“In the second quarter, we focused on international commercial opportunities where our DPP COVID test has been approved. These efforts were successful, resulting in the largest order in company history for DPP SARS-CoV-2 Antigen tests from our longstanding customer Bio-Manguinhos. We also made progress on our clinical activity to support U.S. regulatory submissions for our DPP COVID-19 tests,” said Richard Eberly, Chembio’s President and Chief Executive Officer. “Looking forward, we believe the investments we have made in product development, expanding our commercial infrastructure and our automated manufacturing operations position us for future success. The recently raised capital has strengthened the balance sheet and will support execution of our strategic initiatives.”

Second Quarter 2021 Financial Results

Total revenue for the second quarter of 2021 was $6.5 million, an increase of 26% compared to the prior year period. Net product sales for the second quarter of 2021 were $3.9 million, an increase of 4% compared to the prior year period. Government grant, license and royalty, and R&D revenue for the second quarter of 2021 totaled $2.5 million, an increase of 92% compared to the prior year period.

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Net loss for the second quarter of 2021 was $9.1 million, or $0.45 per diluted share, compared to a net loss of $7.8 million, or $0.42 per diluted share, for the prior year period. The net losses reflected asset impairment, restructuring, severance, and related costs of $2.0 million, or $0.10 per share, for the second quarter of 2021, compared to $0.3 million, or $0.02 per diluted share, for the prior year period.

Cash and cash equivalents as of June 30, 2021 totaled $5.6 million. Subsequent to the quarter-end, $36.9 million of gross proceeds were raised through the ATM offering.

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 the accompanying unaudited condensed consolidated financial statements are issued. 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 the accompanying unaudited condensed consolidated financial statements are issued 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.

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These measures and other plans and initiatives of the Company were designed to provide the Company with adequate liquidity to meet its obligations for at least the twelve-month period following the date the Company’s second quarter  are to be issued. Such plans and initiatives are dependent, however, on factors that are beyond the Company’s control or that may not be available on terms acceptable to the Company, or at all. The Company considered how the uncertainties around the delivery of the full number of tests covered by the Significant POs and other customer orders may be affected by limitations of the Company’s supply chain, staffing and liquidity, uncertainties regarding the achievement of milestones and related recognition of revenue under government grants, and other matters outside the Company’s control. The Company further considered how such uncertainties could impact its ability to meet the obligations specified in the Company’s credit agreement over the next twelve months, which include attaining minimum total revenue ranging from approximately $37.4 million to approximately $43.8 million for the rolling twelve months as of the end of each quarter from September 30, 2021 through June 30, 2022. In the event of 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, Chembio 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. Chembio’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 by the Company for its operations, could have a material adverse effect on the Company’s business, prospects, results of operations, liquidity and financial condition. Accordingly, management determined the Company could not be certain that its plans and initiatives would be effectively implemented within one year after the date the accompanying unaudited condensed consolidated financial statements are issued.

Without giving effect to the prospect of raising additional capital pursuant to the ATM Agreement, 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 date thesecond quarter financial statements are to be issued.

The Company’s second 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 date the financial statements are issued.

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Forward-Looking Statements

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