[X] | 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
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88-0425691
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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3661 Horseblock Road, Medford, NY
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11763
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(Address of principal executive offices)
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(Zip Code)
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Title of each class
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Name of each exchange on which registered
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None
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None
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Securities registered pursuant to section 12(g) of the Act:
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Common Stock, $0.01 par value
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(Title of Class)
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ]
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Smaller reporting company [X]
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(Do not check if a smaller reporting company)
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Page
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PART I
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ITEM 1.
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BUSINESS
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2
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ITEM 1A.
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RISK FACTORS
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16
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ITEM 2.
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PROPERTIES
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21
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ITEM 3.
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LEGAL PROCEEDINGS
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21
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ITEM 4
.
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MINE SAFETY DISCLOSURES
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21
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PART II
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|
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ITEM 5.
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MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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21
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ITEM 6.
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SELECTED FINANCIAL DATA
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22
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ITEM 7.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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23
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ITEM 8.
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FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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31
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ITEM 9.
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
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31
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ITEM 9A.
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CONTROLS AND PROCEDURES
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31
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ITEM 9B.
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OTHER INFORMATION
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31
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PART III
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ITEM 10.
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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
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32
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ITEM 11.
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EXECUTIVE COMPENSATION
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34
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ITEM 12.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
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37
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ITEM 13.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
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40
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ITEM 14.
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PRINCIPAL ACCOUNTANT FEES AND SERVICES
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41
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PART IV
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ITEM 15.
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EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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42
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SIGNATURES
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43
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ITEM 1. | BUSINESS |
·
|
In October 2014, Chembio entered into an exclusive agreement with Integrated BioTherapeutics, Inc. (IBT), a biotechnology company focused on the discovery of novel vaccines and therapeutics for emerging infectious diseases. Under the terms of the agreement, Chembio will combine its patented DPP
®
technology with IBT's proprietary Ebola reagents to develop POC diagnostic tests for Ebola and febrile illness. Since announcing the partnership with IBT, the Company has made the following progress to develop DPP
®
Ebola and DPP
®
Febrile Illness Assays:
|
o
|
Developed DPP
®
Ebola Assays in Chembio's Research & Development facilities.
|
o
|
Successfully tested DPP
®
Ebola Assays in high containment (BSL4) laboratory, using wild type (real) Ebola virus, via IBT's partner in Canada.
|
o
|
Signed a Research Collaboration Agreement with the Centers for Disease Control and Prevention (CDC) to develop and validate DPP
®
Ebola and DPP
®
Febrile Illness Assays.
|
o
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Continued to evaluate its DPP® Ebola test at CDC laboratory in Atlanta, GA, with an estimate of having product for field evaluation in 2Q of 2015.
|
o
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Submitted DPP
®
Ebola pre-qualification application to World Health Organization (WHO) as well as Emergenct Use Authorization (EUA) for FDA
|
o
|
Contacted numerous organizations for Ebola funding, to accelerate the potential development, and potential manufacturing and supply, of DPP
®
Ebola and DPP
®
Febrile Illness Assays, to include both Ebola and Malaria.
|
·
|
The Company entered into an agreement to develop a POC diagnostic test for dengue fever virus, the DPP
®
Dengue Fever Assay, which would be able to detect IgG/IGM and NS1 antigens in October 2014.
|
·
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A partnership with an international diagnostics company to develop a POC diagnostic test for the early detection and monitoring of a specific type of cancer. The cancer project represents the first application of the DPP
®
technology outside the infectious disease field, also announced in October 2014.
|
·
|
The Company entered into a follow-on, milestone-based development agreement with a private contracting organization acting on behalf of the United States Centers for Disease Control and Prevention (CDC), for a multiplex POC influenza immunity test utilizing Chembio's patented Dual Path Platform (DPP
®
) technology.
|
·
|
In January 2015, Chembio entered into an agreement with the Concussion Science Group (CSG) Division of Perseus Science Group LLC, to utilize Chembio's patented DPP
®
technology to develop a POC diagnostic test for traumatic brain injury (TBI), including sports-related concussion. Under terms of the agreement, CSG's patented biomarker will be combined with Chembio's proprietary DPP
®
platform to develop a semi-quantitative or quantitative point-of-care test to diagnose TBI. CSG has agreed to pay Chembio milestone development payments during 2015.
|
·
|
In January 2015, Chembio was awarded a grant from the Bill & Melinda Gates Foundation to expedite the feasibility testing and development of a DPP
®
Malaria POC rapid diagnostic to accurately identify individuals infected with Plasmodium falciparum parasite. Chembio's DPP
®
technology was selected for this grant due to its exceptional sensitivity and potential to aid the foundation in its goal of eradicating malaria. To achieve this goal, diagnostics must be capable of detecting the malaria parasite in infected, but asymptomatic people. Current POC rapid diagnostics tests lack sufficient sensitivity to identify all individuals with transmissible infections.
|
·
|
Each agreement states: "the object of this Agreement is for the Transfer of Technology from Chembio to Bio-Manguinhos, the license by Chembio to Bio-Manguinhos [of] the Chembio Patents applied or granted in Brazil or other Mercosur countries for the term of the patents and the transfer of all the technical information related to the DPP technology and the process to obtain the product by the DPP® technology. This Agreement contemplates the scientific and technological co-operation between Chembio and Bio-Manguinhos for such activities so that Bio-Manguinhos will be able to manufacture the Product in Brazil."
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·
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Each agreement provides that Chembio will supply free of charge to Bio-Manguinhos prototypes of the product to demonstrate performance characteristics that are necessary for evaluation by the Brazilian Ministry of Health and for registration with ANVISA. ANVISA is the Agencia Nacional de Vigliancia Sanitaria, or the National Sanitary Vigilance Agency. The number of prototypes ranges from 15,000 to 45,000 in the various agreements.
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·
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Each agreement provides that the prototypes will be utilized both for a performance study that follows a protocol prepared and approved by Bio-Manguinhos and the Brazilian Ministry of Health, and also will be used for studies in Brazil for the registration procedures at ANVISA. Bio-Manguinhos will then apply to ANVISA to register the product. Within 120 days of the registration of the product with ANVISA, Bio-Manguinhos will make an advance technology transfer payment to Chembio (the "Advance Payment"), in an amount specified in that particular agreement. All five of the Advance Payments provided for in the agreements were made in 2010 and 2011.
|
·
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At such time, if any, that the product for a particular agreement has been successfully registered with ANVISA, then Bio-Manguinhos has the right to qualify for the full technology transfer for that product by purchasing the amount of the product, and at the price, specified in the agreement.
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·
|
Bio-Manguinhos is not required to purchase any amount of any product. For each product, it only needs to purchase that product, in the amount specified in the agreement, only if it desires to be able to complete the technology transfer process in order to manufacture and sell that product on its own. Chembio does not have recourse against Bio-Manguinhos if Bio-Manguinhos does not purchase the qualifying purchase amount of any product. In that case, Chembio can only suspend further phases of the technology transfer, attempt to renegotiate the agreement, and/or retain any amounts previously paid by Bio-Manguinhos. Chembio cannot force Bio-Manguinhos to purchase any amount of any product.
|
·
|
As a result of the terms of these agreements, Bio-Manguinhos has never been required to, and is not now required to, purchase any amount of any of the products.
|
·
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As of December 31, 2014 Bio-Manguinhos had earned the status described below with respect to each of the five products:
|
1.
|
With respect to Chembio's DPP® HIV1/2 Screen test, Bio-Manguinhos had qualified to request the technology transfer. It has requested, and has received, the technology transfer information. Bio-Manguinhos purchased $880,175 of this product in 2011, and $4,990,840 in 2012, all of which applied to the qualifying amount to obtain the right to the technology transfer (the "Qualifying Amount") for this product. In 2013, Bio-Manguinhos made $291,235 of purchases that applied to the Qualifying Amount for this product, and $3,320,010 of purchases in excess of the Qualifying Amount. In 2014, Bio-Manguinhos made $4,799,250 of purchases in excess of the Qualifying Amount.
|
2.
|
With respect to Chembio's Canine Leishmania test, Bio-Manguinhos had qualified to request the technology transfer and did so request. Submission of the technology transfer information is in process at this time. Bio-Manguinhos purchased $2,000,817 of this product in 2011 and $99,183 of this product in 2012 that applied to the Qualifying Amount. In addition, Bio-Manguinhos made purchases in excess of the Qualifying Amount equal to $1,314,117 in 2012, $1,736,700 in 2013 and $2,394,000 in 2014.
|
3.
