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EX-32.2 - EXHIBIT 32.2 - ERBA Diagnostics, Inc.ex32-2.htm
EX-32.1 - EXHIBIT 32.1 - ERBA Diagnostics, Inc.ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - ERBA Diagnostics, Inc.ex31-1.htm
EX-31.2 - EXHIBIT 31.2 - ERBA Diagnostics, Inc.ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2015

 

Commission File Number 1-14798

 

ERBA Diagnostics, Inc.

(Exact name of registrant as specified in its charter)

 

                 Delaware                 

      11-3500746     

(State or other jurisdiction of

(I.R.S. Employer    

incorporation or organization)

Identification No.)

 

14100 NW 57th Court, Miami Lakes, Florida     33014

(Address of principal executive offices)            (Zip Code)

 

(305) 324-2300

(Registrant's telephone number, including area code)

 

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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X        No     

 

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

 

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ]
(Do not check if a smaller reporting company)

Smaller reporting company [X]

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

 

   44,086,009 shares of Common Stock, $.01 par value, outstanding as of June 12, 2015.

 

 
 

 

 

ERBA Diagnostics, Inc.

 

INDEX

 

PART I - FINANCIAL INFORMATION

PAGE NO.
         
 

Item 1

-

Financial Statements

 
 

 

     
 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2015 (unaudited) and December 31, 2014

2
         
 

 

  Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (unaudited) for the three months ended March 31, 2015 and 2014 3
         
 

 

  Condensed Consolidated Statement of Shareholders’ Equity (unaudited)for the three months ended March 31, 2015
         
      Condensed Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2015 and 2014 5
         
      Notes to Condensed Consolidated Financial Statements (unaudited) 6
         
  Item 2 -

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

16
         
 

Item 4

-

Controls and Procedures

30

         

PART II - OTHER INFORMATION

 
         
 

Item 1

-

Legal Proceedings

32

         
 

Item 6

-

Exhibits

32

 

 
1

 

 

ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

As of March 31, 2015 and December 31, 2014

 

   

March 2015

   

2014

 
   

(Unaudited)

         
ASSETS              
                 

CURRENT ASSETS:

               

Cash and cash equivalents

  $ 2,060,000     $ 2,548,295  

Accounts receivable, net

    5,531,524       6,414,895  

Inventories, net

    7,934,312       6,999,335  

Related party receivables

    928,906       1,489,461  

Other current assets

    392,978       1,029,982  

Total current assets

    16,847,720       18,481,968  

 

               

PROPERTY, PLANT AND EQUIPMENT:

               

Land

    352,957       352,957  

Buildings and improvements

    3,929,133       3,794,422  

Machinery and equipment

    4,068,479       4,063,424  

Furniture and fixtures

    1,972,486       2,048,813  

 

    10,323,055       10,259,616  

Less: accumulated depreciation

    (8,259,026 )     (8,276,970 )

Property, plant and equipment, net

    2,064,029       1,982,646  
                 

OTHER LONG-TERM ASSETS:

               

Intangible assets, net

    1,089,440       1,165,325  

Goodwill

    3,494,619       3,494,619  

Equipment on lease, net

    542,350       573,293  

Product license

    155,615       169,762  

Restricted deposits

    278,892       311,516  

Other assets

    14,807       16,656  

Total other long-term assets

    5,575,723       5,731,171  

Total assets

  $ 24,487,472     $ 26,195,785  

               

LIABILITIES AND SHAREHOLDERS EQUITY

               

               

CURRENT LIABILITIES:

               

Accounts payable

  $ 2,610,791     $ 2,399,874  

Revolving line of credit

    1,939,661       1,939,661  

Other accrued expenses

    1,429,282       2,009,661  

Total current liabilities

    5,979,734       6,349,196  

 

               

OTHER LONG-TERM LIABILITIES:

               

Deferred tax liabilities

    662,145       644,948  

Other long-term liabilities

    891,705       985,513  

Total other long-term liabilities

    1,553,850       1,630,461  

Total liabilities

    7,533,584       7,979,657  

 

               

COMMITMENTS AND CONTINGENCIES

               

 

               

SHAREHOLDERS’ EQUITY:

               

Preferred stock, par value $0.01, authorized 5,000,000 shares, none issued and outstanding in 2015 and 2014

    -       -  

Common stock, par value $0.01, authorized 100,000,000 shares, issued and outstanding 44,086,009 at March 31, 2015 and December 31, 2014

    440,860       440,860  

Additional paid-in capital

    53,551,050       53,540,057  

Accumulated deficit

    (36,430,705 )     (35,411,738 )

Accumulated other comprehensive loss

    (607,317 )     (353,051 )

Total shareholders’ equity

    16,953,888       18,216,128  

Total liabilities and shareholders’ equity

  $ 24,487,472     $ 26,195,785  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

 

 
2

 

 

ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

   

2015

   

2014

 
                 

NET REVENUE

  $ 4,853,076     $ 6,371,112  

               

COST OF SALES

    2,752,372       3,424,867  

Gross profit

    2,100,704       2,946,245  

 

               

OPERATING EXPENSES:

               

Selling

    866,177       1,095,678  

General and administrative

    1,707,947       1,398,078  

Research and development

    200,285       203,243  

Total operating expenses

    2,774,409       2,696,999  

 

               

(Loss) Income from operations

    (673,705 )     249,246  

 

               

OTHER INCOME (EXPENSE), NET:

               

Interest expense

    (56,571 )     (9,560 )

Unrealized (loss) gain on foreign currency transactions

    (216,616 )     1,974  

Other expense, net

    (44,723 )     (47,885 )

Total other income (expense), net

    (317,910 )     (55,471 )

 

               

(Loss) income before provision for income taxes

    (991,615 )     193,775  

 

               

PROVISION FOR INCOME TAXES

    27,352       29,529  

 

               

 

               

Net (loss) income

    (1,018,967 )     164,246  

 

               

OTHER COMPREHENSIVE INCOME (LOSS):

               
Foreign currency translation adjustment     (254,266 )     (22,311 )

 

               

Total comprehensive (loss) income

  $ (1,273,233 )   $ 141,935  

 

               

NET INCOME (LOSS) PER SHARE – Basic

  $ (0.02 )   $ 0.00  

NET INCOME (LOSS) PER SHARE – Diluted

  $ (0.02 )   $ 0.00  

 

               

WEIGHTED AVERAGE SHARES OUTSTANDING:

               

Basic

    44,086,009       43,783,221  

Diluted

    44,086,009       55,237,472  

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

 

 
3

 

 

ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Equity

For the Three Months Ended March 31, 2015

(Unaudited)

 

 

   

Common Stock

               

Accumulated Other

   

Total

 
   

Shares

   

Amount

    Additional Paid-in Capital      Accumulated Deficit      Comprehensive Loss     Shareholders’ Equity  

Balances as of December 31, 2014

    44,086,009     $ 440,860     $ 53,540,057     $ (35,411,738

)

  $ (353,051

)

  $ 18,216,128  

Stock compensation expense

                    10,993                   10,993  

Net loss

                      (1,018,967

)

          (1,018,967 )

Foreign currency translation adjustment

                            (254,266 )     (254,266 )

Balances as of March 31, 2015

    44,086,009     $ 440,860     $ 53,551,050     $ (36,430,705

)

  $ (607,317 )   $ 16,953,888  

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

 

 
4

 

 

ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2015 and 2014

(Unaudited)

 

 

   

2015

   

2014

 
                 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net (loss) income

  $ (1,018,967 )   $ 164,246  

Adjustments to reconcile net (loss) income to net cash used in operating activities-

               

Depreciation and amortization

    289,563       257,511  

Reduction for doubtful accounts receivable

    (7,335 )     (152,546 )

Deferred income tax provision

    17,197       -  
Non-cash compensation     10,993       -  

Changes in operating assets and liabilities:

               

Accounts receivable

    400,164       (770,835 )

Inventories

    (921,282 )     (725,053 )

Other current assets

    554,409       60,452  

Related party receivables

    411,966       (230,242 )

Accounts payable and accrued expenses

    73,724       157,951  

Other long-term liabilities

    37,819       20,495  

Net cash used in operating activities

    (151,749 )     (1,218,021 )
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Capital expenditures

    (237,498 )     (1,232 )

Restricted deposits

    32,624       -  

Acquisition of equipment on lease, net

    (85,608 )     (41,509 )

