Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2018 | Aug. 09, 2018 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Fuse Medical, Inc. | |
Entity Central Index Key | 319,016 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity a Well-known Seasoned Issuer | No | |
Is Entity a Voluntary Filer | No | |
Is Entity's Reporting Status Current | Yes | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 70,201,977 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,018 | |
Trading Symbol | FZMD |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 690,018 | $ 804,715 |
Accounts receivable, net of allowance of $943,711 and $499,099, respectively | 3,555,884 | 6,570,382 |
Inventories, net of allowance of $1,518,084 and $1,110,742, respectively | 11,225,037 | 10,626,769 |
Prepaid expenses and other current assets | 36,350 | 32,466 |
Total current assets | 15,507,289 | 18,034,332 |
Property and equipment, net | 35,313 | 16,895 |
Deferred tax asset | 990,112 | 375,278 |
Goodwill | 820,650 | 820,650 |
Total assets | 17,353,364 | 19,247,155 |
Current liabilities: | ||
Accounts payable | 2,639,572 | 2,588,091 |
Accrued expenses | 2,091,484 | 1,830,679 |
Note payable - related parties | 150,000 | 150,000 |
Senior secured revolving credit facility | 2,024,712 | 3,415,351 |
Total current liabilities | 6,905,768 | 7,984,121 |
Earn-out liability | 19,244,543 | 19,244,543 |
Total liabilities | 26,150,311 | 27,228,664 |
Commitments and contingencies | ||
Stockholders' deficit: | ||
Preferred stock, $0.01 par value; 20,000,000 shares authorized, no shares issued and outstanding | ||
Common stock, $0.01 par value; 100,000,000 shares authorized, 69,158,308 and 65,890,808 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 671,583 | 671,583 |
Additional paid-in capital | (7,118,266) | (8,653,092) |
Accumulated deficit | (2,350,264) | |
Total stockholders' deficit | (8,796,947) | (7,981,509) |
Total liabilities and stockholders' deficit | $ 17,353,364 | $ 19,247,155 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Statement Of Financial Position [Abstract] | ||
Net of allowance, accounts receivable | $ 943,711 | $ 499,099 |
Net of allowance, inventories | $ 1,518,084 | $ 1,110,742 |
Preferred Stock Par Value | $ 0.01 | $ 0.01 |
Preferred Stock Shares Authorized | 20,000,000 | 20,000,000 |
Preferred Stock Shares Issued | 0 | 0 |
Preferred Stock Shares Outstanding | 0 | 0 |
Common Stock Par Value | $ 0.01 | $ 0.01 |
Common Stock Shares Authorized | 100,000,000 | 100,000,000 |
Common Stock Shares Issued | 69,158,308 | 65,890,808 |
Common Stock Shares Outstanding | 69,158,308 | 65,890,808 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||||
Net revenues | $ 5,718,458 | $ 7,301,011 | $ 11,722,506 | $ 12,891,355 |
Cost of revenues | 3,770,396 | 4,529,590 | 6,893,898 | 7,590,540 |
Gross profit | 1,948,062 | 2,771,421 | 4,828,608 | 5,300,815 |
Operating expenses: | ||||
Selling, general, administrative and other | 2,293,072 | 773,204 | 4,499,807 | 1,687,612 |
Commissions | 1,614,870 | 1,349,072 | 3,194,056 | 3,494,728 |
Loss on disposal of property and equipment | (8,732) | (8,425) | ||
Depreciation | 3,742 | 5,019 | 5,821 | 10,366 |
Total operating expenses | 3,911,684 | 2,118,563 | 7,699,684 | 5,184,281 |
Operating income (loss) | (1,963,622) | 652,858 | (2,871,076) | 116,534 |
Other income (expense): | ||||
Interest expense | (40,010) | (40,756) | (75,915) | (72,702) |
Extinguishment of debt | 43,308 | |||
Total other income (expense) | (40,010) | (40,756) | (75,915) | (29,394) |
Operating income (loss) before tax | (2,003,632) | 612,102 | (2,946,991) | 87,140 |
Income tax expense (benefit) | (388,335) | (596,727) | ||
Net income (loss) | $ (1,615,297) | $ 612,102 | $ (2,350,264) | $ 87,140 |
Net income (loss) per common share - basic | $ (0.04) | $ 0.05 | $ (0.06) | $ 0.01 |
Net income (loss) per common share - diluted | $ (0.04) | $ 0.04 | $ (0.05) | $ 0.01 |
Weighted average number of common shares outstanding - basic | 40,822,315 | 11,636,710 | 40,822,315 | 11,636,710 |
Weighted average number of common shares outstanding - diluted | 43,831,722 | 14,099,259 | 43,831,722 | 14,099,259 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Cash flows from operating activities | ||
Net (loss) income | $ (2,350,264) | $ 87,140 |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||
Depreciation | 5,821 | 10,366 |
Share-based compensation | 384,482 | |
Provision for bad debts and discounts | 466,440 | (950,627) |
Benefit for deferred taxes | (614,834) | |
Loss on disposal of property and equipment | (8,125) | |
Gain on settlement of accounts payable | (43,308) | |
Increase (decrease) in cash, net of effects of reverse acquisition, resulting from changes in: | ||
Accounts receivable | 2,032,123 | 825,102 |
Inventories, net slow-moving and obsolescence reserves | 1,465,474 | 1,594,489 |
Prepaid expenses and other current assets | (3,884) | (15,333) |
Accounts payable | 51,481 | 251,095 |
Accrued expenses | 260,805 | (456,009) |
Net cash provided by operating activities | 1,697,644 | 1,294,790 |
Cash flows from investing activities | ||
Purchase of property and equipment | (24,239) | (20,333) |
Insurance settlement proceeds | 8,732 | |
Net cash used in investing activities | (24,239) | (11,601) |
Cash flows from financing activities | ||
Payments on senior secured revolving credit facility, net | (1,390,639) | (212,757) |
Member distributions (successor) | (1,135,922) | |
Net cash used in financing activities | (1,788,102) | (1,348,679) |
Net decrease in cash and cash equivalents | (114,697) | (65,490) |
Cash and cash equivalents - beginning of period | 804,715 | 778,447 |
Cash and cash equivalents - end of period | 690,018 | 712,957 |
Supplemental disclosure of cash flow information: | ||
Interest Paid | 64,194 | 59,719 |
Non-cash investing and financing activities | ||
Common control contribution of inventory | 2,063,742 | |
Member contribution of inventory (successor) | 1,738,620 | |
Member distribution of inventory (successor) | $ 98,142 | |
CPM [Member] | ||
Cash flows from financing activities | ||
Purchase price adjustment - CPM acquisition | $ (397,463) |
Nature of Operations
Nature of Operations | 6 Months Ended |
Jun. 30, 2018 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Nature of Operations | Note 1. Nature of Operations Overview Fuse Medical, Inc. (the “Company”) was initially incorporated in 1968 as GolfRounds, Inc., a Florida corporation. During July 1999, GolfRounds, Inc. was re-domesticated to Delaware through a merger into its wholly-owned subsidiary GolfRounds.com, Inc. Effective December 29, 2017, the Company purchased all the outstanding membership interests of CPM Medical Consultants, LLC (“CPM”) pursuant to that certain purchase agreement dated December 15, 2017 (“CPM Purchase Agreement”), by and between the Company and NC 143 Family Holdings, LP, a family limited partnership (“NC 143”) controlled by Mark W. Brooks (“Mr. Brooks”), our chairman of the board of directors (“Board”, and such position “Chairman of the Board”), whereby the Company purchased all of the outstanding membership interests of CPM for an approximate aggregate purchase price of $36,000,000 (such transaction, the “CPM Acquisition”). Basis of Presentation The interim condensed consolidated financial statements included herein reflect all material adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) which, in the opinion of the Company’s management, are ordinary and necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The Company’s management believes the disclosures are adequate to make the information presented not misleading. The condensed consolidated balance sheet information as of December 31, 2017, was derived from the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, as filed with the SEC on April 6, 2018 (“2017 Annual Report”). These condensed consolidated financial statements should be read in conjunction with the 2017 Annual Report. The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results to be expected for the entire fiscal year or for any other period as the Company has historically experienced seasonal trends with greater revenue and volume between the last two calendar quarters compared to the first two calendar quarters of the year. |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 2. Significant Accounting Policies Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and CPM, its wholly-owned subsidiary. Intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of the condensed consolidated financial statements in accordance with GAAP, requires the Company’s management to make estimates and assumptions that affect the Company’s reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying condensed consolidated financial statements include the allowances for doubtful accounts and contractual pricing, valuation of inventories, accrued commissions, and the fair value calculations of stock-based compensation and contingent liabilities. Net income (loss) Per Common Share Basic net income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Shares of restricted stock are included in the basic weighted-average number of common shares outstanding from the time they vest. Diluted net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. Fair Value Measurements Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy: Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets; Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities. In connection with the