SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C. 20549
                                FORM 10-QSB

(Mark One)

   X      Quarterly Report under Section 13 or 15 (d) of the
- -------   Securities Exchange Act of 1934
 
For Quarterly period ended        November 30, 1996
                           ---------------------------------------------------
 
          Transition report under Section 13 or 15 (d) of the
- -------   Securities Exchange Act of 1934
 
For the transition period from                         to
                               -----------------------    -------------------- 

Commission File Number                    000-21326
                       ------------------------------------------------------- 

                             Anika Therapeutics, Inc.
- ------------------------------------------------------------------------------
       (Exact name of small business issue as specified in its charter)
 
               Massachusetts                          04-3145961
- --------------------------------------------------------------------------------
(state or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)
 
236 West Cummings Park, Woburn, Massachusetts                         01801
- --------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number, including area code (617) 932-6616
                                                   -----------------------------
                             Anika Research, Inc.
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last 
report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 and 15 (d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

                               Yes   X   No
                                   -----    -----

                   APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

On January 10, 1997, 4,940,719 shares of common stock, par value $0.01 per
share, were outstanding.

 
PART 1:  FINANCIAL  INFORMATION
ITEM 1:  FINANCIAL  STATEMENTS

ANIKA RESEARCH, INC. 

Balance Sheets as of, November 30, 1996 August 31, 1996 - ----------------------------------------------------------------------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $2,895,759 $3,651,023 Accounts receivable 857,975 631,916 Inventories 2,594,398 2,514,280 Prepaid expenses 372,780 502,207 - --------------------------------------------------------------------------------------- Total current assets 6,720,912 7,299,426 - --------------------------------------------------------------------------------------- Property and equipment 4,789,971 4,745,923 Less accumulated depreciation 3,564,573 3,465,175 - --------------------------------------------------------------------------------------- Net property and equipment 1,225,398 1,280,748 - --------------------------------------------------------------------------------------- Total Assets $7,946,310 $8,580,174 ======================================================================================= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $565,579 $645,484 Accrued expenses 895,470 795,832 - --------------------------------------------------------------------------------------- Total current liabilities 1,461,049 1,441,316 - --------------------------------------------------------------------------------------- Other long-term liabilities 200,000 200,000 Redeemable convertible preferred stock; $.01 par 2,582,442 2,523,483 value: authorized 750,000 shares; issued and outstanding 126,259 shares, respectively; liquidation and redemption value of $20.00 per share plus accrued dividends Stockholders' equity: Undesignated preferred stock, $.01 par value: authorized 1,250,000 shares; no shares issued and outstanding Common stock, $.01 par value: authorized 15,000,000 - - shares; issued and outstanding 4,920,295 shares and 4,840,726 shares, respectively 49,203 48,407 Additional paid-in capital 11,692,407 11,551,685 Unearned stock option compensation (398,437) (468,750) Accumulated deficit (7,640,354) (6,715,967) - --------------------------------------------------------------------------------------- Total stockholders' equity 3,702,819 4,415,375 - --------------------------------------------------------------------------------------- Total Liabilities and Stockholders $7,946,310 $8,580,174 =======================================================================================
See accompanying notes to financial statements. ANIKA RESEARCH INC. STATEMENTS OF OPERATIONS (UNAUDITED)
Three months ended November 30, 1996 1995 - -------------------------------------------------------------------------------- Net sales $1,070,053 $861,671 Cost of sales 988,042 825,104 - -------------------------------------------------------------------------------- Gross profit 82,011 36,567 Operating expenses: Research and development 594,630 300,809 Selling, general and administrative 456,670 262,475 Interest expense (income), net (44,902) (11,215) - -------------------------------------------------------------------------------- Total operating expenses 1,006,398 552,069 - -------------------------------------------------------------------------------- Loss before income tax benefit (924,387) (515,502) Income tax benefit - - - -------------------------------------------------------------------------------- Net loss ($924,387) ($515,502) ================================================================================ Loss per share ($.19) ($.16) ===== ===== Primary and fully diluted shares outstanding 4,898,134 3,293,264 - --------------------------------------------------------------------------------
See accompanying notes to financial statements. ANIKA RESEACH, INC. Statements of Cash Flows (Unaudited)
Three months ended, Nov. 30, Nov. 30, 1996 1995 - -------------------------------------------------------------------------------- Cash flows from operating activities: Net loss ($924,387) ($515,502) Adjustments to reconcile net loss to net cash provided by (used for) operating activities: Depreciation and amortization 99,398 82,092 Amortization of unearned stock compensation 70,313 - Common stock issued to 401(k) plan 21,103 17,412 Changes in operating assets and liabilities: Accounts receivable (226,059) (335,987) Inventories (80,118) 88,353 Prepaid expenses 129,427 90,567 Accounts payable and accrued expenses 19,733 173,964 - -------------------------------------------------------------------------------- Net cash used for operating activities (890,590) (399,101) - -------------------------------------------------------------------------------- Cash flows used for investing activities: Additions to property and equipment (44,048) (196,781) - -------------------------------------------------------------------------------- Net cash used for investing activities (44,048) (196,781) - -------------------------------------------------------------------------------- Cash flows provided by financing activities: Expenses from issuance of preferred stock - (4,710) Proceeds from exercise of stock options 179,374 - - -------------------------------------------------------------------------------- Net cash provided by (used for) financing activities 179,374 (4,710) - -------------------------------------------------------------------------------- Decrease in cash and cash equivalents (755,264) (600,592) Cash and cash equivalents at beginning of period 3,651,023 2,824,663 - -------------------------------------------------------------------------------- Cash and cash equivalents at end of period $2,895,759 $2,224,071 ================================================================================
See accompanying notes to financial statements. PART I: FINANCIAL INFORMATION Item 1: Financial Statements (Continued) ANIKA RESEARCH, INC. Notes to Financial Statements ----------------------------- This Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference are discussed throughout this form 10-QSB and are discussed in the section entitled "Certain Factors Affecting Future Operating Results" of this Form 10-QSB. (1) Nature of Business ------------------ Anika Research, Inc. ("Anika" or the "Company") develops and manufactures hyaluronic acid ("HA") products for use in surgical and therapeutic medical applications. Hyaluronic acid is a naturally occurring biopolymer found in the body that coats, protects, and lubricates soft tissues. Anika currently manufactures AMVISC/(R)(1)/, an HA-based viscoelastic used in ophthalmic surgery for Chiron Vision, a subsidiary of Chiron Corporation. Anika also manufactures HYVISC/(R)/, an HA-based product used to treat equine osteo- arthritis, for Boehringer Ingelheim Animal Health, Inc. in the United States. Commencing on December 31, 1996, Anika Research, Inc. will be changing its fiscal year from an August 31 year end to a calendar year end. (2) Basis of Presentation --------------------- The accompanying financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, these financial statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position of the Company as of November 30, 1996, the results of operations for the three months ended November 30, 1996 and 1995 and the cash flows for the three months ended November 30, 1996 and 1995. The accompanying financial statements and related notes should be read in conjunction with the Company's annual financial statements filed with the Annual Report on Form 10K-SB for the year ended August 31, 1996. The results of operations for the three months ended November 30, 1996 are not necessarily indicative of the results to be expected for the full year. 1) AMVISC is a registered trademark of Chiron Vision (3) Earnings Per Share ------------------ Earnings per share is computed based on the weighted average number of common shares outstanding, adjusted, when dilutive, for the number of shares issuable upon the conversion of Series A Redeemable Convertible Preferred Stock and the assumed exercise of stock options and warrants after the assumed repurchase of shares with the related proceeds. (4) Other Long-Term Liabilities --------------------------- Other long-term liabilities consist of the following: Nov 30, 1996 Aug 31, 1996 ------------ ------------ Advance rent payment 200,000 200,000 -------- -------- $200,000 $200,000 ======== ======== (5) Common Stock ------------ In March, 1996 the Company completed a financing involving the private placement of 1,455,000 shares of newly issued Common Stock to institutional and private accredited investors. Total gross proceeds were $3,968,700 and net proceeds to the Company after fees and expenses were $3,541,585. In addition, the Company granted certain registration rights and filed a registration statement with the Securities and Exchange Commission that was declared effective by the Securities and Exchange Commission on May 23, 1996. The proceeds from the private placement were used to repay a $1,000,000 debt obligation and for general working capital purposes. In connection with the private placement of newly issued Common Stock in March, 1996, the Company issued warrants to the placement agent for 146,664 shares of Common Stock exercisable at $4.00 per share and warrants for 57,036 shares of Common Stock exercisable at $3.00 per share. (6) Subsequent Event ---------------- On January 8, 1997 the shareholders approved a change in the name of the Company from Anika Research, Inc. to Anika Therapeutics, Inc. PART I: FINANCIAL INFORMATION Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations --------------------- Net sales of hyaluronic acid products for the first quarter ended November 30, 1996 totalled $1,070,000, an increase of $208,000 over the $862,000 recorded in net sales for the first quarter of the