KORU Medical Systems Announces Record 2019 Third Quarter Financial Results

Conference Call Scheduled for November 6 at 9:00 am ET

Q3 2019 Highlights

  • Net sales rose 45.5% to a record $6.6 million
  • Gross margin improved to 66.2%
  • Operating profit increased 70.8% to $0.8 million
  • Net income rose to $0.7 million, or $0.02 per diluted share
  • Adjusted EBITDA up 88.8% to $2.1 million

CHESTER, N.Y.–(BUSINESS WIRE)–Repro Med Systems, Inc. dba KORU Medical Systems (NASDAQ: KRMD) (the “Company”) today announced financial results for the third quarter (“Q3 2019”) ended September 30, 2019.

“Our strong performance continued through Q3 2019,” said Don Pettigrew, President and CEO of KORU Medical Systems. “Net sales increased over 45% from Q3 2018, representing the third consecutive quarter of record net sales, and gross margin improved to over 66%. We continue to penetrate our primary disease state end markets, the growth of which we attribute to increasing awareness and diagnosis of PIDD and expanded therapeutic indications for CIDP. Our Freedom Syringe Infusion System is also being utilized in multiple clinical trials associated with the development of new subcutaneous therapies, which is an important component of our long-term growth strategy.”

Mr. Pettigrew concluded, “We also completed two significant corporate developments: the listing of our common stock on NASDAQ effective October 17 and our corporate re-branding to KORU Medical Systems. We believe that both developments reflect our continuing growth as a public company, and the new life and beginnings we provide to patients worldwide.”

Q3 2019 Overview

Net sales rose 45.5% to $6.6 million in Q3 2019 from $4.5 million in Q3 2018. Growth was driven primarily by the Company’s continued success in expanding its presence in the Primary Immune Deficiency Disease (“PIDD”) and Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”) markets, as well as large orders from a domestic distributor, a new customer in Europe, and clinical trials. We cannot predict whether such large distributor orders or volume generally will continue in the future.

Gross profit in Q3 2019 rose to $4.4 million, or 66.2% of net sales, from $2.9 million, or 63.6% of net sales, in Q3 2018. Higher gross profit and gross margin were primarily driven by increased net sales and price increases.

Total operating expenses for Q3 2019 rose to $3.6 million from $2.4 million in Q3 2018. Selling, general & administrative (“SG&A”) expenses were $2.4 million, or 36.9% of net sales, compared to $1.9 million, or 42.2% of net sales in Q3 2018. Litigation costs increased to $0.9 million from $0.3 million in Q3 2018. The Company received its second consecutive favorable judgment in the litigation with EMED Technologies Corp. on August 30, 2019. KORU Medical Systems has filed motions for reimbursement of court costs and attorneys’ fees subsequent to the receipt of both judgements.

Net income for Q3 2019 rose to $0.7 million, or $0.02 per diluted share, from net income of $0.4 million, or $0.01 per diluted share, in Q3 2018.

Q3 2019 Adjusted EBITDA rose to $2.1 million, or 31.5% of net sales, from Adjusted EBITDA of $1.1 million, or 24.3% of net sales, in Q3 2018. Adjusted EBITDA excludes from net income: tax expense, depreciation and amortization, interest income, operating expenses associated with the company’s organizational changes prior to March 31, 2019, litigation costs, and stock option expense.

Cash and equivalents as of September 30, 2019 was $5.1 million. Cash flow of $1.4 million for the first nine months of 2019 included a $2.1 million increase in accounts receivable reflecting a change in payment terms by a large distributor of our products from net 30 days to net 60 days, as well as a $0.6 million increase in inventory to commensurate with sales growth. These increases were partially offset by $1.5 million in proceeds realized from the maturation of a Certificate of Deposit in Q2 2019 and $0.5 million associated with the exercise of warrants and options during the period.

