Cover
Cover - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 05, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | REPRO MED SYSTEMS INC | |
Entity Central Index Key | 0000704440 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity File Number | 0-12305 | |
Entity Incorporation State Country Code | NY | |
Title of 12(b) Security | common stock, $0.01 par value | |
Trading Symbol | KRMD | |
Security Exchange Name | NASDAQ | |
Entity's Reporting Status Current | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 43,909,570 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2020 |
BALANCE SHEETS (Unaudited)
BALANCE SHEETS (Unaudited) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 38,129,349 | $ 5,870,929 |
Accounts receivable less allowance for doubtful accounts of $32,645 at June 30, 2020 and December 31, 2019 | 2,965,902 | 3,234,521 |
Inventory | 3,667,288 | 2,388,477 |
Prepaid expenses | 543,482 | 387,396 |
TOTAL CURRENT ASSETS | 45,306,021 | 11,881,323 |
Property and equipment, net | 818,064 | 611,846 |
Patents, net of accumulated amortization of $319,120 and $288,967 at June 30, 2020 and December 31, 2019, respectively | 926,504 | 807,135 |
Right of use assets, net | 306,101 | 373,734 |
Deferred tax asset | 334,011 | 188,241 |
Other assets | 19,812 | 19,582 |
TOTAL ASSETS | 47,710,513 | 13,881,861 |
CURRENT LIABILITIES | ||
Line of credit payable | 3,500,000 | |
Accounts payable | 920,006 | 572,656 |
Accrued expenses | 2,686,200 | 1,296,612 |
Accrued payroll and related taxes | 523,537 | 190,265 |
Accrued tax liability | 523,190 | 204,572 |
Finance lease liability - current | 3,195 | 5,296 |
Operating lease liability - current | 139,618 | 136,888 |
TOTAL CURRENT LIABILITIES | 8,295,746 | 2,406,289 |
Finance lease liability, net of current portion | 1,030 | 2,646 |
Operating lease liability, net of current portion | 166,483 | 236,846 |
TOTAL LIABILITIES | 8,463,259 | 2,645,781 |
STOCKHOLDERS' EQUITY | ||
Common stock, $0.01 par value; 75,000,000 shares authorized, 46,640,120 and 42,239,788 shares issued, 43,902,889 and 39,502,557 shares outstanding at June 30, 2020 and December 31, 2019, respectively | 466,401 | 422,398 |
Additional paid-in capital | 34,886,850 | 6,293,069 |
Retained earnings | 4,238,207 | 4,864,817 |
TOTAL STOCKHOLDERS' EQUITY BEFORE TREASURY STOCK | 39,591,458 | 11,580,284 |
Less: Treasury stock, 2,737,231 shares at June 30, 2020 and December 31, 2019, respectively, at cost | (344,204) | (344,204) |
TOTAL STOCKHOLDERS' EQUITY | 39,247,254 | 11,236,080 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 47,710,513 | $ 13,881,861 |
BALANCE SHEETS (Unaudited) (Par
BALANCE SHEETS (Unaudited) (Parenthetical) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 32,645 | $ 32,645 |
Patents, accumulated amortization | $ 319,120 | $ 288,967 |
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 |
Common stock, authorized | 75,000,000 | 75,000,000 |
Common stock, issued | 46,640,120 | 42,239,788 |
Common stock, outstanding | 43,902,889 | 39,502,557 |
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, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Statement [Abstract] | ||||
NET SALES | $ 7,708,904 | $ 5,348,812 | $ 14,038,913 | $ 10,323,090 |
Cost of goods sold | 2,799,024 | 1,873,148 | 5,340,823 | 3,799,472 |
Gross Profit | 4,909,880 | 3,475,664 | 8,698,090 | 6,523,618 |
OPERATING EXPENSES | ||||
Selling, general and administrative | 3,201,831 | 2,050,435 | 5,964,811 | 4,535,303 |
Litigation | 2,346,914 | 1,124,947 | 2,446,072 | 1,617,462 |
Research and development | 298,196 | 178,235 | 554,221 | 280,194 |
Depreciation and amortization | 94,940 | 86,169 | 182,164 | 169,820 |
Total Operating Expenses | 5,941,881 | 3,439,786 | 9,147,268 | 6,602,779 |
Net Operating (Loss)/Profit | (1,032,001) | 35,878 | (449,178) | (79,161) |
Non-Operating (Expense)/Income | ||||
Loss on currency exchange | (2,594) | (1,235) | (13,091) | (10,925) |
(Loss)/Gain on disposal of fixed asset, net | (5,522) | 49,980 | (5,522) | 49,740 |
Interest, net and other income, net | (5,002) | 18,243 | 14,028 | 35,723 |
TOTAL OTHER (EXPENSE)/INCOME | (13,118) | 66,988 | (4,585) | 74,538 |
(LOSS)/INCOME BEFORE TAXES | (1,045,119) | 102,866 | (453,763) | (4,623) |
Income Tax Expense | (30,919) | (24,683) | (172,847) | (2,584) |
NET (LOSS)/INCOME | $ (1,076,038) | $ 78,183 | $ (626,610) | $ (7,207) |
NET (LOSS)/INCOME PER SHARE | ||||
Basic (in dollars per share) | $ (0.03) | $ 0 | $ (0.02) | $ 0 |
Diluted (in dollars per share) | $ (0.03) | $ 0 | $ (0.02) | $ 0 |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||
Basic (in shares) | 40,361,924 | 38,353,000 | 40,018,559 | 38,279,718 |
Diluted (in shares) | 40,524,754 | 39,299,800 | 40,201,134 | 39,219,752 |
STATEMENTS OF CASH FLOWS (UNAUD
STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (626,610) | $ (7,207) |
Adjustments to reconcile net loss to net cash provided by/(used in) operating activities: | ||
Stock based compensation expense | 784,821 | 529,538 |
Stock based litigation settlement expense | 1,285,102 | |
Depreciation and amortization | 182,164 | 169,820 |
Deferred capital gain - building lease | (3,763) | |
Deferred taxes | (145,770) | 66,494 |
Loss/(Gain) on disposal of fixed asset | 5,522 | (49,740) |
Changes in operating assets and liabilities: | ||
Decrease/(Increase) in accounts receivable | 268,619 | (1,867,342) |
Increase in inventory | (1,278,811) | (467,706) |
(Increase)/Decrease in prepaid expense and other assets | (156,316) | 44,874 |
Increase in accounts payable | 347,350 | 76,882 |
Increase/(Decrease) in accrued payroll and related taxes | 333,272 | (249,730) |
Increase in accrued expense | 1,389,588 | 346,181 |
Increase/(Decrease) in accrued tax liability | 318,618 | (72,210) |
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES | 2,707,549 | (1,483,909) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payments for capital expenditures | (363,750) | (67,079) |
Payments for patents | (149,523) | (136,182) |
Proceeds on disposal of fixed asset | 217,821 | |
Proceeds from certificate of deposit | 1,517,927 | |
NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES | (513,273) | 1,532,487 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Line of credit advance | 3,500,000 | |
