10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2009

or

o 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 of Incorporation)	(I.R.S. Employer Identification No.)

3240 Whipple Road
Union City, California 94587
(Address of principal executive offices)

(510) 675-6500
(Registrant’s telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of August 6, 2009, there were 21,998,000 shares of the Registrant’s common stock outstanding.

ABAXIS, INC.

Form 10-Q

For the Quarter Ended June 30, 2009

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited):
Condensed Consolidated Statements of Operations for the Three Months Ended June 30, 2009 and 2008		3
Condensed Consolidated Balance Sheets as of June 30, 2009 and March 31, 2009		4
Condensed Consolidated Statements of Cash Flows for the Three Months Ended June 30, 2009 and 2008		5
Notes to the Condensed Consolidated Financial Statements		6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3. Quantitative and Qualitative Disclosures About Market Risk		28
Item 4. Controls and Procedures		29
Item 4T. Controls and Procedures		30
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		40
Item 3. Defaults Upon Senior Securities		40
Item 4. Submission of Matters to a Vote of Security Holders		40
Item 5. Other Information		40
Item 6. Exhibits		40
SIGNATURES		41
Exhibit 10.1
Exhibit 10.3
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

2

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements (Unaudited)

ABAXIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share data)

	Three Months Ended
	June 30,
	2009		2008
Revenues	$	29,625	$	24,572
Cost of revenues		12,470		11,069
Gross profit		17,155		13,503
Operating expenses:
Research and development		2,573		1,997
Sales and marketing		6,360		5,827
General and administrative		2,498		1,662
Total operating expenses		11,431		9,486
Income from operations		5,724		4,017
Interest and other income (expense), net		514		462
Income before income tax provision		6,238		4,479
Income tax provision		2,482		1,703
Net income	$	3,756	$	2,776
Net income per share:
Basic net income per share	$	0.17	$	0.13
Diluted net income per share	$	0.17	$	0.12
Shares used in the calculation of net income per share:
Weighted average common shares outstanding — basic		21,965,000		21,735,000
Weighted average common shares outstanding — diluted		22,357,000		22,398,000
Share-based compensation expense by function:
Cost of revenues	$	49	$	35
Research and development		140		61
Sales and marketing		245		137
General and administrative		462		168
Total share-based compensation expense	$	896	$	401

See accompanying Notes to the Condensed Consolidated Financial Statements.

3

ABAXIS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except share data)

	June 30,			March 31,
	2009			2009
ASSETS
Current assets:
Cash and cash equivalents	$	46,868		$	49,237
Short-term investments		20,215			20,776
Accounts receivables (net of allowances of $473 at June 30, 2009 and $388 at March 31, 2009)		24,159			21,983
Inventories		15,488			15,735
Prepaid expenses		959			957
Net deferred tax asset, current		4,628			4,676
Total current assets		112,317			113,364
Long-term investments		13,759			4,886
Property and equipment, net		14,366			14,798
Intangible assets, net		5,031			5,175
Other assets		35			24
Net deferred tax asset, non-current		2,464			2,464
Total assets	$	147,972		$	140,711
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,303		$	3,963
Accrued payroll and related expenses		4,296			3,698
Accrued taxes		2,005			34
Other accrued liabilities		1,135			1,116
Deferred revenue		1,047			1,024
Warranty reserve		1,732			1,714
Total current liabilities		14,518			11,549
Non-current liabilities:
Deferred rent		92			137
Deferred revenue		1,429			1,550
Warranty reserve		653			583
Total non-current liabilities		2,174			2,270
Commitments and contingencies (Note 8)
Shareholders’ equity:
Preferred stock, no par value; 5,000,000 shares authorized; no shares issued and outstanding		—			—
Common stock, no par value; 35,000,000 shares authorized; 21,985,000 and 21,933,000 shares issued and outstanding at June 30, 2009 and at March 31, 2009, respectively		118,489			117,846
Retained earnings		12,802			9,046
Accumulated other comprehensive loss		(11	)		—
Total shareholders’ equity		131,280			126,892
Total liabilities and shareholders’ equity	$	147,972		$	140,711

See accompanying Notes to the Condensed Consolidated Financial Statements.

4

ABAXIS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

	Three Months Ended
	June 30,
	2009			2008
Cash flows from operating activities:
Net income	$	3,756		$	2,776
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,290			1,004
Investment premium amortization		11			—
(Gain) loss on disposal of property and equipment		6			(20	)
(Gain) loss on foreign exchange translation		(88	)		—
Share-based compensation expense		896			401
Excess tax benefits from share-based awards		(190	)		(1,773	)
Provision for deferred income taxes		245			1,439
Changes in assets and liabilities:
Accounts receivables, net		(2,127	)		(79	)
Inventories		(93	)		(296	)
Prepaid expenses		(2	)		(763	)
Other assets		(11	)		5
Accounts payable		340			(1,613	)
Accrued payroll and related expenses		598			(830	)
Accrued taxes		1,770			120
Other accrued liabilities		19			(280	)
Deferred rent		(45	)		(35	)
Deferred revenue		(98	)		331
Warranty reserve		88			167
Net cash provided by operating activities		6,365			554
Cash flows from investing activities:
Purchases of available-for-sale investments		(3,030	)		—
Purchases of held-to-maturity investments		(11,706	)		(6,991	)
Proceeds from redemptions of available-for-sale investments		—			4,000
Proceeds from maturities of held-to-maturity investments		5,597			6,991
Principal payments of asset-backed securities		798			—
Purchases of property and equipment		(373	)		(524	)
Proceeds from disposal of property and equipment		—			20
Net cash (used in) provided by investing activities		(8,714	)		3,496
Cash flows from financing activities:
Proceeds from issuance of common stock under stock plans, net		(249	)		(11	)
Excess tax benefits from share-based awards		190			1,773
Net cash (used in) provided by financing activities		(59	)		1,762
Effect of exchange rate changes on cash and cash equivalents		39			—
Net (decrease) increase in cash and cash equivalents		(2,369	)		5,812
Cash and cash equivalents at beginning of period		49,237			17,219
Cash and cash equivalents at end of period	$	46,868		$	23,031
Supplemental disclosure of cash flow information:
Cash paid for income taxes, net of refunds	$	227		$	144
Supplemental disclosure of non-cash flow information:
Change in unrealized gain (loss) on investments, net of tax	$	(11	)	$	83
Transfers of equipment between inventory and property and equipment, net	$	347		$	589
Net change in capitalized share-based compensation	$	7		$	(6	)
Common stock withheld for employee taxes in connection with share-based compensation	$	287		$	229

See accompanying Notes to the Condensed Consolidated Financial Statements.

5

ABAXIS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Description of Business. Abaxis, Inc. (the “Company”), incorporated in California in 1989, develops, manufactures, markets and sells portable blood analysis systems for use in the human or veterinary patient-care setting to provide clinicians with rapid blood constituent measurements.

On July 1, 2008, the Company’s sales office in Darmstadt, Germany was incorporated as Abaxis Europe GmbH to market, promote and distribute diagnostic systems for medical and veterinary uses. Abaxis Europe GmbH, a wholly-owned subsidiary of the Company, was formed to provide customer support in a timely manner in response to the growing and increasingly diverse services needs of customers in the European market.

Principles of Consolidation. The accompanying unaudited condensed consolidated financial statements as of and for the three-month period ended June 30, 2009 include the accounts of the Company and its wholly-owned subsidiary, Abaxis Europe GmbH. All intercompany transactions and balances have been eliminated in consolidation.

Basis of Presentation. The unaudited condensed consolidated financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim periods. The unaudited condensed consolidated financial statements included herein reflect all normal recurring adjustments, which are, in the opinion of management, necessary to state fairly the results of operations and financial position for the periods presented. The results for the three-month period ended June 30, 2009 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2010 or for any interim or future period.

These unaudited condensed consolidated financial statements should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2009.

In preparing the accompanying unaudited condensed consolidated financial statements, the Company has reviewed, as determined necessary by the Company’s management, events that have occurred after June 30, 2009 and through the time of filing these condensed consolidated financial statements on Form 10-Q with the SEC on August 10, 2009. There were no subsequent events requiring recognition or disclosure in the financial statements.

Reclassifications. Certain reclassifications have been made to prior periods’ financial statements to conform to the current period presentation. These reclassifications had no material impact on previously reported results of operations or financial position.

Use of Estimates in Preparation of Financial Statements. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Such management estimates include allowance for doubtful accounts, fair value of investments, sales and other allowances, valuation of inventory, fair values of purchased intangible assets, useful lives of intangible assets, income taxes, valuation allowance for deferred tax assets, share-based compensation and warranty reserves. Management bases their estimates on historical experience and on various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results that the Company experiences may differ materially from these estimates.

Significant Accounting Policies. The Company’s significant accounting policies are disclosed in the Company’s Annual Report on Form 10-K for the year ended March 31, 2009 filed with the SEC on June 12, 2009, and have not changed significantly as of June 30, 2009.

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NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

In June 2009, the Financial Accounting Standards Board (the “FASB”) approved the “FASB Accounting Standards Codification” (the “Codification”) as the single source of authoritative U.S. generally accepted accounting principles (“U.S. GAAP”) recognized by the FASB. The Codification does not change current U.S. GAAP, but is intended to simplify user access to all authoritative U.S. GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents will be superseded and all other accounting literature not included in the Codification will be considered non-authoritative. The Codification is effective for interim and annual periods ending after September 15, 2009. The Codification will be effective for the Company in the interim period ending September 30, 2009 and the Company does not expect the adoption of the Codification to have a material impact on its consolidated financial position, results of operations or cash flows.

In May 2009, the FASB issued Statement of Financial Accounting Standard (“SFAS”) No. 165, “Subsequent Events” (“SFAS No. 165”). SFAS No. 165 modifies the definition of what qualifies as a subsequent event—those events or transactions that occur following the balance sheet date, but before the financial statements are issued, or are available to be issued—and requires companies to disclose the date through which it has evaluated subsequent events and the basis for determining that date. The Company adopted the provisions of SFAS No. 165 during the quarter ended June 30, 2009, in accordance with the effective date. The Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

In April 2009, the FASB issued FASB Staff Position (“FSP”) No. Financial Accounting Standard (“FAS”) 115-2 and FAS No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP No. FAS 115-2”). FSP No. FAS 115-2 provides guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. FSP No. FAS 115-2 is effective for the Company for interim periods ending after June 15, 2009 and the Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP No. FAS 107-1”). FSP No. FAS 107-1 amends SFAS No. 107, “Disclosures about Fair Value of Financial Instruments” to require disclosures about fair value of financial instruments in interim reporting periods. Such disclosures were previously required only in annual financial statements. FSP No. FAS 107-1 is effective for the Company’s quarter ended June 30, 2009. FSP No. FAS 107-1 applies only to financial statement disclosures and the Company does not expect the adoption to have a material impact on its consolidated financial position, results of operations or cash flows.

In April 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP No. FAS 157-4”), which provides additional guidance for estimating fair value in accordance with SFAS No. 157. FSP No. FAS 157-4 is effective for the Company’s quarter ended June 30, 2009 and the adoption did not have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In October 2008, the FASB issued FSP No. FAS 157-3, “Determining the Fair Value of a Financial Asset When the Market For That Asset Is Not Active” (“FSP No. FAS 157-3”). FSP No. FAS 157-3 clarifies the application of SFAS No. 157, “Fair Value Measurements,” in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS No. 157-3 became effective upon issuance, including with respect to prior periods for which financial statements have not been issued. The Company’s adoption of FSP No. FAS 157-3 did not have a material impact on its consolidated financial position, results of operations or cash flows.

In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP No. FAS 142-3”). FSP No. FAS 142-3 amends SFAS No. 142, “Goodwill and Other Intangible Assets,” to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS No. 141 and other U.S. generally accepted accounting principles. FSP No. FAS 142-3 is effective for fiscal years beginning after December 15, 2008, as well as interim periods within those fiscal years. The Company’s adoption of FSP No. FAS 142-3 did not have a material impact on its consolidated financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”), which is intended to enable investors to better understand how derivative instruments and hedging activities affect an entity’s financial position, financial performance and cash flows through enhanced disclosure requirements. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. SFAS No. 161 was effective for the Company on April 1, 2009. The Company’s adoption of SFAS No. 161 did not have a material impact on its consolidated financial position, results of operations or cash flows.

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NOTE 3. INVESTMENTS

The following table summarizes short-term and long-term investments by major security type (in thousands):

	June 30, 2009
	Cost or		Gross Unrealized			Fair
	Amortized Cost		Gain (Loss)			Value
Short-term investments
Held-to-maturity:
Certificates of deposits	$	18,001	$	—		$	18,001
Total short-term investments in held-to-maturity	$	18,001	$	—		$	18,001
Available-for-sale:
Asset-backed securities	$	2,232	$	(18	)	$	2,214
Total short-term investments in available-for-sale	$	2,232	$	(18	)	$	2,214
Total short-term investments	$	20,233	$	(18	)	$	20,215
Long-term investments
Held-to-maturity:
Certificates of deposits	$	3,168	$	—		$	3,168
Corporate bonds		10,591		—			10,591
Total long-term investments in held-to-maturity	$	13,759	$	—		$	13,759

	March 31, 2009
	Cost or		Gross Unrealized		Fair
	Amortized Cost		Gain (Loss)		Value
Short-term investments
Held-to-maturity:
Certificates of deposits	$	20,776	$	—	$	20,776
Total short-term investments in held-to-maturity	$	20,776	$	—	$	20,776
Long-term investments
Held-to-maturity:
Certificates of deposits	$	2,376	$	—	$	2,376
Corporate bonds		2,510		—		2,510
Total long-term investments in held-to-maturity	$	4,886	$	—	$	4,886

As of June 30, 2009 and March 31, 2009, unrealized gain (loss) on investments, net of related income taxes, was $(11,000) and $0, respectively.

The contractual maturities of short-term and long-term investments as of June 30, 2009, are as follows (in thousands):

Investments excluding asset-backed securities	Fair Value
Due in less than one year (fiscal year 2010)	$	18,001
Due in 1 to 2 years (fiscal year 2011)		13,759
Asset-backed securities(1)
Weighted average maturity less than 1 year		621
Weighted average maturity 1 to 2 years		1,593
Total investments	$	33,974

(1) Asset-backed securities are separately disclosed as they are not due at a single maturity date.

NOTE 4. FAIR VALUE MEASUREMENTS

Effective April 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”) to measure the fair value of its financial assets and financial liabilities. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS No. 157 are described below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

8

Level 2: Directly or indirectly observable market based inputs used in models or other valuation methodologies.

Level 3: Unobservable inputs that are supported by little or no market data and require the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions.

The following table summarizes financial assets, measured at fair value on a recurring basis, by level within the fair value hierarchy as of June 30, 2009 (in thousands):

	As of June 30, 2009
	Quoted Prices in
	Active Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
	Assets		Inputs		Inputs
	Level 1		Level 2		Level 3		Total
Assets
Cash and cash equivalents(1)	$	46,868	$	—	$	—	$	46,868
Short-term investments:
Certificates of deposits		18,001		—		—		18,001
Asset-backed securities		2,214		—		—		2,214
Long-term investments:
Certificates of deposits		3,168		—		—		3,168
Corporate bonds		10,591		—		—		10,591
Total assets at fair value	$	80,842	$	—	$	—	$	80,842

(1) Cash and cash equivalents as of June 30, 2009 consisted of $7.1 million in cash and $39.8 million in cash equivalents, consisting of money market mutual funds.

The fair value of the Company’s Level 1 financial assets is based on quoted market prices of the underlying security. As of June 30, 2009, the Company did not have any Level 2 or Level 3 financial assets or liabilities.

NOTE 5. INVENTORIES

Inventories, include material, labor and overhead, and are stated at the lower of cost (first-in, first-out method) or market. Components of inventories were as follows (in thousands):

	June 30,		March 31,
	2009		2009
Raw materials	$	9,032	$	8,539
Work-in-process		2,613		2,592
Finished goods		3,843		4,604
Inventories	$	15,488	$	15,735

NOTE 6. WARRANTY RESERVES

The Company provides for the estimated future costs to be incurred under the Company’s standard warranty obligation on its instruments and reagent discs.

Instruments. The Company’s standard warranty obligation on instruments ranges from two to three years. The estimated contractual warranty obligation is recorded when the related revenue is recognized and any additional amount is recorded when such cost is probable and can be reasonably estimated. The estimated accrual for warranty exposure is based on historical experience, estimated product failure rates, material usage, freight incurred in repairing the instrument after failure and known design changes.

Reagent Discs. The Company records a provision for defective reagent discs when the related sale is recognized and any additional amount is recorded when such cost is probable and can be reasonably estimated. The warranty cost includes the replacement costs and freight of a defective reagent disc. During the three months ended June 30, 2009 and 2008, the provision for warranty expense related to replacement of defective reagent discs was $75,000 and $77,000, respectively. The balance of accrued warranty reserve related to replacement of defective reagent discs at June 30, 2009 and 2008 was $461,000 and $407,000, respectively, which was classified as a current liability on the balance sheet.

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The Company evaluates its estimates for warranty reserves on an ongoing basis and believes it has the ability to reasonably estimate warranty costs. However, unforeseeable changes in factors may impact the estimate for warranty and such changes could cause a material change in the Company’s warranty reserve accrual in the period in which the change was identified.

The change in the Company’s accrued warranty reserve during the three months ended June 30, 2009 and 2008 is summarized as follows (in thousands):

	Three Months Ended
	June 30,
	2009			2008
Balance at beginning of period	$	2,297		$	1,948
Provision for warranty expense		257			507
Warranty costs incurred		(169	)		(340	)
Balance at end of period		2,385			2,115
Non-current portion of warranty reserve		653			1,007
Current portion of warranty reserve	$	1,732		$	1,108

NOTE 7. LINE OF CREDIT

The Company has a line of credit with Comerica Bank-California which provides for borrowings of up to $2.0 million. The line of credit may be terminated upon notification by either party and any outstanding balance is payable upon demand. The line of credit bears interest at the bank’s prime rate minus 0.25%, which totaled 3.00% at June 30, 2009, and is payable monthly. At June 30, 2009, of the $2.0 million available, $97,000 was committed to secure a letter of credit for the Company’s facilities lease. At June 30, 2009, there was no amount outstanding under the Company’s line of credit. The weighted average interest rates on the line of credit during the three months ended June 30, 2009 and 2008 were 3.00% and 4.83%, respectively.

The line of credit agreement contains certain financial covenants, which are evaluated on a quarterly basis. At June 30, 2009, the Company was in compliance with each of these covenants. Included in these financial covenants, among other stipulations, are the following requirements:

• The Company must have a minimum net income of $25,000 before preferred stock dividends and accretion on preferred stock in any three quarters of a fiscal year, provided that any loss before preferred stock dividends and accretion on preferred stock incurred in the remaining quarter is not to exceed $250,000.

• The Company is required to be profitable, as defined, on a fiscal year to date basis beginning, with respect to the current fiscal year, with the six month period ending September 30, 2009 and to have net income before preferred stock dividends and accretion on preferred stock of at least $1.2 million for the fiscal year ending March 31, 2010.

• The Company is required to comply with certain financial covenants as follows:

Financial Covenants	Requirements
Quick ratio, as defined	Not less than 2.00 to 1.00
Cash flow coverage, as defined	Not less than 1.25 to 1.00
Debt to net worth ratio, as defined	Not greater than 1.00 to 1.00
Tangible effective net worth, as defined	Not less than $25.7 million

Borrowings under the line of credit are collateralized by the Company’s net book value of assets of $131.3 million at June 30, 2009, including its intellectual property.

NOTE 8. COMMITMENTS AND CONTINGENCIES

Purchase Commitments. In October 2008, the Company entered into an original equipment manufacturing (“OEM”) agreement with Scandinavian Micro Biodevices APS (“SMB”) to purchase coagulation analyzers and coagulation cartridges. In the fourth quarter of fiscal 2009, the Company started marketing the products and, upon achievement of certain milestones by SMB outlined in the agreement, the Company will be subject to the minimum purchase commitments under the OEM agreement. These milestones have not yet been met and the Company is currently purchasing coagulation analyzers and coagulation cartridges on a purchase order basis, but all such purchases will count towards purchase obligations if and when they are triggered.

Patent License Agreement. Effective January 2009, the Company entered into a license agreement with Inverness Medical Switzerland GmbH (“Inverness”). Under the license agreement, the Company licensed co-exclusively certain worldwide patent rights related to lateral flow immunoassay technology in the field of animal health diagnostics in the professional marketplace. The license agreement provides that Inverness shall not grant any future rights to any third parties under its current lateral flow patent rights in the animal health diagnostics field in the professional marketplace. The license agreement enables the Company to develop and market products under rights from Inverness to address animal health and laboratory animal research markets.

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In exchange for the license rights, the Company (i) paid an up-front license fee of $5.0 million to Inverness in January 2009, (ii) agreed to pay royalties during the term of the agreement, based solely on sales of products in a jurisdiction country covered by valid and unexpired claims in that jurisdiction under the licensed Inverness patent rights, and (iii) agreed to pay a yearly minimum license fee of between $500,000 to $1.0 million per year, which fee will be creditable against any royalties due during such calendar year. The royalties, if any, are payable through the date of the expiration of the last valid patent licensed under the agreement that includes at least one claim in a jurisdiction covering products we sell in that jurisdiction. The yearly minimum fees are payable starting in fiscal 2011 for so long as the Company desires to maintain exclusivity under the agreement.

Litigation. The Company is involved from time to time in various litigation matters in the normal course of business. The Company believes that the ultimate resolution of these matters will not have a material effect on its financial position or results of operations.

NOTE 9. SHARE-BASED COMPENSATION

Effective April 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”) using the modified prospective method. Under the fair value provisions of SFAS No. 123(R), the Company recognizes share-based compensation expense, net of an estimated forfeiture rate, for those shares over the requisite service period of the award to employees and directors.

Share-based compensation has been classified in the statements of operations or capitalized on the balance sheets in the same manner as cash compensation paid to employees. Non-cash compensation expense recognized for share-based awards during the three months ended June 30, 2009 and 2008 was $896,000 and $401,000, respectively. Capitalized share-based compensation costs at June 30, 2009 and 2008 were $40,000 and $21,000, respectively, which were included in inventories on the Company’s Condensed Consolidated Balance Sheets.

Cash Flow Impact

SFAS No. 123(R) requires cash flows resulting from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised stock options and vested restricted stock units in excess of the deferred tax asset attributable to share-based compensation expense for such share-based awards. Excess tax benefits are considered realized when the tax deductions reduce taxes that otherwise would be payable. Excess tax benefits classified as a financing cash inflow for the three months ended June 30, 2009 and 2008 were $190,000 and $1.8 million, respectively.

Equity Compensation Plans

The Company’s share-based compensation plans are described below.

2005 Equity Incentive Plan. The Company’s 2005 Equity Incentive Plan (the “Equity Incentive Plan”) restated and amended the Company’s 1998 Stock Option Plan. The Equity Incentive Plan allows for the awards of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, deferred compensation awards or other share-based awards to employees, directors and consultants. On October 28, 2008, the Company’s shareholders approved an amendment to the Equity Incentive Plan to increase the shares reserved for issuance under the Equity Incentive Plan by 500,000 shares. As of June 30, 2009, the Equity Incentive Plan provides for the issuance of a maximum of 5,386,000 shares, of which 539,000 shares of common stock were then available for future issuance.

Options granted to employees and directors generally expire ten years from the grant date. Options granted to employees generally become exercisable over a period of four years based on cliff-vesting terms and continuous employment. Options granted to non-employee directors generally become exercisable over a period of one year based on monthly vesting terms and continuous service. See the “Stock Options” section in this Note for additional information.

Restricted stock units awarded to employees generally vest over a period of four years and the awards may also be subject to accelerated vesting upon achieving certain performance-based milestones and continuous employment during the vesting period. Restricted stock units awarded to non-employee directors generally vest in full one year after the grant date based on continuous service. See the “Restricted Stock Units” section in this Note for additional information.

1992 Outside Directors’ Stock Option Plan. Under the Company’s 1992 Outside Directors’ Stock Option Plan (the “Directors Plan”), options to purchase shares of common stock were automatically granted, annually, to non-employee directors. Options under the Directors Plan were nonqualified stock options and were granted at the fair market value on the date of grant and expired ten years from the date of grant. Options granted to non-employee directors generally become exercisable over a period of one year based on monthly vesting terms and continuous service. The Directors Plan provided for the issuance of a maximum of 250,000 shares. As of June 30, 2009, all outstanding options under the Directors Plan were fully vested and fully exercisable and no shares of common stock were available for future issuance because the time period for granting options expired in accordance with the terms of the Directors Plan in June 2002.

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The Company’s current practice is to issue new shares of common stock from its authorized shares for share-based awards upon the exercise of stock options or vesting of restricted stock units.

Stock Options

Prior to April 1, 2006, the Company granted stock options to employees, with an exercise price equal to the closing market price of the Company’s common stock on the date of grant and with cliff-vesting terms over four years, conditional on continuous employment with the Company. In addition, prior to April 1, 2006, the Company granted stock options to non-employee directors with an exercise price equal to the closing market price of the Company’s common stock on the date of grant and became exercisable over a period of one year based on monthly vesting terms, conditional on continuous service to the Company. There were no stock options granted since the beginning of fiscal 2007 or during the three months ended June 30, 2009.

The Company used the Black-Scholes option pricing model to determine the fair value of stock options granted prior to March 31, 2006. The fair value of each stock option granted was estimated on the date of the grant using the Black-Scholes option pricing model, based on a multiple option valuation approach. In accordance with the provisions of SFAS No. 123(R), the Company has recognized compensation expense during the requisite service period of the stock option. As of June 30, 2009, the Company had no unrecognized compensation expense related to stock options granted.

Stock Option Activity

The following table summarizes information regarding options outstanding and options exercisable at June 30, 2009 and the changes during the three-month period then ended:

				Weighted		Weighted
				Average		Average		Aggregate
				Exercise		Remaining		Intrinsic
	Number of			Price		Contractual		Value
	Shares			Per Share		Life (Years)		(In thousands)
Outstanding at March 31, 2009		848,000		$	8.86
Granted		—			—
Exercised		(11,000	)		3.27
Canceled or forfeited		—			—
Outstanding at June 30, 2009		837,000		$	8.93		3.01	$	9,886
Vested and expected to vest at June 30, 2009		837,000		$	8.93		3.01	$	9,886
Exercisable at June 30, 2009		837,000		$	8.93		3.01	$	9,886

The aggregate intrinsic value in the table above represents the pre-tax intrinsic value, based on the Company’s closing stock price as of June 30, 2009, that would have been received by the option holders had all option holders exercised their stock options as of that date. Total intrinsic value of stock options exercised during the three months ended June 30, 2009 and 2008 was $165,000 and $818,000, respectively. Cash proceeds from stock options exercised during the three months ended June 30, 2009 and 2008 were $38,000 and $218,000, respectively.

Restricted Stock Units

The Company grants restricted stock unit awards to employees and directors as part of its share-based compensation program which began in fiscal 2007. The restricted stock unit awards entitle holders to receive shares of common stock at the end of a specified period of time. Vesting for restricted stock unit awards is based on continuous employment or service of the holder. Upon vesting, the equivalent number of common shares are typically issued net of tax withholdings. If the vesting conditions are not met, unvested restricted stock unit awards will be forfeited. Generally, the restricted stock unit awards vest according to one of the following time-based vesting schedules:

• Restricted stock unit awards to employees: Four-year time-based vesting as follows: five percent vesting after the first year; additional ten percent after the second year; additional 15 percent after the third year; and the remaining 70 percent after the fourth year of continuous employment with the Company.

• Restricted stock unit awards to non-employee directors: 100 percent vesting after one year of continuous service to the Company.

Certain restricted stock unit awards granted to employees in fiscal 2007 may also be subject to accelerated vesting upon achieving certain performance-based milestones. Additionally, the Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”), in its discretion, may provide in the event of a change in control for the acceleration of vesting and/or settlement of the restricted stock unit held by a participant upon such conditions and to such extent as determined by the Compensation Committee. The Company’s Board of Directors has adopted an executive change in control severance plan, which it may terminate or amend at any time, that provides that awards granted to executive officers will accelerate fully on a change of control. The vesting of non-employee director awards granted under the Equity Incentive Plan automatically will also accelerate in full upon a change in control.

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The fair value of restricted stock unit awards used in the Company’s expense recognition method is measured based on the number of shares granted and the closing market price of the Company’s common stock on the date of grant. Such value is recognized as an expense over the corresponding requisite service period. The share-based compensation expense is reduced for an estimate of the restricted stock unit awards that are expected to be forfeited. The forfeiture estimate is based on historical data and other factors, and compensation expense is adjusted for actual results. As of June 30, 2009, the total unrecognized compensation expense related to restricted stock unit awards granted amounted to $14.8 million, which is expected to be recognized over a weighted average service period of 2.45 years.

Restricted Stock Unit Activity

The following table summarizes restricted stock unit activity for the three months ended June 30, 2009:

				Weighted
				Average
	Number of			Grant Date
	Shares			Fair Value(1)
Unvested at March 31, 2009		690,000		$	23.43
Granted		220,000			15.15
Vested(2)		(59,000	)		24.17
Canceled or forfeited		(56,000	)		23.92
Unvested at June 30, 2009		795,000		$	21.05

(1)	The weighted average grant date fair value of restricted stock units is based on the number of shares and the closing market price of the Company’s common stock on the date of grant.
(2)	The number of restricted stock units vested includes shares that the Company withheld on behalf of the employees to satisfy the statutory tax withholding requirements.

Total intrinsic value of restricted stock units vested during the three months ended June 30, 2009 and 2008 was $915,000 and $913,000, respectively. The total grant date fair value of restricted stock units vested during the three months ended June 30, 2009 and 2008 was $1.4 million and $860,000, respectively.

NOTE 10. NET INCOME PER SHARE

Basic net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares that would have been outstanding during the period assuming the issuance of common shares for all potential dilutive common shares outstanding using the treasury stock method. Dilutive potential common shares outstanding include outstanding stock options and restricted stock units.

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The following is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net income per share (in thousands, except share and per share data):

	Three Months Ended
	June 30,
	2009		2008
Numerator:
Net income	$	3,756	$	2,776
Denominator:
Weighted average common shares outstanding — basic		21,965,000		21,735,000
Weighted average effect of dilutive securities:
Stock options		368,000		585,000
Restricted stock units		24,000		78,000
Weighted average common shares outstanding — diluted		22,357,000		22,398,000
Net income per share:
Basic net income per share	$	0.17	$	0.13
Diluted net income per share	$	0.17	$	0.12

The Company excluded the following stock options from the computation of diluted weighted average shares outstanding because the exercise price of the stock options is greater than the average market price of the Company’s common stock during the period and, therefore, the inclusion of these stock options would be antidilutive to net income per share:

	Three Months Ended
	June 30,
	2009		2008
Weighted average number of shares underlying antidilutive stock options		176,000		—
Weighted average exercise price per share underlying antidilutive stock options	$	21.34		N/A

The Company excluded the following restricted stock units from the computation of diluted weighted average shares outstanding because the inclusion of these awards would be antidilutive to net income per share:

	Three Months Ended
	June 30,
	2009		2008
Weighted average number of shares underlying antidilutive restricted stock units		400,000		24,000

NOTE 11. INCOME TAXES

The Company’s effective tax rate for the three months ended June 30, 2009 and 2008 was 40% and 38%, respectively.

