<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>d10k.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                              Washington DC 20549
                                   ----------
                                   FORM 10-K
                                   ----------

             [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended June 30, 2001
                        Commission file number 0-26038

                                  ResMed Inc
            (Exact name of Registrant as specified in its Charter)

                                   Delaware
        (State or other jurisdiction of incorporation or organization)

                                  98-0152841
                       (IRS Employer Identification No.)

                            14040 Danielson Street
                              Poway CA 92064-6857
                           United States Of America
                   (Address of principal executive offices)

                                (858) 746-2400
             (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
                        Title of each class:                               Name of Each exchange upon which registered:
                <S>                                                        <C>
                   Common Stock, $.004 Par Value                                      New York Stock Exchange
                 Rights to Purchase Series A Junior                                   New York Stock Exchange
                   Participating Preferred Stock
</TABLE>

          Securities registered pursuant to Section 12(g) of the Act:

                                     None

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days.

                              Yes [X]     No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulations S-K (S 229.405 of this Chapter) is not contained herein and will
not be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the Form 10-K or
any amendment to this Form 10-K [_].

The aggregate market value of the voting stock held by non-affiliates of
registrant as of September 7, 2001, computed by reference to the closing sale
price of such stock on the New York Stock Exchange, was approximately
$1,105,000,000. (All directors, executive officers, and 10% stockholders of
Registrant are considered affiliates.)

At September 7, 2001, registrant had 31,870,060 shares of Common Stock, $.004
par value, issued and outstanding.

Portions of registrant's definitive Proxy Statement for its November 5, 2001
meeting of stockholders are incorporated by reference into Part III of this
report.
<PAGE>

                                  RESMED INC

                               TABLE OF CONTENTS
                            ______________________

<TABLE>
<CAPTION>
                                                                                            PAGE

<S>                                                                                     <C>
Part I   Item 1     Business                                                                  2

         Item 2     Properties                                                               15

         Item 3     Legal Proceedings                                                        16

         Item 4     Submission of Matters to a Vote of Security Holders                      16


Part II  Item 5     Market for Registrant's Common Equity and Related Stockholder            17
                    Matters

         Item 6     Selected Financial Data                                                  18

         Item 7     Management's Discussion and Analysis of Financial Condition and          19
                    Results of Financial Operation

         Item 7A    Quantitative and Qualitative Disclosures About Market and Business       24
                    Risks

         Item 8     Consolidated Financial Statements and Supplementary Data                 32

         Item 9     Changes in and Disagreements with Accountants on Accounting and          32
                    Financial Disclosure


Part III Item 10    Directors and Executive Officers of the Registrant                       33


         Item 11    Executive Compensation                                                   33

         Item 12    Security Ownership of Certain Beneficial Owners and Management           33

         Item 13    Certain Relationships and Related Transactions                           33


Part IV  Item 14    Exhibits, Consolidated Financial Statement Schedule and Reports on       34
                    Form 8-K
</TABLE>

         Sullivan, VPAP, AutoSet, Bubble Mask, Bubble Cushion, SmartStart,
         ResCap, Mirage, HumidAire, Aero-Click, minni Max nCPAP, Moritz II
         biLEVEL, Aero-Fix, Twister remove, SELFSET, MESAMIV; Poly-MESAM, MEPAL,
         Auto VPAP, AutoScan, AutoSet CS, AutoSet T, AutoView, IPAP MAX,
         ResControl, SCAN, S6, Ultra Mirage, VPAP MAX, AutoSet.com, AutoSet-
         CS.com, and ResMed are our trademarks.

         As used in this 10-K, the terms "we," "us," and "our" refer to ResMed
         Inc., a Delaware corporation, and its subsidiaries, unless otherwise
         stated.
<PAGE>

                                    PART I

Item 1  Business

        General

        We are a leading developer, manufacturer and distributor of medical
        equipment for treating, diagnosing, and managing sleep disordered
        breathing, or SDB. SDB includes obstructive sleep apnea, or OSA, and
        related respiratory disorders that occur during sleep. When we were
        formed in 1989, our primary purpose was to commercialize a treatment for
        OSA developed by Professor Colin Sullivan of the University of Sydney,
        the current Chairman of our Medical Advisory Board. This treatment,
        nasal Continuous Positive Airway Pressure, or CPAP, was the first
        successful noninvasive treatment for OSA. CPAP systems deliver
        pressurized air, typically through a nasal mask, to prevent collapse of
        the upper airway during sleep.

        Since the development of nasal CPAP, we have developed a number of
        innovative products for SDB, including flow generators, diagnostic
        products, mask systems, headgear and other accessories. Our growth has
        been fueled by a productive research and product development effort,
        geographic expansion, and increased awareness of SDB as a significant
        health concern among physicians and patients. In February 2001, we
        acquired MAP Medizin-Technologie GmbH, or MAP. MAP is a leading German
        designer, manufacturer and distributor of medical devices for the
        diagnosis and treatment of SDB, with a particular focus on OSA. This
        acquisition enhances our position in Europe, particularly in Germany,
        the second largest market worldwide for OSA products.

        We employ over 950 people and sell our products in over 60 countries
        through a combination of wholly owned subsidiaries and independent
        distributors.

        Corporate History

        ResMed Inc, a Delaware corporation, was formed in March 1994 as the
        ultimate holding company for our Australian, European and United States
        operating subsidiaries. On June 1, 1995, we completed an initial public
        offering of common stock and on June 2, 1995 our common stock commenced
        trading on The NASDAQ National Market. On September 30, 1999 we
        transferred our principal public listing to the New York Stock Exchange,
        trading under the ticker symbol RMD. On November 25, 1999, we
        established a secondary listing of our shares as Chess Depositary
        Instruments, or CDIs, on the Australian Stock Exchange, also under the
        symbol RMD. Ten CDIs on the ASX represent one share of our common stock
        on the NYSE.

        Our Australian subsidiary, ResMed Holdings Limited, was originally
        organized in 1989 by Dr. Peter Farrell to acquire from Baxter Center for
        Medical Research Pty Limited, or Baxter, the rights to certain
        technology relating to CPAP treatment as well as Baxter's existing CPAP
        device business. Baxter had sold CPAP devices in Australia since 1988,
        having acquired the rights to the technology in 1987 from Dr. Colin
        Sullivan.

        In addition to acquiring MAP in February 2001, we also acquired the
        distribution businesses of Dieter W. Priess Medtechnik, Premium Medical
        SARL, Innovmedics Pte Ltd and EINAR Egnell AB, our German, French,
        Singaporean and Swedish distributors, on February 7, 1996, June 12,
        1996, November 1, 1997 and January 31, 2000, respectively. During the
        1999 fiscal year we made an equity investment in Flaga hf, based in
        Iceland. We now market Flaga's polysomnographic products under the Embla
        and Embletta label in the United States and selected other markets.

                                       2
<PAGE>

      The Market

      Sleep is a complex neurological process that includes two distinct states:
      rapid eye movement, or REM, sleep and non-rapid eye movement, or non-REM,
      sleep. REM sleep, which is about 20-25% of total sleep experienced by
      adults, is characterized by a high level of brain activity, bursts of
      rapid eye movement, increased heart and respiration rates, and paralysis
      of many muscles. Non-REM sleep is subdivided into four stages that
      generally parallel sleep depth; stage 1 is the lightest and stage 4 is the
      deepest.

      The upper airway has no rigid support and is held open by active
      contraction of upper airway muscles. Normally, during REM sleep and deeper
      levels of non-REM sleep, upper airway muscles relax and the airway
      narrows. Individuals with narrow upper airways or poor muscle tone are
      prone to temporary collapses of the upper airway during sleep, or apneas,
      or near closures of the upper airways, or hypopneas. These breathing
      irregularities result in a lowering of blood oxygen concentration, causing
      the central nervous system to react to the lack of oxygen or increased
      carbon dioxide and signaling the body to respond. Typically, the
      individual subconsciously arouses from sleep, causing the throat muscles
      to contract, opening the airway. After a few gasping breaths, blood oxygen
      levels increase and the individual can resume a deeper sleep until the
      cycle repeats itself. Sufferers of OSA typically experience ten or more
      such cycles per hour. While these awakenings greatly impair the quality of
      sleep, the individual is not normally aware of these disruptions.

      In its "Wake Up America" report to Congress in 1993, the National
      Commission on Sleep Disorders Research estimated that approximately 40
      million individuals in the United States suffer from chronic disorders of
      sleep and wakefulness, such as sleep apnea, insomnia and narcolepsy.
      According to this report, sleep apnea is the most common sleep disorder,
      affecting approximately 20 million individuals in the United States.
      Despite the high prevalence of OSA, there is a general lack of awareness
      of OSA among both the medical community and the general public. It is
      estimated that less than 10% of those afflicted by OSA know the cause of
      their fatigue or other symptoms. Health care professionals are often
      unable to diagnose OSA because they are unaware that such non-specific
      symptoms as fatigue, snoring and irritability are characteristic of OSA.

      While OSA has been diagnosed in a broad cross-section of the population,
      it is predominant among middle-aged men and those who are obese, smoke,
      consume alcohol in excess or use muscle-relaxing drugs. In addition,
      patients who are being treated for certain other conditions, including
      those undergoing dialysis treatment or suffering from diabetes, may be
      medically predisposed to OSA. Recent studies have also shown that SDB is
      associated with hypertension, the leading risk factor for the development
      of stroke and heart disease, and that over 50% of post stroke patients and
      patients with congestive heart failure have SDB.

      Sleep Disordered Breathing and Obstructive Sleep Apnea

      Sleep disordered breathing, or SDB, encompasses all physiological
      processes that cause detrimental breathing patterns during sleep.
      Manifestations include OSA, central sleep apnea, or CSA, and
      hypoventilation syndromes that occur during sleep. Hypoventilation
      syndromes are generally associated with obesity, chronic obstructive lung
      disease, neuromuscular disease and upper airway resistance changes. OSA is
      the most common form of SDB.

      Sleep fragmentation and the loss of the deeper levels of sleep caused by
      OSA can lead to excessive daytime sleepiness, reduced cognitive function,
      including memory loss and lack of concentration, depression and
      irritability. OSA sufferers also may experience an increase in heart rate
      and an elevation of blood pressure during the cycle of apneas. Several
      studies indicate that the oxygen

                                       3
<PAGE>

      desaturation, increased heart rate and elevated blood pressure caused by
      OSA may be associated with increased risk of cardiovascular morbidity and
      mortality due to angina, stroke and heart attack. Patients with OSA have
      been shown to have impaired daytime performance in a variety of cognitive
      functions including problem solving, response speed and visual motor
      coordination, and studies have linked OSA to increased occurrences of
      traffic and workplace accidents.

      Generally, an individual seeking treatment for the symptoms of OSA is
      referred by a general practitioner to a specialist for further evaluation.
      The diagnosis of OSA typically requires monitoring the patient during
      sleep at either a sleep clinic or the patient's home. During overnight
      testing, respiratory parameters and sleep patterns are monitored along
      with other vital signs such as blood pressure, heart rate and blood oxygen
      levels. These tests allow sleep clinicians to detect any sleep
      disturbances such as apneas, hypopneas or subconscious awakenings. We
      estimate that there are currently more than 2,000 sleep clinics in the
      United States, a substantial portion of which are affiliated with
      hospitals. The number of sleep clinics has expanded significantly from
      approximately 100 such facilities in 1985.

      Existing Therapies

      Prior to 1981, the primary treatment for OSA was a tracheotomy, a surgical
      procedure to cut a hole in the patient's windpipe to create a channel for
      airflow. Most recently, surgery has involved either
      uvulopalatopharyngoplasty ('UPPP'), in which surgery is performed on the
      upper airway to remove excess tissue and to streamline the shape of the
      airway, or mandibular advancement, in which the lower jaw is moved forward
      to widen the patient's airway. UPPP alone has a poor success rate;
      however, when performed in conjunction with mandibular advancement, a
      greater success rate has been claimed. This combined procedure, performed
      by highly specialized surgeons, is expensive and involves prolonged and
      often painful recovery periods.

      Nasal CPAP, by contrast, is a non-invasive means of treating OSA. Nasal
      CPAP was first used as a treatment for OSA in 1980 by Dr. Colin Sullivan,
      the Chairman of our Medical Advisory Board. CPAP systems were
      commercialized for treatment of OSA in the United States in the mid
      1980's. Today, use of nasal positive airway pressure is generally
      acknowledged as the most effective and least invasive therapy for managing
      OSA.

      During nasal CPAP treatment, a patient sleeps with a nasal mask connected
      to a small portable air flow generator that delivers room air at a
      positive pressure.  The patient breathes in air from the flow generator
      and breathes out through an exhaust port in the mask.  Continuous air
      pressure applied in this manner acts as a pneumatic splint to keep the
      upper airway open and unobstructed.

      CPAP is not a cure but a therapy for managing OSA, and therefore, must be
      used on a daily basis as long as treatment is required.  Patient
      compliance has been a major factor in the efficacy of CPAP treatment.
      Early generations of CPAP units provided limited patient comfort and
      convenience.  Patients experienced soreness from the repeated use of nasal
      masks and had difficulty falling asleep with the CPAP device operating at
      the prescribed pressure.  In more recent years, product innovations to
      improve patient comfort and compliance have been developed. These include
      more comfortable mask systems, delay timers which gradually raise air
      pressure allowing the patient to fall asleep more easily; bilevel flow
      generators, including VPAP systems, which provide different air pressures
      for inhalation and exhalation; heated humidification systems to make the
      airflow more comfortable; and autotitration devices which reduce the
      average pressure delivered during the night.

      Business Strategy

      We believe that the SDB market will continue to grow in the future due to
      a number of factors including increasing awareness of OSA, improved
      understanding of the role of SDB treatment in the

                                       4
<PAGE>

      management of cardiac, neurologic and related disorders, and an increase
      in home-based diagnosis. Our strategy for expanding our business
      operations and capitalizing on the growth of the SDB market consists of
      the following key elements:

      .  Continue Product Development and Innovation. We are committed to
         ongoing innovation in developing products for the diagnosis and
         treatment of SDB. We have been a leading innovator of products designed
         to more effectively treat apneas, increase patient comfort and
         encourage compliance with prescribed therapy. For example, in 1997 we
         introduced the Mirage Mask. This mask contains an inflatable air
         pocket, which conforms to the patient's facial contours, creating a
         more comfortable and better seal. Additionally, in 1999 we introduced
         the AutoSet T flow generator, an autotitrating device that adapts to
         the patient's breathing patterns to more effectively prevent apneas. We
         believe that continued product development and innovation are key
         factors to our ongoing success. Approximately 14% of our employees are
         devoted to research and development activities. In fiscal year 2001, we
         invested $11.1 million, or 7.2% of our revenues, in research and
         development.

      .  Expand Geographic Presence. We market our products in over 60 countries
         to sleep clinics, home health care dealers and third party payers. We
         intend to increase our sales and marketing efforts in our principal
         markets, as well as expand our presence into new geographic regions.
         For example, our acquisition of MAP enhances our position in Europe,
         particularly in Germany, the second largest market worldwide for OSA
         products.

      .  Increase Public and Clinical Awareness. We intend to continue to expand
         our existing promotional activities to increase awareness of SDB and
         our treatment alternatives. These promotional activities target the
         population with predisposition to SDB as well as primary care
         physicians and specialists, such as cardiologists, neurologists and
         pulmonologists. In addition, we also target special interest groups,
         including the National Stroke Association, the American Heart
         Association and the National Sleep Foundation.

      .  Expand into New Clinical Applications. We continually seek to identify
         new applications of our technology for significant unmet medical needs.
         SDB is associated with a number of symptoms beyond fatigue and
         irritability. In particular, recent studies have established a clinical
         association between OSA and stroke and congestive heart failure. We are
         currently developing a device, which has not been approved for sale in
         the United States, for the treatment of Cheyne-Stokes breathing in
         patients with congestive heart failure. In addition, we maintain close
         working relationships with a number of prominent physicians to explore
         new medical applications for our products and technology.

      .  Leverage the Experience of our Management Team and Medical Advisory
         Board. Our senior management team has extensive experience in the
         medical device industry in general, and in the field of SDB in
         particular. Our Medical Advisory Board is comprised of experts in the
         field of SDB, including Dr. Colin Sullivan, the inventor of nasal CPAP.
         We intend to continue to leverage the experience and expertise of these
         individuals to maintain our innovative approach to the development of
         products and increase awareness of the serious medical problems caused
         by SDB.

      Products

      Our portfolio of products for the treatment of OSA and other forms of SDB
      include flow generators, diagnostic products, mask systems, headgear and
      other accessories.

                                       5
<PAGE>

      Flow Generators
      We produce nasal CPAP, VPAP and AutoSet systems for the diagnosis,
      titration and treatment of SDB. The flow generator systems deliver
      positive airway pressure through a small nasal mask (or sometimes a full-
      face mask).  Our VPAP units deliver ultra-quiet, comfortable bilevel
      therapy. There are two preset pressures: a higher pressure as the patient
      breathes in, and a lower pressure as the patient breathes out. Breathing
      out against a lower pressure makes treatment more comfortable,
      particularly for patients who need high pressure levels or for those with
      impaired breathing ability. AutoSet systems are based on a proprietary
      technology to monitor breathing that can also be used in the diagnosis and
      treatment of OSA.  CPAP and VPAP flow generators, together with our
      diagnostic products, accounted for approximately 57%, 60% and 64% of our
      net revenues in fiscal years 2001, 2000 and 1999, respectively.

<TABLE>
<CAPTION>
        --------------------------------------------------------------------------------------------------------------
                                                                                                       Date of
        Flow Generators                                      Description                               Commercial
                                                                                                       Introduction
        --------------------------------------------------------------------------------------------------------------
        <S>                        <C>                                                                <C>
        VPAP II                    Bilevel portable device providing different pressure levels for     March 1996
                                   inhalation and exhalation, improved pressure switching and
                                   reduced noise output and spontaneous breath triggering.

        COMFORT                    Bilevel device with limited features.                               March 1996

        VPAP II ST                 Bilevel portable device with spontaneous and                        April 1996
                                   spontaneous/timed breath triggering modes of operation.

        VPAP II ST A               Bilevel device with power failure alarms.                           August 1998

        VPAP MAX                   Bilevel ventilatory support system for the treatment of adult       November 1998
                                   patients with respiratory insufficiency or respiratory failure.

        AutoSet T                  Autotitrating device which continually adjusts CPAP                 March 1999
                                   treatment pressure based on patient airway resistance.

        ResMed S6 series           Quiet, compact CPAP device with various comfort features.           June 2000

        Minni Max nCPAP            CPAP device with integrated humidification capabilities             February 2001*
                                   and low noise levels.

        Moritz II Bilevel          Bilevel portable device.                                            February 2001*
        --------------------------------------------------------------------------------------------------------------
        </TABLE>

      *Date of acquisition of MAP. The MAP products are not approved for
      marketing in the United States.

                                       6
<PAGE>

     Mask Systems

     Mask systems are one of the most important elements of an OSA treatment
     system. Masks are a primary determinant of patient comfort and as such may
     drive or impede patient compliance with therapy. We have been a consistent
     innovator in masks, improving patient comfort while minimizing size and
     weight.

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------------------------
                                                                                               Date of
     Mask Products                                  Description                                Commercial
                                                                                               Introduction
     ---------------------------------------------------------------------------------------------------------------
     <S>                   <C>                                                                 <C>
     Mirage Mask            Proprietary mask design with a contoured nasal cushion that        August 1997
                            adjusts to patient's facial contours. Quiet, light and low
                            profile.

