Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 08, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Entity Registrant Name | Fuse Medical, Inc. | ||
Entity Central Index Key | 0000319016 | ||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Transition Report | false | ||
Document Period End Date | Dec. 31, 2020 | ||
Document Fiscal Year Focus | 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer | No | ||
Is Entity a Voluntary Filer | No | ||
Is Entity's Reporting Status Current | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Public Float | $ 611,173 | ||
Entity Common Stock, Shares Outstanding | 73,124,458 | ||
Document Fiscal Period Focus | FY | ||
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 | ||
ICFR Auditor Attestation Flag | false | ||
Title of 12(b) Security | Common Stock | ||
Trading Symbol | FZMD |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 1,187,458 | $ 1,099,310 |
Accounts receivable, net of allowance of $787,766 and $615,278, respectively | 4,427,896 | 5,249,653 |
Inventories, net of allowance of $3,077,728 and $3,805,730, respectively | 6,981,413 | 7,855,887 |
Prepaid expenses and other current assets | 24,203 | 39,850 |
Total current assets | 12,620,970 | 14,244,700 |
Property and equipment, net | 17,791 | 32,639 |
Long term accounts receivable, net of allowance of $2,615,834 and $728,000, respectively | 1,669,510 | 924,646 |
Intangible assets, net | 1,138,080 | 1,206,620 |
Goodwill | 1,972,886 | 1,972,886 |
Total assets | 17,419,237 | 18,381,491 |
Current liabilities: | ||
Accounts payable | 3,236,592 | 2,752,854 |
Accrued expenses | 2,584,734 | 3,302,904 |
Convertible notes payable - related parties | 150,000 | 150,000 |
Payroll Protection Program loan | 361,400 | |
Economic Injury Disaster Loan - short term portion | 2,241 | |
Senior secured revolving credit facility | 913,352 | 1,752,501 |
Total current liabilities | 7,248,319 | 7,958,259 |
Notes payable - related parties | 200,000 | |
Economic Injury Disaster Loan - long term portion | 147,759 | |
Earn-out liability | 11,936,000 | 11,645,365 |
Total liabilities | 19,532,078 | 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 December 31, 2020 and 2019 | 731,245 | 731,245 |
Additional paid-in capital | 1,184,222 | 642,435 |
Accumulated deficit | (4,028,308) | (2,595,813) |
Total stockholders’ equity (accumulated deficit) | (2,112,841) | (1,222,133) |
Total liabilities and stockholders’ equity (accumulated deficit) | $ 17,419,237 | $ 18,381,491 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Statement Of Financial Position [Abstract] | ||
Net of allowance, accounts receivable | $ 787,766 | $ 615,278 |
Net of allowance, inventories | 3,077,728 | 3,805,730 |
Net of allowance, long term receivable | $ 2,615,834 | $ 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 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Statement [Abstract] | ||
Net revenues | $ 21,398,936 | $ 22,900,277 |
Cost of revenues | 8,694,713 | 11,762,790 |
Gross profit | 12,704,223 | 11,137,487 |
Operating expenses | ||
Selling, general, administrative and other | 6,541,659 | 8,466,077 |
Commissions | 7,086,335 | 5,982,075 |
Depreciation and amortization | 104,143 | 107,073 |
Goodwill impairment | 0 | 932,203 |
Total operating expenses | 13,732,137 | 15,487,428 |
Operating loss | (1,027,914) | (4,349,941) |
Other income (expense): | ||
Change in fair value of contingent purchase consideration | (290,635) | 1,936,164 |
Interest expense | (94,953) | (121,633) |
Total other income (expense) | (385,588) | 1,814,531 |
Operating loss before income tax | (1,413,502) | (2,535,410) |
Income tax expense | 18,993 | 781,085 |
Net loss | $ (1,432,495) | $ (3,316,495) |
Loss per common share - basic | $ (0.02) | $ (0.05) |
Loss per common share - diluted | $ (0.02) | $ (0.05) |
Weighted average number of common shares outstanding - basic | 70,221,566 | 70,221,566 |
Weighted average number of common shares outstanding - diluted | 70,221,566 | 70,221,566 |
CONSOLIDATED STATEMENT OF CHANG
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) | Total | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated 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 based compensation | 627,678 | $ 627,678 | ||
Restricted stock forfeiture | $ (14,757) | 14,757 | ||
Restricted stock forfeiture, Shares | (1,475,723) | |||
Net income (loss) | (3,316,495) | (3,316,495) | ||
Ending Balance, Amount at Dec. 31, 2019 | (1,222,133) | $ 731,245 | 642,435 | (2,595,813) |
Ending Balance, Shares at Dec. 31, 2019 | 73,124,458 | |||
Stock based compensation | 541,787 | 541,787 | ||
Net income (loss) | (1,432,495) | (1,432,495) | ||
Ending Balance, Amount at Dec. 31, 2020 | $ (2,112,841) | $ 731,245 | $ 1,184,222 | $ (4,028,308) |
Ending Balance, Shares at Dec. 31, 2020 | 73,124,458 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||
Net loss | $ (1,432,495) | $ (3,316,495) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 104,143 | 107,073 |
Change in fair value of contingent purchase consideration | 290,635 | (1,936,164) |
Goodwill impairment | 0 | 932,203 |
Stock based compensation | 553,184 | 627,678 |
Provision for discounts on long term accounts receivable | 1,887,836 | 645,046 |
Provision for bad debts and discounts | 172,488 | 30,269 |
Provision for slow moving and obsolete inventory | (728,002) | 2,093,858 |
Deferred income tax expense | 760,993 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | 649,269 | (178,354) |
Inventories | 1,602,476 | 1,126,144 |
Prepaid expenses and other current assets | 15,647 | (10,297) |
Long term accounts receivable | (2,632,698) | (1,445,261) |
Accounts payable | 483,738 | 39,935 |
Accrued expenses | (729,567) | 518,633 |
Net cash provided by/(used in) operating activities | 236,654 | (4,739) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (20,757) | (15,318) |
Net cash used in investing activities | (20,757) | (15,318) |
Cash flows from financing activities: | ||
Net payments/proceeds from senior secured revolving credit facility | (839,149) | 275,053 |
Proceeds from related party notes payable | 200,000 | |
Net cash provided by/(used in) financing activities | (127,749) | 275,053 |
Net increase in cash and cash equivalents | 88,148 | 254,996 |
Cash and cash equivalents - beginning of year | 1,099,310 | 844,314 |
Cash and cash equivalents - end of year | 1,187,458 | 1,099,310 |
Supplemental disclosure of cash flow information: | ||
Cash paid for interest | 62,866 | $ 94,545 |
Payrolll Protection Program [Member] | ||
Cash flows from financing activities: | ||
Payroll protection program proceeds | 361,400 | |
Economic Injury Disaster Loan Assistance Program [Member] | ||
Cash flows from financing activities: | ||
Economic injury disaster loan proceeds | $ 150,000 |
Nature of Operations
Nature of Operations | 12 Months Ended |
Dec. 31, 2020 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
Nature of Operations | Note 1. Nature of Operations Overview The Company was initially incorporated in 1968 as American Metals Service, Inc., a Florida corporation. In July 1999, American Metals Service, Inc. changed its name to GolfRounds.com, Inc. and was redomiciled to Delaware through a merger. On December 19, 2016, the Change-in-Control Date, the Company entered into a Stock Purchase Agreement by and between the Company, NC 143 which is controlled by Mr. Brooks, the Company’s Chairman of the Board and President; and RMI, which is owned and controlled by Mr. Reeg, the Company’s Chief Executive Officer and Secretary. The closing of the Stock Purchase Agreement resulted in a change-in-control of the Company whereby Mr. Brooks and Mr. Reeg beneficially acquired approximately 61.4% of the Company’s issued and outstanding shares of Common Stock, immediately after the Change-in-Control Date. On December 31, 2017, the Company completed the acquisition of CPM pursuant to the CPM Acquisition Agreement. Subsequent to the Change-in-Control Date, CPM and Company operations are consolidated. On August 1, 2018, the Company completed the acquisition of Maxim Surgical, pursuant to the Maxim Purchase Agreement. As of the Maxim Closing Date, Maxim and Company operations are consolidated. Nature of Business The Company is a Manufacturer, distributor, and wholesaler of medical device implants, offering a broad portfolio of Orthopedic Implants and Biologics including: (i) internal and external fixation products; (ii) upper and lower extremity plating and total joint reconstruction implants; (iii) soft tissue fixation and augmentation for sports medicine procedures; (iv) full spinal implants for trauma, degenerative disc disease and deformity indications; and (v) a wide array of osteo-biologics, regenerative tissues and amniotic tissue, which include human allografts, substitute bone materials, and tendons and regenerative tissues and fluids. All of the Company’s medical devices are approved by the FDA for sale in the United States, and all of the Company’s Biologics suppliers are licensed tissue banks accredited by the American Association of Tissue Banks. The Company’s broad portfolio of Orthopedic Implants and Biologics provide high-quality products to assist surgeons with positive patient outcomes and cost-effective solutions for its customers, which include hospitals, medical facilities, and sub-distributors. The Company operates under exclusive and non-exclusive agreements with certain vendors and supply partners in the geographic territories the Company serves. The Company continuously reviews and expands its product lines to ensure that they offer a comprehensive, high-quality and cost-effective selection of Orthopedic Implants and Biologics so that the Company can be more relevant to its customer needs while continuing to grow its existing customer base. Additionally, the Company continues to grow its manufacturing operations, both by internal product development as well as the acquisition of existing FDA approved devices. Going Concern For the years ended December 31, 2020 and 2019 the Company had accumulated losses of $4,028,308 and $2,595,813, respectively, and a stockholders’ deficit of $2,112,841 and $1,222,133, respectively. Revenues declined by $1,501,341 and $3,441,761 in 2020 and 2019, respectively, as a result of competitive pressures. The Company was out of compliance with its loan covenants at various times during the year ended December 31, 2019 and obtained waivers from the lender to cure the violations, but had reductions of the credit facility amount as a result of the covenant violations. At December 31, 2019 the Company’s management determined that these conditions and events raised substantial doubt about the ability of the Company to continue as a going concern. The Company’s primary sources of liquidity are cash from operations and its RLOC with Amegy Bank. At December 31, 2020, the Company’s current assets exceeded its current liabilities by $5,372,651 (“Working Capital”), which included $1,187,458 in cash and cash equivalents. Cash from the Company’s operations and net borrowings on its RLOC supports the Company’s Working Capital needs. As of December 31, 2020, the Company had sufficient collateral, had approximately $1.3 million in borrowing compacity and was in compliance with the RLOC debt covenants. The Company expects to renew its RLOC maturing May 4, 2021. Further, the Company’s management expects to (i) continue successful execution of new product and licensing deal rollouts and key rebranding initiatives, (ii) expand new retail sales channel opportunities, and (iii) additional strategic cost reductions will continue. Based on these operating results, key initiatives, and the Company’s liquidity position as of December 31, 2020, the Company’s management has determined that these conditions and events supported the Company’s ability to continue as