☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Nevada | 88-0425691 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
555 Wireless, Boulevard, Hauppauge, NY | 11788 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Common Stock, $0.01 par value | CEMI | The NASDAQ Stock Market LLC |
Securities registered pursuant to Section 12(g) of the Act: |
None |
(Title of Class) |
Large accelerated filer ☐ | Accelerated filer ☒ |
Non-accelerated filer ☐ | Smaller reporting company ☒ |
Emerging growth company ☐ |
Page | |||
PART I | |||
ITEM 1. | |||
ITEM 1A. | |||
ITEM 2. | |||
ITEM 3. | |||
PART II | |||
ITEM 5. | |||
ITEM 7. | |||
ITEM 8. | |||
ITEM 9A. | |||
PART III | |||
ITEM 10. | |||
ITEM 11. | |||
ITEM 12. | |||
ITEM 13. | |||
ITEM 14. | |||
PART IV | |||
ITEM 15. | |||
BUSINESS |
● | Enhanced sensitivity and specificity: This is achieved via our patented approach to separating the sample path from the buffer path, together with other patented and proprietary strategies, than traditional lateral flow tests. It also delivers lower levels of detection. |
● | Advanced multiplexing capabilities: Through advanced multiplexing, the DPP platform can detect and differentiate up to eight distinct test results from a single patient sample, which can deliver greater clinical value than other rapid tests. |
● | Quantitative results: For some diagnostic applications, our easy-to-use, highly portable, battery-operated DPP Micro Reader optical analyzers can report accurate results in approximately 15 seconds, making it well-suited for decentralized testing where real-time results enable patients to be clinically assessed while they are still onsite. Objective results produced by the DPP Micro Reader can reduce the possibility of the types of human error that can be experienced in the visual interpretations required by many rapid tests. |
● | COVID-19 antibody test system: We initially refocused our business strategy on the development and commercialization of the DPP COVID-19 IgM/IgG System, which consisted of a new serological test for COVID-19 and a DPP Micro Reader that could provide separate numerical readings for both IgM and IgG levels of antibodies to the virus. We acquired three regulatory approvals of the DPP COVID-19 IgM/IgG system in our targeted global testing market: an EUA, granted by the FDA in April 2020; an approval for emergency use issued by Brazil’s Agência Nacional de Vigilância Sanitária, or ANVISA, in April 2020, and a CE Marking for the European Union obtained in early May 2020. In June 2020 the FDA revoked the EUA for the DPP COVID-19 IgM/IgG system. In September 2020 we submitted to the FDA an EUA application for the DPP SARS-CoV-2 IgM/IgG System, a new rapid antibody test system that detected COVID-19 antibodies using a different methodology that was consistent with updated FDA guidance, but in December 2020 the FDA notified us that it was declining to review the new system based on the FDA’s then-effective prioritization guidance, under which review of the system was not a priority because, for example, the FDA determined that authorization of the tests would have relatively limited impact on testing accessibility or testing capacity. |
● | COVID-19 antigen test system: In July 2020 we received a $628,071 grant, the First BARDA Grant, from the Department of Health and Human Services; Office of the Assistant Secretary for Preparedness and Response; Biomedical Advanced Research and Development Authority, Division of Research Innovation and Ventures, or BARDA, to assist us in developing, submitting and obtaining an EUA application for a COVID-19 point-of-care antigen system using DPP technology. In October 2020, with BARDA’s support in accordance with its grant, we submitted to the FDA an EUA application for the DPP SARS‑CoV‑2 Antigen System, a test system that consists of a DPP SARS-CoV-2 Antigen test cartridge, a DPP Micro Reader optical analyzer and a minimally invasive nasal swab. In December 2020 we received a $12.7 million grant from BARDA, in part to support preparation, submission, and approval of FDA 510(k) clearance for the DPP SARS-CoV-2 Antigen System. In January 2021 the FDA notified us that it was declining to review the DPP SARS-CoV-2 Antigen System based on its updated prioritization guidance, under which review of the system was not a priority. The FDA has supplementally advised us of the type and nature of information it would need to receive in a subsequent EUA application in order for the DPP SARS-CoV-2 Antigen System to be prioritized for review, and we are engaged in testing and development in order to submit a new EUA application for a COVID-19 antigen test system. |
● | COVID-19 and Influenza respiratory antigen panel test system: BARDA’s $12.7 million grant in December 2020 also supported our development, submission and receipt of an EUA for a rapid, multiplex respiratory antigen panel point-of-care test system using DPP technology. We are currently seeking to develop and conduct clinical trials of the DPP Respiratory Antigen Panel, a test system being designed to provide simultaneous, discrete and differential detection of Influenza A, Influenza B and SARS-CoV-2 antigens from a single patient respiratory specimen, such as a nasal swab, in approximately 20 minutes. The system is intended to enable appropriate clinical management of patients with suspected respiratory infections and to assist in the containment of COVID-19 cases during the flu season. This test system is expected to provide results in approximately 20 minutes and to be run on the DPP Micro Reader. |
● | Enhanced sensitivity and specificity: This is achieved via our patented approach to separating the sample path from the buffer path, together with other patented and proprietary strategies, than traditional lateral flow tests. It also delivers lower levels of detection. |
● | Advanced multiplexing capabilities: Through advanced multiplexing, the DPP platform can detect and differentiate up to eight distinct test results from a single patient sample, which can deliver greater clinical value than other rapid tests. |
● | Quantitative results: For some diagnostic applications, our easy-to-use, highly portable, battery-operated DPP Micro Reader optical analyzers can report accurate results in approximately 15 seconds, making it well-suited for decentralized testing where real-time results enable patients to be clinically assessed while they are still onsite. Objective results produced by the DPP Micro Reader can reduce the possibility of the types of human error that can be experienced in the visual interpretations required by many rapid tests. |
Product | U.S. | International |
DPP COVID-19 IgM/IgG System | ✓ | |
DPP HIV 1/2 Assay | ✓ | ✓ |
DPP HIV-Syphilis System | ✓ | ✓ |
DPP Syphilis Screen & Confirm Assay | ✓ | |
DPP ZCD IgM/IgG System | ✓ | |
DPP Dengue NS1 Antigen System | ✓ | |
DPP Dengue IgM/IgG System | ✓ | |
DPP Zika IgM System | ✓ | ✓ |
DPP | ✓ | |
✓ | ||
DPP Ebola Antigen System | ✓ EUA | |
DPP Leishmaniasis Assay | ✓ | |
HIV 1/2 STAT-PAK Assay | ✓ | ✓ |
Chagas STAT-PAK | ✓ | |
SURE CHECK HIV 1/2 Assay | ✓ | ✓ |
SURE CHECK HIV | ✓ |
● | growth in the overall market for rapid diagnostic infectious disease tests; |
● | our increased market penetration in existing markets and channels, including in the United States, Latin America, and Europe; |
● | our registration of existing and new products in unchartered countries and regions, such as selected countries in Latin America and Southeast Asia; |
● | our entry into new market segments, such as respiratory tests and international HIV Self-Testing; and |
● | advances in our product pipeline in infectious disease with key products including a tests for COVID-19, a multiplex test for HIV and syphilis in the U.S. market and tests for dengue, zika and chikungunya. |
● | HIV has claimed more than 35 million lives, including 770,000 in 2018. Approximately 37.9 million people were living with HIV at the end of 2018, and 1.7 million were newly infected during 2018. |
● | There were 18.0 million prevalent cases of syphilis as of 2012, and 5.6 million new infections were estimated to occur annually. |
● | Elimination of mother-to-child transmission, or MTCT, of both HIV and syphilis is a global health priority. In 2013, 1.9 million pregnant women were infected with syphilis worldwide. Congenital syphilis contributes significantly to infant mortality, accounting for 305,000 annual perinatal deaths worldwide in 2013. Globally, more than 1.4 million pregnant women were infected with HIV as of 2015, and MTCT of HIV is estimated to have resulted in over 150,000 infant cases in 2015. |
Product | Collaborator | Phase I Feasibility | Phase II Development | Phase III Verification Validation | Phase IV Clinical & Regulatory | Phase V Commercial Launch |
DPP HIV-Syphilis System (US) | Self-funded | ✓ | ✓ | ✓ | ✓ | |
DPP Dengue IgM/IgG | ||||||
Self-funded | ✓ | ✓ | ✓ | ✓ | CE and ANVISA | |
DPP | Self-funded | ✓ | ✓ | ✓ | ✓ | CE and ANVISA pending |
DPP | Self-funded | ✓ | ✓ | ✓ | ✓ | CE and ANVISA |
DPP Zika | ✓ | ✓ | ✓ | ✓ | ||
DPP Ebola Antigen System | CDC | ✓ | ✓ | ✓ | ✓ | FDA-EUA |
DPP Fever Assay Asia | FIND | ✓ | ✓ | ✓ | ✓ | |