The increase in the effective tax rate for the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to an increase in non-deductible share-based compensation expense and a change in the Company’s investment portfolio, and partially offset by an increase in federal research and development tax credits and tax benefits for federal qualified production activities.

The Company did not have any unrecognized tax benefits as of June 30, 2009 or June 30, 2008. During the three months ended June 30, 2009 and 2008, the Company did not recognize any interest or penalties related to unrecognized tax benefits.

NOTE 12. COMPREHENSIVE INCOME

The following is a summary of comprehensive income for the three months ended June 30, 2009 and 2008 (in thousands):

	Three Months Ended
	June 30,
	2009			2008
Net income	$	3,756		$	2,776
Other comprehensive income:
Change in unrealized gain (loss) on investments, net of tax		(11	)		83
Comprehensive income	$	3,745		$	2,859

NOTE 13. SEGMENT REPORTING INFORMATION

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company’s chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

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The Company develops, manufactures, markets and sells portable blood analysis systems for use in the human or veterinary patient-care setting to provide clinicians with rapid blood constituent measurements. The Company identifies its reportable segments as those customer groups that represent more than 10% of the combined revenue or gross profit or loss of all reported operating segments. The Company manages its business on the basis of the following two reportable segments: (i) the medical market and (ii) the veterinary market, which are based on the products sold by market and customer group. Each reportable segment has similar manufacturing processes, technology and shared infrastructures. The accounting policies for segment reporting are the same as for the Company as a whole. Assets are not segregated by segments since the Company’s chief operating decision maker does not use assets as a basis to evaluate a segment’s performance.

Medical Market

In the medical market reportable segment, the Company serves a worldwide customer group consisting of military installations (ships, field hospitals and mobile care units), physicians office practices across all specialties, urgent care and walk-in clinics (free-standing or hospital-connected), home care providers (national, regional or local), nursing homes, ambulance companies, oncology treatment clinics, hospital labs and draw stations. The products manufactured and sold in this segment primarily consist of Piccolo chemistry analyzers and medical reagent discs.

Veterinary Market

In the veterinary market reportable segment, the Company serves a worldwide customer group consisting of companion animal hospitals, animal clinics with mixed practices of small animals, birds and reptiles, equine and bovine practitioners, veterinary emergency clinics, veterinary referral hospitals, universities, government, pharmaceutical companies, biotechnology companies and private research laboratories. The products manufactured and sold in this segment primarily consist of VetScan chemistry analyzers and veterinary reagent discs. The Company also sells OEM-supplied products in this segment consisting primarily of hematology instruments and hematology reagent kits. Starting in the fourth quarter of fiscal 2009, OEM-supplied products also included coagulation analyzers, coagulation cartridges and canine heartworm rapid tests. Starting in the first quarter of fiscal 2010, OEM-supplied products also included i-STAT cartridges.

The table below summarizes revenues, cost of revenues and gross profit from the Company’s two operating segments and from certain unallocated items for the three months ended June 30, 2009 and 2008 (in thousands):

	Three Months Ended
	June 30,
	2009		2008
Revenues:
Medical Market	$	5,763	$	6,529
Veterinary Market		21,823		16,613
Other(1)		2,039		1,430
Total revenues		29,625		24,572
Cost of revenues:
Medical Market		2,631		3,226
Veterinary Market		8,717		7,043
Other(1)		1,122		800
Total cost of revenues		12,470		11,069
Gross profit:
Medical Market		3,132		3,303
Veterinary Market		13,106		9,570
Other(1)		917		630
Gross profit	$	17,155	$	13,503

(1) Represents unallocated items, not specifically identified to any particular business segment.

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NOTE 14. REVENUES BY PRODUCT CATEGORY AND GEOGRAPHIC REGION AND SIGNIFICANT CONCENTRATIONS

Revenue Information

The following is a summary of revenues for each group of products provided by the Company (in thousands):

	Three Months Ended
	June 30,
Revenues by Product Category	2009		2008
Instruments(1)	$	6,277	$	7,802
Consumables(2)		20,905		14,893
Other products		1,639		1,110
Product sales, net		28,821		23,805
Development and licensing revenue		804		767
Total revenues	$	29,625	$	24,572

(1)	Instruments include chemistry analyzers, hematology instruments and coagulation analyzers.
(2)	Consumables include reagent discs, hematology reagent kits, coagulation cartridges, i-STAT cartridges and canine heartworm rapid tests.

The following is a summary of revenues by geographic region based on customer location (in thousands):

	Three Months Ended
	June 30,
Revenues by Geographic Region	2009		2008
North America	$	24,111	$	20,295
Europe		4,395		3,385
Asia Pacific and rest of the world		1,119		892
Total revenues	$	29,625	$	24,572

Significant Concentrations

Revenues from significant customers as a percentage of total revenues were as follows:

		Three Months Ended
	Geographical	June 30,
Distributor	Location	2009			2008
Walco International, Inc., d/b/a DVM Resources	United States		10	%		<10	%

During the three months ended June 30, 2008, there were no distributors or direct customers that accounted for more than 10% of total worldwide revenues.

At June 30, 2009, one distributor in the United States accounted for 19% of the Company’s total accounts receivable balance. At June 30, 2008, one distributor in the United States accounted for 15% of the Company’s total accounts receivable balance.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements, which reflect Abaxis’ current views with respect to future events and financial performance. In this report, the words “will,” “anticipates,” “believes,” “expects,” “intends,” “plans,” “future,” “projects,” “estimates,” “would,” “may,” “could,” “should,” “might,” 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, in Part II, Item 1A of this report and in Part I, Item 1A of our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), that could cause actual results to differ materially from historical results or those anticipated. Such risks and uncertainties include, but are not limited to, the market acceptance of our products and the continuing development of our products, regulatory clearance and approvals required by the United States Food and Drug Administration (“FDA”) and other government regulatory authorities, risks associated with manufacturing and distributing our products on a commercial scale, free of defects, risks related to the introduction of new instruments manufactured by third parties, risks associated with entering the human diagnostic market on a larger scale, risks related to the protection of Abaxis’ intellectual property or claims of infringement of intellectual property asserted by third parties, risks involved in carrying of inventory, risks associated with the ability to attract, train and retain competent sales personnel, 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 assumes no obligation to update any forward-looking statements as circumstances change.

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BUSINESS OVERVIEW

Abaxis, Inc. (“Abaxis,” “us” or “we”) was incorporated in California in 1989. Our principal offices are located at 3240 Whipple Road, Union City, California 94587. Our telephone number is (510) 675-6500 and our Internet address is www.abaxis.com. We make available free of charge on or through our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. Our common stock trades on the NASDAQ Global Market under the symbol “ABAX.”

We develop, manufacture, market and sell portable blood analysis systems for use in the human or veterinary patient-care setting to provide clinicians with rapid blood constituent measurements. Our primary product is a blood analysis system, consisting of a compact portable analyzer and a series of single-use plastic discs, called reagent discs, containing all the chemicals required to perform a panel of up to 14 tests on human patients and 13 tests on veterinary patients. We manufacture the system in our manufacturing facility in Union City, California and we market our blood chemistry analyzers in both the medical market and in the veterinary market, as described below.

• Medical Market: We currently market the blood analysis system in the medical market under the name Piccolo^® xpress. Through October 2006, we marketed the blood analysis system in the medical market as the Piccolo^®, now referred to as the Piccolo Classic. We continue to support and service our current population of Piccolo xpress and Piccolo Classic chemistry analyzers.

• Veterinary Market: We currently market the blood analysis system in the veterinary market under the name VetScan VS2^®. Through March 2006, we marketed the blood analysis system in the veterinary market as the VetScan^®, now referred to as the VetScan Classic. We continue to support and service our current population of VetScan VS2 and VetScan Classic chemistry analyzers.

In September 2007, we introduced a veterinary hematology instrument under the name VetScan HM5. The VetScan HM5 offers a 22-parameter complete blood count (CBC) analysis, including a five-part differential cell counter specifically designed for veterinary applications. In May 2004, we introduced a veterinary hematology instrument that offers an 18-parameter CBC analysis, including a three-part white blood cell differential, marketed originally as the VetScan HMII, and is now referred to as the VetScan HM2. We currently purchase the hematology instruments from Diatron Medical Instruments PLC. of Budapest, Hungary. Through April 2004, we marketed a veterinary hematology instrument under the name VetScan HMT. We continue to support and service our current population of VetScan HM5, VetScan HM2, VetScan HMII and VetScan HMT hematology instruments. We also market reagent kits to be used with our hematology instruments which we currently purchase from three suppliers: Clinical Diagnostic Solutions, Inc., Diatron Medical Instruments PLC. and Mallinckrodt Baker BV.

In July 2008, our sales office in Darmstadt, Germany was incorporated as Abaxis Europe GmbH to market, promote and distribute diagnostic systems for medical and veterinary uses. As a result, Abaxis Europe GmbH became a wholly-owned subsidiary of Abaxis. The subsidiary was formed to provide customer support in a timely manner in response to the growing and increasingly diverse services needs of customers in the European market.

In January 2009, we introduced a veterinary coagulation analyzer under the name VetScan VSpro. The VetScan VSpro assists in the diagnosis and evaluation of suspected bleeding disorders, toxicity/poisoning, evaluation of Disseminated Intravascular Disease, hepatic disease and monitoring therapy and progression of disease states. The point-of-care coagulation analyzer is offered with a combination assay (PT/aPTT test cartridge) for canine testing. We currently purchase the coagulation analyzers and coagulation cartridges from Scandinavian Micro Biodevices APS of Farum, Denmark.

In January 2009, we introduced a canine heartworm rapid test under the name VetScan Canine Heartworm Rapid Test. The VetScan Canine Heartworm Rapid Test is a highly sensitive and specific test for the detection of Dirofilaria immitis in canine whole blood, serum or plasma. The lateral flow immunoassay technology in the canine heartworm rapid tests provides immediate results.

In May 2009, we entered into an exclusive license agreement with Abbott Point of Care Inc., granting us the right to sell and distribute Abbott’s i-STAT 1 handheld instrument (i-STAT^® 1 analyzer) and associated consumables (for blood gas, electrolyte, basic blood chemistry and immunoassay testing) in the animal health care market worldwide. Our right to sell and distribute these products is initially non-exclusive, but becomes exclusive in all countries of the world, except for Japan, on November 1, 2009. Our rights in Japan remain non-exclusive for the term of the agreement. The initial term of the agreement ends on December 31, 2014, and after this initial term, our agreement continues automatically for successive one-year periods unless terminated by either party. We started marketing and sales activities of the i-STAT cartridges in the first quarter of fiscal 2010. We anticipate selling the i-STAT instrument in its current version in the second quarter of fiscal 2010. We expect to launch an Abaxis-branded version of the i-STAT 1 instrument as part of our VetScan line in the second half of fiscal 2010.

Our sales for any future periods are not predictable with a significant degree of certainty, and may depend on a number of factors outside of our control, including but not limited to inventory or timing considerations by our distributors. We generally operate with a limited order backlog because our products are typically 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. Our expense levels, which are to a

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large extent fixed, are based in part on our expectations of future revenues. Accordingly, we may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. As a result, any such shortfall would negatively affect our operating results and financial condition. In addition, our sales may be adversely impacted by pricing pressure from competitors. Our ability to be consistently profitable will depend, in part, on our ability to increase the sales volumes of our Piccolo and VetScan products and to successfully compete with other competitors. We believe that period to period comparisons of our results of operations are not necessarily meaningful indicators of future results.

CRITICAL ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States and pursuant to the rules and regulations of the SEC. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and the sensitivity of these estimates to deviations in the assumptions used in making them. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. However, there can be no assurance that our actual results will not differ from these estimates.

We have identified the policies below as critical because they are not only important to understanding our financial condition and results of operations, but also because application and interpretation of these policies requires both judgment and estimates of matters that are inherently uncertain and unknown. Accordingly, actual results may differ materially from our estimates. The impact and any associated risks related to these policies on our business operations are discussed below. A more detailed discussion on the application of these and other accounting policies are included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009.

Revenue Recognition and Deferred Revenue. Our primary customers are distributors and direct customers in both the medical and veterinary markets. Revenues from product sales, net of estimated sales allowances and rebates, are recognized when (i) evidence of an arrangement exists, (ii) upon shipment of the products to the customer, (iii) the sales price is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. Rights of return are not provided.

We recognize revenue associated with extended maintenance agreements ratably over the life of the contract. Amounts collected in advance of revenue recognition are recorded as a current or non-current liability based on the time from the balance sheet date to the future date of revenue recognition. We provide incentives in the form of free goods or extended maintenance agreements to customers in connection with the sale of our instruments. Revenues from such sales are allocated separately to the instruments and incentives based on the relative fair value of each element. Revenues allocated to incentives are deferred until the goods are shipped to the customer or are recognized ratably over the life of the maintenance contract.

We periodically offer trade-in programs to customers for trading in an existing instrument to purchase a new instrument and we will either provide incentives in the form of free goods or reduce the sales price of the instrument. These incentives in the form of free goods are recorded according to the policies described above.

Distributor and Customer Rebates. We offer distributor pricing rebates and customer incentives from time to time. The distributor pricing rebates are offered to distributors upon meeting the sales volume requirements during a qualifying period. The distributor pricing rebates are recorded as a reduction to gross revenues during a qualifying period. Cash rebates are offered to distributors or customers who purchase certain products or instruments during a promotional period. Cash rebates are recorded as a reduction to gross revenues.

Sales and Other Allowances. We estimate a provision for defective reagent discs as part of sales allowances when we issue credits to customers for defective reagent discs. We also establish, upon shipment of our products to distributors, a provision for potentially defective reagent discs, based on estimates derived from historical experience. The provision for potentially defective reagent discs was recorded in sales allowances, using internal data available to estimate the level of inventory in the distribution channel, the lag time for customers to report defective reagent discs and the historical rates of defective reagent discs. Starting on July 1, 2007, the provision for potentially defective reagent discs is recorded as part of warranty reserves, instead of sales allowances, since we replace defective reagent discs rather than issue a credit to customers. Changes in our estimates for accruals related to provisions for defective reagent discs have not been material to our financial position or results of operations. In the future, the actual defective reagent discs may exceed our estimates, which could adversely affect our financial results.

Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts based on our assessment of the collectibility of the amounts owed to us by our customers. In determining the amount of the allowance, we make judgments about the creditworthiness of customers which is mostly determined by the customer’s payment history and the outstanding period of accounts. We specifically identify amounts that we believe to be uncollectible and the allowance for doubtful accounts is adjusted accordingly. An additional allowance is recorded based on certain percentages of our aged receivables, using historical experience to estimate the potential uncollectible and our assessment of the general financial condition of our customer base. If our actual collections experience changes, revisions to our allowances may be required, which could adversely affect our operating income.

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Fair Value Measurements. Effective April 1, 2008, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS No. 157”) to measure the fair value of our financial assets and financial liabilities. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under SFAS No. 157 are described below:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. As of June 30, 2009, we used Level 1 assumptions for our cash and cash equivalents and investments in asset-backed securities, certificates of deposits and corporate bonds, which are traded in an active market. The valuations are based on quoted prices of the underlying security that are readily and regularly available in an active market, and accordingly, a significant degree of judgment is not required.

Level 2: Directly or indirectly observable market based inputs used in models or other valuation methodologies. As of June 30, 2009, we did not have any Level 2 financial assets or liabilities.

Level 3: Unobservable inputs that are supported by little or no market data and require the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. As of June 30, 2009, we did not have any Level 3 financial assets or liabilities.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are developed to reflect those that market participants would use in pricing the asset or liability at the measurement date.

Warranty Reserves. We provide for the estimated future costs to be incurred under our standard warranty obligation on our instruments. Our standard warranty obligation on instruments ranges from two to three years. The estimated contractual warranty obligation is recorded when the related revenue is recognized and any additional amount is recorded when such cost is probable and can be reasonably estimated. While we engage in product quality programs and processes, including monitoring and evaluating the quality of our suppliers, our estimated accrual for warranty exposure is based on historical experience, estimated product failure rates, material usage and freight incurred in repairing the instrument after failure and known design changes.

A provision for defective reagent discs is recorded when related sales are recognized and any additional amount is recorded when such cost is probable and can be reasonably estimated, at which time they are included in cost of revenues. The warranty cost includes the replacement costs and freight of a defective reagent disc.

We analyze the adequacy of the ending accrual balance of warranty reserves each quarter. The determination of warranty reserves requires us to make estimates of the expected costs to repair or replace the instruments and to replace defective reagent discs under warranty. If actual repair or replacement costs of instruments or replacement costs of reagent discs differ significantly from our estimates, adjustments to cost of revenues may be required.

Inventories. We state inventories at the lower of cost or market, cost being determined using standard costs which approximates actual costs using the first-in, first-out (FIFO) method. Inventories include material, labor and overhead. We establish provisions for excess, obsolete and unusable inventories after evaluation of future demand and market conditions. If future demand or actual market conditions are less favorable than those estimated by management or if a significant amount of the material were to become unusable, additional inventory write-downs may be required, which would have a negative effect on our operating income.

Valuation of Long-Lived Assets. The carrying value of our long-lived assets, such as property and equipment and amortized intangible assets, are reviewed for impairment, in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. We look to current and future profitability, as well as current and future undiscounted cash flows, excluding financing costs, as primary indicators of recoverability. An impairment loss would be recognized when the sum of the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposal is less than the carrying amount. If impairment is determined to exist, any related impairment loss is calculated based on fair value.

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Income Taxes. We account for income taxes using the liability method under which deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amounts to be recovered.

Effective April 1, 2007, we adopted the provisions of Financial Accounting Standards Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in the consolidated financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes” and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. Our policy to include interest and penalties related to gross unrecognized tax benefits within our provision for income taxes did not change despite the adoption of FIN 48.

Share-Based Compensation Expense. Effective April 1, 2006, we adopted SFAS No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”) using the modified prospective method. Under the fair value provisions of SFAS No. 123(R), we recognize share-based compensation expense, net of an estimated forfeiture rate, for those shares over the requisite service period of the award to employees and directors.

We did not grant stock options during fiscal 2007, 2008 or 2009, or during the first quarter of fiscal 2010. For stock options granted prior to March 31, 2006, we use the Black-Scholes option pricing model to determine the fair value. Determining the appropriate fair value model and calculating the fair value of share-based awards requires highly subjective assumptions, as described below.

• Risk-free interest rate: The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant for the expected term of the option.

• Expected stock price volatility: We estimate the volatility of our common stock at the date of grant based on the historical volatility of our common stock.

• Expected term: We estimate the expected term of stock options granted based on historical exercise and post-vesting termination patterns, which we believe are representative of future behavior.

• Expected dividends: We have not paid cash dividends on our common stock and we do not anticipate paying cash dividends in the foreseeable future; consequently, we use an expected dividend yield of zero.

For restricted stock units, the assumptions to calculate compensation expense is based on the fair value of our stock at the grant date. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future.

As required by SFAS No. 123(R), employee share-based compensation expense recognized is calculated over the requisite service period of the awards and reduced for estimated forfeitures. The forfeiture rate is estimated based on historical data of our share-based compensation awards that are granted and cancelled prior to vesting and upon historical experience of employee turnover. Changes in estimated forfeiture rates and differences between estimated forfeiture rates and actual experience may result in significant, unanticipated increases or decreases in share-based compensation expense from period to period. To the extent we revise our estimate of the forfeiture rate in the future, our share-based compensation expense could be materially impacted in the quarter of revision, as well as in following quarters.

RESULTS OF OPERATIONS

We develop, manufacture, market and sell portable blood analysis systems for use in the human or veterinary patient-care setting to provide clinicians with rapid blood constituent measurements. We operate in two segments: (i) the medical market and (ii) the veterinary market. See “Segment Results” in this section for a detailed discussion.

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Total Revenues

Revenues by Geographic Region and by Product Category. Revenues by geographic region based on customer location and revenues by product category during the three months ended June 30, 2009 and 2008 were as follows (in thousands, except percentages):

	Three Months Ended
	June 30,						Change
							Increase/		Percent
Revenues by Geographic Region	2009			2008			(Decrease)		Change
North America	$	24,111		$	20,295		$	3,816		19	%
Percentage of total revenues		81	%		83	%
Europe		4,395			3,385			1,010		30	%
Percentage of total revenues		15	%		14	%
Asia Pacific and rest of the world		1,119			892			227		25	%
Percentage of total revenues		4	%		3	%
Total revenues	$	29,625		$	24,572		$	5,053		21	%

	Three Months Ended
	June 30,						Change
							Increase/			Percent
Revenues by Product Category	2009			2008			(Decrease)			Change
Instruments(1)	$	6,277		$	7,802		$	(1,525	)		(20	%)
Percentage of total revenues		21	%		32	%
Consumables(2)		20,905			14,893			6,012			40	%
Percentage of total revenues		71	%		61	%
Other products		1,639			1,110			529			48	%
Percentage of total revenues		5	%		4	%
Product sales, net		28,821			23,805			5,016			21	%
Percentage of total revenues		97	%		97	%
Development and licensing revenue		804			767			37			5	%
Percentage of total revenues		3	%		3	%
Total revenues	$	29,625		$	24,572		$	5,053			21	%

(1)	Instruments include chemistry analyzers, hematology instruments and coagulation analyzers.
(2)	Consumables include reagent discs, hematology reagent kits, coagulation cartridges, i-STAT cartridges and canine heartworm rapid tests.

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

North America. During the three months ended June 30, 2009, total revenues in North America increased 19%, or $3.8 million, as compared to the three months ended June 30, 2008. The increase in total revenues in North America was attributed to the following:

• Medical reagent discs sales in North America (excluding the U.S. government) increased 12%, or $303,000, primarily due to an increase in units sold resulting from an expanded installed base of our Piccolo chemistry analyzers.

• Veterinary reagent discs sales in North America increased 42%, or $3.4 million, primarily due to an increase in units sold resulting from an expanded installed base of our VetScan chemistry analyzers.

• Sales of our canine heartworm rapid tests, which we launched in the fourth quarter of fiscal 2009, were $1.1 million in North America during the three months ended June 30, 2009.

• Sales of our VetScan VSpro coagulation analyzers, which we launched in the fourth quarter of fiscal 2009, were $220,000 in North America during the three months ended June 30, 2009.

• During the three months ended June 30, 2009, total revenues from other products sold in North America increased 41%, or $446,000, as compared to the three months ended June 30, 2008. The net increase in revenues from other products was primarily due to a decrease in maintenance contracts offered to customers from time to time as incentives in the form of free goods in connection with the sale of our products, for which revenue is deferred and recognized ratably over the life of the maintenance contract.

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The net increase in revenues in North America was partially offset by the following:

• Medical reagent discs sold to the U.S. government decreased 10%, or $61,000, primarily due to lower average selling prices during the three months ended June 30, 2009. Sales of our medical reagent discs to the U.S. government were based on the U.S. military’s needs for these products, which were not predictable.

• Sales of our Piccolo chemistry analyzers in North America (excluding the U.S. government) decreased 62%, or $970,000, primarily due to inventory stock adjustments by distributors during the three months ended June 30, 2009.

• Sales of our Piccolo chemistry analyzers to the U.S. government decreased 8%, or $60,000, primarily due to lower average selling prices during the three months ended June 30, 2009. Sales of our Piccolo chemistry analyzers to the U.S. government were based on the U.S. military’s needs for these products, which were not predictable.

• Sales of our VetScan chemistry analyzers in North America decreased 35%, or $835,000, and sales of our hematology instruments in North America decreased 16%, or $245,000. The decrease in sales of VetScan chemistry analyzers and hematology instruments was primarily due to economic conditions and the resulting impact of reduced capital spending at the physician office level as a result of the reduced availability of credit to customers.

Europe. During the three months ended June 30, 2009, total revenues in Europe increased 30%, or $1.0 million, as compared to the three months ended June 30, 2008. The increase in total revenues in Europe included the following:

• Veterinary reagent discs sales in Europe increased 39%, or $688,000, primarily due to an increase in units sold resulting from an expanded installed base of our VetScan chemistry analyzers.

Significant concentration. One distributor in the United States, DVM Resources, accounted for 10% of our total worldwide revenues during the three months ended June 30, 2009. There were no distributors or direct customers that accounted for more than 10% of our total worldwide revenues during the three months ended June 30, 2008.

Segment Results

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

The following table presents revenues, cost of revenues, gross profit and percent of revenues by operating segments for the three months ended June 30, 2009 and 2008 (in thousands, except percentages):

				Three Months Ended
	June 30,												Change
				Percent of						Percent of			Increase/			Percent
	2009			Revenues(1)			2008			Revenues(1)			(Decrease)			Change
Revenues:
Medical Market	$	5,763			100	%	$	6,529			100	%	$	(766	)		(12	%)
Percentage of total revenues		19	%					26	%
Veterinary Market		21,823			100	%		16,613			100	%		5,210			31	%
Percentage of total revenues		74	%					68	%
Other(2)		2,039						1,430						609			43	%
Percentage of total revenues		7	%					6	%
Total revenues		29,625						24,572						5,053			21	%
Cost of revenues:
Medical Market		2,631			46	%		3,226			49	%		(595	)		(18	%)
Veterinary Market		8,717			40	%		7,043			42	%		1,674			24	%
Other(2)		1,122						800						322			40	%
Total cost of revenues		12,470						11,069						1,401			13	%
Gross profit:
Medical Market		3,132			54	%		3,303			51	%		(171	)		(5	%)
Veterinary Market		13,106			60	%		9,570			58	%		3,536			37	%
Other(2)		917						630						287			46	%
Gross profit	$	17,155					$	13,503					$	3,652			27	%

(1)	The percentages reported are based on revenues by operating segment.
(2)	Represents unallocated items, not specifically identified to any particular business segment.

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Medical Market

Revenues for Medical Market Segment

During the three months ended June 30, 2009, total revenues in the medical market decreased 12%, or $766,000, as compared to the three months ended June 30, 2008. Components of the change were as follows:

Instruments. Total revenues from sales of our Piccolo chemistry analyzers decreased 38%, or $997,000, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. The changes were attributed to (a) a decrease in revenues in North America (excluding the U.S. government) of 62%, or $970,000, primarily due to inventory stock adjustments by distributors during the three months ended June 30, 2009, and (b) a decrease in Piccolo chemistry analyzers sold to the U.S. government of 8%, or $60,000, primarily due to lower average selling prices during the three months ended June 30, 2009. Sales of our Piccolo chemistry analyzers to the U.S. government were based on the U.S. military’s needs for these products, which were not predictable.

Consumables. Total revenues from consumables sold in the medical market increased 8%, or $291,000, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. The increase in revenues from medical reagent discs was primarily attributed to an increase in revenues in North America (excluding the U.S. government) of 12%, or $303,000, primarily due to an increase in units sold resulting from an expanded installed base of our Piccolo chemistry analyzers. The increase was partially offset by a decrease in revenues in medical reagent discs sold to the U.S. government of 10%, or $61,000, primarily due to lower average selling prices during the three months ended June 30, 2009. Sales of our medical reagent discs to the U.S. government were based on the U.S. military’s needs for these products, which were not predictable.

Gross Profit for Medical Market Segment

Gross profit for the medical market segment decreased 5%, or $171,000, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. Gross profit percentages for the medical market segment during the three months ended June 30, 2009 and 2008 were 54% and 51%, respectively. In absolute dollars, the decrease in gross profit for the medical market segment was primarily due to a decrease in Piccolo chemistry analyzers sold during the three months ended June 30, 2009.

Veterinary Market

Revenues for Veterinary Market Segment

During the three months ended June 30, 2009, total revenues in the veterinary market increased 31%, or $5.2 million, as compared to the three months ended June 30, 2008. Components of the change were as follows:

Instruments. Total revenues from our veterinary instruments sold decreased 10%, or $528,000, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. The primary factors of the change were as follows:

• Sales of our VetScan chemistry analyzers decreased 20%, or $681,000, comprising primarily of a decrease in revenues in North America of 35%, or $835,000. The decrease was primarily due to economic conditions and the resulting impact of reduced capital spending at the physician office level as a result of the reduced availability of credit to customers.

• Sales of our hematology instruments decreased 5%, or $88,000, comprising primarily of a decrease in revenues in North America of 16%, or $245,000. The decrease was primarily due to economic conditions and the resulting impact of reduced capital spending at the physician office level as a result of the reduced availability of credit to customers.

• Sales of our VetScan VSpro coagulation analyzers, which we launched in the fourth quarter of fiscal 2009, were $241,000 during the three months ended June 30, 2009.

Consumables. Total revenues from consumables in the veterinary market increased 51%, or $5.7 million, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. The primary factors of the change were as follows:

• Total revenues from reagent discs sold in the veterinary market increased 40%, or $4.1 million, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. The increase in revenues from veterinary reagent discs was primarily attributed to an increase in units sold resulting from an expanded installed base of our VetScan chemistry analyzers. The increase in revenues was comprised of (a) an increase in revenues in North America of 42%, or $3.4 million, and (b) an increase in revenues in Europe of 39%, or $688,000.

• Sales of our canine heartworm rapid tests, which we launched in the fourth quarter of fiscal 2009, were $1.1 million during the three months ended June 30, 2009, primarily in North America.

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Gross Profit for Veterinary Market Segment

Gross profit for the veterinary market segment increased 37%, or $3.5 million, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008. Gross profit percentages for the veterinary market segment during the three months ended June 30, 2009 and 2008 were 60% and 58%, respectively. In absolute dollars, the increase in gross profit for the veterinary market segment was primarily due to (a) an increase in veterinary reagent discs sold during the three months ended June 30, 2009, (b) higher average selling prices of veterinary reagent discs sold during the three months ended June 30, 2009, and (c) cost improvements on veterinary reagent discs sold during the three months ended June 30, 2009.

Cost of Revenues

The following sets forth, our cost of revenues for the periods indicated (in thousands, except percentages):

	Three Months Ended
	June 30,						Change
							Increase/		Percent
	2009			2008			(Decrease)		Change
Cost of revenues	$	12,470		$	11,069		$	1,401		13	%
Percentage of total revenues		42	%		45	%

Cost of revenues includes the costs associated with manufacturing, assembly, packaging, warranty repairs, test and quality assurance for our instruments and consumables and manufacturing overhead, including costs of personnel and equipment associated with manufacturing support.

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

In absolute dollars, the increase in cost of revenues during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to (a) an increase in the sales volume of veterinary reagent discs and (b) the sales of our canine heartworm rapid tests, and coagulation analyzers and cartridges, which we launched in the fourth quarter of fiscal 2009. As a percentage of total revenues, the decrease in cost of revenues during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to higher average selling prices of veterinary reagent discs sold during the three months ended June 30, 2009.

