Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
May 31, 2016 | Jun. 30, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | REPRO MED SYSTEMS INC | |
Entity Central Index Key | 704,440 | |
Document Type | 10-Q | |
Trading Symbol | REPR | |
Document Period End Date | May 31, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --02-28 | |
Entity a Well-known Seasoned Issuer | No | |
Entity a Voluntary Filer | No | |
Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 37,963,501 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,017 |
BALANCE SHEETS (Unaudited)
BALANCE SHEETS (Unaudited) - USD ($) | May 31, 2016 | Feb. 29, 2016 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 3,860,648 | $ 4,201,949 |
Certificates of deposit | 261,118 | 261,118 |
Accounts receivable less allowance for doubtful accounts and returns of $27,174 at May 31, 2016 and $37,486 at February 29, 2016 | 1,353,936 | 1,350,180 |
Inventory | 1,123,567 | 1,040,277 |
Prepaid expenses | 451,382 | 265,123 |
TOTAL CURRENT ASSETS | 7,050,651 | 7,118,647 |
Property and equipment, net | 985,168 | 996,822 |
Patents, net of accumulated amortization of $151,233 and $147,380 at May 31, 2016 and February 29, 2016, respectively | 267,206 | 247,691 |
Other assets | 31,490 | 31,140 |
TOTAL ASSETS | 8,334,515 | 8,394,300 |
CURRENT LIABILITIES | ||
Deferred capital gain - current portion | 22,481 | 22,481 |
Accounts payable | 608,167 | 307,764 |
Accrued expenses | 502,634 | 499,406 |
Accrued payroll and related taxes | $ 112,080 | 148,766 |
Accrued tax liability | 129,497 | |
TOTAL CURRENT LIABILITIES | $ 1,245,362 | 1,107,914 |
Deferred capital gain - less current portion | 39,356 | 44,976 |
Deferred tax liability | 107,966 | 123,111 |
TOTAL LIABILITIES | 1,392,684 | 1,276,001 |
STOCKHOLDERS' EQUITY | ||
Common stock, $0.01 par value, 50,000,000 shares authorized, 40,487,532 shares issued; 37,963,501 shares outstanding at May 31, 2016 and 37,966,501 shares outstanding at February 29, 2016 | 404,875 | 404,875 |
Additional paid-in capital | 4,019,292 | 3,968,342 |
Retained earnings | 2,786,626 | 3,019,940 |
TOTAL STOCKHOLDERS' EQUITY BEFORE TREASURY STOCK AND DEFERRED COMPENSATION COST | 7,210,793 | 7,393,157 |
Less: Treasury stock at cost, 2,524,031 shares at May 31, 2016 and 2,521,031 at February 29, 2016 | (247,962) | (246,858) |
Less: Deferred compensation cost | (21,000) | (28,000) |
TOTAL STOCKHOLDERS' EQUITY | 6,941,831 | 7,118,299 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 8,334,515 | $ 8,394,300 |
BALANCE SHEETS (Unaudited) (Par
BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | May 31, 2016 | Feb. 29, 2016 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 27,174 | $ 37,486 |
Patents, accumulated amortization | $ 151,233 | $ 147,380 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 50,000,000 | 50,000,000 |
Common stock, issued | 40,487,532 | 40,487,532 |
Common stock, outstanding | 37,963,501 | 37,966,501 |
Treasury stock, shares | 2,524,031 | 2,521,031 |
STATEMENTS OF OPERATIONS (Unaud
STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Income Statement [Abstract] | ||
NET SALES | $ 2,990,166 | $ 2,630,545 |
Cost of goods sold | 1,053,354 | 1,112,686 |
Gross Profit | 1,936,812 | 1,517,859 |
OPERATING EXPENSES | ||
Selling, general and administrative | 2,179,590 | 1,478,339 |
Research and development | 56,668 | 53,665 |
Depreciation and amortization | 70,156 | 64,719 |
Total Operating Expenses | 2,306,414 | 1,596,723 |
Net Operating Loss | (369,602) | (78,864) |
Non-Operating Income/(Expense) | ||
Gain (Loss) currency exchange | $ 15,633 | (15,070) |
Loss on disposal of fixed assets | (4,606) | |
Interest and other income | $ 754 | 1,103 |
TOTAL OTHER INCOME (EXPENSES) | 16,387 | (18,573) |
LOSS BEFORE TAXES | (353,215) | (97,437) |
Income Tax Benefit | 119,901 | 32,797 |
NET LOSS | $ (233,314) | $ (64,640) |
NET LOSS PER SHARE | ||
Basic (in dollars per share) | $ (0.01) | |
Diluted (in dollars per share) | $ (0.01) | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||
Basic (in shares) | 37,965,979 | 38,006,667 |
Diluted (in shares) | 37,965,979 | 38,006,667 |
STATEMENTS OF CASH FLOWS (Unaud
STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 3 Months Ended | |
May 31, 2016 | May 31, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (233,314) | $ (64,640) |
Adjustments to reconcile net loss to net cash (used in)/provided by operating activities: | ||
Amortization of deferred compensation cost | 7,000 | $ 7,000 |
Stock based compensation expense | 50,950 | |
Depreciation and amortization | 70,156 | $ 64,719 |
