Document and Entity Information
Document and Entity Information | 12 Months Ended |
Dec. 31, 2018 | |
Document And Entity Information | |
Entity Registrant Name | REPRO MED SYSTEMS INC |
Entity Central Index Key | 704,440 |
Document Type | S-1/A |
Trading Symbol | REPR |
Document Period End Date | Dec. 31, 2018 |
Amendment Flag | true |
Amendment Description | The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. |
Current Fiscal Year End Date | --12-31 |
Entity's Reporting Status Current | Yes |
Entity Small Business | true |
Entity Emerging Growth Company | false |
Entity Filer Category | Non-accelerated Filer |
Document Fiscal Period Focus | FY |
Document Fiscal Year Focus | 2,018 |
BALANCE SHEETS
BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 3,738,803 | $ 3,974,536 |
Certificates of deposit | 1,517,927 | 263,269 |
Accounts receivable less allowance for doubtful accounts of $37,500 and $77,067 for December 31, 2018, and December 31, 2017, respectively | 1,425,854 | 1,861,949 |
Inventory | 2,103,879 | 1,658,681 |
Prepaid expenses | 246,591 | 170,739 |
TOTAL CURRENT ASSETS | 9,033,054 | 7,929,174 |
Property and equipment, net | 858,781 | 836,283 |
Patents, net of accumulated amortization of $239,581 and $203,768 at December 31, 2018 and December 31, 2017, respectively | 632,156 | 483,821 |
Deferred tax asset | 1,466 | |
Other assets | 19,582 | 31,582 |
TOTAL ASSETS | 10,545,039 | 9,280,860 |
CURRENT LIABILITIES | ||
Deferred capital gain - current | 3,763 | 22,481 |
Accounts payable | 453,498 | 454,398 |
Accrued expenses | 688,649 | 658,060 |
Accrued payroll and related taxes | 421,714 | 334,903 |
Accrued tax liability | 16,608 | 115,854 |
TOTAL CURRENT LIABILITIES | 1,584,232 | 1,585,696 |
Deferred capital gain - long term | 3,762 | |
Deferred tax liability | 21,675 | |
TOTAL LIABILITIES | 1,584,232 | 1,611,133 |
STOCKHOLDERS' EQUITY | ||
Common stock, $0.01 par value, 75,000,000 shares authorized, 40,932,911 and 40,731,529 shares issued; 38,195,680 and 37,994,298 shares outstanding at December 31, 2018, and December 31, 2017, respectively | 409,329 | 407,315 |
Additional paid-in capital | 4,595,214 | 4,216,718 |
Retained earnings | 4,300,468 | 3,389,898 |
TOTAL STOCKHOLDERS' EQUITY BEFORE TREASURY STOCK | 9,305,011 | 8,013,931 |
Less: Treasury stock, 2,737,231 shares at December 31, 2018 and December 31, 2017, respectively, at cost | (344,204) | (344,204) |
TOTAL STOCKHOLDERS' EQUITY | 8,960,807 | 7,669,727 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 10,545,039 | $ 9,280,860 |
BALANCE SHEETS (Parenthetical)
BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 37,500 | $ 77,067 |
Patents, accumulated amortization | $ 239,581 | $ 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 | 40,932,911 | 40,731,529 |
Common stock, outstanding | 38,195,680 | 37,994,298 |
Treasury stock | 2,737,231 | 2,737,231 |
STATEMENTS OF OPERATIONS
STATEMENTS OF OPERATIONS - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
NET SALES | $ 13,313,894 | $ 17,353,737 |
Cost of goods sold | 5,174,946 | 6,543,249 |
Gross Profit | 8,138,948 | 10,810,488 |
OPERATING EXPENSES | ||
Selling, general and administrative | 6,594,570 | 9,095,565 |
Research and development | 50,587 | 241,124 |
Depreciation and amortization | 257,257 | 309,263 |
Total Operating Expenses | 6,902,414 | 9,645,952 |
Net Operating Profit | 1,236,534 | 1,164,536 |
Non-Operating Income/(Expense) | ||
Gain on sale of fixed asset | 4,930 | |
(Loss)/Gain on foreign currency exchange | 68,566 | (20,620) |
Interest income | 2,420 | 28,104 |
INCOME BEFORE TAXES | 1,307,520 | 1,176,950 |
Income tax expense | 402,563 | 266,380 |
NET INCOME | $ 904,957 | $ 910,570 |
NET INCOME PER SHARE | ||
Basic (in dollars per share) | $ 0.02 | $ 0.02 |
Diluted (in dollars per share) | $ 0.02 | $ 0.02 |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | ||
Basic (in shares) | 37,897,632 | 38,128,260 |
Diluted (in shares) | 38,445,482 | 38,921,622 |
STATEMENT OF STOCKHOLDERS' EQUI
STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock [Member] | Total |
Balance beginning at Feb. 28, 2017 | $ 405,584 | $ 4,129,726 | $ 2,484,941 | $ (344,204) | $ 6,676,047 |
Balance beginning (in shares) at Feb. 28, 2017 | 40,558,429 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of stock based compensation | $ 2,171 | 110,329 | 112,500 | ||
Issuance of stock based compensation (in shares) | 217,100 | ||||
Compensation expense related to stock options | (4,417) | (4,417) | |||
Cancellation of common stock | $ (440) | (18,920) | (19,360) | ||
Cancellation of common stock (in shares) | (44,000) | ||||
Net income | 904,957 | 904,957 | |||
Balance ending at Dec. 31, 2017 | $ 407,315 | 4,216,718 | 3,389,898 | (344,204) | 7,669,727 |
Balance ending (in shares) at Dec. 31, 2017 | 40,731,529 | ||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Issuance of stock based compensation | $ 991 | 117,050 | 118,041 | ||
Issuance of stock based compensation (in shares) | 99,134 | ||||
Compensation expense related to stock options | 248,040 | 248,040 | |||
Cancellation of common stock | $ (227) | (36,594) | (36,821) | ||
Cancellation of common stock (in shares) | (22,752) | ||||
Issuance of Option Exercised | $ 1,250 | 50,000 | 51,250 | ||
Issuance of Option Exercised (in shares) | 125,000 | ||||
Net income | 910,570 | 910,570 | |||
Balance ending at Dec. 31, 2018 | $ 409,329 | $ 4,595,214 | $ 4,300,468 | $ (344,204) | $ 8,960,807 |
Balance ending (in shares) at Dec. 31, 2018 | 40,932,911 |
STATEMENTS OF CASH FLOWS
STATEMENTS OF CASH FLOWS - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income | $ 904,957 | $ 910,570 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Stock based compensation expense | 108,083 | 366,081 |
Depreciation and amortization | 257,257 | 309,263 |
Gain on sale of fixed asset | (4,930) | |
Deferred capital gain - building lease | (18,734) | (22,480) |
Deferred taxes | (60,747) | (23,141) |
Provision for returns and doubtful accounts | 58,941 | (39,567) |
Changes in operating assets and liabilities: | ||