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a.
|
With respect to the three variations of Chembio's DPP® Syphilis test, all of which are covered by a single agreement, Bio-Manguinhos had qualified to request the technology transfer with respect to Trep only, and intends to do so in the near future. Bio-Manguinhos purchased $1,194,250 of this product in 2011 and $165,750 of this product in 2012 that applied to the Qualifying Amount. In addition, Bio-Manguinhos made purchases in excess of the Qualifying Amount equal to $2,817,750 in 2012, $646,340 in 2013 and $4,617,891 in 2014.
|
b.
|
With respect to the two variations of Chembio's Screen & Confirm Test, Bio-Manguinhos had not made any purchases in 2011, 2012, 2013 or 2014, and therefore had not qualified to request the technology transfer for either of them. In order to qualify, Bio-Manguinhos would need to purchase an additional $2.2 million of one of these tests, and an additional $2.08 million of the other test.
|
4.
|
With respect to Chembio's DPP® Confirmatory test, Bio-Manguinhos had not qualified to request the technology transfer. Bio-Manguinhos made purchases of $560,000 of this product in 2011, $819,000 in 2012, $390,000 in 2013 and $390,000 in 2014, all of which applied to the Qualifying Amount. In order to qualify for the technology transfer, Bio-Manguinhos would need to purchase an additional $195,000 of this product.
|
5.
|
With respect to Chembio's DPP® Leptospirosis test, Bio-Manguinhos had not qualified to request the technology transfer. Bio-Manguinhos made purchases of $135,000 of this product in 2011, and it made -0- purchases in 2012, $45,000 in 2013 and it made -0- purchases in 2014. In order to qualify for the technology transfer, Bio-Manguinhos would need to purchase an additional $225,000 of this product.
|
·
|
As stated above, Bio-Manguinhos is not obligated to make any purchases. After the specified level of sales for a particular product has been achieved, FIOCRUZ may request that the technology for that product be transferred to FIOCRUZ together with an exclusive license to produce and sell that product in a defined territory. The license is to provide that Chembio will receive a royalty on all sales. Chembio does not release the amount of this royalty because it could have an adverse effect on negotiations concerning royalties in potential transactions with other parties.
|
·
|
All the agreements expire five years after the date of the technology transfer. If terminated earlier by default of FIOCRUZ, FIOCRUZ must stop all activity; if terminated earlier by default of Chembio, or if terminated by natural expiry, FIOCRUZ can continue to produce and commercialize the product without paying royalties.
|
o
|
Market our DPP® HIV 1/2 Assay, HIV 1/2 STAT-PAK® Assay and future DPP® based new products in the US through our internal sales and marketing organization and selected channel partners (e.g., McKesson/PSS, Fisher Healthcare, Henry Schein, etc.). Chembio, following the June 2014 termination of the STAT-PAK® agreement with Alere, does not have to share any portion of the net sales proceeds for STAT-PAK® with Alere, except for the 8.5% lateral flow royalties which was applicable to the sales of the products only until February 2015 when the applicable lateral flow patent of Alere's expired. This decision resulted in incurring expenditures related to hiring sales representatives, establishing agreements and associated discounts with distributors, incurring advertising and marketing expenditures, warehousing, customer service and technical support. If Alere's new competitive product is indeed successful, our ability to retain a significant share of the market that has been established for our products may be enhanced by our having control of the marketing of our products, rather than having Alere sell our products. We are leveraging the same sales force for U.S. Sales of DPP® HIV 1/2 Assay.
|
o
|
We will support, review and assess the marketing and distribution efforts of our rapid HIV barrel test by Alere in the U.S.
|
o
|
Outside the U.S., we will market our products primarily through commercial collaborators and distribution partners.
|
o
|
Leverage our DPP® intellectual property and product development and manufacturing experience to continue creating new collaborations where Chembio can be the exclusive development and manufacturing partner supporting leading marketing organizations.
|
o
|
Establish strong distribution relationships for our Chembio-branded products in the U.S and abroad, and establish a direct sales and marketing organization that is focused in the public health market segment, and that utilizes distributors for other market segments, primarily the acute care market which, together with public health, are the main market segments for rapid HIV tests in the United States. We believe that creation of a Chembio public health brand and marketing organization is fundamental to the creation of shareholder value over the long term.
|
·
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Scientific and technological capability;
|
·
|
Proprietary know-how;
|
·
|
The ability to develop and market products and processes;
|
·
|
The ability to obtain FDA or other required regulatory approvals;
|
·
|
The ability to manufacture products that meet applicable FDA requirements, (i.e. FDA's Quality System Regulations) (see Governmental Regulation section);
|
·
|
The ability to manufacture products cost-effectively;
|
·
|
Access to adequate capital;
|
·
|
The ability to attract and retain qualified personnel; and
|
·
|
The availability of patent protection.
|
ITEM 1A. | RISK FACTORS |
·
|
economic conditions and the absence of or reduction in available funding sources;
|
·
|
regulatory requirements and customs regulations;
|
·
|
cultural and political differences;
|
·
|
foreign exchange rates, currency fluctuations and tariffs;
|
·
|
dependence on and difficulties in managing international distributors or representatives;
|
·
|
the creditworthiness of foreign entities;
|
·
|
difficulties in foreign accounts receivable collection;
|
·
|
competition
|
·
|
pricing; and
|
·
|
any inability we may have in maintaining or increasing revenues.
|
·
|
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.
