ERBA Diagnostics (ERB) 10-Q 2013 Q1 Quarterly report

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, 2013

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 57^th 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 xNo ¨

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 ¨	Smaller reporting companyx
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes¨Nox

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

43,658,221 shares of Common Stock, $.01 par value, outstanding as of July 26, 2013.

ERBA Diagnostics, Inc.

INDEX

			PAGE NO.
PART I - FINANCIAL INFORMATION
	Item 1   -	Financial Statements
		Condensed Consolidated Balance Sheets as of March 31, 2013 (unaudited)and December 31, 2012	1
		Condensed Consolidated Statements of Operations and Comprehensive Income(Loss) (unaudited) for the three months ended March 31, 2013 and 2012	2
		Condensed Consolidated Statement of Shareholders’ Equity (unaudited)for the three months ended March 31, 2013	3
		Condensed Consolidated Statements of Cash Flows (unaudited)for the three months ended March 31, 2013 and 2012	4
		Notes to Condensed Consolidated Financial Statements (unaudited)	5
	Item 2   -	Management’s Discussion and Analysis of Financial Condition andResults of Operations	14
	Item 4   -	Controls and Procedures	27
PART II - OTHER INFORMATION
	Item 1 -	Legal Proceedings	28
	Item 6 -     Exhibits		28

ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31, 2013			December 31, 2012
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	3,595,312		$	4,125,818
Accounts receivable, net		6,768,566			6,369,165
Inventories, net		6,437,351			5,838,150
Other current assets		394,403			219,636
Total current assets		17,195,632			16,552,769
PROPERTY, PLANT AND EQUIPMENT:
Land		352,957			352,957
Buildings and improvements		3,102,712			3,068,607
Machinery and equipment		3,664,694			3,731,139
Furniture and fixtures		2,113,223			2,050,241
		9,233,586			9,202,944
Less accumulated depreciation		(7,635,540	)		(7,605,984	)
		1,598,046			1,596,960
OTHER ASSETS:
Intangible assets, net		1,728,666			1,812,048
Goodwill		3,494,619			3,494,619
Equipment on lease, net		557,776			585,321
Product license		282,936			282,936
Restricted deposits		184,440			148,040
Other assets		76,283			81,075
		6,324,720			6,404,039
Total assets	$	25,118,398		$	24,553,768
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,285,314		$	3,064,516
Capital lease obligation, current		-			21,947
Revolving line of credit		1,189,561			822,635
Other accrued expenses		3,127,802			2,809,447
Total current liabilities		7,602,677			6,718,545
OTHER LONG-TERM LIABILITIES:
Deferred tax liabilities		542,435			509,365
Other long-term liabilities		962,506			993,980
Total other long-term liabilities		1,504,941			1,503,345
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY:
Common stock, par value $0.01, authorized 100,000,000 shares, issued and outstanding 43,658,221 as of March 31, 2013 and December 31, 2012		436,582			436,582
Additional paid-in capital		52,947,370			52,947,370
Accumulated deficit		(36,784,223	)		(36,537,171	)
Accumulated other comprehensive loss		(588,949	)		(514,903	)
Total shareholders’ equity		16,010,780			16,331,878
Total liabilities and shareholders’ equity	$	25,118,398		$	24,553,768

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

1

ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Three Months Ended March 31, 2013 and 2012

	2013			2012
	(Unaudited)			(Unaudited)
NET REVENUE	$	6,708,107		$	4,273,274
COST OF SALES		3,660,933			2,150,936
Gross profit		3,047,174			2,122,338
OPERATING EXPENSES:
Selling		1,303,481			970,893
General and administrative		1,332,744			1,075,387
Research and development		347,118			195,544
Total operating expenses		2,983,343			2,241,824
Income (loss) from operations		63,831			(119,486	)
OTHER INCOME (EXPENSE), NET:
Interest expense		(23,544	)		(12,666	)
Unrealized gain (loss) on foreign currency transactions		(9,687	)		103,576
Acquisition and integration expenses		(211,045	)		-
Other income (expense), net		(25,613	)		(22,210	)
Total other income (expense), net		(269,889	)		68,700
(Loss) before provision for income taxes		(206,058	)		(50,786	)
PROVISION FOR INCOME TAXES		40,994			27,668
Net (loss)		(247,052	)		(78,454	)
OTHER COMPREHENSIVE INCOME (LOSS): Foreign currency translation adjustment		(74,046	)		121,711
Total comprehensive income (loss)	$	(321,098	)	$	43,257
Net (loss) per share - basic and diluted	$	(0.01	)	$	(0.00	)
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted		43,658,221			34,391,554

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

2

ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Statement of Shareholders’ Equity

For the Three Months Ended March 31, 2013

(Unaudited)

