Business Wire | Nov 10, 2021 04:03PM EST

KORU Medical Systems Announces 2021 Third Quarter Financial Results

Nov. 10, 2021

CHESTER, N.Y.--(BUSINESS WIRE)--Nov. 10, 2021--Repro Med Systems, Inc. dba KORU Medical Systems (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 third quarter ended September 30, 2021.

Recent Highlights:

* Achieved net revenue of $6.0 million, a 9% increase versus Q2 2021, marking the third consecutive quarter of positive sequential growth * Received FDA 510(k) clearance for CSL Hizentra(r) 20 ml prefilled syringe with the Freedom Edge(r) Syringe Infusion System * Appointed three leadership team hires and announced an external innovation collaboration * Scheduled strategic plan update presentation on December 2, 2021

"Our strong third quarter top-line results reflect continued momentum in all areas of our business - core US and international, as well as our novel therapies pipeline," said Linda Tharby, KORU Medical's CEO. "I'm proud of the team's progress this quarter as we strengthen our foundation, continue to build the KORU Medical team, and increase our investment in innovation. We remain focused on continued execution of our strategy, which drives incremental growth and market expansion building on our leadership position in large volume subcutaneous home infusion and extending that position into new drug therapies."

Third Quarter 2021 Financial Results

Net revenue was $6.0 million, (0.7)% lower compared with $6.1 million in the prior-year period. Adjusting for net inventory stocking of $0.6 million last year, adjusted net revenue grew 9%, with growth in all areas of our business; domestic core driven by pumps, international driven by consumables and increased novel therapies revenues. Sequential quarterly net revenue growth was 9%, with domestic core growth of 10% driven by pumps and needle sets and growth in novel therapies revenue.

Gross margin was 57.9% for the third quarter of 2021, a decline from prior year of 64.8%. The majority of the decline was driven by delays in the transition to our secondary manufacturing source. We also recorded a reserve for in-process material scrap. This was partially offset by favorability in product mix. We are confident in our path to accelerate margin improvement in 2022.

Total operating expenses for the third quarter of 2021 were $4.8 million, compared to $3.6 million for the same period in 2020. The increase in operating expenses is due to increased spend in support of strategic initiatives including commercialization, regulatory filings, and research and development.

Net loss for the third quarter of 2021 was $1.1 million, or $(0.02) per diluted share, compared with net income of $0.2 million, or $0.01 per diluted share for the same period in 2020.

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(r) and FreedomEdge(r) Syringe Infusion Drivers, Precision Flow Rate Tubing(tm) and HIgH-Flo Subcutaneous Safety Needle Sets(tm). 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. Forward-looking statements can be identified by words such as "scheduled", "our path", and "look forward". 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, 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, 2020, which is on file with the SEC and is 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 10, 2021. 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 December 31, 30,

2021 2020



ASSETS



CURRENT ASSETS

Cash and cash equivalents $ 26,233,411 $ 27,315,286

Accounts receivable less allowance for doubtfulaccounts of $24,469 for September 30, 2021 and 3,122,665 2,572,954 December 31, 2020

Inventory 6,967,932 6,829,772

Prepaid expenses 1,336,819 807,780

TOTAL CURRENT ASSETS 37,660,827 37,525,792

Property and equipment, net 1,159,819 1,167,623

Intangible assets, net of accumulatedamortization of $248,252 and $199,899 at 821,071 843,587 September 30, 2021 and December 31, 2020,respectively

Operating lease right-of-use assets 131,228 236,846

Deferred income tax assets, net 1,565,334 125,274

Other assets 19,812 19,812

TOTAL ASSETS $ 41,358,091 $ 39,918,934



LIABILITIES AND STOCKHOLDERS' EQUITY



CURRENT LIABILITIES

Accounts payable $ 1,385,413 $ 624,920

Accrued expenses 2,036,848 2,610,413

Accrued payroll and related taxes 332,814 287,130

Finance lease liability - current 414 2,646

Operating lease liability - current 131,228 141,293

Note Payable 673,133 -

TOTAL CURRENT LIABILITIES 4,559,850 3,666,402

Operating lease liability, net of current - 95,553 portion

TOTAL LIABILITIES 4,559,850 3,761,955

Commitments and contingencies (Refer to Note 3)

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value, 75,000,000shares authorized, 47,931,664 and 46,680,119shares issued 44,511,162 and 43,259,617 shares 479,317 466,801 outstanding at September 30, 2021 and December31, 2020, respectively

Additional paid-in capital 40,004,197 35,880,986

Treasury stock, 3,420,502 shares at September (3,843,562 ) (3,843,562 )30, 2021 and December 31, 2020, at cost

Retained earnings 158,289 3,652,754

TOTAL STOCKHOLDERS' EQUITY 36,798,241 36,156,979

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 41,358,091 $ 39,918,934

REPRO MED SYSTEMS, INC.

STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020



NET SALES $ 6,040,544 $ 6,080,315 $ 16,999,669 $ 20,119,228

Cost of goods 2,544,794 2,139,592 7,061,881 7,480,415 sold

Gross Profit 3,495,750 3,940,723 9,937,788 12,638,813



OPERATING EXPENSES

Selling, generaland 3,901,830 3,075,169 12,980,604 9,039,980 administrative

Litigation - 675 - 2,446,747

Research and 800,020 390,416 1,523,739 944,637 development

Depreciation and 115,934 115,637 349,822 297,801 amortization

Total Operating 4,817,784 3,581,897 14,854,165 12,729,165 Expenses



Net Operating (1,322,034 ) 358,826 (4,916,377 ) (90,352 )(Loss)/Profit



Non-Operating (Expense)/Income

(Loss)/Gain on (7,283 ) 1,927 (21,761 ) (11,164 )currency exchange

Gain on disposalof fixed assets, 273 22,113 1,009 16,591 net

Interest(expense)/income, (2,838) 9,662 16,883 23,690 net

TOTAL OTHER (9,848 ) 33,702 (3,869) 29,117 (EXPENSE)/INCOME



(LOSS)/INCOMEBEFORE INCOME (1,331,882 ) 392,528 (4,920,246 ) (61,235 )TAXES



Income Tax 238,104 (143,353 ) 1,425,781 (316,200 )Benefit/(Expense)



NET (LOSS)/INCOME $ (1,093,778 ) $ 249,175 $ (3,494,465 ) $ (377,435 )



NET (LOSS)/INCOME PER SHARE



Basic $ (0.02 ) $ 0.01 $ (0.08 ) $ (0.01 )

Diluted $ (0.02 ) $ 0.01 $ (0.08 ) $ (0.01 )



WEIGHTED AVERAGENUMBER OF COMMON SHARESOUTSTANDING



Basic 44,322,335 43,914,542 44,510,021 41,326,815

Diluted 44,322,335 44,119,511 44,510,021 41,326,815

REPRO MED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the Nine Months Ended

September 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss

$

(3,494,465

)

$

(377,435

)

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

Stock-based compensation expense

1,967,632

1,191,146

Stock-based litigation settlement expense

-

1,285,102

Depreciation and amortization

349,822

297,801

Deferred income taxes

(1,440,060

)

(161,368

)

Gain on disposal of fixed assets

(1,009

)

(16,591

)

Changes in operating assets and liabilities:

Increase in accounts receivable

(549,711

)

(502,075

)

Increase in inventory

(138,160

)

(3,244,662

)

Increase in prepaid expenses and other assets

(529,039

)

(457,330

)

Increase in accounts payable

760,493

790,414

Increase in accrued payroll and related taxes

45,684

249,879

(Decrease)/Increase in accrued expenses

(573,565

)

1,754,970

Increase in accrued tax liability

-

158,586

NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES

(3,602,378

)

968,437

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment

(301,720

)

(908,323

)

Proceeds from disposal of property and equipment

9,065

25,000

Purchases of intangible assets

(25,838

)

(124,216

)

NET CASH USED IN INVESTING ACTIVITIES

(318,493

)

(1,007,539

)

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from indebtedness

924,389

4,976,508

Payments on indebtedness

(251,255

)

(4,976,508

)

Proceeds from issuance of equity

1,230,000

26,606,486

Common stock issuance as settlement for litigation

938,094

-

Payments on finance lease liability

(2,232

)

(4,502

)

NET CASH PROVIDED BY FINANCING ACTIVITIES

2,838,996

26,601,984

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS

(1,081,875

)

26,562,882

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

27,315,286

5,870,929

CASH AND CASH EQUIVALENTS, END OF PERIOD

$

26,233,411

$

32,433,811

Supplemental Information

Cash paid during the periods for:

Interest

$

6,194

$

27,698

Income Taxes

$

850

$

318,983

Schedule of Non-Cash Operating, Investing and Financing Activities:

Issuance of common stock as compensation

$

295,947

$

180,006

Issuance of common stock as settlement for litigation

$

938,094

$

938,094

REPRO MED SYSTEMS, INC.

