UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB/A AMENDMENT NO. 1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES ACT OF 1934 For the quarterly period ended November 30, 2002 ----------------- Commission File Number 0-12305 ------- REPRO-MED SYSTEMS, INC. ----------------------- (Exact name of registrant as specified in its charter) New York 13-3044880 - -------- ---------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 24 Carpenter Road, Chester, NY 10918 - ------------------------------ ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (845) 469-2042 -------------- 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 Nov 30 2002 ----- -------------------------- Common stock, $.01 par value 23,504,000 shares Repro-Med Systems, Inc. Table of Contents Part I PAGE Item 1. Financial Statements Balance Sheet (Unaudited) - November 30, 2002 ...........................3 Statements of Operations (Unaudited) - for the three-months and nine months ending November 30, 2002 and November 30, 2001 ..............4 Statements of Cash Flow (Unaudited) - for the nine months ending November 30, 2002 and 2001 .......................................5 Notes to Unaudited Financial Statements .................................6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. ..........................7 PART II Item 1. Legal Proceedings ......................................................10 Item 2. Changes in Securities ..................................................10 Item 3. Defaults Upon Senior Securities ........................................10 Item 4. Submission of Matters to a Vote of Security Holders ....................10 Item 5. Other Information ......................................................10 Item 6. Exhibits and Reports on Form 8-K .......................................11 2 REPRO-MED SYSTEMS, INC. BALANCE SHEET UNAUDITED ASSETS November 30, 2002 CURRENT ASSETS Cash & Cash Equivalents .................................... $ 24,303 Accounts Receivable, net ................................... 182,405 Inventory .................................................. 530,238 Prepaid Expenses & Other Receivables ....................... 35,067 ----------- TOTAL CURRENT ASSETS ........................................... 772,551 ----------- EQUIPMENT & OTHER ASSETS Total Equipment ............................................ 1,199,772 Less - Accumulated Depreciation ............................ (765,676) ----------- Net Book Value of Equipment ................................ 434,095 Deposits ................................................... 52,000 Other Assets ............................................... 45,867 TOTAL EQUIPMENT & OTHER ASSETS ................................. 531,962 ----------- TOTAL ASSETS ................................................... $ 1,304,513 =========== LIABILITIES & STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable ........................................... $ 263,760 Demand loan from President ................................. 84,000 Accrued Expenses ........................................... 84,013 Bank Line of Credit Payable ................................ 200,000 Current Portion of Leases Payable .......................... 25,346 Current Portion Capital Gain ............................... 22,481 ----------- Total Current Liabilities .................................. 679,600 ----------- OTHER LIABILITIES Long-Term Portion of Leases Payable ....................... 51,450 Deferred Capital Gain Income .............................. 342,835 ----------- TOTAL LIABILITIES .............................................. 1,073,885 ----------- STOCKHOLDERS' EQUITY Preferred Stock, 8% Cumulative $.01 Par Value Authorized 2,000,000 Issued & Outstanding 10,000 Shares (liquidation value $100,000) ..... 100 Common Stock, $.01 Par Value, Authorized 50,000,000 Shares, Issued & Outstanding 23,504,000(Includes 2,275,000 in Treasury Shares) Respectively ........................... 235,040 Additional Paid-in Capital ................................. 2,211,631 Accumulated Deficit ........................................ (2,074,143) Treasury Stock at Cost ..................................... (142,000) ----------- TOTAL STOCKHOLDERS' EQUITY ..................................... 230,629 ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ....................... $ 1,304,513 =========== See Accompanying Notes to Unaudited Financial Statements 3 REPRO-MED SYSTEMS, INC STATEMENTS OF OPERATIONS UNAUDITED FOR THE 3 MONTHS ENDED FOR THE 9 MONTHS ENDED ---------------------- ---------------------- Nov 30, Nov 30, Nov 30, Nov 30, 2002 2001 2002 2001 ---- ---- ---- ---- SALES Net Sales of Products ........