										Accumulated			Total
	Common Stock				Additional		Accumulated			Other			Shareholders’
	Shares		Amount		Paid-in Capital		Deficit			Comprehensive Loss			Equity
Balances as of December 31, 2012		43,658,221	$	436,582	$	52,947,370	$	(36,537,171	)	$	(514,903	)	$	16,331,878
Net (loss)		-		-		-		(247,052	)		-			(247,052	)
Foreign currency translation adjustment		-		-		-		-			(74,046	)		(74,046	)
Balances as of March 31, 2013		43,658,221	$	436,582	$	52,947,370	$	(36,784,223	)	$	(588,949	)	$	16,010,780

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

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ERBA Diagnostics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2013 and 2012

	2013			2012
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)	$	(247,052	)	$	(78,454	)
Adjustments to reconcile net (loss) to net cash (used in) operating activities-
Depreciation and amortization		226,279			192,990
Provision (reduction) for doubtful accounts receivable		46,988			(48,209	)
Reversal of provision for inventory obsolescence		(16,953	)		-
Amortization of other assets					17,667
Deferred income tax provision		33,070			15,873
Changes in operating assets and liabilities:
Accounts receivable		(553,939	)		(44,174	)
Inventories		(678,746	)		148,786
Other assets		(147,860	)		(178,556	)
Accounts payable and accrued expenses		490,742			(176,217	)
Other long-term liabilities		19,418			40,482
Net cash (used in) operating activities		(828,053	)		(109,812	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(82,803	)		(9,490	)
Acquisition of equipment on lease, net		(56,776	)		(43,243	)
Decrease in restricted deposits		2,600			9,332
Net cash (used in) investing activities		(136,979	)		(43,401	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (payments under) revolving line of credit		468,666			(75,571	)
Capital lease payments		(21,947	)		(18,980	)
Net cash provided by (used in) financing activities		446,719			(94,551	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS		(12,198	)		105,687
NET CHANGE IN CASH AND CASH EQUIVALENTS		(530,511	)		(142,077	)
CASH AND CASH EQUIVALENTS, beginning of period		4,125,823			3,653,244
CASH AND CASH EQUIVALENTS, end of period	$	3,595,312		$	3,511,167

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

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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, 2013 are not necessarily indicative of the results of operations, financial position, changes in stockholders’ equity and cash flows which may be reported for the remainder of 2013. The consolidated balance sheet as of December 31, 2012 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, 2012.

As approved by the Company’s stockholders at the Company’s Annual Meeting of Stockholders held on June 15, 2012, and as previously approved by the Company’s Board of Directors, the Company’s name was changed from IVAX Diagnostics, Inc. to ERBA Diagnostics, Inc. 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 primarily to customers in the United States and Italy.

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 82.4% of the outstanding shares of the Company’s common stock.

Reclassifications

Certain amounts in the prior period’s condensed consolidated financial statements have been reclassified to conform to the current period’s presentation.

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(2) LIQUIDITY:

The Company incurred a net loss of approximately $247,000 during the three months ended March 31, 2013 and a net loss of approximately $78,000 during the three months ended March 31, 2012 and had cash used in operations of approximately $828,000 and approximately $110,000 for those respective periods.

The Company has implemented certain initiatives and has significantly decreased operating expenses to improve operating results.  The Company expects operating results to continue to improve upon increases in revenue as a result of the commercial launch of the Mago® 4S in the United States during 2011 and anticipated increases in the United States and international revenue from new channels of distribution.  In addition, the Company’s acquisition of Drew Scientific, Inc. and its subsidiaries has expanded the Company’s product base and potential available markets. Management of the Company believes that it has sufficient resources to enable its continued existence as a going concern.

As discussed in Note 13,Revolving Line of Credit, on March 1, 2013, Diamedix Corporation (“Diamedix”), a wholly-owned subsidiary of the Company, closed down the previously existing line of credit from City National Bank of Florida and the Company entered into a new loan agreement with Citibank, N.A., which provides for a secured, revolving credit facility of up to $2,000,000.

(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.

There were no grants, exercises, or expirations of stock options during the three months ended March 31, 2013. As of March 31, 2013, there were stock options outstanding under the Company’s equity plan to purchase 1,120,870 shares of common stock at a weighted average exercise price of $1.28. There was no stock compensation expense for the three months ended March 31, 2013 or 2012.

(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.

6

(5) INVENTORIES, NET:

Inventories, net consist of the following:

	March 31,		December 31,
	2013		2012
Raw materials	$	1,842,095	$	1,712,199
Work-in-process		683,364		664,880
Finished goods		3,911,892		3,461,071
Total inventories, net	$	6,437,351	$	5,838,150

(6) PRODUCT LICENSE:

