California
|
77-0213001
|
|
(State of Incorporation)
|
(I.R.S.
Employer Identification
No.)
|
Page
|
||
PART
I. FINANCIAL INFORMATION
|
|
|
Item
1.
|
Condensed
Financial Statements (Unaudited):
|
|
Condensed
Statements of Operations for the Three and Six Months Ended September
30,
2007 and 2006
|
3
|
|
Condensed
Balance Sheets as of September 30, 2007 and March 31, 2007
|
4
|
|
Condensed
Statements of Cash Flows for the Six Months Ended September 30, 2007
and
2006
|
5
|
|
Notes
to the Unaudited Condensed Financial Statements
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of Operations
|
14
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
28
|
Item
4.
|
Controls
and Procedures
|
29
|
PART
II. OTHER INFORMATION
|
|
|
Item
1.
|
Legal
Proceedings
|
29
|
Item
1A.
|
Risk
Factors
|
29
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
39
|
Item
3.
|
Defaults
Upon Senior Securities
|
39
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
39
|
Item
5.
|
Other
Information
|
39
|
Item
6.
|
Exhibits
|
40
|
|
|
|
SIGNATURES
|
41
|
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues
|
$
|
25,192,000
|
$
|
21,037,000
|
$
|
48,123,000
|
$
|
41,395,000
|
|||||
Cost
of revenues
|
11,335,000
|
9,479,000
|
21,250,000
|
18,400,000
|
|||||||||
Gross
profit
|
13,857,000
|
11,558,000
|
26,873,000
|
22,995,000
|
|||||||||
Operating
expenses:
|
|||||||||||||
Research
and development
|
1,822,000
|
1,519,000
|
3,475,000
|
3,236,000
|
|||||||||
Sales
and marketing
|
6,381,000
|
5,533,000
|
11,610,000
|
10,004,000
|
|||||||||
General
and administrative
|
1,538,000
|
1,386,000
|
3,189,000
|
2,970,000
|
|||||||||
Total
operating expenses
|
9,741,000
|
8,438,000
|
18,274,000
|
16,210,000
|
|||||||||
Income
from operations
|
4,116,000
|
3,120,000
|
8,599,000
|
6,785,000
|
|||||||||
Interest
and other income (expense), net
|
529,000
|
367,000
|
1,028,000
|
703,000
|
|||||||||
Income
before income taxes
|
4,645,000
|
3,487,000
|
9,627,000
|
7,488,000
|
|||||||||
Income
tax provision
|
1,757,000
|
1,373,000
|
3,641,000
|
2,973,000
|
|||||||||
Net
income
|
$
|
2,888,000
|
$
|
2,114,000
|
$
|
5,986,000
|
$
|
4,515,000
|
|||||
Net
income per share:
|
|||||||||||||
Basic
net income per share
|
$
|
0.13
|
$
|
0.10
|
$
|
0.28
|
$
|
0.22
|
|||||
Diluted
net income per share
|
$
|
0.13
|
$
|
0.10
|
$
|
0.27
|
$
|
0.21
|
|||||
Shares
used in the calculation of net income per share:
|
|||||||||||||
Weighted
average common shares outstanding - basic
|
21,448,000
|
20,605,000
|
21,380,000
|
20,437,000
|
|||||||||
Weighted
average common shares outstanding - diluted
|
22,110,000
|
21,968,000
|
22,103,000
|
21,890,000
|
|||||||||
Share-based
compensation expense by function:
|
|||||||||||||
Cost
of revenues
|
$
|
35,000
|
$
|
6,000
|
$
|
55,000
|
$
|
26,000
|
|||||
Research
and development
|
36,000
|
31,000
|
71,000
|
58,000
|
|||||||||
Sales
and marketing
|
88,000
|
76,000
|
168,000
|
153,000
|
|||||||||
General
and administrative
|
130,000
|
84,000
|
252,000
|
150,000
|
|||||||||
Total
share-based compensation expense
|
$
|
289,000
|
$
|
197,000
|
$
|
546,000
|
$
|
387,000
|
ASSETS
|
September
30,
2007
|
March
31,
2007
|
|||||
Current assets: | |||||||
Cash
and cash equivalents
|
$
|
10,820,000
|
$
|
10,183,000
|
|||
Short-term
investments
|
40,911,000
|
35,028,000
|
|||||
Trade
receivables (net of allowances of $193,000 at September 30, 2007
and
$542,000 at March 31, 2007)
|
19,346,000
|
16,929,000
|
|||||
Inventories,
net
|
15,912,000
|
14,813,000
|
|||||
Prepaid
expenses
|
958,000
|
1,321,000
