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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-K
 
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For The Fiscal Year Ended December 31, 2008
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 COMMISSION FILE NUMBER: 001-34256
 HEARTWARE INTERNATIONAL, INC.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    26-3636023(State or other jurisdiction of incorporation or 
organization)
    
    (I.R.S. Employer Identification No.)
 
 
 
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class
    
    Name of Each Exchange
on which RegisteredCommon Stock, $0.001 Par Value Per Share
    
    The NASDAQ Stock Market LLC
 Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
 
 o þ
 o þ
 þ o
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ




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##### 



Part I
    
    
    3Item 1. BUSINESS
    
    
    3Item 1A. RISK FACTORS
    
    
    17Item 1B. UNRESOLVED STAFF COMMENTS
    
    
    29Item 2. PROPERTIES
    
    
    29Item 3. LEGAL PROCEEDINGS
    
    
    30Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    30Part II
    
    
    30Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
    
    
    30Item 6. SELECTED FINANCIAL DATA
    
    
    31Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
    
    
    32Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    39Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    40Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    63Item 9A. CONTROLS AND PROCEDURES
    
    
    63Part III
    
    
    64Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
    
    
    64Item 11. EXECUTIVE COMPENSATION
    
    
    66Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
    
    
    66Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
    
    
    75Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
    
    
    75Part IV
    
    
    76Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    76Exhibit 10.13Exhibit 10.27Exhibit 10.28Exhibit 21.1Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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References
  
    
    HeartWare, the Company, HeartWare Group, we, us and our refer to HeartWare
International, Inc. and its consolidated subsidiaries, HeartWare Limited and HeartWare,
Inc.
 
    
    HeartWare International, Inc. and Successor refers to HeartWare International, Inc.,
a Delaware corporation incorporated on July 29, 2008.
 
    
    HeartWare Limited refers to HeartWare Limited, an Australian corporation.
 
    
    HeartWare, Inc. and Predecessor refers to HeartWare, Inc., a Delaware corporation
incorporated on April 3, 2003. HeartWare, Inc. was acquired by HeartWare Limited on January
24, 2005.
 Forward-Looking Statements
  
    
    our expectation regarding the completion of the proposed acquisition of us by
Thoratec Corporation, a California corporation (Thoratec);
    
    our expectations with respect to regulatory submissions and approvals;
    
    our expectations with respect to our clinical trials, including enrollment in our
clinical trials;
    
    our expectations with respect to our intellectual property position;
    
    our ability to commercialize our existing products;
    
    our ability to develop and commercialize new products; and
    
    our estimates regarding our capital requirements.
  Corporate Information
   1




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www.heartware.com
 Currency
  Trademarks
 ® TM
  2




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Part I
 
 Item 1. BUSINESS
 Overview
          3




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Proposed Acquisition by Thoratec Corporation
 Merger Agreement
       Support Agreements
   4




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Loan Agreement
    Investors Rights Agreement
   Market Opportunity
 Heart Failure
    5




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Our Target MarketsClass III and Class IV Patients
   CHF Treatment Options
   LVAD Treatment for Advanced Heart Failure
 The New England Journal of Medicine
  6




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Bridge-to-transplant therapy
 Destination therapy
 Bridge-to-recovery
therapy New England Journal
of Medicine
 Our Solution and Products
 Proprietary Pump Technology
    7




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The HeartWare System
    The HeartWare MVAD
    
    
    finalization of surgical implantation techniques and procedures, including
identification of necessary surgical implant tools;
 
    
    completion of pump and system designs;
 
    
    finalization of device (pump) prototypes and performance of confirmatory in-vivo
(animal) studies;
 
    
    development of system peripherals (e.g., controller, batteries, power adapters)
utilizing the HeartWare System components;
 
    
    approval of and successful completion of a clinical trial; and
 
    
    receipt of regulatory approvals for commercialization.
  8




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Enhanced Quality of Life with Smaller Peripherals and Implantable Devices
      Our Business Strategy
   Commercially
launch the HeartWare System in Europe and Australia 
 Obtain regulatory approval in the United States 
 Continue our sales and marketing activities 
  9




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Focus on continuous product development 
 Partner with leading professionals in the fields of cardiovascular surgery around the world 
 Sales and Marketing
     Intellectual Property
    10




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
    
    use of dual stators in a blood pump;
    
    the combination of passive magnetic bearings and hydrodynamic thrust bearings;
    
    channels or wide-bladed impellers in a blood pump;
    
    the use of ceramic between an impeller and motor stator;
    
    flow estimation based on impeller speed and viscosity; and
    
    use of platinum alloy for blood pump impellers.
        11




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Government Regulation
 United States
  
    
    product design and development;
    
    product testing;
    
    product manufacturing;
    
    product safety;
    
    product labeling;
    
    product storage;
    
    record keeping;
    
    pre-market approval;
    
    advertising and promotion;
    
    distribution;
    
    product sales and post-market activities;
    
    import and export;
    
    medical device (adverse event) reporting; and
    
    field corrective actions (e.g., recalls).
  Premarket Approval
    12




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Clinical Trials
  Pervasive and Continuing FDA Regulation
  
    
    quality system regulation, which requires manufacturers to follow design,
testing, control, documentation and other quality assurance procedures during the design
and manufacturing processes;
 
    
    regulations which govern product labels and labeling, prohibit the promotion of
products for unapproved or off-label uses and impose other restrictions on labeling
and promotional activities;
 
    
    medical device reporting regulations, which require that manufacturers report to
the FDA if their device may have caused or contributed to a death or serious injury or
malfunctioned in a way that would likely cause or contribute to a death or serious
injury if it were to recur; and
 
    
    notices of correction or removal and recall regulations.
   
    
    warning letters or untitled letters;
    
    fines, injunction and civil penalties;
    
    recall or seizure of our products;
    
    customer notification, or orders for repair, replacement or refund;
    
    operating restrictions, partial suspension or total shutdown of production or
clinical trials;
    
    refusing our request for pre-market approval of new products;
    
    withdrawing pre-market approvals that are already granted; and
    
    criminal prosecution.
  13




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European Union
  Australia
    Other Regulations
  Third Party Reimbursement
     14




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Competition
    
    
    small device size which allows for routine implantation in the space immediately
surrounding the heart in all patients, known as the pericardial space, in all patients
unlike other full-output LVADs that are currently available;
    
    a hybrid passive magnetic and hydrodynamic impeller suspension system which
eliminates the need for mechanical bearings, providing a wearless mechanism; and
    
    a design that includes a wide-bladed impeller which facilitates clear blood flow
paths through the pump and an integrated inflow cannula which optimizes blood flow
characteristics.
  
    
    our products are in the early stages of development, we have limited implantation
experience, and our success is dependent on our clinical trials proving the safety and
efficacy of our products;
    
    a number of our competitors have significantly greater financial and human
resources than we do and have established reputations, as well as worldwide distribution
channels and sales and marketing capabilities that are larger and more established than
ours; and
    
    our market is an emerging market and is reliant upon acceptance of LVAD
technology.
 Research and Development
   15




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Manufacturing
 ,
   Employees
  Legal Proceedings
  Corporate History
    16




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Item 1A. RISK FACTORS
  Risks Relating to Our Proposed Acquisition by Thoratec
 We and Thoratec may not meet the closing conditions which could result in failure of the
acquisition of us by Thoratec.
   17




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If the proposed acquisition by Thoratec is delayed or is not completed, we may not have sufficient
liquidity to continue to operate.
  If the proposed acquisition by Thoratec is not completed, we will have incurred substantial costs
that may adversely affect our financial results and operations and the market price of our common
stock, whether traded in the form of common stock or CDIs.
   The proposed acquisition by Thoratec is subject to the receipt of consents and approvals from
government entities that may impose conditions that could have an adverse effect on us and could
cause abandonment of the acquisition.
  Provisions of the Merger Agreement may deter alternative business combinations and could negatively
impact the stock price of HeartWare if the Merger Agreement is terminated in certain circumstances.
   18




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Risks Relating to Our Business
 We have incurred operating losses since our inception and anticipate that we will continue to incur
operating losses for the foreseeable future.
  
    
    manufacturing product,
    
    continuing to conduct clinical trials,
    
    continuing further product research and development,
    
    seeking regulatory approvals,
    
    expanding our sales and marketing capabilities,
    
    increasing our manufacturing operations, and
    
    complying with the requirements related to being a public company.
  Our products may never achieve market acceptance.
  
