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, 2011 and the unaudited interim consolidated financial statements and the related notes to unaudited interim 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:

ˇ our ability to continue as a going concern;

ˇ 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 Investment or the line of credit, issuing debt or equity securities, incurring indebtedness or curtailing or reducing our operations;

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

ˇ the net proceeds of the Investment, whether or not the warrants are exercised, may not provide adequate cash resources to fund our operations or liquidity needs for the reasonably foreseeable future;

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

ˇ our broad discretion in our use of the net proceeds from the investment;

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

ˇ the decision to exercise the warrants will be made by ERBA 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's interests may conflict with our interests;

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

ˇ 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;

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

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

ˇ the ability of the MagoŽ 4S to perform as expected;

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

ˇ 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 MagoŽ 4 or MagoŽ 4S or as a result of future demand for the MagoŽ 4 or MagoŽ 4S;

ˇ the ability of the MagoŽ 4 or MagoŽ 4S to be a source of revenue growth for us;

ˇ our ability to receive financial benefits or achieve improved operating results as a result of the commercial release of the MagoŽ 4 or the MagoŽ 4S;

ˇ the ability of the MagoŽ 4 or MagoŽ 4S to be a factor in our growth;

ˇ the ability of the MagoŽ 4 or MagoŽ 4S to expand the menu of test kits we offer;

ˇ making derivations of and upgrades to the MagoŽ our primary platforms for marketing our kits;

ˇ our ability to successfully market the MagoŽ 4 or MagoŽ 4S;

ˇ our customers' integration of the MagoŽ 4 or MagoŽ 4S into their operations;

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

ˇ 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;

ˇ 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;

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

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

ˇ our ability to achieve organic growth;

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

ˇ our ability to integrate acquired businesses or products;

ˇ our ability to enhance our position in laboratory automation;

ˇ 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;

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

ˇ the impact of healthcare regulatory reform;

ˇ constantly changing, and our compliance with, governmental regulation;

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

ˇ our limited operating revenues and history of primarily operational losses;

ˇ 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;

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

ˇ 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;

ˇ 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;

ˇ 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;

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

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

ˇ our ability to obtain product technology from the Italian diagnostics company that would enable us to manufacture our own hepatitis products;

ˇ 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;

ˇ 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;

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

ˇ 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;

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

ˇ 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;

ˇ our dependence on agreements with IVAX Corporation, third party distributors and key personnel;

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

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

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

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

ˇ protecting our intellectual property;

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

ˇ the effects of utilizing cash to assist Delta Biologicals, S.r.L., our wholly-owned subsidiary in Italy, in maintaining its compliance with capital requirements established by Italian law;

ˇ 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;

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

ˇ voting control of our common stock by ERBA;

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

ˇ 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, 2011 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.

On September 1, 2010, ERBA Diagnostics Mannheim GmbH, or ERBA, an in vitro diagnostics company headquartered in Germany, the parent company of which is Transasia Bio-Medicals Ltd., or Transasia, purchased all of the approximately 72.4% of the 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 initial transactions contemplated by the investment made by ERBA, as further described below, including ERBA's purchase from us, and our issuance to ERBA, of 6,666,667 shares of our common stock, and ERBA's exercise, in part, of the warrant, as further described below, for 600,000 shares of our common stock, ERBA now beneficially owns, directly or indirectly, approximately 78.0% of the outstanding shares of our common stock.

THREE MONTHS ENDED MARCH 31, 2012 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2011

OVERVIEW

Net loss totaled $78,000 for the three months ended March 31, 2012 compared to net loss of $1,020,000 for the three months ended March 31, 2011. Operating loss was $119,000 in the 2012 period compared to operating loss of $1,008,000 for the 2011 period. The decrease in both net loss and operating loss in the 2012 period compared to the 2011 period resulted primarily from decreases in operating expenses. Net revenues increased by $139,000 to $4,273,000 in the 2012 period from $4,134,000 in the 2011 period, consisting of an increase in net revenues from domestic operations of $119,000, from $2,744,000 in the 2011 period to $2,863,000 in the 2012 period, and an increase in net revenues from European operations of $20,000, including the effect of exchange rate fluctuations of the United States dollar relative to the Euro, from $1,390,000 in the 2011 period to $1,410,000 in the 2012 period. Gross profit increased by $7,000 to $2,122,000 in the 2012 period from $2,115,000 in the 2011 period, as the result of the higher revenue, offset by lower margin percentage. Gross profit as a percentage of net revenues decreased to 49.7% for the 2012 period from 51.2% for the 2011 period, principally as a result of an increase in the sale of instruments and increase in contract research revenue, which have a lower average margin than reagent sales.

