BIOMERICA INC - Quarter Report: 2014 February (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)                                                                                    

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED FEBRUARY 28, 2014

OR 

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number:  0-8765

BIOMERICA, INC.

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(Exact name of registrant as specified in its charter)

          Delaware                                                         95-2645573

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(State or other jurisdiction of                                          (I.R.S. Employer

incorporation or organization)                                            Identification No.)

17571 Von Karman Avenue, Irvine, CA                                  92614

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(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number including area code:  (949) 645-2111

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(Former name, former address and former fiscal year, if changed since last report.)

(TITLE OF EACH CLASS)                         (NAME OF EACH EXCHANGE ON WHICH REGISTERED)

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Common, par value $.08                                            OTC-BULLETIN BOARD

Securities registered pursuant to Section 12(g) of the Act:

(TITLE OF EACH CLASS)

COMMON STOCK, PAR VALUE $0.08

Indicate by check whether the registrant (1) 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 Website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (paragraph 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).         Yes [X] No [_]

Indicate by check mark whether the registrant is a large accelerated, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See 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 Company [X]

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

Indicate the number of shares outstanding of each of the registrant's common stock, as of the latest practicable date: 7,543,714 shares of common stock, par value $0.08, as of April 14, 2014.

PART I - FINANCIAL INFORMATION

SUMMARIZED FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BIOMERICA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

BIOMERICA, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1: Basis of Presentation

The information set forth in these condensed consolidated statements is unaudited and reflects all adjustments which, in the opinion of management, are necessary to present a fair statement of the consolidated results of operations of Biomerica, Inc. and subsidiaries (the “Company”),for the periods indicated. It does not include all information and footnotes necessary for a fair presentation of financial position,results of operations, and cash flows in conformity with generally accepted accounting principles. All adjustments that were made are of normal recurring nature.

The unaudited Condensed Consolidated Financial Statements and Notes are presented as permitted by the requirements for Form 10-Q and do not contain certain information included in our annual financial statements and notes. The condensed consolidated balance sheet data as of May 31, 2013 was derived from audited financial statements. The accompanying interim condensed consolidated financial statements should be read in conjunction with the financial statements and related notes included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on August 29, 2013 for the fiscal year ended May 31, 2013.The results of operations for our interim periods are not necessarily indicative of results to be achieved for our full fiscal year.

Note 2: Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of Biomerica, Inc. as well as the Company’s German subsidiary and Mexican subsidiary which have not begun operations.All significant intercompany accounts and transactions have been eliminated in consolidation.

Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reported period. Actual results could materially differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents consist of demand deposits and money market accounts with original maturities of less than three months.

Accounts Receivable

The Company extends unsecured credit to its customers on a regular basis. International accounts are required to prepay until they establish a history with the Company and at that time,they are extended credit at levels based on a number of criteria.  Credit levels are approved by designated upper level management.Domestic customers are extended initial credit limits until they establish a history with the Company or submit credit information.All increases in credit limits are also approved by designated upper level management.Management evaluates receivables on a quarterly basis and adjusts the reserve for bad debt accordingly.Balances over ninety days old are reserved for unless collection is reasonably assured. Any charge-offs are approved by upper level management prior to charging off.

Occasionally certain long-standing customers, who routinely place large orders, will have unusually large accounts receivables balances relative to the total gross accounts receivables.At February 28, 2014, one customer accounted for 32.1% of the Company’s outstanding gross receivable balance and one foreign customer accounted for 43.4% and 15.3% of the Company’s net sales for the three and nine months ended February 28, 2014, respectively. Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders. 

Inventories

The Company values inventory at the lower of cost (determined using a combination of specific lot identification and the first-in, first-out methods) or market. Management periodically reviews inventory for excess quantities and obsolescence. Management evaluates quantities on hand, physical condition, and technical functionality as these characteristics may be impacted by anticipated customer demand for current products and new product introductions. The reserve is adjusted based on such evaluation, with a corresponding provision included in cost of sales. Abnormal amounts of idle facility expenses, freight, handling costs and wasted material are recognized as current period charges and the allocation of fixed production overhead is based on the normal capacity of the Company’s production facilities.

