8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 6, 2019

CHEMBIO DIAGNOSTICS, INC.

(Exact name of registrant as specified in its charter)

Nevada	0-30379	88-0425691
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

555 Wireless Blvd. Hauppauge, NY 11788

(Address of principal executive offices) (Zip code)

Registrant’s telephone number, including area code: (631) 924-1135

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

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.  ☐

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

Item 1.01 Entry into a Material Definitive Agreement.

We and our newly formed subsidiary Chembio Diagnostics Brazil LLC, or Chembio Brazil, entered into a quota purchase agreement dated November 6, 2019 with Marco Collovito and Franco Collovito, the sole equity holders of Orangelife Comercio e Industria Ltda., or Orangelife. The quota purchase agreement contemplates that at closing:

• Chembio Brazil will acquire all of the outstanding equity securities of Orangelife for delivery of $150,000 in cash and 153,707 shares of our common stock.

• We and Chembio Brazil will enter into a consulting agreement with Marco Collovito, pursuant to which we may issue to Mr. Collovito up to 316,456 shares of our common stock based on his achievement of certain regulatory milestones during the three years following the closing. Shares will be issuable under the consulting agreement from time to time as milestones are achieved, and all of the shares may be deliverable in the event of a specified change in control of our company. The number of shares issuable under the consulting agreement is subject to adjustments based upon Orangelife’s working capital at closing.

• Our subsidiary Chembio Diagnostics Systems, Inc. will enter into an amendment of its existing agency and commission agreement with Marco Collovito, pursuant to which we may issue to Mr. Collovito up to 180,832 shares of our common stock in payment of certain commissions.

The closing, which is subject to standard closing conditions, is expected to be held in the fourth quarter of 2019. The quota purchase agreement contains customary representations and warranties from Marco Collovito and Franco Collovito, as the selling equity holders, to our company and Chembio Brazil, as well as customary representations and warranties from us and Chembio Brazil to the sellers. The rights of our company and Chembio Brazil to indemnification in the event of any misstatements in the sellers’ representations and warranties in the quota purchase agreement will be satisfied by offset against the total number of shares deliverable under the consulting agreement and the amended agency and commission agreement.

The acquisition of Orangelife will allow Chembio to expand its commercial presence by offering its high-quality products to the state, private, and pharmacy markets in Brazil, in addition to providing local support to Bio-Manguinhos.

Orangelife, which is based in Rio de Janeiro, Brazil, is an original equipment manufacturer of point-of-care tests approved by the Brazilian Health Surveillance Agency (Agência Nacional de Vigilância Sanitária, or ANVISA) for infectious diseases that include HIV, Hepatitis C, Zika, Chikungunya and Dengue Fever. Orangelife tests are manufactured in its Rio de Janeiro facility, which is ISO-certified and approved by ANVISA to produce Class II/III/IV medical devices.

Item 2.02 Results of Operations and Financial Condition.

On November 7, 2019, we issued a press release announcing financial results for the quarter ended September 30, 2019. The full text of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8‑K and is incorporated herein by reference. The information contained in this Item 2.02 and in the press release furnished as Exhibit 99.1 to this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of Section 11 or Section 12(a)(2) of the Securities Act of 1933. The information contained in this Item 2.02 and in the press release furnished as Exhibit 99.1 to this report shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by us whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 7.01 Regulation FD Disclosure.

On November 7, 2019, we issued a press release entitled “Chembio Diagnostics Enters into Definitive Agreement to Acquire Orangelife.” A copy of the press release is furnished as Exhibit 99.2 to this report. The information contained in this Item 7.01 and in the press release furnished as Exhibit 99.2 to this report shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section or Section 11 or 12(a)(2) of the Securities Act of 1933. The information contained in this Item 7.01 and in the press release furnished as Exhibit 99.2 to this report shall not be incorporated by reference into any filing with the Securities and Exchange Commission made by us whether made before or after the date hereof, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit	Description
99.1	Press Release of Chembio Diagnostics, Inc. dated November 7, 2019 with respect to financial results for the quarter ended September 30, 2019
99.2	Press Release of Chembio Diagnostics, Inc. dated November 7, 2019 with respect to the definitive agreement to acquire Orangelife Comercio e Industria Ltda.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be filed on its behalf by the undersigned hereunto duly authorized.

	CHEMBIO DIAGNOSTICS, INC.
Dated:  November 7, 2019	By:	/s/ John J. Sperzel III
		John J. Sperzel III
		Chief Executive Officer and President

EX-99.1

Exhibit 99.1

Chembio Diagnostics Reports Third Quarter 2019 Financial Results

MEDFORD, NY, November 7, 2019 -- Chembio Diagnostics, Inc. (Nasdaq: CEMI), a leading point-of-care diagnostics company focused on infectious diseases, today reported financial results for the quarter ended September 30, 2019.

