8-K
Fuse Medical, Inc. (FZMD)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 18, 2022 (November 15, 2022)
FUSE MEDICAL, INC.
(Exact name of Registrant as Specified in Its Charter)
| Delaware | 000-10093 | 59-1224913 |
|---|---|---|
| (State or Other Jurisdiction<br><br><br>of Incorporation) | (Commission File Number) | (IRS Employer<br><br><br>Identification No.) |
| 1565 North Central Expressway<br><br><br>Suite 220 Richardson, Texas | 75080 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (469) 862-3030
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading<br><br><br>Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | FZMD | OTCPink |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
The information in Item 2.02 of this report (including Exhibit 99.1) shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly provided by specific reference in such a filing.
On November 15, 2022, Fuse Medical, Inc. (the “Company”) issued a press release reporting the financial results of the Company for the three and nine months ended September 30, 2022. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
| Exhibit<br><br><br>Number | Description |
|---|---|
| 99.1*<br><br><br>104 | Press Release, dated November 15, 2022<br><br><br>Cover page Interactive Data File (embedded within the inline XBRL document) |
| * | Filed herewith. |
| --- | --- |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Company Name | ||
|---|---|---|
| Date: November 18, 2022 | By: | /s/ Lawrence S. Yellin |
| Lawrence S. Yellin | ||
| Chief Financial Officer and Director |
2
fzmd-ex991_6.htm
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Contact:
Fuse Medical, Inc.
Attention: Kenneth Walker, Sr. Investor Relations Analyst
1565 North Central Expressway, Suite 220
Richardson, Texas 75080
Office (469) 862-3030
Facsimile (469) 862-3035
info@Fusemedical.com
FUSE MEDICAL, INC. ANNOUNCES THIRD QUARTER 2022 FINANCIAL RESULTS
November 15, 2022
RICHARDSON, TX, [DATE] /Businesswire/ -- Fuse Medical, Inc. (OTCPINK: FZMD) (“Fuse” or the “Company”) an emerging manufacturer and distributor of innovative medical devices for the orthopedic and spine marketplace, announced for its third quarter ended September 30, 2022 and that it has filed its quarterly report on Form 10-Q for the quarter ended September 30, 2022 with the Securities and Exchange Commission (“SEC”) on November 14, 2022.
Third Quarter 2022 Financial Highlights
| • | Net revenues for the quarter ended September 30, 2022 were $4.5 million, compared to $4.2 million for the quarter ended September 30, 2021 which was an increase of approximately 7%. |
|---|---|
| • | For the quarter ended September 30, 2022, gross profit was $3 million, or 67% of revenues, compared to $2.3 million, or 56% of revenues, for the quarter ended September 30, 2021 which was an increase of 11%. |
| --- | --- |
| • | Selling, general, administrative, and other expenses (“SG&A”) for the quarter ended September 30, 2022 was approximately $1.7 million compared to $1.5 million for the quarter ended September 30, 2021. |
| --- | --- |
| • | Commissions expense for the quarter ended September 30, 2022 decreased to $1.2 million from $1.4 million for the quarter ended September 30, 2021, a decrease of approximately $276,409. |
| --- | --- |
| • | For the quarter ended September 30, 2022, net loss was $9,376 compared to $697,036 for the quarter ended September 30, 2021, reflecting a reduction in our net loss of $687,660 or approximately 99%. |
| --- | --- |
| • | For the quarter ended September 30, 2022, Adjusted EBITDA was $131,241 compared to Adjusted EBITDA loss of $630,549 for the quarter ended September 30, 2021, reflecting a reduction in our Adjusted EBITDA loss of $761,790 or approximately 121%. |
| --- | --- |
Christopher C. Reeg, Chief Executive Officer of Fuse Medical, commented, “We are pleased with our third quarter performance, as highlighted by a 7% increase in revenue, an 11% increase in gross profit, and a 121% increase in EBITDA over the prior-year period. Our implementation and achievement of strategic initiatives, which includes increasing our portfolio of Fuse branded and manufactured products, is evidenced by the third quarter initial launch of the Fuse PSS Pedicle Screw System with minimally invasive options, and reflected in our third quarter results.”
