KORU Medical Systems (KRMD) 10-Q 2015 Q3 Quarterly report

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 November 30, 2015

Or

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

For the transition period from ________ to ________.

Commission File Number:0-12305

REPRO MED SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

New York	13-3044880
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
24 Carpenter Road, Chester, New York	10918
(Address of Principal Executive Offices)	(Zip Code)

(845) 469-2042

(Registrant’s telephone number, including area code)

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

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

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

As of January 8, 2016, 38,006,667 shares of common stock, $.01 par value per share, were outstanding, which excludes 2,340,625 shares of Treasury Stock.

REPRO MED SYSTEMS, INC.

TABLE OF CONTENTS

		PAGE
PART I– FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Balance Sheets as of November 30, 2015 (Unaudited) and February 28, 2015	3
	Statements of Operations (Unaudited) for the Three Months and Nine Months Ended November 30, 2015, and 2014	4
	Statements of Cash Flows (Unaudited) for the Nine Months Ended November 30, 2015, and 2014	5
	Notes to Financial Statements	6-9
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10-16
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	16
ITEM 4.	Controls and Procedures	16
PART II– OTHER INFORMATION
ITEM 1.	Legal Proceedings	17
ITEM 1A.	Risk Factors	17
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	17
ITEM 3.	Defaults Upon Senior Securities	17
ITEM 4.	Mine Safety Disclosures	18
ITEM 5.	Other Information	18
ITEM 6.	Exhibits	18

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PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements

REPRO MED SYSTEMS, INC.

BALANCE SHEETS

	November 30,
	2015			February 28,
	(Unaudited)			2015
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	3,339,531		$	2,557,235
Certificates of deposit		259,789			259,789
Accounts receivable less allowance for doubtful accounts of $31,455 and $29,865 for November 30, 2015 and February 28, 2015, respectively		1,757,961			1,623,695
Inventory		1,258,802			1,226,636
Prepaid expenses		290,383			240,688
TOTAL CURRENT ASSETS		6,906,466			5,908,043
Property and equipment, net		1,045,765			1,161,432
Patents, net of accumulated amortization of $143,762 and $134,552 at November 30, 2015 and February 28, 2015, respectively		210,264			180,558
Other assets		31,140			31,140
TOTAL ASSETS	$	8,193,635		$	7,281,173
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Deferred capital gain - current portion	$	22,481		$	22,481
Accounts payable		522,338			243,217
Accrued expenses		434,117			304,041
Accrued tax liability		43,424			—
Accrued payroll and related taxes		118,193			121,917
TOTAL CURRENT LIABILITIES		1,140,553			691,656
Deferred capital gain - less current portion		50,596			67,454
Deferred tax liability		231,544			248,607
TOTAL LIABILITIES		1,422,693			1,007,717
STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 50,000,000 shares authorized, 40,347,292 shares issued; 38,006,667 shares outstanding		403,473			403,473
Additional paid-in capital		3,893,548			3,855,188
Retained earnings		2,675,202			2,237,076
		6,972,223			6,495,737
Less: Treasury stock, 2,340,625 shares at cost		(166,281	)		(166,281	)
Less: Deferred compensation cost		(35,000	)		(56,000	)
TOTAL STOCKHOLDERS’ EQUITY		6,770,942			6,273,456
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	8,193,635		$	7,281,173

The accompanying notes are an integral part of these financial statements

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REPRO MED SYSTEMS, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

	For the Three Months Ended						For the Nine Months Ended
	November 30						November 30
	2015			2014			2015			2014
NET SALES	$	3,144,954		$	2,655,155		$	8,941,676		$	7,797,030
Cost of goods sold		1,035,675			1,075,158			3,307,808			3,054,246
Gross Profit		2,109,279			1,579,997			5,633,868			4,742,784
OPERATING EXPENSES
Selling, general and administrative		1,698,226			1,257,134			4,567,709			3,439,258
Research and development		51,564			116,885			143,940			406,705
Depreciation and amortization		69,274			71,544			204,087			202,224
Total Operating Expenses		1,819,064			1,445,563			4,915,736			4,048,187
Net Operating Profit		290,215			134,434			718,132			694,597
Non-Operating Income/(Expense)
Loss on currency exchange		(36,663)			(23,483	)		(42,420)			(33,198	)
Loss on disposal of fixed assets		(253)			—			(13,577)			—
Interest expense		—			—			—			(512	)
Interest and other income		929			1,143			3,058			4,058
TOTAL OTHER INCOME (EXPENSES)		(35,987)			(22,340	)		(52,939	)		(29,652	)
INCOME BEFORE TAXES		254,228			112,094			665,193			664,945
Income Tax Expense		(86,676	)		(19,402	)		(227,067	)		(211,203	)
NET INCOME	$	167,552		$	92,692		$	438,126		$	453,742
NET INCOME PER SHARE
Basic	$	—		$	—		$	0.01		$	0.01
Diluted	$	—		$	—		$	0.01		$	0.01
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic		38,006,667			38,081,667			38,006,667			37,499,849
Diluted		38,006,667			38,081,667			38,006,667			37,499,849

