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, 2022

Oror

[ ]_] 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
~~New York~~	~~13-3044880~~
(State or ~~Other Jurisdiction~~other jurisdiction of ~~Incorporation~~incorporation or ~~Organization)~~ organization)	(I.R.S. Employer Identification No.)

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

(845)469-2042

(Registrant’s telephone number, including area code)

~~February 28~~N/A

(Former name, former address and former fiscal year, if changed since last report)

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	KRMD	The Nasdaq Stock Market

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]~~ [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). [X]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[ ] X]	Smaller reporting company ~~[X]~~ [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]~~ [X]No

As of ~~November 3, 2017, 37,930,620~~May 4, 2022, 44,868,605 shares of common stock, ~~$0.01~~$0.01 par value per share, were outstanding, which excludes ~~2,737,231~~3,420,502 shares of treasury stock.

REPRO MED SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022
TABLE OF CONTENTS

PAGE
~~PAGE~~
PART I. FINANCIAL INFORMATION
~~PART I~~– ~~FINANCIAL INFORMATION~~
ITEM 1.
Financial Statements (Unaudited)
3
~~ITEM 1.~~
~~Financial Statements~~
Balance Sheets (Unaudited) as of March 31, 2022 and December 31, 2021
3
~~Balance Sheets as of September 30, 2017 (Unaudited) and February 28, 2017~~
3
Statements of Operations (Unaudited) for the three ~~and seven~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~
2021
4
Statements of Cash Flows (Unaudited) for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~
2021
5
Statements of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2022 and 2021
6
Notes to Financial Statements
~~6-11~~
7
ITEM 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
~~12-18~~
16
ITEM 3.
Quantitative and Qualitative Disclosures About Market Risk
18
19
ITEM 4.
Controls and Procedures
18
20
PART II–II. OTHER INFORMATION
ITEM 1.
Legal Proceedings 20
ITEM 1A. Risk Factors 20
ITEM 2.
Unregistered Sales of Equity Securities and Use of Proceeds
~~18-19~~
20
ITEM 6.
Exhibits
19
21
Signatures 22

- 2 -

PART I –— FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

REPRO MED SYSTEMS, INC.
BALANCE SHEETS

(UNAUDITED)

September 30,

February 28,

2017

2017

(Unaudited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$
3,661,707

$
3,313,265

Certificates of deposit

262,314

262,314

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

Inventory

1,586,568

1,353,703

Tax Receivable

—

172,457

Prepaid expenses

225,088

175,955

TOTAL CURRENT ASSETS

7,217,087

6,779,724

Property and equipment, net

902,075

932,092

Patents, net of accumulated amortization of $195,354 and $180,137 at September 30, 2017 and February 28, 2017, respectively

440,565

426,943

Other assets

31,583

31,490

TOTAL ASSETS

$
8,591,310

$
8,170,249

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Deferred capital gain - current

$
22,481

$
22,481

Accounts payable

362,878

772,428

Accrued expenses

502,249

417,357

Accrued payroll and related taxes

123,716

177,018

Accrued tax liability

142,883

—

TOTAL CURRENT LIABILITIES

1,154,207

1,389,284

Deferred capital gain – long term

9,382

22,496

Deferred tax liability

91,039

82,422

TOTAL LIABILITIES

1,254,628

1,494,202

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

Additional paid-in capital

4,162,679

4,129,726

Retained earnings

3,111,528

2,484,941

7,680,886

7,020,251

Less: Treasury stock, 2,737,231 shares at September 30, 2017 and February 28, 2017

(344,204
)

(344,204
)
TOTAL STOCKHOLDERS’ EQUITY

7,336,682

6,676,047

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$
8,591,310

$
8,170,249

March 31, December 31,
2022 2021

ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 22,577,247 $ 25,334,889
Accounts receivable less allowance for doubtful accounts of $24,271 for March 31, 2022 and December 31, 2021 3,145,397 3,592,886
Inventory 6,017,737 6,106,338
Other Receivables 680,075 718,220
Prepaid expenses 1,510,851 1,568,821
TOTAL CURRENT ASSETS 33,931,307 37,321,154
Property and equipment, net 1,763,269 1,106,445
Intangible assets, net of accumulated amortization of $278,897 and $263,729 at March 31, 2022 and December 31, 2021, respectively 795,339 808,813
Operating lease right-of-use assets 4,309,282 95,553
Deferred income tax assets, net 2,538,853 1,941,254
Other assets 89,587 19,812
TOTAL ASSETS $ 43,427,637 $ 41,293,031

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable $ 1,267,980 $ 1,227,533
Accrued expenses 2,171,724 2,709,704
Note Payable 255,614 508,583
Other Liabilities 115,625 90,000
Accrued payroll and related taxes 506,315 160,603
Operating lease liability - current 395,359 95,553
TOTAL CURRENT LIABILITIES 4,712,617 4,791,976
Operating lease liability, net of current portion 3,913,923 —
TOTAL LIABILITIES 8,626,540 4,791,976
Commitments and contingencies (Refer to Note 3)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 75,000,000 shares authorized, 48,121,289 and 48,044,162 shares issued, 44,700,787 and 44,623,660 shares outstanding at March 31, 2022 and December 31, 2021, respectively 481,212 480,441
Additional paid-in capital 41,611,030 40,774,245
Treasury stock, 3,420,502 shares at March 31, 2022 and December 31, 2021, at cost (3,843,562 ) (3,843,562 )
Retained deficit (3,447,583 ) (910,069 )
TOTAL STOCKHOLDERS’ EQUITY 34,801,097 36,501,055
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 43,427,637 $ 41,293,031
The accompanying notes are an integral part of these financial ~~statements~~statements.

- 3 -

REPRO MED SYSTEMS, INC.
STATEMENTS OF OPERATIONS ~~(UNAUDITED)~~

(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

Three Months Ended
March 31,
2022 2021

NET SALES $ 6,244,330 $ 5,430,951
Cost of goods sold 2,622,025 2,199,097
Gross Profit 3,622,305 3,231,854

OPERATING EXPENSES
Selling, general and administrative 5,491,213 4,992,829
Research and development 1,148,355 336,841
Depreciation and amortization 109,252 115,473
Total Operating Expenses 6,748,820 5,445,143

Net Operating Loss (3,126,515 ) (2,213,289 )

Non-Operating Expense
Loss on currency exchange (7,135 ) (15,717 )
Gain on disposal of fixed assets, net — 736
Interest (Expense)/Income, net (1,463 ) 9,771
TOTAL OTHER EXPENSE (8,598 ) (5,210 )

LOSS BEFORE INCOME TAXES (3,135,113 ) (2,218,499 )

Income Tax Benefit 597,599 942,361

NET LOSS $ (2,537,514 ) $ (1,276,138 )

NET LOSS PER SHARE

Basic $ (0.06 ) $ (0.03 )
Diluted $ (0.06 ) $ (0.03 )

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic 44,667,977 43,960,936
Diluted 44,667,977 43,960,936
The accompanying notes are an integral part of these financial ~~statements~~statements.

- 4 -

REPRO MED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)

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,
2022 2021

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss $ (2,537,514 ) $ (1,276,138 )
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense 837,556 734,184
Depreciation and amortization 109,252 115,473
Deferred income taxes (597,599 ) (943,211 )
Gain on disposal of fixed assets — (736 )

Changes in operating assets and liabilities:
Decrease/(Increase) in accounts receivable 447,489 (988,387 )
Decrease in other receivables 38,145 —
Decrease/(Increase) in inventory 88,601 (1,229,052 )
(Increase)/Decrease in prepaid expenses and other assets (11,805 ) 117,455
Increase in accounts payable 40,447 1,290,603
Increase in accrued payroll and related taxes 345,712 428,769
Decrease in accrued expenses (537,981 ) (854,613 )
Increase in other liabilities 25,625 —
NET CASH USED IN OPERATING ACTIVITIES (1,752,072 ) (2,605,653 )

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (750,908 ) (95,477 )
Proceeds from disposal of property and equipment — 9,065
Purchases of intangible assets (1,694 ) (15,792 )
NET CASH USED IN INVESTING ACTIVITIES (752,602 ) (102,204 )

CASH FLOWS FROM FINANCING ACTIVITIES
      Payments on indebtedness (252,968) —
Proceeds from issuance of equity — 1,230,000
Common stock issuance as settlement for litigation — 938,094
Payments on finance lease liability — (803 )
NET CASH (USED IN)/PROVIDED BY FINANCING ACTIVITIES (252,968 ) 2,167,291

NET DECREASE IN CASH AND CASH EQUIVALENTS (2,757,642 ) (540,566 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 25,334,889 27,315,286
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 22,577,247 $ 26,774,720

Supplemental Information
Cash paid during the periods for:
Interest $ 4,425 $ 28
Income Taxes $ — $ 850

Schedule of Non-Cash Operating, Investing and Financing Activities:
Issuance of common stock as compensation $ 142,500 $ 56,250
Issuance of common stock as settlement for litigation $ — $ 938,094

The accompanying notes are an integral part of these financial ~~statements~~statements.

