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Rule 424(b)(2)
Registration Statement 333-36705
2,410,866 SHARES
ABAXIS, INC.
COMMON STOCK
The 2,410,866 shares (the "Shares") of Common Stock of Abaxis, Inc., a
California corporation ("Abaxis" or the "Company") offered by this Prospectus
consist of (i) up to 2,353,922 shares of Common Stock of Abaxis that will be
issued in connection with the conversion of shares of the Company's Series B
Convertible Preferred Stock (the "Series B Shares") issued pursuant to that
certain Securities Purchase Agreement dated as of July 18, 1997 by and among the
Company and certain of the Selling Shareholders (as defined below) (the
"Financing"); (ii) 22,120 shares of Common Stock of Abaxis that have been issued
in exchange for certain financial consulting services in connection with the
Financing (the "Consultant's Shares"); and (iii) 34,824 shares of Common Stock
of Abaxis that have been issued in exchange for certain investment relations and
other services (the "IR Shares"). The Shares may be sold from time to time by or
on behalf of certain holders of Series B Shares, the Consultant's Shares or the
IR Shares (collectively, the "Selling Shareholders") who are described in this
Prospectus under "Selling Shareholders." As part of the Financing, the Company
has agreed to register the Shares under the Securities Act of 1933, as amended
(the "Securities Act"). The Company has also agreed to use its best efforts to
cause the registration statement covering the Shares to remain effective until
the earlier of (i) the date on which the Selling Shareholders can sell all the
Shares pursuant to Rule 144 of the Securities Act (without limitation as to
volume), or (ii) when all the Shares have been resold pursuant to Rule 144 or an
effective registration statement. The Company will not receive any of the
proceeds from the sale of the Shares by the Selling Shareholders. See "Use of
Proceeds."
The Company has been advised by the Selling Shareholders that they or
their respective pledgees, donees, transferees or other successors in interest
intend to sell all or a portion of the Shares from time to time on The Nasdaq
National Market, in privately negotiated transactions through the writing of
options on the Shares, short sales or any combination thereof, and on terms and
at prices then obtainable. The Selling Shareholders and any broker-dealers,
agents or underwriters that participate with the Selling Shareholders in the
distribution of any of the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commission received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The Company has
agreed to indemnify in certain circumstances the Selling Shareholders against
certain liabilities, including liabilities under the Securities Act. The Selling
Shareholders have agreed to indemnify in certain circumstances the Company
against certain liabilities, including liabilities under the Securities Act. See
"Plan of Distribution."
The Company will bear all out-of-pocket expenses incurred in connection
with the registration of the Shares, including, without limitation, all
registration and filing fees imposed by the Securities and Exchange Commission
(the "Commission"), the National Association of Securities Dealers ("NASD") and
blue sky laws, printing expenses, transfer agents' and registrars' fees, and the
reasonable fees and disbursements of the Company's outside counsel and
independent accountants and a single counsel for all of the Selling
Shareholders, but excluding underwriting discounts and commissions and transfer
or other taxes and other costs and expenses incident to the offering and sale of
the shares to the public which shall be borne by the Selling Shareholders.
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS
OF ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR
DEALERS EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF
THE SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS
OCCUR, OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
The Company's Common Stock is quoted on The Nasdaq National Market. On
October 29, 1997, the last sales price of the Company's Common Stock as reported
on The Nasdaq National Market was $3.375.
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SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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The date of this Prospectus is October 30, 1997
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. Abaxis' Common
Stock is traded on The Nasdaq National Market. Such reports and other
information may also be inspected without charge at a Web site maintained by the
Commission. The address of the site is http:\\www.sec.gov. Reports and other
information concerning Abaxis can also be inspected at the offices of the
National Association of Securities Dealers, Inc., Market Listing Section, 1735 K
Street, N.W., Washington, D.C. 20006.
The Company has also filed with the Commission a Registration Statement
on Form S-3 (together with all amendments and exhibits thereto, the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is made to the Registration
Statement, copies of which may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
1. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed on December 11,
1991;
2. Annual Report on Form 10-K for the fiscal year ended March 31, 1997;
and
3. Annual Report on Form 10-K/A for the fiscal year ended March 31,
1997 filed on October 28, 1997.
4. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1997.
5. Quarterly Report on Form 10-Q/A for the fiscal quarter ended
September 30, 1996 filed on October 28, 1997.
6. Quarterly Report on Form 10-Q/A for the fiscal quarter ended
December 31, 1996 filed on October 28, 1997.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents or reports. Any statement contained in a document incorporated
by reference or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus. The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the foregoing documents incorporated by reference in this Prospectus (other than
any exhibits thereto). Requests for such documents should be directed to Abaxis,
Inc. at 1320 Chesapeake Terrace, Sunnyvale, California 94089 (telephone number
(408) 734-0200).
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THE COMPANY
This prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Exchange Act of 1933 that reflects the
Company's current view with respect to future events and financial performance.
The future events described in these statements involve risks and
uncertainties, among them risks and uncertainties related to the market
acceptance of its products and continuing development of its products,
including required FDA clearance and other government approvals, risks
associated with manufacturing and distributing its products on a commercial
scale, including complying with Federal and State food and drug regulations,
general market conditions and competition. When used in this report, the words
"anticipates", "believes", "expects", "intends", "plans", "future", and similar
expressions identify forward-looking statements. Actual results could differ
materially from those projected in the forward-looking statements as a result of
factors set forth throughout this document.
