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, 2008
 Universal Biosensors, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    98-0424072(State or other jurisdiction of incorporation or
    
    (I.R.S. Employer Identification Number)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
  Large Accelerated Filer o
    
    Accelerated Filer o
    
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    Smaller reporting company 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, 2008 and
December 31, 2007 (unaudited)
    
    
    32)
    
    Consolidated condensed statements of operations for the three
months and six months ended June 30, 2008 and 2007 (unaudited),
    
    
    43)
    
    Consolidated condensed statements of cash flows for the six
months ended June 30, 2008 and 2007 (unaudited)
    
    
    54)
    
    Consolidated condensed statements of changes in stockholders
equity and comprehensive income for the period ended June 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
    
    
    28Item 3
    
    Defaults Upon Senior Securities
    
    Not ApplicableItem 4
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5
    
    Other Information
    
    Not ApplicableItem 6
    
    Exhibits
    
    
    30Exhibit 3.1Exhibit 3.2Exhibit 31.1Exhibit 31.2Exhibit 32.0SIGNATURES
    
    
    31
  2




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##### 



PART I
 
 Item 1 Financial Statements
 UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED BALANCE SHEETS
 (Unaudited)
 June 30,
    
    
    December 31,2008
    
    
    2007US$
    
    
    US$ASSETSCurrent assets:Cash
    
    $
    34,283,180
    
    
    $
    36,990,423Short-term investments (held-to-maturity)
    
    
    
    
    
    
    2,753,679Inventory  raw materials
    
    
    676,444
    
    
    
    429,016Accrued income
    
    
    223,260
    
    
    
    70,361Receivables
    
    
    1,615,304
    
    
    
    485,902Other current assets
    
    
    3,357,049
    
    
    
    796,782Total current assets
    
    
    40,155,237
    
    
    
    41,526,163Property, plant and equipment
    
    
    20,753,400
    
    
    
    15,828,321Less accumulated depreciation
    
    
    (2,374,165
    )
    
    
    (1,386,070
    )Property, plant and equipment  net
    
    
    18,379,235
    
    
    
    14,442,251Spare parts
    
    
    
    
    
    
    23,907Total assets
    
    $
    58,534,472
    
    
    $
    55,992,321LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    906,925
    
    
    $
    786,296Income taxes payable
    
    
    
    
    
    
    15,869Accrued expenses
    
    
    562,078
    
    
    
    808,210Financial instruments
    
    
    20,519
    
    
    
    Other liability
    
    
    58,099
    
    
    
    Employee entitlements provision
    
    
    508,737
    
    
    
    236,070Total current liabilities
    
    
    2,056,358
    
    
    
    1,846,445Non-current liabilities:Asset retirement obligations
    
    
    1,571,943
    
    
    
    1,381,372Employee entitlements provision
    
    
    58,777
    
    
    
    89,239Other liability
    
    
    518,051
    
    
    
    Total non-current liabilities
    
    
    2,148,771
    
    
    
    1,470,611Total liabilities
    
    
    4,205,129
    
    
    
    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
    
    
    59,359,660
    
    
    
    58,920,901Accumulated deficit
    
    
    (13,295,233
    )
    
    
    (9,759,926
    )Accumulated other comprehensive income
    
    
    8,249,218
    
    
    
    3,498,594Total stockholders equity
    
    
    54,329,343
    
    
    
    52,675,265Total liabilities and stockholders equity
    
    $
    58,534,472
    
    
    $
    55,992,321
  3




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##### 



UNIVERSAL BIOSENSORS, INC.
 (A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
 (Unaudited)
 Period frominception toJune 30,
    
    
    Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007US$
    
    
    US$
    
    
    US$
    
    
    US$
    
    
    US$RevenueRevenue from products
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Revenue from services
    
    
    1,178,643
    
    
    
    1,178,643
    
    
    
    
    
    
    
    1,178,643
    
    
    
