<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended March 31, 1997 or
Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1937
For the transition period from ______ to ______
Commission file number 000-19720
ABAXIS, INC.
(Exact name of registrant as specified in its charter)
California 77-0213001
- --------------------------------------------------------------------------------
(State of Incorporation) (I.R.S Employer Identification No.)
1320 Chesapeake Terrace
Sunnyvale, CA 94089
(Address of principal executive offices)
Registrant's telephone number, including area code, is (408) 734-0200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of June 16, 1997 was approximately $33,648,540 based upon the
closing sale price reported for such date on the NASDAQ National Market. For
purposes of this disclosure, shares of Common Stock held by persons who hold
more than 5% of the outstanding shares of Common Stock and shares held by
officers and directors of the registrant have been excluded because such persons
may be deemed to be affiliates. This determination of affiliate status is not
necessarily conclusive for other purpose.
The number of shares of the registrant's Common Stock outstanding as of
June 16, 1997, was 11,886,153.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Proxy Statement for the Annual Meeting of Shareholders of
Abaxis, Inc. tentatively scheduled to be held on September 9, 1997 are
incorporated by reference in Part III of this Report on Form 10-K.
This report contains 27 pages.
1
<PAGE> 2
FORM 10-K/A
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items of its Annual
Report on Form 10-K for the fiscal year ended March 31, 1997, as set forth in
the pages attached hereto:
The number of shares of the registrant's Common Stock outstanding as of June 16,
1997 on the cover page of this report.
Part II
Item 6. Selected Financial Data
Item 8. Financial Statements and Supplementary Data
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
Exhibit 11.1-Computation of Earnings Per Share
Exhibit 23.1-Consent of Deloitte & Touche LLP, Independent Auditors
Exhibit 23.2-Consent of Ernst & Young LLP, Independent Auditors
Exhibit 27.1-Financial Data Schedule
2
<PAGE> 3
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data of the Company are qualified by reference
to and shall be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and with the financial
statements, related notes and other financial information included elsewhere in
this report.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
Years Ended March 31,
1997 1996 1995 1994 1993
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues $ 7,294,000 $ 2,948,000 $ 1,044,000 $ 1,163,000 $ --
------------ ----------- ------------ ------------ -----------
Operating expenses:
Cost of product sales 7,661,000 4,883,000 2,587,000 -- --
Research and development 1,315,000 1,326,000 4,166,000 8,540,000 7,529,000
Selling, general and
administrative 4,867,000 3,482,000 3,504,000 2,175,000 1,577,000
------------ ----------- ------------ ------------ -----------
Total costs and operating expenses 13,843,000 9,691,000 10,257,000 10,715,000 9,106,000
------------ ----------- ------------ ------------ -----------
Loss from operations (6,549,000) (6,743,000) (9,213,000) (9,552,000) (9,106,000)
Interest income and other 360,000 547,000 376,000 874,000 1,197,000
Interest expense -- -- (149,000) (240,000) (131,000)
------------ ----------- ------------ ------------ -----------
Net loss $ (6,189,000) $(6,196,000) $ (8,986,000) $ (8,918,000) $(8,040,000)
============ =========== ============ ============ ===========
Loss per share (1) - As restated $ (0.72) $ (0.65) $ (1.24) $ (1.43) $ (1.30)
============ =========== ============ ============ ===========
Shares used in calculating
net loss per share 10,502,646 9,466,084 7,268,315 6,226,087 6,176,142
============ =========== ============ ============ ===========
</TABLE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------
March 31,
1997 1996 1995 1994 1993
------------ ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents, and
short-term investments $ 5,321,000 $ 7,778,000 $ 7,195,000 $ 5,573,000 $ 9,801,000
Working capital 6,825,000 7,912,000 7,109,000 3,971,000 6,887,000
Long-term investments -- 500,000 700,000 4,500,000 10,943,000
Total assets 11,977,000 13,046,000 12,147,000 13,569,000 23,370,000
Long-term portion of notes
payable and capital lease
obligation -- -- -- 1,089,000 1,489,000
Total shareholders' equity 9,358,000 10,726,000 10,436,000 10,003,000 18,752,000
</TABLE>
(1) See Note 1 to the Financial Statements for explanation of the loss per share
calculation.
3
<PAGE> 4
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Report of Deloitte & Touche LLP, Independent Auditors
Report of Ernst & Young LLP, Independent Auditors
Balance Sheets at March 31, 1997 and 1996
Statements of Operations for Each of the Three Years in the Period Ended
March 31, 1997
Statements of Shareholders Equity for Each of the Three Years in the Period
Ended March 31, 1997
Statements of Operations for Each of the three Years in the Period Ended
March 31, 1997
Statements of Cash Flows for Each of the Three Years in the
Period Ended March 31, 1997
Notes to Financial Statements
4
<PAGE> 5
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of
Abaxis, Inc.:
We have audited the accompanying balance sheets of Abaxis, Inc. as of March 31,
1997 and 1996, and the related statements of operations, shareholders' equity,
and cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The financial
statements of the Company for the year ended March 31, 1995 were audited by
other auditors whose report, dated April 21, 1995, expressed an unqualified
opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Company as of March 31, 1997 and 1996,
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 11, the accompanying financial statements have been
restated.
