Cover
Cover - $ / shares | 6 Months Ended | ||
Jun. 30, 2023 | Aug. 09, 2023 | Dec. 31, 2022 | |
Cover [Abstract] | |||
Document Type | 10-Q | ||
Amendment Flag | false | ||
Document Quarterly Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Jun. 30, 2023 | ||
Document Fiscal Period Focus | Q2 | ||
Document Fiscal Year Focus | 2023 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity File Number | 0-12305 | ||
Entity Registrant Name | KORU MEDICAL SYSTEMS, INC. | ||
Entity Central Index Key | 0000704440 | ||
Entity Tax Identification Number | 13-3044880 | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Address, Address Line One | 100 Corporate Drive | ||
Entity Address, City or Town | Mahwah | ||
Entity Address, State or Province | NJ | ||
Entity Address, Postal Zip Code | 07430 | ||
City Area Code | 845 | ||
Local Phone Number | 469-2042 | ||
Title of 12(b) Security | Common stock, $0.01 par value | ||
Trading Symbol | KRMD | ||
Security Exchange Name | NASDAQ | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false | ||
Entity Common Stock, Shares Outstanding | 45,639,081 | ||
Entity Listing, Par Value Per Share | $ 0.01 | ||
Treasury Stock, Common, Shares | 3,420,502 | 3,420,502 | 3,420,502 |
BALANCE SHEETS (UNAUDITED)
BALANCE SHEETS (UNAUDITED) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 11,719,405 | $ 17,408,257 |
Accounts receivable less allowance for doubtful accounts of $21,459 as of June 30, 2023 and December 31, 2022 | 3,639,755 | 3,558,884 |
Inventory | 5,278,224 | 6,404,867 |
Other receivables | 1,131,115 | 972,396 |
Prepaid expenses | 772,893 | 1,457,232 |
TOTAL CURRENT ASSETS | 22,541,392 | 29,801,636 |
Property and equipment, net | 3,811,843 | 3,886,975 |
Intangible assets, net of accumulated amortization of $357,809 and $325,872 as of June 30, 2023 and December 31, 2022, respectively | 772,543 | 787,182 |
Operating lease right-of-use assets | 3,626,348 | 3,786,545 |
Deferred income tax assets, net | 5,144,876 | 3,967,480 |
Other assets | 98,970 | 102,625 |
TOTAL ASSETS | 35,995,972 | 42,332,443 |
CURRENT LIABILITIES | ||
Accounts payable | 1,574,630 | 2,391,799 |
Accrued expenses | 1,362,293 | 2,889,941 |
Note payable | 433,295 | |
Other liabilities | 263,253 | 257,337 |
Accrued payroll and related taxes | 422,623 | 542,399 |
Financing lease liability – current | 101,072 | 98,335 |
Operating lease liability – current | 352,809 | 345,834 |
TOTAL CURRENT LIABILITIES | 4,076,680 | 6,958,940 |
Financing lease liability, net of current portion | 343,053 | 394,283 |
Operating lease liability, net of current portion | 3,475,092 | 3,653,257 |
TOTAL LIABILITIES | 7,894,825 | 11,006,480 |
STOCKHOLDERS’ EQUITY | ||
Common stock, $0.01 par value, 75,000,000 shares authorized, 49,033,652 and 48,861,891 shares issued 45,613,150 and 45,441,389 shares outstanding as of June 30, 2023, and December 31, 2022, respectively | 490,337 | 488,619 |
Additional paid-in capital | 45,932,354 | 44,252,117 |
Treasury stock, 3,420,502 shares as of June 30, 2023 and December 31, 2022, at cost | (3,843,562) | (3,843,562) |
Accumulated deficit | (14,477,982) | (9,571,211) |
TOTAL STOCKHOLDERS’ EQUITY | 28,101,147 | 31,325,963 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 35,995,972 | $ 42,332,443 |
BALANCE SHEETS (UNAUDITED) (Par
BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for credit loss, current | $ 21,459 | $ 21,459 |
Finite-lived intangible assets, accumulated amortization | $ 357,809 | $ 325,872 |
Common stock, par or stated value per share | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares, issued | 49,033,652 | 48,861,891 |
Common stock, shares, outstanding | 45,613,150 | 45,441,389 |
Treasury stock, shares | 3,420,502 | 3,420,502 |
STATEMENTS OF OPERATIONS (UNAUD
STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Income Statement [Abstract] | ||||
NET REVENUES | $ 6,935,931 | $ 6,546,628 | $ 14,328,536 | $ 12,790,958 |
Cost of goods sold | 3,047,807 | 3,200,455 | 6,293,377 | 5,822,480 |
Gross Profit | 3,888,124 | 3,346,173 | 8,035,159 | 6,968,478 |
OPERATING EXPENSES | ||||
Selling, general and administrative | 5,303,167 | 5,530,022 | 10,729,044 | 11,021,235 |
Research and development | 1,596,614 | 1,303,731 | 3,161,483 | 2,452,086 |
Depreciation and amortization | 212,919 | 125,882 | 426,036 | 235,134 |
Total Operating Expenses | 7,112,700 | 6,959,635 | 14,316,563 | 13,708,455 |
Net Operating Loss | (3,224,576) | (3,613,462) | (6,281,404) | (6,739,977) |
Non-Operating Income/(Expense) | ||||
Loss on currency exchange | (2,472) | (21,705) | (3,152) | (28,840) |
Loss on disposal of fixed assets, net | (56,279) | |||
Interest income, net | 131,167 | 3,566 | 256,669 | 2,103 |
TOTAL OTHER INCOME/(EXPENSE) | 128,695 | (18,139) | 197,238 | (26,737) |
LOSS BEFORE INCOME TAXES | (3,095,881) | (3,631,601) | (6,084,166) | (6,766,714) |
Income Tax Benefit | 599,995 | 710,260 | 1,177,395 | 1,307,859 |
NET LOSS | $ (2,495,886) | $ (2,921,341) | $ (4,906,771) | $ (5,458,855) |
NET LOSS PER SHARE | ||||
Basic | $ (0.05) | $ (0.07) | $ (0.11) | $ (0.12) |
Diluted | $ (0.05) | $ (0.07) | $ (0.11) | $ (0.12) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||||
Basic | 45,606,603 | 44,921,870 | 45,547,427 | 44,795,625 |
Diluted | 45,606,603 | 44,921,870 | 45,547,427 | 44,795,625 |
STATEMENTS OF CASH FLOWS (UNAUD
STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (4,906,771) | $ (5,458,855) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation expense | 1,681,955 | 1,579,151 |
Depreciation and amortization | 426,036 | 235,134 |
Deferred income taxes | (1,177,395) | (1,308,069) |
Loss on disposal of fixed assets | 56,279 | |
ROU landlord credit | (10,994) | |
Changes in operating assets and liabilities: | ||
(Increase) in Accounts receivable | (239,590) | (454,452) |
Decrease / (Increase) in Inventory | 1,126,643 | (665,176) |
Decrease in Prepaid expenses and other assets | 687,994 | 334,193 |
Increase in Other liabilities | 5,916 | 150,501 |
(Decrease) / Increase in Accounts payable | (817,169) | 1,162,329 |
(Decrease) / Increase in Accrued payroll and related taxes | (119,776) | 535,438 |
Decrease in Accrued expenses | (1,527,648) | (735,508) |
NET CASH USED IN OPERATING ACTIVITIES | (4,814,520) | (4,625,314) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (375,246) | (1,915,289) |
Purchases of intangible assets | (17,298) | (13,540) |
NET CASH USED IN INVESTING ACTIVITIES | (392,544) | (1,928,829) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payments on indebtedness | (433,295) | (508,583) |
Payments on finance lease liability | (48,493) | (6,611) |
NET CASH USED IN FINANCING ACTIVITIES | (481,788) | (515,194) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (5,688,852) | (7,069,337) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 17,408,257 | 25,334,889 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 11,719,405 | 18,265,552 |
Cash paid during the periods for: | ||
Interest | 20,165 | 6,204 |
Income taxes | 3,160 | |
Schedule of Non-Cash Operating, Investing and Financing Activities: | ||
Issuance of common stock as compensation | $ 266,023 | $ 258,005 |
STATEMENTS OF STOCKHOLDERS' EQU
STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)) - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Retained Earnings [Member] | Treasury Stock, Common [Member] | Total |