- 5 -

REPRO MED SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
Three Months Ended March 31, 2022

Additional Total
Common Stock Paid-in Retained Treasury Stockholders’
Shares Amount Capital Deficit Stock Equity

BALANCE, DECEMBER 31, 2021 48,044,162 $ 480,441 $ 40,774,245 $ (910,069 ) $ (3,843,562 ) $ 36,501,055
Issuance of stock-based compensation 47,500 475 142,025 — — 142,500
Compensation expense related to stock options — — 524,670 — — 524,670
Compensation related to Restricted Stock — — 170,386 — — 170,386
Issuance upon options exercised 29,627 296 (296 ) — — —
Net loss — — — (2,537,514 ) — (2,537,514 )
BALANCE, MARCH 31, 2022 48,121,289 $ 481,212 $ 41,611,030 $ (3,447,583 ) $ (3,843,562 ) $ 34,801,097
Three Months Ended March 31, 2021

Additional Total
Common Stock Paid-in Retained Treasury Stockholders’
Shares Amount Capital Earnings Stock Equity

BALANCE, DECEMBER 31, 2020 46,680,119 $ 466,801 $ 35,880,986 $ 3,652,754 $ (3,843,562 ) $ 36,156,979
Issuance of stock-based compensation 10,124 101 56,149 — — 56,250
Compensation expense related to stock options — — 677,934 — — 677,934
Litigation settlement share issuance 95,238 952 937,142 — — 938,094
Issuance upon options exercised 1,110,580 11,106 1,218,894 — — 1,230,000
Net loss — — — (1,276,138 ) — (1,276,138 )
BALANCE, MARCH 31, 2021 47,896,061 $ 478,960 $ 38,771,105 $ 2,376,616 $ (3,843,562 ) $ 37,783,119
The accompanying notes are an integral part of these financial statements.
- 6 -
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. d/b/a KORU Medical Systems (the ~~“Company”, “RMS”,~~“Company,” “KORU Medical,” “we,” “us” or ~~“we”~~“our”) 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 Company’s fiscal year end from February 28 to December 31.~~

BASIS OF PRESENTATION

The accompanying unaudited financial statements as of September 30, 2017, 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, and the results of operations and cash flow for the three and seven month periods ended September 30, 2017, and 2016.

~~The results of operations for the three and seven months ended September 30, 2017, and 2016 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~~annual report on Form 10-K for the year ended ~~February 28, 2017,~~December 31, 2021 (“Annual Report”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been condensed or omitted from the accompanying financial statements. The accompanying year-end balance sheet was derived from the audited financial statements included in the Annual Report. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal, recurring nature. The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods.
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.
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.
The Company believes that it has no uncertain tax positions requiring disclosure or adjustment. Generally, tax years starting with 2019 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.
- 7 -
STOCK-BASED COMPENSATION
The Company maintains a stock option plan under which it grants stock options 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 for director fees are recorded at the fair value of the shares at the grant date.
The Company also maintains an omnibus equity incentive plan. To date the Company has only granted shares of stock for director fees under this plan and those shares of stock granted are recorded at the fair value of the shares at the grant date.
The Company issues restricted stock awards. Restricted stock awards are equity classified and measured at the fair market value of the underlying stock at the grant date. The fair value of restricted stock awards vesting at certain market capitalization thresholds were estimated on the date of grant using the Brownian Motion Monte Carlo lattice model. The fair value of restricted stock awards with time-based vesting were estimated on the date of grant at the current stock price. We recognize restricted stock expense using the straight-line attribution method over the requisite service period and account for forfeitures as ~~filed with~~they occur.
NET LOSS PER COMMON SHARE
Basic earnings per share are computed on the ~~Securities~~weighted average of common shares outstanding during each year. Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee and ~~Exchange Commission on Form 10-K.~~consultant stock options. See “NOTE 4 — STOCK-BASED COMPENSATION” for further detail.

Schedule of net income per common share

Three Months Ended
March 31,
2022 2021

Net loss $ (2,537,514 ) $ (1,276,138 )

Weighted Average Outstanding Shares:
Outstanding shares 44,667,977 43,960,936
Option shares includable 0 ^(a) 0 ^(a)
Total 44,667,977 43,960,936

Net loss per share
Basic $ (0.06 ) $ (0.03 )
Diluted $ (0.06 ) $ (0.03 )
__________
(a) For the three months ended March 31, 2022 and March 31, 2021, option shares of 346,020 and 183,681 were not included as the impact is anti-dilutive.  For the three months ended March 31, 2022 and March 31, 2021, restricted shares of 1,000,000 and zero respectively, were not included as the impact is anti-dilutive.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS

The preparation of financial statements in conformity with ~~U.S. generally accepted accounting principles (“U.S. GAAP”)~~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 valuation, and accruals.

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~- 8 -

REVENUE RECOGNITION
Our revenues derive from three business sources: (i) domestic core, (ii) international core, and (iii) novel therapies. Our core domestic and international revenues consist of sales of our syringe drivers, tubing and needles (“Product Revenue”) for the delivery of subcutaneous drugs that are FDA cleared for use with the KORU Medical infusion system, with the primary delivery for immunoglobulin to treat PIDD and CIDP. Novel therapies consist of Product Revenue for feasibility/clinical trials (pre-clinical studies, Phase I, Phase II, Phase III) of biopharmaceutical companies in the drug development process as well as non-recurring engineering services revenues (“NRE”) received from biopharmaceutical companies to ready or customize the FREEDOM System for clinical and commercial use.
For Product Revenues, we recognize revenues when shipment occurs, and at which point the customer obtains control and ownership of 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 growth rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it is 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.
Our NRE revenue will be complimentary to our existing product line offering. This revenue stream can fluctuate and may not be consistent from period to period, as the main area of opportunity is in relation to clinical trial support. Engineering work performed on our product may be specialized and tailored to the specific needs of each independent clinical trial and not uniform in nature. The clinical trial size and scope of protocols may also range greatly from customer to customer, and there is no expectation of repeat customers on a consistent basis compared to our normal course of business. We recognize NRE revenue under an input method, which recognizes revenue on the basis of our efforts or inputs to the satisfaction of a performance obligation (for example, resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The input method that we use is based on costs incurred.
The following table summarizes net sales by geography for the three months ended March 31, 2022, and 2021:
Schedule of net sales by geography
Three Months Ended March 31, % of Total Net Sales
2022 2021 2022 2021
Net Sales
Domestic $ 5,301,388 $ 4,446,789 84.9% 81.9%
International 942,942 984,162 15.1% 18.1%
Total Net Sales $ 6,244,330 $ 5,430,951
LEASES
In ~~May 2017,~~February 2016, the ~~Financial~~FASB issued a 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 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 on January 1, 2019. The standard had a material impact on our balance sheets but did not have a material impact on our statements of operations. See “NOTE 6 — LEASES” for further detail.
ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the 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.for Income Taxes. The amendments in this ~~update affect any entity that changes~~ASU simplify the ~~terms or conditions~~accounting for income taxes by removing several exceptions including the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments also improve consistent application of ~~a share-based payment award.~~and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ~~update~~ASU are effective for ~~all entities for annual periods,~~fiscal years, and interim periods within those ~~annual periods,~~fiscal years, 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~~2020. The Company adopted this standard on January 1, 2021, 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 effectit had no impact on our financial ~~statements, disclosure requirements and methods of adoption.~~statement disclosures.

- 69 -

ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
In June 2016, the FASB issued ASU No. ~~2016-13—~~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,~~2022, 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,~~March 2020, the FASB issued ASU No. ~~2014-09—Revenue from Contracts with Customers. The ASU clarifies the principles~~2020-04, Reference Rate Reform (Topic 848), which provided elective amendments for ~~recognizing revenue~~entities that have contracts, hedging relationships and ~~develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”)~~other transactions that ~~removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability~~reference LIBOR or another reference rate expected to be discontinued because 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.reference rate reform. The amendments inmay be applied to impacted contracts and hedges prospectively through December 31, 2022. The Company is currently evaluating the impact this update are effective for the annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Full or modified retrospective 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 the effective date 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 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 will have 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 ourits financial ~~condition or results of operations.~~statements.

