UNITED STATES
SECURITIES & 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 September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from _______ to _______
Commission file number 000-19720
ABAXIS, INC.
(Exact name of registrant as specified in its charter)
California 77-0213001
(State 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 February 8, 2000, 13,991,331 shares of common stock, no par value, were
outstanding.
<PAGE>
TABLE OF CONTENTS
ITEM
Facing Sheet
Table of Contents
Part I. Financial Information
Item 1. Financial Statements:
Condensed Statements of Operations - Three and
Nine Months Ended December 31, 1999 and 1998
Condensed Balance Sheets - December 31, 1999 and March 31, 1999
Condensed Statements of Cash Flows -
Nine Months Ended December 31, 1999 and 1998
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
ABAXIS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Product sales, net......... $6,458,000 $3,068,000 $15,876,000 $6,612,000
Development and licensing
revenue.................. 35,000 35,000 105,000 150,000
------------ ------------ ------------ ------------
Total revenues 6,493,000 3,103,000 15,981,000 6,762,000
------------ ------------ ------------ ------------
Costs and operating expenses:
Cost of product sales...... 3,336,000 2,144,000 8,702,000 5,029,000
Research and development... 816,000 755,000 2,618,000 1,233,000
Selling, general, and
administrative........... 2,202,000 1,367,000 5,687,000 2,616,000
------------ ------------ ------------ ------------
Total costs and operating
expenses................. 6,354,000 4,266,000 17,007,000 8,878,000
------------ ------------ ------------ ------------
Loss from operations.......... 139,000 (1,163,000) (1,026,000) (2,116,000)
Interest income 15,000 (53,000) 81,000 31,000
Other income (expense)........ 18,000 (26,000) (7,000) (7,000)
------------ ------------ ------------ ------------
Net loss...................... $172,000 ($1,242,000) ($952,000) ($2,092,000)
============ ============ ============ ============
Basic and diluted loss
per share (a)................ $0.01 ($0.09) ($0.09) ($0.15)
============ ============ ============ ============
Average number of common shares
outstanding used in calculating
basic earnings per share 13,976,000 13,885,000 13,969,000 13,741,000
============ ============ ============ ============
Average number of common shares
outstanding used in calculating
diluted earnings per share 13,968,000 13,885,000 13,969,000 13,741,000
============ ============ ============ ============
</TABLE>
(a) Net income (loss) attributable to common shareholders used in computation
of basic and diluted loss per share for the three and nine months ended
December 31, 1999 and 1998 was $ 112,000, $(1,133,000), $ (1,242,000)
and $(3,338,000) respectively. See Note 3 of Notes to
Condensed Financial Statements.
See Note 3 of Notes to condensed financial statements.
See notes to condensed financial statements.
<PAGE>
ABAXIS, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------ ------------
(unaudited) (Note 1)
<S> <C> <C>
Current assets:
Cash and cash equivalents ....................... $2,694,000 $5,426,000
Trade and other receivables (net of allowance
for doubtful accounts of $231,000 at Dec. 31,
1999 and $174,000 at March 31, 1999).......... 4,415,000 2,731,000
Interest receivable ............................. -- --
Inventories ..................................... 2,553,000 1,933,000
Prepaid expenses ................................ 202,000 233,000
------------ ------------
Total current assets ................... 9,864,000 10,323,000
Property and equipment - net ...................... 3,663,000 2,518,000
Deposits and other assets ......................... 87,000 73,000
------------ ------------
Total assets ...................................... $13,614,000 $12,914,000
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Borrowings under line of credit.................. $771,000 $683,000
Accounts payable ................................ 1,696,000 1,087,000
Dividends payable ............................... 268,000 88,000
Accrued payroll and related expenses ............ 1,619,000 573,000
Other accrued liabilities ....................... 430,000 410,000
Warranty reserve ................................ 710,000 737,000
Deferred rent ................................... 61,000 53,000
Deferred revenue ................................ 463,000 258,000
Current portion of long-term debt ............... 392,000 606,000
------------ ------------
Total current liabilities .............. 6,410,000 4,495,000
------------ ------------
Long-term debt .................................... 690,000 889,000
------------ ------------
Commitments and contingencies
Shareholders' equity:
Convertible preferred stock, no par value:
authorized shares - 5,000,000; issued and
outstanding shares - 4,000 on Dec. 31,1999
and 4,000 on March 31, 1999 ................... 3,581,000 3,581,000
Common stock, no par value: authorized shares -
35,000,000; issued and outstanding shares -
13,977,643 on Dec. 31, 1999 and
12,957,580 on March 31, 1999 .................. 64,111,000 63,944,000
Deferred compensation ........................... (79,000) (28,000)
Accumulated deficit ............................. (61,099,000) (59,967,000)
------------ ------------
Total shareholders' equity ............. 6,514,000 7,530,000
------------ ------------
Total liabilities and shareholders' equity ........ $13,614,000 $12,914,000
============ ============
</TABLE>
See notes to condensed financial statements.
