Document and Entity Information
Document and Entity Information - shares | 4 Months Ended | |
Jun. 30, 2017 | Aug. 04, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | REPRO MED SYSTEMS INC | |
Entity Central Index Key | 704,440 | |
Document Type | 10-Q | |
Trading Symbol | REPR | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 37,834,871 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
BALANCE SHEETS (UNAUDITED)
BALANCE SHEETS (UNAUDITED) - USD ($) | Jun. 30, 2017 | Feb. 28, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 2,982,508 | $ 3,313,265 |
Certificates of deposit | 262,315 | 262,314 |
Accounts receivable less allowance for doubtful accounts of $13,046 at June 30, 2017 and $18,046 at February 28, 2017 | 1,899,622 | 1,502,030 |
Inventory | 1,267,214 | 1,353,703 |
Tax Receivable | 172,457 | |
Prepaid expenses | 229,667 | 175,955 |
TOTAL CURRENT ASSETS | 6,641,326 | 6,779,724 |
Property and equipment, net | 901,464 | 932,092 |
Patents, net of accumulated amortization of $188,735 and $180,137 at June 30, 2017 and February 28, 2017, respectively | 429,974 | 426,943 |
Other assets | 31,582 | 31,490 |
TOTAL ASSETS | 8,004,346 | 8,170,249 |
CURRENT LIABILITIES | ||
Deferred capital gain - current | 22,481 | 22,481 |
Accounts payable | 279,130 | 772,428 |
Accrued expenses | 353,997 | 417,357 |
Accrued payroll and related taxes | 212,083 | 177,018 |
Accrued tax liability | 1,384 | |
TOTAL CURRENT LIABILITIES | 869,075 | 1,389,284 |
Deferred capital gain - long term | 15,002 | 22,496 |
Deferred tax liability | 95,133 | 82,422 |
TOTAL LIABILITIES | 979,210 | 1,494,202 |
STOCKHOLDERS' EQUITY | ||
Common stock, $0.01 par value; 75,000,000 shares authorized, 40,572,102 and 40,558,429 shares issued, 37,834,871 and 37,821,198 shares outstanding at June 30, 2017 and February 28, 2017, respectively | 405,721 | 405,584 |
Additional paid-in capital | 4,117,845 | 4,129,726 |
Retained earnings | 2,845,774 | 2,484,941 |
TOTAL STOCKHOLDERS' EQUITY BEFORE TREASURY STOCK AND DEFERRED COMPENSATION COST | 7,369,340 | 7,020,251 |
Less: Treasury stock, 2,737,231 shares at June 30, 2017 and February 28, 2017 | (344,204) | (344,204) |
TOTAL STOCKHOLDERS' EQUITY | 7,025,136 | 6,676,047 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 8,004,346 | $ 8,170,249 |
BALANCE SHEETS (UNAUDITED) (Par
BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Jun. 30, 2017 | Feb. 28, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 13,046 | $ 18,046 |
Patents, accumulated amortization | $ 188,735 | $ 180,137 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 75,000,000 | 75,000,000 |
Common stock, issued | 40,572,102 | 40,558,429 |
Common stock, outstanding | 37,834,871 | 37,821,198 |
Treasury stock | 2,737,231 | 2,737,231 |
STATEMENTS OF OPERATIONS (UNAUD
STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 1 Months Ended | 3 Months Ended | 4 Months Ended | |||
Mar. 31, 2017 | Mar. 31, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Income Statement [Abstract] | ||||||
NET SALES | $ 1,509,619 | $ 1,276,299 | $ 3,829,457 | $ 2,795,894 | $ 5,339,076 | $ 4,072,193 |
Cost of goods sold | 536,823 | 446,618 | 1,532,158 | 1,008,749 | 2,068,981 | 1,455,367 |
Gross Profit | 972,796 | 829,681 | 2,297,299 | 1,787,145 | 3,270,095 | 2,616,826 |
OPERATING EXPENSES | ||||||
Selling, general and administrative | 637,707 | 655,043 | 2,005,336 | 2,118,159 | 2,643,043 | 2,773,202 |
Research and development | 7,872 | 14,535 | 24,840 | 57,403 | 32,712 | 71,938 |
Depreciation and amortization | 25,576 | 23,536 | 76,781 | 73,041 | 102,357 | 96,577 |
Total Operating Expenses | 671,155 | 693,114 | 2,106,957 | 2,248,603 | 2,778,112 | 2,941,717 |
Net Operating Profit/(Loss) | 301,641 | 136,567 | 190,342 | (461,458) | 491,983 | (324,891) |
Non-Operating Income/(Expense) | ||||||
Gain/(Loss) on currency exchange | 19,988 | 36,673 | 34,671 | (24,340) | 54,659 | 12,333 |
Interest and other income | 322 | 321 | 421 | 752 | 743 | 1,073 |
TOTAL OTHER INCOME/(EXPENSE) | 20,310 | 36,994 | 35,092 | (23,588) | 55,402 | 13,406 |
PROFIT/(LOSS) BEFORE TAXES | 321,951 | 173,561 | 225,434 | (485,046) | 547,385 | (311,485) |
Income Tax (Expense)Benefit | (109,590) | (59,231) | (76,962) | 164,834 | (186,552) | 105,603 |
NET INCOME/(LOSS) | $ 212,361 | $ 114,330 | $ 148,472 | $ (320,212) | $ 360,833 | $ (205,882) |
NET INCOME/(LOSS) PER SHARE | ||||||
Basic (in dollars per share) | $ 0.01 | $ (0.01) | $ 0.01 | $ (0.01) | ||
Diluted (in dollars per share) | $ 0.01 | $ (0.01) | $ 0.01 | $ (0.01) | ||
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||
Basic (in shares) | 37,821,198 | 37,966,501 | 37,825,209 | 37,964,985 | 37,824,189 | 37,965,370 |
Diluted (in shares) | 37,847,628 | 37,966,501 | 37,891,306 | 37,964,985 | 37,877,694 | 37,965,370 |
STATEMENTS OF CASH FLOWS (UNAUD
STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 4 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income (Loss) | $ 360,833 | $ (205,882) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Amortization of deferred compensation cost | 7,000 | |
Stock based compensation expense | 7,615 | 69,714 |
Depreciation and amortization | 102,357 | 96,577 |
Deferred capital gain - building lease | (7,493) | (7,493) |
Deferred taxes | 12,711 | (15,144) |
Provision for returns and doubtful accounts | (5,000) | (10,312) |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable | (392,592) | (376,551) |
Decrease in inventory | 86,489 | 1,575 |
Decrease/(Increase) in prepaid expense and other assets | 118,652 | (108,855) |
(Decrease)/Increase in accounts payable | (493,297) | 186,109 |
Increase/(Decrease) in accrued payroll and related taxes | 35,065 | (21,489) |
Decrease in accrued expense | (63,360) | (67,383) |
Increase/(Decrease) in accrued tax liability | 1,384 | (92,003) |
NET CASH USED IN OPERATING ACTIVITIES | (236,636) | (544,137) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payments for property and equipment | (63,133) | (74,549) |
Payments for patents | (11,628) | (29,085) |
NET CASH USED IN INVESTING ACTIVITIES | (74,761) | (103,634) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payment for cancelled shares | (19,360) | |
Purchase of treasury stock | (1,105) | |
NET CASH USED IN FINANCING ACTIVITIES | (19,360) | (1,105) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (330,757) | (648,876) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 3,313,265 | 4,201,948 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 2,982,508 | 3,553,072 |
Cash paid during the periods for: | ||
Interest | ||
Taxes | 90,000 | |
NON-CASH FINANCING AND INVESTING ACTIVITIES | ||
Issuance of common stock as compensation | $ 45,000 | $ 24,718 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 4 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “RMS”, or “we”) designs, manufactures and markets proprietary 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. 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. With this fiscal year end change, the Company will report one-time, transitional financial information for the month of March 2017 and the quarter April through June 2017 on Form 10-Q. BASIS OF PRESENTATION The accompanying unaudited financial statements as of June 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 June 30, 2017, and the results of operations and cash flow for the four months periods ended June 30, 2017, and 2016. The results of operations for the four months ended June 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 for the year ended February 28, 2017, 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 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 reduce 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. The Company is assessing the impact of the adoption of the ASU on its 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. Based upon our initial evaluation, we do not expect the adoption of the standard and related amendments to have a material effect on our financial condition or results of operations. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The main difference between the current requirement under GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. This ASU requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. This ASU must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the potential impact of this ASU on our financial statements, disclosure requirements and methods of adoption. 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 The Company maintains a long-term incentive stock benefit plan under which it grants stock options and restricted stock 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. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 4 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | 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 zero and $7,000 for the four months ended June 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 $118,000 for the four months ended June 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. 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 $5,668 and $7,167 for the four months ended June 30, 2017 and June 30, 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 $44,168 for each of the four months ended June 30, 2017 and June 30, 2016. The Company also paid property taxes for the four months ended June 30, 2017 and June 30, 2016 in the amount of $16,236 and $15,825, respectively. We are currently seeking another location within a 30 mile radius from our current facility with more square footage to accommodate our expanding needs. In addition to the increased costs of occupying a larger space, we expect to incur additional costs in connection with construction and FDA compliance with respect to the new location. There can be no assurance that we will find a suitable location before our current lease expires on terms that are economically favorable to us or at all. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 4 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: June 30, 2017 February 28, 2017 Land $ 54,030 $ 54,030 Building 171,094 171,094 Furniture, office equipment, and leasehold improvements 1,048,818 1,022,942 Manufacturing equipment and tooling 1,031,207 1,003,166 2,305,149 2,251,232 Less: accumulated depreciation 1,403,685 1,319,140 Property and equipment, net $ 901,464 $ 932,092 |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 4 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | NOTE 4 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 claim and we believed that our design did not infringe and that the EMED patent itself was not valid. Under advice of counsel, on September 20, 2013, the Company commenced in the United States District Court for the Eastern District of California a declaratory judgment action against competitor, 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. 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. A decision on the motion is still pending. 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 the 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”). 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 Non-Final Office Action. EMED filed a response 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 is now responding. 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 very 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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 4 Months Ended |
Jun. 30, 2017 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | 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 June 30, 2017, the Company had repurchased 396,606 shares at an average price of $0.45 under the program. The management of the Company 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. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 4 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 6 STOCK-BASED COMPENSATION On September 30, 2015, the Board of Directors approved the 2015 Stock Option Plan (“the Plan”) authorizing the Company 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 of shares of 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 authorizing the total number of shares of common stock authorized to be subject to awards granted under the Plan to be increased 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 June 30, 2017, there were outstanding 1,113,000 options awarded to certain executives, key employees and advisory board members under the Plan. On October 21, 2015, the Board of Directors of the Company approved non-employee director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, beginning September 1, 2015. The per share weighted average fair value of stock options granted during the four months ended June 30, 2017 and June 30, 2016 was $0.24 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 four months ended June 30, 2017 and June 30, 2016. 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: June 30, 2017 2016 Dividend yield 0.00% 0.00% Expected Volatility 59.00-72.2% 59.00% Weighted-average volatility — — Expected dividends — — Expected term (in years) 4 - 5 Years 5 Years Risk-free rate 2.17-2.48% 2.17% The following table summarizes the status of the Plan: Four Months Ended June 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 18,000 $ — — $ — Exercised — $ — — $ — Forfeited 250,000 $ 0.36 — $ — Outstanding at June 30 1,113,000 $ 0.39 1,060,000 $ 0.37 Options exercisable at June 30, 538,000 $ 0.38 — $ — Weighted average fair value of options granted during the period — $ — — $ — Stock-based compensation expense — $ (37,385 ) — $ 50,055 Total stock-based compensation expense, net of estimated forfeitures for stock option awards totaled $(37,385) and $50,055 for the four months ended June 30, 2017 and June 30, 2016, respectively. The weighted-average grant-date fair value of options granted during the four months ended June 30, 2017 and June 30, 2016, was $4,356 and zero, respectively. The total intrinsic value of options exercised during the four months ended June 30, 2017 and June 30, 2016, was zero for both periods. The following table presents information pertaining to options outstanding at June 30, 2017: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $0.41 1,113,000 5 years $ 0.39 538,000 $ 0.38 As of June 30, 2017, there was $113,821 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 17 months. The total fair value of shares vested during the four months ended June 30, 2017 and June 30, 2016, was $9,300 and zero, respectively. |