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 -~~

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 MEASUREMENTS

Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable:
• Level 1 – Quoted prices in active markets for identical assets or liabilities.
• Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.
• Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and includes instruments for which the determination of fair value requires significant judgment or estimation.
The carrying amounts of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are considered to be representative of their fair values because of the short-term nature of those instruments. There were no transfers between levels in the fair value hierarchy during the three months ended March 31, 2022.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company ~~maintains a long-term incentive stock benefit plan under which it grants stock options~~reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and ~~restricted stock to certain directors and key employees.~~its eventual disposition are less than the carrying amount. The ~~fair value of each option grant is estimated~~impairment loss, if recognized, would be based on the ~~date~~excess 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 faircarrying value of the ~~shares at the grant date,~~impaired asset over ~~the vesting period.~~its respective fair value. No impairment losses have been recorded through March 31, 2022.

RECLASSIFICATION

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

- 10 -
NOTE 2 ~~RELATED PARTY TRANSACTIONS~~

On December 20, 2013, we executed an agreement effective March 1, 2014, with a Company director, Dr. Mark Baker, to provide clinical research 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 for the three months ended September 30, 2017 and 2016, respectively, and zero and $14,000 for the seven months ended September 30, 2017 and 2016, respectively.

On October 21, 2015, Cyril Narishkin was appointed to the Board 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 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 and the Company is currently on a month-to-month basis for rental payments.

~~BUILDING LEASE~~

Mr. Mark Pastreich, a director, is a principal in the entity that owns the building leased by Company. The Company is in year nineteen of a twenty-year lease. There have been no changes to lease terms since his directorship and none are expected through the life of the current lease. With a monthly lease amount of $11,042, the lease payments were $33,126 for each of the three months ended September 30, 2017 and 2016 and $77,294 for each of the seven months ended September 30, 2017 and 2016. The Company also paid property taxes for the three months ended September 30, 2017 and 2016 in the amount of $12,862 and $12,334, respectively, and $29,098 and $28,159 for the seven months ended September 30, 2017 and 2016, respectively.

~~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

Land

$
54,030

$
54,030

Building

171,094

171,094

Furniture, office equipment, and leasehold improvements

1,054,971

1,022,942

Manufacturing equipment and tooling

1,074,157

1,003,166

2,354,252

2,251,232

Less: accumulated depreciation

(1,452,177
)

(1,319,140
)
Property and equipment, net

$
902,075

$
932,092

March 31, 2022 December 31, 2021

Furniture and office equipment $ 826,503 $ 818,897
Construction in progress 638,489 —
Leasehold improvements 556,907 556,907
Manufacturing equipment and tooling 2,134,764 2,042,675
   Total property and equipment 4,156,663 3,418,479
Less: accumulated depreciation and amortization (2,393,394 ) (2,312,034 )
Property and equipment, net $ 1,763,269 $ 1,106,445

Depreciation expense was $94,085 and $100,403 for the three months ended March 31, 2022, and 2021, respectively.
NOTE 4 3 — COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS

Lawyers representing EMED Technologies Corp. (“EMED”) sent RMS a letter dated, May 1, 2013, which alleged that the RMS High-Flo Butterfly design infringed a patent controlled by EMED. RMS disputed this claimThe Company has been and ~~believes that our design did not infringe~~may again become involved in legal proceedings, claims and ~~that the EMED patent itself was not valid. Under advice of counsel, on September 20, 2013, the Company commenced~~litigation arising in the ~~United States District Court for the Eastern District~~ordinary course of ~~California~~business. KORU Medical is not presently a ~~Declaratory Judgment action against competitor, EMED~~party to establish the invalidity of one of EMED’s patents and non-infringement of the Company’s needle sets. EMED answered the complaint and asserted patent infringement and unfair business practice counterclaims. any litigation or other legal proceeding that is believed to be material to its financial condition.
NOTE 4 — STOCK-BASED COMPENSATION
The Company ~~responded by asserting its own unfair business practice claims against EMED. Both parties have requested injunctive relief and monetary damages. Discovery is ongoing.~~

On June 16, 2015, the Court issued what it termed a “narrow” Preliminary Injunction against the Company from making certain statements regarding some of EMED’s products. On June 23, 2016, EMED filed a Motion seeking to have the Company held in contempt, claiming that certain language in the Company’s device labeling does not comply with the injunction. In response to a Show Cause Order, 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.

On March 24, 2016, 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. This second patent is related to the one concerning the Company’s declaratory judgment action. Given the close relationship between thehas two patents, the Company requested that the Texas suit be transferred to California. Also, based on a validity review of the patent in the U.S. Patent and Trademark Office (“USPTO”), discussed below, the Company requested the Texas suit be stayed. On May 12, 2016, the Court entered an order staying the case until after the Patent Trial and Appeal Board (“PTAB”) at the USPTO issued a final written decision regarding the validity of the patent. On January 12, 2017, the PTAB issued its final written decision invalidating the claims asserted by EMED in the Texas litigation. On January 26, 2017, the Company and EMED requested that the Texas case remain stayed pending EMED’s appeal of the PTAB’s final ruling to the Court of Appeals for the Federal Circuit (“CAFC”).

~~- 9 -~~

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. EMED filed a response to this Final Office Action on September 15, 2017 that is awaiting consideration by the Examiner. Thus, the ex parte reexamination is ongoing. A decision to institute 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, the parties are awaiting further action by the CAFC.

Although the Company believes it has meritorious claims and defenses in these 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 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.

~~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 6 STOCK-BASED COMPENSATION~~

~~On September 30, 2015, the Board of Directors approved~~equity incentive plans: the 2015 Stock Option Plan, ~~(“the~~as amended (the “2015 Plan”) ~~authorizing~~and the ~~Company~~2021 Omnibus Equity Incentive Plan (the “2021 Plan”). As of March 31, 2022, there were options to grant stock option awards to certain officers, employees and consultants under the Plan, subject to shareholder approval at the Annual Meeting of Shareholders held on September 6, 2016. The total number ofpurchase 3,638,750 shares of the Company’s common stock ~~of the Company, par value $0.01 per share (“Common Stock”), with respect to which awards may be granted pursuant to the Plan was not to exceed 2,000,000 shares.~~

On June 29, 2016, the Board of Directors approved the amendment to the Plan increasing the total number of shares of Common Stock to be subject to awards granted under the Plan to 4,000,000 shares. On September 6, 2016, at the Annual Shareholder Meeting, the Company’s shareholders approved the Plan as amended.

~~As of September 30, 2017, there were~~ outstanding ~~1,163,000 options awarded~~ to certain executives, key employees and ~~advisory board members~~consultants under the 2015 Plan, of which 135,000 were issued during the three months ended March 31, 2022. Additional options may be issued under the 2015 Plan as outstanding options are forfeited, subject to a maximum 6,000,000 available for issuance under the 2015 Plan. The 2021 Plan provides for the grant of up to 1,000,000 incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, consultants and directors. For the quarter ended March 31, 2022, there had been issued 47,500 shares of common stock as directors fees under the 2021 Plan.

~~On October 21, 2015, the Board of Directors~~Effective January 1, 2021, each non-employee director of the Company ~~approved non-employee director compensation~~(other than the Chairman of ~~$25,000 each~~the Board) and Board advisor were eligible to receive of $75,000 annually, to be paid quarterly ~~half~~$12,500 in cash and ~~half~~$6,250 in common stock ~~beginning September 1, 2015.~~. The Chairman of the Board is eligible to receive $100,000 annually, to be paid quarterly $12,500 in cash and $12,500 in common stock. Effective May 18, 2021, each non-employee director of the Company (other than the Chairman of the Board) and Board advisor are eligible to receive of $110,000 annually, to be paid quarterly $12,500 in cash and $15,000 in common stock. The Chairman of the Board is eligible to receive $140,000 annually, to be paid quarterly $12,500 in cash and $22,500 in common stock. All payments were and are pro-rated for partial service.

