Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Mar. 14, 2019 | Jun. 30, 2018 | |
Document And Entity Information [Abstract] | |||
Entity Registrant Name | Fuse Medical, Inc. | ||
Entity Central Index Key | 0000319016 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 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 | Non-accelerated Filer | ||
Entity Public Float | $ 6,959,716 | ||
Entity Common Stock, Shares Outstanding | 74,600,181 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2018 | ||
Trading Symbol | FZMD | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Current assets: | ||
Cash and cash equivalents | $ 844,314 | $ 804,715 |
Accounts receivable, net of allowance of $667,963 and $499,099, respectively | 5,225,999 | 6,570,382 |
Inventories, net of allowance of $1,711,871 and $1,110,742, respectively | 11,075,889 | 10,626,769 |
Prepaid expenses and other current assets | 29,553 | 32,466 |
Total current assets | 17,175,755 | 18,034,332 |
Property and equipment, net | 42,974 | 16,895 |
Deferred tax asset | 760,993 | 375,278 |
Intangible assets, net | 1,288,040 | |
Goodwill | 2,905,089 | 820,650 |
Total assets | 22,172,851 | 19,247,155 |
Current liabilities: | ||
Accounts payable | 2,712,919 | 2,588,091 |
Accrued expenses | 2,784,271 | 1,830,679 |
Notes payable - related parties | 150,000 | 150,000 |
Senior secured revolving credit facility | 1,477,448 | 3,415,351 |
Total current liabilities | 7,124,638 | 7,984,121 |
Earn-out liability | 13,581,529 | 19,244,543 |
Total liabilities | 20,706,167 | 27,228,664 |
Commitments and contingencies | ||
Stockholders’ equity (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; 74,600,181 shares issued and 71,489,066 shares outstanding at December 31, 2018 and 69,158,308 shares issued and 65,890,808 shares outstanding at December 31, 2017 | 714,891 | 671,583 |
Additional paid-in capital | (8,653,092) | |
Retained earnings | 751,793 | |
Total stockholders’ equity (deficit) | 1,466,684 | (7,981,509) |
Total liabilities and stockholders’ equity (deficit) | $ 22,172,851 | $ 19,247,155 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Statement Of Financial Position [Abstract] | ||
Net of allowance, accounts receivable | $ 667,963 | $ 499,099 |
Net of allowance, inventories | $ 1,711,871 | $ 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 | 74,600,181 | 69,158,308 |
Common Stock Shares Outstanding | 71,489,066 | 65,890,808 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Statement [Abstract] | ||
Net revenues | $ 26,342,038 | $ 26,407,206 |
Cost of revenues | 13,352,558 | 14,582,416 |
Gross profit | 12,989,480 | 11,824,790 |
Operating expenses | ||
Selling, general, administrative and other | 8,466,128 | 5,315,657 |
Commissions | 6,431,967 | 5,641,122 |
Gain on disposal of property and equipment | (5,367) | |
Depreciation and amortization | 49,685 | 14,521 |
Total operating expenses | 14,947,780 | 10,965,933 |
Operating (loss) income | (1,958,300) | 858,857 |
Change in fair value of contingent purchase consideration | 5,663,014 | |
Other income (expense): | ||
Interest expense | (133,944) | (161,669) |
Extinguishment of debt | 43,308 | |
Total other expense | (133,944) | (118,361) |
Operating income before income tax | 3,570,770 | 740,496 |
Income tax benefit | (386,784) | 40,818 |
Net income | $ 3,957,554 | $ 699,678 |
Net income per common share - basic | $ 0.06 | $ 0.04 |
Net income per common share - diluted | $ 0.06 | $ 0.04 |
Weighted average number of common shares outstanding - basic | 68,020,348 | 16,027,794 |
Weighted average number of common shares outstanding - diluted | 70,945,602 | 19,473,553 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Total | Common Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings [Member] |
Beginning Balance, Amount at Dec. 31, 2016 | $ 10,599,475 | $ 158,908 | $ 10,440,567 | |
Beginning Balance, Shares at Dec. 31, 2016 | 15,890,808 | |||
Restricted stock awards granted | 42,609 | $ 12,675 | 29,934 | |
Restricted stock awards granted, Shares | 3,267,500 | |||
Purchase of CPM Medical Consultants, LLC | (19,244,543) | $ 500,000 | (19,744,543) | |
Purchase of CPM Medical Consultants, LLC, Shares | 50,000,000 | |||
Deferred tax asset | 375,278 | 375,278 | ||
Member contribution (successor) | 1,738,620 | 1,738,620 | ||
Member distribution (successor) | (2,192,626) | (1,492,948) | $ (699,678) | |
Net income | 699,678 | 699,678 | ||
Ending Balance, Amount at Dec. 31, 2017 | (7,981,509) | $ 671,583 | (8,653,092) | |
Ending Balance, Shares at Dec. 31, 2017 | 69,158,308 | |||
Restricted stock awards granted | 210,888 | 210,888 | ||
Restricted stock awards granted, Shares | 1,111,115 | |||
Stock options vested | 624,041 | 624,041 | ||
CPM working capital purchase price adjustment | (397,463) | (397,463) | ||
Inventory contributed by stockholder | 1,547,807 | 1,547,807 | ||
Purchase of Maxim Surgical | 3,281,757 | $ 43,308 | 3,238,449 | |
Purchase of Maxim Surgical, Shares | 4,330,758 | |||
Adjustment to CPM purchase price accounting | 223,609 | 223,609 | ||
Net income | 3,957,554 | $ 3,205,761 | 751,793 | |
Ending Balance, Amount at Dec. 31, 2018 | $ 1,466,684 | $ 714,891 | $ 751,793 | |
Ending Balance, Shares at Dec. 31, 2018 | 74,600,181 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Cash flows from operating activities: | ||
Net income | $ 3,957,554 | $ 699,678 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 49,685 | 14,521 |
Change in fair value of contingent purchase consideration | (5,663,014) | |
Share-based compensation | 834,929 | 42,609 |
Provision of bad debts and discounts | 168,864 | |
Benefits for deferred taxes | (431,272) | |
Gain on disposal of property and equipment | (5,067) | |
Extinguishment of debt | (43,308) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 917,689 | (62,096) |
Inventories, net slow-moving and obsolescence reserves | 1,881,556 | 2,022,723 |
Prepaid expenses and other current assets | 2,913 | (9,448) |
Accounts payable | (82,824) | 178,477 |
Accrued expenses | 843,820 | (1,236,527) |
Deferred rent | (848) | |
Security deposit | 3,822 | |
Net cash provided by operating activities | 2,479,900 | 1,604,536 |
Cash flows from investing activities: | ||
Purchases of property and equipment | (41,838) | (20,334) |
Insurance settlement proceeds | 8,732 | |
Acquisition of Maxim Surgical, net of cash acquired | (63,097) | |
Net cash used in investing activities | (104,935) | (11,602) |
Cash flows from financing activities: | ||
Payments on senior secured revolving credit facility | (1,937,903) | 110,004 |
Member contributions (successor) | 273,044 | |
Member distributions (successor) | (1,949,714) | |
Net cash used in financing activities | (2,335,366) | (1,566,666) |
Net increase in cash and cash equivalents | 39,599 | 26,268 |
Cash and cash equivalents - beginning of year | 804,715 | 778,447 |
Cash and cash equivalents - end of year | 844,314 | 804,715 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 107,521 | 139,507 |
Non-cash investing and financing activities: | ||
Inventory contributed by stockholder | 2,063,742 | |
Member contributions of inventory | 1,465,576 | |
Member distributions of inventory | 242,912 | |
Stock issued for Maxim Acquisition | $ (19,244,543) | |
CPM [Member] | ||
Cash flows from financing activities: | ||
Purchase price adjustment - CPM acquisition | (397,463) | |
Maxim Surgical, LLC [Member] | ||
Non-cash investing and financing activities: | ||
Stock issued for Maxim Acquisition | $ 3,281,757 |
Nature of Operations
Nature of Operations | 12 Months Ended |
Dec. 31, 2018 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Nature of Operations | Note 1. Nature of Operations Overview 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 May 28, 2014, GolfRounds.com, Inc. amended its certificate of incorporation to change its name to Fuse Medical, Inc. and merged with and into Fuse Medical, LLC, with Fuse Medical, LLC surviving as a wholly-owned subsidiary of Fuse Medical, Inc. The transaction was accounted for as a reverse merger. The Company was the legal acquirer, and Fuse Medical, LLC was deemed the accounting acquirer. During 2015, certificates of termination were filed for Fuse Medical, LLC and its two subsidiaries. On December 19, 2016 (the “Change-in-Control Date”), the Company entered into a Stock Purchase Agreement by and between the Company, NC 143 Family Holdings, LP, a Texas limited partnership (“NC 143”) which is controlled by Mark W. Brooks (“Mr. Brooks”), the Company’s Chairman of the Board of Directors (“Board”) and President; and Reeg Medical Industries, Inc., a Texas Corporation, (“RMI”, and together with NC 143, the “Investors”), which is owned and controlled by Christopher C. Reeg, the Company’s Chief Executive Officer and Secretary (“Mr . On December 31, 2017, the Company completed the acquisition of CPM Medical Consultants, LLC (“CPM”) pursuant to that certain purchase agreement dated December 15, 2017 (“CPM Acquisition Agreement” and such transaction the “CPM Acquisition”).The Company was the legal acquirer, and, for accounting purposes, CPM was deemed to have acquired the Company in the CPM Acquisition. CPM is the successor entity and becomes the reporting entity which combines the Company at the Change-in-Control Date, with the assets and liabilities of both companies combined at historical cost. Subsequent to the Change-in-Control Date, CPM and Company operations are consolidated. See “Note 4. CPM Acquisition.” On July 30, 2018, the Company, entered into that certain securities purchase agreement (the “Maxim Purchase Agreement”), by and between the Company, Palm Springs Partners, LLC d/b/a Maxim Surgical, a Texas limited liability company (“Maxim”), RMI, Mr. Amir David Tahernia, an individual (“Tahernia”, together with RMI, the “Sellers”), and Tahernia in his capacity as the representative of the Sellers dated July 30, 2018, pursuant to which the Company agreed to purchase all of the outstanding equity securities of Maxim (“Maxim Interests”) from the Sellers (such transaction, the “Maxim Acquisition”) for aggregate consideration of approximately $3,400,000. Before the Maxim Acquisition, Mr. Reeg served as Maxim’s President. On August 1, 2018 (“Maxim Closing Date”), the Company completed the Maxim Acquisition pursuant to the Maxim Purchase Agreement and Maxim operations are consolidated. See “Note 3, Maxim Acquisition.” Nature of Business The Company is a national distributor of medical devices and Biologics and a specification developer and repackager/relabeler of FDA-regulated products who provides a broad portfolio of 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 a wide array of osteo-biologics and regenerative tissue which include human allografts, substitute bone materials and tendons, as well as regenerative tissues and fluids (“Biologics”). All of the Company’s medical devices are approved by the U.S. Food and Drug Administration for sale in the United States, and all of the Company’s Biologics suppliers are licensed tissue banks accredited by the American Association of Tissue Banks. The Company’s broad portfolio of Orthopedic Implants and Biologics provide high-quality products to assist surgeons with positive patient outcomes and cost-effective solutions for its customers, which include hospitals, medical facilities, and sub-distributors. The Company operates under exclusive and non-exclusive agreements with certain vendors and supply partners in the geographic territories the Company serves. The Company continuously reviews and expands its product lines to ensure that they offer the most comprehensive, high-quality and cost-effective selection of Orthopedic Implants and Biologics so that the Company can be more relevant to its customer needs while continuing to grow its existing customer base. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 2. Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of the Company, CPM, and Maxim, the Company’s wholly-owned subsidiaries of which the operations have been integrated with the Company. Intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of the 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 consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying consolidated financial statements include the valuation of inventories, the Company’s effective income tax rate, and the recoverability of deferred tax assets, which are based upon the Company’s management expectation of future taxable income and allowable deductions and the fair value calculations of stock-based compensation and earn-out (“ Earn-Out Segment Reporting In accordance with Accounting Standards Update (“ASU”) No. 280, “Segment Reporting,” the Company uses the management approach for determining its reportable segments. The management approach is based upon the way that management reviews performance and allocates resources. The Company’s Chief Executive Officer serves as the Company’s chief operating decision maker, and his management team review operating results on a consolidated basis for purposes of allocating resources and evaluating the financial performance of the Company. The Company has integrated the operations of both CPM and Maxim. Accordingly, the Company has determined that it has one operating segment and, therefore, one reporting segment. Net Income Per Common Share Basic net income per common share is calculated by dividing net income 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 per common share is computed by dividing net income attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. As of December 31, 2018, and 2017, 1,300,000 and 700,000 outstanding Common Stock equivalents have been included within diluted net earnings per share, respectively. As of December 31, 2018, and 2017, Common Stock equivalents included options to purchase 3,915,000 and 1,302,052 common shares, respectively. 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 related to the Earn-Out portion of the purchase consideration. See “Note 4, CPM Acquisition,” for further discussion of the Earn-Out liability. The Company has classified the Earn-Out liability as a Level 3 liability and the fair value of the Earn-Out liability will be evaluated each reporting period and changes in its fair value will be included in the Company’s earnings. The Earn-Out payments are based on the financial performance of the Company between the period of 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 earnings thresholds as detailed in the CPM Acquisition 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 the Monte Carlo simulation, which was then applied to estimated Earn-Out payments with a discount rate of four percent (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 margins of approximately forty-eight percent (48%), net income margins averaging nine percent (9%) per year, revenue growth of approximately five percent (5%) over a forecast horizon period of 11 years. The Earn-Out liability, which represented contingent consideration associated with the CPM Acquisition, is recorded as a liability. This liability is subject to re-measurement to fair value at each reporting date until the contingency is resolved and the changes in fair value are recognized in the consolidated statements of operations at each reporting period since the arrangement is not subject to the accounting for hedging instruments. For the year ended December 31, 2018, the Company has determined the earnings threshold as detailed in the CPM Acquisition Agreement was not met and therefore no payments for either the base or bonus Earn-Out tranches would be achieved, based on the Company’s 2018 financial performance. The Earn-Out was re-measured to fair value under the probability weighted income approach. As a result, the initial fair value of the Earn-Out liability was reduced by $5,663,014 from $19,244,543 to $13,581,529. The Earn-Out liability was reduced by $5,663,014 with the offset reflected as “Change in fair value of contingent purchase consideration” on our Financial Statements. 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 values of notes payable approximate their respective fair values based upon their effective interest rates. Reclassification Certain amounts in the accompanying 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 December 31, 2018, and December 31, 2017. The Company’s cash is concentrated in two 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 December 31, 2018. As of December 31, 2018, and December 31, 2017, there were deposits of $322,693 and $537,388, respectively, which were greater than federally insured limits. 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 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) less an allowance for slow-moving inventory, expired inventory and inventory obsolescence. Inventories consist entirely of finished goods and Orthopedic Implants and 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 Amortization Period Computer equipment 3 years Furniture and fixtures 3 years Office equipment 3 years Software 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. Long-Lived Assets The Company reviews long-lived assets annually or whenever changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which generally represents furniture and fixtures. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the consolidated cash flow measure monitored for indicators of impairment. As the cash flow measure reaches levels to indicate potential impairment, the Company estimates the future cash flows expected to be generated from the use of the asset and its eventual disposal. If the sum of undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. Fair value is typically determined to be the value to repurchase furniture and fixtures. Based upon the Company’s assessment, there were no indicators of impairment of its long-lived assets at December 31, 2018 and 2017. Goodwill and Other Intangible Assets Goodwill is determined based on an acquisition purchase price in excess of the fair value of identified net assets acquired. Intangible assets with lives restricted by contractual, legal or other means are amortized over their useful lives. The Company tests goodwill at least annually or whenever changes in circumstances indicate that the carrying amount of an asset might not be recoverable for impairment using the fair value approach on a reporting unit basis. Since the Company is one reporting unit, potential goodwill impairment is evaluated by comparing the fair value of the Company to its carrying value. The fair value of the Company is determined using a market approach. If the carrying value of the Company exceeds fair value, a comparison of the fair value of goodwill against the carrying value of goodwill is made to determine whether goodwill has been impaired. The Company performs the annual assessment of the recoverability of goodwill during the fourth quarter of each fiscal year. No goodwill impairment has been recognized during 2018 or 2017. The Company’s intangible assets subject to amortization consist primarily of acquired non-compete agreements and customer relationships. Amortization expense is calculated using the straight-line method over the asset’s expected useful life. See “Note 3 – Maxim Acquisition” for goodwill and other intangibles for additional related disclosures. Revenue Recognition Revenue is recognized when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration that 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 and related procedures. For customers that purchase products as needed, the Company invoices the customers on the date the product is utilized. For customers that have consigned product, the Company invoices the customers as each unit of the product is utilized. Payment terms are due upon receipt of invoice or contractual terms. 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 reduces net revenues to account for estimates of the Company’s sales returns, discounts, and other incentives. Cost of Revenues Cost of revenues consists of cost of goods sold, freight and shipping costs for items sold to customers, cost of storage, investment in medical instruments, which are expenses acquired, inventory shrink, and an estimate for slow-moving, expired inventory, and inventory obsolescence. Shipping and Handling Fees The Company includes shipping and handling fees billed to customers in revenues and the related costs in cost of revenues. Income Taxes As a result of the CPM Acquisition, the Company became the sole managing member of CPM and as a result, began consolidating the financial results of CPM. CPM is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, CPM is not subject to U.S. federal and most applicable state and local income tax purposes. Any taxable income or loss generated by CPM is passed through to and included in the taxable income or loss of the Company. As a result of the Maxim Acquisition, the Company and Maxim will elect to file a consolidated tax return for the period after acquisition. The Company uses the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of December 31, 2018, the Company had no liabilities for uncertain tax positions. The Company's policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law, and new authoritative rulings. Stock-Based Compensation Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For employee stock-based awards, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro-rata compensation expense is adjusted accordingly until such time the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. Recent Accounting Pronouncements The Company considers the applicability and impact of all ASUs 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 twelve (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 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. |
Maxim Acquisition
Maxim Acquisition | 12 Months Ended |
Dec. 31, 2018 | |
Maxim Surgical, LLC [Member] | |
