Liquidity and Capital Resources

A summary of our cash flows is as follows:

18

T o facilitate our strategic growth plans, on December 29, 2017, Fuse entered into , along with CPM, a $5,000,000 revolving line of credit (“RLOC”) with ZB, N.A. (d/b/a Amegy Bank) , to f acilitate the CPM Acquisition and the integration of the two companies as disclosed as Exhibit 10.1 in our Current Report on Form 8-K, filed with the SEC on January 11, 2018, and herein incorporated by reference. Mark W. Brooks, our Chairman of the Board and President, personally guarantees fifty present (50%) of the outstanding RLOC amount . Further , the RLOC will support our strategic growth initiatives and day-to-day working capital needs.

With the RLOC maturing on November 2, 2018, we are currently evaluating alternatives to the RLOC, including, but not limited to a renewal of the current credit facility, an increase in the credit facility availability, a new credit facility, or a newly structured facility. We expect our management team will provide our Board with a recommendation by the end of the second quarter of 2018.

Net Cash Provided by Operating Activities

Our net cash provided by operating activities during the year ended December 31, 2017, resulted primarily from net income of $699,678, $2,022,723 decrease in inventories, net $178,477 increase in accounts payable, $3,822 security deposit, $7,607 non-cash adjustments, offset, in part, by $1,236,5278 reduction in accrued expenses, $62,096 increase in accounts receivable, and an increase of $9,448 in prepaid expenses and other current assets.  

Our net cash provided by operating activities during the year ended December 31, 2016, resulted primarily from net income of $3,016,486, a $995,785 decline in accounts receivable, $32,185 non-cash adjustments, and $107 reduction in prepaid expenses and other current assets, offset in part, by $1,313,409 reduction in accounts payable, and a $139,993 increase in inventories.

Net Cash (Used in) Provided by Investing Activities

Our net cash used in investing activities for the year ended December 31, 2017, primarily related to $20,334 for the purchase of property and equipment, offset in part by $8,732 insurance settlement proceeds.

Our net cash provided by investing activities for the year ended December 31, 2016, related to proceeds from our December change-in-control of $655,390.

Net Cash Used in Financing Activities

Our net cash used in financing activities during the year ended December 31, 2017, primarily resulted from $1,949,714 in member distributions (successor), offset, in part, by $273,044 of member contributions (successor) and net borrowings from our RLOC.

Our net cash used in financing activities during the year ended December 31, 2016, primarily resulted from $ 2,395,606 in member distributions (successor), offset, in part, by $375,210 of member contributions (successor) and $910,5100 in net payment on our RLOC.

Liquidity

As a national distributor of medical devices, our primary sources and uses of liquidity are generated by our operations, our RLOC, commissions, payroll and human capital, and professional fees.

Our strategic growth plan provides for capital investment to upgrade our financial systems, support our infrastructure, and increase our support staff. This investment is deemed essential to support our growth and expansion objectives. We estimate the range of this type of investment to be approximately $400,000 to $650,000, and anticipate the investment to occur in the second half of calendar year 2018. Our projections for calendar years 2018, 2019, and 2020, include expansion opportunities through carefully evaluated and integrated acquisitions, and our five-year projections include the investment in our independent contractor sales team, including focused training, development, and accountability.  

At December 31, 2017, our current assets exceeded our current liabilities by $10,050,211 (our “Working Capital”), which included $804,715 in cash and cash equivalents. As of March 26, 2018, we had approximately $770,000 in available cash. We maintain our cash with large financial institutions. We believe our operations as well as our working capital and revolving line of credit will enable us to support our mid-term growth strategies.

During 2016, we received proceeds of: (i) $720,000 from the sale of our Common Stock in private offerings; (ii) $150,000 in aggregate from the issuance of Notes to entities controlled by the Investors; and (iii) $91,533 of capital contributions resulting from the transfer of inventory to CPM, as described in Item 13 “Certain Relationships and Related Transactions, And Director Independence” below and in our Current Report on Form 8-K, filed with the SEC on December 23, 2016.

19

Off-balance Sheet Arrangement

We have no off-balance sheet arrangements.

Related Party Transactions

Change-in-Control 

Since December of 2016, we have been controlled by the Investors, who are our two primary stockholders. On the Change-in-Control Date, we entered into the Stock Purchase Agreement by and between the Investors and our Company, pursuant to which the Investors received the Investor Shares, effective as of the Change-in-Control Date. For more details, please see “Item 1. Business” of this 2017 Annual Report.