DELOITTE & TOUCHE LLP
San Jose, California
April 22, 1997 (April 30, 1997 as to Note 10;
October 24, 1997 as to Note 11)
5
<PAGE> 6
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders of
Abaxis, Inc.
We have audited the accompanying statements of operations, shareholders' equity,
and cash flows of Abaxis, Inc. for the year March 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, these financial statements referred to above present fairly, in
all material respects, the results of operations and cash flows of Abaxis, Inc.
for the year ended March 31, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
San Jose, California
April 21, 1995
6
<PAGE> 7
ABAXIS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31,
-------------------------------
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................................ $ 1,436,000 $ 1,591,000
Short-term investments ........................................... 3,885,000 6,187,000
Trade and other receivables ...................................... 1,690,000 690,000
Interest receivable .............................................. 80,000 41,000
Inventories ...................................................... 2,218,000 1,456,000
Prepaid expenses ................................................. 135,000 92,000
------------ ------------
Total current assets .................................... 9,444,000 10,057,000
Property and equipment - net ....................................... 2,453,000 2,427,000
Long-term investments .............................................. -- 500,000
Deposits and other assets .......................................... 80,000 62,000
------------ ------------
Total assets ....................................................... $ 11,977,000 $ 13,046,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................. $ 695,000 $ 1,017,000
Accrued payroll and related expenses ............................. 604,000 417,000
Other accrued liabilities ........................................ 554,000 225,000
Warranty reserve ................................................. 495,000 249,000
Deferred rent .................................................... 24,000 94,000
Deferred revenue ................................................. 247,000 143,000
------------ ------------
Total current liabilities ............................... 2,619,000 2,145,000
------------ ------------
Customer deposits .................................................. -- 175,000
------------ ------------
Commitments and contingencies (Note 5)
Shareholders' equity: (As restated - Note 11)
Convertible preferred stock, no par value: authorized shares -
5,000,000; none issued ......................................... -- --
Common stock, no par value: authorized shares - 35,000,000; issued
and outstanding shares - 11,886,153 in 1997 and 9,857,628
in 1996 ........................................................ 59,783,000 53,556,000
Accumulated deficit .............................................. (50,425,000) (42,830,000)
------------ ------------
Total shareholders' equity .............................. 9,358,000 10,726,000
------------ ------------
Total liabilities and shareholders' equity ......................... $ 11,977,000 $ 13,046,000
============ ============
</TABLE>
See notes to financial statements.
7
<PAGE> 8
ABAXIS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Revenues:
Product sales, net ................................................ $ 7,294,000 $ 2,948,000 $ 845,000
Other development revenue ......................................... -- -- 199,000
------------ ----------- ------------
Total revenues ...................................................... 7,294,000 2,948,000 1,044,000
------------ ----------- ------------
Costs and operating expenses:
Cost of product sales ............................................. 7,661,000 4,883,000 2,587,000
Research and development .......................................... 1,315,000 1,326,000 4,166,000
Selling, general and administrative ............................... 4,867,000 3,482,000 3,504,000
------------ ----------- ------------
Total costs and operating expenses .................................. 13,843,000 9,691,000 10,257,000
------------ ----------- ------------
Loss from operations................................................. (6,549,000) (6,743,000) (9,213,000)
Interest and other income ........................................... 360,000 547,000 376,000
Interest expense .................................................... -- -- (149,000)
------------ ----------- ------------
Net loss............................................................. $ (6,189,000) $(6,196,000) $ (8,986,000)
------------ ----------- ------------
Loss per share(a) - (As restated - Note 11).......................... $ (0.72) $ (0.65) $ (1.24)
============ =========== ============
Weighted average shares outstanding ................................. 10,502,646 9,466,084 7,268,315
============ =========== ============
</TABLE>
(a) Loss attributable to common shareholders used in computation of loss per
share for the year ended March 31, 1997 was $7,595,000 (See Note 1)
See notes to financial statements
8
<PAGE> 9
ABAXIS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK TOTAL
-------------------- ---------------------- ACCUMULATED DEFERRED SHAREHOLDERS'
SHARES AMOUNT SHARES AMOUNT DEFICIT COMPENSATION EQUITY
