Company Quick10K Filing
Quick10K
Chembio Diagnostics
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$5.05 17 $87
10-Q 2019-09-30 Quarter: 2019-09-30
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-11-06 Enter Agreement, Earnings, Regulation FD, Exhibits
8-K 2019-09-09 Regulation FD, Exhibits
8-K 2019-09-03 Enter Agreement, Off-BS Arrangement, Regulation FD, Exhibits
8-K 2019-08-07 Regulation FD, Exhibits
8-K 2019-08-06 Earnings, Exhibits
8-K 2019-07-18 Other Events, Exhibits
8-K 2019-06-18 Shareholder Vote
8-K 2019-05-29 Regulation FD, Exhibits
8-K 2019-05-01 Earnings, Exhibits
8-K 2019-04-02 Other Events, Exhibits
8-K 2019-03-20 Enter Agreement, Officers, Exhibits
8-K 2019-03-07 Earnings, Exhibits
8-K 2019-02-27 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-05 Enter Agreement, Off-BS Arrangement, Officers, Exhibits
8-K 2019-01-21 Enter Agreement, Officers, Exhibits
8-K 2019-01-21 Enter Agreement, Officers, Exhibits
8-K 2018-12-19 Other Events, Exhibits
8-K 2018-11-08 Earnings, Exhibits
8-K 2018-11-06 M&A, Exhibits
8-K 2018-11-05 Enter Agreement, Other Events, Exhibits
8-K 2018-10-17 Enter Agreement, Earnings, Other Events, Exhibits
8-K 2018-09-17 Amend Bylaw, Exhibits
8-K 2018-08-08 Regulation FD, Exhibits
8-K 2018-08-07 Officers, Other Events, Exhibits
8-K 2018-07-25 Other Events, Exhibits
8-K 2018-07-19 Regulation FD, Other Events, Exhibits
8-K 2018-05-30 Regulation FD, Exhibits
8-K 2018-05-24 Regulation FD, Exhibits
8-K 2018-05-10 Shareholder Vote, Regulation FD, Exhibits
8-K 2018-04-26 Regulation FD, Exhibits
8-K 2018-04-25 Regulation FD, Exhibits
8-K 2018-03-14 Regulation FD, Exhibits
8-K 2018-02-27 Officers
8-K 2018-02-09 Other Events, Exhibits
8-K 2018-02-08 Other Events, Exhibits
8-K 2018-01-08 Regulation FD, Exhibits
AGN Allergan 52,442
RARE Ultragenyx Pharmaceutical 3,120
EIDX Eidos Therapeutics 1,601
ATNX Athenex 1,006
MOR MorphoSys AG 958
BSTC Biospecifics Technologies 342
ZYNE Zynerba Pharmaceuticals 229
CKPT Checkpoint Therapeutics 92
SVRA Savara 87
VBLT Vascular Biogenics 41
CEMI 2019-09-30
Part I
Item 1. Financial Statements
Note 1 - Description of Business:
Note 2 - Acquisition:
Note 3 - Summary of Significant Accounting Policies:
Note 4 - Stockholders' Equity:
Note 5 - Commitments, Contingencies, and Concentrations:
Note 6 - Long-Term Debt:
Note 7 - Warrant:
Note 8 - Subsequent Events:
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex31_1.htm
EX-31.2 ex31_2.htm
EX-32 ex32.htm

Chembio Diagnostics Earnings 2019-09-30

CEMI 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10q.htm 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

FORM 10-Q

 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the quarterly period ended September 30, 2019
 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from: ______ to ________

000-30379
(Commission File Number)

Chembio Diagnostics, Inc.
(Exact name of registrant as specified in its charter)

Nevada
 
88-0425691
(State or other jurisdiction of incorporation)
 
(IRS Employer Identification Number)

555 Wireless Blvd.
Hauppauge, NY 11788
(Address of principal executive offices including zip code)
(631) 924-1135
(Registrant’s telephone number, including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 
Large accelerated filer ☐
Accelerated filer ☒
 
Non-accelerated filer ☐ 
Smaller reporting company ☒
 
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

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

As of October 28, 2019, the registrant had 17,565,534 shares outstanding of its common stock, $.01 par value.



Quarterly Report on Form 10-Q
For The Quarterly Period Ended
September 30, 2019

Table of Contents

Chembio Diagnostics, Inc.
 
 
Page
     
Part I. FINANCIAL INFORMATION:
 
   

Item 1. Financial Statements:

     
  3
     
 
4
     
 
5
     
 
6
     
  7
     
  9
     
 
10
     
 
21
     
  Item 3. Quantitative and Qualitative Disclosures About Market Risk 24
     
 
34
     
Part II. OTHER INFORMATION:
 
     
 
35
     
 
35
     
  35
     
 
36
     
37
     
EXHIBITS 
 
 
Unless the context requires otherwise, the words ‘‘we,’’ ‘‘our,’’ ‘‘our company,’’ ‘‘us,’’ ‘‘Chembio,’’ and similar terms refer to Chembio Diagnostics, Inc. and its consolidated subsidiaries.

STAT-PAK, STAT-VIEW, SURE CHECK and DPP are our registered trademarks, and CHEMBIO, MICRO READER and our logo design are our trademarks. For convenience, these trademarks appear in this Quarterly Report on Form 10-Q without ® and symbols, but that practice does not mean that we will not assert, to the fullest extent under applicable law, our rights to the trademarks.
2


NOTE ABOUT FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “anticipate,” “project,” “target,” “design,” “estimate,” “predict,” “potential,” “plan” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements reflect our current views with respect to future events and are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors, including those described or incorporated by reference in “Item 1A. Risk Factors” of Part II of this report, that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we assume no obligation to update these statements publicly or to update the reasons actual results could differ materially from those anticipated in these statements, even if new information becomes available in the future.

