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 September 30, 2008
 Universal Biosensors, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    98-0424072(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer Identification Number)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
  Large Accelerated Filer o
    
    Accelerated Filer o
    
    Non-Accelerated Filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 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 September 30, 2008 and
December 31, 2007 (unaudited)
    
    
    32)    Consolidated condensed statements of operations for the three
months and nine months ended September 30, 2008 and 2007
(unaudited)
    
    
    43)   Consolidated condensed statements of cash flows for the nine
months ended September 30, 2008 and 2007 (unaudited)
    
    
    54)   Consolidated condensed statements of changes in stockholders
equity and comprehensive income for the period ended September
30, 2008 (unaudited)
    
    
    65)    Notes to consolidated condensed financial statements (unaudited)
    
    
    7Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    19Item 3 Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4 Controls and Procedures
    
    
    27PART II OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    Not ApplicableItem 1A Risk Factors
    
    
    Not ApplicableItem 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    Not ApplicableItem 3 Defaults Upon Senior Securities
    
    
    Not ApplicableItem 4 Submission of Matters to a Vote of Security Holders
    
    
    Not ApplicableItem 5 Other Information
    
    
    Not ApplicableItem 6 Exhibits
    
    
    28Exhibit 31.1Exhibit 31.2Exhibit 32.0SIGNATURES
    
    
    29
  2




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##### 



PART I
 
 Item 1 Financial Statements
 UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (Unaudited)
 September 30,
    
    
    December 31,2008
    
    
    2007US$
    
    
    US$ASSETSCurrent assets:Cash
    
    $
    25,989,653
    
    
    $
    36,990,423Short-term investments (held-to-maturity)
    
    
    
    
    
    
    2,753,679Inventory  raw materials
    
    
    1,171,675
    
    
    
    429,016Accrued income
    
    
    94,596
    
    
    
    70,361Receivables
    
    
    1,302,447
    
    
    
    485,902Financial instruments
    
    
    84,975
    
    
    
    Other current assets
    
    
    3,629,358
    
    
    
    796,782Total current assets
    
    
    32,272,704
    
    
    
    41,526,163Property, plant and equipment
    
    
    18,955,612
    
    
    
    15,828,321Less accumulated depreciation
    
    
    (2,537,731
    )
    
    
    (1,386,070
    )Property, plant and equipment  net
    
    
    16,417,881
    
    
    
    14,442,251Spare parts
    
    
    
    
    
    
    23,907Total assets
    
    $
    48,690,585
    
    
    $
    55,992,321LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    271,929
    
    
    $
    786,296Income taxes payable
    
    
    
    
    
    
    15,869Accrued expenses
    
    
    453,756
    
    
    
    808,210Other liability
    
    
    182,215
    
    
    
    Employee entitlements provision
    
    
    361,223
    
    
    
    236,070Total current liabilities
    
    
    1,269,123
    
    
    
    1,846,445Non-current liabilities:Asset retirement obligations
    
    
    1,332,187
    
    
    
    1,381,372Employee entitlements provision
    
    
    138,163
    
    
    
    89,239Other liability
    
    
    1,607,850
    
    
    
    Total non-current liabilities
    
    
    3,078,200
    
    
    
    1,470,611Total liabilities
    
    
    4,347,323
    
    
    
    3,317,056Stockholders equity:Preferred stock, $0.01 par value. Authorized 1,000,000 shares;
issued and outstanding nil in 2008 (2007: nil)Common stock, $0.0001 par value. Authorized 300,000,000
shares; issued and outstanding 156,976,936
shares in 2008 (2007: 156,958,812)
    
    
    15,698
    
    
    
    15,696Additional paid-in
capital
    
    
    59,554,553
    
    
    
    58,920,901Accumulated deficit
    
    
    (14,439,806
    )
    
    
    (9,759,926
    )Accumulated other comprehensive income
    
    
    (787,183
    )
    
    
    3,498,594Total stockholders equity
    
    
    44,343,262
    
    
    
    52,675,265Total liabilities and
stockholders equity
    
    $
    48,690,585
    
    
    $
    55,992,321
  3




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 (Unaudited)
 Period frominception to
    
    
    Three Months Ended
    
    
    Nine Months Ended SeptemberSeptember 30,
    
    
    September 30,
    
    
    30,2008
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$RevenueRevenue from products
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Revenue from services
    
    
    2,861,626
    
    
    
