KORU Medical Systems Announces Financial Results for Third Quarter 2020

CHESTER, N.Y.--(BUSINESS WIRE)-- Repro Med Systems, Inc. dba KORU Medical Systems (NASDAQ: KRMD) (“KORU Medical” or the “Company”) today announced financial results for the third quarter ended September 30, 2020 (“Q3 2020”).

Q3 2020 Overview

“The strength and resiliency of our core business, which provides our Freedom Integrated Infusion System to individuals with Primary Immune Deficiency Disease and Chronic Inflammatory Demyelinating Polyneuropathy, is helping us navigate the challenges of the COVID-19 pandemic. Our total net sales declined in Q3 2020 primarily attributable to lower clinical trial activity and allowances associated with U.S. sales. Net sales for the first nine months of 2020 rose 19% from the same period last year and volume growth continued within our business.”

Mr. Pettigrew continued, “We are continuing to manage our operations to deliver growth by capitalizing on multiple, sustainable long-term growth drivers. We remain confident in the strength of our core business, which is predominantly comprised of recurring revenues and excludes clinical trials. Our core business is likely to continue to grow given the heightened awareness of PIDD and CIDP diseases, proven and effective immunoglobulin therapy, the benefits of at home treatment, growing addressable patient populations, and an increasing focus by pharmaceutical manufacturers to develop subcutaneous drugs that allow individuals to self-administer these therapies at home. We believe we remain well-positioned to further capture clinical trials sales, support expanded drug indications for existing therapies, and pursue international expansion as the effects of the pandemic subside. Our business fundamentals and cash position remain strong.”

Update on Strategic Growth Initiatives

Hematology Drug Launch and Additional Clinical Trial Participation

The Freedom System was utilized in a recently completed Phase III clinical trial for a subcutaneous hematology drug. This drug is aimed at treating paroxysmal nocturnal hemoglobinuria (PNH), a rare, chronic blood disorder that affects over 15,000 patients worldwide. KORU Medical expects that this new drug will launch in 2021 and that the Freedom System will be the preferred delivery method. The Company also believes that the Freedom System will be utilized in several additional upcoming clinical trials with this same drug focused on expanding indications and disease states for larger patient populations.

“The new PNH drug is progressing towards its planned launch in 2021 and is currently being trialed in other indications using the Freedom System. Relationships such as this are an essential part of our strategic plan as this PNH indication alone has the potential to significantly expand our core business,” said Mr. Pettigrew.

Q3 2020 Financial Results Summary

Net sales were $6.1 million in Q3 2020 compared to $6.6 million in last year’s third quarter.

Gross profit in Q3 2020 was $3.9 million, or 64.8% of net sales, compared to $4.4 million, or 66.2% of net sales, in Q3 2019, reflecting lower net sales.

Total operating expenses in Q3 2020 remained stable at $3.6 million from Q3 2019.

Net income for Q3 2020 was $0.2 million, or $0.01 per share, compared to net income in Q3 2019 of $0.7 million, or $0.02 per share.

Q3 2020 Adjusted EBITDA was $0.9 million compared to Adjusted EBITDA of $2.2 million in Q3 2019. Adjusted EBITDA excludes from net income / (loss): income tax expense, depreciation and amortization, interest income, net, discontinued product expense, litigation expenses including stock-based settlement expense, manufacturing initiative expenses, and stock option expense.

Balance Sheet Summary

Cash and cash equivalents as of September 30, 2020 totaled $32.4 million, with the increase from December 31, 2019 reflecting $26.5 million of net proceeds from the capital raise completed in Q2 2020.

Non-GAAP Measures

This press release includes the non-GAAP financial measure of “Adjusted EBITDA” that is not in accordance with, nor an alternate to, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, this non-GAAP measure is 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 our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. The non-GAAP financial measure is meant to supplement, and to be viewed in conjunction with, GAAP financial results. A reconciliation of our non-GAAP measure is included in an attachment to this press release.

Conference Call

Management will host a conference call on Wednesday, November 4, 2020 at 9:00 am ET to discuss the results and business activities. Interested parties may participate in the call by dialing:

  • (877) 407-9753 (Domestic) or
  • (201) 493-6739 (International)

Webcast registration: Click Here

Following the live call, a replay will be available for six months on the Company's website, www.korumedical.com under "Investor Relations."

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 that involve risks and uncertainties. Forward-looking statements can be identified by words such as “will,” “expects,” “likely,” “look forward,” “planned,” “potential,” and “believe.” 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, such as uncertainties associated with COVID-19, future operating results, Food and Drug Administration regulations, introduction of competitive products, acceptance of and demand for new and existing products, ability to penetrate new markets, success in enforcing and obtaining patents, reimbursement related risks, government regulation of the home health care industry, success of the research and development effort, expanding the market of FREEDOM60® demand in the SCIg market, availability of sufficient capital if or when needed, dependence on key personnel, and the impact of recent accounting pronouncements; 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, 2019, and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, which are on file with the SEC and are 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 November 3, 2020. 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.

