##### Table of Contents



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, 2009
 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, Victoria 
Australia(Address of principal executive offices)
    
    Not Applicable(Zip Code)
 Telephone: +61 3 9213 9000  (Registrants telephone
number, including area
code)
  þ o
  o o
  Large accelerated filer oAccelerated 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 September 30, 2009 and
December 31, 2008 (unaudited)
    
    
    32)  Consolidated condensed statements of operations for the three
months and nine months ended September 30, 2009 and 2008
(unaudited)
    
    
    43)  Consolidated condensed statements of cash flows for the nine
months ended September 30, 2009 and 2008 (unaudited)
    
    
    54)  Consolidated condensed statements of changes in stockholders
equity and comprehensive income for the period ended September
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
    
    
    31Exhibit 31.1Exhibit 31.2Exhibit 32.0SIGNATURES
    
    
    32EX-31.1EX-31.2EX-32.0
  1




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##### Table of Contents



PART I
 
 Item 1 Financial Statements
 
 UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
 September 30,
    
    
    December 31,2009
    
    
    2008A$
    
    
    A$ASSETSCurrent assets:Cash and cash equivalents
    
    
    17,878,300
    
    
    
    28,334,864Accrued income
    
    
    118,305
    
    
    
    118,305Accounts receivables
    
    
    39,800
    
    
    
    31,657Prepayments
    
    
    2,382,818
    
    
    
    3,730,246Other current assets
    
    
    320,974
    
    
    
    535,000Total current assets
    
    
    20,740,197
    
    
    
    32,750,072Property, plant and equipment
    
    
    27,669,928
    
    
    
    23,522,706Less accumulated depreciation
    
    
    (5,876,618
    )
    
    
    (3,767,457
    )Property, plant and equipment  net
    
    
    21,793,310
    
    
    
    19,755,249Total assets
    
    
    42,533,507
    
    
    
    52,505,321LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    
    357,282
    
    
    
    630,977Accrued expenses
    
    
    748,340
    
    
    
    838,697Financial instruments
    
    
    12,540
    
    
    
    Deferred income
    
    
    484,625
    
    
    
    Employee entitlements provision
    
    
    466,330
    
    
    
    435,387Total current liabilities
    
    
    2,069,117
    
    
    
    1,905,061Non-current liabilities:Asset retirement obligations
    
    
    1,806,694
    
    
    
    1,699,133Employee entitlements provision
    
    
    252,389
    
    
    
    197,897Deferred income
    
    
    43,790
    
    
    
    Total non-current liabilities
    
    
    2,102,873
    
    
    
    1,897,030Total liabilities
    
    
    4,171,990
    
    
    
    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 157,038,558
shares in 2009 (2008: 156,976,936)
    
    
    15,704
    
    
    
    15,698Additional paid-in capital
    
    
    74,016,931
    
    
    
    73,338,995Accumulated deficit
    
    
    (24,353,151
    )
    
    
    (12,357,265
    )Current year loss
    
    
    (11,007,115
    )
    
    
    (11,995,886
    )Accumulated other comprehensive income
    
    
    (310,852
    )
    
    
    (298,312
    )Total stockholders equity
    
    
    38,361,517
    
    
    
    48,703,230Total liabilities and stockholders equity
    
    
    42,533,507
    
    
    
    52,505,321
  3




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 Period fromInception(September 14, 2001)to September 30,
    
    
    Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008A$
    
    
    A$
    
    
    A$
    
    
    A$
    
    
    A$RevenueRevenue from products
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Revenue from services
    
    
    5,720,989
    
    
    
    819,181
    
    
    
    1,880,593
    
    
    
    2,599,235
    
    
    
    3,121,754Total revenue from ordinary activities
    
    
    5,720,989
    
    
    
    819,181
    
    
    
    1,880,593
    
    
    
    2,599,235
    
    
    
    3,121,754Costs of revenuesCost of goods sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of services
    
    
    3,264,010
    
    
    
    80,136
    
    
    
    1,880,593
    
    
    
    142,256
    
    
    
    3,121,754Total costs of revenues
    
    
    3,264,010
    
    
    
    80,136
    
    
    
    1,880,593
    
    
    
