##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarterly period ended September 30, 2008
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the transition period from  to
 COMMISSION FILE NUMBER: 000-52595
 HEARTWARE LIMITED
 (Exact name of registrant as specified in its charter)
 State of Victoria, Australia
    
    98-0498958(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 Level 57, MLC Centre
19-29 Martin Place
Sydney NSW 2000
Australia
+61 2 9238 2064
 
 
 :
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company
þ
  o þ




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##### 



PART I. FINANCIAL INFORMATION
    
    
    4ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
    
    
    4ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
    
    
    22ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    27ITEM 4. CONTROLS AND PROCEDURES
    
    
    28PART II. OTHER INFORMATION
    
    
    28ITEM 1A. RISK FACTORS
    
    
    28ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    30ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    30Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



References
  
    
    HeartWare, the Company, we, us and our refer to HeartWare Limited and its
consolidated subsidiaries, HeartWare, Inc. and HeartWare International, Inc.
    
    HeartWare, Inc. refers to HeartWare, Inc., a Delaware corporation incorporated on
April 3, 2003. HeartWare, Inc. was acquired by HeartWare Limited on January 24, 2005.
    
    HeartWare International, Inc. refers to HeartWare International, Inc. a Delaware
corporation incorporated on July 29, 2008.
 Dollars
  Trademarks
   3




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
 HEARTWARE LIMITED
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
 September 30, 2008
    
    
    December 31, 2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    31,402,679
    
    
    $
    28,276,388Accounts receivable
    
    
    87,600
    
    
    
    Inventories, net
    
    
    600,834
    
    
    
    Prepaid expenses and other current assets
    
    
    839,029
    
    
    
    782,922Total current assets
    
    
    32,930,142
    
    
    
    29,059,310Property, plant and equipment, net
    
    
    3,733,261
    
    
    
    2,977,645Other intangible assets, net
    
    
    546,951
    
    
    
    318,211Other assets, net
    
    
    288,429
    
    
    
    Total assets
    
    $
    37,498,783
    
    
    $
    32,355,166LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    741,072
    
    
    $
    509,487Accrued expenses and other current liabilities
    
    
    2,081,546
    
    
    
    1,246,846Convertible notes, current
    
    
    
    
    
    
    1,326,963Total current liabilities
    
    
    2,822,618
    
    
    
    3,083,296Commitments and contingenciesShareholders equity:Ordinary shares, no par value   310,356,839
shares outstanding at September 30, 2008 and
248,100,277 shares outstanding at December 31,
2007
    
    
    
    
    
    
    Additional paid-in capital
    
    
    112,059,502
    
    
    
    81,859,263Deficit accumulated during the development stage
    
    
    (73,037,058
    )
    
    
    (53,199,166
    )Accumulated other comprehensive income:Cumulative translation adjustments
    
    
    (4,346,279
    )
    
    
    611,773Total shareholders equity
    
    
    34,676,165
    
    
    
    29,271,870Total liabilities and shareholders equity
    
    $
    37,498,783
    
    
    $
    32,355,166
   4




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##### Table of Contents



HEARTWARE LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 Cumulative Period fromNovember 26, 2004Three Months Ended September 30,
    
    
    Nine Months Ended September 30,
    
    

(Inception)
Through2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    

September 30, 2008Revenues
    
    $
    87,600
    
    
    $
    
    
    
    $
    87,600
    
    
    $
    
    
    
    $
    87,600Cost of revenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    87,600
    
    
    
    
    
    
    
    87,600
    
    
    
    
    
    
    
    87,600Operating expenses:Selling, general and
administrative expenses
    
    
    3,180,541
    
    
    
    1,768,737
    
    
    
    7,993,264
    
    
    
    5,491,640
    
    
    
    25,632,422Research and development expenses
    
    
    5,478,392
    
    
    
    3,130,739
    
    
    
    14,801,319
    
    
    
    10,143,260
    
    
    
    51,820,103Total operating expenses
    
    
    8,658,933
    
    
    
    4,899,476
    
    
    
    22,794,583
    
    
    
    15,634,900
    
    
    
    77,452,525Loss from operations
    
    
    (8,571,333
    )
    
    
    (4,899,476
    )
    
    
    (22,706,983
    )
    
    
    (15,634,900
    )
    
    
    (77,364,925
    )Foreign exchange gain (loss)
    
    
    3,196,201
    
    
    
    (678,368
    )
    
    
    1,925,578
    
    
    
    (1,227,739
    )
    
    
    984,564Interest income, net
    
    
    472,851
    
    
    
    206,244
    
    
    
    1,035,625
    
    
    
    529,306
    
    
    
