COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS

9 Months Ended

Sep. 30, 2012

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 nine months ended								Accounts Receivable
	September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011				As of
	Sales		% of Sales		Sales		% of Sales		Sales		% of Sales		Sales		% of Sales		September 30, 2012
Customer 1	$	1,187,124		25	$	1,912,199		35	$	5,780,030		34	$	5,386,670		47	$	648,084
Customer 2		2,522,405		53		2,012,425		36		7,421,430		44		2,936,270		25		1,326,098
Customer 3		*		*		573,957		10		*		*		*		*		*

                                (*) Product sales did not exceed 10% for the period indicated

Note that sales include product sales only while accounts receivable reflects the total due from the customer which includes freight.

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

	For the three months ended								For the nine months ended								Accounts Payable
	September 30, 2012				September 30, 2011				September 30, 2012				September 30, 2011				As of
	Purchases		% of Purc.		Purchases		% of Purc.		Purchases		% of Purc.		Purchases		% of Purc.		September 30, 2012
Vendor 1	$	204,607		15	$	174,278		13	$	613,287		14	$	432,577		11	$	89,710
Vendor 2		211,020		15		160,218		12		589,224		13		412,086		11		60,073

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, in March 2010, 37,500 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.