UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended ~~November~~September 30, ~~2016~~2017

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

For the transition period from ________ to ________.

Commission File Number:0-12305

REPRO MED SYSTEMS, INC.

(Exact name of registrant as specified in its charter)


New York	13-3044880
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

24 Carpenter Road, Chester, New York	10918
(Address of Principal Executive Offices)	(Zip Code)

(845) 469-2042

(Registrant’s telephone number, including area code)

February 28

(Former name, former address and former fiscal year, if changed since last report)

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

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

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


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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [ ]

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

As of ~~January 5,~~November 3, 2017, ~~37,749,081~~37,930,620 shares of common stock, ~~$.01~~$0.01 par value per share, were outstanding, which excludes ~~2,735,981~~2,737,231 shares of treasury stock.

REPRO MED SYSTEMS, INC.

TABLE OF CONTENTS


		PAGE

PART I– FINANCIAL INFORMATION

ITEM 1.	Financial Statements

	Balance Sheets as of ~~November~~September 30, ~~2016~~2017 (Unaudited) and February ~~29, 2016~~28, 2017	3

	Statements of Operations (Unaudited) for the ~~Three Months~~three and ~~Nine~~seven months ~~Ended November~~ended September 30, ~~2016,~~2017 and ~~2015~~2016	4

	Statements of Cash Flows (Unaudited) for the ~~Nine~~seven months ~~Ended November~~ended September 30, ~~2016,~~2017 and ~~2015~~2016	5

	Notes to Financial Statements	6-11

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~12-19~~12-18

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	1918

ITEM 4.	Controls and Procedures	1918

PART II– OTHER INFORMATION

ITEM 1.	~~Legal Proceedings~~	~~19-20~~

~~ITEM~~ 2.	Unregistered Sales of Equity Securities and Use of Proceeds	~~20-21~~18-19

ITEM 6.	Exhibits	2119

- 2 -

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

REPRO MED SYSTEMS, INC.

BALANCE SHEETS


	November 30,						September 30,			February 28,
	2016			February 29,			2017			2017
	(Unaudited)			2016			(Unaudited)
ASSETS
				��
CURRENT ASSETS
Cash and cash equivalents	$	3,440,160		$	4,201,949		$	3,661,707		$	3,313,265
Certificates of deposit		261,118			261,118			262,314			262,314
Accounts receivable less allowance for doubtful accounts and returns of $20,519 at November 30, 2016 and $37,486 at February 29, 2016		1,661,214			1,350,180
Accounts receivable less allowance for doubtful accounts of $77,067 at September 30, 2017 and $18,046 at February 28, 2017								1,481,410			1,502,030
Inventory		1,299,411			1,040,277			1,586,568			1,353,703
Tax Receivable								—			172,457
Prepaid expenses		456,934			265,123			225,088			175,955
TOTAL CURRENT ASSETS		7,118,837			7,118,647			7,217,087			6,779,724
Property and equipment, net		933,947			996,822			902,075			932,092
Patents, net of accumulated amortization of $174,434 and $147,380 at November 30, 2016 and February 29, 2016, respectively		390,578			247,691
Patents, net of accumulated amortization of $195,354 and $180,137 at September 30, 2017 and February 28, 2017, respectively								440,565			426,943
Other assets		31,490			31,140			31,583			31,490
TOTAL ASSETS	$	8,474,852		$	8,394,300		$	8,591,310		$	8,170,249

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Deferred capital gain - current portion	$	22,481		$	22,481
Deferred capital gain - current							$	22,481		$	22,481
Accounts payable		910,763			307,764			362,878			772,428
Accrued expenses		582,998			499,406			502,249			417,357
Accrued payroll and related taxes		112,213			148,766			123,716			177,018
Accrued tax liability		—			129,497			142,883			—
TOTAL CURRENT LIABILITIES		1,628,455			1,107,914			1,154,207			1,389,284
Deferred capital gain - less current portion		28,116			44,976
Deferred capital gain – long term								9,382			22,496
Deferred tax liability		82,196			123,111			91,039			82,422
TOTAL LIABILITIES	$	1,738,767		$	1,276,001			1,254,628			1,494,202

STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value; authorized shares, 75,000,000 at November 30, 2016 and 50,000,000 at November 30, 2015; 40,485,062 shares issued at November 30, 2016 and 40,487,532 shares issued at February 29, 2016; 37,749,081 shares outstanding at November 30, 2016 and 37,966,501 shares outstanding at February 29, 2016		404,851			404,875
Common stock, $0.01 par value; 75,000,000 shares authorized, 40,667,851 and 40,558,429 shares issued, 37,930,620 and 37,821,198 shares outstanding at September 30, 2017 and February 28, 2017, respectively								406,679			405,584
Additional paid-in capital		4,082,218			3,968,342			4,162,679			4,129,726
Retained earnings		2,599,736			3,019,940			3,111,528			2,484,941
		7,086,805			7,393,157			7,680,886			7,020,251
Less: Treasury stock at cost, 2,735,981 shares at November 30, 2016 and 2,521,031 at February 29, 2016		(343,720	)		(246,858	)
Less: Deferred compensation cost		(7,000	)		(28,000	)
Less: Treasury stock, 2,737,231 shares at September 30, 2017 and February 28, 2017								(344,204	)		(344,204	)
TOTAL STOCKHOLDERS’ EQUITY		6,736,085			7,118,299			7,336,682			6,676,047
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	8,474,852		$	8,394,300		$	8,591,310		$	8,170,249

The accompanying notes are an integral part of these financial statements

- 3 -

REPRO MED SYSTEMS, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)


	For the Three Months Ended						For the Nine Months Ended						For the Three Months Ended						For the Seven Months Ended
	November 30						November 30						September 30,						September 30,
	2016			2015			2016			2015			2017			2016			2017			2016

NET SALES	$	3,193,113		$	3,144,954		$	9,331,208		$	8,941,676		$	3,849,338		$	3,221,502		$	9,188,414		$	7,293,695
Cost of goods sold		1,129,170			1,035,675			3,375,862			3,307,808			1,470,680			1,188,558			3,539,662			2,643,925
Gross Profit		2,063,943			2,109,279			5,955,346			5,633,868			2,378,658			2,032,944			5,648,752			4,649,770

OPERATING EXPENSES
Selling, general and administrative		2,034,016			1,698,226			6,145,769			4,567,709			1,893,911			2,114,407			4,536,954			4,887,608
Research and development		59,142			51,564			183,497			143,940			14,852			75,198			47,564			147,136
Depreciation and amortization		83,254			69,274			227,109			204,087			77,517			70,935			179,874			167,513
Total Operating Expenses		2,176,412			1,819,064			6,556,375			4,915,736			1,986,280			2,260,540			4,764,392			5,202,257

Net Operating (Loss)/Profit		(112,469	)		290,215			(601,029	)		718,132
Net Operating Profit/(Loss)														392,378			(227,596	)		884,360			(552,487	)

Non-Operating (Expense)/Income
Loss on currency exchange		(43,546	)		(36,663	)		(33,802	)		(42,420	)
Loss on disposal of fixed assets		—			(253	)		(1	)		(13,577	)
Interest expense		(1,930	)		—			(1,886	)		—
Non-Operating Income/(Expense)
Gain/(Loss) on currency exchange														10,419			(4,096	)		65,079			8,237
Interest and other income		454			929			1,549			3,058			361			262			1,104			1,336
TOTAL OTHER (EXPENSES) INCOME		(45,022	)		(35,987	)		(34,140	)		(52,939	)
TOTAL OTHER INCOME/(EXPENSE)														10,780			(3,834	)		66,183			9,573

(LOSS) INCOME BEFORE TAXES		(157,491	)		254,228			(635,169	)		665,193
PROFIT/(LOSS) BEFORE TAXES														403,158			(231,430	)		950,543			(542,914	)

Income Tax Benefit (Expense)		53,216			(86,676	)		214,965			(227,067	)
Income Tax (Expense)Benefit														(137,404	)		78,217			(323,956	)		183,819

NET (LOSS) INCOME	$	(104,275	)	$	167,552		$	(420,204	)	$	438,126
NET INCOME/(LOSS)													$	265,754		$	(153,213	)	$	626,587		$	(359,095	)

NET (LOSS)/INCOME PER SHARE
NET INCOME/(LOSS) PER SHARE

Basic	$	—		$	—		$	(0.01	)	$	0.01		$	0.01		$	—		$	0.02		$	(0.01	)
Diluted	$	—		$	—		$	(0.01	)	$	0.01		$	0.01		$	—		$	0.02		$	(0.01	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic		37,746,731			38,006,667			37,857,074			38,006,667			37,898,357			37,779,427			37,856,074			37,885,432
Diluted		37,794,350			38,006,667			37,904,693			38,006,667			38,056,604			37,779,427			38,014,321			37,885,432

The accompanying notes are an integral part of these financial statements

- 4 -

REPRO MED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)


	For the Nine Months Ended						For the Seven Months Ended
	November 30,						September 30,
	2016			2015			2017			2016

CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss) Income	$	(420,204	)	$	438,126
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Net Income (Loss)							$	626,587		$	(359,095	)
Adjustments to reconcile net income (loss) to net cash provided by/(used in) operating activities:
Amortization of deferred compensation cost		21,000			21,000			—			14,000
Stock based compensation expense		157,245			38,360			53,407			126,006
Depreciation and amortization		227,109			204,087			179,874			167,513
Deferred capital gain - building lease		(16,860	)		(16,860	)		(13,113	)		(13,113	)
Deferred taxes		(40,914	)		(17,063	)		8,617			(30,288	)
Loss on disposal of fixed assets		—			13,577
Provision for returns and doubtful accounts		(16,967	)		(70	)		58,941			(14,102	)
Changes in operating assets and liabilities:
Increase in accounts receivable		(294,066	)		(134,196	)		(38,321	)		(293,821	)
Increase in inventory		(259,134	)		(32,165	)		(232,865	)		(71,011	)
Increase in prepaid expense		(192,161	)		(49,695	)
Increase in accounts payable		602,998			279,122
Decrease/(Increase) in prepaid expense and other assets								123,231			(78,602	)
(Decrease)/Increase in accounts payable								(409,550	)		357,384
Decrease in accrued payroll and related taxes		(36,553	)		(3,724	)		(53,302	)		(31,204	)
Increase in accrued expense		83,593			130,076			84,892			168,732
(Decrease) Increase in accrued tax liability		(129,497	)		43,424
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES		(314,411	)		913,999
Increase/(Decrease) in accrued tax liability								142,883			(155,075	)
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES								531,281			(212,676	)

CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment		(137,182	)		(106,337	)		(134,640	)		(123,689	)
Proceeds on disposal of fixed assets		—			13,550
Payments for patents		(169,941	)		(38,916	)		(28,839	)		(106,355	)
NET CASH USED IN INVESTING ACTIVITIES		(307,123	)		(131,703	)		(163,479	)		(230,044	)

CASH FLOWS FROM FINANCING ACTIVITIES
Purchase of Treasury Stock		(140,255	)		—
Payment for cancelled shares								(19,360	)		—
Purchase of treasury stock								—			(120,577	)
NET CASH USED IN FINANCING ACTIVITIES		(140,255	)		—			(19,360	)		(120,577	)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(761,789	)		782,296
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS								348,442			(563,297	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		4,201,949			2,557,235			3,313,265			4,201,949
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3,440,160		$	3,339,531		$	3,661,707		$	3,638,652

Supplemental Information
Cash paid during the periods for:
Interest	$	—		$	—		$	—		$	—
Taxes	$	99,342		$	100,000		$	—		$	—

NON-CASH FINANCING AND INVESTING ACTIVITIES
Issuance of common stock as compensation	$	—		$	—		$	78,750		$	43,468

The accompanying notes are an integral part of these financial statements

- 5 -

REPRO MED SYSTEMS, INC.

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

REPRO MED SYSTEMS, INC. (the “Company”, “RMS”, or “we”) designs, manufactures and markets proprietary medical devices primarily for the ambulatory infusion market and emergency medical applications as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality management systems. The Company operates as one segment.

FISCAL YEAR END

On March 22, 2017, the Board of Directors approved a change in the Company’s fiscal year end from February 28 to December 31.

BASIS OF PRESENTATION

The accompanying unaudited financial statements as of ~~November~~September 30, ~~2016,~~2017, have been prepared in accordance with generally accepted accounting principles and with instructions to SEC regulation S-X for interim financial statements.

In the opinion of the Company’s management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Company’s financial position as of ~~November~~September 30, ~~2016,~~2017, and the results of operations and cash flow for the three ~~month~~ and ~~nine~~seven month periods ended ~~November~~September 30, ~~2016,~~2017, and ~~2015.~~2016.

The results of operations for the three and ~~nine~~seven months ended ~~November~~September 30, ~~2016,~~2017, and ~~2015~~2016 are not necessarily indicative of the results to be expected for the full year. These interim financial statements should be read in conjunction with the financial statements and notes thereto of the Company and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report for the year ended February ~~29, 2016,~~28, 2017, as filed with the Securities and Exchange Commission on Form 10-K.

USE OF ESTIMATES IN THE FINANCIAL STATEMENTS

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In ~~December 2016,~~May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. ~~2016-19—Technical Corrections and Improvements~~2017-09—Compensation-Stock Compensation (Topic 718), which ~~contains amendments that affect a wide variety of topics in the Accounting Standards Codification (“ASC”). The reason for each amendment is provided before each of the amendments for~~provides clarity and ~~ease of understanding. The amendments generally fall into one of the following types of categories; (a) Amendments related to differences between original guidance~~reduces both (1) diversity in practice and ~~the ASC: these amendments arose because of differences between original guidance (for example, FASB Statements, Emerging Issues Task Force (“EITF”) Issues,~~(2) cost and so forth) and the ASC. These amendments principally carry forward pre-codification guidance or subsequent amendments into the ASC. Many times, either the writing style or phrasing of the original guidance did not directly translate into the ASC format and style. As a result, the meaning ofcomplexity when applying the guidance ~~might have been unintentionally altered. Alternatively,~~in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in this ~~category may relate~~update affect any entity that changes the terms or conditions of a share-based payment award. The amendments in this update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments in this update should be applied prospectively to ~~guidance that was codified without some text, reference,~~an award modified on or ~~phrasing that,~~after the adoption date. Based upon review, was deemed important to the guidance; (b) Guidance clarification and reference corrections: these amendments provide clarification through updating wording, correcting references, or a combination of both. In most cases, the feedback suggested that, without these enhancements, guidance may be misapplied; (c) Simplification: these amendments streamline or simplify the ASC through minor structural changes to headings or minor editing of text to improve the usefulness and understandability of the ASC; or (d) Minor improvements: these amendments improve the guidance and areour initial evaluation, we do not ~~expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The Company is assessing the impact of~~expect the adoption of the ~~ASU~~standard to have a material effect on ~~its~~our financial statements, disclosure requirements and methods of adoption.

- 6 -

In June 2016, FASB issued ASU No. 2016-13—Financial Instruments – Credit Losses (Topic 326); Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available for sale debt securities. For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For available for sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 will require that credit losses be presented as an allowance rather than as a write-down. This ASU affects entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is intended to not change the core principle of the guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on an ongoing basis. The effective date and transition requirements for the amendments in this update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by update 2014-09). The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption.

In May 2016, the FASB issued ASU No. 2016-11 Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815); Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 Emerging Issues Task Force (“EITF”) Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities—Oil and Gas, effective upon adoption of Topic 606. The Company does not expect the adoption of the ASU to have any impact on its financial statements.

~~In May~~ 2014, the FASB issued ASU No. 2014-09—Revenue from Contracts with Customers. The ASU clarifies the principles for recognizing revenue and develops a common revenue standard for U.S. GAAP and International Financial Reporting Standards (“IFRS”) that removes inconsistencies and weaknesses in revenue requirements, provides a more robust framework for addressing revenue issues, improves comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets, provides more useful information to users of the financial statements through improved disclosure requirements and simplifies the preparation of financial statements by reducing the number of requirements to which an entity must refer. The amendments in this update are effective for the annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Full or modified retrospective adoption is required and early application is not permitted. On July 9, 2015, the FASB issued ASU No. 2015-14 Revenue from Contracts with Customers (Topic 606); Deferral of the Effective Date, which (a) delays the effective date of ASU 2014-09, Revenue from Contracts with Customers (Topic 606), by one year to annual periods beginning after December 15, 2017 and (b) allows early adoption of the ASU by all entities as of the original effective date for public entities. We currently anticipate adopting the new standard using the modified retrospective method beginning January 1, 2018. In March 2016, the FASB issued ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606); Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as the requirements in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606); Identifying Performance Obligations and Licensing, which is intended to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas and the effective date is the same as the requirements in ASU 2014-09. ~~The Company~~In May 2016, FASB issued ASU No. 2016-12—Revenue from Contracts with Customers (Topic 606); Narrow-Scope Improvements and Practical Expedients, which is ~~assessing~~intended to not change the ~~impact~~core principle of the ~~adoption~~guidance in Topic 606, but rather affect only the narrow aspects of Topic 606 by reducing the ~~ASU~~potential for diversity in practice at initial application and by reducing the cost and complexity of applying Topic 606 both at transition and on ~~its financial statements, disclosure~~an ongoing basis. The effective date and transition requirements for the amendments in this update are the same as the effective date and ~~methods of adoption.~~

transition requirements for Topic 606 (and any other Topic amended by update 2014-09). In ~~March~~December 2016, the FASB issued ASU No. ~~2016-09 — Compensation – Stock Compensation (Topic 718):~~2016-20 Technical Corrections and Improvements to ~~Employee Share-Based Payment Accounting. The ASU was issued as part~~Topic 606, Revenue from Contracts with Customers, which represents changes to make minor improvements to the Codification that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. This update is the final, combined version of ~~the FASB’s simplification initiative~~Proposed Accounting Standards Updates 2016-240 and under the ASU, the areas of simplification in the update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classifications of awards as either equity or liabilities,2016-320 (both entitled Technical Corrections and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities. The amendment eliminates the guidance in Topic 718 that was indefinitely deferred shortly after the issuance of FASB Statement No. 123 (revised 2004)Improvements), ~~Share-Based Payment. This should~~which have been deleted. We do not result in a change in practice because the guidance that is being superseded was never effective. The amendment in this ASU is effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Early adoption is permitted for any entity in any interim or annual period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. An entity that elects early adoption must adopt all of the amendments in the same period. The Company is assessing the impact ofexpect the adoption of the ~~ASU~~standard and related amendments to have a material effect on ~~its~~our financial ~~statements, disclosure requirements and methods~~condition or results of ~~adoption.~~operations.

