As filed with the Securities and Exchange Commission on April 27, 2026
Registration No. 333-295213
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
REGISTRATION STATEMENT
(
UNDER
THE SECURITIES ACT OF 1933
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification Number) |
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Fusemachines Inc.
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Ilan Katz, Esq.
Brian
Lee, Esq.
Grant Levine, Esq.
Dentons US LLP
1221 Avenue of the Americas
New York, NY 10020-1089
(212) 768-6700
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐
| Large accelerated filer: | ☐ | Accelerated filer: | ☐ |
| ☒ | Smaller reporting company: | ||
| Emerging growth company: |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION, DATED APRIL 27, 2026 |
Up to 11,363,636 Shares of Common Stock
Fusemachines Inc.
This prospectus relates to the offer and sale of up to 11,363,636 shares of common stock, par value $0.0001 per share (“Common Stock”), of Fusemachines Inc., a Delaware corporation (the “Company”, “we” or “us”), by Roth Principal Investments, LLC (“Roth Principal Investments” or the “Selling Stockholder”).
The shares of Common Stock to which this prospectus relates have been or may be issued by us to Roth Principal Investments pursuant to a Common Stock Purchase Agreement, dated as of April 17, 2026, we entered into with Roth Principal Investments (the “Purchase Agreement”). Such shares of Common Stock include up to 11,363,636 shares that we may, in our sole discretion, elect to sell to Roth Principal Investments, from time to time after the date of this prospectus, pursuant to the Purchase Agreement. As of the date of this prospectus, we have not issued any shares of Common Stock to Roth Principal Investments under the Purchase Agreement.
We are not selling any securities under this prospectus and will not receive any of the proceeds from the sale of Common Stock by the Selling Stockholder. However, we may receive up to $20,000,000 aggregate gross proceeds under the Purchase Agreement from sales of Common Stock we may elect to make to Roth Principal Investments pursuant to the Purchase Agreement after the date of this prospectus. See the section titled “The Committed Equity Facility” in this prospectus for a description of the Purchase Agreement and “Selling Stockholder” for additional information regarding Roth Principal Investments.
Roth Principal Investments may sell or otherwise dispose of the Common Stock described in this prospectus in a number of different ways and at varying prices. See “Plan of Distribution (Conflict of Interest)” for more information about how Roth Principal Investments may sell or otherwise dispose of the Common Stock pursuant to this prospectus. Roth Principal Investments is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended (the “Securities Act”).
We will pay the expenses incurred in registering under the Securities Act the offer and sale of the shares of Common Stock to which this prospectus relates by the Selling Stockholder, including legal fees. We have also engaged Digital Offering, LLC to act as a “qualified independent underwriter” in this offering and have agreed to pay their fees for such services. See “Plan of Distribution (Conflict of Interest)” beginning on page 116.
Our Common Stock and public warrants are listed on The Nasdaq Global Market under the symbols “FUSE” and “FUSEW,” respectively. On April 16, 2026, the last reported sale price of our Common Stock on The Nasdaq Global Market was $1.76 per share.
We are an “emerging growth company” and a “smaller reporting company” under the federal securities laws and are subject to reduced public company reporting requirements.
Investing in our securities involves a high degree of risk. You should review carefully the risks and uncertainties described under the heading “Risk Factors” beginning on page 9 of this prospectus, and under similar headings in any amendment or supplements to this prospectus.
Neither the U.S. Securities and Exchange Commission (the “SEC”) nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 2026.
Table of Contents
You should rely only on the information contained in this prospectus or any prospectus supplement or amendment. Neither we, nor the underwriters, have authorized any other person to provide you with information that is different from, or adds to, that contained in this prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor the underwriters take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. You should assume that the information contained in this prospectus or any free writing prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date. We are not making an offer of any securities in any jurisdiction in which such offer is unlawful.
No action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or possession or distribution of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to inform themselves about and to observe any restrictions as to this public offering and the distribution of this prospectus applicable to that jurisdiction.
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ABOUT THIS PROSPECTUS
This prospectus, including information incorporated by reference herein, is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC” or the “Commission”) under the Securities Act. Under this prospectus, the Selling Stockholder may, from time to time, sell shares of our Common Stock described in this prospectus in one or more transactions, as described herein. This prospectus provides you with a general description of the securities offered by the Selling Stockholder. Any prospectus supplement may also add, update or change information contained in this prospectus. Any statement that we make in this prospectus will be modified or superseded by any inconsistent statement made by us in a prospectus supplement.
We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. If there is any inconsistency between the information in this prospectus and the applicable prospectus supplement or post-effective amendment, you should rely on the prospectus supplement or post-effective amendment, as applicable. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the section titled “Where You Can Find More Information.”
You should rely only on the information contained in this prospectus and any prospectus supplement filed by us with the SEC in connection with this offering, and the documents incorporated by reference herein and therein. Neither we nor the Selling Stockholder have authorized anyone to provide you with different or additional information. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. The information in this prospectus and any applicable prospectus supplement is accurate only as of the date on its respective cover. Our business, financial condition, results of operations and prospects may have changed since those dates. The Selling Stockholder is offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted.
For investors outside the United States: Neither we, nor the Selling Stockholder have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of securities and the distribution of this prospectus outside the United States.
In this prospectus and any prospectus supplement, unless otherwise stated or the context otherwise indicates, references to “Fusemachines,” “the Company,” “we,” “us,” “our” and similar references refer to Fusemachines Inc., a Delaware corporation.
The Fusemachines logo and other trademarks of Fusemachines Inc. appearing in this prospectus are the property of Fusemachines. All other trademarks, service marks and trade names in this prospectus are the property of their respective owners. We have omitted the ® and ™ designations, as applicable, for the trademarks used in this prospectus.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains “forward-looking statements.” Forward-looking statements reflect the current view about future events. When used in this prospectus, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions, as they relate to us or our management, identify forward-looking statements. Such statements, include, but are not limited to, statements contained in this prospectus relating to our business strategy, our future operating results and liquidity and capital resources outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. They are neither statements of historical fact nor guarantees of assurance of future performance. We caution you therefore against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, without limitation:
| ● | our ability to effectively operate our business segments; | |
| ● | our ability to manage our research, development, expansion, growth and operating expenses; | |
| ● | our ability to evaluate and measure our business, prospects and performance metrics; | |
| ● | our ability to compete, directly and indirectly, and succeed in a highly competitive and evolving industry; | |
| ● | our ability to respond and adapt to changes in technology and customer behavior; | |
| ● | our ability to protect our intellectual property and to develop, maintain and enhance a strong brand; and | |
| ● | other factors (including the risks contained in the section of this prospectus entitled “Risk Factors”) relating to our industry, our operations and results of operations. |
Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.
Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
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PROSPECTUS SUMMARY
This summary provides a brief overview of the key aspects of our business and our securities. The reader should read the entire prospectus carefully, especially the risks of investing in our Common Stock discussed under “Risk Factors.” Some of the statements contained in this prospectus, including statements under “Summary” and “Risk Factors” as well as those noted in the documents incorporated herein by reference, are forward-looking statements and may involve a number of risks and uncertainties. Our actual results and future events may differ significantly based upon a number of factors. The reader should not put undue reliance on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.
Company Overview
Fusemachines is a leading provider of enterprise AI solutions, offering AI products including AI Studio, AI Engines, and AI Agents, along with supporting services to organizations across a wide range of industries. With more than a decade of experience, we help enterprises integrate AI into their operations to improve efficiency, reduce costs, and drive innovation. Our products and services are uniquely supported by a global talent pool largely sourced from underserved communities, enabling us to deliver high quality AI solutions at scale while advancing our mission of democratizing access to AI.
Our diverse client base spans industries including consumer brands, healthcare, media, technology, government, and others. These clients use our AI solutions to address critical business challenges such as improving sales forecasting accuracy, eliminating manual data entry errors, automating recruitment processes, and detecting fraud in real time. Our focus on delivering measurable business outcomes has enabled us to build long-term relationships with our clients and position Fusemachines as a partner in their AI driven transformation efforts.
In addition to our enterprise AI solutions, we are committed to education and talent development. Our AI training programs, including our AI Fellowship Program, are designed to upskill students and professionals by providing hands-on experience with real world AI applications. To date, we have certified hundreds of AI Fellows across the United States, Nepal, and the Dominican Republic. These programs help expand the global AI talent pool and address the growing shortage of skilled AI professionals.
