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) September
29, 2006
CHEMBIO
DIAGNOSTIC, INC.
(Exact
name of registrant as specified in its charter)
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Nevada
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0-30379
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88-0425691
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(State
or other jurisdiction
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(Commission
File Number)
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(IRS
Employer
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of
Incorporation)
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Identification
Number)
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3661
Horseblock Road
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Medford,
NY 11763
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(Address
of principal executive offices)
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631-924-1135
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(Registrant’s
Telephone Number)
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N/A
(Former
name or former address, if changed since last report)
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:
o Written
communications pursuant to Rule 425 under the Securities
Act (17 CFR
230.425)
o Soliciting
material pursuant to Rule 14a-12 under the Exchange
Act (17 CFR
240.14a-12)
o Pre-commencement
communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement
communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR
240.13e-4(c))
ITEM
1.01. Entry into a Material Definitive Agreement
On
September 29, 2006 and October 5, 2006, the Registrant
entered into the material
agreements described under ITEM 3.02 below.
ITEM
3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
Series
C Offering
On
September 29, 2006 and October 5, 2006, the Registrant
entered into a private
placement (the “Series C Offering”) for $8,150,000, consisting of 165 shares of
its 7% Series C Convertible Preferred Stock (the “Series C Stock”) together with
warrants to purchase up to 2,578,125 shares of its common
stock (the “Common
Stock”). Except as described below with respect to the conversion
of convertible
debt, each $.80 of consideration received (a) $.80 of
face amount of Series C
Stock, which is convertible into one share of the Common
Stock, and (b) a
five-year warrant to acquire .25 of a share of Common
Stock. Each full share of
the Series C Stock was purchased for $50,000, with fractional
shares of Series C
Stock being purchased in the case of smaller amounts
of
consideration.
The
proceeds from the Series C Offering will be used primarily
for general corporate
purposes including for sales and marketing, research
and development, and
intellectual property, and also for working capital,
investor relations, and
capital expenditures. $600,245 of the private placement
resulted from conversion
of previously outstanding convertible debt of the Registrant.
Based on the terms
of the previously outstanding convertible debt, the $600,245
of debt was
converted at a discount of 12.5% to the price paid by
the other
investors.
The
Registrant relied on Section 4(2) of the Securities Act
of 1933 and Rule 506
promulgated thereunder as the basis for its exemption
from registration of this
issuance. All of the investors in the Series C Offering
are accredited investors
as defined under Rule 501 promulgated under the Securities
Act of
1933.
THE
SECURITIES OFFERED IN THE SERIES C OFFERING HAVE NOT
BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED OR SOLD
IN THE UNITED STATES
ABSENT REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION
REQUIREMENTS.
Compensation
of Placement Agent
Midtown
Partners & Co., LLC (“Midtown”) acted as the placement agent with respect to
investors investing $1,000,000 in the Series C Offering
(the “Midtown
Investors”). As compensation for services rendered to the Registrant
by Midtown,
the Registrant agreed to the following:
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§
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to
pay Midtown a cash fee equal to 5% of the amount
of cash proceeds the
Registrant received from the Midtown
Investors.
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to
issue to Midtown warrants to purchase 62,500
shares of the Registrant’s
Common Stock (the “Placement Warrants”). The Placement Warrants are
exercisable for a period of five years from
their issuance and have an
exercise price of $1.00 per share. The Registrant
has agreed to include
the shares of Common Stock underlying the Placement
Warrants in the
Registration Statement (as defined and described
below).
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Terms
of the Series C Stock
Dividends.
Holders of Series C Stock are entitled to a 7% per annum
dividend per
share. The dividend accrues and is payable semi-annually
in cash or in shares of
Common Stock (at the option of the Registrant). Accrued
but unpaid dividends are
also payable upon the conversion or redemption of the
shares of Series C Stock
and upon a liquidation event.
Voting
Rights.
