COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS

3 Months Ended

Mar. 31, 2013

COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS

COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS

NOTE7 — COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS:

a)   Economic Dependency:

The following table discloses product sales the Company had to each customer that purchased in excess of 10% of the Company's net product sales for the periods indicated:

	For the three months ended						Accounts Receivable As of
	March 31, 2013			March 31, 2012			March 31, 2013		March 31, 2012
	Sales		% of Sales	Sales		% of Sales
Customer 1	$	2,589,954	41	$	2,503,739	39	$	1,160,188	$	850,482
Customer 2		1,218,875	19		2,516,000	40		1,154,160		1,319,247
Customer 3		1,189,137	19		*	*		1,189,137		*

(*) 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 each vendor that sold to the Company in excess of 10% of the Company's total purchases for the periods indicated:

	For the three months ended						Accounts Payable As of
	March 31, 2013			March 31, 2012			March 31, 2013		March 31, 2012
	Purchases		% of Purc.	Purchases		% of Purc.
Vendor 1		*	*	$	177,637	13		*	$	32,385
Vendor 2		*	*		140,654	10		*		121,853

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

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 $590,000 per year.  The Esfandiari contract expires in March 2016 and as of March 31, 2013, the Siebert employment contract expired in May 2013.  On April 19, 2013, the term was extended to May 2014.  In connection with the contract that expires in March 2016, the Company issued, in March 2013, 30,000 options to purchase common stock, with one-third vesting on each of the first, second and third anniversaries of the grant.