You should read this report, and the documents that we reference in this report, including exhibits that are being filed as part of this report, completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.

3

PART I
Item 1.
FINANCIAL STATEMENTS

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

   
September 30, 2019
   
December 31, 2018
 
   
(Unaudited)
       
- ASSETS -
           
CURRENT ASSETS:
           
Cash and cash equivalents
 
$
21,867,892
   
$
12,524,551
 
Accounts receivable, net of allowance for doubtful accounts of $42,000 at September 30, 2019 and December 31, 2018
    5,377,985
     
7,373,971
 
Inventories, net
    8,409,344
     
7,851,222
 
Prepaid expenses and other current assets
    598,127
     
702,010
 
TOTAL CURRENT ASSETS
    36,253,348
     
28,451,754
 
                 
FIXED ASSETS:
   

     
 
Property, plant and equipment, net
    5,245,794
      2,873,920
 
Finance lease right-of-use assets     222,036        -  

    5,467,830
      2,873,920
 
                 
OTHER ASSETS:
               
Operating lease right-of-use assets
    6,697,896        -  
Intangible assets, net
    3,508,594
     
3,884,831
 
Goodwill
    4,681,511
     
4,983,127
 
Deposits and other assets
    308,159
     
717,551
 
      15,196,160
      9,585,509  
                 
TOTAL ASSETS
 
$
56,917,338
   
$
40,911,183
 
                 
- LIABILITIES AND STOCKHOLDERS’ EQUITY -
               
CURRENT LIABILITIES:
               
Accounts payable and accrued liabilities
 
$
5,445,956
   
$
5,888,681
 
Deferred revenue
    237,500
     
422,905
 
Current portion of long-term debt     207,694
      207,694  
Current portion of finance lease liabilities
    41,169        -  
Current portion of operating lease liabilities     255,030
      -  
TOTAL CURRENT LIABILITIES
    6,187,349
     
6,519,280
 
                 
OTHER LIABILITIES:
               
Long-term operating lease liabilities
    6,706,918
      -
 
Long-term finance lease liabilities
    182,702        -  
Long-term debt, less current portion, and debt discount and issuance costs
    17,538,481        171,821  
Deferred tax liability
    505,618
     
892,308
 
                 
TOTAL LIABILITIES
    31,121,068
     
7,583,409
 
                 
COMMITMENTS AND CONTINGENCIES
               
                 
STOCKHOLDERS’ EQUITY:
               
Preferred stock - 10,000,000 shares authorized; none outstanding
   
-
     
-
 
Common stock - $.01 par value; 100,000,000 shares authorized; 17,565,534 and 17,166,459 shares issued and outstanding
at September 30, 2019 and December 31, 2018, respectively
    175,655
     
171,664
 
Additional paid-in capital
    93,376,856
     
90,953,788
 
Accumulated deficit
    (67,696,092
)
   
(57,909,874
)
Accumulated other comprehensive (loss) income
    (60,149
)
   
112,196
 
TOTAL STOCKHOLDERS’ EQUITY
    25,796,270
     
33,327,774
 
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
 
$
56,917,338
   
$
40,911,183
 

See accompanying notes to condensed consolidated financial statements
 
4

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
For the three months ended
   
For the nine months ended
 
   
September 30, 2019
   
September 30, 2018
   
September 30, 2019
   
September 30, 2018
 
REVENUES:
                       
Net product sales
 
$
8,510,629
   
$
8,304,370
   
$
23,381,906
   
$
22,108,727
 
License and royalty revenue
   
238,330
     
228,553
      703,352      
707,010
 
Research and development and grant revenue
   
971,980
     
1,292,202
      3,528,033
     
3,995,115
 
TOTAL REVENUES
   
9,720,939
     
9,825,125
      27,613,291
     
26,810,852
 
                                 
COSTS AND EXPENSES:
                               
Cost of product sales
    6,649,114
     
7,223,081
      18,112,676
     
17,824,557
 
Research and development expenses
    2,223,939      
1,897,751
      6,542,591
     
5,736,265
 
Selling, general and administrative expenses
    4,455,588
     
3,034,130
     
12,565,601
     
7,987,914
 
Acquisition costs
    -
      -
      395,612
       -  
      13,328,641
     
12,154,962
      37,616,480
     
31,548,736
 
LOSS FROM OPERATIONS
    (3,607,702
)
   
(2,329,837
)
    (10,003,189
)
   
(4,737,884
)
                                 
OTHER EXPENSE:
                               
Interest (expense) income, net
    (195,970
)
   
15,656
      (183,368
)
   
42,985
 
                     
         
LOSS BEFORE INCOME TAXES
    (3,803,672
)
   
(2,314,181
)
    (10,186,557
)
   
(4,694,899
)
     
                         
Income tax benefit:
    20,667
 
   
-
      400,339
 
   
-
 
                                 
NET LOSS
 
$
(3,783,005
)
 
$
(2,314,181
)
 
$
(9,786,218
)
 
$
(4,694,899
)
                                 
Basic loss per share
 
$
(0.22
)
 
$
(0.16
)
 
$
(0.58
)
 
$
(0.34
)
                                 