|
|||||
Net
deferred tax asset - current
|
5,851,000
|
8,979,000
|
|||||
Total
current assets
|
93,798,000
|
87,253,000
|
|||||
Property
and equipment, net
|
13,603,000
|
12,662,000
|
|||||
Intangible
assets, net
|
412,000
|
450,000
|
|||||
Other
assets
|
24,000
|
38,000
|
|||||
Net
deferred tax asset - non-current
|
2,312,000
|
2,312,000
|
|||||
Total
assets
|
$
|
110,149,000
|
$
|
102,715,000
|
|||
LIABILITIES
AND SHAREHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
5,251,000
|
$
|
6,505,000
|
|||
Accrued
payroll and related expenses
|
4,162,000
|
3,830,000
|
|||||
Other
accrued liabilities
|
1,096,000
|
1,169,000
|
|||||
Deferred
revenue
|
811,000
|
917,000
|
|||||
Warranty
reserve
|
948,000
|
315,000
|
|||||
Total
current liabilities
|
12,268,000
|
12,736,000
|
|||||
Non-current
liabilities:
|
|||||||
Deferred
rent
|
344,000
|
391,000
|
|||||
Deferred
revenue
|
1,184,000
|
1,244,000
|
|||||
Warranty
reserve
|
346,000
|
532,000
|
|||||
Total
non-current liabilities
|
1,874,000
|
2,167,000
|
|||||
Commitments
and contingencies (Note 7)
|
|||||||
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; 21,466,000
and
21,207,000 shares issued
and
outstanding at September 30, 2007 and at March 31, 2007,
respectively
|
105,491,000
|
103,282,000
|
|||||
Accumulated
deficit
|
(9,484,000
|
)
|
(15,470,000
|
)
|
|||
Total
shareholders' equity
|
96,007,000
|
87,812,000
|
|||||
Total
liabilities and shareholders' equity
|
$
|
110,149,000
|
$
|
102,715,000
|
Six
Months Ended
September
30,
|
|||||||
2007
|
2006
|
||||||
Operating
activities:
|
|||||||
Net
income
|
$
|
5,986,000
|
$
|
4,515,000
|
|||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
1,656,000
|
1,253,000
|
|||||
Loss
on disposal of property and equipment
|
2,000
|
29,000
|
|||||
Share-based
compensation expense
|
546,000
|
387,000
|
|||||
Excess
tax benefits from share-based awards
|
(138,000
|
)
|
-
|
||||
Common
stock issued for employee benefit plans
|
-
|
66,000
|
|||||
Changes
in assets and liabilities:
|
|||||||
Trade
receivables, net
|
(2,417,000
|
)
|
(162,000
|
)
|
|||
Inventories,
net
|
(1,971,000
|
)
|
(1,918,000
|
)
|
|||
Prepaid
expenses
|
501,000
|
(234,000
|
)
|
||||
Other
assets
|
14,000
|
20,000
|
|||||
Net
deferred tax assets
|
3,128,000
|
2,730,000
|
|||||
Accounts
payable
|
(1,254,000
|
)
|
1,450,000
|
||||
Accrued
payroll and related expenses
|
332,000
|
(246,000
|
)
|
||||
Other
accrued liabilities
|
(73,000
|
)
|
284,000
|
||||
Deferred
rent
|
(47,000
|
)
|
(50,000
|
)
|
|||
Deferred
revenue
|
(166,000
|
)
|
(95,000
|
)
|
|||
Warranty
reserve
|
447,000
|
100,000
|
|||||
Other
long-term liabilities
|
-
|
2,000
|
|||||
Net
cash provided by operating activities
|
6,546,000
|
8,131,000
|
|||||
Investing
activities:
|
|||||||
Purchases
of available-for-sale investments
|
(19,575,000
|
)
|
(39,177,000
|
)
|
|||
Purchases
of held-to-maturity investments
|
(14,176,000
|
)
|
-
|
||||
Proceeds
from maturities of available-for-sale investments
|
-
|
32,779,000
|
|||||
Proceeds
from maturities of held-to-maturity investments
|
27,868,000
|
-
|
|||||
Purchases
of property and equipment
|
(1,680,000
|
)
|
(1,616,000
|
)
|
|||
Net
cash used in investing activities
|
(7,563,000
|
)
|
(8,014,000
|
)
|
|||
Financing
activities:
|
|||||||
Proceeds
from issuance of common stock under stock plans, net
|
1,516,000
|
2,860,000
|
|||||
Proceeds
from the exercise of warrants
|
-
|
86,000
|
|||||
Excess
tax benefits from share-based awards
|
138,000
|
-
|
|||||
Net
cash provided by financing activities