Beginning balance, value at Dec. 31, 2021 | $ 480,441 | $ 40,774,245 | $ (910,069) | $ (3,843,562) | $ 36,501,055 |
Beginning balance (in shares) at Dec. 31, 2021 | 48,044,162 | ||||
Accrued compensation paid in shares | $ 475 | 142,025 | 142,500 | ||
Issuance of stock-based compensation (in shares) | 47,500 | ||||
Compensation expense related to stock options | 524,670 | 524,670 | |||
Compensation expense related to restricted stock awards | 170,386 | 170,386 | |||
Ending balance, value at Mar. 31, 2022 | 481,212 | 41,611,030 | (3,447,583) | (3,843,562) | 34,801,097 |
Net loss | (2,537,514) | (2,537,514) | |||
Issuance upon options exercised | $ 296 | (296) | |||
Issuance upon options exercised (in shares) | 29,627 | ||||
Ending balance (in shares) at Mar. 31, 2022 | 48,121,289 | ||||
Beginning balance, value at Dec. 31, 2021 | $ 480,441 | 40,774,245 | (910,069) | (3,843,562) | 36,501,055 |
Beginning balance (in shares) at Dec. 31, 2021 | 48,044,162 | ||||
Ending balance, value at Jun. 30, 2022 | $ 484,076 | 42,349,760 | (6,368,924) | (3,843,562) | 32,621,350 |
Net loss | (5,458,855) | ||||
Ending balance (in shares) at Jun. 30, 2022 | 48,407,619 | ||||
Beginning balance, value at Mar. 31, 2022 | $ 481,212 | 41,611,030 | (3,447,583) | (3,843,562) | 34,801,097 |
Beginning balance (in shares) at Mar. 31, 2022 | 48,121,289 | ||||
Accrued compensation paid in shares | $ 697 | 114,808 | 115,505 | ||
Issuance of stock-based compensation (in shares) | 69,707 | ||||
Compensation expense related to stock options | 527,736 | 527,736 | |||
Compensation expense related to restricted stock awards | $ 500 | 231,011 | 231,511 | ||
Issuance of restricted stock awards (in shares) | 50,000 | ||||
Ending balance, value at Jun. 30, 2022 | $ 484,076 | 42,349,760 | (6,368,924) | (3,843,562) | 32,621,350 |
Net loss | (2,921,341) | (2,921,341) | |||
Issuance upon options exercised | $ 1,667 | (134,825) | (133,158) | ||
Issuance upon options exercised (in shares) | 166,623 | ||||
Ending balance (in shares) at Jun. 30, 2022 | 48,407,619 | ||||
Beginning balance, value at Dec. 31, 2022 | $ 488,619 | 44,252,117 | (9,571,211) | (3,843,562) | 31,325,963 |
Beginning balance (in shares) at Dec. 31, 2022 | 48,861,891 | ||||
Accrued compensation paid in shares | $ 489 | 175,287 | 175,776 | ||
Issuance of stock-based compensation (in shares) | 48,875 | ||||
Compensation expense related to stock options | 535,059 | 535,059 | |||
Compensation expense related to restricted stock awards | $ 500 | 169,887 | 170,387 | ||
Issuance of restricted stock awards (in shares) | 50,000 | ||||
Ending balance, value at Mar. 31, 2023 | $ 489,608 | 45,132,350 | (11,982,096) | (3,843,562) | 29,796,300 |
Net loss | (2,410,885) | (2,410,885) | |||
Ending balance (in shares) at Mar. 31, 2023 | 48,960,766 | ||||
Beginning balance, value at Dec. 31, 2022 | $ 488,619 | 44,252,117 | (9,571,211) | (3,843,562) | 31,325,963 |
Beginning balance (in shares) at Dec. 31, 2022 | 48,861,891 | ||||
Ending balance, value at Jun. 30, 2023 | $ 490,337 | 45,932,354 | (14,477,982) | (3,843,562) | 28,101,147 |
Net loss | (4,906,771) | ||||
Ending balance (in shares) at Jun. 30, 2023 | 49,033,652 | ||||
Beginning balance, value at Mar. 31, 2023 | $ 489,608 | 45,132,350 | (11,982,096) | (3,843,562) | 29,796,300 |
Beginning balance (in shares) at Mar. 31, 2023 | 48,960,766 | ||||
Accrued compensation paid in shares | $ 229 | 90,018 | 90,247 | ||
Issuance of stock-based compensation (in shares) | 22,886 | ||||
Compensation expense related to stock options | 540,099 | 540,099 | |||
Compensation expense related to restricted stock awards | $ 500 | 169,887 | 170,387 | ||
Issuance of restricted stock awards (in shares) | 50,000 | ||||
Ending balance, value at Jun. 30, 2023 | $ 490,337 | 45,932,354 | (14,477,982) | (3,843,562) | 28,101,147 |
Net loss | $ (2,495,886) | $ (2,495,886) | |||
Ending balance (in shares) at Jun. 30, 2023 | 49,033,652 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 1 — NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS KORU MEDICAL SYSTEMS, INC. (the “Company,” “KORU Medical,” “we,” “us” or “our”) designs, manufactures and markets proprietary portable and innovative medical devices primarily for the subcutaneous drug delivery market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international regulations and standards for quality system management. The Company operates as one BASIS OF PRESENTATION The accompanying financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2022 (“Annual Report”). In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in the audited financial statements of the Company. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal, recurring nature. The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods. CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company has historically held cash balances in excess of $ 250,000 250,000 10.4 PATENTS Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents. STOCK-BASED COMPENSATION The Company maintains a stock option plan and an omnibus equity incentive plan under which it grants stock options to certain executives, key employees and consultants. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. The Company also maintains a non-employee director compensation plan. Shares of stock granted for director fees are recorded at the fair value of the shares at the grant date. The Company issues restricted stock awards. Restricted stock awards are equity classified and measured at the fair market value of the underlying stock at the grant date. The fair value of restricted stock awards vesting at certain market capitalization thresholds were estimated on the date of grant using the Brownian Motion Monte Carlo lattice model. The fair value of restricted stock awards with time-based vesting were estimated on the date of grant at the current stock price. The fair value of restricted stock awards vesting at certain annual sales growth thresholds were estimated as of the date of Board acknowledgement of the achievement, at the current stock price. We recognize restricted stock expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur. NET LOSS PER COMMON SHARE Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and common equivalent shares outstanding during the period. The Company’s potentially dilutive common shares are those that result from diluted common stock options and unvested restricted stock awards. The calculation of diluted loss per share excluded stock options of 11,784 137,539 14,001 166,441 The calculation of diluted loss per share excluded performance-based restricted stock and RSUs of 904,496 950,000 904,496 950,000 The following securities were not included in the computation of diluted shares outstanding for the three and six months ended June 30, 2023, and 2022 because the effect would be anti-dilutive: Schedule of securities Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Common stock options $ 11,784 $ 137,539 $ 14,001 $ 166,441 RSUs 54,496 — 54,496 — Restricted stock - PSU 850,000 950,000 850,000 950,000 Total $ 916,280 $ 1,087,539 $ 916,280 $ 1,116,441 Therefore, diluted weighted average number of shares outstanding and diluted net loss per share were the same as basic weighted average number of shares outstanding and net loss per share for the three and six months ended June 30, 2023 and 2022. Schedule of net income per common share Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Net loss $ (2,495,886 ) $ (2,921,341 ) $ (4,906,771 ) $ (5,458,855 ) Weighted Average Outstanding Shares: Basic weighted average shares outstanding 45,606,603 44,921,870 45,547,427 44,795,625 Dilutive effect of outstanding stock options and unvested restricted stock — — — — Diluted weighted average shares outstanding 45,606,603 44,921,870 45,547,427 44,795,625 Net loss per share Basic $ (0.05 ) $ (0.07 ) $ (0.11 ) $ (0.12 ) Diluted $ (0.05 ) $ (0.07 ) $ (0.11 ) $ (0.12 ) USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to asset lives, deferred tax valuation allowances, inventory valuation, and customer rebate and incentive accruals. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the entire 2023 fiscal year. REVENUE RECOGNITION Our revenues are derived from three business sources: (i) domestic core (which consists of US and Canada), (ii) international core, and (iii) novel therapies. Our core domestic and international revenues consist of sales of our syringe drivers, tubing and needles (“Product Revenue”) for the delivery of subcutaneous drugs that are FDA cleared for use with the KORU Medical infusion system, with the primary delivery for immunoglobulin to treat Primary Immunodeficiency Diseases (“PIDD”) and Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”). Novel therapies consist of Product Revenue for feasibility/clinical trials (pre-clinical studies, Phase I, Phase II, Phase III) of biopharmaceutical companies in the drug development process as well as non-recurring engineering services (“NRE”) revenues (including testing and registration services) received from biopharmaceutical companies to ready or customize the FREEDOM System for clinical and commercial use across multiple drug categories. For Product Revenue, we recognize revenues when shipment occurs, and at which point the customer obtains control and ownership of the goods. Shipping costs generally are billed to customers and are included in Product Revenue. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred. Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. In addition, rebates are provided to customers for meeting growth targets. Provisions for both distributor pricing and customer growth rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it is probable the growth target will be achieved. We recognize NRE revenue under an input method, which recognizes revenue on the basis of our efforts or inputs (for example, resources consumed, labor hours expended, costs incurred, or time elapsed) to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation (i.e. completion milestone). The input method that we use is based on costs incurred. Contracts are often modified to account for changes in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes existing, enforceable rights and obligations. Generally, when contract modifications create new performance obligations, the modification is considered to be a separate contract and revenue is recognized prospectively. When contract modifications change existing performance obligations, the impact on the existing transaction price and measure of progress for the performance obligation to which it relates is generally recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. Contract assets primarily represent revenue earnings over time that are not yet billable based on the terms of the contracts. Contract liabilities (i.e., deferred revenue) consist of fees invoiced or paid by the Company’s customers for which the associated performance obligations have not been satisfied and revenue has not been recognized based on the Company’s revenue recognition criteria described above. As of June 30, 2023, the Company has recognized a contract asset of $ 282,118 The following table summarizes net revenues by geography for the three and six months ended June 30, 2023, and 2022: Schedule of net sales by geography Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues Domestic $ 5,686,427 $ 5,512,173 $ 11,970,392 $ 10,813,561 International 1,249,504 1,034,455 2,358,144 1,977,397 Total $ 6,935,931 $ 6,546,628 $ 14,328,536 $ 12,790,958 ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments FAIR VALUE MEASUREMENTS Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: • 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. The carrying amounts of cash and cash equivalents, including investments in short-term U.S. Treasury bills, accounts receivable, prepaid expenses, accounts payable and accrued expenses are considered to be representative of their fair values because of the short-term nature of those instruments. There were no transfers between levels in the fair value hierarchy during the three and six months ended June 30, 2023 and 2022. IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value. The Company did not record any impairment losses through June 30, 2023. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 6 Months Ended |
Jun. 30, 2023 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 2 — PROPERTY AND EQUIPMENT Property and equipment consists of the following at: Schedule of property and equipment June 30, 2023 December 31, 2022 Furniture and office equipment $ 1,345,456 $ 1,456,745 Leasehold improvements 1,933,591 2,413,820 Manufacturing equipment and tooling 2,952,214 2,810,813 Total property and equipment 6,231,261 6,681,378 Less: accumulated depreciation and amortization (2,419,418 ) (2,794,403 ) Property and equipment, net $ 3,811,843 $ 3,886,975 Leasehold improvements and accumulated amortization each decreased of $ 0.5 million Depreciation expense was $ 196,865 110,478 394,099 204,562 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 3 — STOCK-BASED COMPENSATION The Company has three equity incentive plans: the 2015 Stock Option Plan, as amended (the “2015 Plan”), the 2021 Omnibus Equity Incentive Plan (the “2021 Plan”), and the Non-Employee Director Compensation Plan. The Company has also issued restricted stock as employment inducement awards to its Chief Executive Officer. As of June 30, 2023, there were options to purchase 2,600,000 40,000 59,250 The 2021 Plan provides for the grant of up to 1,000,000 45,000 156,758 21,100 520,000 Each non-employee director of the Company (other than the Chairman of the Board) is eligible to receive $ 110,000 to be paid quarterly $12,500 in cash and $15,000 in common stock. 