a going concern |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 2. Significant Accounting Policies Principles of Consolidation The 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 consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (GAAP), requires the Company’s management to make estimates and assumptions that affect the Company’s reported amounts in the consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying consolidated financial statements include the allowances for doubtful accounts, valuation of inventories, the Company’s effective income tax rate and the fair value calculations of stock-based compensation, goodwill, finite lived intangibles and the earn-out liability. Segment Reporting In accordance with Accounting Standards Update (“ASU”) No. 280, “Segment Reporting,” the Company uses the management approach for determining its reportable segments. The management approach is based upon the way that management reviews performance and allocates resources. The Company’s Chief Executive Officer serves as the Company’s chief operating decision maker, and his management team reviews operating results on a consolidated basis for purposes of allocating resources and evaluating the financial performance of the Company. The Company has integrated the operations of both CPM and Maxim. Accordingly, the Company has determined that it has one operating segment and, therefore, one reporting segment. Reclassification 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 consolidated balance sheets. Long term accounts receivable reflects Cases where the patient has obtained a letter of protection, (“LOP”). A LOP is a contract that provides that the medical providers will be paid from any proceeds received from settlement of litigation of the underlying cause of action with respect to the event that necessitated medical goods and services. Once the medical provider receives payment, then the medical provider pays the Company’s invoice which payment is generally greater than 365 days from date of service. The LOP provides medical providers with greater certainty of full payment. This reclassification had no effect on the previously reported total assets or net loss. Loss Per Common Share Loss per common share, basic is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of 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 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 years ended December 31, 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. (See Note 10, “Stockholders’ Equity” for the terms and conditions of restricted stock). For the year ended December 31, 2020, restricted common stock shares and common stock equivalents of 2,245,762 have been excluded from diluted earnings per share because to include them would have been antidilutive (See Note 10, “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, the Company initially recorded a $19,244,543 liability related to the Earn-Out portion of the purchase consideration. The Company has classified the Earn-Out liability as a Level 3 liability and the fair value of the Earn-Out liability will be evaluated each reporting period and changes in its fair value will be included in the Company’s earnings. The Earn-Out payments are based on the financial performance of the Company between the period of January 1, 2018, and December 31, 2034. The base amount of the Earn-Out is $16,000,000 with an additional bonus payment of $10,000,000. The payments of the base and bonus Earn-Out amounts are subject to the Company meeting certain earnings thresholds as detailed in the CPM Acquisition Agreement. The Earn-Out payments during the Earn-Out period specified above, ranges from $0 to $26,000,000. The fair value of the Earn-Out liability was calculated using the Monte Carlo simulation, which was then applied to estimated Earn-Out payments with a discount rate of three percent (3%). To determine the fair value of the Earn-Out liability, the Company’s management evaluates assumptions that require significant judgement. Significant assumptions used for estimating the Earn-Out liability included: (i) EBITDA margins increasing from one percent (1%) to ten percent (10%) over the next four years; and (ii) revenue growth of approximately five percent (5%) over the next five years, and approximately two percent (2%) thereafter. The Earn-Out liability, which represented contingent consideration associated with the CPM Acquisition, is recorded as a liability. This liability is subject to re-measurement to fair value at each reporting date until the contingency is resolved and the changes in fair value are recognized in the consolidated statements of operations at each reporting period. For the year ended December 31, 2020 and 2019, the Company has determined the earnings threshold as detailed in the CPM Acquisition Agreement was not met and therefore no payments for either the base or bonus Earn-Out tranches would be achieved, based on the Company’s 2020 and 2019 financial performance. The Earn-Out was remeasured to fair value under the probability weighted income approach. As a result, the fair value of the Earn-Out liability was increased by $290,635 from $11,645,365 to $11,936,000 in 2020 and reduced by $1,936,164 from $13,581,529 to $11,645,365 in 2019 and reflected as “Change in fair value of contingent purchase consideration” on our Consolidated Financial Statements. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded values of notes payable approximate their respective fair values based upon their effective interest rates. 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 December 31, 2020, and December 31, 2019. The Company’s cash is concentrated in one large financial institution. The amount of cash held at that financial institution may at times exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any financial institution losses from inception through December 31, 2020. As of December 31, 2020 and 2019, there were deposits of $761,671 and $599,309, respectively, which were greater than federally insured limits. Accounts Receivable and Allowances Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts receivable and an allowance for contractual discount pricing. Credit is extended to customers based on an evaluation of their financial condition, industry reputation, and other judgmental factors considered by the Company’s management. The Company generally does not require collateral or other security interest to support accounts receivable. Based on trends and specific factors, the customer’s credit terms may be modified, including required payment upon delivery. The Company performs regular on-going credit evaluations of its customers as deemed relevant. As events, trends, and circumstance warrant, the Company’s management estimates the amounts that are more likely than not to be uncollectible. These amounts are recognized as bad debt expense and are reflected within selling, general, administrative and other expenses on the Company’s accompanying consolidated statement of operations. When accounts are deemed uncollectible, they are often referred to the Company’s outside legal firm for litigation. Accounts deemed uncollectible are written-off in the period when the Company has exhausted its efforts to collect overdue and unpaid receivables or otherwise has evaluated other circumstances that indicate that the Company should abandon such efforts. Accounts deemed uncollectible are removed from the Company’s accounts receivable portfolio, with a corresponding offset to the allowance for doubtful accounts receivable. The Company may record additional allowances for doubtful accounts based on known trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Specific allowances are re-evaluated and adjusted as additional facts and information become available. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The Company’s management estimates its allowance for contractual discount pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, the Company’s management uses assumptions and judgement, based on the best available facts and circumstances to record a specific allowance for the amounts due from those customers. The allowance is offset by a corresponding reduction to revenue. These specific allowances are re-evaluated, analyzed, and adjusted as additional information becomes available to determine the total amount of the allowance. The Company may record additional allowances based on trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Inventories Inventories are stated at the lower of cost or net realizable value (first-in, first-out) less an allowance for slow-moving inventory, expired inventory, and inventory obsolescence. Inventories consist entirely of finished goods and include internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, Orthopedic Implants) and osteo-biologics and regenerative tissue which include human allografts, substitute bone materials and tendons, as well as regenerative tissues and fluids (collectively, Biologics). The Company reviews the market value of inventories whenever events and circumstances indicate that the carrying value of inventories may not be recoverable from the estimated future sales price less cost of disposal and normal gross profit. In cases where the market values are less than the carrying value, a write-down is recognized equal to an amount by which the carrying value exceeds the net realizable value of inventories. During 2019, the Company revised its estimate for slow moving and obsolete inventory. As a result, the Company’s management increased the inventory reserve for slow moving and obsolescence by $2,093,859. In 2020 based on sales activity for the year and inventory on hand at the end of the year, the Company decreased the reserve $728,002, which is reflected in inventory and cost of revenues on the Company’s consolidated balance sheets and statements of operations, respectively. 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 Amortization Period Computer equipment 3 years Furniture and fixtures 3 years Office equipment 3 years Software 3 years Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed. A gain is recorded when consideration received is more than the disposed asset’s cost, net of depreciation, and a loss is recorded when consideration received is less than the disposed asset’s cost, net of depreciation. Long-Lived Assets The Company reviews 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. For the years ended December 31, 2020 and 2019 an impairment charge of zero and $932,203 was recognized, respectively. ASU 350-30-35-18 indicates that an intangible asset that is not subject to amortization shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The Company’s 510(k) intangible asset has an indefinite life. The Company does not believe that triggering event has occurred as of December 31, 2020. 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 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. Some of the Company’s sales for Wholesale Cases are on a consignment basis with a third-party. When consigned, the revenue is not recorded until the device is implanted in a patient during surgery. In the Company’s industry, Retail Cases are typically sold at higher price points than Wholesale Cases, resulting in greater revenue and gross profit per Case. Year Ended December 31, 2020 December 31, 2019 Category Retail $ 19,092,800 $ 19,082,561 Wholesale 2,306,136 3,817,716 Total $ 21,398,936 $ 22,900,277 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 inventory, expired inventory, and inventory obsolescence. Income Taxes As a result of the CPM Acquisition, the Company became the sole managing member of CPM and as a result, began consolidating the financial results of CPM. CPM is treated as a disregarded entity for U.S. federal and most applicable state and local income tax purposes. As a disregarded entity, CPM is not subject to U.S. federal and most applicable state and local income tax purposes. Any taxable income or loss generated by CPM is included in the taxable income or loss of the Company. As a result of the Maxim Acquisition, the Company and Maxim will elect to file a consolidated tax return for the period after acquisition. The Company uses the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of December 31, 2020 and 2019, the Company had no liabilities for uncertain tax positions. The Company's policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law, and new authoritative rulings. Stock-Based Compensation Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For employee stock-based awards, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro-rata compensation expense is adjusted accordingly until such time the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. Recent Accounting Pronouncements The Company considers the applicability and impact of all ASUs issued, both effective and not yet effective. In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, “ Leases In January 2017, the FASB issued ASU 2017-04, “ Intangibles-Goodwill and Other” Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by the Company’s management to have a material impact on the Company's present or future consolidated financial statements. |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2020 | |