prior year. Anika's gross profit as a percentage of net sales was 7.6% for the first quarter of 1997, an increase of 3.4% from the 4.2% recorded over the same quarter in 1996. The increase for the quarter is attributable to a favorable mix of HA products. Research and development expenses for the first quarter ended November 30, 1996 increased by $294,000 to $595,000 from $301,000 for the same period last fiscal year. The increase in spending for the three months ended November 30, 1996 is attributable to expenses associated with the ORTHOVISC clinical trial. Selling, general and administrative expenses for the first quarter ended November 30, 1996 increased by $194,000 to $457,000 from $262,000 for the same period last fiscal year. The increase for the three months ended November 30, 1996 is attributable to additional marketing and administrative staff. Liquidity and Capital Resources ------------------------------- In March, 1996 the Company completed a financing involving the private placement of 1,455,000 shares of newly issued Common Stock to institutional and private accredited investors. Total gross proceeds were approximately $4 million and net proceeds to the Company after fees and expenses were approximately $3,542,000. In connection with the private placement, the Company issued to the placement agent 57,036 warrants to purchase Common Stock exercisable at $3.00 per share and 146,664 warrant to purchase Common Stock exercisable at $4.00 per share. In addition, the Company granted certain registration rights and filed a registration statement with the Securities and Exchange Commission registering the securities which was declared effective by the Securities and Exchange Commission in May 1996. The proceeds from the private placement were used to repay the $1,000,000 debt obligation and general working capital purposes. On May 17, 1995, the Company raised through a private placement $2,235,642, net of offering costs, from the issuance of 120,970 shares of Series A Redeemable Convertible Preferred Stock ("Series A stock") at a selling price of $20.00 per share. Each share of the Series A stock is entitled to receive an annual dividend on May 1 of each year, at a rate of $1.80 per share, payable in additional shares of Series A stock, with the number of dividend shares determined by the price of Anika's underlying common stock. The Company may elect to pay the dividend in cash if certain financial covenants are met. During each consecutive ninety day period in which the average quarterly price of Anika's common stock remains above $6.00 per share, no dividend will accrue. Anika believes that its cash on hand of $2,896,000 at November 30, 1996 will fund calendar 1997 operating expenses including the cost of the ORTHOVISC clinical trial. However, there can be no assurance that the cash on hand will be sufficient for this period of time if actual costs and expenses are higher than anticipated. Commencing January 1, 1997, the Company will be supplying AMVISC to Chiron Vision under a new five year supply contract that has selling prices that are substantially higher than the current contract. Revenues from the AMVISC supply contract should provide the Company with improved gross margins. CERTAIN FACTORS AFFECTING FUTURE OPERATING RESULTS This Form 10-QSB contains forward-looking statements within th meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company's actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include, among other factors noted herein, the following: Need for Additional Funds; Liquidity. Anika currently expects that its cash on hand will fund calendar 1997 operating expenses including the cost of the ORTHOVISC/(R)/ clinical trial. However, higher than anticipated costs and expenses may result in insufficient cash on hand which could create a need for additional financing. The ability of Anika to obtain financing is dependent on the status of Anika's future business prospects as well as conditions prevailing in the relevant capital markets. No assurance can be given that any additional financing will be made available to Anika or will be available on acceptable terms should such a need arise. Competition. Anika competes with many companies, including large pharmaceutical companies, specialized medical products companies, academic institutions, governmental agencies and other research organizations which may be involved in research, development and commercialization of HA products. Successful commercialization of a particular HA product will depend in large part upon the ability of Anika to complete clinical studies and obtain FDA marketing and foreign regulatory approvals prior to its competitors. History of Losses; Uncertainty of Future Profitability. Anika has incurred operating losses since its inception in May 1993 and has accumulated net losses of approximately $8 million as of November 30, 1996. The continued development of Anika's products will require the commitment of substantial resources to conduct research and preclinical and clinical development programs, and to establish sales and marketing capabilities. Anika expects to incur substantial and increasing operating losses until at least 1997. The amount of net losses and the time required by Anika to reach sustained profitability are highly uncertain and to achieve profitability Anika must, among other things, successfully complete development of certain of its products, obtain regulatory approvals and establish sales and marketing capabilities for certain of its products. There can be no assurance that Anika will be able to achieve profitability at all or on a sustained basis. Comprehensive Government Regulation; No Assurance of FDA Approval. Anika's research, development, manufacturing activities and the future marketing of products by Anika are subject to regulation for safety and efficacy by numerous governmental authorities in the United States and other countries. These regulations can be costly, regulatory approvals may take many years, and they can be subject to change and unanticipated delays. Anika cannot predict what impact, if any, such changes might have on its business. There can be no assurance that approvals of Anika's products, processes or facilities will be granted or that Anika will obtain the financing needed to develop certain products. Any failure to obtain, or delay in obtaining, such approvals could adversely affect the ability of Anika to market its products. In addition, requirements relating to the conduct of clinical trials, product licensing, pricing and reimbursement vary widely from country to country. Anika or the FDA may suspend clinical trials at any time upon a determination that the subjects or patients are being exposed to an unacceptable adverse health risk ascribable to Anika's products. If clinical studies are suspended, Anika may be unable to continue the development of the investigational products affected. Dependence on Patents and Proprietary Technology. Anika has a policy of seeking patent protection for patentable aspects of its proprietary technology. However, no assurance can be given that any application filings or issued patents will provide Anika with a competitive advantage or will not be successfully challenged by third parties. Other entities have filed patent applications for or have been issued patents concerning various aspects of HA-related products or processes. There can be no assurance that the products or processes developed by Anika will not infringe the patent rights of others in the future. Anika also relies upon trade secrets and proprietary know-how. However, there can be no assurance that confidentiality agreements, which Anika employees generally sign, will be effective in protecting trade secrets or that third parties will not independently develop substantially equivalent or better technology. Dependence Upon Marketing Partners. Anika does not plan to directly market and sell its products to customers. Therefore, Anika's success will be dependent upon the efforts of its marketing partners and the terms and conditions of Anika's relationships with such marketing partners. In addition, Anika will need to obtain the assistance of additional marketing partners for new products which are brought to market and existing products brought to new markets, and there can be no assurance that such additional partners will be available or that such partners will agree to market Anika's products on acceptable terms. Exposure to Product Liability Claims. The testing, marketing and sale of human health care products entail an inherent risk of allegations of product liability, and there can be no assurance that substantial product liability claims will not be asserted against Anika. Although Anika has not incurred any material product liability to date and coverage under its $1,000,000 insurance policy may be adequate to cover such claims should they arise, there can be no assurance that material claims will not arise in the future or that Anika's insurance will be adequate to cover all situations. Dependence upon Key Personnel. The future success of Anika is highly dependent on the members of its management and scientific staff, the loss of one or more of whom could have a material adverse effect on Anika. Anika faces significant competition for highly skilled scientific, management and marketing personnel from other companies, research and academic institutions, government entities and other organizations. There can be no assurance that Anika will be successfully in hiring or retaining the personnel it requires and failure to do so could materially and adversely affect Anika's prospects. Part II: OTHER INFORMATION Item 4: Submission of Matters to a Vote of Security Holders --------------------------------------------------- At the Company's Annual Meeting of Stockholders held on January 8, 1997, the following proposals were adopted by the vote specified below:
Broker Proposal For Against Abstain Non-votes -------- --- ------- ------- --------- 1. Election of two Directors: Joseph L. Bower 4,232,372 - 14,008 - Eugene A. Davidson 4,232,872 - 13,508 - 2. Approval of Amendment to the Company's Articles of Organization to change the name of the Company from Anika Research, Inc. to Anika Therapeutics, Inc. 5,452,094 28,178 3,659 17,189 3. Ratification of KPMG Peat Marwick as independent auditors 5,483,096 12,665 5,379 -
Item 6: Exhibits and Reports on Form 8-K -------------------------------- (a) Exhibit No. Description 3.1 Amendment to amended and restated Articles of Organization of Anika Research, Inc. "Anika" as amended. * 3.2 Amended and restated Articles of Organization of Anika Research, Inc. as amended. *** 3.3 Certificate of Vote of Directors Establishing a Series of Convertible Preferred Stock. 3.4 Amended and Restated by-laws of Anika Research, Inc. as amended. 11 Computation of loss per share (b) The Company filed a report on Form 8-K on December 13, 1996 notifying the SEC of the appointment of Edward Ross, Jr. to the previously vacant position of vice president of sales and marketing.
* Incorporated by reference to Exhibits to the Registration Statement on Form 10 (File No. 0-21326) filed by Anika on March 5, 1993. *** Incorporated by reference to Exhibits to Anika's Form 10-Q/A for the quarterly period ended May 31, 1995 as filed by Anika on July 29, 1995. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on January 14, 1997. ANIKA THERAPEUTICS, INC. DATE: January 14, 1997 BY: /s/ J.Melville Engle ----------------------------- J. Melville Engle Chief Executive Officer DATE: January 14, 1997 BY: /s/ Sean F. Moran ----------------------------- Sean F. Moran Chief Financial Officer

