Full Press Release Details
Medical Systems Announces 2022 Second Quarter Financial Results
- August 3, 2022 -KORU Medical Systems, Inc. (NASDAQ: KRMD) ("KORU Medical" or the "Company"),
a leading medical technology company focused on the development, manufacturing, and commercialization of innovative and easy-to-use specialty
infusion solutions that improve quality of life for patients, today reported financial results for the second quarter ended June 30, 2022.
| Year-over-year net sales growth of 18.4% to $6.5 million, marking the third consecutive quarter of double-digit growth | |
| Expanded novel therapies pipeline with two new biopharmaceutical agreements | |
| Raising the revenue guidance to $27.0 to 27.5 million | |
| Completed first phase of move to new corporate headquarters in Mahwah, New Jersey |
"We delivered another strong quarter of revenue growth with contribution
across all three of our businesses," said Linda Tharby, KORU Medical's President and CEO. "We continue to gain momentum on
our strategic objectives with an expansion of our novel therapies pipeline and growth in our domestic and international core businesses.
Despite facing some Q2 supply chain challenges, we continue to make meaningful progress towards building a stronger foundation. We are
excited about our progress in driving long-term growth and value for patients, customers and shareholders as a leading provider of large
volume drug delivery solutions."
2022 Second Quarter Financial Results
| Three Months Ended June 30, | Change from Prior Year | ||||||||||
| 2022 | 2021 | $ | % | ||||||||
| Net Sales | |||||||||||
| Domestic Core | $ | 4,996,791 | $ | 4,597,797 | $ | 398,994 | $ | 8.7% | |||
| International Core | 951,485 | 859,694 | 91,791 | 10.7% | |||||||
| Novel Therapies | 598,352 | 70,683 | 527,669 | 746.6% | |||||||
| Total | $ | 6,546,628 | $ | 5,528,174 | $ | 1,018,454 | $ | 18.4% |
Total net sales increased $1.0 million, or 18.4%, for the three months
ended June 30, 2022, as compared with the same period last year. This increase was driven primarily by higher novel therapies sales related
to a NRE development milestone for a large pharmaceutical customer, clinical product sales for an expanded pipeline, and increases in
average selling prices for our products. Our domestic core business grew by 8.7%, and was impacted by supply chain issues and labor shortages
which created backorders estimated to be $0.3 million that are not included in the reported net sales number. The increase in domestic
core demand inclusive of backorders was attributed to volume growth driven by SCIg market growth and label expansions. We define backorders
as any non-cancellable open order not shipped before promised delivery date net of rebates, discounts, and other fees. Backorders are
expected to be cleared in the third quarter of 2022. International net sales were $1.0 million for the three months ended June 30, 2022,
up 10.7% compared with the same period last year due to volume growth in several European markets driven by key tender wins.
Gross profit increased $0.14 million or 4.2% in the three months ended
June 30, 2022, compared to the same period in 2021, while gross profit as a percentage of net sales decreased by 700 basis points to 51.1%. The
decline in the gross profit percent was primarily caused by the accelerated amortization of manufacturing variances in the quarter, due
to lower levels of finished goods inventory. This accounting treatment contributed 380 basis points to the reduction and we believe
it is a non-recurring event. In addition, the gross profit percent was impacted by manufacturing variances due to supply chain issues
in the first quarter of 2022, amortized in the current period. Further contributing to the lower gross profit percent were higher NRE
revenues, which are lower gross margin, and a nominal impact from an increase in average selling prices, partially offsetting the aforementioned
unfavorable impacts.
Total operating expenses for the second quarter of 2022 were $7.0 million,
compared to $4.6 million for the same period in 2021. The increase in operating expenses is due to strategic investments in research and
development, and new hires to support business development, commercialization, quality and regulatory capabilities.
Net loss for the second quarter of 2022 was $2.9
million, or $(0.07) per diluted share, compared to a net loss of $1.1 million, or ($0.03) per diluted share for the same period
of 2021. Net loss included a tax benefit of $0.7 million for the second quarter of 2022. On a non-GAAP basis, adjusted diluted earnings
per share was ($0.06) compared to ($0.02) in the same period of 2021.