The accompanying notes are an integral part of these financial statements

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REPRO MED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Nine Months Ended
	November 30,
	2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income	$	438,126		$	453,742
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred compensation cost		21,000			72,750
Stock based compensation expense		38,360			—
Depreciation and amortization		204,087			202,224
Deferred capital gain - building lease		(16,860	)		(16,860	)
Loss on disposal of fixed assets		13,577			—
Provision for returns and doubtful accounts		(70)			—
Deferred taxes		(17,063	)		(24,701	)
Changes in operating assets and liabilities:
(Increase) decrease  in accounts receivable		(134,196	)		35,905
Increase in inventory		(32,165	)		(752,373	)
(Increase) decrease in prepaid expense		(49,695	)		975
Increase in accounts payable		279,122			431,920
Decrease in accrued payroll and related taxes		(3,724	)		(7,758	)
Increase in accrued expense		130,076			162,721
Increase (decrease) in accrued tax liability		43,424			(166,358	)
NET CASH PROVIDED  BY OPERATING ACTIVITIES		913,999			392,187
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment		(106,337	)		(552,060	)
Proceeds on disposal of fixed assets		13,550			—
Purchase of certificates of deposit		—			(880	)
Payments for patents		(38,916	)		(91,726	)
NET CASH USED IN INVESTING ACTIVITIES		(131,703	)		(644,666	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of securities, net of legal and other fees of $15,000		—			273,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		—			273,000
NET INCREASE IN CASH AND CASH EQUIVALENTS		782,296			20,521
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		2,557,235			2,227,398
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3,339,531		$	2,247,919
Supplemental Information
Cash paid during the periods for:
Interest	$	—		$	512
Taxes	$	100,000		$	404,891
NON-CASH FINANCING AND INVESTING ACTIVITIES
Issuance of common stock as compensation	$	—		$	84,000

The accompanying notes are an integral part of these financial statements

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REPRO MED SYSTEMS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 1  NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

REPRO MED SYSTEMS, INC. (the “Company”) designs, manufactures and markets proprietary medical devices primarily for the ambulatory infusion market and emergency medical applications. The Food and Drug Administration (the “FDA”) regulates these products. The Company operates as one segment.  

BASIS OF PRESENTATION

The accompanying unaudited financial statements as of November 30, 2015, 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 November 30, 2015, and the results of operations and cash flow for the three month and nine month periods ended November 30, 2015, and 2014.

The results of operations for the three and nine months ended November 30, 2015, and 2014 are not necessarily indicative of the results to be expected for the full year.  These interim financial statements should be read in conjunction with the financial statements and notes thereto of the Company and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report for the year ended February 28, 2015, as filed with the Securities and Exchange Commission on Form 10-K.

USE OF ESTIMATES IN THE FINANCIAL STATEMENTS

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11—Simplifying the Measurement of Inventory.  The ASU was issued as part of the FASB’s simplification initiative and under the ASU, inventory is measured at the lower of cost and net realizable value, which would eliminate the other two options that currently exist for the market: (1) replacement cost and (2) net realizable value less an approximately normal profit margin.  This ASU is effective for interim and annual periods beginning after December 15, 2016.  Early application is permitted and should be applied prospectively.  The Company is assessing the impact of the adoption of the ASU on its financial statements.

In May 2014, 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.  The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

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STOCK-BASED COMPENSATION

The Company maintains various long-term incentive stock benefit plans under which it grants stock options and restricted stock awards to certain directors and key employees.  The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value.  The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted are recorded at the fair value of the shares at the grant date, over the vesting period.

RECLASSIFICATION

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

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 provides for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period.  Amortization amounted to $7,000 and $21,000 for the three and nine months ended November 30, 2015 and 2014, respectively.  In August, 2014, Dr. Baker was paid a previously approved bonus of $25,000 to assist him in covering taxes due on the grant of common stock.

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 provides for payment of $16,000 per month, of which half is to be paid in cash and half is to be paid in shares of common stock.

On October 21, 2015, the Board of Directors of the Company also approved independent director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, effective September 1, 2015.  Independent directors include Dr. Mark Baker, Mr. Mark Pastreich, Mr. Arthur Radin and Mr. Cyril Narishkin.  For purposes of director compensation, Mr. Narishkin will receive $25,000 annually in addition to his payments under his consulting agreement.  As of November 30, 2015, $12,500 was included in accrued expenses.

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 sixteen 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.

LEASED AIRCRAFT

The Company leases an aircraft from a company controlled by the president.  The lease payments aggregated were $5,375 and $16,125 for the three and nine months ended November 30, 2015, and 2014, respectively.  The original lease agreement has expired and the Company is currently on a month-to-month basis for rental payments.

