-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cqj91q89VjU1fEWm7JONfCU8c/4jabxFBxToQ++fTesh32RPrQubA3zq5zN4HIy0 UOeAqoqGX7KG7nqSsVQFSg== 0000891618-97-000642.txt : 19970222 0000891618-97-000642.hdr.sgml : 19970222 ACCESSION NUMBER: 0000891618-97-000642 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABAXIS INC CENTRAL INDEX KEY: 0000881890 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 770213001 STATE OF INCORPORATION: CA FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19720 FILM NUMBER: 97534815 BUSINESS ADDRESS: STREET 1: 1320 CHESAPEAKE TERRACE CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087340200 MAIL ADDRESS: STREET 2: 1320 CHESAPEAKE TERRACE CITY: SUNNYVALE STATE: CA ZIP: 94089 10-Q 1 FORM 10-Q 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 December 31, 1996 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 February 10, 1997, 11,886,153 shares of common stock, no par value, were outstanding. This report on Form 10-Q, including all exhibits, contains 26 pages. 1 2 TABLE OF CONTENTS ITEM PAGE Facing Sheet 1 Table of Contents 2 Part I. Financial Information --------------------- Item 1. Financial Statements: Condensed Statements of Operations - Three Months and Nine Months Ended December 31, 1996 and 1995 3 Condensed Balance Sheets - December 31, 1996 and March 31, 1996 4 Condensed Statements of Cash Flows - Nine Months Ended December 31, 1996 and 1995 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. Other Information ----------------- Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 6. Exhibits and Reports on Form 8-K 13 Signatures 14 2 3 PART 1-FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ABAXIS, INC. CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED DECEMBER 31, DECEMBER 31, ---------------------------- ---------------------------- 1996 1995 1996 1995 ------------ ------------ ------------ ------------ Revenues: Product sales $ 1,842,000 $ 716,000 $ 4,459,000 $ 1,690,000 Development and licensing revenue 49,000 176,000 456,000 241,000 ------------ ------------ ------------ ------------ Total revenues 1,891,000 892,000 4,915,000 1,931,000 ------------ ------------ ------------ ------------ Costs and operating expenses: Cost of product sales 1,860,000 1,334,000 5,471,000 3,514,000 Research and development 327,000 402,000 1,036,000 965,000 Selling, general, and administrative 1,088,000 859,000 3,682,000 2,417,000 ------------ ------------ ------------ ------------ Total costs and operating expenses 3,275,000 2,595,000 10,189,000 6,896,000 ------------ ------------ ------------ ------------ Loss from operations (1,384,000) (1,703,000) (5,274,000) (4,965,000) Interest income, net 112,000 147,000 254,000 429,000 Other income (expense) 12,000 -- 26,000 -- ------------ ------------ ------------ ------------ Net loss $ (1,260,000) $ (1,556,000) $ (4,994,000) $ (4,536,000) ============ ============ ============ ============ Net loss per share $ (0.12) $ (0.16) $ (0.50) $ (0.49) ------------ ------------ ------------ ------------ Shares used in calculating net loss per share 10,410,177 9,803,417 10,051,830 9,339,473 ============ ============ ============ ============
See notes to condensed financial statements. 3 4 ABAXIS, INC. CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 MARCH 31, 1996 --------------------------------- (unaudited) (Note) ASSETS Current assets: Cash and cash equivalents $ 2,343,000 $ 1,591,000 Short-term investments 4,934,000 6,187,000 Trade and other receivables 915,000 731,000 Inventories 2,498,000 1,456,000 Prepaid expenses 136,000 92,000 ------------ ------------ Total current assets 10,826,000 10,057,000 Property and equipment - net 2,534,000 2,427,000 Long-term investments -- 500,000 Deposits and other assets 60,000 62,000 ------------ ------------ Total assets $ 13,420,000 $ 13,046,000 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,097,000 $ 1,017,000 Accrued payroll and related expenses 550,000 417,000 Other accrued liabilities 378,000 225,000 Warranty reserve 463,000 249,000 Deferred rent 41,000 94,000 Deferred revenue 168,000 143,000 ------------ ------------ Total current liabilities 2,697,000 2,145,000 ------------ ------------ Customer deposits 170,000 175,000 ------------ ------------ Shareholders' equity: Common stock, no par value: authorized shares - 35,000,000; 11,854,153 issued and outstanding on December 31, 1996 and 9,857,628 issued and 58,405,000 53,556,000 outstanding on March 31, 1996 Accumulated deficit (47,852,000) (42,830,000) ------------ ------------ Total shareholders' equity 10,553,000 10,726,000 ------------ ------------ Total liabilities and shareholders' equity $ 13,420,000 $ 13,046,000 ============ ============
See notes to condensed financial statements. Note: The balance sheet at March 31, 1996 has been derived from the audited financial statements at that date but does not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. 4 5 ABAXIS, INC CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED DECEMBER 31, 1996 1995 ------------------------------ OPERATING ACTIVITIES: Net loss $ (4,994,000) $ (4,536,000) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 701,000 720,000 Amortization of deferred compensation -- 47,000 Changes in assets and liabilities: Trade and other receivables (184,000) (354,000) Inventories (1,042,000) (4,000) Prepaid expenses (44,000) (45,000) Deposits and other assets 2,000 -- Accounts payable 80,000 267,000 Accrued payroll and related expenses 133,000 28,000 Other accrued liabilities 153,000 (55,000) Warranty Reserve 214,000 47,000 Deferred Rent (53,000) (72,000) Deferred Revenue 25,000 4,000 Customer deposits (5,000) (15,000) ------------ ------------ Net cash used in operating activities (5,014,000) (3,968,000) ------------ ------------ INVESTING ACTIVITIES: Purchase of available-for-sale securities (6,447,000) (1,963,000) Maturities of available-for-sale securities 7,700,000 1,798,000 Sales of available-for-sale securities 500,000 -- Purchase of property and equipment (808,000) (273,000) ------------ ------------ Net cash provided (used) by investing activities 945,000 (438,000) ------------ ------------ FINANCING ACTIVITIES : Proceeds from issuance of Common Stock 67,000 6,337,000 Proceeds from issuance of Series A Preferred Stock 4,780,000 -- Preferred stock dividend (26,000) -- ------------ ------------ Net cash provided by financing activities 4,821,000 6,337,000 ------------ ------------ Increase in cash and cash equivalents 752,000 1,931,000 Cash and cash equivalents at beginning of period 1,591,000 3,460,000 ------------ ------------ Cash and cash equivalents at end of period $ 2,343,000 $ 5,391,000 ============ ============ NON CASH FINANCING ACTIVITY: Conversion of Series A Preferred Stock to Common Stock $ 4,780,000 $ -- ============ ============
