Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2020 | Aug. 05, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Fuse Medical, Inc. | |
Entity Central Index Key | 0000319016 | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Document Period End Date | Jun. 30, 2020 | |
Document Fiscal Year Focus | 2020 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Common Stock, Shares Outstanding | 73,124,458 | |
Document Fiscal Period Focus | Q2 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Tax Identification Number | 59-1224913 | |
Entity File Number | 000-10093 | |
Entity Incorporation, State or Country Code | DE | |
Entity Address, Address Line One | 1565 N. Central Expressway | |
Entity Address, Address Line Two | Suite 220 | |
Entity Address, City or Town | Richardson | |
Entity Address, State or Province | TX | |
Entity Address, Postal Zip Code | 75080 | |
City Area Code | 469 | |
Local Phone Number | 862-3030 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | FZMD |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash | $ 1,167,275 | $ 1,099,310 |
Accounts receivable, net of allowance of $801,637 and $615,278, respectively | 2,986,921 | 5,249,653 |
Inventories, net of allowance of $3,184,126 and $3,805,730, respectively | 7,051,891 | 7,855,887 |
Prepaid expenses and other current assets | 87,752 | 39,850 |
Total current assets | 11,293,839 | 14,244,700 |
Property and equipment, net | 33,371 | 32,639 |
Long term accounts receivable, net of allowance of $1,332,194 and $728,000, respectively | 1,830,938 | 924,646 |
Intangible assets, net | 1,165,910 | 1,206,620 |
Goodwill | 1,972,886 | 1,972,886 |
Total assets | 16,296,944 | 18,381,491 |
Current liabilities: | ||
Accounts payable | 2,239,586 | 2,752,854 |
Accrued expenses | 3,064,706 | 3,302,904 |
Convertible notes payable - related parties | 150,000 | 150,000 |
Paycheck Protection Program loan | 361,400 | |
Senior secured revolving credit facility | 1,088,352 | 1,752,501 |
Total current liabilities | 6,904,044 | 7,958,259 |
Notes payable - related parties | 200,000 | |
Economic Injury Disaster Loan | 150,000 | |
Earn-out liability | 11,645,365 | 11,645,365 |
Total liabilities | 18,899,409 | 19,603,624 |
Commitments and contingencies | ||
Stockholders' equity (Accumulated 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, 73,124,458 shares issued and outstanding as of June 30, 2020 and December 31, 2019. | 731,245 | 731,245 |
Additional paid-in capital | 969,533 | 642,435 |
Accumulated deficit | (4,303,243) | (2,595,813) |
Total stockholders' equity | (2,602,465) | (1,222,133) |
Total liabilities and stockholders' equity | $ 16,296,944 | $ 18,381,491 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Statement Of Financial Position [Abstract] | ||
Net of allowance, accounts receivable | $ 801,637 | $ 615,278 |
Net of allowance, inventories | 3,184,126 | 3,805,730 |
Net of allowance, long term receivable | $ 1,332,194 | $ 728,000 |
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 | 73,124,458 | 73,124,458 |
Common Stock Shares Outstanding | 73,124,458 | 73,124,458 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Income Statement [Abstract] | ||||
Net revenues | $ 4,010,666 | $ 5,075,925 | $ 8,647,169 | $ 9,846,584 |
Cost of revenues | 1,796,663 | 2,223,912 | 3,779,559 | 4,199,257 |
Gross profit | 2,214,003 | 2,852,013 | 4,867,610 | 5,647,327 |
Operating expenses: | ||||
Selling, general, administrative and other | 1,161,476 | 1,975,934 | 3,642,247 | 4,340,102 |
Commissions | 1,420,239 | 1,004,994 | 2,811,356 | 2,010,525 |
Depreciation and amortization | 30,752 | 25,596 | 60,735 | 51,320 |
Total operating expenses | 2,612,467 | 3,006,524 | 6,514,338 | 6,401,947 |
Operating loss | (398,464) | (154,511) | (1,646,728) | (754,620) |
Other expense: | ||||
Interest expense | 24,021 | 28,027 | 55,022 | 53,462 |
Total other expense | 24,021 | 28,027 | 55,022 | 53,462 |
Net loss before tax | (422,485) | (182,538) | (1,701,750) | (808,082) |
Income tax benefit | 946 | (40,389) | 5,680 | (154,935) |
Net loss | $ (423,431) | $ (142,149) | $ (1,707,430) | $ (653,147) |
Net loss per common share - basic | $ (0.01) | $ 0 | $ (0.02) | $ (0.01) |
Weighted average number of common shares outstanding - basic | 70,221,566 | 70,221,566 | 70,221,566 | 70,221,566 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($) | Total | Common Stock [Member] | Additional Paid-In Capital [Member] | Retained Earnings/ (Deficit) [Member] |
Beginning Balance, Amount at Dec. 31, 2018 | $ 1,466,684 | $ 746,002 | $ 720,682 | |
Beginning Balance, Shares at Dec. 31, 2018 | 74,600,181 | |||
Stock compensation expense | 499,107 | $ 499,107 | ||
Net loss | (653,147) | (653,147) | ||
Ending Balance, Amount at Jun. 30, 2019 | 1,312,644 | $ 746,002 | 499,107 | 67,535 |
Ending Balance, Shares at Jun. 30, 2019 | 74,600,181 | |||
Beginning Balance, Amount at Dec. 31, 2019 | (1,222,133) | $ 731,245 | 642,435 | (2,595,813) |
Beginning Balance, Shares at Dec. 31, 2019 | 73,124,458 | |||
Stock compensation expense | 327,098 | 327,098 | ||
Net loss | (1,707,430) | (1,707,430) | ||
Ending Balance, Amount at Jun. 30, 2020 | $ (2,602,465) | $ 731,245 | $ 969,533 | $ (4,303,243) |
Ending Balance, Shares at Jun. 30, 2020 | 73,124,458 |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Cash flows from operating activities | ||
Net loss | $ (1,707,430) | $ (653,147) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 60,735 | 51,320 |
Stock based compensation | 327,098 | 499,107 |
Provision for bad debts and discounts | 186,359 | 255,238 |
Provision for long term accounts receivable | 604,194 | 60,101 |
Provision for slow moving inventory | (621,604) | 24,813 |
Benefits for deferred taxes | (168,573) | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,076,373 | 982,357 |
Inventories | 1,425,600 | 285,215 |
Prepaid expenses and other current assets | (47,902) | 11,051 |
Long term accounts receivable | (1,510,486) | 17,100 |
Accounts payable | (513,268) | (318,379) |
Accrued expenses | (238,198) | (823,729) |
Net cash provided by operating activities | 41,471 | 222,474 |
Cash flows from investing activities | ||
Purchase of property and equipment | (20,757) | |
Net cash used in investing activities | (20,757) | |
Cash flows from financing activities | ||
Payments on senior secured revolving credit facility, net | (664,149) | (224,947) |
Proceeds from related party promissory notes | 200,000 | |
Net cash provided by (used in) financing activities | 47,251 | (224,947) |
Net increase (decrease) in cash | 67,965 | (2,473) |
Cash - beginning of period | 1,099,310 | 844,314 |
Cash - end of period | 1,167,275 | 841,841 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 40,018 | $ 42,409 |
Paycheck Protection Program [Member] | ||
Cash flows from financing activities | ||
Proceeds from Paycheck Protection Program | 361,400 | |
Economic Injury Disaster Loan Assistance Program [Member] | ||
Cash flows from financing activities | ||
Proceeds from Economic Injury Disaster Loan | $ 150,000 |
Nature of Operations
Nature of Operations | 6 Months Ended |
Jun. 30, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Nature of Operations | Note 1. Nature of Operations Overview Fuse Medical, Inc., a Delaware corporation (the “ Company CPM CPM Acquisition Maxim Maxim Acquisition Basis of Presentation The interim unaudited condensed consolidated financial statements included herein reflect all material adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) which, in the opinion of the Company’s management, are ordinary and necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles in the United States of America (“ GAAP SEC The condensed consolidated balance sheet information as of December 31, 2019, was derived from the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2019 (“ 2019 Annual Report Exchange Act The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year or for any other period as the Company has historically experienced seasonal trends with greater revenue and volume between the last two calendar quarters compared to the first two calendar quarters of the year. Going Concern The accompanying interim unaudited condensed consolidated financial statements have been prepared as if the Company will continue as a going concern. Through June 30, 2020, the Company has accumulated losses of $4,303,243 and a stockholders’ deficit of $2,602,465. Revenue declined by $1,065,259 in the second quarter of 2020 compared to the same quarter in 2019, as the Company has been impacted by restrictions as a result of the novel coronavirus SARS-CoV-2 global pandemic (“ COVID-19 RLOC Amegy Bank The Company’s ability to continue as a going concern for at least one year beyond the date of this filing is dependent upon the easing of restrictions imposed on elective surgeries by governmental authorities as a result of COVID-19, as well as the Company’s, (i) successful execution of key branding initiatives, (ii) introduction, commercialization and sales of new proprietary products and product lines, (iii) increased sales of existing products, with strategic emphasis on direct sales to medical facilities (“ Retail Cases Cases The interim unaudited condensed consolidated financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern . |
Significant Accounting Policies
Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 2. Significant Accounting Policies Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, CPM and Maxim. Intercompany transactions have been eliminated in consolidation. Use of Estimates The preparation of the interim unaudited condensed consolidated financial statements in accordance with GAAP, requires the Company’s management to make estimates and assumptions that affect the Company’s reported amounts in the interim unaudited condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying interim unaudited condensed consolidated financial statements include the allowance for doubtful accounts, valuation of inventories, the Company’s effective income tax rate, and the recoverability of deferred tax assets, which are based upon the Company management’s expectation of future taxable income and allowable deductions and the fair value calculations of stock-based compensation, goodwill, finite lived intangibles and the earn-out liability. Reclassifications Long term accounts receivable, net of allowance was previously reported as a component of current assets as accounts receivable, net of allowance in the Company’s accompanying interim unaudited condensed consolidated balance sheets. Long term accounts receivable reflects Cases where the patient has obtained a letter of protection, (“ LOP Segment Reporting In accordance with Accounting Standards Codification (“ ASC Earnings (loss) Per Common Share Earnings (loss) per common share, basic is calculated by dividing the net income/(loss) attributable to common stockholders by the weighted-average number of common stock, par value $0.01, (“ Common Stock ”), outstanding during the period, without consideration of Common Stock equivalents. Shares of restricted stock are included in the basic weighted-average number of Common Stock outstanding from the time they vest. Diluted earnings (loss) per common share is computed by dividing net income/(loss) by the weighted-average number of Common Stock equivalents outstanding for the period determined using the treasury stock method. For the six months ended June 30, 2020 and 2019, the Company excluded the effects of outstanding stock options, convertible notes and, to the extent in the money, restricted stock as their effects were antidilutive due to the Company’s operating loss during these periods. For the six months ended June 30, 2020, restricted stock and Common Stock equivalents of 4,777,892 have been excluded from diluted earnings per share because to include them would have been antidilutive. (see Note 9, “Stockholders’ Equity” for the terms and conditions of restricted stock) 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 in December 2017, the Company recorded an earn-out liability as part of the purchase consideration. The fair value of the earn-out liability is re-measured at each reporting period using Level 3 inputs with changes in fair value recorded in earnings. The earn-out payments are based on the financial performance of the Company between January 1, 2018, and December 31, 2034. The base amount of the earn-out ranges from $0.00 to $16,000,000 with an additional bonus payment of $10,000,000 subject to the Company meeting certain earnings thresholds as defined in the CPM Acquisition Agreement. The fair value of the earn-out liability was calculated using the Monte Carlo simulation, which was then applied to estimated earn-out payments. There was no change in the earn-out liability for the six months ended June 30, 2020 and there were no significant changes in the Level 3 inputs from those utilized at December 31, 2019. The required earnings thresholds have not been met from inception of the agreements through June 30, 2020, and as such, there have been no payments required for either the base or bonus earn-out tranches. Financial Instruments 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. Cash and Cash Equivalents The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents at June 30, 2020 and December 31, 2019. The Company’s cash is concentrated in large financial institutions that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any financial institution losses from inception through June 30, 2020. As of June 30, 2020 and December 31, 2019, there were deposits of $861,703 and $599,309 , respectively , Accounts Receivable and Allowances Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts receivable and an allowance for contractual discount pricing. Credit is extended to customers based on an evaluation of their financial condition, industry reputation, and other 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 circumstances warrant, the Company’s management estimates the amounts that are more likely than not to be uncollectible. These amounts are recognized as bad debt expense and are reflected within selling, general, administrative and other expenses on the Company’s accompanying interim unaudited condensed consolidated statements of operations. When accounts are deemed uncollectible, they are often referred to the Company’s outside legal firm for litigation. Accounts deemed uncollectible are written-off in the period when the Company has exhausted its efforts to collect overdue and unpaid receivables or otherwise has evaluated other circumstances that indicate that the Company should abandon such efforts. Accounts deemed uncollectible are removed from the Company’s accounts receivable portfolio, with a corresponding offset to the allowance for doubtful accounts receivable. The Company may record additional allowances for doubtful accounts based on known trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Specific allowances are re-evaluated and adjusted as additional facts and information become available. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The Company’s management estimates its allowance for contractual discount pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, the Company’s management uses assumptions and judgement, based on the best available facts and circumstances to record a specific allowance for the amounts due from those customers. The allowance is offset by a corresponding reduction to revenue. These specific allowances are re-evaluated, analyzed, and adjusted as additional information becomes available to determine the total amount of the allowance. The Company may record additional allowances based on trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Inventories Inventories are stated at the lower of cost or net realizable value (first-in, first-out) which includes an allowance for slow-moving inventory, expired inventory, and inventory obsolescence. Inventories consist entirely of finished goods and include internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, “ Orthopedic Implants Biologics 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. The Company reviews long-lived assets for impairment annually or whenever changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Category Useful Life Computer equipment and software 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 other long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows, which is at the individual asset level or the asset group level. The undiscounted cash flows expected to be generated by the related assets are estimated over their useful life based on updated projections. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related assets or asset group as determined by an appropriate market appraisal or other valuation technique. Assets classified as held for sale, if any, are recorded at the lower of carrying amount or fair value less costs to sell. 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. Goodwill is not amortized but is tested in the fourth quarter each year for impairment, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. As of June 30, 2020, the Company evaluated certain qualitative factors including, (i) macroeconomic factors resulting from the COVID-19 pandemic, (ii) the Company’s operating loss and overall financial performance, (iii) the Company’s stock price, and (iv) specific cost-saving actions taken by the Company in response to the COVID-19 pandemic in concluding that the reported amount of goodwill was not more likely than not impaired. Accounting Standards Update (“ ASU 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. Revenue Recognition The Company’s revenues are generated from the sales of Orthopedic Implants and Biologics to support orthopedic surgeries. The Company obtains purchase orders from its customers for the sale of its products which sets forth the general terms and conditions including line item pricing and payment terms (generally due upon receipt). The Company recognizes revenue when its customers obtain control over the assets (generally when the title passes upon shipment or when a product is utilized in a surgery) and it is probable that the Company will collect substantially all the amounts due. Individual promised goods are the Company’s only performance obligation. Due to the nature of its products, the Company’s product returns have been historically immaterial. The Company includes shipping and handling fees in net revenues. Shipping and handling costs, associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold on the Company’s accompanying interim unaudited condensed consolidated statements of operations. Revenue Differentiation The Company measures sales volume based on medical procedures in which the Company’s products are sold and used (Cases). The Company considers Cases resulting from direct sales to medical facilities to be Retail Cases and Cases resulting from sales to third parties, such as non-medical facilities, distributors, or sub-distributors, to be wholesale cases (“ Wholesale Cases Three Months Ended Six Months Ended June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Category Retail $ 3,604,578 $ 3,722,777 $ 7,732,441 $ 7,375,088 Wholesale 406,088 1,353,148 914,728 2,471,496 Total $ 4,010,666 $ 5,075,925 $ 8,647,169 $ 9,846,584 Cost of Revenues Cost of revenues consists of (i) cost of goods sold, (ii) freight and shipping costs for items sold to customers, (iii) cost of storage, (iv) investment in medical instruments, which are expensed when acquired, (v) inventory shrink, and (vi) an estimate for slow-moving and expired inventory, and inventory obsolescence. 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 Accounting pronouncements issued or effective in 2020 by the Financial Accounting Standards Board (the “ FASB |