Non-GAAP Measures

This press release includes the non-GAAP financial measures of “Adjusted EBITDA” that are not in accordance with, nor an alternate to, generally accepted accounting principles and may be different from non-GAAP measures used by other companies. In addition, these non-GAAP measures are not based on any comprehensive set of accounting rules or principles. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. They are limited in value because they exclude charges that have a material effect on our reported results and, therefore, should not be relied upon as the sole financial measures to evaluate our financial results. The non-GAAP financial measures are meant to supplement, and to be viewed in conjunction with, GAAP financial results. A reconciliation of our non-GAAP measures is included in an attachment to this press release.

Conference Call

Management will host a conference call on Wednesday, November 6, 2019 at 9:00 am ET to discuss Q3 2019 results and business activities.

Interested parties may participate in the call by dialing:

  • (877) 407-9753 (Domestic) or
  • (201) 493-6739 (International)

Webcast registration: Click Here

Following the live call, a replay will be available for six months on the Company’s website, www.korumedical.com under “Investor Relations.”

About KORU Medical Systems

KORU Medical Systems manufactures and commercializes innovative and easy-to-use specialty infusion solutions that improve quality of life for patients around the world. The FREEDOM Syringe Infusion System currently includes the FREEDOM60® and FreedomEdge® Syringe Infusion Drivers, Precision Flow Rate Tubing and HIgH-Flo Subcutaneous Safety Needle Sets. These devices are used for infusions administered in the home and alternate care settings. For more information about the Company, please visit www.korumedical.com.

Forward-looking Statements

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “continue” and “believe,” and similar references to future periods. 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 inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others, the following: introduction of competitive products; availability of insurance reimbursement; changes in U.S. Food and Drug Administration regulations; changes to health care policies; success of our research and development efforts; our ability to raise capital if or when needed; acceptance of and demand for new and existing products; expanded market acceptance of the FREEDOM Syringe Infusion System; our ability to obtain required governmental approvals; success in enforcing and obtaining patents; continued performance by principal suppliers; continued customer preference to work through distributors; continued service of key personnel and attracting and maintaining new personnel; the costs, duration and ultimate outcome of litigation; and general economic and business conditions.

Any forward-looking statement made by us in this press release is based only on information currently available to us and speaks only as of the date on which it is made. We undertake no obligation to publicly update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise.

REPRO MED SYSTEMS, INC.

BALANCE SHEETS

 

 

September 30,

 

December 31,

 

 

 

2019

 

2018

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

5,129,028

 

$

3,738,803

 

Certificates of deposit

 

 

 

 

1,517,927

 

Accounts receivable less allowance for doubtful accounts of $36,609 at September 30, 2019 and $37,500 at December 31, 2018

 

 

3,546,634

 

 

1,425,854

 

Inventory

 

 

2,738,682

 

 

2,103,879

 

Prepaid expenses

 

 

453,151

 

 

246,591

 

TOTAL CURRENT ASSETS

 

 

11,867,495

 

 

9,033,054

 

Property and equipment, net

 

 

636,928

 

 

858,781

 

Patents, net of accumulated amortization of $273,846 and $239,581 at September 30, 2019 and December 31, 2018, respectively

 

 

786,164

 

 

632,156

 

Right of use assets, net

 

 

406,954

 

 

 

Deferred tax asset

 

 

 

 

1,466

 

Other assets

 

 

19,582

 

 

19,582

 

TOTAL ASSETS

 

$

13,717,123

 

$

10,545,039

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

Deferred capital gain – current

 

$

 

$

3,763

 

Accounts payable

 

 

874,977

 

 

453,498

 

Accrued expenses

 

 

1,178,702

 

 

688,649

 

Accrued payroll and related taxes

 

 

111,359

 

 

421,714

 

Accrued tax liability

 

 

 

 

16,608

 

Finance lease liability – current

 

 

3,242

 

 

 

Operating lease liability – current

 

 

135,275

 

 

 

TOTAL CURRENT LIABILITIES

 

