Cover
Cover - $ / shares | 3 Months Ended | |
Mar. 31, 2024 | May 01, 2024 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Mar. 31, 2024 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2024 | |
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 | 45,764,225 | |
Entity Listing, Par Value Per Share | $ 0.01 | |
Treasury Stock, Common, Shares | 3,420,502 |
BALANCE SHEETS (UNAUDITED)
BALANCE SHEETS (UNAUDITED) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 10,820,317 | $ 11,482,240 |
Accounts receivable less allowance for doubtful accounts of $24,777 as of March 31, 2024 and $24,777 as of December 31, 2023 | 4,392,511 | 4,045,211 |
Inventory | 3,147,312 | 3,481,301 |
Other receivables | 288,714 | 28,889 |
Prepaid expenses | 830,408 | 1,218,288 |
TOTAL CURRENT ASSETS | 19,479,262 | 20,255,929 |
Property and equipment, net | 3,755,530 | 3,837,657 |
Intangible assets, net of accumulated amortization of $406,801 and $390,341 as of March 31, 2024 and December 31, 2023, respectively | 737,901 | 754,361 |
Operating lease right-of-use assets | 3,428,885 | 3,514,055 |
Deferred income tax assets, net of allowance for non-realization of deferred tax assets of $6,391,452 and $6,002,777 for March 31, 2024 and December 31, 2023, respectively | ||
Other assets | 98,970 | 98,970 |
TOTAL ASSETS | 27,500,548 | 28,460,972 |
CURRENT LIABILITIES | ||
Accounts payable | 1,774,185 | 975,193 |
Accrued expenses | 1,459,405 | 1,711,427 |
Note payable | 159,031 | 314,344 |
Other liabilities | 457,653 | 512,520 |
Accrued payroll and related taxes | 519,441 | 462,941 |
Financing lease liability – current | 111,103 | 109,540 |
Operating lease liability – current | 372,109 | 368,313 |
TOTAL CURRENT LIABILITIES | 4,852,927 | 4,454,278 |
Financing lease liability, net of current portion | 288,253 | 316,623 |
Operating lease liability, net of current portion | 3,241,837 | 3,336,300 |
TOTAL LIABILITIES | 8,383,017 | 8,107,201 |
STOCKHOLDERS’ EQUITY | ||
Common stock, $0.01 par value, 75,000,000 shares authorized, 49,143,589 and 49,089,864 shares issued 45,723,087 and 45,669,362 shares outstanding as of March 31, 2024, and December 31, 2023, respectively | 491,436 | 490,899 |
Additional paid-in capital | 47,717,888 | 47,018,707 |
Treasury stock, 3,420,502 shares as of March 31, 2024 and December 31, 2023, at cost | (3,843,562) | (3,843,562) |
Accumulated deficit | (25,248,231) | (23,312,273) |
TOTAL STOCKHOLDERS’ EQUITY | 19,117,531 | 20,353,771 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ 27,500,548 | $ 28,460,972 |
BALANCE SHEETS (UNAUDITED) (Par
BALANCE SHEETS (UNAUDITED) (Parenthetical) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for credit loss, current | $ 24,777 | $ 24,777 |
Finite-lived intangible assets, accumulated amortization | 406,801 | 390,341 |
Deferred Rent Receivables, Net, Noncurrent | $ 6,391,452 | $ 6,002,777 |
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 | 49,143,589 | 49,089,864 |
Common Stock, Shares, Outstanding | 45,723,087 | 45,669,362 |
Treasury stock, shares | 3,420,502 | 3,420,502 |
STATEMENTS OF OPERATIONS (UNAUD
STATEMENTS OF OPERATIONS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Income Statement [Abstract] | ||
NET REVENUES | $ 8,197,798 | $ 7,392,605 |
Cost of goods sold | 3,094,500 | 3,245,570 |
Gross Profit | 5,103,298 | 4,147,035 |
OPERATING EXPENSES | ||
Selling, general and administrative | 5,357,620 | 5,425,877 |
Research and development | 1,475,674 | 1,564,869 |
Depreciation and amortization | 231,370 | 213,117 |
Total Operating Expenses | 7,064,664 | 7,203,863 |
Net Operating Loss | (1,961,366) | (3,056,828) |
Non-Operating Income/(Expense) | ||
Loss on currency exchange | (11,479) | (680) |
Loss on disposal of fixed assets, net | (300) | (56,279) |
Interest income, net | 37,187 | 125,502 |
TOTAL OTHER INCOME | 25,408 | 68,543 |
LOSS BEFORE INCOME TAXES | (1,935,958) | (2,988,285) |
Income Tax Benefit | 577,400 | |
NET LOSS | $ (1,935,958) | $ (2,410,885) |
NET LOSS PER SHARE | ||
Basic | $ (0.04) | $ (0.05) |
Diluted | $ (0.04) | $ (0.05) |
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING | ||
Basic | 45,712,224 | 45,487,593 |
Diluted | 45,712,224 | 45,487,593 |
STATEMENTS OF CASH FLOWS (UNAUD
STATEMENTS OF CASH FLOWS (UNAUDITED) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Loss | $ (1,935,958) | $ (2,410,885) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation expense and warrant expense | 699,718 | 881,222 |
Depreciation and amortization | 231,370 | 213,117 |
Deferred income taxes | (577,400) | |
Loss on disposal of fixed assets | 300 | 56,279 |
ROU landlord credit | (5,497) | (5,497) |
Changes in operating assets and liabilities: | ||
Increase in Accounts receivable | (607,125) | (647,994) |
Decrease / (Increase) in Inventory | 333,989 | (233,551) |
Decrease in Prepaid expenses and other assets | 387,880 | 288,786 |
(Decrease) / Increase in Other liabilities | (54,867) | 4,207 |
Increase / (Decrease) in Accounts payable | 798,992 | (888,679) |
Increase / (Decrease) in Accrued payroll and related taxes | 56,500 | (41,984) |