Gross Profit

The following sets forth, our gross profit for the periods indicated (in thousands, except percentages):

	Three Months Ended
	June 30,						Change
							Increase/		Percent
	2009			2008			(Decrease)		Change
Total gross profit	$	17,155		$	13,503		$	3,652		27	%
Total gross margin		58	%		55	%

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

In absolute dollars, the increase in gross profit during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to (a) an increase in veterinary reagent discs sold during the three months ended June 30, 2009 and (b) higher average selling prices of veterinary reagent discs sold during the three months ended June 30, 2009. As a percentage, the increase in gross margin during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to (a) an increase in veterinary reagent discs sold during the three months ended June 30, 2009, (b) higher average selling prices of veterinary reagent discs sold during the three months ended June 30, 2009, and (c) cost improvements on veterinary reagent discs sold during the three months ended June 30, 2009.

Operating Expenses

Research and Development

The following sets forth, our research and development expenses for the periods indicated (in thousands, except percentages):

	Three Months Ended
	June 30,						Change
							Increase/		Percent
	2009			2008			(Decrease)		Change
Research and development expenses	$	2,573		$	1,997		$	576		29	%
Percentage of total revenues		9	%		8	%

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Research and development expenses consist of personnel costs (including salaries, benefits and share-based compensation expense), consulting expenses and materials and related expenses associated with the development of new tests and test methods, clinical trials, product improvements and enhancement of existing products.

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

The increase in research and development expenses, in absolute dollars, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to new product development and enhancement of existing products and clinical trials. Research and development expenses are based on the project activities planned and the level of spending depends on budgeted expenditures. The projects primarily relate to new product development in both the medical and veterinary markets and costs related to compliance with FDA regulations and clinical trials. Share-based compensation expense during the three months ended June 30, 2009 and 2008 was $140,000 and $61,000, respectively.

We anticipate the dollar amount of research and development expenses to increase in fiscal 2010 from fiscal 2009 but remain consistent as a percentage of total revenues, as we complete new products for both the medical and veterinary markets. There can be no assurance, however, that we will undertake such research and development activities in future periods or, if we do, that such activities will be successful.

Sales and Marketing

The following sets forth, our sales and marketing expenses for the periods indicated (in thousands, except percentages):

	Three Months Ended
	June 30,						Change
							Increase/		Percent
	2009			2008			(Decrease)		Change
Sales and marketing expenses	$	6,360		$	5,827		$	533		9	%
Percentage of total revenues		21	%		24	%

Sales and marketing expenses consist of personnel costs (including salaries, benefits and share-based compensation expense), commissions and travel-related expenses for personnel engaged in selling, costs associated with advertising, lead generation, marketing programs, trade shows and services related to customer and technical support.

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

The increase in sales and marketing expenses, in absolute dollars, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to personnel-related costs resulting from an increase in headcount in various divisions including sales and marketing, customer service and technical service, to support the growth in both our medical and veterinary markets. Share-based compensation expense during the three months June 30, 2009 and 2008 was $245,000 and $137,000, respectively.

General and Administrative

The following sets forth, our general and administrative expenses for the periods indicated (in thousands, except percentages):

	Three Months Ended
	June 30,						Change
							Increase/		Percent
	2009			2008			(Decrease)		Change
General and administrative expenses	$	2,498		$	1,662		$	836		50	%
Percentage of total revenues		8	%		7	%

General and administrative expenses consist of personnel costs (including salaries, benefits and share-based compensation expense), and expenses for outside professional services related to general corporate functions, including accounting, human resources and legal.

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

The increase in general and administrative expenses, in absolute dollars, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily related to higher personnel-related costs, which includes share-based compensation expense and an increase in headcount. Share-based compensation expense during the three months ended June 30, 2009 and 2008 was $462,000 and $168,000, respectively.

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Interest and Other Income (Expense), Net

The following sets forth our interest and other income (expense), net, for the periods indicated (in thousands, except percentages):

	Three Months Ended
	June 30,				Change
					Increase/		Percent
	2009		2008		(Decrease)		Change
Interest and other income (expense), net	$	514	$	462	$	52		11	%

Interest and other income (expense), net consists primarily of interest earned on cash, cash equivalents, short-term and long-term investments and foreign currency exchange gains and losses.

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

The increase in interest and other income (expense), net, during the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily attributed to favorable foreign currency exchange rates, and was partially offset by lower interest yields in our investment portfolio compared to the same period in fiscal 2009.

Income Tax Provision

The following sets forth, our income tax provision for the periods indicated (in thousands, except percentages):

	Three Months Ended
	June 30,
	2009			2008
Income tax provision	$	2,482		$	1,703
Effective tax rate		40	%		38	%

Three Months Ended June 30, 2009 Compared to Three Months Ended June 30, 2008

Our effective tax rate for the three months ended June 30, 2009 and 2008 was 40% and 38%, respectively.

The increase in the effective tax rate for the three months ended June 30, 2009, as compared to the three months ended June 30, 2008, was primarily due to an increase in non-deductible share-based compensation expense and a change in our investment portfolio, and was partially offset by an increase in federal research and development tax credits and tax benefits for federal qualified production activities.

We did not have any unrecognized tax benefits as of June 30, 2009 or June 30, 2008. During the three months ended June 30, 2009 and 2008, we did not recognize any interest or penalties related to unrecognized tax benefits.

LIQUIDITY AND CAPITAL RESOURCES

Total cash, cash equivalents and short-term and long-term investments at June 30, 2009 and March 31, 2009 were as follows (in thousands, except percentages):

	June 30,			March 31,
	2009			2009
Cash and cash equivalents	$	46,868		$	49,237
Short-term investments		20,215			20,776
Long-term investments		13,759			4,886
Total cash, cash equivalents and investments	$	80,842		$	74,899
Percentage of total assets		55	%		53	%

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Cash Flow Changes

Cash provided by (used in) the three months ended June 30, 2009 and 2008 were as follows (in thousands):

	Three Months Ended
	June 30,
	2009			2008
Net cash provided by operating activities	$	6,365		$	554
Net cash (used in) provided by investing activities		(8,714	)		3,496
Net cash (used in) provided by financing activities		(59	)		1,762
Effect of exchange rate changes on cash and cash equivalents		39			—
Net (decrease) increase in cash and cash equivalents	$	(2,369	)	$	5,812

At June 30, 2009, we had net working capital of $97.8 million compared to $101.8 million at March 31, 2009. Cash and cash equivalents at June 30, 2009 were $46.9 million, compared to $49.2 million at March 31, 2009. The decrease in cash and cash equivalents during the three months ended June 30, 2009 was primarily due to purchases of investments of $14.7 million, partially offset by net cash provided by operating activities of $6.4 million and maturities of investments of $5.6 million.

Operating Activities

During the three months ended June 30, 2009, we generated $6.4 million in cash from operating activities. The cash provided by operating activities during the three months ended June 30, 2009 was primarily the result of net income of $3.8 million, adjusted for the effects of non-cash adjustments including depreciation and amortization of $1.3 million and share-based compensation expense of $896,000.

Other changes in operating activities during the three months ended June 30, 2009 were as follows:

(i) Net accounts receivables increased by $2.2 million, from $22.0 million at March 31, 2009 to $24.2 million as of June 30, 2009, primarily due to sales in the last month of the quarter ended June 30, 2009.

(ii) Accrued payroll and related expenses increased by $598,000, from $3.7 million at March 31, 2009 to $4.3 million as of June 30, 2009, primarily due to an increase in accrued bonus as of June 30, 2009, which is based on the achievement of established quarterly net sales and quarterly pre-tax income goals during the quarter.

(iii) Accrued taxes increased by $2.0 million, from $34,000 at March 31, 2009 to $2.0 million as of June 30, 2009, primarily due to the utilization of all remaining federal net operating loss carryovers in the fiscal year ended March 31, 2009.

We anticipate that we will incur incremental additional costs to support our future operations, including further additional pre-clinical testing and clinical trials for our current and future products; research and design costs related to the continuing development of our current and future products; and acquisition of capital equipment for our manufacturing facility, which includes the ongoing costs related to the continuing development of our current and future products.

Investing Activities

Net cash used in investing activities during the three months ended June 30, 2009 totaled $8.7 million, compared to net cash provided by investing activities of $3.5 million during the three months ended June 30, 2008. Changes in investing activities were as follows:

Investments. Cash used to purchase investments in asset-backed securities, certificates of deposits and corporate bonds totaled $14.7 million during the three months ended June 30, 2009. Cash provided by proceeds from (a) maturities of certificates of deposits totaled $5.6 million and (b) principal payments of asset-backed securities of $798,000, in each case during the three months ended June 30, 2009.

Property and Equipment. Cash used to purchase property and equipment totaled $373,000 during the three months ended June 30, 2009, primarily to support (a) sales and marketing activities and (b) more efficient production lines. We anticipate that we will continue to purchase property and equipment necessary in the normal course of our business.

Financing Activities

Net cash used in financing activities during the three months ended June 30, 2009 totaled $59,000, primarily consisting of excess tax benefits from share-based awards of $190,000 and the payment of income withholding taxes of $287,000 due upon vesting of restricted stock units, partially offset by cash provided by proceeds of stock options exercises of $38,000.

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Contractual Obligations

Purchase Commitments. In October 2008, we entered into an original equipment manufacturing (“OEM”) agreement with Scandinavian Micro Biodevices APS (“SMB”) of Denmark to purchase coagulation analyzers and coagulation cartridges. In the fourth quarter of fiscal 2009, we started marketing the products and, upon achievement of certain milestones by SMB outlined in the agreement, we will be subject to the minimum purchase commitments under the OEM agreement. These milestones have not yet been met and we are currently purchasing coagulation analyzers and coagulation cartridges on a purchase order basis, but all such purchases will count towards purchase obligations if and when they are triggered.

Patent License Agreement. Effective January 2009, we entered into a license agreement with Inverness Medical Switzerland GmbH (“Inverness”). Under our license agreement, we licensed co-exclusively certain worldwide patent rights related to lateral flow immunoassay technology in the field of animal health diagnostics in the professional marketplace. The license agreement provides that Inverness shall not grant any future rights to any third parties under its current lateral flow patent rights in the animal health diagnostics field in the professional marketplace. The license agreement enables us to develop and market products under rights from Inverness to address animal health and laboratory animal research markets.

In exchange for the license rights, we (i) paid an up-front license fee of $5.0 million to Inverness in January 2009, (ii) agreed to pay royalties during the term of the agreement, based solely on sales of products in a jurisdiction country covered by valid and unexpired claims in that jurisdiction under the licensed Inverness patent rights, and (iii) agreed to pay a yearly minimum license fee of between $500,000 to $1.0 million per year, which fee will be creditable against any royalties due during such calendar year. The royalties, if any, are payable through the date of the expiration of the last valid patent licensed under the agreement that includes at least one claim in a jurisdiction covering products we sell in that jurisdiction. The yearly minimum fees are payable starting in fiscal 2011 for so long as we desire to maintain exclusivity under the agreement.

Line of Credit. We have a line of credit with Comerica Bank-California which provides for borrowings of up to $2.0 million. The line of credit may be terminated upon notification by either party and any outstanding balance is payable upon demand. At June 30, 2009, there was no amount outstanding under our line of credit. The terms and conditions with respect to our loan covenants are set forth in Note 7 of the Notes to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Contingencies

We are involved from time to time in various litigation matters in the normal course of business. While the outcome of these proceedings and claims cannot be predicted with certainty, we do not believe that the ultimate resolution of these matters will have a material effect on our financial position or results of operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements.

Financial Condition

We anticipate that our existing capital resources, available line of credit and anticipated revenues from the sales of our products will be adequate to satisfy our currently planned operating and financial requirements through at least the next 12 months. Our future capital requirements will largely depend upon the increased market acceptance of our point-of-care blood analyzer products. However, our sales for any future periods are not predictable with a significant degree of certainty. Regardless, we may seek to raise additional funds to pursue strategic opportunities.

RECENT ACCOUNTING PRONOUNCEMENTS

A discussion of recent accounting pronouncements is included in Note 2 of the Notes to the Condensed Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

We are exposed to the impact of interest rate changes with respect to our short-term and long-term investments and line of credit.

Our investment objective is to invest excess cash in cash equivalents and in various types of investments to maximize yields without significantly increased risk. At June 30, 2009, our short-term investments totaled $20.2 million, consisting of asset-backed securities and certificates of deposits, and our long-term investments totaled $13.8 million, consisting of certificates of deposits and corporate bonds.

Historically, our investment portfolio had included auction rate securities, which became illiquid as a result of the negative condition in the global credit markets. In September 2008, the bank where our auction rate securities were held, reached agreements with the Financial Industry Regulatory Authority, the State of Michigan Attorney General and the Michigan Office of Financial and Insurance Regulation regarding the repurchase of auction rate securities. In October 2008, we received a commitment from our bank to repurchase all of our remaining auction rate securities, which repurchases were completed in the third quarter of fiscal 2009. During fiscal 2009, we redeemed $37.0 million of our auction rate securities at 100% of par value. As of June 30, 2009, we no longer hold any auction rate securities.

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We have the ability to hold the certificates of deposits and corporate bonds in our investment portfolio at June 30, 2009 until maturity and therefore, we believe we have no material exposure to interest rate risk. As of June 30, 2009, our short-term investment in asset-backed securities were classified as available-for-sale and, consequently, recorded at fair market value with unrealized gains or losses resulting from changes in fair value reported as a separate component of accumulated other comprehensive income, net of any tax effects, in stockholders’ equity. A sensitivity analysis assuming a hypothetical 10% movement in interest rates applied to our total investment balances at June 30, 2009 indicated that such market movement would not have a material effect on our business, operating results or financial condition. We have not experienced any significant loss on our investment portfolio during either fiscal 2009 or during the three months ended June 30, 2009.

For our line of credit, which provides for borrowings of up to $2.0 million, the interest rate is equal to the bank’s prime rate minus 0.25%, which totaled 3.00% at June 30, 2009. Consequently, an increase in the prime rate would expose us to higher interest expenses. A sensitivity analysis assuming a hypothetical 10% movement in the prime rate applied to our line of credit balance at June 30, 2009 indicated that such market movement would not have a material effect on our business, operating results or financial condition, as there was no amount outstanding on our line of credit at June 30, 2009.

As a matter of management policy, we do not currently enter into transactions involving derivative financial instruments. In the event we do enter into such transactions in the future, such items will be accounted for in accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities.”

Foreign Currency Rate Fluctuations

We operate primarily in the United States and a majority of our revenues, cost of revenues, operating expenses and capital purchasing activities are transacted in U.S. dollars. However, we are exposed to foreign currency exchange rate fluctuations on the hematology instruments and hematology reagent kits purchased from Diatron Messtechnik GmbH, which are primarily denominated in Euros.

In the first quarter of fiscal 2009, operations from our sales office in Darmstadt, Germany were stated in Euros and translated into U.S. dollars at the period-end exchange rates. In July 2008, the Germany sales office was incorporated as our wholly-owned subsidiary, Abaxis Europe GmbH, to market, promote and distribute diagnostic systems for medical and veterinary uses. Abaxis Europe GmbH’s functional currency is in U.S. dollars. Foreign currency denominated account balances of our subsidiary are remeasured into U.S. dollars at the end-of-period exchange rates for monetary assets and liabilities, and historical exchange rates for nonmonetary assets. Accordingly, the effects of foreign currency transactions, and of remeasuring the financial condition into the functional currency, resulted in foreign currency gains and losses, which were included in “Interest and other income (expense), net” on our Condensed Consolidated Statements of Operations.

To the extent the U.S. dollar strengthens against the Euro currency, the translation of the foreign currency denominated transactions may result in reduced cost of revenues and operating expenses. Similarly, our cost of revenues and operating expenses will increase if the U.S. dollar weakens against the Euro currency.

Other than the foregoing, there have been no material changes in our market risk during the three months ended June 30, 2009 compared to the disclosures in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended March 31, 2009.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Based on our management’s evaluation, with the participation of our principal executive officer and principal financial officer, as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (which are defined under Securities and Exchange Commission rules as controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods), were effective as of June 30, 2009.

Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2009, there was no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitations on Controls and Procedures

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even an effective system of internal control will provide only reasonable assurance that the objectives of the internal control system are met.

Item 4T. Controls and Procedures

Not applicable.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

We are involved from time to time in various litigation matters in the normal course of business. We do not believe that the ultimate resolution of these matters will have a material effect on our financial position or results of operations.

Item 1A. Risk Factors

RISK FACTORS THAT MAY AFFECT OUR PERFORMANCE

Our future performance is subject to a number of risks. If any of the following risks actually occur, our business could be harmed and the trading price of our common stock could decline.

When used in these risk factors, the words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “future,” “intends,” “may,” “might,” “plans,” “projects,” “will” and similar expressions identify forward-looking statements. Our actual results could differ materially from those that we project in the forward-looking statements as a result of factors that we have set forth throughout this document as well as factors of which we are currently not aware.

In evaluating our business, you should carefully consider the following risks in addition to the other information in our Annual Report on Form 10-K for the fiscal year ended March 31, 2009 as filed with the Securities and Exchange Commission on June 12, 2009. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors and, therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.

We are not able to predict sales in future quarters and a number of factors affect our periodic results, which makes our quarterly operating results less predictable.

We are not able to accurately predict our sales in future quarters. Our revenue in the medical and veterinary markets is derived primarily by selling to distributors who resell our products to the ultimate user. While we are better able to predict sales of our reagent discs, as we sell these discs primarily for use with blood chemistry analyzers that we sold in prior periods, we generally are unable to predict with much certainty sales of our blood chemistry analyzers, as we typically sell our blood chemistry analyzers to new users. Accordingly, our sales in any one quarter are not indicative of our sales in any future period.

We generally operate with a limited order backlog, because we ship our products shortly after we receive the orders from our customers. As a result, our product sales in any quarter are generally dependent on orders that we receive and ship in that quarter. We base our expense levels, which are to a large extent fixed, in part on our expectations as to future revenues. We may be unable to reduce our spending in a timely manner to compensate for any unexpected revenue shortfall. As a result, any such shortfall would immediately materially and adversely impact our operating results and financial condition.

The sales cycle for our products can fluctuate, which may cause revenue and operating results to vary significantly from period to period. We believe this fluctuation is due primarily to (i) seasonal patterns in the decision making processes by our independent distributors and direct customers, (ii) inventory or timing considerations by our distributors and (iii) on the purchasing requirements of the U.S. Military to acquire our products. Accordingly, we believe that period to period comparisons of our results of operations are not necessarily meaningful.

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In the future, our periodic operating results may vary significantly depending on, but not limited to, a number of factors, including:

• new product announcements made by us or our competitors;

• changes in our pricing structures or the pricing structures of our competitors;

• our ability to develop, introduce and market new products on a timely basis;

• our manufacturing capacities and our ability to increase the scale of these capacities;

• the mix of product sales between our blood chemistry analyzers and our reagent disc products;

• the amount we spend on research and development; and

• changes in our strategy.

We would fail to achieve anticipated revenue if the market does not accept our products.

We believe that our core compact blood chemistry analyzer product differs substantially from current blood chemistry analyzers on the market. Our primary competition is from centralized laboratories that offer a greater number of tests than our products, but do so at a greater overall cost and require more time. We also compete with other point-of-care analyzers that cost more, require more maintenance and offer a narrower range of tests. However, these point-of-care analyzers are generally marketed by larger companies which have greater resources for sales and marketing, in addition to a recognized brand name and established distribution relationships.

In the human medical market, we have relatively limited experience in large-scale sales of our Piccolo blood chemistry analyzers. Although we believe that our blood chemistry analyzers offer consumers many advantages, including substantial cost savings according to our analyses, in terms of implementation of the actual product, these advantages involve changes to current standard practices, such as using large clinical laboratories that will require changes in both the procedures and mindset of care providers. The human medical market in particular is highly regulated, structured, difficult to penetrate and often slow to adopt new product offerings. If we are unable to convince large numbers of medical clinics, hospitals and other point-of-care environments of the benefits of our Piccolo blood chemistry analyzers and our other products, we will suffer lost sales and could fail to achieve anticipated revenue.

Historically, in the veterinary market, we have marketed our VetScan systems through both direct sales and distribution channels to veterinarians. We continue to develop new animal blood tests to expand our product offerings and we cannot be assured that these tests will be accepted by the veterinary market.

We rely on patents and other proprietary information, the loss of which would negatively affect our business.

As of June 30, 2009, 41 patent applications have been filed on our behalf with the United States Patent and Trademark Office (“USPTO”), of which 30 patents have been issued and 29 patents are currently active. Additionally, we have filed several international patent applications covering the same subject matter as our domestic applications. The patent position of any medical device manufacturer, including us, is uncertain and may involve complex legal and factual issues. Consequently, we may not be issued any additional patents, either domestically or internationally. Furthermore, our patents may not provide significant proprietary protection because there is a chance that they will be circumvented or invalidated. We cannot be certain that we were the first creator of the inventions covered by our issued patents or pending patent applications, or that we were the first to file patent applications for these inventions, because (1) the USPTO maintains all patent applications that are not filed in any foreign jurisdictions in secrecy until it issues the patents (unless a patent application owner files a request for publication) and (2) publications of discoveries in the scientific or patent literature tend to lag behind actual discoveries by several months. We may have to participate in interference proceedings, which are proceedings in front of the USPTO, to determine who will be issued a patent. These proceedings could be costly and could be decided against us.

We also rely upon copyrights, trademarks and unpatented trade secrets. Others may independently develop substantially equivalent proprietary information and techniques that would undermine our proprietary technologies. Further, others may gain access to our trade secrets or disclose such technology. Although we require our employees, consultants and advisors to execute agreements that require that our corporate information be kept confidential and that any inventions by these individuals are property of Abaxis, there can be no assurance that these agreements will provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information. The unauthorized dissemination of our confidential information would negatively impact our business.

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We must increase sales of our Piccolo and VetScan products or we may not be able to increase profitability.

As of June 30, 2009, we had retained earnings of $12.8 million. Our ability to continue to be profitable and to increase profitability will depend, in part, on our ability to increase our sales volumes of our Piccolo and VetScan products. Increasing the sales volume of our products will depend upon, among other things, our ability to:

• continue to improve our existing products and develop new and innovative products;

• increase our sales and marketing activities;

• effectively manage our manufacturing activities; and

• effectively compete against current and future competitors.

We cannot assure you that we will be able to successfully increase our sales volumes of our products to sustain or increase profitability.

We must continue to develop our sales, marketing and distribution experience in the human diagnostic market or our business will not grow.

Although we have gained experience marketing our VetScan products in the veterinary diagnostic market, we have limited sales, marketing and distribution experience with our Piccolo chemistry analyzers in the human diagnostic market. Accordingly, we cannot assure you that:

• we will be able to establish and maintain effective distribution arrangements in the human diagnostic market;

• any distribution arrangements that we are able to establish will be successful in marketing our products; or

• the costs associated with sales, marketing and distributing our products will not be excessive.

Should we fail to effectively develop our sales, marketing and distribution efforts, our growth will be limited and our results of operations will be adversely affected.

We could fail to achieve anticipated revenue if we experience problems related to the manufacture of our blood chemistry analyzers.

We manufacture our blood chemistry analyzers at our manufacturing facility in Union City, California. During fiscal 2008, we experienced problems related to the manufacture of our new blood chemistry analyzer, which were primarily related to difficulties and delays in obtaining certain key components that we purchase from various suppliers. These manufacturing problems were primarily related to quality control issues for key components that we obtain from our suppliers and to design issues of the key components required in our blood chemistry analyzer. Our difficulties in obtaining an adequate amount of quality components for the manufacture of our blood chemistry analyzer had a materially adverse impact on our sales of VetScan chemistry analyzers in fiscal 2008. We believe that we have taken appropriate steps to resolve these issues, including securing quality parts from our suppliers, but there can be no assurance that our efforts to resolve these manufacturing difficulties will continue to prove to be successful or that similar manufacturing problems will not arise in the future. If we are unable to prevent similar problems from occurring in the future, we may not be able to manufacture sufficient quantities to meet anticipated demand and, therefore, will not be able to effectively market and sell our blood chemistry analyzers; accordingly, our revenue and business would be materially adversely affected.

We may inadvertently produce defective products, which may subject us to significant warranty liabilities or product liability claims and we may have insufficient product liability insurance to pay material uninsured claims.

Our business exposes us to potential warranty and product liability risks which are inherent in the testing, manufacturing and marketing of human and veterinary medical products. We strive to apply sophisticated methods to raw materials and produce defect-free medical test equipment. Although we have established procedures for quality control on both the raw materials that we receive from suppliers and our manufactured final products, these procedures may prove inadequate to detect a defect that occurs in limited quantities, that we have not anticipated or otherwise. Our Piccolo and VetScan chemistry analyzers may be unable to detect all errors which could result in the misdiagnosis of human or veterinary patients.

Should we inadvertently manufacture and ship defective products, we may be subject to substantial claims under our warranty policy or product liability laws. In addition, our policy is to credit medical providers for any defective product that we produce, including those reagent discs that are rejected by our Piccolo and VetScan chemistry analyzers. Therefore, even if a mass defect within a lot or lots of reagent discs were detected by our Piccolo and VetScan chemistry analyzers, the replacement of such reagent discs free of charge would be costly and could materially harm our financial condition. Further, in the event that a product defect is not detected in our Piccolo chemistry analyzer, our relatively recent expansion into the human medical market greatly increases the risk that the amount of damages involved with just one product defect would be material to our operations. We currently maintain limited product liability insurance that we believe is adequate for our current needs, taking into account the risks involved and cost of coverage. However, our product liability insurance and cash may be insufficient to cover potential liabilities. In addition, in the future the coverage that we require may be unavailable on commercially reasonable terms, if at all. Even with our current insurance coverage, a mass product defect, product liability claim or recall could subject us to claims above the amount of our coverage and would materially adversely affect our business and our financial condition.

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We must effectively train and integrate the members of our sales team in order to achieve our anticipated revenue or expand our business.

Many of our sales personnel directly involved in the sales and marketing activities of our products have been employed by us for a limited period of time. In addition, we experience significant turnover in our sales and marketing personnel. If we are to increase our direct sales, particularly in the human medical market, we will need to train new sales personnel and supervise our sales team closely. We also will continue hiring additional sales personnel. If we are unable to retain our existing personnel, or attract and train additional qualified personnel, our growth in the medical market may be limited due to our lack of resources to market our products.

We need to successfully manufacture and market additional reagent discs for the human diagnostic market if we are to compete in that market.

We have developed a blood analysis system that consists of a portable blood analyzer and single-use reagent discs. Each reagent disc performs a series of standard blood tests. We believe that it is necessary to develop additional series of reagent discs with various tests for use with the Piccolo and VetScan chemistry analyzers. Historically, we have developed reagent discs suitable for the human medical and veterinary diagnostic markets. We have received 510(k) clearances from the U.S. Food and Drug Administration (“FDA”) for 25 test methods in the human medical market. These tests are included in standard tests for which the medical community receives reimbursements from third-party payors such as health maintenance organizations (“HMOs”) and Medicare. We may not be able to successfully manufacture or market these reagent discs. Our failure to meet these challenges will materially adversely affect our operating results and financial condition.

We rely primarily on distributors to sell our products and we rely on sole distributor arrangements in a number of countries. Our failure to successfully develop and maintain these relationships could adversely affect our business.

We sell our medical and veterinary products primarily through a limited number of distributors. As a result, we are dependent upon these distributors to sell our products and to assist us in promoting and creating a demand for our products. We operate on a purchase order basis with the distributors and the distributors are under no contractual obligation to continue carrying our products. Further, many of our distributors may carry our competitors’ products, and may promote our competitors’ products over our own products.

We depend on a number of distributors in North America who distribute our VetScan products. Our largest distributor in North America, DVM Resources, accounted for 10% of our total worldwide revenues for the three months ended June 30, 2009. We depend on our distributors to assist us in promoting our products in the veterinary market, and accordingly, if one or more of our distributors were to stop selling our products in the future, we may experience a temporary sharp decline or delay in our sales revenue until our customers identify another distributor or purchase products directly from us.

In the United States medical market, we depend on a few distributors for our Piccolo products. We entered into formal distribution agreements with the following distributors to sell and market Piccolo chemistry analyzers and medical reagent discs: National Distribution & Contracting, Inc., McKesson Medical-Surgical Inc., Cardinal Health, Henry Schein’s Medical Group and PSS World Medical, Inc. We depend on these distributors to assist us in promoting market acceptance of our Piccolo chemistry analyzers.

Internationally, we rely on only a few distributors for our products in both the medical and veterinary diagnostic markets. In the first quarter of fiscal 2008 we terminated our distributor agreement with T. Chatani & Co., Ltd. (“T. Chatani”) in Japan. T. Chatani had agreed to continue to service Abaxis customers, which included selling our reagent discs and hematology reagent kits, for a limited period, which ended during the fourth quarter of fiscal 2008. In October 2007, we signed an exclusive distribution agreement with Central Scientific Commerce, Inc. (“CSC”) to distribute the complete line of our medical and veterinary products in Japan. In the third quarter of fiscal 2008, CSC began the process of registering our instruments, the VetScan VS2, VetScan HM5 and Piccolo xpress in Japan. The registration process was completed in the first quarter of fiscal 2009, and consequently, CSC can begin to import and market our instruments along with our reagent discs and kits. However, we cannot assure you that our new distribution relationship with CSC will be as successful as our prior distribution arrangement, or at all. Furthermore, an inability of, or any delays by, our distributor in receiving the necessary approvals for our new or other products can adversely impact our revenues in Japan.

We currently rely on distributors that carry either our medical or veterinary products in the following countries: Afghanistan, Australia, Austria, Bahrain, Belgium, Canada, Czech Republic, Denmark, France, Germany, Hong Kong, India, Ireland, Israel, Italy, Japan, Korea, Macao, New Zealand, the Philippines, Portugal, Romania, Russia, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, Ukraine, the United Arab Emirates, the United Kingdom and the United States. Our distributors in each of these countries are responsible for obtaining the necessary approvals to sell our new and existing products. These distributors

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may not be successful in obtaining proper approvals for our new and existing products in their respective countries, and they may not be successful in marketing our products. We plan to continue to enter into additional distributor relationships to expand our international distribution base and solidify our international presence. However, we may not be successful in entering into additional distributor relationships on favorable terms, or at all. In addition, our distributors may terminate their relationship with us at any time. Historically, we have experienced a high degree of turnover among our international distributors. This turnover makes it difficult for us to establish a steady distribution network overseas. Consequently, we may not be successful in marketing our Piccolo and VetScan products internationally.

We depend on limited or sole suppliers for several key components in our products, many of whom we have not entered into contractual relationships with and failure of our suppliers to provide the components to us could harm our business.

We use several key components that are currently available from limited or sole sources as discussed below:

• Reagent Discs: Two injection-molding manufacturers, C. Brewer & Co. and Nypro, Inc., currently make the molded plastic discs which, when loaded with reagents and welded together, form our reagent disc products. We believe that only a few manufacturers are capable of producing these discs to the narrow tolerances that we require. To date, we have only qualified these two manufacturers to manufacture the molded plastic discs.