Acquisition | Note 3. Maxim Acquisition On the Maxim Closing Date, the Company completed the Maxim Acquisition pursuant to the Maxim Purchase Agreement. (See Note 1, “Nature of Operations – Overview.”) The Company issued 4,210,526 restricted shares of its Common Stock to the Sellers in exchange for one hundred percent (100%) of the outstanding Maxim Interests, at an agreed-upon value of $0.76 per share of Common Stock, which was equal to the 30-day volume-weighted average price (“VWAP”) of the Common Stock as of three (3) business days prior to the Maxim Closing Date. Subsequent to the Maxim Acquisition, Mr. Reeg is a beneficial owner of more than ten percent (10%) of the Common Stock of the Company. The Company accounted for the Maxim Acquisition as a business combination and recorded the assets acquired and liabilities assumed at their respective estimated fair values as of the Maxim Closing Date. The assets acquired, and liabilities assumed were recorded as of the Maxim Closing Date at their respective fair values and consolidated with those of the Company. The reported consolidated balance sheets of the Company after completion of the acquisition reflects these fair values. The Maxim Purchase Agreement provides for a working capital post-closing adjustment (“Maxim Post-Closing Adjustment”) based on the Maxim Closing Date balance sheet for certain changes in Maxim’s current assets and current liabilities pursuant to the Maxim Purchase Agreement. The Maxim Post-Closing Adjustment was calculated to be $81,757. To finalize the Maxim Post-Closing Adjustment, the Company issued an aggregate of 120,231 restricted shares of Common Stock to the Sellers on October 4, 2018 at an agreed-upon value of $0.68 per share of Common Stock, which was equal to the 30-day VWAP of the Company’s Common Stock as of October 1, 2018. Cash $ 200,000 Fair value of Common Stock 3,200,000 Post-closing working capital adjustment 81,757 Total purchase price $ 3,481,757 Allocation of purchase price Amortization period (years) Cash $ 136,903 Accounts receivable, net 261,431 Inventory, net 266,934 Prepaid expenses and other current assets 898 Total tangible assets acquired 666,166 Liabilities assumed (595,037 ) Net tangible assets less liabilities $ 71,129 Intangible assets: Non-compete agreements 61,766 2 510K product technology 704,380 Indefinite Customer relationships 555,819 11 Goodwill 2,088,663 Indefinite Total purchase price $ 3,481,757 The fair value of the 510K product technology intangible asset was determined based upon a “relief from royalty” method, a form of the income approach. The “relief from royalty” method is based on the premise that a third-party would be willing to pay a royalty to use the assets owned by the subject company. The projected after-tax royalty revenues are discounted to present value through an appropriate discount rate. The customer relationships were valued based on an “excess earnings” method, a form of the income approach. The “excess earnings” method implies that the value of an intangible asset is equal to the present value of the cash flow attributable to that asset. The projected revenues are based on a review of historical customer turnover. Operating expenses and contributory asset charges are deducted from the excess cash flows, which are then discounted to present value. The non-compete agreements were valued based on a “probable loss” method, a form of the income approach. The “probable loss” method measures an asset value by estimating the difference in cash flows generated by the business with the asset in-use versus without the asset. For the non-compete agreements, future cash flows are affected based on the revenue at risk and the ability and willingness to compete for each individual covered, then discounted to present value at an appropriate discount rate. These fair value measurements have significant unobservable input assumptions based on Company management’s estimates and assumptions. The fair value of the identifiable assets, including the intangible assets noted above, may be impacted by the Company’s evaluation of deferred taxes as further discussed below and possibly by future factors that may or may not impact the fair value of the identifiable assets, including the intangible assets noted above. The Company recorded the excess of the aggregate purchase price over the estimated fair values of the identifiable assets acquired as goodwill, which is not deductible for tax purposes. Goodwill is primarily attributable to the benefits the Company expects to realize by expanding its product offerings and addressable markets, thereby contributing to an expanded revenue base. The Company will also increase the size of its sales organization, while realizing cost synergies associated with eliminating redundant positions, primarily in selling, general and administrative functions. The assets and liabilities assumed in the acquisition have been included in the Company’s consolidated balance sheets as of December 31, 2018. The results of Maxim operations are included in the Company’s consolidated statements of operations subsequent to the Maxim Closing Date. Acquisition Costs Acquisition-related expenses were $84,273 for the year ended December 31, 2018. These costs primarily included legal and fairness opinion fees. The Company’s management does not anticipate that the Company will incur substantial additional integration costs. |
CPM Acquisition
CPM Acquisition | 12 Months Ended |
Dec. 31, 2018 | |
CPM [Member] | |
Acquisition | Note 4. CPM Acquisition On December 29, 2017, the Company completed the previously-announced CPM Acquisition, pursuant to the CPM Acquisition Agreement. The Company issued 50 million shares of its Common Stock, par value $0.01 per share, in exchange for one hundred percent (100%) of the outstanding membership interests of CPM, at an agreed-upon value of $0.20 per share of Common Stock, equaling a value of $10,000,000. The remaining $26,000,000 of the purchase price 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 “CPM Effective Date”). The Company’s management engaged an independent third-party valuation specialist to calculate the fair value of the Earn-Out liability. The Company recorded $19,244,543 as a contingent liability related to the fair value of the $26,000,000 Earn-Out liability at its fair value as of the CPM Effective Date, with a corresponding offset to additional paid-in capital on the Company’s accompanying consolidated balance sheets. For the year ended December 31, 2018, the Company’s has determined the earnings threshold as detailed in the CPM Acquisition Agreement were not met and therefore no payments for either the base or bonus Earn-Out tranches would be achieved, based on the Company’s 2018 financial performance. As of December 31, 2018, the Earn-Out was re-measured to fair value under the probability weighted income approach. As a result, the initial fair value of the Earn-Out liability was reduced by $5,663,014 from $19,244,543 to $13,581,529. The Earn-Out liability was reduced by $5,663,014 with the offset reflected as “Change in fair value of contingent purchase consideration” on our consolidated statements of operations to our Financial Statements. The Company’s management will evaluate the estimated fair value of the Earn-Out liability each reporting period. See “Note 2 Fair Value Measurements.” The CPM Acquisition Agreement provides for a working capital post-closing adjustment (“CPM Post-Closing Adjustment”) for certain changes in CPM’s current assets and current liabilities pursuant to the CPM Acquisition Agreement. The CPM 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 consolidated balance sheets. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2018 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | Note 5. Property and Equipment Property and equipment consisted of the following at December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Computer equipment and software $ 41,840 $ - Furniture and fixtures 5,047 5,047 Office equipment 21,913 21,913 Property and equipment costs 68,800 26,960 Less: accumulated depreciation (25,826 ) (10,065 ) Property and equipment, net $ 42,974 $ 16,895 Depreciation expense for the year ended December 31, 2018 and 2017 was $15,760 and $14,521 respectively. |
Revolving Line of Credit
Revolving Line of Credit | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Revolving Line of Credit | Note 6. Revolving Line of Credit On December 29, 2017, the Company became party to a Senior Secured Revolving Credit Facility (“RLOC”) with ZB, N.A., d/b/a Amegy Bank (“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 three percent (3.00%) (effective rate of 4.88% at December 31, 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”), must maintain a maximum senior debt to EBITDA ratio (“Senior Debt to EBITDA”) of less than 3.75x, and must 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 RLOC amount. The Company was not in compliance with the FCCR requirement of the RLOC for the three-month period ending March 31, 2018. For the three-month period ended June 30, 2018, the Company was not in compliance with the Consecutive Net Losses, Senior Debt to EBITDA, or the minimum FCCR requirements of the RLOC. The Company has obtained waivers from Amegy Bank with respect to these two events of default. Further, Amegy Bank suspended the FCCR and Senior Debt to EBITDA for the three months ended September 30, 2018, and added a minimum quarterly net income requirement of $700,000 for the three months ended September 30, 2018. The Company was not in compliance with the minimum quarterly net income requirement of $700,000 for the three months ended September 30, 2018. The Company has obtained a waiver from Amegy Bank with respect to this event of default. On November 19, 2018 the Company executed the Second Amendment to the RLOC with Amegy Bank (the “Second Amendment”). The Second Amendment waived the Company’s events of default under the RLOC for 1) the three months ended March 31, 2018, 2) the three months ended June 30, 2018, and 3) the three months ended September 30, 2018 and amended certain material terms as follows: • added the concept of a dilution reserve in an amount of not less than $600,000, relating to all receivables in the definition of Borrowing Base; • reduced the aggregate limit of the loans offered to $4,000,000; • extended the termination date from November 2, 2018 to November 4, 2019; • increased the rate at which the loans bear interest to the LIBOR Index Rate plus four percent (4.00%) per annum; • amended the financial covenants to state that the Company will not permit: (a) the Fixed Charge Coverage Ratio of any calendar quarter end from and after the quarter ending June 30, 2019 to be less than 1.25 to 1.00; and (b) EBITDA to be less than $700,000 for the fiscal quarter ending December 31, 2018, and $100,000 for the fiscal quarter ending March 31, 2019; and • modified the event of default related to consecutive quarterly losses to be applicable from and after the quarter ending June 30, 2019. The Company’s Chairman of the Board, and President, continues to personally guarantee fifty percent (50%) of the outstanding RLOC amount. The outstanding balance of the RLOC was $1,477,448 and $3,415,351 at December 31, 2018 and 2017, respectively. Interest expense incurred on the RLOC was $106,943 and $134,668 for the year ended December 31, 2018 and 2017, respectively, and is reflected in interest expense on the Company’s accompanying consolidated statements of operations. Accrued interest on the RLOC at December 31, 2018 and 2017 was $4,350 and $4,927, respectively, and is reflected in accrued expenses on the Company’s accompanying consolidated balance sheets. |
Notes Payable - Related Parties
Notes Payable - Related Parties | 12 Months Ended |
