“In the fourth quarter, record quarterly revenue was driven by execution of the largest purchase order in company history, received from Bio-Manguinhos for DPP SARS-CoV-2 Antigen Tests in Brazil, while navigating the tight labor market and global supply chain issues for certain test components to ramp production. Chembio also finished the year with record annual revenue,” said Richard Eberly, Chembio’s President and Chief Executive Officer. “We are confident our investments in developing products in high value growing markets and registering existing products in additional geographies can drive sustained growth over the long-term. We are optimistic about our ability to improve profitability through continued product revenue growth and reduction of our cost infrastructure beginning in 2022.”

Fourth Quarter 2021 Financial Results

Total revenue for the fourth quarter of 2021 was $20.6 million, an increase of 101% compared to the prior year period. Net product sales for the fourth quarter of 2021 were $17.4 million, an increase of 154% compared to the prior year period. Government grant, license and royalty, and R&D revenue for the fourth quarter of 2021 totaled $3.2 million, a decrease of 6% compared to the prior year period.

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Net loss for the fourth quarter of 2021 was $14.0 million, or $0.47 per diluted share, compared to a net loss of $7.1 million, or $0.35 per diluted share, for the prior year period. The net loss includes severance, restructuring, an impairment of goodwill and intangible assets from prior acquisitions and other related costs of $4.6 million, or $0.15 per share, for the fourth quarter of 2021, compared to a de minimis amount in the prior year period.

Full Year 2021 Financial Results

Total revenue for 2021 was $47.8 million, an increase of 47% compared to 2020. Net product sales for 2021 were $34.7 million, an increase of 40% compared to 2020. Government grant, license and royalty, and R&D revenue for 2021 totaled $13.1 million, an increase of 70% compared to 2020.

Net loss for 2021 was $33.9 million, or $1.40 per diluted share, compared to a net loss of $25.5 million, or $1.34 per diluted share, for 2020. The increase in loss per share was negatively impacted by Impairment, restructuring, severance and related costs including an impairment of goodwill and intangible assets from prior acquisitions.

Cash and cash equivalents as of December 31, 2021 totaled $28.8 million.

Going Concern Considerations

Revenues during the twelve months ended December 31, 2021 did not meet the Company’s expectations. The Company’s increase in cash and cash equivalents over the year reflected our issuance of common stock in at-the-market offerings for net proceeds of $38.8 million. 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 of the COVID-19 pandemic. For the year ending December 31, 2021, the Company continued to incur significant expenses in connection with pending legal matters, delayed achievement of milestones associated with government grant income, investments in inventory, and the continuing automation of manufacturing.

The Company performed an assessment to determine whether there were conditions or events that, considered in the aggregate, raised substantial doubt about our ability to continue as a going concern within one year after the date the audited consolidated financial statemetns will be issued (the “Issuance Date”). Because substantial doubt was determined to exist as the result of this initial assessment, management then assessed the mitigating effect of our 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 our ability to continue as a going concern.

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During the twelve months ended December 31, 2021, the Company undertook measures to increase our total revenues and improve its liquidity position. These measures included:

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 has considered in particular how:

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 and Guaranty (the “Credit Agreement”), that the Company and certain of its subsidiaries, as guarantors, entered into with Perceptive Credit Holdings II, LP, (the “Lender”). Those obligations include (a) covenants requiring i) minimum cash balance of $3 million and ii) minimum total revenue amounts for the twelve months preceding each quarter end. For the next year, the minimum total revenue requirements range from $42.0 million for the twelve months ending March 31, 2022 to $47.4  million for the twelve months ending December 31, 2022 and (b) an obligation requiring the payment of principal installments, commencing with the payment of $300,000 on September 30, 2022. 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 the Company’s business, prospects, results of operations, liquidity and financial condition.

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Accordingly, management determined the Company could not be certain that our plans and initiatives would be effectively implemented within one year after the Issuance Date. Without giving effect to the prospect of raising additional capital pursuant to the Company’s 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 our required financial obligations, including the Company’s 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.

Forward-Looking Statements

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