Document and Entity Information
Document and Entity Information | 9 Months Ended |
Sep. 30, 2018 | |
Document And Entity Information | |
Entity Registrant Name | REPRO MED SYSTEMS INC |
Entity Central Index Key | 704,440 |
Document Type | S1 |
Document Period End Date | Sep. 30, 2018 |
Trading Symbol | REPR |
Amendment Flag | false |
Current Fiscal Year End Date | --12-31 |
Entity's Reporting Status Current | Yes |
Entity Small Business | true |
Entity Emerging Growth Company | false |
Entity Ex Transition Period | false |
Entity Filer Category | Non-accelerated Filer |
BALANCE SHEETS (Unaudited)
BALANCE SHEETS (Unaudited) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Feb. 28, 2017 |
CURRENT ASSETS | |||
Cash and cash equivalents | $ 3,649,332 | $ 3,974,536 | $ 3,313,265 |
Certificates of deposit | 1,671,004 | 263,269 | 262,314 |
Accounts receivable less allowance for doubtful accounts of $77,067 at September 30, 2018 and $77,067 at December 31, 2017 | 1,510,630 | 1,861,949 | 1,502,030 |
Inventory | 1,949,403 | 1,658,681 | 1,353,703 |
Tax receivable | 172,457 | ||
Prepaid expenses | 348,085 | 170,739 | 175,955 |
TOTAL CURRENT ASSETS | 9,128,454 | 7,929,174 | 6,779,724 |
Property and equipment, net | 821,313 | 836,283 | 932,092 |
Patents, net of accumulated amortization of $229,693 and $203,768 at September 30, 2018 and December 31, 2017, respectively | 595,754 | 483,821 | 426,943 |
Other assets | 31,582 | 31,582 | 31,490 |
TOTAL ASSETS | 10,577,103 | 9,280,860 | 8,170,249 |
CURRENT LIABILITIES | |||
Deferred capital gain - current | 9,383 | 22,481 | 22,481 |
Accounts payable | 591,919 | 454,398 | 772,428 |
Accrued expenses | 627,237 | 658,060 | 417,357 |
Accrued payroll and related taxes | 121,203 | 334,903 | 177,018 |
Accrued tax liability | 55,002 | 115,854 | |
TOTAL CURRENT LIABILITIES | 1,404,744 | 1,585,696 | 1,389,284 |
Deferred capital gain - long term | 3,762 | 22,496 | |
Deferred tax liability | 32,509 | 21,675 | 82,422 |
TOTAL LIABILITIES | 1,437,253 | 1,611,133 | 1,494,202 |
STOCKHOLDERS' EQUITY | |||
Common stock, $0.01 par value; 75,000,000 shares authorized, 40,932,445 and 40,731,529 shares issued, 38,195,214 and 37,994,298 shares outstanding at September 30, 2018 and December 31, 2017, respectively | 409,324 | 407,315 | 405,584 |
Additional paid-in capital | 4,419,129 | 4,216,718 | 4,129,726 |
Retained earnings | 4,655,601 | 3,389,898 | 2,484,941 |
Stockholder equity before treasury stock | 9,484,054 | 8,013,931 | 7,020,251 |
Less: Treasury stock, 2,737,231 shares at September 30, 2018 and December 31, 2017 | (344,204) | (344,204) | (344,204) |
TOTAL STOCKHOLDERS' EQUITY | 9,139,850 | 7,669,727 | 6,676,047 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 10,577,103 | $ 9,280,860 | $ 8,170,249 |
BALANCE SHEETS (Unaudited) (Par
BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Feb. 28, 2017 |
Statement of Financial Position [Abstract] | |||
Accounts receivable, allowance for doubtful accounts | $ 77,067 | $ 77,067 | $ 18,046 |
Patents, accumulated amortization | $ 229,693 | $ 203,768 | $ 180,137 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 |
Common stock, authorized | 75,000,000 | 75,000,000 | 75,000,000 |
Common stock, issued | 40,932,445 | 40,731,529 | 40,558,429 |
Common stock, outstanding | 38,195,214 | 37,994,298 | 37,821,198 |
Treasury stock | 2,737,231 | 2,737,231 | 2,737,231 |
STATEMENTS OF OPERATIONS (UNAUD
STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 9 Months Ended | 10 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
Income Statement [Abstract] | ||||||
NET SALES | $ 4,547,187 | $ 3,849,338 | $ 13,082,737 | $ 11,317,231 | $ 13,313,894 | $ 12,293,655 |
Cost of goods sold | 1,655,619 | 1,470,680 | 4,985,761 | 4,539,320 | 5,174,946 | 4,724,097 |
Gross Profit | 2,891,568 | 2,378,658 | 8,096,976 | 6,777,911 | 8,138,948 | 7,569,558 |
OPERATING EXPENSES | ||||||
Selling, general and administrative | 2,203,614 | 1,893,911 | 6,106,514 | 5,674,357 | 6,594,570 | 7,767,712 |
Research and development | 126,923 | 14,852 | 160,735 | 85,598 | 50,587 | 237,486 |
Depreciation and amortization | 78,345 | 77,517 | 228,900 | 229,178 | 257,257 | 300,611 |
Total Operating Expenses | 2,408,882 | 1,986,280 | 6,496,149 | 5,989,133 | 6,902,414 | 8,305,809 |
Net Operating Profit | 482,686 | 392,378 | 1,600,827 | 788,778 | 1,236,534 | (736,251) |
Non-Operating (Expense)/Income | ||||||
Interest expense | 1,886 | |||||
(Loss)/Gain on currency exchange | (5,842) | 10,419 | (16,256) | 62,164 | (68,566) | 41,499 |
Gain on sale of fixed asset | 6,000 | 6,000 | ||||
Interest and other income | 6,972 | 361 | 13,088 | 2,427 | (2,420) | (2,937) |
TOTAL OTHER (EXPENSE)/INCOME | 7,130 | 10,780 | 2,832 | 64,591 | ||
PROFIT BEFORE TAXES | 489,816 | 403,158 | 1,603,659 | 853,369 | 1,307,520 | (776,699) |
Income Tax Expense | (103,263) | (137,404) | (337,956) | (312,192) | (402,563) | 241,700 |
NET INCOME | $ 386,553 | $ 265,754 | $ 1,265,703 | $ 541,177 | $ 904,957 | $ (534,999) |
NET INCOME PER SHARE | ||||||
Basic (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.01 | $ 0.02 | $ (0.01) |
Diluted (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.01 | $ 0.02 | $ (0.01) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||||
Basic (in shares) | 38,194,682 | 37,898,357 | 38,104,393 | 37,833,133 | 37,897,632 | 37,830,581 |
Diluted (in shares) | 38,985,684 | 38,072,425 | 38,875,737 | 37,934,851 | 38,445,482 | 37,878,201 |
STATEMENT OF STOCKHOLDERS' EQUI
STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock [Member] | Deferred Compensation Cost [Member] | Total |
Balance beginning at Feb. 29, 2016 | $ 404,875 | $ 3,968,342 | $ 3,019,940 | $ (246,858) | $ (28,000) | $ 7,118,299 |
Balance beginning (in shares) at Feb. 29, 2016 | 40,487,532 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Issuance of stock based compensation | $ 1,674 | 87,984 | 89,658 | |||
Issuance of stock based compensation (in shares) | 167,439 | |||||
Compensation expense related to stock options | 115,828 | 115,828 | ||||
Cancellation of common stock | $ (965) | (42,428) | (43,393) | |||
Cancellation of common stock (in shares) | (96,542) | |||||
Purchase of treasury common stock | (97,346) | (97,346) | ||||
Amortization of deferred compensation cost | 28,000 | 28,000 | ||||
Net income (loss) | (534,999) | (534,999) | ||||
Balance ending at Feb. 28, 2017 | $ 405,584 | 4,129,726 | 2,484,941 | (344,204) | 6,676,047 | |
Balance ending (in shares) at Feb. 28, 2017 | 40,558,429 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Issuance of stock based compensation | $ 2,171 | 110,329 | 112,500 | |||
Issuance of stock based compensation (in shares) | 217,100 | |||||
Compensation expense related to stock options | (4,417) | (4,417) | ||||
Cancellation of common stock | $ (440) | (18,920) | (19,360) | |||
Cancellation of common stock (in shares) | (44,000) | |||||
Net income (loss) | 904,957 | 904,957 | ||||
Balance ending at Dec. 31, 2017 | $ 407,315 | $ 4,216,718 | $ 3,389,898 | $ (344,204) | 7,669,727 | |
Balance ending (in shares) at Dec. 31, 2017 | 40,731,529 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Net income (loss) | 1,265,703 | |||||
Balance ending at Sep. 30, 2018 | $ 9,139,850 |
STATEMENTS OF CASH FLOWS (UNAUD
STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 9 Months Ended | 10 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||||
Net Income | $ 1,265,703 | $ 541,177 | $ 904,957 | $ (534,999) |
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Amortization of deferred compensation cost | 7,000 | 28,000 | ||
Stock based compensation expense | 154,925 | 87,271 | 108,083 | 205,486 |
Depreciation and amortization | 228,900 | 229,178 | 257,257 | 300,611 |
Gain on sale of fixed asset | (6,000) | |||
Deferred capital gain - building lease | (16,860) | (16,860) | (18,734) | (22,480) |
Deferred taxes | 10,834 | 8,843 | (60,747) | (40,689) |
Provision for returns and doubtful accounts | 58,339 | 58,941 | (19,360) | |
Changes in operating assets and liabilities: | ||||
Decrease/(Increase) in accounts receivable | 351,319 | (243,428) | (418,860) | (132,490) |
Increase in inventory | (290,722) | (225,177) | (304,978) | (313,426) |
(Increase)/Decrease in prepaid expense and other assets | (177,346) | 37,753 | 5,217 | (83,289) |
Increase in other assets | (93) | (350) | ||
Increase/(Decrease) in accounts payable | 137,521 | (409,171) | (318,030) | 464,664 |
Decrease in accrued payroll and related taxes | (213,700) | (17,253) | 157,885 | 28,252 |
(Decrease)/Increase in accrued expense | (30,823) | 136,045 | 240,703 | (82,049) |
(Decrease)/Increase in accrued tax liability | (60,852) | 303,349 | 288,311 | (129,497) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 1,352,899 | 497,066 | 899,912 | (331,616) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||||
Payments for capital expenditures | (188,006) | (160,946) | (137,817) | (203,125) |
Purchase of certificate of deposit | (1,500,000) | |||
Proceeds on sale of fixed assets | 6,000 | |||
Payments for patents | (137,858) | (70,556) | (80,509) | (212,008) |
Proceeds/(reinvested earnings) from certificates of deposit | 92,266 | (1,196) | ||
Purchase of certificates of deposit | (955) | (1,196) | ||
NET CASH USED IN INVESTING ACTIVITIES | (1,727,598) | (232,698) | (219,281) | (416,329) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||||
Stock issuances | 51,250 | |||
Payment for cancelled shares | (1,755) | (19,360) | (19,360) | (43,393) |
Purchase of treasury stock | (484) | (97,346) | ||
NET CASH PROVIDED BY/(USED IN) FINANCING ACTIVITIES | 49,495 | (19,844) | (19,360) | (140,739) |
