☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
|
88-0425691
|
(State or other jurisdiction of incorporation)
|
|
(IRS Employer Identification Number)
|
Title of each class
|
|
Trading Symbol
|
|
Name of each exchange on which registered
|
Common Stock, $0.01 par value
|
|
CEMI
|
|
The NASDAQ Stock Market LLC
|
|
Large accelerated filer ☐
|
Accelerated filer ☒
|
|
Non-accelerated filer ☐
|
Smaller reporting company ☒
|
|
Emerging growth company ☐
|
|
|
Page
|
|
|
|
3
|
||
|
|
|
Part I. FINANCIAL INFORMATION:
|
|
|
|
|
|
|
Item 1. Financial Statements:
|
|
|
|
|
|
4
|
|
|
|
|
|
5
|
|
|
|
|
|
6
|
|
|
|
|
|
7
|
|
|
|
|
|
9
|
|
|
|
|
|
10
|
|
|
|
|
|
27
|
|
|
|
|
|
43
|
|
|
|
|
Part II. OTHER INFORMATION:
|
|
|
|
|
|
|
44
|
|
|
|
|
|
45
|
|
|
|
|
|
52
|
|
|
|
|
53
|
Item 1. |
FINANCIAL STATEMENTS
|
|
For the Three Months Ended
|
For the Six Months Ended
|
||||||||||||||
June 30, 2020
|
June 30, 2019
|
June 30, 2020
|
June 30, 2019
|
|||||||||||||
REVENUES:
|
||||||||||||||||
Net product sales
|
$
|
3,791,574
|
$
|
8,785,041
|
$
|
9,508,166
|
$
|
15,409,326
|
||||||||
R&D and grant revenue
|
1,193,973
|
854,264
|
2,101,660
|
2,556,053
|
||||||||||||
License and royalty revenue
|
125,625
|
248,831
|
360,929
|
465,022
|
||||||||||||
TOTAL REVENUES
|
5,111,172
|
9,888,136
|
11,970,755
|
18,430,401
|
||||||||||||
COSTS AND EXPENSES:
|
||||||||||||||||
Cost of product sales
|
5,670,737
|
6,989,975
|
10,045,179
|
12,001,611
|
||||||||||||
Research and development expenses
|
1,922,306
|
2,101,020
|
3,881,159
|
4,318,652
|
||||||||||||
Selling, general and administrative expenses
|
4,397,593
|
4,096,942
|
8,554,234
|
8,110,013
|
||||||||||||
Severance, restructuring and other related costs
|
387,540
|
-
|
1,110,658
|
-
|
||||||||||||
Acquisition costs
|
-
|
-
|
63,497
|
395,612
|
||||||||||||
12,378,176
|
13,187,937
|
23,654,727
|
24,825,888
|
|||||||||||||
LOSS FROM OPERATIONS
|
(7,267,004
|
)
|
(3,299,801
|
)
|
(11,683,972
|
)
|
(6,395,487
|
)
|
||||||||
OTHER INCOME:
|
||||||||||||||||
Interest (expense) income
|
(712,052
|
)
|
5,918
|
(1,374,192
|
)
|
12,602
|
||||||||||
LOSS BEFORE INCOME TAXES
|
(7,979,056
|
)
|
(3,293,883
|
)
|
(13,058,164
|
)
|
(6,382,885
|
)
|
||||||||
Income tax benefit
|
(135,259
|
)
|
(107,203
|
)
|
(214,818
|
)
|
(379,672
|
)
|
||||||||
NET LOSS
|
$
|
(7,843,797
|
)
|
$
|
(3,186,680
|
)
|
$
|
(12,843,346
|
)
|
$
|
(6,003,213
|
)
|
||||
Basic loss per share
|
$
|
(0.42
|
)
|
$
|
(0.19
|
)
|
$
|
(0.71
|
)
|
$
|
(0.36
|
)
|
||||
Diluted loss per share
|
$
|
(0.42
|
)
|
$
|
(0.19
|
)
|
$
|
(0.71
|
)
|
$
|
(0.36
|
)
|
||||
Weighted average number of shares outstanding, basic
|
18,868,144
|
16,914,171
|
18,032,723
|
16,906,936
|
||||||||||||
Weighted average number of shares outstanding, diluted
|
18,868,144
|
16,914,171
|
18,032,723
|
16,906,936
|
|
For the Three Months Ended
|
For the Six Months Ended
|
||||||||||||||
|
June 30, 2020
|
June 30, 2019
|
June 30, 2020
|
June 30, 2019
|
||||||||||||
Net loss
|
$
|
(7,843,797
|
)
|
$
|
(3,186,680
|
)
|
$
|
(12,843,346
|
)
|
$
|
(6,003,213
|
)
|
||||
Other comprehensive loss:
|
||||||||||||||||
Foreign currency translation adjustments
|
(175,447
|
)
|
(313,225
|
)
|
(1,038,741
|
)
|
(111,039
|
)
|
||||||||
Comprehensive loss
|
$
|
(8,019,244
|
)
|
$
|
(3,499,905
|
)
|
$
|
(13,882,087
|
)
|
$
|
(6,114,252
|
)
|
|
For The Six Months Ended June 30, 2020
|
|||||||||||||||||||||||||||||||
Common Stock
|
Additional
Paid-in-Capital |
Treasury
Stock
|
Accumulated
Deficit
|
Accumulated Other
Comprehensive
Income
|
Total
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
|||||||||||||||||||||||||||||
Balance at December 31, 2019
|
17,733,617
|
$
|
177,335
|
$
|
95,433,077
|
-
|
$
|
-
|
$
|
(71,585,003
|
)
|
$
|
9,844
|
$
|
24,035,253
|
|||||||||||||||||
Common Stock:
|
||||||||||||||||||||||||||||||||
Restricted stock issued
|
34,249
|
343
|
117,956
|
-
|
-
|
-
|
-
|
118,299
|
||||||||||||||||||||||||
Restricted stock compensation, net
|
(440,631
|
)
|
(4,406
|
)
|
(292,495
|
)
|
-
|
-
|
-
|
-
|
(296,901
|
)
|
||||||||||||||||||||
Shares tendered for withholding taxes
|
-
|
-
|
145,056
|
(31,486
|
)
|
(145,056
|
)
|
-
|
-
|
-
|
||||||||||||||||||||||
Options:
|
||||||||||||||||||||||||||||||||
Stock option compensation
|
-
|
-
|
139,449
|
-
|
-
|
-
|
-
|
139,449
|
||||||||||||||||||||||||
Comprehensive loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(863,294
|
)
|
(863,294
|
)
|
||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(4,999,549
|
)
|
-
|
(4,999,549
|
)
|
||||||||||||||||||||||
Balance at March 31, 2020
|
17,327,235
|
$
|
173,272
|
$
|
95,543,043
|
(31,486
|
)
|
$
|
(145,056
|
)
|
$
|
(76,584,552
|
)
|
$
|
(853,450
|
)
|
$
|
18,133,257
|
||||||||||||||
Common Stock:
|
||||||||||||||||||||||||||||||||
Issuance of stock, net
|
2,619,593
|
26,196
|
28,410,545
|
-
|
-
|
-
|
-
|
28,436,741
|
||||||||||||||||||||||||
Restricted stock issued
|
18,858
|
189
|
(189
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Restricted stock compensation, net
|
(29,543
|
)
|
(296
|
)
|
262,405
|
-
|
-
|
-
|
-
|
262,109
|
||||||||||||||||||||||
Shares tendered for withholding taxes
|
-
|
-
|
(192,161
|
)
|
(1,804
|
)
|
(5,863
|
)
|
-
|
-
|
(198,024
|
)
|
||||||||||||||||||||
Options:
|
||||||||||||||||||||||||||||||||
Exercised
|
5,528
|
55
|
(55
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Stock option compensation
|
-
|
-
|
122,115
|
-
|
-
|
-
|
-
|
122,115
|
||||||||||||||||||||||||
Warrants exercised
|
253,161
|
2,532
|
(2,532
|
)
|
-
|
-
|
-
|
-
|
-
|
|||||||||||||||||||||||
Comprehensive loss
|
-
|
-
|
-
|
-
|
-
|
-
|
(175,447
|
)
|
(175,447
|
)
|
||||||||||||||||||||||
Net loss
|
-
|
-
|
-
|
-
|
-
|
(7,843,797
|
)
|
-
|
(7,843,797
|
)
|
||||||||||||||||||||||
Balance at June 30, 2020
|
20,194,832
|
$
|
201,948
|
$
|
124,143,171
|
(33,290
|
)
|
$
|
(150,919
|
)
|
$
|
(84,428,349
|
)
|
$
|
(1,028,897
|
)
|
$
|
38,736,954
|
|
For The Six Months Ended June 30, 2019
|
|||||||||||||||||||||||
Common Stock
|
Additional
Paid-in-Capital |
Accumulated
Deficit
|
Accumulated Other
Comprehensive Income
|
Total
|
||||||||||||||||||||
Shares
|
Amount
|
Amount
|
Amount
|
Amount
|
Amount
|
|||||||||||||||||||
Balance at December 31, 2018
|
17,166,459
|
$
|
171,664
|
$
|
90,953,788
|
$
|
(57,909,874
|
)
|
$
|
112,196
|
$
|
33,327,774
|
||||||||||||
Common Stock:
|
||||||||||||||||||||||||
Restricted stock compensation
