UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 QUARTERLY REPORT 
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 Universal Biosensors, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    98-0424072(State or other jurisdiction of
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 Universal Biosensors, Inc.1 Corporate Avenue,Rowville, 3178, VictoriaAustralia
    
    Not Applicable(Address of principal executive offices)
    
    (Zip Code)
 Telephone: +61 3 9213 9000  (Registrants telephone number,
including area code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer  o(Do not check if a smaller reporting company)
    
    Smaller reporting company þ
 o þ




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATIONItem 1 Financial Statements1) Consolidated condensed balance sheets at June 30, 2009 and
December 31, 2008 (unaudited)
    
    
    32) Consolidated condensed statements of operations for the three
months and six months ended June 30, 2009 and 2008 (unaudited)
    
    
    43) Consolidated condensed statements of cash flows for the six
months ended June 30, 2009 and 2008 (unaudited)
    
    
    54) Consolidated condensed statements of changes in stockholders
equity and comprehensive income for the period ended June 30,
2009 (unaudited)
    
    
    65) Notes to consolidated condensed financial statements (unaudited)
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    29Item 4 Controls and Procedures
    
    
    30PART II OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    31Item 1A Risk Factors
    
    
    31Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3 Defaults Upon Senior Securities
    
    
    31Item 4 Submission of Matters to a Vote of Security Holders
    
    
    31Item 5 Other Information
    
    
    31Item 6 Exhibits
    
    
    32Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 31.1Exhibit 31.2Exhibit 32.0SIGNATURES
    
    
    33
  2




---



##### 



PART I
 
 Item 1
    
    Financial Statements
 UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
 June 30,
    
    
    December 31,2009
    
    
    2008A$
    
    
    A$ASSETSCurrent assets:Cash and cash equivalents
    
    
    22,284,881
    
    
    
    28,334,864Accrued income
    
    
    118,305
    
    
    
    118,305Accounts receivables
    
    
    3,459
    
    
    
    31,657Prepayments
    
    
    2,910,572
    
    
    
    3,730,246Other current assets
    
    
    500,855
    
    
    
    535,000Total current assets
    
    
    25,818,072
    
    
    
    32,750,072Property, plant and equipment
    
    
    26,553,746
    
    
    
    23,522,706Less accumulated depreciation
    
    
    (5,173,249
    )
    
    
    (3,767,457
    )Property, plant and equipment  net
    
    
    21,380,497
    
    
    
    19,755,249Total assets
    
    
    47,198,569
    
    
    
    52,505,321LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    504,753
    
    
    
    630,977Accrued expenses
    
    
    813,451
    
    
    
    838,697Financial instruments
    
    
    63,396
    
    
    
    Borrowings
    
    
    119,918
    
    
    
    Deferred income
    
    
    1,230,707
    
    
    
    Employee entitlements provision
    
    
    495,300
    
    
    
    435,387Total current liabilities
    
    
    3,227,525
    
    
    
    1,905,061Non-current liabilities:Asset retirement obligations
    
    
    1,770,841
    
    
    
    1,699,133Employee entitlements provision
    
    
    222,402
    
    
    
    197,897Deferred income
    
    
    77,088
    
    
    
    Total non-current liabilities
    
    
    2,070,331
    
    
    
    1,897,030Total liabilities
    
    
    5,297,856
    
    
    
    3,802,091Stockholders equity:Preferred stock, $0.01 par value. Authorized 1,000,000 shares;
issued and outstanding nil in 2009 (2008: nil)Common stock, $0.0001 par value. Authorized 300,000,000
shares; issued and outstanding 156,976,936
shares in 2009 (2008: 156,976,936)
    
    
    15,698
    
    
    
    15,698Additional paid-in capital
    
    
    73,595,973
    
    
    
    73,338,995Accumulated deficit
    
    
    (24,353,151
    )
    
    
    (12,357,265
    )Current year loss
    
    
    (6,996,099
    )
    
    
    (11,995,886
    )Accumulated other comprehensive income
    
    
    (361,708
    )
    
    
    (298,312
    )Total stockholders equity
    
    
    41,900,713
    
    
    
    48,703,230Total liabilities and stockholders equity
    
    
    47,198,569
    
    
    
    52,505,321
  3




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Period fromInception(September 14,2001) to June 30,
    
    
    Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008A$
    
    
    A$
    
    
    A$
    
    
    A$
    
    
    A$RevenueRevenue from products
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Revenue from services
    
    
    4,901,808
    
    
    
    312,590
    
    
    
    1,240,801
    
    
    
    1,780,054
    
    
    