Diluted loss per share
 
$
(0.22
)
 
$
(0.16
)
 
$
(0.58
)
 
$
(0.34
)
                     
         
Weighted average number of shares outstanding, basic
    16,923,695
     
14,173,620
      16,912,583
     
13,872,055
 
                     
         
Weighted average number of shares outstanding, diluted
    16,923,695
     
14,173,620
      16,912,583
     
13,872,055
 

See accompanying notes to condensed consolidated financial statements
 
5

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
 
   
For the three months ended
   
For the nine months ended
 
   
September 30, 2019
   
September 30, 2018
   
September 30, 2019
   
September 30, 2018
 
Net loss
  $ (3,783,005
)
 
$
(2,314,181
)
  $ (9,786,218
)
  (4,694,899 )
Other comprehensive loss:
                               
Foreign currency translation adjustments
    (61,306
)
   
(104,657
)
    (172,345
)
    (26,187 )
Comprehensive loss
  $ (3,844,311
)
 
$
(2,418,838
)
  $ (9,958,563
)
  $ (4,721,086

See accompanying notes to condensed consolidated financial statements
 
6

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

    For the nine months ended September 30, 2019
 
 
 
Common Stock
   
Additional
Paid-in-Capital
   
Accumulated
Deficit
   
AOCI
   
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
 
 
                                               
Foreign currency translation adjustments
     -        -        -        -       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
 
 
                                               
Foreign currency translation adjustments
     -        -        -        -       (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
 
                                                 
Common Stock:                                                
Restricted stock compensation
     -        -       440,396        -        -       440,396  
                                                 
Options:
                                               
Stock option compensation
     -        -       66,192        -        -       66,192  
                                                 
Warrant on term debt
     -        -        1,196,093        -        -        1,196,093  
                                                 
Foreign currency translation adjustments
     -        -        -        -       (61,306
)
    (61,306 )
                                                 
Net loss
     -        -        -       (3,783,005 )
     -       (3,783,005 )
                                                 
Balance at September 30, 2019
    17,565,534     $
175,655     $
93,376,856     $
(67,696,092 )
  $
(60,149 )
  $
25,796,270  


7

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)

    For the nine months ended September 30, 2018
 
 
 
Common Stock
   
Additional
Paid-in-Capital
   
Accumulated
Deficit
   
AOCI
   
Total
 
 
 
Shares
   
Amount
   
Amount
   
Amount
   
Amount
   
Amount
 
Balance at December 31, 2017
   
12,318,570
   
$
123,185
   
$
62,821,288
   
$
(50,044,225
)
 
$
178,948
   
$
13,079,196
 
                                                 
Common Stock:
                                               
New stock from offering
   
1,783,760
     
17,838
     
10,916,514
     
-
     
-
     
10,934,352
 
                                                 
Options:
     
     
     
     
     
     
 
Exercised
    60,372
      604
      71,309
      -
      -
      71,913
 
Stock option compensation
   
-
     
-
     
97,250
     
-
     
-
     
97,250
 
 
                                               
Foreign currency translation adjustments
     -        -        -       -       252,298       252,298  
                                                 
Net loss
   
-
     
-
     
-
     
(652,343
)
   
-
     
(652,343
)
 
                                               
Balance at March 31, 2018
   
14,162,702
   
$
141,627
   
$
73,906,361
   
$
(50,696,568
)
 
$
431,246    
$
23,782,666  
Options:
     
     
     
     
     
     
 
Exercised
    10,918
      109
      (109
)
    -
      -
      -
 
Stock option compensation
   
-
     
-
     
127,035
     
-
     
-
     
127,035
 
 
                                               
Foreign currency translation adjustments
     -        -        -       -       (173,828 )
    (173,828 )
                                                 
Net loss
   
-
     
-
     
-
     
(1,728,375
)
   
-
     
(1,728,375
)
 
                                               
Balance at June 30, 2018
   
14,173,620
   
$
141,736
   
$
74,033,287
   
$
(52,424,943
)
 
$
257,418    
$
22,007,498  
Options:
                                               
Exercised
     -        -        -        -        -        -  
Stock option compensation
     -        -       74,759        -        -       74,759  
                                                 
Foreign currency translation adjustments
     -        -        -        -        (104,657 )
    (104,657 )
                                                 
Net loss
     -        -        -       (2,314,181 )
     -       (2,314,181 )
                                                 
Balance at September 30, 2018
    14,173,620     $
141,736     $
74,108,046     $
(54,739,124 )
  $
152,761     $
19,663,419  

See accompanying notes to condensed consolidated financial statements

8

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
(Unaudited)

 
 
September 30, 2019
   
September 30, 2018
 
 
           
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Cash received from customers and grants
 
$
29,423,872
   
$
21,812,928
 
Cash paid to suppliers and employees
    (35,185,776
)
   
(29,386,421
)
Cash paid for operating leases
 

(474,150
)
   
-
 
Cash paid for finance leases
     (4,033 )
     -  
Interest and Taxes, net
    (158,120
)
   
42,985
 
Net cash used in operating activities
    (6,398,207
)
   
(7,530,508
)
 
               
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Patent application costs
    (346,663
)
    -  
Acquisition of and deposits on fixed assets
    (2,568,244
)
   
(401,897
)
Working capital adjustment related to business combination
    145,760        -  
Net cash used in investing activities
    (2,769,147
)
   
(401,897
)
 
               
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Proceeds from option exercises
    -
     