The closing of the Stock Purchase Agreement resulted in a change-in-control of our Company whereby the Investors beneficially acquired approximately 61.4% of our Common Stock issued and outstanding immediately after the Change-in-Control Date. Mark W. Brooks became our Chairman of the Board and Christopher C. Reeg became our Chief Executive Officer, as described in our Current Report on Form 8-K, filed with the SEC on December 23, 2016, which is herein incorporated by reference.

CPM Acquisition

On December 15, 2017, we entered into an agreement with NC 143 pursuant to which we would purchase all of the outstanding membership interests of CPM as disclosed in the CPM Acquisition Agreement, disclosed in our Current Report on Form 8-K, dated December 19, 2017, which is herein incorporated by reference.

On December 29, 2017, we completed the previously-announced CPM Acquisition, effective as of the Effective Date. We issued 50 million shares of our Common Stock in exchange for 100% of the outstanding membership interests of CPM, at an agreed-upon value of $0.20 per share of Common Stock, as disclosed in our Current Report on Form 8-K, filed January 5, 2018, and amended by our Current Report on Form 8-K/A, dated March 12, 2018, which are both herein incorporated by reference.

On the Effective Date and following the closing of the CPM Acquisition, NC 143 and RMI beneficially held approximately 90.4% of our Common Stock outstanding.

In the CPM Acquisition, Fuse was the legal acquirer and, for accounting purposes, CPM was deemed to have acquired Fuse. As a result, this 2017 Annual Report reflects CPM as the reporting entity for 2017 and 2016 and is consolidated with Fuse from, and effective, on the Change-in-Control Date.

Lease with 1565 North Central Expressway, LP

As disclosed in “Item 2. Properties” in this 2017 Annual Report, we lease an approximately 11,500 square-foot space as our principal executive office from NCE, LP, a real estate investment company that is owned and controlled by Mark W. Brooks, our Chairman of the Board and President. The CPM lease was effective January 1, 2013, and the Fuse lease was effective July 14, 2017. These leases terminated December 31, 2017, with month-to-month renewals, but we are in the process of renegotiating a lease renewal.

AmBio Contract

As disclosed in “Item 1. Business” in this 2017 Annual Report, AmBio provides us with payroll processing, employee benefit administration, and related human capital services to us effective January 1, 2017. Our Chairman of the Board and President, Mark Brooks, owns and controls AmBio. As of December 31, 2017, and 2016, we had balances due to AmBio of approximately $112,000. As of December 31, 2017, approximately $162,000 of fees were paid to AmBio for its services and are reflected with in selling, general, and administrative expenses on the accompanying consolidated statements of operations.

Operations

We have entered into various related party transactions with entities that are owned by or affiliated with our executive officers and members of our Board. The transactions included sales, purchases, commissions paid for services, and revenues related to services provided to the related party.

MedUSA Group, LLC

20

MedUSA Group, LLC (“MedUSA”) is a sub-distributor owned and controlled by Mark W. Brooks, our Chairman of the Board and President, and Christopher C. Reeg, our Chief Executive Officer and Secretary .

During the years ended December 31, 2017, we had net sales of approximately $5,054,000 to MedUSA for products used in surgical cases.

During the years ended December 31, 2017, we incurred commission expense of approximately $962,000 to MedUSA for services provided to us in surgical cases.

As of December 31, 2017, we had balances due from MedUSA of approximately $1,684,000 included in accounts receivable on the accompanying consolidated balance sheets.

Texas Overlord, LLC

Texas Overlord, LLC (“Overlord”) is an investment holding company owned and controlled by Mark W. Brooks, our Chairman of the Board and President.

During the years ended December 31, 2017, we had net sales of approximately $1,953,000 to Overlord for product used in surgical cases.

During the years ended December 31, 2017, we incurred commission expense of approximately $101,000 respectively, to Overlord for services provided to us in surgical cases.

As of December 31, 2017, we had balances due from Overlord of approximately $444,000 included in accounts receivable on the accompanying consolidated balance sheets.

N.B.M.J., Inc.

N.B.M.J., Inc. (“NBMJ”) is a Durable Medical Equipment (“DME”) distributor and a wound care distributor owned and controlled by Mark W. Brooks, our Chairman of the Board and President.

During the years ended December 31, 2017, we had net sales of approximately $162,000 to NBMJ for product used in surgical cases.