-------- ----------- ---------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at April 1, 1994 ................ -- $ -- 6,260,922 $ 37,782,000 $(27,648,000) $(131,000) $ 10,003,000
Stock option exercises ................... -- -- 111,752 115,000 -- -- 115,000
Issuance of common stock in a public
offering, net of issuance costs
of $167,000 ............................ -- -- 2,347,250 9,222,000 -- -- 9,222,000
Amortization of deferred compensation
and cancellation of stock options ...... -- -- -- (2,000) -- 84,000 82,000
Net loss ................................. -- -- -- -- (8,986,000) -- (8,986,000)
-------- ----------- ---------- ------------ ------------ --------- ------------
Balances at March 31, 1995 ............... -- -- 8,719,924 47,117,000 (36,634,000) (47,000) 10,436,000
Stock option exercises ................... -- -- 157,704 389,000 -- -- 389,000
Issuance of common stock in a private
placement, net of issuance costs
of $23,000 ............................. -- -- 980,000 6,050,000 -- -- 6,050,000
Amortization of deferred compensation .... -- -- -- -- -- 47,000 47,000
Net loss ................................. -- -- -- -- (6,196,000) -- (6,196,000)
-------- ----------- ---------- ------------ ------------ --------- ------------
Balances at March 31, 1996 ............... -- -- 9,857,628 53,556,000 (42,830,000) -- 10,726,000
Stock option exercises ................... -- -- 20,925 67,000 -- -- 67,000
Issuance of Series A preferred stock in a
private placement, net of issuance costs
of $220,000 ............................ 500,000 2,738,000 -- 2,042,000 -- -- 4,780,000
Preferred dividends paid ................. -- -- -- -- (26,000) -- (26,000)
Accretion of preferred stock ............. -- 1,380,000 -- -- (1,380,000) -- --
Conversion of preferred stock into common
stock ..................................(500,000) (4,118,000) 2,007,600 4,118,000 -- -- --
Net loss ................................. -- -- -- -- (6,189,000) -- (6,189,000)
-------- ----------- ---------- ------------ ------------ --------- ------------
Balances at March 31, 1997 (As restated -
Note 11) ............................... -- $ -- 11,886,153 $ 59,783,000 $(50,425,000) $ -- $ 9,358,000
======== =========== ========== ============ ============ ========= ============
</TABLE>
See notes to financial statements
9
<PAGE> 10
ABAXIS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
----------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net loss ................................................ $ (6,189,000) $ (6,196,000) $ (8,986,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ......................... 934,000 657,000 978,000
Amortization of deferred compensation ................. -- 47,000 82,000
Changes in assets and liabilities:
Trade and other receivables ......................... (1,000,000) (405,000) (183,000)
Interest receivable ................................. (39,000) (6,000) 198,000
Inventories ......................................... (762,000) (414,000) (783,000)
Prepaid expenses .................................... (43,000) (19,000) 208,000
Deposits and other assets ........................... (18,000) (17,000) 6,000
Accounts payable .................................... (322,000) 519,000 (248,000)
Accrued payroll and related expenses ................ 187,000 99,000 (164,000)
Other accrued liabilities ........................... 505,000 (28,000) 264,000
Deferred revenue .................................... 104,000 34,000 109,000
Customer deposits ................................... (175,000) (15,000) 190,000
------------ ------------ ------------
Net cash used in operating activities ............. (6,818,000) (5,744,000) (8,329,000)
------------ ------------ ------------
Investing activities:
Purchase of available-for-sale securities ............... (27,370,000) (17,194,000) (28,026,000)
Maturities of available-for-sale securities ............. 30,172,000 15,250,000 26,337,000
Sales of available-for-sale securities .................. -- -- 7,323,000
Purchase of property and equipment ...................... (960,000) (620,000) (1,184,000)
Capital lease deposits .................................. -- -- 4,000
------------ ------------ ------------
Net cash provided by (used in) investing activities 1,842,000 (2,564,000) 4,454,000
------------ ------------ ------------
Financing activities:
Principal payments under notes payable and capital
lease obligations ..................................... -- -- (2,006,000)
Proceeds from issuance of common and preferred stock .... 4,847,000 6,439,000 9,337,000
Preferred dividends paid ................................ (26,000) -- --
------------ ------------ ------------
Net cash provided by financing activities ......... 4,821,000 6,439,000 7,331,000
------------ ------------ ------------
Increase (decrease) in cash and cash equivalents .......... (155,000) (1,869,000) 3,456,000
Cash and cash equivalents at beginning of year ............ 1,591,000 3,460,000 4,000
------------ ------------ ------------
Cash and cash equivalents at end of year .................. $ 1,436,000 $ 1,591,000 $ 3,460,000
============ ============ ============
Supplemental disclosures of cash flow information -
Cash paid for interest .................................. $ -- $ -- $ 149,000
============ ============ ============
Noncash financing activity -
Conversion of preferred stock into common stock ......... $ 4,118,000 $ -- $ --
============ ============ ============
</TABLE>
See notes to financial statements.