Issuance of equity | 26,567,861 | 24,700 |
Payment for cancelled shares | (2,820) | |
Finance lease | (3,717) | (2,069) |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 30,064,144 | 19,811 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 32,258,420 | 68,389 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 5,870,929 | 3,738,803 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 38,129,349 | 3,807,192 |
Cash paid during the periods for: | ||
Interest | 13,554 | 233 |
Taxes | ||
NON-CASH FINANCING AND INVESTING ACTIVITIES | ||
Issuance of common stock as compensation | $ 120,004 | $ 212,898 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2020 | |
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”, “KORU Medical” or “we”) 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. FISCAL YEAR END The Company’s fiscal year end is December 31. BASIS OF PRESENTATION The accompanying unaudited financial statements as of June 30, 2020, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) 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, 2020, and the results of operations and cash flow for the three and six months periods ended June 30, 2020, and 2019. The results of operations for the six months ended June 30, 2020 and 2019 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 twelve months ended December 31, 2019, as filed with the Securities and Exchange Commission on Form 10-K. 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. CERTIFICATE OF DEPOSIT The certificate of deposit was recorded at cost plus accrued interest. The certificate of deposit earned interest at a rate of 1.73% and matured 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 2017 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 a stock option plan under which it grants stock options 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 for director fees are recorded at the fair value of the shares at the grant date. USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with 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. Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. LEASES In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by the Company for those leases classified as operating leases under current U.S. GAAP, while our accounting for capital leases remains substantially unchanged. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard became effective for us January 1, 2019. The standard had a material impact on our balance sheet, but did not have a material impact on our income statements. See NOTE 6 LEASES. 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, 2022, 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 December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing several exceptions including the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. 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 June 30, 2020, the Company does not believe that any of its assets are impaired. 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
PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2020 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 2 PROPERTY AND EQUIPMENT Property and equipment consists of the following at: June 30, 2020 December 31, 2019 Furniture, office equipment, and leasehold improvements 1,213,254 1,135,107 Manufacturing equipment and tooling 1,481,100 1,295,978 2,694,354 2,431,085 Less: accumulated depreciation (1,876,290 ) (1,819,239 ) Property and equipment, net $ 818,064 $ 611,846 Depreciation expense was $79,245 and $75,073 for the three months ended June 30, 2020 and 2019, respectively, and $152,013 and $148,588 for the six months ended June 30, 2020 and 2019, respectively. |
LEGAL PROCEEDINGS
LEGAL PROCEEDINGS | 6 Months Ended |
Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
LEGAL PROCEEDINGS | NOTE 3 LEGAL PROCEEDINGS From 2013 until May 2020, we were involved in several lawsuits with our principal competitor, EMED Technologies Corporation (“EMED”). EMED alleged that our needle sets infringed various patents controlled by EMED. Certain of these lawsuits also alleged antitrust violations, unfair business practices, and various other business tort claims. On May 26, 2020, the parties announced the settlement of all of the litigation between KORU Medical and EMED. The settlement agreement provides KORU Medical with freedom to operate under EMED’s existing patent portfolio, dismissal of all litigation with prejudice (including the claims against Andrew Sealfon, our former President and Chief Executive Officer), and an equity payment by KORU Medical to EMED. The settled litigation is described below. 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 – “’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. On June 16, 2015, the California court entered a preliminary injunction against KORU Medical for making certain statements regarding products cleared for use by the FDA, or that could be safely used, with KORU Medical’s Freedom60 pump, without voiding the product warranty. On September 11, 2015, we requested an ex parte reexamination of the ’703 patent by the U.S. Patent and Trademark Office (“USPTO”). The ex parte reexamination resulted in the Patent Trial and Appeal Board (“PTAB”) of the USPTO determining that claims 1-10 of the ’703 patent are invalid, leaving claim 11 as the only surviving claim of the ’703 patent. Claim 11 of the ’703 patent, however, was not asserted in the California case. EMED informed KORU Medical it will neither appeal the PTAB’s decision nor pursue a claim based on infringement of claim 11 of the ’703 patent in the California case. The second court case was filed by EMED in the United States District Court for the Eastern District of Texas (the “Texas Court”) on June 25, 2015, claiming patent infringement on 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 invalid claims of the EMED ’703 patent. On September 17, 2015, we requested an inter partes review (“IPR”) of the ’476 patent, and subsequently after a trial the PTAB issued a Final Written Decision in our favor, invalidating all claims but one (“dependent Claim 9”) of the ’476 patent. EMED appealed the PTAB’s ruling to the United States Court of Appeals for the Federal Circuit (the “CAFC”), which affirmed the PTAB’s Final Written Decision in our favor on April 3, 2018. During the IPR proceedings regarding the ’476 patent, EMED filed a new patent application that subsequently 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 Texas Court claiming patent infringement of the ’576 patent by our needle sets, and seeking unspecified damages and a preliminary injunction against marketing and sales of our needle sets. We moved to dismiss or transfer venue to the United States District Court for the Southern District of New York (“SDNY”), which resulted in the transfer of the third case to SDNY (“SDNY ’576 matter”) on May 30, 2018. On April 23, 2018, EMED filed a new civil case (the “fourth case”) against us in 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. The fourth case also named Andrew Sealfon, then President and Chief Executive Officer of KORU Medical, individually as a defendant. Following a hearing held on November 14, 2018 to address a motion we had filed to transfer venue, on December 7, 2018, the Texas Court transferred the fourth case to the United States District Court for the Eastern District of California (the “California Court”). We then moved to dismiss that complaint, and Andrew Sealfon filed a separate motion to dismiss the case as to him for lack of jurisdiction. At the same hearing on November 14, 2018, the Texas Court granted EMED leave to amend its infringement contentions to assert infringement of that sole remaining claim 9 of the ’476 patent. In April 2019, EMED served its damages expert’s report opining that EMED’s past infringement damages amount to $1.5 million, and in May KORU Medical served its damages expert’s rebuttal report opining that EMED’s expert miscalculated damages which if properly calculated would amount to less than $100,000. We moved to dismiss the case for lack of infringement. On June 24, 2019, the Texas Court Magistrate Judge issued a Report and Recommendation decision granting summary judgment in our favor, finding no infringement, literally or under the doctrine of equivalents, by KORU Medical’s accused products. EMED’s objections were overruled and on June 28, 2019, the Texas Court issued a Final Judgment in favor of KORU Medical, awarded court costs to KORU Medical, and dismissed the case. A final judgment was entered and KORU Medical submitted its Bill of Costs for approximately $16,000, which was ordered granted by the Texas Court. KORU Medical also moved to declare the case exceptional and for recovery of its attorney fees and expenses of approximately $2.5 million in defense of EMED’s assertion of the ’476 Patent. EMED appealed the non-infringement judgment to the CAFC. On April 9, 2020, the CAFC issued a unanimous decision affirming the Texas Court’s judgment of non-infringement. The Texas Court had stayed proceedings in the district court until the appeal process was completed. The SDNY ’576 matter proceeded in the New York court through claim construction on the ’576 Patent, whereupon KORU Medical filed a motion for summary judgement of non-infringement. That motion was granted on August 30, 2019, and the New York court dismissed the lawsuit and entered a final judgement. KORU Medical submitted a Bill of Costs for approximately $1,500, to which EMED objected, and moved the New York court to declare the case exceptional and for recovery of its attorney fees and expenses of at least $1.16 million. On November 12, 2019, the Magistrate Judge issued a Report and Recommendation that KORU Medical’s fee motion be granted, and KORU Medical be awarded approximately $1.1 million in fees and expenses. EMED filed objections to that Report and Recommendation. EMED also appealed the New York court’s judgment of non-infringement to the CAFC, which the parties had fully briefed, and were awaiting a decision from the CAFC Court. The aforementioned district court litigation has now been finally dismissed with prejudice, and all associated appeals dismissed. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 4 STOCK-BASED COMPENSATION On June 29, 2016, the Board of Directors amended the Company’s 2015 Stock Option Plan (as amended, the “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 of Shareholders 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, may not exceed 6,000,000 pursuant to an amendment to the Plan approved by shareholders on April 23, 2019, at the 2019 Annual Meeting of Shareholders. As of June 30, 2020, the Company had options to purchase 3,785,000 shares of Common Stock outstanding to certain executives, key employees and consultants under the Plan, of which 60,000 were issued during the six months ended June 30, 2020. On May 20, 2020, the Company entered into a Settlement Agreement with EMED as described above in NOTE 3 LEGAL PROCEEDINGS. Pursuant to the Settlement Agreement, the Company issued to EMED (i) 95,238 restricted stock units, which vested on May 21, 2020 and 95,238 restricted stock units vesting on January 1, 2021, and (ii) an option to purchase up to 400,000 shares of the Company’s common stock at an exercise price of $11.21 per share prior to February 1, 2021, which can be settled in cash in lieu of common stock at the Company’s sole discretion, provided that the number of shares of common stock and/or amount of cash paid by the Company upon exercise will be capped at a value of $16.21 per share. The option was recorded at $347,008, the estimated fair value of the option using the Black-Scholes option pricing model with a volatility rate of 52.68% and a risk-free rate of 0.17%. On February 20, 2019, the Board of Directors of the Company approved an increase in compensation for each non-employee director from $25,000 to $50,000 annually effective January 1, 2019, and an additional $10,000 annually for the chair of each Board committee effective February 20, 2019, in each case to be paid quarterly half in cash and half in common stock at the end of each fiscal quarter. On September 30, 2019, the Board of Directors of the Company named R. John Fletcher, a current KORU Medical director, as Chairman, replacing Executive Chairman, Daniel S. Goldberger, who remains a non-executive member of KORU Medical’s Board of Directors. In Mr. Fletcher’s role as Chairman, he receives an additional $50,000 in annual compensation, to be paid quarterly in shares of KORU Medical common stock based on the closing price of the stock on the last day of each quarter. Pursuant to Daniel S. Goldberger’s employment agreement dated October 12, 2018, on February 1, 2019, when Donald B. Pettigrew was appointed to President and Chief Executive Officer, Mr. Goldberger was awarded a performance bonus in the amount of $270,000 to be paid half in cash and half in stock. The number of shares that were issued totaled 90,604 and was based upon the closing price of the Common Stock of the Company on February 1, 2019, as reported by the OTCQX. These shares were issued on April 3, 2019. 