Abaxis, Inc. (the "Company") develops, manufactures and markets
portable blood analysis systems for use in any patient-care setting to provide
clinicians with rapid blood constituent measurements. The Company's products
consist of a compact 6.9 kilogram analyzer and a series of single-use plastic
disks called reagent disks that contain all the chemicals required to perform a
panel of up to 12 tests. The system can be operated with minimal training and
performs multiple routine tests on whole blood, serum or plasma using either
venous or fingerstick samples. The system provides test results in less than 15
minutes with the precision and accuracy equivalent to a clinical laboratory
analyzer. The Company currently markets this system for veterinary use under
the name VetScan(R) and in the human medical market under the name Piccolo(R).
The Company offers its point-of-care blood analyzer system with a total
of 18 test methods. The Company's repertoire of test methods includes albumin,
amylase, alkaline phosphates (ALP), alanine aminotransferase (ALT), asparatate
aminotransferase (AST), direct bilirubin, calcium, creatinine, creatine kinase
(CK), glucose, glutamyl transferase (GGT), potassium, total bilirubin, total
cholesterol, urea nitrogen (BUN), total protein, uric acid, and thyroxine (T4).
Thirteen of these tests are marketed for both human and veterinary markets,
while two tests, uric acid and direct bilirubin, are marketed only in the human
market, and three tests, CK, T4 and potassium, are marketed exclusively in the
veterinary market. The Company markets its reagent products by configuring
these 18 test methods in panels that are designed to meet a variety of clinical
diagnostic needs. The Company currently offers seven multi-test reagent disc
products in the human market and six reagent disks in the veterinary market.
During fiscal 1997 and the first quarter of fiscal 1998 the Company
continued to be expand its presence in the US veterinary market. Through June
30, 1997, the Company had installed a total of 827 VetScan systems in the US, a
136% increase from its installed base of 350 systems on March 31, 1996. The
addition of two national institutional customers, Veterinary Centers of America
("VCA") and VetSmart, contributed significantly to the Company's new system
placements. Both customers purchased the Company's VetScan systems to replace
systems from the Company's competitors. The Company began selling its VetScan
systems to VCA hospitals in September 1996 and through June 1997, a total of 89
systems were installed in a number of VCA's 155 free-standing animal hospitals.
In March 1997, the Company signed an agreement with VetSmart, to provide 105
VetScan analyzers and 80,000 reagent disks for use in VetSmart pet hospitals for
a twelve month period. Through June 1997, the Company has installed 93 VetScan
systems in VetSmart pet clinics located in PetSmart stores nationwide.
Internationally, in July 1997, the Company's VetScan system received regulatory
approval from the Japanese Ministry of Agriculture, Forestry and Fishery
(Noguisho) permitting sales and distribution to the veterinary market throughout
Japan. In addition to 59 VetScan units shipped to Japan during the first quarter
of fiscal 1998, the Company's Japanese distributor has ordered approximately 100
VetScan systems and 8,000 reagent discs for shipment during the second and third
quarters of fiscal 1998.
The Company has targeted branches of the US military as potential
customers for the Company's Piccolo Point-of-Care Blood Analyzer based on the
features of the Piccolo systems and the special requirements of the military
environment. The Company has been involved in rigorous studies with the US Navy
since 1995, evaluating the feasibility and clinical utility of the Piccolo
systems in the often rugged environment encountered by the Navy. In March 1997,
the Company announced that it had been awarded a contract with a potential
contract value of up to $7.5 million to provide the US Navy and the Marine
Corps its Piccolo Point-of-Care Blood Analyzer and reagent disc products. The
contract calls for a maximum order of approximately 345 Piccolo systems and
250,000 reagent discs. Through June 1997, the Company has shipped 85 Piccolo
analyzers under this contract and with another 30 analyzers on backlog. There
can be no assurance that the Company will receive orders for the maximum order
quantity under the conditions of the contract.
During August 1997, the Company received an order from Mexicano del
Sacuro Social for the purchase of 38 Piccolo systems to be used by Projecto
Solidaridad, a network of more than 6,000 rural health clinics throughout
Mexico. The Mexican diagnostic market is estimated at $285 million, with an
annual growth rate of about 4 percent. The majority of this market is funded
through government spending which supports healthcare delivery in hospitals and
rural clinics. This opportunity represents one of the key market segments that
the Piccolo system was designed to address. The systems are scheduled for
shipment during the second quarter of fiscal 1998.
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The Company believes that its current menu of 15 reagent test methods
for it's Piccolo systems are suitable for certain niche human market segments,
such as the military, but not broad enough to fulfill the diagnostic needs of
physician's office practices. One of the key factors to the Company's future
success depends on the Company's ability to identify and develop new test
methods that will allow the Company to penetrate the human diagnostic market.
During fiscal 1997, the Company received 510(k) clearance from the Food and
Drug Administration ("FDA") for its GGT test. Completion of GGT allowed the
Company to release the Liver Panel Plus reagent disc product in October 1996,
which is currently being sold to the US Navy.