    1,682,983
    
    
    
    
    
    
    
    2,861,626
    
    
    
    Total revenue from ordinary activities
    
    
    2,861,626
    
    
    
    1,682,983
    
    
    
    
    
    
    
    2,861,626
    
    
    
    Costs of revenuesCost of goods sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of services
    
    
    (2,861,626
    )
    
    
    (1,682,983
    )
    
    
    
    
    
    
    (2,861,626
    )
    
    
    Gross profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating expenses:Research and development (1 and 2)
    
    
    17,828,605
    
    
    
    819,714
    
    
    
    1,523,030
    
    
    
    4,565,533
    
    
    
    3,998,043General and administrative (3)
    
    
    10,874,375
    
    
    
    1,140,108
    
    
    
    666,754
    
    
    
    3,784,431
    
    
    
    2,376,790Total operating expenses
    
    
    28,702,980
    
    
    
    1,959,822
    
    
    
    2,189,784
    
    
    
    8,349,964
    
    
    
    6,374,833Research and development income
    
    
    9,402,807
    
    
    
    250,000
    
    
    
    249,996
    
    
    
    750,000
    
    
    
    749,988Loss from operations
    
    
    (19,300,173
    )
    
    
    (1,709,822
    )
    
    
    (1,939,788
    )
    
    
    (7,599,964
    )
    
    
    (5,624,845
    )Other income/(expense):Interest income
    
    
    3,863,528
    
    
    
    565,249
    
    
    
    215,284
    
    
    
    1,929,043
    
    
    
    822,281Interest expense
    
    
    (9,022
    )
    
    
    
    
    
    
    
    
    
    
    (9,022
    )
    
    
    Other
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    Total other income/(expense):
    
    
    4,854,506
    
    
    
    565,249
    
    
    
    215,284
    
    
    
    2,920,021
    
    
    
    822,281Net loss before tax
    
    
    (14,445,667
    )
    
    
    (1,144,573
    )
    
    
    (1,724,504
    )
    
    
    (4,679,943
    )
    
    
    (4,802,564
    )Income tax benefit/(expense)
    
    
    5,861
    
    
    
    
    
    
    
    
    
    
    
    63
    
    
    
    Net loss
    
    $
    (14,439,806
    )
    
    $
    (1,144,573
    )
    
    $
    (1,724,504
    )
    
    $
    (4,679,880
    )
    
    $
    (4,802,564
    )Basic and diluted net loss per share
    
    $
    (0.21
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
    
    $
    (0.03
    )
    
    $
    (0.04
    )Number of shares used to compute per share data
    
    
    67,433,642
    
    
    
    156,976,936
    
    
    
    128,191,651
    
    
    
    156,958,812
    
    
    
    128,113,543Notes:1 Net of research grant income in these amounts
    
    
    1,911,603
    
    
    
    
    
    
    
    202,654
    
    
    
    275,061
    
    
    
    525,8732 Includes non-cash compensation expense (research and
development)
    
    
    835,482
    
    
    
    135,171
    
    
    
    100,987
    
    
    
    443,892
    
    
    
    137,1033 Includes non-cash compensation expense (general &
administrative)
    
    
    630,669
    
    
    
    59,722
    
    
    
    38,011
    
    
    
    199,878
    
    
    
    112,074
  4




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Period frominception to
    
    Nine Months EndedSeptember 30,
    
    September 30,2008
    
    2008
    
    2007US$
    
    US$
    
    US$Cash flows from operating activities provided by/(used in):Net loss
    
    
    (14,439,806
    )
    
    
    (4,679,880
    )
    
    
    (4,802,564
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and impairment of plant & equipment
    
    
    2,905,137
    
    
    
    1,420,159
    
    
    
    290,256Share based payments expense
    
    
    1,466,151
    
    
    
    643,770
    
    
    
    249,177Loss on fixed assets disposal
    
    
    97,715
    
    
    
    
    
    
    
    Translation (gain)/loss
    
    
    250,049
    
    
    
    
    
    
    
    (375,938
    )Change in assets and liabilities:Inventory  Raw materials
    
    
    (1,687,984
    )
    
    
    (1,258,968
    )
    
    
    Receivables
    
    
    (1,264,099
    )
    
    
    (778,197
    )
    
    
    Prepaid expenses and other current assets
    
    
    (922,823
    )
    