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (325,204) | 244,524 | 661,271 | (888,684) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 3,974,536 | 3,417,183 | 3,313,265 | 4,201,949 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 3,649,332 | 3,661,707 | 3,974,536 | 3,313,265 |
Cash paid during the periods for: | ||||
Interest | 1,886 | |||
Taxes | 378,000 | 175,000 | 194,470 | |
NON-CASH FINANCING AND INVESTING ACTIVITIES | ||||
Issuance of common stock as compensation | $ 103,333 | $ 101,250 | $ 112,500 | $ 89,658 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 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 The Company’s fiscal year end is December 31. BASIS OF PRESENTATION The accompanying unaudited financial statements as of September 30, 2018, have been prepared in accordance with generally accepted accounting principles and with instructions to SEC regulation S-X for interim financial statements. In the opinion of the Company’s management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Company’s financial position as of September 30, 2018, and the results of operations and cash flow for the three and nine month periods ended September 30, 2018, and 2017. The results of operations for the three and nine months ended September 30, 2018, and 2017 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 Transition Annual Report for the ten months ended December 31, 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. REVENUE RECOGNITION The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09—Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted this ASU effective January 1, 2018 on a full retrospective basis. Adoption of this standard did not result in significant changes to our accounting policies, business processes, systems or controls, or have a material impact on our financial position, results of operations and cash flows or related disclosures. As such, prior period financial statements were not recast. The Company’s revenues result from the sale of assembled products. We recognize revenues when shipment occurs and at which point the customer obtains control and ownership of the goods. Shipping costs generally are billed to customers and are included in sales. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred. Provisions for distributor pricing and annual customer volume rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it’s probable the annual growth target will be achieved. The rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU No. 2016-13—Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of this ASU on its financial statements, disclosure requirements and methods of adoption. 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. In July 2018, the FASB issued ASU No. 2018-10 Codification Improvements to Topic 842, Leases. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. The amendments in this ASU affect the amendments in ASU 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of this ASU, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820 based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. In August 2018, the FASB issued ASU No. 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations. STOCK-BASED COMPENSATION The Company maintains a long-term incentive stock benefit plan under which it grants stock options 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 to certain directors and employees are recorded at the fair value of the shares at the grant date and are recognized 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 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “RMS”) designs, manufactures and markets proprietary portable medical devices and supplies 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. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company holds cash in excess of $250,000 at multiple depositories, which exceeds the FDIC insurance limits and is, therefore, uninsured. CERTIFICATES OF DEPOSIT The certificates of deposit are recorded at cost plus accrued interest. The certificates of deposit earn interest at a rate of 0.35% to 0.55% and mature in February 2018 and March 2018. INVENTORY Inventories of raw materials are stated at the lower of standard cost, which approximates average cost, or market value including allocable overhead. Work-in-process and finished goods are stated at the lower of standard cost or market value and include direct labor and allocable overhead. PATENTS Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents. INCOME TAXES Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. The Company believes that it has no uncertain tax positions requiring disclosure or adjustment. Generally, tax years starting with 2015 are subject to examination by income tax authorities. PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets. STOCK-BASED COMPENSATION The Company maintains various long-term incentive stock benefit plans under which it grants stock options and 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. NET INCOME PER COMMON SHARE Basic earnings per share are computed on the weighted average of common shares outstanding during each year. Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee and director stock options (See Note 6). Fiscal Year Ended Ten Months December 31, 2017 Twelve Months February 28, 2017 Net income/(loss) $ 904,957 $ (534,999 ) Weighted Average Outstanding Shares: Outstanding shares 37,897,632 37,830,581 Option shares includable 547,850 47,620 38,445,482 37,878,201 Net income/(loss) per share Basic $ 0.02 $ (0.01 ) Diluted $ 0.02 $ (0.01 ) USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. REVENUE RECOGNITION Sales of manufactured products are recorded when shipment occurs. The Company’s revenue stream is derived from the sale of an assembled product. Other service revenues are recorded as the service is performed. Shipping and handling costs generally are billed to customers and are included in sales. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. On a monthly basis the Company records rebates based upon actual sales. The rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09—Compensation-Stock Compensation (Topic 718), which provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update affect any entity that changes the terms or conditions of a share-based payment award. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. We do not expect the adoption of the standard to have a material effect on our financial statements, disclosure requirements and methods of adoption. In June 2016, FASB issued ASU No. 2016-13—Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. In August 2016, the FASB issued ASU 2016-15—Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments. The ASU provides guidance on eight specific statement of cash flow classification issues and is intended to reduce diversity in practice. ASU 2016-15 will be effective for the Company on January 1, 2018. The adoption of ASU 2016-15 is not expected to have a material impact on the financial statements. 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. In November 2017, the FASB issued ASU No. 2017-14 Income Statement-Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606), which amends SEC paragraphs pursuant to Staff Accounting Bulletins No. 116 and SEC Release No. 33-10403. 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. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for cash, trade receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. ACCOUNTING FOR LONG-LIVED ASSETS The Company reviews its long-lived assets for impairment at least annually or whenever the circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. As of December 31, 2017, the Company does not believe that any of its assets are impaired. |
INVENTORY
INVENTORY | 10 Months Ended |
Dec. 31, 2017 | |
Inventory Disclosure [Abstract] | |
INVENTORY | NOTE 2 INVENTORY Inventory consists of: December 31, 2017 February 28, 2017 Raw materials and Work-in-process $ 1,042,367 $ 947,670 Finished goods 677,762 456,621 Total 1,720,129 1,404,291 Less: reserve for obsolete inventory 61,448 50,588 Inventory, net $ 1,658,681 $ 1,353,703 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 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. Paul Mark Baker, to provide clinical research and support services related to new and enhanced applications for the FREEDOM System. Authorized by the Board of Directors, the agreement provided for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period. Amortization was zero for the three months ended September 30, 2018 and 2017, respectively, and zero and $7,000 for the nine months ended September 30, 2018 and 2017, respectively; the agreement is fully amortized. On June 24, 2016, Cyril Narishkin, the Company’s former Chief Operating Officer, 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 for the three months ended September 30, 2018 and 2017, respectively, and was zero and $16,000 for the nine months ended September 30, 2018 and 2017, respectively. LEASED AIRCRAFT The Company leased an aircraft from a company controlled by Andrew Sealfon, a Company director and former President and Chief Executive Officer. The lease payments were $1,292 and $3,876 for the three months ended September 30, 2018 and 2017, respectively and $9,045 and $13,128 for the nine months ended September 30, 2018 and 2017, respectively. Upon the termination of Mr. Sealfon as President and Chief Executive Officer on July 25, 2018, the Company ceased leasing this aircraft. 