In September 2004, the Company entered into a license agreement with an Italian diagnostics company to obtain a perpetual, worldwide, royalty-free license of product technology used by the Italian diagnostics company. This licensed hepatitis product technology is existing technology, which the Italian diagnostics company had developed and successfully commercialized to manufacture hepatitis products sold by them and for which it had already received “CE Marking” approval from the European Union. Through the acquisition of this existing technology in its current form, the Company expects to be able to derive revenue from the manufacture and sale of new hepatitis products. In exchange for the Italian diagnostics company’s assistance in transferring the know-how of the manufacturing technology, the Company agreed to pay a total of 1,000,000 Euro in the form of four milestone payments upon the Italian diagnostics company’s achievement of certain enumerated performance objectives related to the transfer of such existing technology. Three of the four milestone payments, totaling 900,000 Euro, were made in prior years. During the year ended December 31, 2012, the balance of 100,000 Euro (equivalent to approximately $132,000) was offset against the accounts receivable owed to the Company from the Italian diagnostics company. In October 2011, the Company received “CE Marking” granting approval for the remaining products covered under the license agreement. Sales are expected to commence in 2013, at which time the Company will commence amortizing this balance.

During the fourth quarter of 2009, the Company determined that the carrying amount of the product license was in excess of its fair value and recorded a non-cash impairment charge to operations totaling $400,000, reducing the value of the product license to $282,936 as of December 31, 2009, from $682,936 as of December 31, 2008. Fair value was determined based upon the income approach, which estimates fair value based upon future discounted cash flows. Based upon this methodology, and utilizing significant assumptions in the income approach that included a forecasted cash flow period of five years and revenue and gross margin estimates beginning in 2012, estimated future cash flows generated by the technology granted by the product license was calculated using a discount rate of 23%, reflecting the Company’s best estimate of fair value. If further product approval delays beyond the product launch assumptions included in the Company’s discounted cash flow computations occur, then the Company may be required to record an additional impairment charge with respect to all or a portion of the remaining $282,936 intangible product license of hepatitis technology asset.

While the license is perpetual, the Company believes that the expected economic useful life of the license will be five years after the Company begins to utilize the licensed technology for its intended purpose. Amortization of the product license will begin following the initial sale of the hepatitis products manufactured by the Company.

7

(7) LOSS PER SHARE:

Basic loss per share excludes any dilution. It is based upon the weighted average number of shares of common stock outstanding during the period. Diluted 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, 2013 and December 31, 2012, 15,854,204 shares of common stock underlying stock options and warrants were not included in computing diluted earnings 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, 2013 and 2012:

	2013		2012
Current:
Domestic	$	-	$	-
Foreign		7,924		11,795
Deferred:
Domestic		33,070		15,873
Total	$	40,994	$	27,668

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, 2013 and 2012. In addition, no current domestic income tax provision was recorded during the same periods, due to the valuation allowance to offset the provision of domestic income of approximately $68,000 during the three months ended March 31, 2013 and its domestic loss of approximately $52,000 during the three months ended March 31, 2012. The foreign current income tax provisions for the three months ended March 31, 2013 and 2012 were the result of Italian local income taxes based upon applicable statutory rates effective in Italy.

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, 2013 and December 31, 2012, the Company had no net domestic deferred tax assets. As of March 31, 2013 and December 31, 2012, the Company had net deferred tax liabilities of $542,435 and $509,365, respectively, relating to tax deductible goodwill which is not expected to reverse in the foreseeable future. Additionally, as of March 31, 2013 and December 31, 2012, 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.

Domestic net operating losses generated by the Company total approximately $19,000,000 as of December 31, 2012 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 2023. 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, 2013 and 2012.

8

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.

In January 2013, one of the Company’s wholly-owned subsidiaries, ImmunoVision, Inc., received three Notices of Final Assessments from the State of Arkansas Department of Finance & Administration for the tax years ended December 31, 2005, 2006 and 2008 for a total of $361,940 (including penalties and interest). Based on discussions with a representative of the Department, the Company was informed that the assessments related to unfiled tax returns for those years. The Company has located file copies of the returns for the years 2005 and 2006, which reflect zero taxable income and zero tax liability. Since the Company has been unable to locate a file copy of the 2008 return, a return for that year has been prepared resulting in total tax, penalties and interest of approximately $10,500. This amount was recorded as an expense in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2012.

(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, 2013 and December 31, 2012, Delta Biologicals’ gross accounts receivable, primarily due from Italian companies, were approximately $4,184,000 and $4,394,000, respectively. Amounts due from hospitals and laboratories controlled by the Italian government as of March 31, 2013 and December 31, 2012 were approximately $1,207,000 and $1,719,000, respectively, which accounted for approximately 18% and 27%, respectively, of the Company’s consolidated net accounts receivable. Delta Biologicals recognized revenues during the three months ended March 31, 2013 and 2012 of in the amount of approximately $975,000 and $1,410,000, respectively, which represented approximately 15% and 33%, respectively, of the Company’s consolidated net revenues.

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.