    
    (123,513
    )
    
    
    (170,220
    )Grants receivable
    
    
    (117,583
    )
    
    
    (47,221
    )
    
    
    (177,916
    )Income tax payable
    
    
    (973
    )
    
    
    (16,842
    )
    
    
    Employee entitlements
    
    
    660,176
    
    
    
    214,614
    
    
    
    146,680Accounts payable and accrued expenses
    
    
    282,055
    
    
    
    (685,428
    )
    
    
    (165,942
    )Net cash provided
by/(used in)
operating activities
    
    
    (12,771,985
    )
    
    
    (5,311,506
    )
    
    
    (5,006,467
    )Cash flows from investing activities:Proceeds from sale of investment securities
    
    
    168,914
    
    
    
    2,922,593
    
    
    
    Installment payments to acquire plant and equipment
    
    
    (2,957,408
    )
    
    
    (2,957,408
    )
    
    
    Purchases of property, plant and equipment
    
    
    (14,927,541
    )
    
    
    (3,197,803
    )
    
    
    (6,044,022
    )Net cash provided
by/(used in)
investing activities
    
    
    (17,716,035
    )
    
    
    (3,232,618
    )
    
    
    (6,044,022
    )Cash flows from financing activities:Gross proceeds from share issue
    
    
    60,347,421
    
    
    
    
    
    
    
    Transaction costs on share issue
    
    
    (3,402,288
    )
    
    
    (14,800
    )
    
    
    Proceeds from stock options exercised
    
    
    158,996
    
    
    
    4,713
    
    
    
    62,455Net cash provided
by/(used in)
financing activities
    
    
    57,104,129
    
    
    
    (10,087
    )
    
    
    62,455Net increase in cash and cash equivalents
    
    
    26,616,109
    
    
    
    (8,554,211
    )
    
    
    (10,988,034
    )Cash and cash equivalent at beginning of period
    
    
    
    
    
    
    36,990,423
    
    
    
    23,885,198Effect of exchange rate fluctuations on the balances of cash held in foreign currencies
    
    
    (626,456
    )
    
    
    (2,446,559
    )
    
    
    1,917,683Cash and cash equivalents at end of period
    
    
    25,989,653
    
    
    
    25,989,653
    
    
    
    14,814,847
  5




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENT 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
    
    equityUS$
    
    
    
    US$
    
    US$
    
    US$
    
    US$
    
    US$Balances at December 31, 2007
    
    
    
    
    
    
    
    
    
    
    156,958,812
    
    
    
    15,696
    
    
    
    58,920,901
    
    
    
    (9,759,926
    )
    
    
    3,498,594
    
    
    
    52,675,265Transaction costs on shares issued in 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,829
    )
    
    
    
    
    
    
    
    
    
    
    (14,829
    )Comprehensive IncomeNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,679,880
    )
    
    
    
    
    
    
    (4,679,880
    )Gains on derivatives and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    84,975
    
    
    
    84,975Foreign currency translation reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,370,752
    )
    
    
    (4,370,752
    )Total Comprehensive
Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,965,657
    )Exercise of stock options issued to employees
    
    
    
    
    
    
    
    
    
    
    18,124
    
    
    
    2
    
    
    
    4,711
    
    
    
    
    
    
    
    
    
    
    
    4,713Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    643,770
    
    
    
    
    
    
    
    
    
    
    
    643,770Balances at September 30, 2008
    
    
    
    
    
    
    
    
    
    
    156,976,936
    
    
    
    15,698
    
    
    
    59,554,553
    
    
    
    (14,439,806
    )
    
    
    (787,183
    )
    
    
    44,343,262
  6




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1  Basis of Presentation and Summary of Significant Accounting Policies
 Organization of the Company
        7




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##### 



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
  Short-Term Investments (Held-to-maturity)
  8




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##### 



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




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Inventory
  Receivables
   Property, Plant and Equipment
   September
    
    
    December30, 2008
    
    
    31, 2007$
    
    
    $Plant and equipment
    
    
    12,552,501
    
    
    
    3,349,905Leasehold improvements
    
    
    6,403,111
    
    
    
    5,548,792Capital work in process
    
    
    
    
    
    
    6,929,62418,955,612
    
    
    
    15,828,321Accumulated depreciation
    
    
    (2,537,731
    )
    
    
    (1,386,070
    )Property, plant & equipment, net
    
    
    16,417,881
    
    
    