~~- 7 -~~

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The main difference between the current requirement under GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. This ASU requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. This ASU must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the potential impact of this ASU on our financial statements, disclosure requirements and ~~expect it will~~methods of adoption.

- 7 -

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 ~~impact~~effect on our financial condition ~~and~~or results of ~~operations upon adoption.~~

In July 2015, the FASB issued ASU No. 2015-11—Simplifying the Measurement of Inventory. The ASU was issued as part of the FASB’s simplification initiative and under the ASU, inventory is measured at the lower of cost and net realizable value, which would eliminate the other two options that currently exist for the market: (1) replacement cost and (2) net realizable value less an approximately normal profit margin. This ASU is effective for interim and annual periods beginning after December 15, 2016. Early application is permitted and should be applied prospectively. The Company does not expect the adoption of the ASU to have any impact on its financial statements.operations.

STOCK-BASED COMPENSATION

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

RECLASSIFICATION

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

NOTE 2 RELATED PARTY TRANSACTIONS

On December 20, 2013, we executed an agreement effective March 1, 2014, with a Company director, Dr. Mark Baker, to provide clinical research and support services related to new and enhanced applications for the FREEDOM60® Syringe Infusion System. Authorized by the Board of Directors, the agreement ~~provides~~provided for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period. Amortization amounted to ~~$7,000~~zero and ~~$21,000~~$7,000 for the three ~~and nine~~ months ended ~~November~~September 30, 2017 and 2016, respectively, and ~~November~~zero and $14,000 for the seven months ended September 30, ~~2015,~~2017 and 2016, respectively.

On October 21, 2015, Cyril Narishkin was appointed to the Board of Directors and Interim Chief Operating Officer of the Company. Also effective October 21, 2015, we entered into a consulting agreement with Mr. Narishkin, to support our expanded management team and accelerate our growth opportunities under his role of Interim Chief Operating Officer. The agreement provided for payment of $16,000 per month for eight days per month, of which half was to be paid in cash and half was to be paid in shares of common stock. Effective January 1, 2016, the agreement provided for the same payment of $16,000 per month, of which seventy-five percent was to be paid in cash and twenty-five percent was to be paid in shares of common stock.

On June 24, 2016, Cyril Narishkin executed a termination and general release agreement, which terminated his previous consulting agreement, and resigned as an officer and director for personal reasons. Mr. Narishkin ~~will be~~was compensated for services as a consultant through January 31, 2017 at a monthly rate of $16,000 per month for up to eight days of service a month upon request of the Company. Mr. ~~Narishkin~~Narishkin’s compensation was ~~granted compensation of~~zero and $48,000 ~~and $198,000~~ for the three ~~and nine~~ months ended ~~November~~September 30, 2017 and 2016, respectively and zero and $166,000 for the seven months ended September 30, 2017 and 2016, respectively. In accordance with the agreement, the Company repurchased 96,542 shares of common stock of the Company owned by Mr. Narishkin at an aggregate purchase price of ~~$43,393.~~$43,393 in July 2016.

~~- 8 -~~

LEASED AIRCRAFT

The Company leases an aircraft from a company controlled by Andrew Sealfon, the Company’s President and Chief Executive Officer. The lease payments were ~~$5,375~~$3,876 and ~~$16,125~~$5,375 for the three ~~and nine~~ months ended ~~November~~September 30, 2017 and 2016, respectively and ~~November~~$9,544 and $12,542 for the seven months ended September 30, ~~2015,~~2017 and 2016, respectively. The original lease agreement has expired and the Company is currently on a month-to-month basis for rental payments.

BUILDING LEASE

Mr. Mark Pastreich, a director, is a principal in the entity that owns the building leased by Company. The Company is in year ~~seventeen~~nineteen of a twenty-year lease. There have been no changes to lease terms since his directorship and none are expected through the life of the current lease. With a monthly lease amount of $11,042, the lease payments were $33,126 for each of the three months ended September 30, 2017 and ~~$99,378~~2016 and $77,294 for each of the seven months ended September 30, 2017 and 2016. The Company also paid property taxes for the three ~~and nine~~ months ended ~~November~~September 30, 2017 and 2016 in the amount of $12,862 and $12,334, respectively, and $29,098 and $28,159 for the seven months ended September 30, 2017 and 2016, respectively.

We are currently negotiating a lease extension at our current facility as we continue to assess what our strategy for future expansion and growth requirements will be.

- 8 -

NOTE 3 PROPERTY AND EQUIPMENT

Property and equipment consists of the following at:


	November 30, 2016		February 29, 2016		September 30, 2017			February 28, 2017

Land	$	54,030	$	54,030	$	54,030		$	54,030
Building		171,094		171,094		171,094			171,094
Furniture, office equipment, and leasehold improvements		1,003,250		923,394		1,054,971			1,022,942
Manufacturing equipment and tooling		966,080		961,486		1,074,157			1,003,166
		2,194,454		2,110,004		2,354,252			2,251,232
Less: accumulated depreciation		1,260,507		1,113,182		(1,452,177	)		(1,319,140	)
Property and equipment, net	$	933,947	$	996,822	$	902,075		$	932,092

NOTE 4 LEGAL PROCEEDINGS

OnLawyers representing EMED Technologies Corp. (“EMED”) sent RMS a letter dated, May 1, 2013, which alleged that the RMS High-Flo Butterfly design infringed a patent controlled by EMED. RMS disputed this claim and believes that our design did not infringe and that the EMED patent itself was not valid. Under advice of counsel, on September 20, 2013, the Company commenced in the United States District Court for the Eastern District of California a ~~declaratory judgment~~Declaratory Judgment action against competitor, EMED ~~Technologies Corp. (“EMED”)~~ to establish the invalidity of one of EMED’s patents and non-infringement of the Company’s needle sets. EMED answered the complaint and asserted patent infringement and unfair business practice counterclaims. The Company responded by asserting its own unfair business practice claims against EMED. Both parties have requested injunctive relief and monetary damages. Discovery is ongoing.

On June 16, 2015, the Court issued what it termed a “narrow” ~~preliminary injunction~~Preliminary Injunction against the Company from making certain statements regarding some of EMED’s products. On June 23, 2016, EMED filed a ~~motion~~Motion seeking to have the Company held in contempt, claiming that certain language in the Company’s device labeling does not comply with the injunction. In response to a ~~show cause order,~~Show Cause Order, the Company advised the Court that the language in the Company’s labeling that EMED challenged is language that the FDA directed the Company to use in its labeling. The Court discharged the ~~show cause order,~~Show Cause Order, effectively rejecting EMED’s contempt argument.

On March 24, 2016, EMED filed a ~~motion~~Motion seeking a second ~~preliminary injunction~~Preliminary Injunction prohibiting RMS from selling three of its products in California. The Company opposed that ~~motion~~Motion on April 19, 2016. ~~A decision~~The Order denying this second Preliminary Injunction was issued June 6, 2017.

On August 22, 2017, the Company filed a Motion seeking a Preliminary Injunction prohibiting EMED from making false statements and claims regarding the products of both companies. EMED filed a Response and Objections to Company’s motion on September 21, 2017, and Company filed a subsequent Reply on September 28, 2017. The Court issued a Minute Order on September 22, 2017 vacating a hearing set for October 5, 2017, and stating that if the ~~motion is still pending.~~Court determines oral hearings to be required, the parties will be notified. Presently, the parties are awaiting further action by the Court.

On June 25, 2015, EMED filed a claim of patent infringement for the second of its patents, also directed to the Company’s needle sets, in the United States District Court for the Eastern District of Texas. This second patent is related to the one concerning the Company’s declaratory judgment action. Given the close relationship between the two patents, the Company requested that the Texas suit be transferred to California. Also, based on a validity review of the patent in the U.S. Patent and Trademark Office (“USPTO”), discussed below, the Company requested the Texas suit be stayed. On May 12, 2016, the Court entered an order staying the case until after the Patent Trial and Appeal Board (“PTAB”) at the USPTO ~~issues~~issued a final written decision regarding the validity of the patent. On January 12, 2017, the PTAB issued its final written decision invalidating the claims asserted by EMED in the Texas litigation. On January 26, 2017, the Company and EMED requested that the Texas case remain stayed pending EMED’s appeal of the PTAB’s final ruling to the Court of Appeals for the Federal Circuit (“CAFC”).

