KORU Medical Systems, Inc. (Repro Med Systems, Inc.) — FY 2021 Form 10-K
Reporting period: Year ended December 31, 2021; comparative figures are for FY 2020. This filing reports annual results, not standalone fourth-quarter results. The company designs and sells portable infusion systems, principally for subcutaneous immunoglobulin (SCIg) therapy. Its FREEDOM System includes syringe drivers, needle sets and tubing.
Financial performance
| Metric | FY 2021 | FY 2020 | Change |
|---|---|---|---|
| Revenue | $23.49 million | $24.18 million | Down 2.8% |
| Gross profit / margin | $13.77 million / 58.6% | $14.94 million / 61.8% | Gross profit down 7.8%; margin down 3.2 percentage points |
| Operating expenses | $20.80 million | $16.19 million | Up 28.5% |
| Net loss | $4.56 million | $1.21 million | Loss increased; loss per share was $0.10 versus $0.03 |
| Cash used in operating activities | $4.32 million | $0.74 million | Cash use increased |
| Cash and cash equivalents | $25.33 million | $27.32 million | Down $1.98 million |
Domestic core revenue rose 0.8% to $19.05 million, largely reflecting second-half pricing. International core revenue increased 14.5% to $3.86 million. Novel-therapy revenue fell materially, principally because FY 2020 included a large clinical-trial order. Domestic revenue was $19.49 million and international revenue $4.00 million in 2021.
SG&A increased 48.5% to $17.86 million, reflecting team expansion, CEO transition and recruitment costs, commercialization and regulatory work, and higher director-related costs. R&D rose 90.8% to $2.47 million. Litigation expense was zero, compared with $2.45 million in 2020 following the EMED settlement. The 2021 income-tax benefit was $1.80 million, materially reducing the reported net loss; the filing attributes it primarily to deferred tax effects, including net operating losses.
Liquidity, debt and capital
- Current assets were $37.32 million and current liabilities $4.79 million at year-end. The company reported $6.11 million of inventory and a $0.72 million receivable related to the Employee Retention Credit.
- The company reported $3.5 million available under its revolving credit facility and no balance drawn on that line at December 31, 2021. It had a $508,583 current note payable, related to financing insurance premiums; the filing also reports $0.9 million of such financing in 2021.
- Operating cash use was $4.32 million; investing cash use was $0.37 million. Financing provided $2.71 million, including option-exercise proceeds and borrowings. FY 2020 financing had included $26.6 million of net equity-offering proceeds.
- Management stated that cash, operating cash flows and the available credit facility should cover requirements for at least the next 12 months and thereafter for the foreseeable future.
Changes, outlook and material matters
- Management reported four consecutive quarters of sequential revenue growth during 2021, although full-year revenue declined. Gross margin pressure reflected unfavorable product mix and delay in transitioning production to the secondary supplier; price increases partly offset the decline.
- For 2022, management estimated expenses of $27–$28 million and capital investments of $1.5–$2.0 million, net of financing arrangements. It expected inventory to rise during the facility move and supplier transition, then convert to cash as those activities are completed. The filing does not provide a specific revenue or earnings forecast.
- The company planned to move headquarters and manufacturing operations to a new 43,975-square-foot Mahwah, New Jersey facility in June 2022. It expected the Command Medical Products transition for subassemblies, needle sets and tubing to be completed in the second half of 2022. Both transitions create execution and continuity-of-supply risks.
- EU medical-device regulation compliance is required to maintain product sales beyond applicable transition deadlines, including May 2024; the company also cited UKCA requirements for Great Britain by July 2023. Regulatory delays or noncompliance could restrict sales.
- Revenue is concentrated: four distributors represented approximately 62% of net revenue, and one U.S. distributor approximately 41%. One major customer accounted for approximately 41% of product revenue in 2021, versus 51% in 2020.
- Other disclosed risks include single-source components, COVID-related demand and supply uncertainty, plasma/drug availability, reimbursement and pricing pressure, competition, and dependence on the success of customers’ therapies in development. The company reported no material pending litigation; the EMED disputes were settled in 2020.
- The company issued 2.0 million stock options during 2021 and granted the new CEO restricted stock awards covering 1.0 million shares. The auditor issued an unqualified opinion on the financial statements; its critical audit matter was valuation of stock options. Management concluded internal controls over financial reporting were effective; the auditor was not engaged to audit those controls.
Most important facts for investors to verify
- Whether the Mahwah move and Command supplier transition were completed on schedule without disrupting customer deliveries, and whether margin recovered afterward.
- Whether the $27–$28 million 2022 expense estimate and $1.5–$2.0 million capital-investment estimate were achieved, alongside operating cash burn and inventory growth.
- Whether distributor/customer concentration, SCIg drug supply and international growth changed materially.
- Progress toward EU MDR and UKCA compliance, and any effect on market access or costs.
- The composition and recurrence of the $1.80 million tax benefit and $0.68 million other income, and the potential dilution from outstanding options and equity awards.