Property and Equipment
Property and Equipment | 6 Months Ended |
Jun. 30, 2020 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | Note 3. Property and Equipment Property and equipment consisted of the following at June 30, 2020 and December 31, 2019: June 30, 2020 December 31, 2019 Computer equipment and software $ 65,744 $ 51,303 Office equipment - 20,333 Property and equipment costs 65,744 71,636 Less: accumulated depreciation (32,373 ) (38,997 ) Property and equipment, net $ 33,371 $ 32,639 Depreciation expense for the three months ended June 30, 2020 and 2019 was $10,397 and $5,241, respectively. Depreciation expense for the six months ended June 30, 2020 and 2019 was $20,025 and $10,610, respectively. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Goodwill and Intangible Assets | Note 4. Goodwill and Intangible Assets The following table summarizes the Company’s goodwill and other intangible assets: June 30, 2020 December 31, 2019 Amortization period (years) Intangible assets: Non-compete agreements $ 61,766 $ 61,766 2 510(k) product technology 704,380 704,380 Indefinite Customer relationships 555,819 555,819 11 Total intangible assets 1,321,965 1,321,965 Less: accumulated amortization (156,055 ) (115,345 ) Intangible assets, net 1,165,910 1,206,620 Goodwill $ 1,972,886 $ 1,972,886 Indefinite Amortization expense for the three months ended June 30, 2020 and 2019 was $20,355 and $20,355, respectively. Amortization expense for the six months ended June 30, 2020 and 2019, was $40,710 and $40,710. The Company’s intangible assets subject to amortization consist primarily of acquired non-compete agreements, and customer relationships. |
Senior Secured Revolving Credit
Senior Secured Revolving Credit Facility | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Senior Secured Revolving Credit Facility | Note 5. Senior Secured Revolving Credit Facility Effective December 29, 2017, the Company became party to its RLOC with Amegy Bank. The RLOC contains customary representation, warranties, covenants, events of default, and is collateralized by substantially all of the Company’s assets. The Company’s Chairman of the Board of Directors (“ Board On September 21, 2018, the Company executed the First Amendment to the RLOC with Amegy Bank (the “ First Amendment On November 19, 2018, the Company executed the Second Amendment to the RLOC with Amegy Bank (the “ Second Amendment On May 9, 2019, the Company executed the Third Amendment to the RLOC with Amegy Bank (the “ Third Amendment On December 18, 2019, the Company executed the Fourth Amendment to the RLOC with Amegy Bank (the “ Fourth Amendment Mr. Brooks On May 21, 2020, the Company executed the Fifth Amendment to the RLOC with Amegy Bank (“the Fifth Amendment In conjunction with executing the Fifth Amendment to the RLOC, the Company obtained an additional $200,000 in capital in the form of subordinated debt from affiliates of Messrs. Brooks and Reeg. Specifically, on May 6, 2020, the Company borrowed $180,000 from NC 143 Family Holdings, LP (“ NC 143 RMI Mr. Reeg For the three months ended June 30, 2020, the Company was in compliance with the covenants of its RLOC with Amegy Bank. The outstanding balance of the RLOC was $1,088,352 and $1,752,501 at June 30, 2020 and December 31, 2019, respectively. Interest expense incurred on the RLOC was $15,363 and $21,295 for the three months ended June 30, 2020 and 2019, respectively, and is reflected in interest expense on the Company’s accompanying unaudited condensed consolidated statements of operations. Interest expense incurred on the RLOC was $39,633 and $40,073 for the six months ended June 30, 2020 and 2019, respectively. Accrued interest on the RLOC at June 30, 2020 and December 31, 2019 was $4,053 and $4,437, respectively, and is reflected in accrued expenses on the Company’s accompanying interim unaudited condensed consolidated balance sheets. At June 30, 2020, the effective interest rate was 5.1%. |
Notes Payable - Related Parties
Notes Payable - Related Parties | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Notes Payable - Related Parties | Note 6. Notes Payable – Related Parties During July 2016 through October 2016, the Company obtained three working capital loans from NC 143 and RMI in the form of convertible promissory notes (“ Notes Maturity Date During the three months ended June 30, 2020 and 2019, interest expense of $6,732 and $ 6,732, respectively, is reflected in interest expense on the Company’s accompanying unaudited condensed consolidated statements of operations. During the six months ended June 30, 2020 and 2019, interest expense of $13,463 and $13,389, respectively, is reflected in interest expense on the Company’s accompanying unaudited condensed consolidated statements of operations. As of June 30, 2020, and December 31, 2019, accrued interest was $99,559 and $86,096, respectively, which is reflected in accrued expenses on the Company’s accompanying unaudited condensed consolidated balance sheets. |
Paycheck Protection Program
Paycheck Protection Program | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Paycheck Protection Program | Note 7 – Paycheck Protection Program On April 11, 2020, the Company received approval from the U.S. Small Business Administration (“ SBA PPP Loan CARES Act As of June 30, 2020, the Company incurred approximately $900 in accrued interest related to the PPP Loan, which is reflected in accrued expenses on the Company’s accompanying interim unaudited condensed consolidated balance sheets. The Company did not incur accrued interest expense on the PPP Loan as of June 30, 2019. For the three months and six months ended June 30, 2020, the Company incurred approximately $900 in interest expense related to the PPP Loan, which is reflected in interest expense on the Company’s statements of operations. The Company did not incur interest expense related to the PPP Loan for the three and six months ended June 30, 2019. |
Economic Disaster Injury Loan
Economic Disaster Injury Loan | 6 Months Ended |
Jun. 30, 2020 | |
Debt Disclosure [Abstract] | |
Economic Disaster Injury Loan | Note 8 – Economic Injury Disaster Loan On May 12, 2020, the Company executed the standard loan documents required for securing a loan from the SBA under its Economic Injury Disaster Loan assistance program (the “ EIDL Loan SBA Loan Agreement As of June 30, 2020, the Company incurred approximately $940 in accrued interest related to the EIDL Loan, which is reflected in accrued expenses on the Company’s accompanying interim unaudited condensed consolidated balance sheets. The Company did not incur accrued interest expense on the EIDL Loan as of June 30, 2019. For the three months and six months ended June 30, 2020, the Company incurred approximately $940 in interest expense related to the EIDL Loan, which is reflected in interest expense on the Company’s statements of operations. The Company did not incur interest expense related to the EIDL Loan for the three and six months ended June 30, 2019. |
Stockholders' Equity
Stockholders' Equity | 6 Months Ended |
Jun. 30, 2020 | |
Stockholders Equity Deficit [Abstract] | |
Stockholders' Equity | Note 9. Stockholders’ Equity Stock-Based Compensation The 2018 Amended and Restated Equity Incentive Plan of Fuse Medical, Inc. (“ 2018 Equity Plan The Company’s management estimates the fair value of stock-based compensation utilizing the Black-Scholes option pricing model. Black-Scholes option pricing is calculated using several variables, including 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. The Company’s management estimates of fair value may not be reflective of actual future values or 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 Company made an accounting policy election to account for forfeitures when they occur, versus estimating the number of awards that are expected to vest, in accordance with ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.” Non-Qualified Stock Option Awards For the three and six months ended June 30, 2019 the Board granted 300,000 and 1,200,000 Non-qualified Stock Option (“ NQSO A summary of the Company’s stock option activity for the six months ended June 30, 2020, is presented below: No. of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Balance outstanding at December 31, 2019 3,948,333 $ 0.61 6.08 $ 157,000 Granted - - - - Exercised - - - - Forfeited (3,333 ) 1.00 8.00 - Expired - - - - Balance outstanding at June 30, 2020 3,945,000 $ 0.61 5.87 $ - Exercisable at June 30, 2020 1,963,333 $ 0.41 3.30 $ - Restricted Common Stock The non-vested restricted stock awards (“ RSA As of June 30, 2020, and 2019, it was not probable that the performance conditions on the outstanding RSAs would be met, therefore, no expense has been recorded for these awards for the three and six months ended June 30, 2020 and 2019. There were no RSA’s that were granted, exercised, or forfeited during the six months ended June 30, 2020. Number of Shares Fair Value Weighted Average Grant Date Fair Value Non-vested, December 31, 2019 2,902,892 $ 1,382,800 $ 0.48 Granted - - - Vested - - - Forfeited - - - Non-vested, June 30, 2020 2,902,892 $ 1,382,800 $ 0.48 |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 10. Income Taxes 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 Six Months Ended June 30, 2020 For the Six Months Ended June 30, 2019 Current: Federal $ - $ - State 5,680 13,638 5,680 13,638 Deferred: Federal - (168,573 ) State - - - (168,573 ) Total income tax expense (benefit) $ 5,680 $ (154,935 ) Significant components of the Company's deferred income tax assets and liabilities are as follows: June 30, 2020 June 30, 2019 Deferred tax assets: Net operating loss carryover $ 833,090 $ 191,679 Accounts receivable 168,344 206,493 Compensation 433,296 