Net cash used in investing activities

    (290,482 )     (42,741 )
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Payments under revolving line of credit

    -       (11,941 )

Proceeds from stock option exercises

    -       106,250  

Net cash provided by financing activities

    -       94,309  
                 
                 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

    (46,064 )     (1,549 )
                 

NET CHANGE IN CASH AND CASH EQUIVALENTS

    (488,295 )     (1,168,002 )
                 

CASH AND CASH EQUIVALENTS, beginning of period

    2,548,295       4,031,071  
                 

CASH AND CASH EQUIVALENTS, end of period

  $ 2,060,000     $ 2,863,069  
                 

SUPPLEMENTAL DISCLOSURES:

               

Income taxes paid

  $ -     $ -  

Interest paid

  $ 48,335     $ 9,629  

 

 

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

 

 
5

 

 

ERBA Diagnostics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

 

 

(1) ORGANIZATION AND OPERATIONS:

 

General Information

 

The accompanying unaudited interim condensed consolidated financial statements of ERBA Diagnostics, Inc. (the “Company,” “ERBA Diagnostics,” “we,” “us” or “our”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q and, therefore, do not include all information normally included in audited financial statements. However, in the opinion of management, all adjustments necessary to state fairly the results of operations, financial position, changes in stockholders’ equity and cash flows have been made. The results of operations, financial position, changes in stockholders’ equity and cash flows for the three months ended March 31, 2015 are not necessarily indicative of the results of operations, financial position, and changes in stockholders’ equity and cash flows which may be reported for the remainder of 2015. The consolidated balance sheet as of December 31, 2014 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes to consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.

 

The Company is a Delaware corporation and, through its subsidiaries, is engaged in developing, manufacturing and marketing diagnostic test kits, reagents and instruments for use in hospitals, reference laboratories, clinical laboratories, research laboratories, doctors' offices and other commercial companies. The Company’s products and instrumentation are sold to customers globally.

 

On September 1, 2010, ERBA Diagnostics Mannheim GmbH, an in vitro diagnostics company headquartered in Germany (“ERBA Mannheim”), the parent company of which is Transasia Bio-Medicals Ltd. (“Transasia”), purchased all of the approximately 72.4% of the outstanding shares of the Company’s common stock then owned by the Debregeas-Kennedy Group for an aggregate purchase price of approximately $15,000,000, or $0.75 per share. As a result of this share acquisition, the consummation of the various transactions contemplated by the investment made by ERBA Mannheim pursuant to that certain Stock Purchase Agreement, as further described below, including ERBA Mannheim’s purchase from the Company, and the Company’s issuance to ERBA Mannheim, of an aggregate of 15,333,334 shares of the Company’s common stock, and ERBA Mannheim’s exercise, in part, of the Warrant, as further described below, for 600,000 shares of the Company’s common stock, ERBA Mannheim now beneficially owns, directly or indirectly, approximately 81.6% of the outstanding shares of the Company’s common stock.

 

 
6

 

 

(2) LIQUIDITY:

 

The Company incurred a net loss of approximately $1,019,000 during the three months ended March 31, 2015 and achieved net income of $164,000 during the three months ended March 31, 2014 and had cash used in operations of approximately $152,000 and approximately $1,218,000 for those respective periods.

 

As discussed in Note 13, Revolving Line of Credit, on March 25, 2015, the Company entered into a new Business Loan Agreement and Promissory Note with Citibank, N.A. (“Citibank”), which provides for a secured, revolving credit facility of up to $3,500,000 (the “New Citibank Line of Credit”) which becomes due and payable on February 29, 2016.

 

(3) STOCK-BASED COMPENSATION:

 

Valuations are based upon highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

 

The Company has historically granted options under the Company’s option plans with an option exercise price equal to the closing market value of the stock on the date of the grant and with vesting, primarily for Company employees, ranging from all at once to equal annual amounts over a four year period, and, primarily for non-employee directors, immediately.

 

During the three months ended March 31, 2015, there were no stock option exercises. Stock compensation expense for the three months ended March 31, 2015 was $10,993. There was no stock compensation expense for the three months ended March 31, 2014.

 

The following table summarizes the stock option activity as of March 31, 2015:


   

Number

of Shares

   

Weighted Average

Exercise Price

 

Balance as of December 31, 2014

    808,082     $ 1.59  

Stock options granted

    40,000     $ 3.15  

Balance as of March 31, 2015

    848,082     $ 1.66  


 
7

 

 

(4) CASH AND CASH EQUIVALENTS:

 

The Company considers certain short-term investments in money market accounts with original maturities of three months or less to be cash equivalents.

 

(5) ACCOUNTS RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS:

 

The Company grants credit without collateral to its customers based on the Company’s evaluation of a particular customer’s credit worthiness. In addition, allowances for doubtful accounts are maintained, particularly in Italy where payment cycles are longer than in the United States and in some instances may take in excess of a year to collect, for potential credit losses based on the age of the accounts receivable and the results of the Company’s periodic credit evaluations of its customers’ financial condition. Accounts receivable are written off after collection efforts have been followed in accordance with the Company’s policies. Accounts written off as uncollectible are deducted from the allowance for doubtful accounts, while subsequent recoveries are netted against provision for doubtful accounts expense. The Company generally does not charge interest on accounts receivable.

 

The Company periodically receives payments based upon negotiated agreements with governmental regions in Italy, acting on behalf of hospitals located in the region, in satisfaction of previously outstanding accounts receivable balances. The Company may have anticipated collection of these amounts through a payment as described above and, therefore, not provided an allowance for doubtful accounts for these amounts. Future payments by governmental regions in Italy are possible and, as a result, the Company may consider the potential receipt of those payments in determining its allowance for doubtful accounts. If contemplated payments are not received when expected or at all, or if negotiated agreements are not complied with in a timely manner or cancelled, then the Company may provide additional allowances for doubtful accounts.

 

Accounts receivable, net, consisted of the following:

 

   

March 31,

2015

   

December 31,

2014

 
   

(unaudited)

         

Accounts receivable

  $ 6,404,497     $ 7,352,473  

Less: allowance for doubtful accounts

    (872,973

)

    (937,578

)

Accounts receivable, net

  $ 5,531,524     $ 6,414,895  

 

 
8

 

 

(6) INVENTORIES, NET:

 

Inventories, net consist of the following:

 

   

March 31,

   

December 31,

 
   

2015

   

2014

 
   

(unaudited)

         
                 

Raw materials

  $ 3,495,908     $ 3,292,215  

Work-in-process

    1,373,125       1,215,178  

Finished goods

    3,065,279       2,491,942  

Total inventories, net

  $ 7,934,312     $ 6,999,335  

 

(7) INCOME (LOSS) PER SHARE:

 

Basic income (loss) per share excludes any dilution. It is based upon the weighted average number of shares of common stock outstanding during the period. Diluted income (loss) per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock. As of March 31, 2015 and 2014, 15,591,416 and 150,000 shares of common stock, respectively, underlying stock options and warrants were not included in computing diluted income per share because their effects would be anti-dilutive.

 

(8) INCOME TAXES:

 

The provision for income taxes consists of the following for the three months ended March 31, 2015 and 2014:

 

   

March 31,

   

March 31,

 
   

2015

   

2014

 
   

(unaudited)

   

(unaudited)

 

Current:

               

Foreign

  $ 10,155     $ 12,332  

Deferred:

               

Domestic

    17,197       17,197  

Total

  $ 27,352     $ 29,529  

 

The Company is susceptible to large fluctuations in its effective tax rate and has thereby recognized income tax expense on a discrete pro-rata basis for the three months ended March 31, 2015 and 2014. In addition, no current domestic income tax provision was recorded during the same periods, due to domestic losses of approximately $836,000 and $23,000 during the three months ended March 31, 2015 and 2014, respectively. The foreign current income tax provisions for the three months ended March 31, 2015 and 2014 were the result of Italian local income taxes based upon applicable statutory rates effective in Italy. In addition, the domestic provision of $17,197 for both 2015 and 2014 represent the deferred tax provisions in these years relating to domestic tax-deductible goodwill.