The Company continues to develop new products that will provide further
opportunities for market penetration. The Company currently is in development
of four electrolyte test methods: bicarbonate, chloride, potassium and sodium.
The Company intends to develop these tests into marketable products for both
the human and the veterinary markets. For the human market, the Company plans
on incorporating these tests into new panels consistent with the codes in the
1998 version of the Current Procedures Terminology manual published by the
American Medical Association. The fixed-test panels are: electrolytes,
comprehensive metabolic, hepatic function and basic metabolic. The Company has
all the tests for the hepatic function panel, and will have all required tests
for the additional three panels with the successful development of the four
electrolyte tests.
In June 1997, the Company introduced to the market a new reagent disc
product, especially designed for the veterinary market, the Equine Profile. The
test methods contained in the Equine Profile are useful for providing
indications of the health condition of horses, particularly in the areas of
hepatic dysfunction and muscle damage. This new product enables the Company to
offer the VetScan system to approximately 11,000 equine practitioners in the
United States where portability and ease-of-use are important features. The
Company completed development of a new test method, creatine kinase (CK) during
fiscal 1997 which allowed for completion of the Equine Profile product. This
method will be entered into clinical trials during fiscal 1998 for inclusion in
new reagent disc products for the human medical market.
While the Company believes that its technology will allow it to develop
reagent disc products in the future to provide a variety of additional blood
tests, there can be no assurances that such future products will be developed,
that such products will receive required regulatory clearance, or that the
Company will be able to manufacture or market such products successfully.
In addition to investing its own resources in expanding the test menu,
the Company signed a letter of intent with Teramecs Co., Ltd. and Daiichi Pure
Chemicals Co., Ltd. in April 1997 to jointly develop additional test methods
for use on the Piccolo analyzer. The product development collaboration will
focus on commercializing targeted methods for lipids, proteins, and enzymes.
The Company is currently negotiating terms of the definitive agreement. There
can be no assurances that the Company will be able to conclude this development
agreement with terms to its satisfaction, or that the conclusion of the
definitive agreement will allow the Company to develop these new test methods,
or if the test methods were developed, be able to successfully market these
methods.
The principal executive offices of Abaxis are located at 1320
Chesapeake Terrace, Sunnyvale, California 94089, and its telephone number at
that location is (408) 734-0200.
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RISK FACTORS
This prospectus contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 that reflect the Company's current
view with respect to future events and financial performance. The future events
described in these statements involve risks and uncertainties, among them risks
and uncertainties related to the market acceptance of its products and
continuing development of its products, including required FDA clearance and
other government approvals, risks associated with manufacturing and distributing
its products on a commercial scale, including complying with Federal and State
food and drug regulations, general market conditions and competition. When used
in this report, the words "anticipates", "believes", "expects", "intends",
"plans", "future", and similar expressions identify forward-looking statements.
Actual results could differ materially from those projected in the
forward-looking statements as a result of factors set forth throughout this
document.
An investment in the shares being offered by this Prospectus involves a
high degree of risk and should not be made by any investor who cannot afford the
loss of the entire investment. In addition to the other information in this
Prospectus, the following risk factors should be considered carefully in
evaluating an investment in the shares offered hereby:
FLUCTUATIONS IN OPERATING RESULTS; HISTORY OF LOSSES; UNCERTAINTY OF
FUTURE PROFITABILITY
As of June 30, 1997, Abaxis had incurred cumulative net losses of
approximately $50.4 million. The Company expects its operating losses may
continue for the foreseeable future. The Company's ability to achieve
profitability will depend in part on effectively and significantly increasing
its marketing and manufacturing activities to facilitate the increase in sales
volume of its Piccolo and VetScan products necessary to absorb the related
costs. There can be no assurance that any of the Company's products will be
manufactured or marketed successfully, or that sales volume sufficient to
achieve profitability will be realized.
Sales for any future periods are not predictable with a significant
degree of certainty. A significant portion of the Company's sales in any quarter
are typically derived from sales to a limited number of customers. Accordingly,
sales in any one quarter are not indicative of sales in any future period. In
addition, the Company generally operates with limited order backlog because its
products typically are shipped shortly after orders are received. As a result,
product sales in any quarter are generally dependent on orders booked and
shipped in that quarter. The Company's expense levels, which are to a large
extent fixed, are based in part on its expectations as to future revenues. The
Company may be unable to adjust spending in a timely manner to compensate for
any unexpected revenue shortfall. As a result, any such shortfall would have an
immediate materially adverse impact on the Company's operating results and
financial condition. In addition, until sales volume of the Company's products,
particularly its reagent discs, increase significantly so as to offset
associated fixed costs and to realize certain manufacturing economies of scale,
sales of the Company's products could result in further losses and adversely
affect the Company's results of operations and financial condition. The Company
believes that period to period comparisons of its results of operations are not
necessarily meaningful.
The Company's periodic operating results have in the past varied and in
the future may vary significantly depending on, but not limited to a number of
factors, including the level of competition; the size and timing of sales
orders; market acceptance of the current and new products; new product
announcements by the Company or its competitors; changes in pricing by the
Company or its competitors, the ability of the Company to develop, introduce and
market new products on a timely basis; component costs and supply constraints;
manufacturing capacities and the ability to scale up production; the mix of
product sales between the analyzers and the reagent disks; mix in sales
channels; levels of expenditures on research and development; changes in Company
strategy; personnel changes; regulatory changes; and general economic trends.
