WARRANTS

6 Months Ended

Jun. 30, 2020

NOTE 7 – WARRANTS:

In connection with entering into the Credit Agreement, on September 3, 2019, Chembio issued to the Lender a seven-year warrant (the “Warrant”) to purchase up to 550,000 shares of common stock at a per-share exercise price of $5.22. The Warrant was exercisable for cash or on a net, or “cashless,” basis, and the exercise price of the Warrant was subject to price-based, weighted-average antidilution adjustments for one year after issuance.

The Warrant was evaluated by the Company and classified as stockholder’s equity. Its fair value was estimated using a Black-Scholes option-pricing model using the following assumptions:

Stock price on issuance date	$	5.40
Strike Price	$	5.22
Risk-free interest rate		1.45	%
Volatility		43.65	%
Expected life	7 years

On the date of grant, the fair value of the Warrant was determined to be approximately $1.4 million at $2.49 per share.

The balance recorded in the Company’s Stockholders’ Equity for the Warrant, net of allocated issuance costs, was $1.2 million.

During the three months ended June 30, 2020, the Warrant was exercised in full on a cashless basis and the Lender received a total of 253,161 shares of common stock from the net exercise.