2015 STOCK OPTION PLAN, as amended Time Based Stock Options The per share weighted average fair value of stock options granted during the six months ended June 30, 2020 and June 30, 2019 was $6.68 and $1.16, 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, 2020 and June 30, 2019. 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, 2020 2019 Dividend yield 0.00% 0.00% Expected Volatility 62.1% 58.9-60.3% Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 Years 10 Years Risk-free rate 0.63% 2.12-2.72% The following table summarizes the status of the Plan with respect to time based stock options: Six Months Ended June 30, 2020 2019 Shares Weighted Shares Weighted Outstanding at January 1 3,647,000 $ 1.32 2,419,000 $ 1.00 Granted 60,000 $ 9.76 1,300,000 $ 1.66 Exercised 722,000 $ 0.58 65,000 $ 0.38 Forfeited 200,000 $ 2.09 — $ — Outstanding at June 30 2,785,000 $ 1.64 3,654,000 $ 1.24 Options exercisable at June 30 812,760 $ 1.37 804,260 $ 0.63 Weighted average fair value of options granted during the period $ 6.68 — $ 1.16 Stock-based compensation expense — $ 290,991 — $ 274,731 Total stock-based compensation expense totaled $290,991 and $274,731 for the six months ended June 30, 2020 and 2019, respectively. Cash received from option exercises for the six months ended June 30, 2020 and 2019 was $95,880 and $24,700, respectively. The weighted-average grant-date fair value of options granted during the six months ended June 30, 2020 and 2019 was $0.4 million and $1.5 million, respectively. The total intrinsic value of options exercised during the six months ended June 30, 2020 and 2019 was $253,386 and $12,796, respectively. The following table presents information pertaining to options outstanding at June 30, 2020: Range of Exercise Price Number Weighted Weighted Number Weighted $0.50 – 9.76 2,785,000 7.6 years $ 1.64 812,760 $ 1.37 As of June 30, 2020, there was $2,011,224 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 48 months. The total fair value of shares vested as of June 30, 2020 and 2019, was $1,110,068 and $313,714, respectively. Performance Based Stock Options The per share weighted average fair value of stock options granted during the six months ended June 30, 2020 and 2019 was zero and $1.16, 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, 2020 and June 30, 2019. 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, 2020 2019 Dividend yield — 0.00% Expected Volatility — 58.9% Weighted-average volatility — — Expected dividends — — Expected term (in years) — 10 Years Risk-free rate — 2.07% The following table summarizes the status of the Plan with respect to performance based stock options: Six Months Ended June 30, 2020 2019 Shares Weighted Shares Weighted Outstanding at January 1 1,000,000 $ 1.70 — $ — Granted — $ — 1,000,000 $ 1.70 Exercised — $ — — $ — Forfeited — $ — — $ — Outstanding at June 30 1,000,000 $ 1.70 1,000,000 $ 1.70 Options exercisable at June 30 — $ — — $ — Weighted average fair value of options granted during the period — $ — — $ 1.16 Stock-based compensation expense — $ 373,826 — $ 41,909 Total performance stock-based compensation expense totaled $373,826 and $41,909 for the six months ended June 30, 2020 and 2019, respectively. The weighted-average grant-date fair value of options granted during the six months ended June 30, 2020 and June 30, 2019, was zero and $1,162,561, respectively. The following table presents information pertaining to performance based options outstanding at June 30, 2020: Range of Exercise Price Number Weighted Weighted Number Weighted $1.70 1,000,000 8.9 years $ 1.70 — $ 1.70 As of June 30, 2020, there was $495,372 of total unrecognized compensation cost related to non-vested performance share option based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 31 months. The total fair value of shares vested as of June 30, 2020 and 2019 was zero for both periods. |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
DEBT OBLIGATIONS | NOTE 5 DEBT OBLIGATIONS On February 8, 2018, the Company issued a Promissory Note to KeyBank National Association (“KeyBank”) 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. On September 25, 2018, KeyBank released the certificate of deposit as collateral for the loan and the Company executed a Commercial Security Agreement as collateral for the loan. On April 14, 2020, the Company issued a promissory note to the KeyBank National Association (the “Bank”) in the aggregate principal amount of $3.5 million (the “Note”) as an extension of its line of credit, replacing its current line of credit agreement and promissory note with the Bank dated February 8, 2018 (the “Original Note”). The Company drew on the additional $2.0 million on April 23, 2020. The Original Note was in the form of a variable rate revolving line of credit with an interest rate of LIBOR plus 2.25%. The $3.5 million Note is in the form of a variable rate non-disclosable revolving line of credit with an interest rate of Prime Rate announced by the Bank minus 0.75%. Interest is due monthly, and all principal and unpaid interest is due on June 1, 2021. The $3.5 million Note may be prepaid at any time prior to maturity with no prepayment penalties. The $3.5 million Note contains events of default and other provisions customary for a loan of this type. In connection with the Note, the Company entered into a Commercial Security Agreement with the Bank dated April 14, 2020 (the “Security Agreement”), pursuant to which the Company granted a security interest in substantially all assets of the Company to secure the