|
-
|
-
|
281,248
|
-
|
-
|
281,248
|
||||||||||||||||||
Options:
|
||||||||||||||||||||||||
Stock option compensation
|
-
|
-
|
66,259
|
-
|
-
|
66,259
|
||||||||||||||||||
Comprehensive loss
|
-
|
-
|
-
|
-
|
202,186
|
202,186
|
||||||||||||||||||
Net loss
|
-
|
-
|
-
|
(2,816,533
|
)
|
-
|
(2,816,533
|
)
|
||||||||||||||||
Balance at March 31, 2019
|
17,166,459
|
$
|
171,664
|
$
|
91,301,295
|
$
|
(60,726,407
|
)
|
$
|
314,382
|
$
|
31,060,934
|
||||||||||||
Common Stock:
|
||||||||||||||||||||||||
Restricted stock issued
|
375,000
|
3,750
|
(3,750
|
)
|
-
|
-
|
-
|
|||||||||||||||||
Restricted stock compensation
|
-
|
-
|
307,774
|
-
|
-
|
307,774
|
||||||||||||||||||
Options:
|
||||||||||||||||||||||||
Exercised
|
24,075
|
241
|
(241
|
)
|
-
|
-
|
-
|
|||||||||||||||||
Stock option compensation
|
-
|
-
|
69,097
|
-
|
-
|
69,097
|
||||||||||||||||||
Comprehensive loss
|
-
|
-
|
-
|
-
|
(313,225
|
)
|
(313,225
|
)
|
||||||||||||||||
Net loss
|
-
|
-
|
-
|
(3,186,680
|
)
|
-
|
(3,186,680
|
)
|
||||||||||||||||
Balance at June 30, 2019
|
17,565,534
|
$
|
175,655
|
$
|
91,674,175
|
$
|
(63,913,087
|
)
|
$
|
1,157
|
$
|
27,937,900
|
(a) |
Basis of Presentation:
|
(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) |
Fixed Assets:
|
(g) |
License Agreements:
|
(h) |
Valuation of Long-Lived Assets and Intangible Assets:
|
(i) |
Revenue Recognition:
|
|
For the Three Months Ended
|
|||||||||||||||||||||||
June 30, 2020
|
June 30, 2019
|
|||||||||||||||||||||||
Exchange
Transactions
|
Non-Exchange
Transactions
|
Total
|
Exchange
Transactions
|
Non-Exchange
Transactions
|
Total
|
|||||||||||||||||||
Net product sales
|
$
|
3,791,574
|
$
|
-
|
$
|
3,791,574
|
$
|
8,785,041
|
$
|
-
|
$
|
8,785,041
|
||||||||||||
R&D and grant revenue
|
1,193,973
|
-
|
1,193,973
|
619,139
|
235,125
|
854,264
|
||||||||||||||||||
License and royalty revenue
|
125,625
|
-
|
125,625
|
248,831
|
-
|
248,831
|
||||||||||||||||||
$
|
5,111,172
|
$
|
-
|
$
|
5,111,172
|
$
|
9,653,011
|
$
|
235,125
|
$
|
9,888,136
|
|
For the Six Months Ended
|
|||||||||||||||||||||||
June 30, 2020
|
June 30, 2019
|
|||||||||||||||||||||||
Exchange
Transactions
|
Non-Exchange
Transactions
|
Total
|
Exchange
Transactions
|
Non-Exchange
Transactions
|
Total
|
|||||||||||||||||||
Net product sales
|
$
|
9,508,167
|
$
|
-
|
$
|
9,508,166
|
$
|
15,409,326
|
$
|
-
|
$
|
15,409,326
|
||||||||||||
R&D and grant revenue
|
2,101,660
|
-
|
2,101,660
|
1,392,204
|
1,163,849
|
2,556,053
|
||||||||||||||||||
License and royalty revenue
|
360,928
|
-
|
360,929
|
465,022
|
-
|
465,022
|
||||||||||||||||||
$
|
11,970,755
|
$
|
-
|
$
|
11,970,755
|
$
|
17,266,552
|
$
|
1,163,849
|
$
|
18,430,401
|
|
For the Three Months Ended
|
For the Six Months Ended
|
||||||||||||||
|
June 30, 2020
|
June 30, 2019
|
June 30, 2020
|
June 30, 2019
|
||||||||||||
Africa
|
$
|
552,570
|
$
|
2,342,740
|
$
|
1,436,085
|
$
|
4,759,040
|
||||||||
Asia
|
119,319
|
119,548
|
482,607
|
240,646
|
||||||||||||
Europe & Middle East
|
1,635,016
|
1,107,558
|
3,811,172
|
3,250,779
|
||||||||||||
Latin America
|
780,567
|
4,897,297
|
2,896,963
|
6,177,770
|
||||||||||||
United States
|
2,023,699
|
1,420,993
|
3,343,928
|
4,002,166
|
||||||||||||
$
|
5,111,172
|
$
|
9,888,136
|
$
|
11,970,755
|
$
|
18,430,401
|
(j) |
Inventories:
|
|
June 30, 2020
|
December 31, 2019
|
||||||
Raw materials
|
$
|
5,136,583
|
$
|
2,901,319
|
||||
Work in process
|
2,609,407
|
793,343
|
||||||
Finished goods
|
6,385,550
|
5,903,368
|
||||||
|
$
|
14,131,540
|
$
|
9,598,030
|
(k) |
Loss Per Share:
|
(l) |
Research and Development:
|
(m) |
Equity Plans:
|
(n) |
Stock-Based Compensation:
|
|
For The Three Months Ended
June 30,
|
For The Six Months Ended
June 30,
|
||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Cost of product sales
|
$
|
-
|
$
|
2,300
|
$
|
6,300
|
$
|
5,800
|
||||||||
Research and development expenses
|
90,924
|
56,300
|
154,737
|
116,100
|
||||||||||||
Selling, general and administrative expenses
|
293,301
|
318,300
|
610,089
|
602,478
|
||||||||||||
Severance and related costs
|
-
|
-
|
(423,984
|
)
|
-
|
|||||||||||
$
|
384,225
|
$
|
376,900
|
$
|
347,142
|
$
|
724,378
|
|
For the Three and
Six Months Ended June 30, 2020
|
|||
Expected term (in years)
|
6.3
|
|||
Expected volatility
|
45.37
|
%
|
||
Expected dividend yield
|
0.00
|
%
|
||
Risk-free interest rate
|
1.33
|
%
|
Stock Options
|
Number of
Shares
|
Weighted
Average
Exercise Price
per Share
|
Weighted
Average
Remaining
Contract
Term
|
Aggregate
Intrinsic
Value
|
||||||
Outstanding at December 31, 2019
|
642,625
|
$
|
5.79
|
3 years
|
$
|
285,925
|
||||
Granted
|
702,499
|
2.50
|
||||||||
Exercised
|
(36,000)
|
6.30
|
95,976
|
|||||||
Forfeited/expired/cancelled
|
(275,000)
|
3.59
|
||||||||
Outstanding at June 30, 2020
|
1,034,124
|
$
|
4.12
|
6 years
|
$
|
598,628
|
||||
Exercisable at June 30, 2020
|
224,333
|
$
|
7.24
|
3 years
|
$
|
-
|
|
Stock Options Outstanding
|
Stock Options Exercisable
|
||||||||||||||||
Range of Exercise Prices
|
Number of
Shares
|
Average
Remaining
Contract Term
(Years)
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
Number of
Shares
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
|||||||||||
$1 to $2.79999
|
672,616
|
6.71
|
$
|
2.36
|
$
|
598,628
|
-
|
$
|
-
|
$
|
-
|
|||||||
$2.8 to $4.59999
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
|||||||||||
$4.6 to $6.39999
|
106,758
|
2.94
|
5.78
|
-
|
58,125
|
5.77
|
-
|
|||||||||||
$6.4 to $8.19999
|
207,875
|
3.56
|
7.31
|
-
|
147,458
|
7.28
|
-
|
|||||||||||
$8.2 to $12
|
46,875
|
3.10
|
11.45
|
-
|
18,750
|
11.45
|
-
|
|||||||||||
Total
|
1,034,124
|
5.52
|
$
|
4.12
|
$
|
598,628
|
224,333
|
$
|
7.24
|
$
|
-
|
|
Number of
Shares & Units
|
Weighted-
Average
Grant Date
Fair Value
|
||||||
Outstanding at December 31, 2019
|
545,986
|
$
|
7.47
|
|||||
Granted
|
610,301
|
2.57
|
||||||
Vested
|
(66,728
|
)
|
3.62
|
|||||
Forfeited/expired/cancelled
|
(470,174
|
)
|
6.58
|
|||||
Outstanding at June 30, 2020
|
619,385
|
$
|
3.32
|
(o) |
Geographic Information and Economic Dependency
|
|
For The Three Months Ended
June 30,
|
For The Six Months Ended
June 30,
|
||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Africa
|
$
|
552,570
|
$
|
2,342,740
|
$
|
1,436,085
|
$
|
4,759,040
|
||||||||
Asia
|
119,319
|
119,548
|
482,607
|
240,646
|
||||||||||||
Europe & Middle East
|
734,073
|
741,641
|
1,909,162
|
1,919,666
|
