Chembio Diagnostics, Inc. (Chembio), a in Vitro diagnostics company, has reported total revenues of $11.05 million for the full year of 2008, up 19.7%, compared with the total revenues of $9.23 million in the previous year-end. It has reported net loss attributable to common stockholders of $1.95 million, or $0.03 per share, for the full year of 2008, compared with the net loss attributable to common stockholders of $8.27 million, or $0.57 per share, in the previous year-end.

The Year Ended December 31, 2008

Year 2008 revenue growth came from $1.59 million of increased product revenues and $.23 million of increased research and grant revenues. The increased product revenues for the year of 2008 included an increase in rapid HIV test and related revenue of $1.26 million to $9.19 million, or up 16%, from $7.93 million in the same period of 2007. In addition, revenues from veterinary tuberculosis tests upby $.17 million in 2008 as compared with 2007.

Gross profit margin for 2008 was $3.85 million, up 38% from $2.80 million in 2007. As a percentage of total revenues, gross profit margin in 2008 was 34.9%, as compared with 30.3% in 2007. The increase in gross profit margin as well as gross profit margin as a percentage of sales for the year of 2008 primarily reflects an increase in total revenues, an improved revenue mix, and volume-related manufacturing efficiencies.

SG&A expense for the year of 2008 was $3.32 million, as compared with $3.77 million for 2007. Increases in commission, based on increased product sales in Brazil, were partially offset by reductions in wages and related expenses, consulting, marketing materials, investor relations, legal and accounting, and travel and entertainment costs as well as other expenses. R&D expenses, which include clinical and regulatory affairs, increased $.70 million to $2.61 million for the year of 2008 as compared with $1.91 million for 2007. The primary reason for the increases was additional R&D personnel related to work on the company’s DPP(R) technology. R&D expenses are funded in part by grant and development income, which increased $.23 million, or 49%, to $.69 million for the year of 2008 as compared with $.47 million in 2007.

The operating loss for the year of 2008 decreased 28% to $2.07 million from an operating loss of $2.88 million in the previous year. The reduced operating loss reflects increased revenues, improved gross profits, and lower SG&A expenses which more than offset increased research and development expenses associated with new product development.

The net loss attributable to common stockholders for the year of 2007 includes $4.2 million of non-recurring deemed dividends and $1.3 million in non-cash dividends to preferred stockholders. As previously reported, all of the company’s convertible preferred stock was converted into common stock in December 2007, which resulted in no preferred stock dividends in 2008.

Fourth Quarter 2008 Financial Results

Total revenues for the fourth quarter of 2008 were $2.45 million, up 3%, compared with fourth quarter 2007 revenues of $2.38 million. This revenue growth is attributable to $83,000 of increased product revenues, partially offset by $9,000 of decreased research and grant revenues. The increase in product revenues for the fourth quarter of 2008 was primarily due to sales other than our rapid HIV test and related revenues which decreased $38,000 to $1.96 million, or 1.9%, from $2.00 million in the same period of 2007.

Gross profit margin in the fourth quarter 2008 was $.62 million, a decrease of 19.5%, from $.76 million in the same period of 2007. As a percentage of total revenues, gross profit margin in the fourth quarter of 2008 was 25.1%, as compared with 32.2% in the same period of 2007. The decrease in the gross profit as well as gross profit margin as a percentage of sales for the fourth quarter of 2008 primarily reflects the adjustment of royalties in the fourth quarter which related to prior quarters (see Highlights above for further clarification).

SG&A expense for the three months ended December 31, 2008 was $.62 million, as compared with $.88 million in the same period of 2007. Decreases in wages and related expenses, consulting, investor relations, legal and accounting, and travel and entertainment costs as well as other expenses were partially offset by increases in commission based on increased product sales in Brazil.

R&D expenses include costs relating to clinical and regulatory affairs, which resulted in up$.13 million to $.65 million for the fourth quarter of 2008 as compared with $.52 million for the same period in 2007. The primary reason for the increases was additional R&D personnel related to work on the company’s DPP(R) technology.

The operating loss for the fourth quarter of 2008 increased 3% to $.66 million from an operating loss of $.64 million in the year-ago period. The increased operating loss reflects the adjustments made to the cost of goods sold for royalties (see Fourth Quarter and Recent Highlights below), and increased research and development expenses associated with new product development, which were partially offset by lower SG&A expenses. DPP(R) is a promising new product platform, and Chembio continues to invest in this technology, which has now advanced to the stage of two products being incorporated into the company’s manufacturing operation.

The net loss attributable to common stockholders decreased 89% to $.55 million, or less than $0.01 per share, for the fourth quarter of 2008 compared with a net loss attributable to common stockholders of $5.20 million, or $0.26 per share, for the fourth quarter of 2007. The net loss attributable to common stockholders for the fourth quarter of 2007 included $4.2 million of non-recurring deemed dividends and $.25 million in non-cash dividends to preferred stockholders. As previously reported, all of the company’s convertible preferred stock was converted into common stock in December 2007, which resulted in no preferred stock dividends in the fourth quarter of 2008.

Commenting on the results, Chembio’s president, Lawrence A. Siebert, stated, “We are very pleased with the steady progress we made during 2008 increasing our sales and gross margin while controlling our costs. Despite a challenging environment we are optimistic about our prospects for this year and believe our current resources will be sufficient to finance our working capital requirements if we continue with the progress we have made over the last year toward profitable results. Without the royalty settlement of approximately $500,000 in the fourth quarter, we would have been very close to break-even in the fourth quarter, which was with sales at a $10MM annualized rate. We believe that we can improve on these results in 2009, as our sales in the global rapid HIV test market grow and our new products based on our DPP(R) technology are brought to market.

“In addition to the DPP(R) products we are developing on an OEM basis and under contract research development grants in collaborations with others, the DPP(R) products that we are focusing our R&D activities on include our DPP(R) HIV 1/2 screening test for use with oral fluids and our unique DPP(R) Syphilis Screen and Confirm test.”