Decrease/(Increase) in accounts receivable | (418,860) | 475,662 |
Increase in inventory | (304,978) | (445,198) |
(Increase)/Decrease in prepaid expense | 5,217 | (75,852) |
Decrease/(Increase) in other assets | (93) | 12,000 |
Decrease in accounts payable | (318,030) | (900) |
Increase in accrued payroll and related taxes | 157,885 | 86,811 |
Increase in accrued expense | 240,703 | 30,589 |
(Decrease)/Increase in accrued tax liability | 288,311 | (99,246) |
NET CASH PROVIDED BY OPERATING ACTIVITIES | 899,912 | 1,479,662 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payments for capital expenditures | (137,817) | (297,018) |
Payments for patents | (80,509) | (184,148) |
Purchase of certificate of deposit | (955) | (1,500,000) |
Proceeds from certificates of deposit | 245,342 | |
Proceeds on sale of fixed assets | 6,000 | |
NET CASH USED IN INVESTING ACTIVITIES | (219,281) | (1,729,824) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Stock issuances | 51,250 | |
Payment for cancelled shares | (19,360) | (36,821) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | (19,360) | 14,429 |
Net (Decrease) Increase in CASH AND CASH EQUIVALENTS | 661,271 | (235,733) |
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR | 3,313,265 | 3,974,536 |
CASH AND CASH EQUIVALENTS, END OF YEAR | 3,974,536 | 3,738,803 |
Cash paid during the years for: | ||
Interest | ||
Taxes | 175,000 | 378,000 |
NON-CASH FINANCING AND INVESTING ACTIVITIES | ||
Issuance of common stock as compensation | $ 112,500 | $ 118,041 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 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”) designs, manufactures and markets proprietary portable and innovative medical devices primarily for the ambulatory infusion market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality system management. The Company operates as one segment. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company holds cash in excess of $250,000 at its depository, which exceeds the FDIC insurance limits and is, therefore, uninsured. CERTIFICATES OF DEPOSIT The certificate of deposit is recorded at cost plus accrued interest. The certificate of deposit earns interest at a rate of 1.73% and matures in May 2019. INVENTORY Inventories of raw materials are stated at the lower of standard cost, which approximates average cost, or market value including allocable overhead. Work-in-process and finished goods are stated at the lower of standard cost or market value and include direct labor and allocable overhead. PATENTS Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents. INCOME TAXES Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. The Company believes that it has no uncertain tax positions requiring disclosure or adjustment. Generally, tax years starting with 2016 are subject to examination by income tax authorities. PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets. STOCK-BASED COMPENSATION The Company maintains various long-term incentive stock benefit plans under which it grants stock options and stock to certain executives, key employees and consultants. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted are recorded at the fair value of the shares at the grant date. NET INCOME PER COMMON SHARE Basic earnings per share are computed on the weighted average of common shares outstanding during each year. Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee, director and consultant stock options (See Note 6). Fiscal Year Ended Twelve Months December 31, 2018 Ten Months December 31, 2017 Net income $ 910,570 $ 904,957 Weighted Average Outstanding Shares: Outstanding shares 38,128,260 37,897,632 Option shares includable 793,362 547,850 38,921,622 38,445,482 Net income per share Basic $ 0.02 $ 0.02 Diluted $ 0.02 $ 0.02 USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. 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, the 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 this 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 believe the adoption of this ASU may have a material impact on our assets and liabilities, but not a material impact on the results of operations on our financial statements, disclosure requirements and methods of adoption. In July 2018, the FASB issued ASU No. 2018-10 Codification Improvements to Topic 842, Leases. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. The amendments in this ASU affect the amendments in ASU 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of this ASU, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820 based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. In August 2018, the FASB issued ASU No. 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is assessing the impact of the adoption of the ASU on its 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. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for cash, trade receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. ACCOUNTING FOR LONG-LIVED ASSETS The Company reviews its long-lived assets for impairment at least annually or whenever the circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. As of December 31, 2018, the Company does not believe that any of its assets are impaired. |
INVENTORY
INVENTORY | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
