UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF
1934
For the quarterly period ended MAY 31, 2008
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Commission File Number 0-12305
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REPRO-MED SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 13-3044880
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24 CARPENTER ROAD, CHESTER, NY 10918
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (845) 469-2042
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act during the
past 12 months (or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes ( X ) No ( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 31, 2008
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Common stock, $.01 par value 34,829,286 shares
REPRO-MED SYSTEMS, INC.
TABLE OF CONTENTS
PAGE
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PART I
ITEM 1. Financial Statements
Balance Sheets - May 31, 2008 (Unaudited) and
February 29, 2008 ................................................. 3
Statements of Operations (Unaudited) - for the three months
Ended May 31, 2008 and 2007 ....................................... 5
Statements of Cash Flows (Unaudited) - for the three months
Ended May 31, 2008 and 2007 ....................................... 6
Notes to Financial Statements ..................................... 8
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ..................... 9
PART II
ITEM 1. Legal Proceedings ................................................. 15
ITEM 2. Changes in Securities and Use of Proceeds ......................... 15
ITEM 3. Defaults Upon Senior Securities ................................... 15
ITEM 4. Submission of Matters to a Vote of Security Holders ............... 16
ITEM 5. Other Information ................................................. 16
ITEM 6. Exhibits and Reports on Form 8-K .................................. 16
ITEM 7. Internal Controls and Procedures .................................. 16
2
REPRO-MED SYSTEMS, INC.
BALANCE SHEETS
MAY 31, FEBRUARY 29,
2008 2008
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(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash .................................................. $ 133,315 $ 95,561
Accounts Receivable less allowance for doubtful
accounts of $24,935 and $26,115 at May 31, 2008 and
February 29, 2008, respectively ...................... 325,607 297,206
Inventory ............................................. 574,704 551,032
Prepaid Expenses ...................................... 35,307 44,392
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Total Current Assets ............................... 1,068,933 988,191
PROPERTY & EQUIPMENT, less accumulated depreciation of
$1,143,570 and $1,126,612 at May 31, 2008 and
February 29, 2008, respectively ......................... 218,719 235,677
OTHER ASSETS:
Patents, net of accumulated amortization of $83,788 and
$82,590 at May 31, 2008 and February 29, 2008,
respectively ......................................... 42,640 44,354
Goodwill .............................................. 8,609 8,609
Security Deposit ...................................... 28,156 28,156
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Total Other Assets ....................................... 79,405 81,119
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TOTAL ASSETS ............................................. $ 1,367,057 $ 1,304,987
=========== ===========
The accompanying notes are an integral part of these financial statements.
3
REPRO-MED SYSTEMS, INC.
BALANCE SHEETS (CONTINUED)
MAY 31, FEBRUARY 29,
2008 2008
----------- -----------
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
CURRENT LIABILITIES
Note payable to financial institution ................. $ 398,306 $ 400,000
Note payable - current portion ........................ 4,025 4,293
Notes payable to related parties - current portion .... 15,000 15,000
Deferred capital gain - current portion ............... 22,481 22,481
Accounts payable ...................................... 333,241 342,433
Accrued expenses ...................................... 64,906 53,180
Accrued interest ...................................... 65,890 63,590
Accrued preferred stock dividends ..................... 52,000 52,000
Accrued payroll and related taxes ..................... 20,104 18,594
Warranty liability .................................... 62,194 62,194
Customer deposits ..................................... - 5,180
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Total Current Liabilities ................................ 1,038,147 1,038,945
OTHER LIABILITIES
Note payable - less current portion ................... 31,544 32,250
Notes payable to related parties - less current portion 394,000 394,000
Deferred capital gain less current portion ............ 219,195 224,815