71,914
 
Proceeds from issuance of long-term debt, net
     18,850,000        -  
Payments on debt issuance costs
     (186,313 )
     -  
Payments on note payable
    (136,232
)
   
(15,800
)
Proceeds from sale of common stock, net
    -
     
10,934,352
 
Principal payments for finance leases
     (9,851 )
     -  
Net cash provided by financing activities
   
18,517,604

   
10,990,466
 
 
               
Effect of exchange rate changes on cash
    (6,909
)
   
220
 
INCREASE IN CASH AND CASH EQUIVALENTS
    9,343,341
 
   
3,058,281
 
Cash and cash equivalents - beginning of the period
   
12,524,551
     
3,790,302
 
 
               
Cash and cash equivalents - end of the period
 
$
21,867,892
   
$
6,848,583
 
 
               
RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:
               
 
               
Net loss
 
$
(9,786,218
)
 
$
(4,694,899
)
Adjustments:
   
         
Depreciation and amortization
    1,666,675
     
663,250
 
Share based compensation
    1,230,966
     
299,044
 
Benefit from deferred tax liability
    (402,639
)
    -  
Changes in assets and liabilities:
               
Accounts receivable
    1,995,986

   
(5,708,674
)
Inventories
    (558,122
)
   
(1,554,808
)
Prepaid expenses and other current assets
    103,883

   
(997,468
)
Deposits and other assets
    (20,608
)
   
-
 
Accounts payable and accrued liabilities
    (442,725
)
   
3,752,297
 
Deferred revenue
    (185,405
)
   
710,750
 
Net cash used in operating activities
 
$
(6,398,207
)
 
$
(7,530,508
)
 
               
Supplemental disclosures for non-cash investing and financing activities:
               
Deposits on manufacturing equipment transferred to fixed assets
 
$
430,000
   
$
268,655
 
Seller-financed equipment purchases
    -
      326,110  

See accompanying notes to condensed consolidated financial statements
 
9

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2019
(Unaudited)

NOTE 1 — DESCRIPTION OF BUSINESS:

Chembio Diagnostics, Inc. and its subsidiaries (collectively, the “Company” or “Chembio”) develop, manufacture, and commercialize point-of-care (“POC”) diagnostic tests that are used to detect or monitor diseases. The Company’s product development efforts are focused on its patented DPP technology, a novel POC diagnostic platform that offers certain customer advantages as compared to traditional lateral flow technology. POC tests, by providing prompt and early diagnosis, can reduce patient stays, lower overall costs, improve therapeutic interventions, and improve patient outcomes.  POC tests can also prevent needless hospital admissions, simplify testing procedures, avoid delays from central lab batching, and eliminate the need for return visits.

The Company’s product commercialization and product development efforts are focused in two areas: infectious disease, which includes both sexually transmitted and tropical and fever disease; and strategic collaborations with leading global healthcare companies, which leverage the DPP platform to provide Chembio with additional revenue streams. In infectious disease, the Company is commercializing tests for HIV, Syphilis, Zika virus, dengue virus, chikungunya virus, and ebola, and developing tests for malaria, lassa, Marburg, leptospirosis, Rickettsia typhi, Burkholderia pseudomallei, and Orientia tsutsugamushi. Certain of these are being developed as part of fever panel tests. Through strategic collaborations, the Company is developing tests for a specific form of cancer, concussions, bovine tuberculosis, and for eosinophilic respiratory disease the last in collaboration with global pharmaceutical company AstraZeneca. Chembio is also developing a point-of-care test for an undisclosed biomarker for Takeda, also a global pharmaceutical company.

Large and growing markets have been established for these kinds of tests, initially in high prevalence regions where they are critical for large scale prevention and treatment programs. The Company’s product development is focused on areas where the availability of rapid, POC screening, diagnostic, or confirmatory results can improve health outcomes.  More generally, the Company believes there is and will continue to be a growing demand for diagnostic products that can provide accurate, actionable diagnostic information in a rapid, cost-effective manner at the point of care.

The Company’s products are sold to medical laboratories and hospitals, governmental and public health entities, non-governmental organizations, medical professionals and retail establishments, both domestically and internationally, under its STAT-PAK, SURE CHECK, STAT-VIEW and DPP registered trademarks, or under the private labels of its marketing partners.

The Company routinely enters into arrangements with governmental and non-governmental organizations for the funding of certain research and development (“R&D”) efforts.

NOTE 2 — ACQUISITION:

On November 6, 2018, pursuant to a share purchase agreement, the Company acquired all of the outstanding shares of opTricon GmbH (subsequently renamed Chembio Diagnostics GmbH), a privately held German developer and manufacturer of handheld analyzers for rapid diagnostic tests, for $5.5 million in cash. Since 2015, the two parties collaborated in developing theDPP Micro Reader, a handheld, battery-operated analyzer that uses an innovative image sensor to provide, when combined with the Company’s DPP tests, a quantitative interpretation of diagnostic results. The Company believes the acquisition will enable it to promote DPP tests and DPP Micro Readers more actively across global markets. The results of the acquired company’s operations have been reflected in the consolidated financial statements since November 6, 2018.
 
As a result of the consideration paid exceeding the fair value of the net assets acquired, goodwill in the amount of $3,337,000 was recorded in connection with this acquisition, none of which will be deductible for tax purposes. In addition, the Company recorded $2,260,000 in intangible assets associated with the addition of developed technology and customer base from the acquisition. During the nine months ended September 30, 2019, the Company reduced goodwill by $145,760 related to routine post-closing adjustments. The consolidated statements of operations for the three and nine months ended September 30, 2019 include $0 and $395,612 of transaction costs related to the acquisition.