|
1,654,000
|
2,946,000
|
|||||
Net
increase in cash and cash equivalents
|
637,000
|
3,063,000
|
|||||
Cash
and cash equivalents at beginning of period
|
10,183,000
|
10,164,000
|
|||||
Cash
and cash equivalents at end of period
|
$
|
10,820,000
|
$
|
13,227,000
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
paid for interest
|
$
|
4,000
|
$
|
4,000
|
|||
Cash
paid for income taxes, net of refunds
|
$
|
150,000
|
$
|
216,000
|
|||
Supplemental
disclosure of non-cash information:
|
|||||||
Change
in unrealized gains on short-term investments, net of tax
|
$
|
-
|
$
|
60,000
|
|||
Transfers
of equipment between inventory and property and equipment
|
$
|
881,000
|
$
|
876,000
|
September
30, 2007
|
March
31, 2007
|
||||||||||||||||||
Amortized
Cost
|
Unrealized
Gains
|
Market
Value
|
Amortized
Cost
|
Unrealized
Gains
|
Market
Value
|
||||||||||||||
Available-for-sale: | |||||||||||||||||||
Auction
rate securities
|
$
|
35,975,000
|
$
|
-
|
$
|
35,975,000
|
$
|
16,400,000
|
$
|
-
|
$
|
16,400,000
|
|||||||
Total
available-for-sale
|
35,975,000
|
-
|
35,975,000
|
16,400,000
|
-
|
16,400,000
|
|||||||||||||
Held-to-maturity:
|
|||||||||||||||||||
Corporate
debt securities
|
4,936,000
|
-
|
4,936,000
|
18,628,000
|
-
|
18,628,000
|
|||||||||||||
Total
held-to-maturity
|
4,936,000
|
-
|
4,936,000
|
18,628,000
|
-
|
18,628,000
|
|||||||||||||
Total
short-term investments
|
$
|
40,911,000
|
$
|
-
|
$
|
40,911,000
|
$
|
35,028,000
|
$
|
-
|
$
|
35,028,000
|
|||||||
September
30,
2007
|
March
31,
2007
|
||||||
Raw
materials
|
$
|
7,557,000
|
$
|
7,974,000
|
|||
Work-in-process
|
4,620,000
|
3,203,000
|
|||||
Finished
goods
|
3,735,000
|
3,636,000
|
|||||
Inventories,
net
|
$
|
15,912,000
|
$
|
14,813,000
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2007
|
|
2006
|
|
2007
|
|
2006
|
|||||||
Balance
at beginning of period
|
$
|
910,000
|
$
|
491,000
|
$
|
847,000
|
$
|
472,000
|
|||||
Provision
for warranty expense
|
612,000
|
142,000
|
874,000
|
197,000
|
|||||||||
Warranty
costs incurred
|
(228,000
|
)
|
(55,000
|
)
|
(427,000
|
)
|
(91,000
|
)
|
|||||
Balance
at end of period
|
1,294,000
|
578,000
|
1,294,000
|
578,000
|
|||||||||
Non-current
portion of warranty reserve
|
346,000
|
265,000
|
346,000
|
265,000
|
|||||||||
Current
portion of warranty reserve
|
$
|
948,000
|
$
|
313,000
|
$
|
948,000
|
$
|
313,000
|
· |
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 the six month period ended September 30, 2007
and to
have net income before preferred stock dividends and accretion on
preferred stock of at least $1,150,000 for the fiscal year ending
March
31, 2008.
|
· |
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 $25,731,000
|
Number
of
Shares
|
Weighted
Average
Exercise
Price
Per
Share
|
Weighted
Average
Remaining
Contractual
Life
(Years)
|
Aggregate
Intrinsic
Value
|
||||||||||
Outstanding
at March 31, 2007
|
1,577,000
|
$
|
7.82
|
||||||||||
Granted
|
-
|
-
|
|||||||||||
Exercised
|
(243,000
|
)
|
6.68
|
||||||||||
Canceled
or forfeited
|
(50,000
|
)
|
20.72
|
||||||||||
Outstanding
at September 30, 2007
|
1,284,000
|
$
|
7.53
|
4.04
|
$
|
19,150,000
|
|||||||
Vested
and expected to vest at September 30, 2007
|
1,281,000
|
$
|
7.53
|
4.03
|
$
|
19,122,000
|
|||||||
Exercisable
at September 30, 2007
|
1,254,000
|
$
|
7.42
|
3.96
|
$
|
18,846,000
|
· |
Restricted
stock unit awards to employees: Four
year time-based vesting as follows: five percent vesting after the
first
year; additional 10 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.