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Total Other Liabilities .................................. 644,739 651,065
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Total Liabilities ........................................ 1,682,886 1,690,010
STOCKHOLDERS' DEFICIT
Preferred Stock, 8% cumulative, liquidation value
$100,000, $0.01 par value, 2,000,000 shares
authorized, 10,000 shares issued and outstanding at
May 31, 2008 and February 29, 2008 ................... 100 100
Common Stock, $0.01 par value, 50,000,000 shares
authorized, 34,829,286 shares issued and outstanding
at May 31, 2008 and February 29, 2008 ................ 348,293 348,293
Additional paid-in Capital ............................ 2,850,504 2,846,094
Accumulated deficit ................................... (3,372,726) (3,437,510)
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(173,829) (243,023)
Less: Treasury Stock, 2,275,000 shares at cost at
May 31, 2008 and February 29, 2008 ................... (142,000) (142,000)
----------- -----------
Total Stockholders' Deficit ........................ (315,829) (385,023)
----------- -----------
Total Liabilities and Stockholders' Deficit .............. $ 1,367,057 $ 1,304,987
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
REPRO-MED SYSTEMS, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED
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MAY 31, MAY 31,
2008 2007
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NET SALES .............................................. $ 699,976 $ 397,417
Costs and Expenses
Cost of goods Sold .................................. 248,715 199,606
Selling, general and administrative ................. 353,412 261,504
Research and development ............................ 3,305 13,753
Depreciation and amortization ....................... 18,156 16,061
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Total Costs and Expenses ............................... 623,588 490,924
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Net Operating Income (Loss) ............................ 76,388 (93,507)
Other Income (Expenses)
Interest Expense .................................... (11,604) (85,525)
Interest and Other Income ........................... - 512
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Total Other Income (Expenses) .......................... (11,604) (85,013)
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INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES ........ 64,784 (178,520)
PROVISION FOR INCOME TAXES .......................... - -
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NET INCOME (LOSS) ..................................... 64,784 (178,520)
PREFERRED STOCK DIVIDENDS .............................. - -
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NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS' .... $ 64,784 $ (178,520)
============ ============
NET INCOME (LOSS) PER COMMON SHARE AVAILABLE TO
COMMON STOCKHOLDERS' .................................. $ 0.01 $ (0.01)
============ ============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING .......... 34,829,286 32,193,090
============ ============
The accompanying notes are an integral part of these financial statements.
5
REPRO-MED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
--------------------------
MAY 31, MAY 31,
2008 2007
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CASH FLOWS FROM OPERATING ACTIVITIES
Net Income ( Loss) .................................. $ 64,784 $(178,520)
Adjustments to reconcile net income (loss) to net
cash from operating activities:
Stock based compensation ......................... - 68,840
Interest charged to additional paid-in capital ... 4,410 -
Depreciation and amortization .................... 18,156 16,061
Deferred capital gain - building lease ........... (5,620) (5,620)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ....... (28,401) 32,930
(Increase) decrease in inventory ................. (23,672) 27,822
(Increase) decrease in prepaid expenses .......... 9,085 (15,308)
(Increase) decrease in security deposits ......... - 26,646
Increase (decrease) in accounts payable .......... (9,192) (205)
Increase (decrease) in accrued expenses .......... 11,726 9,734
Increase (decrease) in accrued interest .......... 2,300 2,162
Increase (decrease) in accrued payroll and related
taxes ........................................... 1,510 8,977
Increase (decrease) in customer deposits ......... (5,180) -
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES .... 39,906 (6,481)
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property and equipment ................. - (1,856)
Reduction in patents ................................ 516 -
Payments for patents ................................ - (2,760)
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES .... 516 (4,616)
The accompanying notes are an integral part of these financial statements.