||||||||||||
Latin America
|
780,567
|
4,897,297
|
2,896,963
|
6,177,770
|
||||||||||||
United States
|
1,605,045
|
683,815
|
2,783,349
|
2,312,204
|
||||||||||||
$
|
3,791,574
|
$
|
8,785,041
|
$
|
9,508,166
|
$
|
15,409,326
|
|
June 30, 2020
|
December 31, 2019
|
||||||
Asia
|
$
|
357,921
|
$
|
393,299
|
||||
Europe & Middle East
|
171,767
|
165,029
|
||||||
Latin America
|
43,701
|
60,527
|
||||||
United States
|
7,132,501
|
5,314,714
|
||||||
|
$
|
7,705,890
|
$
|
5,933,569
|
(p) |
Accounts Payable and Accrued Liabilities:
|
|
June 30, 2020
|
December 31, 2019
|
||||||
Accounts payable – suppliers
|
$
|
6,588,598
|
$
|
3,144,098
|
||||
Accrued commissions and royalties
|
486,998
|
931,760
|
||||||
Accrued payroll
|
188,858
|
231,753
|
||||||
Accrued vacation
|
547,307
|
410,199
|
||||||
Accrued bonuses
|
350,479
|
215,000
|
||||||
Accrued severance
|
260,481
|
-
|
||||||
Accrued expenses – other
|
868,166
|
593,433
|
||||||
TOTAL
|
$
|
9,290,887
|
$
|
5,526,243
|
(q) |
Goodwill, Long-Lived Assets and Intangible Assets:
|
Beginning balance at December 31, 2019
|
$
|
5,872,690
|
||
Change in foreign currency exchange rate
|
(338,066
|
)
|
||
Balance at June 30, 2020
|
$
|
5,534,624
|
|
June 30, 2020
|
December 31, 2019
|
||||||||||||||||||
Weighted
Average
Remaining
Useful Life
|
Cost
|
Accumulated
Amortization
|
Net Book
Value
|
Cost
|
Accumulated
Amortization
|
Net Book
Value
|
||||||||||||||
Intellectual property
|
6
|
$
|
1,470,556
|
$
|
366,353
|
$
|
1,104,203
|
$
|
1,418,681
|
$
|
299,232
|
$
|
1,119,449
|
|||||||
Developed technology
|
6
|
1,924,990
|
400,304
|
1,524,686
|
1,922,682
|
266,550
|
1,656,132
|
|||||||||||||
Customer contracts/relationships
|
7
|
1,232,474
|
327,525
|
904,949
|
1,325,521
|
270,902
|
1,054,619
|
|||||||||||||
Trade names
|
8
|
107,796
|
36,440
|
71,356
|
114,946
|
30,794
|
84,152
|
|||||||||||||
$
|
4,735,816
|
$
|
1,130,622
|
$
|
3,605,194
|
$
|
4,781,830
|
$
|
867,478
|
$
|
3,914,352
|
(r) |
Taxes:
|
(s) |
Allowance for Doubtful Accounts:
|
(t) |
Foreign Currency Translation:
|
(u) |
Acquisition Costs:
|
(v) |
Recently Issued Accounting Standards:
|
(w) |
Severance, restructuring and other related costs:
|
● |
$150,000 in cash and 153,707 shares of common stock.
|
● |
Issuance of 316,456 shares of common stock to the founder and former chief executive officer of Orangelife, based on the transfer and approval of registration of certain of the Company’s product in Brazil prior to November 25, 2022. All of the shares may be deliverable in the event of change in control of Chembio. The number of shares issued was subject to adjustments based upon Orangelife’s working capital at closing. The fair value of the shares on the date of the acquisition was recorded in equity and was valued at $1.2 million.
|
|
Amount
|
|||
Net current assets
|
$
|
320,293
|
||
Property, plant and equipment and other assets
|
226,035
|
|||
Inventory
|
289,205
|
|||
Goodwill
|
986,058
|
|||
Deferred tax liability
|
(50,000
|
)
|
||
Other intangible assets (estimated useful life):
|
||||
Trade name (0.5 years)
|
5,000
|
|||
Customer contracts / relationships (5 years)
|
195,000
|
|||
Total consideration
|
$
|
1,971,591
|
|
Unaudited
Pro Forma
December 31, 2019
|
|||
Total revenues
|
$
|
35,157,248
|
||
Net loss
|
$
|
(13,654,001
|
)
|
|
Net loss per common share
|
$
|
(0.80
|
)
|
|
Diluted net loss per common share
|
$
|
(0.80
|
)
|
(a) |
Common Stock
|
(b) |
Preferred Stock
|
(c) |
Treasury Stock
|
(d) |
Options, Restricted Stock and Restricted Stock Units
|
(a) |
Concentrations:
|
|
For The Three Months Ended
|
For The Six Months Ended
|
Accounts Receivable as of
|
|||||||||||||||||||||||||||||||||||||
June 30, 2020
|
June 30, 2019
|
June 30, 2020
|
June 30, 2019
|
June 30, 2020
|
Dec. 31, 2019
|
|||||||||||||||||||||||||||||||||||
Sales
|
% of Sales
|
Sales
|
% of Sales
|
Sales
|
% of Sales
|
Sales
|
% of Sales
|
|||||||||||||||||||||||||||||||||
Customer 1
|
$
|
657,304
|
17.0
|
%
|
$
|
4,573,434
|
54
|
%
|
$
|
2,297,376
|
24.0
|
%
|
$
|
5,615,932
|
38
|
%
|
$
|
806,196
|
$
|
941,962
|
||||||||||||||||||||
Customer 2
|
$
|
-
|
0.0
|
%
|
$
|
1,627,075
|
19
|
%
|
$
|
-
|
0.0
|
%
|
$
|
3,460,666
|
23
|
%
|
$
|
-
|
$
|
-
|
(b) |
Governmental Regulation:
|
(c) |
Employment Contracts:
|
2020
|
$
|
382,500
|
||
2021
|
765,000
|
|||
2022
|
400,000
|
(d) |
Pension Plan:
|
(e) |
Leases:
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Operating lease expense
|
$
|
388,951
|
$
|
400,658
|
$
|
852,808
|
$
|
682,261
|
||||||||
Finance lease cost
|
||||||||||||||||
Amortization of right-of-use assets
|
$
|
14,687
|
$
|
-
|
$
|
27,085
|
$
|
-
|
||||||||
Interest on lease liabilities
|
5,156
|
-
|
9,367
|
-
|
||||||||||||
Total finance lease expense
|
$
|
19,843
|
$
|
-
|
$
|
36,452
|
$
|
-
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
|
2020
|
2019
|
2020
|
2019
|
||||||||||||
Cash paid for amounts included in the measurement of lease liabilities:
|
||||||||||||||||
Operating cash flows for operating leases
|
$
|
292,058
|
$
|
147,107
|
$
|
457,277
|
$
|
305,157
|
||||||||
Operating cash flows for finance leases
|
5,156
|
-
|
9,367
|
-
|
||||||||||||
Financing cash flows for finance leases
|
12,666
|
-
|
23,578
|
-
|
||||||||||||
Right-of-use assets obtained in exchange for lease obligations:
|
||||||||||||||||
Operating leases
|
-
|
-
|
-
|
6,949,611
|
||||||||||||
Finance leases
|
$
|
47,499
|
$
|
233,722
|
$
|
75,852
|
$
|
233,722
|
|
June 30, 2020
|
June 30, 2019
|
||||||
Finance Leases
|
||||||||
Finance lease right of use asset
|
$
|
309,574
|
$
|
233,722
|
||||
Accumulated depreciation
|
(50,690
|
)
|
-
|
|||||
Finance lease right of use asset, net
|
$
|
258,884
|
233,722
|
|||||
|
||||||||
Weighted-Average Remaining Lease Term
|
||||||||
Operating leases
|
9 years
|
10 years
|
||||||
Finance leases
|
4 years
|
5 years
|
||||||
|
||||||||
Weighted-Average Discount Rate
|
||||||||
Operating leases
|
8.62
|
%
|
8.52
|
%
|
||||
Finance leases
|
9.73
|
%
|
7.0
|
%
|
|
June 30, 2020
|
June 30, 2019
|
||||||||||||||
|
Operating
Leases
|
Finance
Leases
|
Operating
Leases
|
Finance
Leases
|
||||||||||||
2019 and 2020
|
$
|
682,667
|
$
|
37,720
|
$
|
1,129,543
|
$
|
27,768
|
||||||||
2021
|
1,209,787
|
75,440
|
998,071
|
55,536
|
||||||||||||
2022
|
1,057,757
|
75,440
|
1,026,044
|
55,536
|
||||||||||||
2023
|
1,026,272
|
75,440
|
1,011,085
|
55,536
|
||||||||||||
2024