The approximate balances of inventories are the following at:

Property and Equipment

Property and equipment are stated at cost. Expenditures for additions and major improvements are capitalized. Repairs and maintenance costs are charged to operations as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation or amortization is removed from the accounts, and gains or losses from retirements and dispositions are credited or charged to income.

Depreciation and amortization are provided over the estimated useful lives of the related assets, ranging from 5 to 10 years, using the straight-line method. Leasehold improvements are amortized over the lesser of the estimated useful life of the asset or the term of the lease. Depreciation and amortization expense on property and equipment and leasehold improvements amounted to $45,283 and $49,220 for the three months ended February 28, 2014 and 2013, and $131,514 and $142,484 for the nine months ended February 28, 2014 and 2013, respectively.

Intangible Assets

Intangible assets include trademarks, product rights, licenses, technology rights and patents, and are accounted for based on Accounting Standards Codification ASC 350 “Intangibles – Goodwill and Other” (ASC 350). In that regard, intangible assets that have indefinite useful lives are not amortized but are tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. Intangible assets are being amortized using the straight-line method over the useful life; not to exceed 18 years for marketing and distribution rights, 10 years for purchased technology use rights, licenses, and 17 years for patents. Amortization amounted to $5,989 and $4,368 for the three months ended February 28, 2014 and 2013, respectively, and $17,110 and $21,927 for the nine months ended February 28, 2014 and 2013, respectively.

Stock-Based Compensation

The Company follows the guidance of the accounting provisions of ASC 718 “Share-based Compensation” (ASC 718), which requires the use of the fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity instruments (warrants and options).The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected forfeiture rate, expected term, and the risk-free interest rate.

The following summary presents the options and warrants granted, exercised, expired, cancelled and outstanding as of February 28, 2014:

     On June 10, 2013, the Board granted a stock option to purchase 20,000 shares of the Company’s common stock at the purchase price of $0.93 per share.

     On November 13, 2013, the Board granted stock options to purchase 32,000 shares of the Company’s common stock at the purchase price of $0.84 per share.

     In June 2013, options to purchase 2,000 shares of the Company’s common stock were exercised at the exercise price of $0.38 per share.  Net proceeds to the Company were $760.

     In September 2013, options to purchase 2,500 shares of the Company’s common stock were exercised at the exercise prices of $0.45 and $0.38 per share. Net proceeds to the Company were $1,020.

     In December 2013, options to purchase 12,000 shares of the Company’s common stock were exercised at the exercise price of $0.38 per share. Net proceeds to the Company were $5,400.

     In January 2014, options to purchase 22,500 shares of the Company’s common stock were exercised at the exercise prices ranging from $0.43-$0.45 per share. Net proceeds to the Company were $10,095. 

Revenue Recognition

Revenues from product sales are recognized at the time the product is shipped, customarily FOB shipping point, at which point title passes. An allowance is established when necessary for estimated returns as revenue is recognized. In conjunction with sales to certain customers, the Company provides free products upon attaining certain levels of purchases by the customer. The Company accounts for these free products in accordance with ASC 605-50 “Revenue Recognition – Customer Payments and Incentives” and recognizes the cost of the product as part of cost of sales.

Shipping and Handling Fees and Costs

Shipping and handling fees billed to customers are classified as revenues, and shipping and handling costs are classified as cost of sales. The Company included shipping and handling fees billed to customers in net sales. The Company included shipping and handling costs associated with inbound freight and unreimbursed shipping to customers in cost of sales.