SUPPLEMENTAL INFORMATION

(UNAUDITED)

The following table summarizes our net sales for the three and nine months ended September 30, 2021 and 2020:

REPRO MED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)



For the Nine Months Ended

September 30,

2021 2020



CASH FLOWS FROM OPERATING ACTIVITIES

Net Loss $ (3,494,465 ) $ (377,435 )

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

Stock-based compensation expense 1,967,632 1,191,146

Stock-based litigation settlement expense - 1,285,102

Depreciation and amortization 349,822 297,801

Deferred income taxes (1,440,060 ) (161,368 )

Gain on disposal of fixed assets (1,009 ) (16,591 )



Changes in operating assets and liabilities:

Increase in accounts receivable (549,711 ) (502,075 )

Increase in inventory (138,160 ) (3,244,662 )

Increase in prepaid expenses and other assets (529,039 ) (457,330 )

Increase in accounts payable 760,493 790,414

Increase in accrued payroll and related taxes 45,684 249,879

(Decrease)/Increase in accrued expenses (573,565 ) 1,754,970

Increase in accrued tax liability - 158,586

NET CASH (USED IN)/PROVIDED BY OPERATING (3,602,378 ) 968,437 ACTIVITIES



CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of property and equipment (301,720 ) (908,323 )

Proceeds from disposal of property and 9,065 25,000 equipment

Purchases of intangible assets (25,838 ) (124,216 )

NET CASH USED IN INVESTING ACTIVITIES (318,493 ) (1,007,539 )



CASH FLOWS FROM FINANCING ACTIVITIES

Borrowings from indebtedness 924,389 4,976,508

Payments on indebtedness (251,255 ) (4,976,508 )

Proceeds from issuance of equity 1,230,000 26,606,486

Common stock issuance as settlement for 938,094 - litigation

Payments on finance lease liability (2,232 ) (4,502 )

NET CASH PROVIDED BY FINANCING ACTIVITIES 2,838,996 26,601,984



NET (DECREASE)/INCREASE IN CASH AND CASH (1,081,875 ) 26,562,882 EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 27,315,286 5,870,929

CASH AND CASH EQUIVALENTS, END OF PERIOD $ 26,233,411 $ 32,433,811



Supplemental Information

Cash paid during the periods for:

Interest $ 6,194 $ 27,698

Income Taxes $ 850 $ 318,983



Schedule of Non-Cash Operating, Investing and Financing Activities:

Issuance of common stock as compensation $ 295,947 $ 180,006

Issuance of common stock as settlement for $ 938,094 $ 938,094 litigation

REPRO MED SYSTEMS, INC.

SUPPLEMENTAL INFORMATION

(UNAUDITED)

The following table summarizes our net sales for the three and nine months ended September 30, 2021 and 2020:

Three Months Nine Months Ended September 30, Ended September 30,

2021 2020 2021 2020

Net Sales

Domestic $ 5,076,294 $ 5,289,076 $ 14,084,552 $ 15,719,419

International 747,281 702,034 2,585,881 2,539,944

Novel 216,969 89,205 329,236 1,859,865 Therapies

Total $ 6,040,544 $ 6,080,315 $ 16,999,669 $ 20,119,228

A reconciliation of one of our non-GAAP measures is below:

Reconciliation of Three Months Ended Change from PriorReported Net Sales to September 30, Year Non-GAAP Net Sales

2021 2020 $ %

Reported Net Sales $ 6,040,544 $ 6,080,315 $ (39,771 ) (0.7% )

Early Order/Inventory - (552,000 ) 552,000 (100.0% )Stocking

Non-GAAP Adjusted Net $ 6.040,544 $ 5,528,315 $ 512,229 9.3% Sales

Reconciliation of Reported Net Sales to Non-GAAP Net Sales

Nine Months Ended September 30,

Change from Prior Year

2021

2020

$

%

Reported Net Sales

$

16,999,669

$

20,119,228

$

(3,119,559

)

(15.5%

)

Early Order/Inventory Stocking

-

(1,335,000

)

1,335,000

(100.0%

)

Non-GAAP Adjusted Net Sales

$

16,999,669

$

18,784,228

$

(1,784,559

)

(9.5%

)

Early Order/Inventory Stocking. We have excluded the effect of an early order and COVID related inventory stocking in calculating our non-GAAP measure. We had an early order from our largest distributor in the three months ended September 30, 2020, which would have otherwise been placed in the three months ended December 31, 2020, as well as higher purchases in the six months ended June 30, 2020, that we believe would have normally been made in the second half of 2020, had it not been for the pandemic.