Cash and cash equivalents were $18.3 million as of June 30, 2022.
Assumptions and Outlook for Full Year 2022
KORU Medical's outlook for full year 2022 reflects numerous assumptions
that could affect its business, based on the information management has as of this date, which includes assumptions regarding the continued
recovery from the COVID-19 pandemic related to new SCIg patient starts, SCIg market growth rate in the high single digits, plasma supply,
clinical trial activity and expansion of the novel therapies pipeline, inflationary impact (including labor and supply price increases),
supply chain and labor shortage impacts, timely receipt of equipment financing and credits and planned inventory reductions by year end
2022. Management will discuss its outlook and several of its assumptions on its second quarter 2022 earnings call.
KORU Medical now expects full year 2022 revenue to be in the range of $27.0
to $27.5 million (previously $26.5 to $27.0 million).
The Company expects to exit the year with a 55-60% gross margin updated
from prior guidance of 60%. Supply chain disruptions and labor shortages resulted in unfavorable manufacturing variances in the second
quarter of 2022, but are expected to improve in the second half of the year. Transfer of finished goods manufacturing to our third party
contract manufacturing source is now expected in Q1 2023 (previously Q4 2022).
The Company is updating its guidance to include a minimum cash balance
of $16.0 million for year end 2022.
The Company has no further updates to prior guidance.
Conference Call and Webcast Details
The Company will host a live conference call and webcast to discuss these
results and provide a corporate update on Wednesday, August 3, 2022, at 4:30 PM ET.
To participate in the call, please dial (877)-407-0784 (domestic) or (201)-689-8560
(international) and provide conference ID 13730791. The live webcast will be available on the IR Calendar on the News/Events page of the
Investors section of KORU Medical's website.
This press release includes the non-GAAP financial measures "Adjusted
EBITDA" and "Adjusted Diluted earnings per share" that are not in accordance with, nor an alternate to, generally accepted
accounting principles and may be different from non-GAAP measures used by other companies. These non-GAAP measures are not based on any
comprehensive set of accounting rules or principles. Non-GAAP financial measures should not be considered a substitute for, or superior
to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have
a material effect on KORU Medical's reported results and, therefore, should not be relied upon as the sole financial measures to evaluate
the Company's financial results. Non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial
results. Reconciliations of the Company's non-GAAP measures are included at the end of this press release.
About KORU Medical Systems
KORU Medical Systems develops, manufactures, and commercializes innovative
and easy-to-use specialty infusion solutions that improve quality of life for patients around the world. The FREEDOM Syringe Infusion
System currently includes the FREEDOM60 and FreedomEdge Syringe Infusion Drivers, Precision Flow Rate Tubing and HIgH-Flo
Subcutaneous Safety Needle Sets . These devices are used for infusions administered in the home and alternate care settings. For
more information, please visit www.korumedical.com.
Forward-looking Statements
This press release contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. All statements that are not historical fact
are forward-looking statements, including, but not limited to, expected financial outlook and operating performance for fiscal 2022, growth
of novel therapies pipeline, amortization of manufacturing variances, and market growth. Forward-looking statements discuss the Company's
current expectations and projections relating to its financial position, results of operations, plans, objectives, future performance
and business. Forward-looking statements can be identified by words such as "outlook", "expect", "plan",
"believe" and "will". Actual results may differ materially from the results predicted and reported results should
not be considered as an indication of future performance. The potential risks and uncertainties that could cause actual results to differ
from the results predicted include, among others, uncertainties associated with the shift to increased healthcare delivery in the home,
new patient diagnoses, customer ordering patterns, COVID-19, innovation and competition, labor and supply price increases, inflationary
impacts, labor supply, and and those risks and uncertainties included under the captions "Risk Factors" in our Annual Report
on Form 10-K for the year ended December 31, 2021 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, which are
on file with the SEC and available on our website at www.korumedical.com/investors and on the SEC website at www.sec.gov. All information
provided in this release and in the attachments is as of August 3, 2022. Undue reliance should not be placed on the forward-looking statements
in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information
unless required by law.
