Fuse Medical, Inc. Announces Fiscal Year 2020 Financial Results

RICHARDSON, Texas--(BUSINESS WIRE)--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 that it has filed its annual report on Form 10-K for the year ended December 31, 2020 with the Securities and Exchange Commission (“SEC”) on Tuesday, March 30, 2021.

“2020 was a challenging and ambitious year, which began on the heels of the COVID-19 global pandemic, along with the ensuing government restrictions on elective surgeries in the largest markets we serve,” said Christopher C. Reeg, Chief Executive Officer of Fuse. “Despite these conditions, and an approximate 6% decline in revenues for 2020 as compared to 2019, which can be directly correlated to the government imposed quarantines, we were still able to increase our gross profit margin by approximately 10% during the same period. Our results of operations for 2020 and strategic milestones, along with our multiple new product launches, provide us the positive momentum for 2021 to be pivotal for the execution of our growth and profitability strategies,” said Mr. Reeg.

“In response to COVID-19, we took immediate and appropriate steps to align our business with the changing market conditions, as well as the necessary right sizing of our infrastructure and related costs,” said William E. McLaughlin, Chief Financial Officer. “As a result, we were successful in minimizing disruption to our revenue line, while reducing our net loss by $1.9 million or 57% from 2019. Further, we strengthened our balance sheet by improving accounts receivable collections, reducing inventory levels, and reduction of our borrowings on our credit facility.”

Fiscal Year 2020 Highlights:

Fuse’s 2020 has proved to be an exception and pivotal for Fuse’s growth as a Manufacturer and innovative product developer. Our focus to shift our business model from a sole distributor to an integrated Manufacturer and distributor was exceedingly successful during 2020, with continued growth and success serving as a spring-boarding into 2021. Highlights of Fuse’s 2020 strategic milestones include the following:

• In August 2020, we were listed as the one-hundred thirty-sixth (136th) largest public company by revenue in the Dallas-Fort Worth Metroplex, by the Dallas Morning News.

• In November 2020, Deloitte recognized our Company for our fast growth with a ranking of forty-third (43rd) on their 2020 Technology Fast 500^TM.

• In December 2020, we launched FuseChoice^TM, FuseChoice^TM Plus, and FuseChoice^TM Max, part of our amniotic and umbilical membrane product line. We also announced the planned 2021 launches of three additional Biologics product lines including the FuseChoice^TM Derm, FusePure^TM DBM, and FuseTrilogy^TM Viable Matrix products.

• In January 2021, we entered into a marketing agreement with CarePICS Telehealth to increase our wound care offerings.

• In January 2021, we entered into an exclusive agreement with Orthovestments, LLC for the manufacturing and commercialization of the novel Orbitum^TM Staple System, which increases our Manufactured product portfolio.

• In February 2021, we launched our Fuse ACP Anterior Cervical Plating System, expanding our offerings in our Spine division.

• We were successful in adding 10 new distributors for 2020 and adding an additional 7 new distributors during the three months ended March 31, 2021.

Fiscal Year 2020 Financial Highlights

Net revenue for the year ended December 31, 2020 was $21.4 million, compared to $22.9 million for 2019. The decline in revenue was largely attributed to the impact of COVID-19 and the related deferrals in elective procedures that began in late March 2020. Elective procedures have recovered to some extent in the second half of 2020, partially offsetting this impact.

For the year ended December 31, 2020, gross profit was $12.7 million, or 59% of revenues, compared to $11.1 million, or 49% of revenues, for the year ended December 31, 2019.

Selling, general, administrative, and other expenses (“SG&A”) for the year ended December 31, 2020 declined by $1.9 million or 23% to $6.5 million compared to $8.4 million for 2019. The reduction in SG&A reflects our continued commitment to our strategic cost containment initiatives.

Commissions expense for the year ended December 31, 2020 increased to $7.0 million from $5.9 million for the year ended December 31, 2019, an increase of $1.1 million of approximately 18.5%.

For the year ended December 31, 2020, net loss was $1.4 million compared to $3.3 million for the year ended December 31, 2019, reflecting a reduction in our net loss of $1.9 million or approximately 57%.

The Company’s primary sources of liquidity are cash from operations and its credit facility. At December 31, 2020, the Company’s current assets exceeded it current liabilities by $5,372,651 (“Working Capital”), which included $1,187,458 in cash and cash equivalents. As of December 31, 2020, the Company had sufficient collateral and had approximately $1.3 million in credit facility capacity. The Company expects to renew its RLOC maturing May 4, 2021.

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 medicine 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 [e-mail] 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.

FUSE MEDICAL, INC. CONSOLIDATED BALANCE SHEETS (in dollars, except share data)
	December 31, 2020			December 31, 2019
Assets
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
Liabilities and Stockholders' Equity (Accumulated Deficit)
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

FUSE MEDICAL, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in dollars, except share data)
	For the Year Ended December 31, 2020			For the Year Ended December 31, 2019
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		-			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

FUSE MEDICAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
	For the Year Ended December 31, 2020			For the Year Ended December 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	)
Impairment of goodwill		-			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
Payroll protection program proceeds		361,400			-
Economic injury disaster loan proceeds		150,000			-
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