Fuse Medical, Inc.

What they do

Fuse Medical develops, manufactures, and distributes orthopedic implants including foot and ankle fixation, upper and lower extremity plating, total joint reconstruction, sports medicine soft tissue fixation, and spinal implants for trauma, degenerative disc disease, and deformity. The company also distributes osteo-biologics and regenerative products such as human allografts, tendons, synthetic skin, and bone substitute materials. It operates through its wholly-owned subsidiary CPM Medical Consultants, LLC, and sells through both retail and wholesale models.

Revenue drivers

• Orthopedic Implants — Includes foot and ankle, orthopedics, sports medicine, and spine implants; the company's core product category as a manufacturer and distributor.
• Biologics — Osteo-biologics and regenerative products including human allografts, tendons, synthetic skin, and bone substitute materials sourced from licensed tissue banks.
• Fuse Branded Portfolio — Company-manufactured products including the Sterizo Tibial Revision System launched Q2 2022 and the Fuse PSS Pedicle Screw System launched Q3 2022.

Recent performance

Annual revenue declined from $26.3M in 2018 to $18.6M in 2022. The company reported net income of $3.1M in 2022 after net losses in 2019, 2020, and 2021. Operating cash flow was $34,799 in 2022, down from $236,654 in 2020. Recent quarterly revenue was $4.0M for Q1 2023 and $5.0M for Q2 2023, compared to $4.5M in Q3 2022 and $4.9M in Q4 2022. As of June 30, 2023, total assets were $19.3M, total liabilities were $19.5M, and shareholder equity was negative $231,627.

Strategy

Management is shifting the business model from a sole distributor to an integrated manufacturer and distributor, with three new Fuse-branded product launches in 2022. The company expanded its direct sales team in late 2022 and early 2023, hiring a Vice President of Sales, a National Director of Sales for Orthopedics, and a National Director of Sales for Extremities. Research and development efforts focus on novel materials with osseointegration and anti-bacterial properties through Scientific Advisory Boards for Spine, Orthopedics, and Sports Medicine and Extremities. On September 27, 2023, Fuse filed a Form 15 to voluntarily deregister its common stock and suspend SEC reporting obligations, citing costs and low trading liquidity. The company intends to continue providing annual financial statements to OTC Pink and operational updates via its website.

Risks

• SEC Deregistration and Reduced Disclosure — The company has filed to suspend SEC reporting, which will reduce public financial disclosure and may limit investors' ability to assess performance.
• Negative Shareholder Equity — As of June 30, 2023, total liabilities of $19.5M exceeded total assets of $19.3M, resulting in negative shareholder equity of $231,627.
• Declining Revenue — Annual revenue fell from $26.3M in 2018 to $18.6M in 2022, a multi-year trend of contraction.
• Supply Chain and COVID-19 Disruption — The company cites ongoing uncertainties and delays in the U.S. and global supply chain for raw materials and finished goods, impacting lead times and product launches.

Outlook

Management stated that the decision to deregister was made to focus on core business and long-term growth while reducing expenses and administrative burdens. The company expects to save significant annual expenses from reduced professional fees and compliance costs. Fuse plans to continue providing annual financial statements to OTC Pink and operational updates through its website and investor relations email. Management anticipates continued commercialization of new Fuse-branded products and expansion of its national distribution footprint.