Note 3. Acquisition

Between the period July 2016 through October 2016, the Company obtained three loans in the aggregate amount of $150,000 in exchange for the Notes bearing 10% interest per annum, with principal due and payable, upon demand of the payee. The Notes were issued as follows: $100,000 to NC 143, and $50,000 to RMI. The Investors have the sole discretion and right to convert all or any portion of the then unpaid principal and interest balance of the Notes into shares of the Company’s common stock at a conversion price of $0.08 per share. (see note 6).

On December 19, 2016, the Company entered into a Stock Purchase Agreement by and between the Investors and the Company, pursuant to which NC 143 acquired 5 million shares of the Company’s common stock for a purchase price of $400,000 and RMI acquired 4 million shares of the Company’s common stock for a purchase price of $320,000 effective as of the Change-in-Control Date. Direct offering costs of the Company were $64,609 in connection with the offer and sale of the Investor Shares, and, net proceeds from the offer and sale of the Investor Shares were $655,391.

The closing of the Stock Purchase Agreement resulted in a change-in-control of the Company whereby the Investors beneficially acquired approximately 61.4% of the Company’s 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 Commission on December 23, 2016, which is herein incorporated by reference. Fuse recorded a goodwill asset of $820,000 to reflect the excess of the carrying value of the Company’s net assets over their fair value as implied by the purchase price paid by the Investors on the Change-in-Control Date.

On December 15, 2017, Fuse entered into the CPM Acquisition Agreement with NC 143 pursuant to which Fuse would purchase all of the outstanding membership interests of CPM.

On December 29, 2017, Fuse completed the previously-announced CPM Acquisition, pursuant to the CPM Acquisition Agreement by Fuse and NC 143, dated December 15, 2017, whereby Fuse would purchase all of the outstanding membership interests of CPM. Fuse issued 50 million shares of its common stock, par value $0.01 per share in exchange for 100% of the outstanding membership interests of CPM, at an agreed-upon value of $0.20 per share of common stock. The effective date of the CPM Acquisition was December 31, 2017. Additional one-time costs incurred with the acquisition totaled approximately $200,000 and are included in the selling, general, administrative and other expenses on the consolidated statements of operations.

The CPM Acquisition Agreement provides for Earn-Out payments to NC 143 subject to certain sales and profitability targets being met by the Company for years after 2017. The fair value of the Earn-Out was recorded at $19,244,543 as of the Effective Date. The Company recorded the Earn-Out at its fair value of the Effective Date. The CPM Acquisition Agreement provides for a working capital post-closing adjustment (“Post-Closing Adjustment”) for certain changes in CPMs current assets and current liabilities pursuant to the CPM Acquisition Agreement. The Post-Closing Adjustment is approximately $397,463 and will be paid in shares of the Company’s common stock within 120 days the Effective Date.

On the Effective Date of the closing of the CPM acquisition, NC 143 and RMI beneficially acquired approximately 90.4% of the Company’s common stock outstanding.

Fuse is the legal acquirer and, for accounting purposes, CPM was deemed to have acquired the Company in the CPM Acquisition. CPM is the successor entity and becomes the reporting entity which combines Fuse at the Change-in-Control Date, with the assets and liabilities of both companies combined at historical cost. (see note 1).

The following unaudited pro forma summary financial information presents the consolidated results of operations for the Company as if the CPM Acquisition had occurred on January1, 2016. The pro forma results are shown for illustrative purposes only and do not purport to be indicative of the results that would have been reported if the CPM Acquisition had occurred on the date indicated or indicative of the results that may occur in the future.

Unaudited pro forma information for the twelve months ended December 31, 2016 is as follows:

	Year Ended December 31, 2016 - Unaudited
	Historical Fuse Medical, Inc.			Historical CPM Medical Consultants, LLC		Pro forma Adjustments			Pro forma Combined
Revenue	$	567,607		$	25,647,353	$	(103,578	)	$	26,111,382
Net (loss) income	$	(585,935	)	$	3,035,296	$	-		$	2,449,361
Net (loss) income per common share - basic	$	-		$	-	$	-		$	0.34

The supplemental pro forma earnings were adjusted to exclude $103,578 for the year ended December 31, 2016. The number of shares outstanding used in calculating the net (loss) per common share – basic was 7,185,890 for the year ended December 31, 2016.

The Company is managed and operates in one segment, with Fuse merged into the CPM existing operations.