9

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 are 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, including from and after the acquisition date of October 3, 2012, Drew Scientific and its subsidiaries. The European region contains Delta Biologicals and, from and after the acquisition date of October 3, 2012, Drew Scientific Limited Co. 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, loss from operations, total assets and goodwill by region for the three months ended March 31, 2013 and 2012:

	Domestic			European			Eliminations			Total
March 31, 2013:
External net sales	$	5,732,855		$	975,252		$	-		$	6,708,107
Intercompany sales		87,659			11,556			(99,215	)		-
Net revenue	$	5,820,514		$	986,808		$	(99,214	)	$	6,708,107
Income (loss) from operations	$	366,954		$	(303,123	)	$	-		$	63,831
Assets	$	39,892,374		$	5,686,249		$	(20,460,225	)	$	25,118,398
Goodwill	$	3,494,619		$	-		$	-		$	3,494,619
March 31, 2012:
External net sales	$	2,863,037		$	1,410,237		$	-		$	4,273,274
Intercompany sales		134,935			19,917			(154,852	)		-
Net revenue	$	2,997,972		$	1,430,154		$	(154,852	)	$	4,273,274
Income (loss) from operations	$	(153,548	)	$	34,062		$	-		$	(119,486	)
Assets	$	10,685,646		$	6,350,081		$	-		$	17,035,727
Goodwill	$	870,290		$	-		$	-		$	870,290

10

(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, 2013 and 2012, the Company sold products to Transasia, and a subsidiary of ERBA Mannheim, for a total amount of Euro 15,000 (equivalent to approximately $20,000) and Euro 309,000 (equivalent to approximately $405,000), respectively.

In the fourth quarter of 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, 2012, contract research and development revenue under this agreement approximated Euro 112,000 (equivalent to approximately $147,000). No revenues were recognized for the three months ended March 31, 2013 in connection with this agreement.

The Company had total net accounts receivable from ERBA Mannheim and Transasia of approximately $425,000 and $644,000 as of March 31, 2013 and December 31, 2012, respectively, related to the above transactions. As of March 31, 2013 and December 31, 2012, the Company had net payables of $16,548 and net receivables of $65,441, respectively, for the reimbursement of various expenditures on behalf of ERBA Mannheim; this amount is included in other current assets in the accompanying consolidated balance sheet.

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 after June 15, 2013 and 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.

In December 2012, JAS Diagnostics entered into a Research and Development Outsourcing Agreement with Erba Diagnostics France SARL (“Erba Diagnostics France”), pursuant to which JAS Diagnostics has agreed to pay Erba Diagnostics France a total amount of Euro 350,000 (equivalent to approximately $462,500), in seven monthly installments of Euro 50,000 from December 2012 through June 2013, for certain research and development endeavors. On July 24, 2013, JAS Diagnostics and Erba Diagnostics France mutually terminated the agreement and, as result, the second through fourth installments aggregating Euro 150,000 (equivalent to approximately $198,000) are included in other current assets in the accompanying condensed consolidated balance sheet as of March 31, 2013. See Note 14 – “Subsequent Event” for further discussion.

11

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.

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, 2013. As of March 31, 2013, 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.

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Other Transactions

During the three months ended March 31, 2013 and 2012, ImmunoVision paid $6,000 to John B. Harley, M.D., Ph.D., a member of the Board of Directors, under that certain oral consulting agreement between Dr. Harley and ImmunoVision pursuant to which Dr. Harley is paid $2,000 per month in consideration for his provision of technical guidance and business assistance to the subsidiary on an as-needed basis.

Pursuant to a license agreement between the Company and Dr. Harley, he has granted an exclusive worldwide license to the Company for certain patents, rights and technology relating to monoclonal antibodies against autoimmune RNA proteins developed by him in exchange for specified royalty payments, including an annual minimum royalty of $10,000for each licensed product utilized by the Company. For the three months ended March 31, 2013 and 2012, the Company has expensed the minimum $2,500 under such agreement.

The amounts paid to Dr. Harley were in addition to the amounts he received for his service as member of the Company’s Board of Directors and the committees of the Board of Directors on which he served.

(13) REVOLVING LINE OF CREDIT:

On March 1, 2013, the Company entered into that certain Business Loan Agreement and that certain Promissory Note with Citibank, N.A. (“Citibank”), which provides for a secured, revolving credit facility of up to $2,000,000 (the “New Line of Credit”). Amounts outstanding under the New Line of Credit will accrue interest at an annual rate equal to the 30-day LIBOR plus 1.75% and will become due and payable on December 31, 2013, subject to acceleration upon the occurrence of certain specified events of default that the Company believes are customary for transactions of this type. Pursuant to the business loan agreement, the Company will be 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 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, and Drew Scientific. In addition, each of Diamedix, ImmunoVision and Drew Scientific has guaranteed the repayment of amounts drawn on the New Line of Credit. Further, Transasia, the indirect parent company of the Company, has also guaranteed the repayment of amounts drawn on the New Line of Credit.

In connection with establishing the New Line of Credit, Diamedix contemporaneously closed down its former line of credit with City National Bank of Florida; the payoff amount at closing was $975,000.

The Company did not submit its annual and first quarter consolidated financial statements to Citibank as of the required dates. Citibank has issued a waiver for these two areas of noncompliance.