Decrease in Accrued expenses | (252,022) | (1,298,204) |
NET CASH USED IN OPERATING ACTIVITIES | (346,720) | (4,660,583) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchases of property and equipment | (133,083) | (272,605) |
Purchases of intangible assets | 0 | (11,232) |
NET CASH USED IN INVESTING ACTIVITIES | (133,083) | (283,837) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Payments on indebtedness | (155,313) | (214,892) |
Payments on finance lease liability | (26,807) | (24,080) |
NET CASH USED IN FINANCING ACTIVITIES | (182,120) | (238,972) |
NET DECREASE IN CASH AND CASH EQUIVALENTS | (661,923) | (5,183,392) |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 11,482,240 | 17,408,257 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 10,820,317 | 12,224,865 |
Cash paid during the periods for: | ||
Interest | 12,296 | 12,326 |
Income taxes | ||
Schedule of Non-Cash Operating, Investing and Financing Activities: | ||
Issuance of common stock as compensation | $ 123,804 | $ 175,776 |
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, 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 | ||||
Issuance of stock-based compensation | $ 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 related to Restricted Stock | $ 500 | 169,887 | 170,387 | ||
Compensation expense related to restricted stock (in shares) | 50,000 | ||||
Net loss | (2,410,885) | (2,410,885) | |||
Ending balance, value at Mar. 31, 2023 | $ 489,608 | 45,132,350 | (11,982,096) | (3,843,562) | 29,796,300 |
Ending balance (in shares) at Mar. 31, 2023 | 48,960,766 | ||||
Beginning balance, value at Dec. 31, 2023 | $ 490,899 | 47,018,707 | (23,312,273) | (3,843,562) | 20,353,771 |
Beginning balance (in shares) at Dec. 31, 2023 | 49,089,864 | ||||
Issuance of stock-based compensation | $ 537 | 123,267 | 123,804 | ||
Issuance of stock-based compensation (in shares) | 53,725 | ||||
Compensation expense related to stock options | 393,113 | 393,113 | |||
Compensation related to Restricted Stock | 130,676 | 130,676 | |||
Issuance of warrants | 52,125 | 52,125 | |||
Net loss | (1,935,958) | (1,935,958) | |||
Ending balance, value at Mar. 31, 2024 | $ 491,436 | $ 47,717,888 | $ (25,248,231) | $ (3,843,562) | $ 19,117,531 |
Ending balance (in shares) at Mar. 31, 2024 | 49,143,589 |
NATURE OF OPERATIONS AND SUMMAR
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2024 | |
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, 2023 (“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 10.2 million 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 net loss per share excluded stock options of zero 14,626 The calculation of diluted net loss per share excluded stock options, performance-based restricted stock and performance-based restricted stock units (PSUs) of 904,496 914,626 The following securities were not included in the computation of diluted shares outstanding for the three months ended March 31, 2024, and 2023 because the effect would be anti-dilutive: Three Months Ended March 31, 2024 2023 Common stock options $ — $ 14,626 PSUs 54,496 — Restricted stock 850,000 900,000 Total $ 904,496 $ 914,626 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 months ended March 31, 2024 and 2023. Three Months Ended March 31, 2024 2023 Net loss $ (1,935,958 ) $ (2,410,885 ) Weighted Average Outstanding Shares: Basic weighted average shares outstanding 45,712,224 45,487,593 Dilutive effect of outstanding stock options and unvested restricted stock — — Diluted weighted average shares outstanding 45,712,224 45,487,593 Net loss per share Basic $ (0.04 ) $ (0.05 ) Diluted $ (0.04 ) $ (0.05 ) USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with United States generally accepted accounting principles (“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 months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the entire 2024 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 March 31, 2024, the Company has recognized a contract asset of zero. The following table summarizes net revenues by geography for the three months ended March 31, 2024, and 2023: Three Months Ended March 31, 2024 2023 Revenues Domestic $ 6,384,083 $ 6,283,965 International 1,813,715 1,108,640 Total $ 8,197,798 $ 7,392,605 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 months ended March 31, 2024 and 2023. 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 March 31, 2024. |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 2 — PROPERTY AND EQUIPMENT Property and equipment consists of the following at: March 31, 2024 December 31, 2023 Furniture and office equipment $ 1,423,093 $ 1,412,164 Leasehold improvements 1,953,653 1,953,653 Manufacturing equipment and tooling 3,311,833 3,193,113 Total property and equipment 6,688,579 6,558,930 Less: accumulated depreciation and amortization (2,933,049 ) (2,721,273 ) Property and equipment, net $ 3,755,530 $ 3,837,657 Depreciation and amortization expense was $ 214,910 197,233 |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
