Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 06, 2018 | |
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 | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
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 | 38,195,214 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 |
BALANCE SHEETS (UNAUDITED)
BALANCE SHEETS (UNAUDITED) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 3,421,186 | $ 3,974,536 |
Certificate of deposit (restricted cash) | 1,504,818 | |
Certificates of deposit | 159,462 | 263,269 |
Accounts receivable less allowance for doubtful accounts of $77,067 at June 30, 2018 and $77,067 at December 31, 2017 | 1,840,094 | 1,861,949 |
Inventory | 1,718,294 | 1,658,681 |
Prepaid expenses | 255,888 | 170,739 |
TOTAL CURRENT ASSETS | 8,899,742 | 7,929,174 |
Property and equipment, net | 795,484 | 836,283 |
Patents, net of accumulated amortization of $220,340 and $203,768 at June 30, 2018 and December 31, 2017, respectively | 531,685 | 483,821 |
Other assets | 31,582 | 31,582 |
TOTAL ASSETS | 10,258,493 | 9,280,860 |
CURRENT LIABILITIES | ||
Deferred capital gain - current | 15,003 | 22,481 |
Accounts payable | 711,947 | 454,398 |
Accrued expenses | 539,473 | 658,060 |
Accrued payroll and related taxes | 187,307 | 334,903 |
Accrued tax liability | 91,488 | 115,854 |
TOTAL CURRENT LIABILITIES | 1,545,218 | 1,585,696 |
Deferred capital gain - long term | 3,762 | |
Deferred tax liability | 20,733 | 21,675 |
TOTAL LIABILITIES | 1,565,951 | 1,611,133 |
STOCKHOLDERS' EQUITY | ||
Common stock, $0.01 par value; 75,000,000 shares authorized, 40,907,991 and 40,731,529 shares issued, 38,170,760 and 37,994,298 shares outstanding at June 30, 2018 and December 31, 2017, respectively | 409,080 | 407,315 |
Additional paid-in capital | 4,358,618 | 4,216,718 |
Retained earnings | 4,269,048 | 3,389,898 |
Stockholder equity before treasury stock | 9,036,746 | 8,013,931 |
Less: Treasury stock, 2,737,231 shares at June 30, 2018 and December 31, 2017 | (344,204) | (344,204) |
TOTAL STOCKHOLDERS' EQUITY | 8,692,542 | 7,669,727 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 10,258,493 | $ 9,280,860 |
BALANCE SHEETS (UNAUDITED) (Par
BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 77,067 | $ 77,067 |
Patents, accumulated amortization | $ 220,340 | $ 203,768 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 75,000,000 | 75,000,000 |
Common stock, issued | 40,907,991 | 40,731,529 |
Common stock, outstanding | 38,170,760 | 37,994,298 |
Treasury stock | 2,737,231 | 2,737,231 |
STATEMENTS OF OPERATIONS (UNAUD
STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
NET SALES | $ 4,502,326 | $ 3,829,457 | $ 8,535,550 | $ 7,467,893 |
Cost of goods sold | 1,762,742 | 1,532,158 | 3,330,142 | 3,068,639 |
Gross Profit | 2,739,584 | 2,297,299 | 5,205,408 | 4,399,254 |
OPERATING EXPENSES | ||||
Selling, general and administrative | 2,022,631 | 2,005,336 | 3,902,900 | 3,780,445 |
Research and development | 23,963 | 24,840 | 33,811 | 70,746 |
Depreciation and amortization | 75,978 | 76,781 | 150,556 | 151,662 |
Total Operating Expenses | 2,122,572 | 2,106,957 | 4,087,267 | 4,002,853 |
Net Operating Profit | 617,012 | 190,342 | 1,118,141 | 396,401 |
Non-Operating (Expense)/Income | ||||
(Loss)/Gain on currency exchange | (19,838) | 34,670 | (10,414) | 51,744 |
Interest and other income | 5,501 | 421 | 6,116 | 2,066 |
TOTAL OTHER (EXPENSE)/INCOME | (14,337) | 35,091 | (4,298) | 53,810 |
PROFIT BEFORE TAXES | 602,675 | 225,433 | 1,113,843 | 450,211 |
Income Tax Expense | (126,952) | (76,961) | (234,693) | (174,788) |
NET INCOME | $ 475,723 | $ 148,472 | $ 879,150 | $ 275,423 |
NET INCOME PER SHARE | ||||
Basic | $ 0.01 | $ 0.02 | $ 0.01 | |
Diluted | $ 0.01 | $ 0.02 | $ 0.01 | |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||
Basic | 38,100,040 | 37,825,209 | 38,058,500 | 37,799,981 |
Diluted | 38,872,998 | 37,899,619 | 38,815,301 | 37,866,730 |
STATEMENTS OF CASH FLOWS (UNAUD
STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income | $ 879,150 | $ 275,423 |
Adjustments to reconcile net income to net cash provided by/(used in) operating activities: | ||
Amortization of deferred compensation cost | 7,000 | |
Stock based compensation expense | 94,170 | 41,479 |
Depreciation and amortization | 150,556 | 151,662 |
Deferred capital gain - building lease | (11,240) | (11,240) |
Deferred taxes | (941) | 12,937 |
Provision for returns and doubtful accounts | (5,603) | |
Changes in operating assets and liabilities: | ||
Decrease/(Increase) in accounts receivable | 21,855 | (597,699) |
(Increase)/Decrease in inventory | (59,613) | 94,177 |
(Increase)/Decrease in prepaid expense and other assets | (85,149) | 33,174 |
Increase/(Decrease) in accounts payable | 257,549 | (492,919) |
(Decrease)/Increase in accrued payroll and related taxes | (147,597) | 71,113 |
Decrease in accrued expense | (118,587) | (12,207) |
(Decrease)/Increase in accrued tax liability | (24,366) | 161,851 |
