Cover
Cover - shares | 3 Months Ended | |
Mar. 31, 2021 | May 12, 2021 | |
Cover [Abstract] | ||
Entity Registrant Name | REPRO MED SYSTEMS INC | |
Entity Central Index Key | 0000704440 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2021 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 0-12305 | |
Entity Incorporation State Country Code | NY | |
Title of 12(b) Security | common stock, $0.01 par value | |
Trading Symbol | KRMD | |
Security Exchange Name | NASDAQ | |
Entity Reporting Status Current | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 44,490,174 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2021 |
BALANCE SHEETS (UNAUDITED)
BALANCE SHEETS (UNAUDITED) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 26,774,720 | $ 27,315,286 |
Accounts receivable less allowance for doubtful accounts of $24,469 for March 31, 2021, and December 31, 2020, respectively | 3,561,341 | 2,572,954 |
Inventory | 8,058,824 | 6,829,772 |
Prepaid expenses | 690,325 | 807,780 |
TOTAL CURRENT ASSETS | 39,085,210 | 37,525,792 |
Property and equipment, net | 1,154,368 | 1,167,623 |
Intangible assets, net of accumulated amortization of $214,969 and $199,899 at March 31, 2021 and December 31, 2020, respectively | 844,309 | 843,587 |
Operating lease right-of-use assets | 201,598 | 236,846 |
Deferred income tax assets, net | 1,068,485 | 125,274 |
Other assets | 19,812 | 19,812 |
TOTAL ASSETS | 42,373,782 | 39,918,934 |
CURRENT LIABILITIES | ||
Accounts payable | 1,915,523 | 624,920 |
Accrued expenses | 1,755,800 | 2,610,413 |
Accrued payroll and related taxes | 715,899 | 287,130 |
Finance lease liability - current | 1,843 | 2,646 |
Operating lease liability - current | 141,869 | 141,293 |
TOTAL CURRENT LIABILITIES | 4,530,934 | 3,666,402 |
Operating lease liability, net of current portion | 59,729 | 95,553 |
TOTAL LIABILITIES | 4,590,663 | 3,761,955 |
Commitments and contingencies (Refer to Note 3) | ||
STOCKHOLDERS' EQUITY | ||
Common stock, $0.01 par value, 75,000,000 shares authorized, 47,896,061 and 46,680,119 shares issued; 44,475,559 and 43,259,617 shares outstanding at March 31, 2021, and December 31, 2020, respectively | 478,960 | 466,801 |
Additional paid-in capital | 38,771,105 | 35,880,986 |
Treasury stock, 3,420,502 shares and 3,420,502 shares at March 31, 2021 and December 31, 2020, respectively, at cost | (3,843,562) | (3,843,562) |
Retained earnings | 2,376,616 | 3,652,754 |
TOTAL STOCKHOLDERS' EQUITY | 37,783,119 | 36,156,979 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 42,373,782 | $ 39,918,934 |
BALANCE SHEETS (UNAUDITED) (Par
BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 24,469 | $ 24,469 |
Patents, accumulated amortization | $ 214,969 | $ 199,899 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 75,000,000 | 75,000,000 |
Common stock, issued | 47,896,061 | 46,680,119 |
Common stock, outstanding | 44,475,559 | 43,259,617 |
Treasury stock | 3,420,502 | 3,420,502 |
STATEMENTS OF OPERATIONS (UNAUD
STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Income Statement [Abstract] | ||
NET SALES | $ 5,430,951 | $ 6,330,009 |
Cost of goods sold | 2,199,097 | 2,541,799 |
Gross Profit | 3,231,854 | 3,788,210 |
OPERATING EXPENSES | ||
Selling, general and administrative | 4,992,829 | 2,862,138 |
Research and development | 336,841 | 256,025 |
Depreciation and amortization | 115,473 | 87,224 |
Total Operating Expenses | 5,445,143 | 3,205,387 |
Net Operating (Loss)/Profit | (2,213,289) | 582,823 |
Non-Operating (Expense)/Income | ||
Loss on currency exchange | (15,717) | (10,497) |
Gain on disposal of fixed asset | 736 | |
Interest income, net | 9,771 | 19,030 |
TOTAL OTHER (EXPENSE)/INCOME | (5,210) | 8,533 |
(LOSS)/INCOME BEFORE TAXES | (2,218,499) | 591,356 |
Income Tax Benefit/(Expense) | 942,361 | (141,928) |
NET (LOSS)/INCOME | $ (1,276,138) | $ 449,428 |
NET (LOSS)/INCOME PER SHARE | ||
Basic (in dollars per share) | $ (0.03) | $ 0.01 |
Diluted (in dollars per share) | $ (0.03) | $ 0.01 |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||
Basic (in shares) | 43,960,936 | 39,675,107 |
Diluted (in shares) | 43,960,936 | 39,874,989 |
STATEMENTS OF CASH FLOWS (UNAUD
STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net (Loss)/Income | $ (1,276,138) | $ 449,428 |
Adjustments to reconcile net (loss)/income to net cash (used in)/provided by operating activities: | ||
Stock-based compensation expense | 734,184 | 360,968 |
Depreciation and amortization | 115,473 | 87,224 |
Deferred income taxes | (943,211) | (63,203) |
Gain on disposal of fixed assets | (736) | |
Changes in operating assets and liabilities: | ||
Increase in accounts receivable | (988,387) | (185,160) |
Increase in inventory | (1,229,052) | (700,539) |
Decrease/(Increase) in prepaid expenses and other assets | 117,455 | (156,288) |
Increase in accounts payable | 1,290,603 | 524,398 |
Increase in accrued payroll and related taxes | 428,769 | 39,571 |
Decrease in accrued expenses | (854,613) | (408,294) |
Increase in accrued tax liability | 205,131 | |
NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES | (2,605,653) | 153,236 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (95,477) | (99,591) |
Proceeds from disposal of property and equipment | 9,065 | |
Purchases of intangible assets | (15,792) | (80,547) |
NET CASH USED IN INVESTING ACTIVITIES | (102,204) | (180,138) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Borrowings from indebtedness | 1,500,000 | |
Proceeds from issuance of equity | 1,230,000 | 85,500 |
Common stock issuance as settlement for litigation | 938,094 | |
Payments on finance lease liability | (803) | (1,848) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 2,167,291 | 1,583,652 |
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS | (540,566) | 1,556,750 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 27,315,286 | 5,870,929 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 26,774,720 | 7,427,679 |
Cash paid during the periods for: | ||
Interest | 28 | 87 |
Income Taxes | 850 | |
Schedule of Non-Cash Operating, Investing and Financing Activities: | ||
Issuance of common stock as compensation | 56,250 | 60,002 |
Issuance of common stock as settlement for litigation | $ 938,094 |
STATEMENTS OF STOCKHOLDERS' EQU
STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock [Member] | Total |
Balance beginning at Dec. 31, 2019 | $ 422,398 | $ 6,293,069 | $ 4,864,817 | $ (344,204) | $ 11,236,080 |
Balance beginning (in shares) at Dec. 31, 2019 | 42,239,788 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of stock-based compensation | $ 92 | 59,910 | 60,002 | ||
Issuance of stock-based compensation (in shares) | 9,189 | ||||
Compensation expense related to stock options | 300,966 | 300,966 | |||
Issuance upon options exercised | $ 1,750 | 83,750 | 85,500 | ||
Issuance upon options exercised (in shares) | 175,000 | ||||
Net income | 449,428 | 449,428 | |||
Balance ending at Mar. 31, 2020 | $ 424,240 | 6,737,695 | 5,314,245 | (344,204) | 12,131,976 |
Balance ending (in shares) at Mar. 31, 2020 | 42,423,977 | ||||
Balance beginning at Dec. 31, 2020 | $ 466,801 | 35,880,986 | 3,652,754 | (3,843,562) | 36,156,979 |
