[X] |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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[ ] |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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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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Common Stock, $0.01 par value
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The NASDAQ Stock Market LLC
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Securities registered pursuant to Section 12(g) of the Act:
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None
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(Title of Class)
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Large accelerated filer [ ]
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Accelerated filer [X ]
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Non-accelerated filer [ ]
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Smaller reporting company [X ]
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Emerging growth company [ ]
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Page
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PART I
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3
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9
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21
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21
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PART II
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22
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23
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28
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28
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PART III
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30
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30
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30
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30
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30
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PART IV
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31
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32
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•
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enhanced sensitivity and specificity;
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•
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advanced multiplexing; and
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•
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quantitative results, when used with DPP Micro Reader.
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Product (Assay)
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U.S.
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International
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DPP HIV 1/2
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✓
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✓
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DPP HIV-Syphilis
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✓
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DPP Syphilis Screen & Confirm
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✓
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DPP Zika
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✓
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✓
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DPP Leishmaniasis
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✓
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STAT-PAK HIV 1/2
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✓
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✓
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STAT-PAK Chagas
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✓
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SURE CHECK HIV 1/2
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✓
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✓
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SURE CHECK HIV 1/2 Self Test
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✓
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•
|
growth in the overall market for lateral flow infectious disease tests, which we estimate will increase at a
compound annual growth rate of 10.7% through 2022 (see “--Industry” above);
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•
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our increased market penetration in existing markets and channels, including in the United States, Latin America,
Africa and Europe;
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•
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our registration of existing and new products in unchartered countries and regions, such as selected countries in
Latin America and Southeast Asia;
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•
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our entry into new market segments, such as international HIV Self-Testing; and
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•
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advances in our product pipeline in infectious disease with key products including a multiplex test for HIV and
syphilis in the U.S. market and tests for dengue, zika and chikungunya.
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•
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HIV has claimed more than 35 million lives, including 940,000 in 2017. Approximately 36.9 million were
living with HIV at the end of 2017, and 1.8 million were newly infected during 2017.
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•
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There were 18.0 million prevalent cases of syphilis as of 2012, and 5.6 million new infections were
estimated to occur annually.
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•
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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.
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Product
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Collaborator
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Phase I
Feasibility
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Phase II
Development
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Phase III
Verification
&Validation
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Phase IV
Clinical/
Regulatory
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Phase V
Commercial
Launch
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DPP HIV-Syphilis (US)
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Self-funded
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✓
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✓
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✓
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Submitted FDA
Q1 2018
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DPP Dengue (International)
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Fiocruz
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✓
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✓
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✓
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Submitted ANVISA
1
Q3 2018
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DPP Dengue NS1 (International)
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Fiocruz
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✓
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✓
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Ongoing
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||
DPP Zika (US/International)
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Fiocruz
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✓
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✓
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✓
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✓
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Received
FDA EUA
2
,
ANVISA, CE mark
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DPP Chikungunya (International)
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Fiocruz
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✓
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✓
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✓
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✓
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Received
ANVISA, Malaysia
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DPP Dengue-Zika-
Chikungunya
(International)
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Fiocruz
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✓
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✓
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✓
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Submitted ANVISA
Q3 2018
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Received
Malaysia
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DPP Malaria (International)
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Bill & Melinda Gates Foundation
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✓
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✓
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Ongoing
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||
DPP Ebola (US, International)
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Centers for Disease Control
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✓
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✓
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✓
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Received FDA EUA Q4 2018
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DPP Fever Panel (Africa)
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The Paul G. Allen Family Foundation
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✓
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✓
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✓
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Field Testing:
Africa, South America
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DPP Fever Panel (Asia)
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FIND
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✓
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Ongoing
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Product
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Collaborator
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Phase I
Feasibility
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Phase II
Development
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Phase III
Verification
&Validation
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Phase IV
Clinical/
Regulatory
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Phase V
Commercial
Launch
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DPP Eosinophilic / Respiratory
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AstraZeneca
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✓
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✓
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Ongoing
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Received CE mark Q4 2018
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DPP Cancer
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Undisclosed
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✓
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✓
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Ongoing
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||
Infectious Disease Portfolio
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LumiraDx
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Initiated Q3 2018
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||||
DPP Concussion
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Perseus Science
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✓
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Ongoing
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|||
DPP Bovine Tuberculosis
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USDA
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✓
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Ongoing
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|||
DPP Hepatitis C Ab
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FIND
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✓
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Ongoing
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|||
DPP Hepatitis C Ag
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FIND
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Initiated Q3 2018
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•
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In January 2015, we entered into an agreement with the Concussion Science Group (CSG) Division of Perseus Science
Group LLC to develop a point-of-care diagnostic test for traumatic brain injury, including sports-related concussions, utilizing both our DPP and optical analyzer technologies.