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Mr. Reeg further added, “Our growth for the remainder of 2022, and into 2023 is focused on continued design and development of unique medical devices for commercialization, new product launches in the orthopedics and spine marketplace, investing in our direct sales force, and expansion of our national distribution footprint. We expect the execution of these strategic initiatives to drive growth in the near term, while increasing our visibility as an emerging manufacturer of relevant medical devices.”
About Fuse Medical, Inc.
Fuse is an emerging manufacturer and distributor of innovative medical devices for the orthopedic and spine marketplace. We provide a comprehensive portfolio of products in the orthopedic total joints, sports medicine, trauma, foot and ankle space, as well as, degenerative and deformity spine, osteobiologics, wound care, and regenerative products. For more information about the Company, or if you’re interested in becoming a distributor of any Fuse’s products, please contact us at info@fusemedical.com or visit: www.fusemedical.com.
Forward Looking Statements
Certain statements in this press release, constitute “forward-looking statements” within the meaning of the federal securities laws. Words such as “may,” “might,” “will,” “should,” “believe,” “expect,” “anticipate,” “estimate,” “continue,” “predict,” “forecast,” “project,” “plan,” “intend,” or similar expressions or statements regarding intent, belief, or current expectations, are forward-looking statements. While the Company believes these forward-looking statements are reasonable, undue reliance should not be placed on any such forward-looking statements, which are based only on information available to the Company as of the date of this release. These forward-looking statements are based upon current estimates and assumptions and are subject to various risks and uncertainties, including, without limitation, those set forth in the Company’s filings with the Securities and Exchange Commission; the failure of the Company to close the transaction; and integration issues with the consolidated company. Thus, actual results could be materially different. The Company expressly disclaims any obligation to update or alter statements whether as a result of new information, future events, or otherwise, except as required by law.
Note Regarding Use of Non-GAAP Financial Measurements:
The financial data contained in this press release includes certain non-GAAP financial measures as defined by the Securities and Exchange Commission ("SEC"), including "Adjusted EBITDA". The Company is presenting Adjusted EBITDA because it believes that it provides useful information to investors about Fuse, its business and its financial condition. The Company defines Adjusted EBITDA as net income or loss from continuing operations before the effects of interest expense, taxes, depreciation and amortization, and excludes certain non-recurring and non-cash items. The Company believes Adjusted EBITDA is useful to investors because it is one of the measures used by the Company's Board of Directors and management to evaluate its business, including in internal management reporting, budgeting and forecasting processes, in comparing operating results across the business, as an internal profitability measure, as a component in evaluating the ability and the desirability of making capital expenditures and significant acquisitions, and as an element in determining executive compensation.
However, Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles in the United States of America ("GAAP"), and the items excluded from Adjusted EBITDA are significant components in understanding and assessing financial performance. Therefore, Adjusted EBITDA should not be considered a substitute for net income (loss) or cash flows from operating, investing, or financing activities. Because Adjusted EBITDA is calculated before recurring cash charges including interest expense and taxes, and is not adjusted for capital expenditures or other recurring cash requirements of the business, it should
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not be considered as a measure of discretionary cash available to invest in the growth of the business. There are a number of material limitations to the use of Adjusted EBITDA as an analytical tool, including the following:
| • | Adjusted EBITDA does not reflect the Company's interest expense; |
|---|---|
| • | Adjusted EBITDA does not reflect the Company's tax expense or the cash requirements to pay its taxes; and |
| --- | --- |
| • | Although depreciation and amortization are non-cash expenses in the period recorded, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect the cash requirements for such replacement. |
| --- | --- |
The Company compensates for these limitations by relying primarily on its GAAP financial measures and by using Adjusted EBITDA only as supplemental information. The Company believes that consideration of Adjusted EBITDA, together with a careful review of its GAAP financial measures, is the most informed method of analyzing Fuse Medical, Inc.