10
<PAGE> 11
ABAXIS, INC.
NOTES TO FINANCIAL STATEMENTS AS RESTATED
YEARS ENDED MARCH 31, 1997, 1996 AND 1995
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Abaxis, Inc. (the Company) was incorporated in California in 1989 and
develops, manufactures and markets portable blood analysis systems. The
Company was in the development stage until fiscal 1997.
FUTURE FINANCING - The Company expects to incur substantial costs in fiscal
1998 related to the continued development and marketing of its products. In
addition, future capital requirements will include amounts necessary to
fund accounts receivable, inventories, and capital equipment acquisitions.
The Company does not believe that its existing capital resources and
anticipated revenue from VetScan and Piccolo product sales will be adequate
to satisfy its currently planned financial requirements through fiscal
1998. Consequently, the Company will need to raise additional funds from
private or public financing if it is to sustain its currently planned level
of operating expenses during fiscal 1998, or in the event that the Company
is unsuccessful in raising sufficient funding, the Company will have to
significantly reduce its operating expenses.
CASH EQUIVALENTS AND INVESTMENTS - Cash equivalents consist of short-term
financial instruments with original maturities of less than 90 days from
the date of acquisition that are readily convertible into cash. Short-term
investments have maturities of less than one year from the balance sheet
date and long-term investments have maturities greater than one year from
the balance sheet date.
Investments consist primarily of marketable debt securities that are
classified as "available-for-sale" and are carried at amounts approximating
fair value. The fair values for marketable debt securities are based on
quoted market prices. Unrealized gains and losses, net of tax, are
reportable in shareholders' equity; however, such amounts have not been
material and therefore were not recorded. The cost basis of investments is
adjusted for the amortization of premiums and the accretion of discounts to
maturity, which is included in interest income. Realized gains and losses
are also included in interest income. The cost of securities sold is based
on the specific identification method.
CONCENTRATION OF CREDIT RISK - Financial instruments that potentially
subject the Company to a concentration of credit risk consist primarily of
cash, cash equivalents, short- and long-term investments, as well as
accounts receivable. The Company has placed the majority of its cash and
cash equivalents and short-and long-term investments in high-credit,
high-quality corporate notes and commercial paper.
11
<PAGE> 12
The Company sells its products primarily to organizations in the United
States, Japan and Europe. The Company monitors the credit status of its
customers on an ongoing basis and generally does not require its customers
to provide collateral or other security to support accounts receivable. The
Company maintains allowances for potential bad debt losses. At March 31,
1997, three customers accounted for 25%, 25% and 15% of accounts
receivable, respectively. At March 31, 1996, three customers accounted for
54%, 11% and 10% of accounts receivable, respectively.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation and amortization are generally provided using the
straight-line method over the shorter of the estimated useful lives of the
assets (two to five years) or the lease term.
INVENTORIES - Inventories are stated at the lower of cost (first-in,
first-out method) or market.
REVENUE RECOGNITION - Under a distribution agreement, a veterinary products
distributor has certain rights of return for products unsold by the
distributor. The Company defers recognition of such sales and profits until
the products are resold by the distributor. For direct sales and for
distributors where significant rights of return for products unsold do not
exist, revenues are recognized upon shipment. A provision for the estimated
future cost of warranty is made at the time revenue is recognized.
INCOME TAXES - The Company accounts for income taxes using an asset and
liability approach to recording deferred taxes.
CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES - The preparation of financial
statements in accordance with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Such
management estimates include the allowance for doubtful accounts
receivable, the net realizable value of inventory, certain accruals and
warranty reserves. Actual results could differ from those estimates.
The Company operates in a dynamic industry, and accordingly, can be
affected by a variety of factors. For example, management of the Company
believes that changes in any of the following areas could have a negative
effect on the Company in terms of its future financial position and results
of operations: ability to obtain additional financing; regulatory changes;
uncertainty regarding health care reforms; fundamental changes in the
technology underlying blood testing; the ability to develop new products
that are accepted in the marketplace; competition, including, but not
limited to pricing and products or product features and services;
litigation or other claims against the Company; the adequate and timely
sourcing of inventories; and the hiring, training and retention of key
employees.
NET LOSS PER SHARE - Net loss per share is computed using the weighted
average number of shares of common stock outstanding. Common equivalent
shares from stock options are excluded from the computation as their effect
is antidilutive. In the computation of loss per share, loss attributable to
common shareholders includes the accretion of preferred stock totaling
$1,380,000 and preferred stock dividends totaling $26,000 in fiscal 1997
(Note 7).
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<PAGE> 13
STOCK-BASED COMPENSATION - The Company accounts for stock-based awards to
employees using the intrinsic value method in accordance with APB No. 25,
"Accounting for Stock Issued to Employees."