     Mirage Full Face       Mirage-based full face mask system. Provides an effective          June 1999
     Mask                   method of applying ventilatory assist Noninvasive Positive
                            Pressure Ventilation therapy. Can be used to address mouth-
                            breathing problems in conventional bilevel or CPAP therapy.

     Ultra Mirage Mask      Advanced version of the Mirage system with reduced noise           June 2000
                            characteristics and improved forehead bridge.
     ---------------------------------------------------------------------------------------------------------------
</TABLE>

     Diagnostic Products

     We market sleep recorders for the diagnosis, titration and treatment of SDB
     in sleep clinics and hospitals. These diagnostic systems record relevant
     respiratory and sleep data, which can be analyzed by a sleep specialist or
     physician who can then tailor an appropriate OSA treatment regimen for the
     patient.

<TABLE>
<CAPTION>
     ---------------------------------------------------------------------------------------------------------------
                                                                                               Date of
     Diagnostic Products                             Description                               Commercial
                                                                                               Introduction
     ---------------------------------------------------------------------------------------------------------------
     <S>                    <C>                                                                 <C>
     AutoSet Portable II    Portable version of the AutoSet Clinical with PC processor         June 1997
     Plus                   functions.

     ResControl             Device to permit remote monitoring and adjustment of               September 1999
                            ResMed CPAP, VPAP, and AutoSet T Flow generators. An
                            internal pressure transducer enables the clinician to
                            interface with polysomnography to monitor airflow in both
                            titration and diagnostic studies.

     Embla                  Digital sleep recorder that provides comprehensive sleep           October 1999
                            diagnosis in a sleep laboratory.

     Embletta               Pocket-size digital recorder that performs ambulatory sleep        November 2000
                            studies.

     MESAM IV Portable      Portable diagnostic system that measures snore, heart rate,        February 2001*
     Diagnostic System      body position, and oxygen saturation in conjunction with
                             computer assisted analysis.

     Poly-MESAM Portable    Configurable polysomnography system adaptable to                   February 2001*
     Diagnostic System      individual sleep laboratory needs.

     MEPAL Diagnostic       Polysomnography system designed for use in the sleep               February 2001*
     System                 laboratory.

     MEPAL mobil            Ambulatory polysomnography system.                                 February 2001*
     Diagnostic System
     ---------------------------------------------------------------------------------------------------------------
</TABLE>

     *Date of acquisition of MAP. The MAP products are not approved for
     marketing in the United States.

                                       7
<PAGE>

      Accessories and Other Products

      To enhance patient comfort, convenience and compliance, we market a
      variety of other products and accessories. These products include
      humidifiers, such as the SULLIVAN HumidAire, which connect directly with
      the CPAP, VPAP and AutoSet flow generators to humidify and heat the air
      delivered to the patient. Their use prevents the drying of nasal passages
      which can cause discomfort. Other optional accessories include a cold
      passover humidifier, carry bags and breathing circuits. MAP also offers a
      range of accessories, including the Twister remote, an intelligent remote
      control for use in the sleep lab environment to set and monitor flow
      generators, the Aero-Click connection system, which allows a quick, simple
      connect/disconnect between the mask and CPAP air delivery source and the
      AeroFix headgear, for the comfortable adjustment of masks for CPAP
      therapy.


      Product Development and Clinical Trials

      We have a strong track record in innovation in the sleep market. In 1989,
      we introduced our first nasal CPAP device. Since then we have been
      committed to an ongoing program of product advancement and development.
      Currently, our product development efforts are focused on not only
      improving our current product offerings, but also expanding into new
      product applications. For example, in 1997, we introduced the Mirage Mask.
      This mask was based on the innovative Bubble Mask technology introduced in
      1991, which used the principle of air inflation of the mask cushion to
      create a more comfortable and better seal by better conforming to patient
      facial contours. Additionally, in 1999, we introduced the AutoSet T Flow
      generator, an autotitrating device that adapts to the patient's breathing
      patterns to effectively prevent apneas.

      We continually seek to identify new applications of our technology for
      significant unmet medical needs. SDB is associated with a number of
      symptoms beyond fatigue and irritability. In particular, recent studies
      have established a clinical association between SDB and stroke and
      congestive heart failure. For example, we are currently developing a
      device, which has not been approved for sale in the United States, for the
      treatment of Cheyne-Stokes breathing in patients with congestive heart
      failure. We also support clinical trials in the United States, Germany,
      France, the United Kingdom and Australia.

      We consult with physicians at major sleep centers throughout the world to
      identify technological trends in the treatment of SDB. Some of these
      physicians currently serve on our Medical Advisory Board. New product
      ideas are also identified by our marketing staff, direct sales force,
      network of distributors, manufacturers' representatives, customers, and
      patients. Typically, our internal development staff then performs new
      product development.

      In fiscal years 2001, 2000 and 1999, we invested $11,146,000, $8,499,000
      and $6,542,000, respectively, on research and development.


      Sales and Marketing

      Our products are typically purchased by a home healthcare dealer who then
      sells the products to the patient. The decision to purchase our products,
      as opposed those of our competitors, is made or influenced by one or more
      of the following individuals or organizations: the prescribing physician
      and his or her staff, the home healthcare dealer, the insurer and the
      patient.

      We currently market our products in over 60 countries using a network of
      distributors, independent manufacturers' representatives and our direct
      sales force. We attempt to tailor our marketing

                                       8
<PAGE>

      approach to each national market, based on regional awareness of SDB as a
      health problem, physician referral patterns, consumer preferences and
      local reimbursement policies.

      North America and Latin America

      In the United States, our sales and marketing activities are conducted
      through a field sales organization made up of regional territory
      representatives, program development specialists and diagnostic system
      specialists, regional sales directors, and independent manufacturers'
      representatives. Our United States field sales organization markets and
      sells products to more than 4,000 home health care dealer branch locations
      throughout the United States. Our direct sales force receives a base
      salary, plus commissions, while our independent sales representatives
      receive higher commissions, but no base salary.

      We also promote and market our products directly to sleep clinics.
      Patients who are diagnosed with OSA and prescribed CPAP treatment are
      typically referred by the diagnosing sleep clinic to a home health care
      dealer to fill the prescription. The home health care dealer, in
      consultation with the referring physician, will assist the patient in
      selecting the equipment, fit the patient with the appropriate mask and set
      the flow generator pressure to the prescribed level. In the United States,
      our sales employees and manufacturers' representatives are managed by two
      regional Sales Managers, a Director of Sales and ultimately our Senior
      Vice President, U.S. Sales and Marketing.

      Our Canadian and Latin American sales are conducted through independent
      distributors. Sales in North America and Latin America accounted for 52%,
      54% and 57% of our net revenues for fiscal years 2001, 2000 and 1999,
      respectively.

      Europe

      We market our products in most major European countries. We have wholly
      owned subsidiaries in the United Kingdom, Germany, France and Sweden, and
      we use independent distributors to sell our products in other areas of
      Europe. Distributors are selected in each country based on their knowledge
      of respiratory medicine and a commitment to SDB therapy. In each country
      in which we have a subsidiary, a local senior manager is responsible for
      direct national sales. MAP conducts its sales efforts through a direct
      sales force.

      Our Executive Vice President is responsible for coordination of all
      European activities and, in conjunction with local management, the direct
      sales activity in Europe. Sales in Europe accounted for 39%, 35% and 34%
      of our total net revenues for fiscal years 2001, 2000 and 1999,
      respectively. As a result of the MAP acquisition, we expect European sales
      to increase as a percentage of total net revenues in the near future.

      Australia/Rest of World

      Marketing in Australia and the rest of the world is the responsibility of
      our Executive Vice President. Sales in Australia and the rest of the world
      accounted for 9%, 11% and 9% of our total net revenues for the fiscal
      years ended June 30, 2001, 2000 and 1999, respectively.

      Other Marketing Efforts

      In addition to our sales efforts, we work with the following organizations
      to promote public and clinical awareness of SDB and OSA:

      .  National Stroke Association: We have developed a strategic alliance
         with the National Stroke Association to increase awareness about the
         high prevalence of SDB in the stroke survivor population.

                                       9
<PAGE>

      .  American Heart Association: We are working closely with the Western
         Affiliates of the American Heart Association on a number of local
         programs to increase awareness and education about SDB. We are also in
         discussions with the national American Heart/American Stroke
         associations regarding national programs initially targeting clinicians
         on the impact of SDB on both heart disease and stroke patients, as well
         as its role in the development of hypertension, a major risk factor for
         both heart disease and stroke.

      .  National Sleep Foundation: The National Sleep Foundation is a non
         profit organization dedicated to improving public health and safety by
         raising the level of awareness and education toward sleep related
         programs and research. We have been an active corporate partner and
         have supported the National Sleep Foundation for a number of years.

      We believe that our affiliations and continued work with these
      organizations raises the awareness of SDB as a significant health concern.

      Manufacturing

      Our principal manufacturing facilities are located in Sydney, Australia
      and comprise a 120,000 square foot manufacturing and research and
      development facility. Our manufacturing operations consist primarily of
      assembly and testing of our flow generators, masks and accessories. Of the
      numerous raw materials, parts and components purchased for assembly of our
      therapeutic and diagnostic sleep disorder products, most are off-the-shelf
      items available from multiple vendors. We generally manufacture to our
      internal sales forecasts and fill orders as received. Our quality control
      group performs tests at various steps in the manufacturing cycle to ensure
      compliance with our specifications.

      Our quality management system is based upon the requirements of ISO 9001,
      EN46001 (European Medical Standards), FDA Quality System Regulations for
      medical devices (21 CFR part 820) and the Medical Device Directive
      (93/42/EEC).  Our Sydney, Australia facility is accredited to ISO 9001 and
      EN46001 and our San Diego, California facility is accredited to ISO 9002
      and EN46002.  These two sites have third party audits conducted by the ISO
      certification bodies at regular intervals.

      Our newly acquired German manufacturing operation based in Munich operates
      in a facility of approximately 24,000 square feet. This facility is
      accredited to ISO 9001 and EN46001.  The products are primarily flow
      generators that have been developed internally by a small development
      team. The manufacturing process consists of major sub-assemblies produced
      externally by sub-contractors, and final assembly and test of the finished
      product being performed in house. Appropriate quality controls monitor and
      measure product assembly and performance.

      We purchase uniquely configured components for our devices from single-
      source suppliers.  A reduction or stoppage in supply while a replacement
      supplier reconfigures its components, or while we reconfigure our
      components for the replacement part, if required, would limit our ability
      to manufacture our devices, which could result in a significant reduction
      in sales and profitability.

      Third-Party Reimbursement

      The cost of medical care in many of the countries in which we operate is
      funded in substantial part by government and private insurance programs.
      Although we do not generally receive payments for

                                       10
<PAGE>

      our products directly from these payers, our success in major markets is
      dependent upon the ability of patients to obtain adequate reimbursement
      for our products.

      In the United States, our products are purchased primarily by home health
      care dealers, hospitals or sleep clinics, which then invoice third-party
      payers directly. Domestic third-party payers include Medicare, Medicaid,
      and corporate health insurance plans. These payers may deny reimbursement
      if they determine that a device is not used in accordance with cost-
      effective treatment methods, or is experimental, unnecessary or
      inappropriate. The long-term trend towards managed health care could
      control or significantly influence the purchase of health care services
      and products, as well as legislative proposals to reform health care, may
      result in lower prices for our products.

      In the United States, we sell our products primarily to home health care
      dealers and to sleep clinics; we do not file claims and bill governmental
      programs and other third-party payers directly for reimbursement for our
      products. Nevertheless, we are still subject to laws and regulations
      relating to governmental programs, and any violation of these laws and
      regulations could result in civil and criminal penalties, including fines.

      In particular, the federal Anti-Kickback Law prohibits persons from
      knowingly and willfully soliciting, receiving, offering or providing
      remuneration, directly or indirectly, to induce either the referral of an
      individual, or the furnishing, recommending or arranging for a good or
      service, for which payment may be made under a Federal healthcare program
      such as the Medicare and Medicaid programs. The government has interpreted
      this law broadly to apply to the marketing and sales activities of
      manufacturers and distributors like us. Many states have adopted laws
      similar to the federal Anti-Kickback Law. We are also subject to other
      federal and state fraud laws applicable to payment from any third-party
      payer. These laws prohibit persons from knowingly and willfully filing
      false claims or executing a scheme to defraud any healthcare benefit
      program, including private third-party payers. These laws may apply to
      manufacturers and distributors who provide information on coverage, coding
      and reimbursement of their products to persons who bill third-party
      payers. We continuously strive to comply with these laws and believe that
      our arrangements do not violate these laws. Liability may still arise from
      the intentions or actions of the parties with whom we do business or from
      a different governmental agency interpretation of the laws.

      In some foreign markets, such as Spain, France and Germany, government
      reimbursement is currently available for purchase or rental of our
      products subject, however, to constraints such as price controls or unit
      sales limitations. In Australia and in some other foreign markets, there
      is currently limited or no reimbursement for devices that treat OSA.

      Service and Warranty

      We generally offer one-to-two year limited warranties on our flow
      generator products.  Warranties on mask systems are for 90 days.  In most
      markets, we rely on our distributors to repair our products with parts
      supplied by us.  In the United States, home health care dealers generally
      arrange shipment of products to our San Diego facility for repair.

      We receive returns of our products from the field for various reasons. We
      believe that the level of returns experienced to date is consistent with
      levels typically experienced by manufacturers of similar devices. We
      provide for warranties and returns based on historical data.

                                       11
<PAGE>

      Competition

      The markets for our products are highly competitive. We believe that the
      principal competitive factors in all of our markets are product features,
      reliability and price. Reputation and efficient distribution are also
      important factors.

      We compete on a market-by-market basis with various companies, some of
      which have greater financial, research, manufacturing and marketing
      resources than ourselves. In the United States, our principal market,
      Respironics, Inc., DeVilbiss, a division of Sunrise Medical Inc., and
      Nellcor Puritan Bennett, a subsidiary of Tyco Inc., are the primary
      competitors for our CPAP products. Our principal European competitors are
      also Respironics, DeVilbiss, and Nellcor Puritan Bennett, as well as
      regional European manufacturers. The disparity between our resources and
      those of our competitors may increase as a result of the recent trend
      towards consolidation in the health care industry. In addition, our
      products compete with surgical procedures and dental appliances designed
      to treat OSA and other SDB related respiratory conditions. The development
      of new or innovative procedures or devices by others could result in our
      products becoming obsolete or noncompetitive, resulting in a material
      adverse effect on our business, financial condition and results of
      operations.

      Any product developed by us that gains regulatory clearance will have to
      compete for market acceptance and market share. An important factor in
      such competition may be the timing of market introduction of competitive
      products. Accordingly, the relative speed with which we can develop
      products, complete clinical testing and regulatory clearance processes and
      supply commercial quantities of the product to the market are expected to
      be important competitive factors. In addition, our ability to compete will
      continue to be dependent on the extent to which we are successful in
      protecting our patents and other intellectual property.

      Patents and Proprietary Rights and Related Litigation

      Through our subsidiaries ResMed Limited and MAP Medizintechnik fur Arzt
      und Patient GmbH, we own or have licensed rights to 51 issued United
      States patents (including 13 design patents) and 102 issued foreign
      patents. In addition, there are 82 pending United States patent
      applications (including 4 design patent applications) and 197 pending
      foreign patent applications. Some of these patents and patent applications
      relate to significant aspects and features of our products. These include
      U.S. patents relating to CPAP devices, delay timer system, the Bubble
      Mask, and an automated means of varying air pressure based upon a
      patient's changing needs during nightly use, such as that employed in our
      AutoSet device.

      None of our patents is due to expire in the next five years, with the
      exception of five foreign patents due to expire in 2002 and one foreign
      patent in each of the years 2004 and 2005.  We believe that the expiration
      of these patents will not have a material adverse impact on our
      competitive position.

      We rely on a combination of patents, trade secrets, trade marks and non-
      disclosure agreements to protect our proprietary technology and rights.
      ResMed Limited is pursuing an infringement action against one of its
      competitors and is investigating possible infringement by others.  See
      Item 3 - "Legal Proceedings".

      Additional litigation may be necessary to attempt to enforce patents
      issued to us, to protect our rights, or to defend third-party claims of
      infringement by us of the proprietary rights of others.  Patent laws
      regarding the enforceability of patents vary from country to country.
      Therefore, there

                                       12
<PAGE>

      can be no assurance that patent issues will be uniformly resolved, or that
      local laws will provide us with consistent rights and benefits.

      Government Regulations

      Our products are subject to extensive regulation particularly as to
      safety, efficacy and adherence to FDA Quality System Regulation, or QSR,
      and related manufacturing standards. Medical device products are subject
      to rigorous FDA and other governmental agency regulations in the United
      States and regulations of relevant foreign agencies abroad. The FDA
      regulates the introduction, manufacture, advertising, labeling, packaging,
      marketing, distribution, and record keeping for such products, in order to
      ensure that medical products distributed in the United States are safe and
      effective for their intended use. In addition, the FDA is authorized to
      establish special controls to provide reasonable assurance of the safety
      and effectiveness of most devices. Non compliance with applicable
      requirements can result in import detentions, fines, civil penalties,
      injunctions, suspensions or losses of regulatory approvals, recall or
      seizure of products, operating restrictions, refusal of the government to
      approve product export applications or allow us to enter into supply
      contracts, and criminal prosecution.

      The FDA requires that a manufacturer introducing a new medical device or a
      new indication for use of an existing medical device obtain either a
      Section 510(k) premarket notification clearance or a premarket approval,
      or PMA, prior to it being introduced into the market. Our products
      currently marketed in the United States are marketed in reliance on 510(k)
      pre-marketing clearances as either Class I or Class II devices. The
      process of obtaining a Section 510(k) clearance generally requires the
      submission of performance data and often clinical data, which in some
      cases can be extensive, to demonstrate that the device is "substantially
      equivalent'' to a device that was on the market prior to 1976 or to a
      device that has been found by the FDA to be "substantially equivalent'' to
      such a pre-1976 device. As a result, FDA approval requirements may extend
      the development process for a considerable length of time. In addition, in
      some cases, the FDA may require additional review by an advisory panel,
      which can further lengthen the process. The PMA process, which is reserved
      for new devices that are not substantially equivalent to any predicate
      device and for high risk devices or those that are used to support or
      sustain human life, may take several years and requires the submission of
      extensive performance and clinical information.

      As a medical device manufacturer, all of our domestic and Australian
      manufacturing facilities are subject to inspection on a routine basis by
      the FDA. We believe that our design, manufacturing and quality control
      procedures are in substantial compliance with the FDA's regulatory
      requirements. MAP's facilities are not subject to FDA regulation, because
      none of MAP's products is currently marketed in the United States.

      Sales of medical devices outside the United States are subject to
      regulatory requirements that vary widely from country to country. Approval
      for sale of our medical devices in Europe is through the CE mark process.
      Our products where appropriate, are CE marked to the European Union's
      Medical Device Directive. Under the CE marketing scheme, our products are
      classified as either Class I or Class II, our devices are listed in the
      United States with FDA, in Australia with the Therapeutic Goods
      Administration, or TGA, and in Canada with Health Canada.

      Employees

      As of June 30, 2001, we have 953 employees or full time consultants, of
      which 353 persons were employed in warehousing and manufacturing, 129 in
      research and development, 276 in sales and

                                       13
<PAGE>

      marketing and 195 in administration. Of our employees and consultants, 517
      were located in Australia, 151 in the United States, 273 in Europe and 12
      in Singapore, New Zealand and Malaysia.