As of March 31, 2013, $1,189,561 was outstanding under the New Line of Credit.

14 SUBSEQUENT EVENT:

Cancellation of Research and Development Outsourcing Agreement

In December 2012, JAS Diagnostics entered into a Research and Development Outsourcing Agreement with Erba Diagnostics France, as more fully discussed in Note 12 – “Related Party Transactions.” On July 24, 2013, JAS Diagnostics and Erba Diagnostics France mutually terminated the agreement and Erba Diagnostics France has agreed to refund to JAS Diagnostics all amounts paid under the agreement within 90 days. The Company incurred research and development cost in amount of $286,188 from the inception of the agreement through March 31, 2013 which will be reimbursed by Erba Diagnostics France and has been included in other current assets in the accompanying consolidated balance sheet.

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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, 2012 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.

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 continue as a going concern;

· 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;

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

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· our ability to remediate our material weakness relating to our internal controls 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;

· the ability of the Mago^® 4S to perform as expected;

· the impact of the commercial release of the Mago^® 4S on the judgments and estimates we have made with respect to our financial condition, operating results and cash flows;

· the impact on our financial condition and operating results of making or changing judgments and estimates as a result of future design changes to, or the development of improved instrument versions of, the Mago^® 4 or Mago^® 4S or as a result of future demand for the Mago^® 4 or Mago^® 4S;

· the ability of the Mago^® 4 or Mago^® 4S to be a source of revenue growth for us;

· our ability to receive financial benefits or achieve improved operating results as a result of the commercial release of the Mago^® 4 or the Mago^® 4S;

· the ability of the Mago^® 4 or Mago^® 4S to be a factor in our growth;

· the ability of the Mago^® 4 or Mago^® 4S to expand the menu of test kits we offer;

· making derivations of and upgrades to the Mago^® our primary platforms for marketing our kits;

· our ability to successfully market the Mago^® 4 or Mago^® 4S;

· our customers’ integration of the Mago^® 4 or Mago^® 4S into their operations;

· our ability to successfully market the DSX™ and DS2™ instrument systems from Dynex Technologies in conjunction with our test kits on a worldwide basis;

· the success of our comprehensive review of our business plans and operations and the initiatives that we have implemented or may implement based on the results of such review;

· our ability to successfully market the Ds5 instrument system for diabetes testing;

· our ability to successfully market the Ds360 instrument system for diabetes testing;

· our ability to successfully market the D3 instrument system for hematology testing;

· our ability to successfully market the 2280 instrument system for hematology testing;

· our ability to successfully market generic clinical chemistry reagents;

· our ability to improve our competitive position to the extent anticipated, or at all, as a result of our comprehensive review of our business plans and operations and the initiatives that we have implemented or may implement based on the results of such review;

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

· 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 integrate the businesses commonly known as 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 integrate the businesses commonly known as Drew Scientific and JAS Diagnostics;

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· our ability to achieve economies of scale or to maximize the utilization of our assets and facilities, after any integration of the businesses commonly known as 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;

· the timing of the closing of our Drew Scientific facility in Dallas, Texas;

· our ability to enhance our position in laboratory automation;

· 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, or become a leader in the diagnostics industry;

· 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 remaining goodwill recorded at ImmunoVision, 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 obtain product technology from the Italian diagnostics company that would enable us to manufacture our own hepatitis products;

· our ability to introduce and market our own hepatitis products in the European Union when expected, or at all, including the potential that any further delays may require us to record an additional impairment charge with respect to the value of our hepatitis technology product license or pay all or a portion of our accrued payables relating to the product license;

· our ability to internally manufacture our own hepatitis products and raw materials for these products and to become competitive in markets outside of the United States;

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

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· the impact of the anticipated timing of the commercial launch of our own hepatitis products on the judgments and estimates we have made with respect to our financial condition, operating results and cash flows;

· our production capacity at our facility in Miami, Florida;

· the success of the move of our headquarters from our Miami, Florida facility to our Miami Lakes, Florida facility;

· 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 effects of utilizing cash to assist Delta in maintaining its compliance with capital requirements established by Italian law;

· 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;

· 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, Sanjiv Suri and/or Kishore “Kris” Dudani, and with our officers, employees and other directors; and

· other factors discussed elsewhere in this Quarterly 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, 2012 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

On September 1, 2010, ERBA Mannheim purchased all of the approximately 72.4% of the then outstanding shares of our 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 throughout this Quarterly Report on Form 10-Q, including ERBA Mannheim’s purchase from us, and our issuance to ERBA Mannheim, of an aggregate of 15,333,334 shares of our common stock, and ERBA Mannheim’s exercise, in part, of the Warrant, as further described throughout this Quarterly Report on Form 10-Q, for 600,000 shares of our common stock, ERBA Mannheim now beneficially owns, directly or indirectly, approximately 82.4% of the outstanding shares of our common stock.

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ACQUISITION OF DREW SCIENTIFIC, INC.

