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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
or
For the transition period from ________ to ________.
Commission File Number:
(Exact name of registrant as specified in its charter)
|
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| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
|
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| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|
|
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|
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X]
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
[X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer [_] | Accelerated filer [_] | |
|
|
Smaller reporting company
|
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|
Emerging growth company
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [_]
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act). [_] Yes
[X]
As of May 7, 2025, shares of common stock, $ par value per share, were outstanding, which excludes shares of treasury stock.
KORU MEDICAL SYSTEMS, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025
TABLE OF CONTENTS
| PAGE | ||
| PART I. FINANCIAL INFORMATION | ||
| ITEM 1. | Financial Statements (Unaudited) | 3 |
| Balance Sheets as of March 31, 2025 (Unaudited) and December 31, 2024 | 3 | |
| Statements of Operations (Unaudited) for the three months ended March 31, 2025 and 2024 | 4 | |
| Statements of Cash Flows (Unaudited) for the three months ended March 31, 2025 and 2024 | 5 | |
| Statements of Stockholders' Equity (Unaudited) for the three months ended March 31, 2025 and 2024 | 6 | |
| Notes to Financial Statements | 7 | |
| ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14 |
| ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 17 |
| ITEM 4. | Controls and Procedures | 17 |
| PART II. OTHER INFORMATION | ||
| ITEM 1A. | Risk Factors | 18 |
| ITEM 6. | Exhibits | 18 |
| Signatures | 19 | |
- 2 -
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
KORU MEDICAL SYSTEMS, INC.
BALANCE SHEETS
| March 31, | December 31, | ||||||
| 2025 | 2024 | ||||||
| (UNAUDITED) | |||||||
| ASSETS | |||||||
| CURRENT ASSETS | |||||||
| Cash and cash equivalents | $ |
|
$ |
|
|||
| Accounts receivable less allowance for credit losses of $0 as of March 31, 2025 and December 31, 2024 |
|
|
|||||
| Inventory |
|
|
|||||
| Other receivables |
|
|
|||||
| Prepaid expenses |
|
|
|||||
| TOTAL CURRENT ASSETS |
|
|
|||||
| Property and equipment, net |
|
|
|||||
| Intangible assets, net of accumulated amortization of $475,891 and $458,538 as of March 31, 2025 and December 31, 2024, respectively |
|
|
|||||
| Operating lease right-of-use assets |
|
|
|||||
| Other assets |
|
|
|||||
| TOTAL ASSETS | $ |
|
$ |
|
|||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| CURRENT LIABILITIES | |||||||
| Accounts payable | $ |
|
$ |
|
|||
| Accrued expenses |
|
|
|||||
| Note payable |
|
|
|||||
| Other liabilities |
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|
|||||
| Accrued payroll and related taxes |
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|
|||||
| Financing lease liability – current |
|
|
|||||
| Operating lease liability – current |
|
|
|||||
| TOTAL CURRENT LIABILITIES |
|
|
|||||
| Financing lease liability, net of current portion |
|
|
|||||
| Operating lease liability, net of current portion |
|
|
|||||
| TOTAL LIABILITIES |
|
|
|||||
| STOCKHOLDERS’ EQUITY | |||||||
| Common stock, $ par value, shares authorized, and shares issued and shares outstanding as of March 31, 2025, and December 31, 2024, respectively |
|
|
|||||
| Additional paid-in capital |
|
|
|||||
| Treasury stock, and shares as of March 31, 2025 and December 31, 2024, respectively, at cost |
(
|
) |
(
|
) | |||
| Accumulated deficit |
(
|
) |
(
|
) | |||
| TOTAL STOCKHOLDERS’ EQUITY |
|
|
|||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ |
|
$ |
|
|||
The accompanying notes are an integral part of these financial statements.
