We have developedcontinue to target the following geographies: United States, Europe, Latin America, Africa and Southeast Asia. We reach our owntarget markets through a combination of direct sales, strategic local distributors and OEM partners. Our efforts are focused on raising awareness of Chembio’s products and technology through global and regional marketing departments for the salesactivities such as tradeshows and working with local key opinion leaders, local distributors, and strategic partners. We are also increasing our digital and social media activities to drive awareness of our products in the U.S. and internationally.  We also have appointed distributors in the U.S. and internationally for our lateral flow HIV tests.  Our largest markets outside the U.S. for our lateral flow HIV rapid tests are certain countries in Africa, Asia, and South America, as well as Mexico.  Internationally, most of the demand for our products is based on governmental and non-governmental prevention and treatment efforts.  Given this, these programs can and do often result in large orders, but also can result in periods of relatively lower demand, based on the variations associated with this kind of demand.

Competition

ThereMany of our competitors are several established rapid HIV tests which are already in the marketplace that compete with our lateral flow HIV tests and DPP® HIV 1/2 Assay.  These include OraSure (sold by OraSure Technologies), Alere Determine® rapid test product (sold by Alere, Inc.), and INSTI (sold by Biolytical, Inc.). Our competitors may have significant advantages over us, including being substantiallysignificantly larger and havinghave greater financial, research, manufacturing, and marketing resources. Important competitive factors include product quality, analytical performance, ease of use, price, customer service and reputation. Industry competition in general is based on these and the following:following additional factors:

We believe our scientific and technological capabilities and our proprietary know-how relating to our in-licensedpatented DPP^® technology and lateral flow technology rapid tests and to our proprietary know-how related to our patented DPP® technology,are very strong, particularly for the development and manufacture of tests for the detection of antibodies to infectious diseases such as HIV, are very strong.

Our ability to develop and market other products is in large measure dependent on our having additional resources and/or collaborative relationships.  Some of our product development efforts have been funded on a project or milestone basis.  We believe that our proprietary know-how in lateral flow technology and inrelating to our DPP®patented DPP^® technology has been instrumental in our obtaining the collaborations we have and that we continue to pursue.  We believe that theour patent protection that we have with our DPP® technology enhances our ability to both develop more profitable, collaborative relationships and to license out the technology.expand licensing revenue. However, there are a number of competitive technologies used and/or seeking to be used by others in point-of-care settings.  These technologies may be based on immunoassay principles such as the Company's products or other technologies, such as molecular-based technologies.

Although we have no specific knowledge of any other competitors'competitors’ products that are a competitive threat to our products, or that willcould render our products obsolete, if we fail to maintain and enhance our competitive position or fail to introduce new products and product features, our customers may decide to use the products developed by our competitors, which could result in a loss of revenues and cash flow.

During 2017, 2016 2015 and 2014,2015, we spent $8.6 million, $8.4 million and $6.4 million, and $4.8, respectively, on research and development (including regulatory activities).  These expenses were in part underwrittenfunded by funding from R&D milestone and milestonesgrant revenues of $4.0 million in 2017, $3.7 million in 2016 and $2.3 million in 2015 and $1.7 million in 2014.  All of our new product development activities involve employment of our DPP® technology.  These activities include completing development of certain products and making significant progress toward the development of additional products.2015.

At December 31, 2016,2017, we employed approximately 131165 people.  We have entered into employment contracts with our Chief Executive Officer and President, John J. Sperzel, our Chief Operating Officer, Sharon Klugewicz, and our Chief Science and Technology Officer, Javan Esfandiari.  Due to the specific knowledge and experience of these executives regarding the industry, technology and market, the loss of the services of any one of them would likely have a material adverse effect on the Company.   The contract with Mr. Sperzel has a term of three years ending March 13, 2017.  The contract with Ms. Klugewicz, has a term of two years ending May 2017.  The contract with Mr. Esfandiari has a term of three years ending March 2019.  The Company and Mr. Sperzel currently are discussing terms for renewal of his employment agreement.  We have obtained a key man insurance policy for Mr. Esfandiari.

To date, we have not encountered any costs relating to compliance with any environmental laws.

Intellectual Property Strategy

Our intellectual property strategy is to:  (1) build our own intellectual property portfolio around our DPP®DPP^® technology; (2) pursue licenses, trade secrets and know-how within the area of rapid point-of-care testing,testing; and, (3) develop and acquire proprietary positions to reagents and new hardware platforms for the development and manufacturecertain reagents.