See notes to condensed financial statements. 5 6 ABAXIS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The condensed financial statements for the three and nine-months ended December 31, 1996 and 1995 are unaudited, but include all adjustments (consisting only of normal recurring adjustments) that the management of Abaxis, Inc. believes to be necessary for the fair presentation of the financial position, results of operations and cash flows for the periods presented. Interim results are not necessarily indicative of results to be expected for the full year. The financial statements should be read in conjunction with the audited financial statements for the year ended March 31, 1996, included in the Company's annual report on Form 10-K filed with the Securities and Exchange Commission. Through March 31, 1996, the Company was in the development stage and its financial statements were presented in accordance with Statement of Financial Accounting Standards No. 7 "Accounting and Reporting by Development Stage Enterprises." During the quarter ended June 30, 1996, the Company completed the launch of its Piccolo System. Based on the commercial launch of this product combined with sales of previously offered products, management believes that it no longer meets the definition of a development stage enterprise. 2. PER SHARE INFORMATION Per share information for the three and nine-months ended December 31, 1996 and 1995 is based solely on weighted average shares of common stock outstanding during the period. Common equivalent shares have not been considered in the computation since their inclusion would have an antidilutive effect. 3. INVENTORY Inventories are stated at the lower of cost (first-in, first-out) or market and consisted of the following:
DECEMBER 31, 1996 MARCH 31, 1996 ----------------- -------------- Raw materials $ 1,766,000 $ 829,000 Work-in-process 182,000 467,000 Finished goods 550,000 160,000 ------------ ------------ $ 2,498,000 $1,456,000 ------------ ------------
4. PRIVATE EQUITY FINANCING In September 1996, the Company completed a private equity financing in which it issued 500,000 shares of its convertible Series A Preferred Stock for an aggregate net purchase price of $4,780,000 to certain off-shore investors. Holders of preferred stock were entitled to receive cumulative dividends of $0.15 per share in stock or cash, at the discretion of the Board of Directors, on each of the 90th, 180th and 270th day after the issuance date. During the quarter ended December 31, 1996, all 500,000 shares of the convertible Series A Preferred Stock were converted into 1,975,600 shares of common stock. Prior to conversion, the Company paid a cash dividend of approximately $26,000 to Series A Preferred Stock holders. 6 7 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 include a number of forward-looking statements which reflect the Company's current views with respect to future events and financial performance. 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. In this report, the words "anticipates", "believes", expects", "future", "intends", and similar expressions identify forward-looking statements. 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 14 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 December 31, 1996, the Company continued to increase its customer base in both the veterinary market world wide and in the human market outside the United States. The Company shipped a record number of its VetScan and Piccolo Systems during the quarter. A total of 189 Piccolo and VetScan Systems were placed world wide, of which 114 were VetScan Systems sold in the United Sates and another 31 were VetScan Systems sold outside of the United States. Through December 31, 1996, the Company has placed a total of approximately 577 VetScan Systems with veterinarians in the United States and shipped another 134 VetScans to its international distributors. The Company continued to place VetScan units with Veterinary Centers of America ("VCA") bringing the total installation to 79 units. The reagent disc business also grew during the third fiscal quarter, mostly attributable to the larger installed base of VetScan Systems, and to a lesser extent due to the higher consumption rate of institutional users such as the veterinary hospitals in the VCA network. In addition to VetScan Systems, through December 31, 1996, the Company has sold 181 Piccolo Systems, mostly to its international distributors. During fiscal 1997, the Company has sold approximately 110 Piccolo Systems (under the name Lunaspin) to its Japanese distributor. In addition, the Company sold 50 VetScan Systems to its Japanese distributor to place in the animal health market in Japan, under the name "ABAXIS-EA". Although the Company's Piccolo Systems received regulatory approval from the Japanese Ministry of Health and Welfare in August 1996, the general practice in Japan is to place medical devices with clinicians for private evaluations and sometimes these periods are quite extensive before final sales can be concluded. The Company's future sales to Japan will largely depend on the results of the evaluations and the distributor's ability to close sales with end-users. There can be no assurance that the results of such evaluations will result in sales or when any sales in Japan will occur. Outside of Japan, the Company is currently focused in the European veterinary market. The Company has completed its marketing plan for the German market and in December 1996, entered into an agreement with a German distributor. The Company shipped 15 VetScan Systems to its German distributor in December upon signing of the distribution agreement. The Company is engaging in similar activities in England and France, studying the veterinary markets to prepare a targeted plan and align with suitable distributors. The Company's approach to developing new markets is generally to evaluate the specifically identified market's potential based on the products the Company has or intends to offer. The Company believes that thorough market studies prior to entering into a market will be a key factor in its ability to succeed in such market. In addition to signing new