Deferred capital gain - building lease | (5,620) | (5,618) |
Deferred taxes | $ (15,144) | (2,380) |
Loss on disposal of fixed assets | 4,606 | |
Allowance for returns and doubtful accounts | $ (10,312) | 951 |
Changes in operating assets and liabilities: | ||
Decrease in accounts receivable | 6,555 | 148,234 |
Increase in inventory | (83,290) | (186,000) |
Increase in prepaid expense | (186,259) | $ (168,325) |
Increase in other assets | (350) | |
Increase in accounts payable | 300,402 | $ 154,275 |
(Decrease) Increase in accrued payroll and related taxes | (36,686) | 123,885 |
Increase (Decrease) in accrued expense | 3,228 | $ (65,606) |
Decrease in accrued income tax liability | (129,497) | |
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (262,181) | $ 11,101 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payments for property and equipment | (54,649) | (61,344) |
Payments for patents | (23,366) | (36,356) |
NET CASH USED IN INVESTING ACTIVITIES | (78,015) | $ (97,700) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Purchase of treasury stock | (1,105) | |
NET CASH USED IN FINANCING ACTIVITIES | (1,105) | |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (341,301) | $ (86,599) |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 4,201,949 | 2,557,235 |
CASH AND CASH EQUIVALENTS, END OF YEAR | $ 3,860,648 | $ 2,470,636 |
Cash paid during the years for: | ||
Interest | ||
Taxes | $ 91,600 | |
NON-CASH FINANCING AND INVESTING ACTIVITIES | ||
Issuance of common stock as compensation |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
May 31, 2016 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the Company, RMS) designs, manufactures and markets proprietary medical devices primarily for the ambulatory infusion market and emergency medical applications in compliance with the United States Food and Drug Administration (the FDA) quality and regulatory system and international standards for quality management system. The Company operates as one segment. BASIS OF PRESENTATION The accompanying unaudited financial statements as of May 31, 2016, 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 Companys management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Companys financial position as of May 31, 2016, and the results of operations and cash flow for the three-month periods ended May 31, 2016, and 2015. The results of operations for the three months ended May 31, 2016, and 2015 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 managements discussion and analysis of financial condition and results of operations included in the Companys Annual Report for the year ended February 29, 2016, as filed with the Securities and Exchange Commission on Form 10-K. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to, asset lives, valuation allowances, inventory, and accruals. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In May 2014, FASB issued ASU No. 2014-09Revenue 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. In March 2016, the FASB issued ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606); Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as the requirements in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606); Identifying Performance Obligations and Licensing, which is intended to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas and the effective date is the same as the requirements in ASU 2014-09. In May 2016, FASB issued ASU No. 2016-12Revenue 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 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 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive ActivitiesOil 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 March 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-09 Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU was issued as part of the FASBs simplification initiative 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, 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), Share-Based Payment. This should 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. 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 and expect it will have a material impact on our consolidated financial condition and results of operations upon adoption. In July 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-11Simplifying the Measurement of Inventory. The ASU was issued as part of the FASBs 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. STOCK-BASED COMPENSATION The Company maintains various long-term incentive stock benefit plans under which it grants stock options and restricted stock awards to certain directors and key employees. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted are recorded at the fair value of the shares at the grant date, over the vesting period. RECLASSIFICATION Certain reclassifications have been made to conform prior period data to the current presentation. These reclassifications had no effect on reported net income. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
