8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 12, 2018 (December 29, 2017)

FUSE MEDICAL, INC.

(Exact name of Registrant as specified in its charter)

Delaware	000-10093	59-1224913
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

1565 North Central Expressway Suite 220 Richardson, Texas	75080
(Address of principal executive offices)	(Zip Code)

Registrant’s Telephone Number, including area code: (469) 862-3030

(Former name, former address and former fiscal year, 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 Instruction A.2.):

☐ 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))

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 2.01 Completion of Acquisition or Disposition of Assets.

This Amendment No. 1 the Current Report on Form 8-K/A amends the Current Report on Form 8-K filed by Fuse Medical, Inc.  (the “Company”) on January 5, 2018 (the “Initial Filing”), to include, among other things, the financial statements referred to in Item 9.01(a) and the pro forma financial information referred to in Item 9.01(b) relating to the acquisition of CPM Medical Consultants, LLC (“CPM”) by the Company.

On December 29, 2017, the Company completed the previously-announced acquisition of CPM, pursuant to that certain Purchase Agreement (the “Purchase Agreement”), by and between the Company and NC 143 Family Holdings, LP (“NC 143”), dated December 15, 2017, whereby the Company purchased all of the outstanding membership interests of CPM, as disclosed in the Company’s Current Report on Form 8-K filed on December 19, 2017.The Company issued 50,000,000 shares of its common stock, par value $0.01 per share (“Common Stock”), in exchange for 100% of the outstanding equity interests of CPM, at an agreed-upon value of $0.20 per share of Common Stock, as reflected in the fairness opinion provided by ValueScope, Inc. and filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K, filed with the Commission on December 19, 2017. The effective date of the closing was December 31, 2017.

Item 3.02. Unregistered Sale of Equity Securities.

The information set forth in Item 2.01 regarding the issuance of shares of our Common Stock pursuant to the Purchase Agreement is incorporated into this Item 3.02 by reference. The offer and sale of such securities were made to a single purchaser, NC 143, in an offering exempt from registration pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and correlating provisions of state securities laws. The Purchase Agreement contains representations to support the Company’s reasonable belief that NC 143 had access to information concerning the Company’s operations and financial condition and that NC 143 did not acquire the Common Stock with a view to the distribution thereof in the absence of an effective registration statement or an applicable exemption from registration. The Company relied upon such representations in determining that such exemption was available.

Item 9.01. Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

(i) The historical audited condensed consolidated financial statements of CPM as of December 31, 2017, and December 31, 2016, and the related audited condensed consolidated balance sheets, statements of operations, statements of changes in member’s equity, and statements of cash flows for each of the fiscal years ended December 31, 2017, and December 31, 2016, together with the notes thereto and the auditors’ reports thereon, are filed as Exhibit 99.1 and are incorporated in this Item 9.01 by reference.

(b) Pro Forma Financial Information

The unaudited pro forma condensed combined financial statements of the Company as of December 31, 2017, are filed as Exhibit 99.2 and are incorporated herein by reference.

(d) Exhibits

Exhibit No.	Description
99.1	Audited consolidated financial statements of CPM Medical Consultants, LLC, as of December 31, 2017, and December 31, 2016, including audited consolidated balance sheets and the related audited consolidated statements.
99.2	Unaudited pro forma condensed combined financial statements of Fuse Medical, Inc., as of December 31, 2017.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

FUSE MEDICAL, INC.
By:	/s/ William E. McLaughlin, III
	William E. McLaughlin, III, Senior Vice President, Chief Financial Officer, and Director
	(Principal Financial Officer)

Date: March 12, 2018

EX-99.1

Exhibit 99.1

CPM Medical Consultants, LLC

Consolidated Financial Report

December 31, 2017

Contents

Report of Independent Registered Public Accounting Firm	1
Consolidated financial statements
Consolidated balance sheets	2
Consolidated statements of operations	3
Consolidated statements of changes in member’s equity	4
Consolidated statements of cash flows	5
Notes to consolidated financial statements	6-11