$ 381,547 $ 426,393 $ 1,268,628 $ 1,301,956 COST AND EXPENSES Cost of Goods Sold ......... 260,148 323,571 883,753 953,740 Selling, General & Administrative Expenses .. 128,324 155,313 406,175 485,119 Research and Development ... 5,482 11,660 16,273 34,611 Equity Based Compensation .. 0 10,250 0 30,750 Depreciation and Amortization ............. 20,160 21,387 59,757 63,164 ------- ------- --------- --------- TOTAL COST AND EXPENSES ...... 414,114 522,181 1,365,958 1,567,384 ------- ------- --------- --------- (LOSS) FROM OPERATIONS ....... (32,567) (95,788) (97,330) (265,428) Non-Operating Income (Expense) Interest (Expense) ......... (5,158) (5,400) (17,820) (13,465) Interest & Other Income .... 8,310 400 12,402 6,122 ------- ------- --------- --------- (3,152) (5,000) (5,417) (7,343) ------- ------- --------- --------- (LOSS) BEFORE INCOME TAXES ... (29,415) (100,788) (102,748) (272,770) Provision for Income Taxes 0 (161) 0 (572) NET (LOSS) AFTER TAXES ....... (29,415) (100,949) (102,748) (273,342) ------- ------- --------- --------- Preferred Dividends .......... 2,000 0 6,000 8,000 NET (LOSS) AVAILABLE TO COMMON SHAREHOLDERS........... (31,415) (100,949) (108,748) (281,342) ======= ======== ======== ======== (LOSS) PER COMMON SHARE Primary .................... ($ 0.00) ($ 0.00) ($ 0.00) ($ 0.01) Fully Diluted .............. ($ 0.00) ($ 0.00) ($ 0.00) ($ 0.01) See Accompanying Notes to Unaudited Financial Statements 4 REPRO-MED SYSTEMS, INC STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED UNAUDITED November November 30, 2002 30, 2001 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net (Loss) ......................................... ($102,748) ($273,342) Adjustments to reconcile net (loss) to cash (used) in operating activities: Equity Based Compensation ........................ 0 30,750 Depreciation and Amortization .................... 59,757 63,164 Deferred Gross Profit - Building Lease ........... (16,861) (16,861) Accounts Receivable .............................. 13,896 56,707 Inventory ........................................ 70,397 (63,152) Prepaid Expenses and Other Receivables ........... (27,260) 19,751 Other Assets ..................................... 0 (422) Demand Loan to President ......................... 15,000 0 Accounts Payable ................................. 74,649 67,296 Leases Payable ................................... 52 43,332 Other Liabilities ................................ (60,779) 25,840 ------- ------ NET CASH PROVIDED IN (USED BY) OPERATIONS .......... 26,103 (46,937) ------- ------ CASH FLOWS USED BY INVESTING ACTIVITIES Capital Expenditures ............................. (23,470) (73,388) ------- ------ NET CASH USED BY INVESTING ACTIVITIES ............. (23,470) (73,388) ------- ------ CASH FLOW PROVIDED BY FINANCING ACTIVITIES: Proceeds from Line of Credit ..................... 0 130,000 Preferred Stock Dividend ......................... (4,000) (8,000) ------- ------ CASH FLOW PROVIDED BY FINANCING ACTIVITIES: ........ (4,000) 122,000 ------- ------ NET INCREASE (IN CASH .............................. (1,367) 1,675 CASH, beginning of period ........................ 25,670 35,466 ------- ------ CASH, end of period .............................. $ 24,303 $ 37,141 ========= ========= SUPPLEMENTAL DISCLOSURES CASH PAYMENTS FOR Interest ......................................... 3,741 20,252 Income Taxes ..................................... 0 572 See Accompanying Notes to Unaudited Financial Statements 5 Repro-Med Systems, Inc. Notes to the Financial Statements Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and with instructions to Form 10-QSB. Accordingly, they do not include all of the information and disclosures required for annual financial statements. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes for the year ended February 28,2002 included in the Form 10-KSB for the year then ended. As shown in the accompanying interim financial statements, the Company incurred a net loss of $102,748 during the nine-months ended November 30,2002. The Company intends to raise additional capital or financing, to improve their liquidity. These factors create substantial doubt as to the Company's ability to continue as a going concern. These financial statements do not include any adjustments to the financial statements that might be necessary should the Company be unable to continue as a going concern. In the opinion of the Company's management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position as of November 30,2002, and the results of operations for the three-month and nine month periods ended November 30,2002 and 2001 and cash flows for the