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•
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In October 2017, we signed a development agreement with AstraZeneca for the development of a quantitative point-of-care test for eosinophilic
respiratory disease, utilizing both our DPP and optical analyzer technologies.
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•
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In April 2018, we
entered into a collaboration agreement with LumiraDx to develop new point-of-care diagnostic tests for infectious diseases. Under terms of the agreement, we receive
funding from LumiraDx, subject to satisfying certain milestones, to develop certain new point-of-care infectious disease tests. Following the regulatory approval and commercialization of tests in accordance with this agreement,
Chembio will both sell reagents to, and receive royalty payments from, LumiraDx on sales of all products developed through this collaboration.
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•
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In November 2018, we acquired opTricon (Berlin, Germany), a leading developer of handheld optical analyzers rapid diagnostic tests. See
“Management’s Discussion & Analysis of Financial Condition and Results of Operations—Recent Developments.”
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•
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patent protection;
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•
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scientific expertise;
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•
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ability to develop and market products and processes;
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•
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ability to obtain required regulatory approvals;
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•
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ability to manufacture cost-effective products that meet applicable regulatory requirements;
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•
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access to adequate capital; and,
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•
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ability to attract and retain qualified personnel.
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•
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product listing and establishment registration, which helps facilitate FDA inspections and other regulatory action;
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•
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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;
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•
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labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or
off-label use or indication;
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•
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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;
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•
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approval of product modifications that affect the safety or effectiveness of one of our cleared devices;
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•
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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;
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•
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post-approval restrictions or conditions, including post-approval study commitments;
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•
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post-market surveillance regulations, which apply when necessary to protect the public health or to provide
additional safety and effectiveness data for the device;
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•
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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;
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•
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regulations pertaining to voluntary recalls; and,
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•
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notices of corrections or removals.
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•
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strengthen the rules on placing devices on the market and reinforce surveillance once they are
available;
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•
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establish explicit provisions on manufacturers' responsibilities for the follow-up of the quality,
performance and safety of devices placed on the market;
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•
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improve the traceability of medical devices throughout the supply chain to the end-user or patient
through a unique identification number;
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•
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set up a central database to provide patients, healthcare professionals and the public with
comprehensive information on products available in the EU; and
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•
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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.
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•
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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.
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•
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control the composition of our board of directors;
|
•
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control our management and policies;
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•
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determine the outcome of significant corporate transactions, including changes in control that may be beneficial to stockholders; and,
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•
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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.
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ITEM 2.
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PROPERTIES
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ITEM 3.
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LEGAL PROCEEDINGS
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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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•
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Executive Overview
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•
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Consolidated Results of Operations
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•
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Liquidity and Capital Resources
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•
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Recent Developments
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•
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Significant Accounting Policies and Critical Accounting Estimates
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•
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Recently Issued Accounting Pronouncements
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•
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Achieved total revenue of $33.4 million for full year 2018, an increase of 39% over prior year
|
•
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Achieved product sales of $26.7 million for full year 2018, also an increase of 38% over prior year
|
•
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Acquired opTricon, a developer and manufacturer of hand-held analyzers that when used in combination with our DPP tests, provide quantitative
results
|
•
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Advanced technology collaborations with AstraZeneca, Lumira Dx, FIND and others
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•
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Purchased a fully-automated DPP test manufacturing line
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•
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Hosted analyst and investor day and introducing five-year targets for $100 million of revenue in 2023 and 50% gross margins for year end 2023
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Year Ended December 31,
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||||||||||||||||
2018
|
2017
|
|||||||||||||||
TOTAL REVENUES
|
$
|
33,409,251
|
100
|
%
|
$
|
24,015,427
|
100
|
%
|
||||||||
COSTS AND EXPENSES:
|
||||||||||||||||
Cost of product sales
|
21,427,243
|
64
|
%
|
12,921,157
|
54
|
%
|
||||||||||
Research and development expenses
|
8,526,256
|
26
|
%
|
8,555,381
|
36
|
%
|
||||||||||
Selling, general and administrative expenses
|
11,100,775
|
33
|
%
|
8,963,363
|
37
|
%
|
||||||||||
Acquisition costs
|
337,645
|
1
|
%
|
58,076
|
0
|
%
|
||||||||||
41,391,919
|
124
|
%
|
30,497,977
|
127
|
%
|
|||||||||||
LOSS FROM OPERATIONS
|
(7,982,668
|
)
|
(24
|
)%
|
(6,482,550
|
)
|
(27
|
)%
|
||||||||
OTHER INCOME
|
49,498
|
0
|
%
|
22,485
|
0
|
%
|
||||||||||
LOSS BEFORE INCOME TAXES
|
(7,933,170
|
)
|
(24
|
)%
|
(6,460,065
|
)
|
(27
|
)%
|
||||||||
Income tax (benefit) provision
|
(67,521
|
)
|
0
|
%
|
(88,305
|
)
|
0
|
%
|
||||||||
NET LOSS
|
$
|
(7,865,649
|
)
|
(24
|
)%
|
$
|
(6,371,760
|
)
|
(27
|
)%
|
•
|
$7.4 million, or 38% increase in net product sales, reflecting gains in Africa, Latin America, and Europe. Africa benefited from or winning the
single largest tender in our history for the supply of HIV tests to Ethiopia, together with meaningful commercial successes in other countries. Latin America gains reflect continued growth in Brazil, and Europe reflects the increasing
trend of HIV self-testing. As part of these regional successes and as highlighted above, during November 2018, we completed the acquisition of opTricon. Refer to Note 2 – Acquisition to the audited consolidated financial statements
included herein for further information regarding the acquisition.