obligations of the Company under the Note. The Security Agreement contains terms and conditions typical for the granting of security interests of this kind. The Company had $3.5 million and zero outstanding against the line of credit as of June 30, 2020 and 2019, respectively. On April 20, 2020, the Company entered into a Loan Agreement with the Bank (the “PPP Loan Agreement”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), providing for a loan in the principal amount of $1,476,508 (the “PPP Loan”). The PPP Loan was funded on April 27, 2020. On May 13, 2020, the Company returned the funds it received. On April 27, 2020, the Company entered into a Progress Payment Loan and Security Agreement (“PPLSA”) and a Master Security Agreement (the “MSA”), each dated as of April 20, 2020, with Key Equipment Finance, a division of the Bank (“KEF”), to provide up to $2.5 million in financing for equipment purchases from third party vendors. The PPLSA allows the Company to make draws with KEF to make certain payments to the equipment suppliers prior to the commencement of periodic payments under a term loan. Each draw under the PPLSA will bear interest at a variable rate equal to the then-current Prime Rate and will be secured by the financed equipment under the MSA. At the end of each calendar quarter or year, the advances made under the PPLSA will be converted to term loans, subject to KEF’s approval of the equipment and certain other closing conditions being met. Once the draws under the PPLSA are converted into a term loan, each promissory note will bear interest at a fixed rate of 4.07% per annum, subject to adjustment based on KEF’s cost of funds, with principal and interest payable in 84 equal consecutive monthly installments. Each fixed rate installment promissory note may be prepaid, subject to a penalty if prepaid before the fifth anniversary of its issuance. As of June 30, 2020, the Company had zero outstanding against the PPLSA. |
LEASES
LEASES | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
LEASES | NOTE 6 LEASES We have finance and operating leases for our corporate office and certain office and computer equipment. Our leases have remaining lease terms of 1 to 3 years, some of which include options to extend the leases annually and some with options to terminate the leases within 1 year. The components of lease expense were as follows: For the For the June 30, June 30, 2020 2019 2020 2019 Operating lease cost $ 37,921 $ 37,921 $ 75,843 $ 73,750 Finance lease cost: Amortization of right-of-use assets $ 1,855 $ 1,061 $ 3,711 $ 2,121 Interest on lease liabilities 65 59 152 131 Total finance lease cost $ 1,920 $ 1,120 $ 3,863 $ 2,252 Supplemental cash flow information related to leases was as follows: For the For the June 30, June 30, 2020 2019 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Finance cash flows from finance leases $ 1,869 $ 1,041 $ 3,717 $ 2,069 Finance lease cost: Amortization of right-of-use assets $ 1,855 $ 1,061 $ 3,711 $ 2,121 Interest on lease liabilities 65 59 152 131 Total finance lease cost $ 1,920 $ 1,120 $ 3,863 $ 2,252 Supplemental balance sheet information related to leases was as follows: For the June 30, 2020 2019 Operating Leases Operating lease right-of-use assets $ 306,101 $ 439,782 Operating lease current liabilities 139,618 133,417 Operating lease long term liabilities 166,483 306,365 Total operating lease liabilities $ 306,101 $ 439,782 Finance Leases Property and equipment, at cost $ 12,725 $ 6,363 Accumulated depreciation (8,549 ) (2,121 ) Property and equipment, net $ 4,176 $ 4,242 Finance lease current liabilities 3,195 4,295 Finance lease long term liabilities 1,030 — Total finance lease liabilities $ 4,225 $ 4,295 Six Months Ended Six Months Ended Weighted Average Remaining Lease Term Operating leases 2 Years 3 Years Finance leases 1 Year 1 Year Weighted Average Discount Rate Operating leases 4.75% 4.75% Finance leases 4.75% 4.75% Maturities of lease liabilities are as follows: Year Ending December 31, Operating Leases Finance Leases 2020 75,843 1,664 2021 149,476 2,705 2022 97,256 — Total lease payments 322,575 4,369 Less imputed interest (16,474 ) (144 ) Total $ 306,101 $ 4,225 |
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS | 6 Months Ended |
Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | NOTE 7 RELATED PARTY TRANSACTIONS BUILDING LEASE Mark Pastreich, a former director through April 2019, 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. On February 28, 2019, we completed year twenty of a twenty-year lease with monthly lease payments of $11,042. 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 a monthly lease amount of $12,088. The Company exercised four of the six additional renewal options for September 1, 2019, through August 31, 2021. The lease payments were $36,264 for both three months ended June 30, 2020, and 2019 and $72,528 and $70,436 for the six months ended June 30, 2020 and 2019, respectively. The Company also paid property taxes in the amount of $13,238 and $12,989 for three months ended June 30, 2020 and 2019, respectively and $26,659 and $25,416 for the six months ended June 30, 2020 and 2019, respectively. |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS REPRO MED SYSTEMS, INC. (the “Company”, “KORU Medical” or “we”) 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. |
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, 2020, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) 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, 2020, and the results of operations and cash flow for the three and six months periods ended June 30, 2020, and 2019. The results of operations for the six months ended June 30, 2020 and 2019 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 twelve months ended December 31, 2019, as filed with the Securities and Exchange Commission on Form 10-K. |
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. |
