UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2023

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________.

Commission File Number: 0-12305

KORU MEDICAL SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

New York	13-3044880
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

100 Corporate Drive, Mahwah, New Jersey	07430
(Address of principal executive offices)	(Zip Code)

(845) 469-2042

(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
Common stock, $0.01 par value	KRMD	The Nasdaq Stock Market

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] Yes [_] No

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] Yes [_] No

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 [_]
	Non-accelerated filer [X]	Smaller reporting company [X]
		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] No

As of May 4, 2023, 45,613,150 shares of common stock, $0.01 par value per share, were outstanding, which excludes 3,420,502 shares of treasury stock.

KORU MEDICAL SYSTEMS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2023

TABLE OF CONTENTS

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)	3

	Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	3

	Statements of Operations (Unaudited) for the three months ended March 31, 2023 and 2022	4

	Statements of Cash Flows (Unaudited) for the three months ended March 31,2023 and 2022	5

	Statements of Stockholders’ Equity (Unaudited) for the three months ended March 31, 2023 and 2022	6

	Notes to Financial Statements	7

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	20

ITEM 4.	Controls and Procedures	20

PART II. OTHER INFORMATION

ITEM 1A.	Risk Factors	21

ITEM 6.	Exhibits	21

	Signatures	22

- 2 -


	March 31,			December 31,
	2023			2022

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	12,224,865		$	17,408,257
Accounts receivable less allowance for doubtful accounts of $21,459 for March 31, 2023, and for December 31, 2022		4,164,513			3,558,884
Inventory		6,638,418			6,404,867
Other Receivables		1,014,761			972,396
Prepaid expenses		1,172,101			1,457,232
TOTAL CURRENT ASSETS		25,214,658			29,801,636
Property and equipment, net		3,906,067			3,886,975
Intangible assets, net of accumulated amortization of $341,755 and $325,872 at March 31, 2023 and December 31, 2022, respectively		782,531			787,182
Operating lease right-of-use assets		3,706,874			3,786,545
Deferred income tax assets, net		4,544,880			3,967,480
Other assets		98,970			102,625
TOTAL ASSETS	$	38,253,980		$	42,332,443

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,503,120		$	2,391,799
Accrued expenses		1,591,737			2,889,941
Note Payable		218,403			433,295
Other Liabilities		261,544			257,337
Accrued payroll and related taxes		500,415			542,399
Financing lease liability – current		99,694			98,335
Operating lease liability – current		349,304			345,834
TOTAL CURRENT LIABILITIES		4,524,217			6,958,940
Financing lease liability, net of current portion		368,844			394,283
Operating lease liability, net of current portion		3,564,619			3,653,257
TOTAL LIABILITIES		8,457,680			11,006,480

STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 75,000,000 shares authorized, 48,960,766 and 48,861,891 shares issued 45,540,264 and 45,441,389 shares outstanding at March 31, 2023, and December 31, 2022, respectively		489,608			488,619
Additional paid-in capital		45,132,350			44,252,117
Treasury stock, 3,420,502 shares at March 31, 2023 and December 31, 2022, at cost		(3,843,562	)		(3,843,562	)
Retained deficit		(11,982,096	)		(9,571,211	)
TOTAL STOCKHOLDERS’ EQUITY		29,796,300			31,325,963
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	38,253,980		$	42,332,443


	Three Months Ended
	March 31,
	2023			2022

NET SALES	$	7,392,605		$	6,244,330
Cost of goods sold		3,245,570			2,622,025
Gross Profit		4,147,035			3,622,305

OPERATING EXPENSES
Selling, general and administrative		5,425,877			5,491,213
Research and development		1,564,869			1,148,355
Depreciation and amortization		213,117			109,252
Total Operating Expenses		7,203,863			6,748,820

Net Operating Loss		(3,056,828	)		(3,126,515	)