• Reagent Chemicals: We currently depend on the following single source vendors for some of the chemicals that we use to produce the dry reagent chemistry beads that are either inserted in our reagent discs or sold as stand-alone products: Amano Enzyme USA Co., Ltd., Genzyme Corporation, Kikkoman Corporation Biochemical Division, Microgenics Corporation, Roche Molecular Biochemicals of Roche Diagnostics Corporation, a division of F. Hoffmann-La Roche, Ltd., Sigma Aldrich Inc. and Toyobo Specialties (formerly Shinko American Inc.).

• Blood Chemistry Analyzer Components: Our blood analyzer products use several technologically-advanced components that we currently purchase from a limited number of vendors, including certain components from a single-source supplier, UDT Sensors (a division of OSI Optoelectronics). Our analyzers also use a printer that is primarily made by Seiko North America Corporation. The loss of the supply of any of these components could force us to redesign our blood chemistry analyzers.

• Hematology Instruments and Reagents: Our hematology instruments are manufactured by Diatron Medical Instruments PLC. in Hungary and are purchased by us as a completed instrument. In addition, to date, we have qualified only three suppliers to produce the reagents for our hematology instruments: Clinical Diagnostic Solutions, Inc., Diatron Medical Instruments PLC. and Mallinckrodt Baker BV.

• Coagulation Analyzers and Cartridges: Our coagulation analyzers and cartridges are manufactured by Scandinavian MicroBiodevices APS in Denmark and are purchased by us as completed products.

We primarily operate on a purchase order basis with all of the suppliers of our molded plastic reagent discs, reagent chemicals, blood chemistry analyzer components, hematology instruments and hematology reagents and, therefore, these suppliers are under no contractual obligation to supply us with their products or to do so at specified prices. Although we believe that there may be potential alternate suppliers available for these critical components, to date we have not qualified additional vendors beyond those referenced above and cannot assure you we would be able to enter into arrangements with additional vendors on favorable terms, or at all.

Because we are dependent on a limited number of suppliers and manufacturers for critical components to our products, we are particularly susceptible to any interruption in the supply of these products or the viability of our assembly arrangements. The loss of any one of these suppliers or a disruption in our manufacturing arrangements could materially adversely affect our business and financial condition.

We may not be able to compete effectively with larger, more established entities or their products, or with future organizations or future products, which could cause our sales to decline.

Blood analysis is a well-established field in which there are a number of competitors that have substantially greater financial resources and larger, more established marketing, sales and service organizations than we do. We compete with the following organizations:

• commercial clinical laboratories;

• hospitals’ clinical laboratories; and

• manufacturers of bench top multi-test blood analyzers and other testing systems that health care providers can use “on-site” (a listing of our competitors is listed below).

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Historically, hospitals and commercial laboratories performed most human diagnostic testing, and commercial laboratories performed most veterinary medical testing. We have identified five principal factors that we believe customers typically use to evaluate our products and those of our competitors. These factors include:

• range of tests offered;

• immediacy of results;

• cost effectiveness;

• ease of use; and

• reliability of results.

We believe that we compete effectively on each of these factors except for the range of tests offered. Clinical laboratories are effective at processing large panels of tests using skilled technicians and complex equipment. While our current offering of reagent discs cannot provide the same broad range of tests, we believe that in certain markets our products provide a sufficient breadth of test menus to compete successfully with clinical laboratories given the advantages of our products with respect to the other four factors. In addition, we cannot assure you that we will continue to be able to compete effectively on cost effectiveness, ease of use, immediacy of results or reliability of results. We also cannot assure you that we will ever be able to compete effectively on the basis of range of tests offered.

Competition in the human and veterinary diagnostic markets is intense. Our principal competitors in the human diagnostic market are Alfa Wassermann S.P.A., i-STAT Corporation (which was purchased by Abbott Laboratories), Johnson & Johnson (including its subsidiary, Ortho-Clinical Diagnostics, Inc.), Kodak (DT60 analyzer), Polymedco, Inc. and F. Hoffman-La Roche (Reflotron system). Our principal competitors in the veterinary diagnostic market are Idexx Laboratories, Inc. and Heska Corporation. Most of our competitors have significantly larger product lines to offer and greater financial and other resources than we do. In particular, many of our competitors have large sales forces and well-established distribution channels. Consequently, we must develop our distribution channels and significantly improve our direct sales force in order to compete in these markets.

Changes in third-party payor reimbursement regulations can negatively affect our business.

By regulating the maximum amount of reimbursement they will provide for blood testing services, third-party payors, such as HMOs, pay-per-service insurance plans, Medicare and Medicaid, can indirectly affect the pricing or the relative attractiveness of our human testing products. For example, the Centers for Medicare and Medicaid Services (the “CMS”) set the level of reimbursement of fees for blood testing services for Medicare beneficiaries. If third-party payors decrease the reimbursement amounts for blood testing services, it may decrease the amount that physicians and hospitals are able to charge patients for such services. Consequently, we would need to charge less for our products. If the government and third-party payors do not provide for adequate coverage and reimbursement levels to allow health care providers to use our products, the demand for our products will decrease.

We are subject to numerous governmental regulations and regulatory changes are difficult to predict and may be damaging to our business.

Need for FDA Certification for Our Medical Device Products

Our Piccolo products are regulated under the 1976 Medical Device Amendments to the Food, Drug and Cosmetic Act, which is administered by the FDA. The FDA has classified our Piccolo products as “Class I” and “Class II” devices. These classifications require us to submit to the FDA a pre-market notification form or 510(k). The FDA uses the 510(k) to substantiate product claims that are made by medical device manufacturers prior to marketing. In our 510(k) notification, we must, among other things, establish that the product we plan to market is “substantially equivalent” to (1) a product that was on the market prior to the adoption of the 1976 Medical Device Amendment or (2) a product that the FDA has previously cleared under the 510(k) process.

The FDA review process of a 510(k) notification can last anywhere from three to six months, and the FDA must issue a written order finding “substantial equivalence” before a company can market a medical device. As of June 30, 2009, we have received market clearance from the FDA for our Piccolo chemistry analyzer and 25 reagent tests that we have on 13 reagent discs. We are currently developing additional tests that we will have to clear with the FDA through the 510(k) notification procedures. These new test products are crucial for our success in the human medical market. If we do not receive 510(k) clearance for a particular product, we will not be able to market that product in the United States, which could harm our future sales.

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Need to Comply with Manufacturing Regulations

The 1976 Medical Device Amendment also requires us to manufacture our Piccolo products in accordance with Good Manufacturing Practices guidelines. Current Good Manufacturing Practice requirements are set forth in the 21 CFR 820 Quality System Regulation. These requirements regulate the methods used in, and the facilities and controls used for the design, manufacture, packaging, storage, installation and servicing of our medical devices intended for human use. Our manufacturing facility is subject to periodic inspections. In addition, various state regulatory agencies may regulate the manufacture of our products. To date, we have complied with the following federal, state, local and international regulatory requirements:

• In April 2001, the State of California Food and Drug Branch granted our manufacturing facility “in compliance” status, based on the regulations for Good Manufacturing Practices for medical devices.

• In May 2001, the State of California Food and Drug Branch granted licensing for our manufacturing facility in Union City, California.

• In May 2002, we received our ISO 9001 certification, expanding our compliance with international quality standards.

• In December 2003, we received ISO 13485 Quality System certification as required by the 2003 European In Vitro Device Directive. This certified our quality system specifically to medical devices.

• In both March 2003 and September 2005, the FDA conducted a facility inspection and verified our compliance with the 21 CFR 820 Regulation.

• In November 2006, we received our recertification to the ISO 13485:2003 Quality System Standard for medical devices.

• In August 2008, the FDA conducted an additional facility inspection to verify our compliance with 21 CFR 820 Regulation.

We cannot assure you that we will successfully pass the latest FDA inspection or any re-inspection by the FDA or the State of California. In addition, we cannot assure you that we can comply with all current or future government manufacturing requirements and regulations. If we are unable to comply with the regulations, or if we do not pass routine inspections, our business and results of operations will be materially adversely affected.

Effects of the Clinical Laboratory Improvement Amendments on Our Products

Our Piccolo products are also affected by the Clinical Laboratory Improvement Amendments (the “CLIA”) of 1988. The CLIA are intended to insure the quality and reliability of all medical testing in the United States regardless of where the tests are performed. The current CLIA regulations divide laboratory tests into the following three categories:

• waived;

• moderately complex; and

• highly complex.

Many of the tests performed using the Piccolo chemistry analyzer are in the “moderately complex” category. This category requires that any location in which testing is performed be certified as a laboratory. Hence, we can only sell some Piccolo products to customers who meet the standards of a laboratory. To receive “laboratory” certification, a testing facility must be certified by the CMS. After the testing facility receives a “laboratory” certification, it must then meet the CLIA regulations. Because we can only sell some Piccolo products to testing facilities that are certified “laboratories,” the market for some products is correspondingly constrained.

We can currently offer the following Piccolo reagent discs as waived tests to the medical market: Basic Metabolic Panel, Comprehensive Metabolic Panel, Electrolyte Panel, General Chemistry 6, General Chemistry 13, Kidney Check, Lipid Panel, Lipid Panel Plus, Liver Panel Plus, MetLyte 8 Panel and Renal Function Panel. Waived status permits untrained personnel to run the Piccolo chemistry analyzer using these tests; thus, extending the sites (doctors’ offices and other point-of-care environments) that can use the Piccolo chemistry analyzer. In April 2009, we submitted an assay for C-Reactive Protein (“CRP”) to the FDA for 510(k) clearance. We cannot assure you that we will successfully receive 510(k) clearance for this assay on a timely basis, or at all. We have included this assay on a new reagent, MetLyte Plus CRP, which is currently offered for sale and distribution only outside the United States. Although we are engaged in an active program to test and apply for CLIA waivers for additional analytes, we cannot assure you that we will successfully receive CLIA waived status from the FDA for other products. Consequently, for the reagent discs that have not received CLIA waived status, the market for our Piccolo products may be confined to those testing facilities that are certified as “laboratories” and our growth can be limited accordingly.

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Need to Comply with Various Federal, State, Local and International Regulations

Federal, state, local and international regulations regarding the manufacture and sale of health care products and diagnostic devices may change. In addition, as we continue to sell in foreign markets, we may have to obtain additional governmental clearances in those markets. Foreign certifications that we have received include the following, among others:

• In December 2003, we received certification from the British Standards Institute to the ISO 13485:1996 Quality System standard for medical devices. This quality system certification, along with successful completion of product testing to 2003 European standards and the translation of Piccolo product documentation into the required languages, enabled us to meet the compliance requirements of the CE Mark and the 2003 European In Vitro Device Directive.

• In September 2005, we received the Canadian Medical Device Conformity Assessment System stamp on our ISO 13485 certificate to signify compliance with Health Canada regulations.

• In March 2006, we received our certification to the 2003 version of the ISO 13485 Quality System Standard for medical devices.

• In November 2006, we received our recertification to the ISO 13485:2003 Quality System Standard for medical devices.

We cannot predict what impact, if any, such current or future regulatory changes would have on our business. We may not be able to obtain regulatory clearances for our products in the United States or in foreign markets, and the failure to obtain these regulatory clearances will materially adversely affect our business and results of operations.

Although we believe that we will be able to comply with all applicable regulations of the FDA and of the State of California, including the Quality System Regulation, current regulations depend on administrative interpretations. Future interpretations made by the FDA, CMS or other regulatory bodies may adversely affect our business.

We have incurred and may continue to incur, in future periods, significant share-based compensation charges under SFAS No. 123(R), which may adversely affect our reported financial results.

Effective April 1, 2006, we adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (“SFAS No. 123(R)”), issued by the Financial Accounting Standards Board, which requires the measurement of all share-based payments to employees, using a fair-value-based method and the recording of such expense in our results of operations. The fair value of restricted stock unit awards used in our expense recognition method is measured based on the number of shares granted and the closing market price of our common stock on the date of grant. Such value is recognized as an expense, net of an estimated forfeiture rate, for those shares over the corresponding requisite service period. Since fiscal 2007, we granted restricted stock unit awards annually to employees based on the following time-based vesting schedule over a four-year period: five percent vesting after the first year; additional ten percent after the second year; additional 15 percent after the third year; and the remaining 70 percent after the fourth year of continuous employment. Since we began granting restricted stock units as part of our share-based compensation program in fiscal 2007, share-based compensation expense related to restricted stock units had a material impact on our earnings per share and on our financial statements and we expect that it will continue to adversely impact our reported results of operations, particularly in the fourth year of vesting for the restricted stock unit awarded to employees. As of June 30, 2009, our unrecognized compensation expense related to restricted stock unit awards granted to employees and directors to date totaled $14.8 million, which is expected to be recognized over a weighted average service period of 2.45 years.

We depend on key members of our management and scientific staff and, if we fail to retain and recruit qualified individuals, our ability to execute our business strategy and generate sales would be harmed.

We are highly dependent on the principal members of our management and scientific staff. The loss of any of these key personnel, including in particular Clinton H. Severson, our President, Chief Executive Officer and Chairman of our Board of Directors, might impede the achievement of our business objectives. We may not be able to continue to attract and retain skilled and experienced marketing, sales and manufacturing personnel on acceptable terms in the future because numerous medical products and other high technology companies compete for the services of these qualified individuals. We currently do not maintain key man life insurance on any of our employees.

We are subject to increasingly complex requirements from recent legislation requiring companies to evaluate internal control over financial reporting.

Rules adopted by the Securities and Exchange Commission pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require an assessment of internal control over financial reporting by our management and an attestation of the effectiveness of our internal controls over financial reporting by an independent registered public accounting firm. We have an ongoing program to perform the assessment, testing and evaluation to comply with these requirements and we expect to continue to incur significant expenses for Section 404 compliance on an ongoing basis.

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Our management assessed the effectiveness of our internal control over financial reporting as of our fiscal years ended March 31, 2009 and 2008. Although we received an unqualified opinion on our consolidated financial statements for the fiscal years ended March 31, 2009 and 2008, and on the effectiveness of our internal control over financial reporting as of March 31, 2009 and 2008, we cannot predict the outcome of our testing in future periods. In the event that our internal controls over financial reporting are not effective as defined under Section 404, or any failure to implement required new or improved controls, or difficulties encountered in implementation could harm operating results or prevent us from accurately reporting financial results or cause a failure to meet our reporting obligations in the future. If management cannot assess internal control over financial reporting is effective, or our independent registered public accounting firm is unable to provide an unqualified attestation report on such assessment, investor confidence and our share value may be negatively impacted.

We may need additional funding in the future and these funds may not be available to us.

We believe that our existing capital resources, available line of credit and anticipated revenue from the sales of our products will be adequate to satisfy our currently planned operating and financial requirements through the next 12 months, although no assurances can be given. The terms of our line of credit contain a number of covenants concerning financial tests that we must meet, and these tests are more fully explained in Note 7 of the Notes to Consolidated Financial Statements contained in this Quarterly Report on Form 10-Q.

Further, we expect to incur incremental additional costs to support our future operations, including:

• further commercialization of our products and development of new test methods to allow us to further penetrate the human diagnostic market and the veterinary diagnostic market;

• our need to acquire capital equipment for our manufacturing facilities, which includes the ongoing costs related to the continuing development of our current and future products;

• research and design costs related to the continuing development of our current and future products; and

• additional pre-clinical testing and clinical trials for our current and future products.

To the extent that our existing resources and anticipated revenue from the sale of our products are insufficient to fund our activities or if we are unable to meet the financial covenants of our line of credit, we may have to raise additional funds from the issuance of public or private securities. In the event that we cannot maintain compliance with these financial covenants, we may also be subject to increased interest rate expenses. We may not be able to raise additional funding, or if we are able to, we may not be able to raise funding on acceptable terms. We may also dilute then-existing shareholders if we raise additional funds by issuing new equity securities. Alternately, we may have to relinquish rights to certain of our technologies, products and/or sales territories if we are required to obtain funds through arrangements with collaborative partners. If we are unable to raise needed funds, we may be required to curtail our operations significantly. This would materially adversely affect our operating results and financial condition.

We must comply with strict and potentially costly environmental regulations or we could pay significant fines.

We are subject to stringent federal, state and local laws, rules, regulations and policies that govern the use, generation, manufacture, storage, air emission, effluent discharge, handling and disposal of certain materials and wastes. In particular, we are subject to laws, rules and regulations governing the handling and disposal of biohazardous materials used in the development and testing of our products. Our costs to comply with applicable environmental regulations consist primarily of handling and disposing of human and veterinary blood samples for testing (whole blood, plasma, serum). Although we believe that we have complied with applicable laws and regulations in all material respects and have not been required to take any action to correct any noncompliance, we may have to incur significant costs to comply with environmental regulations if our manufacturing to commercial levels continues to increase. In addition, if a government agency determines that we have not complied with these laws, rules and regulations, we may have to pay significant fines and/or take remedial action that would be expensive and we do not carry environmental-related insurance coverage.

Our facilities and manufacturing operations are vulnerable to natural disasters and other unexpected losses; system failures or delays may harm our business.

Our success depends on the efficient and uninterrupted operation of our manufacturing operations, which are co-located with our corporate headquarters in Union City, California. A failure of manufacturing operations, be it in the development and manufacturing of our Piccolo or VetScan blood chemistry analyzers or the reagent discs used in the blood chemistry analyzers, could result in our inability to supply customer demand.

We do not have a backup facility to provide redundant manufacturing capacity in the event of a system failure. Accordingly, if our location in Union City, California experienced a system failure or regulatory problem that temporarily shuts down our manufacturing facility, our manufacturing ability would become unavailable until we were able to bring an alternative facility online, a process which could take several weeks or even months. These manufacturing operations are also vulnerable to damage from earthquakes, fire, floods, power loss, telecommunications failures, break-ins and similar events. Although we carry property and business interruption insurance, our coverage may not be adequate to compensate us for all losses that may occur. Additionally, our computer servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions.

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Fluctuations in foreign exchange rates and the possible lack of financial stability in foreign countries could prevent overseas sales growth.

Our international sales are currently primarily U.S. dollar-denominated. As a result, an increase in the value of the U.S. dollar relative to foreign currencies could make our products less competitive in international markets. For the limited amount of our sales denominated in local currencies, we are subject to fluctuations in exchange rates between the U.S. dollar and the particular local currency. A strong U.S. dollar, when compared to local currencies in Asia, excluding the Japanese yen, may negatively impact our revenue. Our operating results could also be adversely affected by the seasonality of international sales and the economic conditions of our overseas markets.

Our operating results could be materially affected by unanticipated changes in our tax provisions or exposure to additional income tax liabilities.

Our determination of our tax liability (like any company’s determination of its tax liability) is subject to review by applicable tax authorities. Any adverse outcome of such a review could have an adverse effect on our operating results and financial condition. In addition, the determination of our provision for income taxes and other tax liabilities requires significant judgment including our determination of whether a valuation allowance against deferred tax assets is required. Although we believe our estimates and judgments are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial statements and may materially affect our financial results in the period or periods for which such determination is made.

Our stock price is highly volatile and investing in our stock involves a high degree of risk, which could result in substantial losses for investors.

The market price of our common stock, like the securities of many other medical products companies, fluctuates over a wide range, and will continue to be highly volatile in the future. During the quarter ended June 30, 2009, the closing sale prices of our common stock on the NASDAQ Global Market ranged from $14.44 to $20.54 per share and the closing sale price for our quarter ended June 30, 2009 was $20.54 per share. During the last eight fiscal quarters ended June 30, 2009, our stock price closed at a high of $39.74 per share on December 24, 2007 and a low of $10.28 per share on October 27, 2008. Many factors may affect the market price of our common stock, including:

• fluctuation in our operating results;

• announcements of technological innovations or new commercial products by us or our competitors;

• changes in governmental regulation in the United States and internationally;

• prospects and proposals for health care reform;

• governmental or third-party payors’ controls on prices that our customers may pay for our products;

• developments or disputes concerning our patents or our other proprietary rights;

• product liability claims and public concern as to the safety of our devices or similar devices developed by our competitors; and

• general market conditions.

Because our stock price is so volatile, investing in our common stock is highly risky. A potential investor must be able to withstand the loss of his entire investment in our common stock.

Our shareholders rights plan and our ability to issue preferred stock may delay or prevent a change of control of Abaxis.

Our shareholder rights plan, adopted by our board of directors on April 22, 2003, may make it more difficult for a third party to acquire, or discourage a third party from attempting to acquire control of, Abaxis. The shareholder rights plan could limit the price that investors might be willing to pay in the future for shares of our common stock.

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In addition, our board of directors has the authority to issue up to 5,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the shareholders, except to the extent required by NASDAQ rules. The issuance of preferred stock, while providing flexibility in connection with possible financings or acquisitions or other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Exhibit No.	Description of Document
3.1	Restated Articles of Incorporation (Filed with the Securities and Exchange Commission as an exhibit with our Annual Report on Form 10-K for the fiscal year ended March 31, 1993 and incorporated herein by reference.)
3.2	Certificate of Amendment of Amended and Restated Articles of Incorporation (Filed with the Securities and Exchange Commission as an exhibit with our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1996 and incorporated herein by reference.)
3.3	By-laws (Filed with the Securities and Exchange Commission in our Registration Statement No. 33-44326 on December 11, 1991 and incorporated herein by reference.)
3.4	Amendment to the By-laws (Filed with the Securities and Exchange Commission as an exhibit with our Current Report on Form 8-K on July 30, 2007 and incorporated herein by reference.)
4.1	Registration Rights Agreement, dated as of March 29, 2002 (Filed with the Securities and Exchange Commission as an exhibit with our Current Report on Form 8-K on May 13, 2002 and incorporated herein by reference.)
4.2	Reference is made to Exhibit 3.1, Exhibit 3.2, Exhibit 3.3 and Exhibit 3.4.
10.1+	Exclusive Agreement, dated as of May 1, 2009, by and between the Registrant and Abbott Point of Care Inc.
10.2*	Fiscal 2010 Base Salary and Target Bonus for the Named Executive Officers (Filed with the Securities and Exchange Commission as an exhibit with our Current Report on Form 8-K on April 28, 2009 and incorporated herein by reference.)
10.3+	License Agreement by and between Inverness Medical Switzerland GmbH and the Registrant, dated January 5, 2009.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1#	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2#	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

#	This certification accompanies this Quarterly Report on Form 10-Q. The certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Abaxis, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q and irrespective of any general incorporation language contained in any such filing.
*	Management contract or compensatory plan or arrangement.
+	Confidential treatment of certain portions of this agreement has been requested from the Securities and Exchange Commission.

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SIGNATURES

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. (Registrant)
Date: August 10, 2009	BY:	/s/ Clinton H. Severson
		Clinton H. Severson
		President, Chief Executive Officer and Director (Principal Executive Officer)
Date: August 10, 2009	BY:	/s/ Alberto R. Santa Ines
		Alberto R. Santa Ines
		Chief Financial Officer and Vice President of Finance (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description of Document
3.1	Restated Articles of Incorporation (Filed with the Securities and Exchange Commission as an exhibit with our Annual Report on Form 10-K for the fiscal year ended March 31, 1993 and incorporated herein by reference.)
3.2	Certificate of Amendment of Amended and Restated Articles of Incorporation (Filed with the Securities and Exchange Commission as an exhibit with our Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1996 and incorporated herein by reference.)
3.3	By-laws (Filed with the Securities and Exchange Commission in our Registration Statement No. 33-44326 on December 11, 1991 and incorporated herein by reference.)
3.4	Amendment to the By-laws (Filed with the Securities and Exchange Commission as an exhibit with our Current Report on Form 8-K on July 30, 2007 and incorporated herein by reference.)
4.1	Registration Rights Agreement, dated as of March 29, 2002 (Filed with the Securities and Exchange Commission as an exhibit with our Current Report on Form 8-K on May 13, 2002 and incorporated herein by reference.)
4.2	Reference is made to Exhibit 3.1, Exhibit 3.2, Exhibit 3.3 and Exhibit 3.4.
10.1+	Exclusive Agreement, dated as of May 1, 2009, by and between the Registrant and Abbott Point of Care Inc.
10.2*	Fiscal 2010 Base Salary and Target Bonus for the Named Executive Officers (Filed with the Securities and Exchange Commission as an exhibit with our Current Report on Form 8-K on April 28, 2009 and incorporated herein by reference.)
10.3+	License Agreement by and between Inverness Medical Switzerland GmbH and the Registrant, dated January 5, 2009.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1#	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2#	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

#	This certification accompanies this Quarterly Report on Form 10-Q. The certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Abaxis, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q and irrespective of any general incorporation language contained in any such filing.
*	Management contract or compensatory plan or arrangement.
+	Confidential treatment of certain portions of this agreement has been requested from the Securities and Exchange Commission.

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EX-10.1

Exhibit 10.1

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXCLUSIVE AGREEMENT

THIS EXCLUSIVE AGREEMENT (“Agreement”) is made and entered into by and between Abbott Point of Care Inc., a Delaware corporation, having its principal place of business at 400 College Road East, Princeton, NJ 08540 (“Abbott”), and Abaxis, Inc., a Delaware corporation with offices at 3240 Whipple Road, Union City, CA 94587 (“Abaxis”), and effective as of May 1, 2009 (“Effective Date”).

RECITALS

WHEREAS, Abbott is a manufacturer of diagnostic health care equipment and reagents and desires to obtain an OEM distributor of Products (as hereinafter defined) in the Field (as hereinafter defined) in the Territory (as hereinafter defined);

WHEREAS, Abaxis is a manufacturer and distributor of various products in the Field in the Territory; and

WHEREAS, in accordance with the terms and conditions hereof, Abbott is willing to appoint Abaxis as its exclusive distributor of Products in the Territory, and Abaxis is willing to accept such appointment.

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and upon the terms and subject to the conditions set forth below, Abaxis and Abbott hereby agree as follows:

ARTICLE 1
DEFINITIONS

As used in this Agreement, the following terms shall have the meanings set forth below:

1.1 “Abaxis Trademarks” shall mean the Abaxis-owned trademarks and trade names set forth on Exhibit 1.1.

1.2 “Abbott Trademarks” shall mean the Abbott-owned trademarks and trade names set forth on Exhibit 1.2.

1.3 “Affiliate” shall mean, with respect to a Party, any other business entity which directly or indirectly controls, is controlled by, or is under common control with, such Party. A business entity or party shall be regarded as in control of another business entity if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock or other ownership interest of the other business entity, or if it directly or indirectly possesses the power to direct or cause the direction of the management and policies of the other business entity by any means whatsoever.

1.4 “Analyzer” shall mean the i-STAT^® 1 device.

1.5 “Base Target” shall mean, for each Contract Year, the minimum unit number of Product purchases required to be made by Abaxis and its Affiliates during such Contract Year.

1.6 “Cartridge” shall mean the disposable test component of a particular Product that contains one or more sensor chips and fluid handling channels and operates on an Analyzer.

1.7 “Confidential Information” shall mean any proprietary, confidential or non-public information, including without limitation information relating to products, End Users, suppliers, data, processes, prototypes, samples, plans, marketing plans, reports, forecasts, technical or commercial information, patents, patent applications, research, research results and other trade secrets, strategies, Know-How (as hereinafter defined) or intellectual property rights disclosed in writing by one Party to the other Party under this Agreement, as well as information disclosed orally and disclosed to be “Confidential Information” at the time of disclosure, to the extent such oral disclosure is reduced to writing, marked “Confidential” and provided to the receiving Party within [ * ] after oral disclosure. “Confidential Information” shall not include any information which:

(a)	Is known to the receiving Party before receipt thereof under this Agreement, as evidenced by the receiving Party’s written records;
(b)	Is disclosed to the receiving Party without restriction by a Third Party (as hereinafter defined) not under an obligation of nondisclosure to the disclosing Party;
(c)	Is or becomes part of the public domain other than through a breach of this Agreement by the receiving Party;

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(d)	Is disclosed by the disclosing Party to a Third Party without a duty of confidentiality;
(e)	Is independently developed by or for the receiving Party without use of the disclosing Party’s Confidential Information, as evidenced by the receiving Party’s records; or
(f)	Is disclosed by the receiving Party with the disclosing Party’s prior written approval.

1.8 “Contract Quarter” shall mean each calendar quarter during the Initial Term or any Renewal Term (as defined in Section 8.1).

1.9 “Contract Year” shall mean the twelve (12) month period from January 1 through December 31 of each year during the Term, provided that the first Contract Year shall mean the period beginning on the Effective Date and ending on December 31, 2009.

1.10 “Dealer” shall mean a natural person, corporation, partnership, trust, joint venture, government authority or other legal entity or organization in the Territory, other than Abaxis or Abbott and/or their respective Affiliates, which purchases Products from Abaxis for the purpose of resale to End Users for use in the Field.

1.11 “End User” shall mean a natural person, corporation, partnership, trust, joint venture, government authority or other legal entity or organization in the Field in the Territory, other than Abaxis or Abbott and/or their respective Affiliates, that purchases Products under this Agreement for its own use or consumption in the Field, and excluding any Third Party use in the human healthcare market.

1.12 “Field” shall mean the animal health care market, including laboratory animal research and specifically excluding the human health care market.

1.13 “Know-How” shall mean any and all data and information, including but not limited to ideas, designs, engineering drawings, methodologies of preparation or manufacturing, processes, instructions for use, formula enhancements, raw material specifications, raw material standards, and sources of raw material procurements, relating to the manufacture of Products.

1.14 “Products” shall mean the products manufactured by or for Abbott listed on Exhibit 1.14.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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1.15 “Product Purchases” shall mean, for each Contract Year, the Products purchased by Abaxis and its Affiliates from Abbott. For the purposes of this definition, a Product shall be considered purchased in the Contract Year in which it was delivered after having been duly ordered in accordance with the terms and conditions hereunder.

1.16 “Product Sales” means the Products Sold in the Field in the Territory by Abaxis directly to: (a) Dealers (as hereinafter defined) for resale to End Users; or (b) End Users; net of returns. Notwithstanding the foregoing, Products returned as a result of non-compliance with the warranties set forth in Section 3.4(f) shall be counted as Product Sales, it being understood that any replacement Products corresponding to such returned Products shall not be included in Product Sales.

1.17 “Purchase Price” shall mean the price for Analyzers, Cartridges and other Products purchased by Abaxis and its Affiliates from Abbott hereunder, as set forth on Exhibit 1.17 and more fully described in Section 3.3.

1.18 “Sale”, “Sell” or “Sold” shall mean to sell, hire, let, rent, lease or otherwise dispose of Product to a Third Party or Affiliate, provided such Affiliate is an End User of Products for commercial purposes for monetary or other valuable consideration. “Sale”, “Sell” or “Sold” shall not include a transaction where samples of Product are supplied without charge to a Third Party or Affiliate for marketing or demonstration purposes or in connection with clinical or other experimental trials.

1.19 “Term” shall mean the “Initial Term” and any “Renewal Term”.

1.20 “Territory” shall mean the entire world except Japan.

1.21 “Third Party” shall mean a natural person, corporation, partnership, trust, joint venture, governmental authority or other legal entity or organization other than the Parties and/or their Affiliates.