On April 12, 2021, pursuant to an employment agreement entered into on March 15, 2021, with Linda Tharby, the Company’s President and Chief Executive Officer, the Company issued three restricted stock awards for an aggregate 1,000,000 shares of common stock for an aggregate stock price of $3,310,000 and each vesting subject to employment on the respective vesting date. These awards were issued as an inducement for her employment.
2015 STOCK OPTION PLAN, as amended
Time Based Stock Options
The per share weighted average fair value of stock options granted during the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~September 30, 2016~~March 31, 2021 was ~~$0.26~~$2.45 and ~~zero,~~$3.06, 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, 2022 and ~~September 30, 2016.~~March 31, 2021. 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. We have recognized tax benefits associated with stock-based compensation of $49,406 and $43,067 for the three months ended March 31, 2022 and 2021, respectively.

September 30,

2017

2016

Dividend yield

0.00%

—

Expected Volatility

70.1-72.2%

—

Weighted-average volatility

—

—

Expected dividends

—

—

Expected term (in years)

5 Years

—

Risk-free rate

2.30-2.36%

—

- 1011 -

Schedule of time based stock option
March 31,
2022 2021

Dividend yield 0.00% 0.00%
Expected Volatility 76.1 – 77.5% 74.01 – 74.28%
Weighted-average volatility 0 0
Expected dividends 0 0
Expected term (in years) 10 10
Risk-free rate 1.81 – 1.87% 1.20 – 1.62%
The following table summarizes the status of the ~~Plan:~~2015 Plan with respect to time based stock options:

Seven Months Ended September 30,

2017

2016

Shares

Weighted
Average
Exercise
Price

Shares

Weighted
Average
Exercise
Price

Outstanding at March 1

1,345,000

$
0.39

1,060,000

$
0.37

Granted

68,000

$
0.44

—

$
—

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

—

$
—

Weighted average fair value of options granted during the period

—

$
—

—

$
—

Stock-based compensation expense

—

$
(25,343
)

—

$
86,876

Schedule of stock option plan
Three Months Ended March 31,
2022 2021
Shares Weighted
Average
Exercise
Price Shares Weighted
Average
Exercise
Price

Outstanding at January 1 3,672,500 $ 3.42 2,922,494 $ 2.46
Granted 135,000 $ 3.07 1,250,000 $ 3.94
Exercised 75,000 $ 1.60 1,000,000 $ 1.23
Forfeited 93,750 $ 1.57 0 $ 0
Outstanding at March 31 3,638,750 $ 3.49 3,172,494 $ 3.43
Options exercisable at March 31 1,358,750 $ 2.83 803,119 $ 2.09
Weighted average fair value of options granted during the period — $ 2.45 — $ 3.06
Stock-based compensation expense — $ 524,670 — $ 1,086,681
Total stock-based compensation expense ~~net of estimated forfeitures for stock option awards totaled $(25,343)~~was $524,670 and ~~$86,876~~$1,086,681 for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022, and ~~September 30, 2016,~~2021, respectively. Cash received from option exercises for the three months ended March 31, 2022, and 2021 was $0 and $1,230,000, respectively.

The weighted-average grant-date fair value of options granted during the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022, and ~~September 30, 2016,~~2021 was ~~$17,961~~$0.3 million and ~~zero,~~$3.8 million, respectively. ~~The total intrinsic value of~~There were 75,000 options exercised during the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022, and ~~September 30, 2016, was zero for both periods.~~1.0 million during the three months ended March 31, 2021.

The following table presents information pertaining to options outstanding at ~~September 30, 2017:~~March 31, 2022:

Range of 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

Schedule of information pertaining to options outstanding
Range of Exercise Price Number
Outstanding Weighted
Average
Remaining
Contractual
Life Weighted
Average
Exercise
Price Number
Exercisable Weighted
Average
Exercise
Price

$1.57-$9.76 3,638,750 8.5 years $ 3.49 1,358,750 $ 2.83
As of ~~September 30, 2017,~~March 31, 2022, there was ~~$115,384~~$5,861,444 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2015 Plan. That cost is expected to be recognized over a weighted-average period of 1746 months. The total fair value of shares vested as of March 31, 2022, and March 31, 2021, was $2,815,943 and $1,230,434, respectively.
Performance Based Stock Options
There were no stock options granted during the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022, and ~~September 30, 2016, was $17,873 and zero, respectively.~~2021.

- 1112 -
The following table summarizes the status of the 2015 Plan with respect to performance-based stock options:
Schedule of performance base options outstanding
Three Months Ended March 31,
2022 2021
Shares Weighted
Average
Exercise
Price Shares Weighted
Average
Exercise
Price

Outstanding at January 1 — $ — 1,000,000 $ 1.70
Granted 0 $ 0 0 $ —
Exercised 0 $ 0 0 $ —
Forfeited — $ — 1,000,000 $ 1.70
Outstanding at March 31 0 $ 0 — $ —
Options exercisable at March 31 0 $ 0 0 $ 0
Weighted average fair value of options granted during the period 0 $ 0 — $ —
Stock-based compensation expense — $ — — $ (408,747 )
Total performance stock-based compensation expense totaled zero and ($408,747) for the three months ended March 31, 2022, and 2021, respectively. All performance-based stock options were forfeited and there was no unrecognized compensation cost remaining.
RESTRICTED STOCK AWARDS
On April 12, 2021, pursuant to an employment agreement entered into on March 15, 2021, with Linda Tharby, the Company’s President and Chief Executive Officer and as an inducement to her employment, the Company issued three restricted stock awards for an aggregate 1,000,000 shares of common stock for an aggregate stock price of $3,310,000 and each vesting subject to employment on the respective vesting date. The following table summarizes the activities for our unvested restricted stock awards for the three months ended March 31, 2022, and 2021.
Schedule of activities for our unvested restricted stock awards
Three Months Ended March 31,
2022 2021
Shares Weighted
Average
Grant-Date Fair Value Shares Weighted
Average
Grant-Date Fair Value

Unvested at January 1 1,000,000 $ 3.01 0 $ 0
Granted 0 $ 0 0 $ 0
Vested 0 $ 0 0 $ 0
Forfeited/canceled 0 $ 0 0 $ 0
Unvested at March 31 1,000,000 $ 3.01 0 $ 0
As of March 31, 2022, there was $2,129,339 of unrecognized compensation cost related to unvested employee restricted shares. This amount is expected to be recognized over a weighted-average period of 39 months. We have recognized tax benefits associated with restricted stock award compensation of $35,781 andzero for the three months ended March 31, 2022 and 2021 respectively.
Schedule of restricted stock units
Range of Exercise Price Number
Outstanding Weighted
Average
Remaining
Contractual
Life Weighted
Average
Exercise
Price Number
Exercisable Weighted
Average
Exercise
Price

$3.31 1,000,000 3.20 years $ 3.01 — $ 3.01
- 13 -
NOTE 5 — DEBT OBLIGATIONS
On July 26, 2021, the Company entered into a commercial insurance premium finance and security agreement with AON Premium Finance, LLC in the aggregate principal amount of $0.9 million bearing an annual percentage rate of 4.17%, to finance its insurance premiums. Monthly payments are due on the first of each month beginning August 1, 2021 through June 1, 2022.
On April 14, 2020, the Company issued a promissory note to KeyBank in the aggregate principal amount of $3.5 million (the “Note”) as an extension of its line of credit, replacing its then current line of credit agreement. The $3.5 million Note is in the form of a variable rate non-disclosable revolving line of credit with an interest rate of Prime Rate announced by the Bank minus 0.75%. The Note was renewed on June 24, 2021, in the same form with an interest rate of Prime Rate announced by the Bank minus 1.50%. Interest is due monthly, and all principal and unpaid interest is due on June 1, 2022. The $3.5 million Note may be prepaid at any time prior to maturity with no prepayment penalties. The $3.5 million Note contains events of default and other provisions customary for a loan of this type.
In connection with the Note, the Company entered into a Commercial Security Agreement with the Bank dated April 14, 2020 (the “Security Agreement”), pursuant to which the Company granted a security interest in substantially all assets of the Company to secure the obligations of the Company under the Note. The Security Agreement contains terms and conditions typical for the granting of security interests of this kind.
The Company had no amount outstanding against the line of credit as of March 31, 2022.
On April 27, 2020, the Company entered into a Progress Payment Loan and Security Agreement (“PPLSA”) and a Master Security Agreement (the “MSA”), each dated as of April 20, 2020, with Key Equipment Finance, a division of the Bank (“KEF”), to provide up to $2.5 million in financing for equipment purchases from third party vendors. The PPLSA allows the Company to make draws with KEF to make certain payments to the equipment suppliers prior to the commencement of periodic payments under a term loan. Each draw under the PPLSA will bear interest at a variable rate equal to the then-current Prime Rate and will be secured by the financed equipment under the MSA. At the end of each calendar quarter or year, the advances made under the PPLSA will be converted to term loans, subject to KEF’s approval of the equipment and certain other closing conditions being met. Once the draws under the PPLSA are converted into a term loan, each promissory note will bear interest at a fixed rate of 4.07% per annum, subject to adjustment based on KEF’s cost of funds, with principal and interest payable in 84 equal consecutive monthly installments. Each fixed rate installment promissory note may be prepaid, subject to a penalty if prepaid before the fifth anniversary of its issuance. As of March 31, 2022, the Company had no amount outstanding against the PPLSA.
NOTE 6 — LEASES
We have operating leases for our new corporate office location and our existing corporate offices. These two leases have remaining lease terms of 10.5 years and 9 months, respectively.
The components of lease expense were as follows:
Schedule of components of lease expense