Property Plant And Equipment [Abstract] | |
Property and Equipment | Note 3. Property and Equipment Property and equipment consisted of the following at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Computer equipment and software $ 49,918 $ 51,303 Office equipment - 20,333 Property and equipment costs 49,918 71,636 Less: accumulated depreciation (32,127 ) (38,997 ) Property and equipment, net $ 17,791 $ 32,639 Depreciation expense for the year ended December 31, 2020 and 2019 was $35,605 and $25,653 respectively. Additionally, $42,476 of fully depreciated assets were retired during 2020. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 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: December 31, 2020 December 31, 2019 Amortization period (years) Intangible assets: Non-compete agreements $ - $ 61,766 2 510k product technology 704,380 704,380 Indefinite Customer relationships 555,819 555,819 11 Total intangible assets 1,260,199 1,321,965 Less: accumulated amortization (122,119 ) (115,345 ) Intangible assets, net 1,138,080 1,206,620 Goodwill $ 1,972,886 $ 1,972,886 Indefinite Amortization expense for the years ended December 31, 2020 and 2019 was $68,538 and $81,420 respectively. The Company’s intangible assets subject to amortization consist primarily of acquired non-compete agreements, and customer relationships. The following is a schedule by year of the Company’s future amortization expense related to the finite-live intangible assets as of December 31, 2020: Year Ended December 31, 2021 $ 50,532 2022 50,532 2023 50,532 2024 50,532 2025 50,532 Beyond 181,040 $ 433,700 The Company performed its annual goodwill impairment test by comparing the fair value of the reporting units with its carrying amount. The fair value of the reporting units was determined utilizing both a discounted cash flow and merger and acquisitions methodology in the conclusion of value. The fair value exceeded its carrying value for 2020. The carrying value exceeded its fair value and a goodwill impairment charge of $932,203 was recognized for 2019. |
Senior Secured Revolving Credit
Senior Secured Revolving Credit Facility | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Senior Secured Revolving Credit Facility | Note 5. Senior Secured Revolving Credit Facility On December 29, 2017, the Company became party to the RLOC with Amegy Bank. The RLOC established an asset-based senior secured revolving credit facility in the amount of $5,000,000. 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 and President initially personally guaranteed fifty percent (50%) of the outstanding RLOC amount. On September 21, 2018, the Company executed the First Amendment to the RLOC with Amegy Bank. The First Amendment (i) waived the Company’s events of default under the RLOC through the fiscal quarter ended September 30, 2018, and (ii) added a covenant that the Company achieve quarterly net income of $700,000 or more for the fiscal quarter ending on September 30, 2018. On November 19, 2018, the Company executed the Second Amendment to the RLOC with Amegy Bank. The Second Amendment (i) waived the Company’s events of default under the RLOC, (ii) On May 9, 2019, the Company executed the Third Amendment to the RLOC with Amegy Bank. Pursuant to the Third Amendment, Amegy Bank (i) waived the Company’s events of default under the RLOC, (ii) reduced the aggregate limit of the RLOC to $3,500,000, (iii) reduced the limit of credit card exposure to $500,000, (iv) reduced borrowing base component of Inventory to 30%, (v) 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 and (vi) rescinded the Loan Sweep Feature, requiring the Company to give notice of each requested loan by delivery of Advance Request to Amegy Bank. On December 18, 2019, the Company executed the Fourth Amendment to the RLOC with Amegy Bank. Pursuant to the Fourth Amendment, Amegy Bank (i) waived the Company’s events of default under the RLOC, (ii) reduced the aggregate limit of the RLOC to $2,750,000, (iii) reduced and limited the annual salary of the Company’s Chairman of the Board and President, Mr. Brooks, to not exceed $550,000, (iv) 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, (v) extended the termination date of the RLOC to May 4, 2020 and (vi) provides for our Chairman of the Board and President to personally guarantee one hundred percent (100%) of the outstanding RLOC amount. On May 21, 2020, the Company executed the Fifth Amendment to the RLOC with Amegy Bank. Pursuant to the Fifth Amendment, Amegy Bank (i) waived the Company’s events of default under the RLOC, (ii) 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, and (iii) extended the termination date of the RLOC until November 4, 2020. 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 NC 143, and $20,000 from RMI, in exchange for two promissory notes which are unsecured and bear interest at 0.25% per annum until May 6, 2022, the maturity date, and 10.0% per annum after the maturity date, if not paid in full. Principal and interest are due and payable on the maturity date, provided, however, any payment of principal and interest on the loans is subordinated to payment of all indebtedness under the RLOC. On November 12, 2020 the Company executed a Sixth Amendment to the RLOC with Amegy Bank, which extended the termination date of our RLOC to May 4, 2021. The Company was in compliance with all RLOC covenants as of December 31, 2020. The outstanding balance of the RLOC was $913,352 and $1,752,501 at December 31, 2020 and 2019, respectively. Interest expense incurred on the RLOC was $61,036 and $94,633 for the year ended December 31, 2020 and 2019, respectively, and is reflected in interest expense on the Company’s accompanying consolidated statements of operations. Accrued interest on the RLOC at December 31, 2020 and 2019 was $2,947 and $4,437, respectively, and is reflected in accrued expenses on the Company’s accompanying consolidated balance sheets. At December 31, 2020, the effective interest rate was calculated to be 4.60%. |
Notes Payable - Related Parties
Notes Payable - Related Parties | 12 Months Ended |
Dec. 31, 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 aggregate amount of $150,000 in exchange for Notes bearing ten percent (10%) interest per annum until December 31, 2016 (“Maturity Date”) and eighteen percent (18%) interest per annum for periods subsequent to the Maturity Date. The Notes remain outstanding and principal and interest are due and payable upon demand of the payee and at the holder’s sole discretion. The Notes’ holders have the right to convert all or any portion of the then unpaid principal and interest balance into shares of the Company’s Common Stock at a conversion price of $0.08 per share. On May 6, 2020, the Company borrowed $180,000 from NC 143 and $20,000 from RMI, in exchange for two promissory notes which are unsecured and bear interest at 0.25% per annum until May 6, 2022, the maturity date, and 10.0% per annum after the maturity date, if not paid in full. Principal and interest are due and payable on the maturity date, provided, however, any payment of principal and interest on the loans is subordinated to payment of all indebtedness under the RLOC. During the years ended December 31, 2020 and 2019, interest expense of $27,407 and $27,000, respectively, is reflected in interest expense on the Company’s accompanying consolidated statements of operations. As of December 31, 2020, and 2019, accrued interest was $113,503 and $86,096, respectively, which is reflected in accrued expenses on the Company’s accompanying consolidated balance sheets. |
Paycheck Protection Program Loa
Paycheck Protection Program Loan | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Paycheck Protection Program Loan | Note 7. Paycheck Protection Program Loan On April 11, 2020, the Company received approval from the SBA to fund the Company’s request for a PPP Loan created as part of the recently enacted CARES Act administered by the SBA. In connection with the PPP Loan, the Company has entered into a promissory note in the principal amount of $361,400. In accordance with the requirements of the CARES Act, the Company intends to use the proceeds from the PPP Loan primarily for payroll costs. The PPP Loan is scheduled to mature on April 11, 2022, has a 1.00% interest rate, and is subject to the terms and conditions applicable to all loans made pursuant to the PPP. The PPP Loan is reflected in short term liabilities in the Company’s accompanying consolidated balance sheets as the Company expects the PPP Loan will be forgiven effective during 2020. As of December 31, 2020, the Company incurred approximately $2,720 in accrued interest related to the PPP Loan, which is reflected in accrued expenses on the Company’s accompanying consolidated balance sheets. For the year ended December 31, 2020, the Company incurred approximately $2,720 in interest expense related to the PPP Loan, which is reflected in interest expense on the Company’s accompanying consolidated statements of operations. The Company did not incur interest expense related to the PPP Loan for the year ended December 31, 2019. |
Economic Injury Disaster Loan