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FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company anticipates that its existing capital resources, equipment
financing loan and anticipated revenue from the sales of its products will be
adequate to satisfy its currently planned operating and financial requirements
through fiscal 1998. The Company's future capital requirements will largely
depend on the increased market acceptance of its Point-of-Care Blood Analyzer
products. In addition, the Company expects to incur substantial additional costs
to support its future operations, including further commercialization of its
products and development of new test methods to allow the Company to further
penetrate the human diagnostic market; acquisition of capital equipment for the
Company's manufacturing facilities, which includes the ongoing development and
implementation of an automated manufacturing line to provide capacity for
commercial volumes; costs related to continuing development of its current and
future products; and additional pre-clinical testing and clinical trials for its
current and future products. The Company is also currently contracting with a
vendor to build an automated disc assembly line to provide anticipated capacity
for future demand and to improve production efficiency. To the extent that
existing resources and anticipated revenue from the sale of the Piccolo and
VetScan systems are insufficient to fund the Company's activities, additional
funds will be required to be raised from the issuance of public or private
securities. There can be no assurance that additional funding will be available,
or, if available, that it will be available on acceptable terms. If additional
funds are raised by issuing equity securities, further dilution to then-existing
shareholders may result. If adequate funds are not available, the Company may be
required to curtail its operations significantly. The Company may also be
required to obtain funds through arrangements with collaborative partners or
others that may require the Company to relinquish rights to certain of its
technologies, products or marketing territories.
LIMITED MARKETING AND DISTRIBUTION EXPERIENCE AND RESOURCES
The Company has been marketing its VetScan Systems products for
approximately three years and has only recently begun marketing its Piccolo
System products. Accordingly, the Company has very limited marketing and
distribution experience. Further, the Company has limited resources to devote to
marketing and distribution, including building a sales and marketing
organization or establishing an extensive distribution network. There can be no
assurance that the Company can build a successful sales and marketing
organization, establish effective distribution arrangements, that such
arrangements will be successful in marketing Abaxis products, or that the costs
associated with marketing and distribution will not be excessive. Although the
Company has established some international distributors, it has limited
experience and resources in marketing and distributing its products in
international markets. There can be no assurance that the Company will be
successful in marketing the Piccolo System and VetScan System products
internationally.
PRODUCTS UNDER DEVELOPMENT
Abaxis has developed a blood analysis system which consists of a
portable blood analyzer and menu-specific single-use reagent discs. The Company
believes that it is necessary to develop a series of reagent discs with various
tests for use with the Piccolo and VetScan systems. There can be no assurance
that the Company will be able to develop any of these potential products on a
timely basis, that the Company will be able to obtain regulatory clearance for
discs containing additional tests, or that any products, if and when approved,
can be successfully manufactured or marketed. Failure to meet one or more of
these challenges will have a material adverse effect on the Company.
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RELIANCE ON DISTRIBUTION RELATIONSHIPS
Abaxis has entered into an agreement with Vedco that grants Vedco the
right to distribute the Company's VetScan products in the United States, subject
to certain terms and conditions. Abaxis may terminate this agreement if Vedco
fails to achieve minimum annual sales objectives. Either party may terminate the
agreement with 30 days prior notice. The Company is relying on Vedco to devote
financial and other resources to market and distribute the Company's products.
Although the Company believes that Vedco is economically motivated to market and
distribute the Company's products in an effective manner, there can be no
assurance that Vedco will continue to devote the necessary resources to be
successful in its efforts to commercialize the Company's products.
Abaxis has granted exclusive distribution rights for the Piccolo and
VetScan products in Japan to Teramecs Co., Ltd. ("Teramecs"). In addition, the
Company currently has exclusive distribution agreements in the following
countries: Argentina, Australia, Austria, France, Germany, Greece, Hong Kong,
Italy, Korea, Mexico, New Zealand, Norway, Portugal and the United Kingdom.
There can be no assurance that any of the Company's distributors will be
successful in obtaining proper approvals for Abaxis' products in their
respective countries or that these distributors will be successful in marketing
Abaxis' products. The Company plans to enter into additional distribution
agreements to enhance its international distribution base and solidify its
international presence. There can be no assurance that the Company will be
successful in entering into any additional distributor agreements.
There can be no assurance that any of its current or future
distribution agreements will not be terminated or that, if terminated, the
Company will be able to negotiate acceptable alternative distribution
relationships.
LIMITED MANUFACTURING CAPACITY; DEPENDENCE ON SOURCES OF SUPPLY
At present, the Company's manufacturing operations are relatively
limited in capacity. The Company will need to significantly expand these
operations to achieve profitable production levels. In addition, the Company
will need to continue to develop the infrastructure necessary to manage its
manufacturing operations. The manufacture of sufficient quantities of the
Company's products can be an expensive, time-consuming and complex process.
There can be no assurance that the Company will be successful in adding
technical and non-technical personnel as needed to meet the additional staffing
requirements. In addition, there can be no assurance that the Company will be
successful in its engineering efforts to effectively automate its processes on
a larger manufacturing scale. Further, all aspects of such scale-up must comply
with applicable governmental regulations. There can be no assurance that
significant problems or delays will not arise in such scale-up. If the Company
is unable to develop such manufacturing capabilities with appropriate quality,
at acceptable costs and on a timely basis, the business or financial condition
of the Company could be materially adversely affected.