Research and Development

Research and development costs are expensed as incurred.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes” (ASC 740). Deferred tax assets and liabilities arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements that will result in taxable or deductible amounts in future years. These temporary differences are measured using enacted tax rates. A valuation allowance is recorded to reduce deferred tax assets to the extent that management considers it is more likely than not that a deferred tax asset will not be realized. In determining the valuation allowance,management considers factors such as the reversal of deferred income tax liabilities, projected taxable income, and the character of income tax assets and tax planning strategies. A change to these factors could impact the estimated valuation allowance and income tax expense. The Company’s annual effective tax rate is approximately 38%, however, due to its federal net operating loss carry forwards, the effective tax rate for the three and nine months ended February 28, 2014 was adjusted for utilization of these carry forwards. During the quarter ended February 28, 2013, the Company recorded a refund due from the state of California which resulted in an adjustment to the provision for income taxes.

Foreign Currency Translation

The subsidiary located in Germany is accounted for primarily using local functional currency. Accordingly, assets and liabilities of this subsidiary are translated using exchange rates in effect at the end of the period, and revenues and costs are translated using average exchange rates for the period. The resulting adjustments are presented as a separate component of accumulated other comprehensive loss.

Deferred Rent

Incentive payments received from landlords are recorded as deferred lease incentives and are amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.When the terms of an operating lease provide for periods of free rent, rent concessions, and/or rent escalations, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized. This deferred rent liability is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

Net Income (Loss) Per Share

Basic earnings (loss) per share are computed as net income (loss) divided by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur from common shares issuable through stock options, warrants and other convertible securities.The total amount of anti-dilutive warrants or options not included in the earnings per share calculation for the three months ended February 28, 2013 was 910,625. There were no anti-dilutive warrants or options excluded from the earnings per share calculation for the nine months ended February 28, 2013. There were no anti-dilutive warrants or options excluded from the earnings per share calculation for the three months ended February 28, 2014.The total amount of anti-dilutive warrants or options not included in earnings (loss) per share calculation for the nine months ended February 28, 2014 was 359,013.

The following table illustrates the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations.

New Accounting Pronouncements

       Management does not believe that any recently issued, but not effective, accounting standards if currently adopted would have a material effect on the accompanying condensed consolidated financial statements.

Note 3: Accounts Payable and Accrued Expenses

      The Company’s accounts payable and accrued expenses balances consist of the following at:

Note 5: Geographic Information

Financial information about foreign and domestic operations and export sales is as follows:

Note 6: Commitments and Contingencies

     In March 2014, the Company renewed the line of credit (the "Line") with its bank with a borrowing limit of $250,000. The line is secured by substantially all of the Company’s assets, bears interest at 2.0% plus the Wall Street Journal Prime West Coast Edition prime rate. The balance at February 28, 2014 and May 31, 2013 was $0 and $43,000, respectively.

On June 18, 2009, the Company entered into an agreement to lease a building in Irvine, California. The lease commenced September 1, 2009 and ends August 31, 2016.  The initial base rent was set at $18,490 per month with scheduled annual increases through the end of the lease term. The rent is currently set at $20,810 per month.

Note 7: Subsequent Events

     In March 2014, options to purchase 30,000 shares of the Company’s common stock were exercised at the exercise price of $0.60 per share. Net proceeds to the Company were $18,000.

     On March 18, 2014, the Board of Directors approved the grant of 126,000 options to purchase shares of the Company under the 2010 Stock Option Plan at an exercise price of $0.71 per share with an expiration date of five years from date of grant.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      CERTAIN INFORMATION CONTAINED HEREIN (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR TO BE MADE BY BIOMERICA) CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING,SUCH AS STATEMENTS RELATING TO ANTICIPATED FUTURE REVENUES OF THE COMPANY AND SUCCESS OR CURRENT PRODUCT OFFERINGS. SUCH FORWARD-LOOKING INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY AFFECT ANTICIPATED RESULTS IN THE FUTURE, AND ACCORDINGLY, SUCH RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF BIOMERICA. THE POTENTIAL RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHERS, FLUCTUATIONS IN THE COMPANY'S OPERATING RESULTS. THESE RISKS AND UNCERTAINTIES ALSO INCLUDE THE SUCCESS OF THE COMPANY IN RAISING NEEDED CAPITAL, THE ABILITY OF THE COMPANY TO MAINTAIN REQUIREMENTS TO BE LISTED ON NASDAQ, THE CONTINUAL DEMAND FOR THE COMPANY'S PRODUCTS, COMPETITIVE AND ECONOMIC FACTORS OF THE MARKETPLACE, AVAILABILITY OF RAW MATERIALS, HEALTH CARE REGULATIONS AND THE STATE OF THE ECONOMY. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE THESE FORWARD-LOOKING STATEMENTS.