6
REPRO-MED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
FOR THE THREE MONTHS ENDED
--------------------------
MAY 31, MAY 31,
2008 2007
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CASH FLOWS FROM FINANCING ACTIVITIES
Net payments on note payable to financial institution $ (1,694) $ -
Payments on note payable ............................ (974) -
Payments on note payable to related parties ......... - (4,251)
Payments on capitalized lease obligations ........... - (617)
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NET CASH USED IN FINANCING ACTIVITIES .................. (2,668) (4,868)
NET INCREASE (DECREASE) IN CASH ........................ 37,754 (15,965)
CASH BEGINNING OF YEAR ................................. 95,561 99,421
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CASH END OF YEAR ....................................... $ 133,315 $ 83,456
========= =========
Supplemental Information
Cash paid during the year for:
Interest ............................................ $ 4,894 $ 16,685
The accompanying notes are an integral part of these financial statements.
7
REPRO-MED SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2008
BASIS OF PRESENTATION
The accompanying unaudited interim condensed financial statements as of May 31,
2008 and for the three months ended May 31, 2008 and 2007 have been prepared in
accordance with generally accepted accounting principles in accordance with
instructions to Form 10-QSB. Accordingly, they do not include all of the
information and disclosures required by accounting principles generally accepted
in the United States of America for complete financial statement presentation.
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 May 31, 2008 and the results of
operations and cash flows for the three months ended May 31, 2008 and 2007. The
results of operations for the three months ended May 31, 2008, are not
necessarily indicative of the results to be expected for the year ending
February 28, 2009. These interim financial statements should be read in
conjunction with the financial statements and notes thereto of the Company and
management's discussion and analysis of financial condition and results of
operations included in the Company's Annual Report for the year ended February
29, 2008, as filed with the Securities and Exchange Commission on Form 10-KSB.
STOCKHOLDERS' EQUITY/NOTES PAYABLE TO RELATED PARTIES
During the three months ended May 31, 2008, $4,410 of interest accruing on a
note payable to related party was charged to additional paid-in capital.
RECLASSIFICATIONS
Certain amounts in the February 29, 2008 and May 31, 2007, financial statements
have been reclassified to conform to the presentation used in the May 31, 2008,
financial statements.
8
PART I ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This Quarterly Report on Form 10-QSB contains certain "forward-looking"
statements (as such term is defined in the Private Securities Litigation Reform
Act of 1995) and information relating to us that are based on the beliefs of the
management, as well as assumptions made by and information currently available.
Our actual results may vary materially from the forward-looking statements made
in this report due to important factors such as, recent operating losses,
uncertainties associated with future operating results, unpredictability related
to Food and Drug Administration regulations, introduction of competitive
products, limited liquidity, reimbursement related risks, government regulation
of the home health care industry, success of the research and development
effort, market acceptance availability of sufficient capital to continue
operations and dependence on key personnel. When used in this report, the words
"estimate," "project," "believe," "anticipate," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. Such statements
reflect current views with respect to future events based on currently available
information and are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated in such forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. These
statements involve risks and uncertainties with respect to the ability to raise
capital to develop and market new products, acceptance in the market place of
new and existing products, ability to penetrate new markets, our success in
enforcing and obtaining patents, obtaining required Government approvals and
attracting and maintaining key personnel that could cause the actual results to
differ materially. Repro-Med does not undertake any obligation to release
publicly any revision to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
THREE MONTHS ENDED MAY 31 2008 VS. 2007
---------------------------------------
Net profit for the quarter ended May 31, 2008 is $64,784 as compared to a loss
of $178,520 for the same quarter in 2007 and represents a total improvement of
$243,304 (136%) quarter over quarter. This improvement resulted from an overall
increase in sales quarter over quarter of 76% from $397,417 to $699,976 and
stock based compensation which was paid in the previous year's quarter of
$68,840 which was fully paid off before February 29, 2008 and therefore was not
incurred during the current quarter.
