Chembio Diagnostics, Inc. (“Chembio” or the “Company”) (Nasdaq:
CEMI), a leading point-of-care diagnostics company focused on
infectious diseases, today reported financial results for the
quarter ended September 30, 2022.
Recent Highlights
- Achieved third quarter 2022 total
revenue of $11.2 million including product revenue of $10.8
million, representing product revenue growth of 16% compared to the
prior year period
- U.S. product revenue of $4.8
million grew 361% compared to the prior year period
- Awarded $3.2 million contract from
the CDC for development and clinical validation of Dual-Path
Platform (DPP) Syphilis Treponemal Nontreponemal (TNT) Assay
- Launched e-commerce platform
commercialization of Sure Check HIV Self-Test in Brazil and in the
U.K. through Amazon
- Completed initial test production
in the Chembio Malaysia facility
“We are pleased with our product revenue growth
in the third quarter highlighted by 361% growth in the U.S.
compared to the prior year period,” said Richard Eberly, Chembio’s
President and Chief Executive Officer. “We have taken steps to
position Chembio for future profitable growth through execution of
our Global Competitiveness Program including the launch of our
e-commerce platforms in Brazil and Europe for the sale of our HIV
self-test, expanded manufacturing capabilities through automation
and operations improvements at our Malaysia facility and continued
advancements with our regulatory and product pipeline.”
Third Quarter 2022 Financial
ResultsTotal revenue for the third quarter of 2022 was
$11.2 million, a decrease of 7% compared to the prior year period.
Net product sales for the third quarter of 2022 were $10.8 million,
an increase of 16% compared to the prior year period. Government
grant, license and royalty, and R&D revenue for the third
quarter of 2022 totaled $0.4 million, a decrease of 87% compared to
the prior year period.
Gross product margin for the third quarter of
2022 was $1.2 million, compared to $1.5 million for the prior year
period. Gross product margin percentage for the third quarter of
2022 was 11%, compared to 16% for the prior year period and was
negatively impacted by inventory reserves taken in the current
quarter.
Research and development expenses decreased by
$1.6 million, or 46%, compared to the prior year period to $1.9
million in the third quarter of 2022.
Selling, general and administrative expenses
decreased by $0.4 million, or 7%, compared to the prior year period
to $5.6 million in the third quarter of 2022.
Net loss for the third quarter of 2022 was
($6.7) million, or ($0.21) per diluted share, compared to a net
loss of ($6.4) million, or ($0.24) per diluted share, for the prior
year period.
Cash and cash equivalents as of September 30, 2022 totaled $21.1
million, compared to $22.8 million at June 30, 2022. The company
received net proceeds of approximately $4.0 million in the third
quarter of 2022 from use of its ATM program.
Conference CallChembio will
host a conference call today beginning at 4:30 pm ET to discuss its
financial results and recent business highlights. Investors
interested in listening to the call may do so by dialing
888-506-0062 from the United States or 973-528-0011 from outside
the United States and providing entry code 600643. To listen to a
live webcast of the call, please visit the Investor Relations
section of Chembio's website at www.chembio.com. Following the
call, a replay will be available on the Investor Relations section
of Chembio’s website. A telephone replay will be available until
4:30 pm ET on November 17, 2022 by dialing 877-481-4010 from the
United States or 919-882-2331 from outside the United States and
using passcode 46584.
About Chembio
DiagnosticsChembio is a leading diagnostics company
focused on developing and commercializing point-of-care tests used
for the rapid detection and diagnosis of infectious diseases,
including sexually transmitted disease, insect vector and tropical
disease, COVID-19 and other viral and bacterial infections,
enabling expedited treatment. Coupled with Chembio’s extensive
scientific expertise, its novel DPP technology offers broad market
applications beyond infectious disease. Chembio’s products are sold
globally, directly and through distributors, to hospitals and
clinics, physician offices, clinical laboratories, public health
organizations, government agencies, and consumers. Learn more at
www.chembio.com.
Going Concern Considerations
The Company continued to experience market, clinical trial and
regulatory complications in seeking to develop and commercialize a
portfolio of COVID-19 test systems during the continuing, but
evolving, uncertainty resulting from COVID-19. For the three and
nine months ended September 30, 2022, the Company also continued to
incur significant expenses in connection with pending legal
matters.