STOCK-BASED COMPENSATION | NOTE 3 — STOCK-BASED COMPENSATION The Company maintains a stock option plan and omnibus equity incentive plan under which it grants stock options to certain executives, key employees and consultants. It also has granted stock options outside of the plans as inducement awards. 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 issues performance share units (PSUs) under its omnibus equity incentive plan. Performance share units are equity classified and measured at the fair market value of the underlying stock at the grant date. Shares of stock granted for director fees under the non-employee director compensation plan and under its omnibus equity incentive plan are recorded at the fair value of the shares at the grant date. The Company issues restricted stock awards under its omnibus equity incentive plan and outside the plan as incentive 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 other restricted stock awards were estimated on the date of grant 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. 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 and stock options as employment inducement awards to its Chief Executive Officer and Chief Commercial Officer, respectively. The 2015 plan provides for the grant of incentive stock options and nonqualified stock options. As of March 31, 2024, there were 2,120,000 604,250 The 2021 Plan provides for the grant of incentive stock options, nonqualified stock options, stock awards, restricted stock awards, restricted stock units and/or stock appreciation rights to employees, consultants and directors. As of March 31, 2024, there were 656,744 152,811 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. Time Based Stock Options The following table summarizes the activities for our stock options with time based vesting for the three months ended March 31, 2024, and 2023. March 31, 2024 2023 Dividend yield 0.00 0.00 Expected Volatility 46.18 46.21 61.3 Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 10 Risk-free rate 4.2 4.3 3.53 The following table summarizes the status of the stock options: Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Outstanding at January 1 3,256,250 $ 3.66 3,035,000 $ 3.93 Granted 65,000 $ 2.21 40,000 $ 3.91 Exercised — $ — — $ — Forfeited 381,250 $ 7.0 — $ — Outstanding at March 31 2,940,000 $ 3.19 3,075,000 $ 3.92 Options exercisable at March 31 1,393,750 $ 3.59 1,010,000 $ 4.63 Weighted average fair value of options granted during the period — $ 1.39 — $ 2.83 Stock-based compensation expense — $ 393,113 — $ 535,059 Total stock-based compensation expense was $ 393,113 535,059 The following table presents information pertaining to options outstanding at March 31, 2024: Range of Exercise Price Number Weighted Weighted Number Weighted $2.18 - $4.37 2,940,000 6.9 $ 3.19 1,393,750 $ 3.59 As of March 31, 2024, there was $ 2,719,478 3,884,426 3,511,874 - 12 - Table of Contents Performance Based Stock Options The following table summarizes the activities for our unvested performance based stock option awards for the three months ended March 31, 2024, and 2023. Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Unvested at January 1 200,000 $ 1.48 — $ — Granted — $ — — $ — Vested — $ — — $ — Forfeited/canceled — $ — — $ — Unvested at March 31 200,000 $ 1.48 — $ — Total stock-based compensation expense was $ 8,121 zero As of March 31, 2024, there was $ 168,223 Restricted Stock Awards and PSUs The following table summarizes the activities for our restricted stock awards and PSUs for the three months ended March 31, 2024, and 2023. Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Unvested at January 1 904,496 $ 1.80 950,000 $ 3.04 Granted — $ — — $ — Vested — $ — 50,000 $ 3.31 Forfeited/canceled — $ — — $ — Unvested at March 31 904,496 $ 1.80 900,000 $ 2.93 Total stock-based compensation expense was $ 122,551 170,387 As of March 31, 2024, and 2023, there was $ 755,513 1,447,790 Common Stock Warrants The following table summarizes the activities for our common stock warrants issued in connection with our loan financing agreement with HSBC for the three months ended March 31, 2024, and 2023. Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Unvested at January 1 — $ — — $ — Granted 76,104 $ 1.37 — $ — Vested 38,052 $ 1.37 — $ — Forfeited/canceled — $ — — $ — Unvested at March 31 38,052 $ 1.37 — $ — As of March 31, 2024, and 2023, there was $ 52,125 zero |
DEBT OBLIGATIONS
DEBT OBLIGATIONS | 3 Months Ended |
Mar. 31, 2024 | |
Debt Disclosure [Abstract] | |
DEBT OBLIGATIONS | NOTE 4 — DEBT OBLIGATIONS On July 28, 2023, the Company entered into a commercial insurance premium finance and security agreement with AON Premium Finance, LLC in the aggregate principal amount of $ 0.57 million 9.5 Monthly payments are due on the first of each month beginning August 1, 2023 through June 1, 2024. 314,344 159,031 On March 8, 2024, the Company entered into a loan and security agreement with HSBC Ventures USA Inc., as lender, providing for a $ 5,000,000 5,000,000 |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2024 | |
Leases [Abstract] | |