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES | 955,787 | (270,852) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payments for capital expenditures | (93,185) | (89,437) |
Purchase of certificate of deposit (restricted cash) | (1,500,000) | |
Reinvested earnings on certificate of deposit (restricted cash) | (4,818) | |
Payments for patents | (64,436) | (53,346) |
Proceeds/(reinvested earnings) from certificates of deposit | 103,807 | (1,196) |
NET CASH USED IN INVESTING ACTIVITIES | (1,558,632) | (143,979) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Stock issuances | 51,250 | |
Payment for cancelled shares | (1,755) | (19,360) |
Purchase of treasury stock | (484) | |
NET CASH PROVIDED BY/(USED) IN FINANCING ACTIVITIES | 49,495 | (19,844) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (553,350) | (434,675) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 3,974,536 | 3,417,183 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 3,421,186 | 2,982,508 |
Cash paid during the periods for: | ||
Interest | ||
Taxes | 260,000 | |
NON-CASH FINANCING AND INVESTING ACTIVITIES | ||
Issuance of common stock as compensation | $ 67,500 | $ 67,500 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “RMS”, or “we”) designs, manufactures and markets proprietary medical devices primarily for the ambulatory infusion market and emergency medical applications as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality management systems. The Company operates as one segment. FISCAL YEAR END The Company’s fiscal year end is December 31. BASIS OF PRESENTATION The accompanying unaudited financial statements as of June 30, 2018, have been prepared in accordance with generally accepted accounting principles and with instructions to SEC regulation S-X for interim financial statements. In the opinion of the Company’s management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Company’s financial position as of June 30, 2018, and the results of operations and cash flow for the three and six month periods ended June 30, 2018, and 2017. The results of operations for the three and six months ended June 30, 2018, and 2017 are not necessarily indicative of the results to be expected for the full year. These interim financial statements should be read in conjunction with the financial statements and notes thereto of the Company and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on Form 10-K. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to, asset lives, valuation allowances, inventory, and accruals. REVENUE RECOGNITION The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09—Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted this ASU effective January 1, 2018 on a full retrospective basis. Adoption of this standard did not result in significant changes to our accounting policies, business processes, systems or controls, or have a material impact on our financial position, results of operations and cash flows or related disclosures. As such, prior period financial statements were not recast. The Company’s revenues result from the sale of assembled products. We recognize revenues when shipment occurs and at which point the customer obtains control and ownership of the goods. Shipping costs generally are billed to customers and are included in sales. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred. Provisions for distributor pricing and annual customer volume rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it’s probable the annual growth target will be achieved. The rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 2016, 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 February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The main difference between the current requirement under GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. This ASU requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. This ASU must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the potential impact of this ASU on our financial statements, disclosure requirements and methods of adoption. The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations. STOCK-BASED COMPENSATION The Company maintains a long-term incentive stock benefit plan under which it grants stock options and stock to certain directors and key employees. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of restricted stock granted are recorded at the fair value of the shares at the grant date and are recognized over the vesting period. RECLASSIFICATION Certain reclassifications have been made to conform prior period data to the current presentation. These reclassifications had no effect on reported net income. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 2 RELATED PARTY TRANSACTIONS On December 20, 2013, we executed an agreement effective March 1, 2014, with a Company director, Dr. Paul Mark Baker, to provide clinical research and support services related to new and enhanced applications for the FREEDOM System. Authorized by the Board of Directors, the agreement provided for payment of 420,000 shares of common stock valued at $0.20 per share over a three-year period. Amortization was zero for the three months ended June 30, 2018 and 2017, respectively, and zero and $7,000 for the six months ended June 30, 2018 and 2017, respectively; the agreement is fully amortized. On June 24, 2016, Cyril Narishkin, the Company’s former Chief Operating Officer, executed a termination and general release agreement, which terminated his previous consulting agreement, and resigned as an officer and director for personal reasons. Mr. Narishkin was compensated for services as a consultant through January 31, 2017 at a monthly rate of $16,000 per month for up to eight days of service a month upon request of the Company. Mr. Narishkin’s compensation was zero for the three months ended June 30, 2018 and 2017, respectively, and was zero and $16,000 for the six months ended June 30, 2018 and 2017, respectively. In January 2017, Brad Sealfon, the son of Andrew Sealfon, a Company Director and former President and Chief Executive Officer, consulted for the Company in its production and quality departments and was compensated $5,184. In March 2017, Mr. Sealfon provided additional consulting as a principal of Stokequest, LLC for the Company in its marketing department and was compensated $2,000. Mr. Sealfon has not performed any consulting for the Company during the six months ended June 30, 2018. LEASED AIRCRAFT The Company leases an aircraft from a company controlled by Andrew Sealfon, a Company Director and former President and Chief Executive Officer. The lease payments were $3,876 for both three months ended June 30, 2018 and 2017, and $7,752 and $9,251 for the six months ended June 30, 2018 and 2017, 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 twenty of a twenty-year lease. With a monthly lease amount of $11,042, the lease payments were $33,126 for each of the three months ended June 30, 2018 and 2017 and $66,252 for each of the six months ended June 30, 2018 and 2017. The Company also paid property taxes for the three months ended June 30, 2018 and 2017 in the amount of $12,720 and $12,418, respectively, and $25,432 and $24,585 for the six months ended June 30, 2018 and 2017, respectively. On November 14, 2017, the Company executed a lease extension, which calls for six month extensions beginning March 1, 2019 with the option to renew six times at monthly lease amount of $12,088. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: June 30, 2018 December 31, 2017 Land $ 54,030 $ 54,030 Building 171,094 171,094 Vehicles 60,784 43,836 Furniture, office equipment, and leasehold improvements 1,020,801 1,008,665 Manufacturing equipment and tooling 1,129,827 1,075,471 2,436,536 2,353,096 Less: accumulated depreciation (1,641,052 ) (1,516,813 ) Property and equipment, net $ 795,484 $ 836,283 Depreciation expense was $67,504 and $70,154 for the three months ended June 30, 2018 and 2017, respectively, and $133,984 and $139,162 for the six months ended June 30, 2018 and 2017, respectively. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 6 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | NOTE 4 LEGAL PROCEEDINGS The Company is involved in several lawsuits with its competitor, EMED Technologies Corp. (“EMED”), wherein EMED has alleged the Company’s needle sets infringe various patents controlled by EMED. Certain of these lawsuits also allege antitrust violations, unfair business practices and various other claims. Although no assurances can be given, the Company believes it likely that each of EMED’s patents at issue in these cases will be deemed invalid and that the Company will succeed on the merits with respect to all of the other elements of the cases. The initial case involving EMED was filed by the Company in the United States District Court for the Eastern District of California on September 20, 2013, in response to a letter from EMED claiming infringement by RMS, and sought to establish the invalidity of the patent referenced in the letter – patent US 8,500,703 – or “’703.” EMED answered the complaint and asserted patent infringement of ’703 and unfair business practice counterclaims. The Company responded by adding unfair business practice claims against EMED. Both parties have requested injunctive relief and monetary damages in unspecified amounts. On August 22, 2017, the Company filed a motion in this California case seeking a Preliminary Injunction prohibiting EMED from making false statements and claims regarding the products of both companies. The motion has now been fully briefed, and the parties are awaiting action by the Court. Earlier, on September 11, 2015, the Company requested an ex parte reexamination of the ’703 patent by the US Patent and Trademark Office (USPTO). The ex parte reexamination resulted in a Final Office Action dated July 19, 2017 rejecting all EMED claims of the patent. On January 25, 2018 EMED filed an Appeal