RECENTLY ISSUED ACCOUNTING STANDARD - In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 128, "Earnings per Share" (SFAS 128). The Company is required
to adopt SFAS 128 in the third quarter of fiscal 1998.
SFAS 128 replaces current earnings per share (EPS) reporting requirements
and requires a dual presentation of basic and diluted EPS. Basic EPS
exclude dilution and is computed by dividing net income by the weighted
average of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur if securities or other contracts to
issue common stock were exercised or converted into common stock. The
adoption of SFAS 128 will not have an impact on the Company's historically
reported EPS.
2. INVESTMENTS
The amortized cost and the estimated fair value of available-for-sale
securities at March 31 are materially the same and are shown below by
contractual maturity:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Due in one year or less:
Commercial paper and bankers' acceptances $ -- $4,987,000
Corporate debt securities ............... 3,885,000 1,200,000
---------- ----------
$3,885,000 $6,187,000
========== ==========
Due after one year through two years -
Corporate debt securities ............... $ -- $ 500,000
========== ==========
</TABLE>
3. INVENTORIES
Inventories at March 31 consist of the following:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Raw materials............................. $1,235,000 $ 829,000
Work in process .......................... 723,000 467,000
Finished goods ........................... 260,000 160,000
---------- ----------
$2,218,000 $1,456,000
========== ==========
</TABLE>
13
<PAGE> 14
4. PROPERTY AND EQUIPMENT
Property and equipment at March 31 consist of the following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Machinery and equipment ................. $ 3,412,000 $ 3,325,000
Furniture and fixtures .................. 935,000 635,000
Computers and computer equipment ........ 812,000 876,000
Leasehold improvements .................. 230,000 414,000
Construction in progress ................ 1,367,000 679,000
----------- -----------
6,756,000 5,929,000
Accumulated depreciation and amortization (4,303,000) (3,502,000)
----------- -----------
Net property and equipment .............. $ 2,453,000 $ 2,427,000
=========== ===========
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
LEASES - The Company leases its principal facility under a noncancelable
operating lease agreement that expires in July 2000. Monthly rental
payments increase based on a predetermined schedule. The Company recognizes
rent expense on a straight-line basis over the life of the lease. The
future minimum payments under the operating lease at March 31, 1997 are as
follows:
<TABLE>
<CAPTION>
FISCAL YEAR
-----------
<S> <C>
1998.................................................................$ 598,000
1999................................................................. 682,000
2000................................................................. 705,000
2001................................................................. 237,000
-----------
Total.................................................................$ 2,222,000
===========
</TABLE>
Rent expense under operating leases was approximately $390,000, $391,000
and $390,000 for the years ended March 31, 1997, 1996 and 1995,
respectively.
LITIGATION - The Company is involved in litigation in the normal course of
business. In the opinion of management, the ultimate resolution of these
matters will not have a material effect on the Company, the Company's
financial position or results of operations.
6. RETIREMENT PLAN
The Company has a tax deferred savings plan for the benefit of qualified
employees. The plan is designed to provide employees with an accumulation
of funds at retirement. Qualified employees may elect to have salary
reduction contributions made to the plan on a quarterly basis. The Company
may make annual contributions to the plan at the discretion of the Board of
Directors. The Company has made no contributions since the inception of the
plan.
14
<PAGE> 15
7. SHAREHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK - During fiscal year 1997, the Board of
Directors authorized and designated 500,000 shares of Series A convertible
preferred stock. In September 1996, the company sold the 500,000 shares of
Series A convertible preferred stock in a private placement, resulting in
net proceeds of $4,780,000. Significant terms of the Series A convertible
preferred stock included a conversion feature such that each share was
convertible into common stock at the option of the shareholder based upon a
variable exchange ratio ranging from 71% to 80% of the market price of the
Company's common stock, at the time of conversion or the market price of
common stock at the preferred stock issuance date, whichever was lower. The
Series A convertible preferred stock was also subject to automatic
conversion into common stock upon the earlier to occur of (1) the time the
consent of at least a majority of the outstanding preferred stock to such
conversion is obtained or (2) on the second anniversary of the issuance
date. The significant terms of the Series A preferred stock also entitled
the holders to cumulative dividends of $0.15 per share of preferred stock
at fixed intervals of time subsequent to the issuance date. The calculated
imbedded yield representing the discount on the assumed potential
conversion of the preferred stock was allocated to common stock and was
accreted to preferred stock over the preferred stock holding period.
In November and December 1996, the 500,000 shares of Series A convertible
preferred stock were converted into 2,007,600 shares of common stock in
accordance with the specified exchange ratios. In connection with the
conversion, a dividend of $26,000 was paid to the holders of the Series A
preferred stock in accordance with the rights of the shareholders.