Operating expenses decreased to $2,242,000 in the 2012 period from $3,123,000 in the 2011 period as a result of decreases in all three categories of operating expenses. Comparing the 2012 period to the 2011 period, selling expenses decreased by $255,000, general and administrative expenses decreased by $272,000 and research and development expenses decreased by $355,000.

NET REVENUES AND GROSS PROFIT



                                                                   Period over Period
   Three months ended March 31,      2012            2011         Increase (Decrease)
   Net Revenues:
   Domestic                       $ 2,863,000     $ 2,744,000     $            119,000
   European                         1,410,000       1,390,000                   20,000
   Total                            4,273,000       4,134,000                  139,000

   Cost of Sales                    2,150,000       2,019,000                  132,000

   Gross Profit                   $ 2,122,000     $ 2,115,000     $              7,000
   % of Total Net Revenue             49.7%           51.2%

Total net revenues in the three months ended March 31, 2012 increased by $139,000, or 3.4%, from the three months ended March 31, 2011. This increase was composed of an increase of $119,000 in net revenues from domestic operations and an increase of $20,000 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 a decrease of approximately $77,000 in net revenues in the 2012 period as compared to the 2011 period, as further discussed in "Currency Fluctuations" below. As measured in Euros, net revenues from European operations in the 2012 period increased by 1.4% compared to the 2011 period. The increase in net revenues from European operations was mainly due to increase in instrument and contract research and development revenue less the declines in reagent sales in both Italy and other international markets. Net revenues from domestic operations in the 2012 period increased by 4.3% compared to the 2011 period. The increase in net revenue from domestic operations was due to increases in volumes of reagent and instrument sales.

Gross profit in the 2012 period increased by $7,000, or 0.3%, from the 2011 period. The increase in gross profit was primarily attributable to the increase in net revenues. The decrease in gross profit as a percentage of net revenues to 49.7% in the 2012 period from 51.2% in the 2011 period resulted mainly from an increase in the sale of instruments and contract research and development, which have a lower average margins than reagent sales.

OPERATING EXPENSES



                                                 % of                         % of       Period over Period
Three months ended March 31,      2012         Revenue         2011         Revenue          (Decrease)

Selling                        $   971,000        22.7%     $ 1,226,000        29.6%     $          (255,000 )

General and Administrative       1,075,000        25.2%       1,347,000        32.6%                (272,000 )

Research and Development           196,000        4.6%          550,000        13.3%                (354,000 )

Total Operating Expenses       $ 2,242,000        52.5%     $ 3,123,000        75.5%     $          (881,000 )

Total operating expenses decreased to $2,242,000 in the 2012 period from $3,123,000 in the 2011 period as a result of decreases in all three categories of operating expenses.

The decrease of $255,000 in selling expenses during the 2012 period compared to the 2011 period was primarily due to open sales positions in the United States and, in Italy, reduction in workforce and lower commissions from lower sales in commissionable categories.

The decrease of $272,000 in general and administrative expenses during the 2012 period compared to the 2011 period was due principally to reduction in workforce in Italy, reduction in rent and related building expenses in Italy and reduction in provision for doubtful accounts in Italy.

The decrease in research and development expenses of $354,000 was due principally to reduction of research and development activities in the United States and funding of research and development in Italy, for which the relevant expenses are now included in cost of sales (see Note 14 to the financial statements).