      We believe that the success of our business will depend, in part, on our
      ability to attract and retain qualified personnel.  None of our employees
      is covered by a collective bargaining agreement. We believe that our
      relationship with our employees is good.

      Medical Advisory Board

      Our Medical Advisory Board, or MAB, consists of physicians and scientists
      specializing in the field of sleep disordered breathing. MAB members meet
      as a group twice a year with members of our senior management and members
      of our research and marketing departments to advise us on technology
      trends in SDB and other developments in sleep disorders medicine. MAB
      members are also available to consult on an as-needed basis with our
      senior management. In alphabetical order, MAB members include:

      Claudio Bassetti, Dr. Claudio Bassetti is a Professor in the Faculty of
      Medicine, University of Zurich, where he is the Director and Vice-Chairman
      of the Neurological Clinic.  A member of the American Academy of Neurology
      and the American Sleep Disorders Association, Dr. Bassetti is also a
      member of the scientific board of the European Sleep Research Society, and
      an associate editor of 'Sleep Medicine'. He is on the editorial board of
      'Swiss Archives of Neurology and Psychiatry and has produced over 100
      publications.  Dr. Bassetti is a leader in studying the implications of
      sleep disordered breathing on stroke.

      Michael Coppola, MD, is a leading pulmonary critical care and sleep
      disorders physician in private practice in Massachusetts. He is an
      attending physician at Baystate Medical Center and Mercy Hospital in
      Springfield, MA and a Fellow of the American College of Chest Physicians.
      He is Chairman of the Massachusetts Sleep Breathing Disorders Society. He
      is also the Medical Director of Winmar Diagnostics, a sleep disordered
      breathing specialty company, and Associate Clinical Professor of Medicine
      at Tufts University School of Medicine.

      Terence M. Davidson, MD, FACS, is Professor of Surgery in the Division of
      Otolaryngology - Head and Neck Surgery at the University of California,
      San Diego, School of Medicine. He is Section Chief of Head and Neck
      Surgery at the Veterans Administration San Diego Healthcare System and
      Associate Dean for Continuing Medical Education at UCSD. He is also
      director of the UCSD Head and Neck Surgery Sleep Clinic in La Jolla, CA.

      Neil J. Douglas, MD, FRCP, is Professor of Respiratory and Sleep Medicine,
      University of Edinburgh, an Honorary Consultant Physician, Royal Infirmary
      of Edinburgh and Director of the Scottish National Sleep Laboratory. He is
      Dean of the Royal College of Physicians of Edinburgh and Vice Chairman of
      the UK Royal Colleges Committee of CME Directors and a member of the
      Working Party on Sleep Apnea of the Royal College of Physicians of London.
      He is a past Chairman of the British Sleep Society and past Secretary of
      the British Thoracic Society. He has published over 200 papers on
      breathing during sleep.

      Nicholas Hill, MD, is Professor of Medicine at Brown University and
      Director of Critical Care Services at Rhode Island Hospital and Pulmonary
      Medicine at the Miriam Hospital, both in Providence. He is a Fellow of the
      American College of Chest Physicians and a member of the Planning
      Committee for the American Thoracic Society.

                                       14
<PAGE>

       Barry J. Make, MD, is Director, Emphysema Center and Pulmonary
       Rehabilitation National Jewish Medical and Research Center, and Professor
       of Pulmonary Sciences and Critical Care Medicine of the University of
       Colorado School of Medicine. He has served on numerous national and
       international committees for respiratory and cardiovascular diseases. His
       research and clinical work has resulted in a large number of publications
       on mechanisms, treatment and rehabilitation of chronic respiratory
       disease.

       Colin Sullivan, MD, PhD, FRACP, FAA is Chairman of the MAB and the
       inventor of nasal CPAP for treating obstructive sleep apnea. He is
       Professor of Medicine and Director of the David Read Research Laboratory
       and Director of the Australian Centre for Advanced Medical Technology at
       the Sydney University Medical School. He is Head of the Centre for
       Respiratory Failure and Sleep Disorders, as well as a thoracic physician
       at the Royal Prince Alfred Hospital. He is also Academic head of the
       Pediatric Sleep Laboratory, New Children's Hospital, and Sydney
       Children's Hospital. Dr. Sullivan is a Fellow of the Royal Australian
       College of Physicians, and Fellow of the Australian Academy of Science.

       Helmut Teschler, MD, is Associate Professor and Head of the Department of
       Respiratory Medicine and Sleep Medicine, Ruhrlandklinik, Medical Faculty,
       University of Essen, Germany. He is a Fellow of each of the following
       Associations: German Pneumology Society, American Thoracic Society,
       European Respiratory Society and American Sleep Disorders Association.

       J. Woodrow Weiss, MD, is Associate Professor of Medicine and Co-Chairman
       of the Division of Sleep Medicine at Harvard Medical School, as well as
       Chief, Pulmonary & Critical Care Medicine, Beth Israel Deaconess Medical
       Center, Boston, MA.

       B. Tucker Woodson, MD, FACS, is an Associate Professor of Otolaryngology
       and Communication Sciences at the Medical College of Wisconsin. He is a
       Fellow of the American Academy of Otolaryngology - Head and Neck Surgery
       and the American College of Surgeons. Dr. Woodson is the Director of the
       Medical College of Wisconsin/Froedert Memorial Lutheran Hospital Center
       for Sleep. He is active on multiple committees for the American Academy
       of Sleep Medicine and American Academy of Otolaryngology.


Item 2 Properties

       Our principal executive offices and U.S. distribution facilities,
       consisting of approximately 144,000 square feet, are located in Poway
       (North San Diego County), California in a building we own; part of the
       building is leased to other companies. Primary manufacturing operations
       are situated in Sydney, Australia in a 120,000 square foot facility also
       owned by us.

       Sales and warehousing facilities are leased in Oxford, England;
       Moenchengladbach, Germany; Lyon, France; Trollhaettan, Sweden and
       Singapore. Prior to moving our executive offices and distribution
       facilities to Poway, California, we leased space for this purpose in San
       Diego, California. Our lease on those premises expires in 2005. In August
       2000, we began subleasing those premises to another company.

       MAP's principal offices are located in Munich Germany in a 45,000 square
       foot facility leased by us. MAP's subsidiaries also lease sales and
       warehouse facilities in Paris, Lyon and Nantes, France; Lyss,
       Switzerland; Villach, Austria and s'Hertogenbosch, The Netherlands.

                                       15
<PAGE>

Item 3 Legal Proceedings

       We are currently engaged in litigation relating to the enforcement and
       defense of certain of our patents.

       In January 1995, we filed a complaint in the United States District Court
       for the Southern District of California seeking monetary damages from and
       injunctive relief against Respironics for alleged infringement of three
       of our patents. In February 1995, Respironics filed a complaint in the
       United States District Court for the Western District of Pennsylvania
       against us seeking a declaratory judgment that Respironics does not
       infringe claims of these patents and that our patents are invalid and
       unenforceable. The two actions were combined and are proceeding in the
       United States District Court for the Western District of Pennsylvania. In
       June 1996, we filed an additional complaint against Respironics for
       infringement of a fourth ResMed patent, and that complaint was
       consolidated with the earlier action. As of this date, Respironics has
       brought three partial summary judgment motions for non-infringement of
       the ResMed patents; the Court has granted each of the motions. In
       December 1999, in response to the Court's ruling on Respironics' third
       summary judgment motion, the parties jointly stipulated to a dismissal of
       charges of infringement under the fourth ResMed patent, with us reserving
       the right to reassert the charges in the event of a favorable ruling on
       appeal. It is our intention to appeal the summary judgment rulings after
       a final judgment in the consolidated litigation has been entered in the
       District Court proceedings.

       In January 2001, MAP Medizin-Technologie GmbH filed a lawsuit in the
       Civil Chamber of Munich Court against Hofrichter GmbH seeking actual and
       exemplary monetary damages for the unauthorized and infringing use of our
       trademarks and patents. An initial decision has been made in favor of
       MAP. Hofrichter has filed an appeal and have sort Court determination
       that the MAP patents do not apply to certain Hofrichter products.

       While we are prosecuting the above actions, there can be no assurance
       that we will be successful.

       On March 31, 2000, we filed a lawsuit in the United States District court
       for the Southern District of California against MPV Truma and Tiara
       Medical Systems, Inc., seeking actual and exemplary monetary damages and
       injunctive relief for the unauthorized and infringing use of our
       trademarks, trade dress, and patents related to our Mirage mask. The
       parties reached a confidential out of court settlement on April 9, 2001.

       In May, 1995, Respironics and its Australian distributor filed a
       Statement of Claim against us and Dr. Farrell in the Federal Court of
       Australia, alleging that we engaged in unfair trade practices. The
       Statement of Claim asserted damage claims for lost profits on sales in
       the aggregate amount of approximately $1,000,000. The parties reached a
       confidential out of court settlement of this Action on April 16, 2001.


Item 4 Submission of Matters to a Vote of Security Holders

       None.

                                       16
<PAGE>

                                    PART II

Item 5  Market for Registrant's Common Equity and Related Stockholder Matters

        Our Common Stock commenced trading on June 2, 1995 on The NASDAQ
        National Market under the symbol "RESM". On September 30, 1999, we
        transferred our primary listing to the New York Stock Exchange (NYSE)
        under the symbol "RMD". The following table sets forth for the fiscal
        periods indicated the high and low closing prices for the Common Stock
        as reported by the New York Stock Exchange.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
                                                                      2001                        2000
                                                                High           Low          High         Low
                                                             ------------------------------------------------
         <S>                                                  <C>           <C>          <C>          <C>
         Quarter One, ended September 30,                      $38.38        $24.63       $17.19       $11.82
         Quarter Two, ended December 31,                        41.50         25.50        23.13        12.75
         Quarter Three, ended March 31,                         47.00         36.65        39.62        20.34
         Quarter Four, ended June 30,                           57.68         37.91        38.06        22.00
-------------------------------------------------------------------------------------------------------------
</TABLE>

        As of September 7, 2001, there were approximately 13,500 beneficial
        holders of our Common Stock. We have not paid any cash dividends on our
        common stock since prior to the initial public offering of our common
        stock and we do not currently intend to pay cash dividends in the
        foreseeable future. Management anticipates that all of our earnings and
        other cash resources, if any, will be retained for the operation and
        expansion of our business and for general corporate purposes.

        Recent Sales of Unregistered Securities

        On June 20, 2001, we issued $150.0 million of 4% convertible
        subordinated notes due 2006 to initial purchasers including Merrill
        Lynch, Pierce Fenner & Smith Incorporated, Deutsche Banc Alex. Brown
        Inc., William Blair & Company, LLC, Macquarie Bank, and UBS Warburg LLC.
        The discount to the initial purchasers on their purchase of the notes
        was $4,650,000. On July 3, 2001, we issued an additional $30.0 million
        in notes to the initial purchasers upon exercise of the initial
        purchasers' over allotment option, with an additional discount to the
        initial purchasers of $930,000. This increased the total amount of
        convertible subordinated notes issued to $180.0 million, with a total
        discount to the initial purchasers of $5,580,000.

        The notes were issued pursuant to an exemption from the registration
        requirements of the Securities and Exchange Act of 1933, as amended, or
        the Securities Act, set forth under Rule 144A of the Securities Act.
        Accordingly, the notes were offered and sold only to "qualified
        institutional buyers" as defined in Rule 144A or in offshore
        transactions outside the United States that met the requirements of Rule
        903 of Regulation S under the Securities Act.

        The notes are subject to an indenture between us and American Stock
        Transfer & Trust Company, as trustee. The notes are convertible, at the
        option of the holder, at any time on or prior to maturity, into shares
        of our common stock at a conversion price of $60.60 per share, which is
        equal to a conversion rate of 16.5017 shares per $1,000 principal amount
        of notes. The conversion price is subject to adjustment. The notes bear
        interest at 4% per year, payable semiannually on June 20 and December 20
        of each year, beginning December 20, 2001.

        We may redeem some or all of the notes at any time before June 20, 2004
        at a redemption price of $1,000 per $1,000 principal amount of notes,
        plus accrued and unpaid interest, if any, to the redemption date, if (a)
        the closing price of our common stock has exceeded 150% of the
        conversion price then in effect for at least 20 trading days within a
        period of 30 consecutive trading days ending on the trading day before
        the date of mailing of the provisional redemption notice and (b) a shelf
        registration statement covering resale of the notes and the common stock
        issuable upon conversion of the notes is effective and available for use
        and expected to remain effective and available for use for the 30 days
        following the provisional redemption date. Upon any such provisional
        redemption,

                                       17
<PAGE>

       we will make an additional payment in cash equal to $166.67 per $1,000
       principal amount of notes, less the amount of any interest actually paid
       on the notes before the provisional redemption date. We may also redeem
       some or all of the notes at any time on or after June 22, 2004, but prior
       to June 20, 2005, at a redemption price equal to 101.6% of the principal
       amount of notes redeemed and at any time after June 19, 2005, at a
       redemption price equal to 100.8% of the principal amount of notes
       redeemed, plus in any case, accrued and unpaid interest, if any, to the
       redemption date, if the closing price of our common stock has exceeded
       130% of the conversion price then in effect for at least 20 trading days
       within a period of 30 consecutive trading days ending on the trading day
       before the date of mailing of the optional redemption notice.

       The notes are general unsecured obligations and are subordinated to all
       of our existing and future senior indebtedness and will be effectively
       subordinated to all of the indebtedness and liabilities of our
       subsidiaries. The indenture governing the notes will not limit the
       incurrence by us or our subsidiaries of senior indebtedness or other
       indebtedness. The notes mature on June 20, 2006.

Item 6 Selected Financial Data

       The following table summarizes certain selected consolidated financial
       data for, and as of the end of, each of the fiscal years in the five-year
       period ended June 30, 2001. The data set forth below should be read in
       conjunction with the Consolidated Financial Statements and related Notes
       included elsewhere in this Report.

<TABLE>
<CAPTION>
                                                                                  Years Ended June 30,
        Consolidated Statement of Income Data:                       2001       2000       1999      1998      1997
                                                                          (In thousands, except per share data)
                                                                ------------------------------------------------------
        <S>                                                      <C>        <C>        <C>       <C>       <C>
        Net revenues                                              $155,156   $115,615   $88,627   $66,519   $49,180
        Cost of sales                                               50,377     36,991    29,416    23,069    20,287
                                                                ------------------------------------------------------
        Gross profit                                               104,779     78,624    59,211    43,450    28,893
                                                                ------------------------------------------------------
        Selling, general and administrative
         Expenses                                                   49,364     36,987    27,414    21,093    16,759
        Provision for restructure                                      550          -         -         -
        In-process research and development write off               17,677          -         -         -         -
        Research and development expenses                           11,146      8,499     6,542     4,994     3,807
                                                                ------------------------------------------------------

        Total operating expenses                                    78,737     45,486    33,956    26,087    20,566
                                                                ------------------------------------------------------

        Income from operations                                      26,042     33,138    25,255    17,363     8,327
                                                                ------------------------------------------------------
        Other income (expenses):
           Interest income (expense), net                             (762)       801       779     1,011     1,205
           Government grants                                            72        279       833       611       316
           Other, net                                                1,962        (52)   (2,290)   (2,873)    1,239
                                                                ------------------------------------------------------

        Total other income (expenses)                                1,272      1,028      (678)   (1,251)    2,760
                                                                ------------------------------------------------------

        Income before income taxes                                  27,314     34,166    24,577    16,112    11,087
        Income taxes                                                15,684     11,940     8,475     5,501     3,622
                                                                ------------------------------------------------------

        Net income                                                $ 11,630   $ 22,226   $16,102   $10,611   $ 7,465
                                                                ======================================================

        Basic earnings per share                                  $   0.37   $   0.74   $  0.55   $  0.37   $  0.26
                                                                ======================================================

        Diluted earnings per share                                $   0.35   $   0.69   $  0.52   $  0.35   $  0.26

        Basic shares outstanding                                    31,129     30,153    29,416    29,000    28,756

        Diluted shares outstanding                                  33,484     32,303    31,068    30,044    29,268
</TABLE>

                                       18
<PAGE>

<TABLE>
<CAPTION>
                                                              -------------------------------------------------
                                                                                As of June 30,
                                                                  2001      2000     1999     1998     1997
        Consolidated Balance Sheet Data:                                        (In thousands)
        <S>                                                      <C>      <C>       <C>      <C>      <C>
        Working capital                                           144,272  $ 47,550  $32,529  $32,759  $34,395
        Total assets                                              288,090   115,594   89,889   64,618   54,895
        Long-term debt, less current maturities                   150,000         -        -        -      274
        Total stockholders' equity                                100,366    93,972   71,647   50,773   44,625
                                                               =================================================
</TABLE>

Item 7  Management's Discussion and Analysis of Financial Condition and Results
        of Operations

        Overview

        Management's discussion and analysis of financial condition and results
        of operations should be read in conjunction with selected financial data
        and consolidated financial statements and notes, included herein.

        We design, manufacture and market equipment for the diagnosis and
        treatment of sleep disordered breathing conditions, including
        obstructive sleep apnea. Our net revenues are generated from the sale of
        our various flow generator devices, nasal mask systems, accessories and
        other products, and, to a lesser extent from royalties.

        We have invested significant resources in research and development and
        product enhancement. Since 1989, we have developed several innovations
        to the original CPAP device to increase patient comfort and to improve
        ease of product use. We have been developing products for automated
        treatment, titration and monitoring of OSA, such as the AutoSet T flow
        generator. Our research and development expenses have been subsidized in
        part by grants and tax incentives from the Australian federal
        government.

        On February 16, 2001, we acquired all of the outstanding shares of MAP.
        The total transaction was valued at approximately $70 million paid in
        cash and the assumption of bank debt. MAP designs, manufactures and
        distributes medical devices for the diagnosis and treatment of SDB, with
        a particular focus on OSA.

        The acquisition has been accounted for as a purchase and accordingly,
        the results of operations of MAP have been included in our consolidated
        financial statements from February 16, 2001. The excess of the purchase
        price over the fair market value of the net identifiable assets acquired
        of $47.1 million has been recorded as goodwill and is currently being
        amortized on a straight line basis over 20 years.

        As a consequence of the MAP acquisition, we incurred non-recurring
        acquisition charges of $550,000 for restructuring of MAP's unprofitable
        French operations and $17,677,000 for purchased in-process research and
        development.

        Purchased in-process research and development of $17,677,000 was
        expensed upon acquisition of MAP because technological feasibility of
        the products under development had not been established and no further
        alternative uses existed. The value of in process technology was
        calculated by identifying research projects in areas for which
        technological feasibility had not been established, estimating the costs
        to develop the purchased in process technology into commercially viable
        products, estimating the resulting net cash flows from such products,
        discounting the net cash flows to present value, and applying the
        reduced percentage completion of the projects thereto. The discount
        rates used in the analysis were between 27% and 33% and were based on
        the risk profile of the acquired assets.

        All purchased research and development projects related to medical
        equipment for the treatment of sleep disordered breathing, primarily
        relating to the development of mask interface systems and

                                       19
<PAGE>

        autotitrating devices for the treatment of obstructive sleep apnea and
        associated disorders. Key assumptions used in the analysis included
        gross margins ranging from 70% to 80%. As of the date of acquisition,
        the mask interface systems are expected to be completed and commercially
        available in 2002 and versions of the autotitrating devices between 2003
        and 2005. These projects have estimated costs to complete totalling
        approximately $2.0 million.