Balance beginning (in shares) at Dec. 31, 2020 | 46,680,119 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of stock-based compensation | $ 101 | 56,149 | 56,250 | ||
Issuance of stock-based compensation (in shares) | 10,124 | ||||
Compensation expense related to stock options | 677,934 | 677,934 | |||
Litigation settlement options | $ 952 | 937,142 | 938,094 | ||
Litigation settlement share issuance | 95,238 | ||||
Issuance upon options exercised | $ 11,106 | 1,218,894 | 1,230,000 | ||
Issuance upon options exercised (in shares) | 1,110,580 | ||||
Net income | (1,276,138) | (1,276,138) | |||
Balance ending at Mar. 31, 2021 | $ 478,960 | $ 38,771,105 | $ 2,376,616 | $ (3,843,562) | $ 37,783,119 |
Balance ending (in shares) at Mar. 31, 2021 | 47,896,061 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
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. d/b/a KORU Medical Systems (the “Company,” “KORU Medical,” “we,” “us” or “our”) designs, manufactures and markets proprietary portable and innovative medical devices primarily for the ambulatory infusion market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality system management. The Company operates as one segment. BASIS OF PRESENTATION The accompanying financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2020 (“Annual Report”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been condensed or omitted from the accompanying financial statements. The accompanying year-end balance sheet was derived from the audited financial statements included in the Annual Report. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal, recurring nature. The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company holds cash in excess of $250,000 at its depository, which exceeds the FDIC insurance limits and is, therefore, uninsured. INVENTORY Inventories of raw materials are stated at the lower of standard cost, which approximates average cost, or market value including allocable overhead. Work-in-process and finished goods are stated at the lower of standard cost or market value and include direct labor and allocable overhead. PATENTS Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents. INCOME TAXES Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. The Company believes that it has no uncertain tax positions requiring disclosure or adjustment. Generally, tax years starting with 2018 are subject to examination by income tax authorities. PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets. STOCK-BASED COMPENSATION The Company maintains a stock option plan under which it grants stock options to certain executives, key employees and consultants. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted for director fees are recorded at the fair value of the shares at the grant date. 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 consultant stock options. See “NOTE 4 — STOCK-BASED COMPENSATION” for further detail. Three Months Ended March 31, 2021 March 31, 2020 Net (loss)/income $ (1,276,138 ) $ 449,428 Weighted Average Outstanding Shares: Outstanding shares 43,960,936 39,675,107 Option shares includable — (a) 199,882 43,960,936 39,874,989 Net income per share Basic $ (0.03 ) $ 0.01 Diluted $ (0.03 ) $ 0.01 __________ (a) Option shares of 183,681 were not included as the impact is anti-dilutive. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to asset lives, valuation allowances, inventory valuation, and accruals. REVENUE RECOGNITION The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers 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 growth rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it is probable the annual growth target will be achieved. Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. The following table summarizes net sales by geography for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Sales Domestic $ 4,446,789 $ 5,340,866 International 984,162 989,143 Total $ 5,430,951 $ 6,330,009 LEASES In February 2016, the FASB issued a standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by the Company for those leases classified as operating leases under current GAAP, while our accounting for capital leases remains substantially unchanged. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard became effective for us on January 1, 2019. The standard had a material impact on our balance sheets but did not have a material impact on our statements of operations. See “NOTE 6 — ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) 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 MEASUREMENTS Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. • Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and includes instruments for which the determination of fair value requires significant judgment or estimation. The carrying amounts of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are considered to be representative of their fair values because of the short-term nature of those instruments. There were no transfers between levels in the fair value hierarchy during the three months ended March 31, 2021. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value. No impairment losses have been recorded through March 31, 2021. RECLASSIFICATION Certain reclassifications have been made to conform prior period data to the current presentation. These reclassifications had no effect on reported net income. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 2 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: March 31, 2021 December 31, 2020 Furniture and office equipment $ 770,240 $ 753,536 Leasehold improvements 544,896 542,796 Manufacturing equipment and tooling 1,919,915 1,856,909 Total property and equipment 3,235,051 3,153,241 Less: accumulated depreciation and amortization (2,080,683 ) (1,985,618 ) Property and equipment, net $ 1,154,368 $ 1,167,623 Depreciation expense was $100,403 and $72,768 for the three months ended March 31, 2021 and March 31, 2020, respectively. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2021 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 3 COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS The Company has been and may again become involved in legal proceedings, claims and litigation arising in the ordinary course of business. KORU Medical is not presently a party to any litigation or other legal proceeding that is believed to be material to its financial condition. On March 26, 2021, a putative class action lawsuit was filed in the United States District Court for the Southern District of New York against the Company and its Chief Financial Officer and former Chief Executive Officer, alleging they made materially false and/or misleading statements, as well as failed to disclose material adverse facts about the Company’s business, operations and prospects, in the Company’s earnings communications and Form 10-Q filed during the period August 4, 2020 and January 25, 2021. The plaintiff is seeking unspecified compensatory damages, an award of reasonable costs and expenses, including counsel fees and expert fees, and such other relief as the Court may deem just and proper. The Company believes that the plaintiff’s allegations are without merit and intends to vigorously defend against the claims. Because the litigation is in its early stages, the Company is unable to estimate a reasonable possible loss or range of loss, if any, that may result from this matter. From 2013 until May 2020, we were involved in several lawsuits with our principal competitor, EMED, which were all settled in May 2020. OTHER On November 11, 2020, the Company entered into a Manufacturing and Supply Agreement with Command Medical Products, Inc. (“Command”), pursuant to which Command has agreed to manufacture and supply the Company’s subassemblies, needle sets and tubing products pursuant to the Company’s specifications and purchase orders. The first binding purchase order pursuant to the Manufacturing and Supply Agreement was made on November 17, 2020 (the “Effective Date”). The Manufacturing and Supply Agreement provides for a term of five years from the Effective Date. Either party may terminate the Manufacturing and Supply Agreement upon a material breach by the other Party that has not been cured within 90 days, upon the bankruptcy or insolvency of the other Party or as expressly set forth elsewhere in the Agreement. If the Company terminates the Manufacturing and Supply Agreement other than for those reasons within the first three years from the Effective Date, the Company is obligated to pay an early termination fee to Command. The Manufacturing and Supply Agreement also includes customary provisions relating to, among other things, delivery, inspection procedures, warranties, quality management, business continuity plans, handling and transport, intellectual property, confidentiality and indemnification. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 4 STOCK-BASED COMPENSATION On June 29, 2016, the Board of Directors amended the Company’s 2015 Stock Option Plan (as amended, the “Plan”) authorizing the Company to grant awards to certain executives, key employees, and consultants under the Plan, which was approved by shareholders at the Annual Meeting of Shareholders 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, may not exceed 6,000,000 pursuant to an amendment to the Plan approved by shareholders at their annual meeting on April 23, 2019. On January 15, 2021, under the Plan, the Company issued to James M. Beck, its Interim Chief Executive Officer, a non-qualified option to purchase up to 150,000 shares of the Company’s common stock at an exercise price of $4.37 per share, of which 100,000 vested on January 15, 2021 and 50,000 vested on March 22, 2021. On March 15, 2021, under the Plan, the Company issued to Linda Tharby, its incoming President and Chief Executive Officer, a non-qualified stock option to purchase up to 1,000,000 shares of the Company’s common stock at an exercise price of $3.875 per share, subject to vesting as follows: 25% on March 15, 2022 and 25% each twelve months thereafter. As of March 31, 2021, the Company had options to purchase 3,172,494 shares of Common Stock outstanding to certain executives, key employees and consultants under the Plan, of which 1,250,000 were issued during the three months ended March 31, 2021. Prior to January 1, 2021, each non-employee director of the Company was eligible to receive $50,000 annually (effective January 1, 2019), plus $10,000 for chairing a Board committee (effective February 20, 2019), all to be paid quarterly half in cash and half in common stock. The Chairman of the Board was eligible to receive an additional $50,000 annually (effective October 1, 2019), all to be paid in common stock. Effective January 1, 2021, each non-employee director of the Company (other than the Chairman of the Board) and Board advisor are eligible to receive of $75,000 annually, to be paid quarterly $12,500 in cash and $6,250 in common stock. The Chairman of the Board is eligible to receive $100,000 annually, to be paid quarterly $12,500 in cash and $12,500 in common stock. All payments were and are pro-rated for partial service. On May 20, 2020, the Company entered into a Settlement Agreement with EMED Technologies Corporation (“EMED”) to settle all claims in connection with all pending litigation matters between them. Pursuant to the Settlement Agreement, the Company issued to EMED (i) 95,238 restricted stock units, which vested on May 21, 2020 and 95,238 restricted stock units, which vested on January 1, 2021, and (ii) an option to purchase up to 400,000 shares of the Company’s common stock at an exercise price of $11.21 per share prior to February 1, 2021, which was not exercised. On February 16, 2021, Donald Pettigrew, the Company’s former Chief Executive Officer, exercised options held by him for an aggregate 1,000,000 shares of common stock for an aggregate exercise price of $1,230,000. On March 22, 2021, our Board of Directors adopted the 2021 Omnibus Equity Incentive Plan (the “2021 Equity Plan”), subject to approval of our shareholders at their annual meeting to be held on May 18, 2021. There have been no awards made pursuant to the 2021 Equity Plan to date. 2015 STOCK OPTION PLAN, as amended Time Based Stock Options The per share weighted average fair value of stock options granted during the three months ended March 31, 2021 and March 31, 2020 was $3.06 and zero, respectively. The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the three months ended March 31, 2021 and March 31, 2020. 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. We have recognized tax benefits associated with stock-based compensation of $43,067 and $15,598 for the three months ended March 31, 2021 and 2020, respectively. March 31, 2021 2020 Dividend yield 0.00% — Expected Volatility 74.01%-74.28% — Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 — Risk-free rate 1.2-1.62% — The following table summarizes the status of the Plan with respect to time based stock options: Three Months Ended March 31, 2021 2020 Shares Weighted Shares Weighted Outstanding at January 1 2,922,494 $ 2.46 3,647,000 $ 1.32 Granted 1,250,000 $ 3.94 — $ — Exercised 1,000,000 $ 1.23 175,000 $ 0.49 Forfeited — $ — — $ — Outstanding at March 31 3,172,494 $ 3.43 3,472,000 $ 1.36 Options exercisable at March 31 803,119 $ 2.09 1,306,635 $ 1.05 Weighted average fair value of options granted during the period — $ 3.06 — $ — Stock-based compensation expense $ 1,086,681 $ 175,239 Total stock-based compensation expense was $1,086,681 and $175,239 for the three months ended March 31, 2021 and March 31, 2020, respectively. Cash received from option exercises for the three months ended March 31, 2021 and 2020 was $1,230,000 and $85,500, respectively. The weighted-average grant-date fair value of options granted during the three months ended March 31, 2021 and March 31, 2020, was $3.8 million and zero, respectively. There were 1.0 million options exercised during the three months ended March 31, 2021 and 175,000 during the three months ended March 31, 2020. The following table presents information pertaining to options outstanding at March 31, 2021: Range of Exercise Price Number Weighted Weighted Number Weighted $0.50-$9.76 3,172,494 8.1 years $ 3.43 803,119 $ 2.09 As of March 31, 2021, there was $6.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 46 months. The total fair value of shares vested as of March 31, 2021 and March 31, 2020, was $1,230,434 and $868,012, respectively. Performance Based Stock Options The per share weighted average fair value of stock options granted during the three months ended March 31, 2021 and 2020 was zero for both periods. The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the three months ended March 31, 2021 and March 31, 2020. 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. March 31, 2021 2020 Dividend yield — — Expected Volatility — — Weighted-average volatility — — Expected dividends — — Expected term (in years) — — Risk-free rate — — The following table summarizes the status of the Plan with respect to performance based stock options: Three months Ended March 31, 2021 2020 Shares Weighted Shares Weighted Outstanding at January 1 1,000,000 $ 1.70 1,000,000 $ 1.70 Granted — $ — — $ — Exercised — $ — — $ — Forfeited 1,000,000 $ 1.70 — $ — Outstanding at March 31 — $ — 1,000,000 $ 1.70 Options exercisable at March 31 — $ — — $ — Weighted average fair value of options granted during the period — $ — — $ — Stock-based compensation expense — $ (408,747 ) — $ 125,727 Total performance stock-based compensation expense totaled ($408,747) and $125,727 for the three months ended March 31, 2021 and 2020, respectively. The weighted-average grant-date fair value of options granted during the three months ended March 31, 2021 and March 31, 2020, was zero for both periods. The following table presents information pertaining to performance-based options outstanding at March 31, 2021: Range of Exercise Price Number Weighted Weighted Number Weighted — — — $ — — $ — As of March 31, 2021, there was zero dollars of total unrecognized compensation cost related to non-vested performance share option based compensation arrangements granted under the Plan. The total fair value of shares vested as of March 31, 2021 and 2020 was zero for both periods. |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 3 Months Ended |
Mar. 31, 2021 | |
Debt Disclosure [Abstract] | |
DEBT OBLIGATIONS | NOTE 5 DEBT OBLIGATIONS On April 14, 2020, the Company issued a promissory note to KeyBank in the aggregate principal amount of $3.5 million (the “Note”) as an extension of its line of credit, replacing its then current line of credit agreement. The $3.5 million Note is in the form of a variable rate non-disclosable revolving line of credit with an interest rate of Prime Rate announced by the Bank minus 0.75%. Interest is due monthly, and all principal and unpaid interest is due on June 1, 2021. The $3.5 million Note may be prepaid at any time prior to maturity with no prepayment penalties. The $3.5 million Note contains events of default and other provisions customary for a loan of this type. In connection with the Note, the Company entered into a Commercial Security Agreement with the Bank dated April 14, 2020 (the “Security Agreement”), pursuant to which the Company granted a security interest in substantially all assets of the Company to secure the obligations of the Company under the Note. The Security Agreement contains terms and conditions typical for the granting of security interests of this kind. The Company had no amount outstanding against the line of credit as of March 31, 2021. On April 27, 2020, the Company entered into a Progress Payment Loan and Security Agreement (“PPLSA”) and a Master Security Agreement (the “MSA”), each dated as of April 20, 2020, with Key Equipment Finance, a division of the Bank (“KEF”), to provide up to $2.5 million in financing for equipment purchases from third party vendors. The PPLSA allows the Company to make draws with KEF to make certain payments to the equipment suppliers prior to the commencement of periodic payments under a term loan. Each draw under the PPLSA will bear interest at a variable rate equal to the then-current Prime Rate and will be secured by the financed equipment under the MSA. At the end of each calendar quarter or year, the advances made under the PPLSA will be converted to term loans, subject to KEF’s approval of the equipment and certain other closing conditions being met. Once the draws under the PPLSA are converted into a term loan, each promissory note will bear interest at a fixed rate of 4.07% per annum, subject to adjustment based on KEF’s cost of funds, with principal and interest payable in 84 equal consecutive monthly installments. Each fixed rate installment promissory note may be prepaid, subject to a penalty if prepaid before the fifth anniversary of its issuance. As of March 31, 2021, the Company had no amount outstanding against the PPLSA. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
LEASES | NOTE 6 LEASES We have finance and operating leases for our corporate office and certain office and computer equipment. Our leases have remaining lease terms of 1 to 2 years, some of which include options to extend the leases annually and some with options to terminate the leases within 1 year. The components of lease expense were as follows: Three Months Ended March 31, 2021 2020 Operating lease cost $ 37,921 $ 37,922 Short-term lease cost 34,889 5,457 Total lease cost $ 72,810 $ 43,379 Finance lease cost: Amortization of right-of-use assets $ 795 $ 1,856 Interest on lease liabilities 28 87 Total finance lease cost $ 823 $ 1,943 Supplemental cash flow information related to leases was as follows: Three Months Ended March 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 35,248 $ 33,616 Financing cash flows from finance leases 803 1,848 Supplemental balance sheet information related to leases was as follows: March 31, December 31, Operating Leases Operating lease right-of-use assets $ 201,598 $ 236,846 Operating lease current liabilities 141,869 141,293 Operating lease long term liabilities 59,729 95,553 Total operating lease liabilities $ 201,598 $ 236,846 Finance Leases Property and equipment, at cost $ 12,725 $ 12,725 Accumulated depreciation (10,934 ) (10,139 ) Property and equipment, net $ 1,791 $ 2,586 Finance lease current liabilities 1,843 2,646 Finance lease long term liabilities — — Total finance lease liabilities $ 1,843 $ 2,646 March 31, December 31, Weighted Average Remaining Lease Term Operating leases 1.1 Years 1.4 Years Finance leases 0.5 Years 0.7 Years Weighted Average Discount Rate Operating leases 4.75% 4.75% Finance leases 4.75% 4.75% Maturities of lease liabilities are as follows: Year Ending December 31, Operating Leases Finance Leases 2021 (excluding the three months ended March 31, 2021) 111,554 1,873 2022 97,257 — 2023 — — 2024 — — 2025 — — Thereafter — — Total undiscounted lease payments 208,811 1,873 Less: imputed interest (7,213 ) (30 ) Total lease liabilities $ 201,598 $ 1,843 |
EQUITY
EQUITY | 3 Months Ended |
Mar. 31, 2021 | |
Equity [Abstract] | |
EQUITY | NOTE 7 EQUITY On June 18, 2020, the Company entered into a Purchase Agreement with Piper Sandler & Co. and Canaccord Genuity LLC, as representatives of the several underwriters named therein (the “Underwriters”), pursuant to which the Company agreed to issue and sell 3,125,000 shares of its common stock. Under the terms of the Purchase Agreement, the Company granted to the Underwriters an option, exercisable for a period of 30 days, to purchase up to an additional 468,750 shares of the Company’s common stock, which the Underwriters exercised in full on June 19, 2020. The Underwriters purchased the shares pursuant to the Purchase Agreement, including the shares subject to the option, at a price of $7.52 per share. Proceeds to the Company, net of discounts, commissions, fees and expenses, were $26.6 million. On November 16, 2020, the Company announced that its Board of Directors had authorized a stock repurchase program under which the Company may purchase up to $10.0 million of its outstanding common stock through December 31, 2021. As of March 31, 2021, the Company had purchased 683,271 shares for an aggregate $3,499,358 pursuant to this program. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2021 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENT | NOTE 8 SUBSEQUENT EVENTS On April 12, 2021, pursuant to an employment agreement entered into on March 15, 2021 with Linda Tharby, the Company’s President and Chief Executive Officer, the Company issued three restricted stock awards as follows, each vesting subject to employment on the respective vesting date: (1) 600,000 shares of common stock to vest vesting as follows: if the Company’s Net Sales Growth (defined below) for any of the fiscal years ended December 31, 2022, 2023, 2024 or 2025 (each, a “Target Year”) is at least the applicable Net Sales Target set forth on the schedule to the restricted stock award agreement, then, on the applicable Vesting Date, a corresponding portion of the restricted stock award will vest as set forth on such schedule. Additionally, if Net Sales Growth is less than any of the Net Sales Targets set forth in such schedule in any Target Year (a “Miss Year”), vesting of the restricted stock award in the following Target Years (each such subsequent Target Year, a “Catch-up Year”) shall be further subject to the following catch-up vesting provisions: if the Net Sales Growth in the Miss Year(s) when averaged with the Net Sales in each Catch-up Year(s) equals or exceeds a Net Sales Target in any single Miss Year that has not previously been obtained, then on the applicable Vesting Date, an additional portion of the Award shall vest as if the applicable Net Sales Target had been met in the Miss Year(s). Notwithstanding the foregoing, the restricted stock award shall automatically vest in full upon the Company maintaining, for a period of at least two consecutive fiscal quarters after January 1, 2022, at least a specified run rate over the previous four fiscal quarters, as reported in the Company’s filings pursuant to the Securities Exchange Act of 1934, as amended. (2) 200,000 shares of common stock vesting 25% on April 12, 2022 and 25% on each twelve months thereafter. (3) 200,000 shares of common stock, vesting as follows: (i) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control (as defined in the employment agreement) of the Company with an enterprise value of, at least $500,000,000 but less than $600,000,000; (ii) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $600,000,000 but less than $750,000,000; and (iii) 100,000 shares on the date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $750,000,000. “Market Capitalization” shall be determined by (A) multiplying the number of shares reported as outstanding on the cover of the Company’s most recent Form 10-K or 10-Q, as applicable, as filed with the Securities and Exchange Commission, by (B) the Fair Market Value of the Common Stock (as defined in the Company’s 2015 Stock Option Plan, as amended) on each day. Notwithstanding the foregoing, no portion of the restricted stock award shall vest on or following the fifth anniversary of the award date. On April 12, 2021, the Company entered into a Transition Services Agreement with James M. Beck, its then Interim Chief Executive Officer, which terminated his employment agreement dated January 22, 2021 and provides for his transition services for a period of thirty days in exchange for $119,500, to be paid in two cash installments in accordance with the Company’s regular payroll. |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. d/b/a KORU Medical Systems (the “Company,” “KORU Medical,” “we,” “us” or “our”) designs, manufactures and markets proprietary portable and innovative medical devices primarily for the ambulatory infusion market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality system management. The Company operates as one segment. |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2020 (“Annual Report”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with United States generally accepted accounting principles (“GAAP”) have been condensed or omitted from the accompanying financial statements. The accompanying year-end balance sheet was derived from the audited financial statements included in the Annual Report. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal, recurring nature. The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods. |
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company holds cash in excess of $250,000 at its depository, which exceeds the FDIC insurance limits and is, therefore, uninsured. |
INVENTORY | 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 2018 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 stock option plan under which it grants stock options to certain executives, key employees and consultants. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted for director fees are recorded at the fair value of the shares at the grant date. |
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 consultant stock options. See “NOTE 4 — STOCK-BASED COMPENSATION” for further detail. Three Months Ended March 31, 2021 March 31, 2020 Net (loss)/income $ (1,276,138 ) $ 449,428 Weighted Average Outstanding Shares: Outstanding shares 43,960,936 39,675,107 Option shares includable — (a) 199,882 43,960,936 39,874,989 Net income per share Basic $ (0.03 ) $ 0.01 Diluted $ (0.03 ) $ 0.01 __________ (a) Option shares of 183,681 were not included as the impact is anti-dilutive. |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to asset lives, valuation allowances, inventory valuation, and accruals. |
REVENUE RECOGNITION | REVENUE RECOGNITION The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers 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 growth rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it is probable the annual growth target will be achieved. Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. The following table summarizes net sales by geography for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Sales Domestic $ 4,446,789 $ 5,340,866 International 984,162 989,143 Total $ 5,430,951 $ 6,330,009 |
LEASES | LEASES In February 2016, the FASB issued a standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by the Company for those leases classified as operating leases under current GAAP, while our accounting for capital leases remains substantially unchanged. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard became effective for us on January 1, 2019. The standard had a material impact on our balance sheets but did not have a material impact on our statements of operations. See “NOTE 6 — |
ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED | ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes |
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED | ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) 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 MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. • Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and includes instruments for which the determination of fair value requires significant judgment or estimation. The carrying amounts of cash and cash equivalents, accounts receivable, prepaid expenses, accounts payable and accrued expenses are considered to be representative of their fair values because of the short-term nature of those instruments. There were no transfers between levels in the fair value hierarchy during the three months ended March 31, 2021. |
IMPAIRMENT OF LONG-LIVED ASSETS | IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value. No impairment losses have been recorded through March 31, 2021. |
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) | 3 Months Ended |
Mar. 31, 2021 | |
Accounting Policies [Abstract] | |
Schedule of net income per common share | Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee and consultant stock options. See “NOTE 4 — STOCK-BASED COMPENSATION” for further detail. Three Months Ended March 31, 2021 March 31, 2020 Net (loss)/income $ (1,276,138 ) $ 449,428 Weighted Average Outstanding Shares: Outstanding shares 43,960,936 39,675,107 Option shares includable — (a) 199,882 43,960,936 39,874,989 Net income per share Basic $ (0.03 ) $ 0.01 Diluted $ (0.03 ) $ 0.01 __________ (a) Option shares of 183,681 were not included as the impact is anti-dilutive. |
Schedule of net sales by geography | The following table summarizes net sales by geography for the three months ended March 31, 2021 and 2020: Three Months Ended March 31, 2021 2020 Sales Domestic $ 4,446,789 $ 5,340,866 International 984,162 989,143 Total $ 5,430,951 $ 6,330,009 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following at: March 31, 2021 December 31, 2020 Furniture and office equipment $ 770,240 $ 753,536 Leasehold improvements 544,896 542,796 Manufacturing equipment and tooling 1,919,915 1,856,909 Total property and equipment 3,235,051 3,153,241 Less: accumulated depreciation and amortization (2,080,683 ) (1,985,618 ) Property and equipment, net $ 1,154,368 $ 1,167,623 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of fair value of the stock options granted Black-Scholes option valuation model | We have recognized tax benefits associated with stock-based compensation of $43,067 and $15,598 for the three months ended March 31, 2021 and 2020, respectively. March 31, 2021 2020 Dividend yield 0.00% — Expected Volatility 74.01%-74.28% — Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 — Risk-free rate 1.2-1.62% — |
Schedule of stock option plan | The following table summarizes the status of the Plan with respect to time based stock options: Three Months Ended March 31, 2021 2020 Shares Weighted Shares Weighted Outstanding at January 1 2,922,494 $ 2.46 3,647,000 $ 1.32 Granted 1,250,000 $ 3.94 — $ — Exercised 1,000,000 $ 1.23 175,000 $ 0.49 Forfeited — $ — — $ — Outstanding at March 31 3,172,494 $ 3.43 3,472,000 $ 1.36 Options exercisable at March 31 803,119 $ 2.09 1,306,635 $ 1.05 Weighted average fair value of options granted during the period — $ 3.06 — $ — Stock-based compensation expense $ 1,086,681 $ 175,239 |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at March 31, 2021: Range of Exercise Price Number Weighted Weighted Number Weighted $0.50-$9.76 3,172,494 8.1 years $ 3.43 803,119 $ 2.09 |
Schedule of performance base share options | Treasury issues with a term equal to the expected life of the option being valued. March 31, 2021 2020 Dividend yield — — Expected Volatility — — Weighted-average volatility — — Expected dividends — — Expected term (in years) — — Risk-free rate — — |
Schedule of performance base options outstanding | The following table summarizes the status of the Plan with respect to performance based stock options: Three months Ended March 31, 2021 2020 Shares Weighted Shares Weighted Outstanding at January 1 1,000,000 $ 1.70 1,000,000 $ 1.70 Granted — $ — — $ — Exercised — $ — — $ — Forfeited 1,000,000 $ 1.70 — $ — Outstanding at March 31 — $ — 1,000,000 $ 1.70 Options exercisable at March 31 — $ — — $ — Weighted average fair value of options granted during the period — $ — — $ — Stock-based compensation expense — $ (408,747 ) — $ 125,727 |
Schedule of information pertaining to performance base options outstanding | The following table presents information pertaining to performance-based options outstanding at March 31, 2021: Range of Exercise Price Number Weighted Weighted Number Weighted — — — $ — — $ — |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Leases [Abstract] | |
Schedule of components of lease expense | The components of lease expense were as follows: Three Months Ended March 31, 2021 2020 Operating lease cost $ 37,921 $ 37,922 Short-term lease cost 34,889 5,457 Total lease cost $ 72,810 $ 43,379 Finance lease cost: Amortization of right-of-use assets $ 795 $ 1,856 Interest on lease liabilities 28 87 Total finance lease cost $ 823 $ 1,943 |
Schedule of cash flow information related to leases | Supplemental cash flow information related to leases was as follows: Three Months Ended March 31, 2021 2020 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 35,248 $ 33,616 Financing cash flows from finance leases 803 1,848 |
Schdeule of balance sheet information related to leases | Supplemental balance sheet information related to leases was as follows: March 31, December 31, Operating Leases Operating lease right-of-use assets $ 201,598 $ 236,846 Operating lease current liabilities 141,869 141,293 Operating lease long term liabilities 59,729 95,553 Total operating lease liabilities $ 201,598 $ 236,846 Finance Leases Property and equipment, at cost $ 12,725 $ 12,725 Accumulated depreciation (10,934 ) (10,139 ) Property and equipment, net $ 1,791 $ 2,586 Finance lease current liabilities 1,843 2,646 Finance lease long term liabilities — — Total finance lease liabilities $ 1,843 $ 2,646 March 31, December 31, Weighted Average Remaining Lease Term Operating leases 1.1 Years 1.4 Years Finance leases 0.5 Years 0.7 Years Weighted Average Discount Rate Operating leases 4.75% 4.75% Finance leases 4.75% 4.75% |
Schedule of maturities of lease liabilities | Maturities of lease liabilities are as follows: Year Ending December 31, Operating Leases Finance Leases 2021 (excluding the three months ended March 31, 2021) 111,554 1,873 2022 97,257 — 2023 — — 2024 — — 2025 — — Thereafter — — Total undiscounted lease payments 208,811 1,873 Less: imputed interest (7,213 ) (30 ) Total lease liabilities $ 201,598 $ 1,843 |
NATURE OF OPERATIONS AND SUMM_4
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | ||
Accounting Policies [Abstract] | |||
Net (loss)/income | $ (1,276,138) | $ 449,428 | |
Weighted Average Outstanding Shares: | |||
Outstanding shares | 43,960,936 | 39,675,107 | |
Option shares includable | [1] | 199,882 | |
Total | 43,960,936 | 39,874,989 | |
Net income per share | |||
Basic (in dollars per share) | $ (0.03) | $ 0.01 | |
Diluted (in dollars per share) | $ (0.03) | $ 0.01 | |
[1] | Option shares of 183,681 were not included as the impact is anti-dilutive. |
NATURE OF OPERATIONS AND SUMM_5
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Net sales | $ 5,430,951 | $ 6,330,009 |
Domestic [Member] | ||
Net sales | 4,446,789 | 5,340,866 |
International [Member] | ||
Net sales | $ 984,162 | $ 989,143 |
NATURE OF OPERATIONS AND SUMM_6
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 3 Months Ended |
Mar. 31, 2021USD ($)Segmentshares | |
Number of segments | Segment | 1 |
FDIC cash uninsured amount | $ | $ 250,000 |
Option [Member] | |
Anti-dilutive shares | shares | 183,681 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Total property and equipment | $ 3,235,051 | $ 3,153,241 |
Less: accumulated depreciation and amortization | (2,080,683) | (1,985,618) |
Property and equipment, net | 1,154,368 | 1,167,623 |
Furniture and Office Equipment [Member] | ||
Total property and equipment | 770,240 | 753,536 |
Leasehold Improvements [Member] | ||
Total property and equipment | 544,896 | 542,796 |
Manufacturing Equipment And Tooling [Member] | ||
Total property and equipment | $ 1,919,915 | $ 1,856,909 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 100,403 | $ 72,768 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - 2015 Stock Option Plan [Member] - Time Based Shares Options [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Dividend yield | 0.00% | |
Weighted-average volatility | ||
Expected dividends | ||
Expected term (in years) | 10 years | |
Minimum [Member] | ||
Expected Volatility | 74.01% | |
Risk-free rate | 1.20% | |
Maximum [Member] | ||
Expected Volatility | 74.28% | |
Risk-free rate | 1.62% |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details 1) - 2015 Stock Option Plan [Member] - Time Based Shares Options [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 2,922,494 | 3,647,000 |
Granted | 1,250,000 | |
Exercised | 1,000,000 | 175,000 |
Forfeited | ||
Outstanding at ending | 3,172,494 | 3,472,000 |
Options exercisable at ending | 803,119 | 1,306,635 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 2.46 | $ 1.32 |
Granted | 3.94 | |
Exercised | 1.23 | 0.49 |
Forfeited | ||
Outstanding at ending | 3.43 | 1.36 |
Options exercisable at ending | 2.09 | 1.05 |
Weighted average fair value of options granted during the period | $ 3.06 | $ 0 |
Stock-based compensation expense | $ 1,086,681 | $ 175,239 |
STOCK-BASED COMPENSATION (Det_3
STOCK-BASED COMPENSATION (Details 2) - 2015 Stock Option Plan [Member] - $ 0.50 - 9.76 [Member] - Time Based Shares Options [Member] | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Number Outstanding | shares | 3,172,494 |
Weighted Average Remaining Contractual Term | 8 years 1 month 6 days |
Weighted Average Exercise Price | $ / shares | $ 3.43 |
Number Exercisable | shares | 803,119 |
Weighted Average Exercise Price | $ / shares | $ 2.09 |
STOCK-BASED COMPENSATION (Det_4
STOCK-BASED COMPENSATION (Details 3) - 2015 Stock Option Plan [Member] - Performance Based Share Options [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Dividend yield | ||
Expected Volatility | ||
Weighted-average volatility | ||
Expected dividends | ||
Risk-free rate |
STOCK-BASED COMPENSATION (Det_5
STOCK-BASED COMPENSATION (Details 4) - 2015 Stock Option Plan [Member] - Performance Based Share Options [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 1,000,000 | 1,000,000 |
Granted | ||
Exercised | ||
Forfeited | 1,000,000 | |
Outstanding at ending | 1,000,000 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 1.7 | $ 1.7 |
Granted | ||
Exercised | ||
Forfeited | 1.7 | |
Outstanding at ending | 1.7 | |
Options exercisable at ending | ||
Weighted average fair value of options granted during the period | ||
Stock-based compensation expense | $ (408,747) | $ 125,727 |
STOCK-BASED COMPENSATION (Det_6
STOCK-BASED COMPENSATION (Details 5) - 2015 Stock Option Plan [Member] - Performance Based Share Options [Member] - $1.70 [Member] | 3 Months Ended |
Mar. 31, 2021$ / sharesshares | |
Number Outstanding | shares | |
Weighted Average Remaining Contractual Term | |
Weighted Average Exercise Price | $ / shares | |
Number Exercisable | shares | |
Weighted Average Exercise Price | $ / shares |
STOCK-BASED COMPENSATION (Det_7
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Mar. 22, 2021 | Mar. 15, 2021 | Feb. 16, 2021 | Jan. 15, 2021 | Jan. 02, 2021 | Oct. 01, 2019 | May 20, 2019 | Apr. 23, 2019 | Jan. 02, 2019 | Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Non-Employee Director [Member] | |||||||||||||
Nonemployee services transaction cost | $ 50,000 | ||||||||||||
Amount for chairing board committee | $ 10,000 | ||||||||||||
Board of Directors Chairman [Member] | |||||||||||||
Nonemployee services transaction cost | $ 100,000 | $ 50,000 | |||||||||||
Description of non employee services transaction | To be paid quarterly $12,500 in cash and $12,500 in common stock. | ||||||||||||
Non-Employee Director and Board Advisor [Member] | |||||||||||||
Nonemployee services transaction cost | $ 75,000 | ||||||||||||
Description of non employee services transaction | To be paid quarterly $12,500 in cash and $6,250 in common stock. | ||||||||||||
Settlement Agreement [Member] | EMED Technologies Corporation [Member] | |||||||||||||
Description of vesting rights | the Company issued to EMED (i) 95,238 restricted stock units, which vested on May 21, 2020 and 95,238 restricted stock units, which vested on January 1, 2021, and (ii) an option to purchase up to 400,000 shares of the Company’s common stock at an exercise price of $11.21 per share prior to February 1, 2021, which was not exercised. | ||||||||||||
Employees and Consultants under the Plan [Member] | |||||||||||||
Number of stock option shares | 1,250,000 | ||||||||||||
Number of stock option shares issued | 3,172,494 | ||||||||||||
2015 Stock Option Plan [Member] | |||||||||||||
Number of stock option shares | 6,000,000 | ||||||||||||
2015 Stock Option Plan [Member] | Time Based Shares Options [Member] | |||||||||||||
Weighted average grant date fair value of stock options | $ 3.06 | $ 0 | |||||||||||
Allocated stock-based compensation expense | $ 1,086,681 | $ 175,239 | |||||||||||
Weighted-average grant-date fair value options granted | 3,800,000 | 0 | |||||||||||
Total unrecognized compensation cost | $ 6,100,000 | ||||||||||||
Weighted-average period (in years) | 46 months | ||||||||||||
Total fair value of shares vested | $ 1,230,434 | $ 868,012 | |||||||||||
Number of options outstanding | 3,172,494 | 3,472,000 | 2,922,494 | 3,647,000 | |||||||||
Cash received from option exercises | $ 1,230,000 | $ 85,500 | |||||||||||
Number of options exercised | 1,000,000 | 175,000 | |||||||||||
Tax benefits associated with stock-based compensation | $ 43,067 | $ 15,598 | |||||||||||
Stock-based compensation expense | $ 1,086,681 | $ 175,239 | |||||||||||
2015 Stock Option Plan [Member] | Performance Based Share Options [Member] | |||||||||||||
Weighted average grant date fair value of stock options | |||||||||||||
Allocated stock-based compensation expense | $ (408,747) | $ 125,727 | |||||||||||
Total unrecognized compensation cost | 0 | ||||||||||||
Total fair value of shares vested | $ 0 | $ 0 | |||||||||||
Number of options outstanding | 1,000,000 | 1,000,000 | 1,000,000 | ||||||||||
Stock-based compensation expense | $ (408,747) | $ 125,727 | |||||||||||
Donald Pettigrew [Member] | |||||||||||||
Cash received from option exercises | $ 1,230,000 | ||||||||||||
Number of options exercised | 1,000,000 | ||||||||||||
Linda Tharby [Member] | |||||||||||||
Number of stock option shares issued | 1,000,000 | ||||||||||||
exercise price | $ 3.875 | ||||||||||||
Description of vesting rights | 25% on March 15, 2022 and 25% each twelve months thereafter. | ||||||||||||
James M. Beck [Member] | |||||||||||||
Number of stock option shares issued | 150,000 | ||||||||||||
exercise price | $ 4.37 | ||||||||||||
Number of shares vested | 50,000 | 100,000 |
DEBT OBLIGATIONS (Details Narra
DEBT OBLIGATIONS (Details Narrative) - USD ($) | Apr. 27, 2020 | Apr. 14, 2020 | Mar. 31, 2021 |
Promissory Note [Member] | Revolving Credit Facility [Member] | KeyBank National Association [Member] | |||
Face amount | $ 3,500,000 | ||
KeyBank National Association [Member] | Promissory Note [Member] | |||
Face amount | $ 3,500,000 | ||
KeyBank National Association [Member] | Promissory Note [Member] | Non-Disclosable Revolving Line of Credit [Member] | |||
Face amount | $ 3,500,000 | ||
Interest rate terms | Prime Rate announced by the Bank minus 0.75% | ||
Debt instrument, principal and unpaid interest due | Jun. 1, 2021 | ||
Debt instrument, prepaid terms | Any time prior to maturity with no prepayment penalties. | ||
Key Equipment Finance [Member] | Progress Payment Loan and Security Agreement And Master Security Agreement [Member] | |||
Interest rate terms | Fixed rate of 4.07% per annum | ||
Loans, principal amount | $ 2,500,000 | ||
Principal and interest payable terms | 84 equal consecutive monthly installments. |
LEASES (Details)
LEASES (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Leases [Abstract] | ||
Operating lease cost | $ 37,921 | $ 37,922 |
Short-term lease cost | 34,889 | 5,457 |
Total lease cost | 72,810 | 43,379 |
Finance lease cost: | ||
Amortization of right-of-use assets | 795 | 1,856 |
Interest on lease liabilities | 28 | 87 |
Total finance lease cost | $ 823 | $ 1,943 |
LEASES (Details 1)
LEASES (Details 1) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 35,248 | $ 33,616 |
Financing cash flows from finance leases | $ 803 | $ 1,848 |
LEASES (Details 2)
LEASES (Details 2) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Operating Leases | ||
Operating lease right-of-use assets | $ 201,598 | $ 236,846 |
Operating lease current liabilities | 141,869 | 141,293 |
Operating lease long term liabilities | 59,729 | 95,553 |
Total operating lease liabilities | 201,598 | 236,846 |
Finance Leases | ||
Property and equipment, at cost | 12,725 | 12,725 |
Accumulated depreciation | (10,934) | (10,139) |
Property and equipment, net | 1,791 | 2,586 |
Finance lease current liabilities | 1,843 | 2,646 |
Finance lease long term liabilities | ||
Total finance lease liabilities | $ 1,843 | $ 2,646 |
LEASES (Details 3)
LEASES (Details 3) | Mar. 31, 2021 | Dec. 31, 2020 |
Weighted Average Remaining Lease Term | ||
Operating leases | 1 year 1 month 6 days | 1 year 4 months 24 days |
Finance leases | 6 months | 8 months 12 days |
Weighted Average Discount Rate | ||
Operating leases | 4.75% | 4.75% |
Finance leases | 4.75% | 4.75% |
LEASES (Details 4)
LEASES (Details 4) - USD ($) | Mar. 31, 2021 | Dec. 31, 2020 |
Operating Leases | ||
2021 (excluding the three months ended March 31, 2021) | $ 111,554 | |
2022 | 97,257 | |
2023 | ||
2024 | ||
2025 | ||
Thereafter | ||
Total undiscounted operating lease payments | 208,811 | |
Less: imputed interest | (7,213) | |
Total operating lease liabilities | 201,598 | $ 236,846 |
Finance Leases | ||
2021 (excluding the three months ended March 31, 2021) | 1,873 | |
2022 | ||
2023 | ||
2024 | ||
2025 | ||
Thereafter | ||
Total undiscounted finance lease payments | 1,873 | |
Less: imputed interest | (30) | |
Total finance lease liabilities | $ 1,843 | $ 2,646 |
LEASES (Details Narrative)
LEASES (Details Narrative) | 3 Months Ended |
Mar. 31, 2021 | |
Operating lease, options to terminate | 1 year |
Minimum [Member] | |
Operating lease, renewal term | 1 year |
Maximum [Member] | |
Operating lease, renewal term | 2 years |
EQUITY (Details Narrative)
EQUITY (Details Narrative) - USD ($) | Nov. 16, 2020 | Jun. 18, 2020 | Mar. 31, 2021 |
Number of shares repurchased | 683,271 | ||
Aggregate amount stock repurchase | $ 3,499,358 | ||
Maximum amount of stock repurchase program | $ 10,000,000 | ||
Purchase Agreement [Member] | Piper Sandler & Co. and Canaccord Genuity LLC [Member] | Common Stock [Member] | |||
Number of shares issued | 3,125,000 | ||
Option to purchase additional number of shares | 468,750 | ||
Share price (in dollars per share) | $ 7.52 | ||
Proceeds from issuance | $ 26,600,000 | ||
Option excercise date | Jun. 19, 2020 | ||
Option excercise period | 30 days |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - USD ($) | Apr. 12, 2022 | Apr. 12, 2021 |
Transition Services Agreement [Member] | Mr. Beck [Member] | ||
Subsequent Event [Line Items] | ||
Exchange amount for transition services | $ 119,500 | |
Restricted Stock Award [Member] | Tranche One [Member] | ||
Subsequent Event [Line Items] | ||
Number of stock vested | 600,000 | |
Description of vesting of shares | if the Company’s Net Sales Growth (defined below) for any of the fiscal years ended December 31, 2022, 2023, 2024 or 2025 (each, a “Target Year”) is at least the applicable Net Sales Target set forth on the schedule to the restricted stock award agreement, then, on the applicable Vesting Date, a corresponding portion of the restricted stock award will vest as set forth on such schedule. | |
Restricted Stock Award [Member] | Tranche Two [Member] | ||
Subsequent Event [Line Items] | ||
Number of stock vested | 200,000 | |
Description of vesting of shares | (2) 200,000 shares of common stock vesting 25% on April 12, 2022 and 25% on each twelve months thereafter. | |
Restricted Stock Award [Member] | Tranche Three [Member] | ||
Subsequent Event [Line Items] | ||
Number of stock vested | 200,000 | |
Description of vesting of shares | (i) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control (as defined in the employment agreement) of the Company with an enterprise value of, at least $500,000,000 but less than $600,000,000; (ii) 50,000 shares on the first date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $600,000,000 but less than $750,000,000; and (iii) 100,000 shares on the date on which the Company’s Market Capitalization for a period of 90 consecutive days has been, or there has been a Change of Control of the Company with an enterprise value of, at least $750,000,000. |