Economic Injury Disaster Loan | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Economic Injury Disaster 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 EIDL assistance program in light of the impact of the COVID-19 pandemic on the Company’s business. Pursuant to the SBA Loan Agreement, the principal amount of the EIDL Loan was $150,000, with proceeds to be used for working capital purposes. Interest accrues at the rate of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginning May 12, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Loan Agreement. The EIDL Loan is reflected in long term liabilities in the Company’s accompanying consolidated balance sheets. In connection therewith, the Company received a $10,000 advance, which does not have to be repaid and is reflected as an offset in Selling, General, Administrative and Other Expenses in the Company’s accompanying consolidated statements of operations. EIDL Loan interest expense incurred was approximately $3,791 and zero for the years ended December 31, 2020 and 2019, respectively, and is reflected in interest expense on the Company’s accompanying consolidated statements of operations. Accrued interest on the EIDL Loan at December 31, 2020 and 2019 was $3,791 and zero, respectively, and is reflected in accrued expenses on the Company’s accompanying consolidated balance sheets. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 9. Commitments and Contingencies Operating Leases The Company leases office space under a noncancelable operating lease agreement, from a real estate investments company that is owned and controlled by the Company’s Chairman of the Board and President. This lease terminated December 31, 2017 with month-to-month renewals. The lease requires monthly payments of $14,000. Annual rent expense was approximately $168,000 and $168,000 for the years ended December 31, 2020 and 2019, and is included in selling, general, administrative and other expenses on the Company’s accompanying consolidated statement of operations. The Company leases office equipment under two noncancelable operating lease agreements which expire March 2021 and March 2024. In aggregate, these office equipment leases require monthly payments of approximately $849. Rent expense for the equipment leases totaled approximately $10,000 and $10,000 for the years ended December 31, 2020 and 2019, respectively, and is included in selling, general, administrative and other expenses on the Company’s accompanying consolidated statement of operations. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2020: Year Ended December 31, 2021 $ 7,749 2022 7,261 2023 7,261 2024 1,210 2025 - $ 23,481 |
Stockholders' Equity
Stockholders' Equity | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders Equity Deficit [Abstract] | |
Stockholders' Equity | Note 10. Stockholders’ Equity The 2018 Equity Plan is the Company’s stock-based compensation plan which the Company’s Board adopted on April 5, 2017, and subsequently amended and restated on December 13, 2018. The 2018 Equity Plan provides for the granting of equity awards, including qualified incentive and non-qualified stock options, stock appreciation awards, and restricted stock awards to employees, directors, consultants, and advisors. Awards granted pursuant to the 2018 Equity Plan are subject to a vesting schedule set forth in individual agreements. 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 stock compensation expense 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. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to the Company’s product advisory board members, certain key employees, and marketing representatives: Assumptions For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Expected term (years) - 10.0 Expected volatility 0.00 % 105.35 - 118.52% Weighted-average volatility 0.00 % 108.52 % Risk-free interest rate 0.000 % 2.670 % Dividend yield 0.0 % 0.0 % Expected forfeiture rate n/a n/a Non-Qualified Stock Option Awards For the years ended December 31, 2020 and 2019, the Board granted zero and 1,650,000, respectively, of non-qualified stock option awards (“NQSO”) to the Company’s Scientific Advisory Board members, certain key employees and marketing representatives. For the year ended December 31, 2020 and December 31, 2019, the Company amortized $553,184 and $627,678 relating to the vesting of NQSOs, which is included in selling, general, administrative, and other expenses on the Company’s accompanying consolidated statement of operations. The Company will recognize $315,165 as an expense in future periods as the NQSOs vest. The Company recognizes stock compensation expense on a straight-line basis over the requisite service period for each award, which are subject to a vesting schedule as set forth in individual agreements. A summary of the Company’s stock option activity during the year ended December 31, 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 (753,333 ) — Expired (600,000 ) — Balance outstanding at December 31, 2020 2,595,000 $ 0.65 5.92 $ 56,000 Exercisable at December 31, 2020 1,663,333 $ 0.58 4.81 $ 56,000 Restricted Common Stock The non-vested restricted stock awards (“RSAs”), as of December 31, 2020, were granted to the Company’s Board members as compensation. These awards vest only upon: (i) the occurrence of one of the Accelerating Events: (a) a Change in Control (as defined in RSA Agreement); or (b) listing of the Company’s Common Stock on either NYSE or NASDAQ Stock Market; and (ii) the director’s delivery to the Company of a Notice of Acceleration of Vesting (as defined in RSA Agreement), within the Acceleration Notice Period (as defined in RSA Agreement). As of December 31, 2020, it was not probable that the performance conditions on the outstanding options would be met, therefore, no expense has been recorded for the years ended December 31, 2020 and 2019. The following table summarizes the RSAs activity for the year ended December 31, 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, December 31, 2020 2,902,892 $ 1,382,800 $ 0.48 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 11. Income Taxes The Company began consolidating the financial results of CPM effective January 1, 2016, when the Company became the sole managing member of CPM. CPM is treated as a disregarded entity for U.S. federal and most applicable state and local income taxes. As a disregarded entity, CPM is not subject to U.S. federal and certain state and local income taxes. Beginning January 1, 2019, taxable income or loss generated by CPM is included in its taxable income or loss of the Company. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes. The components of income tax expense (benefit) are as follows: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Current: Federal $ - $ - State 18,993 20,092 18,993 20,092 Deferred: Federal - 760,993 State - - - 760,993 Total Income tax expense $ 18,993 $ 781,085 Significant components of the Company’s deferred income tax assets and liabilities are as follows: December 31, 2020 December 31, 2019 Deferred tax assets: Net operating loss carryforward $ 786,751 $ 373,033 Accounts receivable 165,431 282,088 Compensation 480,774 364,605 Inventory 588,966 734,524 Other 5,083 - Total deferred tax assets 2,027,005 1,754,250 Deferred tax liabilities: Intangibles (206,723 ) (218,427 ) Property and equipment (3,736 ) (6,239 ) Total deferred tax liabilities (210,459 ) (224,666 ) Deferred tax assets, net 1,816,546 1,529,584 Valuation allowance: Beginning of year (1,529,584 ) - Increase during year (286,962 ) (1,529,584 ) Ending balance (1,816,546 ) (1,529,584 ) Net deferred tax asset $ - $ - A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. The Company recorded a valuation allowance in 2020 due to the uncertainty of realization. Management believes that based upon the history of losses that the Company has incurred to date and its projection of future taxable operating income for the foreseeable future, it is more likely than not that the Company will not be able to realize the tax benefit associated with the deferred tax assets. The valuation allowance established during the year ended December 31, 2020 was $1,816,546 At December 31, 2020, the Company estimates it has approximately $3,746,433 of net operating loss carryforwards of which $899,331 will expire during 2021 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 unrecognized tax positions. As of December 31, 2020, the Company’s tax years 2017 through 2019 remain open for IRS audit. The Company has not received a notice of audit from the IRS for any of the open tax years. A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Statutory U.S. federal income tax rate 21.0 % 21.0 % Other reconciling items 4.2 % 0.9 % Permanent differences 0.0 % 8.2 % State income taxes, net of federal tax benefit -1.3 % -0.6 % Deferred tax asset valuation allowace -25.6 % -60.3 % Effective income tax rate -1.7 % -30.8 % Our effective income tax rates for the years ended December 31, 2020 and 2019 were -1.7% and -30.8%, respectively. The decrease between years is driven by the valuation allowance allocated to the deferred tax asset for the current period. |
Concentrations
Concentrations | 12 Months Ended |
Dec. 31, 2020 | |
Nature Of Operations And Going Concern [Abstract] | |
Concentrations | Note 12. Concentrations Concentration of Revenues, Accounts Receivable and Suppliers For the years ended December 31, 2020 and 2019, the following significant customers had an individual percentage of total revenue of approximately ten percent (10%) or greater: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Top customer 12.63 % 6.08 % Totals 12.63 % 6.08 % There were no customers with a concentration of accounts receivable over 10% as of December 31, 2020 or 2019. For the years ended December 31, 2020 and 2019, the following significant suppliers represented ten percent (10%) or greater of goods purchased: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Supplier 1 25.60 % 21.60 % Supplier 2 (Related party) 6.90 % 12.80 % Totals 32.50 % 34.40 % |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 13. 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 NCE, LP, a real estate investment company that is owned and controlled by Mr. Brooks. The Company’s lease arrangement includes (1) the lease acquired pursuant to the CPM Acquisition effective January 1, 2013 and (2) a lease effective July 14, 2017 entered-into to support the Company’s relocation of its Fort Worth, Texas corporate offices to CPM’s executive offices. Both leases terminated December 31, 2017, with month-to-month renewals thereafter. For the year ended December 31, 2020 and 2019, the Company paid approximately $168,000 and $168,000 in rent expense, which is reflected in selling, general, administrative, and other expenses in the Company’s accompanying consolidated statements of operations. AmBio Contract The Company engaged AmBio, a Texas licensed PEO, to provide payroll processing, employee benefit administration, and related human capital services effective January 1, 2017. Mr. Brooks owns and controls AmBio. As of December 31, 2020, AmBio operations support approximately 44 FTEs. Of those 44 FTEs, 37 FTEs directly support the Company, 6 FTEs support the operations of other companies and the Company shares 1 FTE with other companies. As of December 31, 2020, and December 31, 2019, the Company owed amounts to AmBio of approximately $154,051 and $169,944, respectively, which is reflected in the accounts payable on the Company’s accompanying consolidated balance sheets. For the year ended December 31, 2020, and 2019, the Company paid approximately $172,221 and $212,045, respectively, to AmBio in administrative fees, which is reflected in selling, general, administrative, and other expenses in the Company’s accompanying 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 wholesale basis, commissions earned and paid, and shared-service fee arrangements. MedUSA Group, LLC MedUSA is a sub-distributor owned and controlled by Mr. Brooks and Mr. Reeg. During the years ended December 31, 2020 and 2019, the Company: • sold Orthopedic Implants and Biologics products to MedUSA in the amounts of approximately $29,822 and $796,430, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; • purchased approximately zero and $31, respectively, of Orthopedic Implants, medical instruments, and Biologics from MedUSA, which is reflected in inventories, net of allowance in the Company’s accompanying consolidated balance sheets; and • incurred approximately $3,527,783 and $2,462,783, respectively, in commission costs, which are reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2020, and December 31, 2019, the Company had outstanding balances due from MedUSA of approximately $398,151 and $555,421, respectively. These amounts are reflected in accounts receivable, net of allowance in the Company’s accompanying consolidated balance sheets. As of