- 3 -
KORU MEDICAL SYSTEMS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
| Three Months Ended | |||||||
| March 31, | |||||||
| 2025 | 2024 | ||||||
| NET REVENUES | $ |
|
$ |
|
|||
| Cost of goods sold |
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|||||
| Gross Profit |
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|||||
| OPERATING EXPENSES | |||||||
| Selling, general and administrative |
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|||||
| Research and development |
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| Depreciation and amortization |
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|||||
| Total Operating Expenses |
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|||||
| Net Operating Loss |
(
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) |
(
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) | |||
| Non-Operating Income/(Expense) | |||||||
| Gain/(Loss) on currency exchange |
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(
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) | ||||
| Loss on disposal of fixed assets, net |
(
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) | |||||
| Interest income, net |
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|||||
| TOTAL OTHER INCOME |
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|
|||||
| LOSS BEFORE INCOME TAXES |
(
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) |
(
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) | |||
| Income Tax Benefit | |||||||
| NET LOSS | $ |
(
|
) | $ |
(
|
) | |
| NET LOSS PER SHARE | |||||||
| Basic & Diluted | $ | ( | ) | $ | ( | ) | |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | |||||||
| Basic & Diluted | |||||||
The accompanying notes are an integral part of these financial statements.
- 4 -
KORU MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
For the
Three Months Ended |
|||||||
| March 31, | |||||||
| 2025 | 2024 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
| Net Loss | $ |
(
|
) | $ |
(
|
) | |
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||
| Stock-based compensation expense and warrant expense |
|
|
|||||
| Depreciation and amortization |
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|||||
| Loss on disposal of fixed assets |
|
||||||
| Non-cash lease adjustments |
(
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) | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable |
(
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) |
(
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) | |||
| Inventory |
(
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) |
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||||
| Prepaid expenses and other assets |
(
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|||||
| Other liabilities |
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(
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) | ||||
| Accounts payable |
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|||||
| Accrued payroll and related taxes |
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|||||
| Accrued expenses |
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(
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) | ||||
| NET CASH USED IN OPERATING ACTIVITIES |
(
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) |
(
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) | |||
| CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
| Purchases of property and equipment |
(
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) |
(
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) | |||
| Purchases of intangible assets |
(
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) |
(
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) | |||
| NET CASH USED IN INVESTING ACTIVITIES |
(
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) |
(
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) | |||
| CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
| Payments on insurance finance indebtedness |
(
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) |
(
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) | |||
| Payments on finance lease liability |
(
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) |
(
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) | |||
| NET CASH USED IN FINANCING ACTIVITIES |
(
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) |
(
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) | |||
| NET DECREASE IN CASH AND CASH EQUIVALENTS |
(
|
) |
(
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) | |||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
|
|||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ |
|
$ |
|
|||
| Supplemental Information | |||||||
| Cash paid during the periods for: | |||||||
| Interest | $ |
|
$ |
|
|||
| Income taxes | $ | $ | |||||
The accompanying notes are an integral part of these financial statements.
- 5 -
KORU MEDICAL SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
Three Months Ended March 31, 2025
| Additional | Total | |||||||||||||||||
| Common Stock | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||
| Shares | Amount | Capital | Deficit | Stock | Equity | |||||||||||||
| BALANCE, DECEMBER 31, 2024 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||
| Issuance of stock-based compensation |
|
|
|
|
||||||||||||||
| Compensation expense related to stock options | — |
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|
|||||||||||||||
| Compensation related to restricted stock | — |
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|
|||||||||||||||
| Issuance of warrants | — |
|
|
|||||||||||||||
| Net loss | — |
(
|
) |
(
|
) | |||||||||||||
| BALANCE, MARCH 31, 2025 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||
Three Months Ended March 31, 2024
| Additional | Total | |||||||||||||||||
| Common Stock | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||
| Shares | Amount | Capital | Deficit | Stock | Equity | |||||||||||||
| BALANCE, DECEMBER 31, 2023 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||
| Issuance of stock-based compensation |
|
|
|
|
||||||||||||||
| Compensation expense related to stock options | — |
|
|
|||||||||||||||
| Compensation related to restricted stock | — |
|
|
|||||||||||||||
| Issuance of warrants | — |
|
|
|||||||||||||||
| Net loss | — |
(
|
) |
(
|
) | |||||||||||||
| BALANCE, MARCH 31, 2024 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | $ |
|
|||||
- 6 -
KORU MEDICAL SYSTEMS, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
KORU MEDICAL SYSTEMS, INC. (the “Company,” “KORU Medical,” “KORU,” “we,” “us” or “our”) develops, manufactures and commercializes innovative and patient-centric large volume subcutaneous infusion solutions primarily for the subcutaneous drug delivery market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international standards for quality system management. The Company operates as one segment.
BASIS OF PRESENTATION
The accompanying financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2024 (“Annual Report”). In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in the audited financial statements of the Company. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal, recurring nature. The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods.
