<PAGE>
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-11303
SYNBIOTICS CORPORATION
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
CALIFORNIA 95-3737816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11011 VIA FRONTERA
SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices) (Zip Code)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 451-3771
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [_]
As of November 7, 1996, 7,351,925 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format: Yes [_] No [X]
================================================================================
<PAGE>
SYNBIOTICS CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Statement of Operations - Three and nine months
ended September 30, 1996 and 1995 2
Condensed Balance Sheet - September 30, 1996 and December 31,
1995 3
Condensed Statement of Cash Flows - Nine months ended
September 30, 1996 and 1995 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 7
Item 2. Changes in Securities 7
Item 3. Defaults Upon Senior Securities 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
</TABLE>
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
SYNBIOTICS CORPORATION
CONDENSED STATEMENT OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ------------------------------
1996 1995 1996 1995
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Product sales $3,747,000 $2,284,000 $14,598,000 $10,921,000
License fees and other 77,000 92,000 307,000 239,000
Interest 77,000 17,000 132,000 35,000
---------- ---------- ----------- -----------
3,901,000 2,393,000 15,037,000 11,195,000
---------- ---------- ----------- -----------
Cost and expenses:
Cost of sales 2,285,000 1,651,000 7,620,000 6,138,000
Research and development 261,000 274,000 721,000 692,000
Selling and marketing 961,000 965,000 3,320,000 3,324,000
General and administrative 794,000 377,000 1,649,000 1,090,000
---------- ---------- ----------- -----------
4,301,000 3,267,000 13,310,000 11,244,000
---------- ---------- ----------- -----------
Income (loss) before gain on sale
of securities available for sale
and gain on disposition of
investment in affiliated company (400,000) (874,000) 1,727,000 (49,000)
Gain on sale of securities
available for sale 1,159,000
Gain on disposition of investment
in affiliate 931,000
---------- ---------- ----------- -----------
Income (loss) before income taxes (400,000) (874,000) 2,886,000 882,000
Provision (benefit) for income
taxes (5,000) (20,000) 113,000 2,000
---------- ---------- ----------- -----------
Net income (loss) $ (395,000) $ (854,000) $ 2,773,000 $ 880,000
========== ========== =========== ===========
Net income (loss) per share $ (.07) $ (.15) $ .46 $ .15
========== ========== =========== ===========
Weighted average shares
outstanding 6,000,000 5,809,000 6,013,000 5,827,000
========== ========== =========== ===========
</TABLE>
Net income (loss) per share was computed based upon the weighted average number
of shares outstanding, including common stock equivalents.
See accompanying notes to condensed financial statements.
-2-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
CONDENSED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents $ 1,889,000 $ 1,017,000
Securities available for sale 3,940,000
Accounts receivable 2,063,000 1,430,000
Inventories 5,097,000 3,439,000
Other current assets 767,000 578,000
------------ ------------
Total current assets 13,756,000 6,464,000
Property and equipment, net 702,000 879,000
Securities available for sale 2,533,000
Other assets 1,658,000 1,582,000
------------ ------------
$ 16,116,000 $ 11,458,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses $ 2,127,000 $ 1,613,000
Other current liabilities 659,000 697,000
------------ ------------
Total current liabilities 2,786,000 2,310,000
------------ ------------
Shareholders' equity:
Common stock, no par value,
24,800,000 shares authorized,
6,001,000 and 5,816,000 shares
issued and outstanding at
September 30, 1996 and
December 31, 1995, respectively 29,725,000 29,351,000
Unrealized holding losses from
securities available for sale (1,035,000)
Accumulated deficit (16,395,000) (19,168,000)
------------ ------------
Total shareholders' equity 13,330,000 9,148,000
------------ ------------
$ 16,116,000 $ 11,458,000
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
-3-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
CONDENSED STATEMENT OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,773,000 $ 880,000
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation and amortization 599,000 761,000
Inventory reserve 243,000
Gain on sale of securities available for sale (1,159,000)
Gain on disposition of investment in affiliate (931,000)
Changes in assets and liabilities:
Accounts receivable (633,000) 595,000
Inventories (1,658,000) (208,000)
Other assets (192,000) 243,000
Accounts payable and accrued expenses 514,000 (494,000)
Other liabilities (38,000) 2,000
----------- ----------
Net cash provided by operating activities 206,000 1,091,000
----------- ----------
Cash flows from investing activities:
Acquisition of property and equipment (96,000) (125,000)
Investment in securities available for sale (3,940,000)
Proceeds from sale of securities available for sale 4,727,000
----------- ----------
Net cash provided by (used for) investing activities 691,000 (125,000)
----------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net (25,000) 23,000
----------- ----------
Net cash (used for) provided by financing activities (25,000) 23,000
----------- ----------
Net increase in cash and equivalents 872,000 989,000
Cash and equivalents - beginning of year 1,017,000 447,000
----------- ----------
Cash and equivalents - end of period $ 1,889,000 $1,436,000
=========== ==========
</TABLE>
See accompanying notes to condensed financial statements.
-4-
<PAGE>
ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
--------------------
SYNBIOTICS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - INTERIM FINANCIAL STATEMENTS:
The accompanying balance sheet as of September 30, 1996 and the statements of
operations and of cash flows for the nine month periods ended September 30, 1996
and 1995 have been prepared by Synbiotics Corporation (the Company) and have not
been audited. These financial statements, in the opinion of management, include
all adjustments (consisting only of normal recurring accruals) necessary for a
fair presentation of the financial position, results of operations and cash
flows for all periods presented. The financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB filed for the year ended December 31,
1995. Interim operating results are not necessarily indicative of operating
results for the full year.
NOTE 2 - SECURITIES AVAILABLE FOR SALE:
Included in current assets are securities available for sale which consist
primarily of short-term commercial paper and U.S. Government Treasury
securities.
NOTE 3 - INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Raw materials $1,764,000 $ 665,000
Work in process 4,000 633,000
Finished goods 3,329,000 2,141,000
---------- ----------
$5,097,000 $3,439,000
========== ==========
</TABLE>
-5-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
---------------------------------------------------------
RESULTS OF OPERATIONS
Total revenue for the third quarter of 1996 increased by $1,508,000 or 63% over
the quarter ended September 30, 1995, and increased for the nine months ended
September 30, 1996 by $3,842,000 or 34% over the nine months ended September 30,
1995. The increases are primarily due to an increase in product sales of
$1,463,000 or 64% during the third quarter of 1996, and an increase in product
sales of $3,667,000 or 34% during the nine months ended September 30, 1996,
respectively.