distributors, the Company will be reevaluating its current international agreements to better define each market's potential and each distributorship's ability to carry out the Company's marketing strategy. There can be no assurance that the Company will continue all of its current distribution arrangements, or be able to sign on any additional 7 8 distributors, or that if it does sign additional distributors, that the distributors can successfully place Piccolo or VetScan Systems into the marketplace. Within the US, the Company is currently focused on the VetScan market and is devoting only limited resources to the Piccolo market. The Company believes that its current Piccolo menu of 16 reagent test methods are suitable for certain niche market segments but not broad enough to fulfill the diagnostic needs of the general physician's office practice. The Company has identified ten additional test methods, particularly four electrolyte methods, that are likely to enhance its ability to penetrate the US human market. The Company has allocated resources to immediately begin development of the four electrolyte test methods. The Company estimates that development of these four test methods as a group will take approximately 18 months to complete. The Company is also engaging in discussions of joint development efforts with its Japanese distributor, Daiichi Pure Chemical, the second largest reagent supplier in Japan. There can be no assurance that the Company will be able to develop these new test methods, obtain development assistance from its Japanese partner, or if the test methods were developed, be able to place its Piccolo Systems. In searching for niche markets within the US for its Piccolo Systems, the Company has identified the US military as a potential customer for the Company's current products. The Company has been involved in an extensive product evaluation with the US Navy. The Navy has issued evaluation reports and accepted the Company as an approved vendor. The Company sold approximately five Piccolo Systems to the US Navy. In early January 1997, the Company completed a sole source solicitation for bid from the US Naval Logistic Command which could potentially award the Company with a contract to purchase up to several hundred Piccolo Systems over several years. There can be no assurance that the Company will be awarded this contract from the US Navy, or that the United States military will purchase additional products from the company. Market acceptance of the Company's Piccolo products in the US will depend in part on all current and future regulations affecting the conditions under which a health care practitioner may conduct medical tests using the Company's products. One of the regulations that affects the Piccolo Systems is the Clinical Laboratory Improvement Amendments of 1988 ("CLIA"). Under the CLIA regulations, the Company's Piccolo Systems are currently classified as "moderately complex", which requires that any location using the Piccolo products be certified as a laboratory. Even though the Company believes that obtaining a CLIA license does not require significant resources for clinicians, it can be a barrier to the Company's ability to place Piccolo Systems. 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. The Company has a meeting scheduled with the CDC in February 1997 to review its application. Although the review process for CLIA 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. Third party payer reimbursement policies may indirectly affect the pricing or relative attractiveness of the Company's products by regulating the maximum amount of reimbursement for blood testing services. The Health Care Financing Administration ("HCFA"), the government agency governing the reimbursement for Medicare patients, has recently recommended changes to the current reimbursement methodology. HCFA has proposed to the American Medical Association ("AMA") that Medicare reimbursement be paid on a panel basis instead of the current fee-per-test basis. HCFA has also recommended specific test methods to be included in these pre-determined panels, typically targeting diagnostic needs of specific organ function. The actual reimbursement rate and effective date of the new panels has not been determined by HCFA and AMA. The Company believes that this change, when effective, could allow the Company to compete more effectively against single test products as the Company's test methods are performed in a panel rather than a single test and the Company's panels are typically organ specific. Out of the test methods the Company currently offers, the Company's Hepatic Function panel matches the liver panel recommended by HCFA. Development of the four electrolyte test methods mentioned above will allow the Company to offer several of the currently proposed panels. However, there can be no assurance that the new HCFA proposals will become the governing rules for Medicare reimbursements or that the Company will have the ability to develop tests that are consistent with HCFA regulations. Finally, the Company's success will depend on its ability to introduce point-of-care systems and compete with laboratories removed from the patient-care setting and with other companies that offer near-patient testing for the alternate-site market. The 8 9 imposition of more stringent government regulations or failure to achieve success in these areas could have a materially adverse effect on the results of operations and financial condition of the Company. 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 conditions. 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 will 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 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(R) Discrete Lypholization 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 a supply agreement with Becton Dickinson Immunocytometry Systems to provide products for flow and image cytometry using the Company's Orbos technology. The Company also has a licensing agreement with Pharmacia Biotech, Inc., granting Pharmacia exclusive use of the Company's Orbos technology in the manufacture and sale of reagents for molecular biology research. Revenues from these contracts are primarily dependent upon sales of products using the Orbos technology by these other parties, which is out of the control of the Company and therefore, may vary significantly from quarter to quarter. The Company is currently working with another company to determine potential suitability of the Orbos technology to this company's product. 