CPM Acquisition, the Company recorded a $19,244,543 liability which represented the fair value of the earn-out portion of the purchase consideration. The earn-out payments are based on the financial performance of the Company between the period from January 1, 2018 and December 31, 2034. The base amount of the earn-out is $16,000,000, with an additional bonus payment of $10,000,000. The payments of the base and bonus earn-out amounts are subject to the Company meeting certain earning thresholds as detailed on the CPM Purchase Agreement. The earn-out payments during the earn-out period specified above ranges from $0 to $26,000,000. The fair value of the earn-out liability was calculated using a Monte Carlo simulation, with applied estimated earn-out payments using a discount rate of 4%. To determine the fair value of the earn-out liability, the Company’s management evaluates assumptions that require significant judgement. Significant assumptions used for estimating the earn-out liability included gross profit margins of approximately 48%, net income margins averaging 9% per year, revenue growth of approximately 5% over a forecast horizon period of 11 years. This liability is subject to re-measurement to fair value at each reporting date until the contingency is resolved, at which time the changes in fair value will be recognized in the statement of operations as this arrangement is not subject to a hedging instrument. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded value of notes payable approximates their fair value based upon their effective interest rates. Reclassification Certain amounts in the accompanying condensed consolidated statements of operations have been reclassified to conform to the current presentation. State income tax expense has been reclassified from selling, general, administrative and other expenses to income tax expense (benefit). Cash and Cash Equivalents The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents at June 30, 2018 and December 31, 2017. The Company’s cash is concentrated in large financial institutions that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any financial institution losses from inception through June 30, 2018. As of June 30, 2018, and December 31, 2017, there were deposits of $310,793 and $537,388 , respectively , Accounts Receivable and Allowances Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts receivable and an allowance for contractual discount pricing. Credit is extended to customers based on an evaluation of their financial condition, industry reputation and other judgmental factors considered by the Company’s management. The Company generally does not require collateral or other security interest to support accounts receivable. Based on trends and specific factors, the customer’s credit terms may be modified, including required payment upon delivery. The Company performs regular on-going credit evaluations of its customers as deemed relevant. As events, trends, and circumstance, warrant, the Company’s management estimates the amounts that are more likely than not to be uncollectible; reflecting these amounts in the allowance for doubtful accounts along with an offset to bad debt expense is reflected within selling, general, administrative and other expenses on the Company’s accompanying condensed consolidated statements of operations. When accounts are deemed uncollectible, they are often referred to the Company’s outside legal firm for litigation. Accounts deemed uncollectible are written-off in the period when the Company has exhausted its efforts to collect overdue and unpaid receivables or otherwise has evaluated other circumstances that indicate that the Company should abandon such efforts. Accounts deemed uncollectible are removed from the Company’s accounts receivable portfolio, with a corresponding offset to the allowance for doubtful accounts receivable. The Company may record additional allowances for doubtful accounts based on known trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Specific allowances are re-evaluated and adjusted as additional facts and information become available. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The Company’s management estimates its allowance for contractual discount pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, the Company’s management uses assumptions and judgement, based on the best available facts and circumstances to record a specific allowance for the amounts due from those customers. The allowance is offset by a corresponding reduction to revenue. These specific allowances are re-evaluated, analyzed, and adjusted as additional information becomes available to determine the total amount of the allowance. The Company may record additional allowances based on trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Inventories Inventories are stated at the lower of cost or net realizable value (first-in, first-out). Inventories consist entirely of finished goods and include internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, “Orthopedic Implants”) and osteo-biologics and regenerative tissue which include human allografts, substitute bone materials and tendons, as well as regenerative tissues and fluids (collectively, “Biologics”). The Company reviews the market value of inventories whenever events and circumstances indicate that the carrying value of inventories may not be recoverable from the estimated future sales price less cost of disposal and normal gross profit. In cases where the market values are less than the carrying value, a write-down is recognized equal to an amount by which the carrying value exceeds the market value of inventories. Property and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets per the following table. Expenditures for additions and improvements are capitalized while repairs and maintenance are expensed as incurred. Category Useful Life Computer equipment and software 3 years Furniture and fixtures 3 years Office equipment 3 years Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed. A gain is recorded when consideration received is more than the disposed asset’s cost, net of depreciation, and a loss is recorded when consideration received is less than the disposed asset’s cost, net of depreciation. Revenue Recognition Revenue is recognized when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods. The Company has contractual agreements with its customers that set forth the general terms and conditions of the relationship including line item pricing, payment terms and contract duration. Revenues are generated from the sales of Orthopedic Implants and Biologics to support orthopedic surgeries . For customers that purchase products as needed, Products that have been sold are not subject to returns unless the product is deemed defective. Credits or refunds are recognized when they are determinable and estimable. The Company’s management reduce net revenues to account for estimates of the Company’s sales returns, discounts and other incentives. Recent Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standard Updates (“ASU”s) issued, both effective and not yet effective. In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, “Leases”, which requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company’s management is in the process of evaluating the impact of the adoption of ASU 2016-02 on the Company's financial statements and disclosures. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment.” The update eliminates Step 2 from the goodwill impairment test. This ASU is effective for fiscal years beginning after December 15, 2019. The amendments in this update should be applied on a prospective basis. The Company’s management is currently assessing the impact that the adoption of ASU 2017-04 will have on its consolidated financial statements. In March 2018, the FASB issued ASU No.2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” This new standard adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Cuts and Jobs Act (H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018) was signed into law. ASU 2018-05 is effective upon inclusion in the FASB codification. The Company’s management is currently evaluating the impact that the adoption of ASU 2018-05 will have on its consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by the Company’s management to have a material impact on the Company's present or future consolidated financial statements. |
CPM Acquisition
CPM Acquisition | 6 Months Ended |
Jun. 30, 2018 | |
Business Combinations [Abstract] | |