140,000 to be paid quarterly $12,500 in cash and $22,500 in common stock. The per share weighted average fair value of stock options granted during the six months ended June 30, 2023 and June 30, 2022 was $ 2.78 2.03 125,504 107,855 The following table summarizes the activities for our stock option plans for the six months ended June 30, 2023, and 2022. Schedule of time based stock options June 30, 2023 2022 Dividend yield 0.00 0.00 Expected Volatility 56.8 61.3 65.9 77.5 Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 10 Risk-free rate 3.50 3.53 1.81 2.99 The following table summarizes the status of the time based stock options: Schedule of status of time based stock options Six Months Ended June 30, 2023 2022 Shares Weighted Shares Weighted Outstanding at January 1 3,035,000 $ 3.92 3,672,500 $ 3.42 Granted 85,000 $ 3.94 770,000 $ 2.68 Exercised — $ — 618,750 $ 1.57 Forfeited — $ — 411,250 $ 2.94 Outstanding at June 30 3,120,000 $ 3.92 3,412,500 $ 3.64 Options exercisable at June 30 1,158,750 $ 4.37 837,500 $ 3.47 Weighted average fair value of options granted during the period — $ 2.78 — $ 2.03 Stock-based compensation expense — $ 1,075,158 — $ 1,052,405 Total stock-based compensation expense was $ 1,075,158 1,052,405 The weighted-average grant-date fair value of options granted during the six months ended June 30, 2023, and 2022 was $ 0.2 million 1.6 million no 618,750 The following table presents information pertaining to options outstanding at June 30, 2023: Schedule of information pertaining to options outstanding Range of Exercise Price Number Weighted Weighted Number Weighted $2.25-$9.49 3,120,000 8.5 $ 3.92 1,158,750 $ 4.37 As of June 30, 2023, there was $ 4,248,300 46 3,798,884 2,149,858 As of June 30, 2023, an aggregate of 361,392 RESTRICTED STOCK AWARDS The following table summarizes the activities for our restricted stock awards for the six months ended June 30, 2023, and 2022. Six Months Ended June 30, 2023 2022 Shares Weighted Shares Weighted Unvested at January 1 950,000 $ 3.04 1,000,000 $ 3.01 Granted 54,496 $ 3.68 — $ — Vested 100,000 $ 3.31 50,000 $ 3.31 Forfeited/canceled — $ — — $ — Unvested at June 30 904,496 $ 2.97 950,000 $ 2.99 As of June 30, 2023, and 2022, there was $ 1,477,730 1,958,952 71,563 71,563 |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 6 Months Ended |
Jun. 30, 2023 | |
Debt Disclosure [Abstract] | |
DEBT OBLIGATIONS | NOTE 4 — DEBT OBLIGATIONS The Company had a $ 3,500,000 On August 5, 2022, the Company entered into a commercial insurance premium finance and security agreement with AON Premium Finance, LLC in the aggregate principal amount of $ 0.8 million 6.5 Monthly payments are due on the first of each month beginning August 1, 2022 through June 1, 2023. 433,295 zero |
LEASES
LEASES | 6 Months Ended |
Jun. 30, 2023 | |
Leases [Abstract] | |
LEASES | NOTE 5 — LEASES The Company has an operating lease for its corporate office, and finance leases for certain office and computer equipment. Our operating lease has remaining lease term of 9.2 years. 3.9 4.3 The components of lease expense were as follows: Schedule of components of lease expense Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Operating lease cost $ 112,279 $ 161,140 $ 224,801 $ 239,582 Short-term lease cost 25,143 28,579 78,037 78,288 Total lease cost $ 137,422 $ 189,719 $ 302,838 $ 317,870 Finance lease cost: Amortization of right-of-use assets $ 27,224 $ 5,918 $ 54,447 $ 5,918 Interest on lease liabilities 6,387 0 13,107 0 Total finance lease cost $ 33,611 $ 5,918 $ 67,554 $ 5,918 Supplemental cash flow information related to leases was as follows: Schedule of cash flow information related to leases Six Months Ended June 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 229,879 $ 181,544 Financing cash flows from finance leases 61,600 6,611 Supplemental balance sheet information related to leases was as follows: Schedule of balance sheet information related to leases June 30, December 31, Operating Leases Operating lease right-of-use assets $ 3,626,348 $ 3,786,545 Operating lease current liabilities 352,809 345,834 Operating lease long term liabilities 3,475,092 3,653,257 Total operating lease liabilities $ 3,827,901 $ 3,999,091 Finance Leases Property and equipment, at cost $ 544,468 $ 544,468 Accumulated depreciation (105,342 ) (50,895 ) Property and equipment, net $ 439,126 $ 493,573 Finance lease current liabilities 101,072 98,335 Finance lease long term liabilities 343,053 394,283 Total finance lease liabilities $ 444,125 $ 492,618 June 30, December 31, Weighted Average Remaining Lease Term Operating leases 9.2 9.7 Finance leases 4.0 4.6 Weighted Average Discount Rate Operating leases 4.00 4.00 Finance leases 4.25 4.25 Maturities of lease liabilities are as follows: Schedule of maturities of lease liabilities Year Ending December 31, Operating Leases Finance Leases Remainder of 2023 $ 249,752 61,600 2024 499,503 123,200 2025 499,503 123,200 2026 499,503 123,200 2027 499,503 65,957 Thereafter 2,331,015 — Total undiscounted lease payments 4,578,779 497,157 Less: imputed interest (750,878 ) (53,032 ) Total lease liabilities $ 3,827,901 $ 444,125 |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 6 — INCOME TAXES For interim income tax reporting, the Company estimates its annual effective tax rate and applies it to fiscal year-to-date pretax loss, excluding unusual or infrequently occurring discrete items. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded. The Company reported an income tax benefit of $ 0.6 0.7 1.2 1.3 Each reporting period, we evaluate the realizability of our net deferred tax assets and perform an assessment of both positive and negative evidence. Based on our evaluation of all available positive and negative evidence, we determined, as of June 30, 2023 and December 31, 2022, that it is more likely than not that our net U.S. deferred tax assets will be realized. Due to estimates and the potential for changes in facts and circumstances, it is reasonably possible that we will be required to record a valuation allowance in future reporting periods that could have a material effect on our results of operations. Recurring items cause our effective tax rate to differ from the U.S. federal statutory rate of 21 Beginning in 2022, certain research and development costs are required to be capitalized and amortized over a five-year period under the Tax Cuts and Jobs Act enacted in December 2017. This change will impact the expected U.S. federal and state income tax expense and cash taxes to be paid for our fiscal 2023. The Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. Income tax returns for years prior to fiscal 2019 are no longer subject to examination by tax authorities. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 7 — COMMITMENTS AND CONTINGENCIES LEGAL PROCEEDINGS The Company has been and may again become involved in legal proceedings, claims and litigation arising in the ordinary course of business. KORU Medical is not presently a party to any litigation or other legal proceeding that is believed to be material to its financial condition. |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 6 Months Ended |
Jun. 30, 2023 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 8 — SUBSEQUENT EVENTS On July 25, 2023, the Company entered into a commercial insurance premium finance and security agreement with AON Premium Finance, LLC in the aggregate principal amount of $ 0.6 9.5 Monthly payments are due on the first of each month beginning August 1, 2023 through June 1, 2024. |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
NATURE OF OPERATIONS | NATURE OF OPERATIONS KORU MEDICAL SYSTEMS, INC. (the “Company,” “KORU Medical,” “we,” “us” or “our”) designs, manufactures and markets proprietary portable and innovative medical devices primarily for the subcutaneous drug delivery market as governed by the United States Food and Drug Administration (the “FDA”) quality and regulatory system and international regulations and standards for quality system management. The Company operates as one |