December 31, 2020, the Company had no outstanding balances owed to MedUSA. As of December 31, 2019, the Company had no outstanding balances owed to MedUSA, which was reflected in accounts payable in the Company’s accompanying consolidated balance sheets. Payment terms per the stocking and distribution agreement with MedUSA are 30 days from receipt of invoice. Texas Overlord, LLC Overlord is an investment holding-company owned and controlled by Mr. Brooks. During the years ended December 31, 2020 and 2019, the Company: • purchased approximately zero and $24,967, respectively, of Orthopedic Implants, medical instruments, and Biologics from Overlord, which is reflected in inventories, net of allowance on the Company’s accompanying consolidated balance sheets; and • incurred approximately $190,000 and $165,000, respectively, in commission costs to Overlord, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2020, and December 31, 2019, the Company had no outstanding balances due from Overlord. As of December 31, 2020, and December 31, 2019, the Company had no outstanding balances owed to Overlord. N.B.M.J., Inc. NBMJ is a durable medical equipment, wound care, and surgical supplies distributor owned and controlled by Mr. Brooks. During the years ended December 31, 2020 and 2019, the Company sold Biologics products to NBMJ in the amounts of approximately $24,708 and $443,056, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; As of December 31, 2020, and December 31, 2019, the Company had no outstanding balances due from NBMJ. Bass Bone and Spine Specialists Bass operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks. During the years ended December 31, 2020 and 2019, the Company: • sold Orthopedic Implants and Biologics products to Bass in the amounts of approximately $81,350 and $113,473, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations; • incurred approximately $16,885 and $80,272, respectively, in commission costs to Bass, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. As of December 31, 2020, and December 31, 2019, the Company has outstanding balances due from Bass of approximately $20,117 and $7,149, respectively. These amounts are reflected in accounts receivable, net of allowance in the Company’s accompanying consolidated balance sheets. Payment terms per the stocking and distribution agreement are 30 days from receipt of invoice. Sintu, LLC Sintu operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks. During the years ended December 31, 2020 and 2019, the Company: incurred approximately $575,918 and $467,195, respectively, in commission costs to Sintu, which is reflected in commissions in the Company’s accompanying consolidated statements of operations. Tiger Orthopedics, LLC Tiger operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks. During the years ended December 31, 2020 and 2019, the Company sold Orthopedic Implants and Biologics products to Tiger in the amounts of approximately $39,922 and $283,435, respectively, which is reflected in net revenues in the Company’s accompanying consolidated statements of operations. As of December 31, 2020, and December 31, 2019, the Company has outstanding balances due from Tiger of approximately zero and $30,525, respectively. These amounts are reflected in accounts receivable, net of allowance in the Company’s accompanying consolidated balance sheets. Payment terms per the stocking and distribution agreement are 30 days from receipt of invoice. Modal Manufacturing, LLC Modal is a manufacturer of medical devices owned and controlled by Mr. Brooks. During the years ended December 31, 2020 and 2019, the Company purchased approximately $508,597 and $1,082,643 respectively, in Orthopedic Implants and medical instruments from Modal, which is reflected within inventories, net of allowance on the Company’s accompanying consolidated balance sheets. As of December 31, 2020, and 2019, the Company had outstanding balances due from Modal of approximately zero and $40,700, respectively. This is reflected in accounts receivable in the Company’s accompanying audited consolidated balance sheets. Payment terms per the stocking and distribution agreement are 30 days from receipt of invoice. As of December 31, 2020, the Company owes Modal a balance of $417,897. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 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 March 25, 2020, the date the financial statements were available to be issued. Severe Weather Conditions . During February 2021, the state of Texas experienced record-breaking winter weather which resulted in dangerous road conditions, widespread power outages, water outages and contamination of the water supply, which caused significant disruptions through-out Texas, including the Company’s corporate office and distribution center for several days. The Company’s executive management team immediately focused on the health and wellbeing of the Company’s employees, while also working to minimize the impact on its customers. The Company resumed full operations on March 1, 2021 and are currently working to address the Cases, sales support, and administrative functions backlog. Generally, surgical cases have been rescheduled to subsequent weeks. (For more information, see Item 1A. “Risk Factors—Risks Related to Our Business and Industry”). The Company’s management concluded there are no other material events or transactions for potential recognition or disclosure. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Principles of Consolidation | Principles of Consolidation The 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 consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (GAAP), requires the Company’s management to make estimates and assumptions that affect the Company’s reported amounts in the consolidated financial statements. Actual results could differ from those estimates. Significant estimates on the accompanying consolidated financial statements include the allowances for doubtful accounts, valuation of inventories, the Company’s effective income tax rate and the fair value calculations of stock-based compensation, goodwill, finite lived intangibles and the earn-out liability. |
Segment Reporting | Segment Reporting In accordance with Accounting Standards Update (“ASU”) No. 280, “Segment Reporting,” the Company uses the management approach for determining its reportable segments. The management approach is based upon the way that management reviews performance and allocates resources. The Company’s Chief Executive Officer serves as the Company’s chief operating decision maker, and his management team reviews operating results on a consolidated basis for purposes of allocating resources and evaluating the financial performance of the Company. The Company has integrated the operations of both CPM and Maxim. Accordingly, the Company has determined that it has one operating segment and, therefore, one reporting segment. |
Reclassification | Reclassification 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 consolidated balance sheets. Long term accounts receivable reflects Cases where the patient has obtained a letter of protection, (“LOP”). A LOP is a contract that provides that the medical providers will be paid from any proceeds received from settlement of litigation of the underlying cause of action with respect to the event that necessitated medical goods and services. Once the medical provider receives payment, then the medical provider pays the Company’s invoice which payment is generally greater than 365 days from date of service. The LOP provides medical providers with greater certainty of full payment. This reclassification had no effect on the previously reported total assets or net loss. |
Loss Per Common Share | Loss Per Common Share Loss per common share, basic is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of 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 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 years ended December 31, 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. (See Note 10, “Stockholders’ Equity” for the terms and conditions of restricted stock). For the year ended December 31, 2020, restricted common stock shares and common stock equivalents of 2,245,762 have been excluded from diluted earnings per share because to include them would have been antidilutive (See Note 10, “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, the Company initially recorded a $19,244,543 liability related to the Earn-Out portion of the purchase consideration. The Company has classified the Earn-Out liability as a Level 3 liability and the fair value of the Earn-Out liability will be evaluated each reporting period and changes in its fair value will be included in the Company’s earnings. The Earn-Out payments are based on the financial performance of the Company between the period of January 1, 2018, and December 31, 2034. The base amount of the Earn-Out is $16,000,000 with an additional bonus payment of $10,000,000. The payments of the base and bonus Earn-Out amounts are subject to the Company meeting certain earnings thresholds as detailed in the CPM Acquisition Agreement. The Earn-Out payments during the Earn-Out period specified above, ranges from $0 to $26,000,000. The fair value of the Earn-Out liability was calculated using the Monte Carlo simulation, which was then applied to estimated Earn-Out payments with a discount rate of three percent (3%). To determine the fair value of the Earn-Out liability, the Company’s management evaluates assumptions that require significant judgement. Significant assumptions used for estimating the Earn-Out liability included: (i) EBITDA margins increasing from one percent (1%) to ten percent (10%) over the next four years; and (ii) revenue growth of approximately five percent (5%) over the next five years, and approximately two percent (2%) thereafter. The Earn-Out liability, which represented contingent consideration associated with the CPM Acquisition, is recorded as a liability. This liability is subject to re-measurement to fair value at each reporting date until the contingency is resolved and the changes in fair value are recognized in the consolidated statements of operations at each reporting period. For the year ended December 31, 2020 and 2019, the Company has determined the earnings threshold as detailed in the CPM Acquisition Agreement was not met and therefore no payments for either the base or bonus Earn-Out tranches would be achieved, based on the Company’s 2020 and 2019 financial performance. The Earn-Out was remeasured to fair value under the probability weighted income approach. As a result, the fair value of the Earn-Out liability was increased by $290,635 from $11,645,365 to $11,936,000 in 2020 and reduced by $1,936,164 from $13,581,529 to $11,645,365 in 2019 and reflected as “Change in fair value of contingent purchase consideration” on our Consolidated Financial Statements. The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded values of notes payable approximate their respective fair values based upon their effective interest rates. |
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 December 31, 2020, and December 31, 2019. The Company’s cash is concentrated in one large financial institution. The amount of cash held at that financial institution may at times exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any financial institution losses from inception through December 31, 2020. As of December 31, 2020 and 2019, there were deposits of $761,671 and $599,309, respectively, which were greater than federally insured limits. |
