15% if the dividend is a “qualifieddividend.”  A dividend on an ADR will bea qualified dividend if (i) either (a) the ADRs are readily tradableon an established market in the United States or (b) we are eligible forthe benefits of a comprehensive income tax treaty with the United States thatthe Secretary of the Treasury determines is satisfactory for purposes of these rules andthat includes an exchange of information program, and (ii) we were not, inthe year prior to the year the dividend was paid, and are not, in the year thedividend is paid, a passive foreign investment company (“PFIC”).  The ADRs are listed on the Nasdaq GlobalMarket, which should qualify them as readily tradable on an establishedsecurities market in the United States. In any event, the Treaty satisfies the requirements of clause (i)(b),and we are a resident of Australia entitled to the benefits of the Treaty.  Based on our audited financial statements andrelevant market and shareholder data, we believe we were not a PFIC for U.S.federal income tax purposes for our taxable years ended June 30, 2007 and June 30,2008, respectively, but we may be classified as a PFIC in the current taxableyear.  Given that the determination ofPFIC status involves the application of complex tax rules, and that it is basedon the nature of our income and assets from time to time, no assurances can beprovided that we will not be considered a PFIC for the current (or any past offuture) taxable year.  In addition, asdescribed in the section below entitled “Passive Foreign Investment CompanyRules,” if we were a PFIC in a year while a U.S. holder held an ADR, and if theU.S. holder has not made a qualified electing fund election effective for thefirst year the U.S. holder held the ADR, the ordinary share underlying the ADRremains an interest in a PFIC for all future years or until such an election ismade. The IRS takes the position that such rule will apply for purposes ofdetermining whether an ADR is an interest in a PFIC in the year a dividend is paid or in the prior year, even ifwe do not satisfy the tests to be a PFIC in either of those years.  Even if dividends on the ADRs would otherwisebe eligible for qualified dividend treatment, in order to qualify for thereduced qualified dividend tax rates, a non-corporate holder must hold theordinary share on which a dividend is paid for more than 60 days during the120-day period beginning 60 days before the ex-dividend date, disregarding forthis purpose any period during which the non-corporate holder has an option tosell, is under a contractual obligation to sell or has made (and not closed) ashort sale of substantially identical stock or securities, is the grantor of anoption to buy substantially identical stock or securities or, pursuant toTreasury regulations, has diminished their risk of loss by holding one or moreother positions with respect to substantially similar or related property.  In addition, to qualify for the reducedqualified dividend tax rates, the non-corporate holder must not be obligated tomake related payments with respect to positions in substantially similar orrelated property.  Payments in lieu ofdividends from short sales or other similar transactions will not qualify forthe reduced qualified dividend tax rates. A non-corporate holder that receives an extraordinary dividend eligiblefor the reduced qualified dividend rates must treat any loss on the sale of thestock as a long-term capital loss to the extent of the dividend.  For purposes of determining the amount of anon-corporate holder’s deductible investment interest expense, a dividend istreated as investment income only if the non-corporate holder elects to treatthe dividend as not eligible for the reduced qualified dividend tax rates.  Special limitations on foreign tax creditswith respect to dividends subject to the reduced qualified dividend tax ratesapply to reflect the reduced rates of tax.

 

TheU.S. Treasury has announced its intention to promulgate rules pursuant towhich non-corporate holders of stock of non-U.S. corporations, andintermediaries through whom the stock is held, will be permitted to rely oncertifications from issuers to establish that dividends are treated asqualified dividends.  Because thoseprocedures have not yet been issued, it is not clear whether we will be able tocomply with them.

 

Non-corporateholders of ordinary shares are urged to consult their own tax advisers regardingthe availability of the reduced qualified dividend tax rates with respect todividends received on the ADRs in the light of their own particularcircumstances.

 

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AnyAustralian withholding tax imposed on dividends received with respect to theADRs will be treated as a foreign income tax eligible for credit against a U.S.holder’s U.S. federal income tax liability, subject to generally applicablelimitations under U.S. federal income tax law. For purposes of computing those limitations separately under current lawfor specific categories of income, a dividend generally will constitute foreignsource “passive income” or, in the case of certain holders, “financial servicesincome” for purposes of taxable years beginning before January 1,2007.  For taxable years beginning after December 31,2006, “passive income” generally will be treated as “passive category income,”and “financial services income” generally will be treated as “general categoryincome.”  A U.S. holder will be denied aforeign tax credit with respect to Australian income tax withheld fromdividends received with respect to the ADRs to the extent the U.S. holder hasnot held the ADRs for at least 16 days of the 30-day period beginning on thedate which is 15 days before the ex-dividend date or to the extent the U.S.holder is under an obligation to make related payments with respect to substantiallysimilar or related property.  Any daysduring which a U.S. holder has substantially diminished its risk of loss on theADRs are not counted toward meeting the 16-day holding period required by thestatute. The rules relating to the determination of the foreign tax creditare complex, and U.S. holders are urged to consult with their own tax advisersto determine whether and to what extent they will be entitled to foreign taxcredits as well as with respect to the determination of the foreign tax creditlimitation (including changes in the rules for taxable years beginningafter December 31, 2006). Alternatively, any Australian withholding tax may be taken as adeduction against taxable income, provided the U.S. holder takes a deductionand not a credit for all foreign income taxes paid or accrued in the sametaxable year.  In general, special rules willapply to the calculation of foreign tax credits in respect of dividend incomethat is subject to preferential rates of U.S. federal income tax.

 

**Non-U.S. holders.**  A dividend paid to a non-U.S. holder of anADR will not be subject to U.S. federal income tax unless the dividend iseffectively connected with the conduct of trade or business by the non-U.S.holder within the United States (and is attributable to a permanentestablishment or fixed base the non-U.S. holder maintains in the United Statesif an applicable income tax treaty so requires as a condition for the non-U.S.holder to be subject to U.S. taxation on a net income basis on income from theADR).  A non-U.S. holder generally willbe subject to tax on an effectively connected dividend in the same manner as aU.S. holder.  A corporate non-U.S. holderunder certain circumstances may also be subject to an additional “branchprofits tax,” the rate of which may be reduced pursuant to an applicable incometax treaty.

 

**Taxation of Capital Gains**

** **

**U.S. holders.**  Subject to the passive foreign investmentcompany rules discussed below, on a sale or other taxable disposition ofan ADR, a U.S. holder will recognize capital gain or loss in an amount equal tothe difference between the U.S. holder’s adjusted basis in the ADR and theamount realized on the sale or other disposition, each determined in U.S.dollars.  Such capital gain or loss willbe long-term capital gain or loss if at the time of the sale or other taxabledisposition the ADR has been held for more than one year.  In general, any adjusted net capital gain ofan individual in a taxable year beginning before January 1, 2011 issubject to a maximum tax rate of 15%.  Inlater years, the maximum tax rate on the net capital gain of an individual willbe 20%.  Capital gains recognized bycorporate U.S. holders generally are subject to U.S. federal income tax at thesame rate as ordinary income.  Thedeductibility of capital losses is subject to limitations.

 

Anygain a U.S. holder recognizes generally will be U.S. source income for U.S.foreign tax credit purposes, and, subject to certain exceptions, any loss willgenerally be a U.S. source loss.  If anAustralian tax is paid on a sale or other disposition of an ADR, the amountrealized will include the gross amount of the proceeds of that sale ordisposition before deduction of the Australian tax.  The generally applicable limitations underU.S. federal income tax law on crediting foreign income taxes may preclude aU.S. holder from obtaining a foreign tax credit for any Australian tax paid ona sale or other disposition of an ADR. The rules relating to the determination of the foreign tax creditare complex, and U.S. holders are urged to consult with their own tax advisersregarding the application of such rules. Alternatively, any Australian tax paid on the sale or other dispositionof an ADR may be taken as a deduction against taxable income, provided the U.S.holder takes a deduction and not a credit for all foreign income taxes paid oraccrued in the same taxable year.

 

**Non-U.S. holders.**  A non-U.S. holder will not be subject to U.S.federal income tax on gain recognized on a sale or other disposition of an ADRunless (i) the gain is effectively connected with the conduct of trade orbusiness by the non-U.S. holder within the United States (and is attributableto a permanent establishment or fixed base the non-U.S. holder maintains in theUnited States if an applicable income tax treaty so requires as a condition forthe non-U.S. holder to be subject to U.S. taxation on a net income basis onincome from the ADR), or (ii) in the case of a non-U.S. holder who is anindividual, the holder is present in the United States for 183 or more days inthe taxable year of the sale or other disposition and certain other conditionsapply.  Any effectively connected gain ofa corporate non-U.S. holder may also be subject under certain circumstances toan additional “branch profits tax,” the rate of which may be reduced pursuantto an applicable income tax treaty.

 

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**Passive Foreign Investment Company Rules**

** **

Aspecial set of U.S. federal income tax rules applies to a foreigncorporation that is a PFIC for U.S. federal income tax purposes.  As noted above, based on our auditedfinancial statements and relevant market and shareholder data, we believe thatwe were not a PFIC for U.S. federal income tax purposes for our taxable yearsended June 30, 2007 and June 30, 2008, respectively, but we may beclassified as a PFIC in the current taxable year.  In addition, given that the determination ofPFIC status involves the application of complex tax rules, and that it is basedon the nature of our income and assets from time to time, no assurances can beprovided that we will not be considered a PFIC for any past or future taxableyears.

 

Ingeneral, a foreign corporation is a PFIC if at least 75% of its gross incomefor the taxable year is passive income or if at least 50% of its assets for thetaxable year produce passive income or are held for the production of passiveincome.  In general, passive income forthis purpose means, with certain designated exceptions, dividends, interest,rents, royalties (other than certain rents and royalties derived in the activeconduct of trade or business), annuities, net gains from dispositions ofcertain assets, net foreign currency gains, income equivalent to interest,income from notional principal contracts and payments in lieu ofdividends.  The determination  of whether a foreign corporation is a PFIC isa factual determination made annually and is therefore subject to change.  Subject to exceptions pursuant to certainelections that generally require the payment of tax, once stock in a foreigncorporation is stock in a PFIC in the hands of a particular shareholder that isa United States person, it remains stock in a PFIC in the hands of thatshareholder.

 

Ifwe are treated as a PFIC, contrary to the tax consequences described in “U.S.Federal Income Tax Considerations--Taxation of Dividends” and “--U.S. FederalIncome Tax Considerations--Taxation of Capital Gains” above, a U.S. holder thatdoes not make an election described in the succeeding two paragraphs would besubject to special rules with respect to (i) any gain realized on asale or other disposition of an ADR (for purposes of these rules, a dispositionof an ADR includes many transactions on which gain or loss is not realizedunder general U.S. federal income tax rules) and (ii) any “excessdistribution” by the Company to the U.S. holder (generally, any distributionduring a taxable year in which distributions to the U.S. holder on the ADRexceed 125% of the average annual taxable distributions (whether actual orconstructive and whether or not out of earnings and profits) the U.S. holderreceived on the ADR during the preceding three taxable years or, if shorter,the U.S. holder’s holding period for the ADR). Under those rules, (i) the gain or excess distribution would beallocated ratably over the U.S. holder’s holding period for the ADR, (ii) theamount allocated to the taxable year in which the gain or excess distributionis realized would be taxable as ordinary income in its entirety and not ascapital gain, would be ineligible for the reduced qualified dividend rates, andcould not be offset by any deductions or losses, and (iii) the amount allocatedto each prior year, with certain exceptions, would be subject to tax at thehighest tax rate in effect for that year, and the interest charge generallyapplicable to underpayments of tax would be imposed in respect of the taxattributable to each of those years.  AU.S. holder who owns an ADR during any year we are a PFIC may have to  file IRS Form 8621.

 

Thespecial PFIC rules described above will not apply to a U.S. holder if theU.S. holder makes a timely election, which remains in effect, to treat theCompany as a “qualified electing fund” (“QEF”) in the first taxable year inwhich the U.S. holder owns an ADR and the Company is a PFIC and if the Companycomplies with certain reporting requirements. Instead, a shareholder of a QEF generally is currently taxable on a prorata share of the Company’s ordinary earnings and net capital gain as ordinaryincome and long-term capital gain, respectively.  Neither that ordinary income nor any actualdividend from the Company would qualify for the 15% maximum tax rate ondividends described above if the Company is a PFIC in the taxable year theordinary income is realized or the dividend is paid or in the preceding taxableyear.  We have not yet determinedwhether, if we are a PFIC, we would make the computations necessary to supplyU.S. holders with the information needed to report income and gain pursuant toa QEF election.  It is, therefore,possible that U.S. holders would not be able to make or retain that election inany year we are a PFIC.  Although a QEFelection generally cannot be revoked, if a U.S. holder made a timely QEFelection for the first taxable year it owned an ADR and the Company is a PFIC(or is treated as having done so pursuant to any of certain elections), the QEFelection will not apply during any later taxable year in which the Company doesnot satisfy the tests to be a PFIC.  If aQEF election is not made in that first taxable year, an election in a lateryear generally will require the payment of tax and interest.

 

Inlieu of a QEF election, a U.S. holder of stock in a PFIC that is consideredmarketable stock could elect to mark the stock to market annually, recognizingas ordinary income or loss each year an amount equal to the difference as ofthe close of the taxable year between the fair market value of the stock andthe U.S. holder’s adjusted basis in the stock. Losses would be allowed only to the extent of net mark-to-market gainpreviously included in income by the U.S. holder under the election for priortaxable years.  A U.S. holder’s adjustedbasis in the ADRs will be adjusted to reflect the amounts included or deductedwith respect to the mark-to-market election. If the mark-to-market election were made, the rules set forth inthe second preceding paragraph would not apply for periods covered by theelection.  A mark-to-market election willnot apply during any later taxable year in which the Company does not satisfythe tests to be a PFIC.  In general, theADRs will be marketable stock if the ADRs are traded, other than in *de minimis* quantities, on at least 15 daysduring each calendar quarter on a national securities exchange that isregistered with the SEC or on a designated national market system or on anyexchange or market that the Treasury Department determines to have rules sufficientto ensure that the market price accurately represents the fair market value ofthe stock**.**  Under current law, the mark-to-marketelection may be available to U.S. holders of ADRs because the ADRs are listedon the Nasdaq Global Market, which constitutes a qualified exchange, althoughthere can be no assurance that the ADRs will be “regularly traded” for purposesof the mark-to-market election.

 

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** **

**Given the complexities of the PFIC rules and theirpotentially adverse tax consequences, U.S. holders of ADRs are urged to consulttheir own tax advisers about the PFIC rules, including the consequences to themof making a QEF election or a mark-to-market election with respect to theordinary shares in the event that the Company is classified as a PFIC for anytaxable year**.

 

**Information Reporting and Backup Withholding**

** **

Dividendspaid on, and proceeds from the sale or other disposition of, an ADR to a U.S.holder generally may be subject to information reporting requirements and maybe subject to backup withholding at the rate of 28% unless the U.S. holderprovides an accurate taxpayer identification number or otherwise establishes anexemption.  The amount of any backupwithholding collected from a payment to a U.S. holder will be allowed as acredit against the U.S. holder’s U.S. federal income tax liability and mayentitle the U.S. holder to a refund, provided certain required information isfurnished to the Internal Revenue Service. A non-U.S. holder generally will be exempt from these informationreporting requirements and backup withholding tax but may be required to complywith certain certification and identification procedures in order to establishits eligibility for exemption.

 

THEDISCUSSION ABOVE IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF ALL TAXCONSIDERATIONS APPLICABLE TO AN INVESTMENT IN ADRs.  HOLDERS AND POTENTIAL HOLDERS ARE URGED TOCONSULT THEIR OWN TAX ADVISERS CONCERNING THE TAX CONSEQUENCES RELEVANT TO THEMIN THEIR PARTICULAR SITUATION.

** **

**Item 10.F       Dividends and Paying Agents**

** **

Nodividends have been paid by the Company or recommended by the directors sincethe end of the previous financial year.

 

**Item 10.G      Statement by Experts**

** **

Not applicable.

 

**Item 10.H      Documents on Display**

** **

Thedocuments concerning the Company which are referred to in this Annual Reportmay be inspected at the offices of the Company at 60-66 Hanover Street, Fitzroy,Victoria 3065 Australia.  Following ourlisting on NASDAQ Global Market in September 2005, we are now subject tothe information requirements of the U.S. Securities Exchange Act of 1934, asamended, and, in accordance therewith, we are required to file reports,including annual reports on Form 20-F, and other information with the U.S.Securities and Exchange Commission in electronic form.  These materials, including this Annual Reportand the exhibits thereto, may be inspected and copied at the Commission’spublic reference room in Washington, D.C. Please call the Commission at 1-800-SEC-0330 for further informationregarding the public reference rooms.  Asa foreign private issuer, we are required to make filings with the Commissionby electronic means.  Any filings we makeelectronically will be available to the public over the Internet at theCommission’s website at http://www.sec.gov. We also maintain a website at www.gtg.com.au.  Information on our website and websiteslinked    to it do not constitute a partof this Annual Report.

 

**Item 10.I        Subsidiary Information**

** **

Thefollowing is a list of the Company’s subsidiaries as at the date of this AnnualReport:

 
| GeneType AG                                 |   | Switzerland         |   | 100  | % |
|---------------------------------------------|--------|---------------------|--------|------|---|
| GeneType  Corporation                       |   | California,  U.S.A. |   | 100  | % |
| GeneType Pty.  Ltd.                         |   | Australia           |   | 100  | % |
| Genetic  Technologies Corporation Pty. Ltd. |   | Australia           |   | 100  | % |
| Frozen Puppies  Dot Com Pty. Ltd.           |   | Australia           |   | 100  | % |
| RareCellect Pty.  Ltd.                      |   | Australia           |   | 100  | % |
| ImmunAid Pty.  Ltd.                         |   | Australia           |   | 69.2 | % |
| Gtech  International Resources Limited      |   | Canada              |   | 75.8 | % |
| AgGenomics Pty.  Ltd.                       |   | Australia           |   | 50.1 | % |

 

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**Item 11.         Quantitative And Qualitative DisclosuresAbout Market Risk**

** **

GeneticTechnologies has exposure to changes in foreign currency exchange rates andinterest rates.

 

Weinvest excess cash in interest-bearing, investment-grade securities and timedeposits in high-quality institutions. We do not utilize derivative financial instruments, derivative commodityinstruments, positions or transactions in any material matter.  Accordingly, we believe that, while theinvestment-grade securities and time-deposits we hold are subject to changes infinancial standing of the issuer of such securities, the principal is notsubject to any material risks arising from changes in interest rates, foreigncurrency exchange rates, commodity prices, equity prices or other marketchanges that affect market risk sensitive instruments.  Since we invest in locations outsideAustralia, we are subject to certain cross-border risks.

 

Weoperate in Australia, and we will be subject to certain foreign currencyexposure.  Historically, currencytranslation gains and losses have been reflected as adjustments to stockholders’equity, while transaction gains and losses have been reflected as components ofincome and loss.  Transaction gains andlosses could be material depending upon changes in the exchange rates betweenthe Australian dollar and the U.S. dollar. A significant amount of our license revenue is denominated in U.S.dollars.

 

Creditrisk represents the accounting loss that would be recognized at the reportingdate if counterparties failed completely to perform as contracted.  Concentrations of credit risk (whether on oroff-balance sheet) that arise from financial instruments exist for groups ofcustomers or counterparties when they have similar economic characteristicsthat would cause their ability to meet contractual obligations to be similarlyaffected by changes in economic or other conditions.  Financial instruments on the balance sheetthat potentially subject the Company to concentration of credit risk consistprincipally of cash and cash equivalents and trade accounts receivable.  The Company places its cash and cashequivalents with quality institutions holding superior credit ratings in orderto limit the degree of credit exposure. The Company has established guidelines relative to credit ratings,diversification and maturities that seek to maintain safety and liquidity.  The Company does not require collateral toprovide credit.  In addition, themajority of the Company’s licensing customers are large, reputableorganizations, which also reduces the risk of credit exposure.  The Company has not entered into anytransactions that would qualify as a financial derivative instrument.

 

AtJune 30, 2008, one customer accounted for 31% ($495,000) of trade accountsreceivable, which related to the testing segment in Australia.  At June 30, 2007, two customersaccounted for 25% ($158,740) and 12% ($75,850), respectively, of trade accountsreceivable, which related to the licensing and genetic testing segments,respectively, in Australia.

 

AtJune 30, 2008, two suppliers accounted for 21% ($267,300) and 18%($227,700), respectively, of trade accounts payable, both of which related tothe research segment in Australia.  At June 30,2007, one supplier accounted for 10% ($81,455) of trade accounts payable, whichrelated to the corporate segment in Australia.

 

In 2008, two customers accountedfor 25% ($3,952,569) and 14% ($2,164,009), respectively, of the Company’s totalrevenue.  In 2007, one customer accountedfor 39% ($5,894,836) of the Company’s total revenue.  In 2006, one customer accounted for 37%($3,730,076) of the Company’s total revenue. All revenues attributable to these customers relate to the licensingsegment in Australia.

 

Exportsales, mainly to the USA, were $10,060,541, $10,476,321 and $3,004,133 in 2008,2007 and 2006, respectively.

 

**Item 12.         Description Of Securities Other ThanEquity Securities**

 

**Item 12.A      Debt Securities**

 

Notapplicable.

 

**Item 12.B      Warrants and Rights**

 

Notapplicable.

 

**Item 12.C      Other Securities**

 

Notapplicable

 

**Item 12.D      American Depositary Shares**

** **

Notapplicable.

 

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**PART II**

** **

**Item 13.         Defaults, Dividend Arrearages andDelinquencies**

** **

Notapplicable.

 

**Item 14.         Material Modifications to The Rights OfSecurity Holders and Use Of Proceeds**

** **

Notapplicable.

 

**Item 15.         Controls and Procedures**

** **

**Item 15.A      Disclosure Controls and Procedures**

** **

Wemaintain disclosure controls and procedures as such term is defined in Rules 13a - 15 (e) and 15 d - 15 (e) under the Securities Exchange Act of1934 (the “Exchange Act”), as amended, that are designed to ensure thatinformation required to be disclosed in the reports that we file or submitunder the Securities Exchange Act of 1934 is recorded, processed, summarizedand reported within the time periods specified in the rules and forms ofthe Securities and Exchange Commission. Disclosure controls and procedures include, without limitation, controlsand procedures designed to ensure that information required to be disclosed inour reports filed or submitted under the Securities Exchange Act of 1934 isaccumulated and communicated to management, including our Chief ExecutiveOfficer and Chief Financial Officer, as appropriate, to allow timely decisionsregarding required disclosure. Disclosure controls and procedures, no matter how well designed andoperated, can only provide reasonable assurance of achieving the desiredcontrol objectives.

 

OurManagement has carried out an evaluation, under the supervision and with theparticipation of our former Chief Executive Officer and current Chief FinancialOfficer, of the effectiveness of our disclosure controls and procedures as of June 30,2008.  On November 19, 2008, ourChief Executive Officer was removed from his position and as a Director of theCompany at the 2008 Annual General Meeting. An international recruitment agent has since been appointed by theCompany to undertake a worldwide search for a replacement Chief ExecutiveOfficer.  Subsequent to the removal ofthe Chief Executive Officer, the Board has worked closely with Management toensure the efficient operation of the Company’s businesses, collectivelyperforming the role of acting CEO.  TheBoard has relied upon the representations of Management and employeesperforming similar functions regarding disclosure controls and procedures forthe period since November 19, 2008. Based on that evaluation, the Board and Chief Financial Officer haveconcluded that such disclosure controls and procedures were effective at thereasonable assurance level as of June 30, 2008.  The Board has resolved that Mr. SidHack, as Chairman of the Company’s Audit Committee, is the most appropriateDirector to sign off on this assessment on behalf of the Board.

 

OurManagement, including our Chief Executive Officer and Chief Financial Officer,does not expect that our disclosure controls and procedures or our internalcontrol over financial reporting will provide absolute assurance that all appropriateinformation will, in fact, be communicated to management to allow timelydecisions to be made or prevent all error and fraud.  A control system, no matter how wellconceived and operated, can provide only reasonable, not absolute, assurancethat the objectives of the control system are met.  Additionally, the design of a control systemmust reflect the fact that there are resource constraints, and the benefit ofcontrols must be considered relative to their costs.  Because of the inherent limitations in allcontrol systems, no evaluation of controls can provide absolute assurance thatall control issues and instances of fraud, if any, within the company have beendetected or that our control system will operate effectively under allcircumstances.  Moreover, the design ofany system of controls is based in part upon certain assumptions about thelikelihood of future events, and there can be no assurance that any design willsucceed in achieving its stated goals under all potential future conditions.

 

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**Item 15.B      Management’s annual report on internalcontrol over financial reporting**

** **

OurManagement is responsible for establishing and maintaining adequate internalcontrol over financial reporting.  TheSecurities Exchange Act of 1934 defines internal control over financialreporting in Rule 13a-15(f) and 15d-15(f) as a process designedby, or under the supervision of, the Company’s principal executive andprincipal financial officers and effected by the Company’s Board of directors,Management and other personnel, to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statementsfor external purposes in accordance with generally accepted accountingprinciples and includes those policies and procedures that:

 

·          Pertainto the maintenance of records that in reasonable detail accurately and fairlyreflect the transactions and dispositions of the assets of the Company;

 

·          Providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of Management and directorsof the Company; and

 

·          Providereasonable assurance regarding prevention or timely detection of unauthorisedacquisition, use or disposition of the company’s assets that could have amaterial effect on the consolidated financial statements.

 

Amaterial weakness is a deficiency, or a combination of deficiencies, ininternal control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the annual financial statements will not beprevented or detected on a timely basis.

 

OurManagement, under the supervision and with the participation of our Board andChief Financial Officer, have assessed the effectiveness of its internalcontrol over financial reporting as of June 30, 2008.  In making this assessment, Management usedthe criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission, or COSO, in Internal Control-Integrated Framework.  As a result of that assessment, Managementidentified the following control deficiencies as of June 30, 2008 thatconstituted material weaknesses:

 

·          Deficiencies in thefinancial statement reporting process of US filing.  In order to address any potential weaknessesin our knowledge in this regard, our senior finance staff are committed toattending targeted SEC reporting courses and subscribing to additionalinformation publications and updates of SEC releases and rule changes andof information about the requirements of the Public Company AccountingOversight Board.  Our CFO has also becomean International Associate of the American Institute of Certified PublicAccountants (AICPA) which assists him in keeping abreast of technical accountingdevelopments in the US.  We have alsomitigated any weakness by conferring and / or hiring outside accountingadvisers with respect to the technical requirements applicable to our financialstatements.

 

·          TheCompany did not maintain an adequate segregation of duties with respect tointernal control over financial reporting. Specifically, the Company did notdesign controls to ensure that the duties and responsibilities related to theauthorization, custody, recordkeeping and reconciliation of transactionsrelated to payables and cash were performed by individuals who had incompatibleroles and responsibilities or were otherwise not monitored by those in chargeof governance.  The Company plansadditional regular reporting to the Board of the potential segregation ofduties conflicts that exist in a smaller business enterprise such as ours andthe impacts of transactions within such areas for the Company.  The efforts to report the potential conflictsand Board’s oversight are intended to be implemented during the year ending June 30,2009.

 

Thematerial weaknesses described above could result in adjustments to the Company’sconsolidated financial statements and disclosures for the year ended June 30,2008 that would result in a material misstatement to the Company’s annualconsolidated financial statements that would not be prevented or detected.

 

Basedupon its assessment, because of the material weaknesses described above, ourManagement has concluded that, as of June 30, 2008, our internal controlover financial reporting is not effective based upon the abovementionedcriteria.

 

ThisAnnual Report does not include an attestation report of the Company’sregistered public accounting firm regarding internal control over financialreporting.  Management’s report was notsubject to attestation by the Company’s registered public accounting firmpursuant to temporary rules of the Securities and Exchange Commission thatpermit the company to provide only Management’s report in this Annual Report.