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the
Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. As of March
31, 2025 the Company held cash and cash-equivalents of $
PATENTS
Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents.
The Company maintains an omnibus equity incentive plan under which it grants options and other equity incentive awards to certain executives, key employees and consultants, as well as shares of common stock to non-employee directors.
The fair value of each stock option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period.
Shares of stock granted for director fees are recorded at the fair value of the shares at the grant date.
Restricted stock awards are equity classified and measured at the fair market value of the underlying stock at the grant date. The fair value of restricted stock awards vesting at certain market capitalization thresholds were estimated on the date of grant using the Brownian Motion Monte Carlo lattice model. The fair value of restricted stock awards with time-based vesting were estimated on the date of grant at the current stock price. The fair value of restricted stock awards vesting at certain annual sales growth thresholds were estimated as of the date of Board acknowledgement of the achievement, at the current stock price. We recognize restricted stock expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur.
Performance share units (“PSUs”) are equity classified and measured at the fair market value of the underlying stock at the grant date.
The Company computes net loss per share using the weighted-average number of common shares outstanding during the period. Basic and diluted net loss per share are the same because the conversion, exercise or issuance of all potential common stock equivalents, which comprise the Company’s outstanding common stock options, unvested restricted stock units, performance stock units and warrants, would be anti-dilutive, due to the reporting of a net loss for each of the periods in the accompanying statements of operations.
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS
The preparation of financial statements in conformity with United States generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to asset lives, deferred tax valuation allowances, inventory valuation, expected credit losses, and customer rebate and incentive accruals. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the entire 2025 fiscal year.
REVENUE RECOGNITION
Our revenues are derived from three business sources: (i) domestic core (which consists of US and Canada), (ii) international core, and (iii) pharma services and clinical trials. Our domestic and international core revenues consist of sales of our syringe drivers, tubing and needles (“Product Revenue”) for the delivery of subcutaneous drugs that are FDA cleared for use with the KORU Medical infusion system, with the primary delivery for immunoglobulin to treat Primary Immunodeficiency Diseases (“PIDD”) and Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”). Pharma services and clinical trials consist of Product Revenue for feasibility/clinical trials (pre-clinical studies, Phase I, Phase II, Phase III) of biopharmaceutical companies in the drug development process as well as non-recurring engineering services (“NRE”) revenues (including testing and registration services) received from biopharmaceutical companies to ready or customize the FREEDOM TM System for clinical and commercial use across multiple drug categories.
For Product Revenue, we recognize revenues when shipment occurs, and at which point the customer obtains control and ownership of the goods. Shipping costs generally are billed to customers and are included in Product Revenue.
The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred.
Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. In addition, rebates are provided to customers for meeting growth targets. Provisions for both distributor pricing and customer growth rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it is probable the growth target will be achieved.
We recognize NRE revenue under an input method, which recognizes revenue on the basis of our efforts or inputs (for example, resources consumed, labor hours expended, costs incurred, or time elapsed) to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation (i.e. completion milestone). The input method that we use is based on costs incurred.
Contracts are often modified to account for changes
in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes existing,
enforceable rights and obligations. Generally, when contract modifications create new performance obligations, the modification is considered
to be a separate contract and revenue is recognized prospectively. When contract modifications change existing performance obligations,
the impact on the existing transaction price and measure of progress for the performance obligation to which it relates is generally recognized
as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. Contract assets primarily
represent revenue earnings over time that are not yet billable based on the terms of the contracts. Contract liabilities (i.e., deferred
revenue) consist of fees invoiced or paid by the Company’s customers for which the associated performance obligations have not been
satisfied and revenue has not been recognized based on the Company’s revenue recognition criteria described above. The Company has
recognized a contact asset, which is included in other receivables in the accompanying balance sheet, of $
The following table summarizes net revenues by geography for the three months ended March 31, 2025, and 2024.
| Three Months Ended March 31, | |||||||
| 2025 | 2024 | ||||||
| Revenues | |||||||
| Domestic | $ |
|
$ |
|
|||
| International |
|
|
|||||
| Total | $ |
|
$ |
|
|||
ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED
The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value. The Company did not record any impairment losses for the quarter ended March 31, 2025 nor March 31, 2024.