Accounts Receivable and Allowances | Accounts Receivable and Allowances Accounts receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts receivable and an allowance for contractual discount pricing. Credit is extended to customers based on an evaluation of their financial condition, industry reputation, and other judgmental factors considered by the Company’s management. The Company generally does not require collateral or other security interest to support accounts receivable. Based on trends and specific factors, the customer’s credit terms may be modified, including required payment upon delivery. The Company performs regular on-going credit evaluations of its customers as deemed relevant. As events, trends, and circumstance warrant, the Company’s management estimates the amounts that are more likely than not to be uncollectible. These amounts are recognized as bad debt expense and are reflected within selling, general, administrative and other expenses on the Company’s accompanying consolidated statement of operations. When accounts are deemed uncollectible, they are often referred to the Company’s outside legal firm for litigation. Accounts deemed uncollectible are written-off in the period when the Company has exhausted its efforts to collect overdue and unpaid receivables or otherwise has evaluated other circumstances that indicate that the Company should abandon such efforts. Accounts deemed uncollectible are removed from the Company’s accounts receivable portfolio, with a corresponding offset to the allowance for doubtful accounts receivable. The Company may record additional allowances for doubtful accounts based on known trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. Specific allowances are re-evaluated and adjusted as additional facts and information become available. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received. The Company’s management estimates its allowance for contractual discount pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, the Company’s management uses assumptions and judgement, based on the best available facts and circumstances to record a specific allowance for the amounts due from those customers. The allowance is offset by a corresponding reduction to revenue. These specific allowances are re-evaluated, analyzed, and adjusted as additional information becomes available to determine the total amount of the allowance. The Company may record additional allowances based on trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value. |
Inventories | Inventories Inventories are stated at the lower of cost or net realizable value (first-in, first-out) less an allowance for slow-moving inventory, expired inventory, and inventory obsolescence. Inventories consist entirely of finished goods and include internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, Orthopedic Implants) and osteo-biologics and regenerative tissue which include human allografts, substitute bone materials and tendons, as well as regenerative tissues and fluids (collectively, Biologics). The Company reviews the market value of inventories whenever events and circumstances indicate that the carrying value of inventories may not be recoverable from the estimated future sales price less cost of disposal and normal gross profit. In cases where the market values are less than the carrying value, a write-down is recognized equal to an amount by which the carrying value exceeds the net realizable value of inventories. During 2019, the Company revised its estimate for slow moving and obsolete inventory. As a result, the Company’s management increased the inventory reserve for slow moving and obsolescence by $2,093,859. In 2020 based on sales activity for the year and inventory on hand at the end of the year, the Company decreased the reserve $728,002, which is reflected in inventory and cost of revenues on the Company’s consolidated balance sheets and statements of operations, respectively. |
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 Amortization Period Computer equipment 3 years Furniture and fixtures 3 years Office equipment 3 years Software 3 years Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed. A gain is recorded when consideration received is more than the disposed asset’s cost, net of depreciation, and a loss is recorded when consideration received is less than the disposed asset’s cost, net of depreciation. |
Long-Lived Assets | Long-Lived Assets The Company reviews 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. For the years ended December 31, 2020 and 2019 an impairment charge of zero and $932,203 was recognized, respectively. ASU 350-30-35-18 indicates that an intangible asset that is not subject to amortization shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The Company’s 510(k) intangible asset has an indefinite life. The Company does not believe that triggering event has occurred as of December 31, 2020. 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 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. Some of the Company’s sales for Wholesale Cases are on a consignment basis with a third-party. When consigned, the revenue is not recorded until the device is implanted in a patient during surgery. In the Company’s industry, Retail Cases are typically sold at higher price points than Wholesale Cases, resulting in greater revenue and gross profit per Case. Year Ended December 31, 2020 December 31, 2019 Category Retail $ 19,092,800 $ 19,082,561 Wholesale 2,306,136 3,817,716 Total $ 21,398,936 $ 22,900,277 |
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 inventory, expired inventory, and inventory obsolescence. |
Income Taxes | Income Taxes As a result of the CPM Acquisition, the Company became the sole managing member of CPM and as a result, began consolidating the financial results of CPM. CPM is treated as a disregarded entity for U.S. federal and most applicable state and local income tax purposes. As a disregarded entity, CPM is not subject to U.S. federal and most applicable state and local income tax purposes. Any taxable income or loss generated by CPM is included in the taxable income or loss of the Company. As a result of the Maxim Acquisition, the Company and Maxim will elect to file a consolidated tax return for the period after acquisition. The Company uses the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. The Company has deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income. The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of December 31, 2020 and 2019, the Company had no liabilities for uncertain tax positions. The Company's policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law, and new authoritative rulings. |
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For employee stock-based awards, the Company calculates the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro-rata compensation expense is adjusted accordingly until such time the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements The Company considers the applicability and impact of all ASUs issued, both effective and not yet effective. In February 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU No. 2016-02, “ Leases In January 2017, the FASB issued ASU 2017-04, “ Intangibles-Goodwill and Other” Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by the Company’s management to have a material impact on the Company's present or future consolidated financial statements. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Estimated Useful Lives of Assets | Category Amortization Period Computer equipment 3 years Furniture and fixtures 3 years Office equipment 3 years Software 3 years |
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. Some of the Company’s sales for Wholesale Cases are on a consignment basis with a third-party. When consigned, the revenue is not recorded until the device is implanted in a patient during surgery. In the Company’s industry, Retail Cases are typically sold at higher price points than Wholesale Cases, resulting in greater revenue and gross profit per Case. Year Ended December 31, 2020 December 31, 2019 Category Retail $ 19,092,800 $ 19,082,561 Wholesale 2,306,136 3,817,716 Total $ 21,398,936 $ 22,900,277 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property Plant And Equipment [Abstract] | |
Summary of Property and Equipment | Property and equipment consisted of the following at December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Computer equipment and software $ 49,918 $ 51,303 Office equipment - 20,333 Property and equipment costs 49,918 71,636 Less: accumulated depreciation (32,127 ) (38,997 ) Property and equipment, net $ 17,791 $ 32,639 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 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: December 31, 2020 December 31, 2019 Amortization period (years) Intangible assets: Non-compete agreements $ - $ 61,766 2 510k product technology 704,380 704,380 Indefinite Customer relationships 555,819 555,819 11 Total intangible assets 1,260,199 1,321,965 Less: accumulated amortization (122,119 ) (115,345 ) Intangible assets, net 1,138,080 1,206,620 Goodwill $ 1,972,886 $ 1,972,886 Indefinite |
Schedule of Future Amortization Expense Related to Finite-Lived Intangible Assets | The following is a schedule by year of the Company’s future amortization expense related to the finite-live intangible assets as of December 31, 2020: Year Ended December 31, 2021 $ 50,532 2022 50,532 2023 50,532 2024 50,532 2025 50,532 Beyond 181,040 $ 433,700 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Commitments And Contingencies Disclosure [Abstract] | |
Summary of Operating Leases | The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 2020: Year Ended December 31, 2021 $ 7,749 2022 7,261 2023 7,261 2024 1,210 2025 - $ 23,481 |
Stockholders' Equity (Tables)
Stockholders' Equity (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Stockholders Equity Deficit Tables [Abstract] | |
Summary of Compensation Expense for Stock Options Granted to Board Members, Employees and Marketing Representatives | The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted to the Company’s product advisory board members, certain key employees, and marketing representatives: Assumptions For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Expected term (years) - 10.0 Expected volatility 0.00 % 105.35 - 118.52% Weighted-average volatility 0.00 % 108.52 % Risk-free interest rate 0.000 % 2.670 % Dividend yield 0.0 % 0.0 % Expected forfeiture rate n/a n/a |
Summary of Stock Option Activity | A summary of the Company’s stock option activity during the year ended December 31, 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 (753,333 ) — Expired (600,000 ) — Balance outstanding at December 31, 2020 2,595,000 $ 0.65 5.92 $ 56,000 Exercisable at December 31, 2020 1,663,333 $ 0.58 4.81 $ 56,000 |
Summary of Restricted Stock Awards Activity | The following table summarizes the RSAs activity for the year ended December 31, 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, December 31, 2020 2,902,892 $ 1,382,800 $ 0.48 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Components of Income Tax Expense (Benefit) | The components of income tax expense (benefit) are as follows: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Current: Federal $ - $ - State 18,993 20,092 18,993 20,092 Deferred: Federal - 760,993 State - - - 760,993 Total Income tax expense $ 18,993 $ 781,085 |
Significant Components of Deferred Income Tax Assets and Liabilities | Significant components of the Company’s deferred income tax assets and liabilities are as follows: December 31, 2020 December 31, 2019 Deferred tax assets: Net operating loss carryforward $ 786,751 $ 373,033 Accounts receivable 165,431 282,088 Compensation 480,774 364,605 Inventory 588,966 734,524 Other 5,083 - Total deferred tax assets 2,027,005 1,754,250 Deferred tax liabilities: Intangibles (206,723 ) (218,427 ) Property and equipment (3,736 ) (6,239 ) Total deferred tax liabilities (210,459 ) (224,666 ) Deferred tax assets, net 1,816,546 1,529,584 Valuation allowance: Beginning of year (1,529,584 ) - Increase during year (286,962 ) (1,529,584 ) Ending balance (1,816,546 ) (1,529,584 ) Net deferred tax asset $ - $ - |