 
                                                                     EXHIBIT 3.1

__________
Examiner


__________
Name
Approved


                                       C
                                       P
                                       M
                                      R.A.


__________
P.C.

                                                                  NO. 04-3145961
                                                                      ----------

                       THE COMMONWEALTH OF MASSACHUSETTS
                             WILLIAM FRANCIS GALVIN
                         Secretary of the Commonwealth
             One Ashburton Place, Boston, Massachusetts  02108-1512

                                        
                             ARTICLES OF AMENDMENT
                    (GENERAL LAWS, CHAPTER 156B, SECTION 72)
 
We,         J. Melville Engle                                      , *President,
    ---------------------------------------------------------------

and         Sean F. Moran                                          , *Clerk,
    ---------------------------------------------------------------

of                             Anika Research, Inc.                ,
   ----------------------------------------------------------------
                          (Exact name of corporation)

located at          236 West Cummings Park, Woburn, MA 01801       ,
           --------------------------------------------------------
                (Street address of corporation in Massachusetts)

certify that these Articles of Amendment affecting articles numbered:

                                   Article 1
- --------------------------------------------------------------------------------
          (Number those articles 1, 2, 3, 4, 5 and/or 6 being amended)

of the Articles of Organization were duly adopted at a meeting held on January 
8, 1997, by vote of:

4,197,334  shares of          Common      of   4,917,023     shares outstanding,
- ---------            --------------------    ---------------
                        (type, class & series, if any)

  125,476  shares of  Series A Preferred  of     126,259     shares outstanding,
- ---------            --------------------    ---------------
                        (type, class & series, if any)

           shares of                     of                  shares outstanding,
- ---------            --------------------    ---------------
                        (type, class & series, if any)

/1**/ being at least a majority of each type, class or series outstanding and 
      entitled to vote thereon:

            Changed name of corporation to Anika Therapeutics, Inc.