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Member Managers

CPM Medical Consultants, LLC and Subsidiary

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CPM Medical Consultants, LLC (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations, changes in member’s equity, and cash flows for each of the years in the two-year period ended 2017 and 2016, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the years in the two-year period ended 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board in the United States (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Montgomery Coscia Greilich LLP

Plano, Texas

March 12, 2018

1

CPM Medical Consultants, LLC
Consolidated Balance Sheets
December 31, 2017 and 2016
	2017		2016
Assets
Current assets:
Cash	$	480,781	$	110,972
Accounts receivable, net		6,572,958		6,527,400
Inventories, net		10,617,618		11,401,501
Prepaid expenses and other		10,793		19,490
Total current assets		17,682,150		18,059,363
Property and equipment, net		15,250		5,815
Total assets	$	17,697,400	$	18,065,178
Liabilities and Member's Equity
Current liabilities:
Accounts payable	$	2,511,080	$	2,369,512
Accrued expenses and other		1,748,420		3,062,113
Line of credit		3,415,351		3,305,347
Total current liabilities		7,674,851		8,736,972
Commitments and contingencies		-		-
Member's equity		10,022,549		9,328,206
Total liabilities and member's equity	$	17,697,400	$	18,065,178
See notes to the consolidated financial statements.

2

CPM Medical Consultants, LLC
Consolidated Statements of Operations
Years Ended December 31, 2017 and 2016
	2017		2016
Net sales	$	25,710,097	$	25,647,353
Cost of goods sold		14,560,665		11,253,268
Gross profit		11,149,432		14,394,085
Operating expenses:
Selling, general, and administrative		4,273,242		4,150,384
Commissions		5,582,270		7,056,431
Depreciation		10,903		18,640
Operating income		1,283,017		3,168,630
Interest expense		134,668		133,334
Net income	$	1,148,349	$	3,035,296
See notes to the consolidated financial statements.

3

CPM Medical Consultants, LLC
Consolidated Statements of Changes in Member's Equity
Years Ended December 31, 2017 and 2016
Balance, December 31, 2015 (Note 1)	$	7,998,139
Net income		3,035,296
Member contributions		775,949
Member distributions		(2,481,178	)
Balance, December 31, 2016		9,328,206
Net income		1,148,349
Member contributions		1,738,620
Member distributions		(2,192,626	)
Balance, December 31, 2017	$	10,022,549
See notes to the consolidated financial statements.

4

CPM Medical Consultants, LLC
Consolidated Statements of Cash Flows
Years Ended December 31, 2017 and 2016
	2017			2016
Cash flows from operating activities:
Net income	$	1,148,349		$	3,035,296
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation		10,903			18,640
Provision for doubtful accounts and pricing adjustments and discounts		269,331			(118,812	)
Changes in operating assets and liabilities:
Accounts receivable		(314,889	)		1,028,140
Inventories		2,006,547			(143,785	)
Prepaid expenses and other		8,697			(1,110	)
Accounts payable		141,568			(1,238,777	)
Accrued expenses and other		(1,313,693	)		198,661
Net cash provided by operating activities		1,956,813			2,778,253
Cash Flows from investing activities:
Purchase of property and equipment		(20,338	)		-
Net cash used in investing activities		(20,338	)		-
Cash flows from financing activities:
Proceeds from line of credit		15,690,350			13,208,210
Principal payments on line of credit		(15,580,346	)		(14,118,720	)
Member contributions received		273,044			375,210
Member distributions paid		(1,949,714	)		(2,395,606	)
Net cash used in financing activities		(1,566,666	)		(2,930,906	)
Net increase (decrease) in cash		369,809			(152,653	)
Cash:
Beginning of period	$	110,972		$	263,625
End of period	$	480,781		$	110,972
Supplemental disclosure of cash flow information:
Cash paid for interest	$	134,411		$	143,081
Cash paid for taxes	$	60,000		$	50,192
Supplemental disclosure of noncash operating and financing activities:
Member contributions through reduction of accounts payable	$	-		$	25,000
Member contributions of inventory	$	1,465,576		$	375,739
Member distributions of inventory	$	242,912		$	85,572
See notes to the consolidated financial statements.