    14,442,251
   10




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
    Nine month ended
    
    
    Year endedSeptember 30, 2008
    
    
    December 31, 2007$
    
    
    $Movement in accumulated depreciation
    
    
    1,151,661
    
    
    
    351,325Written down value of fixed assets disposed/written off
    
    
    
    
    
    
    391,542Difference in exchange rates
    
    
    268,498
    
    
    
    (148,340
    )Depreciation expense
    
    
    1,420,159
    
    
    
    594,527
  Research and Development
    11




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 PeriodfrominceptiontoSeptember
    
    Three Months Ended
    
    Nine Months Ended30,
    
    September 30,
    
    September 30,2008
    
    2008
    
    2007
    
    2008
    
    2007$
    
    $
    
    $
    
    $
    
    $Research and development expenses
    
    
    19,740,208
    
    
    
    819,714
    
    
    
    1,725,684
    
    
    
    4,840,594
    
    
    
    4,523,916Research grants received
recognized against related
research and development
expenses
    
    
    1,911,603
    
    
    
    
    
    
    
    202,654
    
    
    
    275,061
    
    
    
    525,873Research and development
expenses as reported
    
    
    17,828,605
    
    
    
    819,714
    
    
    
    1,523,030
    
    
    
    4,565,533
    
    
    
    3,998,043
 Income Taxes
     Asset Retirement Obligations
   12




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Nine month ended
    
    
    Year endedSeptember 30, 2008
    
    
    December 31, 2007$
    
    
    $Opening balance
    
    
    1,381,372
    
    
    
    New obligations
    
    
    
    
    
    
    1,344,925Accretion expense
    
    
    90,497
    
    
    
    34,682Foreign currency translation
    
    
    (139,682
    )
    
    
    1,765Ending balance
    
    
    1,332,187
    
    
    
    1,381,372
 Fair Value of Financial Instruments
  Impairment of Long-Lived Assets
  Australian Goods and Services Tax (GST)
  Revenue Recognition
 Revenue from services
  Research and development revenue
  13




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
   Fee Income
  Interest revenue
  Foreign Currency
 Functional and reporting currency
   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;
 14




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 
    
    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
   Leased Assets
  Stock-based Compensation
   15




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
    Period frominception to
    
    Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,
    
    September 30,2008
    
    2008
    
    2007
    
    2008
    
    2007$
    
    $
    
    $
    
    $
    
    $Research and development
    
    
    835,482
    
    
    
    135,171
    
    
    
    100,987
    
    
    
    443,892
    
    
    
    137,103General and administrative
    
    
    630,669
    
    
    
    59,722
    
    
    
    38,011
    
    
    
    199,878
    
    
    
    112,074Total share-based compensation expense
    
    
    1,466,151
    
    
    
    194,893
    
    
    
    138,998
    
    
    
    643,770
    
    
    
    249,177
   Grant DateAugust 2008
    
    March 2008
    
    October 2007
    
    September 2007
    
    March 2007Exercise Price
    
    $
    0.61
    
    
    $
    0.82
    
    
    $
    1.04
    
    
    $
    1.02
    
    
    $
    0.95Share Price at Grant
Date
    
    $
    0.62
    
    
    $
    0.84
    
    
    $
    1.10
    
    
    $
    1.04
    
    
    $
    0.98Volatility
    
    
    71
    %
    
    
    76
    %
    
    
    76
    %
    
    
    72
    %
    
    
    74
    %Expected Life
    
    10 years
    
    10 years
    
    10 years
    
    10 years
    
    10 yearsRisk Free Interest Rate
    
    
    5.85
    %
    
    
    5.87
    %
    
    
    6.13
    %
    
    
    5.99
    %
    
    
    5.86
    %Fair Value of Option
    
    $
    0.40
    
    
    $
    0.55
    
    
    $
    0.72
    
    
    $
    0.66
    
    
    $
    0.64
  Number ofOptions Over
    
    Weighted -AverageShares
    
    Exercise PriceOutstanding Balance, December 31, 2007
    
    
    4,946,395
    
    
    $
    0.55Granted
    
    
    1,553,000
    
    
    
    0.77Exercised
    
    
    (18,124
    )
    
    
    0.26Lapsed
    
    
    (107,987
    )
    
    
    1.03Outstanding Balance, September 30, 2008
    
    
    6,373,284
    
    
    
