UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2019

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________.

Commission File Number:0-12305

REPRO MED SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


New York	13-3044880
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

24 Carpenter Road, Chester, New York	10918
(Address of Principal Executive Offices)	(Zip Code)

(845) 469-2042

(Registrant’s telephone number, including area code)

~~February 28~~N/A

(Former ~~name, former address~~Name, Former Address and ~~former fiscal year,~~Former Fiscal Year, if ~~changed since last report)~~Changed Since Last Report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


	Large accelerated filer [ ]	Accelerated filer [ ]
	Non-accelerated filer [ ]	Smaller reporting company [X]
	~~(Do not check if a smaller reporting company)~~	Emerging growth company [ ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
common stock, $0.01 par value	REPR	OTCQX

As of ~~November 3, 2017, 37,930,620~~May 7, 2019, 38,316,634 shares of common stock, $0.01 par value per share, were outstanding, which excludes 2,737,231 shares of treasury stock.

REPRO MED SYSTEMS, INC.

TABLE OF CONTENTS


		PAGE

PART I– FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Balance Sheets as of ~~September 30, 2017~~March 31, 2019 (Unaudited) and ~~February 28, 2017~~December 31, 2018	3

	Statements of Operations (Unaudited) for the three ~~and seven~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	4

	Statements of Cash Flows (Unaudited) for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018	5

	Notes to Financial Statements	~~6-11~~6

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~12-18~~14

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	18

ITEM 4.	Controls and Procedures	18

PART II– OTHER INFORMATION

ITEM 1.	Legal Proceedings	19

ITEM 1A.	Risk Factors	20

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~18-19~~20

ITEM 6.	Exhibits	1921

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

REPRO MED SYSTEMS, INC.

BALANCE SHEETS


	September 30,			February 28,			March 31,
	2017			2017			2019			December 31,
	(Unaudited)						(Unaudited)			2018
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	3,661,707		$	3,313,265		$	2,592,889		$	3,738,803
Certificates of deposit		262,314			262,314			1,524,416			1,517,927
Accounts receivable less allowance for doubtful accounts of $77,067 at September 30, 2017 and $18,046 at February 28, 2017		1,481,410			1,502,030
Accounts receivable less allowance for doubtful accounts of $37,500 at March 31, 2019 and December 31, 2018								2,655,273			1,425,854
Inventory		1,586,568			1,353,703			2,508,684			2,103,879
Tax Receivable		—			172,457
Prepaid expenses		225,088			175,955			286,615			246,591
TOTAL CURRENT ASSETS		7,217,087			6,779,724			9,567,877			9,033,054
Property and equipment, net		902,075			932,092			833,015			858,781
Patents, net of accumulated amortization of $195,354 and $180,137 at September 30, 2017 and February 28, 2017, respectively		440,565			426,943
Patents, net of accumulated amortization of $249,716 and $239,581 at March 31, 2019 and December 31, 2018, respectively								670,738			632,156
Right of use assets, net								472,224			—
Deferred tax asset								—			1,466
Other assets		31,583			31,490			19,582			19,582
TOTAL ASSETS	$	8,591,310		$	8,170,249		$	11,563,436		$	10,545,039

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Deferred capital gain - current	$	22,481		$	22,481		$	—		$	3,763
Accounts payable		362,878			772,428			943,091			453,498
Accrued expenses		502,249			417,357			699,887			688,649
Accrued payroll and related taxes		123,716			177,018			248,049			421,714
Accrued tax liability		142,883			—			—			16,608
Finance lease liability - current								4,241			—
Operating lease liability - current								131,845			—
TOTAL CURRENT LIABILITIES		1,154,207			1,389,284			2,027,113			1,584,232
Deferred capital gain – long term		9,382			22,496
Deferred tax liability		91,039			82,422			24,128			—
Finance lease liability, net of current portion								1,094			—
Operating lease liability, net of current portion								340,379			—
TOTAL LIABILITIES		1,254,628			1,494,202			2,392,714			1,584,232

STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; 75,000,000 shares authorized, 40,667,851 and 40,558,429 shares issued, 37,930,620 and 37,821,198 shares outstanding at September 30, 2017 and February 28, 2017, respectively		406,679			405,584
Common stock, $0.01 par value; 75,000,000 shares authorized, 40,939,825 and 40,932,911 shares issued, 38,202,594 and 38,195,680 shares outstanding at March 31, 2019 and December 31, 2018, respectively								409,398			409,329
Additional paid-in capital		4,162,679			4,129,726			4,890,450			4,595,214
Retained earnings		3,111,528			2,484,941			4,215,078			4,300,468
		7,680,886			7,020,251			9,514,926			9,305,011
Less: Treasury stock, 2,737,231 shares at September 30, 2017 and February 28, 2017		(344,204	)		(344,204	)
Less: Treasury stock, 2,737,231 shares at March 31, 2019 and December 31, 2018, respectively, at cost								(344,204	)		(344,204	)
TOTAL STOCKHOLDERS’ EQUITY		7,336,682			6,676,047			9,170,722			8,960,807
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	8,591,310		$	8,170,249		$	11,563,436		$	10,545,039

The accompanying notes are an integral part of these financial statements

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REPRO MED SYSTEMS, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

For the
Three Months Ended

For the
Seven Months Ended

September 30,

September 30,

2017

2016

2017

2016

NET SALES

$
3,849,338

$
3,221,502

$
9,188,414

$
7,293,695

Cost of goods sold

1,470,680

1,188,558

3,539,662

2,643,925

Gross Profit

2,378,658

2,032,944

5,648,752

4,649,770

OPERATING EXPENSES

Selling, general and administrative

1,893,911

2,114,407

4,536,954

4,887,608

Research and development

14,852

75,198

47,564

147,136

Depreciation and amortization

77,517

70,935

179,874

167,513

Total Operating Expenses

1,986,280

2,260,540

4,764,392

5,202,257

Net Operating Profit/(Loss)

392,378

(227,596
)

884,360

(552,487
)

Non-Operating Income/(Expense)

Gain/(Loss) on currency exchange

10,419

(4,096
)

65,079

8,237

Interest and other income

361

262

1,104

1,336

TOTAL OTHER INCOME/(EXPENSE)

10,780

(3,834
)

66,183

9,573

PROFIT/(LOSS) BEFORE TAXES

403,158

(231,430
)

950,543

(542,914
)

Income Tax (Expense)Benefit

(137,404
)

78,217

(323,956
)

183,819

NET INCOME/(LOSS)

$
265,754

$
(153,213
)
$
626,587

$
(359,095
)

NET INCOME/(LOSS) PER SHARE

Basic

$
0.01

$
—

$
0.02

$
(0.01
)
Diluted

$
0.01

$
—

$
0.02

$
(0.01
)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic

37,898,357

37,779,427

37,856,074

37,885,432

Diluted

38,056,604

37,779,427

38,014,321

37,885,432

The accompanying notes are an integral part of these financial statements

- 5 -

REPRO MED SYSTEMS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

REPRO MED SYSTEMS, INC. (the “Company”, “RMS”, or “we”) designs, manufactures and markets proprietary portable and innovative medical devices primarily for the ambulatory infusion market ~~and emergency medical applications~~ as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality ~~management systems.~~system management. The Company operates as one segment.

FISCAL YEAR END

~~On March 22, 2017, the Board of Directors approved a change in the~~The Company’s fiscal year end ~~from February 28 to~~is December 31.

BASIS OF PRESENTATION

The accompanying unaudited financial statements as of ~~September 30, 2017,~~March 31, 2019, have been prepared in accordance with generally accepted accounting principles and with instructions to SEC regulation S-X for interim financial statements.

In the opinion of the Company’s management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Company’s financial position as of ~~September 30, 2017,~~March 31, 2019, and the results of operations and cash flow for the three ~~and seven month~~months periods ended ~~September 30, 2017,~~March 31, 2019, and ~~2016.~~2018.

The results of operations for the three ~~and seven~~ months ended ~~September 30, 2017,~~March 31, 2019 and ~~2016~~2018 are not necessarily indicative of the results to be expected for the full year. These interim financial statements should be read in conjunction with the financial statements and notes thereto of the Company and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report for the ~~year~~twelve months ended ~~February 28, 2017,~~December 31, 2018, as filed with the Securities and Exchange Commission on Form 10-K.

CASH AND CASH EQUIVALENTS

For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company holds cash in excess of $250,000 at its depository, which exceeds the FDIC insurance limits and is, therefore, uninsured.

CERTIFICATES OF DEPOSIT

The certificate of deposit is recorded at cost plus accrued interest. The certificate of deposit earns interest at a rate of 1.73% and matures in May 2019.

INVENTORY

Inventories of raw materials are stated at the lower of standard cost, which approximates average cost, or market value including allocable overhead. Work-in-process and finished goods are stated at the lower of standard cost or market value and include direct labor and allocable overhead.

PATENTS

Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents.

INCOME TAXES

Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences.

- 6 -

The Company believes that it has no uncertain tax positions requiring disclosure or adjustment. Generally, tax years starting with 2016 are subject to examination by income tax authorities.

PROPERTY, EQUIPMENT, AND DEPRECIATION

Property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets.

STOCK-BASED COMPENSATION

The Company maintains a stock option plan under which it grants stock options and has issued stock to certain executives, key employees and consultants. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted are recorded at the fair value of the shares at the grant date.

USE OF ESTIMATES IN THE FINANCIAL STATEMENTS

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to, asset lives, valuation allowances, inventory, and accruals.