Non-Operating Income/(Expense)
Loss on currency exchange		(680	)		(7,135	)
Loss on disposal of fixed assets, net		(56,279	)		—
Interest income (expense), net		125,502			(1,463	)
TOTAL OTHER INCOME/(EXPENSE)		68,543			(8,598	)

LOSS BEFORE INCOME TAXES		(2,988,285	)		(3,135,113	)

Income Tax Benefit		577,400			597,599

NET LOSS	$	(2,410,885	)	$	(2,537,514	)

NET LOSS PER SHARE

Basic	$	(0.05	)	$	(0.06	)
Diluted	$	(0.05	)	$	(0.06	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic		45,487,593			44,667,977
Diluted		45,487,593			44,667,977


	For the Three Months Ended
	March 31,
	2023			2022

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(2,410,885	)	$	(2,537,514	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		881,222			837,556
Depreciation and amortization		213,117			109,252
Deferred income taxes		(577,400	)		(597,599	)
Loss on disposal of fixed assets		56,279			—
ROU landlord credit		(5,497	)		—
Changes in operating assets and liabilities:
(Increase)/Decrease in accounts receivable		(647,994	)		447,489
Decrease in other receivables		—			38,145
(Increase)/Decrease in inventory		(233,551	)		88,601
Decrease/(Increase) in prepaid expenses and other assets		288,786			(11,805	)
Increase in other Liabilities		4,207			25,625
(Decrease)/Increase in accounts payable		(888,679	)		40,447
(Decrease)/Increase in accrued payroll and related taxes		(41,984	)		345,712
Decrease in accrued expenses		(1,298,204	)		(537,981	)

NET CASH USED IN OPERATING ACTIVITIES		(4,660,583	)		(1,752,072	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(272,605	)		(750,908	)
Purchases of intangible assets		(11,232	)		(1,694	)
NET CASH USED IN INVESTING ACTIVITIES		(283,837	)		(752,602	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payments on indebtedness		(214,892	)		(252,968	)
Payments on finance lease liability		(24,080	)		—
NET CASH USED IN FINANCING ACTIVITIES		(238,972	)		(252,968	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(5,183,392	)		(2,757,642	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		17,408,257			25,334,889
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	12,224,865		$	22,577,247

Supplemental Information
Cash paid during the periods for:
Interest	$	12,326		$	4,425
Income Taxes	$	—		$	—

Schedule of Non-Cash Operating, Investing and Financing Activities:
Issuance of common stock as compensation	$	175,776		$	142,500


				Additional								Total
	Common Stock			Paid-in		Retained			Treasury			Stockholders’
	Shares	Amount		Capital		Deficit			Stock			Equity

BALANCE, DECEMBER 31, 2022	48,861,891	$	488,619	$	44,252,117	$	(9,571,211	)	$	(3,843,562	)	$	31,325,963
Issuance of stock-based compensation	48,875		489		175,287		—			—			175,776
Compensation expense related to stock options	—		—		535,059		—			—			535,059
Compensation related to Restricted Stock	50,000		500		169,887		—			—			170,387
Net loss	—		—		—		(2,410,885	)		—			(2,410,885	)
BALANCE, MARCH 31, 2023	48,960,766	$	489,608	$	45,132,350	$	(11,982,096	)	$	(3,843,562	)	$	29,796,300

(a)	For the three months ended March 31, 2023, and 2022, option shares of 14,626 and 346,020 respectively, were not included as the impact is anti-dilutive.

(b)	For the three months ended March 31, 2023, and 2022, Linda Tharby’s 900,000 and 1,000,000 shares of restricted stock, respectively, were not included as the impact is anti-dilutive.

	Three Months Ended March 31,				% of Total Revenues
	2023		2022		2023		2022
Revenues
Domestic	$	6,283,965	$	5,301,388		85%		85%
International		1,108,640		942,942		15%		15%
Total	$	7,392,605	$	6,244,330

•	Level 1 – Quoted prices in active markets for identical assets or liabilities.