The Committed Equity Facility
On April 17, 2026, we entered into the Purchase Agreement and a related registration rights agreement, dated as of April 17, 2026 (the “Registration Rights Agreement”), with Roth Principal Investments. Upon the terms and subject to the satisfaction of the conditions contained in the Purchase Agreement, we have the right, in our sole discretion, to sell to Roth Principal Investments up to $20,000,000 of shares of our Common Stock (subject to certain limitations contained in the Purchase Agreement)(the “Commitment Amount”), from time to time after the date of this prospectus and during the term of the Purchase Agreement through one or more Purchases (as defined below). Sales of Common Stock pursuant to the Purchase Agreement, and the timing of any sales, are solely at our option, and we are under no obligation to sell any securities to Roth Principal Investments under the Purchase Agreement. In accordance with our obligations under the Registration Rights Agreement, we have filed the registration statement that includes this prospectus with the SEC to register under the Securities Act, the offer and resale by Roth Principal Investments of up to 11,363,636 shares of Common Stock (the “Purchase Shares”) that we may, in our sole discretion, elect to sell to Roth Principal Investments, from time to time from and after the Commencement Date (defined below) pursuant to the Purchase Agreement.
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Upon the initial satisfaction of each of the conditions to Roth Principal Investments’ purchase obligations set forth in the Purchase Agreement (the initial satisfaction of all of such conditions, the “Commencement”), none of which are within Roth Principal Investments’ control, including that the registration statement that includes this prospectus shall have been declared effective by the SEC, we have the right, but not the obligation, from time to time at our sole discretion for a period of up to 36 months (unless the Purchase Agreement is earlier terminated), beginning on the date on which the Commencement occurs (such date, the “Commencement Date” and such period, the “Commitment Period”), to direct Roth Principal Investments to purchase a specified number of shares of Common Stock (each, a “Market Open Purchase”), not to exceed the lesser of (such lesser number of shares, the “Market Open Purchase Maximum Amount”): (i) 2,000,000 shares of Common Stock and (ii) up to a certain percentage (not to exceed 25.0%), which we will specify in the applicable Market Open Purchase Notice (as defined below) for such Market Open Purchase (such specified percentage, the “Market Open Purchase Percentage”), of the total aggregate number (or volume) of shares of our Common Stock traded on Nasdaq during the applicable Market Open Purchase Valuation Period (as defined below) for such Market Open Purchase (such specified number of shares to be purchased by Roth Principal Investments, adjusted as necessary to give effect to the applicable Market Open Purchase Maximum Amount as set forth in the Purchase Agreement, the “Market Open Purchase Share Amount”), by timely delivering written notice of such Market Open Purchase to Roth Principal Investments (each, a “Market Open Purchase Notice”) prior to 9:00 a.m., New York City time, on any trading day (each, a “Purchase Date”), so long as (a) the closing sale price of our Common Stock on Nasdaq on the trading day immediately prior to such Purchase Date is not less than a threshold price of $0.50 (the “Threshold Price”), and (b) all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement. Each notice provided by us to Roth Principal Investments relating to the sale of Purchase Shares is defined herein as a “Purchase Notice”.
The per share purchase price that Roth Principal Investments is required to pay for shares of Common Stock in a Market Open Purchase effected by us pursuant to the Purchase Agreement, if any, will be determined by reference to the volume weighted average price of the Common Stock (the “VWAP”), calculated in accordance with the Purchase Agreement, for the period (the “Market Open Purchase Valuation Period”) beginning at the official open (or “commencement”) of the regular trading session on Nasdaq on the applicable Purchase Date for such Purchase, and ending at the earliest to occur of (i) 3:59 p.m., New York City time, on such Purchase Date or such earlier time publicly announced by the trading market as the official close of the regular trading session on such Purchase Date, (ii) such time that the total aggregate number (or volume) of shares of Common Stock traded on Nasdaq during such Market Open Purchase Valuation Period (calculated in accordance with the Purchase Agreement) reaches the applicable share volume maximum amount for such Market Open Purchase (the “Market Open Purchase Share Volume Maximum”), calculated by dividing (a) the applicable Market Open Purchase Share Amount for such Market Open Purchase, by (b) the Market Open Purchase Percentage we specified in the applicable Market Open Purchase Notice for such Market Open Purchase, and (iii) if we further specify in the applicable Market Open Purchase Notice for such Market Open Purchase that a “limit order discontinue election” (a “Limit Order Discontinue Election”) shall apply to such Market Open Purchase, such time that the trading price of our Common Stock on Nasdaq during such Market Open Purchase Valuation Period (calculated in accordance with the Purchase Agreement) falls below the applicable minimum price threshold for such Market Open Purchase specified by us in the Market Open Purchase Notice for such Market Open Purchase, or if we do not specify a minimum price threshold in such Market Open Purchase Notice, a price equal to 75.0% of the closing sale price of the Common Stock on the trading day immediately prior to the applicable Purchase Date for such purchase (the “Minimum Price Threshold”), less a fixed 3.0% discount to the VWAP for such Market Open Purchase Valuation Period (calculated in accordance with the Purchase Agreement).
Under the Purchase Agreement, for purposes of calculating the volume of shares of Common Stock traded during a Market Open Purchase Valuation Period, as well as the VWAP for a Market Open Purchase Valuation Period, the following transactions, to the extent they occur during such Market Open Purchase Valuation Period, shall be excluded: (x) the opening or first purchase of Common Stock at or following the official open of the regular trading session on Nasdaq on the applicable Purchase Date for such Market Open Purchase, (y) the last or closing sale of Common Stock at or prior to the official close of the regular trading session on Nasdaq on the applicable Purchase Date for such Market Open Purchase, and (z) if we have specified in the applicable Market Open Purchase Notice for such Market Open Purchase that a “limit order continue election” (a “Limit Order Continue Election”), rather than a Limit Order Discontinue Election, shall apply to such Market Open Purchase, all purchases and sales of Common Stock on Nasdaq during such Market Open Purchase Valuation Period at a price per share that is less than the applicable Minimum Price Threshold for such Market Open Purchase.
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From and after the Commencement Date, in addition to Market Open Purchases described above, we will also have the right, but not the obligation, subject to the continued satisfaction of the conditions set forth in the Purchase Agreement, to direct Roth Principal Investments to purchase, on any trading day that would qualify as a Purchase Date, whether or not a Market Open Purchase is effected on such Purchase Date, a specified number of shares of Common Stock (each, an “Intraday Purchase”), not to exceed the lesser of (such lesser number of shares, the “Intraday Purchase Maximum Amount”): (i) 2,000,000 shares of Common Stock and (ii) up to a certain percentage (not to exceed 25.0%), which we will specify in the applicable Intraday Purchase Notice (as defined below) for such Intraday Purchase (such specified percentage, the “Intraday Purchase Percentage”), of the total aggregate volume of shares of our Common Stock traded on Nasdaq during the applicable “Intraday Purchase Valuation Period” (determined in a similar manner as the Market Open Purchase Valuation Periods for a Market Open Purchase) for such Intraday Purchase (such specified number of shares to be purchased by Roth Principal Investments, adjusted to the extent necessary to give effect to the applicable Intraday Purchase Maximum Amount as set forth in the Purchase Agreement, the “Intraday Purchase Share Amount”), by the delivery to Roth Principal Investments of an irrevocable written purchase notice for such Intraday Purchase, after 10:00 a.m., New York City time (and after the Market Open Purchase Valuation Period for any earlier Market Open Purchase and the Intraday Purchase Valuation Period for the most recent prior Intraday Purchase effected on the same Purchase Date as such applicable Intraday Purchase, if applicable, have ended), and prior to 2:00 p.m., New York City time, on such Purchase Date (each, an “Intraday Purchase Notice”), so long as (i) the closing sale price of the Common Stock on Nasdaq on the trading day immediately prior to such Purchase Date is not less than the Threshold Price and (ii) all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
The per share purchase price for the shares of Common Stock that we elect to sell to Roth Principal Investments in an Intraday Purchase pursuant to the Purchase Agreement, if any, will be calculated in the same manner as in the case of a Market Open Purchase (including the same fixed 3.0% discount to the applicable VWAP used to calculate the per share purchase price for a Market Open Purchase, as described above), provided that the VWAP for each Intraday Purchase effected on a Purchase Date will be calculated over different Intraday Purchase Valuation Periods during the regular trading session on Nasdaq on such Purchase Date, each of which will commence and end at different times on such Purchase Date.
