Fuse Medical, Inc., (OTCPINK: FZMD), an emerging manufacturer and distributor of medical devices for the orthopedic and spine marketplace, announced record earnings for the fiscal year ended December 31, 2018.
2018 Financial Highlights
- Net revenue of $26.3 million
- Gross profit increase by 10% to $13 million
- Record net income of $4.0 million, or 15% of net revenues
- Earnings per share of $0.06 compared to $0.04 for 2017,on a diluted basis
- EBITDA of $4.6 million, an increase of $3.6 million over 2017(1)
- Net cash flows provided by operations, an increase of 55% to $2.5 million (1)
2018 Strategic Milestones
- Listed as “Penny Stock Exempt” by OTC Markets
- Recognized as No. 56 of the fastest growing companies in the Deloitte 2018 Technology Fast 500TM
- Ranked as the 143rd largest public company by revenue in the Dallas-Fort Worth metropolitan area by the Dallas Morning News
- Completed the acquisition and integration of CPM Medical Consultants, LLC & Palm Springs Partners, LLC d/b/a Maxim Surgical
- Established Scientific Advisory Boards with Key Opinion Leaders to assist with our product development and design input
Chief Executive Officer Christopher C. Reeg said, “2018 was an incredible year of accomplishments and financial successes for us. The year proved to be pivotal for successful transformation into the medical device manufacturing space. Repositioning Fuse into an integrated medical device manufacturer and supplier was the all-important initial step to begin realizing increased revenue growth at higher profit margins.”
Mr. Reeg added that “for 2019, our focus is the expansion of our manufactured product portfolio, as well as our private label product offerings in the spine and the foot and ankle market.”
About Fuse Medical, Inc.
Fuse is a manufacturer and national distributor of medical devices, providing a broad portfolio of internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; full spinal implants for trauma, degenerative disc disease, and deformity indications, (collectively, “Orthopedic Implants”) and a wide array of osteo-biologics, regenerative tissues, and amniotic tissue, including human allografts, substitute bone materials and tendons, and regenerative tissues and fluids (“Biologics”). The Company’s broad portfolio of Orthopedic Implants and Biologics provide high-quality products that assist surgeons in providing positive patient outcomes and cost-effective solutions. For more information about the Company, please visit: www.fusemedical.com.
Forward Looking Statements
Certain statements in this press release, including those related to an anticipated purchase of all of the outstanding membership units and plans for the consolidated company, 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.
(1) EBITDA and Net Cash Flows Provided by Operations are both non-GAAP financial measures. For more information about GAAP and non-GAAP financial measures, please see the section of this release titled “Use of Non-GAAP Financial Measures.”
| FUSE MEDICAL, INC. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| December 31, | December 31, | |||||||||
| Assets | ||||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 844,314 | $ | 804,715 | ||||||
| Accounts receivable, net of allowance of $667,963 and $499,099, respectively | 5,225,999 | 6,570,382 | ||||||||
| Inventories, net of allowance of $1,711,871 and $1,110,742, respectively | 11,075,889 | 10,626,769 | ||||||||
| Prepaid expenses and other current assets | 29,553 | 32,466 | ||||||||
| Total current assets | 17,175,755 | 18,034,332 | ||||||||
| Property and equipment, net | 42,974 | 16,895 | ||||||||
| Deferred tax asset | 760,993 | 375,278 | ||||||||
| Intangible assets, net | 1,288,040 | - | ||||||||
| Goodwill | 2,905,089 | 820,650 | ||||||||
| Total assets | $ | 22,172,851 | $ | 19,247,155 | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||||
| Current liabilities: | ||||||||||
| Accounts payable | $ | 2,712,919 | $ | 2,588,091 | ||||||
| Accrued expenses | 2,784,271 | 1,830,679 | ||||||||
| Notes payable - related parties | 150,000 | 150,000 | ||||||||