May 31, 2016 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 2 RELATED PARTY TRANSACTIONS On December 20, 2013, we executed an agreement effective March 1, 2014, with a Company director, Dr. Mark Baker, to provide clinical research and support services related to new and enhanced applications for the FREEDOM60® Syringe Infusion System. Authorized by the Board of Directors, the agreement provides for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period. Amortization amounted to $7,000 for the each of the three months ended May 31, 2016 and May 31, 2015. In August, 2014, Dr. Baker was paid a previously approved bonus of $25,000 to assist him in covering taxes due on the grant of common stock. 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 provides for payment of $16,000 per month for eight days per month, of which half is to be paid in cash and half is to be paid in shares of common stock. Effective January 1, 2016, the agreement provides for the same payment of $16,000 per month, of which seventy-five percent is to be paid in cash and twenty-five percent is to be paid in shares of common stock. On April 26, 2016, Cyril Narishkin was appointed President of the Company. On June 24, 2016, Cyril Narishkin executed a termination and general release agreement and resigned as President, Interim Chief Operating Officer and Director for personal reasons. Mr. Narishkin will be compensated for services as a consultant through January 31, 2017 at a monthly rate of $16,000 per month for up to eight days a month upon request of the Company. On June 29, 2016, Andrew Sealfon was reinstated as President of the Company. LEASED AIRCRAFT The Company leases an aircraft from a company controlled by the Chief Executive Officer. The lease payments were $5,375 for each of the three months ended May 31, 2016, and May 31, 2015. 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 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. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
May 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: May 31, 2016 February 29, 2016 Land $ 54,030 $ 54,030 Building 171,094 171,094 Furniture, office equipment, and leasehold improvements 975,926 923,394 Manufacturing equipment and tooling 953,985 961,486 2,155,035 2,110,004 Less: accumulated depreciation 1,169,867 1,113,182 Property and equipment, net $ 985,168 $ 996,822 |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 3 Months Ended |
May 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | NOTE 4 LEGAL PROCEEDINGS In 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 EMEDs patents and non-infringement of the Companys 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. On June 16, 2015, the Court issued what it termed a narrow preliminary injunction against the Company from making certain statements regarding some of EMEDs products. On June 23, 2016 EMED filed a motion challenging RMSs compliance with that order. RMS will be opposing that motion. On March 24, 2016, EMED filed a motion for a second preliminary injunction regarding sales of RMS products in California. The Company opposed that motion, which is still pending. Discovery is ongoing. On June 25, 2015, EMED filed a claim of patent infringement for the second of its patents, also directed to the Companys needle sets, in the United States District Court for the Eastern District of Texas. This second patent is related to the one concerning the Companys 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 at the USPTO issues a final written decision regarding the validity of the patent. 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 U.S. Patent and Trademark Office (USPTO) instituted the ex parte reexamination request having found a substantial new question of patentability concerning EMEDs patent in the first filed case. A decision to institute the IPR for EMEDs 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. Both the ex parte reexamination and the inter partes review are ongoing. Although the Company believes it has meritorious claims and defenses in these litigations and proceedings, their outcomes cannot be predicted with any certainty. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 3 Months Ended |