        We believe that the assumptions used to value the acquired intangible
        assets were reasonable at the time of acquisition. No assurance can be
        given, however, that the underlying assumptions used to estimate
        expected project revenues, development costs or profitability, or events
        associated with such projects, will transpire as estimated. For these
        reasons, among others, actual results may vary from the projected
        results.

        Our income tax rate is governed by the laws of the regions in which our
        income is recognized. To date, a substantial portion of our income has
        been subject to income tax in Australia where the statutory rate is 34%.
        During fiscal 2001, 2000 and 1999, our effective tax rate has fluctuated
        from approximately 34% to approximately 35%. These fluctuations have
        resulted from, and future effective tax rates will depend upon, numerous
        factors, including the amount of research and development expenditures
        for which a 125% Australian tax deduction is available, the level of
        non-deductible expenses, and the use of available net operating loss
        carryforward deductions and other tax credits or benefits available to
        us under applicable tax laws.


        Fiscal Year Ended June 30, 2001 Compared to Fiscal Year Ended June 30,
        2000

        Net revenues. Net revenues increased in fiscal 2001 to $155.2 million
        from $115.6 million in fiscal 2000, an increase of $39.5 million or 34%.
        This increase was primarily attributable to an increase in unit sales of
        our flow generators and accessories in North and Latin America where net
        revenues increased to $79.9 million from $62.7 million and in Europe,
        where net revenues increased to $60.5 million from $40.5 million. Net
        revenues were unfavorably impacted by a decline in European foreign
        exchange rates.

        Gross profit. Gross profit increased in fiscal 2001 to $104.8 million
        from $78.6 million in fiscal 2000, an increase of $26.2 million or 33%.
        The increase resulted primarily from increased unit sales during fiscal
        2001. Gross profit as a percentage of net revenues was 68%, consistent
        with fiscal 2000. Lower flow generator selling prices were offset by a
        decline in the Australian dollar, improved manufacturing efficiencies
        and increased sales of higher margin mask system units.

        Selling, general and administrative expenses. Selling, general and
        administrative expenses increased in 2001 to $49.4 million from $37.0
        million for 2000, an increase of $12.4 million or 33%. As a percentage
        of net revenues, selling, general and administrative expenses were
        steady in fiscal 2001, compared to fiscal 2000 at 32%. The gross
        increase in expenses was due primarily to an increase to 471 from 281 in
        the number of sales and administrative personnel and other expenses
        related to the increase in our sales.

        Research and development expenses. Research and development expenses
        increased in fiscal 2001 to $11.1 million from $8.5 million in fiscal
        2000, an increase of $2.6 million or 31%. As a percentage of net
        revenues, research and development expenses remained static in fiscal
        2001 at 7%. The dollar increase in research and development expenses was
        due primarily to an increase in clinical trial costs, personnel and
        external consultancy fees.

        Other income (expense). Other income (expense) improved in fiscal 2001
        to $1.3 million from $1.0 million for fiscal 2000, an increase of $0.3
        million. This improvement was due primarily to foreign currency gains
        incurred in our foreign currency hedging structures, partially offset by
        interest expense associated with the purchase of MAP. Net foreign
        currency gains for fiscal 2001 were $2.0 million compared to net foreign
        currency losses of $0.2 million in 2000.

                                       20
<PAGE>

        Income taxes. Our effective income tax rate for fiscal 2001 before MAP
        acquisition charges of $0.6 million for restructuring costs and in-
        process research and development write off of $17.7 million was 34.4%
        down from 34.9% for fiscal 2000. This reduction was primarily due to the
        reduction in Australian corporate tax rates from 36% to 34% on July 1,
        2000 and to additional research and development expenses in Australia
        for which we received a 125% deduction for tax purposes.


        Fiscal Year Ended June 30, 2000 Compared to Fiscal Year Ended June 30,
        1999

        Net revenues. Net revenues increased in fiscal 2000 to $115.6 million
        from $88.6 million in fiscal 1999, an increase of $27 million or 30%.
        This increase was primarily attributable to an increase in unit sales of
        our flow generators and accessories in the Americas where net revenues
        increased to $62.7 million from $51.0 million and, to a lesser extent,
        in Europe, where net revenues increased to $40.5 million from $30.2
        million. Net revenues were unfavorably impacted by a decline in European
        foreign exchange rates and changes in domestic reimbursement regulations
        with respect to our SULLIVAN VPAP II ST systems.

        Gross profit. Gross profit increased in fiscal 2000 to $78.6 million
        from $59.2 million in fiscal 1999, an increase of $19.4 million or 33%.
        The increase resulted primarily from increased unit sales during fiscal
        2000. Gross profit as a percentage of net revenues increased in fiscal
        2000 to 68% from 66.8% in 1999. The increase was due to improved
        manufacturing efficiencies, a decline in the Australian Dollar and
        increased sales of higher margin mask system units.

        Selling, general and administrative expenses. Selling, general and
        administrative expenses increased in 2000 to $37.0 million from $27.4
        million for 1999, an increase of $9.6 million or 35%. As a percentage of
        net revenues, selling, general and administrative expenses increased in
        fiscal 2000 to 32% from 31% for fiscal 1999. The gross increase in
        expenses was due primarily to an increase to 281 from 212 in the number
        of sales and administrative personnel and other expenses related to the
        increase in our sales.

        Research and development expenses. Research and development expenses
        increased in fiscal 2000 to $8.5 million from $6.5 million in fiscal
        1999, an increase of $2.0 million or 30%. As a percentage of net
        revenues, research and development expenses remained static in fiscal
        2000 at 7.4%. The dollar increase in research and development expenses
        was due primarily to an increase in research and development equipment,
        personnel and external consultancy fees.

        Other income (expense). Other income (expense) improved in fiscal 2000
        to $1.0 million from a loss of $0.7 million for fiscal 1999, a change of
        $1.7 million. This improvement was due primarily to reduced losses
        incurred in our foreign currency hedging structures, partially offset by
        reduced government grants. Net foreign currency losses for fiscal 2000
        were $0.2 million compared to net foreign currency losses of $2.5
        million in 1999.

        Income taxes. Our effective income tax rate for fiscal 2000 increased to
        approximately 34.9% from approximately 34.5% for fiscal 1999. This
        increase was primarily due to the high relative taxes incurred in France
        and Germany. These higher tax rates were partially offset by additional
        research and development expenses in Australia for which we received a
        125% deduction for tax purposes.

        Liquidity and Capital Resources

        As of June 30, 2001 and June 30, 2000, we had cash and cash equivalents
        and marketable securities available for sale of approximately $102.8
        million and $22.0 million, respectively. Our working capital
        approximated $144.3 million and $47.6 million, respectively, at June 30,
        2001 and 2000.

                                       21
<PAGE>

      The increase in working capital balances reflects cash received from our
      $150 million subordinated convertible note issuance that occurred on June
      20, 2001.

      We have financed our operations and capital expenditures through cash
      generated from operations and, to a lesser extent, through sales of common
      stock and our 4% convertible subordinated notes issued June 20, 2001.
      During the fiscal years ended June 30, 2001 and 2000, our operations
      generated cash of approximately $29.5 million and $20.3 million,
      respectively, primarily as a result of continued increases in net
      revenues, offset in part by increases in accounts receivable, inventory
      and prepayments.  Cash and cash equivalents and marketable securities
      available for sale increased to $102.8 million at June 30, 2001 from $22.0
      million at June 30, 2000, an increase of $80.8 million.  During fiscal
      2001 and 2000, approximately $7.9 million and $6.4 million of cash was
      received from the issue of common stock upon exercise of common stock
      options.

      Our investing activities (excluding the purchases and sales of marketable
      securities and business acquisitions) for fiscal years 2001 and 2000
      aggregated $30.6 million and $20.4 million, respectively.  The majority of
      the fiscal 2001 investing activities were for the purchase of production
      tooling and equipment, office furniture, research and development
      equipment and costs associated with the continuing installation of our
      Oracle applications computer system.  In addition, we paid $17.2 million
      associated with the purchase of the new U.S. headquarters in Poway,
      California.  As a result, our June 30, 2001 balance sheet reflects an
      increase in net property, plant and equipment to approximately $55.1
      million at June 30, 2001, from $36.6 million at June 30, 2000, an increase
      of approximately $18.5 million.

      On February 16, 2001, our wholly owned German subsidiary, ResMed
      Beteiligungs GmbH, acquired all the common stock of MAP for total
      consideration, including acquisition costs, of $55.4 million. We also
      assumed approximately $14.5 million of bank debt in connection with the
      acquisition.

      On June 20, 2001 we issued $150 million of 4% convertible subordinated
      notes due 2006; an additional $30 million of these notes were issued on
      July 3, 2001 upon exercise of the initial purchasers' over allotment
      option.  For additional discussion regarding these notes, see "Item 5 -
      Market for Registrant's Common Equity and Related Stockholder Matters" and
      note 7 to the Consolidated Financial Statements included with this report.

      The results of our international operations are affected by changes in
      exchange rates between currencies.  Changes in exchange rates may
      negatively affect our consolidated net revenue and gross profit margins
      from international operations.  We have a substantial exposure to
      fluctuations in the Australian dollar, with respect to our manufacturing
      and research activities, which is managed through foreign currency option
      contracts.

      We expect to satisfy all of our short-term liquidity requirements through
      a combination of cash on hand and cash generated from operations.

      New Accounting Pronouncements

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
      SFAS Financial Accounting Standards ("SFAS") No. 142, Goodwill and Other
      Intangible Assets.  We will adopt SFAS 142 effective July 1, 2001.  SFAS
      142 requires goodwill and intangible assets with indefinite useful lives
      to no longer be amortized, but instead be tested for impairment at least
      annually.

      SFAS 142 provides a six-month transitional period from the effective date
      of adoption for us to perform an assessment of whether there is an
      indication that goodwill is impaired. To the extent that an indication of
      impairment exists, we must perform a second test to measure the amount of
      the

                                       22
<PAGE>

      impairment. The second test must be performed as soon as possible, but no
      later than the end of the fiscal year. Any impairment measured as of the
      date of adoption will be recognized as the cumulative effect of a change
      in accounting principle. Because of the extensive effort needed to
      complete this assessment, we have not determined whether there is any
      indication that goodwill is impaired or estimated the amount of any
      potential impairment.

      Effective July 1, 2001, we will also adopt FASB SFAS No. 141, Business
      Combinations.  SFAS 141 requires that the purchase method of accounting be
      used for all business combinations initiated after June 30, 2001.  We have
      evaluated the impact of SFAS 141 and believe that it will not have a
      material impact on our results of operations, financial position or
      liquidity.

      SFAS No. 133, 'Accounting for Derivative Instruments and Hedging
      Activities', SFAS No. 137, 'Accounting for Derivative Instruments and
      Hedging Activities' - Deferral of the Effective Date of FASB Statement No.
      133 (an amendment of FASB Statement No. 133), and SFAS 138, 'Accounting
      for Certain Derivative Instruments and Certain Hedging Activities' (an
      amendment of FASB Statement No. 133) were issued by the FASB in June 1998,
      June 1999 and June 2000, respectively and were effective for our quarter
      ended September 30, 2000. SFAS 133 standardizes the accounting for
      derivative instruments, including certain derivative instruments embedded
      in other contracts. Under the standard, entities are required to carry all
      derivative instruments in the statement of financial position at fair
      value. The accounting for changes in the fair value (i.e., gains or
      losses) of a derivative instrument depends on whether it has been
      designated and qualifies as part of a hedging relationship and, if so, on
      the reason for holding it. If certain conditions are met, entities may
      elect to designate a derivative instrument as a hedge of exposures to
      changes in fair values, cash flows, or foreign currencies. If the hedged
      exposure is a fair value exposure, the gain or loss on the derivative
      instrument is recognized in earnings in the period of change together with
      the offsetting loss or gain on the hedged item attributable to the risk
      being hedged. If the hedged exposure is a cash flow exposure, the
      effective portion of the gain or loss on the derivative instrument is
      reported initially as a component of other comprehensive income (outside
      earnings) and subsequently reclassified into earnings when the forecasted
      transaction affects earnings. Any amounts excluded from the assessment of
      hedge effectiveness as well as the ineffective portion of the gain or loss
      is reported in earnings immediately. Accounting for foreign currency
      hedges is similar to the accounting for fair value and cash flow hedges.
      If the derivative instrument is not designated as a hedge, the gain or
      loss is recognized in earnings in the period of change.

      Due to the restrictive definition of hedge effectiveness contained in SFAS
      133, our hedging contracts do not have hedge effectiveness and are
      therefore marked to market with resulting gains or losses being recognized
      in earnings in the period of change.  This was consistent with our
      previous accounting policy and therefore adoption of SFAS 133 did not have
      a material impact on our financial position or results of operation.

      In December 1999, the Securities and Exchange Commission issued Staff
      Accounting Bulletin, ("SAB") No. 101 Revenue Recognition in Financial
      Statements', which was effective for the first quarter of fiscal 2001.
      SAB 101 requires, among other things, that license and other up-front fees
      be recognized over the term of the agreement, unless the fees are in
      exchange for products delivered or services performed that represent the
      culmination of a separate earnings process.  This did not have a material
      impact on our financial position or results of operation.

      In March 2000, the FASB issued FASB Interpretation No. 44 ("FIN 44"),
      Accounting for Certain Transactions Involving Stock Compensation - an
      Interpretation of Accounting Principles Board Opinion No. 25.  FIN 44 was
      generally effective July 1, 2000.  The application of FIN 44 did not have
      a material impact on our consolidated financial statements.

                                       23
<PAGE>

Item 7A Quantitative and Qualitative Disclosures about Market and Business Risks

        Foreign Currency Market Risk

        Our functional currency is the U.S. dollar although we transact business
        in various foreign currencies including a number of major European
        currencies as well as the Australian dollar. We have significant foreign
        currency exposure through both our Australian manufacturing activities
        and international sales operations.

        We have established a foreign currency hedging program using purchased
        currency options to hedge foreign-currency-denominated financial assets,
        liabilities and manufacturing expenditure. The goal of this hedging
        program is to economically guarantee or lock in the exchange rates on
        our foreign currency exposures denominated in Euro's and the Australian
        dollar. Under this program, increases or decreases in our foreign-
        currency-denominated financial assets, liabilities, and firm commitments
        are partially offset by gains and losses on the hedging instruments.

        The table below provides information about our foreign currency
        derivative financial instruments and presents such information in U.S.
        dollar equivalents. The table summarizes information on instruments and
        transactions that are sensitive to foreign currency exchange rates,
        including foreign currency call options held at June 30, 2001. The table
        presents the notional amounts and weighted average exchange rates by
        contractual maturity dates for our foreign currency derivative financial
        instruments. These notional amounts generally are used to calculate
        payments to be exchanged under the options contracts.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------

                                                                         Fiscal Year                                Fair Value
                                              --------------------------------------------------------------
                                                      2002                  2003                 Total         Assets/ (Liabilities)
        (In thousands except exchange rates)                                                                      As of June 30,
                                                                                                                  2001       2000
                                              --------------------------------------------------------------
        <S>                                   <C>                     <C>                  <C>                    <C>        <C>
        Foreign Exchange Call Options
        (Receive AUS$/Pay U.S.$)
        Option amount                             $214,000                      -              $  214,000           $ 577   $ 534
        Average contractual exchange rate      AUS $1 = USD 0.598                            AUS $1 = USD 0.598

        (Receive AUS$/Pay Euro)
        Option amount                             $  9,368                  $ 384              $    9,752           $  20   $ 367
        Average contractual exchange rate     AUS $1 = Euro 0.659    AUS $1 = Euro 0.667   AUS $1 = Euro 0.6597
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

        Interest Rate Risk

        We are exposed to risk associated with changes in interest rates
        affecting the return on investments.

        At June 30, 2001, we maintained a portion of our cash and cash
        equivalents in financial instruments with original maturities of three
        months or less. We maintain a short-term investment portfolio containing
        financial instruments in which the majority have original maturities of
        greater than three months but less than twelve months. These financial
        instruments, principally comprised of corporate obligations, are subject
        to interest rate risk and will decline in value if interest rates
        increase. A hypothetical 100 basis point change in interest rates during
        the twelve months ended June 30, 2001, would have resulted in
        approximately $0.2 million change in pretax income. We do not use
        derivative financial instruments in our investment portfolio.

                                       24
<PAGE>

      Forward-Looking Statements

      This report on Form 10-K contains or may contain certain forward-looking
      statements and information that are based on the beliefs of our management
      as well as estimates and assumptions made by, and information currently
      available to our management. The words "believe," "expect," "anticipate,"
      "estimate," "plan," "future" and other similar expressions generally
      identify forward-looking statements, including, in particular, statements
      regarding the development and approval of new products and product
      applications, market expansion and pending litigation. These forward-
      looking statements are made pursuant to the safe harbor provisions of the
      Private Securities Litigation Reform Act of 1995.  You are cautioned not
      to place undue reliance on these forward-looking statements. Such forward-
      looking statements reflect the views of our management at the time such
      statements are made and are subject to a number of risks, uncertainties,
      estimates and assumptions, including, without limitation, and in addition
      to those identified in the text surrounding such statements, those
      identified below and elsewhere in this report.  In addition, important
      factors to consider in evaluating such forward-looking statements include
      changes or developments in social, economic, market, legal or regulatory
      circumstances, changes in our business or growth strategy or an inability
      to execute our strategy due to changes in our industry or the economy
      generally, the emergence of new or growing competitors, the actions or
      omissions of third parties, including suppliers, customers, competitors
      and governmental authorities, and various other factors. Should any one or
      more of these risks or uncertainties materialize, or the underlying
      estimates or assumptions prove incorrect, actual results may vary
      significantly from those expressed in such forward-looking statements, and
      there can be no assurance that the forward-looking statements contained in
      this report will in fact occur.

      The risks and uncertainties that may affect our business, financial
      condition or results of operations include the following:

      Our inability to compete successfully in our markets may harm our
      business.

      The markets for our SDB products are highly competitive and are
      characterized by frequent product improvements and evolving technology.
      Our ability to compete successfully depends, in part, on our ability to
      develop innovative new products and to be the first to market with those
      products. The development of innovative new products by our competitors or
      the discovery of alternative treatments or potential cures for the
      conditions that our products treat could result in our products becoming
      noncompetitive or obsolete.

      Additionally, some of our competitors have greater financial, research and
      development, manufacturing and marketing resources than we do. The past
      several years have seen a trend towards consolidation in the health care
      industry and in the markets for our products. Industry consolidation could
      result in greater competition if our competitors combine their resources
      or if our competitors are acquired by other companies with greater
      resources than ours. This competition could increase pressure on us to
      reduce the selling prices of our products or could cause us to increase
      our spending on research and development and sales and marketing. If we
      are unable to develop innovative new products, maintain competitive
      pricing, and offer products that consumers perceive to be as reliable as
      those of our competitors, our sales or gross margins could decrease which
      would harm our business.

                                       25
<PAGE>

      Our business depends on our ability to market effectively to dealers of
      home health care products and sleep clinics.