INVENTORY | NOTE 2 INVENTORY Inventory consists of: December 31, 2018 December 31, 2017 Raw materials and Work-in-process $ 1,155,632 $ 1,042,367 Finished goods 1,020,930 677,762 Total 2,176,562 1,720,129 Less: reserve for obsolete inventory 72,683 61,448 Inventory, net $ 2,103,879 $ 1,658,681 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 3 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: December 31, 2018 December 31, 2017 Estimated Useful Lives Land $ 54,030 $ 54,030 Building 171,094 171,094 20 years Furniture, office equipment, and leasehold improvements 1,058,507 1,052,501 3-10 years Manufacturing equipment and tooling 1,279,865 1,075,471 3-12 years Total 2,563,496 2,353,096 Less: accumulated depreciation 1,704,715 1,516,813 Property and equipment, net $ 858,781 $ 836,283 Depreciation expense was $273,450 and $233,626 for the twelve months ended December 31, 2018, and the ten months ended December 31, 2017, respectively. |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 4 RELATED PARTY TRANSACTIONS On December 17, 2018, the Company entered into a Common Stock Purchase Agreement (the “Agreement”) with Andrew I. Sealfon and other sellers set forth in the Agreement and purchasers listed in the Agreement in a private placement transaction. Pursuant to that agreement, we agreed to file a resale registration statement. The existing stockholders party to the agreement included Andrew I. Sealfon and Paul Mark Baker, then directors of RMS, together with certain members of their respective family members. Andrew I. Sealfon, Paul Mark Baker, Andrea Baker, Brad Sealfon and Mary Sealfon, existing stockholders party to the agreement, received an aggregate of $12,218,977 in connection with the transaction. One of the purchasers was Horton Freedom, L.P., an affiliate of Horton Capital Partners, LLC, who paid $3,842,036 in connection with the transaction. At the time of the purchase, Horton Capital Partners, LLC beneficially owned more than 5% of our outstanding common stock. Joseph M. Manko, Jr. is the managing member of Horton Capital Partners, LLC and has served as a director of the Company since May 2016. In connection with the purchase agreement, also on December 17, 2018, we entered into an Agreement Regarding Stock Sale with Mr. Sealfon and a separate Agreement Regarding Stock Sale with Dr. Baker. Pursuant to these Separation Agreements, Mr. Sealfon and Dr. Baker tendered their respective resignations from our Board of Directors effective with the first closing of the transaction under the purchase agreement, which occurred on December 18, 2018. Each of these separation agreements provides for the mutual general release by us, on the one hand, and each of Mr. Sealfon and Dr. Baker, on the other hand, of all claims against the other arising or occurring on or before the date thereof, subject to certain exceptions. Pursuant to the agreement with Mr. Sealfon, Mr. Sealfon has agreed to certain non-competition and non-solicitation restrictions for a period of six months after the first closing. LEASED AIRCRAFT From 1992 to 2018, we leased an aircraft from AMI Aviation, Inc., of which our former President and Chief Executive Officer, Andrew Sealfon, was a majority shareholder. The lease payments were $9,045 for the year ended December 31, 2018 and $13,421 for the ten months ended December 31, 2017. Upon the termination of Mr. Sealfon as President and Chief Executive Officer on July 25, 2018, the Company ceased leasing this aircraft. BUILDING LEASE In February 2011, Mark Pastreich joined our board of directors. Mr. Pastreich is a principal in the entity that owns the building leased by us for our corporate headquarters and manufacturing facility at 24 Carpenter Road, Chester, New York 10918. We are in year twenty of a twenty-year lease. With a monthly lease amount of $11,042, the lease payments were $132,504 for the twelve months ended December 31, 2018, and $110,420 for the ten months ended December 31, 2017. The Company also paid property taxes for the twelve months ended December 31, 2018 in the amount of $50,072 and $41,959 for the ten months ended December 31, 2017. On November 14, 2017, we 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. |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 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 September 30, 2018, the Company had repurchased 396,606 shares at an average price of $0.45. In June 2017, management of the Company 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 | 12 Months Ended |
Dec. 31, 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 executives, key employees, and consultants under the plan, which was approved by shareholders at the Annual Meeting held on September 6, 2016. Currently, the total number of shares of Common Stock, with respect to which awards may be granted pursuant to the Plan, may not exceed 4,000,000. On February 20, 2019, our Board of Directors approved an increase to the number of shares authorized under the plan to 6,000,000, subject to shareholder approval at the 2019 Annual Meeting of Shareholders. As of December 31, 2018, the Company had 2,419,000 options outstanding to certain executives, key employees and consultants 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 fiscal year ended December 31, 2018 and December 31, 2017 was $0.83 and $0.29, 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 fiscal year ended December 31, 2018 and December 31, 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. December 31, 2018 December 31, 2017 Dividend yield 0.00% 0.00% Expected Volatility 61.1-65.2% 70.1%-72.2% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5-10 Years 5 Years Risk-free rate 2.8-3.15% 2.3%-2.36% The following table summarizes the status of the Company’s stock option plan: December 31, 2018 December 31, 2017 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at January 1 1,038,000 $ 0.41 1,345,000 $ 0.39 Granted 1,518,000 $ 1.34 318,000 $ 0.49 Exercised 125,000 $ 0.41 — $ — Forfeited 12,000 $ 0.87 625,000 $ 0.39 Outstanding at year end 2,419,000 $ 1.00 1,038,000 $ 0.41 Options exercisable 785,094 $ 0.55 737,010 $ 0.38 Weighted average fair value of options granted during the period $ 0.83 — $ 0.29 Stock-based compensation expense $ 248,040 — $ (4,417 ) Total stock-based compensation expense, net of forfeitures, for stock option awards totaled $248,040 and $(4,417) for the fiscal year ended December 31, 2018 and December 31, 2017, respectively. The weighted-average grant-date fair value of options granted during twelve months ended December 31, 2018 and the ten months ended December 31, 2017 was $1,255,234 and $93,115 respectively. The total intrinsic value of options exercised during the twelve months ended December 31, 2018 and the ten months ended December 31, 2017, was $51,250 and zero respectively. The following table presents information pertaining to options outstanding at December 31, 2018: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36-1.57 2,419,000 5 years $ 1.00 785,094 $ 0.55 As of December 31, 2018, there was $1,078,843 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 34 months. The total fair value of vested options was $258,666 and $150,820 at December 31, 2018 and December 31, 2017, respectively. |