May 31, 2016 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 5 STOCKHOLDERS EQUITY On September 30, 2015, RMSs 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 Companys 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 May 31, 2016, the Company had repurchased 183,406 shares at an average price of $0.45 under the program. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
May 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 6 STOCK-BASED COMPENSATION On September 30, 2015, the Board of Directors approved the 2015 Stock Option Plan authorizing the Company to grant awards to certain employees under the plan at fair market value, subject to shareholder approval at the Annual Meeting to be 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 shall not exceed 2,000,000 shares. As of May 31, 2016, the Company awarded 1,060,000 options to certain executives and key employees under the plan. On October 21, 2015, the Board of Directors of the Company approved director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, effective September 1, 2015. Beginning March 1, 2016, all Directors, excluding Mr. Andrew Sealfon, the Companys Chief Executive Officer, will receive director compensation. The per share weighted average fair value of stock options granted during the three months ended May 31, 2016 and May 31, 2015 was $0.19 and zero, respectively. The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the three months ended May 31, 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: Three Months Ended May 31, 2016 2015 Dividend yield 0.00% Expected Volatility 59.00% Weighted-average volatility Expected dividends Expected term (in years) 5 Years Risk-free rate 2.17% The following table summarizes the status of the Companys stock option plan: Three Months Ended May 31, 2016 2015 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at March 1 1,060,000 $ 0.36 - 0.38 $ Granted $ $ Exercised $ $ Forfeited $ $ Outstanding at May 31, 2016, 1,060,000 $ 0.36 - 0.38 $ Options exercisable at May 31, $ $ Weighted average fair value of options granted during the period $ $ Stock-based compensation expense $ 37,542 $ Total stock-based compensation expense for stock option awards totaled $37,542 and zero for the three months ended May 31, 2016 and May 31, 2015, respectively. The weighted-average grant-date fair value of options granted during three months ended May 31, 2016 and May 31, 2015 was zero for both periods. The total intrinsic value of options exercised during three months ended May 31, 2016 and May 31, 2015, was zero for both periods. The following table presents information pertaining to options outstanding at May 31, 2016: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $0.38 1,060,000 5 years $ 0.37 $ As of May 31, 2016, there was $0.1 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 17 months. The total fair value of shares vested during the three months ended May 31, 2016 and May 31, 2015, was zero for both periods. |
NATURE OF OPERATIONS AND SUMM12
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
May 31, 2016 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the Company, RMS) designs, manufactures and markets proprietary medical devices primarily for the ambulatory infusion market and emergency medical applications in compliance with the United States Food and Drug Administration (the FDA) quality and regulatory system and international standards for quality management system. The Company operates as one segment. |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited financial statements as of May 31, 2016, 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 Companys management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Companys financial position as of May 31, 2016, and the results of operations and cash flow for the three-month periods ended May 31, 2016, and 2015. The results of operations for the three months ended May 31, 2016, and 2015 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 managements discussion and analysis of financial condition and results of operations included in the Companys Annual Report for the year ended February 29, 2016, as filed with the Securities and Exchange Commission on Form 10-K. |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to, asset lives, valuation allowances, inventory, and accruals. |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In May 2014, FASB issued ASU