    1,240,801Total revenue from ordinary activities
    
    
    4,901,808
    
    
    
    312,590
    
    
    
    1,240,801
    
    
    
    1,780,054
    
    
    
    1,240,801Costs of revenuesCost of goods sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of services
    
    
    3,183,874
    
    
    
    47,285
    
    
    
    1,240,801
    
    
    
    62,120
    
    
    
    1,240,801Total costs of revenues
    
    
    3,183,874
    
    
    
    47,285
    
    
    
    1,240,801
    
    
    
    62,120
    
    
    
    1,240,801Gross profit
    
    
    1,717,934
    
    
    
    265,305
    
    
    
    
    
    
    
    1,717,934
    
    
    
    Operating expensesResearch and development (1 and 2)
    
    
    36,253,859
    
    
    
    4,104,205
    
    
    
    2,065,317
    
    
    
    7,337,840
    
    
    
    4,005,946General and administrative (3)
    
    
    16,948,642
    
    
    
    1,395,286
    
    
    
    1,432,689
    
    
    
    2,585,878
    
    
    
    2,821,702Total operating expenses
    
    
    53,202,501
    
    
    
    5,499,491
    
    
    
    3,498,006
    
    
    
    9,923,718
    
    
    
    6,827,648Research and development income
    
    
    13,816,131
    
    
    
    349,848
    
    
    
    274,213
    
    
    
    738,167
    
    
    
    553,511Loss from operations
    
    
    (37,668,436
    )
    
    
    (4,884,338
    )
    
    
    (3,223,793
    )
    
    
    (7,467,617
    )
    
    
    (6,274,137
    )Other income/(expense)Interest income
    
    
    5,059,291
    
    
    
    193,184
    
    
    
    702,517
    
    
    
    460,258
    
    
    
    1,476,474Interest expense
    
    
    (16,716
    )
    
    
    (3,614
    )
    
    
    (9,489
    )
    
    
    (7,227
    )
    
    
    (9,489
    )Fee income
    
    
    1,131,222
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,131,222Other
    
    
    163,183
    
    
    
    52,265
    
    
    
    (67,433
    )
    
    
    18,487
    
    
    
    (83,661
    )Total other income/(expense)
    
    
    6,336,980
    
    
    
    241,835
    
    
    
    625,595
    
    
    
    471,518
    
    
    
    2,514,546Net loss before tax
    
    
    (31,331,456
    )
    
    
    (4,642,503
    )
    
    
    (2,598,198
    )
    
    
    (6,996,099
    )
    
    
    (3,759,591
    )Income tax benefit/(expense)
    
    
    (17,794
    )
    
    
    
    
    
    
    (2,848
    )
    
    
    
    
    
    
    206Net loss
    
    $
    (31,349,250
    )
    
    $
    (4,642,503
    )
    
    $
    (2,601,046
    )
    
    $
    (6,996,099
    )
    
    $
    (3,759,385
    )Basic and diluted net loss per share
    
    $
    (0.41
    )
    
    $
    (0.03
    )
    
    $
    (0.02
    )
    
    $
    (0.04
    )
    
    $
    (0.02
    )Average weighted number of shares outstanding during the
period
    
    
    76,022,193
    
    
    
    156,976,936
    
    
    
    156,969,888
    
    
    
    156,976,936
    
    
    
    156,964,319
 Notes:
 1. Net of research grant income in these
amounts
    
    
    2,366,063
    
    
    
    
    
    
    
    59,862
    
    
    
    
    
    
    
    300,6132. Includes non-cash compensation
expense (research and development)
    
    
    1,325,773
    
    
    
    81,024
    
    
    
    253,212
    
    
    
    177,021
    
    
    
    331,0563. Includes non-cash compensation
expense (general and administrative)
    
    
    931,095
    
    
    
    35,506
    
    
    
    55,910
    
    
    
    79,957
    
    
    
    151,674
  4




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Period fromInception(September 14,2001) to June 30,
    
    Six Months Ended June 30,2009
    
    2009
    
    2008A$
    
    A$
    
    A$Cash flows from operating activities:Net loss
    
    
    (31,349,250
    )
    
    
    (6,996,099
    )
    
    
    (3,759,383
    )Adjustments to reconcile net loss to net cash used in operating activities:Net exchange difference
    
    
    1,102,572
    
    
    
    
    
    
    
    Depreciation and impairment of plant & equipment
    
    
    5,696,111
    
    
    
    1,414,828
    
    
    
    889,150Share based payments expense
    
    
    2,256,868
    
    
    
    256,978
    
    
    
    482,730Loss on fixed assets disposal
    
    
    206,506
    
    
    