    142,256
    
    
    
    3,121,754Gross profit
    
    
    2,456,979
    
    
    
    739,045
    
    
    
    
    
    
    
    2,456,979
    
    
    
    Operating expensesResearch and development (1 and 2)
    
    
    39,935,560
    
    
    
    3,681,701
    
    
    
    1,234,887
    
    
    
    11,019,541
    
    
    
    5,240,833General and administrative (3)
    
    
    18,491,947
    
    
    
    1,543,305
    
    
    
    1,303,981
    
    
    
    4,129,183
    
    
    
    4,125,683Total operating expenses
    
    
    58,427,507
    
    
    
    5,225,006
    
    
    
    2,538,868
    
    
    
    15,148,724
    
    
    
    9,366,516Research and development income
    
    
    14,127,076
    
    
    
    310,945
    
    
    
    259,740
    
    
    
    1,049,112
    
    
    
    813,251Loss from operations
    
    
    (41,843,452
    )
    
    
    (4,175,016
    )
    
    
    (2,279,128
    )
    
    
    (11,642,633
    )
    
    
    (8,553,265
    )Other income/(expense)Interest income
    
    
    5,220,332
    
    
    
    161,041
    
    
    
    634,275
    
    
    
    621,299
    
    
    
    2,110,749Interest expense
    
    
    (19,125
    )
    
    
    (2,409
    )
    
    
    
    
    
    
    (9,636
    )
    
    
    (9,489
    )Fee income
    
    
    1,131,222
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,131,222Other
    
    
    168,551
    
    
    
    5,368
    
    
    
    314,405
    
    
    
    23,855
    
    
    
    230,744Total other income/(expense)
    
    
    6,500,980
    
    
    
    164,000
    
    
    
    948,680
    
    
    
    635,518
    
    
    
    3,463,226Net loss before tax
    
    
    (35,342,472
    )
    
    
    (4,011,016
    )
    
    
    (1,330,448
    )
    
    
    (11,007,115
    )
    
    
    (5,090,039
    )Income tax benefit/(expense)
    
    
    (17,794
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    206Net loss
    
    $
    (35,360,266
    )
    
    $
    (4,011,016
    )
    
    $
    (1,330,448
    )
    
    $
    (11,007,115
    )
    
    $
    (5,089,833
    )Basic and diluted net loss per share
    
    $
    (0.45
    )
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.07
    )
    
    $
    (0.03
    )Average weighted number of shares outstanding during the
period
    
    
    78,584,752
    
    
    
    157,004,871
    
    
    
    156,976,936
    
    
    
    156,986,350
    
    
    
    156,968,571Notes:1. Net of research grant income in
these
amounts
    
    
    2,366,063
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,6132. Includes non-cash compensation
expense (research and development)
    
    
    1,555,410
    
    
    
    229,637
    
    
    
    152,495
    
    
    
    406,658
    
    
    
    483,5513. Includes non-cash compensation
expense (general and
administrative)
    
    
    1,103,348
    
    
    
    172,253
    
    
    
    67,340
    
    
    
    252,210
    
    
    
    219,014
  4




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
 Period fromInception(September 14, 2001)to September 30,
    
    Nine Months Ended September 30,2009
    
    2009
    
    2008A$
    
    A$
    
    A$Cash flows from operating activities:Net loss
    
    
    (35,360,266
    )
    
    
    (11,007,115
    )
    
    
    (5,089,833
    )Adjustments to reconcile net loss to net cash used in operating activities:Net exchange difference
    
    
    1,102,572
    
    
    
    
    
    
    
    Depreciation and impairment of plant & equipment
    
    
    6,411,230
    
    
    
    2,129,947
    
    
    
    1,561,413Share based payments expense
    
    
    2,658,758
    
    
    
    658,868
    
    
    
    702,565Loss on fixed assets disposal
    
    
    211,343
    
    
    
    60,658
    
    
    
    Change in assets and liabilities:Inventory
    
    
    
    
    
    
    
    
    
    
    (978,699
    )Accounts receivables
    
    
    (947,128
    )
    
    
    (8,143
    )
    
    
    (1,157,532
    )Prepaid expenses and other current assets
    
    
    282,755
    
    
    