- 9 -

On September 11, 2015, the Company requested an ex parte reexamination of the patent in the first filed case, and on September 17, 2015 the Company requested an inter partes review (“IPR”) of the patent in the second filed case. On November 20, 2015, the USPTO instituted the ex parte reexamination request having found a substantial new question of patentability concerning EMED’s patent in the first filed case. ~~The~~All EMED claims have been rejected by the USPTO Examiner in a Final Office Action dated July 19, 2017. EMED filed a response to this Final Office Action on September 15, 2017 that is awaiting consideration by the Examiner. Thus, the ex parte reexamination is ongoing. A decision to institute the IPR for EMED’s patent in the second filed case was ordered by the USPTO on February 19, 2016 having determined a reasonable likelihood all claims of the patent may be found to be unpatentable. Oral argument for the IPR was held on November 22, 2016 and a final ruling ~~is due~~issued on ~~or before February 19,~~January 12, 2017. In its final ruling, the PTAB held the claim asserted by EMED against the Company in the second filed case was invalid. EMED appealed the PTAB’s final ruling, and EMED’s opening brief in the CAFC was filed on June 26, 2017. The Company’s response brief was filed on August 3, 2017. EMED filed a reply brief on August 17, 2017. Presently, the parties are awaiting further action by the CAFC.

Although the Company believes it has meritorious claims and defenses in these actions and proceedings, their outcomes cannot be predicted with any certainty. IfWe believe that it is likely both patents will be determined invalid, however, if any of these actions against the Company are successful, they could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

NOTE 5 STOCKHOLDERS’ EQUITY

On September 30, 2015, RMS’s Board of Directors authorized ~~a stock repurchase program pursuant to which~~ the Company ~~has and expects to continue~~ to make open market purchases of up to 2,000,000 shares of the Company’s outstanding common stock. The Board of Directors initially authorized such purchases up to 1,000,000 shares. On June 29, 2016, the Board of Directors approved the amendment to the stock repurchase program increasing the authorized to be repurchased to 2,000,000 shares.Common Stock. The purchases ~~will be~~are made through a broker ~~to be~~ designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the ~~safe harbor~~ rules of the Securities and Exchange Commission ~~(the “Commission”)~~ for such repurchases.

As of ~~November~~September 30, ~~2016,~~2017, the Company had repurchased ~~395,356~~396,606 shares at an average price of ~~$0.45~~$0.45. The management of the Company has decided to discontinue repurchasing its outstanding common stock under the ~~program.~~program for an undetermined period of time to utilize cash for capital investments needed to expand the business.

NOTE 6 STOCK-BASED COMPENSATION

On September 30, 2015, the Board of Directors approved the 2015 Stock Option Plan (“the Plan”) authorizing the Company to grant stock option awards to certain officers, employees and consultants under the Plan, subject to shareholder approval at the Annual Meeting of Shareholders held on September 6, 2016. The total number of shares of common stock of the Company, par value $0.01 per share (“Common Stock”), with respect to which awards may be granted pursuant to the Plan was not to exceed 2,000,000 shares.

On June 29, 2016, the Board of Directors approved the amendment to the Plan ~~authorizing~~increasing the total number of shares of ~~common stock authorized~~Common Stock to be subject to awards granted under the Plan ~~to be increased~~ to 4,000,000 shares. On September 6, 2016, at the Annual Shareholder Meeting, the Company’s shareholders approved the Plan as amended.

As of ~~November~~September 30, ~~2016, the Company had~~2017, there were outstanding 1,163,000 options awarded ~~905,000 options~~ to certain executives, ~~and~~ key employees and advisory board members under the Plan.

The per share weighted average fair value of stock options granted during the ~~nine~~seven months ended ~~November~~September 30, 2017 and September 30, 2016 was $0.26 and ~~November 30, 2015 was~~ zero, ~~and $0.19,~~ 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 ~~nine~~seven months ended ~~November~~September 30, 2017 and September 30, 2016. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued:


	November 30,				September 30,
	2016		2015		2017		2016

Dividend yield		0.00%		0.00%		0.00%		—
Expected Volatility		59.00%		59.00%		70.1-72.2%		—
Weighted-average volatility		—		—		—		—
Expected dividends		—		—		—		—
Expected term (in years)		5 Years		5 Years		5 Years		—
Risk-free rate		2.17%		2.17%		2.30-2.36%		—

- 10 -

The following table summarizes the status of the Plan:


	Nine Months Ended November 30,							Seven Months Ended September 30,
	2016			2015				2017				2016
	Shares	Weighted Average Exercise Price		Shares		Weighted Average Exercise Price		Shares	Weighted Average Exercise Price			Shares		Weighted Average Exercise Price

Outstanding at March 1	1,060,000	$	0.36 - 0.38		—	$	—	1,345,000	$	0.39			1,060,000	$	0.37
Granted	—	$	—		1,155,000	$	0.36 - 0.38	68,000	$	0.44			—	$	—
Exercised	—	$	—		—	$	—	—	$	—			—	$	—
Forfeited	155,000	$	0.36 - 0.38		—	$	—	250,000	$	0.36			155,000	$	0.36
Outstanding at November 30	905,000	$	0.36 - 0.38		1,155,000	$	0.36 - 0.38
Options exercisable at November 30,	500,000	$	0.38		—	$	—
Outstanding at September 30								1,163,000	$	0.40			905,000	$	0.37
Options exercisable at September 30,								573,000	$	0.38			—	$	—
Weighted average fair value of options granted during the period	—	$	—		—	$	—	—	$	—			—	$	—
Stock-based compensation expense	—	$	101,337		—	$	10,717	—	$	(25,343	)		—	$	86,876

Total stock-based compensation expense, net of estimated forfeitures for stock option awards totaled ~~$101,337~~$(25,343) and ~~$10,717~~$86,876 for the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017 and ~~November~~September 30, ~~2015,~~2016, respectively.

The weighted-average grant-date fair value of options granted during the ~~nine~~seven months ended ~~November~~September 30, 2017 and September 30, 2016, was $17,961 and ~~November 30, 2015 was~~ zero, ~~for both periods.~~respectively. The total intrinsic value of options exercised during the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017 and ~~November~~September 30, ~~2015,~~2016, was zero for both periods.

The following table presents information pertaining to options outstanding at ~~November~~September 30, ~~2016:~~2017:


Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price		Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price

$0.36 - $0.38	905,000	5 years	$	0.37	—	$	—
$0.36 - $0.46								1,163,000	5 years	$	0.40	573,000	$	0.38

As of ~~November~~September 30, ~~2016,~~2017, there was ~~$35,958~~$115,384 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 17 months. The total fair value of shares vested during the ~~nine~~seven months ended ~~November~~September 30, 2017 and September 30, 2016, ~~and November 30, 2015,~~ was ~~$98,432~~$17,873 and zero, respectively.

- 11 -

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

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

Our actual results may vary materially from the forward-looking statements made in this report due to important factors such as uncertainties associated with future operating results, unpredictability related to Food and Drug Administration regulations, introduction of competitive products, limited liquidity, reimbursement related risks, government regulation of the home health care industry, success of the research and development effort, expanding the market of FREEDOM60^®,demand in the SCIg market, availability of sufficient capital to continue operations, dependence on key personnel and the outcome of litigation and regulatory investigation. When used in this report, the words “estimate,” “project,” “believe,” “may,” “will,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements. Such statements reflect current views with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. These statements involve risks and uncertainties with respect to the ability to raise capital if or when needed to develop and market new products, acceptance of and demand for new and existing products, ability to penetrate new markets, our success in enforcing and obtaining patents, obtaining required Government approvals, attracting and maintaining key personnel and succeeding in ~~defending~~ litigation claims ~~and resolving the FDA Warning Letter~~ that could cause the actual results to differ materially. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. The Company does not undertake any obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Throughout this report, “RMS,” the “Company,” “we,” “us” and “our” refer to Repro Med Systems, Inc.

OVERVIEW

~~Our~~On March 22, 2017, the Board of Directors approved a change in the Company’s fiscal year end from February 28 to December 31.

During the three months ended September 30, 2017, our total net sales ~~results for the three and nine months ended November 30, 2016 increased 1.5% and 4.4%, respectively, versus~~were up 19.5% compared with the same ~~periods~~period last ~~year. The~~year, with the majority of the increase ~~is driven by new customers in~~coming from higher volume from our ~~international region~~domestic customers. Our gross margin percentage, 61.8%, was not as ~~well~~high as ~~organic growth with our existing customers both domestically and internationally. We have increased our sales force internationally,~~the same period last year, 63.1%, mostly due to higher production costs related to scrap during quality inspections as we continue to work to implement a nondestructive testing protocol, which ~~has resulted in gaining two new accounts and~~ we expect to ~~bring on more new customers in~~have implemented before the ~~future.~~end of the calendar year. Our selling, general and administrative costs ~~are 19.8% and 34.5% higher~~were 10.4% lower for the three ~~and nine~~ months ended ~~November~~September 30, ~~2016~~2017 compared with the same period last year mostly due to a significant reduction in legal fees for the quarter related to our litigation and regulatory efforts.