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 twenty of a twenty-year lease. With a monthly lease amount of $11,042, the lease payments were $33,126 for each of the three months ended September 30, 2018 and 2017 and $99,378 for each of the nine months ended September 30, 2018 and 2017. The Company also paid property taxes for the three months ended September 30, 2018 and 2017 in the amount of $12,431 and $12,862, respectively, and $37,863 and $37,447 for the nine months ended September 30, 2018 and 2017, respectively. On November 14, 2017, the Company executed a lease extension, which calls for six month extensions beginning March 1, 2019 with the option to renew six times at a monthly lease amount of $12,088. | NOTE 4 RELATED PARTY TRANSACTIONS On December 20, 2013, we executed an agreement effective March 1, 2014, with a Company director, Dr. Paul Mark Baker, to provide clinical research and support services related to new and enhanced applications for the FREEDOM System. Authorized by the Board of Directors, the agreement provided for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period. Amortization was zero for the ten months ended December 31, 2017, and was $28,000 for the twelve months ended February 28, 2017; the agreement is fully amortized. 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 $230,000 for the year ended February 28, 2017. In accordance with the agreement, the Company repurchased 96,542 shares of common stock of the Company owned by Mr. Narishkin at an aggregate purchase price of $43,393. In December 2016 and January 2017, Brad Sealfon, the son of Andrew Sealfon, the Company’s President and Chief Executive Officer, consulted for the Company in its production and quality departments and was compensated $7,744. In March 2017, Mr. Sealfon provided additional consulting for the Company in its marketing department and was compensated $2,000. 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 $13,421 for the ten months ended December 31, 2017 and $21,500 for the year ended February 28, 2017. 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. With a monthly lease amount of $11,042, the lease payments were $110,420 for the ten months ended December 31, 2017, and $132,504 for the twelve months ended February 28, 2017. The Company also paid property taxes for the ten months ended December 31, 2017 in the amount of $41,959 and $48,455 for the twelve months ended February 28, 2017. On November 14, 2017, we executed a lease extension, which calls for six month extensions beginning March 1, 2019 with the option to renew six times at monthly lease amount of $12,088. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
PROPERTY AND EQUIPMENT | NOTE 3 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: September 30, 2018 December 31, 2017 Land $ 54,030 $ 54,030 Building 171,094 171,094 Vehicles 57,920 43,836 Furniture, office equipment, and leasehold improvements 1,032,895 1,008,665 Manufacturing equipment and tooling 1,194,683 1,075,471 2,510,622 2,353,096 Less: accumulated depreciation (1,689,309 ) (1,516,813 ) Property and equipment, net $ 821,313 $ 836,283 Depreciation expense was $68,991 and $70,898 for the three months ended September 30, 2018 and 2017, respectively, and $202,975 and $210,060 for the nine months ended September 30, 2018 and 2017, respectively. | NOTE 3 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: December 31, 2017 February 28, 2017 Estimated Useful Lives Land $ 54,030 $ 54,030 Building 171,094 171,094 20 years Furniture, office equipment, and leasehold improvements 1,052,501 1,022,942 3-10 years Manufacturing equipment and tooling 1,075,471 1,003,166 3-12 years Total 2,353,096 2,251,232 Less: accumulated depreciation 1,516,813 1,319,140 Property and equipment, net $ 836,283 $ 932,092 Depreciation expense was $233,626 and $267,854 for the ten months ended December 31, 2017, and the twelve months ended February 28, 2017, respectively. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | ||
LEGAL PROCEEDINGS | NOTE 4 LEGAL PROCEEDINGS The Company is involved in several lawsuits with its competitor, EMED Technologies Corporation (“EMED”), wherein EMED has alleged the Company’s needle sets infringe various patents controlled by EMED. Certain of these lawsuits also allege antitrust violations, unfair business practices and various other claims. Although no assurances can be given, the Company believes it likely that each of EMED’s patents at issue in these cases will be deemed invalid and that the Company will succeed on the merits with respect to all of the other elements of the cases. The initial case involving EMED was filed by the Company in the United States District Court for the Eastern District of California on September 20, 2013, in response to a letter from EMED claiming infringement by the Company, and sought to establish the invalidity of the patent referenced in the letter – patent US 8,500,703 – or “’703.” EMED answered the complaint and asserted patent infringement of ’703 and unfair business practice counterclaims. The Company responded by adding unfair business practice claims against EMED. Both parties have requested injunctive relief and monetary damages in unspecified amounts. On August 22, 2017, the Company filed a motion in this California case seeking a Preliminary Injunction prohibiting EMED from making false statements and claims regarding the products of both companies. The motion has now been fully briefed, and the parties are awaiting action by the Court. Earlier, on September 11, 2015, the Company requested an ex parte reexamination of the ’703 patent by the US Patent and Trademark Office (USPTO). The ex parte reexamination resulted in a Final Office Action dated July 19, 2017 rejecting all EMED claims of the patent. On January 25, 2018 EMED filed an Appeal Brief with a Petition for Revival, and the ex parte reexamination is ongoing. The second court case was filed by EMED in the United States District Court for the Eastern District of Texas on June 25, 2015, claiming patent infringement of another of its patents (US 8,961,476 – “’476”), by the Company’s needle sets, and seeking unspecified monetary damages. This ’476 patent is related to the ’703 patent. On September 17, 2015 the Company requested an inter partes review (“IPR”) of ’476, and in response to the Company’s request, the Court entered an order staying the second case until after the Patent Trial and Appeal Board (“PTAB”) of the USPTO made a decision regarding the validity of the patent. On January 12, 2017, the PTAB issued its Final Written Decision in the Company’s favor invalidating all but one of the claims in this patent. The Company believes the remaining claim is not independently material to any of EMED’s litigation claims or the Company’s rights. EMED appealed the PTAB’s ruling to the United States Court of Appeals for the Federal Circuit, which affirmed the PTAB’s Final Written Decision in the Company’s favor on April 3, 2018. On April 18, 2018, EMED filed a petition for en banc rehearing, which was denied. On August 16, 2018, EMED petitioned the United States Supreme Court for a Writ of Certiorari regarding Federal Court’s upholding of the PTAB’s Final Written Decision, which was denied on October 29, 2018, thus finally affirming the PTAB’s invalidation of ’476, save for one dependent claim. As EMED did not plead this dependent claim in the charge of infringement, the Company expects the Eastern District of Texas to dismiss the ’476 case. Following the PTAB’s Final Written Decision in the IPR of ’476, EMED filed a new patent application claiming priority back to the application that issued as ’703 at issue in the California case. Submitted for accelerated examination, this new application issued as US 9,808,576 – “’576” on November 7, 2017. On this same date, EMED filed a new case (third case) in the United States District Court for the Eastern District of Texas claiming patent infringement of ’576, also directed to the Company’s needle sets, and seeking unspecified damages and a preliminary injunction against the Company’s marketing of its needle sets. The Company filed a Motion to Dismiss or Transfer Venue to the Southern District of New York (“SDNY”), which has resulted in the transfer to the SDNY. On May 4, 2018 the Company requested an IPR of ’576 and EMED’s response was filed on August 24, 2018. On November 2, 2018, the PTAB issued its decision denying institution of an IPR for ’576. Consequently, the SDNY Court has lifted the stay of EMED’s ’576 infringement lawsuit and the Company will present its defenses to validity and infringement of the ’576 patent in that Court. The SDNY Court has further ordered the parties to participate in a settlement conference tentatively set for January 2019. EMED has petitioned the Eastern District of Texas for right to move the ’476 matter to the SDNY and for leave to amend the original complaint, but neither request is believed likely to succeed as both issues are years past statutory deadlines and at odds with prior statements made by EMED in this matter. On April 23, 2018, EMED filed a new Civil Case in the Eastern District of Texas asserting antitrust, defamation and unfair business practice claims, and seeking unspecified damages, similar to those previously presented in the first case, described above. The Company has filed a Motion to Dismiss and the parties are awaiting a decision by the Court. Although the Company believes it has meritorious claims and defenses in these actions and proceedings, their outcomes cannot be predicted with any certainty. If any of these actions against the Company are successful, they could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. | NOTE 