From and after the Commencement Date, in addition to Market Open Purchases and Intraday Purchases described above, we will also have the right, but not the obligation, subject to the continued satisfaction of the conditions set forth in the Purchase Agreement, to direct Roth Principal Investments to purchase a specified number of shares of Common Stock (each, a “Pre-Market Purchase”), not to exceed the lesser of (such lesser number of shares, the “Pre-Market Purchase Maximum Amount”): (i) 1,000,000 shares of Common Stock and (ii) up to a certain percentage (not to exceed 20.0%), which we will specify in the applicable Pre-Market Purchase Notice for such Pre-Market Purchase (such specified percentage, the “Pre-Market Purchase Percentage”), of the total aggregate number (or volume) of shares of our Common Stock traded on Nasdaq during the applicable Pre-Market Purchase Valuation Period (as defined below) for such Pre-Market Purchase (such specified number of shares to be purchased by Roth Principal Investments, adjusted to the extent necessary to give effect to the applicable Pre-Market Purchase Maximum Amount as set forth in the Purchase Agreement, the “Pre-Market Purchase Share Amount”), by the delivery to Roth Principal Investments of an irrevocable written purchase notice for such Pre-Market Purchase (each, a “Pre-Market Purchase Notice”), after 7:00 a.m., New York City time, and prior to 8:30 a.m., New York City time, on any trading day we select as the Purchase Date for such Pre-Market Purchase, so long as (a) the closing sale price of the Common Stock on Nasdaq on the trading day immediately prior to such Purchase Date is not less than the Threshold Price and (b) all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
The per share purchase price for the shares of Common Stock that we elect to sell to Roth Principal Investments in a Pre-Market Purchase pursuant to the Purchase Agreement, if any, will be calculated in a similar manner as in the case of a Market Open Purchase, except that the applicable VWAP will be calculated over a different valuation period (the “Pre-Market Purchase Valuation Period”) during extended hours trading on Nasdaq on the applicable Purchase Date, commencing upon acknowledgment by Roth Principal Investments of receipt of the applicable Pre-Market Purchase Notice, and the per share purchase price will reflect a fixed 5.0% discount to such VWAP (rather than the 3.0% discount applicable to Market Open Purchases and Intraday Purchases). See “The Committed Equity Facility” for a more detailed description of how the Pre-Market Purchase Valuation Period and the per share purchase price for Pre-Market Purchases are determined.
From and after the Commencement Date, in addition to Market Open Purchases, Intraday Purchases and Pre-Market Purchases described above, we will also have the right, but not the obligation, subject to the continued satisfaction of the conditions set forth in the Purchase Agreement, to direct Roth Principal Investments to purchase a specified number of shares of Common Stock (each, a “Post-Market Purchase”), not to exceed the lesser of (such lesser number of shares, the “Post-Market Purchase Maximum Amount”): (i) 1,000,000 shares of Common Stock and (ii) up to a certain percentage (not to exceed 20.0%), which we will specify in the applicable Post-Market Purchase Notice for such Post-Market Purchase (such specified percentage, the “Post-Market Purchase Percentage”), of the total aggregate number (or volume) of shares of our Common Stock traded on Nasdaq during the applicable Post-Market Purchase Valuation Period (as defined below) for such Post-Market Purchase (such specified number of shares to be purchased by Roth Principal Investments, adjusted to the extent necessary to give effect to the applicable Post-Market Purchase Maximum Amount as set forth in the Purchase Agreement, the “Post-Market Purchase Share Amount”), by the delivery to Roth Principal Investments of an irrevocable written purchase notice for such Post-Market Purchase (each, a “Post-Market Purchase Notice”), after 4:05 p.m., New York City time, and prior to 5:00 p.m., New York City time, on any trading day we select as the Purchase Date for such Post-Market Purchase, so long as (a) the closing sale price of the Common Stock on Nasdaq on such Purchase Date (not the prior trading day) is not less than the Threshold Price and (b) all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
The per share purchase price for the shares of Common Stock that we elect to sell to Roth Principal Investments in a Post-Market Purchase pursuant to the Purchase Agreement, if any, will be calculated in the same manner as in the case of a Pre-Market Purchase (including the same fixed 5.0% discount to the applicable VWAP used to calculate the per share purchase price for a Pre-Market Purchase, as described above), provided that the VWAP for each Post-Market Purchase will be calculated over a different valuation period (the “Post-Market Purchase Valuation Period”) during extended hours trading on Nasdaq on the applicable Purchase Date, commencing upon acknowledgment by Roth Principal Investments of receipt of the applicable Post-Market Purchase Notice. See “The Committed Equity Facility” for a more detailed description of how the Post-Market Purchase Valuation Period and the per share purchase price for Post-Market Purchases are determined.
There is no upper limit on the price per share that Roth Principal Investments could be obligated to pay for the Common Stock we may elect to sell to it in any Market Open Purchase, any Intraday Purchase, any Pre-Market Purchase or any Post-Market Purchase under the Purchase Agreement. In the case of Market Open Purchases, Intraday Purchases, Pre-Market Purchases and Post-Market Purchases effected by us under the Purchase Agreement, if any, all share and dollar amounts used in determining the purchase price per share of Common Stock to be purchased by Roth Principal Investments in a Market Open Purchase, an Intraday Purchase, a Pre-Market Purchase or a Post-Market Purchase (as applicable), or in determining the applicable maximum purchase share amounts or applicable volume or price threshold amounts in connection with any such Purchase (as applicable), in each case, will be equitably adjusted as set forth in the Purchase Agreement for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during any period used to calculate such per share purchase price, maximum purchase share amounts or applicable volume or minimum price thresholds.
We will control the timing and amount of any sales of Common Stock to Roth Principal Investments that we may elect, in our sole discretion, to effect from time to time from and after the Commencement Date and during the term of the Purchase Agreement. Actual sales of shares of Common Stock to Roth Principal Investments under the Purchase Agreement will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of the Common Stock and determinations by us as to the appropriate sources of funding for our company’s business and operations. The Company has no obligation to sell any shares to Roth Principal Investments, and Roth Principal Investments is obligated to purchase shares only as directed by the Company and subject to the terms and conditions of the Purchase Agreement.
Under the applicable Nasdaq rules, in no event may we issue to Roth Principal Investments under the Purchase Agreement more than 5,750,000 shares of Common Stock, which number of shares is equal to 19.99% of the shares of Common Stock outstanding immediately prior to the execution of the Purchase Agreement (the “Exchange Cap”), unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Roth Principal Investments for all of the shares of Common Stock that we direct Roth Principal Investments to purchase from us pursuant to the Purchase Agreement, if any, equals or exceeds $1.76 (representing the lower of (a) the official closing price of our Common Stock on Nasdaq immediately preceding the execution of the Purchase Agreement and (b) the average official closing price of our Common Stock on Nasdaq for the five consecutive trading days immediately preceding the execution of the Purchase Agreement, adjusted as required by Nasdaq to take into account, among other things, our payment of the Cash Commitment Fee (defined below) to Roth Principal Investments), so that the Exchange Cap limitation will not apply to issuances and sales of Common Stock pursuant to the Purchase Agreement.
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Moreover, we may not issue or sell any shares of Common Stock to Roth Principal Investments under the Purchase Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by Roth Principal Investments and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act, and Rule 13d-3 thereunder), would result in Roth Principal Investments beneficially owning more than 4.99% of the outstanding shares of Common Stock (the “Beneficial Ownership Limitation”).
The net proceeds to us from sales that we elect to make to Roth Principal Investments under the Purchase Agreement, if any, will depend on the frequency and prices at which we sell shares of our Common Stock to Roth Principal Investments. We expect that any proceeds received by us from such sales of Common Stock to Roth Principal Investments will be used for working capital and general corporate purposes.
There are no restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement or Registration Rights Agreement, other than a prohibition (with certain limited exceptions) on entering into specified “Variable Rate Transactions” (as such term is defined in the Purchase Agreement) during the term of the Purchase Agreement. Such transactions include, among others, the issuance of convertible securities with a conversion or exercise price that is based upon or varies with the trading price of our Common Stock after the date of issuance, or our effecting or entering into an agreement to effect an “equity line of credit” or other substantially similar continuous offering with a third party, in which we may offer, issue or sell Common Stock or any securities exercisable, exchangeable or convertible into Common Stock at a future determined price.