    
    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.
  19




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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.
     Fluctuations in foreign currency exchange rates could adversely affect our financial results.
  We may need substantial additional funding and may be unable to raise capital when needed, which
would force us to delay, reduce or eliminate our product development programs or commercialization
efforts.
    20




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Our products have not yet been approved for commercial sale within the United States, and our
success will depend heavily on the success of our clinical trial program for our lead device, the
HeartWare System. If we are unable to complete, or experience significant delays of, our US trial,
our ability to obtain regulatory approval to commercialize our products within the United States,
the largest medical device market in the world, and our ability to generate revenues will be
harmed.
     
    
    slower than expected rates of patient recruitment and enrollment, including as a
result of our competitors undertaking similar clinical trials or having equivalent
products that have received approval for sale;
    
    failure of patients to complete the clinical trial;
    
    patients preferring to use approved devices rather than experimental devices such
as our HeartWare System;
    
    unforeseen safety issues;
    
    lack of efficacy during clinical trials;
    
    inability or unwillingness of patients or medical investigators to follow our
clinical trial protocols;
    
    inability to monitor patients adequately during or after treatment;
    
    risks associated with trial design, which may result in a failure of the trial to
show statistically significant results even if the product is effective;
    
    governmental and regulatory delays or changes in regulatory requirements,
policies or guidelines; and
    
    varying interpretation of data by regulatory agencies.
  21




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
    
    take a significant period of time;
    
    require the expenditure of substantial resources;
    
    involve rigorous pre-clinical and clinical testing;
    
    require changes to our products; and
    
    result in limitations on the indicated uses of the products.
 ,
 We may not meet regulatory quality standards applicable to our manufacturing and quality processes,
which could have an adverse effect on our business, financial condition or results of operations.
   Product issues could result in substantial costs and write-downs.
  We plan to operate in multiple regulatory environments that require costly and time consuming
approvals.
   22




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Our products may never achieve market acceptance even if we obtain regulatory approvals.
  
    
    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.
  If we fail to obtain an adequate level of reimbursement for our products by third party payers,
there may be no commercially viable markets for our product candidates or the markets may be much
smaller than expected.
    23




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If hospitals do not conduct destination therapy procedures using the HeartWare System, market
opportunities for our product will be diminished.
  
    
    the number of sites approved for destination therapy by relevant regulatory
agencies;
    
    the clinical outcomes of destination therapy procedures;
    
    cardiology and referring physician education, and their commitment to destination
therapy;
    
    the economics of the destination therapy procedure for individual hospitals,
which includes the costs of the LVAD and related pre-and post-operative procedures and
their reimbursement; and
    
    the economics of hospitals not conducting a destination therapy procedure,
including the costs and related reimbursements of long-term hospitalization.
  Our manufacturing facilities and the manufacturing facilities of our suppliers must comply
with applicable regulatory requirements. If we fail to achieve regulatory approval for these
manufacturing facilities, our business and our results of operations would be harmed.
  We rely on specialized suppliers for certain components and materials.
      24




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We may not be able to effectively protect our intellectual property rights which could have an
adverse effect on our business, financial condition or results of operations.
  Intellectual property litigation could be costly and disruptive to us.
  
    
    stop our ongoing or planned clinical trials or delay or abandon commercialization
of the product that is the subject of the suit;
 
    
    attempt to obtain a license to sell or use the relevant technology or substitute
technology, which license may not be available on reasonable terms or at all; or
 
    
    redesign those products that use the relevant technology.
  If we are unable to protect the confidentiality of our proprietary information and know-how, the
value of our technology and products could be adversely affected.
   25




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If we are unable to manage our expected growth, we may not be able to commercialize our product
candidates.
  We compete against companies that have longer operating histories, more established or approved
products and greater resources than we do, which may prevent us from achieving further market
penetration or improving operating results.
   
    
    product performance and design;
    
    product safety;
    
    sales, marketing and distribution capabilities;
    
    comparable clinical outcomes;
    
    success and timing of new product development and introductions; and
    
    intellectual property protection.
 The competition for qualified personnel is particularly intense in our industry. If we are unable
to retain or hire key personnel, we may not be able to sustain or grow our business.
   26




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Product liability claims could damage our reputation or adversely affect our business.
  Investors could lose confidence in our financial reports, and the value of our shares may be
adversely affected, if our internal controls over financial reporting are found not to be effective
by management or by an independent registered public accounting firm or if we make disclosure of
existing or potential significant deficiencies or material weaknesses in those controls.
    27




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Risk Factors Related to Our Common Stock
 The price of our common stock may fluctuate significantly.
  
    
    future announcements concerning us or our competitors;
    
    regulatory developments, enforcement actions bearing on advertising, marketing or
sales, and disclosure regarding completed, ongoing or future clinical trials;
    
    quarterly variations in operating results, which we have experienced in the past
and expect to experience in the future;
    
    introduction of new products or changes in product pricing policies by us or our
competitors;
    
    acquisition or loss of significant customers, distributors or suppliers;
    
    business acquisitions or divestitures;
    
    changes in third party reimbursement practices;
    
    fluctuations of investor interest in the medical device sector;
    
    fluctuations in the economy, world political events or general market conditions;
and
    
    failure to complete the acquisition of us by Thoratec.
  Your interests may differ or conflict with those of the Companys largest shareholder.
  If there are substantial sales of common stock, our share price could decline.
  We do not intend to pay cash dividends on our common stock in the foreseeable future.
   28




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Anti-takeover provisions in our charter documents and Delaware law may discourage a third party
from acquiring us, which could limit our stockholders opportunities to sell their shares at a
premium.
  We may be subject to arbitrage risks.
  
 Item 1B. UNRESOLVED STAFF COMMENTS
  
 Item 2. PROPERTIES
        29




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Item 3. LEGAL PROCEEDINGS
  
 Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 Part II
 
 Item 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
   High
    
    
    Low
    
    
    High
    
    
    LowPeriod
    
    (AU$)
    
    
    (AU$)
    
    
    (US$)
    
    
    (US$)Fiscal Year 2008:First Quarter
    
    
    0.55
    
    
    
    0.35
    
    
    
    0.51
    
    
    
    0.32Second Quarter
    
    
    0.65
    
    
    
    0.36
    
    
    
    0.63
    
    
    
    0.34Third Quarter
    
    
    0.64
    
    
    
    0.40
    
    
    
    0.51
    
    
    
    0.32Fourth Quarter
    
    
    0.62
    
    
    
    0.40
    
    
    
    0.50
    
    
    
    0.28Fiscal Year 2007:First Quarter
    
    
    0.87
    
    
    
    0.64
    
    
    
    0.70
    
    
    
    0.52Second Quarter
    
    
    0.92
    
    
    
    0.60
    
    
    
    0.78
    
    
    
    0.51Third Quarter
    
    
    0.65
    
    
    
    0.55
    
    
    
    0.57
    
    
    
    0.49Fourth Quarter
    
    
    0.80
    
    
    
    0.53
    
    
    
    0.71
    
    
    
    0.47
     30




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Equity Compensation Plans
  Number ofsecuritiesto be
    
    
    Weightedissued
    
    
    averageupon
    
    
    exercise
    
    
    Number of securitiesexercise of
    
    
    price of
    
    
    remaining available foroutstanding
    
    
    outstanding
    
    
    future issuance underoptions,
    
    
    options,
    
    
    equity compensation planswarrants
    
    
    warrants
    
    
    (excluding securitiesand rights
    
    
    and rights
    
    
    reflected in column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders:HeartWare International, Inc. Employee Stock Option Plan
    
    
    629,936
    
    
    $
    16.89
    
    
    
    345,401HeartWare International, Inc. Restricted Stock Unit Plan
    
    
    142,846
    
    
    $
    0.00
    
    
    
    6,154HeartWare International, Inc. 2008 Stock Incentive Plan
    
    
    
    
    
    
    N/A
    
    
    
    469,140Equity compensation plans not approved by security holders:Non-Plan options
    
    
    68,438
    
    
    $
    18.02
    
    
    
    N/A
 
 Item 6. SELECTED FINANCIAL DATA
    Successor
    
    
    PredecessorCumulative Period from
    
    
    
    
    
    
    Cumulative Period fromNovember 26, 2004
    
    
    
    
    
    
    April 8, 2003(Inception) Through
    
    
    Year Ended
    
    
    (Inception) ThroughYears Ended December 31,
    
    
    December 31,
    
    
    December 31,
    
    
    December 31,(In thousands, except per share data)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2008
    
    
    2004
    
    
    2004Statement of Operations Data:Revenues
    
    $
    332
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    332
    
    
    $
    
    
    
    $
    Cost of revenues
    
    
    78
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    78
    
    
    
    
    
    
    
    General and administrative expenses
    
    
    10,981
    
    
    
    7,303
    
    
    
    6,024
    
    
    
    4,312
    
    
    
    28,620
    
    
    
    138
    
    
    
    304Research and development expenses
    
    
    18,644
    
    
    
    14,636
    
    
    
    11,650
    
    
    
    10,732
    
    
    
    55,662
    
    
    
    4,795
    
    
    
    6,066Depreciation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    88
    
    
    
    123In process research and development
expensed when acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,984Other income (expense), net
    
    
    5,607
    
    
    
    
    
    
    
    248
    
    
    