STOCK OPTION PLAN - Under the Company's 1989 Stock Option Plan (the Option
Plan), options to purchase common stock may be granted to employees and
consultants of the Company. Options granted under the 1989 Stock Option
Plan may be either incentive stock options or nonqualified stock options.
Incentive stock options are granted at no less than the fair market value
of the common stock on the date of grant, and nonqualified stock options
are granted at no less than 85% of the current fair market value of the
common stock on the date of grant. The stock options generally expire ten
years from the date of grant and normally become exercisable ratably over
four years. Under the Company's Outside Directors' Stock Option Plan (the
Directors' Plan), options to purchase common stock may be granted only to
directors of the Company who are not employees. Options under the
Directors' Plan are nonqualified stock options and are granted at the fair
market value on the date of grant and expire five years from the date of
grant.
In a prior year, the Company's Board of Directors reserved 20,000 shares of
common stock of which options to purchase 15,000 shares were granted to a
non-employee director at the fair market value of the Company's common
stock on the date of grant.
15
<PAGE> 16
Information with respect to stock option activity is summarized as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF SHARES PRICE
--------- --------
<S> <C> <C>
Balances at April 1, 1994 763,945 $ 3.49
Granted ................................................ 326,750 5.53
Exercised .............................................. (111,752) 1.02
Canceled ............................................... (174,069) 6.79
---------
Balances at March 31, 1995 (323,778 vested at a weighted
average price of $2.22) 804,874 3.95
Granted (weighted average fair value of $4.14 per share) 299,000 6.28
Exercised .............................................. (157,704) 2.42
Canceled ............................................... (147,565) 5.20
---------
Balances at March 31, 1996 (368,143 vested at a weighted
average price of $3.64) 798,605 4.85
Granted (weighted average fair value of $2.99 per share) 634,350 4.56
Exercised .............................................. (20,925) 3.23
Canceled ............................................... (234,981) 5.75
---------
Balances at March 31, 1997 ............................. 1,177,049 $ 4.54
=========
</TABLE>
Additional information regarding options outstanding as of March 31, 1997
is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------------------------------
OPTIONS EXERCISABLE
WEIGHTED ------------------------
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING (YEARS) PRICE EXERCISABLE PRICE
--------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.32 - $ 1.32 118,921 3.88 $ 0.91 118,921 $ 0.91
$ 2.50 - $ 2.50 149,850 9.94 $ 2.50 -- $ --
$ 2.87 - $ 4.00 113,000 5.54 $ 3.74 73,585 $ 3.93
$ 4.37 - $ 5.00 145,875 7.85 $ 4.70 118,448 $ 4.66
$ 5.12 - $ 5.12 255,000 9.23 $ 5.12 - $ --
$ 5.25 - $ 5.62 154,000 8.54 $ 5.60 39,208 $ 5.54
$ 5.75 - $ 6.25 133,736 7.81 $ 6.00 53,120 $ 6.13
$ 6.37 - $ 9.11 106,667 7.02 $ 7.31 60,783 $ 7.14
--------- -------
$ 0.32 - $ 9.11 1,177,049 7.80 $ 4.54 464,065 $ 4.15
========= =======
</TABLE>
At March 31, 1997, 378,512 and 93,750 shares were available for future
grants under the Option Plan and the Directors' Plan, respectively.
16
<PAGE> 17
ADDITIONAL STOCK PLAN INFORMATION - As discussed in Note 1, the Company
continues to account for its stock-based awards using the intrinsic value
method in accordance with APB No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123), requires the disclosure of pro forma
net income and earnings per share had the Company adopted the fair value
method as of the beginning of fiscal 1996. Under SFAS 123, the fair value
of stock-based awards to employees is calculated through the use of option
pricing models, even though such models were developed to estimate the fair
value of freely tradable, fully transferable options without vesting
restrictions, which significantly differ from the Company's stock option
awards. These models also require subjective assumptions, including future
stock price volatility and expected time to exercise, which greatly affect
the calculated values. The Company's calculations were made using the
Black-Scholes option pricing method with the following weighted average
assumptions: expected life, 19 months following vesting; volatility, 91% in
1997 and 92% in 1996; risk-free interest rates, 5.8% in 1997 and 4.9% in
1996; and no dividends during the expected term. The Company's calculations
are based on a multiple option valuation approach, and forfeitures are
recognized as they occur. If the computed fair values of the 1997 and 1996
awards had been amortized to expense over the vesting period of the awards,
pro forma net loss would have been $7,022,000 ($0.67 per share) in 1997 and
$6,446,000 ($0.68 per share) in 1996. However, the impact of outstanding
non-vested stock options granted prior to 1996 has been excluded from the
pro forma calculation; accordingly, the 1997 and 1996 pro forma adjustments
are not indicative of future period pro forma adjustments, when the
calculation will apply to all applicable stock options.