Three Months Ended
March 31,
2022 2021

Operating lease cost $ 78,442 $ 37,921
Short-term lease cost 49,709 34,889
Total lease cost $ 128,151 $ 72,810

Finance lease cost:
Amortization of right-of-use assets $ — $ 795
Interest on lease liabilities — 28
Total finance lease cost $ — $ 823
- 14 -
Supplemental cash flow information related to leases was as follows:
Schedule of cash flow information related to leases

Three Months Ended
March 31,
2022 2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases $ 63,193 $ 35,248
Financing cash flows from finance leases — 803
Supplemental balance sheet information related to leases was as follows:
Schdeule of balance sheet information related to leases
March 31,
2022 December 31,
2021

Operating Leases
Operating lease right-of-use assets $ 4,309,282 $ 95,553

Operating lease current liabilities 395,359 95,553
Operating lease long term liabilities 3,913,923 —
Total operating lease liabilities $ 4,309,282 $ 95,553

Finance Leases
Property and equipment, at cost $ — $ 12,725
Accumulated depreciation — (12,725 )
Property and equipment, net $ — $ —

Finance lease current liabilities — —
Finance lease long term liabilities — —
Total finance lease liabilities $ — $ —
March 31,
2022 December 31,
2021

Weighted Average Remaining Lease Term
Operating leases 10.4 Years 0.6 Years
Finance leases 0 Years 0 Years

Weighted Average Discount Rate
Operating leases 4.05% 4.75%
Finance leases 0 4.75%
Maturities of lease liabilities are as follows:
Schedule of maturities of lease liabilities
Year Ending December 31, Operating Leases Finance Leases
2022 (excluding the three months ended March 31, 2022) $ 435,067 $ 0
2023 499,503 0
2024 499,503 0
2025 499,503 0
2026 499,503 0
Thereafter 2,830,518 0
Total undiscounted lease payments 5,263,597 0
Less: imputed interest (954,315 ) 0
Total lease liabilities $ 4,309,282 $ —
- 15 -

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 COVID-19, customer ordering patterns, availability and costs of raw materials and labor and our ability to recover such costs, our ability to convert inventory to a source of cash, future operating results, ~~unpredictability related to~~growth of new patient starts, Food and Drug Administration and foreign authority regulations and the outcome of regulatory audits, 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~~our 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~~impact of ~~litigation and regulatory investigation.~~recent accounting pronouncements. 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,” “KORU Medical,” “we,” “us” ~~and~~or “our” ~~refer~~refers to Repro Med Systems, Inc.

OVERVIEW

~~On March 22, 2017,~~The Company designs, manufactures and markets proprietary portable and innovative medical devices primarily for the ~~Board~~ambulatory infusion market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality system management.
KORU Medical continues to monitor its operations and government recommendations as they relate to the COVID-19 pandemic. We cannot predict the effects the pandemic may have on our business, in particular with respect to demand for our products, our strategy, and our prospects, the effects on our customers, or the impact on our financial results. For example, our future net sales growth may continue to be impacted due to fewer new prescriptions for individuals with Primary Immune Deficiency Disease (“PIDD”) and Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”) as a result of ~~Directors approved a change~~patients not seeking care during the pandemic. We believe that the pandemic has precipitated limited availability and rising costs of raw materials and labor, which may impact our financial results if current trends continue.
Our revenues derive from three business sources: (i) domestic core, (ii) international core, and (iii) novel therapies. Our core domestic and international revenues consist of sales of our products for the delivery of subcutaneous drugs that are FDA cleared for use with the KORU Medical infusion system, with the primary delivery for immunoglobulin to treat PIDD and CIDP. Novel therapies consist of product revenues of our infusion system (syringe drivers, tubing and needles) for feasibility/clinical trials (pre-clinical studies, Phase I, Phase II, Phase III) of biopharmaceutical companies in the ~~Company’s fiscal year end~~drug development process as well as non-recurring engineering services revenues (“NRE”) received from ~~February 28~~biopharmaceutical companies to ~~December 31.~~ready or customize the FREEDOM System for clinical and commercial use.

~~During~~The Company began its implementation of secondary sourcing of our needle and tubing sets to Command at the ~~three months~~beginning of 2021 and is expected to complete the implementation by the second half of 2022. The Company has entered into a lease commencing March 1, 2022 for a new manufacturing facility and corporate headquarters, into which the Company expects to move in June 2022.
The Company ended ~~September 30, 2017, our total~~the quarter with $6.2 million in net ~~sales were up 19.5%~~revenues, or a 15.0% increase, compared with $5.4 million in the same period last year ~~with~~driven by growth in domestic core, both pumps and consumables, and novel therapies.
Our gross margin, which is our gross profit stated as a percentage of net sales, for the three months ended March 31, 2022, was 58.0%, a decline from prior year period of 59.5%. The majority of the ~~increase coming~~decline was driven by more lower margin NRE revenues for a pre-commercialization innovation development agreement for a large SCIg customer in the 2022 period and year over year higher manufacturing costs in our core business due to increasing raw material and labor costs, partially offset by increased price and mix.
- 16 -
Operating expenses for the three months ended March 31, 2022, were $6.7 million, up from ~~higher volume from our domestic customers. Our gross margin percentage, 61.8%, was not as high as~~$5.4 million for 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 a nondestructive testing protocol, which we expect to have implemented before the end of the calendar year. Our selling, generaldriven primarily by research and administrative costs were 10.4% lower for the three months ended September 30, 2017 compared with the same period last year mostly due to a significant reduction in legal fees for the quarter related to our litigation 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 domestically 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 generationdevelopment efforts ~~and the timing of spend for current year marketing initiatives. Offsetting these savings were increased salary and related benefit costs in our regulatory department due to headcount~~ to support our ~~regulatory compliance requirements~~core and ~~the addition of our Chief Operating Officer.~~

~~We continue~~novel therapies business, and by new hires to ~~expand internationally, generating our first sales in Asia~~support commercialization 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 practicesbusiness development, 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.regulatory consulting, partially offset by reorganization costs of $1.0 million last year.

~~- 12 -~~

RESULTS OF OPERATIONS

Three months ended ~~September 30, 2017~~March 31, 2022, compared to ~~September 30, 2016~~March 31, 2021

Net Sales

The following table summarizes our net sales for the three months ended ~~September 30, 2017~~March 31, 2022, and ~~2016:~~2021:

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%

Three Months Ended March 31, Change from Prior Year % of Total Net Sales
2022 2021 $ % 2022 2021
Net Sales
Domestic Core $ 4,993,536 $ 4,412,417 $ 581,119 13.2% 80.0% 81.2%
International Core 894,942 978,906 (83,964 ) (8.6% ) 14.3% 18.0%
Novel Therapies 355,852 39,628 316,224 798.0% 5.7% 0.8%
Total $ 6,244,330 $ 5,430,951 $ 813,379 15.0%

Total net sales ~~increased $0.6~~were $6.2 million ~~or 19.5%~~ for the three months ended ~~September 30, 2017 compared with~~March 31, 2022, a 15.0% increase from $5.4 million in the same period ~~last year. This~~of 2021, with strong year over year growth driven by domestic core, up 13.2%, due to growth in pumps and consumables driven by an overall increase in the subcutaneous immunoglobulin market, as well as our key growth initiatives including prefills and label expansions. Total novel therapies sales were $0.4 million for the three months ended March 31, 2022, a $0.3 million increase from the same period of 2021 primarily due to recognition of initial NRE revenues for a pre-commercialization innovation development agreement for a large SCIg customer. International core was ~~driven mostly by increased volume from domestic sales. We continue~~down 8.6% year over year, due to ~~concentrate the majority~~quarterly buying pattern changes of our efforts in our infusion product lines, specifically towards new applications in both domestic 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 into the antibiotic market.a few smaller customers.