Note 1 - Amounts are derived from audited financial statements.
<PAGE>
ABAXIS, INC
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
-------------------------
1999 1998
------------ ------------
<S> <C> <C>
Operating activities:
Net loss............................................... ($952,000) ($3,327,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization........................ 138,000 525,000
Amortization of deferred compensation................ (50,000) --
Common stock issued for services..................... -- --
Changes in assets and liabilities:
Trade and other receivables....................... (1,684,000) (356,000)
Interest receivable............................... -- 127,000
Inventories....................................... (620,000) (691,000)
Prepaid expenses.................................. 97,000 (86,000)
Deposits and other assets......................... (14,000) 11,000
Accounts payable.................................. 609,000 (629,000)
Accrued payroll and related expenses.............. 1,046,000 19,000
Other accrued liabilities......................... 20,000 (22,000)
Warranty reserve.................................. (27,000) 17,000
Deferred revenue and other........................ 213,000 (52,000)
------------ ------------
Net cash used in operating activities.................. (1,224,000) (4,464,000)
------------ ------------
Investing activities:
Purchase of available-for-sale securities.............. -- (4,874,000)
Maturities of available-for-sale securities............ -- 8,270,000
Purchase of property and equipment..................... (1,595,000) (801,000)
------------ ------------
Net cash provided by (used in) investing activities.... (1,595,000) 2,595,000
------------ ------------
Financing activities:
Proceeds from issuance of common stock................. 167,000 236,000
Proceeds from issuance of preferred stock.............. -- 3,568,000
Net proceeds from equipment financing.................. 1,176,000 1,974,000
Repayment of equipment financing....................... (1,655,000) (777,000)
------------ ------------
Net cash used in financing activities.................. (312,000) 5,001,000
------------ ------------
Increase (decrease) in cash and cash equivalents....... (3,131,000) 3,132,000
Cash and cash equivalents at beginning of period....... 5,426,000 1,701,000
------------ ------------
Cash and cash equivalents at end of period............. $2,295,000 $4,833,000
============ ============
Supplemental disclosures of cash flow information:
Interest paid....................................... $222,000 $160,000
============ ============
Noncash financing activities:
Accrued dividends on preferred stock................ $180,000 --
============ ============
Conversion of preferred stock into common stock..... -- $2,440,000
============ ============
Accretion of preferred stock........................ -- $11,000
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE>
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 on Form 10-K
for the fiscal year ended March 31, 1999. 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 of and for the periods
presented. Certain amounts as presented in the March 31, 1999 financial
statements have been reclassified to conform to the fiscal year 2000
financial statement presentation. The results for the periods
presented are not necessarily indicative of the results to be expected
for the entire fiscal year ending March 31, 2000 or for any future
period.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition - Revenues are recognized upon shipment. Rights of
return are generally not provided and a provision for the estimated
future cost of warranty is made at the time revenue is recognized.
Revenues under extended warranty arrangements are recognized ratably
over the related warranty period. Instrument revenues under cross
distribution agreements (where the Company and another party purchase
each other's products for sale) are recognized upon sale of the products
to the end user.