ARTICLE 2
APPOINTMENT AND AUTHORIZATION

2.1 Appointment.

(a) Initial Non-Exclusive Appointment. As of the Effective Date, Abbott hereby appoints Abaxis and its Affiliates as Abbott’s non-exclusive distributor of Products in the Field in the Territory until October 31, 2009, and Abaxis hereby accepts such appointment. Abaxis shall have the non-exclusive right to Sell and distribute Products in the Territory until October 31, 2009.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(b) Exclusive Appointment. As of November 1, 2009, and subject to Sections 2.1(d) and 2.5 below, Abbott hereby appoints Abaxis and its Affiliates for the Term as its exclusive distributor of Products in the Field in the Territory, and Abaxis hereby accepts such appointment from Abbott. As exclusive distributor in the Field in the Territory, Abaxis shall have the sole and exclusive right (even as to Abbott) to Sell and distribute Products in the Territory for use in the Field.

(c) Abbott Restriction. For so long as Abaxis is the exclusive distributor of Products in the Field in the Territory in accordance with the terms and provisions of this Agreement and subject to Section 2.1(d) below, Abbott shall not Sell or, directly or indirectly (e.g., through Affiliates or Third Parties) distribute Products, in the Field in the Territory. Upon reasonable prior notice and at mutually agreeable times, Abaxis may, at Abaxis’ expense, retain an independent third party auditor to audit Abbott’s books and records relating to Abbott’s Sales of Products solely to verify Abbott’s compliance with its obligations under this Section 2.1(c), provided that such independent third party auditor shall execute a customary confidentiality agreement with the audited party with respect to the information received in connection with such audit that is not broader in scope or more burdensome than the confidentiality obligations contained in this Agreement. Notwithstanding this subsection 2.1(c) or subsections 2.1(a) and 2.1(b) above, Abbott may maintain certain consultative and technical staff, at Abbott’s expense, to assist Abaxis in connection with such marketing, promotion, sales and distribution efforts. Other than Section 3.2(b), nothing contained in this Agreement shall limit or be interpreted to limit Abbott or Abbott’s Affiliates from selling products not listed on Exhibit 1.14 in the Territory.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(d) Exceptions to Exclusivity. Notwithstanding anything else provided in this Agreement, any right of Abaxis hereunder to exclusively distribute Products shall be subject to the following exceptions: (I) Abbott shall be permitted to sell Products to [ * ], but only to [ * ], and (II) Abbott and/or its authorized distributors shall be permitted to sell Products [ * ] for [ * ].

2.2 Non-Exclusive Appointment in Japan. As of the Effective Date, Abbott hereby appoints Abaxis and its Affiliates for the Term as Abbott’s non-exclusive distributor of Products, other than the BNP Cartridge, in the Field in Japan, and Abaxis hereby accepts such appointment. Abaxis shall have the non-exclusive right to Sell and distribute Products in Japan for use in the Field other than the BNP Cartridge which Abaxis agrees not to Sell or distribute in Japan.

2.3 Authorization. Abbott hereby authorizes Abaxis to represent itself as Abbott’s exclusive authorized distributor of Products in the Field in the Territory using Abbott Trademarks.

2.4 Minimum Purchase and Sales Requirements.

(a) Minimum Purchase Requirement. Abaxis shall achieve Product Purchases greater than or equal to the Base Target as set forth in the following Table 2.4(a) (“Minimum Purchase Requirement”). The Parties shall meet and negotiate in good faith to establish the Minimum Purchase Requirement for any Renewal Terms occurring beyond the years specified in Table 2.4(a).

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Table 2.4(a)

	Base Target
	Base
	Cartridge	Base
Contract	Purchases	Analyzer Purchases
Year	(USD)	(Units)
[ * ]	[ * ]	[ * ]
[ * ]	$[ * ]	[ * ]
[ * ]	$[ * ]	[ * ]
[ * ]	$[ * ]	[ * ]
[ * ]	$[ * ]	[ * ]
[ * ]	$[ * ]	[ * ]

(b) Minimum Sales Requirement. Abaxis shall achieve Product Sales of at least [ * ] of Product Purchases with respect to the number of units purchased by Abaxis from Abbott and, in turn, Sold by Abaxis, within each Contract Year (“Minimum Sales Requirement”). To achieve the Minimum Sales Requirement in a given Contract Year with respect to Cartridges, [ * ] must equal at least [ * ]. To achieve the Minimum Sales Requirement in a given Contract Year with respect to Analyzers, [ * ] must equal at least [ * ].

2.5 Failure to Achieve Minimum Purchase and Sale Requirements. Abbott’s sole remedies for Abaxis’ failure to achieve the Minimum Purchase Requirement and Minimum Sales Requirement set forth in Section 2.4 above in any Contract Year shall be to convert Abaxis’ status as exclusive distributor of Products in the Field in the Territory to non exclusive distributor of Products in the Field in the Territory effective upon [ * ] prior written notice, and/or to terminate this Agreement upon [ * ] prior written notice.

2.6 Annual Product Purchases Calculation. Following each Contract Year, the number of Product Purchases for such Contract Year shall be determined as set forth in Subsections 2.6(a) and/or 2.6(b) below and the Parties shall execute and attach to this Agreement the “Annual Product Purchase Calculation” form set forth on Exhibit 2.6 completed for such Contract Year.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(a)

Abbott Provides Abbott Calculation. Within [ * ] after the end of each Contract Year, Abbott may provide Abaxis with Abbott’s written calculation of Abaxis’ Product Purchases in such Contract Year (the Abbott Calculation”). If Abaxis disagrees with the Abbott Calculation, if any, Abaxis shall have [ * ] after receipt of the Abbott Calculation to respond in writing, with (a) Abaxis’ estimate; (b) the difference between Abaxis’ estimate and the Abbott Calculation; and (c) purchase order level detail so that Abbott may verify the Abbott Calculation. If Abbott disagrees with Abaxis’ calculation and Abaxis requests, in writing, purchase order level detail for the Abbott Calculation, Abbott shall provide such information. If the exchange of such information does not resolve the dispute, the Parties shall negotiate in good faith to determine the actual Product Purchases in such Contract Year and, if such dispute is not resolved within [ * ], the dispute shall be resolved pursuant to Section 9.11.

(b)

Abbott Does Not Provide Abbott Calculation. If Abbott does not provide Abaxis with the Abbott Calculation within [ * ] after the end of a given Contract Year, Abaxis shall provide Abbott with Abaxis’ written calculation of Abaxis’ Product Purchases in such Contract Year (the “Abaxis Calculation”) within [ * ] after the end of such Contract Year. If Abbott disagrees with the Abaxis Calculation, Abbott shall have [ * ] after receipt of the Abaxis Calculation to respond, in writing, with (i) Abbott’s estimate, (ii) the difference between Abbott’s estimate and the Abaxis Calculation, and (iii) purchase order level detail so that Abaxis may verify the Abaxis Calculation. If Abaxis disagrees with Abbott’s calculation and Abbott requests, in writing, purchase order level detail for the Abaxis Calculation, Abaxis shall provide such information. If the exchange of such information does not resolve the dispute, the Parties shall negotiate in good faith to determine the actual Product Purchases in such Contract Year and, if such dispute is not resolved within [ * ], the dispute shall be resolved pursuant to Section 9.11.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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2.7 Annual Product Sales Calculation. Abaxis shall provide Abbott with Abaxis’ written calculation of Abaxis’ Product Sales in each Contract Year in conjunction with its annual reporting obligations set forth in Section 3.8 of this Agreement.

2.8 Promotional Materials. Abaxis shall not disseminate or publish any written promotional materials or advertisements intended for customer distribution referencing the Products without Abbott’s prior written approval, which approval shall not be unreasonably withheld. Abaxis shall forward any written promotional materials or advertisements requiring Abbott’s approval pursuant to the terms of this Section 2.8 to the attention of Divisional Vice President, Marketing, Abbott Point of Care, 400 College Road East, Princeton, NJ 08540. Abbott shall review and comment on such written promotional materials or advertisements within [ * ] after receipt thereof from Abaxis. If Abbott does not respond during such [ * ] period, such promotional materials shall be deemed approved.

ARTICLE 3
SALES, MARKETING AND SUPPORT

3.1 Sales and Promotional Activities.

(a) Marketing. Abaxis shall, at its own expense, use commercially reasonable efforts to market and promote the Products in the Territory. Abaxis’ promotional activities shall include, but shall not be not limited to: (a) including the Products in its appropriate catalogs, promotional mailings and like publications; (b) developing, preparing and placing advertising concerning the Products in appropriate media or through appropriate direct mail; (c) exhibiting the Products at appropriate trade shows and exhibitions; (d) conducting commercially reasonable and appropriate market research; and (e) rendering other services customarily rendered by a distributor of veterinary medical products. By [ * ] of each Contract Year, Abaxis shall provide Abbott with a list of all proposed trade shows and exhibitions that it plans to attend in the next Contract Year. Abaxis may develop printed sales and promotional materials relating to the Products in the local language at its own expense. Abaxis

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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	shall provide such materials, if any, which have not been previously approved to Abbott for Abbott’s review and approval, which approval shall not be unreasonably delayed or withheld. Abbott shall review such materials within [ * ], and Abbott’s failure to object to any materials within such [ * ] of sending shall be deemed approval. If Abbott objects to the material, Abaxis shall modify such materials accordingly.
(b)	Sales Personnel. Abaxis, at its sole cost and expense, shall engage, compensate, supervise, train and maintain such competent, qualified personnel as may be reasonably required to, deliver, promote, market, sell, distribute, provide technical service and support for the Products, and End User complaint handling in the Territory.
(c)	Sales Effort. Abaxis shall use a degree of effort to market, promote and Sell the Products in the Field in the Territory [ * ].
(d)	Fees and Commission. Abaxis shall not [ * ]. Abaxis shall not [ * ], including [ * ].
(e)	Appointment of Dealers. Abaxis shall have the right to appoint Dealers for the sale of the Products in the Field in the Territory. Abaxis shall within [ * ] of this agreement update Abaxis’ written Distributor Policy to include language that [ * ] and shall communicate the same to its then-existing dealers. Abaxis agrees that, if it enters into a new agreement or arrangement, following the Effective Date, with any dealer to allow such dealer to offer for Sale, Sell, have Sold, use, have used, market, have marketed, distribute, have distributed, import and have imported Products in the Field in any country or region of the Territory, Abaxis shall [ * ], and further by subjecting them to the Distributor Policy described in the foregoing sentence.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(f)	Technical Support. Abaxis shall be responsible as the first point of contact for technical support with the End User, including the establishment of species-specific reference ranges. Abaxis will further provide technical support on the usage of Products by the End Users based upon information supplied by Abbott, [ * ]. The term “Technical Support” shall mean problem resolution, explanation of functionality and collection of incident reports. Abbott will provide technical support to Abaxis [ * ].
(g)	Modified and New Products. Abaxis shall provide timely comprehensive information to its Dealers or End Users, as appropriate, with respect to newly available Products, discontinuance of Products and changes in existing Products, including, but not limited to, performance specification changes and required software upgrades in Analyzers (which may or may not be coupled to specific lots of Cartridges). Abaxis shall use commercially reasonable efforts to ensure that each End User in the Territory makes any such performance specification changes and software upgrades in a timely manner. Abbott shall inform Abaxis in writing of newly available Products, the discontinuance of Products, or changes in existing Products at least [ * ] prior to the availability of such new Products or the effectiveness of such discontinuance or change, as the case may be.
(h)	Warranty Services. Abaxis shall provide a technical liaison and assistance to End Users for warranty service of the Products, [ * ]. In addition, at the written request of Abbott, Abaxis shall perform certain warranty repairs pursuant to the warranty set forth in Section 3.4(f) of this Agreement during the term of such warranty, which shall be billed to and paid by Abbott at mutually agreed upon labor rates and using replacement parts furnished by Abbott at its sole cost.
(i)	Customer Service. Abaxis acknowledges and agrees that it shall be responsible for all customer service, training, and education within the Territory relating to the operation and use of the Products. All such services shall be performed in accordance with Abbott’s standards and specifications, as notified by Abbott to Abaxis from time to time during the continuance of this Agreement. As part of its customer service obligations, Abaxis shall maintain a twenty-four (24) hour answering service to assist Customers with all Product inquiries.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(j)

Strategy Meetings. Periodically during the Term (but not less than [ * ]), Abaxis and Abbott shall review topics which may include Abaxis’ marketing and selling strategy, potential collaboration in the development of new Product assays or configurations to meet needs or opportunities in the Field, training of End Users, inventory, and other practices with a view toward maximizing End Users’ use of and satisfaction with Products.

(k)

Quality Assurance Audit by Abbott. Abbott shall, upon giving not less than [ * ] notice to Abaxis, have the right, during normal business hours, to retain an independent third party to visit or assess all locations where Abaxis maintains, ships, or repairs inventory of Products to conduct a quality assurance audit of such facilities and/or an on-site surveillance of its inventory storage tracking, provided that such independent third party shall execute a customary confidentiality agreement with the audited party with respect to the information received in connection with such audit that is not broader in scope or more burdensome than the confidentiality obligations contained in this Agreement. Provided further that some or all of such audit activities may be undertaken directly by Abbott upon the prior mutual written agreement of the Parties. In the event that an audit reveals matters that Abbott determines should be corrected by Abaxis, Abbott shall provide, in writing, within [ * ] of such audit, a list of such matters and any proposed corrective action to be taken by Abaxis. Abaxis shall respond within [ * ] of receiving Abbott’s notification of the corrective action to be taken and an estimated complete date.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(l)

Quality Assurance Audit by Abaxis. Abaxis shall, upon giving not less than [ * ] notice to Abbott, have the right, during normal business hours, to retain an independent third party to visit or assess all locations where Abbott manufactures, maintains, ships, or repairs inventory of Products to conduct a quality assurance audit of such facilities and/or an on-site surveillance of its inventory storage tracking, provided that such independent third party shall execute a customary confidentiality agreement with the audited party with respect to the information received in connection with such audit that is not broader in scope or more burdensome than the confidentiality obligations contained in this Agreement. Provided further that some or all of such audit activities may be undertaken directly by Abaxis upon the prior mutual written agreement of the Parties. In the event that an audit reveals matters that Abaxis determines should be corrected by Abbott, Abaxis shall provide, in writing, within [ * ] of such audit, a list of such matters and any proposed corrective action to be taken by Abbott. Abbott shall respond within [ * ] of receiving Abaxis’ notification of the corrective action to be taken and an estimated complete date.

(m)

Compliance Audit. Upon reasonable prior notice and at mutually agreeable times, Abbott may, at Abbott’s expense, retain an independent third party auditor to audit Abaxis’ books and records pertaining to its business in the Field, to the extent such books and records are relevant to Abaxis’ compliance with its obligations under this Section 3.1, solely to verify Abaxis’ compliance with its obligations under this Section 3.1, provided that such independent third party auditor shall execute a customary confidentiality agreement with the audited party with respect to the information received in connection with such audit that is not broader in scope or more burdensome than the confidentiality obligations contained in this Agreement.

3.2 Diversion and Counterfeiting.

(a) Resellers — Obligations of Abaxis. Abaxis shall not promote or market any Product for use outside the Field, [ * ]. Abaxis shall not [ * ]. Abaxis shall [ * ]. Recognizing the end use of the Products in healthcare, Abaxis shall not [ * ]. Abaxis shall [ * ]. Upon Abbott’s request, if and to the extent Abaxis or its dealers Sell Products to customers outside the Field, Abaxis shall [ * ]. The Cartridge units Sold outside the Field shall not be included in Cartridge Purchases for the purpose of meeting the Minimum Purchase Requirement or the Minimum Sales Requirement contained in Section 2.4. Without Abbott’s specific written consent, Abaxis may not [ * ].

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(b)	Resellers — Obligations of Abbott. This Section 3.2(b) is subject to the limitations set forth in Section 2.1(d). Neither Abbott nor its Affiliates shall promote or market any Product for use in the Field, [ * ]. Neither Abbott nor its Affiliates shall [ * ]. Abbott shall [ * ]. Abbott and its Affiliates shall not [ * ]. Abbott shall [ * ]. Without Abaxis’ specific written consent, neither Abbott nor its Affiliates may [ * ].
(c)	Counterfeit Products. Abaxis shall purchase Products for distribution and Sale in the Field in the Territory exclusively from Abbott. If Abaxis is offered the opportunity to purchase or otherwise becomes aware of any counterfeit products similar in appearance and/or function to the Products manufactured by an entity other than Abbott (“Counterfeit Products”), Abaxis shall promptly notify Abbott thereof. Abaxis covenants and agrees not to purchase any Counterfeit Products, and the failure of Abaxis to comply with the foregoing covenant and agreement shall constitute grounds for immediate termination of this Agreement by written notice to such effect sent by Abbott. Such termination of this Agreement shall be effective as of the date of receipt of any such notice by Abaxis. In addition, Abaxis acknowledges that its purchase of Counterfeit Products will cause Abbott irreparable harm and that Abbott shall have the right to equitable and injunctive relief, in addition to money damages, in the case of such action by Abaxis.
(d)	Corrupt Practices. Abaxis shall not use any compensation hereunder as payment to any government official or employee of any country in the Territory for the purpose of influencing such person’s decisions or actions regarding the Products.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(e)

Abbott Compliance Audit. Upon reasonable prior notice and at mutually agreeable times, Abbott may, at Abbott’s expense, retain an independent third party auditor to audit Abaxis’ books and records relating to Abaxis’ Sales of Product solely to verify Abaxis’ compliance with its obligations under this Section 3.2, provided that such independent third party auditor shall execute a customary confidentiality agreement with the audited party with respect to the information received in connection with such audit that is not broader in scope or more burdensome than the confidentiality obligations contained in this Agreement.

(f)

Abaxis Compliance Audit. Upon reasonable prior notice and at mutually agreeable times, Abaxis may, at Abaxis’ expense, retain an independent third party auditor to audit Abbott’s books and records relating to Abbott’s Sales of Products solely to verify Abbott’s compliance with its obligations under this Section 3.2, provided that such independent third party auditor shall execute a customary confidentiality agreement with the audited party with respect to the information received in connection with such audit that is not broader in scope or more burdensome than the confidentiality obligations contained in this Agreement.

3.3 Purchase Prices. Abaxis’ Purchase Prices for the Products as of the Effective Date are set forth in Exhibit 1.17, attached hereto and incorporated herein. All Purchase Prices for the Products and payments therefor shall be in U.S. dollars.

(a) Price Adjustments. The Purchase Price for each Product shall [ * ], upon [ * ] prior written notice, Abbott may adjust the Purchase Prices for the Products, provided such increase may not exceed [ * ]. “PPI” shall mean the most current final Producer Price Index for Manufacturing, Analytical and Scientific Instruments Except Optical, (industry code 334516-0), not seasonally adjusted, as published by the United States Department of Labor, Bureau of Labor Statistics; provided, that if the United States Department of Labor, Bureau of Labor Statistics, or a successor agency, ceases to publish the foregoing PPI, the index that will most nearly accomplish the purpose thereof and the use thereof by the parties hereto with respect to price increases under this Agreement shall be used in lieu of the foregoing PPI. Notwithstanding the foregoing, Abbott may adjust the Purchase Price for a Product at any time during the Term of this Agreement in the event that [ * ], in the event of such an increase, [ * ].

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(b)	[ * ]. Abaxis shall have the right to purchase up to [ * ] Cartridges from Abbott per Calendar Year at a [ * ] to be used for [ * ]. Such purchases of Product for [ * ] purposes in accordance with this subsection will not count towards the Minimum Purchase Requirement and will not incur premium charges.
(c)	Rebate. Abaxis will receive a [ * ] rebate on Purchase Prices for purchases that exceed the Minimum Purchase Requirement in any Contract Year, [ * ]. This rebate will be paid to Abaxis within [ * ] of the end of any calendar quarter during the Calendar Year in which the Minimum Purchase Requirement is exceeded.
(d)	Resale Prices. Abbott price increases to Abaxis are in no way contingent upon Abaxis agreeing to increase prices to its customers nor its effectiveness in increasing prices to its customers. Abaxis shall set its own prices for resale of the Products to customers provided that Abbott may, at its option, suggest resale prices to Abaxis.
(e)	Taxes; Import Fees. All Purchase Prices for the Products do not include insurance, freight, customs, duties, taxes, any foreign, federal, state or local taxes that may be applicable to Products including, without limitation, sales, excise, value-added, withholding, and other taxes. Customs duties and charges, if any, shall be borne by Abaxis. Any and all export and import licenses or approvals shall be obtained by Abaxis at its expense. When Abbott has the legal obligation to collect such taxes, the appropriate amount shall be added to Abaxis’ invoice and paid by Abaxis unless Abaxis provides Abbott with a valid tax exemption certificate authorized by the appropriate taxing authority.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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3.4 Other Terms and Conditions of Sale. Abaxis’ purchase of Products from Abbott hereunder shall also be subject to the following terms and conditions of sale:

(a)	Payment Terms. Payment terms for all shipments of Products to Abaxis shall be net [ * ] from the date of receipt of Abbott’s invoice to Abaxis for each shipment of Products. All payments shall be made without set-off or counterclaim and free and clear of and without deduction for any other charges of any kind, other than amounts that are the subject of a reasonable good faith dispute. The invoiced amount shall be paid by Abaxis to Abbott by: (a) wire transfer to the bank specified by Abbott, or (b) certified bankers check. Abbott reserves the right to change the payment or credit terms at any time upon [ * ] prior notice to Abaxis. Any invoiced amount not received within [ * ] of the date the payment was due shall be subject to a service charge of the lesser of [ * ] per month or the maximum rate permitted by law.
(b)	Order Entry. Abaxis shall order Products on purchase orders consistent with the process set forth in Section 3.5 and, for co-branded Products only, subject to the minimum order requirements set forth on Exhibit 3.4(b). All purchase order forms shall specify the quantities of each Product ordered, requested delivery dates, the identity of Products ordered, Product price, and delivery and shipping instructions including carrier selected. All orders will be governed by the terms of this Agreement. Any other terms and conditions stated on such purchase orders shall not be applicable to purchases hereunder.
(c)	Delivery. All shipments of Products to Abaxis shall be shipped F.O.B. Abbott’s facilities. Abbott shall select the carriers for all shipments of Products hereunder following consultation with Abaxis, provided that [ * ] Abaxis shall be responsible for shipping charges for the Products, which shall be added to Abbott’s invoices to Abaxis. Title and risk of loss shall pass to Abaxis upon delivery of the Products to the carrier for shipment.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(d)

Acceptance of Product. Abaxis shall inspect all Products upon delivery in a commercially reasonable manner. Failure by Abaxis to give notice of defective or damaged Product within the time periods specified in Section 3.4(e) shall be deemed a waiver of Abbott’s obligations as stated herein, with respect to such defect or damage only. Notwithstanding the foregoing, this Section 3.4(d) is not intended to limit Abaxis’ rights under Section 7.3 with respect to defective or damaged Product.

(e)

Defective and Improper Delivery; Product Returns. If Abaxis or a Dealer or End User claims that: (a) incorrect Product was shipped; or (b) there was a shortage in the shipment, and notice in writing of such incorrect shipment or shortage is provided to Abbott within [ * ] of receipt of the shipment then, upon receipt of such notice, Abbott’s sole obligation shall be to either replace any incorrectly shipped Product, make up any shortfall, or refund any Purchase Price paid by Abaxis, at Abbott’s option. If any Product is claimed by Abaxis, a Dealer or End User to be defective and Abbott is notified in writing of such defect within [ * ] of receipt of the Product by the End User or, in the case of a latent defect, Abbott is notified in writing within [ * ] of discovery of such latent defect within the warranty period stated in Section 3.4(f), then Abbott’s sole obligation shall be to either repair or replace any Product found by Abbott to be defective or determined to be defective by a Third Party laboratory as provided below. If Abaxis claims a credit pursuant to this Section 3.4(e), such claim shall be accompanied by the original invoice issued by Abaxis to the End User or Dealer returning the Product. Upon request by Abbott, Abaxis shall deliver to Abbott, at Abaxis’ cost, any returned Product with regard to which the credit is claimed. Abbott shall determine [ * ]. Any disagreements between the parties as to which a returned Product is defective shall, at the request of either party, be resolved by a mutually acceptable independent third party laboratory after

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

18

analysis of the relevant Products. Such third party laboratory shall determine whether such Products are defective, and the parties agree that such laboratory’s determination on this issue shall be final, binding, and determinative. The party against whom the third party laboratory rules shall bear all costs of such third party testing. All sales of the Products are final and there will be no Product returns accepted except as set forth in this Section 3.4(e) without Abbott’s prior written consent.

(f)

Warranty. Abbott warrants that (i) each Product sold hereunder will, at the time of shipment, comply with the then-current specifications for such Product and be free and clear of any and all encumbrances, liens, or other third party claims; (ii) Products (including refurbished Analyzers) shall comply with Abbott’s standard warranty therefor, as set forth in Exhibit 3.4(f). ABBOTT MAKES NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, AND ABBOTT EXCLUDES AND DISCLAIMS ANY OTHER WARRANTIES INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. ABBOTT SHALL HAVE NO LIABILITY FOR INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES RELATING TO THE SALE OR USE OF THE PRODUCTS, INCLUDING LOST PROFITS.

3.5 Rolling Forecasts. [ * ] after the Effective Date, Abaxis shall provide Abbott with a monthly forecast of its requirements of the Products for the first full Contract Year. On or before the [ * ] prior to the beginning of each subsequent calendar month during the Term, Abaxis shall provide Abbott with a rolling [ * ] forecast, the first [ * ] of which will be firm purchase orders binding on Abaxis, the last [ * ] of each shall consist of Abaxis’ best estimate forecast of its requirements of Products. Abaxis shall also provide, with each monthly forecast, a [ * ] rolling unit and dollar sales history detail for each individual Product, major customer type (Dealer and End User), United States and each major international area (e.g. Western Europe, Asia), the quantities and prices of Products Sold by Abaxis, the aggregate total dollar sales volume for purchases on a Product group-by-Product group basis and such other information relating to the Sales and distribution of Products by Abaxis as Abbott may reasonably request.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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3.6 Inventory. Abaxis shall use commercially reasonable efforts to maintain a level of inventory of all Products that Abaxis distributes in the Territory sufficient to ensure that Abaxis is able to fill at least [ * ] of customers’ orders within [ * ] of Abaxis’ receipt of such orders. Abaxis shall store Product inventory in its distribution centers in a manner appropriate for maintaining such Products in good and saleable condition as required on Product labeling and consistent with the Product dating and storage conditions specified by Abbott. All Abaxis distribution centers shall conform to the temperature control requirements set forth on Product labeling, and shall be subject to periodic audit by Abbott by no more than three (3) Abbott representatives per audit at mutually agreeable reasonable times and upon reasonable prior notice. Abaxis’ current list of distribution centers is set forth in Exhibit 3.6, attached hereto and incorporated herein, and Abaxis shall promptly notify Abbott in writing of any changes to this list at least [ * ]. Abaxis shall maintain a distribution record system reasonably sufficient to enable Abbott and/or Abaxis to promptly notify Distributors and End Users of Product safety information or issues. If required by applicable laws or regulations, Abaxis shall establish and maintain an auditable distribution record system including an accurate, traceable lot number control system which is traceable to End Users for such Products purchased from Abaxis.

3.7 Export Regulations. Abaxis will not take any action which would, or fail to take any action where such failure would, directly or indirectly result in or constitute a violation by Abaxis or Abbott of any applicable law, treaty, ruling or regulation, including, without limitation, laws and regulations relating to the export, resale and distribution of the Products. In performing Abaxis’s obligations, Abaxis or any person acting on its behalf must not seek, accept, offer, promise or give any payments, fees, loans, services or gifts from or to any person or firm as a condition or result of doing business with Abaxis or Abbott. In performing its obligations under this Agreement, neither Abaxis nor any person acting on Abaxis’s behalf shall make, directly or indirectly, any offer or promise or authorization of a bribe, kickback, payoff or any other payment or gift intended to improperly influence an agent, government official, political party or candidate for public office to exercise their discretionary authority or influence in order to assist in the sale, marketing, promotion, importation, licensing or distribution of the Products.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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3.8 Annual Reporting; Books and Records. Abaxis shall provide to Abbott annually within [ * ] following the end of each Contract Year, a report that provides Cartridge unit Sales to Dealers and End Users that Abaxis Sells to directly, aggregated monthly in each country or region, and the calculation of the percentage of Cartridges Sold to customers by country or region. Abaxis shall maintain books and records in keeping with standard industry practice relating to the Sale of Products hereunder including monthly Cartridge unit Sales to Dealers and End Users that Abaxis Sells to directly, aggregated monthly in each country or region, and shall retain such records during the Term and for [ * ] thereafter. Such books and records shall be in accordance with generally accepted accounting principles reflecting each Product’s unit Sales and per country or region in the Territory. Upon [ * ] prior written notice to Abaxis, Abaxis’ books and records relating to the Sale of Product hereunder shall be open for inspection in accordance with the following terms. To conduct such inspection, Abbott shall retain, at its own expense, an independent certified public accountant reasonably acceptable to Abaxis. Such examination shall occur at Abaxis’ principal place of business during normal business hours for the sole purpose of verifying the accuracy of financial calculations hereunder. Such independent accountant shall be required to execute a mutually acceptable confidentiality agreement and shall report to Abbott only the amount of any discrepancy, if any, in the calculations. Abbott shall bear the cost of such audit, unless the audit reveals inaccurate annual reporting of unit Sales greater than [ * ] or a value of [ * ] (whichever is greater), in which case Abaxis shall reimburse Abbott for its reasonable expenses incurred in connection with such audit.

3.9 Product Recalls and Complaints. Upon Abbott’s request, Abaxis shall assist Abbott in identifying Dealers and End Users for notification in connection with any Product recalls. Within [ * ] of Abaxis’ own receipt of notice (at Abaxis headquarters) of any End User technical questions, complaints or actual or alleged Product defects, Abaxis shall notify Abbott thereof orally, followed promptly by a written notice using the “Abbott Laboratories Product Complaint Inquiry Form”, the current form of which is set forth in Exhibit 3.9, attached hereto and incorporated herein.

3.10 Billing and Collections. Abaxis shall have sole responsibility for billings to and collections from customers for Abaxis’ sales of Products.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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3.11 Abbott Trademarks. Abaxis acknowledges that Abbott Trademarks are valid trademarks and trade names and the sole property of Abbott, and Abaxis shall not disparage or challenge the validity of Abbott Trademarks during the Term. Abaxis shall promptly notify Abbott of any actual or alleged infringements of Abbott Trademarks of which Abaxis becomes aware during the Term. Nothing contained herein shall be construed to authorize Abaxis: (a) to use any Abbott Trademarks as a style or name, or as a part of the style or name, of any firm, partnership or corporation; (b) to apply Abbott Trademarks to any goods other than the Products; or (c) at any time after the termination of this Agreement, to apply Abbott Trademarks to goods or to any other use whatsoever.