NOTE 3  PROPERTY AND EQUIPMENT

Property and equipment consists of the following at:

	November 30, 2015		February 28, 2015
Land	$	54,030	$	54,030
Building		171,094		171,094
Furniture, office equipment, and leasehold improvements		932,049		887,959
Manufacturing equipment and tooling		966,223		963,843
		2,123,396		2,076,926
Less: accumulated depreciation		1,077,631		915,494
Property and equipment, net	$	1,045,765	$	1,161,432

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NOTE 4  LEGAL PROCEEDINGS

In 2013, the Company commenced in the Eastern District of California a declaratory judgment action against competitor, EMED Technologies Crop. (“EMED”) 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. The Company responded by asserting its own unfair business practice claims against EMED.  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.  The Company is complying with that order.  Discovery is ongoing.

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 Eastern District of Texas.  This second patent is related to the one concerning the Company’s declaratory judgment action.  Given the close relationship between the two patents, the Company has requested that the Texas suit be transferred to California.  The Court has not yet ruled on the Company’s transfer request.  Discovery in the Texas suit is ongoing.

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 of the patent in the second filed case.  On November 20, 2015, the U.S. Patent and Trademark Office instituted the ex parte reexamination request having found a substantial new question of patentability concerning EMED’s patent in the first filed case.  A decision whether to institute the inter partes review is expected within three (3) months.

Although the Company believes it has meritorious claims and defenses in these litigations and proceedings, their outcomes cannot be predicted with any certainty.

NOTE 5  STOCK

On September 30, 2015, RMS’s Board of Directors authorized a stock repurchase program pursuant to which the Company will make open market purchases of up to 1,000,000 shares of the Company’s Outstanding Common Stock.  The purchases will be made through a broker to be designated by the Company with price, timing and volume restrictions based on average daily trading volume, consistent with the safe harbor rules of the Securities and Exchange Commission for such repurchases.  As of November 30, 2015, the Company had not made any purchases under the program, and as of January 8, 2016, the Company had repurchased 33,454 shares at an average price of $0.47 under the program.

NOTE 6  STOCK-BASED COMPENSATION

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, subject to shareholder approval.  The total number of shares of common stock of the Company, par value $.01 per share (“Common Stock”), with respect to which awards may be granted pursuant to the Plan shall not exceed 2,000,000 shares.  As of November 30, 2015, the Company awarded 1.2 million options to certain executives and key employees under the plan.

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 provides for payment of $16,000 per month, of which half is to be paid in cash and half is to be paid in shares of common stock.

On October 21, 2015, the Board of Directors of the Company also approved independent director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, effective September 1, 2015.  For purposes of director compensation, Mr. Narishkin will receive $25,000 annually in addition to his payments under his consulting agreement.  As of November 30, 2015, $12,500 was included in accrued expenses.

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The per share weighted average fair value of stock options granted during the three months ended November 30, 2015 and November 30, 2014 was $0.19 and zero, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the three months ended November 30, 2015. 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:

	Three Months Ended November 30,
	2015		2014
Dividend yield		0.00%		—
Expected Volatility		59.00%		—
Weighted-average volatility		—		—
Expected dividends		—		—
Expected term (in years)		5 Years		—
Risk-free rate		2.17%		—

The following table summarizes the status of the Company’s stock option plan:

	Three Months Ended November 30,
	2015				2014
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Outstanding at September 1		—	$	—		—	$	—
Granted		1,155,000	$	0.36 - 0.38		—	$	—
Exercised		—	$	—		—	$	—
Forfeited		—	$	—		—	$	—
Outstanding at November 30,		1,155,000	$	0.36 - 0.38		—	$	—
Options exercisable at November 30,		—	$	—		—	$	—
Weighted average fair value of options granted during the period		—	$	—		—	$	—
Stock-based compensation expense		—	$	10,717		—	$	—

Total stock-based compensation expense for stock option awards totaled $10,717 and zero for the three months ended November 30, 2015 and November 30, 2014, respectively.

The weighted-average grant-date fair value of options granted during the three months ended November 30, 2015 and November 30, 2014 was $219,000 and zero, respectively. The total intrinsic value of options exercised during the three months ended November 30, 2015 and November 30, 2014, was zero for both periods.

The following table presents information pertaining to options outstanding at November 30, 2015:

Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$0.36 - $0.38	1,155,000	5 years	$	0.37	—	$	—

As of November 30, 2015, there was $0.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 19 months. The total fair value of shares vested during the three months ended November 30, 2015 and November 30, 2014, was zero for both periods.

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

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

Our actual results may vary materially from the forward-looking statements made in this report due to important factors such as uncertainties associated with future operating results, unpredictability related to Food and Drug Administration regulations, introduction of competitive products, limited liquidity, reimbursement related risks, government regulation of the home health care industry, success of the research and development effort, expanding the market of FREEDOM60, availability of sufficient capital to continue operations and dependence on key personnel. 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 to develop and market new products, acceptance in the marketplace of new and existing products, ability to penetrate new markets, our success in enforcing and obtaining patents, obtaining required Government approvals and attracting and maintaining key personnel 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.