NATURE OF OPERATIONS AND SUMM12
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 4 Months Ended |
Jun. 30, 2017 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “RMS”, or “we”) designs, manufactures and markets proprietary 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. The Company operates as one segment. |
FISCAL YEAR END | 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. With this fiscal year end change, the Company will report one-time, transitional financial information for the month of March 2017 and the quarter April through June 2017 on Form 10-Q. |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited financial statements as of June 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 June 30, 2017, and the results of operations and cash flow for the four months periods ended June 30, 2017, and 2016. The results of operations for the four months ended June 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 for the year ended February 28, 2017, as filed with the Securities and Exchange Commission on Form 10-K. |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | 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 | 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 reduce 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. The Company is assessing the impact of the adoption of the ASU on its 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. Based upon our initial evaluation, we do not expect the adoption of the standard and related amendments to have a material effect on our financial condition or results of operations. In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The main difference between the current requirement under GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. This ASU requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. This ASU must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the potential impact of this ASU on our financial statements, disclosure requirements and methods of adoption. 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 | STOCK-BASED COMPENSATION The Company maintains a long-term incentive stock benefit plan under which it grants stock options and restricted stock 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 | RECLASSIFICATION Certain reclassifications have been made to conform prior period data to the current presentation. These reclassifications had no effect on reported net income. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 4 Months Ended |
Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following at: June 30, 2017 February 28, 2017 Land $ 54,030 $ 54,030 Building 171,094 171,094 Furniture, office equipment, and leasehold improvements 1,048,818 1,022,942 Manufacturing equipment and tooling 1,031,207 1,003,166 2,305,149 2,251,232 Less: accumulated depreciation 1,403,685 1,319,140 Property and equipment, net $ 901,464 $ 932,092 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 4 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of fair value of the stock options granted Black-Scholes option valuation model | 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: June 30, 2017 2016 Dividend yield 0.00% 0.00% Expected Volatility 59.00-72.2% 59.00% Weighted-average volatility — — Expected dividends — — Expected term (in years) 4 - 5 Years 5 Years Risk-free rate 2.17-2.48% 2.17% |
Schedule of stock option plan | The following table summarizes the status of the Plan: Four Months Ended June 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 18,000 $ — — $ — Exercised — $ — — $ — Forfeited 250,000 $ 0.36 — $ — Outstanding at June 30 1,113,000 $ 0.39 1,060,000 $ 0.37 Options exercisable at June 30, 538,000 $ 0.38 — $ — Weighted average fair value of options granted during the period — $ — — $ — Stock-based compensation expense — $ (37,385 ) — $ 50,055 |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at June 30, 2017: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $0.41 1,113,000 5 years $ 0.39 538,000 $ 0.38 |
NATURE OF OPERATIONS AND SUMM15
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 4 Months Ended |
Jun. 30, 2017Segment | |
Accounting Policies [Abstract] | |
Number of operating segments | 1 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Jun. 24, 2016 | Jan. 01, 2016 | Oct. 21, 2015 | Dec. 20, 2013 | Jun. 30, 2017 | Jun. 30, 2016 |
Mr. Andrew I. Sealfon [Member] | Lease Agreement [Member] | Aircraft [Member] | ||||||
Lease payments | $ 5,668 | $ 7,167 | ||||
Mr. Mark Pastreich [Member] | Lease Agreement [Member] | Building [Member] | ||||||
Monthly lease payments | 11,042 | 11,042 | ||||
Lease payments | 44,168 | 44,168 | ||||
Property taxes paid | 16,236 | 15,825 | ||||
Clinical Research & Support Services Consulting Agreement [Member] | Dr. Mark Baker [Member] | ||||||