REPRO MED SYSTEMS, INC.

BALANCE SHEETS

(Unaudited)

 

 

 

 

 

 

 

 

 

September 30,

 

 

December 31,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

32,433,811

 

 

$

5,870,929

 

Accounts receivable less allowance for doubtful accounts of $24,676 and $32,645 at September 30, 2020 and December 31, 2019, respectively

 

 

3,736,596

 

 

 

3,234,521

 

Inventory

 

 

5,633,139

 

 

 

2,388,477

 

Prepaid expenses

 

 

844,496

 

 

 

387,396

 

TOTAL CURRENT ASSETS

 

 

42,648,042

 

 

 

11,881,323

 

Property and equipment, net

 

 

1,260,675

 

 

 

611,846

 

Patents, net of accumulated amortization of $335,686 and $288,967 at September 30, 2020 and December 31, 2019, respectively

 

 

884,635

 

 

 

807,135

 

Right of use assets, net

 

 

271,679

 

 

 

373,734

 

Deferred tax asset

 

 

349,609

 

 

 

188,241

 

Other assets

 

 

19,812

 

 

 

19,582

 

TOTAL ASSETS

 

$

45,434,452

 

 

$

13,881,861

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

 

1,363,070

 

 

 

572,656

 

Accrued expenses

 

 

3,051,582

 

 

 

1,296,612

 

Accrued payroll and related taxes

 

 

440,144

 

 

 

190,265

 

Accrued tax liability

 

 

363,158

 

 

 

204,572

 

Finance lease liability – current

 

 

3,026

 

 

 

5,296

 

Operating lease liability – current

 

 

140,450

 

 

 

136,888

 

TOTAL CURRENT LIABILITIES

 

 

5,361,430

 

 

 

2,406,289

 

Finance lease liability, net of current portion

 

 

414

 

 

 

2,646

 

Operating lease liability, net of current portion

 

 

131,229

 

 

 

236,846

 

TOTAL LIABILITIES

 

 

5,493,073

 

 

 

2,645,781

 

Commitments and contingencies

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Common stock, $0.01 par value; 75,000,000 shares authorized, 46,671,807 and 42,239,788 shares issued, 43,934,576 and 39,502,557 shares outstanding at September 30, 2020 and December 31, 2019, respectively

 

 

466,718

 

 

 

422,398

 

Additional paid-in capital

 

 

35,331,483

 

 

 

6,293,069

 

Treasury stock, 2,737,231 shares at September 30, 2020 and December 31, 2019, respectively, at cost

 

 

(344,204

)

 

 

(344,204

)

Retained earnings

 

 

4,487,382

 

 

 

4,864,817

 

TOTAL STOCKHOLDERS’ EQUITY

 

 

39,941,379

 

 

 

11,236,080

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

45,434,452

 

 

$

13,881,861

 

 

REPRO MED SYSTEMS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

 

 

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

6,080,315

 

 

$

6,617,397

 

 

$

20,119,228

 

 

$

16,940,487

 

Cost of goods sold

 

 

2,139,592

 

 

 

2,234,489

 

 

 

7,480,415

 

 

 

6,033,961

 

Gross Profit

 

 

3,940,723

 

 

 

4,382,908

 

 

 

12,638,813

 

 

 

10,906,526

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

3,075,169

 

 

 

2,441,381

 

 

 

9,039,980

 

 

 

6,976,684

 

Litigation

 

 

675

 

 

 

864,009

 

 

 

2,446,747

 

 

 

2,481,471

 

Research and development

 

 

390,416

 

 

 

170,260

 

 

 

944,637

 

 

 

450,454

 

Depreciation and amortization

 

 

115,637

 

 

 

82,774

 

 

 

297,801

 

 

 

252,594

 

Total Operating Expenses

 

 

3,581,897

 

 

 

3,558,424

 

 

 

12,729,165

 

 

 

10,161,203

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Operating Profit/(Loss)

 

 

358,826

 

 

 

824,484

 

 

 

(90,352

)

 

 

745,323

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Operating Income/(Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(Loss) on currency exchange

 

 

1,927

 

 

 

(9,358

)

 

 

(11,164

)

 

 

(20,283

)

Gain on disposal of fixed assets, net

 

 

22,113

 

 

 

 

 

 

16,591

 

 

 

49,740

 

Interest income, net

 

 

9,662

 

 

 

23,368

 

 

 

23,690

 

 

 

59,091

 

TOTAL OTHER INCOME/(EXPENSE)

 

 

33,702

 

 

 

14,010

 

 

 

29,117

 

 

 

88,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) BEFORE INCOME TAXES

 

 

392,528

 

 

 

838,494

 

 

 

(61,235

)

 

 

833,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

 

(143,353

)

 

 

(186,681

)

 

 

(316,200

)

 

 

(189,265

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

249,175

 

 

$

651,813

 

