KORU Medical Systems(KRMD) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Koru Medical Systems, Inc. as of and for the three and six months ended June 30, 2024, showing increased revenues, improved gross profit, and reduced net loss. Balance Sheets As of June 30, 2024, total assets were $27.3 million, a decrease from $28.5 million at year-end 2023, primarily due to lower cash and cash equivalents. Balance Sheet Summary (in thousands) | Balance Sheet Items | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,458 | $11,482 | | Total Current Assets | $19,366 | $20,256 | | Total Assets | $27,304 | $28,461 | | Liabilities & Equity | | | | Total Current Liabilities | $5,137 | $4,454 | | Total Liabilities | $8,599 | $8,107 | | Total Stockholders' Equity | $18,705 | $20,354 | Statements of Operations For Q2 2024, net revenues increased 21.5% to $8.4 million, gross profit grew 40.9% to $5.5 million, and net loss significantly narrowed to $1.0 million. Q2 Performance Comparison (in thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $8,430 | $6,936 | +21.5% | | Gross Profit | $5,480 | $3,888 | +40.9% | | Net Operating Loss | ($1,192) | ($3,225) | +63.1% | | Net Loss | ($989) | ($2,496) | +60.4% | | Net Loss Per Share | ($0.02) | ($0.05) | +60.0% | Six-Month Performance Comparison (in thousands, except per share data) | Metric | H1 2024 | H1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Net Revenues | $16,628 | $14,329 | +16.0% | | Gross Profit | $10,583 | $8,035 | +31.7% | | Net Operating Loss | ($3,153) | ($6,281) | +49.8% | | Net Loss | ($2,925) | ($4,907) | +40.4% | | Net Loss Per Share | ($0.06) | ($0.11) | +45.5% | Statements of Cash Flows Net cash used in operating activities for the first six months of 2024 dramatically improved to $0.3 million from $4.8 million in the prior year, primarily due to a lower net loss and favorable working capital changes. Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($335) | ($4,815) | | Net Cash Used in Investing Activities | ($282) | ($393) | | Net Cash Used in Financing Activities | ($407) | ($482) | | Net Decrease in Cash | ($1,024) | ($5,689) | | Cash at End of Period | $10,458 | $11,719 | Statements of Stockholders' Equity Total stockholders' equity decreased from $20.4 million at December 31, 2023, to $18.7 million at June 30, 2024, mainly due to the net loss incurred. - The accumulated deficit increased from $23.3 million to $26.2 million during the first six months of 2024 due to the net loss for the period[9] Notes to the Unaudited Financial Statements The notes detail accounting policies, revenue recognition by geography, and the company's new $5 million revolving credit and $5 million term loan facilities, with no outstanding borrowings as of June 30, 2024. Net Revenues by Geography (in thousands) | Region | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Domestic | $6,779 | $5,686 | $13,163 | $11,970 | | International | $1,651 | $1,250 | $3,465 | $2,358 | | Total | $8,430 | $6,936 | $16,628 | $14,329 | - On March 8, 2024, the Company secured a new loan agreement providing a $5 million revolving credit facility and a $5 million term loan facility, enhancing its financial flexibility. No amounts were drawn as of June 30, 2024[45] - The company maintains a full valuation allowance of $6.6 million against its net deferred tax assets as of June 30, 2024, as it is not more likely than not that these assets will be realized[51] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the 21.5% Q2 revenue growth to strong performance across all segments, with gross margin expanding to 65.0% due to efficiencies and favorable sales mix, and operating expenses decreasing by 6.2%. Results of Operations For the six-month period, total net revenues increased by 16.0%, driven by domestic core growth and a 54.4% surge in international core revenue, while gross margin improved to 63.6% and total operating expenses decreased by 4.1%. Q2 2024 Net Revenue Growth by Segment | Segment | Q2 2024 Revenue | YoY Growth | | :--- | :--- | :--- | | Domestic Core | $6.2M | +14.3% | | International Core | $1.6M | +45.8% | | Novel Therapies | $0.6M | +49.9% | | Total | $8.4M | +21.5% | - The increase in Q2 gross margin to 65.0% from 56.1% was primarily driven by increased production efficiencies, a favorable sales mix from clinical trial orders, and higher average selling prices[62] - R&D expenses for Q2 decreased by 29.0% year-over-year, mainly due to increased efficiencies from insourcing and the timing of project expenditures[65] Liquidity and Capital Resources The company's $10.5 million cash balance and improved operating cash flows are expected to provide sufficient liquidity for at least the next twelve months. - The company's cash on hand was $10.5 million as of June 30, 2024, which management expects will be sufficient to meet requirements for at least the next twelve months[70][71] - Net cash used in operating activities for the first six months of 2024 was substantially reduced to $0.3 million from $4.8 million in the same period of 2023, driven by a smaller net loss and favorable working capital changes[73] Quantitative and Qualitative Disclosures About Market Risk The company has indicated that this section is not applicable, suggesting it does not have material exposure to market risks that require disclosure under this item. - The company states that quantitative and qualitative disclosures about market risk are not applicable[76] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter. - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by this report[76] - There were no changes in internal control over financial reporting during the six months ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, these controls[77] PART II. OTHER INFORMATION Risk Factors The company directs investors to the risk factors disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023, indicating no material updates to its risk profile during the second quarter of 2024. - The company's risk factors are described in its Annual Report on Form 10-K for the year ended December 31, 2023, and there are no material changes reported in this 10-Q[78] Exhibits This section lists the exhibits filed with the report, including the required certifications by the Principal Executive Officer and Principal Financial Officer under Sections 302 and 906 of the Sarbanes-Oxley Act, as well as Inline XBRL documents. - The exhibits filed with this report include CEO and CFO certifications pursuant to the Sarbanes-Oxley Act of 2002 and interactive data files (XBRL)[79]