    Total revenue from ordinary activities
    
    
    1,178,643
    
    
    
    1,178,643
    
    
    
    
    
    
    
    1,178,643
    
    
    
    Costs of revenuesCost of goods sold
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Cost of services
    
    
    (1,178,643
    )
    
    
    (1,178,643
    )
    
    
    
    
    
    
    (1,178,643
    )
    
    
    Gross profit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating expenses:Research and development (1 and 2)
    
    
    17,008,891
    
    
    
    1,973,427
    
    
    
    1,376,993
    
    
    
    3,745,819
    
    
    
    2,475,013General and administrative (3)
    
    
    9,734,267
    
    
    
    1,385,021
    
    
    
    1,071,943
    
    
    
    2,644,323
    
    
    
    1,710,036Total operating expenses
    
    
    26,743,158
    
    
    
    3,358,448
    
    
    
    2,448,936
    
    
    
    6,390,142
    
    
    
    4,185,049Research and development income
    
    
    9,152,807
    
    
    
    250,000
    
    
    
    249,995
    
    
    
    500,000
    
    
    
    499,992Loss from operations
    
    
    (17,590,351
    )
    
    
    (3,108,448
    )
    
    
    (2,198,941
    )
    
    
    (5,890,142
    )
    
    
    (3,685,057
    )Other income/(expense):Interest income
    
    
    3,298,279
    
    
    
    662,511
    
    
    
    299,411
    
    
    
    1,363,794
    
    
    
    606,997Interest expense
    
    
    (9,022
    )
    
    
    (9,022
    )
    
    
    
    
    
    
    (9,022
    )
    
    
    Other
    
    
    1,000,000
    
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    Total other income/(expense):
    
    
    4,289,257
    
    
    
    653,489
    
    
    
    299,411
    
    
    
    2,354,772
    
    
    
    606,997Net loss before tax
    
    
    (13,301,094
    )
    
    
    (2,454,959
    )
    
    
    (1,899,530
    )
    
    
    (3,535,370
    )
    
    
    (3,078,060
    )Income tax benefit/(expense)
    
    
    5,861
    
    
    
    (2,704
    )
    
    
    
    
    
    
    63
    
    
    
    Net loss
    
    $
    (13,295,233
    )
    
    $
    (2,457,663
    )
    
    $
    (1,899,530
    )
    
    $
    (3,535,307
    )
    
    $
    (3,078,060
    )Basic and diluted net loss per share
    
    $
    (0.21
    )
    
    $
    (0.02
    )
    
    $
    (0.01
    )
    
    $
    (0.02
    )
    
    $
    (0.02
    )Number of shares used to compute per share data
    
    
    64,113,213
    
    
    
    156,969,888
    
    
    
    128,086,971
    
    
    
    156,964,319
    
    
    
    128,074,042Notes:1 Net of research grant income in these amounts
    
    
    1,911,603
    
    
    
    56,917
    
    
    
    173,493
    
    
    
    275,061
    
    
    
    323,2192 Includes non-cash compensation expense (research and
development)
    
    
    700,311
    
    
    
    238,187
    
    
    
    16,849
    
    
    
    308,721
    
    
    
    36,1163 Includes non-cash compensation expense (general &
administrative)
    
    
    570,947
    
    
    
    53,384
    
    
    
    47,732
    
    
    
    140,156
    
    
    
    74,063
  4




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 
 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
 (Unaudited)
 Period frominception to June
    
    
    Six Months Ended June 30,30, 2008
    
    
    2008
    
    
    2007US$
    
    
    US$
    
    
    US$Cash flows from operating activities provided by/(used in):Net loss
    
    
    (13,295,233
    )
    
    
    (3,535,307
    )
    
    
    (3,078,060
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and impairment of plant & equipment
    
    
    2,310,070
    
    
    
    825,092
    
    
    
    157,605Share based payments expense
    
    
    1,271,258
    
    
    
    448,877
    
    
    