Sales of the FREEDOM60(R) Syringe Infusion System and related accessories
increased 146% domestically in the first quarter ending May 31, 2008 as compared
to the same period in 2007. This continued increase is due to the sales for use
with immune globulin and antibiotics. It is also assisted by the improved word
of the Freedom60 performance and cost benefits spreading through out the
industry. Sales of RES-Q-VAC(R) and related accessories increased overall 39% in
the current quarter over previous quarter from $142,787 to $198,692. Much of the
RES-Q-VAC increase was due to a solid improvement of 73% in international sales
which occurred during this period.
9
Our Gross Profit margin for the current quarter was 64% as compared with last
year's quarter of 49%. This improvement is primarily due to increased sales
improving our efficiency and is in line with the 61.7% reported in our annual
report for the year ending February 29, 2008. Selling, General and
Administrative Expense (SG&A) increased by $91,908 from $261,504 to $353,412
quarter over quarter 2008 vs. 2007 due to increased marketing including
advertising, trade shows and travel expenses. Research and Development decreased
by $10,448 primarily from timing issues related to a quarterly report.
Interest expense decreased $5,081 to $11,604 from $16,685 as a result of the
company paying off high interest stock based compensation which was replaced
with a significantly lower interest simple loan.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Net profit for the quarter ended May 31, 2008 was $64,784 as compared to a loss
of $178,520 for the same quarter in 2007 primarily as result of our improved
sales performance. For the Quarter ending May 31,2008. Net Cash from Operations
was $39,907 as compared with $(6,481) for the prior year. This increase is due
primarily to increased sales and certain cost controls related to Selling and
General and Administrative Expense.
In January of 2008 we were notified by The Trade Adjustment Assistance Program
of the Trade Department that our application for a grant of $150,000 was
approved for use to assist us with marketing, ISO and regulatory affairs, and
new product development. The grant matches the company on a 50-50 basis thereby
reducing our costs for these new programs in half. The Trade Adjustment
Assistance Program is a United States Government program to help manufacturing
firms adjust to foreign business competition. The program is authorized by the
Trade Act of 1974 and is administered by the U. S. Department of Commerce. The
program operates through Trade Adjustment Assistance Centers located across the
United States. The New York State area is served by the New York State Trade
Adjustment Assistance Center (NYS TAAC). The NYS TAAC is affiliated with the
Research Foundation of the State University of New York at Binghamton.
In raising capital beginning in February 2004, the Company issued promissory
notes in the total amount of $432,000. These five-year promissory notes paid 2%
over prime plus four shares of common stock per year for every year the loan was
in place. The loans were fully satisfied by the end of February 2008 and
replaced with a simple loan secured with an interest rate set at prime on
February 21st, 2008.
We believe we are continuing to enhance a new customer base for our products. We
have experienced an increase in sales and cash flow during this past quarter and
past year. With these increases and the capital we currently have, we will
continue to meet or exceed the company's financial goals. If the sales continue
to increase at the current rate, which we feel confident of but cannot assure,
we believe we will have sufficient resources to meet our financial obligations
for the next twelve months from our cash flow alone.
FREEDOM60(R)
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The FREEDOM60 uses an innovative "engine" to create a constant pressure drive
system which we believe results in substantially greater safety, reliability,
and an overall higher quality infusion than other devices on the market - all at
a lower cost. The basic drive mechanism used in the FREEDOM60 represents the
first of a line of products, which we intend to develop to broaden the product
applications and appeal.
10
FREEDOM60(R) uses rate-controlled tubing with standard slide clamp and luer disc
connector on the patient end. Our patented luer disc connector insures that only
the Company's FREEDOM60(R) tubing sets will function with the pump.
Non-conforming tubing sets, without the patented connector, are ejected from the
pump to prevent the danger of an overdose or runaway pump from injuring the
patient. Repro-Med Systems' objective is to build a product franchise with
FREEDOM60(R) and the sale of patented disposable tubing sets.