10 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 believes 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. The Order denying this second Preliminary Injunction was issued June 6, 2017. On August 22, 2017, the Company filed a Motion seeking a Preliminary Injunction prohibiting EMED from making false statements and claims regarding the products of both companies. EMED filed a Response and Objections to Company’s motion on September 21, 2017, and Company filed a subsequent Reply on September 28, 2017. The Court issued a Minute Order on September 22, 2017 vacating a hearing set for October 5, 2017, and stating that if the Court determines oral hearings to be required, the parties will be notified. Presently, the parties are awaiting further action by the Court. On June 25, 2015, EMED filed a claim of patent infringement for the second of its patents, also directed to the Company’s needle sets, in the United States District Court for the Eastern District of Texas. This second patent is related to the one concerning the Company’s declaratory judgment action. Given the close relationship between 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 Final Office Action dated July 19, 2017. EMED filed a response to this Final Office Action on September 15, 2017, and subsequently filed a Notice of Appeal on October 17, 2017. The Date for filing an Appeal Brief is two (2) months from the date of Notice. On January 25, 2018 EMED filed an Appeal Brief with a Petition for Revival having unintentionally delayed the filing by more than two months. Service was made to RMS on January 28, 2018. Thus, the ex parte reexamination is ongoing. A decision to institute the IPR for EMED’s patent in the second filed case was ordered by the USPTO on February 19, 2016 having determined a reasonable likelihood all claims of the patent may be found to be unpatentable. Oral argument for the IPR was held on November 22, 2016 and a final ruling issued on January 12, 2017. In its final ruling, the PTAB held the claim asserted by EMED against the Company in the second filed case was invalid. EMED appealed the PTAB’s final ruling, and EMED’s opening brief in the CAFC was filed on June 26, 2017. The Company’s response brief was filed on August 3, 2017. EMED filed a reply brief on August 17, 2017. Presently, the parties are awaiting further action by the CAFC. Following the final decision on January 12, 2017 by the PTAB in the IPR regarding the second patent, EMED apparently filed a new application in the USPTO claiming priority back to US Application 12/187,256 – which was issued as US 8,500,703, and the subject of the Ex-Parte Re Examination noted above. This new application was submitted under the USPTO Tract 1 accelerated prosecution option and resulted in a new patent US 9, 808,576 issued November 7, 2017. On this same date, EMED filed a new claim of patent infringement for this third patent, also directed to the Company’s needle sets, in the United States District Court for the Eastern District of Texas. In light of the recent cases, including TC Heartland v. Kraft Foods Group, Although the Company believes it has meritorious claims and defenses in these actions and proceedings, their outcomes cannot be predicted with any certainty. We believe that it is likely both patents will be determined invalid, however, if any of these actions against the Company are successful, they could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Stockholders' Equity Note [Abstract] | ||
STOCKHOLDERS' EQUITY | NOTE 5 STOCKHOLDERS’ EQUITY On June 29, 2016, RMS’s Board of Directors authorized the Company to make open market purchases of up to 2,000,000 shares of the Company’s outstanding Common Stock. The purchases are made through a broker designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the rules of the Securities and Exchange Commission for such repurchases. As of September 30, 2018, the Company had repurchased 396,606 shares at an average price of $0.45. In June 2017, 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. | NOTE 5 STOCKHOLDERS’ EQUITY On September 30, 2015, RMS’s Board of Directors authorized a stock repurchase program pursuant to which the Company has and expects to continue to make open market purchases of the Company’s outstanding common stock. The Board of Directors initially authorized such purchases up to 1,000,000 shares. On June 29, 2016, the Board of Directors approved the amendment to the stock repurchase program increasing the authorized to be repurchased to 2,000,000 shares. 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 safe harbor rules of the Securities and Exchange Commission (the “Commission”) for such repurchases. As of December 31, 2017, the Company had repurchased 396,606 shares at an average price of $0.45 under the program. 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. As such, no shares were repurchased in the ten months ended December 31, 2017. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
STOCK-BASED COMPENSATION | NOTE 6 STOCK-BASED COMPENSATION On June 29, 2016, the Board of Directors amended the 2015 Stock Option Plan authorizing the Company to grant awards to certain employees under the plan, which was approved by shareholders at the Annual Meeting held on September 6, 2016. The total number of shares of Common Stock, with respect to which awards may be granted pursuant to the Plan, shall not exceed 4,000,000 shares. As of September 30, 2018, there were outstanding 1,919,000 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 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 nine months ended September 30, 2018 and September 30, 2017. 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: September 30, 2018 2017 Dividend yield 0.00% 0.00% Expected Volatility 62.8 - 65.2% 70.1 - 72.20% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5 Years 5 Years Risk-free rate 2.80 - 2.90% 2.30 - 2.48% The following table summarizes the status of the Plan: Nine months Ended September 30, 2018 2017 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at January 1 1,038,000 $ 0.41 905,000 $ 0.37 Granted 1,018,000 $ 1.23 568,000 $ 0.41 Exercised 125,000 $ 0.41 — $ — Forfeited 12,000 $ 0.87 310,000 $ 0.36 Outstanding at September 30 1,919,000 $ 0.85 1,163,000 $ 0.40 Options exercisable at September 30 666,969 $ 0.40 573,000 $ 0.38 Stock-based compensation expense — $ 51,592 — $ (13,979 ) Total stock-based compensation expense, net of estimated forfeitures for stock option awards totaled $51,592 and ($13,979) for the nine months ended September 30, 2018 and September 30, 2017, respectively. Cash received from option exercises for the nine months ended September 30, 2018 and 2017 was $51,250 and zero, respectively. The weighted-average grant-date fair value of options granted during the nine months ended September 30, 2018 and September 30, 2017, was $0.68 and $0.22, respectively. The total intrinsic value of options exercised during the nine months ended September 30, 2018 and September 30, 2017, was $30,664 and zero, respectively. The following table presents information pertaining to options outstanding at September 30, 2018: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $1.33 1,919,000 5 years $ 0.85 666,969 $ 0.40 As of September 30, 2018, there was $712,745 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 34 months. The total fair value of shares vested as of September 30, 2018 and September 30, 2017, was $139,569 and $116,305, respectively. | 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 December 31, 2017, the Company has 1,038,000 options outstanding to certain executives and key employees under the Plan. Effective November 1, 2016, the Company entered into an employment agreement with Dr. Ma, the Company’s Chief Medical Officer. The agreement calls for quarterly equity compensation in the form of shares of common stock of the Company. The stock will be awarded on the day following the last working day of each quarter. The number of shares issued each quarter shall be determined by dividing $15,000 by the closing bid price of the Company’s common stock as reported by the OTC Markets Inc. as of the last working day of such quarter (the “Closing Price”). As of December 31, 2017, 129,019 shares of common stock were issued to Dr. Ma. 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 fiscal year ended December 31, 2017 and February 28, 2017 was $0.29 and $0.21, 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 fiscal year ended December 31, 2017 and February 28, 2017. 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: December 31, 2017 February 28, 2017 Dividend yield 0.00% 0.00% Expected Volatility 70.1%-72.2% 59.00%-70.90% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5 Years 5 Years Risk-free rate 2.30%-2.36% 2.17%-2.48% The following table summarizes the status of the Company’s stock option plan: December 31, 2017 February 28, 2017 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 318,000 $ 0.49 500,000 $ 0.41 Exercised — $ — — $ — Forfeited 625,000 $ 0.39 215,000 $ 0.36 Outstanding at year end 1,038,000 $ 0.41 1,345,000 $ 0.39 Options exercisable 737,010 $ 0.38 — $ — Weighted average fair value of options granted during the period — $ 0.29 — $ 0.21 Stock-based compensation expense — $ (4,417 ) — $ 115,828 Total stock-based compensation expense, net of forfeitures, for stock option awards totaled $(4,417) and $115,828 for the fiscal year ended December 31, 2017 and February 28, 2017, respectively. The weighted-average grant-date fair value of options granted during ten months ended December 31, 2017 and the twelve months ended February 28, 2017 was $93,115 and $122,656 respectively. The total intrinsic value of options exercised during the ten months ended December 31, 2017 and the twelve months ended February 28, 2017, was zero for both periods. The following table presents information pertaining to options outstanding at December 31, 2017: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36-0.50 1,038,000 5 years $ 0.41 737,010 $ 0.38 As of December 31, 2017, there was $77,620 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 vested options during the ten months ended December 31, 2017 was $150,820 and for the twelve months ended February 28, 2017, it was $98,432. |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 9 Months Ended |