RESULTS OF OPERATIONS

Three Months Ended November 30, 2015 compared to November 30, 2014

Net Sales

The following table summarizes our net sales for the three months ended November 30, 2015 and 2014:

	Three Months Ended November 30,				Change from Prior Year				% of Sales
	2015		2014		$		%		2015		2014
Sales
Domestic	$	2,645,241	$	2,211,589	$	433,652	19.6	%	84.1	%	83.3	%
International		499,713		443,566		56,147	12.7	%	15.9	%	16.7	%
Total	$	3,144,954	$	2,655,155	$	489,799	18.4	%

Net sales for the quarter grew 18.4%, an increase of $0.5 million versus the same period last year, driven by domestic sales. This increase was mostly driven by sales of our infusion products.

Gross Profit

Our gross profit for the three months ended November 30, 2015 and 2014 is as follows:

	Three Months Ended November 30,						Change from Prior Year
	2015			2014			$		%
Gross Profit	$	2,109,279		$	1,579,997		$	529,282	33.5	%
Stated as a Percentage of Net Sales		67.1	%		59.5	%

Gross profit increased $0.5 million or 33.5% in the three months ended November 30, 2015, as compared to the same period in 2014.  This was mostly driven by the increase in revenue for the quarter.  Stated as a percentage of net sales, our gross profit improved from 59.5% in the three month period ended November 30, 2014 to 67.1% in the three month period ended November 30, 2015.  This improvement is the result of our lean manufacturing initiatives during the first six months of our fiscal year.  The third quarter continued to have increased capacity, as well as lower direct assembly labor costs.

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Selling, general and administrative and Research and development

Our selling, general and administrative expenses and research and development costs for the three months ended November 30, 2015 and 2014 are as follows:

	Three Months Ended November 30,						Change from Prior Year
	2015			2014			$			%
Selling, general and administrative	$	1,698,226		$	1,257,134		$	441,092		35.1	%
Research and development		51,564			116,885			(65,321	)	(55.9	)%
	$	1,749,790		$	1,374,019		$	375,771		27.3	%
Stated as a Percentage of Net Sales		55.6	%		51.7	%

Selling, general and administrative expenses increased $0.4 million during the three months ended November 30, 2015 as compared to the same period last year mostly due to legal fees incurred for our patent litigation and regulatory consulting fees incurred for FDA reporting requirements in the amount $0.3 million, a net increase in salaries following the reorganization efforts of $0.1 million and the addition of board of director compensation.

Research and development expenses decreased by $0.1 million in the three months ended November 30, 2015 compared to the same period last year mostly due to a reduction in outside consulting services and from attrition in the department.  We continue to be committed to our research and development efforts in order to develop new products.  We continue to actively pursue new product development and enhance existing product lines based on demand from the marketplace which includes feedback from sales and marketing at RMS and our distributors, the RMS clinical advisory panel, and our strategic business partners.  We believe that such efforts have been useful in helping us to maintain our competitive position, increase revenue from our existing customer base and expand our market reach. Although our research and development efforts have allowed us to develop the Freedom60, our HIgH-Flo needle sets, and the FreedomEdge in 2015, there can be no assurance that our research and development will result in additional commercially successful products.

Depreciation and amortization

Depreciation and amortization expense decreased slightly by 3.2% down to $69,274 in the three months ended November 30, 2015 compared with $71,544 in the three months ended November 30, 2014.

Net Income

	Three Months Ended November 30,						Change from Prior Year
	2015			2014			$		%
Net Income	$	167,552		$	92,692		$	74,860	80.8	%
Stated as a Percentage of Net Sales		5.3	%		3.5	%

Our net income for the three months ended November 30, 2015 increased $0.1 million or 80.8% compared with the same three months ended November 30, 2014.  The improvement in net income is mostly driven by the increase in sales, partially offset by the increase in selling, general and administrative expenses.

Nine Months Ended November 30, 2015 compared to November 30, 2014

Net Sales

The following table summarizes our net sales for the nine months ended November 30, 2015 and 2014:

	Nine Months Ended November 30,				Change from Prior Year				% of Sales
	2015		2014		$		%		2015		2014
Sales
Domestic	$	7,396,597	$	6,478,690	$	917,907	14.2	%	82.7	%	83.1	%
International		1,545,049		1,318,340		226,709	17.2	%	17.3	%	16.9	%
Total	$	8,941,646	$	7,797,030	$	1,144,616	14.7	%

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Net sales increased in the nine months ended November 30, 2015 by $1.1 million or 14.7% compared to the nine months ended November 30, 2014.  This increase was mostly driven by sales of our infusion products.