| Senior secured revolving credit facility | 1,477,448 | 3,415,351 | ||||||||
| Total current liabilities | 7,124,638 | 7,984,121 | ||||||||
| Earn-out liability | 13,581,529 | 19,244,543 | ||||||||
| Total liabilities | 20,706,167 | 27,228,664 | ||||||||
| Commitments and contingencies | - | - | ||||||||
| Stockholders’ equity (deficit): | ||||||||||
| Preferred stock, $0.01 par value; 20,000,000 shares authorized; no shares issued and outstanding | - | - | ||||||||
| Common stock, $0.01 par value; 100,000,000 shares authorized; 74,600,181 shares issued and 71,489,066 shares outstanding at December 31, 2018 and 69,158,308 shares issued and 65,890,808 shares outstanding at December 31, 2017 | 714,891 | 671,583 | ||||||||
| Additional paid-in capital | - | (8,653,092 | ) | |||||||
| Retained earnings | 751,793 | - | ||||||||
| Total stockholders’ equity (deficit) | 1,466,684 | (7,981,509 | ) | |||||||
| Total liabilities and stockholders’ equity (deficit) | $ | 22,172,851 | $ | 19,247,155 | ||||||
| FUSE MEDICAL, INC. | |||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||
| (Amounts in dollars, except per share data) | For the | For the | |||||||||
| Net revenues | $ | 26,342,038 | $ | 26,407,206 | |||||||
| Cost of revenues | 13,352,558 | 14,582,416 | |||||||||
| Gross profit | 12,989,480 | 11,824,790 | |||||||||
| Operating expenses | |||||||||||
| Selling, general, administrative and other | 8,466,128 | 5,315,657 | |||||||||
| Commissions | 6,431,967 | 5,641,122 | |||||||||
| Gain on disposal of property and equipment | - | (5,367 | ) | ||||||||
| Depreciation and amortization | 49,685 | 14,521 | |||||||||
| Total operating expenses | 14,947,780 | 10,965,933 | |||||||||
| Operating (loss) income | (1,958,300 | ) | 858,857 | ||||||||
| Change in fair value of contingent purchase consideration | 5,663,014 | - | |||||||||
| Other income (expense): | |||||||||||
| Interest expense | (133,944 | ) | (161,669 | ) | |||||||
| Extinguishment of debt | - | 43,308 | |||||||||
| Total other expense | (133,944 | ) | (118,361 | ) | |||||||
| Operating income before income tax | 3,570,770 | 740,496 | |||||||||
| Income tax benefit | (386,784 | ) | 40,818 | ||||||||
| Net income | $ | 3,957,554 | $ | 699,678 | |||||||
| Net income per common share - basic | $ | 0.06 | $ | 0.04 | |||||||
| Net income per common share - diluted | $ | 0.06 | $ | 0.04 | |||||||
| Weighted average number of common shares outstanding - basic | 68,020,348 | 16,027,794 | |||||||||
| Weighted average number of common shares outstanding - diluted | 70,945,602 | 19,473,553 | |||||||||
Fuse Medical, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures(1)
(Unaudited)
Use of Non-GAAP Financial Measures
This press release includes the non-GAAP financial measures of Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) and Net Cash Provided by Operations (“Net Cash”).
Fuse presents these non-GAAP financial measures because it believes these measures are a useful indicator of the Company’s operating performance. The Company’s management utilize these non-GAAP measures principally as a measure of the Company’s operating performance and believes that these measures are useful to investors because they are frequently used by analysts, investors and other interested parties to evaluate companies in the Company’s industry. The Company also believes that these measures are useful to its management and investors as measures of comparative operating performance from period to period.
EBITDA represents net income plus interest expense, income tax (benefit) expense, depreciation and amortization, and stock-based compensation expense. Net Cash is the amount of cash generated by net income, adjusted for non-cash items, and adjusted for changes in net working capital.
The Company presents EBITDA and Net Cash because it believes they are useful indicators of the Company’s operating performance. The Company’s management utilize EBITDA and Net Cash principally as a measure of the Company’s operating performance as well as for planning purposes, including the preparation of the Company’s annual operating budget and financial projections.