Comprehensive Income (Loss) - 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 its net
assets during the period from nonowner sources. Comprehensive income
(loss) was the same as net income (loss) for the three and six months
ended December 31, 1999 and 1998.
New Accounting Pronouncement - In September 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 is
currently required to adopt SFAS 133 in its financial statements in the
first quarter of the fiscal year ending March 31, 2002.
3. PER SHARE INFORMATION
Basic loss per share is computed based upon the weighted average number
of shares of common stock outstanding and the net loss attributable to
common shareholders. Diluted loss per share is computed by dividing net
income (loss) by the weighted average number of common shares that would
have been outstanding during the period assuming the issuance of common
shares for all dilutive potential common shares outstanding. Shares
used in the calculation of diluted loss per share for the three months
ended December 31, 1998 exclude 1,635,000 and for the nine months ended
December 31, 1999 and 1998 exclude 2,173,000 and 1,662,000, common
equivalent shares related to options, warrants and preferred stock.
Loss attributable to common shareholders includes accrued dividends and
the accretion relating to the calculated imbedded yield representing the
discount on the assumed potential conversion of the preferred stock
issued by the Company.
The reconciliation of net income (loss) to net income (loss)
attributable to common shareholders is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 13, 1999 December 13, 1999
------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss...................... $172,000 ($1,242,000) ($953,000) ($3,327,000)
Cumulative preferred
stock dividends............. (60,000) -- (180,000) --
Value assigned to accretion
of preferred stock.......... -- -- -- (11,000)
------------ ------------ ------------ ------------
Net loss attributable to
common shareholders......... $112,000 ($1,242,000) ($1,133,000) ($3,338,000)
============ ============ ============ ============
</TABLE>
The reconciliation of average number of common shares outstanding used
in calculating basic earnings per share and in calculating diluted
earnings per share:
<TABLE>
<CAPTION>
Quarters Ended Dec, 31 Nine Mos. Ended Dec 31,
------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Average number of common shares
ousttanding used in calculating
basic earnings per share...... 13,976,000 13,885,000 13,969,000 13,741,000
Peferred stock................ 1,600,000 -- -- --
Average number of stock options
outstanding.................... 727,000 -- -- --
Average number of warrants
outstanding.................. 71,000
------------ ------------ ------------ ------------
Average number of common shares
outstanding used in calculating
diluted earnings per share..... 16,374,000 13,885,000 13,969,000 13,741,000
============ ============ ============ ============
</TABLE>
4. INVENTORY
Inventories are stated at the lower of cost (first-in, first-out) or
market and consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------ ------------
<S> <C> <C>
Raw materials................ $821,000 $910,000
Work-in-process.............. 854,000 574,000
Finished goods............... 878,000 449,000
------------ ------------
$2,553,000 $1,933,000
</TABLE> ============ ============
5. CO-PROMOTION AGREEMENT
On September 30, 1999 the Company announced a co-promotion agreement
with ABBOTT Laboratories ("ABBOTT"). The agreement is for two years
with an option, exercisable by ABBOTT for three additional years. Under
this agreement, the ABBOTT animal health sales force will co-promote
Abaxis' VetScan chemistry analyzer in the United States and Canada.
ABBOTT will receive a commission on analyzers placed above a
predetermined baseline number per quarter payable over an approximate
eight year period. The present value of the commission obligation is
recorded concurrently with the instrument sales using a discount rate of
9.75%. In addition, ABBOTT will provide up to $5 million in financing
to support the Company's expansion of manufacturing capacity. Such
borrowings will bear interest at 1.6% below prime, with interest payable
quarterly and principal repayment no later than December 31, 2007. The
difference between the discounted interest rate and the Company's
incremental borrowing rate is being amortized over the initial two year
term of the agreement. In addition, ABBOTT agreed to provide additional
financing at 1.6% below prime to support additional sales programs
contemplated by the Company.