The increase in product sales during the third quarter of 1996 comprises an
increase in diagnostic sales of $238,000 or 11% and a $1,226,000 or 161%
increase in the sales of vaccines. The increased diagnostic sales are primarily
due to increased average selling prices and the introduction of
Assure/(R)//Parvo, for the detection of canine parvovirus, and ICT GOLD/TM/
FeLV, the Company's new feline leukemia diagnostic. The increased average
selling prices of the Company's existing diagnostic products resulted from a
general price increase during the third quarter of 1996, as well as the non-
recurrence of promotional pricing which was in effect during the third quarter
of 1995. Vaccine sales increased due to sales to private label partners and
increased international and domestic shipments of bulk feline leukemia vaccine.
The nine months ended September 30, 1996 saw an increase in diagnostic sales of
$1,701,000 or 23% and a $1,976,000 or 52% increase in vaccine sales, both
explained by the respective factors discussed above, as well as the introduction
of the Company's DiroCHEK TF/(R)/ canine heartworm diagnostic product, in
January 1996, to regain unit sales and price points eroded in 1995 due to a
major competitor's improved microwell canine heartworm product. Also, in 1996
the Company was able to market its ICT GOLD/TM/ HW canine heartworm diagnostic
for the full nine months (the product was introduced in March 1995).
The cost of sales as a percentage of product revenue decreased to 61% during the
third quarter of 1996 as compared to 72% for the quarter ended September 30,
1995. The improvement is due to the increase in average selling prices
discussed above and the non-recurrence of a $243,000 write-off of vaccine
inventory during the third quarter of 1995. These factors were partially offset
by extra costs in connection with the 1996 transition of vaccine manufacturing
from one third party to another and by the increased domestic shipments of bulk
feline leukemia vaccine to Rhone Merieux, Inc. (located in Athens, Georgia)
during the third quarter of 1996. The Company has contracted to sell bulk
vaccine to Rhone Merieux, Inc. at cost because the Company receives a royalty on
Rhone Merieux, Inc.'s resulting product sales in the United States. By
contrast, the Company's international sales of bulk feline leukemia vaccine to
Rhone-Merieux of France are at a profit, not at cost. Cost of sales as a
percentage of product revenue would have been 57% and 66% during the quarters
ended September 30, 1996 and 1995, respectively, if the zero margin bulk sales
and inventory write-off were not taken into consideration. The cost of sales as
a percentage of product revenue decreased to 52% for the nine months ended
September 30, 1996 as compared to 56% for the nine months ended September 30,
1995. The improvement is primarily due to factors similar to those discussed in
the quarterly comparison.
Research and development expenses and selling and marketing expenses fluctuated
insignificantly during the third quarter of 1996 and during the nine months
ended September 30, 1996. Each declined, during the 1996 periods, as a
percentage of sales.
General and administrative expenses during the third quarter of 1996 increased
by $417,000 or 111% over the quarter ended September 30, 1995, and increased
during the nine months ended September 30, 1996 by $559,000 or 51% over the nine
months ended September 30, 1995. The increases are due to the retirement of the
Company's President on July 31, 1996, the addition of a new Chief Executive
Officer in May 1996 and an increase in certain patent-related legal expenses.
-6-
<PAGE>
The Company's business is seasonal, and is concentrated within the canine
heartworm selling season, which falls mainly in the quarters ending March 31 and
June 30 of each year. Sales and results from operations in the quarters ending
September 30 and December 31 of each year are expected to be less favorable than
in the heartworm selling season.
In October 1996, the Company was notified by two of its important distributors
that they had terminated their distribution agreements with the Company. While
the Company believes that its remaining distributors will be able to absorb the
business of these two distributors, it is not known how long such absorption
will take. As a result, the loss of these two distributors may have a
significant impact on the Company's fourth quarter 1996 sales.
On February 27, 1996 and February 28, 1996, the Company sold a total of 614,000
shares of Texas Biotechnology Corporation ("TBC") common stock on the American
Stock Exchange at an average selling price of $3.573 per share. As a result of
the transactions, the Company recognized a gain of $385,00 during the first
quarter of 1996. As a result of the sale of the shares, the Company's ownership
of TBC was reduced to approximately 3%. During the period April 25, 1996 to May
2, 1996, the Company sold its remaining 614,000 shares of TBC common stock on
the American Stock Exchange at an average selling price of $4.205 per share. As
a result of the transactions, the Company recognized a gain of $774,000 during
the second quarter of 1996. The net proceeds received from the sales, which
totalled $4,727,000, will be used primarily for working capital requirements and
to fund business opportunities such as acquisitions. On June 30, 1995, the
Company received 573,000 shares of TBC common stock resulting from the
satisfaction of a certain contingency on May 31, 1995 related to the acquisition
of ImmunoPharmaceutics, Inc. ("IPI") by TBC in July 1994. The Company had been
a major shareholder of IPI, and in 1994 had recognized a $2,036,000 gain on the
transaction for financial reporting purposes. In the second quarter of 1995,
the Company recognized an additional gain for financial reporting purposes in
the amount of $931,000.
FINANCIAL CONDITION
Management believes that the Company's present capital resources, which included
working capital of $10,970,000 at September 30, 1996, are sufficient to meet its
current working capital needs and also the working capital needs associated with
the acquisition of International Canine Genetics, Inc. ("ICG") (see Part II,
Item 5). ICG has had operating losses to date and the Company expects that
business's losses to continue through at least 1997. Included in working
capital at September 30, 1996 is inventory in the amount of $5,097,000 as
compared to $3,439,000 at December 31, 1995. The increase is due to the
building of inventory in order to meet anticipated demand for the upcoming
canine heartworm season, as well as inventory for the Company's OTC biological
products which did not exist at December 31, 1995.
PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-----------------
No material developments.
ITEM 2. CHANGES IN SECURITIES
---------------------
None.