|
Number
of
Shares
|
Weighted
Average
Grant
Date
Fair
Value (1)
|
||||||
Unvested
at March 31, 2007
|
295,000
|
$
|
24.66
|
||||
Granted
|
243,000
|
20.98
|
|||||
Vested
|
(22,000
|
)
|
25.07
|
||||
Forfeited
|
(44,000
|
)
|
23.19
|
||||
Unvested
at September 30, 2007
|
472,000
|
$
|
22.89
|
||||
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Numerator:
|
|||||||||||||
Net
income
|
$
|
2,888,000
|
$
|
2,114,000
|
$
|
5,986,000
|
$
|
4,515,000
|
|||||
Denominator:
|
|||||||||||||
Weighted
average common shares outstanding - basic
|
21,448,000
|
20,605,000
|
21,380,000
|
20,437,000
|
|||||||||
Weighted
average effect of dilutive securities:
|
|||||||||||||
Stock
options
|
658,000
|
1,223,000
|
707,000
|
1,313,000
|
|||||||||
Restricted
stock units
|
4,000
|
4,000
|
10,000
|
1,000
|
|||||||||
Warrants
|
-
|
136,000
|
6,000
|
139,000
|
|||||||||
Weighted
average common shares outstanding - diluted
|
22,110,000
|
21,968,000
|
22,103,000
|
21,890,000
|
|||||||||
Net
income per share:
|
|||||||||||||
Basic
net income per share
|
$
|
0.13
|
$
|
0.10
|
$
|
0.28
|
$
|
0.22
|
|||||
Diluted
net income per share
|
$
|
0.13
|
$
|
0.10
|
$
|
0.27
|
$
|
0.21
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2007
|
|
2006
|
|
2007
|
|
2006
|
|||||||
Weighted
average number of shares underlying antidilutive stock options
and
warrants
|
218,000
|
-
|
218,000
|
5,000
|
|||||||||
Weighted
average exercise price per share underlying antidilutive stock
options and
warrants
|
$
|
21.65
|
$
|
-
|
$
|
21.66
|
$
|
22.10
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
September
30,
|
September
30,
|
||||||||||||
2007
|
|
2006
|
|
2007
|
|
2006
|
|||||||
Weighted
average number of shares underlying antidilutive restricted stock
units
|
387,000
|
212,000
|
192,000
|
184,000
|
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Net
income
|
$
|
2,888,000
|
$
|
2,114,000
|
$
|
5,986,000
|
$
|
4,515,000
|
|||||
Other
comprehensive income:
|
|||||||||||||
Change
in unrealized gains on short-term investments, net of tax
|
-
|
4,000
|
-
|
60,000
|
|||||||||
Comprehensive
income
|
$
|
2,888,000
|
$
|
2,118,000
|
$
|
5,986,000
|
$
|
4,575,000
|
|||||
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Revenues: | |||||||||||||
Medical
Market
|
$
|
5,643,000
|
$
|
4,120,000
|
$
|
10,450,000
|
$
|
7,850,000
|
|||||
Veterinary
Market
|
17,989,000
|
15,160,000
|
34,425,000
|
30,701,000
|
|||||||||
Unallocated
amounts
|
1,560,000
|
1,757,000
|
3,248,000
|
2,844,000
|
|||||||||
Total
revenues
|
25,192,000
|
21,037,000
|
48,123,000
|
41,395,000
|
|||||||||
Cost
of revenues:
|
|||||||||||||
Medical
Market
|
2,805,000
|
2,045,000
|
5,248,000
|
3,808,000
|
|||||||||
Veterinary
Market
|
7,889,000
|
7,044,000
|
14,848,000
|
13,687,000
|
|||||||||
Unallocated
amounts
|
641,000
|
390,000
|
1,154,000
|
905,000
|
|||||||||
Total
cost of revenues
|
11,335,000
|
9,479,000
|
21,250,000
|
18,400,000
|
|||||||||
Gross
profit:
|
|||||||||||||
Medical
Market
|
2,838,000
|
2,075,000
|
5,202,000
|
4,042,000
|
|||||||||
Veterinary
Market
|
10,100,000
|
8,116,000
|
19,577,000
|
17,014,000
|
|||||||||
Unallocated
amounts
|
919,000
|
1,367,000
|
2,094,000
|
1,939,000
|
|||||||||
Gross
profit
|
$
|
13,857,000
|
$
|
11,558,000
|
$
|
26,873,000
|
$
|
22,995,000
|
Three
Months Ended
|
|
Six
Months Ended
|
|
||||||||||
|
|
September
30,
|
|
September
30,
|
|||||||||
Revenues
by Product Category
|
2007
|
|
2006
|
|
2007
|
|
2006
|
||||||
Instruments
|
$
|
7,462,000
|
$
|
6,568,000
|
$
|
13,926,000
|
$
|
13,298,000
|
