Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” and ~~��emerging~~“emerging growth company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

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 ofor revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes ☐ No ☐

Indicate the number of shares outstanding of each of the registrant’s classes of ~~Common Stock,~~common stock, as of the latest practicable date: As of November 56,, ~~2017, 18,215,808~~2020, 73,124,458 shares of the registrant’s ~~Common Stock~~common stock, $0.01 par value, were outstanding.

~~ITEM~~Item 1. ~~FINANCIAL STATEMENTS~~Condensed Consolidated Financial Statements

	September 30, 2017			December 31, 2016			September 30, 2020			December 31, 2019
	(Unaudited)						(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	472,246		$	667,475
Accounts receivable		285,463			58,065
Cash							$	1,538,888		$	1,099,310
Accounts receivable, net of allowance of $801,685 and $615,278, respectively								3,215,069			5,249,653
Inventories		8,493			25,326			6,982,916			7,855,887
Prepaid expenses and other current assets		24,704			3,528			34,959			39,850
Total current assets		790,906			754,394			11,771,832			14,244,700
Property and equipment, net		2,029			8,931			25,255			32,639
Security deposit		3,822			3,822
Long term accounts receivable, net of allowance of $1,491,361 and $728,000, respectively								2,069,689			924,646
Intangible assets, net								1,150,713			1,206,620
Goodwill								1,972,886			1,972,886
Total assets	$	796,757		$	767,147		$	16,990,375		$	18,381,491
Liabilities and Stockholders' Equity
Liabilities and Stockholders' Equity (Accumulated Deficit)
Current liabilities:
Accounts payable	$	61,764		$	83,410		$	2,343,483		$	2,752,854
Accounts payable - related parties		110,626			77,178
Accrued expenses		95,104			5,097			3,521,939			3,302,904
Note payable - related parties		150,000			150,000
Deferred rent - short term		-			160
Convertible notes payable - related parties								150,000			150,000
Paycheck Protection Program loan								361,400			—
Senior secured revolving credit facility								1,038,352			1,752,501
Total current liabilities		417,494			315,845			7,415,174			7,958,259
Deferred rent - long term		-			687
Notes payable - related parties								200,000			—
Economic Injury Disaster Loan								150,000			—
Earn-out liability								11,645,365			11,645,365
Total liabilities		417,494			316,532			19,410,539			19,603,624
Commitments and contingencies								—			—
Stockholders' equity:
Stockholders' equity (Accumulated 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, 18,215,808 and 15,890,808 shares issued and outstanding		162,158			158,908
Common stock, $0.01 par value; 100,000,000 shares authorized, 73,124,458 shares issued and outstanding as of September 30, 2020 and December 31, 2019								731,245			731,245
Additional paid-in capital		3,210,560			3,192,686			1,071,350			642,435
Accumulated deficit		(2,993,455	)		(2,900,979	)		(4,222,759	)		(2,595,813	)
Total stockholders' equity		379,263			450,615			(2,420,164	)		(1,222,133	)
Total liabilities and stockholders' equity	$	796,757		$	767,147		$	16,990,375		$	18,381,491

~~The accompanying~~See notes ~~are an integral part of these~~to unaudited condensed consolidated financial statements.

(Amounts in dollars, except per share data)
For the Three-months Ended
September 30, 2017

For the Three-months Ended
September 30, 2016

For the Nine-
months Ended
September 30, 2017

For the Nine-
months Ended
September 30, 2016

Revenues
$
428,204

$
107,584

$
911,033

$
421,170

Cost of revenues (primarily from related party, see note 8)

169,817

42,536

333,119

144,654

Gross profit

258,387

65,048

577,914

276,516

Operating expenses:

General, administrative and other

216,874

178,633

686,902

590,147

Loss on disposal of property and equipment

3,058

-

3,365

1,580

Depreciation

384

3,501

3,237

10,666

Total operating expenses

220,316

182,134

693,504

602,393

Operating income (loss)

38,071

(117,086
)

(115,590
)

(325,877
)

Interest expense

(6,806
)

(31,824
)

(20,194
)

(35,324
)
Extinguishment of debt

-

35,517

43,308

35,517

Net income (loss)
$
31,265

$
(113,393
)
$
(92,476
)
$
(325,684
)
Net income (loss) per common share - basic
$
0.00

$
(0.02
)
$
(0.01
)
$
(0.05
)
Net income (loss) per common share - diluted
$
0.00

$
-

$
-

$
-

Weighted average number of common shares outstanding - basic

15,890,808

6,890,808

15,890,808

6,890,808

Weighted average number of common shares outstanding - diluted

17,047,291

-

-

-

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2020		2019			2020			2019

Net revenues	$	5,738,662	$	5,716,344		$	14,385,831		$	15,562,928
Cost of revenues		2,043,722		4,787,939			5,823,281			8,987,196
Gross profit		3,694,940		928,405			8,562,550			6,575,732
Operating expenses:
Selling, general, administrative and other		1,379,385		2,263,964			5,021,632			6,604,066
Commissions		2,185,487		1,741,770			4,996,843			3,752,295
Depreciation and amortization		23,312		25,596			84,047			76,916
Total operating expenses		3,588,184		4,031,330			10,102,522			10,433,277
Operating income\(loss)		106,756		(3,102,925	)		(1,539,972	)		(3,857,545	)
Other expense:
Interest expense		20,611		34,900			75,633			88,362
Total other expense		20,611		34,900			75,633			88,362
Net income\(loss) before tax		86,145		(3,137,825	)		(1,615,605	)		(3,945,907	)
Income tax expense		5,661		926,517			11,341			771,582
Net income\(loss)	$	80,484	$	(4,064,342	)	$	(1,626,946	)	$	(4,717,489	)

Net income\(loss) per common share - basic	$	0.00	$	(0.06	)	$	(0.02	)	$	(0.07	)
Net income\(loss) per common share - diluted	$	0.00	$	(0.06	)	$	(0.02	)	$	(0.07	)
Weighted average number of common shares outstanding - basic		70,221,566		70,221,566			70,221,566			70,221,566
Weighted average number of common shares outstanding - diluted		74,999,458		70,221,566			70,221,566			70,221,566

~~The accompanying~~See notes ~~are an integral part of these~~to unaudited condensed consolidated financial statements.

CONDENSED ~~STATEMENT~~CONSOLIDATED STATEMENTS OF CHANGES IN ~~STOCKHOLDERS'~~STOCKHOLDERS’ EQUITY

Common Stock

Additional
Paid-In

Accumulated

(Amounts in dollars, except per share data)

Shares

Amount

Capital

Deficit

Total

Balance, December 31, 2016

15,890,808

$
158,908

$
3,192,686

$
(2,900,979
)

$
450,615

Issuance of restricted stock for services

2,325,000

3,250

17,874

-

21,124

Net loss

-

-

-

(92,476
)

(92,476
)
Balance, September 30, 2017

18,215,808

$
162,158

$
3,210,560

$
(2,993,455
)

$
379,263

	Common Stock				Additional Paid-In		Retained Earnings/
	Shares		Amount		Capital		(Deficit)			Total
Balance, December 31, 2019		73,124,458	$	731,245	$	642,435	$	(2,595,813	)	$	(1,222,133	)
Stock compensation expense		-		-		428,915		-			428,915
Net loss		-		-		-		(1,626,946	)		(1,626,946	)
Balance, September 30, 2020		73,124,458	$	731,245	$	1,071,350	$	(4,222,759	)	$	(2,420,164	)

~~The accompanying notes are an integral part of these condensed financial statements.~~

For the Nine-
months Ended
September 30, 2017

For the Nine-
months Ended
September 30, 2016

Cash flows from operating activities

Net loss

$
(92,476
)

$
(325,684
)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:

Amortization of debt discount

-

28,499

Depreciation

3,237

10,666

Loss on disposal of property and equipment

3,365

1,580

Extinguishment of debt

(43,308
)

(35,517
)
Stock-based compensation

21,124

-

Changes in operating assets and liabilities

Accounts receivable

(227,398
)

275,683

Inventories

16,833

49,618

Prepaid expenses and other receivables

(21,176
)

13,604

Accounts payable

21,662

(146,096
)
Accounts payable - related parties

33,448

(13,604
)
Accrued expenses

88,312

2,170

Deferred revenues

-

91,534

Deferred rent

848

824

Net cash (used in) provided by operating activities

(195,529
)

(46,723
)
Cash flows from investing activities

Proceeds from the disposal of property and equipment

300

300

Net cash provided by investing activities

300

300

Cash flows from financing activities

Proceeds from issuance of promissory notes to related parties

-

100,000

Net cash provided by financing activities

-

100,000

Net (decrease) increase in cash and cash equivalents

(195,229
)

53,577

Cash and cash equivalents - beginning of period

667,475

8,157

Cash and cash equivalents - end of period

$
472,246

$
61,734

Supplemental disclosure of cash flow information:

Interest Paid

$
-

$
5,250

	For the Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities
Net income\(loss)	$	(1,626,946	)	$	(4,717,489	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		84,047			76,916
Stock based compensation		428,915			487,524
Provision for bad debts and discounts		186,407			702,811
Provision for long term accounts receivable		763,361			376,826
Deferred income tax expense		-			760,993
Changes in operating assets and liabilities:
Accounts receivable		1,848,177			161,943
Inventories		872,971			2,886,268
Prepaid expenses and other current assets		4,891			12,188
Long term accounts receivable		(1,908,403	)		(774,712	)
Accounts payable		(409,371	)		(186,823	)
Accrued expenses		219,035			125,458
Net cash provided by (used in) operating activities		463,084			(88,097	)
Cash flows from investing activities
Purchase of property and equipment		(20,757	)		—
Net cash used in investing activities		(20,757	)		-
Cash flows from financing activities
Payments on senior secured revolving credit facility, net		(714,149	)		275,053
Proceeds from Paycheck Protection Program		361,400			—
Proceeds from related party promissory notes		200,000		-
Proceeds from Economic Injury Disaster Loan		150,000			—
Net cash provided by (used in) financing activities		(2,749	)		275,053
Net increase in cash		439,578			186,956
Cash - beginning of period		1,099,310			844,314
Cash - end of period	$	1,538,888		$	1,031,270
Supplemental disclosure of cash flow information:
Cash paid for interest	$	52,188		$	69,257

~~The accompanying~~See notes ~~are an integral part of these~~to unaudited condensed consolidated financial statements.

~~The Company was initially incorporated in 1968 as Golf Rounds.com,~~Fuse Medical, Inc., a Delaware ~~corporation. Effective May 28, 2014,~~corporation (the “Company”), is a manufacturer and national distributor of medical devices and surgical implants for the Company amended its certificate of incorporation to change its name from “GolfRounds.com, Inc.” to “Fuse Medical, Inc.” (the “Company”). Then, also on May 28, 2014, the Company merged with and into Fuse Medical, LLC, with Fuse Medical, LLC surviving as a wholly owned subsidiary of Fuse Medical, Inc (“Legacy Fuse”). The transaction was accounted for as a reverse merger with Fuse Medical, Inc. deemed the legal acquirer, and Fuse Medical, LLC deemed the accounting acquirer. During 2015, Certificates of Termination were filed for Fuse Medical, LLC and its two subsidiaries.

On December 19, 2016 (the “Closing Date”), the Company entered into a definitive Stock Purchase Agreement (the “Purchase Agreement”) by and among the Company, NC 143 Family Holdings, LP, a family limited partnership ~~controlled by Mark W. Brooks~~ (“NC 143”), and Reeg Medical Industries, Inc., an investment holding company owned and controlled by Christopher C. Reeg (“RMI” and, together with NC 143, the “Investors”), pursuant to which NC 143 acquired 5,000,000 shares of the Company’s common stock for a purchase price of $400,000 and RMI acquired 4,000,000 shares of the Company’s common stock for a purchase price of $320,000, effective as of the Closing Date. As direct offering costs amounted to $64,609, net proceeds from the sale of these shares were $655,391. The closing of the Purchase Agreement resulted in a change in control of the Company whereby the Investors acquired a majority interest in the Company. Effective as of the Closing Date, Mark W. Brooks became the Chairman of the Board of Directors and Christopher C. Reeg became the Chief Executive Officer of the Company.

orthopedic market. The Company distributes a broad portfolio of orthopedic implants including 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 also supports its broad portfolio of Orthopedic Implants with human allografts, substitute bone materials and tendons, as well as regenerative tissues and fluids (“Biologics”). The Company’s principal supplier isacquired CPM Medical Consultants, LLC (“~~CPM”~~CPM”) in December 2017 (the “CPM Acquisition”), in which the Company was the legal acquirer and CPM was deemed the accounting acquirer. In August 2018, the Company completed the acquisition of Palm Springs Partners, LLC d/b/a ~~company owned~~Maxim Surgical (“Maxim” and ~~controlled by~~such transactions the “Maxim Acquisition”). CPM and Maxim survive as the Company’s ~~Chairman~~wholly-owned subsidiaries and subsequent to the completion of ~~the Board of Directors. The~~each acquisition, CPM, Maxim and Company ~~strives to provide cost savings and quality products to its customers, which include hospitals and medical facilities.~~operations were consolidated.

The interim unaudited condensed consolidated financial statements included herein reflect all material adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) which, in the opinion of the Company’s management, are ordinary and necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under generally accepted accounting principles ~~generally accepted~~ in the United States of America (“~~GAAP”~~GAAP”) have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the ~~“SEC”~~“SEC”). The Company’s management believes the disclosures are adequate to make the information presented not misleading.

The condensed consolidated balance sheet information as of December 31, ~~2016,~~2019 was derived from the Company’s ~~Annual Report~~annual report on Form 10-K for the fiscal year ended December 31, ~~2016, as~~2019 (“2019 Annual Report”), filed with the SEC pursuant to Section 13 or 15(d) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), on March ~~20, 2017 (“2016 Annual Report”).~~30, 2020. These interim unaudited condensed consolidated financial statements should be read in conjunction with the ~~2016~~2019 Annual Report.

The results of operations for the three and ~~nine-months~~nine months ended September 30, ~~2017~~2020 are not necessarily indicative of the results to be expected for the entire fiscal year or for any other ~~period.~~period as the Company has historically experienced seasonal trends with greater revenue and volume between the last two calendar quarters compared to the first two calendar quarters of the year.

The accompanying interim unaudited condensed consolidated financial statements have been prepared as if the Company will continue as a going concern. ~~For the nine-month period ended~~Through September 30, ~~2017,~~2020, the Company ~~used cash~~has accumulated losses of $4,222,759 and a stockholders’ deficit of $2,420,164. Although revenue increased by $22,318 in ~~operations~~the third quarter of ~~$195,529,~~2020 compared to the same quarter in 2019, the Company has been impacted in 2020 by restrictions as a result of the novel coronavirus SARS-CoV-2 global pandemic (“COVID-19”). At various times during the years ended December 31, 2018 and 2019 and in the first quarter ended March 31, 2020, the Company was out of compliance with one or more covenants contained in its Amended and Restated Business Loan Agreement (“RLOC”) with ZB, N.A., d/b/a Amegy Bank (“Amegy Bank”), but obtained waivers from Amegy Bank to cure the violations, resulting in reductions in the Company’s aggregate contractual borrowing limits under the RLOC. The RLOC functions as a senior secured revolving loan facility. On November 12, 2020, the Company executed a Sixth Amendment to the RLOC with Amegy Bank which ~~$92,476 represented~~extended the termination date of the RLOC until May 4, 2021. (See Note 13, “Subsequent Events”). The Company’s management has determined that these conditions and events raise substantial doubt about the ability of the Company to continue as a ~~net loss.~~ going concern.