 

**Item 15.C      Attestation report of the registeredpublic accounting firm**

** **

Notapplicable.

 

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**Item 15.D****     ****Changes in internal control over financial reporting**

 

Inconnection with the audits of our financial years ended June 30,  2007 and 2006, Ernst & Young, theCompany’s independent registered public accounting firm, identified materialweakness in the financial statement close process and knowledge of US GAAP andthe maintenance of adequate segregation of duties.  As the Company converted from US GAAP to IFRSfor the year ended June 30, 2008, the material weakness relating to theknowledge of US GAAP and related financial statement close process has beenremediated.

 

Therewere no other changes in our internal control over financial reporting duringthe period covered by this Annual Report that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

**Item 16.A****     ****Audit Committee Financial Expert**

 

Followingthe resignation of Mr. Robert Edge at the 2006 Annual General Meeting, wedid not have an audit committee financial expert within the meaning of theSarbanes-Oxley Act and related regulations. However, on February 26, 2007, we appointed Mr. DavidCarruthers as a Non-Executive Director who replaced Mr. Edge as Chairmanof the Company’s Audit Committee and who we believe qualified as a financialexpert within the meaning of the Sarbanes-Oxley Act and relatedregulations.  On November 19, 2008, Mr. Carrutherswas removed as a Director of the Company and was replaced as Chairman of theAudit Committee by Mr. Sid Hack  onthat date.  We believe Mr. Hack doesnot qualify as a financial expert within the meaning of the Sarbanes-Oxley Actand related regulations.

 

Recentchanges in Board composition at the Company have resulted in its non-compliancewith the requirements of the Nasdaq and the U.S. Securities and ExchangeCommission that listed companies have an audit committee that is composed of aminimum of three independent directors. At present there are only two independent directors serving on the AuditCommittee and the Company is actively engaged in seeking appropriate candidatesfor appointment to its Board of Directors who also can serve on the AuditCommittee, and who have the necessary financial expertise.

 

**Item 16B.****     ****Code Of Ethics**

 

We have adopted a Code of Ethics(styled Code of Conduct) that applies to all of our Directors and employees,including our principal executive officer, principal financial officer,principal accounting officer or controller. The Code  can be downloaded at ourwebsite (www.gtg.com.au).  Additionally,any person, upon request, can ask for a hard copy or electronic file of suchCode.  If we make any substantiveamendment to the Code of Ethics or grant any waivers, including any implicitwaiver, from a provision of the Code of Ethics, we will disclose the nature ofsuch amendment or waiver on our website. During the year ended June 30, 2008, no such amendment was made orwaiver granted.  Our Board of Directorsis responsible for the corporate governance of the consolidated entity andguides and monitors the business and affairs of Genetic Technologies on behalfof the shareholders by whom they are elected and to whom they areaccountable.  We are required to publisha Corporate Governance Statement annually that accords with the introductionlast year of the Australian SecuritiesExchange Corporate Governance Council’s (the “Council’s”) “Principles of GoodCorporate Governance and Best Practice Recommendations”.  In accordance with the Council’srecommendations, the Corporate Governance Statement must now contain certainspecific information and must disclose the extent to which we have followed theguidelines during the period.  Where arecommendation has not been followed, that fact must be disclosed, togetherwith the reasons for the departure.  TheCompany’s Corporate Governance Statement is now structured with reference to the Corporate Governance Council’sprinciples and recommendations.  Below isan extract from the Company’s most recent Corporate Governance Statement:

 

Asof the date of this Annual Report, the following twelve Corporate Governancedocuments had been adopted by the Board, in addition to the Company’sConstitution which was revised and approved by the shareholders of the Companyin November 2005.  All of thesedocuments are available on the Company’s website: www.gtg.com.au

 

**·**      BoardCharter which defines the role of the Board and that of Management;

 

·      Audit Committee Charter;

 

·      Corporate Governance CommitteeCharter;

 

·      Board Protocol whichclarifies the responsibilities of Directors and the Company’s expectations ofthem;

 

·      Code of Conduct, including aDocument Retention Policy;

 

·      Board Performance EvaluationPolicy;

 

·      Risk and Compliance Policy;

 

·      Continuous DisclosurePolicy;

 

·      Securities Trading Policy;

 

·      Shareholder CommunicationsPolicy; and

 

·      Whistleblower Policy.

 

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**Item 16.C****     ****Principal Accountant Fees and Services**

 

Thefollowing table sets forth the fees billed to us by our Independent RegisteredPublic Accounting Firm, Ernst & Young, during the financial yearsended June 30, 2008 and 2007, respectively:

 
| ** ** | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------|------------|----------|------------|----------|------------|
| Audit fees |       | $        | 177,500    |     | $          | 410,274 |   |
| Tax fees   |       | 38,350   |       | 55,095   |       |
| Total      |       | $        | 215,850    |     | $          | 465,369 |   |

 

Auditfees in the above table are the aggregate fees billed by Ernst & Youngin connection with the audit of our annual financial statements and review ofour semi-annual financial information. Tax fees related to the preparation of the Company’s income tax returns.

 

*Audit Committee Pre-Approval Policies and Procedures*

 

OurBoard of Directors has established pre-approval and procedures for theengagement of its Independent Registered Public Accounting Firm for audit andnon-audit services.

 

TheBoard of Directors reviews the scope of the services to be provided, beforetheir commencement, in order to ensure that there are no independence issuesand the services are not prohibited services, as defined by the Sarbanes-OxleyAct of 2002.

 

**Item 16D.****     ****Exemptions From The Listing Standards For Audit Committees**

 

Notapplicable.

 

**Item 16E.****      ****Purchases Of Equity Securities By The Issuer And AffiliatedPurchasers**

 

Notapplicable.

 

**PART III**

 

**Item 17.****        ****Financial Statements**

 

TheCompany has responded to Item 18 in lieu of responding to this Item.

 

**Item 18.****        ****Financial Statements**

 

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**GENETICTECHNOLOGIES LIMITED**

 

**INDEX TOCONSOLIDATED FINANCIAL STATEMENTS**

 
|                                                                                                                                | **Page** |
|-------------------------------------------------------------------------------------------------------------------------------------|----------|
| Genetic Technologies  Limited - Report of Independent Registered Public Accounting Firm.                                            |     |
|                                                                                                                                |     |
| Genetic Technologies Limited - Consolidated Income  Statements for the years ended June 30, 2008, 2007 and 2006.               | F1       |
|                                                                                                                                |     |
| Genetic Technologies Limited - Consolidated Balance  Sheets as of June 30, 2008 and 2007.                                      | F2       |
|                                                                                                                                |     |
| Genetic Technologies Limited - Consolidated Statements  of Changes in Equity for the years ended June 30, 2008, 2007 and 2006. | F3       |
|                                                                                                                                |     |
| Genetic Technologies Limited - Consolidated Cash Flows  Statements for the years ended June 30, 2008, 2007 and 2006.           | F4       |
|                                                                                                                                |     |
| Genetic Technologies Limited - Notes to Consolidated  Financial Statements.                                                         | F5       |

 

**Item 19.****        ****Exhibits**

 
|   |   | The following documents are filed as exhibits to this  Annual Report on Form 20-F:                                                                                                                                                                                                                                                                                                                      |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 1.1    |   | Constitution of the Registrant. #                                                                                                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 2.1    |   | Deposit Agreement, dated as of January 14, 2002, by  and among Genetic Technologies Limited, The Bank of New York, as Depositary,  and the Owners and Holders of American Depositary Receipts (such agreement is  incorporated herein by reference to the Registration Statement on  Form F-6 relating to the ADSs (File No. 333-14270) filed with the  Commission on January 14, 2002). |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 2.2.   |   | The total indebtedness authorized under any instrument  relating to long term debt of the Company does not exceed 10% of our total  consolidated assets. Any instrument relating to indebtedness will be supplied  to the Commission upon its request.                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.1    |   | Consulting contract with Dr. Stephen Kent for  Technical Review Committee for ImmunAid Pty. Ltd., dated September 14,  2001.+                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.2    |   | Staff Share Plan 2001 dated November 30, 2001. +                                                                                                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.3    |   | License agreement with an effective date of 7  March 2003 between Genetic Technologies Limited and Pyrosequencing AB. +                                                                                                                                                                                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.4    |   | Research license dated as of July 22, 2003 between  Genetic Technologies Limited and University of Sydney, and Agreement to  Assign Intellectual Property dated September 4, 2003. +                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.5    |   | License agreement dated as of August 1, 2003 between  Genetic Technologies Limited and Quest Diagnostics Inc. +                                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.6    |   | License Agreement dated as of December 31, 2003  between Genetic Technologies Limited and TM Bioscience Corporation. +                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.7    |   | License Agreement dated as of February 5, 2004  between Genetic Technologies Limited and Laboratory Corporation of America  Holdings.* ++                                                                                                                                                                                                                                                               |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.8    |   | Settlement and License Agreement dated as of  June 15, 2004 between Genetic Technologies Limited and C.Y. O’Connor  ERADE Village Foundation (incorporating the Immunogenetics Research  Foundation and the Institute of Molecular Genetics and Immunology  Incorporated). +                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                         |
| 4.9    |   | Sponsored Research Agreement dated as of June 15,  2004 between Genetic Technologies Limited and the C.Y. O’Connor ERADE Village  Foundation. +                                                                                                                                                                                                                                                    |

 

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| 4.10   |   | IP Sale and Royalty Agreement dated as of June 15,  2004 between Genetic Technologies Limited and C.Y. O’Connor ERADE Village  Foundation. +                |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                  |
| 4.11   |   | License Agreement dated as of September 17, 2004  between the Company and Genzyme Corporation.* ++                                                               |
|   |   |                                                                                                                                                                  |
| 4.12   |   | License Agreement dated as of September 17, 2004  between the Company and MetaMorphix, Inc. +                                                               |
|   |   |                                                                                                                                                                  |
| 4.13   |   | License Agreement dated as of September 27, 2004  among the Company, MetaMorphix, Inc. and MMI Genomics, Inc. +                                        |
|   |   |                                                                                                                                                                  |
| 4.14   |   | Patent License Agreement with an effective date of  December 1, 2006 between Genetic Technologies Limited and Genosense  Diagnostic GMBH.*+++                    |
|   |   |                                                                                                                                                                  |
| 4.15   |   | Settlement and License Agreement with an effective date  of June 20, 2007 between Genetic Technologies Limited and Monsanto  Company.*+++                        |
|   |   |                                                                                                                                                                  |
| 4.16   |   | License Agreement and Release with an effective date of  June 29, 2007 between Genetic Technologies Limited and Thermo Fisher  Scientific Inc.*+++               |
|   |   |                                                                                                                                                                  |
| 4.17   |   | License Agreement with an effective date of  August 22, 2007 between Genetic Technologies Limited and Monsanto  Company.*+++                                     |
|   |   |                                                                                                                                                                  |
| 4.18   |   | License Agreement with an effective date of  September 28, 2007 between Genetic Technologies Limited and Syngenta  Crop Protection AG.*+++                       |
|   |   |                                                                                                                                                                  |
| 4.19   |   | License Agreement with an effective date of  September 30, 2007 between Genetic Technologies Limited and BioSearch  Technologies Inc.*+++                        |
|   |   |                                                                                                                                                                  |
| 4.20   |   | Share Purchase Agreement with an effective date of  July 22, 2008 between Genetic Technologies Limited and the shareholders  of Frozen Puppies Dot Com Pty. Ltd. |
|   |   |                                                                                                                                                                  |
| 12.01  |   | Section 302 Certification                                                                                                                                        |
|   |   |                                                                                                                                                                  |
| 12.02  |   | Section 302 Certification                                                                                                                                        |
|   |   |                                                                                                                                                                  |
| 13.01  |   | Section 1350 Certification                                                                                                                                       |
|   |   |                                                                                                                                                                  |
| 13.02  |   | Section 1350 Certification                                                                                                                                       |

 

----

*  Certain provisions of this exhibit have beenomitted and filed separately with the Commission pursuant to an application forconfidential treatment under Rule 24b-2 promulgated under the SecuritiesExchange Act of 1934, as amended.

 

+  Previously filed with the Company’sRegistration Statement on Form 20-F (File No. 0-51504), filed withthe Commission on August 19, 2005 and incorporated herein by reference.

 

++  Previously filed with Amendment No. 1 tothe Company’s Registration Statement on Form 20-F (File No. 0-51504),filed with the Commission on August 29, 2005 and incorporated herein byreference.

 

#  Previously filed with the Company’s AnnualReport on Form 20-F (File No. 0-51504), filed with the Commission on December 30,2005 and incorporated herein by reference.

 

+++  Previously filed with the Company’s AnnualReport on Form 20-F (File No. 0-51504), filed with the Commission on December 20,2007 and incorporated herein by reference.

 

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**SIGNATURES**

 

Theregistrant hereby certifies that it meets all of the requirements for filing onForm 20-F and that it has duly caused and authorized the undersigned tosign this Annual Report on its behalf.

 
|                          | GENETIC TECHNOLOGIES LIMITED |
|-------------------------------|------------------------------|
|                          |                         |
|                          |                         |
| Dated: December 30, 2008 | By:                          | /s/ Sidney C. Hack |
|                          |                         | Name: | Sidney C. Hack |
|                          |                         | Title: | Director and Chairman of the Audit Committee |

 

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**Report of Independent RegisteredPublic Accounting Firm**

 

TheBoard of Directors and Shareholders of Genetic Technologies Limited

 

Wehave audited the accompanying consolidated balance sheets of GeneticTechnologies Limited and subsidiaries as of June 30, 2008 and 2007, andthe related consolidated statements of income, shareholders’ equity, and cashflows for each of the three years in the period ended June 30, 2008. Thesefinancial statements are the responsibility of the Company’s management. Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

Weconducted our audits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards require that weplan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. We were not engaged toperform an audit of the Company’s internal control over financial reporting.Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statement presentation.We believe that our audits provide a reasonable basis for our opinion.

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Genetic TechnologiesLimited and subsidiaries at June 30, 2008 and 2007, and the consolidatedresults of their operations and their cash flows for each of the three years inthe period ended June 30, 2008, in conformity with International FinancialReporting Standards as issued by the International Accounting Standards Board.

 
| /s/ Ernst & Young                                                     |   |
|--------------------------------------------------------------------------------|--------|
| Ernst & Young Melbourne,  Victoria, Australia December 24,  2008 |   |

 

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**CONSOLIDATED INCOME STATEMENTS**

For the year ended June 30,2008

 
| **(Australian dollars)**                                                                           | ** ** | **Notes**  | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                                                              | ** ** | ** ** | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** |
| ** **                                                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Revenue from operations**                                                                             |       | 4          |       | 15,702,336 |       | 14,978,819 |       | 10,048,703 |       |
| ** **                                                                                              |       |       |       |       |       |       |       |       |       |
| Other income                                                                                            |       | 5          |       | 276,606    |       | 340,486    |       | 708,411    |       |
| Employee benefits  expenses                                                                             |       | 6          |       | (6,568,966 | )          | (5,556,644 | )          | (5,432,506 | )          |
| Amortisation and  depreciation expenses                                                                 |       | 6          |       | (4,755,155 | )          | (4,602,992 | )          | (4,817,277 | )          |
| Impairment losses  and other write-downs                                                                |       | 6          |       | (2,378,000 | )          | (1,306,960 | )          | (97,500    | )          |
| Genetic testing  expenses                                                                               |       |       |       | (1,599,644 | )          | (1,989,098 | )          | (2,008,546 | )          |
| Contract research  and trial expenses                                                                   |       |       |       | (1,267,748 | )          | (1,247,775 | )          | (1,345,916 | )          |
| Royalties,  license fees and commissions paid                                                           |       |       |       | (889,520   | )          | (580,122   | )          | (177,283   | )          |
| Legal and patent  fees                                                                                  |       |       |       | (873,854   | )          | (748,605   | )          | (1,440,929 | )          |
| Administration  expenses                                                                                |       |       |       | (839,226   | )          | (901,380   | )          | (910,776   | )          |
| Rent and  outgoings                                                                                     |       |       |       | (533,644   | )          | (535,045   | )          | (511,050   | )          |
| Net foreign exchange  losses                                                                            |       |       |       | (254,954   | )          | (317,317   | )          | —     |       |
| Marketing and  promotion expenses                                                                       |       |       |       | (221,644   | )          | (437,087   | )          | (502,353   | )          |
| Withholding tax                                                                                         |       |       |       | (94,524    | )          | (264,391   | )          | (90,500    | )          |
| Finance costs                                                                                           |       | 6          |       | (66,763    | )          | (90,929    | )          | (112,082   | )          |
| Other expenses                                                                                          |       | 6          |       | (1,086,938 | )          | (1,086,662 | )          | (1,218,519 | )          |
|                                                                                                    |       |       |       |       |       |       |       |       |       |
| **Loss before income tax**                                                                              |       |       |       | (5,451,638 | )          | (4,345,702 | )          | (7,908,123 | )          |
| ** **                                                                                              |       |       |       |       |       |       |       |       |       |
| Income tax  expense                                                                                     |       | 7          |       | —     |       | —     |       | —     |       |
|                                                                                                    |       |       |       |       |       |       |       |       |       |
| **Loss for the year**                                                                                   |       |       |       | (5,451,638 | )          | (4,345,702 | )          | (7,908,123 | )          |
|                                                                                                    |       |       |       |       |       |       |       |       |       |
| **Loss is attributable to:**                                                                            |       |       |       |       |       |       |       |       |       |
| ** **                                                                                              |       |       |       |       |       |       |       |       |       |
| Equity holders of  Genetic Technologies Limited                                                         |       |       |       | (5,446,089 | )          | (4,328,543 | )          | (7,918,773 | )          |
| Minority interest                                                                                       |       | 26         |       | (5,549     | )          | (17,159    | )          | 10,650     |       |
|                                                                                                    |       |       |       | (5,451,638 | )          | (4,345,702 | )          | (7,908,123 | )          |
| ** **                                                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **Earnings per share (cents per share)**                                                                | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                                                                              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic loss for  the year attributable to the ordinary equity holders of Genetic Technologies  Limited   |       | 8          |       | (1.5       | )          | (1.2       | )          | (2.2       | )          |
|                                                                                                    |       |       |       |       |       |       |       |       |       |
| Diluted loss for  the year attributable to the ordinary equity holders of Genetic Technologies  Limited |       | 8          |       | (1.5       | )          | (1.2       | )          | (2.2       | )          |

 

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**CONSOLIDATEDBALANCE SHEETS**

As at June 30, 2008

 
| **(Australian dollars)**     | ** ** | **Notes**  | ** ** | **2008**    | ** ** | **2007**    | ** ** |
|-----------------------------------|------------|------------|------------|-------------|------------|-------------|------------|
| ** **                        | ** ** | ** ** | ** ** | **$**       | ** ** | **$**       | ** ** |
| ** **                        | ** ** | ** ** | ** ** | ** **  | ** ** | ** **  | ** ** |
| **ASSETS**                        |       |       |       |        |       |        |       |
| ** **                        |       |       |       |        |       |        |       |
| **Current assets**                |       |       |       |        |       |        |       |
| Cash and cash  equivalents        |       | 9          |       | 12,920,772  |       | 13,333,750  |       |
| Trade and other  receivables      |       | 10         |       | 1,596,738   |       | 646,946     |       |
| Prepayments and  other assets     |       | 11         |       | 857,225     |       | 543,252     |       |
| Performance bond  and deposits    |       | 12         |       | 519,117     |       | 76,898      |       |
|                              |       |       |       |        |       |        |       |
| **Total current assets**          |       |       |       | 15,893,852  |       | 14,600,846  |       |
|                              |       |       |       |        |       |        |       |
| **Non-current assets**            |       |       |       |        |       |        |       |
| Deposits                          |       | 13         |       | —      |       | 450,000     |       |
| Receivables                       |       | 14         |       | —      |       | —      |       |
| Prepayments                       |       |       |       | —      |       | 8,698       |       |
| Available-for-sale  investments   |       | 15         |       | 207,195     |       | 233,330     |       |
| Property, plant  and equipment    |       | 16         |       | 1,703,757   |       | 1,944,379   |       |
| Intangible assets  and goodwill   |       | 17         |       | 6,289,774   |       | 12,211,774  |       |
|                              |       |       |       |        |       |        |       |
| **Total non-current assets**      |       |       |       | 8,200,726   |       | 14,848,181  |       |
| ** **                        |       |       |       |        |       |        |       |
| **Total assets**                  |       |       |       | 24,094,578  |       | 29,449,027  |       |
| ** **                        |       |       |       |        |       |        |       |
| **LIABILITIES**                   |       |       |       |        |       |        |       |
| ** **                        |       |       |       |        |       |        |       |
| **Current liabilities**           |       |       |       |        |       |        |       |
| Trade and other  payables         |       | 18         |       | 1,786,412   |       | 1,563,652   |       |
| Interest-bearing  liabilities     |       | 19         |       | 111,117     |       | 476,989     |       |
| Deferred revenue                  |       | 20         |       | 138,941     |       | 321,317     |       |
| Withholding tax  payable          |       |       |       | 326,361     |       | 324,837     |       |
| Provisions                        |       | 21         |       | 684,171     |       | 561,968     |       |
|                              |       |       |       |        |       |        |       |
| **Total current liabilities**     |       |       |       | 3,047,002   |       | 3,248,763   |       |
| ** **                        |       |       |       |        |       |        |       |
| **Non-current liabilities**       |       |       |       |        |       |        |       |
| Interest-bearing  liabilities     |       | 22         |       | 187,082     |       | 46,978      |       |
| Provisions                        |       | 21         |       | 75,421      |       | 50,477      |       |
|                              |       |       |       |        |       |        |       |
| **Total non-current liabilities** |       |       |       | 262,503     |       | 97,455      |       |
| ** **                        |       |       |       |        |       |        |       |
| **Total liabilities**             |       |       |       | 3,309,505   |       | 3,346,218   |       |
| ** **                        |       |       |       |        |       |        |       |
| **Net assets**                    |       |       |       | 20,785,073  |       | 26,102,809  |       |
|                              |       |       |       |        |       |        |       |
| **EQUITY**                        |       |       |       |        |       |        |       |
| ** **                        |       |       |       |        |       |        |       |
| Contributed  equity               |       | 23         |       | 70,243,996  |       | 70,243,996  |       |
| Reserves                          |       | 24         |       | 1,588,804   |       | 1,456,895   |       |
| Accumulated  losses               |       | 25         |       | (51,189,189 | )          | (45,743,100 | )          |
|                              |       |       |       |        |       |        |       |
| Parent entity  interest           |       |       |       | 20,643,611  |       | 25,957,791  |       |
|                              |       |       |       |        |       |        |       |
| Minority  interests               |       | 26         |       | 141,462     |       | 145,018     |       |
|                              |       |       |       |        |       |        |       |
| **Total equity**                  |       |       |       | 20,785,073  |       | 26,102,809  |       |

 

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**CONSOLIDATEDSTATEMENTS OF CHANGES IN EQUITY**

For the year ended June 30,2008

 
| ** **                                        | ** ** | **Attributable to Members of Genetic Technologies Limited** | ** ** | ** **   | ** ** | ** **              | ** ** |
|---------------------------------------------------|------------|-------------------------------------------------------------------------------------------|------------|--------------|------------|-------------------------|------------|
| **(Australian  dollars)**                         | ** ** | **Contributed  equity**                                                                   | ** ** | **Reserves** | ** ** | **Accumulated  losses** | ** ** | **Parent  interests** | ** ** | **Minority  interests** | ** ** | **Total equity** | ** ** |
|                                              | ** ** | **$**                                                                                     | ** ** | **$**        | ** ** | **$**                   | ** ** | **$** | ** ** | **$** | ** ** | **$** | ** ** |
|                                              | ** ** | ** **                                                                                | ** ** | ** **   | ** ** | ** **              | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| **At 30 June 2005**                          |       | 70,235,396                                                                                |       | 779,101      |       | (33,495,784             | )          | 37,518,713 |   | 164,526 |   | 37,683,239 |   |
| Currency  translation differences                 |       | —                                                                                    |       | 26,548       |       | —                  |       | 26,548 |   | — |   | 26,548 |   |
| Loss for the year                                 |       | —                                                                                    |       | —       |       | (7,918,773              | )          | (7,918,773 | ) | 10,650 |   | (7,908,123 | ) |
| Total recognised  income and expense for the year |       | —                                                                                    |       | 26,548       |       | (7,918,773              | )          | (7,892,225 | ) | 10,650 |   | (7,881,575 | ) |
| Issue of ordinary  shares                         |       | 8,600                                                                                     |       | —       |       | —                  |       | 8,600 |   | — |   | 8,600 |   |
| Share-based  payments                             |       | —                                                                                    |       | 431,875      |       | —                  |       | 431,875 |   | — |   | 431,875 |   |
| **At 30 June 2006**                          |       | 70,243,996                                                                                |       | 1,237,524    |       | (41,414,557             | )          | 30,066,963 |   | 175,176 |   | 30,242,139 |   |
| Currency  translation differences                 |       | —                                                                                    |       | (38,535      | )          | —                  |       | (38,535 | ) | (12,999 | ) | (51,534 | ) |
| Loss for the year                                 |       | —                                                                                    |       | —       |       | (4,328,543              | )          | (4,328,543 | ) | (17,159 | ) | (4,345,702 | ) |
| Total recognised  income and expense for the year |       | —                                                                                    |       | (38,535      | )          | (4,328,543              | )          | (4,367,078 | ) | (30,158 | ) | (4,397,236 | ) |
| Share-based  payments                             |       | —                                                                                    |       | 257,906      |       | —                  |       | 257,906 |   | — |   | 257,906 |   |
| **At 30 June 2007**                          |       | 70,243,996                                                                                |       | 1,456,895    |       | (45,743,100             | )          | 25,957,791 |   | 145,018 |   | 26,102,809 |   |
| Currency  translation differences                 |       | —                                                                                    |       | (32,624      | )          | —                  |       | (32,624 | ) | (9,161 | ) | (41,785 | ) |
| Share of issued  capital                          |       | —                                                                                    |       | —       |       | —                  |       | — |   | 11,154 |   | 11,154 |   |
| Loss for the year                                 |       | —                                                                                    |       | —       |       | (5,446,089              | )          | (5,446,089 | ) | (5,549 | ) | (5,451,638 | ) |
| Total recognised  income and expense for the year |       | —                                                                                    |       | (32,624      | )          | (5,446,089              | )          | (5,478,713 | ) | (3,556 | ) | (5,482,269 | ) |
| Share-based  payments                             |       | —                                                                                    |       | 164,533      |       | —                  |       | 164,533 |   | — |   | 164,533 |   |
| **At 30 June 2008**                          |       | 70,243,996                                                                                |       | 1,588,804    |       | (51,189,189             | )          | 20,643,611 |   | 141,462 |   | 20,785,073 |   |

 

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**CONSOLIDATED CASH FLOW STATEMENTS**

For the year ended June 30,2008

 
| **(Australian dollars)**                                   | ** ** | **Notes**  | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2006**    | ** ** |
|-----------------------------------------------------------------|------------|------------|------------|-------------|------------|-------------|------------|-------------|------------|
| ** **                                                      | ** ** | ** ** | ** ** | **$**       | ** ** | **$**       | ** ** | **$**       | ** ** |
| ** **                                                      | ** ** | ** ** | ** ** | ** **  | ** ** | ** **  | ** ** | ** **  | ** ** |
| **Cash flows provided by / (used in) operating activities**     |       |       |       |        |       |        |       |        |       |
| Receipts from  customers                                        |       |       |       | 12,961,170  |       | 14,541,621  |       | 7,537,611   |       |
| Payments to  suppliers and employees                            |       |       |       | (13,642,885 | )     | (12,723,248 | )          | (15,067,011 | )          |
| Interest received                                               |       |       |       | 919,447     |       | 489,824     |       | 926,777     |       |
| Other income                                                    |       |       |       | 217,076     |       | 379,978     |       | 757,383     |       |
| Finance costs                                                   |       |       |       | (32,038     | )          | (90,929     | )          | (112,082    | )          |
|                                                            |       |       |       |        |       |        |       |        |       |
| **Net cash flows provided by / (used in) operating activities** |       | 9          |       | 422,770     |       | 2,597,246   |       | (5,957,322  | )          |
| ** **                                                      |       |       |       |        |       |        |       |        |       |
| **Cash flows provided by / (used in) investing activities**     |       |       |       |        |       |        |       |        |       |
| Proceeds from the  sale of plant and equipment                  |       |       |       | 70,611      |       | —      |       | 4,469       |       |
| Proceeds from the  sale of shares                               |       |       |       | —      |       | 332,709     |       | —      |       |
| Purchases of  plant and equipment                               |       |       |       | (118,010    | )          | (158,699    | )          | (159,716    | )          |
| Advances to  unrelated parties                                  |       |       |       | —      |       | (80,000     | )          | —      |       |
|                                                            |       |       |       |        |       |        |       |        |       |
| **Net cash flows provided by / (used in) investing activities** | ** ** | ** ** |       | (47,399     | )          | 94,010      | )          | (155,247    | )          |
| ** **                                                      | ** ** | ** ** |       |        |       |        |       |        |       |
| **Cash flows used in financing activities**                     |       |       |       |        |       |        |       |        |       |
| Repayment of hire  purchase principal                           |       |       |       | (528,899    | )          | (502,505    | )          | (450,892    | )          |
|                                                            |       |       |       |        |       |        |       |        |       |
| **Net cash flows used in financing activities**                 |       |       |       | (528,899    | )          | (502,505    | )          | (450,892    | )          |
| ** **                                                      |       |       |       |        |       |        |       |        |       |
| **Net increase / (decrease) in cash and cash equivalents**      |       |       |       | (153,528    | )          | 2,188,751   | )          | (6,563,461  | )          |
| ** **                                                      |       |       |       |        |       |        |       |        |       |
| Cash and cash  equivalents at beginning of year                 |       |       |       | 13,783,750  |       | 11,885,247  |       | 18,414,017  |       |
|                                                            |       |       |       |        |       |        |       |        |       |
| Net foreign  exchange difference                                |       |       |       | (259,450    | )          | (290,248    | )          | 34,691      |       |
|                                                            |       |       |       |        |       |        |       |        |       |
| **Cash and cash equivalents at end of year**                    |       | 9          |       | 13,370,772  |       | 13,783,750  |       | 11,885,247  |       |

 

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**NOTES TO THE FINANCIAL STATEMENTS**

Forthe year ended June 30, 2008

 

**1.     CORPORATEINFORMATION**

 

TheFinancial Report of Genetic Technologies Limited (the “Company”) for the yearended June 30, 2008 was authorised for issue in accordance with aresolution of the Directors dated August 27, 2008.  Genetic Technologies Limited is incorporatedin Australia and is a company limited by shares.  The Company’s ordinary shares are publiclytraded on the Australian Securities Exchange under the symbol GTG and, viaLevel II American Depositary Receipts, on the NASDAQ Global Market under theticker GENE.