EBITDA and Net Cash are non-GAAP financial measures and should not be considered alternatives to net income as a measure of financial performance or cash flows from operations as a measure of liquidity, or any other performance measure derived in accordance with GAAP. They should also not be construed as an inference that the Company’s future results will be unaffected by unusual or non-recurring items. In addition, EBITDA and Net Cash are not intended to be measures of free cash flows for management’s discretionary use, as they do not reflect certain cash requirements such as tax payments, senior secured revolving credit facility borrowings and payments, capital expenditures and certain other cash costs that may recur in the future. EBITDA and Net Cash contain certain other limitations, including the failure to reflect the Company’s cash expenditures, cash requirements for working capital needs and cash costs to replace assets being depreciated and amortized. In evaluating EBITDA or Net Cash, one should be aware that in the future the Company may incur expenses that are the same as or similar to some of the adjustments in this presentation. The Company’s presentation of EBITDA and Net Cash should not be construed to imply that the Company’s future results will be unaffected by any such adjustments. Management compensates for these limitations by primarily relying on its GAAP results in addition to using EBITDA and Net Cash as supplemental resources. The Company’s definition of EBITDA and Net Cash are not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.
The following tables presents reconciliations of net income to EBITDA and Net Cash for the periods presented.
| Fuse Medical, Inc. | ||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures - EBITDA | ||||||||||
| (Unaudited) | ||||||||||
| 2018 | 2017 | |||||||||
| Net income | $ | 3,957,554 | $ | 699,678 | ||||||
| Interest expense | 133,944 | 161,669 | ||||||||
| Income tax (benefit) expense | (386,784 | ) | 40,818 | |||||||
| Depreciation and amortization | 49,685 | 14,521 | ||||||||
| Stock-based compensation expense | 834,929 | 42,609 | ||||||||
| EBITDA (a Non-GAAP Measure) | $ | 4,589,328 | $ | 959,295 | ||||||
| Fuse Medical, Inc. | |||||||||||
| Reconciliation of GAAP to Non-GAAP Financial Measures - Net Cash Provided By Operating Activities | |||||||||||
| (Unaudited) | |||||||||||
| For the | For the | ||||||||||
| Year Ended | Year Ended | ||||||||||
| 31-Dec-18 | 31-Dec-17 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 3,957,554 | $ | 699,678 | |||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 49,685 | 14,521 | |||||||||
| Change in fair value of contingent purchase consideration | (5,663,014 | ) | - | ||||||||
| Share-based compensation | 834,929 | 42,609 | |||||||||
| Provision of bad debts and discounts | 168,864 | - | |||||||||
| Benefits for deferred taxes | (431,272 | ) | - | ||||||||
| Gain on disposal of property and equipment | - | (5,067 | ) | ||||||||
| Extinguishment of debt | - | (43,308 | ) | ||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | 917,689 | (62,096 | ) | ||||||||
| Inventories, net slow-moving and obsolescence reserves | 1,881,556 | 2,022,723 | |||||||||
| Prepaid expenses and other current assets | 2,913 | (9,448 | ) | ||||||||
| Accounts payable | (82,824 | ) | 178,477 | ||||||||
| Accrued expenses | 843,820 | (1,236,527 | ) | ||||||||
| Deferred rent | - | (848 | ) | ||||||||
| Security deposit | - | 3,822 | |||||||||
| Net cash provided by operating activities (a Non-GAAP Measure) | $ | 2,479,900 | $ | 1,604,536 | |||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190325005214/en/
Contacts
Fuse Medical, Inc.
Attention: Devon Morgan, Senior Investor Relations Analyst
Office (469) 862-3030
Facsimile (469) 862-3035
info@Fusemedical.com
Source: Fuse Medical, Inc.
View this news release online at:
http://www.businesswire.com/news/home/20190325005214/en