337,606 Inventory 650,837 388,074 Other 18,428 28,129 Total deferred tax assets 2,103,995 1,151,981 Deferred tax liabilities: Intangibles (211,222 ) (218,427 ) Property and equipment (4,828 ) (3,988 ) Total deferred tax liabilities (216,050 ) (222,415 ) Deferred tax assets, net $ 1,887,945 $ 929,566 Valuation allowance: Beginning of year (1,529,584 ) - Increase during the year (358,361 ) - Ending balance (1,887,945 ) - Net deferred tax asset $ - $ 929,566 At June 30, 2020, the Company estimates it had approximately $3,967,098 of net operating loss carryforwards which $899,331 will expire during 2020 through 2037. The Company's management believes its tax positions are more likely than not of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax positions. As of June 30, 2020, the Company's tax years 2016 through 2018 remain open for Internal Revenue Service (" IRS On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES Act, but at present does not expect that the NOL carryback provision of the CARES Act to result in a material impact to the Company . A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows: Six Months Ended June 30, 2020 June 30, 2019 Expected U.S. federal incomes as statutory rate 21.0% 21.0% Change in deferred tax asset valuation allowance -21.1% 0.0% State and local income taxes, net of federal benefit -0.3% -1.3% Permanent differences 0.0% -0.5% Other 0.0% 0.0% Effective tax rate -0.4% 19.2% Our effective income tax rates for the six months ended June 30, 2020 and 2019 were (0.4%) and 19.2%, respectively. The decrease from the prior period was driven by the valuation allowance allocated to the deferred tax asset for the current period. |
Concentrations
Concentrations | 6 Months Ended |
Jun. 30, 2020 | |
Nature Of Operations And Going Concern [Abstract] | |
Concentrations | Note 11. Concentrations Concentration of Revenues, Accounts Receivable and Suppliers For the six months ended June 30, 2020 and 2019, the following significant customers had an individual percentage of total revenues equaling ten percent (10%) or greater: For the Six Months Ended June 30, 2020 June 30, 2019 Customer 1 16.58 % 0.00 % Customer 2 7.97 % 11.86 % Totals 24.55 % 11.86 % At June 30, 2020 and December 31, 2019, the following significant customers had a concentration of accounts receivable representing ten percent (10%) or greater of accounts receivable: June 30, 2020 December 31, 2019 Customer 1 - related party 15.45 % 9.47 % Totals 15.45 % 9.47 % For the six months ended June 30, 2020 and 2019, the following significant suppliers represented ten percent (10%) or greater of goods purchased: For the Six Months Ended June 30, 2020 June 30, 2019 Supplier 1 22.00 % 22.00 % Supplier 2 12.10 % 3.50 % Supplier 3 - related party 11.30 % 12.50 % Totals 45.40 % 38.00 % |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2020 | |
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 (“ NCE, LP For the six months ended June 30, 2020 and 2019, the Company paid approximately $84,000 and $84,000, respectively, in rent expense, which is reflected in selling, general, administrative, and other expenses in the Company’s accompanying interim unaudited condensed consolidated statements of operations. AmBio Contract The Company engaged AmBio Staffing, LLC (“ AmBio FTE As of June 30, 2020 and December 31, 2019, the Company owed amounts to AmBio of approximately $130,000 and $170,000, respectively, which are reflected in accounts payable on the Company’s unaudited condensed consolidated balance sheets. For the six months ended June 30, 2020 and June 30, 2019, the Company paid approximately $89,000 and $105,000, respectively, to AmBio in administrative fees, which are reflected in selling, general, administrative, and other expenses in the Company’s accompanying unaudited 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 agreements. As described more fully below, these transactions include: selling and purchasing of inventory on a wholesale basis, commissions earned and paid and shared-service fee arrangements. MedUSA Group, LLC MedUSA Group, LLC (“ MedUSA During the six months ended June 30, 2020 and 2019, the Company: • sold Orthopedic Implants and Biologics products to MedUSA in the amounts of approximately $30,000 and $643,000, respectively, which are reflected in net revenues in the Company’s accompanying interim unaudited condensed consolidated statements of operations; and • incurred approximately $1,318,000 and $946,000, respectively, in commission costs, which are reflected in commissions in the Company’s accompanying interim unaudited condensed consolidated statements of operations. As of June 30, 2020 and December 31, 2019, the Company had approximately $470,000 and $598,000, respectively, of unpaid commission costs due to MedUSA, which is reflected in accrued liabilities in the Company’s accompanying condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, the Company had outstanding balances due from MedUSA of approximately $585,000 and $555,000, respectively. These amounts are reflected in accounts receivable, net of allowance in the Company’s accompanying condensed consolidated balance sheets. Texas Overlord, LLC Texas Overlord, LLC (“ Overlord During the six months ended June 30, 2020 and 2019, the Company: • purchased approximately $0 and $25,000, respectively, in Orthopedic Implants and medical instruments, and Biologics from Overlord, which are reflected within inventories on the Company’s accompanying interim unaudited condensed consolidated balance sheets; and • incurred approximately $75,000 and $90,000, respectively, in commission costs, which are reflected in commissions in the Company’s accompanying interim unaudited condensed consolidated statements of operations. As of June 30, 2020 and December 31, 2019, the Company had approximately $30,000 and $15,000 of unpaid commissions costs owed to Overlord, which are reflected in accrued liabilities in the Company’s accompanying condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, the Company had no outstanding balances due from Overlord. NBMJ, Inc. NBMJ, Inc. d/b/a Incare Technology (“ NBMJ During the six months ended June 30, 2020 and 2019, the Company sold Biologics products to NBMJ in the amounts of approximately $12,000, and $364,000, respectively, which are reflected in net revenues in the Company’s accompanying interim unaudited condensed consolidated statements of operations. As of June 30, 2020 and December 31, 2019, the Company had no outstanding balances due from NBMJ. Payment terms per the stocking and distribution agreement with NBMJ are 30 days from receipt of invoice. Bass Bone and Spine Specialists Bass Bone & Spine Specialists (“ Bass During the six months ended June 30, 2020 and 2019, the Company: • sold Orthopedic Implants and Biologics products to Bass in the amounts of approximately $44,000 and $97,000, respectively, which are reflected in net revenues in the Company’s accompanying interim unaudited condensed consolidated statements of operations; and • incurred approximately $16,000 and $14,000, respectively, in commission costs to Bass, which is reflected in commissions in the Company’s accompanying interim unaudited condensed consolidated statements of operations. As of June 30, 2020 and December 31, 2019, the Company had outstanding balances due from Bass of approximately $26,000 and $7,000, respectively. These amounts are reflected in accounts receivable, net of allowance, in the Company’s accompanying condensed consolidated balance sheets. Payment terms per the stocking and distribution agreement with Bass are 30 days from receipt of invoice. Sintu, LLC Sintu, LLC (“ Sintu During the six months ended June 30, 2020 and 2019, the Company incurred approximately $279,000 and $174,000, respectively, in commission costs to Sintu, which are reflected in commissions on the Company’s accompanying interim unaudited condensed consolidated statements of operations. Tiger Orthopedics, LLC Tiger Orthopedics, LLC (“ Tiger During the six months ended June 30, 2020 and June 30, 2019, the Company sold Orthopedic Implants and Biologics products to Tiger in the amounts of approximately $39,000 and $132,000, respectively, which are reflected in net revenues in the Company’s accompanying interim unaudited condensed consolidated statements of operations. As of June 30, 2020, and December 31, 2019, the Company had outstanding balances due from Tiger of approximately $5,000 and $30,000, respectively. These amounts are reflected in accounts receivable, net of allowance, in the Company’s accompanying condensed consolidated balance sheets. Payment terms per the stocking and distribution agreement with Tiger are 30 days from receipt of invoice. Modal Manufacturing, LLC Modal Manufacturing, LLC (“ Modal During the six months ended June 30, 2020 and 2019, the Company purchased approximately $318,000 and $481,000, respectively, in Orthopedic Implants and medical instruments from Modal, which are reflected within inventories, net of allowance in the Company’s accompanying interim unaudited condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, the Company had outstanding balances owed to Modal of approximately $277,000 and $0, respectively. These amounts are reflected in accounts payable in the Company’s accompanying condensed consolidated balance sheets. As of June 30, 2020 and December 31, 2019, the Company had outstanding balances due from Modal of approximately $0 and $40,700, respectively. These are reflected in accounts receivable, net of allowance, in the Company’s accompanying condensed consolidated balance sheets. Payment terms per the stocking and distribution agreement with Modal are 30 days from receipt of invoice. |
Subsequent Events
Subsequent Events | 6 Months Ended |
Jun. 30, 2020 | |
