Form 10-Q

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 September 30, 2024

[_] 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)

Delaware	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 November 13, 2024, 45,837,304 shares of common stock, $0.01 par value per share, were outstanding, which excludes 3,438,526 shares of treasury stock.

KORU MEDICAL SYSTEMS, INC.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2024

TABLE OF CONTENTS

		PAGE

PART I. FINANCIAL INFORMATION

ITEM 1.	Financial Statements (Unaudited)	3

	Balance Sheets as of September 30, 2024 (Unaudited) and December 31, 2023	3

	Statements of Operations (Unaudited) for the three and nine months ended September 30, 2024 and 2023	4

	Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2024 and 2023	5

	Statements of Stockholders' Equity (Unaudited) for the three and nine months ended September 30, 2024 and 2023	6-7

	Notes to Financial Statements	8

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	21

ITEM 4.	Controls and Procedures	22

PART II. OTHER INFORMATION

ITEM 1A.	Risk Factors	22

ITEM 6.	Exhibits	22

	Signatures	23

- 2 -


	September 30,			December 31,
	2024			2023
	(UNAUDITED)

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	8,806,310		$	11,482,240
Accounts receivable less allowance for credit losses of $0 as of September 30, 2024 and $24,777 as of December 31, 2023		5,164,700			4,045,211
Inventory		3,928,318			3,481,301
Other receivables		74,312			28,889
Prepaid expenses		955,213			1,218,288
TOTAL CURRENT ASSETS		18,928,853			20,255,929
Property and equipment, net		4,552,176			3,837,657
Intangible assets, net of accumulated amortization of $441,186 and $390,341 as of September 30, 2024 and December 31, 2023, respectively		746,302			754,361
Operating lease right-of-use assets		3,063,731			3,514,055
Other assets		98,970			98,970
TOTAL ASSETS	$	27,390,032		$	28,460,972

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	1,670,300		$	975,193
Accrued expenses		2,792,967			1,711,427
Note payable		401,993			314,344
Other liabilities		181,745			512,520
Accrued payroll and related taxes		766,867			462,941
Financing lease liability – current		114,297			109,540
Operating lease liability – current		395,954			368,313
TOTAL CURRENT LIABILITIES		6,324,123			4,454,278
Financing lease liability, net of current portion		230,332			316,623
Operating lease liability, net of current portion		3,102,097			3,336,300
TOTAL LIABILITIES		9,656,552			8,107,201

STOCKHOLDERS’ EQUITY
Common stock, $0.01 par value, 75,000,000 shares authorized, 49,275,830 and 49,059,583 shares issued 45,837,304 and 45,639,081 shares outstanding as of September 30, 2024, and December 31, 2023, respectively		492,758			490,899
Additional paid-in capital		48,940,978			47,018,707
Treasury stock, 3,438,526 and 3,420,502 shares as of September 30, 2024 and December 31, 2023, respectively, at cost		(3,882,493	)		(3,843,562	)
Accumulated deficit		(27,817,763	)		(23,312,273	)
TOTAL STOCKHOLDERS’ EQUITY		17,733,480			20,353,771
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	27,390,032		$	28,460,972


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023

NET REVENUES	$	8,179,977		$	7,003,198		$	24,807,864		$	21,331,734
Cost of goods sold		2,993,986			2,661,021			9,038,825			8,954,398
Gross Profit		5,185,991			4,342,177			15,769,038			12,377,336

OPERATING EXPENSES
Selling, general and administrative		5,127,658			4,623,928			15,804,966			15,352,972
Research and development		1,533,845			1,293,256			4,143,751			4,454,739
Depreciation and amortization		227,785			216,014			677,019			642,050
Total Operating Expenses		6,889,288			6,133,198			20,625,736			20,449,761

Net Operating Loss		(1,703,297	)		(1,791,021	)		(4,856,698	)		(8,072,425	)

Non-Operating Income/(Expense)
Gain/(Loss) on currency exchange		9,485			(9,390	)		(12,674	)		(12,542	)
Loss on disposal of fixed assets, net		—			(3,527	)		(300	)		(59,806	)
Interest income, net		112,995			135,429			364,183			392,098
TOTAL OTHER INCOME		122,480			122,512			351,208			319,750

LOSS BEFORE INCOME TAXES		(1,580,817	)		(1,668,509	)		(4,505,490	)		(7,752,675	)