    55,821
    
    
    
    Change in assets and liabilities:Inventory
    
    
    
    
    
    
    
    
    
    
    (216,091
    )Accounts receivables
    
    
    (910,787
    )
    
    
    28,198
    
    
    
    (1,206,710
    )Prepaid expenses and other current assets
    
    
    (3,899
    )
    
    
    (195,627
    )
    
    
    16,608Accrued income
    
    
    (108,855
    )
    
    
    
    
    
    
    (152,123
    )Income tax payable
    
    
    
    
    
    
    
    
    
    
    (18,000
    )Deferred revenue
    
    
    1,307,795
    
    
    
    1,307,795
    
    
    
    Employee entitlements
    
    
    717,702
    
    
    
    84,418
    
    
    
    220,563Accounts payable and accrued expenses
    
    
    1,313,171
    
    
    
    (179,361
    )
    
    
    (87,384
    )Net cash used in operating activities
    
    
    (19,772,066
    )
    
    
    (4,223,049
    )
    
    
    (3,830,640
    )Cash flows from investing activities:Proceeds/(purchases) from sale of investment securities
    
    
    
    
    
    
    
    
    
    
    3,123,501Instalment payments to acquire plant and equipment
    
    
    (5,146,240
    )
    
    
    (1,530,005
    )
    
    
    (2,663,339
    )Purchases of property, plant and equipment
    
    
    (21,160,745
    )
    
    
    (416,847
    )
    
    
    (2,961,114
    )Net cash used in investing activities
    
    
    (26,306,985
    )
    
    
    (1,946,852
    )
    
    
    (2,500,952
    )Cash flows from financing activities:Gross proceeds from share issue
    
    
    73,517,472
    
    
    
    
    
    
    
    Transaction costs on share issue
    
    
    (4,099,870
    )
    
    
    
    
    
    
    (16,659
    )Proceeds from borrowings
    
    
    479,673
    
    
    
    479,673
    
    
    
    Repayment of borrowings
    
    
    (359,755
    )
    
    
    (359,755
    )
    
    
    Proceeds from stock options exercised
    
    
    184,045
    
    
    
    
    
    
    
    5,047Net cash provided by/(used in)
financing activities
    
    
    69,721,565
    
    
    
    119,918
    
    
    
    (11,612
    )Net increase/(decrease) in cash and cash equivalents
    
    
    23,642,514
    
    
    
    (6,049,983
    )
    
    
    (6,343,204
    )Cash and cash equivalent at beginning of period
    
    
    
    
    
    
    28,334,864
    
    
    
    41,958,285Effect of exchange rate fluctuations on the balances of cash held in foreign currencies
    
    
    (1,357,633
    )
    
    
    
    
    
    
    Cash and cash equivalents at end of period
    
    
    22,284,881
    
    
    
    22,284,881
    
    
    
    35,615,081
  5




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS 
EQUITY AND COMPREHENSIVE INCOME
(Unaudited)
 Additional
    
    
    
    
    
    
    Other
    
    
    TotalPreference Shares
    
    
    Ordinary shares
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    EquityA$
    
    
 
   
    
    A$
    
    
    A$
    
    
    A$
    
    
    A$
    
    
    A$Balance at September 14, 2001 (1)Changes during the period from September
14, 2001 through December 31, 2007Preference and ordinary shares issued for
cash
    
    
    40,386,962
    
    
    
    16,701,436
    
    
    
    116,071,631
    
    
    
    11,607
    
    
    
    54,474,378
    
    
    
    
    
    
    
    
    
    
    
    71,187,421Conversion of preference shares to
ordinary shares
    
    
    (40,386,962
    )
    
    
    (16,701,436
    )
    
    
    40,386,962
    
    
    
    4,039
    
    
    
    16,697,397
    
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options issued to
employees
    
    
    
    
    
    
    
    
    
    
    500,219
    
    
    
    50
    
    
    
    178,948
    
    
    
    
    
    
    
    
    
    
    
    178,998Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,038,782
    
    
    
    
    
    
    
    
    
    
    
    1,038,782Comprehensive IncomeForeign currency translation reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (298,312
    )
    
    
    (298,312
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,357,265
    )
    
    
    
    
    
    
    (12,357,265
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,655,577
    )Balances at December 31, 2007
    
    
    
    
    
    
    
    
    
    
    156,958,812
    
    
    
    15,696
    
    
    
    72,389,505
    
    
    
    (12,357,265
    )
    
    
    (298,312
    )
    
    
    59,749,624Transaction costs on shares issued in
2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,663
    )
    
    
    
    
    
    
    
    
    