 

The Company has established a full valuation allowance on its net domestic deferred tax assets, which are primarily comprised of net operating loss carryforwards.  Accordingly, as of March 31, 2015 and December 31, 2014, the Company had no net domestic deferred tax assets.  As of March 31, 2015 and December 31, 2014, the Company had net deferred tax liabilities of $662,145 and $644,948, respectively, relating to tax deductible goodwill which is not expected to reverse in the foreseeable future.  Additionally, as of March 31, 2015 and December 31, 2014, the Company also had no net foreign deferred tax asset, as a full valuation allowance was provided.  Future changes in the estimated net realizable value of the deferred tax assets or deferred tax liabilities could cause the provision for income taxes to vary significantly from period to period.

 

 
9

 

 

Domestic net operating losses generated by the Company total approximately $17,215,000 as of December 31, 2014 and are subject to any applicable limitations as described below.  The net operating losses included in the domestic net deferred tax asset will begin to expire in 2022. Under Section 382 of the Internal Revenue Code, the Company’s use of its net operating loss carryforwards will be limited in the future as a result of the September 1, 2010 acquisition by ERBA Mannheim of the approximately 72.4% of the then outstanding shares of the Company’s common stock previously owned by the Debregeas-Kennedy Group. As a result of that acquisition, the Company’s ability to utilize net operating loss carryforwards to offset any future taxable income is currently limited to approximately $827,000 per year, plus both any limitation unused since the acquisition and any unused net operating losses generated after the September 1, 2010 acquisition date.  The amount of the annual limitation will be adjusted upwards for any recognized built-in gains on certain assets sold during the five year period commencing with the ownership change.  The limitations of these net operating loss carryforwards did not impact the Company’s results for the three months ended March 31, 2015 and 2014.

 

United States income taxes have not been provided on undistributed earnings of foreign subsidiaries, as such earnings are being retained indefinitely by such subsidiaries for reinvestment.  The distribution of these earnings would first reduce the domestic valuation allowance before resulting in additional United States income taxes.

 

(9) CONCENTRATION OF CREDIT RISK:

 

The Company performs periodic credit evaluations of its customers’ financial condition and provides allowances for doubtful accounts as required. The Company maintains allowances for doubtful accounts, particularly in Italy where payment cycles are longer than in the United States, for potential credit losses based on the age of the accounts receivable and the results of the Company’s periodic credit evaluations of its customers’ financial condition. Additionally, the Company periodically receives payments based upon negotiated agreements with governmental regions in Italy, acting on behalf of hospitals located in the region, in satisfaction of previously outstanding accounts receivable balances.

 

A substantial portion of the Company’s accounts receivable and revenues are derived from Delta Biologicals, S.r.l., the Company’s subsidiary located in Italy (“Delta Biologicals”), and its operations may be affected by the recent fiscal and debt crisis the Italian government is facing. As of March 31, 2015 and December 31, 2014, Delta Biologicals’ gross accounts receivable, primarily due from Italian companies, were approximately $1,721,000 and $2,120,000, respectively. Amounts due from hospitals and laboratories controlled by the Italian government as of March 31, 2015 and December 31, 2014 were approximately $782,000 and $865,000, respectively, which accounted for approximately 14% and 13%, respectively, of the Company’s consolidated net accounts receivable. Delta Biologicals recognized revenues during the three months ended March 31, 2015 and 2014 of approximately $857,000 and $1,468,000, respectively, which represented approximately 17% and 23%, respectively, of the Company’s consolidated net revenues.

 

 
10

 

 

In recent years, the Italian government has been experiencing severe fiscal and debt crises and a  recession, including its increasingly uncertain ability to service its sovereign debt obligations, caused in part by the declining global markets and economic conditions. Accordingly, the Company is subject to certain economic, business and, in particular, credit risk if its customers located in Italy, which are hospitals or laboratories controlled by the Italian government, do not pay amounts owed to the Company, extend payment cycles even further or ask the Company to accept a lower payment amount than is owed to the Company. The Company’s current allowances for doubtful accounts, although currently believed by management to be adequate, may not be adequate and the Company may be required to make additional allowances, which would adversely affect, and could materially adversely affect, the Company’s operating results in the period in which the determination or allowance is or was made. Any of these factors could materially and adversely affect the Company’s business, prospects, operating results, financial condition and cash flows in the near term.

 

The Company’s cash management and investment policies restrict investments to low-risk, highly liquid securities, and the Company performs periodic evaluations of the credit standing of the financial institutions with which it deals. A significant portion of the Company’s cash and cash equivalents is presently held at one international securities brokerage firm. Accordingly, the Company is subject to credit risk if this brokerage firm is unable to repay the balance in the account or deliver the Company’s securities or if the brokerage firm should become bankrupt or otherwise insolvent. From time to time cash balances exceed federally insured limits.

 

(10) SEGMENT INFORMATION:

 

The Company’s management reviews financial information, allocates resources and manages its business by geographic region. The domestic region, which includes corporate expenditures, contains the Company’s subsidiaries in the United States. The European region contains Delta Biologicals. The information provided is based on internal reports and was developed and utilized by management to track trends and changes in the results of the regions. The information, including the allocations of expense and overhead, was calculated based on a management approach and may not reflect the actual economic costs, contributions or results of operations of the regions as stand-alone businesses. If a different basis of presentation or allocation were utilized, the relative contributions of the regions might differ but the relative trends would, in management's view, likely not be materially impacted. The table below sets forth net revenues, income (loss) from operations, total assets, goodwill, depreciation and amortization, and capital expenditures by region for the three months ended March 31, 2015 and 2014:

  

      Domestic       European       Eliminations       Total  
March 31, 2015:                                

External net sales

  $ 4,007,902     $ 845,174     $ -     $ 4,853,076  

Intercompany sales

    55,426       12,077       (67,503 )     -  

Net revenue

  $ 4,063,328     $ 857,251     $ (67,503 )   $ 4,853,076  
                                 

Loss from operations

  $ (534,022 )   $ (139,683 )   $ -     $ (673,705 )
                                 

Assets

  $ 40,303,057     $ 4,644,640     $ (20,460,225 )   $ 24,487,472  

Goodwill

  $ 3,494,619     $ -     $ -     $ 3,494,619  

Depreciation and amortization

  $ 254,923     $ 34,640     $ -     $ 289,563  

Capital Expenditures

  $ 234,454     $ 3,044     $ -     $ 237,498  

 

March 31, 2014:

                               

External net sales

  $ 4,905,112     $ 1,466,000     $ -     $ 6,371,112  

Intercompany sales

    60,030       2,027       (62,057 )     -  

Net revenue

  $ 4,965,142     $ 1,468,027     $ (62,057 )   $ 6,371,112  
                                 

Income from operations

  $ 52,585     $ 192,661       -     $ 249,246  
                                 

Assets

  $ 40,360,146     $ 6,406,349     $ (20,460,225 )   $ 26,306,270  

Goodwill

  $ 3,494,619     $ -     $ -     $ 3,494,619  
Depreciation and amortization   $ 211,675     $ 45,836     $ -     $ 257,511  
Capital Expenditures   $ 1,232     $ -     $ -     $ 1,232  

 

 
11

 

 

(11) COMMITMENTS AND CONTINGENCIES:

 

The Company is involved in various legal claims and actions and regulatory matters, and other notices and demand proceedings arising in the ordinary course of business. While it is not possible to predict or determine the outcome of these proceedings, in the opinion of management, based on a review with legal counsel, any losses resulting from such legal proceedings would not have a material adverse impact on the financial position, results of operations or cash flows of the Company.

 

(12) RELATED PARTY TRANSACTIONS:

 

Certain Relationships and Related Transactions

 

During the three months ended March 31, 2015 and 2014, the Company sold products to Transasia, and a subsidiary of ERBA Mannheim, for a total amount of approximately $80,485 and $617,000, respectively.

 

During the year ended December 31, 2014, the Company began to incur management fees from ERBA Mannheim related to the management of global trade conferences and distributors in European, North African and Asian countries. During the three months ended March 31, 2015, the Company incurred approximately $52,500 in such management fees to ERBA Mannheim.

 

During 2011, Delta Biologicals entered into a contract research and development agreement with ERBA Mannheim, as amended, for a total of Euro 754,700, pursuant to which ERBA Mannheim has agreed to pay the subsidiary a total amount of Euro 133,000 (equivalent to approximately $186,000) during the fourth quarter of 2011 and an additional Euro 621,700 (equivalent to approximately $799,000) during the year ended December 31, 2012 for the results of certain research and development. For the three months ended March 31 2014, the Company recognized research and development revenue under this agreement in the amount of approximately Euro 138,000 (equivalent to approximately $190,000). There was no revenue recognized under this agreement for the three month period ended March 31, 2015.