|
ITEM 2. | PROPERTIES |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
Fiscal Year 2014
|
High Bid
|
Low Bid
|
||||||
First Quarter
|
$
|
3.88
|
$
|
2.81
|
||||
Second Quarter
|
$
|
3.56
|
$
|
2.81
|
||||
Third Quarter
|
$
|
3.85
|
$
|
3.02
|
||||
Fourth Quarter
|
$
|
5.19
|
$
|
3.40
|
||||
|
||||||||
Fiscal Year 2013
|
High Bid
|
Low Bid
|
||||||
First Quarter
|
$
|
5.75
|
$
|
4.61
|
||||
Second Quarter
|
$
|
5.10
|
$
|
4.10
|
||||
Third Quarter
|
$
|
5.32
|
$
|
3.00
|
||||
Fourth Quarter
|
$
|
3.95
|
$
|
3.19
|
ITEM 6. | SELECTED FINANCIAL DATA |
CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
|
||||||||||||||||||||||||||||||||||||||||
SELECTED HISTORICAL FINANCIAL DATA
|
||||||||||||||||||||||||||||||||||||||||
As of and For the Years Ended
|
||||||||||||||||||||||||||||||||||||||||
Statement of Operations Data:
|
||||||||||||||||||||||||||||||||||||||||
|
December 31, 2014
|
|
December 31, 2013
|
|
December 31, 2012
|
|
December 31, 2011
|
|
December 31, 2010
|
|
||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||||||||
TOTAL REVENUES
|
$
|
27,645,284
|
|
$
|
29,549,609
|
|
$
|
25,610,595
|
|
$
|
19,388,036
|
|
$
|
16,704,703
|
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||
GROSS MARGIN
(1)
|
10,814,023
|
39
|
%
|
12,300,159
|
42
|
%
|
10,789,991
|
42
|
%
|
9,390,303
|
48
|
%
|
8,100,699
|
48
|
%
|
|||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
OPERATING COSTS:
|
||||||||||||||||||||||||||||||||||||||||
Research and development expenses
(1)
|
4,832,537
|
17
|
%
|
5,834,249
|
20
|
%
|
4,486,302
|
18
|
%
|
4,878,119
|
25
|
%
|
2,586,308
|
15
|
%
|
|||||||||||||||||||||||||
Selling, general and administrative expenses
(1)
|
7,531,739
|
27
|
%
|
5,461,083
|
18
|
%
|
4,851,587
|
19
|
%
|
3,424,297
|
18
|
%
|
2,940,721
|
18
|
%
|
|||||||||||||||||||||||||
|
12,364,276
|
11,295,332
|
9,337,889
|
8,302,416
|
5,527,029
|
|||||||||||||||||||||||||||||||||||
INCOME (LOSS) FROM OPERATIONS
|
(1,550,253
|
)
|
1,004,827
|
1,452,102
|
1,087,887
|
2,573,670
|
||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
OTHER INCOME (EXPENSES):
|
132
|
12,943
|
(1,584
|
)
|
(12,325
|
)
|
(14,503
|
)
|
||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
INCOME (LOSS) BEFORE INCOME TAXES
(1)
|
(1,550,121
|
)
|
-6
|
%
|
1,017,770
|
3
|
%
|
1,450,518
|
6
|
%
|
1,075,562
|
6
|
%
|
2,559,167
|
15
|
%
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Income tax (benefit) provision
|
(412,918
|
)
|
486,952
|
509,237
|
(5,133,229
|
)
|
-
|
|||||||||||||||||||||||||||||||||
NET INCOME (LOSS)
|
$
|
(1,137,203
|
)
|
$
|
530,818
|
$
|
941,281
|
$
|
6,208,791
|
$
|
2,559,167
|
|||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Basic income (loss) per share
|
$
|
(0.12
|
)
|
$
|
0.06
|
$
|
0.12
|
$
|
0.79
|
$
|
0.33
|
|||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Diluted income (loss) per share
|
$
|
(0.12
|
)
|
$
|
0.06
|
$
|
0.11
|
$
|
0.73
|
$
|
0.29
|
|||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Weighted average number of shares outstanding, basic
|
9,530,320
|
8,994,080
|
7,986,030
|
7,874,807
|
7,762,858
|
|||||||||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||||||||||
Weighted average number of shares outstanding, diluted
|
9,530,320
|
9,519,968
|
8,614,944
|
8,556,284
|
8,865,114
|
|||||||||||||||||||||||||||||||||||
Balance Sheet Data:
|
||||||||||||||||||||||||||||||||||||||||
Working capital
|
$
|
12,372,169
|
$
|
4,221,011
|
$
|
7,630,368
|
$
|
6,133,956
|
$
|
4,560,277
|
||||||||||||||||||||||||||||||
Total assets
|
25,010,192
|
24,486,592
|
17,335,150
|
15,485,744
|
9,086,174
|
|||||||||||||||||||||||||||||||||||
Total liabilities
|
5,286,030
|
4,309,490
|
3,460,630
|
2,991,110
|
3,277,230
|
|||||||||||||||||||||||||||||||||||
Shareholders' equity
|
19,724,162
|
20,177,102
|
13,874,520
|
12,494,634
|
5,808,944
|
ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Selected Product Categories:
|
For the years ended
|
|||||||||||||||
December 31, 2014
|
December 31, 2013
|
$ Change
|
% Change
|
|||||||||||||
|
|
|
|
|
||||||||||||
Lateral Flow HIV Tests and Components
|
$
|
9,518,242
|
$
|
20,248,364
|
$
|
(10,730,122
|
)
|
-52.99
|
%
|
|||||||
DPP® Tests and Components
|
15,655,680
|
6,592,660
|
9,063,020
|
137.47
|
%
|
|||||||||||
Other
|
775,847
|
674,762
|
101,085
|
14.98
|
%
|
|||||||||||
Net Product Sales
|
25,949,769
|
27,515,786
|
(1,566,017
|
)
|
-5.69
|
%
|
||||||||||
License and royalty revenue
|
23,257
|
4,906
|
18,351
|
374.05
|
%
|
|||||||||||
R&D, milestone and grant revenue
|
1,672,258
|
2,028,917
|
(356,659
|
)
|
-17.58
|
%
|
||||||||||
Total Revenues
|
$
|
27,645,284
|
$
|
29,549,609
|
$
|
(1,904,325
|
)
|
-6.44
|
%
|
|||||||
Gross Margin related to Net Product Sales:
|
For the years ended
|
|||||||||||||||
December 31, 2014
|
December 31, 2013
|
$ Change
|
% Change
|
|||||||||||||
|
|
|
|
|
||||||||||||
Gross Margin per Statement of Operations
|
$
|
10,814,023
|
$
|
12,300,159
|
$
|
(1,486,136
|
)
|
-12.08
|
%
|
|||||||
Less: R&D, milestone, grant, license and royalties
|
1,695,515
|
2,033,823
|
(338,308
|
)
|
-16.63
|
%
|
||||||||||
Gross Margin from Net Product Sales
|
$
|
9,118,508
|
$
|
10,266,336
|
$
|
(1,147,828
|
)
|
-11.18
|
%
|
|||||||
Product Gross Margin %
|
35.14
|
%
|
37.31
|
%
|
||||||||||||
Selected expense lines:
|
For the years ended
|
|||||||||||||||
December 31, 2014
|
December 31, 2013
|
$ Change
|
% Change
|
|||||||||||||
Clinical and Regulatory Affairs:
|
|
|
|
|
||||||||||||
Wages and related costs
|
$
|
448,852
|
$
|
436,088
|
$
|
12,764
|
2.93
|
%
|
||||||||
Consulting
|
29,741
|
53,493
|
(23,752
|
)
|
-44.40
|
%
|
||||||||||
Stock-based compensation
|
3,231
|
19,478
|
(16,247