SALE-LEASEBACK TRANSACTION - OP
SALE-LEASEBACK TRANSACTION - OPERATING LEASE | 12 Months Ended |
Dec. 31, 2018 | |
Leases [Abstract] | |
SALE-LEASEBACK TRANSACTION - OPERATING LEASE | NOTE 7 SALE-LEASEBACK TRANSACTION - OPERATING LEASE On February 25, 1999, the Company entered into a sale-leaseback arrangement whereby the Company sold its land and building at 24 Carpenter Road in Chester, New York and leased it back for a period of twenty years. The leaseback is accounted for as an operating lease. The gain of $0.5 million realized in this transaction has been deferred and is amortized to income in proportion to rental expense over the term of the related lease. On November 14, 2017, we 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. Rent expense for the twelve months ending December 31, 2018 was $132,504 and ten months ended December 31, 2017 was $110,420. |
FEDERAL AND STATE INCOME TAXES
FEDERAL AND STATE INCOME TAXES | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
FEDERAL AND STATE INCOME TAXES | NOTE 8 FEDERAL AND STATE INCOME TAXES The provision (benefit) for income taxes at December 31, 2018, and December 31, 2017 consisted of: December 31, 2018 December 31, 2017 State income tax: Current, net of refund $ 12,391 $ 1,670 Federal income tax: Deferred 23,141 (47,327 ) Current 230,848 448,220 Total $ 266,380 $ 402,563 The reconciliation of income taxes shown in the financial statements and amounts computed by applying the Federal expected tax rate of 21% for fiscal year 2018 and 34% for fiscal year 2017 is as follows: December 31, 2018 December 31, 2017 Income before tax $ 1,176,950 $ 1,307,520 Computed expected tax $ 247,160 $ 444,557 State income and franchise tax 12,391 1,670 Reduction in deferred tax from change in tax rate — (13,420 ) Other 6,829 (30,244 ) Provision for taxes $ 266,380 $ 402,563 The components of deferred tax assets/(liabilities) at December 31, 2018, and December 31, 2017, respectively, are as follows: December 31, 2018 December 31, 2017 Deferred compensation cost $ 79,632 $ 33,987 Depreciation and amortization (79,640 ) (69,550 ) Allowance for bad debts and other 1,474 13,888 Deferred tax asset/(liabilities) $ 1,466 $ (21,675 ) New Tax Legislation On December 22, 2017, the President of the United States (“U.S.”) signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant change in U.S tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the highest U.S corporate tax rate from the current rate of 35% to 21%, effective January 1, 2018. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the enacted rate. This revaluation resulted in an additional benefit of $13,420 included in income tax expense and corresponding reduction in the net deferred tax liabilities at December 31, 2107. The other provisions of the Tax Cuts and Jobs Act did not have a material impact on the 2017 financial statements. |
MAJOR CUSTOMERS
MAJOR CUSTOMERS | 12 Months Ended |
Dec. 31, 2018 | |
Risks and Uncertainties [Abstract] | |
MAJOR CUSTOMERS | NOTE 9 MAJOR CUSTOMERS For the twelve months ended December 31, 2018, and the ten months ended December 31, 2017, approximately, 58% and 56%, respectively, of the Company’s gross product revenues were derived from one major customer. At December 31, 2018 and December 31, 2017, accounts receivable due from this customer were $0.8 million and $0.9 million, respectively. The largest customer in both years is a domestic medical products and supplies distributor. Although a number of larger infusion customers have elected to consolidate their purchases through one or more distributors in recent years, we continue to maintain strong direct relationships with them. We do not believe that their continued purchase of FREEDOM System products and related supplies is contingent upon the distributor. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | NOTE 10 LEGAL PROCEEDINGS We are involved in several lawsuits with our principal competitor, EMED Technologies Corporation (“EMED”), wherein EMED has alleged that our needle sets infringe various patents controlled by EMED. Certain of these lawsuits also allege antitrust violations, unfair business practices, and various other claims. We are vigorously defending against all of the lawsuits brought by EMED. Although no assurances can be given, we believe we have meritorious defenses to all of EMED’s claims. The initial case involving EMED was filed by us in the United States District Court for the Eastern District of California on September 20, 2013 (the “California case”), in response to a letter from EMED claiming patent infringement by us, and sought a declaratory judgment establishing the invalidity of the patent referenced in the letter – EMED’s US patent 8,500,703 – or “‘703.” EMED answered the complaint and asserted patent infringement of the ‘703 Patent and several counterclaims relating generally to claims of unfair business practices against us. We responded by adding several claims against EMED, generally relating to claims of unfair business practices on EMED’s part. Both parties have requested injunctive relief and monetary damages in unspecified amounts. On August 22, 2017, we 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, we 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 of EMED’s claims in the patent. On January 25, 2018 EMED filed an Appeal Brief with a Petition for Revival, which was accepted. On April 9, 2018 the USPTO denied EMED’s request for reconsideration of the order rejecting all claims in the ‘703 patent. 