|
•
|
$2.0 million, or 42% increase in R&D and grant, and license and royalty revenues compared to 2017, reflecting our continued success
in securing governmental, non-governmental, and commercial partnerships, in particular associated with our DPP technology platform.
|
For the years ended
|
||||||||||||||||
December 31, 2018
|
December 31, 2017
|
Favorable/
(unfavorable)
|
% Change
|
|||||||||||||
|
(in thousands)
|
|||||||||||||||
Net product sales
|
$
|
26,741
|
$
|
19,322
|
$
|
7,419
|
38.4
|
%
|
||||||||
Less: Cost of product sales
|
(21,427
|
)
|
(12,921
|
)
|
(8,506
|
)
|
65.8
|
%
|
||||||||
Gross product margin
|
$
|
5,314
|
$
|
6,401
|
$
|
(1,087
|
)
|
(17.0
|
)%
|
|||||||
Gross product margin %
|
19.9
|
%
|
33.1
|
%
|
•
|
$2.4 million from favorable product sales volume as described above, and
|
•
|
$3.5 million from unfavorable product margins, related to increased labor (including contract labor) to manually assemble our products and the impact of geographic mix
on average selling prices.
|
For the years ended
|
||||||||||||||||
December 31, 2018
|
December 31, 2017
|
Favorable/
(unfavorable)
|
% Change
|
|||||||||||||
(in thousands)
|
||||||||||||||||
Clinical and regulatory affairs
|
$
|
1,307
|
$
|
2,298
|
$
|
991
|
|
43.1
|
%
|
|||||||
Other research and development
|
7,219
|
6,257
|
(962
|
)
|
(15.4
|
)%
|
||||||||||
Total research and development
|
$
|
8,526
|
$
|
8,555
|
$
|
29
|
|
0.3
|
%
|
December 31, 2018
|
||||
(in thousands)
|
||||
Cash and cash equivalents
|
$
|
12,525
|
||
Accounts receivable, net of allowance for doubtful amounts
|
7,374
|
|||
Inventories, net
|
7,851
|
|||
Prepaid expenses and other current assets
|
702
|
|||
Total current assets
|
28,452
|
|||
Less: Total current liabilities
|
(6,519
|
)
|
||
Working capital
|
$
|
21,933
|
•
|
It requires us to make assumptions about matters that were uncertain at the time we were making the estimate, and
|
•
|
Changes in the estimate or different estimates that we could have selected would have had a material impact on our financial condition or
results of operations.
|
ITEM 9A.
|
Controls and Procedures
|
•
|
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 10.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
ITEM 11.
|
EXECUTIVE COMPENSATION
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
ITEM 13.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
|
ITEM 14.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
ITEM 15.
