Chembio Diagnostics Reports Third Quarter 2021 Financial Results
- Achieved third quarter 2021 total revenue of
$12.1 millionand product revenue of $9.4 million, representing growth of 17% and 12%, respectively, compared to the prior year period. After reflecting the deferred recognition to the third quarter of 2020 of revenue associated with shipments from the second quarter of 2020, total revenues in the third quarter of 2021 increased by $4.5 million, or 59.2%, compared to the prior year period.
- Awarded substantial purchase orders in
July 2021from Bio-Manguinhos for DPP SARS-COV-2 Antigen tests and the Partnership for Supply Chain Management, supported by The Global Fund, for STAT-PAK 1/2 HIV tests.
- Launched US commercial distribution of a third-party COVID-19 Antigen Assay.
$38.8 millionin net proceeds from at-the-market offerings of common stock launched in July.
“Product revenue growth is being driven by the largest purchase order in company history, received from Bio-Manguinhos in
Third Quarter 2021 Financial Results
Total revenue for the third quarter of 2021 was
Gross product margin for the third quarter of 2021 was
Research and development expenses increased by
During the third quarter of 2021, Chembio recognized
Net loss for the third quarter of 2021 was
Cash and cash equivalents as of
Going Concern Considerations
Revenues during the three months ended
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 on which its unaudited condensed consolidated financial statements will be issued (the “Issuance Date”). 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 Issuance Date and (2) when implemented, would mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.
During the three months ended
July 20, 2021, the Company received a $28.3 millionpurchase order from Bio-Manguinhos for the purchase of DPP SARS-CoV-2 Antigen tests for delivery during 2021 to support the urgent needs of Brazil’s Ministry of Health in addressing the COVID-19 pandemic.
July 22, 2021, the Company received a $4 millionpurchase order from the Partnership for Supply Chain Management, supported by The Global Fund, for the purchase of HIV 1/2 STAT-PAK Assays for shipment to Ethiopiainto early 2022.
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 Issuance Date. The Company’s execution of those measures and its other plans and initiatives continue to depend, however, on factors 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:
- Limitations of the Company’s staffing, supply chain and liquidity have impaired, and are expected to continue to impair, the Company’s ability to fulfill at least
$11.5 millionof the July Purchase Order from Bio-Manguinhos by December 31, 2021, the end of the existing shipment schedule under the order.
- Earlier delays in clinical trials, which reflected the impact of the COVID-19 vaccination rollout and the related decline in positivity rates at clinical trials on the Company’s clinical plan enrollment levels, and continuing requirements of achievement of regulatory approvals may limit the Company’s ability to achieve a portion of the revenue- and cash- generating milestones under a
$12.7 millionaward granted pursuant to the Company’s contract dated December 2, 2020with the BARDA, which contract will, unless extended by BARDA, expire on December 2, 2021.
- The ongoing healthcare and economic impacts of the COVID-19 pandemic 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 by, for example, decreasing the allocation of funding for HIV testing, thereby continuing to adversely affect the Company’s liquidity.
- 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 Company’s existing credit agreement. Those obligations include a covenant requiring minimum total revenue amounts for the twelve months preceding each quarter end. For the next year, the minimum total revenue requirements range from
Accordingly, management determined the Company could not be certain that its plans and initiatives would be effectively implemented within one year after the Issuance Date. Without giving effect to the prospect of raising additional capital in at-the-market offerings, 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 rent, 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 Issuance Date.
The Company’s third quarter financial statements are being 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 Issuance Date.
Chembio will host a conference call today beginning at
Chembio 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.