The Company’s ability to continue as a going concern for at least one year beyond the date of this unaudited condensed consolidated balance sheet at September 30, 2020 is dependent upon the ~~ability~~continued easing of restrictions imposed on elective surgeries by governmental authorities as a result of COVID-19, as well as the Company’s ~~management~~(i) successful execution of key branding initiatives, (ii) introduction, commercialization and sales of new proprietary products and product lines, (iii) increased sales of existing products, with strategic emphasis on direct sales to ~~successfully execute its restructuring~~medical facilities (“Retail Cases”), and ~~rebranding strategies while~~ increasing ~~revenue growth and profitability. As~~the percentage of Retail Cases sold as a ~~result,~~percentage of all cases sold by the Company (sales volume based on medical procedures in which the Company’s ~~independent registered public accounting firm, in~~products are sold and used “Cases”), and (iv) continued cost reductions. Additionally, the Company will need to refinance its ~~report on the Company’s 2016 audited financial statements, has raised substantial doubt about the Company’s ability to continue as~~RLOC with Amegy Bank with a ~~going concern.~~

The Company’s management expects to fund its future business development activities and its working capital needs largely from improved future operations and other traditional financing sources, such as a revolving line ofnew credit facility ~~term notes,~~on commercially reasonable terms, or ~~additional private placements until such time sufficient funds are provided~~obtain financing by operations. There can be no assurance the Company’s financing efforts will be successful, or if the Company’s management will be able to achieve sufficient revenue and profitability growth from operations. Additional financing, may include restrictions on the Company’s operations, or with equity financing may result in the Company’s stockholders’ ownership being diluted.May 4, 2021.

The interim unaudited condensed consolidated financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going ~~concern.~~concern.

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, CPM and Maxim. Intercompany transactions have been eliminated in consolidation.

The preparation of the interim unaudited condensed consolidated financial statements in ~~conformity~~accordance with GAAP requires the Company’s management to make estimates and assumptions that affect the Company’s reported amounts in the interim unaudited condensed consolidated financial statements.

Actual results could differ from those estimates. Significant estimates inon the accompanying interim unaudited condensed consolidated financial statements ~~may~~ include ~~allowance~~the allowances for doubtful accounts, valuation of inventories, the ~~estimates~~Company’s effective income tax rate, and the recoverability of ~~fixed assets useful lives, the valuation of property and equipment, the valuation allowance on~~ deferred tax assets, which are based upon the Company management’s expectation of future taxable income and allowable deductions and the fair value ~~calculation~~calculations of stock-based ~~awards.~~compensation, goodwill, finite lived intangibles and the earn-out liability.

~~Net Income (Loss)~~Long term accounts receivable, net of allowance was previously reported as a component of current assets as accounts receivable, net of allowance, in the Company’s accompanying interim unaudited condensed consolidated balance sheets. Long term accounts receivable reflects Cases where the patient has obtained a letter of protection, (“LOP”). A LOP is a contract that provides that the medical providers will be paid from any proceeds received from settlement of litigation of the underlying cause of action with respect to the event that necessitated medical goods and services. Once the medical provider receives payment, then the medical provider pays the Company’s invoice which payment is generally greater than 365 day from date of service. The LOP provides medical providers with greater certainty of full payment. This reclassification had no effect on the previously reported total assets or net loss.

In accordance with Accounting Standards Codification (“ASC”) No. 280, “Segment Reporting,” the Company uses the management approach for determining its reportable segments. The management approach is based upon the way that management reviews performance and allocates resources. The Company’s Chief Executive Officer serves as the Company’s chief operating decision maker, and his management team reviews operating results on a consolidated basis for purposes of allocating resources and evaluating the financial performance of the Company. The Company has integrated the operations of both CPM and Maxim. Accordingly, the Company has determined that it has one operating segment and, therefore, one reporting segment.

~~Basic net income~~Earnings (loss) per common share, basic is calculated by dividing the net ~~income~~ income/(loss) attributable to common stockholders by the weighted-average number of common ~~shares~~stock, par value $0.01 (“Common Stock”), outstanding during the period, without consideration of ~~common stock~~Common Stock equivalents. Shares of restricted stock are included in the basic ~~weighted average~~weighted-average number of ~~common shares~~Common Stock outstanding from the time they vest.

Diluted ~~net income~~earnings (loss) per common share is computed by dividing net ~~income~~ income/(loss) ~~attributable to common stockholders~~ by the weighted-average number of ~~common share~~Common Stock equivalents outstanding for the period determined using the treasury stock method. ~~As of~~For the three and nine months ended September 30, ~~2016, 604,788~~2020 and 2019, the Company excluded the effects of outstanding ~~common~~ stock ~~equivalents have been excluded from diluted net~~options, convertible notes and, to the extent in the money, restricted stock as their effects were antidilutive due to the Company’s operating loss ~~per common share because their inclusion would be anti-dilutive.~~during these periods. (See Note 9, “Stockholders’ Equity” for the terms and conditions of restricted stock).

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. The Company classifies assets and liabilities recorded at fair value under the fair value hierarchy based upon 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,~~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.

In connection with the CPM Acquisition in December 2017, the Company recorded an earn-out liability as part of the purchase consideration. The fair value of the earn-out liability is re-measured at each reporting period using Level 3 inputs with changes in fair value recorded in earnings. The earn-out payments are based on the financial performance of the Company between January 1, 2018, and December 31, 2034. The base amount of the earn-out ranges from $0.00 to $16,000,000 with an additional bonus payment of $10,000,000, subject to the Company meeting certain earnings thresholds as defined in the CPM Acquisition Agreement. The fair value of the earn-out liability was calculated using the Monte Carlo simulation, which was then applied to estimated earn-out payments. There was no change in the earn-out liability for the nine months ended September 30, 2020, and there were no significant changes in the Level 3 inputs from those utilized at December 31, 2019. The required earnings thresholds have not been met from inception of the agreements through September 30, 2020, and, as such, there have been no payments required for either the base or bonus earn-out tranches.

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~~values of notes payable ~~approximates~~approximate their respective fair ~~value~~values based upon their effective interest rates.

Certain amounts in the accompanying condensed financial statements as of September 30, 2016, and for the three-months and nine-months then ended, have been reclassified to conform to the presentation of September 30, 2017 condensed financial statements for the three-months and nine-months then ended. These include deferred rent and depreciation expense, previously reported as a component of accrued expenses and general, administrative and other expenses, respectively.

The Company considers highly liquid investments with maturities of ~~three-months~~three months or less at the time of purchase to be cash equivalents. There were no cash equivalents at September 30, ~~2017~~2020 and ~~2016.~~December 31, 2019. The ~~Company maintains its~~Company’s cash is concentrated in alarge financial ~~institution demand deposit account~~institutions that at times may exceed federally insured limits of $250,000 per financial institution. The Company has not experienced any financial institution losses ~~in such accounts~~ from inception through September 30, ~~2017.~~2020. As of September 30, ~~2017,~~2020 and December 31, ~~2016,~~2019, there were deposits of ~~$231,498~~$1,075,880 and ~~$421,636~~$599,309, respectively, greater than federally insured limits.

Accounts Receivable and ~~Allowance for Doubtful Accounts Receivable~~Allowances

Accounts ~~receivables~~receivable are non-interest bearing and are stated at gross invoice amounts less an allowance for doubtful accounts ~~receivable.~~receivable and an allowance for contractual discount pricing. Credit is extended to customers based on an evaluation of their financial condition, industry reputation, and other factors considered by the Company’s management. The Company ~~estimates its allowance for doubtful~~generally does not require collateral or other security interest to support accounts ~~by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. Payment~~receivable. Based on trends and ~~receivable~~specific factors, the customer’s credit terms may be modified, including required payment upon delivery.

The Company performs regular on-going credit evaluations of its customers as deemed relevant. As events, trends, and circumstances warrant, the Company’s management estimates the amounts ~~outstanding~~that are more likely than not to be uncollectible. These amounts are recognized as bad debt expense and are reflected within selling, general, administrative and other expenses on the Company’s accompanying interim unaudited condensed consolidated statements of operations.

When accounts are deemed uncollectible, they are often referred to the Company’s outside legal firm for ~~an extended period beyond contractual terms are examples of these indicators.~~litigation. Accounts deemed uncollectible are ~~written off~~written-off in the period when the Company has exhausted its efforts to collect overdue and unpaid receivables or otherwise has evaluated other circumstances that indicate that the Company should abandon such efforts. ~~The~~Accounts deemed uncollectible are removed from the Company’s ~~Management has determined that no~~accounts receivable portfolio, with a corresponding offset to the allowance for doubtful accounts ~~was necessary~~receivable. The Company may record additional allowances for doubtful accounts based on known trends and

expectations to ensure the Company’s accounts receivable portfolio is recorded at ~~September 30, 2017~~net realizable value. Specific allowances are re-evaluated and ~~December 31, 2016.~~adjusted as additional facts and information become available. Previously written-off accounts receivable subsequently collected are recognized as a reduction of bad debt expense when funds are received.

The Company’s management estimates its allowance for contractual discount pricing, by evaluating specific accounts where information indicates the customer is offered contractual pricing and discount allowances. In these arrangements, the Company’s 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 re-evaluated, analyzed, and adjusted as additional information becomes available to determine the total amount of the allowance. The Company may record additional allowances based on trends and expectations to ensure the Company’s accounts receivable portfolio is recorded at net realizable value.

Inventories are stated at the lower of cost or net realizable value (first-in, first-out) ~~or market.~~, which includes an allowance for slow-moving inventory, expired inventory, and inventory obsolescence. Inventories consist entirely of finished goods and include internal and external fixation products; upper and lower extremity plating and total joint reconstruction; soft tissue fixation and augmentation for sports medicine procedures; spinal implants for trauma, degenerative disc disease, and deformity indications (collectively, “Orthopedic Implants”) and ~~Biologics.~~osteo-biologics and regenerative tissue which include human allografts, substitute bone materials, tendons, and amniotic tissues and fluids (collectively, “Biologics”). The Company reviews 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, a write-down is recognized equal to an amount by which the carrying value exceeds the market value of inventories.

Property and equipment are recorded at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets per the following table. Expenditures for additions and improvements are capitalized, while repairs and maintenance are expensed as incurred. The Company reviews long-lived assets for impairment annually or whenever changes in circumstances indicate that the carrying amount of an asset might not be recoverable.

Upon the retirement or disposition of property and equipment, the related cost and accumulated depreciation is removed. A gain is recorded when consideration received is more than the disposed asset’s cost, net of depreciation, and a loss is recorded when consideration received is less than the disposed asset’s cost, net of depreciation.

The Company ~~uses~~reviews other long-lived assets for indicators of impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The evaluation is performed at the lowest level of identifiable cash flows, which is at the individual asset level or the asset ~~and liability method~~group level. The undiscounted cash flows expected to ~~compute the differences between the tax basis of assets and liabilities and~~be generated by the related ~~financial amounts. Valuation allowances~~assets are ~~established, when necessary, to reduce deferred tax assets to~~estimated over their useful life based on updated projections. If the ~~amount~~evaluation indicates that ~~more likely than not will be realized. The Company has 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. Realizationamount of the ~~deferred tax~~ assets ~~net of deferred tax liabilities,~~may not be recoverable, any potential impairment is ~~principally dependent~~measured based upon ~~achievement of projected future taxable income.~~

The Company records a liability for uncertain tax positions when it is probable that a loss has been incurred and the amount can be reasonably estimated. As of September 30, 2017, the Company had no liabilities for uncertain tax positions. The Company's policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings.

The Company recognizes revenue 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. The Company reports revenues for transactions in which it is the primary obligor on a gross basis and revenues in which it acts as an agent (earning a fixed percentage of the sale) on a net basis, (net of related costs).

The Company periodically issues stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic 718 of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. The Company estimates the fair value of ~~stock option~~the related assets or asset group as determined by an appropriate market appraisal or other valuation technique. Assets classified as held for sale, if any, are recorded at the lower of carrying amount or fair value less costs to sell.

Goodwill and ~~warrant awards to employees and directors~~Other Intangible Assets

Goodwill is determined based on ~~the date~~an acquisition purchase price in excess of grant using an option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in the Company’s Statement of Operations. The Company estimates the fair value of identified net assets acquired. Intangible assets with lives restricted stock awards (“RSA”) to employees and directors using the market price of the Company’s common stock on the date of grant, and the value of the portion of the award that is ultimately expected to vest is recognized as expenseby contractual, legal or other means are amortized over the required service period in the Company’s Statements of Operations. The Company accounts for share-based payments to non-employees in accordance with Topic 505 of the FASB Accounting Standards Codification, whereby the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

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 is in the process of evaluating the impact of ASU 2014-09 on the Company's financial statements and disclosures.

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 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 do not believe that this guidance will have a material impact on its financial statements and disclosures.

All other ASUs issued and not yet effective for the nine-months ended September 30, 2017, and through the date of this report, were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s financial position of results of operations.their useful lives.

Goodwill is not amortized but is tested in the fourth quarter each year for impairment, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. The Company performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. If the carrying value of a reporting unit exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. As of September 30, ~~2017~~
2020, the Company evaluated certain qualitative factors including, (i) macroeconomic factors resulting from the COVID-19 pandemic, (ii) the Company’s operating results and overall financial performance, (iii) the Company’s stock price, and (iv) specific cost-saving actions taken by the Company in response to the COVID-19 pandemic in concluding that the reported amount of goodwill was not more likely than not impaired.

Accounting Standards Update (“ASU”) 350-30-35-18 indicates that an intangible asset that is not subject to amortization shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. The Company’s 510(k) intangible asset has an indefinite life. The Company does not believe that triggering event has occurred as of September 30, 2020.

The Company’s intangible assets subject to amortization consist primarily of acquired non-compete agreements and customer relationships. Amortization expense is calculated using the straight-line method over the asset’s expected useful life.

The Company’s revenues are generated from the sales of Orthopedic Implants and Biologics to support orthopedic surgeries. The Company obtains purchase orders from its customers for the sale of its products, which set forth the general terms and conditions including line item pricing and payment terms (generally due upon receipt). The Company recognizes revenue when its customers obtain control over the assets (generally when the title passes upon shipment or when a product is utilized in a surgery) and it is probable that the Company will collect substantially all the amounts due. Individual promised goods are the Company’s only performance obligation.

Due to the nature of its products, the Company’s product returns have been historically immaterial.

The Company includes shipping and handling fees in net revenues. Shipping and handling costs, associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of goods sold on the Company’s accompanying interim unaudited condensed consolidated statements of operations.