Roth Principal Investments has agreed that none of Roth Principal Investments, any of its officers, or any entity managed or controlled by Roth Principal Investments will engage in or effect, directly or indirectly, for Roth Principal Investments’ own account or for the principal account of any such entity managed or controlled by Roth Principal Investments, any short sales of the Common Stock or hedging transaction that establishes a net short position in the Common Stock during the term of the Purchase Agreement.
The Purchase Agreement will automatically terminate on the earliest to occur of (i) the first day of the month next following the 36-month anniversary of the Commencement Date, (ii) the date on which Roth Principal Investments shall have purchased from us under the Purchase Agreement shares of Common Stock for an aggregate gross purchase price of $20,000,000, (iii) the date on which the Common Stock shall have failed to be listed or quoted on Nasdaq or another U.S. national securities exchange identified as an “eligible market” in the Purchase Agreement for a period of one trading day, (iv) the 30th trading day after the date on which a voluntary or involuntary bankruptcy proceeding involving our company has been commenced that is not discharged or dismissed prior to such 30th trading day, and (v) the date on which a bankruptcy custodian is appointed for all or substantially all of our property or we make a general assignment for the benefit of creditors.
We have the right to terminate the Purchase Agreement at any time after Commencement, at no cost or penalty, upon 5 trading days’ prior written notice to Roth Principal Investments. We and Roth Principal Investments may also agree to terminate the Purchase Agreement by mutual written consent, provided that no termination of the Purchase Agreement will be effective during the pendency of any Purchase that has not then fully settled in accordance with the Purchase Agreement. Neither we nor Roth Principal Investments may assign or transfer any of our respective rights or obligations under the Purchase Agreement or the Registration Rights Agreement, and no provision of the Purchase Agreement or the Registration Rights Agreement may be modified or waived by us or Roth Principal Investments.
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As consideration for Roth Principal Investments’ commitment to purchase shares of Common Stock our direction upon the terms and subject to the conditions set forth in the Purchase Agreement, we (i) paid to Roth Principal Investments a cash “structuring fee” of $20,000, prior to our execution of the Purchase Agreement, and (ii) agreed to pay to Roth Principal Investments a cash commitment fee of $300,000 (the “Cash Commitment Fee”), which is equal to 1.5% of Roth Principal Investments’ $20,000,000 total aggregate dollar amount purchase commitment under the Purchase Agreement. The Cash Commitment Fee shall be payable in cash to Roth Principal Investments out of the first proceeds, following Market Open Purchases or Intraday Purchases, at a 10% participation rate until the entire Commitment Fee has been received by the Roth Principal Investments.
In addition, we have agreed to reimburse Roth Principal Investments for the reasonable legal fees and disbursements of Roth Principal Investments’ legal counsel in connection with the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement in an amount equal to $60,000 (the “Initial Legal Fee Reimbursement Amount”), upon our execution of the Purchase Agreement and Registration Rights Agreement. We have also agreed to reimburse Roth Principal Investments up to $7,500 per fiscal quarter (the “Additional Investor Legal Fee Reimbursement Amount”) for the reasonable legal fees and disbursements of Roth Principal Investments’ legal counsel in connection with quarterly and annual bring-down due diligence investigations and related matters as contemplated by the Purchase Agreement.
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions, and indemnification obligations of the parties. Copies of the agreements have been filed as exhibits to the registration statement that includes this prospectus and are available electronically on the SEC’s website at www.sec.gov.
Because the per share purchase price that Roth Principal Investments will pay for Purchase Shares in any Market Open Purchase, Intraday Purchase, Pre-Market Purchase or Post-Market Purchase that we may elect to effect pursuant to the Purchase Agreement will be determined by reference to the VWAP during the applicable Purchase Valuation Period on the applicable Purchase Date for such Purchase, as of the date of this prospectus, we cannot determine the actual purchase price per share that Roth Principal Investments will be required to pay for any Purchase Shares that we may elect to sell to Roth Principal Investments under the Purchase Agreement from and after Commencement and, therefore, we cannot be certain how many Purchase Shares, in the aggregate, we may issue and sell to Roth Principal Investments under the Purchase Agreement from and after Commencement. As of April 10, 2026, there were 28,939,240 shares of our Common Stock outstanding, of which 10,518,715 shares were held by non-affiliates of our company. If all of the 11,363,636 shares of Common Stock offered for resale by Roth Principal Investments under this prospectus were issued and outstanding as of the date hereof, such shares would represent approximately 39.3% of the total number of outstanding shares of Common Stock and approximately 108.0% of the total number of outstanding shares of Common Stock held by non-affiliates of our company, in each case as of April 10, 2026. We may sell no more than 5,750,000 shares of Common Stock under this prospectus without shareholder approval.
Although the Purchase Agreement provides that we may sell up to $20,000,000 of our Common Stock to Roth Principal Investments, only 11,363,636 Purchase Shares are being registered under the Securities Act for resale by Roth Principal Investments under the registration statement that includes this prospectus. At an assumed purchase price per share of $1.76, representing the closing sale price of our Common Stock on Nasdaq immediately prior to the execution of the Purchase Agreement, the number of Purchase Shares that are being registered under the registration statement that includes this prospectus would be sufficient to enable us to receive the full $20,000,000 in aggregate gross proceeds from the sale of such Purchase Shares to Roth Principal Investments under the Purchase Agreement. However, depending on the market prices of our Common Stock on the Purchase Dates on which we elect to sell such Purchase Shares to Roth Principal Investments under the Purchase Agreement, we may need to register under the Securities Act additional shares of our Common Stock for resale by Roth Principal Investments in order for us to receive aggregate proceeds equal to Roth Principal Investments’ $20,000,000 maximum aggregate purchase commitment available to us under the Purchase Agreement. Moreover, to the extent that the Exchange Cap remains applicable to issuances and sales of our common stock under the Purchase Agreement, if we elect to issue and sell to Roth Principal Investments more shares of Common Stock than the Exchange Cap (or 5,750,000 shares of Common Stock) under the Purchase Agreement, which we have the right, but not the obligation, to do, we must first obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in accordance with applicable Nasdaq rules. Any issuance and sale by us under the Purchase Agreement of a substantial amount of shares of Common Stock being registered for resale by Roth Principal Investments under the registration statement that includes this prospectus could cause additional substantial dilution to our stockholders.
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The number of shares of Common Stock ultimately offered for resale by Roth Principal Investments through this prospectus is dependent upon the number of shares of Common Stock, if any, we elect to sell to Roth Principal Investments under the Purchase Agreement from and after the Commencement Date. The issuance of our Common Stock to Roth Principal Investments pursuant to the Purchase Agreement will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted. Although the number of shares of our Common Stock that our existing stockholders own will not decrease, the shares of our Common Stock owned by our existing stockholders will represent a smaller percentage of our total outstanding shares of our Common Stock after any such issuance.
For additional information see the section titled “The Committed Equity Facility”, below.
Summary Risk Factors
● We operate in a relatively new and evolving market for enterprise AI services, and if market adoption is slower than expected or declines, our business, financial condition and results of operations could be adversely affected.
● Our growth depends on attracting new customers, expanding relationships with existing customers, and successfully developing and deploying new technologies, and we may not achieve or sustain profitability.
● Our sales cycles are long and unpredictable, we rely on a limited number of large customers for a substantial portion of our revenue, and purchasing decisions by enterprise customers are often influenced by factors outside our control.
● We face intense competition and rapid technological change, and our failure to innovate, maintain service quality, and protect our reputation and brand could harm our business.
● Our business depends on the performance, reliability, and security of our platforms, technology, and third-party service providers, and any errors, defects, cybersecurity incidents, data breaches, or service disruptions could result in liability, reputational harm, and loss of customers.
● Our business relies on intellectual property, proprietary technology, trade secrets, and open source software, and our inability to protect our intellectual property or avoid infringing the rights of others could adversely affect our business.
● The use of artificial intelligence technologies presents risks, including potential bias, lack of transparency, regulatory scrutiny, reputational harm, and liability.
● We require substantial additional capital to fund our operations, have a history of losses and a going concern qualification, and our indebtedness and fixed costs could adversely affect our financial condition.
● Our operations are subject to risks related to international operations, particularly in Nepal, including political instability, economic conditions, currency fluctuations, and operational disruptions.
● We have identified material weaknesses in internal control over financial reporting and have previously filed reports late, and if we fail to maintain effective disclosure controls and internal controls, investor confidence and our stock price could be adversely affected.