 

2,303,555

 

 

1,584,232

 

Deferred tax liability

 

 

133,097

 

 

 

Operating lease liability, net of current portion

 

 

271,679

 

 

 

TOTAL LIABILITIES

 

 

2,708,331

 

 

1,584,232

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Common stock, $0.01 par value; 75,000,000 shares authorized, 42,228,658 and 40,932,911 shares issued, 39,491,427 and

38,195,680 shares outstanding at September 30, 2019 and December 31, 2018, respectively

 

 

422,286

 

 

409,329

 

Additional paid-in capital

 

 

5,985,636

 

 

4,595,214

 

Retained earnings

 

 

4,945,074

 

 

4,300,468

 

 

 

 

11,352,996

 

 

9,305,011

 

Less: Treasury stock, 2,737,231 shares at September 30, 2019 and December 31, 2018, respectively, at cost

 

 

(344,204

)

 

(344,204

)

TOTAL STOCKHOLDERS’ EQUITY

 

 

11,008,792

 

 

8,960,807

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$

13,717,123

 

$

10,545,039

 

The accompanying notes are an integral part of these financial statements

REPRO MED SYSTEMS, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

For the

Three Months Ended

 

For the

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET SALES

 

$

6,617,397

 

$

4,547,187

 

$

16,940,487

 

$

13,082,737

 

Cost of goods sold

 

 

2,234,489

 

 

1,655,619

 

 

6,033,961

 

 

4,985,761

 

Gross Profit

 

 

4,382,908

 

 

2,891,568

 

 

10,906,526

 

 

8,096,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

2,441,381

 

 

1,917,127

 

 

6,976,684

 

 

5,513,727

 

Litigation

 

 

864,009

 

 

286,487

 

 

2,481,471

 

 

592,787

 

Research and development

 

 

170,260

 

 

126,923

 

 

450,454

 

 

160,735

 

Depreciation and amortization

 

 

82,774

 

 

78,345

 

 

252,594

 

 

228,900

 

Total Operating Expenses

 

 

3,558,424

 

 

2,408,882

 

 

10,161,203

 

 

6,496,149

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Operating Profit

 

 

824,484

 

 

482,686

 

 

745,323

 

 

1,600,827

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Operating Income/(Expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on currency exchange

 

 

(9,358

)

 

(5,842

)

 

(20,283

)

 

(16,256

)

Gain on disposal of fixed asset, net

 

 

 

 

6,000

 

 

49,740

 

 

6,000

 

Interest, net and other income, net

 

 

23,368

 

 

6,972

 

 

59,091

 

 

13,088

 

TOTAL OTHER INCOME

 

 

14,010

 

 

7,130

 

 

88,548

 

 

2,832

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE TAXES

 

 

838,494

 

 

489,816

 

 

833,871

 

 

1,603,659

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income Tax Expense

 

 

(186,681

)

 

(103,263

)

 

(189,265

)

 

(337,956

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

651,813

 

$

386,553

 

$

644,606

 

$

1,265,703

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME PER SHARE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.02

 

$

0.01

 

$

0.02

 

$

0.03

 

Diluted

 

$

0.02

 

$

0.01

 

$

0.02

 

$

0.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

39,022,298

 

 

38,194,682

 

 

38,534,021

 

 

38,104,393

 

Diluted

 

 

39,298,408

 

 

38,985,684

 

 

38,734,083

 

 

38,875,737

 

The accompanying notes are an integral part of these financial statements

REPRO MED SYSTEMS, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

 

2019

 

2018

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

Net Income

 

$

644,606

 

$

1,265,703

 

Adjustments to reconcile net income to net cash (used in)/provided by operating activities:

 

 

 

 

 

 

 

Stock based compensation expense

 

 

897,300

 

 

154,925

 

Depreciation and amortization

 

 

252,594

 

 

228,900

 

Deferred capital gain – building lease

 