CPM Acquisition | Note 3. CPM Acquisition On December 29, 2017, the Company completed the previously-announced CPM Acquisition, pursuant to the CPM Purchase Agreement. The Company issued 50 million authorized and un-issued shares of its common stock, par value $0.01 per share (“Common Stock”), in exchange for 100% of the outstanding membership interests of CPM, at an agreed-upon value of $0.20 per share of Common Stock, a value of $10,000,000. The remaining $26,000,000 of the purchase consideration will be paid by the Company to NC 143 in the form of contingent earn-out payments based on the Company achieving certain future profitability targets for years after 2017. The effective date of the CPM Acquisition was December 31, 2017 (the “Effective Date”). The Company’s management engaged an independent third-party valuation specialist to calculate the fair value of the contingent earn-out liability. The Company recorded $19,244,543 as a contingent liability related to the fair value of the $26,000,000 contingent earn-out portion of the purchase consideration The Company’s management will evaluate the estimated the fair value of the earn-out liability each reporting period. See Note 2 “Fair Value Measurements.” The CPM Purchase Agreement provides for a working capital post-closing adjustment (“Post-Closing Adjustment”) for certain changes in CPM’s current assets and current liabilities pursuant to the CPM Purchase Agreement. The Post-Closing Adjustment was calculated to be $397,463 and was paid in cash on June 27, 2018 to NC 143, with a corresponding offset to additional paid-in capital on the Company’s accompanying condensed consolidated balance sheets. |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2018 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | Note 4. Property and Equipment Property and equipment consisted of the following at June 30, 2018 and December 31, 2017: June 30, 2018 December 31, 2017 Computer equipment and software $ 24,239 $ - Furniture and fixtures 5,047 5,047 Office equipment 21,913 21,913 51,199 26,960 Less: accumulated depreciation (15,886 ) (10,065 ) Property and equipment, net $ 35,313 $ 16,895 Depreciation expense for the three months ended June 30, 2018 and 2017 was $3,742 and $5,019, respectively. Depreciation expense for the six months ended June 30, 2018 and 2017 was $5,821 and $10,366, respectively. |
Senior Secured Revolving Credit
Senior Secured Revolving Credit Facility | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Senior Secured Revolving Credit Facility | Note 5. Senior Secured Revolving Credit Facility On December 27, 2017, the Company became party to a Senior Secured Revolving Credit Facility (“RLOC”) with ZB, N.A., d/b/a (“Amegy Bank”). The RLOC established an asset-based senior secured revolving credit facility in the amount of $5,000,000. The RLOC bears interest at a variable rate based on the one-month LIBOR rate plus 3.00% (effective rate of 4.78% at June 30, 2018). The RLOC contains customary representation, warranties, covenants, events of default, and is collateralized by substantially all of the Company’s assets. Among other covenants, the Company must not have two consecutive quarters of net losses (“Consecutive Net Losses”), maintain a maximum senior debt to earnings before interest taxes, depreciation and amortization (“EBITDA”) ratio (“Senior Debt to EBITDA”) of less than 3.75x and maintain a minimum fixed charge coverage ratio (“FCCR”) above 1.25x. The Company’s Chairman of the Board and President personally guarantees fifty percent (50%) of the outstanding loan amount. The Company was not in compliance with the FCCR requirement of the RLOC for the three-month period ending March 31, 2018, and was not in compliance with the Consecutive Net Losses, Senior Debt to EBITDA, and the minimum FCCR requirements of the RLOC for the three month period ending June 30, 2018. The Company has obtained a waiver from Amegy Bank with respect to failures of compliance. Further, Amegy Bank suspended the FCCR and Senior Debt to EBITDA for the three months ended September 30, 2018 and added a minimum net profit requirement of $700,000 for the three months ended September 30, 2018. The outstanding balance of the RLOC was $2,024,712 and $3,415,351 at June 30, 2018 and December 31, 2017, respectively. Interest expense incurred on the RLOC was $33,280 and $34,026 for the three months ended June 30, 2018 and 2017, respectively, and is reflected in interest expense on the Company’s accompanying condensed consolidated statements of operations. Interest expense incurred on the RLOC was $62,526 and $59,315 for the six months ended June 30, 2018 and 2017, respectively, and is reflected in interest expense on the Company’s accompanying condensed consolidated statements of operations. Accrued interest on the RLOC at June 30, 2018 and December 31, 2017 was $3,259 and $4,927, respectively, and is reflected in accrued expenses on the Company’s accompanying condensed consolidated balance sheets. |
Notes Payable - Related Parties
Notes Payable - Related Parties | 6 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable - Related Parties | Note 6. Notes Payable – Related Parties During July 2016 through October 2016, the Company obtained three working capital loans from NC 143, and Reeg Medical Industries, Inc., and investment holding company owned and controlled by Christopher C. Reeg (“Mr. Reeg”), the Company’s Chief Executive Officer (“RMI”, and together with NC 143, the “Investor Shares”), in the form of convertible promissory notes in the aggregate amount of $150,000 bearing 10% interest per annum until December 31, 2017 (“Maturity Date”) and 18% interest per annum for periods subsequent to the Maturity Date (“Notes”). The Notes’ principal and interest shall be due and payable, upon demand of the payee and at the holder’s sole discretion. The Notes’ holder has the right to convert all or any portion of the then unpaid principal and interest balance into shares of the Company’s Common Stock at a conversion price of $0.08 per share. During the three months ended June 30, 2018 and 2017, interest expense of $6,732 and $6,732, respectively, is reflected in interest expense on the Company’s accompanying condensed consolidated statements of operations. During the six months ended June 30, 2018 and 2017, interest expense of $13,389 and $13,389, respectively, is reflected in interest expense on the Company’s accompanying condensed consolidated statements of operations. As of June 30, 2018, and December 31, 2017, accrued interest was $45,485 and $32,096, respectively, which is reflected in accrued expenses on the Company’s accompanying condensed consolidated balance sheets. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 7. Commitments and Contingencies Legal Matters On January 27, 2014, M. Richard Cutler and Cutler Law Group, P.C. (the “Plaintiffs”) filed a complaint in the District Court of Harris County, Texas, Cause No. 2014-03355, against Fuse Medical, LLC, Alan Meeker, Rusty Shelton, Jonathan Brown, Robert H. Donehew and GolfRounds.com, Inc. On April 21, 2014, the complaint was dismissed for “want of prosecution.” On September 18, 2015, Plaintiffs refiled a complaint in the District Court of Harris County, Texas, Cause No. 2015-55652 and added PH Squared, LLC as an additional Plaintiff. During April 2017, one of the named individuals in the complaint filed for bankruptcy protection. There is currently no trial date set. The Company’s management continues to believe that the lawsuit is completely without merit and will vigorously contest it and protect the interests of the Company. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2018 | |
Stockholders Equity Deficit [Abstract] | |
Stockholders' Equity | Note 8. Stockholders' Equity Stock Incentive Plans The Company has a stock-based compensation plan which provides for the granting of equity awards, including qualified incentive and non-qualified stock options, stock appreciation awards and restricted stock awards to employees, directors, consultants and advisors; the 2017 Equity Incentive Plan (the “2017 Plan”), which was adopted by the Company’s Board on April 5, 2017. The awards are subject to a vesting schedule as set forth in individual agreements. The Company’s management estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of the Company’s stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company’s management believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are the estimates made by the Company’s management and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The Company’s management utilizes the simplified method to estimate the expected life for stock options granted to employees, as the Company does not have sufficient historical data regarding stock option exercises. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company’s management believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased. For the three and six months ended June 30, 2018, the Board granted 1,210,000 and 3,480,000 of Non-qualified Stock Options (“NQSO”) to certain advisory board members, key employees, marketing representatives. The Board did not grant stock options during the three and six months ended June 30, 2017. For the three and six months ended June 30, 2018, the Company amortized $59,003 and $226,316 relating to the vesting of stock options which is included in selling, general, administrative, and other expenses on the Company’s accompanying condensed consolidated statement of operations. The Company will recognize $3,231,775 as an expense in future periods as the stock options vest. For the three and six months ended June 30, 2017, the Company did not have stock options to amortize. The Company recognizes stock compensation expense on a straight-line basis over the requisite service period for each award, which are subject to a vesting schedule as set forth in individual agreements. A summary of the Company’s stock option activity for the six months ended June 30, 2018 is presented below: No. of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Balance outstanding at December 31, 2017 1,302,052 $ 0.20 3.3 $ 1,717,000 Granted 3,480,000 1.08 - - Exercised - - - - Forfeited - - - - Expired - - - - Balance outstanding at June 30, 2018 4,782,052 $ 0.84 7.9 $ 1,084,800 Exercisable at June 30, 2018 1,322,052 $ 0.21 2.9 $ 1,080,000 The weighted-average grant-date fair value of options granted during the six months ended June 30, 2018 was $.99. Restricted Common Stock For the three and six months ended June 30, 2018, the Company amortized $79,083 and $158,166 relating to the vesting of these shares which is included in selling, general, administrative, and other expenses, on the accompanying condensed consolidated statement of operations. The Company will recognize $52,722 as expense in future periods as the shares vest. The Company did not have RSAs to amortize for the three and six months ended June 30, 2017. The following table summarizes restricted Common Stock activity: Number of Shares Fair Value Weighted Average Grant Date Fair Value Non-vested, December 31, 2017 3,267,500 $ 1,813,500 $ 0.56 Granted - - - Vested - - - Forfeited - - - Non-vested, June 30, 2018 3,267,500 $ 1,813,500 $ 0.56 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 9. Income Taxes The Company began consolidating the financial results of CPM effective January 1, 2016, when it became the sole managing member of CPM, which is treated as a partnership for U.S. federal and most applicable state and local income taxes. As a partnership, CPM is not subject to U.S. federal and certain state and local income taxes. Beginning January 1, 2018, taxable income or loss generated by CPM is passed through to the Company and is included in its taxable income or loss. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes. The components of income tax expense (benefit) are as follows: For the Period Ended June 30, 2018 For the Period Ended December 31, 2017 Current: Federal $ - $ - State 18,107 40,818 18,107 40,818 Deferred: Federal (614,834 ) - State - - (614,834 ) - Total income tax expense (benefit) $ (596,727 ) $ 40,818 Significant components of the Company's deferred income tax assets and liabilities are as follows: June 30, 2018 December 31, 2017 Deferred tax assets: Net operating loss carryover $ 491,797 $ 172,704 Intangibles 37,653 40,342 Accounts receivable 175,295 81,927 Compensation 138,200 57,458 Inventory 154,389 25,792 Total deferred tax assets 997,334 378,223 Deferred tax liabilities: Prepaid expenses - - Property and equipment (7,222 ) (2,945 ) Total deferred tax liabilities (7,222 ) (2,945 ) Deferred tax assets, net 990,112 375,278 Valuation allowance: Beginning of year - (308,026 ) (Increase) decrease during year - 308,026 Ending balance - - Net deferred tax asset $ 990,112 $ 375,278 As of June 30, 2018, the Company recognized a deferred tax asset of $990,112, or an increase of $614,834 recognized at December 31, 2017. Consistent with the one year ago period and the current business trends and expectations, the Company’s management does not deem a valuation allowance to be appropriate as of June 30, 2018. At June 30, 2018, the Company estimates it has approximately $2,341,890 of net operating loss carryforwards which will expire during 2018 through 2037. The Company’s management believes its tax positions are highly certain of being upheld upon examination. As such, the Company has not recorded a liability for unrecognized tax benefits. As of June 30, 2018, the Company’s tax years 2014 through 2017 remain open for Internal Revenue Service (“IRS”) audit. The Company has not received a notice of audit from the IRS for any of the open tax years. A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows: Six Months Ended June 30, 2018 June 30, 2017 Expected U.S. federal incomes as statutory rate 21.0% 35.0% State and local income taxes, net of federal benefit -0.5% 18.9% Permanent differences -0.3% 15.2% Other 0.0% -50.2% 20.2% 18.9% |
Concentrations
Concentrations | 6 Months Ended |
Jun. 30, 2018 | |
Nature Of Operations And Going Concern [Abstract] | |
Concentrations | Note 10. Concentrations Concentration of Revenues, Accounts Receivable and Suppliers For the six months ended June 30, 2018 and 2017, the following significant customers had an individual percentage of total revenues equaling 10% or greater: For the Six Months Ended June 30, 2018 June 30, 2017 Customer 1 17.6 % 16.7 % Customer 2 - related party 11.1 % 17.4 % Totals 28.7 % 34.1 % At June 30, 2018 and December 31, 2017, the following significant customers had a concentration of accounts receivable representing 10% or greater of accounts receivable: June 30, 2018 December 31, 2017 Customer 1 12.9 % 15.3 % Customer 2 - related party 12.4 % 24.8 % Customer 3 11.1 % 0.0 % Totals 36.4 % 40.1 % For the six months ended June 30, 2018 and 2017, the following significant suppliers represented 10% or greater of goods purchased: For the Six Months Ended June 30, 2018 June 30, 2017 Supplier 1 - related party 10.8 % 0.0 % Totals 10.8 % 0.0 % |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 11. Related Party Transactions Lease with 1565 North Central Expressway, LP The Company leases an aggregate of approximately 11,500 square-foot space as its principal executive office, located at 1565 North Central Expressway, Suite 220, Richardson, Texas 75080 from 1565 North Central Expressway, LP, a real estate investment company that is owned and controlled by Mr. Brooks. The Company’s lease arrangement includes 1) the lease acquired pursuant to the CPM Acquisition effective January 1, 2013 (“CPM Lease”) and 2) a lease effective July 14, 2017 entered-into to support the Company’s relocation of its Fort Worth, Texas corporate offices to CPM’s executive offices (“Relocation Lease”). Both leases terminated December 31, 2017 with month-to-month renewals. For the six months ended June 30, 2018 and 2017, the Company paid approximately $84,000 and $60,000 in rent expense, which is reflected in selling, general, administrative, and other expenses in the Company’s accompanying condensed consolidated statements of operations. The Company had no rent expense amounts due and unpaid at June 30, 2018 and December 31, 2017. Professional Employment Organization Services The Company engaged AmBio Staffing, LLC (“AmBio”) a Texas licensed Professional Employment Organization, (“PEO”) to provide payroll processing, employee benefit administration, and related human capital services effective January 1, 2017. Mr. Brooks, owns and controls AmBio. As of June 30, 2018, AmBio operations supports approximately 70 full time equivalents (“FTE”). Of those 70 FTEs, 44 FTEs directly support the Company, 15 FTEs support the operations of other companies and the Company shares 11 FTEs with other companies. As of June 30, 2018, and December 31, 2017, the Company owed amounts to AmBio of approximately $168,000 and $112,000, respectively, and is reflected in accounts payable on the Company’s condensed consolidated balance sheets. For the six months ended June 30, 2018, and 2017, approximately $110,000 and $82,000 of administrative fees were paid to AmBio, respectively, and is reflected in selling, general, administrative, and other expenses in the Company’s accompanying condensed consolidated statements of operations. Operations Historically, the Company conducts various related-party transactions with entities that are owned by or affiliated with Mr. Brooks and Mr. Reeg. These transactions are based on wholesale contractual agreements, that the Company’s management believes are on terms and conditions substantially similar other third-party contractual arrangements. As described more fully below, these transactions include; sale of product and purchase of inventory on wholesale basis, commissions earned and paid, and shared service fee arrangements. MedUSA Group, LLC MedUSA Group, LLC (“MedUSA”) is a sub-distributor owned and controlled by Mr. Brooks and Mr. Reeg. During the six months ended June 30, 2018 and 2017, the Company: • sold products in the amounts of approximately $1,330,000 and $2,299,000, respectively which is reflected in net revenues in the Company’s accompanying condensed consolidated statements of operations; • purchased approximately $643,000 and $21,000 in Orthopedic Implants, instruments, and Biologics from MedUSA and are reflected in inventories in the Company’s accompanying condensed consolidating balance sheets and • incurred approximately $1,058,000 and $439,000, respectively, of commission costs and is reflected in commissions expense in the Company’s accompanying condensed consolidated statements of operations; As of June 30, 2018, and December 31, 2017, the Company has outstanding balances due from MedUSA of approximately $493,000 and $1,684,000, respectively, and are reflected in accounts receivable in the Company’s accompanying condensed consolidated balance sheets. During the three months ended June 30, 2018, the Company received saleable product inventory from MedUSA as settlement of approximately $516,000 in past-due accounts receivable. The Company’s management estimates the fair value of the received product inventory to be approximately $2,064,000. The Company recognized $516,000 as a reduction in accounts receivable, an increase to inventories with the corresponding offset $1,548,000 as an increase to additional paid-in- capital as an injection of capital from a related party under common control and is reflected in the Company’s accompanying condensed consolidated balance sheets. Texas Overlord, LLC Texas Overlord, LLC (“Overlord”) is an investment holding-company owned and controlled by Mr. Brooks. During the six months ended June 30, 2018, the Company purchased approximately $498,000 in Orthopedic Implants and instruments from Overlord and are reflected within inventories on the Company’s