● We are subject to evolving laws and regulations, potential litigation, tax liabilities, and accounting changes, which could increase our costs and adversely affect our results of operations.
● Our management team has limited experience managing a public company, and the costs and demands of being a public company may strain our resources and divert management’s attention.
● The market price of our securities may be volatile, there may not be an active trading market, future issuances of securities may cause dilution, and we may be unable to maintain Nasdaq listing.
● Our executive officers and directors have significant control over us, and anti-takeover provisions and exclusive forum provisions may limit stockholders’ ability to influence corporate matters.
● We do not intend to pay dividends for the foreseeable future, and investors may lose all or part of their investment.
● Our warrants contain provisions that may make them less valuable, including redemption provisions, cashless exercise features, and exclusive forum provisions.
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Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We are an “emerging growth company” as defined in the Securities Act as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). As such, we are eligible to take, and intend to take, advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
We will remain an emerging growth company until the earliest of (i) December 31, 2026, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the “Exchange Act”), which would occur if the market value of our Common Stock held by non-affiliates was $700.0 million or more as of the last business day of the second fiscal quarter of such year or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we may adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies instead of the dates required for other public companies.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting Common Stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting Common Stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.
Available Information
Fusemachines (formerly CSLM Holdings Inc.) completed its business combination with Fusemachines USA Inc. (formerly Fusemachines Inc.) which was incorporated on November 16, 2012. Fusemachines has since grown into a global provider of AI solutions. Our principal offices are located at 251 West 30th Street, 5th Floor, New York, New York 10001. We also maintain a website at www.fusemachines.com, where additional information about our company and solutions can be found. Information contained on or that can be accessed through our website is neither a part of, nor incorporated by reference into, this prospectus, and you should not consider information on our website to be part of this prospectus.
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THE OFFERING
| Shares of Common Stock that may be offered and sold by the Selling Stockholder | Up to 11,363,636 shares of our Common Stock as Purchase Shares we may issue and sell to Roth Principal Investments from time to time, at our sole discretion, during the Commitment Period. | |
| Selling Stockholder | Roth Principal Investments, LLC, a Delaware limited liability company. See “Selling Stockholder.” | |
| Common Stock Outstanding Before this Offering | 28,939,240 shares of Common Stock. | |
| Common Stock Outstanding After this Offering | 40,302,876 shares of Common Stock, assuming the sale of a total of 11,363,636 Purchase Shares to the Selling Stockholder under the Purchase Agreement. The actual number of shares outstanding after this offering will vary depending upon the actual number of shares we issue and sell to Roth Principal Investments under the Purchase Agreement after the date of this prospectus. | |
| Use of Proceeds | We will not receive any of the proceeds from the sale of the shares of Common Stock by the Selling Stockholder. With respect to shares of Common Stock underlying the warrants, we will not receive any proceeds from such shares except with respect to amounts received by us upon exercise of such warrants to the extent such warrants are exercised for cash. See “Use of proceeds” above for more information on the proceeds we expect to receive from the exercise of such warrants. | |
| Conflict of Interest | Roth Principal Investments, LLC is an affiliate of Roth Capital Partners, LLC (“RCP”), a registered broker-dealer and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”). RCP will act as an executing broker that will effectuate resales of our Common Stock that have been and may be acquired by Roth Principal Investments from us pursuant to the Purchase Agreement to the public in this offering.
Because Roth Principal Investments will receive all the net proceeds from such resales of our Common Stock made to the public through RCP, RCP is deemed to have a “conflict of interest” within the meaning of FINRA Rule 5121. Consequently, this offering will be conducted in compliance with the provisions of FINRA Rule 5121, which requires that a “qualified independent underwriter,” as defined in FINRA Rule 5121, participate in the preparation of the registration statement that includes this prospectus and exercise the usual standards of “due diligence” with respect thereto. Accordingly, we have engaged Digital Offering, LLC, a registered broker-dealer and FINRA member (“Digital Offering”), to be the qualified independent underwriter in this offering and, in such capacity, participate in the preparation of the registration statement that includes this prospectus and exercise the usual standards of “due diligence” with respect thereto.
We have agreed to pay directly to Digital Offering a cash fee of $50,000, as consideration for its services in connection with acting as the qualified independent underwriter in this offering. Digital Offering will receive no other compensation for acting as the qualified independent underwriter in this offering.
In accordance with FINRA Rule 5121, RCP is not permitted to sell shares of our Common Stock in this offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder. See “Plan of Distribution (Conflict of Interest).” | |
| Risk Factors | Investing in our Common Stock involves a high degree of risk, and the purchasers of our Common Stock may lose all or part of their investment. Please see “Risk Factors” beginning on page 9 of this prospectus, as well as the other information included in or incorporated by reference in this prospectus, for a discussion of risks you should carefully consider before investing in our securities. | |
| Nasdaq Global Market Symbol | “FUSE” |
The number of shares of Common Stock to be outstanding is based on 28,939,240 shares of Common Stock outstanding as of April 10, 2026 and excludes:
| ● | up to 9,487,500 shares of common stock issuable upon exercise of public warrants each having an exercise price of $11.50 per share; | |
| ● | up to 2,230,281 shares of common stock issuable upon exercise of private warrants, having a volume weighted average exercise price of $11.53 per share; and | |
| ● | up to 636,570 shares of common stock issuable upon the exercise of options, having a volume weighted average exercise price of $3.02 per share. |
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RISK FACTORS
Our business is subject to many risks and uncertainties, which may affect our future financial performance. Our business and financial performance could be adversely affected, our actual results could differ materially from our expectations, the price of our stock could decline, and investors in our securities may lose all or part of their investment as a result of these risks. The risks and uncertainties discussed below are not the only ones we face. There may be additional risks and uncertainties not currently known to us or that we currently do not believe are material that may adversely affect our business and financial performance. You should carefully consider the risks described below, together with all other information included in this prospectus including our financial statements and related notes, before making an investment decision. The statements contained in this prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements.
Risks Related to this Offering
The issuance and sale of our Common Stock to Roth Principal Investments may cause dilution to our other stockholders and the sale of the shares of Common Stock acquired by Roth Principal Investments, or the perception that such sales may occur, could cause the price of our Common Stock to fall.
On April 17, 2026, we entered into the Purchase Agreement with Roth Principal Investments, pursuant to which Roth Principal Investments has committed to purchase up to $20.0 million of Purchase Shares, upon the terms and subject to the conditions set forth in the Purchase Agreement. The shares of our Common Stock that may be issued under the Purchase Agreement may be sold by us to Roth Principal Investments at our discretion from time to time over a 36-month period following the effective date of the registration statement of which this prospectus forms a part, subject to certain conditions. The purchase price for the shares that we may sell to Roth Principal Investments under the Purchase Agreement will fluctuate based on the market price of our Common Stock. Depending on demand and market liquidity at the time, sales of such shares by Roth Principal Investments may cause the trading price of our Common Stock to fall.
We generally have the right to control the timing and amount of any future sales of our shares to Roth Principal Investments. Any sales of our Common Stock to Roth Principal Investments will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Roth Principal Investments all, some or none of the shares of our Common Stock that may be available for us to sell pursuant to the Purchase Agreement. If and when we sell shares to Roth Principal Investments, Roth Principal Investments may then resell all, some or none of those shares at any time or from time to time in its discretion. See the section titled “Plan of Distribution (Conflict of Interest)” elsewhere in this prospectus for more information. Therefore, our sales to Roth Principal Investments could result in substantial dilution to the interests of other holders of our Common Stock. Additionally, the sale of a substantial number of shares of our Common Stock to Roth Principal Investments, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.
It is not possible to predict the actual number of shares we will sell under the Purchase Agreement to Roth Principal Investments, or the actual gross proceeds resulting from those sales.
On April 17, 2026, we entered into the Purchase Agreement with Roth Principal Investments, pursuant to which Roth Principal Investments has committed to purchase up to $20,000,000 of shares of our Common Stock, subject to certain limitations and conditions set forth in the Purchase Agreement. The shares of our Common Stock that may be issued under the Purchase Agreement may be sold by us to Roth Principal Investments at our discretion from time to time during the Commitment Period.
We generally have the right to control the timing and amount of any sales of our shares of Common Stock to Roth Principal Investments under the Purchase Agreement. Sales of our Common Stock, if any, to Roth Principal Investments under the Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Roth Principal Investments all, some or none of the shares of our Common Stock that may be available for us to sell to Roth Principal Investments pursuant to the Purchase Agreement.