We have obtained patent coverage on our DPP®DPP^® technology, including four U.S.numerous patents and patents in the United States, China, Malaysia, Eurasia, Mexico, Singapore, Japan, Australia, Indonesia, Korea and the U.K.  Additional patent applications on our DPP®DPP^® technology are pending in the U.S., as well as in many foreign countries such as Brazil, Canada, the European Union, India, Israel, and South Africa. Patents have also been filed on extensions to the DPP® product line concept, such as 4th generation assays.  The four U.S. patents are as follows:

Trademarks

We have filed and obtained trademarks for our products, including DPP®DPP^®, SURE CHECK®CHECK^®, STAT-VIEW^®, and STAT-PAK® and alsoSTAT-PAK^®, as well as for the SampleTainer®SampleTainer^®, which is used inwith certain DPP®DPP^® products.  Our DPP® trademark is also registered undertrademarks have been obtained in the European convention (ECT).  We recently filed a trademark for STAT-VIEW®, to marketUnited States and certain other countries around the barrel product in Europe.world.

Trade Secrets and Know-How

We believe that we have developed a substantial body of trade secrets and know-how relating to the development and manufacture of lateral flow and DPP®DPP^®-based diagnostic tests, including but not limited to the sourcing and optimization of materials for such tests, and howmethods to maximize sensitivity, speed-to-result, specificity, stability and reproducibility.reproducibility of our tests.  We possess proprietary know-how to develop tests for multiple conditions using colored latex.particles.  Our buffer formulations enable extremely long shelf lives of our rapid HIV and other tests, and we believe that this providesproviding us with an important competitive advantage.

Lateral Flow Technology and Reagent Licenses

As part of February 3, 2015 the agreements executed in 2006 with Alere for the marketing of our HIV tests, we were granted non-exclusive licensesroyalty expenses related to certain lateral flow patents for certain products manufactured and marketed by us, including but not limited to our lateral flow HIV tests.  This license allowstechnology expired. These now allow us to produce market and sell assays using lateral flow technologies specifically including our STAT-PAK®STAT-PAK^®, SURE CHECK®CHECK^®, DIPSTICK®STAT-VIEW^®, DIPSTICK^®, and veterinary product lines.  Under this license agreement, prior to February 3, 2015, we paid royalties to Alere ranging from 5% to 8½%, depending upon the country in which the products are sold.  Between 2007 and 2015 we incurred a totallines free of $2.87 million in lateral flow royalty expenses.  As of February 3, 2015 this royalty expense was no longer payable.those royalties.

Although we believe our DPP®DPP^® IP is outside of the scope of all lateral flow patents of which we are aware, we consult with patent counsel, and seek licenses and/or redesigns of products that we believe to be in our best interests.  Because of the costs and other negative consequences of time-consuming patent litigation, we often attempt to obtain a license on reasonable terms.  Nevertheless, there is no assurance that the Alere lateral flow patents we have licensed will not be challenged or that other patents containing claims relevant to our lateral flow or DPP®DPP^® products will not be granted to third parties and that licenses to such patents, will be available on reasonable terms, if any. In the past Alere has aggressively enforced its lateral flow intellectual property, although some of the main patents have expired and we are not aware of any patent enforcement litigation that is ongoing with respect to the Alere lateral flow intellectual property.

The peptides used in our rapid HIV tests were patented by Adaltis Inc. and were licensed to us under a 10-year non-exclusive license agreement dated August 30, 2002.  However, in connection with Adaltis' bankruptcy, during theby one or more third quarter of 2009 we bought out all of our remaining obligations under that agreement.parties. We also have licensed the antigens used in other tests including our Syphilis, Tuberculosis, Leptospirosis, Leishmaniasis and Chagas tests, and we may enter other license agreements.  In prior years, we concluded license agreements related to intellectual property rights owned by the United States associated with HIV-1, and, during the first quarter of 2008, we entered into a sub-license agreement for HIV-2 with Bio-Rad Laboratories N.A., the exclusive licensee of the Pasteur Institute's HIV-2 intellectual property estate.

Corporate Information

We are a Nevada corporation that was formed in December 1985. Since inception, we have been involved in developing, manufacturing, selling and distributing medical diagnostic tests, including rapid tests that detect a number of diseases and other conditions in humans and animals.

Stockholder Rights Agreement

On March 8, 2016, we entered into a Rights Agreement (the "Rights Agreement") between us and Action Stock Transfer Corp., as Rights Agent.  Pursuant to the Rights Agreement, we declared a dividend distribution of one Preferred Share Purchase Right (a "Right") for each outstanding share of our common stock, par value $0.01 (the "Common Stock"), in the manner described below. The Board of Directors set the payment date for the distribution of the Rights as March 8, 2016, and the Rights were distributed to our shareholders of record on that date.  The Rights Agreement also provides that Rights are issued with respect to any shares of our common stock that are newly issued after March 8, 2016, such as with respect to the Company's underwritten public offering in February 2018.  The description and terms of the Rights are set forth in the Rights Agreement.

The Rights are not exercisable until a Distribution Date.  Until a Right is exercised, the holder thereof, as such, has no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends.