3.12 Non-Competition Obligations. During the Term, Abaxis and its Affiliates shall not promote or sell any products that are competitive with the Products (“Competitive Products”) in the Field in the Territory, and shall use its best efforts to ensure compliance with the provisions of this Section 3.12 by all Abaxis employees, subject to the following exceptions and conditions:

(a)

Excluded Competitive Products. Competitive Products shall exclude the products referenced in Exhibit 3.12(a) attached hereto and incorporated herein by reference (“Excluded Competitive Products”). Abaxis and its Affiliates shall have the right to promote and sell Excluded Competitive Products. Exhibit 3.12(a) may be amended only by mutual written agreement of the Parties.

(b)

Exception for Recall or Withdrawal. If any Product is the subject of a recall, withdrawal or interruption of Product supply for a period in excess of [ * ], or a Product is not available for resale due to Abbott’s inability to supply such Products, Abaxis may, at its option, purchase and resell reasonably comparable replacement products for the duration of such recall or withdrawal or Product unavailability, provided that (i) [ * ]; (ii) [ * ]; (iii) Abaxis shall return to selling recalled, withdrawn or unavailable Products or Abbott Alternative Products and discontinue selling competitor’s products within [ * ] of the availability of such Products or Alternative Abbott Products;

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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	(iv) Abbott shall notify Abaxis in writing at least [ * ] prior to the availability of such Products or Abbott Alternative Products to enable Abaxis to commence reduction of competitive product stock. In the event that Abaxis does not cease selling replacement products and resume selling Products or Abbott Alternative Products as set forth above within [ * ] of such Products becoming available, Abbott shall have the right, without prejudice to any other rights or remedies available to it, to terminate this Agreement upon [ * ] prior written notice to Abaxis.
(d)	EU Commission Directive. In accordance with the EU Commission Directive on Vertical Agreements, the covenant not to sell Competitive Products set forth in this Section 3.12 for countries in the European Union (“EU”) shall be for no longer than [ * ] after the Effective Date. Abaxis agrees that if Abaxis has maintained exclusivity as set forth in Sections 2.4 and 2.5 during the Term, that Abaxis shall arrange to meet with Abbott to negotiate in good faith the terms, if any, under which the covenant not to sell competitive products in the EU may be extended.
(e)	Compliance Audit. Upon reasonable prior written notice to Abaxis and at mutually agreeable times, Abbott may, at Abbott’s expense, retain an independent third party auditor to audit Abaxis’ sales records, branch inventory and any other records necessary to verify Abaxis’ compliance with its obligations under this Section 3.12, provided that such independent third party auditor shall execute a customary confidentiality agreement with the audited party with respect to the information received in connection with such audit that is not broader in scope or more burdensome than the confidentiality obligations contained in this Agreement. In the event that any such audit reveals that Abaxis is non-compliant with the provisions of this Section 3.12 or that Abaxis has given to Abbott false sales data or other information concerning the purchase or sale of Products, Abbott shall notify Abaxis of the results of such audit and Abaxis shall have [ * ] to cure any identified deficiencies. In the event that Abaxis does not cure any identified deficiencies within such [ * ] period, Abbott may in its sole discretion terminate this Agreement on [ * ] notice to Abaxis.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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3.13 Regulatory Approvals. If and solely to the extent required by local laws, Abaxis shall, [ * ], obtain and maintain in effect all registrations, permits, licenses and approvals (collectively, “Approvals”) necessary or appropriate for the importation of the Products into, and the distribution, sale, resale, and use of the Products within the Territory. Abaxis shall promptly forward all copies of all such Approvals to Abbott’s Regulatory Affairs Department. Abbott shall provide Abaxis with Product test results and other technical information required to obtain and maintain the Approvals. Abaxis shall inform Abbott within a reasonable period of time of any changes to the Approval process or the vigilance reporting requirements within the Territory. Abaxis shall forward any questions or correspondence from regulatory authorities related to such Approvals within the Territory to Abbott for response. To the extent permitted by applicable law, such Approvals shall be [ * ]. If, however, applicable law requires [ * ], Abaxis shall, [ * ]. Abaxis represents and warrants that it has and shall maintain at all times during the term of this Agreement, all Approvals necessary or appropriate for performing its obligations hereunder. Should Abaxis fail to obtain or maintain such Approvals during the term of this Agreement, Abbott shall have the right to immediately terminate this Agreement upon written notice to Abaxis.

In the event that Abaxis does not obtain or maintain in effect the Approvals necessary to perform its obligations hereunder, Abbott shall have the right but is not obligated to repurchase at the price paid by Abaxis for such Products up to [ * ] inventory of Products which shall mean a quantity not exceeding [ * ] of the total number of each Product sold by Abbott to Abaxis under this Agreement over the previous [ * ] or since the date hereof, whichever is shorter; provided, that any such inventory of Products shall be of saleable condition and the same quality as originally shipped to Abaxis and shall have at least [ * ] shelf-life remaining on the date Abaxis delivers the Products to Abbott or its designated recipient. Such re-purchased Products shall be delivered to Abbott at the sole cost of Abaxis. Abaxis shall destroy any Products not re-purchased by Abbott and provide Abbott with a certificate of destruction certified by an independent Third Party appointed by Abbott. Abbott shall pay Abaxis for only such properly returned or re-purchased Products upon receipt by Abbott upon the same payment terms as set out for purchase of Products by Abaxis in this Agreement. The aggregate amount to be paid to Abaxis under this provision may be offset by Abbott against claims it has against Abaxis or any sums owed by Abaxis to Abbott.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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3.14 Legal Environment. Abaxis shall immediately advise Abbott if Abaxis becomes aware of any legislation, rule, regulation or other law (including, but not limited to, all health and safety, custom, trade, tariff or other import laws, approvals process or vigilance reporting requirements) which is in effect or which may come into effect after this Agreement becomes effective and which affects the importation of the Products into, or the distribution, sale, or use of the Products within the Territory and/or Japan, and shall use commercially reasonable efforts to remain informed of all such legislation, rules, regulations or other laws.

3.15 Contacts with Authorities. Abaxis shall notify Abbott of any correspondence exchanged with local authorities regarding the distribution of the Products in the Territory.

3.16 Debarment and Exclusion. Abaxis represents and warrants that, to the best of its knowledge, neither it, nor any of its employees or agents providing services under this Agreement, has ever been, is currently, or is the subject of a proceeding that could lead to that Party becoming, as applicable, a Debarred Individual or Debarred Entity. A “Debarred Individual” is an individual who has been debarred by the U.S. Food and Drug Administration (“FDA”) pursuant to Title 21 United States Code §335a (a) or (b), or by any other competent authority, including, without limitation, any local competent authority, from providing services in any capacity to a person that has an approved or pending drug product application. A “Debarred Entity” is a corporation, partnership or association that has been debarred by FDA pursuant to Title 21 United States Code §335a (a) or (b), or by any other competent authority, including, without limitation, any local competent authority, from submitting or assisting in the submission of any abbreviated drug application, or a subsidiary or affiliate of such a corporation, partnership or association. Abaxis further covenants, represents and warrants that if, during the term of this Agreement, it becomes aware that it, or any of its employees or agents providing services under this Agreement, becomes or is the subject of a proceeding that could lead to that Party becoming, as applicable, a Debarred Individual or Debarred Entity, Abaxis shall immediately notify Abbott, and Abbott shall have the right to immediately terminate this Agreement.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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3.17 Customer Communication. Abaxis shall promptly inform Abbott of any Product quality-related communication (i.e., Product information, customer letters, device correction). Abaxis shall follow the reasonable actions requested by Abbott regarding quality-related matters and, at Abbott’s request, provide any reasonable quality-related information without delay to its customers.

3.18 Promotional Materials. At no cost to Abaxis, Abbott shall provide Abaxis with such promotional materials relating to the Products as Abbott deems appropriate in such quantities as may be mutually agreed for Abaxis’ use hereunder. Such documents shall be in the English language, and may be in other languages to the extent already available. As required by local regulatory laws or regulations, Abaxis shall, at its own cost, arrange for translation of documents relating to the Products by a professional translator into the local language(s) of Customers and shall revise such translation in accordance with the changes to the Documents that may be made from time to time by Abbott. Such translation shall at a minimum meet all regulatory requirements of the Territory and be of a standard deemed appropriate for medical products and comparable with that provided for other products sold into the health care industry in the Territory. Abaxis will provide any documents translated into the local language to Abbott for review and shall revise such translation according to Abbott’s comments.

3.19 Training For Abaxis and End Users. Abbott shall provide Abaxis personnel such training, at Abbott’s expense, as Abaxis may request in writing and that Abbott, at its sole discretion, deems reasonable. Notwithstanding the above, all expenses incurred by Abaxis’ personnel in connection with such training, including without limitation, travel and other per diem expenses shall be borne by Abaxis. Abaxis, prior to shipment of Products to an End User, shall provide to each such End User Product storage and use instructions. Abaxis shall use commercially reasonable efforts to ensure that all necessary and adequate introductory training is made available to End Users within [ * ] after receipt of Analyzers and Cartridges; further, Abaxis shall provide its End Users with necessary and adequate training and support within [ * ] after delivery of the first shipment of Products to an End User. Upon Abaxis’ written request, Abbott may provide follow-up training, at its sole discretion, at Abaxis’ facility. Abbott shall pay for its employees’ salaries and their travel and travel-related expenses, including meals, lodging and other living expenses. For training situations not covered by this Section 3.19, and the Parties shall discuss how to equitably share the travel and related expenses.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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ARTICLE 4
INTELLECTUAL PROPERTY

4.1 Markings. Product distributed by Abaxis hereunder shall include both the Abaxis Trademarks and the Abbott Trademarks. Abaxis shall not omit or alter patent numbers, trade names or trademarks, numbers or series or any other Abbott markings affixed on the Products obtained from Abbott or alter Product labeling. Abaxis shall be entitled to mark the following Products with its trademark or trade name in prominent place, subject to Abbott’s prior written approval, not to be unreasonably withheld: Analyzer and outer Cartridge box, provided that Cartridge labels and pouches will not carry Abaxis’ mark. Abaxis is not authorized to use the trademark and trade name “Abbott” or any other trademark or trade name of Abbott in any manner except to indicate that Abbott is the manufacturer of the Products and, consistent with the provisions of Section 4.2 and during the Term of this Agreement and only in the Field in the Territory, that Abaxis is an independent distributor for Abbott and is selling Abbott’s Products. Abaxis shall acquire no rights in the Abbott trademark and trade name, or any other trademark owned by Abbott.

4.2 Use of Trademarks and Tradenames. Abbott hereby authorizes Abaxis to use, on a nonexclusive basis for the Term, without cost to Abaxis other than payment for the Products, the Abbott Trademarks, solely to identify Abbott as the manufacturer of the Products and for Abaxis’ distribution of Products and related performance under this Agreement. The Abbott Trademarks and the goodwill associated therewith are and shall remain the exclusive property of Abbott. Abaxis shall not: (a) use the Abbott Trademarks as part of any composite mark including any elements not approved in advance in writing by Abbott; (b) challenge the validity or enforceability of the Abbott Trademarks (unless such restriction is illegal); or (c) acquire any proprietary rights in the Abbott Trademarks by reason of any activities under this Agreement or otherwise. All uses of the Abbott Trademarks by Abaxis and any additional goodwill created thereby shall inure to the exclusive benefit of Abbott. Abbott, at all times during the Term on reasonable notice, shall have the right to inspect the materials and services on or in connection with which the Abbott Trademarks are used in order to assure Abbott that its quality standards relating to the Products and Abaxis’ servicing and other provisions of this Agreement pertinent to the Abbott Trademarks are being observed. If at any time Abbott shall reasonably object to any use to which the Abbott Trademarks are put, Abaxis shall promptly cease any such use.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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4.3 License to Use Computer Software. All software, on whatever media and in whatever form, Abbott shall deliver to Abaxis hereunder (the “Software”) is and shall remain the property of Abbott and its suppliers and licensors thereof and shall only be used in accordance with the terms of this Agreement and any End User License Agreements (each, a “EULA”) distributed therewith. The Software contains copyrighted and proprietary trade secrets of Abbott (and its suppliers and licensors), and Abaxis shall keep the Software in confidence. Abaxis shall not copy, use or disassemble the Software unless agreed by Abbott. Abaxis shall have the right to reproduce Software only for: (a) one backup/archival copy; and (b) installation on and use with equipment designated by Abbott as suitable therefor and for use solely with the Products distributed by Abaxis. Abaxis shall reproduce the copyright and other proprietary notices of Abbott and Third Parties present in the Software delivered to Abaxis. Abaxis’ license to use and distribute the Software shall terminate on the earlier of: (w) termination of this Agreement; (x) discontinuance of use of the designated equipment for the Software; (y) discontinuance of payment of periodic license and maintenance fees, if any; or (z) breach by Abaxis of any of the above given terms; provided, that End Users’ license rights shall continue in accordance with each EULA. All copies of Software with respect to which the license hereunder is terminated shall be returned to Abbott within [ * ] after such termination. Abaxis shall deliver to each End User a copy of Abbott’s EULA, which shall inform them that such Software is and shall remain the property of Abbott and its suppliers and licensors. Copies of the translated materials shall be provided by Abaxis to Abbott for inclusion in the technical file before any CE marked Product is distributed in Abaxis’ territory in the Field.

ARTICLE 5
CONFIDENTIALITY

5.1 Confidential Information. It is contemplated that in the course of the performance of this Agreement each Party may, from time to time, disclose Confidential Information to the other Party. The Confidential Information may be in any form whatsoever and shall be owned, or legally acquired by either Party hereto without restriction on dissemination or licensing, and shall be transferred to the other Party in connection with this Agreement pursuant to the respective rights and obligations hereunder.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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5.2 Term of Confidentiality. Except to the extent expressly authorized by this Agreement or otherwise agreed to in writing, during the term of this Agreement and for a period of [ * ] following the termination of this Agreement, the receiving Party shall take such reasonable measures to maintain such Confidential Information as confidential as it takes to protect its own proprietary and confidential information, shall not use for its own benefit or the benefit of others, and shall not publish or otherwise disclose such Confidential Information of a similar nature except that each Party shall be each permitted to disclose portions of Confidential Information to the extent reasonably necessary to such Party’s attorneys, accountants and other professional advisors under an obligation of confidentiality to such Party.

5.3 Disclosure Due to Judicial or Administrative Processes. In the event that a receiving Party is required by judicial or administrative process to disclose Confidential Information, it shall promptly notify the disclosing Party and allow the disclosing Party, at its sole cost and expense, a reasonable time to oppose such process and/or seek a protective order to limit exposure to and dissemination of said Confidential Information.

5.4 Disclosure Mandated by Law. To the extent any disclosure is required by law or regulation, including but not limited to securities or other laws or regulations of any country, the Parties shall consult with each other regarding the contents of such disclosure prior to such disclosure, and the disclosing Party in any event shall provide to the other Party a draft copy of the information to be disclosed for approval at least [ * ] prior to such disclosure, such approval not to unreasonably withheld.

5.5 Publicity. Neither Party shall make any public announcement concerning this Agreement, nor make any public statement which includes the name of the other Party or any of its Affiliates, or otherwise use the name of the other Party or any of its Affiliates in any public statement or document, except as may be required by law or judicial order, without the written consent of the other Party, which written consent shall not be unreasonably withheld. Notwithstanding the foregoing, Abaxis shall have the right, without obtaining Abbott’s consent, to make a public announcement within [ * ] after the Effective Date that solely communicates the fact that Abaxis has filed a legally required disclosure with the Securities and Exchange Commission relating to the execution of this Agreement, provided that Abbott shall have an opportunity to review and comment on such disclosure at least [ * ] before such disclosure is filed.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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5.6 Terms of the Agreement. The terms of this Agreement are confidential and shall be treated as Confidential Information hereunder.

5.7 Return of Confidential Information. Upon expiration or termination of this Agreement, or at any time upon request by Abbott, Abaxis shall promptly return to Abbott all Confidential Information disclosed by Abbott to Abaxis (including any and all copies thereof). Upon request, Abaxis shall certify to Abbott that such action has been taken.

ARTICLE 6
REPRESENTATIONS AND WARRANTIES

Each Party hereby represents and warrants to the other Party as follows:

6.1 Corporate Existence and Power. Such Party (a) is a corporation duly organized, validly existing and in good standing under the laws of the state in which it is incorporated, (b) has the corporate power and authority and the legal right to own and operate its property and assets, to lease the property and assets it operates under lease, and to carry on its business as it is now being conducted and as it is proposed to be conducted hereunder, and (c) is in compliance with all requirements of applicable laws and regulations, except as previously disclosed to the other Party or to the extent that any noncompliance would not have a material adverse effect on the properties, business, or financial condition of such Party and would not materially and adversely affect such Party’s ability to perform its obligations under this Agreement.

6.2 Authorization and Enforcement of Obligations. Such Party (a) has the corporate power and authority and the legal right to enter into this Agreement and to perform its obligations hereunder, and (b) has taken all necessary corporate action on its part to authorize the execution and delivery of this Agreement and the performance of its obligations hereunder. This Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, binding obligation, enforceable against such Party in accordance with its terms.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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6.3 Consents. All necessary consents, approvals and authorizations of all governmental authorities and other persons required to be obtained by such Party in connection with the execution, delivery and performance of this Agreement have been obtained.

6.4 No Conflict. The execution and delivery of this Agreement and the performance of such Party’s obligations hereunder (a) do not conflict with or violate any requirement of applicable laws or regulations and (b) do not conflict with, violate or breach or constitute a default or require any consent under, any contractual obligation of such Party.

6.5 Compliance With Laws. Each Party shall perform its obligations hereunder in compliance with all applicable laws, including without limitation federal, state and local laws, regulations and accepted industry guidelines.

ARTICLE 7
INDEMNIFICATION AND INSURANCE

7.1 Abaxis Indemnification. Abaxis shall defend, indemnify and hold harmless Abbott, its Affiliates, and the officers, directors, employees and agents of Abbott and its Affiliates, from and against any and all liabilities, damages, claims, demands, costs, or expenses (including reasonable attorneys’ fees) claimed by any Third Party for any property or other economic loss or damage or injury or death suffered by it to the extent the same is determined to have been caused by [ * ], other than [ * ], but only if [ * ], or [ * ].

7.2 Insurance. During the Term, Abaxis and Abbott shall maintain general business liability insurance coverage, including, if applicable, self-insurance, in the minimum aggregate amount of [ * ].

7.3 Abbott Indemnification. Abbott shall defend, indemnify and hold harmless Abaxis, its Affiliates, and the officers, directors, employees and agents of Abaxis and its Affiliates, from and against any and all liabilities, damages, claims, demands, costs, or expenses (including reasonable attorneys’ fees) claimed by any Third Party for any property or other economic loss or damage or injury or death suffered by it to the extent the same is determined to have arisen out of or been attributable to: [ * ]. Abbott’s obligations hereunder will apply only when the applicable Product is unmodified by Abaxis, lawfully used in the Field, lawfully dispensed or lawfully distributed all in accordance with the terms and conditions of this Agreement, and used in accordance with the applicable operator’s manual, product insert or as otherwise instructed in writing by Abbott. Any other use of the applicable Product will not be subject to this indemnity.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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7.4 Conditions of Indemnifications. If Abbott seeks indemnification from Abaxis pursuant to Section 7.1 or Abaxis seeks indemnification from Abbott pursuant to Section 7.3, the Party seeking indemnification shall (a) notify the other Party in writing of the claim or suit for which indemnification is sought within [ * ] after the date the Party seeking indemnification itself receives notice of such claim or suit and (b) allow the other Party to control the defense or settlement of such claim or suit, provided that the Party seeking indemnification may, at its own option and expense, participate in the defense or settlement of such claim or suit, and provided further that the indemnifying Party shall not enter into any binding settlement, consent to any judgment or otherwise resolve any such claim or suit pursuant to which the other Party would be obligated to take or refrain from taking any action or to make any payments or admissions, without the other Party’s prior written consent.

ARTICLE 8
TERM AND TERMINATION

8.1 Expiration. Unless terminated earlier by written agreement of the Parties or in accordance with the provisions of this Agreement, the term of this Agreement shall commence on the Effective Date and continue until the conclusion of [ * ] Contract Years thereafter (“Initial Term”). UPON EXPIRATION OF THE INITIAL TERM, THE AGREEMENT SHALL CONTINUE AUTOMATICALLY FOR ADDITIONAL SUCCESSIVE ONE (1) YEAR PERIODS (EACH ONE (1) YEAR PERIOD A “RENEWAL TERM”) UNLESS TERMINATED BY EITHER PARTY BY GIVING WRITTEN NOTICE TO THE OTHER PARTY NOT LESS [ * ] PRIOR TO EXPIRATION OF THE INITIAL TERM OR ANY RENEWAL TERM. The Initial Term and Renewal Terms shall be defined as the “Term” of the Agreement.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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8.2 Early Termination. This Agreement may be terminated as set forth below and following provision of written notice:

(a)	Bankruptcy. A Party may terminate this Agreement if the other Party becomes insolvent, is adjudged bankrupt, applies for judicial or extra-judicial settlement with its creditors, makes an assignment for the benefit of its creditors, voluntarily files for bankruptcy or has a receiver or trustee (or the like) in bankruptcy appointed by reason of its insolvency, or in the event an involuntary bankruptcy action is filed against the other Party and not dismissed within [ * ], or if the other Party becomes the subject of liquidation or dissolution proceedings or otherwise discontinues business.
(b)	Default. A Party may terminate this Agreement if the other Party commits a material breach of this Agreement and the Party alleged to be in breach fails to (i) cure such breach or (ii) commence dispute resolution proceedings under Section 9.11 contesting whether a breach has occurred and/or whether such breach is a material breach within [ * ] after receipt of written notice from the Party asserting the breach. For purposes of this Section, a material breach by Abaxis shall include, but is not limited to, any material breach by Abaxis of its non-competition obligations pursuant to Section 3.12.
(c)	Change of Control. In the event that a Third Party, directly or indirectly, acquires at least fifty percent (50%) of the controlling interest in or assets of Abaxis, whether in a single transaction or otherwise, including any sale of assets, sale of shares, mixed sale of assets and shares, merger, consolidation or other form of business combination transaction (“Change of Control”), Abaxis shall give written notice of such Change of Control to Abbott within [ * ] of the effective date of such Change of Control. Within [ * ] of a Change of Control, [ * ] shall have the right to terminate this Agreement upon written notice to [ * ]. Within [ * ] of a Change of Control, [ * ].

8.3 Effect of Termination. Upon the termination of this Agreement:

(a) The Parties shall immediately cease the use of any Confidential Information of the other Party and, in the case of Abaxis, of the Abbott Trademarks, except as permitted in Section 8.3(b) below.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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(b)	Unless this Agreement is terminated by Abbott for Abaxis’ breach or bankruptcy, and subject to Abbott’s rights as provided in this Section 8.3, (i) [ * ], and (ii) [ * ].
(c)	Abbott shall have the right (but not the obligation), upon prior written notice to Abaxis given within [ * ] after termination to purchase from Abaxis all or any portion of the Products in its inventory, for the same Purchase Prices paid for such products by Abaxis, at the time of such termination for credit against outstanding invoices, or for cash refund to the extent there are no invoices then outstanding.
(d)	Abaxis shall return to Abbott all promotional and sales training materials provided to Abaxis by Abbott under this Agreement.
(e)	To the extent permitted by law, Abaxis shall [ * ].
(f)	Abaxis shall not, in the final [ * ] of any notification of termination (or such actual time after notice and before actual termination, if shorter), undertake any actions intended or designed to cause End Users to purchase higher than normal levels of inventory of Products.

8.4 Continuing Obligations. Upon any termination of this Agreement (except termination for cause by Abaxis due to Abbott’s breach), at Abbott’s election and in accordance with Abbott’s instructions, Abaxis shall: (a) [ * ]; and (b) [ * ]. Following termination of this Agreement for any reason, Abaxis shall have no further obligations to End Users with respect to Software updates and maintenance or technical support. Nothing in this Agreement shall be construed as preventing Abaxis from soliciting End Users for other products following the termination of this Agreement.

8.5 Post-Termination Obligations. Termination or expiration of this Agreement through any means and for any reason shall not relieve the Parties of any obligations accruing prior thereto, and shall be without prejudice to the rights and remedies of either Party with respect to any breach of any of the provisions of this Agreement.

8.6 Survival. The following Articles and Sections shall survive termination or expiration of the Agreement: [ * ]. In addition, all provisions that expressly survive termination, that are irrevocable or that arise due to termination shall survive in accordance with their terms. Any other provisions of this Agreement contemplated by their terms to pertain to a period of time following termination or expiration of this Agreement shall survive only for the specified period of time.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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ARTICLE 9
MISCELLANEOUS

9.1 Force Majeure. Neither Party shall be held in breach of this Agreement for failure to perform any of its obligations hereunder and the time required for performance shall be extended for a period equal to the period of such delay, provided that such delay has been caused by or is a result of any acts of God; acts of the public enemy; civil strife; wars declared or undeclared; embargoes; labor disputes, including strikes, lockouts, job actions or boycotts; fires; explosions; floods; shortages of material or energy; events caused by reason of laws or regulations or orders by any government, governmental entity or instrumentality or by any other supervening unforeseeable circumstances beyond the reasonable control of the Party so affected. The Party so affected shall: (a) give prompt written notice to the other Party of the nature and date of commencement of the force majeure event and its expected duration; and (b) use its commercially reasonable efforts to relieve the effect of such cause as rapidly as possible.

9.2 Assignment. This Agreement may be assigned by Abbott to an Abbott Affiliate without consent. In addition, (a) any Party may without the consent of the other Party assign its rights to payments under this Agreement and (b) any Party may without the consent of the other Party assign its rights and delegate performance of its obligations under this Agreement in connection with a sale of all or substantially all of that portion of the business of the assigning Party to which this Agreement relates (whether such sale is structured as a sale of assets, sale of shares, mixed sale of assets and shares, merger, consolidation or other form of business combination transaction). The assigning Party shall provide a written notice to the other Party of any assignment pursuant to clause (b) above as of the date of the assignment. Following any assignment pursuant to clause (b) above, the assigning Party shall continue to be responsible for the performance of all obligations arising under this Agreement prior to the date of assignment, and the assignee shall be responsible for the performance of all obligations arising under this Agreement on or after the date of the assignment.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

35

Except as otherwise provided in this Section 9.2, no Party shall assign its rights or delegate performance of its obligations under this Agreement to any Third Party without the prior written consent of the other Party, and any attempted assignment without such consent shall be void. This Agreement shall inure to the benefit of and shall be binding upon and enforceable by, the Parties and their successors and permitted assigns.

9.3 Binding Effect. This Agreement shall be binding upon and inure to the benefit of each of the Parties and its successors and permitted assigns.

9.4 Waiver. No waiver or modification of any of the terms of this Agreement shall be valid unless in writing and signed by authorized representatives of both Parties. Failure by either Party to enforce any of its rights under this Agreement shall not be construed as a waiver of such rights nor shall a waiver by either Party in one or more instances be construed as constituting a continuing waiver or as a waiver in other instances.

9.5 Severability. Any provision of this Agreement that in any way contravenes the law of any state or country in which this Agreement is effective shall, in that state or country, to the extent the law is contravened, be considered separable and non-applicable and shall not effect any other provision or provisions of this Agreement. Parties shall cooperate to mitigate the effects of any such contravening clause/term.

9.6 Relationship of the Parties. The relationship of the Parties under this Agreement is that of independent contractors. Nothing contained in this Agreement is intended or is to be construed so as to constitute the Parties as partners, joint ventures, or either Party as an agent or employee of the other. Neither Party has any express or implied right under this Agreement to assume or create any obligation on behalf of or in the name of the other, or to bind the other Party to any contract, agreement or undertaking with any Third Party, and no conduct of the Parties shall be deemed to infer such right.

9.7 Entire Agreement; Modifications. This Agreement, together with any exhibits hereto, constitute the entire agreement between the Parties relating to the subject matter hereof. It may not be modified or amended except in a writing and signed by both Parties. All previous agreements or arrangements between the Parties, written or oral, relating to the subject matter hereof are hereby canceled and superseded.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

36

9.8 Compliance with Law. In performing this Agreement, each Party shall comply with all applicable laws, regulations and guidelines and shall not be required to perform or omit to perform any act required or permitted under this Agreement if such performance or omission would violate the provisions of any such law, regulation or guideline.

9.9 Counterparts. This Agreement may be executed in one or more identical counterparts, each of which shall be considered an original and all of which together shall constitute one and the same instrument.

9.10 Governing Law. All disputes arising in any manner out of or in relation to this Agreement shall be resolved in accordance with the laws of Illinois, without reference to its choice of laws provisions. Each Party hereby disclaims the application to this Agreement of the United Nations Convention on the International Sale of Goods.

9.11 Alternative Dispute Resolution. Any dispute that arises in connection with this Agreement shall be binding on the Parties and resolved by binding Alternative Dispute Resolution (“ADR”) in the manner described in Exhibit 9.11.

9.12 Notices. Any notice, report, payment or statement required or permitted under this Agreement shall be considered to be given when in writing sent by certified mail (return receipt requested), postage prepaid, or faxed then mailed, or if sent via courier and addressed to the Party for whom it is intended at its address of record. The record address of the Parties is as follows:

If to Abaxis:	Abaxis, Inc.
	Vice President, Veterinary Marketing and Sales
	3240 Whipple Road
	Union City, CA 94587
	Fax: 510-441-6150
with copy to:	Cooley Godward Kronish LLP
	101 California Street
	5th Floor
	San Francisco, CA 94111-5800
	Attn: Nan Wu, Esq.
	Fax: 415-693-2222

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

37

If to Abbott:	Divisional Vice President, Business Development
	Abbott Point of Care
	400 College Road East
	Princeton, NJ 08540
	Tel: 609-454-9437
	Fax: 609-419-9376
with copy to:	Divisional Vice President, Commercial Legal Operations
	Abbott Laboratories
	AP6A-2
	100 Abbott Park Road
	Abbott Park, IL 60064-6049
	Fax: (847) 938-1206

9.13 Expenses. Unless otherwise specifically provided for herein, all costs and expenses incurred with connection with this Agreement and the transactions contemplated hereby shall be paid by the Party that shall have incurred the same, and the other Party shall no liability thereto.

9.14 Interpretation. When a reference is made in this Agreement to Sections, Subsections, Tables or Exhibits, such references shall be to a Section, Subsection, Table or Exhibit to this Agreement unless otherwise indicated. The words “include,” “includes” and “including” when used herein shall be deemed in each case to be followed by the words “without limitation.” The table of contents and headings, if contained in this Agreement, have been inserted for convenience of reference only and shall not be relied upon in construing this Agreement. Use of any gender herein to refer to any person shall be deemed to comprehend masculine, feminine, and neuter unless the context clearly requires otherwise.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

38

IN WITNESS WHEREOF, each Party has caused this Agreement to be signed by its duly authorized representative as of the Effective Date.