The Company reconciles Adjusted EBITDA to net income, and that reconciliation is set forth below. Because Adjusted EBITDA is not a measurement determined in accordance with GAAP and is susceptible to varying calculations, Adjusted EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. Revenues and expenses are measured in accordance with the policies and procedures described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
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FUSE MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in dollars, except share data)
| December 31,<br><br><br>2021 | |||||
|---|---|---|---|---|---|
| Assets | |||||
| Current assets: | |||||
| Cash | 505,989 | $ | 553,190 | ||
| Accounts receivable, net of allowance of 392,135 and 498,261, respectively | 2,625,949 | 3,528,992 | |||
| Inventories | 9,850,682 | 8,736,474 | |||
| Prepaid expenses and other current assets | 33,712 | 5,921 | |||
| Total current assets | 13,016,332 | 12,824,577 | |||
| Property and equipment, net | 399,948 | 7,251 | |||
| Long term accounts receivable, net of allowance of 3,937,568 and 3,355,391, respectively | 2,570,554 | 2,182,437 | |||
| Intangible assets, net | 1,223,695 | 1,317,341 | |||
| Goodwill | 1,972,886 | 1,972,886 | |||
| Total assets | 19,183,415 | $ | 18,304,492 | ||
| Liabilities and Stockholders' Equity (Accumulated Deficit) | |||||
| Current liabilities: | |||||
| Accounts payable | 4,822,278 | $ | 4,461,641 | ||
| Accrued expenses | 4,244,400 | 2,898,068 | |||
| Convertible notes payable - related parties | 150,000 | 150,000 | |||
| Notes payable - related parties | 200,000 | 200,000 | |||
| Senior secured revolving credit facility | 2,044,606 | 2,432,770 | |||
| Total current liabilities | 11,461,284 | 10,142,479 | |||
| Earn-out liability | 11,593,832 | 11,593,832 | |||
| Total liabilities | 23,055,116 | 21,736,311 | |||
| Commitments and contingencies | - | - | |||
| Stockholders' equity (accumulated deficit) | |||||
| Preferred stock, 0.01 par value; 20,000,000 shares authorized, no shares issued and<br> outstanding | - | - | |||
| Common stock, 0.01 par value; 100,000,000 shares authorized, 72,895,793 shares issued and outstanding as of June 30, 2022 and December 31, 2021. | 728,958 | 728,958 | |||
| Additional paid-in capital | 1,476,516 | 1,455,422 | |||
| Accumulated deficit | (6,077,175 | ) | (5,616,199 | ) | |
| Total stockholders' equity (accumulated deficit) | (3,871,701 | ) | (3,431,819 | ) | |
| Total liabilities and stockholders' equity (accumulated deficit) | 19,183,415 | $ | 18,304,492 |
All values are in US Dollars.
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FUSE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in dollars, except share data)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Net revenues | $ | 4,536,595 | $ | 4,250,554 | $ | 13,759,223 | $ | 14,356,328 | ||||
| Cost of revenues | 1,481,648 | 1,861,620 | 4,830,480 | 5,935,093 | ||||||||
| Gross profit | 3,054,947 | 2,388,934 | 8,928,743 | 8,421,235 | ||||||||
| Operating expenses: | ||||||||||||
| Selling, general, administrative and other | 1,708,543 | 1,559,708 | 4,840,852 | 5,016,594 | ||||||||
| Commissions | 1,219,311 | 1,495,720 | 4,188,841 | 4,894,845 | ||||||||
| Depreciation and amortization | 82,199 | 14,493 | 226,243 | 46,751 | ||||||||
| Total operating expenses | 3,010,053 | 3,069,921 | 9,255,936 | 9,958,190 | ||||||||
| Operating loss | 44,894 | (680,987 | ) | (327,193 | ) | (1,536,955 | ) | |||||
| Other (income) expense: | ||||||||||||
| Interest expense | 46,992 | 12,512 | 116,477 | 47,561 | ||||||||
| Gain on Payroll Protection Loan extinguishment | - | - | - | (361,400 | ) | |||||||