Our net sales for the seven months ended September 30, 2017 increased 26.0%, versus the same period last year. Part of the increase was the result of backorders of $0.4 million at February 28, 2017 which were filled during the three month period ended June 30, 2017. Excluding these backorders, net sales grew 18.0% driven by growth both domestically and internationally, which included a larger pump order from a national customer in the period and a large return of product related to a market withdrawal last year. Our selling, general and administrative costs were 7.2% lower for the seven months ended September 30, 2017 compared with the same period last year. We ~~continue to have high professional~~saw a significant reduction in legal fees related to our litigation and regulatory ~~efforts and, although we are making every effort to resolve the litigation and close out our FDA Warning Letter,~~efforts. However, we cannot predict ~~the timing of either of these efforts,~~whether this trend will continue, nor can we predict the ~~outcome.~~outcome of the litigation or regulatory process. We also had reductions in sales and marketing spend driven by reduced consulting fees that were incurred last year related to our website redesign, public relations, sales training and lead generation efforts and the timing of spend for current year marketing initiatives. Offsetting these savings were increased salary and related benefit costs in our regulatory department due to headcount to support our regulatory compliance requirements and the addition of our Chief Operating Officer.

We continue to expand internationally, generating our first sales in Asia and Africa in the 2017 quarter. The FDA issued a new 510(k) clearance for our Integrated Catch-Up Freedom Syringe Driver System, the first ever fully integrated 510(k) cleared system by the FDA, confirming the science behind the performance of using the dedicated RMS system. It is also the only mechanical infusion system cleared for both subcutaneous drugs (SCIg) and intravenous (antibiotics), clearing the path for customers to invest in one system to meet all their needs. The FDA renewed our Certificate to Foreign Government which is used to communicate to foreign governments that the FDA certified that RMS meets good manufacturing practices and quality system regulations. We received registrations in new countries, launched our new flow controller in Europe and started several clinical trials with drug companies. Furthermore, we have launched a new marketing campaign, redesigned our packaging and entered the social media world to help extend our brand awareness. We plan to continue to focus on global sales growth, cost control and new product development. We have ~~hired a Chief Medical Officer~~requested an extension on the lease for our facility as we continue to assess what our strategy for future expansion and plan to increase headcount to facilitate compliance with our quality management system. We are also seeking to fill the role of Chief Operating Officer prior to the end of our fourth quarter to facilitate RMS’s future growth.growth requirements will be.

- 12 -

RESULTS OF OPERATIONS

Three ~~Months Ended November~~months ended September 30, ~~2016~~2017 compared to ~~November~~September 30, ~~2015~~2016

Net Sales

The following table summarizes our net sales for the three months ended ~~November~~September 30, ~~2016~~2017 and ~~2015:~~2016:


	Three Months Ended November 30,				Change from Prior Year				% of Sales			Three Months Ended September 30,				Change from Prior Year			% of Sales
	2016		2015		$		%		2016	2015		2017		2016		$		%	2017	2016
Sales
Domestic	$	2,652,107	$	2,645,241	$	6,866	0.3	%	83.1%	84.1	%	$	3,209,345	$	2,597,905	$	611,440	23.5%	83.4%	80.6%
International		541,006		499,713		41,293	8.3	%	16.9%	15.9	%		639,993		623,597		16,396	2.6%	16.6%	19.4%
Total	$	3,193,113	$	3,144,954	$	48,159	1.5	%				$	3,849,338	$	3,221,502	$	627,836	19.5%

~~- 12 -~~

Total net sales increased ~~$48,159~~$0.6 million or ~~1.5%~~19.5% for the ~~quarter~~three months ended ~~November~~September 30, ~~2016~~2017 compared towith the ~~quarter ended November 30, 2015. While~~same period last year. This growth was driven mostly by increased volume from domestic ~~sales were nearly even with last year, our international market increased $41,293 or 8.3% mostly due to new customers.~~sales. We continue to concentrate the majority of our efforts in our infusion product lines, specifically towards new applications in both domestic and international markets. ~~We anticipate~~During the quarter we generated our first sales toin Asia and Africa, and we continue to ~~increase as~~pursue registrations in new ~~markets, including new patient therapies and new countries,~~countries. We also continue to ~~develop and as we work on new enhancements to the FREEDOM60 that we believe will~~ expand ~~markets even further. For example,~~ our sales efforts ~~to reenter~~ into the antibiotic ~~market resulted in a large home care hospital system selecting the FREEDOM60 for all patients receiving this therapy.~~market.

Gross Profit

Our gross profit for the three months ended ~~November~~September 30, ~~2016~~2017 and ~~2015~~2016 is as follows:


	Three Months Ended November 30,						Change from Prior Year					Three Months Ended September 30,				Change from Prior Year
	2016			2015			$			%		2017		2016		$		%
Gross Profit	$	2,063,943		$	2,109,279		$	(45,336	)	(2.1	)%	$	2,378,658	$	2,032,944	$	345,714	17.0%
Stated as a Percentage of Net Sales		64.6	%		67.1	%							61.8%		63.1%

Gross profit ~~decreased $45,336~~increased $0.3 million or ~~2.1%~~17.0% in the three months ended ~~November~~September 30, ~~2016, as~~2017, compared to the same period in ~~2015.~~2016. This ~~decrease~~increase in the quarter was mostly driven by the ~~increases~~increase in net sales ~~rebates~~of $0.6 million. Partially offsetting this increase were higher production costs related to scrap during quality inspections as we work to implement a ~~specific customer contract renewal in~~nondestructive testing protocol, which we expect to have implemented before the ~~quarter compared to~~end of the ~~same period last year,~~calendar year. Additionally, we still incurred slightly higher payroll costs as ~~well as an increase in salary and related costs associated with higher headcount in our quality department to ensure compliance with our quality management system.~~we built up inventory.

Selling, general and administrative and Research and development

Our selling, general and administrative expenses and research and development costs for the three months ended ~~November~~September 30, ~~2016~~2017 and ~~2015~~2016 are as follows:


	Three Months Ended November 30,						Change from Prior Year				Three Months Ended September 30,				Change from Prior Year
	2016			2015			$		%		2017		2016		$			%
Selling, general and administrative	$	2,034,016		$	1,698,226		$	335,790	19.8	%	$	1,893,911	$	2,114,407	$	(220,496	)	(10.4	)
Research and development		59,142			51,564			7,578	14.7	%		14,852		75,198		(60,346	)	(80.2	)
	$	2,093,158		$	1,749,790		$	343,368	19.6	%	$	1,908,763	$	2,189,605	$	(280,842	)	(12.8	)
Stated as a Percentage of Net Sales		65.6	%		55.6	%						49.6%		68.0%

Selling, general and administrative expenses ~~increased $0.3~~decreased $0.2 million, or 10.4%, during the three months ended ~~November~~September 30, ~~2016~~2017 compared to the same period last year. The ~~increase came primarily from professional~~decrease was the result of a significant reduction in legal fees ~~and consultants~~of $0.3 million related to our litigation and regulatory ~~compliance~~efforts. We cannot predict whether this trend will continue, nor can we predict the outcome of the litigation. We also had reduced expenses in sales and ~~implementing the FDA’s unique device identification system, representing an aggregate increase~~marketing of ~~approximately $0.4 million. This was offset by approximately~~ $0.1 million ofmostly due to lower salary and related ~~benefits in sales and marketing~~costs due to attrition in Europe, lower overall marketing spend due to timing, all partially offset by recruiting fees in Europe. Further offsetting the savings were increased costs of $0.1 million in our regulatory department due to headcount ~~domestically~~to support our regulatory compliance requirements and ~~lower annual bonus~~the addition of our Chief Operating Officer, as well as an increase in bad debt expense ~~in the quarter versus last year.~~

of $65,000 related to an international customer. Research and development ~~expenses increased by 14.7%, primarily~~expense decreased 80.2% due to ~~additional engineering employees and consultants.~~attrition. We ~~continue~~are committed to actively pursue new product development and enhance existing product lines based on demand from the marketplace which includes feedback from sales and marketing at RMS and our distributors, the RMS clinical advisory panel, and our strategic business partners. We believe that such efforts have been useful in helping us to maintain our competitive position, increase revenue from our existing customer base and expand our market reach. Although our research and development ~~efforts have allowed us~~activities and are actively searching to ~~develop~~replace the ~~Freedom60, our HIgH-Flo needle sets, and the FreedomEdge~~^® ~~in 2015, there can be no assurance that our research and development will result in additional commercially successful products.~~open positions.

- 13 -

Depreciation and amortization

Depreciation and amortization expense increased by ~~20.2%~~9.3% up to ~~$83,254~~$77,517 in the three months ended ~~November~~September 30, ~~2016~~2017 compared with ~~$69,274~~$70,935 in the three months ended ~~November~~September 30, ~~2015~~2016 as a result of continued investment in ~~new~~computer equipment, testing equipment, patent applications and maintenance of existing patents.