    91,027
    
    
    
    230,967Accrued income
    
    
    (108,855
    )
    
    
    
    
    
    
    (38,494
    )Income tax payable
    
    
    
    
    
    
    
    
    
    
    (18,000
    )Deferred revenue
    
    
    528,414
    
    
    
    528,414
    
    
    
    Employee entitlements
    
    
    718,719
    
    
    
    85,435
    
    
    
    255,549Accounts payable and accrued expenses
    
    
    1,254,730
    
    
    
    (237,802
    )
    
    
    (547,488
    )Net cash used in operating activities
    
    
    (23,247,728
    )
    
    
    (7,698,711
    )
    
    
    (5,079,552
    )Cash flows from investing activities:Proceeds/(purchases) from sale of investment securities
    
    
    
    
    
    
    
    
    
    
    3,123,501Instalment payments to acquire plant and equipment
    
    
    (5,762,043
    )
    
    
    (2,145,808
    )
    
    
    (3,698,610
    )Purchases of property, plant and equipment
    
    
    (21,375,017
    )
    
    
    (631,119
    )
    
    
    (3,788,572
    )Net cash used in investing activities
    
    
    (27,137,060
    )
    
    
    (2,776,927
    )
    
    
    (4,363,681
    )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
    
    
    (479,673
    )
    
    
    (479,673
    )
    
    
    Proceeds from stock options exercised
    
    
    203,119
    
    
    
    19,074
    
    
    
    5,047Net cash provided by/(used in)
financing activities
    
    
    69,620,721
    
    
    
    19,074
    
    
    
    (11,612
    )Net increase/(decrease) in cash and cash equivalents
    
    
    19,235,933
    
    
    
    (10,456,564
    )
    
    
    (9,454,845
    )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
    
    
    17,878,300
    
    
    
    17,878,300
    
    
    
    32,503,440
  5




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##### Table of Contents



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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    702,565
    
    
    
    
    
    
    
    
    
    
    
    702,565Comprehensive IncomeLoss on derivatives and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    106,272
    
    
    
    106,272Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,089,833
    )
    
    
    
    
    
    
    (5,089,833
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,983,561
    )Balances at September 30, 2008
    
    
    
    
    
    
    
    
    
    
    156,976,936
    
    
    
    15,698
    
    
    
    73,080,452
    
    
    
    (17,447,098
    )
    
    
    (192,040
    )
    
    
    55,457,012Balances at December 31, 2008
    
    
    
    
    
    
    
    
    
    
    156,976,936
    
    
    
    15,698
    
    
    
    73,338,995
    
    
    
    (24,353,151
    )
    
    
    (298,312
    )
    
    
    48,703,230Changes during the nine months period
ended September 30, 2009Exercise of stock options issued to
employees
    
    
    
    
    
    
    
    
    
    
    61,622
    
    
    
    6
    
    
    
    19,068
    
    
    
    
    
    
    
    
    
    
    
    19,074Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    658,868
    
    
    
    
    
    
    
    
    
    
    
    658,868Comprehensive IncomeLoss on derivatives and hedges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,540
    )
    
    
    (12,540
    )Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,007,115
    )
    
    
    
    
    
    
    (11,007,115
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,019,655
    )Balances at September 30, 2009
    
    
    
    
    
    
    
    
    
    
    157,038,558
    
    
    
    15,704
    
    
    
    74,016,931
    
    
    
    (35,360,266
    )
    
    
    (310,852
    )
    
    
    38,361,517
 
 (1)
    
    Incorporation date  6




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Inventory
  Receivables
   Property, Plant and Equipment
   September 30, 2009
    
    
    December 31, 2008A$
    
    A$Plant and equipment
    
    
    13,189,224
    
    
    
    13,003,248Leasehold improvements
    
    
    8,204,962
    
    
    
    8,123,925Capital work in process
    
    
    6,275,742
    
    
    
    2,395,53327,669,928
    
    
    
    23,522,706Accumulated depreciation
    
    
    (5,876,618
    )
    
    
    (3,767,457
    )Property, plant & equipment, net
    
    
    21,793,310
    
    
    