KORU MEDICAL SYSTEMS, INC.
| June 30, | December 31, | ||||||
| 2022 | 2021 | ||||||
| ASSETS | |||||||
| CURRENT ASSETS | |||||||
| Cash and cash equivalents | $ | 18,265,552 | $ | 25,334,889 | |||
| Accounts receivable less allowance for doubtful accounts of $24,471 for June 30, 2022, and December 31, 2021 | 4,084,762 | 3,592,886 | |||||
| Inventory | 6,771,514 | 6,106,338 | |||||
| Other Receivables | 680,796 | 718,220 | |||||
| Prepaid expenses | 1,165,668 | 1,568,821 | |||||
| TOTAL CURRENT ASSETS | 30,968,292 | 37,321,154 | |||||
| Property and equipment, net | 2,823,090 | 1,106,445 | |||||
| Intangible assets, net of accumulated amortization of $294,301 and $263,729 at June 30, 2022 and December 31, 2021, respectively | 791,781 | 808,813 | |||||
| Operating lease right-of-use assets | 4,190,931 | 95,553 | |||||
| Finance lease right -of-use, net accumulated depreciation of $5,918 at June 30, 2022 | 349,153 | - | |||||
| Deferred income tax assets, net | 3,249,323 | 1,941,254 | |||||
| Other assets | 88,772 | 19,812 | |||||
| TOTAL ASSETS | $ | 42,461,342 | $ | 41,293,031 | |||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
| CURRENT LIABILITIES | |||||||
| Accounts payable | $ | 2,389,862 | $ | 1,227,533 | |||
| Accrued expenses | 1,974,196 | 2,709,704 | |||||
| Note Payable | - | 508,583 | |||||
| Other Liabilities | 240,501 | 90,000 | |||||
| Accrued payroll and related taxes | 696,042 | 160,603 | |||||
| Financing lease liability - current | 66,503 | - | |||||
| Operating lease liability - current | 363,030 | 95,553 | |||||
| TOTAL CURRENT LIABILITIES | 5,730,134 | 4,791,976 | |||||
| Financing lease liability, net of current portion | 281,958 | - | |||||
| Operating lease liability, net of current portion | 3,827,900 | - | |||||
| TOTAL LIABILITIES | 9,839,992 | 4,791,976 | |||||
| STOCKHOLDERS' EQUITY | |||||||
| Common stock, $0.01 par value, 75,000,000 shares authorized, 48,407,619 and 48,044,162 shares issued 44,987,117 and 44,623,660 shares outstanding at June 30, 2022, and December 31, 2021, respectively | 484,076 | 480,441 | |||||
| Additional paid-in capital | 42,349,760 | 40,774,245 | |||||
| Treasury stock, 3,420,502 shares at June 30, 2022 and December 31, 2021, respectively, at cost | (3,843,562 | ) | (3,843,562 | ) | |||
| Retained deficit | (6,368,924 | ) | (910,069 | ) | |||
| TOTAL STOCKHOLDERS' EQUITY | 32,621,350 | 36,501,055 | |||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 42,461,342 | $ | 41,293,031 |
KORU MEDICAL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
| Three Months Ended | Six Months Ended | ||||||||||||
| June 30, | June 30, | ||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| NET SALES | $ | 6,546,628 | $ | 5,528,174 | $ | 12,790,958 | $ | 10,959,125 | |||||
| Cost of goods sold | 3,200,455 | 2,317,990 | 5,822,480 | 4,517,087 | |||||||||
| Gross Profit | 3,346,173 | 3,210,184 | 6,968,478 | 6,442,038 | |||||||||
| OPERATING EXPENSES | |||||||||||||
| Selling, general and administrative | 5,530,022 | 4,085,945 | 11,021,235 | 9,078,774 | |||||||||
| Research and development | 1,303,731 | 386,878 | 2,452,086 | 723,719 | |||||||||
| Depreciation and amortization | 125,882 | 118,415 | 235,134 | 233,888 | |||||||||
| Total Operating Expenses | 6,959,635 | 4,591,238 | 13,708,455 | 10,036,381 | |||||||||
| Net Operating Loss | (3,613,462 | ) | (1,381,054 | ) | (6,739,977 | ) | (3,594,343 | ) | |||||
| Non-Operating Income/(Expense) | |||||||||||||