Brief with a Petition for Revival, and the ex parte reexamination is ongoing. The second court case was filed by EMED in the United States District Court for the Eastern District of Texas on June 25, 2015, claiming patent infringement of another of its patents (US 8,961,476 – “’476”), by the Company’s needle sets, and seeking unspecified monetary damages. This ’476 patent is related to the ’703 patent. On September 17, 2015 the Company requested an inter partes review (“IPR”) of ’476, and in response to the Company’s request, the Court entered an order staying the second case until after the Patent Trial and Appeal Board (“PTAB”) of the USPTO made a decision regarding the validity of the patent. On January 12, 2017, the PTAB issued its Final Written Decision in RMS’s favor invalidating all but one of the claims in this patent. (The Company believes the remaining claim is not independently material to any of EMED’s litigation claims or RMS’s rights.) EMED appealed the PTAB’s ruling to the United States Court of Appeals for the Federal Circuit, which affirmed the PTAB’s Final Written Decision in the Company’s favor on April 3, 2018. On April 18, 2018, EMED filed a petition for en banc rehearing. The second court case in the Eastern District of Texas remains stayed pending EMED’s exhaustion of its rights of judicial review of the PTAB’s decision. Following the PTAB’s Final Written Decision in the IPR of ’476, EMED filed a new patent application claiming priority back to the application that issued as ’703 at issue in the California case. Submitted for accelerated examination, this new application issued as US 9,808,576 – “’576” on November 7, 2017. On this same date, EMED filed a new case (third case) in the United States District Court for the Eastern District of Texas claiming patent infringement of ’576, also directed to the Company’s needle sets, and seeking unspecified damages and a preliminary injunction against the Company’s marketing of its needle sets. RMS has filed a Motion to Dismiss or Transfer Venue to the Southern District of New York, as RMS has no physical or direct presence in the Eastern District of Texas. RMS also filed an opposition to EMED’s preliminary injunction motion, to which EMED did not file a reply. The Eastern District of Texas has now ordered the case moved to the Southern District of New York, which has now occurred. On May 4, 2018 the Company requested an inter parties review (“IPR”) of ’576 and EMED’s response is due in mid-August. Upon the submission of that Response, the Company intends to Move for Stay of the ’576 Southern District of New York matter. EMED has petitioned the Eastern District of Texas for right to move the ’476 matter to the Southern District of New York and for leave to amend the original complaint, but neither request is believed likely to succeed as both issues are years past statutory deadlines and at odds with prior statements made by EMED in this matter. On April 23, 2018, EMED filed a new Civil Case in the Eastern District of Texas asserting antitrust, defamation and unfair business practice claims, and seeking unspecified damages, similar to those previously presented in the first case, described above. The Company has filed a Motion to Dismiss and the parties are awaiting a decision by the Court. Although the Company believes it has meritorious claims and defenses in these actions and proceedings, their outcomes cannot be predicted with any certainty. If any of these actions against the Company are successful, they could have a material adverse effect on the Company’s business, results of operations, financial condition and cash flows. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2018 | |
Stockholders' Equity Note [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 5 STOCKHOLDERS’ EQUITY On June 29, 2016, RMS’s Board of Directors authorized the Company to make open market purchases of up to 2,000,000 shares of the Company’s outstanding Common Stock. The purchases are made through a broker designated by the Company, with price, timing and volume restrictions based on average daily trading volume, consistent with the rules of the Securities and Exchange Commission for such repurchases. As of June 30, 2018, the Company had repurchased 396,606 shares at an average price of $0.45. The management of the Company has decided to discontinue repurchasing its outstanding common stock under the program for an undetermined period of time to utilize cash for capital investments needed to expand the business. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 6 STOCK-BASED COMPENSATION On June 29, 2016, the Board of Directors amended the 2015 Stock Option Plan authorizing the Company to grant awards to certain employees under the plan at fair market value, which was approved by shareholders at the Annual Meeting held on September 6, 2016. The total number of shares of Common Stock, with respect to which awards may be granted pursuant to the Plan, shall not exceed 4,000,000 shares. As of June 30, 2018, there were outstanding 931,000 options awarded to certain executives, key employees and advisory board members under the Plan. On October 21, 2015, the Board of Directors of the Company approved non-employee director compensation of $25,000 each annually, to be paid quarterly half in cash and half in common stock, beginning September 1, 2015. The per share weighted average fair value of stock options granted during the six months ended June 30, 2018 and June 30, 2017 was $0.75 and $0.25, 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 six months ended June 30, 2018 and June 30, 2017. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options. The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued: June 30, 2018 2017 Dividend yield 0.00% 0.00% Expected Volatility 65.2% 70.9-72.20% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5 Years 5 Years Risk-free rate 2.80% 2.36-2.48% The following table summarizes the status of the Plan: Six months Ended June 30, 2018 2017 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at January 1 1,038,000 $ 0.41 905,000 $ 0.37 Granted 18,000 $ 1.33 518,000 $ 0.41 Exercised 125,000 $ 0.41 — $ — Forfeited — $ — 310,000 $ 0.36 Outstanding at June 30 931,000 $ 0.43 1,113,000 $ 0.39 Options exercisable at June 30 656,885 $ 0.39 538,000 $ 0.38 Stock-based compensation expense — $ 26,670 — $ (26,021 ) Total stock-based compensation expense, net of estimated forfeitures for stock option awards totaled $26,670 and ($26,021) for the six months ended June 30, 2018 and June 30, 2017, respectively. Cash received from option exercises for the six months ended June 30, 2018 and 2017 was $51,250 and zero, respectively. The weighted-average grant-date fair value of options granted during the six months ended June 30, 2018 and June 30, 2017, was $0.75 and $0.25, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2018 and June 30, 2017, was $30,664 and zero, respectively. The following table presents information pertaining to options outstanding at June 30, 2018: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $1.33 931,000 5 years $ 0.43 656,885 $ 0.39 As of June 30, 2018, there was $64,507 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 19 months. The total fair value of shares vested as of June 30, 2018 and June 30, 2017, was $135,979 and $107,732, respectively. |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 6 Months Ended |
Jun. 30, 2018 | |
Debt Obligations | |
DEBT OBLIGATIONS | NOTE 7 DEBT OBLIGATIONS On February 8, 2018, the Company executed a Promissory Note with KeyBank National Association in the amount of $1.5 million as a variable rate revolving line of credit loan due on demand with an interest rate of Libor plus 2.25%, collateralized with a certificate of deposit in the amount of $1.5 million. The Company entered into this arrangement to establish a credit lending history and, in the event needed, to have additional cash on hand for future expansion. As of June 30, 2018 the Company has no outstanding amounts against the line of credit. |
NATURE OF OPERATIONS AND SUMM13
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “RMS”, or “we”) designs, manufactures and markets proprietary medical devices primarily for the ambulatory infusion market and emergency medical applications as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality management systems. The Company operates as one segment. |
FISCAL YEAR END | FISCAL YEAR END The Company’s fiscal year end is December 31. |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying unaudited financial statements as of June 30, 2018, have been prepared in accordance with generally accepted accounting principles and with instructions to SEC regulation S-X for interim financial statements. In the opinion of the Company’s management, the financial statements contain all adjustments consisting of normal recurring accruals necessary to present fairly the Company’s financial position as of June 30, 2018, and the results of operations and cash flow for the three and six month periods ended June 30, 2018, and 2017. The results of operations for the three and six months ended June 30, 2018, and 2017 are not necessarily indicative of the results to be expected for the full year. These interim financial statements should be read in conjunction with the financial statements and notes thereto of the Company and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report for the year ended December 31, 2017, as filed with the Securities and Exchange Commission on Form 10-K. |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to, asset lives, valuation allowances, inventory, and accruals. |