DPP Fever Assay Africa | Paul Allen Foundation | ✓ | ✓ | ✓ |
DPP | ✓ | ✓ | ||||
✓ | ✓ |
● | patent protection; |
● | scientific expertise; |
● | ability to develop and market products and processes; |
● | ability to obtain required regulatory approvals; |
● | ability to manufacture cost-effective products that meet applicable regulatory requirements; |
● | access to adequate capital; and, |
● | ability to attract and retain qualified personnel. |
● | product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action; |
● | QSR, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the development and manufacturing process; |
● | labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication; |
● | clearance of product modifications that could significantly affect safety or efficacy or that would constitute a major change in intended use of one of our cleared devices; |
● | approval of product modifications that affect the safety or effectiveness of one of our cleared devices; |
● | medical device reporting regulations, which require that manufacturers comply with FDA requirements to report if their device may have caused or contributed to a death or serious injury, or has malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction of the device or a similar device were to recur; |
● | post-approval restrictions or conditions, including post-approval study commitments; |
● | post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device; |
● | the FDA’s recall authority, whereby it can ask, or under certain conditions order, device manufacturers to recall from the market a product that is in violation of governing laws and regulations; |
● | regulations pertaining to voluntary recalls; and, |
● | notices of corrections or removals. |
RISK FACTORS |
● | the refocus of our business strategy to respond to COVID‑19, including the successful development and market acceptance of the DPP SARS-CoV-2 IgM/IgG System, the DPP SARS CoV 2 Antigen System and the DPP Respiratory Antigen Panel, which we refer to as the COVID-19 Diagnostic Test Systems; |
● | our allocation of substantially all of our resources to the development and production of COVID-19 Diagnostic Test Systems; |
● | the effects of existing or future shareholder litigation; |
● | our competitors developing more effective or successful products; |
● | the ability of our products to compete with the new or existing products of our competitors; |
● | the negative impact of healthcare industry consolidation on our future revenues and operating results; |
● | our ability to retain key employees and attract additional qualified personnel; |
● | third‑party reimbursement policies; and |
● | the vulnerability of our business to cyber‑attacks. |
● | the COVID-19 Diagnostic Test Systems not gaining wide industry acceptance; |
● | the impact of COVID‑19 mutations on the ability of the COVID-19 Diagnostic Test Systems adequately detecting COVID‑19 or SARS‑CoV‑2 antigens; |
● | our ability to successfully introduce and market our products, particularly the COVID-19 Diagnostic Test Systems; |
● | timely receipt and implementation of additional customized manufacturing automation equipment; |
● | variability and unpredictability due to lengthy sales cycles for our products; |
● | our customers not adopting rapid point‑of‑care diagnostic testing; |
● | the concentration of our customers; and |
● | our products not performing properly. |
● | our incurrence of losses in recent years and uncertainty about our future profitability; |
● | the fluctuation of our financial results; |
● | our compliance with the terms of our Credit Agreement and Guaranty; |
● | our ability to generate sufficient cash to service our debt; |
● | increased interest expenses due to changes in LIBOR; |
● | the negative impact of changes in foreign currency exchange rates on our operating results; and |
● | basing our estimates or judgments relate to critical accounting policies on assumptions that can change or prove to be incorrect. |
● | our ability to protect our proprietary technology; and |
● | the effect of future intellectual property disputes on our ability to sell products or use certain technologies. |
● | our dependence on a limited number of third‑party suppliers, including single source suppliers, for critical components and materials; |
● | the limitation on rights we receive from collaborations with strategic collaborators, and the exposure to risks outside of our control due to such collaborations; |
● | our ability to maintain existing distribution channels or develop new distribution channels; and |
● | our compliance with U.S. government contracts. |
● | the impact of changes in CLIA, FDA, ANVISA, and other regulatory changes, on COVID‑19 diagnostic tests; |
● | our ability to receive and maintain necessary regulatory approvals for our products, particularly the COVID-19 Diagnostic Test Systems; |
● | the impact of governmental export controls on our ability to compete in international markets; |
● | our ability to comply with FDA and other regulatory requirements, particularly with respect to the COVID-19 Diagnostic Test Systems; |
● | our ability to respond to changes in regulatory requirements; |
● | the effect of FDA regulation of laboratory‑developed tests and genetic testing on demand for our products; |
● | disruptions at the FDA and other government agencies affecting the ability of the FDA to hire, retain or deploy key leadership or personal or otherwise could prevent new and modified products from being developed, cleared, approved, authorized or commercialized; |
● | ongoing changes in healthcare regulation; |
● | a reduction or elimination in the types of government awards that partially support some of our programs; |
● | compliance with privacy, security and breach notification regulations; |
● | our ability to manufacture products in accordance with applicable requirements; |
● | the effect of healthcare fraud and abuse laws on our business; and |
● | increased exposure to regulatory, cultural and other challenges due to international expansion. |
● | the limited liquidity of our Common Stock; |
● | the volatility of the price of our Common Stock; |
● | the effect of future issuances of Common Stock on the price of our Common Stock and our ability to raise funds in new equity offerings; |
● | the control management and larger stockholders exercise over us; and |
● | the depression of the market price of our common stock due to sale by existing stockholders, executive officers or directors. |
● | our ability to successfully generate the expected benefits of our acquisitions; and |
● | developments related to the U.K.’s referendum on membership in the E.U.; and |
● | legislative and regulatory changes. |
● | our ability to compete with companies that are currently in, or may in the future enter, the market for our products; |
● | our ability to control costs, including our operating expenses; |
● | our ability to successfully expand our business; |
● | our ability to meet customer demand; |
● | the amount and timing of operating expenses, particularly sales and manufacturing expenses, related to the maintenance and expansion of our business, operations and infrastructure; and |
● | general economic and political conditions in our markets. |
● | perceptions by members of the health care community, including physicians, about the safety and effectiveness of our products; |
● | limitation on use or warnings required by FDA in our product labeling; |
● | cost‑effectiveness of our products relative to competing products; |
● | convenience and ease of administration; |
● | potential advantages of alternative treatment methods; |
● | availability of reimbursement for our products from government or other healthcare payers; and |
● | effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any. |
● | patent protection; |
● | scientific expertise; |
● | ability to develop and market products and processes; |
● | ability to obtain required regulatory approvals; |
● | ability to manufacture cost‑effective products that meet applicable regulatory requirements; |
● | access to adequate capital; and |
● | ability to attract and retain qualified personnel. |
● | control the composition of our board of directors; |
● | control our management and policies; |
● | determine the outcome of significant corporate transactions, including changes in control that may be beneficial to stockholders; and, |
● | act in each of their own interests, which may conflict with or differ from the interests of each other or the interests of the other stockholders. |
● | We could reduce the level, or otherwise delay the timing, of the anticipated investments in our production capacity and other activities, which would likely curtail or delay the growth in our business contemplated by our operating plan and could impair or defer our ability to achieve profitability and generate cash flow. |
● | We could raise additional funds through public or private financings, strategic relationships, or other arrangements, to the extent funding would be available to us on acceptable terms or at all. If we succeed in raising additional funds through the issuance of equity or convertible securities, then the issuance could result in substantial dilution to existing stockholders. Furthermore, the holders of these new securities or debt may have rights, preferences and privileges senior to those of the holders of our Common Stock. |