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|
Exhibit No.
|
Description
|
|
|
||
3.1
|
|
|
3.2
|
|
|
10.1(a)*
|
|
|
10.1(b)*
|
|
|
10.2(a)*
|
|
|
10.2(b)*
|
|
|
10.3*
|
||
10.4*
|
|
|
10.5*
|
|
|
10.6*
|
|
|
10.7(a)*
|
|
|
10.7(b)*
|
|
|
10.8*
|
|
|
10.9(a)
|
|
|
10.9(b)
|
|
|
10.10
|
|
|
10.11
|
|
|
10.12
|
|
|
10.13
|
|
|
14.1
|
|
|
21.1
|
|
|
23.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32
|
|
|
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
|
*
|
Indicates management contract or compensatory plan.
|
|
CHEMBIO DIAGNOSTICS, INC.
|
||
|
|
|
|
March 18, 2019
|
By
|
/s/ John J. Sperzel
|
|
|
|
John J. Sperzel III
|
|
|
|
Chief Executive Officer and President
|
|
|
|
|
|
Signatures
|
|
Title
|
Date
|
|
|
|
|
|
|
/s/ John J. Sperzel
|
|
Chief Executive Officer, President and Director
|
March 18, 2019
|
|
John J. Sperzel III
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ Neil A. Goldman
|
|
Executive Vice President and Chief Financial Officer
|
March 18, 2019
|
|
Neil A. Goldman
|
|
(Principal Financial & Accounting Officer)
|
|
|
/s/ Katherine L. Davis
|
|
Chair of the Board
|
March 18, 2019
|
|
Katherine L. Davis
|
|
|
|
|
|
|
|
|
|
/s/ Gail S. Page
|
|
Director
|
March 18, 2019
|
|
Gail S. Page
|
|
|
|
|
/s/ Mary Lake Polan
|
Director
|
March 18, 2019
|
||
Mary Lake Polan
|
||||
/s/ John G. Potthoff
|
Director
|
March 18, 2019
|
||
John G. Potthoff
|
|
Page(s)
|
Report of Independent Registered Public Accounting Firm
|
F-1
|
|
|
Consolidated Financial Statements:
|
|
|
|
Balance Sheets as of December 31, 2018 and 2017
|
F-2
|
|
|
Statements of Operations for the years ended December 31, 2018 and 2017
|
F-3
|
|
|
Statements of Comprehensive Loss for the years ended December 31, 2018, and 2017
|
F-4 |
Statements of Changes in Stockholders’ Equity for the years ended December 31, 2018, and 2017
|
F-5
|
|
|
Statements of Cash Flows for the years ended December 31, 2018, and 2017
|
F-6
|
Notes to Consolidated Financial Statements
|
F-7 - F-18
|
|
For the years ended
|
|||||||
|
December 31, 2018
|
December 31, 2017
|
||||||
REVENUES:
|
||||||||
Net product sales
|
$
|
26,741,020
|
$
|
19,322,302
|
||||
License and royalty revenue
|
948,773
|
741,534
|
||||||
R&D and grant revenue
|
5,719,458
|
3,951,591
|
||||||
TOTAL REVENUES
|
33,409,251
|
24,015,427
|
||||||
|
||||||||
COSTS AND EXPENSES:
|
||||||||
Cost of product sales |
21,427,243
|
12,921,157
|
||||||
Research and development expenses
|
8,526,256
|
8,555,381
|
||||||
Selling, general and administrative expenses
|
11,100,775
|
8,963,363
|
||||||
Acquisition costs
|
337,645 | 58,076 | ||||||
|
41,391,919
|
30,497,977
|
||||||
LOSS FROM OPERATIONS
|
(7,982,668
|
)
|
(6,482,550
|
)
|
||||
|
||||||||
OTHER INCOME (EXPENSE):
|
||||||||
Interest income, net
|
49,498
|
22,485
|
||||||
|
||||||||
LOSS BEFORE INCOME TAXES (BENEFIT) PROVISION
|
(7,933,170
|
)
|
(6,460,065
|
)
|
||||
|
||||||||
Income tax (benefit) provision
|
(67,521
|
)
|
(88,305
|
)
|
||||
|
||||||||
NET LOSS
|
$
|
(7,865,649
|
)
|
$
|
(6,371,760
|
)
|
||
|
||||||||
Basic loss per share
|
$
|
$ (0.55
|
)
|
$
|
(0.52
|
)
|
||
|
||||||||
Diluted loss per share
|
$
|
$ (0.55
|
)
|
$
|
(0.52
|
)
|
||
|
||||||||
Weighted average number of shares outstanding, basic
|
14,432,505
|
12,300,031
|
||||||
|
||||||||
Weighted average number of shares outstanding, diluted
|
14,432,505
|
12,300,031
|
|
For the years ended
|
|||||||
|
December 31, 2018
|
December 31, 2017
|
||||||
Net loss
|
$
|
(7,865,649
|
)
|
$
|
(6,371,760
|
)
|
||
Other comprehensive income:
|
||||||||
Foreign currency translation adjustments
|
(66,752
|
)
|
178,948
|
|||||
COMPREHENSIVE LOSS
|
$
|
(7,932,401
|
)
|
$
|
(6,192,812
|
)
|
|
Common Stock
|
Additional
Paid-in-Capital |
Accumulated
Deficit
|
AOCI
|
Total
|
|||||||||||||||||||
|
Shares
|
Amount
|
Amount
|
Amount
|
Amount
|
Amount
|
||||||||||||||||||
Balance at December 31, 2016
|
12,026,847
|
$
|
120,268
|
$
|
60,721,783
|
$
|
(43,672,465
|
)
|
$
|
-
|
$
|
17,169,586
|
||||||||||||
Common Stock:
|
||||||||||||||||||||||||
Purchase of RVR Diagnostics Sdn Bhd
|
269,236
|
2,692
|
1,680,033
|
-
|
-
|
1,682,725
|
||||||||||||||||||
Options:
|
||||||||||||||||||||||||
Exercised
|
22,487
|
225
|
34,575
|
-
|
-
|
34,800
|
||||||||||||||||||
Stock option compensation
|
-
|
-
|
384,897
|
-
|
-
|
384,897
|
||||||||||||||||||
|
||||||||||||||||||||||||
Comprehensive income
|
- | - | - | - | 178,948 | 178,948 | ||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(6,371,760
|
)
|
-
|
(6,371,760
|
)
|
||||||||||||||||
|
||||||||||||||||||||||||
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
|
Amount
|
||||
Net current assets
|
$
|
404,204 | ||
Property, plant and equipment
|
|
125,000
|
||
Goodwill
|
3,337,000
|
|||
Deferred tax liability
|
(635,000
|
)
|
||
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
|
$
|
35,442,806
|
||
|
||||
Net loss
|
(8,394,074
|
)
|
||
|
||||
Net loss per common share
|
$
|
(0.58
|
)
|
|
|
||||
Diluted net loss per common share
|
$
|
(0.58
|
)
|
Amount
|
||||
Property, plant and equipment
|
$
|
235,141
|
||
Goodwill
|
1,651,361
|
|||
Deferred tax liability
|
(307,636
|
)
|
||
Contingent consideration | (148,000 | ) | ||
Other intangible assets (estimated useful life):
|
||||
Intellectual property (10 years)
|
800,000
|
|||
Customer contracts / relationships (10 years)
|
700,000
|
|||
Order backlog (3 months)
|
200,134
|
|||
Trade name (11 years)
|
100,000
|
|||
Total consideration
|
$
|
3,231,000
|
(a)
|
Principles of Consolidation:
|
(b) |
Use of Estimates:
|
(c) |
Fair Value of Financial Instruments:
|
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). |
(d) |
Cash and Cash Equivalents:
|
(e) |
Concentrations of Credit Risk:
|
(f) |
Inventories:
|
(g) |
Fixed Assets:
|
(h) |
License Agreements:
|
|
(i) |
Valuation of Long-Lived Assets and Intangible Assets:
|
(j) |
Revenue Recognition:
|
|
||||||||||||
Exchange
Transactions
|
Non-Exchange
Transactions
|
Total
|
||||||||||
Net product sales
|
$
|
26,741,020
|
$
|
-
|
$
|
26,741,020
|
||||||
License and royalty revenue
|
948,773
|
-
|
948,773
|
|||||||||
R&D, milestone and grant revenue
|
2,687,210
|
3,032,248
|
5,719,458
|
|||||||||
|
$
|
30,377,003
|
$
|
3,032,248
|
$
|
33,409,251
|
Total
|
||||
Africa
|
$ | 8,605,306 | ||
Asia
|
1,389,120
|
|||
Europe & Middle East
|
4,726,691
|
|||
Latin America
|
11,722,224
|
|||
United States
|
6,965,910
|
|||
|
$
|
33,409,251
|
(k) |
Research and Development:
|
(l) |
Stock-Based Compensation:
|
(m) |
I
ncome Taxes:
|
(n) |
Loss Per Share:
|
(o) |
Goodwill and Intangible Assets:
|
Beginning balance 1/1/18
|
$
|
1,666,610
|
||
Acquisition of opTricon
|
3,337,000 | |||
Changes in foreign currency exchange rate
|
(20,483
|
)
|
||
Balance at December 31, 2018
|
$
|
4,983,127
|
Weighted
Average
Remaining Life
|
December 31, 2018
|
December 31, 2017
|
||||||||||||||||||||||||||
|
Cost
|
Accumulated Amortization
|
Net Book Value
|
Cost
|
Accumulated Amortization
|
Net Book Value
|
||||||||||||||||||||||
Intellectual property
|
10 |
$
|
1,089,688
|
$
|
173,633
|
$
|
916,055
|
$ | 886,872 | $ | 88,687 | $ | 798,185 | |||||||||||||||
Developed technology
|
7 |
1,910,315
|
-
|
1,910,315
|
- | - | - | |||||||||||||||||||||
Customer contracts/relationships
|
8 |
1,121,600
|
151,929
|
969,671
|
776,013 | 77,601 | 698,412 | |||||||||||||||||||||
Order backlog
|
- |
217,187
|
217,187
|
-
|
221,867 | 221,867 | - | |||||||||||||||||||||
Trade names
|
9 |
108,521
|
19,731
|
88,790
|
110,859 | 10,079 | 100,780 | |||||||||||||||||||||
|
$
|
4,447,311
|
$
|
562,480
|
$
|
3,884,831
|
$ | 1,995,611 | $ | 398,234 | $ | 1,597,377 |
|
(p) |
Allowance for Doubtful Accounts:
|
|
(q) |
Acquisition Costs:
|
(r) |
Foreign Currency Translation:
|
(s) |
Recent Accounting Pronouncements Affecting the Company:
|
December 31, 2018
|
December 31, 2017
|
|||||||
Raw Materials
|
$
|
2,803,677
|
$
|
1,767,684
|
||||
Work in Process
|
263,043
|
286,413
|
||||||
Finished Goods
|
4,784,502
|
2,369,521
|
||||||
$
|
7,851,222
|
$
|
4,423,618
|
December 31, 2018
|
December 31, 2017
|
|||||||
Machinery and Equipment
|
$
|
6,070,137
|
$
|
4,582,759
|
||||
Furniture and Fixtures
|
35,287
|
449,548
|
||||||
Computer Equipment
|
435,348
|
422,946
|
||||||
Leasehold Improvements
|
2,334,512
|
2,258,779
|
||||||
Enterprise Business Systems
|
462,420
|
-
|
||||||
Less: Accumulated Depreciation and Amortization
|
(6,463,784
|
)
|
(5,804,800
|
)
|
||||
$
|
2,873,920
|
$
|
1,909,232
|
December 31, 2018
|
December 31, 2017
|
|||||||
Accounts Payable - suppliers
|
$
|
3,622,765
|
$
|
1,494,759
|
||||
Accrued Commissions
|
588,131
|
126,827
|
||||||
Accrued Royalties / license fees
|
279,213
|
429,297
|
||||||
Accrued Payroll
|
48,867
|
187,305
|
||||||
Accrued Vacation
|
264,789
|
309,767
|
||||||
Accrued Bonuses
|
494,318
|
282,500
|
||||||
Accrued Expenses - Other
|
590,598
|
215,848
|
||||||
$
|
5,888,681
|
$
|
3,046,303
|
|
2018
|
2017
|
||||||
Current
|
||||||||
Federal
|
$
|
-
|
$
|
(97,339
|
) | |||
State
|
10,914
|
9,034
|
||||||
Foreign
|
- | - | ||||||
Total current (benefit) provision
|
10,914
|
(88,305
|
) | |||||
|
||||||||
Deferred
|
||||||||
Federal
|
-
|
-
|
||||||
State
|
-
|
-
|
||||||
Foreign
|
(78,435 | ) | - | |||||
Total deferred (benefit) provision
|
(78,435
|
) |
-
|
|||||
|
||||||||
Total (benefit) provision
|
$
|
(67,521
|
)
|
$
|
(88,305
|
) |
2018
|
2017
|
|||||||
Inventory reserves
|
$
|
204,206
|
$
|
244,158
|
||||
Accrued expenses
|
175,168
|
102,332
|
||||||
Net operating loss carry-forwards
|
7,122,576
|
5,800,144
|
||||||
Research and development credit
|
1,696,870
|
1,918,137
|
||||||
Stock-based compensation
|
215,797
|
167,522
|
||||||
Depreciation
|
139,362
|
91,258
|
||||||
Total deferred tax assets
|
9,553,979
|
8,323,551
|
||||||
Intangibles
|
(968,849
|
)
|
(341,042
|
)
|
||||
Total deferred tax liabilities
|
(968,849
|
)
|
(341,042
|
)
|
||||
Net deferred tax assets before valuation allowance
|
8,585,130
|
7,982,509
|
||||||
Less valuation allowances
|
(9,477,438
|
)
|
(8,323,551
|
)
|
||||
Net noncurrent deferred tax liabilities
|
$
|
(892,308
|
)
|
$
|
(341,042
|
)
|
|
Year Ending December 31,
|
|||||||
|
2018
|
2017
|
||||||
United States operations
|
$
|
(7,137,428
|
)
|
$
|
(6,054,002
|
)
|
||
International operations
|
(795,742
|
)
|
(406,063
|
) | ||||
(Loss) before taxes
|
$
|
(7,933,170
|
)
|
$
|
(6,460,065
|
)
|
|
Year Ending December 31,
|
|||||||
|
2018
|
2017
|
||||||
Federal income tax at statutory rates
|
21.00
|
%
|
34.00
|
%
|
||||
State income taxes, net of federal benefit
|
(.10
|
)%
|
(0.09
|
)%
|
||||
Nondeductible expenses
|
(1.58
|
)%
|
(1.04
|
)%
|
||||
Foreign rate differential
|
.36
|
%
|
(2.14
|
)% | ||||
Change in valuation allowance
|
(18.44
|
)%
|
(99.41
|
)%
|
||||
Impact of Tax Act on valuation allowance
|
-
|
%
|
60.48
|
% | ||||
AMT refund under Tax Act
|
-
|
%
|
1.51
|
% | ||||
Tax credits
|
-
|
%
|
7.07
|
%
|
||||
Other
|
(.39
|
)%
|
0.99
|
%
|
||||
Income tax benefit
|
.85
|
%
|
1.37
|
%
|
(a) |
Common Stock
|
(b) |
Preferred Stock
|
(c) |
Options, Restricted Stock, and Restricted Stock Units
|
(d) |
Warrants
|
December 31, 2018
|
December 31, 2017
|
|||||||
Expected term (in years)
|
4.96
|
5.48
|
||||||
Expected volatility
|
39.91
|
%
|
43.31
|
%
|
||||
Expected dividend yield
|
n/a
|
n/a
|
||||||
Risk-free interest rate
|
2.70
|
%
|
1.78
|
%
|
Number of
Shares
|
Weighted
Average
Exercise Price per
Share
|
Weighted
Average
Remaining
Contractual
Term
|
Aggregate Intrinsic
Value
|
||||||||||
Outstanding at December 31, 2016
|
600,549
|
4.55
|
3.43 years
|
$
|
1,463,052
|
||||||||
Granted
|
267,875
|
6.40
|
|||||||||||
Exercised
|
56,969
|
4.19
|
100,018
|
||||||||||
Forfeited/expired/cancelled
|
785
|
5.56
|
|||||||||||
Outstanding at December 31, 2017
|
810,670
|
5.18
|
3.69 years
|
$
|
2,477,853
|
||||||||
Exercisable at December 31, 2017
|
371,295
|
4.44
|
2.62 years
|
$
|
1,409,440
|
||||||||
Outstanding at December 31, 2017
|
810,670
|
$
|
5.18
|
3.69 years
|
$
|
2,477,853
|
|||||||
|
|
||||||||||||
Granted
|
93,750
|
$
|
9.80
|
|
352,220 | ||||||||
Exercised
|
144,947
|
$
|
4.83
|
|
523,327
|
||||||||
Forfeited/expired/cancelled
|
47,505
|
$
|
8.82
|
|
154,583 | ||||||||
Outstanding at December 31, 2018
|
711,968
|
$
|
5.62
|
3.33 years
|
$
|
687,364
|
|||||||
|
|
||||||||||||
Exercisable at December 31, 2018
|
396,799
|
$
|
4.70
|
2.66 years
|
$
|
568,956
|
|
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
|
|||||||||||||||||||||
1 to 2.79999
|
-
|
-
|
$
|
-
|
$
|
-
|
-
|
$
|
-
|
$
|
-
|
|||||||||||||||||
2.8 to 4.59999
|
304,343
|
1.90
|
3.45
|
672,896
|
254,343
|
3.46
|
560,711
|
|||||||||||||||||||||
4.6 to 6.39999
|
152,875
|
3.43
|
5.85
|
14,468
|
58,020
|
5.80
|
8,245
|
|||||||||||||||||||||
6.4 to 8.19999
|
207,875
|
5.05
|
7.31
|
-
|
75,041
|
7.21
|
-
|
|||||||||||||||||||||