    
    (16,663
    )Exercise of stock options issued to
employees
    
    
    
    
    
    
    
    
    
    
    18,124
    
    
    
    2
    
    
    
    5,045
    
    
    
    
    
    
    
    
    
    
    
    5,047Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    482,730
    
    
    
    
    
    
    
    
    
    
    
    482,730Comprehensive IncomeLoss on derivatives and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,316
    )
    
    
    (21,316
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,759,385
    )
    
    
    
    
    
    
    (3,759,385
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,780,701
    )Balances at June 30, 2008
    
    
    
    
    
    
    
    
    
    
    156,976,936
    
    
    
    15,698
    
    
    
    72,860,617
    
    
    
    (16,116,650
    )
    
    
    (319,628
    )
    
    
    56,440,037Balances at December 31, 2008
    
    
    
    
    
    
    
    
    
    
    156,976,936
    
    
    
    15,698
    
    
    
    73,338,995
    
    
    
    (24,353,151
    )
    
    
    (298,312
    )
    
    
    48,703,230Changes during the six month period
ended June 30, 2009Comprehensive IncomeLoss on derivatives and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


    

    
    (63,396
    )

    
    
    (63,396
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,996,099
    )

    
    
    
    
    
    
    (6,996,099
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,059,495
    )Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    256,978
    
    
    
    
    
    
    
    
    
    
    
    256,978Balances at June 30, 2009
    
    
    
    
    
    
    
    
    
    
    156,976,936
    
    
    
    15,698
    
    
    
    73,595,973
    
    
    
    (31,349,250
    )
    
    
    (361,708
    )
    
    
    41,900,713
 
   6




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Basis of Presentation and Summary of Significant Accounting Policies
 Organization of the Company
       7




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
   Interim Financial Statements
   Basis of Presentation
   Principles of Consolidation
  Use of Estimates
  Cash & Cash Equivalents
  8




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Short-Term Investments (Held-to-maturity)
  Concentration of Credit Risk and Other Risks and Uncertainties
   Derivative Instruments and Hedging Activities
 Derivative financial instruments
   Cash flow hedges
    9




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Inventory
  Receivables
   Property, Plant and Equipment
   June 30, 2009
    
    
    December 31, 2008A$
    
    
    A$Plant and equipment
    
    
    13,214,904
    
    
    
    13,003,248Leasehold improvements
    
    
    8,188,072
    
    
    
    8,123,925Capital work in process
    
    
    5,150,770
    
    
    
    2,395,53326,553,746
    
    
    
    23,522,706Accumulated depreciation
    
    
    (5,173,249
    )
    
    
    (3,767,457
    )Property, plant & equipment, net
    
    
    21,380,497
    
    
    
    19,755,249
  10




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
    Six months ended
    
    
    Year endedJune 30, 2009
    
    
    December 31, 2008A$
    
    
    A$Movement in accumulated depreciation
    
    
    1,405,792
    
    
    
    2,195,236Accumulated depreciation of fixed assets disposed
    
    
    9,036
    
    
    
    71,611Depreciation expense
    
    
    1,414,828
    
    
    
    2,266,847
 Research and Development
    11




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Period frominception toJune 30,
    
    Three months ended June 30,
    
    Six months ended June 30,2009
    
    2009
    
    2008
    
    2009
    
    2008A$
    
    A$
    
    A$
    
    A$
    
    A$Research and development expenses
    
    
    38,619,922
    
    
    
    4,104,205
    
    
    
    2,125,179
    
    
    
    7,337,840
    
    
    
    4,306,559Research grants received
recognized against related
research and development
expenses
    
    
    (2,366,063
    )
    
    
    
    
    
    
    (59,862
    )
    
    
    
    
    
    
    (300,613
    )Research and development
expenses as reported
    
    
    36,253,859
    
    
    
    4,104,205
    
    
    
    2,065,317
    
    
    
    7,337,840
    
    
    
    4,005,946
 Income Taxes
     Asset Retirement Obligations
   12




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Six months ended June
    
    
    Year ended30, 2009
    
    
    December 31, 2008A$
    
    
    A$Opening balance
    
    
    1,699,133
    
    
    
    1,566,892Accretion expense
    
    
    71,708
    
    
    
    132,241Ending balance
    
    
    1,770,841
    
    
    