Sep. 30, 2018 | |
Debt Obligations | |
DEBT OBLIGATIONS | NOTE 7 DEBT OBLIGATIONS On February 8, 2018, the Company executed a Promissory Note with KeyBank National Association (“KeyBank”) in the amount of $1.5 million as a variable rate revolving line of credit loan due on demand with an interest rate of LIBOR plus 2.25%, collateralized with a certificate of deposit in the amount of $1.5 million. The Company entered into this arrangement to establish a credit lending history and, in the event needed, to have additional cash on hand for future expansion. On September 25, 2018, KeyBank released the certificate of deposit as collateral for the loan and the Company executed a Commercial Security Agreement as collateral for the loan. As of September 30, 2018, the Company has no outstanding amounts against the line of credit. |
MANAGEMENT CHANGES
MANAGEMENT CHANGES | 9 Months Ended |
Sep. 30, 2018 | |
Management Changes | |
MANAGEMENT CHANGES | NOTE 8 MANAGEMENT CHANGES On July 25, 2018, the Board of Directors of RMS removed Andrew I. Sealfon as President, Chief Executive Officer and Chairman of the Board, effective immediately. Consequently, Mr. Sealfon’s employment was terminated. Mr. Sealfon remains a director. Also on July 25, 2018, Daniel S. Goldberger was appointed as President and Chief Executive Officer on an interim basis and as Chairman of the Board, and replaced as the Lead Director. The Board appointed Joseph M. Manko, Jr., a current RMS director, as Lead Director. On September 4, 2018, Donald B. Pettigrew was employed as the Company’s President and Chief Commercial Officer. Mr. Pettigrew’s annual base compensation is $325,000 and he will be eligible to earn an annual bonus in accordance with the Company policy and procedure for granting of a specified executive bonus which is equivalent to 50% of base compensation based on achievement of goals payable in cash. Mr. Pettigrew will receive a sign-on stock option grant of 1,000,000 non-qualified stock options at an exercise price of $1.23 that vest twenty-five percent 25% at the one (1) year anniversary of the Effective Date and twelve and one-half percent (12.5%) every six (6) months thereafter until fully vested. Mr. Pettigrew will also receive reimbursement for commuting expenses to and from the corporate offices for up to twelve (12) months following the effective date of his agreement. On October 12, 2018, the Company entered into an employment agreement with Daniel S. Goldberger with respect to his service as interim Chief Executive Officer (the “Employment Agreement”). Mr. Goldberger’s monthly base compensation is $30,000 a month and he received a signing bonus in the amount of $75,000. Mr. Goldberger will receive a performance bonus based upon amounts payable to the person who first succeeds Mr. Goldberger as chief executive officer of the Company, which performance bonus will equal 50% of the initial annual base salary and 50% of the initial target bonus payable to such successor (the “Performance Bonus”). The Performance Bonus will be paid in cash and/or shares of the Company’s Common Stock, as may be determined in the sole discretion of the Board, sixty (60) days following Mr. Goldberger’s termination of employment under the employment agreement. Notwithstanding the above, no Performance Bonus will be paid to Mr. Goldberger in the event he becomes the chief executive officer of the Company following his tenure under the Employment Agreement, he resigns his employment prior to the appointment of his successor to the position of chief executive officer of the Company, he is terminated by the Company for “Cause” (as defined in the Employment Agreement), or he fails to use his best efforts in assisting in the orderly transition of his successor to the position of chief executive officer of the Company (as determined by the Board). Mr. Goldberger was issued a 10-year non-qualified option under the Company’s 2015 Stock Option Plan to purchase up to 500,000 shares of the Company’s Common Stock at an exercise price of $1.57 per share, of which 100,000 shares vested immediately, and the remaining 400,000 shares will vest at the rate of 25,000 shares per completed quarter. |
SALE-LEASEBACK TRANSACTION - OP
SALE-LEASEBACK TRANSACTION - OPERATING LEASE | 10 Months Ended |
Dec. 31, 2017 | |
Leases [Abstract] | |
SALE-LEASEBACK TRANSACTION - OPERATING LEASE | NOTE 7 SALE-LEASEBACK TRANSACTION - OPERATING LEASE On February 25, 1999, the Company entered into a sale-leaseback arrangement whereby the Company sold its land and building at 24 Carpenter Road in Chester, New York and leased it back for a period of twenty years. The leaseback is accounted for as an operating lease. The gain of $0.5 million realized in this transaction has been deferred and is amortized to income in proportion to rental expense over the term of the related lease. At December 31, 2017, minimum future rental payments are: Year Minimum Rental Payments 2018 132,504 2019 22,084 $ 154,588 Rent expense for the ten months ended December 31, 2017 was $110,420, and for the twelve months ended February 28, 2017 was $132,504. |
FEDERAL AND STATE INCOME TAXES
FEDERAL AND STATE INCOME TAXES | 10 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
FEDERAL AND STATE INCOME TAXES | NOTE 8 FEDERAL AND STATE INCOME TAXES The provision (benefit) for income taxes at December 31, 2017, and February 28, 2017 consisted of: December 31, 2017 February 28, 2017 State income tax: Current, net of refund $ 1,670 $ 2,004 Federal income (benefit) tax: Deferred (47,327 ) (40,689 ) Current 448,220 (203,015 ) Total $ 402,563 $ (241,700 ) The reconciliation of income taxes shown in the financial statements and amounts computed by applying the Federal expected tax rate of 34% is as follows: December 31, 2017 February 28, 2017 Income (loss) before tax $ 1,307,520 $ (776,699 ) Computed expected tax (benefit) $ 444,557 $ (264,078 ) State income and franchise tax/(refund) 1,670 1,323 Reduction in deferred tax from change in tax rate (13,420 ) — Other (30,244 ) 21,055 Provision (benefit) for taxes $ 402,563 $ (241,700 ) The components of deferred tax liabilities at December 31, 2017, and February 28, 2017, respectively, are as follows: December 31, 2017 February 28, 2017 Deferred compensation cost $ 33,987 $ 49,228 Depreciation and amortization (69,550 ) (156,596 ) Allowance for bad debts and other 13,888 24,946 Deferred tax liabilities $ (21,675 ) $ (82,422 ) New Tax Legislation On December 22, 2017, the President of the United States (“U.S.”) signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant change in U.S tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the highest U.S corporate tax rate from the current rate of 35% to 21%, effective January 1, 2018. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the enacted rate. This revaluation resulted in an additional benefit of $13,420 included in income tax expense and corresponding reduction in the net deferred tax liabilities. The other provisions of the Tax Cuts and Jobs Act did not have a material impact on the 2017 financial statements. |
MAJOR CUSTOMERS
MAJOR CUSTOMERS | 10 Months Ended |
Dec. 31, 2017 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS | NOTE 9 MAJOR CUSTOMERS For the ten months ended December 31, 2017, and the twelve months ended February 28, 2017, approximately, 55% and 56%, respectively, of the Company’s gross product revenues were derived from one major customer. At December 31, 2017, and February 28, 2017, accounts receivable due from this customer were $0.9 million and $0.4 million, respectively. The largest customer in both years is a domestic medical products and supplies distributor. Although a number of larger infusion customers have elected to consolidate their purchases through one or more distributors in recent years, we continue to maintain a strong direct relationship with them. We do not believe that their continued purchase of FREEDOM System products and related supplies is contingent upon the distributor. |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 10 Months Ended |
Dec. 31, 2017 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFITS | NOTE 11 EMPLOYEE BENEFITS We provide a safe harbor 401(k) plan for our employees that allows for employee elective contributions, Company matching contributions and discretionary profit sharing contributions. Employee elective contributions are funded through voluntary payroll deductions. The Company makes safe harbor matching contributions in an amount equal to 100% of the employee’s contribution not to exceed 3% of employee’s compensation plus 50% of employee’s pay contributed between 3% and 5% of employee’s compensation. Company matching expense for the period ended December 31, 2017 and February 28, 2017 was $64,881 and $54,042, respectively. The Company has not provided for a discretionary profit sharing contribution. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 10 Months Ended |