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 August 7, 2020. 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) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, CPM and Maxim. Intercompany transactions have been eliminated in consolidation. |
Use of Estimates | Use of Estimates The preparation of the interim unaudited condensed consolidated financial statements in accordance with GAAP, requires the Company’s management to make estimates and assumptions that affect the Company’s reported amounts in the interim unaudited condensed consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying interim unaudited condensed consolidated financial statements include the allowance for doubtful accounts, valuation of inventories, the Company’s effective income tax rate, and the recoverability of deferred tax assets, which are based upon the Company management’s expectation of future taxable income and allowable deductions and the fair value calculations of stock-based compensation, goodwill, finite lived intangibles and the earn-out liability. |
Reclassifications | Reclassifications Long term accounts receivable, net of allowance was previously reported as a component of current assets as accounts receivable, net of allowance in the Company’s accompanying interim unaudited condensed consolidated balance sheets. Long term accounts receivable reflects Cases where the patient has obtained a letter of protection, (“ LOP |
Segment Reporting | Segment Reporting In accordance with Accounting Standards Codification (“ ASC |
Earnings (loss) Per Common Share | Earnings (loss) Per Common Share Earnings (loss) per common share, basic is calculated by dividing the net income/(loss) attributable to common stockholders by the weighted-average number of common stock, par value $0.01, (“ Common Stock ”), outstanding during the period, without consideration of Common Stock equivalents. Shares of restricted stock are included in the basic weighted-average number of Common Stock outstanding from the time they vest. Diluted earnings (loss) per common share is computed by dividing net income/(loss) by the weighted-average number of Common Stock equivalents outstanding for the period determined using the treasury stock method. For the six months ended June 30, 2020 and 2019, the Company excluded the effects of outstanding stock options, convertible notes and, to the extent in the money, restricted stock as their effects were antidilutive due to the Company’s operating loss during these periods. For the six months ended June 30, 2020, restricted stock and Common Stock equivalents of 4,777,892 have been excluded from diluted earnings per share because to include them would have been antidilutive. (see Note 9, “Stockholders’ Equity” for the terms and conditions of restricted stock) |
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 in December 2017, the Company recorded an earn-out liability as part of the purchase consideration. The fair value of the earn-out liability is re-measured at each reporting period using Level 3 inputs with changes in fair value recorded in earnings. The earn-out payments are based on the financial performance of the Company between January 1, 2018, and December 31, 2034. The base amount of the earn-out ranges from $0.00 to $16,000,000 with an additional bonus payment of $10,000,000 subject to the Company meeting certain earnings thresholds as defined in the CPM Acquisition Agreement. The fair value of the earn-out liability was calculated using the Monte Carlo simulation, which was then applied to estimated earn-out payments. There was no change in the earn-out liability for the six months ended June 30, 2020 and there were no significant changes in the Level 3 inputs from those utilized at December 31, 2019. The required earnings thresholds have not been met from inception of the agreements through June 30, 2020, and as such, there have been no payments required for either the base or bonus earn-out tranches. |
Financial Instruments | Financial Instruments 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. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents. There were no cash equivalents at June 30, 2020 and December 31, 2019. The Company’s cash is concentrated in large financial institutions that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any financial institution losses from inception through June 30, 2020. As of June 30, 2020 and December 31, 2019, there were deposits of $861,703 and $599,309 , respectively , |
Accounts Receivable and Allowances | Accounts Receivable and Allowances Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts receivable and an allowance for contractual discount pricing. Credit is extended to customers based on an evaluation of their financial condition, industry reputation, and other 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 circumstances warrant, the Company’s management estimates the amounts that are more likely than not to be uncollectible. These amounts are recognized as bad debt expense and are reflected within selling, general, administrative and other expenses on the Company’s accompanying interim unaudited condensed consolidated statements of operations. When accounts are deemed uncollectible, they are often referred to the Company’s outside legal firm for litigation. Accounts deemed uncollectible are written-off in the period when the Company has exhausted its efforts to collect overdue and unpaid receivables or otherwise has evaluated other circumstances that indicate that the Company should abandon such efforts. Accounts deemed uncollectible are removed from the Company’s accounts receivable portfolio, with a corresponding offset to the allowance for doubtful accounts receivable. The Company may record additional allowances for doubtful accounts based on known trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Specific allowances are re-evaluated and adjusted as additional facts and information become available. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The Company’s management estimates its allowance for contractual discount pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, the Company’s management uses assumptions and judgement, based on the best available facts and circumstances to record a specific allowance for the amounts due from those customers. The allowance is offset by a corresponding reduction to revenue. These specific allowances are re-evaluated, analyzed, and adjusted as additional information becomes available to determine the total amount of the allowance. The Company may record additional allowances based on trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value (first-in, first-out) which includes an allowance for slow-moving inventory, expired inventory, and inventory obsolescence. Inventories consist entirely of finished goods and include internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, “ Orthopedic Implants Biologics |
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. The Company reviews long-lived assets for impairment annually or whenever changes in circumstances indicate that the carrying amount of an asset might not be recoverable. Category Useful Life Computer equipment and software 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 other long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows, which is at the individual asset level or the asset group level. The undiscounted cash flows expected to be generated by the related assets are estimated over their useful life based on updated projections. If the evaluation indicates that the carrying amount of the assets may not be recoverable, any potential impairment is measured based upon the fair value of the related assets or asset group as determined by an appropriate market appraisal or other valuation technique. Assets classified as held for sale, if any, are recorded at the lower of carrying amount or fair value less costs to sell. |
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. Goodwill is not amortized but is tested in the fourth quarter each year for impairment, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. As of June 30, 2020, the Company evaluated certain qualitative factors including, (i) macroeconomic factors resulting from the COVID-19 pandemic, (ii) the Company’s operating loss and overall financial performance, (iii) the Company’s stock price, and (iv) specific cost-saving actions taken by the Company in response to the COVID-19 pandemic in concluding that the reported amount of goodwill was not more likely than not impaired. Accounting Standards Update (“ ASU 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. |
Revenue Recognition | Revenue Recognition The Company’s revenues are generated from the sales of Orthopedic Implants and Biologics to support orthopedic surgeries. The Company obtains purchase orders from its customers for the sale of its products which sets forth the general terms and conditions including line item pricing and payment terms (generally due upon receipt). The Company recognizes revenue when its customers obtain control over the assets (generally when the title passes upon shipment or when a product is utilized in a surgery) and it is probable that the Company will collect substantially all the amounts due. Individual promised goods are the Company’s only performance obligation. Due to the nature of its products, the Company’s product returns have been historically immaterial. The Company includes shipping and handling fees in net revenues. Shipping and handling costs, associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold on the Company’s accompanying interim unaudited condensed consolidated statements of operations. Revenue Differentiation The Company measures sales volume based on medical procedures in which the Company’s products are sold and used (Cases). The Company considers Cases resulting from direct sales to medical facilities to be Retail Cases and Cases resulting from sales to third parties, such as non-medical facilities, distributors, or sub-distributors, to be wholesale cases (“ Wholesale Cases Three Months Ended Six Months Ended June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Category Retail $ 3,604,578 $ 3,722,777 $ 7,732,441 $ 7,375,088 Wholesale 406,088 1,353,148 914,728 2,471,496 Total $ 4,010,666 $ 5,075,925 $ 8,647,169 $ 9,846,584 |