 

**2.     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

 

**(a)   Basis ofpreparation**

 

Thisgeneral purpose Financial Report has been prepared in accordance withInternational Financial Reporting Standards (“IFRS”) and other authoritativepronouncements of the International Accounting Standards Board (“IASB”).

 

*Compliance with IFRS*

 

TheFinancial Report complies with both IFRS, as issued by the InternationalAccounting Standards Board, and the Australian Accounting Standards, as issuedby the Australian Accounting Standards Board.

 

Theconsolidated entity changed its accounting policies on July 1, 2005 tocomply with IFRS.  The transition to IFRSis accounted for in accordance with *IFRS 1:First-Time Adoption of International Financial Reporting Standards* (“IFRS1”), with July 1, 2004 as the date of transition.

 

*Historical cost convention`*

 

Thesefinancial statements have been prepared under the historical cost convention,as modified by the measurement of certain available-for-sale investments atfair value.

 

*Significant accounting estimates*

 

Thepreparation of financial statements requires the use of certain criticalaccounting estimates.  It also requiresManagement to exercise its judgement in the process of applying the Group’saccounting policies.  The areas involvinga higher degree of judgement or complexity, or areas where assumptions and estimatesare significant to the financial statements, are disclosed in Note 3.

 

**(b)   New accountingstandards and interpretations**

 

Inrespect of the year ended June 30, 2008, the Group has adopted *IFRS 7 Financial Instruments; Disclosures*,together with all consequential amendments which became applicable on January 1,2007.  The adoption of this standard hasonly affected the disclosure in these financial statements.  There has been no affect on profit and lossor the financial position of the Group.

 

CertainInternational Financial Reporting Standards and interpretations have beenissued or amended that are not mandatory for the June 30, 2008 reportingperiod.  The assessment of the impact ofthese standards and interpretations which are considered to be of relevance tothe Group and the parent entity is set out below.

 

·             *Revised International Accounting Standard 23: BorrowingCosts*

 

IAS23 (Revised) is applicable to annual reporting periods beginning on or after January 1,2009.  These amendments to IAS 23 requirethat all borrowing costs associated with a qualifying asset becapitalised.  The Group has notdetermined the extent of the impact this amendment will have on the financialstatements of the Group.

 

·             *Revised International Accounting Standard 1: Presentation ofFinancial Statements*

 

IAS1 (Revised) is applicable to annual reporting periods beginning on or after January 1,2009.  This Standard introduces astatement of comprehensive income.  Otherrevisions include impacts on the presentation of items in the statement ofchanges in equity, new presentation requirements for restatements orreclassifications of items in the financial statements, changes in thepresentation requirements for dividends and changes to the titles of thefinancial statements.  These amendmentsare only expected to affect the presentation of the Group’s Financial Reportand will not have a direct impact on the measurement and recognition of amountsdisclosed in the Financial Report.  TheGroup has not determined at this stage whether to present a single statement ofcomprehensive income or two separate statements.

 

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**2.     SUMMARY OF SIGNIFICANTACCOUNTING POLICIES (cont.)**

 

**(b)   New****accounting****standards and interpretation (cont.)**

 

·             *Revised IFRS 2: Share-based Payments: Vesting Conditions and Cancellations*

 

IFRS2 (Revised) is applicable to annual reporting periods beginning on or after January 1,2009.  The amendments clarify thedefinition of “vesting conditions”, introducing the term “non-vestingconditions” for conditions other than vesting conditions as specificallydefined and prescribe the accounting treatment of an award that is effectivelycancelled because a non-vesting condition is not satisfied.  The Group has share-based paymentarrangements that may be affected by these amendments.  However, the Group has not yet determined theextent of the impact, if any.

 

·             *Improvements to IFRSs*

 

Certainimprovements to IFRS that are applicable to annual reporting periods beginningon or after January 1, 2009 except for amendments to IFRS 5, which areeffective from July 1, 2009.  Theimprovements project is an annual project that provides a mechanism for makingnon-urgent, but necessary, amendments to IFRSs. The IASB has separated the amendments into two parts: Part 1 dealswith changes the IASB identified resulting in accounting changes; Part IIdeals with either terminology or editorial amendments that the IASB believeswill have minimal impact.  The Group hasnot yet determined the extent of the impact of the amendments, if any.

 

·             *Revised IFRS 3: Business Combinations*

 

IFRS 3 (Revised) is applicable to annual reportingperiods beginning on or after July 1, 2009.  The revised standard introduces a number ofamendments to the accounting for business combinations, including: requiringacquisition costs to be expensed immediately; the fair value measurement ofcontingent consideration to be recognised in the balance sheet at acquisitiondate with subsequent changes reflected in the income statement; it providesfurther guidance on determining the fair value of certain assets andliabilities; as well as other changes. The majority of these changes will apply prospectively.

 

Asthis standard will mainly only impact business combinations entered into after July 1,2009, the Group has not yet fully assessed the impact of this standard,including which of the available accounting policy options it will adopt.

 

TheGroup has entered into a business combination during the financial year ended June 30,2009 (Note 39).  However, the Group hasnot yet assessed the impact of early adoption, including which accountingpolicy to adopt.

 

·             *Revised International Accounting Standards 27: Consolidatedand Separate Financial Statements*

 

IAS27 (Revised) is applicable to annual reporting periods beginning on or after July 1,2009.  Under the revised standard, achange in the ownership interest of a subsidiary (that does not result in lossof control) will be accounted for as an equity transaction.  If the Group changes its ownership interestin existing subsidiaries in future, the change will be accounted for as anequity transaction.  This will have noimpact on goodwill, nor will it give rise to a gain or loss in the Group’sincome statement.

 

Theseare the only changes which are expected to be of relevance to the Group.

 

**(c)****         ****Basis of consolidation**

 

Theconsolidated financial statements comprise the financial statements of GeneticTechnologies Limited and its subsidiaries (collectively the “Group”).  The financial statements of subsidiaries areprepared for the same reporting period as the parent, using consistentaccounting policies.  Adjustments aremade to bring into line any dissimilar accounting policies that may exist.  All intercompany balances and transactions,including unrealised profits arising from intra-group transactions, have beeneliminated in full.  Unrealised lossesare eliminated unless costs cannot be recovered.

 

Subsidiariesare consolidated from the date on which control is transferred to the Group andcease to be consolidated from the date on which control is transferred out ofthe Group.  Where there is loss ofcontrol of a subsidiary, the consolidated financial statements include theresults for the part of the reporting period during which Genetic TechnologiesLimited has control.  Minority interestsrepresent the interests not held by the Group in Gtech International ResourcesLimited, ImmunAid Pty. Ltd. and AgGenomics Pty. Ltd.

 

**(d)   Earnings per share**

 

BasicEPS is calculated as the net loss attributable to members divided by theweighted average number of ordinary shares.

 

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**2.     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(e)   Foreign currencytranslation**

 

Boththe functional and presentation currency of Genetic Technologies Limited andits Australian subsidiaries is the Australian dollar (AUD).  Transactions in foreign currencies areinitially recorded in the functional currency at the exchange rates ruling atthe date of the transaction.  Monetaryassets and liabilities which are denominated in foreign currencies areretranslated at the rate of exchange ruling at the balance sheet date.  All differences are taken to the incomestatement.

 

Non-monetaryitems that are measured in terms of historical cost in a foreign currency aretranslated using the exchange rate ruling at the date of the initialtransaction.  Non-monetary items measuredat fair value in a foreign currency are translated using the exchange ratesruling at the date when the fair value was determined.

 

Thefunctional currencies of the Company’s three overseas subsidiaries are asfollows:

 

GtechInternational Resources Limited – Canadian dollars (CAD)

GeneType AG – Swiss francs (CHF)

GeneTypeCorporation – United States dollars (USD)

 

Asat the reporting date, the assets and liabilities of these overseassubsidiaries are translated into the presentation currency of GeneticTechnologies Limited at the rate of exchange ruling at the balance sheet dateand the income statements are translated at the weighted average exchange ratesfor the period.  The exchange differencesarising on the retranslation are taken directly to a separate component ofequity.  On disposal of a foreign entity,the deferred cumulative amount recognised in equity relating to that particularforeign operation is recognised in the income statement.

 

**(f)    Fair valueestimation**

 

Thefair value of financial instruments that are not traded in an active market(for example, non-listed equity securities classified as available-for-saleassets) is determined using valuation techniques, including the last price atwhich shares were issued to third parties, where amounts are reliablymeasured.  The Group uses a variety ofmethods and makes assumptions that are based on market conditions existing ateach balance date.  Information includingquoted market prices and details of recent capital raisings is used todetermine fair value for these remaining financial instruments.  Available-for-sale investments are measuredat approximate market value, where fair value cannot be reliablydetermined.  The carrying value lessimpairment provision of trade receivables are assumed to approximate their fairvalues due to their short-term nature.

 

**(g)   Segment reporting**

 

An *operating segment* is a component of theGroup:

 

·                  that engages in business activities from which it mayearn revenues and incur expenses (including revenues and expenses relating totransactions with other components of the Group);

 

·                  whose operating results are regularly reviewed by theGroup’s chief operating decision maker to make decisions about resources to beallocated to the segment and assess its performance; and

 

·                  for which discrete financial information is available.

 

TheGroup elected to early adopt *IFRS 8: SegmentReporting* as from July 1, 2006.

 

**(h)   Revenue recognition**

 

Revenuesare recognised to the extent that it is probable that the economic benefitswill flow to the entity and the revenues can be reliably measured.  Revenues are recognised at the fair value ofthe consideration received or receivable net of the amounts of goods andservices tax (GST).  The followingspecific recognition criteria must also be met before revenue is recognised:

 

*License fees received*

 

Licensefee income is recorded on the execution of a binding agreement where the Grouphas no future obligations, income is fixed and determinable, there is nospecific term clause, and collection is reasonably assured.  The Group does not grant refunds to itscustomers.  Refer also to Note 2(y).

 

*Rendering of services*

 

Revenuesfrom the rendering of services are recognised when the services are providedand the fee for the services is recoverable. Service arrangements are of short duration (in most cases less thanthree months).

 

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**2.****             ****SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(h)****        ****Revenue recognition (cont.)**

 

*Royalties and annuities received*

 

TheCompany licenses the use *of* itspatented genetic technologies.  Royaltiesand annuities arising from these licenses are recognised when earned inaccordance with the substance of the agreement, in cases where no futureperformance is required by the Company, and collection is reasonably assured.

 

*Interest received*

 

Revenueis recognised as the interest accrues using the effective interest method.  Interest charged on loans to related partiesis charged on commercial and arm’s-length terms and conditions.

 

*Research and development grants received*

 

TheCompany receives non-*refundable*grants that assist the Company to fund specific research and developmentprojects.  These grants generally providefor the *reimbursement* of approvedcosts incurred as defined in the various agreements.  Government grants are recorded as otherincome when they become receivable, i.e. when key milestones set within eachagreement are achieved and accepted by all parties to the grant, no performanceobligation remains and collectibility is reasonably assured.

 

**(i)    Share-basedpayment transactions**

 

TheGroup provides benefits to employees of the Group in the form of share-basedpayment transactions, whereby employees render services and receive rights overshares (“equity-settled transactions”). There is currently a Staff Share Plan in place to provide these benefitsto senior executives, consultants and employees.  The cost of these equity-settled transactionsis measured by reference to the fair value at the date they are granted.  The fair value is determined by an externalvaluer using a Black-Scholes option pricing model.

 

Invaluing equity-settled transactions, no account is taken of any performanceconditions.  The cost of equity-settledtransactions is recognised, together with a corresponding increase in equity,over the period in which the relevant vesting conditions are fulfilled, endingon the date that the relevant employees become fully entitled to the award (“vestingdate”).  The cumulative expenserecognised for equity-settled transactions at each reporting date until vestingdate reflects (i) the extent to which the vesting period has expired; and (ii) thenumber of awards that, in the opinion of the Directors of the Group, willultimately vest.  This opinion is formedbased on the best information available at balance date.

 

Noexpense is recognised for any awards that do not ultimately vest.  Where the terms of an equity-settled awardare modified, as a minimum an expense is recognised as if the terms had notbeen modified.  In addition, an expenseis recognised for any increase in the value of the transaction as a result ofthe modification, as measured at the date of modification.  Where an equity-settled award is cancelled,it is treated as if it had vested on the date of cancellation, and any expensenot yet recognised for the award is recognised immediately.  However, if a new award is substituted forthe cancelled award, and designated as a replacement award on the date that itis granted, the cancelled and new award are treated as if they were amodification of the original award, as described in the previousparagraph.  Where appropriate, thedilutive effect of outstanding options is reflected as additional sharedilution in the computation of diluted earnings per share.

 

**(j)****           ****Income tax**

 

The income tax expense or revenue for the period isthe tax payable on the current period’s taxable income based on the nationalincome tax rate for each jurisdiction adjusted by changes in deferred taxassets and liabilities attributable to temporary differences and unused taxlosses.  Deferred income tax is providedin full, using the liability method, on temporary differences arising betweenthe tax bases of assets and liabilities and their carrying amounts in theconsolidated financial statements. However, the deferred income tax is not accounted for if it arises frominitial recognition of an asset or liability in a transaction other than abusiness combination that, at the time of the transaction, affects neither accountingnor taxable profit or loss.  Deferredincome tax is determined using tax rates (and laws) that have been enacted orsubstantially enacted by the balance sheet date and are expected to apply whenthe related deferred income tax asset is realised or the deferred income taxliability is settled.  Deferred taxassets are recognised for deductible temporary differences and unused taxlosses only if it is probable that future taxable amounts will be available toutilise those temporary differences and losses.

 

Deferredtax liabilities and assets are not recognised for temporary differences betweenthe carrying amount and tax bases of investments in controlled entities wherethe parent entity is able to control the timing of the reversal of thetemporary differences and it is probable that the differences will not reversein the foreseeable future.  Deferred taxassets and liabilities are offset when there is a legally enforceable right tooffset current tax assets and liabilities and when the deferred tax balancesrelate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has alegally enforceable right to offset and intends either to settle on a netbasis, or to realise the asset and settle the liability simultaneously.  Current and deferred tax balancesattributable to amounts recognised directly in equity are also recogniseddirectly in equity.

 

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**2.****             ****SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(j)****           ****Income tax (cont.)**

 

*Tax consolidationlegislation*

 

Genetic Technologies *Limited*and its wholly-owned Australian-resident subsidiaries have implemented the taxconsolidation legislation.  The headentity, Genetic Technologies Limited, and the subsidiaries in the taxconsolidated group account for their own current and deferred tax amounts.  These tax amounts are measured as if eachentity in the tax consolidated group continues to be a stand alone taxpayer inits own right.

 

In addition to its own current and deferred taxamounts, Genetic Technologies Limited also recognises the current taxliabilities (or assets) and the deferred tax assets arising from unused taxlosses and unused tax credits assumed from subsidiaries in the tax consolidatedgroup.

 

Assets or liabilities arising *under* tax funding agreements with the taxconsolidated entities are recognised as amounts receivable from or payable toother entities in the Group.  Detailsabout the tax funding agreement are disclosed in Note 7.  Any difference between the amounts assumedand amounts receivable or payable under the tax funding agreements arerecognised as a contribution to (or distribution from) wholly-owned taxsubsidiaries.

 

**(k)****       ****Withholding tax**

 

TheGroup generates *revenues* from the granting of licenses toparties resident in overseas countries. Such revenues may be subject to the deduction of local withholdingtax.  In certain cases, these revenues arepaid to the Group without appropriate withholding tax having been deducted.  Accordingly, the Group recognises a provisionin respect of the Directors’ best estimate of the amounts payable.

 

**(l)    Other taxes**

 

Revenues,expenses and *assets* are recognised net of the amount of Goods and Services Tax(GST) except where the GST incurred on a purchase of goods and services is notrecoverable from the taxation authority, in which case the GST is recognised aspart of the cost of acquisition of the asset or as part of the expense item asapplicable; and receivables and payables are stated with the amount of GSTincluded.  The net amount of GSTrecoverable from, or payable to, the taxation authority is included as part ofreceivables or payables in the balance sheet.

 

Cashflows are included in *the* cash flow statement on a grossbasis and the GST component of cash flows arising from investing and financingactivities, which is recoverable from, or payable to, the taxation authorityare classified as operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverablefrom, or payable to, the taxation authority.

 

**(m)****     ****Cash and cash equivalents**

 

Cashand short-term deposits in the balance sheet comprise cash at bank and in handand short-term deposits with an original maturity of three months or less.  For the purposes of the cash flow statement,cash and cash equivalents consist of cash and cash equivalents as definedabove.  Cash at bank earns interest atfloating rates based on daily bank deposit rates.  Short-term deposits are made forvarying periods of between one day and three months, depending on the immediatecash requirements of the Group, and earn interest at the respective short-termdeposit rates.

 

**(n)   Trade and otherreceivables**

 

Tradereceivables, which are non-interest bearing and generally have terms of between30 to 90 days, are recognised and carried at original invoice amount less anallowance for any uncollectible amounts. An allowance for doubtful debts is made when there is objective evidencethat a receivable is impaired.  Suchevidence includes an assessment of the debtor’s ability and willingness to paythe amount due.  The amount of theallowance/impairment loss is measured as the difference between the carryingamount of the trade receivables and the estimated future cash flows expected tobe received from the relevant debtors. No impairment charge has been recognised as an expense for the currentyear.  Details regarding interest rateand credit risk of current receivables are disclosed in Note 37.

 

**(o)****         ****Consumables**

 

Consumablesprincipally comprise laboratory and other supplies and are valued at the lowerof cost and net realizable value. Consumable costs are recognised as the purchase price of items fromsuppliers plus freight inwards and any applicable landing charges.  Costs are assigned on the basis of weightedaverage costs.

 

**(p)****         ****Restricted security deposits**

 

Restrictedsecurity deposits include cash deposits held as security for the performance ofcertain contractual obligations.

 

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**2.     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(q)   Investments andother financial assets**

 

Allinvestments are initially recognised at cost, being the fair value of theconsideration given plus directly attributable transaction costs.  After initial recognition, investments insubsidiaries are carried at cost, less any impairment disclosed in the separatefinancial statements of Genetic Technologies Limited.  Other investments, which are classified asavailable-for-sale, are measured at fair value if this can reliably bedetermined or at cost where fair value cannot be reliably determined.  Gains or losses on available-for-saleinvestments are recognised as a separate component of equity until theinvestment is sold, or otherwise disposed of, or until the investment isdetermined to be impaired, at which time the cumulative gain or loss previouslyreported in equity is included in the income statement.

 

*Available-for-sale investments*

 

Available-for-saleinvestments consist of investments in ordinary shares which have no fixed maturitydate or coupon rate.  The fair value ofthe unlisted available-for-sale investments has been estimated using valuationtechniques based on assumptions that are not supported by observable marketprices or rates.  Management believes the estimatedfair values (where reliably measured) resulting from the valuation techniquesand recorded in the balance sheet are reasonable and the most appropriate atthe balance sheet date.  Any relatedchanges in fair values are directly recorded in equity.  Available-for-sale investments are measuredat approximate market value, where fair value cannot be reliably determined.

 

**(r)   Property, plant andequipment**

 

Plantand equipment is stated at cost less accumulated depreciation and anyimpairment in value.  Depreciation iscalculated on either a straight-line or diminishing value basis over theestimated useful life of the respective asset as follows:

 

Laboratoryequipment – 3 to 5 years

Computerequipment – 2 to 5 years

Officeequipment – 2 to 5 years

Equipmentunder hire purchase – 3 years

Leaseholdimprovements – lease term, being between 4 and 10 years

 

Costsrelating to day-to-day servicing of any item of property, plant and equipment,which may include the cost of small parts, are recognised in profit or loss asincurred.  The cost of replacing largerparts of some items of property, plant and equipment are capitalized whenincurred and depreciated over the period until their next scheduledreplacement.

 

**(s)   Intangible assets**

 

*Patents*

 

Patentsheld by the Group are used in the licensing, testing and research areas and arecarried at cost and amortised on a straight-line basis over their useful lives,being from 5 to 10 years.  External costsincurred in filing and protecting patent applications, for which no futurebenefit is reasonably assured, are expensed as incurred.

 

*Research costs*

 

Costsrelating to research activities are expensed as incurred.

 

**(t)    Goodwill**

 

Goodwillon acquisition is initially measured at cost, being the excess of the cost ofthe business combination over the acquirer’s interest in the net fair value ofthe identifiable assets, liabilities and contingent liabilities.  Following its initial recognition, goodwillis measured at cost less any accumulated impairment losses.  Goodwill is not amortised but is reviewed forimpairment at each reporting date, or more frequently if events or changes incircumstances indicate that the carrying value may be impaired.  Impairment is determined by assessing therecoverable amount of the cash-generating unit to which the goodwillrelates.  Where the recoverable amount ofthe cash-generating unit is less than the carrying amount, an impairment lossis recognised.

 

Wheregoodwill forms part of a cash-generating unit and part of the operation withinthat unit is disposed of, the goodwill associated with the operation disposedof is included in the carrying amount of the operation when determining thegain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis ofthe relative values of the operation disposed of and the portion of thecash-generating unit retained.  For thepurpose of impairment testing, goodwill acquired in a business combination is,from the acquisition date, allocated to each of the Group’s cash-generatingunits, or groups of cash-generating units, that are expected to benefit fromthe synergies of the combination, irrespective of whether other assets orliabilities of the Group are assigned to those units or groups of units.  Each unit or group of units to which thegoodwill is so allocated represents the lowest level within the Group at whichthe goodwill is monitored for internal management purposes; and is not largerthan an operating segment in accordance with *IFRS8 Operating Segments*.

 

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**2.     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(u)   Impairment ofassets (other than goodwill)**

 

TheGroup assesses at each reporting date whether there is an indication that anasset may be impaired.  If any suchindication exists, the Group makes an estimate of the asset’s recoverableamount.  An asset’s recoverable amount isthe higher of its fair value less costs to sell and its value in use and isdetermined for an individual asset, unless the asset does not generate cashinflows that are largely independent of those from other assets or groups ofassets and the asset’s value-in-use cannot be estimated to be close to its fairvalue.  In such cases, the asset istested for impairment as part of the cash-generating unit to which itbelongs.  When the carrying amount of anasset or cash-generating unit exceeds its recoverable amount, the asset orcash-generating unit is considered impaired and is written down to itsrecoverable amount.

 

Inassessing value in use, the estimated future cash flows are discounted to theirpresent value using a pre-tax discount rate that reflects current marketassessments of the time value of money and the risks specific to theasset.  Impairment losses relating tooperations are recognised in those expense categories consistent with thefunction of the impaired asset unless the asset is carried at its revaluedamount (in which case the impairment loss is treated as a revaluationdecrease).

 

Anassessment is made at each reporting date as to whether there is any indicationthat previously recognised impairment losses may no longer exist or may havedecreased.  If such indication exists,the recoverable amount is estimated.  Apreviously recognised impairment loss is reversed only if there has been achange in the estimates used to determine the asset’s recoverable amount sincethe last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased toits recoverable amount.  That increasedamount cannot exceed the carrying amount that would have been determined, netof depreciation, had no impairment loss been recognised for the asset in prioryears.  Such reversal is recognised inprofit or loss unless the asset is carried at revalued amount, in which casethe reversal is treated as a revaluation increase.  After such a reversal, the depreciationcharge is adjusted in future periods to allocate the asset’s revised carryingamount, less any residual value, on a systematic basis over its remaininguseful life.

 

**(v)    Trade and otherpayables**

 

Tradepayables and other payables are carried at amortised cost and represent futureliabilities for goods and services provided to the Group prior to the end ofthe financial year that are unpaid and arise when the Group becomes obliged tomake future payments in respect of the purchase of these goods andservices.  Trade payables and otherpayables generally have terms of between 30 and 60 days.

 

**(w)   Leases and hirepurchase agreements**

 

Financeleases and hire purchase agreements, which transfer to the Group substantiallyall the risks and benefits incidental to ownership of the leased item, arecapitalized at the inception of the lease at the fair value of the leasedproperty or, if lower, at the present value of the minimum lease payments.

 

Leaseand hire purchase payments are apportioned between finance charges and areduction of the associated liability so as to achieve a constant rate ofinterest on the remaining balance of the liability.  Finance charges are recognised as an expensein profit or loss.  Capitalised leasedassets and assets under hire purchase are depreciated over the shorter of theestimated useful life of the asset or the term of the agreement.  Leases where the lessor retains substantiallyall the risks and benefits of ownership of the asset are classified asoperating leases.  Operating leasepayments are recognised as an expense in the income statement on astraight-line basis over the lease term.

 

**(x)   Finance costs**

 

Finance costs are recognised as anexpense when incurred.