Dec. 31, 2017 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 SUBSEQUENT EVENTS On February 8, 2018, the Company executed a Promissory Note with KeyBank National Association in the amount of $1.5 million as a variable rate revolving line of credit loan due on demand with an interest rate of Libor plus 2.25%, collateralized with a certificate of deposit in the amount of $1.5 million. The Company entered into this arrangement to establish a credit lending history and, in the event needed, to have additional cash on hand for future expansion. |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 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. | NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “RMS”) designs, manufactures and markets proprietary portable medical devices and supplies 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. |
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company holds cash in excess of $250,000 at multiple depositories, which exceeds the FDIC insurance limits and is, therefore, uninsured. | |
CERTIFICATES OF DEPOSIT | CERTIFICATES OF DEPOSIT The certificates of deposit are recorded at cost plus accrued interest. The certificates of deposit earn interest at a rate of 0.35% to 0.55% and mature in February 2018 and March 2018. | |
INVENTORY | INVENTORY Inventories of raw materials are stated at the lower of standard cost, which approximates average cost, or market value including allocable overhead. Work-in-process and finished goods are stated at the lower of standard cost or market value and include direct labor and allocable overhead. | |
PATENTS | PATENTS Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents. | |
INCOME TAXES | INCOME TAXES Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. The Company believes that it has no uncertain tax positions requiring disclosure or adjustment. Generally, tax years starting with 2015 are subject to examination by income tax authorities. | |
PROPERTY, EQUIPMENT, AND DEPRECIATION | PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets. | |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company maintains a long-term incentive stock benefit plan under which it grants stock options 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 to certain directors and employees are recorded at the fair value of the shares at the grant date and are recognized over the vesting period. | STOCK-BASED COMPENSATION The Company maintains various long-term incentive stock benefit plans under which it grants stock options and 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. |
NET INCOME PER COMMON SHARE | NET INCOME PER COMMON SHARE Basic earnings per share are computed on the weighted average of common shares outstanding during each year. Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee and director stock options (See Note 6). Fiscal Year Ended Ten Months December 31, 2017 Twelve Months February 28, 2017 Net income/(loss) $ 904,957 $ (534,999 ) Weighted Average Outstanding Shares: Outstanding shares 37,897,632 37,830,581 Option shares includable 547,850 47,620 38,445,482 37,878,201 Net income/(loss) per share Basic $ 0.02 $ (0.01 ) Diluted $ 0.02 $ (0.01 ) | |
FISCAL YEAR END | FISCAL YEAR END The Company’s fiscal year end is December 31. | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited financial statements as of September 30, 2018, have been prepared in accordance with generally accepted accounting principles and with instructions to SEC regulation S-X for interim financial statements. In the opinion of the Company’s management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Company’s financial position as of September 30, 2018, and the results of operations and cash flow for the three and nine month periods ended September 30, 2018, and 2017. The results of operations for the three and nine months ended September 30, 2018, and 2017 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 Transition Annual Report for the ten months ended December 31, 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. | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. |
REVENUE RECOGNITION | REVENUE RECOGNITION The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09—Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted this ASU effective January 1, 2018 on a full retrospective basis. Adoption of this standard did not result in significant changes to our accounting policies, business processes, systems or controls, or have a material impact on our financial position, results of operations and cash flows or related disclosures. As such, prior period financial statements were not recast. The Company’s revenues result from the sale of assembled products. We recognize revenues when shipment occurs and at which point the customer obtains control and ownership of the goods. Shipping costs generally are billed to customers and are included in sales. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred. Provisions for distributor pricing and annual customer volume rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it’s probable the annual growth target will be achieved. The rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. | REVENUE RECOGNITION Sales of manufactured products are recorded when shipment occurs. The Company’s revenue stream is derived from the sale of an assembled product. Other service revenues are recorded as the service is performed. Shipping and handling costs generally are billed to customers and are included in sales. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. On a monthly basis the Company records rebates based upon actual sales. The rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 2016, the FASB issued ASU No. 2016-13—Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of this ASU on its financial statements, disclosure requirements and methods of adoption. 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. In July 2018, the FASB issued ASU No. 2018-10 Codification Improvements to Topic 842, Leases. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. The amendments in this ASU affect the amendments in ASU 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of this ASU, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820 based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. In August 2018, the FASB issued ASU No. 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations. | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-09—Compensation-Stock Compensation (Topic 718), which provides clarity and reduces both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this update affect any entity that changes the terms or conditions of a share-based payment award. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this update should be applied prospectively to an award modified on or after the adoption date. We do not expect the adoption of the standard to have a material effect on our financial statements, disclosure requirements and methods of adoption. In June 2016, FASB issued ASU No. 2016-13—Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. In August 2016, the FASB issued ASU 2016-15—Statement of Cash Flows (Topic 230); Classification of Certain Cash Receipts and Cash Payments. The ASU provides guidance on eight specific statement of cash flow classification issues and is intended to reduce diversity in practice. ASU 2016-15 will be effective for the Company on January 1, 2018. The adoption of ASU 2016-15 is not expected to have a material impact on the financial statements. 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. In November 2017, the FASB issued ASU No. 2017-14 Income Statement-Reporting Comprehensive Income (Topic 220), Revenue Recognition (Topic 605), and Revenue from Contracts with Customers (Topic 606), which amends SEC paragraphs pursuant to Staff Accounting Bulletins No. 116 and SEC Release No. 33-10403. 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. |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for cash, trade receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. | |
ACCOUNTING FOR LONG-LIVED ASSETS | ACCOUNTING FOR LONG-LIVED ASSETS The Company reviews its long-lived assets for impairment at least annually or whenever the circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. As December 31, 2017, the Company does not believe that any of its assets are impaired. | |
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. |
NATURE OF OPERATIONS AND SUMM_3
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 10 Months Ended |
Dec. 31, 2017 | |
Accounting Policies [Abstract] | |
Schedule of net income per common share | Basic earnings per share are computed on the weighted average of common shares outstanding during each year. Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee and director stock options (See Note 6). Fiscal Year Ended Ten Months December 31, 2017 Twelve Months February 28, 2017 Net income/(loss) $ 904,957 $ (534,999 ) Weighted Average Outstanding Shares: Outstanding shares 37,897,632 37,830,581 Option shares includable 547,850 47,620 38,445,482 37,878,201 Net income/(loss) per share Basic $ 0.02 $ (0.01 ) Diluted $ 0.02 $ (0.01 ) |
INVENTORY (Tables)
INVENTORY (Tables) | 10 Months Ended |
Dec. 31, 2017 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | Inventory consists of: December 31, 2017 February 28, 2017 Raw materials and Work-in-process $ 1,042,367 $ 947,670 Finished goods 677,762 456,621 Total 1,720,129 1,404,291 Less: reserve for obsolete inventory 61,448 50,588 Inventory, net $ 1,658,681 $ 1,353,703 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Abstract] | ||