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~REVENUE RECOGNITION

~~In May 2017, the~~The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2017-09—Compensation-Stock Compensation (Topic 718),~~2014-09—Revenue from Contracts with Customers, which provides ~~clarity and reduces both (1) diversity~~a single comprehensive model for entities to use in ~~practice and (2) cost and complexity when applying the guidance~~accounting for revenue arising from contracts with customers. We adopted this ASU effective January 1, 2018 on a full retrospective basis. Adoption of this standard did not result in ~~Topic 718, Compensation—Stock Compensation,~~significant changes to ~~a change to the terms~~our accounting policies, business processes, systems or ~~conditions of a share-based payment award. The amendments in this update affect any entity that changes the terms~~controls, or conditions of a share-based payment award. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. Based upon our initial evaluation, we do not expect the adoption of the standard to have a material ~~effect~~impact on our financial position, results of operations and cash flows or related disclosures. As such, prior period financial statements ~~disclosure requirements~~were not recast.

The Company’s revenues result from the sale of assembled products. We recognize revenues when shipment occurs and ~~methods~~at which point the customer obtains control and ownership of ~~adoption.~~the goods. Shipping costs generally are billed to customers and are included in sales.

The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred.

Provisions for distributor pricing and annual customer volume rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it’s probable the annual growth target will be achieved. Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers.

LEASES

In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by the Company for those leases classified as operating leases under current U.S. GAAP, while our accounting for capital leases remains substantially unchanged. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard became effective for us January 1, 2019. The standard had a material impact on our balance sheets, but did not have a material impact on our income statements. See NOTE 7 LEASES.

- 67 -

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2016, the FASB issued ASU No. 2016-13—Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

In ~~May 2014,~~August 2018, the FASB issued ASU No. ~~2014-09—Revenue from Contracts with Customers. The ASU clarifies~~2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the ~~principles~~Disclosure for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”) that removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, provides more useful information to users of the financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer.Fair Value Measurement. The amendments in this ~~update~~ASU modify the disclosure requirements on fair value measurements in Topic 820 based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for ~~the annual reporting~~all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2016, including~~2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods ~~within that reporting period. Full~~presented upon their effective date. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified ~~retrospective~~disclosures upon issuance of this ASU and delay adoption ~~is required and early application is not permitted. On July 9, 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606); Deferral~~ of the ~~Effective Date, which (a) delays~~additional disclosures until their effective date. The Company is assessing the ~~effective date~~impact of ~~ASU 2014-09, Revenue from Contracts with Customers (Topic 606), by one year to annual periods beginning after December 15, 2017 and (b) allows early~~the adoption of the ASU by all entities as of the original effective date for public entities. We currently anticipate adopting the new standard using the modified retrospective method beginning January 1, 2018. In March 2016, the FASB issued ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606); Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as the requirements in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606); Identifying Performance Obligations and Licensing, which is intended to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas and the effective date is the same as the requirements in ASU 2014-09. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by update 2014-09). In December 2016, the FASB issued ASU No. 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which represents changes to make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This update is the final, combined version of Proposed Accounting Standards Updates 2016-240 and 2016-320 (both entitled Technical Corrections and Improvements), which have been deleted. We do not expect the adoption of the standard and related amendments to have a material effect on our financial condition or results of operations.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The main difference between the current requirement under GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. This ASU requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. This ASU must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the potential impact of this ASU on our financial statements, disclosure requirements and methods of adoption.

~~- 7 -~~In August 2018, the FASB issued ASU No. 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations.

~~STOCK-BASED COMPENSATION~~FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts reported in the balance sheet for cash, trade receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments.

ACCOUNTING FOR LONG-LIVED ASSETS

The Company ~~maintains a long-term incentive stock benefit plan under which it grants stock options~~reviews its long-lived assets for impairment at least annually or whenever the circumstances and ~~restricted stock to certain directors and key employees. The fair value~~situations change such that there is an indication that the carrying amounts may not be recoverable. As of ~~each option grant is estimated on~~March 31, 2019, the ~~date~~Company does not believe that any of ~~the grant using the Black-Scholes option-pricing model. All options~~its assets are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted are recorded at the fair value of the shares at the grant date, over the vesting period.impaired.

RECLASSIFICATION

Certain reclassifications have been made to conform prior period data to the current presentation. These reclassifications had no effect on reported net income.

- 8 -

NOTE 2 RELATED PARTY TRANSACTIONS

~~On December 20, 2013,~~LEASED AIRCRAFT

From 1992 to 2018, we ~~executed~~leased an ~~agreement effective March 1, 2014, with~~aircraft from AMI Aviation, Inc., of which our former President and Chief Executive Officer, Andrew Sealfon, was a ~~Company director, Dr. Mark Baker, to provide clinical research~~majority shareholder. The lease payments were $0 and support services related to new and enhanced applications for the FREEDOM60® Syringe Infusion System. Authorized by the Board of Directors, the agreement provided for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period. Amortization amounted to zero and $7,000$3,876 for the three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016, respectively, and zero and $14,000 for~~2018, respectively. Upon the ~~seven months ended September 30, 2017 and 2016, respectively.~~

~~On October 21, 2015, Cyril Narishkin was appointed to the Board~~termination of ~~Directors and Interim Chief Operating Officer of the Company. Also effective October 21, 2015, we entered into a consulting agreement with~~ Mr. Narishkin, to support our expanded management team and accelerate our growth opportunities under his role of Interim Chief Operating Officer. The agreement provided for payment of $16,000 per month for eight days per month, of which half was to be paid in cash and half was to be paid in shares of common stock. Effective January 1, 2016, the agreement provided for the same payment of $16,000 per month, of which seventy-five percent was to be paid in cash and twenty-five percent was to be paid in shares of common stock.

~~On June 24, 2016, Cyril Narishkin executed a termination and general release agreement, which terminated his previous consulting agreement, and resigned~~Sealfon as an officer and director for personal reasons. Mr. Narishkin was compensated for services as a consultant through January 31, 2017 at a monthly rate of $16,000 per month for up to eight days of service a month upon request of the Company. Mr. Narishkin’s compensation was zero and $48,000 for the three months ended September 30, 2017 and 2016, respectively and zero and $166,000 for the seven months ended September 30, 2017 and 2016, respectively. In accordance with the agreement, the Company repurchased 96,542 shares of common stock of the Company owned by Mr. Narishkin at an aggregate purchase price of $43,393 in July 2016.

~~LEASED AIRCRAFT~~

~~The Company leases an aircraft from a company controlled by Andrew Sealfon, the Company’s~~ President and Chief Executive Officer. The lease payments were $3,876 and $5,375 for the three months ended September 30, 2017 and 2016, respectively and $9,544 and $12,542 for the seven months ended September 30, 2017 and 2016, respectively. The original lease agreement has expired andOfficer on July 25, 2018, the Company ~~is currently on a month-to-month basis for rental payments.~~ceased leasing this aircraft.

BUILDING LEASE

Mr. ~~Mark~~ Pastreich, aour former board of director, is a principal in the entity that owns the building leased by ~~Company. The Company is in~~us for our corporate headquarters and manufacturing facility at 24 Carpenter Road, Chester, New York 10918. On February 28, 2019, we completed year ~~nineteen~~twenty of a ~~twenty-year lease. There have been no changes~~twenty year lease with monthly lease payments of $11,042. On November 14, 2017, we executed a lease extension, which calls for six month extensions beginning March 1, 2019 with the option to ~~lease terms since his directorship and none are expected through the life of the current lease. With~~renew six times at a monthly lease amount of ~~$11,042, the~~$12,088. The lease payments were ~~$33,126~~$34,172 for ~~each of~~ the three months ended ~~September 30, 2017~~March 31, 2019, and ~~2016 and $77,294~~$33,126 for ~~each of~~ the ~~seven~~three months ended ~~September 30, 2017 and 2016.~~March 31, 2018. The Company also paid property taxes for the three months ended ~~September 30, 2017 and 2016~~March 31, 2019 in the amount of ~~$12,862~~$12,427 and ~~$12,334, respectively, and $29,098 and $28,159~~$12,712 for the ~~seven~~three months ended ~~September 30, 2017 and 2016, respectively.~~March 31, 2018.

~~We are currently negotiating a lease extension at our current facility as we continue to assess what our strategy for future expansion and growth requirements will be.~~

~~- 8 -~~

NOTE 3 PROPERTY AND EQUIPMENT

Property and equipment consists of the following at:


	September 30, 2017			February 28, 2017			March 31, 2019			December 31, 2018

Land	$	54,030		$	54,030		$	54,030		$	54,030
Building		171,094			171,094			171,094			171,094
Furniture, office equipment, and leasehold improvements		1,054,971			1,022,942			1,085,234			1,058,507
Manufacturing equipment and tooling		1,074,157			1,003,166			1,282,303			1,279,865
		2,354,252			2,251,232			2,592,661			2,563,496
Less: accumulated depreciation		(1,452,177	)		(1,319,140	)		(1,759,646	)		(1,704,715	)
Property and equipment, net	$	902,075		$	932,092		$	833,015		$	858,781

Depreciation expense was $73,515 and $66,480 for the three months ended March 31, 2019 and March 31, 2018, respectively.

NOTE 4 LEGAL PROCEEDINGS

~~Lawyers representing~~We are involved in several lawsuits with our principal competitor, EMED Technologies ~~Corp.~~Corporation (“EMED”) ~~sent RMS a letter dated, May 1, 2013, which~~. EMED has alleged that ~~the RMS High-Flo Butterfly design infringed a patent~~our needle sets infringe various patents controlled by EMED. ~~RMS disputed this claim~~Certain of these lawsuits also allege antitrust violations, unfair business practices, and ~~believes that our design did not infringe and that~~various other claims. We are vigorously defending against all of the lawsuits brought by EMED. Although no assurances can be given, we believe we have meritorious defenses to all of EMED’s claims.

The initial case involving EMED ~~patent itself~~ was ~~not valid. Under advice of counsel, on September 20, 2013, the Company commenced~~filed by us in the United States District Court for the Eastern District of California on September 20, 2013 (the “California case”), in response to a ~~Declaratory Judgment action against competitor,~~letter from EMED ~~to establish~~claiming patent infringement by us, and seeking a declaratory judgment establishing the invalidity of ~~one of~~the patent referenced in the letter – EMED’s ~~patents and non-infringement of the Company’s needle sets.~~US patent 8,500,703 – “‘703.” EMED answered the complaint and asserted patent infringement of the ‘703 patent and several counterclaims relating generally to claims of unfair business ~~practice counterclaims. The Company~~practices against us. We responded by ~~asserting its own~~adding several claims against EMED, generally relating to claims of unfair business ~~practice claims against EMED.~~practices on EMED’s part. Both parties have requested injunctive relief and monetary ~~damages. Discovery is ongoing.~~damages in unspecified amounts.