/*/ Delete the inapplicable words.    /**/ Delete the inapplicable clause.
/1/ For amendments adopted pursuant to Chapter 156B, Section 70.
/2/ For amendments adopted pursuant to Chapter 156B, Section 71.


NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON ONE SIDE ONLY OF SEPARATE 8 1/2 X
11 SHEETS OF PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE THAN
ONE ARTICLE MAY BE MADE ON A SINGLE SHEET SO LONG AS EACH ARTICLE REQUIRING EACH
ADDITION IS CLEARLY INDICATED.

                                       1

 
To change the number of shares and the par value (if any) of any type, class or
series of stock which the corporation is authorized to issue, fill in the
following:

The total presently authorized is:
 
 
WITHOUT PAR VALUE STOCKS            WITH PAR VALUE STOCKS
- ------------------------------------------------------------------
             NUMBER OF                     NUMBER OF 
TYPE          SHARES           TYPE         SHARES       PAR VALUE
- ------------------------------------------------------------------
Common:          N/A          Common:         N/A          $1.00
- ------------------------------------------------------------------

- ------------------------------------------------------------------
Preferred:       N/A          Preferred:      N/A
- ------------------------------------------------------------------

- ------------------------------------------------------------------
 
 
Change the total authorized to:
 
 
WITHOUT PAR VALUE STOCKS            WITH PAR VALUE STOCKS
- ------------------------------------------------------------------
             NUMBER OF                     NUMBER OF 
TYPE          SHARES           TYPE         SHARES       PAR VALUE
- ------------------------------------------------------------------
Common:           N/A          Common          N/A
- ------------------------------------------------------------------

- ------------------------------------------------------------------
Preferred:        N/A          Preferred:      N/A
- ------------------------------------------------------------------

- ------------------------------------------------------------------

                                       2

 
SIGNED UNDER THE PENALTIES OF PERJURY, this   8th  day of   January  , 1997,
                                            -------       ----------

/s/ J. Melville Engle                                          , *President,
- --------------------------------------------------------------
J. Melville Engle

/s/ Sean F. Moran                                                  , *Clerk.
- ------------------------------------------------------------------
Sean F. Moran


/*/ Delete the inapplicable words.

                                       3
                                               
                                                         EXHIBIT 3.4  
 
                          AMENDED AND RESTATED BY-LAWS

                                       OF

                              ANIKA RESEARCH, INC.


                            ARTICLE 1 - Stockholders
                            ------------------------

     1.1  Place of Meetings.  All meetings of stockholders shall be held within
          -----------------                                                    
the Commonwealth of Massachusetts unless the Articles of Organization permit the
holding of stockholders' meetings outside Massachusetts, in which event such
meetings may be held either within or without Massachusetts.  Meetings of
stockholders shall be held at the principal office of the Corporation unless a
different place is fixed by the Board of Directors or the President and stated
in the notice of the meeting.

     1.2  Annual Meeting.  The annual meeting of stockholders shall be held
          --------------                                                   
within six months after the end of each fiscal year of the Corporation on a date
to be fixed by the Board of Directors or the President (which date shall not be
a legal holiday in the place where the meeting is to be held) at the time and
place to be fixed by the Board of Directors or the President and stated in the
notice of the meeting.  The purposes for which the annual meeting is to be held,
in addition to those prescribed by law, by the Articles of Organization or by
these By-Laws, may be specified by the Board of Directors or the President.  If
no annual meeting is held in accordance with the foregoing provisions, a special
meeting may be held in lieu of the annual meeting, and any action taken at that
special meeting shall have the same effect as if it had been taken at the annual
meeting, and in such case all references in these By-Laws to the annual meeting
of stockholders shall be deemed to refer to such special meeting.

     1.3  Special Meetings.  Special meetings of stockholders may be called at
          ----------------                                                    
any time by the President or by the Chairman of the Board of Directors.
Business transacted at any special meeting of stockholders shall be limited to
matters relating to the purpose or purposes stated in the notice of the meeting.
Notwithstanding any other provision of law, these By-Laws or the Corporation's
Articles of Organization, as amended, and notwithstanding the fact that a lesser
percentage may be specified by law, the affirmative vote of the holders of at
least seventy-five percent (75%) of the votes which all the stockholders would
be entitled to cast at any annual election of directors or class of directors
shall be required to amend or repeal this Section 1.3 or to adopt any provision
inconsistent with this Section 1.3.

     1.4  Notice of Meetings.  A written notice of each meeting of stockholders,
          ------------------                                                    
stating the place, date and hour thereof, and the purposes for which the meeting
is to be held, shall be given by the Clerk, Assistant Clerk or other person
calling the meeting at least seven days before the meeting to each stockholder
entitled to vote at the meeting and to each stockholder who by law, by the
Articles of Organization or by these By-Laws is entitled to such notice, by
leaving such notice with him or at his residence or usual place of business, or
by mailing it

 
postage prepaid and addressed to him at his address as it appears in the records
of the Corporation.  Whenever any notice is required to be given to a
stockholder by law, by the Articles of Organization or by these By-Laws, no such
notice need be given if a written waiver of notice, executed before or after the
meeting by the stockholder or his authorized attorney, is filed with the records
of the meeting.

     1.5  Quorum.  Unless the Articles of Organization otherwise provide, the
          ------                                                             
holders of a majority of the number of shares of the stock issued, outstanding
and entitled to vote on any matter shall constitute a quorum with respect to
that matter, except that if two or more classes of stock are outstanding and
entitled to vote as separate classes, then in the case of each such class a
quorum shall consist of the holders of a majority of the number of shares of the
stock of that class issued, outstanding and entitled to vote.  Shares owned
directly or indirectly by the Corporation shall not be counted in determining
the total number of shares outstanding for this purpose.

     1.6  Adjournments.  Except as provided in Section 1.3 hereof, any meeting
          ------------                                                        
of stockholders may be adjourned to any other time and to any other place at
which a meeting of stockholders may be held under these By-Laws by the
stockholders present or represented at the meeting, although less than a quorum,
or by any officer entitled to preside or to act as clerk of such meeting, if no
stockholder is present.  It shall not be necessary to notify any stockholder of
any adjournment.  Any business which could have been transacted at any meeting
of the stockholders as originally called may be transacted at any adjournment of
the meeting.

     1.7  Voting and Proxies.  Each stockholder shall have one vote for each
          ------------------                                                
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
by the Articles of Organization. Stockholders may vote either in person or by
written proxy dated not more than six months before the meeting named in the
proxy.  Proxies shall be filed with the clerk of the meeting, or of any
adjourned meeting, before being voted.  Except as otherwise limited by their
terms, a proxy shall entitle the persons named in the proxy to vote at any
adjournment of such meeting, but shall not be valid after final adjournment of
such meeting.  A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by any one of them, unless at or prior to
exercise of the proxy the Corporation receives a specific written notice to the
contrary from any one of them.  A proxy purported to be executed by or on behalf
of a stockholder shall be deemed valid unless challenged at or prior to its
exercise.

