<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-19720
ABAXIS, INC.
(Exact name of registrant as specified in its charter)
California 77-0213001
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization ) Identification No.)
1320 Chesapeake Terrace
Sunnyvale, California 94089
(Address of principal executive offices)
Telephone: (408) 734-0200
Indicate by check mark whether the registrant:
(1) has filed all reports
required to be filed by
Section 13 or 15(d)
Securities Exchange Act
of 1934 during the
preceding 12 months (or
for such shorter period
that the registrant was
required to file such
reports),
Yes X No
--------- ---------
and
(2) has been subject to such
filing requirements for
the 90 days.
Yes X No
--------- ---------
At August 11, 1998, 13,882,980 shares of common stock, no par value,
were outstanding.
This Report on Form 10-Q consists of 13 pages. The exhibit index is on
page 12.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C> <C>
Facing Sheet............................................................................................... 1
Table of Contents.......................................................................................... 2
Part I. Financial Information
Item 1. Financial Statements:
Condensed Statements of Operations -
Three Months Ended June 30, 1998 and 1997........................................ 3
Condensed Balance Sheets - June 30, 1998 and March 31, 1998......................... 4
Condensed Statements of Cash Flows -
Three Months Ended June 30, 1998 and 1997....................................... 5
Notes to Condensed Financial Statements............................................. 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................................. 8
Part II. Other Information
Item 2. Changes in Securities............................................................... 11
Item 6. Exhibits and Reports on Form 8-K.................................................... 12
Signatures.......................................................................... 13
</TABLE>
2
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PART 1-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ABAXIS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1998 1997
------------ ------------
<S> <C> <C>
Revenues:
Product sales $ 3,059,000 $ 2,680,000
Development and licensing revenue 220,000 73,000
------------ ------------
Total revenues 3,279,000 2,753,000
------------ ------------
Costs and operating expenses:
Cost of product sales 2,598,000 2,595,000
Research and development 521,000 375,000
Selling, general, and administrative 1,253,000 1,216,000
------------ ------------
Total costs and operating expenses 4,372,000 4,186,000
------------ ------------
Loss from operations (1,093,000) (1,433,000)
Interest income, net 37,000 58,000
Other income (expense) -- (1,000)
------------ ------------
Net loss $ (1,056,000) $ (1,376,000)
============ ============
Basic and diluted loss per share (a) $ (0.08) $ (0.12)
------------ ------------
============ ============
Common stock used in computing basic and
diluted per share amounts 13,466,268 11,886,153
============ ============
</TABLE>
(a) Loss attributable to common shareholders used in computation of loss per
share for the three months ended June 30, 1998 and June 30, 1997 was
$(1,067,000) and $(1,376,000), respectively.
See Note 3 of Notes to condensed financial statements.
See notes to condensed financial statements.
3
<PAGE> 4
ABAXIS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1998 MARCH 31, 1998
------------ ------------
(unaudited) (Note 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,230,000 $ 1,701,000
Short-term investments 2,344,000 4,196,000
Trade and other receivables 2,173,000 1,930,000
Interest receivable 35,000 130,000
Inventories 1,796,000 1,531,000
Prepaid expenses 125,000 150,000
------------ ------------
Total current assets 7,703,000 9,638,000
Property and equipment - net 2,543,000 2,309,000
Deposits and other assets 79,000 85,000
------------ ------------
Total assets $ 10,325,000 $ 12,032,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,115,000 $ 1,510,000
Accrued payroll and related expenses 693,000 769,000
Other accrued liabilities 274,000 392,000
Warranty reserve 700,000 707,000
Deferred rent 68,000 68,000
Current portion of note payable 174,000 174,000
Deferred revenue 230,000 266,000
------------ ------------
Total current liabilities 3,254,000 3,886,000
------------ ------------
Note payable 222,000 263,000
Commitments and contingencies -- --
Shareholders' equity:
Convertible preferred stock, no par value: authorized shares -
5,000,000; issued and outstanding shares - none on June 30, 1998 and 2,623 on
March 31, 1998 . -- 2,429,000
Common stock, no par value: 35,000,000 authorized; issued
and outstanding shares - 13,881,572 on June 30, 1998
and 12,187,620 on March 31, 1998 63,574,000 61,112,000
Accumulated deficit (56,725,000) (55,658,000)
------------ ------------
Total shareholders' equity 6,849,000 7,883,000
------------ ------------
Total liabilities and shareholders' equity $ 10,325,000 $ 12,032,000
============ ============
</TABLE>
See notes to condensed financial statements.