Proprietary technology employed in the FREEDOM60 uses constant pressure to
administer drugs. FREEDOM60 avoids an important problem faced by electronic
pumps currently on the market which employ constant flow mechanisms that result
in potentially dangerous, high pressures placed on indwelling catheters or
subcutaneous needles placed under the skin. In order to protect the patients,
these pumps must contain an overpressure sensor to shut the pump off when a
potentially threatening pressure is detected. Some of these electronic pumps
will generate extremely high pressures exceeding 70psi before the over pressure
system will activate. Also with these systems, the alarm can be falsely
triggered, and the administration halted until a health professional can verify
that the infusion is in fact safe and the pump may be reactivated. In either
case, the patient is at risk from damaging pressures or not receiving the
medication required.
Other unsafe conditions of conventional equipment include runaway
administrations; overdose due to programming errors or pump failure, and over
pressure resulting in burst blood vessels or failed internal access devices. The
expanded use of the FREEDOM60 demonstrates that the FREEDOM60 eliminates these
potential outcomes and insures a safe, constant, controlled infusion. Electronic
devices will increase infusion pressure while attempting to continue an infusion
at the programmed rate, while the FREEDOM60's design maintains a safe constant
pressure and thereby automatically reduces the flow rate accordingly if any
problems of administration occur.
We have expanded the use of the FREEDOM60(R) to cover most antibiotics including
the widely used and somewhat difficult to administer vancomycin. We have also
found a following for FREEDOM60(R) for use in treating thalissemia with the drug
desferal. In Europe we found success in using the FREEDOM60(R) for pain control,
specifically post-operative epidural pain administration. Our European market
also uses the FREEDOM60(R) for chemotherapy.
The FREEDOM60(R) is used for the treatment of Primary Immune Deficiency by
injecting immune globulin (IgG) under the skin as a subcutaneous administration.
This method has provided patients with vastly improved quality of life with much
fewer unpleasant side effects over the traditional intravenous route. The
FREEDOM60(R) is an ideal system for this administration since the patient is
able to self-medicate at home, the pump is easily configured for this
application, and the FREEDOM60(R) is the lowest cost infusion system available
in a heavily cost constrained market. Also due to its safe, limited and
controlled pressure system, the Freedom60 adjusts automatically to the patient's
needs providing a reliable and comfortable administration for these patients.
We have surmised and have recently confirmed anecdotally that the Freedom60
system because of its constant safe pressure design is the ideal technology to
infuse IgG medication regardless of cost. IgG is quite viscous, and the
Freedom60 will adjust automatically to patient tissue saturation, preventing
complications at the administration sites which include pain, swelling, redness
and possible tissue damage. Competitive electronic devices, which are also used
for this indication, generally deliver higher and quite possibly harmful
pressures, and will reach occlusion pressures, which will frequently cause the
electronic pumps to shut down prior to completing the drug delivery.
11
For routine intravenous deliveries, the FREEDOM60(R) provides a high-quality
delivery to the patient at costs similar to a gravity drip system and is
targeted for the home health care industry, patient emergency transportation,
and for any time a safe, consistent, and low-cost infusion is required.
THE MARKET FOR INFUSION PUMPS & DISPOSABLES
The primary market for the FREEDOM60 is the home care patient. For home care,
the FREEDOM60 is ideal because it is completely portable, lightweight and
easy-to-use. The mechanical pump acts on a 60cc syringe and is cost effective
and maintenance free. It requires no electric, no batteries and no cumbersome IV
pole. For the infusion professional, FREEDOM60 delivers precise infusion rates
and uniform flow profiles providing consistent transfer of medication. A Form
510k Pre-market Notification for the design of the FREEDOM60 as a Class II
device was approved by the FDA in May 1994.
We continue to expand the application in home care for the Freedom60 for the
treatment of Primary Immune Deficiency using a subcutaneous administration of
immune globulin better known as SCIG therapy. This disease may affect some
500,000 people in the USA and is reportedly under diagnosed. Previously IgG was
solely administered using a conventional intra-venous system, however; the
subcutaneous route of administration has seen increased usage over the past year
with the introduction of an FDA approved IgG for this application. This method
has provided patients with vastly improved quality of life with much fewer
unpleasant side effects over the traditional intravenous route.