|||||
Reagent
discs and kits
|
15,680,000
|
12,280,000
|
29,939,000
|
24,390,000
|
|||||||||
Other
products
|
1,598,000
|
1,688,000
|
3,335,000
|
2,764,000
|
|||||||||
Product
sales, net
|
24,740,000
|
20,536,000
|
47,200,000
|
40,452,000
|
|||||||||
Development
and licensing revenues
|
452,000
|
501,000
|
923,000
|
943,000
|
|||||||||
Total
revenues
|
$
|
25,192,000
|
$
|
21,037,000
|
$
|
48,123,000
|
$
|
41,395,000
|
Three
Months Ended
|
|
Six
Months Ended
|
|
||||||||||
|
|
September
30,
|
|
September
30,
|
|||||||||
Revenues
by Geographic Region
|
2007
|
|
2006
|
|
2007
|
|
2006
|
||||||
North
America
|
$
|
21,071,000
|
$
|
17,668,000
|
$
|
40,240,000
|
$
|
34,431,000
|
|||||
Europe
|
3,175,000
|
2,319,000
|
6,232,000
|
4,762,000
|
|||||||||
Asia
Pacific and rest of the world
|
946,000
|
1,050,000
|
1,651,000
|
2,202,000
|
|||||||||
Total
revenues
|
$
|
25,192,000
|
$
|
21,037,000
|
$
|
48,123,000
|
$
|
41,395,000
|
Geographical
|
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||||
Distributor
|
Location
|
2007
|
2006
|
2007
|
2006
|
|||||||||||
Walco
International, Inc., d/b/a DVM Resources
|
United
States
|
13
|
%
|
16
|
%
|
14
|
%
|
16
|
%
|
· |
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.
|
· |
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
over a term of one year.
|
· |
Expected
term: We estimate the expected term of stock options granted based
on
historical exercise 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.
|
Three
Months Ended
September
30,
|
Change
|
Six
Months Ended September
30, |
Change
|
|||||||||||||||||||||||
|
|
Increase/
|
Percent
|
Increase/
|
Percent
|
|||||||||||||||||||||
Revenues
by Geographic Region
|
2007
|
2006
|
(Decrease)
|
Change
|
2007
|
2006
|
(Decrease)
|
Change
|
||||||||||||||||||
North
America
|
$
|
21,071,000
|
$
|
17,668,000
|
$
|
3,403,000
|
19
|
%
|
$
|
40,240,000
|
$
|
34,431,000
|
$
|
5,809,000
|
17
|
%
|
||||||||||
Percentage
of total revenues
|
84
|
%
|
84
|
%
|
84
|
%
|
83
|
%
|
||||||||||||||||||
Europe
|
3,175,000
|
2,319,000
|
856,000
|
37
|
%
|
6,232,000
|
4,762,000
|
1,470,000
|
31
|
%
|
||||||||||||||||
Percentage
of total revenues
|
13
|
%
|
11
|
%
|
13
|
%
|
12
|
%
|
||||||||||||||||||
Asia
Pacific and rest of the world
|
946,000
|
1,050,000
|
(104,000
|
)
|
(10
|
%)
|
1,651,000
|
2,202,000
|
(551,000
|
)
|
(25
|
%)
|
||||||||||||||
Percentage
of total revenues
|
3
|
%
|
5
|
%
|
3
|
%
|
5
|
%
|
||||||||||||||||||
Total
revenues
|
$
|
25,192,000
|
$
|
21,037,000
|
$
|
4,155,000
|
20
|
%
|
$
|
48,123,000
|
$
|
41,395,000
|
$
|
6,728,000
|
16
|
%
|
|
||||||||||||||||||||||||||
|
|
|
Three
Months Ended
September
30,
|
|
Change
|
Six
Months Ended
September
30,
|
Change
|
|||||||||||||||||||
|
Increase/
|
Percent
|
Increase/
|
Percent
|
||||||||||||||||||||||
Revenues
by Product Category
|
2007
|
2006
|
(Decrease)
|
Change
|
2007
|
2006
|
(Decrease)
|
Change
|
||||||||||||||||||
Instruments
|
$
|
7,462,000
|
$
|
6,568,000
|
$
|
894,000
|
14
|
%
|
$
|
13,926,000
|
$
|
13,298,000
|
$
|
628,000
|
5
|
%
|
||||||||||
Percentage
of total revenues
|
30
|
%
|
31
|
%
|
29
|
%
|
32
|
%
|
||||||||||||||||||
Reagent
discs and kits
|
15,680,000
|
12,280,000
|
3,400,000
|
28
|
%
|
29,939,000
|
24,390,000
|
5,549,000
|
23
|
%
|
||||||||||||||||
Percentage
of total revenues
|
62
|
%
|
59
|
%
|
62
|
%
|
59
|
%
|
||||||||||||||||||
Other
products
|
1,598,000
|
1,688,000
|
(90,000
|
)
|
(5
|
%)
|
3,335,000
|
2,764,000
|
571,000
|
21
|
%
|
|||||||||||||||
Percentage
of total revenues
|
6
|
%
|
8
|
%