 

 
12

 

 

 

The Company had total net accounts receivable from ERBA Mannheim, Transasia and related subsidiaries of approximately $929,000 and $1,489,000 as of March 31, 2015 and December 31, 2014, respectively, related to the above transactions, receivables and payables from the sale and purchase of products and the reimbursement of various expenditures incurred on behalf of ERBA Mannheim.

 

On June 15, 2012, the Company entered into a use of name license agreement with ERBA Mannheim granting a royalty-free, non-exclusive license to use the name “ERBA” for an annual fee of one dollar. The license agreement will be terminated upon the earlier of (a) the transfer by ERBA Mannheim to the Company of all of ERBA Mannheim’s rights, title and interest in and to the use of the name and any stylized logos or marks associated with the name (the date that such transfer becomes effective, the “Transfer Date”) and (b) such time, if any, as ERBA Mannheim no longer owns, directly or indirectly, shares of the Company’s common stock representing more than 50% of the issued and outstanding shares of such stock (the “Share Threshold Date”). Furthermore, ERBA Mannheim may terminate the license agreement at any time prior to the earlier of the Transfer Date and the Share Threshold Date: (a) upon providing the Company 180 days prior written notice of its intent to terminate and the date upon which the license agreement shall terminate; or (b) upon providing the Company 30 days prior written notice of any breach of the license agreement by the Company, which breach remains uncured at the end of such 30 day period.

 

Common Stock and Equity Transactions

 

The Company entered into the Stock Purchase Agreement with ERBA Mannheim, on April 8, 2011, pursuant to which the Company agreed to sell and issue to ERBA Mannheim an aggregate of 20,000,000 shares of the Company’s common stock for an aggregate purchase price of $15,000,000, or $0.75 per share of the Company’s common stock, and warrants to purchase an additional 20,000,000 shares of the Company’s common stock.  The consummation of the investment contemplated by the Stock Purchase Agreement was subject to, among other things, the approval of holders of at least 66-2/3% of the issued and outstanding shares of the Company’s common stock (excluding any shares beneficially owned, directly or indirectly, by ERBA Mannheim).  At the 2011 Annual Meeting of Stockholders held on June 10, 2011, the required approval of the Company’s stockholders was achieved.

 

On June 30, 2011, ERBA Mannheim paid the Company $5,000,000 in order to consummate the initial transactions contemplated by the Stock Purchase Agreement (the “Initial Closing”). As a result, at the Initial Closing, the Company issued to ERBA Mannheim 6,666,667 shares of common stock and, in connection with the consummation of the initial transactions contemplated by the Stock Purchase Agreement, a warrant to purchase an additional 20,000,000 shares of common stock (the “Warrant”). After giving effect to transaction costs of $399,700 relating to the Stock Purchase Agreement, the Company received net proceeds of $4,600,300 at the consummation of the initial transactions contemplated by the Stock Purchase Agreement. The Warrant has a five year term and an exercise price per share of the Company’s common stock of $0.75 and is exercisable only to the extent that shares of the Company’s common stock have been purchased under the Stock Purchase Agreement.

 

 
13

 

 

On April 16, 2012, ERBA Mannheim exercised, in part, the Warrant by paying an aggregate exercise price of $450,000 and, in connection therewith, the Company issued to ERBA Mannheim 600,000 shares of the Company’s common stock. A total of 19,400,000 warrants remain unexercised as of March 31, 2015 and 2014. As of March 31, 2015 and 2014, the Warrant was exercisable for 14,733,334 shares of the Company’s common stock.

 

Pursuant to amendments to the Stock Purchase Agreement on December 29, 2011 and October 3, 2012, each of which was unanimously approved by the independent directors on the Board of Directors, the Company and ERBA Mannheim agreed that the Company would sell and issue to ERBA Mannheim, and ERBA Mannheim would purchase from the Company, 8,666,667 shares of common stock at the second closing of the transactions contemplated by the Stock Purchase Agreement (the “Second Closing”) for an aggregate purchase price of $6,500,000, or $0.75 per share, and 4,666,666 shares of common stock at the final closing of the transactions contemplated by the Stock Purchase Agreement (the “Final Closing”) for an aggregate purchase price of $3,500,000, or $0.75 per share. In addition, pursuant to the amendments to the Stock Purchase Agreement, the Company and ERBA Mannheim agreed to hold the Second Closing as promptly as practicable on or after October 3, 2012 and to hold the Final Closing on the date that is 60 days after the date on which a majority of the independent directors on the Board of Directors determines by vote or written consent that such issuance, sale and purchase shall occur and causes notice thereof to be delivered to ERBA Mannheim.

 

The Second Closing was held on October 3, 2012, at which time ERBA Mannheim paid the $6,500,000 aggregate purchase price to the Company, and, in connection therewith, the Company issued to ERBA Mannheim 8,666,667 shares of the Company’s common stock. The Company used all of the proceeds of the Second Closing to consummate the October 3, 2012 acquisition of Drew Scientific.

 

(13) REVOLVING LINE OF CREDIT:

 

On March 1, 2013, the Company entered into a Business Loan Agreement and Promissory Note with Citibank, which provided for a secured, revolving credit facility of up to $2,000,000 (the “Old Citibank Line of Credit”). Amounts outstanding under the Old Citibank Line of Credit accrued interest at an annual rate equal to the 30-day LIBOR plus 1.75% (1.91% at December 31, 2014) and was to become due and payable on December 31, 2014, but was temporarily extended. At December 31, 2014, approximately $1,939,000 was outstanding under the Old Citibank line of credit.

 

On March 25, 2015, the Company entered into a new Business Loan Agreement and Promissory Note with Citibank, which provides for a secured, revolving credit facility of up to $3,500,000 (the “New Citibank Line of Credit”). The New Citibank Line of Credit has replaced the Old Citibank Line of Credit, which is no longer outstanding. Amounts outstanding under the New Citibank Line of Credit will accrue interest at an annual rate equal to the 30-day LIBOR plus 1.75% (1.93% at March 31, 2015) and will become due and payable on February 29, 2016, subject to acceleration upon the occurrence of certain specified events of default that the Company believes are customary for transactions of this type.

 

 
14

 

 

Pursuant to the Business Loan Agreement, the Company is subject to certain specified positive and negative covenants (including, without limitation, the requirements to maintain a specified capital base of not less than $8,500,000 and a specified leverage ratio, as defined, of not less than 2.0-to-1.0) that the Company believes are customary for transactions of this type.

 

Amounts outstanding under the New Citibank Line of Credit have been collateralized by all of the assets of the Company and its wholly-owned subsidiaries located in the United States – Diamedix, ImmunoVision, Drew Scientific and JAS Diagnostics. In addition, each of Diamedix, ImmunoVision, Drew Scientific and JAS Diagnostics has guaranteed the repayment of amounts drawn on the New Citibank Line of Credit. Further, Transasia, the indirect parent company of the Company, has also guaranteed the repayment of amounts drawn on the New Citibank Line of Credit.

 

Amounts outstanding under the New Citibank Line of Credit are also collateralized by the Company’s pledge of up to sixty-six percent (66%) of the total combined voting power of all classes of capital stock and other equity interests entitled to vote of Delta Biologicals, the Company’s wholly-owned subsidiary located in Italy.

 

As of March 31, 2015, approximately $1,939,000 was outstanding under the New Citibank Line of Credit.

 

(14) OTHER:

 

On March 25, 2015, our wholly-owned subsidiary located in Miami Lakes, Florida – Diamedix – entered into a Purchase and Sale Agreement with Joe Management LLC, as buyer, for the sale of the real property owned by Diamedix located at 2115, 2140, 2141, 2150, 2155, 2160 North Miami Avenue and 38 NW 22nd Street, in Miami, Florida, and all improvements thereon, or collectively, the Property. The purchase price for the Property was $23,000,000. As of March 31, 2015, the net book value of the land, buildings and improvements being sold was approximately $0.4 million. The Purchase and Sale Agreement provided for a 45-day examination period, during which the buyer had the right to conduct a due diligence investigation of the Property and terminate the Purchase and Sale Agreement in its sole and absolute discretion. On June 19, 2015, Diamedix received notice from the buyer that the buyer was exercising its right to terminate the Purchase and Sale Agreement effective immediately.