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Because the per share purchase price that Roth Principal Investments will pay for Purchase Shares in any Market Open Purchase or Intraday Purchase that we may elect to effect pursuant to the Purchase Agreement will be determined by reference to the VWAP during the applicable Market Open Purchase Valuation Period or Intraday Purchase Valuation Period, respectively, on the applicable Purchase Date for such Market Open Purchase or Intraday Purchase (as the case may be), as of the date of this prospectus, it is not possible for us to predict the number of shares of Common Stock that we will sell to Roth Principal Investments as Purchase Shares under the Purchase Agreement, the purchase price per share that Roth Principal Investments will pay for Purchase Shares purchased from us under the Purchase Agreement, or the aggregate gross proceeds that we will receive from those purchases by Roth Principal Investments under the Purchase Agreement.
Although the Purchase Agreement provides that we may sell up to $20,000,000 of our Common Stock to Roth Principal Investments, only 11,363,636 Purchase Shares are being registered under the Securities Act for resale by Roth Principal Investments under the registration statement that includes this prospectus. At an assumed purchase price per share of $1.76, representing the closing sale price of our Common Stock on Nasdaq immediately prior to the execution of the Purchase Agreement, the number of Purchase Shares that are being registered under the registration statement that includes this prospectus would be sufficient to enable us to receive the full $20,000,000 in aggregate gross proceeds from the sale of such Purchase Shares to Roth Principal Investments under the Purchase Agreement. However, depending on the market prices of our Common Stock on the Purchase Dates on which we elect to sell such Purchase Shares to Roth Principal Investments under the Purchase Agreement, we may need to register under the Securities Act additional shares of our Common Stock for resale by Roth Principal Investments in order for us to receive aggregate proceeds equal to Roth Principal Investments’ $20,000,000 maximum aggregate purchase commitment available to us under the Purchase Agreement.
Moreover, to the extent that the Exchange Cap remains applicable to issuances and sales of our common stock under the Purchase Agreement, if we elect to issue and sell to Roth Principal Investments more shares of Common Stock than the Exchange Cap (or 5,750,000 shares of Common Stock) under the Purchase Agreement, which we have the right, but not the obligation, to do, we must first obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in accordance with applicable Nasdaq rules. Any issuance and sale by us under the Purchase Agreement of a substantial amount of shares of Common Stock being registered for resale by Roth Principal Investments under the registration statement that includes this prospectus could cause additional substantial dilution to our stockholders. The number of shares of Common Stock ultimately offered for resale by Roth Principal Investments through this prospectus is dependent upon the number of shares of Common Stock, if any, we elect to sell to Roth Principal Investments under the Purchase Agreement from and after the Commencement Date.
Investors who buy shares at different times will likely pay different prices.
Pursuant to the Purchase Agreement, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to Roth Principal Investments. If and when we do elect to sell shares of our Common Stock to Roth Principal Investments pursuant to the Purchase Agreement, after Roth Principal Investments has acquired such shares, Roth Principal Investments may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Roth Principal Investments in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution, and in some cases substantial dilution, and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Roth Principal Investments in this offering as a result of future sales made by us to Roth Principal Investments at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of shares to Roth Principal Investments under the Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with Roth Principal Investments may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.
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Our management team will have broad discretion over the use of the net proceeds from our sale of shares of Common Stock to Roth Principal Investments, if any, and you may not agree with how we use the proceeds and the proceeds may not be invested successfully.
Our management team will have broad discretion as to the use of the net proceeds from our sale of shares of Common Stock to Roth Principal Investments, if any, and we could use such proceeds for purposes other than those contemplated at the time of commencement of this offering. Accordingly, you will be relying on the judgment of our management team with regard to the use of those net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. It is possible that, pending their use, we may invest those net proceeds in a way that does not yield a favorable, or any, return for us. The failure of our management team to use such funds effectively could have a material adverse effect on our business, financial condition, operating results and cash flows.
The Selling Stockholder will pay less than the then-prevailing market price for our shares of Common Stock, which could cause the price of our Common Stock to decline.
The purchase price of our Common Stock to be sold to Roth Principal Investments under the Purchase Agreement is derived from the market price of our Common Stock on Nasdaq. Common stock to be sold to Roth Principal Investments pursuant to the Purchase Agreement will be purchased at a discounted price. The actual amount of proceeds we receive pursuant to each Purchase Notice (each, the “Purchase Amount”) is determined by multiplying the Purchase Amount requested by the applicable purchase price. See section entitled “The Committed Equity Facility” for more information.
The Selling Stockholder may sell the shares it receives immediately after receipt of such shares, and/or may sell such shares short prior to the purchase of such shares, which may be prior to final determination of the purchase price for such shares and could cause the price of our Common Stock to decrease. If the price of our Common Stock declines, then Roth Principal Investments may pay a lower purchase price for such shares.
We may require additional financing to sustain our operations, without which we may not be able to continue operations, and the terms of subsequent financings may adversely impact our stockholders.
The extent we rely on Roth Principal Investments as a source of funding will depend on a number of factors, including the prevailing market price of our Common Stock and the extent to which we are able to secure working and other capital from other sources. If obtaining sufficient funding from Roth Principal Investments were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working and other capital needs. Even if we were to sell to Roth Principal Investments all of the shares of Common Stock available for sale to Roth Principal Investments under the Purchase Agreement, we may still need additional capital to fully implement our business, operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences may be a material adverse effect on our business, operating results, financial condition and prospects. Depending on the type and the terms of any financing we pursue, stockholders’ rights and the value of their investment in our Common Stock could be reduced. A financing could involve one or more types of securities including Common Stock, convertible debt or warrants to acquire Common Stock. These securities could be issued at or below the then prevailing market price for our Common Stock. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.
Risks Related to Business, Industry, and Operations
The market for our enterprise AI services and products is relatively new, and may decline or experience limited growth, and our business is dependent on our clients’ continuing adoption and use of its services and products.
The use of enterprise AI is still relatively new, and customers may not recognize the need for or benefits of our services and products. If customers do not recognize the need for and benefits of our services and products, then they may decide to adopt alternative services to satisfy their business needs. In order to grow our business and extend our market position, Fusemachines intends to focus on educating potential customers about the benefits of our services and products, expanding the range of our services and bringing new technologies to market to increase market acceptance and use of our platform. Our ability to expand the market that our services and products address depends upon a number of factors, including the cost, performance and perceived value associated with our services and products. The market for our services and products could fail to grow significantly or there could be a reduction in demand for our services and/or products as a result of a lack of acceptance, technological challenges, competing services, a decrease in spending by current and prospective customers, weakening economic conditions and other causes. If the market for enterprise AI does not experience continued significant growth, or demand for its services and/or products decreases, then our business, financial condition and results of operations could be adversely affected.
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We have experienced moderate growth in the past several years, and if we fail to effectively manage our growth, then our business, results of operations and financial condition could be adversely affected.
We have experienced moderate growth in our business since our founding in 2012. This growth has placed, and may continue to place, significant demands on our corporate culture, operational infrastructure and management. Any failure to manage our anticipated growth and organizational changes in a manner that preserves the key aspects of its culture and services could adversely affect our overall chance for future success, including its ability to recruit and retain personnel, and effectively focus on and pursue its corporate objectives. This, in turn, could adversely affect its business, financial condition and results of operations.
In addition, our ability to manage its operations and future growth will require us to continue to improve its operational, financial and management controls, compliance programs with multiple and changing international laws and regulations and reporting systems. We may not be able to implement improvements in an efficient or timely manner and may discover deficiencies in existing controls, programs, systems and procedures, which could have an adverse effect on its business, reputation, results of operations and financial condition.
Our sales efforts involve considerable time and expense and our sales cycle is often long and unpredictable. These fluctuations may negatively impact our results of operations and financial condition.
Our results of operations may fluctuate, in part, because of the intensive nature of our sales efforts and the length and unpredictability of our sales cycle. The length of our sales cycle, from initial evaluation to payment often lasts six to eight months, but can extend to a year or more for some customers. As part of our sales efforts, we invest considerable time and expense evaluating the specific organizational needs of our potential customers and educating these potential customers about the technical capabilities and value of our products and services.