8.2 to 12
|
46,875
|
4.60
|
11.45
|
-
|
9,375
|
11.45
|
-
|
|||||||||||||||||||||
Total
|
711,968
|
3.33
|
$
|
5.62
|
$
|
687,364
|
396,779
|
$
|
4.70
|
$
|
568,956
|
Number of
Shares & Units
|
Weighted
Average
Grant Date
Fair Value
|
|||||||
Outstanding at December 31, 2017
|
-
|
$
|
-
|
|||||
Granted
|
287,564
|
9.65
|
||||||
Exercised
|
- | - | ||||||
Forfeited/expired/cancelled
|
- | - | ||||||
Outstanding at December 31, 2018
|
287,564
|
9.65
|
||||||
Exercisable at December 31, 2018
|
-
|
$
|
-
|
|
For the years ended
|
|||||||
|
December 31, 2018
|
December 31, 2017
|
||||||
Africa
|
$
|
8,605,306
|
$
|
3,568,455
|
||||
Asia
|
1,389,120
|
1,626,750
|
||||||
Europe & Middle East
|
2,172,031
|
1,763,274
|
||||||
Latin America
|
11,722,224
|
8,476,003
|
||||||
United States
|
2,852,339
|
3,887,820
|
||||||
|
$
|
26,741,020
|
$
|
19,322,302
|
|
2018
|
2017
|
||||||
Asia
|
$
|
466,185
|
$
|
472,774
|
||||
Europe & Middle East
|
123,752
|
-
|
||||||
United States
|
2,283,983
|
1,436,458
|
||||||
|
$
|
2,873,920
|
$
|
1,909,232
|
2019
|
$
|
485,493
|
||
2020
|
85,000
|
2019
|
$
|
384,308
|
||
2020
|
88,576
|
|||
2021
|
-
|
|||
|
$
|
472,884
|
For the years ended
|
Accounts Receivable
|
|||||||||||||||||||||||
|
December 31, 2018
|
December 31, 2017
|
December 31, 2018
|
December 31, 2017
|
||||||||||||||||||||
|
Sales
|
% of Sales
|
Sales
|
% of Sales
|
||||||||||||||||||||
Customer 1
|
$
|
11,171,174
|
42
|
%
|
$
|
8,065,217
|
42
|
%
|
$
|
3,499,340
|
$
|
-
|
||||||||||||
Customer 2
|
4,346,640
|
16
|
%
|
-
|
-
|
%
|
1,033,824
|
-
|
For the years ended
|
Accounts Payable
|
|||||||||||||||||||||||
|
December 31, 2018
|
December 31, 2017
|
December 31, 2018
|
December 31, 2017
|
||||||||||||||||||||
|
Purchases
|
% of Purc.
|
Purchases
|
% of Purc.
|
||||||||||||||||||||
Vendor 1
|
$
|
*
|
*
|
$
|
*
|
*
|
|
$
|
*
|
$
|
*
|
|||||||||||||
Vendor 2
|
*
|
*
|
|
746,868
|
12
|
%
|
*
|
*
|
||||||||||||||||
Vendor 3
|
*
|
*
|
|
849,966
|
14
|
%
|
164,312
|
*
|
||||||||||||||||
Vendor 4
|
|
1,646,614
|
16
|
%
|
884,698
|
14
|
%
|
*
|
*
|
1.
|
Plan Administration
|
2.
|
ELIGIBILITY AND PARTICIPATION
|
3.
|
Award Determination
|
|
· |
for a Participant without a written contract, a percentage determined by the Committee at the beginning of the Plan Year; and
|
|
· |
for a Participant with a written contract, the incentive percentage shall be as stated in that Participant’s written contract.
|
4.
|
Payment of Awards
|
5.
|
Rights of Participants
|
6.
|
Amendments and Termination
|
7.
|
Miscellaneous
|
Name of Subsidiary
|
Jurisdiction of Incorporation
|
Chembio Diagnostic Systems Inc.
|
Delaware
|
Chembio Diagnostics Malaysia Sdn. Bhd.
|
Malaysia
|
opTricon GmbH
|
Germany
|
Brillant 3006, GmbH | Germany |
Date: March 18, 2019
|
/s/ John J. Sperzel
|
|
John J. Sperzel, President
|
||
& Chief Executive Officer
|
Date: March 18, 2019
|
/s/ Neil A. Goldman
|
|
Neil A. Goldman
|
||
Executive Vice President & Chief Financial Officer
|
Dated: March 18, 2019
|
/s/ John J. Sperzel
|
|
John J. Sperzel
|
||
President & Chief Executive Officer
|
Dated: March 18, 2019
|
/s/ Neil A. Goldman
|
|
Neil A. Goldman
|
||
Executive Vice President & Chief Financial Officer
|