Gross Profit

Our gross profit for the nine months ended November 30, 2015 and 2014 is as follows:

	Nine Months Ended November 30,						Change from Prior Year
	2015			2014			$		%
Gross Profit	$	5,633,868		$	4,742,784		$	891,084	18.8	%
Stated as a Percentage of Net Sales		63.0	%		60.8	%

Gross profit increased $0.9 million or 18.8% in the nine months ended November 30, 2015 compared to the same period in 2014.  This was mostly due to the increase in sales.  As a percentage of sales we showed an improvement of 2.2 basis points due to lean initiatives completed in the first six months of our fiscal year.  

Selling, general and administrative and Research and development

Our selling, general and administrative expenses and research and development costs for the nine months ended November 30, 2015 and 2014 are as follows:

	Nine Months Ended November 30,						Change from Prior Year
	2015			2014			$			%
Selling, general and administrative	$	4,567,709		$	3,439,258		$	1,128,451		32.8	%
Research and development		143,940			406,705			(262,765	)	(64.6	)%
	$	4,711,649		$	3,845,963		$	865,686		22.5	%
Stated as a Percentage of Net Sales		52.7	%		49.3	%

Selling, general and administrative expenses increased $1.1 million during the nine months ended November 30, 2015 as compared to the same period last year.   The majority of this increase came from a reorganization effort which included a severance charge of $0.2 million and higher salary costs of $0.3 million, recruiting and consulting fees of $0.3 million and $0.3 million of legal fees incurred mostly for our patent litigation.

Research and development expenses decreased by $0.3 million in the nine months ended November 30, 2015 compared to the same period last year mostly due to a reduction in outside consulting services and from attrition in the department.  We continue to be committed to our research and development efforts in order to develop new products.  We continue to actively pursue new product development and enhance existing product lines based on demand from the marketplace which includes feedback from sales and marketing at RMS and our distributors, the RMS clinical advisory panel, and our strategic business partners.  We believe that such efforts have been useful in helping us to maintain our competitive position, increase revenue from our existing customer base and expand our market reach. Although our research and development efforts have allowed us to develop the Freedom60, our HIgH-Flo needle sets, and the FreedomEdge in 2015, there can be no assurance that our research and development will result in additional commercially successful products.

Depreciation and amortization

Depreciation and amortization expense increased slightly up to $204,087 in the nine months ended November 30, 2015 compared with $202,224 in the nine months ended November 30, 2014.

Net Income

	Nine Months Ended November 30,						Change from Prior Year
	2015			2014			$			%
Net Income	$	438,126		$	453,742		$	(15,616	)	(3.4	)%
Stated as a Percentage of Net Sales		4.9	%		5.8	%

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Our net income for the nine months ended November 30, 2015 was $0.4 million compared with net income of $0.5 million for the nine months ended November 30, 2014.  This decrease of $15,616 in net income is mostly the result of the increase in selling, general and administrative expenses of $1.1 million described above, mostly offset by increased sales.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of liquidity is our cash of $3.3 million as of November 30, 2015, and cash flows from operations.  Our principal source of operating cash inflows is from sales of our products to customers.  Our principal cash outflows relate to the purchase and production of inventory and related costs, selling, general and administrative expenses, research and development costs, capital expenditures and patent costs.

We believe that as of November 30, 2015, cash on hand and cash expected to be generated from future operating activities will be sufficient to fund our operations, including further research and development and capital expenditures for the next 12 months.  We believe the FREEDOM60® continues to find a solid following in the subcutaneous immunoglobulin market and this market is expected to continue to increase both domestically and internationally.

On September 30, 2015, RMS’s Board of Directors authorized a stock repurchase program pursuant to which the Company will make open market purchases of up to 1,000,000 shares of the Company’s Outstanding Common Stock.  The purchases will be made through a broker to be designated by the Company with price, timing and volume restrictions based on average daily trading volume, consistent with the safe harbor rules of the Securities and Exchange Commission for such repurchases.  As of November 30, 2015, the Company had not made any purchases under the program, and as of January 8, 2016, the Company had repurchased 33,454 shares at an average price of $0.47 under the program.

On September 30, 2015, the Board of Directors also approved the 2015 Stock Option Plan authorizing the Company to grant awards to certain employees under the plan at fair market value, subject to shareholder approval.  The total number of shares of common stock of the Company, par value $.01 per share (“Common Stock”), with respect to which awards may be granted pursuant to the Plan shall not exceed 2,000,000 shares.  As of November 30, 2015, the Company awarded 1.2 million options to certain executives and key employees under the plan.

RMS HIgH-Flo™ Subcutaneous Safety Needle Sets have clearance for sale in Europe, Canada and the U.S. We believe that the RMS administration sets represent an improvement in performance and safety over competitive devices on the market. We believe we have sufficient resources to continue marketing the needle sets domestically and internationally.