LEASES | NOTE 5 — LEASES We have finance and operating leases for our corporate office and certain office and computer equipment. Our two operating leases have remaining lease terms of 8.4 4.8 3.2 2.75 4.5 The components of lease expense were as follows: Three Months Ended March 31, 2024 2023 Operating lease cost $ 111,548 $ 112,522 Short-term lease cost 3,460 52,894 Total lease cost $ 115,008 $ 165,416 Finance lease cost: Amortization of right-of-use assets $ 28,896 $ 27,223 Interest on lease liabilities 6,053 6,720 Total finance lease cost $ 34,949 $ 33,943 Supplemental cash flow information related to leases was as follows: Three Months Ended March 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 120,365 $ 113,813 Financing cash flows from finance leases 32,859 30,800 Supplemental balance sheet information related to leases was as follows: March 31, December 31, Operating Leases Operating lease right-of-use assets $ 3,428,885 $ 3,514,055 Operating lease current liabilities 372,109 368,313 Operating lease long term liabilities 3,241,837 3,336,300 Total operating lease liabilities $ 3,613,946 $ 3,704,613 Finance Leases Property and equipment, at cost $ 577,929 $ 577,929 Accumulated depreciation (190,358 ) (161,461 ) Property and equipment, net $ 387,571 $ 416,468 Finance lease current liabilities 111,103 109,540 Finance lease long term liabilities 288,253 316,623 Total finance lease liabilities $ 399,356 $ 426,163 March 31, December 31, Weighted Average Remaining Lease Term Operating leases 6.6 6.9 Finance leases 3.6 3.7 Weighted Average Discount Rate Operating leases 5.73 5.76 Finance leases 6.17 6.19 Maturities of lease liabilities are as follows: Year Ending December 31, Operating Leases Finance Leases Remainder of 2024 $ 384,041 98,578 2025 512,055 131,437 2026 512,055 131,437 2027 512,055 74,194 2028 511,009 6,179 Thereafter 1,833,604 — Total undiscounted lease payments 4,264,819 441,825 Less: imputed interest (650,873 ) (42,469 ) Total lease liabilities $ 3,613,946 $ 399,356 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2024 | |
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 expense of zero 0.6 million We evaluate our deferred tax assets to determine if they are more likely than not to be realized by assessing both positive and negative evidence in accordance with ASC Topic 740, Income Taxes. After considering our cumulative pretax loss (the three-year period ending with the current year), as well as analyzing all available evidence, we have recorded a valuation allowance of $ 6.0 million 6.4 million 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 2024. 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 2020 are no longer subject to examination by tax authorities. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2024 | |
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 Systems Inc. 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 | 3 Months Ended |
Mar. 31, 2024 | |
Subsequent Events | |
SUBSEQUENT EVENTS | NOTE 8 — SUBSEQUENT EVENTS On April 8, 2024, the Company’s appeal to BSI in connection with a prior audit matter was upheld resulting in no disruption of sales of the Company to the market and patients. Our products remain certified, marketed and sold in the EU. The Company intends to address the identified nonconformance through the routine BSI assessment process. |
NATURE OF OPERATIONS AND SUMM_2
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
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, 2023 (“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 10.2 million |
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 net loss per share excluded stock options of zero 14,626 The calculation of diluted net loss per share excluded stock options, performance-based restricted stock and performance-based restricted stock units (PSUs) of 904,496 914,626 The following securities were not included in the computation of diluted shares outstanding for the three months ended March 31, 2024, and 2023 because the effect would be anti-dilutive: Three Months Ended March 31, 2024 2023 Common stock options $ — $ 14,626 PSUs 54,496 — Restricted stock 850,000 900,000 Total $ 904,496 $ 914,626 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 months ended March 31, 2024 and 2023. Three Months Ended March 31, 2024 2023 Net loss $ (1,935,958 ) $ (2,410,885 ) Weighted Average Outstanding Shares: Basic weighted average shares outstanding 45,712,224 45,487,593 Dilutive effect of outstanding stock options and unvested restricted stock — — Diluted weighted average shares outstanding 45,712,224 45,487,593 Net loss per share Basic $ (0.04 ) $ (0.05 ) Diluted $ (0.04 ) $ (0.05 ) |
USE OF ESTIMATES IN THE FINANCIAL STATEMENTS | USE OF ESTIMATES IN THE FINANCIAL STATEMENTS The preparation of financial statements in conformity with United States generally accepted accounting principles (“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 months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the entire 2024 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 March 31, 2024, the Company has recognized a contract asset of zero. The following table summarizes net revenues by geography for the three months ended March 31, 2024, and 2023: Three Months Ended March 31, 2024 2023 Revenues Domestic $ 6,384,083 $ 6,283,965 International 1,813,715 1,108,640 Total $ 8,197,798 $ 7,392,605 |
