Business Wire | Nov 3, 2020 06:17PM EST

KORU Medical Systems Announces Financial Results for Third Quarter 2020

Nov. 03, 2020

CHESTER, N.Y.--(BUSINESS WIRE)--Nov. 03, 2020--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(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 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(r) 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 December 31, 30,

2020 2019

ASSETS



CURRENT ASSETS

Cash and cash equivalents $ 32,433,811 $ 5,870,929

Accounts receivable less allowance fordoubtful accounts of $24,676 and $32,645 at 3,736,596 3,234,521 September 30, 2020 and December 31, 2019, respectively

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 884,635 807,135 and December 31, 2019, respectively

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 414 2,646 portion

Operating lease liability, net of current 131,229 236,846 portion

TOTAL LIABILITIES 5,493,073 2,645,781

Commitments and contingencies

STOCKHOLDERS' EQUITY

Common stock, $0.01 par value; 75,000,000shares authorized, 46,671,807 and 42,239,788shares issued, 43,934,576 and 39,502,557 466,718 422,398 shares outstanding at September 30, 2020 andDecember 31, 2019, respectively

Additional paid-in capital 35,331,483 6,293,069

Treasury stock, 2,737,231 shares at September30, 2020 and December 31, 2019, respectively, (344,204 ) (344,204 )at cost

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 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 2,139,592 2,234,489 7,480,415 6,033,961 sold

Gross Profit 3,940,723 4,382,908 12,638,813 10,906,526



OPERATING EXPENSES

Selling,general and 3,075,169 2,441,381 9,039,980 6,976,684 administrative

Litigation 675 864,009 2,446,747 2,481,471

Research and 390,416 170,260 944,637 450,454 development

Depreciationand 115,637 82,774 297,801 252,594 amortization

TotalOperating 3,581,897 3,558,424 12,729,165 10,161,203 Expenses



Net Operating 358,826 824,484 (90,352 ) 745,323 Profit/(Loss)



Non-OperatingIncome/ (Expense)

Gain/(Loss) oncurrency 1,927 (9,358 ) (11,164 ) (20,283 )exchange

Gain ondisposal of 22,113 - 16,591 49,740 fixed assets, net

Interest 9,662 23,368 23,690 59,091 income, net

TOTAL OTHERINCOME/ 33,702 14,010 29,117 88,548 (EXPENSE)



INCOME/(LOSS)BEFORE INCOME 392,528 838,494 (61,235 ) 833,871 TAXES



Income Tax (143,353 ) (186,681 ) (316,200 ) (189,265 )Expense



NET INCOME/ $ 249,175 $ 651,813 $ (377,435 ) $ 644,606 (LOSS)



NET INCOME/(LOSS) PER SHARE



Basic $ 0.01 $ 0.02 $ (0.01 ) $ 0.02

Diluted $ 0.01 $ 0.02 $ (0.01 ) $ 0.02



WEIGHTEDAVERAGE NUMBEROF COMMON SHARESOUTSTANDING



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

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)/incometo 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 (457,330 ) (206,560 )assets

Increase in accounts payable 790,414 421,479

Increase/(Decrease) in accrued payroll and 249,879 (310,355) related taxes

Increase in accrued expenses 1,754,970 490,053

Increase/(Decrease) in accrued tax 158,586 (16,608) liability

NET CASH PROVIDED BY/(USED IN) OPERATING 968,437 (502,014) ACTIVITIES



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 25,000 217,821 equipment

Proceeds from certificate of deposit - 1,517,927

NET CASH (USED IN)/PROVIDED BY INVESTING (1,007,539 ) 1,389,281 ACTIVITIES



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 5,870,929 3,738,803 PERIOD

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.

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