    115,687Loss on fixed assets disposal
    
    
    97,715
    
    
    
    
    
    
    
    Translation (gain)/loss
    
    
    250,049
    
    
    
    
    
    
    
    (12,099
    )Change in assets and liabilities:Inventory  Raw materials
    
    
    (631,210
    )
    
    
    (202,194
    )
    
    
    Receivables
    
    
    (1,540,322
    )
    
    
    (1,054,420
    )
    
    
    Prepaid expenses and other current assets
    
    
    (3,216,813
    )
    
    
    (2,417,503
    )
    
    
    (282,941
    )Grants receivable
    
    
    (212,701
    )
    
    
    (142,339
    )
    
    
    285,808Income tax payable
    
    
    (973
    )
    
    
    (16,842
    )
    
    
    Employee entitlements
    
    
    651,940
    
    
    
    206,378
    
    
    
    102,823Accounts payable and accrued expenses
    
    
    785,693
    
    
    
    (181,790
    )
    
    
    169,147Net cash provided by/(used in) operating activities
    
    
    (13,530,527
    )
    
    
    (6,070,048
    )
    
    
    (2,542,030
    )Cash flows from investing activities:Proceeds from sale of investment securities
    
    
    168,914
    
    
    
    2,922,593
    
    
    
    Purchases of property, plant and equipment
    
    
    (14,507,296
    )
    
    
    (2,777,558
    )
    
    
    (3,702,527
    )Net cash provided by/(used in) investing activities
    
    
    (14,338,382
    )
    
    
    145,035
    
    
    
    (3,702,527
    )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
    
    
    
    25,825Net cash provided by/(used in) financing activities
    
    
    57,104,129
    
    
    
    (10,087
    )
    
    
    25,825Net increase in cash and cash equivalents
    
    
    29,235,220
    
    
    
    (5,935,100
    )
    
    
    (6,218,732
    )Cash and cash equivalent at beginning of period
    
    
    
    
    
    
    36,990,422
    
    
    
    23,885,198Effect of exchange rate fluctuations on the balances of cash held in
foreign currencies
    
    
    5,047,960
    
    
    
    3,227,858
    
    
    
    1,204,323Cash and cash equivalents at end of period
    
    
    34,283,180
    
    
    
    34,283,180
    
    
    
    18,870,789
  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
    
    
    
    
    
    
    Foreign
    
    
    TotalPreference Shares
    
    
    Ordinary shares
    
    
    Paid-in
    
    
    Accumulated
    
    
    currency
    
    
    stockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    deficit
    
    
    reserve
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,535,307
    )
    
    
    
    
    
    
    (3,535,307
    )Foreign currency translation reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,750,624
    
    
    
    4,750,624Total Comprehensive Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,215,317Exercise of stock options issued to employees
    
    
    
    
    
    
    
    
    
    
    18,124
    
    
    
    2
    
    
    
    4,711
    
    
    
    
    
    
    
    
    
    
    
    4,713Stock option expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    448,877
    
    
    
    
    
    
    
    
    
    
    
    448,877Balances at June 30, 2008
    
    
    
    
    
    
    
    
    
    
    156,976,936
    
    
    
    15,698
    
    
    
    59,359,660
    
    
    
    (13,295,233
    )
    
    
    8,249,218
    
    
    
    54,329,343
  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
   June 30,
    
    
    December 31,2008
    
    
    2007$
    
    
    $Plant and equipment
    
    
    13,133,235
    
    
    
    3,349,905Leasehold improvements
    
    
    7,620,165
    
    
    
    5,548,792Capital work in process
    
    
    
    
    
    
    6,929,62420,753,400
    
    
    
    15,828,321Accumulated depreciation
    
    
    (2,374,165
    )
    
    
    (1,386,070
    )Property, plant & equipment, net
    
    
    18,379,235
    
    
    