•	Level 2 – Inputs other than Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

•	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Value is determined using pricing models, discounted cash flow methodologies, or similar techniques and includes instruments for which the determination of fair value requires significant judgment or estimation.

	March 31, 2023			December 31, 2022

Furniture and office equipment	$	1,325,908		$	1,456,745
Leasehold improvements		1,888,245			2,413,820
Manufacturing equipment and tooling		2,916,577			2,810,813
Total property and equipment		6,130,730			6,681,378
Less: accumulated depreciation and amortization		(2,224,663	)		(2,794,403	)
Property and equipment, net	$	3,906,067		$	3,886,975

Range of Exercise Price	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price

$2.25-$9.49	2,600,000	8.6 years	$	4.15	1,010,000	$	4.63


	March 31, 2023		December 31, 2022

Operating Leases
Operating lease right-of-use assets	$	3,706,874	$	3,786,545

Operating lease current liabilities		349,304		345,834
Operating lease long term liabilities		3,564,619		3,653,257
Total operating lease liabilities	$	3,913,923	$	3,999,091

Finance Leases
Property and equipment, at cost	$	544,468	$	544,468
Accumulated depreciation		(78,118)		(50,895	)
Property and equipment, net	$	466,350	$	493,573

Finance lease current liabilities		99,694		98,335
Finance lease long term liabilities		368,844		394,283
Total finance lease liabilities	$	468,538	$	492,618

	March 31,
	2023		2022

Dividend yield		0.00%		0.00%
Expected Volatility		61.3%		76.1% - 77.5%
Weighted-average volatility		—		—
Expected dividends		—		—
Expected term (in years)		10		10
Risk-free rate		3.53%		1.81% - 1.87%

	March 31,
	2023		2022

Dividend yield		0.00%		0.00%
Expected Volatility		0.00%		0.00%
Weighted-average volatility		—		—
Expected dividends		—		—
Expected term (in years)		0		0
Risk-free rate		0.00%		0.00%

	March 31, 2023	December 31, 2022

Weighted Average Remaining Lease Term
Operating leases	9.4 Years	9.7 Years
Finance leases	4.3 Years	4.6 Years

Weighted Average Discount Rate
Operating leases	4.00%	4.0%
Finance leases	4.25%	4.25%

Year Ending December 31,	Operating Leases			Finance Leases
2023 (excluding the three months ended March 31, 2023)		374,627			92,400
2024		499,503			123,200
2025		499,503			123,200
2026		499,503			123,200
2027		499,503			65,957
Thereafter		2,331,014			—
Total undiscounted lease payments		4,703,653			527,957
Less: imputed interest		(789,730	)		(59,419	)
Total lease liabilities	$	3,913,923		$	468,538

	Three Months Ended March 31,				Change from Prior Year			% of Net Revenue
	2023		2022		$		%	2023	2022
Net Revenues
Domestic Core	$	5,719,135	$	4,993,536	$	725,599	14.5%	77.4%	80.0%
International Core		1,097,490		894,942		202,548	22.6%	14.8%	14.3%
Novel Therapies		575,980		355,852		220,128	61.9%	7.8%	5.7%
Total	$	7,392,605	$	6,244,330	$	1,148,275	18.4%

	Three Months Ended March 31, 2023			Three Months Ended March 31, 2022
Net cash used in operating activities	$	(4,660,583	)	$	(1,752,072	)
Net cash used in investing activities	$	(283,837	)	$	(752,602	)
Net cash used in financing activities	$	(238,972	)	$	(252,968	)

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)

	KORU MEDICAL SYSTEMS, INC.

May 4, 2023	/s/ Linda Tharby
	Linda Tharby, President and Chief Executive Officer (Principal Executive Officer)

May 4, 2023	/s/ Thomas Adams
	Thomas Adams, Interim Chief Financial Officer and Treasurer (Principal Financial Officer)

SEC Form 10-Q filed by KORU Medical Systems Inc.