The Rights are to be evidenced by the certificates for shares of Common Stock registered in the names of the holders thereof, and not by separate rights certificates until the earlier to occur of (i) the close of business on the tenth business day following a public announcement that an Acquiring Person (as defined in the Rights Agreement) has acquired a Combined Ownership (as defined in the Rights Agreement) of 20% or more of the outstanding shares of the Common Stock (the "Shares Acquisition Date") or (ii) the later of (A) the close of business on the tenth business day (or such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated or associated persons becomes an Acquiring Person) after the date that a tender or exchange offer or intention to commence a tender or exchange offer by any person is first published, announced, sent or given within the meaning of Rule 14d-4(A) under the Securities Exchange Act of 1934, as amended, the consummation of which would result in any person having Combined Ownership of 20% or more of the outstanding shares of the Common Stock, or (B) if such a tender or exchange offer has been published, announced, sent or given before the date of the Rights Agreement, then the close of business on the tenth business day after the date the Rights Agreement was entered into (or such later date as may be determined by action of the Board of Directors prior to such time as any person becomes an Acquiring Person); (the earlier of such dates referred to in (i) and (ii), which date may include any such date that is after the date of the Rights Agreement but prior to the issuance of the Rights, being called the "Distribution Date").

You should carefully consider each of the following risk factors and all of the other information provided in this Form 10-K before purchasingin considering whether to make or continue to hold an investment in our Common Stock. The risks described below are those we currently believe may materially affect us. An investment in our Company involves a high degree of risk, and should be considered only by persons who can afford the loss of their entire investment.  Although we believe that these risks are the most important for you to consider, you should read this section in conjunction with our financial statements, the notes to those financial statements and our management's discussion and analysis of financial condition and results of operations included in our periodic reports and incorporated into this prospectus supplementForm 10-K by reference.

Risks relatedRelated to our industry, business and strategyOur Business

In 2006 Alere, Inc. acquired a division from Abbott Diagnostic located in Japan that manufactured and marketed a rapid HIV test product line called Determine®.  The Determine® format was developed for the developing world and remote settings and, central to the needs of that market. The format is essentially a test strip that is integrated into a thin foil wrapper. When opened, the underside of the wrapper serves as the test surface for applying the blood sample and performing the test.  This design reduces costs and shipping weights and volumes and provides an advantage for the developing world markets it serves.  Some of the disadvantages of the platform are the amount of blood sample that is needed (50 microliters versus 2.5, 5 and 10 for our lateral flow barrel, lateral flow cassette, and DPP® products respectively), the open nature of the test surface, and the absence of a true control that differentiates biological from other kinds of samples.

The so-called "3rd generation" version of this product has been marketed for many years and is the leading rapid HIV test that is used in a large majority of the national algorithms of countries funded by PEPFAR and the Global Fund, as well as many other countries in the world.  That product is not FDA-approved though it is CE marked. The newest Determine® HIV version, which was developed and manufactured by Alere's subsidiary in Israel, Orgenics, is the so-called "4th Generation" version Determine® test. According to its claims, this product detects HIV antibodies and P24 HIV antigens. Because the P24 antigen is known to occur in HIV-positive individuals' blood samples before antibodies do, the 4th generation Determine® test is designed to detect HIV infection earlier than tests that solely rely on antibody detection. Chembio's tests, as well as all of the other currently FDA-approved rapid HIV tests, only detect antibodies.  There are however laboratory tests that are FDA-approved that are "4th generation" tests, but they are neither rapid nor point-of-care.

The initial "4th generation" Alere Determine® rapid test product that was also CE marked and that Alere launched internationally some years ago has not been successfully commercialized to the best of our knowledge and at least certain published studies were not favorable for this product.  The 4th generation product that is now FDA-approved was apparently modified as compared to the initial international version, and it may perform more satisfactorily.  Alere received FDA approval of this modified product in August 2013 and CLIA waiver for it in December 2014. Alere is also aggressively pursuing development of the market for this product.  Moreover there is support by a number of key opinion leaders for the public health value of such 4th generation tests, and this product represents a significant competitive threat to Chembio as well as to each of the other rapid HIV test manufacturers (OraSure and Trinity primarily).

During 2011, Biolytical, Inc. of Vancouver, Canada received FDA approval and in 2012 received CLIA waiver of a flow-through rapid HIV test called "INSTI".  The flow-through technology used in the INSTI test is older than lateral flow, and requires handling of multiple components (3 vials of solution) to perform the test in multiple steps.  However, these steps can be accomplished in less than ten minutes, and the actual test results occur in only one minute after those steps are completed.  Therefore sample-to-result time is shorter than any of the competitive products.  The product also has good performance claims.  There are settings where that reduced total test time, despite the multiple steps required, may be a distinct advantage, and we believe Biolytical has made some progress in penetrating certain public health markets.