Reconciliation of Income Tax Computed at U.S. Statutory Rate to Effective Income Tax Rate | A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Statutory U.S. federal income tax rate 21.0 % 21.0 % Other reconciling items 4.2 % 0.9 % Permanent differences 0.0 % 8.2 % State income taxes, net of federal tax benefit -1.3 % -0.6 % Deferred tax asset valuation allowace -25.6 % -60.3 % Effective income tax rate -1.7 % -30.8 % |
Concentrations (Tables)
Concentrations (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Revenues [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the years ended December 31, 2020 and 2019, the following significant customers had an individual percentage of total revenue of approximately ten percent (10%) or greater: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Top customer 12.63 % 6.08 % Totals 12.63 % 6.08 % |
Goods Purchased [Member] | |
Concentration Risk [Line Items] | |
Concentration of Revenues, Accounts Receivable and Suppliers | For the years ended December 31, 2020 and 2019, the following significant suppliers represented ten percent (10%) or greater of goods purchased: For the Year Ended December 31, 2020 For the Year Ended December 31, 2019 Supplier 1 25.60 % 21.60 % Supplier 2 (Related party) 6.90 % 12.80 % Totals 32.50 % 34.40 % |
Nature of Operations (Details N
Nature of Operations (Details Narrative) - USD ($) | Aug. 01, 2018 | Dec. 31, 2017 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Nature Of Operations And Going Concern [Line Items] | |||||
Percentage of common stock issued | 61.40% | ||||
Percentage of common stock outstanding | 61.40% | ||||
Accumulated losses | $ 4,028,308 | $ 2,595,813 | |||
Stockholders' deficits | 2,112,841 | 1,222,133 | $ (1,466,684) | ||
Revenue declined as the result of competitive pressures | 1,501,341 | 3,441,761 | |||
Gross profit | 12,704,223 | 11,137,487 | |||
Increase in gross profit | $ 1,566,736 | ||||
Percentage of change in gross profit | 14.00% | ||||
Selling, general, administrative and other | $ 6,541,659 | 8,466,077 | |||
Increase (decrease) in selling, general, administrative, and other expenses | $ (1,924,418) | ||||
Percentage of change in selling, general, administrative, and other expenses | 23.00% | ||||
Net income (loss) | $ (1,432,495) | (3,316,495) | |||
Increase (decrease) in net loss | $ (1,884,000) | ||||
Percentage of change in net loss | 57.00% | ||||
Working capital | $ 5,372,651 | ||||
Cash and cash equivalents | 1,187,458 | $ 1,099,310 | |||
Debt collateral amount | $ 1,300,000 | ||||
CPM [Member] | |||||
Nature Of Operations And Going Concern [Line Items] | |||||
Date of acquisition agreement | Dec. 31, 2017 | ||||
Maxim Surgical, LLC [Member] | |||||
Nature Of Operations And Going Concern [Line Items] | |||||
Date of acquisition agreement | Aug. 1, 2018 |
Significant Accounting Polici_4
Significant Accounting Policies (Details Narrative) | 12 Months Ended | |||
Dec. 31, 2020USD ($)Segmentshares | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | Dec. 31, 2017USD ($) | |
Significant Accounting Policies [Line Items] | ||||
Number of operating segments | Segment | 1 | |||
Number of reportable segments | Segment | 1 | |||
Earn-out liability | $ 11,936,000 | $ 11,645,365 | $ 13,581,529 | |
Amount of earn-out liability increased/reduced | 290,635 | 1,936,164 | ||
Cash equivalents | 0 | 0 | ||
FDIC insurance limit | 250,000 | |||
Deposits greater than federally insured limit | 761,671 | 599,309 | ||
Goodwill impairment charge | 0 | 932,203 | ||
Liabilities for uncertain tax positions, current | 0 | 0 | ||
liabilities for uncertain tax positions, noncurrent | $ 0 | 0 | ||
ASU 2016-02 [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Change in Accounting Principle, Accounting Standards Update, Adopted [true false] | true | |||
Change in Accounting Principle, Accounting Standards Update, Adoption Date | Jan. 1, 2020 | |||
Change in Accounting Principle, Accounting Standards Update, Immaterial Effect [true false] | true | |||
ASU 2017-04 [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Change in Accounting Principle, Accounting Standards Update, Adopted [true false] | true | |||
Change in Accounting Principle, Accounting Standards Update, Adoption Date | Dec. 31, 2019 | |||
Cost of Revenue [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Inventory write-down | $ 728,002 | $ 2,093,859 | ||
CPM [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Earn-out liability | $ 19,244,543 | |||
Earn-out payment start date | Jan. 1, 2018 | |||
Earn-out payment end date | Dec. 31, 2034 | |||
Earn-out payment base amount | $ 16,000,000 | |||
Earn-out payment additional bonus amount | $ 10,000,000 | |||
Discount rate on fair value earn-out liability | 3.00% | |||
Estimated earn out liability growth period | 5 years | |||
Earn out liability revenue growth | 5.00% | |||
Earn out liability revenue growth thereafter | 2.00% | |||
CPM [Member] | Minimum [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Earn-out payment during earn-out period | $ 0 | |||
Average EBITDA margin included in earn-out liability | 1.00% | |||
Estimated earn out liability growth period | 4 years | |||
CPM [Member] | Maximum [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Earn-out payment during earn-out period | $ 26,000,000 | |||
Average EBITDA margin included in earn-out liability | 10.00% | |||
Restricted Common Stock Shares and Common Stock Equivalents [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Shares excluded from diluted earnings per share | shares | 2,245,762 |
Significant Accounting Polici_5
Significant Accounting Policies - Estimated Useful Lives of Assets (Details) | 12 Months Ended |
Dec. 31, 2020 | |
Computer equipment [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Furniture and fixtures [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Office equipment [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Software [Member] | |
Property Plant And Equipment [Line Items] | |
Estimated useful lives of the assets | 3 years |
Significant Accounting Polici_6
Significant Accounting Policies - Schedule of Revenue Differentiation (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Disaggregation Of Revenue [Line Items] | ||
Net revenues | $ 21,398,936 | $ 22,900,277 |
Retail [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Net revenues | 19,092,800 | 19,082,561 |
Wholesale [Member] | ||
Disaggregation Of Revenue [Line Items] | ||
Net revenues | $ 2,306,136 | $ 3,817,716 |
Property and Equipment - Summar
Property and Equipment - Summary of Property and Equipment (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | $ 49,918 | $ 71,636 |
Less: accumulated depreciation | (32,127) | (38,997) |
Property and equipment, net | 17,791 | 32,639 |
Computer Equipment and Software [Member] | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment costs | $ 49,918 | 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 ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Property Plant And Equipment [Abstract] | ||
Depreciation expense | $ 35,605 | $ 25,653 |
Fully depreciated assets retired | $ 42,476 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets - Schedule of Goodwill and Other Intangible Assets (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Intangible assets: | ||
Total intangible assets | $ 1,260,199 | $ 1,321,965 |
Less: accumulated amortization | (122,119) | (115,345) |
Intangible assets, net | 1,138,080 | 1,206,620 |
Goodwill | 1,972,886 | 1,972,886 |
510K 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 | |
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 ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Goodwill And Intangible Assets Disclosure [Abstract] | ||
Amortization expense | $ 68,538 | $ 81,420 |
Goodwill impairment charge | $ 0 | $ 932,203 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets - Schedule of Future Amortization Expense Related to Finite-Live Intangible Assets (Details) | Dec. 31, 2020USD ($) |
Goodwill And Intangible Assets Disclosure [Abstract] | |
2021 | $ 50,532 |
2022 | 50,532 |
2023 | 50,532 |
2024 | 50,532 |
2025 | 50,532 |
Beyond | 181,040 |
Finite-live intangible assets | $ 433,700 |
Senior Secured Revolving Cred_2
Senior Secured Revolving Credit Facility (Details Narrative) - USD ($) | Nov. 12, 2020 | May 21, 2020 | May 06, 2020 | Dec. 18, 2019 | May 09, 2019 | Nov. 19, 2018 | Dec. 31, 2017 | Dec. 29, 2017 | Mar. 31, 2020 | Dec. 31, 2019 | Sep. 30, 2019 | Jun. 30, 2019 | Mar. 31, 2019 | Dec. 31, 2018 | Sep. 30, 2018 | Sep. 30, 2020 | Dec. 31, 2020 | Dec. 31, 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 | |||||||||||||||||
Minimum net profit required for compliance | $ 25,000 | |||||||||||||||||
RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | Sixth Amendment [Member] | ||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||
Line of credit facility, expiration date | May 4, 2021 | |||||||||||||||||
CPM [Member] | ||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||
Date of acquisition agreement | Dec. 31, 2017 | |||||||||||||||||
CPM [Member] | RLOC [Member] | ZB, N.A. (d/b/a Amegy Bank) [Member] | ||||||||||||||||||
Debt Instrument [Line Items] | ||||||||||||||||||
Date of acquisition agreement | Dec. 29, 2017 | |||||||||||||||||
Line of credit maximum borrowing capacity | $ 5,000,000 | |||||||||||||||||
Percentage of guarantees of outstanding loan amount | 50.00% | |||||||||||||||||
Line of credit outstanding balance amount | $ 1,752,501 | $ 913,352 | $ 1,752,501 | |||||||||||||||
Interest expense | 61,036 | 94,633 | ||||||||||||||||
Accrued interest | 4,437 | $ 2,947 | $ 4,437 | |||||||||||||||
Effective interest rate | 4.60% | |||||||||||||||||
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 maximum borrowing capacity | $ 4,000,000 | |||||||||||||||||
Line of credit facility, expiration date | Nov. 4, 2019 | |||||||||||||||||
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 maximum borrowing capacity | $ 3,500,000 | |||||||||||||||||
Line of credit facility, expiration date | May 9, 2019 | |||||||||||||||||
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] | ||||||||||||||||||
Line of credit maximum borrowing capacity | $ 2,750,000 | |||||||||||||||||
Percentage of guarantees of outstanding loan amount | 100.00% | |||||||||||||||||
Line of credit facility, expiration date | May 4, 2020 | |||||||||||||||||
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 | Oct. 31, 2016 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2017 |
Debt Instrument [Line Items] | |||||
Interest expense on notes payable | $ 27,407 | $ 27,000 | |||
Accrued expenses [Member] | |||||
Debt Instrument [Line Items] | |||||
Accrued interest | $ 113,503 | $ 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 L_2
Paycheck Protection Program Loan (Details Narrative) - USD ($) | Apr. 11, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Accrued expenses [Member] | |||
Debt Instrument [Line Items] | |||
Accrued interest | $ 113,503 | $ 86,096 | |
Paycheck Protection Program [Member] | |||
Debt Instrument [Line Items] | |||
Interest expense | 2,720 | $ 0 | |
Paycheck Protection Program [Member] | Accrued expenses [Member] | |||
Debt Instrument [Line Items] | |||
Accrued interest | $ 2,720 | ||
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 Injury Disaster Loan (
Economic Injury Disaster Loan (Details Narrative) - USD ($) | May 12, 2020 | Dec. 31, 2020 | Dec. 31, 2019 |
Accrued expenses [Member] | |||
Debt Instrument [Line Items] | |||
Accrued interest | $ 113,503 | $ 86,096 | |