Cash Flows

The following table summarizes our cash flows:

	Nine Months Ended November 30, 2015			Nine Months Ended November 30, 2014
Net cash provided by operating activities	$	913,999		$	392,187
Net cash used in investing activities		(131,703	)		(644,666	)
Net cash provided by financing activities		—			273,000

Operating Activities

Net cash provided by operating activities of $0.9 million for the nine months ended November 30, 2015, was primarily attributable to our net income of $0.4 million, non-cash charges of $0.2 million for depreciation and amortization of long lived tangible and intangible assets, $21,000 of deferred compensation costs, $38,360 of stock based compensation, an increase of accounts receivable of $0.1 million, and an increase in accounts payable and accrued expense of $0.4 million. The increase in inventory levels of $32,165 in the nine months ended November 30, 2015 was also much lower than the $0.8 million in the nine months ended November 30, 2014 due to initial increases resulting from our outsourcing of subassemblies for our manufacturing process and increased finished good levels for needle sets in that period.  Net cash provided by operating activities of $0.4 million for the nine months ended November 30, 2014 was primarily attributable to our net income of $0.5 million, non-cash charges of $0.2 million for depreciation and amortization of long lived tangible and intangible assets, $0.1 million of deferred compensation costs and an increase in accounts payable and accrued expense of $6.0 million, all offset mostly by an increase in inventory levels of $0.8 million in the period as described above as well as a decrease in accrued tax liability.

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Investing Activities

Our net cash used in investing activities was $0.1 million for the nine months ended November 30, 2015 and $0.6 million for the nine months ended November 30, 2014.  The cash used was primarily attributable to capital expenditures and patent costs, of which in the prior year period we opened a second clean room, did facility upgrades and added new production equipment.

Financing Activities

Our net cash provided by financing activities was zero for the nine months ended November 30, 2015 and $0.3 million for the nine months ended November 30, 2014 due to the sale of common stock.

OUR PRODUCTS

FREEDOM60 SYRINGE INFUSION SYSTEM

The FREEDOM60 Syringe Infusion System (“FREEDOM60”), comprised of the FREEDOM60 Syringe Infusion Pump and RMS Precision Flow Rate Tubing™, is designed for ambulatory medication infusions.  For the home care patient, FREEDOM60 is an easy-to-use lightweight mechanical pump using a 60ml syringe, completely portable and maintenance free, with no batteries to replace. FREEDOM60 offers increased safety, greater reliability and an overall higher quality infusion.  For the infusion professional, FREEDOM60 delivers accurate infusion rates and class-leading flow performance. For the home infusion provider, FREEDOM60 can be used in place of electronic and disposable pumps.  FREEDOM60s lower acquisition and operating costs free up significant working capital for growing infusion business.

The FREEDOM60 operates in “dynamic equilibrium,” that is, the system finds and maintains a balance between what a patient’s subcutaneous tissues are able to manage and what the pump infuses.  This balance is created by a safe, limited, and controlled pressure, which adjusts the flow rate automatically to the patient’s needs providing a reliable, faster, and more comfortable administration with fewer side effects for those patients.  Electronic devices will increase infusion pressure while attempting to continue an infusion at the programmed rate, while the FREEDOM60 design maintains a safe constant pressure and thereby automatically reduces the flow rate as required, if problems of administration occur.

Ambulatory infusion pumps are most prevalent in the outpatient and home care market although we believe there is potential in the hospital setting as well.  Applications for the FREEDOM60 include the infusion of specialized drugs such as Immunoglobulin G (“IgG”), pain control, and chemotherapy.  We are expanding into intravenous antibiotics including the widely used yet challenging to administer Vancomycin, and beta lactams which require longer infusion times as a part of antimicrobial stewardship.  We have also found a following for FREEDOM60 for use in treating thalassemia with the drug Desferal®.  In Europe, we find additional success in using the FREEDOM60 for pain control, specifically post-operative epidural pain administration.

The FREEDOM60 provides a high-quality delivery to the patient at costs comparable to gravity-driven infusions and is designed for the home health care industry, patient emergency transportation, and for any time a low-cost infusion is required. We continue to meet milestones in building a product franchise with FREEDOM60 and the sale of RMS Precision Flow Rate Tubing. This positions us well to expand on the technology of dynamic equilibrium for other home infusion devices.

The FREEDOM60 use for treatment of primary immune deficiency diseases by administering IgG under the skin has continued to increase during the past year. The FREEDOM60 is the leading pump in the U.S. used to infuse immune globulin medicines such as Hizentra® and Gammagard® under the skin as a subcutaneous administration (“SCIg”).  For patients with Primary Immunodeficiency, Multifocal Motor Neuropathy, Idiopathic thrombocytopenic purpura, and Chronic Inflammatory Demyelinating Polyneuropathy, this method has provided vastly improved quality of life with much fewer unpleasant side effects over the traditional intravenous route.  There is evidence that indications for SCIg therapy will continue to expand to other disease states. The FREEDOM60 is an ideal system for this administration since the patient is able to self-medicate at home.  The pump is easily configured for this application, and the FREEDOM60 is the lowest cost infusion system available in a heavily cost constrained market.