    1,211
    
    
    
    7,066
    
    
    
    (982
    )
    
    
    (1,230
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (23,764
    )
    
    
    (21,939
    )
    
    
    (17,427
    )
    
    
    (13,833
    )
    
    
    (76,963
    )
    
    
    (6,003
    )
    
    
    (11,707
    )Basic and diluted loss per share
    
    
    (3.00
    )
    
    
    (3.60
    )
    
    
    (3.49
    )
    
    
    (3.67
    )
 As ofAs of December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Balance Sheet Data:Cash and cash equivalents
    
    $
    20,804
    
    
    $
    28,276
    
    
    $
    16,698
    
    
    $
    10,037
    
    
    $
    139Total assets
    
    
    30,338
    
    
    
    32,355
    
    
    
    20,243
    
    
    
    11,970
    
    
    
    372Total liabilities
    
    
    3,583
    
    
    
    3,083
    
    
    
    2,779
    
    
    
    2,245
    
    
    
    12,027Total shareholders equity
    
    
    26,756
    
    
    
    29,272
    
    
    
    17,464
    
    
    
    9,725
    
    
    
    11,654
  31




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Item 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
 The following discussion and analysis of our financial condition and results of operations
should be read together with our consolidated financial statements and related notes appearing
elsewhere in this Annual Report on Form 10-K . This discussion and analysis contains forward-looking
statements that involve risks, uncertainties and assumptions. You should review the Risk Factors
section of this Annual Report on Form 10-K for a discussion of important factors that could cause
actual results to differ materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis.
 Overview
          32




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Critical Accounting Policies and Estimates
  Revenue recognition
 Revenue Recognition
 Inventory Capitalization
     33




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Research and Development
  Share-Based Payments
     Income Taxes
 Accounting for Income Taxes Accounting for Uncertainty in Income Taxes
  Translation of Foreign Currency
   34




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Fiscal Years 2008 and 2007
 Revenue
  Cost of Goods Sold
  Selling, General and Administrative
    35




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Research and Development
    Other Income
    Income Taxes
    36




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Fiscal Years 2007 and 2006
 Revenue
  Cost of Goods Sold
  Selling, General and Administrative
   Research and Development
  Other Income
   Income Taxes
   37




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Liquidity and Capital Resources
          38




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##### Table of Contents



Contractual Obligations
  Payments due by period(in thousands of dollars)LessthanTotal
    
    

1
year
    
    
    1-3 years
    
    
    3-5 yearsOperating lease obligations
    
    $
    2,331
    
    
    $
    839
    
    
    $
    1,320
    
    
    $
    172Purchase obligations
    
    
    2,591
    
    
    
    2,591
    
    
    
    
    
    
    
    Milestone payments under settlement agreement
    
    
    750
    
    
    
    750
    
    
    
    
    
    
    
    Total
    
    $
    5,672
    
    
    $
    4,180
    
    
    $
    1,320
    
    
    $
    172
 Off-Balance Sheet Arrangements
  
 Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  Interest Rate Risk
  Foreign Currency Rate Fluctuations
     39




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##### Table of Contents



Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 HEARTWARE INTERNATIONAL, INC.
  PageFinancial Statements:Report of Independent Registered Public Accounting Firm
    
    
    41Consolidated Balance Sheets
    
    
    42Consolidated Statements of Operations
    
    
    43Consolidated Statements of Comprehensive Loss
    
    
    44Consolidated Statement of Shareholders Equity
    
    
    45Consolidated Statements of Cash Flows
    
    
    46Notes to Consolidated Financial Statements
    
    
    47
  40




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##### Table of Contents



41




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
(A Development Stage Company)
 
 CONSOLIDATED BALANCE SHEETS
 December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    20,803,656
    
    
    $
    28,276,388Accounts receivable
    
    
    244,198
    
    
    
    Inventories, net
    
    
    3,508,065
    
    
    
    Prepaid expenses and other current assets
    
    
    1,061,737
    
    
    
    782,922Total current assets
    
    
    25,617,656
    
    
    
    29,059,310Property, plant and equipment, net
    
    
    3,608,626
    
    
    
    2,977,645Other intangible assets, net
    
    
    823,495
    
    
    
    318,211Restricted cash held by lessor
    
    
    288,429
    
    
    
    Total Assets
    
    $
    30,338,206
    
    
    $
    32,355,166LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    699,064
    
    
    $
    509,487Accrued expenses and other current liabilities
    
    
    2,883,587
    
    
    
    1,246,846Convertible notes, current
    
    
    
    
    
    
    1,326,963Total current liabilities
    
    
    3,582,651
    
    
    
    3,083,296Commitments and contingenciesShareholders equity:Preferred stock  $.001 par value; 5,000,000
shares authorized; no shares issued and
outstanding at December 31, 2008 and 2007,
respectively
    
    
    
    
    
    
    Common stock  $.001 par value; 25,000,000
shares authorized; 8,866,702 and 7,088,572
shares issued and outstanding at December 31,
2008 and 2007, respectively
    
    
    8,867
    
    
    
    7,089Additional paid-in capital
    
    
    112,400,642
    
    
    
    81,852,174Deficit accumulated during the development stage
    
    
    (76,962,787
    )
    
    
    (53,199,166
    )Accumulated other comprehensive income (loss):Cumulative translation adjustments
    
    
    (8,691,167
    )
    
    
    611,773Total Shareholders Equity
    
    
    26,755,555
    
    
    
    29,271,870Total Liabilities and Shareholders Equity
    
    $
    30,338,206
    
    
    $
    32,355,166
   42




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Cumulative Periodfrom November 26,2004(Inception)ThroughYears Ended December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008Revenues
    
    $
    331,799
    
    
    $
    
    
    
    $
    
    
    
    $
    331,799Cost of revenues
    
    
    77,632
    
    
    
    
    
    
    
    
    
    
    
    77,632Gross profit
    
    
    254,167
    
    
    
    
    
    
    
    
    
    
    
    254,167Operating expenses:Selling, general and
administrative expenses
    
    
    10,981,131
    
    
    
    7,303,145
    
    
    
    6,024,374
    
    
    
    28,620,289Research and development expenses
    
    
    18,643,557
    
    
    
    14,636,198
    
    
    
    11,649,822
    
    
    
    55,662,341Total operating expenses
    
    
    29,624,688
    
    
    
    21,939,343
    
    
    
    17,674,196
    
    
    
    84,282,630Loss from operations
    
    
    (29,370,521
    )
    
    
    (21,939,343
    )
    
    
    (17,674,196
    )
    
    
    (84,028,463
    )Foreign exchange gain (loss)
    
    
    4,550,193
    
    
    
    (851,032
    )
    
    
    (583,805
    )
    
    
    3,609,179Interest income, net
    
    
    1,245,140
    
    
    
    950,675
    
    
    
    844,522
    
    
    
    3,757,458Other, net
    
    
    (188,433
    )
    
    
    (99,299
    )
    
    
    (13,229
    )
    
    
    (300,961
    )Loss before income taxes
    
    
    (23,763,621
    )
    
    
    (21,938,999
    )
    
    
    (17,426,708
    )
    
    
    (76,962,787
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (23,763,621
    )
    
    $
    (21,938,999
    )
    
    $
    (17,426,708
    )
    
    $
    (76,962,787
    )Loss per common share  basic
and diluted
    
    $
    (3.00
    )
    
    $
    (3.60
    )
    
    $
    (3.49
    )Weighted average shares
outstanding  basic and diluted
    
    
    7,929,054
    
    
    
    6,086,542
    
    
    
    4,991,149
   43




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
 Cumulative Periodfrom November 26,2004(Inception)ThroughYears Ended December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008Net loss
    
    $
    (23,763,621
    )
    
    $
    (21,938,999
    )
    
    $
    (17,426,708
    )
    
    $
    (76,962,787
    )Foreign currency translation
    
    
    (9,302,940
    )
    
    
    542,148
    
    
    
    732,661
    
    
    
    (8,691,167
    )Comprehensive loss
    
    $
    (33,066,561
    )
    
    $
    (21,396,851
    )
    
    $
    (16,694,047
    )
    
    $
    (85,653,954
    )
   44




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
 Deficit
    
    
    AccumulatedCommon Shares,
    
    
    
    
    
    
    Accumulated
    
    
    Other$.001 Par Value Per Share
    
    
    Additional
    
    
    During the
    
    
    ComprehensiveShares
    
    
    
    
    
    
    Paid-In
    
    
    Development
    
    
    IncomeIssued
    
    
    Amount
    
    
    Capital
    
    
    Stage
    
    
    (Loss)
    
    
    TotalBalance at November 26, 2004, (inception)
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of founding ordinary shares
    
    
    57
    
    
    
    
    
    
    
    794
    
    
    
    
    
    
    
    
    
    
    
    794Balance December 31, 2004
    
    
    57
    
    
    
    
    
    
    
    794
    
    
    
    
    
    
    
    
    
    
    
    794Issuance of ordinary shares pursuant to
the acquisition of HeartWare, Inc.
    