5

CPM Medical Consultants, LLC

Notes to Consolidated Financial Statements

Note 1. Description of Business and Summary of Significant Accounting Policies

Nature of operations: CPM Medical Consultants, LLC (“CPM”) and its consolidated subsidiary (collectively, the Company), operate in one business segment and is a national distributor of technologically advanced orthopedic and related surgical solutions.

The Company’s high-quality implant portfolio include Federal Drug Administration (“FDA”) approved internal and external fixation products, upper and lower extremity plating and total joint reconstruction, soft tissue fixation and augmentation for sports medicine procedures, and full spinal implants for trauma, degenerative disc disease and deformity indications (Orthopedic Implants).

The Company offers an array of scientific advanced regenerative tissue, including; human allografts, substitute bone materials and tendons, as well as amniotic tissues and fluids (“Biologics”) which complement its broad portfolio of Orthopedic Implant offerings.

The Company leverages the above core competencies to transcend comprehensive delivery of its state of the art orthopedic implant offerings and surgical solutions, assisting surgeons with a full continuum of care to facilitate quality patient outcomes and efficacy. This results in cost effective solutions to its customers, which include hospitals, medical facilities, and sub-distributors. The Company maintains exclusivity agreements with certain vendors and supply partners in the geographies it serves.

Basis of accounting: The accounts are maintained and the consolidated financial statements have been prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Principles of consolidation: The consolidated financial statements reflect the accounts of CPM and its wholly-owned subsidiary A-Gen Technologies, LLC (“A-Gen”), see “Change in reporting entity” below. All material intercompany accounts and transactions have been eliminated in consolidation.

Change in reporting entity: On January 1, 2016, the Company initiated significant reorganization strategies within its operations. This reorganization involved the assignment of ownership of A-Gen to CPM, including the transfer of the assets and liabilities of A-Gen to CPM. This reorganization is a transfer between entities under common ownership resulting in a change in reporting entity in 2016. Effective January 1, 2017 the Company terminated the operations of A-Gen, and dissolved the legal entity.

On December 29, 2017, Fuse Medical, Inc. (“Fuse”) completed the previously-announced acquisition of CPM, pursuant to the Purchase Agreement, by and between Fuse and NC 143 Family Holdings, LP (“NC 143”), dated December 15, 2017, whereby Fuse purchased one-hundred percent (100%) of the outstanding membership interests of CPM, as disclosed in Fuse’s Form 8-K filed on December 19, 2017. Accordingly, the Company is a wholly-owned subsidiary of Fuse.  The Company’s financial statements have not been adjusted for the effects of the acquisition.

Use of estimates: The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

6

CPM Medical Consultants, LLC

Notes to Consolidated Financial Statements

Note 1. Description of Business and Summary of Significant Accounting Policies (Continued)

Cash: The Company maintains deposits in financial institutions. At times, amounts on deposit may be in excess of the FDIC insurance limit. The Company has not experienced any losses with such accounts.

Accounts receivable: Accounts receivable are carried at a net amount (determined by the original invoice, less an estimate made for pricing adjustments or discounts provided to the customers) less an estimate made for doubtful receivables based on a review of all outstanding amounts each month.

The Company’s management determines the allowance for doubtful accounts by reviewing each account for its potential collection and historical experience applied to an aging of accounts. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written-off are recorded when received.

Revenue recognition: Revenue is recognized upon shipment or the date of surgery for inventory maintained at 3^rd party healthcare facilities, whichever is applicable.

Inventories: The Company’s inventories consist primarily of biologics and orthopedic implants. Inventories are stated at the lower of cost or net realizable value on a first-in, first-out (FIFO) basis. A provision is made to reduce excess or obsolete inventories to their net realizable value.

The Company maintains certain inventories that are held at various customer locations to accelerate speed of delivery for critical medical procedures. The Company had approximately $4,749,000 and $4,414,000 in inventory at these offsite locations, as of December 31, 2017 and 2016, respectively.

Property and equipment: Property and equipment is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. The estimated useful lives of the Company’s vehicles, equipment, and software are estimated to be approximately 3 years.