    19,755,249
  10




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
    Nine months ended
    
    
    Year endedSeptember 30, 2009
    
    
    December 31, 2008A$
    
    
    A$Movement in accumulated depreciation
    
    
    2,109,161
    
    
    
    2,195,236Accumulated depreciation of fixed assets disposed
    
    
    20,786
    
    
    
    71,611Depreciation expense
    
    
    2,129,947
    
    
    
    2,266,847
 Research and Development
    11




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##### Table of Contents



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 30,2009
    
    2009
    
    2008
    
    2009
    
    2008A$
    
    A$
    
    A$
    
    A$
    
    A$Research and development expenses
    
    
    42,301,623
    
    
    
    3,681,701
    
    
    
    1,234,887
    
    
    
    11,019,541
    
    
    
    5,541,446Research grants received
recognized against related
research and development
expenses
    
    
    (2,366,063
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300,613
    )Research and development
expenses as reported
    
    
    39,935,560
    
    
    
    3,681,701
    
    
    
    1,234,887
    
    
    
    11,019,541
    
    
    
    5,240,833
 Income Taxes
     Asset Retirement Obligations
    12




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Nine months ended
        
    
    Year endedSeptember 30, 2009
    
    
    
    December 31, 2008A$
    
    A$Opening balance
    
    
    1,699,133
    
    
    
    1,566,892Accretion expense
    
    
    107,561
    
    
    
    132,241Ending balance
    
    
    1,806,694
    
    
    
    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 ASC 605  Revenue Recognition (formerly 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




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##### Table of Contents



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.
 The transaction with LifeScan satisfies the revenue recognition criteria outlined in ASC 605
(formerly Staff Accounting Bulletin 101/104). The principles of revenue recognition in ASC
605 have all been satisfied; services were performed by us which were supported by purchase
orders issued by LifeScan on a regular basis, collection was assured, delivery of the
services had occurred and the amount was objectively determined and reflected the cost of
the services that were to be provided by us. The costs of the services, consisting of
materials, labor hours and factory overheads, were largely dependant on the number of test
runs that were required to be carried out by us on a monthly basis. The arrangement
consisted of only one deliverable which was the development and scale up of the production
activities of our blood glucose sensor strips. The relevant services performed under this
arrangement were completed and ceased in September 2008. We recognized revenue from these
services as we performed the services. Furthermore, the revenue received was not contingent
on performing any other services.(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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Leased Assets
  Stock-based Compensation
     Period fromInception(September 14,2001) to September
    
    Three Months Ended September 30,
    
    Nine Months Ended September 30,30, 2009
    
    2009
    
    2008
    
    2009
    
    2008A$
    
    A$
    
    A$
    
    A$
    
    A$Research and development
    
    
    1,555,410
    
    
    
    229,637
    
    
    
    152,495
    
    
    
    406,658
    
    
    
    483,551General and administrative
    
    
    1,103,348
    
    
    
    172,253
    
    
    
    67,340
    
    
    
    252,210
    
    
    
    219,014Total share-based compensation expense
    
    
    2,658,758
    
    
    
    401,890
    
    
    
    219,835
    
    
    
    658,868
    
    
    
    702,565
   18




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##### Table of Contents



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
    
    
    (147,334
    )
    
    
    1.04Granted
    
    
    2,279,200
    
    
    
    0.70Exercised
    
    
    (61,622
    )
    
    
    0.35Outstanding Balance, September
30, 2009
    
    
    8,443,528
    
    
    
    0.66Exercisable shares as of
September 30, 2009
    
    
    4,712,278
    
    
    
    0.56
   Fiscal Year
    
    A$2009  remaining periods
    
    
    474,0172010
    
    
    624,1622011
    
    
    233,5022012
    
    
    68,3462013
    
    
    30,2632014
    
    
    9,1971,439,487
 Pension Costs
  19




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##### Table of Contents



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
      20




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Related Party Transactions
     Three Months Ended September 30,
    
    Nine Months Ended September 30,2009
    
    2008
    
    2009
    
    2008A$
    
    A$
    
    A$
    
    A$Current ReceivablesReimbursement of
expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    300,589Revenue from
services
    
    
    
    
    