8. INCOME TAXES
As of March 31, 1997, the Company had federal and state net operating loss
carryforwards of approximately $46,000,000 and $15,000,000, respectively.
The Company also had federal and state research and development tax credit
carryforwards of approximately $1,600,000 and $800,000, respectively. The
net operating loss and credit carryforwards will expire at various dates
from 1998 through 2011, if not utilized. Use of the Company's net operating
loss and tax credit carryforwards may be limited if a change in ownership,
as defined by the Internal Revenue Code, occurs.
17
<PAGE> 18
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards ................. $ 16,500,000 $ 14,800,000
Research and development credit and manufacturer's
investment credit carryforwards ................ 2,400,000 2,100,000
Capitalized research and development ............. 1,000,000 1,300,000
Other, net ....................................... 600,000 800,000
------------ ------------
20,500,000 19,000,000
Valuation allowance for deferred tax assets ........ (20,500,000) (19,000,000)
------------ ------------
Total deferred tax assets .......................... $ -- $ --
============ ============
</TABLE>
The Company has not recorded any tax provision or credit for income taxes
due to the Company's historic losses and uncertainties surrounding the
ability to utilize its deferred tax assets in the future.
9. CUSTOMER AND GEOGRAPHIC INFORMATION
Three customers accounted for 34%, 20% and 10%, respectively, of total
revenues for the fiscal year ended March 31, 1997. In fiscal year 1996, one
customer accounted for 64%, and in fiscal year 1995, two customers
accounted for 76% and 23%, respectively, of total revenues.
The following is a summary of revenues by geographic region:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
-------------------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
United States $4,995,000 $2,436,000 $1,044,000
Europe ...... 695,000 263,000 --
Japan ....... 1,452,000 82,000 --
Other ....... 152,000 167,000 --
---------- ---------- ----------
Total ....... $7,294,000 $2,948,000 $1,044,000
========== ========== ==========
</TABLE>
10. SUBSEQUENT EVENT
On April 30, 1997, the Company obtained a $2,000,000 equipment financing
loan to be used for equipment purchases and immediately borrowed $600,000
against the line. Borrowings under this new equipment financing loan are
collateralized by the Company's equipment and bear interest at
approximately 16%. In connection with this new equipment financing loan,
warrants to purchase 106,667 shares of the Company's common stock at an
exercise price of $3.00 per share were issued to the lender.
18
<PAGE> 19
11. RESTATEMENT
Subsequent to the issuance of the Company's financial statements for the year
ended March 31, 1997, the Company's management determined that the calculated
imbedded yield representing the discount on the assumed potential conversion of
the preferred stock issued by the Company should have been accreted to preferred
stock and included in the loss per share computation. The effect of the
restatement for the year ended March 31, 1997 was to increase loss attributable
to common shareholders by $1,380,000 and to increase loss per share by $0.13.
19
<PAGE> 20
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) List of documents filed as part of this report:
1. Financial Statements
Reference is made to the Index to Financial Statements under Item 8 of
Part II hereof, where these documents are included.
2. Financial Statement Schedules
There are no financial statement schedules filed as part of this report
because such schedules are not required to be set forth therein or the
information is shown in the financial statements or notes thereto.
3. Exhibits filed with this Report on Form 10-K (numbered in accordance
with Item 601 of Regulation S-K)
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.20 Employment Agreement with Mr. Clinton H. Severson
dated March 31, 1997
10.21 Amendment to the Lease Agreement between the Company and
South Bay/Caribbean dated March 11, 1997
10.22 Equipment Loan Agreement between the Company and
Transamerica Business Credit dated March 4, 1997
11.1 Computation of Earnings per share
22.1 Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP, Independent
Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
27.1 Financial Data Schedule
</TABLE>
20
<PAGE> 21
(b) Reports on From 8-K
None
EXHIBITS INDEX
Exhibit
No. Description of Document
- ------- -----------------------
3.1 Restated Articles of Incorporation, as amended (5) (10)
3.2 By-laws of the Company (1)
10.5 1989 Stock Option Plan as amended and forms of agreement (3)
10.6 1992 Outside Directors Stock Option Plan and forms of agreement (4)
10.7 401(k) Plan (1)
10.8 Lease Agreement between the Company and South Bay/Caribbean dated
March 11, 1992 (3)
10.13 Exclusive Distribution Agreement dated September 20, 1991 between the
Company and Teramecs (1) (2)
10.14 Sponsored Research Agreement dated as of September 20, 1991 between
the Company and Teramecs (1) (2)
10.15 Development Agreement between the Company and Becton Dickinson and
Company (through its Becton Dickinson Immunocytometry Systems
Division) dated April 9, 1993 (5) (6)
10.16 Distribution agreement between the Company and VedCo, Inc. dated
June 20, 1994 (6)
10.17 Supply Agreement between the Company and Becton Dickinson and Company
(through its Becton Dickinson Immunocytometry Systems Division) dated
September 16, 1994 (6) (7)