Income Tax Benefit		—			300,247			—			1,477,642

NET LOSS	$	(1,580,817	)	$	(1,368,262	)	$	(4,505,490	)	$	(6,275,033	)

NET LOSS PER SHARE

Basic & Diluted	$	(0.03	)	$	(0.03	)	$	(0.10	)	$	(0.14	)

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

Basic & Diluted		45,851,019			45,639,081			45,791,756			45,578,314


	For the Nine Months Ended
	September 30,
	2024			2023

CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(4,505,490	)	$	(6,275,033	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense and warrant expense		1,924,131			2,379,613
Depreciation and amortization		677,019			642,050
Deferred income taxes		—			(1,477,643	)
Loss on disposal of fixed assets		300			59,806
Non-cash lease adjustments		243,762			(16,489	)
Changes in operating assets and liabilities:
Accounts receivable		(1,119,490	)		(332,975	)
Inventory		(447,017	)		1,727,954
Prepaid expenses and other assets		217,652			87,540
Other liabilities		(330,773	)		243,283
Accounts payable		695,107			(1,446,180	)
Accrued payroll and related taxes		303,927			(149,872	)
Accrued expenses		1,081,539			(1,431,412	)
NET CASH USED IN OPERATING ACTIVITIES		(1,259,333	)		(5,989,358	)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment		(1,340,994	)		(586,897	)
Purchases of intangible assets		(42,786	)		(19,312	)
NET CASH USED IN INVESTING ACTIVITIES		(1,383,780	)		(606,209	)

CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings from insurance finance indebtedness		487,516			565,172
Payments on insurance finance indebtedness		(399,867	)		(532,441	)
Payments on finance lease liability		(81,534	)		(73,243	)
Payments for taxes related to net share settlement of equity awards		(38,932	)		—
NET CASH USED IN FINANCING ACTIVITIES		(32,817	)		(40,512	)

NET DECREASE IN CASH AND CASH EQUIVALENTS		(2,675,930	)		(6,636,079	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		11,482,240			17,408,257
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	8,806,310		$	10,772,178

Supplemental Information
Cash paid during the periods for:
Interest	$	46,014		$	34,773
Income taxes	$	—		$	3,160


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

BALANCE, DECEMBER 31, 2023	49,089,864	$	490,899	$	47,018,707	$	(23,312,273	)	$	(3,843,562	)	$	20,353,771
Issuance of stock-based compensation	53,725		537		123,267		—			—			123,804
Compensation expense related to stock options	—		—		393,113		—			—			393,113
Compensation related to restricted stock	—		—		130,676		—			—			130,676
Issuance of warrants	—		—		52,125		—			—			52,125
Net loss	—		—		—		(1,935,958	)		—			(1,935,958	)
BALANCE, MARCH 31, 2024	49,143,589	$	491,436	$	47,717,888	$	(25,248,231	)	$	(3,843,562	)	$	19,117,531

Issuance of stock-based compensation	41,138		411		136,020		—			(38,932	)		97,500
Compensation expense related to stock options	—		—		401,218		—			—			401,218
Compensation related to restricted stock	55,061		551		63,434		—			—			63,984
Issuance of warrants	—		—		13,032		—			—			13,032
Net loss	—		—		—		(988,715	)		—			(988,715	)
BALANCE, JUNE 30, 2024	49,239,788	$	492,398	$	48,331,591	$	(26,236,946	)	$	(3,882,493	)	$	18,704,550

Issuance of stock-based compensation	36,042		360		97,140		—			—			97,500
Compensation expense related to stock options	—		—		305,376		—			—			305,376
Compensation related to restricted stock	—		—		193,839		—			—			193,839
Issuance of warrants	—		—		13,032		—			—			13,032
Net loss	—		—		—		(1,580,817	)		—			(1,580,817	)
BALANCE, SEPTEMBER 30, 2024	49,275,830	$	492,758	$	48,940,978	$	(27,817,763	)	$	(3,882,493	)	$	17,733,480

	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Revenues
Domestic	$	7,022,811	$	5,929,071	$	20,186,191	$	17,899,463
International		1,157,166		1,074,127		4,621,672		3,432,271
Total	$	8,179,977	$	7,003,198	$	24,807,864	$	21,331,734