Therefore, even though our lateral flow products currently enjoy a substantial market share in the U.S. rapid HIV test market, and we have an additional rapid HIV test, the DPP® HIV 1/2 Assay, there a number of risks and uncertainties concerning current and anticipated developments in this market.  Although we have no specific knowledge of any other new product that is a significant competitive threat to our products, or that will render our products obsolete, if we fail to maintain and enhance our competitive position or fail to introduce new products and product features, our customers may decide to use products developed by our competitors, which could result in a loss of revenues and cash flow.

More generally, the point-of-care diagnostics industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services.  As new technologies become introduced into the point-of-care diagnostic testing market, we may be required to commit considerable additional efforts, time and resources to enhance our current product portfolio or develop new products.  We may not have the available time and resources to accomplish this, and many of our competitors have substantially greater financial and other resources to invest in technological improvements.  We may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers, which would materially harm our operating results.

Although we own our DPP® patent, lateral flow technology is still a competitive platform to DPP®, and lateral flow technology has a lower cost of manufacture than DPP® products. Although the DPP® platform has shown improved sensitivity as compared with conventional lateral flow platforms in a number of studies, several factors go into the development and performance attributes of products.  Therefore the ability of our products to successfully compete will depend on several other factors, including but not limited to our having a patented rapid test platform technology that differentiates DPP® from lateral flow as well as from other diagnostic platform technologies.

We believe that our DPP® is outside of the scope of currently issued patents in the field of lateral flow technology, thereby offering the possibility of greater freedom to operate.  However there can be no assurance that our patents or our products incorporating the patent claims will not be challenged at some time in the future.

We must regularly commit substantial resources to research and development and the commercialization of third-party suppliers, someour new or enhanced products. The research and development process usually takes a long time from inception to commercial launch. During each stage of which may constitute our sole supply source, for certain important product components presentsthis process there is a substantial risk that could have negative consequences for other business.

Our products require significant development and investment prior to commercialization, including testing to demonstrate the products performance capabilities, cost-effectiveness or technical issues, or any other reason. If this occurs, we could incur substantial expensebenefits. We must obtain regulatory approval before most products may be sold and time toadditional development efforts on these products may be able to reestablishrequired before the appropriate quality, cost,products will be reviewed. However, regulatory and market-acceptance circumstances neededauthorities may not approve these products for commercial success.  Even withsale or may substantially delay or condition such approval. There may be little or no market for the needed expenseproduct and time,entry into or development of new markets for our products may require an investment of substantial resources even if all applicable regulatory approvals are obtained. Furthermore, we may spend a significant amount of money on advertising or other activities and still fail to develop a market for the product. The success of our efforts may be affected by our ability to manufacture products in a cost-effective manner, whether we can obtain necessary intellectual property rights and protection and our ability to obtain reimbursement authorizations in the markets where the product will be sold. Therefore, if we fail to develop and gain commercial acceptance for our products, or if competitors develop more effective products or a greater number of successful new products, customers may decide not be able to reestablish any or all of these factors.  The absence of any one or more of these factors could prevent us from being able to commercially produce and market the affected product or products.

The developmentdiagnostic industry is focused on the testing of biological specimens in a laboratory or at the point-of-care and commercializationis highly competitive and rapidly changing.  Some of our principal competitors may have considerably greater financial, technical and marketing resources than we do.  Several companies produce diagnostic tests that compete directly with our testing product line, including but not limited to, OraSure Technologies, Alere and Trinity Biotech.  Furthermore these and/or other companies have or may have products outside ofincorporating molecular and/or other advanced technologies that over time could directly compete with our testing product line. As new products incorporating new technologies enter the diagnostics industry could adversely affectmarket, our products may become obsolete or a competitor's products may be more effective or more effectively marketed and sold.

There is no assurance that we will be successful in implementing our financial and strategic objectives, including our efforts to increase sales of our products. For example, the funds for research, clinical development of a safe and effective vaccine to HIV or treatments for other diseases or conditions thatprojects have in the past come primarily from our business operations. If the sale of our products slows and we have less money available to fund research and development and clinical programs, we will have to cut certain programs. If adequate financial, personnel, equipment or other resources are designednot available, we may be required to detect,delay or scale back our business. If our total revenue and gross profits do not correspondingly increase or if our technology, product, clinical and market development efforts are unsuccessful or delayed, our operations will be negatively affected. Furthermore, our failure to successfully introduce new or enhanced products and develop new markets could have a material adverse effect on our business and prospects.