NOTE 2 — PROPERTY AND EQUIPMENT
Property and equipment consists of the following at:
| March 31, 2025 | December 31, 2024 | ||||||
| Furniture and office equipment | $ |
|
$ |
|
|||
| Leasehold improvements |
|
|
|||||
| Manufacturing equipment and tooling |
|
|
|||||
| Total property and equipment |
|
|
|||||
| Less: accumulated depreciation and amortization |
(
|
) |
(
|
) | |||
| Property and equipment, net | $ |
|
$ |
|
|||
The Company maintains three equity incentive plans: the 2015 Stock Option Plan, as amended (the “2015 Plan”), the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”), and the 2024 Omnibus Equity Incentive Plan (the “2024 Plan”). All equity awards issued to employees, consultants, and non-employee directors on or after May 9, 2024 are issued from the 2024 Plan. The Company has also issued restricted stock and stock options as employment inducement awards outside of these plans to its Chief Executive Officer and former Chief Commercial Officer, respectively.
The 2015 Plan provides for the grant of incentive stock options and nonqualified stock options. As of March 31, 2025, there were shares reserved for outstanding awards under the 2015 Plan.
The 2021 Plan provides for the grant of incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units, performance share units, stock appreciation rights, and/or other equity-based awards to employees, consultants and directors. As of March 31, 2025, there were shares reserved for outstanding awards under the 2021 Plan.
The 2024 Plan provides for the grant of incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units, performance share units, stock appreciation rights and/or other equity-based awards to employees, consultants and directors. Awards previously made under the 2015 Plan and the 2021 Plan that are forfeited or cancelled after May 9, 2024 will be available for issuance under the 2024 Plan. As of March 31, 2025, there were shares reserved for outstanding awards and shares available for issuance under the 2024 Plan.
Each non-employee director of the Company (other than
the Chairman of the Board) is eligible to receive $
annually,
Restricted stock units (“RSUs”) and performance share units (“PSUs”) are equity classified and measured at the fair value of the underlying stock at the grant date.
Shares of stock granted for non-employee director fees are recorded at the fair value of the shares at the grant date.
Time-Vesting Stock Options
| Shares |
Weighted
Average Exercise Price |
|||||
| Outstanding at January 1 |
|
$ |
|
|||
| Granted | ||||||
| Exercised | ||||||
| Forfeited | ||||||
| Outstanding at March 31 |
|
$ |
|
|||
| Options exercisable at March 31 |
|
$ |
|
|||
Total stock-based compensation expense for time-vested stock options, included
in operating expense in the accompanying statement of operations, was $
| Range of Exercise Price |
Number
Outstanding |
Weighted
Average Remaining Contractual Life |
Weighted
Average Exercise Price |
Number
Exercisable |
Weighted
Average Exercise Price |
||||||||
| $2.08-$3.98 |
|
years | $ |
|
|
$ |
|
||||||
As of March 31, 2025, there was $ of total unrecognized compensation cost related to unvested share-based stock compensation awards granted under the Plans. That cost is expected to be recognized over a weighted-average period of 25 months.
Performance-Vesting Stock Options
| Shares |
Weighted
Average Grant-Date Fair Value |
|||||
| Unvested at January 1 |
|
$ |
|
|||
| Granted |
|
|
||||
| Vested |
|
|
||||
| Forfeited/canceled |
|
|
||||
| Unvested at December 31 |
|
$ |
|
|||
Total stock-based compensation expense for performance-vesting stock options
was $
for the three months ended March 31, 2025.
As of March 31, 2025, there was $
Restricted Stock Awards, RSUs, and PSUs
The following table summarizes the activities for our unvested restricted stock awards, RSUs, and PSUs for the three months ended March 31, 2025.
| Shares |
Weighted
Average Grant-Date Fair Value |
|||||
| Unvested at January 1 |
|
$ |
|
|||
| Granted |
|
$ |
|
|||
| Vested |
(
|
) | $ |
|
||
| Forfeited/canceled | ||||||
| Unvested at March 31 |
|
$ |
|
|||
Total stock-based compensation expense for restricted stock awards, RSUs, and PSUs, included in operating expense in the accompanying statement of operations, was $ for the three months ended March 31, 2025.
