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.

BASIS OF PRESENTATION

The accompanying unaudited financial statements as of August 31, 2012 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 August 31, 2012 and the results of operations and cash flow for the three-month and six month periods ended August 31, 2012 and 2011.

The results of operations for the three months and six months ended August 31, 2012 and 2011 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 29, 2012, 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.

INVENTORIES

Our inventory includes $349,000 of certain subassemblies which did not meet our specifications and were rejected by us and returned to the vendor for correction or replacement.

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 consolidated 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.

SUBSEQUENT EVENTS EVALUATION

The Company has evaluated subsequent events through October 15, 2012, the date on which the financial statements were issued.

EMERGING ACCOUNTING STANDARDS

Management does not believe that any of the standards adopted by the Financial Accounting Standards Board that have been adopted but 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 August 31, 2012 and 2011 and $10,750 for the six months ended August 31, 2012 and August 31, 2011. The original lease agreement has expired and the Company is currently on a month-to-month basis for rental payments.