Hospitals, physicians and other healthcare providers who purchase diagnostic products in the United States generally rely on third-party payors, such as private health insurance plans, Medicare and Medicaid, to reimburse all or part of the cost of the product. Due to the overall escalating cost of medical products and services, there is increased pressures on the healthcare industry, both foreign and domestic, to reduce the cost of products and services. Given the efforts to control and reduce healthcare costs in the United States, available levels of reimbursement may change for our existing products or eventually eliminateproducts under development. Third-party reimbursement and coverage may not be available or adequate in either the United States or international markets, current reimbursement amounts may be decreased in the future and future legislation, and regulation or reimbursement policies of third-party payors, may reduce the demand for our products or our ability to sell our products on a profitable basis.

We believe it to be in our best interests to meaningfully participate in large testing programs.  Moreover many of these programs are funded by governments and other donors, and there can be no assurance that funding will not be reduced or completely discontinued.  Participation in these programs also requires alignment and engagement with the many other participants in these programs, including WHO, CDC, U.S. Agency for International Development, foreign governments and their agencies, non-governmental organizations, and HIV service organizations.  If we are unsuccessful in our efforts to participate in these programs, our operating results could be materially harmed.

Government agencies may issue diagnostic testing guidelines or recommendations, which can alter the usage of our HIV testing products. New laws or guidelines, or changes to existing laws or guidelines, and the manner in which these new or changed laws and guidelines are interpreted and applied, could impact the degree to which our testing products are used. These developments could affect the frequency of testing, the number of people tested and whether the testing products are used broadly for screening large populations or in a more limited capacity. These factors could in turn affect the level of sales of our products and our results of operations.

The current U.S. Presidential Administration has promised to repeal and replace the Affordable Care Act, expressed concerns with respect to existing trade agreements, and has indicated a desire to make other diagnostic productsregulatory changes during his administration. Changes in regulatory or economic conditions or in the laws and policies governing foreign trade, taxes, manufacturing, and development in the United States could impact our business. Economic and regulatory changes could also affect foreign currency exchange rates which, in turn, could affect our reported financial results and our competitiveness on a worldwide basis.

On June 23, 2016, the United Kingdom (“U.K.”) voted in favor of leaving the European Union, or E.U. Following this “Brexit” referendum there has been increased political and economic uncertainty, particularly in the U.K. and E.U. and this uncertainty may last for the foreseeable future. Until the terms and timing of the U.K.’s exit from the E.U. are finalized, it will be difficult to predict the impact of Brexit. Our business in the U.K., the E.U. and world-wide could be negatively affected during this period of uncertainty, and perhaps longer. The decision of voters in the U.K. to exit the E.U. could cause volatility in global financial markets, such as global currency exchanges, resulting in a slow-down in economic activity in the U.K., Europe or globally, and result in a losssignificant regulatory changes and uncertainty. These events could make it more difficult or costly to sell our products, particularly in the U.K. and Europe, and negatively affect our revenues and results of revenues.operations. The Brexit referendum may also influence other countries and result in additional countries deciding to leave the E.U. This in turn could result in additional changes and uncertainty, any or all of which could negatively impact our business.

We may be subject to cyber-attacks whereby computer hackers may attempt to access our computer systems or our third party IT service provider’s systems and, if successful, misappropriate personal or confidential information. In addition, a contractor or other third party with whom we do business may attempt to circumvent our security measures or obtain such information, and may purposefully or inadvertently cause a breach involving sensitive information. We will continue to evaluate and implement additional protective measures to reduce the risk and detect cyber incidents, but cyber-attacks are becoming more sophisticated and frequent and the techniques used in such attacks change rapidly. Even though we take cyber-security measures that are continuously reviewed and updated, our information technology networks and infrastructure may still be vulnerable due to sophisticated attacks by hackers or breaches.

Even the most well protected IT networks, systems, and facilities remain potentially vulnerable because the techniques used in security breaches are continually evolving and generally are not have sufficientrecognized until launched against a target and, in fact, may not be detected. Any such compromise of our or our third party’s IT service providers’ data security and access, public disclosure, or loss of personal or confidential business information, could result in legal claims proceedings, liability under laws to protect, privacy of personal information, and regulatory penalties, disrupt our operations, require significant management attention and resources to remedy any damages that result, damage our reputation and customers willingness to transact business with us, any of which could adversely affect our business.

We rely heavily on complex information technology systems across our operations and on the internet, including for management of inventory, invoices, purchase orders, shipping, interactions with our third-party logistics provider, revenue and expense accounting, consumer call support, online business, and various other processes and transactions. Our ability to effectively introducemanage our business, coordinate the production, distribution and marketsale of our products, respond to customer inquiries, and ensure the timely and accurate recording and disclosure of financial information depends significantly on the reliability and capacity of these systems and the internet.