 

 
15

 

 

(15) RECENTLY ISSUED ACCOUNTING STANDARDS:

 

In January 2015, the FASB issued ASU 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” which changed the requirements for reporting extraordinary and unusual items in the income statement. The update eliminates the concept of extraordinary items. The presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. A reporting entity may apply the amendments prospectively or retrospectively to all periods presented in the financial statements. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this newly issued guidance is not expected to have an impact to the Company’s consolidated financial statements.

 

In February 2015, the FASB issued ASU 2015-02, “Consolidations (Topic 225-20): Amendments to the Consolidation Analysis,” which affects current consolidation guidance. The guidance changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance must be applied using one of two retrospective application methods and will be effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact, if any, of the adoption of this newly issued guidance to its consolidated financial statements.

 

In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Topic 225-20): Simplifying the Presentation of Debt Issue Costs,” that simplifies the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by these amendments. This guidance should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The guidance will be effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company is currently evaluating the impact, if any, of the adoption of this newly issued guidance to its consolidated financial statements.

 

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

 

The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014 and the unaudited interim condensed consolidated financial statements and the related notes to unaudited interim condensed consolidated financial statements included in Item 1 of this Quarterly Report on Form 10-Q.

 

 
16

 

 

 

We have made forward-looking statements, which are subject to risks and uncertainties, in this Quarterly Report on Form 10-Q. Forward-looking statements may be preceded by, followed by or otherwise include the words “may,” “will,” “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “projects,” “could,” “would,” “should,” or similar expressions or statements that certain events or conditions may occur. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by these forward-looking statements. These forward-looking statements are based largely on our expectations and the beliefs and assumptions of our management and on the information currently available to it and are subject to a number of risks and uncertainties, including, but not limited to, the risks and uncertainties associated with:

 

 

our ability to generate positive cash flow or otherwise improve our liquidity, whether from existing operations, strategic initiatives or possible future sources of liquidity, including, without limitation, from the line of credit or the investment contemplated by the stock purchase agreement, issuing debt or equity securities, incurring indebtedness or curtailing or reducing our operations;

 

the remaining transactions contemplated by the investment under the stock purchase agreement may not be consummated on the contemplated terms, in the time frame anticipated, or at all;

 

the net proceeds of the investment contemplated by the stock purchase agreement may not provide adequate cash resources to fund our operations or liquidity needs for the reasonably foreseeable future;

 

our ability to achieve or sustain profitability from our operations or otherwise secure funds to provide the basis for our long-term liquidity;

 

our broad discretion in our use of the net proceeds from the investment contemplated by the stock purchase agreement;

 

the warrants may not be exercised, in whole or in part;

 

the decision to exercise the warrants will be made by ERBA Mannheim based upon considerations it deems appropriate, which may include, among other things, the future market price of our common stock, which is subject to volatility and a number of other factors, many of which are beyond our control, and, when making any such decision to exercise the warrants, ERBA Mannheim’s interests may conflict with our interests;

 

 
17

 

 

 

our ability to pay when due the principal and interest on our outstanding indebtedness under the revolving line of credit;

 

our ability to operate our business under the restrictions imposed by the positive and negative covenants to which we are subject under the loan agreement in connection with the revolving line of credit;

 

our ability to remediate our material weakness relating to our internal control over financial reporting;

 

our ability to timely cure our non-compliance with the continued listing standards of the NYSE MKT within the anticipated timeframe or at all, which, if not timely cured, could result in our common stock being delisted from the NYSE MKT;

 

if we timely cure our non-compliance with the continued listing standards of the NYSE MKT, our ability to maintain compliance with the continued listing standards of the NYSE MKT, the failure of which could result in our common stock being delisted from the NYSE MKT;

 

economic, competitive, political, governmental and other factors affecting us and our operations, markets and products;

 

the success of technological, strategic and business initiatives, including our automation strategy;

 

our ability to successfully market the DSXTM and DS2TM instrument systems from Dynex Technologies in conjunction with our test kits on a worldwide basis;

 

our ability to successfully market the Mago 4S instrument system, Ds5 instrument system for diabetes testing, the Ds360 instrument system for diabetes testing, the D3 instrument system for hematology testing, and the 2280 instrument system for hematology testing;

 

our ability to successfully market generic clinical chemistry reagents;

 

our ability to expand the menu of test kits that we offer to include other complementary infectious disease or autoimmune testing sectors or otherwise;

 

our ability to expand our portfolio of products;

 

our ability to expand geographically;

 

our ability to successfully execute market segmentation and market focus strategies;

 

the response of our current customer base to an expansion of our menu of test kits;

 

our ability to achieve organic growth;

 

our ability to identify or consummate acquisitions of businesses or products;

 

our ability to integrate acquired businesses or products, including, without limitation, our ability to continue integrating Drew Scientific and JAS Diagnostics;

 

acquisitions of business and products, and the integration of acquired businesses and products, may disrupt our business, distract our management and may not proceed as planned, including, without limitation, our acquisition of and our ability to continue integrating Drew Scientific and JAS Diagnostics;

 

our ability to achieve economies of scale or to maximize the utilization of our assets and facilities, after continued integration of Drew Scientific and JAS Diagnostics into our legacy operations;

 

our ability to enter into and exploit the diabetes market;

 

our ability to leverage the marketing and distribution infrastructure that ERBA Mannheim and its affiliates have established around the world;

 

our ability to enhance our position in laboratory automation;

 

 
18

 

 

 

our ability to expand our product offerings and/or market reach, including, without limitation, our ability to increase our presence in key countries in Europe, South America, Asia as well as other international markets;

 

the impact the existing global economic conditions may have on our financial condition, operating results and cash flows;

 

the impact of healthcare regulatory reform;

 

constantly changing, and our compliance with, governmental regulation;

 

the impact of our adoption or implementation of new accounting statements and pronouncements on our financial condition and operating results;

 

our limited operating revenues and history of primarily operational losses;

 

our ability to collect our accounts receivable, particularly in Italy, and the impact of making or changing judgments and estimates regarding our allowances for doubtful accounts on our financial condition and operating results;

 

our ability to utilize our net operating losses, whether subject to limitations or not, and its impact on our financial condition and operating results;

 

the impact of any future limitations on our ability to utilize our net operating losses in the event of any future change in control or similar transaction;

 

the impact of making or changing judgments and estimates regarding our deferred tax liabilities and our valuation allowances and reserves against our deferred tax assets on our financial condition and operating results;

 

the impact of making or changing judgments and estimates regarding our goodwill, including the goodwill recorded at ImmunoVision and Drew Scientific, and other intangible assets, such as our hepatitis technology product license, on our financial condition and operating results;

 

our ability to achieve cost advantages from our own manufacture of instrument systems, reagents and test kits;

 

our ability to grow beyond the autoimmune and infectious disease markets and to expand into additional diagnostic test sectors;

 

our ability to derive revenue growth from our manufacture and sale of our own hepatitis products;

 

our ability to successfully improve our facilities and upgrade or replace our equipment and information systems in the timeframe and utilizing the amount of funds anticipated or at all;

 

our dependence on agreements with ERBA Mannheim, third party distributors and key personnel;

 

consolidation of our customers affecting our operations, markets and products;

 

reimbursement policies of governmental and private third parties affecting our operations, markets and products;

 

price constraints imposed by our customers and governmental and private third parties;

 

our ability to increase the volume of our reagent production to meet increased demand;

 

protecting our intellectual property;

 

political and economic instability and foreign currency fluctuation affecting our foreign operations;

 

the holding of a significant portion our cash and cash equivalents at a single brokerage firm, including risks relating to the bankruptcy or insolvency of such brokerage firm;

 

 
19

 

 

 

litigation regarding products, distribution rights, intellectual property rights, product liability and labor and employment matters;

 

voting control of our common stock by ERBA Mannheim;

 

conflicts of interest with ERBA Mannheim and its affiliates, including Suresh Vazirani and/or Kishore “Kris” Dudani, and with our officers, employees and other directors; and

 

other factors discussed elsewhere in this Annual Report on Form 10-Q

 

See the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2014 for further discussion of certain risks and uncertainties that could materially and adversely affect our business, operating results or financial condition. Many of these factors are beyond our control.

 

 

MAJORITY STOCKHOLDER

 

ERBA Mannheim, an in vitro diagnostics company headquartered in Germany, the parent company of which is Transasia Bio-Medicals Ltd., or Transasia, is the beneficial owner, directly or indirectly, of approximately 81.6% of the outstanding shares of our common stock.

