COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS

6 Months Ended

Jun. 30, 2011

COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS [Abstract]

COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS

NOTE7-COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS:

(a)   Economic Dependency:

The following table discloses product sales the Company had to customers in excess of 10% of net product sales for the periods indicated:

	For the three months ended						For the six months ended						Accounts Receivable
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010			As of
	Sales		% of Sales	Sales		% of Sales	Sales		% of Sales	Sales		% of Sales	June 30, 2011
Customer 1	$	1,419,261	48	$	1,288,038	55	$	3,474,471	58	$	2,449,965	54	$	26,063
Customer 2		872,734	29		*	*		923,845	15		*	*		860,192
Customer 3		*	*		474,564	20		*	*		474,564	10		37,294

In the table above, the asterisk (*) indicates that sales to the customer did not exceed 10% for the period indicated.

The following table discloses purchases the Company made from a vendor in excess of 10% of total purchases for the periods indicated:

	For the three months ended						For the six months ended						Accounts Payable
	June 30, 2011			June 30, 2010			June 30, 2011			June 30, 2010			As of
	Purchases		% of Purc.	Purchases		% of Purc.	Purchases		% of Purc.	Purchases		% of Purc.	June 30, 2011
Vendor 1	$	*	*	$	76,400	15	$	258,300	11	$	184,063	14	$	24,699
Vendor 2		174,952	11		*	*		251,869	11		*	*		134,368

The Company currently buys materials which are purchased under intellectual property rights agreements and are important components in its products.  Management believes that other suppliers could provide similar materials on comparable terms.  A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which could adversely affect operating results.

(b)   Governmental Regulation:

All of the Company's existing and proposed diagnostic products are regulated by the United States Food and Drug Administration, United States Department of Agriculture, certain U.S., state and local agencies, and/or comparable regulatory bodies in other countries.  Most aspects of development, production, and marketing, including product testing, authorizations to market, labeling, promotion, manufacturing, and record keeping are subject to review.  After marketing approval has been granted, Chembio must continue to comply with governmental regulations.  Failure to comply with these regulations can result in significant penalties.

(c)   Employment Agreement:

The Company has employment contracts with two key employees.  The contracts call for salaries presently aggregating $545,000 per year.  One contract expires in May 2013 and one contract expires in March 2013.  In connection with the contract that expires in March 2013, the Company issued 300,000 options to purchase common stock with one-third vesting immediately and one-third vesting on each of the second and third anniversaries of the grant.

On June 24, 2011, the cash bonus portion of the contract expiring March 2013 was amended in its entirety to provide for a cash bonus of up to 50% of his base salary for each respective year consisting of (i) a performance-based bonus of up to 20% of his base salary based upon attainment of the Company budget; (ii) a performance-based bonus of up to 15% of his base salary based upon attainment of specified and agreed-upon goals and objectives within the Research & Development Department; and (iii) a discretionary bonus of up to 15% of his base salary.