If there are significant or unexpected increases in the demand for our products, we may not be able to meet that demand without expending additional capital resources. This would increase our capital costs, which could materiallynegatively affect our earnings. In addition, new manufacturing equipment or facilities may require FDA approval before they can be used to manufacture our products. To the extent we are unable to obtain or are delayed in obtaining such approvals, our ability to meet the demand for our products could be adversely affected. Furthermore, our suppliers may be unable or unwilling to expend the necessary capital resources or otherwise expand their capacity, which could negatively affect our business.

Introducing and achieving market acceptance for our rapid HIV tests and other new products will require substantial marketing efforts and will require us and/or our contract partners, sales agents, and/or distributors to make significant expenditures of time and money. In some instances we will be significantly or totally reliant on the marketing efforts and expenditures of our contract partners, sales agents, and/or distributors.  If they do not have or commit the expertise and resources to effectively market the products that we manufacture, our operating results will be materially harmed.

Our competitors make similar products to ours. A number of our business depends on,competitors are making investments in technologies and products, and may have a competitive advantage because of their greater financial, technical, research and other resources. Some competitors offer broader product lines and may have greater name recognition than we have. We also face competition from certain of our distributors or former customers that have created or may decide to create, their own products to compete with ours. If our competitors’ products take market share from our products through more effective marketing or competitive pricing, our revenues, margins and operating results could be adversely affected. In addition, to the market successour revenues and operating results could be negatively impacted if some of our customers internally develop or acquire their own sample collection devices and use those devices in place of our products in order to reduce costs.

The development and commercialization of products outside of the diagnostics industry could adversely affect sales of our abilityproducts.  For example, the development of a safe and effective vaccine to raise additional capital throughHIV or treatments for other diseases or conditions that our products are designed to detect, could reduce or eventually eliminate the saledemand for our HIV or other diagnostic products and result in a loss of debtrevenues.

Some of our products may require lengthy and unpredictable sales cycles, which makes it more difficult to accurately forecast revenues in a given period and may cause revenues and operating results to vary from period to period. Our products may involve sales to large public and private institutions which may require many levels of approval and may be dependent on economic or equitypolitical conditions and the availability of grants or through borrowing, andfunding from government or public health agencies which can vary from period to period. There can be no assurance that purchases or funding from these agencies will occur or continue, especially if current negative economic conditions continue or intensify. As a result, we may expend considerable resources on unsuccessful sales efforts or we may not be able to raise capitalcomplete transactions at all or borrow funds on attractivea schedule and in an amount consistent with our objectives.

We will continue to try to increase revenue derived from international sales of our products. There are several of factors that could adversely affect the performance of our business and/or cause us to incur substantially increased costs because of our international presence and sales, including: (i) uncertainty in the application of foreign laws and the interpretation of contracts with foreign parties; (ii) cultural and political differences that favor local competitors or make it difficult to effectively market, sell and gain acceptance of our products; (iii) exchange rates, currency fluctuations, tariffs and other barriers, extended payment terms and dependence on international distributors or representatives; (iv) trade protection measures, trade sanctions and import/export licensing requirements; (v) our inability to obtain or maintain regulatory approvals or registrations for our products; (vi) Economic conditions, political instability, the absence of available funding sources, terrorism, civil unrest, war and natural disasters in foreign countries; (vii) Reduced protection for, or enforcement of, our patents and other intellectual property rights in foreign countries; (viii) our inability to identify international distributors and negotiate acceptable terms for distribution agreements; and (ix) restrictions on our ability to repatriate investments and earnings from foreign operations.

We were profitable for five consecutive years through 2013.  Nevertheless, prior to 2009 we sustained significant operating losses since 2004, and we incurred an operating loss each year for 2014 2015 and 2016.through 2017.  We estimate that our resources are sufficient to fund our needs through the end of 20172018 and beyond.  We have already made, and may continue to make, significant financial commitments to invest in our sales and marketing organization, regulatory approvals, research and development including new technologies, and production capacity, including expanded facilities.

Our liquidity and cash requirements will depend on several factors. These factors include, among others, (1) the level of revenues; (2) the extent to which, if any, that revenue level improves operating cash flows; (3) our investments in research and development, facilities, marketing, regulatory approvals, and other investments we may determine to make; and (4) our investment in capital equipment and the extent to which it improves cash flow through operating efficiencies. There are no assurances that we will generate positive cash flow for 20172018 or, in the alternative, be successful in raising sufficient capital to fund our needs after 2017.2018.

Our U.S. market sales are difficult to predict in 20172018 given (i) our early June 2014 termination of the agreement with a third party for exclusive distribution of our cassette product in the U.S; and (ii) the May 31, 2016 termination of the agreement with a third party for exclusive distribution of our barrel product in the U.S.  As a result of these terminations, we expect to continue to experience higher average revenue per unit, and a lower volume of U.S. sales, of the cassette and barrel products.  Higher revenue per unit is anticipated because we previously sold these products to the exclusive U.S. distributor at a significantly lower price than the price at which the distributor resold these products to customers (including re-sellers and distributors) in the United States.  However at this point with respect to the barrel product, this can occur only after any inventory that the exclusive U.S. distributor has accumulated is consumed, which may take several months. In addition, in marketing these products directly, we are incurring substantial costs associated with developing our sales and marketing organization and channel distribution partners.