● | incur, assume or guarantee additional Indebtedness (as defined in the Credit Agreement); |
● | repurchase capital stock; |
● | make other restricted payments including, without limitation, paying dividends and making investments; |
● | create liens; |
● | sell or otherwise dispose of assets, including capital stock of subsidiaries; |
● | enter into agreements that restrict dividends from subsidiaries; |
● | enter into mergers or consolidations; and |
● | enter into transactions with affiliates |
● | strengthen the rules on placing devices on the market and reinforce surveillance once they are available; |
● | establish explicit provisions on manufacturers’ responsibilities for the follow‑up of the quality, performance and safety of devices placed on the market; |
● | improve the traceability of medical devices throughout the supply chain to the end‑user or patient through a unique identification number; |
● | set up a central database to provide patients, healthcare professionals and the public with comprehensive information on products available in the EU; and |
● | strengthen rules for the assessment of certain high‑risk devices, such as implants, which may have to undergo an additional check by experts before they are placed on the market. |
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 5. | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Year Ended December 31, | ||||||||||||||||||||||||||||||||
Year Ended December 31, | (in thousands) | |||||||||||||||||||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||||||||||||||||||
TOTAL REVENUES | $ | 34,464,032 | 100 | % | $ | 34,581,440 | 100 | % | $ | 32,470 | 100 | % | $ | 34,464 | 100 | % | ||||||||||||||||
COSTS AND EXPENSES: | ||||||||||||||||||||||||||||||||
Cost of product sales | 22,394,317 | 65 | % | 22,599,432 | 65 | % | 23,874 | 74 | % | 22,394 | 65 | % | ||||||||||||||||||||
Research and development expenses | 8,538,416 | 25 | % | 8,526,256 | 26 | % | 9,509 | 29 | % | 8,538 | 25 | % | ||||||||||||||||||||
Selling, general and administrative expenses | 16,138,424 | 47 | % | 11,100,775 | 33 | % | 21,038 | 65 | % | 16,139 | 47 | % | ||||||||||||||||||||
Severance and related costs | 1,122 | 3 | % | — | 0 | % | ||||||||||||||||||||||||||
Acquisition costs | 721,465 | 2 | % | 337,645 | 1 | % | 63 | 0 | % | 721 | 2 | % | ||||||||||||||||||||
47,792,622 | 139 | % | 42,564,108 | 25 | % | 55,606 | 171 | % | 47,792 | 139 | % | |||||||||||||||||||||
LOSS FROM OPERATIONS | (13,328,590 | ) | (39 | )% | (7,982,668 | ) | (23 | )% | (23,136 | ) | (71 | )% | (13,328 | ) | (39 | )% | ||||||||||||||||
OTHER (LOSS)/INCOME | (846,831 | ) | (2 | )% | 49,498 | 0 | % | |||||||||||||||||||||||||
OTHER (EXPENSE) / INCOME | (2,842 | ) | (9 | )% | (847 | ) | (2 | )% | ||||||||||||||||||||||||
LOSS BEFORE INCOME TAXES | (14,175,421 | ) | (41 | )% | (7,933,170 | ) | (23 | )% | ||||||||||||||||||||||||
LOSS BEFORE INCOME TAX BENEFIT | (25,978 | ) | (80 | )% | (14,175 | ) | (41 | )% | ||||||||||||||||||||||||
Income tax benefit | (500,292 | ) | (2 | )% | (67,521 | ) | 0 | % | 457 | 1 | % | 500 | 1 | % | ||||||||||||||||||
NET LOSS | $ | (13,675,129 | ) | (39 | )% | $ | (7,865,649 | ) | (23 | )% | $ | (25,521 | ) | (79 | )% | $ | (13,675 | ) | (40 | )% |
For the years ended December 31 | Favorable/ (unfavorable) | % Change | For the years ended December 31 | Favorable/ | ||||||||||||||||||||||||||||
2019 | 2018 | 2020 | 2019 | (unfavorable) | % Change | |||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Net product sales | $ | 28,845 | $ | 27,913 | $ | 932 | 3.3 | % | $ | 24,767 | $ | 28,845 | $ | (4,078 | ) | (14.1 | )% | |||||||||||||||
Less: Cost of product sales | (22,394 | ) | (22,599 | ) | 205 | (0.9 | %) | (23,874 | ) | (22,394 | ) | (1,480 | ) | 6.6 | % | |||||||||||||||||
Gross product margin | $ | 6,451 | $ | 5,314 | $ | 1,137 | 21.4 | % | $ | 893 | $ | 6,451 | $ | (5,558 | ) | (86.2 | )% | |||||||||||||||
Gross product margin % | 22.4 | % | 19.0 | % | 3.6 | % | 22.4 | % |
● | We incurred the cost of product sales for COVID-19 IgM/IgG Systems that were returned by customers following the Revocation. |
● | The Revocation precluded planned sales of COVID-19 IgM/IgG Systems to customers in the United States in the last three quarters of 2020 and resulted in the deferral ,of certain customer opportunities for sales of COVID-19 IgM/IgG Systems outside the United States, which negatively impacted our sales mix as we experienced (a) significantly lower sales in the United States, where we have our highest average selling prices, and (b) outside the United States, a higher mix of sales in geographic regions with lower average selling prices. |
● | We experienced operational inefficiencies, including those triggered by the Revocation and activities related to qualifying automated lines for production of certain products, which resulted in increased cost of product sales as we substantially shifted our production from COVID-19 products back to legacy products. |
For the years ended December 31 | Favorable/ (unfavorable) | % Change | For the years ended December 31 | Favorable/ | ||||||||||||||||||||||||||||
2019 | 2018 | 2020 | 2019 | (unfavorable) | % Change | |||||||||||||||||||||||||||
(in thousands) | (in thousands) | |||||||||||||||||||||||||||||||
Clinical and regulatory affairs | $ | 1,516 | $ | 1,307 | $ | (209 | ) | (16.0 | )% | $ | 1,061 | $ | 1,516 | $ | 455 | 30.0 | % | |||||||||||||||
Other research and development | 7,022 | 7,219 | 197 | 2.7 | % | 8,448 | 7,022 | (1,426 | ) | (20.3 | )% | |||||||||||||||||||||
Total research and development | $ | 8,538 | $ | 8,526 | $ | (12 | ) | (0.1 | )% | $ | 9,509 | $ | 8,538 | $ | (971 | ) | (11.4 | )% |
● | Principal Amount. The Credit Agreement provides for a $20,000,000 senior secured term loan credit facility, which was drawn in full on September 4, 2019. Under the terms of the Credit Agreement, we may use the proceeds for general working capital purposes and other permitted corporate purposes, to refinance certain of our existing indebtedness and to pay fees, costs and expenses incurred in connection with the Credit Agreement. |
● | Interest Rate. Principal outstanding under the Credit Agreement bears interest at a rate per annum equal to the sum of (a) the greater of the one-month London Interbank Offered Rate and 2.5% plus (b) 8.75%. At any time at which an event of default (as described under “—Default Provisions” below) has occurred and is continuing, the interest rate will increase by 4.0%. Accrued interest is payable on a monthly basis. |
● | Scheduled Repayment. No principal repayments are due prior to September 30, 2022, unless we elect to prepay principal as described under “—Optional Prepayment” below or principal is accelerated pursuant to an event of default as described under “—Default Provisions” below. Principal installments in the amount of $300,000 are payable on the last day of each of the eleven months from September 2022 through July 2023, and all remaining principal is payable at maturity on September 3, 2023. |
● | Optional Prepayment. We may prepay outstanding principal from time to time, subject to payment of a premium on the prepaid principal amount equal to 10% through September 3, 2020, 8% from September 4, 2020 through September 3, 2021, and 4% from September 4, 2021 through September 3, 2022. No premium will be due with respect to any prepayment made on or after September 4, 2022. |
● | Guaranties. Our subsidiaries Chembio Diagnostic Systems Inc. and Chembio Diagnostics Malaysia Sdn Bhd. have guaranteed, and the Lender from time to time may require our other subsidiaries to guarantee, our obligations under the Credit Agreement. |
● | Security. Our obligations under the Credit Agreement are secured by a first priority, perfected lien on substantially all of our property and assets, including our equity interests in our subsidiaries. Our subsidiary Chembio Diagnostic Systems Inc. has secured its guarantee of our Credit Agreement obligations with a lien on substantially all of its assets, and the Lender from time to time may require Chembio Diagnostics Malaysia Sdn Bhd. and any of our other subsidiaries that has guaranteed our Credit Agreement obligations to do the same. |
● | Representations and Warranties; Financial and Other Covenants. In the Credit Agreement we made customary representations and warranties as well as customary affirmative and negative covenants, including covenants limiting additional indebtedness, liens, guaranties, mergers and acquisitions, substantial asset sales, investments and loans, sale and leasebacks, transactions with affiliates, and fundamental changes. The Credit Agreement also contains financial covenants requiring that we maintain aggregate unrestricted cash of not less than $3,000,000 at all times and we achieve specified minimum rolling four-quarter (“last twelve month”) total revenue amounts as of September 30, 2019 and the last day of each calendar quarter thereafter. The minimum total revenue amounts, which range from $32.0 million to $50.1 million, were developed for purposes of the Credit Agreement and do not reflect the internal estimates and plans used by our management and board of directors to understand and evaluate our operating performance, to establish budgets, and to establish operational goals for managing our business. We therefore do not believe that the covenant requirements provide useful information to investors or others in enhancing an understanding of our future prospects. |