    3,547,943Other, net
    
    
    
    
    
    
    (74,763
    )
    
    
    (92,112
    )
    
    
    (74,763
    )
    
    
    (204,640
    )Loss before income taxes
    
    
    (4,902,281
    )
    
    
    (5,446,363
    )
    
    
    (19,837,892
    )
    
    
    (16,408,096
    )
    
    
    (73,037,058
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (4,902,281
    )
    
    $
    (5,446,363
    )
    
    $
    (19,837,892
    )
    
    $
    (16,408,096
    )
    
    $
    (73,037,058
    )Loss per ordinary share  basic
and diluted
    
    $
    (0.02
    )
    
    $
    (0.02
    )
    
    $
    (0.07
    )
    
    $
    (0.08
    )Weighted average shares
outstanding  basic and diluted
    
    
    302,913,120
    
    
    
    230,616,127
    
    
    
    266,504,589
    
    
    
    201,233,896
   5




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##### Table of Contents



HEARTWARE LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited)
 Cumulative Period fromNovember 26, 2004For the Three Months Ended September 30,
    
    
    For the Nine Months Ended September 30,
    
    

(Inception) Through2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    September 30, 2008Net loss
    
    $
    (4,902,281
    )
    
    $
    (5,446,363
    )
    
    $
    (19,837,892
    )
    
    $
    (16,408,096
    )
    
    $
    (73,037,058
    )Foreign currency
translation
    
    
    (6,796,767
    )
    
    
    (68,878
    )
    
    
    (4,958,052
    )
    
    
    514,501
    
    
    
    (4,346,279
    )Comprehensive loss
    
    $
    (11,699,048
    )
    
    $
    (5,515,241
    )
    
    $
    (24,795,944
    )
    
    $
    (15,893,595
    )
    
    $
    (77,383,337
    )
   6




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##### Table of Contents



HEARTWARE LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
(unaudited)
 Deficit
    
    
    AccumulatedAccumulated
    
    
    OtherOrdinary Shares
    
    
    Additional
    
    
    During the
    
    
    ComprehensiveShares
    
    
    
    
    
    
    Paid-In
    
    
    Development
    
    
    IncomeIssued
    
    
    Amount
    
    
    Capital
    
    
    Stage
    
    
    (Loss)
    
    
    TotalBalance December 31, 2007
    
    
    248,100,277
    
    
    $
    
    
    
    $
    81,859,263
    
    
    $
    (53,199,166
    )
    
    $
    611,773
    
    
    $
    29,271,870Issuance of ordinary shares
pursuant to private
placement, net of offering
costs
    
    
    62,256,562
    
    
    
    
    
    
    
    29,398,626
    
    
    
    
    
    
    
    
    
    
    
    29,398,626Share-based compensation
    
    
    
    
    
    
    
    
    
    
    801,613
    
    
    
    
    
    
    
    
    
    
    
    801,613Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (19,837,892
    )
    
    
    
    
    
    
    (19,837,892
    )Accumulated other
comprehensive income
(loss):Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,958,052
    )
    
    
    (4,958,052
    )Balance September 30, 2008
    
    
    310,356,839
    
    
    
    
    
    
    $
    112,059,502
    
    
    $
    (73,037,058
    )
    
    $
    (4,346,279
    )
    
    $
    34,676,165
   7




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##### Table of Contents



HEARTWARE LIMITED
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 Cumulative Period fromNovember 26, 2004Nine Months Ended September 30,
    
    
    (Inception) Through2008
    
    
    2007
    
    
    September 30, 2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (19,837,892
    )
    
    $
    (16,408,096
    )
    
    $
    (73,037,058
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation
    
    
    470,457
    
    
    
    393,472
    
    
    
    1,607,550Amortization
    
    
    23,781
    
    
    
    15,002
    
    
    
    71,450Share-based compensation expense
    
    
    781,421
    
    
    
    1,987,987
    
    
    
    5,883,932Loss on disposal of assets
    
    
    92,112
    
    
    
    74,763
    
    
    
    206,080Accrued interest on convertible note
    
    
    (81,632
    )
    
    
    18,514
    
    
    
    (14,025
    )Change in operating assets and liabilities:Accounts receivable
    
    
    (87,600
    )
    
    
    
    
    
    
    (87,600
    )Inventories, net
    
    
    (580,642
    )
    
    
    
    
    
    
    (580,642
    )Prepaid expenses and other current assets
    
    
    (91,117
    )
    
    
    65,889
    
    
    
    (496,733
    )Note receivable, current
    
    
    
    
    
    
    
    
    
    
    794Accounts payable
    
    
    231,558
    
    
    