      We market our products primarily to home health care dealers and to sleep
      clinics that diagnose OSA and other sleep disorders. We believe that home
      health care dealers and sleep clinics play a significant role in
      determining which brand of CPAP product a patient will use. For example,
      in the United States, when a physician at a sleep clinic prescribes the
      use of a CPAP product, the patient typically purchases the product from a
      home health care dealer. The physician may or may not prescribe a specific
      brand of CPAP product. If a specific brand is prescribed, we believe the
      brand prescribed depends upon the brand of CPAP product that is used in
      the sleep clinic. If a specific brand is not prescribed, the home health
      care dealer may recommend a specific brand. Occasionally, even if the
      physician prescribes a specific brand, a home health care dealer may
      substitute a competitive CPAP product for the patient. We have limited
      resources to market to the more than 2,000 U.S. sleep clinics and the more
      than 4,000 home health care dealer branch locations, most of which use,
      sell or recommend several brands of CPAP products. In addition, home
      health care dealers have experienced price pressures as government and
      third-party reimbursement have declined for home care products, and home
      health care dealers are requiring price discounts and longer periods of
      time to pay for products purchased from us. We cannot assure you that
      sleep clinic physicians will continue to prescribe our products, or that
      home health care dealers or patients will not substitute competing
      products when a prescription specifying our products has been written. The
      success of our business depends on our ability to market effectively to
      home health care dealers and sleep clinics and to ensure that our products
      are properly marketed and sold by these third parties.

      We intend to expand our marketing activities to target the population with
      a predisposition to SDB as well as primary care physicians and
      specialists. We cannot assure you that these marketing efforts will be
      successful in increasing awareness of our products.

      If we are unable to support our continued growth, our business could
      suffer.

      We have experienced rapid and substantial growth. As we continue to grow,
      the complexity of our operations increases, placing greater demands on our
      management. Our ability to manage our growth effectively depends upon our
      ability to implement and improve our financial and management information
      systems on a timely basis and to effect other changes in our business.
      Unexpected difficulties during expansion, the failure to attract and
      retain qualified employees, the failure to successfully replace or upgrade
      our management information systems, the failure to manage costs or our
      inability to respond effectively to growth or plan for future expansion
      could cause our growth to stop. If we fail to manage our growth, our
      business could suffer.

      If we fail to integrate our recent acquisition in Germany with our
      operations, our business could suffer.

      On February 16, 2001, we acquired all of the outstanding shares of MAP
      located near Munich, Germany. We are currently in the process of
      integrating our operations with those of MAP. The integration requires
      significant efforts from each company. We may find it difficult to
      integrate the operations of MAP. MAP personnel may leave MAP because of
      the acquisition and MAP licensees, distributors or suppliers may terminate
      their arrangements with MAP, or demand amended terms to these
      arrangements. Additionally, our management may have their attention
      diverted while trying to integrate the two companies. This diversion or
      these difficulties in integration could have an adverse impact on us. If
      we are not able to successfully integrate the operations of MAP, we may
      not realize the anticipated benefits of the MAP acquisition.

                                       26
<PAGE>

      We manufacture substantially all of our products outside the United States
      and sell a significant portion of our products in non-U.S. markets,
      subjecting us to various risks relating to international activities that
      could adversely affect our overall profitability.

      Sales outside North and Latin America accounted for approximately 48%,
      46%, and 43% of our net revenues in fiscal years 2001, 2000 and 1999,
      respectively. As a result of the MAP acquisition, we expect that sales
      within these areas will account for over 50% of our net revenues in the
      foreseeable future. Our sales outside of North America and our operations
      in Europe, Australia and Asia are subject to several difficulties and
      risks that are separate and distinct from those we face in our domestic
      operations, including:

      .  fluctuations in currency exchange rates;

      .  tariffs and other trade barriers;

      .  compliance with foreign medical device manufacturing regulations;

      .  reduction in third party payer reimbursement for our products;

      .  inability to obtain import licenses;

      .  changes in trade policies and in domestic and foreign tax policies;

      .  possible changes in export or import restrictions; and

      .  the modification or introduction of other governmental policies with
         potentially adverse effects.

      Fluctuations in foreign currency exchange rates could result in declines
      in our reported sales and earnings.

      Since our international sales and a significant portion of our
      manufacturing costs are denominated in local currencies and not in U.S.
      dollars, our reported sales and earnings are subject to fluctuations in
      foreign exchange rates. We had foreign currency transaction losses in
      recent periods and may have further losses in the future. We expect that
      international sales will continue to be a significant portion of our
      business and that a significant portion of our manufacturing costs will
      continue to be denominated in Australian dollars.

      Government and private insurance plans may not reimburse patients for our
      products, which could result in reductions in sales or selling prices for
      our products.

      Our ability to sell our products depends in large part on the extent to
      which reimbursement for the cost of our products will be available from
      government health administration authorities, private health insurers and
      other organizations. These third party payors are increasingly challenging
      the prices charged for medical products and services. Therefore, even if a
      product is approved for marketing, we cannot assure you that reimbursement
      will be allowed for such product or that the reimbursement amount will be
      adequate or, if adequate, will not subsequently be reduced. For example,
      in some markets, such as Spain, France and Germany, government
      reimbursement is currently available for purchase or rental of our
      products but is subject to constraints such as price controls or unit
      sales limitations. In other markets, such as Australia and the United
      Kingdom, there is currently limited or no reimbursement for devices that
      treat sleep disordered breathing related respiratory conditions.
      Additionally, future legislation or regulation concerning the health care
      industry or third party or governmental coverage and reimbursement,
      particularly, legislation or regulation limiting consumers' reimbursement
      rights may harm our business. As we continue to develop new products,
      those products will generally not qualify for reimbursement, if at all,
      until they are approved for marketing.

                                       27
<PAGE>

      In the United States, we sell our products primarily to home health care
      dealers and to sleep clinics. We do not file claims and bill governmental
      programs and other third party payors directly for reimbursement for our
      products. However, we are still subject to laws and regulations relating
      to governmental reimbursement programs, particularly Medicaid and
      Medicare.

      In particular, the federal Anti-Kickback Law prohibits persons from
      knowingly and willfully soliciting, receiving, offering or providing
      remuneration, directly or indirectly, to induce either the referral of an
      individual, or the furnishing, recommending or arranging for a good or
      service, for which payment may be made under a federal healthcare program
      such as the Medicare and Medicaid programs. The government has interpreted
      this law broadly to apply to the marketing and sales activities of
      manufacturers and distributors like us. Many states have adopted laws
      similar to the federal Anti-Kickback Law. We are also subject to other
      federal and state fraud laws applicable to payment from any third party
      payer. These laws prohibit persons from knowingly and willfully filing
      false claims or executing a scheme to defraud any healthcare benefit
      program, including private third party payors. These laws may apply to
      manufacturers and distributors who provide information on coverage,
      coding, and reimbursement of their products to persons who do bill third
      party payors. Any violation of these laws and regulations could result in
      civil and criminal penalties, including fines.

      Complying with FDA and other regulations is an expensive and time-
      consuming process, and any failure to comply could result in substantial
      penalties.

      We are subject to various federal, state, local and international
      regulations regarding the testing, manufacture, distribution, marketing,
      promotion, record keeping and reporting of our products. In particular,
      our failure to comply with FDA regulations could result in, among other
      things, recalls of our products, substantial fines and/or criminal charges
      against us and our employees.

      Product sales, introductions or modifications may be delayed or canceled
      as a result of the FDA or similar foreign regulations, which could cause
      our sales to decline.

      Before we can market or sell a new medical device in the United States, we
      must obtain FDA clearance, which can be a lengthy and time-consuming
      process. We generally receive clearance from the FDA to market our
      products in the United States under Section 510(k) of the Federal Food,
      Drug, and Cosmetic Act or our products are exempt from the 510(k)
      clearance process. We have modified some of our 510(k) approved products
      without submitting new 510(k) notices, which we do not believe were
      required. However, if the FDA disagrees with us and requires us to submit
      new 510(k) notifications for modifications to our existing products, we
      may be required to stop marketing the products while the FDA reviews the
      510(k) notification. Any new product introduction or existing product
      modification could be subjected to a lengthier, more rigorous FDA
      examination process. For example, in certain cases we may need to conduct
      clinical trials of a new product prior to submitting a 510(k) notice.
      Additionally, we may be required to obtain premarket approvals for our
      products. The requirements of these more rigorous processes could delay
      product introductions and increase the costs associated with FDA
      compliance. Marketing and sale of our products outside the United States
      are also subject to regulatory clearances and approvals, and if we fail to
      obtain these regulatory approvals, our sales could suffer. We cannot
      assure you that any new products we develop will receive required
      regulatory approvals from U.S. or foreign regulatory agencies.

                                       28
<PAGE>

      Off label marketing of our products could result in substantial penalties.

      Clearance under Section 510(k) only permits us to market our products for
      the uses indicated on the labeling cleared by the FDA. We may request
      additional label indications for our current products, and the FDA may
      deny those requests outright, require additional expensive clinical data
      to support any additional indications or impose limitations on the
      intended use of any cleared products as a condition of clearance. If the
      FDA determines that we have marketed our products for off label use, we
      could be subject to fines, injunctions or other penalties.

      Disruptions in the supply of components from our single source suppliers
      could result in a significant reduction in sales and profitability.

      We purchase uniquely configured components for our devices from single-
      source suppliers. We cannot assure you that a replacement supplier would
      be able to configure its components for our devices on a timely basis or,
      in the alternative, that we would be able to reconfigure our devices to
      integrate the replacement part. A reduction or stoppage in supply while a
      replacement supplier reconfigures its components, or while we reconfigure
      our components for the replacement part, would limit our ability to
      manufacture our devices, which could result in a significant reduction in
      sales and profitability. We cannot assure you that our inventories would
      be adequate to meet our production needs during any prolonged interruption
      of supply.

      Our intellectual property may not protect our products, and our products
      may infringe on the intellectual property rights of third parties.

      We rely on a combination of patents, trade secrets and non-disclosure
      agreements to protect our intellectual property. Our success depends, in
      part, on our ability to obtain and maintain United States and foreign
      patent protection for our products, their uses and our processes to
      preserve our trade secrets and to operate without infringing on the
      proprietary rights of third parties. We have a number of pending patent
      applications, and we do not know whether any patents will issue from any
      of these applications. We do not know whether any of the claims in our
      issued patents or pending applications will provide us with any
      significant protection against competitive products or otherwise be
      commercially valuable. Legal standards regarding the validity of patents
      and the proper scope of their claims are still evolving, and there is no
      consistent law or policy regarding the valid breadth of claims.
      Additionally, there may be third party patents, patent applications and
      other intellectual property relevant to our products and technology which
      are not known to us and that block or compete with our products.

      We face the risks that:

      .  third parties will infringe our intellectual property rights;

      .  our non-disclosure agreements will be breached;

      .  we will not have adequate remedies for infringement;

      .  our trade secrets will become known to or independently developed by
         our competitors; or

      .  any third parties will be issued patents that may prevent the sale of
         our products or require us to license and pay fees or royalties in
         order for us to be able to market some of our products.

      We are currently engaged in litigation relating to the enforcement and
      defense of five of our patents. Additional litigation may be necessary to
      enforce patents issued to us, to protect our proprietary

                                       29
<PAGE>

      rights, or to defend third party claims that we have infringed upon
      proprietary rights of others. The defense and prosecution of patent
      claims, including these pending claims, as well as participation in other
      inter-party proceedings, can be expensive and time consuming, even in
      those instances in which the outcome is favorable to us. If the outcome of
      any litigation or proceeding brought against us were adverse, we could be
      subject to significant liabilities to third parties, could be required to
      obtain licenses from third parties or could be required to cease sales of
      the affected products. Additionally, the laws regarding the enforceability
      of patents vary from country to country, and we cannot assure you that any
      patent issues we face will be uniformly resolved, or that local laws will
      provide us with consistent rights and benefits.

      We are subject to product liability claims that may exceed the scope and
      amount of our insurance coverage, which would expose us to liability for
      uninsured claims.

      We are subject to potential product liability claims as a result of the
      design, manufacture and marketing of medical devices. Any product
      liability claim brought against us, with or without merit, could result in
      the increase of our product liability insurance rates. In addition, we
      would have to pay any amount awarded by a court in excess of our policy
      limits. Our insurance policies have various exclusions, and thus we may be
      subject to a product liability claim for which we have no insurance
      coverage, in which case, we may have to pay the entire amount of any
      award. We cannot assure you that our insurance coverage will be adequate
      or that all claims brought against us will be covered by our insurance.
      Insurance varies in cost and can be difficult to obtain, and we cannot
      assure you that we will be able to obtain insurance in the future on terms
      acceptable to us or at all. A successful product liability claim brought
      against us in excess of our insurance coverage, if any, may require us to
      pay substantial amounts, which could harm our business.

      Our business could suffer if we lose the services of key members of our
      management.

      We are dependent upon the continued services of key members of our senior
      management and a limited number of key employees and consultants. The loss
      of the services of any one of these individuals could significantly
      disrupt our operations. Additionally, our future success will depend,
      among other factors, on our ability to continue to hire and retain the
      necessary qualified scientific, technical and managerial personnel. We
      compete for such personnel with numerous other companies, academic
      institutions and organizations.

      Our quarterly operating results are subject to fluctuation for a variety
      of reasons.

      Our operating results have, from time to time, fluctuated on a quarterly
      basis and may be subject to similar fluctuations in the future. These
      fluctuations may result from a number of factors, including:

      .  the introduction of new products by us or our competitors;

      .  the geographic mix of product sales;

      .  the success of our marketing efforts in new regions;

      .  changes in third party reimbursement;

      .  timing of regulatory clearances and approvals;

      .  timing of orders by distributors;

      .  expenditures incurred for research and development;

      .  competitive pricing in different regions;

      .  seasonality;

      .  the cost and effect of promotional and marketing programs; and

      .  the effect of foreign currency transaction gains or losses.

                                       30
<PAGE>

      We are subject to an ongoing tax audit, the results of which may require
      significant tax adjustments.

      We are subject to an ongoing audit of our tax returns for the years 1995
      through 1998, which began in February 1998. The IRS may disagree with our
      tax positions on such returns, and if challenged by the IRS, our tax
      positions may not be sustained by the courts. As a result of these audits,
      we may be required to make certain tax adjustments and pay additional
      taxes and fines that may be significant and have a negative impact on our
      result of operations.

      If a natural or man made disaster strikes our manufacturing facilities, we
      will be unable to manufacture our products for a substantial amount of
      time and our sales will decline.

      We manufacture a significant portion of our products in our facilities in
      Australia. These facilities and the manufacturing equipment we use to
      produce our products would be costly to replace and could require
      substantial lead time to repair or replace. The facilities may be affected
      by natural or man made disasters and in the event it was affected by a
      disaster, we would be forced to rely on third party manufacturers.
      Although we believe we possess adequate insurance for damage to our
      property and the disruption of our business from casualties, such
      insurance may not be sufficient to cover all of our potential losses and
      may not continue to be available to us on acceptable terms, or at all.

      Delaware law, provisions in our charter and our shareholder rights plan
      could make the acquisition of our company by another company more
      difficult.

      Provisions of our certificate of incorporation may have the effect of
      delaying or preventing changes in control or management which might be
      beneficial to us or our securityholders. In particular, our board of
      directors is divided into three classes, serving for staggered three-year
      terms. Because of this classification it will require at least two annual
      meetings to elect directors constituting a majority of our board of
      directors.

      Additionally, our board of directors has the authority to issue up to
      2,000,000 shares of preferred stock and to determine the price, rights,
      preferences, privileges and restrictions, including voting rights, of
      those shares without further vote or action by the stockholders. Under our
      stockholders rights plan, we have also issued purchase rights to the
      holders of our common stock that entitle those holders to purchase our
      Series A Junior Participating Preferred Stock at a discount, under certain
      circumstances. The rights of the holders of our common stock will be
      subject to, and may be adversely affected by, the rights of the holders of
      any preferred stock that may be issued in the future. The issuance of
      preferred stock may have the effect of delaying, deferring or preventing a
      change in control, may discourage bids for our common stock at a premium
      over the market price of our common stock and may adversely affect the
      market price of our common stock and the voting and other rights of the
      holders of our common stock.

      You may not be able to enforce the judgments of U.S. courts against some
      of our assets or officers and directors.

      A substantial portion of our assets are located outside the United States.
      Additionally, two of our six directors and three of our eight officers
      reside outside the United States, along with all or a substantial portion
      of the assets of these persons. As a result, it may not be possible for
      investors to enforce judgments of U.S. courts relating to any liabilities
      under U.S. securities laws against our assets, those persons or their
      assets.  In addition, we have been advised by our Australian counsel

                                       31
<PAGE>

         that some doubt exists as to the ability of investors to pursue claims
         based on U.S. securities laws against these assets or these persons in
         Australian courts.

         The information contained in this section is not intended to be an
         exhaustive description of the risks and uncertainties inherent in our
         business or in our strategic plans. Please see Item 1 "Business" and
         Item 3 "Legal Proceedings".

Item 8   Consolidated Financial Statements and Supplementary Data

         a)  Index to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                                                                                             Page
         <S>                                                                                                <C>
         Independent Auditors' Report                                                                         F1
         Consolidated Balance Sheets as of June 30, 2001 and 2000                                             F2
         Consolidated Statements of Income for the years ended June 30, 2001, 2000 and 1999                   F3
         Consolidated Statements of Stockholders' Equity for the years ended June 30, 2001, 2000 and 1999     F4
         Consolidated Statements of Cash Flows for the years ended June 30, 2001, 2000 and 1999               F5
         Notes to Consolidated Financial Statements                                                           F6
         Schedule II - Valuation and Qualifying Accounts and Reserves                                         30
</TABLE>

         b)  Supplementary Data

         Quarterly Financial Information (unaudited)

         The quarterly results for the years ended June 30, 2001 and 2000 are
         summarized below (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                             2001
                                        ------------------------------------------------
                                         First    Second    Third      Fourth    Fiscal
                                        Quarter  Quarter   Quarter    Quarter     Year
                                        ------------------------------------------------
         <S>                           <C>       <C>      <C>         <C>      <C>
         Net revenues                   $31,082   $34,366  $ 42,680    $47,028  $155,156
         Gross profit                    21,087    23,021    28,923     31,748   104,779
         Net income (loss)                6,580     6,898   (10,194)     8,346    11,630

         Basic earnings per share       $  0.21   $  0.22    ($0.33)   $  0.27  $   0.37
         Diluted earnings per share     $  0.20   $  0.21    ($0.30)   $  0.25  $   0.35
<CAPTION>
                                                            2000
                                        ------------------------------------------------
                                         First    Second    Third      Fourth    Fiscal
                                        Quarter  Quarter   Quarter    Quarter     Year
                                        ------------------------------------------------
         <S>                           <C>       <C>       <C>        <C>      <C>
         Net revenues                   $25,945   $28,135   $29,971    $31,564  $115,615
         Gross profit                    17,721    19,531    19,819     21,553    78,624
         Net income                       4,835     5,362     5,838      6,191    22,226

         Basic earnings per share       $  0.16   $  0.18   $  0.19    $  0.20  $   0.74
         Diluted earnings per share     $  0.15   $  0.17   $  0.18    $  0.19  $   0.69
</TABLE>

          /(1)/ Per share amounts for each quarter are computed independently,
                and, due to the computation formula, the sum of the four
                quarters may not equal the year.


Item 9  Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure

        None.

                                       32
<PAGE>

                                   PART III

Item 10  Directors and Executive Officers of the Registrant

         Incorporated by reference to our definitive Proxy Statement for our
         November 5, 2001, meeting of stockholders, which will be filed with the
         Securities and Exchange Commission within 120 days after June 30, 2001.


Item 11  Executive Compensation

         Incorporated by reference to our definitive Proxy Statement for our
         November 5, 2001, meeting of stockholders, which will be filed with the
         Securities and Exchange Commission within 120 days after June 30, 2001.