On October 3, 2012, we acquired all of the issued and outstanding shares of capital stock of Drew Scientific from a subsidiary of Escalon Medical Corp. pursuant to a Stock Purchase Agreement between, among others, us and Escalon. Included in the acquired businesses were Drew Scientific’s wholly-owned subsidiaries – JAS Diagnostics, Inc. and Drew Scientific Limited Co.

The acquired businesses, collectively referred to as Drew Scientific, were acquired with the purpose of integrating Drew Scientific’s manufacturing and distribution capabilities with our legacy operations in an effort to achieve economies of scale and maximize the utilization of our assets and facilities. We paid $6,500,000 for all of the issued and outstanding shares of capital stock of Drew Scientific, which purchase price was funded through the purchase by ERBA Mannheim from us of 8,666,667 shares of our common stock at a purchase price of $0.75 per share, for an aggregate purchase price of $6,500,000.

Prior to the October 3, 2012 acquisition date, our management decided to cease the operations of the Dallas, Texas, and the United Kingdom facilities of Drew Scientific and its subsidiaries. As a result, we have accrued on the opening balance sheet as of October 3, 2012 estimated plant closing costs, including lease buy-out and severance costs, of $160,000 and $118,000, respectively. Regarding the Dallas, Texas facility, in May 2013, our management announced that the closing would be effective in late September 2013. With respect to the United Kingdom facility, the closing was effective in late March 2013.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2013 COMPARED TO THREE MONTHS ENDED MARCH 31, 2012

OVERVIEW

Net loss totaled $247,000 for the three months ended March 31, 2013 compared to a net loss of $78,000 for the three months ended March 31, 2012. Operating income was $64,000 for 2013 compared to an operating loss of $119,000 for 2012. The decrease in operating loss in 2013 compared to 2012 resulted primarily from the operating income of $493,000 for Drew Scientific for 2013, offset by a decrease from operating income to loss in our European operations of $303,000. The increase in net loss in 2013 compared to 2012 resulted primarily from acquisition and integration expenses of $211,000 in 2013.

Net revenues increased by $2,435,000 to $6,708,000 in 2013 from $4,273,000 in 2012. This net increase was attributed to the net revenues of $3,472,000 for Drew Scientific for 2013 offset by other factors from recurring operations resulting in a decrease of $1,037,000. This decrease of $1,037,000 consisted of a decrease in net revenues from legacy domestic operations of $602,000, to $2,261,000 in 2013 from $2,863,000 in 2012, and a decrease in net revenues from European operations of $435,000, including the effect of exchange rate fluctuations of the United States dollar relative to the Euro, to $975,000 in 2013 from $1,410,000 in 2012.

Gross profit increased by $925,000 to $3,047,000 in 2013 from $2,122,000 in 2012. This net increase was attributed to the gross profit of $1,352,000 for Drew Scientific for 2013 offset by other factors from recurring operations resulting in a decrease of $427,000. This decrease of $427,000 from recurring operations was primarily the result of lower domestic and European revenues.

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Total operating expenses increased by $741,000 to $2,983,000 in 2013 from $2,242,000 in 2012. This increase was primarily attributed to the expenses of $859,000 for Drew Scientific for 2013. This increase of $741,000 was a result of increases in all three expense categories. Comparing 2013 to 2012, selling expenses increased by $332,000, general and administrative expenses increased by $258,000 and research and development expenses increased by $151,000.

NET REVENUES AND GROSS PROFIT

The following table presents comparative net revenues and gross profit for our operations, including the operations of Drew Scientific (net revenues of $3,472,000, cost of sales of $2,120,000 and gross profit of $1,352,000), for the three-month periods ended March 31, 2013 and 2012.

					Increase
	2013		2012		(Decrease)
Net Revenues:
Domestic	$	5,733,000	$	2,863,000	$	2,870,000
European		975,000		1,410,000		(435,000	)
Total		6,708,000		4,273,000		2,435,000
Cost of Sales		3,661,000		2,151,000		1,510,000
Gross Profit	$	3,047,000	$	2,122,000	$	925,000
% of Total	45.4%		49.7%

The net increase in revenues for 2013 compared to 2012 was attributed to the post-acquisition net revenues of $3,472,000 for Drew Scientific, a decrease of $602,000 in net revenues from our legacy domestic operations and a decrease of $435,000 in net revenues from European operations. Exchange rate differences resulting from the strength or weakness of the United States dollar against the Euro resulted in an increase of approximately $7,000 in net revenues in 2013 as compared to 2012, as further discussed in “Currency Fluctuations” below. As measured in Euros, net revenues from European operations in 2013 decreased by Euro 279,000, or 27.4%, as compared to 2012. The decrease in net revenues from European operations (as measured by the Euro) was mainly due to contract research and development revenue partially offset by the declines in reagent sales in Italy and other international markets. The decrease in net revenues from legacy domestic operations of $602,000, or 21.0%, was principally due to a decline in sales to international customers of approximately $100,000, principally in Latin America and Japan, a decrease in reagent sales of approximately $327,000, and a decrease in equipment sales of $153,000.