The acquisition was accounted for using the purchase method of accounting. The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of November 6, 2018:

   
Amount
 
Net current assets
 
$
404,204
 
Property, plant and equipment
   
125,000
 
Goodwill
   
3,337,000
 
Deferred tax liability
   
(635,000
)
Other intangible assets (estimated useful life):
       
Developed technology (7 years)
   
1,900,000
 
Customer contracts / relationships (10 years)
   
360,000
 
Total consideration
 
$
5,491,204
 

The Company calculated the fair value of the fixed assets based on the net book value of the acquired company, as net book value approximated fair value. The developed technology and customer contracts and relationships were based on discounted cash flows using management estimates.

As indicated, the allocation of the purchase price shown above is preliminary, pending completion of an analysis of the deferred tax liability. Therefore, an adjustment may be required.
 
10

NOTE 3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:


a)
Basis of Presentation:

The preceding (a) condensed consolidated balance sheet as of December 31, 2018, which has been derived from audited financial statements, and (b) unaudited interim condensed consolidated financial statements as of September 30, 2019 and for the three and nine months ended September 30, 2019 and 2018 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States, have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of September 30, 2019 and its condensed consolidated results of operations for the three and nine months ended September 30, 2019 and 2018 have been made. The interim financial information should be read in conjunction with the financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed with the SEC on March 18, 2019. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
 
The Company’s future working capital needs will depend on many factors, including the rate of its business and revenue growth, the timing of its continuing automation of U.S. manufacturing, and the timing of its investment in R&D as well as sales and marketing. The Company believes that its existing cash and cash equivalents will be sufficient to meet the Company’s anticipated cash needs for the foreseeable future consistent with its long-term operating plan. If, however, this source of liquidity becomes insufficient to fund the growth of the Company’s business, the Company may need to reduce the level or slow the timing of its growth plans, which would likely curtail or delay the growth in the Company’s business contemplated by its operating plan and could impair or defer its ability to achieve profitability and generate cash flow, or to seek to raise additional funds through debt or equity financings, strategic relationships, or other arrangements.
 
In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s condensed consolidated financial position as of September 30, 2019 and, its condensed consolidated results of operations for the three and nine months ended September 30, 2019 and 2018 have been made. (Note 3q - Error Correction) The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.


b)
Revenue Recognition:

In May 2014, the Financial Accounting Standards Board (“FASB”) issued converged guidance on recognizing revenue in contracts with customers, Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606). The intent of the new standard is to improve financial reporting and comparability of revenue globally. The core principle of the standard is for a company to recognize revenue in a manner that depicts the transfer of goods or services to customers in an amount that reflects the consideration which the company expects to receive in exchange for those goods or services. The guidance provides a five-step analysis of transactions to determine when and how revenue is recognized. Other major provisions include capitalization of certain contract costs, consideration of the time value of money in the transaction price, and in certain circumstances, allowing estimates of variable consideration to be recognized before contingencies are resolved. The guidance also requires enhanced disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.

The new revenue standards became effective for the Company on January 1, 2018 and were adopted using the modified retrospective method. The adoption of the new revenue standards as of January 1, 2018 did not change the Company’s revenue recognition as its revenues continue to be recognized when the customer takes control of its product. As the Company did not identify any material accounting changes that impacted the amount of reported revenues with respect to its product revenue, license and royalty revenue, and R&D and grant revenues, no adjustment to retained earnings was required upon adoption.

The Company adopted the standards for contracts that were not completed at the date of initial application (January 1, 2018).
 
Under the new revenue standards, the Company recognizes revenues when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company recognizes revenues following the five-step model prescribed under ASU No. 2014-09: (i) identify contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenues when (or as) the Company satisfies the performance obligations.

Product Revenues

Revenues from product sales are recognized and commissions are accrued when the customer obtains control of the Company’s product, which occurs at a point in time, typically upon tendering to the customer. The Company expenses incremental costs of obtaining a contract as and when incurred because the expected amortization period of the asset that it would have recognized is one year or less or the amount is immaterial. Freight and distribution activities on products are performed after the customer obtains control of the goods. The Company has made an accounting policy election to account for shipping and handling activities that occur either when or after goods are tendered to the customer as a fulfillment activity, and therefore recognizes freight and distribution expenses in cost of product sales.

The Company’s payment terms vary by the type and location of the Company’s customer and products or services offered. Payment terms differ by jurisdiction and customer, but payment is generally required in a term ranging from 30 to 60 days from date of shipment or satisfaction of the performance obligation.

Reserves for Discounts and Allowances

Revenues from product sales are recorded net of reserves established for applicable discounts and allowances that are offered within contracts with the Company’s customers. The Company’s process for estimating reserves established for these variable consideration components does not differ materially from its historical practices.

Product revenue reserves, which are classified as a reduction in product revenues, are generally related to discounts. Estimates of variable consideration and the determination of whether to include estimated amounts in the transaction price are based on all information (historical, current and forecasted) that is reasonably available to the Company, taking into consideration the type of customer, the type of transaction and the specific facts and circumstances of each arrangement. The transaction price, which includes variable consideration reflecting the impact of discounts and allowances, may be subject to constraint and is included in the net sales price only to the extent that it is probable that a significant reversal of the amount of the cumulative revenues recognized will not occur in a future period. Actual amounts may ultimately differ from the Company’s estimates. If actual results vary, the Company adjusts these estimates, which could have an effect on earnings in the period of adjustment.