Additional applications for the FREEDOM60(R) include pain control,
chemotherapeutics and the infusion of specialized drugs such as the widely used
and somewhat difficult to administer vancomycin. We have found a following among
providers of the FREEDOM60(R) for use in treating thalissemia with the drug
desferal, and in Europe found it is being used for pain control, specifically
post-operative epidural pain administration and chemotherapy.
The home infusion therapy market is comprised of approximately 4,500 sites of
service, including local and national organizations, hospital-affiliated
organizations, and national home infusion organizations, and generates
approximately $4.5 Billion in revenue annually. (Ref: www.nhianet.org). With
insurance reimbursement in a severe decline, there is a tremendous need for a
low-cost, effective alternative to electronic and expensive disposable IV
administration devices for the home care and nursing home market.
IMPORTANCE OF INSURANCE REIMBURSEMENT TO FREEDOM60 SALES
The ambulatory market has been rapidly changing due to reimbursement issues. The
denial of insurance reimbursement has drastically reduced the market share of
high-end competitors with electronic type delivery systems as well as high-cost
disposable non-electric devices, providing an opportunity for the FREEDOM60(R).
We challenged the previous Freedom60 reimbursement for Medicare by requesting a
coding verification for the Freedom60 with the Centers for Medicare and Medicaid
services (CMS). The Freedom60 was reclassified by CMS on May 21, 2007 for use
under code E0779 which increases the reimbursement for the Freedom60 for all
billable syringe pump applications approved by Medicare. In June 2007 Medicare
issued a letter of clarification stating in part:
"The Freedom60 Syringe Infusion Pump is the only allowable pump to be billed
with the Subcutaneous Immune Globulin (SCIG). The code for this pump for dates
of service 1/1/00 - 5/16/07 is E0780. For dates of service on or after 5/17/07
the correct code is E0779 per SADMERC. The items being billed must be supported
by corresponding documentation. All other pumps or modifiers will result in a
denial".
12
At this time we believe we are the only Medicare approved device for SCIG.
DISTRIBUTION CHANNELS FOR THE FREEDOM60
We have qualified and trained a new distributor in Finland who plans to engage
other sub-distributors for sales of the Freedom60 in Scandinavia. They have
placed their first order, and we are making arrangements to further train their
staff and the other sub-distributors in that region. We also have been informed
that the Freedom60 has been approved in Peru and we will begin training a
distributor in that country as well.
We have engaged the services of an experienced infusion marketing person to
assist us in setting up distribution channels in the United States and abroad.
He is a seasoned professional who is assisting us to find, qualify and train
regional distributors in the infusion market.
RES-Q-VAC(R)
------------
The RES-Q-VAC(R) Emergency Airway Suction System is a lightweight, portable,
hand-operated suction device that removes fluids from a patient's airway by
attaching the RES-Q-VAC(R) pump to various proprietary sterile and non-sterile
single-use catheters sized for adult and pediatric suctioning. The one-hand
operation makes it extremely effective and the product is generally found in
emergency vehicles, hospitals and wherever portable aspiration is a necessity,
including backup support for powered suction systems. The disposable features of
the RES-Q-VAC(R) reduce the risk of contaminating the health professional and
the general public from infectious diseases such as HIV and SARS when suctioning
a patient or during post treatment cleanup. All of the parts that connect to the
pump are disposable.
We recently introduced a new updated version called RES-Q-VAC ULTRA which comes
with our FSP filter, new pediatric connectors, new graduated canister, new adult
catheters, and new convenient carry pouch. It is also available with a patent
pending, fully malleable, portable LED white light source which is attached to
the top of the canister system and provides illumination for the medical
professional during night time or low light conditions.