Item 12  Security Ownership of Certain Beneficial Owners and Management

         Incorporated by reference to our definitive Proxy Statement for our
         November 5, 2001, meeting of stockholders, which will be filed with the
         Securities and Exchange Commission within 120 days after June 30, 2001.


Item 13  Certain Relationships and Related Transactions

         No material transactions.

                                       33
<PAGE>

                                    PART IV

Item 14   Exhibits, Consolidated Financial Statements, Schedule, and Reports on
          Form 8-K

        a)  The following documents are filed as part of this report:
            1.   Consolidated Financial Statements and Schedule

                 The consolidated financial statements and schedule of the
                 Company and its consolidated subsidiaries are set forth in the
                 "Index to Consolidated Financial Statements" under Item 8 of
                 this report.
            2.   Exhibits
                 2.1  Sale and Assignment Agreement, dated as of February 16,
                      2001 between ResMed Inc, ResMed Beteiligungs GmbH and the
                      shareholders of MAP Medizin-Technologie GmbH*
                 3.1  Certificate of Incorporation of Registrant, as amended**
                 3.2  By-laws of Registrant**
                 4.1  Form of certificate evidencing shares of Common Stock**
                 4.2  Rights agreement dated as of April 23, 1997***
                 4.3  Indenture dated as of June 20, 2001, between ResMed Inc
                      and American Stock Transfer & Trust Company

                 4.4  Registration Rights Agreement dated as of June 20, 2001,
                      by and between ResMed Inc, Merrill Lynch & Co., Merrill
                      Lynch, Pierce, Fenner & Smith Incorporated, Deutsche Banc
                      Alex Brown Inc., William Blair & Company, L.L.C.,
                      Macquarie Bank Limited and UBS Warburg LLC

                10.1  1995 Stock Option Plan**
                10.2  1997 Equity Participation Plan****
                10.3  Licensing Agreement between the University of Sydney and
                      ResMed Limited dated May 17, 1991, as amended**
                10.4  Consulting Agreement between Colin Sullivan and ResMed
                      Limited effective from 1 January 1998*****
                10.5  Loan Agreement between the Australian Trade Commission and
                      ResMed Limited dated May 3, 1994**
                10.6  Lease for 10121 Carroll Canyon Road, San Diego CA 92131-
                      1109, USA*****
                11.1  Computation of Earnings per Common Share
                21.1  Subsidiaries of the Registrant
                23.1  Independent Auditors' Consent and Report on Schedule
         --------------------
          *     Incorporated by reference to the Registrant's Report on Form 8-K
                dated March 2, 2001
          **    Incorporated by reference to the Registrant's Registration
                Statement on Form S-1 (No. 33-91094) declared effective on June
                1, 1995.
          ***   Incorporated by reference to the Registrant's Registration
                Statement on Form 8-A12G filed on April 25, 1997.
          ****  Incorporated by reference to the Registrant's 1997 Proxy
                Statement (File No. 0-26038).
          ***** Incorporated by reference to the Registrant's Report on Form
                10-K dated June 30, 1998 (File No. 0-26038)

                                       34
<PAGE>

     b)  Reports on Form 8-K

         On May 1, 2001 we filed a report on Form 8-K/A reporting Pro Forma
         Condensed Consolidated Financial Information associated with the
         acquisition, on February 16, 2001, of MAP Medizin-Technologie GmbH.

         On June 12, 2001 we filed a report on Form 8-K that announced our
         proposed private placement of $150 million of convertible subordinated
         notes and included a press release issued by us on June 11, 2001 to
         that same effect.

         On June 15, 2001, we filed a report on Form 8-K that announced we had
         entered into a purchase agreement providing for the sale to certain
         initial purchasers of $150 million of convertible subordinated notes
         (plus an additional $30 million to cover over allotments, if any). The
         report included a press release issued by us on June 14, 2001 to that
         effect. The report also announced the specific pricing for the sale of
         the convertible subordinated notes and included a press release dated
         June 15, 2001, to that effect.

                                       35
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

DATED September 20, 2001

ResMed Inc


/S/ PETER C. FARRELL
-------------------------------------------------------
Peter C. Farrell, President and Chief Executive Officer
President and Chief Executive Officer



/S/ ADRIAN M. SMITH
-------------------------------------------------------
Adrian M. Smith
Vice President Finance and Chief Financial Officer



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE                                                     TITLE                                      DATE
<S>                                                          <C>                                         <C>

/S/           PETER C. FARRELL                                Chief Executive Officer,                   September 20, 2001
---------------------------------------------
               Peter C. Farrell                               President, Chairman of the Board
                                                              (Principal Executive Officer)

/S/      CHRISTOPHER G. ROBERTS                               Director                                   September 20, 2001
---------------------------------------------
          Christopher G. Roberts

/S/            MICHAEL A. QUINN                               Director                                   September 20, 2001
---------------------------------------------
               Michael A. Quinn

/S/               GARY W. PACE                                Director                                   September 20, 2001
---------------------------------------------
                  Gary W. Pace

/S/          DONAGH MCCARTHY                                  Director                                   September 20, 2001
---------------------------------------------
              Donagh McCarthy

/S/    CHRISTOPHER BARTLETT                                   Director                                   September 20, 2001
---------------------------------------------
         Christopher Bartlett
</TABLE>
<PAGE>

                          Independent Auditors' Report


The Board of Directors and Stockholders
ResMed Inc:


We have audited the accompanying consolidated balance sheets of ResMed Inc and
subsidiaries as of June 30, 2001, and 2000, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the years
in the three-year period ended June 30, 2001.  These consolidated financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of ResMed Inc. and
subsidiaries as of June 30, 2001 and 2000, and the results of their operations
and their cash flows for each of the years in the three-year period ended June
30, 2001, in conformity with accounting principles generally accepted in the
United States of America.



/s/ KPMG LLP

KPMG LLP
San Diego, California
August 3, 2001

                                      F-1
<PAGE>

                          ResMed Inc And Subsidiaries
                          Consolidated Balance Sheets
                             June 30, 2001 and 2000
                (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                  June 30,           June 30,
                                                                                    2001               2000
                                                                         -------------------------------------
<S>                                                                         <C>                <C>
Assets
Current assets:

Cash and cash equivalents                                                          $ 40,136           $ 18,250
Marketable securities available for sale (note 3)                                    62,616              3,713
Accounts receivable, net of allowance for doubtful accounts
  of $892 and $833 at June 30, 2001 and 2000, respectively                           32,248             24,688
Inventories, net (note 4)                                                            29,994             15,802
Deferred income taxes (note 10)                                                       4,152              2,361
Prepaid expenses and other current assets                                             8,736              4,358
                                                                         -------------------------------------
Total current assets                                                                177,882             69,172
                                                                         -------------------------------------

Property, plant and equipment, net of accumulated depreciation of
$19,930 at June 30, 2001 and $13,552 at June 30, 2000 (note 5)                       55,092             36,576
Patents, net of accumulated amortization of $1,030 and $789
at June 30, 2001 and 2000, respectively                                               1,390              1,342
Goodwill, net of accumulated amortization of $3,193 and $2,003 at
June 30, 2001 and 2000, respectively                                                 47,870              5,626
Other assets                                                                          5,856              2,878
                                                                         -------------------------------------
Total assets                                                                       $288,090           $115,594
                                                                         =====================================

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                                                   $  7,971           $  5,929
Accrued expenses (note 6)                                                            16,751              9,224
Income taxes payable                                                                  8,888              6,469
                                                                         -------------------------------------
Total current liabilities                                                            33,610             21,622

Non current liabilities:
Deferred revenue                                                                      4,114                  -
Convertible subordinated notes (note 7)                                             150,000                  -
                                                                         -------------------------------------
Total non current liabilities                                                       154,114                  -

                                                                         -------------------------------------
Total liabilities                                                                   187,724             21,622
                                                                         -------------------------------------

Stockholders' equity: (note 8)
Preferred stock, $.01 par value,
2,000,000 shares authorized; none issued                                                  -                  -
Series A Junior Participating preferred stock, $0.01 par value,
250,000 shares authorized; none issued                                                    -                  -
Common stock, $.004 par value, 50,000,000 shares authorized;
Issued and outstanding 31,478,780 at June 30, 2001 and
30,593,921 at June 30, 2000                                                             126                122
Additional paid-in capital                                                           52,675             41,495
Retained earnings                                                                    77,137             65,507
Accumulated other comprehensive loss                                                (29,572)           (13,152)
                                                                         -------------------------------------
Total stockholders' equity                                                          100,366             93,972
                                                                         -------------------------------------

Commitments and contingencies (notes 13 and 16)                                           -                  -

Total liabilities and stockholders' equity                                         $288,090           $115,594
                                                                         =====================================
</TABLE>

See accompanying notes to consolidated financial statements.

                                      F-2
<PAGE>

                          ResMed Inc and Subsidiaries
                       Consolidated Statements of Income
                    Years ended June 30, 2001, 2000 and 1999
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                                               June 30,           June 30,           June 30,
                                                                                 2001               2000               1999
                                                                     --------------------------------------------------------
<S>                                                                         <C>                <C>                <C>
Net revenues                                                                   $155,156           $115,615            $88,627
Cost of sales                                                                    50,377             36,991             29,416
                                                                     --------------------------------------------------------
Gross profit                                                                    104,779             78,624             59,211
                                                                     --------------------------------------------------------

Operating expenses:
  Selling, general and administrative                                            49,364             36,987             27,414
  Provision for restructure (note 6)                                                550                  -                  -
  In-process research and development write off (note 14)                        17,677                  -                  -
  Research and development                                                       11,146              8,499              6,542
                                                                     --------------------------------------------------------
Total operating expenses                                                         78,737             45,486             33,956
                                                                     --------------------------------------------------------

Income from operations                                                           26,042             33,138             25,255
                                                                     --------------------------------------------------------

Other income (expenses):
       Interest income (expense), net                                              (762)               801                779
       Government grants                                                             72                279                833
       Other, net (note 9)                                                        1,962                (52)            (2,290)
                                                                     --------------------------------------------------------
Total other income (expenses), net                                                1,272              1,028               (678)
                                                                     --------------------------------------------------------

Income before income taxes                                                       27,314             34,166             24,577
Income taxes (note 10)                                                           15,684             11,940              8,475
                                                                     --------------------------------------------------------

Net income                                                                     $ 11,630           $ 22,226            $16,102
                                                                     ========================================================

Basic earnings per share                                                          $0.37              $0.74              $0.55
Diluted earnings per share                                                        $0.35              $0.69              $0.52

Basic shares outstanding                                                         31,129             30,153             29,416
Diluted shares outstanding                                                       33,484             32,303             31,068
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

                          ResMed Inc And Subsidiaries
                Consolidated Statements of Stockholders' Equity
                    Years ended June 30, 2001, 2000 and 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                             Accumulated
                                                                      Additional                other
                                                      Common stock     paid-in    Retained  comprehensive           Comprehensive
                                                     Shares   Amount   capital    Earnings  income (loss)    Total      Income
                                                   --------------------------------------------------------------------------------
<S>                                                  <C>       <C>    <C>         <C>       <C>            <C>      <C>
Balance, June 30, 1998                                 29,104   $117     $31,165   $27,179       $ (7,688) $ 50,773

Common stock issued on exercise of options (note 8)       512      1       2,124         -              -     2,125
Tax benefit from exercise of options                        -      -         388         -              -       388
Comprehensive income:
Net income                                                  -      -           -    16,102              -    16,102      $ 16,102
Other comprehensive income
Foreign currency translation adjustments                                                            2,259     2,259         2,259
                                                                                                                    ---------------
Comprehensive income                                                                                                     $ 18,361
                                                                                                                    ===============
                                                   --------------------------------------------------------------------------------

Balance, June 30, 1999                                 29,616    118      33,677    43,281         (5,429)   71,647

Common stock issued to consultants                         10      -         126         -              -       126
Common stock issued on exercise of options (note 8)       968      4       6,376         -              -     6,380
Tax benefit from exercise of options                        -      -       1,316         -              -     1,316
Comprehensive income:
Net income                                                  -      -           -    22,226              -    22,226      $ 22,226
Other comprehensive income
Foreign currency translation adjustments                                                           (7,723)   (7,723)       (7,723)
                                                                                                                    ---------------
Comprehensive income                                                                                                     $ 14,503
                                                                                                                    ===============
                                                   --------------------------------------------------------------------------------

Balance, June 30, 2000                                 30,594   $122      41,495    65,507        (13,152)   93,972

Common stock issued on exercise of options (note 8)       885      4       7,939         -              -     7,943
Tax benefit from exercise of options                        -      -       3,241         -              -     3,241
Comprehensive income:
Net income                                                  -      -           -    11,630              -    11,630      $ 11,630
Other comprehensive income
Foreign currency translation adjustments                    -      -           -         -        (16,420)  (16,420)      (16,420)
                                                                                                                    ---------------
Comprehensive income/(loss)                                                                                              $ (4,790)
                                                                                                                    ===============

Balance, June 30, 2001                                 31,479   $126     $52,675   $77,137       $(29,572) $100,366
                                                     ==============================================================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>

                          ResMed Inc And Subsidiaries
                     Consolidated Statements of Cash Flows
                    Years ended June 30, 2001, 2000 and 1999
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                                June 30,           June 30,           June 30,
                                                                                  2001               2000               1999
                                                                     ---------------------------------------------------------
<S>                                                                         <C>                 <C>                <C>
Cash flows from operating activities:
   Net income                                                                  $  11,630           $ 22,226           $ 16,102
      Adjustments to reconcile net income to net cash provided
      by operating activities:
      Depreciation and amortization                                                7,015              6,248              3,973
      Goodwill amortization                                                        1,430                690                633
      Provision for service warranties                                               174                184                240
      Deferred income taxes                                                       (2,306)                77                549
      Foreign currency options revaluation                                         2,766              2,158                125
      Non cash consulting expenses                                                     -                126                  -
      Restructuring provision                                                        550                  -                  -
      Purchased in-process research and development write off                     17,677                  -                  -
   Changes in operating assets and liabilities, net of effect
    of acquisitions:
      Accounts receivable, net                                                    (5,531)            (7,394)            (5,516)
      Inventories                                                                 (8,130)            (6,027)            (2,919)
      Prepaid expenses and other current assets                                   (3,470)            (1,572)              (204)
      Accounts payable and accrued expenses                                        2,633              1,412              2,873
      Income taxes payable                                                         5,082              2,147              2,332
                                                                     ---------------------------------------------------------
      Net cash provided by operating activities                                   29,520             20,275             18,188
                                                                     ---------------------------------------------------------

Cash flows from investing activities:
   Purchases of property, plant and equipment                                    (27,459)           (16,168)           (20,515)
   Purchase of marketable securities - available for sale                        (79,879)           (36,804)            (7,290)
   Proceeds from sale of marketable securities - available for sale               20,976             38,717              6,862
   Patent registration costs                                                        (516)              (961)              (445)
   Business acquisitions, net of cash acquired of $367 (note 14)                 (55,070)              (576)            (2,024)
   Purchases of investments                                                       (2,602)            (2,732)            (1,529)
                                                                     ---------------------------------------------------------
      Net cash used in investing activities                                     (144,550)           (18,524)           (24,941)
                                                                     ---------------------------------------------------------

Cash flows from financing activities:
   Proceeds from issuance of common stock, net                                     7,943              6,380              2,125
   Repayment of borrowings                                                       (82,854)                 -               (235)
   Proceeds from borrowings, net of borrowing costs                              213,937                  -                  -
                                                                     ---------------------------------------------------------
      Net cash provided by  financing activities                                 139,026              6,380              1,890
                                                                     ---------------------------------------------------------
Effect of exchange rate changes on cash                                           (2,110)              (989)               445
                                                                     ---------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                              21,886              7,142             (4,418)
Cash and cash equivalents at beginning of the year                                18,250             11,108             15,526
                                                                     ---------------------------------------------------------
Cash and cash equivalents at end of the year                                   $  40,136           $ 18,250           $ 11,108
                                                                     =========================================================
Supplemental disclosure of cash flow information:
   Income taxes paid                                                           $  12,908           $  9,716           $  5,374
   Interest paid                                                                   1,439                  -                  -
                                                                     =========================================================
   Fair value of assets acquired in acquisition                                $  33,139           $    383                  -
   Liabilities assumed                                                           (24,821)               (36)                 -
   Goodwill on acquisition                                                        47,119                229              2,024
                                                                     ---------------------------------------------------------
Cash paid for acquisition                                                      $  55,437           $    576           $  2,024
                                                                     =========================================================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-5
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000


1.   Organization and Basis of Presentation

     ResMed Inc (the "Company") is a Delaware corporation formed in March 1994
     as a holding company for ResMed Holdings Ltd (RHL), a company resident in
     Australia. The Company designs, manufactures and markets devices for the
     evaluation and treatment of sleep disordered breathing, primarily
     obstructive sleep apnea. The Company's corporate offices are based in San
     Diego, California with its principal manufacturing operation located in
     Australia. Other major distribution and sales sites are located in the
     United States, United Kingdom, France, Germany, Sweden and Singapore.


2.   Summary of Significant Accounting Policies

     (a)  Basis of Consolidation

          The consolidated financial statements include the accounts of the
          Company and its wholly owned subsidiaries. All significant
          intercompany transactions and balances have been eliminated on
          consolidation.

          The preparation of financial statements in conformity with accounting
          principles generally accepted in the United States of America requires
          management estimates and assumptions that affect amounts reported in
          the financial statements and accompanying notes. Actual results could
          differ from management's estimates.

     (b)  Revenue Recognition

          Revenue on product sales is recorded at the time of shipment. Royalty
          revenue from license agreements is recorded when earned. Service
          revenue received in advance from service contracts is initially
          capitalized and progressively recognized as revenue over the life of
          the service contract. Revenue from sale of marketing or distribution
          rights is initially capitalized and progressively recognized as
          revenue over the life of the contract.

     (c)  Cash and Cash Equivalents

          Cash equivalents including certificates of deposit, commercial paper
          and other highly liquid investments are stated at cost, which
          approximates market. Investments with original maturities of 90 days
          or less are considered to be cash equivalents for purposes of the
          consolidated statements of cash flows.

     (d)  Inventories

          Inventories are stated at the lower of cost or market, determined
          principally by the first-in, first-out method.

     (e)  Property, Plant and Equipment

          Property, plant and equipment is recorded at cost. Depreciation
          expense is computed using the straight-line method over the estimated
          useful lives of the assets, generally two to ten years. Straight-line
          and accelerated methods of depreciation are used for tax purposes.
          Maintenance and repairs are charged to expense as incurred.

                                      F-6
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000

2.   Summary of Significant Accounting Policies (continued)

     (f)  Patents

          The registration costs for new patents are capitalized and amortized
          over the estimated useful life of the patent, generally five years. In
          the event of a patent being superseded, the unamortized costs are
          written off immediately.

     (g)  Goodwill

          Goodwill arising from business acquisitions has been amortized on a
          straight-line basis over periods ranging from three to 20 years. The
          Company carries goodwill at cost net of accumulated amortization. The
          Company reviews its goodwill carrying value when events indicate that
          an impairment may have occurred in goodwill. If, based on the
          undiscounted cash flows, management determines goodwill is not
          recoverable, goodwill is written down to its discounted cash flow
          value and the amortization period is re-assessed.

          Amortization expense of goodwill was $1,430,000, $690,000 and $633,000
          for the years ended June 30, 2001, 2000 and 1999, respectively.