● | Default Provisions. The Credit Agreement provides for customary events of default, including events of default based on non-payment of amounts due under the Credit Agreement, defaults on other debt, misrepresentations, covenant breaches, changes of control, insolvency, bankruptcy and the occurrence of a material adverse effect on the Company. Upon an event of default resulting from a voluntary or involuntary proceeding for bankruptcy, insolvency or receivership, the amounts outstanding under the Credit Agreement will become immediately due and payable and the Lender’s commitments will be automatically terminated. Upon the occurrence and continuation of any other event of default, the Lender may accelerate payment of all obligations and terminate the Lender’s commitments under the Credit Agreement. Upon an acceleration of payment following an event of default occurring prior to September 4, 2021, the amounts due and payable by us will include a prepayment premium on accelerated principal in the amount described under “—Optional Prepayment” above. |
December 31, 2019 | December 31, 2020 | |||||||
(in thousands) | (in thousands) | |||||||
Cash and cash equivalents | $ | 18,271 | $ | 23,066 | ||||
Accounts receivable, net | 3,661 | 3,377 | ||||||
Inventories, net | 9,598 | 12,516 | ||||||
Prepaid expenses and other current assets | 693 | 779 | ||||||
Total current assets | 32,223 | 39,738 | ||||||
Less: Total current liabilities | (6,442 | ) | 12,351 | |||||
Working capital | $ | 25,781 | $ | 27,387 |
● | pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; |
● | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made in accordance with authorizations of management and directors of the company; and |
● | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
ITEM 9B. | Other Information |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Exhibit No. | Description | |
3.1 | ||
3.2 | ||
4.1 | ||
Description of Securities | ||
10.1(a)* | ||
10.1(b)* | ||
10.2(a)* | ||
10.2(b)* | ||
10.4* | ||
10.5* | ||
10.6*‡ | ||
10.8(a)* | ||
10.8(b)* | ||
10.9* | ||
10.14*‡ | ||
10.15* | ||
14.1 | ||
Consent of EY, Independent Registered Public Accounting Firm | ||
Consent of BDO USA, LLP, Independent Registered Public Accounting Firm | ||
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Definition Linkbase Document | |
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* | Indicates management contract or compensatory plan. |
† | Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. We hereby undertake to furnish copies of the omitted exhibits and schedules upon request by the Securities and Exchange Commission, provided that we may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934 for the exhibits and schedules so furnished. |
‡ | Certain sensitive personally identifiable information in this exhibit was omitted by means of redacting a portion of the text and replacing it with [***]. |
** | The certifications attached as Exhibit 32.1 accompany the Annual Report on Form 10-K pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. |
CHEMBIO DIAGNOSTICS, INC. | |||
March | By | /s/ | |
Signatures | Title | Date | ||
/s/ | March | |||
(Principal Executive Officer) | ||||
/s/ Neil A. Goldman | Executive Vice President and Chief Financial Officer | March | ||
Neil A. Goldman | (Principal Financial & Accounting Officer) | |||
/s/ Katherine L. Davis | Chair of the Board | March | ||
Katherine L. Davis | ||||
/s/ David W. K. Acheson | Director | March 11, 2021 | ||
David W. K. Acheson | ||||
/s/ David W. Bespalko | Director | March 11, 2021 | ||
David W. Bespalko | ||||
/s/ Mary Lake Polan | Director | March | ||
Mary Lake Polan | ||||
/s/ John G. Potthoff | Director | March | ||
John G. Potthoff |
F-1 and F-2 | ||
Consolidated Financial Statements: | ||
Balance Sheets as of December 31, | ||
Statements of Operations for the years ended December 31, | ||
Statements of Comprehensive Loss for the years ended December 31, | ||
Statements of Changes in Stockholders’ Equity for the years ended December 31, | ||
Statements of Cash Flows for the years ended December 31, | ||
Notes to Consolidated Financial Statements |
Description of the Matter | Revenue Recognition – Variable Consideration For the year ended December 31, 2020, the Company recognized $24.8 million of net product revenue. As discussed in Note 2 to the consolidated financial statements, variable consideration, which includes the effect of estimated future returns, is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenues recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Auditing the Company’s measurement of variable consideration related to future returns was especially complex and involved a higher degree of subjectivity due to the significant estimation uncertainty. The estimation of variable consideration was dependent upon significant assumptions such as the probability of future returns and the likelihood of changes in approval by regulatory agencies. Changes in management’s significant assumptions can have a material effect on the amount and timing of revenue recognized. |
How We Addressed the Matter in Our Audit | To test the estimation of variable consideration, our audit procedures included, among others, the evaluation of the completeness of the underlying data used in management’s calculation and testing the significant assumptions described above. For example, these procedures included evaluating the likelihood of changes in regulatory approval, inspection of Company’s correspondences with the third parties and regulatory agencies, and corroborating inquiries of the Company’s operational personnel in order to support management’s assumptions. We also tested subsequent cash collection for products shipped to third party customers and performed a lookback analysis comparing actual product returns to the reserve established by management. |
December 31, | ||||||||||||||||
December 31, 2019 | December 31, 2018 | 2020 | 2019 | |||||||||||||
- ASSETS - | ||||||||||||||||
CURRENT ASSETS: | ||||||||||||||||
Cash and cash equivalents | $ | 18,271,352 | $ | 12,524,551 | $ | 23,066,301 | $ | 18,271,352 | ||||||||
Accounts receivable, net of allowance for doubtful accounts of $62,000 and $42,000 at December 31, 2019 and 2018, respectively | 3,661,325 | 7,373,971 | ||||||||||||||
Accounts receivable, net of allowance for doubtful accounts of $296,793 and $62,000 at December 31, 2020 and 2019, respectively | 3,377,387 | 3,661,325 | ||||||||||||||
Inventories, net | 9,598,030 | 7,851,222 | 12,516,402 | 9,598,030 | ||||||||||||
Prepaid expenses and other current assets | 693,013 | 702,010 | 778,683 | 693,013 | ||||||||||||
TOTAL CURRENT ASSETS | 32,223,720 | 28,451,754 | 39,738,773 | 32,223,720 | ||||||||||||
FIXED ASSETS: | ||||||||||||||||
Property, plant and equipment, net | 5,933,569 | 2,873,920 | 8,688,403 | 5,933,569 | ||||||||||||
Finance lease right-of-use assets, net | 210,350 | – | 233,134 | 210,350 | ||||||||||||
OTHER ASSETS: | ||||||||||||||||
Operating right-of-use assets, net | 7,030,744 | – | 6,112,632 | 7,030,744 | ||||||||||||
Intangible assets, net | 3,914,352 | 3,884,831 | 3,645,986 | 3,914,352 | ||||||||||||
Goodwill | 5,872,690 | 4,983,127 | 5,963,744 | 5,872,690 | ||||||||||||
Deposits and other assets | 543,539 | 717,551 | 509,342 | 543,539 | ||||||||||||
TOTAL ASSETS | $ | 55,728,964 | $ | 40,911,183 | $ | 64,892,014 | $ | 55,728,964 | ||||||||
- LIABILITIES AND STOCKHOLDERS’ EQUITY - | ||||||||||||||||
CURRENT LIABILITIES: | ||||||||||||||||
Accounts payable and accrued liabilities | $ | 5,526,243 | $ | 5,888,681 | $ | 10,042,790 | $ | 5,526,243 | ||||||||
Deferred revenue | 125,000 | 422,905 | 1,606,997 | 125,000 | ||||||||||||
Note payable | 180,249 | 207,694 | ||||||||||||||
Notes Payable | 0 | 180,249 | ||||||||||||||
Operating lease liabilities | 642,460 | 568,294 | ||||||||||||||
Finance lease liabilities | 41,894 | – | 58,877 | 41,894 | ||||||||||||
Operating lease liabilities | 568,294 | – | ||||||||||||||
TOTAL CURRENT LIABILITIES | 6,441,680 | 6,519,280 | 12,351,124 | 6,441,680 | ||||||||||||
OTHER LIABILITIES: | ||||||||||||||||
Long-term operating lease liabilities | 6,969,603 | – | 6,327,143 | 6,969,603 | ||||||||||||
Long-term finance lease liabilities | 171,953 | – | 185,239 | 171,953 | ||||||||||||
Note payable | – | 171,821 | ||||||||||||||
Long-term debt net of debt discount and issuance costs | 17,644,149 | – | ||||||||||||||
Long-term debt, less current portion, net | 18,182,158 | 17,644,149 | ||||||||||||||
Deferred tax liability | 466,326 | 892,308 | 69,941 | 466,326 | ||||||||||||
