##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    March 31, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934   Commission File Number
    000-19720
  ABAXIS, INC.
 (Exact name of registrant as
    specified in its charter)
  California

77-0213001(State or other jurisdiction
    of
    incorporation or organization)

(I.R.S. Employer
    Identification No.)3240 Whipple Road, Union City, California(Address of principal
    executive offices)

94587(Zip code)   Registrants telephone number, including area code:
 (510) 675-6500
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Class

Name of Each Exchange on Which RegisteredCommon Stock, no par value

The NASDAQ Stock Market, Inc.   Securities registered pursuant to Section 12(g) of the
    Act:
 None
  o þ
  o þ
  þ o
  Regulation S-T o o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer þ
    Non-accelerated
    filer o
    Smaller
    reporting
    company o   Rule 12b-2 o þ




---



##### 





Abaxis,
    Inc.
    Annual Report on
    Form 10-K
    For The Fiscal Year Ended March 31, 2009
  TABLE OF
    CONTENTS
   
 PagePART IItem 1.


Business


3Item 1A.


Risk Factors


14Item 1B.


Unresolved Staff Comments


25Item 2.


Properties


25Item 3.


Legal Proceedings


25Item 4.


Submission of Matters to a Vote of Security
    Holders


25PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


26Item 6.


Selected Financial Data


28Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


29Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


52Item 8.


Financial Statements and Supplementary Data


54Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


83Item 9A.


Controls and Procedures


83Item 9B.


Other Information


85PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance


85Item 11.


Executive Compensation


88Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


105Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


107Item 14.


Principal Accountant Fees and Services


108PART IVItem 15.


Exhibits and Financial Statement Schedules


109Exhibit Index


111Signatures


113EX-10.22EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   2




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##### Table of Contents



PART I  FORWARD-LOOKING
    STATEMENTS
    Form 10-K Form 10-Q Form 8-K,
  Item 1.
    Business  GENERAL
  (510) 675-6500
  OUR
    INDUSTRY: IN VITRO DIAGNOSTIC TESTING
     3




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##### Table of Contents



ABAXIS
    PRODUCTS
    Point-of-Care
    Blood Chemistry Analyzer
    
    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.  Reagent
    Discs
     4




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##### Table of Contents



Test Methods



Test MethodsAlanine aminotransferase

ALT

Lactate dehydrogenase

LDAlbumin

ALB

Magnesium

MGAlkaline phosphatase

ALP

Phosphorous

PHOSAmylase

AMY

Potassium

K+Aspartate aminotransferase

AST

Sodium

NA+Bile acids

BA

Thyroxine

T4Calcium

CA

Total bilirubin

TBILChloride

CL-

Total carbon dioxide

tCO2Creatine kinase

CK

Total cholesterol

CHOLCreatinine

CRE

Total protein

TPDirect bilirubin

DBIL

Triglycerides

TRIGGamma glutamyltransferase

GGT

Urea nitrogen

BUNGlucose

GLU

Uric acid

UAHigh-density lipoprotein cholesterol

HDL   4
    Piccolo Panels

Description of the Test PanelsBasic Metabolic Panel (CLIA waived)

BUN, CA, CL-, CRE, GLU, K+, NA+,
    tCO2.Basic Metabolic Panel Plus

BUN, CA, CL-, CRE, GLU, K+, LD, MG, NA+,
    tCO2.Comprehensive Metabolic Panel (CLIA waived)

ALB, ALP, ALT, AST, BUN, CA, CL-, CRE, GLU, K+, NA+, TBIL,
    tCO2,
    TP.Electrolyte Panel (CLIA waived)

CL-, K+, NA+,
    tCO2.General Chemistry 6 (CLIA waived)

ALT, AST, BUN, CRE, GGT, GLU.General Chemistry 13 (CLIA waived)

ALB, ALP, ALT, AMY, AST, BUN, CA, CRE, GGT, GLU, TBIL, TP, UA.Hepatic Function Panel

ALB, ALP, ALT, AST, DBIL, TBIL, TP.Kidney Check (CLIA waived)

BUN, CRE.Lipid Panel (CLIA waived)

CHOL, CHOL/HDL RATIO, HDL, LDL, TRIG, VLDL.Lipid Panel Plus (CLIA waived)

ALT, AST, CHOL, CHOL/HDL RATIO, GLU, HDL, LDL, TRIG, VLDL.Liver Panel Plus (CLIA waived)

ALB, ALP, ALT, AMY, AST, GGT, TBIL, TP.Metlyte 8 Panel (CLIA waived)

BUN, CK, CL-, CRE, GLU, K+, NA+,
    tCO2.Renal Function Panel (CLIA waived)

ALB, BUN, CA, CL-, CRE, GLU, K+, NA+, PHOS,
    tCO2.      5




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##### Table of Contents



VetScan Profile

Description of the Test PanelsAvian/Reptilian Profile Plus

ALB, AST, BA, CA, CK, GLOB, GLU, K+, NA+, PHOS, TP, UA.Comprehensive Diagnostic Profile

ALB, ALP, ALT, AMY, BUN, CA, CRE, GLOB, GLU, K+, NA+, PHOS,
    TBIL, TP.Critical Care Plus

ALT, BUN, CL-, CRE, GLU, K+, NA+,
    tCO2.Equine Profile Plus

ALB, AST, BUN, CA, CK, CRE, GGT, GLOB, GLU, K+, NA+, TBIL,
    tCO2,
    TP.Large Animal Profile

ALB, ALP, AST, BUN, CA, CK, GGT, GLOB, MG, PHOS, TP.Mammalian Liver Profile

ALB, ALP, ALT, BA, BUN, CHOL, GGT, TBIL.Prep Profile II

ALP, ALT, BUN, CRE, GLU, TP.Thyroxine
    (T4)/Cholesterol
    Profile

CHOL,
    T4.   Hematology
    Coagulation
  pro pro point-of-care
  Canine
    Heartworm Rapid Test
  Dirofilaria immitis
  Orbos
    Process
  ®
 6




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##### Table of Contents



Future
    Products
      ®
  CUSTOMERS
    AND DISTRIBUTION
    Customers
  point-of-care
  Medical
    Market
    Veterinary
    Market
   7




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##### Table of Contents



Distribution
    Within North America
  Medical
    Market
        Veterinary
    Market
       8




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##### Table of Contents



Distribution
    Outside of North America
          MANUFACTURING
  pro
    
    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. 9




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##### Table of Contents




    Point-of-Care
    Blood Chemistry Analyzer:  The analyzer used in
    the Piccolo and VetScan systems employs a variety of components
    designed or specified by us, including a variable speed motor,
    microprocessors, a liquid crystal display, a printer, a
    spectrophotometer and other electronic components. These
    components are manufactured by several third-party vendors that
    have been qualified and approved by us and then assembled by our
    contract manufacturers. The components are assembled at our
    facility in Union City into the finished product and completely
    tested to ensure that the finished product meets product
    specifications. The analyzer uses technologically-advanced
    components, many of which are available only from single source
    vendors. Currently, we purchase technologically advanced
    components from a limited number of vendors, including
    components from Hamamatsu Corporation and PerkinElmer, Inc. and
    components from a single-source supplier, UDT Sensors (a
    division of OSI Optoelectronics). We do not have supply
    agreements with any of these companies and they are not
    contractually obligated to continue supplying us with components
    in the quantities or at the prices that such companies have done
    historically.
    Reagent Discs:  The molded plastic discs used
    in the manufacture of the reagent disc are manufactured to our
    specifications by established injection-molding manufacturers.
    To achieve the precision required for accurate test results, the
    discs must be molded to very strict tolerances. To date, we have
    only qualified two manufacturers, C. Brewer & Co. and
    Nypro, Inc. to mold the discs. We do not have supply agreements
    with either of these companies and they are under no contractual
    obligation to continue supplying us with discs either in the
    quantities or at the prices that such companies have done
    historically. We are also working with our suppliers to improve
    yields and increase capacity on the existing production molds.
    While we have increased the number of disc molding tools to
    strengthen and better protect our line of supply, an inability
    by our injection-molding manufacturers to supply sufficient
    discs would have a material adverse impact on our results of
    operations. We assemble the reagent discs by using the molded
    plastic discs, loading the disc with reagents and then
    ultrasonically welding together the top and bottom pieces.
    Reagent Beads:  The reagent discs contain
    diluent and all the dry reagent chemistry beads necessary to
    perform blood analyses. We purchase chemicals from third-party
    suppliers and formulate the raw materials, using proprietary
    processes, into beads at the proper concentration and
    consistency to facilitate placement in the reagent disc and
    provide homogeneous dissolution and mixing when contacted by the
    diluted plasma. We are dependent on the following companies who
    are our single source providers of one or more chemicals that we
    use in the reagent production process: 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.). We do not have
    supply agreements with any of these companies and they are under
    no contractual obligation to continue supplying us in the
    quantities or at the price such companies have done
    historically. Although we believe all of the chemicals provided
    by these companies would be readily available elsewhere and we
    continue to evaluate vendor sources to protect and improve our
    lines of supply, the loss of any of these companies as a
    supplier could materially adversely affect our manufacturing
    activities and results of operations.    MATERIAL
    RELATIONSHIPS WITH SUPPLIERS AND OTHER THIRD PARTIES
  Diatron Messtechnik GmbH.
 10




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##### Table of Contents



Scandinavian Micro Biodevices APS.
  Inverness Medical Switzerland GmbH.
    DVM Resources.
  COMPETITION
  on-site.
     11




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##### Table of Contents



GOVERNMENT
    REGULATION
  U.S.
    Food and Drug Administration Clearance
      Clinical
    Laboratory Improvements Act Regulations
    point-of-care
  Other
    Regulations
   12




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##### Table of Contents




    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.    RESEARCH
    AND DEVELOPMENT
    PATENTS
    AND PROPRIETARY TECHNOLOGIES
    EMPLOYEES
    INFORMATION
    AVAILABLE TO INVESTORS
  Form 10-K, Form 10-Q, Form 8-K http://www.sec.gov. 1-800-SEC-0330,
 13




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##### Table of Contents



Item 1A.
    Risk
    Factors  RISK
    FACTORS THAT MAY AFFECT OUR PERFORMANCE
  Form 10-K.
  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.
          
    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.
  point-of-care point-of-care
 14




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##### Table of Contents



point-of-care
    We
    rely on patents and other proprietary information, the loss of
    which would negatively affect our business.
      We
    must increase sales of our Piccolo and VetScan products or we
    may not be able to increase profitability.
    
    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. 15




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##### Table of Contents



We
    must continue to develop our sales, marketing and distribution
    experience in the human diagnostic market or our business will
    not grow.
    
    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.    We
    could fail to achieve anticipated revenue if we experience
    problems related to the manufacture of our blood chemistry
    analyzers.
    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.
     16




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##### Table of Contents



We
    must effectively train and integrate the members of our sales
    team in order to achieve our anticipated revenue or expand our
    business.
    We
    need to successfully manufacture and market additional reagent
    discs for the human diagnostic market if we are to compete in
    that market.
    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.
         17




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##### Table of Contents



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.
    
    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 components from Hamamatsu Corporation and
    PerkinElmer, Inc. and 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. 18




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##### Table of Contents




    Coagulation Analyzers and Reagents:  Our
    coagulation analyzers and reagents are manufactured by
    Scandinavian MicroBiodevices APS in Denmark and are purchased by
    us as completed products.      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.
    
    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).    
    range of tests offered;
    immediacy of results;
    cost effectiveness;
    ease of use; and
    reliability of results.     19




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##### Table of Contents



Changes
    in third-party payor reimbursement regulations can negatively
    affect our business.
  pay-per-service
  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
      Need to
    Comply with Manufacturing Regulations
    
    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. 20




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##### Table of Contents




    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.    Effects
    of the Clinical Laboratory Improvement Amendments on Our
    Products
    
    waived;
    moderately complex; and
    highly complex.    point-of-care
  Need to
    Comply with Various Federal, State, Local and International
    Regulations
    
    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. 21




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##### Table of Contents




    In November 2006, we received our recertification to the ISO
    13485:2003 Quality System Standard for medical devices.      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.
    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
    subject to increasingly complex requirements from recent
    legislation requiring companies to evaluate internal control
    over financial reporting.
     22




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We may
    need additional funding in the future and these funds may not be
    available to us.
  Form 10-K.
    
    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.  and/or
  We
    must comply with strict and potentially costly environmental
    regulations or we could pay significant fines.
  and/or
 23




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##### Table of Contents



Our
    facilities and manufacturing operations are vulnerable to
    natural disasters and other unexpected losses; system failures
    or delays may harm our business.
      Fluctuations
    in foreign exchange rates and the possible lack of financial
    stability in foreign countries could prevent overseas sales
    growth.
    Our
    operating results could be materially affected by unanticipated
    changes in our tax provisions or exposure to additional income
    tax liabilities.
    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.
    