accompanying condensed consolidating balance sheets. The Company had no such purchases for the six months ended June 30, 2017. For the six months ended June 30, 2018, the Company incurred commission costs of approximately $459,000 and is reflected in commissions expense in the Company’s accompanying condensed consolidated statements of operations. The Company had no such commission costs for the six months ended June 30, 2017. As of December 31, 2017, the Company had accounts receivable due from Overlord of approximately $444,000, and is reflected in accounts receivable in the Company’s accompanying condensed consolidated balance sheets. The Company had no such accounts receivable at June 30, 2018. NBMJ, Inc. d/b/a Incare Technology NBMJ, Inc. d/b/a Incare Technology (“NBMJ”) is a durable medical equipment, wound care, and surgical supplies distributor owned and controlled by Mr. Brooks. During the six months ended June 30, 2018 and 2017, NBMJ purchased equipment and related supplies aggregating approximately $90,000, and $70,000, respectively, and are reflected in net revenues and cost of revenues in the Company’s accompanying condensed consolidated statements of operations, respectively. The Company had no such net revenue transactions for the six months ended June 30, 2017. As of June 30, 2018, the Company had approximately $8,000 due from NBMJ and are reflected in accounts receivable in the Company’s accompanying condensed consolidated balance sheets. The Company did not have accounts receivable balances due from NBMJ at December 31, 2017. Palm Springs Partners d/b/a Maxim Surgical, LLC Palm Springs Partners d/b/a Maxim Surgical, LLC (“Maxim”) is a manufacturer of record and distributor of spinal, Orthopedic Implants and related instrumentation. At June 30, 2018, Maxim is owned and controlled by Mr. Reeg, Mr. Reeg serves as Maxim’s President. With respect to Maxim, during the six months ended June 30, 2018 and 2017, the Company: • sold products in the amounts of approximately $131,000 and $79,000, respectively, which is reflected in net revenues in the Company’s accompanying condensed consolidated statements of operations; • purchased approximately $212,000 and $228,000, respectively, in surgical spinal implants and instruments, which is reflected in net revenues in the Company’s accompanying condensed consolidating balance sheets. The Company incurred commission costs of approximately $21,000 during the six months ended June 30, 2018, which is reflected in commissions expense in the Company’s accompanying condensed consolidated statements of operations. The Company had no such commission transactions for the six months ended June 30, 2017. For the six month period ended June 30, 2018 and 2017, the Company earned approximately $9,000 and $8,000, respectively, pursuant to the Company’s shared services and sublease agreements and is reflected in selling, general, administrative, and other expenses in the Company’s accompanying consolidated statements of operations. As of June 30, 2018, and December 31, 2017, the Company had accounts receivable balances due from Maxim of approximately $63,000 and $50,000, respectively, and is reflected in accounts receivable on the Company’s accompanying condensed consolidated balance sheets. At June 30, 2018, and December 31, 2017, the Company had outstanding accounts payable balances due to Maxim of approximately $86,000 and $93,000, respectively, for the purchase of inventory and is reflected in inventories and accounts payable in the Company’s accompanying condensed consolidated balance sheets. Sintu, LLC Sintu, LLC (“Sintu”) operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks. During the six months ended June 30, 2018 and 2017, the Company incurred commission costs of approximately $352,000 and $578,000 and is reflected in commission expense on the Company’s accompanying condensed consolidated statement of operations. Recon Orthopedics, LLC Recon Orthopedics, LLC (“Recon”) operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks. During the six months ended June 30, 2018, the Company incurred commission costs of approximately $209,000, and is reflected in commission expense on the Company’s accompanying condensed consolidated statement of operations. The Company had no such commission costs for the six months ended June 30, 2017. During the six months ended June 30, 2018 and 2017, the Company earned approximately $4,000 and $9,000, respectively, pursuant to the to the Company’s shared services agreement and is reflected in selling, general, administrative, and other expenses in the Company’s accompanying consolidated statements of operations. Other During the six months ended June 30, 2018 and 2017, the Company generated approximately $467,000 and $281,000 in revenues, respectively, with related parties primarily for wholesale product purchases and is reflected in net revenues in the Company’s accompanying condensed consolidated statement of operations. For the six months ended June 30, 2018 and 2017, the Company incurred commission costs of approximately $92,000 and $165,000, respectively, with related parties and is reflected in commissions expense in the Company’s accompanying condensed consolidated statements of operations. As of June 30, 2018, and December 31, 2017, the Company has outstanding balances due from related parties of approximately $96,000 and $164,000, respectively, and is reflected in accounts receivable in the Company’s accompanying condensed consolidated balance sheets. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 12. Subsequent Events In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through August 20, 2018, the date the financial statements were available to be issued. On August 1, 2018, the Company completed the purchase of all outstanding equity securities of Maxim pursuant to that certain Securities Purchase Agreement by and between the Company, Maxim, RMI and Mr. Amir David Tahernia (as the “Sellers”), and Mr. Amir David Tahernia in his capacity as representative of the Sellers dated July 30, 2018. The Company issued 4,311,169 restricted shares of its Common Stock in exchange for 100% of the outstanding equity securities of Maxim, at an agreed upon value of $0.76 per share of Common Stock, which was equal to the 30-day volume-weighted average price of the Common Stock as of three (3) days prior to the Maxim Closing. On August 13, 2018, the Company’s management obtained a waiver from Amegy Bank with respect to certain failures to comply with the terms of the RLOC. See Note 5, “Senior Secured Revolving Credit Facility.” The Company’s Management concluded there are no other material events or transactions for potential recognition or disclosure. F-1 |
Significant Accounting Polici18
Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The condensed consolidated financial statements include the accounts of the Company and CPM, its wholly-owned subsidiary. Intercompany transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of the condensed consolidated financial statements in accordance with GAAP, requires the Company’s management to make estimates and assumptions that affect the Company’s reported amounts in the condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying condensed consolidated financial statements include the allowances for doubtful accounts and contractual pricing, valuation of inventories, accrued commissions, and the fair value calculations of stock-based compensation and contingent liabilities. |
Net Income (Loss) Per Common Share | Net income (loss) Per Common Share Basic net income (loss) per common share is calculated by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Shares of restricted stock are included in the basic weighted-average number of common shares outstanding from the time they vest. Diluted net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. |
Fair Value Measurements | Fair Value Measurements Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon the observability of inputs used in valuation techniques. Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy: Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets; Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities. In connection with the CPM Acquisition, the Company recorded a $19,244,543 liability which represented the fair value of the earn-out portion of the purchase consideration. The earn-out payments are based on the financial performance of the Company between the period from January 1, 2018 and December 31, 2034. The base amount of the earn-out is $16,000,000, with an additional bonus payment of $10,000,000. The payments of the base and bonus earn-out amounts are subject to the Company meeting certain earning thresholds as detailed on the CPM Purchase Agreement. The earn-out payments during the earn-out period specified above ranges from $0 to $26,000,000. The fair value of the earn-out liability was calculated using a Monte Carlo simulation, with applied estimated earn-out payments using a discount rate of 4%. To determine the fair value of the earn-out liability, the Company’s management evaluates assumptions that require significant judgement. Significant assumptions used for estimating the earn-out liability included gross profit margins of approximately 48%, net income margins averaging 9% per year, revenue growth of approximately 5% over a forecast horizon period of 11 years. This liability is subject to re-measurement to fair value at each reporting date until the contingency is resolved, at which time the changes in fair value will be recognized in the statement of operations as this arrangement is not subject to a hedging instrument. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded value of notes payable approximates their fair value based upon their effective interest rates. |