11

Royalty Revenues

The Company receives royalty revenues on sales by a licensee of products covered under patents that it owns. The Company does not have future performance obligations under this license arrangement. The Company records these revenues based on estimates of the sales that occurred during the relevant period as a component of license and royalty revenues. The relevant period estimates of sales are based on interim data provided by licensees and analysis of historical royalties that have been paid to the Company, adjusted for any changes in facts and circumstances, as appropriate. Differences between actual and estimated royalty revenues are adjusted for in the period in which they become known, typically the following quarter. Historically, adjustments have not been material when compared to actual amounts paid by licensees.

R&D and Grant Revenue

All R&D and grant contracts are evaluated under the five-step model described above. For certain contracts that represent grants where the funder does not meet the definition of a customer, the Company recognizes revenue when earned in accordance with ASU No. 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made. Such contracts are further described under Disaggregation of Revenue, below. Grants are invoiced and revenue is recognized as expenses are incurred, as that is the depiction of the timing of the transfer of services. Performance obligations generally follow the major phases of product development processes: design feasibility and planning, product development and design optimization, design verification, design validation and process validation, and pivotal studies.

12

Disaggregation of Revenue

The following tables disaggregate total revenues:
 
    For the three months ended September 30, 2019     For the three months ended September 30, 2018
 
   
Exchange
Transactions
   
Non-Exchange
Transactions
    Total
   
Exchange
Transactions
   
Non-Exchange
Transactions
   
Total
 
Net product sales   $
8,510,629
    $
-
    $
8,510,629
    $ 8,304,370    
$
-
    $ 8,304,370  
License and royalty revenue     238,330
     
-
      238,330
      228,553      
-
      228,553  
R&D and grant revenue     880,458
     
91,522
      971,980
      960,332       331,870       1,292,202  
    $
9,629,417
    $
91,522
    $
9,720,939
    $ 9,493,255     $ 331,870     $ 9,825,125  
                                                 
                    Total                     Total
 
Africa                   $
1,250,063
                    $
3,193,098
 
Asia                    
505,379
                      216,527
 
Europe & Middle East
                   
1,629,965
                      1,666,066
 
Latin America
                   
4,296,903
                      3,404,623
 
United States
                   
2,038,629
                     
1,344,811
 
                    $ 9,720,939
                    $
9,825,125
 

    For the nine months ended September 30, 2019     For the nine months ended September 30, 2018
 
   
Exchange
Transactions
   
Non-Exchange
Transactions
    Total
    Exchange 
Transactions
   
Non-Exchange
Transactions
   
Total
 
Net product sales   $
23,381,906
    $
-
    $
23,381,906
    $ 22,108,727    
$
-
    $ 22,108,727  
License and royalty revenue     703,352
     
-
      703,352
      707,010      
-
      707,010  
R&D and grant revenue     2,272,454
     
1,255,579
      3,528,033
      2,328,058       1,667,057       3,995,115  
    $
26,357,712
    $
1,255,579
    $
27,613,291
    $ 25,143,795     $ 1,667,057     $ 26,810,852  
                                                 
                    Total                     Total
 
Africa                   $
6,009,103
                    $
7,156,822
 
Asia                    
746,025
                      1,212,839
 
Europe & Middle East
                   
4,880,744
                      3,831,580
 
Latin America
                   
9,981,874
                      9,743,764  
United States
                   
5,995,545
                     
4,865,847
 
                    $ 27,613,291
                    $
26,810,852
 

Exchange transactions are recognized in accordance with ASU No. 2014-09, and non-exchange transactions are recognized in accordance with ASU No. 2018-08.

Contract Liabilities

Deferred revenue relates to payments received in advance of performance under the contract. Deferred revenue is recognized as revenue as (or when) the Company performs under the contract.  At December 31, 2018, the Company reported $422,905 in deferred revenue, all of which was earned and recognized as R&D and grant revenue during the nine months ended September 30, 2019. At September 30, 2019, the Company reported $237,500 in deferred revenue that is expected to be recognized during the last quarter of 2019.
 

c)
Inventories
 
Inventories consist of the following at:

   
September 30, 2019
   
December 31, 2018
 
Raw materials
  $ 2,653,368
   
$
2,803,677
 
Work in process
    1,313,045
     
263,043
 
Finished goods
    4,442,931
     
4,784,502
 
    $ 8,409,344
   
$
7,851,222
 
 
Inventories, consisting of material, labor and manufacturing overhead, are stated at the lower of cost and net realizable value. Cost is determined on the first-in, first-out method. The Company’s policy is to periodically evaluate the market value of the inventory and the stage of product life cycle, and record a write-down for any inventory considered slow moving or obsolete. There were reserves against inventory of approximately $67,000 and $78,000 as of September 30, 2019 and December 31, 2018, respectively.
 

d)
Loss Per Share:

Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period excluding unvested restricted stock. Diluted loss per share for the three and nine months ended September 30, 2019 and 2018 reflects the potential dilution from the exercise or conversion of other securities into common stock, if dilutive.

There were 650,093 and 693,116 weighted-average number of options outstanding as of September 30, 2019 and 2018, respectively, that were not included in the calculation of diluted per common share equivalents for the three months ended September 30, 2019 and 2018, respectively, because the effect would have been anti-dilutive. There were 672,472 and 709,042 weighted-average number of options outstanding as of September 30, 2019 and 2018, respectively, that were not included in the calculation of diluted per common share equivalent for the nine months ended September 30, 2019 and 2018, respectively, because the effect would have been anti-dilutive. There were 550,000 shares of warrants issued in September 2019. The weighted average of these shares were excluded from the calculation of diluted EPS as the effect would have been anti-dilutive.