Dec. 31, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable - Related Parties | Note 7. Notes Payable – Related Parties During July 2016 through October 2016, the Company obtained three working capital loans from NC 143 and RMI in the form of Notes in the aggregate amount of $150,000 bearing ten percent (10%) interest per annum until December 31, 2016 (“Maturity Date”) and eighteen percent (18%) interest per annum for periods subsequent to the Maturity Date. The Notes’ principal and interest shall be due and payable, upon demand of the payee and at the holder’s sole discretion. The Notes’ holders have 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 years ended December 31, 2018 and 2017, interest expense of $27,000 and $27,000, respectively, is reflected in interest expense on the Company’s accompanying consolidated statements of operations. As of December 31, 2018, and 2017, accrued interest was $59,096 and $32,096, respectively, which is reflected in accrued expenses on the Company’s accompanying consolidated balance sheets. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 8. Commitments and Contingencies Legal Matters There is one material legal proceeding that has been present, but not active, for several years now. On January 27, 2014, M. Richard Cutler and Cutler Law Group, P.C. (“Plaintiffs”) filed a complaint in the District Court of Harris County, Texas, 2014-03355, against Fuse, Alan Meeker, Rusty Shelton, Jonathan Brown, Robert H. Donehew and Golf Rounds.com, Inc. On April 21, 2014, the complaint was dismissed for “want of prosecution.” On September 18, 2015, the 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. There is currently no trial date for the matter, as it has been “administratively closed” since 2017 due to one of the named individuals in the complaint filing for bankruptcy protection, but the Company continues to monitor the status of the lawsuit. 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. Operating Leases The Company leases office space under a noncancelable operating lease agreement, from a real estate investments company that is owned and controlled by the Company’s Chairman of the Board and President. This lease terminated December 31, 2017 with month-to-month renewals. The lease requires monthly payments of $14,000. Annual rent expense was approximately $168,000 and $142,000 for the years ended December 31, 2018 and 2017, and are included in selling, general, administrative and other expenses on the Company’s accompanying consolidated statement of operations. The Company leases office equipment under two noncancelable operating lease agreements which expire March 2019 and February 2021. In aggregate, these office equipment leases require monthly payments of approximately $779. Rent expense for the equipment leases totaled approximately $11,000 and $11,000 for the years ended December 31, 2018 and 2017, respectively, and are included in selling, general, administrative and other expenses on the Company’s accompanying consolidated statement of operations. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2018: Year ending December 31, 2019 $ 5,000 2020 3,000 2021 500 2022 - $ 8,500 |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders Equity Deficit [Abstract] | |
Stockholders' Equity | Note 9. Stockholders’ Equity The 2018 Equity Incentive Plan of Fuse Medical, Inc. (“2018 Equity Plan”), is the Company’s stock-based compensation plan, which the Company’s Board adopted on April 5, 2017 and subsequently amended and restated on December 13, 2018. The 2018 Equity Plan 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. Awards granted pursuant to the 2018 Plan are subject to a vesting schedule as set forth in individual agreements. The Company’s management estimates that the fair value of stock-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. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to the Company’s product advisory board members, certain key employees, and marketing representatives during: Assumptions For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Expected term (years) 10 - Expected volatility 107.22 % 0 % Weighted-average volatility 107.22 % 0 % Risk-free interest rate 2.785 % 0.00 % Dividend yield 0.0 % 0.0 % Expected forfeiture rate n/a n/a For the year ended December 31, 2018, the Board granted 3,930,000, respectively, of non-qualified stock option awards (“NQSO”) to the Company’s product advisory board members, certain key employees and marketing representatives. For the year ended December 31, 2018, the Company amortized $624,041 relating to the vesting of NQSOs, which is included in selling, general, administrative, and other expenses on the Company’s accompanying consolidated statement of operations. For the year ended December 31, 2017, the Company did not have stock options to amortize. The Company will recognize $1,984,950 as an expense in future periods as the NQSOs vest. 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 during the year ended December 31, 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 Granted 3,930,000 $ 1.04 Exercised — $ - Forfeited (1,315,000 ) $ 0.96 Expired (2,052 ) $ 11.11 Balance outstanding at December 31, 2018 3,915,000 $ 0.78 7.0 $ 443,000 Exercisable at December 31, 2018 1,340,000 $ 0.21 2.5 $ 443,000 The weighted-average grant-date fair value of options granted during the year ended December 31, 2018 was $0.96. Restricted Common Stock For the year ended December 31, 2018, and 2017 the Company amortized $210,888 and $42,609 relating to the vesting of restricted stock awards (“RSAs”), respectively, which is included in selling, general, administrative, and other expenses, on the accompanying consolidated statement of operations. The following table summarizes RSAs 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 1,111,115 500,000 0.45 Vested (1,267,500 ) (253,500 ) 0.20 Forfeited - - - Board Modification 1 1,267,500 - - Non-vested, December 31, 2018 4,378,615 $ 2,060,000 $ 0.47 1) The Board, modified the 2017 RSAs vesting terms for shares of the Company’s Common Stock subject to RSA’s granted to the directors as director compensation effective during 2017. The Board modified the 2017 RSAs so that shares of the Company’s Common Stock granted pursuant to the 2017 RSAs vest only upon: (i) the occurrence of a Change in Control (as defined in the 2017 RSAs), listing of the Company’s Common Stock on a national exchange, or the director’s termination of Continuous Service (as defined in the 2017 RSAs), and (ii) the director’s notification to the Company of such accelerating events, within a specified period (“ Triggering Events The non-vested RSAs as of December 31, 2018, were granted by the Company’s Board to the Board members as compensation and vest fully upon Triggering Events, as defined. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 10. Income Taxes The Company began consolidating the financial results of CPM effective January 1, 2016, when the Company became the sole managing member of CPM. CPM 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 Year Ended December 31, 2018 For the Year Ended December 31, 2017 Current: Federal $ - $ - State 48,711 40,818 48,711 40,818 Deferred: Federal (435,495 ) - State - - (435,495 ) - Total Income tax expense (benefit) $ (386,784 ) $ 40,818 Significant components of the Company's deferred income tax assets and liabilities are as follows: December 31, 2018 December 31, 2017 Deferred tax assets: Net operating loss carryover $ 216,793 $ 172,704 Accounts receivable 140,272 81,927 Compensation 232,793 57,458 Inventory 383,744 25,792 Other 28,128 - Total deferred tax assets 1,001,730 337,881 Deferred tax liabilities: Intangibles (232,835 ) 40,342 Property and equipment (7,902 ) (2,945 ) Total deferred tax liabilities (240,737 ) 37,397 Deferred tax assets, net 760,993 375,278 Valuation allowance: Beginning of year - (308,026 ) (Increase) decrease during year - 308,026 Ending balance - - Net deferred tax asset $ 760,993 $ 375,278 As of December 31, 2018, the Company recognized a net deferred tax asset of $760,993, or an increase of $385,715 recognized at December 31, 2017. Consistent with the one-year period and the current business trends and expectations, the Company’s management does not deem a valuation allowance to be appropriate as of December 31, 2018. At December 31, 2018, the Company estimates it has approximately $1,032,348 of net operating loss carryforwards which will expire during 2019 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 December 31, 2018, the Company’s tax years 2015 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: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Statutory U.S. federal income tax rate 21.0 % 35.0 % State income taxes, net of federal tax benefit 1.1 % 5.8 % Permanent differences -32.8 % 3.8 % Other reconciling items -0.1 % 20.5 % LLC flow-through structure 0.0 % (59.3 %) Valuation allowance 0.0 % 0.0 % Effective income tax rate -10.8 % 5.8 % |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2018 | |
Nature Of Operations And Going Concern [Abstract] | |
Concentrations | Note 11. Concentrations Concentration of Revenues, Accounts Receivable and Suppliers For the years ended December 31, 2018 and 2017, the following significant customers had an individual percentage of total revenues equaling ten percent (10%) or greater: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Customer 1 19.78 % 18.06 % Totals 19.78 % 18.06 % At December 31, 2018 and 2017, the following significant customers had a concentration of accounts receivable representing ten percent (10%) or greater of accounts receivable: December 31, 2018 December 31, 2017 Customer 1 15.03 % 15.26 % Totals 15.03 % 15.26 % For the years ended December 31, 2018 and 2017, the following significant suppliers represented ten percent (10%) or greater of goods purchased: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Supplier 1 13.20 % 10.70 % Supplier 2 10.50 % 5.80 % Totals 23.70 % 16.50 % |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 12. Related Party Transactions Lease with 1565 North Central Expressway, LP For its principal executive office, the Company leases an aggregate of approximately 11,500 square-foot space 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 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. Both leases terminated December 31, 2017, with month-to-month renewals. For the year ended December 31, 2018 and 2017, the Company paid approximately $168,000 and $142,000 in rent expense, which is reflected in selling, general, administrative, and other expenses in the Company’s accompanying consolidated statements of operations. AmBio Contract The Company engaged AmBio Staffing, LLC (“AmBio”), a Texas licensed Professional Employment Organization, to provide payroll processing, employee benefit administration, and related human capital services effective January 1, 2017. Mr. Brooks owns and controls AmBio. As of December 31, 2018, AmBio operations support approximately 69 full time equivalents (“FTE”). Of those 69 FTEs, 48 FTEs directly support the Company, 14 FTEs support the operations of other companies and the Company shares 7 FTEs with other companies. As of December 31, 2018, and December 31, 2017, the Company owed amounts to AmBio of approximately $180,000 and $178,000, respectively, which is reflected in the accounts payable on the Company’s consolidated balance sheets. For the year ended December 31, 2018, and 2017, the Company paid approximately $ 224,000 and $ 152,000, respectively, to AmBio in administrative fees, which 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 to other third-party contractual arrangements. As described more fully below, these transactions include: selling and purchasing 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 years ended December 31, 2018 and 2017, the Company: • sold Orthopedic Implants and Biologics products to MedUSA in the amounts of approximately $2,069,000 and $5,054,000, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; • purchased approximately $650,000 and $37,000, respectively, of Orthopedic Implants, medical instruments, and Biologics from MedUSA, which is reflected in inventories in the Company’s accompanying consolidated balance sheets; and • incurred approximately $2,139,000 and $962,000, respectively, in commission costs to MedUSA, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances due from MedUSA of approximately $389,000 and $1,684,000, respectively. These amounts are reflected in accounts receivable in the Company’s accompanying consolidated balance sheets. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances owed to MedUSA of approximately $8,000 and $1,000, respectively. These amounts are reflected in accounts payable in the Company’s accompanying 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 and an increase of $1,548,000 to inventories and additional paid-in-capital as an injection of capital from a related party under common control, which is reflected in the Company’s accompanying consolidated balance sheets. Texas Overlord, LLC Texas Overlord, LLC (“Overlord”) is an investment holding-company owned and controlled by Mr. Brooks. During the years ended December 31, 2018 and 2017, the Company: • sold Biologics products to Overlord in the amounts of approximately $0.00 and $1,953,000, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; • purchased approximately $547,000 and $0.00, respectively, of Orthopedic Implants, medical instruments, and Biologics from Overlord, which is reflected in inventories in the Company’s accompanying consolidated balance sheets; and • incurred approximately $635,000 and $101,000, respectively, in commission costs to Overlord, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances due from Overlord of approximately $0.00 and $444,000, respectively. These amounts are reflected in accounts receivable in the Company’s accompanying consolidated balance sheets. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances owed to Overlord of approximately $2,000 and $0.00, respectively. These amounts are reflected in accounts payable in the Company’s accompanying consolidated balance sheets. N.B.M.J., Inc. 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 years ended December 31, 2018 and 2017, the Company: • sold Biologics products to NBMJ in the amounts of approximately $373,000 and $162,000, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; As of December 31, 2018, and December 31, 2017, the Company has outstanding balances due from NBMJ of approximately $155,000 and $0.00, respectively. These amounts are reflected in accounts receivable in the Company’s accompanying consolidated balance sheets. Palm Springs Partners, LLC d/b/a Maxim Surgical Maxim is a contract manufacturer and distributor of spinal implants and related instrumentation. On the Maxim Closing Date, the Company completed the Maxim Acquisition pursuant to the Maxim Purchase Agreement. See Note 1, “Nature of Operations – Overview” and Note 3, “Maxim Acquisition.” Prior to the Maxim Closing Date, Mr. Reeg owned sixty percent (60%) of Maxim and served as its President. With respect to Maxim, during the seven months ended July 31, 2018 and the year ended December 31, 2017, the Company: • sold Orthopedic Implants and Biologics products to Maxim in the amounts of approximately $173,000 and $202,000, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; • purchased approximately $286,000 and $467,000, respectively, of Orthopedic Implants, medical instruments, and Biologics from Maxim, which is reflected in inventories in the Company’s accompanying consolidated balance sheets; and • incurred approximately $21,000 and $0.00, respectively, in commission costs to Maxim, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances due from Maxim of approximately $0.00 and $50,000, respectively. These amounts are reflected in accounts receivable in the Company’s accompanying consolidated balance sheets. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances owed to Maxim of approximately $0.00 and $93,000, respectively. These amounts are reflected in accounts payable in the Company’s accompanying consolidated balance sheets. For the seven months ended July 31, 2018 and the year ended December 31, 2017, the Company earned approximately $11,000 and $18,000, respectively, pursuant to the Company’s shared services and sublease agreements. Those amounts are reflected in selling, general, administrative, and other expenses in the Company’s accompanying consolidated statements of operations. Pursuant to the Maxim Acquisition, these agreements terminated as of the Maxim Closing Date. Bass Bone and Spine Specialists Bass Bone & Spine Specialists (“Bass”) operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks. During the years ended December 31, 2018 and 2017, the Company: • sold Orthopedic Implants and Biologics products to Bass in the amounts of approximately $763,000 and $311,000, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; • incurred approximately $8,000 and $3,000, respectively, in commission costs to Bass, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances due from Bass of approximately $179,000 and $106,000, respectively. These amounts are reflected in accounts receivable in the Company’s accompanying 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 years ended December 31, 2018 and 2017, the Company: • incurred approximately $860,000 and $1,114,000, respectively, in commission costs to Sintu, which is reflected in commissions in the Company’s accompanying consolidated statements 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 years ended December 31, 2018 and 2017, the Company: • sold Orthopedic Implants and Biologics products to Recon in the amounts of approximately $0.00 and $204,000, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; • incurred approximately $209,000 and $30,000, respectively, in commission costs to Recon, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2018, and December 31, 2017, the Company has outstanding balances due from Recon of approximately $0.00 and $6,000, respectively. These amounts are reflected in accounts receivable in the Company’s accompanying consolidated balance sheets. During the year ended December 31, 2018 and 2017, the Company earned approximately $4,000 and $15,000, respectively, pursuant to the Company’s shared-services agreement with Recon, which is reflected in selling, general, administrative, and other expenses in the Company’s accompanying consolidated statements of operations. The Company terminated the shared services agreement effective April 30, 2018. Tiger Orthopedics, LLC Tiger Orthopedics, LLC (“Tiger”) operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks. During the years ended December 31, 2018 and 2017, the Company: • sold Orthopedic Implants and Biologics products to Tiger in the amounts of approximately $154,000 and $410,000, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; As of December 31, 2018, and December 31, 2017, the Company has outstanding balances due from Tiger of approximately $5,000 and $44,000, respectively. These amounts are reflected in accounts receivable in the Company’s accompanying consolidated balance sheets. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 13. Subsequent Events In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through March 21, 2019, the date the financial statements were available to be issued. On March 16, 2019, to reflect its original intent, the Company’s Board, acting by written unanimous consent effective December 31, 2018, modified the vesting terms for shares of the Company’s Common Stock subject to RSA’s granted to the directors as director compensation effective during 2017. The Board modified the 2017 RSAs so that shares of the Company’s Common Stock granted pursuant to the 2017 RSAs vest only upon Triggering Events. See “Note 9. Stockholders’ Equity.” The Company’s management concluded there are no other material events or transactions for potential recognition or disclosure. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of the Company, CPM, and Maxim, the Company’s wholly-owned subsidiaries of which the operations have been integrated with the Company. Intercompany transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of the 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 consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying consolidated financial statements include the valuation of inventories, the Company’s effective income tax rate, and the recoverability of deferred tax assets, which are based upon the Company’s management expectation of future taxable income and allowable deductions and the fair value calculations of stock-based compensation and earn-out (“ Earn-Out |
Segment Reporting | Segment Reporting In accordance with Accounting Standards Update (“ASU”) No. 280, “Segment Reporting,” the Company uses the management approach for determining its reportable segments. The management approach is based upon the way that management reviews performance and allocates resources. The Company’s Chief Executive Officer serves as the Company’s chief operating decision maker, and his management team review operating results on a consolidated basis for purposes of allocating resources and evaluating the financial performance of the Company. The Company has integrated the operations of both CPM and Maxim. Accordingly, the Company has determined that it has one operating segment and, therefore, one reporting segment. |
Net Income Per Common Share | Net Income Per Common Share Basic net income per common share is calculated by dividing net income 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 per common share is computed by dividing net income attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period determined using the treasury stock method. As of December 31, 2018, and 2017, 1,300,000 and 700,000 outstanding Common Stock equivalents have been included within diluted net earnings per share, respectively. As of December 31, 2018, and 2017, Common Stock equivalents included options to purchase 3,915,000 and 1,302,052 common shares, respectively. |
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 related to the Earn-Out portion of the purchase consideration. See “Note 4, CPM Acquisition,” for further discussion of the Earn-Out liability. The Company has classified the Earn-Out liability as a Level 3 liability and the fair value of the Earn-Out liability will be evaluated each reporting period and changes in its fair value will be included in the Company’s earnings. The Earn-Out payments are based on the financial performance of the Company between the period of 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 earnings thresholds as detailed in the CPM Acquisition 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 the Monte Carlo simulation, which was then applied to estimated Earn-Out payments with a discount rate of four percent (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 margins of approximately forty-eight percent (48%), net income margins averaging nine percent (9%) per year, revenue growth of approximately five percent (5%) over a forecast horizon period of 11 years. The Earn-Out liability, which represented contingent consideration associated with the CPM Acquisition, is recorded as a liability. This liability is subject to re-measurement to fair value at each reporting date until the contingency is resolved and the changes in fair value are recognized in the consolidated statements of operations at each reporting period since the arrangement is not subject to the accounting for hedging instruments. For the year ended December 31, 2018, the Company has determined the earnings threshold as detailed in the CPM Acquisition Agreement was not met and therefore no payments for either the base or bonus Earn-Out tranches would be achieved, based on the Company’s 2018 financial performance. The Earn-Out was re-measured to fair value under the probability weighted income approach. As a result, the initial fair value of the Earn-Out liability was reduced by $5,663,014 from $19,244,543 to $13,581,529. The Earn-Out liability was reduced by $5,663,014 with the offset reflected as “Change in fair value of contingent purchase consideration” on our Financial Statements. 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 values of notes payable approximate their respective fair values based upon their effective interest rates. |