 

 

RESULTS OF OPERATIONS

 

THREE MONTHS ENDED MARCH 31, 2015 COMPARED TO THREE MONTHS ENDED MARCH 31, 2014

 

Net revenue decreased by $1,518,000 to $4,853,000 in 2015 from $6,371,000 in 2014. This 24% decrease is attributable to a number of factors including weakening currencies in Europe, a significant volume of backorders to work through as a result of the consolidation of facilities into our Miami Lakes facility, increased competition from new technology in our immunology clinical chemistry sector where we have mature products, and unfavorable change in foreign exchange rates.

 

Cost of sales decreased by $673,000 to $2,752,000 in 2015 from $3,425,000 in 2014. This 20% decrease is directly related to the decrease in sales mentioned above, product mix, and unfavorable absorption of manufacturing costs.

 

Gross profit decreased by $845,000 to $2,101,000 in 2015 from $2,946,000 in 2014. This 29% decrease is attributed to the decrease in sales mentioned above and lower absorption of manufacturing costs. Gross profit margins decreased to 43.3% in 2015 from 46.2% in 2014 impacted by the lower volumes, product mix, and unfavorable manufacturing variances.

  

Total operating expenses increased by $77,000 to $2,774,000 in 2015 from $2,697,000 in 2014. The 3% increase is driven by an increase in general and administrative expenses of $310,000, or 22%, to $1,708,000 in 2015 from $1,398,000 in 2014 partially offset by a decrease in selling expenses of $230,000, or 21%, to $866,000 in 2015 from $1,096,000 in 2014. The increase in total operating expenses is primarily attributable to incremental recruiting costs to upgrade talent and fill key vacant positions, royalty expense, higher legal and accounting costs, and commissions not expensed in prior periods.

 

 
20

 

 

Operating loss was $674,000 in 2015 compared to operating income of $249,000 in 2014. The decrease is primarily related to the impact of the $845,000 reduction in gross profit resulting primarily from the decreased revenues as discussed above, research and development costs that were not billable to ERBA Mannheim of $109,000, and the higher general and administrative expenses partially offset by the decrease in selling expenses.

 

 

NET REVENUES AND GROSS PROFIT

 

The following table presents comparative net revenues and gross profit for our operations.

 

   

2015

   

2014

   

Increase/

(Decrease)

 

Net Revenues:

                       

Domestic

  $ 4,008,000     $ 4,905,000     $ (897,000 )

European

    845,000       1,466,000       (621,000 )

Total

    4,853,000       6,371,000       (1,518,000 )

Cost of Sales

    2,752,000       3,425,000       (673,000 )

Gross Profit

  $ 2,101,000     $ 2,946,000     $ (845,000 )

% of Total

    43.3%       46.2%          

 

 

The decrease in domestic revenue is attributed to a number of factors including a decrease in instrument and reagents orders in the international market, primarily in Russia which was affected by a weakening ruble as compared to the US Dollar. In addition, we entered the first quarter of 2015 with a significant volume of backorders to work through as a result of the consolidation of facilities into our Miami Lakes facility. Another factor impacting our revenues is the competition from new technology in our immunology clinical chemistry sector where we have mature products. The decrease in European revenues is the result of lower and/or delayed orders from the public sector in Italy, the lack of billing of research and development costs to ERBA Mannheim compared to $190,000 billed for the same period in prior year, and the change in foreign exchange rates unfavorably impacted revenues by $181,000.

 

Gross profit decreased by $845,000 to $2,101,000 in 2015 from $2,946,000 in 2014. This 29% decrease was attributed to the decrease in sales mentioned above as well as higher sales returns and discounts and lower absorption of manufacturing costs partially driven by inefficiencies with the consolidation of facilities into our Miami Lakes facility. Gross profit margins decreased to 43.3% in 2015 from 46.2% in 2014 impacted by the lower volumes and product mix.

 

 
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OPERATING EXPENSES

 

The following table presents our comparative operating expenses. The percentages below are based on the net revenues in the above table.

 

   

2015

   

% of Revenue

   

2014

   

% of Revenue

   

Increase/

(Decrease)

 

Selling

  $ 866,000       17.8

%

  $ 1,096,000       17.2

%

  $ (230,000 )

General and Administrative

    1,708,000       35.2

%

    1,398,000       21.9

%

    310,000  

Research and Development

    200,000       4.1

%

    203,000       3.2

%

    (3,000 )

Total Operating Expenses

  $ 2,774,000       57.1

%

  $ 2,697,000       42.3

%

  $ 77,000  

 

Total operating expenses increased $77,000 from $2,697,000 in 2014 to $2,774,000 in 2015.

 

The 21% decrease of $230,000 in selling expenses in 2015 compared to 2014 is primarily due to open sales positions in the domestic operations, which were subsequently filled at the end of the second quarter of 2015, partially offset by commission expense of $85,000 related to prior periods.

 

The increase of $310,000 in general and administrative expenses in 2015 compared to 2014 is primarily additional expenses related to incremental recruiting costs to upgrade talent and fill key vacant positions, royalty expense under various royalty agreements, higher legal and accounting costs, additional rent for the Miami Lakes expanded facility as well as higher depreciation from increased fixed assets related to the consolidation of facilities into our Miami Lakes facility and the implementation of a new ERP system.

 

Research and development expenses in 2015 is slightly lower at $200,000 compared to $203,000 for 2014 as research and development efforts of our European operations of approximately Euro 97,000 (equivalent to approximately $109,000) incurred in 2015 were not billable to ERBA Mannheim. This cost was offset by lower spending in the domestic operations as we downsized headcount.

 

INCOME (LOSS) FROM OPERATIONS

 

Loss from operations totaled $674,000 in 2015 as compared to operating income of $249,000 in 2014 primarily from the reduction in gross profit and increase in general and administrative expenses partially offset by the reduction in selling expenses.

 

OTHER INCOME (EXPENSE), NET

 

Other income (expense) totaled a net expense of $318,000 in 2015 as compared to a net expense of $55,000 in 2014. The major drivers in 2015 are unrealized foreign currency exchange loss of $217,000 from the conversion of a foreign denominated cash account balance into US dollars and interest expense of $57,000 from delayed vendor payments and the line of credit.

 

INCOME TAX PROVISION

 

We recorded income tax provisions of $27,000 for 2015 and $30,000 for 2014. The current portion of our tax provisions in both years relates to Italian local income taxes based upon applicable statutory rates effective in Italy. In addition, the domestic provision of $17,000 for both 2015 and 2014 represent the deferred tax provisions in these years relating to domestic tax-deductible goodwill. No current tax benefit was recorded during 2015 or 2014 on our losses because we had a full valuation allowance against the net deferred income tax assets.

 

 
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See also Note 8, Income Taxes, to the condensed consolidated financial statements regarding other tax matters.

 

NET INCOME (LOSS)

 

Net loss for 2015 was $1,019,000 compared to net income of $164,000 in 2014. The net loss for 2015 resulted primarily from a decrease in gross profit of $845,000 in 2015 as compared to 2014, foreign currency transaction losses of $217,000 in 2015 as compared to foreign currency transaction gains of $2,000 in 2014, plus an increase in operating expenses of $77,000 in 2015 as compared to 2014. Basic and diluted net loss per common share was $0.02 in 2015 as compared to a basic and diluted net income per common share of $0.00 in 2014.

 

 

LIQUIDITY AND CAPITAL RESOURCES

 

At March 31, 2015, our working capital was $10,868,000 compared to $12,133,000 at December 31, 2014. Cash and cash equivalents totaled $2,060,000 at March 31, 2015 and $2,548,000 at December 31, 2014.

 

Operating activities

 

Net cash flows of $152,000 were used in operating activities during the three months ended March 31, 2015 as compared to $1,218,000 during the three months ended March 31, 2014.

 

Cash used in operating activities of $152,000 during 2015 was the result of changes in operating assets and liabilities of $557,000 and non-cash items of $310,000 more than offset by the net loss for the period. The non-cash items include principally depreciation and amortization, deferred income taxes, and stock options compensation expense. Cash provided by changes in operating assets and liabilities was due to a decrease in accounts receivable both from improved collection efforts and lower revenues, an increase in inventories from the lower revenue, a reduction in other assets as we reduced the prepayments for inventory received and an increase in accounts payable due to cash flow constraints which created delays in paying vendors.