The Company performed an assessment to determine
whether there were conditions or events that, considered in the
aggregate, raised substantial doubt about the Company’s ability to
continue as a going concern within one year after the date its
unaudited condensed consolidated financial statements are being
issued for the nine months ended September 30, 2022. Initially,
this assessment did not consider the potential mitigating effect of
management’s plans that had not been fully implemented. Because, as
described below, substantial doubt was determined to exist as the
result of this initial assessment, management then assessed the
mitigating effect of its plans to determine if it is probable that
the plans (1) would be effectively implemented within one year
after the date its unaudited condensed consolidated financial
statements for the nine months ended September 30, 2022 are issued
and (2) when implemented, would mitigate the relevant conditions or
events that raise substantial doubt about the Company’s ability to
continue as a going concern.
The Company achieved significant revenue growth
in recent years while profitability has not been at levels as
expected. It has taken steps including investments in automation to
mitigate headwinds such as labor availability, volatile capacity
planning and implementation of operational efficiency targets to
proactively monitor production with the overarching goal of
profitable growth. The Company undertook measures to increase its
total revenues and improve its liquidity position by continuing to
develop the Global Competitiveness Program. The main pillars of the
Global Competitiveness Program include the following:
- Focus on higher margin business in growth markets
- Lower manufacturing costs
- Reduce infrastructure costs
- Strategic review of non-core businesses and assets
In addition, the Company will continue to focus
on regulatory approvals for its DPP SARS-CoV-2 Antigen test system,
DPP Respiratory Antigen Panel, and DPP HIV-Syphilis test system.
These measures and other plans and initiatives have been designed
to provide the Company with adequate liquidity to meet its
obligations for at least the twelve-month period following the date
its unaudited condensed consolidated financial statements for the
nine months ended September 30, 2022 are being issued. The
Company’s execution of its plans continue to depend, however, on
factors and uncertainties that are beyond the Company’s control, or
that may not be addressable on terms acceptable to the Company or
at all. The Company considered in particular how:
- The ongoing healthcare and economic impacts of COVID-19 on the
global customer base for the Company’s non-COVID-19 products
continue to negatively affect the timing and rate of recovery of
the Company’s revenues from those products.
- Although the Company has entered into agreements to distribute
third-party COVID-19 products in the United States, its ability to
sell those products could be constrained because of staffing and
supply chain limitations affecting the suppliers of those
products.
The Company further considered how these factors
and uncertainties could impact its ability over the next year to
meet the obligations specified in the credit agreement with its
lender. Those obligations include covenants requiring: i) minimum
cash balance of $3.0 million and ii) minimum total revenue amounts
for the twelve months preceding each quarter end. For the next
three quarters, the minimum total revenue requirements range from
$47.4 million for the twelve months ending December 31, 2022 to
$50.1 million for the twelve months ending June 30,
2023. Upon an event of default under the Credit
Agreement, the lender could elect to declare all amounts
outstanding thereunder, together with accrued interest, to be
immediately due and payable. In such an event, there can be no
assurance that the Company would have sufficient liquidity to fund
payment of the amounts that would be due under the credit agreement
or that, if such liquidity were not available, the Company would be
successful in raising additional capital on acceptable terms, or at
all, or in completing any other endeavor to continue to be
financially viable and continue as a going concern. The Company’s
inability to raise additional capital on acceptable terms in the
near future, whether for purposes of funding payments required
under the credit agreement or providing additional liquidity needed
for its operations, could have a material adverse effect on its
business, prospects, results of operations, liquidity and financial
condition.
Accordingly, management determined the Company
could not be certain that the Company’s plans and initiatives would
be effectively implemented within one year after the date on which
its unaudited condensed consolidated financial statements for the
nine months ended September 30, 2022 are being issued. Without
giving effect to the prospect of raising additional capital,
increasing product revenue in the near future or executing other
mitigating plans, many of which are beyond the Company’s control,
it is unlikely that the Company will be able to generate sufficient
cash flows to meet its required financial obligations, including
its debt service and other obligations due to third parties. The
existence of these conditions raises substantial doubt about the
Company’s ability to continue as a going concern for the
twelve-month period following the date on which the unaudited
condensed consolidated financial statements for the nine months
ended September 30, 2022 are being issued.