 

**(y)   Deferred revenue**

 

*License revenues and annuities*

 

Licenserevenues received in respect of future accounting periods are deferred untilthe Company has fulfilled its obligations under the terms of theagreement.  Where deferred revenuerelates to a license agreement with a specific term but the Company has nofuture performance obligations, the revenue is recognised on a straight-lineaccruals basis over the term in accordance with the agreements.  Where revenue has been deferred because theCompany has future performance obligations, revenue is recognized as theCompany’s performance obligations are satisfied.  Costs incurred relating to this futurerevenue are also deferred.

 

Wherea licence agreement provides for the payment of regular annuities to the Companyand the licencee has the right to terminate the agreement prior to the paymentof those annuities with no penalty, the Company does not recognise revenueuntil such time as the associated cash payments are received, as it is notconsidered probable that the benefits of the transaction will flow to theCompany until cash collection is made. Where such annuities are paid in advance, the revenue is allocated on apro-rata basis with the balance being reflected in the balance sheet as adeferred revenue liability.

 

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**2.     SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES (cont.)**

 

**(y)   Deferred revenue(cont.)**

 

*Genetic testing revenues*

 

TheCompany operates testing laboratories which provide genetic testingservices.  The Company recognises revenuefrom the provision of testing services when the testing services have beencompleted.  Fees received in advance ofthe testing process are deferred until such time as the Company completes itsperformance obligations.

 

*Grant revenues*

 

Governmentgrants are recognised when there is reasonable assurance that the grant will bereceived and all attaching conditions will be complied with.  When the grant relates to an expense item, itis recognised as income over the periods necessary to match the grant on asystematic basis to the costs that it is intended to compensate.  When the grant relates to an asset, the fairvalue is credited to a deferred income account and is released to the incomestatement over the expected useful life of the relevant asset by equal annualinstalments.

 

**(z)   Provisions**

 

Provisionsare recognised when the Group has a present obligation (legal or constructive)as a result of a past event, it is probable that an outflow of resourcesembodying economic benefits will be required to settle the obligation and areliable estimate can be made of the amount of the obligation.  Where the Group expects some or all of a provisionto be reimbursed, the reimbursement is recognised as a separate asset but onlywhen the reimbursement is virtually certain. The expense relating to any provision is presented in the incomestatement net of any reimbursement.

 

Ifthe effect of the time value of money is material, provisions are determined bydiscounting the expected future cash flows at a pre-tax rate that reflectscurrent market assessments of the time value of money and, where appropriate,the risks specific to the liability. Where discounting is used, the increase in the provision due to thepassage of time is recognised as a finance cost.

 

**(aa) Contributed equity**

 

Issuedand paid up capital is recognised at the fair value of the considerationreceived by the Company.  Any transactioncosts arising on the issue of ordinary shares are recognised directly in equityas a deduction, net of tax, of the share proceeds received.  The Company has a share-based payment optionscheme under which options to subscribe for the Company’s shares have beengranted to certain executives and other employees (refer Note 27).

 

**(ab) Reclassifications**

 

Certainreclassifications have been made in the financial statements to ensure thatprior year comparatives conform to current year presentations.

 

**(ac) Employee benefits**

 

Provisionis made for employee benefits accumulated as a result of employees renderingservices up to the reporting date.  Thesebenefits include wages and salaries, annual leave and long service leave.  Liabilities arising in respect of wages andsalaries, annual leave and any other employee benefits expected to be settledwithin twelve months of the reporting date are measured at their nominalamounts based on remuneration rates which are expected to be paid when theliability is settled.  All other employeebenefit liabilities are measured at the present value of the estimated futurecash outflow to be made in respect of services provided by employees up to thereporting date using the projected unit credit method.  Any unused sick leave is forfeited and notaccumulated at year end.  Expenses fornon-accumulating sick leave are recognised when the leave is taken during theyear and are measured at rates paid or payable.

 

Indetermining the present value of future cash outflows, the market yield as atthe reporting date on national government bonds, which have terms to maturityapproximating the terms of the related liability, are used.  Employee benefits expenses and revenuesarising in respect of wages and salaries, non-monetary benefits, annual leave,long service leave and other leave benefits; and other types of employeebenefits are recognised against profits on a net basis in their respectivecategories.

 

**(ad) Interest in jointventure operation**

 

TheGroup’s interest in its joint venture operation is accounted for by recognisingthe Group’s assets and liabilities from the joint venture, as well as expensesincurred by the Group and the Group’s share of income earned from the jointventure, in the consolidated financial statements.

 

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**3.     SIGNIFICANTACCOUNTING ESTIMATES AND JUDGEMENTS**

 

Estimates and judgements are evaluated and are based on historicalexperience and other factors, including expectations of future events that mayhave a financial impact on the Company and that are believed to be reasonableunder the circumstances.

 

**(a)   Significantaccounting estimates and assumptions**

 

Thecarrying amounts of certain assets and liabilities are often determined basedon estimates and assumptions of future events. The key estimates and assumptions that have a significant risk ofcausing a material adjustment to the carrying value of certain assets andliabilities within the next annual reporting period are set out below.

 

*Share-based payments transactions*

 

The Groupmeasures the cost of equity-settled transactions with employees by reference tothe value of the equity instruments at the date on which they are granted.  The fair value is determined by an externalvaluer using a Black-Scholes options pricing model, using the assumptionsdetailed in Note 33.

 

*Impairment of intangible assets and goodwill*

 

The Group determines whether intangible assets withindefinite useful lives, including goodwill, are impaired on at least abi-annual basis, inaccordance with the accounting policies stated in Notes 2(t) and 2(u).  This process requires an estimation to bemade of the recoverable amount of the cash-generating units to which therespective assets are allocated.  These calculations require theuse of assumptions which are detailed in Note 17.

 

*Income and withholding taxes*

 

The Group is subject to income andwithholding taxes in both Australia and jurisdictions where it has foreignoperations.  Significant judgement isrequired in determining the worldwide provision for income and withholdingtaxes.  There are many transactions andcalculations undertaken during the ordinary course of business for which theultimate tax determination is uncertain. Where the final outcome of these matters is different from the amountsthat were initially recorded, such differences will impact the current,deferred and withholding tax provisions in the period in which suchdetermination is made (refer Notes 2(j), 2(k) and 2(l)).

 

In addition, the Group hasconsidered the recognition of deferred tax assets relating to carried forwardtax losses to the extent there are sufficient taxable temporary differences(deferred tax liabilities) relating to the same taxation authority and the samesubsidiary against which the unused tax losses can be utilised.  However, utilisation of the tax losses alsodepends on the ability of the entity to satisfy certain tests at the time thelosses are recouped.

 

*Useful lives of assets*

 

Theestimation of the useful lives of assets has been based on historicalexperience as well as lease terms (for leased equipment) and patent terms (forpatents).  In addition, the condition ofthe assets is assessed at least once per year and considered against the remaininguseful life. Adjustments to useful lives are made when considerednecessary.  Depreciation and amortisationexpenses are included in Note 6.

 

The Groupdetermines whether goodwill is impaired at least on an annual basis.  This requires an estimation of therecoverable amount of the cash-generating units, using a discounted cash flowmethodology, to which the goodwill is allocated.  The assumptions used in this estimation ofrecoverable amount and the carrying amount of goodwill are discussed in Note 17.

 

**(b)   Significantjudgements in applying the entity’s accounting policies**

 

*Rehabilitationcosts*

 

Asdisclosed in Notes 30 and 32, the Group held an interest in a mining project asat 30 June 2008.  As at that date,the Group had recorded a provision for $94,987 in respect of its share of theestimated rehabilitation costs associated with the project (refer Note21).  The amount of the provision wasbased on calculations provided to the Group by the project manager.  Refer to Note 39 Subsequent Events.

 

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**4.**     **REVENUE**

 
| ** **                         | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                         | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** |
| **Revenue from  operations**       |       |       |       |       |       |       |       |
| License fees received (refer note) |       | 9,904,191  |       | 8,678,084  |       | 5,124,347  |       |
| Rendering of services              |       | 3,918,692  |       | 3,119,131  |       | 2,550,221  |       |
| Royalties and annuities  received  |       | 921,076    |       | 2,658,995  |       | 1,560,901  |       |
|                               |       |       |       |       |       |       |       |
| Total revenue from  operations     |       | 14,743,959 |       | 14,456,210 |       | 9,235,469  |       |
| ** **                         |       |       |       |       |       |       |       |
| **Other  revenue**                 |       |       |       |       |       |       |       |
| Interest received                  |       | 920,299    |       | 488,980    |       | 805,088    |       |
| Rental recovery                    |       | 31,945     |       | 31,945     |       | —     |       |
| Miscellaneous revenue              |       | 6,133      |       | 1,684      |       | 8,146      |       |
|                               |       |       |       |       |       |       |       |
| Total other revenue                |       | 958,377    |       | 522,609    |       | 813,234    |       |
|                               |       |       |       |       |       |       |       |
| Total revenue                      |       | 15,702,336 |       | 14,978,819 |       | 10,048,703 |       |

 

Note:                   Licensefees received includes credits drawn down under the supply agreement withApplera Corporation (refer Note 29) totalling $1,057,135 (2007: $1,142,086;2006: $1,036,111).

 

**5.      OTHER INCOME**

 
| Grants received and  related income             |   | 178,998 |   | 315,486 |   | 570,667 |   |
|-------------------------------------------------|--------|---------|--------|---------|--------|---------|--------|
| Write-back of provision  for diminution of loan |   | 80,000  |   | —  |   | —  |   |
| Net gain on disposal of  plant and equipment    |   | 17,608  |   | —  |   | 2,321   |   |
| Net gain on disposal of  business               |   | —  |   | 25,000  |   | —  |   |
| Net foreign exchange gains                      |   | —  |   | —  |   | 123,616 |   |
| Miscellaneous income                            |   | —  |   | —  |   | 11,807  |   |
|                                            |   |    |   |    |   |    |   |
| Total other income                              |   | 276,606 |   | 340,486 |   | 708,411 |   |

 

**6.      EXPENSES**

 
| **Employee  benefits expenses**               |   |      |   |      |   |      |   |
|-----------------------------------------------|--------|-----------|--------|-----------|--------|-----------|--------|
| Wages and salaries                            |   | 4,255,535 |   | 3,573,292 |   | 3,326,462 |   |
| Consulting fees                               |   | 863,538   |   | 792,759   |   | 854,724   |   |
| Superannuation                                |   | 368,978   |   | 312,730   |   | 343,785   |   |
| Directors’ fees                          |   | 316,260   |   | 188,674   |   | 197,369   |   |
| Staff recruitment,  training and amenities    |   | 255,964   |   | 151,636   |   | 86,114    |   |
| Payroll tax                                   |   | 213,077   |   | 174,401   |   | 168,963   |   |
| Share-based payments  expense                 |   | 164,533   |   | 257,906   |   | 431,875   |   |
| Termination benefits                          |   | 82,500    |   | 87,500    |   | —    |   |
| Fringe benefits tax                           |   | 36,841    |   | —    |   | —    |   |
| Workers’ compensation  costs             |   | 11,740    |   | 17,746    |   | 23,214    |   |
|                                          |   |      |   |      |   |      |   |
| Total employee benefits  expenses             |   | 6,568,966 |   | 5,556,644 |   | 5,432,506 |   |
| ** **                                    |   |      |   |      |   |      |   |
| **Amortisation  and depreciation expenses**   |   |      |   |      |   |      |   |
|                                          |   |      |   |      |   |      |   |
| Patents                                       |   | 3,544,000 |   | 3,412,482 |   | 3,596,320 |   |
| Laboratory equipment                          |   | 670,417   |   | 479,079   |   | 564,347   |   |
| Equipment under hire  purchase                |   | 392,573   |   | 537,335   |   | 510,828   |   |
| Computer equipment                            |   | 113,129   |   | 144,778   |   | 121,099   |   |
| Office equipment                              |   | 19,750    |   | 14,576    |   | 12,835    |   |
| Leasehold improvements                        |   | 15,286    |   | 14,742    |   | 11,848    |   |
|                                          |   |      |   |      |   |      |   |
| Total amortisation and  depreciation expenses |   | 4,755,155 |   | 4,602,992 |   | 4,817,277 |   |

 

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**6.      EXPENSES (cont.)**

 
| ** **                                      | ** ** | **2008**  | ** ** | **2007**  | ** ** | **2006** | ** ** |
|-------------------------------------------------|------------|-----------|------------|-----------|------------|----------|------------|
| ** **                                      |       | **$**     |       | **$**     |       | **$**    |       |
| **Finance  costs**                              |       |      |       |      |       |     |       |
| Other finance costs                             |       | 34,725    |       | 24,540    |       | 27,378   |       |
| Interest paid                                   |       | 32,038    |       | 66,389    |       | 84,704   |       |
|                                            |       |      |       |      |       |     |       |
| Total finance costs                             |       | 66,763    |       | 90,929    |       | 112,082  |       |
| ** **                                      |       |      |       |      |       |     |       |
| **Impairment  losses and other write-downs**    |       |      |       |      |       |     |       |
| Impairment loss on patents                      |       | 2,378,000 |       | 1,150,000 |       | —   |       |
| Write-down of loans to  other parties           |       | —    |       | 80,000    |       | —   |       |
| Write-down of plant and  equipment              |       | —    |       | 76,960    |       | —   |       |
| Write-off of goodwill                           |       | —    |       | —    |       | 97,500   |       |
|                                            |       |      |       |      |       |     |       |
| Total impairment losses  and other write-downs  |       | 2,378,000 |       | 1,306,960 |       | 97,500   |       |
| ** **                                      |       |      |       |      |       |     |       |
| **Other  expenses**                             |       |      |       |      |       |     |       |
| Operating lease payments                        |       | 501,239   |       | 445,384   |       | 399,273  |       |
| Loss on sale of  available-for-sale investments |       |      |       |      |       |     |       |
| Proceeds from sale                              |       | —    |       | (332,709  | )          | —   |       |
| Less: carrying value at  date of sale           |       | —    |       | 366,016   |       | —   |       |
|                                            |       |      |       |      |       |     |       |
| Loss on sale                                    |       | —    |       | 33,307    |       | —   |       |

 

**7.      INCOME TAX**

 
| **Reconciliation  of income tax expense to prima facie tax payable**                   |   |       |   |       |   |       |   |
|----------------------------------------------------------------------------------------|--------|------------|--------|------------|--------|------------|--------|
| Loss before income tax  expense                                                        |   | (5,451,638 | )      | (4,345,702 | )      | (7,908,123 | )      |
| Tax at the Australian tax  rate of 30% (2007: 30%; 2006: 30%)                          |   | (1,635,491 | )      | (1,303,711 | )      | (2,372,437 | )      |
| Tax effect amounts which  are not deductible / (taxable) in calculating taxable income |   |       |   |       |   |       |   |
| Share-based payments  expense                                                          |   | 49,360     |   | 77,372     |   | 129,563    |   |
| Research and development  expenses                                                     |   | (300,000   | )      | (206,646   | )      | (150,000   | )      |
| Withholding tax expense                                                                |   | 28,357     |   | 79,317     |   | —     |   |
| Other non-deductible items                                                             |   | 8,704      |   | 26,690     |   | 32,972     |   |
|                                                                                   |   | (1,849,070 | )      | (1,326,978 | )      | (2,359,902 | )      |
| Tax effect of adjustments  relating to temporary differences                           |   |       |   |       |   |       |   |
|                                                                                   |   |       |   |       |   |       |   |
| Amortisation, impairment  and depreciation expenses                                    |   | 1,894,372  |   | 1,622,603  |   | 1,042,061  |   |
| Net movements in  provisions                                                           |   | 44,145     |   | (202,337   | )      | 48,874     |   |
| Settlement proceeds from  Applera Corporation                                          |   | (317,141   | )      | (342,627   | )      | 2,253,417  |   |
| Other                                                                                  |   | (5,964     | )      | 225,153    |   | —     |   |
| Tax losses now utilised                                                                |   | —     |   | —     |   | (984,450   | )      |
| Tax losses not recognised                                                              |   | 233,658    |   | 24,186     |   | —     |   |
|                                                                                   |   |       |   |       |   |       |   |
| Income tax expense                                                                     |   | —     |   | —     |   | —     |   |

 

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**7.      INCOME TAX (cont.)**

 
| ** **                                                             | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                             | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** |
| **Deferred tax  assets**                                               | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Withholding tax                                                        |       | 326,361    |       | 324,837    |       | 600,466    |       |
| Deferred revenue                                                       |       | 41,682     |       | 96,395     |       | —     |       |
| Applera settlement                                                     |       | 1,537,010  |       | 1,910,790  |       | 2,253,417  |       |
| Doubtful debts                                                         |       | —     |       | 24,000     |       | —     |       |
| Amortisation of hire purchase  assets                                  |       | 392,573    |       | 537,335    |       | —     |       |
| Provisions                                                             |       | 227,878    |       | 183,733    |       | 134,441    |       |
| Other                                                                  |       | —     |       | 34,567     |       | —     |       |
| Tax losses                                                             |       | —     |       | —     |       | 44,142     |       |
|                                                                   |       |       |       |       |       |       |       |
| Total deferred tax assets                                              |       | 2,525,504  |       | 3,111,657  |       | 3,032,466  |       |
|                                                                   |       |       |       |       |       |       |       |
| Set-off of deferred tax  liabilities pursuant to set-off provisions    |       | (223,898   | )          | (1,947,198 | )          | (3,032,466 | )          |
| Deferred tax assets on  temporary differences not brought to account   |       | (2,301,606 | )          | (1,164,459 | )          | —     |       |
|                                                                   |       |       |       |       |       |       |       |
| Total net deferred tax  assets                                         |       | —     |       | —     |       | —     |       |
|                                                                   |       |       |       |       |       |       |       |
| **Deferred tax liabilities**                                           |       |       |       |       |       |       |       |
| Intangible assets                                                      |       | (223,898   | )          | (1,947,198 | )          | (3,032,466 | )          |
| Total deferred tax  liabilities                                        |       | (223,898   | )          | (1,947,198 | )          | (3,032,466 | )          |
| ** **                                                             |       |       |       |       |       |       |       |
| **Tax losses**                                                         |       |       |       |       |       |       |       |
| Unused tax losses for  which no deferred tax asset has been recognised |       | 19,479,430 |       | 19,245,772 |       | 19,221,586 |       |
| Deferred tax asset @ 30%  not recognised                               |       | 5,843,829  |       | 5,773,732  |       | 5,766,476  |       |

 

Subject tothe Group continuing to meet relevant statutory tests, the tax losses areavailable for offset against future taxable income.

 

**Tax consolidation legislation**

 

Genetic Technologies Limited and its wholly-owned Australiansubsidiaries implemented the tax consolidation legislation as from July 1,2003.  The accounting policy in relationto this legislation is set out in Note 2(j).

 

The entities in the tax consolidated group have entered into a TaxSharing Agreement which, in the opinion of the Directors, limits the joint andseveral liabilities of the wholly-owned entities in the case of a default bythe head entity, Genetic Technologies Limited.

 

The entities have also entered into a Tax Funding Agreement under whichthe wholly-owned entities fully compensate Genetic Technologies Limited for anycurrent tax payable assumed and are compensated by Genetic Technologies Limitedfor any current tax receivable and deferred tax assets relating to unused taxlosses or unused tax credits that are transferred to Genetic TechnologiesLimited under the tax consolidation legislation.  The funding amounts are determined by referenceto the amounts recognised in the subsidiaries’ financial statements.

 

The amounts receivable or payable under the Tax Funding Agreement aredue upon receipt of the funding advice from the head entity, which is issued assoon as practicable after the end of each financial year.  During the year ended June 30, 2008,Genetic Technologies Limited has assumed $1,344,005 of losses from members ofthe tax consolidated group.  Payment forthese amounts has been settled through the intercompany account in accordancewith the Tax Funding Agreement.

 

As at June 30, 2008, there are no unrecognised temporarydifferences associated with the Group’s investments in subsidiaries or jointventure, as the Group has no liability for additional taxation shouldunremitted earnings be remitted (2007: $nil).

 

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**8.      LOSS PER SHARE**

 

Thefollowing reflects the income and share data used in the calculations of basicand diluted loss per share:

 
| ** **                                                                     | ** ** | **2008**    | ** ** | **2007**    | ** ** | **2006**    | ** ** |
|--------------------------------------------------------------------------------|------------|-------------|------------|-------------|------------|-------------|------------|
|                                                                           |       | **$**       |       | **$**       |       | **$**       |       |
| Loss for the year                                                              |       | (5,451,638  | )          | (4,345,702  | )          | (7,908,123  | )          |
| Loss attributable to  minority interests                                       |       | 5,549       |       | 17,159      |       | (10,650     | )          |
|                                                                           |       |        |       |        |       |        |       |
| Loss used in calculating  loss per share                                       |       | (5,446,089  | )          | (4,328,543  | )          | (7,918,773  | )          |
|                                                                           |       |        |       |        |       |        |       |
| Weighted average number of  ordinary shares used in calculating loss per share |       | 362,389,899 |       | 362,389,899 |       | 362,386,940 |       |

 

There havebeen no other transactions involving ordinary shares or potential ordinaryshares between the reporting date and the date of completion of these financialstatements.  None of the 11,175,602options over ordinary shares are considered to be dilutive for the purposes ofcalculating diluted loss per share and have therefore been excluded from theweighted average number of shares.

 

**9.      CASH AND CASH EQUIVALENTS**

 
| ** **                                           | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                           | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** |
| **Reconciliation  of cash and cash equivalents**     | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash at bank and on hand                             |       | 5,490,846  |       | 11,303,764 |       | 9,147,060  |       |
| Short-term deposits                                  |       | 7,429,926  |       | 2,029,986  |       | 2,288,187  |       |
|                                                 |       |       |       |       |       |       |       |
| Current cash and cash  equivalents                   |       | 12,920,772 |       | 13,333,750 |       | 11,435,247 |       |
| Current and non-current  cash deposits (refer  note) |       | 450,000    |       | 450,000    |       | 450,000    |       |
|                                                 |       |       |       |       |       |       |       |
| Total cash and cash  equivalents                     |       | 13,370,772 |       | 13,783,750 |       | 11,885,247 |       |

 

Note:                   Asat June 30, 2008 and 2007, cash amounting to $450,000 was held on depositas security for a bank guarantee (refer Notes 12 and 13).

 
| **Reconciliation  of operating loss**                                                                                            | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| Reconciliation of  operating loss after income tax to net cash flows used in or provided by  operating activities is as follows: |       |       |       |       |       |       |       |
| Operating loss after  income tax                                                                                                 |       | (5,451,638 | )          | (4,345,702 | )          | (7,908,123 | )          |
| * *                                                                                                                         |       |       |       |       |       |       |       |
| *Adjust for  non-cash items*                                                                                                     |       |       |       |       |       |       |       |
| Amortisation and  depreciation expenses                                                                                          |       | 4,755,155  |       | 4,602,992  |       | 4,817,277  |       |
| Share-based payments  expense                                                                                                    |       | 164,533    |       | 257,906    |       | 431,875    |       |
| Impairment losses and  other write-downs                                                                                         |       | 2,378,000  |       | 1,306,960  |       | 97,500     |       |
| Net draw-downs under  Applera settlement (Note  29)                                                                              |       | (602,395   | )          | (747,533   | )          | (641,664   | )          |
| Net foreign exchange  (gains) / losses                                                                                           |       | 254,954    |       | 317,497    |       | (17,242    | )          |
| Profit / (loss) on sale of  assets                                                                                               |       | (17,608    | )          | 33,307     |       | (2,321     | )          |
| * *                                                                                                                         |       |       |       |       |       |       |       |
| *Adjust for  changes in assets and liabilities*                                                                                  |       |       |       |       |       |       |       |
| (Increase)/decrease in  trade and other receivables                                                                              |       | (948,940   | )          | 753,678    |       | (827,298   | )          |
| (Increase)/decrease in  accrued interest                                                                                         |       | (852       | )          | 844        |       | 121,689    |       |
| (Increase)/decrease in  prepayments                                                                                              |       | (43,608    | )          | 78,641     |       | (50,820    | )          |
| (Increase)/decrease in  consumables                                                                                              |       | (261,667   | )          | —     |       | —     |       |
| (Increase)/decrease in  other financial assets                                                                                   |       | 7,781      |       | 9,065      |       | 1,551      |       |
|                                                                                                                             |       |       |       |       |       |       |       |
| Increase/(decrease) in  trade and other payables                                                                                 |       | 421,704    |       | (22,514    | )          | (1,476,308 | )          |
| Increase/(decrease) in  accrued expenses                                                                                         |       | (198,944   | )          | 175,788    |       | (118,007   | )          |
| Increase/(decrease) in  deferred revenue                                                                                         |       | (182,376   | )          | 287,638    |       | (447,799   | )          |
| Increase/(decrease) in  withholding tax payable                                                                                  |       | 1,524      |       | (275,629   | )          | (45,355    | )          |
| Increase/(decrease) in  provisions                                                                                               |       | 147,147    |       | 164,308    |       | 107,723    |       |
|                                                                                                                             |       |       |       |       |       |       |       |
| Net cash flows provided by  operating activities                                                                                 |       | 422,770    |       | 2,597,246  |       | (5,957,322 | )          |

 

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**9.      CASH AND CASH EQUIVALENTS (cont.)**

 
| ** **                                                                                           | ** ** | **2008**   | ** ** | **2007**   | ** ** | **2006**   | ** ** |
|------------------------------------------------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| ** **                                                                                           | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** |
| **Financing  facilities available**                                                                  | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| As at 30 June 2008,  the following financing facilities had been negotiated and were available: |       |       |       |       |       |       |       |
| * *                                                                                             |       |       |       |       |       |       |       |
| *Total  facilities*                                                                                  |       |       |       |       |       |       |       |
| Hire purchase facility                                                                               |       | 2,500,000  |       | 2,500,000  |       | 2,500,000  |       |
| Credit cards                                                                                         |       | 145,000    |       | 110,000    |       | 110,000    |       |
| * *                                                                                             |       |       |       |       |       |       |       |
| *Facilities  used as at reporting date*                                                              |       |       |       |       |       |       |       |
| Hire purchase facility (Note 31)                                                                     |       | (298,199   | )          | (523,967   | )          | (982,108   | )          |
| Credit cards                                                                                         |       | (32,272    | )          | (19,797    | )          | (27,885    | )          |
| * *                                                                                             |       |       |       |       |       |       |       |
| *Facilities  unused as at reporting date*                                                            |       |       |       |       |       |       |       |
| Hire purchase facility                                                                               |       | 2,201,801  |       | 1,976,033  |       | 1,517,892  |       |
| Credit cards                                                                                         |       | 112,728    |       | 90,203     |       | 82,115     |       |

 

**Non-cash activities**

 

During thefinancial year, the Group acquired plant and equipment by means of a hirepurchase agreement with an aggregate fair value of $333,444 (2007: $40,330;2006: $81,444) (refer Note 31).

 

**10.    TRADE AND OTHER RECEIVABLES****(CURRENT)**

 
| Trade receivables                          |   | 1,595,438 |   | 646,498 |   |
|--------------------------------------------|--------|-----------|--------|---------|--------|
| Accrued interest                           |   | 1,300     |   | 448     |   |
|                                       |   |      |   |    |   |
| Total current trade and  other receivables |   | 1,596,738 |   | 646,946 |   |

 
| Note:  | Trade receivables include amounts due in European Euros  of EUR 100,000 (2007: EUR 100,000) and US dollars of USD 68,100 (2007: USD  66,348).                                                                 |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Refer Note 37 for details of aging, interest rate and  credit risks applicable to trade and other receivables for which, due to  their short-term nature, their carrying value approximates their fair value. |

 

**11.    PREPAYMENTS AND OTHER ASSETS****(CURRENT)**

 
| Prepayments                                               |   | 595,558 |   | 543,252 |   |
|-----------------------------------------------------------|--------|---------|--------|---------|--------|
| Consumables at the lower of cost and net realisable value |   | 261,667 |   | —  |   |
|                                                      |   |    |   |    |   |
| Total current prepayments and other assets                |   | 857,225 |   | 543,252 |   |

 

Note:      As at June 30, 2007, no consumableswere recognised as consumables for the Group.