As of March 31, 2025, there was $
NOTE 4 — DEBT OBLIGATIONS
On March 8, 2024, the Company entered into a loan
and security agreement with a large domestic banking institution, as lender, providing for a $
On August 1, 2024, the Company renewed its commercial insurance premium
finance and security agreement with its insurance provider for the insurance period covering July 1, 2024 through June 30, 2025. As of
March 31, 2025, the aggregate principal amount of the note was $
NOTE 5 — LEASES
We have finance and operating leases for our corporate office, vehicles, and certain office and computer equipment.
The components of lease expense were as follows:
| Three Months Ended | |||||||
| March 31, | |||||||
| 2025 | 2024 | ||||||
| Operating lease cost | $ |
|
$ |
|
|||
| Short-term lease cost |
|
|
|||||
| Total lease cost | $ |
|
$ |
|
|||
| Finance lease cost: | |||||||
| Amortization of right-of-use assets | $ |
|
$ |
|
|||
| Interest on lease liabilities |
|
|
|||||
| Total finance lease cost | $ |
|
$ |
|
|||
Supplemental cash flow information related to leases was as follows:
| Three Months Ended | |||||||
| March 31, | |||||||
| 2025 | 2024 | ||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||
| Operating cash flows from operating leases | $ |
|
$ |
|
|||
| Financing cash flows from finance leases |
|
|
|||||
|
March 31,
2025 |
December 31,
2024 |
||||
| Weighted Average Remaining Lease Term | |||||
| Operating leases | Years | Years | |||
| Finance leases | Years | Years | |||
| Weighted Average Discount Rate | |||||
| Operating leases |
|
|
|||
| Finance leases |
|
|
Maturities of lease liabilities are as follows:
| Three Months Ending March 31, | Operating Leases | Finance Leases | |||||
| Remainder of 2025 | $ |
|
$ |
|
|||
| 2026 |
|
|
|||||
| 2027 |
|
|
|||||
| 2028 |
|
|
|||||
| 2029 |
|
||||||
| Thereafter |
|
||||||
| Total undiscounted lease payments |
|
|
|||||
| Less: imputed interest |
(
|
) |
(
|
) | |||
| Total lease liabilities | $ |
|
$ |
|
|||
NOTE 6 — INCOME TAXES
For interim income tax reporting, the Company estimates
its annual effective tax rate and applies it to fiscal year-to-date pretax loss, excluding unusual or infrequently occurring discrete
items. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded. The Company reported an income tax expense
of
for the three months ended March 31, 2025, and 2024, which is lower than the statutory tax rate at
We evaluate our deferred tax assets to determine if they are more likely than not to be realized by assessing both positive and negative evidence in accordance with ASC Topic 740, Income Taxes. After considering our cumulative pretax loss (the three-year period ending with the current year), as well as analyzing all available evidence, we maintained the full valuation allowance against our net deferred tax assets. As we continue to assess the realizability of our deferred tax assets, reported pretax income and new evidence may result in a partial or full reduction of the valuation allowance in future periods.
The Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. Income tax returns for years prior to fiscal 2021 are no longer subject to examination by tax authorities. The Company was previously under audit for tax year 2022 but has since received notification from the Internal Revenue Services that the Company is no longer under audit.
NOTE 7 — COMMITMENTS AND CONTINGENCIES
LEGAL PROCEEDINGS
The Company has been and may again become involved in legal proceedings, claims and litigation arising in the ordinary course of business. The Company is not presently a party to any litigation or other legal proceeding that is believed to be material to its financial condition.
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NOTE 8 — SUBSEQUENT EVENTS
Newly enacted tariffs and other trade restrictions have recently been imposed by the United States and other countries around the world. It is unclear at this time what impact, if any, these actions may have on the Company’s business.
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PART I — ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains, and our officers and representatives may from time to time make, certain “forward-looking” statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) and information relating to us that are based on the beliefs of the management, as well as assumptions made and information currently available. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control.
Our actual results may vary materially from the forward-looking statements made in this report due to important factors such as uncertainties associated with inflation, tariffs, war and other geopolitical conflicts, customer ordering patterns, availability and costs of raw materials and labor and our ability to recover such costs, future operating results, growth of new patient starts and the Ig market, our compliance with Food and Drug Administration and foreign authority regulations and the outcome of regulatory audits, 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 our research and development effort, expanding the market of FREEDOM TM System, demand in the SCIg market, availability of sufficient capital if or when needed, dependence on key personnel, and the impact of recent accounting pronouncements, as well as those risks and uncertainties described in our Annual Report on Form 10-K for the year ended December 31, 2024. When used in this report, the words “estimate,” “project,” “believe,” “may,” “will,” “anticipate,” “intend,” “expect” and similar expressions are intended to identify forward-looking statements, which include, without limitation, statements regarding need for additional financing. Such statements reflect current views with respect to future events based on currently available information and are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company does not undertake any obligation to release publicly any revision to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
Throughout this report, the “Company,” “KORU Medical,” “we,” “us” or “our” refers to KORU Medical Systems, Inc.