|
1,018,875
|
47,672
|
-
|
55,536
|
||||||||||||
Thereafter
|
5,773,887
|
4,774
|
6,792,767
|
27,767
|
||||||||||||
Total lease payments
|
$
|
10,769,245
|
$
|
316,486
|
$
|
10,957,510
|
$
|
277,679
|
||||||||
Less: imputed interest
|
3,427,535
|
50,366
|
3,986,013
|
43,957
|
||||||||||||
Total
|
$
|
7,341,710
|
$
|
266,120
|
$
|
6,971,497
|
$
|
233,722
|
(f) |
Litigation:
|
Stock price on issuance date
|
$
|
5.40
|
||
Strike Price
|
$
|
5.22
|
||
Risk-free interest rate
|
1.45
|
%
|
||
Volatility
|
43.65
|
%
|
||
Expected life
|
7 years
|
• |
We acquired three regulatory approvals of the DPP COVID-19 System in our targeted global testing market: an Emergency Use Authorization, or EUA, granted by the U.S. Food and Drug Administration, or FDA, in April 2020; an approval for emergency use issued by Brazil’s Agência Nacional de Vigilância Sanitária, or ANVISA, in April 2020, and a CE Marking for the European Union obtained in early May 2020.
|
• |
Stony Brook Medicine selected the DPP COVID-19 System to help identify persons who have recovered from COVID-19 for use in an FDA-approved investigation to determine if those persons’ convalescent blood plasma can help treat patients with an active COVID-19 infection.
|
• |
We began shipping the DPP COVID-19 System to fulfill a $4 million purchase order from Bio-Manguinhos, a long-standing customer that is a subsidiary of the foundation responsible for the development and production of vaccines, diagnostics and biopharmaceuticals for Brazil’s national public health system.
|
• |
We initiated commercial shipments of the DPP COVID-19 System to customers in the United States.
|
• |
We strengthened our balance sheet by raising $28.4 million in a secondary public offering in May 2020.
|
• |
We stablished a non-exclusive distribution relationship with Thermo Fisher Scientific’s healthcare channel for the distribution of Chembio’s DPP COVID-19 System in the U.S.
|
• |
We stand behind the real-world clinical data, including that which we submitted to the FDA, in connection with the DPP COVID-19 IgM/IgG System EUA, and
|
• |
The FDA’s recent identification of the performance criteria for COVID-19 serology tests clarified our path forward in working to revise the DPP COVID-19 IgM/IgG System to meet or exceed current FDA requirements.
|
• |
We acknowledge the policy change that led the FDA to create performance criteria and rely on the NCI study for those purposes.
|
• |
On April 15, 2020, the DPP COVID-19 IgM/IgG System was granted an EUA. Subsequently, the FDA announced the adoption of a performance review process based in part on a NCI methodology for the evaluation of COVID 19 serology tests. The NCI report acknowledges that this process, which evaluates COVID-19 serology test sensitivity and specificity using a panel of pre-selected samples, may not be indicative of either performance in the real-world or performance of finger stick blood as used in the Chembio system.
|
• |
In addition, the NCI study does not invalidate the real-world clinical data that we submitted to the FDA, including that compiled by Chembio as well as independent evaluators at two university medical centers.
|
• |
The importance of our system’s real-world performance has been highlighted by a number of customers.
|
• |
enhanced sensitivity and specificity;
|
• |
advanced multiplexing; and
|
• |
when used with our Micro Reader, accurate results processed in approximately 15 seconds.
|
Product
|
U.S.
|
International
|
DPP COVID-19 IgM/IgG System
|
✓
|
|
DPP HIV 1/2 Assay
|
✓
|
✓
|
DPP HIV-Syphilis System
|
Pending FDA Approval
|
✓
|
DPP Syphilis Screen & Confirm Assay
|
✓
|
|
DPP ZCD IgM/IgG System
|
✓
|
|
DPP Dengue NS1 Antigen System
|
✓
|
|
DPP Dengue IgM/IgG System
|
✓
|
|
DPP Zika IgM System
|
✓
|
✓
|
DPP Zika IgM/IgG System
|
✓
|
|
DPP Chikungunya System
|
✓
|
|
DPP Ebola Antigen System
|
✓ EUA
|
|
DPP Leishmaniasis Assay
|
✓
|
|
HIV 1/2 STAT-PAK Assay
|
✓
|
✓
|
Chagas STAT-PAK Assay
|
✓
|
|
SURE CHECK HIV 1/2 Assay
|
✓
|
✓
|
SURE CHECK HIV Self-Test
|
✓
|
• |
our registration of existing and new products in unchartered countries and regions, such as selected countries in Latin America and Southeast Asia;
|
• |
our entry into new market segments, such as international HIV self-testing; and
|
• |
advances in our product pipeline in infectious disease with key products, including a multiplex test for HIV and Syphilis targeted for sale in the United States and tests for Chikungunya, Dengue and Zika for sale internationally.
|
• |
HIV has claimed more than 35 million lives, including 770,000 in 2018. Approximately 37.9 million people were living with HIV at the end of 2018, and 1.7 million were newly infected during 2018.
|
• |
There were 18.0 million prevalent cases of Syphilis as of 2012, and 5.6 million new infections were estimated to occur annually.
|
• |
Elimination of mother-to-child transmission, or MTCT, of both HIV and Syphilis is a global health priority. In 2013, 1.9 million pregnant women were infected with Syphilis worldwide. Congenital syphilis contributes significantly to infant mortality, accounting for 305,000 annual perinatal deaths worldwide in 2013. Globally, more than 1.4 million pregnant women were infected with HIV as of 2015, and MTCT of HIV is estimated to have resulted in over 150,000 infant cases in 2015.
|
Product
|
Collaborator
|
Phase I
Feasibility
|
Phase II
Development
|
Phase III
Verification &
Validation
|
Phase IV
Clinical &
Regulatory
|
Phase V
Commercial
Launch
|
DPP HIV-Syphilis System (US)
|
Self-funded
|
✓
|
✓
|
✓
|
✓
|
PMA pending
|
DPP Dengue IgM/IgG System
|
Self-funded
|
✓
|
✓
|
✓
|
✓
|
CE and ANVISA
|
DPP Dengue NS1 Antigen System
|
Self-funded
|
✓
|
✓
|
✓
|
✓
|
CE and ANVISA pending
|
DPP Chikungunya IgM/IgG System
|
Self-funded
|
✓
|
✓
|
✓
|
✓
|
CE and ANVISA
|
DPP Zika Chikungunya Dengue IgM/IgG System
|
Self-funded
|
✓
|
✓
|
✓
|
✓
|
CE and ANVISA
|
DPP Ebola Antigen System
|
CDC
|
✓
|
✓
|
✓
|
✓
|
FDA-EUA
|
DPP Fever Assay Asia
|
FIND
|
✓
|
✓
|
✓
|
✓
|
|
DPP Fever Assay Africa
|
Paul Allen Foundation
|
✓
|
✓
|
✓
|
||
DPP Fever Assay Malaysia
|
Self-funded
|
✓
|
✓
|
✓
|
✓
|
• |
In January 2015 we entered into an agreement with the Concussion Science Group Division of Perseus Science Group LLC, or Perseus, to develop a rapid diagnostic test for traumatic brain injury utilizing both our DPP and optical analyzer technologies.