A critical component and advantage of the RES-Q-VAC(R) is the Full Stop
Protection(R), (FSP(R)) a recently patented filtering system that prevents both
leakage and over-flow of the aspirated fluids, even at full capacity, and traps
all air and fluid borne pathogens and potentially infectious materials within
the sealable container. This protects healthcare providers as well as the
general public from potential exposure to disease and contamination.
On April 29, 2003, the Centers for Disease Control (CDC) issued additional
guidelines for the control of SARS (Sudden Acute Respiratory Syndrome), which
requires all suction systems to have filtration equivalent to a HEPA filter to
prevent the spread of this disease. At the current time, we believe that the
RES-Q-VAC(R) with Full Stop Protection(R) is the only portable device to comply
with the CDC directives.
With the new connectors added to our pediatric catheters, which allow them to
connect directly to the adult canisters with FSP(R), enable pediatric suctioning
with the benefit of the Full Stop Protection(R) device as well as with sterile
catheters. Many infants are born with contagious diseases and the new system
eliminates this concern among paramedics during an emergency delivery.
13
A critical advantage of our RES-Q-VAC(R) airway suction system is versatility.
With the addition of Full Stop Protection(R), we created specific custom
RES-Q-VAC(R) kits for various vertical markets:
Emergency Medicine - we make several special kits for emergency use, which
contain all the catheters necessary to treat adults as well as infants or
children. These first responder kits are generally non-sterile. We also have
special attachments available for the advanced paramedic to treat patients who
are intubated.
Respiratory - in-home care, long term care, situations requiring frequent
suctioning such as cystic fibrosis patients, patients with swallowing disorders,
elderly, patients on ventilators and with tracheostomies all benefit from the
portability, cost and performance of the RES-Q-VAC(R). In hospitals, the
RES-Q-VAC(R) provides emergency back up due to power loss or breakdown of the
wall suction system.
Hospital Use - for crash carts, the emergency room, patients in isolation,
moving patients throughout the hospital (e.g., from ICU to Radiology) and backup
for respiratory, RES-Q-VAC(R) is available sterile with Full Stop Protection(R)
for the ultimate in performance and to meet all the OSHA regulations and CDC
guidelines for use in treating patients in isolation, and in any location.
Hospitals are required under the EMTALA regulations to provide emergency
treatments to patients anywhere in the primary facility and up to 250 yards
away. The RES-Q-VAC insures full compliance with these regulations and helps
minimize unfavorable outcomes and potential lawsuits there from. We provide
special hospital kits, which are fully stocked to meet all hospital applications
for both adult and pediatric.
Nursing homes, hospice, sub-acute - we provide special configurations for dining
areas, portable suctioning for outside events and travel. Chronic suction can be
accommodated with RES-Q-VAC(R), which can be left by the bedside for rapid use
during critical times.
Dental applications - we offer a version of the RES-Q-VAC(R), called
DENTAL-EVAC(R) which addresses the needs of oral surgeons for emergency back up
suction during a procedure. DENTAL-EVAC(R) is supplied with the dental suction
attachments such as saliva ejector and high volume evacuator.
Military Applications -Due to its light weight, portability, and rapid
deployment, we believe that the RES-Q-VAC(R) is ideal for any military
situation. In addition, exposure to chemical weapons of mass destruction such as
Sarin is best treated by rapid, aggressive, and repeated suctioning. We believe
that the RES-Q-VAC(R)'s compact size, powerful pump, and full protection of the
user from any contamination, gives us a competitive edge in this market.