Reclassification | Reclassification Certain amounts in the accompanying 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 December 31, 2018, and December 31, 2017. The Company’s cash is concentrated in two 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 December 31, 2018. As of December 31, 2018, and December 31, 2017, there were deposits of $322,693 and $537,388, respectively, which were greater than federally insured limits. |
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 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) less an allowance for slow-moving inventory, expired inventory and inventory obsolescence. Inventories consist entirely of finished goods and Orthopedic Implants and 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 Amortization Period Computer equipment 3 years Furniture and fixtures 3 years Office equipment 3 years Software 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. |
Long-Lived Assets | Long-Lived Assets The Company reviews long-lived assets annually or whenever changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Assets are grouped and evaluated for impairment at the lowest level for which there are identifiable cash flows that are largely independent of the cash flows of other groups of assets, which generally represents furniture and fixtures. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is the consolidated cash flow measure monitored for indicators of impairment. As the cash flow measure reaches levels to indicate potential impairment, the Company estimates the future cash flows expected to be generated from the use of the asset and its eventual disposal. If the sum of undiscounted future cash flows is less than the carrying amount of the asset, an impairment loss is recognized. The impairment loss is measured by comparing the fair value of the asset to its carrying amount. Fair value is typically determined to be the value to repurchase furniture and fixtures. Based upon the Company’s assessment, there were no indicators of impairment of its long-lived assets at December 31, 2018 and 2017. |
Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets Goodwill is determined based on an acquisition purchase price in excess of the fair value of identified net assets acquired. Intangible assets with lives restricted by contractual, legal or other means are amortized over their useful lives. The Company tests goodwill at least annually or whenever changes in circumstances indicate that the carrying amount of an asset might not be recoverable for impairment using the fair value approach on a reporting unit basis. Since the Company is one reporting unit, potential goodwill impairment is evaluated by comparing the fair value of the Company to its carrying value. The fair value of the Company is determined using a market approach. If the carrying value of the Company exceeds fair value, a comparison of the fair value of goodwill against the carrying value of goodwill is made to determine whether goodwill has been impaired. The Company performs the annual assessment of the recoverability of goodwill during the fourth quarter of each fiscal year. No goodwill impairment has been recognized during 2018 or 2017. The Company’s intangible assets subject to amortization consist primarily of acquired non-compete agreements and customer relationships. Amortization expense is calculated using the straight-line method over the asset’s expected useful life. See “Note 3 – Maxim Acquisition” for goodwill and other intangibles for additional related disclosures. |
Revenue Recognition | Revenue Recognition Revenue is recognized when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration that 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 and related procedures. For customers that purchase products as needed, the Company invoices the customers on the date the product is utilized. For customers that have consigned product, the Company invoices the customers as each unit of the product is utilized. Payment terms are due upon receipt of invoice or contractual terms. 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 reduces net revenues to account for estimates of the Company’s sales returns, discounts, and other incentives. |
Cost of Revenues | Cost of Revenues Cost of revenues consists of cost of goods sold, freight and shipping costs for items sold to customers, cost of storage, investment in medical instruments, which are expenses acquired, inventory shrink, and an estimate for slow-moving, expired inventory, and inventory obsolescence. |
Shipping and Handling Fees | Shipping and Handling Fees The Company includes shipping and handling fees billed to customers in revenues and the related costs in cost of revenues. |
Income Taxes | Income Taxes As a result of the CPM Acquisition, the Company became the sole managing member of CPM and as a result, began consolidating the financial results of CPM. CPM is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, CPM is not subject to U.S. federal and most applicable state and local income tax purposes. Any taxable income or loss generated by CPM is passed through to and included in the taxable income or loss of the Company. As a result of the Maxim Acquisition, the Company and Maxim will elect to file a consolidated tax return for the period after acquisition. The Company uses the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of December 31, 2018, the Company had no liabilities for uncertain tax positions. The Company's policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law, and new authoritative rulings. |
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For employee stock-based awards, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro-rata compensation expense is adjusted accordingly until such time the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company considers the applicability and impact of all ASUs 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 twelve (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 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 Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Accounting Policies [Abstract] | |
Estimated Useful Lives of Assets | Category Amortization Period Computer equipment 3 years Furniture and fixtures 3 years Office equipment 3 years Software 3 years |
Maxim Acquisition (Tables)
Maxim Acquisition (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Business Combinations [Abstract] | |
Schedule of Components of Aggregate Purchase Price | Cash $ 200,000 Fair value of Common Stock 3,200,000 Post-closing working capital adjustment 81,757 Total purchase price $ 3,481,757 |
Summary of Assets Acquired and Liabilities Assumed | Allocation of purchase price Amortization period (years) Cash $ 136,903 Accounts receivable, net 261,431 Inventory, net 266,934 Prepaid expenses and other current assets 898 Total tangible assets acquired 666,166 Liabilities assumed (595,037 ) Net tangible assets less liabilities $ 71,129 Intangible assets: Non-compete agreements 61,766 2 510K product technology 704,380 Indefinite Customer relationships 555,819 11 Goodwill 2,088,663 Indefinite Total purchase price $ 3,481,757 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | Property and equipment consisted of the following at December 31, 2018 and 2017: December 31, 2018 December 31, 2017 Computer equipment and software $ 41,840 $ - Furniture and fixtures 5,047 5,047 Office equipment 21,913 21,913 Property and equipment costs 68,800 26,960 Less: accumulated depreciation (25,826 ) (10,065 ) Property and equipment, net $ 42,974 $ 16,895 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Commitments And Contingencies Disclosure [Abstract] | |
Summary of Operating Leases | The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2018: Year ending December 31, 2019 $ 5,000 2020 3,000 2021 500 2022 - $ 8,500 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Stockholders Equity Deficit Tables [Abstract] | |
Summary of Compensation Expense for Stock Options Granted to Board Members, Employees and Marketing Representatives | The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to the Company’s product advisory board members, certain key employees, and marketing representatives during: Assumptions For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Expected term (years) 10 - Expected volatility 107.22 % 0 % Weighted-average volatility 107.22 % 0 % Risk-free interest rate 2.785 % 0.00 % Dividend yield 0.0 % 0.0 % Expected forfeiture rate n/a n/a |
Summary of Stock Option Activity | A summary of the Company’s stock option activity during the year ended December 31, 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 Granted 3,930,000 $ 1.04 Exercised — $ - Forfeited (1,315,000 ) $ 0.96 Expired (2,052 ) $ 11.11 Balance outstanding at December 31, 2018 3,915,000 $ 0.78 7.0 $ 443,000 Exercisable at December 31, 2018 1,340,000 $ 0.21 2.5 $ 443,000 |
Summary of Restricted Stock Awards Activity | The following table summarizes RSAs 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 1,111,115 500,000 0.45 Vested (1,267,500 ) (253,500 ) 0.20 Forfeited - - - Board Modification 1 1,267,500 - - Non-vested, December 31, 2018 4,378,615 $ 2,060,000 $ 0.47 1) The Board, modified the 2017 RSAs vesting terms for shares of the Company’s Common Stock subject to RSA’s granted to the directors as director compensation effective during 2017. The Board modified the 2017 RSAs so that shares of the Company’s Common Stock granted pursuant to the 2017 RSAs vest only upon: (i) the occurrence of a Change in Control (as defined in the 2017 RSAs), listing of the Company’s Common Stock on a national exchange, or the director’s termination of Continuous Service (as defined in the 2017 RSAs), and (ii) the director’s notification to the Company of such accelerating events, within a specified period (“ Triggering Events |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | |
Components of Income Tax Expense (Benefit) | The components of income tax expense (benefit) are as follows: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Current: Federal $ - $ - State 48,711 40,818 48,711 40,818 Deferred: Federal (435,495 ) - State - - (435,495 ) - Total Income tax expense (benefit) $ (386,784 ) $ 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: December 31, 2018 December 31, 2017 Deferred tax assets: Net operating loss carryover $ 216,793 $ 172,704 Accounts receivable 140,272 81,927 Compensation 232,793 57,458 Inventory 383,744 25,792 Other 28,128 - Total deferred tax assets 1,001,730 337,881 Deferred tax liabilities: Intangibles (232,835 ) 40,342 Property and equipment (7,902 ) (2,945 ) Total deferred tax liabilities (240,737 ) 37,397 Deferred tax assets, net 760,993 375,278 Valuation allowance: Beginning of year - (308,026 ) (Increase) decrease during year - 308,026 Ending balance - - Net deferred tax asset $ 760,993 $ 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: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Statutory U.S. federal income tax rate 21.0 % 35.0 % State income taxes, net of federal tax benefit 1.1 % 5.8 % Permanent differences -32.8 % 3.8 % Other reconciling items -0.1 % 20.5 % LLC flow-through structure 0.0 % (59.3 %) Valuation allowance 0.0 % 0.0 % Effective income tax rate -10.8 % 5.8 % |