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-month period ended December 31, 1996, the Company reported total revenues of $1,891,000 ($1,273,000 from instrument sales, $540,000 from reagent disc sales, and $78,000 in Orbos contract and other product sales), a $999,000 or 112% increase as compared to net revenue of $892,000 ($546,000 from instrument sales, $170,000 from reagent disc sales, and $176,000 in Orbos contract and other product sales) for the same period in fiscal 1996. The increase in revenue in the quarter ended December 31, 1996, compared to the quarter ended December 31, 1995, was due to new system sales of VetScan units in the United States, new system sales of both Piccolo and VetScan units in the international market, and new and repeat reagent disc sales in the domestic and international markets. For the nine months ended December 31, 1996, total revenue was $4,915,000 ($3,119,000 from instrument sales, $1,390,000 from reagent disc sales, and $406,000 in Orbos contract and other product sales), a $2,984,000 or 155% increase as compared to net revenue of $1,931,000 ($1,227,000 from instrument sales, $453,000 from reagent disc sales, and $251,000 in Orbos contract and other product sales) for the same nine-month period in fiscal 1996. The increase in revenue for the nine-month 9 10 period ended December 31, 1996, compared to the nine-month period ended December 31, 1995 was due to new system sales of VetScan units in the United States, new system sales of both Piccolo and VetScan units in the international market, new and repeat reagent disc sales in the domestic and international market and an increase in revenue from Orbos contract and other product sales. COST OF PRODUCT SALES Cost of product sales includes the cost of all manufacturing activities for the Company's products. Cost of product sales during the quarter ended December 31, 1996, was $1,860,000, or 98% of total revenues, as compared to $1,334,000, or 150% of total revenues for the quarter ended December 31, 1995. For the nine-month period ended December 31, 1996, cost of sales was $5,471,000 or 111% of total revenues as compared to $3,514,000 or 182% for the same period in fiscal 1996. The increase in cost of product sales in the quarter and nine-month period ended December 31, 1996, as compared to the same quarter and nine-month period in fiscal 1996, was primarily a function of the increase in sales volume, partially offset by higher efficiency resulting from better standardized manufacturing processes. RESEARCH AND DEVELOPMENT Research and development expense during the third quarter of fiscal 1997 was $327,000, or 17% of total revenues. Third quarter fiscal 1997 expenses decreased $75,000 or 19% from research and development expense of $402,000 or 45% of total revenues in the same period in fiscal 1996. The decrease during the third quarter of fiscal 1997 from the third quarter of fiscal 1996 research and development expenses is mainly the result of reduced development activities and transferring research and development staff to support product manufacturing. For the first nine months of fiscal 1997 research and development expense was $1,036,000, or 21% of total revenues. Fiscal 1997 through December 31, 1996, research and development expense increased $71,000 or 7% from research and development expenses of $965,000 or 50% of total revenues in the first nine months of fiscal 1996. The increase in expenses during the nine-month period ended December 31, 1996, as compared to the nine-month period ended December 31, 1995, is primarily due to increased research and development activity in clinical trials for both human and veterinary markets. The Company expects research and development expense to increase as the Company plans to undertake development of new test methods to expand its test menus as well as other development projects. There can be no assurance, however, that such research and development projects will be undertaken or that research and development expenses will not continue to fluctuate as a percentage of total revenues. SELLING, GENERAL AND ADMINISTRATIVE Selling, general and administrative expenses totaled $1,088,000 or 58% of total revenues for the three-month period ended December 31, 1996. This is a $229,000 or 27% increase from selling, general and administrative expenses of $859,000 or 96% of total revenues for the three-month period ending December 31, 1995. The quarter to quarter increase was primarily due to costs incurred in building administrative, sales and marketing infrastructures to support increased sales and marketing activities both in the United States and internationally. Selling, general and administrative expenses for the first nine months of fiscal 1997 were $3,682,000 or 75% of total revenues. This is a $1,265,000 or 52% increase from selling, general and administrative expenses of $2,417,000 or 125% of total revenues for the first nine months of fiscal 1996. The increase in the nine-month period ending December 31, 1996, compared to the nine-month period ending December 31, 1995, related primarily to launching the Piccolo products worldwide and increases in administrative, sales and marketing staffing. While the majority of the costs related to the Piccolo launch activities are non-recurring, the Company expects marketing and sales expenditures to increase in absolute dollars in future periods as the Company expands marketing and distribution activities worldwide for both the VetScan and Piccolo products. 