TOTAL LIABILITIES | 31,693,711 | 7,583,409 | 37,115,605 | 31,693,711 | ||||||||||||
COMMITMENTS AND CONTINGENCIES (Note 12) | 0 | 0 | ||||||||||||||
STOCKHOLDERS’ EQUITY: | ||||||||||||||||
Preferred stock – 10,000,000 shares authorized, none outstanding | – | – | ||||||||||||||
Common stock - $.01 par value; 100,000,000 shares authorized, 17,733,617 and 17,166,459 shares issued and outstanding at December 31, 2019 and 2018, respectively | 177,335 | 171,664 | ||||||||||||||
Preferred stock – 10,000,000 shares authorized, NaN outstanding | 0 | 0 | ||||||||||||||
Common stock - $0.01 par value; 100,000,000 shares authorized, 20,223,498 and 17,733,617 shares issued and outstanding at December 31, 2020 and 2019, respectively | 202,235 | 177,335 | ||||||||||||||
Additional paid-in capital | 95,433,077 | 90,953,788 | 124,961,514 | 95,433,077 | ||||||||||||
Accumulated deficit | (71,585,003 | ) | (57,909,874 | ) | (97,106,331 | ) | (71,585,003 | ) | ||||||||
Treasury stock – 41,141 and 0 shares at cost, at December 31, 2020 and 2019, respectively | (190,093 | ) | 0 | |||||||||||||
Accumulated other comprehensive income | 9,844 | 112,196 | (90,916 | ) | 9,844 | |||||||||||
TOTAL STOCKHOLDERS’ EQUITY | 24,035,253 | 33,327,774 | 27,776,409 | 24,035,253 | ||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 55,728,964 | $ | 40,911,183 | $ | 64,892,014 | $ | 55,728,964 |
For the years ended | ||||||||
December 31, 2019 | December 31, 2018 | |||||||
REVENUES: | ||||||||
Net product sales | $ | 28,844,997 | $ | 27,913,209 | ||||
R&D and grant revenue | 4,680,282 | 5,719,458 | ||||||
License and royalty revenue | 938,753 | 948,773 | ||||||
TOTAL REVENUES | 34,464,032 | 34,581,440 | ||||||
COSTS AND EXPENSES: | ||||||||
Cost of product sales | 22,394,317 | 22,599,432 | ||||||
Research and development expenses | 8,538,416 | 8,526,256 | ||||||
Selling, general and administrative expenses | 16,138,424 | 11,100,775 | ||||||
Acquisition costs | 721,465 | 337,645 | ||||||
47,792,622 | 42,564,108 | |||||||
LOSS FROM OPERATIONS | (13,328,590 | ) | (7,982,668 | ) | ||||
OTHER (EXPENSE) INCOME: | ||||||||
Interest (expense) income, net | (846,831 | ) | 49,498 | |||||
LOSS BEFORE INCOME TAX BENEFIT | (14,175,421 | ) | (7,933,170 | ) | ||||
Income tax benefit | (500,292 | ) | (67,521 | ) | ||||
NET LOSS | $ | (13,675,129 | ) | $ | (7,865,649 | ) | ||
Basic loss per share | $ | (0.81 | ) | $ | (0.54 | ) | ||
Diluted loss per share | $ | (0.81 | ) | $ | (0.54 | ) | ||
Weighted average number of shares outstanding, basic | 16,954,142 | 14,432,505 | ||||||
Weighted average number of shares outstanding, diluted | 16,954,142 | 14,432,505 |
December 31, | ||||||||
2020 | 2019 | |||||||
REVENUES: | ||||||||
Product revenue | $ | 24,767,149 | $ | 28,844,997 | ||||
R&D revenue | 4,851,562 | 4,025,538 | ||||||
Government grant income | 2,018,924 | 654,744 | ||||||
License and royalty revenue | 832,562 | 938,753 | ||||||
TOTAL REVENUES | 32,470,197 | 34,464,032 | ||||||
COSTS AND EXPENSES: | ||||||||
Cost of product sales | 23,874,487 | 22,394,317 | ||||||
Research and development expenses | 9,508,494 | 8,538,416 | ||||||
Selling, general and administrative expenses | 21,037,701 | 16,138,424 | ||||||
Severance and related costs | 1,122,310 | 0 | ||||||
Acquisition costs | 63,497 | 721,465 | ||||||
55,606,489 | 47,792,622 | |||||||
LOSS FROM OPERATIONS | (23,136,292 | ) | (13,328,590 | ) | ||||
OTHER (EXPENSE) INCOME: | ||||||||
Interest expense, net | (2,841,830 | ) | (846,831 | ) | ||||
LOSS BEFORE INCOME TAX BENEFIT | (25,978,122 | ) | (14,175,421 | ) | ||||
Income tax benefit | 456,794 | 500,292 | ||||||
NET LOSS | $ | (25,521,328 | ) | $ | (13,675,129 | ) | ||
Basic and diluted loss per share | $ | (1.34 | ) | $ | (0.81 | ) | ||
Weighted average number of shares outstanding, basic and diluted | 19,085,691 | 16,954,142 |
For the years ended | ||||||||
December 31, 2019 | December 31, 2018 | |||||||
Net loss | $ | (13,675,129 | ) | $ | (7,865,649 | ) | ||
Other comprehensive loss: | ||||||||
Foreign currency translation adjustments | (102,352 | ) | (66,752 | ) | ||||
COMPREHENSIVE LOSS | $ | (13,777,481 | ) | $ | (7,932,401 | ) |
December 31, | ||||||||
2020 | 2019 | |||||||
Net loss | $ | (25,521,328 | ) | $ | (13,675,129 | ) | ||
Other comprehensive loss: | ||||||||
Foreign currency translation adjustments | (100,760 | ) | (102,352 | ) | ||||
COMPREHENSIVE LOSS | $ | (25,622,088 | ) | $ | (13,777,481 | ) |
Common Stock | Additional Paid-in-Capital Amount | Treasury Stock | Accumulated Deficit Amount | AOCI Amount | Total Amount | |||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||
Balance at December 31, 2018 | 17,166,459 | $ | 171,664 | $ | 90,953,788 | 0 | $ | 0 | $ | (57,909,874 | ) | $ | 112,196 | $ | 33,327,774 | |||||||||||||||||
Common Stock: | ||||||||||||||||||||||||||||||||
Restricted stock issued | 381,908 | 3,819 | (128,081 | ) | 0 | 0 | 0 | 0 | (124,262 | ) | ||||||||||||||||||||||
Restricted stock compensation | - | 0 | 1,394,812 | 0 | 0 | 0 | 0 | 1,394,812 | ||||||||||||||||||||||||
Issuance of common stock for business acquired | 153,707 | 1,537 | 441,754 | 0 | 0 | 0 | 0 | 443,291 | ||||||||||||||||||||||||
Options: | ||||||||||||||||||||||||||||||||
Exercised | 31,543 | 315 | 32,171 | 0 | 0 | 0 | 0 | 32,486 | ||||||||||||||||||||||||
Stock option compensation | - | 0 | 261,088 | - | 0 | 0 | 0 | 261,088 | ||||||||||||||||||||||||
Warrants and Other: | ||||||||||||||||||||||||||||||||
Warrant on Term Debt | - | 0 | 1,196,093 | - | 0 | 0 | 0 | 1,196,093 | ||||||||||||||||||||||||
Contingent Earnout for business acquired | - | 0 | 1,281,452 | - | 0 | 0 | 0 | 1,281,452 | ||||||||||||||||||||||||
Comprehensive loss | - | 0 | 0 | - | 0 | 0 | (102,352 | ) | (102,352 | ) | ||||||||||||||||||||||
Net loss | - | 0 | 0 | - | 0 | (13,675,129 | ) | 0 | (13,675,129 | ) | ||||||||||||||||||||||
Balance at December 31, 2019 | 17,733,617 | $ | 177,335 | $ | 95,433,077 | 0 | $ | 0 | $ | (71,585,003 | ) | $ | 9,844 | $ | 24,035,253 | |||||||||||||||||
Common Stock: | ||||||||||||||||||||||||||||||||
Issuance of stock, net | 2,619,593 | 26,196 | 28,410,544 | 0 | 0 | 0 | 0 | 28,436,740 | ||||||||||||||||||||||||
Restricted stock issued | 81,773 | 819 | 128,356 | 0 | 0 | 0 | 0 | 129,175 | ||||||||||||||||||||||||
Restricted stock compensation, net | (470,174 | ) | (4,702 | ) | 617,919 | 0 | 0 | 0 | 0 | 613,217 | ||||||||||||||||||||||
Shares tendered for withholding taxes | - | 0 | (296,667 | ) | - | 0 | 0 | 0 | (296,667 | ) | ||||||||||||||||||||||
Options: | ||||||||||||||||||||||||||||||||
Exercised | 5,528 | 55 | (55 | ) | 0 | |||||||||||||||||||||||||||
Stock option compensation | - | 0 | 480,779 | - | 0 | 0 | 0 | 480,779 | ||||||||||||||||||||||||
Warrants exercised | 253,161 | 2,532 | (2,532 | ) | - | 0 | 0 | 0 | 0 | |||||||||||||||||||||||
Treasury stock | - | - | 190,093 | (41,141 | ) | (190,093 | ) | - | - | 0 | ||||||||||||||||||||||
Comprehensive loss | - | - | 0 | - | 0 | 0 | (100,760 | ) | (100,760 | ) | ||||||||||||||||||||||
Net loss | - | 0 | 0 | - | 0 | (25,521,328 | ) | 0 | (25,521,328 | ) | ||||||||||||||||||||||
Balance at December 31, 2020 | 20,223,498 | $ | 202,235 | $ | 124,961,514 | (41,141 | ) | $ | (190,093 | ) | $ | (97,106,331 | ) | $ | (90,916 | ) | $ | 27,776,409 |
Common Stock | Additional Paid-in-Capital Amount | Accumulated Deficit Amount | AOCI Amount | Total Amount | ||||||||||||||||||||
Shares | Amount | |||||||||||||||||||||||
Balance at December 31, 2017 | 12,318,570 | $ | 123,185 | $ | 62,821,288 | $ | (50,044,225 | ) | $ | 178,948 | $ | 13,079,196 | ||||||||||||
Common Stock: | ||||||||||||||||||||||||
New stock from offerings | 4,509,760 | 45,098 | 27,431,162 | – | – | 27,476,260 | ||||||||||||||||||
Restricted stock issued | 266,839 | 2,668 | (2,668 | ) | – | – | – | |||||||||||||||||
Restricted stock compensation | – | – | 281,249 | – | – | 281,249 | ||||||||||||||||||
Options: | ||||||||||||||||||||||||
Exercised | 71,290 | 713 | 71,201 | – | – | 71,914 | ||||||||||||||||||
Stock option compensation | – | – | 351,556 | – | – | 351,556 | ||||||||||||||||||
Comprehensive loss | – | – | – | – | (66,752 | ) | (66,752 | ) | ||||||||||||||||
Net loss | – | – | – | (7,865,649 | ) | – | (7,865,649 | ) | ||||||||||||||||
Balance at December 31, 2018 | 17,166,459 | $ | 171,664 | $ | 90,953,788 | $ | (57,909,874 | ) | $ | 112,196 | $ | 33,327,774 | ||||||||||||
Common Stock: | ||||||||||||||||||||||||
Restricted stock issued | 381,908 | 3,819 | (128,081 | ) | – | – | (124,262 | ) | ||||||||||||||||
Restricted stock compensation | – | – | 1,394,812 | – | – | 1,394,812 | ||||||||||||||||||
Issuance of common stock for business acquired | 153,707 | 1,537 | 441,754 | – | – | 443,291 | ||||||||||||||||||
Options: | ||||||||||||||||||||||||
Exercised | 31,543 | 315 | 32,171 | – | – | 32,486 | ||||||||||||||||||
Stock option compensation | – | – | 261,088 | – | – | 261,088 | ||||||||||||||||||
Warrants and Other: | ||||||||||||||||||||||||
Warrant on Term Debt | – | – | 1,196,093 | – | – | 1,196,093 | ||||||||||||||||||
Contingent Earnout for business acquired | – | – | 1,281,452 | – | – | 1,281,452 | ||||||||||||||||||
Comprehensive loss | – | – | – | – | (102,352 | ) | (102,352 | ) | ||||||||||||||||