The net increase in gross profit of approximately $925,000 for 2013 compared to 2012 was attributed to the gross profit of $1,352,000 for Drew Scientific for 2013 offset by a decrease in gross profit of $427,000 for our legacy operations. Gross profit as a percentage of net revenues decreased from 49.7% in 2012 to 45.4% in 2013, resulting principally from the lower gross profit percentage of 38.9% for the operations of Drew Scientific.

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OPERATING EXPENSES

The following table presents comparative operating expenses for us, including the amounts for Drew Scientific of $859,000 (selling expenses of $536,000, general and administrative expenses of $330,000 and credit balance of $7,000 in research and development expenses), for the three-month periods ended March 31, 2013 and 2012. The percentages in the table below are based on the total net revenues in the above table.

	2013		% of Revenue			2012		% of Revenue			Increase
Selling	$	1,303,000		19.4	%	$	971,000		22.7	%	$	332,000
General and Administrative		1,333,000		19.9	%		1,075,000		25.2	%		258,000
Research and Development		347,000		5.2	%		196,000		4.6	%		151,000
Total Operating Expenses	$	2,983,000		44.5	%	$	2,242,000		52.5	%	$	741,000

The increase in total operating expenses from $2,242,000 in 2012 to $2,983,000 in 2013 was primarily attributed to the expenses of $859,000 for Drew Scientific for 2013, due to the factors noted below.

The net increase of $332,000 in selling expenses in 2013 compared to 2012 was due to the amounts for Drew Scientific for 2013 of $536,000 and a decrease of $204,000 in our recurring operations. This decrease was due principally to open sales positions in the United States and, in Italy, reduction in workforce and lower commissions from lower sales in various commissionable categories.

The net increase of $258,000 in general and administrative expenses for 2013 compared to 2012 was due to the amounts for Drew Scientific for 2013 of $339,000, offset by a decrease of $81,000 in our recurring domestic operations. This decrease was due to consolidation of operations and resulting reduction in workforce.

The net increase of $151,000 in research and development expenses for 2013 compared to 2012 was due the increase of $158,000 in our recurring operations. This increase was due principally to the research and development agreement of our European operations as further discussed in Note 12 – “Related Party Transactions.”

Income from operations totaled $64,000 in 2013 as compared to an operating loss of $119,000 in 2012. Income from operations in 2013 was composed of operating income of $493,000 for Drew Scientific, an operating loss of $126,000 from the legacy domestic operations and an operating loss of $303,000 from our European operations. Loss from operations in 2012 was composed of a $153,000 loss from domestic operations and income of $34,000 from European operations. Our domestic operations include corporate expenditures, including costs required to maintain our status as a public company.

OTHER INCOME (EXPENSE), NET

Other income (expense) totaled an other expense, net of $270,000 in 2013 as compared to an other income, net of $69,000 in 2012. The decrease in other income to loss from 2012 to 2013 was primarily the result of acquisition and integration costs of $211,000 incurred in 2013.

INCOME TAX PROVISION

We recorded recurring income tax provisions of $41,000 for 2013 and $27,000 for 2012. The current portion of our tax benefit and provisions, respectively, in both years relates to Italian local income taxes based upon applicable statutory rates effective in Italy. The deferred tax provisions in these years relate to domestic tax deductible goodwill. No current tax benefit was recorded during the two years on our losses because we had a full valuation allowance against the net deferred income tax assets.

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

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NET LOSS

We generated a consolidated net loss of $247,000 in 2013 (including the net income of $448,000 for Drew Scientific) as compared to a net loss of $78,000 in 2012. Basic and diluted net loss per common share was $0.01 in 2013 as compared to $0.00 in 2012. The net loss for both years resulted from the various factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2013, our working capital was $9,593,000 compared to $9,834,000 at December 31, 2012. Cash and cash equivalents totaled $3,595,000 at March 31, 2013 and $4,126,000 at December 31, 2012.

Operating activities

Net cash flows of $828,000 were used in operating activities during the three months ended March 31, 2013 as compared to $110,000 that was used in operating activities during the three months ended March 31, 2012.

Cash provided by operating activities during 2013 was primarily the result of changes in operating assets and liabilities of $870,000. 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.

Cash used in operating activities of $110,000 during 2012 was the result of the net loss of $78,000 and changes in operating assets and liabilities of ($210,000), partially offset by non-cash items of $178,000. 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 $137,000 and $43,000 was used in investing activities during 2013 and 2012, respectively. The cash flows relating to investing activities in 2013 were primarily for capital expenditures of $83,000 and acquisition of equipment on lease of $57,000. The cash flows relating to investing activities in 2012 were for capital expenditures of $9,000 and acquisition of equipment on lease of $43,000, offset by cash released from restricted deposits of $9,000.