~~- 13 -~~

Net Income/(Loss)~~/Income~~


	Three Months Ended November 30,						Change from Prior Year					Three Months Ended September 30,					Change from Prior Year
	2016			2015			$			%		2017		2016			$
Net (Loss)/Income	$	(104,275	)	$	167,552		$	(271,827	)	(162.2	)%
Net Income/(Loss)												$	265,754	$	(153,213	)	$	418,967
Stated as a Percentage of Net Sales		(3.3	)%		5.3	%							6.9%		(4.8%	)

Our net ~~loss~~income for the three months ended ~~November~~September 30, ~~2016~~2017 was ~~$0.1~~$0.3 million compared to a net ~~income~~loss of $0.2 million for the three months ended ~~November~~September 30, ~~2015, a $0.3~~2016. This $0.4 million ~~decrease, which~~change was mostly a result of the increase in net sales and the reduced selling, general and administrative expenses ~~of $0.3 million~~ as described above. Additionally, the Company recognized a $10,419 foreign exchange gain for the period.

~~Nine~~Seven months ~~Ended November~~ended September 30, ~~2016~~2017 compared to ~~November~~September 30, ~~2015~~2016

Net Sales

The following table summarizes our net sales for the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017 and ~~2015:~~2016:


	Nine Months Ended November 30,				Change from Prior Year				% of Sales				Seven Months Ended September 30,				Change from Prior Year			% of Sales
	2016		2015		$		%		2016		2015		2017		2016		$		%	2017	2016
Sales
Domestic	$	7,584,332	$	7,396,597	$	187,735	2.5	%	81.3	%	82.7	%	$	7,463,949	$	5,885,669	$	1,578,280	26.8%	81.2%	80.7%
International		1,746,876		1,545,079		201,797	13.1	%	18.7	%	17.3	%		1,724,465		1,408,026		316,439	22.5%	18.8%	19.3%
Total	$	9,331,208	$	8,941,676	$	389,532	4.4	%					$	9,188,414	$	7,293,695	$	1,894,719	26.0%

~~Net~~Total net sales increased $1.9 million or 26.0% for the seven months ended September 30, 2017 compared with the same period last year and was driven by both domestic and international sales. Part of the increase was the result of backorders of $0.4 million at February 28, 2017 which were filled during the three month period ended June 30, 2017. Excluding these backorders, net sales grew 18.0%. The launch of a new drug generated increased needle sales as customers built inventory, a larger pump order was received from a national customer in the ~~nine months ended November 30, 2016 by $0.4 million or 4.4% compared~~period and last year included a large return of product related to a market withdrawal. We continue to concentrate the ~~nine months ended November 30, 2015. This increase was mostly driven by sales~~majority of our efforts in our infusion ~~products which resulted from~~product lines, specifically towards new applications in both ~~organic growth~~domestic and international markets. We generated our first sales in Asia and Africa during the period, and we continue to pursue registrations in new ~~customers.~~countries. We also continue to expand our sales efforts into the antibiotic market.

Gross Profit

Our gross profit for the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017 and ~~2015~~2016 is as follows:


	Nine Months Ended November 30,						Change from Prior Year				Seven Months Ended September 30,				Change from Prior Year
	2016			2015			$		%		2017		2016		$		%
Gross Profit	$	5,955,346		$	5,633,868		$	321,478	5.7	%	$	5,648,752	$	4,649,770	$	998,982	21.5%
Stated as a Percentage of Net Sales		63.8	%		63.0	%						61.5%		63.8%

Gross profit increased ~~$0.3~~$1.0 million or ~~5.7%~~21.5% in the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017, compared to the same period in ~~2015.~~2016. This increase was ~~mostly due to the increase in sales. As a percentage of sales we showed an increase due to the moratorium on the medical device tax offset~~driven by the increase in net sales of $1.9 million. Partially offsetting this increase were higher production costs related to scrap during quality inspections as we work to implement a nondestructive testing protocol, higher sterilization costs due to more frequent cycles required to meet demand and backlog and increased shipping costs due to a backlog. We also had higher production salary and related benefits costs ~~associated with~~from overtime and the addition of a second shift to meet increased ~~headcount in our quality department.~~demand.

- 14 -

Selling, general and administrative and Research and development

Our selling, general and administrative expenses and research and development costs for the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017 and ~~2015~~2016 are as follows:


	Nine Months Ended November 30,						Change from Prior Year				Seven Months Ended September 30,				Change from Prior Year
	2016			2015			$		%		2017		2016		$			%
Selling, general and administrative	$	6,145,769		$	4,567,709		$	1,578,060	34.5	%	$	4,536,954	$	4,887,608	$	(350,654	)	(7.2%	)
Research and development		183,497			143,940			39,557	27.5	%		47,564		147,136		(99,572	)	(67.7%	)
	$	6,329,266		$	4,711,649		$	1,617,617	34.3	%	$	4,584,518	$	5,034,744	$	(450,226	)	(8.9%	)
Stated as a Percentage of Net Sales		67.8	%		52.7	%						49.9%		69.0%

~~- 14 -~~

Selling, general and administrative expenses ~~increased $1.6~~decreased $0.4 million, or 7.2%, during the ~~nine~~seven months ended ~~November~~September 30, ~~2016 as~~2017 compared to the same period last year. The ~~increase came primarily from professional~~decrease was the result of a significant reduction in legal fees ~~and consultants~~of $0.6 million related to our litigation and regulatory ~~compliance, operations management and implementing~~efforts. We cannot predict whether this trend will continue, nor can we predict the ~~FDA’s unique device identification system representing an aggregate increase~~outcome of ~~approximately $1.5 million. Additionally, expenses were higher~~the litigation. We also had reductions in sales and marketing ~~as a result~~spend of $0.2 million driven by lower consulting fees related to our website redesign last year, timing of spend this year on marketing initiatives and tradeshows and lower salary and related costs due to attrition in Europe. Partially offsetting these savings were increased costs in our regulatory department due to headcount to support our regulatory compliance requirements and the addition of our ~~reorganization last year and the increase in headcount internationally,~~Chief Operating Officer, totaling $0.4 million, as well as ~~initiatives for our website redesign,~~ an ~~aggregate~~ increase in bad debt expense of ~~approximately $0.1 million. These costs were all offset by lower payroll and~~$65,000, related ~~benefits in general and administrative support due~~ to ~~lower bonus expense versus last year of $0.1 million.~~

an international customer. Research and development ~~expenses increased~~expense decreased by ~~$39,557 in the nine months ended November 30, 2016 compared to the same period last year mostly~~$0.1 million, or 67.7%, primarily due to attrition for the ~~addition of engineering employees~~period. We are committed to our research and ~~consultants.~~development activities and are actively searching to replace the open positions.

Depreciation and amortization

Depreciation and amortization expense increased by ~~11.3%,~~7.4% up to ~~$227,109~~$179,874 in the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017 compared with ~~$204,087~~$167,513 in the ~~nine~~seven months ended ~~November~~September 30, ~~2015~~2016 as a result of continued investment in ~~capital assets mostly related to production and for new~~computer equipment, testing equipment, patent applications and maintenance of existing patents.

Net ~~Income~~Income/(Loss)


	Nine Months Ended November 30,						Change from Prior Year					Seven Months Ended September 30,					Change from Prior Year
	2016			2015			$			%		2017		2016			$
Net (Loss) Income	$	(420,204	)	$	438,126		$	(858,330	)	(195.9	)%
Net Income/(Loss)												$	626,587	$	(359,095	)	$	985,682
Stated as a Percentage of Net Sales		(4.5	)%		4.9	%							6.8%		(4.9%	)

Our net ~~loss~~income for the ~~nine~~seven months ended ~~November~~September 30, ~~2016~~2017 was ~~$0.4~~$0.6 million compared ~~with~~to a net ~~income~~loss of $0.4 million for the ~~nine~~seven months ended ~~November~~September 30, ~~2015.~~2016.. This ~~decrease of $0.9~~$1.0 million ischange was mostly ~~the~~a result of the increase in net sales and the reduced selling, general and administrative expenses ~~of $1.6 million~~as described ~~above, partially offset by increased sales.~~above. Additionally, the Company recognized $65,079 in foreign exchange gain for the period.

LIQUIDITY AND CAPITAL RESOURCES

Our principal source of liquidity is our cash of ~~$3.4~~$3.7 million as of ~~November~~September 30, ~~2016,~~2017, and cash flows from operations. Our principal source of operating cash inflows is from sales of our products to customers. Our principal cash outflows relate to the purchase and production of inventory and related costs, selling, general and administrative expenses, ~~research and development costs,~~ capital expenditures and patent costs.