    
    2,514,286
    
    
    
    2,514
    
    
    
    (1,226,798
    )
    
    
    
    
    
    
    
    
    
    
    (1,224,284
    )Issuance of ordinary shares pursuant to
initial public offering, net of offering
costs
    
    
    1,852,539
    
    
    
    1,853
    
    
    
    23,435,744
    
    
    
    
    
    
    
    
    
    
    
    23,437,597Issuance of ordinary shares pursuant to
share option exercise
    
    
    11,297
    
    
    
    11
    
    
    
    59,565
    
    
    
    
    
    
    
    
    
    
    
    59,576Issuance of ordinary shares pursuant to
cashless warrant exercise
    
    
    81,714
    
    
    
    82
    
    
    
    (82
    )
    
    
    
    
    
    
    
    
    
    
    Share-based compensation
    
    
    
    
    
    
    
    
    
    
    1,947,537
    
    
    
    
    
    
    
    
    
    
    
    1,947,537Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,833,459
    )
    
    
    
    
    
    
    (13,833,459
    )Accumulated other comprehensive income
(loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (663,036
    )
    
    
    (663,036
    )Balance December 31, 2005
    
    
    4,459,893
    
    
    
    4,460
    
    
    
    24,216,760
    
    
    
    (13,833,459
    )
    
    
    (663,036
    )
    
    
    9,724,725Issuance of shares pursuant to capital
raise, net of offering costs
    
    
    847,992
    
    
    
    848
    
    
    
    23,377,521
    
    
    
    
    
    
    
    
    
    
    
    23,378,369Issuance of shares pursuant to
shareholder purchase plan
    
    
    2,155
    
    
    
    2
    
    
    
    61,252
    
    
    
    
    
    
    
    
    
    
    
    61,254Issuance of shares pursuant to share
option exercise
    
    
    11,743
    
    
    
    12
    
    
    
    103,124
    
    
    
    
    
    
    
    
    
    
    
    103,136Share-based compensation
    
    
    
    
    
    
    
    
    
    
    890,319
    
    
    
    
    
    
    
    
    
    
    
    890,319Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,426,708
    )
    
    
    
    
    
    
    (17,426,708
    )Accumulated other comprehensive income
(loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    732,661
    
    
    
    732,661Balance December 31, 2006
    
    
    5,321,783
    
    
    
    5,322
    
    
    
    48,648,976
    
    
    
    (31,260,167
    )
    
    
    69,625
    
    
    
    17,463,756Issuance of shares pursuant to
shareholder purchase plan
    
    
    57,226
    
    
    
    57
    
    
    
    1,062,901
    
    
    
    
    
    
    
    
    
    
    
    1,062,958Issuance of shares pursuant to share
option exercise
    
    
    3,656
    
    
    
    4
    
    
    
    21,698
    
    
    
    
    
    
    
    
    
    
    
    21,702Issuance of shares pursuant to capital
raise, net of offering costs
    
    
    1,705,907
    
    
    
    1,706
    
    
    
    29,853,944
    
    
    
    
    
    
    
    
    
    
    
    29,855,650Share-based compensation
    
    
    
    
    
    
    
    
    
    
    2,264,655
    
    
    
    
    
    
    
    
    
    
    
    2,264,655Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,938,999
    )
    
    
    
    
    
    
    (21,938,999
    )Accumulated other comprehensive income
(loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    542,148
    
    
    
    542,148Balance December 31, 2007
    
    
    7,088,572
    
    
    
    7,089
    
    
    
    81,852,174
    
    
    
    (53,199,166
    )
    
    
    611,773
    
    
    
    29,271,870Issuance of shares pursuant to capital
raise, net of offering costs
    
    
    1,778,130
    
    
    
    1,778
    
    
    
    29,396,849
    
    
    
    
    
    
    
    
    
    
    
    29,398,627Share-based compensation
    
    
    
    
    
    
    
    
    
    
    1,151,619
    
    
    
    
    
    
    
    
    
    
    
    1,151,619Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,763,621
    )
    
    
    
    
    
    
    (23,763,621
    )Accumulated other comprehensive income
(loss):Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,302,940
    )
    
    
    (9,302,940
    )Balance December 31, 2008
    
    
    8,866,702
    
    
    $
    8,867
    
    
    $
    112,400,642
    
    
    $
    (76,962,787
    )
    
    $
    (8,691,167
    )
    
    $
    26,755,555
   45




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
(A Development Stage Company)
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Cumulative Periodfrom November 26,2004(Inception)ThroughYears Ended December 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (23,763,621
    )
    
    $
    (21,938,999
    )
    
    $
    (17,426,708
    )
    
    $
    (76,962,787
    )Adjustments to reconcile net loss to net cash
used in operating activities:Depreciation
    
    
    663,894
    
    
    
    518,367
    
    
    
    371,497
    
    
    
    1,800,987Amortization
    
    
    41,187
    
    
    
    20,679
    
    
    
    16,528
    
    
    
    88,855Share-based compensation expense
    
    
    1,151,619
    
    
    
    2,264,655
    
    
    
    890,319
    
    
    
    6,254,130Loss on disposal of assets
    
    
    189,380
    
    
    
    100,739
    
    
    
    13,229
    
    
    
    303,348Accrued interest on convertible note
    
    
    (81,633
    )
    
    
    26,254
    
    
    
    22,126
    
    
    
    (14,025
    )Change in operating assets and liabilities:Accounts receivable
    
    
    (244,198
    )
    
    
    
    
    
    
    
    
    
    
    (244,198
    )Inventories, net
    
    
    (3,508,065
    )
    
    
    
    
    
    
    
    
    
    
    (3,508,065
    )Prepaid expenses and other current assets
    
    
    (229,815
    )
    
    
    (129,688
    )
    
    
    (229,689
    )
    
    
    (635,431
    )Note receivable, current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    794Accounts payable
    
    
    59,906
    
    
    
    196,681
    
    
    
    (666,383
    )
    
    
    (260,555
    )Accrued expenses and other current liabilities
    
    
    1,660,070
    
    
    
    (78,567
    )
    
    
    1,071,959
    
    
    
    2,914,317Net cash used in operating activities
    
    
    (24,061,276
    )
    
    
    (19,019,879
    )
    
    
    (15,937,122
    )
    
    
    (70,262,630
    )CASH FLOWS FROM INVESTING ACTIVITIESAdditions to property, plant and equipment
    
    
    (1,490,248
    )
    
    
    (880,446
    )
    
    
    (1,732,372
    )
    
    
    (5,515,589
    )Additions to patents
    
    
    (546,471
    )
    
    
    (121,693
    )
    
    
    (34,945
    )
    
    
    (912,351
    )Restricted cash held by lessor
    
    
    (288,429
    )
    
    
    
    
    
    
    
    
    
    
    (288,429
    )Net cash provided by acquisition
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    126,380Proceeds from dispositions of assets
    
    
    
    
    
    
    8,435
    
    
    
    23,701
    
    
    
    32,136Net cash used in investing activities
    
    
    (2,325,148
    )
    
    
    (993,704
    )
    
    
    (1,743,616
    )
    
    
    (6,557,853
    )CASH FLOWS FROM FINANCING ACTIVITIESRepayment of convertible note
    
    
    (1,360,929
    )
    
    
    
    
    
    
    
    
    
    
    (1,360,928
    )Proceeds from issuance of share capital
    
    
    30,239,247
    
    
    
    32,839,448
    
    
    
    25,083,953
    
    
    
    113,282,449Payment of offering costs
    
    
    (840,620
    )
    
    
    (1,899,138
    )
    
    
    (1,541,194
    )
    
    
    (5,903,581
    )Net cash provided by financing activities
    
    
    28,037,698
    
    
    
    30,940,310
    
    
    
    23,542,759
    
    
    
    106,017,940Effect of exchange rate changes on cash
    
    
    (9,124,006
    )
    
    
    651,892
    
    
    
    798,807
    
    
    
    (8,393,801
    )CHANGE IN CASH AND CASH EQUIVALENTS
    
    
    (7,472,732
    )
    
    
    11,578,619
    
    
    
    6,660,828
    
    
    
    20,803,656CASH AND CASH EQUIVALENTS  BEGINNING OF PERIOD
    
    
    28,276,388
    
    
    
    16,697,769
    
    
    
    10,036,941
    
    
    
    CASH AND CASH EQUIVALENTS  END OF PERIOD
    
    $
    20,803,656
    
    
    $
    28,276,388
    
    
    $
    16,697,769
    
    
    $
    20,803,656SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:Interest paid
    
    $
    88,870
    
    
    $
    
    
    
    $
    
    
    
    $
    88,870
   46




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
 
 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2008
 Note 1 Description of Business
        Development Stage
    47