periods ended November 30,2002 and 2001 have been included. The results of operations for the three-month and nine-month periods ended November 30,2002, are not necessarily indicative of the results to be expected for the full year. For further information, refer to the financial statements and footnotes thereto included in the Company's Form 10-KSB as filed with the Securities and Exchange Commission for the year ended February 28,2002. Reclassification - certain reclassifications have been made to prior year amounts to conform to current year presentation. Debt As of November 30,2002, we have an outstanding balance of $200,000 on our bank line of credit. The line agreement officially ended on June 30,2001 but was verbally renewed by the bank through February 2003. New Accounting Developments In June 2002, the Financial Accounting Standards Board issued SFAS No. 146 on "Accounting for Costs Associated with Exit or Disposal Activities". The 6 Company is reviewing the requirements and implications of adopting such standards by December 31, 2002. This Statement addresses financial and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The Company currently does not believe adopting such standards will have a material effect on the presentation of the financial statements. 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 of FREEDOM60, 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 November 30, 2002 vs. 2001 Sales of the Fredom60 Syringe infusion system increased quarter over quarter ended November 30, 2002 by 36% due to increased sales in the home care market. Res-Q-Vac sales decreased slightly by 6% due to a general world-wide 7 economic slowdown during the past year. Approximately 60% of Res-Q-Vac sales are exported overseas to other countries. Net sales decreased 11% overall from $426,393 (2001) to $381,547 (2002) for the quarter due to the loss in sales of approximately $53,000 from a major OEM customer and reduced sales for a low margin product line that has been phased out over the last year. Gross profit increased to 31.8% of net sales in 2002 from 24.1% in 2001 primarily resulting from cost containment reductions. Selling, general and administrative expense decreased 17% from 2001 to 2002 as a result of the reduction of sales and administrative personnel, and decreased marketing and show expenses. Research and development expenses decreased 53% quarter over quarter due to the fact that we enlisted outside engineering help in the second quarter 2001 but not in the second quarter 2002. There was no material changes in depreciation and amortization expense during this period. Nine Months Ended November 30, 2002 vs. 2001 Sales of our core products increased for the nine months ended November 30, 2002 vs. the nine-months ended November 30,2001, with our Freedom60 sales increasing by 28% and Res-Q-Vac sales increasing by 14%. Net sales decreased slightly by 3% overall from $1,301,956 (2001) to $1,268,628 (2002) for the quarter due in large part to the loss in sales of approximately $201,318 from a major OEM customer for the nine-months ended November 30,2002 and the elimination of a low margin product line that has been phased out over the last year. Gross profit increased to 30% of net sales in 2002 from 27% in 2001 primarily resulting from cost containment reductions and reductions in material costs. Selling, general and administrative expense continued to decrease and was down 16% from 2001 to 2002 as a result of the reduction of sales and administrative personnel, and decreased marketing and show expenses. Research and development expenses decreased 53% due to the fact that we enlisted outside engineering help during the nine months ended November 30, 2001 but not during the nine-months ended November 30,2002. 8 Liquidity and Capital Resources During June 2000, we negotiated a $200,000 line of credit with M&T Bank that is guaranteed by the President and one of the directors. The line of credit was intended for material purchases for new orders and tooling. As of August 31, 2002, $200,000 has been advanced on the line of credit. Although the line expired on June 30,2001, the bank verbally renewed the line through February 2003. We are attempting to achieve and maintain positive cash flow by continuing to increase sales for the FREEDOM60 and RES-Q-VAC, decreasing material costs and by pursuing capital investment through debt or equity. The Company is working with outside distributors to increase market share in the European markets for the RES-Q-VAC, and to introduce the FREEDOM60 into the European market. Currently, our distributor for the FREEDOM60 in Italy is marketing the product and has received an initial