 

Cash used in operating activities of $1,218,000 during 2014 was the result of changes in operating assets and liabilities of $1,486,000, partially offset by non-cash items of $105,000. The non-cash items include principally depreciation and amortization, reduction in the provision for doubtful accounts receivable, amortization of other assets and deferred income taxes. Cash provided by changes in operating assets and liabilities was due to changes in accounts receivable, inventories, other assets, accounts payable and accrued expenses and other long-term liabilities.

 

Investing activities

 

Net cash of $290,000 and $43,000 was used in investing activities during 2015 and 2014, respectively. The cash flows relating to investing activities in 2015 were primarily for capital expenditures of $237,000 related to the Miami Lakes expanded facility and acquisition of equipment on lease of $86,000. The cash flows relating to investing activities in 2014 were primarily for acquisition of equipment on lease of $42,000.

 

 
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Financing activities

 

There were no financing activities during 2015. Financing activities during 2014 reflect proceeds from exercises of stock options of $106,000, offset by net payments of $12,000 under the revolving line of credit.

 

Other matters

 

Liquidity is expected to be sufficient through the end of 2015 from the combination of the existing cash and cash equivalents at March 31, 2015, and the investment that ERBA Mannheim has agreed to make under the Stock Purchase Agreement, including the Warrant, as described throughout this Quarterly Report on Form 10-Q.

 

A significant portion of our cash and cash equivalents is presently held at one international securities brokerage firm. Accordingly, we are subject to credit risk if this brokerage firm is unable to repay the balance in the account or deliver our securities or if the brokerage firm should become bankrupt or otherwise insolvent. We invest in only select money market instruments, United States treasury investments, municipal and other governmental agency securities and corporate issuers.

 

Our product research and development expenditures were $200,000 during 2015 and $203,000 during 2014. Delta Biologicals billed ERBA Mannheim for a total of Euro 138,000 (equivalent to approximately $190,000) for research and development costs incurred in the three months March 31, 2014, as compared to no billing in the three months March 31, 2015. Actual expenditures will depend upon, among other things, the outcome of clinical testing of products under development, delays or changes in government required testing and approval procedures, technological and competitive developments, strategic marketing decisions and liquidity. There can be no assurance that these expenditures will result in the development of new products or product enhancements, which we will successfully complete products under development, that we will obtain regulatory approval or that any approved product will be produced in commercial quantities, at reasonable costs, and be successfully marketed.

 

For a detailed discussion of related party activities, refer to Note 12, Related Party Transactions, to our Condensed Consolidated Financial Statements.

 

In connection with our evaluation of our operating results, financial condition and cash position, and specifically considering our cash utilization during the first quarter of 2015, we continue to implement measures expected to improve future cash flow. To this end, we expect operating results to continue to improve from the operating results achieved during the first quarter of 2015, based principally upon increases in revenue as a result of filling vacant sales positions in the domestic operations at the end of the second quarter of 2015 as well as an reevaluation of our channels of distribution in the United States and international markets.

 

 
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We maintain allowances for doubtful accounts, particularly in Italy where payment cycles are longer than in the United States, for estimated losses resulting from the inability of our customers to make required or timely payments. Additionally, we periodically receive payments based upon negotiated agreements with governmental regions in Italy, acting on behalf of hospitals located in the region, in satisfaction of previously outstanding accounts receivable balances. We may anticipate collection of these amounts through a payment as described above, and, therefore, not provide an allowance for doubtful accounts for these amounts. If contemplated payments are not received, if existing agreements are not complied with or cancelled, or if we require additional allowances, then our operating results could be materially adversely affected during the period in which we make the determination to increase the allowance for doubtful accounts.

 

We cannot guarantee that we can generate net income, increase revenues, improve our cash flow or successfully obtain debt or equity financing on acceptable terms, or at all, and, if we cannot do so, then we may not be able to survive and any investment in our company may be lost. For the long-term, we intend to utilize principally existing cash and cash equivalents, proceeds we expect to receive from ERBA Mannheim pursuant to the investment contemplated by the Stock Purchase Agreement, including the Warrant, as well as internally generated funds, which are anticipated to be derived primarily from the sale of existing diagnostic and instrumentation products and diagnostic and instrumentation products currently under development as well as possible sources of debt and equity financings. If we are not successful in improving our cash flows or if existing and possible future sources of liquidity described above are insufficient, then we may be required to curtail or reduce our operations.

 

 

CRITICAL ACCOUNTING POLICIES

 

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to product returns, allowance for doubtful accounts, inventories, intangible assets, stock compensation, income and other tax accruals, the realization of long-lived assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our assumptions and estimates may, however, prove to have been incorrect and our actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies and the judgments and estimates we make concerning their application have significant impact on our condensed consolidated financial statements.

 

The critical accounting policies discussed below are not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP, with no need for management's judgment in their application. There are also areas in which management's judgment in selecting any available alternative would not produce a materially different result.

 

 
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REVENUE RECOGNITION

 

Revenue and the related cost of sales on sales of test kits and instruments are recognized when risk of loss and title passes, which is generally at the time of shipment. Net revenue is composed of gross revenue less provisions for expected product returns, allowances, discounts and warranty claims.

 

We also own instruments that we place under “reagent rental” programs common to the industry, for periods of time at customer facilities for usage with our products. The instrument system, which remains our property, is utilized by customers to expedite the performance of certain tests and its use, including any required instrument service, is paid for by the customer through reagent kit purchases over the agreed upon contract period, typically three to five years. Upon completion of the contract period, the instrument is returned to us.

 

We recognize milestone payments when earned, as evidenced by written acknowledgment from the collaborator, provided that the milestone event is substantive and its achievability was not reasonably assured at the inception of the agreement, the milestone represents the culmination of an earnings process, the milestone payment is non-refundable and our past research and development services, as well as our ongoing commitment to provide research and development services under the collaboration, are charged at fees that are comparable to the fees that we customarily charge for similar research and development services.

 

 

ALLOWANCE FOR DOUBTFUL ACCOUNTS

 

We grant credit without collateral to our customers based on our evaluation of a particular customer’s credit worthiness. In addition, allowances for doubtful accounts are maintained, particularly in Italy where payment cycles are longer than in the United States and in some instances may take in excess of a year to collect, for potential credit losses based on the age of the accounts receivable and the results of our periodic credit evaluations of our customers’ financial condition. We maintain allowances for doubtful accounts, particularly in Italy for the operations of our European subsidiary, for estimated losses based on historical loss percentages resulting from the inability of our customers to make required payments.

 

 

INVENTORY

 

We regularly review inventory quantities on hand, which include components for current or future versions of products and instrumentation. If necessary, we record a provision for excess and obsolete inventory based primarily on our estimates of component obsolescence, product demand and production requirements, as well as based upon the status of a product within the regulatory approval process. In accordance with our inventory accounting policy, our inventory balance as of March 31, 2015 included components for current or future versions of products and instrumentation.

 

Inventory reserves were $759,000 as of both March 31, 2015 and December 31, 2014.

 

 
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GOODWILL AND OTHER INTANGIBLES

 

Goodwill represents the excess purchase price over the estimated fair value of net assets acquired as of the acquisition date. We test goodwill for impairment on an annual basis and between annual tests when impairment indicators are identified, and goodwill is written down when impaired. Goodwill was recognized in connection with the acquisition of ImmunoVision and the more recent acquisition of Drew Scientific. We perform our annual goodwill impairment test during the last quarter of the fiscal year. No impairment charge was recorded for the goodwill at ImmunoVision or Drew Scientific during the three months ended March 31, 2015 and 2014.

 

As part of our annual goodwill impairment test, we first perform a qualitative assessment to determine whether further impairment testing is necessary. If, as a result of the qualitative assessment, it is more-likely-than-not (i.e. greater than 50% chance) that the fair value of the reporting unit is less than the carrying amount, then the quantitative impairment test will be required. Otherwise, no further testing will be required.

 

Examples of events and circumstances that might indicate that a reporting unit’s fair value is less than its carrying amount include macro-economic conditions such as deterioration in the entity’s operating environment or industry or market considerations; entity-specific events such as increasing costs, declining financial performance, or loss of key personnel; or other events such as an expectation that a reporting unit will be sold or a sustained decrease in its stock price on either an absolute basis or relative to peers.

