KORU Medical Systems, Inc. Form 10-Q Quarterly Report for 03-31-2024

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2024

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________.

Commission File Number: 0-12305

KORU MEDICAL SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	13-3044880
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 Corporate Drive, Mahwah, New Jersey	07430
(Address of principal executive offices)	(Zip Code)

(845) 469-2042

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value	KRMD	The Nasdaq Stock Market

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 of 1934 during the preceding 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. [X] Yes [_] No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). [X] Yes [_] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer [_]	Accelerated filer [_]
	Non-accelerated filer [X]	Smaller reporting company [X]
		Emerging growth company [_]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [_] Yes [X] No

As of August 7, 2024, 45,855,328 shares of common stock, $0.01 par value per share, were outstanding, which excludes 3,438,526 shares of treasury stock.

KORU MEDICAL SYSTEMS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2024

TABLE OF CONTENTS

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)	3

	Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	3

	Statements of Operations (Unaudited) for the three and six months ended June 30, 2024 and 2023	4

	Statements of Cash Flows (Unaudited) for the six months ended June 30, 2024 and 2023	5

	Statements of Stockholders' Equity (Unaudited) for the three and six months ended June 30, 2024 and 2023	6

	Notes to Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	20

ITEM 4.	Controls and Procedures	21

PART II. OTHER INFORMATION

ITEM 1A.	Risk Factors	21

ITEM 6.	Exhibits	21

	Signatures	22

- 2 -


	June 30,			December 31,
	2024			2023

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	10,458,001		$	11,482,240
Accounts receivable less allowance for credit losses of $24,777 as of June 30, 2024 and December 31, 2023		5,846,082			4,045,211
Inventory		2,588,750			3,481,301
Other receivables		—			28,889
Prepaid expenses		472,864			1,218,288
TOTAL CURRENT ASSETS		19,365,697			20,255,929
Property and equipment, net		3,678,984			3,837,657
Intangible assets, net of accumulated amortization of $423,834 and $390,341 as of June 30, 2024 and December 31, 2023, respectively		745,084			754,361
Operating lease right-of-use assets		3,414,831			3,514,055
Deferred income tax assets, net of allowance for non-realization of deferred tax assets of $6,581,206 and $6,002,777 as of June 30, 2024 and December 31, 2023, respectively		—			—
Other assets		98,970			98,970
TOTAL ASSETS	$	27,303,566		$	28,460,972

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,595,691		$	975,193
Accrued expenses		2,144,722			1,711,427
Note payable		—			314,344
Other liabilities		447,788			512,520
Accrued payroll and related taxes		444,251			462,941
Financing lease liability – current		112,689			109,540
Operating lease liability – current		391,699			368,313
TOTAL CURRENT LIABILITIES		5,136,840			4,454,278
Financing lease liability, net of current portion		259,479			316,623
Operating lease liability, net of current portion		3,202,697			3,336,300
TOTAL LIABILITIES		8,599,016			8,107,201

STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 75,000,000 shares authorized, 49,257,812 and 49,089,864 shares issued 45,819,286 and 45,669,362 shares outstanding as of June 30, 2024, and December 31, 2023, respectively		492,398			490,899
Additional paid-in capital		48,331,591			47,018,707
Treasury stock, 3,438,526 shares as of June 30, 2024 and December 31, 2023, at cost		(3,882,493	)		(3,843,562	)
Accumulated deficit		(26,236,946	)		(23,312,273	)
TOTAL STOCKHOLDERS’ EQUITY		18,704,550			20,353,771
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	27,303,566		$	28,460,972


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2024			2023			2024			2023

NET REVENUES	$	8,430,089		$	6,935,931		$	16,627,887		$	14,328,536
Cost of goods sold		2,950,339			3,047,807			6,044,839			6,293,377
Gross Profit		5,479,750			3,888,124			10,583,048			8,035,159

OPERATING EXPENSES
Selling, general and administrative		5,319,688			5,303,167			10,677,308			10,729,044
Research and development		1,134,232			1,596,614			2,609,907			3,161,483
Depreciation and amortization		217,864			212,919			449,233			426,036
Total Operating Expenses		6,671,784			7,112,700			13,736,448			14,316,563

Net Operating Loss		(1,192,034	)		(3,224,576	)		(3,153,400	)		(6,281,404	)

Non-Operating Income/(Expense)
Loss on currency exchange		(10,680	)		(2,472	)		(22,159	)		(3,152	)
Loss on disposal of fixed assets, net		—			—			(300	)		(56,279	)
Interest income, net		213,999			131,167			251,186			256,669
TOTAL OTHER INCOME		203,319			128,695			228,727			197,238