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 months ended March 31, 2024 and 2023. |
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 March 31, 2024. |
NATURE OF OPERATIONS AND SUMM_3
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Accounting Policies [Abstract] | |
The following securities were not included in the computation of diluted shares outstanding for the three months ended March 31, 2024, and 2023 because the effect would be anti-dilutive: | The following securities were not included in the computation of diluted shares outstanding for the three months ended March 31, 2024, and 2023 because the effect would be anti-dilutive: Three Months Ended March 31, 2024 2023 Common stock options $ — $ 14,626 PSUs 54,496 — Restricted stock 850,000 900,000 Total $ 904,496 $ 914,626 |
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 months ended March 31, 2024 and 2023. | 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 months ended March 31, 2024 and 2023. Three Months Ended March 31, 2024 2023 Net loss $ (1,935,958 ) $ (2,410,885 ) Weighted Average Outstanding Shares: Basic weighted average shares outstanding 45,712,224 45,487,593 Dilutive effect of outstanding stock options and unvested restricted stock — — Diluted weighted average shares outstanding 45,712,224 45,487,593 Net loss per share Basic $ (0.04 ) $ (0.05 ) Diluted $ (0.04 ) $ (0.05 ) |
The following table summarizes net revenues by geography for the three months ended March 31, 2024, and 2023: | The following table summarizes net revenues by geography for the three months ended March 31, 2024, and 2023: Three Months Ended March 31, 2024 2023 Revenues Domestic $ 6,384,083 $ 6,283,965 International 1,813,715 1,108,640 Total $ 8,197,798 $ 7,392,605 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment consists of the following at: | Property and equipment consists of the following at: March 31, 2024 December 31, 2023 Furniture and office equipment $ 1,423,093 $ 1,412,164 Leasehold improvements 1,953,653 1,953,653 Manufacturing equipment and tooling 3,311,833 3,193,113 Total property and equipment 6,688,579 6,558,930 Less: accumulated depreciation and amortization (2,933,049 ) (2,721,273 ) Property and equipment, net $ 3,755,530 $ 3,837,657 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Share-Based Payment Arrangement [Abstract] | |
The following table summarizes the activities for our stock options with time based vesting for the three months ended March 31, 2024, and 2023. | The following table summarizes the activities for our stock options with time based vesting for the three months ended March 31, 2024, and 2023. March 31, 2024 2023 Dividend yield 0.00 0.00 Expected Volatility 46.18 46.21 61.3 Weighted-average volatility — — Expected dividends — — Expected term (in years) 10 10 Risk-free rate 4.2 4.3 3.53 |
The following table summarizes the status of the stock options: | The following table summarizes the status of the stock options: Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Outstanding at January 1 3,256,250 $ 3.66 3,035,000 $ 3.93 Granted 65,000 $ 2.21 40,000 $ 3.91 Exercised — $ — — $ — Forfeited 381,250 $ 7.0 — $ — Outstanding at March 31 2,940,000 $ 3.19 3,075,000 $ 3.92 Options exercisable at March 31 1,393,750 $ 3.59 1,010,000 $ 4.63 Weighted average fair value of options granted during the period — $ 1.39 — $ 2.83 Stock-based compensation expense — $ 393,113 — $ 535,059 |
The following table presents information pertaining to options outstanding at March 31, 2024: | The following table presents information pertaining to options outstanding at March 31, 2024: Range of Exercise Price Number Weighted Weighted Number Weighted $2.18 - $4.37 2,940,000 6.9 $ 3.19 1,393,750 $ 3.59 |
The following table summarizes the activities for our unvested performance based stock option awards for the three months ended March 31, 2024, and 2023. | The following table summarizes the activities for our unvested performance based stock option awards for the three months ended March 31, 2024, and 2023. Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Unvested at January 1 200,000 $ 1.48 — $ — Granted — $ — — $ — Vested — $ — — $ — Forfeited/canceled — $ — — $ — Unvested at March 31 200,000 $ 1.48 — $ — |
The following table summarizes the activities for our restricted stock awards and PSUs for the three months ended March 31, 2024, and 2023. | The following table summarizes the activities for our restricted stock awards and PSUs for the three months ended March 31, 2024, and 2023. Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Unvested at January 1 904,496 $ 1.80 950,000 $ 3.04 Granted — $ — — $ — Vested — $ — 50,000 $ 3.31 Forfeited/canceled — $ — — $ — Unvested at March 31 904,496 $ 1.80 900,000 $ 2.93 |