During the years ended December 31, 2017 we incurred commission expense of approximately $0.00 to NBMJ for services provided to us in surgical cases.

Palm Springs Partners d/b/a Maxim Surgical, LLC

Palm Springs Partners d/b/a Maxim Surgical, LLC (“Maxim”) is a manufacturer/distributor owned and controlled by Christopher C. Reeg, our Chief Executive Officer and Secretary, and Mark W. Brooks, our Chairman of the Board and President.

During the year ending December 31, 2017, we had net sales of approximately $202,000 to Maxim for product used in surgical cases.

During the year ending December 31, 2017, we purchased approximately $468,000 from Maxim.

As of December 31, 2017, we had a balance due from Maxim of approximately $50,000, included in accounts receivable on the accompanying consolidated balance sheets. As of December 31, 2017, we had a balance due to Maxim of approximately $93,000, included in accounts payable on the accompanying consolidated balance sheets.

Sintu, LLC

Sintu, LLC (“Sintu”) is a sub-distributor owned and controlled by Mark W. Brooks, our Chairman of the Board and President. During the year ended December 31, 2017, we incurred commission expense of approximately $1,114,000 to Sintu for services provided in surgical cases.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP, requires our management to make judgments, assumptions and estimates that affect the amounts of revenue, expenses, income, assets and liabilities, reported in our consolidated financial statements and their accompanying notes (“Financial Statements”). Understanding our accounting policies and the extent to which our management uses judgment, assumptions and estimates in applying these policies is integral to understanding our Financial Statements. We describe our most significant accounting policies in Note 2, “Significant Accounting Policies” in the notes to the Financial Statements beginning on page F-1 found elsewhere herein. We have identified the following accounting policies as those that require significant judgments, assumptions and estimates and that have a significant impact on our financial condition and results of operations. These policies are considered critical because they may result in fluctuations in our reported results from

21

period to period due to the significant judgments, estimates and assumptions about highly complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions .

Revenue Recognition, Discounts, and Allowances Accruals

We recognize revenues when: (i) persuasive evidence of an arrangement exists; (ii) the fees are fixed or determinable; (iii) no significant Company obligations remain; and (iv) collection of the related receivable is reasonably assured. We report revenues for transactions in which we are the primary obligor on a gross basis and revenues in which we act as an agent (earning a fixed percentage of the sale) on a net basis, (net of related costs). We report funds collected from customers as deferred revenues until all revenue recognition criteria have been met.

Our revenues are sales of Orthopedic Implants and Biologics to support orthopedic surgeries and wound care. For customers that purchase products as needed, we invoice the customers on the date that the product is utilized. For customers that have consigned product, we invoice the customers as each unit of the product is utilized. Payment terms are due upon receipt of invoice.

Products that have been sold are not subject to returns unless the product is deemed defective. Credits or refunds are recognized when they are determinable and estimable. Net revenues have been reduced to account for sales returns, discounts and other incentives.

Long-Lived Assets

We assess potential impairments to our long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The events and circumstances we consider when determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include, but are not limited to: (i) significant changes in performance relative to expected operating results; (ii) significant changes in the use of the assets; (iii) significant negative industry or economic trends; (iv) a significant decline in our stock price for a sustained period of time; and (v) changes in our business strategy. We record an impairment loss when the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Any required impairment loss is measured as the amount by which the carrying amount of a long-lived asset exceeds fair value and is recorded as a reduction in the carrying value of the related asset and an expense to operating results. Based on our assessment, there were no indicators of impairment of our long-lived assets at December 31, 2017, and 2016.

Goodwill

Goodwill is the excess of the purchase price over the fair value of net assets of acquired businesses. We test goodwill for impairment annually or whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. The test for impairment requires that we make several estimates about fair value, most of which are based on projected future cash flows. Our estimates associated with the goodwill impairment test are considered critical due to the amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value, including projected future cash flows. We did not recognize any goodwill impairment during 2017 or 2016.

Fair Value Measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. We classify assets and liabilities recorded at fair value under the fair value hierarchy based on the observability of inputs used in valuation techniques.  Observable inputs (highest level) reflect market data obtained from independent sources, while unobservable inputs (lowest level) reflect internally developed market assumptions. The fair value measurements are classified under the following hierarchy:

Level 1—Observable inputs that reflect quoted market prices (unadjusted) for identical assets and liabilities in active markets;

Level 2—Observable inputs, other than quoted market prices, that are either directly or indirectly observable in the marketplace for identical or similar assets and liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities; and

Level 3—Unobservable inputs that are supported by little or no market activity that are significant to the fair value of assets or liabilities.