Concentrations (Tables)
Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Revenues [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the years ended December 31, 2018 and 2017, the following significant customers had an individual percentage of total revenues equaling ten percent (10%) or greater: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Customer 1 19.78 % 18.06 % Totals 19.78 % 18.06 % |
Accounts Receivable [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | At December 31, 2018 and 2017, the following significant customers had a concentration of accounts receivable representing ten percent (10%) or greater of accounts receivable: December 31, 2018 December 31, 2017 Customer 1 15.03 % 15.26 % Totals 15.03 % 15.26 % |
Goods Purchased [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the years ended December 31, 2018 and 2017, the following significant suppliers represented ten percent (10%) or greater of goods purchased: For the Year Ended December 31, 2018 For the Year Ended December 31, 2017 Supplier 1 13.20 % 10.70 % Supplier 2 10.50 % 5.80 % Totals 23.70 % 16.50 % |
Nature of Operations (Details N
Nature of Operations (Details Narrative) - USD ($) | Aug. 01, 2018 | Jul. 30, 2018 | Dec. 31, 2017 | Dec. 29, 2017 | Dec. 31, 2018 |
Nature Of Operations And Going Concern [Line Items] | |||||
Percentage of common stock issued | 61.40% | ||||
Percentage of common stock outstanding | 61.40% | ||||
Common Stock Par Value | $ 0.01 | $ 0.01 | |||
CPM [Member] | |||||
Nature Of Operations And Going Concern [Line Items] | |||||
Common Stock Par Value | $ 0.01 | ||||
Date of acquisition agreement | Dec. 31, 2017 | Dec. 29, 2017 | |||
Maxim Surgical, LLC [Member] | |||||
Nature Of Operations And Going Concern [Line Items] | |||||
Date of acquisition agreement | Jul. 30, 2018 | ||||
Approximate aggregate purchase price of outstanding membership interests | $ 3,481,757 | $ 3,400,000 |
Significant Accounting Polici_4
Significant Accounting Policies (Details Narrative) | 12 Months Ended | |
Dec. 31, 2018USD ($)Segmentshares | Dec. 31, 2017USD ($)shares | |
Significant Accounting Policies [Line Items] | ||
Number of operating segments | Segment | 1 | |
Number of reportable segments | Segment | 1 | |
Outstanding common stock equivalents included with diluted net earnings per share | shares | 1,300,000 | 700,000 |
Options to purchase included in common stock equivalents | shares | 3,915,000 | 1,302,052 |
Earn-out liability | $ 13,581,529 | $ 19,244,543 |
Amount of earn-out liability reduced | 5,663,014 | |
Cash equivalents | 0 | 0 |
FDIC insurance limit | 250,000 | |
Deposits greater than federally insured limit | 322,693 | 537,388 |
Goodwill impairment | 0 | 0 |
Liabilities for uncertain tax positions, current | 0 | |
liabilities for uncertain tax positions, noncurrent | 0 | |
CPM [Member] | ||
Significant Accounting Policies [Line Items] | ||
Earn-out liability | $ 13,581,529 | $ 19,244,543 |
Earn-out payment start date | Jan. 1, 2018 | |
Earn-out payment end date | Dec. 31, 2034 | |
Earn-out payment base 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 | |
Amount of earn-out liability reduced | $ 5,663,014 | |
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 Polici_5
Significant Accounting Policies - Estimated Useful Lives of Assets (Details) | 12 Months Ended |
Dec. 31, 2018 | |
Computer equipment [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 |
Software [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Maxim Acquisition (Details Narr
Maxim Acquisition (Details Narrative) - USD ($) | Oct. 04, 2018 | Aug. 01, 2018 | Dec. 31, 2018 |
Business Acquisition [Line Items] | |||
Acquisition related expenses | $ 84,273 | ||
Maxim Surgical, LLC [Member] | |||
Business Acquisition [Line Items] | |||
Percentage of outstanding equity securities acquired | 100.00% | ||
Common stock price per share | $ 0.68 | $ 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 | 30 days | |
Post-closing working capital adjustment | $ 81,757 | ||
Maxim Surgical, LLC [Member] | Minimum [Member] | |||
Business Acquisition [Line Items] | |||
Equity interest percentage | 10.00% | ||
Restricted Common Stock [Member] | Maxim Surgical, LLC [Member] | |||
Business Acquisition [Line Items] | |||
Number of shares issued for acquisition | 120,231 | 4,210,526 |
Maxim Acquisition - Schedule of
Maxim Acquisition - Schedule of Components of Aggregate Purchase Price (Details) - Maxim Surgical, LLC [Member] - USD ($) | Aug. 01, 2018 | Jul. 30, 2018 |
Business Acquisition [Line Items] | ||
Cash | $ 200,000 | |
Fair value of Common Stock | 3,200,000 | |
Post-closing working capital adjustment | 81,757 | |
Total purchase price | $ 3,481,757 | $ 3,400,000 |
Maxim Acquisition - Summary of
Maxim Acquisition - Summary of Assets Acquired and Liabilities Assumed (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Aug. 01, 2018 | Dec. 31, 2017 | |
Intangible assets: | |||
Goodwill | $ 2,905,089 | $ 820,650 | |
Maxim Surgical, LLC [Member] | |||
Business Acquisition [Line Items] | |||
Cash | $ 136,903 | ||
Accounts receivable, net | 261,431 | ||
Inventory, net | 266,934 | ||
Prepaid expenses and other current assets | 898 | ||
Total tangible assets acquired | 666,166 | ||
Liabilities assumed | (595,037) | ||
Net tangible assets less liabilities | 71,129 | ||
Intangible assets: | |||
Goodwill | 2,088,663 | ||
Total purchase price | 3,481,757 | ||
Maxim Surgical, LLC [Member] | 510K Product Technology [Member] | |||
Intangible assets: | |||
Purchase price of indefinite lived intangible assets | 704,380 | ||
Intangible assets, amortization period | Indefinite | ||
Maxim Surgical, LLC [Member] | Goodwill [Member] | |||
Intangible assets: | |||
Intangible assets, amortization period | Indefinite | ||
Non-Compete Agreements [Member] | Maxim Surgical, LLC [Member] | |||
Intangible assets: | |||
Purchase price of finite lived intangible assets | 61,766 | ||
Intangible assets, amortization period | 2 years | ||
Customer Relationships [Member] | Maxim Surgical, LLC [Member] | |||
Intangible assets: | |||
Purchase price of finite lived intangible assets | $ 555,819 | ||
Intangible assets, amortization period | 11 years |
CPM Acquisition (Details Narrat
CPM Acquisition (Details Narrative) - USD ($) | Jun. 27, 2018 | Dec. 31, 2017 | Dec. 29, 2017 | Dec. 31, 2018 |
Business Acquisition [Line Items] | ||||
Common Stock Par Value | $ 0.01 | $ 0.01 | ||
Earn-out liability | $ 19,244,543 | $ 13,581,529 | ||
Decrease in earn-out liability | 5,663,014 | |||
CPM [Member] | ||||
Business Acquisition [Line Items] | ||||
Date of acquisition agreement | Dec. 31, 2017 | 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 | 13,581,529 | ||
Fair value of earn-out liability | $ 26,000,000 | |||
Decrease in earn-out liability | $ 5,663,014 | |||
Post-closing adjustment paid in cash | $ 397,463 |
Property and Equipment (Details
Property and Equipment (Details) - USD ($) | Dec. 31, 2018 | Dec. 31, 2017 |
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | $ 68,800 | $ 26,960 |
Less: accumulated depreciation | (25,826) | (10,065) |
Property and equipment, net | 42,974 | 16,895 |
Computer Equipment and Software [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | 41,840 | |
Furniture and fixtures [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | 5,047 | 5,047 |
Office equipment [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | $ 21,913 | $ 21,913 |
Property and Equipment (Detai_2
Property and Equipment (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property Plant And Equipment [Abstract] | ||
Depreciation expense | $ 15,760 | $ 14,521 |
Revolving Line of Credit (Detai
Revolving Line of Credit (Details Narrative) - CPM [Member] - USD ($) | Nov. 19, 2018 | Nov. 18, 2018 | Dec. 31, 2017 | Dec. 29, 2017 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Dec. 31, 2018 | Dec. 31, 2017 |
Debt Instrument [Line Items] | |||||||||
Date of acquisition agreement | Dec. 31, 2017 | Dec. 29, 2017 | |||||||
RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Date of acquisition agreement | Dec. 29, 2017 | ||||||||
Line of credit maximum borrowing capacity | $ 4,000,000 | $ 5,000,000 | |||||||
Variable rate, description | the LIBOR Index Rate plus four percent (4.00%) | one-month LIBOR rate plus three percent | |||||||
Variable rate | 3.00% | ||||||||
Effective rate | 4.88% | 4.88% | |||||||
Maximum senior debt to earnings before interest taxes, depreciation and amortization | 3.75% | ||||||||
Minimum fixed charge coverage ratio | 1.25% | 1.25% | |||||||
Percentage of guarantees of outstanding loan amount | 50.00% | 50.00% | |||||||
Minimum net profit required for compliance | $ 700,000 | $ 700,000 | |||||||
Description of possible effect of non-compliance | The Company was not in compliance with the minimum quarterly net income requirement of $700,000 | ||||||||
Dilution reserve relating to all receivables as defined in borrowing base | $ 600,000 | ||||||||
Line of credit facility, expiration date | Nov. 4, 2019 | Nov. 2, 2018 | |||||||
Description of financial covenants | (a) the Fixed Charge Coverage Ratio of any calendar quarter end from and after the quarter ending June 30, 2019 to be less than 1.25 to 1.00; and (b) EBITDA to be less than $700,000 for the fiscal quarter ending December 31, 2018, and $100,000 for the fiscal quarter ending March 31, 2019 | ||||||||
Line of credit outstanding balance amount | $ 3,415,351 | 1,477,448 | $ 1,477,448 | $ 3,415,351 | |||||
Interest expense | 106,943 | 134,668 | |||||||
Accrued interest | $ 4,927 | $ 4,350 | $ 4,350 | $ 4,927 | |||||
RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Scenario Forecast [Member] | |||||||||
Debt Instrument [Line Items] | |||||||||
Minimum net profit required for compliance | $ 100,000 |
Notes Payable - Related Parti_2
Notes Payable - Related Parties (Details Narrative) - USD ($) | 4 Months Ended | 12 Months Ended | |
Oct. 31, 2016 | Dec. 31, 2018 | Dec. 31, 2017 | |
Debt Instrument [Line Items] | |||
Interest expense on notes payable | $ 27,000 | $ 27,000 | |
Accrued expenses [Member] | |||
Debt Instrument [Line Items] | |||
Accrued interest | $ 59,096 | $ 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_2
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Commitments And Contingencies [Line Items] | ||
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, Alan Meeker, Rusty Shelton, Jonathan Brown, Robert H. Donehew and Golf Rounds.com, Inc. | |
Loss contingency, date of complaint dismissal | Apr. 21, 2014 | |
Lease termination date | Dec. 31, 2017 | |
Operating lease requires monthly payments | $ 14,000 | |
Office Equipment One [Member] | ||
Commitments And Contingencies [Line Items] | ||
Operating lease expiration month and year | 2019-03 | |
Office Equipment Two [Member] | ||
Commitments And Contingencies [Line Items] | ||
Operating lease expiration month and year | 2021-02 | |
Office Equipment Leases [Member] | ||
Commitments And Contingencies [Line Items] | ||
Operating lease requires monthly payments | $ 779 | |
Selling, General, Administrative and Other Expenses [Member] | ||
Commitments And Contingencies [Line Items] | ||
Annual rent expense | 168,000 | $ 142,000 |
Selling, General, Administrative and Other Expenses [Member] | Office Equipment Leases [Member] | ||
Commitments And Contingencies [Line Items] | ||
Annual rent expense | $ 11,000 | $ 11,000 |