-7-
<PAGE>
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
-----------------
On October 25, 1996 the Company acquired substantially all of the assets of
International Canine Genetics, Inc. ("ICG") pursuant to a purchase agreement
dated July 23, 1996 and amended September 7, 1996. The consideration paid to
ICG was $1.00 plus 1,113,205 shares of Synbiotics Common Stock valued at
$4,689,000 (based upon the average closing price of Synbiotics' Common Stock,
for the period October 18, 1996 through October 24, 1996, which was $4.2125 per
share). The Company also assumed approximately $238,000 of outstanding ICG
liabilities which were due and payable as of the closing date. In addition, all
of ICG's outstanding warrants and stock options were made exercisable for an
adjusted number of shares of Synbiotics Common Stock. Prior to the acquisition,
S.R. One, Limited, ICG's largest shareholder, purchased 237,389 shares of newly
issued Synbiotics Common Stock for $1,000,000 (based upon the average closing
price of Synbiotics' Common Stock, for the period October 18, 1996 through
October 24, 1996, which was $4.2125 per share).
ICG, based in Malvern, PA, is a publicly held company which, until the
acquisition, manufactured and marketed canine reproduction diagnostic products
and services, PennHIP(R) (a diagnostic test for canine hip dysplasia),
nutritional supplements and a line of coat and skin care products to breeders
and owners of purebred dogs and their veterinarians. Recently, ICG began
marketing the first at-home diagnostic ovulation test for dogs in the U.S. and
announced a sponsored research agreement with New York University, New Jersey
Medical School and Cornell University for the co-development of a diagnostic
product for early canine pregnancy detection.
All of the assets acquired by Synbiotics were used and will continue to be used
to operate the activities described above.
Paul A. Rosinack, ICG's former President and CEO, became Vice President and
General Manager, Animal Health of Synbiotics. On October 24, 1996, Brenda D.
Gavin, D.V.M., a Vice President of S.R. One, Limited, was elected a Director of
the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
<TABLE>
<CAPTION>
(a) Exhibits
--------
<C> <S>
2.2 Purchase Agreement dated July 23, 1996 by and among the
Registrant, International Canine Genetics, Inc. and S.R.
One, Limited/(2)/.
2.3 Amendment to Purchase Agreement dated September 7, 1996 by
and among the Registrant, International Canine Genetics,
Inc. and S.R. One, Limited/(3)/.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
<C> <S>
10.36.2 Amendment to FeLV Distribution Agreement between the
Registrant and Bio-Trends International, Inc., dated as of
August 22, 1996/(1)/.
10.38.1 Addendum to Distribution Agreement between the Registrant
and Rhone-Merieux, dated April 11, 1996/(1)/.
10.38.2 Second Addendum to Distribution Agreement between the
Registrant and Rhone-Merieux, dated August 27, 1996.
10.41.1 Addendum to Agreement between the Registrant and Rhone
Merieux, Inc., dated August 22, 1996/(1)/.
11.1 Computation of Earnings (Loss) Per Share.
27 Financial Data Schedule (for electronic filing purposes
only).
</TABLE>
- -----------------------------
(1) Certain confidential portions of this exhibit have been omitted by means of
blacking out the text (the "Mark"). This exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
(2) Incorporated by reference to Exhibit 2.2 to the Registrant's Registration
Statement on Form S-4, as amended, Registration No. 333-10343, dated September
16, 1996.
(3) Incorporated by reference to Exhibit 2.3 to the Registrant's Registration
Statement on Form S-4, as amended, Registration No. 333-10343, dated September
16, 1996.
(b) Reports on Form 8-K
-------------------
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SYNBIOTICS CORPORATION
Date: November 13, 1996 /s/ MICHAEL K. GREEN
-----------------------------
Michael K. Green
Vice President of Finance and
Chief Financial Officer
(signing both as a duly authorized officer
and as principal financial officer)
-9-
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM 10-QSB
UNDER
SECURITIES EXCHANGE ACT OF 1934
SYNBIOTICS CORPORATION
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<C> <S>
2.2 Purchase Agreement dated July 23, 1996 by and among the Registrant,
International Canine Genetics, Inc. and S.R. One, Limited/(2)/.
2.3 Amendment to Purchase Agreement dated September 7, 1996 by and
among the Registrant, International Canine Genetics, Inc. and S.R.
One, Limited/(3)/.
10.36.2 Amendment to FeLV Distribution Agreement between the Registrant and
Bio-Trends International, Inc., dated as of August 22, 1996/(1)/.
10.38.1 Addendum to Distribution Agreement between the Registrant and
Rhone-Merieux, dated April 11, 1996/(1)/.
10.38.2 Second Addendum to Distribution Agreement between the Registrant
and Rhone-Merieux, dated August 27, 1996.
10.41.1 Addendum to Agreement between the Registrant and Rhone Merieux,
Inc., dated August 22, 1996/(1)/.
11.1 Computation of Earnings (Loss) Per Share.
27 Financial Data Schedule (for electronic filing purposes only).
</TABLE>
- ---------------------------
(1) Certain confidential portions of this exhibit have been omitted by means of
blacking out the text (the "Mark"). This exhibit has been filed separately with
the Secretary of the Commission without the Mark pursuant to the Company's
Application Requesting Confidential Treatment under Rule 24b-2 under the
Securities Exchange Act of 1934, as amended.
(2) Incorporated by reference to Exhibit 2.2 to the Registrant's Registration
Statement on Form S-4, as amended, Registration No. 333-10343, dated September
16, 1996.
(3) Incorporated by reference to Exhibit 2.3 to the Registrant's Registration
Statement on Form S-4, as amended, Registration No. 333-10343, dated September
16, 1996.
<PAGE>
EXHIBIT 10.36.2
---------------
AMENDMENT
TO
FeLV DISTRIBUTION AGREEMENT
This "Amendment" is entered into by Synbiotics Corporation, a California
corporation ("Synbiotics") and Bio-Trends International, Inc., a California
corporation ("BTI") as of August 22, 1996. The parties hereby agree to amend
the Distribution Agreement dated February 7, 1990 between Synbiotics and BTI
(the "FeLV Agreement") as follows.
1. The FeLV Agreement is hereby amended to give Synbiotics a non-exclusive
-------------
right to distribute the FeLV Product in South America subject to the terms of
the FELV Distribution Agreement.