6. LINE OF CREDIT AND LONG-TERM DEBT
In September 1999, the Company refinanced the line of credit and the
equipment financing loan. The new line of credit is $4,000,000, of
which $2,500,000 is currently available. The additional $1,500,000
could become available if the Company elects to pay a certain fee to the
bank. The amount borrowed under the line of credit as of December 31,
1999 was $771,000 and carries an interest rate equal to 1% above the
prime rate, which was 8.50% at December 31, 1999. The new equipment
financing loan was used to refinance the previous equipment financing
loan. The equipment financing loan carries and interest rate of 1.5%
above the prime rate.
7. CUSTOMER AND GEOGRAPHIC INFORMATION
The Company currently operates in one segment. The following is a
summary of revenues from external customers for each group of products
and services provided by the Company:
<TABLE>
<CAPTION>
Quarters Ended Dec, 31 Nine Mos. Ended Dec 31,
------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Blood chemistry analyzers.... $3,577,000 $1,300,000 $7,369,000 $4,134,000
Reagent discs................ 2,686,000 1,595,000 7,711,000 4,998,000
Other........................ 195,000 173,000 796,000 548,000
------------ ------------ ------------ ------------
Product sales, net......... 6,458,000 3,068,000 15,876,000 9,680,000
Development and licensing
revenue.................... 35,000 35,000 105,000 185,000
------------ ------------ ------------ ------------
Total revenues............... $6,493,000 $3,103,000 $15,981,000 $9,865,000
============ ============ ============ ============
</TABLE>
The following is a summary of revenues by geographic region based on
customer location:
<TABLE>
<CAPTION>
Quarters Ended Dec, 31 Nine Mos. Ended Dec 31,
------------------------- -------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
United States ............... $5,377,000 $2,501,000 $13,021,000 $8,095,000
Europe ...................... 899,000 381,000 2,203,000 935,000
Asia and Latin America....... 217,000 221,000 757,000 835,000
------------ ------------ ------------ ------------
Total ....................... $6,493,000 $3,103,000 $15,981,000 $9,865,000
============ ============ ============ ============
</TABLE>
The Company's long-lived assets are located in the United States.
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, Inc. (the "Company") develops, manufactures and markets
portable blood chemistry 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 discs 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, 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. The
Company currently markets this system for veterinary use under the name
VetScan and in the human medical market under the name Piccolo. In
addition to the blood chemistry analysis system, the Company markets a
hematology analysis system. The hematology system, the VetScan HMT, is
purchased from MELET SCHLOESING Laboratories International ("MELET")
through a cross OEM agreement. MELET markets the VetScan as the MScan
in certain European markets.
In the three months ended December 31, 1999, the Company's US revenues
accounted for 83% of its total revenues versus 81% in the three months
ended December 31, 1998. In the nine months ended December 31, 1999,
the Company's US revenues accounted for 81% of its total revenues versus
82% in the nine months ended December 31, 1998. European revenues
accounted for 14% versus 12% in the three-months ended December 31,
1998. In the nine months ended December 31, 1999, the Company's
European revenues accounted for 14% of its total revenues versus 9% in
the nine months ended December 31, 1998. Asian and Latin American
revenues accounted for 3% versus 7% in the three months ended December
31, 1998. In the nine months ended December 31, 1999, the Company's
Asian and Latin American revenues accounted for 5% of its total revenues
versus 8% in the nine months ended December 31, 1998. During the nine
month period ended December 31, 1999 the Asian and Latin American
revenues declined due to adverse currency and economic conditions. The
Company does not expect the Asian and Latin American markets to recover
to previous levels in the near future.
During the three months ended December 31, 1999, the Company shipped 312
point-of-care blood chemistry analyzers worldwide, a 63% increase from
192 instruments shipped in the three months ended December 31, 1998.