CERTIFICATE OF DEPOSIT | CERTIFICATE OF DEPOSIT The certificate of deposit was recorded at cost plus accrued interest. The certificate of deposit earned interest at a rate of 1.73% and matured 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 2017 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 a stock option plan under which it grants stock options 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 for director fees are recorded at the fair value of the shares at the grant date. |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with 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. Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. |
LEASES | LEASES In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by the Company for those leases classified as operating leases under current U.S. GAAP, while our accounting for capital leases remains substantially unchanged. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard became effective for us January 1, 2019. The standard had a material impact on our balance sheet, but did not have a material impact on our income statements. See NOTE 6 LEASES. |
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, 2022, 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 December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this ASU simplify the accounting for income taxes by removing several exceptions including the exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. 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 June 30, 2020, the Company does not believe that any of its assets are impaired. |
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, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following at: June 30, 2020 December 31, 2019 Furniture, office equipment, and leasehold improvements 1,213,254 1,135,107 Manufacturing equipment and tooling 1,481,100 1,295,978 2,694,354 2,431,085 Less: accumulated depreciation (1,876,290 ) (1,819,239 ) Property and equipment, net $ 818,064 $ 611,846 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Share-based Payment Arrangement [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, 2020 2019 Dividend yield 0.00% 0.00% Expected Volatility 62.1% 58.9-60.3% Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 Years 10 Years Risk-free rate 0.63% 2.12-2.72% |
Schedule of stock option plan | The following table summarizes the status of the Plan with respect to time based stock options: Six Months Ended June 30, 2020 2019 Shares Weighted Shares Weighted Outstanding at January 1 3,647,000 $ 1.32 2,419,000 $ 1.00 Granted 60,000 $ 9.76 1,300,000 $ 1.66 Exercised 722,000 $ 0.58 65,000 $ 0.38 Forfeited 200,000 $ 2.09 — $ — Outstanding at June 30 2,785,000 $ 1.64 3,654,000 $ 1.24 Options exercisable at June 30 812,760 $ 1.37 804,260 $ 0.63 Weighted average fair value of options granted during the period $ 6.68 — $ 1.16 Stock-based compensation expense — $ 290,991 — $ 274,731 |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at June 30, 2020: Range of Exercise Price Number Weighted Weighted Number Weighted $0.50 – 9.76 2,785,000 7.6 years $ 1.64 812,760 $ 1.37 |
Schedule of performance base share 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, 2020 2019 Dividend yield — 0.00% Expected Volatility — 58.9% Weighted-average volatility — — Expected dividends — — Expected term (in years) — 10 Years Risk-free rate — 2.07% |
Schedule of performance base options outstanding | The following table summarizes the status of the Plan with respect to performance based stock options: Six Months Ended June 30, 2020 2019 Shares Weighted Shares Weighted Outstanding at January 1 1,000,000 $ 1.70 — $ — Granted — $ — 1,000,000 $ 1.70 Exercised — $ — — $ — Forfeited — $ — — $ — Outstanding at June 30 1,000,000 $ 1.70 1,000,000 $ 1.70 Options exercisable at June 30 — $ — — $ — Weighted average fair value of options granted during the period — $ — — $ 1.16 Stock-based compensation expense — $ 373,826 — $ 41,909 |
Schedule of information pertaining to performance base options outstanding | The following table presents information pertaining to performance based options outstanding at June 30, 2020: Range of Exercise Price Number Weighted Weighted Number Weighted $1.70 1,000,000 8.9 years $ 1.70 — $ 1.70 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Leases [Abstract] | |
Schedule of components of lease expense | The components of lease expense were as follows: For the For the June 30, June 30, 2020 2019 2020 2019 Operating lease cost $ 37,921 $ 37,921 $ 75,843 $ 73,750 Finance lease cost: Amortization of right-of-use assets $ 1,855 $ 1,061 $ 3,711 $ 2,121 Interest on lease liabilities 65 59 152 131 Total finance lease cost $ 1,920 $ 1,120 $ 3,863 $ 2,252 |
Schedule of cash flow information related to leases | Supplemental cash flow information related to leases was as follows: For the For the June 30, June 30, 2020 2019 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Finance cash flows from finance leases $ 1,869 $ 1,041 $ 3,717 $ 2,069 Finance lease cost: Amortization of right-of-use assets $ 1,855 $ 1,061 $ 3,711 $ 2,121 Interest on lease liabilities 65 59 152 131 Total finance lease cost $ 1,920 $ 1,120 $ 3,863 $ 2,252 |
Schdeule of balance sheet information related to leases | Supplemental balance sheet information related to leases was as follows: For the June 30, 2020 2019 Operating Leases Operating lease right-of-use assets $ 306,101 $ 439,782 Operating lease current liabilities 139,618 133,417 Operating lease long term liabilities 166,483 306,365 Total operating lease liabilities $ 306,101 $ 439,782 Finance Leases Property and equipment, at cost $ 12,725 $ 6,363 Accumulated depreciation (8,549 ) (2,121 ) Property and equipment, net $ 4,176 $ 4,242 Finance lease current liabilities 3,195 4,295 Finance lease long term liabilities 1,030 — Total finance lease liabilities $ 4,225 $ 4,295 Six Months Ended Six Months Ended Weighted Average Remaining Lease Term Operating leases 2 Years 3 Years Finance leases 1 Year 1 Year Weighted Average Discount Rate Operating leases 4.75% 4.75% Finance leases 4.75% 4.75% |
Schedule of maturities of lease liabilities | Maturities of lease liabilities are as follows: Year Ending December 31, Operating Leases Finance Leases 2020 75,843 1,664 2021 149,476 2,705 2022 97,256 — Total lease payments 322,575 4,369 Less imputed interest (16,474 ) (144 ) Total $ 306,101 $ 4,225 |
NATURE OF OPERATIONS AND SUMM_3
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 6 Months Ended |
Jun. 30, 2020USD ($)Segment | |
Number of segments | Segment | 1 |