2. Section 9.1 of the FeLV Agreement is hereby amended to read: "This Agreement
shall terminate on December 31, 2004." The maximum continuation period
contemplated in Section 9.4 of the FeLV Agreement is extended to December 31,
2004.
3. Synbiotics agrees to provide BTI with all current and future agreements with
respect to FeLV vaccine (or any other vaccine in which FeLV constitutes a
fraction), but only if the agreement contains specific terms and or performance
criteria relating to the FeLV vaccine, as opposed to Synbiotics generic
contracts for distribution of its entire product line. Should Synbiotics
contemplate entering into any such agreement with any third party, it shall
provide BTI, in advance and in confidence, the documents and terms of such
contemplated agreement insofar as it pertains, in any way, to the FeLV Product
or to the sales and/or marketing thereof by Synbiotics or any third party. BTI
may consult with Synbiotics with regard to any contemplated agreement, but the
decision whether or not to enter into the agreement (and on which terms) shall
belong exclusively to Synbiotics, in its sole and absolute discretion. This
provision shall in no way relieve or excuse Synbiotics from fulfilling its
obligation to use its reasonable best efforts to sell the FeLV vaccine.
4. With regard to section 1.3 of the FeLV Agreement, the parties agree
Commonwealth Serum Laboratories is an appropriate candidate with whom to
commence discussions as the designated FeLV vaccine manufacturer/seller for
Australia and New Zealand. Final approval of this company as such will be
subject to the mutual acceptance of the terms of such a manufacturing/sales
agreement by both BTI and Synbiotics.
5. For purposes of Section 8.1 of the FeLV Agreement relating to insurance,
indemnification, defense and hold harmless, all doses of the FeLV Product sold
in the over-the-counter market ("OTC Products") shall be deemed Products covered
by such Section. In addition, Synbiotics shall, with respect to such OTC
Products, indemnify, defend and hold harmless BTI from and against all claims,
actions, damages, expenses and awards resulting from any actual or alleged
"packaging related incidents", such as a child injuring himself or another with
a needle or contracting an infection or disease as a result thereof. Further
examples shall include situations that may occur as a result of a "veterinary
non-professional" administering the vaccines.
6. BTI is in the process of upgrading its facilities to meet UK (MAFF facility
standards) and OMP facility standards as required by the EU (hereafter "EU
Standards"). In the event BTI is hereafter "unable" to manufacture the FeLV
Product in accordance with EU Standards, or at such earlier time as BTI has
received final notice from the applicable EU facility licensing authorities that
its facility does not and will not, even after modifications or
- -----------------------
[*] Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the "Mark"). This Exhibit has been filed separately
with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 24b-2
under the Securities Exchange Act of 1934, as amended.
-1-
<PAGE>
corrections, meet EU Standards, BTI shall begin and diligently continue
information and technology transfer to RMI-Lyon who will then act as the "third
party manufacturer" of the FeLV Product for sales solely within the EU Market,
provided satisfactory terms can be reached with RMI-Lyon at such time. In the
event RMI-Lyon is utilized as a third party manufacturer, BTI and Synbiotics
shall equally divide the gross profits from all RMI-Lyon manufactured doses of
FeLV in accordance with the examples set forth in Section 7 hereof. For purposes
of this section, BTI only shall be considered "unable" to manufacture the FeLV
vaccine in accordance with EU Standards if BTI is prevented by the appropriate
EU authorities from continuing to supply the FeLV Product to the EU market in
the ordinary course of business.
In the event, at the time compliance for EU Standards is required, BTI is
"unable" to manufacture the FeLV Product to EU Standards and satisfactory terms
cannot be reach with RMI-Lyon to act as the third patty manufacturer, BTI shall
begin and diligently continue an information and technology transfer to such
other third party manufacturer as Synbiotics and BTI may mutually agree.
For purposes of this Amendment the term "third party manufacturer" shall mean
the party responsible to supply the FeLV Product, either in bulk or finished
form, to both Synbiotics' distributors and RMI-Lyon. BTI shall be responsible
for controlling the technology transfer, as well as negotiating the term of
manufacturer, and all additional provisions with respect to the manufacture of
the Product, except that Synbiotics and BTI must jointly agree to a mutually
acceptable contract manufacturing price from the "third party manufacturer".
BTI shall initially be responsible to pay all costs associated with the
technology transfer, however, BTI shall be entitled to full reimbursement for
any and all such costs BTI reasonably and actually incurs, prior to the division
of any profits pursuant to Section 7 hereof; provided that Synbiotics and BTI
shall agree in advance as to the approximate dollar level of such expenditures.
Except as BTI may otherwise agree with the "third party manufacturer", BTI shall
have the absolute right, at any time and from time to time, to designate a
replacement third party manufacturer, or commence manufacturing the Product
itself for either or both the EU or the UK markets when BTI's facilities become
at least conditionally licensed, provided no significant interruption in Product
manufacture or supply results from any such change.
Notwithstanding any of the foregoing provisions, BTI shall have the absolute
right to continue to manufacture and supply the FeLV Product for any and all non
---
EU or UK portions of the "Territory" as defined in the FeLV Distribution
- ------------------------------------
agreement.
Notwithstanding the foregoing, BTI shall also have the right to continue to
manufacture and supply FeLV Product to all EU portions of the Territory provided
------------------ -------------
it is not prohibited from doing so by EU regulatory authorities.
BTI will continue to enjoy its rights under 7.2 of the current FeLV Distribution
agreement with respect to ownership of product licenses in foreign countries.
In certain instances, as in the EU, where a product license is a combination of
the "product technology and know-how" contained in a product dossier (owned in
this case by BTI), and initiated in each country through payment of fees to
obtain a "Marketing Acknowledgment" (in this case by Synbiotics or its
distributors), BTI and Synbiotics will be jointly named as the holders of any
such Marketing Acknowledgments or other form of product licenses.