Recent Accomplishments & Highlights

• Achieved total revenue of $9.7 million and product revenue of $8.5 million for the third quarter of 2019, representing changes of -1% and 2%, respectively, compared to the prior year period;

• Signed a definitive agreement to acquire Orangelife, a Brazilian point-of-care diagnostics company, enabling commercial expansion into the state, private, and pharmacy markets in Brazil;

• Received World Health Organization (WHO) Prequalification approval for SURE CHECK HIV Self-Test, permitting the commercialization of the product across Africa;

• Received WHO Prequalification approval for Malaysian manufacturing facility, allowing the production of Stat-Pak HIV 1/2 tests in Malaysia;

• Entered into a collaboration with Takeda Pharmaceutical, a global pharmaceutical company, to develop a quantitative point-of-care test to detect an undisclosed biomarker; and

• Strengthened balance sheet by closing a $20 million term loan with Perceptive Advisors.

“During the third quarter, the Chembio team continued to execute on our three corporate priorities: expanding our commercialization, advancing our R&D pipeline, and preparing for additional growth,” said John Sperzel, Chembio’s Chief Executive Officer. “Total revenue during the third quarter was impacted by lower product sales in Africa; however, we are pleased with the significant product sales increases in the United States, Latin America, and Asia Pacific, and we believe the Orangelife acquisition will provide another growth vehicle for the company.”

Third Quarter 2019 Financial Results

Total revenue for the third quarter of 2019 was $9.7 million, a decrease of 1% compared to the prior year period. Net product sales for the third quarter of 2019 were $8.5 million, an increase of 2% compared to the prior year period. License and royalty, and R&D and grant revenue for the third quarter of 2019 was $1.2 million, a decrease of 20% compared to the prior year period.

Gross product margin for the third quarter of 2019 was $1.9 million compared to $1.1 million in the prior year period. Gross product margin percent for the third quarter of 2019 was 22% compared to 13% for the prior year period. The increased gross product margin percent for the third quarter of 2019 resulted primarily from reduced labor costs and favorable average selling prices due to geographic mix.

Research and development expenses increased by $0.3 million, or 17%, for the third quarter of 2019 compared to the prior year period from the acquisition of Chembio Diagnostics Germany GmbH in the fourth quarter of 2018. Selling, general and administrative expenses increased by $1.4 million, or 47%, for the three months ended September 30, 2019 compared to the prior year period. The increase in selling, general and administrative expenses resulted primarily from the acquisition of Chembio Diagnostics Germany, higher non-cash equity compensation costs, and rent and other costs related to leasing our new facility in Hauppauge, NY.

Net loss for the third quarter of 2019 was $3.8 million, or $0.22 per diluted share, compared with a net loss of $2.3 million, or $0.16 per diluted share, for the prior year period. 

Cash and cash equivalents as of September 30, 2019 totaled $21.9 million.

Conference Call

Chembio will host a conference call today beginning at 4:30pm ET to discuss financial results and recent business highlights, including the contemplated acquisition of Orangelife. Investors interested in listening to the call may do so by dialing 844-602-0380 from the U.S. or 862-298-0970 from outside the U.S.  To listen to a live webcast, 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 the company’s website for 90 days. A telephone replay will be available by dialing 877-481-4010 from the U.S. or (919) 882-2331 from outside the U.S. using the conference ID: 53958 until 4:30pm ET on November 14, 2019.

About Chembio Diagnostics

Chembio is a leading point-of-care diagnostics company focused on detecting and diagnosing infectious diseases. The company’s patented DPP technology platform, which uses a small drop of blood from the fingertip, provides high-quality, cost-effective results in 15-20 minutes. Coupled with Chembio’s extensive scientific expertise, its novel DPP technology offers broad market applications beyond infectious disease, a number of which are under active development with collaboration partners. 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.

Forward-Looking Statements

Statements contained in the last paragraph under “Recent Accomplishments & Highlights” that are not historical facts may be forward-looking statements within the meaning of the Securities Act of 1933, as amended. Forward-looking statements include statements regarding the intent, belief or current expectations of the company and its management. Such statements, which are estimates 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 the above 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 ability of Chembio to timely close the Orangelife acquisition; the ability of Chembio to maintain existing, and timely obtain additional, regulatory approvals; and the risks of doing business with a foreign country, 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 these forward-looking statements to reflect events or circumstances that occur after the date hereof or to reflect any change in Chembio's expectations with regard to these forward-looking statements or the occurrence of unanticipated events. Factors that may impact Chembio's success are more fully disclosed in Chembio's most recent 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, 2018, particularly under the heading “Risk Factors.”

DPP is our registered trademark. For convenience, this trademark appears in this release without ® symbols, but that practice does not mean that we will not assert, to the fullest extent under applicable law, our rights to the trademark.

