KORU Medical Systems(KRMD) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for the quarter ended March 31, 2024, detailing a net loss of $1.9 million, an improvement from $2.4 million in the prior-year period, driven by higher revenues and improved gross margins Balance Sheets As of March 31, 2024, total assets were $27.5 million, slightly down from $28.5 million at year-end 2023, primarily due to reduced cash, while liabilities increased and equity decreased reflecting the net loss Balance Sheet Data | Balance Sheet Data | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,820,317 | $11,482,240 | | Total Current Assets | $19,479,262 | $20,255,929 | | Total Assets | $27,500,548 | $28,460,972 | | Liabilities & Equity | | | | Total Current Liabilities | $4,852,927 | $4,454,278 | | Total Liabilities | $8,383,017 | $8,107,201 | | Total Stockholders' Equity | $19,117,531 | $20,353,771 | Statements of Operations For the three months ended March 31, 2024, net revenues increased 10.9% to $8.2 million, gross profit grew 23.1% to $5.1 million, and the net loss narrowed to $1.9 million, or ($0.04) per share, from $2.4 million in Q1 2023 Statement of Operations | Statement of Operations | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Revenues | $8,197,798 | $7,392,605 | | Gross Profit | $5,103,298 | $4,147,035 | | Net Operating Loss | ($1,961,366) | ($3,056,828) | | Net Loss | ($1,935,958) | ($2,410,885) | | Net Loss Per Share (Basic & Diluted) | ($0.04) | ($0.05) | Statements of Cash Flows Net cash used in operating activities significantly decreased to $0.35 million in Q1 2024 from $4.66 million in Q1 2023, reflecting improved operating results and working capital management, with the quarter ending with $10.8 million in cash Cash Flow Activity | Cash Flow Activity | For the Three Months Ended March 31, 2024 | For the Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($346,720) | ($4,660,583) | | Net Cash Used in Investing Activities | ($133,083) | ($283,837) | | Net Cash Used in Financing Activities | ($182,120) | ($238,972) | | Net Decrease in Cash | ($661,923) | ($5,183,392) | | Cash and Cash Equivalents, End of Period | $10,820,317 | $12,224,865 | Statements of Stockholders' Equity Stockholders' equity decreased from $20.4 million at year-end 2023 to $19.1 million as of March 31, 2024, primarily due to the $1.9 million net loss - Total stockholders' equity decreased from $20,353,771 on December 31, 2023, to $19,117,531 on March 31, 2024[19] - The decrease was primarily caused by a net loss of $1,935,958 for the quarter[19] Notes to Financial Statements The notes detail accounting policies, a new $10 million HSBC loan facility, a $6.4 million deferred tax asset valuation allowance, and a successful regulatory appeal upholding EU sales - Revenues are derived from three sources: domestic core (US and Canada), international core, and novel therapies[38] - On March 8, 2024, the Company entered into a loan agreement with HSBC for a $5 million revolving credit facility and a $5 million term loan facility, with no outstanding borrowings as of March 31, 2024[74] - On April 8, 2024, the Company's appeal to BSI regarding a prior audit was upheld, preventing disruption of sales to the EU market[84] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial results, highlighting 10.9% revenue growth to $8.2 million, improved gross margin to 62.3%, a narrowed net loss, and sufficient liquidity Results of Operations Total net revenues grew 10.9% to $8.2 million, driven by strong International Core performance, with gross profit rising 23.1% to $5.1 million and margin expanding to 62.3% Net Revenues by Segment | Net Revenues by Segment | Q1 2024 | Q1 2023 | Change (%) | | :--- | :--- | :--- | :--- | | Domestic Core | $5,953,865 | $5,719,135 | 4.1% | | International Core | $1,790,483 | $1,097,490 | 63.1% | | Novel Therapies | $453,450 | $575,980 | (21.3%) | | Total | $8,197,798 | $7,392,605 | 10.9% | - Gross margin increased to 62.3% in Q1 2024 from 56.1% in Q1 2023, primarily driven by production efficiencies from outsourced manufacturing and consolidation of US manufacturing sites[94] - Operating expenses decreased by 1.9% year-over-year, mainly due to a 5.7% decrease in research and development expenses related to the timing of project spending[95][96] Liquidity and Capital Resources The company ended Q1 2024 with $10.8 million in cash, with net cash used in operating activities significantly improving to $0.3 million from $4.7 million in the prior-year quarter, ensuring sufficient liquidity for at least the next twelve months - The company's principal source of liquidity is cash on hand, which was $10.8 million as of March 31, 2024[99] - Net cash used in operating activities improved to $0.3 million in Q1 2024 from $4.7 million in Q1 2023[102][103] - Management expects that cash on hand and cash flows from operations will be sufficient to meet requirements for at least the next twelve months[101] Quantitative and Qualitative Disclosures About Market Risk The company has determined that quantitative and qualitative disclosures about market risk are not applicable for this reporting period, indicating no material exposure requiring such disclosure - The company has determined that quantitative and qualitative disclosures about market risk are not applicable[108] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by this report[109] - No changes in the Company's internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[110] PART II. OTHER INFORMATION Risk Factors The company refers to the risk factors described in its Annual Report on Form 10-K for the year ended December 31, 2023, with no new or materially changed risk factors reported in this 10-Q - The company directs readers to the risk factors disclosed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2023, for a description of various risks and uncertainties[111] Exhibits This section lists the exhibits filed with the Form 10-Q, primarily consisting of CEO and CFO certifications required by Sarbanes-Oxley Act Sections 302 and 906, and Inline XBRL documents - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[111] - Inline XBRL instance and taxonomy documents are also filed as exhibits to the report[111][116] Signatures - The report was duly signed and authorized on May 1, 2024, by Linda Tharby, President and Chief Executive Officer, and Thomas Adams, Chief Financial Officer and Treasurer[115]