7. EU Profit Sharing. In the event a "third party manufacturer" is utilized to
manufacture and Supply the FeLV Product to the EU and/or UK markets, Synbiotics
agrees to pay BTI, with respect to all product purchased by Synbiotics from such
"third party manufacturer", [*] incurred by Synbiotics, calculated in accordance
with the following example (Note: the numbers quoted below are meant only as
examples to assist in demonstrating the profit sharing formula):
-2-
<PAGE>
[*]
8. Synbiotics agrees at all times set forth in this Section 8, to place firm
orders to purchase at least [*] of calendar 1994 doses per year of FeLV vaccine
purchased from BTI [*] on a rolling four-quarter annual basis. This minimum
purchase order requirement shall in no way excuse or relieve Synbiotics from its
obligation to utilize its best efforts to sell the FeLV vaccine.
The first three-month period upon which Synbiotics' purchase orders shall be
tested for compliance with this minimum purchase order requirement shall be the
earlier of (a) the three-month period beginning January 1, 2000; (b) the three-
month period beginning the first day of the tenth month following notice by
either party of termination of the Agreement dated January 1, 1992 between
Synbiotics and RMI-Athens; or (c) the first day of the month following RMI-
Athens commencing to sell or distribute any FeLV vaccine other than BTI's.
Synbiotics and BTI agree to utilize a rolling four-quarter annual basis (a
minimum of [*] doses during the quarter being tested and the three previous
quarters) to evaluate Synbiotics' compliance with the minimum purchase order
requirements.
Once testing of Synbiotics' minimum purchase order begins, if Synbiotics' FeLV
purchase orders during any four-quarter period are below the required minimum,
Synbiotics shall be in default unless it cures such shortfall within the
calendar month immediately following such four-quarter period (the "Cure
Period"). In order to cure any default, Synbiotics must pay BTI sufficient
funds for and place a firm order to purchase enough FeLV vaccine during the Cure
Period to meet the shortfall in its minimum dose requirements (a "Cure
Purchase"). Each Cure Purchase of FeLV doses by Synbiotics shall, for testing
future minimum purchase order compliance, be deemed to have occurred during the
previous quarter, in which the shortfall necessitating the Cure Purchase
occurred, and shall not be counted as a purchase order for FeLV doses in the
following quarter when the purchase order is actually placed.
If at any time Synbiotics fails to timely cure any default, Synbiotics' rights
to promote, use and sell the FeLV Product under the FeLV Agreement shall
automatically become non-exclusive for the remainder of the term of the FeLV
Agreement, as extended by this Amendment. Failure by Synbiotics to meet the
minimum purchase order requirements under this section will not give rise to any
liability of Synbiotics to purchase the shortfall from BTI.
-3-
<PAGE>
9. From and after the date of this Amendment, the prices at which Synbiotics
agrees to purchase and BTI agrees to sell FeLV vaccine shall, except as
otherwise modified, adjusted or determined pursuant to this Section 9, be as
follows:
(a) BTI shall sell Bulk FeLV vaccine to Synbiotics, for delivery to a
Synbiotics designated manufacturer, currently Diamond Annual Health, for use
solely in manufacturing OTC FeLV vaccine on behalf of Synbiotics, at a
transfer price of [*] per dose, plus reimbursement to BTI for any "quality
control" costs reasonably and actually incurred by BTI with respect thereto,
and otherwise on the terms and conditions set forth in the FeLV Agreement.
(b) BTI shall sell bulk FeLV vaccine to Synbiotics, for delivery to RMI-
Athens, at a transfer price of [*] per dose through December 31, 1997, and
at [*] per dose from January 1, 1998 through December 31, 2004. Other terms
and conditions shall be as set forth in the FeLV Agreement.
(c) BTI shall sell bulk FeLV vaccine to Synbiotics, for delivery to RMI-
Lyon at a transfer price of [*] per dose until such time as BTI has the
capability and is appropriately licensed to produce the FeLV Product in
accordance with EU Standards. At all times after BTI has the capability and
is appropriately licensed to produce the FeLV vaccine in accordance with EU
Standards, BTI shall sell bulk FeLV vaccine, manufactured to EU Standards,
to Synbiotics for delivery to RMI-Lyon, at a transfer price of [*] per dose.
Other terms and conditions shall be as set forth in the FeLV Agreement.
(d) Except as otherwise specifically set forth in the FeLV Agreement and
this Amendment, the transfer price at which BTI shall sell FeLV vaccine to
Synbiotics, for delivery to any distributor shall, especially for doses of
FeLV vaccine produced for sale outside the United States, shall be
determined based upon the provisions set forth in this Section 9(d) and the
per dose prices shown in the following chart:
<TABLE>
<CAPTION>
Finished Goods
Bulk- FeLV Single and Multi Dose
-----------------------------------------------------------
<S> <C> <C>
FeLV Product purchased from BTI [*] per dose, Mutually agreed to be negotiated
for sale or delivery in "EU Similar F.O.B.West in good faith by the parties, if
Countries" Sacramento necessary, at a later date.
-----------------------------------------------------------
FeLV Product purchased from BTI [*] per dose, In accordance with the
for sale or delivery in "Non-EU F.O.B.West prevailing
Similar Countries" Sacramento U.S. finished goods prices set
forth in Article 5 of the FeLV
Agreement.
------------------------------------------------------------
</TABLE>
The parties hereby acknowledge the chart set forth above is intended to
serve as a guideline for determining FeLV Transfer Prices for distributors
other than Diamond, RMI-Athens and RMI-Lyon whose Transfer Prices are
described above in Sections 9(a), (b) and (c), respectively. For purposes
of this Section, the term "EU Similar Countries" shall mean countries whose
regulatory authorities require the FeLV vaccine to be manufactured in
substantial conformance with EU Standards. In contrast, the term "Non-EU
Similar Countries" shall mean countries whose regulatory authorities require
the FeLV vaccine to be manufactured in substantial conformance with or below
the USDA Standards existing as of the date of this Amendment.
The parties anticipate that most countries are likely to adopt a regulatory
standard somewhere between the EU Standards and the current USDA Standards
and, thus, have established the Transfer Prices reflected above as the
current high and low ranges for FeLV Transfer Prices. Further, the parties
intend to establish
-4-
<PAGE>
Transfer Prices for each country within the range of [*] to [*] per dose for
Bulk FeLV vaccine (and using the prevailing U.S. finished goods dose prices
as the low range prices for finished goods), based upon whether the
country's regulatory standards more closely resemble EU Standards or current
USDA Standards, and what, if any, additional elements of difficulty, cost or
expense will be encountered in manufacturing, controlling, validating and,
if applicable, filling and labeling the FeLV Product in conformance with
such country's regulatory standards. As to the Transfer Price for each such
country, the parties agree, in good faith, to meet, discuss and reach a
mutually acceptable Transfer Price based upon the range set forth herein,
depending upon the country's regulatory environment.
The parties acknowledge that many uncertainties exist as to the cost of and
potential product returns relating to bottling and labeling the FeLV
Product, particularly in countries where it has been historically difficult
to import biological products, such as Japan. In order to substantially
reduce or eliminate these uncertainties, the parties agree, whenever
possible and contractually acceptable to Synbiotics, to sell Bulk FeLV
vaccine in such markets as opposed to finished goods.
Notwithstanding any other provisions of the FeLV Agreement or this Amendment,
future bulk and finished vaccine pricing from BTI to RMI-Athens, RMI-Lyon,
Diamond Animal Health (for OTC), Synbiotics and any other distributor of the
FeLV Product, shall be adjusted to good faith by the parties, as necessary to
take into account (1) changes in consumer price levels And/or purchasing power,
(2) any improvements to the product, and (3) increases in the cost of producing
the FeLV Product particularly those due to requirements imposed by regulatory
entities or introduction of the FeLV Product into new markets.
10. The parties agree that for purposes of Section 1.1 of the FeLV Agreement,
"improvements" shall include such modifications as additions of new strains of
whole killed FeLV virus; additions of adjuvants or immuno-enhancers to the whole
killed FeLV vaccine Product; changes in growth media or other production
techniques to improve stability or purity of the whole killed FeLV vaccine
Product; freeze drying of Product; changes in concentration of the FeLV virus;
and other similar type changes. Some improvements will require another
negotiated transfer price. It is further agreed that "improvements" shall not
include FeLV antigens that are reduced to recombinant vaccines; modified live
FeLV vaccines; oral/nasal preparations or FeLV vaccine; gene deleted DNA or RNA
vaccines; and any genetically altered or other futuristic types of FeLV virus
vaccines. Finally, It is confirmed that, unless Synbiotics' right to promote,
use and sell the FeLV Product becomes non-exclusive, BTI will not have the right
to sell the conventional whole killed FeLV vaccine Product in combination
vaccines without the express written consent of Synbiotics.
11. The [*] loan by Synbiotics to BTI referred to in Section 10.2 of the PRC
Agreement shall be repaid as follows: effective upon signing this Agreement,
and notwithstanding anything in this Amendment or the FeLV Agreement or the PRC
agreement to the contrary, Synbiotics shall retain, from the purchase price
Synbiotics would otherwise pay BTI for purchases of FeLV vaccine, the sum of [*]
per dose of FeLV vaccine purchased from BTI by Synbiotics. Such [*] per dose
sum retained by Synbiotics shall be applied against and reduce the outstanding
principal balance of the loan until fully repaid, This [*] per dose loan
repayment procedure shall not apply to any FeLV vaccine sold by BTI to
Synbiotics for delivery to RMI-Athens for which Synbiotics must pay in full.
The [*] per dose purchase price retention by Synbiotics shall immediately cease
at such time as the loan has been paid in full.
12. Except as expressly amended by this Agreement, the FeLV Agreement will
remain unchanged and in full force and effect.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Amendment as of
the date first written above.
SYNBIOTICS CORPORATION, BIO-TRENDS INTERNATIONAL, INC.,
a California corporation a California corporation
By: /s/ KENNETH M. COHEN By: /s/ CHARLES J. YORK
-------------------- -------------------
Title: President and Chief Title: President and Chief
Executive Officer Executive Officer
-6-
<PAGE>
EXHIBIT 10.38.1
---------------
ADDENDUM
To
DISTRIBUTION AGREEMENT
The Distribution Agreement between RHONE MERIEUX, France ("RM") SYNBIOTICS
CORPORATION ("SYNBIOTICS"), dated July 10, 1990 "Agreement"), is amended as
follows:
1. The scheduled expiration date of the Agreement is amended to be December 31,
1999 with the understanding that both parties are willing in good faith to
discuss extending this agreement through December 31, 2004.
2. RM shall have the non-exclusive right to distribute SYNBIOTICS' VacSYN/FeLV
vaccine in South Africa.
3. SYNBIOTICS is guaranteed the purchase of minimum doses, pursuant to (S)7.2
of the Agreement (as hereunder amended) only in markets exclusive to RM.
Current markets exclusive to RM are (i) France (for the duration of the
Agreement) and (ii) the United Kingdom (for three (3) years post-licensure
of VacSYN/FeLV/TM/. All other markets are non-exclusive.
For non exclusive markets, SYNBIOTICS and RM will, three months before the
beginning of each year, after significant consultation, set sales goals
(quantities, average transfer price, ...), on a global basis.
If RM reaches these global sales goals, a [*] rebate on net sales occurring
in each country will be due to RM within sixty (60) days of the end of each
calendar year in which the Agreement is in effect.
4. The second paragraph of (S)1.2 of the Agreement shall be amended in its
entirety to read as follows:
"Under the condition that SYNBIOTICS is unsuccessful in developing an FIV
and/or FIP combination vaccine, RM rejects its right of first refusal as
identified above, RM may combine these antigens with VacSYN/FeLV/TM/. If RM
chooses to market these combination antigens with other than SYNBIOTICS' FIV
and/or FIP antigen, then SYNBIOTICS would be free to market its combination
product with other marketing partners in the Territory. RM has the right to
develop its own FeLV products to be used in a RM combination product for the
Territory subject to Section 6.3 of this Agreement. RM has the right at its
option to combine any of its feline antigens with the VacSYN/FeLV/TM/
product for the Territory."
5. Section 6.3 of the Agreement shall be amended in its entirety to read as
follows:
"6.3 RM has the right to develop its own FeLV products to be used in a RM
combination product in each exclusive Territory and in a RM monovalent
or combination product in each non-exclusive Territory. RM will
provide SYNBIOTICS three (3) year's notice of its intent to use its
own FeLV. Regardless of development of its own product RM will
continue to promote and sell the SYNBIOTICS's VacSYN/FeLV/TM/ product
in the Territory. If and when RM use a combination product, RM's
rights in any Territory then considered exclusive shall become non-
exclusive upon the date of the relevant product registration."