Cost of Revenues | Cost of Revenues Cost of revenues consists of (i) cost of goods sold, (ii) freight and shipping costs for items sold to customers, (iii) cost of storage, (iv) investment in medical instruments, which are expensed when acquired, (v) inventory shrink, and (vi) an estimate for slow-moving and expired inventory, and inventory obsolescence. |
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 Accounting pronouncements issued or effective in 2020 by the Financial Accounting Standards Board (the “ FASB |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Estimated Useful Lives of Assets | Category Useful Life Computer equipment and software 3 years Furniture and fixtures 3 years Office equipment 3 years Software 3 years |
Schedule of Revenue Differentiation | The Company measures sales volume based on medical procedures in which the Company’s products are sold and used (Cases). The Company considers Cases resulting from direct sales to medical facilities to be Retail Cases and Cases resulting from sales to third parties, such as non-medical facilities, distributors, or sub-distributors, to be wholesale cases (“ Wholesale Cases Three Months Ended Six Months Ended June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019 Category Retail $ 3,604,578 $ 3,722,777 $ 7,732,441 $ 7,375,088 Wholesale 406,088 1,353,148 914,728 2,471,496 Total $ 4,010,666 $ 5,075,925 $ 8,647,169 $ 9,846,584 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Property Plant And Equipment [Abstract] | |
Summary of Property and Equipment | Property and equipment consisted of the following at June 30, 2020 and December 31, 2019: June 30, 2020 December 31, 2019 Computer equipment and software $ 65,744 $ 51,303 Office equipment - 20,333 Property and equipment costs 65,744 71,636 Less: accumulated depreciation (32,373 ) (38,997 ) Property and equipment, net $ 33,371 $ 32,639 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill and Other Intangible Assets | The following table summarizes the Company’s goodwill and other intangible assets: June 30, 2020 December 31, 2019 Amortization period (years) Intangible assets: Non-compete agreements $ 61,766 $ 61,766 2 510(k) product technology 704,380 704,380 Indefinite Customer relationships 555,819 555,819 11 Total intangible assets 1,321,965 1,321,965 Less: accumulated amortization (156,055 ) (115,345 ) Intangible assets, net 1,165,910 1,206,620 Goodwill $ 1,972,886 $ 1,972,886 Indefinite |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Stockholders Equity Deficit Tables [Abstract] | |
Summary of Stock Option Activity | A summary of the Company’s stock option activity for the six months ended June 30, 2020, is presented below: No. of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Balance outstanding at December 31, 2019 3,948,333 $ 0.61 6.08 $ 157,000 Granted - - - - Exercised - - - - Forfeited (3,333 ) 1.00 8.00 - Expired - - - - Balance outstanding at June 30, 2020 3,945,000 $ 0.61 5.87 $ - Exercisable at June 30, 2020 1,963,333 $ 0.41 3.30 $ - |
Summary of Restricted Stock Awards Activity | There were no RSA’s that were granted, exercised, or forfeited during the six months ended June 30, 2020. Number of Shares Fair Value Weighted Average Grant Date Fair Value Non-vested, December 31, 2019 2,902,892 $ 1,382,800 $ 0.48 Granted - - - Vested - - - Forfeited - - - Non-vested, June 30, 2020 2,902,892 $ 1,382,800 $ 0.48 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
Components of Income Tax Expense (Benefit) | The components of income tax expense (benefit) are as follows: For the Six Months Ended June 30, 2020 For the Six Months Ended June 30, 2019 Current: Federal $ - $ - State 5,680 13,638 5,680 13,638 Deferred: Federal - (168,573 ) State - - - (168,573 ) Total income tax expense (benefit) $ 5,680 $ (154,935 ) |
Significant Components of Deferred Income Tax Assets and Liabilities | Significant components of the Company's deferred income tax assets and liabilities are as follows: June 30, 2020 June 30, 2019 Deferred tax assets: Net operating loss carryover $ 833,090 $ 191,679 Accounts receivable 168,344 206,493 Compensation 433,296 337,606 Inventory 650,837 388,074 Other 18,428 28,129 Total deferred tax assets 2,103,995 1,151,981 Deferred tax liabilities: Intangibles (211,222 ) (218,427 ) Property and equipment (4,828 ) (3,988 ) Total deferred tax liabilities (216,050 ) (222,415 ) Deferred tax assets, net $ 1,887,945 $ 929,566 Valuation allowance: Beginning of year (1,529,584 ) - Increase during the year (358,361 ) - Ending balance (1,887,945 ) - Net deferred tax asset $ - $ 929,566 |
Reconciliation of Income Tax Computed at U.S. Statutory Rate to Effective Income Tax Rate | A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows: Six Months Ended June 30, 2020 June 30, 2019 Expected U.S. federal incomes as statutory rate 21.0% 21.0% Change in deferred tax asset valuation allowance -21.1% 0.0% State and local income taxes, net of federal benefit -0.3% -1.3% Permanent differences 0.0% -0.5% Other 0.0% 0.0% Effective tax rate -0.4% 19.2% |
Concentrations (Tables)
Concentrations (Tables) | 6 Months Ended |
Jun. 30, 2020 | |
Revenues [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the six months ended June 30, 2020 and 2019, the following significant customers had an individual percentage of total revenues equaling ten percent (10%) or greater: For the Six Months Ended June 30, 2020 June 30, 2019 Customer 1 16.58 % 0.00 % Customer 2 7.97 % 11.86 % Totals 24.55 % 11.86 % |
Accounts Receivable [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | At June 30, 2020 and December 31, 2019, the following significant customers had a concentration of accounts receivable representing ten percent (10%) or greater of accounts receivable: June 30, 2020 December 31, 2019 Customer 1 - related party 15.45 % 9.47 % Totals 15.45 % 9.47 % |
Goods Purchased [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the six months ended June 30, 2020 and 2019, the following significant suppliers represented ten percent (10%) or greater of goods purchased: For the Six Months Ended June 30, 2020 June 30, 2019 Supplier 1 22.00 % 22.00 % Supplier 2 12.10 % 3.50 % Supplier 3 - related party 11.30 % 12.50 % Totals 45.40 % 38.00 % |
Nature of Operations (Details N
Nature of Operations (Details Narrative) - USD ($) | Aug. 01, 2018 | Jun. 30, 2020 | Dec. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2018 |
Nature Of Operations And Going Concern [Line Items] | |||||
Accumulated losses | $ 4,303,243 | $ 2,595,813 | |||
Stockholders’ deficits | 2,602,465 | $ 1,222,133 | $ (1,312,644) | $ (1,466,684) | |
Revenue declined as the result of competitive pressures | $ 1,065,259 | ||||
Maxim Surgical, LLC [Member] | |||||
Nature Of Operations And Going Concern [Line Items] | |||||
Acquisition agreement month and year | 2018-08 |
Significant Accounting Polici_4
Significant Accounting Policies (Details Narrative) | 6 Months Ended | |
Jun. 30, 2020USD ($)Segment$ / sharesshares | Dec. 31, 2019USD ($)$ / shares | |
Significant Accounting Policies [Line Items] | ||
Number of operating segments | Segment | 1 | |
Number of reportable segments | Segment | 1 | |
Common Stock Par Value | $ / shares | $ 0.01 | $ 0.01 |
Earn-out liability | $ 11,645,365 | $ 11,645,365 |
Cash equivalents | 0 | 0 |
FDIC insurance limit | 250,000 | |
Deposits greater than federally insured limit | $ 861,703 | $ 599,309 |
CPM [Member] | ||
Significant Accounting Policies [Line Items] | ||
Earn-out payment start date | Jan. 1, 2018 | |
Earn-out payment end date | Dec. 31, 2034 | |
Earn-out payment additional bonus amount | $ 10,000,000 | |
Earn-out liability | 0 | |
CPM [Member] | Minimum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Earn-out payment base amount | 0 | |
CPM [Member] | Maximum [Member] | ||
Significant Accounting Policies [Line Items] | ||
Earn-out payment base amount | $ 16,000,000 | |
Restricted Stock and Common Stock Equivalents [Member] | ||
Significant Accounting Policies [Line Items] | ||
Shares excluded from diluted earnings per share | shares | 4,777,892 |
Significant Accounting Polici_5
Significant Accounting Policies - Estimated Useful Lives of Assets (Details) | 6 Months Ended |
Jun. 30, 2020 | |
Computer Equipment and Software [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Furniture and fixtures [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Office equipment [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Software [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Significant Accounting Polici_6
Significant Accounting Policies - Schedule of Revenue Differentiation (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Disaggregation Of Revenue [Line Items] | ||||
Net revenues | $ 4,010,666 | $ 5,075,925 | $ 8,647,169 | $ 9,846,584 |
Retail [Member] | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net revenues | 3,604,578 | 3,722,777 | 7,732,441 | 7,375,088 |
Wholesale [Member] | ||||
Disaggregation Of Revenue [Line Items] | ||||
Net revenues | $ 406,088 | $ 1,353,148 | $ 914,728 | $ 2,471,496 |
Property and Equipment - Summar
Property and Equipment - Summary of Property and Equipment (Details) - USD ($) | Jun. 30, 2020 | Dec. 31, 2019 |
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | $ 65,744 | $ 71,636 |
Less: accumulated depreciation | (32,373) | (38,997) |
Property and equipment, net | 33,371 | 32,639 |
Computer Equipment and Software [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | $ 65,744 | 51,303 |