    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; 24




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##### Table of Contents




    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.    Our
    shareholders rights plan and our ability to issue preferred
    stock may delay or prevent a change of control of
    Abaxis.
      Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties    Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   25




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information for Common Stock
  intra-day
  PricesFiscal 2009


Fiscal 2008High


Low


High


LowQuarter ended June 30

$
30.62


$
22.74


$
27.00


$
20.50Quarter ended September 30


24.80



17.81



22.89



17.54Quarter ended December 31


20.43



10.17



40.00



22.07Quarter ended March 31


19.49



13.24



38.09



20.83       Dividends
   26




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##### Table of Contents



Stock
    Performance
    Graph1
      COMPARISON
    OF 5 YEAR CUMULATIVE TOTAL RETURN
 Among Abaxis, Inc., the Russell 2000 Index
    and the NASDAQ Medical Equipment Securities Index
  
  3/31/2004


3/31/2005


3/31/2006


3/31/2007


3/31/2008


3/31/2009Abaxis, Inc.


$
100.00



$
43.55



$
111.61



$
119.93



$
114.03



$
84.84Russell 2000


$
100.00



$
105.41



$
132.66



$
140.50



$
122.23



$
70.13NASDAQ Medical Equipment Securities


$
100.00



$
103.84



$
135.67



$
138.07



$
139.82



$
79.71     1
 27




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##### Table of Contents



Item 6.
    Selected
    Financial Data  Form 10-K.
  Year Ended March 31,2009(1)


2008(1)


2007(1)


2006


2005(In thousands, except per share data)Consolidated Statements of Operations Data:Revenues

$
105,562


$
100,551


$
86,221


$
68,928


$
52,758Cost of revenues


46,937



45,507



39,362



30,075



24,811Gross profit


58,625



55,044



46,859



38,853



27,947Operating expenses:Research and development


8,361



6,966



6,180



6,127



5,150Sales and marketing


24,712



23,689



20,569



16,219



10,820General and administrative


7,757



6,681



5,735



5,775



4,881Total operating expenses


40,830



37,336



32,484



28,121



20,851Income from operations


17,795



17,708



14,375



10,732



7,096Interest and other income (expense), net


1,271



2,096



1,774



787



269Income before income tax provision


19,066



19,804



16,149



11,519



7,365Income tax provision


7,053



7,301



6,076



4,044



2,514Net income

$
12,013


$
12,503


$
10,073


$
7,475


$
4,851Net income per share:Basic net income per share

$
0.55


$
0.58


$
0.49


$
0.37


$
0.25Diluted net income per share

$
0.54


$
0.56


$
0.46


$
0.35


$
0.22Shares used in the calculation of net income per share:Weighted average common shares outstanding  basic


21,826



21,499



20,643



19,985



19,696Weighted average common shares outstanding  diluted


22,324



22,261



21,846



21,492



21,662     (1)
    
    On April 1, 2006, we adopted Statement of Financial Accounting
    Standards No. 123 (revised 2004), Share-Based
    Payment and included share-based compensation for employee
    share-based awards in our consolidated statements of operations.  As of March 31,2009


2008


2007


2006


2005(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents

$
49,237


$
17,219


$
10,183


$
10,164


$
5,776Short-term investments


20,776



6,991



35,028



20,372



16,858Working capital


101,815



52,500



74,517



49,949



38,744Long-term investments


4,886



35,463











Total assets


140,711



120,903



102,715



83,078



71,009Long-term liabilities


2,270



2,161



2,167



1,679



1,629Total shareholders equity


126,892



104,649



87,812



71,038



61,667  28




---



##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-K. Form 10-K.
  BUSINESS
    OVERVIEW
    
    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.      pro pro point-of-care
  Dirofilaria immitis
 29




---



##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES, ESTIMATES AND JUDGMENTS
    Form 10-K.
  Revenue Recognition and Deferred Revenue.
      Distributor and Customer Rebates.
 30




---



##### Table of Contents



Balance atBeginning








Balance atof Year


Provisions


Payments


End of YearYear Ended March 31, 2009:Distributor rebates

$
140


$
264


$
(330
)

$
74Customer rebates






30



(8
)


22Total distributor and customer rebates

$
140


$
294


$
(338
)

$
96Year Ended March 31, 2008:Distributor rebates

$
229


$
498


$
(587
)

$
140Customer rebates


168







(168
)


Total distributor and customer rebates

$
397


$
498


$
(755
)

$
140Year Ended March 31, 2007:Distributor rebates

$
90


$
781


$
(642
)

$
229Customer rebates


36



328



(196
)


168Total distributor and customer rebates

$
126


$
1,109


$
(838
)

$
397   Sales and Other Allowances.
 31




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##### Table of Contents



Allowance for Doubtful Accounts.
  Fair Value Measurements.
  Level 1:
  Level 2:
  Level 3:
    Warranty Reserves.
     32




---



##### Table of Contents



Inventories. first-in,
  Valuation of Long-Lived Assets.
  Income Taxes.
    Share-Based Compensation Expense.
    
    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. 33




---



##### Table of Contents



Form 10-K.
  RESULTS
    OF OPERATIONS
  patient-care
  Total
    Revenues
  Revenues by Geographic Region and by Product
    Category.
  Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


PercentRevenues by Geographic Region

2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeNorth America

$
87,801


$
83,830


$
72,015


$
3,971



5
%

$
11,815



16
%Percentage of total revenues


83
%


84
%


84
%Europe


14,045



13,472



10,370



573



4
%


3,102



30
%Percentage of total revenues


13
%


13
%


12
%Asia Pacific and rest of the world


3,716



3,249



3,836



467



14
%


(587
)


(15
)%Percentage of total revenues


4
%


3
%


4
%Total revenues

$
105,562


$
100,551


$
86,221


$
5,011



5
%

$
14,330



17
%   34




---



##### Table of Contents



Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


PercentRevenues by Product Category

2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeInstruments

$
28,194


$
30,011


$
28,899


$
(1,817
)


(6
)%

$
1,112



4
%Percentage of total revenues


27
%


30
%


34
%Consumables


69,072



61,928



50,741



7,144



12
%


11,187



22
%Percentage of total revenues


65
%


62
%


59
%Other products


5,170



6,583



4,775



(1,413
)


(21
)%


1,808



38
%Percentage of total revenues


5
%


6
%


5
%Product sales, net


102,436



98,522



84,415



3,914



4
%


14,107



17
%Percentage of total revenues


97
%


98
%


98
%Development and licensing revenue


3,126



2,029



1,806



1,097



54
%


223



12
%Percentage of total revenues


3
%


2
%


2
%Total revenues

$
105,562


$
100,551


$
86,221


$
5,011



5
%

$
14,330



17
%   Fiscal
    2009 Compared to Fiscal 2008
  North America
  Instruments.
        pro
  Consumables.
     35




---



##### Table of Contents



Other products.
  Development and licensing.
  Significant concentration.
  Europe
  Instruments.
        Consumables.
        Other products.
 36




---



##### Table of Contents



Asia Pacific and rest of the
    world
  Instruments.
        Consumables.
        Other products.
  Fiscal
    2008 Compared to Fiscal 2007
  North America
  Instruments.
       37




---



##### Table of Contents



Consumables.
        Other products.
  Development and licensing.
  Significant concentration.
  Europe
  Instruments.
        Consumables.
        Other products.
 38




---



##### Table of Contents



Asia Pacific and rest of the
    world
  Instruments.
        Consumables.
        Other products.
 39




---



##### Table of Contents



Segment
    Results
  Fiscal
    2009 Compared to Fiscal 2008
    Year Ended March 31,


ChangePercent of





Percent of


Increase/


Percent2009


Revenues(1)


2008


Revenues(1)


(Decrease)


ChangeRevenues:Medical Market

$
24,796



100
%

$
22,764



100
%

$
2,032



9
%Percentage of total revenues


23
%






23
%Veterinary Market


74,046



100
%


71,091



100
%


2,955



4
%Percentage of total revenues


70
%






71
%Other(2)


6,720







6,696







24



<1
%Percentage of total revenues


7
%






6
%Total revenues


105,562







100,551







5,011



5
%Cost of revenues:Medical Market


12,407



50
%


11,340



50
%


1,067



9
%Veterinary Market


31,052



42
%


31,812



45
%


(760
)


(2
)%Other(2)


3,478







2,355







1,123



48
%Total cost of revenues


46,937







45,507







1,430



3
%Gross profit:Medical Market


12,389



50
%


11,424



50
%


965



8
%Veterinary Market


42,994



58
%


39,279



55
%


3,715



9
%Other(2)


3,242







4,341







(1,099
)


(25
)%Gross profit

$
58,625






$
55,044






$
3,581



7
%     (1)
    
    The percentage reported is based on revenues by operating
    segment.(2)
    
    Represents unallocated items, not specifically identified to any
    particular business segment.  Medical
    Market
  Revenues
    for Medical Market Segment
    Instruments.
 40




---



##### Table of Contents



Consumables.
  Gross
    Profit for Medical Market Segment
    Veterinary
    Market
  Revenues
    for Veterinary Market Segment
    Instruments.
      pro
  Consumables.
   41




---



##### Table of Contents



Gross
    Profit for Veterinary Market Segment
    Fiscal
    2008 Compared to Fiscal 2007
    Year Ended March 31,


ChangePercent of





Percent of


Increase/


Percent2008


Revenues(1)


2007


Revenues(1)


(Decrease)


ChangeRevenues:Medical Market

$
22,764



100
%

$
17,455



100
%

$
5,309



30
%Percentage of total revenues


23
%






20
%Veterinary Market


71,091



100
%


63,851



100
%


7,240



11
%Percentage of total revenues


71
%






74
%Other(2)


6,696







4,915







1,781



36
%Percentage of total revenues


6
%






6
%Total revenues


100,551







86,221







14,330



17
%Cost of revenues:Medical Market


11,340



50
%


8,549



49
%


2,791



33
%Veterinary Market


31,812



45
%


29,021



45
%


2,791



10
%Other(2)


2,355







1,792







563



31
%Total cost of revenues


45,507







39,362







6,145



16
%Gross profit:Medical Market


11,424



50
%


8,906



51
%


2,518



28
%Veterinary Market


39,279



55
%


34,830



55
%


4,449



13
%Other(2)


4,341







3,123







1,218



39
%Gross profit

$
55,044






$
46,859






$
8,185



17
%     (1)
    
    The percentage reported is based on revenues by operating
    segment.(2)
    
    Represents unallocated items, not specifically identified to any
    particular business segment. 42




---



##### Table of Contents



Medical
    Market
  Revenues
    for Medical Market Segment
    Instruments.
  Consumables.
  Gross
    Profit for Medical Market Segment
    Veterinary
    Market
  Revenues
    for Veterinary Market Segment
    Instruments.
     43




---



##### Table of Contents



Consumables.
      Gross
    Profit for Veterinary Market Segment
    Cost
    of Revenues
    Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


Percent2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeCost of revenues

$
46,937


$
45,507


$
39,362


$
1,430



3
%

$
6,145



16
%Percentage of total revenues


44
%


45
%


46
%     Fiscal
    2009 Compared to Fiscal 2008
    Fiscal
    2008 Compared to Fiscal 2007
   44




---



##### Table of Contents



Gross
    Profit
    Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


Percent2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeTotal gross profit

$
58,625


$
55,044


$
46,859


$
3,581



7
%

$
8,185



17
%Total gross margin


56
%


55
%


54
%   Fiscal
    2009 Compared to Fiscal 2008
    Fiscal
    2008 Compared to Fiscal 2007
    Operating
    Expenses
  Research
    and Development
    Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


Percent2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeResearch and development

$
8,361


$
6,966


$
6,180


$
1,395



20
%

$
786



13
%Percentage of total revenues


8
%


7
%


7
%     Fiscal
    2009 Compared to Fiscal 2008
   45




---



##### Table of Contents



Fiscal
    2008 Compared to Fiscal 2007
    Sales
    and Marketing
    Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


Percent2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeSales and marketing expenses

$
24,712


$
23,689


$
20,569


$
1,023



4
%

$
3,120



15
%Percentage of total revenues


23
%


24
%


24
%     Fiscal
    2009 Compared to Fiscal 2008
    Fiscal
    2008 Compared to Fiscal 2007
    General
    and Administrative
    Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


Percent2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeGeneral and administrative expenses