Gross Profit

Our gross profit for the three months ended ~~September 30, 2017~~March 31, 2022, and ~~2016~~2021 is as follows:

Three Months Ended September 30,

Change from Prior Year

Three Months Ended March 31, Change from Prior Year

2017

2016

$

%

2022 2021 $ %
Gross Profit

$
2,378,658

$
2,032,944

$
345,714

17.0%

$ 3,622,305 $ 3,231,854 $ 390,451 12.1%
Stated as a Percentage of Net Sales

61.8%

63.1%

58.0% 59.5%

Gross profit increased ~~$0.3~~by $0.4 million or ~~17.0%~~12.1% in the ~~three months ended September 30, 2017, compared~~first quarter of 2022, while gross margin decreased by 1.5 margin points to ~~the same period in 2016. This increase in the quarter was mostly~~58.0% primarily driven by ~~the increase~~increased lower margin NRE revenues for a pre-commercialization innovation development agreement for a large SCIg customer and year over year higher manufacturing costs in ~~net sales of $0.6 million. Partially offsetting this increase were higher production~~our core business due to increasing raw material and labor 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.partially offset by increased price and mix.

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, 2022, and ~~2016~~2021 are as follows:

Three Months Ended September 30,

Change from Prior Year

Three Months Ended March 31, Change from Prior Year

2017

2016

$

%

2022 2021 $ %
Selling, general and administrative

$
1,893,911

$
2,114,407

$
(220,496
)
(10.4
)
$ 5,491,213 $ 4,992,829 $ 498,384 10.0%
Research and development

14,852

75,198

(60,346
)
(80.2
)
1,148,355 336,841 811,514 240.9%

$
1,908,763

$
2,189,605

$
(280,842
)
(12.8
)
$ 6,639,568 $ 5,329,670 $ 1,309,898 24.6%
Stated as a Percentage of Net Sales

49.6%

68.0%

106.3% 98.1%

Selling, general and administrative expenses ~~decreased $0.2~~increased $0.5 million, or ~~10.4%~~10.0%, during the three months ended ~~September 30, 2017~~March 31, 2022, compared to the same period last ~~year. The decrease was~~year, driven by $1.5 million in costs associated with new hires in the ~~result~~second half of ~~a significant reduction in legal fees of $0.3 million related~~2021 to ~~our litigation~~support commercialization and business development, and quality and regulatory efforts. We cannot predict whether this trend will continue, nor can we predict the outcome of the litigation. We also had reduced expenses in sales and marketing of $0.1 million mostly due to lower salary and related costs due to attrition in Europe, lower overall marketing spend due to timing, allconsulting, partially offset by ~~recruiting fees in Europe. Further offsetting~~costs associated with the ~~savings were increased costs~~departure and replacement of ~~$0.1 million in our regulatory department due to headcount to support our regulatory compliance requirements~~the former chief executive officer and the ~~addition~~recruitment of ~~our Chief Operating Officer, as well as an increase in bad debt expense~~two new Board members of ~~$65,000 related to an international customer.~~ $1.0 million last year.
- 17 -
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~~$0.8 million, or 240.9%, 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, 2022, compared with the same period last year due to higher salary and ~~was driven~~related expenses to build our internal capability and consulting fees to support product development.
Depreciation and amortization
Depreciation and amortization expense decreased 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~~5.4% to $109,252 in the three ~~month period~~months 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 customerMarch 31, 2022, compared with $115,473 in the ~~period and last year included a large return of product related to a market withdrawal.~~three months ended March 31, 2021. We continue to ~~concentrate the majority of our efforts~~invest in ~~our infusion product lines, specifically towards new applications in both domestic~~capital assets, mostly related to manufacturing 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.computer equipment, offset by assets reaching their remaining useful life.

~~Gross Profit~~Net Loss

Three Months Ended March 31, Change from Prior Year
2022 2021 $ %
Net Loss $ (2,537,514 ) $ (1,276,138 ) $ (1,261,376 ) (98.8% )
Stated as a Percentage of Net Sales (40.6% ) (23.5% )
Our ~~gross profit for~~net loss was $2.5 million in the ~~seven~~three 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~~March 31, 2022, compared with net loss of $1.3 million ~~or 21.5%~~ in ~~the seven months ended September 30, 2017, compared to the~~ same period ~~in 2016. This increase was~~last year mostly 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 higher research and development ~~costs for the seven months ended September 30, 2017 and 2016 are~~expenses, partially offset by higher gross profit, all 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 feesdescribed above. A tax benefit of $0.6 million ~~related to our litigation and regulatory efforts. We cannot predict whether this trend will continue, nor can we predict~~resulting from the ~~outcome of~~loss was also recorded during 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 to $179,874 in the seven~~three months ended September 30, 2017 compared with $167,513 in the seven months ended September 30, 2016 as a result of continued investment in computer equipment, testing equipment, patent applications and maintenance of existing patents.March 31, 2022.

~~Net Income/(Loss)~~

Seven Months Ended September 30,

Change from Prior Year

2017

2016

$

Net Income/(Loss)

$
626,587

$
(359,095
)
$
985,682

Stated as a Percentage of Net Sales

6.8%

(4.9%
)

Our net income for the seven 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 reduced 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 on hand of ~~$3.7~~$22.6 million as of ~~September 30, 2017, and cash flows from operations.~~March 31, 2022. 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, research and development expenses and selling, general and administrative expenses.
To develop new products, support future growth, achieve operating efficiencies, and maintain product quality, we are continuing to invest in manufacturing technologies, facilities and equipment, and research and development. We estimate expenses to be between $27.0 million and $28.0 million in 2022. We expect our 2022 capital ~~expenditures~~investments for manufacturing and ~~patent costs.~~leasehold improvements for our new facility to be in aggregate between $1.5 million and $2.0 million, net of pre-approved financing arrangements totaling approximately $1.0 million, which are expected to be executed in the second quarter of 2022.

Our inventory position was $6.0 million at March 31, 2022. We expect these levels to rise in the short term as we build to ensure timely order fulfillment as we complete the transition of the manufacturing of our needle sets and tubing products to our secondary source and for supply continuity as we move our manufacturing facility to our new location in 2022. As the relocation and transition to our secondary source are completed, which we expect by the end of 2022, this inventory is expected to convert to a source of cash.
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act contains a provision known as the Employee Retention Credit (“ERC”), a refundable payroll tax credit for qualified wages paid to retained full-time employees between March 13, 2020, and December 31, 2020. The Consolidations Appropriations Act (CAA), signed into law on December 27, 2020, significantly modified and expanded the provisions of the ERC to include wages paid in 2021. For 2021, the ERC provides employers a refundable federal tax credit equal to 70% of the first $10,000 of qualified wages and benefits paid to retained employees between January 1, 2021, and December 31, 2021. Credits may be claimed immediately by reducing payroll taxes sent to the Internal Revenue Service. To the extent that the credit exceeds employment withholdings, the employer may request a refund of prior taxes paid. The Company determined that it qualified for this credit and anticipated utilizing benefits under this act to aid its liquidity position and as a result recorded a receivable of $0.7 million as of December 31, 2021. As of March 31, 2022, the credit has not been received.
We ~~believe~~expect that ~~as of September 30, 2017,~~our cash on hand, cash flows from operations, and ~~cash expected to be generated from future operating activities~~our available credit facility will be sufficient to ~~fund~~meet our ~~operations, including further research and development and capital expenditures for~~requirements at least through the next 12 months. We believe the FREEDOM System continues to find a solid following in the 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 for additional uses such as antibiotics, chemotherapeutics, and pain medications.