No. 2014-09Revenue 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. In March 2016, the FASB issued ASU No. 2016-08 Revenue from Contracts with Customers (Topic 606); Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which is intended to improve the operability and understandability of the implementation guidance on principal versus agent considerations and the effective date is the same as the requirements in ASU 2014-09. In April 2016, the FASB issued ASU No. 2016-10 Revenue from Contracts with Customers (Topic 606); Identifying Performance Obligations and Licensing, which is intended to clarify identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas and the effective date is the same as the requirements in ASU 2014-09. In May 2016, FASB issued ASU No. 2016-12Revenue 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 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 EITF Meeting, which is rescinding certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive ActivitiesOil 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 March 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-09 Compensation Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The ASU was issued as part of the FASBs simplification initiative 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, 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), Share-Based Payment. This should 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. 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 and expect it will have a material impact on our consolidated financial condition and results of operations upon adoption. In July 2015, the FASB issued Accounting Standards Update (ASU) No. 2015-11Simplifying the Measurement of Inventory. The ASU was issued as part of the FASBs 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. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company maintains various long-term incentive stock benefit plans under which it grants stock options and restricted stock awards to certain directors and key employees. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted are recorded at the fair value of the shares at the grant date, over the vesting period. |
RECLASSIFICATION | RECLASSIFICATION Certain reclassifications have been made to conform prior period data to the current presentation. These reclassifications had no effect on reported net income. |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
May 31, 2016 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following at: May 31, 2016 February 29, 2016 Land $ 54,030 $ 54,030 Building 171,094 171,094 Furniture, office equipment, and leasehold improvements 975,926 923,394 Manufacturing equipment and tooling 953,985 961,486 2,155,035 2,110,004 Less: accumulated depreciation 1,169,867 1,113,182 Property and equipment, net $ 985,168 $ 996,822 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
May 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of fair value assumptions | The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the three months ended May 31, 2016. Three Months Ended May 31, 2016 2015 Dividend yield 0.00% Expected Volatility 59.00% Weighted-average volatility Expected dividends Expected term (in years) 5 Years Risk-free rate 2.17% |
Schedule of stock option plan | The following table summarizes the status of the Companys stock option plan: Three Months Ended May 31, 2016 2015 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at March 1 1,060,000 $ 0.36 - 0.38 $ Granted $ $ Exercised $ $ Forfeited $ $ Outstanding at May 31, 2016, 1,060,000 $ 0.36 - 0.38 $ Options exercisable at May 31, $ $ Weighted average fair value of options granted during the period $ $ Stock-based compensation expense $ 37,542 $ |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at May 31, 2016: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $0.38 1,060,000 5 years $ 0.37 $ |
NATURE OF OPERATIONS AND SUMM15
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 3 Months Ended |
May 31, 2016Number | |
Accounting Policies [Abstract] | |
Number of operating segments | 1 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Jun. 24, 2016 | Jan. 01, 2016 | Oct. 21, 2015 | Dec. 20, 2013 | Aug. 31, 2014 | May 31, 2016 | May 31, 2015 |
Mr. Andrew I. Sealfon [Member] | Lease Agreement [Member] | Aircraft [Member] | |||||||
Lease payments | $ 5,375 | $ 5,375 | |||||
Mr. Mark Pastreich [Member] | Lease Agreement [Member] | Building Lease [Member] | |||||||
Description of lease terms | Seventeen of a twenty-year lease. | ||||||