On ~~June 16,~~September 11, 2015, we requested an ex parte reexamination of the ~~Court issued what it termed~~‘703 patent by the US Patent and Trademark Office (“USPTO”). The ex parte reexamination resulted in a ~~“narrow” Preliminary Injunction against the Company from making certain statements regarding some~~Final Office Action dated July 19, 2017 rejecting all of EMED’s ~~products.~~claims in the patent. On ~~June 23, 2016,~~January 25, 2018 EMED filed an Appeal Brief with a ~~Motion seeking to have~~Petition for Revival, which was accepted. On April 9, 2018, the ~~Company held in contempt, claiming that certain language~~USPTO denied EMED’s request for reconsideration of the order rejecting all claims in the ~~Company’s device labeling does not comply with~~‘703 patent. Both the ~~injunction. In response to a Show Cause Order,~~California case and EMED’s appeal of the Company advised the Court that the language in the Company’s labeling that EMED challenged is language that the FDA directed the Company to use in its labeling. The Court discharged the Show Cause Order, effectively rejecting EMED’s contempt argument.USPTO rejections are pending.

~~On March 24, 2016,~~The second court case was filed by EMED filed a Motion seeking a second Preliminary Injunction prohibiting RMS from selling three of its products in California. The Company opposed that Motion on April 19, 2016. The Order denying this second Preliminary Injunction was issued June 6, 2017.

On August 22, 2017, the Company filed a Motion seeking a Preliminary Injunction prohibiting EMED from making false statements and claims regarding the products of both companies. EMED filed a Response and Objections to Company’s motion on September 21, 2017, and Company filed a subsequent Reply on September 28, 2017. The Court issued a Minute Order on September 22, 2017 vacating a hearing set for October 5, 2017, and stating that if the Court determines oral hearings to be required, the parties will be notified. Presently, the parties are awaiting further action by the Court.

~~On June 25, 2015, EMED filed a claim of patent infringement for the second of its patents, also directed to the Company’s needle sets,~~ in the United States District Court for the Eastern District of ~~Texas.~~Texas on June 25, 2015, claiming patent infringement on another of its patents (US 8,961,476 – “‘476”), by our needle sets, and seeking unspecified monetary damages (“ED Texas ‘476 matter”). This ~~second~~‘476 patent is related to the ~~one concerning the Company’s declaratory judgment action. Given the close relationship between the two patents, the Company~~now rejected EMED ‘703 patent.

- 9 -

On September 17, 2015, we requested ~~that the Texas suit be transferred to California. Also, based on a validity~~an inter partes review (“IPR”) of the ‘476 patent, and in ~~the U.S. Patent and Trademark Office (“USPTO”), discussed below, the Company requested the Texas suit be stayed. On May 12, 2016,~~response to our request, the Court entered an order staying the ~~case~~ED Texas ‘476 matter until after the Patent Trial and Appeal Board (“PTAB”) atof the USPTO ~~issued~~made a ~~final written~~ decision regarding the validity of the patent. On January 12, 2017, the PTAB issued its ~~final written decision~~Final Written Decision in our favor, invalidating all but one (“dependent Claim 9”) of the claims ~~asserted by EMED~~ in the ~~Texas litigation. On January 26, 2017,~~‘476 patent. EMED appealed the ~~Company and EMED requested that the Texas case remain stayed pending EMED’s appeal of the~~ PTAB’s ~~final~~ ruling to the United States Court of Appeals for the Federal Circuit, which affirmed the PTAB’s Final Written Decision in our favor on April 3, 2018. On April 18, 2018, EMED filed a petition for en banc rehearing, which was denied. On August 16, 2018, EMED petitioned the United States Supreme Court for a Writ of Certiorari to review the Federal Circuit’s upholding the PTAB’s Final Written Decision. On October 29, 2018 the United States Supreme Court denied EMED’s Petition for a Writ of Certiorari, thus finally affirming the PTAB’s invalidation of ‘476, save for one dependent claim.

Following the PTAB’s Final Written Decision in the IPR regarding the ‘476 patent, EMED filed a new patent application claiming priority back to the application that issued as ‘703, which is the patent at issue in the California case. Submitted for accelerated examination, this new application issued as US 9,808,576 – “‘576” on November 7, 2017. On this same date, EMED filed a new case (the “third case”) in the United States District Court for the Eastern District of Texas claiming patent infringement of ‘576, also directed to our needle sets, and seeking unspecified damages and a preliminary injunction against our marketing of its needle sets. We filed a Motion to Dismiss or Transfer Venue to the United States District Court for the Southern District of New York (“~~CAFC”~~SDNY”), which has resulted in the transfer of the third case to SDNY (“SDNY ‘576 matter”).

~~- 9 -~~The SDNY ‘576 matter is proceeding with preliminary matters and although neither a discovery schedule nor a fixed trial date has not been set, a trial is expected to be scheduled sometime in 2020.

On September 11, 2015, the Company requested an ex parte reexamination of the patent in the first filed case, and on September 17, 2015 the Company requested an inter partes review (“IPR”) of the patent in the second filed case. On November 20, 2015, the USPTO instituted the ex parte reexamination request having found a substantial new question of patentability concerning EMED’s patent in the first filed case. All EMED claims have been rejected by the USPTO Examiner in a Final Office Action dated July 19, 2017.April 23, 2018, EMED filed a ~~response~~new civil case (the “fourth case”) against us in the United States District Court for the Eastern District of Texas asserting antitrust, defamation and unfair business practice claims, and seeking unspecified damages, similar to ~~this Final Office Action~~those previously presented in the California case, described above. As the result of a hearing on ~~September 15, 2017~~November 14, 2018, on December 7, 2018 the Court entered an order transferring the fourth case to the United States District Court for the Eastern District of California (the “California Court”). The fourth case is expected to be consolidated with the California case, or dismissed, as the California Court sees fit.

At the same hearing on November 14, 2018, the Texas Court granted EMED leave to amend its infringement contentions, following the IPR decision invalidating all but one claim of the ‘476 patent, in order to assert infringement of that sole remaining claim, namely dependent Claim 9. The Texas Court’s order allowing EMED’s amendment of its infringement contentions against us was entered on December 7, 2018.

The ED Texas ‘476 matter is ~~awaiting consideration~~now proceeding under EMED’s amended infringement contention to incorporate the surviving dependent Claim 9, which incorporates Claims 1 and 8 of the ‘476 patent, meaning that, to prove infringement on the part of us, EMED must prove more elements of infringement than it originally charged against us. The Texas Court has set a trial date of August 19, 2019 for the trial of the ED Texas ‘476 matter.

As is required by the ~~Examiner. Thus,~~respective Courts in both the ~~ex parte reexamination is ongoing. A decision to institute~~SDNY ‘576 matter and the IPR for EMED’s patent in the second filed case was ordered by the USPTO on February 19, 2016 having determined a reasonable likelihood all claims of the patent may be found to be unpatentable. Oral argument for the IPR was held on November 22, 2016 and a final ruling issued on January 12, 2017. In its final ruling, the PTAB held the claim asserted by EMED against the Company in the second filed case was invalid. EMED appealed the PTAB’s final ruling, and EMED’s opening brief in the CAFC was filed on June 26, 2017. The Company’s response brief was filed on August 3, 2017. EMED filed a reply brief on August 17, 2017. Presently,ED Texas ‘476 matter, the parties are ~~awaiting further action by the CAFC.~~engaging in settlement discussions and have conducted a court-sponsored mediation session, which did not result in settlement.

Although ~~the Company believes it~~we believe RMS has meritorious claims and defenses in ~~these~~all of the above-described actions and proceedings, their outcomes cannot be predicted with any certainty. ~~We believe that it is likely both patents will be determined invalid, however, if~~If any of these actions against ~~the Company~~us are successful, they could have a material adverse effect on ~~the Company’s~~our business, results of operations, financial condition and cash flows.

~~NOTE 5 STOCKHOLDERS’ EQUITY~~

On September 30, 2015, RMS’s Board of Directors authorized the Company to make open market purchases of up to 2,000,000 shares of the Company’s outstanding Common Stock. The purchases are made through a broker designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the rules of the Securities and Exchange Commission for such repurchases. As of September 30, 2017, the Company had repurchased 396,606 shares at an average price of $0.45. The management of the Company has decided to discontinue repurchasing its outstanding common stock under the program for an undetermined period of time to utilize cash for capital investments needed to expand the business.

NOTE 65 STOCK-BASED COMPENSATION

On ~~September 30, 2015,~~June 29, 2016, the Board of Directors ~~approved~~amended the 2015 Stock Option Plan ~~(“the Plan”~~(the “Plan”) authorizing the Company to grant ~~stock option~~ awards to certain ~~officers,~~executives, key employees, and consultants under the Plan, ~~subject to shareholder approval~~which was approved by shareholders at the Annual Meeting ~~of Shareholders~~ held on September 6, 2016. ~~The~~Currently, the total number of shares of ~~common stock of the Company, par value $0.01 per share (“~~Common ~~Stock”),~~Stock, with respect to which awards may be granted pursuant to the Plan, ~~was~~may not to exceed ~~2,000,000 shares.~~

4,000,000. On ~~June 29, 2016, the~~February 20, 2019, our Board of Directors approved ~~the amendment~~an increase to the ~~Plan increasing the total~~ number of shares ~~of Common Stock to be subject to awards granted~~authorized under the Plan to ~~4,000,000 shares. On September 6, 2016,~~6,000,000, subject to shareholder approval at the 2019 Annual ~~Shareholder~~ Meeting ~~the Company’s shareholders approved the Plan as amended.~~of Shareholders.