$
7,757


$
6,681


$
5,735


$
1,076



16
%

$
946



16
%Percentage of total revenues


7
%


7
%


7
%  46




---



##### Table of Contents



Fiscal
    2009 Compared to Fiscal 2008
    Fiscal
    2008 Compared to Fiscal 2007
    Interest
    and Other Income (Expense), Net
    Year Ended March 31,


Change 2008 to 2009


Change 2007 to 2008Increase/


Percent


Increase/


Percent2009


2008


2007


(Decrease)


Change


(Decrease)


ChangeInterest and other income (expense), net

$
1,271


$
2,096


$
1,774


$
(825
)


(39
)%

$
322



18
%     Fiscal
    2009 Compared to Fiscal 2008
    Fiscal
    2008 Compared to Fiscal 2007
    Income
    Tax Provision
    Year Ended March 31,2009


2008


2007Income tax provision

$
7,053


$
7,301


$
6,076Effective tax rate


37
%


37
%


38
%   Fiscal
    2009 Compared to Fiscal 2008
   47




---



##### Table of Contents



Fiscal
    2008 Compared to Fiscal 2007
    LIQUIDITY
    AND CAPITAL RESOURCES
    March 31,2009


2008


2007Cash and cash equivalents

$
49,237


$
17,219


$
10,183Short-term investments


20,776



6,991



35,028Long-term investments


4,886



35,463



Total cash, cash equivalents and investments

$
74,899


$
59,673


$
45,211Percentage of total assets


53
%


49
%


44
%   Cash
    Flow Changes
    Year Ended March 31,2009


2008


2007Net cash provided by operating activities

$
14,331


$
14,966


$
11,822Net cash provided by (used in) investing activities


10,673



(12,557
)


(17,701
)Net cash provided by financing activities


7,066



4,627



5,898Effect of exchange rate changes on cash and cash equivalents


(52
)






Net increase in cash and cash equivalents

$
32,018


$
7,036


$
19   Form 10-K.
   48




---



##### Table of Contents



Operating
    Activities
                         49




---



##### Table of Contents



Investing
    Activities
    Investments.
  Property and Equipment.
  Intangible Assets.
  Financing
    Activities
    Contractual
    Obligations
    Payments Due by PeriodDue in FiscalTotal


2010


2011


2012


2013


2014


ThereafterOperating leases

$
2,672


$
1,363


$
1,112


$
166


$
31


$



$
   Operating Leases.
  Purchase Commitments.
    Patent Licensing Agreement.
 50




---



##### Table of Contents



Line of Credit. Form 10-K.
  Contingencies
    Off-Balance
    Sheet Arrangements
    Financial
    Condition
    RECENT
    ACCOUNTING PRONOUNCEMENTS
  (FSP) FAS No. 157-3, No. 157-3). FSP FAS No. 157-3 FSP FAS No. 157-3 FAS No. 157-3
  FAS No. 142-3, FAS No. 142-3). FAS No. 142-3 FAS No. 142-3
 51




---



##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Interest
    Rate Risk
           52




---



##### Table of Contents



Foreign
    Currency Rate Fluctuations
       53




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  ABAXIS,
    INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 Description

PageReport of Independent Registered Public
    Accounting Firm


55Consolidated Balance Sheets at March 31,
    2009 and 2008


56Consolidated Statements of Operations for the
    Years Ended March 31, 2009, 2008 and 2007


57Consolidated Statements of Shareholders
    Equity and Comprehensive Income for the Years Ended
    March 31, 2009, 2008 and 2007


58Consolidated Statements of Cash Flows for the
    Years Ended March 31, 2009, 2008 and 2007


59Notes to Consolidated Financial Statements


60   54




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     Form 10-K
      Internal Control  Integrated
    Framework
  
    55




---



##### Table of Contents



ABAXIS,
    INC.
  CONSOLIDATED
    BALANCE SHEETS
  March 31,2009


2008(In thousands, except share data)ASSETSCurrent assets:Cash and cash equivalents

$
49,237


$
17,219Short-term investments


20,776



6,991Trade receivables (net of allowances of $388 and $272 in 2009
    and 2008, respectively)


21,983



20,873Inventories


15,735



18,657Prepaid expenses


957



427Net deferred tax asset, current


4,676



2,426Total current assets


113,364



66,593Long-term investments


4,886



35,463Property and equipment, net


14,798



14,599Intangible assets, net


5,175



375Other assets


24



5Net deferred tax asset, non-current


2,464



3,868Total assets

$
140,711


$
120,903LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
3,963


$
6,421Accrued payroll and related expenses


3,698



4,277Other accrued liabilities


1,150



1,369Deferred revenue


1,024



807Warranty reserve


1,714



1,219Total current liabilities


11,549



14,093Non-current liabilities:Deferred rent


137



286Deferred revenue


1,550



1,146Warranty reserve


583



729Total non-current liabilities


2,270



2,161Commitments and contingencies (Note 9)Shareholders equity:Preferred stock, no par value: 5,000,000 shares authorized;
    no shares issued and outstanding in 2009 and 2008






Common stock, no par value: 35,000,000 shares authorized;
    21,933,000 and 21,706,000 shares issued and outstanding in
    2009 and 2008, respectively


117,846



109,031Retained earnings (accumulated deficit)


9,046



(2,967
)Accumulated other comprehensive loss






(1,415
)Total shareholders equity


126,892



104,649Total liabilities and shareholders equity

$
140,711


$
120,903    56




---



##### Table of Contents



ABAXIS,
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended March 31,2009


2008


2007(In thousands, except per share data)Revenues

$
105,562


$
100,551


$
86,221Cost of revenues


46,937



45,507



39,362Gross profit


58,625



55,044



46,859Operating expenses:Research and development


8,361



6,966



6,180Sales and marketing


24,712



23,689



20,569General and administrative


7,757



6,681



5,735Total operating expenses


40,830



37,336



32,484Income from operations


17,795



17,708



14,375Interest and other income (expense), net


1,271



2,096



1,774Income before income tax provision


19,066



19,804



16,149Income tax provision


7,053



7,301



6,076Net income

$
12,013


$
12,503


$
10,073Net income per share:Basic net income per share

$
0.55


$
0.58


$
0.49Diluted net income per share

$
0.54


$
0.56


$
0.46Shares used in the calculation of net income per share:Weighted average common shares outstanding  basic


21,826



21,499



20,643Weighted average common shares outstanding  diluted


22,324



22,261



21,846    57




---



##### Table of Contents



ABAXIS,
    INC.
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY AND COMPREHENSIVE
    INCOME
  Retained


AccumulatedEarnings


Other


TotalCommon Stock


(Accumulated


Comprehensive


Shareholders


ComprehensiveShares


Amount


Deficit)


Income (Loss)


Equity


Income(In thousands, except share data)Balances at March 31, 2006


20,135,000


$
96,506


$
(25,543
)

$
75


$
71,038Common stock issued for employee benefit plans


3,000



66











66Common stock issued under stock option exercises


931,000



4,506











4,506Issuance of common stock upon exercise of warrants


138,000



823











823Share-based compensation






812











812Excess tax benefits from share-based awards






569











569Components of comprehensive income:Net income










10,073







10,073


$
10,073Change in unrealized gain (loss) on investments, net of tax














(75
)


(75
)


(75
)Comprehensive income





















$
9,998Balances at March 31, 2007


21,207,000



103,282



(15,470
)






87,812Common stock issued under stock option exercises


483,000



3,128











3,128Common stock issued in settlement of restricted stock units, net
    of shares withheld for employee taxes


16,000



(110
)










(110
)Share-based compensation






1,122











1,122Excess tax benefits from share-based awards






1,609











1,609Components of comprehensive income:Net income










12,503







12,503


$
12,503Change in unrealized gain (loss) on investments, net of tax














(1,415
)


(1,415
)


(1,415
)Comprehensive income





















$
11,088Balances at March 31, 2008


21,706,000



109,031



(2,967
)


(1,415
)


104,649Common stock issued under stock option exercises


194,000



636











636Common stock issued in settlement of restricted stock units, net
    of shares withheld for employee taxes


33,000



(281
)










(281
)Share-based compensation






1,749











1,749Excess tax benefits from share-based awards






6,711











6,711Components of comprehensive income:Net income










12,013







12,013


$
12,013Change in unrealized gain (loss) on investments, net of tax














1,415



1,415



1,415Comprehensive income





















$
13,428Balances at March 31, 2009


21,933,000


$
117,846


$
9,046


$



$
126,892    58




---



##### Table of Contents



ABAXIS,
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended March 31,2009


2008


2007(In thousands)Cash flows from operating activities:Net income

$
12,013


$
12,503


$
10,073Adjustments to reconcile net income to net cash provided by
    operating activities:Depreciation and amortization


4,492



3,497



2,685Loss on disposal of property and equipment


16



2



37Loss on foreign exchange translation


137







Share-based compensation expense


1,743



1,108



799Excess tax benefits from share-based awards


(6,711
)


(1,609
)


(569
)Provision for deferred income taxes


4,813



6,400



5,178Common stock issued for employee benefit plans










66Changes in assets and liabilities:Trade receivables, net


(1,221
)


(3,944
)


(2,291
)Inventories


1,051



(5,572
)


(6,755
)Prepaid expenses


(295
)


894



(306
)Other assets


(21
)


33



42Accounts payable


(2,440
)


(84
)


1,891Accrued payroll and related expenses


(576
)


447



(60
)Other accrued liabilities


509



503



464Deferred rent


(149
)


(105
)


(87
)Deferred revenue


621



(208
)


284Warranty reserve


349



1,101



375Other long-term liabilities










(4
)Net cash provided by operating activities


14,331



14,966



11,822Cash flows from investing activities:Purchases of
    available-for-sale
    investments






(20,575
)


(67,483
)Purchases of
    held-to-maturity
    investments


(32,950
)


(21,167
)


(25,868
)Proceeds from maturities of
    available-for-sale
    investments


36,975







71,330Proceeds from maturities of
    held-to-maturity
    investments


14,279



32,804



7,240Purchases of property and equipment


(2,651
)


(3,619
)


(2,920
)Proceeds from disposal of property and equipment


20







Purchase of intangible assets


(5,000
)






Net cash provided by (used in) investing activities


10,673



(12,557
)


(17,701
)Cash flows from financing activities:Proceeds from issuance of common stock under stock plans, net


355



3,018



4,506Proceeds from exercise of warrants










823Excess tax benefits from share-based awards


6,711



1,609



569Net cash provided by financing activities


7,066



4,627



5,898Effect of exchange rate changes on cash and cash equivalents


(52
)






Net increase in cash and cash equivalents


32,018



7,036



19Cash and cash equivalents at beginning of year


17,219



10,183



10,164Cash and cash equivalents at end of year

$
49,237


$
17,219


$
10,183Supplemental disclosure of cash flow information:Cash paid for interest

$
7


$
4


$
15Cash paid for income taxes, net of refunds

$
1,491


$
319


$
503Supplemental disclosure of non-cash flow information:Change in unrealized gain (loss) on investments, net of tax

$
1,415


$
(1,415
)

$
(75
)Transfers of equipment between inventory and property and
    equipment

$
1,877


$
1,742


$
2,351Change in capitalized share-based compensation

$
6


$
14


$
13Common stock withheld for employee taxes in connection with
    share-based compensation

$
281


$
110


$
    59




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 YEARS ENDED MARCH 31, 2009, 2008 AND 2007
  NOTE 1.
    DESCRIPTION
    OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES  Description of Business.
    Principles of Consolidation.
  Use of Estimates in Preparation of Financial
    Statements.
  Certain Significant Risks and
    Uncertainties.
  Reclassification.
  Cash and Cash Equivalents.
  Investments. available-for-sale held-to-maturity. available-for-sale
   60




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      other-than-temporary other-than-temporary,
  Concentration of Credit Risk.
    Allowance for Doubtful Accounts.
  Fair Value of Financial Instruments.
   61




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Level 1:
  Level 2:
  Level 3:
  Inventories. first-in,
  Property and Equipment.
  Asset Classification

Estimated Useful LifeMachinery and equipment

2-10 yearsFurniture and fixtures

3-8 yearsComputer equipment

2-7 yearsLeasehold improvements

Shorter of estimated useful life or lease term, including any
    lease term extensions that the Company has the right and
    intention to execute     Valuation of Long-Lived Assets.
  Intangible Assets.
  Revenue Recognition and Deferred
    Revenue.
  