We believe that as of ~~November~~September 30, ~~2016,~~2017, cash on hand and cash expected to be generated from future operating activities will be sufficient to fund our operations, including further research and development and capital expenditures for the next 12 months. We believe the ~~FREEDOM60~~FREEDOM System continues to find a solid following in the ~~subcutaneous immune globulin~~SCIg market, and ~~expect~~ this market is expected to continue to increase both domestically and internationally. In addition, we expect many of the SCIg providers, and others, will see benefit in using the FREEDOM System for additional uses such as antibiotics, chemotherapeutics, and pain medications.

We continue to be in litigation with a competitor, EMED Technologies Corp. (“EMED”) and have incurred a significant amount of legal fees in connection with that process. Although the Company believes it has meritorious claims and defenses in the actions and proceedings, their outcomes cannot be predicted with any certainty. If any of these actions against the Company are successful, they could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

- 15 -

On September 30, 2015, RMS’s Board of Directors authorized ~~a stock repurchase program pursuant to which~~ the Company ~~has and expects to continue~~ to make open market purchases of up to 2,000,000 shares of the Company’s ~~Outstanding~~outstanding Common Stock. The ~~Board of Directors initially authorized such~~ purchases up to 1,000,000 shares. On June 29, 2016, the Board of Directors approved the amendment to the stock repurchase program increasing the authorized to be repurchased to 2,000,000 shares. The purchases will beare made through a broker ~~to be~~ designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the ~~safe harbor~~ rules of the Securities and Exchange Commission for such repurchases. As of ~~November~~September 30, ~~2016,~~2017, the Company had repurchased ~~395,356~~396,606 shares at an average price of ~~$0.45 under~~$0.45. The management of the ~~program.~~Company has decided to discontinue repurchasing its outstanding Common Stock for an undetermined period of time to utilize cash for capital investments needed to expand the business.

Cash Flows

The following table summarizes our cash flows:


	Nine Months Ended November 30, 2016			Nine Months Ended November 30, 2015			Seven Months Ended September 30, 2017			Seven Months Ended September 30, 2016
Net cash (used in) provided by operating activities	$	(314,411	)	$	913,999
Net cash provided by/(used in) operating activities							$	531,281		$	(212,676	)
Net cash used in investing activities	$	(307,123	)	$	(131,703	)	$	(163,479	)	$	(230,044	)
Net cash used in financing activities	$	(140,255	)	$	—		$	(19,360	)	$	(120,577	)

~~- 15 -~~

Operating Activities

Net cash used in operating activities of $0.3 million for the nine months ended November 30, 2016, was primarily attributable to our net loss of $0.4 million, higher inventory levels due to anticipated sales and higher accounts receivable mostly due to a single customer. Offsetting these were the increase in accounts payable mostly due to professional fees and the purchase of raw materials, non-cash charges of $0.2 million for depreciation and amortization of long lived tangible and intangible assets, $21,000 of deferred compensation costs and stock based compensation expense of $0.1 million.

Net cash provided by operating activities of ~~$0.9~~$0.5 million for the ~~nine~~seven months ended ~~November~~September 30, ~~2015,~~2017 was primarily attributable to ~~our~~ net income of ~~$0.4~~$0.6 million, non-cash charges of $0.2 million for depreciation and amortization of long lived tangible and intangible assets, ~~$21,000~~a decrease in tax receivable of ~~deferred compensation costs, $38,360~~$0.1 million, and an increase in tax liability of $0.1 million. Offsetting these were an increase in inventory of $0.2 million as we built up finished goods inventory after our backorder position at February 28, 2017 and the reduction of accounts payable of $0.4 million which was the result of the payment of legal fees accrued at February 28, 2017.

Net cash used in operating activities of $0.2 million for the seven months ended September 30, 2016 was primarily attributable to the operating loss of $0.4 million, an increase in accounts receivable of $0.3 million, an increase in prepaid expense of $0.1 million mostly due to an income tax receivable of $0.1 million due to the loss in the period and the decrease in tax liability of $0.2 million. Partially offsetting these were non-cash charges of $0.2 million for depreciation and amortization of long lived tangible and intangible assets, stock based compensation expense of $0.1 million and an increase in accounts payable ~~and accrued expense~~ of $0.4 million ~~offset by an increase of accounts receivable of $0.1 million.~~mostly due to raw material purchases and legal fees.

Investing Activities

Our net cash used in investing activities of ~~$0.3 million and $0.1~~$0.2 million for the ~~nine~~seven months ended ~~November~~September 30, 2017 and September 30, 2016 ~~and November 30, 2015, respectively, were~~was primarily attributable to our continued investment in capital assets mostly related to production and for new patent applications and maintenance of existing patents.

Financing Activities

Our net cash used in financing activities ~~of $0.1 million~~was $19,360 and $120,577 for the ~~nine~~seven months ended ~~November~~September 30, 2017 and September 30, 2016, ~~was attributable to stock repurchases under the Company’s repurchase program.~~

~~NON-GAAP FINANCIAL MEASURES~~

~~Management~~respectively, and were a result of the ~~Company believes that investors’ understanding~~repurchase of shares of the Company’s ~~performance is enhanced~~common stock.

FDA

RMS had an inspection by ~~disclosing non-GAAP financial measures~~the FDA in June 2015, which included, among other items, a review of customer complaints, quality controls, quality assurance and documentation. The FDA inspection was then expanded as a ~~reasonable basis for comparison~~consequence of an extensive “trade complaint” filed on behalf of a competitor which resulted in the ~~Company’s ongoing results~~issuance of ~~operations. These non-GAAP measures should not~~an FDA FORM 483. Eight months later, on February 29, 2016 we received a Warning Letter. Since that time the Company has successfully addressed all quality and regulatory issues cited in the Warning Letter and the FDA FORM 483. On October 2, 2017, the FDA conducted another inspection as a last step in closing the Warning Letter. We anticipate the Warning Letter to be considered a substitute for GAAP-basis measures and results. Our non-GAAP measures may not be comparable to non-GAAP measures of other companies. The table below provides a disclosure of these non-GAAP financial measures toclosed in the ~~most closely analogous measure determined in accordance with GAAP.~~near future.

~~Non-GAAP financial measures should not be considered a substitute for, or superior~~On April 19, 2017, the FDA renewed our Certificate to measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial results.

We disclose and discuss EBITDA as a non-GAAP financial measure in our public releases, including quarterly earnings releases, and other filings with the Securities and Exchange Commission. We define EBITDA as earnings (net income) before interest, income taxes, depreciation and amortization. We believe that EBITDAForeign Government which is used ~~by investors~~to communicate to foreign governments that the FDA confirmed and ~~other users of our financial statements as a supplemental financial measure~~certified that ~~when viewed with our GAAP results~~RMS meets U.S. FDA good manufacturing practices and the accompanying reconciliation, we believe provides additional information that is useful to gain an understanding of the factors and trends affecting our business. We also believe the disclosure of EBITDA helps investors meaningfully evaluate and compare our cash flow generating capacity from quarter to quarter and year to year. EBITDA is used by management as a supplemental internal measure for planning and forecasting overall expectations and for evaluating actual results against such expectations. Because management uses EBITDA for such purposes, the Company uses EBITDA, adjusted for certain items, as a significant criterion for determining the amount of annual cash incentive compensation paid to our executive officers and employees. We have historically found that EBITDA is superior to other metrics for our company-wide cash incentive program, as it is more easily explained and understood by our typical employee.

We also include the use of non-GAAP normalized net income in our earnings releases. RMS management evaluates its business and makes certain operating decisions (e.g., budgeting, forecasting, employee compensation, asset management and resource allocation) using normalized net income. Management believes that because this measure provides it with useful supplemental information for evaluating and operating the business, investors would find it beneficial to have the opportunity to view the business in the same manner. Normalized net income is a measure that focuses on the Company’s operations and facilitates comparison from period to period on a consistent basis. Management also believes it is appropriate in evaluating the Company’s operations to exclude professional fees related to litigation and regulatory items because these costs are not expected to continue in the long term.quality system regulations.

- 16 -

~~A reconciliation of our non-GAAP measures is below:~~

Reconciliation of GAAP Net (Loss)/Income

Three Months Ended November 30

Nine Months Ended November 30

to Non-GAAP Normalized EBITDA:

2016

2015

2016

2015

GAAP Net (Loss)/Income

$
(104,275
)
$
167,552

$
(420,204
)
$
438,126

   Tax (Benefit)/Expense

(53,216
)

86,676

(214,965
)

227,067

   Depreciation

83,254

69,274

227,109

204,087

   Professional Fees (1)

583,547

280,156

1,503,722

518,028

Non-GAAP Normalized EBITDA

$
509,310

$
603,658

$
1,095,662

$
1,387,308

Reconciliation of GAAP Net (Loss)/Income
to Non-GAAP Normalized Net Income:

2016

2015

2016

2015

GAAP Net (Loss)/Income

$
(104,275
)
$
167,552

$
(420,204
)
$
438,126

   Professional Fees (1)

583,547

280,156

1,503,722

518,028

   Tax Expense on Professional Fees

(198,075
)

(95,014
)

(510,273
)

(175,228
)
Non-GAAP Normalized Net Income

$
281,197

$
352,694

$
573,245

$
780,926

~~__________~~

~~(1) Includes consulting and professional fees related to regulatory and litigation.~~

~~FDA~~

On February 29, 2016, the Company received a Warning Letter (WL NYK-2016-26) from the New York District Office of U.S. Food and Drug Administration (“FDA”) (“the Letter”) pursuant to observations arising from an FDA site inspection of the Company’s manufacturing facility which occurred over a three week period in June 2015.