| Total other (income) expense | 46,992 | 12,512 | 116,477 | (313,839 | ) | |||||||
| Net loss before income tax | (2,098 | ) | (693,499 | ) | (443,670 | ) | (1,223,116 | ) | ||||
| Income tax expense | 7,278 | 3,537 | 17,305 | 12,723 | ||||||||
| Net loss | $ | (9,376 | ) | $ | (697,036 | ) | $ | (460,975 | ) | $ | (1,235,839 | ) |
| Net loss per common share - basic | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.02 | ) |
| Weighted average number of common shares outstanding - basic | 70,321,566 | 70,221,566 | 70,321,566 | 70,221,566 | ||||||||
| Supplemental Non-GAAP Disclosure | ||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Adjusted EBITDA | ||||||||||||
| (unaudited) | ||||||||||||
| Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||
| Net (loss) | $ | (9,376 | ) | $ | (697,036 | ) | $ | (460,975 | ) | $ | (1,235,839 | ) |
| Add (Deduct): | ||||||||||||
| Income tax expense (benefit) | 7,278 | 3,537 | 17,305 | 12,723 | ||||||||
| Interest expense | 46,992 | 12,512 | 116,477 | 47,561 | ||||||||
| Depreciation and amortization | 82,199 | 14,493 | 226,243 | 46,751 | ||||||||
| EBITDA | 127,093 | (666,494 | ) | (100,950 | ) | (1,128,804 | ) | |||||
| Non-cash stock-based compensation expense | 4,148 | 35,945 | 21,094 | 221,968 | ||||||||
| Gain on Payroll Protection Program Loan extinguishment | - | - | - | (361,400 | ) | |||||||
| Adjusted EBITDA | $ | 131,241 | $ | (630,549 | ) | $ | (79,856 | ) | $ | (1,268,236 | ) |
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FUSE MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
| For the Nine Months Ended September 30, | ||||||
|---|---|---|---|---|---|---|
| 2022 | 2021 | |||||
| Cash flows from operating activities | ||||||
| Net loss | $ | (460,976 | ) | $ | (1,235,839 | ) |
| Adjustments to reconcile net loss to net cash provided by operating<br><br><br>activities: | ||||||
| Depreciation and amortization | 226,243 | 46,751 | ||||
| Stock based compensation | 21,094 | 221,968 | ||||
| Provision for bad debts and discounts | (106,127 | ) | 95,889 | |||
| Provision for long term accounts receivable | 582,175 | 578,503 | ||||
| Provision for slow moving inventory | (220,608 | ) | (486,611 | ) | ||
| Gain on Payroll Protection Program Loan extinguishment | - | (361,400 | ) | |||
| Changes in operating assets and liabilities: | ||||||
| Accounts receivable | 1,009,170 | 1,872,936 | ||||
| Inventories | (893,600 | ) | (1,099,828 | ) | ||
| Prepaid expenses and other current assets | (27,791 | ) | (42,258 | ) | ||
| Long term accounts receivable | (970,292 | ) | (984,058 | ) | ||
| Accounts payable | 360,637 | 1,172,261 | ||||
| Accrued expenses | 1,346,332 | 453,165 | ||||
| Net cash provided by operating activities | 866,257 | 231,479 | ||||
| Cash flows from investing activities | ||||||
| Purchase of property and equipment | (520,794 | ) | - | |||
| Net cash (used in) investing activities | (520,794 | ) | - | |||
| Cash flows from financing activities | ||||||
| Net payments on CNH senior secured revolving credit facility | (392,664 | ) | - | |||
| Payments from Economic Injury Disaster Loan, net | - | (3,655 | ) | |||
| Proceeds on Economic Injury Disaster Loan | - | 350,000 | ||||
| Net cash (used in) financing activities | (392,664 | ) | 346,345 | |||
| Net increase (decrease) in cash | (47,201 | ) | 577,824 | |||
| Cash and cash equivalents - beginning of period | 553,190 | 1,187,458 | ||||
| Cash and cash equivalents - end of period | $ | 505,989 | $ | 1,765,282 | ||
| Supplemental disclosure of cash flow information: | ||||||
| Cash paid for interest | $ | 94,978 | $ | 32,091 |
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