    154,254
    
    
    
    (88,903
    )Accrued expenses and other current liabilities
    
    
    844,831
    
    
    
    (405,605
    )
    
    
    2,099,078Net cash used in operating activities
    
    
    (18,234,723
    )
    
    
    (14,103,820
    )
    
    
    (64,436,077
    )CASH FLOWS FROM INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (1,320,789
    )
    
    
    (624,186
    )
    
    
    (5,346,130
    )Additions to patents
    
    
    (252,521
    )
    
    
    (73,829
    )
    
    
    (618,401
    )Cash paid for security deposits
    
    
    (288,429
    )
    
    
    
    
    
    
    (288,429
    )Net cash provided by acquisition
    
    
    
    
    
    
    
    
    
    
    126,380Proceeds from dispositions of assets
    
    
    
    
    
    
    5,778
    
    
    
    32,136Net cash flows used in investing activities
    
    
    (1,861,739
    )
    
    
    (692,237
    )
    
    
    (6,094,444
    )CASH FLOWS FROM FINANCING ACTIVITIESRepayment of convertible note
    
    
    (1,360,928
    )
    
    
    
    
    
    
    (1,360,928
    )Proceeds from issuance of share capital
    
    
    30,239,246
    
    
    
    32,762,777
    
    
    
    113,282,449Payment of offering costs
    
    
    (840,620
    )
    
    
    (1,837,885
    )
    
    
    (5,903,581
    )Net cash provided by financing activities
    
    
    28,037,698
    
    
    
    30,924,892
    
    
    
    106,017,940Effect of exchange rate changes on cash
    
    
    (4,814,945
    )
    
    
    631,990
    
    
    
    (4,084,740
    )INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    3,126,291
    
    
    
    16,760,825
    
    
    
    31,402,679CASH AND CASH EQUIVALENTS  BEGINNING OF PERIOD
    
    
    28,276,388
    
    
    
    16,697,769
    
    
    
    CASH AND CASH EQUIVALENTS  END OF PERIOD
    
    $
    31,402,679
    
    
    $
    33,458,594
    
    
    $
    31,402,679
  
  8




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 1.
    
    Basis of Presentation
 
 Development Stage
   Interim Financial Statements
   2.
    
    Liquidity
   9




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 3.
    
    Significant Accounting Policies
 Principles of Consolidation
  Accounting Estimates
  Revenue Recognition
 (SAB 104), Revenue Recognition
 Inventory
     10




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
  Cash and Cash Equivalents
  Vendor Concentration
  Net Loss Per Ordinary Share
  Recent Accounting Pronouncements
 Fair Value Measurements Application of FASB Statement No. 157 to FASB Statement No. 13 and Other
Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13, Accounting for Leases Effective Date of
FASB Statement No. 157 non-financial
  11




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 The Fair Value Option for Financial Assets
and Financial Liabilities, Including an Amendment of FASB Statement No. 115 SFAS No. 159.
 Accounting for Nonrefundable Advance Payments for Goods or
Services Received for Use in Future Research and Development Activities
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements SFAS No. 141(R) SFAS No. 160
 Disclosures about Derivative Instruments and
Hedging Activities SFAS No.161
 Hierarchy of Generally Accepted Accounting
Principles, The Meaning of Present Fairly in Conformity With
Generally Accepted Accounting Principles
  12




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 4.
    
    Inventories, net
  September 30,
    
    
    December 31,2008
    
    
    2007Inventories, netRaw material
    
    $
    274,115
    
    
    $
    Work-in-process
    
    
    152,004
    
    
    
    Finished goods
    
    
    174,715
    
    
    
    $
    600,834
    
    
    $
    
   5.
    
    Property, Plant and Equipment
  September 30,
    
    
    December 31,Useful Lives
    
    
    2008
    
    
    2007Property, Plant and EquipmentMachinery and equipment
    
    
    5 to 7 years
    
    
    $
    4,304,571
    
    
    $
    3,327,331Leasehold improvements
    
    
    3 to 7 years
    
    
    
    181,813
    
    
    
    95,951Office equipment, furniture and fixtures
    
    
    5 to 7 years
    
    
    
    410,568
    
    
    
    279,536Software
    
    
    5 to 7 years
    
    
    
    394,724
    
    
    
    388,7495,291,676
    
    
    
    4,091,567Less: accumulated depreciation
    
    
    
    
    
    
    (1,558,415
    )
    
    
    (1,113,922
    )$
    3,733,261
    
    
    $
    2,977,645
   13




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 6.
    