    Evidence of an arrangement exists:  Persuasive
    evidence of an arrangement with a customer that reflects the
    terms and conditions to deliver products must exist in order to
    recognize revenue.
    Upon shipment of the products to the
    customer:  Delivery is considered to occur at the
    time of shipment of products to a distributor or direct
    customer, as title and risk of loss have been transferred to the
    distributor or direct customer on delivery to the common
    carrier. Rights of return are not provided. 62




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    Fixed or determinable sales price:  When the
    sales price is fixed or determinable that amount is recognized
    as revenue.
    Collection is reasonably assured:  Collection
    is deemed probable if a customer is expected to be able to pay
    amounts under the arrangement as those amounts become due.
    Revenue is recognized when the resulting receivable is
    reasonably assured.        Distributor and Customer Rebates.
  Shipping and Handling. No. 00-10,
  Research and Development Costs.
  Advertising Expenses.
  Income Taxes.
   63




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Share-Based Compensation Expense.
    
    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:  The Company
    estimates the volatility of its common stock at the date of
    grant based on the historical volatility of its common stock.
    Expected term:  The Company estimates the
    expected term of stock options granted based on historical
    exercise and post-vesting termination patterns, which it
    believes are representative of future behavior.
    Expected dividends:  The Company has not paid
    cash dividends on its common stock and does not anticipate
    paying cash dividends in the foreseeable future; consequently,
    the Company uses an expected dividend yield of zero.      Net Income Per Share.
  Comprehensive Income. net-of-tax available-for-sale
  Foreign Currency Translations. end-of-period
 64




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Recent
    Accounting Pronouncements
  No. 157-3, No. 157-3). No. 157-3 No. 157-3 No. 157-3
  FAS No. 142-3, FAS No. 142-3). FAS No. 142-3 FAS No. 142-3
         65




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NOTE 2.
    INVESTMENTS    March 31, 2009Cost orAmortized


Gross Unrealized


FairCost


Gain (Loss)


ValueShort-term investmentsHeld-to-maturity:Certificates of deposits

$
20,776


$



$
20,776Total short-term investments in
    held-to-maturity

$
20,776


$



$
20,776Long-term investmentsHeld-to-maturity:Certificates of deposits

$
2,376


$



$
2,376Corporate bonds


2,510







2,510Total long-term investments in
    held-to-maturity

$
4,886


$



$
4,886   March 31, 2008Cost orAmortized


Gross Unrealized


FairCost


Gain (Loss)


ValueShort-term investmentsHeld-to-maturity:Certificates of deposits

$
2,974


$



$
2,974Municipal bonds


4,017







4,017Total short-term investments in
    held-to-maturity

$
6,991


$



$
6,991Long-term investmentsAvailable-for-sale:Auction rate securities

$
36,975


$
(1,512
)

$
35,463Total long-term investments in
    available-for-sale

$
36,975


$
(1,512
)

$
35,463       March 31, 2009

Fair ValueDue in less than one year (fiscal year 2010)

$
20,776Due in 1 to 2 years (fiscal year 2011)


4,886$
25,662    66




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 3.
    FAIR
    VALUE MEASUREMENTS  FAS No. 157-2
    Level 1:
  Level 2:
  Level 3:
    As of March 31, 2009Quoted Prices in





SignificantActive Markets for


Significant Other


UnobservableIdentical Assets


Observable Inputs


InputsAssets

Level 1


Level 2


Level 3


TotalCash and cash equivalents(1)

$
49,237


$



$



$
49,237Short-term investments:Certificates of deposits


20,776











20,776Long-term investments:Certificates of deposits


2,376











2,376Corporate bonds


2,510











2,510Total assets at fair value

$
74,899


$



$



$
74,899     (1)
    
    Cash and cash equivalents as of March 31, 2009 consisted of
    $18.8 million in cash and $30.4 million in cash
    equivalents, consisting of money market mutual funds.   67




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Auction RateSecuritiesBalance at April 1, 2008

$
35,463Redemptions during the period


(36,975
)Transfers


Total gain or loss (realized or unrealized):Included in earnings (loss)


Included in other comprehensive income (loss)


1,512Balance at March 31, 2009

$
   NOTE 4.
    INVENTORIES    March 31,2009


2008Raw materials

$
8,539


$
9,067Work-in-process


2,592



4,315Finished goods


4,604



5,275Inventories

$
15,735


$
18,657   NOTE 5.
    PROPERTY
    AND EQUIPMENT, NET    March 31,2009


2008Machinery and equipment

$
22,223


$
19,197Furniture and fixtures


1,621



1,446Computer equipment


2,353



1,937Leasehold improvements


6,195



6,179Construction in progress


3,376



3,00135,768



31,760Accumulated depreciation and amortization


(20,970
)


(17,161
)Property and equipment, net

$
14,798


$
14,599  68




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    NOTE 6.
    INTANGIBLE
    ASSETS, NET    Accumulated


Net BookCost


Amortization


ValueBalance, March 31, 2009Licenses

$
5,000


$
125


$
4,875Patents


750



450



300Total purchased intangible assets

$
5,750


$
575


$
5,175Balance, March 31, 2008Patents

$
750


$
375


$
375Total purchased intangible assets

$
750


$
375


$
375       Estimated Future Annual Amortization ExpenseFiscal Year Ending March 31,Total


2010


2011


2012


2013


2014


ThereafterAmortization expense

$
5,175


$
575


$
575


$
575


$
575


$
500


$
2,375   NOTE 7.
    WARRANTY
    RESERVES    Instruments.
  Reagent Discs.
 69




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Year Ended March 31,2009


2008


2007Balance at beginning of period

$
1,948


$
847


$
472Provision for warranty expense(1)


1,558



2,036



611Warranty costs incurred(1)


(1,209
)


(935
)


(236
)Balance at end of period


2,297



1,948



847Non-current portion of warranty reserve


583



729



532Current portion of warranty reserve

$
1,714


$
1,219


$
315     (1)
    
    The change in the Companys accrued warranty reserve during
    fiscal 2009 and 2008 includes a provision for warranty expense
    and warranty costs incurred for replacement costs of reagent
    discs.  NOTE 8.
    LINE OF
    CREDIT      
    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 ended September 30,
    2008 and to have net income before preferred stock dividends and
    accretion on preferred stock of at least $1.2 million for
    the fiscal year ended March 31, 2009. 70




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   
    The Company is required to comply with certain financial
    covenants as follows:  Financial Covenants

RequirementsQuick ratio, as defined

Not less than 2.00 to 1.00Cash flow coverage, as defined

Not less than 1.25 to 1.00Debt to net worth ratio, as defined

Not greater than 1.00 to 1.00Tangible effective net worth, as defined

Not less than $25.7 million     NOTE 9.
    COMMITMENTS
    AND CONTINGENCIES    Payments Due by PeriodDue in FiscalTotal


2010


2011


2012


2013


2014


ThereafterOperating leases

$
2,672


$
1,363


$
1,112


$
166


$
31


$



$
   Operating Leases.
    Purchase Commitments.
    Patent Licensing Agreement.
 71




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Litigation.
  NOTE 10.
    EMPLOYEE
    BENEFIT PLAN    NOTE 11.
    SHARE-BASED
    COMPENSATION    Year Ended March 31,2009


2008


2007Cost of revenues

$
152


$
127


$
72Research and development


240



153



117Sales and marketing


508



325



292General and administrative


843



503



318Share-based compensation expense before income taxes


1,743



1,108



799Income tax benefit


(704
)


(442
)


(219
)Total share-based compensation expense after income taxes

$
1,039


$
666


$
580Net impact of share-based compensation on:Basic net income per share

$
0.05


$
0.03


$
0.03Diluted net income per share

$
0.05


$
0.03


$
0.03    72




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Cash
    Flow Impact
    Equity
    Compensation Plans
    2005 Equity Incentive Plan.
      1992 Outside Directors Stock Option
    Plan.
    Stock
    Options
   73




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Valuation
    and Expense Recognition Method for Stock Options
    Stock
    Option Activity
    Weighted


WeightedAverage


Average


AggregateExercise


Remaining


IntrinsicNumber of


Price


Contractual


ValueShares


Per Share


Life (Years)


(In thousands)Outstanding at March 31, 2006(2,317,000 shares exercisable at a weighted average
    exercise price of $6.61 per share)


2,532,000


$
6.77Granted






Exercised


(931,000
)


4.84Canceled or forfeited


(24,000
)


12.93Outstanding at March 31, 2007(1,522,000 shares exercisable at a weighted average
    exercise price of $7.69 per share)


1,577,000


$
7.82Granted






Exercised


(483,000
)


6.48Canceled or forfeited


(50,000
)


20.71Outstanding at March 31, 2008(1,026,000 shares exercisable at a weighted average
    exercise price of $7.75 per share)


1,044,000


$
7.82Granted






Exercised


(194,000
)


3.27Canceled or forfeited


(2,000
)


11.85Outstanding at March 31, 2009


848,000


$
8.86



3.24


$
7,832Vested and expected to vest at March 31, 2009


848,000


$
8.86



3.24


$
7,832Exercisable at March 31, 2009


848,000


$
8.86



3.24


$
7,832    74




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Options Outstanding


Options ExercisableWeighted


Weighted





WeightedAverage


Average





AverageNumber of


Remaining


Exercise


Number of


ExerciseShares


Contractual


Price


Shares


PriceRange of Exercise Prices

Outstanding


Life (Years)


Per Share


Exercisable


Per Share$ 3.00 - $ 3.84


59,000



2.85


$
3.06



59,000


$
3.06$ 3.85 - $ 3.85


144,000



4.06



3.85



144,000



3.85$ 4.13 - $ 4.75


30,000



2.18



4.31



30,000



4.31$ 4.87 - $ 4.87


211,000



2.07



4.87



211,000



4.87$ 4.94 - $ 6.31


103,000



1.73



5.95



103,000



5.95$ 6.33 - $12.68


85,000



2.56



8.23



85,000



8.23$12.75 - $19.45


53,000



5.20



14.76



53,000



14.76$19.65 - $19.65


4,000



4.66



19.65



4,000



19.65$21.45 - $21.45


2,000



5.04



21.45



2,000



21.45$21.65 - $21.65


157,000



5.05



21.65



157,000



21.65$ 3.00 - $21.65


848,000



3.24


$
8.86



848,000


$
8.86   Restricted
    Stock Units
    
    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.  and/or
 75




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Valuation
    and Expense Recognition Method for Restricted Stock
    Unit
    Restricted
    Stock Unit Activity
    WeightedAverageNumber of


Grant DateShares


Fair Value(1)Unvested at March 31, 2006





$
Granted


305,000



24.56Vested(2)






Canceled or forfeited


(10,000
)


21.43Unvested at March 31, 2007


295,000


$
24.66Granted


267,000



21.73Vested(2)


(22,000
)


25.06Canceled or forfeited


(46,000
)


23.11Unvested at March 31, 2008


494,000


$
23.21Granted


254,000



23.68Vested(2)


(45,000
)


23.34Canceled or forfeited


(13,000
)


20.09Unvested at March 31, 2009


690,000


$
23.43     (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.    NOTE 12.
    COMMON
    STOCK  Stock Purchase Rights.
 76




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Common Stock Warrants.
  NOTE 13.
    NET
    INCOME PER SHARE    Year Ended March 31,2009


2008


2007Numerator:Net income

$
12,013


$
12,503


$
10,073Denominator:Weighted average common shares outstanding  basic


21,826,000



21,499,000



20,643,000Weighted average effect of dilutive securities:Stock options


467,000



701,000



1,082,000Restricted stock units


31,000



58,000



4,000Warrants






3,000



117,000Weighted average common shares outstanding  diluted


22,324,000



22,261,000



21,846,000Net income per share:Basic net income per share

$
0.55


$
0.58


$
0.49Diluted net income per share

$
0.54


$
0.56


$
0.46     Year Ended March 31,2009


2008


2007Weighted average number of shares underlying antidilutive stock
    options and warrants


159,000







222,000Weighted average exercise price per share underlying
    antidilutive stock options and warrants

$
21.65



N/A


$
21.65  77




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended March 31,2009


2008


2007Weighted average number of shares underlying antidilutive
    restricted stock units


195,000



9,000



199,000   NOTE 14.
    INCOME
    TAXES    Year Ended March 31,2009


2008


2007Current:Federal

$
1,000


$
368


$
405State


1,204



533



493Foreign


36







Total current income tax provision


2,240



901



898Deferred:Federal


4,794



5,838



4,930State


19



562



248Total deferred income tax provision


4,813



6,400



5,178Total income tax provision

$
7,053


$
7,301


$
6,076     Year Ended March 31,2009


2008


2007United States

$
18,941


$
19,804


$
16,149Foreign


125







Income before income tax provision

$
19,066


$
19,804


$
16,149     Year Ended March 31,2009


2008


2007Income taxes at federal income tax rate

$
6,673


$
6,931


$
5,652State income taxes, net of federal benefits


920



880



635Share-based compensation


(5
)