ABBOTT POINT OF CARE INC.			ABAXIS, INC.
By:	/s/ Greg Arnsdorff		By:	/s/ Martin Mulory
	Name:	Greg Arnsdorff		Name:	Martin Mulory
	Title:	President		Title:	Vice President Sales & Marketing

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

39

List of Exhibits

Trademarks
Abaxis	1.1
Abbott	1.2
Products	1.14
Purchase Prices	1.17
Annual Product Purchase Calculation	2.6
Parts and Components	3.3(a)
Minimum Order Quantities	3.4(b)
i-STAT®1 Warranty	3.4(f)
Abaxis Distribution Centers	3.6
Product Complaint Inquiry Form	3.9
Excluded Competitive Products	3.12(a)
Alternative Dispute Resolution	9.11

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 1.1

Abaxis Trademarks

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 1.2

Abbott Trademarks

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 1.14

Products

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 1.17

Purchase Price

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 1.17

Purchase Price
(Continued)

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 2.6

Annual Product Purchase Calculation

Contract Year:
Abbott Calculation:		date provided to Abaxis:
Approved by Abaxis:	_____  Yes /  _____  No*	date approved by Abaxis:
* if No:
Abaxis Estimate:		date provided to Abbott:
Approved by Abbott:	_____  Yes /  _____  No **	date approved by Abbott:
** if No:
Agreed Calculation:		date agreed:

Official Determination of Product Purchases

For Contract Year                      is                                         .

Abbott	Abaxis
By:	By:
Name:	Name:
Title:	Title:
Date:	Date:

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 3.3(a)

Parts and Components

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Exhibit 3.4(b)

Minimum Product Order Quantities

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 3.4(f)

Abbott i-STAT^®1

Warranty

(An electronic copy of this form will also be provided to Abaxis.
A snap shot sample is below.)

1-1
Introduction
Art: 715003-01H Rev. Date: 03/03/08

1

1-2 Art: 715003-01H Rev. Date: 03/03/08

This manual describes the i-STAT o Portable Clinical Analyzer, the Philips Medical Systems* Blood Analysis Module, i-STAT Cartridges and the i-STAT Central Data Station Version 5 program. Related sections are grouped behind tabs. The i- STAT Portable Clinical Analyzer and Philips Blood Analysis Module perform the same basic functions, although some elements of the Blood Analysis Module’s user interface have been adapted for a patient monitoring environment. Except were noted, operating instructions apply to both pieces of equipment. For specific information on the Blood Analysis Module, refer to the Blood Analysis Module section of this manual.

The i-STATo1 Analyzer is described in a separate manual.

* Formally distributed by Hewlett-Packard and Agilent Technologies.

This Manual Overview of the i-STAT System

The i-STAT System incorporates a comprehensive group of components needed to perform blood analysis at the point of care. A handheld Portable Clinical Analyzer or a Blood Analysis Module, a cartridge with the required tests, and 2 to 3 drops of blood will allow the caregiver to view quantitative test results for blood gas and chemistry tests in approximately 2 minutes as well as quantitative times for coagulation tests.

Portable printers and infrared communication devices allow all patient information obtained at the bedside to be printed on demand and transmitted to centralized information systems for record keeping and billing.

The Central Data Station (CDS) program provides system management tools.

Intended Use The i-STAT Portable Clinical Analyzer and Philips Blood Analysis Module are intended for use with i-STAT cartridges for the in vitro quantification of various analytes and coagulation times in whole blood. Analyzers and cartridges should be used by healthcare professionals trained to use the system and should be used according to the facility’s policies and procedures.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

In the USA, for the purpose of CLIA compliance, the i-STAT CHEM8+ cartridge is categorized as Waived. All other i-STAT cartridges are categorized as moderate complexity. Please note that the CHEM8+ cartridge can only be run on the i-STAT 1 Analyzer.

Components The i-STAT System consists of:

o i-STAT Cartridges

o Abbott MediSense Precision PCx and PCx Plus Blood Glucose Test Strips (for i-STAT1 Analyzer)

o i-STAT Portable Clinical Analyzer

o i-STAT 1 Analyzer

o Philips Medical Systems Blood Analysis Module (used in conjunction with Philips CMS and 24/26 Patient Monitors)

Rev. Date: 03/03/08 Art: 715003-01H 1-3

o Portable Printer

o Quality Assurance Materials

o Electronic Simulator

o Control Solutions

o Calibration Verification Set

o Data Management System

o Downloader and/or Downloader/Recharger for i-STAT 1 Analyzer

o IR Link for Portable Clinical Analyzer

o Data Manager

o Central Data Station Version 5, software for cartridge management

o QC Manager software for PCx glucose tests strip management

o Data Manager Printer

o i-STAT Central Data Station

o Central Data Station, version 4, software for cartridge management

o LIS/HIS Interface Software

Summary of the Procedure

To perform cartridge testing, the operator fills a cartridge with sample, seals the cartridge with its snap closure, and inserts the cartridge into the analyzer. Inserting the cartridge activates the analyzer. The unit-use cartridge contains all components necessary to perform one or more tests including: calibrating solution for blood gas and chemistry tests or reagents for coagulation tests, a sample handling system, and sensors. The analyzer automatically controls all steps in the testing cycle, which may include: fluid movement, calibration, reagent mixing, and thermal control. Quality checks are performed continuously throughout the testing cycle. Operator and patient IDs and patient chart information can be entered. When the test cycle is completed, results are displayed and the test record is stored. This degree of automation, along with the ability to test fresh whole blood, eliminates many sources of error as well as time-consuming and costly steps inherent in other methods.

Data Management Test records can be transmitted to the Data Manager or Central Data Station where they can be printed and/or transmitted to the Laboratory Information System or Hospital Information System. An optional portable printer enables the operator to print results at the point of care.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Selection of Components

The selection of components is dependent on factors unique to each facility such as:

o Types of tests to be performed

o Number of testing sites

o Number of tests per site

o System administrative requirements

Interfacing The Central Data Station can be interfaced to a Laboratory Information System (LIS) or Hospital Information System (HIS) to automate billing and patient record keeping.

1-4 Art: 715003-01H Rev. Date: 03/03/08

Symbols Symbols can be helpful in reducing the necessity for translating important information into multiple languages, particularly where space is limited. The following symbols may be found on components of the i-STAT System.

Note Regarding System Reliability

The i-STAT System automatically runs a comprehensive set of quality checks of analyzer and cartridge performance each time a sample is tested. This internal quality system will suppress results if the analyzer or cartridge does not meet certain internal specifications (see Quality Control section in System Manual for detailed information). To minimize the probability of delivering a result with medically significant error the internal specifications are very stringent. It is typical for the system to suppress a very small percentage of results in normal operation given the stringency of these specifications. If however the analyzer or cartridges have been compromised, results may be persistently suppressed, and one or the other must be replaced to restore normal operating conditions. Where unavailability of results while awaiting replacement of analyzers or cartridges is unacceptable, Abbott Point of Care Inc. recommends maintaining both a backup i-STAT System analyzer and cartridges from an alternate lot number.

Symbol Definition

Attention: See instructions for use.

Caution: Risk of electrical shock.

Laser radiation hazard symbol.

Biological Risks.

Temperature limitations. The upper and lower limits for storage are adjacent to upper and lower arms.

Upper limit of temperature. The upper limit for storage is adjacent to the upper arm Use by or expiration date.

An expiration date expressed as YYYY-MM-DD means the last day the product can be used.

An expiration date expressed as YYYY-MM means the product cannot be used past the last day of the month specified.

Manufacturer’s lot number or batch code. The lot number or batch will appear adjacent to this symbol.

Catalog number, list number, or reference number. The number adjacent to this symbol is used to reorder the product.

Serial number. The serial number will appear adjacent to this symbol.

Rev. Date: 03/03/08 Art: 715003-01H 1-5

Symbol Definition

MN Model number. The model number will appear adjacent to this symbol.

Date of manufacture.

Manufacturer

In vitro diagnostic medical device.

Authorized Representative for Regulatory Affairs in the European Community.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Contains sufficient for < n > tests.

Direct Current (DC)

Alternating Current (AC)

Class II Construction

Consult instructions for use or see System Manual for instructions.

control Control

Signifies that the product bearing the ETL Listed mark complies with both U.S. and Canadian product safety standards:

UL 61010A-1

CAN/CSA C22.2 No. 1010.1-92

i/immuno: Cartridges bearing this symbol must be run on i-STAT analyzers that also bear this symbol.

Battery: i-STAT 1 Analyzer low battery icon (flashes on lower left side of display screen).

Separate waste collection for this electrical/electronic item indicated.

Separate waste collection for this electrical/electronic item indicated;

Equipment manufactured / put on the market after 13 August 2005; Indicates compliance with Article 10(3) of Directive 2002/96/EC (WEEE) for the European Union (EU).

1-6 Art: 715003-01H Rev. Date: 03/03/08

Symbol Definition

BODxxxx-xx

Born On Date: the label BODxxxx-xx defines the year and month of manufacture.

Do not reuse.

This symbol is used for compliance with the China RoHS regulation(s). It indicates in years the Environmentally Friendly Use Period (EFUP) for the labeled electronic medical device product

Symbol The following symbols are used on the i-STAT 1 keypad.

SCAN Key used to scan information into the analyzer.

ABC Key used to enter letters.

Key used to enter information.

MENU Key used to access the analyzer’s menu.

Key used to print a test record.

Key used to turn the analyzer off and on.

Symbol The following symbols are used on the i-STAT Portable Clinical Analyzer Keypad

DIS Key used to activate the display.

ENT Key used to enter information.

PRT Key used to print a test record.

CLR Key used to clear an incorrect entry.

Symbol The following symbols are used on i-STAT Value Assignment Sheets Mean

R Range

Rev. Date: 03/03/08 Art: 715003-01H 1-7

Symbol TEST

Na Sodium

K Potassium

Cl Chloride

Glu Glucose

Lac Lactate

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

Crea Creatinine

pH pH

PCO2 Partial pressure of carbon dioxide.

PO2 Partial pressure of oxygen.

iCa Ionized Calcium

BUN/UREA Urea nitrogen/Urea

Hct Hematocrit

ACTc

Celite ACT

Activated Clotting Time with Celite^® activator.

ACTk

Kaolin ACT

Activated Clotting Time with Kaolin activator.

PT/INR Prothrombin Time / International Normalized Ratio

Hb Hemoglobin

TCO2 Total carbon dioxide concentration.

HCO3 Bicarbonate

BE (b&ecf) Base excess (b for blood, ecf for extra cellular fluid)

AnGap Anion Gap

sO2 Oxygen saturation

cTnI Cardiac Troponin I

CK-MB Creatine Kinase MB Isoenzyme

BNP B-type Natriuretic Peptide

1-8 Art: 715003-01H Rev. Date: 03/03/08

Abbott Point of Care Inc. warrants this medical product (excluding disposable or consumable supplies) against defects in materials and workmanship for one year from the date of shipment. If Abbott Point of Care Inc. receives notice of such defects during the warranty period, Abbott Point of Care Inc. shall, at its option, either repair or replace products which prove to be defective. With respect to software or firmware, if Abbott Point of Care Inc. receives notice of defects in these products during the warranty period, Abbott Point of Care Inc. shall repair or replace software media and firmware which does not execute their programming instructions due to such defects. Abbott Point of Care Inc. does not warrant that the operating of the software, firmware or hardware shall be uninterrupted or error free. If Abbott Point of Care Inc. is unable, within a reasonable time, to repair or replace any product to a condition as warranted, Buyer shall be entitled to a refund of the purchase price upon return of the product to Abbott Point of Care Inc.

Note: Warranty rights may vary from state to state, province to province and country to country.

Warranty Limitations of Warranty

The foregoing warranty shall not apply to defects resulting from:

1 Improper or inadequate maintenance by Buyer or an unauthorized person,

2 Using accessories and/or consumables that are not approved by Abbott Point of Care Inc.,

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

3 Buyer-supplied software or interfacing,

4 Unauthorized repairs, modifications, misuse, or damage caused by disposable batteries, or rechargeable batteries not supplied by Abbott Point of Care Inc.

5 Operating outside of the environmental specifications of the product, or

6 Improper site preparation or maintenance.

THE WARRANTY SET FORTH ABOVE IS EXCLUSIVE AND NO OTHER WARRANTY, WHETHER WRITTEN OR ORAL, IS EXPRESSED OR IMPLIED. ABBOTT SPECIFICALLY DISCLAIMS THE IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.

Selling or Leasing the i-STAT System

If you sell an i-STAT analyzer, please notify Abbott Point of Care Inc. so that we can enter the new owner into our software update database. If you rent an i-STAT analyzer and do not intend to provide software updates to the lessee, please notify Abbott Point of Care Inc. so that we can enter the lessee into our software database.

End of Warranty.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 3.6

Abaxis Distribution Centers

Abaxis, Inc.
3240 Whipple Road, Union City, CA 94587

Other sites may be added upon written mutual consent.

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 3.9

Product Complaint Inquiry Form

If an End-User is experiencing difficulty with the performance of an i-STAT^®1 cartridge or analyzer, a complaint will be opened by Abbott and Abbott will request the products be returned for investigation.

Abaxis will be provided with the Abbott Customer Contact Form for Business Partners document electronically. Abaxis may also use the Abbott technical support contact information listed below which can be found on the Abbott website.

(An electronic copy of this form will also be provided to Abaxis. A snap shot sample is below.)

PART A — CUSTOMER CONTACT REPORT
(TO BE COMPLETED FOR ALL INCIDENTS)

1. General Information

		Date of	Date entered into	Date closed in
		Customer	business partner	business partner
	Incident #	Contact	complaint system	complaint system
Business Partner
Abbott Point of Care

Business Partner Information	Customer Information
Name:	Name:
Street:	Street:
City:	City:
Post Code:	Post Code:
Country:	Country:
Contact Name:	Contact Name:
Phone:	Phone:

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 3.9
(Continued)

Customer Assistance

Troubleshooting and Frequently Asked Questions

• Technical Support	techsvc@i-stat.com	800.366.8020, Option 1
• Customer Service	custsvc@i-stat.com	800.366.8020, Option 2

Technical Support

Online Service & Support for product information and technical help. Please enter your Identification and Password in the sign-in area below.

Abbott POC ID:                               

          Password:                               

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 3.12(a)

Excluded Competitive Products

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EXHIBIT 16.11

ALTERNATE DISPUTE RESOLUTION (ADR)

[ * ]

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

EX-10.3

Exhibit 10.3

[ * ] = Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

LICENSE AGREEMENT

     This LICENSE AGREEMENT dated as of January 5, 2009 (the “Effective Date”), is entered into by and between Inverness Medical Switzerland GmbH, a corporation organized and existing under the laws of Switzerland, with its principal office for the conduct of business located at Bahnhofstrasse 28, CH- 6300 Zug, Switzerland (“Licensor”) and Abaxis, Inc,. a California corporation, having its principal office at 3240 Whipple Road, Union City, CA 94587 USA (“Licensee”).

     WHEREAS, Licensor owns or controls certain Patent Rights (as defined below) pertaining to lateral flow immunoassay devices and methods; and

     WHEREAS, subject to the terms and conditions of this License Agreement, Licensee desires and is willing to secure from Licensor, and Licensor desires and is willing to grant to Licensee an exclusive license in the Field (as defined below) and in the Professional Channel (as defined below) in and to the Patent Rights.

     NOW, THEREFORE, in consideration of these premises and the mutual covenants, agreements, representations and warranties herein contained, the Parties hereby agree as follows:

1. Certain Defined Terms. The following terms shall have the meanings set forth below:

     1.1 “Affiliates” means any individual or entity that directly, or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the individual or entity specified. For purposes of this definition, control of an individual or entity means the power, direct or indirect, to direct or cause the direction of the management and policies of such individual or entity whether by contract or otherwise and, in any event and without limitation of the previous sentence, any individual or entity owning fifty percent (50%) or more of the Voting Stock of a second individual or entity shall be deemed to control that second individual or entity. “Voting Stock” means, with respect to any entity, securities ordinarily (and apart from rights arising under special circumstances) having the right to vote in the election of directors or persons performing similar functions with respect to such entity.

     1.2 “Control”, “Controls” or “Controlled by” means, with respect to any item of or right under any Patent, the possession of (whether by ownership or license), or the ability of Licensor and/or its respective Affiliates to grant access to, or a license or sublicense of such item or right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party existing at the time Licensor would be required hereunder to grant such access, right or (sub)license.

     1.3 “Effective Date” shall have the meaning set forth in the Introductory Paragraph.

     1.4 “Excluded Field” means the detection of microbial food pathogens to assess the safety of food for human consumption.

     1.5 “Field” means the detection of diseases, physiologic conditions, and substances in non-human animals and products obtained from non-human animals, excluding the Excluded Field.

     1.6 “Improved Product” shall have the meaning set forth in Section 17.6.

     1.7 “Lateral Flow Patent Rights” means Patents that (i) exist as of the Effective Date, (ii) are Controlled by Licensor as of the Effective Date, and (iii) claim or cover a diagnostic test for at least one analyte and which test comprises a detectable entity and when wetted provides for liquid flow under capillary action.

     1.8 “Laws” means all laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, domestic or foreign.

     1.9 “License Agreement” means this License Agreement, including all exhibits and attachments hereto.

     1.10 “Licensed Company” shall have the meaning set forth in Section 3.2(b).

     1.11 “Licensed Product” means any product, branded under only one or more brands Controlled by Licensee or its Affiliates, the making, having made (on Licensee’s behalf), using, selling, offering for sale or importing of which by or on behalf of Licensee would, but for the license granted to Licensee pursuant to this License Agreement infringe a Valid Claim of a Patent included in the Patent Rights in the country in which any such product is so made, used, sold, offered for sale or imported by Licensee or on Licensee’s behalf.

     1.12 “Licensee” shall have the meaning set forth in the Introductory Paragraph.

     1.13 “Licensor Competitor” shall have the meaning set forth in Section 17.6.

     1.14 “Licensor Indemnitees” shall have the meaning set forth in Section 14.1.

     1.15 “Licensor” shall have the meaning set forth in the Introductory Paragraph.

     1.16 “Minimum Annual Royalty” shall have the meaning set forth in Section 3.5(a).

     1.17 “Net Sales” means the gross amounts invoiced or billed, and all other amounts (including as a result of any agreement or arrangement with any Third Party and whether in cash or non-cash consideration) received by Licensee with respect to sales by or on behalf of Licensee of Licensed Product to unaffiliated Third Parties less the sum of actual amounts for the following items: any outbound transportation, insurance and other shipping and handling costs paid or allowed; trade, quantity and discounts in amounts customary in the trade; allowances and credits to purchasers for damaged and returned product, including allowances and credits because of returns or rejections; excise, duty, sales or similar taxes; allowances for promotional and demonstration units permitted under Section 3.4; and [*]. “Net Sales” shall be measured on a country-by-country basis, when a Licensed Product is first sold or otherwise transferred for value by or on behalf of Licensee, or first used or leased in such country.

     1.18 “Party” means Licensee or Licensor, individually, and “Parties” means Licensee and Licensor, collectively.

     1.19 “Patent Challenge” shall have the meaning set forth in Section 2.7.

     1.20 “Patent Rights” means the Patents listed on Schedule A attached hereto.

     1.21 “Patents” means (a) patents and patent applications, (b) substitutions, divisionals, continuations, continuations-in-part, reissues, provisional applications, registrations, confirmations, reexaminations and renewals of any such patents and patent applications, and (c)

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

2

any foreign equivalents of the foregoing.

     1.22 “Pre-Existing Licenses” shall have the meaning set forth in Section 2.5.

     1.23 “Professional Channel” means sales or distribution channels where products or systems are designed or intended for, or marketed to, (a) professional providers of non-human animal health-care, including veterinary health-care, and professional non-human animal health-care centers, (b) other Third Party professionals trained to administer and/or analyze diagnostic tests on non-human animals, and (c) diagnostic laboratories. Notwithstanding anything to the contrary in this License Agreement, “Professional Channel” does not include sales or distribution channels where products or systems are primarily intended for or marketed to an end-user consumer for private use, including self-care, at-home care, and minute clinic channels.

     1.24 “Representatives” shall have the meaning set forth in Section 12.1.

     1.25 “Royalties” shall have the meaning set forth in Section 3.2(a).

     1.26 “Third Party” means any person or entity other than Licensee, Licensor and their respective Affiliates.

     1.27 “Valid Claim” means any unexpired issued claim or pending claim prosecuted in good faith of any Patent Right which has not lapsed, become abandoned or been held revoked, invalid, or unenforceable by a decision of a court or administrative or government authority or agency of competent jurisdiction from which no appeal can be or has been taken within the time allowed for such appeal, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or otherwise.

2. License Rights.

     2.1 Patent Rights. Subject to the terms and conditions set forth in this License Agreement, Licensor hereby grants to Licensee, and Licensee hereby accepts, a worldwide, exclusive (subject to limitation in Section 2.3), royalty-bearing, non-transferable (except as expressly set forth in Section 17.6) and non-sublicenseable right and license under Licensor’s rights in and to the Patents included in the Patent Rights, in the Field only, to make, have made for Licensee (including by contract manufacturers for Licensee), use, sell, offer for sale and import Licensed Products in the Professional Channel, and the right to practice the methods claimed in such Patent Rights in connection with such Licensed Products. Licensee may exercise its rights under this Section 2.1 directly or through distribution channels on its behalf.

     2.2 Sublicensing; Additional Licenses.

     (a) No Sublicensing. Licensee shall not sublicense, directly or indirectly, the rights granted to Licensee under Section 2.1. The Parties agree that any potential sublicensee opportunity with respect to rights under this License Agreement shall be addressed pursuant to Section 2.2(b).

     (b) Additional License Opportunities. In the event that either Party identifies a possible opportunity to grant licenses to Third Parties under the Patent Rights in the Field and in the Professional Channel, the other Party shall cooperate with such Party in connection with such opportunity. [*]

     2.3 Exclusivity. The license rights granted to Licensee under Section 2.1 are exclusive in the Field and in the Professional Channel as to (a) all persons and entities other than

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

3

Licensor and Third Parties to whom Licensor or any of its licensors or their predecessors has granted licenses as of the October 10, 2008 under the Patent Rights that may be exploited in the Field, including the Third Parties identified or contemplated under Section 2.5 below; and (b) any subsequent licensee agreed upon by the Parties pursuant to Section 2.2(b). Notwithstanding anything to the contrary in this License Agreement, the grant of rights by Licensor under this License Agreement shall be subject and limited in all respects by the terms of the applicable Third Party agreements and arrangements pursuant to which Licensor acquired any Patent Rights, and all rights or sublicenses granted under this License Agreement shall be limited to the extent that Licensor may grant such rights and sublicenses under the Patent Rights.

     2.4 Licensor Out-Licensing Restrictions. During the term of this License Agreement Licensor shall not, except with the written consent of Licensee, (i) enter into any new agreements with a Third Party pursuant to which Licensor grants such Third Party new license rights under any Lateral Flow Patent Rights in the Field and in the Professional Channel except in accordance with Section 2.2(b), or (ii) notwithstanding any rights to the contrary under any Pre-Existing License, amend any Pre-Existing License in a manner that extends or expands the license rights of such Third Party under any Lateral Flow Patent Rights in the Field and in the Professional Channel if such extension or expansion would materially adversely affect Licensee’s rights under this License Agreement.

     2.5 Pre-Existing Licenses.

          (a) The grant of rights by Licensor under this License Agreement shall be subject to and limited in all respects by the terms and conditions of the applicable agreements existing as of the Effective Date pursuant to which Licensor has control of any Patent Rights, and all rights or sublicenses granted under this License Agreement shall be limited to the extent that Licensor may grant such rights and sublicenses under the terms and conditions of the applicable agreements existing as of the Effective Date pursuant to which Licensor has granted any right or license to a Third Party under the Patent Rights (collectively, the “Pre-Existing Licenses”).

          (b) [*]

          (c) [*]

     2.6 Restrictions. Licensee shall not knowingly (i.e., knew or should have known) sell, transfer or otherwise provide, directly or indirectly, the Licensed Products for use or sale outside of the Field and/or outside of the Professional Channel. In connection with any Licensee transaction or agreement relating to any Licensed Product with a Third Party, Licensee shall restrict (through contracts and/or purchase orders, marketing literature, shipping documents, or similar documents used when a supply, distribution or similar agreement is not in place) such Third Party and require similar restrictions throughout the supply chain, from shipping or selling Licensed Products outside of the Field and/or outside of the Professional Channel. Licensee shall use commercially reasonable efforts to enforce such restrictions, including by (i) promptly suspending shipments of the Licensed Products to a Third Party if the Licensed Products are being sold or used by such Third Party outside the Field and/or outside of the Professional Channel, (ii) notifying such Third Party in writing of such alleged violation, (iii) conducting an investigation of such violation as reasonably appropriate under the circumstances, (iv) following

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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completion of such investigation, terminating any agreement with such Third Party following the investigation of which revealed that such Third Party failed to comply with such restrictions, and (v) pursuing a damage claim (or authorizing Licensor to pursue such damage claim on its behalf) against any such Third Party that failed to comply with its restrictions in accordance with this Section 2.6. In any written agreement of Licensee with a Third Party with respect to a Licensed Product to which Licensor is not a party, Licensee shall require that such Third Party agrees that Licensor shall be treated as an intended third party beneficiary for purposes of enforcing under such agreement the restrictions described in this Section 2.6.

     2.7 Licensee No-Challenge Covenant. In the event that Licensee or any of its Affiliates institutes or prosecutes itself or through a Third Patty (other than to defend any Patent licensed to Licensee under Section 2.1), or substantially supports a Third Party in instituting or prosecuting, before any administrative or regulatory body, including the U.S. Patent and Trademark Office or its foreign counterparts, any claim, demand, action or cause of action for declaratory relief, damages or any other remedy or for an enjoinment, injunction or any other equitable remedy, including any interference, re-examination, opposition or any similar proceeding, alleging that any claim in a Patent included in the Lateral Flow Patent Rights is invalid, unenforceable or otherwise not patentable (a “Patent Challenge”), Licensor shall have the right to terminate this License Agreement upon thirty (30) day prior written notice, if not cured within such 30-day period. For clarity, the term “substantially supports” as used in this Section 2.7 shall not include cooperation required to be provided pursuant to any order, subpoena or other response to any action undertaken by an administrative or regulatory body.

     2.8 Reservation of Rights. Licensor hereby reserves and retains all right, title and interest in and to the Patent Rights and all other rights not expressly granted hereunder and any and all remedies herein expressly conferred upon a Party will be deemed cumulative with, and not exclusive of, any other remedy conferred hereby, or by law or equity upon such Party, and the exercise by a Party of any one remedy will not preclude the exercise of any other remedy available under this License Agreement or otherwise.

     2.9 Covenant not to Sue. Licensor hereby agrees that it will not (nor will Licensor grant any rights to a Third Party to) threaten, make a claim or undertake any action against Licensee, Licensee’s distributors or customers with respect to Licensee’s making, having made, using, selling, offering for sale or importing of Licensed Products in the Field and in the Professional Channel in accordance with this License Agreement during the term of this License Agreement. The obligations of Licensor under this Section 2.9 shall only apply with respect to any Valid Claims of Patents Controlled by Licensor as of the Effective Date solely to the extent that such Valid Claims claim or cover subject matter or a method that is necessary for Licensee to make, have made, use, sell, offer for sale or import Licensed Products in the Field and in the Professional Channel in accordance with the terms and conditions of this License Agreement. Notwithstanding anything to the contrary in this License Agreement, the foregoing shall have no force or effect with respect to any product manufactured, offered for sale, sold, transferred, or otherwise used, directly or indirectly, outside of the Field and/or outside of the Professional Channel.

3. License Fee and Royalties.

     3.1 License Fee. In partial consideration of the rights granted to Licensee under this

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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Licensee Agreement, Licensee shall pay to Licensor a license fee in the amount of Five Million Dollars ($5,000,000). Such license fee payment is due on the Effective Date and payable within two business days following the Effective Date. In addition, such license fee payment is nonrefundable and is not creditable against any other payments due to Licensor under this License Agreement.

     3.2 Earned Royalties.

     (a) In partial consideration of the rights granted to Licensee under this License Agreement, Licensee shall pay to Licensor a royalty of [*] of Net Sales of Licensed Products made by or on behalf of Licensee (“Royalties”). Royalties shall be paid on a Licensed Product by Licensed Product and country by country basis from the first commercial sale of each Licensed Product in a country until expiration of the last to expire of any issued Patent within the Patent Rights covering such Licensed Product or its manufacture or use in such country.

     (b) In the event that a Third Party that has a royalty-bearing license to or under any of the Patent Rights (a “Licensed Company”) (i) is acquired by Licensee or (ii) sells components to Licensee for integration by Licensee into a Licensed Product, the royalty that would otherwise be payable to Licensor with respect to Licensed Company’s or Licensee’s use of the Patent Rights in connection with the Licensed Products shall be included in (that is, not be in addition to) the [*] Royalties payable to Licensor by Licensee in connection with Net Sales of such Licensed Product.

     3.3 Royalties shall not be due on sales or transfers of any Licensed Product manufactured by Licensor on behalf of Licensee as contemplated under Section 5.

     3.4 Licensee may provide reasonable quantities of Licensed Products to Third Parties solely for promotional or demonstration purposes without charge, which Licensed Products shall not be deemed to be included in the calculation of Net Sales.

     3.5 Minimum Royalties.

     (a) For each completed calendar year during the term of this License Agreement, Licensee shall pay Licensor the following minimum royalty payments (“Annual Minimum Royalty”):

Calendar Year	Minimum Royalty
2009		0
2010	$	500,000
2011	$	750,000
2012 and beyond	$	1,000,000

     (b) If the actual Royalties to Licensor in any calendar year are less than the Annual Minimum Royalty payment required for the specified year, Licensee may pay Licensor the difference between the actual Royalties during the applicable calendar year and the Annual Minimum Royalty payment in full satisfaction of its obligations under this Section 3.5 within sixty (60) days after the end of the applicable calendar year.

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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     (c) If in any calendar year Licensee fails to make the Annual Minimum Royalty payment and does not cure such failure within fifteen days (15) after written notice by Licensor, Licensor may, in its sole discretion, immediately upon written notice to Licensee, terminate this License Agreement or convert the exclusive license into a non-exclusive license, at which point there shall be no restrictions on Licensor’s ability to exploit or grant licenses under the Patent Rights, including Licensor’s right to grant additional licenses to Third Parties under the Patent Rights in the Field and in the Professional Channel. Waiver of any Annual Minimum Royalty payment by Licensor is not a waiver of any subsequent Annual Minimum Royalty payment.

     (d) Net Sales attributable to Licensed Products manufactured by Licensor on behalf of Licensee as contemplated under Section 5 shall be credited against the applicable Annual Minimum Royalty (as if earned Royalties had been paid on sales of such Licensed Products).

     3.6 Payments. Royalties shall be paid by Licensee within sixty (60) days after the end of each calendar quarter in which the applicable Net Sales are received by Licensee. Royalties payable to Licensor by Licensee shall be computed and paid in U.S. dollars by wire transfer. For purposes of determining the amount of Royalties due, the amount of Net Sales in any foreign currency shall be computed by converting such amount into U.S. dollars at a rate equal to the prevailing commercial rate of exchange for purchasing dollars with such foreign currency as published in the Wall Street Journal for the close of the last business day of the calendar quarter for which the relevant Royalty payment is to be made by Licensee. Payments shall be without deduction of exchange, collection, or other foreign currency translation charges. Any past due amounts under this License Agreement will be subject to an automatic late fee of 1¹/2% per month or the highest rate allowed by law, whichever is less.