Several components used in the Company's products are currently
available from limited or sole sources and the Company relies on a single
contract manufacturer to assemble its analyzers. The molded plastic disks which,
when loaded with reagents and welded together, form the Company's reagent
discs, are currently manufactured to the required very narrow tolerances by an
established injection molding manufacturer. The Company believes only a few
manufacturers are capable of manufacturing to such tolerances and, to date, only
one manufacturer has been qualified by the Company to manufacture the disks. The
Company is also currently dependent on single source vendors for some of the
chemicals which are used to produce the dry reagent chemistry beads. Further,
the Company's analyzer products use several technologically advanced components
that are available only from single source vendors. An interruption of the
Company's current supply or assembly arrangements would adversely impact the
Company's ability to produce commercial quantities of its products and
materially affect the business or financial condition of the Company.
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COMPETITION
Abaxis' competition includes clinical laboratories, hospitals and
independent laboratories and manufacturers of bench top multi-test analyzers and
other near-patient test systems. Blood analysis is a well established field in
which there are a number of competitors which have substantially greater
financial resources and larger, more established marketing, sales and service
organizations than the Company. In addition, rapid technological developments
are expected to continue in the health care and diagnostic testing device
industry. No assurance can be given that the Company's products will be
competitive with existing or future products or services of such competitors or
that the Company will be able to keep pace with technological developments.
Historically, most human medical testing has been performed in the
hospital or commercial laboratory setting and most veterinary medical testing
has been performed in the commercial laboratory setting. Clinical laboratories
have traditionally been effective at processing large panels of tests using
skilled technicians and complex equipment. The Company's products compete with
the clinical laboratories with respect to range of tests offered, the immediacy
of results and cost effectiveness. While Abaxis cannot provide the same range of
tests, the Company believes that its products will provide a sufficient breadth
of test menus to compete successfully with clinical laboratories on the basis of
immediacy of results and cost effectiveness in certain limited markets. The
Company's products compete with products in the marketplace with respect to
ease-of-use, the ability to conduct tests without a skilled technician, the
ability to conduct multiple test panels, breadth of tests, built-in calibration
and quality control, cost effectiveness and quality of results.
The Company's primary competitors in the human medical testing market
include a limited number of instrument and reagent providers, including Johnson
& Johnson, and centralized laboratories. The Company's primary competitors in
the veterinary medical testing market are a limited number of instrument
providers, including Idexx Laboratories, Inc., and centralized laboratories.
Most of the Company's current and potential competitors have significantly
greater financial and other resources than Abaxis, and the Company expects the
competition will be intense. In particular, most of these competitors have large
sales forces and well-developed channels of distribution. To compete, the
Company must develop effective channels of distribution and a focused direct
sales force. There is no assurance that the Company will be able to compete
successfully.
POTENTIAL IMPACT OF MEDICARE REIMBURSEMENT REGULATIONS
Third party payors can indirectly affect the pricing or the relative
attractiveness of the Company's human testing products by regulating the maximum
amount of reimbursement they will provide for blood testing services. For
example, the reimbursement of fees for blood testing services for Medicare
beneficiaries is set by the Health Care Financing Administration ("HCFA"). If
the reimbursement amounts for blood testing services are decreased in the
future, it may decrease the amount which physicians and hospitals are able to
charge patients for such services and consequently the price the Company can
charge for its products. If adequate coverage and reimbursement levels are not
provided by government and third-party payors for use of the Company's products,
the market acceptance of those products would be adversely affected.
GOVERNMENT REGULATION: NEED FOR FDA MARKETING CLEARANCE; COMPLIANCE WITH GMP
GUIDELINES; APPLICATION OF CLIA REGULATIONS
Abaxis' Piccolo products are regulated under the 1976 Medical Device
Amendments to the Food, Drug and Cosmetic Act (the "Amendment"). The Company's
initial Piccolo products are Class II devices requiring the submission of a
510(k) FDA pre-market notification to substantiate label claims prior to
marketing. In its submission, the Company must, among other things, establish
that the product to be marketed is "substantially equivalent" to a product that
was on the market prior to the Amendment or to a product that has previously
been cleared under the 510(k) process. The typical process for clearance of a
510(k) notification can be three months to over a year and the FDA must issue a
written order finding substantial equivalence. To date, Abaxis has received
market clearance for its portable blood analyzer and 16 test methods from the
FDA. Abaxis is currently and plans to continue developing additional tests that
will be required to be cleared through the FDA. There can be no assurance that
Abaxis will receive marketing clearance for any of its future products.
9
<PAGE> 9
The Amendment also requires the Company to manufacture its Piccolo
products in accordance with GMP guidelines, using facilities registered to
manufacture the Company's products that are subject to periodic FDA audit. In
addition, the use of the Company's products may be regulated by various state
agencies. For example, the Company has obtained a license from the State of
California to manufacture its products. In September 1996, the FDA granted the
Company's manufacturing facility "in compliance" status, according to the
regulations for Good Manufacturing Practices ("GMP") for medical devices. The
Company is scheduled for inspection by the FDA and the State of California on a
routine basis, typically once every 24 months. There can be no assurance that
the Company can successfully pass a re-inspection by the FDA or the State of
California or any other future inspections. There can be no assurances that the
Company can comply with all current or future government manufacturing
requirements and regulations.