Office equipment [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | $ 20,333 |
Property and Equipment (Details
Property and Equipment (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Property Plant And Equipment [Abstract] | ||||
Depreciation expense | $ 10,397 | $ 5,241 | $ 20,025 | $ 10,610 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Schedule of Goodwill and Other Intangible Assets (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Dec. 31, 2019 | |
Intangible assets: | ||
Total intangible assets | $ 1,321,965 | $ 1,321,965 |
Less: accumulated amortization | (156,055) | (115,345) |
Intangible assets, net | 1,165,910 | 1,206,620 |
Goodwill | 1,972,886 | 1,972,886 |
510(k) Product Technology [Member] | ||
Intangible assets: | ||
Indefinite lived intangible assets | $ 704,380 | 704,380 |
Intangible assets, amortization period | Indefinite | |
Goodwill [Member] | ||
Intangible assets: | ||
Intangible assets, amortization period | Indefinite | |
Non-Compete Agreements [Member] | ||
Intangible assets: | ||
Finite lived intangible assets | $ 61,766 | 61,766 |
Intangible assets, amortization period | 2 years | |
Customer Relationships [Member] | ||
Intangible assets: | ||
Finite lived intangible assets | $ 555,819 | $ 555,819 |
Intangible assets, amortization period | 11 years |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets - (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | ||||
Amortization expense | $ 20,355 | $ 20,355 | $ 40,710 | $ 40,710 |
Senior Secured Revolving Cred_2
Senior Secured Revolving Credit Facility (Details Narrative) - USD ($) | May 21, 2020 | May 06, 2020 | Dec. 18, 2019 | May 09, 2019 | Nov. 19, 2018 | Dec. 29, 2017 | Jun. 30, 2020 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2020 | Jun. 30, 2020 | Jun. 30, 2019 |
RLOC [Member] | 0.25% Promissory Notes [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Subordinated debt from affiliates | $ 200,000 | ||||||||||||||||
Maturity date | May 6, 2022 | ||||||||||||||||
Interest rate percentage | 0.25% | ||||||||||||||||
Interest rate per annum after maturity date | 10.00% | ||||||||||||||||
RLOC [Member] | 0.25% Promissory Notes [Member] | NC 143 [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Borrowed from related parties | $ 180,000 | ||||||||||||||||
RLOC [Member] | 0.25% Promissory Notes [Member] | RMI [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Borrowed from related parties | $ 20,000 | ||||||||||||||||
RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Fifth Amendment [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Line of credit facility, expiration date | Nov. 4, 2020 | ||||||||||||||||
Description of financial covenants | amended the financial covenants to state that the Company will not permit EBITDA to be less than $25,000 for the six months ended September 30, 2020 | ||||||||||||||||
RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Fifth Amendment [Member] | Scenario Forecast [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Minimum net profit required for compliance | $ 25,000 | ||||||||||||||||
CPM [Member] | RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Date of acquisition agreement | Dec. 29, 2017 | ||||||||||||||||
Percentage of guarantees of outstanding loan amount | 50.00% | ||||||||||||||||
Line of credit outstanding balance amount | $ 1,088,352 | $ 1,752,501 | $ 1,088,352 | ||||||||||||||
Interest expense | 15,363 | $ 21,295 | 39,633 | $ 40,073 | |||||||||||||
Accrued interest | $ 4,053 | 4,437 | $ 4,053 | ||||||||||||||
Effective interest rate | 5.10% | 5.10% | |||||||||||||||
CPM [Member] | RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | First Amendment [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Minimum net income to achieve | $ 700,000 | ||||||||||||||||
CPM [Member] | RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Second Amendment [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Line of credit facility, expiration date | Nov. 4, 2019 | ||||||||||||||||
Line of credit maximum borrowing capacity | $ 4,000,000 | ||||||||||||||||
Variable rate, description | the one-month LIBOR rate plus four percent | ||||||||||||||||
Variable rate | 4.00% | ||||||||||||||||
Minimum fixed charge coverage ratio | 1.25% | ||||||||||||||||
Description of financial covenants | 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; 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 | ||||||||||||||||
Minimum net profit required for compliance | $ 100,000 | $ 700,000 | |||||||||||||||
CPM [Member] | RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Third Amendment [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Line of credit facility, expiration date | May 9, 2019 | ||||||||||||||||
Line of credit maximum borrowing capacity | $ 3,500,000 | ||||||||||||||||
Description of financial covenants | amended the financial covenants to state that the Company will not permit EBITDA to be less than $100,000 for the fiscal quarter ending June 30, 2019 and $500,000 for the fiscal quarter ending September 30, 2019 | ||||||||||||||||
Minimum net profit required for compliance | $ 500,000 | $ 100,000 | |||||||||||||||
Line of credit component of inventory percentage | 30.00% | ||||||||||||||||
CPM [Member] | RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Fourth Amendment [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Percentage of guarantees of outstanding loan amount | 100.00% | ||||||||||||||||
Line of credit facility, expiration date | May 4, 2020 | ||||||||||||||||
Line of credit maximum borrowing capacity | $ 2,750,000 | ||||||||||||||||
Description of financial covenants | amended the financial covenants to state that the Company will not permit EBITDA to be less than $600,000 for the fiscal quarter ending December 31, 2019 and $125,000 for the fiscal quarter ending March 31, 2020 | ||||||||||||||||
Minimum net profit required for compliance | $ 125,000 | $ 600,000 | |||||||||||||||
CPM [Member] | RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Fourth Amendment [Member] | Mr. Brooks [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Maximum annual salary of chairman of board and president | $ 550,000 | ||||||||||||||||
CPM [Member] | Credit Card Exposure [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Third Amendment [Member] | |||||||||||||||||
Debt Instrument [Line Items] | |||||||||||||||||
Line of credit maximum borrowing capacity | $ 500,000 |
Notes Payable - Related Parti_2
Notes Payable - Related Parties (Details Narrative) - USD ($) | May 06, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Oct. 31, 2016 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2017 | Dec. 31, 2019 |
Debt Instrument [Line Items] | ||||||||
Interest expense on notes payable | $ 6,732 | $ 6,732 | $ 13,463 | $ 13,389 | ||||
Accrued expenses [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Accrued interest | $ 99,559 | $ 99,559 | $ 86,096 | |||||
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 | |||||||
RLOC [Member] | 0.25% Promissory Notes [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Interest rate percentage | 0.25% | |||||||
Maturity date | May 6, 2022 | |||||||
Interest rate per annum after maturity date | 10.00% | |||||||
RLOC [Member] | 0.25% Promissory Notes [Member] | NC 143 [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowed from related parties | $ 180,000 | |||||||
RLOC [Member] | 0.25% Promissory Notes [Member] | RMI [Member] | ||||||||
Debt Instrument [Line Items] | ||||||||
Borrowed from related parties | $ 20,000 |
Paycheck Protection Program (De
Paycheck Protection Program (Details Narrative) - USD ($) | Apr. 11, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 |
Accrued expenses [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Accrued interest | $ 99,559 | $ 99,559 | $ 86,096 | |||
Paycheck Protection Program [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Interest expense | 900 | $ 0 | 900 | $ 0 | ||
Paycheck Protection Program [Member] | Accrued expenses [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Accrued interest | $ 900 | $ 0 | $ 900 | $ 0 | ||
CARES Act [Member] | Paycheck Protection Program [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Promissory note principal amount | $ 361,400 | |||||
Maturity date | Apr. 11, 2022 | |||||
Interest rate percentage | 1.00% |
Economic Disaster Injury Loan (
Economic Disaster Injury Loan (Details Narrative) - USD ($) | May 12, 2020 | Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | Dec. 31, 2019 |
Accrued expenses [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Accrued interest | $ 99,559 | $ 99,559 | $ 86,096 | |||
Economic Injury Disaster Loan Assistance Program [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Interest expense | 940 | $ 0 | 940 | $ 0 | ||
Economic Injury Disaster Loan Assistance Program [Member] | Accrued expenses [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Accrued interest | $ 940 | $ 0 | $ 940 | $ 0 | ||
CARES Act [Member] | Economic Injury Disaster Loan Assistance Program [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Loan principal amount | $ 150,000 | |||||
Interest rate percentage | 3.75% | |||||
Debt instrument frequency of periodic payment | monthly | |||||
Debt instrument date of first required payment | May 12, 2021 | |||||
Installment payments including principal and interest | $ 731 | |||||
Loan principal and interest payable term | 30 years | |||||
CARES Act [Member] | Economic Injury Disaster Loan Assistance Program [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||||
Debt Instrument [Line Items] | ||||||
Advance extinguished reflected offset in expenses | $ 10,000 |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Non-Qualified Stock Option Awards [Member] | ||||
Class Of Stock [Line Items] | ||||
Stock options, granted | 0 | 300,000 | 0 | 1,200,000 |