Schedule of property and equipment | Property and equipment consists of the following at: September 30, 2018 December 31, 2017 Land $ 54,030 $ 54,030 Building 171,094 171,094 Vehicles 57,920 43,836 Furniture, office equipment, and leasehold improvements 1,032,895 1,008,665 Manufacturing equipment and tooling 1,194,683 1,075,471 2,510,622 2,353,096 Less: accumulated depreciation (1,689,309 ) (1,516,813 ) Property and equipment, net $ 821,313 $ 836,283 | Property and equipment consists of the following at: December 31, 2017 February 28, 2017 Estimated Useful Lives Land $ 54,030 $ 54,030 Building 171,094 171,094 20 years Furniture, office equipment, and leasehold improvements 1,052,501 1,022,942 3-10 years Manufacturing equipment and tooling 1,075,471 1,003,166 3-12 years Total 2,353,096 2,251,232 Less: accumulated depreciation 1,516,813 1,319,140 Property and equipment, net $ 836,283 $ 932,092 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 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: September 30, 2018 2017 Dividend yield 0.00% 0.00% Expected Volatility 62.8 - 65.2% 70.1 - 72.20% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5 Years 5 Years Risk-free rate 2.80 - 2.90% 2.30 - 2.48% | 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: December 31, 2017 February 28, 2017 Dividend yield 0.00% 0.00% Expected Volatility 70.1%-72.2% 59.00%-70.90% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5 Years 5 Years Risk-free rate 2.30%-2.36% 2.17%-2.48% |
Schedule of stock option plan | The following table summarizes the status of the Plan: Nine months Ended September 30, 2018 2017 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at January 1 1,038,000 $ 0.41 905,000 $ 0.37 Granted 1,018,000 $ 1.23 568,000 $ 0.41 Exercised 125,000 $ 0.41 — $ — Forfeited 12,000 $ 0.87 310,000 $ 0.36 Outstanding at September 30 1,919,000 $ 0.85 1,163,000 $ 0.40 Options exercisable at September 30 666,969 $ 0.40 573,000 $ 0.38 Stock-based compensation expense — $ 51,592 — $ (13,979 ) | The following table summarizes the status of the Company’s stock option plan: December 31, 2017 February 28, 2017 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 318,000 $ 0.49 500,000 $ 0.41 Exercised — $ — — $ — Forfeited 625,000 $ 0.39 215,000 $ 0.36 Outstanding at year end 1,038,000 $ 0.41 1,345,000 $ 0.39 Options exercisable 737,010 $ 0.38 — $ — Weighted average fair value of options granted during the period — $ 0.29 — $ 0.21 Stock-based compensation expense — $ (4,417 ) — $ 115,828 |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at September 30, 2018: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $1.33 1,919,000 5 years $ 0.85 666,969 $ 0.40 | The following table presents information pertaining to options outstanding at December 31, 2017: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36-0.50 1,038,000 5 years $ 0.41 737,010 $ 0.38 |
SALE-LEASEBACK TRANSACTION - _2
SALE-LEASEBACK TRANSACTION - OPERATING LEASE (Tables) | 10 Months Ended |
Dec. 31, 2017 | |
Leases [Abstract] | |
Schedule of minimum future rental payments | At December 31, 2017, minimum future rental payments are: Year Minimum Rental Payments 2018 132,504 2019 22,084 $ 154,588 |
FEDERAL AND STATE INCOME TAXES
FEDERAL AND STATE INCOME TAXES (Tables) | 10 Months Ended |
Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Schedule of provision (benefit) for income taxes | The provision (benefit) for income taxes at December 31, 2017, and February 28, 2017 consisted of: December 31, 2017 February 28, 2017 State income tax: Current, net of refund $ 1,670 $ 2,004 Federal income (benefit) tax: Deferred (47,327 ) (40,689 ) Current 448,220 (203,015 ) Total $ 402,563 $ (241,700 ) |
Schedule of reconciliation of income taxes | The reconciliation of income taxes shown in the financial statements and amounts computed by applying the Federal expected tax rate of 34% is as follows: December 31, 2017 February 28, 2017 Income (loss) before tax $ 1,307,520 $ (776,699 ) Computed expected tax (benefit) $ 444,557 $ (264,078 ) State income and franchise tax/(refund) 1,670 1,323 Reduction in deferred tax from change in tax rate (13,420 ) — Other (30,244 ) 21,055 Provision (benefit) for taxes $ 402,563 $ (241,700 ) |
Schedule of component of deferred tax liabilities | The components of deferred tax liabilities at December 31, 2017, and February 28, 2017, respectively, are as follows: December 31, 2017 February 28, 2017 Deferred compensation cost $ 33,987 $ 49,228 Depreciation and amortization (69,550 ) (156,596 ) Allowance for bad debts and other 13,888 24,946 Deferred tax liabilities $ (21,675 ) $ (82,422 ) |
NATURE OF OPERATIONS AND SUMM_4
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 10 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
Accounting Policies [Abstract] | ||||||
Net income/(loss) | $ 386,553 | $ 265,754 | $ 1,265,703 | $ 541,177 | $ 904,957 | $ (534,999) |
Weighted Average Outstanding Shares: | ||||||
Outstanding shares | 38,194,682 | 37,898,357 | 38,104,393 | 37,833,133 | 37,897,632 | 37,830,581 |
Option shares includable | 547,850 | 47,620 | ||||
Total | 38,985,684 | 38,072,425 | 38,875,737 | 37,934,851 | 38,445,482 | 37,878,201 |
Net income/(loss) per share | ||||||
Basic (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.01 | $ 0.02 | $ (0.01) |
Diluted (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.03 | $ 0.01 | $ 0.02 | $ (0.01) |
NATURE OF OPERATIONS AND SUMM_5
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018Segment | Dec. 31, 2017USD ($)Segment | |
Number of segments | Segment | 1 | 1 |
FDIC cash uninsured amount | $ | $ 250,000 | |
Certificates Of Deposit [Member] | ||
Description of maturity date | Mature in February 2018 and March 2018. | |
Certificates Of Deposit [Member] | Minimum [Member] | ||
Interest rate | 0.35% | |
Certificates Of Deposit [Member] | Maximum [Member] | ||
Interest rate | 0.55% |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Sep. 30, 2018 | Dec. 31, 2017 | Feb. 28, 2017 |
Inventory Disclosure [Abstract] | |||
Raw materials and Work-in-process | $ 1,042,367 | $ 947,670 | |
Finished goods | 677,762 | 456,621 | |
Total | 1,720,129 | 1,404,291 | |
Less: reserve for obsolete inventory | 61,448 | 50,588 | |
Inventory, net | $ 1,949,403 | $ 1,658,681 | $ 1,353,703 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Sep. 04, 2018 | Nov. 14, 2017 | Jun. 24, 2016 | Dec. 20, 2013 | Mar. 31, 2017 | Jan. 31, 2017 | Dec. 31, 2016 | Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 |
Mr. Andrew I. Sealfon [Member] | |||||||||||||
Officer compensation | $ 325,000 | ||||||||||||
Mr. Andrew I. Sealfon [Member] | Lease Agreement [Member] | Aircraft [Member] | |||||||||||||
Lease payments | $ 1,292 | $ 3,876 | $ 9,045 | $ 13,128 | $ 13,421 | $ 21,500 | |||||||
Mr. Mark Pastreich [Member] | Lease Agreement [Member] | Building [Member] | |||||||||||||
Monthly lease payments | $ 12,088 | 11,042 | 11,042 | 11,042 | |||||||||
Lease payments | 33,126 | 33,126 | 99,378 | 99,378 | 110,420 | 132,504 | |||||||
Property taxes paid | 12,431 | 12,862 | 37,863 | 37,447 | 41,959 | 48,455 | |||||||
Brad A. Sealfon [Member] | |||||||||||||
Officer compensation | $ 2,000 | $ 7,744 | $ 7,744 | ||||||||||
Clinical Research & Support Services Consulting Agreement [Member] | Dr. Mark Baker [Member] | |||||||||||||
Amortization of deferred compensation cost | 0 | 0 | 0 | 7,000 | $ 0 | 28,000 | |||||||
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 (Consultant) [Member] | |||||||||||||
Monthly payment for agreement | $ 16,000 | ||||||||||||
Number of shares repurchased | 96,542 | ||||||||||||
Value of shares repurchased | $ 43,393 | ||||||||||||
Officer compensation | $ 0 | $ 0 | $ 0 | $ 16,000 | $ 230,000 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | 10 Months Ended | ||
Dec. 31, 2017 | Sep. 30, 2018 | Feb. 28, 2017 | |
Property and equipment, gross | $ 2,353,096 | $ 2,510,622 | $ 2,251,232 |
Less: accumulated depreciation | (1,516,813) | (1,689,309) | (1,319,140) |
Property and equipment, net | 836,283 | 821,313 | 932,092 |
Land [Member] | |||
Property and equipment, gross | 54,030 | 54,030 | 54,030 |
Building [Member] | |||
Property and equipment, gross | $ 171,094 | 171,094 | 171,094 |
Useful life | 20 years | ||
Vehicles [Member] | |||
Property and equipment, gross | $ 43,836 | 57,920 | |
Furniture, Office Equipment, and Leasehold Improvements [Member] | |||
Property and equipment, gross | $ 1,008,665 | 1,032,895 | 1,022,942 |
Furniture, Office Equipment, and Leasehold Improvements [Member] | Minimum [Member] | |||
Useful life | 3 years | ||
Furniture, Office Equipment, and Leasehold Improvements [Member] | Maximum [Member] | |||
Useful life | 10 years | ||
Manufacturing Equipment And Tooling [Member] | |||
Property and equipment, gross | $ 1,075,471 | $ 1,194,683 | $ 1,003,166 |
Manufacturing Equipment And Tooling [Member] | Minimum [Member] | |||
Useful life | 3 years | ||
Manufacturing Equipment And Tooling [Member] | Maximum [Member] | |||
Useful life | 12 years |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 10 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
Property, Plant and Equipment [Abstract] | ||||||
Depreciation expense | $ 68,991 | $ 70,898 | $ 202,975 | $ 210,060 | $ 233,626 | $ 267,854 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - Share Repurchase Program [Member] - $ / shares | 9 Months Ended | 10 Months Ended | ||
Sep. 30, 2018 | Dec. 31, 2017 | Jun. 29, 2016 | Sep. 30, 2015 | |