OVERVIEW
The Company develops, manufactures and markets proprietary portable and innovative medical devices primarily for the subcutaneous drug delivery market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international regulations and standards for quality system management.
Our revenues derive from three business sources: (i) domestic core (which consists of US and Canada), (ii) international core, and (iii) pharma services and clinical trials. Our domestic core and international core revenues consist of sales of our products for the delivery of subcutaneous drugs that are FDA cleared for use with the FREEDOM TM System, with the primary delivery for immunoglobulin to treat Primary Immunodeficiency Diseases (“PIDD”) and Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”). Pharma services and clinical trials revenues consist of product revenues from our infusion system (syringe drivers, tubing and needles) for feasibility/clinical trials (pre-clinical studies, Phase I, Phase II, Phase III) of biopharmaceutical companies in the drug development process as well as non-recurring engineering services revenues (“NRE”) received from biopharmaceutical companies to ready or customize the FREEDOM TM System for clinical and commercial use.
The Company ended the first quarter of 2025 with $9.6 million in net revenues, a 17.5% increase compared to $8.2 million in the same period last year. Revenues were driven by growth in our core domestic and international business of 16.4% and 35.6%, respectively, partially offset with a decrease of 38.6% in our pharma services and clinical trials business.
Gross profit for the first quarter of 2025 was $6.0 million, an 18.5% increase compared to $5.1 million in the same period last year, primarily driven by additional revenue from volume growth in our core domestic and international businesses. Gross margin was 62.8% for the three months ended March 31, 2025, an increase from 62.3% in the prior year period. We define gross margin as gross profit stated as a percentage of net revenues.
Operating expenses for the first quarter of 2025 were $7.3 million, compared to $7.1 million for the same period last year, driven by an increase of $0.6 million in selling, general, and administrative expenses offset by a decrease of $0.4 million in research and development expenses.
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Current uncertainties about increases in tariffs on imported products may have an adverse effect on our Company. In April 2025, the U.S. government announced a baseline tariff of 10% on products from all countries and an additional individualized reciprocal on the countries with which the United States has the largest trade deficits. We are evaluating the potential impacts of these tariffs, as well as our ability to mitigate their related impacts. We do not currently expect these announced tariffs to have a material affect on our revenues and cost of goods.
RESULTS OF OPERATIONS
Three months ended March 31, 2025, compared to March 31, 2024
Net Revenues
The following table summarizes our net revenues for the three months ended March 31, 2025, and 2024:
| Three Months Ended March 31, | Change from Prior Year | % of Net Revenues | ||||||||||||||
| 2025 | 2024 | $ | % | 2025 | 2024 | |||||||||||
| Net Revenues | ||||||||||||||||
| Domestic Core | $ | 6,927,964 | $ | 5,953,865 | $ | 974,099 | 16.4% | 71.9% | 72.6% | |||||||
| International Core | 2,428,662 | 1,790,483 | 638,179 | 35.6% | 25.2% | 21.8% | ||||||||||
| Total Core | 9,356,626 | 7,744,348 | 1,612,278 | 20.8% | 97.1% | 94.5% | ||||||||||
| Pharma Services and Clinical Trials | 278,449 | 453,450 | (175,001 | ) | (38.6% | ) | 2.9% | 5.5% | ||||||||
| Total | $ | 9,635,075 | $ | 8,197,798 | $ | 1,437,277 | 17.5% | 100% | 100% | |||||||
Total net revenues increased $1.4 million, or 17.5%, to $9.6 million for the three months ended March 31, 2025, as compared to $8.2 million in the prior year period. Domestic core revenues were $6.9 million, an increase of 16.4% over the prior year period, primarily due to higher pump and consumable volumes, driven by new patient starts and market share gains within new and existing accounts, supported by a strong underlying SCIg market. International core revenues were $2.4 million, an increase of 35.6% over the prior year period, primarily due to higher pump and consumable volumes, driven by geographical expansion and a tender win with an Ig pharma partner. International growth was impacted by approximately $0.4 million of distributor stocking to support expansion, compared to $0.3 million of distributor stocking in the prior year as a result of the BSI regulatory review process. Pharma services and clinical trials net revenues were $0.3 million, a decrease of 38.6% over the prior year period, primarily due to lower clinical trial revenue.