As of ~~September 30, 2017, there were~~March 31, 2019, the Company had 3,469,000 options outstanding ~~1,163,000 options awarded~~ to certain executives, key employees and ~~advisory board members~~consultants under the ~~Plan.~~Plan, of which 1,050,000 were issued during the three months ended March 31, 2019.

- 10 -

On ~~October 21, 2015,~~February 20, 2019, the Board of Directors of the Company approved an increase in compensation for each non-employee director ~~compensation~~from $25,000 to $50,000 annually effective January 1, 2019 and an additional $10,000 annually for the chair of ~~$25,000~~ each ~~annually,~~Board committee effective February 20, 2019, in each case to be paid quarterly half in cash and half in common stock ~~beginning September~~at the end of each fiscal quarter.

Pursuant to Daniel S. Goldberger’s employment agreement dated October 12, 2018, on February 1, ~~2015.~~2019, when Donald B. Pettigrew was appointed to President and Chief Executive Officer, Mr. Goldberger was awarded a performance bonus in the amount of $270,000 to be paid half in cash and half in stock on April 1, 2019. The number of shares to be issued is based upon the closing price of the Common Stock of the Company on February 1, 2019 as reported by the OTCQX.

The per share weighted average fair value of stock options granted during the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016~~March 31, 2018 was ~~$0.26~~$1.10 and zero, respectively. The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016.~~March 31, 2018. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being ~~valued:~~valued.


	September 30,				March 31,
	2017		2016		2019		2018

Dividend yield		0.00%		—		0.00%		—
Expected Volatility		70.1-72.2%		—		59.4-60.3%		—
Weighted-average volatility		—		—		—		—
Expected dividends		—		—		—		—
Expected term (in years)		5 Years		—		10		—
Risk-free rate		2.30-2.36%		—		2.64-2.72%		—

~~- 10 -~~

The following table summarizes the status of the Plan:


	Seven Months Ended September 30,								Three Months Ended March 31,
	2017				2016				2019			2018
	Shares	Weighted Average Exercise Price			Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price

Outstanding at March 1	1,345,000	$	0.39			1,060,000	$	0.37
Outstanding at January 1									2,419,000	$	1.00		1,038,000	$	0.41
Granted	68,000	$	0.44			—	$	—	1,050,000	$	1.57		—	$	—
Exercised	—	$	—			—	$	—	—	$	—		—	$	—
Forfeited	250,000	$	0.36			155,000	$	0.36	—	$	—		—	$	—
Outstanding at September 30	1,163,000	$	0.40			905,000	$	0.37
Options exercisable at September 30,	573,000	$	0.38			—	$	—
Outstanding at March 31									3,469,000	$	1.17		1,038,000	$	0.41
Options exercisable at March 31									828,219	$	0.58		756,385	$	0.39
Weighted average fair value of options granted during the period	—	$	—			—	$	—	—	$	1.10		—	$	—
Stock-based compensation expense	—	$	(25,343	)		—	$	86,876		$	121,875			$	12,183

Total stock-based compensation expense ~~net of estimated forfeitures for stock option awards totaled $(25,343)~~was $121,875 and ~~$86,876~~$12,183 for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016,~~March 31, 2018, respectively.

The weighted-average grant-date fair value of options granted during the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016,~~March 31, 2018, was ~~$17,961~~$1.2 million and zero, respectively. ~~The total intrinsic value of~~There were no options exercised during the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~September 30, 2016, was zero for both periods.~~March 31, 2018.

- 11 -

The following table presents information pertaining to options outstanding at ~~September 30, 2017:~~March 31, 2019:


Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price		Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price

$0.36 - $0.46	1,163,000	5 years	$	0.40	573,000	$	0.38
$0.36-$1.57								3,469,000	5.5 years	$	1.17	828,219	$	0.58

As of ~~September 30, 2017,~~March 31, 2019, there was ~~$115,384~~$2.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 1738 months. The total fair value of shares vested ~~during the seven months ended September 30, 2017~~as of March 31, 2019 and ~~September 30, 2016,~~March 31, 2018, was ~~$17,873~~$293,373 and ~~zero,~~$156,425, respectively.

NOTE 6 DEBT OBLIGATIONS

On February 8, 2018, the Company executed a Promissory Note with KeyBank National Association (“KeyBank”) in the amount of $1.5 million as a variable rate revolving line of credit loan due on demand with an interest rate of LIBOR plus 2.25%, collateralized with a certificate of deposit in the amount of $1.5 million. The Company entered into this arrangement to establish a credit lending history and, in the event needed, to have additional cash on hand for future expansion. On September 25, 2018, KeyBank released the certificate of deposit as collateral for the loan and the Company executed a Commercial Security Agreement as collateral for the loan. As of March 31, 2019, the Company has no outstanding amounts against the line of credit.

NOTE 7 LEASES

We have finance and operating leases for our corporate office and certain office and computer equipment. Our leases have remaining lease terms of 1 to 3 years, some of which include options to extend the leases annually and some with options to terminate the leases within 1 year.

The components of lease expense were as follows:


	Three Months Ended March 31, 2019

Operating lease cost	$	35,829

Finance lease cost:
Amortization of right-of-use assets	$	1,060
Interest on lease liabilities		72
Total finance lease cost	$	1,132

Supplemental cash flow information related to leases was as follows:


	Three Months Ended March 31, 2019

Cash paid for amounts included in the measurement of lease liabilities:
Finance cash flows from finance leases	$	1,028
Finance lease cost:
Amortization of right-of-use assets	$	1,060
Interest on lease liabilities		72
Total finance lease cost	$	1,132

- 1112 -

Supplemental balance sheet information related to leases was as follows:


	Three Months Ended March 31, 2019
Operating Leases
Operating lease right-of-use assets	$	472,224

Operating lease current liabilities		131,845
Operating lease long term liabilities		340,379
Total operating lease liabilities	$	472,224

Finance Leases
Property and equipment, at cost	$	6,363
Accumulated depreciation		1,060
Property and equipment, net	$	5,303

Finance lease current liabilities		4,241
Finance lease long term liabilities		1,094
Total finance lease liabilities	$	5,335


		Three Months Ended March 31, 2019
Weighted Average Remaining Lease Term
Operating leases		3 Years
Finance leases		1 Year

Weighted Average Discount Rate
Operating leases		4.75%
Finance leases		4.75%

Maturities of lease liabilities are as follows:


Year Ending December 31,		Operating Leases			Finance Leases
2019	$	113,764		$	3,300
2020		151,685			2,206
2021		149,476			—
2022		97,256			—
Total lease payments		512,181			5,506
Less imputed interest		(39,957	)		(171	)
Total	$	472,224		$	5,335

- 13 -

PART I – ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF ~~OPERATIONS.~~OPERATIONS

This Quarterly Report on Form 10-Q contains certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to us that are based on the beliefs of the management, as well as assumptions made and information currently available.

Our actual results may vary materially from the forward-looking statements made in this report due to important factors such as uncertainties associated with future operating results, unpredictability related to Food and Drug Administration regulations, introduction of competitive products, ~~limited liquidity,~~acceptance of and demand for new and existing products, ability to penetrate new markets, success in enforcing and obtaining patents, reimbursement related risks, government regulation of the home health care industry, success of the research and development effort, expanding the market of FREEDOM60^®demand in the SCIg market, availability of sufficient capital ~~to continue operations,~~if or when needed, dependence on key personnel and the outcome of ~~litigation and regulatory investigation.~~litigation. When used in this report, the words “estimate,” “project,” “believe,” “may,” “will,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. Such statements reflect current views with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. These statements involve risks and uncertainties with respect to the ability to raise capital if or when needed to develop and market new products, acceptance of and demand for new and existing products, ability to penetrate new markets, our success in enforcing and obtaining patents, obtaining required Government approvals, attracting and maintaining key personnel and succeeding in litigation claims that could cause the actual results to differ materially. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. The Company does not undertake any obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Throughout this report, “RMS,” the “Company,” “we,” “us” and “our” refer to Repro Med Systems, Inc.

OVERVIEW

~~On March 22, 2017,~~We ended the ~~Board~~first quarter of ~~Directors approved a change in the Company’s fiscal year end from February 28 to December 31.~~

~~During the three months ended September 30, 2017, our total~~2019 with record net sales ~~were up 19.5%~~results of $5.0 million, an increase of 23% compared with the same period last year, driven by needle sales and the fulfillment of open orders from December 31, 2018 totaling $0.2 million. We believe the growth was a result of our national account focus, growth in diagnosis of primary immunodeficiency diseases (“PIDD”) and expansion into the neurology market with ~~the majority of the increase coming from higher volume from our domestic customers.~~expanded Hizentra® indication for chronic inflammatory demyelinating polyneuropathy (“CIDP”). Our gross margin percentage ~~61.8%,~~ was ~~not as high as~~ the same ~~period last year, 63.1%, mostly due to higher production costs related to scrap during quality inspections as we continue to work to implement~~for both periods. We had a ~~nondestructive testing protocol, which we expect to have implemented before the end of the calendar year. Our selling, general and administrative costs were 10.4% lower~~net loss for the ~~three months~~period ended ~~September 30, 2017~~March 31, 2019, compared with net income for the ~~same period last~~previous year mostly due to ~~a significant reduction in~~increased legal fees for ~~the quarter related to our~~ litigation activity and ~~regulatory efforts.~~

~~Our net sales~~ for the seven months ended September 30, 2017 increased 26.0%, versus the same period last year. Part of the increase was the result of backorders of $0.4 million at February 28, 2017 which were filled during the three month period ended June 30, 2017. Excluding these backorders, net sales grew 18.0% driven by growth both domesticallyresale registration statement and internationally, which included a larger pump order from a national customer in the period and a large return of product related to a market withdrawal last year. Our selling, general and administrative costs were 7.2% lower for the seven months ended September 30, 2017 compared with the same period last year. We saw a significant reduction in legal fees related to our litigation and regulatory efforts. However, we cannot predict whether this trend will continue, nor can we predict the outcome of the litigation or regulatory process. We also had reductions in sales and marketing spend driven by reduced consulting fees that were incurred last year related to our website redesign, public relations, sales training and lead generation efforts and the timing of spend for current year marketing initiatives. Offsetting these savings were increasedpreviously announced executive management changes, higher salary and related ~~benefit costs in~~expenses resulting from the executive management changes, as well as a performance bonus payment to our ~~regulatory department due to headcount to support our regulatory compliance requirements and the addition of our~~former interim Chief ~~Operating~~Executive Officer.