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 Claim 1 of another of its patents (US 8,961,476 – “‘476”), by our needle sets, and seeking unspecified monetary damages (“ED Texas ‘476 matter”). This ‘476 patent is related to the ‘703 patent. On September 17, 2015, we requested an inter partes review (“IPR”) of ‘476, and in response to our request, the Court entered an order staying the ED Texas ‘476 matter 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 our favor invalidating all but one (“dependent Claim 9”) of the claims in the ‘476 patent. 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 our favor on April 3, 2018. On April 18, 2018, EMED filed a petition for en banc rehearing, which was denied. On August 16, 2018, EMED petitioned the United States Supreme Court for a Writ of Certiorari to review the Federal Circuit’s upholding the PTAB’s Final Written Decision. On October 29, 2018 the United States Supreme Court denied EMED’s Petition for a Writ of Certiorari, thus finally affirming the PTAB’s invalidation of ‘476, save for one dependent claim. Following the PTAB’s Final Written Decision in the IPR regarding ‘476, EMED filed a new patent application claiming priority back to the application that issued as ‘703, which is the patent 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 (the “third case”) in the United States District Court for the Eastern District of Texas claiming patent infringement of ‘576, also directed to our needle sets, and seeking unspecified damages and a preliminary injunction against our marketing of its needle sets. We filed a Motion to Dismiss or Transfer Venue to the United States District Court for the Southern District of New York (“SDNY”), which has resulted in the transfer of the third case to SDNY (“SDNY ‘576 matter”). The SDNY ‘576 matter is proceeding with preliminary matters and although a fixed trial date has not been set it is expected to be in the fourth quarter of 2019 or the first quarter of 2020. On April 23, 2018, EMED filed a new civil case (the “fourth case”) against us in the United States District Court for the Eastern District of Texas (the “Texas Court”) asserting antitrust, defamation and unfair business practice claims, and seeking unspecified damages, similar to those previously presented in the California case, described above. As the result of a hearing on November 14, 2018, on December 7, 2018 the Court entered an order transferring the fourth case to the United States District Court for the Eastern District of California (the “California Court”) to be combined with the California case, or dismissed, as the California Court sees fit. At the same hearing on November 14, 2018, the Texas Court granted EMED leave to amend its infringement contentions, following the IPR decision invalidating all but one claim of the ‘476 patent, in order to assert infringement of that sole remaining claim, namely dependent Claim 9. The Texas Court’s order allowing EMED’s amendment of its infringement contentions against us was entered on December 7, 2018. The ED Texas ‘476 matter is now proceeding under EMED’s amended infringement contention to incorporate the surviving dependent Claim 9, which incorporates Claims 1 and 8 of the ‘476 patent, meaning that, to prove infringement on the part of us, EMED must prove more elements of infringement than it originally charged against us. The Texas Court has set a trial date of August 19, 2019 for the trial of the ED Texas ‘476 matter. As is required by the respective Courts in both the SDNY ‘576 matter and the ED Texas ‘476 matter, the parties are engaging in settlement discussions and have scheduled mediation sessions. Although we believe it has meritorious claims and defenses in all of the above-described actions and proceedings, their outcomes cannot be predicted with any certainty. If any of these actions against us are successful, they could have a material adverse effect on our business, results of operations, financial condition and cash flows. |
EMPLOYEE BENEFITS
EMPLOYEE BENEFITS | 12 Months Ended |
Dec. 31, 2018 | |
Retirement Benefits [Abstract] | |
EMPLOYEE BENEFITS | NOTE 11 EMPLOYEE BENEFITS We provide a safe harbor 401(k) plan for our employees that allows for employee elective contributions, Company matching contributions and discretionary profit sharing contributions. Employee elective contributions are funded through voluntary payroll deductions. The Company makes safe harbor matching contributions in an amount equal to 100% of the employee’s contribution not to exceed 3% of employee’s compensation plus 50% of employee’s pay contributed between 3% and 5% of employee’s compensation. Company matching expense for the period ended December 31, 2018 and December 31, 2017 was $121,834 and $64,881, respectively. The Company has not provided for a discretionary profit sharing contribution. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 12 SUBSEQUENT EVENTS On February 1, 2019, Mr. Donald B. Pettigrew, the Company’s President and Chief Commercial Officer, was promoted to President and Chief Executive Officer, replacing Mr. Daniel S. Goldberger as interim Chief Executive Officer. Mr. Goldberger remains our Chairman of the Board and, effective February 1, 2019, was appointed Executive Chairman. |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “RMS”) designs, manufactures and markets proprietary portable and innovative medical devices primarily for the ambulatory infusion market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality system management. The Company operates as one segment. |
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company holds cash in excess of $250,000 at its depository, which exceeds the FDIC insurance limits and is, therefore, uninsured. |
CERTIFICATES OF DEPOSIT | CERTIFICATES OF DEPOSIT The certificate of deposit is recorded at cost plus accrued interest. The certificate of deposit earns interest at a rate of 1.73% and matures in May 2019. |