REVENUE RECOGNITION | REVENUE RECOGNITION The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09—Revenue from Contracts with Customers, which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. We adopted this ASU effective January 1, 2018 on a full retrospective basis. Adoption of this standard did not result in significant changes to our accounting policies, business processes, systems or controls, or have a material impact on our financial position, results of operations and cash flows or related disclosures. As such, prior period financial statements were not recast. The Company’s revenues result from the sale of assembled products. We recognize revenues when shipment occurs and at which point the customer obtains control and ownership of the goods. Shipping costs generally are billed to customers and are included in sales. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred. Provisions for distributor pricing and annual customer volume rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it’s probable the annual growth target will be achieved. The rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. |
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS | RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS 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 February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The main difference between the current requirement under GAAP and this ASU is the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases. This ASU requires that a lessee recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term (other than leases that meet the definition of a short-term lease). The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Operating leases will result in straight-line expense (similar to current operating leases) while finance leases will result in a front-loaded expense pattern (similar to current capital leases). Classification will be based on criteria that are largely similar to those applied in current lease accounting. For lessors, the guidance modifies the classification criteria and the accounting for sales-type and direct financing leases. This is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. This ASU must be adopted using a modified retrospective transition, and provides for certain practical expedients. Transition will require application of the new guidance at the beginning of the earliest comparative period presented. We are currently assessing the potential impact of this ASU on our financial statements, disclosure requirements and methods of adoption. The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company maintains a long-term incentive stock benefit plan under which it grants stock options and stock to certain directors and key employees. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of restricted stock granted are recorded at the fair value of the shares at the grant date and are recognized 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) | 6 Months Ended |
Jun. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following at: June 30, 2018 December 31, 2017 Land $ 54,030 $ 54,030 Building 171,094 171,094 Vehicles 60,784 43,836 Furniture, office equipment, and leasehold improvements 1,020,801 1,008,665 Manufacturing equipment and tooling 1,129,827 1,075,471 2,436,536 2,353,096 Less: accumulated depreciation (1,641,052 ) (1,516,813 ) Property and equipment, net $ 795,484 $ 836,283 Depreciation expense was $67,504 and $70,154 for the three months ended June 30, 2018 and 2017, respectively, and $133,984 and $139,162 for the six months ended June 30, 2018 and 2017, respectively. |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of fair value of the stock options granted Black-Scholes option valuation model | The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued: June 30, 2018 2017 Dividend yield 0.00% 0.00% Expected Volatility 65.2% 70.9-72.20% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5 Years 5 Years Risk-free rate 2.80% 2.36-2.48% |
Schedule of stock option plan | The following table summarizes the status of the Plan: Six months Ended June 30, 2018 2017 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at January 1 1,038,000 $ 0.41 905,000 $ 0.37 Granted 18,000 $ 1.33 518,000 $ 0.41 Exercised 125,000 $ 0.41 — $ — Forfeited — $ — 310,000 $ 0.36 Outstanding at June 30 931,000 $ 0.43 1,113,000 $ 0.39 Options exercisable at June 30 656,885 $ 0.39 538,000 $ 0.38 Stock-based compensation expense — $ 26,670 — $ (26,021 ) |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at June 30, 2018: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36 - $1.33 931,000 5 years $ 0.43 656,885 $ 0.39 |
NATURE OF OPERATIONS AND SUMM16
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 6 Months Ended |
Jun. 30, 2018Segment | |
Accounting Policies [Abstract] | |
Number of operating segments | 1 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Nov. 14, 2017 | Jun. 24, 2016 | Dec. 20, 2013 | Mar. 31, 2017 | Jan. 31, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 |
Mr. Andrew I. Sealfon [Member] | Lease Agreement [Member] | Aircraft [Member] | |||||||||
Lease payments | $ 3,876 | $ 3,876 | $ 7,752 | $ 9,251 | |||||