The Company measures sales volume based on medical procedures in which the Company’s products are sold and used (Cases). The Company considers Cases resulting from direct sales to medical facilities to be Retail Cases and Cases resulting from sales to third parties, such as non-medical facilities, distributors, or sub-distributors, to be wholesale cases (“Wholesale Cases”). Some of the Company’s sales for Wholesale Cases are on a consignment basis with a third party. When consigned, the revenue is not recorded until the device is implanted in a patient during surgery. In the Company’s industry, Retail Cases are typically sold at higher price points than Wholesale Cases, resulting in greater revenue and gross profit per Case.

Cost of revenues consists of (i) cost of goods sold, (ii) freight and shipping costs for items sold to customers, (iii) cost of storage, (iv) investment in medical instruments, which are expensed when acquired, (v) inventory shrink, and (vi) an estimate for slow-moving and expired inventory, and inventory obsolescence.

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, the Company calculates 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 the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. For non-employee stock-based awards, the Company calculates 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 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.

Accounting pronouncements issued or effective in 2020 by the Financial Accounting Standards Board (the “FASB”) did not have, or are not believed by the Company’s management to have, a material impact on the Company's present or future unaudited condensed consolidated financial statements.

Property and equipment consisted of the following at September 30, ~~2017~~2020 and December 31, ~~2016:~~2019:

Depreciation expense for the ~~three-months~~three months ended September 30, ~~2017~~2020 and ~~2016~~2019 was ~~$384~~$8,116 and ~~$3,501,~~$5,241, respectively. Depreciation expense for the ~~nine-months~~nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 was ~~$3,237~~$28,141 and ~~$10,666,~~$15,851, respectively. ~~During~~

The following table summarizes the ~~nine-months~~Company’s goodwill and other intangible assets:

Amortization expense for the three months ended September 30, 2020 and 2019 was $15,197 and $20,355, respectively. Amortization expense for the nine months ended September 30, 2020 and 2019, was $55,906 and $61,065, respectively.

The Company’s intangible assets subject to amortization consist primarily of acquired non-compete agreements, and customer relationships.

Effective December 29, 2017, the Company ~~disposed~~became party to its RLOC with Amegy Bank. The RLOC contains customary representation, warranties, covenants and events of ~~furniture~~default and ~~fixtures~~is collateralized by substantially all of the Company’s assets. The Company’s Chairman of the Board of Directors (“Board”) and President initially personally guaranteed fifty percent (50%) of the outstanding RLOC amount.

On September 21, 2018, the Company executed the First Amendment to the RLOC with Amegy Bank (the “First Amendment”). The First Amendment (i) waived the Company’s events of default under the RLOC through the fiscal quarter ended September 30, 2018, and (ii) added a covenant that the Company achieve quarterly net ~~book value~~income of ~~$3,665~~$700,000 or more for ~~proceeds~~the fiscal quarter ending on September 30, 2018.

On November 19, 2018, the Company executed the Second Amendment to the RLOC with Amegy Bank (the “Second Amendment”). The Second Amendment (i) waived the Company’s events of ~~$300, resulting~~default under the RLOC, (ii) reduced the aggregate limit of the RLOC to $4,000,000, (iii) extended the maturity date to November 4, 2019, (iv) revised the variable interest rate to the one-month LIBOR rate plus four percent (4.00%) per annum, and (v) amended the financial covenants to state that the Company will not permit the Fixed Charge Coverage Ratio of any calendar quarter end from and after the quarter ending June 30, 2019, to be less than 1.25 to 1.00; EBITDA to be less than $700,000 for the fiscal quarter ending December 31, 2018, and $100,000 for the fiscal quarter ending March 31, 2019; and modified the event of default related to consecutive quarterly losses to be applicable from and after the quarter ending June 30, 2019.

On May 9, 2019, the Company executed the Third Amendment to the RLOC with Amegy Bank (the “Third Amendment”). Pursuant to the Third Amendment Amegy Bank (i) waived the Company’s events of default under the RLOC, (ii) reduced the aggregate limit of the RLOC to $3,500,000, (iii) reduced the limit of credit card exposure to $500,000, (iv) reduced borrowing base component of inventory to 30%, (v) amended the financial covenants to state that the Company will not permit EBITDA to be less than $100,000 for the fiscal quarter ending June 30, 2019 and $500,000 for the fiscal quarter ending September 30, 2019 and (vi) rescinded the Loan Sweep Feature, requiring the Company to give notice of each requested loan by delivery of Advance Request to Amegy Bank.

On December 18, 2019, the Company executed the Fourth Amendment to the RLOC with Amegy Bank (the “Fourth Amendment”). Pursuant to the Fourth Amendment, Amegy Bank (i) waived the Company’s events of default under the RLOC, (ii) reduced the aggregate limit of the RLOC to $2,750,000, (iii) reduced and limited the annual salary of the Company’s Chairman of the Board and President, Mark W. Brooks (“Mr. Brooks”), to not exceed $550,000, (iv) amended the financial covenants to state that the Company will not permit EBITDA to be less than $600,000 for the fiscal quarter ending December 31, 2019 and $125,000 for the fiscal quarter ending March 31, 2020, (v) extended the termination date of the RLOC to May 4, 2020 and (vi) provided for our Chairman of the Board and President to personally guarantee one hundred percent (100%) of the outstanding RLOC amount.

On May 21, 2020, the Company executed the Fifth Amendment to the RLOC with Amegy Bank (“the Fifth Amendment”). Pursuant to the Fifth Amendment, Amegy Bank (i) waived the Company’s events of default under the RLOC, (ii) amended the financial covenants to state that the Company will not permit EBITDA to be less than $25,000 for the six months ended September 30, 2020, and (iii) extended the termination date of the RLOC until November 4, 2020.

In conjunction with executing the Fifth Amendment to the RLOC, the Company obtained an additional $200,000 in capital in the form of subordinated debt from affiliates of Messrs. Brooks and Reeg. Specifically, on May 6, 2020, the Company borrowed $180,000 from NC 143 Family Holdings, LP (“NC 143”), a ~~loss~~limited partnership controlled by Mr. Brooks, the Company’s President and Chairman of ~~$3,365~~the Board, and $20,000 from Reeg Medical Industries, Inc. (“RMI”), a company owned and controlled by Christopher C. Reeg (“Mr. Reeg”), the Company’s Chief Executive Officer and Secretary, in exchange for two promissory notes which are unsecured and bear interest at 0.25% per annum until May 6, 2022, the maturity date, and 10.0% per annum after the maturity date, if not paid in full. Principal and interest are due and payable on ~~disposal~~the maturity date, provided, however, any payment of ~~property~~principal and ~~equipment.~~interest on the loans is subordinated to payment of all indebtedness under the RLOC.

Pursuant to the Fifth Amendment to the RLOC, the Company was in compliance with the covenants of its RLOC with Amegy Bank for the six months ended September 30, 2020.

The outstanding balance of the RLOC was $1,038,352 and $1,752,501 at September 30, 2020 and December 31, 2019, respectively. Interest expense incurred on the RLOC was $11,354 and $28,095 for the three months ended September 30, 2020 and 2019, respectively, and is reflected in interest expense on the Company’s accompanying unaudited condensed consolidated statements of operations. Interest expense incurred on the RLOC was $50,987 and $68,168 for the nine months ended September 30, 2020 and 2019, respectively. Accrued interest on the RLOC at September 30, 2020 and December 31, 2019 was $3,236 and $4,437, respectively, and is reflected in accrued expenses on the Company’s accompanying interim unaudited condensed consolidated balance sheets. At September 30, 2020, the effective interest rate was 4.76%.

During July 2016 through October 2016, the Company obtained three ~~short-term~~working capital loans from NC 143 and RMI in the ~~Investors~~form of convertible promissory notes (“Notes”) in the aggregate amount of $150,000 ~~in exchange for promissory notes~~ bearing ~~10%~~ten percent (10%) interest per annum until December 31, 2016 (“Maturity Date”), and ~~18%~~eighteen percent (18%) interest per annum ~~after December 31, 2016, which~~for periods subsequent to the Maturity Date. The Notes remain outstanding and principal ~~shall be~~and interest are due and payable upon demand of the payee ~~at any time after the earlier of: (i) December 31, 2016, or (ii) upon a change in control of the Company. Notwithstanding, on or after January 16, 2017,~~and at the holder’s sole ~~discretion, the holder has~~discretion. The Notes’ holders have the right to convert all or any portion of the then unpaid principal and interest balance into shares of the Company’s ~~common stock~~Common Stock at a conversion price of $0.08 per share. ~~This resulted~~On May 6, 2020, the Company borrowed $180,000 from NC 143 and $20,000 from RMI, in ~~a beneficial conversion feature in the aggregate amount of $117,500, which was treated as a discount to each of the~~exchange for two promissory notes which are unsecured and ~~amortized over~~bear interest at 0.25% per annum until May 6, 2022, the ~~term~~maturity date, and 10.0% per annum after the maturity date, if not paid in full. Principal and interest are due and payable on the maturity date, provided, however, any payment of ~~each respective promissory note, maturing~~principal and interest on ~~December 31, 2016,~~ the ~~date in which~~loans is subordinated to payment of all indebtedness under the ~~beneficial conversion feature was fully amortized.~~RLOC.

During the ~~three-months~~three months ended September 30, ~~2017~~2020 and ~~2016,~~2019, interest expense of ~~$6,806~~$6,930 and ~~$1,750,~~$6,805, respectively, ~~was recognized on outstanding notes payable – related parties and are~~is reflected ~~within~~in interest expense on the Company’s accompanying unaudited condensed consolidated statements of operations. During the ~~nine-months~~nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, interest expense of ~~$20,194~~$20,477 and ~~$5,250,~~$20,195, respectively, ~~was recognized on outstanding notes payable – related parties and are~~is reflected ~~within~~in interest expense on the Company’s accompanying unaudited condensed consolidated statements of operations. As of September 30, ~~2017,~~2020, and December 31, ~~2016, accrued interest payable was $25,290 and $5,096, respectively, which is included in accrued expenses on the accompanying condensed balance sheets.~~

On January 27, 2014, M. Richard Cutler and Cutler Law Group, P.C. (the “Plaintiffs”) filed a complaint in the District Court of Harris County, Texas, 2014-03355, against Legacy Fuse, Alan Meeker, Rusty Shelton, Jonathan Brown, Robert H. Donehew and GolfRounds.com, Inc. (the “Defendants”). On April 21, 2014, the complaint was dismissed for “want of prosecution.” On September 18, 2015, Plaintiffs refiled a complaint in the District Court of Harris County, Texas, Cause No. 2015-55652 and added PH Squared, LLC as an additional Plaintiff, as more fully described in “Legal Matters” included in Note 6 in the Company’s 2016 Annual Report, which is herein incorporated by reference. During April 2017, one of the named individuals in the complaint filed for bankruptcy protection. There is currently no trial date set.

~~The Company’s management continues to believe that the lawsuit is completely without merit and will vigorously contest it and protect the Company’s interests.~~

~~Accounts Payable~~2019, accrued interest was $106,572 and $86,096, respectively, which is reflected in accrued expenses on the Company’s accompanying unaudited condensed consolidated balance sheets.

On April 11, 2020, the ~~nine-months~~Company received approval from the U.S. Small Business Administration (“SBA”) to fund the Company’s request for a loan under the Paycheck Protection Program (“PPP Loan”) created as part of the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the SBA. In connection with the PPP Loan, the Company has entered into a promissory note in the principal amount of $361,400. In accordance with the requirements of the CARES Act, the Company intends to use the proceeds from the PPP Loan primarily for payroll costs. The PPP Loan is scheduled to mature on April 11, 2022, has a 1.00% interest rate, and is subject to the terms and conditions applicable to all loans made pursuant to the Paycheck Protection Program as administered by the SBA under the CARES Act. The PPP Loan is reflected in short term liabilities in the Company’s accompanying interim unaudited condensed consolidated balance sheets as the Company expects the PPP Loan will be forgiven during 2020.

As of September 30, 2020, the Company incurred approximately $1,810 in accrued interest related to the PPP Loan, which is reflected in accrued expenses on the Company’s accompanying interim unaudited condensed consolidated balance sheets. For the three months and nine months ended September 30, ~~2017,~~2020, the Company ~~recorded a gain of $43,308 on extinguishment of long-aged outstanding payables owed to a former law firm for $32,052~~incurred approximately $907 and ~~liabilities aggregating $11,256 owed~~$1,810, respectively, in interest expense related to the ~~Company’s beneficial owners for services provided to the Company and~~PPP Loan, which is reflected ~~within extinguishment of debt~~in interest expense on the ~~accompanying condensed~~Company’s statements of operations. The Company did not incur interest expense related to the PPP Loan for the three and nine months ended September 30, 2019.

On May 12, 2020, the Company executed the standard loan documents required for securing a loan from the SBA under its Economic Injury Disaster Loan assistance program (the “EIDL Loan”) in light of the impact of the COVID-19 pandemic on the Company’s ~~management believes if these items were contested,~~business. Pursuant to the ~~probable outcome would~~Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan was $150,000, with proceeds to be ~~favorable primarily~~used for working capital purposes. Interest accrues at the rate of 3.75% per annum. Installment payments, including principal and interest, are due monthly beginning May 12, 2021 (twelve months from the date of the SBA Loan Agreement) in the amount of $731. The balance of principal and interest is payable thirty years from the date of the SBA Loan Agreement. The EDIL Loan is reflected in long term liabilities in the Company’s accompanying interim unaudited condensed consolidated balance sheets. In connection therewith, the Company received a $10,000 advance, which does not have to ~~statute~~be repaid and is reflected as an offset in Selling, General, Administrative and Other Expenses in the Company’s accompanying interim unaudited condensed consolidated statements of ~~limitations.~~operations.

As of September 30, 2020, the Company incurred approximately $2,359 in accrued interest related to the EIDL Loan, which is reflected in accrued expenses on the Company’s accompanying interim unaudited condensed consolidated balance sheets. The Company did not incur accrued interest expense on the EIDL Loan as of September 30, 2019. For the three months and nine months ended September 30, 2020, the Company incurred approximately $1,419 and $2,359 in interest expense related to the EIDL Loan, which is reflected in interest expense on the Company’s statements of operations. The Company did not incur interest expense related to the EIDL Loan for the three and nine months ended September 30, 2019.

The ~~Company has a~~2018 Amended and Restated Equity Incentive Plan of Fuse Medical, Inc. (“2018 Equity Plan”) is the Company’s stock-based compensation plan, which the Company’s Board adopted on April 5, 2017, and subsequently amended and restated on December 13, 2018. The 2018 Equity Plan provides for the granting of equity awards, including qualified incentive and non-qualified stock options, stock appreciation awards, and restricted stock awards to employees, directors, consultants, and ~~advisors;~~advisors. Awards granted pursuant to the ~~2017~~2018 Equity ~~Incentive~~ Plan are subject to a vesting schedule set forth in individual agreements.

The Company’s management estimates the fair value of ~~Fuse Medical, Inc. (the “2017 Plan”), which was adopted by~~stock-based compensation utilizing the Black-Scholes option pricing model. Black-Scholes option pricing is calculated using several variables, including the expected option term, expected volatility of the Company’s stock price over the expected option term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company’s management believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors, which are

subject to ASC Topic 718 requirements. The Company’s management estimates of fair value may not be reflective of actual future values or amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award.