The Company’s unaudited condensed consolidated
financial statements for the nine months ended September 30, 2022
have been prepared assuming the Company will continue as a going
concern, which contemplates continuity of operations, realization
of assets and the satisfaction of liabilities in the normal course
of business for the twelve-month period following the date such
unaudited condensed consolidated financial statements are issued.
As such, the Company’s unaudited condensed consolidated financial
statements for the nine months ended September 30, 2022 do not
include any adjustments relating to the recoverability and
classification of assets and their carrying amounts, or the amount
and classification of liabilities that may result should the
Company be unable to continue as a going concern.
Forward-Looking
StatementsCertain statements contained in the third and
fourth bulleted items under “Recent Highlights” above and in the
paragraph following the bulleted items under “Recent Highlights”
above are not historical facts and may be forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include statements
regarding the intent, belief or current expectations with respect
to Reszon Diagnostics International’s manufacturing products and
Chembio’s increasing its commercial presence in the Asia-Pacific
region; Chembio’s expanding the Direct-to-Consumer e-Commerce
channel for the commercialization of the Sure Check HIV Self-test
in Brazil and the United Kingdom, and the third-party SCoV-2 Ag
Detect Self-Test in the United States; Chembio’s continued progress
with its Global Competitiveness Program, positioning it to drive
adoption of its core higher margin products in high-growth markets,
and expanding manufacturing capabilities through automation and a
contract manufacturing agreement leveraging its facility in
Malaysia; and Chembio’s advance key new product development and
regulatory initiatives, all of which help define a path to more
profitable growth. Such statements, which are expectations only,
reflect management's current views, are based on certain
assumptions, and involve risks and uncertainties. Actual results,
events or performance may differ materially from forward-looking
statements due to a number of important factors, and will be
dependent upon a variety of factors, including, but not limited to,
the following, any of which could be exacerbated even further by
the continuing COVID-19 outbreak in the United States and globally:
the ability of Chembio to continue to generate revenue from the HIV
test purchase order supported by product orders, and the margins it
can realize from that revenue, or its ability to develop new
products, will depend on the availability and cost of human,
material and other resources required to build and deliver the
tests, which factors are largely outside Chembio’s control; the
ability of Chembio to maintain existing, and timely obtain
additional, regulatory approvals, which approvals are subject to
processes that can change on a recurrent basis without notice; the
highly competitive and rapidly developing diagnostics market, which
includes a number of competing companies with strong relationships
with current and potential customers, including governmental
authorities, and with significantly greater financial and other
resources that are available to Chembio; and the risks of doing
business with foreign governmental entities, including
geopolitical, international and other challenges as well as
potential material adverse effects of tariffs and other changes in
U.S. trade policy. Chembio undertakes no obligation to publicly
update forward-looking statements in this release to reflect events
or circumstances that occur after the date hereof or to reflect any
change in Chembio's expectations with regard to the forward-looking
statements or the occurrence of unanticipated events. Factors that
may impact Chembio's success are more fully disclosed in Chembio's
periodic public filings with the U.S. Securities and Exchange
Commission, including its Annual Report on Form 10-K for the fiscal
year ended December 31, 2021, its Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 2022, June 30, 2022 and
September 30, 2022 and in subsequent filings, particularly under
the headings “Risk Factors.”
DPP is Chembio’s registered trademark, and the
Chembio logo is Chembio’s trademark. For convenience, these
trademarks appear in this release without ® or ™ symbols, but that
practice does not mean that Chembio will not assert, to the fullest
extent under applicable law, its rights to the trademarks. All
other trademarks appearing in this release are the property of
their respective owners.