     1.8  Action at Meeting.  When a quorum is present at any meeting, the
          -----------------                                               
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter), shall decide
any matter to be voted on by the stockholders, except when a larger vote is
required by law, the Articles of Organization or these By-Laws.  Any election by
stockholders shall be determined by a plurality of the votes cast by the
stockholders entitled to vote at the 

                                       2

 
election. No ballot shall be required for such election unless requested by a
stockholder present or represented at the meeting and entitled to vote in the
election. The Corporation shall not directly or indirectly vote any share of its
own stock.

     1.9  Introduction of Business at Meeting.  Except as otherwise provided by
          -----------------------------------                                  
law, at any annual or special meeting of stockholders only such business shall
be conducted as shall have been properly brought before the meeting.  In order
to be properly brought before the meeting, such business must have been either
(A) specified in the written notice of the meeting (or any supplement thereto)
given to stockholders of record on the record date for such meeting by or at the
direction of the Board of Directors, (B) brought before the meeting at the
direction of the Board of Directors or the chairman of the meeting or (C)
specified in a written notice given by or on behalf of a stockholder of record
on the record date for such meeting entitled to vote thereat or a duly
authorized proxy for such stockholder, in accordance with all of the following
requirements.  A notice referred to in clause (C) hereof must be delivered
personally to or mailed to and received at the principal executive office of the
Corporation, addressed to the attention of the Clerk, not more than ten (10)
days after the date of the initial notice referred to in clause (A) hereof, in
the case of business to be brought before a special meeting of stockholders, and
not less than thirty (30) days prior to the first anniversary date of the
initial notice referred to in clause (A) hereof to the previous year's annual
meeting, in the case of business to be brought before an annual meeting of
stockholders; provided, however, that such notice shall not be required to be
              --------  -------                                              
given more than sixty (60) days prior to an annual meeting of stockholders.
Such notice referred to in clause (C) hereof shall set forth (i) a full
description of each such item of business proposed to be brought before the
meeting, (ii) the name and address of the person proposing to bring such
business before the meeting, (iii) the class and number of shares held of
record, held beneficially and represented by proxy by such person as of the
record date for the meeting (if such date has been made publicly available) and
as of the date of such notice, (iv) if any item of such business involves
nomination for director, all information regarding each such nominee that would
be required to be set forth in a definitive proxy statement filed with the
Securities and Exchange Commission pursuant to Section 14 of the Securities
Exchange Act of 1934, as amended, or any successor thereto, and the written
consent of each such nominee to serve if elected, and (v) all other information
that would be required to be filed with the Securities and Exchange Commission
if, with respect to the business proposed to be brought before the meeting, the
person proposing such business was a participant in a solicitation subject to
Section 14 of the Securities Exchange Act of 1934, as amended, or any successor
thereto.  No business shall be brought before any meeting of stockholders of the
Corporation otherwise than as provided in this paragraph.

     Notwithstanding the foregoing provisions, the Board of Directors shall be
obligated to include information as to any nominee for director in any proxy
statement or other communication sent to stockholders.

     The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any proposed item of business was not brought before
the meeting in accordance 

                                       3

 
with the foregoing procedure and, if he should so determined, he shall so
declare to the meeting and the defective item of business shall be disregarded.

     1.10  Action without Meeting.  Until the Corporation becomes subject to the
           ----------------------                                               
reporting requirements of the Securities Exchange Act of 1934 (the "Triggering
Event"), any action required or permitted to be taken at any annual or special
meeting of stockholders of the Corporation may be taken without a meeting,
without prior notice and without a vote, if a consent in writing, setting forth
the action so taken, is signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote on such
action were present and voted.  Prompt notice of the taking of corporate action
without a meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing.  Effective upon the date of the
Triggering Event, stockholders of the Corporation may not take any action by
written consent in lieu of a meeting.  Notwithstanding any other provision of
law, these By-Laws or the Corporation's Articles or Organization, and
notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of seventy-five percent (75%) of the votes which
all the stockholders would be entitled to cast at any annual election of
directors or class of directors shall be required to amend or repeal, or to
adopt any provision inconsistent with, this Section 1.9.


                             ARTICLE 2 - Directors
                             ---------------------

     2.1  Powers.  The business of the Corporation shall be managed by a Board
          ------                                                              
of Directors, who may exercise all the powers of the Corporation except as
otherwise provided by law, by the Articles of Organization or by these By-Laws.
In the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full Board
until the vacancy is filled.

     2.2  Number, Election and Qualification.  The number of Directors which
          ----------------------------------                                
shall constitute the whole Board of Directors shall be determined by vote of the
stockholders or the Board of Directors, but shall consist of not less than three
Directors (except that whenever there shall be only two stockholders the number
of Directors shall be not less than two and whenever there shall be only one
stockholder or prior to the issuance of any stock, there shall be at least one
Director).  The number of Directors may be decreased at any time and from time
to time either by the stockholders or by a majority of the Directors then in
office, but only to eliminate vacancies existing by reason of the death,
resignation, removal or expiration of the term of one or more Directors.  The
Directors shall be elected at the annual meeting of stockholders by such
stockholders as have the right to vote on such election.  No Director need be a
stockholder of the Corporation.  The number of Directors may be increased at any
time and from time to time by the stockholders or by a majority of the Directors
then in office.

     2.3  Classes of Directors.  The Board of Directors shall be and is divided
          --------------------                                                 
into three classes:  Class I, Class II and Class III.  No one class shall have
more than one director more 

                                       4

 
than any other class. If a fraction is contained in the quotient arrived at by
dividing the authorized number of directors by three, then, if such fraction is
one-third, the extra directors shall be a member of Class I and, if such
fraction is two-thirds, one of the extra directors shall be a member of Class I
and the other extra director shall be a member of Class II, unless otherwise
provided for from time to time by resolution adopted by a majority of the Board
of Directors.

     2.4  Election of Directors.  Elections of directors need not be by written
          ---------------------                                                
ballot except as and to the extent provided in the By-Laws of the Corporation.

     2.5  Terms of Office.  Each director shall serve for a term ending on the
          ---------------                                                     
date of the third annual meeting following the annual meetings at which such
director was elected; provided, however, that each initial director in Class I
                      --------  -------                                       
shall serve for a term ending on the date of the annual meeting next following
the end of the Corporation's fiscal year ending August 31, 1994; each initial
director in Class II shall serve for a term ending on the date of the annual
meeting next following the end of the Corporation's fiscal year ending August
31, 1995; and each initial director in Class III shall serve for a term ending
on the date of the annual meeting next following the end of the Corporation's
fiscal year ending August 31, 1996.