|
)
|
-83.41
|
%
|
||||||||||
Clinical trials
|
205,589
|
1,515,212
|
(1,309,623
|
)
|
-86.43
|
%
|
||||||||||
Other
|
93,780
|
82,852
|
10,928
|
13.19
|
%
|
|||||||||||
Total Regulatory
|
781,193
|
2,107,123
|
(1,325,930
|
)
|
-62.93
|
%
|
||||||||||
|
||||||||||||||||
R&D Other than Regulatory:
|
||||||||||||||||
Wages and related costs
|
2,456,514
|
2,224,882
|
231,632
|
10.41
|
%
|
|||||||||||
Consulting
|
123,965
|
106,155
|
17,810
|
16.78
|
%
|
|||||||||||
Stock-based compensation
|
41,306
|
86,023
|
(44,717
|
)
|
-51.98
|
%
|
||||||||||
Materials and supplies
|
1,021,516
|
975,503
|
46,013
|
4.72
|
%
|
|||||||||||
Other
|
408,043
|
334,563
|
73,480
|
21.96
|
%
|
|||||||||||
Total other than Regulatory
|
4,051,344
|
3,727,126
|
324,218
|
8.70
|
%
|
|||||||||||
|
||||||||||||||||
Total Research and Development
|
$
|
4,832,537
|
$
|
5,834,249
|
$
|
(1,001,712
|
)
|
-17.17
|
%
|
|||||||
Selected expense lines:
|
For the years ended
|
|||||||||||||||
December 31, 2014
|
December 31, 2013
|
$ Change
|
% Change
|
|||||||||||||
|
|
|
|
|
||||||||||||
Wages and related costs
|
$
|
2,763,370
|
$
|
2,068,173
|
$
|
695,197
|
33.61
|
%
|
||||||||
Consulting
|
456,658
|
279,688
|
176,970
|
63.27
|
%
|
|||||||||||
Commissions
|
1,432,567
|
902,393
|
530,174
|
58.75
|
%
|
|||||||||||
Stock-based compensation
|
399,334
|
169,502
|
229,832
|
135.59
|
%
|
|||||||||||
Marketing materials
|
345,426
|
112,326
|
233,100
|
207.52
|
%
|
|||||||||||
Investor relations/investment bankers
|
168,410
|
214,786
|
(46,376
|
)
|
-21.59
|
%
|
||||||||||
Legal, accounting and compliance
|
662,522
|
621,429
|
41,093
|
6.61
|
%
|
|||||||||||
Travel, entertainment and trade shows
|
320,280
|
190,698
|
129,582
|
67.95
|
%
|
|||||||||||
Bad debt allowance (recovery)
|
28,000
|
(33,450
|
)
|
61,450
|
-183.71
|
%
|
||||||||||
Other
|
955,172
|
935,538
|
19,634
|
2.10
|
%
|
|||||||||||
Total S, G &A
|
$
|
7,531,739
|
$
|
5,461,083
|
$
|
2,070,656
|
37.92
|
%
|
||||||||
|
For the years ended
|
||||||||||||||||
December 31, 2014
|
December 31, 2013
|
$ Change
|
% Change
|
|||||||||||||
|
|
|
|
|
||||||||||||
Other income (expense)
|
$
|
(5,707
|
)
|
$
|
7,500
|
$
|
(13,207
|
)
|
-176.09
|
%
|
||||||
Interest income
|
$
|
5,839
|
$
|
5,778
|
$
|
61
|
1.06
|
%
|
||||||||
Interest expense
|
-
|
(335
|
)
|
335
|
-100.00
|
%
|
||||||||||
Total Other Income and (Expense)
|
$
|
132
|
$
|
12,943
|
$
|
(12,811
|
)
|
-98.98
|
%
|
|||||||
Selected Changes in Financial Condition
|
As of
|
|
||||||||||||||
December 31, 2014
|
December 31, 2013
|
$ Change
|
% Change
|
|||||||||||||
Cash and cash equivalents
|
$
|
4,614,538
|
$
|
9,650,275
|
$
|
(5,035,737
|
)
|
-52.18
|
%
|
|||||||
Accounts receivable, net of allowance for doubtful accounts of $52,000 and $24,000 at December 31, 2014 and 2013, respectively
|
8,338,889
|
4,592,121
|
3,746,768
|
81.59
|
%
|
|||||||||||
Inventories
|
3,638,299
|
3,188,726
|
449,573
|
14.10
|
%
|
|||||||||||
Fixed assets, net of accumulated depreciation
|
2,797,929
|
1,978,232
|
819,697
|
41.44
|
%
|
|||||||||||
Deposits and other assets
|
245,870
|
44,367
|
201,503
|
454.17
|
%
|
|||||||||||
Deferred tax asset, net of valuation allowance
|
4,031,302
|
3,590,207
|
441,095
|
12.29
|
%
|
|||||||||||
Accounts payable and accrued liabilities
|
4,946,030
|
4,309,490
|
636,540
|
14.77
|
%
|
|||||||||||
Deferred revenue
|
340,000
|
-
|
340,000
|
100.00
|
%
|
For the years ended
|
||||||||||||||||
December 31, 2014
|
December 31, 2013
|
$ Change
|
% Change
|
|||||||||||||
|
|
|
|
|
||||||||||||
Net cash (used in) provided by operating activities
|
$
|
(3,820,299
|
)
|
$
|
2,277,614
|
$
|
(6,097,913
|
)
|
-267.73
|
%
|
||||||
Net cash used in investing activities
|
(1,452,601
|
)
|
(885,609
|
)
|
(566,992
|
)
|
64.02
|
%
|
||||||||
Net cash provided by financing activities
|
237,163
|
5,306,411
|
(5,069,248
|
)
|
-95.53
|
%
|
||||||||||
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
$
|
(5,035,737
|
)
|
$
|
6,698,416
|
$
|
(11,734,153
|
)
|
17-5.18
|
%
|
||||||
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. |
ITEM 9A. | CONTROLS AND PROCEDURES |
a. | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company; |
b. | 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 only in accordance with authorizations of management and directors of the Company; and |
c. | 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 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
Name /
|
Salary
1
|
Bonus
2
|
Stock
|
Option Awards
3
|
All Other Compensation
6
|
Total
|
|||||||||||||||||||
Principal
|
($)
|
($)
|
Awards
|
($)
|
($)
|
($)
|
|||||||||||||||||||
Position
|
Year
|
|
|
($)
|
|
|
|
||||||||||||||||||
John J. Sperzel
4
|
2014
|
$
|
298,558
|
$
|
-
|
$
|
-
|
$
|
669,625
|
$
|
-
|
$
|
968,183
|
||||||||||||
CEO
|
2013
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
n/a
|
|
||||||||||||
|
|
||||||||||||||||||||||||
Lawrence A. Siebert
5, 7
|
2014
|
$
|
84,703
|
$
|
87,000
|
$
|
-
|
$
|
-
|
$
|
147,462
|
$
|
319,165
|
||||||||||||
CEO
|
2013
|
$
|
290,000
|
$
|
50,750
|
$
|
-
|
$
|
21,610
|
$
|
10,240
|
$
|
372,600
|
||||||||||||
|
|
||||||||||||||||||||||||
Javan Esfandiari
|
2014
|
$
|
315,000
|
$
|
90,000
|
$
|
-
|
$
|
-
|
$
|
9,825
|
$
|
414,825
|
||||||||||||
CSTO
|
2013
|
$
|
292,462
|
$
|
44,625
|
$
|
-
|
$
|
141,078
|
$
|
8,697
|
$
|
486,862
|
||||||||||||
|
|
||||||||||||||||||||||||
Sharon Klugewicz
|
2014
|
$
|
259,616
|
$
|
75,000
|
$
|
-
|
$
|
-
|
$
|
4,182
|
$
|
338,798
|
||||||||||||
COO
|
2013
|
$
|
233,642
|
$
|
5,950
|
$
|
-
|
$
|
18,551
|
$
|
3,542
|
$
|
261,685
|
|
Option Awards
|
Stock Awards
|
|
|||||
Name
|
Number of Securities Underlying Unexercised Options Exercisable (#)