Note 1 - Amounts are derived from audited financial statements.
4
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ABAXIS, INC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $(1,056,000) $(1,376,000)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 172,000 206,000
Common stock issued for services 9,000 --
Changes in assets and liabilities:
Trade and other receivables (243,000) 31,000
Interest receivable 95,000 36,000
Inventories (265,000) 623,000
Prepaid expenses 25,000 (7,000)
Deposits and other assets 6,000 (9,000)
Accounts payable (395,000) 253,000
Accrued payroll and related expenses (76,000) 31,000
Other accrued liabilities (125,000) 245,000
Deferred revenue (36,000) 8,000
----------- -----------
Net cash provided by (used in) operating activities (1,889,000) 41,000
----------- -----------
INVESTING ACTIVITIES:
Purchase of available-for-sale securities (1,474,000) (3,698,000)
Maturities of available-for-sale securities 3,326,000 3,000,000
Purchase of property and equipment (406,000) (168,000)
----------- -----------
Net cash provided by (used in) investing activities 1,446,000 (866,000)
----------- -----------
FINANCING ACTIVITIES :
Proceeds from equipment financing -- 600,000
Repayment of equipment financing (41,000) (50,000)
Proceeds from issuance of common stock 13,000 --
----------- -----------
Net cash provided by (used in) financing activities (28,000) 550,000
----------- -----------
Decrease in cash and cash equivalents (471,000) (275,000)
Cash and cash equivalents at beginning of period 1,701,000 1,436,000
----------- -----------
Cash and cash equivalents at end of period $ 1,230,000 $ 1,161,000
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 19,000 $ 9,000
=========== ===========
Noncash financing activities -
Conversion of preferred stock into common stock $ 2,440,000 $ --
=========== ===========
Accretion of preferred stock $ 11,000 $ --
=========== ===========
</TABLE>
See notes to condensed financial statements.
5
<PAGE> 6
ABAXIS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. These condensed financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report to Shareholders for the fiscal year ended March 31,
1998. The unaudited condensed financial statements included herein reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the
opinion of management, necessary to state fairly the results for the periods
presented. Certain amounts as presented in the March 31, 1998 financial
statements have been reclassified to conform to the fiscal year 1999 financial
statement presentation. The results for such periods are not necessarily
indicative of the results to be expected for the entire fiscal year ending March
31, 1999 or for any future period.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information", which establishes annual and interim
reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas, and major customers.
The Company has not yet determined its reporting segments. Adoption of this
statement will not impact the Company's financial position, results of
operations or cash flows, and any effect will be limited to the form and content
of its disclosures. The Company will adopt this statement in its financial
statements for the year ending March 31, 1999.
In June 1998 , the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities", (SFAS 133) which establishes accounting and reporting standards for
derivative instruments and for hedging activities. SFAS 133 requires that
entities recognize all derivatives as either assets or liabilities and measure
those instruments at fair value. Adoption of this statement is not expected to
have a material impact on the Company's financial position, results of
operations or cash flows. The Company will adopt SFAS 133 in its financial
statements in the first quarter of the fiscal year ending March 31, 2000.
3. PER SHARE INFORMATION
The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS 128) and has restated earnings per share (EPS) data
for prior periods to conform with current presentation.
SFAS 128 requires a dual presentation of basic and diluted EPS. Basic EPS
excludes dilution and is computed by dividing net income (loss) attributable to
common shareholders by the weighted average number of common shares outstanding
during the period. Diluted EPS reflects the potential dilution from securities
and other contracts, which are exercisable or convertible into common shares. As
a result of operating losses, there is no difference between the basic and
diluted calculations of EPS. Loss attributable to common shareholders includes
the accretion relating to the calculated imbedded yield representing the
discount on the assumed potential conversion of the preferred stock issued by
the Company.
6
<PAGE> 7
The reconciliation of net loss to net loss attributable to common shareholders
is as follows:
<TABLE>
<CAPTION>
Three months ended
June 30,
1998 1997
----------- -----------
<S> <C> <C>
Net loss $(1,056,000) $(1,376,000)
Value assigned to accretion of preferred stock (11,000) --
----------- -----------
Loss attributable to common shareholders $(1,067,000) $(1,376,000)
=========== ===========
</TABLE>
4. INVENTORY
Inventories are stated at the lower of cost (first-in, first-out) or market and
consist of the following:
<TABLE>
<CAPTION>
JUNE 30, 1998 MARCH 31, 1998
------------- --------------
<S> <C> <C>
Raw materials $ 957,000 $ 909,000
Work-in-process 485,000 261,000
Finished goods 354,000 361,000
---------- ----------
$1,796,000 $1,531,000
========== ==========
</TABLE>
5. EQUITY FINANCING
On July 18, 1997, RGC International Investors LDC and Advantage Fund Ltd., each
of which is an accredited investor as defined in Regulation D pursuant to the
Securities Act of 1933, as amended (the "Securities Act") to the best knowledge
of the Company, purchased from the Company 3,000 shares of Series B Convertible
Preferred Stock at a price per share of $1,000, with net proceeds to the Company
of approximately $2,732,000. The shares were sold in this private offering
transaction under Rule 506 and/or Section 4(2) of the Securities Act have not
been registered with the Securities and Exchange Commission and carry a
restrictive legend. The Series B Preferred Stock is convertible to the Company's
common stock. The Company filed a registration statement on Form S-3 on
September 29, 1997 to register the resale of the common stock issuable upon
conversion of the preferred stock. The registration was declared effective on
October 30, 1997. As of June 30, 1998, all shares of Series B Preferred Stock
were converted into a total of 1,903,502 shares of common stock.
6. COMPREHENSIVE INCOME
In the first quarter of fiscal year 1999, the Company adopted Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income", which
requires an enterprise to report, by major components and as a single total, the
change in net assets during the period from non-owner sources. For the three
months ended June 30, 1998 and 1997, comprehensive income was the same as net
income attributable to common shareholders.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
This Management's Discussion and Analysis of Financial Condition and Results of
Operations includes a number of forward-looking statements which reflect the
Company's current views with respect to future events and financial performance.
In this report, the words "anticipates", "believes", "expects", "future",
"intends", "plans", and similar expressions identify forward-looking statements
These forward-looking statements are subject to certain risks and uncertainties,
including but not limited to those discussed below, that could cause actual
results to differ materially from historical results or those anticipated. Such
risks and uncertainties include market acceptance of the Company's products and
continuing development of its products, including obtaining required Food and
Drug Administration ("FDA") clearance and other government approvals, risks
associated with manufacturing and distributing products on a commercial scale,
including complying with Federal and state food and drug regulations and general
market conditions and competition. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.
Abaxis 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 discs
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 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. The Company currently markets this system
for veterinary use under the name VetScan(R) and in the human market under the
name Piccolo(R).
During the quarter ended June 30, 1998, the Company shipped 198 point-of-care
blood chemistry analyzers and approximately 179,000 reagent discs compared to
249 analyzers and 101,000 reagent discs during the quarter ended June 30, 1997.
The increase in reagent disc shipments each quarter is consistent with the
Company's belief that there will be recurring reagent disc revenue as the
Company's product lines mature. This growth is mostly attributable to the
expanded installed base of VetScan systems and higher consumption rates of
institutional users. There can be no assurance this growth will continue.
Ninety-four percent (94%) of these reagent disc shipments were for veterinary
applications. Product sales in North America accounted for 72%, international
sales accounted for 21% and Orbos contract revenue accounted for the remaining
7% of total revenues for the first quarter of fiscal 1999.
In North America, 94% of the sales in the US were to the veterinary market and
6% were to the human medical market. Internationally (outside of North America),
sales to Japan constituted 55% and sales to Europe constituted 33% of the total
international sales during the quarter. Of the total Japanese revenue, 83% was
for veterinary applications. The Company believes that economic conditions in
Japan have resulted in a decreased demand for point-of-care blood chemistry. Of
the total European revenue, 69% was for veterinary applications. On June 1,
1998, the Company announced that it had signed an exclusive distribution
agreement with Genzyme Virotech for distribution of the Company's products in
Germany. The agreement covers both the VetScan and Piccolo analyzer systems.
Through June 30, 1998, the Company has placed a total of 2,400 units of the
point-of-care blood chemistry analyzer worldwide, of which 1,914 were VetScan
systems and 486 were Piccolo systems. Of these totals 1,317 VetScan systems and
207 Piccolo systems were placed in North America and 597 VetScan systems and 279
Piccolo systems were placed internationally.
The Company continues to develop new products that the Company believes will
provide further opportunities for market penetration. The Company is working on
the development of four electrolyte test methods: total carbon dioxide,
chloride, potassium and sodium. Clinical trials of these test methods have begun
and are expected to be completed during the second quarter of fiscal 1999.
Additional future test methods development for other disc products will be
targeted at specific applications based on fulfilling clinical needs. The
Company's current focus of test methods development is in clinical chemistry. In
addition to clinical chemistry, the Company has demonstrated its ability to
perform immunoassay tests in its
8
<PAGE> 9
blood analysis system by successfully developing its Thyroxine (T4) test for the
veterinary market. The Company believes other homogeneous immunoassay methods
can be performed in its discs to measure a wide assortment of low concentration
blood analytes, such as therapeutic drugs and drugs of abuse. The Company is not
currently developing additional immunoassay methods. There can be no assurance
that Abaxis will be able to develop any of these potential products. 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 assurance 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.
Sales for any future periods are not predictable with a significant degree of
certainty. The Company generally operates with limited order backlog because its
products typically are shipped shortly after orders are received. The Company's
expense levels, which are to a large extent fixed, are based in part on its
expectations as to future revenues. Accordingly 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 operating results 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 a number of factors including, but
not limited to, the level of competition; the size and timing of sales orders;
market acceptance of 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 ability to scale up production; the mix of product
sales between the analyzers and the reagent discs; mix in sales channels; levels
of expenditure on research and development; changes in Company strategy;
personnel changes; regulatory changes; and general economic trends.
The Company continues to explore the application of its proprietary technology
used to produce the dry reagents used in the reagent discs, called the Orbos
Discrete Lyophilization Process, to other companies' products. This process
allows the production of an accurate, precise amount of active chemical
ingredients in the form of a soluble bead. The Company believes that the Orbos
process has broad applications in products where delivery of active ingredients
in a stable, pre-metered format is desired. The Company has contracts with
Becton Dickinson Immunocytometry Systems and Pharmacia Biotech, Inc. to either
supply products or license Orbos technology. The Company is currently working
with other companies to determine potential suitability of the Orbos technology
to these companies' products. As resources permit, the Company will pursue other
development, licensing or manufacturing agreement opportunities for its Orbos
technology with other companies. There can be no assurances, however, that other
applications will be identified or that additional agreements with the Company
will result.
RESULTS OF OPERATIONS
REVENUES
During the three-month period ended June 30, 1998, the Company reported total
revenues of approximately $3,279,000 ($3,059,000 in product revenue and $220,000
in Orbos contract revenue), a $526,000 or 19% increase as compared to total
revenues of approximately $2,753,000 ($2,680,000 in product revenue and $73,000
in Orbos contract revenue) for the same period in fiscal 1998. The increase in
revenue for the quarter ended June 30, 1998 compared to the quarter ended June
30, 1997 primarily was due to new and repeat reagent disc sales in the domestic
and international markets. Revenues from Orbos contracts are primarily dependent
upon sales of products using the Orbos technology by other parties, which is out
of the control of the Company and, therefore, may vary significantly from
quarter to quarter.
9
<PAGE> 10
COST OF PRODUCT SALES
Cost of product sales during the quarter ended June 30, 1998, was approximately
$2,598,000, or 79% of total revenues, as compared to approximately $2,595,000,
or 94% of total revenues for the quarter ended June 30, 1997. The decrease in
cost of product sales as a percentage of total revenues for the quarter ended
June 30, 1998 as compared to the same period ended June 30, 1997 is due to lower
unit costs resulting from better standardized manufacturing processes and
economies of scale related to increased manufacturing volume. During the quarter
ended June 30, 1998, the Company achieved, for the first time in Company
history, a positive gross margin on its consumable reagent disc sales. There can
be no assurance that the Company will continue to maintain or improve gross
margin in future quarters.
RESEARCH AND DEVELOPMENT
Research and development expenses during the first quarter of fiscal 1999 were
approximately $521,000, or 16% of total revenues. First quarter fiscal 1999
research and development expenses increased $146,000 or 39% from research and
development expenses of approximately $375,000, or 14% of total revenues, for
the same period in fiscal 1998. The increase is the result of the Company's
development of new test methods to expand its test menus as well as other
development projects and increased expenses to support regulatory and quality
assurance projects. The Company expects research and development expenses to
increase during the second quarter of fiscal 1999 as compared to the first
quarter of fiscal 1999 due to expenses associated with clinical trials of new
test methods.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses totaled approximately $1,253,000 or
38% of total revenues for the three-month period ended June 30, 1998,
representing a $37,000 or 3% increase from selling, general and administrative
expenses of approximately $1,216,000 or 44% of total revenues for the
three-month period ending June 30, 1997. This increase is the result of
additional expenses associated with staffing, travel and advertising to support
sales and marketing activities. During the remaining quarters of fiscal 1999,
the Company expects total selling, general and administrative expenses to
increase as compared to total selling, general and administrative expenses for
the first quarter of fiscal 1999 due to an increase in selling expenses.
NET INTEREST INCOME
Net interest income totaled approximately $37,000 or 1% of total revenues for
the quarter ended June 30, 1998, compared to $58,000 or 2% of total revenues in
the comparable quarter of fiscal 1998. The decrease in interest income was
primarily the result of decreased investment levels. The Company incurred
interest expense related to payments on an equipment loan of approximately
$19,000 during the period ended June 30, 1998 and approximately $9,000 during
the period ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had approximately $1,230,000 in cash and cash
equivalents and $2,344,000 in short-term investments, for total cash and
investment resources of $3,574,000. 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 that will
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's new automated
disc assembly line was delivered and installed during July 1998. The Company
estimates the final cost of this new assembly line will be approximately
$1,500,000 of which approximately $1,371,000 was paid through July 31, 1998. The
Company expects to pay the balance upon final acceptance of the equipment. In
April 1997, in anticipation of taking delivery of the automated assembly line,
the Company arranged for an equipment financing loan of up to $2,000,000, with
36 monthly payments, and a final balloon payment equal to 10% of the original
principal amount.
10
<PAGE> 11
The equipment financing loan is collateralized by the Company's equipment and
bears interest at approximately 16%. In April 1997, the Company borrowed
$600,000 against this loan. On August 10, 1998, the Company borrowed the
remaining $1,400,000 on the equipment financing loan. Additional manufacturing
equipment will also need to be added during fiscal 1999 to provide additional
production capabilities. On July 28, 1998, the Company signed a commitment
letter for an additional $1,000,000 financing loan for equipment to be purchased
during fiscal 1999. Additionally, inventories and receivables related to the
commercialization of the VetScan and Piccolo systems could increase
significantly in future periods, which would require significant capital
resources.
Net cash used in operating activities during the three months ended June 30,
1998 was approximately $1,889,000 compared to net cash provided by operating
activities of approximately $41,000 for the same period ended June 30, 1997. The
increase in net cash used in operating activities was due to increases in
receivables and inventories and decreases in accounts payable, accrued payroll,
other accrued liabilities and deferred revenue, offset by a decrease in net
loss.
Net cash provided by investing activities during the three months ended June 30,
1998 was approximately $1,446,000, compared to approximately $866,000 used in
investing activities during the three months ended June 30, 1997. The change
from net cash used in investing activities in the three months ended June 30,
1997 to net cash provided by investing activities in the three months ended June
30, 1998 was primarily the result of an increase in maturities and sales of
short-term investments, offset by a decrease in purchases of short-term
investments and increases in purchases of property and equipment primarily
related to the new automated assembly line.
Net cash used in financing activities for the three month period ended June 30,
1998 was approximately $28,000 compared to approximately $550,000 net cash
provided by financing activities for the same period in fiscal 1998. Net cash
provided by financing activities in fiscal 1998 was due to the net proceeds
received from an equipment financing loan. Net cash used in financing activities
during fiscal 1999 resulted from repayment on an equipment loan offset by
proceeds from issuance of common stock.
The Company anticipates that its existing capital resources, debt financing and
anticipated revenue from the sales of its products will be adequate to satisfy
its currently planned operating and financial requirements through fiscal 1999.
The Company's future capital requirements will largely depend upon the increased
market acceptance of its point-of-care blood chemistry analyzer products.
However, the Company's sales are not predictable due to its limited market
experience with its products. In the event the sales are significantly below the
anticipated level or there are other unexpected adverse developments affecting
cash flow, the Company will need to obtain additional equity or debt financing
if it is to sustain its currently planned level of operating expenses during
fiscal 1999 and beyond. In the event that the Company is unsuccessful in raising
sufficient funding, the Company will have to significantly reduce its operating
expenses and curtail operations. There can be no assurance that any such
financing will be available, and any additional equity financing may be dilutive
to shareholders, while debt financing may involve restrictive covenants.
PART II-OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 18, 1997, RGC International Investors LDC and Advantage Fund Ltd., each
of which is an accredited investor as defined in Regulation D pursuant to the
Securities Act to the best knowledge of the Company, purchased from the Company
3,000 shares of Series B Convertible Preferred Stock at a price per share of
$1,000, with net proceeds to the Company of approximately $2,732,000. The shares
were sold in this private offering transaction under Rule 506 and/or Section
4(2) of the Securities Act have not been registered with the Securities and
Exchange Commission and carry a restrictive legend. The Series B Preferred Stock
is convertible to the Company's common stock. The Company filed a registration
statement on Form S-3 on September 29, 1997 to register the resale of the common
stock issuable upon conversion of the preferred stock. The registration was
declared effective on October 30, 1997. As of June 30, 1998, all shares of
Series B Preferred Stock were converted into a total of 1,903,502 shares of
common stock.
In April 1998, the Company issued 2,823 shares of common stock to a consultant
in payment for services provided to the Company. The shares were valued at
$9,000. This issuance was made pursuant to Section 4(2) under the Securities
Act.
11
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits included herein (numbered in accordance with Item 601 of Regulation
S-K)
Exhibit Number Description
- --------------------------------------------------------------------------------
27.0 Financial Data Schedule
(b) Reports on Form 8-K
None
12
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABAXIS, INC.
August 14, 1998 by: /s/Clinton H. Severson
- ---------------------------- --------------------------------------------
Date Clinton H. Severson
President and Chief Executive Officer
(Principal Executive Officer)
August 14, 1998 by: /s/ Donald Stewart
- ---------------------------- --------------------------------------------
Date Donald Stewart
Vice President of Finance & Administration
and Chief Financial Officer
(Principal Financial and Accounting Officer)
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27.0 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,230,000
<SECURITIES> 2,344,000
<RECEIVABLES> 2,173,000
<ALLOWANCES> 0
<INVENTORY> 1,796,000
<CURRENT-ASSETS> 7,703,000
<PP&E> 7,609,000
<DEPRECIATION> 5,066,000
<TOTAL-ASSETS> 10,325,000
<CURRENT-LIABILITIES> 3,254,000
<BONDS> 222,000
0
0
<COMMON> 63,574,000
<OTHER-SE> (56,725,000)
<TOTAL-LIABILITY-AND-EQUITY> 10,325,000
<SALES> 3,059,000
<TOTAL-REVENUES> 3,279,000
<CGS> 2,598,000
<TOTAL-COSTS> 1,774,000
<OTHER-EXPENSES> 37,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,056,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,056,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,056,000)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