Our sales strategy is comprised of two main constituents: our direct sales team and our channel partners. Our direct sales team is tasked with both acquiring clients in established verticals and acquiring new channel partners in expansionary markets. We leverage our channel partners to generate leads in new verticals and geographies which we then scale through our direct sales force. Our sales team is supported by engineers with deep technical expertise and responsibility for pre-sales technical support, solutions for engineering for our customers and technical training for our channel partners. We generate customer leads, accelerate sales opportunities and build brand awareness through our marketing programs and through our channel partner relationships. Our marketing programs target business units within companies rather than purchasing, human resources or administrative departments to drive sales by demonstrating the impact of our product capabilities on results. Our principal marketing programs include webinars, roadshows, sponsored exhibitions and events, cooperative marketing efforts with channel partners, and use of our website.
Our results of operations depend on sales to commercial enterprise organizations, which make product purchasing decisions based in part or entirely on factors, or perceived factors, not directly related to the features of the platforms, including, among others, that customer’s projections of business growth, uncertainty about macroeconomic conditions (including the occurrence of natural disasters, pandemics, geopolitical tensions (particularly those relating to the People’s Republic of China), military conflicts rising inflation and interest rates, or monetary policy changes), capital budgets, anticipated cost savings from the implementation of our platforms, potential preference for such customer’s internally-developed software solutions, perceptions about our business and platforms, more favorable terms offered by potential competitors, and previous technology investments. In addition, certain decision makers and other stakeholders within our potential customers tend to have vested interests in the continued use of internally developed or existing software, which may make it more difficult for us to sell our platforms and services. As a result of these and other factors, our sales efforts typically require an extensive effort throughout a customer’s organization, a significant investment of human resources, expense and time, including by our senior management, and there can be no assurances that we will be successful in making a sale to a potential customer. If our sales efforts to a potential customer do not result in sufficient revenue to justify our investments, including in our growing direct sales force, our business, financial condition, and results of operations could be adversely affected.
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A limited number of customers account for a substantial portion of our revenue. If existing customers do not make subsequent purchases from us or renew their contracts with us, or if our relationships with its largest customers are impaired or terminated, our revenue could decline, and its results of operations would be adversely impacted.
We derive a significant portion of our revenue from existing customers that expand their relationships with us. Increasing the size and number of the deployments of our existing customers is a major part of our growth strategy. We may not be effective in executing this or any other aspect of our growth strategy.
For the year ended December 31, 2025 and 2024, two customers represented approximately 30% and 23%, respectively, of our total revenue. The loss of one or more significant customers or a reduction in the amount of revenue we derive from any such customer could significantly and adversely affect our business, financial condition and results of operations. Our top customers by revenue have been long term customers. From time to time, we may lose a major customer. It is not possible for us to predict the future level of demand from our larger customers for our platforms and applications.
We generally offer contract terms of up to one year in length, which may not provide for automatic renewal and may require the customer to opt-in to extend the term. Our customers have no obligation to renew, upgrade, or expand their agreements with us after the terms of their existing agreements have expired. In addition, many of our customer contracts permit the customer to terminate their contracts with us with notice periods ranging from 60 to 90 days. If one or more of our customers terminate their contracts with us, whether for convenience, for default in the event of a breach by us, or for other reasons specified in our contracts, as applicable; if our customers elect not to renew their contracts with us; if our customers renew their contractual arrangements with us for shorter contract lengths or for a reduced scope; or if our customers otherwise seek to renegotiate terms of their existing agreements on terms less favorable to us, our business and results of operations could be adversely affected. This adverse impact would be even more pronounced for customers that represent a material portion of our revenue or business operations.
Our ability to renew or expand our customer relationships may decrease or vary as a result of a number of factors, including our customers’ satisfaction or dissatisfaction with our platforms and services, the frequency and severity of software and implementation errors, our platforms’ reliability, our pricing, the effects of general economic conditions, competitive offerings or alternatives, or reductions in our customers’ spending levels. If our customers do not renew or expand their agreements with us or if they renew their contracts for shorter lengths or on other terms less favorable to us, our revenue may grow more slowly than expected or decline, and our business could suffer. Our business, financial condition, and results of operations would also be adversely affected if we face difficulty collecting our accounts receivable from our customers.
Achieving renewal or expansion of deployments may require us to increasingly engage in sophisticated and costly sales efforts that may not result in additional sales. In addition, our customers’ decisions to expand the deployment of our platforms depends on a number of factors, including general economic conditions, the functioning of our platforms, the ability of our forward-deployed engineers to assist our customers in identifying new use cases, enabling the simplification and acceleration of rapidly building applications, and our customers’ satisfaction with our services. If our efforts to expand within our existing customer base are not successful, our business may suffer.
If we do not successfully develop and deploy new technologies to address the needs of its customers, its business and results of operations could suffer.
Our success has been based on our ability to design products that enables our customers to rapidly develop, deploy, and operate large-scale enterprise AI applications. We spend substantial amounts of time and money researching and developing new technologies and enhanced versions of existing features to meet our customers’ and potential customers’ rapidly evolving needs. There is no assurance that our enhancements to our platforms or our new product features, capabilities, or offerings, will be compelling to our customers or gain market acceptance. If our research and development investments do not accurately anticipate customer demand or if we fail to develop our platforms in a manner that satisfies customer preferences in a timely and cost-effective manner, we may fail to retain our existing customers or increase demand for our platforms.
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The introduction of new products and services by competitors or the development of entirely new technologies to replace existing offerings could make our platforms obsolete or adversely affect our business, financial condition, and results of operations. We may experience difficulties with software development, design, or marketing that delay or prevent our development, introduction, or implementation of new platforms, features, or capabilities. We have in the past experienced delays in our internally planned release dates of new features and capabilities, and there can be no assurance that new platforms, features, or capabilities will be released according to schedule. Any delays could result in adverse publicity, loss of revenue or market acceptance, or claims by customers brought against us, any of which could harm our business. Moreover, the design and development of new platforms or new features and capabilities to our existing platforms may require substantial investment, and we have no assurance that such investments will be successful. If customers do not widely adopt our new platforms, experiences, features, and capabilities, we may not be able to realize a return on our investment and our business, financial condition, and results of operations may be adversely affected.
Our new and existing platforms and changes to our existing platforms could fail to attain sufficient market acceptance for many reasons, including:
| ● | our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion; | |
| ● | product defects, errors, or failures or our inability to satisfy customer service level requirements; | |
| ● | negative publicity or negative private statements about the security, performance, or effectiveness of our platforms or product enhancements; | |
| ● | delays in releasing to the market our new offerings or enhancements to our existing offerings; | |
| ● | introduction or anticipated introduction of competing platforms or functionalities by our competitors; | |
| ● | inability of our platforms or product enhancements to scale and perform to meet customer demands; | |
| ● | receiving qualified or adverse opinions in connection with security or penetration testing, certifications or audits, such as those related to IT controls and security standards and frameworks or compliance; | |
| ● | poor business conditions for our customers, causing them to delay software purchases; | |
| ● | reluctance of customers to purchase proprietary software products; | |
| ● | reluctance of our customers to purchase products hosted by our vendors and/or service interruption from such providers; and | |
| ● | reluctance of customers to purchase products incorporating open source software. |
If we are not able to continue to identify challenges faced by our customers and develop, license, or acquire new features and capabilities to our platforms in a timely and cost-effective manner, or if such enhancements do not achieve market acceptance, our business, financial condition, results of operations, and prospects may suffer and our anticipated revenue growth may not be achieved. Because we derive, and expect to continue to derive, substantially all of our revenue from customers purchasing our platforms and products, market acceptance of these platforms and products, and any enhancements or changes thereto, is critical to our success.
Our ability to sell its products and satisfy its customers is dependent on the quality of our services, and our failure to offer high quality services could have a material adverse effect on its sales and results of operations.
Once our platforms are deployed and integrated with our customers’ existing information technology investments and data, our customers will depend on our support and maintenance services to resolve any issues relating to our platforms. In the future, our platforms may be deployed in large-scale, complex technology environments, and we believe our future success will depend on our ability to increase sales of our platforms for use in such deployments. Further, our ability to provide effective ongoing services, or to provide such services in a timely, efficient, or scalable manner, may depend in part on our customers’ environments and their upgrading to the latest versions of our platforms and participating in our centralized platform management and services.
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In addition, our ability to provide effective services is largely dependent on our ability to attract, train, and retain qualified personnel with experience in supporting customers on platforms such as ours. We may be unable to respond quickly enough to accommodate short-term increases in customer demand for our services. We also may be unable to modify the future scope and delivery of our services to compete with changes in the services provided by our competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect our business and results of operations.