     2.6  Allocation of Directors Among Classes in the Event of Increases or
          ------------------------------------------------------------------
Decreases in the Number of Directors.  In the event of any increase or decrease
- ------------------------------------                                           
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he is a member
until the expiration of his current term or his prior death, retirement or
resignation and (ii) the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so as to ensure than no one class has more
than one director more than any other class.  To the extent possible, consistent
with the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of office are to expire at the earliest dates
following such allocation, unless otherwise provided for form time to time by
resolution adopted by a majority of the directors then in office, although less
than a quorum.

     2.7  Tenure.  Notwithstanding any provisions to the contrary contained
          ------                                                           
herein, each director shall hold office until his successor is elected and
qualified, or until his earlier death, resignation or removal.

     2.8  Vacancies.  Any vacancy in the Board of Directors, however occurring,
          ---------                                                            
including a vacancy resulting from an enlargement of the Board, may be filled by
a vote of a majority of directors then in office.  A director elected to fill a
vacancy shall be elected for the unexpired term of his predecessor in office, if
applicable, and a director chosen to fill a position resulting from an increase
in the number of directors shall hold office until the next 

                                       5

 
election of the class for which such director shall have been chosen and until
his successor is elected or qualified, or until his earlier death, resignation
or removal.

     2.9  Resignation.  Any Director may resign by delivering his written
          -----------                                                    
resignation to the Corporation at its principal office or to the President or
Clerk.  Such resignation shall be effective upon receipt unless it is specified
to be effective at some other time or upon the happening of some other event.

     2.10  Removal.  A Director may be removed from office with or without cause
           -------                                                              
by vote of the holders of a majority of the shares entitled to vote in the
election of Directors. However, the Directors elected by the holders of a
particular class or series of stock may be removed from office with or without
cause only by vote of the holders of a majority of the outstanding shares of
such class or series.  In addition, a Director may be removed from office for
cause by vote of a majority of the Directors then in office.  A Director may be
removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him.

     2.11  Regular Meetings.  Regular meetings of the Directors may be held
           ----------------                                                
without call or notice at such places, within or without Massachusetts, and at
such times as the Directors may from time to time determine, provided that any
Director who is absent when such determination is made shall be given notice of
the determination.  A regular meeting of the Directors may be held without a
call or notice immediately after and at the same place as the annual meeting of
stockholders.  Meetings of the Directors shall be held at least once in every
fiscal quarter of the Company.

     2.12  Special Meetings.  Special meetings of the Directors may be held at
           ----------------                                                   
any time and place, within or without Massachusetts, designated in a call by the
Chairman of the Board, President, Treasurer, two or more Directors, any one
Director who is a member of the Executive Committee or by one Director in the
event that there is only a single Director in office.

     2.13  Meetings by Telephone Conference Calls.  Directors or members of any
           --------------------------------------                              
committee designated by the Directors may participate in a meeting of the
Directors or such committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time and participation by such means
shall constitute presence in person at a meeting.

     2.14  Notice of Special Meetings.  Notice of any special meeting of the
           --------------------------                                       
Directors shall be given to each Director by the Clerk or by the officer or one
of the Directors calling the meeting.  Notice shall be duly given to each
Director (i) by notice given to such Director in person or by telephone at least
48 hours in advance of the meeting, (ii) by sending a telegram or telecopy, or
by delivering written notice by hand to his last known business or home address
at least 48 hours in advance of the meeting, or (iii) by mailing written notice
to his last known business or home address at least 72 hours in advance of the
meeting.  Notice 

                                       6

 
need not be given to any Director if a written waiver of notice, executed by him
before or after the meeting, is filed with the records of the meeting, or to any
Director who attends the meeting without protesting prior to the meeting or at
its commencement the lack of notice to him. A notice or waiver of notice of a
Directors' meeting need not specify the purposes of the meeting. If notice is
given in person or by telephone, an affidavit of the Clerk, officer or Director
who gives such notice that the notice has been duly given shall, in the absence
of fraud, be conclusive evidence that such notice was duly given.

     2.15  Quorum.  A majority of the total number of the whole Board of
           ------                                                       
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the number so fixed constitute a quorum.  In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.

     2.16  Action at Meeting.  At any meeting of the Board of Directors at which
           -----------------                                                    
a quorum is present, the vote of a majority of those present shall be sufficient
to take any action, unless a different vote is specified by law, by the Articles
of Organization or by these By-Laws.

     2.17  Action by Consent.  Any action required or permitted to be taken at
           -----------------                                                  
any meeting of the Board of Directors may be taken without a meeting if all the
Directors consent to the action in writing and the written consents are filed
with the records of the Directors' meetings.  Each such consent shall be treated
for all purposes as a vote at a meeting.

     2.18  Committees.  The Board of Directors may, by vote of a majority of the
           ----------                                                           
Directors then in office, elect from their number an executive committee or
other committees and may by like vote delegate to committees so elected some or
all of their powers to the extent permitted by law.  Except as the Board of
Directors may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Directors or in
such rules, its business shall be conducted as nearly as possible in the same
manner as is provided by these By-Laws for the Directors.  The Board of
Directors shall have the power at any time to fill vacancies in any such
committee, to change its membership or to discharge the committee.

     2.19  Executive Committee.  The Executive Committee of the Board of
           -------------------                                          
Directors shall consist of up to four members.  The Executive Committee will be
responsible for formulating and establishing a strategic business plan for the
future and presenting same to the full Board of Directors.  The Executive
Committee will review and approve the Annual Operating Plan before it is
submitted to the Board of Directors for formal approval.  The Executive
Committee will review and monitor actual business and financial performance
against the Annual Operating Plan and the Strategic Plan and report to the full
Board of

                                       7

 
Directors thereon. The Executive Committee will be responsible for reviewing
the operating activities of the Company including sales and marketing,
regulatory, manufacturing, product development, finance and administration. The
Executive Committee shall meet at least once every calendar month until the
Corporation shall have positive net income for a fiscal year.

     2.20  Compensation of Directors.  Directors may be paid such compensation
           -------------------------                                          
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine.  No such payment
shall preclude any Director from serving the Corporation in any other capacity
and receiving compensation therefor.

     2.21  Consent to Certain Actions.  The approval of two-thirds of the Board
           --------------------------                                          
of Directors shall be required to take any of the actions set forth in Section 8
of the Series A Preferred Stock Purchase Agreement dated as of May __, 1995 by
and among the Corporation and the investors listed on Schedule 1 thereto to the
extent such actions would otherwise be prohibited by such Section 8 unless such
prohibition is waived by the holders of the Corporation's Series A Preferred
Stock.