We continue to expand internationally, generating our first sales in Asia and Africa in the 2017 quarter. The FDA issued a new 510(k) clearance for our Integrated Catch-Up Freedom Syringe Driver System, the first ever fully integrated 510(k) cleared system by the FDA, confirming the science behind the performance of using the dedicated RMS system. It is also the only mechanical infusion system cleared for both subcutaneous drugs (SCIg) and intravenous (antibiotics), clearing the path for customers to invest in one system to meet all their needs. The FDA renewed our Certificate to Foreign Government which is used to communicate to foreign governments that the FDA certified that RMS meets good manufacturing practices and quality system regulations. We received registrations in new countries, launched our new flow controller in Europe and started several clinical trials with drug companies. Furthermore, we have launched a new marketing campaign, redesigned our packaging and entered the social media world to help extend our brand awareness. We plan to continue to focus on global sales growth, cost control and new product development. We have requested an extension on the lease for our facility as we continue to assess what our strategy for future expansion and growth requirements will be.

~~- 12 -~~

RESULTS OF OPERATIONS

Three months ended ~~September 30, 2017~~March 31, 2019 compared to ~~September 30, 2016~~March 31, 2018

Net Sales

The following table summarizes our net sales for the three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:

Three Months Ended September 30,

Change from Prior Year

% of Sales

2017

2016

$

%

2017

2016

Sales

Domestic

$
3,209,345

$
2,597,905

$
611,440

23.5%

83.4%

80.6%

International

639,993

623,597

16,396

2.6%

16.6%

19.4%

Total

$
3,849,338

$
3,221,502

$
627,836

19.5%

Total net sales increased ~~$0.6~~$0.9 million or ~~19.5%~~23.3% for the three months ended ~~September 30, 2017~~March 31, 2019 compared with the same period last year. This growth was driven mostly by increased volume in needle sales and the fulfillment of open orders from ~~domestic sales.~~December 31, 2018 totaling $0.2 million. We ~~continue to concentrate~~believe the ~~majority~~growth was a result of our ~~efforts~~national account focus, growth in ~~our infusion product lines, specifically towards new applications in both domestic~~the diagnosis of PIDD and ~~international markets. During the quarter we generated our first sales in Asia and Africa, and we continue to pursue registrations in new countries. We also continue to expand our sales efforts~~expansion into the ~~antibiotic market.~~neurology market with expanded Hizentra® indication for CIDP.

- 14 -

Gross Profit

Our gross profit for the three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 is as follows:


	Three Months Ended September 30,				Change from Prior Year			Three Months Ended March 31,				Change from Prior Year
	2017		2016		$		%	2019		2018		$		%
Gross Profit	$	2,378,658	$	2,032,944	$	345,714	17.0%	$	3,047,954	$	2,465,824	$	582,130	23.6%
Stated as a Percentage of Net Sales		61.8%		63.1%					61.3%		61.1%

Gross profit increased ~~$0.3~~$0.6 million or ~~17.0%~~23.6% in the three months ended ~~September 30, 2017,~~March 31, 2019, compared to the same period in ~~2016.~~2018. This increase in the quarter was mostly driven by the increase in net sales of ~~$0.6~~$0.9 million. Partially offsetting this increase were higher production costs related to scrap during quality inspections as we work to implement a nondestructive testing protocol, which we expect to have implemented before the end of the calendar year. Additionally, we still incurred slightly higher payroll costs as we built up inventory.

Selling, general and administrative and Research and development

Our selling, general and administrative expenses and research and development costs for the three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 are as follows:


	Three Months Ended September 30,				Change from Prior Year					Three Months Ended March 31				Change from Prior Year
	2017		2016		$			%		2019		2018		$		%
Selling, general and administrative	$	1,893,911	$	2,114,407	$	(220,496	)	(10.4	)	$	2,977,383	$	1,880,269	$	1,097,114	58.3%
Research and development		14,852		75,198		(60,346	)	(80.2	)		101,959		9,848		92,111	935.3%
	$	1,908,763	$	2,189,605	$	(280,842	)	(12.8	)	$	3,079,342	$	1,890,117	$	1,189,225	62.9%
Stated as a Percentage of Net Sales		49.6%		68.0%							61.9%		46.9%

Selling, general and administrative expenses ~~decreased $0.2~~increased $1.1 million, or ~~10.4%~~58.3%, during the three months ended ~~September 30, 2017~~March 31, 2019 compared to the same period last ~~year. The decrease was~~year partially due to increased litigation activity including the ~~result~~engagement of ~~a significant reduction in~~new counsel and legal ~~fees of $0.3 million related to our litigation and regulatory efforts. We cannot predict whether this trend will continue, nor can we predict~~support for the ~~outcome~~filing of the ~~litigation. We also had reduced expenses in sales~~resale registration statement and ~~marketing of $0.1 million mostly due to lower~~executive management changes matters totaling $0.5 million. Executive salary and related ~~costs~~benefits increased $0.5 million due to attrition in Europe, lower overall marketing spend due to timing, all partially offset by recruiting fees in Europe. Further offsetting the savings were increased costs of $0.1 million in our regulatory department due to headcount to support our regulatory compliance requirements and the addition of the Executive Chairman of the Board, our new President and Chief ~~Operating~~Executive Officer ~~as well as an increase~~and other executive changes, including a performance bonus payment to our former interim Chief Executive Officer in ~~bad debt~~the amount of $0.3 million. We also added a Vice President of Medical Affairs to the team, adding $0.1 million year over year. Higher investor relation expenses and director fees also contributed $0.1 million to the increase. Offsetting these increases was attrition in regulatory salary and related benefit expense in the amount of ~~$65,000 related to an international customer.~~ $0.1 million.

Research and development ~~expense decreased 80.2% due to attrition. We are committed to our research and development activities and are actively searching to replace the open positions.~~

~~- 13 -~~

~~Depreciation and amortization~~

~~Depreciation and amortization expense~~expenses increased ~~by 9.3% up to $77,517 in~~$0.1 million during the three months ended September 30, 2017 compared with $70,935 in the three months ended September 30, 2016 as a result of continued investment in computer equipment, testing equipment, patent applications and maintenance of existing patents.

~~Net Income/(Loss)~~

Three Months Ended September 30,

Change from Prior Year

2017

2016

$

Net Income/(Loss)

$
265,754

$
(153,213
)
$
418,967

Stated as a Percentage of Net Sales

6.9%

(4.8%
)

Our net income for the three months ended September 30, 2017 was $0.3 million compared to a net loss of $0.2 million for the three months ended September 30, 2016. This $0.4 million change was mostly a result of the increase in net sales and the reduced selling, general and administrative expenses as described above. Additionally, the Company recognized a $10,419 foreign exchange gain for the period.

~~Seven months ended September 30, 2017 compared to September 30, 2016~~

~~Net Sales~~

~~The following table summarizes our net sales for the seven months ended September 30, 2017 and 2016:~~

Seven Months Ended September 30,

Change from Prior Year

% of Sales

2017

2016

$

%

2017

2016

Sales

Domestic

$
7,463,949

$
5,885,669

$
1,578,280

26.8%

81.2%

80.7%

International

1,724,465

1,408,026

316,439

22.5%

18.8%

19.3%

Total

$
9,188,414

$
7,293,695

$
1,894,719

26.0%

~~Total net sales increased $1.9 million or 26.0% for the seven months ended September 30, 2017~~March 31, 2019 compared with the same period last year due to increased headcount and was driven by both domestic and international sales. Part of the increase was the result of backorders of $0.4 million at February 28, 2017 which were filled during the three month period ended June 30, 2017. Excluding these backorders, net sales grew 18.0%. The launch of a new drug generated increased needle sales as customers built inventory, a larger pump order was received from a national customer in the period and last year included a large return ofexpanded product related to a market withdrawal. We continue to concentrate the majority of our efforts in our infusion product lines, specifically towards new applications in both domestic and international markets. We generated our first sales in Asia and Africa during the period, and we continue to pursue registrations in new countries. We also continue to expand our sales efforts into the antibiotic market.

~~Gross Profit~~

~~Our gross profit for the seven months ended September 30, 2017 and 2016 is as follows:~~

Seven Months Ended September 30,

Change from Prior Year

2017

2016

$

%

Gross Profit

$
5,648,752

$
4,649,770

$
998,982

21.5%

Stated as a Percentage of Net Sales

61.5%

63.8%

~~Gross profit increased $1.0 million or 21.5% in the seven months ended September 30, 2017,~~development initiatives compared to the same period in 2016. This increase was driven by the increase in net sales of $1.9 million. Partially offsetting this increase were higher production costs related to scrap during quality inspections as we work to implement a nondestructive testing protocol, higher sterilization costs due to more frequent cycles required to meet demand and backlog and increased shipping costs due to a backlog. We also had higher production salary and related benefits costs from overtime and the addition of a second shift to meet increased demand.