Abaxis' Piccolo products are affected by the Clinical Laboratory
Improvement Amendments of 1988 ("CLIA"), which is intended to insure the quality
and reliability of all medical testing in the United States regardless of where
tests are performed. Under the current CLIA regulations, laboratory tests are
divided into three categories: "simple," "moderately complex" and "highly
complex." Piccolo products are in the "moderately complex" category, which
requires that any location in which testing is performed be certified as a
laboratory. Initial certification would require the laboratory to obtain a
registration certificate from HCFA, which certificate would be issued if the
laboratory (1) agrees to notify HCFA within 30 days of any change in its
ownership, name or location, (2) agrees to treat proficiency testing samples in
the same manner as patient specimens and (3) remits the registration fee. Within
two years of registration certificate issuance, laboratories would be inspected
to determine compliance with the CLIA requirements. The CLIA regulations require
laboratories to meet specified standards in the areas of personnel
qualification, administration, participation in proficiency testing, patient
test management, quality control/assurance, laboratory information systems and
inspections. There can be no assurance that CLIA regulations will not have a
material adverse impact on the Company and its ability to market and sell its
products.
In July 1996, the Company filed an application to the Center for
Disease Control ("CDC") for its Piccolo systems to be waived from the CLIA
regulations. If granted, users of the product can then avoid many of the burdens
imposed on users of moderately complex tests. To have the Piccolo placed in the
waived category, the Company must conduct field studies at three non-laboratory
sites using at least 20 operators each who have no medical laboratory training
and can operate the Piccolo system with directions that require no more than
seventh grade reading skills. The Company met with the CDC in February 1997 to
review its application. CDC has requested more detailed performance data, which
the Company is in the process of collecting. To date, only a few companies have
received waived category status for their tests and approval time from CDC
appears to be over a year or two. Although the review process for a CLIA license
application could potentially be very lengthy and costly, the Company believes
that its Piccolo products fulfill all requirements for obtaining a waived
status. There can be no assurance that the Company will be able to obtain a
waived status for its Piccolo systems, or that if such waived status was
granted, it will enhance the Company's ability to place Piccolo systems.
Federal and state regulations regarding the manufacture and sale of
health care products and diagnostic devices are subject to future change. The
Company cannot predict what material impact, if any, such changes might have on
its business. In addition, the introduction of the Company's products in
international markets might require obtaining foreign regulatory clearances.
There can be no assurance that the Company will be able to obtain regulatory
clearances for its products in the United States or in foreign markets.
Although Abaxis believes that it will be able to comply with all
applicable regulations of the FDA and of the State of California, including GMP
guidelines, current regulations depend on administrative interpretations, and
there can be no assurance that future interpretations made by the FDA, HCFA, CDC
or other regulatory bodies, with possible retroactive effect, will not adversely
affect the Company.
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<PAGE> 10
UNCERTAINTY OF PROTECTION OF PATENTS AND PROPRIETARY TECHNOLOGY
As of September 29, 1997, the Company had filed 25 patent applications
in the United States and had been issued 17 patents. Additionally, the Company
has filed several international patent applications covering the subject matter
of its domestic applications. The patent position of any medical device
manufacturer, including Abaxis, is uncertain and may involve complex legal and
factual issues. Consequently, even though Abaxis is currently prosecuting its
patent applications in the United States and has filed international patent
applications, there can be no assurance that any of the Company's applications
will result in the issuance of any further patents, or that any patents issued
will provide significant proprietary protection or will not be circumvented or
invalidated. Since United States patent applications are maintained in secrecy
until patents are issued, and since publications of discoveries in the
scientific or patent literature tend to lag behind actual discoveries by several
months, Abaxis cannot be certain that it was the first creator of inventions
covered by its issued patents or pending patent applications or that it was the
first to file patent applications for such inventions. There can be no assurance
that if issued the patents will offer protection against competitors with
similar technology, nor can there be any assurance that others will not obtain
patents that the Company would need to license or circumvent. Moreover, the
Company may have to participate in interference proceedings declared by the U.S.
Patent and Trademark Office to determine the priority of inventions, which could
result in substantial cost to the Company.
The Company also relies upon copyright, trademarks and unpatented trade
secrets, and no assurance can be given that others will not independently
develop substantially equivalent proprietary information and techniques or
otherwise gain access to the Company's trade secrets or disclose such
technology.
NEED TO RETAIN AND ATTRACT KEY EMPLOYEES
The Company is highly dependent on the principal members of its
management and scientific staff, the loss of whose services might impede the
achievement of the Company's business objectives. The Company currently
maintains no key man life insurance. Furthermore, recruiting and retaining
additional qualified marketing, sales and manufacturing personnel will be
critical to the Company's success. Although the Company believes that it will be
successful both in retaining its management and scientific staff and attracting
and retaining skilled and experienced marketing, sales and manufacturing
personnel, there can be no assurance that such personnel may be employed on
acceptable terms, given the competition among numerous medical products and
other high technology companies for such experienced individuals.