LOSS BEFORE INCOME TAXES		(988,715	)		(3,095,881	)		(2,924,673	)		(6,084,166	)

Income Tax Benefit		—			599,995			—			1,177,395

NET LOSS	$	(988,715	)	$	(2,495,886	)	$	(2,924,673	)	$	(4,906,771	)

NET LOSS PER SHARE

Basic	$	(0.02	)	$	(0.05	)	$	(0.06	)	$	(0.11	)
Diluted	$	(0.02	)	$	(0.05	)	$	(0.06	)	$	(0.11	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic		45,811,373			45,606,603			45,761,799			45,547,427
Diluted		45,811,373			45,606,603			45,761,799			45,547,427


	For the Six Months Ended
	June 30,
	2024			2023

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(2,924,673	)	$	(4,906,771	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense and warrant expense		1,314,384			1,681,955
Depreciation and amortization		449,233			426,036
Deferred income taxes		—			(1,177,395	)
Loss on disposal of fixed assets		300			56,279
Non-cash lease adjustments		(10,994	)		(10,994	)
Changes in operating assets and liabilities:
Accounts receivable		(1,800,871	)		(239,590	)
Inventory		892,551			1,126,643
Prepaid expenses and other assets		774,313			687,994
Other liabilities		(64,731	)		5,916
Accounts payable		620,498			(817,169	)
Accrued payroll and related taxes		(18,691	)		(119,776	)
Accrued expenses		433,296			(1,527,648	)
NET CASH USED IN OPERATING ACTIVITIES		(335,385	)		(4,814,520	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(257,367	)		(375,246	)
Purchases of intangible assets		(24,216	)		(17,298	)
NET CASH USED IN INVESTING ACTIVITIES		(281,583	)		(392,544	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments on insurance finance indebtedness		(314,344	)		(433,295	)
Payments on finance lease liability		(53,995	)		(48,493	)
Payments for taxes related to net share settlement of equity awards		(38,932	)		—
NET CASH USED IN FINANCING ACTIVITIES		(407,271	)		(481,788	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(1,024,239	)		(5,688,852	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		11,482,240			17,408,257
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	10,458,001		$	11,719,405

Supplemental Information
Cash paid during the periods for:
Interest	$	20,491		$	20,165
Income taxes	$	—		$	3,160

Schedule of Non-Cash Operating, Investing and Financing Activities:
Issuance of common stock as compensation	$	221,182		$	266,023


				Additional								Total
	Common Stock			Paid-in		Retained			Treasury			Stockholders’
	Shares	Amount		Capital		Deficit			Stock			Equity

BALANCE, DECEMBER 31, 2023	49,089,864	$	490,899	$	47,018,707	$	(23,312,273	)	$	(3,843,562	)	$	20,353,771
Issuance of stock-based compensation	53,725		537		123,267		—			—			123,804
Compensation expense related to stock options	—		—		393,113		—			—			393,113
Compensation related to restricted stock	—		—		130,676		—			—			130,676
Issuance of warrants	—		—		52,125		—			—			52,125
Net loss	—		—		—		(1,935,958	)		—			(1,935,958	)
BALANCE, MARCH 31, 2024	49,143,589	$	491,436	$	47,717,888	$	(25,248,231	)	$	(3,843,562	)	$	19,117,531

Issuance of stock-based compensation	41,138		411		136,020		—			(38,932	)		97,500
Compensation expense related to stock options	—		—		401,218		—			—			401,218
Compensation related to restricted stock	55,061		551		63,434		—			—			63,984
Issuance of warrants	—		—		13,032		—			—			13,032
Net loss	—		—		—		(988,715	)		—			(988,715	)
BALANCE, JUNE 30, 2024	49,239,788	$	492,398	$	48,331,591	$	(26,236,946	)	$	(3,882,493	)	$	18,704,550

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenues
Domestic	$	6,779,298	$	5,686,427	$	13,163,381	$	11,970,392
International		1,650,791		1,249,504		3,464,506		2,358,144
Total	$	8,430,089	$	6,935,931	$	16,627,887	$	14,328,536

	June 30, 2024			December 31, 2023

Furniture and office equipment	$	1,435,083		$	1,412,164
Leasehold improvements		1,953,653			1,953,653
Manufacturing equipment and tooling		3,424,129			3,193,113
Total property and equipment		6,812,865			6,558,930
Less: accumulated depreciation and amortization		(3,133,881	)		(2,721,273	)
Property and equipment, net	$	3,678,984		$	3,837,657

Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price

$2.08 - $3.96	3,037,500	6.64 years	$	3.36	1,392,500	$	3.40


	June 30, 2024			December 31, 2023

Operating Leases
Operating lease right-of-use assets	$	3,414,831		$	3,514,055

Operating lease current liabilities		391,699			368,313
Operating lease long term liabilities		3,202,697			3,336,300
Total operating lease liabilities	$	3,594,396		$	3,704,613

Finance Leases
Property and equipment, at cost	$	577,929		$	577,929
Accumulated depreciation		(219,254	)		(161,461	)
Property and equipment, net	$	358,675		$	416,468

Finance lease current liabilities		112,689			109,540
Finance lease long term liabilities		259,479			316,623
Total finance lease liabilities	$	372,168		$	426,163

	June 30, 2024	December 31, 2023

Weighted Average Remaining Lease Term
Operating leases	5.56 Years	6.88 Years
Finance leases	3.22 Years	3.72 Years

Weighted Average Discount Rate
Operating leases	6.60%	5.76%
Finance leases	6.25%	6.19%

Year Ending December 31,	Operating Leases			Finance Leases
Remainder of 2024	$	266,990			65,718
2025		533,979			131,437
2026		533,979			131,437
2027		533,979			74,194
2028		520,985			6,180
Thereafter		1,833,603			—
Total undiscounted lease payments		4,223,515			408,966
Less: imputed interest		(629,119	)		(36,799	)
Total lease liabilities	$	3,594,396		$	372,168

	June 30,
	2024			2023

Dividend yield		0.00	%		0.00	%
Expected Volatility		46.18 - 47.83	%		56.83 - 61.29	%
Expected dividends		—			—
Expected term (in years)		6.25			10
Risk-free rate		4.24% - 4.63	%		3.50 - 3.53	%

	Six Months Ended June 30,
	2024			2023
	Shares	Weighted Average Grant-Date Fair Value		Shares	Weighted Average Grant-Date Fair Value

Unvested at January 1	904,496	$	1.80	950,000	$	3.04
Granted	—	$	—	54,496	$	3.68
Vested	81,789	$	3.38	100,000	$	3.31
Forfeited/canceled	—	$	—	—	$	—
Unvested at June 30	822,707	$	1.98	904,496	$	2.97

	Three Months Ended June 30,				Change from Prior Year			% of Net Revenues
	2024		2023		$		%	2024	2023
Net Revenues
Domestic Core	$	6,156,098	$	5,388,172	$	767,926	14.3%	73.0%	77.7%
International Core		1,628,191		1,117,004		511,187	45.8%	19.3%	16.1%
Total Core		7,784,289		6,505,176		1,279,113	19.7%	92.3%	93.8%
Novel Therapies		645,800		430,754		215,046	49.9%	7.7%	6.2%
Total	$	8,430,089	$	6,935,930	$	1,494,159	21.5%	100%	100%

	Six Months Ended June 30,				Change from Prior Year			% of Net Revenues
	2024		2023		$		%	2024	2023
Net Revenues
Domestic Core	$	12,109,963	$	11,107,308	$	1,002,655	9.0%	72.8%	77.5%
International Core		3,418,674		2,214,494		1,204,180	54.4%	20.6%	15.5%
Total Core		15,528,637		13,321,801		2,206,836	16.6%	93.4%	93.0%
Novel Therapies		1,099,250		1,006,734		92,516	9.2%	6.6%	7.0%
Total	$	16,627,887	$	14,328,536	$	2,299,351	16.0%	100%	100%

	Six Months Ended June 30, 2024			Six Months Ended June 30, 2023
Net cash used in operating activities	$	(335,385	)	$	(4,814,520	)
Net cash used in investing activities	$	(281,583	)	$	(392,544	)
Net cash used in financing activities	$	(407,271	)	$	(481,788	)

Exhibit No.	Description

31.1	Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002

31.2	Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002

32.1	Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

32.2	Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002

101.INS	Inline XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH	Inline XBRL Taxonomy Extension Schema Document

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF	Inline XBRL Taxonomy Definition Linkbase Document

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

	KORU MEDICAL SYSTEMS, INC.

August 7, 2024	/s/ Linda Tharby
	Linda Tharby, President and Chief Executive Officer (Principal Executive Officer)

August 7, 2024	/s/ Thomas Adams
	Thomas Adams, Chief Financial Officer and Treasurer (Principal Financial Officer)

SEC Form 10-Q filed by KORU Medical Systems Inc.