OVERVIEW

Biomerica, Inc. and Subsidiaries ("Biomerica",the "Company", "we" or "our") develops, manufactures, and markets medical diagnostic products designed for the early detection and monitoring of chronic diseases and medical conditions. Our medical diagnostic products are sold worldwide in two markets: 1) clinical laboratories and 2) point of care (physicians' offices and over-the-counter drugstores).Our diagnostic test kits are used to analyze blood or urine from patients in the diagnosis of various diseases and other medical complications, or to measure the level of specific hormones, antibodies, antigens or other substances, which may exist in the human body in extremely small concentrations.

RESULTS OF OPERATIONS

      Consolidated net sales for Biomerica were $1,492,719 for the three months ended February 28, 2014 as compared to $1,416,698 for the same period in the previous year. This represents an increase of $76,021 or 5.4%. The increase for the three month period was due to increased sales in the United States. In addition, while China sales were down compared to the same period last fiscal year,the sales in this quarter increased compared to the first and second quarters of this fiscal year. For the nine month periods ended February 28, 2014 as compared to February 28, 2013, net sales were $3,441,299 as compared to $5,002,418, a decrease of $1,561,119, or 31.2%.  The decrease for the nine month period was primarily due to the decrease of sales in Asia which resulted from the restructuring of the Company’s distribution channel in China which is negatively impacting sales in the near term. Management anticipates that sales volume through this distribution channel will increase.

        For the three months ended February 28, 2014 as compared to 2013, cost of sales decreased as a percentage of sales from 68.6% of sales or $971,316, to 61.2% of sales, or $914,157. This decrease in cost of sales was the result of various factors, which included product mix of items sold, lower wages and lower scrap. For the nine months ended February 28, 2014 as compared to 2013, cost of sales as a percentage of sales increased from 61.1% of sales or $3,055,575, to 68.2% of sales or $2,346,803. The increase in cost of sales as a percentage was primarily a result of the lower sales volume.

         For the three months ended February 28, 2014 compared to 2013, selling, general and administrative costs increased by $47,255, or 13.2%. For the nine month periods ended February 28, 2014 as compared to 2013, general and administrative costs increased by $18,245, or 1.7%. The increase in selling, general and administrative costs was primarily due to higher cost of trade show attendance and commissions.

         For the three months ended February 28, 2014 compared to 2013, research and development expenses decreased by $10,005, or 6.7%. This decrease was primarily due to lower material costs. For the nine month period ended February 28, 2014 as compared to February 29, 2013, these expenses increased by $14,318, or 4.0%.  The increase for the nine months was primarily due to outside services.

         For the three and nine month ended February 28, 2014 as compared to 2013, dividend and interest income and interest expense remained relatively constant.

LIQUIDITY AND CAPITAL RESOURCES

       As of February 28, 2014 and May 31, 2013, the Company had cash and cash equivalents in the amount of $1,665,690 and $2,469,796 and working capital of $4,517,353 and $4,693,462, respectively.