6



93Research and development tax credits


(62
)


(242
)


(350
)Extraterritorial income exclusion










(27
)Tax-exempt interest income


(241
)


(336
)


Qualified production activities income benefit


(51
)






Other


(181
)


62



73Provision for income taxes

$
7,053


$
7,301


$
6,076  78




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended March 31,2009


2008


2007Deferred tax assets:Net operating loss carryforwards

$



$



$
5,328Research and development tax credit carryforwards


2,417



3,007



3,713Capitalized research and development


266







86Inventory reserves


297



364



140Deferred revenue from extended maintenance agreements and
    warranty reserves


1,864



1,172



864Accrued vacation


506



424



383Share-based compensation


648



378



192Alternative minimum tax credits


710



675



485Other


583



496



725Valuation allowance for deferred tax assets










(352
)Total deferred tax assets


7,291



6,516



11,564Deferred tax liabilities:Depreciation

$
(51
)

$
(145
)

$
(189
)Other


(100
)


(77
)


(84
)Total deferred tax liabilities


(151
)


(222
)


(273
)Net deferred tax assets

$
7,140


$
6,294


$
11,291        79




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      NOTE 15.
    SEGMENT
    REPORTING INFORMATION      Medical
    Market
    Veterinary
    Market
   80




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended March 31,2009


2008


2007Revenues:Medical Market

$
24,796


$
22,764


$
17,455Veterinary Market


74,046



71,091



63,851Other(1)


6,720



6,696



4,915Total revenues


105,562



100,551



86,221Cost of revenues:Medical Market


12,407



11,340



8,549Veterinary Market


31,052



31,812



29,021Other(1)


3,478



2,355



1,792Total cost of revenues


46,937



45,507



39,362Gross profit:Medical Market


12,389



11,424



8,906Veterinary Market


42,994



39,279



34,830Other(1)


3,242



4,341



3,123Gross profit

$
58,625


$
55,044


$
46,859     (1)
    
    Represents unallocated items, not specifically identified to any
    particular business segment.  NOTE 16.
    REVENUES
    BY PRODUCT CATEGORY AND GEOGRAPHIC REGION AND SIGNIFICANT
    CONCENTRATIONS  Revenue
    Information
    Year Ended March 31,2009


2008


2007Revenues by Product CategoryInstruments(1)

$
28,194


$
30,011


$
28,899Consumables(2)


69,072



61,928



50,741Other products


5,170



6,583



4,775Product sales, net


102,436



98,522



84,415Development and licensing revenue


3,126



2,029



1,806Total revenues

$
105,562


$
100,551


$
86,221     (1)
    
    Instruments include chemistry analyzers, hematology instruments
    and coagulation analyzers.(2)
    
    Consumables include reagent discs, hematology reagent kits,
    coagulation reagents and canine heartworm rapid tests.    Year Ended March 31,2009


2008


2007Revenues by Geographic RegionNorth America

$
87,801


$
83,830


$
72,015Europe


14,045



13,472



10,370Asia Pacific and rest of the world


3,716



3,249



3,836Total revenues

$
105,562


$
100,551


$
86,221  81




---



##### Table of Contents



ABAXIS,
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Significant
    Concentrations
    Geographical


Year Ended March 31,Distributor

Location


2009


2008


2007Walco International, Inc., d/b/a DVM Resources


United States



10
%


12
%


15
%     NOTE 17.
    QUARTERLY
    RESULTS OF OPERATIONS (UNAUDITED)    Quarter EndedJune 30


September 30


December 31


March 31Fiscal Year Ended March 31, 2009:Revenues

$
24,572


$
27,688


$
26,964


$
26,338Gross profit

$
13,503


$
15,342


$
15,105


$
14,675Net income

$
2,776


$
3,297


$
3,356


$
2,584Net income per share  basic

$
0.13


$
0.15


$
0.15


$
0.12Net income per share  diluted

$
0.12


$
0.15


$
0.15


$
0.12Fiscal Year Ended March 31, 2008:Revenues

$
22,931


$
25,192


$
25,690


$
26,738Gross profit

$
13,016


$
13,857


$
13,609


$
14,562Net income

$
3,098


$
2,888


$
3,205


$
3,312Net income per share  basic

$
0.15


$
0.13


$
0.15


$
0.15Net income per share  diluted

$
0.14


$
0.13


$
0.14


$
0.15   NOTE 18.
    SUBSEQUENT
    EVENT  ®
     82




---



##### Table of Contents



Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e)
  Managements
    Report on Internal Control Over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
    Attestation
    Report of the Independent Registered Public Accounting
    Firm
    Changes
    in Internal Control over Financial Reporting
  Rule 13a-15(f) 15d-15(f)
 83




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL
    CONTROLS OVER FINANCIAL REPORTING
     Internal Control  Integrated Framework
            
    84




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III Item 10.
    Directors,
    Executive Officers and Corporate Governance    Name

Age

TitleClinton H. Severson


61


Chairman of the Board, President and Chief Executive OfficerRichard J. Bastiani, Ph.D.(1)(2)(3)


66


DirectorHenk J. Evenhuis(1)(3)


66


DirectorBrenton G. A. Hanlon(1)(2)(3)


63


DirectorPrithipal Singh, Ph.D.(1)(3)


70


DirectorErnest S. Tucker, III, M.D.(1)(3)


76


DirectorAlberto R. Santa Ines


62


Chief Financial Officer and Vice President of FinanceKenneth P. Aron, Ph.D.


56


Chief Technology OfficerDonald P. Wood


57


Chief Operations OfficerVladimir E. Ostoich, Ph.D.


63


Vice President of Government Affairs and Vice President of
    Marketing for the Pacific Rim, FounderMartin V. Mulroy


48


Vice President of Veterinary Sales and Marketing for North
    America     (1)
    
    Member of the Audit Committee(2)
    
    Member of the Compensation Committee(3)
    
    Member of the Nominating and Corporate Governance Committee  Clinton H. Severson
  Richard J. Bastiani, Ph.D.
  Henk J. Evenhuis
 85




---



##### Table of Contents



Brenton G. A. Hanlon
  Prithipal Singh, Ph.D.
  Ernest S. Tucker, III, M.D.
  Alberto R. Santa Ines
  Kenneth P. Aron, Ph.D.
  Donald P. Wood
  Vladimir E. Ostoich, Ph.D.,
  Martin V. Mulroy
 86




---



##### Table of Contents



Term and
    Number of Directors
      Identification
    of Audit Committee and Financial Expert
      Section 16(a)
    Beneficial Ownership Reporting Compliance
      Code of
    Business Conduct and Ethics
  Form 8-K
 87




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##### Table of Contents



Item 11.
    Executive
    Compensation  COMPENSATION
    DISCUSSION AND ANALYSIS
  Overview
      
    to align our executive compensation with our strategic business
    objectives;
    to align the interests of our executive officers with both
    short-term and long-term shareholder interests; and
    to place a substantial portion of our executives
    compensation at risk such that actual compensation depends on
    both overall company performance and individual performance.  Executive
    Compensation Program Objectives and Framework
      Role of
    Our Compensation Committee
  and/or
   88




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##### Table of Contents



Competitive
    Benchmarking
    Abiomed

Conceptus

Palomar Medical TechnologiesAdeza Biomedical

Cutera

SurmodicsAngiodynamics

Digene

ThoratecAspect Medical Systems

Intralase

VivusATS Medical

Kensey Nash

VNUS Medical TechnologiesBiosite

Meridian BioscienceCholestech

Orasure Technologies     
    total shareholder return;
    revenue; and
    EBITDA (earnings before income tax, depreciation and
    amortization).    Compensation
    Determinations
   89




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##### Table of Contents



Elements
    of Compensation
  Base
    Salary
            Fiscal 2009


Fiscal 2010Named Executive Officer

Base Salary


Base SalaryClinton H. Severson

$
360,000


$
360,000Alberto R. Santa Ines

$
200,000


$
200,000Kenneth P. Aron, Ph.D.

$
210,000


$
210,000Vladimir E. Ostoich, Ph.D.

$
210,000


$
210,000Martin V. Mulroy

$
185,000


$
185,000     Fiscal 2009


Fiscal 2010Percent Increase


Percent IncreaseNamed Executive Officer

In Base Salary


In Base SalaryClinton H. Severson


6.5
%



%Alberto R. Santa Ines


8.1
%



%Kenneth P. Aron, Ph.D.


8.8
%



%Vladimir E. Ostoich, Ph.D.


3.5
%



%Martin V. Mulroy


5.7
%



%  90




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##### Table of Contents



Annual
    Cash Incentive Bonus
    year-over-year
    Fiscal 2009


Fiscal 2009Named Executive Officer

Target Bonus


Bonus AwardedClinton H. Severson

$
525,000


$
226,406Alberto R. Santa Ines

$
300,000


$
129,375Kenneth P. Aron, Ph.D.

$
300,000


$
129,375Vladimir E. Ostoich, Ph.D.

$
300,000


$
129,375Martin V. Mulroy

$
275,000


$
139,219   and/or
 91




---



##### Table of Contents



Fiscal 2010Named Executive Officer

Target BonusClinton H. Severson

$
525,000Alberto R. Santa Ines

$
300,000Kenneth P. Aron, Ph.D.

$
300,000Vladimir E. Ostoich, Ph.D.

$
300,000Martin V. Mulroy

$
275,000   and/or
    Long-term
    Equity Incentive Compensation
    Stock
    Options
   92




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##### Table of Contents



Restricted
    Stock Units
  Fiscal 2009 Restricted Stock Unit Grants.
    
    five percent vesting after the first year of continuous
    employment;
    additional ten percent after the second year of continuous
    employment;
    additional 15 percent after the third year of continuous
    employment; and
    the remaining 70 percent after the fourth year of
    continuous employment.    Fiscal 2010 Restricted Stock Unit Grants.
  Other
    Compensation and Benefits
    Employment
    Agreements
   93




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##### Table of Contents



Change in
    Control Agreements
        
    on the 60th day after the termination date, a lump sum cash
    payment equal to two times the sum of the participants
    annual base salary and the participants target annual
    bonus amount for the year in which the change of control occurs;
    payment of up to 24 months of premiums for medical, dental
    and vision benefits, provided, however, that if the participant
    becomes eligible to receive comparable benefits under another
    employers plan, the Companys benefits shall be
    secondary to those provided under such other plan;
    reimbursement, on a monthly basis, of up to 24 months of
    premiums for disability and life insurance benefits if the
    participant elects to convert his or her disability
    and/or life
    insurance benefits under the Companys plans into
    individual policies following termination; and
    payment of an amount equal to any excise tax imposed under
    Section 4999 of the Code, provided, however, that payment
    of such amount is capped at $1,000,000 per participant.    Tax
    Considerations
  Deductibility
    of Executive Compensation
   94




---



##### Table of Contents



Compensation
    Committee Interlocks and Insider Participation
  Form 10-K.
  COMPENSATION
    COMMITTEE
    REPORT2
  Form 10-K
  Form 10-K
         2
 95




---



##### Table of Contents



EXECUTIVE
    COMPENSATION
  Summary
    Compensation Table
    Non-EquityStock


Option


Incentive Plan


All OtherFiscal


Salary


Bonus


Awards


Awards


Compensation


Compensation


TotalName and Principal Position

Year


($)


($)


($)(1)


($)(2)


($)(3)


($)(4)


($)Clinton H. Severson


2009



355,770







465,214







226,406



9,311
(5)


1,056,701President, Chief Executive Officer and


2008



336,500







253,941



1,099



456,000



11,535
(5)


1,059,075Chairman of the Board


2007



323,500







101,040



8,603



500,250



13,823
(5)


947,216Alberto R. Santa Ines


2009



197,115







129,741







129,375



8,949
(6)


465,180Chief Financial Officer and


2008



183,846







64,597



879



261,250



10,972
(6)


521,544Vice President of Finance


2007



174,008







22,453



8,997



287,500



13,227
(6)


506,185Kenneth P. Aron, Ph.D.


2009



206,730







129,741







129,375



19,585
(7)


485,431Chief Technology Officer


2008



192,077







64,597



879



261,250



20,753
(7)


539,5562007



184,054







22,453



6,882



287,500



22,592
(7)


523,481Vladimir E. Ostoich, Ph.D.