    1,699,133
 Fair Value of Financial Instruments
  Impairment of Long-Lived Assets
  Australian Goods and Services Tax (GST)
  Revenue Recognition
 Revenue from services
  (1)
    
    as we perform the servicesUnder the terms of our arrangement with LifeScan, we provided certain services relating
to the development and scale up of the production of our blood glucose sensor strip.
Production scale up includes activities such as producing strips and testing strips. Under
this arrangement, no margin was earned as the costs of providing the services were equal to
the revenue recognized. In accordance with Emerging Issues Task Force (EITF) Issue 99-19,
revenue has been recognized on a gross basis as the Company has earned revenue from the
provision of services. Other factors which management considered, which support the gross
basis of revenue recognition are as follows:
 13




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 
 
    
    the Company was responsible for providing the service and was also the primary
obligor with respect to purchasing goods and services from third party suppliers which
in turn were used to provide services to LifeScan;
    
    the Company had unmitigated general inventory risk;
    
    the Company had credit risk; and
    
    pricing was not fixed but determined by the level of activity.
  (2)
    
    on a proportional performance basis where revenues is related to costs incurred in providing
the services required under the contractThe Company has been providing services to LifeScan to enable LifeScan to establish its
own manufacturing line for the blood glucose sensor strips. The proportional performance
method has been used to recognize revenue. We believe this method is appropriate as the
contract amount was determined prior to the commencement of the service, LifeScan receives
value as the services are performed and LifeScan need not re-perform the services that it
has already received from the Company should the service arrangement be terminated.
 Research and development revenue
    14




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
    
  Fee Income
   15




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
    Interest revenue
  Foreign Currency
 Functional and reporting currency
     16




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Transactions and balances
   Group companies
  
    
    assets and liabilities for each balance sheet item reported are translated at the closing
rate at the date of that balance sheet;
    
    income and expenses for each income statement are translated at average exchange rates
(unless this is not a reasonable approximation of the effect of the rates prevailing on the
transaction dates, in which case income and expenses are translated at the dates of the
transactions); and
    
    all resulting exchange differences are recognized as a separate component of equity.
  Commitments and Contingencies
  Patent and License Costs
  Clinical Trial Expenses
   17




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Leased Assets
  Stock-based Compensation
   
  Period frominception to
    
    Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,2009
    
    2009
    
    2008
    
    2009
    
    2008$
    
    $
    
    $
    
    $
    
    $Research and development
    
    
    1,325,773
    
    
    
    81,024
    
    
    
    253,212
    
    
    
    177,021
    
    
    
    331,056General and administrative
    
    
    931,095
    
    
    
    35,506
    
    
    
    55,910
    
    
    
    79,957
    
    
    
    151,674Total share-based compensation expense
    
    
    2,256,868
    
    
    
    116,530
    
    
    
    309,122
    
    
    
    256,978
    
    
    
    482,730
 18




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
   Grant DateJune
    
    June
    
    May
    
    February
    
    August
    
    March2009
    
    2009
    
    2009
    
    2009
    
    2008
    
    2008Exercise Price (A$)
    
    Nil
        
    $
    0.94
    
    
    Nil
        
    $
    0.50
    
    
    $
    0.70
    
    
    $
    0.89Share Price at Grant Date (A$)
    
    $
    0.95
    
    
    $
    0.95
    
    
    $
    1.18
    
    
    $
    0.43
    
    
    $
    0.71
    
    
    $
    0.91Volatility
    
    
    80
    %
    
    
    80
    %
    
    
    81
    %
    
    
    77
    %
    
    
    71
    %
    
    
    76
    %Expected Life
    
    10 years
        
    10 years
        
    10 years
        
    10 years
        
    10 years
        
    10 yearsRisk Free Interest Rate
    
    
    5.49
    %
    
    
    5.49
    %
    
    
    4.87
    %
    
    
    4.26
    %
    
    
    5.85
    %
    
    
    5.87
    %Fair Value of Option (A$)
    
    $
    0.95
    
    
    $
    0.62
    
    
    $
    1.04
    
    
    $
    0.28
    
    
    $
    0.45
    
    
    $
    0.59
  Weighted-AverageNumber of Options
    
    Exercise PriceOver Shares
    
    A$Outstanding Balance, December 31, 2008
    
    
    6,373,284
    
    
    
    0.66Lapsed
    
    
    (65,337
    )
    
    
    1.04Granted
    
    
    2,279,200
    
    
    
    0.70Outstanding Balance, June 30, 2009
    
    
    8,587,147
    
    
    
    0.66Exercisable shares as of June 30, 2009
    
    
    4,820,562
    
    
    
    0.56
   Fiscal Year
    
    A$2009  remaining periods
    
    
    828,5802010
    
    
    669,4162011
    
    
    260,4172012
    
    
    68,3462013
    
    
    30,2632014
    
    
    9,1971,866,219
 Pension Costs
  19




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Net Loss per Share and Anti-dilutive Securities
  Total Comprehensive Income
  Recent Accounting Pronouncements
    Related Party Transactions
    20