Net loss | – | – | – | (13,675,129 | ) | – | (13,675,129 | ) | ||||||||||||||||
Balance at December 31, 2019 | 17,733,617 | $ | 177,335 | $ | 95,433,077 | $ | (71,585,003 | ) | $ | 9,844 | $ | 24,035,253 |
December 31, 2019 | December 31, 2018 | December 31, | ||||||||||||||
2020 | 2019 | |||||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Cash received from customers and grants | $ | 37,930,172 | $ | 29,804,273 | $ | 34,736,133 | $ | 37,930,172 | ||||||||
Cash paid to suppliers and employees | (45,655,562 | ) | (41,624,299 | ) | (50,238,409 | ) | (45,655,562 | ) | ||||||||
Cash paid for operating and finance leases | (640,844 | ) | – | |||||||||||||
Cash paid for operating leases | (1,139,944 | ) | (632,952 | ) | ||||||||||||
Cash paid for finance leases | (19,987 | ) | (7,892 | ) | ||||||||||||
Interest and taxes, net | (689,272 | ) | 38,585 | (2,225,031 | ) | (689,272 | ) | |||||||||
Net cash used in operating activities | (9,055,506 | ) | (11,781,441 | ) | (18,887,238 | ) | (9,055,506 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Purchase of businesses, net of cash acquired | (100,000 | ) | (5,491,204 | ) | 0 | (100,000 | ) | |||||||||
Acquisition of and deposits on fixed assets | (3,502,540 | ) | (1,467,192 | ) | (3,961,369 | ) | (3,502,540 | ) | ||||||||
Patent Application Costs | (297,006 | ) | – | (205,493 | ) | (297,006 | ) | |||||||||
Working capital adjustments related to business combination | 145,760 | – | ||||||||||||||
Working capital adjustment related to business combination | 0 | 145,760 | ||||||||||||||
Net cash used in investing activities | (3,753,786 | ) | (6,958,396 | ) | (4,166,862 | ) | (3,753,786 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Proceeds from sale of common stock, net | 28,436,740 | 0 | ||||||||||||||
Proceeds from option exercises | 32,486 | 71,914 | 0 | 32,486 | ||||||||||||
Principal payments for finance leases | (19,875 | ) | – | (51,166 | ) | (19,875 | ) | |||||||||
Payments on debt issuance costs | (186,313 | ) | – | 0 | (186,313 | ) | ||||||||||
Payments on note payable | (181,822 | ) | (64,481 | ) | (180,249 | ) | (181,822 | ) | ||||||||
Proceeds from issuance of long-term debt, net | 18,850,000 | – | 0 | 18,850,000 | ||||||||||||
Proceeds from sale of common stock, net | – | 27,476,260 | ||||||||||||||
Stimulus package loan | 2,978,315 | 0 | ||||||||||||||
Payment of stimulus package loan | (2,978,315 | ) | 0 | |||||||||||||
Payments of tax withholdings on stock award | (441,723 | ) | 0 | |||||||||||||
Net cash provided by financing activities | 18,494,476 | 27,483,693 | 27,763,602 | 18,494,476 | ||||||||||||
Effect of exchange rate changes on cash | 61,617 | (9,607 | ) | 85,447 | 61,617 | |||||||||||
INCREASE IN CASH AND CASH EQUIVALENTS | 5,746,801 | 8,734,249 | 4,794,949 | 5,746,801 | ||||||||||||
Cash and cash equivalents - beginning of the period | 12,524,551 | 3,790,302 | 18,271,352 | 12,524,551 | ||||||||||||
Cash and cash equivalents - end of the period | $ | 18,271,352 | $ | 12,524,551 | $ | 23,066,301 | $ | 18,271,352 | ||||||||
RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: | ||||||||||||||||
Net Loss | $ | (13,675,129 | ) | $ | (7,865,649 | ) | $ | (25,521,328 | ) | $ | (13,675,129 | ) | ||||
Adjustments: | ||||||||||||||||
Depreciation and amortization | 1,916,194 | 902,505 | 2,697,126 | 1,916,194 | ||||||||||||
Share based compensation | 1,655,900 | 632,805 | 1,223,171 | 1,655,900 | ||||||||||||
Benefit from deferred tax liability | (513,715 | ) | (78,432 | ) | (396,385 | ) | (513,715 | ) | ||||||||
Provision for doubtful accounts | 20,000 | – | 270,193 | 20,000 | ||||||||||||
Non-cash inventory changes | 3,543,515 | 0 | ||||||||||||||
Changes in assets and liabilities, net of effects from acquisitions: | ||||||||||||||||
Accounts receivable | 3,764,045 | (5,150,072 | ) | 283,939 | 3,764,045 | |||||||||||
Inventories | (1,457,612 | ) | (3,077,104 | ) | (6,461,887 | ) | (1,457,612 | ) | ||||||||
Prepaid expenses and other current assets | 64,355 | (118,293 | ) | (85,670 | ) | 64,355 | ||||||||||
Deposits and other assets | (90,624 | ) | – | 34,195 | (90,624 | ) | ||||||||||
Accounts payable and accrued liabilities | (441,015 | ) | 2,599,894 | 4,043,896 | (441,015 | ) | ||||||||||
Deferred revenue | (297,905 | ) | 372,905 | 1,481,997 | (297,905 | ) | ||||||||||
Net cash used in operating activities | $ | (9,055,506 | ) | $ | (11,781,441 | ) | $ | (18,887,238 | ) | $ | (9,055,506 | ) | ||||
Supplemental disclosures for non-cash investing and financing activities: | ||||||||||||||||
Deposits on manufacturing equipment transferred to fixed assets | $ | 430,000 | $ | 257,455 | $ | 472,651 | $ | 430,000 | ||||||||
Deposits and other assets transferred to intangible assets | – | 118,899 | ||||||||||||||
Seller-financed equipment purchases | – | 326,110 | ||||||||||||||
Issuance of common stock for net assets of business acquired | 443,291 | – | 0 | 443,291 | ||||||||||||
Contingent liability earnout | 1,225,000 | – | 1,011,261 | 1,225,000 |
Amount | ||||
Net current assets | $ | 320,293 | ||
Property, plant and equipment and other assets | 226,035 | |||
Inventory | 289,205 | |||
Goodwill | 986,058 | |||
Deferred tax liability | (50,000 | ) | ||
Other intangible assets (estimated useful life): | ||||
Trade name (0.5 years) | 5,000 | |||
Customer contracts / relationships (5 years) | 195,000 | |||
Total consideration | $ | 1,971,591 |
Unaudited Proforma December 31, 2019 | ||||
Total revenues | $ | 35,157,248 | ||
Net loss | $ | (13,654,001 | ) | |
Net loss per common share | $ | (0.80 | ) | |
Diluted net loss per common share | $ | (0.80 | ) |
Amount | ||||
Net current assets | $ | 404,204 | ||
Property, plant and equipment | 125,000 | |||
Goodwill | 3,383,112 | |||
Deferred tax liability | (681,112 | ) | ||
Other intangible assets (estimated useful life): | ||||
Developed technology (7 years) | 1,900,000 | |||
Customer contracts / relationships (10 years) | 360,000 | |||
Total consideration | $ | 5,491,204 |
Proforma | ||||
December 31, 2018 | ||||
Total revenues | $ | 36,614,995 | ||
Net loss | $ | (8,394,074 | ) | |
Net loss per common share | $ | (0.58 | ) | |
Diluted net loss per common share | $ | (0.58 | ) |
Level 1: | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
Level 2: | Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and |
Level 3: | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). |
Exchange Transactions | Non-Exchange Transactions | Total | ||||||||||
Net product sales | $ | 28,844,997 | $ | – | $ | 28,844,997 | ||||||
R&D, milestone and grant revenue | 3,321,031 | 1,359,251 | 4,680,282 | |||||||||
License and royalty revenue | 938,753 | – | 938,753 | |||||||||
$ | 33,104,781 | $ | 1,359,251 | $ | 34,464,032 |
Total | ||||
Africa | $ | 7,564,360 | ||
Asia | 888,800 | |||
Europe & Middle East | 6,498,995 | |||
Latin America | 11,808,768 | |||
United States | 7,703,109 | |||
$ | 34,464,032 |
Exchange Transactions | Non-Exchange Transactions | Total | ||||||||||
Net product sales | $ | 27,913,209 | $ | – | $ | 27,913,209 | ||||||
R&D, milestone and grant revenue | 2,687,210 | 3,032,248 | 5,719,458 | |||||||||
License and royalty revenue | 948,773 | – | 948,773 | |||||||||
$ | 34,581,440 | $ | 3,032,248 | $ | 34,581,440 |
Total | ||||
Africa | $ | 8,838,632 | ||
Asia | 1,404,982 | |||
Europe & Middle East | 4,895,273 | |||
Latin America | 12,546,083 | |||
United States | 6,896,470 | |||
$ | 34,581,440 |
Beginning balance January 1, 2019 | $ | 4,983,127 | ||
Acquisition of Orangelife | 986,058 | |||
Chembio Diagnostics GmbH measurement period adjustment | (99,648 | ) | ||
Changes in foreign currency exchange rate | 3,153 | |||
Balance at December 31, 2019 | $ | 5,872,690 |
Weighted Average Remaining Life | December 31, 2019 | December 31, 2018 | ||||||||||||||||||||||||||
Cost | Accumulated Amortization | Net Book Value | Cost | Accumulated Amortization | Net Book Value | |||||||||||||||||||||||
Intellectual property | 6 | $ | 1,418,681 | $ | 299,232 | $ | 1,119,449 | $ | 1,089,688 | $ | 173,633 | $ | 916,055 | |||||||||||||||
Developed technology | 6 | 1,922,682 | 266,550 | 1,656,132 | 1,910,315 | – | 1,910,315 | |||||||||||||||||||||
Customer contracts/relationships | 7 | 1,325,521 | 270,902 | 1,054,619 | 1,121,600 | 151,929 | 969,671 | |||||||||||||||||||||
Trade names | 8 | 114,946 | 30,794 | 84,152 | 108,521 | 19,731 | 88,790 | |||||||||||||||||||||
$ | 4,781,830 | $ | 867,478 | $ | 3,914,352 | $ | 4,230,124 | $ | 345,293 | $ | 3,884,831 |
● | $150,000 in cash and 153,707 shares of common stock. |
● | Issuance of 316,456 shares of common stock to the founder and former chief executive officer of Orangelife, based on the transfer and approval of registration of certain of the Company’s products in Brazil prior to November 25, 2022. All of the shares may be deliverable in the event of change in control of Chembio. The number of shares issued was subject to adjustments based upon Orangelife’s working capital at closing. The fair value of the shares on the date of the acquisition was recorded in equity and was valued at $1.2 million. |
Amount | ||||
Net current assets | $ | 320,293 | ||
Property, plant and equipment and other assets | 226,035 | |||