                              ARTICLE 3 - Officers
                              --------------------

     3.1  Enumeration.  The officers of the Corporation shall consist of a
          -----------                                                     
President, a Treasurer, a Clerk and such other officers with such other titles
as the Board of Directors may determine, including, but not limited to, a
Chairman of the Board, a Vice Chairman of the Board, a Clerk and one or more
Vice Presidents, Assistant Treasurers, and Assistant Clerks.

     3.2  Election.  The president, Treasurer and Clerk shall be elected
          --------                                                      
annually by the Board of Directors at their first meeting following the annual
meeting of stockholders.  Other officers may be chosen or appointed by the Board
of Directors at such meeting or at any other meeting.

     3.3  Qualification.  Neither the President nor any other officer need be a
          -------------                                                        
director or stockholder.  Any two or more offices may be held by the same
person.  The Clerk shall be a resident of Massachusetts unless the Corporation
has a resident agent appointed for the purpose of service of process.  Any
officer may be required by the Directors to give bond for the faithful
performance of his duties to the Corporation in such amount and with such
sureties as the Directors may determine.  The premiums for such bonds may be
paid by the Corporation.

     3.4  Tenure.  Except as otherwise provided by law, by the Articles of
          ------                                                          
Organization or by these By-Laws, the President, Treasurer and Clerk shall hold
office until the first meeting of the Directors following the next annual
meeting of stockholders and until their respective successors are chosen and
qualified; and all other officers shall hold office until the first meeting of
the Directors following the annual meeting of stockholders, unless a different
term is specified in the vote choosing or appointing them, or until his earlier
death, resignation or removal.

                                       8

 
     3.5  Resignation and Removal.  Any officer may resign by delivering his
          -----------------------                                           
written resignation to the Corporation at its principal office or to the
President, or Clerk.  Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of some
other event.

     Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of Directors then in office.  An officer may be
removed for cause only after reasonable notice and opportunity to be heard by
the Board of Directors prior to action thereon.

     Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his compensation be by the month or the year or
otherwise, unless such compensation is expressly provided in a duly authorized
written agreement with the Corporation.

     3.6  Vacancies.  The Board of Directors may fill any vacancy occurring in
          ---------                                                           
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Clerk.  Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is chosen and qualified, or until he sooner
dies, resigns or is removed.

     3.7  Chairman of the Board and Vice-Chairman of the Board.  The Board of
          ----------------------------------------------------               
Directors may appoint a Chairman of the Board and may designate him as Chief
Executive Officer.  If the Board of Directors appoints a Chairman of the Board,
he shall perform such duties and possess such powers as are assigned to him by
the Board of Directors.  If the Board of Directors appoints a Vice-Chairman of
the Board, he shall, in the absence or disability of the Chairman of the Board,
perform the duties and exercise the powers of the Chairman of the Board and
shall perform such other duties and possess such other powers as may from time
to time be vested in him by the Board of Directors.

     3.8  President.  The President shall, subject to the direction of the Board
          ---------                                                             
of Directors, have general charge and supervision of the business of the
Corporation.  Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a Director, at all
meetings of the Board of Directors.  Unless the Board of Directors has
designated the Chairman of the Board or another officer as Chief Executive
Officer, the President shall be the Chief Executive Officer of the Corporation.
The President shall perform such other duties and shall possess such other
powers as the Board of Directors may from time to time prescribe.

     3.9  Vice Presidents.  Any Vice President shall perform such duties and
          ---------------                                                   
possess such powers as the Board of Directors or the President may from time to
time prescribe.  In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors)

                                       9

 
shall perform the duties of the President and when so performing shall have all
the powers of and be subject to all the restrictions upon the President.  The
Board of Directors may assign to any Vice President the title of Executive Vice
President, Senior Vice President or any other title selected by the Board of
Directors.

     3.10  Treasurer and Assistant Treasurers.  The Treasurer shall perform such
           ----------------------------------                                   
duties and shall have such powers as may from time to time be assigned to him by
the Board of Directors or the President.  In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the Corporation, to deposit funds of
the Corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
Corporation.

     The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the President or the Treasurer may from time to time
prescribe.  In the event of the absence, inability or refusal to act of the
Treasurer, the Assistant Treasurer (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.

     3.11  Clerk and Assistant Clerks.  The Clerk shall perform such duties and
           --------------------------                                          
shall possess such powers as the Board of Directors or the President may from
time to time prescribe. In addition, the Clerk shall perform such duties and
have such powers as are incident to the office of the clerk, including without
limitation the duty and power to give notices of all meetings of stockholders
and special meetings of the Board of Directors, to attend all meetings of
stockholders and the Board of Directors and keep a record of the proceedings, to
maintain a stock ledger and prepare lists of stockholders and their addresses as
required, to be custodian of corporate records and the corporate seal and to
affix and attest to the same on documents.

     Any Assistant Clerk shall perform such duties and possess such powers as
the Board of Directors, the President or the Clerk may from time to time
prescribe.  In the event of the absence, inability or refusal to act of the
Clerk, the Assistant Clerk (or if there shall be more than one, the Assistant
Clerks in the order determined by the Board of Directors) shall perform the
duties and exercise the powers of the Clerk.

     In the absence of the Clerk or any Assistant Clerk at any meeting of
stockholders or Directors, the person presiding at meeting shall designate a
temporary clerk to keep a record of the meeting.

     3.12  Salaries.  Officers of the Corporation shall be entitled to such
           --------                                                        
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.

                                      10

 
                           ARTICLE 4 - Capital Stock
                           -------------------------

     4.1  Issue of Capital Stock.  Unless otherwise voted by the stockholders,
          ----------------------                                              
the whole or any part of any unissued balance of the authorized capital stock of
the Corporation or the whole or any part of the capital stock of the Corporation
held in its treasury may be issued or disposed of by vote of the Board of
Directors, in such manner, for such consideration and on such terms as the
Directors may determine.

     4.2  Certificate of Stock.  Each stockholder shall be entitled to a
          --------------------                                          
certificate of the capital stock of the Corporation in such form as may be
prescribed from time to time by the Directors.  The certificate shall be signed
by the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, but when a certificate is countersigned by a transfer agent or a
registrar, other than a Director, officer or employee of the Corporation, such
signature may be a facsimile.  In case any officer who has signed or whose
facsimile signature has been placed upon such certificate shall have ceased to
be such officer before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer at the time of its
issue.