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 effectContinued execution on ~~the Company’s business, results of operations, financial condition and cash flows.~~

~~- 15 -~~

~~On September 30, 2015, RMS’s Board of Directors authorized~~our longer-term strategic plan may require the Company to ~~make open~~take on additional debt or raise capital through issuance of equity, or a combination of both in the periods post 12/31/2023. Our future capital requirements may vary from those currently planned and will depend on many factors, including our rate of sales growth, the timing and extent of spending on various strategic initiatives, our international expansion, the timing of new product introductions, market ~~purchases~~acceptance of upour solutions, and overall economic conditions including the potential impact of global supply imbalances and COVID-19 on the global financial markets. To the extent that current and anticipated future sources of liquidity are insufficient to ~~2,000,000 shares of the Company’s outstanding Common Stock. The purchases are made through a broker designated by~~fund our future business activities and requirements, we may be required to seek additional equity or debt financing sooner. There can be no assurance the Company ~~with price, timing and volume restrictions based on average daily trading volume, consistent with~~will be able to obtain the ~~rules of~~financing or raise 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 decidedcapital required to ~~discontinue repurchasing its outstanding Common Stock for an undetermined period of time to utilize cash for capital investments needed to expand the business.~~fund planned expansion.

- 18 -
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, 2022 Three Months Ended
March 31, 2021
Net cash used in operating activities $ (1,752,072 ) $ (2,605,653 )
Net cash used in investing activities $ (752,602 ) $ (102,204 )
Net cash (used in)/provided by financing activities $ (252,968 ) $ 2,167,291

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~~$1.8 million for the ~~seven~~three months ended ~~September 30, 2016~~March 31, 2022, was primarily ~~attributable~~due to the ~~operating~~net loss of $2.5 million and the deferred tax asset of $0.6 million, offset by favorable net working capital of $0.4 million driven by accounts receivable collections and non-cash charges for stock-based compensation of $0.8 million, and depreciation and amortization of $0.1 million.
Net cash used in operating activities of $2.6 million for the three months ended March 31, 2021 was primarily due to the net loss of $1.3 million, working capital changes which include an increase in inventory of $1.2 million related to the transition of manufacturing to our secondary source, an increase in accounts receivable of ~~$0.3 million, an increase in prepaid expense of $0.1 million mostly due to an income tax receivable of $0.1~~$1.0 million due to ~~the loss in the period and the~~delayed payments at our largest distributor, as well as a decrease in accrued expenses of $0.9 million most of which was non-cash activity related to the issuance of common stock in settlement of litigation. Further contributing were deferred tax ~~liability~~assets of ~~$0.2 million. Partially offsetting~~$0.9 million increased for book to tax differences related to stock option expense. Offsetting these were primarily non-cash charges for stock-based compensation of ~~$0.2~~$0.7 million, ~~for depreciation and amortization of long lived tangible and intangible assets, stock based compensation expense of $0.1 million and~~ an increase in accounts payable of $1.3 million due to timing of payments and an increase in accrued payroll of $0.4 million ~~mostly due~~related to ~~raw material purchases and legal fees.~~the separation agreement with our former chief executive officer.

Investing Activities

~~Our net~~Net cash used in investing activities of ~~$0.2~~$0.8 million for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022, was for capital improvement expenditures for our new location and ~~September 30, 2016 was primarily attributable to our continued investment in capital assets mostly related to production~~manufacturing and ~~for new patent applications and maintenance of existing patents.~~office equipment.

~~Financing Activities~~

~~Our net~~Net cash used in investing activities of $0.1 million for the three months ended March 31, 2021 was for capital expenditures for manufacturing and office equipment.
Financing Activities
The $0.3 million used by financing activities ~~was $19,360 and $120,577~~ for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022, was for financed director and ~~September 30, 2016, respectively,~~officer liability insurance.
The $2.2 million provided by financing activities for the three months ended March 31, 2021 is from options exercised and ~~were a result of~~ the ~~repurchase of shares of the Company’s common stock.~~

~~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 innon-cash activity related to 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~~common stock in settlement of litigation.
ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED
Refer to “NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” 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~~accompanying financial statements, which is incorporated herein by reference.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Refer to ~~be closed~~“NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” in the ~~near future.~~

~~On April 19, 2017, the FDA renewed our Certificate to Foreign Government~~accompanying financial statements, 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.~~incorporated herein by reference.

~~- 16 -~~

~~RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS~~

In May 2017, 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.

In May 2014, the FASB issued ASU No. 2014-09—Revenue from Contracts with Customers. The ASU clarifies the principles 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. The amendments in this update are effective for the annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Full or modified retrospective 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 the effective date 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 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 -~~

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.

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.

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

Not ~~Applicable.~~applicable.

~~PART I –~~ - 19 -
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.

There have been no changes in the Company’s internal control over financial reporting during the ~~quarter~~three months ended ~~September 30, 2017,~~March 31, 2022, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

~~PART II –~~ ITEM 1. LEGAL PROCEEDINGS
The Company has been and may again become involved in legal proceedings, claims and litigation arising in the ordinary course of business. KORU Medical is not presently a party to any litigation or other legal proceeding that is believed to be material to its financial condition.
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described in “PART 1, ITEM 1A. RISK FACTORS” in our Annual Report on Form 10-K for the year ended December 31, 2021, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common 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, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF ~~PROCEEDS.~~PROCEEDS

On ~~October 21, 2015, the Board~~March 4, 2022, we issued 20,107 shares 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 of shares to be issued each quarter is calculated based upon the closing price of the common stock on the last day of each fiscal quarter as reported by the OTCQX. The Company issued 53,196 and 97,314 shares ofour common stock to ~~its non-employee directors during the three and seven month period ended September 30, 2017, respectively.~~

~~The Company issued 42,553 and 56,108 shares~~our Chief Executive Officer as a portion of ~~common stock to Dr. Fred Ma, its Chief Medical Officer, under~~her 2021 annual bonus in accordance with the terms of ~~his~~her employment ~~agreement, during the three and seven month period ended September 30, 2017, respectively.~~

~~On September 30, 2015, RMS’s Board of Directors authorized the Company to make open market purchases of up to 2,000,000~~agreement. These 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, the Board of Directors approved 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. As of September 30, 2017, there were outstanding 1.2 million options awarded to certain executives, key employees and advisory board members under the Plan.

~~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.

Exhibit No. Description
~~31.1~~
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*
101.INS
Inline XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data ~~Files of Financial Statements~~File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Definition Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (formatted as Inline XBRL and ~~Notes.~~
contained in Exhibit 101)

* 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~~

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 4, 2022
/s/ ~~Andrew I. Sealfon~~
Linda Tharby
~~Andrew I. Sealfon,~~Linda Tharby, President ~~Chairman of the Board, Director,~~and Chief Executive Officer

(Principal Executive Officer)
~~November 3, 2017~~
May 4, 2022
/s/ Karen Fisher
Karen Fisher, Chief Financial Officer and Treasurer

(Principal Financial Officer)

- 2022 -

		PAGE
		~~PAGE~~
			PART I. FINANCIAL INFORMATION
~~PART I~~– ~~FINANCIAL INFORMATION~~
ITEM 1.	Financial Statements (Unaudited)	3
~~ITEM 1.~~	~~Financial Statements~~
	Balance Sheets (Unaudited) as of March 31, 2022 and December 31, 2021	3
	~~Balance Sheets as of September 30, 2017 (Unaudited) and February 28, 2017~~	3

	Statements of Operations (Unaudited) for the three ~~and seven~~ months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~ 2021	4

	Statements of Cash Flows (Unaudited) for the ~~seven~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016~~ 2021	5

	Statements of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2022 and 2021	6

	Notes to Financial Statements	~~6-11~~ 7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~12-18~~ 16

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	18 19

ITEM 4.	Controls and Procedures	18 20

PART II–II. OTHER INFORMATION

ITEM 1.	Legal Proceedings	20

ITEM 1A.	Risk Factors	20

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

ITEM 6.	Exhibits	19 21

	Signatures	22


	September 30,			February 28,
	2017			2017
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	3,661,707		$	3,313,265
Certificates of deposit		262,314			262,314
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
Inventory		1,586,568			1,353,703
Tax Receivable		—			172,457
Prepaid expenses		225,088			175,955
TOTAL CURRENT ASSETS		7,217,087			6,779,724
Property and equipment, net		902,075			932,092
Patents, net of accumulated amortization of $195,354 and $180,137 at September 30, 2017 and February 28, 2017, respectively		440,565			426,943
Other assets		31,583			31,490
TOTAL ASSETS	$	8,591,310		$	8,170,249

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Deferred capital gain - current	$	22,481		$	22,481
Accounts payable		362,878			772,428
Accrued expenses		502,249			417,357
Accrued payroll and related taxes		123,716			177,018
Accrued tax liability		142,883			—
TOTAL CURRENT LIABILITIES		1,154,207			1,389,284
Deferred capital gain – long term		9,382			22,496
Deferred tax liability		91,039			82,422
TOTAL LIABILITIES		1,254,628			1,494,202