Income taxes: The Company, with the consent of its member manager, elected to be taxed under sections of federal and state income tax laws which provide that, in lieu of corporate income taxes, the member separately accounts for the Company’s items of income, deductions, losses and credits. Therefore, these statements do not include any provision for corporate income taxes. Although the Company is not a taxpaying entity for federal income tax purposes, it is responsible for Texas margin tax. Although the Texas margin tax is imposed on an entity’s margin rather than on its net income, certain aspects of the tax make it similar to an income tax. The Company’s estimated Texas margin tax was approximately $42,000 and $35,000 for the years ended December 31, 2017 and 2016, respectively, and is reflected in selling, general, and administrative expense on the accompanying consolidated statements of income.

The Company follows applicable accounting guidance for uncertainty in income taxes. The Company’s management has evaluated their material tax positions and determined no income tax effects with respect to the financial statements.

Shipping and handling costs: Shipping and handling costs primarily consist of costs for out-bound delivery of inventory and are expensed as incurred within costs of goods sold in the accompanying consolidated statements of income. These expenses totaled approximately $293,000 and $168,000 for the years ended December 31, 2017 and 2016, respectively.

7

CPM Medical Consultants, LLC

Notes to Consolidated Financial Statements

Note 1. Description of Business and Summary of Significant Accounting Policies (Continued)

Recent accounting pronouncements: In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers”. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also

will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company’s management is in the process of evaluating the impact of ASU 2014-09 on the Company's financial statements and disclosures.

In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-11 — Inventory (Topic 330), which requires an entity to measure inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company adopted ASU 2015-11 as of January 1, 2017 and did not have a material impact on the Company’s financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, “Leases”, which requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company’s management is in the process of evaluating the impact of the adoption of ASU 2016-02 on the Company's financial statements and disclosures.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230) Classification of Certain Cash Receipts and Cash payments.” The update addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for the public business entities for fiscal years beginning after December 15, 2017 and for interim periods within those fiscal years. The amendments in this update may be applied retrospectively or prospectively and early adoption is permitted. The Company’s management is in the process of evaluating the impact of ASU 2016-15 on the Company’s financial statements and disclosures.

In November 2016, the FASB issued ASU Update 2016-18 — Statement of Cash Flows (Topic 230): Restricted Cash (A Consensus of the FASB EITF).  ASU 2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. These amounts should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This amendment does not provide a definition of restricted cash or restricted cash equivalents. The update will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. The Company’s management is in the process of evaluating the impact of ASU 2016-18 on the Company’s financial statements and disclosures.

8

CPM Medical Consultants, LLC

Notes to Consolidated Financial Statements

Note 2. Revolving Line of Credit

On November 20, 2015, the Company entered into a $5,000,000 revolving line of credit (RLOC) with ZB, N.A. (d/b/a Amegy Bank). The RLOC establishes an asset based senior secured revolving credit facility with a maturity date of November 20, 2017. The RLOC bears interest at a variable rate based on the one-month LIBOR rate plus 3.00% (effective rate of 4.56% at December 31, 2017). The RLOC contains customary representations, warranties, covenants, events of default, and is collateralized by substantially all the Company’s assets. The member manager personally guarantees fifty percent (50%) of the outstanding loan amount.

On February 9, 2017, the RLOC was amended to facilitate the Company’s membership units being conveyed to NC 143, a family limited partnership owned and controlled by the former member manager. The terms and conditions of the RLOC remained substantially unchanged.

On November 20, 2017, the RLOC was amended to extend the maturity date to December 31, 2017. The terms and conditions of the RLOC remained substantially unchanged.

On December 29, 2017, the RLOC was amended and restated to facilitate the December 31, 2017 acquisition of the Company by Fuse (See Note 1 – Change in reporting entity). The maturity date of the RLOC was extended until November 2, 2018. All other terms and conditions of the RLOC remained substantially unchanged. 

The outstanding balance of the RLOC was $3,415,351 and $3,305,347 at December 31, 2017 and 2016, respectively. Interest expense incurred was $134,668 and $133,334 for 2017 and 2016, respectively.