Commitments and Contingencies -
Commitments and Contingencies - Summary of Operating Leases (Details) | Dec. 31, 2018USD ($) |
Commitments And Contingencies Disclosure [Abstract] | |
2019 | $ 5,000 |
2020 | 3,000 |
2021 | 500 |
Total | $ 8,500 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Compensation Expense for Stock Options Granted to Board Members, Employees And Marketing Representatives (Details) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||
Expected term (years) | 10 years | |
Expected volatility | 107.22% | 0.00% |
Weighted-average volatility | 107.22% | 0.00% |
Risk-free interest rate | 2.785% | 0.00% |
Dividend yield | 0.00% | 0.00% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Class Of Stock [Line Items] | ||
Stock options, granted | 3,930,000 | |
Weighted-average grant-date fair value of options, granted | $ 0.96 | |
Stock Option [Member] | ||
Class Of Stock [Line Items] | ||
Share-based compensation expense | $ 0 | |
Non-qualified Stock Options [Member] | ||
Class Of Stock [Line Items] | ||
Stock options, granted | 3,930,000 | |
Unrecognized compensation expenses on stock options | $ 1,984,950 | |
Non-qualified Stock Options [Member] | Selling, General, Administrative and Other Expenses [Member] | ||
Class Of Stock [Line Items] | ||
Share-based compensation expense | 624,041 | |
Restricted Stock Award [Member] | Selling, General, Administrative and Other Expenses [Member] | ||
Class Of Stock [Line Items] | ||
Share-based compensation expense | $ 210,888 | $ 42,609 |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of Stock Option Activity (Details) | 12 Months Ended |
Dec. 31, 2018USD ($)$ / sharesshares | |
No. of Shares, Abstract | |
No. of Shares, Beginning Balance | shares | 1,302,052 |
Granted, No. of Shares | shares | 3,930,000 |
Forfeited, No. of Shares | shares | (1,315,000) |
Expired, No. of Shares | shares | (2,052) |
No. of Shares, Ending Balance | shares | 3,915,000 |
Exercisable, No. of Shares | shares | 1,340,000 |
Weighted Average Exercise Price, Abstract | |
Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 0.20 |
Granted, Weighted Average Exercise Price | $ / shares | 1.04 |
Forfeited, Weighted Average Exercise Price | $ / shares | 0.96 |
Expired, Weighted Average Exercise Price | $ / shares | 11.11 |
Weighted Average Exercise Price, Ending Balance | $ / shares | 0.78 |
Exercisable, Weighted Average Exercise Price | $ / shares | $ 0.21 |
Weighted Average Remaining Contractual Term, Abstract | |
Weighted Average Remaining Contractual Term, Balance outstanding | 7 years |
Weighted Average Remaining Contractual Term, Exercisable | 2 years 6 months |
Aggregate Intrinsic Value, Abstract | |
Aggregate Intrinsic Value, Balance outstanding | $ | $ 443,000 |
Aggregate Intrinsic Value, Exercisable | $ | $ 443,000 |
Stockholders' Equity - Summar_3
Stockholders' Equity - Summary of Restricted Stock Awards Activity (Details) - Restricted Stock Award [Member] | 12 Months Ended |
Dec. 31, 2018USD ($)$ / sharesshares | |
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 |
Number of Shares,Granted | 1,111,115 |
Number of Shares,Vested | (1,267,500) |
Number of Shares,Board Modification | 1,267,500 |
Number of Shares, Non-vested, Balance | 4,378,615 |
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 |
Fair Value,Granted | $ | 500,000 |
Fair Value,Vested | $ | (253,500) |
Fair Value, Non-vested, Balance | $ | $ 2,060,000 |
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 | $ / shares | $ 0.56 |
Weighted Average Grant Date Fair Value,Granted | $ / shares | 0.45 |
Weighted Average Grant Date Fair Value,Vested | $ / shares | 0.20 |
Weighted Average Grant Date Fair Value, Non-vested, Balance | $ / shares | $ 0.47 |
Income Taxes - Components of In
Income Taxes - Components of Income Tax Expense (Benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Current: | ||
Federal | $ 0 | $ 0 |
State | 48,711 | 40,818 |
Total | 48,711 | 40,818 |
Deferred: | ||
Federal | (435,495) | 0 |
State | 0 | 0 |
Total | (435,495) | 0 |
Total Income tax expense (benefit) | $ (386,784) | $ 40,818 |
Income Taxes - Significant Comp
Income Taxes - Significant Components of Deferred Income Tax Assets and Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Deferred tax assets: | ||
Net operating loss carryover | $ 216,793 | $ 172,704 |
Accounts receivable | 140,272 | 81,927 |
Compensation | 232,793 | 57,458 |
Inventory | 383,744 | 25,792 |
Other | 28,128 | 0 |
Total deferred tax assets | 1,001,730 | 337,881 |
Deferred tax liabilities: | ||
Intangibles | (232,835) | |
Property and equipment | (7,902) | (2,945) |
Total deferred tax liabilities | (240,737) | |
Intangibles | 40,342 | |
Total deferred tax liabilities | 37,397 | |
Deferred tax assets, net | 760,993 | 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 | $ 760,993 | $ 375,278 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Deferred tax asset | $ 760,993 | $ 375,278 |
Recognized increase in deferred tax asset | $ 385,715 | |
Net operating loss carryforwards | $ 1,032,348 | |
Net operating loss carryforwards earliest expiration year | 2019 | |
Net operating loss carryforwards latest expiration year | 2037 | |
Open tax year | 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) | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Income Tax Disclosure [Abstract] | ||
Statutory U.S. federal income tax rate | 21.00% | 35.00% |
State income taxes, net of federal tax benefit | 1.10% | 5.80% |
Permanent differences | (32.80%) | 3.80% |
Other reconciling items | (0.10%) | 20.50% |
LLC flow-through structure | 0.00% | (59.30%) |
Valuation allowance | 0.00% | 0.00% |
Effective income tax rate | (10.80%) | 5.80% |
Concentrations - Significant Cu
Concentrations - Significant Customers with Individual Percentage of Total Revenues Equaling Ten Percent (10%) or Greater (Details) - Revenues [Member] - Customer Concentration Risk [Member] | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 19.78% | 18.06% |
Customer 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 19.78% | 18.06% |
Concentrations - Significant _2
Concentrations - Significant Customers with Concentration of Accounts Receivable Representing Ten Percent (10%) or Greater of Accounts Receivable (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member] | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 15.03% | 15.26% |
Customer 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 15.03% | 15.26% |
Concentrations - Significant Su
Concentrations - Significant Suppliers Represented Ten Percent (10%) or Greater of Goods Purchased (Details) - Goods Purchased [Member] - Supplier Concentration Risk [Member] | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 23.70% | 16.50% |
Supplier 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 13.20% | 10.70% |
Supplier 2 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 10.50% | 5.80% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 3 Months Ended | 7 Months Ended | 12 Months Ended | |
Jun. 30, 2018USD ($) | Jul. 31, 2018USD ($) | Dec. 31, 2018USD ($)ft²FullTimeEquivalent | Dec. 31, 2017USD ($) | |
Related Party Transaction [Line Items] | ||||
Lease termination date | Dec. 31, 2017 | |||
Mr. Reeg [Member] | ||||
Related Party Transaction [Line Items] | ||||
Equity interest in acquiree percentage | 60.00% | |||
Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Rent expense | $ 168,000 | $ 142,000 | ||
1565 North Central Expressway, LP [Member] | ||||
Related Party Transaction [Line Items] | ||||
Area of leased property | ft² | 11,500 | |||
Lease termination date | Dec. 31, 2017 | |||
1565 North Central Expressway, LP [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Rent expense | $ 168,000 | 142,000 | ||
AmBio Staffing, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Number of full time equivalents supporting operations | FullTimeEquivalent | 69 | |||
Number of full time equivalents directly supporting company | FullTimeEquivalent | 48 | |||
Number of full time equivalents supporting other companies | FullTimeEquivalent | 14 | |||
Number of full time equivalents shares with other companies | FullTimeEquivalent | 7 | |||
AmBio Staffing, LLC [Member] | Account Payables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | $ 180,000 | 178,000 | ||
AmBio Staffing, LLC [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Administrative fees paid for services | 224,000 | 152,000 | ||
MedUSA Group, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 2,069,000 | 5,054,000 | ||
Purchases from related parties | 650,000 | 37,000 | ||
Inventory received from related party | $ 2,064,000 | |||
Decrease in accounts receivable | 516,000 | |||
Injection of capital from related party | $ 1,548,000 | |||
MedUSA Group, LLC [Member] | Account Payables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | 8,000 | 1,000 | ||
MedUSA Group, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 389,000 | 1,684,000 | ||
MedUSA Group, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 2,139,000 | 962,000 | ||
Texas Overlord, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 0 | 1,953,000 | ||
Texas Overlord, LLC [Member] | Account Payables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | 2,000 | 0 | ||
Texas Overlord, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 0 | 444,000 | ||
Texas Overlord, LLC [Member] | Inventory [Member] | ||||
Related Party Transaction [Line Items] | ||||
Purchases from related parties | 547,000 | 0 | ||
Texas Overlord, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 635,000 | 101,000 | ||
N.B.M.J., Inc. [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 373,000 | 162,000 | ||
N.B.M.J., Inc. [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 155,000 | 0 | ||
Maxim Surgical, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | $ 173,000 | 202,000 | ||
Maxim Surgical, LLC [Member] | Account Payables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due to related parties | 0 | 93,000 | ||
Maxim Surgical, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 0 | 50,000 | ||
Maxim Surgical, LLC [Member] | Inventory [Member] | ||||
Related Party Transaction [Line Items] | ||||
Purchases from related parties | 286,000 | 467,000 | ||
Maxim Surgical, LLC [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 11,000 | 18,000 | ||
Maxim Surgical, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | $ 21,000 | 0 | ||
Bass Bone And Spine Specialists [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 763,000 | 311,000 | ||
Bass Bone And Spine Specialists [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 179,000 | 106,000 | ||
Bass Bone And Spine Specialists [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 8,000 | 3,000 | ||
Sintu L L C | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | 860,000 | 1,114,000 | ||
Recon Orthopedics, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 0 | 204,000 | ||
Recon Orthopedics, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | 0 | 6,000 | ||
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 | 15,000 | ||
Shared services expiration date | Apr. 30, 2018 | |||
Recon Orthopedics, LLC [Member] | Commission [Member] | ||||
Related Party Transaction [Line Items] | ||||
Expense incurred on behalf of related parties | $ 209,000 | 30,000 | ||
Tiger Orthopedics, LLC [Member] | ||||
Related Party Transaction [Line Items] | ||||
Net revenues to related parties | 154,000 | 410,000 | ||
Tiger Orthopedics, LLC [Member] | Account Receivables [Member] | ||||
Related Party Transaction [Line Items] | ||||
Due from related parties | $ 5,000 | $ 44,000 |