|
7
|
%
|
7
|
%
|
||||||||||||||||||
Product
sales, net
|
24,740,000
|
20,536,000
|
4,204,000
|
20
|
%
|
47,200,000
|
40,452,000
|
6,748,000
|
17
|
%
|
||||||||||||||||
Percentage
of total revenues
|
98
|
%
|
98
|
%
|
98
|
%
|
98
|
%
|
||||||||||||||||||
Development
and licensing revenues
|
452,000
|
501,000
|
(49,000
|
)
|
(10
|
%)
|
923,000
|
943,000
|
(20,000
|
)
|
(2
|
%)
|
||||||||||||||
Percentage
of total revenues
|
2
|
%
|
2
|
%
|
2
|
%
|
2
|
%
|
||||||||||||||||||
Total
revenues
|
$
|
25,192,000
|
$
|
21,037,000
|
$
|
4,155,000
|
20
|
%
|
$
|
48,123,000
|
$
|
41,395,000
|
$
|
6,728,000
|
16
|
%
|
Three
Months Ended
September
30,
|
Change
|
||||||||||||||||||||
2007
|
Percent
of Revenues
(1) |
2006
|
Percent
of
Revenues
(1)
|
Increase/
(Decrease)
|
Percent
Change
|
||||||||||||||||
Revenues:
|
|||||||||||||||||||||
Medical
Market
|
$
|
5,643,000
|
100
|
%
|
$
|
4,120,000
|
100
|
%
|
$
|
1,523,000
|
37
|
%
|
|||||||||
Percentage
of total revenues
|
22
|
%
|
20
|
%
|
|||||||||||||||||
Veterinary
Market
|
17,989,000
|
100
|
%
|
15,160,000
|
100
|
%
|
2,829,000
|
19
|
%
|
||||||||||||
Percentage
of total revenues
|
72
|
%
|
72
|
%
|
|||||||||||||||||
Unallocated
amounts
|
1,560,000
|
1,757,000
|
(197,000
|
)
|
(11
|
%)
|
|||||||||||||||
Percentage
of total revenues
|
6
|
%
|
8
|
%
|
|||||||||||||||||
Total
revenues
|
25,192,000
|
21,037,000
|
4,155,000
|
20
|
%
|
||||||||||||||||
Cost
of revenues:
|
|||||||||||||||||||||
Medical
Market
|
2,805,000
|
50
|
%
|
2,045,000
|
50
|
%
|
760,000
|
37
|
%
|
||||||||||||
Veterinary
Market
|
7,889,000
|
44
|
%
|
7,044,000
|
46
|
%
|
845,000
|
12
|
%
|
||||||||||||
Unallocated
amounts
|
641,000
|
390,000
|
251,000
|
64
|
%
|
||||||||||||||||
Total
cost of revenues
|
11,335,000
|
9,479,000
|
1,856,000
|
20
|
%
|
||||||||||||||||
Gross
profit:
|
|||||||||||||||||||||
Medical
Market
|
2,838,000
|
50
|
%
|
2,075,000
|
50
|
%
|
763,000
|
37
|
%
|
||||||||||||
Veterinary
Market
|
10,100,000
|
56
|
%
|
8,116,000
|
54
|
%
|
1,984,000
|
24
|
%
|
||||||||||||
Unallocated
amounts
|
919,000
|
1,367,000
|
(448,000
|
)
|
(33
|
%)
|
|||||||||||||||
Gross
profit
|
$
|
13,857,000
|
$
|
11,558,000
|
$
|
2,299,000
|
20
|
%
|
Six
Months Ended
September
30,
|
Change
|
||||||||||||||||||||
2007
|
Percent
of Revenues
(1) |
2006
|
Percent
of Revenues
(1) |
Increase/
(Decrease)
|
Percent
Change
|
||||||||||||||||
Revenues:
|
|||||||||||||||||||||
Medical
Market
|
$
|
10,450,000
|
100
|
%
|
$
|
7,850,000
|
100
|
%
|
$
|
2,600,000
|
33
|
%
|
|||||||||
Percentage
of total revenues
|
22
|
%
|
19
|
%
|
|||||||||||||||||
Veterinary
Market
|
34,425,000
|
100
|
%
|
30,701,000
|
100
|
%
|
3,724,000
|
12
|
%
|
||||||||||||
Percentage
of total revenues
|
72
|
%
|
74
|
%
|
|||||||||||||||||
Unallocated
amounts
|
3,248,000
|
2,844,000
|
404,000
|
14
|
%
|
||||||||||||||||
Percentage
of total revenues
|
6
|
%
|
7
|
%
|
|||||||||||||||||
Total
revenues
|
48,123,000
|
41,395,000
|
6,728,000
|
16
|
%
|
||||||||||||||||
Cost
of revenues:
|
|||||||||||||||||||||
Medical
Market
|
5,248,000
|
50
|
%
|
3,808,000
|
49
|
%
|
1,440,000
|
38
|
%
|
||||||||||||
Veterinary
Market
|
14,848,000
|
43
|
%
|
13,687,000
|
45
|
%
|
1,161,000
|
8
|
%
|
||||||||||||
Unallocated
amounts
|
1,154,000
|
905,000
|
249,000
|
28
|
%
|
||||||||||||||||
Total
cost of revenues
|
21,250,000
|
18,400,000
|
2,850,000
|
15
|
%
|
||||||||||||||||
Gross
profit:
|
|||||||||||||||||||||
Medical
Market
|
5,202,000
|
50
|
%
|
4,042,000
|
51
|
%
|
1,160,000
|
29
|
%
|
||||||||||||
Veterinary
Market
|