We believe that underlying demand for HIV rapid testing in the United States remains strong, and that the restoration of some of the funding cutbacks from sequestration and the implementation of the Affordable Care Act and of the United States Preventive Services Task Force recommendations will have a positive impact on the development of the market.  On the other hand, it is possible that changes to healthcare law in 2017 and thereafter could change this and/or have a negative impact on the market for our products.  Further, our products are well established and relied upon by a large installed base of customers over many years of use in the U.S. global market, and we believe this is a strong advantage. We also believe that our DPP® HIV 1/2 Assay, for which CLIA waiver was obtained in October 2014, for use with oral fluid or bloods samples will be able to serve new customers that were previously unavailable to us with our lateral flow blood tests.  However, development of new customers with this product is costly and time-consuming.

Chembio Diagnostics Malaysia’s revenues and expenses and the translation of Chembio Diagnostics Malaysia’s financial results into U.S. Dollars may be negatively affected by fluctuations in the exchange rate. Favorable movement in exchange rates have benefited us in prior periods. However, where there are unfavorable currency exchange rate fluctuations, our consolidated financial statements could be negatively affected. Furthermore, fluctuations in exchange rates could affect year-to-year comparability of operating results. In the past, we have not generally entered into hedging instruments to manage our currency exchange rate risk, but we may need to do so in the future. However, our attempts to hedge against these risks may not be successful. If we are unable to successfully hedge against unfavorable foreign currency exchange rate movements, our consolidated financial results may be adversely impacted.

Volatility in the economy may continue or exist in the future. This could negatively impact our financial performance or those of our customers and suppliers. These circumstances could inhibit our access to liquidity needed to conduct or expand our business. Many of our customers rely on public funding provided by federal, state and local governments, and this funding has been and may continue to be reduced or deferred as a result of economic conditions. These circumstances may adversely impact our customers and suppliers, which, in turn, could adversely affect their ability to purchase our products or supply us with necessary equipment, raw materials or components. Even with the improvement of economic conditions, it may take time for our customers and suppliers to establish new budgets and return to normal purchasing and shipping patterns. We cannot predict the reoccurrence of any economic slowdown or the strength or sustainability of an ethicseconomic recovery.

We believe we are not a covered entity nor a business associate of a covered entity and the Company is not responsible for complying with the Health Insurance Portability and Accountability Act of 1996, as amended (“HIPAA”). Even though the Company is likely not a covered entity under HIPAA, the Company does have in place administrative, technical and physical safeguards to protect the privacy and security of consumers’ personal information.] The Company is required to comply with varying state privacy, security and breach reporting laws. If we fail to comply with existing or new laws and regulations related to properly transferring data containing consumers’ personal information, we could be subject to monetary fines, civil penalties or criminal sanctions. Also, there are other federal and state laws that protect the privacy and security of consumers’ personal information, and we may be subject to enforcement by various governmental authorities and courts resulting in complex compliance issues. We could incur damages under state laws pursuant to an action brought by a private party for the wrongful use or disclosure of consumers’ personal information.

There are various federal and state laws targeting fraud and abuse in the healthcare industry that the Company is subject to, including anti-kickback laws, laws constraining the sales, false claims laws, marketing and promotion of medical devices by limiting the kinds of financial arrangements that manufacturers of these products may enter into with physicians, hospitals, laboratories and other potential purchasers of medical devices. There are other laws the Company is subject to that require the Company to report certain transactions between it and healthcare professionals. Violations of these laws are punishable by criminal or civil sanctions, including substantial fines, imprisonment and exclusion from participation in government healthcare programs. Many of the existing requirements are new and have no knowledgenot been definitively interpreted by state authorities or reasoncourts, and available guidance is limited. We could face enforcement action and fines and other penalties, and could receive adverse publicity, unless and until we are in full compliance with these laws, all of which could materially harm the Company. Furthermore, changes in or evolving interpretations of these laws, regulations, or administrative or judicial interpretations, may require us to knowchange our business practices or subject our business practices to legal challenges, which could have a material adverse effect on our business, financial condition and results of operations.

