Chembio Diagnostics, Inc.

of 2022 was $6.9 million for a loss of 23 cents per diluted share compared to a net loss of $9.1 million for a loss of 45 cents per diluted share in the prior year period. There were no impairment, restructuring, severance, or related costs for the second quarter of 2022 compared to $2 million or 10 cents per share in the prior year period. On the balance sheet, cash and cash equivalents as of June 30, 2022 totaled $22.8 million. We were able to reduce cash usage in the quarter to $1.6 million through tight cost controls on spend and working capital management. The company did not sell any shares of common stock as part of the ATM offering in the second quarter of 2022. Networking capital as of June 30th, 2022 was $27.1 million. Looking forward, given the substantial nature of the COVID revenues over the past two quarters, we expect revenue for the year will be first half weighted. and we will face challenging sales growth comparisons in the third and fourth quarters of 2022. Line of sight on orders is a major priority for the second half of the year, especially with regards to our large customers and markets. I will now provide an overview of the progress we are making on our global competitiveness program, which we launched in the first quarter of 2022. First, we are laser focused on higher margin business in growth markets. This includes our core products and being opportunistic with non-core products when these opportunities fit our profitability criteria. Notably, as Rick discussed, we see a significant global opportunity for our SureCheck HIV self-test and have aligned resources to support adoption of this product across markets. Second, we are taking action to lower manufacturing costs. Automation and labor management are essential to increasing product gross margin and for scaling unit volumes to support new opportunities. Our third automated manufacturing line is now up and running. Line four has been installed and we have initiated production on a new semi-automated line. Furthermore, Our contract manufacturing agreement with Freson should also provide a pathway to drive down manufacturing costs. We currently are facing a major margin headwind as high inflation is causing material supplies and logistics price increases. As a result, we have incorporated the assumption of longer lead times for materials into our manufacturing algorithm. We're evaluating appropriate price increases and delivery schedules for our products to offset these industry-wide impacts. Third, we're working to reduce infrastructure costs. This includes an in-depth analysis of all our support functions and external spend to reduce costs. Mainly through attrition, our organizational headcount is down to 290 employees. from 337 at the end of 2021. We plan on further headcount reductions in the second half of the year to adjust with automation efficiencies and lower volumes. Fourth, we have completed the majority of work related to the strategic review of non-core businesses and assets. Our focus has been on our subsidiaries in Brazil and Germany with the intent to develop independent tax profitability for each business. We have completed the restructuring of our German subsidiary, including employee reductions, at the local business. We believe that these pillars, when taken together, provide a clear roadmap for a trajectory toward profitability. Successful execution of these pillars is dependent upon a number of critical factors, such as delivering on the top line, key relationships with customers and distributors, expansion in large markets such as the US, and regulatory approvals. We are committed to adhering to these pillars and look forward to providing updates as we continue to execute. I'll now turn the call back to Rick for concluding remarks. Thank you, Larry. We were pleased with our results from the first half of 2022. and are excited to build upon this positive momentum. We've experienced strong year-over-year revenue growth, improved our gross margins, and are beginning to see the positive impacts of our global competitiveness program. We've increased our commercial efforts on the distribution of our higher-value core products, which we offer in high-growth markets such as the U.S., France, the U.K., and Brazil. Progress on the regulatory and product development front will increase our opportunities to drive more profitable growth in the years to come. With that operator, please open up the call to questions.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone provide optimum sound quality. Please hold while we poll for questions. Thank you. Your first question is coming from Per Ousland with Craig Hallam. Sir, please pose your question.

Thank you. Good afternoon, guys. To start with might be a bit of a dumb question to start with, but I think it might be a little bit foundational nevertheless. So as we've talked in recent quarters about COVID waning, you've talked increasingly about refocusing around the core portfolio. And I guess maybe my first question is, internally, how do you define and how do you think about your core portfolio? And the reason I ask the question is because there are always these other things that come up, whether it's been a Zika outbreak or obviously COVID and now monkeypox is the virus that can be opportunities for you as well. Whether or not they actually qualify as core is certainly an open question, but I look at DPP as a relatively product development friendly platform and it's easy to use. So when these things come up, whether they're core or potentially core or not, how do you evaluate what kind of opportunities you want to pursue as you're refocusing around the core? I know that's kind of a circuitous way to get to that, but let's start there if we can.