ERBA Diagnostics, Inc. Reports First Quarter 2013 Financial Results

ERBA Diagnostics, Inc. (NYSE MKT: ERB), a fully integrated in vitro diagnostics company, reported its financial results for the quarter ended March 31, 2013. Sanjiv Suri, Interim Chief Executive Officer of ERBA Diagnostics, said, “I am pleased to report a continuation in the first quarter of 2013 of the turnaround we are experiencing, with a significant year-over-year improvement from an operating loss to positive operating income, resulting from our recent acquisition of Drew Scientific. Our expenses from recurring operations have continued to stabilize through the first quarter of 2013. We have seen growth in reagent sales in the first quarter of 2013. For the remainder of 2013, we plan to continue to streamline our operations as well as to continue to implement a number of new initiatives in an effort to grow sales and product range, organically. We are also exploring potential acquisitions, both in the United States and internationally. These efforts are backed by our previously reported stock purchase agreement and warrant with our principal stockholder, ERBA Diagnostics Mannheim GmbH, which has already provided us with $11.95 million of equity funding and which has agreed to provide us with another $3.50 million pursuant to the stock purchase agreement and which has the right to provide us with an additional $14.55 million pursuant to the warrant.”

Financial Highlights for the Quarter Ended March 31, 2013

Net revenues increased by $2,435,000 to $6,708,000 in the first quarter of 2013 from $4,273,000 in the first quarter of 2012. This net increase was attributed to the net revenues of $3,472,000 for Drew Scientific for the first quarter of 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 the first quarter of 2013 from $2,863,000 in the first quarter of 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 the first quarter of 2013 from $1,410,000 in the first quarter of 2012.

Gross profit increased by $925,000 to $3,047,000 in the first quarter of 2013 from $2,122,000 in the first quarter of 2012. This net increase was attributed to the gross profit of $1,352,000 for Drew Scientific for the first quarter of 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.

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

Other income (expense) totaled an other expense, net of $270,000 in the first quarter of 2013 as compared to an other income, net of $69,000 in the first quarter of 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 the first quarter of 2013.

We generated a consolidated net loss of $247,000 in the first quarter of 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 the first quarter of 2013 as compared to $0.00 in the first quarter of 2012. The net loss for both years resulted from the various factors discussed above.

About ERBA Diagnostics, Inc.

ERBA Diagnostics, Inc. ( www.erbadiagnostics.com), headquartered in Miami Lakes, Florida, is a fully integrated in vitro diagnostics company that develops, manufactures and distributes in the United States and internationally, proprietary diagnostic reagents, test kits and instrumentation, primarily for autoimmune and infectious diseases, through its legacy subsidiaries – Diamedix Corporation (U.S.), Delta Biologicals S.r.l. (Europe) and ImmunoVision, Inc. (U.S.) – and through its recently acquired subsidiaries – Drew Scientific, Inc. (U.S.) and JAS Diagnostics, Inc. (U.S.).

Safe Harbor Statement

Except for the historical matters contained herein, statements in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements involve risks and uncertainties that may affect the business and prospects of ERBA Diagnostics, Inc., including, without limitation, the risks and uncertainties related to: ERBA Diagnostics’ ability to successfully improve its financial condition, results of operations and cash flows; ERBA Diagnostics’ ability to successfully maintain its cost containment efforts and reduced expenses; ERBA Diagnostics’ ability to continue to maintain a stabilized level of expenses; ERBA Diagnostics’ ability to continue to achieve growth in the level of reagent sales; ERBA Diagnostics’ ability to successfully streamline operations, achieve revenue growth and increased product range; ERBA Diagnostics’ ability to successfully maintain stability in its cash flows and liquidity position; ERBA Diagnostics’ ability to successfully grow its business, sales and product range in the United States and other markets, whether organically or through acquisitions or otherwise, during the anticipated time frame or at all; ERBA Diagnostics may not be successful in identifying or consummating acquisitions or other strategic opportunities and any identified and consummated acquisition or other strategic opportunity may not be successfully integrated and may not result in synergies, operational efficiencies or other benefits anticipated and may not otherwise improve ERBA Diagnostics’ financial condition, operating results or cash position; ERBA Diagnostics’ ability to successfully integrate acquired businesses or products, including, without limitation, its ability to integrate its recently acquired subsidiaries – Drew Scientific, Inc. and JAS Diagnostics, Inc.; acquisitions of businesses and products, and the integration of acquired businesses and products, may disrupt ERBA Diagnostics’ business, distract its management and may not proceed as planned, including, without limitation, its acquisition of and its ability to integrate its recently acquired subsidiaries – Drew Scientific, Inc. and JAS Diagnostics, Inc.; the risks and uncertainties related to the transactions contemplated by ERBA Diagnostics’ stock purchase agreement with ERBA Diagnostics Mannheim GmbH, including, among other things, that the transactions contemplated to be consummated at the future closings under the stock purchase agreement may not be consummated on the contemplated terms, in the time frame anticipated, or at all, that the warrants may not be exercised, in whole or in part, by ERBA Diagnostics Mannheim, that ERBA Diagnostics Mannheim has the sole discretion regarding its decision of whether or not, and if so when, to exercise the warrants, in whole or in part, and such decision will be based upon considerations ERBA Diagnostics Mannheim deems to be appropriate, which may include, among other things, the future market price of ERBA Diagnostics’ common stock, which is subject to volatility and a number of other factors, many of which may be beyond ERBA Diagnostics’ control, and that, when deciding whether or not, and if so when, to exercise the warrants, in whole or in part, ERBA Diagnostics Mannheim’s interest may conflict with ERBA Diagnostics’ interests; economic, competitive, political, governmental and other factors affecting ERBA Diagnostics and its operations, markets and products. In addition to the risks and uncertainties set forth above, investors should consider the economic, competitive, governmental, technological and other risks and uncertainties discussed in ERBA Diagnostics’ filings with the Securities and Exchange Commission, including, without limitation, the risks and uncertainties discussed under the heading “Risk Factors” in such filings.
 

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  
 
 

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  
 

Copyright Business Wire 2010

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