13



e)
Stock Incentive Plan:
 
Effective June 3, 2008, the Company’s stockholders voted to approve the 2008 Stock Incentive Plan (the “2008 Plan”), with 625,000 shares of common stock available to be issued.  At the Annual Stockholder Meeting on September 22, 2011 the Company’s stockholders voted to approve an increase to the shares of common stock issuable under the 2008 Plan by 125,000 to 750,000.  Under the terms of the 2008 Plan, which expired during 2018, the Board of Directors (the “Board”) or its Compensation Committee had the discretion to select the persons to whom awards were to be granted. Awards could be stock options, restricted stock and/or restricted stock units (“Equity Award Units”).  The Equity Award Units became vested at such times and under such conditions as determined by the Board or its Compensation Committee.  Cumulatively through September 30, 2019, there were 508,889 options exercised, and at September 30, 2019, 99,132 options were outstanding and no Equity Award Units were available to be issued under the 2008 Plan.
 
Effective June 19, 2014, the Company’s stockholders voted to approve the 2014 Stock Incentive Plan (the “2014 Plan”), with 800,000 shares of common stock available to be issued.  Under the terms of the 2014 Plan, the Board or its Compensation Committee has the discretion to select the persons to whom Equity Award Units were to be granted.  Awards can be in the form of Equity Award Units.  The Equity Award Units vest at such times and under such conditions as determined by the Board or its Compensation Committee.  Cumulatively through September 30, 2019, there were 132,282 options exercised, and at September 30, 2019, 344,093 options were outstanding.  Upon approval of the 2019 Plan (defined below), no additional Equity Award Units could be issued under the 2014 Plan.  During 2018, 266,839 shares of restricted stock and 20,725 restricted stock units were awarded under the 2014 Plan.

Effective June 18, 2019, the Company’s stockholders voted to approve the 2019 Omnibus Incentive Plan (the “2019 Plan”), with 2,400,000 shares of common stock available to be issued. Under the terms of the 2019 Plan, the Board or its Compensation Committee has the discretion to select the persons to whom awards are to be granted. Awards can be in the form of Equity Award Units. The awards vest at such times and under such conditions as determined by the Board or its Compensation Committee. As of September 30, 2019, 375,000 shares of restricted stock had been awarded under the 2019 Plan, and 2,025,000 Equity Award Units were available to be issued.


f)
Stock-Based Compensation:

The fair value of restricted stock and restricted stock unit awards are their fair value on the date of grant. Stock-based compensation expense for stock options is calculated using the Black-Scholes valuation model based on awards ultimately expected to vest, together with the fair value of restricted stock and restricted stock unit awards, are reduced for actual forfeitures and expensed on a straight-line basis over the requisite service period of the grant. 

Stock option compensation expense in each of the periods presented represents the estimated fair value of unvested, outstanding options, amortized on a straight-line basis over the requisite vesting periods of the entire awards.

Stock-based compensation expense recognized in the condensed consolidated statements of operations was classified as follows:
 
 
 
For the three months ended
   
For the nine months ended
 

  September 30, 2019     September 30, 2018     September 30, 2019     September 30, 2018  
Cost of product sales
 
$
2,691    
$
5,800
   
$
8,479
   
$
19,800
 
Research and development expenses
    56,251
     
3,600
      172,346
     
19,000
 
Selling, general and administrative expenses
    447,646      
65,359
      1,050,141      
260,244
 
 
 
$
506,588    
$
74,759
   
$
1,230,966    
$
299,044
 

14

The weighted-average assumptions made in calculating the fair values of options are as follows:

   
For the three months ended
   
For the nine months ended
 
   
September 30, 2019
   
September 30, 2018
   
September 30, 2019
   
September 30, 2018
 
Expected term (in years)
    N/A
      4.5       N/A
     
4.9
 
Expected volatility
     N/A     39.69 %
     N/A    
39.91
%
Expected dividend yield
    N/A
    0 %
    N/A
   
0
%
Risk-free interest rate
     N/A     2.70 %
    N/A
   
2.70
%

The following table provides stock option activity for the nine months ended September 30, 2019:

Stock Options
 
Number of
Shares
   
Weighted
Average
Exercise Price
per Share
 
Weighted
Average
Remaining
Contract
Term
 
Aggregate
Intrinsic
Value
 
Outstanding at December 31, 2018
   
711,968
   
$
5.62
 
3.33 years
 
$
687,364
 
                           
Granted
   
-
     
-
       
-
 
Exercised
   
46,875
     
3.48
     

172,242
 
Forfeited/expired/cancelled
    15,000       5.68         30,286  
Outstanding at September 30, 2019
    650,093    
$
5.77  
2.79 years
 
$
730,142  
Exercisable at September 30, 2019
    447,759    
$
4.98  
2.16 years
 
$
713,762
 

The following table summarizes information about stock options outstanding at September 30, 2019:

   
Stock Options Outstanding
   
Stock Options Exercisable
 
Range of
Exercise
Prices
  Number of Shares
   
Average
Remaining
Contract Term
(Year)
   