22

In connection with the CPM Acquisition, we recorded a $19,244,543 liability related to the earn-out portion of the purchase consideration. See Note 3, “Acquisition” in the notes to the Consolidated Financial Statements beginning on page F-1 for further discussion of the Earn-Out Liability and our classification the Earn-Out Liability as a Level 3 liability.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The recorded value of notes payable approximates their fair value based upon their effective interest rates.

Accounts Receivable and Allowances

Accounts receivables are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts receivable and an allowance for contractual pricing. Credit is extended to customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts.

We estimate our allowance for doubtful accounts by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations, such as bankruptcy proceedings and receivable amounts outstanding for an extended period beyond contractual terms. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are reevaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.

Our management estimates an allowance for contractual pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, our management uses assumptions and judgement, based on the best available facts and circumstances, to record a specific allowance for the amounts due from those customers.  The allowance is offset by a corresponding reduction to revenue. These specific allowances are reevaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.

Accounts deemed uncollectible are written-off in the period when we have exhausted efforts to collect overdue and unpaid receivables or we have evaluated other circumstances that indicate that our Company should abandon such efforts. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received.

Inventories

Inventories are stated at lower of cost or the net realizable value (first-in, first-out). Our inventories consist entirely of finished goods and include Orthopedic Implants and Biologics. We review the market value of inventories whenever events and circumstances indicate that the carrying value of inventories may not be recoverable from the estimated future sales price less cost of disposal and normal gross profit. In cases where the market values are less than the carrying value, we recognize a write-down equal to an amount by which the carrying value exceeds the market value of inventories.

Stock-Based Compensation

Stock-based compensation expense is measured at the grant date fair value of the award and is expensed over the requisite service period. For employee stock-based awards, we calculate the fair value of the award on the date of grant using the Black-Scholes option pricing model. Determining the fair value of stock-based awards at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, we calculate the fair value of the award on the date of grant in the same manner as employee awards, however, the awards are revalued at the end of each reporting period and the pro-rata compensation expense is adjusted accordingly, until such time that the non-employee award is fully vested, at which time the total compensation recognized to date shall equal the fair value of the stock-based award as calculated on the measurement date, which is the date at which the award recipient’s performance is complete. The estimation of stock-based awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from original estimates, such amounts are recorded as a cumulative adjustment in the period estimates are revised.

23

Income Taxes

Because of the CPM Acquisition, Fuse became the sole managing member of CPM and as a result, began consolidating the financial results of CPM. CPM is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, CPM is not subject to either U.S. federal or most applicable state and local income taxes. Any taxable income or loss generated by CPM is passed through to, and included in, the taxable income or loss of its members.

We use the asset and liability method to compute the differences between the tax basis of assets and liabilities and the related financial amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount that more likely than not will be realized. We have deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets are subject to periodic recoverability assessments. Realization of the deferred tax assets, net of deferred tax liabilities, is principally dependent upon achievement of projected future taxable income.

We record a liability for uncertain tax positions when it is probable that we have incurred a loss and we can reasonably estimate its amount. As of December 31, 2017, we had no liabilities for uncertain tax positions. Our policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. We continually evaluate expiring statutes of limitations, audits, proposed settlements, changes in tax law, and new authoritative rulings.

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 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. We are in the process of evaluating the impact of ASU 2014-09 on our financial statements and disclosures.

In July 2015, the FASB issued ASU No. 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. We adopted ASU 2015-11 as of January 1, 2017, and did not have a material impact on our 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. We are in the process of evaluating the impact of the adoption of ASU 2016-02 on our 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 (8) 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. We are in the process of evaluating the impact of ASU 2016-15 on our financial statements and disclosures.

In November 2016, the FASB issued ASU Update No. 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. We are in the process of evaluating the impact of ASU 2016-18 on our financial statements and disclosures.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not believed by management to have a material impact on our present or future consolidated financial statements.

24

Cautionary Note Regarding Forward Looking Statements

This report contains forward-looking statements, including the statements regarding capital expenditures and liquidity.

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategies, and financial needs.

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties, and risks that may cause actual results to differ materially from these forward-looking statements are contained in “Item 1A. Risk Factors” above. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise. For more information regarding some of the ongoing risks and uncertainties of our business, see “Item 1A. Risk Factors” and our other filings with the SEC.