The Company’s management utilizes the simplified method to estimate the expected life for stock options granted to employees, as the Company does not have sufficient historical data regarding stock option exercises. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company’s management believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

The Company made an accounting policy election to account for forfeitures when they occur, versus estimating the number of awards that are expected to vest, in accordance with ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting.”

For the three and nine months ended September 30, 2019 the Board granted 150,000 and 1,350,000 Non-qualified Stock Option (“NQSO”) to the Company’s product advisory board members, certain key employees and marketing representatives. For the three and nine months ended September 30, 2020, the Board did not grant any NQSOs. For the three months ended September 30, 2020 and September 30, 2019 the Company amortized $101,817 and recognized a benefit of ~~Directors (the “Board”)~~$11,583 relating to the vesting of stock options which is included in selling, general, administrative, and other expenses on ~~April 5, 2017.~~the Company’s accompanying interim unaudited condensed consolidated statement of operations. For the nine months ended September 30, 2020 and September 30, 2019 the Company amortized $428,915 and $487,524 relating to the vesting of stock options which is included in selling, general, administrative, and other expenses on the Company’s accompanying interim unaudited condensed consolidated statements of operations. The ~~awards~~Company will recognize $439,434 as an expense in future periods as the stock options vest. The Company recognizes stock compensation expense on a straight-line basis over the requisite service period for each award, which are subject to a vesting schedule as set forth in individual agreements.

~~On September 21, 2017,~~A summary of the Board approved an amendment to the 2017 Plan to increase the number of shares of common stock authorized for issuance under the Plan from 1,500,000 shares of common stock to 2,500,000 shares of common stock.

~~The following summary reflects equity awards granted prior to the 2017 Plan and the~~Company’s stock option activity ~~during~~for the ~~nine-months~~nine months ended September 30, ~~2017~~2020, is presented below:

	No. of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value		No. of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance outstanding at December 31, 2016		1,304,788		$	0.22		4.3	$	35,000
Balance outstanding at December 31, 2019											3,948,333		$	0.61		6.08	$	157,000
Granted		-			-		-		-		-			-		-		-
Exercised		-			-		-		-		-			-		-		-
Forfeited		-			-		-		-		(703,333	)		0.74		-		-
Expired		(2,736	)		-		-		-		(600,000	)		0.26		-		-
Balance outstanding at September 30, 2017		1,302,052		$	0.20		3.5	$	3,277,000
Exercisable at September 30, 2017		1,302,052		$	0.20		3.5	$	3,277,000
Balance outstanding at September 30, 2020											2,645,000		$	0.65		6.22	$	-
Exercisable at September 30, 2020											1,663,333		$	0.58		5.05	$	-

The non-vested restricted stock awards (“RSA”s), as of September ~~21, 2017,~~30, 2020, were granted to the Company’s Board ~~voted to award an aggregate~~members as compensation. These awards vest only upon: (i) the occurrence of ~~325,000 shares of common stock~~one of the ~~Company, par value $0.01 per share, through the granting of RSAs pursuant to the 2017 Plan, to the members~~Accelerating Events: (a) a Change in Control (as defined in RSA Agreement); or (b) listing of the ~~Board as annual compensation for services rendered~~Company’s Common Stock on either NYSE or NASDAQ Stock Market; and (ii) the director’s delivery to the Company ~~as Board members. Each member~~a Notice of Acceleration of Vesting (as defined in RSA Agreement), within the ~~Board was granted an~~Acceleration Notice Period (as defined in RSA constituting 65,000 shares of common stock. The common stock within each RSA had an aggregate fair market value of $0.78 per share on the date of grant ($253,500 in the aggregate) and each RSA will fully vest upon the one year anniversary of the date of grant or September 21, 2018. Agreement).

As of September 30, ~~2017,~~2020, and 2019, it was not probable that the Company had amortized $21,124 relating to the vesting of these shares which is included in general and administrative expenses, and $232,376 which will be recognized as an expense in future periods as the shares vest.

Also on September 21, 2017, the Board awarded an aggregate of 2,000,000 shares of common stock through the granting of RSAs pursuant to the 2017 Plan to the Company’s independent Board of Directors (“Independent Members”) as special services compensation. The Independent Members were each granted an RSA constituting 1,000,000 shares of common stock. The common stock within each RSA had a fair market value of $0.78performance conditions on the ~~date of grant, ($1,560,000 in~~outstanding RSAs would be met therefore, no expense has been recorded for these awards for the ~~aggregate)~~three and ~~each RSA will fully vest upon the earlier of a change in control of the Company or the Company’s listing on a national securities exchange. As of~~nine months ended September 30, ~~2017,~~2020 and 2019.

There were no RSA’s that were granted, exercised, or forfeited during the ~~Company had not amortized any amounts relating to the vesting of these shares due to the uncertainty of meeting these milestones.~~nine months ended September 30, 2020.

The Company is subject to U.S. federal income taxes, in addition to state and local income taxes.

Significant components of the Company's deferred income tax assets and liabilities are as follows:

	September 30, 2020			September 30, 2019
Deferred tax assets:
Net operating loss carryover	$	843,582		$	191,319
Accounts receivable		168,344			366,996
Stock based compensation		454,678			335,173
Inventory		610,215			893,231
Other		7,341			28,129
Total deferred tax assets		2,084,160			1,814,848

Deferred tax liabilities:
Intangibles		(208,703	)		(222,029	)
Property and equipment		(4,214	)		(4,950	)
Total deferred tax liabilities		(212,917	)		(226,979	)

Deferred tax assets, net	$	1,871,243		$	1,587,869

Valuation allowance:
Beginning of year		(1,529,584	)		-
Increase during the year		(341,659	)		(1,587,869	)
Ending balance		(1,871,243	)		(1,587,869	)

Net deferred tax asset	$	-		$	-

A reconciliation of income tax computed at the U.S. statutory rate to the effective income tax rate is as follows:

The Company’s effective income tax rates for the nine months ended September 30, 2020 and 2019 were (.7%) and 19.2%, respectively. The decrease from the prior period was driven by the valuation allowance allocated to the deferred tax asset for the current period.

For the ~~three-months and nine-months~~nine months ended September 30, ~~2017~~2020 and ~~2016,~~2019, the ~~Company had~~following significant customers ~~with~~had an individual percentage of total revenues equaling ~~10%~~ten percent (10%) or ~~greater as follows:~~

At September 30, ~~2017~~2020 and December 31, ~~2016,~~2019, the following significant customers had a concentration of accounts receivable ~~with significant customers~~ representing ~~10%~~ten percent (10%) or greater of accounts ~~receivable was as follows:~~receivable:

For the nine months ended September 30, 2020 and ~~provided 10%~~2019, the following significant suppliers represented ten percent (10%) or greater of ~~the Company’s~~ goods ~~purchased for the periods presented below:~~purchased:

For its principal executive office, the Company leases approximately 11,500 square feet of space at 1565 North Central Expressway, Suite 220, Richardson, Texas 75080 from 1565 North Central Expressway, LP (“NCE, LP”), a real estate investment company that is owned and controlled by Mr. Brooks. The ~~Company~~Company’s lease arrangement includes (i) the lease acquired pursuant to the CPM Acquisition effective January 1, 2013, and (ii) a lease effective July 14, 2017, entered into ~~a distributor agreement~~to support the Company’s relocation of its Fort Worth, Texas corporate offices to CPM’s executive offices. Both leases terminated December 31, 2017, with ~~CPM effective August 2, 2012, pursuant to which~~month-to-month renewals thereafter.

For the ~~Company acts as a non-exclusive distributor of certain amniotic membrane products. The term of the agreement is one year and renews on each annual~~

anniversary date for successive one-year terms unless it is terminated in writing by either party. Effective January 1, 2017, this agreement was amended to expand and include Orthopedic Implants and a broader assortment of Biologics. (See Note 1)

~~During the three-months~~nine months ended September 30, ~~2017~~2020 and ~~2016~~2019, the Company ~~sold $169,799~~paid approximately $126,000 and ~~$35,420,~~$126,000, respectively, ~~of its products purchased from CPM that are~~in rent expense, which is reflected in ~~cost of revenues on~~selling, general, administrative, and other expenses in the Company’s accompanying interim unaudited condensed statements of operations. During the nine-months ended September 30, 2017 and 2016 the Company sold $327,381 and $48,420, respectively, of its products purchased from CPM that are reflected in cost of revenues on the accompanying condensedconsolidated statements of operations.

During the three-months ended September 30, 2017 and 2016 the Company purchased $173,456 and $39,600, respectively, of its products from CPM. During the nine-months ended September 30, 2017 and 2016 the Company purchased $331,564 and $52,800, respectively, of its products from CPM. The balance due to CPM at September 30, 2017 and December 31, 2016 was $110,626 and $77,178, respectively, and are reflected within accounts payable – related parties on the accompanying condensed balance sheets.AmBio Contract

During July 2016 through October 2016, the Company obtained three short-term loans from the Investors in the aggregate amount of $150,000 in exchange for promissory notes bearing 10% interest per annum, and 18% interest per annum after December 31, 2016, which principal shall be due and payable, upon demand of the payee, at any time after the earlier of: (i) December 31, 2016, or (ii) upon a change in control of the Company. Notwithstanding, on or after January 16, 2017, at the holder’s sole discretion, the holder has the right to convert all or any portion of the then unpaid principal and interest balance into shares of the Company’s common stock at a conversion price of $0.08 per share. The ~~balance of the notes payable at September 30, 2017 and December 31, 2016 was $150,000.~~

On December 19, 2016, the Company entered into the Purchase Agreement by and among the Company, NC 143, and RMI, pursuant to which NC 143 acquired 5,000,000 shares of the Company’s common stock for a purchase price of $400,000 and RMI acquired 4,000,000 shares of the Company’s common stock for a purchase price of $320,000, effective as of the Closing Date. As direct offering costs amounted to $64,609, net proceeds from the sale of these shares were $655,391. (See Note 1)

During the three-months and nine-months ended September 30, 2017, CPM provided shared services for back-office functions such as accounting, finance, supply chain management, and sales support. In addition, the Company’s Chief Executive Officer and Interim Chief Financial Officer provided services at no charge to the Company. The financial statements do not reflect an estimate of fair value of these services.

~~Effective January 1, 2017 the~~ Company engaged AmBio Staffing, LLC (“AmBio”), a Texas licensed ~~professional employment organization~~Professional Employment Organization, to provide payroll processing, employee benefit administration, and related human capital ~~services. AmBio Staffing, LLC is controlled by the Company’s Chairman~~services effective January 1, 2017. Mr. Brooks owns and controls AmBio. As of ~~the Board of Directors. There was no balance due to AmBio Staffing at~~ September 30, ~~2017~~2020, AmBio operations support approximately 44 full time equivalents (“FTE”). Of those 44 FTEs, 37 FTEs directly support the Company, 6 FTEs support the operations of other companies, and one FTE is shared between the Company and other companies.

As of September 30, 2020 and December 31, ~~2016.~~2019, the Company owed amounts to AmBio of approximately $138,773 and $170,000, respectively, which are reflected in accounts payable on the Company’s unaudited condensed consolidated balance sheets. For the ~~three-months and nine-months~~nine months ended September 30, ~~2017, $371~~2020 and ~~$7,248 of fees were~~September 30, 2019, the Company paid approximately $131,851 and $154,000, respectively, to AmBio ~~Staffing, LLC for such services, respectively and~~in administrative fees, which are reflected ~~within~~in selling, general, administrative, and other expenses in the Company’s accompanying unaudited condensed consolidated statements of operations.

Historically, the Company conducts various related-party transactions with entities that are owned by or affiliated with Mr. Brooks and Mr. Reeg. These transactions are based on wholesale contractual agreements that the Company’s management believes are on terms and conditions substantially similar to other third-party contractual agreements. As described more fully below, these transactions include: selling and purchasing of inventory on a wholesale basis, commissions earned and paid and shared-service fee arrangements.

MedUSA Group, LLC (“MedUSA”) is a sub-distributor owned and controlled by Mr. Brooks and Mr. Reeg.

As of September 30, 2020 and December 31, 2019, the Company had approximately $659,767 and $598,000, respectively, of unpaid commission costs due to MedUSA, which are reflected in accrued liabilities in the Company’s accompanying condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, the Company had outstanding balances due from MedUSA of approximately $501,543 and $555,000, respectively. These amounts are reflected in accounts receivable, net of allowance in the Company’s accompanying condensed consolidated balance sheets.

Texas Overlord, LLC (“Overlord”) is an investment holding-company owned and controlled by Mr. Brooks.

As of September 30, 2020 and December 31, 2019, the Company had approximately $15,000 and $15,000 of unpaid commissions costs owed to Overlord, which are reflected in accrued liabilities in the Company’s accompanying condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, the Company had no outstanding balances due to or from Overlord.

NBMJ, Inc. d/b/a Incare Technology (“NBMJ”) is a durable medical equipment, wound care, and surgical supplies distributor owned and controlled by Mr. Brooks.

During the nine months ended September 30, 2020 and 2019, the Company sold Biologics products to NBMJ in the amounts of approximately $13,770, and $412,000, respectively, which are reflected in net revenues in the Company’s accompanying interim unaudited condensed consolidated statements of operations.

~~On July 19, 2017,~~As of September 30, 2020 and December 31, 2019, the Company ~~entered into~~had $1,420 and zero in outstanding balances due from NBMJ.

Payment terms per the stocking and distribution agreement with NBMJ are 30 days from receipt of invoice.

Bass Bone & Spine Specialists (“Bass”) operates as a ~~commercial property lease agreement for its new office space located at 1565 North Central Expressway, Suite 220, Richardson, Texas 75080, dated~~sub-distributor of surgical implants and is owned and controlled by Mr. Brooks.

As of September 30, 2020 and December 31, 2019, the Company had outstanding balances due from Bass of approximately $9,975 and ~~1565 North Central Expressway, LP—an entity~~$7,000, respectively. These amounts are reflected in accounts receivable, net of allowance, in the Company’s accompanying condensed consolidated balance sheets.

Payment terms per the stocking and distribution agreement with Bass are 30 days from receipt of invoice.

Sintu, LLC (“Sintu”) operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks.

During the nine months ended September 30, 2020 and 2019, the Company incurred approximately $482,308 and $269,000, respectively, in commission costs to Sintu, which are reflected in commissions on the Company’s ~~Chairman~~accompanying interim unaudited condensed consolidated statements of operations.

Tiger Orthopedics, LLC (“Tiger”) operates as a sub-distributor of surgical implants and is owned and controlled by Mr. Brooks.

During the ~~Board of Directors. The Lease provides that~~nine months ended September 30, 2020 and September 30, 2019, the Company ~~will pay rent~~sold Orthopedic Implants and Biologics products to Tiger in the amounts of ~~$4,000 per month~~approximately $39,922 and $189,000, respectively, which are reflected in net revenues in the ~~initial term~~Company’s accompanying interim unaudited condensed consolidated statements of ~~the Lease begins on July 14, 2017~~operations.

As of September 30, 2020 and ~~ends~~ December 31, ~~2017.~~ 2019, the Company had outstanding balances due from Tiger of approximately $836 and $30,000, respectively. These amounts are reflected in accounts receivable, net of allowance, in the Company’s accompanying condensed consolidated balance sheets.

Payment terms per the stocking and distribution agreement with Tiger are 30 days from receipt of invoice.