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Three Months Ended June 30,
    
    Six Months Ended June 30,2009
    
    2008
    
    2009
    
    2008A$
    
    A$
    
    A$
    
    A$Current ReceivablesReimbursement of expenses
    
    
    
    
    
    
    
    
    
    
    2,730
    
    
    
    432,305Revenue from services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,236,2632,730
    
    
    
    1,668,568Sale of Goods and ServicesRevenue from services
    
    
    312,590
    
    
    
    1,240,801
    
    
    
    1,780,054
    
    
    
    1,240,801
  
    
    the Company received research and development revenue of A$349,848 and A$274,212 for the
three months ended June 30, 2009 and 2008 and A$738,167 and A$553,511 for the six month
ended June 30, 2009 and 2008, respectively under the Development and Research Agreement
with LifeScan;
    
    Universal Biosensors Pty Ltd received an initial non-refundable fee of A$1,131,222 in
January 2008 in consideration for the grant of certain rights to LifeScan pursuant to the
Master Services and Supply Agreement; and
    
    Universal Biosensors Pty Ltd was reimbursed $0 and A$384,900 for the three months ended
June 30, 2009 and 2008 and A$32,353 and A$692,608 for the six months ended June 30, 2009
and 2008, respectively for certain expenditure incurred on behalf of LifeScan
 Borrowings
  Subsequent Events
   21




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis provides information that we believe is relevant to an
assessment and understanding of our results of operations and financial condition. You should read
this analysis in conjunction with our audited consolidated financial statements and related
footnotes and Managements Discussion and Analysis of Financial Condition and Results of Operations
included in our Form 10-K filed with the United States Securities and Exchange Commission (SEC).
This Form 10-Q contains, including this discussion and analysis, certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, which are intended to be covered by the safe harbors created by
such acts. For this purpose, any statements that are not statements of historical fact may be
deemed to be forward looking statements, including statements relating to future events and our
future financial performance. Those statements in this Form 10-Q containing the words believes,
anticipates, plans, expects, and similar expressions constitute forward looking statements,
although not all forward looking statements contain such identifying words.
 The forward looking statements contained in this Form 10-Q are based on our current
expectations, assumptions, estimates and projections about the Company and its businesses. All
such forward looking statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results to be materially different from those results expressed or
implied by these forward-looking statements, including those set forth in this Quarterly Report.
 Overview
    Master Services and Supply Agreement with LifeScan
  22




---



##### 



UNIVERSAL BIOSENSORS, INC.
  Development and Research Agreement with LifeScan
   License Agreement with LifeScan
   Results of Operations
 Gross Profit on Services Performed
  23




---



##### 



UNIVERSAL BIOSENSORS, INC.
 Research and Development Expenses
  
    
    consultant and employee related expenses, which include salary and benefits;
 
    
    materials and consumables acquired for the research and development activities;
 
    
    external research and development expenses incurred under agreements with third party
organizations and universities; and
 
    
    facilities, depreciation and other allocated expenses, which include direct and allocated
expenses for rent and maintenance of facilities, depreciation of leasehold improvements and
equipment and laboratory and other supplies.
  Periodfrominception
    
    Three months ended June
    
    Six months ended Juneto June 30,
    
    30,
    
    30,2009
    
    2009
    
    2008
    
    2009
    
    2008A$
    
    A$
    
    A$
    
    A$
    
    A$Research and development expenses
    
    
    38,619,922
    
    
    
    4,104,205
    
    
    
    2,125,179
    
    
    
    7,337,840
    
    
    
    4,306,559Research grants received
recognized against related
research and development
expenses
    
    
    (2,366,063
    )
    
    
    
    
    
    
    (59,862
    )
    
    
    
    
    
    
    (300,613
    )Research and development
expenses as reported
    
    
    36,253,859
    
    
    
    4,104,205
    
    
    
    2,065,317
    
    
    
    7,337,840
    
    
    
    4,005,946
     24




---



##### 



UNIVERSAL BIOSENSORS, INC.
  General and Administrative Expenses
   Research and Development Income
    Fee Income
  Interest Income
  25




---



##### 



UNIVERSAL BIOSENSORS, INC.
 Interest Expense
  Liquidity and Capital Resources
       26