~~- 14 -~~

~~Selling, general and administrative and Research and development~~

~~Our selling, general and administrative expenses and research and development costs for the seven months ended September 30, 2017 and 2016 are as follows:~~

Seven Months Ended September 30,

Change from Prior Year

2017

2016

$

%

Selling, general and administrative

$
4,536,954

$
4,887,608

$
(350,654
)
(7.2%
)
Research and development

47,564

147,136

(99,572
)
(67.7%
)

$
4,584,518

$
5,034,744

$
(450,226
)
(8.9%
)
Stated as a Percentage of Net Sales

49.9%

69.0%

~~Selling, general and administrative expenses decreased $0.4 million, or 7.2%, during the seven months ended September 30, 2017 compared to the same period~~ last year. The decrease was the result of a significant reduction in legal fees of $0.6 million related to our litigation and regulatory efforts. We cannot predict whether this trend will continue, nor can we predict the outcome of the litigation. We also had reductions in sales and marketing spend of $0.2 million driven by lower consulting fees related to our website redesign last year, timing of spend this year on marketing initiatives and tradeshows and lower salary and related costs due to attrition in Europe. Partially offsetting these savings were increased costs in our regulatory department due to headcount to support our regulatory compliance requirements and the addition of our Chief Operating Officer, totaling $0.4 million, as well as an increase in bad debt expense of $65,000, related to an international customer. Research and development expense decreased by $0.1 million, or 67.7%, primarily due to attrition for the period. We are committed to our research and development activities and are actively searching to replace the open positions.

Depreciation and amortization

Depreciation and amortization expense increased by ~~7.4% up~~12.2 % to ~~$179,874~~$83,651 in the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 compared with ~~$167,513~~$74,578 in the ~~seven~~three months ended ~~September 30, 2016 as a result of~~March 31, 2018. We continued ~~investment~~to invest in capital assets, mostly related to computer equipment ~~testing equipment,~~and leasehold improvements, and in patent applications and ~~maintenance of existing patents.~~their maintenance.

Net ~~Income/(Loss)~~Income


	Seven Months Ended September 30,					Change from Prior Year		Three Months Ended March 31,					Change from Prior Year
	2017		2016			$		2019			2018		$			%
Net Income/(Loss)	$	626,587	$	(359,095	)	$	985,682
Net Income								$	(85,390	)	$	403,427	$	(488,817	)	-121.2%
Stated as a Percentage of Net Sales		6.8%		(4.9%	)				-1.7%			10.0%

Our net loss for the three months ended March 31, 2019 was $0.1 million compared to $0.4 million in net income for the ~~seven~~three months ended September 30, 2017 was $0.6 million compared to a net loss of $0.4 million for the seven months ended September 30, 2016.. This $1.0 million change was mostly a result of the increase in net sales and the reducedMarch 31, 2018, driven by increased selling, general and administrative expenses, as described above. ~~Additionally, the Company recognized $65,079 in foreign exchange gain for the period.~~

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of liquidity is our cash of ~~$3.7~~$2.6 million as of ~~September 30, 2017,~~March 31, 2019. Additionally, we have a $1.5 million certificate of deposit that matures in May 2019 and ~~cash flows from operations.~~a $1.5 million line of credit with no outstanding amounts against it. Our principal source of operating cash inflows is from sales of our products to customers. Our principal cash outflows relate to the purchase and production of inventory and related costs, selling, general and administrative expenses ~~capital expenditures~~ and ~~patent costs.~~professional fees.

- 15 -

We believe that as of ~~September 30, 2017,~~March 31, 2019, cash on hand and cash expected to be generated from future operating activities will be sufficient to fund our operations, including further research and development and capital expenditures, for the next 12 months. We believe ~~the FREEDOM System continues~~RMS’s home infusion products continue to find a solid following in the ~~SCIg~~subcutaneous immunoglobulin (“SCIg”) market, ~~and this market is expected to continue to increase both domestically and internationally. In addition, we expect many of the SCIg providers, and others, will see benefit in using the FREEDOM System~~as well as, into new markets like neurology where Hizentra® received an expanded indication for ~~additional uses such as antibiotics, chemotherapeutics, and pain medications.~~CIDP.

We continue to be in litigation with a competitor, EMED Technologies Corp. (“EMED”) and have incurred a significant amount of legal fees in connection with that process. Although the Company believes it has meritorious claims and defenses in the actions and proceedings, their outcomes cannot be predicted with any certainty. If any of these actions against the Company are successful, they could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

~~- 15 -~~

On September 30, 2015, RMS’s Board of Directors authorized the Company to make open market purchases of up to 2,000,000 shares of the Company’s outstanding Common Stock. The purchases are made through a broker designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the rules of the Securities and Exchange Commission for such repurchases. As of September 30, 2017, the Company had repurchased 396,606 shares at an average price of $0.45. The management of the Company has decided to discontinue repurchasing its outstanding Common Stock for an undetermined period of time to utilize cash for capital investments needed to expand the business.

Cash Flows

The following table summarizes our cash flows:

Seven Months Ended
September 30, 2017

Seven Months Ended
September 30, 2016

Net cash provided by/(used in) operating activities

$
531,281

$
(212,676
)
Net cash used in investing activities

$
(163,479
)
$
(230,044
)
Net cash used in financing activities

$
(19,360
)
$
(120,577
)


	Three Months Ended March 31, 2019			Three Months Ended March 31, 2018
Net cash used in operating activities	$	(1,045,233	)	$	(13,114	)
Net cash (used in)/ provided by investing activities	$	(96,833	)	$	71,733
Net cash used in financing activities	$	(3,848	)	$	—

Operating Activities

Net cash provided by operating activities of $0.5 million for the seven months ended September 30, 2017 was primarily attributable to net income of $0.6 million, non-cash charges of $0.2 million for depreciation and amortization of long lived tangible and intangible assets, a decrease in tax receivable of $0.1 million, and an increase in tax liability of $0.1 million. Offsetting these were an increase in inventory of $0.2 million as we built up finished goods inventory after our backorder position at February 28, 2017 and the reduction of accounts payable of $0.4 million which was the result of the payment of legal fees accrued at February 28, 2017.

Net cash used in operating activities of ~~$0.2~~$1.0 million for the ~~seven~~three months ended ~~September 30, 2016~~March 31, 2019 was ~~primarily~~mostly attributable to ~~the operating loss~~increased accounts receivable of $1.2 million as one of our major customer’s payment terms changed on January 1, 2019 from net 30 to net 60 days and increased inventory of $0.4 million as we look to build stock to keep pace with sales growth. Partially offsetting these was an increase in accounts ~~receivable~~payable of $0.5 million and non-cash charges for stock based compensation of $0.3 ~~million, an increase~~million.

Net cash used in ~~prepaid expense~~operating activities of $13,114 for the three months ended March 31, 2018 was primarily the result of increased inventory of $0.1 million, ~~mostly due to an income tax receivable of $0.1 million due to the loss in the period~~ and the ~~decrease~~pay out of bonuses, commissions and severance accrued for at December 31, 2017 totaling $0.6 million in ~~tax liability of $0.2 million. Partially~~aggregate. Mostly offsetting these decreases were higher net income of $0.4 million and non-cash charges of ~~$0.2~~$0.1 million for depreciation and amortization of long lived tangible and intangible assets, stock based compensation ~~expense~~ of ~~$0.1 million and~~$45,933, as well as an increase in accounts payable of ~~$0.4 million mostly due to raw material purchases and legal fees.~~$0.1 million.

Investing Activities

~~Our net~~Net cash used in investing activities of ~~$0.2~~$0.1 million for the ~~seven~~three months ~~ended September 30, 2017~~ending March 31, 2019 was for capital expenditures for computer equipment and ~~September 30, 2016 was primarily attributable to our~~leasehold improvements, as well as continued investment in ~~capital assets~~patents. Net cash provided by investing activities of $0.1 million for the three months ended March 31, 2018 was mostly ~~related to production and for new patent applications and maintenance~~the result of ~~existing patents.~~the maturity of a certificate of deposit.

Financing Activities

~~Our net cash~~The $3,848 used in financing activities ~~was $19,360 and $120,577~~ for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2019 is related to payments for cancelled shares and ~~September 30, 2016, respectively, and~~leased office equipment. There were ~~a result of~~no financing activities for the ~~repurchase of shares of the Company’s common stock.~~three months ended March 31, 2018.

~~FDA~~

RMS had an inspection by the FDA in June 2015, which included, among other items, a review of customer complaints, quality controls, quality assurance and documentation. The FDA inspection was then expanded as a consequence of an extensive “trade complaint” filed on behalf of a competitor which resulted in the issuance of an FDA FORM 483. Eight months later, on February 29, 2016 we received a Warning Letter. Since that time the Company has successfully addressed all quality and regulatory issues cited in the Warning Letter and the FDA FORM 483. On October 2, 2017, the FDA conducted another inspection as a last step in closing the Warning Letter. We anticipate the Warning Letter to be closed in the near future.

On April 19, 2017, the FDA renewed our Certificate to Foreign Government which is used to communicate to foreign governments that the FDA confirmed and certified that RMS meets U.S. FDA good manufacturing practices and quality system regulations.

~~- 16 -~~

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In ~~May 2017,~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09—Compensation-Stock Compensation (Topic 718), which provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update affect any entity that changes the terms or conditions of a share-based payment award. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. Based upon our initial evaluation, we do not expect the adoption of the standard to have a material effect on our financial statements, disclosure requirements and methods of adoption.

~~In June 2016, FASB issued ASU~~ No. 2016-13—Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

- 16 -

In August 2018, the FASB issued ASU No. ~~2015-14 Revenue from Contracts~~2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with ~~Customers (Topic 606); Deferral~~the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the ~~Effective Date, which (a) delays the~~amendments in this ASU. The amendments in this ASU are effective ~~date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), by one year to annual periods~~for fiscal years beginning after December 15, ~~2017~~2019, and ~~(b) allows early~~interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is assessing the impact of the adoption of the ASU by all entities as of the original effective date for public entities. We currently anticipate adopting the new standard using the modified retrospective method beginning January 1, 2018. In March 2016, the FASB issued ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606); Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as the requirements in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606); Identifying Performance Obligations and Licensing, which is intended to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas and the effective date is the same as the requirements in ASU 2014-09. In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by update 2014-09). In December 2016, the FASB issued ASU No. 2016-20 Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, which represents changes to make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This update is the final, combined version of Proposed Accounting Standards Updates 2016-240 and 2016-320 (both entitled Technical Corrections and Improvements), which have been deleted. We do not expect the adoption of the standard and related amendments to have a material effect on our financial condition or results of operations.