Economic Injury Disaster Loan Assistance Program [Member] | |||
Debt Instrument [Line Items] | |||
Interest expense | 3,791 | 0 | |
Economic Injury Disaster Loan Assistance Program [Member] | Accrued expenses [Member] | |||
Debt Instrument [Line Items] | |||
Accrued interest | $ 3,791 | $ 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 |
Commitments and Contingencies_2
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Commitments And Contingencies [Line Items] | ||
Lease termination date | Dec. 31, 2017 | |
Operating lease requires monthly payments | $ 14,000 | |
Office Equipment One [Member] | ||
Commitments And Contingencies [Line Items] | ||
Operating lease expiration month and year | 2021-03 | |
Office Equipment Two [Member] | ||
Commitments And Contingencies [Line Items] | ||
Operating lease expiration month and year | 2024-03 | |
Office Equipment Leases [Member] | ||
Commitments And Contingencies [Line Items] | ||
Operating lease requires monthly payments | $ 849 | |
Selling, General, Administrative and Other Expenses [Member] | ||
Commitments And Contingencies [Line Items] | ||
Rent expense | 168,000 | $ 168,000 |
Selling, General, Administrative and Other Expenses [Member] | Office Equipment Leases [Member] | ||
Commitments And Contingencies [Line Items] | ||
Rent expense | $ 10,000 | $ 10,000 |
Commitments and Contingencies -
Commitments and Contingencies - Summary of Operating Leases (Details) | Dec. 31, 2020USD ($) |
Commitments And Contingencies Disclosure [Abstract] | |
2021 | $ 7,749 |
2022 | 7,261 |
2023 | 7,261 |
2024 | 1,210 |
Total | $ 23,481 |
Stockholders' Equity - Summary
Stockholders' Equity - Summary of Compensation Expense for Stock Options Granted to Board Members, Employees And Marketing Representatives (Details) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | ||
Expected term (years) | 0 years | 10 years |
Expected volatility | 0.00% | |
Expected volatility, minimum | 105.35% | |
Expected volatility, maximum | 118.52% | |
Weighted-average volatility | 0.00% | 108.52% |
Risk-free interest rate | 0.00% | 2.67% |
Dividend yield | 0.00% | 0.00% |
Stockholders' Equity (Details N
Stockholders' Equity (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Non-Qualified Stock Option Awards [Member] | ||
Class Of Stock [Line Items] | ||
Stock options, granted | 0 | 1,650,000 |
Unrecognized compensation expenses on stock options | $ 315,165 | |
Non-Qualified Stock Option Awards [Member] | Selling, General, Administrative and Other Expenses [Member] | ||
Class Of Stock [Line Items] | ||
Share-based compensation expense | $ 553,184 | 627,678 |
Restricted Common Stock [Member] | ||
Class Of Stock [Line Items] | ||
Share-based compensation expense | $ 0 | $ 0 |
Stockholders' Equity - Summar_2
Stockholders' Equity - Summary of Stock Option Activity (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
No. of Shares, Abstract | ||
No. of Shares, Beginning Balance | 3,948,333 | |
Forfeited, No. of Shares | (753,333) | |
Expired, No. of Shares | (600,000) | |
No. of Shares, Ending Balance | 2,595,000 | 3,948,333 |
Exercisable, No. of Shares | 1,663,333 | |
Weighted Average Exercise Price, Abstract | ||
Weighted Average Exercise Price, Beginning Balance | $ 0.61 | |
Weighted Average Exercise Price, Ending Balance | 0.65 | $ 0.61 |
Exercisable, Weighted Average Exercise Price | $ 0.58 | |
Weighted Average Remaining Contractual Term, Abstract | ||
Weighted Average Remaining Contractual Term, Balance outstanding | 5 years 11 months 1 day | 6 years 29 days |
Weighted Average Remaining Contractual Term, Exercisable | 4 years 9 months 21 days | |
Aggregate Intrinsic Value, Abstract | ||
Aggregate Intrinsic Value, Balance outstanding | $ 56,000 | $ 157,000 |
Aggregate Intrinsic Value, Exercisable | $ 56,000 |
Stockholders' Equity - Summar_3
Stockholders' Equity - Summary of Restricted Stock Awards Activity (Details) - Restricted Stock Awards [Member] | 12 Months Ended |
Dec. 31, 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, Balance | 2,902,892 |
Number of Shares, Granted | 0 |
Number of Shares, Vested | 0 |
Number of Shares, Forfeited | 0 |
Number of Shares, Non-vested, Balance | 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, Balance | $ | $ 1,382,800 |
Fair Value, Non-vested, Balance | $ | $ 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, Balance | $ / shares | $ 0.48 |
Weighted Average Grant Date Fair Value, Non-vested, Balance | $ / shares | $ 0.48 |
Income Taxes - Components of In
Income Taxes - Components of Income Tax Expense (Benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Current: | ||
Federal | $ 0 | $ 0 |
State | 18,993 | 20,092 |
Total | 18,993 | 20,092 |
Deferred: | ||
Federal | 0 | 760,993 |
State | 0 | 0 |
Total | 0 | 760,993 |
Total Income tax expense | $ 18,993 | $ 781,085 |
Income Taxes - Significant Comp
Income Taxes - Significant Components of Deferred Income Tax Assets and Liabilities (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Deferred tax assets: | ||
Net operating loss carryforward | $ 786,751 | $ 373,033 |
Accounts receivable | 165,431 | 282,088 |
Compensation | 480,774 | 364,605 |
Inventory | 588,966 | 734,524 |
Other | 5,083 | 0 |
Total deferred tax assets | 2,027,005 | 1,754,250 |
Deferred tax liabilities: | ||
Intangibles | (206,723) | (218,427) |
Property and equipment | (3,736) | (6,239) |
Total deferred tax liabilities | (210,459) | (224,666) |
Deferred tax assets, net | 1,816,546 | 1,529,584 |
Valuation allowance: | ||
Beginning of year | (1,529,584) | 0 |
Increase during year | (286,962) | (1,529,584) |
Ending balance | (1,816,546) | (1,529,584) |
Net deferred tax asset | $ 0 | $ 0 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Operating Loss Carryforwards [Line Items] | |||
Valuation allowance | $ 1,816,546 | $ 1,529,584 | $ 0 |
Net operating loss carryforwards | $ 3,746,433 | ||
Net operating loss carryforwards earliest expiration year | 2021 | ||
Net operating loss carryforwards latest expiration year | 2037 | ||
Open tax year | 2017 2018 2019 | ||
Effective income tax rates | (1.70%) | (30.80%) | |
Operating Carryforwards Expiration Date During 2021 through 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) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Statutory U.S. federal income tax rate | 21.00% | 21.00% |
Other reconciling items | 4.20% | 0.90% |
Permanent differences | 0.00% | 8.20% |
State income taxes, net of federal tax benefit | (1.30%) | (0.60%) |
Deferred tax asset valuation allowace | (25.60%) | (60.30%) |
Effective income tax rate | (1.70%) | (30.80%) |
Concentrations - Significant Cu
Concentrations - Significant Customers with Individual Percentage of Total Revenues Equaling Ten Percent (10%) or Greater (Details) - Revenues [Member] - Customer Concentration Risk [Member] | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 12.63% | 6.08% |
Top Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 12.63% | 6.08% |
Concentrations - Significant _2
Concentrations - Significant Customers with Concentration of Accounts Receivable Representing Ten Percent (10%) or Greater of Accounts Receivable (Parenthetical) (Details) - Accounts Receivable [Member] - Customer Concentration Risk [Member] | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 0.00% | 0.00% |
Top Customer [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 0.00% | 0.00% |
Concentrations - Significant _3
Concentrations - Significant Customers with Concentration of Accounts Receivable Representing Ten Percent (10%) or Greater of Accounts Receivable (Details) - Goods Purchased [Member] - Supplier Concentration Risk [Member] | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 32.50% | 34.40% |
Supplier 1 [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 25.60% | 21.60% |
Supplier 2 - Related Party [Member] | ||
Concentration Risk [Line Items] | ||
Concentration risk, percentage | 6.90% | 12.80% |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 12 Months Ended | |
Dec. 31, 2020USD ($)ft²FullTimeEquivalent | Dec. 31, 2019USD ($) | |
Related Party Transaction [Line Items] | ||
Lease termination date | Dec. 31, 2017 | |
1565 North Central Expressway, LP [Member] | ||
Related Party Transaction [Line Items] | ||
Area of leased property | ft² | 11,500 | |
Lease termination date | Dec. 31, 2017 | |
1565 North Central Expressway, LP [Member] | Selling, General, Administrative and Other Expenses [Member] | ||
Related Party Transaction [Line Items] | ||
Rent expense | $ 168,000 | $ 168,000 |
AmBio [Member] | ||
Related Party Transaction [Line Items] | ||
Number of full time equivalents | FullTimeEquivalent | 44 | |
Number of full time equivalents directly support company | FullTimeEquivalent | 37 | |
Number of full time equivalents support operations of other companies | FullTimeEquivalent | 6 | |
Number of full time equivalents shared between company and other companies | FullTimeEquivalent | 1 | |
AmBio [Member] | Account Payables [Member] | ||
Related Party Transaction [Line Items] | ||
Due to related parties | $ 154,051 | 169,944 |
AmBio [Member] | Selling, General, Administrative and Other Expenses [Member] | ||
Related Party Transaction [Line Items] | ||
Administrative fees | 172,221 | 212,045 |
MedUSA Group, LLC [Member] | ||
Related Party Transaction [Line Items] | ||
Net revenues from related parties | 29,822 | 796,430 |
Purchases from related parties | 0 | 31 |
MedUSA Group, LLC [Member] | Account Payables [Member] | ||
Related Party Transaction [Line Items] | ||
Due to related parties | 0 | 0 |
MedUSA Group, LLC [Member] | Account Receivables [Member] | ||
Related Party Transaction [Line Items] | ||
Due from related parties | 398,151 | 555,421 |
MedUSA Group, LLC [Member] | Commission [Member] | ||
Related Party Transaction [Line Items] | ||
Expense incurred on behalf of related parties | 3,527,783 | 2,462,783 |
Texas Overlord, LLC [Member] | ||
Related Party Transaction [Line Items] | ||
Due to related parties | 0 | 0 |
Due from related parties | 0 | 0 |
Texas Overlord, LLC [Member] | Inventory [Member] | ||
Related Party Transaction [Line Items] | ||
Purchases from related parties | 0 | 24,967 |
Texas Overlord, LLC [Member] | Commission [Member] | ||
Related Party Transaction [Line Items] | ||
Expense incurred on behalf of related parties | 190,000 | 165,000 |
N.B.M.J., Inc. [Member] | ||
Related Party Transaction [Line Items] | ||
Net revenues from related parties | 24,708 | 443,056 |
Due from related parties | 0 | 0 |
Bass Bone And Spine Specialists [Member] | ||
Related Party Transaction [Line Items] | ||
Net revenues from related parties | 81,350 | 113,473 |
Bass Bone And Spine Specialists [Member] | Account Receivables [Member] | ||
Related Party Transaction [Line Items] | ||
Due from related parties | 20,117 | 7,149 |
Bass Bone And Spine Specialists [Member] | Commission [Member] | ||
Related Party Transaction [Line Items] | ||
Expense incurred on behalf of related parties | 16,885 | 80,272 |
Sintu L L C | Commission [Member] | ||
Related Party Transaction [Line Items] | ||
Expense incurred on behalf of related parties | 575,918 | 467,195 |
Tiger Orthopedics, LLC [Member] | ||
Related Party Transaction [Line Items] | ||
Net revenues from related parties | 39,922 | 283,435 |
Tiger Orthopedics, LLC [Member] | Account Receivables [Member] | ||
Related Party Transaction [Line Items] | ||
Due from related parties | 0 | 30,525 |
Modal Manufacturing, LLC [Member] | ||
Related Party Transaction [Line Items] | ||
Due to related parties | 417,897 | |
Modal Manufacturing, LLC [Member] | Account Receivables [Member] | ||
Related Party Transaction [Line Items] | ||
Due from related parties | 0 | 40,700 |
Modal Manufacturing, LLC [Member] | Inventory [Member] | ||
Related Party Transaction [Line Items] | ||
Purchases from related parties | $ 508,597 | $ 1,082,643 |