    14,442,251
   10




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
   Six month ended
    
    
    Year endedJune 30, 2008
    
    
    December 31, 2007$
    
    
    $Movement in accumulated depreciation
    
    
    988,095
    
    
    
    351,325Written down value of fixed assets disposed/written off
    
    
    
    
    
    
    391,542Difference in exchange rates
    
    
    (163,003
    )
    
    
    (148,340
    )Depreciation expense
    
    
    825,092
    
    
    
    594,527
  Research and Development
    11




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##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 Periodfrominception
    
    Three Months Ended
    
    Six Months Ended Juneto June 30,
    
    June 30,
    
    30,2008
    
    2008
    
    2007
    
    2008
    
    2007$
    
    $
    
    $
    
    $
    
    $Research and development expenses
    
    
    18,920,494
    
    
    
    2,030,344
    
    
    
    1,550,486
    
    
    
    4,020,880
    
    
    
    2,798,232Research grants received
recognized against related
research and development
expenses
    
    
    (1,911,603
    )
    
    
    (56,917
    )
    
    
    (173,493
    )
    
    
    (275,061
    )
    
    
    (323,219
    )Research and development
expenses as reported
    
    
    17,008,891
    
    
    
    1,973,427
    
    
    
    1,376,993
    
    
    
    3,745,819
    
    
    
    2,475,013
 Income Taxes
     Asset Retirement Obligations
   12




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  June 30, 2008
    
    
    December 31, 2007$
    
    
    $Opening balance at January 1
    
    
    1,381,372
    
    
    
    New obligations
    
    
    
    
    
    
    1,344,925Accretion expense
    
    
    61,140
    
    
    
    34,682Foreign currency translation
    
    
    129,431
    
    
    
    1,765Ending balance at December 31
    
    
    1,571,943
    
    
    
    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




---



##### 



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;
    
    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.
 14




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
 
  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
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,2008
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007$
    
    
    $
    
    
    $
    
    
    $
    
    
    $Research and development
    
    
    700,311
    
    
    
    238,187
    
    
    
    16,849
    
    
    
    308,721
    
    
    
    36,116General and administrative
    
    
    570,947
    
    
    
    53,384
    
    
    
    47,732
    
    
    
    140,156
    
    
    
    74,063Total share-based compensation expense
    
    
    1,271,258
    
    
    
    291,571
    
    
    
    64,581
    
    
    
    448,877
    
    
    
    110,179
   Grant DateMarch 2008
    
    October 2007
    
    September 2007
    
    March 2007Exercise Price
    
    $
    0.82
    
    
    $
    1.04
    
    
    $
    1.02
    
    
    $
    0.95Share Price at Grant Date
    
    $
    0.84
    
    
    $
    1.10
    
    
    $
    1.04
    
    
    $
    0.98Volatility
    
    
    76
    %
    
    
    76
    %
    
    
    72
    %
    
    
    74
    %Expected Life
    
    
    10 years
    
    
    
    10 years
    
    
    
    10 years
    
    
    
    10 yearsRisk Free Interest Rate
    
    
    5.87
    %
    
    
    6.13
    %
    
    
    5.99
    %
    
    
    5.86
    %Fair Value of Option
    
    $
    0.59
    
    
    $
    0.72
    
    
    $
    0.66
    
    
    $
    0.64
  Number ofOptions Over
    
    Weighted AverageShares
    
    Exercise PriceOutstanding Balance, December 31, 2007
    
    
    4,946,395
    
    
    $
    0.55Granted
    
    
    1,199,000
    
    
    
    0.82Exercised
    
    
    (18,124
    )
    
    
    0.26Lapsed
    
    
    (8,000
    )
    
    
    0.95Outstanding Balance, June 30, 2008
    
    
    6,119,271
    
    
    
    0.55Exercisable shares as of June 30, 2008
    
    
    3,247,547
    
    
    