| (Loss)/Gain on currency exchange | (21,705 | ) | 1,239 | (28,840 | ) | (14,478 | ) | ||||||
| Gain on disposal of fixed assets, net | - | - | - | 736 | |||||||||
| Interest income, net | 3,566 | 9,950 | 2,103 | 19,721 | |||||||||
| TOTAL OTHER INCOME/(EXPENSE) | (18,139 | ) | 11,189 | (26,737 | ) | 5,979 | |||||||
| LOSS BEFORE INCOME TAXES | (3,631,601 | ) | (1,369,865 | ) | (6,766,714 | ) | (3,588,364 | ) | |||||
| Income Tax Benefit | 710,260 | 245,316 | 1,307,859 | 1,187,677 | |||||||||
| NET LOSS | $ | (2,921,341 | ) | $ | (1,124,549 | ) | $ | (5,458,855 | ) | $ | (2,400,687 | ) | |
| NET LOSS PER SHARE | |||||||||||||
| Basic | $ | (0.07 | ) | $ | (0.03 | ) | $ | (0.12 | ) | $ | (0.05 | ) | |
| Diluted | $ | (0.07 | ) | $ | (0.03 | ) | $ | (0.12 | ) | $ | (0.05 | ) | |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |||||||||||||
| Basic | 44,921,870 | 44,489,853 | 44,795,625 | 44,226,936 | |||||||||
| Diluted | 44,921,870 | 44,489,853 | 44,795,625 | 44,226,936 |
KORU MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
| For the Six Months Ended | |||||||
| June 30, | |||||||
| 2022 | 2021 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
| Net Loss | $ | (5,458,855 | ) | $ | (2,400,687 | ) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Stock-based compensation expense | 1,579,151 | 1,339,356 | |||||
| Depreciation and amortization | 235,134 | 233,888 | |||||
| Deferred income taxes | (1,308,069 | ) | (1,201,956 | ) | |||
| Gain on disposal of fixed assets | - | (736 | ) | ||||
| Changes in operating assets and liabilities: | |||||||
| Increase in accounts receivable | (454,452 | ) | (4,446 | ) | |||
| Increase in inventory | (665,176 | ) | (732,978 | ) | |||
| Decrease in prepaid expenses and other assets | 334,193 | 346,227 | |||||
| Increase in other Liabilities | 150,501 | - | |||||
| Increase in accounts payable | 1,162,329 | 380,733 | |||||
| Increase in accrued payroll and related taxes | 535,438 | 103,196 | |||||
| Decrease in accrued expenses | (735,508 | ) | (838,747 | ) | |||
| NET CASH USED IN OPERATING ACTIVITIES | (4,625,314 | ) | (2,776,150 | ) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
| Purchases of property and equipment | (1,915,289 | ) | (152,223 | ) | |||
| Proceeds from disposal of property and equipment | - | 9,065 | |||||
| Purchases of intangible assets | (13,540 | ) | (23,978 | ) | |||
| NET CASH USED IN INVESTING ACTIVITIES | (1,928,829 | ) | (167,136 | ) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
| Payments on indebtedness | (508,583 | ) | - | ||||
| Proceeds from issuance of equity | - | 1,230,000 | |||||
| Common stock issuance as settlement for litigation | - | 938,094 | |||||
| Payments on finance lease liability | (6,611 | ) | (1,616 | ) | |||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | (515,194 | ) | 2,166,478 | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (7,069,337 | ) | (776,808 | ) | |||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 25,334,889 | 27,315,286 | |||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 18,265,552 | $ | 26,538,478 | |||
| Supplemental Information | |||||||
| Cash paid during the periods for: | |||||||
| Interest | $ | 6,204 | $ | 47 | |||
| Income Taxes | $ | - | $ | 850 | |||
| Schedule of Non-Cash Operating, Investing and Financing Activities: | |||||||
| Issuance of common stock as compensation | $ | 258,005 | $ | 153,446 | |||
| Issuance of common stock as settlement for litigation | $ | - | $ | 938,094 |