 

**12.    PERFORMANCE BOND AND DEPOSITS****(CURRENT)**

 
| Deposit  for bank guarantee (note)          |   | 450,000 |   | — |   |
|---------------------------------------------|--------|---------|--------|--------|--------|
| Performance  bond                           |   | 68,917  |   | 76,898 |   |
| Other  deposits                             |   | 200     |   | — |   |
|                                        |   |    |   |   |   |
| Total current performance bond and deposits |   | 519,117 |   | 76,898 |   |

** **

Note:                   Asat June 30, 2008, cash amounting to $450,000 was held on deposit assecurity for a bank guarantee of less than 12 month’s duration. Refer Notes 31 and 37 for details pertaining to the performance bond and otherdeposits.

 

**13.    DEPOSITS****(NON-CURRENT)**

 
| Deposit  for bank guarantee (note) |   | **—** |   | 450,000 |   |
|------------------------------------|--------|------------|--------|---------|--------|
|                               |   | ** ** |   |    |   |
| Total  non-current deposits        |   | **—** |   | 450,000 |   |

 

Note:                   Asat June 30, 2007, cash amounting to $450,000 was held on deposit as securityfor a bank guarantee of more than 12 month’s duration.

 

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**14.****          ****RECEIVABLES****(NON-CURRENT)**

 
| ** **                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| ** **                                      |       | **$**    |       | **$**    |       |
| **Loans to other parties**                      |       |     |       |     |       |
| Loans to  unrelated parties                     |       | —   |       | 80,000   |       |
| Less: provision  for impairment                 |       | —   |       | (80,000  | )          |
| Net loans to  unrelated parties                 |       | —   |       | —   |       |
|                                            |       |     |       |     |       |
| **Reconciliation of provision for impairment**  |       |     |       |     |       |
| Balance at the  beginning of the financial year |       | (80,000  | )          | —   |       |
| Add: reversal /  (charge) during the year       |       | 80,000   |       | (80,000  | )          |
| Balance at the  end of the financial year       |       | —   |       | (80,000  | )          |

 

Note:         ReferNote 37 for details of aging, interest rate and credit risks applicable totrade and other receivables for which, due to their short-term nature, theircarrying value approximates their fair value.

 

**15.****          ****AVAILABLE-FOR-SALE INVESTMENTS****(NON-CURRENT)**

 
| Unlisted shares,  at fair value                   |   | 207,195 |   | 233,330 |   |
|---------------------------------------------------|--------|---------|--------|---------|--------|
| Total non-current  available-for-sale investments |   | 207,195 |   | 233,330 |   |

 

**16.****          ****PROPERTY, PLANT AND EQUIPMENT**

 
| Laboratory equipment, at cost |   | 3,853,103  |   | 3,807,360  |   |
|----------------------------------------------|--------|------------|--------|------------|--------|
| Less: accumulated  depreciation              |   | (2,630,340 | )      | (2,558,113 | )      |
| Net laboratory  equipment                    |   | 1,222,763  |   | 1,249,247  |   |
|                                         |   |       |   |       |   |
| Computer  equipment, at cost                 |   | 726,020    |   | 691,950    |   |
| Less: accumulated  depreciation              |   | (631,150   | )      | (518,674   | )      |
| Net computer  equipment                      |   | 94,870     |   | 173,276    |   |
|                                         |   |       |   |       |   |
| Office equipment,  at cost                   |   | 162,912    |   | 148,775    |   |
| Less: accumulated  depreciation              |   | (111,865   | )      | (92,115    | )      |
| Net office  equipment                        |   | 51,047     |   | 56,660     |   |
|                                         |   |       |   |       |   |
| Equipment under  hire purchase, at cost      |   | 1,895,669  |   | 1,632,868  |   |
| Less: accumulated  depreciation              |   | (1,605,097 | )      | (1,227,463 | )      |
| Net equipment  under hire purchase           |   | 290,572    |   | 405,405    |   |
|                                         |   |       |   |       |   |
| Leasehold  improvements, at cost             |   | 92,209     |   | 92,209     |   |
| Less: accumulated  depreciation              |   | (47,704    | )      | (32,418    | )      |
| Net leasehold  improvements                  |   | 44,505     |   | 59,791     |   |
|                                         |   |       |   |       |   |
| Total net  property, plant and equipment     |   | 1,703,757  |   | 1,944,379  |   |

 

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**16.****          ****PROPERTY, PLANT AND EQUIPMENT (cont.)**

 
| ** **                                           | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                           | ** ** | **$**      | ** ** | **$**      | ** ** |
| **Reconciliation of property, plant and  equipment** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Opening gross  carrying amount                       |       | 5,897,162  |       | 5,427,100  |       |
| Add: additions  purchased during the year            |       | 1,023,536  |       | 946,062    |       |
| Less: disposals  made during the year                |       | (190,785   | )          | (476,000   | )          |
| Closing gross  carrying amount                       |       | 6,729,913  |       | 5,897,162  |       |
|                                                 |       |       |       |       |       |
| Opening  accumulated depreciation                    |       | (3,952,783 | )          | (3,161,313 | )          |
| Add: depreciation  expense charged                   |       | (1,211,155 | )          | (1,190,510 | )          |
| Less: disposals  made during the year                |       | 137,782    |       | 399,040    |       |
| Closing  accumulated depreciation                    |       | (5,026,156 | )          | (3,952,783 | )          |
| Total net  property, plant and equipment             |       | 1,703,757  |       | 1,944,379  |       |

 

**Reconciliation of movements in property, plant and equipmentby asset category**

 
| ** **                     | ** ** | **Opening**           | ** ** | ** **           | ** ** | ** **             | ** ** | ** **       | ** ** | **Closing**           | ** ** |
|--------------------------------|------------|-----------------------|------------|----------------------|------------|------------------------|------------|------------------|------------|-----------------------|------------|
| ** **                     | ** ** | **net carrying** | ** ** | **Additions**        | ** ** | **Net disposals** | ** ** | **Depreciation** | ** ** | **net carrying** | ** ** |
| **Asset category**        | ** ** | **amount**            | ** ** | **during year** | ** ** | **during year**   | ** ** | **expense**      | ** ** | **amount**            | ** ** |
| ** **                     | ** ** | **$**                 | ** ** | **$**                | ** ** | **$**                  | ** ** | **$**            | ** ** | **$**                 | ** ** |
| Laboratory  equipment          |       | 1,249,247             |       | 667,986              |       | (24,053                | )          | (670,417         | )          | 1,222,763             |       |
| Computer  equipment            |       | 173,276               |       | 38,282               |       | (3,559                 | )          | (113,129         | )          | 94,870                |       |
| Office equipment               |       | 56,660                |       | 14,137               |       | —                 |       | (19,750          | )          | 51,047                |       |
| Equipment under  hire purchase |       | 405,405               |       | 303,131              |       | (25,391                | )          | (392,573         | )          | 290,572               |       |
| Leasehold  improvements        |       | 59,791                |       | —               |       | —                 |       | (15,286          | )          | 44,505                |       |
|                           |       |                  |       |                 |       |                   |       |             |       |                  |       |
| Totals                         |       | 1,944,379             |       | 1,023,536            |       | (53,003                | )          | (1,211,155       | )          | 1,703,757             |       |

 

**17.****          ****INTANGIBLE ASSETS AND GOODWILL**

 
| ** **                                            | ** ** | **2008**    | ** ** | **2007**    | ** ** |
|-------------------------------------------------------|------------|-------------|------------|-------------|------------|
| ** **                                            | ** ** | **$**       | ** ** | **$**       | ** ** |
| **Patents**(refer notes below)                        |       |        |       |        |       |
| Patents, at cost                                      |       | 36,059,673  |       | 35,929,621  |       |
| Less: accumulated  amortisation and impairment losses |       | (30,085,287 | )          | (24,033,235 | )          |
|                                                  |       |        |       |        |       |
| Net patents                                           |       | 5,974,386   |       | 11,896,386  |       |
|                                                  |       |        |       |        |       |
| **Goodwill**(refer notes below)                       |       |        |       |        |       |
| Goodwill, at cost                                     |       | 315,388     |       | 315,388     |       |
|                                                  |       |        |       |        |       |
| Total net  intangible assets and goodwill             |       | 6,289,774   |       | 12,211,774  |       |

 

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**17.****          ****INTANGIBLE ASSETS AND GOODWILL (cont.)**

 
| ** **                                              | ** ** | **2008**    | ** ** | **2007**    | ** ** |
|---------------------------------------------------------|------------|-------------|------------|-------------|------------|
| ** **                                              | ** ** | **$**       | ** ** | **$**       | ** ** |
| **Reconciliation of patents**                           |       |        |       |        |       |
| Opening gross  carrying amount                          |       | 35,929,621  |       | 36,223,593  |       |
| Adjust for  exchange rate movements                     |       | 130,052     |       | (293,972    | )          |
| Closing gross  carrying amount                          |       | 36,059,673  |       | 35,929,621  |       |
|                                                    |       |        |       |        |       |
| Opening  accumulated amortisation and impairment losses |       | (24,033,235 | )          | (19,764,725 | )          |
| Add: amortisation  expense charged                      |       | (3,544,000  | )          | (3,412,482  | )          |
| Less: impairment  loss (refer notes below)              |       | (2,378,000  | )          | (1,150,000  | )          |
| Adjust for  exchange rate movements                     |       | (130,052    | )          | 293,972     |       |
|                                                    |       |        |       |        |       |
| Closing  accumulated amortisation and impairment losses |       | (30,085,287 | )          | (24,033,235 | )          |
|                                                    |       |        |       |        |       |
| Total net patents                                       |       | 5,974,386   |       | 11,896,386  |       |
|                                                    |       |        |       |        |       |
| **Reconciliation of goodwill**                          |       |        |       |        |       |
| Opening gross  carrying amount                          |       | 315,388     |       | 315,388     |       |
| Less: write-off  of goodwill                            |       | —      |       | —      |       |
|                                                    |       |        |       |        |       |
| Total net  goodwill                                     |       | 315,388     |       | 315,388     |       |

 

**Impairmentnotes**

** **

*Business combination*

 

Thepatents and goodwill were purchased as part of various business combinationscompleted in previous years.

 

*Goodwill*

 

Goodwillis allocated to the Group’s cash-generating units (CGUs) on the basis of theappropriate operating segment.  The Group’sgoodwill has been allocated to the testing operating segment to which itrelates and is carried at cost.  There isno carrying amount of intangible assets with indefinite useful lives allocatedto this segment.  In testing goodwill forimpairment, the recoverable amount of a CGU is determined based on value-in-usecalculations which use cash flow projections and are based on financial budgetsapproved by the Board.  In performing thevalue-in-use calculations, the Directors have assumed that the testing businesswill begin to generate an operating profit in the next 2 to 3 years based onprojected revenue growth.  Should thistime period be extended beyond 3 years, there is a possibility that the value-in-usemay fall below the carrying value of the goodwill.

 

Basedon Management forecasts, the cashflow projections assume testing revenues of$6.7 million for the year ending June 30, 2009.  As a key assumption, constant revenue growthof 18% is assumed beyond 2009 based on the historical five-year average growthrate applicable to the testing business.

 

Expensesare assumed to be relatively constant over time given that significant capacityis available with the existing laboratory equipment and that the testingbusiness is relatively capital-intensive. Management has assessed the future cashflows using discount ratesranging between 10% and 25% which result in the recoverable amount exceedingthe carrying value of goodwill which is carried at cost.

 

*Impairment of patents*

 

Theimpairment loss for 2008 arose in respect of patents held within the researchoperating segment and resulted from a lack of progress with the researchrelated to the commercialisation of certain applications of the technologycovered by these patents.

 

Followinga detailed scientific review of the work that had been undertaken in respect ofone of the applications of the underlying technology, it was decided during the2008 financial year to terminate the program. In addition, whilst work continues in respect of the use of thetechnology in relation to other related areas, the lack of progress made as atbalance date gave rise to an impairment charge of $2,378,000 during the yearended June 30, 2008 (refer Note 6).

 

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**17.****          ****INTANGIBLE ASSETS AND GOODWILL (cont.)**

 

*Impairment of patents (cont.)*

 

Giventhat the Company’s previous attempts to commercialise the technology associatedwith the patents have, so far, not delivered the anticipated revenues due tothe factors mentioned previously, the Company believes that it is appropriateto base its assessment of the carrying value of the underlying patents as at June 30,2008 around a further product based on the technology which has already beensuccessfully completed and from the sale of which revenues have already beengenerated.  Accordingly, the carryingvalue of the underlying patents as at June 30, 2008 has been based on theanticipated net cash flows that the Company believes will be generated from thefuture sales of this product.

 

Thecashflow forecasts associated with the impairment assessment of the patentshave been projected to 2012, being the first year in which the respective patentswill expire, using the Company’s estimated weighted average cost of capital andconservative projections of anticipated sales volumes over the next 4years.  Further, given the competitiveadvantage afforded to the Company in respect of this product, a terminationvalue has also been included to reflect that sales of the product are expectedto continue beyond the date of the patent expiry.  The forecasts and associated recoverableamount has been determined by Management taking into account the sales thathave been generated to date and the considerable interest arising frompre-launch market analysis.

 

Withregards to the assessment of the value-in-use of the patents in the researchoperating segment, Management believes that there are no reasonably possiblechanges in any of the above key assumptions that would cause the carrying valueof the patents to materially exceed their recoverable amount.

 

Noother class of asset was impaired following from this exercise.  Further, no change in the useful economiclife of these patents was noted.  Theremaining amortisation period of the patents carried forward is between 2 to 4years.

 

**18.****          ****TRADE AND OTHER PAYABLES****(CURRENT)**

 
| ** **                              | ** ** | **2008**  | ** ** | **2007**  | ** ** |
|-----------------------------------------|------------|-----------|------------|-----------|------------|
| ** **                              | ** ** | **$**     | ** ** | **$**     | ** ** |
| Trade payables                          |       | 1,292,009 |       | 852,561   |       |
| Other payables                          |       | 228,464   |       | 246,208   |       |
| Accrued expenses                        |       | 265,939   |       | 464,883   |       |
| Total current  trade and other payables |       | 1,786,412 |       | 1,563,652 |       |

 

Note:         Tradepayables and other payables include amounts due in US dollars of USD 134,166(2007: USD 326,978), European euros of EUR 22,531 (2007: EUR nil), Canadiandollars of CAD 5,211 (2007: CAD 5,438) and Swiss francs of CHF 2,870 (2007: CHF4,030). ReferNote 37 for details of contractual maturity and management of interest rate,foreign exchange and liquidity risks applicable to trade and other payables forwhich, due to their short-term nature, their carrying value approximates theirfair value.

 

**19.****          ****INTEREST-BEARING LIABILITIES****(CURRENT)**

 
| Hire purchase  liability (Notes 31 and 37)  |   | 111,117 |   | 476,989 |   |
|---------------------------------------------|--------|---------|--------|---------|--------|
| Total current  interest-bearing liabilities |   | 111,117 |   | 476,989 |   |

 

Note:         The carrying values of thehire purchase liabilities approximate their fair values.  During the current year and prior years,there were no defaults or breaches of any of the hire purchase agreements.

 

**20.****          ****DEFERRED REVENUE****(CURRENT)**

 
| Genetic testing  fees received in advance |   | 138,941 |   | 104,879 |   |
|-------------------------------------------|--------|---------|--------|---------|--------|
| Annuities  received in advance            |   | —  |   | 216,438 |   |
| Total current  deferred revenue           |   | 138,941 |   | 321,317 |   |

 

 

F22

----

Table of Contents

 

**21.****          ****PROVISIONS****(CURRENT ANDNON-CURRENT)**

 
| ** **                                               | ** ** | **2008**   | ** ** | **2008**   | ** ** |
|----------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                               | ** ** | **$**      | ** ** | **$**      | ** ** |
| **Current provisions**                                   |       |       |       |       |       |
| Annual leave                                             |       | 368,492    |       | 294,419    |       |
| Long service  leave                                      |       | 220,692    |       | 189,051    |       |
| Rehabilitation  costs                                    |       | 94,987     |       | 78,498     |       |
|                                                     |       |       |       |       |       |
| Total current  provisions                                |       | 684,171    |       | 561,968    |       |
|                                                     |       |       |       |       |       |
| **Non-current provisions**                               |       |       |       |       |       |
| Long service  leave                                      |       | 75,421     |       | 50,477     |       |
| Total non-current  provisions                            |       | 75,421     |       | 50,477     |       |
|                                                     |       |       |       |       |       |
| Total provisions                                         |       | 759,592    |       | 612,445    |       |
|                                                     |       |       |       |       |       |
| **Reconciliation of annual leave provision**             | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance at the  beginning of the financial year          |       | 294,419    |       | 244,010    |       |
| Add: obligation  accrued during the year                 |       | 272,763    |       | 248,391    |       |
| Less: utilised  during the year                          |       | (198,690   | )          | (197,982   | )          |
|                                                     |       |       |       |       |       |
| Balance at the  end of the financial year                |       | 368,492    |       | 294,419    |       |
|                                                     |       |       |       |       |       |
| **Reconciliation of long service leave provision**       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance at the  beginning of the financial year          |       | 239,528    |       | 204,127    |       |
| Add: obligation  accrued during the year                 |       | 56,585     |       | 35,401     |       |
| Less: utilised during  the year                          |       | —     |       | —     |       |
|                                                     |       |       |       |       |       |
| Balance at the  end of the financial year                |       | 296,113    |       | 239,528    |       |
|                                                     |       |       |       |       |       |
| **Reconciliation of provision for rehabilitation costs** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance at the  beginning of the financial year          |       | 78,498     |       | —     |       |
| Add: costs  accrued during the year (Note 31)            |       | 16,489     |       | 78,498     |       |
|                                                     |       |       |       |       |       |
| Balance at the  end of the financial year                |       | 94,987     |       | 78,498     |       |

 

**22.****          ****INTEREST-BEARING LIABILITIES****(NON-CURRENT)**

 
| Hire purchase  liability (Notes 31 and 37)      |   | 187,082 |   | 46,978 |   |
|-------------------------------------------------|--------|---------|--------|--------|--------|
|                                            |   |    |   |   |   |
| Total non-current  interest-bearing liabilities |   | 187,082 |   | 46,978 |   |

 

Note:         The carrying values of thehire purchase liabilities approximate their fair values.  During the current year and prior years,there were no defaults or breaches of any of the hire purchase agreements.

 

**23.****          ****CONTRIBUTED EQUITY**

 
| **Issued and paid-up capital** |   |       |   |       |   |
|--------------------------------|--------|------------|--------|------------|--------|
| Fully paid  ordinary shares    |   | 70,243,996 |   | 70,243,996 |   |
| Total contributed  equity      |   | 70,243,996 |   | 70,243,996 |   |

 
| ** **                                           | ** ** | **2008**    | ** ** | **2007**   | ** ** |
|------------------------------------------------------|------------|-------------|------------|------------|------------|
| **Movements in shares on issue** | ** ** | **Shares**  | ** ** | **$**      | ** ** | **Shares** | ** ** | **$** | ** ** |
| Balance at the  beginning of the financial year      |       | 362,389,899 |       | 70,243,996 |       | 362,389,899 |   | 70,243,996 |   |
| Add: shares  issued during the year                  |       | —      |       | —     |       | — |   | — |   |
|                                                 |       |        |       |       |       |   |   |   |   |
| Balance at the  end of the financial year            |       | 362,389,899 |       | 70,243,996 |       | 362,389,899 |   | 70,243,996 |   |

 

F23

----

Table of Contents

 

**23.****          ****CONTRIBUTED EQUITY (cont.)**

 

**Terms and conditions of contributed equity**

 

Ordinary shares have the right toreceive dividends as declared and, in the event of winding up the Company, toparticipate in the proceeds from the sale of all surplus assets in proportionto the number of and amounts paid up on shares held.  Ordinary shares entitle their holder to onevote, either in person or by proxy, at a meeting of the Company.  Effective July 1, 1998, the Corporationslegislation abolished the concepts of authorised capital and par valueshares.  Accordingly, the Company doesnot have authorised capital nor par value in respect of its issued capital.

 

**Capital management**

 

When managing capital, Management’sobjective is to ensure that the Group continues as a going concern as well asto maintain optimal returns for shareholders and benefits for otherstakeholders.  Management also aims tomaintain a capital structure that ensures the lowest cost of capital availableto the entity.  The Group is not subjectto any externally imposed capital requirements.

 

**24.****          ****RESERVES**

 
| ** **                                                 | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|------------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                                 | ** ** | **$**      | ** ** | **$**      | ** ** |
| Foreign currency  translation                              |       | (47,930    | )          | (15,306    | )          |
| Share-based  payments                                      |       | 1,636,734  |       | 1,472,201  |       |
|                                                       |       |       |       |       |       |
| Total reserves                                             |       | 1,588,804  |       | 1,456,895  |       |
|                                                       |       |       |       |       |       |
| **Reconciliation of foreign currency translation reserve** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance at the  beginning of the financial year            |       | (15,306    | )          | 23,229     |       |
| Add: net currency  translation loss                        |       | (32,624    | )          | (38,535    | )          |
|                                                       |       |       |       |       |       |
| Balance at the  end of the financial year                  |       | (47,930    | )          | (15,306    | )          |
|                                                       |       |       |       |       |       |
| **Reconciliation of share-based payments reserve**         | ** ** | ** ** | ** ** | ** ** | ** ** |
| Balance at the  beginning of the financial year            |       | 1,472,201  |       | 1,214,295  |       |
| Add: share-based  payments                                 |       | 164,533    |       | 257,906    |       |
|                                                       |       |       |       |       |       |
| Balance at the  end of the financial year                  |       | 1,636,734  |       | 1,472,201  |       |

 

**Nature and purpose of reserves**

*Foreign currencytranslation reserve*

Thisreserve is used to record exchange differences arising from the translation of thefinancial statements of foreign subsidiaries.

 

*Share-basedpayments reserve*

Thisreserve is used to record the value of share-based payments provided toemployees and others providing similar services as part of their remuneration.

 

**25.****          ****ACCUMULATED LOSSES**

 
| Balance at the  beginning of the financial year                        |   | (45,743,100 | )      | (41,414,557 | )      |
|------------------------------------------------------------------------|--------|-------------|--------|-------------|--------|
| Add: net loss  attributable to members of Genetic Technologies Limited |   | (5,446,089  | )      | (4,328,543  | )      |
|                                                                   |   |        |   |        |   |
| Balance at the  end of the financial year                              |   | (51,189,189 | )      | (45,743,100 | )      |

 

F24

----

 

**26.****          ****MINORITY INTERESTS**

 

**Reconciliation ofminority interests in subsidiaries**

 
| ** **                                      | ** ** | **2008** | ** ** | **2007** | ** ** |
|-------------------------------------------------|------------|----------|------------|----------|------------|
| ** **                                      | ** ** | **$**    | ** ** | **$**    | ** ** |
| Balance at the beginning  of the financial year |       | 145,018  |       | 175,176  |       |
| Add: movements during the  year                 |       |     |       |     |       |
| Less: share of operating  losses                |       | (5,549   | )          | (17,159  | )          |
| Less: share of movement in  reserves            |       | (9,161   | )          | (12,999  | )          |
| Net loss attributable to  minority interests    |       | (14,710  | )          | (30,158  | )          |
| Add: share of issued  capital                   |       | 11,154   |       | —   |       |
| Balance at the end of the  financial year       |       | 141,462  |       | 145,018  |       |

 

**27.    OPTIONS**

 

**Options summary**

 

As at June 30,the following options over ordinary shares in the Company were outstanding.

 
| ** **                | ** ** | **2008**   | ** ** | **Weighted ave.  exercise price** | ** ** | **2007** | ** ** | **Weighted ave.  exercise price** | ** ** | **2006** | ** ** | **Weighted ave.  exercise price** | ** ** |
|---------------------------|------------|------------|------------|---------------------------------------------|------------|----------|------------|---------------------------------------------|------------|----------|------------|---------------------------------------------|------------|
| Staff Share Plan options  |       | 11,175,602 |       | $                                           | 0.27       |     | 11,977,500 |                                        | $          | 0.52     |       | 14,677,500                                  |       | $ | 0.52 |   |
| Other options             |       | —     |       | —                                      |       | 600,000  |       | $                                           | 0.70       |     | 600,000    |                                        | $          | 0.70 |   |
| Total options outstanding |       | 11,175,602 |       | $                                           | 0.27       |     | 12,577,500 |                                        | $          | 0.53     |       | 15,277,500                                  |       | $ | 0.52 |   |

 

The movements in the number of options in each respectiveclass are detailed below.