The following table summarizes the activities for our common stock warrants issued in connection with our loan financing agreement with HSBC for the three months ended March 31, 2024, and 2023. | The following table summarizes the activities for our common stock warrants issued in connection with our loan financing agreement with HSBC for the three months ended March 31, 2024, and 2023. Three Months Ended March 31, 2024 2023 Shares Weighted Shares Weighted Unvested at January 1 — $ — — $ — Granted 76,104 $ 1.37 — $ — Vested 38,052 $ 1.37 — $ — Forfeited/canceled — $ — — $ — Unvested at March 31 38,052 $ 1.37 — $ — |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Leases [Abstract] | |
The components of lease expense were as follows: | The components of lease expense were as follows: Three Months Ended March 31, 2024 2023 Operating lease cost $ 111,548 $ 112,522 Short-term lease cost 3,460 52,894 Total lease cost $ 115,008 $ 165,416 Finance lease cost: Amortization of right-of-use assets $ 28,896 $ 27,223 Interest on lease liabilities 6,053 6,720 Total finance lease cost $ 34,949 $ 33,943 |
Supplemental cash flow information related to leases was as follows: | Supplemental cash flow information related to leases was as follows: Three Months Ended March 31, 2024 2023 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 120,365 $ 113,813 Financing cash flows from finance leases 32,859 30,800 |
Supplemental balance sheet information related to leases was as follows: | Supplemental balance sheet information related to leases was as follows: March 31, December 31, Operating Leases Operating lease right-of-use assets $ 3,428,885 $ 3,514,055 Operating lease current liabilities 372,109 368,313 Operating lease long term liabilities 3,241,837 3,336,300 Total operating lease liabilities $ 3,613,946 $ 3,704,613 Finance Leases Property and equipment, at cost $ 577,929 $ 577,929 Accumulated depreciation (190,358 ) (161,461 ) Property and equipment, net $ 387,571 $ 416,468 Finance lease current liabilities 111,103 109,540 Finance lease long term liabilities 288,253 316,623 Total finance lease liabilities $ 399,356 $ 426,163 March 31, December 31, Weighted Average Remaining Lease Term Operating leases 6.6 6.9 Finance leases 3.6 3.7 Weighted Average Discount Rate Operating leases 5.73 5.76 Finance leases 6.17 6.19 |
Maturities of lease liabilities are as follows: | Maturities of lease liabilities are as follows: Year Ending December 31, Operating Leases Finance Leases Remainder of 2024 $ 384,041 98,578 2025 512,055 131,437 2026 512,055 131,437 2027 512,055 74,194 2028 511,009 6,179 Thereafter 1,833,604 — Total undiscounted lease payments 4,264,819 441,825 Less: imputed interest (650,873 ) (42,469 ) Total lease liabilities $ 3,613,946 $ 399,356 |
The following securities were n
The following securities were not included in the computation of diluted shares outstanding for the three months ended March 31, 2024, and 2023 because the effect would be anti-dilutive: (Details) - shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Accounting Policies [Abstract] | ||
Common stock options | 14,626 | |
PSUs | 54,496 | |
Restricted stock | 850,000 | 900,000 |
Total | 904,496 | 914,626 |
Therefore, diluted weighted ave
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 months ended March 31, 2024 and 2023. (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Net loss | $ (1,935,958) | $ (2,410,885) |
Weighted Average Outstanding Shares: | ||
Basic weighted average shares outstanding | 45,712,224 | 45,487,593 |
Dilutive effect of outstanding stock options and unvested restricted stock | ||
Diluted weighted average shares outstanding | 45,712,224 | 45,487,593 |
Net loss per share | ||
Basic | $ (0.04) | $ (0.05) |
Diluted | $ (0.04) | $ (0.05) |
Common Stock [Member] | ||
Net loss | ||
Weighted Average Outstanding Shares: | ||
Basic weighted average shares outstanding | 45,712,224 | 45,487,593 |
Diluted weighted average shares outstanding | 45,712,224 | 45,487,593 |
The following table summarizes
The following table summarizes net revenues by geography for the three months ended March 31, 2024, and 2023: (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Revenues | $ 8,197,798 | $ 7,392,605 |
UNITED STATES | ||
Revenues | 6,384,083 | 6,283,965 |
Non-US [Member] | ||
Revenues | $ 1,813,715 | $ 1,108,640 |
NATURE OF OPERATIONS AND SUMM_4
NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 3 Months Ended | |
Mar. 31, 2024 USD ($) Number shares | Mar. 31, 2023 shares | |
Accounting Policies [Abstract] | ||
Number of segment | Number | 1 | |
FDIC cash uninsured amount | $ | $ 250,000 | |
Investment securities treasury bill | $ | $ 10,200,000 | |
Anti-dilutive stock options | shares | 0 | 14,626 |
Anti-dilutive Securities | shares | 904,496 | 914,626 |
Property and equipment consists
Property and equipment consists of the following at: (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 6,688,579 | $ 6,558,930 |
Less: accumulated depreciation and amortization | (2,933,049) | (2,721,273) |