Amortization of deferred compensation cost | $ 0 | 7,000 | ||||
Clinical Research & Support Services Consulting Agreement [Member] | FREEDOM60 Syringe Infusion System [Member] | Dr. Mark Baker [Member] | ||||||
Number of shares issued upon agreement | 420,000 | |||||
Share price (in dollars per share) | $ 0.20 | |||||
Agreement term | 3 years | |||||
Consulting Agreement [Member] | Mr. Cyril Narishkin [Member] | ||||||
Monthly payment for agreement | $ 16,000 | $ 16,000 | ||||
Description of payment terms | Seventy-five percent was to be paid in cash and twenty-five percent was to be paid in shares of common stock. | Half was to be paid in cash and half was to be paid in shares of common stock. | ||||
Consulting Agreement [Member] | Mr. Cyril Narishkin (Consultant) [Member] | ||||||
Monthly payment for agreement | $ 16,000 | |||||
Number of shares repurchased | 96,542 | |||||
Value of shares repurchased | $ 43,393 | |||||
Officer compensation | $ 0 | $ 118,000 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2017 | Feb. 28, 2017 |
Property and equipment, gross | $ 2,305,149 | $ 2,251,232 |
Less: accumulated depreciation | 1,403,685 | 1,319,140 |
Property and equipment, net | 901,464 | 932,092 |
Land [Member] | ||
Property and equipment, gross | 54,030 | 54,030 |
Building [Member] | ||
Property and equipment, gross | 171,094 | 171,094 |
Furniture, Office Equipment, and Leasehold Improvements [Member] | ||
Property and equipment, gross | 1,048,818 | 1,022,942 |
Manufacturing Equipment and Tooling [Member] | ||
Property and equipment, gross | $ 1,031,207 | $ 1,003,166 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - Share Repurchase Program [Member] - $ / shares | 4 Months Ended | |
Jun. 30, 2017 | Sep. 30, 2015 | |
Equity, Class of Treasury Stock [Line Items] | ||
Maximum number of shares repurchased | 2,000,000 | |
Number of shares repurchased | 396,606 | |
Average share price (in dollars per share) | $ 0.45 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - 2015 Stock Option Plan [Member] - USD ($) | 4 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Dividend yield | 0.00% | 0.00% |
Expected Volatility | 59.00% | |
Expected dividends | ||
Expected term (in years) | 5 years | |
Risk-free rate | 2.17% | |
Minimum [Member] | ||
Expected Volatility | 59.00% | |
Expected term (in years) | 4 years | |
Risk-free rate | 2.17% | |
Maximum [Member] | ||
Expected Volatility | 72.20% | |
Expected term (in years) | 5 years | |
Risk-free rate | 2.48% |
STOCK-BASED COMPENSATION (Det20
STOCK-BASED COMPENSATION (Details 1) - 2015 Stock Option Plan [Member] - USD ($) | 4 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 1,345,000 | 1,060,000 |
Granted | 18,000 | |
Exercised | ||
Forfeited | 250,000 | |
Outstanding at ending | 1,113,000 | 1,060,000 |
Options exercisable at ending | 538,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 0.39 | $ 0.37 |
Granted | ||
Exercised | ||
Forfeited | 0.36 | |
Outstanding at ending | 0.39 | 0.37 |
Options exercisable at ending | 0.38 | |
Weighted average fair value of options granted during the period | $ 0.24 | $ 0 |
Stock-based compensation expense | $ (37,385) | $ 50,055 |
STOCK-BASED COMPENSATION (Det21
STOCK-BASED COMPENSATION (Details 2) - 2015 Stock Option Plan [Member] - $0.36 - $0.41 [Member] | 4 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Number Outstanding | shares | 1,113,000 |
Weighted Average Remaining Contractual Term | 5 years |
Weighted Average Exercise Price | $ / shares | $ 0.39 |
Number Exercisable | shares | 538,000 |
Weighted Average Exercise Price | $ / shares | $ 0.38 |
STOCK-BASED COMPENSATION (Det22
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Oct. 21, 2015 | Jun. 30, 2017 | Jun. 30, 2016 | Feb. 28, 2017 | Jun. 29, 2016 | Sep. 30, 2015 |
Common shares par value (in dollars per share) | $ 0.01 | $ 0.01 | ||||
Independent Directors ( Dr. Mark Baker, Mr. Mark Pastreich, Mr. Arthur Radin and Mr. Cyril Narishkin) [Member] | ||||||
Description of payment terms | Paid quarterly half in cash and half in common stock. | |||||
Annually compensation paid per director | $ 25,000 | |||||
2015 Stock Option Plan [Member] | ||||||
Number of shares authorized | 4,000,000 | 2,000,000 | ||||
Number of common shares awarded | 18,000 | |||||
Common shares par value (in dollars per share) | $ 0.01 | |||||
Weighted average grant date fair value of stock options | $ 0.24 | $ 0 | ||||
Allocated stock-based compensation expense | $ (37,385) | $ 50,055 | ||||
Weighted-average grant-date fair value options granted | 4,356 | 0 | ||||
Total unrecognized compensation cost | $ 113,821 | |||||
Weighted-average period (in years) | 17 months | |||||
Total fair value of shares vested | $ 9,300 | $ 0 | ||||
2015 Stock Option Plan [Member] | Key Employees [Member] | ||||||
Number of common shares awarded | 1,113,000 |