INVENTORY | INVENTORY Inventories of raw materials are stated at the lower of standard cost, which approximates average cost, or market value including allocable overhead. Work-in-process and finished goods are stated at the lower of standard cost or market value and include direct labor and allocable overhead. |
PATENTS | PATENTS Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents. |
INCOME TAXES | INCOME TAXES Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. The Company believes that it has no uncertain tax positions requiring disclosure or adjustment. Generally, tax years starting with 2016 are subject to examination by income tax authorities. |
PROPERTY, EQUIPMENT, AND DEPRECIATION | PROPERTY, EQUIPMENT, AND DEPRECIATION Property and equipment is stated at cost and is depreciated using the straight-line method over the estimated useful lives of the respective assets. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company maintains various long-term incentive stock benefit plans under which it grants stock options and stock to certain executives, key employees and consultants. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. Shares of stock granted are recorded at the fair value of the shares at the grant date. |
NET INCOME PER COMMON SHARE | NET INCOME PER COMMON SHARE Basic earnings per share are computed on the weighted average of common shares outstanding during each year. Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee, director and consultant stock options (See Note 6). Fiscal Year Ended Twelve Months December 31, 2018 Ten Months December 31, 2017 Net income $ 910,570 $ 904,957 Weighted Average Outstanding Shares: Outstanding shares 38,128,260 37,897,632 Option shares includable 793,362 547,850 38,921,622 38,445,482 Net income per share Basic $ 0.02 $ 0.02 Diluted $ 0.02 $ 0.02 |
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 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. 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, the 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 this 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 believe the adoption of this ASU may have a material impact on our assets and liabilities, but not a material impact on the results of operations on our financial statements, disclosure requirements and methods of adoption. In July 2018, the FASB issued ASU No. 2018-10 Codification Improvements to Topic 842, Leases. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. The amendments in this ASU affect the amendments in ASU 2016-02, which are not yet effective, but for which early adoption upon issuance is permitted. For entities that early adopted Topic 842, the amendments are effective upon issuance of this ASU, and the transition requirements are the same as those in Topic 842. For entities that have not adopted Topic 842, the effective date and transition requirements will be the same as the effective date and transition requirements in Topic 842. In July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. The amendments in this ASU affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in this ASU related to transition do not include amendments from proposed ASU, Leases (Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in ASU 2016-02. That additional transition method will be issued as part of a forthcoming and separate ASU that will result in additional amendments to transition paragraphs included in this ASU to conform with the additional transition method. In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements in Topic 820 based on the concepts in the Concepts Statement, including the consideration of costs and benefits. The amendments in this ASU are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this ASU. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. The Company is assessing the impact of the adoption of the ASU on its financial statements, disclosure requirements and methods of adoption. In August 2018, the FASB issued ASU No. 2018-15 Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments in this ASU. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption of the amendments in this ASU is permitted, including adoption in any interim period, for all entities. The amendments in this ASU should be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. The Company is assessing the impact of the adoption of the ASU on its 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. |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts reported in the balance sheet for cash, trade receivables, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. |
ACCOUNTING FOR LONG-LIVED ASSETS | ACCOUNTING FOR LONG-LIVED ASSETS The Company reviews its long-lived assets for impairment at least annually or whenever the circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. As of December 31, 2018, the Company does not believe that any of its assets are impaired. |
NATURE OF OPERATIONS AND SUMM_3
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Schedule of net income per common share | Basic earnings per share are computed on the weighted average of common shares outstanding during each year. Diluted earnings per share include only an increase in the weighted average shares by the common shares issuable upon exercise of employee, director and consultant stock options (See Note 6). Fiscal Year Ended Twelve Months December 31, 2018 Ten Months December 31, 2017 Net income $ 910,570 $ 904,957 Weighted Average Outstanding Shares: Outstanding shares 38,128,260 37,897,632 Option shares includable 793,362 547,850 38,921,622 38,445,482 Net income per share Basic $ 0.02 $ 0.02 Diluted $ 0.02 $ 0.02 |
INVENTORY (Tables)
INVENTORY (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Inventory Disclosure [Abstract] | |