     (h)  Government Grants

          Government grants revenue is recognized when earned. Grants have been
          obtained by the Company from the Australian Federal Government to
          support the continued development of the Company's proprietary
          positive airway pressure technology and to assist development of
          export markets. Grants have been recognized in the amount of $72,000,
          $279,000 and $833,000 for the years ended June 30, 2001, 2000 and
          1999, respectively.

     (i)  Foreign Currency

          The consolidated financial statements of the Company's non-U.S.
          subsidiaries are translated into U.S. dollars for financial reporting
          purposes. Assets and liabilities of non-U.S. subsidiaries whose
          functional currencies are other than the U.S. dollar are translated at
          year end exchange rates, and revenue and expense transactions are
          translated at average exchange rates for the year. Cumulative
          translation adjustments are recognized as part of comprehensive
          income, as described in Note 15, and are included in accumulated other
          comprehensive loss in the consolidated balance sheet until such time
          as the subsidiary is sold or substantially or completely liquidated.
          Gains and losses on transactions, denominated in other than the
          functional currency of the entity, are reflected in operations.

     (j)  Research and Development

          All research and development costs are expensed in the period
          incurred.

                                      F-7
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000

2.   Summary of Significant Accounting Policies (continued)

     (k)  Earnings Per Share

          The weighted average shares used to calculate basic earnings per share
          were 31,129,000, 30,153,000, and 29,416,000 for the years ended June
          30, 2001, 2000 and 1999, respectively. The difference between basic
          earnings per share and diluted earnings per share is attributable to
          the impact of outstanding stock options during the periods presented.
          Stock options had the effect of increasing the number of shares used
          in the calculation (by application of the treasury stock method) by
          2,355,000, 2,150,000 and 1,652,000 for the years ended June 30, 2001,
          2000 and 1999, respectively.

     (l)  Financial Instruments

          The carrying value of financial instruments, such as of cash and cash
          equivalents, marketable securities - available for sale, accounts
          receivable, government grants receivable and accounts payable
          approximate their fair value because of their short term nature. The
          estimated fair value of the Company's long-term debt at June 30, 2001
          approximates $147.9 million compared with the carrying value of $150.0
          million. Foreign currency option contracts are marked to market and
          therefore reflect their fair value. The Company does not hold or issue
          financial instruments for trading purposes.

          The fair value of financial instruments is defined as the amount at
          which the instrument could be exchanged in a current transaction
          between willing parties.

     (m)  Foreign Exchange Risk Management

          The Company enters into various types of foreign exchange contracts in
          managing its foreign exchange risk, including derivative financial
          instruments encompassing forward exchange contracts and foreign
          currency options.

          The purpose of the Company's foreign currency hedging activities is to
          protect the Company from adverse exchange rate fluctuations with
          respect to net cash movements resulting from the sales of products to
          foreign customers and Australian manufacturing activities. The Company
          enters into foreign currency option contracts to hedge anticipated
          sales and manufacturing costs, principally denominated in Australian
          dollars and Euros. The terms of such foreign currency option contracts
          generally do not exceed three years.

          Unrealized gains or losses are recognized as incurred in the
          consolidated balance sheets as either other assets or other
          liabilities and are recorded within other income, net on the Company's
          consolidated statements of income. Unrealized gains and losses on
          currency derivatives are determined based on dealer quoted prices.

          The Company is exposed to credit-related losses in the event of non-
          performance by counterparties to financial instruments. The credit
          exposure of foreign exchange options at June 30, 2001 was $597,000,
          which represents the positive fair value of options held by the
          Company.

          The Company held foreign currency option contracts with notional
          amounts totalling $223,752,000 and $171,530,000 at June 30, 2001 and
          2000, respectively to hedge foreign currency items. These contracts
          mature at various dates prior to July 2002.

                                      F-8
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000

2.   Summary of Significant Accounting Policies (continued)

     (n)  Income Taxes

          The Company accounts for income taxes under the asset and liability
          method. Deferred tax assets and liabilities are recognized for the
          future tax consequences attributable to differences between the
          financial statement carrying amounts of existing assets and
          liabilities and their respective tax bases. Deferred tax assets and
          liabilities are measured using enacted tax rates expected to apply to
          taxable income in the years in which those temporary differences are
          expected to be recovered or settled. The effect on deferred tax assets
          and liabilities of a change in tax rates is recognized in income in
          the period that includes the enactment date.

     (o)  Marketable Securities

          Management determines the appropriate classification of its
          investments in debt and equity securities at the time of purchase and
          re-evaluates such determination at each balance sheet date. Debt
          securities for which the Company does not have the intent or ability
          to hold to maturity are classified as available for sale. Securities
          available for sale are carried at fair value, with the unrealized
          gains and losses, net of tax, reported in accumulated other
          comprehensive income (loss).

          At June 30, 2001 and 2000, the Company's investments in debt
          securities were classified on the accompanying consolidated balance
          sheet as marketable securities available for sale. These investments
          are diversified among high credit quality securities in accordance
          with the Company's investment policy.

          The amortized cost of debt securities classified as available-for-sale
          is adjusted for amortization of premiums and accretion of discounts to
          maturity. Such amortization and interest are included in interest
          income. Realized gains and losses are included in other income or
          expense. The cost of securities sold is based on the specific
          identification method.

     (p)  Warranty

          Estimated future warranty obligations related to certain products are
          provided by charges to operations in the period in which the related
          revenue is recognized.

     (q)  Impairment of Long-Lived Assets

          The Company periodically evaluates the carrying value of long-lived
          assets to be held and used, including certain identifiable intangible
          assets, when events and circumstances indicate that the carrying
          amount of an asset may not be recovered. Recoverability of assets to
          be held and used is measured by a comparison of the carrying amount of
          an asset to future net cash flows expected to be generated by the
          asset. If such assets are considered to be impaired, the impairment to
          be recognized is measured by the amount by which the carrying amount
          of the assets exceed the fair value of the assets. Assets to be
          disposed of are reported at the lower of the carrying amount or fair
          value, less costs to sell.

                                      F-9
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000

3.   Marketable Securities

     The estimated fair value of marketable securities available for sale as of
     June 30, 2001 and 2000, was $62,616,000 and $3,713,000, respectively. The
     estimated fair value of each investment approximates the amortized cost,
     and therefore, there are no unrealized gains or losses as of June 30, 2001
     or 2000.

     Expected maturities may differ from contractual maturities because the
     issuers of the securities may have the right to prepay obligations without
     prepayment penalties.

4.   Inventories

     Inventories net, were comprised of the following as of June 30, 2001 and
     2000 (in thousands):


                                      2001             2000
                                ---------------------------

     Raw materials                 $ 7,584          $ 4,826
     Work in progress                   98              297
     Finished goods                 22,312           10,679
                                ---------------------------
                                   $29,994          $15,802
                                ===========================

5.   Property, Plant and Equipment

     Property, plant and equipment is comprised of the following as of June 30,
     2001 and 2000 (in thousands):

                                                       2001        2000
                                                    ---------------------
     Machinery and equipment                         $ 10,930    $  8,024
     Computer equipment                                12,829       9,685
     Furniture and fixtures                             8,667       5,214
     Vehicles                                           1,219       1,214
     Clinical, demonstration and rental equipment       8,194       7,844
     Leasehold improvements                               663         552
     Land                                               5,333       3,113
     Buildings                                         27,187       9,837
     Construction in Process                                -       4,645
                                                    ---------------------
                                                       75,022      50,128
     Accumulated depreciation and  amortization       (19,930)    (13,552)
                                                    ---------------------
                                                     $ 55,092    $ 36,576
                                                    =====================

                                     F-10
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000

6.  Accrued Expenses

    Accrued expenses at June 30, 2001 and 2000 consist of the following (in
    thousands):

                                                    2001             2000
                                              ---------------------------
    Service warranties                           $   739           $  601
    Consulting and professional fees                 809              324
    Royalties                                        290              240
    Value added taxes due                          6,033            2,520
    Employee related costs                         4,687            3,087
    Deferred revenue                               1,388            1,341
    Clinical research                                 75              178
    Provision for restructure(a)                     375                -
    Promotional programs                           1,198                -
    Other                                          1,157              933
                                              ---------------------------
                                                 $16,751           $9,224
                                              ===========================

    (a)  Subsequent to the purchase of MAP Medizin-Technologie GmbH, the Company
    has begun limited restructuring of MAP's activities and for the year ended
    June 30, 2001, has taken a charge of $550,000 associated with the sale and
    closure of MAP's unprofitable French operation.  At June 30, 2001, the
    provision for restructure was $375,000 representing amounts to be paid on
    termination of employees and leases.

7.  Long-Term Debt

    Long-term debt at June 30, 2001 and 2000 consist of the following (in
    thousands):

                                                      2001              2000
                                                   -----------------------------

    4% Convertible subordinate notes due 2006         $150,000          $ -
                                                   =============================

    On June 20, 2001 the Company issued $150.0 million of 4% convertible
    subordinated notes that are due to mature on June 20, 2006.  On July 3,
    2001, the Company received an additional $30.0 million in over allotments.
    This increased the total amount of convertible subordinated notes issued to
    $180.0 million.

    The notes are convertible, at the option of the holder, at any time on or
    prior to maturity, into shares of common stock of ResMed Inc.  The notes are
    convertible at a conversion price of $60.60 per share, which is equal to a
    conversion rate of 16.5017 shares per $1,000 principal amount of notes,
    subject to adjustment.

    Interest is to be paid on the notes on June 20 and December 20 of each year,
    beginning December 20, 2001.

    The Company may redeem some or all of the notes at any time before June 20,
    2004 at a redemption price of $1,000 per $1,000 principal amount of notes,
    plus accrued and unpaid interest, if any, to the redemption date, if the
    closing price of our common stock has exceeded 150% of the conversion price
    then in effect for at least 20 trading days within a period of 30
    consecutive trading days ending on the trading day before the date of
    mailing of the provisional redemption notice.  Upon any such provisional
    redemption, the Company will make an additional payment in cash equal to
    $166.67 per $1,000 principal amount of notes, less the amount of any
    interest actually paid on the notes before the provisional redemption date.


                                      F-11
<PAGE>

                          ResMed Inc And Subsidiaries
                  Notes to Consolidated Financial Statements
                            June 30, 2001 and 2000

7.  Long-Term Debt (continued)

    The Company may also redeem some or all of the notes at any time on or after
    June 22, 2004, but prior to June 20, 2005, at a redemption price equal to
    101.6% of the principal amount of notes redeemed, and at any time after June
    19, 2005, at a redemption price of 100.8% of the principal amount of notes,
    plus in any case accrued and unpaid interest, if any, to the redemption
    date, if the closing price of the Company's common stock has exceeded 130%
    of the conversion price then in effect for at least 20 trading days within a
    period of 30 consecutive trading days ending on the trading day before the
    date of mailing of the optional redemption notice.

    The notes are general unsecured obligations and are subordinated to all of
    the Company's existing and future senior indebtedness and will be
    effectively subordinated to all of the indebtedness and liabilities of the
    Company's subsidiaries.  The indenture governing the notes will not limit
    the Company or its subsidiaries from incurring senior indebtedness or other
    indebtedness.

8.  Stockholders' Equity

    Stock Options - The Company has granted stock options to personnel,
    -------------
    including officers and directors in accordance with both the 1995 Option
    Plan and the 1997 Equity Participation Plan (collectively the "Plans").
    These options have expiration dates of ten years from the date of grant and
    vest over three years.  The Company granted these options with the exercise
    price equal to the market value as determined at the date of grant.

    In August 1997 as part of the introduction of the 1997 Equity Participation
    Plan, the Company cancelled 43,880 options, being all non-issued options
    remaining under the 1995 Option Plan.

    The following table summarizes option activity:

<TABLE>
<CAPTION>
                                                   ---------------------------------------------------------------------
                                                                  Weighted               Weighted               Weighted
                                                                  Average                Average                Average
                                                                  Exercise               Exercise               Exercise
                                                        2001       Price       2000       Price        1999      Price
                                                   ---------------------------------------------------------------------
    <S>                                            <C>            <C>       <C>          <C>      <C>           <C>
    Outstanding at beginning of year                  3,298,022     $10.12   3,142,272     $ 7.32 $ 2,403,160     $ 4.57

      Granted                                         1,569,690      27.27   1,336,900      14.14   1,265,000      11.31
      Exercised                                        (884,859)      8.98    (967,985)      6.59    (512,688)      4.15
      Forfeited                                        (130,035)     17.78    (213,165)     10.04     (13,200)     11.32
                                                   ---------------------------------------------------------------------
    Outstanding at end of year                        3,852,818     $17.14   3,298,022     $10.12   3,142,272     $ 7.32
                                                   ---------------------------------------------------------------------
    Price range of granted options                   $   24-$40             $   13-$27            $    10-$12

    Options exercisable at end of year                1,240,427     $ 8.02   1,368,286     $ 6.92   1,254,126     $ 4.00
                                                   ---------------------------------------------------------------------
</TABLE>

                                     F-12
<PAGE>

                          ResMed Inc And Subsidiaries
                  Notes to Consolidated Financial Statements
                            June 30, 2001 and 2000

8.  Stockholders' Equity (continued)

    The total number of shares of Common Stock authorized for issuance upon
    exercise of options and other awards, or upon vesting of restricted or
    deferred stock awards, under the 1997 Plan was initially established at
    1,000,000 and increases at the beginning of each fiscal year, commencing on
    July 1, 1998, by an amount equal to 4% of the outstanding Common Stock on
    the last day of the preceding fiscal year.  The maximum number of shares of
    Common Stock issuable upon exercise of incentive stock options granted under
    the 1997 Plan, however, cannot exceed 8,000,000.  Furthermore, the maximum
    number of shares which may be subject to options, rights or other awards
    granted under the 1997 Plan to any individual in any calendar year cannot
    exceed 300,000.

    The following table summarizes information about stock options outstanding
    at June 30, 2001.

<TABLE>
<CAPTION>
                                                                                 Weighted Average
      Exercise Prices                          Number Outstanding at                 Remaining            Number Exercisable at
                                                   June 30, 2001                 Contractual Life             June 30, 2001
----------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>                               <C>                      <C>
       $ 0 - $10                                       735,578                         5.35                      732,244
       $11 - $20                                     1,577,049                         7.64                      489,510
       $21 - $30                                     1,178,901                         9.42                       18,673
       $31 - $40                                       347,290                         9.75                            -
       $41 - $50                                        14,000                         9.58                            -
----------------------------------------------------------------------------------------------------------------------------------
                                                     3,852,818                         7.96                    1,240,427
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

    The Company applies APB Opinion No. 25 in accounting for its Plans and,
    accordingly, no compensation cost has been recognized for its stock options.
    Had the Company determined compensation cost based on the fair value at the
    grant date for its stock options under SFAS 123, the Company's net income
    would have been reduced to the pro forma amounts indicated below:

<TABLE>
-------------------------------------------------------------------------------------------------------------------------------
                                                                                         2001            2000            1999

<S>                                                                                  <C>            <C>              <C>
      Net income (in thousands):

          As reported                                                                   $11,630         $22,226         $16,102
          Pro forma                                                                       2,859          17,511          12,951

      Basic earnings per common share:
          As reported                                                                   $  0.37         $  0.74         $  0.55
          Pro forma                                                                     $  0.09         $  0.58         $  0.44

      Diluted income per common and common equivalent share:
          As reported                                                                   $  0.35         $  0.69         $  0.52
          Pro forma                                                                     $  0.09         $  0.54         $  0.42
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

    The fair value of each stock option grant was estimated on the date of grant
    using the Black-Scholes option-pricing model with the following assumptions:
    weighted average risk-free interest rates of 5.75% for fiscal 2001, and 6.5%
    and 5.8% for fiscal 2000 and 1999, respectively; no dividend yield; expected
    lives of four years; and volatility of 61% for 2001 and 2000 and 55% for
    1999.

                                     F-13
<PAGE>

                          ResMed Inc And Subsidiaries
                  Notes to Consolidated Financial Statements
                            June 30, 2001 and 2000

8.  Stockholders' Equity (continued)

    Preferred Stock - In April 1997, the board of directors authorized 2,000,000
    ---------------
    shares of $0.01 par value preferred stock.  No such shares were issued or
    outstanding at June 30, 2001.

    Stock Purchase Rights - In April 1997, the Company implemented a plan to
    ---------------------
    protect stockholders' rights in the event of a proposed takeover of the
    Company.  Under the plan, each share of the Company's outstanding common
    stock carries one right to purchase Series A Junior Participating Preferred
    Stock (the "Right").  The Right enables the holder, under certain
    circumstances, to purchase common stock of the Company or of the acquiring
    person at a substantially discounted price ten days after a person or group
    publicly announces it has acquired or has tendered an offer for 20% or more
    of the Company's outstanding common stock.  The Rights are redeemable at
    $0.01 per Right and expire in 2007.

    Common Stock - During fiscal 2000, the Board of Directors declared a two-
    ------------
    for-one split of the Company's common stock, effective March 31, 2000.
    Stockholders' equity has been restated for all periods presented to give
    retroactive recognition to the stock split by reclassifying from additional
    paid-in capital to common stock, the par value of the additional shares as a
    result of the stock split.

9.  Other, net

    Other, net is comprised of the following at June 30, 2001, 2000 and 1999 (in
    thousands):

<TABLE>
                                                                    -------------------------------------------------------
                                                                           2001                2000              1999
                                                                    -------------------------------------------------------
   <S>                                                              <C>                      <C>               <C>
    License fees                                                          $   125            $   167           $    58
    Gain/(loss) on foreign currency hedging position                       (2,766)            (1,863)              435
    Gain/(loss) on foreign currency transactions                            4,747              1,681            (2,888)
    Write back of investment                                                    -                  -               300
    Other                                                                    (144)               (37)             (195)
                                                                    -------------------------------------------------------
                                                                          $ 1,962            $   (52)          $(2,290)
                                                                    =======================================================
</TABLE>

    In March 1998, the Company granted to a third party licenses to three of the
    Company's patents for a non-refundable payment of $1,250,000.  The license
    agreement will allow the third party to manufacture and distribute certain
    products featuring the Company's patented technology in the U.S. homecare
    market.  Additionally, the Company will earn royalties on products
    manufactured.