    Accrued Expenses and Other Current Liabilities
  September 30,
    
    
    December 31,2008
    
    
    2007Accrued expenses and other current liabilitiesAccrued R&D materials
    
    $
    1,011,981
    
    
    $
    181,172Accrued payroll and other employee costs
    
    
    835,612
    
    
    
    837,881Accrued professional fees
    
    
    233,953
    
    
    
    227,793$
    2,081,546
    
    
    $
    1,246,846
 7.
    
    Equity Incentive Plans
  Employee Share Option Plan
     pre-determined
  14




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
   Accounting for Contingencies
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualExercise
    
    
    Life
    
    
    AggregateShares
    
    
    Price
    
    
    (Years)
    
    
    Intrinsic ValueOutstanding at December 31, 2007
    
    
    22,387,170
    
    
    $
    0.65
    
    
    
    7.04
    
    
    $
    Granted
    
    
    3,635,000Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (2,341,903
    )Expired
    
    
    (1,529,403
    )Outstanding at September 30, 2008
    
    
    22,150,864
    
    
    $
    0.61
    
    
    
    6.66
    
    
    $
    Exercisable at September 30, 2008
    
    
    10,230,738
    
    
    $
    0.55
    
    
    
    4.60
    
    
    $
    
       15




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
 non-vested
  Nine MonthsEndedSeptember 30,2008Dividend yield
    
    
    
    %Estimated annual volatility
    
    
    58.78
    %Risk-free interest rate
    
    
    5.88
    %Estimated forfeiture rate
    
    
    12.50
    %Estimated holding period (in years)
    
    
    6.25
 Performance Rights Plan
      16




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
  WeightedAverageRemainingContractualLife
    
    
    AggregateShares
    
    
    (Years)
    
    
    Intrinsic ValueOutstanding at December 31, 2007
    
    
    2,050,000
    
    
    
    9.88
    
    
    $
    994,004Granted
    
    
    3,350,000Exercised
    
    
    Forfeited
    
    
    (400,000
    )Expired
    
    
    Outstanding at September 30, 2008
    
    
    5,000,000
    
    
    
    9.57
    
    
    $
    2,478,760Exercisable at September 30, 2008
    
    
    
    
    
    
    
    
    
    $
    
      Non-Plan Options
    17




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##### Table of Contents



HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
  WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualExercise
    
    
    Life
    
    
    AggregateShares
    
    
    Price
    
    
    (Years)
    
    
    Intrinsic ValueOutstanding at December 31, 2007
    
    
    2,395,600
    
    
    $
    0.66
    
    
    
    3.17
    
    
    $
    Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    Expired
    
    
    Outstanding at September 30, 2008
    
    
    2,395,600
    
    
    $
    0.59
    
    
    
    2.42
    
    
    $
    Exercisable at September 30, 2008
    
    
    2,045,600
    
    
    $
    0.59
    
    
    
    1.27
    
    
    $
    
    non-vested
 All Plans
  Awards Outstanding
    
    
    Awards ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedWeighted
    
    
    Average
    
    
    
    
    
    
    Weighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    
    
    
    
    Average
    
    
    RemainingShares
    
    
    Exercise
    
    
    Contractual
    
    
    Shares
    
    
    Exercise
    
    
    ContractualLow
    
    High
    
    
    Outstanding
    
    
    Price
    
    
    Life
    
    
    Outstanding
    
    
    Price
    
    
    Life$   0.00
    
    $
    0.00
    
    
    
    5,000,000
    
    
    
    
    
    
    
    9.57
    
    
    
    
    
    
    
    
    
    
    
    $   0.01
    
    $
    0.71
    
    
    
    9,835,110
    
    
    $
    0.32
    
    
    
    4.99
    
    
    
    5,685,008
    
    
    $
    0.24
    
    
    
    1.99$   0.72
    
    $
    1.35
    
    
    
    14,029,252
    
    
    $
    0.78
    
    
    
    7.36
    
    
    
    6,291,330
    
    
    $
    0.81
    
    
    
    6.04$   1.36
    
    $
    1.44
    
    
    
    682,102
    
    
    $
    1.20
    
    
    
    1.36
    
    
    
    300,000
    
    
    $
    1.20
    
    
    
    1.2529,546,464
    
    
    $
    0.51
    
    
    
    6.81
    
    
    
    12,276,338
    
    
    $
    0.56
    
    
    
    4.05
  Share-Based Payment, re-evaluate
  18




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HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007General and administrative
    
    $
    238,768
    
    
    $
    403,701
    
    
    $
    903,582
    
    
    $
    1,146,656Research and development
    
    
    172,699
    
    
    
    249,239
    
    
    
    (122,161
    )
    
    
    841,331Total share-based compensation expense
    
    $
    411,467
    
    
    $
    652,940
    
    
    $
    781,421
    
    
    $
    1,987,987
  8.
    