Reclassification | Reclassification Certain amounts in the accompanying condensed consolidated statements of operations have been reclassified to conform to the current presentation. State income tax expense has been reclassified from selling, general, administrative and other expenses to income tax expense (benefit). |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents at June 30, 2018 and December 31, 2017. The Company’s cash is concentrated in large financial institutions that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any financial institution losses from inception through June 30, 2018. As of June 30, 2018, and December 31, 2017, there were deposits of $310,793 and $537,388 , respectively , |
Accounts Receivable and Allowances | Accounts Receivable and Allowances Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts receivable and an allowance for contractual discount pricing. Credit is extended to customers based on an evaluation of their financial condition, industry reputation and other judgmental factors considered by the Company’s management. The Company generally does not require collateral or other security interest to support accounts receivable. Based on trends and specific factors, the customer’s credit terms may be modified, including required payment upon delivery. The Company performs regular on-going credit evaluations of its customers as deemed relevant. As events, trends, and circumstance, warrant, the Company’s management estimates the amounts that are more likely than not to be uncollectible; reflecting these amounts in the allowance for doubtful accounts along with an offset to bad debt expense is reflected within selling, general, administrative and other expenses on the Company’s accompanying condensed consolidated statements of operations. When accounts are deemed uncollectible, they are often referred to the Company’s outside legal firm for litigation. Accounts deemed uncollectible are written-off in the period when the Company has exhausted its efforts to collect overdue and unpaid receivables or otherwise has evaluated other circumstances that indicate that the Company should abandon such efforts. Accounts deemed uncollectible are removed from the Company’s accounts receivable portfolio, with a corresponding offset to the allowance for doubtful accounts receivable. The Company may record additional allowances for doubtful accounts based on known trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Specific allowances are re-evaluated and adjusted as additional facts and information become available. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The Company’s management estimates its allowance for contractual discount pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, the Company’s management uses assumptions and judgement, based on the best available facts and circumstances to record a specific allowance for the amounts due from those customers. The allowance is offset by a corresponding reduction to revenue. These specific allowances are re-evaluated, analyzed, and adjusted as additional information becomes available to determine the total amount of the allowance. The Company may record additional allowances based on trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value (first-in, first-out). Inventories consist entirely of finished goods and include internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, “Orthopedic Implants”) and osteo-biologics and regenerative tissue which include human allografts, substitute bone materials and tendons, as well as regenerative tissues and fluids (collectively, “Biologics”). The Company reviews the market value of inventories whenever events and circumstances indicate that the carrying value of inventories may not be recoverable from the estimated future sales price less cost of disposal and normal gross profit. In cases where the market values are less than the carrying value, a write-down is recognized equal to an amount by which the carrying value exceeds the market value of inventories. |
Property and Equipment | Property and Equipment Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets per the following table. Expenditures for additions and improvements are capitalized while repairs and maintenance are expensed as incurred. Category Useful Life Computer equipment and software 3 years Furniture and fixtures 3 years Office equipment 3 years Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed. A gain is recorded when consideration received is more than the disposed asset’s cost, net of depreciation, and a loss is recorded when consideration received is less than the disposed asset’s cost, net of depreciation. |
Revenue Recognition | Revenue Recognition Revenue is recognized when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods. The Company has contractual agreements with its customers that set forth the general terms and conditions of the relationship including line item pricing, payment terms and contract duration. Revenues are generated from the sales of Orthopedic Implants and Biologics to support orthopedic surgeries . For customers that purchase products as needed, Products that have been sold are not subject to returns unless the product is deemed defective. Credits or refunds are recognized when they are determinable and estimable. The Company’s management reduce net revenues to account for estimates of the Company’s sales returns, discounts and other incentives. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company considers the applicability and impact of all Accounting Standard Updates (“ASU”s) issued, both effective and not yet effective. In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, “Leases”, which requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company’s management is in the process of evaluating the impact of the adoption of ASU 2016-02 on the Company's financial statements and disclosures. In January 2017, the FASB issued ASU No. 2017-04, “Intangibles-Goodwill and Other (Topic 350) Simplifying the Test for Goodwill Impairment.” The update eliminates Step 2 from the goodwill impairment test. This ASU is effective for fiscal years beginning after December 15, 2019. The amendments in this update should be applied on a prospective basis. The Company’s management is currently assessing the impact that the adoption of ASU 2017-04 will have on its consolidated financial statements. In March 2018, the FASB issued ASU No.2018-05 “Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118.” This new standard adds SEC paragraphs pursuant to the SEC Staff Accounting Bulletin No. 118, which expresses the view of the staff regarding application of Topic 740, Income Taxes, in the reporting period that includes December 22, 2017 - the date on which the Tax Cuts and Jobs Act (H.R.1, An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018) was signed into law. ASU 2018-05 is effective upon inclusion in the FASB codification. The Company’s management is currently evaluating the impact that the adoption of ASU 2018-05 will have on its consolidated financial statements. Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by the Company’s management to have a material impact on the Company's present or future consolidated financial statements. |
Significant Accounting Polici19
Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Estimated Useful Lives Of Assets | Category Useful Life Computer equipment and software 3 years Furniture and fixtures 3 years Office equipment 3 years |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | Property and equipment consisted of the following at June 30, 2018 and December 31, 2017: June 30, 2018 December 31, 2017 Computer equipment and software $ 24,239 $ - Furniture and fixtures 5,047 5,047 Office equipment 21,913 21,913 51,199 26,960 Less: accumulated depreciation (15,886 ) (10,065 ) Property and equipment, net $ 35,313 $ 16,895 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Stockholders Equity Deficit Tables [Abstract] | |
Summary of Stock Option Activity | A summary of the Company’s stock option activity for the six months ended June 30, 2018 is presented below: No. of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Balance outstanding at December 31, 2017 1,302,052 $ 0.20 3.3 $ 1,717,000 Granted 3,480,000 1.08 - - Exercised - - - - Forfeited - - - - Expired - - - - Balance outstanding at June 30, 2018 4,782,052 $ 0.84 7.9 $ 1,084,800 Exercisable at June 30, 2018 1,322,052 $ 0.21 2.9 $ 1,080,000 |
Summary of Restricted Common Stock Activity | The following table summarizes restricted Common Stock activity: Number of Shares Fair Value Weighted Average Grant Date Fair Value Non-vested, December 31, 2017 3,267,500 $ 1,813,500 $ 0.56 Granted - - - Vested - - - Forfeited - - - Non-vested, June 30, 2018 3,267,500 $ 1,813,500 $ 0.56 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Components of Income Tax Expense (Benefit) | The components of income tax expense (benefit) are as follows: For the Period Ended June 30, 2018 For the Period Ended December 31, 2017 Current: Federal $ - $ - State 18,107 40,818 18,107 40,818 Deferred: Federal (614,834 ) - State - - (614,834 ) - Total income tax expense (benefit) $ (596,727 ) $ 40,818 |