Clinical Research & Support Services Consulting Agreement [Member] | Dr. Paul Mark Baker [Member] | |||||||
Amortization of deferred compensation cost | $ 7,000 | $ 7,000 | |||||
Bonus paid to director | $ 25,000 | ||||||
Clinical Research & Support Services Consulting Agreement [Member] | FREEDOM60 Syringe Infusion System [Member] | Dr. Paul Mark Baker [Member] | |||||||
Number of shares issued upon agreement | 420,000 | ||||||
Share price (in dollars per share) | $ 0.20 | ||||||
Agreement term | 3 years | ||||||
Consulting Agreement [Member] | Mr. Cyril Narishkin [Member] | |||||||
Monthly payment for agreement | $ 16,000 | $ 16,000 | |||||
Description of payment terms | Seventy-five percent is to be paid in cash and twenty-five percent is to be paid in shares of common stock. | Half is to be paid in cash and half is to be paid in shares of common stock. | |||||
Consulting Agreement [Member] | Mr. Cyril Narishkin [Member] | Subsequent Event [Member] | |||||||
Monthly payment for agreement | $ 16,000 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | May 31, 2016 | Feb. 29, 2016 |
Property and equipment, gross | $ 2,155,035 | $ 2,110,004 |
Less: accumulated depreciation | 1,169,867 | 1,113,182 |
Property and equipment, net | 985,168 | 996,822 |
Land [Member] | ||
Property and equipment, gross | 54,030 | 54,030 |
Building [Member] | ||
Property and equipment, gross | 171,094 | 171,094 |
Furniture, Office Equipment, And Leasehold Improvements [Member] | ||
Property and equipment, gross | 975,926 | 923,394 |
Manufacturing Equipment And Tooling [Member] | ||
Property and equipment, gross | $ 953,985 | $ 961,486 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - Share Repurchase Program [Member] - $ / shares | 3 Months Ended | ||
May 31, 2016 | Feb. 29, 2016 | Sep. 30, 2015 | |
Maximum number of shares repurchased | 1,000,000 | ||
Number of shares repurchased | 183,406 | ||
Average share price (in dollars per share) | $ 0.45 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - 2015 Stock Option Plan [Member] - USD ($) | 3 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Dividend yield | 0.00% | |
Expected Volatility | 59.00% | |
Weighted-average volatility | ||
Expected dividends | ||
Expected term (in years) | 5 years | |
Risk-free rate | 2.17% |
STOCK-BASED COMPENSATION (Det20
STOCK-BASED COMPENSATION (Details 1) - 2015 Stock Option Plan [Member] - USD ($) | 3 Months Ended | |
May 31, 2016 | May 31, 2015 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 1,060,000 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding at ending | 1,060,000 | |
Options exercisable at ending | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Options exercisable at ending | ||
Weighted average fair value of options granted during the period | $ 0.19 | |
Stock-based compensation expense | $ 37,542 | |
Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 0.36 | |
Granted | ||
Exercised | ||
Forfeited | ||
Outstanding at ending | $ 0.36 | |
Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | 0.38 | |
Outstanding at ending | $ 0.38 |
STOCK-BASED COMPENSATION (Det21
STOCK-BASED COMPENSATION (Details 2) - 2015 Stock Option Plan [Member] - $0.36 - $0.38 [Member] | 3 Months Ended |
May 31, 2016$ / sharesshares | |
Number Outstanding | shares | 1,060,000 |
Weighted Average Remaining Contractual Term | 5 years |
Weighted Average Exercise Price | $ / shares | $ 0.37 |
Number Exercisable | shares | |
Weighted Average Exercise Price | $ / shares |
STOCK-BASED COMPENSATION (Det22
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Oct. 21, 2015 | May 31, 2016 | May 31, 2015 | Feb. 29, 2016 | Sep. 30, 2015 | Feb. 28, 2015 |
Common shares par value (in dollars per share) | $ 0.01 | $ 0.01 | ||||
Directors excluding Mr. Andrew Sealfon [Member] | ||||||
Description of payment terms | Paid quarterly half in cash and half in common stock. | |||||
Annually compensation paid per director | $ 25,000 | |||||
2015 Stock Option Plan [Member] | ||||||
Number of shares authorized | 2,000,000 | |||||
Number of shares outstanding | 1,060,000 | 1,060,000 | ||||
Common shares par value (in dollars per share) | $ 0.01 | |||||
Weighted average grant date fair value of stock options | $ 0.19 | |||||
Allocated stock-based compensation expense | $ 37,542 | |||||
Weighted-average grant-date fair value options granted | 0 | $ 0 | ||||
Total intrinsic value of options exercised | 0 | 0 | ||||
Total unrecognized compensation cost | $ 100,000 | |||||
Weighted-average period (in years) | 17 months | |||||
Total fair value of shares vested | $ 0 | $ 0 |