     3.7 Taxes. If a law or regulation of any country requires withholding of taxes of any type, levies or other similar charges with respect to any amounts payable hereunder, Licensee shall promptly pay such tax, levy or other charge to the appropriate government authority and furnish Licensor with documentation of such payment. Licensee shall be entitled to deduct such tax, levy or charge actually paid from the payment due to Licensor. Licensee agrees to assist Licensor in claiming exemption from such deduction or withholding.

     3.8 Reports. Licensee further shall deliver written reports to Licensor relating to the Net Sales of each Licensed Product on a calendar quarter basis, with each report setting forth (a) the quantity and dollar value of Licensed Products sold during the immediately prior calendar quarter by country in which such Licensed Product was sold, (b) the Net Sales of each Licensed Product by Licensee in each country and (c) a calculation of the amount of Royalty due. Such reports shall be provided to Licensor no later than sixty (60) days following the end of the corresponding calendar quarter.

4. Records and Audit. Licensee shall keep complete and accurate records of sales by or on behalf of Licensee of each Licensed Product in sufficient detail to allow the accruing Royalties to be determined accurately for a period of not less than three (3) years. Licensor shall have the right to appoint at its expense an independent certified public accountant reasonably acceptable to Licensee to inspect the relevant records of Licensee to verify such report or statement, including historical payments for a period of up to three (3) years from the date of notice of inspection. Upon Licensee’s written request, Licensee shall permit such independent certified public accountant who has entered into a reasonably acceptable confidentiality agreement and, if necessary, Licensor’s technical personnel, to examine records, materials, and manufacturing

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

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processes of Licensee, during regular business hours and no more frequently than one time per calendar year, at Licensee’s applicable facility, to verify the accuracy of the reports and payments by Licensee. Licensor agrees to hold in confidence and not use for any purpose all information concerning Royalty payments and reports, and all information learned in the course of any audit or inspection, except to the extent necessary for Licensor to reveal such information in order to enforce its rights under this License Agreement or if disclosure is required by law.

5. Manufacturing and Development.

     5.1 [*]

     5.2 [*]

          (a) [*]

          (b) [*]

6. Patent Marking. Licensee shall mark or cause to be marked all Licensed Products with the number of each issued Patent under the Patent Rights that applies to such Licensed Product in a manner to provide sufficient notice under 35 U.S.C. § 287(a) and other applicable law. In the event that a Licensed Product cannot be marked itself, the patent notice shall be placed on associated tags, labels, packaging, or accompanying documentation, either electronic or paper, as appropriate to provide sufficient notice under 35 U.S.C. § 287(a) and other applicable law.

7. Compliance with Laws. Licensee shall comply with all applicable Laws in connection with the research, development, manufacture, use, sale, import and/or export of Licensed Products, its use of the Patent Rights, and its performance of this License Agreement.

8. Prosecution and Maintenance. Licensor has the sole right to file, prosecute and maintain with the U.S. Patent and Trademark Office, the U.S. Copyright Office or any similar office or agency, at its sole expense, the Patent Rights, in its own name and in countries designated by it at its sole discretion. Licensor shall keep Licensee regularly informed regarding status of material issues (including copies of relevant correspondence and filings) pertaining to the prosecution and maintenance of the Patent Rights in the Field.

9. Enforcement and Defense.

     9.1 Infringement by Third Party.

          (a) Notice of Third Party Infringement. Each Party shall promptly notify the other Party in writing of any Third Party infringement of the Patent Rights occurring in the Field and in the Professional Channel.

          (b) Licensee’s Rights.

               (i) Licensee shall have the first option, but not the obligation, under its own control and at its own expense, to prosecute any Third Party infringement of the Patent Rights if such infringement is occurring solely in the Field and in the Professional Channel or to defend the Patent Rights in any action (other than interferences, oppositions, reissue proceedings and re-examinations with respect thereto) brought by a Third Party against Licensee which alleges invalidity, unenforceability, or non-infringement of the Patent Rights if such action is solely in the Field and in the Professional Channel.

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

8

               (ii) If Licensor fails to exercise its rights under Section 9.1(c)(i) below with respect to a specific claim of infringement or action [*], then Licensee shall have the right, but not the obligation, under its own control and at its own expense, to prosecute such Third Party infringement of the Patent Rights or to defend the Patent Rights in such action (other than interferences, oppositions, reissue proceedings and re-examinations with respect thereto) [*] against Licensee which alleges invalidity, unenforceability, or non-infringement of the Patent Rights in the Field and in the Professional Channel.

               (iii) If Licensor fails to exercise its rights under Section 9.1(c)(i) below with respect to a specific claim of infringement or action [*], Licensor may elect to allow Licensee to prosecute such Third Party infringement of the Patent Rights or defend any such action. In such case, Licensor shall give written notice to Licensee of such election as soon as practicable, but in no case later than reasonably necessary for Licensee to meet any applicable deadline for such enforcement or action, and Licensee shall have the right in its sole discretion to bring suit or defend such action on its own behalf, at its own expense.

          (c) Licensor’s Rights.

               (i) With respect to any Third Party infringement of the Patent Rights that is occurring in the Field and in the Professional Channel as well as in the Excluded Field or outside of the scope of the exclusive rights granted to Licensee hereunder, Licensor shall have the first option, but not the obligation, under its own control and at its own expense, to bring suit or defend such action on its own behalf, at its own expense.

               (ii) If Licensee fails to exercise its rights under Section 9.1(b) above with respect to a specific claim of infringement or action, then Licensee shall give notice to Licensor as soon as practicable, but in no case later than reasonably necessary for Licensor to meet any applicable deadline for such enforcement or action, and Licensor shall have the right in its sole discretion to bring suit or defend such action on its own behalf, at its own expense. In addition, and except for the limited rights granted to Licensee under Section 9.1(b) above, Licensor shall have sole control at its sole expense over any and all prosecution of any Third Party infringement of the Patent Rights and any defense of the Patent Rights in any action brought by a Third Party which alleges invalidity, unenforceability, or non-infringement of the Patent Rights.

     9.2 Infringement of Third Party Rights.

          (a) Notice of Infringement. Licensee shall promptly notify Licensor in writing if the manufacture, sale, offer for sale, use or importation of any Licensed Product that practices the Patent Rights results in any claim, suit or proceeding filed by a Third Party alleging patent infringement.

          (b) Right to Defend. If a claim (including any counterclaim) is brought against a Party with respect to a Licensed Product that practices the Patent Rights and such Party desires to assert any Patent Rights as a defense to such claim then that Party shall have the right to defend and control the defense of any such claim, suit or proceeding which relates to the Patent Rights, at its own expense.

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

9

     9.3 Process and Cooperation.

          (a) Process. In the event that Licensee desires to exercise its rights under Sections 9.1(b) or 9.2(b), Licensee shall, at its own expense, first provide Licensor with a written summary of its prima facie case, any proposed legal and factual arguments and any additional documents and materials requested by Licensor and its counsel to enable Licensor and its counsel to evaluate the potential legal and business risks to the Patent Rights that could result from such suit or action. Licensor and its counsel shall, at its own expense, review the materials provided under this Section 9.3(a) to determine whether Licensee’s proposed suit or defense of the applicable action raises substantial potential legal and business risks to the Patent Rights, including, without limitation, potential challenges to the validity of any Patent Rights and/or claim construction that may impact Licensor’s exercise of its rights under the Patent Rights. Within thirty (30) days following delivery of the materials and documents by Licensee pursuant to this Section 9.3(a), Licensor shall notify Licensee whether, based on advice of Licensor’s counsel, Licensor elects to proceed with such proposed suit or defense of the applicable action.

          (b) Cooperation. The non-enforcing Party shall reasonably assist the enforcing Party in any action or proceeding being defended or prosecuted under Article 9 if so requested, and shall join such action or proceeding if reasonably requested by the enforcing Party or required by applicable law or, if the enforcing Party is unable to legally become a party to such action, shall join or commence such action and act on behalf, and at the direction of, the enforcing Party. In addition, the non-enforcing Party shall have the right to participate in any such action or proceeding with its own counsel at its own expense and without reimbursement.

          (c) Control. With respect to any suit or action contemplated under Sections 9.1(b) or 9.2(b), Licensor shall have the right to control the prosecution or defense of such suit or action at any time, at its own expense, in the event that such action raises potential substantial legal and business risks to the Patent Rights, including, without limitation, potential challenges to the validity of any Patent Rights and/or claim construction that may impact Licensor’s exercise of its rights under the Patent Rights.

     9.4 Settlements. The enforcing Party may enter into any settlement, including granting of a sublicense under the Patent Rights in the Field and in the Professional Channel, consent judgment, or other voluntary final disposition of any infringement or declaratory judgment action hereunder, provided that the terms and conditions of any such settlement and sublicense, including the sharing of any settlement proceeds (after the reimbursement to the enforcing Party of all of its costs and expenses in bringing such action) pertaining to infringement in the Field, are agreed to in writing by the Parties, provided, further, that Licensee shall not enter into any agreement or settlement which admits or concedes that any aspect of the Patent Rights is invalid or unenforceable without the prior written consent of Licensor. In addition, no settlements, consent judgments, or other voluntary final dispositions of a dispute adversely affecting the rights or obligations of a Party under this License Agreement, shall be entered into in connection with any dispute, claim or proceeding described in this Article 9 without the prior written consent of the adversely affected Party, such consent not to be unreasonably withheld. Notwithstanding the foregoing to the contrary, Licensor shall have the right to settle any suit or action contemplated under Sections 9.1(b) or 9.2(b) if at any point such suit or action raises potential substantial legal and business risks regarding potential challenges

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

10

to the validity of any Patent Rights and/or claim construction that may impact Licensor’s exercise of its rights under the Patent Rights.

     9.5 Recovery. Unless otherwise agreed to in writing by the Parties, any recovery obtained by either or both Licensee and Licensor in connection with or as a result of any action under the Patent Rights in the Field and in the Professional Channel contemplated by Sections 9.1(b), 9.1(c)(i), 9.2(b), whether by settlement or otherwise, shall be shared in order as follows: (i) the Party that prosecuted or defended the action shall recoup all of its costs and expenses incurred in connection with such action; and (ii) the amount of any recovery remaining shall then be allocated on a [*] basis.

10. Representations and Warranties.

     10.1 Licensor. Licensor hereby represents and warrants to Licensee that as of the Effective Date:

          (a) All corporate action on the part of Licensor and on the part of each of its officers and directors necessary for the authorization, execution and delivery of this License Agreement and the performance of its obligations hereunder has been taken.

          (b) This License Agreement is the legal, valid and binding obligation of Licensor, enforceable against it in accordance with its terms.

          (c) Licensor has the rights to grant to Licensee the license rights set forth in Section 2.1.

          (d) Except as disclosed on Schedule B, Licensor is not aware of any rights or licenses granted to a Third Party by Licensor in the Field and in the Professional Channel that would conflict with or have an adverse effect on Licensee’s exercise of the license rights granted to Licensee under Section 2.1.

          (e) No claim is pending, or to the best knowledge of Licensor, has been threatened in writing against Licensor or its Affiliates challenging Licensor’s right of use or ownership of the Patent Rights in the Field in the Professional Channel or to grant the licenses to the Patent Rights in the Field in the Professional Channel pursuant to this Agreement.

Notwithstanding anything to the contrary in this License Agreement, Licensor makes no representation or warranty with respect to any product manufactured, offered for sale, sold, transferred, or otherwise used, directly or indirectly, outside of the Field and/or outside of the Professional Channel.

     10.2 Licensee. Licensee hereby represents and warrants to Licensor that as of the Effective Date:

          (a) All corporate action on the part of Licensee and on the part of each of its officers and directors necessary for the authorization, execution and delivery of this License Agreement and the performance of its obligations hereunder has been taken.

          (b) This License Agreement is the legal, valid and binding obligation of Licensee, enforceable against it in accordance with its terms.

     10.3 Disclaimers.

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

11

          (a) Except ax expressly provided in Section 10.1(a), Licensor makes no representation or warranty regarding the sufficiency of the Patent Rights to support the operation of Licensee’s business, or the making, using, selling, or importation of any product by Licensee. Further, Licensor hereby assumes any and all liability in respect of any infringement of Patents or other rights of any Third Party in connection with Licensee’s operation under the Patent Rights.

          (b) IT IS FURTHER UNDERSTOOD BY THE PARTIES THAT THE PATENT RIGHTS AND ANY LICENSES GRANTED BY LICENSOR TO LICENSEE ARE PROVIDED UNDER THIS LICENSE AGREEMENT “AS IS” AND MAY CONTAIN DEFICIENCIES AND THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES INCLUDED IN SECTION 10.1, LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES UNDER THIS LICENSE AGREEMENT AND DISCLAIMS ALL IMPLIED REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NONINFRINGEMENT.

11. Term & Termination.

     11.1 Term. This License Agreement commences on the Effective Date and remains in effect on a country by country basis until the expiration of the last issued Patent within the Patent Rights in such country, unless earlier terminated in accordance with the provisions of this License Agreement. Upon the expiration of the License Agreement, Licensee shall have no obligation to pay Royalties or make payments on sales of Licensed Products after such expiration.

     11.2 Termination for Default. If either Party commits a material breach of its obligations under this License Agreement and fails to cure that breach within sixty (60) days, or in the case on nonpayment of amounts due, within three (3) business days, after receiving written notice of the breach, the other Party may terminate this License Agreement immediately upon written notice to the Party in breach.

     11.3 Termination for Convenience. Licensee shall have the right to terminate this License Agreement upon thirty (30) days notice to Licensor (a) prior to December 31, 2013, by payment of [*]; or (b) on or after January 1, 2014, Licensee may terminate this License Agreement upon thirty (30) days prior written notice to Licensor.

     11.4 Effect of Termination. Termination or expiration of this License Agreement shall not relieve either Party of any obligations that incurred or accrued prior to such termination or expiration, including as a result of breach. In addition, the following provisions survive the expiration or termination of this License Agreement: 2.6 (with respect to Licensed Products sold during the term of this License Agreement), 2.8, 2.9, 3, 4, (with respect to actions brought during the term of this License Agreement 9.3(b), 9.4 and 9.5), 11.1, 11.4, 12, 13, 14, 15, 16 and 17.

12. Confidentiality; Publications; Publicity.

     12.1 Terms of License Agreement. Neither Party will disclose the financial terms of this License Agreement to any other Third Party without the prior written consent of the other Party, except that either Party may disclose the terms of this License Agreement to its employees, consultants, existing and potential investors, potential distributors, acquirers and lenders, the professional and legal advisers of any of the foregoing and its professional and legal advisers (collectively, “Representatives”), which Representatives have a “need-to-know” for the

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

12

purposes of exercising such Party’s rights or performing such Party’s obligations under this License Agreement or evaluating, negotiating or documenting a contemplated investment, loan or acquisition; provided, however, that each such Representative is bound by a written agreement (or in the case of attorneys or other professional advisors, ethical duties) requiring such Representative to treat, hold and maintain the terms of this License Agreement as confidential information.

     12.2 Publicity Restrictions. Except for the mutually agreed press release attached hereto as Schedule C, Licensee may not use the name of Licensor, its Affiliates, or any adaptation of their names, in any promotional material or other public announcement or disclosure without the prior written consent of Licensor. The foregoing notwithstanding, Licensee may disclose that information without the consent of Licensor in any prospectus, offering memorandum, or other document or filing required by applicable securities Laws or other applicable Law, provided that Licensee provides Licensor at least ten (10) days prior written notice of the proposed text for the purpose of giving Licensor the opportunity to comment on the text.

13. Limitations. THE PARTIES HERETO AGREE THAT, NOTWITHSTANDING ANY OTHER PROVISION IN THIS LICENSE AGREEMENT, EXCEPT FOR LIABILITY ARISING FROM (I) A PARTY’S INDEMNIFICATION OBLIGATIONS UNDER THIS LICENSE AGREEMENT, (II) EITHER PARTY’S VIOLATION OF THE OTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS, OR (III) A PARTY’S GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT, NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE TO THE OTHER OR ANY OTHER PERSON FOR DAMAGES IN THE FORM OF CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES, LOST PROFITS, LOST SAVINGS, LOSS OF GOODWILL OR OTHERWISE, OR FOR EXEMPLARY DAMAGES, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT AS EXPRESSLY SET FORTH IN THE LAST SENTENCE OF SECTION 14.2 BELOW, IN NO EVENT SHALL LICENSOR’S LIABILITY TO LICENSEE EXCEED THE AMOUNT OF MONEY ACTUALLY RECEIVED BY LICENSOR FROM LICENSEE UNDER THIS LICENSE AGREEMENT.

14. Indemnification.

     14.1 Licensee Indemnification Obligations. Licensee shall defend, indemnify and hold Licensor, its Affiliates and their respective officers, directors, employees and agents (the “Licensor Indemnitees”) harmless, and hereby forever releases and discharges all Licensor Indemnitees, from and against all losses, liabilities, damages and expenses (including reasonable attorneys’ fees and costs of litigation) incurred by or imposed upon any or all of the Licensor Indemnitees as a result of any claim, demand, action and other proceeding brought by a Third Party under any theory of liability (regardless of whether such action has any factual basis) (i) concerning any Licensed Product, the use by Licensee of the Patent Rights, or Licensee’s breach of any representation or obligation under this License Agreement, except to the extent arising from the negligence or willful misconduct of any Licensor Indemnitee or the breach of any representation or warranty made by Licensor under Section 10.1 of this License Agreement, or (ii) with respect to Licensee’s prosecution of any Third Party infringement of the Patent Rights or directly related defense of the Patent Rights under any suit or action contemplated under Sections 9, Licensee shall pay all costs and damages finally awarded against Licensor by a court

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

13

of competent jurisdiction and any amounts owed by Licensor under any settlement agreement entered into by Licensee as a result of any such prosecution or defense by Licensee.

     14.2 Licensor Indemnification Obligations. Licensor shall defend, indemnify and hold Licensee, its Affiliates and their respective officers, directors, employees and agents (the “Licensee Indemnitees”) harmless, and hereby forever releases and discharges all Licensee Indemnitees, from and against all losses, liabilities, damages and expenses (including reasonably attorneys’ fees and costs of litigation) incurred by or imposed upon any of the Licensee Indemnitees as a result of any claim, demand, action and other proceeding brought by a Third Party under any theory of liability (regardless of whether such action has any factual basis) concerning Licensor’s breach of any representation or obligation under this License Agreement, except to the extent arising from the negligence or willful misconduct of any Licensee Indemnitee. or the breach of any representation or warranty made by Licensee pursuant to Section 10.2. Licensor’s liability to Licensee under this Section 14.2 shall not be offset or reduced by Licensor’s costs to defend or settle any claim, demand, action, or other proceeding entitled to indemnification under this Section 14.2.

     14.3 Indemnification Procedure. Each Licensor Indemnitee or Licensee Indemnitee, as the case may be, entitled to indemnification pursuant to this Section 14 will (i) provide the indemnifying Party with prompt written notice of any such claim for which indemnification is sought under Section 14.1 or 14.2 of this License Agreement, as the case may be; (ii) cooperate fully with Licensee in such defense; and (iii) permit the indemnifying Party to conduct and control such defense and, subject to Section 9.3, the disposition of such claim (including all decisions relative to litigation, appeal, and settlement) with attorneys reasonably acceptable to the Party for whom indemnification is provided.

15. Injunctive Relief. Notwithstanding anything to the contrary contained in this License Agreement, each Party acknowledges and agrees that a breach by it (or any of its Affiliates) of any of the provisions of this License Agreement would cause irreparable injury to the other Party which would not be adequately compensated by money damages. Accordingly, in addition to any and all other rights and remedies existing, the aggrieved Party and/or its successors or assigns shall be entitled to obtain an injunction, specific performance or other appropriate equitable relief upon application to any court of competent jurisdiction in order to enforce or prevent any breach or threatened breach of this License Agreement, in each case without the requirement of posting a bond or proving actual damages.

16. Attorneys’ Fees. The prevailing Party in any legal action brought by one Party against the other Party arising out of this License Agreement, will be entitled, in addition to any other rights it may have, to reimbursement of its costs and expenses associated with such legal action, including litigation and court costs and reasonable attorneys’ fees.

17. Miscellaneous Provisions.

17.1 Notices. Any notice, request, demand other communication required or permitted hereunder shall be in writing and shall be deemed to have been given (i) if delivered or sent by facsimile transmission, upon acknowledgment of receipt by the recipient, (ii) if sent by a nationally recognized overnight courier, properly addressed with postage prepaid, on the next business day (or Saturday if sent for Saturday delivery) or (iii) if sent by registered or certified

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

14

mail, upon the sooner of receipt or the expiration of three (3) days after deposit in United States post office facilities properly addressed with postage prepaid. All notices will be sent to the addresses set forth below or to such other address as such Party may designate by notice to each other Party hereunder:

If to Licensor:

Inverness Medical Innovations, Inc.
51 Sawyer Road
Suite 200
Waltham, MA 02453
Attention: General Counsel
Facsimile: [*]

     with a copy (which shall not constitute notice) to:

Goodwin Procter LLP
Exchange Place
Boston, MA 02109
Attention: Scott F. Duggan, Esq.
Facsimile: [*]

If to Licensee:

Abaxis, Inc.
3240 Whipple Road
Union City, CA 94587
Attention: Clint Severson, President and CEO
Facsimile: [*]

     with a copy (which shall not constitute notice) to:

Cooley Godward Kronish LLP
101 California Street
San Francisco, CA 94111-5800
Attention: Dr. Nan Wu, Esq.
Facsimile: [*]

Any notice given hereunder may be given on behalf of any Party by its counsel or other authorized representative.

     17.2 Captions and Gender. The captions in this License Agreement are for convenience only and shall not affect the construction or interpretation of any term or provision hereof. The use in this License Agreement of the masculine pronoun in reference to a Party hereto shall be deemed to include the feminine or neuter pronoun, as the context may require.

     17.3 Governing Law. All questions concerning the construction, validity and interpretation of this License Agreement shall be governed by and construed in accordance with the Laws of the Commonwealth of Massachusetts applicable to contracts executed in and to be performed in the Commonwealth of Massachusetts.

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

15

     17.4 Parties in Interest. Nothing in this License Agreement, express or implied, is intended to confer on any person other than the Parties and their respective successors and assigns any rights or remedies under or by virtue of this License Agreement.

     17.5 CONSENT TO JURISDICTION. THE PARTIES AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY PURSUANT TO THIS LICENSE AGREEMENT SHALL PROPERLY AND EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE COMMONWEALTH OF MASSACHUSETTS. BY EXECUTION AND DELIVERY OF THIS LICENSE AGREEMENT, EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. THE PARTIES FURTHER AGREE THAT THE MAILING BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, OF ANY PROCESS REQUIRED BY ANY SUCH COURT SHALL CONSTITUTE VALID AND LAWFUL SERVICE OF PROCESS AGAINST THEM, WITHOUT NECESSITY FOR SERVICE BY ANY OTHER MEANS PROVIDED BY STATUTE OR RULE OF COURT.

     17.6 Assignment. Licensee may not assign or transfer this License Agreement without the prior written consent of Licensor; provided that Licensee may assign this License Agreement without prior written consent to its successor in interest by way of merger, acquisition or sale of substantially all of its assets, provided that Licensee provides prior written notice of such assignment, and such corporation or other business entity expressly assumes, in a writing delivered to Licensor, all of the terms and conditions of this License Agreement; and provided further that if such successor in interest is reasonably determined by Licensor to be a direct competitor of Licensor (“Licensor Competitor”), then Licensed Products shall be limited solely to those Licensed Products of Abaxis, Inc. in existence as of the effective date of the assignment to such Licensor Competitor and any improvements to such Licensed Products to the extent that the making, using, selling, offering for sale or importation of such changed product does not infringe any Patent Rights other than the Patent Rights that claimed or covered the product before such change(s) and in the configuration sold as of the effective date of such assignment (each, an “Improved Product”). For the avoidance of doubt, each Improved Product shall be deemed a Licensed Product for all purposes under this License Agreement. This License Agreement and the obligations of the Parties hereunder shall be binding upon and enforceable by, and shall inure to the benefit of, the Parties and their respective successors, executors, administrators, estates, heirs and permitted assigns, and no others.

     17.7 Severability. If any term or other provision of this License Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this License Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this License Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible.

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

16

     17.8 Relationship Between Parties. The relationship between the Parties created under this License Agreement is that of independent contractors. With respect to the relationship created under this License Agreement, the Parties are not joint venturers, partners, principal and agent, master and servant, employer or employee, and have no relationship other than as independent contracting parties, and neither Party shall have the power to bind or obligate the other in any manner.

     17.9 Entire Agreement. This License Agreement, including the Schedules hereto, and the documents referred to herein contain the entire agreement between the Parties and supersede any prior understandings, agreements or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way.

     17.10 Amendments and Waiver. This License Agreement may not be amended or modified, nor may compliance with any condition or covenant set forth herein be waived, except by a writing duly and validly executed by each of the Parties hereto, or, in the case of a waiver, the Party waiving compliance. No delay on the part of any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any Party of any such right, power or privilege, or any single or partial exercise of any such right, power or privilege, preclude any further exercise thereof or the exercise of any other such right, power or privilege.

     17.11 Construction. Each Party hereto agrees that any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not be applied in the construction or interpretation of this License Agreement. As used in this License Agreement, the words “include” and “including” and variations thereof, shall not be deemed to be terms of limitation.

     17.12 Counterparts. This License Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same document. The delivery of a counterpart hereto by facsimile or other electronic transmission shall be deemed an original.

[SIGNATURE PAGE FOLLOWS]

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

17

     In Witness Whereof, the Parties have caused this License Agreement to be duly executed in their respective names and on their behalf, as of the date first above written.

INVERNESS MEDICAL SWITZERLAND GMBH		ABAXIS, INC.
By:	/s/ Ron Zwanziger	By:	/s/ Alberto Santa Ines
Title:	Chairman	Title:	CFO

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

SCHEDULE A
Patent Rights

[*]

Schedule A to License Agreement

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

A-1

SCHEDULE B

[*]

Schedule B to License Agreement

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

B-1

SCHEDULE C
Press Release

See attached.

Schedule C to License Agreement

[ * ]  =  Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

C-1

ABAXIS Announces Worldwide Animal Health Licensing Agreement for Rapid Test Technology

UNION CITY, Calif., Jan. 7 /PRNewswire-FirstCall/ — Abaxis, Inc. (Nasdaq: ABAX), a medical products company manufacturing point-of-care blood analysis instruments for both the medical and veterinary markets, announced today that it has entered into a license agreement for co-exclusive worldwide rights in the field of animal health diagnostics in the professional marketplace for certain technologies pertaining to lateral flow immunoassay devices and methods.

This license agreement provides Abaxis the co-exclusive opportunity to utilize these technologies to expand the Abaxis product portfolio and enter on a large scale the professional veterinary rapid diagnostic market. This includes point of care tests for infectious diseases, hormones and therapeutic drugs. The total market for these types of tests in the animal health and laboratory animal research is estimated to be over $100,000,000 in the United States alone.

“The VetScan brand is recognized in the research market and animal health industry worldwide as synonymous with quality, reliability and unparalleled cost effectiveness. The Abaxis rapid diagnostic product line now in development will extend these attributes into rapid test lateral flow devices and maintain Abaxis’ standards of product excellence,” said Clint Severson, Chairman and Chief Executive Officer. Kenneth Aron, PhD, Chief Technology Officer added, “With this license agreement we will now be able to develop and offer point of care tests for animal health in the professional marketplace in both our rotor format and in the popular “strip test” format. Having this license means that we can now move forward with an aggressive plan to develop and place our product offerings in the widest range of professional market segments throughout the veterinary industry.”

About Abaxis, Inc.

Abaxis develops, manufactures and markets portable blood analysis systems for use in any veterinary or human patient-care setting to provide clinicians with rapid blood constituent measurements. The system consists of a compact, 5.1 kilogram (11.2 pounds), portable 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 13 tests on veterinary patients and 14 tests on human patients. The system can be operated with minimal training and performs multiple routine tests on whole blood, serum or plasma samples. The system provides test results in less than 12 minutes with the precision and accuracy equivalent to a clinical laboratory analyzer. The veterinary business also provides to the veterinarian and research market now a line of hematology instruments for point of care complete blood counts (CBC).

This press release includes statements that constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Abaxis claims the protection of the safe-harbor for forward-looking statements contained in the Reform Act. Specific forward-looking statements contained in this press release include, but are not limited to, risks and uncertainties related to the market acceptance of the Company’s products and the continuing development of its products, risks associated with manufacturing and distributing its products on a commercial scale, risks associated with entering the human diagnostic market on a larger scale, risks involved in carrying of inventory, risks from unexpected problems or delays in the Company’s manufacturing facility, risks associated with the ability to attract and retain competent sales personnel, general market conditions, competition, risks and uncertainties related to its ability to raise capital in order to fund its operations and other risks detailed from time to time in Abaxis’ periodic reports filed with the United States Securities and Exchange Commission. Forward-looking statements speak only as of the date the statement was made. Abaxis does not undertake and specifically disclaims any obligation to update any forward-looking statements.

EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, Clinton H. Severson, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Abaxis, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2009	/s/ Clinton H. Severson
	Clinton H. Severson
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer
Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002

I, Alberto R. Santa Ines, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Abaxis, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 10, 2009	/s/ Alberto R. Santa Ines
	Alberto R. Santa Ines
	Chief Financial Officer and Vice President of Finance

EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Clinton H. Severson, Chief Executive Officer of Abaxis, Inc. (the “Registrant”), do hereby certify in accordance with the requirements set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United State Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of section 13(a) or section 15(d) of the Exchange Act; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant for the periods covered by the Report.

Dated: August 10, 2009	By:	/s/ Clinton H. Severson
		Clinton H. Severson
		President and Chief Executive Officer

This certification accompanies this Quarterly Report on Form 10-Q. The certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Abaxis, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q and irrespective of any general incorporation language contained in any such filing.

EX-32.2

EXHIBIT 32.2

Certification of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

I, Alberto R. Santa Ines, Chief Financial Officer of Abaxis, Inc. (the “Registrant”), do hereby certify in accordance with the requirements set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United State Code (18 U.S.C. 1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) the Quarterly Report on Form 10-Q of the Registrant, to which this certification is attached as an exhibit (the “Report”), fully complies with the requirements of section 13(a) or section 15(d) of the Exchange Act; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant for the periods covered by the Report.

Dated: August 10, 2009	By:	/s/ Alberto R. Santa Ines
		Alberto R. Santa Ines
		Chief Financial Officer and Vice President of Finance

This certification accompanies this Quarterly Report on Form 10-Q. The certification is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Abaxis, Inc. under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Quarterly Report on Form 10-Q and irrespective of any general incorporation language contained in any such filing.