During the three-months ended December 31, 1999, the Company shipped 172
point-of-care blood hematology analyzers (the VetScan HMT). The
VetScan HMT is a new product offered for the first time in September
1999. Therefore, total instruments shipped during the three months
ended December 31, 1999 were 484. During the nine months ended December
31, 1999, the Company placed 720 point-of-care blood chemistry analyzers
worldwide, a 19% increase from 606 instruments shipped in the nine
months ended December 31, 1998. During the nine months ended December
31, 1999, the Company shipped 291 point-of-care blood hematology
analyzers (the VetScan HMT). Therefore, total instruments shipped
during the nine months ended December 31, 1999 were 1,011.
Reagent discs shipped during the three months ended December 31, 1999
were approximately 277,000, an increase of 62% compared to shipments of
approximately 171,000 reagent discs during the three months ended
December 31, 1998. Reagent discs shipped during the nine months ended
December 31, 1999 were approximately 801,000, an increase of 51%
compared to shipments of approximately 531,000 reagent discs during the
nine months ended December 31, 1998. The increase in reagent disc
shipments 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 and Piccolo systems and higher consumption rates of
institutional users. There can be no assurance growth in revenues or
unit sales will continue or that the Company will be able to increase
production to meet increased product demand.
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. 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. 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. Until sales volume of the Company's products,
particularly its reagent discs, increases significantly so as to offset
associated fixed costs and to realize certain manufacturing economies of
scale, sales of the Company's products will result in further losses and
adversely affect the Company's results of operations and financial
condition. The Company believes that it needs to complete the
development and obtain approval for its four electrolyte disc in order
to make a significant impact in the human medical market. The Company
recently received marketing clearance from the FDA for three of the
electrolytes, potassium, CO2 and sodium. The fourth electrolyte,
chloride, is in research and development. There is no assurance that
chloride or any other product in development will be successfully
developed or that the FDA will approve the marketing application. 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 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
Revenue
During the three months ended December 31, 1999, the Company reported
total revenues of approximately $6,493,000, a $3,390,000 or 109%
increase from total revenues of approximately $3,103,000 for the three
months ended December 31, 1998. During the nine months ended December
31, 1999, the Company reported total revenues of approximately
$15,981,000, a $6,116,000 or 62% increase from total revenues of
approximately $9,865,000 for the nine months ended December 31, 1998.
Revenue increases were due to increased analyzer and reagent disc sales
in Europe and the US.
Total revenue in the US for the three months ended December 31, 1999 was
approximately $5,377,000, a $2,876,000 or 115% increase from revenue of
approximately $2,501,000 for the three months ended December 31, 1998.
Total revenue in the US for the nine months ended December 31, 1999 was
approximately $13,021,000, a $4,926,000 or 61% increase from revenue of
approximately $8,095,000 for the nine months ended December 31, 1998.
The increase in revenue in the US reflects an increase in reagent disc
sales, the launch of the VetScan HMT instrument and an increase in the
number of sales personnel during the year.
Total revenue in Europe for the three months ended December 31, 1999 was
approximately $899,000, a $518,000 or 136% increase from revenue of
approximately $381,000 for the three months ended December 31, 1998.
Total revenue in Europe for the nine months ended December 31, 1999 was
approximately $2,203,000, a $1,268,000 or 136% increase from revenue of
approximately $935,000 for the nine months ended December 31, 1998. The
increase in revenue in Europe was due to an increase in instrument
placements due primarily to placements by Melet, the launch of the
VetScan HMT and an increase in reagent disc sales.
Total revenue in Asia and Latin America for the three months ended
December 31, 1999 was approximately $217,000, a $4,000 or 2% decrease
from revenue of approximately $221,000 for the three months ended
December 31, 1998. Total revenue in Asia and Latin America was
approximately $757,000, a $78,000 or 9% decrease from revenue of
approximately $835,000 for the nine months ended December 31, 1998. The
decrease in Asia and Latin America was due to adverse currency and
economic conditions.
Cost of Product Sales
Cost of product sales during the three months ended December 31, 1999
was approximately $3,336,000 or 52% of product sales, as compared to
approximately $2,144,000 or 69% of product sales in the three months
ended December 31, 1998. Cost of product sales during the nine months
ended December 31, 1999 was approximately $8,702,000 or 55% of product
sales, as compared to approximately $7,173,000 or 74% of product sales
in the nine months ended December 31, 1998.