Significant Components of Deferred Income Tax Assets and Liabilities | Significant components of the Company's deferred income tax assets and liabilities are as follows: June 30, 2018 December 31, 2017 Deferred tax assets: Net operating loss carryover $ 491,797 $ 172,704 Intangibles 37,653 40,342 Accounts receivable 175,295 81,927 Compensation 138,200 57,458 Inventory 154,389 25,792 Total deferred tax assets 997,334 378,223 Deferred tax liabilities: Prepaid expenses - - Property and equipment (7,222 ) (2,945 ) Total deferred tax liabilities (7,222 ) (2,945 ) Deferred tax assets, net 990,112 375,278 Valuation allowance: Beginning of year - (308,026 ) (Increase) decrease during year - 308,026 Ending balance - - Net deferred tax asset $ 990,112 $ 375,278 |
Reconciliation of Income Tax Computed at U.S. Statutory Rate to Effective Income Tax Rate | A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows: Six Months Ended June 30, 2018 June 30, 2017 Expected U.S. federal incomes as statutory rate 21.0% 35.0% State and local income taxes, net of federal benefit -0.5% 18.9% Permanent differences -0.3% 15.2% Other 0.0% -50.2% 20.2% 18.9% |
Concentrations (Tables)
Concentrations (Tables) | 6 Months Ended |
Jun. 30, 2018 | |
Revenues [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the six months ended June 30, 2018 and 2017, the following significant customers had an individual percentage of total revenues equaling 10% or greater: For the Six Months Ended June 30, 2018 June 30, 2017 Customer 1 17.6 % 16.7 % Customer 2 - related party 11.1 % 17.4 % Totals 28.7 % 34.1 % |
Accounts Receivable [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | At June 30, 2018 and December 31, 2017, the following significant customers had a concentration of accounts receivable representing 10% or greater of accounts receivable: June 30, 2018 December 31, 2017 Customer 1 12.9 % 15.3 % Customer 2 - related party 12.4 % 24.8 % Customer 3 11.1 % 0.0 % Totals 36.4 % 40.1 % |
Goods Purchased [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the six months ended June 30, 2018 and 2017, the following significant suppliers represented 10% or greater of goods purchased: For the Six Months Ended June 30, 2018 June 30, 2017 Supplier 1 - related party 10.8 % 0.0 % Totals 10.8 % 0.0 % |
Nature of Operations (Details N
Nature of Operations (Details Narrative) - CPM [Member] | Dec. 29, 2017USD ($) |
Nature Of Operations And Going Concern [Line Items] | |
Date of acquisition agreement | Dec. 29, 2017 |
Approximate aggregate purchase price of outstanding membership interests | $ 36,000,000 |
Significant Accounting Polici25
Significant Accounting Policies (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2018 | Dec. 31, 2017 | |
Significant Accounting Policies [Line Items] | ||
Earn-out liability | $ 19,244,543 | $ 19,244,543 |
Cash equivalents | 0 | 0 |
FDIC insurance limit | 250,000 | |
Deposits greater than federally insured limit | 310,793 | $ 537,388 |
CPM [Member] | ||
Significant Accounting Policies [Line Items] | ||
Earn-out liability | $ 19,244,543 | |
Earn-out payment start date | Jan. 1, 2018 | |
Earn-out payment end date | Dec. 31, 2034 | |
Earn-out payment bese amount | $ 16,000,000 | |
Earn-out payment additional bonus amount | $ 10,000,000 | |
Discount rate on fair value earn-out liability | 4.00% | |
Approximate gross profit margin included in earn-out liability | 48.00% | |
Average net income margin included in earn-out liability | 9.00% | |
Approximate growth rate used to calculate in earn-out liability | 5.00% | |
Earn-out liability forecast horizon period | 11 years | |
CPM [Member] | Minimum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Earn-out payment during earn-out period | $ 0 | |
CPM [Member] | Maximum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Earn-out payment during earn-out period | $ 26,000,000 |
Significant Accounting Polici26
Significant Accounting Policies - Estimated Useful Lives of Assets (Details) | 6 Months Ended |
Jun. 30, 2018 | |
Computer Equipment and Software [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Furniture and fixtures [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Office equipment [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
CPM Acquisition (Details Narrat
CPM Acquisition (Details Narrative) - USD ($) | Jun. 27, 2018 | Dec. 29, 2017 | Jun. 30, 2018 | Dec. 31, 2017 |
Business Acquisition [Line Items] | ||||
Common Stock Par Value | $ 0.01 | $ 0.01 | ||
Earn-out liability | $ 19,244,543 | $ 19,244,543 | ||
CPM [Member] | ||||
Business Acquisition [Line Items] | ||||
Date of acquisition agreement | Dec. 29, 2017 | |||
Number of shares issued for acquisition | 50,000,000 | |||
Common Stock Par Value | $ 0.01 | |||
Equity interest percentage | 100.00% | |||
Share price | $ 0.20 | |||
Business acquisition common stock value | $ 10,000,000 | |||
Business acquisition remaining purchase price | $ 26,000,000 | |||
Effective date of acquisition | Dec. 31, 2017 | |||
Earn-out liability | 19,244,543 | |||
Fair value of contingent earn-out portion | $ 26,000,000 | |||
Post-closing adjustment paid in cash | $ 397,463 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 51,199 | $ 26,960 |
Less: accumulated depreciation | (15,886) | (10,065) |
Property and equipment, net | 35,313 | 16,895 |
Computer Equipment and Software [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 24,239 | |
Furniture and fixtures [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 5,047 | 5,047 |
Office equipment [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 21,913 | $ 21,913 |
Property and Equipment (Detai29
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Property Plant And Equipment [Abstract] | ||||
Depreciation expense | $ 3,742 | $ 5,019 | $ 5,821 | $ 10,366 |
Senior Secured Revolving Cred30
Senior Secured Revolving Credit Facility (Details Narrative) - CPM [Member] - USD ($) | Dec. 29, 2017 | Dec. 27, 2017 | Sep. 30, 2018 | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 |
Debt Instrument [Line Items] | ||||||||
Date of acquisition agreement | Dec. 29, 2017 | |||||||
RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Line of credit maximum borrowing capacity | $ 5,000,000 | |||||||
Date of acquisition agreement | Dec. 27, 2017 | |||||||
Effective rate | 4.78% | 4.78% | ||||||
Variable rate, description | one-month LIBOR rate plus 3.00% | |||||||
Variable rate | 3.00% | |||||||
Maximum senior debt to earnings before interest taxes, depreciation and amortization | 3.75% | |||||||
Minimum fixed charge coverage ratio | 1.25% | |||||||
Percentage of guarantees of outstanding loan amount | 50.00% | |||||||
Minimum net profit required for compliance | $ 700,000 | |||||||
Line of credit outstanding balance amount | $ 2,024,712 | $ 2,024,712 | $ 3,415,351 | |||||
Interest expense | 33,280 | $ 34,026 | 62,526 | $ 59,315 | ||||
Accrued interest | $ 3,259 | $ 3,259 | $ 4,927 |
Notes Payable - Related Parti31
Notes Payable - Related Parties (Details Narrative) - USD ($) | 3 Months Ended | 4 Months Ended | 6 Months Ended | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Oct. 31, 2016 | Jun. 30, 2018 | Jun. 30, 2017 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | ||||||
Interest expense on notes payable | $ 6,732 | $ 6,732 | $ 13,389 | $ 13,389 | ||
Accrued expenses [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Accrued interest | $ 45,485 | $ 45,485 | $ 32,096 | |||
10% Promissory Notes [Member] | NC 143 Family Holdings, LP and RMI [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Convertible notes payable - related parties | $ 150,000 | |||||
Interest rate of promissory notes | 10.00% | 18.00% | ||||
Debt Instrument, description | principal and interest balance into shares of the Company’s Common Stock at a conversion price of $0.08 per share. | |||||
Conversion price of common stock | $ 0.08 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) | 6 Months Ended |
Jun. 30, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Loss contingency, complaint filing date | January 27, 2014 |
Loss contingency, name of plaintiff | M. Richard Cutler and Cutler Law Group, P.C. |
Loss contingency, name of defendants | Fuse Medical, LLC, Alan Meeker, Rusty Shelton, Jonathan Brown, Robert H. Donehew and GolfRounds.com, Inc. |
Loss contingency, date of complaint dismissal | Apr. 21, 2014 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | Jun. 30, 2017 | |
Class Of Stock [Line Items] | ||||
Stock options, granted | 3,480,000 | |||
Weighted-average grant-date fair value of options, granted | $ 0.99 | |||
Non-qualified Stock Options [Member] | ||||
Class Of Stock [Line Items] | ||||
Stock options, granted | 1,210,000 | 0 | 3,480,000 | 0 |
Unrecognized compensation expenses on stock options | $ 3,231,775 | $ 3,231,775 | ||
Non-qualified Stock Options [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Class Of Stock [Line Items] | ||||
Share-based compensation expense | 59,003 | 226,316 | ||
Stock Option [Member] | ||||
Class Of Stock [Line Items] | ||||
Share-based compensation expense | $ 0 | $ 0 | ||
Restricted Common Stock [Member] | ||||
Class Of Stock [Line Items] | ||||
Share-based compensation expense | $ 0 | $ 0 | ||
Unrecognized compensation expenses | 52,722 | 52,722 | ||
Restricted Common Stock [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Class Of Stock [Line Items] | ||||
