KORU Medical Systems Announces 2020 Second Quarter Financial Results

Nachrichtenquelle: Business Wire (engl.)
04.08.2020, 23:34  |  123   |   |   

Repro Med Systems, Inc. dba KORU Medical Systems (NASDAQ: KRMD) (“KORU Medical” or the “Company”) today announced financial results for the second quarter ended June 30, 2020 (“Q2 2020”).

“We reported a strong Q2 2020, highlighted by a quarterly net sales record of $7.7 million,” said Don Pettigrew, President and CEO. “During the second quarter, we completed a successful public offering, settled our outstanding litigation with our competitor, were added to the broad market Russell 3000 Index, the Russell 2000 Index, and Russell Microcap Index, and continued to execute against our long-term growth objectives, including success with our strategy to broaden our pharmaceutical industry relationships and pursue clinical trial opportunities. I am extremely proud of the entire KORU Medical team for navigating us through the COVID-19 pandemic and embracing their designation as essential workers supporting the thousands of chronically ill patients who rely on our products.

“We believe that the awareness and diagnosis of Primary Immunodeficiency Diseases and Chronic Inflammatory Demyelinating Polyneuropathy - our primary end markets - is continuing to increase. We believe that COVID-19-related health concerns are driving the ongoing shift from hospital and clinic-based IVIg treatments to home-based subcutaneous Ig therapy, and that the acceleration of this trend is supporting the adoption of KORU Medical’s mechanical, easy-to-use Freedom Integrated Infusion System which allows patients with immune diseases and other chronic conditions to self-administer their Ig drug therapy at home. The growing preference for at-home treatment is also, in our view, encouraging pharmaceutical companies to continue to develop subcutaneous Ig therapies and new drugs that can be administered at home.”

Q2 2020 Overview

Net sales increased 44.1% to $7.7 million in Q2 2020 from $5.3 million in last year’s second quarter, with growth in all product categories (pumps, needle sets, and tubing). We believe this growth was primarily driven by continued demand increases that included clinical trials, as well as increased purchasing to support the trend towards at-home infusion therapy and in response to the uncertainties created by COVID-19.

Gross profit in Q2 2020 rose 41.3% to $4.9 million from $3.5 million in Q2 2019, primarily due to increased sales volume. Gross margin was 63.7% in Q2 2020 as compared to 65.0% in Q2 2019, mostly due to an increase in overtime costs related to COVID-19 absenteeism. Gross margin was 65.4% when adjusted for overtime.

Selling, general & administrative expenses were $3.2 million, or 41.5% of net sales, compared to $2.1 million, or 38.3% of net sales in Q2 2019. The increase was due primarily to the impact of new hires in the second half of last year, severance, a bonus for employee service during the COVID-19 pandemic, increased consulting, distributor fees and other miscellaneous administrative costs, partially offset by lower trade show and travel expenses due to COVID-19 related travel restrictions.

Higher litigation costs in Q2 2020 consisted of a $2.2 million non-cash, stock-based expense associated with the negotiation of and entry into a litigation settlement agreement with a competitor in May 2020. The Company expects expenses related to the competitor litigation will discontinue because of the settlement. Litigation expenses in Q2 2019 were $1.1 million, attributable to the competitor litigation.

Net loss for Q2 2020 was $(1.1) million, or $(0.03) per share, and included the one-time, non-cash litigation settlement expense of $2.2 million. Net income in Q2 2019 was $0.1 million, or $0.00 per share.

Q2 2020 Adjusted EBITDA rose 18.1% to $1.8 million from Adjusted EBITDA of $1.5 million in Q2 2019. Adjusted EBITDA excludes from net income: tax expense, depreciation and amortization, interest income, net, discontinued product expense, litigation costs that consisted of a $2.2 million non-cash, stock-based settlement expense, manufacturing initiative expenses, and stock option expense.

Balance Sheet, Liquidity Initiatives and Credit

Cash and equivalents as of June 30, 2020 totaled $38.1 million, a $32.2 million increase from December 31, 2019. Substantially all of the increase was due to the $26.5 million of net proceeds from the recent capital raise and a $3.5 million draw against the Company’s line of credit.

“This fresh capital allows us to fund our growth initiatives, including commercial expansion, increased clinical trial participation, gross margin enhancement, and new product innovation,” concluded Mr. Pettigrew.