---



##### 



UNIVERSAL BIOSENSORS, INC.
   Operating Capital and Capital Expenditure Requirements
   
    
    expenses we incur in manufacturing, developing, marketing and selling products;
    
    any need to scale our manufacturing operations to meet demand for blood glucose strips
under the Master Services and Supply Agreement, or for our point-of-care tests, including
additional costs related to the fit out of our manufacturing facility in Melbourne,
Australia and the acquisition of additional manufacturing equipment;
    
    changes to our operations to enable us to perform services required under the Master
Services and Supply Agreement;
    
    the timing and amount of receipts of revenue from LifeScan under the Master Services and
Supply Agreement;
    
    the success of our research and development efforts, and whether or not additional funds
are required to support these;
    
    the rate of progress and cost of our product development activities;
    
    the timing and amount of revenue generated by sales of our point-of-care tests;
    
    costs and timing of regulatory approvals;
    
    costs of filing, prosecuting, defending and enforcing any patent claims and other
intellectual property rights;
    
    the terms and timing of any collaborative, licensing and other arrangements that we may
establish; and
    
    the acquisition of businesses, products and technologies, although we currently have no
commitments or agreements relating to any of these types of transactions.
 27




---



##### 



UNIVERSAL BIOSENSORS, INC.
 Off-Balance Sheet Arrangement
  Less than 1 year
    
    A$
    517,3661  3 years
    
    
    1,088,9083  5 years
    
    
    1,008,523More than 5 years
    
    
    Total minimum lease payments
    
    A$
    2,614,798
  Contractual Obligations
  Payments Due By PeriodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    13 years
    
    35 years
    
    yearsLong-Term Debt Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Asset Retirement Obligations (1)
    
    
    1,770,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,770,841Operating Lease Obligations (2)
    
    
    2,614,798
    
    
    
    517,366
    
    
    
    1,088,908
    
    
    
    1,008,523
    
    
    
    Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Liabilities on
Balance Sheet under GAAP (3)
    
    
    222,402
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    222,402Total
    
    
    4,608,041
    
    
    
    517,366
    
    
    
    1,088,908
    
    
    
    1,008,523
    
    
    
    1,993,243
 
 (1)
    
    Represents legal obligations associated with the retirement and removal of long-lived assets.(2)
    
    Our operating lease obligations relate primarily to the lease of our premises.(3)
    
    Represents long service leave owing to the employees Segments
  28




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 Item 3 Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Market Risk
   2009 (*)
    
    Fair ValueAnticipated Transactions and Related Derivatives$AUD Functional Currency:Forward exchange agreements (Sell $AUD/Buy Euros)Contract amount
    
    AUD$615,803
    
    
    A$679,198Average contractual exchange rate
    
    
    0.5151
 
 *
    
    Expected maturity or transaction date Interest Rate Risk
  29




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 Item 4 Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
  
    
    information required to be disclosed by the Company in this
Quarterly Report on Form 10-Q and other reports that the
Company files or submits under the Exchange Act would be
accumulated and communicated to the Companys management,
including its principal executive officer and principal
financial officer, as appropriate to allow timely decisions
regarding required disclosure;
    
    information required to be disclosed by the Company in this
Quarterly Report on Form 10-Q and other reports that the
Company files or submits under the Exchange Act would be
recorded, processed, summarized and reported within the
time periods specified in the SECs rules and forms; and
    
    the Companys disclosure controls and procedures are
effective as of the end of the period covered by this
Quarterly Report on Form 10-Q to ensure that material
information relating to the Company and its consolidated
subsidiaries is made known to them, particularly during the
period in which the periodic reports of the Company,
including this Quarterly Report on Form 10-Q, are being
prepared.
 Changes in Internal Control Over Financial Reporting.
  30




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 PART II
 
 Item 1
    
    Legal Proceedings
 N/A
 
 Item 1A
    
    Risk Factors
 N/A
 
 Item 2
    
    Unregistered Sales of Equity Securities and Use of Proceeds
 N/A
 
 Item 3
    
    Defaults Upon Senior Securities
 N/A
 
 Item 4
    
    Submission of Matters to a Vote of Security Holders
  Item
    
    Proposal
    
    Details of Proposal1(a).
    
    Re-election of Mr. Andrew
Denver as a Class I director
of the Company
    
    Proposal to re-elect Mr.
Andrew Denver as a Class I
director of the Company to
serve a three-year term of
office expiring on the date
of the 2012 annual general
meeting of stockholders1(b).
    
    Re-election of Mr. Andrew
Jane as a Class I director
of the Company
    
    Proposal to re-elect Mr.
Andrew Jane as a Class II
director of the Company to
serve a three-year term of
office expiring on the date
of the 2012 annual general
meeting of stockholders2.
    