10 11 NET INTEREST INCOME Net interest income totaled $112,000 or 6% of total revenues for the quarter ended December 31, 1996, compared to $147,000 or 16% of total revenues in the comparable quarter in fiscal 1996. The decrease in interest income for the three-month period ending December 31, 1996, as compared to the three-month period ended December 31, 1995 was primarily due to a lower rate of return on investments. Net interest income totaled $254,000 or 5% of total revenues for the first nine-months of fiscal 1997 and $429,000 or 22% of total revenues for the same period in fiscal 1996. The decrease in interest income for the nine-month period ending December 31, 1996, as compared to the nine-month period ended December 31, 1995 was primarily the result of decreased investment levels and a lower rate of return on investments. LIQUIDITY AND CAPITAL RESOURCES As of December 31, 1996, the Company had approximately $2,343,000 in cash and cash equivalents and $4,934,000 in short-term investments, for total cash and investment resources of $7,277,000. The Company currently has no credit facilities. The Company expects to incur substantial additional costs to support its future operations, including commercialization of its Piccolo products; development of a sales and marketing organization to support sales and marketing activities for the Piccolo and VetScan products; 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; additional pre-clinical testing and clinical trials for its current and future products; and expansion of administrative support activities. The Company is currently contracting with a vendor to build an automated disc assembly line to provide anticipated capacity for future demand and to improve production efficiency. The Company currently believes the cost of this new production line will be approximately $1,500,000 of which approximately $815,000 was paid through December 31, 1996. The Company expects upon acceptance of the equipment that the balance will paid during the next six months. Additional manufacturing equipment will also need to be added during the balance of fiscal year 1997 and fiscal year 1998 to provide sufficient production capabilities. 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 nine months ended December 31, 1996, was $5,014,000, compared to $3,968,000 for the same period ended December 31, 1995. The increase in net cash used in operating activities was primarily due to the increase in net loss, the increase in trade and other receivables due to increased revenue, and an increase in inventory in anticipation of expanded product demand. Net cash provided by investing activities during the nine months ended December 31, 1996, was $945,000, compared to $438,000 of net cash used in investing activities during the nine months ended December 31, 1995. The change from net cash used in the nine months ended December 31, 1995, to net cash provided in the nine months ended December 31, 1996, was primarily the result of an increase in maturities and sales of short-term investments, offset in part by purchases of short-term investments and purchases of property and equipment. Net cash provided by financing activities for the nine month period ended December 31, 1996, was $4,821,000, compared to $6,337,000 for the same period in fiscal 1996. Net cash provided by financing activities for the nine month period ended 1996 and 1995 was primarily the result of offshore private placements of Preferred Stock and issuance of Common Stock. The Company anticipates that its existing capital resources and anticipated revenue from the sales of its products will be adequate to satisfy its currently planned operating and financial requirements through fiscal 1997. However, the Company is uncertain that its existing capital resources and anticipated revenue will be adequate to satisfy its financial requirements for the next 12 months. Accordingly, the Company may need to raise additional funds from public or private financing if it is to sustain its currently planned level of operating expenses during the next 12 months, or in the event that the Company is unsuccessful in raising sufficient equity funding, the Company will have to significantly reduce its operating expenses, which could have a material adverse impact on the Company's ability to develop, manufacture and market products, and hence the Company's results of operations. There can be no assurance that any financing will be available, or if available, be available at terms acceptable to the Company. Furthermore, any additional equity financing may be dilutive to shareholders and debt financing may involve restrictive covenants. 11 12 PART II-OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Idexx Laboratories v. Abaxis, Inc., et al. United States District Court (S.D. CA) Case No. 96-1113 K (CM) Plaintiff Idexx Laboratories filed a complaint on June 20, 1996, alleging federal and state unfair competition and trade libel arising from the distribution of a publication concerning Idexx testing equipment. The complaint sought injunctive relief and unspecified compensatory and punitive damages. The parties stipulated to a preliminary injunction. The Company answered the complaint on or about July 10, 1996, denying the material allegations and raising several affirmative defenses. The Company announced on December 20, 1996, that it reached an agreement with Idexx Laboratories, Inc. on the settlement of the lawsuit brought by Idexx against Abaxis. The Company agreed that there will be no further circulation of a publication concerning Idexx testing equipment. Other terms of the settlement are confidential; however, there is no material adverse financial impact on either party. On January 10, 1997, The United States District Court ordered the case dismissed with prejudice. The matter is now fully concluded. ITEM 2. CHANGES IN SECURITIES On January 31, 1997, the Company issued 32,000 shares of Common Stock to a consultant in payment for investor relations consulting services provided to the Company during 1996. These shares were valued at $3.875 per share, the closing market price for the Company's Common Stock as reported by Nasdaq on January 10, 1997. This issuance was made pursuant to Section 4(2) under the Securities Act of 1933. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The Company's Annual Meeting was held on November 26, 1996. (b) The following individuals were elected as directors to serve for the ensuing year. The following table indicates the number of votes in favor and votes against:
Director Votes in favor Votes against -------- -------------- ------------- Clinton H. Severson 7,107,963 83,982 Richard Bastiani, Ph.D. 7,106,463 85,482 Brenton G. A. Hanlon 7,108,963 82,982 Prithipal Singh, Ph.D. 7,086,963 104,982 Gary H. Stroy 7,106,963 84,982 Ernest S. Tucker, III, 7,089,963 101,982 M.D.
12 13 (c) In addition to the election of directors, the following matters were voted upon at the meeting and received the number of affirmative votes, negative votes, abstentions and broker non-votes indicated: (i) Amendment of the Company's Articles of Incorporation to increase the number of shares of Common Stock authorized for issuance to 35,000,000.
For Against Abstain Broker Non-Vote --- ------- ------- --------------- 6,422,295 473,057 39,250 257,343
(ii) Ratify the appointment of Deloitte & Touche LLP as the Company's independent auditors for fiscal year ending March 31, 1997.