    0.35
 16




---



##### 



UNIVERSAL BIOSENSORS, INC.
(A Development Stage Enterprise)
 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
 (Unaudited)
  Fiscal Year2008  remaining periods
    
    $
    222,7212009
    
    
    425,0202010
    
    
    348,261996,002
 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




---



##### 



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;
    
    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.
 20




---



##### 



UNIVERSAL BIOSENSORS, INC.
  Periodfrominception
    
    Three Months Ended
    
    Six Months Endedto June 30,
    
    June 30,
    
    June 30,2008
    
    2008
    
    2007
    
    2008
    
    2007$
    
    $
    
    $
    
    $
    
    $Research and development expenses
    
    
    18,920,494
    
    
    
    2,030,344
    
    
    
    1,550,486
    
    
    
    4,020,880
    
    
    
    2,798,232Research grants received
recognized against related
research and development
expenses
    
    
    (1,911,603
    )
    
    
    (56,917
    )
    
    
    (173,493
    )
    
    
    (275,061
    )
    
    
    (323,219
    )Research and development
expenses as reported
    
    
    17,008,891
    
    
    
    1,973,427
    
    
    
    1,376,993
    
    
    
    3,745,819
    
    
    
    2,475,013
     21




---



##### 



UNIVERSAL BIOSENSORS, INC.
 General and Administrative Expenses
  Research and Development Income
  Fee Income
  Interest Income
  Interest Expense
  Income Tax Benefit
  Liquidity and Capital Resources
  22




---



##### 



UNIVERSAL BIOSENSORS, INC.
        Operating Capital and Capital Expenditure Requirements
  23




---



##### 



UNIVERSAL BIOSENSORS, INC.
  
    
    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;
    
    whether 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
    
    $
    481,4151  3 years
    
    
    1,013,2163  5 years
    
    
    1,083,795More than 5 years
    
    
    424,065Total minimum lease payments
    
    $
    3,002,491
  24




---



##### 



UNIVERSAL BIOSENSORS, INC.
 Contractual Obligations
  Less than 1
    
    Payments Due By Period
    
    More than 5Total
    
    year
    
    1  3 years
    
    3  5 years
    
    yearsLong-Term Debt Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Capital Lease Obligations (1)
    
    
    1,571,943
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,571,943Operating Lease Obligations (2)
    
    
    3,002,491
    
    
    
    481,415
    
    
    
    1,013,216
    
    
    
    1,083,795
    
    
    
    424,065Purchase Obligations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
Long-Term Liabilities on Balance Sheet under GAAP (3)
    
    
    58,777
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,777Total
    
    
    4,633,211
    
    
    
    481,415
    
    
    
    1,013,216
    
    
    
    1,083,795
    
    
    
    2,054,785
 
 (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




---



##### 



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$477,343
    
    U.S.$3,194Average contractual exchange rate
    
    0.6135
 
 *
    
    Expected maturity or transaction date Interest Rate Risk
  26




---



##### 



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




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 PART II
 
 Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
  Number of OptionsExercised andCorresponding NumberExercise Date
    
    of Shares Issued
    
    
    Option Exercise Price
    
    
    Proceeds ReceivedMay, 2008
    
    
    18,124
    
    
    $
    0.26
    
    
    $
    4,713
 28




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 Item 4 Submission of Matters to a Vote of Security Holders
  Item
    
    Proposal
    
    Details of Proposal1(a).
    
    Re-election of Mr Denis Hanley
as a Class II director of the
Company
    
    Proposal to re-elect Mr Denis
Hanley as a Class II director
of the Company to serve a
three-year term of office
expiring on the date of the
2011 annual general meeting of
stockholders1(b).
    
    Re-election of Dr Elizabeth
(Jane) Wilson as a Class II
director of the Company
    
    Proposal to re-elect Dr
Elizabeth (Jane) Wilson as a
Class II director of the
Company to serve a three-year
term of office expiring on the
date of the 2011 annual
general meeting of
stockholders1(c).
    