       During the nine months ended February 28, 2014 the Company’s operations used cash of $852,902 compared to cash provided of $1,496,040 in the same period of the prior fiscal year. Cash used in operations in fiscal 2014 was a result of the net loss of $384,532, increases of $360,407 in inventory, increases of trade accounts receivable in the amount of $304,783 and delayed payout of compensation of $87,654. In addition to this, there were non-cash charges of approximately $148,624 which consisted primarily of depreciation expense. Cash used in investing activities in the nine months ended February 28, 2014 was $117,365 compared to the nine months ended February 28, 2013 of $249,410.  The increase was due to equipment purchases of $117,365. Cash provided by financing activities in the nine months ended February 28, 2014 was $167,275 as compared to cash used of $2,586 in the nine months ended February 29, 2013. This was the result of $17,275 for stock options exercised and cash received from a private placement of restricted common stock in the amount of $150,000.

       In March 2014, the Company renewed the line of credit (the "Line") with its bank which has a borrowing limit of $250,000. The line is secured by substantially all of the Company’s assets, bears interest at 2.0% plus the Wall Street Journal Prime West Coast Edition prime rate. At February 28, 2014, the Company had not drawn any funds on the Line.

       On April 8, 2013, the Company entered into a Stock Purchase Agreement wherein the Company agreed to issue and sell to a private investor 400,000 shares of restricted common stock at the purchase price of $1.25 per share ($500,000). On April 8, 2013, the initial deposit of $250,000 was received by the Company and therefore 200,000 shares were issued. On January 15, 2014, the remaining balance of the Purchase Agreement was fulfilled and therefore the remaining 200,000 shares were issued.

OFF BALANCE SHEET ARRANGEMENTS - None.

CRITICAL ACCOUNTING POLICIES

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements. On an ongoing basis, we evaluate estimates and assumptions based upon historical experience and various other factors and circumstances. We believe our estimates and assumptions are reasonable in the circumstances; however, actual results may differ from these estimates under different future conditions.

We believe that the estimates and assumptions that are most important to the portrayal of our financial condition and results of operations, in that they require subjective or complex judgments, form the basis for the accounting policies deemed to be most critical to us. These relate to revenue recognition, bad debts, inventory overhead application, and inventory reserve. We believe estimates and assumptions related to these critical accounting policies are appropriate under the circumstances; however, should future events or occurrences result in unanticipated consequences, there could be a material impact on our future financial conditions or results of operations. We suggest that our significant accounting policies be read in conjunction with this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

       We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 4.  CONTROLS AND PROCEDURES

         Our management evaluated 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, as amended, or the Exchange Act, as of the end of the period covered by this report. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The disclosure controls and procedures have been designed to provide reasonable assurance of achieving their objectives and the Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures are effective at the "reasonable assurance" level. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that we file and submit under the Exchange Act is (1) recorded, processed,summarized and reported within the time periods specified in the Commission's rules and forms; and (2) accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

         There have been no changes in our internal control over financial reporting identified in connection with the evaluation that occurred during our last fiscal quarter that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS.  None.

Item 1A. RISKS FACTORS.

         You should read the following factors in conjunction with the factors discussed elsewhere in this and our other filings with the Securities and Exchange Commission and in materials incorporated by reference in these filings. The following is intended to highlight certain factors that may affect the financial condition and results of operations of Biomerica, Inc. and are not meant to be an exhaustive discussion of risks that apply to companies such as Biomerica, Inc. Like other businesses, Biomerica, Inc. is susceptible to macroeconomic downturns in the United States or abroad, as were experienced in recent history that may affect the general economic climate and performance of Biomerica, Inc. or its customers.

Item 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. In January 2014, pursuant to the Stock Purchase Agreement dated April 8, 2013, the Company sold the reamining shares of its common stock at a price of $1.25 per share to an investor for $250,000. Part of the proceeds were used to pay for international regulatory approval fees. The remaining proceeds from the sale will strengthen the Company’s balance sheet and may be used for various product registrations and/or research and development.

Item 3.  DEFAULTS UPON SENIOR SECURITIES.  None. 

Item 4.  MINE SAFETY DISCLOSURES. None. 

Item 5.  OTHER INFORMATION. None.

Item 6.  EXHIBITS.

The following exhibits are filed or furnished as part of this quarterly report on Form 10-Q:

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