|
Number of Securities Underlying Unexercised Options Unexercisable
(#) |
Option Exercise Price
($) |
Option Expiration Date
|
Option Vesting Date
|
Number of Shares of Stock That Have Not Vested
(#) |
Market Value of Shares of Stock That Have Not Vested
($) |
Foot-
note |
John J. Sperzel
|
|
25,000
|
3.4163
|
3/21/2021
|
3/13/2015
|
|
|
5
|
|
|
25,000
|
3.4163
|
3/21/2021
|
3/13/2015
|
|
|
2
|
|
|
18,132
|
3.4163
|
3/21/2021
|
3/13/2016
|
|
|
5
|
|
|
31,868
|
3.4163
|
3/21/2021
|
3/13/2016
|
|
|
2
|
|
|
50,000
|
3.4163
|
3/21/2021
|
3/13/2017
|
|
|
2
|
|
|
50,000
|
3.4163
|
3/21/2021
|
3/13/2018
|
|
|
2
|
|
|
50,000
|
3.4163
|
3/21/2021
|
3/13/2019
|
|
|
2
|
|
|
|
|
|
|
|
|
|
Javan Esfandiari
|
10,000
|
|
5.44
|
3/5/2018
|
3/5/2014
|
|
|
1
|
|
|
10,000
|
5.44
|
3/5/2018
|
3/5/2015
|
|
|
1
|
|
|
10,000
|
5.44
|
3/5/2018
|
3/5/2016
|
|
|
1
|
|
4,765
|
|
5.56
|
2/26/2018
|
2/26/2013
|
|
|
4
|
|
7,969
|
|
4.00
|
2/16/2017
|
2/16/2012
|
|
|
3
|
|
12,500
|
|
2.16
|
3/4/2015
|
3/5/2013
|
|
|
1
|
|
12,500
|
|
2.16
|
3/4/2015
|
3/5/2012
|
|
|
1
|
|
12,500
|
|
2.16
|
3/4/2015
|
3/5/2010
|
|
|
1
|
|
|
|
|
|
|
|
|
|
Sharon Klugewicz
|
2,500
|
|
4.50
|
5/22/2018
|
5/22/2014
|
|
|
1
|
|
|
2,500
|
4.50
|
5/22/2018
|
5/22/2015
|
|
|
1
|
|
630
|
|
5.56
|
2/26/2018
|
2/26/2013
|
|
|
4
|
|
12,000
|
|
4.45
|
9/4/2017
|
9/4/2013
|
|
|
5
|
|
12,000
|
|
4.45
|
9/4/2017
|
9/4/2014
|
|
|
5
|
|
|
12,000
|
4.45
|
9/4/2017
|
9/4/2015
|
|
|
5
|
1 Options issued in connection with an employment contract and under the 2008 Stock Incentive Plan.
|
2 Options issued in connection with the start of employment with the Company and not under a Plan.
|
3
On February 16, 2012, the Company determined to grant on February 16, 2012, to certain employees of the Company, options to purchase an aggregate of 203,125 shares of the Company's common stock. The exercise price for these options was the last traded market price for the Company's common stock on February 16, 2012, which was $4.00 per share. The options become exercisable on the effective date of the grant. Each option granted will expire and terminate, if not exercised sooner, upon the earlier to occur of (a) 30 days after termination of the employee's employment with the Company or (b) the fifth anniversary of the effective date of grant.
|
4
On February 26, 2013, the Company determined to grant on February 26, 20123 to certain employees of the Company, options to purchase an aggregate of 16,360 shares of the Company's common stock. The exercise price for these options was the last traded market price for the Company's common stock on February 26, 2013, which was $5.56 per share. The options become exercisable on the effective date of the grant. Each option granted will expire and terminate, if not exercised sooner, upon the earlier to occur of (a) 30 days after termination of the employee's employment with the Company or (b) the fifth anniversary of the effective date of grant.
|
5 Options issued in connection with the start of employment with the Company and under the 2008 Stock Incentive Plan.
|
Name
|
Fees Earned or Paid in Cash
($) 1 |
Option Awards
($) 2 |
Total
($) |
|||||||||
Katherine L. Davis
|
$
|
105,750
|
$
|
80,822
|
$
|
186,752
|
||||||
Barbara DeBuono
|
52,000
|
-
|
52,500
|
|||||||||
|
||||||||||||
Pete Kissinger
|
46,500
|
-
|
46,500
|
|||||||||
Gary Meller
|
31,000
|
80,822
|
111,822
|
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
Name and Address of
Beneficial Owner
|
Amount and Nature
of Beneficial
Ownership
|
|
Percent of Class
|
John J. Sperzel
(1)
3661 Horseblock Road
Medford, NY 11763
|
50,000
|
|
0.52%
|
Esfandiari, Javan
(2)
3661 Horseblock Road
Medford, NY 11763
|
144,844
|
|
1.50%
|
Larkin, Richard
(3)
3661 Horseblock Road
Medford, NY 11763
|
66,514
|
|
.69%
|
Ippolito, Tom
(4)
3661 Horseblock Road
Medford, NY 11763
|
38,916
|
|
.40%
|
Steele, Michael
(5)
3661 Horseblock Road
Medford, NY 11763
|
24,785
|
|
.26%
|
Klugewicz, Sharon
(6)
3661 Horseblock Road
Medford, NY 11763
|
37,130
|
|
.38%
|
Meller, Gary
(7)
3661 Horseblock Road
Medford, NY 11763
|
114,375
|
|
1.19%
|
Davis, Katherine L.
(8)
3661 Horseblock Road
Medford, NY 11763
|
67,671
|
|
.70%
|
DeBuono, Barbara
(9)
3661 Horseblock Road
Medford, NY 11763
|
39,454
|
|
.41%
|
Kissinger, Peter
(10)
3661 Horseblock Road
Medford, NY 11763
|
41,254
|
|
.43%
|
GROUP
(11)
|
623,143
|
|
6.29%
|
|
|
|
|
Wellington Management Company, LLP
280 Congress Street
Boston, MA 02210
|
1,050,280
|
|
10.91%
|
Norman H. Pessin
366 Madison Ave, 14
th
Floor
New York, NY 10017
|
616,476
|
6.40%
|
(1) | Includes 50,000 shares issuable upon exercise of options exercisable within 60 days. Does not include 200,000 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(2) | Includes 32,734 shares issuable upon exercise of options exercisable within 60 days. Does not include 10,000 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(3) | Includes 23,217 shares issuable upon exercise of options exercisable within 60 days. |
(4) | Includes 20,399 shares issuable upon exercise of options exercisable within 60 days. |
(5) | Includes 24,785 shares issuable upon exercise of options exercisable within 60 days. Does not include 12,000 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(6) | Includes 27,130 shares issuable upon exercise of options exercisable within 60 days. Does not include 14,500 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(7) | Includes 9,375 shares issuable upon exercise of options exercisable within 60 days. Does not include 37,500 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(8) | Includes 9,375 shares issuable upon exercise of options exercisable within 60 days. Does not include 37,500 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(9) | Includes 39,454 shares issuable upon exercise of options exercisable within 60 days. Does not include 9,375 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(10) | Includes 39,454 shares issuable upon exercise of options exercisable within 60 days. Does not include 9,375 shares issuable upon exercise of options that are not exercisable within the next 60 days. |
(11) | Includes footnotes (1)-(10). |
Combined Equity Compensation Plans - Information as of December 31, 2014
|
||||||||||||
Plan Category
|
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
|
Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights
|
Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a)
|
|||||||||
|
(a)
|
(b)
|
(c)
|
|||||||||
Equity compensation plans approved by security holders
1
|
691,869
|
$
|
3.66
|
728,173
|
||||||||
Equity compensation plans not approved by security holders
|
-
|
-
|
-
|
|||||||||
Total
|
691,869
|
$
|
3.66
|
728,173
|
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. |
Name of Executive Officer
|
Number of Shares of Common Stock Options
|
|
Richard Bruce - Vice President of Operations
|
1,520
|
|
Javan Esfandiari – Executive Vice President of R&D
|
4,765
|
|
Tom Ippolito - Vice President of Regulatory Affairs, QA & QC
|
1,775
|
|
Richard J. Larkin – Chief Financial Officer
|
1,670
|
|
Lawrence A. Siebert – Chief Executive Officer
|
5,215
|
|
Michael Steele – Vice President of Sales and Marketing
|
785
|
|
Sharon Klugewicz – Vice President of QA/QC
|
630
|
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
Number
|
Description
|
|
3.1
|
Articles of Incorporation, as amended. (1)
|
|
3.2
|
Amended and Restated Bylaws. (2)
|
|
4.1
|
Form of Employee Option Agreement, for 1999 Plan. (3)
|
|
4.2
|
1999 Equity Incentive Plan, as amended. (4)
|
|
4.3
|
2008 Stock Incentive Plan, as amended. (4)
|
|
4.4
|
Form of Option, for 2008 Stock Incentive Plan (5)
|
|
4.5
|
2014 Stock Incentive Plan (6)
|
|
4.6
|
Form of Option, for 2014 Stock Incentive Plan (7)
|
|
4.7
|
Rights Agreement, dated March 8, 2010 (8)
|
|
4.8
|
Form of Warrant (to be filed by amendment)
|
|
10.1*
|
Employment Agreement dated March 13, 2014 with John J. Sperzel III (5)
|
|
10.2*
|
Employment Agreement dated March 5, 2013 with Javan Esfandiari (9).
|
|
10.3*
|
Employment Agreement dated May 22, 2013 with Sharon Klugewicz (10)
|
|
10.3
|
HIV Barrel License, Marketing and Distribution Agreement, dated as of September 29, 2006, by and among the Registrant, Alere and StatSure. (11)
|
|
10.4
|
HIV Cassette License, Marketing and Distribution Agreement, dated as of September 29, 2006, between the Registrant and Alere. (11)
|
|
10.5
|
Non-Exclusive License, Marketing and Distribution Agreement, dated as of September 29, 2006, between the Registrant and Alere. (11)
|
|
10.6
|
Joint HIV Barrel Product Commercialization Agreement, dated as of September 29, 2006, between the Registrant and StatSure. (11)
|
|
10.8
|
Secured Revolving Demand Note, dated as of April 30, 2013, by and among the Registrant, Chembio Diagnostics Systems, Inc. and HSBC Bank, NA (10)
|
|
10.9
|
Loan and Security Agreement, dated as of April 30, 2013, by and among the Registrant, Chembio Diagnostics Systems, Inc. and HSBC Bank, NA (10)
|
|
10.10
|
2015 Omnibus Agreement
|
|
14.1
|
Ethics Policy (12)
|
|
21
|
List of Subsidiaries
|
|
23.1
|
Consent of BDO USA, LLP, Independent Registered Public Accountants.
|
|
31.1
|
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101.INS
|
XBRL Instance Document
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
XBRL Taxonomy Definition Linkbase Document
|
|
101.LAB
|
XBRL Taxonomy Label Linkbase Document
|
|
101.PRE
|
XBRL Taxonomy Presentation Linkbase Document
|
|
1
|
Incorporated by reference to the Registrant's annual report on Form 10-KSB filed with the Commission on March 31, 2005.
|
|
2
|
Incorporated by reference to the Registrant's registration statement on Form SB-2 (File No. 333-85787) filed with the Commission on August 23, 1999 and the Registrant's Forms 8-K filed on May 14, 2004, December 20, 2007 and April 18, 2008.
|
|
3
|
Incorporated by reference to the Registrant's annual report on Form 10-KSB filed with the Commission on March 12, 2008.
|
|
4
|
Incorporated by reference to the Registrant's definitive proxy statement on Schedule 14A filed with the Commission on Auguust 3, 2012.
|
|
5
|
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on May 8, 2014.
|
|
6
|
Incorporated by reference to the Registrant's definitive proxy statement on Schedule 14A filed with the Commission on April 29, 2014.
|
|
7
|
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 7, 2014.
|
|
8
|
Incorporated by reference to the Registrant's registration statement on Form 8-A filed with the Commission on March 11, 2010.
|
|
9
|
Incorporated by reference to the Registrant's Annual Report on Form 10-K filed with the Commission on March 7, 2013.
|
|
10
|
Incorporated by reference to the Registrant's Quarterly Report on Form 10-Q filed with the Commission on August 8, 2013.
|
|
11
|
Incorporated by reference to the Registrant's Current Report on Form 8-K filed with the Commission on October 5, 2006.
|
|
12
|
Incorporated by reference to the Registrant's Annual Report on Form 10-KSB filed with the Commission on March 30, 2006.
|
|
(*)
|
An asterisk (*) beside an exhibit number indicates the exhibit contains a management contract, compensatory plan or arrangement which is required to be identified in this report.
|
|
CHEMBIO DIAGNOSTICS, INC.
|
||
|
|
|
|
Date: March 5, 2015
|
By
|
/s/ John J. Sperzel
|
|
|
|
John J. Sperzel
|
|
|
|
President, Chief Executive Officer and
|
|
|
|
Member of the Board
|
|
Signatures
|
|
Title
|
Date
|
|
|
|
|
|
|
/s/ John J. Sperzel
|
|
Chief Executive Officer, President and
|
March 5, 2015
|
|
John J. Sperzel
|
|
Member Of The Board
|
|
|
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Richard J. Larkin
|
|
Chief Financial Officer (Principal Financial &
|
March 5, 2015
|
|
Richard J. Larkin
|
|
Accounting Officer)
|
|
|
|
|
|
|
|
/s/ Gary Meller
|
|
Director
|
March 5, 2015
|
|
Gary Meller
|
|
|
|
|
|
|
|
|
|
/s/ Katherine L. Davis
|
|
Director & Chair of the Board
|
March 5, 2015
|
|
Katherine L. Davis
|
|
|
|
|
|
|
|
|
|
/s/ Peter T. Kissinger
|
|
Director
|
March 5, 2015
|
|
Peter T. Kissinger
|
|
|
|
|
|
|
|
|
|
/s/ Barbara DeBuono
|
|
Director
|
March 5, 2015
|
|
Barbara DeBuono
|
|
|
|
|
Page(s)
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
|
Consolidated Financial Statements:
|
|
|
|
Balance Sheets December 31, 2014 and 2013
|
F-2
|
|
|
Statements of Operations for each of the years ended December 31, 2014 and 2013
|
F-3
|
|
|
Statements of Changes in Stockholders' Equity for each of the years ended December 31, 2014 and 2013
|
F-4
|
|
|
Statements of Cash Flows for each of the years ended December 31, 2014 and 2013
|
F-5
|
|
|
Notes to Consolidated Financial Statements
|
F-6 - F-19
|
|
For the years ended
|
|||||||
|
December 31, 2014
|
December 31, 2013
|
||||||
REVENUES:
|
|
|
||||||
Net product sales
|
$
|
25,949,769
|
$
|
27,515,786
|
||||
License and royalty revenue
|
23,257
|
4,906
|
||||||
R&D, milestone and grant revenue
|
1,672,258
|
2,028,917
|
||||||
TOTAL REVENUES
|
27,645,284
|
29,549,609
|
||||||
|
||||||||
Cost of product sales
|
16,831,261
|
17,249,450
|
||||||
|
||||||||
GROSS MARGIN
|
10,814,023
|
12,300,159
|
||||||
|
||||||||
OPERATING EXPENSES:
|
||||||||
Research and development expenses
|
4,832,537
|
5,834,249
|
||||||
Selling, general and administrative expenses
|
7,531,739
|
5,461,083
|
||||||
|
12,364,276
|
11,295,332
|
||||||
(LOSS) INCOME FROM OPERATIONS
|
(1,550,253
|
)
|
1,004,827
|
|||||
|
||||||||
OTHER:
|
||||||||
Other income
|
(5,707
|
)
|
7,500
|
|||||
Interest income
|
5,839
|
5,778
|
||||||
Interest expense
|
-
|
(335
|
)
|
|||||
|
132
|
12,943
|
||||||
|
||||||||
(LOSS) INCOME BEFORE INCOME TAXES (BENEFIT)
|
(1,550,121
|
)
|
1,017,770
|
|||||
|
||||||||
Income tax (benefit) provision
|
(412,918
|
)
|
486,952
|
|||||
|
||||||||
NET (LOSS) INCOME
|
$
|
(1,137,203
|
)
|
$
|
530,818
|
|||
|
||||||||
Basic earnings per share
|
$
|
(0.12
|
)
|
$
|
0.06
|
|||
|
||||||||
Diluted earnings per share
|
$
|
(0.12
|
)
|
$
|
0.06
|
|||
|
||||||||
Weighted average number of shares outstanding, basic
|
9,530,320
|
8,994,080
|
||||||
|
||||||||
Weighted average number of shares outstanding, diluted
|
9,530,320
|
9,519,968
|
|
Common Stock
|
Additional Paid
in Capital
|
Accumulated
Deficit
|
Total
|
||||||||||||||||
|
Shares
|
Amount
|
Amount
|
Amount
|
Amount
|
|||||||||||||||
Balance at December 31, 2012
|
8,036,232
|
$
|
80,362
|
$
|
41,116,149
|
$
|
(27,321,991
|
)
|
$
|
13,874,520
|
||||||||||
|
||||||||||||||||||||
Common Stock:
|
||||||||||||||||||||
New Stock from Offering
|
1,200,000
|
12,000
|
5,396,462
|
-
|
5,408,462
|
|||||||||||||||
Options:
|
||||||||||||||||||||
Exercised
|
88,551
|
886
|
30,546
|
-
|
31,432
|
|||||||||||||||
Stock option compensation
|
-
|
-
|
331,870
|
-
|
331,870
|
|||||||||||||||
|
||||||||||||||||||||
Net income
|
-
|
-
|
-
|
530,818
|
530,818
|
|||||||||||||||
|
||||||||||||||||||||
Balance at December 31, 2013
|
9,324,783
|
$
|
93,248
|
$
|
46,875,027
|
$
|
(26,791,173
|
)
|
$
|
20,177,102
|
||||||||||
|
||||||||||||||||||||
Options:
|
||||||||||||||||||||
Exercised
|
286,356
|
2,864
|
234,299
|
-
|
237,163
|
|||||||||||||||
Stock option compensation
|
-
|
-
|
447,100
|
-
|
447,100
|
|||||||||||||||
Net loss
|
-
|
-
|
-
|
(1,137,203
|
)
|
(1,137,203
|
)
|
|||||||||||||
|
||||||||||||||||||||
Balance at December 31, 2014
|
9,611,139
|
$
|
96,112
|
$
|
47,556,426
|
$
|
(27,928,376
|
)
|
$
|
19,724,162
|
(a) | Principles of Consolidation: |
(b) | Use of Estimates: |
(c) | Fair Value of Financial Instruments: |
(d) | Statements of Cash Flows: |
(e) | Concentrations of Credit Risk: |
(f) | Inventories: |
(g) | Fixed Assets: |
(h) | License Agreement: |
(i) | Impairment of Long-Lived Assets and Intangible Assets |
(j) | Revenue Recognition: |
(k) | Research and Development: |
(l) | Stock-Based Compensation: |
(m) | I ncome Taxes: |
(n) | Earnings Per Share |
|
For the years ended
|
||
|
December 31, 2014
|
|
December 31, 2013
|
Basic
|
9,530,320
|
|
8,994,080
|
|
-
|
|
-
|
Diluted
|
9,530,320
|
|
9,519,968
|
|
For the years ended
|
||
|
December 31, 2014
|
|
December 31, 2013
|
1999, 2008 and 2014 Plan Stock Options
|
-
|
|
525,888
|
(o) | Recent Accounting Pronouncements Affecting the Company: |
|
December 31, 2014
|
December 31, 2013
|
||||||
Raw materials
|
$
|
2,323,863
|
$
|
1,710,627
|
||||
Work in process
|
346,494
|
464,481
|
||||||
Finished goods
|
967,942
|
1,013,618
|
||||||
|
$
|
3,638,299
|
$
|
3,188,726
|
|
December 31, 2014
|
December 31, 2013
|
||||||
Machinery and equipment
|
$
|
3,508,944
|
$
|
3,158,265
|
||||
Furniture and fixtures
|
388,040
|
352,923
|
||||||
Computer and telephone equipment
|
315,916
|
167,045
|
||||||
Leasehold improvements
|
1,955,817
|
1,016,783
|
||||||
Automobiles
|
-
|
37,061
|
||||||
|
6,168,717
|
4,732,077
|
||||||
Less accumulated depreciation and amortization
|
(3,370,788
|
)
|
(2,753,845
|
)
|
||||
|
$
|
2,797,929
|
$
|
1,978,232
|
|
December 31, 2014
|
December 31, 2013
|
||||||
Accounts payable – suppliers
|
$
|
1,980,120
|
$
|
1,815,369
|
||||
Accrued commissions
|
947,451
|
371,905
|
||||||
Accrued royalties / license fees
|
1,034,062
|
1,028,286
|
||||||
Accrued payroll
|
106,487
|
328,564
|
||||||
Accrued vacation
|
219,924
|
203,444
|
||||||
Accrued bonuses
|
265,500
|
317,372
|
||||||
Accrued expenses – other
|
392,486
|
244,550
|
||||||
TOTAL
|
$
|
4,946,030
|
$
|
4,309,490
|
|
2014
|
2013
|
||||||
Current
|
|
|
||||||
Federal
|
$
|
(16,119
|
)
|
$
|
27,175
|
|||
State
|
6,576
|
1,623
|
||||||
Total current (benefit) provision
|
(9,543
|
)
|
28,798
|
|||||
|
||||||||
Deferred
|
||||||||
Federal
|
(449,452
|
)
|
454,439
|
|||||
State
|
46,077
|
3,715
|
||||||
Total deferred (benefit) provision
|
(403,375
|
)
|
458,154
|
|||||
|
||||||||
Total (benefit) provision
|
$
|
(412,918
|
)
|
$
|
486,952
|
|
2014
|
2013
|
||||||
Current assets
|
|
|
||||||
Inventory reserves
|
$
|
311,931
|
$
|
307,080
|
||||
Accrued expenses
|
286,616
|
329,187
|
||||||
Net current deferred asset
|
$
|
598,547
|
$
|
636,267
|
||||
|
||||||||
Noncurrent assets
|
||||||||
Net operating loss carry-forwards
|
$
|
3,986,618
|
$
|
3,616,089
|
||||
Research and development credit
|
1,175,725
|
1,052,166
|
||||||
Other credits
|
107,967
|
124,413
|
||||||
Other
|
149,923
|
107,808
|
||||||
Gross noncurrent deferred tax assets
|
5,420,233
|
4,900,476
|
||||||
Depreciation
|
(213,206
|
)
|
(258,103
|
)
|
||||
Noncurrent deferred tax assets
|
5,207,027
|
4,642,373
|
||||||
Less valuation allowances
|
(1,175,725
|
)
|
(1,052,166
|
)
|
||||
Net noncurrent deferred tax assets
|
$
|
4,031,302
|
$
|
3,590,207
|
|
Year Ending December 31,
|
||
|
2014
|
2013
|
|
Federal income tax at statutory rates
|
(34.00)%
|
|
34.00%
|
State income taxes, net of federal benefit
|
.28%
|
|
0.47%
|
Nondeductible expenses
|
4.54%
|
|
10.27%
|
Change in valuation allowance
|
9.47%
|
|
33.48%
|
Tax credits
|
(9.47)%
|
|
(33.48)%
|
Change in tax rates
|
1.96%
|
|
3.10%
|
Other
|
.58%
|
|
(0.01)%
|
Income tax (benefit)
|
(26.64)%
|
|
47.83%
|
(a) | Common Stock |
(b) | Preferred Stock |
(c) | Options |
(d) | Warrants |
|
For the years ended
|
||
|
December 31, 2014
|
|
December 31, 2013
|
Expected term (in years)
|
4.5-6.3
|
|
4-5
|
Expected volatility
|
61.50-96.10%
|
|
99.60-115.77%
|
Expected dividend yield
|
n/a
|
|
n/a
|
Risk-free interest rate
|
.83-1.52%
|
|
.34-0.34%
|
Stock Options
|
Number of
Shares
|
Weighted
Average
Exercise Price per
Share
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate Intrinsic
Value
|
|||||||||
Outstanding at December 31, 2013
|
656,398
|
$
|
2.57
|
1.65 years
|
$
|
801,888
|
|||||||
|
|
||||||||||||
Granted
|
379,750
|
$
|
3.52
|
|
|||||||||
Exercised
|
318,750
|
$
|
1.04
|
|
$
|
341,729
|
|||||||
Forfeited/expired/cancelled
|
25,529
|
$
|
3.17
|
|
|||||||||
Outstanding at December 31, 2014
|
691,869
|
$
|
3.66
|
3.97 years
|
$
|
334,636
|
|||||||
|
|
||||||||||||
Exercisable at December 31, 2014
|
265,619
|
$
|
3.67
|
1.94 years
|
$
|
158,149
|
|
Stock Options Outstanding
|
Stock Options Exercisable
|
||||||||||||||||||
Range of
Exercise
Prices
|
Shares
|
Average
Remaining
Contract Life
(Year)
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
Shares
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
|||||||||||||
$ 0.000 to 3.500
|
475,000
|
4.50
|
$
|
3.21
|
$
|
332,500
|
131,250
|
$
|
2.71
|
$
|
157,500
|
|||||||||
3.501 to 4.500
|
153,744
|
2.54
|
4.28
|
-
|
103,244
|
4.24
|
-
|
|||||||||||||
4.501 to 8.000
|
75,625
|
2.90
|
5.30
|
-
|
43,625
|
5.28
|
-
|
|||||||||||||
Total
|
704,369
|
3.90
|
$
|
3.67
|
$
|
332,500
|
278,119
|
$
|
3.68
|
$
|
157,500
|
|
For the years ended
|
|||||||
|
December 31, 2014
|
December 31, 2013
|
||||||
Africa
|
$
|
2,097,353
|
$
|
4,352,731
|
||||
Asia
|
96,061
|
115,889
|
||||||
Europe
|
191,947
|
99,146
|
||||||
North America
|
11,134,691
|
9,730,557
|
||||||
South America
|
12,429,717
|
13,217,463
|
||||||
|
$
|
25,949,769
|
$
|
27,515,786
|
2015
|
$
|
794,000
|
||
2016
|
426,000
|
|||
2017
|
78,000
|
2015
|
$
|
513,414
|
||
2016
|
527,151
|
|||
2017
|
306,018
|
|||
2018
|
64,067
|
|||
|
$
|
1,410,650
|
|
For the years ended
|
Accounts
Receivable As of
|
||||||||||||||||||||||
|
December 31, 2014
|
December 31, 2013
|
December 31, 2014
|
December 31, 2013
|
||||||||||||||||||||
|
Sales
|
% of
Sales
|
Sales
|
% of
Sales
|
|
|
||||||||||||||||||
Customer 1
|
$
|
6,618,251
|
26
|
%
|
$
|
8,894,969
|
32
|
%
|
$
|
386,270
|
$
|
547,888
|
||||||||||||
Customer 2
|
3,455,402
|
13
|
%
|
*
|
*
|
138,335
|
209,166
|
|||||||||||||||||
Customer 3
|
12,253,526
|
47
|
%
|
6,449,385
|
23
|
%
|
6,230,886
|
2,064,940
|
||||||||||||||||
Customer 4
|
*
|
*
|
6,745,939
|
25
|
%
|
*
|
*
|
|
For the years ended
|
Accounts
Payable As of
|
||||||||||||||||||||||
|
December 31, 2014
|
December 31, 2013
|
December 31, 2014
|
December 31, 2013
|
||||||||||||||||||||
|
Purchases
|
% of
Purc.
|
Purchases
|
% of
Purc.
|
|
|
||||||||||||||||||
Vendor 1
|
$
|
1,331,647
|
14
|
%
|
$
|
1,114,810
|
10
|
%
|
$
|
200,855
|
$
|
84,161
|
||||||||||||
Vendor 2
|
1,594,838
|
17
|
%
|
$
|
0
|
0
|
%
|
-
|
-
|
a. | National Institutes of Health (NIH) Grant: |
b. | Battelle/CDC DPP® Influenza Immunity Test: |
c. | Cooperative research agreement with a U.S. government agency: |
(a)
|
Claims based on events, acts or omissions taking place after the Execution Date of this Agreement; and
|
(b)
|
Actions to enforce the terms of, or otherwise arising under, this Agreement.
|
(a)
|
Corporate Power and Authority
. Each Party represents to the other Party that it has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof. Each Party represents to the other that this Agreement constitutes a valid and binding agreement, enforceable against it in accordance with its terms.
|
(b)
|
No Default or Violation
. Each Party represents and warrants to the other Party that the execution, delivery and performance of this Agreement does not (i) violate or require any registration, qualification, consent, approval, or filing under (1) any law, statute, ordinance, rule or regulation applicable to it, or (2) any judgment, injunction, order, writ or decree of any court, arbitrator, or governmental entity by which such Party or any of its assets or properties may be bound; or (ii) conflict with, require any consent, approval, or filing under, result in the breach or termination of any provision of, constitute a default under, result in the acceleration of the performance of any obligations under, result in the vesting or enhancement of any other Person's rights under, or result in the creation of any lien upon any of such Party's properties, assets, or businesses pursuant to (x) its organizing documents or By-Laws or (y) any material indenture, mortgage, deed of trust, license, permit, approval, consent, franchise, lease, contract, or other instrument or agreement to which such Party is a party or by which such Party or any of such Party's properties or assets is bound.
|
(c)
|
Licensed Intellectual Property
. SDS represents and warrants to Chembio that (a) SDS has the full right, title and authority to grant to Chembio the License granted hereunder; and (b) to the best of SDS's knowledge and except as otherwise disclosed to Chembio, all such licensed rights existing as of the Effective Date are valid and enforceable.
|
(d)
|
Non-assignment of Claims
. Each Party warrants and represents that he or it has not transferred or assigned to any other person, firm, corporation or other legal entity any claims, rights or causes of action against any person or entity released by this Agreement.
|
(a)
|
Limited Disclosure and Use
. Each of Chembio and SDS shall hold in confidence any Confidential Information disclosed by the other Party or otherwise obtained by such Party from the other Party as a result of this Agreement, including, without limitation, information obtained via an audit performed pursuant to Section 3, but excluding the licensed intellectual property rights. Each of SDS and Chembio shall protect the confidentiality thereof with the same degree of care that it exercises with respect to its own information of a like nature, but in no event less than reasonable care. Without the prior written consent of the disclosing Party, a receiving Party shall not use, disclose, or distribute any Confidential Information, in whole or in part, except as required to perform such Party's obligations or exercise such Party's rights hereunder. Access to the disclosing Party's Confidential Information shall be restricted to the receiving Party's employees, agents, contractors, and licensees, who, in each case, need to have access to carry out a permitted use and are bound in writing to maintain the confidentiality of such Confidential Information.
|
(b)
|
Exceptions
. The obligations set forth in Section 13(a) shall not apply to any portion of the Confidential Information that the receiving Party can demonstrate by legally sufficient evidence: (i) now or hereafter, through no act or failure to act on the part of the receiving Party, is or becomes generally available; (ii) is known to the receiving Party at the time of receiving such Confidential Information and not subject to an obligation of confidentiality to a Third Party; (iii) is hereafter furnished to the receiving Party by a Third Party as a matter of right (and without violating any agreement with the disclosing Party) without restriction on use or disclosure; or (iv) is independently developed by the receiving Party without use of any Confidential Information received from the other Party. In addition, each receiving Party may disclose Confidential Information to the extent such disclosure is reasonably necessary to prosecute or defend litigation, to comply with applicable law or regulation or the rules of any securities exchange or other trading market on which such Party's securities are listed, to protect intellectual property rights, to obtain necessary or desirable regulatory approvals, to respond to a valid order of a court or other governmental body or any political subdivision thereof, or to conduct preclinical or clinical trials, provided that, other than with respect to disclosure for protecting intellectual property rights, the receiving Party shall use reasonable efforts to secure confidential treatment of such Confidential Information required to be disclosed.
|
(c)
|
Use of Name
. Except as authorized in this Agreement or otherwise required by applicable law, regulation or the rules of any securities exchange or other trading market on which such Party's securities are listed, neither Party shall use the name of the other Party in any publicity or advertising without the prior written approval of the other Party, except that either Party may disclose that it has entered into this Agreement.
|
(d)
|
Survival
. The obligations set forth in this Section 13 shall survive any termination or expiration of this Agreement in perpetuity (with respect to trade secrets) and for a period of five years (with respect to all other data and information).
|
If to Chembio:
|
Chembio Diagnostic Systems, Inc.
3661 Horseblock Road
Medford, New York 11763
Facsimile:
631-924-2065
E-mail:
admin@chembio.com
Attention:
John Sperzel, President and Chief Executive Officer
|
If to SDS:
|
StatSure Diagnostic Systems, Inc.
1333 East 9
th
Street
Brooklyn, NY
|
CHEMBIO DIAGNOSTIC SYSTEMS, INC.
|
STATSURE DIAGNOSTIC SYSTEMS, INC.
|
By:________________________
Name: John Sperzel
Title: President and Chief Executive Officer
Dated:________________________
|
By: ________________________
Name:
Title:
Dated:________________________
|