LOSS FROM OPERATIONS

Loss from operations totaled $119,000 in the 2012 period as compared to loss from operations of $1,008,000 in the 2011 period, primarily due to reduction in operating expenses. Loss from operations in the 2012 period was composed of a $153,000 loss from domestic operations and a $34,000 income from European operations. Loss from operations in the 2011 period was composed of a $577,000 loss from domestic operations and a $431,000 loss from European operations. Domestic operations include corporate expenditures, including costs required to maintain our status as a public company.

OTHER INCOME, NET

Other income, net totaled $69,000 in the 2012 period as compared to $16,000 in the 2011 period. Amounts included in other income, net in the 2012 and 2011 periods were primarily net foreign currency gains, from deposits held in Euros and transactions of our Italian subsidiary which were denominated in currencies other than its functional currency.

INCOME TAX PROVISION

We recorded income tax provisions of $28,000 in both the 2012 and 2011 periods. The current tax provision of $12,000 for both periods relates to Italian local income taxes based upon applicable statutory rates effective in Italy. The deferred tax provision of $16,000 for both periods relates to domestic tax deductible goodwill. No current tax benefit was recorded during the two periods on our losses because we had a full valuation allowance against the net deferred income tax assets.

NET LOSS

We generated a net loss of $79,000 in the 2012 period as compared to a net loss of $1,020,000 in the 2011 period. Our basic and diluted loss per common share was $0.00 in 2012 as compared to a basic and diluted loss per common share of $0.04 in the 2011 period. The net loss for both periods resulted from the various factors discussed above.

At March 31, 2012, our working capital was $8,847,000 compared to $8,631,000 at December 31, 2011. Cash and cash equivalents totaled $3,511,000 at March 31, 2012 and $3,653,000 at December 31, 2011.

Net cash flows of $110,000 were used in operating activities during the three months ended March 31, 2012 as compared to $855,000 that were used in operating activities during the three months ended March 31, 2011.

Cash used in operating activities of $110,000 during the 2012 period was the result of the net loss of $78,000 and changes in operating assets and liabilities of $(224,000), partially offset by non-cash items of $192,000. The non-cash items include 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 current assets, accounts payable and accrued expenses and other long-term liabilities.

Cash used in operating activities of $855,000 during the 2011 period was the result of the net loss of $1,020,000 and changes in operating assets and liabilities of $66,000, partially offset by non-cash items of $231,000. The non-cash items include depreciation and amortization, a recovery for doubtful accounts receivable, a provision for inventory obsolescence and deferred income taxes.

Net cash of $43,000 was used in investing activities during the 2012 and 2011 periods. In both periods, the use was primarily for equipment on lease and capital expenditures.

Financing activities during the period consisted of capital lease payments during 2012 and 2011, as well as payments during 2012 to reduce outstanding borrowings under the revolving line of credit.

Liquidity is expected to be sufficient through the end of 2012 from the combination of the existing cash and cash equivalents at March 31, 2012, the exercise of warrants subsequent to March 31, 2012 and the investment that ERBA has agreed to make under the Stock Purchase Agreement, including the Warrant, as described throughout this Quarterly Report on Form 10-Q.

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

Our product research and development expenditures were $1,451,000 during the year ended December 31, 2011 and $195,000 for the three months ended March 31, 2012. In the fourth quarter of 2011, a subsidiary of the Company entered into a contract research and development agreement with ERBA, as amended, for a total of Euro 754,000 ($1,003,000) in 2011 and 2012. A total of Euro 133,000 and Euro 54,000 was invoiced under the contract in the fourth quarter of 2011 and the first quarter of 2012, respectively. 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, that 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 2011, 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 2011 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. We are evaluating various forms of debt and equity financing arrangements. Any such financing arrangements would likely impose positive and negative covenants on us, which could restrict various aspects of our business, operations and finances. In addition, any issuance of equity securities, or securities convertible into shares of our common stock, would be dilutive to our existing stockholders. For the long-term, we intend to utilize principally existing cash and cash equivalents, 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.

Our discussion and analysis of our financial condition and results of operations are based upon our 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 consolidated financial statements.

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.

During the year ended December 31, 2011, a subsidiary of the Company entered . . .