As long as any shares of Series C Stock are outstanding,
the Registrant
cannot take any of the following actions without the
separate class vote or
written consent of 81% of the then outstanding shares
of Series C Stock:
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amend,
alter or repeal the provisions of the Series
C Stock so as to adversely
affect any right, preference, privilege or
voting power of the Series C
Stock;
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authorize
or create any class of stock ranking as to
dividends, redemption or
distribution of assets upon a liquidation event,
senior to or otherwise
pari passu with the Series C Stock;
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amend
the Articles of Incorporation or By-Laws of
the Registrant so as to
adversely affect any rights of the Series C
Stock;
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increase
the authorized number of shares of Series C
Stock;
or
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enter
into any agreement with respect to the foregoing.
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Conversion.
The Series C Stock is convertible, at the option of the
holders, into
shares of Common Stock at an initial conversion price
of $.80 per share. Based
on the original purchase price of $50,000.00 per share,
each share of Series C
Stock is initially convertible into 62,500 shares of
Common Stock. The Series C
Stock is issuable in fractional shares. The Series C Stock contains
adjustment provisions upon the occurrence of stock splits,
stock dividends,
combinations, reclassifications or similar events of
our capital stock.
Redemption.
In the event of (i) a consolidation, merger, or other business
combination involving the Registrant, (ii) the sale of
all or substantially all
of the Registrant’s assets, (iii) the acquisition by another person of
in excess
of 50% of the voting securities of the Registrant or
(iv) certain specified
triggering events (involving (A) the lapse or unavailability
of the Registration
Statement, (B) the suspension from listing of the Common
Stock for a period of
seven (7) consecutive days, (C) the Registrant’s failure or inability to comply
with a conversion request from a holder of Series C Stock,
(D) the breach by the
Registrant of any of its representations or warranties
contained in the Series C
Stock documentation that continues uncured for a period
of thirty (30) days, or
(E) the Registrant becomes subject to certain bankruptcy
events) (collectively,
the “Trigger Events”), each holder of Series C Stock has the right to require
the Registrant to redeem all of such holder's shares
of Series C Stock at a
price per share of Series C Stock equal to the sum of
(i) the greater of (a)
$65,000 and (b) the product of (x) the daily volume weighted
average price of
the Registrant’s Common Stock as reported on the OTC Bulletin Board
on the date
immediately preceding the Trigger Event by Bloomberg
Financial L.P. and (y) the
quotient of $65,000 divided by the then current conversion
price for the Series
C Stock, plus (ii) any accrued but unpaid dividends,
plus (iii) all liquidated
damages and other amounts due in respect of the Series
C Stock.
Rank;
Liquidation Preference.
The holders of Series C Stock rank pari passu to the
holders of the
Registrant’s Series A Convertible Preferred Stock (the “Series A Stock”), Series
B 9% Convertible Preferred Stock (the “Series B Stock”) and prior to the holders
of the Common Stock and, unless otherwise consented to
by the holders of Series
C Stock, prior to all other classes of capital stock
that the Registrant may
establish, with respect to (i) the payment of dividends
and (ii) the
distribution of its assets upon a bankruptcy, liquidation
or other similar
event. The liquidation preference for the Series C Stock
is an amount equal to
$50,000 per share plus any accrued and unpaid dividends
and liquidated damages
owing thereon.
Preemptive
Rights
Pursuant
to the terms of the Series C Offering, the Registrant
granted each investor the
right to purchase a pro rata portion of any future sales of Common Stock,
or securities convertible into Common Stock, except for
certain permitted
issuances (a “Subsequent Financing”), by the Registrant within the twelve (12)
months following the closing of the Series C Offering
(the “Closing”), based on
the ratio of the number of shares of Series C Stock held
by that investor, to
the total number of shares of Series C Stock purchased
by all of the investors
in the Series C Offering (subject to reduction on a pro
rata basis to allow for
the preemptive rights granted to holders of Series A
Stock and Series B Stock).
As a result, the holders of Series A Stock, Series B
Stock and Series C Stock
will have the right to purchase 100% of the securities
that the Registrant
offers to sell in a Subsequent Financing. The Registrant also agreed that
during the ninety (90) day period after the effective
date of the Registration
Statement (described below) it would not enter into any
Subsequent Financing.