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, August 5, 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,” “should,” “believe” and “in our view.” 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, 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, as amended, and our most recent Quarterly Report on Form 10-Q for the quarter ended March 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. In addition, there are risks and uncertainties with respect to the impact of COVID-19 on our supply chain, operations, and financial condition. All information provided in this release and in the attachments is as of August 4, 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

 

 

 

 

 

 

 

June 30,
2020

 

December 31,

 

 

 

(Unaudited)

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

38,129,349

 

$

5,870,929

 

Accounts receivable less allowance for doubtful accounts of $32,645 at
June 30, 2020 and December 31, 2019

 

 

2,965,902

 

 

3,234,521

 

Inventory

 

 

3,667,288

 

 

2,388,477

 

Prepaid expenses

 

 

543,482

 

 

387,396

 

TOTAL CURRENT ASSETS

 

 

45,306,021

 

 

11,881,323

 

Property and equipment, net

 

 

818,064

 

 

611,846

 

Patents, net of accumulated amortization of $319,120 and $288,967 at
June 30, 2020 and December 31, 2019, respectively

 

 

926,504

 

 

807,135

 

Right of use assets, net

 

 

306,101

 

 

373,734

 

Deferred tax asset

 

 

334,011

 

 

188,241

 

Other assets

 

 

19,812

 

 

19,582

 

TOTAL ASSETS

 

$

47,710,513

 

$

13,881,861

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Line of credit payable

 

$

3,500,000

 

$

 

Accounts payable

 

 

920,006

 

 

572,656

 

Accrued expenses

 

 

2,686,200

 

 

1,296,612

 

Accrued payroll and related taxes

 

 

523,537

 

 

190,265

 

Accrued tax liability

 

 

523,190

 

 

204,572

 

Finance lease liability - current

 

 

3,195

 

 

5,296

 

Operating lease liability - current

 

 

139,618

 

 

136,888

 

TOTAL CURRENT LIABILITIES

 

 

8,295,746

 

 

2,406,289

 

Finance lease liability, net of current portion

 

 

1,030

 

 

2,646

 

Operating lease liability, net of current portion

 

 

166,483

 

 

236,846

 

TOTAL LIABILITIES

 

 

8,463,259

 

 

2,645,781

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Common stock, $0.01 par value; 75,000,000 shares authorized,
46,640,120 and 42,239,788 shares issued, 43,902,889 and 39,502,557
shares outstanding at June 30, 2020 and December 31, 2019, respectively

 

 

466,401

 

 

422,398

 

Additional paid-in capital

 

 

34,886,850

 

 

6,293,069

 

Retained earnings

 

 

4,238,207

 

 

4,864,817

 

 

 

 

39,591,458

 

 

11,580,284

 

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

 

 

(344,204

)

 

(344,204

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

39,247,254

 

 

11,236,080

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

47,710,513

 

$

13,881,861

 

REPRO MED SYSTEMS, INC.

STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the
Three Months Ended

 

For the
Six Months Ended

 

 

 

June 30,

 

June 30,

 

 

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

7,708,904

 

$

5,348,812

 

$

14,038,913

 

$

10,323,090

 

Cost of goods sold

 

 

2,799,024

 

 

1,873,148

 

 

5,340,823

 

 

3,799,472

 

Gross Profit

 

 

4,909,880

 

 

3,475,664

 

 

8,698,090

 

 

6,523,618

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

3,201,831

 

 

2,050,435

 

 

5,964,811

 

 

4,535,303

 

Litigation

 

 

2,346,914

 

 

1,124,947

 

 

2,446,072

 

 

1,617,462

 

Research and development

 

 

298,196

 

 

178,235

 

 

554,221

 

 

280,194

 

Depreciation and amortization

 

 

94,940

 

 

86,169

 

 

182,164

 

 

169,820

 

Total Operating Expenses

 

 

5,941,881

 

 

3,439,786

 

 

9,147,268

 

 

6,602,779

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Operating (Loss)/Profit

 

 

(1,032,001

)

 

35,878

 

 

(449,178

)

 

(79,161

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Operating (Expense)/Income

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on currency exchange

 

 

(2,594

)

 

(1,235

)

 

(13,091

)

 

(10,925

)

(Loss)/Gain on disposal of fixed asset, net

 

 

(5,522

)

 

49,980

 

 

(5,522

)

 

49,740

 

Interest, net and other income, net

 

 

(5,002

)

 

18,243

 

 

14,028

 

 

35,723

 

TOTAL OTHER (EXPENSE)/INCOME

 

 

(13,118

)

 

66,988

 

 

(4,585

)

 

74,538

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(LOSS)/INCOME BEFORE TAXES

 

 

(1,045,119

)

 

102,866

 

 

(453,763

)

 

(4,623

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

 

(30,919

)

 

(24,683

)

 

(172,847

)

 

(2,584

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS)/INCOME

 

$

(1,076,038

)

$

78,183

 

$

(626,610

)

$

(7,207

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET (LOSS)/INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.03