Investor Relations
ContactPhilip TaylorGilmartin Group(415)
937-5406investor@chembio.com
CHEMBIO DIAGNOSTICS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited) |
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the nine months ended |
|
September 30, 2022 |
|
September 30, 2021 |
|
September 30, 2022 |
|
September 30, 2021 |
REVENUES: |
|
|
|
|
|
|
|
Product revenue |
$ |
10,844,003 |
|
|
$ |
9,371,160 |
|
|
$ |
38,229,605 |
|
|
$ |
17,327,204 |
|
R&D revenue |
|
50,000 |
|
|
|
441 |
|
|
|
76,219 |
|
|
|
1,107,808 |
|
Government grant income |
|
- |
|
|
|
2,400,000 |
|
|
|
- |
|
|
|
8,030,000 |
|
License and royalty
revenue |
|
306,145 |
|
|
|
286,843 |
|
|
|
872,365 |
|
|
|
779,901 |
|
TOTAL
REVENUES |
|
11,200,148 |
|
|
|
12,058,444 |
|
|
|
39,178,189 |
|
|
|
27,244,913 |
|
|
|
|
|
|
|
|
|
COSTS AND
EXPENSES: |
|
|
|
|
|
|
|
Cost of product revenue |
|
9,658,678 |
|
|
|
7,902,819 |
|
|
|
32,969,388 |
|
|
|
15,490,956 |
|
Research and development
expenses |
|
1,871,113 |
|
|
|
3,442,044 |
|
|
|
5,567,169 |
|
|
|
9,102,363 |
|
Selling, general and
administrative expenses |
|
5,551,362 |
|
|
|
5,947,327 |
|
|
|
17,747,613 |
|
|
|
18,033,748 |
|
Impairment, restructuring,
severance and related costs |
|
110,250 |
|
|
|
396,740 |
|
|
|
3,153,429 |
|
|
|
2,440,983 |
|
TOTAL COSTS AND
EXPENSES |
|
17,191,403 |
|
|
|
17,688,930 |
|
|
|
59,437,599 |
|
|
|
45,068,050 |
|
|
|
|
|
|
|
|
|
LOSS FROM
OPERATIONS |
|
(5,991,255 |
) |
|
|
(5,630,486 |
) |
|
|
(20,259,410 |
) |
|
|
(17,823,137 |
) |
|
|
|
|
|
|
|
|
OTHER
EXPENSE: |
|
|
|
|
|
|
|
Interest expense, net |
|
(707,549 |
) |
|
|
(735,336 |
) |
|
|
(2,169,525 |
) |
|
|
(2,175,188 |
) |
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME
TAXES |
|
(6,698,804 |
) |
|
|
(6,365,822 |
) |
|
|
(22,428,935 |
) |
|
|
(19,998,325 |
) |
|
|
|
|
|
|
|
|
Income tax (provision)
benefit |
|
- |
|
|
|
(28 |
) |
|
|
(6,606 |
) |
|
|
67,928 |
|
|
|
|
|
|
|
|
|
NET LOSS |
$ |
(6,698,804 |
) |
|
$ |
(6,365,850 |
) |
|
$ |
(22,435,541 |
) |
|
$ |
(19,930,397 |
) |
|
|
|
|
|
|
|
|
Basic and diluted loss
per share |
$ |
(0.21 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.73 |
) |
|
$ |
(0.89 |
) |
|
|
|
|
|
|
|
|
Weighted average
number of shares outstanding, basic and diluted |
|
32,274,664 |
|
|
|
26,701,546 |
|
|
|
30,862,982 |
|
|
|
22,361,899 |
|
CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES |
CONDENSED CONSOLIDATED BALANCE SHEETS |
AS OF |
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
September 30, 2022 |
|
December 31, 2021 |
|
|
|
|
|
- ASSETS - |
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
Cash and cash equivalents |
|
$ |
21,055,026 |
|
|
$ |
28,772,892 |
|
Accounts receivable, net of
allowance for doubtful accounts of $242,354 and $243,042 as of
September 30, 2022 and December 31, 2021, respectively |
|
|
5,252,573 |
|
|
|
11,441,107 |
|
Inventories, net |
|
|
8,465,210 |
|
|
|
12,920,451 |
|
Prepaid expenses and other
current assets |
|
|
12,509,604 |
|
|
|
2,096,399 |
|
TOTAL CURRENT
ASSETS |
|
|
47,282,413 |
|
|
|
55,230,849 |
|
|
|
|
|
|
FIXED