~~- 17 -~~

NON-GAAP FINANCIAL MEASURES

Management of the Company believes that investors’ understanding of the Company’s performance is enhanced by disclosing non-GAAP financial measures as a reasonable basis for comparison of the Company’s ongoing results of operations. These non-GAAP measures should not be considered a substitute for GAAP-basis measures and results. Our non-GAAP measures may not be comparable to non-GAAP measures of other companies. The table below provides a disclosure of these non-GAAP financial measures to the most closely analogous measure determined in accordance with GAAP.

Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial results.

We disclose and discuss Adjusted EBITDA as a non-GAAP financial measure in our public releases, including quarterly earnings releases, and other filings with the Securities and Exchange Commission. We define Adjusted EBITDA as earnings (net income) before interest, income taxes, depreciation and amortization, reorganization charges, litigation and stock compensation expenses. We believe that Adjusted EBITDA is used by investors and other users of our financial statements as a supplemental financial measure that, when viewed with our GAAP results and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our business. We also believe the disclosure of Adjusted EBITDA helps investors meaningfully evaluate and compare our cash flow generating capacity from quarter to quarter and year to year. Adjusted EBITDA is used by management as a supplemental internal measure for planning and forecasting overall expectations and for evaluating actual results against such expectations. Because management uses Adjusted EBITDA for such purposes, the Company uses Adjusted EBITDA as a significant criterion for determining the amount of annual cash incentive compensation paid to our executive officers and employees. We have historically found that Adjusted EBITDA is superior to other metrics for our company-wide cash incentive program, as it is more easily explained and understood by our typical employee.

We also include the use of non-GAAP normalized net income in our earnings releases. RMS management evaluates its business and makes certain operating decisions (e.g., budgeting, forecasting, employee compensation, asset management and resource allocation) using normalized net income. Management believes that because this measure provides it with useful supplemental information for evaluating and operating the business, investors would find it beneficial to have the opportunity to view the business in the same manner. Normalized net income is a measure that focuses on the Company’s operations and facilitates comparison from period to period on a consistent basis.

- 17 -

A reconciliation of our non-GAAP measures is below:


	Three Months Ended
Reconciliation of GAAP Net (Loss)/Income	March 31,
to Non-GAAP Adjusted EBITDA:	2019			2018
GAAP Net (Loss)/Income	$	(85,390	)	$	403,427
Tax (Benefit)/Expense		(22,099	)		107,741
Depreciation/Amortization		83,651			74,578
Interest Income, Net		(17,480	)		(615	)
Reorganization Charges		354,926			72,551
Litigation		492,515			155,800
Stock Compensation Expense		121,875			27,183
Non-GAAP Adjusted EBITDA	$	927,998		$	840,665


	Three Months Ended
Reconciliation of GAAP Net (Loss)/Income	March 31,
To Non-GAAP Normalized Net Income:	2019			2018
GAAP Net (Loss)/Income	$	(85,390	)	$	403,427
Reorganization Charges		354,926			72,551
Litigation		492,515			155,800
Stock Compensation Expense		121,875			27,183
Tax (Expense) adjustment		(203,556	)		(53,662	)
Non-GAAP Normalized Net Income	$	680,370		$	605,299

Reorganization Charges. We have excluded the effect of Reorganization Charges in calculating our non-GAAP Adjusted EBITDA and non-GAAP Normalized Net Income measures. We incurred significant expenses in connection with the recent termination and replacement of C-suite executives and senior management which we would not otherwise incur in periods presented as part of our continuing operations. Reorganization charges include costs related to the replacement of C-suite executives including a transition bonus and recruiting fees.

Litigation.We have excluded litigation expenses in calculating our non-GAAP Adjusted EBITDA and non-GAAP Normalized Net Income measures. We continue to evaluate our business performance excluding litigation fees and we expect them to continue and/or increase in future periods.

Stock Compensation Expense. We have excluded the effect of stock-based compensation expenses in calculating our non-GAAP Adjusted EBITDA and non-GAAP Normalized Net Income measures. Although stock based compensation is a key incentive offered to our employees, we continue to evaluate our business performance excluding stock-based compensation expenses. We record non-cash compensation expense related to grants of options and depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods.

PART I – ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET ~~RISK.~~RISK

Not Applicable.

PART I – ITEM 4. CONTROLS AND ~~PROCEDURES.~~PROCEDURES

The Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, ~~have~~has evaluated the effectiveness of the Company’s disclosure controls and procedures as such is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluations, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

- 18 -

There have been no changes in the Company’s internal control over financial reporting during the quarter ended ~~September 30, 2017,~~March 31, 2019, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are involved in several lawsuits with our principal competitor, EMED Technologies Corporation (“EMED”). EMED has alleged that our needle sets infringe various patents controlled by EMED. Certain of these lawsuits also allege antitrust violations, unfair business practices, and various other claims. We are vigorously defending against all of the lawsuits brought by EMED. Although no assurances can be given, we believe we have meritorious defenses to all of EMED’s claims.

The initial case involving EMED was filed by us in the United States District Court for the Eastern District of California on September 20, 2013 (the “California case”), in response to a letter from EMED claiming patent infringement by us, and seeking a declaratory judgment establishing the invalidity of the patent referenced in the letter – EMED’s US patent 8,500,703 – “‘703.” EMED answered the complaint and asserted patent infringement of the ‘703 patent and several counterclaims relating generally to claims of unfair business practices against us. We responded by adding several claims against EMED, generally relating to claims of unfair business practices on EMED’s part. Both parties have requested injunctive relief and monetary damages in unspecified amounts.

On September 11, 2015, we requested an ex parte reexamination of the ‘703 patent by the US Patent and Trademark Office (“USPTO”). The ex parte reexamination resulted in a Final Office Action dated July 19, 2017 rejecting all of EMED’s claims in the patent. On January 25, 2018 EMED filed an Appeal Brief with a Petition for Revival, which was accepted. On April 9, 2018, the USPTO denied EMED’s request for reconsideration of the order rejecting all claims in the ‘703 patent. Both the California case and EMED’s appeal of the USPTO rejections are pending.

The second court case was filed by EMED in the United States District Court for the Eastern District of Texas on June 25, 2015, claiming patent infringement on another of its patents (US 8,961,476 – “‘476”), by our needle sets, and seeking unspecified monetary damages (“ED Texas ‘476 matter”). This ‘476 patent is related to the now rejected EMED ‘703 patent.

On September 17, 2015, we requested an inter partes review (“IPR”) of the ‘476 patent, and in response to our request, the Court entered an order staying the ED Texas ‘476 matter until after the Patent Trial and Appeal Board (“PTAB”) of the USPTO made a decision regarding the validity of the patent. On January 12, 2017, the PTAB issued its Final Written Decision in our favor, invalidating all but one (“dependent Claim 9”) of the claims in the ‘476 patent. EMED appealed the PTAB’s ruling to the United States Court of Appeals for the Federal Circuit, which affirmed the PTAB’s Final Written Decision in our favor on April 3, 2018. On April 18, 2018, EMED filed a petition for en banc rehearing, which was denied. On August 16, 2018, EMED petitioned the United States Supreme Court for a Writ of Certiorari to review the Federal Circuit’s upholding the PTAB’s Final Written Decision. On October 29, 2018 the United States Supreme Court denied EMED’s Petition for a Writ of Certiorari, thus finally affirming the PTAB’s invalidation of ‘476, save for one dependent claim.

Following the PTAB’s Final Written Decision in the IPR regarding the ‘476 patent, EMED filed a new patent application claiming priority back to the application that issued as ‘703, which is the patent at issue in the California case. Submitted for accelerated examination, this new application issued as US 9,808,576 – “‘576” on November 7, 2017. On this same date, EMED filed a new case (the “third case”) in the United States District Court for the Eastern District of Texas claiming patent infringement of ‘576, also directed to our needle sets, and seeking unspecified damages and a preliminary injunction against our marketing of its needle sets. We filed a Motion to Dismiss or Transfer Venue to the United States District Court for the Southern District of New York (“SDNY”), which has resulted in the transfer of the third case to SDNY (“SDNY ‘576 matter”).

The SDNY ‘576 matter is proceeding with preliminary matters and although neither a discovery schedule nor a fixed trial date has not been set, a trial is expected to be scheduled sometime in 2020.

On April 23, 2018, EMED filed a new civil case (the “fourth case”) against us in the United States District Court for the Eastern District of Texas asserting antitrust, defamation and unfair business practice claims, and seeking unspecified damages, similar to those previously presented in the California case, described above. As the result of a hearing on November 14, 2018, on December 7, 2018 the Court entered an order transferring the fourth case to the United States District Court for the Eastern District of California (the “California Court”). The fourth case is expected to be consolidated with the California case, or dismissed, as the California Court sees fit.

- 19 -

The ED Texas ‘476 matter is now proceeding under EMED’s amended infringement contention to incorporate the surviving dependent Claim 9, which incorporates Claims 1 and 8 of the ‘476 patent, meaning that, to prove infringement on the part of us, EMED must prove more elements of infringement than it originally charged against us. The Texas Court has set a trial date of August 19, 2019 for the trial of the ED Texas ‘476 matter.

As is required by the respective Courts in both the SDNY ‘576 matter and the ED Texas ‘476 matter, the parties are engaging in settlement discussions and have conducted a court-sponsored mediation session, which did not result in settlement.

Although we believe RMS has meritorious claims and defenses in all of the above-described actions and proceedings, their outcomes cannot be predicted with any certainty. If any of these actions against us are successful, they could have a material adverse effect on our business, results of operations, financial condition and cash flows.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. There have been no material changes to our risk factors since our Annual Report on Form 10-K for the year ended December 31, 2018.