Property and equipment, net | 3,755,530 | 3,837,657 |
Furniture and Office Equipment [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 1,423,093 | 1,412,164 |
Leasehold Improvements [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | 1,953,653 | 1,953,653 |
Manufacturing Equipment and Tooling [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Total property and equipment | $ 3,311,833 | $ 3,193,113 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization expense | $ 214,910 | $ 197,233 |
The following table summarize_2
The following table summarizes the activities for our stock options with time based vesting for the three months ended March 31, 2024, and 2023. (Details) - Stock Option Plan 2015 [Member] - Time Based Shares Options [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Dividend yield | 0% | 0% |
Expected volatility | 61.30% | |
Weighted-average volatility | 0% | 0% |
Expected dividends | $ 0 | $ 0 |
Expected term (in years) | 10 years | 10 years |
Risk-free rate | 3.53% | |
Minimum [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Expected volatility | 46.18% | |
Risk-free rate | 4.20% | |
Maximum [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Expected volatility | 46.21% | |
Risk-free rate | 4.30% |
The following table summarize_3
The following table summarizes the status of the stock options: (Details) - Stock Option Plan 2015 [Member] - Time Based Shares Options [Member] - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Outstanding at beginning | 3,256,250 | 3,035,000 |
Outstanding at beginning | $ 3.66 | $ 3.93 |
Granted | 65,000 | 40,000 |
Granted | $ 2.21 | $ 3.91 |
Exercised | ||
Exercised | ||
Forfeited | 381,250 | |
Forfeited | $ 7 | |
Outstanding at ending | 2,940,000 | 3,075,000 |
Outstanding at ending | $ 3.19 | $ 3.92 |
Options exercisable | 1,393,750 | 1,010,000 |
Options exercisable | $ 3.59 | $ 4.63 |
Weighted average fair value of options granted during the period | $ 1.39 | $ 2.83 |
Stock-based compensation expense | $ 393,113 | $ 535,059 |
The following table presents in
The following table presents information pertaining to options outstanding at March 31, 2024: (Details) - Stock Option Plan 2015 [Member] - Time Based Shares Options [Member] - Exercise Price1 [Member] | 3 Months Ended |
Mar. 31, 2024 $ / shares shares | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | |
Number outstanding | shares | 2,940,000 |
Weighted average remaining contractual life | 6 years 10 months 25 days |
Weighted average exercise price | $ / shares | $ 3.19 |
Number exercisable | shares | 1,393,750 |
Weighted average exercise price | $ / shares | $ 3.59 |
The following table summarize_4
The following table summarizes the activities for our unvested performance based stock option awards for the three months ended March 31, 2024, and 2023. (Details) - Performance Based Shares Options [Member] - $ / shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Outstanding at beginning | 200,000 | |
Unvested at beginning | $ 1.48 | |
Granted | 0 | 0 |
Granted | $ 0 | $ 0 |
Forfeited | 0 | 0 |
Vested | $ 0 | $ 0 |
Forfeited | 0 | 0 |
Forfeited/canceled | $ 0 | $ 0 |
Unvested at ending | 200,000 | |
Unvested at ending | $ 1.48 |
The following table summarize_5
The following table summarizes the activities for our restricted stock awards and PSUs for the three months ended March 31, 2024, and 2023. (Details) - Restricted Stock Awards [Member] - Stock Option Plan 2021 [Member] - $ / shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Outstanding at beginning | 904,496 | 950,000 |
Outstanding at beginning | $ 1.80 | $ 3.04 |
Granted | ||
Granted | ||
Vested | 50,000 | |
Vested | $ 3.31 | |
Forfeited/canceled | ||
Forfeited/canceled | ||
Outstanding at ending | 904,496 | 900,000 |
Outstanding at ending | $ 1.80 | $ 2.93 |
The following table summarize_6
The following table summarizes the activities for our common stock warrants issued in connection with our loan financing agreement with HSBC for the three months ended March 31, 2024, and 2023. (Details) - Common Stock Warrants [Member] - Stock Option Plan 2021 [Member] - $ / shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Outstanding at beginning | ||
Outstanding at beginning | ||
Granted | 76,104 | |
Granted | $ 1.37 | |
Vested | 38,052 | |
Vested | $ 1.37 | |
Forfeited/canceled | ||
Forfeited/canceled | ||
Outstanding at ending | 38,052 | |
Outstanding at ending | $ 1.37 |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Performance Shares [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total stock-based compensation expense | $ 8,121 | $ 0 |
Unrecognized cost | 168,223 | |
Restricted Stock [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Total stock-based compensation expense | 122,551 | 170,387 |
Unrecognized cost | 755,513 | 1,447,790 |
Common Stock Warrants [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Unrecognized cost | $ 52,125 | 0 |
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] | ||
Nonemployee services transaction cost | 140,000 | |