We are planning a direct sales effort into the hospital market and continue our
effort into nursing homes working with a national distributor and by direct
sales to penetrate this market. Due to power outages, hurricanes such Katrina
and other disasters; there is interest for the RES-Q-VAC for these markets. In
the hospital, the RES-Q-VAC is used on crash carts, emergency room, patients in
isolation, for tracheotomy patients and to meet new hospital regulations such as
EMTALA. Hospitals also are cognizant of infectious disease control and we
continue to make them aware of our Full Stop Protection(R) filter, which
protects the users from any contamination from overflow and traps all pathogens
inside the suction container. This feature is also a requirement of the
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Occupational Safety and Health Administration under OSHA 29CFR 1910.1030 -
Occupational Exposure to Blood borne Pathogens. The RES-Q-VAC(R) is the only
hand-held non-electric suction system with sterile catheters for infants, large
catheters for adults, and meets the intent of the OSHA requirements with the
Full Stop Protection(R). The Company has received a letter from OSHA confirming
that the Full Stop Protection(R) falls under the engineering controls of the
Blood borne Pathogen regulation and therefore would be required by any employer
of medical personnel to protect their employees from potentially infectious
materials. The Centers for disease control have issued Guidelines for medical
personnel for the treatment of patients with SARS, which include the
recommendation to employ suction devices containing HEPA type filtration on the
output to prevent the spread of this disease. We believe RES-Q-VAC(R) is the
only hand-held portable suction system, which meets this requirement.
TRADE SHOWS
-----------
In this quarter ended May 31, 2008, we attended numerous tradeshows for
Freedom60 including NHIA (National Home Infusion Association) from March 9 to 11
held in Phoenix, AZ and AAAAI (American Academy of Allergy, Asthma and
Immunology) from March 15 to 17 held in Philadelphia. We also met with nurses in
Philadelphia for a training session March 28 and 29 and with Critical Care in
April about the Freedom60 and its use with subcutaneous administration of
immunoglobulin. During this time we also made plans to attend Medica in
Dusseldorf, Germany from November 19 to 22.
For RES-Q-VAC we attended EMS Today in Baltimore from March 28 to 30.
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
-------------------------
We are, from time to time, subject to claims and suits arising in the ordinary
course of business, including claims for damages for personal injuries, breach
of management contracts and employment related claims.
One of our sales employees who reigned in 2006 had undertaken a lawsuit in which
he claimed was for commissions earned. Based on the actual sales performance
during that time period, we believed this lawsuit was without merit. However, we
agreed to mediation to settle this matter and avoid additional legal expenses. A
settlement was negotiated in the amount of $30,000 payable over 20 months and
has been recorded in our financial statements during the year ended February 29,
2008.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
-------------------------------------------------
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
---------------------------------------
None
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
-----------------------------------------------------------
No matters were submitted to a vote of security holders of the Company during
the quarter ended May 31, 2008.
ITEM 5. OTHER INFORMATION
-------------------------
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
----------------------------------------
(a) EXHIBITS
31.1 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act 2002
32.1 Certification of Chief Executive Officer and Principal Financial
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002
ITEM 7. INTERNAL CONTROLS AND PROCEDURES
----------------------------------------
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the
participation of our management, including our Chief Executive Officer, or CEO,
acting as Chief Financial Officer, or CFO, and the Chief Operating Officer, or
COO, of the effectiveness of our disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Exchange Act) as of May 31, 2008. Based on that
evaluation, our management, including our CEO/CFO and COO, concluded that our
disclosure controls and procedures are not effective to ensure that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and is accumulated and
communicated to our management, including our CEO/CFO and COO, to allow timely
decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
There has been a change in our internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three
months ended May 31, 2008 that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting. We
determined that we had certain deficiencies for which we have taken corrective
action by replacing a senior member of our accounting staff, and by seeking an
outside consulting relationship to provide management with additional oversight
of accounting operations.
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SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934 the Registrant has duly caused this report to be signed on its
behalf by the undersigned; thereunto duly authorized.
REPRO-MED SYSTEMS, INC.
/s/ Andrew I. Sealfon July 21, 2008
---------------------
Andrew I. Sealfon, President, Treasurer,
Chairman of the Board, Director, and
Chief Executive Officer
17