    
    
    
    
    
    39,800
    
    
    
    1,324,04239,800
    
    
    
    1,624,631Sale of Goods and
ServicesRevenue from
services
    
    
    819,181
    
    
    
    1,880,593
    
    
    
    2,599,235
    
    
    
    3,121,754
  
    
    the Company received research and development revenue of A$310,945 and A$259,740 for the
three months ended September 30, 2009 and 2008 and A$1,049,112 and A$813,251 for the nine
month period ended September 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$198,783 for the three months ended
September 30, 2009 and 2008 and A$32,353 and A$894,417 for the nine months ended September
30, 2009 and 2008, respectively for certain expenditure incurred on behalf of LifeScan.
 Borrowings
  Subsequent Events
  21




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##### Table of Contents



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 on
Form 10-Q.
 Overview
    Master Services and Supply Agreement with LifeScan
  22




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##### Table of Contents



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




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##### Table of Contents



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.
  Period frominception toSeptember
    
    
    Three months ended
    
    
    Nine months ended30,
    
    
    September 30,
    
    
    September   30,2009
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008A$
    
    
    A$
    
    
    A$
    
    
    A$
    
    
    A$Research and development expenses
    
    
    42,301,623
    
    
    
    3,681,701
    
    
    
    1,234,887
    
    
    
    11,019,541
    
    
    
    5,541,446Research grants received
recognized against related
research and development
expenses
    
    
    (2,366,063
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (300,613
    )Research and development
expenses as reported
    
    
    39,935,560
    
    
    
    3,681,701
    
    
    
    1,234,887
    
    
    
    11,019,541
    
    
    
    5,240,833
     24




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
 Off-Balance Sheet Arrangement
  Less than 1 year
    
    A$
    517,3661  3 years
    
    
    1,088,9083  5 years
    
    
    859,154More than 5 years
    
    
    Total minimum lease payments
    
    A$
    2,465,428
 The above relates to our operating lease obligations in relation to the lease of our premises.
 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)
    
    
    1,806,694
    
    
    
    
    
    
    
    
    
    
    
    1,806,694
    
    
    
    Operating Lease Obligations (2)
    
    
    2,465,428
    
    
    
    517,366
    
    
    
    1,088,908
    
    
    
    859,154
    
    
    
    Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Liabilities on
Balance Sheet under GAAP (3)
    
    
    252,389
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    252,389Total
    
    
    4,524,511
    
    
    
    517,366
    
    
    
    1,088,908
    
    
    
    2,665,848
    
    
    
    252,389
 
 (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




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##### Table of Contents



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
    
    A$
    811,303
    
    
    A$
    798,763Average contractual exchange rate
    
    
    0.5865
 
 *
    
    Expected maturity or transaction date Interest Rate Risk
  29




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##### Table of Contents



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




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
 
 PART II
 
 Item 1 Legal Proceedings
  
 Item 1A Risk Factors
  
 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
  Number of OptionsExercised andCorresponding
    
    
    
    
    
    
    ProceedsNumber of Shares
    
    
    Option Exercise
    
    
    ReceivedExercise Date
    
    Issued
    
    
    Price (A$)
    
    
    (A$)August, 2009
    
    
    36,248
    
    
    $
    0.31
    
    
    $
    11,221September, 2009
    
    
    25,374
    
    
    $
    0.31
    
    
    $
    7,85361,622
    
    
    
    
    
    
    $
    19,074
  
 Item 3 Defaults Upon Senior Securities
  
 Item 4 Submission of Matters to a Vote of Security Holders
  
 Item 5 Other Information
  
 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 31




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##### Table of Contents



UNIVERSAL BIOSENSORS, INC.
 
 SIGNATURES
  UNIVERSAL BIOSENSORS, INC.
(Registrant)By:
    /s/ MARK MORRISSONDate: October 30, 2009
    
    Mark MorrissonChief Executive Officer and
Executive DirectorBy:
    /s/ SALESH BALAKDate: October 30, 2009
    
    Salesh BalakChief Financial Officer 32




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##### Table of Contents



INDEX TO EXHIBITS
Quarterly Report on Form 10-Q
Dated October 30, 2009
 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