Modal Manufacturing, LLC (“Modal”) is a manufacturer of medical devices owned and controlled by Mr. Brooks.

During the nine months ended September 30, 2020 and 2019, the Company purchased approximately $355,274 and $624,000, respectively, in Orthopedic Implants and medical instruments from Modal, which are reflected within inventories, net of allowance in the Company’s accompanying interim unaudited condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, the Company had outstanding balances owed to Modal of approximately $314,574 and $0, respectively. These amounts are reflected in accounts payable in the Company’s accompanying condensed consolidated balance sheets.

As of September 30, 2020 and December 31, 2019, the Company had outstanding balances due from Modal of approximately $0 and $40,700, respectively. These are reflected in accounts receivable, net of allowance, in the Company’s accompanying condensed consolidated balance sheets.

Payment terms per the stocking and distribution agreement with Modal are 30 days from receipt of invoice.

On November 12, 2020, the Company and Amegy Bank executed the Sixth Amendment to the RLOC, extended the termination date of the RLOC until May 4, 2021. (See Note 5, “Revolving Line of Credit”).

The Company’s Management concluded there are no other material events or transactions for potential recognition or disclosure.

On October 4, 2017, the Board approved an additional amendment to the 2017 Plan to increase the number of shares of common stock authorized for issuance under the 2017 Plan from 2,500,000 shares of common stock to 4,500,000 shares of common stock.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

As used in this report on Form 10-Q, “we”, “us”, “our”, and the “Company” refer to Fuse Medical, ~~Inc.~~ Inc, a Delaware corporation, and its consolidated subsidiaries.

This discussion and analysis should be read in conjunction with our interim unaudited condensed consolidated financial statements and the related notes included in this report for the periods presented (our “Financial Statements”), our audited consolidated financial statements and the related notes thereto and the Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2019 Annual Report.

We are ~~an emerging~~a manufacturer and national distributor of medical ~~device distributor providing~~devices. We provide a broad portfolio of orthopedic implants ~~including~~including:

We also provide a wide array of osteo-biologics and regenerative tissues, which include human allografts, substitute bone materials, tendons, and ~~tendons, as well as regenerative~~amniotic tissues and fluids, which we refer to as (“~~Biologics”~~Biologics”).

All of our medical devices are approved by the U.S. Food and Drug Administration (“FDA”) for sale in the United States, and all of our Biologics suppliers are licensed tissue banks accredited by the American Association of Tissue Banks. Additionally, we are an FDA-registered medical device specification developer and repackager/relabeler, and manufacturer of record (a “Manufacturer”). We are seeking to grow our manufacturing operations, both by internal product development and by acquiring existing FDA approved devices.

The novel coronavirus SARS CoV-2 (“COVID-19”) global pandemic presents significant risks to our business plan. During our first quarter 2020 and as a response to COVID-19, the Governor of Texas declared a state of disaster and issued an executive order requiring hospitals to defer all elective surgeries. The order was effective March 19, 2020 through April 22, 2020.

On April 17, 2020, the Governor of Texas issued an additional executive order permitting hospital facilities to begin elective surgeries effective April 22, 2020 with certain restrictions, including maintaining a percentage of available beds for potential COVID-19 related patients. The disaster declaration in Texas and similar declarations other governmental jurisdictions, specifically the temporary deferral of all elective surgeries, adversely impacted our results of operations for the second quarter 2020, in particular, the periods prior to April 22, 2020.

Our products support ~~orthopedic~~patient conditions which are degenerative in nature. While most of our Cases are currently considered elective, they are typically necessary for a patient to restore mobility, reduce pain and increase quality of life. We continue to believe our annual revenues for 2020 will fall within a range of 4% to 6% lower compared to 2019. Our revenues during our second quarter were significantly lower than the three months ended June 30, 2019 due to the restrictions on elective surgeries in place prior to April 22, 2020. For the three months ended September 30, 2020 our revenues exceeded the prior year quarter by $22,318. We anticipate this steady increase in revenues to continue throughout the fourth quarter of the year.

~~Medical device companies such~~greater sales volume, as ~~ours typically experience seasonality between~~a percentage of revenue, during the last two calendar quarters of our fiscal year compared to the first two ~~quarters compared to the last two~~calendar quarters of the year. We believe this revenue trend is primarily due to the increase in ~~part the result of patient annual healthcare deductibles being met~~elective surgeries during the last two quarters of the calendar year, ~~compared~~which are partially satisfied by patient annual healthcare deductibles being met in those two quarters. We use this seasonality trend to assist us in enterprise-wide resource planning, such as purchasing and product inventory logistics.

~~As more fully described in our Annual Report~~government-imposed shelter-in-place mandates and prohibitions on ~~Form 10-K~~elective surgeries, revenues for the ~~year ended December 31, 2016, as filed on March 20, 2017 (the “2016 Annual Report”), during December 2016~~third quarter of 2020 were higher than our historical seasonality trends due to surgeries forgone in the ~~change~~second quarter of 2020 due to elective surgery restrictions being performed in ~~control over a majority of our issued~~the third quarter.

Retail and ~~outstanding voting common stock resulted in new executive leadership.~~Wholesale Cases

~~During the nine-months ended September 30, 2017, we have successfully executed the following milestones:~~

~~We continue to~~ believe our comprehensive selection of Orthopedic Implants and Biologics products ~~will prove pivotal in~~is essential to our ability to acquire new customers and increase sales volume, revenues, and ~~profitability~~profitability. We continue to review and evaluate our product lines, ensuring we maintain a high-quality and cost-effective selection of Orthopedic Implants and Biologics.

Retail. Under our retail distribution model, (“Retail Model”), we sell directly to our end customers, which consist of hospitals and medical facilities, utilizing (i) our full-time sales representatives whom we employ or engage as ~~demonstrated~~independent contractors and (ii) independent sales representatives who work on a non-exclusive basis. In both instances, we pay the sales representative a commission with respect to sales made by the representative. We refer to sales through our ~~three months-ended March 31, 2017, June 30, 2017,~~Retail Model as Retail Cases (which are herein referred to as “Retail Cases”).

Wholesale. Under our wholesale distribution model, (“Wholesale Model”), we sell our products directly to independent distributors rather than to hospitals and medical facilities who are the ultimate end customer. We do not pay or receive commissions from any sales by the independent distributor to the end customer. We refer to our sales through our Wholesale Model as Wholesale Cases, (which are herein referred to as “Wholesale Cases”).

Retail Cases in our industry command higher revenue price points than Wholesale Cases. Because Retail Cases involve direct sales to our end customers, we receive a higher profit margin due to the absence of any third party in the sales process, before we pay any potential commissions to a full time or independent sales representative. As a result, Retail Cases generally generate substantially more gross profit than Wholesale Case transactions.

In the quarter ended September 30, ~~2017~~2020, our average revenue per Retail Case increased by approximately 5%, and our average revenue per Wholesale Case increased by approximately 102% compared to the quarter ended September 30, 2019.

Wholesale Cases in our industry command lower revenue price-points than Retail Cases. Because Wholesale Cases involve sales to third parties who in turn sell our products to end customers, our profit margins are reduced for these Cases. Thus, our Wholesale Cases generate substantially lower gross profit than our Retail Cases, but are not subject to additional overhead support costs, such as case coverage and commissions. Our Wholesale Case business is highly dependent on minimum volume sales levels to achieve appropriate profitability.

During the nine months ended September 30, 2020, our average revenue per Retail Case increased by approximately 12%, and our average revenue per Wholesale Case increased by approximately 59% compared to the nine months ended September 30, 2019.

Pricing pressure has increased in our industry due to (i) continuous consolidation among healthcare providers, (ii) trends toward managed care, (iii) increased government oversight of healthcare costs, and (iv) new laws and regulations that address healthcare reimbursement and pricing. Pricing pressure, reductions in reimbursement levels or coverage, or other cost containment measures can significantly impact our business, operating results ~~of operations over~~and financial condition.

We employ strategies to maximize revenue per Case. For the ~~prior year. We expect~~nine months ended September 30, 2020 and 2019, our average revenues per Case were $5,406 and $4,033, respectively. The approximate 34% increase in average revenue per Case was primarily due to ~~offer compensation~~(a)(i) a shift to focus on Retail Cases, and ~~other valuable long-term incentives to key distributors, executive leadership and key employees~~(ii) an increase in revenue derived from commission agreements, offset, in part, by (b) continued pricing pressures, as wedescribed above.

We continue to ~~expand~~experience gross profit improvements primarily based on revenues derived from our ~~strategic partnerships~~manufactured branded products and ~~network arrangements.~~reduced distribution overhead costs.

The preparation of ~~financial statements~~our Financial Statements and the related disclosures in conformity with ~~accounting principles generally accepted in the U.S., (or “GAAP”),~~GAAP, requires our management to make judgments, assumptions, and estimates that affect the amounts of revenue,

expenses, income, assets, and liabilities, reported in our ~~condensed financial statements~~Financial Statements and accompanying notes. 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.~~Financial Statements.

We describe our most significant accounting policies in Note 2, “Significant Accounting Policies” of our unaudited condensed consolidated notes to ~~the financial statements~~our Financial Statements beginning on page F-1 and found elsewhere in this report and in our ~~2016~~2019 Annual Report. These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates, and assumptions about highly complex and inherently uncertain ~~matters and because~~matters. In addition, 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.

There have been no material changes to our critical accounting policies during the period covered by this report.

We describe recent accounting pronouncements in Note 2, ~~“Recent~~“Significant Accounting ~~Pronouncements”~~Policies” of our accompanying unaudited condensed consolidated notes to ~~the financial statements~~our Financial Statements beginning ofon page F-1.

The following table sets forth certain financial information from our unaudited condensed consolidated statements of operations along with a percentage of net revenue and should be read in conjunction with ~~the condensed financial statements~~our Financial Statements and related notes included in this report.

For the Three-months Ended September 30,
2017

(%)

For the Three-months Ended September 30,
2016

(%)

For the Nine-months Ended September 30,
2017

(%)

For the Nine-months Ended September 30,
2016

(%)

Revenues
$
428,204

100%

$
107,584

100%

$
911,033

100%

$
421,170

100%

Cost of revenues

169,817

40%

42,536

40%

333,119

37%

144,654

34%

Gross profit

258,387

60%

65,048

60%

577,914

63%

276,516

66%

Operating expenses:

General, administrative and other

216,874

51%

178,633

166%

686,902

75%

590,147

140%

Loss on disposal of property and equipment

3,058

1%

-

0%

3,365

0%

1,580

0%

Depreciation

384

0%

3,501

3%

3,237

0%

10,666

3%

Total operating expenses

220,316

51%

182,134

169%

693,504

76%

602,393

143%

Operating income (loss)

38,071

9%

(117,086
)

-109%

(115,590
)

-13%

(325,877
)

-77%

Interest expense

(6,806
)

-2%

(31,824
)

-30%

(20,194
)

-2%

(35,324
)

-8%

Extinguishment of debt

-

0%

35,517

33%

43,308

5%

35,517

8%

Net income (loss)
$
31,265

7%

$
(113,393
)

-105%

$
(92,476
)

-10%

$
(325,684
)

-77%

	For the Three Months Ended
	September 30, 2020		(% Rev)	September 30, 2019			(% Rev)
Net revenues	$	5,738,662	100%	$	5,716,344		100%
Cost of revenues		2,043,722	36%		4,787,939		84%
Gross profit		3,694,940	64%		928,405		16%
Operating expenses:
Selling, general, administrative and other expenses		1,379,385	24%		2,263,964		40%
Commissions		2,185,487	38%		1,741,770		31%
Depreciation and amortization		23,312	0%		25,596		0%
Total operating expenses		3,588,184	63%		4,031,330		71%
Operating income\(loss)		106,756	2%		(3,102,925	)	-54%
Other expense
Interest expense		20,611	0%		34,900		1%
Total other expense		20,611	0%		34,900		1%
Operating income (loss) before tax		86,145	2%		(3,137,825	)	-55%
Income tax benefit (expense)		5,661	0%		926,517		16%
Net income\(loss)	$	80,484	1%	$	(4,064,342	)	-71%

~~Three-months~~Three Months Ended September 30, ~~2017~~2020, Compared to ~~Three-months~~Three Months Ended September 30, ~~2016~~2019

For the ~~three-months~~three months ended September 30, ~~2017,~~2020, net revenues were ~~$428,204~~$5,738,662 compared to ~~$107,584~~$5,716,344 for the ~~three-months~~three months ended September 30, ~~2016,~~2019, an increase of ~~$320,620,~~$22,318, or approximately ~~298%~~0.3%. ~~The~~

For the three months ended September 30, 2020, Retail Cases decreased by 3% compared to the three months ended September 30, 2019, offset by, revenues from Retail Cases for the three months ended September 30, 2020, increasing by 2% compared to revenues from Retail Cases for the three months ended September 30, 2019. We believe this 2% increase in revenues from Retail Cases is primarily ~~a result of~~driven by an ~~approximate 84%~~ increase in revenue per Retail Case.

Our Wholesale Cases decreased by 56% for the ~~medical cases~~three months ended September 30, 2020, compared to Wholesale Cases during the three months ended September 30, 2019. Accordingly, revenues from Wholesale Cases for the three months ended September 30, 2020, decreased by 11% compared to revenues from Wholesale Cases for the three months ended September 30, 2019.

As discussed above in ~~which~~“Current Trends and Outlook,” we believe that as our ~~products are used (“~~industry faces increased pricing pressures, we will need to focus on increased volume of Cases” to maintain gross profit levels. We will seek to increase our volume of Retail Case Sales to our existing retail customer base and ~~each a “Case”) and an approximate 214% increase in average price per Case. We gained five~~add new ~~customers, offset, by three customers becoming inactive.~~retail customers.

For the ~~three-months~~three months ended September 30, ~~2017,~~2020, our cost of revenues was ~~$169,817,~~$2,043,722, compared to ~~$42,536~~$4,787,939 for the ~~three-months~~three months ended September 30, ~~2016,~~2019, representing ~~an increase~~a decrease of ~~$127,281,~~$2,744,217, or approximately ~~299%~~134.3%.

As a percentage of revenues, cost of revenues decreased approximately 48 percentage points to approximately 36% for the three months ended September 30, 2020, compared to approximately 84% for the three months ended September 30, 2019. The ~~increase~~decrease as a percentage of net revenues resulted from (a)(i) an approximate 47% decrease in inventory shrink and inventory loss provision, (a)(ii) an approximate 4% reduction in cost of revenues is primarily attributable to an approximate 84% increase in revenue that resulted from an increase in the number of Cases and a shift from Cases in which we supplied Biologics to Cases in which we supplied Orthopedic Implants, which carry a higher average cost per Case

~~compared to Biologics,~~goods sold, offset, in part, by ~~productivity improvements~~(b) an approximate 3% increase in supply chain operations. These productivity improvements include the integration of a perpetual inventory system having FDA tracking capabilities as well as transitioning our product fulfillment and delivery model to a just in time approach. For the three-months ended September 30, 2017 and 2016, Orthopedic Implants represented 84% and 3% of revenues, respectively.medical instrument expense.