Certain statements contained in the two paragraphs 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 the distribution and sale of Chembio’s diagnostic tests, the availability, timing, functionality and regulatory approval of Chembio’s COVID-19 diagnostic tests, and Chembio’s ability to maintain sufficient liquidity to fund its operation, including its sales of tests pursuant to the July Purchase Orders. 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
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 Contact
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
|For the three months ended
|For the nine months ended
|Government grant income||2,400,000||209,776||8,030,000||209,776|
|License and royalty revenue||286,843||211,521||779,901||572,450|
|COSTS AND EXPENSES:|
|Cost of product revenue||7,902,819||7,467,746||15,490,956||17,512,925|
|Research and development expenses||3,442,044||2,351,880||9,102,363||6,233,040|
|Selling, general and administrative expenses||5,947,327||5,348,958||18,033,748||13,903,192|
|Asset impairment, severance, restructuring and related costs||396,740||11,651||2,440,983||1,122,310|
|LOSS FROM OPERATIONS||(5,630,486||)||(4,907,757||)||(17,823,137||)||(16,591,730||)|
|Interest expense, net||(735,336||)||(735,819||)||(2,175,188||)||(2,110,011||)|
|LOSS BEFORE INCOME TAXES||(6,365,822||)||(5,643,576||)||(19,998,325||)||(18,701,741||)|
|Income tax (provision) benefit||(28||)||104,778||67,928||319,597|
|Basic and diluted loss per share||$||(0.24||)||$||(0.28||)||$||(0.89||)||$||(0.98||)|
|Weighted average number of shares outstanding, basic and diluted||26,701,546||20,104,547||22,361,899||18,728,372|
|CONDENSED CONSOLIDATED BALANCE SHEETS|
|- ASSETS -|
|Cash and cash equivalents||$||36,004,000||$||23,066,301|
|Accounts receivable, net of allowance for doubtful accounts of
|Prepaid expenses and other current assets||1,191,678||778,683|
|TOTAL CURRENT ASSETS||60,784,145||39,738,773|
|Property, Plant and Equipment, net||8,744,713||8,688,403|
|Finance lease right-of-use asset, net||208,908||233,134|
|TOTAL FIXED ASSETS, net||8,953,621||8,921,537|
|Operating lease right-of-use assets, net||6,085,655||6,112,632|
|Intangible assets, net||2,178,186||3,645,986|
|Deposits and other assets||367,396||509,342|
|- LIABILITIES AND STOCKHOLDERS’ EQUITY -|
|Accounts payable and accrued liabilities||$||10,182,488||$||10,042,790|
|Operating lease liabilities||856,917||642,460|
|Finance lease liabilities||66,790||58,877|
|Current portion of long-term debt||300,000||-|
|TOTAL CURRENT LIABILITIES||11,426,390||12,351,124|
|Long-term operating lease liabilities||6,207,698||6,327,143|
|Long-term finance lease liabilities||157,251||185,239|
|Long-term debt, net||18,333,267||18,182,158|
|Deferred tax liability||-||69,941|
|Preferred stock – 10,000,000 shares authorized, none issued or outstanding||-||-|
|Common stock -
|Additional paid-in capital||165,442,942||124,961,514|
|Accumulated other comprehensive loss||(598,454||)||(90,916||)|
|TOTAL STOCKHOLDERS’ EQUITY||47,918,529||27,776,409|
|TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY||$||84,043,135||$||64,892,014|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
|CASH FLOWS FROM OPERATING ACTIVITIES:|
|Cash received from customers and grants||$||22,355,958||$||26,122,815|
|Cash paid to suppliers and employees||(43,732,182||)||(37,776,303||)|
|Cash paid for operating leases||(1,049,198||)||(797,482||)|
|Cash paid for finance leases||(15,358||)||(14,762||)|
|Interest and taxes, net||(1,709,704||)||(1,681,155||)|
|Net cash used in operating activities||(24,150,484||)||(14,146,887||)|
|CASH FLOWS FROM INVESTING ACTIVITIES:|
|Acquisition of and deposits on fixed assets||(1,387,601||)||(3,000,763||)|
|Patent Application Costs||(32,648||)||(181,417||)|
|Net cash used in investing activities||(1,420,249||)||(3,182,180||)|
|CASH FLOWS FROM FINANCING ACTIVITIES:|
|Issuance of stock, net||38,811,960||28,463,741|
|Stimulus package loan||-||2,978,315|
|Payment of stimulus package loan||-||(2,978,315||)|
|Payments on note payable||-||(180,249||)|
|Payments of tax withholdings on stock award||(119,513||)||(348,944||)|
|Payments on finance lease||(45,680||)||(37,166||)|
|Net cash provided by financing activities||38,646,767||27,897,382|
|Effect of exchange rate changes on cash||(138,335||)||(125,214||)|
|DECREASE IN CASH AND CASH EQUIVALENTS||12,937,699||10,443,101|
|Cash and cash equivalents - beginning of the period||23,066,301||18,271,352|
|Cash and cash equivalents - end of the period||$||36,004,000||$||28,714,453|
|RECONCILIATION OF NET LOSS TO
|Depreciation and amortization||2,186,684||2,057,275|
|Share based compensation||1,802,056||824,345|
|Non-cash inventory changes||926,499||2,530,444|
|Benefit from deferred tax liability||(69,941||)||(301,000||)|
|Impairment of long-lived assets||1,273,945||-|
|Provision (recovery) for doubtful accounts||(103,258||)||214,210|
|Changes in assets and liabilities, net of effects from acquisitions:|
|Prepaid expenses and other current assets||(412,995||)||(314,460||)|
|Deposits and other assets||141,946||80,873|
|Accounts payable and accrued liabilities||139,698||559,888|
|Net cash used in operating activities||$||(24,150,484||)||$||(14,146,887||)|
|Supplemental disclosures for non-cash investing and financing activities:|
|Deposits on manufacturing equipment transferred to fixed assets||$||-||$||472,651|
Source: Chembio Diagnostics, Inc.