PART II – ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS.~~PROCEEDS

On October 21, 2015, the Board of Directors of the Company approved non-employee director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, beginning September 1, 2015. ~~The number~~On February 20, 2019, the Board of ~~shares~~Directors of the Company approved an increase in compensation for each non-employee director from $25,000 to $50,000 annually effective January 1, 2019, and an additional $10,000 annually for the chair of each Board committee effective February 20, 2019, in each case to be ~~issued each quarter is calculated based upon the closing price of the~~paid quarterly half in cash and half in common stock onat the ~~last day~~end of each fiscal ~~quarter as reported by the OTCQX.~~quarter. The Company issued ~~53,196~~25,782 and ~~97,314~~25,962 shares of common stock to its non-employee directors during the three ~~and seven~~ month period ended ~~September 30, 2017,~~March 31, 2019 and March 31, 2018, respectively.

~~The Company issued 42,553 and 56,108 shares of common stock~~Pursuant to ~~Dr. Fred Ma, its Chief Medical Officer, under the terms of his~~Daniel S. Goldberger’s employment agreement ~~during~~dated October 12, 2018, on February 1, 2019, when Donald B. Pettigrew was appointed to President and Chief Executive Officer, Mr. Goldberger was awarded a performance bonus in the ~~three~~amount of $270,000 to be paid half in cash and ~~seven month period ended September 30, 2017, respectively.~~half in stock on April 1, 2019. The number of shares issued was 90,604 based upon the closing price of the Common Stock of the Company on February 1, 2019 as reported by the OTCQX.

On September 30, 2015, RMS’s Board of Directors authorized the Company to make open market purchases of up to 2,000,000 shares of the Company’s outstanding Common Stock. The purchases are made through a broker designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the rules of the Securities and Exchange Commission for such repurchases. As of September 30, 2017, the Company had repurchased 396,606 shares at an average price of $0.45. There were no repurchases of common stock by the Company during the quarter ended September 30, 2017. The management of the Company has decided to discontinue repurchasing its outstanding Common Stock for an undetermined period of time to utilize cash for capital investments needed to expand the business. There is no expiration date to the repurchase plan.

~~- 18 -~~

~~On September 30, 2015,~~June 29, 2016, the Board of Directors ~~approved~~amended the 2015 Stock Option Plan authorizing the Company to grant awards to certain employees under the plan, ~~at fair market value,~~ which was approved by shareholders at the Annual Meeting held on September 6, 2016. The total number of shares of Common Stock, with respect to which awards may be granted pursuant to the Plan, shall not exceed 4,000,000 shares. On February 20, 2019, our Board of Directors approved an increase to the number of shares authorized under the plan to 6,000,000, subject to stockholder approval at the 2019 Annual Meeting of Stockholders. As of ~~September 30, 2017, there were~~March 31, 2019, the Company had 3,469,000 options outstanding ~~1.2 million options awarded~~ to certain executives, key employees and ~~advisory board members~~consultants under the ~~Plan.~~plan, of which 1,050,000 were issued during the three months ended March 31, 2019.

All of the securities issued by the Company as described in this Item were issued in reliance on the exemption from registration under Section 4(2) under the Securities Act of 1933, as amended.

- 20 -

PART II – ITEM 6. EXHIBITS.


4.1	Form of Incentive Stock Option Award Agreement pursuant to the Company’s 2015 Stock Option Plan, as amended.

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002

31.2	Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002

32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

101*	Interactive Data Files of Financial Statements and Notes.

* In accordance with Regulation S-T, the Interactive Data Files in Exhibit 101 to the Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed”.

- 1921 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	REPRO MED SYSTEMS, INC.

~~November 3, 2017~~May 7, 2019	/s/ ~~Andrew I. Sealfon~~Donald B. Pettigrew
	~~Andrew I. Sealfon,~~Donald B. Pettigrew, President ~~Chairman of the Board, Director,~~and Chief Executive Officer

~~November 3, 2017~~May 7, 2019	/s/ Karen Fisher
	Karen Fisher, Chief Financial Officer and Treasurer

- 2022 -


	For the Seven Months Ended
	September 30,
	2017			2016

CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)	$	626,587		$	(359,095	)
Adjustments to reconcile net income (loss) to net cash provided by/(used in) operating activities:
Amortization of deferred compensation cost		—			14,000
Stock based compensation expense		53,407			126,006
Depreciation and amortization		179,874			167,513
Deferred capital gain - building lease		(13,113	)		(13,113	)
Deferred taxes		8,617			(30,288	)
Provision for returns and doubtful accounts		58,941			(14,102	)
Changes in operating assets and liabilities:
Increase in accounts receivable		(38,321	)		(293,821	)
Increase in inventory		(232,865	)		(71,011	)
Decrease/(Increase) in prepaid expense and other assets		123,231			(78,602	)
(Decrease)/Increase in accounts payable		(409,550	)		357,384
Decrease in accrued payroll and related taxes		(53,302	)		(31,204	)
Increase in accrued expense		84,892			168,732
Increase/(Decrease) in accrued tax liability		142,883			(155,075	)
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES		531,281			(212,676	)

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment		(134,640	)		(123,689	)
Payments for patents		(28,839	)		(106,355	)
NET CASH USED IN INVESTING ACTIVITIES		(163,479	)		(230,044	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payment for cancelled shares		(19,360	)		—
Purchase of treasury stock		—			(120,577	)
NET CASH USED IN FINANCING ACTIVITIES		(19,360	)		(120,577	)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS		348,442			(563,297	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		3,313,265			4,201,949
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3,661,707		$	3,638,652

Supplemental Information
Cash paid during the periods for:
Interest	$	—		$	—
Taxes	$	—		$	—

NON-CASH FINANCING AND INVESTING ACTIVITIES
Issuance of common stock as compensation	$	78,750		$	43,468


	For the Three Months Ended
	March 31,
	2019			2018

CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)/Income	$	(85,390	)	$	403,427
Adjustments to reconcile net (loss)/income to net cash used in operating activities:
Stock based compensation expense		298,125			45,933
Depreciation and amortization		83,651			74,578
Deferred capital gain - building lease		(3,763	)		(5,620	)
Deferred taxes		25,594			2,329
Loss on disposal of fixed asset		240			—
Changes in operating assets and liabilities:
(Increase)/Decrease in accounts receivable		(1,229,419	)		7,307
Increase in inventory		(404,805	)		(141,868	)
Increase in prepaid expense and other assets		(40,024	)		(32,563	)
Increase in accounts payable		489,593			95,366
Decrease in accrued payroll and related taxes		(173,665	)		(138,275	)
Increase/(Decrease) in accrued expense		11,238			(319,139	)
Decrease in accrued tax liability		(16,608	)		(4,589	)
NET CASH USED IN OPERATING ACTIVITIES		(1,045,233	)		(13,114	)

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for capital expenditures		(41,626	)		(4,145	)
(Purchase)/proceeds from certificate of deposit		(6,489	)		104,360
Payments for patents		(48,718	)		(28,482	)
NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES		(96,833	)		71,733

CASH FLOWS FROM FINANCING ACTIVITIES
Payment for cancelled shares		(2,820	)		—
Finance lease		(1,028	)		—
NET CASH USED IN FINANCING ACTIVITIES		(3,848	)		—

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(1,145,914	)		58,619
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		3,738,803			3,974,536
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	2,592,889		$	4,033,155

Supplemental Information
Cash paid during the periods for:
Interest	$	174		$	—
Taxes	$	—		$	110,000

NON-CASH FINANCING AND INVESTING ACTIVITIES
Issuance of common stock as compensation	$	176,250		$	33,750


	Three Months Ended March 31,				Change from Prior Year			% of Sales
	2019		2018		$		%	2019	2018
Sales
Domestic	$	3,883,565	$	3,375,208	$	508,357	15.1%	78.1%	83.7%
International		1,090,713		658,016		432,697	65.8%	21.9%	16.3%
Total	$	4,974,278	$	4,033,224	$	941,054	23.3%


	For the Three Months Ended						For the Seven Months Ended
	September 30,						September 30,
	2017			2016			2017			2016

NET SALES	$	3,849,338		$	3,221,502		$	9,188,414		$	7,293,695
Cost of goods sold		1,470,680			1,188,558			3,539,662			2,643,925
Gross Profit		2,378,658			2,032,944			5,648,752			4,649,770

OPERATING EXPENSES
Selling, general and administrative		1,893,911			2,114,407			4,536,954			4,887,608
Research and development		14,852			75,198			47,564			147,136
Depreciation and amortization		77,517			70,935			179,874			167,513
Total Operating Expenses		1,986,280			2,260,540			4,764,392			5,202,257

Net Operating Profit/(Loss)		392,378			(227,596	)		884,360			(552,487	)

Non-Operating Income/(Expense)
Gain/(Loss) on currency exchange		10,419			(4,096	)		65,079			8,237
Interest and other income		361			262			1,104			1,336
TOTAL OTHER INCOME/(EXPENSE)		10,780			(3,834	)		66,183			9,573

PROFIT/(LOSS) BEFORE TAXES		403,158			(231,430	)		950,543			(542,914	)

Income Tax (Expense)Benefit		(137,404	)		78,217			(323,956	)		183,819

NET INCOME/(LOSS)	$	265,754		$	(153,213	)	$	626,587		$	(359,095	)

NET INCOME/(LOSS) PER SHARE

Basic	$	0.01		$	—		$	0.02		$	(0.01	)
Diluted	$	0.01		$	—		$	0.02		$	(0.01	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic		37,898,357			37,779,427			37,856,074			37,885,432
Diluted		38,056,604			37,779,427			38,014,321			37,885,432


	Seven Months Ended September 30, 2017			Seven Months Ended September 30, 2016
Net cash provided by/(used in) operating activities	$	531,281		$	(212,676	)
Net cash used in investing activities	$	(163,479	)	$	(230,044	)
Net cash used in financing activities	$	(19,360	)	$	(120,577	)