10.18 Licensing agreement between the Company and Pharmacia Biotech, Inc.
dated October 1, 1994 (6) (7)
10.19 Employment Agreement with Mr. Gary H. Stroy dated March 11, 1995 (8)
10.20 Employment Agreement with Mr. Clinton H. Severson dated March 31, 1997
(Page 46)
10.21 Amendment to the Lease Agreement between the Company and South
Bay/Caribbean dated March, 11, 1997 (Page 50)
10.22 Equipment Loan Agreement between the Company and Transamerica Business
Credit dated March 4, 1997 (Page 54)
11.1 Computation of Earnings per share
16.1 Letter from Ernst & Young LLP dated January 30, 1996 (9)
22.1 Subsidiaries of Registrant (Page 69)
23.1 Consent of Deloitte & Touche LLP, Independent Auditors (Page 70)
23.2 Consent of Ernst & Young LLP, Independent Auditors (Page 71)
27.1 Financial Data Schedule (Page 72)
21
<PAGE> 22
(1) Incorporated by reference from Registration Statement No. 33-44326 filed
December 11, 1991.
(2) Confidential treatment of certain portions of these agreements has been
granted.
(3) Incorporated by reference to the exhibit filed with the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1992.
(4) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1992.
(5) Incorporated by reference to the exhibit filed with the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993.
(6) Confidential treatment of certain portions of these agreements has been
granted.
(7) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.
(8) Incorporated by reference to the exhibit filed with the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1995.
(9) Incorporated by reference to the Company's Report on Form 8-K filed
February 1, 1996.
(10) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1996.
22
<PAGE> 23
FORM 10-K/A
AMENDMENT NO. 1
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
ABAXIS, INC.
By: /s/ Ting W. Lu
----------------------------------
Ting W. Lu
Vice President of Finance and
Administration and Chief
Financial Officer
Date: October 27, 1997
23
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year ended March 31,
1997 1996 1995
<S> <C> <C> <C>
Net loss $ (6,189,000) $ (6,196,000) $ (8,986,000)
Cumulative preferred stock dividends 26,000 -- --
Value assigned to accretion of preferred 1,380,000 -- --
stock
------------ ------------- ------------
Loss attributable to common shareholders $ (7,595,000) $ (6,196,000) $ (8,986,000)
============ ============= ============
Loss per share $ (0.72) $ (0.65) $ (1.24)
============ ============= ============
Weighted average common shares outstanding 10,502,646 9,466,084 7,268,315
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement No.
333-36705 on Form S-3 and Registration Statements Nos. 33-49758, 33-85744 and
333-07541 on Form S-8 of Abaxis, Inc. of our report dated April 22, 1997, April
30, 1997 as to Note 10, October 24, 1997 as to Note 11 (which expresses an
unqualified opinion and includes an explanatory paragraph relating to the
restatement described in Note 11), appearing in this Annual Report on Form
10-K/A of Abaxis, Inc. for the year ended March 31, 1997.
DELOITTE & TOUCHE LLP
San Jose, California
October 24, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-3, No. 333-36705), the Registration Statement (Form S-8 No. 33-49758)
pertaining to the 1989 Stock Option Plan, the Outside Directors Stock Option
Plan and the Individual Written Compensation Agreement and the Registration
Statements (Form S-8 Nos. 33-85744 and 333-07541) pertaining to the 1989 Stock
Option Plan of our report dated April 21, 1995, with respect to the financial
statements of Abaxis, Inc. included in this Annual Report (Form 10-K/A) for the
year ended March 31, 1997.
ERNST & YOUNG LLP
San Jose, California
October 27, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed statement of operations and condensed balance sheet and is qualified
in its entirety to such Company's yearly report on form 10K for the year ended
March 31, 1997.
</LEGEND>
<RESTATED>
<CIK> 0000881890
<NAME> ABAXIS INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,436,000
<SECURITIES> 3,885,000
<RECEIVABLES> 1,830,000
<ALLOWANCES> (61,000)
<INVENTORY> 2,218,000
<CURRENT-ASSETS> 9,444,000
<PP&E> 6,756,000
<DEPRECIATION> (4,303,000)
<TOTAL-ASSETS> 11,977,000
<CURRENT-LIABILITIES> 2,619,000
<BONDS> 0
0
0
<COMMON> 59,783,000
<OTHER-SE> (50,425,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,977,000
<SALES> 7,294,000
<TOTAL-REVENUES> 7,294,000
<CGS> 7,661,000
<TOTAL-COSTS> 7,661,000
<OTHER-EXPENSES> 6,182,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (6,189,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,189,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,189,000)
<EPS-PRIMARY> (0.72)
<EPS-DILUTED> (0.72)
</TABLE>