Equity, Class of Treasury Stock [Line Items] | ||||
Maximum number of shares repurchased | 2,000,000 | 1,000,000 | ||
Number of shares repurchased | 396,606 | 396,606 | ||
Average share price (in dollars per share) | $ 0.45 | $ 0.45 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - 2015 Stock Option Plan [Member] - USD ($) | 9 Months Ended | 10 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
Dividend yield | 0.00% | 0.00% | 0.00% | 0.00% |
Weighted-average volatility | ||||
Expected dividends | ||||
Expected term (in years) | 5 years | 5 years | 5 years | 5 years |
Minimum [Member] | ||||
Expected Volatility | 62.80% | 70.10% | 70.10% | 59.00% |
Risk-free rate | 2.80% | 2.30% | 2.30% | 2.17% |
Maximum [Member] | ||||
Expected Volatility | 65.20% | 72.20% | 72.20% | 70.90% |
Risk-free rate | 2.90% | 2.48% | 2.36% | 2.48% |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details 1) - 2015 Stock Option Plan [Member] - USD ($) | 9 Months Ended | 10 Months Ended | 12 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||||
Outstanding at beginning | 1,038,000 | 905,000 | 1,345,000 | 1,060,000 |
Granted | 1,018,000 | 568,000 | 318,000 | 500,000 |
Exercised | 125,000 | |||
Forfeited | 12,000 | 310,000 | 625,000 | 215,000 |
Outstanding at ending | 1,919,000 | 1,163,000 | 1,038,000 | 1,345,000 |
Options exercisable at ending | 666,969 | 573,000 | 737,010 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||||
Outstanding at beginning | $ 0.41 | $ 0.37 | $ 0.39 | $ 0.37 |
Granted | 1.23 | 0.41 | 0.49 | 0.41 |
Exercised | 0.41 | |||
Forfeited | 0.87 | 0.36 | 0.39 | 0.36 |
Outstanding at ending | 0.85 | 0.40 | 0.41 | 0.39 |
Options exercisable at ending | 0.40 | 0.38 | 0.38 | |
Weighted average fair value of options granted during the period | $ 0.68 | $ 0.22 | $ 0.29 | $ 0.21 |
Stock-based compensation expense | $ 51,592 | $ (13,979) | $ (4,417) | $ 115,828 |
STOCK-BASED COMPENSATION (Det_3
STOCK-BASED COMPENSATION (Details 2) - 2015 Stock Option Plan [Member] - $ / shares | 9 Months Ended | 10 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
$0.36 - $1.33 [Member] | ||
Weighted Average Remaining Contractual Term | 5 years | |
Weighted Average Exercise Price | $ 0.85 | |
Number Exercisable | 666,969 | |
Weighted Average Exercise Price | $ 0.40 | |
$0.36 - $0.50 [Member] | ||
Weighted Average Remaining Contractual Term | 5 years | |
Weighted Average Exercise Price | $ 0.41 | |
Number Exercisable | 737,010 | |
Weighted Average Exercise Price | $ 0.38 |
STOCK-BASED COMPENSATION (Det_4
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Oct. 21, 2015 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | Jun. 29, 2016 | Sep. 30, 2015 |
Common shares par value (in dollars per share) | $ 0.01 | $ 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 | ||||||
Dr. Ma. [Member] | |||||||
Issuance of common stock | $ 129,019 | ||||||
2015 Stock Option Plan [Member] | |||||||
Number of shares authorized | 4,000,000 | 2,000,000 | |||||
Number of common shares awarded | 1,018,000 | 568,000 | 318,000 | 500,000 | |||
Weighted average grant date fair value of stock options | $ 0.68 | $ 0.22 | $ 0.29 | $ 0.21 | |||
Allocated stock-based compensation expense | $ 51,592 | $ (13,979) | $ (4,417) | $ 115,828 | |||
Weighted-average grant-date fair value options granted | 93,115 | 122,656 | |||||
Cash received from option exercises | 51,250 | 0 | |||||
Total intrinsic value of options exercised | 30,664 | 0 | 0 | 0 | |||
Total unrecognized compensation cost | $ 712,745 | $ 77,620 | |||||
Weighted-average period (in years) | 34 months | 17 months | |||||
Total fair value of shares vested | $ 139,569 | $ 116,305 | $ 150,820 | $ 98,432 | |||
Common shares par value (in dollars per share) | $ 0.01 | ||||||
2015 Stock Option Plan [Member] | Key Employees [Member] | |||||||
Number of common shares awarded | 1,919,000 | 1,038,000 |
DEBT OBLIGATIONS (Details Narra
DEBT OBLIGATIONS (Details Narrative) - USD ($) | Feb. 08, 2018 | Sep. 30, 2018 |
Description of interest rate | Interest rate of Libor plus 2.25%, collateralized with a certificate of deposit in the amount of $1.5 million. | |
Key Bank National Association [Member] | Line Of Credit [Member] | ||
Promissory note amount | $ 1,500,000 | $ 0 |
MANAGEMENT CHANGES (Details Nar
MANAGEMENT CHANGES (Details Narrative) - USD ($) | Oct. 12, 2018 | Sep. 04, 2018 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 |
2015 Stock Option Plan [Member] | ||||||
Number of stock options granted | 1,018,000 | 568,000 | 318,000 | 500,000 | ||
Exercise price (in dollar per share) | $ 1.23 | $ 0.41 | $ 0.49 | $ 0.41 | ||
Mr. Donald B. Pettigrew [Member] | ||||||
Annual base compensation | $ 325,000 | |||||
Description of annual bonus terms | Specified executive bonus which is equivalent to 50% of base compensation based on achievement of goals payable in cash. | |||||
Number of stock options granted | 1,000,000 | |||||
Exercise price (in dollar per share) | $ 1.23 | |||||
Description of vesting rights | Vest twenty-five percent 25% at the one (1) year anniversary of the Effective Date and twelve and one-half percent (12.5%) every six (6) months thereafter until fully vested. | |||||
Mr. Daniel S. Goldberger [Member] | Subsequent Event [Member] | ||||||
Monthly base compensation | $ 30,000 | |||||
Signing bonus | $ 75,000 | |||||
Description of performance bonus terms | Performance bonus will equal 50% of the initial annual base salary and 50% of the initial target bonus payable to such successor (the Performance Bonus) | |||||
Option expiration term | 10 years | |||||
Mr. Daniel S. Goldberger [Member] | Subsequent Event [Member] | 2015 Stock Option Plan [Member] | ||||||
Number of stock options granted | 500,000 | |||||
Exercise price (in dollar per share) | $ 1.57 | |||||
Description of vesting rights | 100,000 shares vested immediately, and the remaining 400,000 shares will vest at the rate of 25,000 shares per completed quarter. |
SALE-LEASEBACK TRANSACTION - _3
SALE-LEASEBACK TRANSACTION - OPERATING LEASE (Details) | Dec. 31, 2017USD ($) |
Leases [Abstract] | |
2,018 | $ 132,504 |
2,019 | 22,084 |
Total | $ 154,588 |
SALE-LEASEBACK TRANSACTION - _4
SALE-LEASEBACK TRANSACTION - OPERATING LEASE (Details Narrative) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Feb. 28, 2017 | |
Rent expense | $ 110,420 | $ 132,504 |
Sale-Leaseback Arrangement [Member] | Land and Building [Member] | ||
Lease terms | Twenty years. | |
Gain realized | $ 500,000 |
FEDERAL AND STATE INCOME TAXE_2
FEDERAL AND STATE INCOME TAXES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 10 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
State income tax: | ||||||
Current, net of refund | $ 1,670 | $ 2,004 | ||||
Federal income (benefit) tax: | ||||||
Deferred | (47,327) | (40,689) | ||||
Current | 448,220 | (203,015) | ||||
Total | $ 103,263 | $ 137,404 | $ 337,956 | $ 312,192 | $ 402,563 | $ (241,700) |
FEDERAL AND STATE INCOME TAXE_3
FEDERAL AND STATE INCOME TAXES (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | 10 Months Ended | 12 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | Dec. 31, 2017 | Feb. 28, 2017 | |
Income Tax Disclosure [Abstract] | ||||||
Income (loss) before tax | $ 1,307,520 | $ (776,699) | ||||
Computed expected tax (benefit) | 444,557 | (264,078) | ||||
State income and franchise tax/(refund) | 1,670 | 1,323 | ||||
Reduction in deferred tax from change in tax rate | (13,420) | |||||
Other | (30,244) | 21,055 | ||||
Provision (benefit) for taxes | $ 103,263 | $ 137,404 | $ 337,956 | $ 312,192 | $ 402,563 | $ (241,700) |
FEDERAL AND STATE INCOME TAXE_4
FEDERAL AND STATE INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2017 | Feb. 28, 2017 |
Income Tax Disclosure [Abstract] | ||
Deferred compensation cost | $ 33,987 | $ 49,228 |
Depreciation and amortization | (69,550) | (156,596) |
Allowance for bad debts and other | 13,888 | 24,946 |
Deferred tax liabilities | $ (21,675) | $ (82,422) |
FEDERAL AND STATE INCOME TAXE_5
FEDERAL AND STATE INCOME TAXES (Details Narrative) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Feb. 28, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal expected tax rate | 34.00% | 34.00% |
U.S corporate tax rate | 35.00% | |
Revised federal tax rate | 21.00% | |
Reduction in the net deferred tax liabilities | $ 13,420 |
MAJOR CUSTOMERS (Details Narrat
MAJOR CUSTOMERS (Details Narrative) - One Customer [Member] - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Feb. 28, 2017 | |
Sales Revenue [Member] | ||
Product Information [Line Items] | ||
Percentage of product revenues | 55.00% | 56.00% |
Accounts Receivable [Member] | ||
Product Information [Line Items] | ||
Accounts receivable | $ 900,000 | $ 400,000 |
EMPLOYEE BENEFITS (Details Narr
EMPLOYEE BENEFITS (Details Narrative) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Feb. 28, 2017 | |
Retirement Benefits [Abstract] | ||
Description of matching contribution | The Company makes safe harbor matching contributions in an amount equal to 100% of the employee’s contribution not to exceed 3% of employee’s compensation plus 50% of employee’s pay contributed between 3% and 5% of employee’s compensation. | |
Matching expense | $ 64,881 | $ 54,042 |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - USD ($) | Feb. 08, 2018 | Sep. 30, 2018 | Dec. 31, 2017 | Feb. 28, 2017 |
Certificate of deposit | $ 1,671,004 | $ 263,269 | $ 262,314 | |
Subsequent Event [Member] | Promissory Note [Member] | KeyBank National Association [Member] | ||||
Line of credit loan | $ 1,500,000 | |||
Description of variable rate basis | Libor plus 2.25% | |||
Certificate of deposit | $ 1,500,000 |