Schedule of inventory | Inventory consists of: December 31, 2018 December 31, 2017 Raw materials and Work-in-process $ 1,155,632 $ 1,042,367 Finished goods 1,020,930 677,762 Total 2,176,562 1,720,129 Less: reserve for obsolete inventory 72,683 61,448 Inventory, net $ 2,103,879 $ 1,658,681 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following at: December 31, 2018 December 31, 2017 Estimated Useful Lives Land $ 54,030 $ 54,030 Building 171,094 171,094 20 years Furniture, office equipment, and leasehold improvements 1,058,507 1,052,501 3-10 years Manufacturing equipment and tooling 1,279,865 1,075,471 3-12 years Total 2,563,496 2,353,096 Less: accumulated depreciation 1,704,715 1,516,813 Property and equipment, net $ 858,781 $ 836,283 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Schedule of fair value of the stock options granted Black-Scholes option valuation model | Treasury issues with a term equal to the expected life of the option being valued. December 31, 2018 December 31, 2017 Dividend yield 0.00% 0.00% Expected Volatility 61.1-65.2% 70.1%-72.2% Weighted-average volatility — — Expected dividends — — Expected term (in years) 5-10 Years 5 Years Risk-free rate 2.8-3.15% 2.3%-2.36% |
Schedule of stock option plan | The following table summarizes the status of the Company’s stock option plan: December 31, 2018 December 31, 2017 Shares Weighted Average Exercise Price Shares Weighted Average Exercise Price Outstanding at January 1 1,038,000 $ 0.41 1,345,000 $ 0.39 Granted 1,518,000 $ 1.34 318,000 $ 0.49 Exercised 125,000 $ 0.41 — $ — Forfeited 12,000 $ 0.87 625,000 $ 0.39 Outstanding at year end 2,419,000 $ 1.00 1,038,000 $ 0.41 Options exercisable 785,094 $ 0.55 737,010 $ 0.38 Weighted average fair value of options granted during the period $ 0.83 — $ 0.29 Stock-based compensation expense $ 248,040 — $ (4,417 ) |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at December 31, 2018: Range of Exercise Price Number Outstanding Weighted Average Remaining Contractual Life Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $0.36-1.57 2,419,000 5 years $ 1.00 785,094 $ 0.55 |
FEDERAL AND STATE INCOME TAXES
FEDERAL AND STATE INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Schedule of provision (benefit) for income taxes | The provision (benefit) for income taxes at December 31, 2018, and December 31, 2017 consisted of: December 31, 2018 December 31, 2017 State income tax: Current, net of refund $ 12,391 $ 1,670 Federal income tax: Deferred 23,141 (47,327 ) Current 230,848 448,220 Total $ 266,380 $ 402,563 |
Schedule of reconciliation of income taxes | The reconciliation of income taxes shown in the financial statements and amounts computed by applying the Federal expected tax rate of 21% for fiscal year 2018 and 34% for fiscal year 2017 is as follows: December 31, 2018 December 31, 2017 Income before tax $ 1,176,950 $ 1,307,520 Computed expected tax $ 247,160 $ 444,557 State income and franchise tax 12,391 1,670 Reduction in deferred tax from change in tax rate — (13,420 ) Other 6,829 (30,244 ) Provision for taxes $ 266,380 $ 402,563 |
Schedule of component of deferred tax liabilities | The components of deferred tax assets/(liabilities) at December 31, 2018, and December 31, 2017, respectively, are as follows: December 31, 2018 December 31, 2017 Deferred compensation cost $ 79,632 $ 33,987 Depreciation and amortization (79,640 ) (69,550 ) Allowance for bad debts and other 1,474 13,888 Deferred tax asset/(liabilities) $ 1,466 $ (21,675 ) |
NATURE OF OPERATIONS AND SUMM_4
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Accounting Policies [Abstract] | ||
Net income | $ 904,957 | $ 910,570 |
Weighted Average Outstanding Shares: | ||
Outstanding shares | 37,897,632 | 38,128,260 |
Option shares includable | 547,850 | 793,362 |
Total | 38,445,482 | 38,921,622 |
Net income per share | ||
Basic (in dollars per share) | $ 0.02 | $ 0.02 |
Diluted (in dollars per share) | $ 0.02 | $ 0.02 |
NATURE OF OPERATIONS AND SUMM_5
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended |
Dec. 31, 2018USD ($)Segment | |
Number of segments | Segment | 1 |
FDIC cash uninsured amount | $ | $ 250,000 |
Certificates Of Deposit [Member] | |
Interest rate | 1.73% |
Description of maturity date | Matures in May 2019. |
INVENTORY (Details)
INVENTORY (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Inventory Disclosure [Abstract] | ||
Raw materials and Work-in-process | $ 1,155,632 | $ 1,042,367 |
Finished goods | 1,020,930 | 677,762 |
Total | 2,176,562 | 1,720,129 |
Less: reserve for obsolete inventory | 72,683 | 61,448 |
Inventory, net | $ 2,103,879 | $ 1,658,681 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property and equipment, gross | $ 2,563,496 | $ 2,353,096 |
Less: accumulated depreciation | 1,704,715 | 1,516,813 |
Property and equipment, net | 858,781 | 836,283 |
Land [Member] | ||
Property and equipment, gross | 54,030 | 54,030 |
Building [Member] | ||
Property and equipment, gross | $ 171,094 | 171,094 |
Useful life | 20 years | |
Furniture, Office Equipment, and Leasehold Improvements [Member] | ||
Property and equipment, gross | $ 1,058,507 | 1,052,501 |
Furniture, Office Equipment, and Leasehold Improvements [Member] | Minimum [Member] | ||
Useful life | 3 years | |
Furniture, Office Equipment, and Leasehold Improvements [Member] | Maximum [Member] | ||
Useful life | 10 years | |
Manufacturing Equipment and Tooling [Member] | ||
Property and equipment, gross | $ 1,279,865 | $ 1,075,471 |
Manufacturing Equipment and Tooling [Member] | Minimum [Member] | ||
Useful life | 3 years | |
Manufacturing Equipment and Tooling [Member] | Maximum [Member] | ||
Useful life | 12 years |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 233,626 | $ 273,450 |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) | Dec. 17, 2018 | Dec. 31, 2017 | Dec. 31, 2018 | Mar. 01, 2019 |
Horton Capital Partners, LLC [Member] | ||||
Minimum ownership percentage | 5.00% | |||
Mr. Andrew I. Sealfon [Member] | Lease Agreement [Member] | Aircraft [Member] | ||||
Lease payments | $ 13,421 | $ 9,045 | ||
Mr. Mark Pastreich [Member] | Lease Agreement [Member] | Building [Member] | ||||
Monthly lease payments | 11,042 | |||
Lease payments | 110,420 | 132,504 | ||
Property taxes paid | $ 41,959 | $ 50,072 | ||
Mr. Mark Pastreich [Member] | Lease Agreement [Member] | Building [Member] | Subsequent Event [Member] | ||||