BASIS OF PRESENTATION | BASIS OF PRESENTATION The accompanying financial statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2022 (“Annual Report”). In accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”), the Company has omitted footnote disclosures that would substantially duplicate the disclosures contained in the audited financial statements of the Company. The accompanying interim financial statements are unaudited and reflect all adjustments which are in the opinion of management necessary for a fair statement of the Company’s financial position, results of operations, and cash flows for the periods presented. All such adjustments are of a normal, recurring nature. The Company’s results of operations and cash flows for the interim periods are not necessarily indicative of the results of operations and cash flows that it may achieve in future periods. |
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all short-term investments with an original maturity of three months or less to be cash equivalents. The Company has historically held cash balances in excess of $ 250,000 250,000 10.4 |
PATENTS | PATENTS Costs incurred in obtaining patents have been capitalized and are being amortized over the legal life of the patents. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company maintains a stock option plan and an omnibus equity incentive plan under which it grants stock options to certain executives, key employees and consultants. The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. All options are charged against income at their fair value. The entire compensation expense of the award is recognized over the vesting period. The Company also maintains a non-employee director compensation plan. Shares of stock granted for director fees are recorded at the fair value of the shares at the grant date. The Company issues restricted stock awards. Restricted stock awards are equity classified and measured at the fair market value of the underlying stock at the grant date. The fair value of restricted stock awards vesting at certain market capitalization thresholds were estimated on the date of grant using the Brownian Motion Monte Carlo lattice model. The fair value of restricted stock awards with time-based vesting were estimated on the date of grant at the current stock price. The fair value of restricted stock awards vesting at certain annual sales growth thresholds were estimated as of the date of Board acknowledgement of the achievement, at the current stock price. We recognize restricted stock expense using the straight-line attribution method over the requisite service period and account for forfeitures as they occur. |
NET LOSS PER COMMON SHARE | NET LOSS PER COMMON SHARE Basic net loss per common share is calculated by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common and common equivalent shares outstanding during the period. The Company’s potentially dilutive common shares are those that result from diluted common stock options and unvested restricted stock awards. The calculation of diluted loss per share excluded stock options of 11,784 137,539 14,001 166,441 The calculation of diluted loss per share excluded performance-based restricted stock and RSUs of 904,496 950,000 904,496 950,000 The following securities were not included in the computation of diluted shares outstanding for the three and six months ended June 30, 2023, and 2022 because the effect would be anti-dilutive: Schedule of securities Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Common stock options $ 11,784 $ 137,539 $ 14,001 $ 166,441 RSUs 54,496 — 54,496 — Restricted stock - PSU 850,000 950,000 850,000 950,000 Total $ 916,280 $ 1,087,539 $ 916,280 $ 1,116,441 Therefore, diluted weighted average number of shares outstanding and diluted net loss per share were the same as basic weighted average number of shares outstanding and net loss per share for the three and six months ended June 30, 2023 and 2022. Schedule of net income per common share Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Net loss $ (2,495,886 ) $ (2,921,341 ) $ (4,906,771 ) $ (5,458,855 ) Weighted Average Outstanding Shares: Basic weighted average shares outstanding 45,606,603 44,921,870 45,547,427 44,795,625 Dilutive effect of outstanding stock options and unvested restricted stock — — — — Diluted weighted average shares outstanding 45,606,603 44,921,870 45,547,427 44,795,625 Net loss per share Basic $ (0.05 ) $ (0.07 ) $ (0.11 ) $ (0.12 ) Diluted $ (0.05 ) $ (0.07 ) $ (0.11 ) $ (0.12 ) |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Important estimates include but are not limited to asset lives, deferred tax valuation allowances, inventory valuation, and customer rebate and incentive accruals. The results of operations for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the entire 2023 fiscal year. |
REVENUE RECOGNITION | REVENUE RECOGNITION Our revenues are derived from three business sources: (i) domestic core (which consists of US and Canada), (ii) international core, and (iii) novel therapies. Our core domestic and international revenues consist of sales of our syringe drivers, tubing and needles (“Product Revenue”) for the delivery of subcutaneous drugs that are FDA cleared for use with the KORU Medical infusion system, with the primary delivery for immunoglobulin to treat Primary Immunodeficiency Diseases (“PIDD”) and Chronic Inflammatory Demyelinating Polyneuropathy (“CIDP”). Novel therapies consist of Product Revenue for feasibility/clinical trials (pre-clinical studies, Phase I, Phase II, Phase III) of biopharmaceutical companies in the drug development process as well as non-recurring engineering services (“NRE”) revenues (including testing and registration services) received from biopharmaceutical companies to ready or customize the FREEDOM System for clinical and commercial use across multiple drug categories. For Product Revenue, we recognize revenues when shipment occurs, and at which point the customer obtains control and ownership of the goods. Shipping costs generally are billed to customers and are included in Product Revenue. The Company generally does not accept return of goods shipped unless it is a Company error. The only credits provided to customers are for defective merchandise. The Company warrants the syringe driver from defects in materials and workmanship under normal use and the warranty does not include a performance obligation. The costs under the warranty are expensed as incurred. Rebates are provided to distributors for the difference in selling price to distributor and pricing specified to select customers. In addition, rebates are provided to customers for meeting growth targets. Provisions for both distributor pricing and customer growth rebates are variable consideration and are recorded as a reduction of revenue in the same period the related sales are recorded or when it is probable the growth target will be achieved. We recognize NRE revenue under an input method, which recognizes revenue on the basis of our efforts or inputs (for example, resources consumed, labor hours expended, costs incurred, or time elapsed) to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation (i.e. completion milestone). The input method that we use is based on costs incurred. Contracts are often