Share-based goods and non-employee services transaction | to be paid quarterly $12,500 in cash and $22,500 in common stock. | |
Stock Option Plan 2015 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Shares issued under plan | 2,120,000 | |
Shares available for issuance | 604,250 | |
Stock Option Plan 2021 [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Shares issued under plan | 656,744 | |
Shares available for issuance | 152,811 | |
Stock Option Plans 2015 and 2021 Combined [Member] | ||
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||
Fair value of shares | $ 3,884,426 | 3,511,874 |
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 | 393,113 | $ 535,059 |
Total unrecognized compensation cost | $ 2,719,478 |
DEBT OBLIGATIONS (Details Narra
DEBT OBLIGATIONS (Details Narrative) - USD ($) | Jul. 28, 2023 | Mar. 31, 2024 | Mar. 08, 2024 | Dec. 31, 2023 |
AON Premium Finance LLC [Member] | Promissory Note [Member] | ||||
Short-Term Debt [Line Items] | ||||
Notes payable | $ 570,000 | |||
Note payable terms | 9.50% | |||
Description of the frequency of periodic payments | Monthly payments are due on the first of each month beginning August 1, 2023 through June 1, 2024. | |||
Balance of AON note | $ 159,031 | $ 314,344 | ||
H S B C Ventures U S A Inc [Member] | Revolving Credit Facility [Member] | ||||
Short-Term Debt [Line Items] | ||||
Revolving credit facility | $ 5,000,000 | |||
H S B C Ventures U S A Inc [Member] | Term Loan Facility [Member] | ||||
Short-Term Debt [Line Items] | ||||
Term loan facility | $ 5,000,000 |
The components of lease expense
The components of lease expense were as follows: (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Leases [Abstract] | ||
Operating lease cost | $ 111,548 | $ 112,522 |
Short-term lease cost | 3,460 | 52,894 |
Total lease cost | 115,008 | 165,416 |
Finance lease cost: | ||
Amortization of right-of-use assets | 28,896 | 27,223 |
Interest on lease liabilities | 6,053 | 6,720 |
Total finance lease cost | $ 34,949 | $ 33,943 |
Supplemental cash flow informat
Supplemental cash flow information related to leases was as follows: (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash paid for amounts included in the measurement of lease liabilities: | ||
Operating cash flows from operating leases | $ 120,365 | $ 113,813 |
Financing cash flows from finance leases | $ 32,859 | $ 30,800 |
Supplemental balance sheet info
Supplemental balance sheet information related to leases was as follows: (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Operating Leases | ||
Operating lease right-of-use assets | $ 3,428,885 | $ 3,514,055 |
Operating lease current liabilities | 372,109 | 368,313 |
Operating lease long term liabilities | 3,241,837 | 3,336,300 |
Total operating lease liabilities | 3,613,946 | 3,704,613 |
Finance Leases | ||
Property and equipment, at cost | 577,929 | 577,929 |
Accumulated depreciation | (190,358) | (161,461) |
Property and equipment, net | 387,571 | 416,468 |
Finance lease current liabilities | 111,103 | 109,540 |
Finance lease long term liabilities | 288,253 | 316,623 |
Total finance lease liabilities | $ 399,356 | $ 426,163 |
Operating leases term | 6 years 7 months 6 days | 6 years 10 months 25 days |
Finance leases term | 3 years 7 months 6 days | 6 years 8 months 12 days |
Operating leases discount rate | 5.73% | 5.76% |
Finance leases discount rate | 6.17% | 6.19% |
Maturities of lease liabilities
Maturities of lease liabilities are as follows: (Details) - USD ($) | Mar. 31, 2024 | Dec. 31, 2023 |
Leases [Abstract] | ||
2024 - Operating Leases | $ 384,041 | |
2024 - Finance Leases | 98,578 | |
2025 - Operating Leases | 512,055 | |
2025 - Finance Leases | 131,437 | |
2026 - Operating Leases | 512,055 | |
2026 - Finance Leases | 131,437 | |
2027 - Operating Leases | 512,055 | |
2027 - Finance Leases | 74,194 | |
2028 - Operating Leases | 511,009 | |
2028 - Finance Leases | 6,179 | |
Thereafter - Operating Leases | 1,833,604 | |
Thereafter - Finance Leases | ||
Total undiscounted lease payments - Operating Leases | 4,264,819 | |
Total undiscounted lease payments - Finance Leases | 441,825 | |
Less: imputed interest - Operating Leases | (650,873) | |
Less: imputed interest - Finance Leases | (42,469) | |
Total lease liabilities - Operating Leases | 3,613,946 | $ 3,704,613 |
Total lease liabilities - Finance Leases | $ 399,356 | $ 426,163 |
LEASES (Details Narrative)
LEASES (Details Narrative) | 3 Months Ended |
Mar. 31, 2024 | |
Lease One [Member] | |
Operating lease remaining term | 8 years 4 months 24 days |
Finance lease remaining term | 3 years 2 months 12 days |
Lease Two [Member] | |
Operating lease remaining term | 4 years 9 months 18 days |
Finance lease remaining term | 2 years 9 months |
Lease Three [Member] | |
Finance lease remaining term | 4 years 6 months |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 3 Months Ended | ||
Mar. 31, 2024 | Mar. 31, 2023 | Dec. 31, 2023 | |
Income Tax Disclosure [Abstract] | |||
Income tax benefit | $ 0 | $ 600,000 | |
Valuation Allowance | $ 6,400,000 | $ 6,000,000 | |
Statutory rate | 21% |