Note 3. Accounts Receivable

Accounts receivable consisted of the following at December 31, 2017 and 2016:

	2017			2016
Accounts receivable, gross	$	7,072,057		$	7,295,830
Less allowance for pricing adjustments and discounts		(177,734	)		(571,842	)
Less allowance for doubtful accounts		(321,365	)		(196,588	)
Accounts receivable, net	$	6,572,958		$	6,527,400

Note 4. Inventories

Inventories at December 31, 2017 and 2016 are summarized as follows:

	2017			2016
Biologics	$	3,524,514		$	5,528,203
Orthopedic implants		8,203,846			7,007,311
Inventory, gross		11,728,360			12,535,514
Less allowance for slow-moving and obsolete inventory		(1,110,742	)		(1,134,013	)
Inventory, net	$	10,617,618		$	11,401,501

9

CPM Medical Consultants, LLC

Notes to Consolidated Financial Statements

Note 5. Property and Equipment

Property and equipment and related accumulated depreciation at December 31, 2017 and 2016 consisted of the following:

	2017			2016
Vehicles	$	20,338		$	-
Equipment		-			7,640
Software		-			34,252
Property and equipment, gross		20,338			41,892
Less accumulated depreciation		(5,088	)		(36,077	)
Property and equipment, net	$	15,250		$	5,815

Depreciation expense related to property and equipment totaled $10,903 and $18,640 for the years ended December 31, 2017 and 2016, respectively.

Note 6. Lease Commitments and Related Party Leases

The Company leases office space under a noncancelable operating lease agreement, with a related party under common ownership, which expired at December 31, 2017 and is renewable on a month-to-month basis. The lease requires monthly payments of $10,000. Rent expense associated with the related party lease totaled $120,000 for each of the years ended December 31, 2017 and 2016, and are included in selling, general, and administrative expenses.

The Company leases office equipment under two noncancelable operating lease agreements which expire in March 2019 and February 2021. In aggregate, these office equipment leases require monthly payments of approximately $779. Rent expense for the equipment leases totaled approximately $11,000 and $8,000 for the years ended December 31, 2017 and 2016, respectively, and are included in selling, general, and administrative expenses.

Approximate future minimum lease payments under the office equipment leases at December 31, 2017 are as follows:

2018	$	9,000
2019		5,000
2020		3,000
2021		500
	$	17,500

Note 7. Related Party Transactions

The Company enters into various related party transactions with entities that are owned by or affiliated with the Company’s member manager. During the years ended December 31, 2017 and 2016, the Company had net sales of approximately $8,831,000 and $6,578,000, respectively, to these entities. During the years ended December 31, 2017 and 2016, the Company had purchases of approximately $484,000 and $466,000, respectively, from these entities. During the years ended December 31, 2017 and 2016, the Company incurred commission expense of approximately $1,278,000 and $1,316,000, respectively, to these entities.

10

CPM Medical Consultants, LLC

Notes to Consolidated Financial Statements

Note 7. Related Party Transactions (Continued)

The Company also had other income related to charges for shared services of approximately $33,000 and $114,000 for the years ended December 31, 2017 and 2016, respectively, included with selling, general, and administrative expenses.

As of December 31, 2017, and 2016, the Company had balances due from these entities of approximately $2,512,000 and $2,033,000, respectively, included in accounts receivable. As of December 31, 2017 and 2016 the Company had balances due to these entities of approximately $93,000 and $102,000, respectively, reflected in accounts payable.

The Company engages AmBio Staffing, LLC a Texas licensed professional employment organization (“PEO”) and AmBio Reps, LLC to provide payroll processing, employee benefit administration, and related human capital services. AmBio Staffing, LLC and AmBio Reps, LLC are owned and controlled by the Company’s member manager. Effective January 1, 2017 AmBio Reps, LLC operations were merged into AmBio Staffing, LLC. As of December 31, 2017 and 2016 the Company incurred PEO service expenses in the aggregate amount of approximately $3,142,000 and $2,902,000, respectively, which are included in selling, general, and administrative expenses. As of December 31, 2017 and 2016, the Company owed the PEO entities approximately $110,000 and $107,000, respectively, reflected in accounts payable.