19,577,000
|
57
|
%
|
17,014,000
|
55
|
%
|
2,563,000
|
15
|
%
|
||||||||||||
Unallocated
amounts
|
2,094,000
|
1,939,000
|
155,000
|
8
|
%
|
||||||||||||||||
Gross
profit
|
$
|
26,873,000
|
$
|
22,995,000
|
$
|
3,878,000
|
17
|
%
|
Three
Months Ended
September
30,
|
Change
|
Six
Months Ended
September
30,
|
Change
|
|||||||||||||||||||||||
Increase/
|
Percent
|
Increase/
|
Percent
|
|||||||||||||||||||||||
2007
|
2006
|
(Decrease) |
Change
|
2007
|
2006
|
(Decrease)
|
Change
|
|||||||||||||||||||
Cost
of revenues
|
$
|
11,335,000
|
$
|
9,479,000
|
$
|
1,856,000
|
20%
|
$
|
21,250,000
|
$
|
18,400,000
|
$
|
2,850,000
|
15
|
%
|
|||||||||||
Percentage
of total revenues
|
45
|
%
|
45
|
%
|
44
|
%
|
44
|
%
|
Three
Months Ended
September
30,
|
Change
|
Six
Months Ended
September
30,
|
Change
|
|||||||||||||||||||||||
2007
|
2006
|
Increase/
(Decrease)
|
Percent
Change
|
2007
|
2006
|
Increase/
(Decrease)
|
Percent
Change
|
|||||||||||||||||||
Research
and development expenses
|
$
|
1,822,000
|
$
|
1,519,000
|
$
|
303,000
|
20
|
%
|
$
|
3,475,000
|
$
|
3,236,000
|
$
|
239,000
|
7
|
%
|
||||||||||
Percentage
of total revenues
|
7
|
%
|
7
|
%
|
7
|
%
|
8
|
%
|
Three
Months Ended
September
30,
|
Change
|
Six
Months Ended
September
30,
|
Change
|
||||||||||||||||||||||
2007
|
2006
|
Increase/ (Decrease) |
Percent
Change
|
2007
|
2006
|
Increase/
(Decrease)
|
Percent
Change
|
||||||||||||||||||
Sales
and marketing expenses
|
$
|
6,381,000
|
$
|
5,533,000
|
$
|
848,000
|
15%
|
|
$
|
11,610,000
|
$
|
10,004,000
|
$
|
1,606,000
|
16
|
%
|
|||||||||
Percentage
of total revenues
|
25
|
%
|
26
|
%
|
24
|
%
|
24
|
%
|
Three
Months Ended
September
30,
|
Change
|
Six
Months Ended
September
30,
|
Change
|
||||||||||||||||||||||
2007
|
2006
|
Increase/
(Decrease)
|
Percent Change |
2007
|
2006
|
Increase/
(Decrease)
|
Percent
Change
|
||||||||||||||||||
General
and administrative expenses
|
$
|
1,538,000
|
$
|
1,386,000
|
$
|
152,000
|
11%
|
|
$
|
3,189,000
|
$
|
2,970,000
|
$
|
219,000
|
7
|
%
|
|||||||||
Percentage
of total revenues
|
6
|
%
|
7
|
%
|
7
|
%
|
7
|
%
|
Three
Months Ended
September
30,
|
Change
|
Six
Months Ended
September
30,
|
Change
|
||||||||||||||||||||||
2007
|
2006
|
Increase/
(Decrease)
|
Percent Change |
2007
|
2006
|
Increase/
(Decrease)
|
Percent
Change
|
||||||||||||||||||
Interest
and other income (expense), net
|
$
|
529,000
|
$
|
367,000
|
$
|
162,000
|
44%
|
|
$
|
1,028,000
|
$
|
703,000
|
$
|
325,000
|
46
|
%
|
Three
Months Ended
September
30,
|
Six
Months Ended
September
30,
|
||||||||||||
2007
|
2006
|
2007
|
2006
|
||||||||||
Income
tax provision
|
$
|
1,757,000
|
$
|
1,373,000
|
$
|
3,641,000
|
$
|
2,973,000
|
|||||
Effective
tax rate
|
38
|
%
|
39
|
%
|
38
|
%
|
40
|
%
|
September
30,
|
March
31,
|
||||||
2007
|
2007
|
||||||
Cash
and cash equivalents
|
$
|
10,820,000
|
$
|
10,183,000
|
|||
Short-term
investments
|
40,911,000
|
35,028,000
|
|||||
Total
cash, cash equivalents and short-term investments
|
$
|
51,731,000
|
$
|
45,211,000
|
|||
Percentage
of total assets
|
47
|
%
|
44
|
%
|
Six
Months Ended
September
30,
|
|||||||
2007
|
2006
|
||||||
Net
cash provided by operating activities
|
$
|
6,546,000
|
$
|
8,131,000
|
|||
Net
cash used in investing activities
|
(7,563,000
|
)
|
(8,014,000
|
)
|
|||
Net
cash provided by financing activities
|
1,654,000
|
2,946,000
|
|||||
Net
increase in cash and cash equivalents
|
$
|
637,000
|
$
|
3,063,000
|
· |
We
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.
|
· |
We