Gross Profit
Our gross profit for the three months ended March 31, 2025 and 2024 is as follows:
| Three Months Ended March 31, | Change from Prior Year | |||||||||||
| 2025 | 2024 | $ | % | |||||||||
| Gross Profit | $ | 6,046,335 | $ | 5,103,298 | $ | 943,037 | 18.5% | |||||
| Gross Margin | 62.8% | 62.3% | ||||||||||
Gross profit increased $0.9 million, or 18.5%, to $6.0 million in the three months ended March 31, 2025, as compared to $5.1 million in the prior year period. Gross margin increased to 62.8% in the three months ended March 31, 2025, as compared to 62.3% in the prior year period. The increase in gross margin was primarily driven by favorable changes in product revenue mix.
Operating Expenses
Our selling, general and administrative, research and development and depreciation and amortization expenses for the three months ended March 31, 2025 and 2024 are as follows:
| Three Months Ended March 31, | Change from Prior Year | |||||||||||
| 2025 | 2024 | $ | % | |||||||||
| Selling, general and administrative | $ | 5,959,374 | $ | 5,357,620 | $ | 601,754 | 11.2% | |||||
| Research and development | 1,114,609 | 1,475,674 | (361,065 | ) | (24.5% | ) | ||||||
| Depreciation and amortization | 217,357 | 231,369 | (14,013 | ) | (6.1% | ) | ||||||
| Total Operating Expenses | $ | 7,291,340 | $ | 7,064,664 | $ | 226,676 | 3.2% | |||||
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Selling, general and administrative expenses increased $0.6 million, or 11.2%, to $6.0 million during the three months ended March 31, 2025, as compared to $5.4 million in the prior year period. The increase in selling, general and administrative expenses was primarily driven by increases in compensation-related expenses related to product development, higher stock compensation expenses, and legal fees, partially offset by lower severance, recruiting, and consulting expenses.
Research and development expenses decreased $0.4 million, or 24.5%, to $1.1 million during the three months ended March 31, 2025, as compared to $1.5 million in the prior year period, primarily due to timing of project spend related to our new product development.
Depreciation and amortization expense remained flat at $0.2 million during the three months ended March 31, 2024, as compared to $0.2 million in the prior year period, primarily driven by timing of projects and related capital spending.
Net Loss
| Three Months Ended March 31, | Change from Prior Year | |||||||||||
| 2025 | 2024 | $ | % | |||||||||
| Net Loss | $ | (1,166,237 | ) | $ | (1,935,958 | ) | $ | 769,721 | 39.8% | |||
Our net loss decreased $0.8 million in the three months ended March 31, 2025, as compared to the prior year period, primarily driven by an increase in gross profit of $0.9 million, driven by increased revenues, partially offset by operating expense increases of $0.2 million.
LIQUIDITY AND CAPITAL RESOURCES
Our principal source of liquidity is our cash on hand of $8.7 million as of March 31, 2025. Our principal source of operating cash inflows is from sales of our products and NRE. Our principal cash outflows relate to the purchase and production of inventory, funding of research and development, and selling, general and administrative expenses. To develop new products, support future growth, achieve operating efficiencies, and maintain product quality, we are continuing to invest in research and development and manufacturing equipment.
Our inventory position was $3.3 million at March 31, 2025, which reflects an increase of $0.5 million from December 31, 2024.
We expect that our cash on hand and cash flows from operations will be sufficient to meet our requirements at least through the next twelve months. Continued execution on our longer-term strategic plan may require the Company to draw on our credit facility, take on additional debt, raise capital through issuance of equity, or utilize a combination of the above. Our future capital requirements may vary from those currently planned and will depend on many factors, including our rate of sales growth, the timing and extent of spending on various strategic initiatives including research and development, our international expansion, the timing of new product introductions, market acceptance of our solutions, and overall economic conditions including inflation and the potential impact of global supply imbalances on the global financial markets. To the extent that current and anticipated future sources of liquidity are or are expected to be insufficient to fund our future business activities and requirements, we may be required to draw on our new credit facility or seek additional equity or debt financing sooner. There can be no assurance the Company will be able to obtain the financing or raise the capital required to fund its operations or planned expansion.