    Re-election of Mr Mark
Morrisson as a Class II
director of the Company
    
    Proposal to re-elect Mr Mark
Morrisson as a Class II
director of the Company to
serve a three-year term of
office expiring on the date of
the 2011 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 Company3.
    
    Grant of options to Mr Mark
Morrisson
    
    The grant of options to Mr
Mark Morrisson, the Companys
Chief Executive Officer and
Managing Director, under the
Option Plan, requires the
approval of stockholders under
ASX Listing Rule 10.14. On
March 17, 2008, subject to
receipt of necessary
stockholder approval, the
Board resolved to grant
150,000 employee options to
Mark Morrisson under the
Option Plan. The resolution
proposed in item 3 seeks the
necessary approval of this
grant of options in accordance
with the ASX Listing Rules.4.
    
    Increase in non-executive
remuneration pool
    
    Proposal to increase the total
amount of the pool of
directors fees potentially
payable to the non-executive
directors of the Company by
A$200,000, from $500,000 to
A$700,000 per annum in
accordance with ASX Listing
Rules. ASX Listing Rule 10.17
provides that the Company must
not increase the total amount
of directors fees payable to
non-executive directors
without the approval of
stockholders.
  
 *
    
    Voting restrictions were applied in accordance with the requirements of the Listing Rules of ASX. Resolution
    
    Votes For
    
    Votes Against
    
    AbstentionsProposal 1(a) Re-election of Mr Denis Hanley
    
    
    90,198,379
    
    
    
    450,250
    
    
    
    9,167Proposal 1(b) Re-election of Dr Elizabeth (Jane)
Wilson
    
    
    90,467,392
    
    
    
    181,237
    
    
    
    9,167Proposal 1(c) Re-election of Mr Mark Morrisson
    
    
    90,466,392
    
    
    
    182,237
    
    
    
    9,167Proposal 2 Adoption and approval of remuneration
report
    
    
    90,097,455
    
    
    
    559,341
    
    
    
    1,000
    **Proposal 3 Grant of options to Mr Mark Morrisson*
    
    
    82,941,840
    
    
    
    605,522
    
    
    
    3,567
    **Proposal 4 Increase in non-executive
remuneration pool*
    
    
    59,768,845
    
    
    
    402,493
    
    
    
    3,567
    **
 
 *
    
    Voting exclusions were applied in respect of Proposal 3 and Proposal 4.**
    
    Abstentions with respect to these resolutions are counted as votes against the proposal. 29




---



##### 



UNIVERSAL BIOSENSORS, INC.
 PART II
 
 Item 6 Exhibits
 Exhibit No
    
    Description
    
    Location3.1*
    
    Amended and Restated Articles of Incorporation
    
    Incorporated herein by reference3.2**
    
    Amended and Restated By-Laws
    
    Incorporated herein by reference31.1
    
    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
 
 *
    
    Previously filed as an exhibit by the same number of the Companys Form 10 filed on April 30,
2007**
    
    Previously filed as an exhibit by the same number of the Companys Amendment No. 5 to Form 10
filed on April 29, 2008***
    
    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 30




---



##### 



UNIVERSAL BIOSENSORS, INC.
 
 SIGNATURES
  UNIVERSAL BIOSENSORS, INC.(Registrant)By:
    
    /s/ MARK MORRISSONDate: August 5, 2008
    
    
    
    Mark MorrissonChief Executive Officer and
Executive DirectorBy:
    
    /s/ SALESH BALAKDate: August 5, 2008
    
    
    
    Salesh BalakChief Financial Officer
 31




---



##### 



INDEX TO EXHIBITS
Quarterly Report on Form 10-Q
Dated August 5, 2008
 Exhibit No
    
    Description
    
    Location3.1
    
    Amended and Restated Articles of Incorporation
    
    Incorporated herein by reference3.2
    
    Amended and Restated By-Laws
    
    Incorporated herein by reference31.1
    
    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