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
  Basis of Presentation
  th
 Note 2 Liquidity
  Note 3 Significant Accounting Policies
 Principles of Consolidation
  Accounting Estimates
   48




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
 Cash and Cash Equivalents
  Inventories
  December 31,2008
    
    
    2007Inventories, netRaw material
    
    $
    813,276
    
    
    $
    Work-in-process
    
    
    1,690,852
    
    
    
    Finished goods
    
    
    1,003,937
    
    
    
    $
    3,508,065
    
    
    $
    
   Property, Plant and Equipment
  Other Intangible Assets
  2008
    
    
    2007Life
    
    
    Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmortizable Intangible Assets
    
    (Years)
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationPatents
    
    
    15
    
    
    $
    912,351
    
    
    $
    (88,856
    )
    
    $
    365,880
    
    
    $
    (47,669
    )
    49




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
 Share-Based Payments
     Impairment of Long-Lived Assets
  Income Taxes
 Accounting for Income
Taxes Accounting for Uncertainty in
Income Taxes
   50




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
 Translation of Foreign Currency
    Research and Development
  Vendor Concentration
  Marketing and Advertising Costs
  Net Loss Per Common Share
  New Accounting Standards
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment of FASB Statement No. 115
  51




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
      52




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
 Note 4 Other Balance Sheet Information
  December 31,Estimated Useful Lives
    
    
    2008
    
    
    2007Property, Plant and EquipmentMachinery and equipment
    
    
    5 to 7 years
    
    
    $
    4,428,452
    
    
    $
    3,327,331Leasehold improvements
    
    
    3 to 7 years
    
    
    
    212,891
    
    
    
    95,951Office equipment, furniture and fixtures
    
    
    5 to 7 years
    
    
    
    271,275
    
    
    
    279,536Purchased software
    
    
    5 to 7 years
    
    
    
    406,983
    
    
    
    388,7495,319,601
    
    
    
    4,091,567Less: accumulated depreciation
    
    
    
    
    
    
    (1,710,975
    )
    
    
    (1,113,922
    )$
    3,608,626
    
    
    $
    2,977,645
  December 31,2008
    
    
    2007Accrued expenses and other current liabilitiesAccrued payroll and other employee costs
    
    $
    1,721,506
    
    
    $
    837,881Accrued material purchases
    
    
    417,344
    
    
    
    Accrued research and development materials
    
    
    494,997
    
    
    
    181,172Accrued professional fees
    
    
    149,146
    
    
    
    209,819Other accrued expenses
    
    
    100,594
    
    
    
    17,974$
    2,883,587
    
    
    $
    1,246,846
 Note 5 Exchange of Equity Interests Among Entities Under Common Control
    Note 6 Borrowings and Credit Facilities
    53




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HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
  Note 7 Leases
  OperatingLeasesYear Ending December 31,2009
    
    $
    839,3692010
    
    
    859,7982011
    
    
    459,8042012
    
    
    165,2932013
    
    
    6,893Total minimum lease payments
    
    $
    2,331,157
 Note 8 Equity Incentive Plans
    HeartWare International, Inc. Employee Share Option Plan (ESOP) (formerly HeartWare Limited
Employee Share Option Plan)
     54




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HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
     WeightedWeighted
    
    
    AverageAverage
    
    
    RemainingExercise
    
    
    Contractual Life
    
    
    AggregateShares
    
    
    Price
    
    
    (Years)
    
    
    Intrinsic ValueOutstanding at December 31, 2005
    
    
    402,812
    
    
    
    16.10
    
    
    
    
    
    
    $
    1,272,313Granted
    
    
    289,010
    
    
    
    31.30Exercised
    
    
    (11,743
    )
    
    
    9.39Forfeited
    
    
    (118,721
    )
    
    
    27.20Expired
    
    
    (34,117
    )
    
    
    16.48Outstanding at December 31, 2006
    
    
    527,241
    
    
    
    23.01
    
    
    
    
    
    
    $
    Granted
    
    
    121,412
    
    
    
    26.06Exercised
    
    
    (3,656
    )
    
    
    6.17Forfeited
    
    
    (4,829
    )
    
    
    33.36Expired
    
    
    (610
    )
    
    
    32.46Outstanding at December 31, 2007
    
    
    639,558
    
    
    
    22.78
    
    
    
    
    
    
    $
    Granted
    
    
    103,838
    
    
    
    13.86Exercised
    
    
    
    
    
    
    0.00Forfeited
    
    
    (69,762
    )
    
    
    23.86Expired
    
    
    (43,698
    )
    
    
    22.96Outstanding at December 31, 2008
    
    
    629,936
    
    
    $
    18.62
    
    
    
    6.39
    
    
    $
    Exercisable at December 31, 2008
    
    
    295,808
    
    
    $
    16.89
    
    
    
    4.39
    
    
    $
    
     55




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HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
    2008
    
    
    2007
    
    
    2006Dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Estimated annual volatility
    
    
    58.78
    %
    
    
    52.66
    %
    
    
    54.82
    %Risk-free interest rate
    
    
    5.88
    %
    
    
    5.96
    %
    
    
    5.67
    %Estimated forfeiture rate
    
    
    12.50
    %
    
    
    12.50
    %
    
    
    12.12
    %Estimated holding period (years)
    
    
    6.25
    
    
    
    7.47
    
    
    
    10
 HeartWare International, Inc. Restricted Stock Unit Plan (formerly HeartWare Limited Performance
Rights Plan)
      56




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HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
  WeightedAverageRemainingContractualLife
    
    
    AggregateShares
    
    
    (Years)
    
    
    Intrinsic ValueOutstanding at December 31, 2007
    
    
    58,567
    
    
    
    
    
    
    $
    994,004Granted
    
    
    95,707Exercised
    
    
    Forfeited
    
    
    (11,428
    )Expired
    
    
    Outstanding at December 31, 2008
    
    
    142,846
    
    
    
    9.32
    
    
    $
    2,078,238Exercisable at December 31, 2008
    
    
    
    
    
    
    
    
    
    $
    
     2008
    
    
    2007Dividend yield
    
    
    0
    %
    
    
    0
    %Estimated annual volatility
    
    
    58.23
    %
    
    
    53.24
    %Risk-free interest rate
    
    
    6.22
    %
    
    
    6.00
    %Estimated forfeiture rate
    
    
    12.50
    %
    
    
    12.50
    %Estimated holding period (years)
    
    
    6.22
    
    
    
    6.63
  Non-Plan Options
    WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualExercise
    
    
    Life
    
    
    AggregateShares
    
    
    Price
    
    
    (Years)
    
    
    Intrinsic ValueOutstanding at December 31, 2005
    
    
    58,439
    
    
    $
    19.07
    
    
    
    
    
    
    $
    11,064Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    ExpiredOutstanding at December 31, 2006
    
    
    58,439
    
    
    $
    20.55
    
    
    
    
    
    
    $
    Granted
    
    
    9,999
    
    
    $
    23.14Exercised
    
    
    Forfeited
    
    
    Expired
    
    
    Outstanding at December 31, 2007
    
    
    68,438
    
    
    $
    22.93
    
    
    
    
    
    
    $
    Granted
    
    
    Exercised
    
    
    Forfeited
    
    
    Expired
    
    
    Outstanding at December 31, 2008
    
    
    68,438
    
    
    $
    18.03
    
    
    
    2.17
    
    
    $
    Exercisable at December 31, 2008
    
    
    62,438
    
    
    $
    18.02
    
    
    
    1.53
    
    
    $
    
  57




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HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
      2008
    
    
    2007
    
    
    2006Dividend yield
    
    
    
    
    
    
    0
    %
    
    
    Estimated annual volatility
    
    
    
    
    
    
    53.24
    %
    
    
    Risk-free interest rate
    
    
    
    
    
    
    6.00
    
    
    
    Estimated forfeiture rate
    
    
    
    
    
    
    12.50
    %
    
    
    Estimated holding period (years)
    
    
    
    
    
    
    10
    
    
    
    
 HeartWare International, Inc. 2008 Stock Incentive Plan
  Summary
  Awards Outstanding
    
    
    Awards ExercisableWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    
    AverageWeighted
    
    
    Remaining
    
    
    
    
    
    
    Weighted
    
    
    RemainingRange of
    
    Shares
    
    
    Average
    
    
    Contractual
    
    
    Shares
    
    
    Average
    
    
    ContractualExercise Prices
    
    Outstanding
    
    
    Exercise Price
    
    
    Life (years)
    
    
    Outstanding
    
    
    Exercise Price
    
    
    Life (years)$0.00 - $0.00
    
    
    142,846
    
    
    $
    
    
    
    
    9.32
    
    
    
    
    
    
    $
    
    
    
    
    $0.24 - $17.94
    
    
    279,524
    
    
    
    9.83
    
    
    
    4.72
    
    
    
    162,396
    
    
    
    7.43
    
    
    
    1.74$18.19
- $33.95
    
    
    399,365
    
    
    
    23.80
    
    
    
    7.10
    
    
    
    187,281
    
    
    
    24.58
    
    
    
    5.90$34.19 - $36.37
    
    
    19,485
    
    
    
    36.37
    
    
    
    1.11
    
    
    
    8,569
    
    
    
    36.37
    
    
    
    1.00841,220
    
    
    $
    15.41
    
    
    
    6.55
    
    
    
    358,246
    
    
    $
    17.09
    
    
    
    3.89
  58




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HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
    (in thousands)
    
    2008
    
    
    2007
    
    
    2006General and administrative
    
    $
    1,026
    
    
    $
    1,365
    
    
    $
    293Cost of product sold
    
    
    37
    
    
    
    
    
    
    
    Research and development
    
    
    89
    
    
    
    900
    
    
    
    597$
    1,152
    
    
    $
    2,265
    
    
    $
    890
 Note 9 Income Taxes
    For the Year Ended December 31,2008
    
    
    2007
    
    
    2006United States
    
    $
    (24,679,024
    )
    
    $
    (17,354,330
    )
    
    $
    (13,467,250
    )Non-US
    
    
    915,403
    
    
    
    (4,584,669
    )
    
    
    (3,959,458
    )$
    (23,763,621
    )
    
    $
    (21,938,999
    )
    
    $
    (17,426,708
    )
   59




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
  At December 31,2008
    
    
    2007Net operating loss and other carryforwards
    
    $
    26,418,604
    
    
    $
    17,649,460Total deferred tax assets
    
    
    26,418,604
    
    
    
    17,649,460Valuation allowance
    
    
    (26,418,604
    )
    
    
    (17,649,460
    )Net deferred tax assets
    
    $
    
    
    
    $
    
  Year
    
    
    
    
    
    
    ForeignYear of Expiration
    
    Generated
    
    
    US Losses
    
    
    Lossesunlimited
    
    
    2005
    
    
    
    
    
    
    $
    (422,443
    )unlimited
    
    
    2006
    
    
    
    
    
    
    
    (3,069,139
    )unlimited
    
    
    2007
    
    
    
    
    
    
    
    (2,320,105
    )2025
    
    
    2005
    
    
    $
    (9,433,864
    )
    
    
    2026
    
    
    2006
    
    
    
    (13,467,250
    )
    
    
    2027
    
    
    2007
    
    
    
    (17,354,330
    )
    
    
    2028
    
    
    2008
    
    
    
    (24,679,024
    )
    
    
    $
    (64,934,468
    )
    
    $
    (5,811,687
    )
 Uncertain tax positions
 Accounting for Uncertainty in Income Taxes
 Note 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 $15,000,000 in cash on hand and, if the Company does not have $15,000,000 at
that time, then the payment is deferred until such time that the Company has $15,000,000
in cash on hand;
    
    a milestone payment of $1,250,000 within 6 months of the date when the first
circulatory assist device is approved for sale in the United States, provided that the
Company has at least $25,000,000 in cash on hand and, if the Company does not have
$25,000,000 at that time, then the payment is deferred until such time that the Company
has $25,000,000 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.
  60




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
    Note 11 Guarantees
  Note 12 Shareholders Equity
 Preferred Stock
  Common Stock
   Note 13 Retirement Savings Plan
   61




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##### Table of Contents



HEARTWARE INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2008
 Note 14 Net Loss Per Share
  Common shares issuable upon:
    
    2008
    
    
    2007Exercise of share-based payment awards
    
    
    841,220
    
    
    
    766,563Conversion of convertible note
    
    
    
    
    
    
    43,005
 Note 15 Subsequent Events
 Proposed Acquisition by Thoratec Corporation
      NASDAQ Listing
  CE Marking
   62




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##### Table of Contents



Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 Item 9A. CONTROLS AND PROCEDURES
  Disclosure Controls and Procedures
   Internal Control over Financial Reporting
     63




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##### Table of Contents



Changes in Internal Control over Financial Reporting
  Item 9B. OTHER INFORMATION
  
 Part III
 
 Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  Name
    
    Age
    
    PositionDouglas Godshall
    
    
    44
    
    
    Managing Director (1), Chief Executive OfficerDavid McIntyre
    
    
    38
    
    
    Chief Financial Officer and Chief Operating Officer, Company SecretaryJeffrey LaRose
    
    
    47
    
    
    Chief Scientific OfficerDavid Hathaway
    
    
    61
    
    
    Chief Medical OfficerLauren Farrell
    
    
    41
    
    
    Vice President, FinanceRamon Paz
    
    
    51
    
    
    Vice President, Quality AssuranceJames Schuermann
    
    
    41
    
    
    Vice President, Sales and MarketingBarry M. Yomtov
    
    
    53
    
    
    Vice President, Product Development
 
 (1)
    
    The term Managing Director with respect to Mr. Godshall is a job title given to him by the
Company. Biographical Summaries
 Douglas Godshall
 David McIntyre
  64




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##### Table of Contents



Jeffrey LaRose
 Dr. David Hathaway.
 Lauren Farrell.
 James Schuermann.
 Barry Yomtov
  65




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##### Table of Contents



Ramon Augusto Paz.
 Other Information
   
 Item 11. EXECUTIVE COMPENSATION
  
 Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  Australian Disclosure Requirements
    66




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##### Table of Contents



Substantial Shareholders
 
 Number of
    
    
    PercentageOrdinary CDIs
    
    
    %Apple Tree Partners
    
    
    93,588,782
    
    
    
    30.2Mr. Muneer A. Satter
    
    
    48,000,000
    
    
    
    15.5FMR LLC and FIL Limited
    
    
    29,112,558
    
    
    
    9.4Deephaven Capital Management LLC
    
    
    20,515,180
    
    
    
    6.6
 Shareholder Information as at 20 February 2009.  Distribution of equity security holders
 CDIs
    
    
    Options (unlisted)Number of
    
    
    Number of
    
    
    Number of
    
    
    Number ofholders
    
    
    CDIs
    
    
    holders
    
    
    options1  1,000
    
    
    100
    
    
    
    80,529
    
    
    
    
    
    
    
    1,001  5,000
    
    
    259
    
    
    
    831,680
    
    
    
    
    
    
    
    5,001  10,000
    
    
    256
    
    
    
    2,208,883
    
    
    
    
    
    
    
    10,001  100,000
    
    
    525
    
    
    
    18,406,445
    
    
    
    31
    
    
    
    1,653,050100,001  and over
    
    
    124
    
    
    
    287,272,073
    
    
    
    45
    
    
    
    27,789,6501,264
    
    
    
    308,799,610
    
    
    
    76
    
    
    
    29,442,700
  Number of
    
    
    % of CDIsNo.
    
    Holder
    
    CDIs held
    
    
    Outstanding1.
    
    Apple Tree Partners I LP
    
    
    90,234,235
    
    
    
    29.2202.
    
    HSBC Custody Nominees (Australia) Limited-GSCO ECA
    
    
    48,105,000
    
    
    
    15.5803.
    
    HSBC Custody Nominees (Australia) Limited
    
    
    26,508,450
    
    
    
    8.5804.
    
    ANZ Nominees Limited <Cash Income A/C>
    
    
    21,344,828
    
    
    
    6.9105.
    
    JP Morgan Nominees Australia Limited
    
    
    12,770,800
    
    
    
    4.1406.
    
    Citicorp Nominees Australia Limited
    
    
    10,031,508
    
    
    
    3.2507.
    
    National Nominees PTY Limited
    
    
    7,363,488
    
    
    
    2.3808.
    
    HSBC Custody Nominees (Australia) Limited  A/C 2
    
    
    7,194,621
    
    
    
    2.3309.
    
    Phillip Asset Management Ltd <IB AUS Bioscience Fund I
A/C>
    
    
    5,633,330
    
    
    
    1.82010.
    
    Mr. Jon B Platt
    
    
    5,197,500
    
    
    
    1.68011.
    
    Warman Investments PTY Ltd
    
    
    4,749,990
    
    
    
    1.54012.
    
    Merrill Lynch (Australia) Nominees PTY Limited
    
    
    3,870,965
    
    
    
    1.25013.
    
    Mr. Jon Benjamin Platt
    
    
    2,802,485
    
    
    
    0.91014.
    
    UBS Nominees PTY Ltd
    
    
    2,283,417
    
    
    
    0.74015.
    
    Mr. Matthew Rosenthal
    
    
    2,247,945
    
    
    
    0.73016.
    
    Mr. Seth Garrison <Apple Tree Partners I LP A/C>
    
    
    1,999,970
    
    
    
    0.65017.
    
    Warman Investments PTY Ltd
    
    
    1,649,970
    
    
    
    0.53018.
    
    Mr. Robert Thomas and Mrs. Kyrenia Thomas <Rob Thomas
Super Fund A/C>
    
    
    1,549,975
    
    
    
    0.50019.
    
    Nickeli Holdings PTY Limited <Wade Family S/Fund A/C>
    
    
    1,451,310
    
    
    
    0.47020.
    
    Fitel Nominees Limited
    
    
    1,435,788
    
    
    
    0.460Total CDIs held by top 20 shareholders
    
    
    258,425,575
    
    
    
    83.687Total CDIs held by all other shareholders
    
    
    50,374,035
    
    
    
    16.313
  67




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##### Table of Contents



Options Unlisted
   Voting Rights
    (a)
    
    instructing CDN, as the legal owner, to vote the HeartWare International Shares underlying
their CDIs in a particular manner. The instruction form must be completed and returned to
HeartWare Internationals share registry prior to the meeting;
 (b)
    
    informing HeartWare International that they wish to nominate themselves or another person to
be appointed as CDNs proxy for the purposes of attending and voting at the general meeting;
 (c)
    
    converting their CDIs into a holding of HeartWare International Shares and voting these at
the meeting (however, if thereafter the former CDI holder wishes to sell their investment on
ASX, it would be necessary to convert HeartWare International Shares back to CDIs). This must
be done prior to the record date for the meeting. See section 7 below for further information
regarding the conversion process.
    Required Statements
  (a)
    
    There is no current on-market buy-back of the Companys securities.
 (b)
    
    HeartWare International, Inc. was incorporated in the state of Delaware in the United States
of America.
 (c)
    
    The Company is not subject to Chapters 6, 6A, 6B or 6C of the Corporations Act dealing with
the acquisitions of shares (ie, substantial shareholdings and takeovers).
 (d)
    
    Under the Delaware General Corporation Law, shares are generally freely transferable subject
to restrictions imposed by US federal or state securities laws, by the certificate of
incorporation or by-laws of the Company or by an agreement signed with the holders of the
 shares at issue. The Companys certificate of incorporation and by-laws do not impose any
specific restrictions on transfer.
  68




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##### Table of Contents



General Information
     Australian Corporate Governance Statement
   www.heartware.com
  Principle
1  Lay solid foundations for management and oversight
 Principle 1.1 

    Establish the functions reserved to the Board of Directors and those delegated to
senior executives and disclose those functions
  (a)
    
    the Board of Directors is to provide effective governance over the business and affairs of
HeartWare and its controlled entities (the HeartWare Group) so that the interests of all
stakeholders are protected; and
 (b)
    
    the Chief Executive Officer is to oversee the day-to-day performance of the HeartWare Group
(pursuant to Board delegated powers).
  69




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##### Table of Contents



(a)
    
    decisions about corporate strategy and policies as well as commitments over
prescribed limits;
 (b)
    
    setting major capital expenditure, acquisitions, divestments and funding
arrangements;
 (c)
    
    setting the various internal controls and reporting framework for the
management of the risks inherent in the operations of the HeartWare Group;
 (d)
    
    setting of discretionary financial and related operating limits for management;
and
 (e)
    
    establishing and determining the powers and functions of the committees of the
Board.
 Principle 1.2  Disclose the process for evaluating the performance of senior executives
  Reporting Requirement
  Principle
2  Structure the Board to add value
 Principle 2.1  A majority of the Board of Directors should be independent
   Name
    
    Position
    
    Date Appointed
    
    Tenure*
    
    IndependentRob Thomas
    
    Non-executive Chairman
    
    26 Nov 2004
    
    4.1 years
    
    YesSeth Harrison
    
    Non-executive Deputy Chairman
    
    26 Nov 2004
    
    4.1 years
    
    NoDenis Wade
    
    Non-executive director
    
    15 Dec 2004
    
    4.0 years
    
    YesChristine Bennett
    
    Non-executive director
    
    15 Dec 2004
    
    4.0 years
    
    YesBob Stockman
    
    Non-executive director
    
    11 Dec 2006
    
    1.1 years
    
    YesRay Larkin Jr
    
    Non-executive director
    
    3 Oct 2008
    
    0.2 years
    
    YesTim Barberich
    
    Non-executive director
    
    29 Apr 2008
    
    0.7 years
    
    YesDoug Godshall
    
    Chief Executive Officer / President / Executive Director
    
    28 Oct 2006
    
    1.2 years
    
    No
 *
    
    Calculated at as at 31 December 2008.  70




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##### Table of Contents



Independent advice
   Principle 2.2  The Chair should be an independent director
 Principle 2.3  The roles of Chairman and Chief Executive Officer should not be exercised by the
same individual
 Reporting Requirement
  Principle 2.4  The Board should establish a Nomination Committee
 Reporting Requirement
  Principle 2.5 

    Disclose the process for evaluating the performance of the Board, its committees
and individual directors
 Reporting Requirement
  Principle 2.6  Disclosure of information under Principle 2 of the ASX Governance Recommendations
 Reporting Requirement
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##### Table of Contents



Principle 3  Promote ethical and responsible decision-making
 Principle 3.1  Establish a Code of Conduct and disclose it
  Principle 3.2 

    Establish a policy concerning trading in Company securities by directors, senior
executives and employees and disclose it
  Reporting Requirement
  Principle 4  Safeguard integrity in financial reporting
 Principle 4.1  The Board should establish an Audit Committee
 Principle 4.2 
    The Audit Committee should: (a) consist of non-executive directors only; (b)
consist of a majority of independent directors; (c) be chaired by an independent chair who is
not chair of the Board; and (d) have at least three (3) members
 Principle 4.3  The Audit Committee should have a formal charter
   Reporting Requirement
  Principle 4.4  Disclosure of information under Principle 4 of the ASX Governance Recommendations
 Reporting Requirement
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##### Table of Contents



Principle 5  Make timely and balanced disclosure
 Principle 5.1 

    Establish written policies designed to ensure compliance with ASX Listing Rule
disclosure requirements and to ensure accountability at a senior executive level for that
compliance and disclose those policies
    Reporting Requirement
  Principle 6  Respect the rights of shareholders
 Principle 6.1 

    Design a communications policy for promoting effective shareholder communication
and encourage their participation at general meetings and disclose those policies
   Reporting requirement
  Principle 7  Recognise and manage risk
 Principle 7.1  Establish policies for the oversight and management of material business risks and
disclose it
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##### Table of Contents



Reporting requirement
  Principle 7.2 

    Require management to design and implement the risk management and internal control
system to manage the Companys material business risk and report to it whether those risks are
being managed effectively (and makes disclosures therein)
  Principle 7.3 

    Disclose whether the Board has received assurance from the Chief Executive Officer
and the Chief Financial Officer that the declaration under Section 295A of the Corporations
Act is founded on a sound system of risk management and internal control and is operating
effectively in all material respects in relation to financial reporting risks
 Reporting requirement
    Principle 8  Remunerate fairly and responsibly
 Principle 8.1  Establish a Remuneration Committee
  Principle 8.2 
    Clearly distinguish the structure of non-executive directors remuneration from
that of executive directors and senior executives
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##### Table of Contents



Reporting requirement
   
 Rob Thomas
Chairman
Date 25 February 2009
 
 Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
  
 Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
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##### Table of Contents



Part IV
 
 Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  1.
    
    Financial Statements:Report of Independent Registered Public Accounting FirmConsolidated Balance SheetsConsolidated Statements of OperationsConsolidated Statements of Comprehensive LossConsolidated Statement of Shareholders EquityConsolidated Statements of Cash FlowsNotes to Consolidated Financial Statements2.
    
    Financial Statement Schedules:Required schedule information is included in the Notes to Consolidated
Financial Statements or is omitted because it is either not required
or not applicable.3.
    
    Exhibits:See Exhibit Index
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##### Table of Contents



HeartWare LimitedDate: February 26, 2009
    By:
    /s/ Douglas GodshallName:
    Douglas GodshallTitle:
    Chief Executive Officer  Name
    
    Title
    
    Date/s/ Douglas Godshall
    
    Chief Executive Officer and DirectorDouglas Godshall
    
    (Principal
Executive Officer)
    
    February 26, 2009/s/ David McIntyre
    
    Chief Financial Officer,David McIntyre
    
    Chief Operating Officer
and Secretary 
(Principal
Financial and Accounting
Officer)
    
    February 26, 2009/s/ Robert ThomasRobert Thomas
    
    Chairman
and Director
    
    February 26, 2009/s/ Seth HarrisonSeth Harrison
    
    Director
    
    February 26, 2009/s/ Christine BennettChristine Bennett
    
    Director
    
    February 26, 2009/s/ Denis WadeDenis Wade
    
    Director
    
    February 26, 2009/s/ Robert StockmanRobert Stockman
    
    Director
    
    February 26, 2009/s/ Timothy J. BarberichTimothy J. Barberich
    
    Director
    
    February 26, 2009/s/ C. Raymond Larkin, Jr.C. Raymond Larkin, Jr.
    
    Director
    
    February 26, 2009
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##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Description2.1
    
    
    Implementation Agreement, dated as of August 5, 2008, between HeartWare International, Inc. and HeartWare Limited.
(13)2.2
    
    
    Agreement and Plan of Merger, dated as of February 12, 2009, among HeartWare International, Inc., Thoratec
Corporation, Thomas Merger Sub I, Inc. and Thomas Merger Sub II, Inc. (14)3.1
    
    
    Certificate of Incorporation of HeartWare International, Inc.(4)3.2
    
    
    Bylaws of HeartWare International, Inc. (4)10.01
    
    
    Convertible Note between HeartWare Limited and Apple Tree Partners I, L.P. dated December 15, 2004 (1)10.02
    
    
    Securities Exchange Agreement between Apple Tree Partners I, L.P., Anthony Low-Beer, Edward Nerssissian, Garrett and
Carol Thunen, HeartWare, Inc. and HeartWare Limited dated December 13, 2004 (1)10.03
    
    
    Lease Agreement, dated as of April 17, 2008, between JDRP Associates No. 1, Ltd. and HeartWare, Inc. (10)10.04
    
    
    Lease extension, dated as of February 23, 2004, between Sunbeam Properties, Inc. and HeartWare, Inc. (1)10.05
    
    
    Second lease extension, dated as of February 20, 2005, between Sunbeam Properties, Inc. and HeartWare, Inc. (1)10.06
    
    
    Sublease Agreement, dated June 1, 2006, between Starkey Laboratories, Inc. and HeartWare, Inc. (1)10.07
    
    
    Addendum to Sublease Agreement, dated as of June 1, 2006, between Starkey Laboratories, Inc. and HeartWare, Inc. (1)10.08
    
    
    Employment Agreement, dated as of December 5, 2008, between HeartWare International, Inc. and Douglas Godshall (5) +10.09
    
    
    Employment Agreement, dated as of December 5, 2008, between HeartWare International, Inc and David McIntyre (5) +10.10
    
    
    Employment Agreement, dated as of December 5, 2008, between HeartWare International, Inc. and Jeffrey LaRose (5) +10.11
    
    
    Employment Agreement, dated as of December 5, 2008, between HeartWare International, Inc. and James Schuermann (5) +10.12
    
    
    Employment Agreement, dated as of December 5, 2008, between HeartWare International, Inc. and Ramon Paz (5) +10.13
    
    
    Employment Agreement, dated as of December 5, 2008 between HeartWare Inc. and David R. Hathaway, M.D. * +10.14
    
    
    Separation Agreement between HeartWare, Inc. and Dozier Rowe dated May 13, 2008 (11) +10.15
    
    
    Clinical Investigation Agreement, dated as of March 21, 2006 between Medical University of Vienna and HeartWare,
Inc. (1)10.16
    
    
    Clinical Investigation Agreement, dated as of February 17, 2006, between Royal Perth Hospital and HeartWare, Inc. (1)10.17
    
    
    Clinical Investigation Agreement, dated as of October 23, 2006, between Royal Brompton & Harefiled NHS Trust and
HeartWare, Inc. (1)10.18
    
    
    Clinical Investigation Agreement, dated as of May 17, 2006, between Hannover Medical School and HeartWare, Inc. (1)10.19
    
    
    Production Services Agreement, dated August 17, 2006, between Minnetronix, Inc. and HeartWare, Inc. (2)10.20
    
    
    Servicing Agreement, dated August 17, 2006, between Minnetronix, Inc. and HeartWare, Inc. (1)10.21
    
    
    Sustaining Services and Clinical Support Agreement, dated August 17, 2006, between Minnetronix, Inc. and HeartWare,
Inc. (1)
  78




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##### Table of Contents



Exhibit No.
    
    Description10.22
    
    
    Form of Deed of Indemnity, Access and Insurance Agreement for directors and executive
officers (1) +10.23
    
    
    Letter of Appointment as a Director of the Company dated December 1, 2006 between HeartWare Limited and Robert
Stockman (1) +10.24
    
    
    Letter of Appointment as a Director of the Company dated December 15, 2004 between HeartWare Limited and Robert
Thomas (1) +10.25
    
    
    Letter of Appointment as a Director of the Company dated December 15, 2004 between HeartWare Limited and Christine
Bennett (1) +10.26
    
    
    Letter of Appointment as a Director of the Company dated December 15, 2004 between HeartWare Limited and Denis Wade
(1) +10.27
    
    

Letter of Appointment as a Director of the Company dated September 3, 2008 between HeartWare International, Inc. and
Ray Larkin * +10.28
    
    

Letter
of Appointment as a Director of the Company dated April 16, 2008 between HeartWare International, Inc. and
Timothy J. Barberich * +10.29
    
    
    HeartWare Limited Employee Share Option Plan Rules (1) +10.30
    
    
    HeartWare Limited Share Performance Rights Plan  Plan Rules (3) +10.31
    
    
    Incentive Option Agreement between HeartWare Limited and Dr. Christine Bennett (12)10.32
    
    
    Incentive Option Agreement between HeartWare Limited and Dr. Denis Wade (12)10.33
    
    
    Incentive Option Agreement between HeartWare Limited and Inteq Limited (12)10.34
    
    
    Incentive Option Agreement between HeartWare Limited and Robert Thomas (12)10.35
    
    
    HeartWare International, Inc. 2008 Stock Incentive Plan (6)10.36
    
    
    HeartWare International, Inc. Employee Stock Option Plan (7)10.37
    
    
    HeartWare International, Inc. Restricted Stock Unit Plan (8)10.38
    
    
    Form of HeartWare International, Inc. Incentive Option Terms (9)10.39
    
    
    Business Lease, dated December 27, 2006, between HeartWare, Inc. and Atlantic-Philadelphia Realty LLC (12)10.40
    
    
    Loan Agreement, dated as of February 12, 2009, among HeartWare International, Inc., the Guarantors thereto and
Thoratec Corporation (14)10.41
    
    
    Investors Rights Agreement, dated as of February 12, 2009, between HeartWare International, Inc. and Thoratec
Corporation (14)21.1
    
    
    List of Subsidiaries *23.1
    
    
    Consent of Independent Registered Public Accounting Firm *
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Exhibit No.
    
    Description31.1
    
    
    Certificate pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of Chief Executive
Officer *31.2
    
    
    Certificate pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934 of Chief Financial
Officer *32.1
    
    
    Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, of Chief Executive Officer *32.2
    
    
    Certificate pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, of Chief Financial Officer *
 
 (1)
    
    Incorporated by reference to the respective exhibits filed with the Companys Registration
Statement on Form 10 (File No. 000-52595) filed with the Securities and Exchange Commission on
April 30, 2007.(2)
    
    Incorporated by reference to Exhibit 10.22 filed with Amendment No. 2 to the Companys
Registration Statement on Form 10 (File No. 000-52595) filed with the Securities and Exchange
Commission on July 13, 2007.(3)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Registration Statement on Form S-8
(File No. 333-147506) filed with the Securities and Exchange Commission on November 19, 2007.(4)
    
    Incorporated by reference to the respective exhibits filed with the Companys Current Report
on Form 8-K filed with the Securities and Exchange Commission on November 13, 2008.(5)
    
    Incorporated by reference to Exhibit 99 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on December 5, 2008.(6)
    
    Incorporated by reference to Appendix 12 to the Information Memorandum contained in the
Companys Proxy Statement on Form DEF 14A filed with the Securities and Exchange Commission on
September 22, 2008.(7)
    
    Incorporated by reference to Appendix 9 to the Information Memorandum contained in the
Companys Proxy Statement on Form DEF 14A filed with the Securities and Exchange Commission on
September 22, 2008.(8)
    
    Incorporated by reference to Appendix 10 to the Information Memorandum contained in the
Companys Proxy Statement on Form DEF 14A filed with the Securities and Exchange Commission on
September 22, 2008.(9)
    
    Incorporated by reference to Exhibit 99.4 to the Companys Registration Statement on Form S-8
(File No. 333-155359) filed with the Securities and Exchange Commission on November 13, 2008.(10)
    
    Incorporated by reference to Exhibit 10.01 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on April 18, 2008.(11)
    
    Incorporated by reference to Exhibit 99.1 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on May 15, 2008.(12)
    
    Incorporated by reference to the Companys Annual Report on Form 10-K filed with the
Securities and Exchange Commission on February 28, 2008.(13)
    
    Incorporated by reference to Appendix 1 to the Information Memorandum contained in the
Companys Proxy Statement on Form DEF 14A filed with the Securities and Exchange Commission on
September 22, 2008.(14)
    
    Incorporated by reference to Exhibit 2.1 to the Companys Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 13, 2009.*
    
    Filed herewith+
    
    Management contract or compensatory plan or arrangement.  80