Financing activities

Financing activities during 2013 reflect net proceeds of $469,000 under the revolving line of credit and capital lease payments of $22,000.

Financing activities during 2012 reflect net payments of $76,000 under the revolving line of credit and capital lease payments of $19,000.

Other matters

Liquidity is expected to be sufficient through the end of 2013 from the combination of the existing cash and cash equivalents at March 31, 2013, 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.

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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 $347,000 during 2013 and $196,000 for 2012. In the fourth quarter of 2011, Delta Biologicals entered into a contract research and development agreement, as amended, with ERBA Mannheim for a total of Euro 754,700 (equivalent to approximately $1,003,000). A total of Euro 54,000 (equivalent to approximately $71,000) was invoiced under the contract during the three months ended March 31, 2012. 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.

In connection with our evaluation of our operating results, financial condition and cash position, and specifically considering our results of operations and cash utilization during 2012, 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 2012, based principally upon increases in revenue as a result of new channels of distribution in the United States and international markets.

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 operating results and 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.

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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.

REVENUE RECOGNITION

A principal source of revenue is our “reagent rental” program in which customers make reagent kit purchase commitments with us that will usually last for a period of three to five years. In exchange, we typically include an instrument system, which remains our property (or, in the case of a lease financing arrangement, that of the financing company). We also include any required instrument service. Both the instrumentation and service are paid for by the customer through these reagent kit purchases over the life of the commitment. We recognize revenue from the reagent kit sales when title passes, which is generally at the time of shipment. Should actual reagent kit or instrument failure rates significantly increase, our future operating results could be negatively impacted by increased warranty obligations and service delivery costs.

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.

During the year ended December 31, 2011, one of our subsidiaries entered into a contract research and development agreement with ERBA Mannheim, as amended. Expenses incurred pursuant to that contract are included in cost of sales as the related revenues are recorded from the achievement of milestones.

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. In the first quarter of 2013, we re-evaluated the formula used to determine the allowance for doubtful accounts, resulting in no change in the allowance.

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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, 2013 included components for current or future versions of products and instrumentation.

Our inventory balance as of March 31, 2013 and December 31, 2012 included approximately $100,000 of inventory relating to our hepatitis product, substantially all of which has a shelf life exceeding five years, for which we obtained “CE Marking” approval in the European Union during 2011 and which we have begun marketing in certain markets.

Inventory reserves were $797,000 and $816,000 as of March 31, 2013 and December 31, 2012, respectively.

GOODWILL AND OTHER INTANGIBLES

Goodwill is attributed to the acquisitions of ImmunoVision and Drew Scientific and represents the excess of the cost over the fair value of net assets acquired. We test goodwill for possible impairment on an annual basis and at any other time events occur or circumstances indicate that the carrying amount of goodwill may be impaired. The first step required in the impairment analysis consists of a comparison of the fair value of the reporting unit with its carrying amount, including the goodwill.

For the annual test of remaining goodwill at ImmunoVision, we determined fair value primarily based upon the income approach, which estimates the fair value based on the future discounted cash flows, rather than the market approach, which estimates the fair value based on market prices of comparable companies. We believe the income approach is more appropriate to determine the fair value at ImmunoVision and should therefore be more heavily weighted due to the fact that similar public companies comparable to ImmunoVision are difficult to identify and current market conditions are in a period of volatility with wide ranging multiples. Based upon this methodology, and utilizing significant assumptions in the income approach that included a forecasted cash flow period of five years, long-term annual growth rates of 3% for both years and a discount rate of 20% for both years, no impairment was recorded during the three months ended March 31, 2013 and 2012.

We review our long-lived assets for impairment, including intangible assets 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 undiscounted future cash flows is less than the carrying amount of the related assets, then we will recognize an impairment loss. Assets to be disposed of are reclassified as assets held for sale at the lower of their carrying amount or fair value less costs to sell. Write-downs to fair value less disposal costs are reported as a part of loss from operations.

We do not believe that there were any events or changes in circumstances which indicate that the carrying amounts of our long-lived assets may not be recoverable as of March 31, 2013 and December 31, 2012, respectively.

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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.

INCOME TAXES

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, 2013. 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, 2013 and 2012 were not impacted by these limitations.

RECENTLY ISSUED ACCOUNTING STANDARDS

There were no recently issued accounting standards issued during the three months ended March 31, 2013 that were applicable to us.

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CURRENCY FLUCTUATIONS

For the three months ended March 31, 2013 and 2012, approximately 15% and 33%, 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 an increase of approximately $7,000 in net revenues for 2013 as compared to 2012. 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, 2013 and 2012, 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.

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 theIncome 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.

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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, 2012, 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.

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 as described above, there were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2013 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 Interim 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 Interim 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:  August 9, 2013	By:	/s/Prakash J. Patel
		Prakash J. Patel,
		Principal Financial Officer

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EXHIBIT INDEX

Exhibit Number	Description
31.1	Certification of Interim 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 Interim 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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