For Against Abstain Broker Non-Vote --- ------- ------- --------------- 7,139,114 27,401 25,430 --
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 Sequential Page Number 3.3 Amendments to Articles of Incorporation 15 27 Financial Data Schedule 25 (b) Reports on Form 8-K None 13 14 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. February 14, 1997 by: /s/Clinton H. Severson - -------------------------------- -------------------------------- Date Clinton H. Severson President and Chief Executive Officer (Principal Executive Officer) February 14, 1997 by: /s/ Ting W. Lu - -------------------------------- -------------------------------- Date Ting W. Lu Vice President of Finance & Administration and Chief Financial Officer (Principal Financial and Accounting Officer) 14 15 EXHIBIT INDEX EX-3.3 Certificate of Determination of Preference of Series A Preferred Stock of Abaxis, Inc. EX-27.1 Financial Data Schedule EX-3.3 2 CERTIFICATE OF DETERMINATION OF SERIES A STOCK 1 EXHIBIT 3.3 CERTIFICATE OF DETERMINATION OF PREFERENCES OF SERIES A PREFERRED STOCK OF ABAXIS, INC. A California corporation Clinton H. Severson and Ting W. Lu certify that: 1. They are the duly elected and acting President and Secretary, respectively, of said Corporation. 2. Pursuant to authority given by said Corporation's Articles of Incorporation, the Board of Directors of said Corporation has duly adopted the following recitals and resolutions: WHEREAS, the Articles of Incorporation of the Corporation provide for a class of its authorized shares known as Preferred Stock, comprising Five Million (5,000,000) shares issuable from time to time in one or more series; WHEREAS, the Board of Directors of this Corporation is authorized to fix the number of shares of any series of Preferred Stock; to determine the designation of any such series, and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock including but not limited to the dividend rights, dividend rate and conversion rights, and to fix, alter or reduce the number of shares constituting any such series (but not below the number of shares then outstanding); and WHEREAS, it is the desire of the Board of Directors of the Corporation, pursuant to its authority under the Articles of Incorporation, to fix the rights, preferences, privileges, restrictions and other matters relating to a series of Preferred Stock to be designated Series A Preferred Stock; NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors does hereby provide for the issue of a new series of Preferred Stock of the Corporation and does hereby fix the rights, preferences, privileges, restrictions and other matters relating to such series of Preferred Stock as follows: 1. Designation. There shall be a series of Preferred Stock, which shall comprise Five Hundred Thousand (500,000) shares and shall be designated "Series A Preferred Stock." As used hereafter, the terms "Preferred Stock" and "Preferred Shares" without designation shall refer to shares of Series A Preferred Stock. 1 2 2. Dividends. The holder of record of a share of Series A Preferred Stock on the 90th day after the first date the Corporation issues Series A Preferred Stock (the date of issuance hereinafter referred to as the "Issuance Date") shall be entitled to receive, out of any assets at the time legally available therefor, a dividend of $0.15 per share of Series A Preferred Stock. The holder of record of a share of Series A Preferred Stock on the 180th day after the Issuance Date shall be entitled to receive, out of any assets at the time legally available therefor, a dividend of $0.15 per share of Series A Preferred Stock. The holder of record of a share of Series A Preferred Stock on the 270th day after the Issuance Date shall be entitled to receive, out of any assets at the time legally available therefor, a dividend of $0.15 per share of Series A Preferred Stock. The right to the dividends on the Series A Preferred Stock described in the preceding three sentences shall be cumulative. The Corporation will pay such dividends either in cash or by issuing shares of the Corporation's Common Stock ("Common Stock") having the Market Value (as defined below) equal to such dividends, at the option of the Board of Directors of the Corporation. If the Corporation elects to pay such dividends by issuing Common Stock, the "Market Value" of such Common Stock will be the average of the closing sale prices of the Corporation's Common Stock as reported on the Nasdaq National Market for the five (5) trading days prior to the record date for such dividend. A holder of Series A Preferred Stock who would otherwise be entitled to receive a fraction of a share of Common Stock under this Section 2 (taking into account all shares of Series A Preferred Stock held by such holder) shall receive, in lieu thereof, an amount equal to the product of such fractional interest multiplied by the Market Value. No dividends or distributions shall be made with respect to the Common Stock unless at the same time an equivalent dividend with respect to the Series A Preferred Stock has been paid or declared and set apart for payment. 3. Conversion Rights. The holders of Series A Preferred Stock shall have conversion rights as follows: a. Right to Convert. Each share of Series A Preferred shall be convertible, at the option of the holder thereof, at any time after the 45th day after the Issuance Date, at the office of the Corporation or any transfer agent for the Series A Preferred, into Common Stock as more fully described below. The number of shares of fully paid and nonassessable Common Stock into which each share of Series A Preferred may be converted shall be determined by dividing Ten Dollars ($10.00) by the Series A Conversion Price (as hereinafter defined) in effect at the time of conversion. The Series A Conversion Price shall be the lesser of (i) the Purchase Date Price (as defined below) and (ii): A. In the event the holder converts between forty-six (46) days and ninety (90) days after the Issuance Date, eighty percent (80%) of the Market Price (as defined below); B. In the event the holder converts between ninety one (91) 2 3 days and one hundred twenty (120) days after the Issuance Date, seventy-eight percent (78%) of the Market Price; C. In the event the holder converts between one hundred twenty one (121) days and one hundred fifty (150) days after the Issuance Date, seventy-six percent (76%) of the Market Price; D. In the event the holder converts between one hundred fifty one (151) days and one hundred eighty (180) days after the Issuance Date, seventy-four percent (74%) of the Market Price; E. In the event the holder converts between one hundred eighty one (181) days and two hundred ten (210) days after the Issuance Date, seventy-three percent (73%) of the Market Price; F. In the event the holder converts between two hundred eleven (211) days and two hundred forty (240) days after the Issuance Date, seventy-two percent (72%) of the Market Price; and G. In the event the holder converts anytime after two hundred forty one (241) days after the Issuance Date, seventy-one percent (71%) of