The Letter identified a variety of concerns and requested submission of a response to the FDA to which the Company filed its initial response to on March 18, 2016. The Company subsequently had further telephonic and written communications with the FDA. The Company underwent a site re-inspection which concluded on December 16, 2016 with the issuance of a Form 483 (Inspectional Observations) to which the Company plans to respond within the fifteen business days deadline. There is no deadline for a reply by the FDA, and the Company’s manufacturing and distribution continue without interruption.

Although the Company is attempting to meet all of the FDA requirements, we cannot be certain that our actions will be deemed satisfactory by the FDA and this could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

~~- 17 -~~

- 1817 -

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

Not Applicable.

PART I – ITEM 4. CONTROLS AND PROCEDURES.

The Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures as such is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluations, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There have been no changes in the Company’s internal control over financial reporting during the quarter ended ~~November~~September 30, ~~2016,~~2017, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

~~PART II – ITEM 1. LEGAL PROCEEDINGS.~~

On September 20, 2013, the Company commenced in the United States District Court for the Eastern District of California a declaratory judgment action against competitor, EMED Technologies Corp. (“EMED”) to establish the invalidity of one of EMED’s patents and non-infringement of the Company’s needle sets. EMED answered the complaint and asserted patent infringement and unfair business practice counterclaims. The Company responded by asserting its own unfair business practice claims against EMED. Both parties have requested injunctive relief and monetary damages. Discovery is ongoing.

On June 16, 2015, the Court issued what it termed a “narrow” preliminary injunction against the Company from making certain statements regarding some of EMED’s products. On June 23, 2016, EMED filed a motion seeking to have the Company held in contempt, claiming that certain language in the Company’s device labeling does not comply with the injunction. In response to a show cause order, the Company advised the Court that the language in the Company’s labeling that EMED challenged is language that the FDA directed the Company to use in its labeling. The Court discharged the show cause order, effectively rejecting EMED’s contempt argument.

~~- 19 -~~

On March 24, 2016, EMED filed a motion seeking a second preliminary injunction prohibiting RMS from selling three of its products in California. The Company opposed that motion on April 19, 2016. A decision on the motion is still pending.

Although the Company believes it has meritorious claims and defenses in these actions and proceedings, their outcomes cannot be predicted with any certainty. If any of these actions against the Company are successful, they could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows.

PART II – ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On October 21, 2015, the Board of Directors of the Company approved non-employee director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, beginning September 1, 2015. The number of shares to be issued each quarter is calculated based upon the closing price of the common stock on the last day of each fiscal quarter as reported by the ~~OTCQX (except that the stock issued on February 29, 2016 was calculated based on the closing price of the common stock on February 9, 2016).~~OTCQX. The Company issued ~~an aggregate of 94,072~~53,196 and 97,314 shares of common stock to its non-employee directors during the ~~fiscal quarter~~three and seven month period ended ~~November~~September 30, ~~2016.~~2017, respectively.

The ~~following table provides information regarding repurchases~~Company issued 42,553 and 56,108 shares of common stock to Dr. Fred Ma, its Chief Medical Officer, under the terms of his employment agreement, during the three and seven month period ended September 30, 2017, respectively.

On September 30, 2015, RMS’s Board of Directors authorized the Company to make open market purchases of up to 2,000,000 shares of the Company’s outstanding Common Stock. The purchases are made through a broker designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the rules of ~~its~~the Securities and Exchange Commission for such repurchases. As of September 30, 2017, the Company had repurchased 396,606 shares at an average price of $0.45. There were no repurchases of common stock by the Company during the ~~three month~~quarter ended September 30, 2017. The management of the Company has decided to discontinue repurchasing its outstanding Common Stock for an undetermined period ~~ended November 30, 2016:~~

~~Issuer Purchases~~ of ~~Common Stock~~time to utilize cash for capital investments needed to expand the business. There is no expiration date to the repurchase plan.

Total Number

Maximum

of Shares

Number of

Total

Purchased as

Shares that May

Number of

Average

Part of Publicly

Yet Be

Shares

Price Paid

Announced

Purchased

Period (1)

Purchased

Per Share

Plan (2)

Under the Plan (2)

September 1, 2016 – September 30, 2016

—

—

—

1,649,544

October 1, 2016 – October 31, 2016

23,300

$
0.44

23,300

1,626,244

November 1, 2016 - November 30, 2016

21,600

$
0.44

21,600

1,604,644

Total

44,900

$
0.44

44,900

~~__________~~


~~(1)~~	~~Monthly information is presented by reference to the Company’s fiscal months during the third quarter of fiscal 2017.~~

~~(2)~~	On September 30, 2015, RMS’s Board of Directors authorized a stock repurchase program pursuant to which the Company will make open market purchases of up to 1,000,000 shares of the Company’s outstanding common stock. The purchases will be made through a broker to be designated by the Company with price, timing and volume restrictions based on average daily trading volume, consistent with the safe harbor rules of the Securities and Exchange Commission for such repurchases. As of November 30, 2016, the Company had repurchased 395,356 shares at an average price of $0.45 under the program. On June 29, 2016, the Board of Directors approved the amendment to the stock repurchase program increasing the authorized 1,000,000 shares to be repurchased to 2,000,000 shares. There is no expiration date to the program.

- 2018 -

On September 30, 2015, the ~~Company announced the approval~~Board of Directors approved the 2015 Stock Option Plan ~~(the “Plan”)~~ authorizing the Company to grant awards to certain employees under the plan at fair market value, ~~subject to shareholder approval. On June 29, 2016,~~which was approved by shareholders at the ~~Board of Directors approved the amendment to the Plan authorizing the~~Annual Meeting held on September 6, 2016. The total number of shares of ~~common stock authorized~~Common Stock, with respect to which awards may be granted ~~under~~pursuant to the Plan, ~~be amended from 2,000,000 shares to~~shall not exceed 4,000,000 shares. ~~On September 6, 2016, at the Annual Shareholder Meeting, shareholders approved the Plan as amended.~~ As of ~~November~~September 30, ~~2016, the Company had awarded 0.9~~2017, there were outstanding 1.2 million options awarded to certain executives, ~~and~~ key employees and advisory board members under the Plan.

All of the securities issued by the Company as described in this Item were issued in reliance on the exemption from registration under Section 4(2) under the Securities Act of 1933, as amended.

PART II – ITEM 6. EXHIBITS.


~~3(i)~~	~~Amended and Restated Certificate of Incorporation, effective December 28, 2016~~

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002

31.2	Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002

32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

101*	Interactive Data Files of Financial Statements and Notes.

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

- 19 -

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	REPRO MED SYSTEMS, INC.

~~January 5,~~November 3, 2017	/s/ Andrew I. Sealfon
	Andrew I. Sealfon, President, Chairman of the Board, Director, Chief Executive Officer

~~January 5,~~November 3, 2017	/s/ Karen Fisher
	Karen Fisher, Chief Financial Officer and Treasurer

- 2120 -


Reconciliation of GAAP Net (Loss)/Income	Three Months Ended November 30						Nine Months Ended November 30
to Non-GAAP Normalized EBITDA:		2016			2015			2016			2015
GAAP Net (Loss)/Income	$	(104,275	)	$	167,552		$	(420,204	)	$	438,126
Tax (Benefit)/Expense		(53,216	)		86,676			(214,965	)		227,067
Depreciation		83,254			69,274			227,109			204,087
Professional Fees (1)		583,547			280,156			1,503,722			518,028
Non-GAAP Normalized EBITDA	$	509,310		$	603,658		$	1,095,662		$	1,387,308

Reconciliation of GAAP Net (Loss)/Income to Non-GAAP Normalized Net Income:		2016			2015			2016			2015
GAAP Net (Loss)/Income	$	(104,275	)	$	167,552		$	(420,204	)	$	438,126
Professional Fees (1)		583,547			280,156			1,503,722			518,028
Tax Expense on Professional Fees		(198,075	)		(95,014	)		(510,273	)		(175,228	)
Non-GAAP Normalized Net Income	$	281,197		$	352,694		$	573,245		$	780,926


				Total Number	Maximum
				of Shares	Number of
	Total			Purchased as	Shares that May
	Number of	Average		Part of Publicly	Yet Be
	Shares	Price Paid		Announced	Purchased
Period (1)	Purchased	Per Share		Plan (2)	Under the Plan (2)
September 1, 2016 – September 30, 2016	—		—	—	1,649,544
October 1, 2016 – October 31, 2016	23,300	$	0.44	23,300	1,626,244
November 1, 2016 - November 30, 2016	21,600	$	0.44	21,600	1,604,644
Total	44,900	$	0.44	44,900