    0.55Exercisable shares as of September 30, 2008
    
    
    3,247,547
    
    
    
    0.35
 16




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Fiscal Year2008 - remaining periods
    
    $
    201,6502009
    
    
    387,9312010
    
    
    118,2842011
    
    
    7,361715,226
 Pension Costs
  Net Loss per Share and Anti-dilutive Securities
  Total Comprehensive Income
  Recent Accounting Pronouncements
   17




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Subsequent Events
  18




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##### 



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
     19




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##### 



UNIVERSAL BIOSENSORS, INC.
   Results of Operations
 Gross Profit on Services Performed
   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.Research and development expenses for the respective periods are as follows:
 PeriodfrominceptiontoSeptember
    
    Three Months Ended
    
    Nine Months Ended30,
    
    September 30,
    
    September 30,2008
    
    2008
    
    2007
    
    2008
    
    2007$
    
    $
    
    $
    
    $
    
    $Research and development expenses
    
    
    19,740,208
    
    
    
    819,714
    
    
    
    1,725,684
    
    
    
    4,840,594
    
    
    
    4,523,916Research grants received
recognized against related
research and development
expenses
    
    
    1,911,603
    
    
    
    
    
    
    
    202,654
    
    
    
    275,061
    
    
    
    525,873Research and development
expenses as reported
    
    
    17,828,605
    
    
    
    819,714
    
    
    
    1,523,030
    
    
    
    4,565,533
    
    
    
    3,998,043
 20




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##### 



UNIVERSAL BIOSENSORS, INC.
     General and Administrative Expenses
  Research and Development Income
  21




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##### 



UNIVERSAL BIOSENSORS, INC.
 Fee Income
  Interest Income
  Interest Expense
  Income Tax Benefit
  Liquidity and Capital Resources
     22




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##### 



UNIVERSAL BIOSENSORS, INC.
     Operating Capital and Capital Expenditure Requirements
   
    
    expenses we incur in manufacturing, developing, marketing and selling products;
 23




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
    
    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 through: (i) milestone payments upon the achievement of regulatory
milestones; (ii) services fees calculated with reference to blood glucoses tests strips
sold by LifeScan; and (iii) income from the manufacture of blood glucose tests strips by
Universal Biosensors for LifeScan is sufficient to offset our costs in total or in part;
    
    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.
 Off-Balance Sheet Arrangement
  Less than 1 year
    
    $
    399,8961  3 years
    
    
    841,6453  5 years
    
    
    898,790More than 5 years
    
    
    233,981Total minimum lease payments
    
    $
    2,374,312
  24




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##### 



UNIVERSAL BIOSENSORS, INC.
 Contractual Obligations
  Payments Due By PeriodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Total
    
    year
    
    1  3 years
    
    3  5 years
    
    yearsLong-Term Debt Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital Lease Obligations (1)
    
    
    1,332,187
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,332,187Operating Lease Obligations (2)
    
    
    2,374,312
    
    
    
    399,896
    
    
    
    841,645
    
    
    
    898,790
    
    
    
    233,981Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Liabilities on
Balance Sheet under GAAP (3)
    
    
    138,163
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    138,163Total
    
    
    3,844,662
    
    
    
    399,896
    
    
    
    841,645
    
    
    
    898,790
    
    
    
    1,704,331
 
 (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
  25




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##### 



UNIVERSAL BIOSENSORS, INC.
 
 Item 3 Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Market Risk
   Interest Rate Risk
  26




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##### 



UNIVERSAL BIOSENSORS, INC.
 
 Item 4 Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Controls
  27




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##### 



UNIVERSAL BIOSENSORS, INC.
 
 PART II
 
 Item 6 Exhibits
 Exhibit No
    
    Description
    
    Location31.1
    
    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 28




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##### 



UNIVERSAL BIOSENSORS, INC.
 
 SIGNATURES
  UNIVERSAL BIOSENSORS, INC.(Registrant)Date: October 27, 2008
    
    By:
    
    /s/ MARK MORRISSON

Mark MorrissonChief Executive Officer and
Executive DirectorDate: October 27, 2008
    
    By:
    
    /s/ SALESH BALAK

Salesh BalakChief Financial Officer
 29




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##### 



INDEX TO EXHIBITS
Quarterly Report on Form 10-Q
Dated October 27, 2008
 Exhibit No
    
    Description
    
    Location31.1
    
    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