Unrecognized compensation expenses on stock options | $ 798,661 | $ 798,661 | ||
Non-Qualified Stock Option Awards [Member] | Selling, General, Administrative and Other Expenses [Member] | ||||
Class Of Stock [Line Items] | ||||
Share-based compensation expense | 164,443 | $ 254,699 | 327,098 | $ 499,107 |
Restricted Common Stock [Member] | ||||
Class Of Stock [Line Items] | ||||
Share-based compensation expense | $ 0 | $ 0 | $ 0 | $ 0 |
Number of shares granted | 0 | |||
Number of shares, exercised | 0 | |||
Number of shares forfeited | 0 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Stock Option Activity (Details) | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020$ / sharesshares | Dec. 31, 2019USD ($)$ / sharesshares | |
No. of Shares, Abstract | ||
No. of Shares, Beginning Balance | shares | 3,948,333 | |
Forfeited, No. of Shares | shares | (3,333) | |
No. of Shares, Ending Balance | shares | 3,945,000 | 3,948,333 |
Exercisable, No. of Shares | shares | 1,963,333 | |
Weighted Average Exercise Price, Abstract | ||
Weighted Average Exercise Price, Beginning Balance | $ / shares | $ 0.61 | |
Forfeited, Weighted Average Exercise Price | $ / shares | 1 | |
Weighted Average Exercise Price, Ending Balance | $ / shares | 0.61 | $ 0.61 |
Exercisable, Weighted Average Exercise Price | $ / shares | $ 0.41 | |
Weighted Average Remaining Contractual Term, Abstract | ||
Weighted Average Remaining Contractual Term, Balance outstanding | 5 years 10 months 13 days | 6 years 29 days |
Weighted Average Remaining Contractual Term, Forfeited | 8 years | |
Weighted Average Remaining Contractual Term, Exercisable | 3 years 3 months 18 days | |
Aggregate Intrinsic Value, Abstract | ||
Aggregate Intrinsic Value, Balance outstanding | $ | $ 157,000 |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of Restricted Stock Awards Activity (Details) - Restricted Stock Award [Member] | 6 Months Ended |
Jun. 30, 2020USD ($)$ / 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, December 31, 2019 | 2,902,892 |
Number of Shares, Granted | 0 |
Number of Shares, Vested | 0 |
Number of Shares, Forfeited | 0 |
Number of Shares, Non-vested, June 30, 2020 | 2,902,892 |
Share-based Compensation Arrangement by Share Based Payment Award, Equity Instruments Other than Options, Nonvested, Fair Value [Abstract] | |
Fair Value, Non-vested, December 31, 2019 | $ | $ 1,382,800 |
Fair Value, Non-vested, June 30, 2020 | $ | $ 1,382,800 |
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, December 31, 2019 | $ / shares | $ 0.48 |
Weighted Average Grant Date Fair Value, Non-vested, June 30, 2020 | $ / shares | $ 0.48 |
Income Taxes - Components of In
Income Taxes - Components of Income Tax Expense (Benefit) (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2020 | Jun. 30, 2019 | Jun. 30, 2020 | Jun. 30, 2019 | |
Current: | ||||
Federal | $ 0 | $ 0 | ||
State | 5,680 | 13,638 | ||
Total | 5,680 | 13,638 | ||
Deferred: | ||||
Federal | 0 | (168,573) | ||
State | 0 | 0 | ||
Total | 0 | (168,573) | ||
Total income tax expense (benefit) | $ 946 | $ (40,389) | $ 5,680 | $ (154,935) |
Income Taxes - Significant Comp
Income Taxes - Significant Components of Deferred Income Tax Assets and Liabilities (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Deferred tax assets: | ||
Net operating loss carryover | $ 833,090 | $ 191,679 |
Accounts receivable | 168,344 | 206,493 |
Compensation | 433,296 | 337,606 |
Inventory | 650,837 | 388,074 |
Other | 18,428 | 28,129 |
Total deferred tax assets | 2,103,995 | 1,151,981 |
Deferred tax liabilities: | ||
Intangibles | (211,222) | (218,427) |
Property and equipment | (4,828) | (3,988) |
Total deferred tax liabilities | (216,050) | (222,415) |
Deferred tax assets, net | 1,887,945 | 929,566 |
Valuation allowance: | ||
Beginning of year | (1,529,584) | 0 |
Increase during the year | (358,361) | 0 |
Ending balance | (1,887,945) | 0 |
Net deferred tax asset | $ 0 | $ 929,566 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | $ 3,967,098 | |
Net operating loss carryforwards earliest expiration year | 2020 | |
Net operating loss carryforwards latest expiration year | 2037 | |
Open tax year | 2016 2017 2018 | |
Effective income tax rates | (0.40%) | 19.20% |
CARES Act [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
NOL carryovers and carrybacks to offset percentage of taxable income | 100.00% | |
Net operating loss incurred in 2018, 2019 and 2020 carried back period for each preceding taxable years | 5 years | |
Operating Carryforwards Expiration Date from 2020 to 2037 [Member] | ||
Operating Loss Carryforwards [Line Items] | ||
Net operating loss carryforwards | $ 899,331 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of Income Tax Computed at U.S. Statutory Rate to Effective Income Tax Rate (Details) | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | ||
Expected U.S. federal incomes as statutory rate | 21.00% | 21.00% |
Change in deferred tax asset valuation allowance | (21.10%) | 0.00% |
State and local income taxes, net of federal benefit | (0.30%) | (1.30%) |
Permanent differences | 0.00% | (0.50%) |
Other | 0.00% | 0.00% |
Effective tax rate | (0.40%) | 19.20% |
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] | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 24.55% | 11.86% |
Customer 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 16.58% | 0.00% |
Customer 2 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 7.97% | 11.86% |
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] | 6 Months Ended | 12 Months Ended |
Jun. 30, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 15.45% | 9.47% |
Customer 1 - Related Party [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 15.45% | 9.47% |
Concentrations - Significant Su
Concentrations - Significant Suppliers Represented Ten Percent (10%) or Greater of Goods Purchased (Details) - Goods Purchased [Member] - Supplier Concentration Risk [Member] | 6 Months Ended | |
Jun. 30, 2020 | Jun. 30, 2019 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 45.40% | 38.00% |
Supplier 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 22.00% | 22.00% |
Supplier 2 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 12.10% | 3.50% |
Supplier 3 - Related Party [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 11.30% | 12.50% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 6 Months Ended | ||
Jun. 30, 2020USD ($)ft²FullTimeEquivalent | Jun. 30, 2019USD ($) | Dec. 31, 2019USD ($) | |
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 | $ 84,000 | $ 84,000 | |
AmBio {Member} | |||
Related Party Transaction [Line Items] | |||
Number of full time equivalents | FullTimeEquivalent | 41 | ||
Number of full time equivalents directly support company | FullTimeEquivalent | 34 | ||
Number of full time equivalents support operations of other companies | FullTimeEquivalent | 7 | ||
Number of full time equivalents shared between company and other companies | FullTimeEquivalent | 0 | ||
Due to related parties | $ 130,000 | $ 170,000 | |
AmBio {Member} | Selling, General, Administrative and Other Expenses [Member] | |||
Related Party Transaction [Line Items] | |||
Administrative fees | 89,000 | 105,000 | |
MedUSA Group, LLC [Member] | |||
Related Party Transaction [Line Items] | |||
Net revenues to related parties | 30,000 | 643,000 | |
Due from related parties | 585,000 | 555,000 | |
MedUSA Group, LLC [Member] | Accrued expenses [Member] | |||
Related Party Transaction [Line Items] | |||
Due to related parties | 470,000 | 598,000 | |
MedUSA Group, LLC [Member] | Commission [Member] | |||
Related Party Transaction [Line Items] | |||
Expense incurred on behalf of related parties | 1,318,000 | 946,000 | |
Texas Overlord, LLC [Member] | |||
Related Party Transaction [Line Items] | |||
Due from related parties | 0 | 0 | |
Texas Overlord, LLC [Member] | Inventory [Member] | |||
Related Party Transaction [Line Items] | |||
Purchases from related parties | 0 | 25,000 | |
Texas Overlord, LLC [Member] | Commission [Member] | |||
Related Party Transaction [Line Items] | |||
Due to related parties | 30,000 | 15,000 | |
Expense incurred on behalf of related parties | 75,000 | 90,000 | |
N.B.M.J., Inc. [Member] | |||
Related Party Transaction [Line Items] | |||
Net revenues to related parties | 12,000 | 364,000 | |
N.B.M.J., Inc. [Member] | Account Receivables [Member] | |||
Related Party Transaction [Line Items] | |||
Due from related parties | 0 | 0 | |
Bass Bone And Spine Specialists [Member] | |||
Related Party Transaction [Line Items] | |||
Net revenues to related parties | 44,000 | 97,000 | |
Bass Bone And Spine Specialists [Member] | Account Receivables [Member] | |||
Related Party Transaction [Line Items] | |||
Due from related parties | 26,000 | 7,000 | |
Bass Bone And Spine Specialists [Member] | Commission [Member] | |||
Related Party Transaction [Line Items] | |||
Expense incurred on behalf of related parties | 16,000 | 14,000 | |
Sintu L L C | Commission [Member] | |||
Related Party Transaction [Line Items] | |||
Expense incurred on behalf of related parties | 279,000 | 174,000 | |
Tiger Orthopedics, LLC [Member] | |||
Related Party Transaction [Line Items] | |||
Net revenues to related parties | 39,000 | 132,000 | |
Tiger Orthopedics, LLC [Member] | Account Receivables [Member] | |||
Related Party Transaction [Line Items] | |||
Due from related parties | 5,000 | 30,000 | |
Modal Manufacturing, LLC [Member] | Inventory [Member] | |||
Related Party Transaction [Line Items] | |||
Purchases from related parties | 318,000 | $ 481,000 | |
Modal Manufacturing, LLC [Member] | Account Receivables [Member] | |||
Related Party Transaction [Line Items] | |||
Due from related parties | 0 | 40,700 | |
Modal Manufacturing, LLC [Member] | Account Payables [Member] | |||
Related Party Transaction [Line Items] | |||
Due to related parties | $ 277,000 | $ 0 |