RISK OF PRODUCT LIABILITY EXPOSURE; AVAILABILITY OF INSURANCE
Testing, manufacturing and marketing of the Company's products will
entail risk of product liability. The Company's business exposes it to potential
product liability risks which are inherent in the testing, manufacturing and
marketing of human medical products. The Company currently maintains product
liability insurance which it considers adequate for its needs, taking into
account the risks involved and cost of coverage. There can be no assurance,
however, that such coverage is in amounts sufficient to cover potential
liabilities, that the Company will continue to maintain such coverage or that
such coverage will be available on commercially reasonable terms, if at all. In
addition, a product liability claim or recall could have a material adverse
effect on the business or financial condition of Abaxis.
ENVIRONMENTAL MATTERS
Due to the nature of its current and proposed manufacturing processes,
the Company is subject to stringent federal, state and local laws, rules,
regulations and policies governing the use, generation, manufacture, storage,
air emission, effluent discharge, handling and disposal of certain materials and
wastes. In particular, the Company is subject to laws, rules and regulations
governing the handling and disposal of blood samples used in the development and
testing of its products. Although the Company believes that it has complied with
these laws and regulations in all material respects and has not been required to
take any action to correct any noncompliance, there can be no assurance that
Abaxis will not be required to incur significant costs to comply with
environmental regulations as manufacturing is increased to commercial levels,
nor that the operations, business or assets of the
11
<PAGE> 11
Company will not be materially and adversely affected by current or future
environmental laws, rules, regulations and policies.
VOLATILITY OF STOCK PRICE
The market price of the Company's Common Stock, like the securities of
many other medical products companies, has fluctuated over a wide range and the
market price of the shares of Common Stock is likely to be highly volatile in
the future. Factors such as fluctuation in the Company's operating results,
announcements of technological innovations or new commercial products by the
Company or its competitors, governmental regulation, prospects and proposals for
health care reform and controls on prices that may be paid for the Company's
potential products, developments or disputes concerning patent or other
proprietary rights, public concern as to the safety of devices developed by the
Company or its competitors, and general market conditions may have a significant
effect on the market price of the Common Stock.
ANTI-TAKEOVER EFFECT OF PREFERRED STOCK
The Board of Directors, without shareholder approval, can from time to
time cause the Company to issue Preferred Stock that could adversely affect the
rights of the holders of Common Stock and could delay or prevent a change of
control of the Company or make removal of management more difficult. In
September 1996 and July 1997, the Company issued shares of Series A Preferred
Stock and Series B Convertible Preferred Stock, respectively, without approval
of its shareholders.
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends and does not anticipate
paying cash dividends in the foreseeable future.
POTENTIAL FOR DILUTION
As of October 30, 1997, 3,000 shares of the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock") were issued and
outstanding. Each share of the Series B Preferred Stock is convertible into such
number of shares of Common Stock as is determined by dividing the stated value
($1,000) of each share of Series B Preferred Stock (as such value is increased
by a premium based on the number of days the Series B Preferred Stock is held)
by the then current Conversion Price (which is determined by reference to the
then current market price). If converted on October 30, 1997, the Series B
Preferred Stock would have been convertible into approximately 1,105,991 shares
of Common Stock. Depending on market conditions at the time of conversion, the
number of shares issuable could prove to be significantly greater in the event
of a decrease in the trading price of the Common Stock. Purchasers of Common
Stock could therefore experience substantial dilution upon conversion of the
Series B Preferred Stock. The shares of Series B Preferred Stock are not
registered and may be sold only if registered under the Securities Act or sold
in accordance with an applicable exemption from registration, such as Rule 144.
The shares of Common Stock into which the Series B Preferred Stock may be
converted are being registered pursuant to this Registration Statement.
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<PAGE> 12
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares
by the Selling Shareholders.
SELLING SHAREHOLDERS
The table below lists the Selling Shareholders, the number of shares of
Abaxis Common Stock which each owned as of October 30, 1997, the number of
Shares subject to sale pursuant to this Registration Statement, and the number
of the shares of Abaxis Common Stock which each would own assuming that such
number of Shares were offered and assuming the sale of all such Shares.
<TABLE>
<CAPTION>
Shares To Shares Owned
Shares Owned Be After Offering
Selling Stockholder(1) Before Offering Offered Such Shares
- ---------------------- --------------- --------- --------------
<S> <C> <C> <C>
RGC International Investors, LDC 1,569,281(2) 1,569,281(3) -
Advantage Fund Ltd. 784,641(2) 784,641(3) -
Per Erik Danielsen 32,000 32,000 -
Wharton Capital Partners, Ltd. 22,120 22,120 -
Coffin Communications Group 2,824 2,824 -
</TABLE>
- ---------------
(1) The persons named in the table have sole voting and investment power with
respect to all shares of Abaxis Common Stock shown as beneficially owned by
them, subject to community property laws, where applicable.
(2) Assumes the sale of all shares offered hereby.
(3) The number of shares set forth in the table represents an estimate of the
number of shares of Common Stock to be offered by the Selling Stockholder.