2009



208,654







129,741







129,375



14,552
(8)


482,322Vice President of Government Affairs


2008



202,077







64,597



879



261,250



16,599
(8)


545,402and Vice President of Marketing
    for the Pacific Rim


2007



194,100







22,453



6,882



287,500



17,013
(8)


527,948Martin V. Mulroy


2009



183,077







129,741



6,218



139,219



7,896
(10)


466,151Vice President of Veterinary Sales and Marketing for North
    America(9)     (1)
    
    Awards consist of restricted stock units granted to the Named
    Executive Officer in the fiscal year specified as well as prior
    fiscal years. Amounts shown do not reflect whether the Named
    Executive Officer has actually realized a financial benefit from
    the awards (such as by vesting in a restricted stock unit
    award). Amounts listed in this column represent the compensation
    cost recognized by us for financial statement reporting
    purposes. These amounts have been calculated in accordance with
    Statement of Financial Accounting Standards No. 123
    (revised 2004), Share-Based Payment
    (SFAS No. 123(R)). For a discussion of the
    assumptions used in determining the fair value of awards of
    restricted stock units in the above table, see Note 11 of
    the Notes to Consolidated Financial Statements included in this
    Annual Report on
    Form 10-K.(2)
    
    Awards consist of stock options granted to the Named Executive
    Officer in the fiscal year specified as well as prior fiscal
    years. Amounts shown do not reflect whether the Named Executive
    Officer has actually realized a financial benefit from the
    awards (such as by exercising stock options). Amounts listed in
    this column represent the compensation cost recognized by us for
    financial statement reporting purposes. These amounts have been
    calculated in accordance with SFAS No. 123(R). For a
    discussion of the assumptions used in determining the fair value
    of awards of stock options in the above table, see Note 11
    of the Notes to Consolidated Financial Statements included in
    this Annual Report on
    Form 10-K.(3)
    
    Represents aggregate cash performance bonuses earned during each
    fiscal year based on achievement of corporate financial
    performance goals, as described under Executive
    Compensation  Compensation Discussion and
    Analysis above. These bonuses were paid in four quarterly
    installments within one month following the end of the
    applicable quarter upon achieving the established quarterly net
    sales and quarterly pre-tax income goals for that quarter.
    Amounts do not include bonuses paid during a fiscal year, with
    respect to bonuses earned in a prior fiscal year.(4)
    
    Amounts listed are based upon our actual costs expensed in
    connection with such compensation.(5)
    
    In fiscal 2009, consists of $4,652 in supplemental health plan
    expenses reimbursed by us, $648 in group life insurance paid by
    us, $626 in disability insurance premiums paid by us and $3,385
    in matching contributions made by us to Mr. Seversons
    401(k) account. In fiscal 2008, consists of $4,378 in
    supplemental health plan expenses reimbursed by us, $780 in
    group life insurance paid by us, $752 in disability insurance
    premiums paid by us and $5,625 in matching contributions made by
    us to Mr. Seversons 401(k) account. In fiscal 2007,
    consists of $4,366 in supplemental health plan expenses
    reimbursed by us, $780 in group life insurance paid by 96




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##### Table of Contents



us, $812 in disability insurance premiums paid by us and $7,865
    in matching contributions made by us to Mr. Seversons
    401(k) account.(6)
    
    In fiscal 2009, consists of $4,652 in supplemental health plan
    expenses reimbursed by us, $432 in group life insurance paid by
    us, $480 in disability insurance premiums paid by us and $3,385
    in matching contributions made by us to Mr. Santa
    Ines 401(k) account. In fiscal 2008, consists of $4,490 in
    supplemental health plan expenses reimbursed by us, $420 in
    group life insurance paid by us, $437 in disability insurance
    premiums paid by us and $5,625 in matching contributions made by
    us to Mr. Santa Ines 401(k) account. In fiscal 2007,
    consists of $4,505 in supplemental health plan expenses
    reimbursed by us, $420 in group life insurance paid by us, $437
    in disability insurance premiums paid by us and $7,865 in
    matching contributions made by us to Mr. Santa Ines
    401(k) account.(7)
    
    In fiscal 2009, consists of $14,959 in supplemental health plan
    expenses reimbursed by us, $451 in group life insurance paid by
    us, $502 in disability insurance premiums paid by us and $3,673
    in matching contributions made by us to Mr. Arons
    401(k) account. In fiscal 2008, consists of $14,222 in
    supplemental health plan expenses reimbursed by us, $444 in
    group life insurance paid by us, $462 in disability insurance
    premiums paid by us and $5,625 in matching contributions made by
    us to Mr. Arons 401(k) account. In fiscal 2007,
    consists of $14,186 in supplemental health plan expenses
    reimbursed by us, $444 in group life insurance paid by us, $462
    in disability insurance premiums paid by us and $7,500 in
    matching contributions made by us to Mr. Arons 401(k)
    account.(8)
    
    In fiscal 2009, consists of $10,599 in supplemental health plan
    expenses reimbursed by us, $451 in group life insurance paid by
    us, $502 in disability insurance premiums paid by us and $3,000
    in matching contributions made by us to Mr. Ostoichs
    401(k) account. In fiscal 2008, consists of $10,043 in
    supplemental health plan expenses reimbursed by us, $444 in
    group life insurance paid by us, $487 in disability insurance
    premiums paid by us and $5,625 in matching contributions made by
    us to Mr. Ostoichs 401(k) account. In fiscal 2007,
    consists of $10,058 in supplemental health plan expenses
    reimbursed by us, $468 in group life insurance paid by us, $487
    in disability insurance premiums paid by us and $6,000 in
    matching contributions made by us to Mr. Ostoichs
    401(k) account.(9)
    
    Mr. Mulroy was not a Named Executive Officer for fiscal
    2008 or 2007.(10)
    
    In fiscal 2009, consists of $4,652 in supplemental health plan
    expenses reimbursed by us, $400 in group life insurance paid by
    us, $444 in disability insurance premiums paid by us and $2,400
    in matching contributions made by us to Mr. Mulroys
    401(k) account.  Salary and Bonus in Proportion to Total
    Compensation.
  Annual CashBase Salary As a


Incentive Bonus As aPercentage of


Percentage ofNamed Executive Officer

Total Compensation


Total CompensationClinton H. Severson


34
%


21
%Alberto R. Santa Ines


42
%


28
%Kenneth P. Aron, Ph.D.


43
%


27
%Vladimir E. Ostoich, Ph.D.


43
%


27
%Martin V. Mulroy


39
%


30
%   CEO Employment Agreement.
 97




---



##### Table of Contents



Grants of
    Plan-Based Awards in Fiscal 2009
    All OtherStockAwards:


Grant DateNumber of


Fair Value ofEstimated Future Payouts Under











Shares of


Stock andNon-Equity Incentive Plan Awards(1)


Estimated Future Payouts Under Equity Incentive Plan
    Awards


Stock or


OptionThreshold


Target


Maximum


Threshold


Target


Maximum


Units


AwardsName

Grant Date


($)


($)


($)


(#)


(#)


(#)(2)


(#)


($)(3)Clinton H. Severson


5/5/2008























50,000







1,250,000131,250



525,000



1,050,000Alberto R. Santa Ines


5/5/2008























20,000







500,00075,000



300,000



600,000Kenneth P. Aron, Ph.D.


5/5/2008























20,000







500,00075,000



300,000



600,000Vladimir E. Ostoich, Ph.D.


5/5/2008























20,000







500,00075,000



300,000



600,000Martin V. Mulroy


5/5/2008























20,000







500,00068,750



275,000



550,000     (1)
    
    Actual cash performance bonuses, which were approved by the
    Board of Directors upon recommendation by the Compensation
    Committee based on achievement of corporate financial
    performance goals for fiscal 2009, were paid in four quarterly
    installments within one month following the end of the
    applicable quarter upon achieving the established quarterly net
    sales and quarterly pre-tax income goals. Actual cash
    performance bonuses are shown in the Non-Equity Incentive
    Plan Compensation column of the Summary Compensation
    Table above.(2)
    
    Each of the equity-based awards reported in the Grants of
    Plan-Based Awards table was granted under, and is subject
    to, the terms of our 2005 Equity Incentive Plan. The time-based
    vesting schedule of restricted stock unit grants during fiscal
    2009 are described above in Restricted Stock Units.(3)
    
    Represents the fair value of the restricted stock unit award on
    the date of grant, pursuant to SFAS No. 123(R). See
    Note 11 of the Notes to Consolidated Financial Statements
    included in this Annual Report on
    Form 10-K
    for additional information. 98




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##### Table of Contents



Outstanding
    Equity Awards at Fiscal Year End 2009
    Option Awards


Stock AwardsEquityIncentive


EquityPlan


IncentiveAwards:


Plan Awards:Number of


Market orNumber of














Market


Unearned


Payout ValueSecurities


Number of








Number of


Value of


Shares,


of UnearnedUnderlying


Securities








Shares or


Shares or


Units or


Shares, UnitsUnexercised


Underlying








Units of


Units of


Other


or OtherOptions


Unexercised


Option





Stock That


Stock That


Rights That


Rights That(#)


Options


Exercise


Option


Have Not


Have Not


Have Not


Have NotExercisable


(#)


Price


Expiration


Vested


Vested


Vested


VestedName

(1)


Unexercisable


($)(2)


Date


(#)


($)


(#)


($)(3)Clinton H. Severson


150,000







4.87



4/24/201110,417







3.85



4/22/201350,000
(4)






21.65



4/20/201434,000
(5)


586,16042,500
(5)


732,70047,500
(6)


818,90050,000
(7)


862,000Alberto R. Santa Ines


37,432







3.00



7/23/201225,000







3.85



4/22/201340,000
(4)






21.65



4/20/201417,000
(5)


293,08019,000
(6)


327,56020,000
(7)


344,800Kenneth P. Aron, Ph.D.


3,109







7.5625



2/7/201050,000







6.31



10/31/20104,500







5.47



7/24/201140,000
(4)






21.65



4/20/201417,000
(5)


293,08019,000
(6)


327,56020,000
(7)


344,800Vladimir E. Ostoich, Ph.D.


16,000







8.125



1/25/20109,500







5.47



7/24/201140,000







3.85



4/22/201322,000
(4)






21.65



4/20/201417,000
(5)


293,08019,000
(6)


327,56020,000
(7)


344,800Martin V. Mulroy


437







6.0625



1/2/20112,812







4.87



4/24/20118,000







3.85



4/22/20132,292







14.05



1/3/201517,000
(5)


293,08019,000
(6)


327,56020,000
(7)


344,800     (1)
    
    Options granted to the Named Executive Officers expire ten years
    after the grant date. All options vest one-fourth on the first
    anniversary date of grant and vests at a rate of 1/48th for each
    full month thereafter, except as otherwise noted. 99




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##### Table of Contents



(2)
    
    Represents the fair value of our common stock on the grant date
    of the option.(3)
    
    The value of the equity award is based on the closing price of
    our common stock of $17.24 on March 31, 2009, as reported
    on the NASDAQ Global Select Market.(4)
    
    These options were accelerated in full by our Board of Directors
    and became fully vested on December 5, 2005. However,
    pursuant to a
    lock-up and
    consent agreement entered into with each of our Named Executive
    Officers, these options may not be exercised prior to the date
    on which the exercise would have been permitted under the
    vesting schedule set forth in footnote 1, or earlier upon the
    Named Executive Officers last day of employment or a
    change in control. On April 20, 2008, the restrictions
    under the
    lock-up and
    consent agreements expired and 100% of these shares became
    exercisable.(5)
    
    The four-year time-based vesting terms of the restricted stock
    units is as follows, assuming continuous employment: five
    percent of the shares vest on April 25, 2007; ten percent
    of the shares vest on April 25, 2008; 15 percent of
    the shares vest on April 25, 2009; and 70 percent of
    the shares vest on April 25, 2010. Additionally, these
    restricted stock unit awards are also subject to accelerated
    vesting upon achieving the following performance-based
    milestones:  
    upon attainment of certain pre-tax income goals by
    March 31, 2007, vesting will accelerate to an aggregate of
    25% within one year from grant date; by March 31, 2008,
    vesting will accelerate to an aggregate of 25% within two years
    from grant date; by March 31, 2009, vesting will accelerate
    to an aggregate of 30%, within three years of grant date; hence,
    meeting pre-tax income goals in each of the fiscal years ended
    March 31, 2007, 2008 and 2009 can result in a cumulative
    vesting of 80% over three years;
    upon attainment of certain product development objectives prior
    to June 30, 2007, an additional vesting of 10% would be
    awarded;
    upon satisfaction of certain regulatory requirements prior to
    March 31, 2008, an additional vesting of 10% would be
    awarded; or
    upon attainment of a certain level of operating income per share
    for any fiscal year during the four-year vesting period, the
    restricted stock units will accelerate in full.  To date, none of the foregoing performance-based milestones
    required for acceleration has been achieved. In each case,
    vesting of the equity award is conditioned upon the Named
    Executive Officers continuous employment through the
    applicable vesting date.(6)
    
    The four-year time-based vesting terms of the restricted stock
    units is as follows, assuming continuous employment: five
    percent of the shares vest on April 30, 2008; ten percent
    of the shares vest on April 30, 2009; 15 percent of
    the shares vest on April 30, 2010; and 70 percent of
    the shares vest on April 30, 2011.(7)
    
    The four-year time-based vesting terms of the restricted stock
    units is as follows, assuming continuous employment: five
    percent of the shares vest on May 5, 2009; ten percent of
    the shares vest on May 5, 2010; 15 percent of the
    shares vest on May 5, 2011; and 70 percent of the
    shares vest on May 5, 2012.  Option
    Exercises and Stock Vested in Fiscal 2009
    Option Awards


Stock AwardsNumber of





Number ofShares


Value


Shares


ValueAcquired on


Realized on


Acquired on


Realized onExercise


Exercise


Vesting


VestingName

(#)


($)(1)


(#)


($)(2)Clinton H. Severson


70,000



893,394



11,500



287,500Alberto R. Santa Ines










3,000



75,000Kenneth P. Aron, Ph.D.