Reconciliation ofReported Net Sales Nine Months Ended Change from Prior Year to Non-GAAP Net September 30,Sales

2021 2020 $ %

Reported Net Sales $ 16,999,669 $ 20,119,228 $ (3,119,559 ) (15.5% )

Early Order/ - (1,335,000 ) 1,335,000 (100.0% )Inventory Stocking

Non-GAAP Adjusted $ 16,999,669 $ 18,784,228 $ (1,784,559 ) (9.5% )Net Sales

Early Order/Inventory Stocking. We have excluded the effect of an early order and COVID related inventory stocking in calculating our non-GAAP measure. We had an early order from our largest distributor in the three months ended September 30, 2020, which would have otherwise been placed in the three months ended December 31, 2020, as well as higher purchases in the six months ended June 30, 2020, that we believe would have normally been made in the second half of 2020, had it not been for the pandemic.

REPRO MED SYSTEMS, INC.

SUPPLEMENTAL INFORMATION

(UNAUDITED)

A reconciliation of our non-GAAP measures is below:

Three Months Ended Nine Months Ended

Reconciliation ofGAAP Net (Loss)/ September 30, September 30,Income

to Non-GAAP 2021 2020 2021 2020Adjusted EBITDA:

GAAP Net Loss $ (1,093,778 ) $ 249,175 $ (3,494,465 ) $ (377,435 )

Tax (Benefit)/ (238,104 ) 143,353 (1,425,781 ) 316,200 Expense

Depreciation and 115,934 115,637 349,822 297,801 Amortization

Interest Expense/ 2,838 (9,662 ) (16,883 ) (23,690 )(Income), Net

Reorganization (1,262 ) - 1,192,618 - Charges

Discontinued - (6,659 ) - 71,318 Product Expenses

Litigation - 675 - 2,446,747 Expenses

ManufacturingInitiative 35,892 59,045 237,333 194,804 Expenses

Stock-basedCompensation 628,276 406,325 1,967,632 1,191,146 Expense

Non-GAAP Adjusted $ (550,204 ) $ 957,889 $ (1,189,724 $ 4,116,891 EBITDA

Three Months Ended

Nine Months Ended

Reconciliation of Reported Diluted EPS

September 30,

September 30,

to Non-GAAP Adjusted Diluted EPS*:

2021

2020

2021

2020

Reported Diluted Earnings Per Share

$

(0.02

)

$

0.01

$

(0.08

)

$

(0.01

)

Reorganization Charges

-

-

0.03

-

Discontinued Product Expense

-

-

-

-

Litigation Expenses

-

-

-

0.06

Manufacturing Initiative Expenses

-

-

0.01

Stock-based Compensation Expense

-

-

0.01

-

Tax (Expense) Adjustment

-

-

(0.01

)

(0.01

)

Non-GAAP Adjusted Diluted Earnings Per Share

$

(0.02

)

$

0.01

$

(0.04

)

$

0.04

*Numbers presented are rounded to the nearest whole cent

Reorganization Charges. We have excluded the effect of reorganization charges in calculating our non-GAAP measures. We incurred significant expenses in connection with the departure and replacement of our chief executive officer and the recruiting of two new board members, which we would not have otherwise incurred in periods presented as part of our continuing operations.

Discontinued Product Expense. We have excluded the effect of expenses related to a discontinued product line in calculating our non-GAAP measures. We did not incur any related expense in 2021.

Litigation. We have excluded litigation expenses in calculating our non-GAAP measures. Litigation expenses in 2020 included professional fees associated with our litigation with EMED, which discontinued as a result of the settlement on May 20, 2020.

Manufacturing Initiative Expenses. We have excluded the effect of expenses related to creating manufacturing efficiencies, in calculating our non-GAAP measures. We incurred expenses in connection with these initiatives which we would not have otherwise incurred in periods presented as part of our continuing operations. We expect to incur related expenses for the next six to nine months.

Stock-based Compensation Expense. We have excluded the effect of stock-based compensation expense in calculating our non-GAAP measures. We record non-cash compensation expense related to grants of options for executives, employees and consultants, and grants of common stock to our board of directors and our CEO. Depending upon the size, timing and the terms of the grants, the non-cash compensation expense may vary significantly but will recur in future periods. Adjusted EBITDA for the nine months ended September 30, 2021 included stock-based compensation expense of $0.4 million related to the departure and replacement of our chief executive officer. This expense is the only amount included in Stock-based Compensation Expense in calculating Adjusted Diluted EPS.

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CONTACT: Investor Contact: Greg Chodaczek 347-620-7010 investor@korumedical.com