- -------------------
[*] Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment
under Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
-1-
<PAGE>
6. Section 6.5 of the Agreement shall be amended in its entirety to read as
follows:
"6.5 At the termination of the Agreement or when RM withdraws from a
market, SYNBIOTICS will own all the regulatory licensure rights and RM
will assist SYNBIOTICS to the extent required to have these regulation
licenses issued in SYNBIOTICS' name. However, RM shall in no case be
obliged to conduct any additional works in order to complete or amend
the available registration dossiers."
7. a) The first paragraph of section 7.2 of the Agreement is amended as
follows:
"7.2. For the exclusive markets, RM will guarantee the purchase from
SYNBIOTICS of the following minimum doses of the Product:
<TABLE>
<CAPTION>
Sales Period Nr of Doses Transfer Price
------------ ----------- --------------
<S> <C> <C>
For November 1996
to 31 December 1997: [*] [*] per dose
For each following
calendar year: [*] to be discussed and
agreed 3 months before
the beginning of the
relevant year.
</TABLE>
The agreed prices could be renegotiated at any time in case of
important changes in the economical conditions and competition
situation in the markets."
b) The second paragraph of Section 7.2 of the Agreement (from "The third
twelve months ... to ... doses from year two") is deleted and replaced
by:
"The hereabove minimum guaranteed quantities will be renegotiated
in good faith to reflect lost sales due to a competitive
combination product entering the market and RM does not have a
combination product provided internally, or by SYNBIOTICS. In
addition, if due to no fault of RM, the product has not received
United Kingdom approval, and/or if any registration or approval
is cancelled or suspended in any exclusive market, the guaranteed
minimum purchases, and/or the whole Agreement if necessary, will
be renegotiated in good faith to reflect the new situation so
created."
8. All capitalized terms shall have the same meaning as set forth in the
Agreement, unless otherwise defined herein.
9. All the section of this addendum shall become effective upon the end of the
present contractual term, on October 24, 1996, except section 2 hereabove
which is effective immediately upon the date of signature of this Addendum.
10. Except as expressly amended by this Addendum, the Agreement remains
unchanged and in full force and effect. This Addendum may be executed in any
number of counterparts, each of which when so delivered shall be deemed an
original, but all such counterparts shall constitute one and the same
instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this Addendum in San
Diego, California on April 11, 1996.
RHONE MERIEUX, FRANCE
By: /s/ GUY MAHLER
------------------------
Title:
SYNBIOTICS CORPORATION
By: /s/ ROBERT L. WIDERKEHR
------------------------
Title: President and Chief Executive Officer
-3-
<PAGE>
EXHIBIT 10.38.2
---------------
SECOND ADDENDUM
TO
DISTRIBUTION AGREEMENT
The Distribution Agreement between Rhone Merieux, France ("RM") and Synbiotics
Corporation ("Synbiotics"), dated July 10, 1990 (the "Agreement"), as amended by
that certain Addendum to Distribution Agreement, dated April 11, 1996 (the
"First Addendum") is hereby further amended as follows:
1. As contemplated in paragraph 1 of the First Addendum, effective upon the
date upon which both Synbiotics and Bio-Trends International, a California
corporation ("BTI"), have each executed that certain Amendment to FeLV
Distribution Agreement, which extend the distribution agreement between
Synbiotics and BTI for BTI's FeLV vaccine through December 31, 2004,
Synbiotics and RM agree to extend the Agreement, as modified by the First
Addendum, between RM and Synbiotics through December 31, 2004, subject to
all the other terms and conditions set forth therein.
Except as otherwise expressly provided in this Second Addendum, the Agreement,
as modified by the First Addendum, will remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, the parties have executed and delivered this Second Addendum
to Distribution Agreement in San Diego, California, as of this 27th day of
August, 1996.
RHONE MERIEUX, FRANCE
By: /s/ GUY MAHLER
--------------------
Title:
SYNBIOTICS CORPORATION,
a California corporation
By: /s/ KENNETH M. COHEN
----------------------
Title: President and Chief Executive Officer
-1-
<PAGE>
EXHIBIT 10.41.1
---------------
ADDENDUM TO AGREEMENT
The Agreement between Rhone Merieux, Inc. ("RMI") and Synbiotics ("Synbiotics")
dated January 1, 1992 (the "Agreement"), is amended as follows:
1.0 Effective immediately, Synbiotics shall have rights to market FeLV R,C,P
(live) and CHL combination vaccine (see Section 1.2.1 of the Agreement) as
provided by RMI in the United States, Canada and Mexico. Synbiotics shall
not market thin vaccine directly to veterinarians or to or through other
biological manufacturers. Synbiotics will not indicate to any third party
that any of its products are of Rhone Merieux origin.
2.0 Effective 17 August 1995 as per letter agreement, RMI shall have rights to
market Synbiotics' FeLV vaccine (monovalent) in Canada, either direct or
through RMI distributors. This marketing right shall be co-exclusive, with
only Synbiotics retaining the right to appoint one distributor (but no more
than one distributor) to market FeLV vaccine (monovalent) in Canada (direct
or through subdistributors). The marketing rights granted to RMI in this
Section 2 shall apply only to finished, final FeLV (monovalent) products
manufactured by RMI from bulk FeLV supplied by Synbiotics. No royalty shall
be due from RMI to Synbiotics on sales of FeLV vaccine (monovalent) in
Canada.
3.0 The scheduled expiration date of the Agreement is amended to be December
31, 2004.
4.0 Section 2.2.1 of the Agreement shall be amended in its entirety to read as
follows:
2.2.1 "RMI's annual requirement of bulk, tested, completed FeLV Product
("FeLV"), at a purchase price of [*] per one dose equivalent (defined
as 1.2 ml) through December 31, 1997 and at a purchase price of [*]
from January 1, 1998 until the expiration or earlier termination of
the Agreement. Notwithstanding the foregoing, Synbiotics shall have
the right to increase the prices set forth herein: (i) in the event
that the United States Animal and Plant Health Inspection Service
officially requires Synbiotics to upgrade its manufacturing
facilities, but no such price increase may occur prior to 31 December
1999 and if such increase is necessary, the price of FeLV shall not
exceed [*]/one dose equivalent; or (ii) Synbiotics reasonably
determines that a price increase shall be restricted to a case where
the annual inflation rate at the end of a given calendar year exceeds
ten (10%) percent according to the U.S. Producer Price Index. The
parties will agree to meet in such a case and mutually agree upon the
future price of the FeLV; or (iii) Synbiotics reasonably determines
that an improvement has resulted in an increase in value provided,
however, the price of FeLV shall not exceed [*] per one dose
equivalent."