3,000



75,000Vladimir E. Ostoich, Ph.D.


50,000



723,625



3,000



75,000Martin V. Mulroy


400



5,233



3,000



75,000  100




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##### Table of Contents



(1)
    
    The value realized equals the difference between the option
    exercise price and the fair market value of our common stock on
    the date of exercise, as reported on the NASDAQ Global Market,
    multiplied by the number of shares for which the option was
    exercised.(2)
    
    The value realized on vesting of restricted stock units equals
    the fair market value of our common stock on the settlement
    date, multiplied by the number of shares that vested.  Severance
    and Change in Control Agreements
  Employment
    Agreement
    Executive
    Change of Control Severance Plan
        
    on the 60th day after the termination date, a lump sum cash
    payment equal to two times the sum of the participants
    annual base salary and the participants target annual
    bonus amount for the year in which the change of control occurs;
    payment of up to 24 months of premiums for medical, dental
    and vision benefits, provided, however, that if the participant
    becomes eligible to receive comparable benefits under another
    employers plan, the Companys benefits shall be
    secondary to those provided under such other plan;
    reimbursement, on a monthly basis, of up to 24 months of
    premiums for disability and life insurance benefits if the
    participant elects to convert his or her disability
    and/or life
    insurance benefits under the Companys plans into
    individual policies following termination; and
    payment of an amount equal to any excise tax imposed under
    Section 4999 of the Code, provided, however, that payment
    of such amount is capped at $1,000,000 per participant. 101




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##### Table of Contents



Incentive
    Plans
  and/or
    and/or
 102




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##### Table of Contents



Potential
    Payments Upon Termination or Change in Control
  InvoluntaryInvoluntary





Termination WithoutTermination Without


Change In Control


Cause Following aExecutive Benefits and Payments Upon Separation

Cause(1)


(No Termination)


Change In Control(2)Clinton H. SeversonSalary and bonus

$
1,853,077






$
1,853,077Vesting of restricted stock units(3)

$
2,999,760


$
2,999,760


$
2,999,760Health and welfare benefits(4)

$
11,852






$
11,852Total

$
4,864,689


$
2,999,760


$
4,864,689Alberto R. Santa InesSalary and bonus









$
1,046,154Vesting of restricted stock units(3)





$
965,440


$
965,440Health and welfare benefits(4)









$
11,128Excise tax reimbursement(5)









$
101,339Total





$
965,440


$
2,124,061Kenneth P. Aron, Ph.D.Salary and bonus









$
1,068,462Vesting of restricted stock units(3)





$
965,440


$
965,440Health and welfare benefits(4)









$
31,824Total





$
965,440


$
2,065,726Vladimir E. Ostoich, Ph.D.Salary and bonus









$
1,068,462Vesting of restricted stock units(3)





$
965,440


$
965,440Health and welfare benefits(4)









$
23,104Total





$
965,440


$
2,057,006Martin V. MulroySalary and bonus









$
962,692Vesting of restricted stock units(3)





$
965,440


$
965,440Health and welfare benefits(4)









$
10,992Excise tax reimbursement(5)









$
189,652Total





$
965,440


$
2,128,776     (1)
    
    Amounts relate to payments to Mr. Severson equal to two
    years of salary, bonus and benefits if his employment with us is
    terminated for any reason other than cause (as defined in
    Mr. Seversons employment agreement).(2)
    
    Amounts assume that the Named Executive Officer was terminated
    without cause or due to constructive termination during the
    18-month
    period following a change in control.(3)
    
    The value of the restricted stock unit assumes that the market
    price per share of our common stock on the date of termination
    of employment was equal to the closing price of our common stock
    of $17.24 on March 31, 2009, as reported on the NASDAQ
    Global Select Market.(4)
    
    Health and welfare benefits includes payment of 24 months
    of premiums for medical, dental, vision, disability and life
    insurance benefits.(5)
    
    For purposes of computing the excise tax reimbursement payments,
    base amount calculations are based on the Named Executive
    Officers taxable wages for the fiscal years 2004 through
    2009. 103




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##### Table of Contents



DIRECTOR
    COMPENSATION
  Director
    Compensation Table
    Fees Earned or








All OtherPaid in Cash


Stock Awards


Option Awards


Compensation


TotalName(1)

($)


($)(2)(3)(4)


($)(5)


($)


($)Richard J. Bastiani, Ph.D.


24,000



36,346











60,346Henk J. Evenhuis


28,250



36,346











64,596Brenton G. A. Hanlon


24,000



36,346











60,346Prithipal Singh, Ph.D.


21,250



36,346











57,596Ernest S. Tucker, III, M.D.


23,250



36,346











59,596     (1)
    
    Clinton H. Severson, our Chief Executive Officer and Director,
    is not included in this table as he is an employee of the
    Company and receives no compensation for his services as a
    director. The compensation received by Mr. Severson as an
    employee is shown in the Summary Compensation Table
    above.(2)
    
    Amounts listed in this column represent our accounting expense
    for these awards, over the requisite service period, in
    accordance with SFAS No. 123(R). For a discussion of
    the assumptions used in determining the fair value of awards of
    restricted stock units in the above table, see Note 11 of
    the Notes to Consolidated Financial Statements in this Annual
    Report on
    Form 10-K.
    Restricted stock units were granted to non-employee directors
    starting in fiscal 2007. No stock awards were forfeited by any
    of our non-employee directors during fiscal 2009.(3)
    
    Each non-employee director listed in the table above was granted
    an award of 1,500 restricted stock units on May 5, 2008
    under our 2005 Plan. The grant date fair value, as determined in
    accordance with SFAS No. 123(R), of the restricted
    stock units granted during fiscal 2009 for each of the directors
    listed in the table above was $37,500.(4)
    
    As of March 31, 2009, each of our non-employee directors
    held 1,500 shares of unvested restricted stock units.(5)
    
    No options were awarded to our non-employee directors in fiscal
    2009, 2008 or 2007. As of March 31, 2009, the non-employee
    directors held the following number of outstanding options:
    Dr. Bastiani, 24,000; Mr. Evenhuis, 18,000;
    Mr. Hanlon, 16,000; Dr. Singh, 22,000; and
    Dr. Tucker, 13,000 shares.  Cash
    Compensation Paid to Board Members
    Equity
    Compensation Paid to Board Members
   104




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##### Table of Contents



Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Percent of AbaxisShares


Common StockBeneficially


BeneficiallyName and Address of Beneficial Owner

Owned


Owned(1)Five Percent Holders:Brown Capital Management, Inc.(3)


2,371,380



10.8
%Capital World Investors(4)


1,486,800



6.8
%Wasatch Advisors, Inc.(5)


1,448,354



6.6
%Neuberger Berman Inc. and Neuberger Berman, LLC(6)


1,430,245



6.5
%Kayne Anderson Rudnick Investment Management, LLC(7)


1,275,646



5.8
%FMR LLC(8)


1,139,400



5.2
%Executive Officers:(2)Clinton H. Severson(9)


672,170



3.0
%Vladimir E. Ostoich, Ph.D.(10)


405,662



1.8
%Alberto R. Santa Ines(11)


126,681



*Kenneth P. Aron, Ph.D.(12)


110,893



*Martin V. Mulroy(13)


21,701



*Outside Directors:(2)Richard J. Bastiani, Ph.D.(14)


81,500



*Brenton G. A. Hanlon(15)


25,400



*Prithipal Singh, Ph.D.(16)


30,500



*Ernest S. Tucker, III, M.D.(17)


13,000



*Henk J. Evenhuis(18)


22,500



*Executive officers and directors as a group
    (11 persons)(19)


1,511,226



6.7
%     *
    
    Less than one percent.(1)
    
    The percentages shown in this column are calculated based on
    21,984,832 shares of common stock outstanding on
    May 31, 2009 and includes shares of common stock that such
    person or group had the right to acquire on or within
    60 days after that date, including, but not limited to,
    upon the exercise of options.(2)
    
    The business address of the beneficial owners listed is
    c/o Abaxis,
    Inc., 3240 Whipple Road, Union City, CA 94587.(3)
    
    Based on information set forth in a Schedule 13G/A filed
    with the SEC on May 13, 2009 by Brown Capital Management,
    Inc., reporting sole power to vote and dispose of 1,125,215 and
    2,371,380 shares, respectively. The business address for
    Brown Capital Management, Inc. is 1201 North Calvert Street,
    Baltimore, MD 21202.(4)
    
    Based on information set forth in a Schedule 13G filed with
    the SEC on February 13, 2009 by Capital World Investors,
    reporting sole power to vote and dispose of
    1,486,800 shares. The business address for Capital World
    Investors is 333 South Hope Street, Los Angeles, CA 90071.(5)
    
    Based on information set forth in a Schedule 13G/A filed
    with the SEC on February 17, 2009 by Wasatch Advisors,
    Inc., reporting sole power to vote and dispose of
    1,448,354 shares. The business address for Wasatch
    Advisors, Inc. is 150 Social Hall Avenue, Salt Lake City, UT
    84111. 105




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##### Table of Contents



(6)
    
    Based on information set forth in a Schedule 13G filed with
    the SEC on February 12, 2009 by both Neuberger Berman Inc.
    and Neuberger Berman, LLC reporting sole power to vote and
    dispose of 3,320 and 0 shares, respectively, and shared
    power to vote and dispose of 1,065,900 and
    1,430,245 shares, respectively. The business address for
    both Neuberger Berman Inc. and Neuberger Berman, LLC is 605
    Third Avenue, New York, NY 10158.(7)
    
    Based on information set forth in a Schedule 13G/A filed
    with the SEC on February 10, 2009 by Kayne Anderson
    Rudnick Investment Management, LLC, reporting sole power to vote
    and dispose of 1,275,646 shares. The business address for
    Kayne Anderson Rudnick Investment Management, LLC is 1800 Avenue
    of the Stars, 2nd Floor, Los Angeles, CA 90067.(8)
    
    Based on information set forth in a Schedule 13G filed with
    the SEC on February 17, 2009 by FMR LLC, reporting sole
    power to vote and dispose of 0 and 1,139,400 shares,
    respectively. The business address for FMR LLC is 82 Devonshire
    Street, Boston, MA 02109.(9)
    
    Includes:  
    461,753 shares held by Mr. Severson; and
    210,417 shares subject to stock options exercisable by
    Mr. Severson within sixty days of May 31, 2009.  (10)
    
    Includes:  
    152,079 shares held by Dr. Ostoich;
    26,355 shares held by Dr. Ostoichs IRA;
    22,400 shares held by Mrs. Ostoichs IRA;
    117,328 shares held by the Vladimir Ostoich and Liliana
    Ostoich Trust Fund, for the benefit of Dr. Ostoich and
    his wife; and
    87,500 shares subject to stock options exercisable by
    Dr. Ostoich within sixty days of May 31, 2009.  (11)
    
    Includes:  
    24,249 shares held by Mr. Santa Ines; and
    102,432 shares subject to stock options exercisable by
    Mr. Santa Ines within sixty days of May 31, 2009.  (12)
    
    Includes:  
    13,284 shares held by Dr. Aron; and
    97,609 shares subject to stock options exercisable by
    Dr. Aron within sixty days of May 31, 2009.  (13)
    