)

$

0.00

 

$

(0.02

)

$

0.00

 

Diluted

 

$

(0.03

)

$

0.00

 

$

(0.02

)

$

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

40,361,924

 

 

38,353,000

 

 

40,018,559

 

 

38,279,718

 

Diluted

 

 

40,524,754

 

 

39,299,800

 

 

40,201,134

 

 

39,219,752

 

REPRO MED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

2019

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net Loss

 

$

(626,610

)

$

(7,207

)

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

 

 

 

 

 

 

 

Stock based compensation expense

 

 

784,821

 

 

529,538

 

Stock based litigation settlement expense

 

 

1,285,102

 

 

 

Depreciation and amortization

 

 

182,164

 

 

169,820

 

Deferred capital gain - building lease

 

 

 

 

(3,763

)

Deferred taxes

 

 

(145,770

)

 

66,494

 

Loss/(Gain) on disposal of fixed asset

 

 

5,522

 

 

(49,740

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Decrease/(Increase) in accounts receivable

 

 

268,619

 

 

(1,867,342

)

Increase in inventory

 

 

(1,278,811

)

 

(467,706

)

(Increase)/Decrease in prepaid expense and other assets

 

 

(156,316

)

 

44,874

 

Increase in accounts payable

 

 

347,350

 

 

76,882

 

Increase/(Decrease) in accrued payroll and related taxes

 

 

333,272

 

 

(249,730

)

Increase in accrued expense

 

 

1,389,588

 

 

346,181

 

Increase/(Decrease) in accrued tax liability

 

 

318,618

 

 

(72,210

)

NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES

 

 

2,707,549

 

 

(1,483,909

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Payments for capital expenditures

 

 

(363,750

)

 

(67,079

)

Payments for patents

 

 

(149,523

)

 

(136,182

)

Proceeds on disposal of fixed asset

 

 

 

 

217,821

 

Proceeds from certificate of deposit

 

 

 

 

1,517,927

 

NET CASH (USED IN)/PROVIDED BY INVESTING ACTIVITIES

 

 

(513,273

)

 

1,532,487

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Line of credit advance

 

 

3,500,000

 

 

 

Issuance of equity

 

 

26,567,861

 

 

24,700

 

Payment for cancelled shares

 

 

 

 

(2,820

)

Finance lease

 

 

(3,717

)

 

(2,069

)

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

30,064,144

 

 

19,811

 

 

 

 

 

 

 

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

 

 

32,258,420

 

 

68,389

 

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

5,870,929

 

 

3,738,803

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

38,129,349

 

$

3,807,192

 

 

 

 

 

 

 

 

 

Supplemental Information

 

 

 

 

 

 

 

Cash paid during the periods for:

 

 

 

 

 

 

 

Interest

 

$

13,554

 

$

233

 

Taxes

 

$

 

$

 

 

 

 

 

 

 

 

 

NON-CASH FINANCING AND INVESTING ACTIVITIES

 

 

 

 

 

 

 

Issuance of common stock as compensation

 

$

120,004

 

$

212,898

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

Six Months Ended

Reconciliation of GAAP Net (Loss)/Income

 

June 30,

 

 

June 30,

to Non-GAAP Adjusted EBITDA:

 

2020

 

 

2019

 

 

2020

 

2019

GAAP Net (Loss)/Income

 

$

(1,076,038

)

 

$

78,183

 

 

$

(626,610

)

$

(7,207

)

Tax Expense

 

 

30,919

 

 

 

24,683

 

 

 

172,847

 

 

2,584

 

Depreciation/Amortization

 

 

94,940

 

 

 

86,169

 

 

 

182,164

 

 

169,820

 

Interest Expense/(Income), Net

 

 

5,002

 

 

 

(18,243

)

 

 

(14,028

)

 

(35,723

)

Reorganization Charges

 

 

 

 

 

 

 

 

 

 

354,926

 

Discontinued Product Expenses

 

 

(31,581

)

 

 

 

 

 

77,977

 

 

 

Litigation*

 

 

2,346,914

 

 

 

1,124,947

 

 

 

2,446,072

 

 

1,617,462

 

Manufacturing Initiative Expenses

 

 

25,957

 

 

 

 

 

 

135,759

 

 

 

Stock Option Expense

 

 

363,851

 

 

 

194,765

 

 

 

664,817

 

 

316,640

 

Non-GAAP Adjusted EBITDA

 

$

1,759,964

 

 

$

1,490,504

 

 

$

3,038,998

 

$

2,418,502

 

 

*For the three and six months ended June 30, 2020, litigation costs consisted of a $2.2 million non-cash, stock-based settlement expense.

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