Mr. Mark Pastreich [Member] | Lease Agreement [Member] | Building [Member] | |||||||||
Monthly lease payments | $ 12,088 | 11,042 | 11,042 | ||||||
Lease payments | 33,126 | 33,126 | 66,252 | 66,252 | |||||
Property taxes paid | 12,720 | 12,418 | 25,432 | 24,585 | |||||
Brad A. Sealfon [Member] | |||||||||
Officer compensation | $ 2,000 | $ 5,184 | |||||||
Clinical Research & Support Services Consulting Agreement [Member] | Dr. Mark Baker [Member] | |||||||||
Amortization of deferred compensation cost | 0 | 0 | 0 | 7,000 | |||||
Clinical Research & Support Services Consulting Agreement [Member] | FREEDOM60 Syringe Infusion System [Member] | Dr. Mark Baker [Member] | |||||||||
Number of shares issued upon agreement | 420,000 | ||||||||
Share price (in dollars per share) | $ 0.20 | ||||||||
Agreement term | 3 years | ||||||||
Consulting Agreement [Member] | Mr. Cyril Narishkin (Consultant) [Member] | |||||||||
Monthly payment for agreement | $ 16,000 | ||||||||
Officer compensation | $ 0 | $ 0 | $ 0 | $ 16,000 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Property, Plant and Equipment [Abstract] | ||
Land | $ 54,030 | $ 54,030 |
Building | 171,094 | 171,094 |
Vehicles | 60,784 | 43,836 |
Furniture, office equipment, and leasehold improvements | 1,020,801 | 1,008,665 |
Manufacturing equipment and tooling | 1,129,827 | 1,075,471 |
Property and equipment, gross | 2,436,536 | 2,353,096 |
Less: accumulated depreciation | (1,641,052) | (1,516,813) |
Property and equipment, net | $ 795,484 | $ 836,283 |
PROPERTY AND EQUIPMENT (Detai19
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 67,504 | $ 70,154 | $ 133,984 | $ 139,162 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - Share Repurchase Program [Member] - $ / shares | 6 Months Ended | |
Jun. 30, 2018 | Jun. 29, 2016 | |
Equity, Class of Treasury Stock [Line Items] | ||
Maximum number of shares repurchased | 2,000,000 | |
Number of shares repurchased | 396,606 | |
Average share price (in dollars per share) | $ 0.45 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - 2015 Stock Option Plan [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Dividend yield | 0.00% | 0.00% |
Expected Volatility | 65.20% | |
Weighted-average volatility | ||
Expected dividends | ||
Expected term (in years) | 5 years | 5 years |
Risk-free rate | 2.80% | |
Minimum [Member] | ||
Expected Volatility | 70.90% | |
Risk-free rate | 2.36% | |
Maximum [Member] | ||
Expected Volatility | 72.20% | |
Risk-free rate | 2.48% |
STOCK-BASED COMPENSATION (Det22
STOCK-BASED COMPENSATION (Details 1) - 2015 Stock Option Plan [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 1,038,000 | 905,000 |
Granted | 18,000 | 518,000 |
Exercised | 125,000 | |
Forfeited | 310,000 | |
Outstanding at ending | 931,000 | 1,113,000 |
Options exercisable at ending | 656,885 | 538,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 0.41 | $ 0.37 |
Granted | 1.33 | 0.41 |
Exercised | 0.41 | |
Forfeited | 0.36 | |
Outstanding at ending | 0.43 | 0.39 |
Options exercisable at ending | $ 0.39 | $ 0.38 |
Stock-based compensation expense | $ 26,670 | $ (26,021) |
STOCK-BASED COMPENSATION (Det23
STOCK-BASED COMPENSATION (Details 2) - 2015 Stock Option Plan [Member] - $0.36 - $1.33 [Member] | 6 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Number Outstanding | shares | 931,000 |
Weighted Average Remaining Contractual Term | 5 years |
Weighted Average Exercise Price | $ / shares | $ 0.43 |
Number Exercisable | shares | 656,885 |
Weighted Average Exercise Price | $ / shares | $ 0.39 |
STOCK-BASED COMPENSATION (Det24
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Oct. 21, 2015 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 29, 2016 |
Independent Directors ( Dr. Mark Baker, Mr. Mark Pastreich, Mr. Arthur Radin and Mr. Cyril Narishkin) [Member] | ||||
Description of payment terms | Paid quarterly half in cash and half in common stock | |||
Annually compensation paid per director | $ 25,000 | |||
2015 Stock Option Plan [Member] | ||||
Number of shares authorized | 4,000,000 | |||
Number of common shares awarded | 18,000 | 518,000 | ||
Weighted average grant date fair value of stock options | $ 0.75 | $ 0.25 | ||
Allocated stock-based compensation expense | $ 26,670 | $ (26,021) | ||
Cash received from option exercises | 51,250 | 0 | ||
Total intrinsic value of options exercised | 30,664 | 0 | ||
Total unrecognized compensation cost | $ 64,507 | |||
Weighted-average period (in years) | 19 months | |||
Total fair value of shares vested | $ 135,979 | $ 107,732 | ||
2015 Stock Option Plan [Member] | Key Employees [Member] | ||||
Number of common shares awarded | 931,000 |
DEBT OBLIGATIONS (Details Narra
DEBT OBLIGATIONS (Details Narrative) - USD ($) | Feb. 08, 2018 | Jun. 30, 2018 |
Description of interest rate | Interest rate of Libor plus 2.25%, collateralized with a certificate of deposit in the amount of $1.5 million. | |
Key Bank National Association [Member] | Line Of Credit [Member] | ||
Promissory note amount | $ 1,500,000 | $ 0 |