NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE NATURE OF OPERATIONS

Repro-Med Systems, Inc. (the "Company") designs, manufactures, and markets proprietary medical devices primarily for the ambulatory infusion market and emergency medical applications.  The FDA regulates these products.  We use the d/b/a (doing business as) name RMS Medical Products, and incorporate RMS part of the branding of some products.

BASIS OF PRESENTATION

The accompanying unaudited financial statements as of November 30, 2013 have been prepared in accordance with generally accepted accounting principles in accordance with instructions to regulation S-X.  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 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 November 30, 2013 and the results of operations and cash flow for the three-month and nine month periods ended November 30, 2013 and 2012.

The results of operations for the three months and nine months ended November 30, 2013 and 2012 are not necessarily indicative of the results to be expected for the full year.  These interim financial statements should be read in conjunction with the financial statements and notes thereto of the Company and management's discussion and analysis of financial condition and results of operations included in the Company's Annual Report for the year ended February 28, 2013, as filed with the Securities and Exchange Commission on Form 10-K.

EMPLOYEE STOCK AWARDS

In July 2012, 1,465,000 shares were authorized to issue to employees as share compensation valued at $0.18 per share, the market value on the date of the board authorization.  The value of these shares will be amortized into operations over the one to two year restriction on the shares. Amortization amounted to $25,875 and $105,975 for the three-months and nine-months ended November 30, 2013, respectively  Amortization amounted to $40,050 for the three-months and nine-months ended November 30, 2012.

INVENTORIES

Our inventory includes $208,000 of certain subassemblies which did not meet our specifications and were rejected by us and returned to the vendor for rework.

USE OF ESTIMATES IN THE FINANCIAL STATEMENTS

The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("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.

LEGAL PROCEEDINGS

The Company previously commenced a declaratory judgment action to establish the invalidity of any claim that our needle sets infringe a patent of a competitor. The defendant has recently answered the complaint and asserted various counterclaims that the Company believes are without merit. Such claims are currently being reviewed by legal counsel.  The Company subsequently added claims against the defendant to show that the defendant has engaged in various unfair business practices.  The parties are presently scheduling the case and will begin the fact discovery process.

SUBSEQUENT EVENTS EVALUATION

The Company has evaluated subsequent events through January 14, 2014, the date on which the financial statements were issued.  There were no material subsequent events that required recognition or additional disclosure in the financial statements.

EMERGING ACCOUNTING STANDARDS

Management does not believe that any of the standards adopted by the Financial Accounting Standards Board, but which are not yet effective, will have a material effect on the Company's financial reporting.

LEASED AIRCRAFT

The Company leases an aircraft from a company controlled by the president.  The lease payments aggregated were $5,375 for the three-months ended November 30, 2013 and 2012 and $16,125 for the nine months ended November 30, 2013 and November 30, 2012.  The original lease agreement has expired and the Company is currently on a month-to-month basis for rental payments.