     Every certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Articles of Organization, the By-Laws, applicable
securities laws or any agreement to which the Corporation is a party, shall have
conspicuously noted on the face or back of the certificate either the full text
of the restriction or a Stockholder of the existence of such restrictions and a
statement that the Corporation will furnish a copy of the restrictions to the
holder of such certificate upon written request and without charge.  Every
certificate issued when the Corporation is authorized to issue more than one
class or series of stock shall set forth on its face or back either the full
text of the preferences, voting powers, qualifications and special and relative
rights of the shares of each class and series authorized to be issued or a
statement of the existence of such preferences, powers, qualifications and
rights and a statement that the Corporation will furnish a copy thereof to the
holder of such certificate upon written request and without charge.

     4.3  Transfers.  Subject to the restrictions, if any, stated or noted on
          ---------                                                          
the stock certificates, shares of stock may be transferred on the books of the
Corporation by the surrender to the Corporation or its transfer agent of the
certificate representing such shares properly endorsed or accompanied by a
written assignment or power of attorney properly executed, and with such proof
of authority or the authenticity of signature as the Corporation or its transfer
agent may reasonably require.  Except as may be otherwise required by law, by
the Articles of Organization or by these By-Laws, the Corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect thereto, regardless of a any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the Corporation in accordance with the requirements of these By-Laws.

                                      11

 
     It shall be the duty of each stockholder to notify the Corporation of his
post office address and of his taxpayer identification number.

     4.4  Record Date.  The Board of Directors may fix in advance a time not
          -----------                                                       
more than 60 days preceding the date of any meeting of stockholders or the date
for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of stockholders may
be effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting, and any
adjournment, or the right to receive such dividend or distribution or the right
to give such consent or dissent.  In such case only stockholders of record on
such record date shall have such right, notwithstanding any transfer of stock on
the books of the Corporation after the record date.  Without fixing such record
date the Directors may for any of such purposes close the transfer books for all
or any part of such period.

     If no record date is fixed and the transfer books are not closed, the
record date for determining the stockholders having the right to notice of or to
vote at a meeting of stockholders shall be at the close of business on the day
before the day on which notice is given, and the record date for determining the
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors acts with respect to such purpose.

     4.5  Replacement of Certificates.  In case of the alleged loss or
          ---------------------------                                 
destruction or the mutilation of a certificate of stock, a duplicate certificate
may be issued in place of the lost, destroyed or mutilated certificate, upon
such terms as the Directors may prescribe, including the presentation of
reasonable evidence of such loss, destruction or mutilation and the giving of
such indemnity as the Directors may require for the protection of the
Corporation or any transfer agent or registrar.


                      ARTICLE 5 - Miscellaneous Provisions
                      ------------------------------------

     5.1  Fiscal Year.  Except as otherwise set forth in the Articles of
          -----------                                                   
Organization or as otherwise determined from time to time by the Board of
Directors, the fiscal year of the Corporation shall in each year end on December
31.

     5.2  Seal.  The seal of the Corporation shall, subject to alteration by the
          ----                                                                  
Directors, bear its name, the word "Massachusetts" and the year of its
incorporation.

     5.3  Voting of Securities.  Except as the Board of Directors may otherwise
          --------------------                                                 
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
Corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this Corporation.

                                      12

 
     5.4  Corporate Records.  The original, or attested copies, of the Articles
          -----------------                                                    
of Organization, By-Laws and records of all meetings of the incorporators and
stockholders, and the stock records, which shall contain the names of all
stockholders and the record address and the amount of stock held by each, shall
be kept in Massachusetts at the principal office of the Corporation, or at an
office of its transfer agent or of the Clerk.  These copies and records need not
all be kept in the same office.  They shall be available at all reasonable times
for the inspection of any stockholder for any proper purpose, but not to secure
a list of stockholders for the purpose of selling the list or copies of the list
or of using the list for a purpose other than in the interest of the applicant,
as a stockholder, relative to the affairs of the Corporation.

     5.5  Evidence of Authority.  A certificate by the Clerk or an Assistant
          ---------------------                                             
Clerk, or a temporary Clerk, as to any action taken by the stockholders,
Directors, any committee or any officer or representative of the Corporation
shall as to all persons who rely on the certificate in good faith be conclusive
of such action.

     5.6  Articles of Organization.  All references in these By-Laws to the
          ------------------------                                         
Articles of Organization shall be deemed to refer to the Articles of
Organization shall be deemed to refer to the Articles of Organization of the
Corporation, as amended and in effect from time to time.

     5.7  Severability.  Any determination that any provision of these By-Laws
          ------------                                                        
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.

     5.8  Pronouns.  All pronouns used in these By-Laws shall be deemed to refer
          --------                                                              
to the masculine, feminine or neuter, singular or plural, as the identify of the
person or persons may require.


                             ARTICLE 6 - Amendments
                             ----------------------

     Unless otherwise provided for therein, these By-Laws may be amended by vote
of the holders of a majority of the shares of each class of the capital stock at
the time outstanding and entitled to vote at any annual or special meeting of
stockholders, if notice of the substance of the proposed amendment is stated in
the notice of such meeting.  If authorized by the Articles of Organization and
unless otherwise provided for therein, the Directors, by a majority of their
number then in office, may also make, amend or repeal these By-Laws, in whole or
in part, except with respect to (a) the provisions of these By-Laws governing
(i) the removal of Directors and (ii) the amendment of these By-Laws and (b) any
provision of these By-Laws which by law, the Articles of Organization or these
By-Laws requires action by the stockholders.

     Not later than the time of giving notice of the meeting of stockholders
next following the making, amending or repealing by the Directors of any By-Law,
notice stating the

                                      13

 
substance of such change shall be given to all stockholders entitled to vote on
amending the By-Laws.

     Any By-Law adopted by the Directors may be amended or repealed by the
stockholders entitled to vote or amending the By-Law.


                                      14

 
                                  EXHIBIT 11
                             ANIKA RESEARCH, INC.
          COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS PER SHARE


Three months ended November 30, 1996 1995 -------------------------- PRIMARY AND FULLY DILUTED: - ------------------------- Net loss: ($924,387) ($515,502) Weighted average number of common shares outstanding 4,898,134 3,293,264 Dilutive effect of outstanding stock options, warrants and redeemable convertible preferred stock - - ------------------------- Weighted average number of common shares as adjusted 4,898,134 3,293,264 ------------------------- Primary and fully diluted earnings per share ($0.19) ($0.16) =========================
 


5 3-MOS AUG-31-1997 SEP-01-1996 NOV-30-1996 2,895,759 0 857,975 0 2,594,398 6,720,912 4,789,971 3,564,573 7,946,310 1,461,049 0 2,582,442 0 49,203 3,653,616 7,946,310 1,070,053 1,070,053 988,042 988,042 0 0 0 (969,289) 0 (969,289) 0 0 0 (924,387) (0.19) (0.19)