|
• |
In October 2017 we signed a biomarker development project agreement with AstraZeneca plc, or AstraZeneca, utilizing both our DPP and optical analyzer technologies.
|
• |
In April 2018, we entered into a collaboration agreement with LumiraDx to develop new rapid diagnostic tests for infectious diseases. Under terms of the agreement, we receive funding from LumiraDx, subject to satisfying certain milestones, to develop certain neibiw rapid infectious disease tests. Following the regulatory approval and commercialization of tests in accordance with the agreement, we will both sell reagents to, and receive royalty payments from, LumiraDx on sales of all products developed through this collaboration.
|
• |
In July 2019 we entered into a collaboration agreement with Shire, a subsidiary of Takeda Pharmaceutical to develop a novel rapid diagnostic test to detect an undisclosed biomarker.
|
• |
In March 2020 we completed the technical feasibility phase for a potential companion/compatible diagnostic test being developed in collaboration with Shire. The program is focused within Takeda’s Rare Diseases Therapeutic Area Unit, which aspires to transform the treatment of rare diseases in immunology, hematology, metabolic and lysosomal storage disorders. Based on the progress, in March 2020 Takeda provided the next tranche of funding for the next phase of the program.
|
• |
We entered into agreements with LumiraDx in March 2020 (as amended in April 2020) to, among other things, develop a diagnostic test for the detection of the COVID-19 virus and IgM and IgG antibodies on the LumiraDx platform.
|
• |
In July 2020, we were selected to conduct a second research and development services program for Takeda utilizing our DPP technology and Micro Reader analyzers.
|
Product
|
Collaborator
|
Phase I
Feasibility
|
Phase II
Development
|
Phase III Verification &Validation
|
Phase IV Clinical/
Regulatory
|
Phase V Commercial Launch
|
DPP Rare Disease (undisclosed biomarker)
|
Takeda
|
✓
|
✓
|
|||
DPP (undisclosed biomarker)
|
Takeda
|
✓
|
||||
DPP COVID-19 Antigen System
|
BARDA
|
✓
|
||||
COVID-19 Test
|
LumiraDx
|
✓
|
✓
|
✓
|
||
Infectious Disease Portfolio
|
LumiraDx
|
✓
|
✓
|
|||
DPP Biomarker Development Project
(undisclosed biomarker)
|
AstraZeneca
|
✓
|
✓
|
✓
|
CE Mark*
|
|
DPP TBI
|
Perseus
|
✓
|
✓
|
• |
patent protection;
|
• |
scientific expertise;
|
• |
ability to develop and market products and processes;
|
• |
ability to obtain required regulatory approvals;
|
• |
ability to manufacture cost-effective products that meet applicable regulatory requirements;
|
• |
access to adequate capital; and,
|
• |
ability to attract and retain qualified personnel.
|
|
June 30, 2020
|
June 30, 2019
|
||||||||||||||
TOTAL REVENUES
|
$
|
5,111
|
100
|
%
|
$
|
9,888
|
100
|
%
|
||||||||
OPERATING COSTS AND EXPENSES:
|
||||||||||||||||
Cost of product sales
|
5,671
|
111
|
%
|
6,990
|
71
|
%
|
||||||||||
Research and development expenses
|
1,922
|
38
|
%
|
2,101
|
22
|
%
|
||||||||||
Selling, general and administrative expenses
|
4,397
|
41
|
%
|
4,097
|
43
|
%
|
||||||||||
Severance and restructuring costs
|
388
|
0
|
%
|
-
|
0
|
%
|
||||||||||
12,378
|
13,188
|
|||||||||||||||
LOSS FROM OPERATIONS
|
(7,267
|
)
|
(3,300
|
)
|
||||||||||||
OTHER (EXPENSE) INCOME, NET
|
(712
|
)
|
6
|
|||||||||||||
LOSS BEFORE INCOME TAXES
|
(7,979
|
)
|
(156
|
)%
|
(3,294
|
)
|
(36
|
)%
|
||||||||
Income tax benefit
|
(135
|
)
|
(107
|
)
|
||||||||||||
NET LOSS
|
$
|
(7,844
|
)
|
$
|
(3,187
|
)
|
For the Three Months
Ended June 30
|
Favorable/(Unfavorable)
|
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
Net product sales
|
$
|
3,792
|
$
|
8,785
|
$
|
(4,993
|
)
|
56.8
|
%
|
|||||||
Less: Cost of product sales
|
(5,671
|
)
|
(6,990
|
)
|
1,319
|
18.9
|
%
|
|||||||||
Gross product margin
|
$
|
(1,879
|
)
|
$
|
1,795
|
$
|
(3,674
|
)
|
204.7
|
%
|
||||||
Gross product margin percentage
|
(49.6
|
)%
|
20.4
|
%
|
• |
$1 million unfavorable product sales volume as described above, together with
|
• |
$2.6 million unfavorable product margins related to the cost of returned product and product shipped outside the U.S.
|
For the Three Months
Ended June 30
|
Favorable/(Unfavorable)
|
|||||||||||||||
2020
|
2019
|
$ Change
|
% Change
|
|||||||||||||
Clinical and regulatory affairs
|
$
|
178
|
$
|
323
|
$
|
145
|
44.9
|
%
|
||||||||
Other research and development
|
1,744
|
1,778
|
34
|
1.9
|
%
|
|||||||||||
Total research and development
|
$
|
1,922
|
$
|
2,101
|
$
|
179
|
8.5
|
%
|
June 30, 2020
|
June 30, 2019
|
|||||||||||||||
TOTAL REVENUES
|
$
|
11,971
|
100
|
%
|
$
|
18,430
|
100
|
%
|
||||||||
OPERATING COSTS AND EXPENSES:
|
||||||||||||||||
Cost of product sales
|
10,045
|
84
|
%
|
12,002
|
65
|
%
|
||||||||||
Research and development expenses
|
3,881
|
32
|
%
|
4,318
|
23
|
%
|
||||||||||
Selling, general and administrative expenses
|
8,554
|
71
|
%
|
8,110
|
44
|
%
|
||||||||||
Severance and restructuring costs
|
1,111
|
9
|
%
|
-
|
0
|
%
|
||||||||||
Acquisition costs
|
64
|
1
|
%
|
396
|
2
|
%
|
||||||||||
23,655
|
24,827
|
|||||||||||||||
LOSS FROM OPERATIONS
|
(11,684
|
)
|
(6,396
|
)
|
||||||||||||
OTHER (EXPENSE) INCOME, NET
|
(1,374
|
)
|
13
|
|||||||||||||
LOSS BEFORE INCOME TAXES
|
(13,058
|
)
|
(109
|
)%
|
(6,383
|
)
|
(35
|
)%
|
||||||||
Income tax benefit
|
(215
|
)
|
(380
|
)
|
||||||||||||
NET LOSS
|
$
|
(12,843
|
)
|
$
|
(6,003
|
)
|
For the Six Months Ended
|
Favorable/(Unfavorable)
|
|||||||||||||||
June 30, 2020
|
June 30, 2019
|
$ Change
|
% Change
|
|||||||||||||
Net product sales
|
$
|
9,508
|
$
|
15,409
|
$
|
(5,901
|
)
|
38.3
|
%
|
|||||||
Less: Cost of product sales
|
10,045
|
(12,002
|
)
|
1,957
|
16.3
|
%
|
||||||||||
Gross product margin
|
$
|
(537
|
)
|
$
|
3,407
|
$
|
(3,944
|
)
|
115.8
|
%
|
||||||
Gross product margin percentage
|
(5.6
|
)%
|
22.1
|
%
|
• |
$1.3 million unfavorable product sales volume as described above, together with
|
• |
$2.6 million unfavorable product margins related to the cost of returned product and product shipped outside the U.S.