Monthly lease payments | $ 12,088 | |||
Common Stock Purchase Agreement [Member] | Andrew I. Sealfon And Other Sellers [Member] | ||||
Related party transaction | $ 12,218,977 | |||
Common Stock Purchase Agreement [Member] | Horton Freedom, L.P [Member] | ||||
Related party transaction | $ 3,842,036 | |||
Common Stock Purchase Agreement [Member] | Horton Capital Partners, LLC [Member] | ||||
Minimum ownership percentage | 5.00% |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - Share Repurchase Program [Member] - $ / shares | 12 Months Ended | |
Dec. 31, 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 ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Dividend yield | 0.00% | 0.00% |
Weighted-average volatility | ||
Expected dividends | ||
Expected term (in years) | 5 years | |
Minimum [Member] | ||
Expected Volatility | 70.10% | 61.10% |
Expected term (in years) | 5 years | |
Risk-free rate | 2.30% | 2.80% |
Maximum [Member] | ||
Expected Volatility | 72.20% | 65.20% |
Expected term (in years) | 10 years | |
Risk-free rate | 2.36% | 3.15% |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details 1) - 2015 Stock Option Plan [Member] - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 1,345,000 | 1,038,000 |
Granted | 318,000 | 1,518,000 |
Exercised | 125,000 | |
Forfeited | 625,000 | 12,000 |
Outstanding at ending | 1,038,000 | 2,419,000 |
Options exercisable at ending | 737,010 | 785,094 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 0.39 | $ 0.41 |
Granted | 0.49 | 1.34 |
Exercised | 0.41 | |
Forfeited | 0.39 | 0.87 |
Outstanding at ending | 0.41 | 1 |
Options exercisable at ending | 0.38 | 0.55 |
Weighted average fair value of options granted during the period | $ 0.29 | $ 0.83 |
Stock-based compensation expense | $ (4,417) | $ 248,040 |
STOCK-BASED COMPENSATION (Det_3
STOCK-BASED COMPENSATION (Details 2) - 2015 Stock Option Plan [Member] - $0.36 - $1.57 [Member] | 12 Months Ended |
Dec. 31, 2018$ / sharesshares | |
Weighted Average Remaining Contractual Term | 5 years |
Weighted Average Exercise Price | $ 1 |
Number Exercisable | shares | 785,094 |
Weighted Average Exercise Price | $ 0.55 |
STOCK-BASED COMPENSATION (Det_4
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Oct. 21, 2015 | Dec. 31, 2017 | Dec. 31, 2018 | Feb. 20, 2019 | Sep. 06, 2016 |
2015 Stock Option Plan [Member] | |||||
Number of shares authorized | 4,000,000 | ||||
Number of common shares awarded | 318,000 | 1,518,000 | |||
Weighted average grant date fair value of stock options | $ 0.29 | $ 0.83 | |||
Allocated stock-based compensation expense | $ (4,417) | $ 248,040 | |||
Weighted-average grant-date fair value options granted | 93,115 | 1,255,234 | |||
Total intrinsic value of options exercised | 0 | 51,250 | |||
Total unrecognized compensation cost | $ 1,078,843 | ||||
Weighted-average period (in years) | 34 months | ||||
Total fair value of shares vested | $ 150,820 | $ 258,666 | |||
2015 Stock Option Plan [Member] | Board Of Directors Chairman [Member] | Subsequent Event [Member] | |||||
Number of shares authorized | 6,000,000 | ||||
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 | ||||
Key Employees [Member] | 2015 Stock Option Plan [Member] | |||||
Number of common shares awarded | 2,419,000 |
SALE-LEASEBACK TRANSACTION - _2
SALE-LEASEBACK TRANSACTION - OPERATING LEASE (Details Narrative) - USD ($) | 10 Months Ended | 12 Months Ended | 16 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | Mar. 01, 2019 | |
Rent expense | $ 110,420 | $ 132,504 | |
Building [Member] | Lease Agreement [Member] | Mr. Mark Pastreich [Member] | |||
Monthly lease payments | $ 12,088 | ||
Sale-Leaseback Arrangement [Member] | Land and Building [Member] | |||
Lease terms | Twenty years. | ||
Gain realized | $ 500,000 |
FEDERAL AND STATE INCOME TAXE_2
FEDERAL AND STATE INCOME TAXES (Details) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
State income tax: | ||
Current, net of refund | $ 1,670 | $ 12,391 |
Federal income tax: | ||
Deferred | (47,327) | 23,141 |
Current | 448,220 | 230,848 |
Total | $ 402,563 | $ 266,380 |
FEDERAL AND STATE INCOME TAXE_3
FEDERAL AND STATE INCOME TAXES (Details 1) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Income before tax | $ 1,307,520 | $ 1,176,950 |
Computed expected tax | 444,557 | 247,160 |
State income and franchise tax | 1,670 | 12,391 |
Reduction in deferred tax from change in tax rate | (13,420) | |
Other | (30,244) | 6,829 |
Total | $ 402,563 | $ 266,380 |
FEDERAL AND STATE INCOME TAXE_4
FEDERAL AND STATE INCOME TAXES (Details 2) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Income Tax Disclosure [Abstract] | ||
Deferred compensation cost | $ 79,632 | $ 33,987 |
Depreciation and amortization | (79,640) | (69,550) |
Allowance for bad debts and other | 1,474 | 13,888 |
Deferred tax asset/(liabilities) | $ 1,466 | $ (21,675) |
FEDERAL AND STATE INCOME TAXE_5
FEDERAL AND STATE INCOME TAXES (Details Narrative) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Federal expected tax rate | 34.00% | 21.00% |
U.S corporate tax rate | 35.00% | |
Revised federal tax rate | 21.00% | |
Reduction in the net deferred tax liabilities | $ 13,420 |
MAJOR CUSTOMERS (Details Narrat
MAJOR CUSTOMERS (Details Narrative) - One Customer [Member] - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Sales Revenue [Member] | ||
Product Information [Line Items] | ||
Percentage of product revenues | 56.00% | 58.00% |
Accounts Receivable [Member] | ||
Product Information [Line Items] | ||
Accounts receivable | $ 900,000 | $ 800,000 |
EMPLOYEE BENEFITS (Details Narr
EMPLOYEE BENEFITS (Details Narrative) - USD ($) | 10 Months Ended | 12 Months Ended |
Dec. 31, 2017 | Dec. 31, 2018 | |
Retirement Benefits [Abstract] | ||
Description of matching contribution | The Company makes safe harbor matching contributions in an amount equal to 100% of the employees contribution not to exceed 3% of employees compensation plus 50% of employees pay contributed between 3% and 5% of employees compensation. | |
Matching expense | $ 64,881 | $ 121,834 |