10. Income Taxes

    Income before income taxes for the years ended June 30, 2001, 2000, and
    1999, was taxed under the following jurisdictions (in thousands):

<TABLE>

                                                                    ---------------------------------------------------
                                                                           2001               2000             1999
                                                                    ---------------------------------------------------
    <S>                                                             <C>                      <C>               <C>
    U.S.                                                                  $ 3,482            $ 4,644           $ 4,043
    Non-U.S.                                                               23,832             29,522            20,534
                                                                    ---------------------------------------------------
                                                                          $27,314            $34,166           $24,577
                                                                    ===================================================
</TABLE>

                                     F-14
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000

10. Income Taxes (continued)

    The provision for income taxes is presented below (in thousands):


<TABLE>
<CAPTION>
                                                                    ------------------------------------------------
                                                                             2001             2000              1999
                                                                    ------------------------------------------------
<S>                                                                 <C>            <C>               <C>
Current:
  Federal                                                                $ 2,938           $ 1,396            $  772
  State                                                                      203                77               174
 Non-U.S.                                                                 14,790            10,390             6,980
                                                                    ------------------------------------------------
                                                                          17,931            11,863             7,926
                                                                    ------------------------------------------------
Deferred:
  Federal                                                                   (652)              390               360
  State                                                                       90                14               (12)
  Non-U.S.                                                                (1,685)             (327)              201
                                                                    ------------------------------------------------
                                                                          (2,247)               77               549
                                                                    ------------------------------------------------
Provision for income taxes                                               $15,684           $11,940            $8,475
                                                                    ================================================
</TABLE>

    The provision for income taxes differs from the amount of income tax
    determined by applying the applicable U.S. federal income tax rate of 34% to
    pretax income as a result of the following (in thousands):

<TABLE>
<CAPTION>
                                                                    ------------------------------------------------
                                                                           2001              2000              1999
                                                                    ------------------------------------------------
<S>                                                              <C>               <C>               <C>
Computed 'expected' tax expense                                          $ 9,287           $11,616            $8,356
Increase (decrease) in income taxes
Resulting from:
      Non-deductible expenses                                                460               715               302
      Research and development credit                                       (781)             (430)             (250)
      Tax effect of intercompany dividends                                (3,885)             (508)               13
      Utilization of net operating loss carryforwards                         (5)               (4)                -
      Change in valuation allowance                                        4,431                22                71
      Effect of non-U.S. tax rates                                             4               714               455
      State income taxes                                                     356               235               131
      In-process research and development write-off                        6,010                 -                 -
      Provision for restructure                                              187                 -                 -
      Other                                                                 (380)             (420)             (603)
                                                                    ------------------------------------------------
                                                                         $15,684           $11,940            $8,475
                                                                    ================================================
</TABLE>

    The tax effects of temporary differences that give rise to significant
    portions of the deferred tax assets and deferred tax liabilities are
    comprised of the following at June 30, 2001 and 2000 (in thousands):

<TABLE>
<CAPTION>
                                                                                    ------------------------------
                                                                                            2001              2000
                                                                                    ------------------------------
<S>                                                                                 <C>            <C>
Deferred tax assets:
      Employee benefit obligations                                                       $   573            $  534
      Provision for service warranties                                                       203               203
      Provision for doubtful debts                                                           317               254
      Net operating loss carryforwards                                                     2,206                79
      Deferred foreign tax credits                                                         7,193               970
      Accrual for legal costs                                                                  5                76
      Intercompany profit in inventories                                                   3,492             2,188
      Property, plant and equipment                                                          189               290
      Other accruals                                                                         663               418
                                                                                    ------------------------------
                                                                                          14,925             5,012
Less valuation allowance                                                                  (5,592)              (86)
                                                                                    ------------------------------
Deferred tax assets                                                                      $ 9,333            $4,926
                                                                                    ------------------------------
</TABLE>

                                     F-15
<PAGE>

                          ResMed Inc And Subsidiaries
                   Notes to Consolidated Financial Statements
                             June 30, 2001 and 2000

10. Income Taxes (continued)

<TABLE>
<CAPTION>
                                                                                   -------------------------------
                                                                                            2001              2000
                                                                                   -------------------------------
<S>                                                                                 <C>                     <C>
Deferred tax liabilities:
      Patents                                                                            $  (382)             (413)
      Capitalized software                                                                  (495)             (453)
      Unrealized gain on foreign currency options                                           (179)             (306)
      Unrealized foreign exchange gains                                                        -              (196)
      Undistributed German income                                                         (2,104)             (992)
      Deferred tax deductible goodwill amortization                                       (1,698)                -
      Other receivables                                                                     (197)             (168)
      Other                                                                                 (126)              (37)
                                                                                   -------------------------------
Deferred tax liabilities                                                                  (5,181)           (2,565)
                                                                                   -------------------------------
Net deferred tax asset                                                                   $ 4,152             2,361
                                                                                   ===============================
</TABLE>

    The valuation allowance at June 30, 2001, primarily relates to a provision
    for uncertainty as to the utilization of deferred foreign tax credits of
    $4,322,000 and net operating loss carryforwards of $1,046,000 relating to
    MAP. The net change in the valuation allowance was an increase of $5,506,000
    for the year ended June 30, 2001, in comparison to an increase of $22,000
    and an increase of $48,000, for the years ended June 30, 2000 and 1999,
    respectively. The measurement of deferred tax assets and liabilities at June
    30 of each year, reflect foreign currency translation adjustments, changes
    in enacted tax rates and changes in temporary differences. Income taxes in
    2001, 2000 and 1999 were reduced by $5,000, $4,000 and $0, respectively,
    through the utilization of net operating loss carryforwards.

    At June 30, 2001, the net operating loss carryforwards relate to MAP,
    Singapore and Malaysia.

11. Employee Retirement Plans

    The Company contributes to a number of employee retirement plans for the
    benefit of its employees.  These plans are detailed as follows:

    Australia - The Company contributes to defined contribution pension plans
    ---------
    for each employee resident in Australia.  All Australian employees after
    serving a qualifying period, are entitled to benefits on retirement,
    disability or death.  Employees may contribute additional funds to the
    plans.  The Company contributes to the plans at the rate of 8% of the
    salaries of all Australian employees.  Total Company contributions to the
    plans for the years ended June 30, 2001, 2000, and 1999 were $814,000,
    $632,000 and $457,000, respectively.

    United Kingdom - The Company contributes to a defined contribution plan for
    --------------
    each permanent United Kingdom employee.  All employees, after serving a
    three month qualifying period, are entitled to benefit on retirement,
    disability or death.  Employees may contribute additional funds to the plan.
    The Company contributes to the plans at the rate of 3% of the salaries.
    Total Company contributions to the plan were $7,000, $8,000 and $8,000 in
    fiscal 2001, 2000, and 1999 respectively.

                                     F-16
<PAGE>

                         ResMed Inc. And Subsidiaries
                  Notes to Consolidated Financial Statements
                            June 30, 2001 and 2000

11. Employee Retirement Plans (continued)

    United States - The Company sponsors a defined contribution pension plan
    -------------
    available to substantially all domestic employees.  Company contributions to
    this plan are based on a percentage of employee contributions to a maximum
    of 3% of employee salaries.  The cost of this plan to the Company was
    $158,000, $123,000 and $96,000 in fiscal 2001, 2000 and 1999 respectively.

12. Segment Information

    The Company operates solely in the sleep disordered breathing sector of the
    respiratory medicine industry.  The Company therefore believes that, given
    the single market focus of its operations and the inter dependence of its
    products that the Company operates as a single operating segment.  The
    Company assesses performance and allocates resources on the basis of a
    single operating entity.

    Financial information by geographic area for the years ended June 30, 2001,
    2000 and 1999, is summarized below (in thousands):

<TABLE>
<CAPTION>
                                                    -----------------------------------------------------------------------------

                                                                                                            Rest of
                                                         U.S.A       Germany     Australia     France        World        Total

                                                    -----------------------------------------------------------------------------
        <S>                                         <C>              <C>         <C>           <C>          <C>           <C>
        2001
        Revenue from external customers                 $74,981       25,646        5,318       17,592       31,619      $155,156

        Long lived assets                               $30,475        3,063       25,130          555        1,725      $ 60,948
                                                    =============================================================================

        2000
        Revenue from external customers                 $58,419       14,317        4,444       11,949       26,486      $115,615

        Long lived assets                               $ 8,126        1,248       27,595          622        1,863      $ 39,454
                                                    =============================================================================

        1999
        Revenue from external customers                 $47,229       13,181        3,489        6,978       17,750      $ 88,627

        Long lived assets                               $ 2,525          816       26,611          400        1,429      $ 31,781
                                                    =============================================================================
</TABLE>

                                     F-17
<PAGE>

                          ResMed Inc And Subsidiaries
                  Notes to Consolidated Financial Statements
                            June 30, 2001 and 2000

12. Segment Information (continued)

    Net revenues from external customers is based on the location of the
    customer. Long-lived assets of geographic areas are those assets used in the
    Company's operations in each geographical area and excludes patents,
    deferred tax assets and goodwill.

13. Commitments

    The Company leases buildings, motor vehicles and office equipment under
    operating leases.  Rental charges for these items are expensed as incurred.
    At June 30, 2001 the Company had the following future minimum lease payments
    under non-cancelable operating leases (in thousands):

    ----------------------------------------------------------------------------
                                     Operating   Sub lease   Total net minimum
     Years                             Leases  rental income   lease payments
    ----------------------------------------------------------------------------

     2002                              $1,720     $   330         $ 1,390
     2003                               1,540         245           1,295
     2004                               1,179         251             928
     2005                                 529         257             272
     2006                                 439         130             309
     Thereafter                           468           -             468
    ----------------------------------------------------------------------------
     Total minimum lease payments      $5,875     $ 1,213         $ 4,662
    ============================================================================

    Rent expenses under operating leases for the years ended June 30, 2001, 2000
    and 1999 were approximately $1,087,000, $744,000 and $789,000, respectively.

14. Business Acquisition

    On February 16, 2001 the Company's fully owned German Subsidiary, ResMed
    Beteiligungs GmbH, acquired all the common stock of MAP Medizin-Technologie
    GmbH ("MAP'') for total consideration, including acquisition costs, of $55.4
    million.

    The acquisition has been accounted for as a purchase and accordingly, the
    results of operations of MAP have been included in the Company's
    consolidated financial statements from February 16, 2001.  The excess of the
    purchase price over the fair value of the net identifiable assets acquired
    of $47.1 million has been recorded as goodwill and is being amortized on a
    straight line basis over 20 years.

    Purchased in-process research and development of $17,677,000 was expensed
    upon acquisition of MAP because technological feasibility of the products
    under development had not been established and no further alternative uses
    existed.  The value of in process technology was calculated by identifying
    research projects in areas for which technological feasibility had not been
    established, estimating the costs to develop the purchased in process
    technology into commercially viable products, estimating the resulting net
    cash flows from such products, discounting the net cash flows to present
    value, and applying the reduced percentage completion of the projects
    thereto.  The discount rates used in the analysis were between 27% and 33%
    and were based on the risk profile of the acquired assets.

    All purchased research and development projects related to medical equipment
    for the treatment of sleep disordered breathing, primarily relating to the
    development of mask interface systems and autotitrating devices for the
    treatment of obstructive sleep apnea and associated disorders.  Key
    assumptions used in the analysis included gross margins ranging from 70% to
    80%. As of the date of acquisition, the mask interface systems are expected
    to be completed and commercially available in 2002 and versions of the
    autotitrating devices between 2003 and 2005.  These projects have estimated
    costs to complete totalling approximately $2.0 million.

                                     F-18
<PAGE>

                          ResMed Inc And Subsidiaries
                  Notes to Consolidated Financial Statements
                            June 30, 2001 and 2000

14. Business Acquisition (Continued)

    The Company believes that the assumptions used to value the acquired
    intangible assets were reasonable at the time of acquisition.  No assurance
    can be given, however, that the underlying assumptions used to estimate
    expected project revenues, development costs or profitability, or events
    associated with such projects, will transpire as estimated.  For these
    reasons, among others, actual results may vary from the projected results.

    The following unaudited pro-forma financial information presents the
    combined results of operations of the Company and MAP as if the acquisition
    had occurred as of the beginning of the years ended June 30, 2001 and 2000,
    respectively and after giving effect to certain adjustments, including
    amortization of goodwill and increased interest expense associated with debt
    funding the acquisition. The pro-forma financial information does not
    necessarily reflect the results of operations that would have occurred had
    the Company and MAP constituted a single entity during such years.

    The pro-forma net income for the year ended June 30, 2001 excludes non-
    recurring acquisition charges of $17,677,000 for purchased in-process
    research and development and $550,000 for restructuring of MAP's French
    operations.

    (In thousands except per share data)

                                                -----------------------
                                                   2001         2000
                                                -----------------------

    Net revenue                                  $172,250     $138,396
    Net income                                     28,556       17,612

    Basic earnings per share                     $   0.92     $   0.58
    Diluted earnings per share                   $   0.85     $   0.55

    Basic shares outstanding                       31,129       30,153
    Diluted shares outstanding                     33,484       32,303

    On January 31, 2000, the Company's wholly owned Swedish subsidiary, ResMed
    Sweden AB, acquired the business and associated assets of Einar Egnell AB,
    its Swedish distributor for $576,000 in cash.  The acquisition has been
    accounted for as a purchase and accordingly, the results of operations of
    the Einar Egnell business have been included in the Company's consolidated
    financial statements from January 31, 2000.  The excess of the purchase
    price over the fair value of the net identifiable assets acquired of
    $229,000 has been recorded as goodwill and is being amortized on a straight
    line basis over five years.

    In fiscal 1999, the Company paid $2,024,000 as a final deferred goodwill
    payment on the 1996 acquisition of its German distributor.

15. Comprehensive Income

    As of July 1, 1999, the Company adopted Statement of Financial Accounting
    Standards No. 130, 'Reporting Comprehensive Income' which established
    standards for the reporting and display of comprehensive income and its
    components in the financial statements. The only component of comprehensive
    income that impacts the Company is foreign currency translation adjustments.
    The net loss associated with foreign currency translation adjustments for
    the year ended June 30, 2001 was $16.4 million compared to a net loss of
    $7.7 million for the year ended June 30, 2000 and net gain of $2.3 million
    for the year ended June 30, 1999.

                                     F-19
<PAGE>

                          ResMed Inc And Subsidiaries
                  Notes to Consolidated Financial Statements
                            June 30, 2001 and 2000

15. Comprehensive Income (Continued)

    Comprehensive income/(loss) for the years ended June 30, 2001, June 30, 2000
    and June 30, 1999 was ($4.8) million, $14.5 million and $18.4 million,
    respectively.  The Company does not provide for U.S. income taxes on foreign
    currency translation adjustments since it does not provide for such taxes on
    undistributed earnings of foreign subsidiaries.  Accumulated other
    comprehensive loss at June 30, 2001 and June 30, 2000 consisted of foreign
    currency translation adjustments and represent unrealized losses of $29.6
    million and $13.2 million, respectively.

16. Legal Actions

    The Company is currently engaged in litigation relating to the enforcement
    and defense of certain of its patents.

    In January 1995, the Company filed a complaint in the United States District
    Court for the Southern District of California seeking monetary damages from
    and injunctive relief against Respironics for alleged infringement of three
    ResMed patents. In February 1995, Respironics filed a complaint in the
    United States District Court for the Western District of Pennsylvania
    against the Company seeking a declaratory judgment that Respironics does not
    infringe claims of these patents and that the Company's patents are invalid
    and unenforceable. The two actions were combined and are proceeding in the
    United States District Court for the Western District of Pennsylvania. In
    June 1996, the Company filed an additional complaint against Respironics for
    infringement of a fourth ResMed patent, and that complaint was consolidated
    with the earlier action. As of this date, Respironics has brought three
    partial summary judgment motions for non-infringement of the ResMed patents;
    the Court has granted each of the motions. In December 1999, in response to
    the Court's ruling on Respironics' third summary judgment motion, the
    parties jointly stipulated to a dismissal of charges of infringement under
    the fourth ResMed patent, with ResMed reserving the right to reassert the
    charges in the event of a favorable ruling on appeal. It is ResMed's
    intention to appeal the summary judgment rulings after a final judgment in
    the consolidated litigation has been entered in the District Court
    proceedings.

    In January 2001, MAP Medizin-Technologie GmbH filed a lawsuit in the Civil
    Chamber of Munich Court against Hofrichter GmbH seeking actual and exemplary
    monetary damages for the unauthorized and infringing use of the Company's
    trademarks and patents. An initial decision has been made in favor of MAP.
    Hofrichter has filed an appeal and have sort Court determination that the
    MAP patents do not apply to certain Hofrichter products.

    While the Company is prosecuting the above actions, there can be no
    assurance that the Company will be successful.

    On March 31, 2001, we filed a lawsuit in the United States District Court
    for the Southern District of California against MPV Truma and Tiara Medical
    Systems, Inc., seeking actual and exemplary monetary damages and injunctive
    relief for the unauthorized and infringing use of our trademarks, trade
    dress, and patents related to our Mirage mask. The parties reached a
    confidential out of court settlement on April 9, 2001.

    In May 1995, Respironics and its Australian distributor filed a Statement of
    Claim against us and Dr. Farrell in the Federal Court of Australia, alleging
    that we engaged in unfair trade practices. The statement of Claim asserted
    damage claims for lost profits on sales in the aggregate amount of
    approximately $1,000,000. The parties reached a confidential out of court
    settlement of this Action on April 16, 2001.

                                     F-20
<PAGE>

                                                                     Schedule II
--------------------------------------------------------------------------------

                          ResMed Inc and Subsidiaries
                Valuation and Qualifying Accounts and Reserves
                   Years Ended June 30, 2001, 2000 and 1999
                                (in thousands)

<TABLE>
<CAPTION>
                                         -----------------------------------------------------------------------
                                              Balance at       Charged to          Other           Balance at
                                             Beginning of      costs and        (deductions)         end of
                                                Period          expenses                             period
                                         -----------------------------------------------------------------------
<S>                                          <C>              <C>                <C>               <C>
Year ended June 30, 2001
  Applied against asset account                   $833               681               (622)            892
  Allowance for doubtful accounts
                                         =======================================================================

Year ended June 30, 2000
  Applied against asset account
  Allowance for doubtful accounts                 $421               632               (220)            833
                                         =======================================================================

Year ended June 30, 1999
  Applied against asset account
  Allowance for doubtful accounts                 $248               348               (175)            421
                                         =======================================================================
</TABLE>

                See accompanying independent auditor's report.
<PAGE>

                                 Exhibit Index



  2.1   Sale and Assignment Agreement dated as of February 16, 2001, between
        ResMed Inc, ResMed Beteilingungs GmbH and the shareholders of MAP
        Medizin-Technologie GmbH*
  3.1   Certificate of Incorporation of Registrant, as amended**
  3.2   By-laws of Registrant**
  4.1   Form of certificate evidencing shares of Common Stock**
  4.2   Rights agreement dated as of April 23, 1997***
  4.3   Indenture dated as of June 20, 2001, between ResMed Inc and American
        Stock Transfer & Trust Company
  4.4   Registration Rights Agreement dated as of June 20, 2001, by and between
        ResMed Inc, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
        Incorporated, Deutsche Banc Alex Brown Inc., William Blair & Company,
        L.L.C., Macquarie Bank Limited and UBS Warburg LLC
  10.1  1995 Stock Option Plan**
  10.2  1997 Equity Participation Plan****
  10.3  Licensing Agreement between the University of Sydney and ResMed Limited
        dated May 17, 1991, as amended**
  10.4  Consulting Agreement between Colin Sullivan and ResMed Limited effective
        from 1 January 1998*****
  10.5  Loan Agreement between the Australian Trade Commission and ResMed
        Limited dated May 3, 1994**
  10.6  Lease for 10121 Carroll Canyon Road, San Diego 92131-1109, U.S.A.*****
  11.1  Computation of Earnings per Common Share
  21.1  Subsidiaries of the Registrant
  23.1  Independent Auditors' Consent and Report on Schedule


  ------------------------------
    *   Incorporated by reference to the Registrant's Report on Form 8-K dated
        March 2, 2001
   **   Incorporated by reference to the Registrant's Registration Statement on
        Form S-1 (No. 33-91094) declared effective June 1, 1995.
  ***   Incorporated by reference from the Registrants' Registration Statement
        on Form 8-A12G filed April 25, 1997.
 ****   Incorporated by reference from the Registrant's 1997 Proxy Statement
        (File No. 0-26038).
*****   Incorporated by reference from the Registrant's Report on Form 10-K
        dated June 30, 1998 (File No. 0-26038)

</TEXT>
</DOCUMENT>