Exchange
Rights
Pursuant
to the terms of the Series C Offering, the Registrant
granted each investor the
right
to
exchange all or a portion of the Series C Stock then
held by it for any
securities issued in a Subsequent Financing (such exchange
to be made at the
same time as, and pursuant to, the closing of such Subsequent
Financing) based
the effective price at which such securities are sold
in such Subsequent
Placement. The exchanged Series C Stock will be valued
at $50,000 per share plus
accrued but unpaid dividends and other fees owed to the
holder.
Registration
Rights
In
connection with the offering of the Series C Stock, the
Registrant entered into
a registration rights agreement (the “Registration Rights Agreement”) pursuant
to which it is required to file a registration statement
with the Commission
(the “Registration Statement”) within 45 days of Closing, to register (i) all
the shares of Common Stock issuable upon the conversion
of the Series C Stock
(including any shares of Common Stock issuable upon conversion
of shares of
Series C Stock issued as dividends on the Series C Stock,
and including any
shares issued pursuant to the anti-dilutive provisions
of the Series C Stock),
(ii) all the shares of Common Stock issuable upon the exercise of
the
warrants issued to the investors in the Series C Offering,
and (iii) all the
shares of Common Stock issuable upon conversion of the
Placement Shares and the
Placement Warrants. If the Registration Statement is not filed within 45
days of Closing or declared effective by the SEC within
120 days of Closing
(within 150 days of Closing in the event of a full review
by the Commission),
then, in each such case, the Registrant will be subject
to the payment of
liquidated damages equal to 1% of the aggregate purchase
price received by it
from each respective subscriber.
The
Registrant must keep the Registration Statement effective
until the earliest to
occur of (i) the date when all the securities covered
by the Registration
Statement may be sold without restriction pursuant to
Rule 144(k) and (ii) the
date on which all securities covered by the registration
statement have been
sold.
The
foregoing descriptions do not purport to be complete
and are qualified in their
entirety by reference to the Certificate of Designation
of Preferences, Rights
and Limitations of the Series C Stock, Amended Certificate
of Designation of
Preferences, Rights and Limitations of the Series C Stock,
the form of warrant
issued to the investors, the Registration Rights Agreements
and the Securities
Purchase Agreements, copies of which are included as
Exhibits 3.1,
3.2, 4.1, 4.2, 4.3, 10.1, 10.2 and 10.3, respectively, to
this Current
Report on Form 8-K.
ITEM
7.01. REGULATION FD DISCLOSURES
On
October 5, 2006, Chembio Diagnostics, Inc. (the “Company”) issued a press
release entitled “Chembio Reports $8.15 Million Private Financing.” The press
release is attached as Exhibit 99.1 hereto.
In
accordance with General Instruction B.2 of Form 8-K,
the information in this
report shall not be deemed filed for the purpose of Section
18 of the Securities
Act of 1934, nor shall it be deemed incorporated by reference
in any
filing.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
3.1
Certificate of Designation of Preferences, Rights and
Limitations of
Series C 7% Convertible Preferred Stock of the Registrant.
3.2
Amended Certificate of Designation of Preferences, Rights
and Limitations of
Series C 7% Convertible Preferred Stock of the Registrant
4.1
Form of Common Stock Warrant issued pursuant to the Securities
Purchase
Agreement.
4.2
Registration Rights Agreement, dated as of September
29, 2006, by and among the
Registrant and the Purchasers listed therein.
4.3
Registration Rights Agreement, dated as of October 5,
2006, by and among the
Registrant and the Purchasers listed therein.
10.1
Securities Purchase Agreement (the “Securities Purchase Agreement”), dated as of
September 29, 2006, by and among the Registrant and the
Purchasers listed
therein.
10.2
Securities Purchase Agreement (the “Securities Purchase Agreement”), dated as of
October 5, 2006, by and among the Registrant and the
Purchasers listed
therein.
10.3
Letter of Amendment to Securities Purchase Agreements
dated as of September 29,
2006 by and among the Registrant and the Purchasers listed
therein.
99.1
Press Release entitled “Chembio Reports $8.15 Million Private Financing”, issued
October 5, 2006.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of
1934, the registrant has
duly caused this report to be signed on its behalf by
the undersigned thereunto
duly authorized.
Date:
October 5, 2006 CHEMBIO
DIAGNOSTICS, INC.
By: /s/
Lawrence A. Siebert
Lawrence
A. Siebert
Chief
Executive Officer