Weighted
Average
Exercise
Price
   
Aggregate
Intrinsic
Value
   
Number of Shares
   
Weighted
Average
Exercise
Price
   
Aggregate
Intrinsic
Value
 
1 to 2.79999
   
-
     
-
   
$
-
   
$
-
     
-
   
$
-
   
$
-
 
2.8 to 4.59999
    257,468
      1.41
      3.44
      689,143
      257,468
      3.44
      689,143
 
4.6 to 6.39999
    137,875
      2.70
      5.87
      40,999
      87,125
      5.89
     
24,619
 
6.4 to 8.19999
    207,875
      4.31
      7.31
     
-
      84,416
      7.32
     
-
 
8.2 to 12
    46,875
      3.85
      11.45
     
-
      18,750
      11.45
     
-
 
 Total
    650,093
      2.79
   
$
5.77
   
$
730,142
      447,759
   
$
4.98
   
$
713,762
 

As of September 30, 2019, there was $496,296 of net unrecognized compensation cost related to stock options that had not vested, which is expected to be recognized over a weighted average period of approximately 1.82 years. The total fair value of shares vested during the nine months ended September 30, 2019 and 2018 was $295,412 and $379,384, respectively.

The following table summarizes information about restricted stock and restricted stock units outstanding as of September 30, 2019:

   
Number of
Shares & Units
   
Weighted
Average
Grant Date
Fair Value
 
Outstanding at December 31, 2018
   
287,564
   
$
9.65
 
                 
Granted
    375,000       5.80  
Earned/released
     -        -  
Forfeited/expired/cancelled
     -        -  
Outstanding at September 30, 2019
   
662,564
    $
7.47
 

As of September 30, 2019, there was $3,639,325 of net unrecognized compensation cost related to restricted stock and restricted stock units that had not vested, which is expected to be recognized over a weighted average period of approximately 2.42 years.

15


g)
Geographic Information and Economic Dependency
 
The Company produces only one group of similar products known collectively as “rapid medical tests”, and it operates in a single business segment. Net product sales by geographic area were as follows:

   
For the three months ended
   
For the nine months ended
 
   
September 30, 2019
   
September 30, 2018
   
September 30, 2019
   
September 30, 2018
 
Africa
 
$
1,250,063
   
$
3,193,098
    $ 6,009,103
    $ 7,156,822  
Asia
   
505,379
     
216,527
      746,025       1,212,839  
Europe & Middle East
   
1,027,147
     
728,073
      2,946,813       1,773,872
 
Latin America
   
4,296,904
     
3,404,683
      9,981,874
      9,743,764  
United States
   
1,431,136
     
761,989
      3,698,091       2,221,430  
   
$
8,510,629
   
$
8,304,370
    $ 23,381,906
    $ 22,108,727  

Long-lived assets by geographic area were as follows at:

   
September 30, 2019
   
December 31, 2018
 
Asia
    419,719       466,185  
Europe & Middle East
    157,257       123,752  
United States
    4,668,818       2,283,983  
    $ 5,245,794     $ 2,873,920  


h)
Fair Value of Financial Instruments:

Fair value measurements of all financial assets and liabilities that are being measured and reported on a fair value basis are required to be classified and disclosed in one of the following three categories:

  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).

The carrying values for cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and other current liabilities approximate fair value due to the immediate or short-term maturity of these financial instruments. Included in cash and cash equivalents were $20.5 million and $4.7 million as of September 30, 2019 and December 31, 2018, respectively, of money market funds that are Level 1 fair value measurements under the hierarchy.

The fair value of the Company’s total debt of $20.2 million (carrying value of $17.7 million) and $0.2 million as of September 30, 2019 and December 31, 2018, respectively, is a Level 2 fair value measurement under the hierarchy and the company’s debt face value approximates the recorded value as the rate is based upon the current rates available to the Company for similar financial instruments.


i)
Accounts Payable and Accrued Liabilities:

Accounts payable and accrued liabilities consisted of:

   
September 30, 2019
   
December 31, 2018
 
Accounts payable – suppliers
 
$
2,975,913
   
$
3,622,765
 
Accrued commissions and royalties
   
819,405
     
867,344
 
Accrued payroll
   
320,266
     
48,867
 
Accrued vacation
   
659,358
     
264,789
 
Accrued bonuses
   
497,190
     
494,318
 
Accrued expenses – other
   
173,824
     
590,598
 
TOTAL
 
$
5,445,956
   
$
5,888,681
 

16


j)
Goodwill Long-Lived Assets and Intangible Assets:

Goodwill represents the excess of the purchase price the Company paid over the fair value of the net tangible and identifiable intangible assets acquired in the Company’s acquisition of Chembio Diagnostics GmbH in November 2018 and Chembio Diagnostics Malaysia Sdn Bhd in January 2017. Goodwill is not amortized but rather is tested annually as of the first day of the fiscal fourth quarter for impairment or more frequently if the Company believes that indicators of impairment exist. The Company makes a qualitative evaluation about the likelihood of goodwill impairment, which is based on a number of applicable factors. If the Company concludes that it is more likely than not that the carrying value of the applicable reporting unit is greater than its fair value, then the Company recognizes an impairment charge for the amount by which the carrying value exceeds the reporting unit’s fair value, provided the impairment charge does not exceed the total amount of goodwill allocated to the reporting unit.
 
The following table reflects changes in goodwill:

Beginning balance at December 31, 2018
 
$
4,983,127
 
Chembio Diagnostics GmbH measurement period adjustment     (145,760 )
Change in foreign currency exchange rate
    (155,856 )
Balance at September 30, 2019
 
$
4,681,511  

Intangible assets consisted of the following at: