UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF 1934 For the quarterly period ended AUGUST 31, 2007 --------------- Commission File Number 0-12305 ------- REPRO-MED SYSTEMS, INC. ----------------------- (Exact name of registrant as specified in its charter) NEW YORK 13-3044880 -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 24 CARPENTER ROAD, CHESTER, NY 10918 ------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (845) 469-2042 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ( X ) No ( ) Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at August 31, 2007 ----- ----------------------------- Common stock, $.01 par value 32,779,286 shares REPRO-MED SYSTEMS, INC. TABLE OF CONTENTS PART I PAGE ---- ITEM 1. Financial Statements Balance Sheet (Unaudited) - August 31, 2007 and February 28, 2007 (Audited) ....................................... 3 Statements of Operations (Unaudited) - for the three-months Ending August 31, 2007 and August 31, 2006 ........................ 4 Statements of Cash Flow (Unaudited) - for the three months Ending August 31, 2007 and August 31, 2006 ........................ 5 Notes to Unaudited Financial Statements ........................... 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 7 PART II ITEM 1. Legal Proceedings ................................................. 12 ITEM 2. Changes in Securities ............................................. 12 ITEM 3. Defaults Upon Senior Securities ................................... 12 ITEM 4. Submission of Matters to a Vote of Security Holders ............... 12 ITEM 5. Other Information ................................................. 12 ITEM 6. Exhibits and Reports on Form 8-K .................................. 12 2 REPRO-MED SYSTEMS, INC. BALANCE SHEETS ASSETS AUGUST 31, 2007 FEBRUARY 28, 2007 (UNAUDITED) (AUDITED) --------------- ----------------- CURRENT ASSETS: Cash .................................................................. $ 70,046 $ 99,421 Accounts Receivable less allowance for doubtful accounts of $24,046 and $21,950 for August 31, 2007 and February 28 2007 respectively .. 252,493 214,446 Inventory ........................................................... 513,054 489,738 Prepaid Expenses .................................................... 25,876 10,310 ----------- ----------- TOTAL CURRENT ASSETS .................................................. 861,469 813,915 PROPERTY & EQUIPMENT, less accumulated depreciation of $1,095,662 and $1,066,329 for August 31, 2007 and February 28, 2007, respectively .. 197,281 220,515 OTHER ASSETS: Patents, net of accumulated amortization of $81,224 and $78,675 for August 31, 2007 and February 28, 2007 respectively .................. 44,300 40,588 Goodwill, net of accumulated amortization of $5,708 and $5,528 for August 31, 2007 and February 28, 2007, respectively ................. 8,429 8,609 Security Deposits ................................................... 28,156 54,802 ----------- ----------- TOTAL OTHER ASSETS .................................................... 80,885 103,999 ----------- ----------- TOTAL ASSETS ............................................................ $ 1,139,636 $ 1,138,429 =========== =========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) CURRENT LIABILITIES Notes payable to related parties .................................... $ 68,035 $ 71,274 Accounts Payable .................................................... 480,657 443,440 Accrued Expenses .................................................... 71,039 46,179 Accrued Interest .................................................... 48,907 44,565 Current Portion of capital lease obligations ........................ - 617 Accrued Preferred stock dividends ................................... 48,000 44,000 Accrued payroll and related taxes ................................... 12,356 9,408 ----------- ----------- TOTAL CURRENT LIABILITIES ............................................... 728,994 659,483 OTHER LIABILITIES Deferred capital gain ............................................... 258,536 269,776 Long-term debt - notes payable ...................................... 855,000 855,000 ----------- ----------- TOTAL OTHER LIABILITIES ............................................... 1,113,536 1,124,776 ----------- ----------- TOTAL LIABILITIES ....................................................... $ 1,842,530 $ 1,784,259 STOCKHOLDERS' DEFICIT Preferred Stock, 8% cumulative, liquidation value $100,000, $0.01 par value, 2,000,000 shares authorized, 10,000 shares issued and outstanding 2007 and 2006, respectively ............................. 100 100 Common Stock, $0.01 par value, 50,000,000 shares authorized, 32,779,286 and 31,033,286 issued and outstanding at August 31, 2007 and February 28, 2007, respectively ................................. 352,543 310,333 Additional paid-in Capital .......................................... 2,641,628 2,612,748 Accumulated deficit ................................................. (3,555,165) (3,427,011) ----------- ----------- (560,894) (503,830) Less: Treasury Stock, 2,275,000 shares at cost at August 31, 2007 and February 28, 2007 respectively ...................................... (142,000) (142,000) ----------- ----------- Total Stockholders' Deficit ........................................... (702,894) (645,830) ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT ............................. $ 1,139,636 $ 1,138,429 =========== =========== See Accompanying Notes to Financial Statements 3 REPRO-MED SYSTEMS, INC. STATEMENT OF OPERATIONS UNAUDITED FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED AUGUST 31, AUGUST 31, ---------------------------- ---------------------------- 2007 2006 2007 2006 ------------ ------------ ------------ ------------ NET SALES ......................................... $ 605,946 $ 416,009 $ 1,003,364 $ 763,733 COST AND EXPENES Cost of goods Sold .............................. 189,827 144,690 389,433 295,000 Selling, general and administrative ............. 317,956 224,169 579,461 510,111 Research and development ........................ 12,358 11,567 26,111 21,632 Depreciation and amortization ................... 16,001 15,886 32,062 35,096 ------------ ------------ ------------ ------------ TOTAL COSTS AND EXPENSES .......................... 536,143 396,312 1,027,067 861,839 ============ ============ ============ ============ NET OPERATING PROFIT (LOSS) ....................... 69,804 19,697 (23,703) (98,106) OTHER INCOME/(EXPENSES) Stock based compensation to obtain loan financing (2,250) (71,300) (71,090) (71,300) Interest Expense ................................ (13,187) (27,600) (29,872) (47,063) Other Financing Costs ........................... - (10,000) - (10,000) Interest and Other Income ....................... - 54 512 54 ------------ ------------ ------------ ------------ TOTAL OTHER INCOME/(EXPENSE) ...................... (15,437) (108,846) (100,450) (128,309) ------------ ------------ ------------ ------------ NET PROFIT (LOSS) BEFOR TAXES ................... 54,367 (89,149) (124,153) (226,415) Provision for Income Taxes .................... - - - (1,000) ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ NET PROFIT (LOSS) AFTER TAXES ................... $ 54,367 $ (89,149) $ (124,153) $ (227,415) ============ ============ ============ ============ NET LOSS PER COMMON SHARE ......................... 0.01 (0.01) (0.01) (0.01) ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ........ 31,903,275 30,613,286 ============ ============ See Accompanying Notes to Financial Statements 4 REPRO-MED SYSTEMS, INC STATEMENT OF CASH FLOWS UNAUDITED FOR THE SIX MONTHS ENDED AUGUST 31, ------------------------- 2007 2006 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss .................................................................. $ (124,153) $ (227,415) Adjustments to reconcile net loss to net cash used in operating activities: Stock based Compensation to obtain loan financing ....................... 71,090 11,250 Depreciation and amortization ........................................... 32,062 35,096 Deferred capital gain - building lease .................................. (11,240) (11,240) Changes in operating assets and liabilities: (Increase) decrease in accounts receivable .............................. (38,047) (19,473) (Increase) decrease in inventory ........................................ (23,316) (75,971) (Increase) decrease in prepaid expense .................................. (15,566) (533) Increase (decrease) in accounts payable ................................. 37,215 42,054 Increase (decrease) in preferred stock dividend ......................... 4,000 - Increase (decrease) in accrued payroll and related taxes ................ 2,948 - Increase (decrease) in accrued expense .................................. 24,860 129,811 Increase (decrease) in accrued interet .................................. 4,342 - ---------- ---------- NET CASH USED IN OPERATING ACTIVITIES ....................................... (35,805) (116,421) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ........................................ (6,100) - Additional patent costs ................................................... (6,260) - Security Deposits ......................................................... 26,646 - ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES ....................................... 14,286 - CASH FLOWS FROM FINANCING ACTIVITIES Notes payable ............................................................. - 413,784 Repayment of Bank Loan .................................................... - (198,553) Preferred stock dividends ................................................. (4,000) (4,000) Proceeds from note payable to related party ............................... (3,238) - Payments on capitalized lease obligations ................................. (617) (616) ---------- ---------- NET CASH USED IN FINANCING ACTIVITIES ....................................... (7,855) 210,615 NET DECREASE IN CASH AND CASH EQUIVALENTS ................................... (29,375) 94,194 CASH AND CASH EQUIVALENTS-BEGINNING OF YEAR ................................. 99,421 26,753 ---------- ---------- CASH AND CASH EQUIVALENTS-END OF PERIOD ..................................... $ 70,046 $ 120,947 ========== ========== Cash paid during the period for: Interest ................................................................. 13,187 47,063 See Accompanying Notes to Financial Statements 5 REPRO-MED SYSTEMS, INC. NOTES TO THE FINANCIAL STATEMENTS UN-AUDITED BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with instructions to Form 10-QSB. Accordingly, they do not include all of the information and disclosures required for annual financial statements. These financial statements should be read in conjunction with the financial statements and related footnotes for the year ended February 28, 2007 included in the Form 10-KSB for the year then ended. In the opinion of the Company's management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position as of August 31, 2007 and the results of operations and cash flows for the six-month period ended August 31, 2007 and 2006 have been included. The results of operations for the three-month period ended August 31, 2007, are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-KSB as filed with the Securities and Exchange Commission for the year ended February 28, 2007. STOCKHOLDERS' EQUITY/NOTES PAYABLE In connection with the Company's notes, the Company is obligated to issue four shares of its common stock each year for each dollar of principal borrowed. As of August 31, 2007 the Company is obligated to issue an additional 1,746,000 shares for previously executed note agreements. Such shares have been considered as issued for purposes of financial reporting. GOING CONCERNS As shown in the accompanying financial statements, the Company incurred a net profit of $54,367 during the three-months ended August 31, 2007,a net loss of $124,153 for the six months ended August 31, 2007 and has an accumulated deficit of $3,555,165. Additionally, for the three-months ending August 31, 2007, the Company had working capital of $132,475. The Company is seeking to raise additional working capital through debt or equity channels and is working with outside distributors to increase its market share in the European and U.S. markets for its products. However, even if the Company does raise capital through debt or equity channels and continues to increase its sales through its new strategies, there can be no assurance that the net proceeds of the capital raised or that the revenues generated from the new marketing initiatives will continue to grow at a rate sufficient to enable it to reach a level where it will generate continued profits and cash flows from operations. These matters raise "substantial doubt" about the Company's ability to continue as a going concern. However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. RELATED PARTY LOANS The President of the Company has advanced the Company $100,000 under a demand loan which bears interest at the rate of 8%. This note has been approved by the Board of Directors. The President has agreed to extend the maturity date to March 30, 2009. Additionally, included in current liabilities are notes payable to related parties of $68,036. Included in this amount is $66,036 to the President of the Company and $2,000 to the former Controller. The $66,036 to the 6 President represents short-term advances that are secured by certain customer accounts receivable. The $2,000 to the former controller is currently past due and bears interest at the rate of 2% over prime. PART I ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Quarterly Report on Form 10-QSB contains certain "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to us that are based on the beliefs of the management, as well as assumptions made by and information currently available. Our actual results may vary materially from the forward-looking statements made in this report due to important factors such as, recent operating losses, uncertainties associated with future operating results, unpredictability related to Food and Drug Administration regulations, introduction of competitive products, limited liquidity, reimbursement related risks, government regulation of the home health care industry, success of the research and development effort, market acceptance of FREEDOM60(R), availability of sufficient capital to continue operations and dependence on key personnel. When used in this report, the words "estimate," "project," "believe," "anticipate," "intend," "expect" and similar expressions are intended to identify forward-looking statements. Such statements reflect current views with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. These statements involve risks and uncertainties with respect to the ability to raise capital to develop and market new products, acceptance in the market place of new and existing products, ability to penetrate new markets, our success in enforcing and obtaining patents, obtaining required Government approvals and attracting and maintaining key personnel that could cause the actual results to differ materially. Repro-Med does not undertake any obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. THREE MONTHS ENDED AUGUST 31 2007 VS. 2006 - ------------------------------------------ Total sales increased by 45.66% ($189,937) from $416,009 to $605,946 for the three-month period ending August 31, 2007. Net Income/(Loss) from operations shows a profit of $69,804 for the three-months ending August 31, 2007 as compared to a profit of $19,697 for the same quarter in 2006 and represents a total improvement of $50,107 quarter over quarter. Sales of the FREEDOM60(R) Syringe Infusion System, related accessories and repairs increased 69.5% domestically in the second quarter ending August 31, 2007 as compared to the same period in 2006. This increase is due to the increased sales for use with immune globulin caused by Medicare specifying the Freedom60 for use with SCIG, and antibiotics along with word of our performance and costs being communicated throughout the industry. Sales of RES-Q-VAC(R) and related accessories showed an overall increase of 91.3% from 181,308 to 244,756 which includes an international increase of 103.8% offsetting a slight decline domestically of 12.5%. Company sales of non-core Gyneco, Restore, and OEM (Osbon & Vet) products line also increased 51.3% August 31,2007 over August 31, 2006. Net profit for the Quarter was $54,367, which includes $2,250 in stock based compensation, as compared to the previous quarter loss of $89,149, which included stock, based compensation of $71,300. This is due to the stock based compensation for 2007 being recorded in the first quarter of 2007 versus being recorded in the second quarter of 2006. Gross Profit increased to 69% from 65% last year for the same period. This increase is attributed in part to two 7 clinical trials of the pump which occurred in the first quarter in which we have incurred salary and material expenses that are not offset by sales revenue in the first quarter but have been recognized in the second quarter. Due to the increase in demand additional sterilization cycles were required to meet customer delivery dates, which increased production costs. Our precision flow control sets increased 25.6% over last year to 37,585 sets from 29,919 set as the same time August 31, 2006. Selling, General and Administrative Expense (SG&A) increased $93,787 from 224,169 to 317,956 quarter over quarter 2007 vs. 2006, which included a legal agreement from mediation with a former employee of $30,000 and associated legal fees of $4,900. Product liability insurance increased $9,573, which was for product insurance in the European market. Wages and benefits increase $33,297 quarter over quarter from $88,728 to $122,025 due to filling open staff positions. Trade show and related expenses increase $13,234 from $708 to $13,942 quarter over quarter 2007 vs. 2006 as we continue to increase our present in the market place. Research and Development increased slightly $791. Interest expense decreased $14,413 to $13,187 from $27,600 as a result of the company paying off high interest on demand bank notes and capital leases. SIX MONTHS ENDED AUGUST 31 2007 VS. 2006 - ---------------------------------------- Total sales increased by 31.38% ($239,631) from $763,733 to $1,003,364 for the six-month period ending August 31, 2007. Net Income/(Loss) from operations shows a loss of $124,153 for the six-months ending August 31, 2007 as compared to a loss of $226,415 for the same six months in 2006 and represents a total improvement of $102,262. Sales of the FREEDOM60(R) Syringe Infusion System, related accessories and repairs increased 66.9% domestically in the six-months ended August 31, 2007 vs. six-months ended August 31, 2006. The results from this quarter resulted from a management shift in sales strategy and by eliminating outside consulting and in-house sales personnel who were ineffective in driving any new revenues. We decided to focus the majority of our efforts in the Freedom60 line, specifically towards the subcutaneous immune globulin (SCIG) market. We made decisions to directly support clinical trials by providing 42 Freedom60 pumps at our sole expense into a phase IV clinical trial. We attended a dozen SCIG nursing education programs. This has allowed us to meet hundreds of nurses all over the country who administer to the needs of this market. We generated a great deal of effort aimed at achieving better reimbursement from Medicare for the Freedom60. Due to our direct efforts, reimbursement was increased twenty fold and subsequently resulted in Medicare issuing a letter of clarification stating the Freedom60 as the only pump approved for SCIG reimbursement. Lastly, we diligently called on, in-serviced and sold virtually every major SCIG provider in the country. We anticipate these sales to continue to increase as the SCIG market continues to develop and as we work on new enhancements to the Freedom60 that we believe will expand this market even further. In addition, many of the SCIG users will see benefit in using the Freedom60 system for other uses, such as antibiotics, chemotherapeutics and pain medications Sales of the Res-Q-Vac increased overall by 13.8% with the international sales increasing by 41.4% offset by the domestic decreasing slightly by 9.3% for the six-months ended August 31,2007 vs. six-months ended August 31, 2006. Gross Profit remained consent at 61% of net sales in both 2007 and 2006. Selling, General and Administrative Expense (SG&A) increased 13.59% from 510,111 in 2006 to $579,461 in 2007. This is increase in directly related it an increased in trade show expenses, product liability insurance, and the legal agreement and fees associated with a mediation agreement. Research and development expenses increased $4,479 from 2006 to 2007. 8 Depreciation and amortization expense decreased by $3,034 from 2006 to 2007, as a result of equipment reaching the end of it depreciable life and not being fully replaced by equivalent capital investments. Interest expense has decreased $17,191 from 2006 to 2007 as a result of paying off high interest notes to the bank. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- We continue to seek funds to enhance our marketing efforts substantially and for other corporate purposes, although there is no assurance that such funding can be obtained, or obtained at terms acceptable to us. Substantial resources have been directed into the marketing efforts during the past year which produced an increase in new RES-Q-VAC(R) customers and a significant increase in new FREEDOM60(R) users. We are aware of the delay between marketing and the resulting sales in our medical markets. Furthermore, new customers tend to purchase smaller initial quantities, and since a major portion of our income stream is derived from the use of disposable supplies, it may take several months for the full impact of new customers to be reflected in our sales performance. We believe we will continue to enhance a new customer base for our products. With the current capital we have, and if sales continue to meet the Company's targets, which we expect but cannot assure, we believe that we will have sufficient resources to meet our obligations for the next twelve months. However, if these sales do not continue to develop to our expectations, and if new funding does not become available, then our viability could be in question (see going concerns). We remain cautiously optimistic that, at a minimum, these new sales will continue to increase and meet our expectations and needs for the coming year. FREEDOM60(R) - ------------ The FREEDOM60(R) Syringe Infusion Pump is designed for ambulatory medication infusions. Ambulatory infusion pumps are most prevalent in the home care market. Other potential applications for the FREEDOM60(R) are pain control, the infusion of specialized drugs such as IgG, and chemotherapy. The home infusion therapy market is comprised of approximately 4,500 sites of service, including local and national organizations, hospital-affiliated organizations, and national home infusion organizations, and produces approximately $4.5 Billion in revenue annually (Ref: www.nhianet.org). With insurance reimbursement in a severe decline, there is a tremendous need for a low-cost, effective alternative to electronic and expensive disposable IV administration devices for the home care and nursing home market. The FREEDOM60(R) provides a high-quality delivery to the patient at costs similar to gravity and is targeted for the home health care industry, patient emergency transportation, and for any time a low-cost infusion is required. For the home care patient, FREEDOM60(R) is an easy-to-use lightweight mechanical pump using a 60cc syringe, completely portable, cost effective and maintenance free, with no batteries to replace and no cumbersome IV pole. For the infusion professional, FREEDOM60(R) delivers precise infusion rates and uniform flow profiles providing consistent transfer of medication. A Form 510(k) Pre-market Notification for initial design of the FREEDOM60(R) as a Class II device was approved by the FDA in August 1994. The Company also designed and manufactured the FREEDOM60(R)-FM, an enhanced version of the FREEDOM60(R) which contains an electronic flow monitor system that provides occlusion and end of infusion alarm. This product is directed at nursing homes, hospitals and pediatric ambulatory applications where alarms are generally required for nursing acceptance. Nurses also appreciate being able to visualize the drug volume by reading the scale on the syringe. 9 We have expanded the use of the FREEDOM60(R) to cover most antibiotics including the widely used and somewhat difficult to administer vancomycin. We have also found a following for FREEDOM60(R) for use in treating thalissemia with the drug desferal. In Europe we found success in using the FREEDOM60(R) for pain control, specifically post-operative epidural pain administration. Our European market also uses the FREEDOM60(R) for chemotherapy. The FREEDOM60(R) use for Primary Immune Deficiency by injecting immune globulin (IgG) under the skin as a subcutaneous administration has seen increased usage over the past year. This method has provided patients with vastly improved quality of life with much fewer unpleasant side effects over the traditional intravenous route. The FREEDOM60(R) is an ideal system for this administration since the patient is able to self-medicate at home, the pump is easily configured for this application, and the FREEDOM60(R) is the lowest cost infusion system available in a heavily cost constrained market. Also due to its safe, limited and controlled pressure system, the Freedom60 adjusts automatically to the patient's needs providing a reliable and comfortable administration for these patients. Repro-Med Systems' objective is to build a product franchise with FREEDOM60(R) and the sale of patented disposable tubing sets. FREEDOM60(R) uses rate-controlled tubing with standard slide clamp and luer-lock connector on the patient end. Our patented syringe disc connector insures that only the Company's FREEDOM60(R) tubing sets will function with the pump. Non-conforming tubing sets, without the patented disc connector, are ejected from the pump to prevent the danger of an overdose or runaway pump from injuring the patient. THE MARKET FOR INFUSION PUMPS & DISPOSABLES The ambulatory market has been rapidly changing due to reimbursement issues. Insurance reimbursement has drastically reduced the market share of high-end electronic type delivery systems as well as high-cost disposable non-electric devices, providing an opportunity for the FREEDOM60(R). The Freedom60 was reclassified by the Centers for Medicare and Medicaid on May 21, 2007 for use under code E0779 which increases the reimbursement for the Freedom60 for all billable syringe pump applications approved by Medicare. We believe market pressures have moved patients to low-cost gravity system or IV push where the drug is pushed into the vein directly from a syringe. This is a low-cost option but has been associated with complications and considered by many to be a high-risk procedure. Thus, the overall trend has been towards syringe pumps due to the low-cost of disposables. FREEDOM60(R)-FM addresses the largest market segments with the lowest cost alarm syringe pump system. In order to receive more favorable Medicare reimbursement for our FREEDOM60(R) Syringe Infusion System, we had submitted a formal request for a HCPCS coding verification with the Statistical Analysis Durable Medical Equipment Regional Carrier (SADMERC). On May 21, 2007 we received a notification from CMS (Centers for Medicare & Medicaid Services) that the Freedom 60(R) had been re-reviewed for Medicare billing. It was the determination that the Medicare HCPCS code(s) to bill the four Durable Medical Regional Carries (DMERCs) should be: E0779 Ambulatory infusion pump, mechanical, reusable, for infusion 8 hours or greater. The new coding provides for a substantial increase in reimbursement for providers using an infusion pump for authorized users under Part B of Medicare. Current approved uses under Medicare include among others, subcutaneous immune globulin, antivirals, antifungals, and chemotherapeutics. In June 2007 CMS issued a clarification that the Freedom 60(R) Syringe Infusion Pump is the only allowable pump to be billed with subcutaneous immune globulin under HCPCS code E0779. RES-Q-VAC(R) - ------------ The RES-Q-VAC(R) Emergency Airway Suction System, is a lightweight, portable, hand-operated suction device that removes fluids from a patient's airway by attaching the RES-Q-VAC(R) pump to various proprietary sterile and non-sterile 10 single-use catheters sized for adult and pediatric suctioning. The one-hand operation makes it extremely effective and the product is generally found in emergency vehicles, hospitals and wherever portable aspiration is a necessity, including backup support for powered suction systems. The disposable features of the RES-Q-VAC(R) reduce the risk of contaminating the health professional from HIV or SARS when suctioning a patient or during post treatment cleanup. All of the parts that connect to the pump are disposable. We recently introduced a new version of the RES-Q-VAC with the addition of a portable LED white light, which attaches to the canister assembly. The light is fully malleable and can direct light during operations when lighting is poor or at night. We have begun marketing the new system with a national master distributor and will introduce the new product to the international community during the second quarter. A critical component and advantage of the RES-Q-VAC(R) is the Full Stop Protection(R), (FSP(R)) a recently patented filtering system that both prevents leakage and over-flow of the aspirated fluids, even at full capacity, and traps all air and fluid borne pathogens and potentially infectious materials within the sealable container. This protects users from potential exposure to disease and contamination. The Full Stop Protection(R) meets the requirement of the Occupational Safety and Health Administration as described below. The Company has received a letter from OSHA confirming that the RES-Q-VAC(R) with the Full Stop Protection(R) falls under the engineering controls of the Blood borne Pathogen regulation and that the Products use would fulfill the regulatory requirements. We have also added new connectors to our pediatric catheters, which allow them to connect directly to the adult containers with FSP(R). These connectors allow pediatric suctioning with the benefit of the Full Stop Protection(R) device as well as with sterile catheters. Many infants are born with contagious diseases and the new system eliminates this concern among paramedics during an emergency delivery. A critical advantage of our RES-Q-VAC(R) airway suction system is versatility. With the addition of Full Stop Protection(R), we created specific custom RES-Q-VAC(R) kits for various vertical markets: Emergency Medicine - we make several special kits for emergency use, which contain all the catheters necessary to treat adults as well as infants or children. These first responder kits are generally non-sterile. We also have special attachments available for the advanced paramedic to treat patients who are intubated. Respiratory - in-home care, long term care, situations requiring frequent suctioning such as cystic fibrosis patients, patients with swallowing disorders, elderly, patients on ventilators and with tracheostomies all benefit from the portability, cost and performance of the RES-Q-VAC(R). In hospitals, the RES-Q-VAC(R) provides emergency back up due to power loss or breakdown of the wall suction system. Hospital Use - for crash carts, the emergency room, patients in isolation, moving patients throughout the hospital (e.g., from ICU to Radiology) and backup for respiratory, RES-Q-VAC(R) is available sterile with Full Stop Protection(R) for the ultimate in performance and to meet all the OSHA regulations and CDC guidelines for use in treating patients in isolation, and in any location. Hospitals are required under the EMTALA regulations to provide emergency treatments to patients anywhere in the primary facility and up to 250 yards away. The RES-Q-VAC insures full compliance with these regulations and helps minimize unfavorable outcomes and potential lawsuits there from. We provide special hospital kits, which are fully stocked to meet all hospital applications for both adult and pediatric. Nursing homes, hospice, sub-acute - we provide special configurations for dining areas, portable suctioning for outside events and travel. Chronic suction can be accommodated with RES-Q-VAC(R), which can be left by the bedside for rapid use during critical times. 11 Dental applications - we offer a version of the RES-Q-VAC(R), called DENTAL-EVAC(R) which addresses the needs of oral surgeons for emergency back up suction during a procedure. DENTAL-EVAC(R) is supplied with the dental suction attachments such as saliva ejector and high volume evacuator. Military Applications -Due to its lightweight, portability, and rapid deployment, we believe that the RES-Q-VAC(R) is ideal for any military situation. In addition, rapid, aggressive, and repeated suctioning best treats exposure to chemical weapons of mass destruction such as Sarin. We believe that the RES-Q-VAC(R)'s compact size, powerful pump, and full protection of the user from any contamination, gives us a competitive edge in this market. RES-Q-VAC(R) is sold domestically and internationally by emergency medical device distributors. These distributors generally sell to the end user and advertise these products in relevant publications and in their catalogs. TRADE SHOWS - ----------- We continue to support our products at several trade shows. During the months of September and October we attended the AHRM, EMS, INS shows and CLS Primer Meeting to exhibit our RES-Q-VAC(R) and Freedom60(R) products. We are also scheduled and preparing to attend the Medica Show in Dusseldorf, Germany from November 14-17 2007. PART II - OTHER INFORMATION - --------------------------- ITEM 1. LEGAL PROCEEDINGS - ------------------------- We are, from time to time, subject to claims and suits arising in the ordinary course of business, including claims for damages for personal injuries, breach of management contracts and employment related claims. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS - ------------------------------------------------- None ITEM 3. DEFAULTS UPON SENIOR SECURITIES - --------------------------------------- None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - ----------------------------------------------------------- No matters were submitted to a vote of security holders of the Company during the quarter ended August 31, 2007. ITEM 5. OTHER INFORMATION - ------------------------- None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - ---------------------------------------- (a) 31.1 Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act 2002 32.1 Certification of Chief Executive Officer and Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 (b) Reports None 12 SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned; thereunto duly authorized. REPRO-MED SYSTEMS, INC. /s/ Andrew I. Sealfon October 19, 2007 - --------------------- Andrew I. Sealfon, President, Treasurer, Chairman of the Board, Director, and Chief Executive Officer 13