	September 30, 2024			December 31, 2023

Furniture and office equipment	$	1,433,622		$	1,412,164
Leasehold improvements		1,953,653			1,953,653
Manufacturing equipment and tooling		4,504,610			3,193,113
Total property and equipment		7,891,885			6,558,930
Less: accumulated depreciation and amortization		(3,339,709	)		(2,721,273	)
Property and equipment, net	$	4,552,176		$	3,837,657

	September 30, 2024

Dividend yield		0.00	%
Expected Volatility		46.18 - 59.97	%
Expected dividends		—
Expected term (in years)		6.25
Risk-free rate		3.78% - 4.63	%

	Shares		Weighted Average Exercise Price

Outstanding at January 1	3,256,250		$	3.66
Granted	537,025		$	1.67
Exercised	—		$	—
Forfeited/canceled	(898,750	)	$	4.96
Outstanding at September 30	2,894,525		$	3.03
Options exercisable at September 30	1,446,250		$	3.37
Weighted average fair value of options granted during the period	—		$	1.37
Stock-based compensation expense	—		$	1,122,128

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

$2.08 - $3.88	2,894,525	7.40 years	$	3.03	1,446,250	$	3.37

	Shares	Weighted Average Grant-Date Fair Value

Unvested at January 1	200,000	$	1.48
Granted	—	$	—
Vested	—	$	—
Forfeited/canceled	—	$	—
Unvested/outstanding at September 30	200,000	$	1.48

	September 30, 2024	December 31, 2023

Weighted Average Remaining Lease Term
Operating leases	5.31 Years	6.88 Years
Finance leases	2.97 Years	3.72 Years

Weighted Average Discount Rate
Operating leases	6.56%	5.76%
Finance leases	6.30%	6.19%

Year Ending December 31,	Operating Leases			Finance Leases
Remainder of 2024	$	133,495			32,897
2025		533,979			131,437
2026		533,979			131,437
2027		533,979			74,194
2028		520,985			6,180
Thereafter		1,833,603			—
Total undiscounted lease payments		4,090,020			376,145
Less: imputed interest		(591,969	)		(31,516	)
Total lease liabilities	$	3,498,051		$	344,629

	Three Months Ended September 30,				Change from Prior Year			% of Net Revenues
	2024		2023		$		%	2024	2023
Net Revenues
Domestic Core	$	6,447,469	$	5,773,863	$	673,606	11.7%	78.8%	82.4%
International Core		1,121,196		1,066,567		54,629	5.1%	13.7%	15.2%
Total Core		7,568,665		6,840,430		728,235	10.6%	92.5%	97.7%
Novel Therapies		611,312		162,768		448,544	275.6%	7.5%	2.3%
Total	$	8,179,977	$	7,003,198	$	1,176,778	16.8%	100%	100%

	Nine Months Ended September 30,				Change from Prior Year			% of Net Revenues
	2024		2023		$		%	2024	2023
Net Revenues
Domestic Core	$	18,557,431	$	16,881,170	$	1,676,261	9.9%	74.8%	79.1%
International Core		4,539,871		3,281,061		1,258,809	38.4%	18.3%	15.4%
Total Core		23,097,302		20,162,231		2,935,071	14.6%	93.1%	94.5%
Novel Therapies		1,710,562		1,169,503		541,059	46.3%	6.9%	5.5%
Total	$	24,807,864	$	21,331,734	$	3,476,130	16.3%	100%	100%

	Shares		Weighted Average Grant-Date Fair Value

Unvested at January 1	904,496		$	1.80
Granted	458,975		$	2.30
Vested	(81,789	)	$	3.38
Forfeited/canceled	(11,745	)	$	2.30
Unvested at September 30	1,269,937		$	2.74

	Nine Months Ended September 30, 2024			Nine Months Ended September 30, 2023
Net cash used in operating activities	$	(1,259,333	)	$	(5,989,358	)
Net cash used in investing activities	$	(1,383,780	)	$	(606,209	)
Net cash used in financing activities	$	(32,817	)	$	(40,512	)

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.

November 13, 2024	/s/ Linda Tharby
	Linda Tharby, President and Chief Executive Officer (Principal Executive Officer)

November 13, 2024	/s/ Thomas Adams
	Thomas Adams, Chief Financial Officer and Treasurer (Principal Financial Officer)

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