Note 8. Major Customers

Net sales for the years ended December 31, 2017 and 2016 include approximate sales to the following major customers, together with the approximate accounts receivables due from these customers:

	Net Sales			Accounts Receivables
	Amount		%	Amount		%
2017:
Customer A (related party)	$	5,054,000	20%	$	1,684,000	24%
Customer B		4,882,000	19%		1,036,000	15%
Customer C (related party)		1,953,000	8%		444,000	6%
2016:
Customer A (related party)	$	4,797,000	18%	$	1,752,000	24%
Customer B		3,038,000	12%		898,000	12%

Note 9. Commitments and Contingencies

The Company is occasionally involved in various claims and legal actions arising in the ordinary course of business. In the opinion of the Company’s management, the ultimate disposition of these matters is not expected to have a material adverse effect on the Company’s financial position, results of operations or liquidity.

Note 10. Subsequent Events

In preparing these financial statements, the Company has evaluated events and transactions for potential recognition or disclosure through March 12, 2018, the date the financial statements were available to be issued. The Company’s management concluded there are no material events or transactions for potential recognition or disclosure.

11

EX-99.2

Exhibit 99.2

FUSE MEDICAL, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On December 29, 2017, Fuse Medical, Inc. (the “Company”) completed the previously-announced acquisition of CPM Medical Consultants, LLC (“CPM”), a Texas limited liability company, pursuant to that certain Purchase Agreement, by and between the Company and NC 143 Family Holdings, LP, dated December 15, 2017, whereby the Company would purchase all of the outstanding membership interests of CPM, as disclosed in the Company’s Form 8-K filed on December 19, 2017 (the “Merger”).  CPM is now a wholly-owned subsidiary of the Company.

The following unaudited pro forma condensed combined financial statements have been prepared to give effect to the Merger. These unaudited pro forma condensed combined financial statements are derived from the historical consolidated financial statements of the Company and CPM (collectively the “Combined Company”). These financial statements have been adjusted as described in the notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined balance sheet of the Combined Company, reflects the historical consolidated balance sheets of the Combined Company, has been prepared assuming the Merger closed on December 31, 2017. In addition, the unaudited pro forma condensed combined statement of operations combines the historical consolidated statements of operations of the Combined Company. The unaudited pro forma condensed combined statement of operations has been prepared assuming the Merger closed on January 1, 2017. The unaudited pro forma condensed combined financial statements do not account for the cost of any restructuring activities or synergies resulting from the Merger or other costs relating to the integration of the two companies, or other historical acquisitions that were undertaken by the Company.

The Company has prepared the unaudited pro forma condensed combined financial statements based on available information using assumptions that it believes are reasonable. These unaudited pro forma condensed combined financial statements are being provided for informational purposes only and do not claim to represent the Company’s actual financial position or results of operations had the Merger occurred on that date specified nor do they project the Company’s results of operations or financial position for any future period or date. The actual results reported by the Combined Company in periods following the Merger may differ significantly from these unaudited pro forma condensed combined financial statements for a number of reasons. The unaudited pro forma condensed combined financial statements do not account for the cost of any restructuring activities or synergies resulting from the Merger or other costs relating to the integration of the two companies, or other historical acquisitions that were undertaken by the Company.

These unaudited pro forma condensed combined financial statements should be read in conjunction with the Company’s historical consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 and the historical financial statements of CPM for the year ended December 31, 2017 and 2016 contained in this Form 8-K/A.

