NOTE 6 — COMMITMENTS, CONTINGENCIES, AND CONCENTRATIONS:

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, 2018						March 31, 2017						March 31, 2018			March 31, 2017
	Sales			% of Sales			Sales			% of Sales
Customer 1		$	2,409,758		38	%		$	1,939,587		36	%		$	1,189,232		$	2,781,266
Customer 2			839,399		13				1,326,171		24				438,869			914,526
Customer 3			801,625		13				*		*				-			*

In the table above, an asterisk (*) indicates that product sales to the customer 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, including 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, 2018						March 31, 2017						March 31, 2018			March 31, 2017
	Purchases			% of Purch.			Purchases			% of Purch.
Vendor 1		$	469,357		16	%		$	*		*			$	163,538		$	*
Vendor 2			335,105		11			$	698,838		32	%			-			375,164

In the table above, an asterisk (*) indicates that purchases from the vendor did not exceed 10% for the period indicated.

The Company currently buys materials that 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 as the vendors shown in this table. A change in suppliers, however, could cause a delay in manufacturing, either from the logistics of changing suppliers or from product changes attributable to new components, which could result in a possible loss of sales, and which could adversely affect operating results.

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 regulatory 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.

Employment Contracts:

The Company has multi-year contracts with two key employees. The contracts call for salaries presently aggregating $770,000 per year, and they expire in March 2019 and March 2020. The following table is a schedule of future minimum salary commitments as of March 31, 2018:

2018	$	577,500
2019		485,500
2020		85,000

Pension Plan:

The Company has a 401(k) plan established for its employees whereby it matches 40% of the first 5% (or 2% of salary) that an employee contributes to the plan. Matching contribution expenses totaled $ 23,264 and $23,164 for the three months ended March 31, 2018 and 2017, respectively.