|
For the Six Months Ended
|
Favorable/(Unfavorable)
|
|||||||||||||||
June 30, 2020
|
June 30, 2019
|
$ Change
|
% Change
|
|||||||||||||
Clinical and regulatory affairs
|
$
|
500
|
$
|
763
|
$
|
263
|
34.5
|
%
|
||||||||
Other research and development
|
3,381
|
3,555
|
174
|
4.9
|
%
|
|||||||||||
Total Research and Development
|
$
|
3,881
|
$
|
4,318
|
$
|
437
|
10.1
|
%
|
June 30, 2020
|
||||
(in thousands)
|
||||
Cash and cash equivalents
|
$
|
36,427,468
|
||
Accounts receivable, net of allowance for doubtful amounts
|
2,610,587
|
|||
Inventories, net
|
14,131,540
|
|||
Prepaid expenses and other current assets
|
742,908
|
|||
Total current assets
|
53,912,503
|
|||
Less: Total current liabilities
|
14,296,153
|
|||
Working capital
|
$
|
39,616,350
|
ITEM 4. |
CONTROLS AND PROCEDURES
|
(a) |
Disclosure Controls and Procedures. Under the supervision and with the participation of our senior management, consisting of our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report. Based on this evaluation, our management, including our principal executive officer and principal financial officer, concluded that as of June 30, 2020 our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in our Exchange Act reports is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
|
(b) |
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 under the Exchange Act that occurred during the three months ended June 30, 2020, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
|
PART II. |
OTHER INFORMATION
|
ITEM 1. |
LEGAL PROCEEDINGS
|
ITEM 1A. |
RISK FACTORS
|
• |
our ability to compete with companies that are currently in, or may in the future enter, the market for our products;
|
• |
our ability to control costs, including our operating expenses;
|
• |
our ability to successfully expand our business;
|
• |
our ability to meet customer demand;
|
• |
the amount and timing of operating expenses, particularly sales and manufacturing expenses, related to the maintenance and expansion of our business, operations and infrastructure; and
|
• |
general economic and political conditions in our markets.
|
• |
perceptions by members of the health care community, including physicians, about the safety and effectiveness of our products;
|
• |
limitation on use or warnings required by FDA in our product labeling;
|
• |
cost-effectiveness of our products relative to competing products;
|
• |
convenience and ease of administration;
|
• |
potential advantages of alternative treatment methods;
|
• |
availability of reimbursement for our products from government or other healthcare payers; and
|
• |
effectiveness of marketing and distribution efforts by us and our licensees and distributors, if any.
|
• |
patent protection;
|
• |
scientific expertise;
|
• |
ability to develop and market products and processes;
|
• |
ability to obtain required regulatory approvals;
|
• |
ability to manufacture cost-effective products that meet applicable regulatory requirements;
|
• |
access to adequate capital; and
|
• |
ability to attract and retain qualified personnel.
|
• |
incur, assume or guarantee additional Indebtedness (as defined in the Credit Agreement);
|
• |
repurchase capital stock;
|
• |
make other restricted payments including, without limitation, paying dividends and making investments;
|
• |
create liens;
|
• |
sell or otherwise dispose of assets, including capital stock of subsidiaries;
|
• |
enter into agreements that restrict dividends from subsidiaries;
|
• |
enter into mergers or consolidations; and
|
• |
enter into transactions with affiliates
|
ITEM 6. |
EXHIBITS
|
Number
|
Description
|
|
Underwriting Agreement dated May 7, 2020 between Chembio Diagnostics, Inc. and Robert W. Baird & Co. Incorporated, as representative of the several underwriters named therein
|
||
Amendment No. 1, dated June 16, 2020, to the letter agreement dated January 17, 2020 between Chembio Diagnostics, Inc. and Gail S. Page
|
||
Letter agreement dated June 15, 2020 between Chembio Diagnostics, Inc. and Gail S. Page
|
||
Amendment No. 1, dated June 30, 2020, to the letter agreement dated June 15, 2020 between Chembio Diagnostics, Inc. and Gail S. Page
|
||
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
||
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
|
Inline XBRL Instance Document
|
|
101.SCH
|
Inline XBRL Taxonomy Extension Schema Document
|
|
101.CAL
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document
|
|
101.DEF
|
Inline XBRL Taxonomy Definition Linkbase Document
|
|
101.LAB
|
Inline XBRL Taxonomy Label Linkbase Document
|
|
101.PRE
|
Inline XBRL Taxonomy Presentation Linkbase Document
|
|
104
|
Cover page formatted as Inline XBRL and contained in Exhibit 101
|
† |
Indicates management contract or compensatory plan or arrangement.
|
* |
The certifications attached as Exhibit 32.1 accompany the Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.
|
‡ |
Certain sensitive personally identifiable information in this exhibit was omitted by means of redacting a portion of the text and replacing it with [***].
|
|
Chembio Diagnostics, Inc.
|
|
Date: August 7, 2020
|
By: /s/ Richard L. Eberly
|
|
Richard L. Eberly
|
||
Chief Executive Officer and President
|
||
Date: August 7, 2020
|
By: /s / Neil A. Goldman
|
|
Neil A. Goldman
|
||
Chief Financial Officer and Executive Vice President
|
Gail S. Page
|
Chembio Diagnostics, Inc.
|
||
/s/ Gail S. Page
|
By:
|
/s/ Richard L. Eberly
|
|
Richard L. Eberly
|
|||
Chief Executive Officer and President
|
1. |
Duties. You agree to serve the Company faithfully, diligently and competently and, except as determined in accordance with Section 1(b), to devote approximately one-half of your full
working time to the performance of the duties and responsibilities set forth in this Section 1.
|
(a) |
Basic Chair Duties. During the Term, you will have all of the duties, responsibilities and authority commensurate with the position of Chair of the Board during the Term, including:
|
(i) |
to chair meetings of the Board, and otherwise administer affairs of the Board, in a manner that will foster a collective decision-making process for the Board’s actions and responsibilities;
|
|
(ii) |
to serve as the primary liaison between the Board and members of management of the Company, including to ensure an effective communication flow from management to the Board and its committees;
|
|
(iii) |
as otherwise set forth from time to time in the charter and bylaws of the Company or in the corporate law of the jurisdiction in which the Company has been incorporated; and
|
|
(iv) |
as otherwise may be requested of you by the Board from time to time consistent with the position of Chair of the Board.
|
|
(b) |
Supplemental Executive Chair Duties. As Executive Chair you will have the following additional duties, responsibilities and authority through at least December 31, 2020:
|
|
(i) |
to the extent specifically requested by the Chief Executive Officer and President of the Company (the “CEO”), advise the CEO on a strategic level with respect to operations and finance and advise
other members of the Company’s management as the CEO specifies; and
|
|
(ii) |
serve as mentor to the CEO by providing advice, counseling and supervision to the CEO when and as specifically requested by the CEO and seeking to motivate and support the CEO in the execution of his duties and responsibilities.
|
|
In December 2020, you, the Compensation Committee of the Board (the “Committee”) and the CEO will discuss and mutually evaluate the nature and extent of the duties,
responsibilities and authority that you will have under this Section 1(b) during the remainder of the Term, commencing on January 1, 2021, in light of then-existing conditions and circumstances. The Committee reserves the right, based on
such discussion and evaluation, to modify the duties, responsibilities and authority set forth in the first sentence of this Section 1(b) for such remainder of the Term, except that no such modification may, without your prior consent,
increase the hours required for the performance of your duties and responsibilities as Executive Chair in 2021 to exceed one-half of your full working time.
|
|
(c) |
Clarification of Scope of Duties. Your duties and responsibilities as Executive Chair shall consist exclusively of actions taken to help the Board to fulfill its duties and responsibilities. As
Executive Chair, you shall provide leadership to the Board and not to the Company, which is the responsibility of the CEO. Your duties, responsibilities and authority as Executive Chair shall not include any duties, responsibilities and
authority associated with the position of CEO or of any other management position, and the provisions of Section 1(b) shall not be interpreted in a manner that, whether at the request of the CEO or otherwise, would result in your performing
any duties or responsibilities, or exercising any authority, associated with the position of CEO or of any other management position. For purposes of clarity, it is understood that your duties, responsibilities and authority as Executive
Chair during the Term will be more limited than those you have been fulfilling during the transition period following your service as the Company’s interim chief executive officer, including the portion of such transition period during
which you served as Executive Chair prior to the date hereof. As examples (but not an exclusive list) of actions and activities that you will no longer be required or authorized to perform as of the commencement of the Term, you shall not
participate in (i) executive leadership team or other management meetings, except as may be requested by the CEO for a specific, limited issue or purpose or (ii) investor or public relations activities, except as contemplated by the
Company’s written communications policies and procedures for director interaction with stockholders and other market participants (for which purpose the Company confirms that an updated statement of such policies and programs will be
implemented on or before June 30, 2020). The Committee shall, after consulting with the Executive Chair and the CEO, have full power and authority to rule on any question or uncertainty that arises with respect to the interpretation of the
subject matter of this Section 1(c).