    Adoption and approval of
remuneration report
    
    Proposal that the security
holders have the opportunity
to vote in respect of the
remuneration report of the
Company. The vote on the
resolution is advisory only
and does not bind the board
of directors of the Company
  Resolution
    
    Votes For
    
    Votes Against
    
    AbstentionsProposal 1(a) Re-election of Mr. Andrew Denver
    
    
    72,010,400
    
    
    Nil
    
    NilProposal 1(b) Re-election of Mr. Andrew Jane
    
    
    72,010,400
    
    
    Nil
    
    NilProposal 2 Adoption and approval of remuneration report
    
    
    71,970,400
    
    
    
    63,985
    
    
    
    40,000
    *
 
 *
    
    Abstentions with respect to this resolution is counted as votes against the proposal. 
 Item 5
    
    Other Information
 N/A
 31




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 Item 6
    
    Exhibits
 Exhibit No
    
    Description
    
    Location10.1
    
    Advanced Care Enhanced Product
Agreement (which is an addendum to the Amended and Restated Master Services and
Supply Agreement filed with this Form 10-Q as Exhibit 10.3)
(Portions of this Exhibit have been omitted pursuant to a request
for confidential treatment)
    
    Filed herewith10.2
    
    Amendment to Development and Research Agreement (which amends the
Development and Research Agreement filed on April 30, 2007 on
Form 10 as Exhibit 10.2 and the Amendment to Development and
Research Agreement filed on November 14, 2007 on Form 10-Q as
Exhibit 10.3)
    
    Filed herewith10.3
    
    Amended and Restated Master Services and Supply Agreement (which
amends and restates the Master Services and Supply Agreement filed
on November 14, 2007 on Form 10-Q as Exhibit 10.1 and the First
Amendment to the Master Services and Supply Agreement filed on
March 30, 2009 on Form 10-K as Exhibit 10.14) (Portions of this
Exhibit have been omitted pursuant to a request for confidential
treatment)
    
    Filed herewith10.4
    
    Manufacturing Initiation Payment Addendum to Master Services and
Supply Agreement (which is an addendum to the Amended and Restated Master Services and Supply Agreement
filed with this Form 10-Q as Exhibit 10.3) (Portions of this
Exhibit have been omitted pursuant to a request for confidential
treatment)
    
    Filed herewith31.1
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
    
    Filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)
    
    Filed herewith32.0    *
    
    Section 1350 Certificate
    
    Filed herewith
 
 *
    
    This exhibit is furnished rather than filed, and shall not be incorporated by reference into
any filing of the registrant in accordance with Item 601 of Registration S-K 32




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 SIGNATURES
  UNIVERSAL BIOSENSORS, INC.
               (Registrant)By:
    /s/ MARK MORRISSONDate: August 7, 2009
    
    Mark MorrissonChief Executive Officer and Executive DirectorBy:
    /s/ SALESH BALAKDate: August 7, 2009
    
    Salesh BalakChief Financial Officer 33




---



##### 



INDEX TO EXHIBITS
 
 Quarterly Report on Form 10-Q
Dated August 7, 2009
 Exhibit No
    
    Description
    
    Location10.1
    
    Advanced Care Enhanced Product Agreement (which is an addendum to the Amended and Restated Master Services and
Supply Agreement filed with this Form 10-Q as Exhibit 10.3)
(Portions of this Exhibit have been omitted pursuant to a request
for confidential treatment)
    
    Filed herewith10.2
    
    Amendment to Development and Research Agreement (which amends the
Development and Research Agreement filed on April 30, 2007 on
Form 10 as Exhibit 10.2 and the Amendment to Development and
Research Agreement filed on November 14, 2007 on Form 10-Q as
Exhibit 10.3)
    
    Filed herewith10.3
    
    Amended and Restated Master Services and Supply Agreement (which
amends and restates the Master Services and Supply Agreement filed
on November 14, 2007 on Form 10-Q as Exhibit 10.1 and the First
Amendment to the Master Services and Supply Agreement filed on
March 30, 2009 on Form 10-K as Exhibit 10.14) (Portions of this
Exhibit have been omitted pursuant to a request for confidential
treatment)
    
    Filed herewith10.4
    
    Manufacturing Initiation Payment Addendum to Master Services and
Supply Agreement (which is an addendum to the Amended and Restated Master Services and Supply Agreement
filed with this Form 10-Q as Exhibit 10.3) (Portions of this
Exhibit have been omitted pursuant to a request for confidential
treatment)
    
    Filed herewith31.1
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Executive Officer)
    
    Filed herewith31.2
    
    Rule 13a-14(a)/15d-14(a) Certification (Principal Financial Officer)
    
    Filed herewith32.0     *
    
    Section 1350 Certificate
    
    Filed herewith