are required to be profitable, as defined, on a fiscal year to date
basis
beginning with the six month period ended September 30, 2007 and
to have
net income before preferred stock dividends and accretion on preferred
stock of at least $1,150,000 for the fiscal year ending March 31,
2008.
|
· |
We
are 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 $25,731,000
|
· |
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 marketing and distributing our products will
not be
excessive.
|
·
|
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 a stand-alone product:
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., Shinko American Inc. and Sigma Aldrich Inc.
|
·
|
Blood
Analyzer Components:
Our analyzer products use several technologically advanced components
that
we currently purchase from the following single source vendors:
PerkinElmer, Inc. and UDT Sensors. Our analyzers use a printer that
is
only made by Seiko North America Corporation. The loss of the supply
of
any of these components could force us to redesign our analyzers.
|
·
|
Hematology
Instruments and Reagents:
Our hematology instruments are manufactured by Diatron in Hungary
and is
purchased by us as a completed instrument. To date, we have qualified
three suppliers to produce the reagents for our hematology instruments:
Clinical Diagnostic Solutions, Inc., Diatron and Mallinckrodt Baker
BV.
|
· |
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.
|
·
|
commercial clinical laboratories;
|
·
|
hospitals’ clinical laboratories; and
|
· |
range
of tests offered;
|
· |
immediacy
of results;
|
· |
cost
effectiveness;
|
· |
ease
of use; and
|
· |
reliability
of results.
|
· |
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 September 2005 and March 2003, 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.
|
· |
waived;
|
· |
moderately
complex; and
|
· |
highly
complex.
|
· |
In
March 2007, the FDA granted waived status under CLIA regulations
for the
following analytes: calcium (CA), creatinine (CRE), urea nitrogen
(BUN)
and uric acid (UA).
|
· |
In
October 2006, the FDA granted waived status under CLIA regulations
for the
following analytes: albumin (ALB), alkaline phosphatase (ALP), amylase
(AMY), gamma glutamyltransferase (GGT), total bilirubin (TBIL) and
total
protein (TP).
|
· |
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.
|
· |
fluctuation
in our operating results;
|
· |
announcements
of technological innovations or new commercial products by us or
our
competitors;
|
· |
changes
in governmental regulation;
|
· |
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;
|
· |
public
concern as to the safety of our devices or similar devices developed
by
our competitors; and
|
· |
general
market conditions.
|
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
|
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.)
|
3.3
|
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
|
Form
of Warrant Agreement issued to purchasers of Series E Convertible
Preferred Stock (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.)
|
4.3
|
Reference
is made to Exhibit 3.1, Exhibit 3.2 and Exhibit 3.3.
|
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.
|
ABAXIS,
INC.
(Registrant)
|
|
Date: November 9, 2007 |
BY: /s/
Clinton H. Severson
Clinton H. Severson
President,
Chief Executive Officer and Director
(Principal
Executive Officer)
|
Date: November 9, 2007 |
BY: /s/
Alberto R. Santa Ines
Alberto
R. Santa Ines
Chief
Financial Officer and Vice President of Finance
(Principal
Financial and Accounting Officer)
|