For the ~~three-months~~three months ended September 30, ~~2017,~~2020, we generated a gross profit of ~~$258,387,~~$3,694,940, compared to ~~$65,048~~$928,405 for the ~~three-months~~three months ended September 30, ~~2016,~~2019, representing an increase of ~~$193,339,~~$2,766,535 or approximately ~~297%~~298.0%.

As a percentage of net revenue, gross profit increased approximately 48 percentage points to 64% for the three months ended September 30, 2020, compared to 16% for the three months ended September 30, 2019. This increase in gross profit as a percentage of revenues was primarily caused by the decrease in cost of revenues as a percentage of net revenues, as discussed above.

For the three months ended September 30, 2020, selling, general, administrative, and other expenses decreased to $1,379,385 from $2,263,964 for the three months ended September 30, 2019, representing a decrease of $884,579, or approximately 39.1%.

As a percentage of net revenues, selling, general, administrative and other expenses accounted for approximately 24% and 40% for the three months ended September 30, 2020 and September 30, 2019, respectively. As a percentage of net revenue, the decrease of approximately 16 percentage points primarily resulted from (a)(i) an approximate 9 percentage-point decline in provision for bad debt, (a)(ii) an approximate 5 percentage point decline in leased staffing costs, and (a)(iii) an approximate 4 percentage point decline in professional expense, offset, in part by, (b)(i) an approximate 2 percentage-point increase in stock based compensation. Reflected in professional fees and stock-based compensation was approximately $232,841 in compensation to members of our scientific advisory boards (“SABs”), of which approximately $150,000 was in the form of cash expense and approximately $82,841 was non-cash stock-based compensation. The three months ended September 30, 2020, reflected an approximate $112,500 decrease in professional fees related to the SABs as compared to the three months ended September 30, 2019.

For the three months ended September 30, 2020 and September 30, 2019, commission expense was $2,185,487 and $1,741,770, respectively, representing an increase of $443,717, or approximately 25.5%.

As a percentage of net revenues, commission expense accounted for approximately 38% for the three months ended September 30, 2020, and 31% for the three months ended September 30, 2019. This approximate 7 percentage-point increase primarily resulted from an approximate 1% increase of revenues eligible for commissions and an approximate 6% increase in average commission rates.

For the three months ended September 30, 2020, our depreciation and amortization expense decreased to $23,312 from $25,596 for the three months ended September 30, 2019, representing a decrease of $2,284. This decrease is primarily driven by the complete amortization of the Company’s non-compete agreements.

For the three months ended September 30, 2020, interest expense declined to $20,611 from $34,900 for the three months ended September 30, 2019, which is a reduction of $14,289, or approximately 40.9%. The decline of $14,289 was primarily driven by (a)(i) an approximate $6,972 reduction in interest costs caused by a decline in LIBOR market interest rates, (a)(ii) an approximate $9,768 decrease in interest related to decreased borrowings on our RLOC, offset, in part, by (b)(i) an approximate $1,419 increase related to accrued interest on our EIDL Loan, (b)(ii) an approximate $907 increase related to accrued interest on our PPP Loan, and (b)(iii) an approximate $125 increase of accrued interest on our Subordinated Notes.

For the three months ended September 30, 2020 and 2019, we recorded an income tax expense of approximately $5,661, and income tax expense $926,517. For additional information, please see Note 10, “Income Taxes,” of our accompanying Financial Statements, beginning on page F-1.

For the three months ended September 30, 2020, we had net income of $80,484 compared to a net loss of $4,064,342 for the three months ended September 30, 2019, respectively, representing an increase in net income of $4,144,826 or approximately 102.0%.

As a percentage of revenue, ~~gross profit was~~net income/(loss) represented approximately ~~60%~~1% and (71)% for ~~both~~ the ~~three-months~~three months ended September 30, ~~2017~~2020 and ~~2016,~~September 30, 2019, respectively.

The approximate 72 percentage point increase in net income as a percentage of revenue was primarily attributable to (a)(i) an approximate 7 percentage point increase in commissions, offset, in part, by (b)(i) an approximate 16 percentage point decrease in income tax expense, (b)(ii) an approximate 16 percentage point decrease in selling, general, administrative, and other expenses, and (b)(iii) an approximate 48 percentage point decrease in cost of revenues.

Nine Months Ended September 30, 2020, Compared to Nine Months Ended September 30, 2019

The following table sets forth certain financial information from our unaudited condensed consolidated statements of operations along with a percentage of net revenue and should be read in conjunction with our Financial Statements and related notes included in this report.

	For the Nine Months Ended
	September 30, 2020			(% Rev)	September 30, 2019			(% Rev)
Net revenues	$	14,385,831		100%	$	15,562,928		100%
Cost of revenues		5,823,281		40%		8,987,196		58%
Gross profit		8,562,550		60%		6,575,732		42%
Operating expenses:
Selling, general, administrative and other expenses		5,021,632		35%		6,604,066		42%
Commissions		4,996,843		35%		3,752,295		24%
Depreciation and amortization		84,047		1%		76,916		0%
Total operating expenses		10,102,522		70%		10,433,277		67%
Operating loss		(1,539,972	)	-11%		(3,857,545	)	-25%
Other expense
Interest expense		75,633		1%		88,362		1%
Total other expense		75,633		1%		88,362		1%
Operating loss before tax		(1,615,605	)	-11%		(3,945,907	)	-25%
Income tax benefit		11,341		0%		771,582		5%
Net loss	$	(1,626,946	)	-11%	$	(4,717,489	)	-30%

For the nine months ended September 30, 2020, net revenues were $14,385,831 compared to $15,562,928 for the nine months ended September 30, 2019, a decrease of $1,177,097 or approximately 7.6%.

For the nine months ended September 30, 2020, Retail Cases decreased by 9% compared to the nine months ended September 30, 2019. Revenues from Retail Cases for the nine months ended September 30, 2020, increased by 2% compared to revenues from Retail Cases for the nine months ended September 30, 2019. This 2% increase in revenues from Retail Cases is primarily driven by greater concentration in new medical facilities.

Our Wholesale Cases decreased by 67% for the nine months ended September 30, 2020, compared to Wholesale Cases during the nine months ended September 30, 2019. Accordingly, revenues from Wholesale Cases for the nine months ended September 30, 2020, decreased by 47% compared to revenues from Wholesale Cases for the period ended September 30, 2019.

For the nine months ended September 30, 2020, our cost of revenues was $5,823,281, compared to $8,987,196 for the nine months ended September 30, 2019, representing a decrease of $3,163,915, or approximately 35%.

As a percentage of revenues, cost of revenues decreased approximately 18 percentage points to approximately 40% for the nine months ended September 30, 2020, compared to approximately 58% for the nine months ended September 30, 2019. The decrease as a percentage of net revenues resulted from (a)(i) an approximate 12 percentage-point decrease in inventory shrink and inventory loss provision, (a)(ii)an approximate 7 percentage point reduction in cost of products sold, offset, in part, by (b)(i) an approximate 1 percentage point increase in medical instrument expense.

For the nine months ended September 30, 2020, we generated a gross profit of $8,562,550, compared to $6,575,732 for the nine months ended September 30, 2019, representing an increase of $1,986,818, or approximately 30.2%.

As a percentage of net revenue, gross profit increased by 18 percentage points to 60% for the nine months ended September 30, 2020, compared to 42% for the nine months ended September 30, 2019. This increase in gross profit as a percentage of revenues was primarily caused by the decrease in cost of revenues, as discussed above.

For the ~~three-months~~nine months ended September 30, ~~2017,~~2020, selling, general, administrative, and other ~~operating~~ expenses ~~increased~~decreased to ~~$216,874~~$5,021,632 from ~~$178,633~~$6,604,066 for the ~~three-months~~nine months ended September 30, ~~2016,~~2019, representing a decrease of $1,582,434, or approximately 24.0%.

As a percentage of net revenues, selling, general, administrative and other expenses accounted for approximately 35% and 42% for the nine months ended September 30, 2020 and September 30, 2019, respectively. As a percentage of net revenue, the decrease of approximately 7 percentage points primarily resulted from (a)(i) an approximate 3 percentage-point decline in the provision for bad debt, (a)(ii) an approximate 3 percentage point decline in leased staffing costs, and (a)(iii) an approximate 1 percentage point decrease in professional expense. Reflected in professional fees and stock-based compensation is approximately $1,240,469 in compensation to members of our SABs, of which approximately $800,000 was in the form of cash expense and approximately $440,469 was non-cash stock-based compensation. The nine months ended September 30, 2020, reflected an approximate reduction of approximately $250,000 in professional fees related to the SABs as compared to the nine months ended September 30, 2019.

For the nine months ended September 30, 2020 and September 30, 2019, commission expense was $4,996,843 and $3,752,295, respectively, representing an increase of ~~$38,241,~~$1,244,548, or approximately ~~21%~~33.2%.

As a percentage of net revenues, commissions expenses accounted for approximately 35% for the nine months ended September 30, 2020, and 24% for the nine months ended September 30, 2019. This approximate 11 percentage-point increase primarily resulted from an approximate 3% increase of revenues eligible for commissions and approximately an 8% increase in average commission rates as well as the realignment and restructuring of the commission agreement for our largest commission-based representative.

For the nine months ended September 30, 2020, our depreciation expense increased to $84,047 from $76,916 for the nine months ended September 30, 2019, representing an increase of $7,131. This increase was primarily the result of an investment to upgrade our supply-chain inventory management system and new office workstations in prior periods.

For the nine months ended September 30, 2020, interest expense decreased to $75,633 from $88,362 for the nine months ended September 30, 2019, which is a decrease of $12,729, or approximately 14%. The decrease of $12,729 was primarily driven by (a)(i) an approximate $18,231 reduction in interest costs caused by a decline in the LIBOR market interest rates, offset, in part, by, (b)(i) an approximate $1,051 increase in interest related to increased borrowings on our RLOC, (b)(ii) an approximate $2,359 increase related to accrued interest on our EIDL Loan, (b)(iii) an approximate $1,810 increase related to accrued interest on our PPP Loan, and (b)(iv) an approximate $282 increase related to accrued interest on our Subordinated Notes.

For the nine months ended September 30, 2020 and 2019, we recorded an income tax expense of approximately $11,341 and $771,582. For additional information, please see Note 10, “Income Taxes,” of our accompanying Financial Statements, beginning on page F-1.

For the nine months ended September 30, 2020, we had a net loss of $1,626,946 compared to a net loss $4,717,489 for the nine months ended September 30, 2019, respectively, representing a decrease in net loss of $3,090,543, or approximately 65%.

As a percentage of revenue, ~~general, administrative~~net loss represented approximately 11% and ~~other operating expenses were approximately 51% and 166%~~30% for the ~~three-months~~nine months ended September 30, ~~2017~~2020 and 2016, respectively. The decrease as a percentage of revenues is approximately 115% and is primarily the result of a decrease of approximately 89% for payroll and benefit costs, a decrease of approximately 25% in professional fees, a 21% reduction in other corporate expenses, approximately 2% of savings from our exit of sponsorship programs, offset, in part, by an approximate 15% increase in legal and valuation study costs relating to our corporate restructuring and rebranding strategies, and an approximately 7% increase in commission expense.

~~For the three-months ended~~ September 30, ~~2017, depreciation expense decreased to $384 from $3,501 for the three-months ended September 30, 2016, representing a decrease of $3,117 or approximately 89%.~~ 2019, respectively.

~~For the three-months ended September 30, 2017, interest expense decreased to $6,806 from $31,824 for the three-months ended September 30, 2016. The $25,018~~approximate 19 percentage point decrease in interest expense is primarily driven by a $28,499 reduction in beneficial ownership discount amortization, a $1,750 reduction in interest expense related to a note payable with a beneficial owner, offset by an increase in interest expense of $5,230 related to the notes payables – related parties.

For the three-months ended September 30, 2016 we recorded $35,517 on extinguishment of debt relating to settlement of outstanding accounts payable owed to our former legal counsel for $25,000. For the three-months ended September 30, 2017, we did not record any amount with respect to the extinguishment of debt.

~~For the three-months ended September 30, 2017, we had a net income of $31,265 compared to a~~ net loss of $113,393 for the three-months ended September 30, 2016, representing an increase in profitability by $144,658, an increase of approximately 128%. The increase in profitability as a percentage of revenues was approximately 112% and is primarily a result of a (i) reduction of approximately 115% in general, administrative and other operating expenses, (ii) a reduction in depreciation expense of approximately 3% and (iii) a decrease in interest expense of approximately 28%. The increase in profitability as percentage of revenues was offset, in part, by approximately a 33% decrease in extinguishment of debt and an approximately 1% increase in loss on disposal of property and fixed assets.

~~Nine-months Ended September 30, 2017 Compared to Nine-months Ended September 30, 2016~~

For the nine-months ended September 30, 2017, revenues were $911,033, compared to $421,170 for the nine-months ended September 30, 2016, an increase of $489,863, or approximately 116%. The increase in revenues is primarily a result of an approximate 34% increase in the number of Cases and an approximate 82% increase in average price per Case. We gained six new customers, offset, by six customers becoming inactive.

For the nine-months ended September 30, 2017, our cost of revenues was $333,119, compared to $144,654 for the nine-months ended September 30, 2016, representing an increase of $188,465, or approximately 130%. The increase in cost of revenues is primarily attributable to an approximate 34% increase in the number of Cases and a shift from Cases in which we supplied Biologics to Cases in which we supplied Orthopedic Implants which carry a higher average cost per Case compared to Biologics, offset, in part, by productivity improvements in supply chain operations. The increase as a percentage of revenues is approximately 3% and is primarily a result of our strategy to increase Orthopedic Implants Case volume, offset, in part, by productivity improvements in supply chain operations. These productivity improvements include the integration of a perpetual inventory system having FDA tracking capabilities as well as transitioning our product fulfillment and delivery model to a just in time approach. For the nine-months ended September 30, 2017 and 2016, Orthopedic Implants represented 79% and 4% of revenues, respectively.

For the nine-months ended September 30, 2017, we generated a gross profit of $577,914, compared to $276,516 for the nine-months ended September 30, 2016, an increase of $301,398, or approximately 109%. As a percentage of revenue, gross profit was approximately 63% and 66% for the nine-months ended September 30, 2017 and 2016, respectively.

For the nine-months ended September 30, 2017, general, administrative and other operating expenses increased to $686,902 from $590,147 for the nine-months ended September 30, 2016, representing an increase of $96,755, or approximately 16%. As a percentage of revenue, general, administrative and other was approximately 75% and 140% for the nine-months ended September 30, 2017 and 2016, respectively. This decrease as a percentage of revenues is approximately 65% and is primarily the result of a reduction of approximately 55% for payroll and benefit costs, approximately 16% for professional fees, approximately 12% for other corporate fixed costs, approximately 4% of savings from our exit of sponsorship programs, offset, in part, by an approximately 20% increase in legal and valuation study costs relating to our corporate restructuring and rebranding initiatives and approximately 2% increase in commission expense.

For the nine-months ended September 30, 2017, depreciation expense decreased to $3,237 from $10,666 for the nine-months ended September 30, 2016, representing a decrease of $7,429 or approximately 70%. The decrease is primarily related to a reduction in fixed assets.