order. We are in the process of validating new lower-cost and more efficient vendors for our raw materials, which will assist us in continuing to improve our margins on our current products. The Company has sufficient capital for our ongoing needs based on anticipated sales growth in the next six months and continuing to maintain careful control of expenses. The funds available on November 30, 2002 are expected to meet cash requirements as planned under current operating conditions at least for the next 12 months. We have signed a reciprocal sales agreement with Trademark Medical at the end of July for sales of Res-Q-Vac into their dental markets and we have combined their Plak Vac dental hygiene device with the Res-Q-Vac system to provide specialty dental hygiene to compromised patients within the home. The combined system is low-cost and management anticipates sales from this venture. Trademark Medical is also promoting a back-up dental version of Res-Q-Vac for sales into dental offices along with Broadreach Medical Resources (see Below). During the past quarter Trademark has begun marketing the Res-Q-Vac and has placed some limited orders as interest is developed. We attended the Medica Trade Show in Dusseldorf Germany at the end of November, 2002, and met with several new potential distributors for Freedom60 and Res-Q-Vac. Two of these contacts are evaluating our products and we expect to receive decision by the end of our fiscal year. As a result of our efforts at Medica, we have received a number of orders from distributors, and expect additional orders in the near future. At the Medica trade show, we finalized and signed an agreement with Ferno Norden for exclusive distribution of Res-Q-Vac within the Scandinavian countries including Norway, Denmark Iceland, Sweden, Finland, Estonia, Latvia, and 9 Lithuania. And non-exclusive for Germany, Poland, and Russia. Ferno Norden had been marketing Res-Q-Vac for several years as a non-exclusive distributor, and we expect that our new relationship will produce improved sales within the region. Certain minimums will be required, and with bulk shipping we anticipate lower costs of the Res-Q-Vac landed in those countries which will further assist in market penetration. On September 23rd, 2002,. we signed a sales representation agreement with Broadreach Medical Resources (BMR), and sales and marketing company to represent Freedom60 and Res-Q-Vac in the domestic market. BMR is organizing to enter the hospital, home care, long term care and dental markets. We have created a dental version of Res-Q-Vac which is being made available to dentist and dental surgeons to provide an emergency back-up to their wall suction systems which will enable them to continue a procedure in the event of a failure. Both Trademark Medical and BRM are jointly marketing our new Res-Q-Vac dental kit. There are more than 200,000 dental offices in the United States and preliminary promotions indicated strong interest. However, there can be no assurance that significant sales will be derived from this effort. BMR has also indicated interest in investing in our Company and further discussions are anticipated. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is neither a party to any material litigation, nor to the knowledge of the officers and directors of the Company, is there any material litigation threatened against the Company. Item 2. Changes in Securities and Use of Proceeds None Item 3. Defaults Upon Senior Securities None 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 November 30, 2002. Item 5. Other Information None 10 Item 6. Exhibits and Reports on Form 8-K a) Exhibits: Exhibit Description ------- ----------- 99.1 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 b) Reports on Form 8-K: None 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 January 17, 2003 Andrew I. Sealfon, President, Treasurer, Chairman of the Board, Director, Chief Executive Officer and Chief Financial Officer 11 CERTIFICATION I, Andrew Sealfon, certify that: 1. I have reviewed this quarterly report on Form 10-QSB/A of Repro-Med Systems, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstance under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows, of the registrant as of, and for the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities particularly during the period this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which would adversely effect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material; that involves management or other employees who have a significant role in the registrant's internal controls; and 12 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: January 17, 2003 13