Investor Relations Contact

Lynn Pieper Lewis

Gilmartin Group

(415) 937-5402

investor@chembio.com

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
R&D, milestone 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 INCOME:
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 and 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

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF

	(Unaudited)
	September 30, 2019			December 31, 2018
- ASSETS -
CURRENT ASSETS:
Cash and cash equivalents	$	21,867,892		$	12,524,551
Accounts receivable, net		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 asset		222,036			-
TOTAL FIXED ASSETS, net		5,467,830			2,873,920
OTHER ASSETS:
Operating lease right-of-use asset		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
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 note payable		207,694			207,694
Current portion of finance lease liability		41,169			-
Current portion of operating lease liability		255,030			-
TOTAL CURRENT LIABILITIES		6,187,349			6,519,280
OTHER LIABILITIES:
Operating lease liability		6,706,918			-
Finance lease liability		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
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 as of September 30, 2019 and December 31, 2018		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

CHEMBIO DIAGNOSTICS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended
	September 30, 2019			September 30, 2018
Net cash used in operating activities	$	(6,398,207	)	$	(7,530,508	)
Net cash used in investing activities		(2,769,147	)		(401,897	)
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

EX-99.2

Exhibit 99.2

Chembio Diagnostics Enters into Definitive Agreement to Acquire Orangelife

Acquisition will expand commercial presence and market opportunity in Brazil

Medford, NY – November 7, 2019 - Chembio Diagnostics, Inc. (Nasdaq: CEMI), a leading point-of-care diagnostics company focused on infectious diseases, today announced that it has entered into a definitive agreement (the “Agreement”) to acquire Orangelife Comercio e Industria Ltda., a privately-held Brazilian manufacturer and distributor of point-of-care diagnostics tests for infectious diseases.

Under the terms of the Agreement, Chembio will make an upfront payment of $150,000 in cash and 153,707 shares of common stock. The Agreement contemplates that Chembio will also enter into certain consulting agreements that could include payment of up to 497,288 additional shares of common stock based on the achievement of certain sales and regulatory milestones between 2020 and 2022. Subject to customary closing conditions, the transaction is expected to close during the fourth quarter of 2019.

Chembio has a long history of selling its point-of-care infectious disease products to Brazil’s federal government. Since 2004, Chembio products have been sold to the Ministry of Health in collaboration with Bio-Manguinhos, a subsidiary of the Oswaldo Cruz Foundation, which is responsible for the development and production of vaccines, diagnostics and biopharmaceuticals, primarily to meet the demands of Brazil’s national public health system.

“We consider Brazil to be the largest and most attractive market for infectious disease testing,” said John Sperzel, Chembio’s Chief Executive Officer. “Over the last fifteen years, Chembio has supplied millions of infectious disease tests to Brazil’s Ministry of Health through our partner Bio-Manguinhos, an arm of Brazil’s government. The acquisition of Orangelife will allow Chembio to expand its commercial presence by offering its high-quality products to the state, private, and pharmacy markets in Brazil, in addition to providing local support to Bio-Manguinhos.”

Orangelife manufactures numerous ANVISA-approved point-of-care infectious disease tests, including Brazil’s first ANVISA-approved HIV self-test. Orangelife tests are manufactured in its Rio de Janeiro, Brazil facility that is ISO-certified and approved by ANVISA to produce Class II/III/IV medical devices.

Following the acquisition, Orangelife will be renamed as Chembio Diagnostics Brazil Ltda and operate as a wholly-owned subsidiary of Chembio.

Conference Call

Chembio will host a corresponding conference call today beginning at 4:30 p.m. Eastern Time. Investors interested in listening to the conference call may do so by dialing 844-602-0380 from the US or 862-298-0970 from outside the US or by accessing www.chembio.com/investors/calendar-of-events/. A replay of the call will be available by dialing 877-481-4010 from the US or 919-882-2331 from outside the US (using passcode 53958) or by accessing www.chembio.com/investors/calendar-of-events/.

About Chembio Diagnostics

Chembio is a leading point-of-care diagnostics company focused on detecting and diagnosing infectious diseases. The company’s patented DPP technology platform, which uses a small drop of blood from the fingertip, provides high-quality, cost-effective results in approximately 15 minutes. Coupled with Chembio’s extensive scientific expertise, its novel DPP technology offers broad market applications beyond infectious disease, a number of which applications are under active development with collaboration partners. 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.

Forward-Looking Statements

Statements contained in the second and fourth paragraphs of this release that are not historical facts may be forward-looking statements within the meaning of the Securities Act of 1933, as amended. Forward-looking statements include statements regarding the intent, belief or current expectations of the company and its management. Such statements, which are estimates 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 the above 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 ability of Chembio to timely close the Orangelife acquisition; the ability of Chembio to maintain existing, and timely obtain additional, regulatory approvals; and the risks of doing business with a foreign country, 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 these forward-looking statements to reflect events or circumstances that occur after the date hereof or to reflect any change in Chembio's expectations with regard to these forward-looking statements or the occurrence of unanticipated events. Factors that may impact Chembio's success are more fully disclosed in Chembio's most recent public filings with the U.S. Securities and Exchange Commission.

DPP is Chembio’s registered trademark. For convenience, this trademark appears in this release without ® symbols, but that practice does not mean that Chembio will not assert, to the fullest extent under applicable law, its rights to the trademarks.

Investor contact:

Lynn Pieper Lewis

Gilmartin Group

(415) 937-5402

investor@chembio.com