The decrease in cost of product sales as a percent of product sales for
the three and nine months ended December 31, 1999 as compared to the
same periods last year was primarily a function of the increase in sales
volume of reagent discs and lower unit costs resulting from improved
manufacturing processes.
Selling, General and Administrative Expense
Selling, general and administrative expenses were approximately
$2,202,000 or 34% of total revenues in the three months ended December
31, 1999 compared to $1,367,000 or 44% of total revenues in the three
months ended December 31, 1998. Selling, general and administrative
expenses were approximately $5,687,000 or 36% of total revenues in the
nine months ended December 31, 1999 compared to $3,983,000 or 40% of
total revenues in the nine months ended December 31, 1998. The increase
in selling, general and administrative expenses is primarily the result
of the launch of new products and an increase in headcount. The
Company expects the dollar amount of selling, general and administrative
expense to increase in fiscal 2000 from fiscal year 1999 as a result of
increased staffing and support demands associated with increased sales.
Research and Development Expense
Research and development expenses were approximately $816,000 or 13% of
total revenues in the three months ended December 31, 1999 compared to
$755,000 or 24% of total revenues in the three months ended December 31,
1998. Research and development expenses were approximately $2,618,000 or
16% of total revenues in the nine months ended December 31, 1999
compared to $1,988,000 or 20% of total revenues in the nine months ended
December 31, 1998. The increase in research and development expenses is
the result of increased spending in the development of new test methods
and process development research for automating production. The Company
expects the dollar amount of research and development expenses to
increase in fiscal 2000 as compared to fiscal 1999 as the Company
completes development and clinical trials of new test methods to expand
its test menus as well as research in automation projects. There can be
no assurance, however, that the Company will undertake such research and
development activities in future periods or, if it does, that such
activities will be successful.
Net Interest and Other Income (Expense)
The Company incurred interest expense of approximately $222,000 on its
capital equipment loan and its line of credit during the three months
ended December 31, 1999, net of capitalized interest of approximately
$195,000 on the purchase and installation of the new automated disc
production line. The Company expects interest expense to increase in
fiscal 2000 as additional bank financing is used to meet working capital
requirements associated with an increase in sales.
Liquidity and Capital Resources
As of March 31, 1999, the Company had approximately $2,694,000 in cash
and cash equivalents. 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 costs related to continuing
development of its current and future products; development and
implementation of an automated manufacturing line to provide capacity
for commercial volumes; and additional pre-clinical testing and clinical
trials for its current and future products.
Net cash used in operating activities during the nine months ended
December 31, 1999 was $913,000 compared to $4,452,000 in the nine months
ended December 31, 1998. The decrease in net cash used in operating
activities was due primarily to a decrease in the net loss, an increase
in accounts payable, accrued payroll, deferred revenue and other
expenses offset by an increase in trade receivables and inventories.
Net cash used in investing activities for the nine months ended December
31, 1999 was $1,595,000 as compared to net cash provided of $2,595,000
for the nine months ended December 31, 1998. The change from net cash
used in 1999 versus cash provided in 1998 was due primarily to the
purchase of property and equipment in 1999 and net maturities of
available-for-sale securities in 1998.
Net cash used in financing activities for the nine months ended December
31, 1999 was $224,000 as compared to net cash provided of $5,520,000
for the nine months ended December 31, 1998. Cash used in financing
activities for 1999 is primarily the result of repayments on the
equipment financing loan, net of an proceeds from the issuance of common
stock and proceeds from the line of credit.
In September 1999, the Company refinanced its line of credit and
equipment financing loan. The new line of credit is $4,000,000, of
which $2,500,000 was available. The additional $1,500,000 could become
available if the Company elects to pay a certain fee to the bank. As of
December 31, 1999 the Company has $771,000 outstanding which carries an
interest rate equal to 1% above the prime rate, which was 9.50% at
December 31, 1999. This line of credit expires in November 2000 and
there can be no assurance that the Company will be able to extend the
line of credit for another year. The new equipment financing loan was
used to refinance the previous equipment financing loan. The equipment
financing loan carries and interest rate of 1.5% above the prime rate.
As of December 31, 1999, the Company had $1,016,000 outstanding on the
equipment financing loan.
On September 30, 1999 the Company announced a co-promotion agreement
with ABBOTT Laboratories ("ABBOTT"). The agreement is for two years
with an option, exercisable by ABBOTT for three additional years. Under
this agreement, the ABBOTT animal health sales force will co-promote
Abaxis' VetScan chemistry analyzer in the United States and Canada.
ABBOTT will receive a commission on analyzers placed above a
predetermined baseline number per quarter payable over an approximate
eight year period. In addition, ABBOTT will provide up to $5 million in
financing to support the Company's expansion of manufacturing capacity.
Such borrowings will bear interest at 1.6% below prime, with interest
payable quarterly and principal repayment no later than December 31,
2007. In addition, ABBOTT agreed to provide additional financing at
1.6% below prime to support additional sales programs contemplated by
the Company.
The Company anticipates that its existing capital resources, debt
financing, financing available from ABBOTT and anticipated revenue from
the sales of its products will be adequate to satisfy its currently
planned operating and financial requirements through the next twelve
months. 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, the
Company may need to obtain additional equity or debt financing. There
can be no assurance that any such financing will be available on terms
acceptable to the Company, if at all, and any additional equity
financing may be dilutive to shareholders, while debt financing may
involve restrictive covenants.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to financial market risks with respect to
interest rates on the Company's accounts receivable line of credit and
short-term investments. The Company does not use derivative financial
instruments for speculative or trading purposes.
The accounts receivable line of credit monthly interest expense is based
on 1.0% over the prime rate. An increase in the prime rate would expose
the Company to higher interest expenses. The balance on the line of
credit was $771,000 as of December 31, 1999. For each 1% increase in
the prime rate the Company would pay approximately $1,830 of additional
interest expense each quarter.
The long-term debt monthly interest expense is based on 1.5% over the
prime rate. An increase in interest rates would have exposed the
Company to higher interest expenses. The balance on long-term debt was
approximately $1,016,000 as of December 31, 1999. For each 1% increase
in interest rates, the Company would have paid approximately $2,500 of
additional interest expense each quarter.
The Company at times has investments in marketable debt securities that
are subject to interest rate risks. These investments are classified as
"available for sale" securities. The Company does not attempt to
reduce or eliminate its market exposure on these investments. Although
changes in interest rates may affect the fair market value of
"available for sale" securities and cause unrealized gains or losses,
such gains or losses would not be realized unless the investments were
sold.
PART II-OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
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
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.
January 14, 2000 by: /s/Clinton H. Severson
Date Clinton H. Severson
President and Chief Executive
Officer
(Principal Executive Officer)
January 14, 2000 by: /s/ Donald J. Stewart
Date Donald J. Stewart
Vice President of Finance &
Administration
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM CONDENSED BALANCE SHEETS, CONDENSED
STATEMENTS OF OPERATIONS AND NOTES TO CONDENSED
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,694,000
<SECURITIES> 0
<RECEIVABLES> 4,415,000
<ALLOWANCES> 231,000
<INVENTORY> 2,553,000
<CURRENT-ASSETS> 9,864,000
<PP&E> 3,663,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,614,000
<CURRENT-LIABILITIES> 6,410,000
<BONDS> 0
0
3,581,000
<COMMON> 64,111,000
<OTHER-SE> (61,178,000)
<TOTAL-LIABILITY-AND-EQUITY> 13,614,000
<SALES> 6,485,000
<TOTAL-REVENUES> 6,493,000
<CGS> 3,336,000
<TOTAL-COSTS> 3,336,000
<OTHER-EXPENSES> 3,018,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 172,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 172,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 172,000
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
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