 

(3,763

)

 

(16,860

)

Deferred taxes

 

 

134,563

 

 

10,834

 

Gain on disposal of fixed asset

 

 

(49,740

)

 

(6,000

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

(Increase)/Decrease in accounts receivable

 

 

(2,120,780

)

 

351,319

 

Increase in inventory

 

 

(634,803

)

 

(290,722

)

Increase in prepaid expense and other assets

 

 

(206,560

)

 

(177,346

)

Increase in accounts payable

 

 

421,479

 

 

137,521

 

Decrease in accrued payroll and related taxes

 

 

(310,355

)

 

(213,700

)

Increase/(Decrease) in accrued expense

 

 

490,053

 

 

(30,823

)

Decrease in accrued tax liability

 

 

(16,608

)

 

(60,852

)

NET CASH (USED IN)/PROVIDED BY OPERATING ACTIVITIES

 

 

(502,014

)

 

1,352,899

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

Payments for capital expenditures

 

 

(158,193

)

 

(188,006

)

Purchase of certificate of deposit

 

 

 

 

(1,500,000

)

Payments for patents

 

 

(188,274

)

 

(137,858

)

Proceeds on disposal of fixed asset

 

 

217,821

 

 

6,000

 

Proceeds from certificates of deposit

 

 

1,517,927

 

 

92,266

 

NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES

 

 

1,389,281

 

 

(1,727,598

)

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

Stock issuances

 

 

508,900

 

 

51,250

 

Payment for cancelled shares

 

 

(2,820

)

 

(1,755

)

Finance lease

 

 

(3,122

)

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

502,958

 

 

49,495

 

 

 

 

 

 

 

 

 

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

1,390,225

 

 

(325,204

)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

 

 

3,738,803

 

 

3,974,536

 

CASH AND CASH EQUIVALENTS, END OF PERIOD

 

$

5,129,028

 

$

3,649,332

 

 

 

 

 

 

 

 

 

Supplemental Information

 

 

 

 

 

 

 

Cash paid during the periods for:

 

 

 

 

 

 

 

Interest

 

$

280

 

$

 

Taxes

 

$

103,465

 

$

378,000

 

 

 

 

 

 

 

 

 

NON-CASH FINANCING AND INVESTING ACTIVITIES

 

 

 

 

 

 

 

Issuance of common stock as compensation

 

$

256,525

 

$

103,333

 

The accompanying notes are an integral part of these financial statements

REPRO MED SYSTEMS, INC.

RECONCILIATION OF NON-GAAP MEASURES

 

 

Three Months Ended

 

Nine Months Ended

Reconciliation of GAAP Net Income

 

September 30,

 

September 30,

to Non-GAAP Adjusted EBITDA:

 

2019

 

2018

 

2019

 

2018

GAAP Net Income

 

$

651,813

 

$

386,553

 

$

644,606

 

$

1,265,703

 

Tax Expense

 

 

186,681

 

 

103,263

 

 

189,265

 

 

337,956

 

Depreciation/Amortization

 

 

82,774

 

 

78,345

 

 

252,594

 

 

228,900

 

Interest Income, Net

 

 

(23,368

)

 

(6,972

)

 

(59,091

)

 

(13,088

)

Reorganization Charges

 

 

 

 

232,471

 

 

354,926

 

 

383,668

 

Litigation

 

 

864,009

 

 

286,487

 

 

2,481,471

 

 

592,787

 

Stock Option Expense

 

 

324,135

 

 

24,922

 

 

640,775

 

 

51,592

 

Non-GAAP Adjusted EBITDA

 

$

2,086,044

 

$

1,105,069

 

$

4,504,546

 

$

2,847,518

 

 

Contacts

The Equity Group Inc.
Devin Sullivan

Senior Vice President

212-836-9608

dsullivan@equityny.com

Kalle Ahl, CFA

Vice President

212-836-9614

kahl@equityny.com

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