 

**Unlisted StaffShare Plan options**

 

On November 30,2001, the Directors of the Company established a Staff Share Plan.  Pursuant to the terms of the Plan, theDirectors of the Company may, at their discretion, grant options over theordinary shares in Genetic Technologies Limited to executives, consultants andemployees of the Group.  The options,which are granted at nil cost, are typically granted for a term of 6 years andhave various vesting periods.  Theoptions are not transferable and are not quoted on the Australian SecuritiesExchange.  The options lapse at theearlier of employment termination or six years. As at June 30, 2008, there were 3 executives, 1 consultant and 27employees who held options that had been granted under the Plan.  Options granted under the Plan carry norights to dividends and no voting rights. The movements in the numbers of Staff Share Plan options are as follows:

 
| ** **                                      | ** ** | **2008**   | ** ** | **Weighted ave.  exercise price** | ** ** | **2007** | ** ** | **Weighted ave.  exercise price** | ** ** | **2006** | ** ** | **Weighted ave.  exercise price** | ** ** |
|-------------------------------------------------|------------|------------|------------|---------------------------------------------|------------|----------|------------|---------------------------------------------|------------|----------|------------|---------------------------------------------|------------|
| Balance at the beginning  of the financial year |       | 11,977,500 |       | $                                           | 0.52       |     | 14,677,500 |                                        | $          | 0.52     |       | 12,007,500                                  |       | $ | 0.54 |   |
|                                            |       |       |       |                                        |       |     |       |                                        |       |     |       |                                        |       |   |   |   |
| Add: options granted  during the year           |       | 8,150,602  |       | $                                           | 0.19       |     | —     |                                        | —     |     | 5,300,000  |                                        | $          | 0.48 |   |
|                                            |       |       |       |                                        |       |     |       |                                        |       |     |       |                                        |       |   |   |
| Less: options forfeited  during the year        |       | (2,900,000 | )          | $                                           | 0.41       |     | (1,175,000 | )                                           | $          | 0.37     |       | —                                      |       | — |   |
|                                            |       |       |       |                                        |       |     |       |                                        |       |     |       |                                        |       |   |   |
| Less: options expired  during the year          |       | (6,052,500 | )          | $                                           | 0.57       |     | (1,525,000 | )                                           | $          | 0.39     |       | (2,630,000                                  | )          | $ | 0.52 |   |
|                                            |       |       |       |                                        |       |     |       |                                        |       |     |       |                                        |       |   |   |   |
| Balance at the end of the  financial year       |       | 11,175,602 |       | $                                           | 0.27       |     | 11,977,500 |                                        | $          | 0.52     |       | 14,677,500                                  |       | $ | 0.52 |   |
|                                            |       |       |       |                                        |       |     |       |                                        |       |     |       |                                        |       |   |   |   |
| Exercisable at the end of  the financial year   |       | 2,837,500  |       | $                                           | 0.46       |     | 8,577,500  |                                        | $          | 0.54     |       | 8,296,250                                   |       | $ | 0.53 |   |

 

F25

----

 

**27.    OPTIONS (cont.)**

 

**Unlisted StaffShare Plan options (cont.)**

 

No funds were raised from the exercise of options grantedunder the Staff Share Plan during the years ended June 30, 2008, 2007 and2006.  The numbers of Staff Share Planoptions outstanding as at June 30, 2008 by ASX code, including therespective dates of expiry and exercise prices, are tabled below.  Refer Note 33 for further information.  The options listed below are not listed onASX.

 
| **Options (expiry dates)**      | ** ** | **2008**   | ** ** | **Weighted ave.  exercise price** | ** ** | **2007**  | ** ** | **Weighted ave.  exercise price** | ** ** | **2006**  | ** ** | **Weighted ave.  exercise price** | ** ** |
|-------------------------------------------|------------|------------|------------|---------------------------------------------|------------|-----------|------------|---------------------------------------------|------------|-----------|------------|---------------------------------------------|------------|
| GTGAA (6 Sept. 2010)                      |       | 750,000    |       | $                                           | 0.48       |      | 750,000    |                                        | $          | 0.48      |       | 750,000                                     |       | $ | 0.48 |   |
| GTGAC (25 Nov. 2010)                 |       | —     |       | —                                      |       | —    |       | —                                      |       | 500,000   |       | $                                           | 0.48       |   |
| GTGAD (12 Aug. 2011)                 |       | 700,000    |       | $                                           | 0.43       |      | 850,000    |                                        | $          | 0.43      |       | 950,000                                     |       | $ | 0.43 |   |
| GTGAE (12 Aug. 2011)                 |       | 250,000    |       | $                                           | 0.53       |      | 1,000,000  |                                        | $          | 0.53      |       | 1,000,000                                   |       | $ | 0.53 |   |
| GTGAF (23 Nov. 2011)                 |       | —     |       | —                                      |       | 1,000,000 |       | $                                           | 0.56       |      | 1,000,000  |                                        | $          | 0.56 |   |
| GTGAG (1 Feb. 2012)                  |       | —     |       | —                                      |       | 750,000   |       | $                                           | 0.46       |      | 750,000    |                                        | $          | 0.46 |   |
| GTGAH (31 May 2012)                  |       | 450,000    |       | $                                           | 0.40       |      | 700,000    |                                        | $          | 0.40      |       | 700,000                                     |       | $ | 0.40 |   |
| GTGAI (30 June 2013)                 |       | 1,000,000  |       | $                                           | 0.13       |      | —     |                                        | —     |      | —     |                                        | —     |   |
| GTGAI (30 Nov. 2007)                 |       | —     |       | —                                      |       | 1,750,000 |       | $                                           | 0.56       |      | 1,750,000  |                                        | $          | 0.56 |   |
| GTGAK (11 June 2009)                 |       | 200,000    |       | $                                           | 0.45       |      | 200,000    |                                        | $          | 0.45      |       | 200,000                                     |       | $ | 0.45 |   |
| GTGAM (30 Nov. 2007)                 |       | —     |       | —                                      |       | 2,500,000 |       | $                                           | 0.61       |      | 2,500,000  |                                        | $          | 0.61 |   |
| GTGAO (30 Nov. 2007)                 |       | —     |       | —                                      |       | 802,500   |       | $                                           | 0.49       |      | 902,500    |                                        | $          | 0.49 |   |
| GTGAP (20 May 2009)                  |       | —     |       | —                                      |       | —    |       | —                                      |       | 1,000,000 |       | $                                           | 0.48       |   |
| GTGAQ (20 May 2009)                  |       | 700,000    |       | $                                           | 0.44       |      | 700,000    |                                        | $          | 0.44      |       | 1,400,000                                   |       | $ | 0.44 |   |
| GTGAS (20 May 2009)                  |       | 175,000    |       | $                                           | 0.38       |      | 175,000    |                                        | $          | 0.38      |       | 175,000                                     |       | $ | 0.38 |   |
| GTGAU (17 Jan. 2012)                 |       | —     |       | —                                      |       | 200,000   |       | $                                           | 0.45       |      | 200,000    |                                        | $          | 0.45 |   |
| GTGAW (24 Sept. 2012)                     |       | 3,650,602  |       | $                                           | 0.17       |      | —     |                                        | —     |      | —     |                                        | —     |   |
| GTGAY (23 Oct. 2012)                 |       | 2,800,000  |       | $                                           | 0.22       |      | —     |                                        | —     |      | —     |                                        | —     |   |
| GTGAZ (27 Feb. 2010)                 |       | 200,000    |       | $                                           | 0.56       |      | 200,000    |                                        | $          | 0.56      |       | 400,000                                     |       | $ | 0.56 |   |
| GTGAZ (27 Feb. 2010)                 |       | 300,000    |       | $                                           | 0.49       |      | 400,000    |                                        | $          | 0.49      |       | 500,000                                     |       | $ | 0.49 |   |
|                                      |       |       |       |                                        |       |      |       |                                        |       |      |       |                                        |       |   |   |   |
| Balance at the end of the  financial year |       | 11,175,602 |       | $                                           | 0.27       |      | 11,977,500 |                                        | $          | 0.52      |       | 14,677,500                                  |       | $ | 0.52 |   |

 

Details of the options issued under the Staff Share Planthat are outstanding as at June 30, 2008 are as follows:

 
| **Options (expiry dates)**     | ** ** | **Vesting details**                         |
|------------------------------------------|------------|--------------------------------------------------|
| GTGAA  (expiring 6 September 2010)  |       | Vesting fully on 6 September 2008           |
| GTGAD  (expiring 12 August 2011)    |       | Vesting fully on 12 August 2009             |
| GTGAE  (expiring 12 August 2011)    |       | Vesting fully on 12 August 2009             |
| GTGAH  (expiring 31 May 2012)       |       | Vesting fully on 31 May 2010                |
| GTGAI  (expiring 30 June 2013)      |       | Vesting fully on 30 June 2011               |
| GTGAK  (expiring 11 June 2009)      |       | Options are fully vested as at 30 June 2008 |
| GTGAQ  (expiring 20 May 2009)       |       | Options are fully vested as at 30 June 2008 |
| GTGAS  (expiring 20 May 2009)       |       | Options are fully vested as at 30 June 2008 |
| GTGAW  (expiring 24 September 2012) |       | Vesting fully on 24 September 2010          |
| GTGAY  (expiring 23 October 2012)   |       | Vesting fully on 23 October 2010            |
| GTGAZ  (expiring 27 February 2010)  |       | Options are fully vested as at 30 June 2008 |

 

**Unlisted Otheroptions**

 

On August 2, 2001, the Company announced it hadentered into an agreement with GTH Capital (now GMCG, LLC, “GMCG”) of New York,USA to pursue the listing of its Level II ADRs on the NASDAQ stockexchange.  Under the agreement, theCompany agreed to issue 900,000 options at an exercise price of $0.70 to GMCGwithin three years.  On October 27,2004, GMCG was granted 600,000 of the options due.  On September 7, 2007, the optionsexpired.

 

F26

----

 

**28.****          ****SEGMENT INFORMATION**

 

**Identification of reportable segments**

 

The Grouphas identified its four reportable operating segments based on the similarityof the products produced and sold and/or the services provided, as theserepresent the sources of the Group’s major risks and have the greatest effecton the rates of return.  The separategroups of similar products and services are then divided into operatingbusinesses, the performances of which are reported to the Chief ExecutiveOfficer, the Management team and the Board of Directors on a monthly basis.

 

**Identification of reportable segments**

 

*Business segments*

*Licensing* — involves the out-licensing ofthe Group’s “non-coding” technology.

*Testing* — involves the provision of arange of genetic testing services.

*Research —* involves the undertaking of arange of research and development projects in the field of genetics and relatedareas.

*Corporate* — involves the management of theGroup’s corporate activities.

 

**Business segments**

 
| ** **        | ** ** | ** ** | ** ** | **Revenues and income** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | **Amortisation** | ** ** |
|-------------------|------------|------------|------------|-----------------------------------|------------|------------|------------|------------|------------|------------|------------|------------------|------------|
| **Segment**       | ** ** | ** ** | ** ** | **Sales**                         | ** ** | **Other**  | ** ** | **Totals** | ** ** | **Result** | ** ** | **Assets**       | ** ** | **Liabilities** | ** ** | **/depreciation** | ** ** |
| ** **        | ** ** | ** ** | ** ** | **$**                             | ** ** | **$**      | ** ** | **$**      | ** ** | **$**      | ** ** | **$**            | ** ** | **$** | ** ** | **$** | ** ** |
| Licensing         |       | 2008       |       | 10,825,267                        |       | —     |       | 10,825,267 |       | 6,000,724  |       | 2,447,788        |       | (229,445 | ) | (2,900,722 | ) |
|              |       | 2007       |       | 11,337,079                        |       | —     |       | 11,337,079 |       | 7,229,326  |       | 8,846,395        |       | (1,194,853 | ) | (2,770,911 | ) |
|              |       | 2006       |       | 6,685,248                         |       | —     |       | 6,685,248  |       | 1,940,605  |       |             |       |   |   | (2,945,193 | ) |
|              |       |       |       |                              |       |       |       |       |       |       |       |             |       |   |   |   |   |
| Testing           |       | 2008       |       | 3,918,692                         |       | 17,608     |       | 3,936,300  |       | (2,251,040 | )          | 2,892,870        |       | (1,186,880 | ) | (1,019,958 | ) |
|              |       | 2007       |       | 3,119,131                         |       | 25,000     |       | 3,144,131  |       | (3,323,326 | )          | 2,246,571        |       | (964,401 | ) | (946,689 | ) |
|              |       | 2006       |       | 2,550,221                         |       | —     |       | 2,550,221  |       | (3,661,081 | )          |             |       |   |   | (1,006,931 | ) |
|              |       |       |       |                              |       |       |       |       |       |       |       |             |       |   |   |   |   |
| Research          |       | 2008       |       | —                            |       | 210,943    |       | 210,943    |       | (6,000,122 | )          | 4,817,373        |       | (740,256 | ) | (761,593 | ) |
|              |       | 2007       |       | —                            |       | 347,431    |       | 347,431    |       | (3,483,985 | )          | 4,012,800        |       | (268,185 | ) | (813,760 | ) |
|              |       | 2006       |       | —                            |       | 570,667    |       | 570,667    |       | (3,849,033 | )          |             |       |   |   | (804,776 | ) |
|              |       |       |       |                              |       |       |       |       |       |       |       |             |       |   |   |   |   |
| Corporate  (note) |       | 2008       |       | —                            |       | 1,006,432  |       | 1,006,432  |       | (3,201,200 | )          | 13,936,547       |       | (1,152,924 | ) | (72,882 | ) |
|              | 2007       |       | —     |                              | 490,664    |       | 490,664    |       | (4,767,717 | )          | 14,343,261 |             | (918,779   | ) | (71,632 | ) |
|              |       | 2006       |       | —                            |       | 950,978    |       | 950,978    |       | (2,338,614 | )          |             |       |   |   | (60,377 | ) |
|              |       |       |       |                              |       |       |       |       |       |       |       |             |       |   |   |   |   |
| Totals            |       | 2008       |       | 14,743,959                        |       | 1,234,983  |       | 15,978,942 |       | (5,451,638 | )          | 24,094,578       |       | (3,309,505 | ) | (4,755,155 | ) |
|              |       | 2007       |       | 14,456,210                        |       | 863,095    |       | 15,319,305 |       | (4,345,702 | )          | 29,449,027       |       | (3,346,218 | ) | (4,602,992 | ) |
|              |       | 2006       |       | 9,235,469                         |       | 1,521,645  |       | 10,757,114 |       | (7,908,123 | )          |             |       |   |   | (4,817,277 | ) |

 
| ** **  | ** ** | ** ** | ** ** | **Impairment**                    | ** ** | **Purchases of** | ** ** | **Net cash flows (used in) / provided by** | ** ** |
|-------------|------------|------------|------------|-----------------------------------|------------|-----------------------|------------|-------------------------------------------------------------------------------|------------|
| **Segment** | ** ** | ** ** | ** ** | **losses/ write downs** | ** ** | **equipment**         | ** ** | **operating activities**                                                 | ** ** | **investing activities** | ** ** | **financing activities** | ** ** |
| ** **  | ** ** | ** ** | ** ** | **$**                             | ** ** | **$**                 | ** ** | **$**                                                                         | ** ** | **$** | ** ** | **$** | ** ** |
| Licensing   |       | 2008       |       | —                            |       | 6,030                 |       | 7,641,118                                                                     |       | (6,030 | ) | — |   |
|        |       | 2007       |       | —                            |       | 294                   |       | 9,633,894                                                                     |       | (801 | ) | — |   |
|        |       | 2006       |       | —                            |       | 4,448                 |       | 3,930,178                                                                     |       | (3,918 | ) | — |   |
|        |       |       |       |                              |       |                  |       |                                                                          |       |   |   |   |   |
| Testing     |       | 2008       |       | —                            |       | 962,904               |       | (1,778,767                                                                    | )          | (21,996 | ) | (385,350 | ) |
|        |       | 2007       |       | (76,960                           | )          | 864,938               |       | (671,312                                                                      | )          | (81,853 | ) | (357,275 | ) |
|        |       | 2006       |       | (97,500                           | )          | 757,646               |       | (2,730,649                                                                    | )          | (34,614 | ) | (332,687 | ) |
|        |       |       |       |                              |       |                  |       |                                                                          |       |   |   |   |   |
| Research    |       | 2008       |       | (2,378,000                        | )          | 5,675                 |       | (2,679,753                                                                    | )          | (5,675 | ) | (106,169 | ) |
|        |       | 2007       |       | (1,150,000                        | )          | 57,030                |       | (3,407,060                                                                    | )          | (20,759 | ) | (128,468 | ) |
|        |       | 2006       |       | —                            |       | 81,830                |       | (3,865,291                                                                    | )          | (52,129 | ) | (113,896 | ) |
|        |       |       |       |                              |       |                  |       |                                                                          |       |   |   |   |   |
| Corporate   |       | 2008       |       | —                            |       | 48,978                |       | (2,759,828                                                                    | )          | (13,698 | ) | (37,380 | ) |
|        |       | 2007       |       | (80,000                           | )          | 23,800                |       | (2,958,276                                                                    | )          | 197,423 |   | (16,762 | ) |
|        |       | 2006       |       | —                            |       | 38,901                |       | (3,291,560                                                                    | )          | (64,586 | ) | (4,309 | ) |
|        |       |       |       |                              |       |                  |       |                                                                          |       |   |   |   |   |
| Totals      |       | 2008       |       | (2,378,000                        | )          | 1,023,587             |       | 422,770                                                                       |       | (47,399 | ) | (528,899 | ) |
|        |       | 2007       |       | (1,306,960                        | )          | 946,062               |       | 2,597,246                                                                     |       | 94,010 |   | (502,505 | ) |
|        |       | 2006       |       | (97,500                           | )          | 882,825               |       | (5,957,322                                                                    | )          | (155,247 | ) | (450,892 | ) |

 
| Note: | Other revenue-corporate  includes interest received of $920,299 (2007: $488,980) (refer Note 4). There  were no intersegment sales. |
|-------|-------------------------------------------------------------------------------------------------------------------------------------|

 

F27

----

 

**28.****          ****SEGMENT INFORMATION (cont.)**

 

**Geographic information**

 

*Australia* — is the home country of theparent entity and the location of the Company’s testing facilities andlicensing activities.

*Canada* — is the home of GtechInternational Resources Limited.

*Switzerland —* is the home of GeneType AG.

 

Revenuesare allocated on the basis of the geographical location of the entities whichearn them.  The following table presentssales and other income and revenue on the basis of geographical locations forthe years ended June 30, 2008 and June 30, 2007.

 
| **Segment** | ** ** | ** ** | ** ** | **Sales revenue** | ** ** | **Other** | ** ** | **Totals** | ** ** |
|-------------|------------|------------|------------|------------------------|------------|-----------|------------|------------|------------|
| ** **  | ** ** | ** ** | ** ** | **$**                  | ** ** | **$**     | ** ** | **$**      | ** ** |
| Australia   |       | 2008       |       | 14,743,959             |       | 1,223,833 |       | 15,967,792 |       |
|        |       | 2007       |       | 14,456,210             |       | 849,827   |       | 15,306,037 |       |
|        |       | 2006       |       | 9,235,469              |       | 1,508,335 |       | 10,743,804 |       |
|        |       |       |       |                   |       |      |       |       |       |
| Canada      |       | 2008       |       | —                 |       | 11,133    |       | 11,133     |       |
|        |       | 2007       |       | —                 |       | 13,261    |       | 13,261     |       |
|        |       | 2006       |       | —                 |       | 11,796    |       | 11,796     |       |
|        |       |       |       |                   |       |      |       |       |       |
| Switzerland |       | 2008       |       | —                 |       | 17        |       | 17         |       |
|        |       | 2007       |       | —                 |       | 7         |       | 7          |       |
|        |       | 2006       |       | —                 |       | 1,514     |       | 1,514      |       |
|        |       |       |       |                   |       |      |       |       |       |
| Totals      |       | 2008       |       | 14,743,959             |       | 1,234,983 |       | 15,978,942 |       |
|        |       | 2007       |       | 14,456,210             |       | 863,095   |       | 15,319,305 |       |
|        |       | 2006       |       | 9,235,469              |       | 1,521,645 |       | 10,757,114 |       |

 

**Segment products and locations**

 

The fourprincipal business segments of the Group are licensing, genetic testing,research and corporate.  The principalgeographic segment is Australia, with the Company’s headquarters being locatedin Melbourne in the State of Victoria.

 

**Segment accounting policies**

 

Segmentinformation is prepared in conformity with the accounting policies of theentity as disclosed in Note 2(f) and Accounting Standard *IFRS 8 Operating Segments*.  As a result, the primary reporting segmentsnow reflect more closely the information that Management uses to make decisionsabout operating matters.  Specifically,segment information is disclosed for the licensing, genetic testing andresearch operations which were previously disclosed within the biotechnologysegment.

 

Thefollowing items are allocated to the corporate segment as they do not form partof the operations of any of the other segments:

 

·             Interestreceived (Note 4)

·             Netgains / (losses) on the sale of available-for-sale investments (Note 6)

·             Financecosts (Note 6)

·             Incometax expense (Note 7)

 

**Major customers**

 

The Grouphas a number of major customers to which it provides both products andservices.  During the year ended June 30,2008, there were two customers from whom the Group generated revenuesrepresenting more than 10% of the total consolidated revenue from operations.  The most significant of these customersrepresented approximately 38.3% of total revenue from operations.

 

**29.****          ****CONTINGENT ASSETS**

 

On December 12,2005, the Company announced it had reached a final settlement of its patentdispute with Applera Corporation.  Aspart of the settlement, the parties executed a number of binding agreements,including a supply agreement, pursuant to which Applera agreed to supply theCompany with certain equipment and reagents which the Company uses in itsgenetic testing business.  The totalvalue of these credits was $8,547,500, comprising equipment credits to thevalue of $4,602,500 and reagent credits to the value of $3,945,000.  As at June 30, 2007, the Company haddrawn down equipment and reagents under the supply agreement with a total valueof $2,178,197.  During the year ended June 30,2008, the Company drew down equipment and reagents under the supply agreementwith a total value of $1,587,626.  Ofthis amount, a total of $1,057,135 (comprising equipment credits of $662,635and reagent credits of $394,500) was recognised as income during the year ended30 June 2008 and disclosed in Note 4 as part of license fees received,whilst the remaining $530,491 represented the balance of certain prepaidservice contracts.  Accordingly, as at June 30,2008, the Company had a contingent asset (unrecorded) representing remainingcredits available to it with a total value of $4,781,677.

 

F28

----

 

**30.****          ****CONTINGENT LIABILITIES**

 

The Group hasbeen notified of a number of native title claims under the Commonwealth NativeTitle Act, 1993, covering exploration tenements in the North Laverton JointVenture in Western Australia in which the Group has a direct equity interest(refer Note 32).  Due to the sale of theCompany’s interest in the Joint Venture on August 27, 2008, the potentialimpact of any claim or the claims in aggregate is no longer relevant.

 

**31.****          ****COMMITMENTS AND CONTINGENCIES**

 

**Hire purchase expenditure commitments**

 
| ** **                                           | ** ** | **2008** | ** ** | **2007** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|
|                                                 |       | **$**    | ** ** | **$**    |       |
| Minimum hire purchase  payments                      |       |     |       |     |       |
| - not later than one year                            |       | 134,027  |       | 496,675  |       |
| - later than one year but  not later than five years |       | 204,532  |       | 49,474   |       |
| - later than five years                              |       | —   |       | —   |       |
| Total minimum hire  purchase payments                |       | 338,559  |       | 546,149  |       |
| Less: future finance  charges                        |       | (40,360  | )          | (22,182  | )          |
| Present value of hire  purchase payments             |       | 298,199  |       | 523,967  |       |
| Aggregate expenditure  commitments comprise:         |       |     |       |     |       |
| Current liability (Note 19)                          |       | 111,117  |       | 476,989  |       |
| Non-current liability (Note 22)                      |       | 187,082  |       | 46,978   |       |
| Total hire purchase  expenditure commitments         |       | 298,199  |       | 523,967  |       |

 

On January 14, 2005, the Company executed a MasterAsset Finance Agreement with National Australia Bank Limited in respect of a$2,500,000 asset finance facility (the “Facility”).  Since January 14, 2005, the Company hasfinanced the acquisition of laboratory and office equipment under the Facilitywith a total value of $1,966,312.  Eachof the Company’s Australian-resident subsidiaries has provided a guarantee tothe Company in respect of the Facility.

 
| **Operating  lease expenditure commitments**         | ** ** | ** ** | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                           | ** ** | ** ** | ** ** | ** ** | ** ** |
| Minimum operating lease  payments                    |       |       |       |       |       |
| - not later than one year                            |       | 466,412    |       | 418,177    |       |
| - later than one year but  not later than five years |       | 965,825    |       | 1,307,963  |       |
| - later than five years                              |       | —     |       | —     |       |
| Total minimum operating  lease payments              |       | 1,432,237  |       | 1,726,140  |       |

 

The operating lease relates to office and laboratorypremises located in Fitzroy, Victoria that were occupied by the Company duringthe year.  The lease, which is in thename of GeneType Pty. Ltd. (a wholly-owned subsidiary of the Company), expireson June 30, 2011.  GeneType Pty.Ltd. has an option to extend the lease at its expiration for a further ten yearperiod.  The premises are owned byBankberg Pty. Ltd., a company associated with the Company’s former CEO andNon-Executive Director, Dr. Mervyn Jacobson (refer Note 34).  GeneType Pty. Ltd. does not have an option topurchase the leased assets at the expiry of the lease period.

 
| **Research and  development expenditure commitments** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|
| ** **                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Minimum research and  development payments            |       |       |       |       |       |
| - not later than one year                             |       | 762,500    |       | 1,150,000  |       |
| - later than one year but  not later than five years  |       | 490,000    |       | 700,000    |       |
| - later than five years                               |       | —     |       | —     |       |
| Total minimum research and  development payments      |       | 1,252,500  |       | 1,850,000  |       |

 

On June 15,2004, the Company entered into a Sponsored Research Agreement with C.Y. O’ConnorERADE Village Foundation in Perth, Western Australia pursuant to which GeneticTechnologies Limited will contribute $900,000 per annum towards research for aperiod of five years, amounting to a total commitment of $4,500,000.  The Company will own any intellectualproperty arising from the research undertaken by the Foundation.  As at balance date, an amount of $450,000remained payable under the Agreement.

 

F29

----

 

**31.****           ****COMMITMENTS AND CONTINGENCIES (cont.)**

 

**Research and development expenditure commitments (cont.)**

 

On April 1,2008, the Company entered into an Australian Research Council (ARC) LinkageAgreement with the University of Newcastle. The Agreement relates to the synthesis of novel nematocidal compoundsand complements an existing ARC Linkage Agreement that the Company has with theUniversity of Melbourne.  The Companywill contribute $90,000 per annum in cash over a period of three years from2008 to 2010.  As at June 30, 2008,$802,500 remained payable under the Agreement, which included a non-cashin-kind contribution of $532,500.

 

**Other capitalexpenditure commitments**

 

As at June 30, 2008, the Company did not have anyother significant contracted capital expenditure commitments.

 

**Other expenditurecommitments**

 

As at June 30, 2008, the Company held a 14.66% (2007:16.36%) direct equity interest in the North Laverton Joint Venture with RegisResources Limited (“Regis”) (refer Note 32) which has continuing minimalexpenditure requirements as prescribed by the Western Australian MinesDepartment in respect of its prospecting and exploration licenses and miningleases owned by the joint venture.  Byagreement with the joint venture partner, the Company is not contributing anyfunding towards the project, as these costs are met by its joint venturepartner.  As at June 30, 2008, theCompany had recorded a provision for $94,987 in respect of its share of theestimated rehabilitation costs associated with the North Laverton project(refer Note 21).  The amount of theprovision was based on calculations provided to the Company by Regis as projectmanager.  As disclosed in Note 39,however, the Company sold its entire interest in the joint venture to Regis on August 27,2008 and, as part of this sale, has been fully indemnified by Regis against anyfuture rehabilitation liabilities which may arise from the explorationactivities of the joint venture undertaken up until the date of sale.  This indemnification will enable the Company,during the year ending 30 June 2009, to fully reverse the provision of$94,987 in respect of such liabilities which had been recorded in the Company’sbalance sheet as at June 30, 2008.

 

**32.****           ****JOINT VENTURES**

 

The Companyholds a direct equity interest in the North Laverton Joint Venture with RegisResources Limited in Western Australia. The Company is not contributing any funding towards the project byagreement with the joint venture partner and does not have any involvement inits operations.  All liabilities of thejoint venture are borne by the joint venture partner.  The Company’s investment in the joint venturehas been written down to nil.  As aresult of its election not to contribute its share of expenditures, the Company’sinterest in the joint venture was diluted down to 14.66% as at June 30,2008 (2007: 16.36%).  All joint ventureinterests have been valued at nil and no revenues or expenses have been derivedor incurred during the year ended June 30, 2008 with the exception in therehabilitation provision of $16,489 (refer Note 21).  As disclosed in Note 39, the Company sold itsentire interest in the joint venture to Regis on August 27, 2008.

 

**33.****          ****EMPLOYEE BENEFITS**

 

**Staff Share Plan**

 

On November 30,2001, the Directors of the Company established a Staff Share Plan.  Pursuant to the terms of the Plan, theDirectors may, at their discretion, grant options over the ordinary shares inthe Genetic Technologies Limited to executives, consultants, employees, andformerly Non-Executive Directors, of the Group as detailed in Note 27.  As at June 30, 2008, there were 3executives, 1 consultant and 27 employees who held options that had beengranted under the Plan.  Informationregarding the movements in the number of options granted under the Staff SharePlan is set out in Note 27.

 

The fair value of each option granted under the Staff SharePlan is estimated by an external valuer using a Black-Scholes option-pricingmodel with the following assumptions used for grants made during the yearsended June 30, 2008, 2007 and 2006:

 
| ** **                                   | ** ** | **2008**             | ** ** | **2007 ****(note)** | ** ** | **2006**             | ** ** |
|----------------------------------------------|------------|----------------------|------------|--------------------------|------------|----------------------|------------|
| Dividend yield                               |       | —               |       | —                   |       | —               |       |
| Historic volatility and  expected volatility |       | 75%                  |       | N/A                      |       | 53%                  |       |
| Option exercises prices                      |       | $ 0.17 to $0.22 |       | N/A                      |       | $ 0.38 to $0.61 |       |
| Weighted average exercise  price             |       | $ 0.19          |       | N/A                      |       | $ 0.53          |       |
| Risk-free interest rate                      |       | 5.99 - 6.50%         |       | N/A                      |       | 5.62%                |       |
| Expected life of an option                   |       | 3 years - 5 years    |       | N/A                      |       | 5 years              |       |

 

Note:         Nooptions were granted during the year ended June 30, 2007.

 

Theexpected volatility reflects the assumption that the historical volatility isindicative of future trends, which may also not necessarily be the actualoutcome.

 

F30

----

 

**33.****          ****EMPLOYEE BENEFITS (cont.)**

 

**Superannuationcommitments**

 

TheGroup does not have any defined benefit funds. The Group makes statutory contributions to various superannuation fundson behalf of all employees at a rate of 9% per annum, in addition to makingother superannuation contributions as part of salary packaging arrangementswith staff.  All contributions areexpensed when incurred.  Contributionsmade by the Group of up to 9% per annum of employees’ wages and salaries arelegally enforceable in Australia.