In March, 2015, at the National Home Infusion Association Show in Phoenix, AZ, we introduced the FreedomEdge™ Syringe Infusion Pump (“FreedomEdge”).  The FreedomEdge has all the trusted technology of the FREEDOM60 in a new, smaller package for use with 20ml or 30ml syringe sizes, utilizing our existing RMS Precision Flow Rate Tubing.  The FreedomEdge is expected to appeal to IgG patients who do not need the larger dose capacity of the FREEDOM60 along with cephalosporin antibiotic infusion, deferoxamine administration, and foreign markets that prefer pumps with a smaller form factor.  To date, we have begun shipping the FreedomEdge for product evaluation.

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RMS HIGH-FLO™ SUBCUTANEOUS SAFETY NEEDLE SETS

RMS HIgH-Flo Subcutaneous Safety Needle Sets (“HIgH-Flo”) are designed for self-administration of medicine under the skin. Our needles feature unique design elements specific to subcutaneous self-administration, including a 5-bevel back-cut needle designed for more comfort and less tissue damage. Our needle set design permits drug flows which are the same or faster than those achieved with larger gauge needles currently on the market. This proprietary hydraulic engineering for compatibility with the FREEDOM60 and FreedomEdge, guarantees the sensitivity of the system’s dynamic equilibrium.

Reflecting RMS’ dedication to clinician safety, the sets’ butterfly wing closures encase needles after use and help to protect against accidental needle stick injuries, an area of concern to the medical community.  The sets are called safety needle sets to reflect this safety feature as an integral part of every set.

We expanded the range of HIgH-Flo sets available, including a 24 gauge set for very high flow rates, to meet the delivery demands of new drugs on the market such as Hyqvia®.  HIgH-Flo sets are also being used in major clinical trials world-wide.

RES-Q-VAC® PORTABLE MEDICAL SUCTION

The RES-Q-VAC Portable Medical Suction System (“RES-Q-VAC”) is a lightweight, portable, hand-operated suction device that removes fluids from a patient’s airway by attaching the RES-Q-VAC pump to various proprietary sterile and non-sterile single-use catheters sized for adult and pediatric suctioning. The bottom-hinged one-hand operation makes it extremely effective and the product is generally found in emergency vehicles, hospitals, disaster kits, mass casualty trailers, and wherever portable aspiration is a necessity, including backup support for powered suction systems.  Additional markets include nursing homes, hospice, sub-acute, dental and military applications.  The Full Stop Protection® filter and disposable features of the RES-Q-VAC reduce the risk of exposing the health professional to human immunodeficiency virus (“HIV”) or Tuberculosis (“TB”) when suctioning a patient or during post treatment cleanup.  All of the parts that connect to the pump are disposable.

A critical component and significant advantage of the RES-Q-VAC system is our Full Stop Protection® filter, a patented filtering system that both prevents leakage and overflow of the aspirated fluids, even at full capacity, and traps many air- and fluid-borne pathogens and potentially infectious materials within the sealable container. This protects users from potential exposure to disease and contamination.  Full Stop Protection meets the requirement of the Occupational Safety and Health Administration (“OSHA”) ‘Occupational Exposure to Blood Borne Pathogens” Code of Federal Regulations 29 1910.1030.  The Company has received a letter from OSHA confirming that the RES-Q-VAC with Full Stop Protection falls under the engineering controls of the blood borne pathogen regulation and that the product’s use would fulfill the regulatory requirements.

Centers for Disease Control (“CDC”) and World Health Organization continue to emphasize the importance of minimizing aerosol production during suctioning, in order to reduce the spread of pandemic and epidemic diseases such as Ebola and Influenza. At the current time, we believe that the RES-Q-VAC with Full Stop Protection is the only portable, hand-operated device to comply with CDC directives from 2003.

Hospitals are required under the Emergency Medical Treatment and Labor Act (“EMTALA”) regulations to provide emergency treatment to patients anywhere in the primary facility and up to 250 yards away.  The RES-Q-VAC ensures full compliance with these regulations and helps minimize unfavorable outcomes and potential lawsuits.  We provide special hospital kits, which are fully stocked to meet all hospital applications, both adult and pediatric.

We continue actively pursuing a direct sales effort into the hospital market working with direct sales and several regional distributors in the respiratory market.  We also work internationally with distributors who are well represented in the hospital and emergency markets.

COMPETITION

The FREEDOM60

Competition for the FREEDOM60 for IgG includes electrically powered infusion devices, which are more costly and can create high pressures during delivery, which can cause complications for the administration of IgG. However, there can be no assurance that other companies, including those with greater resources, will not enter the market with competitive products which will have an adverse effect on our sales.