Inventory | 289,205 | |||
Goodwill | 986,058 | |||
Deferred tax liability | (50,000 | ) | ||
Other intangible assets (estimated useful life): | ||||
Trade name (0.5 years) | 5,000 | |||
Customer contracts / relationships (5 years) | 195,000 | |||
Total consideration | $ | 1,971,591 |
Unaudited Proforma December 31, 2019 | ||||
Total revenues | $ | 35,157,248 | ||
Net loss | $ | (13,654,001 | ) | |
Net loss per common share (basic and diluted) | $ | (0.80 | ) |
December 31 | December 31 | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Raw Materials | $ | 2,901,319 | $ | 2,803,677 | $ | 5,955,215 | $ | 2,901,319 | ||||||||
Work in Process | 793,343 | 263,043 | 2,549,516 | 793,343 | ||||||||||||
Finished Goods | 5,903,368 | 4,784,502 | 4,011,671 | 5,903,368 | ||||||||||||
$ | 9,598,030 | $ | 7,851,222 | $ | 12,516,402 | $ | 9,598,030 |
December 31 | December 31 | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Machinery and Equipment | $ | 7,955,511 | $ | 6,070,137 | $ | 10,996,869 | $ | 7,955,511 | ||||||||
Furniture and Fixtures | 21,477 | 35,287 | 25,418 | 21,477 | ||||||||||||
Computer Equipment | 416,359 | 435,348 | 446,300 | 416,359 | ||||||||||||
Leasehold Improvements | 3,038,469 | 2,334,512 | 3,158,074 | 3,038,469 | ||||||||||||
Enterprise Business Systems | 1,830,925 | 462,420 | 2,741,806 | 1,830,925 | ||||||||||||
Subtotal: | 17,368,467 | 13,262,741 | ||||||||||||||
Less: Accumulated Depreciation and Amortization | (7,329,173 | ) | (6,463,784 | ) | (8,680,064 | ) | (7,329,172 | ) | ||||||||
$ | 5,933,569 | $ | 2,873,920 | $ | 8,688,403 | $ | 5,933,569 |
December 31 | December 31 | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Accounts Payable - suppliers | $ | 3,144,098 | $ | 3,622,765 | $ | 5,727,781 | $ | 3,144,098 | ||||||||
Accrued Commissions & Royalties | 931,760 | 867,344 | 807,708 | 931,760 | ||||||||||||
Accrued Payroll | 231,753 | 48,867 | 277,908 | 231,753 | ||||||||||||
Accrued Vacation | 410,199 | 264,789 | 417,238 | 410,199 | ||||||||||||
Accrued Bonuses | 215,000 | 494,318 | 1,193,985 | 215,000 | ||||||||||||
Accrued Professional Fees | 511,681 | 0 | ||||||||||||||
Accrued Expenses - Other | 593,433 | 590,598 | 1,106,489 | 593,433 | ||||||||||||
$ | 5,526,243 | $ | 5,888,681 | $ | 10,042,790 | $ | 5,526,243 |
Exchange Transactions | Non-Exchange Transactions | Total | ||||||||||
Net product sales | $ | 24,767,149 | $ | 0 | $ | 24,767,149 | ||||||
R&D revenue | 4,851,562 | 0 | 4,851,562 | |||||||||
Government grant income | 0 | 2,018,924 | 2,018,924 | |||||||||
License and royalty revenue | 832,562 | 0 | 832,562 | |||||||||
$ | 30,451,273 | $ | 2,018,924 | $ | 32,470,197 |
Total | ||||
Africa | $ | 4,890,370 | ||
Asia | 824,488 | |||
Europe & Middle East | 9,905,437 | |||
Latin America | 9,841,773 | |||
United States | 7,008,129 | |||
$ | 32,470,197 |
Exchange Transactions | Non-Exchange Transactions | Total | ||||||||||
Net product sales | $ | 28,844,997 | $ | 0 | $ | 28,844,997 | ||||||
R&D revenue | 3,321,031 | 704,507 | 4,025,538 | |||||||||
Government grant income | 0 | 654,744 | 654,744 | |||||||||
License and royalty revenue | 938,753 | 0 | 938,753 | |||||||||
$ | 33,104,781 | $ | 1,359,251 | $ | 34,464,032 |
Total | ||||
Africa | $ | 7,564,360 | ||
Asia | 888,800 | |||
Europe & Middle East | 6,498,995 | |||
Latin America | 11,808,768 | |||
United States | 7,703,109 | |||
$ | 34,464,032 |
Year Ending December 31, | ||||||||
2020 | 2019 | |||||||
United States operations | $ | (23,384,133 | ) | $ | (12,504,780 | ) | ||
International operations | (2,593,989 | ) | (1,670,641 | ) | ||||
(Loss) before taxes | $ | (25,978,122 | ) | $ | (14,175,421 | ) |
Year Ending December 31, | ||||||||
2019 | 2018 | |||||||
United States operations | $ | (12,504,780 | ) | $ | (7,137,428 | ) | ||
International operations | (1,670,641 | ) | (795,742 | ) | ||||
(Loss) before taxes | $ | (14,175,421 | ) | $ | (7,933,170 | ) |
Year Ending December 31, | Year Ending December 31, | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Current | ||||||||||||||||
Federal | $ | – | $ | – | $ | (66,906 | ) | $ | 0 | |||||||
State | 9,790 | 10,911 | 6,497 | 9,790 | ||||||||||||
Foreign | 3,633 | – | 0 | 3,633 | ||||||||||||
Total current (benefit) provision | 13,423 | 10,911 | (60,409 | ) | 13,423 | |||||||||||
Deferred | ||||||||||||||||
Federal | – | – | 0 | 0 | ||||||||||||
State | – | – | 0 | 0 | ||||||||||||
Foreign | (513,715 | ) | (78,435 | ) | (396,385 | ) | (513,715 | ) | ||||||||
Total deferred (benefit) provision | (513,715 | ) | (78,435 | ) | (396,385 | ) | (513,715 | ) | ||||||||
Total (benefit) provision | $ | (500,292 | ) | $ | (67,521 | ) | $ | (456,794 | ) | $ | (500,292 | ) |
Year Ending December 31, | Year Ending December 31, | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Federal income tax at statutory rates | 21.00 | % | 21.00 | % | 21.00 | % | 21.00 | % | ||||||||
State income taxes, net of federal benefit | (0.05 | )% | (0.10 | )% | (0.02 | )% | (0.05 | )% | ||||||||
Nondeductible expenses | (1.00 | )% | (1.58 | )% | (0.19 | )% | (1.00 | )% | ||||||||
Foreign rate differential | 0.45 | % | 0.36 | % | 0.47 | % | 0.45 | % | ||||||||
Change in valuation allowance | (17.51 | )% | (18.44 | )% | (19.37 | )% | (17.51 | )% | ||||||||
Other | 0.64 | % | (0.39 | )% | (0.13 | )% | 0.64 | % | ||||||||
Income tax benefit | 3.53 | % | 0.85 | % | 1.76 | % | 3.53 | % |
2019 | 2018 | 2020 | 2019 | |||||||||||||
Inventory reserves | $ | 196,193 | $ | 204,206 | $ | 461,709 | $ | 196,193 | ||||||||
Accrued expenses | 105,323 | 175,168 | 130,291 | 105,323 | ||||||||||||
Net operating loss carry-forwards | 10,079,317 | 7,122,576 | 14,844,798 | 10,079,317 | ||||||||||||
Research and development credit | 1,679,495 | 1,696,870 | 1,696,870 | 1,679,495 | ||||||||||||
Stock-based compensation | 581,053 | 215,797 | 398,900 | 581,053 | ||||||||||||
602,187 | 0 | |||||||||||||||
Lease obligations | 1,646,584 | – | 1,583,814 | 1,646,584 | ||||||||||||
Depreciation | 44,993 | 139,362 | 0 | 44,993 | ||||||||||||
Total deferred tax assets | 14,332,958 | 9,553,979 | 19,718,569 | 14,332,958 | ||||||||||||
Right-of-use assets | (1,538,129 | ) | – | (1,340,914 | ) | (1,538,129 | ) | |||||||||
Depreciation | (254,366 | ) | 0 | |||||||||||||
Intangibles | (921,807 | ) | (968,849 | ) | (821,363 | ) | (921,807 | ) | ||||||||
Total deferred tax liabilities | (2,459,936 | ) | (968,849 | ) | (2,416,643 | ) | (2,459,936 | ) | ||||||||
Net deferred tax assets before valuation allowance | 11,873,022 | 8,585,130 | 17,301,926 | 11,873,022 | ||||||||||||
Less valuation allowances | (12,339,348 | ) | (9,477,438 | ) | (17,371,867 | ) | (12,339,348 | ) | ||||||||
Net noncurrent deferred tax liabilities | $ | (466,326 | ) | $ | (892,308 | ) | $ | (69,941 | ) | $ | (466,326 | ) |
(a) | Common Stock |
(b) | Preferred Stock |
(c) | Options, Restricted Stock, and Restricted Stock Units |
(d) | Warrants |
2019 | 2018 | 2020 | 2019 | |||||||||||||
Expected term (in years) | n/a | 4.96 | 6.29 | n/a | ||||||||||||
Expected volatility | n/a | 39.91 | % | 46.21 | % | n/a | ||||||||||
Expected dividend yield | n/a | n/a | 0 | n/a | ||||||||||||
Risk-free interest rate | n/a | 2.70 | % | 1.30 | % | n/a |
Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | Number of Shares | Weighted Average Exercise Price per Share | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||
Outstanding at December 31, 2017 | 810,670 | $ | 5.18 | 3.69 years | $ | 2,477,853 | |||||||||||||||||
Outstanding at December 31, 2019 | 642,625 | $ | 5.79 | 2.57 years | $ | 285,925 | |||||||||||||||||
Granted | 93,750 | 9.80 | 726,280 | $ | 2.59 | 0 | |||||||||||||||||
Exercised | 144,947 | 4.83 | 523,327 | 36,000 | $ | 6.30 | 95,976 | ||||||||||||||||
Forfeited/expired/cancelled | 47,505 | 8.82 | 358,127 | $ | 2.44 | 0 | |||||||||||||||||
Outstanding at December 31, 2018 | 711,968 | $ | 5.62 | 3.33 years | $ | 687,364 | |||||||||||||||||
Outstanding at December 31, 2020 | 974,778 | $ | 4.12 | 5.19 years | $ | 1,520,910 | |||||||||||||||||
Exercisable at December 31, 2018 | 396,799 | $ | 4.70 | 2.66 years | $ | 568,956 | |||||||||||||||||
Outstanding at December 31, 2018 | 711,968 | $ | 5.62 | 3.33 years | $ | 687,364 | |||||||||||||||||
Granted | – | $ | 0.00 | – | |||||||||||||||||||
Exercised | 54,343 | $ | 3.60 | 172,242 | |||||||||||||||||||
Forfeited/expired/cancelled | 15,000 | $ | 5.68 | – | |||||||||||||||||||
Outstanding at December 31, 2019 | 642,625 | $ | 5.79 | 2.57 years | $ | 285,925 | |||||||||||||||||
Exercisable at December 31, 2019 | 493,958 | $ | 5.22 | 2.20 years | $ | 285,925 | |||||||||||||||||
Exercisable at December 31, 2020 | 257,211 | $ | 7.42 | 2.87 years | $ | 0 |
Stock Options Outstanding | Stock Options Exercisable | Stock Options Outstanding | Stock Options Exercisable | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Range of Exercise Prices | Shares Outstanding | Average Remaining Contract Life (Year) | Weighted Average Exercise Price | Aggregate Intrinsic Value | Shares Exercisable | Weighted Average Exercise Price | Aggregate Intrinsic Value | Shares Outstanding | Average Remaining Contract Life (Year) | Weighted Average Exercise Price | Aggregate Intrinsic Value | Shares Exercisable | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||||||||||||||||||||||||||||||||||