 

**34.****          ****RELATED PARTY DISCLOSURES**

 

**Ultimate parent**

 

Genetic Technologies Limited is theultimate Australian parent company.  Asat the date of this Report, no shareholder controls more than 50% of the issuedcapital of the Company.

 

**Other related party transactions**

 

As at June 30, 2008, a netamount of $5,517,825 (2007: $9,177,574) was receivable by the Company from itsvarious subsidiaries.  As at the samedate, an amount of $1,640,320 (2007: $1,134,778) was payable by the Company toits wholly-owned subsidiaries.  All suchloans are unsecured, generally interest free and there are no fixed terms ofrepayment.

 

Alsoduring the year, GeneType Pty. Ltd., a subsidiary, paid a total of $501,239(2007: $445,384) to Bankberg Pty. Ltd., a company associated with former ChiefExecutive Officer and Non-Executive Director, Dr. Mervyn Jacobson, forrent in respect of the office and laboratory premises in Fitzroy, Victoria thatare leased by the Group.  Further,Genetic Technologies Limited paid a total of $414,133 to Transmedia Inc.,another company associated with Dr. Jacobson, in respect of licensingservices provided to the Company.

 

Finally,during the year ended June 30, 2008, Genetic Technologies Limited paid atotal of $79,936 to Government Relations Australia Advisory Pty. Ltd., acompany associated with Non-Executive Director Mr. John Dawkins AO, inrespect of consulting services provided to the Company.

 

Alltransactions with Key Management Personnel have been entered into under termsand conditions no more favourable than those which the entity would haveadopted if dealing at arm’s length. Please refer to Note 35 for a description of transactions with KeyManagement Personnel.

 

**35.****          ****KEY MANAGEMENT PERSONNEL DISCLOSURES**

 

**Details of Key Management Personnel**

 

*Directors*

 

HenryBosch AO *(Non-Executive Chairman)*

FredBart *(Non-Executive)*

DavidCarruthers *(Non-Executive)*

JohnS. Dawkins AO *(Non-Executive)*

Dr. MervynJacobson *(Non-Executive)*

Dr. LeanneRowe *(Non-Executive)*

* *

*Executives*

 

Michael B. Ohanessian *(Chief Executive Officer)*

Thomas G. Howitt *(Chief Financial Officer and Company Secretary)*

Ross Barrow *(Chief Operating Officer)*

Dr. Gary Cobon *(Chief Scientific Officer)*

 

Note:         Dr. Jacobson retired asChief Executive Officer on September 24, 2007 and was appointed as aNon-Executive Director on that date.

Dr. Rowewas appointed as a Non-Executive Director on April 16, 2008.

MichaelOhanessian was appointed as Chief Executive Officer and as an ExecutiveDirector on September 24, 2007.

RossBarrow was appointed as Chief Operating Officer on April 14, 2008.

Dr. GaryCobon resigned as Chief Scientific Officer on March 28, 2008.

Dr. Jacobsonresigned as a Non-Executive Director on December 12, 2008.

 

F31

----

 

**35.****          ****KEY MANAGEMENT PERSONNEL DISCLOSURES (cont.)**

 

**Remuneration of Key Management Personnel**

 
| **Name and title of**           | ** ** | ** ** | ** ** | **Short-term**  | ** ** | ** ** | ** ** | **Post-employment** | ** ** | **Long-term**                    | ** ** | **Share-based** | ** ** | ** ** | ** ** |
|------------------------------------------------|------------|------------|------------|-----------------|------------|------------|------------|---------------------|------------|----------------------------------|------------|-----------------|------------|------------|------------|
| **Directors**                                  | ** ** | **Year**   | ** ** | **Salary/fees** | ** ** | **Other**  | ** ** | **Superannuation**  | ** ** | **Long service leave** | ** ** | **Options**     | ** ** | **Totals** | ** ** |
| ** **                                     | ** ** | ** ** | ** ** | **$**           | ** ** | **$**      | ** ** | **$**               | ** ** | **$**                            | ** ** | **$**           | ** ** | **$**      | ** ** |
| Henry Bosch AO                                 |       | 2008       |       | 126,846         |       | —     |       | —              |       | —                           |       | 12,921          |       | 139,767    |       |
| Non-Executive  Chairman                        |       | 2007       |       | 90,000          |       | —     |       | —              |       | —                           |       | 74,025          |       | 164,025    |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Fred Bart                                      |       | 2008       |       | 42,282          |       | —     |       | 3,805               |       | —                           |       | —          |       | 46,087     |       |
| Non-Executive  Director                        |       | 2007       |       | 30,000          |       | —     |       | 2,700               |       | —                           |       | —          |       | 32,700     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| David Carruthers                               |       | 2008       |       | 50,000          |       | —     |       | 4,500               |       | —                           |       | —          |       | 54,500     |       |
| Non-Executive  Director                        |       | 2007       |       | —          |       | —     |       | 18,795              |       | —                           |       | —          |       | 18,795     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| John S. Dawkins  AO                            |       | 2008       |       | 42,282          |       | —     |       | 3,805               |       | —                           |       | 12,921          |       | 59,008     |       |
| Non-Executive  Director                        |       | 2007       |       | 30,000          |       | —     |       | 2,700               |       | —                           |       | 74,025          |       | 106,725    |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Dr. Mervyn  Jacobson (note)               |       | 2008       |       | 138,461         |       | —     |       | —              |       | —                           |       | —          |       | 138,461    |       |
| Non-Executive  Director                        |       | 2007       |       | 300,000         |       | —     |       | —              |       | —                           |       | —          |       | 300,000    |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Dr. Leanne  Rowe AM (note)                |       | 2008       |       | —          |       | —     |       | 11,353              |       | —                           |       | —          |       | 11,353     |       |
| Non-Executive  Director                        |       | 2007       |       | —          |       | —     |       | —              |       | —                           |       | —          |       | —     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Robert J. Edge (note)                          |       | 2008       |       | —          |       | —     |       | —              |       | —                           |       | —          |       | —     |       |
| Non-Executive  Director                        |       | 2007       |       | 11,414          |       | —     |       | 1,027               |       | —                           |       | —          |       | 12,441     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Prof. Deon J.  Venter (note)                   |       | 2008       |       | —          |       | —     |       | —              |       | —                           |       | —          |       | —     |       |
| Non-Executive  Director                        |       | 2007       |       | 17,500          |       | —     |       | 399                 |       | —                           |       | —          |       | 17,899     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Sub-totals for  Directors                      |       | 2008       |       | 399,871         |       | —     |       | 23,463              |       | —                           |       | 25,842          |       | 449,176    |       |
|                                           |       | 2007       |       | 478,914         |       | —     |       | 25,621              |       | —                           |       | 148,050         |       | 652,585    |       |
| **Executives**                                 |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Michael B.  Ohanessian (note)                  |       | 2008       |       | 232,546         |       | 6,706      |       | 20,769              |       | 356                              |       | 68,175          |       | 328,552    |       |
| Chief Executive  Officer                       |       | 2007       |       | —          |       | —     |       | —              |       | —                           |       | —          |       | —     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Thomas G. Howitt (note)                        |       | 2008       |       | 200,000         |       | 35,000     |       | 21,150              |       | 8,284                            |       | 30,759          |       | 295,193    |       |
| Chief Financial  Officer and Company Secretary |       | 2007       |       | 190,000         |       | —     |       | 17,100              |       | 3,881                            |       | 35,050          |       | 246,031    |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Ross Barrow (note)                             |       | 2008       |       | 54,006          |       | —     |       | 4,860               |       | —                           |       | —          |       | 58,866     |       |
| Chief Operating  Officer                       |       | 2007       |       | —          |       | —     |       | —              |       | —                           |       | —          |       | —     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Dr. Gary  Cobon (note)                    |       | 2008       |       | 66,047          |       | 82,500     |       | 74,619              |       | —                           |       | —          |       | 223,166    |       |
| Chief Scientific  Officer                      |       | 2007       |       | 93,741          |       | —     |       | 80,659              |       | 877                              |       | 50,512          |       | 225,789    |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Geoffrey E.  Newing (note)                     |       | 2008       |       | —          |       | —     |       | —              |       | —                           |       | —          |       | —     |       |
| Fmr. Chief  Operating Officer                  |       | 2007       |       | 188,333         |       | 87,500     |       | 16,630              |       | —                           |       | —          |       | 292,463    |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Ian N.  Christensen (note)                     |       | 2008       |       | —          |       | —     |       | —              |       | —                           |       | —          |       | —     |       |
| Group General  Manager - IP                    |       | 2007       |       | 23,358          |       | —     |       | 1,380               |       | —                           |       | —          |       | 24,738     |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Sub-totals for  Executives                     |       | 2008       |       | 552,599         |       | 124,206    |       | 121,398             |       | 8,640                            |       | 98,934          |       | 905,777    |       |
|                                           |       | 2007       |       | 495,432         |       | 87,500     |       | 115,769             |       | 4,758                            |       | 85,562          |       | 789,021    |       |
|                                           |       |       |       |            |       |       |       |                |       |                             |       |            |       |       |       |
| Total  remuneration of                         |       | 2008       |       | 952,470         |       | 124,206    |       | 144,861             |       | 8,640                            |       | 124,776         |       | 1,354,953  |       |
| Key Management  Personnel                      |       | 2007       |       | 974,346         |       | 87,500     |       | 141,390             |       | 4,758                            |       | 233,612         |       | 1,441,606  |       |

 

Note:                   TheCompany and the Group had only four Executives, as defined, during the yearended June 30, 2008.

 

Thecolumn above entitled “Other” of $124,206 (2007: $87,500) comprises terminationbenefits of $82,500 (2007: $87,500), bonuses of $35,000 (2007: $nil) and motorvehicle allowances of $6,706 (2007: $nil) (refer notes on the following page).

 

F32

----

 

**35.****          ****KEY MANAGEMENT PERSONNEL DISCLOSURES (cont.)**

 

**Remuneration of Key Management Personnel (cont.)**

 

Thedetails of those Executives nominated as Key Management Personnel under section300A of the *Corporations Act 2001*have been disclosed in this Report.  Noother employees of the Company meet the definition of “Key Management Personnel”as defined in *IAS 24 Related PartyDisclosures*.

 

Note:         Dr. Jacobson served asthe Company’s Chief Executive Officer from July 1, 2007 to September 24,2007.

Dr. Rowewas appointed as a Director of the Company on April 16, 2008.

Mr. Edgeretired as a Director of the Company on November 17, 2006.

Prof.Venter resigned as a Director of the Company on August 23, 2006.

Mr. Ohanessianwas appointed as a Director of the Company and its Chief Executive Officer on September 24,2007.

Mr. Ohanessianreceived $6,706 during the year ended June 30, 2008 in respect of a motorvehicle allowance.

Mr. Howittreceived an STI payment of $35,000 during the year ended June 30, 2008 inrespect of the prior year.

Mr. Barrowwas appointed as the Company’s Chief Operating Officer on April 14, 2008.

Dr. Cobonresigned as the Company’s Chief Scientific Officer on March 28, 2008.

Dr. Cobonreceived $82,500 during the year ended June 30, 2008 in respect of atermination benefit.

Mr. Newingresigned as the Company’s Chief Operating Officer on July 1, 2007.

Mr. Newingreceived $87,500 during the year ended June 30, 2007 in respect of atermination benefit.

Mr. Christensenresigned as the Company’s Group General Manager - IP on August 12, 2006.

** **

**Remuneration ofKey Management Personnel**

 
| ** **                                      | ** ** | **2008**  | ** ** | **2007**  | ** ** | **2006**  | ** ** |
|-------------------------------------------------|------------|-----------|------------|-----------|------------|-----------|------------|
| ** **                                      | ** ** | **$**     | ** ** | **$**     | ** ** | **$**     | ** ** |
| Short-term  employee benefits                   |       | 994,176   |       | 974,346   |       | 1,147,433 |       |
| Post-employment  benefits                       |       | 144,861   |       | 141,390   |       | 74,057    |       |
| Termination  benefits                           |       | 82,500    |       | 87,500    |       | —    |       |
| Long-term  benefits                             |       | 8,640     |       | 4,758     |       | 6,564     |       |
| Share-based  payments                           |       | 124,776   |       | 233,612   |       | 343,469   |       |
| Total  remuneration of Key Management Personnel |       | 1,354,953 |       | 1,441,606 |       | 1,571,523 |       |

 

**Optionholdings of Key Management Personnel**

**June 30, 2008**

 
| ** **                         | ** ** | ** **  | ** ** | ** **                      | ** ** | ** **    | ** ** | **Vested and non-vested as at year end** | ** ** |
|------------------------------------|------------|-------------|------------|---------------------------------|------------|---------------|------------|------------------------------------------------------------------------|------------|
| ** **                         | ** ** | **Opening** | ** ** | **Number of options** | ** ** | **Closing**   | ** ** | **Not**                                                                | ** ** |
| **Name of optionholder** | ** ** | **balance** | ** ** | **Granted**                     | ** ** | **Exercised** | ** ** | **Lapsed**                                                             | ** ** | **balance** | ** ** | **Total** | ** ** | **exercisable** | ** ** | **Exercisable** | ** ** |
| **Director**                       |       |        |       |                            |       |          |       |                                                                   |       |   |   |   |   |   |   |   |   |
| Henry Bosch AO                     |       | 500,000     |       | —                          |       | —        |       | (500,000                                                               | )          | — |   | — |   | — |   | — |   |
| Fred Bart                          |       | 500,000     |       | —                          |       | —        |       | (500,000                                                               | )          | — |   | — |   | — |   | — |   |
| David Carruthers                   |       | —      |       | —                          |       | —        |       | —                                                                 |       | — |   | — |   | — |   | — |   |
| John S. Dawkins  AO                |       | 500,000     |       | —                          |       | —        |       | (500,000                                                               | )          | — |   | — |   | — |   | — |   |
| Dr. Mervyn  Jacobson          |       | 2,000,000   |       | —                          |       | —        |       | (2,000,000                                                             | )          | — |   | — |   | — |   | — |   |
| Dr. Leanne  Rowe AM           |       | —      |       | —                          |       | —        |       | —                                                                 |       | — |   | — |   | — |   | — |   |
| **Executive**                      |       |        |       |                            |       |          |       |                                                                   |       |   |   |   |   |   |   |   |   |
| Michael B.  Ohanessian             |       | —      |       | 3,650,602                       |       | —        |       | —                                                                 |       | 3,650,602 |   | 3,650,602 |   | 3,650,602 |   | — |   |
| Thomas G. Howitt                   |       | 1,000,000   |       | 1,000,000                       |       | —        |       | —                                                                 |       | 2,000,000 |   | 2,000,000 |   | 1,312,500 |   | 687,500 |   |
| Ross Barrow                        |       | —      |       | 1,000,000                       |       | —        |       | —                                                                 |       | 1,000,000 |   | 1,000,000 |   | 1,000,000 |   | — |   |
| Dr. Gary  Cobon               |       | 750,000     |       | 500,000                         |       | —        |       | (1,250,000                                                             | )          | — |   | — |   | — |   | — |   |
| Geoffrey E.  Newing                |       | 750,000     |       | —                          |       | —        |       | (750,000                                                               | )          | — |   | — |   | — |   | — |   |
| Totals                             |       | 6,000,000   |       | 6,150,602                       |       | —        |       | (5,500,000                                                             | )          | 6,650,602 |   | 6,650,602 |   | 5,963,102 |   | 687,500 |   |

 

F33

----

 

**35.****          ****KEY MANAGEMENT PERSONNEL DISCLOSURES (cont.)**

 

**Optionholdings of Key Management Personnel (cont.)**

**June 30, 2007**

 
| ** **                         | ** ** | ** **  | ** ** | ** **                      | ** ** | ** **    | ** ** | **Vested as at year end** | ** ** |
|------------------------------------|------------|-------------|------------|---------------------------------|------------|---------------|------------|-----------------------------------------------|------------|
| ** **                         | ** ** | **Opening** | ** ** | **Number of options** | ** ** | **Closing**   | ** ** | ** **                                    | ** ** | **Not** | ** ** | ** ** | ** ** |
| **Name of optionholder** | ** ** | **balance** | ** ** | **Granted**                     | ** ** | **Exercised** | ** ** | **Lapsed**                                    | ** ** | **balance** | ** ** | **Total** | ** ** | **exercisable** | ** ** | **Exercisable** | ** ** |
| **Director**                       |       |        |       |                            |       |          |       |                                          |       |   |   |   |   |   |   |   |   |
| Henry Bosch AO                     |       | 500,000     |       | —                          |       | —        |       | —                                        |       | 500,000 |   | 500,000 |   | 125,000 |   | 375,000 |   |
| Dr. Mervyn  Jacobson          |       | 2,000,000   |       | —                          |       | —        |       | —                                        |       | 2,000,000 |   | 2,000,000 |   | — |   | 2,000,000 |   |
| Fred Bart                          |       | 500,000     |       | —                          |       | —        |       | —                                        |       | 500,000 |   | 500,000 |   | — |   | 500,000 |   |
| David Carruthers                   |       | —      |       | —                          |       | —        |       | —                                        |       | — |   | — |   | — |   | — |   |
| John S. Dawkins  AO                |       | 500,000     |       | —                          |       | —        |       | —                                        |       | 500,000 |   | 500,000 |   | 125,000 |   | 375,000 |   |
| Robert J. Edge                     |       | 500,000     |       | —                          |       | —        |       | (500,000                                      | )          | — |   | — |   | — |   | — |   |
| Prof. Deon J.  Venter              |       | 1,000,000   |       | —                          |       | —        |       | (1,000,000                                    | )          | — |   | — |   | — |   | — |   |
| **Executive**                      |       |        |       |                            |       |          |       |                                          |       |   |   |   |   |   |   |   |   |
| Thomas G. Howitt                   |       | 1,000,000   |       | —                          |       | —        |       | —                                        |       | 1,000,000 |   | 1,000,000 |   | 562,500 |   | 437,500 |   |
| Geoffrey E.  Newing                |       | 750,000     |       | —                          |       | —        |       | —                                        |       | 750,000 |   | 750,000 |   | 562,500 |   | 187,500 |   |
| Dr. Gary  Cobon               |       | 750,000     |       | —                          |       | —        |       | —                                        |       | 750,000 |   | 750,000 |   | 562,500 |   | 187,500 |   |
| Ian N.  Christensen                |       | 300,000     |       | —                          |       | —        |       | (300,000                                      | )          | — |   | — |   | — |   | — |   |
| Totals                             |       | 7,800,000   |       | —                          |       | —        |       | (1,800,000                                    | )          | 6,000,000 |   | 6,000,000 |   | 1,937,500 |   | 4,062,500 |   |

 

**Shareholdings of Key Management Personnel**

**June 30, 2008**

 
| **Shares held in Genetic** | ** ** | **Opening** | ** ** | **Number of shares** | ** ** | **Acquired on** | ** ** | **Closing**                       | ** ** |
|-------------------------------------------|------------|-------------|------------|--------------------------------|------------|----------------------|------------|-----------------------------------|------------|
| **Technologies Limited**             | ** ** | **balance** | ** ** | **Bought**                     | ** ** | **Sold**             | ** ** | **exercise of options** | ** ** | **balance** | ** ** |
| **Director**                              |       |        |       |                           |       |                 |       |                              |       |   |   |
| Henry Bosch AO                            |       | 185,000     |       | 60,406                         |       | —               |       | —                            |       | 245,406 |   |
| Fred Bart                                 |       | 25,918,214  |       | —                         |       | —               |       | —                            |       | 25,918,214 |   |
| David Carruthers                          |       | —      |       | 150,000                        |       | —               |       | —                            |       | 150,000 |   |
| John S. Dawkins  AO                       |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Dr. Mervyn  Jacobson                 |       | 150,931,900 |       | —                         |       | —               |       | —                            |       | 150,931,900 |   |
| Dr. Leanne  Rowe AM                  |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| **Executive**                             |       |        |       |                           |       |                 |       |                              |       |   |   |
| Michael B.  Ohanessian                    |       | —      |       | 70,000                         |       | —               |       | —                            |       | 70,000 |   |
| Thomas G. Howitt                          |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Ross Barrow                               |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Dr. Gary  Cobon                      |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Totals                                    |       | 177,035,114 |       | 280,406                        |       | —               |       | —                            |       | 177,315,520 |   |

 

F34

----

 

**35.****          ****KEY MANAGEMENT PERSONNEL DISCLOSURES (cont.)**

 

**Shareholdings of Key Management Personnel (cont.)**

**30 June 2007**

 
| **Shares held in Genetic** | ** ** | **Opening** | ** ** | **Number of shares** | ** ** | **Acquired on** | ** ** | **Closing**                       | ** ** |
|-------------------------------------------|------------|-------------|------------|--------------------------------|------------|----------------------|------------|-----------------------------------|------------|
| **Technologies Limited**             | ** ** | **balance** | ** ** | **Bought**                     | ** ** | **Sold**             | ** ** | **exercise of options** | ** ** | **balance** | ** ** |
| **Director**                              |       |        |       |                           |       |                 |       |                              |       |   |   |
| Henry Bosch AO                            |       | 185,000     |       | —                         |       | —               |       | —                            |       | 185,000 |   |
| Dr. Mervyn  Jacobson                 |       | 150,931,900 |       | —                         |       | —               |       | —                            |       | 150,931,900 |   |
| Fred Bart                                 |       | 25,918,214  |       | —                         |       | —               |       | —                            |       | 25,918,214 |   |
| David Carruthers                          |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| John S. Dawkins  AO                       |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Robert J. Edge                            |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Prof. Deon J.  Venter (note)              |       | 25,000      |       | —                         |       | —               |       | —                            |       | 25,000 |   |
| **Executive**                             |       |        |       |                           |       |                 |       |                              |       |   |   |
| Thomas G. Howitt                          |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Dr. Gary  Cobon                      |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Geoffrey E.  Newing (note)                |       | 213,350     |       | 3,980,650                      |       | (746,654             | )          | —                            |       | 3,447,346 |   |
| Ian N.  Christensen (note)                |       | —      |       | —                         |       | —               |       | —                            |       | — |   |
| Totals                                    |       | 177,273,464 |       | 3,980,650                      |       | (746,654             | )          | —                            |       | 180,507,460 |   |

 

Note:   Prof. Venter, Mr. Newing and Mr. Christensenall resigned during the years ended June 30, 2007 and 2008.

 

Allequity transactions with Key Management Personnel, other than those arisingfrom the exercise of options, have been entered into under terms and conditionsno more favourable than those which the entity would have adopted if dealing atarm’s length.

 

**Other transactions and balances with Key Management Personneland their related parties**

Duringthe year ended June 30, 2008:

 

·                      GeneTypePty. Ltd. paid a total of $501,239 (2007: $445,384) to Bankberg Pty. Ltd., acompany associated with Dr. Mervyn Jacobson, for rent in respect of theoffice and laboratory premises in Fitzroy, Victoria that are leased by theGroup.

 

·                      TheCompany paid a total of $79,936 (2007: $nil) to Government Relations AustraliaAdvisory Pty. Ltd., a company associated with Mr. John Dawkins AO, inrespect of consulting services provided to the Group.

 

·                      TheCompany paid a total of $414,133 (2007: $nil) to Transmedia Inc., a companyassociated with Dr. Mervyn Jacobson, in respect of licensing servicesprovided to the Group.

 

·                      Dr. MervynJacobson acquired a total of 522 ordinary shares in ImmunAid Pty. Ltd., asubsidiary of the Company.  As at 30 June 2008,Dr. Jacobson held a total of 522 ordinary shares in ImmunAid Pty. Ltd.,representing approximately 4.0% of that company’s total issued capital.

 

Alltransactions with Key Management Personnel are undertaken on normal commercialterms and conditions.

 

F35

----

 

**36.****          ****SUBSIDIARIES**

 

Thefollowing diagram is a depiction of the Group structure as at June 30,2008.

 

 
| ** **                                  | ** ** | ** **                                      | ** ** | **Group interest (%)** | ** ** | **Net carrying value ($ )** | ** ** |
|---------------------------------------------|------------|-------------------------------------------------|------------|----------------------------------|------------|-------------------------------------------------|------------|
| **Name of Group company**    | ** ** | **Incorporation details**                  | ** ** | **2008**                         | ** ** | **2007**                                        | ** ** | **2008** | ** ** | **2007** | ** ** |
| * *                                    | ** ** | ** **                                      | ** ** | ** **                       | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| *Entities held directly by parent*          | ** ** | ** **                                      | ** ** | ** **                       | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| GeneType Pty.  Ltd.                         |       | 5  September 1990  Victoria, Australia     |       | 100                              | %          | 100                                             | %          | 1 |   | 1 |   |
| Genetic  Technologies Corporation Pty. Ltd. |       | 11  October 1996 N.S.W.,  Australia        |       | 100                              | %          | 100                                             | %          | 2 |   | 2 |   |
| RareCellect Pty.  Ltd.                      |       | 7 March 2001  N.S.W.,  Australia           |       | 100                              | %          | 100                                             | %          | 10 |   | 10 |   |
| GeneType AG                                 |       | 13  February 1989 Zug,  Switzerland        |       | 100                              | %          | 100                                             | %          | 26,698 |   | 26,698 |   |
| GeneType  Corporation                       |       | 18  December 1989  California, U.S.A.      |       | 100                              | %          | 100                                             | %          | — |   | — |   |
| Gtech  International Resources Limited      |       | 29  November 1968 Yukon  Territory, Canada |       | 75.8                             | %          | 75.8                                            | %          | 424,535 |   | 424,535 |   |
| ImmunAid Pty.  Ltd. (refer note below)      |       | 21  March 2001 Victoria,  Australia        |       | 69.2                             | %          | 68.2                                            | %          | — |   | — |   |
| Total carrying  value                       |       |                                            |       |                             |       |                                            |       | 451,246 |   | 451,246 |   |
| *Entities held by other subsidiaries*       |       |                                            |       |                             |       |                                            |       |   |   |   |   |
| AgGenomics Pty.  Ltd.                       |       | 15  February 2002  Victoria, Australia     |       | 50.1                             | %          | 50.1                                            | %          | 50 |   | 50 |   |

 

Duringthe year ended June 30, 2008, outstanding loans between the Company andImmunAid Pty. Ltd. were converted into additional equity in that company.  The total amount of the loans at the time ofthe conversions was $278,175.  As aresult of the conversion, the Company increased its interest in ImmunAid Pty.Ltd. by approximately 1.0% to 69.2%.

 

**37.****          ****FINANCIAL RISK MANAGEMENT**

 

TheGroup’s activities expose it to a variety of financial risks such as market risk(including currency risk and interest rate risk), credit risk and liquidityrisk.  The Group’s overall riskmanagement program focuses on the unpredictability of financial markets andseeks to minimise potential adverse effects on the financial performance of theGroup.  The Group uses different methodsto measure different types of risk to which it is exposed.  These methods include sensitivity analysis inthe case of foreign exchange, interest rate and aging analysis for credit risk.

 

Riskmanagement is managed by the Group’s Risk Management Committee under guidanceprovided by the Board of Directors.  TheCommittee identifies and evaluates financial risks in close cooperation withthe Group’s operating units.  The Board,via its Audit Committee, provides guidance for overall risk management, as wellas policies covering specific areas, such as foreign exchange risk, interestrate risk and credit risk.

 

F36

----

 

**37.****          ****FINANCIAL RISK MANAGEMENT (cont.)**

 

The Group’sprincipal financial instruments comprise cash at bank and on hand, short-termdeposits and hire purchase liabilities. The Group has other financial assets and liabilities, such as tradereceivables and payables, which arise directly from its operations.