    Includes:  
    8,160 shares held by Mr. Mulroy; and
    13,541 shares subject to stock options exercisable by
    Mr. Mulroy within sixty days of May 31, 2009.  (14)
    
    Includes:  
    57,500 shares held by Dr. Bastiani; and
    24,000 shares subject to stock options exercisable by
    Dr. Bastiani within sixty days of May 31, 2009.  (15)
    
    Includes:  
    9,400 shares held by Mr. Hanlon; and
    16,000 shares subject to stock options exercisable by
    Mr. Hanlon within sixty days of May 31, 2009.  (16)
    
    Includes:  
    8,500 shares held by Dr. Singh; and
    22,000 shares subject to stock options exercisable by
    Dr. Singh within sixty days of May 31, 2009. 106




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##### Table of Contents



(17)
    
    Reflects:  
    13,000 shares subject to stock options exercisable by
    Dr. Tucker within sixty days of May 31, 2009.  (18)
    
    Includes:  
    4,500 shares held by Mr. Evenhuis; and
    18,000 shares subject to stock options exercisable by
    Mr. Evenhuis within sixty days of May 31, 2009.  (19)
    
    Includes:  
    906,727 shares held by all executive officers and directors
    as a group; and
    604,499 shares subject to stock options exercisable by all
    executive officers and directors as a group within sixty days of
    May 31, 2009.  Securities
    Authorized for Issuance Under Equity Compensation
    Plans
        Equity
    Compensation Plan Information
  Number of Securities to


Weighted-Average


Number of Securities Remainingbe Issued Upon Exercise


Exercise Price of


Available for Future Issuanceof Outstanding Options,


Outstanding Options,


Under Equity CompensationPlan Category

Warrants and Rights


Warrants and Rights


Plans(1)Equity compensation plans approved by our shareholders:2005 Equity Incentive Plan(2)


1,499,000


$
9.03
(3)


703,0001992 Outside Directors Stock Option Plan


39,000


$
5.30



Equity compensation plans not approved by our
    shareholders:










Total:


1,538,000


$
8.86
(3)


703,000     (1)
    
    The shares are available for award grant purposes under the 2005
    Plan and excludes shares listed under the column Number of
    Securities to be Issued Upon Exercise of Outstanding Options,
    Warrants and Rights.(2)
    
    The 2005 Plan amended and restated the 1998 Stock Option Plan in
    October 2005. To date, share-based awards granted under the 2005
    Plan includes stock options and restricted stock units.(3)
    
    Excludes outstanding and unvested restricted stock unit awards,
    for which there is no exercise price.  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Certain
    Relationships and Related Transactions
   107




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##### Table of Contents



Indemnification
    Agreements
    Related-Person
    Transactions Policy and Procedures
      Item 14.
    Principal
    Accountant Fees and Services    Year Ended March 31,2009


2008Audit Fees(1)

$
636,000


$
614,000Audit-Related Fees(2)


48,000



Tax Fees






All Other Fees






Total All Fees

$
684,000


$
614,000     (1)
    
    Audit fees represent fees for professional services provided in
    connection with the audit of our financial statements and review
    of our quarterly financial statements, including attestation
    services related to Section 404 of the Sarbanes-Oxley Act
    of 2002 and Abaxis tax deferral savings plan.(2)
    
    Audit-related fees represent fees for assurance and related
    services that are reasonably related to the performance of the
    audit or review of our financial statements and are not reported
    under Audit Fees. In fiscal 2009, these services
    include due diligence services pertaining to potential
    acquisitions. 108




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##### Table of Contents



Pre-Approval
    Policies and Procedures
   PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Financial Statements 
  Financial Statement Schedules
  
    Schedule II  Valuation and Qualifying Accounts
    and Reserves
    Other financial statement schedules are not included because
    they are not required or the information is otherwise shown in
    the financial statements or notes thereto.  Exhibits
     109




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##### Table of Contents



Abaxis,
    Inc.
  Schedule II
  Valuation
    and Qualifying Accounts and Reserves
 Years
    ended March 31, 2009, 2008 and 2007
  Balance at


AdditionsBeginning of


Charged to


Deductions from


Balance atDescription

Year


Expenses


Reserves


End of YearYear ended March 31, 2009:Allowance for Doubtful Accounts

$
246,000


$
115,000


$



$
361,000Reserve for Sales Allowances


26,000



121,000



120,000



27,000Total Reserve for Doubtful Accounts and Sales Allowances

$
272,000


$
236,000


$
120,000


$
388,000Year ended March 31, 2008:Allowance for Doubtful Accounts

$
174,000


$
114,000


$
42,000


$
246,000Reserve for Sales Allowances


368,000



51,000



393,000



26,000Total Reserve for Doubtful Accounts and Sales Allowances

$
542,000


$
165,000


$
435,000


$
272,000Year ended March 31, 2007:Allowance for Doubtful Accounts

$
109,000


$
78,000


$
13,000


$
174,000Reserve for Sales Allowances


234,000



849,000



715,000



368,000Total Reserve for Doubtful Accounts and Sales Allowances

$
343,000


$
927,000


$
728,000


$
542,000  110




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##### Table of Contents



Exhibit Index  ExhibitNo.

Description of Document3
.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

Abaxis, Inc. and Equiserve Trust Company, N.A. as Rights
    Agent, Rights Agreement, dated as of April 23, 2003 (Filed
    with the Securities and Exchange Commission as an exhibit with
    our Current Report on
    Form 8-K
    on May 16, 2003 and incorporated herein by reference.)4
.3

Reference is made to Exhibit 3.1, Exhibit 3.2 and
    Exhibit 3.3.10
.1*

1989 Stock Option Plan, as amended and restated as the 1998
    Stock Option Plan (Filed with the Securities and Exchange
    Commission as an exhibit with our Quarterly Report on
    Form 10-Q
    for the quarter ended December 31, 2004 and incorporated
    herein by reference.)10
.2*

1992 Outside Directors Stock Option Plan and forms of agreement
    (Filed with the Securities and Exchange Commission as an exhibit
    with our Def 14A Proxy Statement on August 10, 1992 and
    incorporated herein by reference.)10
.3+

Licensing agreement between Abaxis, Inc. and Pharmacia Biotech,
    Inc., dated October 1, 1994 (Filed with the Securities and
    Exchange Commission as an exhibit with our Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 1994 and incorporated
    herein by reference.)10
.4

Lease Agreement with Principal Development Investors, LLC, dated
    June 21, 2000 (Filed with the Securities and Exchange
    Commission as an exhibit with our Registration Statement on
    Form S-3
    on January 10, 2001 and incorporated herein by reference.)10
.5

Loan and Security Agreement with Comerica Bank California, dated
    March 13, 2002 (Filed with the Securities and Exchange
    Commission as an exhibit with our Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002 and incorporated herein
    by reference.)10
.6

First and Second Modification to Loan and Security Agreement
    with Comerica Bank California, dated March 29, 2002 (Filed
    with the Securities and Exchange Commission as an exhibit with
    our Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002 and incorporated herein
    by reference.)10
.7

Loan Revision/Extension Agreement with Comerica Bank California,
    dated March 29, 2002 (Filed with the Securities and
    Exchange Commission as an exhibit with our Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002 and incorporated herein
    by reference.)10
.8

Loan Revision/Extension Agreement with Comerica Bank California,
    dated September 23, 2002 (Filed with the Securities and
    Exchange Commission as an exhibit with our Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2002 and incorporated
    herein by reference.)10
.9+

Letter Setting Forth Additional Terms of Relationship Between
    Abaxis, Inc. and Pharmacia Biotech, dated as of June 9,
    1997 (Filed with the Securities and Exchange Commission as an
    exhibit with our Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2002 and incorporated
    herein by reference.)10
.10+

Private Label Manufacturing and Supply Agreement by and between
    Diatron Messtechnik GmbH and Abaxis, Inc., dated
    November 13, 2003 (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, 2004 and incorporated
    herein by reference.)10
.11

Distribution Agreement by and between Scil Animal Care Company
    GmbH and Abaxis, Inc., dated September 1, 2001 (Filed with
    the Securities and Exchange Commission as an exhibit with
    Amendment Number One to our Annual Report on
    Form 10-K/A
    for the fiscal year ended March 31, 2002, on
    December 24, 2002 and incorporated herein by reference.)10
.12

Loan and Security Agreement by and between Abaxis, Inc. and
    Comerica Bank California, dated as of September 8, 2003
    (Filed with the Securities and Exchange Commission as an exhibit
    with our Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2003 and incorporated
    herein by reference.) 111




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##### Table of Contents



ExhibitNo.

Description of Document10
.13

First Modification to Business Loan Agreement with Comerica Bank
    California, dated September 15, 2004 (Filed with the
    Securities and Exchange Commission as an exhibit with our
    Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2004 and incorporated
    herein by reference.)10
.14*

Employment Agreement with Mr. Clinton H. Severson, dated
    July 11, 2005 (Filed with the Securities and Exchange
    Commission as an exhibit with our Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2005 and incorporated herein
    by reference.)10
.15*

2005 Equity Incentive Plan, as amended as of October 28,
    2008 (Filed with the Securities and Exchange Commission as an
    exhibit with our Current Report on
    Form 8-K
    on November 3, 2008 and incorporated herein by reference.)10
.16*

Abaxis, Inc. Executive Change of Control Severance Plan, as
    amended as of December 23, 2008 (Filed with the Securities
    and Exchange Commission as an exhibit with our Quarterly Report
    on
    Form 10-Q
    for the quarter ended December 31, 2008 and incorporated
    herein by reference.)10
.17+

Amendment, dated September 21, 2006, to the Private Label
    Manufacturing and Supply Agreement by and between Diatron
    Messtechnik GmbH and Abaxis, Inc., dated November 13, 2003
    (Filed with the Securities and Exchange Commission as an exhibit
    with our Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006 and incorporated
    herein by reference.)10
.18+

Distribution Agreement by and between Walco International, Inc.
    (d/b/a DVM Resources) and Abaxis, Inc., dated April 1, 2006
    (Filed with the Securities and Exchange Commission as an exhibit
    with our Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2006 and incorporated
    herein by reference.)10
.19*

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
.20+

Addendum, dated February 28, 2008, to the Private Label
    Manufacturing and Supply Agreement by and between Diatron
    Messtechnik GmbH and Abaxis, Inc., dated November 13, 2003
    (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, 2008 and incorporated
    herein by reference.)10
.21*

Form of Indemnification Agreement entered into by Abaxis, Inc.
    with each of its directors and executive officers (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, 2008 and incorporated
    herein by reference.)10
.22++

License Agreement by and between Inverness Medical Switzerland
    GmbH and Abaxis, Inc., dated January 5, 2009.21
.1

Subsidiaries of the Company.23
.1

Consent of Burr, Pilger & Mayer LLP, Independent
    Registered Public Accounting Firm24
.1

Power of Attorney. Reference is made to the Signature Page
    hereto.31
.1

Certification of Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2

Certification of Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1#

Certification of Chief Executive Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232
.2#

Certification of Chief Financial Officer pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     +
    
    Confidential treatment of certain portions of this agreement has
    been granted by the Securities and Exchange Commission.++
    
    Confidential treatment of certain portions of this agreement has
    been requested from the Securities and Exchange Commission.*
    
    Management contract or compensatory plan or arrangement.#
    
    This certification accompanies the
    Form 10-K
    to which it relates, is not deemed filed with the Securities and
    Exchange Commission and is not to be incorporated by reference
    into any filing of the Registrant 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 the
    Form 10-K),
    irrespective of any general incorporation language contained in
    such filing. 112




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##### Table of Contents



SIGNATURES      By:
    /s/  Clinton
    H. Severson   
  POWER
    OF ATTORNEY
  Form 10-K,
    Signature

Title

Date/s/  Clinton
    H. SeversonClinton
    H. Severson

President, Chief Executive Officer
    and Director
    (Principal Executive Officer)

June 12, 2009/s/  Alberto
    R. Santa InesAlberto
    R. Santa Ines

Chief Financial Officer and
    Vice President of Finance
    (Principal Financial and Accounting Officer)

June 12, 2009/s/  Richard
    J. Bastiani, Ph.D.Richard
    J. Bastiani, Ph.D.

Director

June 12, 2009/s/  Henk
    J. EvenhuisHenk
    J. Evenhuis

Director

June 12, 2009/s/  Brenton
    G. A. HanlonBrenton
    G. A. Hanlon

Director

June 12, 2009/s/  Prithipal
    Singh, Ph.D.Prithipal
    Singh, Ph.D.

Director

June 12, 2009/s/  Ernest
    S. Tucker IIIErnest
    S. Tucker III

Director

June 12, 2009  113