5.0 Synbiotics shall pay a royalty to RMI on all net sales by Synbiotics of all
Products containing RMI Components equal to [*] percent of net sales during
the remainder of this Agreement.
- -----------------------
[*] Certain confidential portions of this Exhibit were omitted by means of
blackout of the text (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark
pursuant to the Company's Application Requesting Confidential Treatment
under Rule 24b-2 under the Securities Exchange Act of 1934, as amended.
-1-
<PAGE>
6.0 Section 3.3.2 of the Agreement shall be amended in its entirety to read as
follows:
3.3.2 RMI shall pay a royalty to Synbiotics on Synbiotics origin FeLV net
sales by RMI as follows:
<TABLE>
<CAPTION>
a. FeLV Monovalent (USA Only) Royalty Rates
-------------------------- -------------
<S> <C>
1 Sept. 95 - 31 Oct. 95 [*]
1 Nov. 95 - 31 Oct. 96 [*]
1 Nov. 96 - 31 Oct. 97 [*]
1 Nov. 97 - 31 Dec. 99 [*]
1 Jan. 2000 - 31 Dec. 2004 [*]
</TABLE>
<TABLE>
<CAPTION>
b. FeLV Combinations (USA/CANADA/MEXICO) Royalty Rates
------------------------------------- -------------
<S> <C>
1 Sept. 95 - 31 Oct. 95 [*]
1 Nov. 95 - 31 Oct. 96 [*]
1 Nov. 96 - 31 Oct. 97 [*]
1 Nov. 97 - 31 Dec. 99 [*]
1 Jan. 2000 - 31 Dec. 2004 [*]
</TABLE>
7.0 All capitalized terms shall have the same meaning as set forth in the
Agreement, unless other wise defined.
8.0 Effective January 1, 1997 upon providing Synbiotics with twelve (12) months
prior written notice, RMI shall have the right to market in the territory,
FeLV mono and combination vaccines (other than Synbiotics origin). RMI's
right to sell Synbiotics' FeLV mono and combination vaccines shall become
nonexclusive nine (9) months after such written notice. When non-exclusive,
RMI will purchase FeLV at a price no higher than the price offered to any
other party. The reciprocal shall be true for RMI's origin R-C-P-CHL filled
containers (see Section 2.1.1 of the Agreement).
9.0 Except as expressly amended by this Addendum, the Agreement remains
unchanged and in full force and effect. This Addendum may be executed in
any number of counterparts each of which when so delivered shall be deemed
an original, but all such counterparts shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this Addendum in
Athens, Georgia 22 August 1996.
SYNBIOTICS CORPORATION RHONE MERIEUX, INC.
By: /s/ KENNETH M. COHEN By: /s/ DON HILDEBRAND
------------------------- -----------------------
Title: President and Chief Title: President
Executive Officer
Print Name: Kenneth M. Cohen Print Name: Don Hildebrand
Date: August 22, 1996 Date: August 22, 1996
-2-
<PAGE>
EXHIBIT 11.1
------------
SYNBIOTICS CORPORATION
COMPUTATION OF EARNINGS (LOSS) PER SHARE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS (LOSS) PER SHARE:
Net income (loss) per statement
of operations $ (395,000) $ (854,000) $2,773,000 $ 880,000
=========== =========== ========== ============
Weighted average number of shares
outstanding 6,000,000 5,809,000 6,013,000 5,827,000
=========== =========== ========== ============
Primary earnings (loss) per share $ (.07) $ (.15) $ .46 $ .15
=========== =========== ========== ============
FULLY DILUTED EARNINGS (LOSS) PER
SHARE:/(1)/
Net income (loss) per statement
of operations $ (395,000) $ (854,000) $2,773,000 $ 880,000
=========== =========== ========== ============
Reconciliation of weighted average
number of shares per primary
computation above, to amount used
for fully diluted computation:
Weighted average number of shares
outstanding, per primary computation 6,000,000 5,809,000 6,013,000 5,827,000
Add-effect of outstanding options
(as determined by the application
of the treasury method) 153,000 54,000 26,000 7,000
----------- ----------- ---------- ------------
Weighted average number of shares,
as adjusted 6,153,000 5,863,000 6,039,000 5,834,000
=========== =========== ========== ============
Fully diluted earnings (loss)
per share $ (.06) $ (.15) $ .46 $ .15
=========== =========== ========== ============
</TABLE>
- -----------------------------------
/(1)/ This computation is submitted, for the three months ended September 30,
1996 and 1995, in accordance with Regulation S-B Item 601(b)(11) although
it is contrary to paragraph 40 of APB Opinion No. 15 because it produces
an anti-dilutive result.
-1-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE CONDENSED BALANCE SHEET AS OF SEPTEMBER 30, 1996 AND THE RELATED STATEMENTS
OF OPERAIONS AND OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
INCLUDED IN THIS FORM 10-QSB.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,889
<SECURITIES> 3,940
<RECEIVABLES> 2,110
<ALLOWANCES> 47
<INVENTORY> 5,097
<CURRENT-ASSETS> 13,756
<PP&E> 4,478
<DEPRECIATION> 3,776
<TOTAL-ASSETS> 16,116
<CURRENT-LIABILITIES> 2,786
<BONDS> 0
0
0
<COMMON> 29,725
<OTHER-SE> (16,395)
<TOTAL-LIABILITY-AND-EQUITY> 16,116
<SALES> 14,598
<TOTAL-REVENUES> 15,037
<CGS> 7,620
<TOTAL-COSTS> 7,620
<OTHER-EXPENSES> 5,690
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,727
<INCOME-TAX> 113
<INCOME-CONTINUING> 2,773
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,773
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