|
|
(d) |
Other Board Duties. It is expected that you will continue as a member of the Board throughout the Term, subject to your re-election to the Board at the Company’s 2020 Annual Meeting of
Stockholders. During the Term, you will not serve as a member of any of the standing committees of the Board (that is, the Audit Committee, the Compensation Committee, or the Nominating and Corporate Governance Committee). You may, at the
invitation of the appropriate Chairs of those standing committees, elect to attend meetings of any or all of those committees to the extent you determine that it will help you to fulfill your duties and responsibilities as Executive Chair.
|
|
(e) |
Unrelated Activities. You may serve in any capacity with one or more other public or private organizations during the Term, provided that any such
activities do not, at the time the activities commence or thereafter, (i) create an actual or potential business or fiduciary conflict of interest with your services as Executive Chair, (ii) individually or in the aggregate, interfere
materially with the performance of your duties to the Company in your capacity as Executive Chair, or (iii) violate or breach any written policy or program of the Company applicable in your capacity as a member of the Board.
|
2. |
Term. Notwithstanding any other provision of this Agreement, the Term will terminate immediately upon the expiration or termination of your service as a member of the Board for any reason prior to the Company’s 2021 Annual Meeting
of Stockholders.
|
3. |
Compensation.
|
|
(a) |
Retainer. The Company will pay you a cash retainer at an annualized rate of $175,000 for your time commitment of one-half of your full time during the Term, less applicable withholdings for
taxes, payable in accordance with the Company’s historical practice for Board-related retainers or with such other mutual agreement as may be agreed upon by the parties.
|
|
(b) |
Equity Awards. You will not be entitled to receive any equity award from the Company during the Term solely in connection with your service as Executive Chair. For purposes of clarity, your
currently outstanding equity awards will continue to vest during the Term in accordance with their terms, without any change as the result of this Agreement.
|
|
(c) |
Reimbursements. The Company will reimburse you for reasonable out‑of-pocket business, entertainment and travel expenses in connection with the performance of your duties under this Agreement that
are incurred and submitted in accordance with the Company’s expense reimbursement policy from time to time in effect with respect to directors generally.
|
|
(d) |
Bonuses. Cash or equity bonuses, if any, for your services as Executive Chair will be at the sole discretion of the Committee and shall be agreed upon by you and the Committee in advance when and
if determined by the Committee to be appropriate.
|
4. |
Independent Contractor. You shall be an independent contractor, and not an employee, of the Company.
|
5. |
Confidential Information and Company Records.
|
|
(a) |
Confidentiality. During the Term and continuing thereafter, you agree that you will not, whether alone or in association with any other person, directly or indirectly, knowingly divulge, furnish
or make accessible to any third person or organization other than in the regular course of the Company’s business any confidential information concerning the Company or its subsidiaries or its or their business, including confidential
methods of operation and organization, confidential sources of supply and customer or other mailing lists.
|
|
(b) |
Records. All records, files, documents and the like, or abstracts, summaries or copies thereof, relating to the business of the Company or the business of any subsidiary or affiliated companies,
which the Company or you prepare or use or come into contact with, will remain the sole property of the Company or the affiliated or subsidiary company, as the case may be, and will be promptly returned upon termination of the Transition
Period or at such earlier time as may be requested by the Board.
|
|
(c) |
Enforcement. The provisions of this Section 5 shall survive the end of the Term and the end of the Transition Period. You acknowledge that any remedy at law for a breach or threatened breach of
any of the provisions of this Section 5 may be inadequate and that accordingly the Company shall be entitled to an injunction or specific performance or any other mode of equitable relief without the necessity of showing any actual damage,
posting a bond or furnishing other security.
|
6. |
Company Policies. You will be bound by and comply fully with the Company’s standard confidentiality agreement (a form of which was been provided to you), insider trading policy, code of business conduct and ethics, and any other
policies and programs adopted by the Company regulating the behavior of its employees, as such policies and programs may be amended from time to time to the extent the same are not inconsistent with this Agreement.
|
7. |
Indemnification. To the maximum extent permitted by law, you will be indemnified under the Company’s charter and bylaws while serving as Executive Chair, and you will continue to be named as an insured on the director and officer
liability insurance policy currently maintained by the Company, or as may be maintained by the Company from time to time.
|
8. |
Miscellaneous.
|
|
(a) |
Notices. Notices under this Agreement must be in writing and will be deemed to have been given when personally delivered or two days after mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to you will be addressed to you at the home address that you have most recently communicated to the Company in writing. Notices to the Company will be addressed to the CEO at the
Company’s corporate headquarters. Either party hereto may change its address for the purpose of this Section 8(a) by written notice similarly given.
|
|
(b) |
Successors. This Agreement is binding on and may be enforced by the Company and its successors and permitted assigns and is binding on and may be enforced by you and your heirs and legal
representatives.
|
|
(c) |
Waiver. No provision of this Agreement may be modified or waived except in writing signed by you and a duly authorized officer of the Company.
|
|
(d) |
Severability. The invalidity, illegality or unenforceability of any provision or provisions of this Agreement shall not affect any other provision of this Agreement, which shall remain in full
force and effect, nor shall the invalidity, illegality or unenforceability of a portion of any provision of this Agreement affect the balance of such provision. In the event that any one or more of the provisions contained in this Agreement
or any portion thereof shall for any reason be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be reformed, construed and enforced as if such invalid, illegal or unenforceable provision had never been
contained in this Agreement.
|
|
(e) |
Survival. The provisions of this Agreement shall survive the expiration or termination of the Term for any reason to the extent necessary to enable the parties to enforce their respective rights
under this Agreement.
|
|
(f) |
Entire Agreement. This Agreement constitutes the entire understanding and agreement you and between the Company regarding your service as Executive Chair. This Agreement supersedes all prior
negotiations, discussions, correspondence, communications, understandings and agreements between you and the Company relating to such service.
|
|
(g) |
Modifications. This Agreement may not be modified or amended, nor may any rights under it be waived, except in a writing signed and agreed to by both you and the Committee.
|
|
(h) |
Interpretation. For purposes of this Agreement:
|
|
(i) |
headings used in this Agreement are for convenience of reference only and shall not, for any purpose, be deemed a part of this Agreement;
|
|
(ii) |
the word “including” as used in this Agreement shall not be construed so as to exclude any other thing not referred to or described; and
|
|
(iii) |
this Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting an instrument or causing any instrument to be drafted.
|
|
(i) |
Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED IN THAT STATE, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
|
Chembio Diagnostics Inc.
|
||
By:
|
/s/ Richard L. Eberly
|
|
Chief Executive Officer and President
|
||
Accepted and agreed:
|
||
Gail S. Page
|
||
/s/ Gail S. Page
|
|
1. |
Term. Notwithstanding any provision of the Agreement, the Term shall terminate as of 5:00 p.m., Eastern daylight saving
time, on June 30, 2020, and Page’s performance of, and compensation for, services as Executive Chair shall terminate as of such time.
|
|
2. |
Board Service and Compensation. Page shall serve as a member of the Board until her term expires at the Annual Meeting.