Public companies are subject to various laws and regulations, which have increased the scope, complexity and cost of corporate governance, reporting and disclosure practices. For example, we are subject to the Sarbanes-Oxley Act of 2002, The Dodd-Frank Wall Street Reform and Consumer Protection Act, the requirements of The NASDAQ Global Market, and the SEC’s requirements for public companies to provide financial statements in interactive data format using the eXtensible Business Reporting Language (“XBRL”). The implementation of certain aspects of these laws and regulations has required and will continue to require substantial management time and oversight and may require us to incur significant additional accounting and legal costs. We continually review changes with respect to new and proposed rules and cannot predict or estimate the amount of additional costs, and the timing of such costs, we may incur. There are several interpretations of these laws and regulations, in many cases due to their lack of specificity, and as a result, their application in practice may change as new guidance is provided by regulatory and governing bodies. This may result in continuing uncertainty regarding compliance matters and higher costs. We are committed to maintaining high standards of corporate governance and public disclosure, but if we fail to comply with any practicesof these requirements, legal proceedings may be initiated against us, which may adversely affect our business.

We have a policy in place prohibiting our employees, distributors and agents from engaging in corrupt business practices, including activities prohibited by the United States Foreign Corrupt Practices Act (the "FCPA"). Nevertheless, because we work through independent sales agents and distributors (and do not have any employees or subsidiaries) outside the United States, we do not have control over the day-to-day activities of such independent agents and distributors. In addition, in the donor-funded markets in Africa where we sell our products, there is significant oversight from PEPFAR, the Global Fund, and advisory committees comprised of technical experts concerning the development and establishment of national testing protocols.  This is a process that includes an overall assessment of a product which includes extensive product performance evaluations including five active collaborations and manufacturer's quality systems, as well as price and delivery.  In Brazil, where we have had a total of six product collaborations with FIOCRUZ, the programs through which our products may be deployed are all funded by the Brazilian Ministry of Health. Although FIOCRUZ is affiliated with the Brazilian Ministry of Health, and is its sole customer, FIOCRUZ is not the exclusive supplier for the Ministry of Health. However, because each of our previous collaborations with FIOCRUZ incorporates a technology transfer aspect, we believe we have a competitive advantage versus other suppliers to the Brazilian Ministry of Health, assuming other aspects of our product offering through FIOCRUZ are otherwise competitive in comparison. We have no knowledge or reason to know of any activities by our employees, distributors or sales agents of any actions which could be in violation of the FCPA, although there can be no assurance of this.

Risks relatedRelated to ourOur Common Stock

Our Common Stock continues to be illiquid, so investors may not be able to sell as much stock as they want at prevailing market prices.

The average daily trading volume of our Common Stock on the NASDAQ market was approximately 16,368 shares per day over the three months ended December 31, 2017 as compared with approximately 19,300 shares per day over the three months ended December 31, 2016 as compared with approximately 21,600 shares per day over the three months ended December 31, 2015.2016.  The liquidity of our stock depends on several factors, including but not limited to the financial results of the Company and overall market conditions, so it is not possible to predict whether this level of liquidity will continue, be sustained, or decrease.

Decreased trading volume in our stock would make it more difficult for investors to sell their shares in the public market at any given time at prevailing prices. Our management and larger stockholders exercise significant control over the Company.

After the volatility in the market price of a company’s stock, class action litigation has occurred against the issuing company. If we were subject to this type of litigation in the future, we could incur substantial costs and the attention and resources of our management could be diverted, each of which could have a material adverse effect on our revenue and largerearnings. Any adverse determination in this type of litigation could also subject us to significant liabilities.

If our existing stockholders, exerciseofficers or directors sell our Common Stock in the public market, or the perception that such sales may occur, it could negatively affect the price of our Common Stock. We are unable to estimate the number of shares of our Common Stock that may actually be resold in the public market since this will depend on the market price for our Common Stock, the individual circumstances of the sellers and other factors.

Institutional stockholders own significant amounts of our Common Stock. If one or more of these stockholders sell large portions of their holdings in a relatively short time, the prevailing price of our Common Stock could be negatively affected. In addition, it is possible that one or more of our executive officers or non-employee members of our Board of Directors could sell shares of our Common Stock during an open trading window. These transactions and the perceived reasons for these transactions could have a negative effect on the prevailing market price of our Common Stock.

The SEC has adopted rules requiring us, as a public company, to include a report in our Annual Reports on Form 10-K that contains an assessment by management of the effectiveness of our internal control over financial reporting. In addition, our independent registered public accounting firm must report on the effectiveness of these internal controls.

As of December 31, 2016,2017, our named executive officers, directors and 5% stockholders beneficially owned approximately 38.43%44.35% of our voting power, which includes four large investors that beneficially own approximately 10.36%13.97%, 9.36%10.42%, 9.00%7.46%, and 5.02%7.09%, respectively of the outstanding stock. For the foreseeable future, and assuming these ownership percentages continue to apply, to the extent that these parties vote similarly, they may be able to exercise significant control over many matters requiring approval by the board of directors or our stockholders.  As a result, they may be able to: