Universal Biosensors : Appendix 4C - quarterly

Universal Biosensors, Inc.

Commentary on FY 2018

Universal Biosensors, Inc. (ASX: UBI) has today released its cash flow report (ASX Appendix 4C) for the quarter ending 31 December 2018 (Q4 FY 2018). Unless otherwise noted, all references to "$" are references to Australian dollars.

Highlights

• • Cash on hand was $12.13m as at 31 December 2018

• • Repayment of US$15m secured loan on 26 November 2018. No further secured debt obligations outstanding

• • Quarterly Service Fees (QSF) for the full financial year (FY 2018) increased 6.9% to $21.38m compared to the prior comparable period (FY 2017)

• • Lump sum service fee of US$31.50m ($44.64m) expected to be received from LifeScan on or before 15 February 2019. No further QSF to be received by UBI beyond Q4 FY 2018

• • Product revenues from the supply of the Xprecia Stride™ PT-INR test strips to Siemens declined 58.9% to $1.67m in FY 2018

• • Positive operating cash flows delivered due to increased QSFs and our focus on operating cost management

• • Research and development activities in the coagulation market continue

LifeScan revenues

(a) Quarterly Service Fees (QSF)

QSF generated from the sale of LifeScan's OneTouch Verio blood glucose strips for Q4 2018 were $4.93m, up 15.8% when compared to the prior comparable period (Q4 2017). QSF for the 12-months to 31 December 2018 were $21.38m, representing a 6.9% increase over the prior full year (FY 2017:$19.99m).

(b) Lump Sum Service Fees

UBI received notice from LifeScan in Q3 2018 that it had exercised its right to convert or "buyout" its obligation to pay QSF to UBI under the terms of the Master Services & Supply Agreement between the parties. Following completion of the 2018 LifeScan financial year (12 months to 31 December 2018), the amount of the lump sum service fee has been determined, being a multiple of two times the total QSF paid to UBI over this period. This lump sum service fee is US$31,503,880 (or A$44,635,704 based on the A$/US$ FX rate on 31 December 2018). The lump sum service fee is expected to be received by UBI on or before 15 February 2019.

No further QSF will be received by UBI beyond Q4 2018.

Siemens product revenue

Revenue from the sale of Xprecia Stride™ PT-INR test strips was $1.67m for FY 2018, 58.9% lower than FY 2017 revenues of $4.07m.

As previously foreshadowed, FY 2018 Xprecia Stride™ strip sales are lower given a portion of strips sold in prior comparable year represented customer inventory build-up to seed the supply chain. Management expects the PT-INR test strip volume to remain volatile until the Xprecia Stride™ product gains meaningful global market share.

Cash flow

A summary of the net cash flows for FY 2018 compared to prior comparable period is as follows:

Cash flow comparison to prior comparable period	12 months ending 31 Dec,
	2018 ($ M)	2017 ($ M)
Net cash provided by operating activities	1.76	8.71
Net cash used in investing activities	-0.36	-1.02
Net cash used in financing activities	-20.95	-0.37
Movement in exchange rates	2.18	-1.44
Net movement in cash at period end	-17.37	5.88
Cash and restricted cash at period end	12.13	29.50

UBI's cash balance is $12.13m as at the end of FY 2018, compared to $29.50m as at the end of FY 2017, primarily as a result of the repayment of the US$15m secured loan during the period.

Other relevant factors to note include:

• • The operating cash flow surplus in FY 2018 of $1.76m was delivered as a result of increased QSFs, operating cost reductions and a contained and focused R&D investment program;

• • The operating cash surplus in FY 2017 includes $7.52m of R&D tax incentive (in respect of R&D expenditure incurred in FY 2016, where UBI's revenues were less than $20 million);

• • R&D investment in new products is funded from UBI's operating cash flows. UBI's in-house coagulation testing program has been suspended during Q4 FY 2018 with resources redirected to the Siemens development program; and

• • The movement in exchange rates is a non-cash currency translation adjustment caused by the fluctuation of the USD against the AUD.

UBI's Net Cash position (cash on hand less short and long term debt) as at 31 December 2018 is $12.13 m - this represents an improvement of $1.66m from 31 December 2017.

For further information, please contact:

Rick Legleiter	Salesh Balak
Chief Executive Officer	Chief Financial Officer
[phone]	[phone]

Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Appendix 4C

+Rule 4.7B

Quarterly report for entities subject to Listing Rule 4.7B

Introduced 31/03/00 Amended 30/09/01, 24/10/05, 17/12/10, 01/09/16

Name of entity

UNIVERSAL BIOSENSORS, INC.

ABN

67 950 836 446

Quarter ended ("current quarter")

31 December 2018

Consolidated statement of cash flows

• 1. Cash flows from operating activities

• 1.1 Receipts from customers

• 1.2 Payments for

  • (a) research and development

  • (b) product manufacturing and operating costs

  • (c) advertising and marketing

  • (d) leased assets

  • (e) staff costs

  • (f) administration and corporate costs

• 1.3 Dividends received (see note 3)

• 1.4 Interest received

• 1.5 Interest and other costs of finance paid

• 1.6 Income taxes paid

• 1.7 Government grants and tax incentives

• 1.8 Other (provide details if material)

• 1.9 Net cash from / (used in) operating activities

• 2. Cash flows from investing activities

• 2.1 Payments to acquire:

  • (a) property, plant and equipment

  • (b) businesses (see item 10)

  • (c) investments

Current quarter

$A'000

Year to date (12 months)

$A'000

5,704

24,061

(323) (3,983)

(338) (1,195)

0

(4)

(271) (1,124)

(3,293) (12,844)

(472) (1,608)

165 (312)

498 (2,077)

40 40

900 1,764

(51) (360)

+ See chapter 19 for defined terms 1 September 2016

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Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows	Current quarter	Year to date
$A'000	(12 months)
$A'000
(d) intellectual property
(e) other non-current assets

• 2.2 Proceeds from disposal of:

  • (a) property, plant and equipment

  • (b) businesses (see item 10)

  • (c) investments

  • (d) intellectual property

  • (e) other non-current assets

• 2.3 Cash flows from loans to other entities

• 2.4 Dividends received (see note 3)

• 2.5 Other (provide details if material)

• 2.6 Net cash from / (used in) investing activities

• 3. Cash flows from financing activities

• 3.1 Proceeds from issues of shares

• 3.2 Proceeds from issue of convertible notes

• 3.3 Proceeds from exercise of share options

• 3.4 Transaction costs related to issues of shares, convertible notes or options

• 3.5 Proceeds from borrowings

• 3.6 Repayment of borrowings

• 3.7 Transaction costs related to loans and borrowings

• 3.8 Dividends paid

• 3.9 Other (provide details if material)

• 3.10 Net cash from / (used in) financing activities

• 4. Net increase / (decrease) in cash and cash equivalents for the period

• 4.1 Cash and cash equivalents at beginning of quarter/year to date

• 4.2 Net cash from / (used in) operating activities (item 1.9 above)

• 4.3 Net cash from / (used in) investing activities (item 2.6 above)

• 4.4 Net cash from / (used in) financing activities (item 3.10 above)

0

3

(51)

(357)

(20,690)

(20,690)

0

(256)

(20,690) (20,946)

31,767 29,495

900 1,764

(51) (357)

(20,690)

(20,946)

+ See chapter 19 for defined terms 1 September 2016

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Appendix 4C

Quarterly report for entities subject to Listing Rule 4.7B

Consolidated statement of cash flows

4.5

Effect of movement in exchange rates on cash held

4.6

Cash and cash equivalents at end of quarter

5.

Reconciliation of cash and cash equivalents at the end of the quarter (as shown in the consolidated statement of cash flows) to the related items in the accounts

5.1 5.2 5.3 5.4

Bank balances

Call deposits Bank overdrafts

Other (provide details) - The Company maintains restricted cash which includes tenant security deposits, credit card security deposits and cash collateral for its borrowings

5.5

Cash and cash equivalents at end of quarter (should equal item 4.6 above)

Current quarter

$A'000

Year to date (12 months)

$A'000

207	2,177
12,133	12,133
Current quarter	Previous quarter
$A'000	$A'000

11,798 28,531

335 3,236

12,133 31,767

6.

Payments to directors of the entity and their associates

6.1 6.2

Aggregate amount of payments to these parties included in item 1.2

Aggregate amount of cash flow from loans to these parties included in item 2.3

Current quarter

$A'000

6.3

Include below any explanation necessary to understand the transactions included in items 6.1 and 6.2

6.1

Non-executive directors' fees and salaries, including allowances and superannuation.

7.	Payments to related entities of the entity and their	Current quarter
associates	$A'000
7.1	Aggregate amount of payments to these parties included in item 1.2
7.2	Aggregate amount of cash flow from loans to these parties included
in item 2.3
7.3

Include below any explanation necessary to understand the transactions included in items 7.1 and 7.2

93

+ See chapter 19 for defined terms 1 September 2016

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