Share-based compensation expense | $ 79,083 | $ 158,166 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Stock Option Activity (Details) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018USD ($)$ / sharesshares | Dec. 31, 2017USD ($)$ / sharesshares | |
No. of Shares, Abstract | ||
No. of Shares, Beginning Balance | shares | 1,302,052 | |
Granted, No. of Shares | shares | 3,480,000 | |
No. of Shares, Ending Balance | shares | 4,782,052 | 1,302,052 |
Exercisable, No. of Shares | shares | 1,322,052 | |
Weighted Average Exercise Price, Abstract | ||
Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 0.20 | |
Granted, Weighted Average Exercise Price | $ / shares | 1.08 | |
Weighted Average Exercise Price, Ending Balance | $ / shares | 0.84 | $ 0.20 |
Exercisable, Weighted Average Exercise Price | $ / shares | $ 0.21 | |
Weighted Average Remaining Contractual Term, Abstract | ||
Weighted Average Remaining Contractual Term, Balance outstanding | 7 years 10 months 25 days | 3 years 3 months 18 days |
Weighted Average Remaining Contractual Term, Exercisable | 2 years 10 months 25 days | |
Aggregate Intrinsic Value, Abstract | ||
Aggregate Intrinsic Value, Balance outstanding | $ | $ 1,084,800 | $ 1,717,000 |
Aggregate Intrinsic Value, Exercisable | $ | $ 1,080,000 |
Stockholders' Equity - Summar35
Stockholders' Equity - Summary of Restricted Common Stock Activity (Details) - Restricted Common Stock [Member] - USD ($) | Jun. 30, 2018 | Dec. 31, 2017 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward] | ||
Number of Shares, Non-vested, Balance | 3,267,500 | 3,267,500 |
Share-based Compensation Arrangement by Share Based Payment Award, Equity Instruments Other than Options, Nonvested, Fair Value [Abstract] | ||
Fair Value, Non-vested, Balance | $ 1,813,500 | $ 1,813,500 |
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract] | ||
Weighted Average Grant Date Fair Value, Non-vested, Balance | $ 0.56 | $ 0.56 |
Income Taxes - Components of In
Income Taxes - Components of Income Tax Expense (Benefit) (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Current: | ||
Federal | $ 0 | $ 0 |
State | 18,107 | 40,818 |
Total | 18,107 | 40,818 |
Deferred: | ||
Federal | (614,834) | 0 |
State | 0 | 0 |
Total | (614,834) | 0 |
Total income tax expense (benefit) | $ (596,727) | $ 40,818 |
Income Taxes - Significant Comp
Income Taxes - Significant Components of Deferred Income Tax Assets and Liabilities (Details) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Deferred tax assets: | ||
Net operating loss carryover | $ 491,797 | $ 172,704 |
Intangibles | 37,653 | 40,342 |
Accounts receivable | 175,295 | 81,927 |
Compensation | 138,200 | 57,458 |
Inventory | 154,389 | 25,792 |
Total deferred tax assets | 997,334 | 378,223 |
Deferred tax liabilities: | ||
Prepaid expenses | 0 | 0 |
Property and equipment | (7,222) | (2,945) |
Total deferred tax liabilities | (7,222) | (2,945) |
Deferred tax assets, net | 990,112 | 375,278 |
Valuation allowance: | ||
Beginning of year | 0 | (308,026) |
(Increase) decrease during year | 0 | 308,026 |
Ending balance | 0 | 0 |
Net deferred tax asset | $ 990,112 | $ 375,278 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Deferred tax asset | $ 990,112 | $ 375,278 |
Recognized increase in deferred tax asset | $ 614,834 | |
Net operating loss carryforwards | $ 2,341,890 | |
Net operating loss carryforwards earliest expiration year | 2,018 | |
Net operating loss carryforwards latest expiration year | 2,037 | |
Open tax year | 2014 2015 2016 2017 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of Income Tax Computed at U.S. Statutory Rate to Effective Income Tax Rate (Details) | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Expected U.S. federal incomes as statutory rate | 21.00% | 35.00% |
State and local income taxes, net of federal benefit | (0.50%) | 18.90% |
Permanent differences | (0.30%) | 15.20% |
Other | 0.00% | (50.20%) |
Effective income tax rate | 20.20% | 18.90% |
Concentrations - Significant Cu
Concentrations - Significant Customers with Individual Percentage of Total Revenues Equaling 10% or Greater (Details) - Revenues [Member] - Customer Concentration Risk [Member] | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 28.70% | 34.10% |
Customer 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 17.60% | 16.70% |
Customer 2 - Related Party [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 11.10% | 17.40% |
Concentrations - Significant 41
Concentrations - Significant Customers with Concentration of Accounts Receivable Representing 10% or Greater of Accounts Receivable (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member] | 6 Months Ended | 12 Months Ended |
Jun. 30, 2018 | Dec. 31, 2017 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 36.40% | 40.10% |
Customer 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 12.90% | 15.30% |
Customer 2 - Related Party [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 12.40% | 24.80% |
Customer 3 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 11.10% | 0.00% |
Concentrations - Significant Su
Concentrations - Significant Suppliers Represented 10% or Greater of Goods Purchased (Details) - Goods Purchased [Member] - Supplier Concentration Risk [Member] | 6 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.80% | 0.00% |
Supplier 1 - Related Party [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.80% | 0.00% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2018USD ($)FullTimeEquivalent | Jun. 30, 2018USD ($)ft²FullTimeEquivalent | Jun. 30, 2017USD ($) | Dec. 31, 2017USD ($) | |
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | $ 467,000 | $ 281,000 | ||
Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | $ 96,000 | 96,000 | $ 164,000 | |
Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | $ 92,000 | 165,000 | ||
1565 North Central Expressway, LP [Member] | ||||
Related Party Transaction [Line Items] | ||||
Area of leased property | ft² | 11,500 | |||
Lease termination date | Dec. 31, 2017 | |||
Rent expense due and unpaid | $ 0 | $ 0 | 0 | |
1565 North Central Expressway, LP [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Rent expense | $ 84,000 | 60,000 | ||
AmBio Staffing, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Number of full time equivalents supporting operations | FullTimeEquivalent | 70 | 70 | ||
Number of full time equivalents directly supporting company | FullTimeEquivalent | 44 | 44 | ||
Number of full time equivalents supporting other companies | FullTimeEquivalent | 15 | 15 | ||
Number of full time equivalents shares with other companies | FullTimeEquivalent | 11 | 11 | ||
AmBio Staffing, LLC [Member] | Account Payables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | $ 168,000 | $ 168,000 | 112,000 | |
AmBio Staffing, LLC [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Administrative fees paid for services | 110,000 | 82,000 | ||
MedUSA Group, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 1,330,000 | 2,299,000 | ||
Purchases from related parties | 643,000 | 21,000 | ||
Inventory received from related party | 2,064,000 | 2,064,000 | ||
Decrease in accounts receivable | 516,000 | |||
Injection of capital from related party | 1,548,000 | 1,548,000 | ||
MedUSA Group, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 493,000 | 493,000 | 1,684,000 | |
MedUSA Group, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 1,058,000 | 439,000 | ||
Texas Overlord, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 0 | 0 | 444,000 | |
Texas Overlord, LLC [Member] | Inventory [Member] | ||||
Related Party Transaction [Line Items] | ||||
Purchases from related parties | 498,000 | 0 | ||
Texas Overlord, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 459,000 | 0 | ||
N.B.M.J., Inc. [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 90,000 | 0 | ||
Amount of transaction related to sale of products reflected in cost of sales | 70,000 | |||
N.B.M.J., Inc. [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 8,000 | 8,000 | 0 | |
Maxim Surgical, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 131,000 | 79,000 | ||
Maxim Surgical, LLC [Member] | Account Payables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | 86,000 | 86,000 | 93,000 | |
Maxim Surgical, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | $ 63,000 | 63,000 | $ 50,000 | |
Maxim Surgical, LLC [Member] | Inventory [Member] | ||||
Related Party Transaction [Line Items] | ||||
Purchases from related parties | 212,000 | 228,000 | ||
Maxim Surgical, LLC [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 9,000 | 8,000 | ||
Maxim Surgical, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 21,000 | 0 | ||
Sintu L L C | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 352,000 | 578,000 | ||
Recon Orthopedics, LLC [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 4,000 | 9,000 | ||
Recon Orthopedics, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | $ 209,000 | $ 0 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - Subsequent Event [Member] - Maxim Surgical, LLC [Member] | Aug. 01, 2018$ / sharesshares |
Subsequent Event [Line Items] | |
Percentage of outstanding equity securities acquired | 100.00% |
Common stock price per share | $ / shares | $ 0.76 |
Days of volume-weighted average price of common stock as of three days prior to closing to decide purchase price of common stock | 30 days |
Restricted Common Stock [Member] | |
Subsequent Event [Line Items] | |
Number of shares issued for acquisition | shares | 4,311,169 |