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There is the potential for new drugs to enter the market which might change the market conditions for devices such as the FREEDOM60 and RMS HIgH-Flo Subcutaneous Safety Needle Sets (e.g. Hyaluronidase, which can facilitate absorption of IgG, making multiple site infusions unnecessary).  We believe dynamic equilibrium (the principle behind the FREEDOM60) is ideal for new drug combinations, and that they might increase the size of the subcutaneous market, but there can be no assurance that newer drugs will have the same needs and requirements as the current drugs being used.

We are currently involved in legal proceedings with a competitor who has been offering accessories that can be used with the FREEDOM60 (see Item 1 – Legal Proceedings).

The RES-Q-VAC

We believe that the RES-Q-VAC is currently the performance leader for manual, portable suction instruments. In the hospital market, standard electric powered suction often creates a reliability disadvantage. For outpatient and rehabilitation use, RES-Q-VAC is lighter and quieter than electric units, and offers tactile feedback which is not found in electric suction.

For emergency services we believe that Full Stop Protection substantially separates the RES-Q-VAC from competitive manually operated units, which tend to leak fluid when becoming full or could pass airborne pathogens during use.  There is a heightened concern from health care professionals concerning exposure to disease and we believe the RES-Q-VAC provides improved protection for these users.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11—Simplifying the Measurement of Inventory.  The ASU was issued as part of the FASB’s simplification initiative and under the ASU, inventory is measured at the lower of cost and net realizable value, which would eliminate the other two options that currently exist for the market: (1) replacement cost and (2) net realizable value less an approximately normal profit margin.  This ASU is effective for interim and annual periods beginning after December 15, 2016.  Early application is permitted and should be applied prospectively.  The Company is assessing the impact of the adoption of the ASU on its financial statements.

In May 2014, 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.  The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

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

Not Applicable.

PART I – ITEM 4.  CONTROLS AND PROCEDURES.

The Company’s management, including the Company’s Principal Executive Officer and Chief Financial Officer, have 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 Chief 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 Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

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There have been no changes in the Company’s internal control over financial reporting during the quarter ended November 30, 2015, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

In 2013, the Company commenced in the Eastern District of California a declaratory judgment action against competitor, EMED Technologies Crop. (“EMED”) 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. The Company responded by asserting its own unfair business practice claims against EMED.  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.  The Company is complying with that order.  Discovery is ongoing.

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 Eastern District of Texas.  This second patent is related to the one concerning the Company’s declaratory judgment action.  Given the close relationship between the two patents, the Company has requested that the Texas suit be transferred to California.  The Court has not yet ruled on the Company’s transfer request.  Discovery in the Texas suit is ongoing.

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 of the patent in the second filed case.  On November 20, 2015, the U.S. Patent and Trademark Office instituted the ex parte reexamination request having found a substantial new question of patentability concerning EMED’s patent in the first filed case.  A decision whether to institute the inter partes review is expected within three (3) months.

Although the Company believes it has meritorious claims and defenses in these litigations and proceedings, their outcomes cannot be predicted with any certainty.

ITEM 1A.  RISK FACTORS.

Not required for smaller reporting companies.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On September 30, 2015, RMS’s Board of Directors authorized a stock repurchase program pursuant to which the Company will make open market purchases of up to 1,000,000 shares of the Company’s Outstanding Common Stock.  The purchases will be made through a broker to be designated by the Company with price, timing and volume restrictions based on average daily trading volume, consistent with the safe harbor rules of the Securities and Exchange Commission for such repurchases.  As of November 30, 2015, the Company had not made any purchases under the program, and as of January 8, 2016, the Company had repurchased 33,454 shares at an average price of $0.47 under the program.

On September 30, 2015, the Board of Directors also approved the 2015 Stock Option Plan authorizing the Company to grant awards to certain employees under the plan at fair market value, subject to shareholder approval.  The total number of shares of common stock of the Company, par value $.01 per share (“Common Stock”), with respect to which awards may be granted pursuant to the Plan shall not exceed 2,000,000 shares.  As of November 30, 2015, the Company awarded 1.2 million options to certain executives and key employees under the plan.

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 provides for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period.

On August 8, 2014, we executed an agreement with Horton Capital Partners Fund, an institutional investor based in Philadelphia, PA, to sell one million shares of our common stock and warrants to purchase an additional one million shares of common stock at an exercise price of $0.45 per share.  The aggregate purchase price was $288,000.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

None.

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ITEM 4.  MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5.  OTHER INFORMATION.

None.

ITEM 6.  EXHIBITS.

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002
31.2	Certification of Chief 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 Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002
101*	Interactive Data Files of Financial Statements and Notes.

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

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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.
January 8, 2016	/s/ Andrew I. Sealfon
	Andrew I. Sealfon, President, Chairman of the Board, Director, Principal Executive Officer
January 8, 2016	/s/ Karen Fisher
	Karen Fisher, Chief Financial Officer and Treasurer

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