    Fair Values of Financial Instruments
 Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair
Value Measurements for Purposes of Lease Classification or Measurement under Statement 13, Accounting for Leases Effective Date of FASB Statement No. 157
 9.
    
    Net Loss Per Ordinary Share
 weighted-average
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HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Ordinary shares issuable upon:Exercise of share-based awards
    
    
    29,546,464
    
    
    
    21,706,250
    
    
    
    29,546,464
    
    
    
    21,706,250Conversion of convertible notes
    
    
    
    
    
    
    1,497,941
    
    
    
    
    
    
    
    1,497,941
 10.
    
    Commitments and Contingencies
  
    
    a milestone payment of $750,000 within 6 months of the date when the first
circulatory assist device is approved for sale in Europe, provided that the Company has
at least $15 million in cash on hand and, if the Company does not have $15 million at
that time, then the payment is deferred until such time that the Company has $15 million
in cash on hand;
    
    a milestone payment of $1.25 million within 6 months of the date when the first
circulatory assist device is approved for sale in the US, provided that the Company has
at least $25 million in cash on hand and, if the Company does not have $25 million at
that time, then the payment is deferred until such time that the Company has $25 million
in cash on hand; and
    
    a special payment of up to $500,000 upon a sale of HeartWare, Inc. if such sale
generates proceeds in excess of the aggregate liquidation preferences of all of
HeartWare, Inc.s then outstanding preferred stock.
   11.
    
    Subsequent Events
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HEARTWARE LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
  
    
    Court Ordered Scheme Meeting of Shareholders  Approval of Share Scheme
    
    Court Ordered Scheme Meeting of Optionholders  Approval of Option Scheme
    
    Court Ordered Scheme Meeting of Performance Rights Holders  Approval of Performance Rights Scheme
    
    Extraordinary General Meeting  Approval of 2008 Stock Incentive Plan
   21




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
 Overview
  c
   bridge-to-transplant
     22




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Critical Accounting Policies and Estimates
  Revenue recognition
 Revenue Recognition
 Inventory Capitalization
     Translation of Non-US Currency
    23




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Research and Development
  Share-Based Compensation
 Accounting for
Contingencies
    Three and nine months ended September 30, 2008 and 2007
 Revenue
  Cost of Goods Sold
 Critical Accounting Policies  Inventory
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Selling,
General and Administrative
     Research and Development
     
    
    increased headcount and related employee costs;
    
    research and development expenses including external consultants and contractors,
material costs and animal studies;
    
    professional fees related to regulatory activities related to obtaining our
Investigational Device Exemption (IDE), preparation for submission for Conformité
Européne (CE) Mark and International Organization for Standardization (ISO)
certification; and
    
    an increase in share-based compensation expense.
  25




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Other Income
      Income Taxes
   Loss Per Share
   26




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Liquidity and Capital Resources
        
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
   27




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Foreign Currency Rate Fluctuations
     
 ITEM 4. CONTROLS AND PROCEDURES
 Rule 13a-15(e)
  
 PART II. OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
   Our products may never achieve market acceptance even if we obtain regulatory approvals.
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
    
    the perceived effectiveness of the product;
    
    the prevalence and severity of any side effects;
    
    potential advantages over alternative treatments or competitive products;
    
    the strength of marketing and distribution support; and
    
    sufficient third party coverage or reimbursement.
  We have limited sales, marketing and distribution experience.
  
    
    we may not be able to attract and build a significant, successful or qualified
marketing or sales force;
    
    the cost of establishing, training and providing regulatory oversight for a
marketing or sales force may be substantial; and
    
    there are significant legal and regulatory risks in medical device marketing and
sales, and any failure to comply with all legal and regulatory requirements for sales,
marketing and distribution could result in enforcement action by the FDA or other
authorities that could jeopardize our ability to market the product or could subject us
to substantial liability.
 We have limited capabilities and manufacturing personnel, and if our manufacturing
facilities are unable to provide an adequate supply of products, our growth could be limited and
our business could be harmed.
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Fluctuations in foreign currency exchange rates could adversely affect our financial
results.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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Signatures
  HEARTWARE LIMITEDDate: November 12, 2008
    /s/  Douglas GodshallDouglas GodshallChief Executive OfficerDate: November 12, 2008
    /s/  David McIntyreDavid McIntyreChief Financial Officer and Chief Business Officer  31




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EXHIBIT INDEX
 31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the
Securities Exchange Act31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the
Securities Exchange Act32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32