 

$

(377,435

)

 

$

644,606

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS) PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

0.02

 

 

$

(0.01

)

 

$

0.02

 

Diluted

 

$

0.01

 

 

$

0.02

 

 

$

(0.01

)

 

$

0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,914,542

 

 

 

39,022,298

 

 

 

41,326,815

 

 

 

38,534,021

 

Diluted

 

 

44,119,511

 

 

 

39,298,408

 

 

 

41,326,815

 

 

 

38,734,083

 

 

REPRO MED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net (Loss)/Income

 

$

(377,435

)

 

$

644,606

 

Adjustments to reconcile net (loss)/income to net cash provided by/(used in) operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,191,146

 

 

 

897,300

 

Stock-based litigation settlement expense

 

 

1,285,102

 

 

 

 

Depreciation and amortization

 

 

297,801

 

 

 

252,594

 

Deferred capital gain - building lease

 

 

 

 

 

(3,763

)

Deferred taxes

 

 

(161,368

)

 

 

134,563

 

Gain on disposal of fixed assets

 

 

(16,591

)

 

 

(49,740

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Increase in accounts receivable

 

 

(502,075

)

 

 

(2,120,780)

 

Increase in inventory

 

 

(3,244,662

)

 

 

(634,803)

 

Increase in prepaid expenses and other assets

 

 

(457,330

)

 

 

(206,560

)

Increase in accounts payable

 

 

790,414

 

 

 

421,479

 

Increase/(Decrease) in accrued payroll and related taxes

 

 

249,879

 

 

 

(310,355)

 

Increase in accrued expenses

 

 

1,754,970

 

 

 

490,053

 

Increase/(Decrease) in accrued tax liability

 

 

158,586

 

 

 

(16,608)

 

NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES

 

 

968,437

 

 

 

(502,014)

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(908,323

)

 

 

(158,193)

 

Purchases of patents

 

 

(124,216

)

 

 

(188,274)

 

Proceeds from disposal of property and equipment

 

 

25,000

 

 

 

217,821

 

Proceeds from certificate of deposit

 

 

 

 

 

1,517,927

 

NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES

 

 

(1,007,539

)

 

 

1,389,281

 

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Proceeds from issuance of equity

 

 

26,606,486

 

 

 

508,900

 

Payments for cancelled shares

 

 

 

 

 

(2,820

)

Borrowings from indebtedness

 

 

4,976,508

 

 

 

 

Payments on indebtedness

 

 

(4,976,508)

 

 

 

 

Payments on finance lease liability

 

 

(4,502

)

 

 

(3,122

)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

26,601,984

 

 

 

502,958

 

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

26,562,882

 

 

 

1,390,225

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

5,870,929

 

 

 

3,738,803

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

32,433,811

 

 

$

5,129,028

 

 

 

 

 

 

 

 

 

 

Supplemental Information

 

 

 

 

 

 

 

 

Cash paid during the periods for:

 

 

 

 

 

 

 

 

Interest

 

$

27,698

 

 

$

280

 

Income taxes

 

$

318,983

 

 

$

103,465

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

Reconciliation of GAAP Net Income/(Loss)

 

September 30,

 

 

September 30,

to Non-GAAP Adjusted EBITDA:

 

2020

 

 

2019

 

 

2020

 

 

2019

GAAP Net Income/(Loss)

 

$

249,175

 

 

$

651,813

 

 

$

(377,435

)

 

$

644,606

 

Income Tax Expense

 

 

143,353

 

 

 

186,681

 

 

 

316,200

 

 

 

189,265

 

Depreciation and Amortization

 

 

115,637

 

 

 

82,774

 

 

 

297,801

 

 

 

252,594

 

Interest Income, Net

 

 

(9,662

)

 

 

(23,368

)

 

 

(23,690

)

 

 

(59,091

)

Reorganization Charges

 

 

 

 

 

 

 

 

 

 

 

354,926

 

Discontinued Product Expense

 

 

(6,659

)

 

 

 

 

 

71,318

 

 

 

 

Litigation*

 

 

675

 

 

 

864,009

 

 

 

2,446,747

 

 

 

2,481,471

 

Manufacturing Initiative Expenses

 

 

59,045

 

 

 

120,386

 

 

 

194,804

 

 

 

120,386

 

Stock Option Expense

 

 

346,323

 

 

 

324,135

 

 

 

1,011,140

 

 

 

640,775

 

Non-GAAP Adjusted EBITDA

 

$

897,887

 

 

$

2,206,430

 

 

$

3,936,885

 

 

$

4,624,932

 

 

*For the nine months ended September 30, 2020, litigation consisted of a $2.2 million non-cash, stock-based settlement expense.

 

The Equity Group Inc.
Devin Sullivan
Senior Vice President
212-836-9608
dsullivan@equityny.com

Kalle Ahl, CFA
Vice President
212-836-9614
kahl@equityny.com

Source: KORU Medical Systems