FDIC cash uninsured amount | $ | $ 250,000 |
Certificates Of Deposit [Member] | |
Interest rate | 1.73% |
Certificate of deposit, matured date | May 31, 2019 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Property and equipment, gross | $ 2,694,354 | $ 2,431,085 |
Less: accumulated depreciation | (1,876,290) | (1,819,239) |
Property and equipment, net | 818,064 | 611,846 |
Furniture, Office Equipment, and Leasehold Improvements [Member] | ||
Property and equipment, gross | 1,213,254 | 1,135,107 |
Manufacturing Equipment And Tooling [Member] | ||
Property and equipment, gross | $ 1,481,100 | $ 1,295,978 |
PROPERTY AND EQUIPMENT (Detai_2
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation expense | $ 79,245 | $ 75,073 | $ 152,013 | $ 148,588 |
LEGAL PROCEEDINGS (Details Narr
LEGAL PROCEEDINGS (Details Narrative) - EMED Technologies Corporation [Member] - USD ($) | Nov. 12, 2019 | Aug. 30, 2019 | Apr. 30, 2019 | Jun. 30, 2020 |
Past infringement damages amount | $ 1,500,000 | |||
Properly calculated damages amount | $ 100,000 | |||
Bill of Costs | $ 1,500 | $ 16,000 | ||
Legal fees | $ 1,160,000 | $ 2,500,000 | ||
Fees And Expenses [Member] | ||||
Past infringement damages amount | $ 1,100,000 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - 2015 Stock Option Plan [Member] - Time Based Shares Options [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Dividend yield | 0.00% | 0.00% |
Expected Volatility | 62.10% | |
Weighted-average volatility | ||
Expected dividends | ||
Expected term (in years) | 10 years | 10 years |
Risk-free rate | 0.63% | |
Minimum [Member] | ||
Expected Volatility | 58.90% | |
Risk-free rate | 2.12% | |
Maximum [Member] | ||
Expected Volatility | 60.30% | |
Risk-free rate | 2.72% |
STOCK-BASED COMPENSATION (Det_2
STOCK-BASED COMPENSATION (Details 1) - 2015 Stock Option Plan [Member] - Time Based Shares Options [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 3,647,000 | 2,419,000 |
Granted | 60,000 | 1,300,000 |
Exercised | 722,000 | 65,000 |
Forfeited | 200,000 | |
Outstanding at ending | 2,785,000 | 3,654,000 |
Options exercisable at ending | 812,760 | 804,260 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 1.32 | $ 1 |
Granted | 9.76 | 1.66 |
Exercised | 0.58 | 0.38 |
Forfeited | 2.09 | |
Outstanding at ending | 1.64 | 1.24 |
Options exercisable at ending | 1.37 | 0.63 |
Weighted average fair value of options granted during the period | $ 6.68 | $ 1.16 |
Stock-based compensation expense | $ 290,991 | $ 274,731 |
STOCK-BASED COMPENSATION (Det_3
STOCK-BASED COMPENSATION (Details 2) - 2015 Stock Option Plan [Member] - $ 0.50 - 9.76 [Member] - Time Based Shares Options [Member] | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Number Outstanding | shares | 2,785,000 |
Weighted Average Remaining Contractual Term | 7 years 7 months 6 days |
Weighted Average Exercise Price | $ / shares | $ 1.64 |
Number Exercisable | shares | 812,760 |
Weighted Average Exercise Price | $ / shares | $ 1.37 |
STOCK-BASED COMPENSATION (Det_4
STOCK-BASED COMPENSATION (Details 3) - 2015 Stock Option Plan [Member] - Performance Based Share Options [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Dividend yield | 0.00% | |
Expected Volatility | 58.90% | |
Weighted-average volatility | ||
Expected dividends | ||
Expected term (in years) | 10 years | |
Risk-free rate | 2.07% |
STOCK-BASED COMPENSATION (Det_5
STOCK-BASED COMPENSATION (Details 4) - 2015 Stock Option Plan [Member] - Performance Based Share Options [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward] | ||
Outstanding at beginning | 1,000,000 | |
Granted | 1,000,000 | |
Exercised | ||
Forfeited | ||
Outstanding at ending | 1,000,000 | 1,000,000 |
Options exercisable at ending | ||
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward] | ||
Outstanding at beginning | $ 1.70 | |
Granted | 1.70 | |
Exercised | ||
Forfeited | ||
Outstanding at ending | 1.70 | 1.70 |
Options exercisable at ending | ||
Weighted average fair value of options granted during the period | $ 0 | $ 1.16 |
Stock-based compensation expense | $ 373,826 | $ 41,909 |
STOCK-BASED COMPENSATION (Det_6
STOCK-BASED COMPENSATION (Details 5) - 2015 Stock Option Plan [Member] - Performance Based Share Options [Member] - $1.70 [Member] | 6 Months Ended |
Jun. 30, 2020$ / sharesshares | |
Number Outstanding | shares | 1,000,000 |
Weighted Average Remaining Contractual Term | 8 years 10 months 24 days |
Weighted Average Exercise Price | $ / shares | $ 1.70 |
Number Exercisable | shares | |
Weighted Average Exercise Price | $ / shares | $ 1.70 |
STOCK-BASED COMPENSATION (Det_7
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | Sep. 30, 2019 | May 20, 2019 | Apr. 23, 2019 | Apr. 02, 2019 | Feb. 20, 2019 | Feb. 02, 2019 | Jan. 02, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 | Dec. 31, 2018 |
Number of shares authorized to employees | 60,000 | ||||||||||
Settlement Agreement [Member] | EMED Technologies Corporation [Member] | |||||||||||
Description of vesting rights | The Company issued to EMED (i) 95,238 restricted stock units, which vested on May 21, 2020 and 95,238 restricted stock units vesting on January 1, 2021, and (ii) an option to purchase up to 400,000 shares of the Company’s common stock at an exercise price of $11.21 per share prior to February 1, 2021, which can be settled in cash in lieu of common stock at the Company’s sole discretion, provided that the number of shares of common stock and/or amount of cash paid by the Company upon exercise will be capped at a value of $16.21 per share. The option was recorded at $347,008, the estimated fair value of the option using the Black-Scholes option pricing model with a volatility rate of 52.68% and a risk-free rate of 0.17%. | ||||||||||
Independent Directors [Member] | |||||||||||
Description of payment terms | Paid quarterly half in cash and half in common stock | ||||||||||
Annually compensation paid per director | $ 25,000 | $ 50,000 | |||||||||
Annually additional payment for agreement | $ 10,000 | ||||||||||
Mr. R. John Fletcher [Member] | |||||||||||
Annually compensation paid per director | $ 50,000 | ||||||||||
Chief Executive Officer, Mr. Goldberger [Member] | Employment Agreement [Member] | |||||||||||