The actual number of shares of Common Stock issuable upon conversion of
Series B Preferred Stock is indeterminate, is subject to adjustment and
could be materially less or more than such estimated number depending on
factors which cannot be predicted by the Company at this time, including
among other factors, the future market price of the Common Stock. The
actual number of shares of Common Stock offered hereby, and included in the
Registration Statement of which this Prospectus is a part, includes such
additional number of shares of Common Stock as may be issued or issuable
upon conversion of the Series B Preferred Stock by reason of the floating
rate conversion price mechanism or other adjustment mechanisms described
therein, or by reason of any stock split, stock dividend or similar
transaction involving the Common Stock, in order to prevent dilution, in
accordance with Rule 416 under the Securities Act. Pursuant to the terms of
the Series B Preferred Stock, if the Series B Preferred Stock had been
actually converted on October 30, 1997 the conversion price would have
been $2.7125 (100% of the average of the closing bid prices of the Common
Stock for the five consecutive trading days immediately preceding such July
18, 1997) at which price the Series B Preferred Stock would have been
converted into approximately 1,105,991 shares of Common Stock. Pursuant to
the terms of the Series B Preferred Stock, the shares of Series B Preferred
Stock are convertible by any holder only to the extent that the number of
shares of Common Stock thereby issuable, together with the number of shares
of Common Stock owned by such holder and its affiliates (but not including
shares of Common Stock underlying unconverted shares of Series B Preferred
Stock) would not exceed 4.9% of the then outstanding Common Stock as
determined in accordance with Section 13(a) of the Exchange Act.
Accordingly, the number of shares of Common Stock set forth in the table
for this Selling Stockholder exceeds the number of shares of Common Stock
that this Selling Stockholder could own beneficially at any given time
through their ownership of the Series B Preferred Stock. In that regard,
beneficial ownership of this Selling Stockholder set forth in the table is
not determined in accordance with rule 13d-3 under the Exchange Act.
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<PAGE> 13
PLAN OF DISTRIBUTION
The Shares being offered by the Selling Stockholders or their
respective pledgees, donees, transferees or other successors in interest, will
be sold in one or more transactions (which may involve block transactions) on
the Nasdaq National Market or on such other market on which the Common Stock
may from time to time be trading, in privately-negotiated transactions, through
the writing of options on the Shares, short sales or any combination thereof.
The sale price to the public may be the market price prevailing at the time of
sale, a price related to such prevailing market price or such other price as
the Selling Stockholders determine from time to time. The Shares may also be
sold pursuant to Rule 144.
The Selling Stockholders or their respective pledgees, donees,
transferees or other successors in interest, may also sell the Shares directly
to market makers acting as principals and/or broker-dealers acting as agents
for themselves or their customers. Brokers acting as agents for the Selling
Stockholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that a
Selling Stockholder will attempt to sell shares of Common Stock in block
transactions to market makers or other purchasers at a price per share which
may be below the then market price. There can be no assurance that all or any
of the Shares offered hereby will be issued to, or sold by, the Selling
Stockholders. The Selling Stockholders and any brokers, dealers or agents, upon
effecting the sale of any of the Shares offered hereby, may be deemed
"underwriters" as that term is defined under the Securities Act or the Exchange
Act, or the rules and regulations thereunder.
The Selling Stockholders and any other persons participating in the
sale or distribution of the Shares will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of purchases and sales of any of the Shares by the Selling
Stockholders or any other such person. The foregoing may affect the
marketability of the Shares.
The Company has agreed to indemnify in certain circumstances the
Selling Shareholders, or their transferees or assignees, and the broker-dealers
who may be deemed to be the underwriters (if any) of the securities covered by
this Registration Statement against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments, the Selling Shareholders
or their respective pledgees, donees, transferees or other successors in
interest, may be required to make in respect thereof. The Selling Shareholders
have agreed to indemnify in certain circumstances the Company against certain
liabilities, including liabilities under the Securities Act.
The Company has agreed to use its best efforts to keep the Registration
Statement, of which this Prospectus constitutes a part, effective until the
earlier of (i) the date on which the Selling Shareholders can sell all the
Shares pursuant to Rule 144 of the Security Act (without regard to volume
limitations), or (ii) when all of the Shares have been resold pursuant to Rule
144 or an effective registration statement.
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<PAGE> 14
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
EXPERTS
The Company's financial statements as of March 31, 1997 and 1996 and
for the years then ended incorporated in this prospectus by reference from the
Company's Annual Report on Form 10-K for the year ended March 31, 1997 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The financial statements of Abaxis, Inc. for the year ended March 31,
1995 included in the Abaxis, Inc. Annual Report (Form 10-K) for the year ended
March 31, 1997, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report included therein and incorporated by reference
herein. Such financial statements are incorporated by reference herein in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
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<PAGE> 15
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING SHAREHOLDER OR BY ANY
UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED
SECURITIES TO WHICH IT RELATES, OR AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE
COMMON STOCK HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..........................3
Incorporation of Certain
Documents by Reference.......................3
The Company....................................4
Risk Factors...................................6
Use of Proceeds...............................15
Selling Shareholders..........................15
Plan of Distribution..........................16
Legal Matters.................................17
Experts.......................................17
</TABLE>
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2,410,866 SHARES
ABAXIS, INC.
COMMON STOCK
------------------
PROSPECTUS
------------------
October 30, 1997
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18