Cash Flows
The following table summarizes our cash flows:
|
Three Months Ended
March 31, 2025 |
Three Months Ended
March 31, 2024 |
||||||
| Net cash used in operating activities | $ | (237,467 | ) | $ | (346,720 | ) | |
| Net cash used in investing activities | $ | (446,838 | ) | $ | (133,083 | ) | |
| Net cash used in financing activities | $ | (160,808 | ) | $ | (182,120 | ) | |
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Operating Activities
Net cash used in operating activities was $0.2 million for the three months ended March 31, 2025, as compared to $0.3 million in the prior year period. This net cash usage of $0.2 million was primarily due to the net loss of $1.2 million, an increase in accounts receivable of $0.2 million, and increases in inventory of $0.5 million, partially offset by increases in accounts payable of $0.4 million, expense and payroll related accruals of $0.3 million, and other liabilities of $0.1 million. Additional offsets to the net loss were non-cash items including stock-based compensation expense of $0.7 million, and depreciation and amortization expense of $0.2 million.
Net cash used in operating activities was $0.3 million for the three months ended March 31, 2024. This net cash usage was primarily due to the net loss of $1.9 million, an increase in accounts receivable of $0.3 million, a reduction of accrued expenses of $0.2 million driven by payment of 2023 bonuses, offset by an increase in accounts payable of $0.8 million, a decrease in inventory of $0.3 million, and non-cash items including stock-based compensation expense of $0.7 million, and depreciation and amortization expense of $0.2 million.
Investing Activities
Net cash used in investing activities of $0.4 million for the three months ending March 31, 2025, was for capital expenditures for manufacturing equipment related to our new consumables production lines.
Net cash used in investing activities of $0.1 million for the three months ending March 31, 2024, was for capital expenditures for research and development and office equipment.
Financing Activities
Net cash used in financing activities of $0.2 million for the three months ended March 31, 2025 was due primarily to payments on our note payable for insurance premium financing.
Net cash used in financing activities of $0.2 million for the three months ended March 31, 2024, was due to payments on our note payable for insurance premium financing.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Refer to “NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES” in the accompanying financial statements, which is incorporated herein by reference.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The Company’s management, including the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as such is defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon their evaluations, the Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective for the purpose of ensuring that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act with the Securities and Exchange Commission (the “SEC”) (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to the Company’s management, including its Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
There have been no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II – OTHER INFORMATION
ITEM 1A. RISK FACTORS
Our operations and financial results are subject to various risks and uncertainties, including those described in “PART 1, ITEM 1A. RISK FACTORS” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock.
Changes in tariff and trade policies by the US administration, and uncertainties with respect to such policies, may have an adverse impact on our costs of goods and gross margin.
In April 2025, the U.S. government announced a baseline tariff of 10% on products from all countries and an additional individualized reciprocal tariff on the countries with which the United States has the largest trade deficits. The U.S. and/or countries from which we source raw materials may, in the future, adjust and/or impose new quotas, duties, tariffs or reciprocal tariffs or other restrictions which may affect our operations and our ability to purchase raw materials at reasonable prices, which may negatively affect our costs of goods sold and gross margin. The ultimate impact of any tariffs will depend on various factors, including how long such tariffs remain in place, the ultimate levels of such tariffs and how other countries respond to the U.S. tariffs.
PART II – ITEM 6. EXHIBITS.
| Exhibit No. | Description |
| 31.1 | Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002 |
| 31.2 | Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act 2002 |
| 32.1 | Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 |
| 32.2 | Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act 2002 |
| 101.INS | Inline XBRL Instance Document - the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
| 101.DEF | Inline XBRL Taxonomy Definition Linkbase Document |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| KORU MEDICAL SYSTEMS, INC. | |
| May 7, 2025 | /s/ Linda Tharby |
|
Linda Tharby, President and Chief Executive Officer
(Principal Executive Officer) |
|
| May 7, 2025 | /s/ Thomas Adams |
|
Thomas Adams, Chief Financial Officer and Treasurer
(Principal Financial Officer) |
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