the Market Price. For purposes of this Section 3, "Purchase Date Price" shall be the closing sales price of the Common Stock as reported on the Nasdaq National Market on September 9, 1996. For purposes of this Section 3, "Market Price" shall be the average of the closing bid prices of the Common Stock as reported on the Nasdaq National Market for the five (5) trading days prior to the date the Corporation receives written notice by telecopy from the holder of Series A Preferred Stock that such holder elects to convert Series A Preferred Stock, as adjusted to reflect any stock dividends on, or stock splits or stock combinations of, the Common Stock since the Issuance Date. b. Automatic Conversion. Each share of Series A Preferred Stock shall be converted into Common Stock automatically upon the earlier to occur of (i) the time the consent of at least a majority of the outstanding Series A Preferred Stock to such conversion is obtained or (ii) on the second anniversary of the Issuance Date. c. No Fractional Shares. No fractional shares of common stock or script shall be issued upon conversion of shares of Series A Preferred Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at any one time by the same holder, the number of full shares of common stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. Instead of any fractional shares of common stock which would otherwise be issuable upon conversion of any shares of Series A Preferred Stock, 3 4 the Corporation shall pay a cash adjustment in respect of such fractional interest equal to the product of such fractional interest multiplied by the Market Price relevant to such conversion. d. Mechanics of Conversion. Before any holder of Preferred Stock shall be entitled to convert the same into Common Stock, such holder shall surrender the certificate or certificates therefor, duly endorsed in blank or accompanied by proper instruments of transfer, at the principal office of the Corporation or of any transfer agent for the Preferred Stock, and shall give written notice to the Corporation at such office that such holder elects to convert the same and shall state in writing therein the name or names in which such holder wishes the certificate or certificates for Common Stock to be issued. As soon as practicable thereafter, the Corporation shall issue and deliver at such office to such holder's nominee or nominees, certificates for the number of whole shares of Common Stock to which such holder shall be entitled. Such conversion shall be deemed to have been made as of the date of such surrender of the Preferred Stock to be converted, and the person or persons entitled to receive the Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Common Stock on said date. e. Capital Adjustments. In case the Corporation shall at any time (A) subdivide the outstanding Common Stock, or (B) issue a stock dividend on its outstanding Common Stock, the number of shares of Common Stock issuable upon conversion of the Preferred Stock immediately prior to such subdivision or the issuance of such stock dividend shall be proportionately increased by the same ratio as the subdivision or dividend (with appropriate adjustments in the Series A Conversion Price). In case the Corporation shall at any time combine its outstanding Common Stock, the number of shares of Common Stock issuable upon conversion of the Preferred Stock immediately prior to such combination shall be proportionately decreased by the same ratio as the combination (with appropriate adjustments in the Series A Conversion Price). All such adjustments described herein shall be effective at the close of business on the date of such subdivision, stock dividend or combination, as the case may be. f. Reorganization. In case of any capital reorganization (other than in connection with a merger or other reorganization in which the Corporation is not the continuing or surviving entity) or any reclassification of the Common Stock of the Corporation, the Preferred Stock shall thereafter be convertible into that number of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of the shares of Preferred Stock immediately prior to such reorganization or recapitalization would have been entitled upon such reorganization or reclassification. In any such case, appropriate adjustment (as determined by the Board of Directors) shall be made in the application of the provisions herein set forth with respect to the rights and interests thereafter of the holders of Preferred Stock, such that the provisions set forth herein shall thereafter be applicable, as nearly as reasonably may be, in relation to any share of stock or other 4 5 property thereafter deliverable upon the conversion. h. Reservation of Stock. The Corporation shall at all times reserve and keep available, out of its authorized but unissued Common Stock, solely for the purpose of effecting the conversion of the Preferred Stock, the full number of shares of Common Stock deliverable upon the conversion of all Preferred Stock from time to time outstanding. The Corporation shall from time to time (subject to obtaining necessary director and shareholder action), in accordance with the laws of the State of California, increase the authorized amount of its Common Stock if at any time the authorized number of shares of Common Stock remaining unissued shall not be sufficient to permit the conversion of all of the shares of Preferred Stock at the time outstanding. 4. Voting Rights. Except as otherwise required by law, each holder of shares of Series A Preferred Stock shall be entitled to the number of votes for the Series A Preferred Stock held by him as shall be equal to the whole number of shares of Common Stock into which all of such shares of Series A Preferred Stock could be converted immediately after the close of business on the record date for the vote or consent of shareholders and shall have voting rights and powers equal to the voting rights and powers of the Common Stock. The holder of each share of Series A Preferred Stock shall be entitled to notice of any shareholders' meeting in accordance with the Bylaws of the Corporation and shall vote with holders of the Common Stock upon any matter submitted to a vote of shareholders, except those matters required by law to be submitted to a class vote. RESOLVED FURTHER, that the President or any Vice President, and the Secretary or any Assistant Secretary, of the Corporation be, and hereby are, authorized and directed to execute, acknowledge, file and record a Certificate of Determination of preferences in accordance with the foregoing resolutions and the provisions of California law. 3. The authorized number of shares of Series A Preferred Stock is 500,000, none of which have been issued. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK. 5 6 The undersigned declare under penalty of perjury under the laws of the State of California that the matters set forth in the foregoing Certificate are true and correct of their own knowledge. Executed at Sunnyvale, California on September 24, 1996. _______________________________ Clinton H. Severson President _______________________________ Ting W. Lu Secretary 6 7 ARTICLE 2 CERTIFICATE OF CORRECTION OF CERTIFICATE OF DETERMINATION OF PREFERENCES OF SERIES A PREFERRED STOCK OF ABAXIS, INC. A California corporation Clinton H. Severson and Ting W. Lu certify that: 1. They are the duly elected and acting President and Secretary, respectively, of said Corporation. 