modified to account for changes in contract specifications and requirements. Contract modifications exist when the modification either creates new, or changes existing, enforceable rights and obligations. Generally, when contract modifications create new performance obligations, the modification is considered to be a separate contract and revenue is recognized prospectively. When contract modifications change existing performance obligations, the impact on the existing transaction price and measure of progress for the performance obligation to which it relates is generally recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. Contract assets primarily represent revenue earnings over time that are not yet billable based on the terms of the contracts. Contract liabilities (i.e., deferred revenue) consist of fees invoiced or paid by the Company’s customers for which the associated performance obligations have not been satisfied and revenue has not been recognized based on the Company’s revenue recognition criteria described above. As of June 30, 2023, the Company has recognized a contract asset of $ 282,118 The following table summarizes net revenues by geography for the three and six months ended June 30, 2023, and 2022: Schedule of net sales by geography Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues Domestic $ 5,686,427 $ 5,512,173 $ 11,970,392 $ 10,813,561 International 1,249,504 1,034,455 2,358,144 1,977,397 Total $ 6,935,931 $ 6,546,628 $ 14,328,536 $ 12,790,958 |
ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED | ACCOUNTING PRONOUNCEMENTS RECENTLY ADOPTED The Company considers the applicability and impact of all recently issued accounting pronouncements. Recent accounting pronouncements not specifically identified in our disclosures are either not applicable to the Company or are not expected to have a material effect on our financial condition or results of operations. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments |
FAIR VALUE MEASUREMENTS | FAIR VALUE MEASUREMENTS Fair value is the exit price that would be received to sell an asset or paid to transfer a liability. Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability. Valuation techniques used to measure fair value should maximize the use of observable inputs and minimize the use of unobservable inputs. To measure fair value, the Company uses the following fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable: • 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. The carrying amounts of cash and cash equivalents, including investments in short-term U.S. Treasury bills, accounts receivable, prepaid expenses, accounts payable and accrued expenses are considered to be representative of their fair values because of the short-term nature of those instruments. There were no transfers between levels in the fair value hierarchy during the three and six months ended June 30, 2023 and 2022. |
IMPAIRMENT OF LONG-LIVED ASSETS | IMPAIRMENT OF LONG-LIVED ASSETS The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than the carrying amount. The impairment loss, if recognized, would be based on the excess of the carrying value of the impaired asset over its respective fair value. The Company did not record any impairment losses through June 30, 2023. |
NATURE OF OPERATIONS AND SUMM_3
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Accounting Policies [Abstract] | |
Schedule of net income per common share | Therefore, diluted weighted average number of shares outstanding and diluted net loss per share were the same as basic weighted average number of shares outstanding and net loss per share for the three and six months ended June 30, 2023 and 2022. Schedule of net income per common share Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Net loss $ (2,495,886 ) $ (2,921,341 ) $ (4,906,771 ) $ (5,458,855 ) Weighted Average Outstanding Shares: Basic weighted average shares outstanding 45,606,603 44,921,870 45,547,427 44,795,625 Dilutive effect of outstanding stock options and unvested restricted stock — — — — Diluted weighted average shares outstanding 45,606,603 44,921,870 45,547,427 44,795,625 Net loss per share Basic $ (0.05 ) $ (0.07 ) $ (0.11 ) $ (0.12 ) Diluted $ (0.05 ) $ (0.07 ) $ (0.11 ) $ (0.12 ) |
Schedule of net sales by geography | The following table summarizes net revenues by geography for the three and six months ended June 30, 2023, and 2022: Schedule of net sales by geography Three Months Ended June 30, Six Months Ended June 30, 2023 2022 2023 2022 Revenues Domestic $ 5,686,427 $ 5,512,173 $ 11,970,392 $ 10,813,561 International 1,249,504 1,034,455 2,358,144 1,977,397 Total $ 6,935,931 $ 6,546,628 $ 14,328,536 $ 12,790,958 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Property, Plant and Equipment [Abstract] | |
Schedule of property and equipment | Property and equipment consists of the following at: Schedule of property and equipment June 30, 2023 December 31, 2022 Furniture and office equipment $ 1,345,456 $ 1,456,745 Leasehold improvements 1,933,591 2,413,820 Manufacturing equipment and tooling 2,952,214 2,810,813 Total property and equipment 6,231,261 6,681,378 Less: accumulated depreciation and amortization (2,419,418 ) (2,794,403 ) Property and equipment, net $ 3,811,843 $ 3,886,975 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of time based stock options | The following table summarizes the activities for our stock option plans for the six months ended June 30, 2023, and 2022. Schedule of time based stock options June 30, 2023 2022 Dividend yield 0.00 0.00 Expected Volatility 56.8 61.3 65.9 77.5 Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 10 Risk-free rate 3.50 3.53 1.81 2.99 |
Schedule of status of time based stock options | The following table summarizes the status of the time based stock options: Schedule of status of time based stock options Six Months Ended June 30, 2023 2022 Shares Weighted Shares Weighted Outstanding at January 1 3,035,000 $ 3.92 3,672,500 $ 3.42 Granted 85,000 $ 3.94 770,000 $ 2.68 Exercised — $ — 618,750 $ 1.57 Forfeited — $ — 411,250 $ 2.94 Outstanding at June 30 3,120,000 $ 3.92 3,412,500 $ 3.64 Options exercisable at June 30 1,158,750 $ 4.37 837,500 $ 3.47 Weighted average fair value of options granted during the period — $ 2.78 — $ 2.03 Stock-based compensation expense — $ 1,075,158 — $ 1,052,405 |
Schedule of information pertaining to options outstanding | The following table presents information pertaining to options outstanding at June 30, 2023: Schedule of information pertaining to options outstanding Range of Exercise Price Number Weighted Weighted Number Weighted $2.25-$9.49 3,120,000 8.5 $ 3.92 1,158,750 $ 4.37 |
The following table summarizes the activities for our restricted stock awards for the six months ended June 30, 2023, and 2022. | The following table summarizes the activities for our restricted stock awards for the six months ended June 30, 2023, and 2022. Six Months Ended June 30, 2023 2022 Shares Weighted Shares Weighted Unvested at January 1 950,000 $ 3.04 1,000,000 $ 3.01 Granted 54,496 $ 3.68 — $ — Vested 100,000 $ 3.31 50,000 $ 3.31 Forfeited/canceled — $ — — $ — Unvested at June 30 904,496 $ 2.97 950,000 $ 2.99 |
LEASES (Tables)
LEASES (Tables) | 6 Months Ended |
Jun. 30, 2023 | |
Leases [Abstract] | |