For the nine-months ended September 30, 2017, interest expense decreased to $20,194 from $35,324 for the nine-months ended September 30, 2016. The $15,130 decrease in interest expense is primarily driven by a $28,499 reduction in beneficial ownership discount amortization, a $5,250 reduction in interest expense related to a note payable with a beneficial owner, offset by an increase in interest expense of $18,619 related to the notes payable – related parties.

For the nine-months ended September 30, 2017 and 2016, we recorded $43,308 and $35,517, respectively, for extinguishment of debt. During the nine-months ended September 30, 2017, the extinguishment of debt primarily related to long-aged outstanding payables owed to a former law firm for $32,052 and liabilities aggregating $11,256 owed to the Company’s beneficial owners for services provided to the Company. During the nine-months ended September 30, 2016, our recording for the extinguishment of debt primarily resulted from the settlement of outstanding accounts payable of $60,517, owed to our former legal counsel for a payment of $25,000.

For the nine-months ended September 30, 2017, we generated a net loss of $92,476 compared to a net loss of $325,684 for the nine-months ended September 30, 2016, representing an increase in profitability by $233,208, an increase of approximately 72%. The increase in profitability as a percentage of revenues is approximately 68% and is primarily due to (i) an approximate 65% reduction of general, administrative and other costs, (ii) an approximate 3% reduction in depreciation expense and (iii) an approximate 6% reduction in interest expense. The increase in profitability as a percentage of revenue was primarily attributable to (a)(i) an approximate 7 percentage point decrease in selling, general, administrative, and other expenses, (a)(ii) an approximate 5 percentage point reduction in income tax expense, and (a)(iii) an approximate 18 percentage point increase in gross profit, offset, in part, by ~~approximately 3% extinguishment of debt and approximately 3% reduction of gross profit.~~(b)(i) an approximate 11 percentage point increase commissions.

~~Net~~During the nine months ended September 30, 2020, net cash provided by operating activities was $463,084 compared to $88,097 used in operating activities for the nine months ended September 30, 2019, representing an increase of $551,181.

For the nine months ended September 30, 2020, our net cash provided by operating activities resulted primarily from: (a)(i) a $1,848,178 decrease in accounts receivable, (a)(ii) a $872,971 reduction in inventories, (a)(iii) a $219,035 increase in accrued expenses, and (a)(iv) a $4,891 decrease in prepaid expenses and other current assets, offset, in part by (b)(i) an increase of $1,908,403 of long term accounts receivable, (b)(ii) a $409,371 reduction in accounts payable, and (b)(iii) a $164,216 of net loss adjusted for non-cash items.

For the nine months ended September 30, 2019, our net cash used in operating activities ~~during the nine-months ended September 30, 2017~~ resulted primarily ~~from a~~from: (a)(i) $2,312,419 of net loss adjusted for non-cash items (a)(ii) an increase of ~~$92,476,~~$774,712 in long term accounts receivable, and (a)(iii) a ~~$227,398 increase~~$186,823 reduction in accounts ~~receivable, a $21,176 increase in prepaid expenses and other receivables, $15,582 of adjustments in stock-based compensation, depreciation expense and other non-cash items,~~payable, net, offset, in part, by ~~$21,662 increase~~(b)(i) a $2,886,268 decrease in inventories, (b)(ii) a $161,943 decrease in accounts ~~payable, $33,448 increase in accounts payable-related parties, $88,312~~receivable, (b)(iii) a $125,458 increase in accrued ~~expenses, $16,833 reduction~~liabilities, and (b)(iv) a $12,188 decrease in ~~inventories, and $848 increase in deferred rent.~~prepaid expenses.

During the nine months ended September 30, 2020, net cash used in investing activities was approximately $20,757 for our investments in (i) new office workstations and (ii) equity incentive plan administrative and tracking software.

For the nine months ended September 30, 2019, there was no net cash used in investing activities.

For the nine months ended September 30, 2020, net cash used in financing activities was $2,749, compared to the $275,053 provided by financing activities for the nine months ended September 30, 2019.

The $2,749 in net cash used in financing activities for the nine months ended September 30, 2020 primarily resulted from (a)(i) $361,400 in proceeds from our PPP Loan, (a)(ii) $200,000 in proceeds from our Subordinated Notes; and (a)(iii) $150,000 in proceeds from our EIDL Loan, offset by (b)(i) $714,149 in net repayments on our RLOC.

The $275,053 in net cash provided by ~~investing~~financing activities for the ~~nine-months~~nine months ended September 30, ~~2017~~2019 resulted from borrowings on our RLOC.

Our primary sources of liquidity are cash ~~proceeds~~ from ~~the disposal~~our operations and our RLOC with Amegy Bank. As of ~~property and equipment of $300.~~

At September 30, ~~2017, we had working capital of $373,412, including $472,246~~2020, our current assets exceeded our current liabilities by $4,345,261 (our “Working Capital”), which includes $1,538,888 in cash and cash equivalents. ~~As of November 6,~~We believe cash from our operations and net borrowings on our RLOC supports our Working Capital needs.

Effective December 31, 2017, we ~~had approximately $517,000 in available cash. Our cash~~became party to the RLOC with Amegy Bank. The RLOC established an asset-based senior secured revolving credit facility with contractual aggregate limit of $5,000,000. The RLOC contains customary representation, warranties, covenants, events of default, and is concentrated in a large financial institution. We believe our ability to continue as a going concern is dependent, in part, on our ability to successfully execute our restructuring and rebranding strategies, as well as expansioncollateralized by substantially all of our ~~network~~assets and provides that our Chairman of ~~independent distributors, which~~the Board of Directors (“Board”) and President provides a personal guarantee for a portion of the outstanding RLOC amount.

On September 21, 2018, we ~~believe will increase~~executed the First Amendment to the RLOC with Amegy Bank (the “First Amendment”). The First Amendment (i) waived our ~~revenue growth~~events of default under the RLOC through the fiscal quarter ended September 30, 2018, and ~~profitability. We believe these strategies, along with our current cash balance and anticipated cash generated by increasingly profitable operations will be enough to sustain operations through~~(ii) added a covenant that we achieve quarterly net income of $700,000 or more for the fiscal quarter ending on September 30, 2018.

On November 19, 2018, we executed the Second Amendment to the RLOC with Amegy Bank (the “Second Amendment”). The Second Amendment (i) waived our events of default under the RLOC, (ii) reduced the aggregate contractual limit of the RLOC to $4,000,000, (iii) extended the maturity date to November 4, 2019, (iv) revised the variable interest rate to the one-month LIBOR rate plus four percent (4.00%) per annum, and (v) amended the financial covenants to state that we will not permit (i) the Fixed Charge Coverage Ratio of any calendar quarter end from and after the quarter ending June 30, 2019, to be less than 1.25 to 1.00; (ii) earnings before interest, taxes, depreciation and amortization (“EBITDA”) to be less than $700,000 for the fiscal quarter ending December 31, 2018, and $100,000 for the fiscal quarter ending March 31, 2019; and (iii) modified the event of default related to consecutive quarterly losses to be applicable from and after the quarter ending June 30, 2019.

On May 9, 2019, we executed the Third Amendment to the RLOC with Amegy Bank (the “Third Amendment”). Pursuant to the Third Amendment, Amegy Bank (i) waived our events of default under the RLOC, (ii) reduced the aggregate contractual limit of the RLOC to $3,500,000, (iii) reduced the limit of credit card exposure to $500,000, (iv) reduced the borrowing base component of Inventory to 30%, (v) amended the financial covenants to state that we will not permit EBITDA to be less than $100,000 for the fiscal quarter ending June 30, 2019 and $500,000 for the fiscal quarter ending September 30, 2019, and (vi) rescinded the loan sweep feature, requiring us to give notice of each requested loan by delivery of advance request to Amegy Bank.

On December 18, 2019, we executed the Fourth Amendment to the RLOC with Amegy Bank (the “Fourth Amendment”). Pursuant to the Fourth Amendment, Amegy Bank (i) waived our events of default under the RLOC, (ii) reduced the aggregate contractual limit of the RLOC to $2,750,000, (iii) reduced and limited the annual salary of our Chairman of the Board and President, Mr. Brooks, to not exceed $550,000, (iv) amended the financial covenants to state that we will not permit EBITDA to be less than $600,000 for the fiscal quarter ending December 31, 2019 and $125,000 for the fiscal quarter ending March 31, 2020, (v) extended the termination date of the RLOC to May 4, 2020, and (vi) provided that our Chairman of the Board and President provides a personal guarantee for one-hundred percent (100%) of the outstanding RLOC amount.

On May 21, 2020, we executed the Fifth Amendment to our RLOC with Amegy Bank (the “Fifth Amendment”). Pursuant to the Fifth Amendment, Amegy Bank (i) waived our events of default under the RLOC, (ii) amended the financial covenants to state that we will not permit EBITDA to be less than $25,000 for the fiscal quarters ending June 30, 2020 and September 30, 2020, and (iii) extended the termination date of our RLOC until November 4, 2020.

In conjunction with obtaining the Fifth Amendment, we obtained an additional $200,000 in capital in the form of subordinated debt from affiliates of Messrs. Brooks and Reeg. Specifically, on May 6, 2020, we borrowed $180,000 from NC 143, a limited partnership controlled by Mr. Brooks, and $20,000 from RMI, a company owned and controlled by Mr. Reeg, in exchange for two promissory notes which are unsecured and bear interest at 0.25% per annum until May 6, 2022, the maturity date, and 10.0% per annum after the maturity date. Principal and interest are due and payable on the maturity date, provided, however, any payment of principal and interest on the loans is subordinated to payment of all indebtedness under the RLOC.

For the three months ended September 30, 2020, we were in compliance with the covenants of our RLOC with Amegy Bank. On November 12, 2020 we executed a Sixth Amendment to the RLOC with Amegy Bank, which extended the termination date of our RLOC to May 4, 2021. (See Note 5, “Senior Secured Revolving Credit Facility” of our accompanying unaudited condensed consolidated notes to our Financial Statements, beginning on page F-1).

We rely on our RLOC for capital expenditures and other day-to-day Working Capital needs. As of November 5, 2020, we had approximately $1,186,674 in available cash, and $528,667 available on our RLOC for borrowing (subject to certain borrowing base limitations). Borrowings on our RLOC are repaid from cash generated from our operations.

On April 11, 2020, we received approval from the SBA to fund our request for a PPP Loan created as part of the recently enacted CARES Act administered by the SBA. In connection with the PPP Loan, we entered into a promissory note in the principal amount of $361,400. In accordance with the requirements of the CARES Act, we intend to use the proceeds from the PPP Loan primarily for payroll costs. The PPP Loan is reflected in short term liabilities in our accompanying interim unaudited condensed consolidated balance sheets on F-1 as we expect the PPP Loan will be forgiven during 2020.

On May 12, 2020, we executed the standard loan documents required for securing a EIDL Loan from the SBA in light of the impact of the COVID-19 pandemic on our business. Pursuant to that certain Loan Authorization and Agreement (the “SBA Loan Agreement”), the principal amount of the EIDL Loan was $150,000, with proceeds to be used for working capital purposes. In connection therewith, we received a $10,000 advance, which does not have to be repaid and is reflected as an offset in Selling, General, Administrative and Other Expenses in our accompanying interim unaudited condensed consolidated statements of operations.

(See Note 8, “Economic Injury Disaster Loan” of our accompanying unaudited condensed consolidated notes to our Financial Statements, beginning on page F-1).

The accompanying interim unaudited condensed consolidated financial statements have been prepared as if we will continue as a going concern. ~~For the nine-month period ended~~Through September 30, ~~2017,~~2020, we had ~~net cash used~~accumulated losses of $4,222,759 and a stockholders’ deficit of $2,420,164. Although revenue increased by $22,318, or less than 1% in ~~operations~~the third quarter of $195,529, of which $92,476 represented a net loss. We expect to fund our future business development activities and working capital needs largely from improved future operations and other traditional financing sources, such2020 versus the same quarter in 2019, as we have been impacted by restrictions as a ~~revolving line~~result of ~~credit facility, term notes,~~the COVID-19 pandemic throughout 2020. At various times during 2018 and 2019, and for the first quarter ended March 31, 2020, we were out of compliance with one or additional private placements until such time sufficient funds are provided by operations. There can be no assurance our financing efforts will be successful, or if we will be able to achieve sufficient revenue and profitability growth from operations. Additional financing, may include restrictions on our operations, or with equity financing may resultmore covenants contained in our ~~stockholders’ ownership being diluted.~~

~~The estimated costs~~RLOC, but obtained waivers from Amegy Bank to cure the violations, along with reductions in our aggregate contractual borrowing limits under our RLOC. On November 12, 2020, we executed a Sixth Amendment to the RLOC with Amegy Bank, which extended the termination date of ~~operations while we work~~our RLOC to ~~increase our revenues are substantially greater than the amount of funds we~~May 4, 2021. We have ~~on hand. Our existence is dependent upon~~determined that these conditions and events raise substantial doubt about our ability to execute our restructuring and rebranding strategies and have accessibility to adequate funding as required. There can be no assurance that our efforts will result in profitable operations or provide resolution of our liquidity challenges. See Risk Factors, Item 1A, in our 2016 Annual Report.

~~In our 2016 Annual Report, our independent registered public accounting firm included an emphasis-of-matter paragraph with respect to our financial statements concerning our assumption that we will~~ continue as a going concern.

Our ability to continue as a going concern for at least one year beyond the date of this filing is dependent upon the easing of restrictions imposed on elective surgeries by civil authority as a result of COVID-19, as well as our (i) successful execution of key branding initiatives, (ii) introduction, commercialization and sales of new proprietary products and product lines, (iii) increased sales of existing products, with strategic emphasis on selling more Retail Cases and increasing the percentage of Retail Cases sold as a percentage of all Cases we sell, and (iv) continued cost reductions. Additionally, we will need to refinance our RLOC with Amegy Bank, which is set to expire on May 4, 2021, with a new credit facility on commercially reasonable terms or obtain equity financing. We were in compliance with all covenants contained in our RLOC with Amegy Bank as of Septembers 30, 2020.

Our accompanying interim unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern.

For the ~~nine-months~~nine months ended September 30, ~~2017,~~2020, we had ~~no material capital expenditures. We have~~ no material commitments for capital ~~expenditures as of~~expenditures.

For the nine months ended September 30, ~~2017. These capital expenditures will be allocated across business development initiatives, including investment in inventories and scalable infrastructure.~~2020, we had no off-balance sheet arrangements.

This report includes forward-looking statements including statements regarding 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 strategy, and financial needs.

The results anticipated by any ~~or all~~ of these forward-looking statements might not occur. Important factors that could cause actual results to differ from those in the forward-looking statements ~~include~~include; the ~~condition~~conditions of the capital markets, particularly for smaller ~~companies,~~companies; the willingness of doctors and facilities to purchase the products that we ~~sell and~~sell; certain regulatory issues adversely affecting our ~~margins,~~margins; insurance companies denying reimbursement to facilities who use the products that we ~~sell and/or~~sell; and our ability to sell products. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events, or otherwise.

As a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.

~~Evaluation~~We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, that are filed or submitted under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that this information is accumulated and communicated to management, including the principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

We conducted an evaluation (pursuant to Rule 13a-15(b) promulgated under the Exchange Act), under the supervision and with the participation of ~~Disclosure Controls~~management, including our Chief Executive and ~~Procedures~~Chief Financial Officers, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Exchange Act) as of September 30, 2020.

Based ~~upon the~~on our evaluation, ~~required by Section 13a-13(b) of the Securities Exchange Act of 1934, as amended,~~ our Chief Executive Officer and Chief Financial Officer ~~with the participation of our Board of Directors, continue to believe based on changes we~~ have ~~been making, since our year ended December 31, 2016~~concluded that ~~our~~ these disclosure controls and procedures, were effective as of September 30, ~~2017, are significantly improved since December 31, 2016.~~

Our management is responsible for establishing and maintaining adequate internal controls over our financial reporting. With the new executive leadership team, including the Chief Executive Officer and the Chief Financial Officer, and the significant restructuring and rebranding efforts deemed necessary by our Board of Directors, our management was unable to complete their full assessment regarding ~~the~~ ~~establishment and maintenance of adequate~~ ~~internal~~ ~~controls~~ ~~over our financial reporting~~ ~~using~~ ~~the criteria set forth by the Committee of~~ ~~Sponsoring~~ ~~Organizations of the Treadway Commission in~~ ~~Internal Control~~ — ~~Integrated Framework. Due to the inability to properly complete this process, we are unable to conclude that internal~~ ~~controls~~ ~~over financial reporting~~ ~~were~~ ~~effective~~ as of that date. Our Board of Directors, Chief Executive Officer, and Chief Financial Officer have engaged an independent third-party to assist in establishing a sustainable framework and processes to ensure adequate internal controls over financial reporting.

During the nine-months ended September 30, 2017, we out-sourced our supply chain management, finance, sales support, and other related functions, including payroll processing, employee benefit administration, and related human capital services to companies owned and controlled by our Chairman of the Board of Directors. We believe these arrangements have significantly improved internal controls over financial reporting and have provided us scalability for anticipated growth and expansion, while driving down fixed costs per transaction.2020.

On January 27, 2014, M. Richard Cutler and Cutler Law Group, P.C. (the “Plaintiffs”) filed a complaint in the District Court of Harris County, Texas, 2014-03355, against Legacy Fuse (See Note 1, “Nature of Operations and liquidity” of our interim condensed notes to the financial statements beginning on page F-1 and found elsewhere in this report), Alan Meeker, Rusty Shelton, Jonathan Brown, Robert H. Donehew and GolfRounds.com, Inc. (the “Defendants”). On April 21, 2014, the complaint was dismissed for “want of prosecution.” On September 18, 2015, Plaintiffs refiled a complaint in the District Court of Harris County, Texas, Cause No. 2015-55652 and added PH Squared, LLC as an additional Plaintiff, as more fully described in “Legal Matters” included in Note 6 in our 2016 Annual Report, which is herein incorporated by reference. During April 2017, one of the named individuals in the complaint filed for bankruptcy protection. There is currently no trial date set.

~~Our management continues to believe that the lawsuit is completely without merit and will vigorously contest it and protect our interests.~~

~~As a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this item.~~

On November 12, 2020, we executed the Sixth Amendment to our RLOC with Amegy Bank, which extended the termination date of the RLOC until May 4, 2021. The Sixth Amendment is attached hereto as Exhibit 10.1. (See Note 5, “Revolving Line of Credit” and Note 13, “Subsequent Events” of our unaudited condensed consolidated notes to our Financial Statements beginning on page F-1).

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

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

1565 N. Central Expressway, Suite 220, Richardson, TX		75080
(Address of principal executive offices)		(Zip Code)

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	~~(Do not check if smaller reporting company)~~	Smaller reporting company	☒
Emerging growth company	☐

			PAGE
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements		F-1
	Condensed Consolidated Balance Sheets at September 30, ~~2017~~2020 (Unaudited) and December 31, ~~2016~~2019		F-1
	Condensed ~~(Unaudited)~~Consolidated Statements of Operations for the ~~Three-months~~Three and ~~Nine-months~~Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (Unaudited)		F-2
	Condensed ~~(Unaudited) Statement~~Consolidated Statements of Changes in ~~Stockholders'~~Stockholders’ Equity for the ~~Nine-months~~Nine Months Ended September 30, ~~2017~~2020 and 2019 (Unaudited)		F-3
	Condensed ~~(Unaudited)~~Consolidated Statements of Cash Flows for the ~~Nine-months~~Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019 (Unaudited)		F-4
	Notes to Unaudited Condensed ~~(Unaudited)~~Consolidated Financial Statements		F-5
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations		3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		813
Item 4.	Controls and Procedures		813
PART II. OTHER INFORMATION
~~Item 1.~~		~~Legal Proceedings~~		9
~~Item 1A.~~		~~Risk Factors~~		9
~~Item 2.~~		~~Unregistered Sales of Equity Securities and Use of Proceeds~~		9
~~Item 3.~~		~~Defaults upon Senior Securities~~		9
~~Item 4.~~		~~Mine Safety Disclosures~~		9
Item 5.	Other Information		914
Item 6.	Exhibits		914
Signatures			1116

Category		Useful Life
Computer equipment and software		3 years
Furniture and fixtures		3 years
Office equipment		3 years
Software		3 years

	September 30, 2017			December 31, 2016			September 30, 2020			December 31, 2019
Computer equipment	$	-		$	29,290
Furniture and fixtures		5,047			6,347
Leasehold improvements		-			6,728
Computer equipment and software							$	45,411		$	51,303
Office equipment		1,580			1,580			20,333			20,333
		6,627			43,945
Property and equipment costs								65,744			71,636
Less: accumulated depreciation		(4,598	)		(35,014	)		(40,489	)		(38,997	)
Property and equipment, net	$	2,029		$	8,931		$	25,255		$	32,639

(Amounts in dollars, except per share data)	For the Three-months Ended September 30, 2017			For the Three-months Ended September 30, 2016			For the Nine- months Ended September 30, 2017			For the Nine- months Ended September 30, 2016
Revenues	$	428,204		$	107,584		$	911,033		$	421,170
Cost of revenues (primarily from related party, see note 8)		169,817			42,536			333,119			144,654
Gross profit		258,387			65,048			577,914			276,516
Operating expenses:
General, administrative and other		216,874			178,633			686,902			590,147
Loss on disposal of property and equipment		3,058			-			3,365			1,580
Depreciation		384			3,501			3,237			10,666
Total operating expenses		220,316			182,134			693,504			602,393
Operating income (loss)		38,071			(117,086	)		(115,590	)		(325,877	)

Interest expense		(6,806	)		(31,824	)		(20,194	)		(35,324	)
Extinguishment of debt		-			35,517			43,308			35,517

Net income (loss)	$	31,265		$	(113,393	)	$	(92,476	)	$	(325,684	)
Net income (loss) per common share - basic	$	0.00		$	(0.02	)	$	(0.01	)	$	(0.05	)
Net income (loss) per common share - diluted	$	0.00		$	-		$	-		$	-
Weighted average number of common shares outstanding - basic		15,890,808			6,890,808			15,890,808			6,890,808
Weighted average number of common shares outstanding - diluted		17,047,291			-			-			-

	Common Stock				Additional Paid-In		Accumulated
(Amounts in dollars, except per share data)	Shares		Amount		Capital		Deficit			Total
Balance, December 31, 2016		15,890,808	$	158,908	$	3,192,686	$	(2,900,979	)	$	450,615
Issuance of restricted stock for services		2,325,000		3,250		17,874		-			21,124
Net loss		-		-		-		(92,476	)		(92,476	)
Balance, September 30, 2017		18,215,808	$	162,158	$	3,210,560	$	(2,993,455	)	$	379,263

	Three Months Ended				Nine Months Ended
	September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019
Category
Retail	$	5,092,676	$	5,050,785	$	12,826,054	$	12,425,874
Wholesale		645,986		665,559		1,559,777		3,137,054
Total	$	5,738,662	$	5,716,344	$	14,385,831	$	15,562,928

	September 30, 2020			December 31, 2019			Amortization period (years)
Intangible assets:
Non-compete agreements	$	-		$	61,766		2
510(k) product technology		704,380			704,380		Indefinite
Customer relationships		555,819			555,819		11
Total intangible assets		1,260,199			1,321,965
Less: accumulated amortization		(109,486	)		(115,345	)
Intangible assets, net		1,150,713			1,206,620
Goodwill	$	1,972,886		$	1,972,886		Indefinite

	Number of Shares		Fair Value		Weighted Average Grant Date Fair Value
Non-vested, December 31, 2019		2,902,892	$	1,382,800	$	0.48
Granted		-		-		-
Vested		-		-		-
Forfeited		-		-		-
Non-vested, September 30, 2020		2,902,892	$	1,382,800	$	0.48

	For the Nine Months Ended September 30, 2020		For the Nine Months Ended September 30, 2019
Current:
Federal	$	-	$	-
State		11,341		10,589
		11,341		10,589
Deferred:
Federal		-		760,993
State		-		-
		-		760,993
Total income tax expense	$	11,341	$	771,582

	For the Three-months Ended September 30, 2017			For the Three-months Ended September 30, 2016			For the Nine-months Ended September 30, 2017			For the Nine-months Ended September 30, 2016
Customer 1		40.5	%		0.0	%		39.3	%		0.0	%
Customer 2		22.5	%		0.0	%		23.6	%		0.0	%
Customer 3		22.1	%		0.0	%		15.2	%		0.0	%
Customer 4		13.9	%		0.0	%		19.0	%		0.0	%
Totals		99.0	%		0.0	%		97.1	%		0.0	%

	For the Three-months Ended September 30, 2017			(%)		For the Three-months Ended September 30, 2016			(%)		For the Nine-months Ended September 30, 2017			(%)		For the Nine-months Ended September 30, 2016			(%)
Revenues	$	428,204			100%	$	107,584			100%	$	911,033			100%	$	421,170			100%
Cost of revenues		169,817			40%		42,536			40%		333,119			37%		144,654			34%
Gross profit		258,387			60%		65,048			60%		577,914			63%		276,516			66%
Operating expenses:
General, administrative and other		216,874			51%		178,633			166%		686,902			75%		590,147			140%
Loss on disposal of property and equipment		3,058			1%		-			0%		3,365			0%		1,580			0%
Depreciation		384			0%		3,501			3%		3,237			0%		10,666			3%
Total operating expenses		220,316			51%		182,134			169%		693,504			76%		602,393			143%
Operating income (loss)		38,071			9%		(117,086	)		-109%		(115,590	)		-13%		(325,877	)		-77%

Interest expense		(6,806	)		-2%		(31,824	)		-30%		(20,194	)		-2%		(35,324	)		-8%
Extinguishment of debt		-			0%		35,517			33%		43,308			5%		35,517			8%

Net income (loss)	$	31,265			7%	$	(113,393	)		-105%	$	(92,476	)		-10%	$	(325,684	)		-77%

	Nine Months Ended September 30,
	2017			2016
Net cash used in operating activities	$	(195,529	)	$	(46,723	)
Net cash provided by investing activities		300			300
Net cash provided by financing activities		-			100,000
Net (decrease) increase in cash and cash equivalents	$	(195,229	)	$	53,577

Exhibit No.		Description


3.1		Amended and Restated Certificate of Incorporation of ~~the Company (filed as~~Fuse Medical, Inc., incorporated herein by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 15, ~~2014, and incorporated herein by reference).~~ 2014.

3.2		~~Amendment to the~~ Amended and Restated ~~Certificate~~Bylaws of ~~Incorporation of the Company (filed as Annex A~~Fuse Medical, Inc., incorporated herein by reference to Exhibit 3.1 to the Company’s ~~Information Statement,~~Current Report on Form 8-K filed with the SEC on ~~December 4, 2015, and incorporated herein by reference).~~March 21, 2019.


~~3.3~~10.1*		~~Bylaws (filed as Exhibit 3.2~~Sixth Amendment to the ~~Company’s Current Report Form 8-K, filed on May 29, 2014,~~Amended and ~~incorporated herein by reference).~~


~~3.4~~		Certificate of Merger, as filed with the Secretary of State of the State of Delaware on May 28, 2014 (filed as Exhibit 3.3 to the Company’s Form 8-K filed on May 29, 2014, and incorporated herein by reference).


~~3.5~~		~~Amendment No. 1 to the Bylaws (filed as Exhibit 3.1 to the Company’s Form 8-K, filed on December 19, 2016, and incorporated herein by reference).~~

~~4.1~~		~~2017 Equity Incentive Plan of Fuse Medical, Inc. dated April 5, 2017 (filed as Exhibit 99.2 to the Company’s Form 8-K filed April 6, 2017, and incorporated herein by reference).~~

~~4.2~~		Amendment Number 1 to the 2017 Equity Incentive Plan of Fuse Medical, Inc. dated September 21, 2017 (filed as Exhibit 4.1 to the Company’s Form 8-K/A filed November 6, 2017, and incorporated herein by reference.)

~~4.3~~		Amendment Number 2 to the 2017 Equity Incentive Plan of Fuse Medical, Inc. dated October 4, 2017 (filed as Exhibit 4.2 to the Company’s Form 8-K/A filed November 6, 2017, and incorporated herein by reference.)

~~10.1~~		~~Commercial Property Lease~~Restated Business Loan Agreement dated ~~July 19, 2017~~November 12, 2020, by and between Zions Bancorporation, N.A. (dba Amegy Bank) and Fuse Medical, Inc. and ~~1565 North Central Expressway, LP (filed as Exhibit 10.1 to the Company’s Form 8-K, filed on July 19, 2017, and incorporated herein by reference).~~

~~10.2~~		~~Assignment of Sublease and Consent, dated July 17, 2017, by and between (i) PBIII-SOP, LP, (ii) PHILLIP GALYEN, PC, d/b/a Bailey & Galyen, (iii) Fuse~~CPM Medical ~~Inc., and (iv) LawConnect, Inc. d/b/a GetLegal.com (filed as Exhibit 10.2 to the Company’s Form 8-K, filed on July 19, 2017, and incorporated herein by reference).~~

~~10.3~~		~~Form of Restricted Stock Award for Board Compensation of Fuse Medical, Inc. (filed as Exhibit 10.1 to the Company’s Form 8-K filed October 10, 2017, and incorporated herein by reference).~~

~~10.4~~		~~Form of Restricted Stock Award for Special Board Compensation of Fuse Medical, Inc. (filed as Exhibit 10.2 to the Company’s Form 8-K filed October 10, 2017, and incorporated herein by reference).~~Consultants, LLC.

31.1*		Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


31.2*		Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.


32.1**		Certification of the Chief Executive Officer and the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


101.INS *		XBRL Instance Document

101.SCH *		XBRL Taxonomy Extension Schema Document


101.CAL *		XBRL Taxonomy Extension Calculation Linkbase Document


101.DEF *		XBRL Taxonomy Extension Definition Linkbase Document


101.LAB *		XBRL Taxonomy Extension Label Linkbase Document


101.PRE *		XBRL Taxonomy Extension Presentation Linkbase Document

	FUSE MEDICAL, INC.

Date: November ~~8, 2017~~ 16, 2020	By:	/s/ Christopher C. Reeg
		Christopher C. Reeg
		Chief Executive Officer and Director (Principal Executive Officer)