2. The Corporation filed with the Secretary of State of the State of California on September 6, 1996 a Certificate of Determination of Series A Preferred Stock of Abaxis, Inc. (the "Certificate of Determination"). 3. The Certificate of Determination incorrectly stated the resolution adopted by the Board of Directors of the Corporation. Specifically, the last sentence in subsection 3(a) ("Conversion Rights") incorrectly stated that "For purposes of this Section 3, "Market Price" shall be the average of the closing sales prices of the Common Stock as reported on the Nasdaq National Market for the five (5) trading days prior to the date of conversion of the Series A Preferred Stock, as adjusted to reflect any stock dividends on, or stock splits or stock combinations of, the Common Stock since the Issuance Date." In fact, this sentence read as follows in the resolution adopted by the Board of Directors of the Corporation: "For purposes of this Section 3, "Market Price" shall be the average of the closing bid prices of the Common Stock as reported on the Nasdaq National Market for the five (5) trading days prior to the date of conversion of the Series A Preferred Stock, as adjusted to reflect any stock dividends on, or stock splits or stock combinations of, the Common Stock since the Issuance Date." 4. Accordingly, subsection 3(a) of the Certificate of Determination is corrected to read in full as follows: a. Right to Convert. Each share of Series A Preferred shall be convertible, at the option of the holder thereof, at any time after the 45th day after the Issuance Date, at the office of the Corporation or any transfer agent for the Series A Preferred, into Common Stock as more fully described below. The number of shares of fully paid and nonassessable Common Stock into which each share of Series A Preferred may be converted shall be determined by dividing Ten Dollars ($10.00) by the Series A Conversion Price (as hereinafter defined) in effect at the time of conversion. The Series A Conversion Price shall be the lesser of (i) the Purchase Date Price (as defined below) and (ii): A. In the event the holder converts between forty-six (46) days 8 and ninety (90) days after the Issuance Date, eighty percent (80%) of the Market Price (as defined below); B. In the event the holder converts between ninety one (91) days and one hundred twenty (120) days after the Issuance Date, seventy-eight percent (78%) of the Market Price; C. In the event the holder converts between one hundred twenty one (121) days and one hundred fifty (150) days after the Issuance Date, seventy-six percent (76%) of the Market Price; D. In the event the holder converts between one hundred fifty one (151) days and one hundred eighty (180) days after the Issuance Date, seventy-four percent (74%) of the Market Price; E. In the event the holder converts between one hundred eighty one (181) days and two hundred ten (210) days after the Issuance Date, seventy-three percent (73%) of the Market Price; F. In the event the holder converts between two hundred eleven (211) days and two hundred forty (240) days after the Issuance Date, seventy-two percent (72%) of the Market Price; and G. In the event the holder converts anytime after two hundred forty one (241) days after the Issuance Date, seventy-one percent (71%) of the Market Price. For purposes of this Section 3, "Purchase Date Price" shall be the closing sales price of the Common Stock as reported on the Nasdaq National Market on September 9, 1996. For purposes of this Section 3, "Market Price" shall be the average of the closing bid prices of the Common Stock as reported on the Nasdaq National Market for the five (5) trading days prior to the date of conversion of the Series A Preferred Stock, as adjusted to reflect any stock dividends on, or stock splits or stock combinations of, the Common Stock since the Issuance Date. 5. This Certificate of Correction does not alter the wording of any resolution or written consent which was in fact adopted by the Board of Directors of the Corporation. THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK. 2 9 The undersigned declare under penalty of perjury under the laws of the State of California that the matters set forth in the foregoing Certificate are true and correct of their own knowledge. Executed at Sunnyvale, California on September 24, 1996. _______________________________ Clinton H. Severson President _______________________________ Ting W. Lu Secretary 3 10 ARTICLE 3 CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED ARTICLES OF INCORPORATION OF ABAXIS, INC. Clinton H. Severson and Ting W. Lu certify that: 1. They are, respectively, the President and Secretary of Abaxis, Inc., a California corporation. 2. Paragraph (a) of Article III of the Amended and Restated Articles of Incorporation of this corporation is amended to read as follows: (a) The Corporation is authorized to issue two classes of stock to be designated, respectively, "Preferred Stock" and "Common Stock." The total number of shares of Preferred Stock the Corporation shall have authority to issue is 5,000,000 shares and the total number of shares of Common Stock the Corporation shall have authority to issue is 35,000,000 shares. 3. The foregoing amendment of this corporation's Amended and Restated Articles of Incorporation ("Amendment") has been duly approved by the board of directors. 4. The foregoing Amendment has been duly approved by the required vote of shareholders in accordance with Sections 902 and 903 of the California Corporations Code. The total number of outstanding shares of capital stock of this corporation entitled to vote with respect to the foregoing Amendment was 9,878,553 shares, all of which are Common Stock. The number of shares voting in favor of the Amendment equaled or exceeded the vote required. The percentage voted required was more than fifty percent (50%). 11 The undersigned declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of their own knowledge. Executed at San Jose, California on December __, 1996. _______________________________ Clinton H. Severson, President _______________________________ Ting W. Lu, Secretary EX-27.1 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED STATEMENT OF OPERATIONS AND CONDENSED BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY TO SUCH COMPANY'S QUARTERLY REPORT ON FORM 10Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996. 9-MOS MAR-31-1997 OCT-01-1996 DEC-31-1996 2,343,000 4,934,000 970,000 (55,000) 2,498,000 10,826,000 6,612,000 (4,078,000) 13,420,000 2,697,000 0 0 0 58,405,000 (47,852,000) 13,420,000 1,842,000 1,891,000 1,860,000 1,860,000 1,403,000 0 0 (1,260,000) 0 (1,260,000) 0 0 0 (1,260,000) (0.12) (0.12)
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