1 to 2.79999 | – | – | $ | – | $ | – | – | $ | – | $ | – | 636,364 | 6.21 | $ | 2.36 | $ | 1,520,910 | 0 | $ | 0 | $ | 0 | ||||||||||||||||||||||||||||||||||
2.8 to 4.59999 | 250,000 | 1.20 | 3.42 | 285,925 | 250,000 | 3.42 | 285,925 | 0 | - | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||
4.6 to 6.39999 | 137,875 | 2.44 | 5.87 | – | 87,125 | 5.89 | – | 83,664 | 4.25 | 5.53 | 0 | 39,961 | 5.53 | 0 | ||||||||||||||||||||||||||||||||||||||||||
6.4 to 8.19999 | 207,875 | 4.05 | 7.31 | – | 138,083 | 7.22 | – | 207,875 | 3.05 | 7.31 | 0 | 189,125 | 7.22 | 0 | ||||||||||||||||||||||||||||||||||||||||||
8.2 to 12 | 46,875 | 3.60 | 11.45 | – | 18,750 | 11.45 | – | 46,875 | 2.60 | 11.45 | 0 | 28,125 | 11.45 | 0 | ||||||||||||||||||||||||||||||||||||||||||
Total | 642,625 | 2.57 | $ | 5.79 | $ | 285,925 | 493,958 | $ | 5.22 | $ | 285,925 | 974,778 | 5.19 | $ | 4.12 | $ | 1,520,910 | 257,211 | $ | 7.42 | $ | 0 |
Number of Shares & Units | Weighted Average Grant Date Fair Value | Number of Shares & Units | Weighted Average Grant Date Fair Value | |||||||||||||
Unvested at December 31, 2018 | 287,564 | $ | 9.65 | |||||||||||||
Unvested at December 31, 2019 | 545,986 | $ | 7.47 | |||||||||||||
Granted | 375,000 | 5.80 | 656,759 | 2.75 | ||||||||||||
Vested | (116,578 | ) | 9.65 | 112,726 | 5.63 | |||||||||||
Forfeited/expired/cancelled | – | – | 486,488 | 6.43 | ||||||||||||
Unvested at December 31, 2019 | 545,986 | 7.47 | ||||||||||||||
Unvested at December 31, 2020 | 603,531 | 3.08 |
Year Ending December 31, | Year Ending December 31, | |||||||||||||||
2019 | 2018 | 2020 | 2019 | |||||||||||||
Africa | $ | 7,564,360 | $ | 8,838,632 | $ | 4,890,370 | $ | 7,564,360 | ||||||||
Asia | 888,800 | 1,404,982 | 824,488 | 888,800 | ||||||||||||
Europe & Middle East | 3,781,761 | 2,208,063 | 5,274,927 | 3,781,761 | ||||||||||||
Latin America | 11,808,767 | 12,546,083 | 9,841,772 | 11,808,767 | ||||||||||||
United States | 4,801,309 | 2,915,449 | 3,935,592 | 4,801,309 | ||||||||||||
$ | 28,844,997 | $ | 27,913,209 | $ | 24,767,149 | $ | 28,844,997 |
2019 | 2018 | 2020 | 2019 | |||||||||||||
Asia | $ | 393,299 | $ | 466,185 | $ | 326,267 | $ | 393,299 | ||||||||
Europe & Middle East | 165,029 | 123,752 | 147,692 | 165,029 | ||||||||||||
Latin America | 60,527 | – | 14,719 | 60,527 | ||||||||||||
United States | 5,314,715 | 2,283,983 | 8,199,725 | 5,314,715 | ||||||||||||
$ | 5,933,569 | $ | 2,873,920 | $ | 8,688,403 | $ | 5,933,569 |
a) | Employment Contracts: |
2020 | $ | 365,000 | ||
2021 | 365,000 |
2021 | $ | 843,292 | ||
2022 | 460,000 | |||
2023 | 0 |
b) |
c) | Leases: |
Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
Operating lease expense | $ | 1,669,105 | $ | 1,655,573 | ||||
Finance lease cost | ||||||||
Amortization of right-of-use assets | $ | 58,414 | $ | 23,372 | ||||
Interest on lease liabilities | 19,986 | 7,892 | ||||||
Total finance lease expense | $ | 78,400 | $ | 31,264 |
Year Ended December 31, 2019 | Year Ended December 31, 2020 | Year Ended December 31, 2019 | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||
Operating cash flows for operating leases | $ | 632,952 | $ | 1,139,944 | $ | 632,952 | ||||||
Operating cash flows for finance leases | 7,892 | 19,987 | 7,892 | |||||||||
Financing cash flows for finance leases | 19,875 | 51,166 | 19,875 | |||||||||
Right-of-use assets obtained in exchange for lease obligations: | 7,892 | |||||||||||
Operating leases | $ | 7,030,744 | $ | 0 | $ | 7,030,744 | ||||||
Finance leases | 210,350 | 69,528 | 210,350 |
December 31, 2019 | ||||||||||||
Operating Leases | ||||||||||||
Operating lease right-of-use assets | $ | 7,030,744 | ||||||||||
– | ||||||||||||
Current portion of operating lease liability | 568,294 | |||||||||||
Operating lease liabilities | 6,969,603 | |||||||||||
Total operating lease liabilities | $ | 7,537,897 | ||||||||||
December 31, 2020 | December 31, 2019 | |||||||||||
Finance Leases | ||||||||||||
Finance lease right of use asset | $ | 233,722 | $ | 315,154 | $ | 233,722 | ||||||
Accumulated depreciation | (23,372 | ) | (82,020 | ) | (23,372 | ) | ||||||
Finance lease right of use asset, net | $ | 210,350 | $ | 233,134 | $ | 210,350 | ||||||
Current portion of finance lease liability | 41,894 | 58,877 | 41,894 | |||||||||
Finance lease liability | 171,953 | 185,239 | 171,953 | |||||||||
Total finance lease liabilities | $ | 213,847 | $ | 244,116 | $ | 213,847 |
Weighted Average Remaining Lease Term | ||||||||
Operating leases | 9.0 years | 9.3 years | ||||||
Finance leases | 3.7 years | 4.8 years | ||||||
Weighted Average Discount Rate | ||||||||
Operating leases | 8.58 | % | 8.67 | % | ||||
Finance leases | 8.18 | % | 7.00 | % |
Operating Leases | Finance Leases | December 31, 2020 | December 31, 2019 | |||||||||||||||||||||
2020 | $ | 1,205,161 | $ | 55,536 | ||||||||||||||||||||
Operating Leases | Finance Leases | Operating Leases | Finance Leases | |||||||||||||||||||||
2021 | 1,209,787 | 55,536 | $ | 1,209,787 | $ | 76,904 | $ | 1,205,161 | $ | 55,536 | ||||||||||||||
2022 | 1,057,757 | 55,536 | 1,057,757 | 76,904 | 1,209,787 | 55,536 | ||||||||||||||||||
2023 | 1,026,272 | 55,536 | 1,026,272 | 76,904 | 1,057,757 | 55,536 | ||||||||||||||||||
2024 | 1,018,875 | 27,767 | 1,018,875 | 49,136 | 1,026,272 | 55,536 | ||||||||||||||||||
2025 | 1,049,442 | 5,755 | 1,018,875 | 27,767 | ||||||||||||||||||||
Thereafter | 5,773,887 | – | 4,724,445 | 0 | 5,773,887 | 0 | ||||||||||||||||||
Total lease payments | $ | 11,291,739 | $ | 249,911 | $ | 10,086,578 | $ | 285,603 | $ | 11,291,739 | $ | 249,911 | ||||||||||||
Less: imputed interest | (3,753,842 | ) | (36,064 | ) | (3,116,975 | ) | (41,487 | ) | (3,753,842 | ) | (36,064 | ) | ||||||||||||
Total | $ | 7,537,897 | $ | 213,847 | $ | 6,969,603 | $ | 244,116 | $ | 7,537,897 | $ | 213,847 |
2019 | $ | 384,308 | ||
2020 | 88,576 | |||
2021 | – | |||
$ | 472,884 |
d) | Economic Dependency: |
For The Years Ended | Accounts Receivable | |||||||||||||||||||||||
December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||||||||||
Net Sales | % of Net Sales | Net Sales | % of Net Sales | |||||||||||||||||||||
Customer 1 | $ | 6,224,737 | 25.1 | % | $ | 11,263,573 | 39 | % | $ | 522,218 | $ | 941,962 | ||||||||||||
Customer 2 | 2,955,312 | 11.9 | % | 5,782,543 | 20 | % | 1,987 | 16,033 | ||||||||||||||||
Customer 3 | 2,956,945 | 11.9 | % | * | * | * | * |
For the years ended | Accounts Receivable | |||||||||||||||||||||||
December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||||||||
Net Sales | % of Net Sales | Net Sales | % of Net Sales | |||||||||||||||||||||
Customer 1 | $ | 11,263,573 | 39 | % | $ | 11,333,767 | 33 | % | $ | 941,962 | $ | 3,499,340 | ||||||||||||
Customer 2 | 5,782,543 | 20 | % | 4,346,640 | 13 | % | 16,033 | 1,033,824 |
For the years ended | Accounts Payable | |||||||||||||||||||||||
December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | |||||||||||||||||||||
Purchases | % of Purc. | Purchases | % of Purc. | |||||||||||||||||||||
Vendor 1 | * | * | 1,646,614 | 16 | % | * | 164,312 |
For The Years Ended | Accounts Payable | |||||||||||||||||||||||
December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||||||||||||||||||
Purchases | % of Purc. | Purchases | % of Purc. | |||||||||||||||||||||
Vendor 1 | $ | 2,222,182 | 13.0 | % | * | * | $ | 222,588 | * |
e) | Litigation: |
● | Sergey Chernysh v. Chembio Diagnostics, Inc., Richard L. Eberly, and Gail S. Page, filed on June 18, 2020, which we refer to as the Chernysh case; |
● | James Gowen v. Chembio Diagnostics, Inc., Richard L. Eberly, and Gail S. Page, filed on June 22, 2020, which we refer to as the Gowen case; |
● | Anthony Bailey v. Chembio Diagnostics, Inc. Richard J. Eberly, Gail S. Page, and Neil A. Goldman, filed on July 3, 2020, which we refer to as the Bailey case; and |
● | Special Situations Fund III QP, L.P., Special Situations Cayman Fund, L.P., and Special Situations Private Equity Fund, L.P. v. Chembio Diagnostics, Inc., Richard Eberly, Gail S. Page, Robert W. Baird & Co. Inc. and Dougherty & Company LLC, filed August 17, 2020, which we refer to as the Special Situations Funds case. |
f) | Governmental Regulation: |
Stock price on issuance date | $ | 5.40 | ||
Strike Price | $ | 5.22 | ||
Risk-free interest rate | 1.45 | % | ||
Volatility | 43.65 | % | ||
Expected life | 7 years |
Beginning balance January 1, 2020 | $ | 5,872,690 | ||
Changes in foreign currency exchange rate | 91,054 | |||
Balance at December 31, 2020 | $ | 5,963,744 |
December 31, 2020 | December 31, 2019 | ||||||
Weighted Average Remaining Life | Cost | Accumulated Amortization | Net Book Value | Cost | Accumulated Amortization | Net Book Value | |
Intellectual property | 5 | $1,638,699 | $472,190 | $1,166,509 | $1,418,681 | $299,232 | $1,119,449 |
Developed technology | 5 | 2,102,526 | 594,186 | 1,508,340 | 1,922,682 | 266,550 | 1,656,132 |
Customer contracts/relationships | 6 | 1,323,424 | 423,093 | 900,331 | 1,325,521 | 270,902 | 1,054,619 |
Trade names | 7 | 115,318 | 44,512 | 70,806 | 114,946 | 30,794 | 84,152 |
$5,179,967 | $1,533,981 | $3,645,986 | $4,781,830 | $867,478 | $3,914,352 |