FUSE MEDICAL, INC. AND CPM MEDICAL CONSULTANTS, LLC
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS
	As of December 31, 2017
	Historical Fuse Medical, Inc.			Historical CPM Medical Consultants, LLC		Pro forma Adjustments				Pro forma Combined
ASSETS
Current assets:
Cash and cash equivalents	$	323,934		$	480,781	$	-			$	804,715
Accounts receivables, net		162,576			6,572,958		(165,151	)	(a)		6,570,383
Inventories, net		9,151			10,617,618		-				10,626,769
Prepaid expenses and other current assets		21,673			10,793		-				32,466
Total current assets		517,334			17,682,150		(165,151	)			18,034,333
Property and equipment, net		1,644			15,250		-				16,894
Total Assets	$	518,978		$	17,697,400	$	(165,151	)		$	18,051,227
LIABILITES, STOCKHOLDERS', AND MEMBER'S EQUITY
Current liabilities:
Accounts payable	$	242,162		$	2,511,080	$	(165,151	)	(a)	$	2,588,091
Accrued expenses and other		82,259			1,748,420		-				1,830,679
Notes payable - related parties		150,000			-		-				150,000
Revolving line of credit		-			3,415,351		-				3,415,351
Total current liabilities		474,421			7,674,851		(165,151	)			7,984,121
Total Liabilities		474,421			7,674,851		(165,151	)			7,984,121
Commitments and contingencies		-			-		-				-
Stockholders' and Member's equity:
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; 19,158,308 issued and 15,890,808 outstanding		171,583			-		-				171,583
Additional paid-in capital		3,222,621			-		10,022,549		(b)		13,245,170
Accumulated deficit		(3,349,647	)		-		-				(3,349,647	)
Member's equity		-			10,022,549		(10,022,549	)	(b)		-
Total Stockholders' and Member's equity		44,557			10,022,549		-				10,067,106
Total Liabilities, Stockholders', and Member's Equity	$	518,978		$	17,697,400	$	(165,151	)		$	18,051,227

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

FUSE MEDICAL, INC. AND CPM MEDICAL CONSULTANTS, LLC
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
	Year Ended December 31, 2017
	Historical Fuse Medical, Inc.			Historical CPM Medical Consultants, LLC		Pro forma Adjustments				Pro forma Combined
Net sales	$	1,106,742		$	25,710,097	$	(409,634	)	(a)	$	26,407,205
Cost of goods sold		431,383			14,560,665		(409,634	)	(a)		14,582,414
Gross profit		675,359			11,149,432		-				11,824,791
Operating expenses:
Selling, general, and administrative		1,074,499			4,273,242		-				5,347,741
Commissions		58,849			5,582,270		-				5,641,119
Loss on disposal of property and equipment		3,365			-		-				3,365
Depreciation		3,621			10,903		-				14,524
Total operating expenses		1,140,334			9,866,415		-				11,006,749
Operating (loss) income		(464,975	)		1,283,017		-				818,042
Interest expense		26,999			134,668		-				161,667
Extinguishment of debt		(43,308	)		-		-				(43,308	)
Net (loss) income	$	(448,666	)	$	1,148,349	$	-			$	699,683
Net (loss) income per common share - basic and diluted	$	(0.03	)	$	-	$	-			$	0.04
Weighted average number of common shares outstanding - basic and diluted		15,890,808			-		-				15,890,808

The accompanying notes are an integral part of these unaudited pro forma condensed combined financial statements.

FUSE MEDICAL, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

1. Basis ofPresentation

The unaudited pro forma condensed combined balance sheet as of December 31, 2017 combines the historical consolidated balance sheets of the Combined Company, and has been prepared as if the Merger had closed on December 31, 2017. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2017 combines the historical consolidated statements of operations of the Combined Company and has been prepared as if the Merger had closed on January 1, 2017.

The Company has prepared the unaudited pro forma condensed combined financial statements based on available information using assumptions that it believes are reasonable. These unaudited pro forma condensed combined financial statements are being provided for informational purposes only and do not claim to represent the Combined Company actual financial position or results of operations had the Merger occurred on that date specified nor do they project the Combined Company results of operations or financial position for any future period or date. The actual results reported by the Combined Company in periods following the Merger may differ significantly from these unaudited pro forma condensed combined financial statements for a number of reasons. The unaudited pro forma condensed combined financial statements do not account for the cost of any restructuring activities or synergies resulting from the Merger or other costs relating to the integration of the two companies, or other historical acquisitions that were undertaken by the Company.

FUSE MEDICAL, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

2. Pro FormaAdjustments

(a) The pro forma adjustments included in the unaudited pro forma condensed combined financial statements reflect eliminations of intercompany transactions between the Combined Company.

(b) The pro forma adjustments included in the unaudited pro forma condensed combined financial statements reflect the reclassification of member’s equity to additional paid-in capital.