Schedule of components of lease expense | The components of lease expense were as follows: Schedule of components of lease expense Three Months Ended Six Months Ended June 30, June 30, 2023 2022 2023 2022 Operating lease cost $ 112,279 $ 161,140 $ 224,801 $ 239,582 Short-term lease cost 25,143 28,579 78,037 78,288 Total lease cost $ 137,422 $ 189,719 $ 302,838 $ 317,870 Finance lease cost: Amortization of right-of-use assets $ 27,224 $ 5,918 $ 54,447 $ 5,918 Interest on lease liabilities 6,387 0 13,107 0 Total finance lease cost $ 33,611 $ 5,918 $ 67,554 $ 5,918 |
Schedule of cash flow information related to leases | Supplemental cash flow information related to leases was as follows: Schedule of cash flow information related to leases Six Months Ended June 30, 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 229,879 $ 181,544 Financing cash flows from finance leases 61,600 6,611 |
Schedule of balance sheet information related to leases | Supplemental balance sheet information related to leases was as follows: Schedule of balance sheet information related to leases June 30, December 31, Operating Leases Operating lease right-of-use assets $ 3,626,348 $ 3,786,545 Operating lease current liabilities 352,809 345,834 Operating lease long term liabilities 3,475,092 3,653,257 Total operating lease liabilities $ 3,827,901 $ 3,999,091 Finance Leases Property and equipment, at cost $ 544,468 $ 544,468 Accumulated depreciation (105,342 ) (50,895 ) Property and equipment, net $ 439,126 $ 493,573 Finance lease current liabilities 101,072 98,335 Finance lease long term liabilities 343,053 394,283 Total finance lease liabilities $ 444,125 $ 492,618 June 30, December 31, Weighted Average Remaining Lease Term Operating leases 9.2 9.7 Finance leases 4.0 4.6 Weighted Average Discount Rate Operating leases 4.00 4.00 Finance leases 4.25 4.25 |
Schedule of maturities of lease liabilities | Maturities of lease liabilities are as follows: Schedule of maturities of lease liabilities Year Ending December 31, Operating Leases Finance Leases Remainder of 2023 $ 249,752 61,600 2024 499,503 123,200 2025 499,503 123,200 2026 499,503 123,200 2027 499,503 65,957 Thereafter 2,331,015 — Total undiscounted lease payments 4,578,779 497,157 Less: imputed interest (750,878 ) (53,032 ) Total lease liabilities $ 3,827,901 $ 444,125 |
Schedule of net income per comm
Schedule of net income per common share (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Net loss | $ (2,495,886) | $ (2,921,341) | $ (4,906,771) | $ (5,458,855) |
Weighted Average Outstanding Shares: | ||||
Basic weighted average shares outstanding | 45,606,603 | 44,921,870 | 45,547,427 | 44,795,625 |
Diluted weighted average shares outstanding | 45,606,603 | 44,921,870 | 45,547,427 | 44,795,625 |
Net loss per share | ||||
Basic | $ (0.05) | $ (0.07) | $ (0.11) | $ (0.12) |
Diluted | $ (0.05) | $ (0.07) | $ (0.11) | $ (0.12) |
Common Stock [Member] | ||||
Weighted Average Outstanding Shares: | ||||
Basic weighted average shares outstanding | 45,606,603 | 44,921,870 | 45,547,427 | 44,795,625 |
Diluted weighted average shares outstanding | 45,606,603 | 44,921,870 | 45,547,427 | 44,795,625 |
Schedule of net sales by geogra
Schedule of net sales by geography (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Revenues | $ 6,935,931 | $ 6,546,628 | $ 14,328,536 | $ 12,790,958 |
UNITED STATES | ||||
Revenues | 5,686,427 | 5,512,173 | 11,970,392 | 10,813,561 |
Non-US [Member] | ||||
Revenues | $ 1,249,504 | $ 1,034,455 | $ 2,358,144 | $ 1,977,397 |
NATURE OF OPERATIONS AND SUMM_4
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 6 Months Ended |
Jun. 30, 2023 USD ($) Number | |
Number of segment | Number | 1 |
FDIC cash uninsured amount | $ 250,000 |
Investment securities treasury bill | 10,400,000 |
Other accounts receivable | 282,118 |
F D I C Bank [Member] | |
FDIC cash uninsured amount | $ 250,000 |
Schedule of property and equipm
Schedule of property and equipment (Details) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 6,231,261 | $ 6,681,378 |
Less: accumulated depreciation and amortization | (2,419,418) | (2,794,403) |
Property and equipment, net | 3,811,843 | 3,886,975 |
Furniture And Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 1,345,456 | 1,456,745 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 1,933,591 | 2,413,820 |
Manufacturing Equipment And Tooling [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 2,952,214 | $ 2,810,813 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Property, Plant and Equipment [Abstract] | ||||
Construction in progress gross | $ 500,000 | $ 500,000 | ||
Depreciation expense | $ 196,865 | $ 110,478 | $ 394,099 | $ 204,562 |
Schedule of time based stock op
Schedule of time based stock options (Details) - Stock Option Plans 2015 And 2021 Combined [Member] - Time Based Shares Options [Member] - USD ($) | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Dividend yield | 0% | 0% |
Weighted-average volatility | 0% | 0% |
Expected dividends | $ 0 | $ 0 |
Expected term (in years) | 10 years | 10 years |
Minimum [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 56.80% | 65.90% |
Risk-free rate | 3.50% | 1.81% |
Maximum [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award, Fair Value Assumptions, Expected Volatility Rate | 61.30% | 77.50% |
Risk-free rate | 3.53% | 2.99% |
Schedule of status of time base
Schedule of status of time based stock options (Details) - Stock Option Plans 2015 And 2021 Combined [Member] | 6 Months Ended | |
Jun. 30, 2023 USD ($) $ / shares shares | Jun. 30, 2022 USD ($) $ / shares shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Outstanding at beginning | shares | 3,035,000 | 3,672,500 |
Outstanding at beginning | $ 3.92 | $ 3.42 |
Granted | shares | 85,000 | 770,000 |
Granted | $ 3.94 | $ 2.68 |
Exercised | shares | 618,750 | |
Exercised | $ 1.57 | |
Forfeited | shares | 411,250 | |
Forfeited | $ 2.94 | |
Outstanding at ending | shares | 3,120,000 | 3,412,500 |
Outstanding at ending | $ 3.92 | $ 3.64 |
Options exercisable | shares | 1,158,750 | 837,500 |
Options exercisable | $ 4.37 | $ 3.47 |
Weighted average fair value of options granted during the period | $ 2.78 | $ 2.03 |
Stock-based compensation expense | $ | $ 1,075,158 | $ 1,052,405 |
Schedule of information pertain
Schedule of information pertaining to options outstanding (Details) - Stock Option Plans 2015 And 2021 Combined [Member] - Time Based Shares Options [Member] - Exercise Price1 [Member] | 6 Months Ended |
Jun. 30, 2023 $ / shares shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Number outstanding | shares | 3,120,000 |
Weighted average remaining contractual life | 8 years 6 months |
Weighted average exercise price | $ / shares | $ 3.92 |
Number exercisable | shares | 1,158,750 |
Weighted average exercise price | $ / shares | $ 4.37 |
The following table summarizes
The following table summarizes the activities for our restricted stock awards for the six months ended June 30, 2023, and 2022. (Details) - Restricted Stock Awards [Member] - $ / shares | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Outstanding at beginning | 950,000 | 1,000,000 |
Outstanding at beginning | $ 3.04 | $ 3.01 |
Granted | 54,496 | |
Granted | $ 3.68 | |
Vested | 100,000 | 50,000 |
Vested | $ 3.31 | $ 3.31 |