ASSETS: |
|
|
|
|
Property, Plant and Equipment,
net |
|
|
8,813,699 |
|
|
|
8,556,773 |
|
Finance lease right-of-use
asset, net |
|
|
154,826 |
|
|
|
191,870 |
|
TOTAL FIXED ASSETS,
net |
|
|
8,968,525 |
|
|
|
8,748,643 |
|
|
|
|
|
|
OTHER
ASSETS: |
|
|
|
|
Operating lease right-of-use
assets, net |
|
|
5,639,763 |
|
|
|
5,891,906 |
|
Goodwill |
|
|
- |
|
|
|
3,022,787 |
|
Deposits and other assets |
|
|
289,203 |
|
|
|
358,010 |
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
62,179,904 |
|
|
$ |
73,252,195 |
|
|
|
|
|
|
- LIABILITIES AND STOCKHOLDERS’ EQUITY - |
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
Accounts payable and accrued
liabilities |
|
$ |
18,645,498 |
|
|
$ |
13,127,993 |
|
Operating lease
liabilities |
|
|
910,100 |
|
|
|
886,294 |
|
Finance lease liabilities |
|
|
75,279 |
|
|
|
68,176 |
|
Current portion of long-term
debt |
|
|
18,993,535 |
|
|
|
1,200,000 |
|
TOTAL CURRENT
LIABILITIES |
|
|
38,624,412 |
|
|
|
15,282,463 |
|
|
|
|
|
|
OTHER
LIABILITIES: |
|
|
|
|
Long-term operating lease
liabilities |
|
|
5,655,468 |
|
|
|
5,976,151 |
|
Long-term finance lease
liabilities |
|
|
96,529 |
|
|
|
139,678 |
|
Long-term debt, net |
|
|
- |
|
|
|
17,576,635 |
|
Other long-term
liabilities |
|
|
10,684 |
|
|
|
12,368 |
|
TOTAL
LIABILITIES |
|
|
44,378,093 |
|
|
|
38,987,295 |
|
|
|
|
|
|
STOCKHOLDERS’
EQUITY: |
|
|
|
|
Preferred stock – 10,000,000
shares authorized, none issued or outstanding |
|
|
- |
|
|
|
- |
|
Common stock - $0.01 par
value; 100,000,000 shares authorized; 35,392,496 shares and
30,056,929 shares issued at September 30, 2022 and December 31,
2021, respectively |
|
|
354,406 |
|
|
|
301,050 |
|
Additional paid-in
capital |
|
|
171,448,870 |
|
|
|
165,772,636 |
|
Accumulated deficit |
|
|
(153,445,401 |
) |
|
|
(131,009,860 |
) |
Treasury stock 48,057 shares
at cost as of September 30, 2022 and December 31, 2021,
respectively |
|
|
(206,554 |
) |
|
|
(206,554 |
) |
Accumulated other
comprehensive loss |
|
|
(358,510 |
) |
|
|
(592,372 |
) |
TOTAL STOCKHOLDERS’
EQUITY |
|
|
17,792,811 |
|
|
|
34,264,900 |
|
|
|
|
|
|
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
$ |
62,179,904 |
|
|
$ |
73,252,195 |
|
CHEMBIO DIAGNOSTICS, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWSFOR THE NINE MONTHS
ENDED(Unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
September 30, |
|
|
|
|
2022 |
|
|
2021 |
|
Net cash used in operating activities |
|
|
|
(9,861,916 |
) |
|
|
|
(24,150,484 |
) |
|
Net cash used in investing activities |
|
|
|
(1,480,662 |
) |
|
|
|
(1,420,249 |
) |
|
Net cash provided by financing activities |
|
|
|
3,531,071 |
|
|
|
|
38,646,767 |
|
|
Effect of exchange rate changes on cash |
|
|
|
93,641 |
|
|
|
|
(138,335 |
) |
|
(DECREASE)/INCREASE IN CASH AND CASH
EQUIVALENTS |
|
|
|
(7,717,866 |
) |
|
|
|
12,937,699 |
|
|
Cash and cash equivalents - beginning of the period |
|
|
|
28,772,892 |
|
|
|
|
23,066,301 |
|
|
Cash and cash equivalents - end of the period |
|
|
$ |
21,055,026 |
|
|
|
$ |
36,004,000 |
|
|
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