 

If it is determined, as a result of the qualitative assessment, that it is more-likely-than-not that the fair value of the reporting unit is less than the carrying amount, then the provisions of authoritative guidance require that we perform a two-step impairment test on goodwill. The first step of the test identifies whether potential impairment may have occurred, while the second step of the test measures the amount of impairment, if any. Impairment is recognized when the carrying amount of goodwill exceeds its fair value.

 

We review for impairment our long-live assets, including other intangibles and fixed assets that are held and used in our operations, whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If such an event or change in circumstances occurs, then we will estimate the undiscounted future net cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the future undiscounted cash flows is less than the carrying amount of the related assets, then we will recognize an impairment loss.

 

STOCK-BASED COMPENSATION

 

Stock-based compensation expense for all stock-based compensation awards is based on the grant-date fair value estimate calculated in accordance with applicable accounting guidance. We recognize these compensation costs on a straight-line basis over the requisite service year of the award, which is generally the option vesting term of either immediately or in equal annual amounts over a four year period.

 

Valuations are based on highly subjective assumptions about the future, including stock price volatility and exercise patterns. The fair value of share-based payment awards was estimated using the Black-Scholes option pricing model. Expected volatilities are based on the historical volatility of our stock. We use historical data to estimate expected term, taking into account option exercise and employee terminations. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for years within the expected life of the option is based on the United States Treasury yield curve in effect at the time of the grant.

 

 
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INCOME TAXES

 

In prior years, we have experienced net losses from our operations. In accordance with GAAP, we are required to record a valuation allowance against the deferred tax asset associated with these losses if it is “more likely than not” that we will not be able to utilize the net operating loss to offset future taxes. Due to the cumulative net losses from the operations of both our domestic and European operations, we have provided a full valuation allowance against our deferred tax assets as of March 31, 2015.  Over time we may reach levels of profitability that could cause our management to conclude that it is more likely than not that we will realize all or a portion of our net operating loss carryforwards and other temporary differences.  Upon reaching such a conclusion, and upon such time as we reverse the entire amount or a portion of the valuation allowance against the deferred tax asset, we would then provide for income taxes at a rate equal to our effective tax rate.

  

Under Section 382 of the Internal Revenue Code, our ability to use our net operating loss carryforwards will be limited in the future as a result of the September 1, 2010 acquisition by ERBA Mannheim of the approximately 72.4% of the then outstanding shares of our common stock previously owned by the Debregeas-Kennedy Group.  As a result of that acquisition, our ability to utilize net operating loss carryforwards to offset future taxable income is currently limited to approximately $827,000 per year, plus both any limitation unused since the acquisition and any unused net operating losses generated after the September 1, 2010 acquisition date.  The amount of the annual limitation will be adjusted upwards for any recognized built-in gains on certain assets sold during the five year period commencing with the September 1, 2010 ownership change, but may be further limited in the event of any future change in control or similar transaction.  Our results for the three months ended March 31, 2015 and 2014 were not impacted by these limitations.

 

 

RECENTLY ISSUED ACCOUNTING STANDARDS

  

In January 2015, the FASB issued ASU 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” which changed the requirements for reporting extraordinary and unusual items in the income statement. The update eliminates the concept of extraordinary items. The presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include items that are both unusual in nature and infrequently occurring. A reporting entity may apply the amendments prospectively or retrospectively to all periods presented in the financial statements. The guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The adoption of this newly issued guidance is not expected to have an impact to the Company’s consolidated financial statements.

 

 
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In February 2015, the FASB issued ASU 2015-02, “Consolidations (Topic 225-20): Amendments to the Consolidation Analysis,” which affects current consolidation guidance. The guidance changes the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance must be applied using one of two retrospective application methods and will be effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in any interim period. The Company is currently evaluating the impact, if any, of the adoption of this newly issued guidance to its consolidated financial statements.

 

In April 2015, the FASB issued ASU 2015-03, “Interest – Imputation of Interest (Topic 225-20): Simplifying the Presentation of Debt Issue Costs,” that simplifies the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by these amendments. This guidance should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. The guidance will be effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company is currently evaluating the impact, if any, of the adoption of this newly issued guidance to its consolidated financial statements.

 

 

CURRENCY FLUCTUATIONS

 

For the three months ended March 31, 2015 and 2014, approximately 18% and 23%, respectively, of our net revenues were generated in currencies other than the United States dollar. We expect that this percentage may increase in the future as a result of our efforts to increase our international presence, particularly in key markets in Europe, Asia and South America. Fluctuations in the value of foreign currencies relative to the United States dollar affect our reported results of operations. If the United States dollar weakens relative to the foreign currency, then our earnings generated in the foreign currency will, in effect, increase when converted into United States dollars and vice versa. Exchange rate differences resulting from the relationship of the United States dollar against the Euro resulted in a decrease of approximately $181,000 in net revenues for 2015 as compared to 2014. Our European subsidiary incurs most of its revenue and expenses in Euro, which, to some extent, serves as a natural hedge and limits the net currency exposure.

 

During the three months ended March 31, 2015 and 2014, none of our subsidiaries was domiciled in a highly inflationary environment and the impact of inflation and changing prices on our net revenues and on our loss from continuing operations was not material.

 

 
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Conducting an international business inherently involves a number of difficulties, risks, and uncertainties, such as export and trade restrictions, inconsistent and changing regulatory requirements, tariffs and other trade barriers, cultural issues, labor and employment laws, longer payment cycles, problems in collecting accounts receivable, political instability, local economic downturns, seasonal reductions in business activity in Europe during the traditional summer vacation months and potentially adverse tax consequences.

 

 

INCOME TAXES

 

Refer to Note 8, Income Taxes, to the condensed consolidated financial statements and the Income Taxes section of Critical Accounting Policies included in this Quarterly Report on Form 10-Q regarding income tax matters.

 

 

RISK OF PRODUCT LIABILITY CLAIMS

 

Developing, manufacturing and marketing diagnostic test kits, reagents and instruments subject us to the risk of product liability claims. We believe that we continue to maintain an adequate amount of product liability insurance, but there can be no assurance that our insurance will cover all existing and future claims. There can be no assurance that claims arising under any pending or future product liability cases, whether or not covered by insurance, will not have a material adverse effect on our business, results of operations or financial condition. Our current products liability insurance is a “claims made” policy.

 

 

Item 4- Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

 

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management evaluated, with the participation of our principal executive officer and principal financial officer, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based upon that evaluation, and due to the fact that there was a material weakness in our internal control over financial reporting as discussed in more detail in Part II Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2014, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Notwithstanding the material weakness, our management, including our principal executive officer and principal financial officer, has concluded that the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with GAAP.

 

 
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Remediation Plan

 

Our remediation efforts to address this material weakness are ongoing and include, among other things, hiring additional qualified personnel and evaluating or undertaking certain improvements to our systems and processes, which, if successful, we believe will be sufficient to provide us with the ability to remediate or cure this material weakness in the future. If this material weakness is not remediated or cured, then this deficiency in internal control over financial reporting could adversely affect the timing and accuracy of our financial reporting.

 

Changes in Internal Control over Financial Reporting

 

Except with respect to our efforts to remediate our material weakness in internal control over financial reporting, there were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II - OTHER INFORMATION

 

Item 1 Legal Proceedings

 

We are involved in various legal claims and actions and regulatory matters, and other notices and demand proceedings arising in the ordinary course of business. While it is not possible to predict or determine the outcome of these proceedings, in the opinion of management, based on a review with legal counsel, any losses resulting from such legal proceedings would not have a material adverse impact on our financial position, results of operations or cash flows.

 

Item 6 Exhibits   

 

Exhibit

Number

 

Description

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

 

____________________

*

Pursuant to Item 601(b)(32) of Regulation S-K, this exhibit is furnished, rather than filed, with this Quarterly Report on Form 10-Q.

 

 
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Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 ERBA Diagnostics, Inc.

 

 

 

 Date: June 26, 2015

 By: 

/s/     Mohan Gopalkrishnan                               

 

 

Mohan Gopalkrishnan  

   

Principal Financial Officer

 

 
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EXHIBIT INDEX

 

 

 

Exhibit

Number

 

Description

31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2

Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

32.2

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

 

_____________________

 

*

Pursuant to Item 601(b)(32) of Regulation S-K, this exhibit is furnished, rather than filed, with this Quarterly Report on Form 10-Q.

 

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