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
Additional paid-in capital		4,162,679			4,129,726
Retained earnings		3,111,528			2,484,941
		7,680,886			7,020,251
Less: Treasury stock, 2,737,231 shares at September 30, 2017 and February 28, 2017		(344,204	)		(344,204	)
TOTAL STOCKHOLDERS’ EQUITY		7,336,682			6,676,047
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	8,591,310		$	8,170,249

		March 31,			December 31,
	2022			2021

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	22,577,247		$	25,334,889
Accounts receivable less allowance for doubtful accounts of $24,271 for March 31, 2022 and December 31, 2021		3,145,397			3,592,886
Inventory		6,017,737			6,106,338
Other Receivables		680,075			718,220
Prepaid expenses		1,510,851			1,568,821
TOTAL CURRENT ASSETS		33,931,307			37,321,154
Property and equipment, net		1,763,269			1,106,445
Intangible assets, net of accumulated amortization of $278,897 and $263,729 at March 31, 2022 and December 31, 2021, respectively		795,339			808,813
Operating lease right-of-use assets		4,309,282			95,553
Deferred income tax assets, net		2,538,853			1,941,254
Other assets		89,587			19,812
TOTAL ASSETS	$	43,427,637		$	41,293,031

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,267,980		$	1,227,533
Accrued expenses		2,171,724			2,709,704
Note Payable		255,614			508,583
Other Liabilities		115,625			90,000
Accrued payroll and related taxes		506,315			160,603
Operating lease liability - current		395,359			95,553
TOTAL CURRENT LIABILITIES		4,712,617			4,791,976
Operating lease liability, net of current portion		3,913,923			—
TOTAL LIABILITIES		8,626,540			4,791,976
Commitments and contingencies (Refer to Note 3)
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 75,000,000 shares authorized, 48,121,289 and 48,044,162 shares issued, 44,700,787 and 44,623,660 shares outstanding at March 31, 2022 and December 31, 2021, respectively		481,212			480,441
Additional paid-in capital		41,611,030			40,774,245
Treasury stock, 3,420,502 shares at March 31, 2022 and December 31, 2021, at cost		(3,843,562	)		(3,843,562	)
Retained deficit		(3,447,583	)		(910,069	)
TOTAL STOCKHOLDERS’ EQUITY		34,801,097			36,501,055
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	43,427,637		$	41,293,031


	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


	Three Months Ended
	March 31,
	2022			2021

NET SALES	$	6,244,330		$	5,430,951
Cost of goods sold		2,622,025			2,199,097
Gross Profit		3,622,305			3,231,854

OPERATING EXPENSES
Selling, general and administrative		5,491,213			4,992,829
Research and development		1,148,355			336,841
Depreciation and amortization		109,252			115,473
Total Operating Expenses		6,748,820			5,445,143

Net Operating Loss		(3,126,515	)		(2,213,289	)

Non-Operating Expense
Loss on currency exchange		(7,135	)		(15,717	)
Gain on disposal of fixed assets, net		—			736
Interest (Expense)/Income, net		(1,463	)		9,771
TOTAL OTHER EXPENSE		(8,598	)		(5,210	)

LOSS BEFORE INCOME TAXES		(3,135,113	)		(2,218,499	)

Income Tax Benefit		597,599			942,361

NET LOSS	$	(2,537,514	)	$	(1,276,138	)

NET LOSS PER SHARE

Basic	$	(0.06	)	$	(0.03	)
Diluted	$	(0.06	)	$	(0.03	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic		44,667,977			43,960,936
Diluted		44,667,977			43,960,936


	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


				Additional									Total
	Common Stock			Paid-in			Retained			Treasury			Stockholders’
	Shares	Amount		Capital			Deficit			Stock			Equity

BALANCE, DECEMBER 31, 2021	48,044,162	$	480,441	$	40,774,245		$	(910,069	)	$	(3,843,562	)	$	36,501,055
Issuance of stock-based compensation	47,500		475		142,025			—			—			142,500
Compensation expense related to stock options	—		—		524,670			—			—			524,670
Compensation related to Restricted Stock	—		—		170,386			—			—			170,386
Issuance upon options exercised	29,627		296		(296	)		—			—			—
Net loss	—		—		—			(2,537,514	)		—			(2,537,514	)
BALANCE, MARCH 31, 2022	48,121,289	$	481,212	$	41,611,030		$	(3,447,583	)	$	(3,843,562	)	$	34,801,097

	Three Months Ended March 31,				% of Total Net Sales
	2022		2021		2022		2021
Net Sales
Domestic	$	5,301,388	$	4,446,789		84.9%	81.9%
International		942,942		984,162		15.1%	18.1%
Total Net Sales	$	6,244,330	$	5,430,951

•	Level 1 – Quoted prices in active markets for identical assets or liabilities.

•	Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

•	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and includes instruments for which the determination of fair value requires significant judgment or estimation.


	September 30, 2017			February 28, 2017

Land	$	54,030		$	54,030
Building		171,094			171,094
Furniture, office equipment, and leasehold improvements		1,054,971			1,022,942
Manufacturing equipment and tooling		1,074,157			1,003,166
		2,354,252			2,251,232
Less: accumulated depreciation		(1,452,177	)		(1,319,140	)
Property and equipment, net	$	902,075		$	932,092

	March 31, 2022			December 31, 2021

Furniture and office equipment	$	826,503		$	818,897
Construction in progress		638,489			—
Leasehold improvements		556,907			556,907
Manufacturing equipment and tooling		2,134,764			2,042,675
Total property and equipment		4,156,663			3,418,479
Less: accumulated depreciation and amortization		(2,393,394	)		(2,312,034	)
Property and equipment, net	$	1,763,269		$	1,106,445


	Seven Months Ended September 30,
	2017				2016
	Shares	Weighted Average Exercise Price			Shares		Weighted Average Exercise Price

Outstanding at March 1	1,345,000	$	0.39			1,060,000	$	0.37
Granted	68,000	$	0.44			—	$	—
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			—	$	—
Weighted average fair value of options granted during the period	—	$	—			—	$	—
Stock-based compensation expense	—	$	(25,343	)		—	$	86,876


Range of 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

	March 31, 2022		December 31, 2021

Operating Leases
Operating lease right-of-use assets	$	4,309,282	$	95,553

Operating lease current liabilities		395,359		95,553
Operating lease long term liabilities		3,913,923		—
Total operating lease liabilities	$	4,309,282	$	95,553

Finance Leases
Property and equipment, at cost	$	—	$	12,725
Accumulated depreciation		—		(12,725	)
Property and equipment, net	$	—	$	—

Finance lease current liabilities		—		—
Finance lease long term liabilities		—		—
Total finance lease liabilities	$	—	$	—

	March 31, 2022	December 31, 2021

Weighted Average Remaining Lease Term
Operating leases	10.4 Years	0.6 Years
Finance leases	0 Years	0 Years

Weighted Average Discount Rate
Operating leases	4.05%	4.75%
Finance leases	0	4.75%

Year Ending December 31,	Operating Leases			Finance Leases
2022 (excluding the three months ended March 31, 2022)	$	435,067		$	0
2023		499,503			0
2024		499,503			0
2025		499,503			0
2026		499,503			0
Thereafter		2,830,518			0
Total undiscounted lease payments		5,263,597			0
Less: imputed interest		(954,315	)		0
Total lease liabilities	$	4,309,282		$	—


	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%


	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, 2022			Three Months Ended March 31, 2021
Net cash used in operating activities	$	(1,752,072	)	$	(2,605,653	)
Net cash used in investing activities	$	(752,602	)	$	(102,204	)
Net cash (used in)/provided by financing activities	$	(252,968	)	$	2,167,291

Exhibit No.	Description
~~31.1~~
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* 101.INS	Inline XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data ~~Files of Financial Statements~~File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and ~~Notes.~~ contained in Exhibit 101)


	REPRO MED SYSTEMS, INC.

~~November 3, 2017~~ May 4, 2022	/s/ ~~Andrew I. Sealfon~~ Linda Tharby
	~~Andrew I. Sealfon,~~Linda Tharby, President ~~Chairman of the Board, Director,~~and Chief Executive Officer (Principal Executive Officer)

~~November 3, 2017~~ May 4, 2022	/s/ Karen Fisher
	Karen Fisher, Chief Financial Officer and Treasurer (Principal Financial Officer)