During the period from the end of the Term until the Annual Meeting: (a) Page shall be entitled to receive a retainer fee for service as a member of the Board, in accordance with the policy in effect as of the date of the Amendment with
respect to non-employee members of the Board generally; (b) Page’s currently outstanding equity awards shall continue to vest in accordance with their terms, without any change as the result of this Agreement, and she shall be entitled to
elect to net exercise some or all of her outstanding vested options, consistent with the terms of the options and the Company’s past practices; and (c) the Company shall reimburse Page for her reasonable out of-pocket expenses that are
incurred and submitted in accordance with the Company’s expense reimbursement policy from time to time in effect with respect to non-employee members of the Board generally.
|
|
3. |
Covenants. Section 5 of the Agreement is deleted in its entirety and is amended and restated as set forth below:
|
(a)
|
Confidentiality.
|
|
(i) |
Page acknowledges that, in the course of her services (her “Services”) as interim Chief Executive Officer of the Company, as a consultant to the Company during the
Transition Period and as a member of the Board (including certain of the committees of the Board), Page has and will come to know general and specific information (collectively, “Confidential Information”)
that is confidential and proprietary to the Company and/or its subsidiaries (collectively, the “Company Entities”). Confidential Information includes oral and written information about, relating to or
concerning the Company Entities that the Company has, by its policies or otherwise, indicated (A) should be kept confidential, (B) should reasonably be deemed confidential by Page whether or not it was designated as confidential, or (C) if
disclosed could be injurious to any of the Company Entities. Confidential Information includes business plans, concepts, strategies, proposals, processes, methods, internal procedures, financial statements, projections, technical
specifications, data, supplier lists, marketing plans, sales strategies, product designs, customer information, and other confidential operational information of any of the Company Entities. Without limiting the generality of the foregoing,
Confidential Information specifically includes the Company Entities’: personnel lists and files, and related confidential information; hiring plans and strategies; compensation data and strategies; talent management plans and strategies; and
sales and marketing strategies.
|
|
(ii) |
Page agrees that Confidential Information is the sole and exclusive property of the Company Entities, and Page agrees to hold, in a fiduciary capacity for the benefit of the Company Entities, all Confidential
Information acquired by Page during the period of her Services (including the time from the date of this Amendment to the date of the Annual Meeting). Page agrees and covenants that, other than as required by law, she shall not use to the
detriment of any Company Entity or divulge, publicly or privately, any specified or other Confidential Information regarding any aspect of the business and operations of the Company Entities acquired during or as a result of her Services.
Furthermore, to the extent that disclosure of any Confidential Information is controlled by statute, regulation or other law, Page agrees that she is bound by such laws and that the Agreement, as amended by this Amendment, shall not operate
as a waiver of any such non-disclosure requirement.
|
(iii) |
Page agrees that, during the six‑month period following the Annual Meeting, she shall refrain from making any statements, whether privately or publicly and whether implied or expressed, concerning any of the
Company Entities, their respective businesses or operations, or any of their respective directors, officers, employees or service providers (including accountants, attorneys, financial advisers, and lenders and other creditors) other than as
required by law, except (A) with respect to communications, on a confidential basis, with her accountants, attorneys, financial advisers and credit providers or her immediate family members or (B) with prior written permission from the
Company and in cooperation with the Company’s internal personnel and investor relations firm. The requirements of this paragraph (iii) are in addition to the requirements of Section 5(c).
|
|
(b) |
Records. All records, files, documents and the like, or abstracts, summaries or copies thereof relating to
the business of any Company Entity, which such Company Entity or Page prepares or uses or with which she has come into contact, shall remain the sole property of such Company Entity and shall be promptly returned upon termination of the
Page’s membership on the Board or at such earlier time as may be requested by the Board. The Company may issue to Page a list of items to be returned, detailing due dates and requesting she work with any assigned vendor to retrieve any
electronic files belonging to any Company Entity stored on any personal computers or any mobile or other devices such as tablets or telephones, and Page shall use her reasonable efforts to comply promptly with such requests. Additionally,
in order that the Company can implement a smooth and professional transition of all matters with which Page was involved during the period of her Services, Page agrees to cooperate by being reasonably responsive to any questions conveyed by
the CEO by email or telephone regarding any issues and commitments that she managed, oversaw or played a role in during the period of her Services.
|
|
(c) |
Non-Disparagement. Page agrees that, at all times following her signing of this Amendment, Page shall not
engage in any vilification of any of the Company Entities or any of their respective directors, officers, employees or service providers (including accountants, attorneys, financial advisers, and lenders and other creditors) and shall
refrain from making any false, negative, critical. defamatory or disparaging statements, implied or expressed, concerning any of the Company Entities or any of their respective directors, officers, employees or service providers (including
as aforesaid), including with respect to management or communication style, methods of doing business, quality of products and services, or role in the community. Page further agrees to do nothing that would damage the business reputation
or goodwill of any of the Company Entities or any of their respective directors, officers, employees or service providers (including as aforesaid). The Company agrees that, promptly following the Annual Meeting, its Chair of the Board shall
instruct the members of the Board and the Company’s Executive Leadership Team that they shall refrain, and such individuals shall at all times thereafter refrain, from making any false, negative, critical, defamatory or disparaging
statements, implied or expressed, concerning Page that would damage her reputation.
|
|
(d) |
Trading Restrictions. Page acknowledges and agrees that she (i) shall not buy or sell any securities of the
Company during the period from the date of this Amendment until the commencement of the second trading day on the NASDAQ Stock Market after the date on which the Company publicly issues its earnings release for the quarter ending June 30,
2020, other than any shares of common stock acquired from the Company pursuant to exercises of options for cash, and (ii) shall comply in all respects with applicable federal securities laws pertaining to “insider trading” with respect to
securities of the Company.
|
|
(e) |
Enforcement. The provisions of this Section 5 shall survive the termination of Page’s service as a member of
the Board. Page acknowledges that any remedy at law for a breach or threatened breach of any of the provisions of this Section 5 may be inadequate and that accordingly the Company shall be entitled to an injunction or specific performance
or any other mode of equitable relief without the necessity of showing any actual damage, posting a bond or furnishing other security.”
|
|
4. |
Cooperation in Legal Matters. Upon reasonable notice by the Company, Page shall voluntarily
provide thorough and accurate information and truthful testimony to and on behalf of the Company regarding (a) any litigation, arbitration, or government or other administrative investigations or proceedings initiated by, or brought or
threatened against, any Company Entity or in which any Company Entity is an indemnifying party, including participating in meetings with counsel representing any Company Entity and testifying at depositions, trials or other proceedings or
(b) any dispute between any Company Entity and any other entity or person (other than Page) arising from or related to any act or omission by Page that actually or allegedly occurred during the period of her Services. In making any request
for cooperation or assistance under this Section 4, a Company Entity shall attempt to work with Page to arrange times that reasonably accommodate her, and in responding to any such request, Page shall reasonably accommodate her schedule to
the needs of such Company Entity. Except as may be required by law, Page shall not disclose to or to discuss with anyone who is not directing or assisting such Company Entity in any such litigation, arbitration or investigation, other than
Page’s own attorney, the fact of or subject matter of the litigation, arbitration or investigation. If the services described above are requested, Page will be
compensated at the rate of $218.75 per hour for such services as an independent contractor and will be reimbursed (consistent with the Company’s expense reimbursement policies and procedures) for reasonable out-of-pocket expenses,
including travel expenses but excluding legal fees and expenses, incurred by her in connection with her compliance with this Section 4), provided that (i) Page shall not be entitled to receive any compensation or expense reimbursement
pursuant to this Section 4 with respect to any litigation, arbitration, or government or other administrative proceeding (y) to which Page is a party or (z) for which, pursuant to the indemnification provisions of the Company’s charter
and bylaws or a director and officer liability insurance policy maintained by the Company, Page either is eligible to receive expense reimbursements or is disqualified, under such indemnification provisions or insurance policy, from
receiving expense reimbursements solely as the result of acts or omissions by her and (ii) in no event shall Page be entitled to any compensation for time spent testifying at depositions, trials or other proceedings.
|
|
5. |
Indemnification. Section
7 of the Agreement is deleted in its entirety and is amended and restated as set forth below:
|
|
6. |
Miscellaneous. Except to the extent set forth herein, the terms of the Agreement are unchanged and shall remain in full
force and effect. This Amendment, and its validity, interpretation and enforcement, shall be governed by the laws of the State of New York, excluding conflict of laws principles
|
Gail S. Page
|
Chembio Diagnostics, Inc.
|
||
/s/ Gail S. Page
|
By:
|
/s/ Richard L. Eberly | |
Richard L. Eberly
|
|||
Chief Page Officer and President
|
Date: August 7, 2020
|
/s/ Richard L. Eberly
|
Richard L. Eberly
|
|
Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
Date: August 7, 2020
|
/s/ Neil A. Goldman
|
Neil A. Goldman
|
|
Chief Financial Officer and Executive Vice President
|
|
(Principal Financial Officer)
|
Date: August 7, 2020
|
/s/ Richard L. Eberly
|
Richard L. Eberly
|
|
Chief Executive Officer and President
|
|
(Principal Executive Officer)
|
Date: August 7, 2020
|
/s/ Neil A. Goldman
|
Neil A. Goldman
|
|
Chief Financial Officer and Executive Vice President
|
|
(Principal Financial Officer)
|