Forfeited/canceled | ||
Forfeited/canceled | ||
Outstanding at ending | 904,496 | 950,000 |
Outstanding at ending | $ 2.97 | $ 2.99 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2023 | Jun. 30, 2022 | |
Restricted Stock Awards [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Unrecognized compensation cost | $ 1,477,730 | $ 1,958,952 | |
Tax benefit from restricted stock compensation | $ 71,563 | $ 71,563 | |
Non Employee Director And Board Advisor [Member[ | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Nonemployee services transaction cost | 110,000 | ||
Share-based goods and non-employee services transaction | to be paid quarterly $12,500 in cash and $15,000 in common stock. | ||
Board of Directors Chairman [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Share-based goods and non-employee services transaction | to be paid quarterly $12,500 in cash and $22,500 in common stock. | ||
Non-employee director compensation | 140,000 | ||
Stock Option Plan 2015 [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Shares available for issuance | 59,250 | 59,250 | |
Stock Option Plan 2015 [Member] | Executiveskey Employees And Consultants [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Option shares outstanding under plan | 2,600,000 | 2,600,000 | |
Stock issued during period | 40,000 | ||
Stock Option Plan 2021 [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Stock issuable under plan (in shares) | 1,000,000 | ||
Issuance of option awards (in shares) | 45,000 | ||
Stock Option Plan 2021 [Member] | Director [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Director fee shares issued under plan | 156,758 | 156,758 | |
Stock Option Plan 2021 [Member] | Executive [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Bonus shares issued under plan | 21,100 | 21,100 | |
Stock Option Plan 2021 [Member] | Executive Officer [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Total shares issued under plan | 520,000 | 520,000 | |
Stock Option Plans 2015 And 2021 Combined [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Stock options granted | $ 2.78 | $ 2.03 | |
Tax benefit from stock-based compensation | $ 125,504 | $ 107,855 | |
Fair value of shares | $ 3,798,884 | $ 3,798,884 | 2,149,858 |
Shares remaining for future stockgrants | 361,392 | 361,392 | |
Stock Option Plans 2015 And 2021 Combined [Member] | Time Based Shares Options [Member] | |||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |||
Stock-based compensation expense | $ 1,075,158 | 1,052,405 | |
Weighted-average grant-date fair value options granted | $ 200,000 | $ 200,000 | $ 1,600,000 |
Number of options exercised | 0 | 618,750 | |
Total unrecognized compensation cost | $ 4,248,300 | $ 4,248,300 | |
Weighted-average period (in years) | 46 months |
DEBT OBLIGATIONS (Details Narra
DEBT OBLIGATIONS (Details Narrative) - USD ($) | Aug. 05, 2022 | Jun. 01, 2022 | Jun. 30, 2023 | Dec. 31, 2022 |
Short-Term Debt [Line Items] | ||||
Description of the frequency of periodic payments | Monthly payments are due on the first of each month beginning August 1, 2022 through June 1, 2023. | |||
A O N Premium Finance L L C [Member] | ||||
Short-Term Debt [Line Items] | ||||
Balance of AON note | $ 0 | $ 433,295 | ||
A O N Premium Finance L L C [Member] | Promissory Note [Member] | ||||
Short-Term Debt [Line Items] | ||||
Notes payable | $ 800,000 | |||
A O N Premium Finance L L C [Member] | Promissory Note [Member] | Line of Credit [Member] | ||||
Short-Term Debt [Line Items] | ||||
Note payable terms | 6.50% | |||
Key Equipment Finance [Member] | Progress Payment Loan And Security Agreement [Member] | ||||
Short-Term Debt [Line Items] | ||||
Loans, principal amount | $ 3,500,000 |
Schedule of components of lease
Schedule of components of lease expense (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Leases [Abstract] | ||||
Operating lease cost | $ 112,279 | $ 161,140 | $ 224,801 | $ 239,582 |
Short-term lease cost | 25,143 | 28,579 | 78,037 | 78,288 |
Total lease cost | 137,422 | 189,719 | 302,838 | 317,870 |
Finance lease cost: | ||||
Amortization of right-of-use assets | 27,224 | 5,918 | 54,447 | 5,918 |
Interest on lease liabilities | 6,387 | 0 | 13,107 | 0 |
Total finance lease cost | $ 33,611 | $ 5,918 | $ 67,554 | $ 5,918 |
Schedule of cash flow informati
Schedule of cash flow information related to leases (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 229,879 | $ 181,544 |
Financing cash flows from finance leases | $ 61,600 | $ 6,611 |
Schedule of balance sheet infor
Schedule of balance sheet information related to leases (Details) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Operating Leases | ||
Operating lease right-of-use assets | $ 3,626,348 | $ 3,786,545 |
Operating lease current liabilities | 352,809 | 345,834 |
Operating lease long term liabilities | 3,475,092 | 3,653,257 |
Total operating lease liabilities | 3,827,901 | 3,999,091 |
Finance Leases | ||
Property and equipment, at cost | 544,468 | 544,468 |
Accumulated depreciation | (105,342) | (50,895) |
Property and equipment, net | 439,126 | 493,573 |
Finance lease current liabilities | 101,072 | 98,335 |
Finance lease long term liabilities | 343,053 | 394,283 |
Total finance lease liabilities | $ 444,125 | $ 492,618 |
Operating leases | 9 years 2 months 12 days | 9 years 8 months 12 days |
Finance leases | 4 years | 4 years 7 months 6 days |
Operating leases | 4% | 4% |
Finance leases | 4.25% | 4.25% |
Schedule of maturities of lease
Schedule of maturities of lease liabilities (Details) - USD ($) | Jun. 30, 2023 | Dec. 31, 2022 |
Leases [Abstract] | ||
2023 (excluding the three months ended March 31, 2023) | $ 249,752 | |
2023 (excluding the three months ended March 31, 2023) | 61,600 | |
2024 | 499,503 | |
2024 | 123,200 | |
2025 | 499,503 | |
2025 | 123,200 | |
2026 | 499,503 | |
2026 | 123,200 | |
2027 | 499,503 | |
2027 | 65,957 | |
Thereafter | 2,331,015 | |
Thereafter | ||
Total undiscounted lease payments | 4,578,779 | |
Total undiscounted lease payments | 497,157 | |
Less: imputed interest | (750,878) | |
Less: imputed interest | (53,032) | |
Total lease liabilities | 3,827,901 | $ 3,999,091 |
Total lease liabilities | $ 444,125 | $ 492,618 |
LEASES (Details Narrative)
LEASES (Details Narrative) | 6 Months Ended | 10 Months Ended | |
Jun. 30, 2023 | Jun. 30, 2022 | Oct. 31, 2022 | |
Leases [Abstract] | |||
Description of lease term | Our operating lease has remaining lease term of 9.2 years. | ||
Operating lease, options to terminate | 3 years 10 months 25 days | 4 years 3 months 19 days |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) $ in Millions | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2023 | Jun. 30, 2022 | Jun. 30, 2023 | Jun. 30, 2022 | |
Income Tax Disclosure [Abstract] | ||||
Income tax benefit | $ 0.6 | $ 0.7 | $ 1.2 | $ 1.3 |
Statutory rate | 21% |
SUBSEQUENT EVENTS (Details Narr
SUBSEQUENT EVENTS (Details Narrative) - Subsequent Event [Member] - Security Agreement [Member] - A O N Premium Finance L L C [Member] $ in Millions | Jul. 25, 2023 USD ($) |
Subsequent Event [Line Items] | |
Debt Instrument, Issued, Principal | $ 0.6 |
Annual percentage rate | 9.50% |
Description of monthly payments | Monthly payments are due on the first of each month beginning August 1, 2023 through June 1, 2024. |