 

The Groupdoes not typically enter into derivative transactions, such as interest rateswaps or forward currency contracts.  Itis, and has been throughout the period under review, the Group’s policy that notrading in financial instruments shall be undertaken.  The main risks arising from the Group’sfinancial instruments are credit risk exposures, liquidity risk, interest raterisk and foreign currency risk.  Thepolicies for managing each of these risks are summarised below.

 

Details ofthe significant accounting policies and methods adopted, including the criteriafor recognition, the basis of measurement and the basis on which income andexpenses are recognised, in respect of each class of financial asset, financialliability and equity instrument are disclosed in Note 2.

 

The Groupholds the following financial instruments:

 
| ** **                      | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|---------------------------------|------------|------------|------------|------------|------------|
| ** **                      | ** ** | **$**      | ** ** | **$**      | ** ** |
| **Financial  assets**           | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| Cash at bank / on hand          |       | 5,490,846  |       | 11,303,764 |       |
| Short-term deposits             |       | 7,429,926  |       | 2,029,986  |       |
| Trade and other  receivables    |       | 1,596,738  |       | 646,946    |       |
| Performance bond and  deposits  |       | 519,117    |       | 526,898    |       |
| Available-for-sale  investments |       | 207,195    |       | 233,330    |       |
|                            |       |       |       |       |       |
| Total financial assets          |       | 15,243,822 |       | 14,740,924 |       |
|                            |       |       |       |       |       |
| **Financial  liabilities**      |       |       |       |       |       |
|                            |       |       |       |       |       |
| Trade and other payables        |       | 1,786,412  |       | 1,563,652  |       |
| Hire purchase liabilities       |       | 298,199    |       | 523,967    |       |
|                            |       |       |       |       |       |
| Total financial  liabilities    |       | 2,084,611  |       | 2,087,619  |       |

 

**Credit risk**

 

The Group’s credit risk is managed on a Group basis.  Credit risk arises from cash and cashequivalents and deposits with banks and financial institutions, as well ascredit exposures to customers, including outstanding receivables and committedtransactions.  If there is no independentrating, the Group assesses the credit quality of the customer, taking intoaccount its financial position, past experience and other factors.  Individual risk limits are set based oninternal or external ratings.  Thecompliance with credit limits by customers is regularly monitored byManagement.  Sales to retail customersare required to be settled in cash or using major credit cards, mitigatingcredit risk.  The maximum exposures tocredit risk as at June 30, 2008 in relation to each class of recognisedfinancial assets is the carrying amount of those assets, as indicated in thebalance sheet.

 

Financial assets included on the balance sheet thatpotentially subject the Group to concentration of credit risk consistprincipally of cash and cash equivalents and trade receivables.  In accordance with the guidelines included inthe Group’s Short Term Investment Policy, the Group minimizes thisconcentration of risk by placing its cash and cash equivalents with financialinstitutions that maintain superior credit ratings in order to limit the degreeof credit exposure.  For banks andfinancial institutions, only independently-rated parties with a minimum ratingof “A-1” are accepted.  The Group hasalso established guidelines relative to credit ratings, diversification andmaturities that seek to maintain safety and liquidity.  The Group does not require collateral toprovide credit to its customers, however, the majority of the Group’s customersare large, reputable organisations and, as such, the risk of credit exposure islimited.  The Group has not entered intoany transactions that qualify as a financial derivative instrument.

 

In addition, receivable balances are monitored on anongoing basis with the result that the Group’s exposure to bad debts is notsignificant.  For some trade receivables,the Group may also obtain security in the form of guarantees, deeds ofundertaking or letters of credit which can be called upon if the counterpartyis in default under the terms of the agreement.

 

Credit risk further arises in relation to financialguarantees given by the Group to certain parties in respect of obligations ofits subsidiaries.  Such guarantees areonly provided in exceptional circumstances.

 

In assessing the recoverability of intercompanyreceivables, Genetic Technologies Limited, the parent entity, raises aprovision for diminution to ensure that the carrying amount of thesereceivables does not exceed the net tangible assets of the subsidiaries.

 

F37

----

 

**37.****          ****FINANCIAL RISK MANAGEMENT (cont.)**

 

**Credit risk(cont.)**

 

An analysis of the aging of trade and other receivables andtrade and other payables is provided below:

 
| ** **                                            | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|-------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                  |       | **$**      |       | **$**      |       |
| **Trade and  other receivables**                      | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Current (less than 30  days)                          |       | 1,442,167  |       | 481,043    |       |
| 31 days to 60 days                                    |       | 23,897     |       | 77,764     |       |
| 61 days to 90 days (note)                             |       | 17,035     |       | 60,926     |       |
| Greater than 90 days (note)                           |       | 113,639    |       | 27,213     |       |
|                                                  |       |       |       |       |       |
| Total trade and other  receivables (Notes  10 and 14) |       | 1,596,738  |       | 646,946    |       |
|                                                  |       |       |       |       |       |
| **Trade and  other payables**                         |       |       |       |       |       |
|                                                  |       |       |       |       |       |
| Current (less than 30  days)                          |       | 1,655,450  |       | 1,431,817  |       |
| 31 days to 60 days                                    |       | 7,738      |       | 55,131     |       |
| 61 days to 90 days                                    |       | 1,814      |       | 63,448     |       |
| Greater than 90 days (note)                           |       | 121,410    |       | 13,256     |       |
|                                                  |       |       |       |       |       |
| Total trade and other  payables (Note 18)             |       | 1,786,412  |       | 1,563,652  |       |

 
| Note: |   | A total of $130,674 in trade and  other receivables greater than 60 days is past due, of which a total of  $121,540 had been received prior to the date of this Financial Report. The  Company considers that the remaining $9,134 is recoverable and not impaired. |
|-------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

**Market risk**

 

*Foreign currency risk*

 

The Group and the parent entity operate internationally andare exposed to foreign currency exchange risk, primarily with respect to the USdollar and Canadian dollar, through financial assets and liabilities.  It is the Group’s policy not to hedge thesetransactions as the exposure is considered to be minimal from a consolidatedoperations perspective.  Further, as theGroup incurs expenses payable in US dollars, the financial assets that are heldin US dollars provide a natural hedge for the Group.

 

Foreign exchange risk arises from planned future commercialtransactions and recognised assets and liabilities denominated in a currencythat is not the entity’s functional currency and net investments in foreignoperations.  The risk is measured usingsensitivity analysis and cash flow forecasting.

 

The Group has introduced a Foreign Exchange ManagementPolicy which was developed to establish a formal framework and procedures forthe efficient management of the financial risks that impact on GeneticTechnologies Limited through its activities outside of Australia, predominantlyin the United States.  The policy governsthe way in which the financial assets and liabilities of the Group that aredenominated in foreign currencies are managed and any risks associated withthat management are identified and addressed. Under the policy, which is to be updated on a regular basis ascircumstances dictate, the Group generally retains in foreign currency onlysufficient funds to meet the expected expenditures in that currency.  Surplus funds, if any, are converted intoAustralian dollars as soon as practicable after receipt.

 

F38

----

 

**37.****          ****FINANCIAL RISK MANAGEMENT (cont.)**

 

**Market risk(cont.)**

 

*Foreign currency risk (cont.)*

 

As at June 30, 2008, the Group held the followingfinancial assets and liabilities that were denominated in foreign currencies:

 
| **Consolidated**                | ** ** | **Year**   | ** ** | **United States  Dollars** | ** ** | **Canadian  Dollars** | ** ** | **European  Euro** | ** ** | **Japanese  Yen** | ** ** | **Swiss  Francs** | ** ** |
|---------------------------------|------------|------------|------------|---------------------------------|------------|-----------------------|------------|--------------------|------------|-------------------|------------|-------------------|------------|
|                            |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| **Financial  assets**           | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **            | ** ** | ** **         | ** ** | ** **        | ** ** | ** **        | ** ** |
| ** **                      | ** ** | ** ** | ** ** | ** **                      | ** ** | ** **            | ** ** | ** **         | ** ** | ** **        | ** ** | ** **        | ** ** |
| Cash at bank / on hand          |       | 2008       |       | 63,212                          |       | 437,032               |       | —             |       | 47,350            |       | 7,848             |       |
|                            |       | 2007       |       | 8,161,046                       |       | 459,508               |       | 2,977              |       | —            |       | 17,630            |       |
|                            |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| Trade and other receivables     |       | 2008       |       | 68,100                          |       | —                |       | 100,000            |       | —            |       | —            |       |
|                            |       | 2007       |       | 66,348                          |       | —                |       | 100,000            |       | —            |       | —            |       |
|                            |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| Available-for-sale  investments |       | 2008       |       | 198,120                         |       | —                |       | —             |       | —            |       | —            |       |
|                            |       | 2007       |       | 198,120                         |       | —                |       | —             |       | —            |       | —            |       |
|                            |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| Total financial assets          |       | 2008       |       | 329,432                         |       | 437,032               |       | 100,000            |       | 47,350            |       | 7,848             |       |
|                            |       | 2007       |       | 8,425,514                       |       | 459,508               |       | 102,977            |       | —            |       | 17,630            |       |
|                            |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| **Financial  liabilities**      |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| ** **                      |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| Trade and other payables        |       | 2008       |       | 134,166                         |       | 5,211                 |       | 22,531             |       | —            |       | 2,870             |       |
|                            |       | 2007       |       | 326,978                         |       | 5,438                 |       | —             |       | —            |       | 4,030             |       |
|                            |       |       |       |                            |       |                  |       |               |       |              |       |              |       |
| Total financial  liabilities    |       | 2008       |       | 134,166                         |       | 5,211                 |       | 22,531             |       | —            |       | 2,870             |       |
|                            |       | 2007       |       | 326,978                         |       | 5,438                 |       | —             |       | —            |       | 4,030             |       |

 

During the year ended June 30, 2008, the Australiandollar / US dollar exchange rate increased by 12.6%, from 0.8491 at thebeginning of the year to 0.9562 at the end of the year.  During the same period, Australian dollar /Canadian dollar exchange rate increased by 8.1%, from 0.8991 at the beginningof the year to 0.9722 at the end of the year.

 

Based on the financial instruments held at 30 June 2008,had the Australian dollar weakened / strengthened by 10% against the US dollarwith all other variables held constant, the Group’s loss for the year wouldhave been $23,000 lower / $19,000 higher (2007: $1,060,000 lower / $867,000higher), mainly as a result of changes in the values of cash and cashequivalents which are denominated in US dollars, as detailed in the abovetables.

 

Based on the financial instruments held at June 30,2008, had the Australian dollar weakened / strengthened by 10% against theCanadian dollar with all other variables held constant, the Group’s loss forthe year would have been $49,000 lower / $40,000 higher (2007: $56,000 lower /$46,000 higher), due to changes in the values of cash and cash equivalentswhich are denominated in Canadian dollars, as detailed in the above tables.

 

*Interest rate risk*

 

The Group’s main interest rate risk arises in relation toits short-term deposits with various financial institutions.  If rates were to decrease, the Group maygenerate less interest revenue from such deposits.  However, given the relatively short durationof such deposits, the associate risk is relatively minimal.  The Group also has various hire purchaseliabilities with fixed interest rates. While these rates do not vary once the contract has been executed, theGroup may be subject to interest rate movements if it were to acquireadditional assets via similar contracts in the future.

 

The Grouphas introduced a Short Term Investment Policy which was developed toefficiently manage the Group’s surplus cash and cash equivalents.  In this context, the Group adopts a prudentapproach that is tailored to cash forecasts rather than seeking high returnsthat may compromise access to funds as and when they are required.  Under the policy, the Group seeks to depositits surplus cash in a range of deposits / securities over different time framesand with different institutions in an effort to diversify its portfolio andminimise risk.

 

On a monthly basis, Management provides the Board with adetailed list of all cash and cash equivalents, showing the periods over whichthe cash has been deposited, the name and credit rating of the institutionholding the deposit and the interest rate at which has been deposited.  A comparison of interest rate movements frommonth to month and a variance to an 11am deposit rate is also provided.

 

At 30 June 2008, if interest rates had changed by +/-50 basis points from the year-end rates, with all other variables heldconstant, the Group’s loss for the year would have been $67,000 lower / higher(2007: $36,000 lower / higher), mainly as a result of higher / lower interestincome from cash and cash equivalents. Consolidated equity for the Group would have been $67,000 higher / lower(2007: $36,000 higher / lower) mainly as a result of an increase / decrease inthe fair value of cash and cash equivalents.

 

F39

----

 

**37.****          ****FINANCIAL RISK MANAGEMENT (cont.)**

 

**Market risk (cont.)**

 

*Interest rate risk (cont.)*

 

The exposure to interest rate risks and the effectiveinterest rates of financial assets and liabilities, both recognised andunrealised, for both the Group and Genetic Technologies Limited are as follows:

 
| **Consolidated**              | ** ** | **Year**   | ** ** | **Floating rate** | ** ** | **Fixed rate** | ** ** | **Carrying  amount** | ** ** | **Weighted ave.  effective rate** | ** ** | **Ave. maturity  period  days** | ** ** |
|-------------------------------|------------|------------|------------|------------------------|------------|---------------------|------------|----------------------|------------|---------------------------------------------|------------|--------------------------------------|------------|
| ** **                    | ** ** | ** ** | ** ** | **$**                  | ** ** | **$**               | ** ** | **$**                | ** ** | **%**                                       | ** ** | ** **                           | ** ** |
| **Financial  assets**         | ** ** | ** ** | ** ** | ** **             | ** ** | ** **          | ** ** | ** **           | ** ** | ** **                                  | ** ** | ** **                           | ** ** |
| ** **                    | ** ** | ** ** | ** ** | ** **             | ** ** | ** **          | ** ** | ** **           | ** ** | ** **                                  | ** ** | ** **                           | ** ** |
| Cash at bank / on hand (note) |       | 2008       |       | 5,490,846              |       | —              |       | 5,490,846            |       | 6.33                                        | %          | At call                              |       |
|                          |       | 2007       |       | 11,303,764             |       | —              |       | 11,303,764           |       | 2.89                                        | %          | At call                              |       |
|                          |       |       |       |                   |       |                |       |                 |       |                                        |       |                                 |       |
| Short-term deposits           |       | 2008       |       | —                 |       | 7,429,926           |       | 7,429,926            |       | 7.71                                        | %          | 73                                   |       |
|                          |       | 2007       |       | —                 |       | 2,029,986           |       | 2,029,986            |       | 6.20                                        | %          | 90                                   |       |
|                          |       |       |       |                   |       |                |       |                 |       |                                        |       |                                 |       |
| Performance bond /  deposits  |       | 2008       |       | —                 |       | 519,117             |       | 519,117              |       | 7.86                                        | %          | 93                                   |       |
|                          |       | 2007       |       | —                 |       | 526,898             |       | 526,898              |       | 6.93                                        | %          | 86                                   |       |
|                          |       |       |       |                   |       |                |       |                 |       |                                        |       |                                 |       |
| Totals                        |       | 2008       |       | 5,490,846              |       | 7,949,043           |       | 13,439,889           |       |                                        |       |                                 |       |
|                          |       | 2007       |       | 11,303,764             |       | 2,556,884           |       | 13,860,648           |       |                                        |       |                                 |       |
|                          |       |       |       |                   |       |                |       |                 |       |                                        |       |                                 |       |
| **Financial  liabilities**    |       |       |       |                   |       |                |       |                 |       |                                        |       |                                 |       |
| ** **                    |       |       |       |                   |       |                |       |                 |       |                                        |       |                                 |       |
| Hire purchase liabilities     |       | 2008       |       | —                 |       | 298,199             |       | 298,199              |       | 9.26                                        | %          | 914                                  |       |
|                          |       | 2007       |       | —                 |       | 523,967             |       | 523,967              |       | 7.17                                        | %          | 281                                  |       |
|                          |       |       |       |                   |       |                |       |                 |       |                                        |       |                                 |       |
| Totals                        |       | 2008       |       | —                 |       | 298,199             |       | 298,199              |       |                                        |       |                                 |       |
|                          |       | 2007       |       | —                 |       | 523,967             |       | 523,967              |       |                                        |       |                                 |       |

 
| Note:  |   | As at June 30, 2007, the Group held cash and cash  equivalents in US dollars of USD 8,161,046. Of this amount, USD 5,490,870 was  held on deposit at an interest rate of 1.65%. The remaining USD 2,670,176 was  held on deposit at an interest rate of 5.17%. Immediately after June 30,  2007, a total of USD 7,400,000 was converted into Australian dollars and  placed on deposit at an interest rate of 6.35%. |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
|   |   | All other periods in respect of financial assets are for  less than one year. In respect of the hire purchase liability, the interest  rates are fixed for the terms of the facility, which is less than one year  ($111,117) and between one and five years ($187,082).                                                                                                                                                       |

 

**Liquidity risk**

 

Prudent liquidity risk management implies maintainingsufficient cash and cash equivalents and the availability of funding through anadequate amount of committed credit facilities, such as its hire purchase andcredit card facilities.  The Groupmanages liquidity risk by continuously monitoring forecast and actual cashflows and, wherever possible, matching the maturity profiles of financialassets and liabilities.  Due to thedynamic nature of the underlying businesses, Management aims to maintainflexibility in funding by keeping committed credit lines available.  Surplus funds are generally only invested ininstruments that are tradeable in highly liquid markets.

 

The remaining contractual maturities of the financialliabilities of the Group are:

 
| ** **                   | ** ** | **2008**   | ** ** | **2007**   | ** ** |
|------------------------------|------------|------------|------------|------------|------------|
|                         |       | **$**      |       | **$**      |       |
| **Financial  liabilities**   | ** ** | ** ** | ** ** | ** ** | ** ** |
| ** **                   | ** ** | ** ** | ** ** | ** ** | ** ** |
| < 6 months                |       | 1,840,837  |       | 1,783,255  |       |
| 6 months to 12 months        |       | 56,692     |       | 257,415    |       |
| 1 year to 5 years            |       | 187,082    |       | 46,949     |       |
| > 5 years                 |       | —     |       | —     |       |
|                         |       |       |       |       |       |
| Total financial  liabilities |       | 2,084,611  |       | 2,087,619  |       |

 

F40

----

 

**37.****          ****FINANCIAL RISK MANAGEMENT (cont.)**

 

**Liquidity risk(cont.)**

 

A balanced view of cash inflows and outflows affecting theGroup is summarised in the table below:

 
| **Consolidated**                | ** ** | **Year**   | ** ** | **< 6 months** | ** ** | **6 to 12 months** | ** ** | **1 to 5  years** | ** ** | **> 5 years** | ** ** | **Totals** | ** ** |
|---------------------------------|------------|------------|------------|-----------------------------|------------|-----------------------------------|------------|-----------------------------|------------|----------------------------|------------|------------|------------|
| ** **                      | ** ** | ** ** | ** ** | **$**                       | ** ** | **$**                             | ** ** | **$**                       | ** ** | **$**                      | ** ** | **$**      | ** ** |
| **Financial  assets**           | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** ** | ** ** |
| ** **                      | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** ** | ** ** |
| Cash at bank / on hand          |       | 2008       |       | 5,490,846                   |       | —                            |       | —                      |       | —                     |       | 5,490,846  |       |
|                            |       | 2007       |       | 11,303,764                  |       | —                            |       | —                      |       | —                     |       | 11,303,764 |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Short-term deposits             |       | 2008       |       | 7,429,926                   |       | —                            |       | —                      |       | —                     |       | 7,429,926  |       |
|                            |       | 2007       |       | 2,029,986                   |       | —                            |       | —                      |       | —                     |       | 2,029,986  |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Trade and other  receivables    |       | 2008       |       | 1,596,738                   |       | —                            |       | —                      |       | —                     |       | 1,596,738  |       |
|                            |       | 2007       |       | 646,946                     |       | —                            |       | —                      |       | —                     |       | 646,946    |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Performance bond and  deposits  |       | 2008       |       | 69,117                      |       | 450,000                           |       | —                      |       | —                     |       | 519,117    |       |
|                            |       | 2007       |       | 76,898                      |       | —                            |       | 450,000                     |       | —                     |       | 526,898    |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Available-for-sale  investments |       | 2008       |       | —                      |       | —                            |       | 207,195                     |       | —                     |       | 207,195    |       |
|                            |       | 2007       |       | —                      |       | —                            |       | 233,330                     |       | —                     |       | 233,330    |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Total financial assets          |       | 2008       |       | 14,586,627                  |       | 450,000                           |       | 207,195                     |       | —                     |       | 15,243,822 |       |
|                            |       | 2007       |       | 14,057,594                  |       | —                            |       | 683,330                     |       | —                     |       | 14,740,924 |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| **Financial  liabilities**      | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** ** | ** ** |
| ** **                      | ** ** | ** ** | ** ** | ** **                  | ** ** | ** **                        | ** ** | ** **                  | ** ** | ** **                 | ** ** | ** ** | ** ** |
| Trade and other payables        |       | 2008       |       | 1,786,412                   |       | —                            |       | —                      |       | —                     |       | 1,786,412  |       |
|                            |       | 2007       |       | 1,563,652                   |       | —                            |       | —                      |       | —                     |       | 1,563,652  |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Hire purchase liabilities       |       | 2008       |       | 54,425                      |       | 56,692                            |       | 187,082                     |       | —                     |       | 298,199    |       |
|                            |       | 2007       |       | 219,603                     |       | 257,415                           |       | 46,949                      |       | —                     |       | 523,967    |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Total financial  liabilities    |       | 2008       |       | 1,840,837                   |       | 56,692                            |       | 187,082                     |       | —                     |       | 2,084,611  |       |
|                            |       | 2007       |       | 1,783,255                   |       | 257,415                           |       | 46,949                      |       | —                     |       | 2,087,619  |       |
|                            |       |       |       |                        |       |                              |       |                        |       |                       |       |       |       |
| Net maturity                    |       | 2008       |       | 12,745,790                  |       | 393,308                           |       | 20,113                      |       | —                     |       | 13,159,211 |       |
|                            |       | 2007       |       | 12,274,339                  |       | (257,415                          | )          | 636,381                     |       | —                     |       | 12,653,305 |       |

 

The Group had access to the following undrawn borrowingfacilities as at June 30, 2008:

 
| ** **                     | ** ** | **Facility limit** | ** ** | **Amount used** | ** ** | **Amount available$** | ** ** |
|--------------------------------|------------|-------------------------|------------|----------------------|------------|-----------------------|------------|
| * *                       |       | **$**                   |       | **$**                |       | **$**                 |       |
| *Nature of facility* |       |                    |       |                 |       |                  |       |
| Master Asset Finance  Facility |       | 2,500,000               |       | (298,199             | )          | 2,201,801             |       |
| Credit card facility           |       | 145,000                 |       | (32,272              | )          | 112,728               |       |

 

Note:         The Master Asset Finance Facility may be drawn at any timeand is subject to annual review.

 

**Fair valueestimation**

 

As at June 30, 2008, the Group’s available-for-saleinvestments have been recognised at their net fair values.  The following methods and assumptions areused to determine the net fair values of financial assets and liabilities:

 

*Cash and cash equivalents*:the carrying amount approximates fair value due to their short term tomaturity.

*Trade and other receivables*:the carrying amount approximates fair value.

*Consumables*:the carrying amount approximates fair value.

*Performance bond and deposits*:the carrying amount approximates fair value due to its short term to maturity.

*Unlisted shares*:the carrying amount has been written down to recoverable amount whichapproximates fair value.

*Trade and other payables*:the carrying amount approximates fair value.

*Accrued expenses*:the carrying amount approximates fair value.

*Hire purchase liabilities*:the carrying amount approximates fair value.

 

F41

----

 

**38.****   ****AUDITORS’ REMUNERATION**

 
| ** **                                       | ** ** | **2008** | ** ** | **2007** | ** ** | **2006** | ** ** |
|--------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| ** **                                       |       | $        |       | **$**    |       | **$**    |       |
| **Audit services**                               |       |     |       |     |       |     |       |
| ** **                                       |       |     |       |     |       |     |       |
| Ernst & Young  Australia in respect of: |       |     |       |     |       |     |       |
| Audit of the Company’s  Financial Report    |       | 177,500  |       | 410,274  |       | 403,918  |       |
|                                             |       |     |       |     |       |     |       |
| Other audit firms in  respect of:                |       |     |       |     |       |     |       |
| Audit of the Financial  Reports of subsidiaries  |       | 8,241    |       | 9,158    |       | 8,120    |       |
|                                             |       |     |       |     |       |     |       |
| Total remuneration in  respect of audit services |       | 185,741  |       | 419,432  |       | 412,038  |       |
|                                             |       |     |       |     |       |     |       |
| **Non-audit  services**                          |       |     |       |     |       |     |       |
| ** **                                       |       |     |       |     |       |     |       |
| Ernst & Young  Australia in respect of: |       |     |       |     |       |     |       |
| Tax advice and compliance  services              |       | 38,350   |       | 55,095   |       | 79,120   |       |
|                                             |       |     |       |     |       |     |       |
| Total auditors’  remuneration               |       | 224,091  |       | 474,527  |       | 491,158  |       |

 

**39.****          ****SUBSEQUENT EVENTS**

 

On July 22,2008, the Company acquired 100% of the issued capital of Frozen Puppies Dot ComPty. Ltd. (“FPDC”), Australia’s foremost provider of canine reproductiveservices.  Under the terms of theAgreement between the Company and FPDC, Genetic Technologies Limited (“GTG”)acquired 100% of the issued share capital of FPDC in return for the issue tothe FPDC shareholders of 12,254,902 ordinary shares in GTG and the payment of$153,160 in cash.  In other terms of theacquisition, GTG advanced $346,840 in loan funds to FPDC to enable shareholderloans to be repaid and Employment Agreements were executed between the Companyand the five principals of FPDC. Voluntary Restriction Agreements were also executed with all former FPDCshareholders.  As a result, 80% of the12,254,902 GTG shares that were issued as part of the acquisition are subjectto voluntary escrow and will be released from escrow in four equal tranchesafter the expiration of 6, 12, 18 and 24 months from the date of issue,respectively.

 

On August 27,2008, the Company sold its entire interest in the North Laverton Joint Ventureto its partner, Regis Resources Limited (“Regis”), in return for the payment of$100,000 in cash and 500,000 fully paid ordinary shares in Regis.  As part of the sale, the Company will alsohave returned to it a performance bond which had a face value of $68,917 as at June 30,2008 (refer Note 12).  Further, theCompany has been fully indemnified by Regis against any future rehabilitationliabilities which may arise from the exploration activities of the JointVenture undertaken up until the date of sale. This indemnification will enable the Company, during the financial yearending June 30, 2009, to fully reverse the provision of $94,987 in respectof such liabilities which has been recorded in the Company’s balance sheet asat June 30, 2008 (refer Note 21).

 

On November 5,2008, the Company received a letter from the Australian Taxation Officeadvising that a review of the Company’s available tax losses which had recentlybeen completed had been escalated to a full audit.  As at the date of these financial statements,the Company is unable to form an assessment of the likely impact, if any, ofthis audit.

 

On November 19,2008, at the Company’s Annual General Meeting of shareholders, five of theCompany’s Directors (Non–Executive Chairman Mr. Henry Bosch AO, Mr. JohnDawkins AO, Dr. Leanne Rowe AM, Mr. David Carruthers and ChiefExecutive Officer Mr. Michael Ohanessian) were removed as Directors of theCompany.  On the same day, immediatelyfollowing the AGM, Mr. Huw Jones and Mr. Sid Hack were appointed asDirectors of the Company to fill casual vacancies.  Subsequent to Mr. Ohanessian’s removalas a Director, the Company paid to him amounts totaling $370,491 under theterms of his employment agreement.

 

On November 24,2008, the Company drew down the remaining equipment credits available to itunder the Supply Agreement executed with Applera Corporation (refer Note29).  The remaining credits had a valueof approximately $2.0 million on that date. Accordingly, as at the date of these financial statements, the Companyhad a contingent asset representing the remaining reagent credits available toit with a total value of $2,761,500.

 

On December 12,2008, Dr. Mervyn Jacobson resigned as a Director of the Company.

 

Apart fromthese transactions, there have been no other significant events which haveoccurred after balance date.

 

F42

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