Number of shares authorized to employees | 90,604 | ||||||||||
Description of payment terms | A performance bonus in the amount of $270,000 to be paid half in cash and half in stock. | ||||||||||
2015 Stock Option Plan [Member] | |||||||||||
Number of shares authorized to employees | 6,000,000 | ||||||||||
2015 Stock Option Plan [Member] | Time Based Shares Options [Member] | |||||||||||
Weighted average grant date fair value of stock options | $ 6.68 | $ 1.16 | |||||||||
Allocated stock-based compensation expense | $ 290,991 | $ 274,731 | |||||||||
Weighted-average grant-date fair value options granted | 400,000 | 1,500,000 | |||||||||
Total unrecognized compensation cost | $ 2,011,224 | ||||||||||
Weighted-average period (in years) | 48 months | ||||||||||
Total fair value of shares vested | $ 1,110,068 | $ 313,714 | |||||||||
Number of options outstanding | 2,785,000 | 3,654,000 | 3,647,000 | 2,419,000 | |||||||
Cash received from option exercises | $ 95,880 | $ 24,700 | |||||||||
Number of options exercised | 253,386 | 12,796 | |||||||||
2015 Stock Option Plan [Member] | Performance Based Share Options [Member] | |||||||||||
Weighted average grant date fair value of stock options | $ 0 | $ 1.16 | |||||||||
Allocated stock-based compensation expense | $ 373,826 | $ 41,909 | |||||||||
Weighted-average grant-date fair value options granted | 0 | 1,162,561 | |||||||||
Total unrecognized compensation cost | $ 495,372 | ||||||||||
Weighted-average period (in years) | 31 months | ||||||||||
Total fair value of shares vested | $ 0 | $ 0 | |||||||||
Number of options outstanding | 1,000,000 | 1,000,000 | 1,000,000 |
DEBT OBLIGATIONS (Details Narra
DEBT OBLIGATIONS (Details Narrative) - USD ($) | Apr. 27, 2020 | Apr. 20, 2020 | Apr. 14, 2020 | Feb. 08, 2018 | Jun. 30, 2020 | Apr. 23, 2020 | Jun. 30, 2019 |
PPP Loan Agreement [Member] | |||||||
Loans, principal amount | $ 1,476,508 | ||||||
Loans, funded date | Apr. 27, 2020 | ||||||
Key Equipment Finance [Member] | Progress Payment Loan and Security Agreement And Master Security Agreement [Member] | |||||||
Interest rate terms | Fixed rate of 4.07% per annum | ||||||
Loans, principal amount | $ 2,500,000 | ||||||
Principal and interest payable terms | 84 equal consecutive monthly installments. | ||||||
Promissory Note [Member] | KeyBank National Association [Member] | |||||||
Face amount | $ 3,500,000 | $ 2,000,000 | |||||
Interest rate terms | LIBOR plus 2.25% | ||||||
Promissory Note [Member] | Non-Disclosable Revolving Line of Credit [Member] | KeyBank National Association [Member] | |||||||
Face amount | $ 3,500,000 | ||||||
Interest rate terms | Prime Rate announced by the Bank minus 0.75% | ||||||
Description collateral | collateralized with a Commercial Security Agreement | ||||||
Debt instrument, principal and unpaid interest due | Jun. 1, 2021 | ||||||
Debt instrument, prepaid terms | Any time prior to maturity with no prepayment penalties. | ||||||
KeyBank National Association [Member] | Promissory Note [Member] | Revolving Credit Facility [Member] | |||||||
Face amount | $ 1,500,000 | $ 3,500,000 | $ 0 | ||||
Interest rate terms | LIBOR plus 2.25% | ||||||
Description collateral | collateralized with a certificate of deposit | ||||||
Collateral amount | $ 1,500,000 |
LEASES (Details)
LEASES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Leases [Abstract] | ||||
Operating lease cost | $ 37,921 | $ 37,921 | $ 75,843 | $ 73,750 |
Finance lease cost: | ||||
Amortization of right-of-use assets | 1,855 | 1,061 | 3,711 | 2,121 |
Interest on lease liabilities | 65 | 59 | 152 | 131 |
Total finance lease cost | $ 1,920 | $ 1,120 | $ 3,863 | $ 2,252 |
LEASES (Details 1)
LEASES (Details 1) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Finance cash flows from finance leases | $ 1,869 | $ 1,041 | $ 3,717 | $ 2,069 |
Finance lease cost: | ||||
Amortization of right-of-use assets | 1,855 | 1,061 | 3,711 | 2,121 |
Interest on lease liabilities | 65 | 59 | 152 | 131 |
Total finance lease cost | $ 1,920 | $ 1,120 | $ 3,863 | $ 2,252 |
LEASES (Details 2)
LEASES (Details 2) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 |
Operating Leases | |||
Operating lease right-of-use assets | $ 306,101 | $ 373,734 | $ 439,782 |
Operating lease current liabilities | 139,618 | 136,888 | 133,417 |
Operating lease long term liabilities | 166,483 | 236,846 | 306,365 |
Total operating lease liabilities | 306,101 | 439,782 | |
Finance Leases | |||
Property and equipment, at cost | 12,725 | 6,363 | |
Accumulated depreciation | (8,549) | (2,121) | |
Property and equipment, net | 4,176 | 4,242 | |
Finance lease current liabilities | 3,195 | 5,296 | 4,295 |
Finance lease long term liabilities | 1,030 | $ 2,646 | |
Total finance lease liabilities | $ 4,225 | $ 4,295 |
LEASES (Details 3)
LEASES (Details 3) | Jun. 30, 2020 | Jun. 30, 2019 |
Weighted Average Remaining Lease Term | ||
Operating leases | 2 years | 3 years |
Finance leases | 1 year | 1 year |
Weighted Average Discount Rate | ||
Operating leases | 4.75% | 4.75% |
Finance leases | 4.75% | 4.75% |
LEASES (Details 4)
LEASES (Details 4) - USD ($) | Jun. 30, 2020 | Jun. 30, 2019 |
Operating Leases | ||
2020 | $ 75,843 | |
2021 | 149,476 | |
2022 | 97,256 | |
Total lease payments | 322,575 | |
Less imputed interest | (16,474) | |
Total operating lease liabilities | 306,101 | $ 439,782 |
Finance Leases | ||
2020 | 1,664 | |
2021 | 2,705 | |
2022 | ||
Total lease payments | 4,369 | |
Less imputed interest | (144) | |
Total finance lease liabilities | $ 4,225 | $ 4,295 |
LEASES (Details Narrative)
LEASES (Details Narrative) | 6 Months Ended |
Jun. 30, 2020 | |
Operating lease, options to terminate | 1 year |
Minimum [Member] | |
Operating lease, renewal term | 1 year |
Maximum [Member] | |
Operating lease, renewal term | 3 years |
RELATED PARTY TRANSACTIONS (Det
RELATED PARTY TRANSACTIONS (Details Narrative) - Lease Agreement [Member] - Building [Member] - Mr. Mark Pastreich [Member] - USD ($) | 3 Months Ended | 6 Months Ended | ||||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Mar. 01, 2019 | Feb. 28, 2019 | |
Monthly lease payments | $ 12,088 | $ 11,042 | ||||
Lease payments | $ 36,264 | $ 36,264 | $ 72,528 | $ 70,436 | ||
Property taxes paid | $ 13,238 | $ 12,989 | $ 26,659 | $ 25,416 |