Our customers may in the future need training in the proper use of and the variety of benefits that can be derived from our platforms to maximize the potential of our platforms. If we do not effectively deploy, update, or upgrade our platforms, succeed in helping our customers quickly resolve post-deployment issues, and provide effective ongoing services, our ability to sell additional products and services to existing customers could be adversely affected, we may face negative publicity, and our reputation with potential customers could be damaged. As a result, our failure to maintain high quality services may have a material adverse effect on our business, financial condition, results of operations, and growth prospects.
If we are not able to maintain and enhance its brand and reputation, our relationships with our customers, partners, and employees may be harmed, and its business and results of operations may be adversely affected.
We believe that maintaining and enhancing our brand identity and reputation is important to our relationships with, and to our ability to attract and retain customers, partners, investors, and employees. The successful promotion of our brand depends upon our ability to continue to offer high-quality software, maintain strong relationships with our customers, the community, and others, while successfully differentiating our platforms from those of our competitors. Unfavorable media coverage may adversely affect our brand and reputation. We anticipate that as our market becomes increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive. If we do not successfully maintain and enhance our brand identity and reputation, we may fail to attract and retain employees, customers, investors, or partners, grow our business, or sustain pricing power, all of which could adversely impact our business, financial condition, results of operations, and growth prospects. Additionally, despite our internal safeguards and efforts to the contrary, we cannot guarantee that our customers will not ultimately use our platforms for purposes inconsistent with our company values, and such uses may harm our brand and reputation.
If the market for our platforms and services develops more slowly than we expect, our growth may slow or stall, and our business, financial condition, and results of operations could be harmed.
The market for our platforms is rapidly evolving. Our future success will depend in large part on the growth and expansion of this market, which is difficult to predict and relies on a number of factors, including customer adoption, customer demand, changing customer needs, the entry of competitive products, the success of existing competitive products, potential customers’ willingness to adopt an alternative approach to developing, deploying, and operating enterprise AI, and their willingness to invest in new software after significant prior investments in legacy software. The estimates and assumptions that are used to calculate our market opportunity are subject to change over time, and there is no guarantee that any particular number or percentage of the organizations covered by our market opportunity estimates will pay for our platforms and services at all or generate any particular level of revenue for us. Even if the market in which we compete meets the size estimates and growth forecasts, our business could fail to grow at the levels we expect or at all for a variety of reasons outside our control, including competition in our industry. Further, if we or other enterprise AI companies experience security breaches or incidents, loss, corruption, or unavailability of or unauthorized access to customer data, disruptions in delivery, or other problems, this market as a whole, including our platforms, may be negatively affected. If software for the challenges that we address does not achieve widespread adoption, or if there is a reduction in demand caused by a lack of customer acceptance, technological challenges, weakening economic conditions (including the occurrence of natural disasters, pandemics, geopolitical tensions (particularly those relating to the People’s Republic of China), military conflicts, rising inflation and interest rates, and monetary policy changes), security or privacy concerns, competing technologies and products, decreases in corporate spending, or otherwise, or, alternatively, if the market develops but we are unable to continue to penetrate it due to the cost, performance, and perceived value associated with our platforms, or other factors, it could result in decreased revenue and our business, financial condition, and results of operations could be adversely affected.
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Issues raised by the use of AI (including machine learning) in our platforms may result in reputational harm or liability.
AI is enabled by or integrated into our technology platforms and is a significant element of our business. As with many developing technologies, AI presents risks and challenges that could affect its further development, adoption, and use, and therefore our business. AI algorithms may be flawed. Datasets in AI training, development, or operations may be insufficient, of poor quality, or reflect unwanted forms of bias. Inappropriate or controversial data practices by, or practices reflecting inherent biases of, data scientists, engineers, and end-users of our systems could impair the acceptance of AI solutions. If the recommendations, forecasts, or analyses that AI applications assist in producing are deficient or inaccurate, we could be subjected to competitive harm, potential legal liability, including under new proposed legislation regulating AI in jurisdictions such as the United States and the European Union and brand or reputational harm. The European Union has enacted the EU AI Act, which imposes significant compliance obligations on providers of AI systems, including requirements for transparency, human oversight, and conformity assessments for high-risk AI applications. In the United States, various states have enacted or proposed AI-specific legislation, and federal agencies are increasing their focus on AI governance. Compliance with these evolving and potentially conflicting regulatory frameworks may require substantial investment in compliance infrastructure, modification of our products and services, and could limit our ability to offer certain AI capabilities. Failure to comply with applicable AI regulations could result in significant fines, restrictions on our business, reputational harm, and civil or criminal liability.
Some AI scenarios present ethical issues. Though our technologies and business practices are designed to mitigate many of these risks, if we enable or offer AI solutions that are controversial or problematic because of their purported or real impact on human rights, privacy, employment, or other social issues, we may experience brand or reputational harm, as well as regulatory or legal scrutiny.
Real or perceived errors, failures, defects, or bugs in our products, or platforms could adversely affect our results of operations and growth prospects.
Because we offer complex technology products, undetected errors, defects, failures, or bugs may in the future occur, especially when products or capabilities are first introduced or when new versions or other product or infrastructure updates are released. Our platforms are often installed and used in large-scale computing environments with different operating systems, software products and equipment, and data source and network configurations, which may cause errors or failures in our platforms or may expose undetected errors, failures, or bugs in our platforms. Despite testing by us, errors, failures, or bugs may not be found in new software or releases until after commencement of platform implementation. Errors may affect the performance of our platforms and may also delay the development or release of new platforms or capabilities or new versions of platforms, adversely affect our reputation and our customers’ willingness to buy platforms from us, and adversely affect market acceptance or perception of our platforms. Many of our customers use our platforms in applications that are critical to their businesses or missions and may have a lower risk tolerance to defects in our platforms than to defects in other, less critical, software products. Any errors or delays in releasing new software or new versions of platforms or allegations of unsatisfactory performance, errors, defects, or failures in released software could cause us to lose revenue or market share, increase our service costs, cause us to incur substantial costs in redesigning the software, cause us to lose significant customers, subject us to liability for damages and divert our resources from other tasks, any one of which could materially and adversely affect our business, results of operations and financial condition. In addition, our platforms could be perceived to be ineffective for a variety of reasons outside of our control. Hackers or other malicious parties could circumvent our or our customers’ security measures, and customers may misuse our platforms resulting in a security breach or perceived product failure. Alleviating any of these problems could require additional significant expenditures of our capital and other resources and could cause interruptions, delays, or cessation of our product licensing, which could cause us to lose existing or potential customers and could adversely affect our business, financial condition, results of operations, and growth prospects.
We have not been profitable in the past and may not achieve or maintain profitability in the future.
We had a comprehensive loss of approximately $0.93 million and $15.3 million for the years ended December 31, 2025 and December 31, 2024, respectively.
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There can be no assurance that Fusemachines will ever achieve the level of revenues needed to be profitable in the future and if profitability is achieved, that it will be sustained. Our revenues have fluctuated and are likely to continue to fluctuate significantly from quarter to quarter and from year to year. Fusemachines will need to obtain additional capital and increase sales to become profitable.
We require substantial additional funding, which may not be available to us on acceptable terms, or at all, and, if not so available, may require Fusemachines to delay, limit, reduce or cease its operations.
We have limited financial resources. There can be no assurance that sufficient funding will be available to us to fund our operating expenses and to further develop our business. Unless we achieve substantial profitability, we anticipate that we will likely need to raise additional capital to fund our operations while we implement and execute our business plan. We currently do not have any contracts or commitments for additional financing. In addition, any additional equity financing may involve substantial dilution to our existing shareholders. There can be no assurance that such additional capital will be available on a timely basis or on terms that will be acceptable to us. Failure to obtain such additional financing could result in delay or indefinite postponement of operations or the further development of our business. If adequate funds are not available or are not available on acceptable terms, we may not be able to further fund our business or the expansion thereof, take advantage of strategic acquisitions or investment opportunities or respond to competitive pressures. Such inability to obtain additional financing when needed could have a material adverse effect on our business, results of operations, cash flow, financial condition and prospects.
Our independent registered public accounting firm’s report for the year ended December 31, 2025 contains an explanatory paragraph that expresses substantial doubt about our ability to continue as a “going concern.”
As of December 31, 2025, we had cash of approximately $4,221 thousand. For the year ended December 31, 2025, we used approximately $5,529 thousand in cash for operating activities. Historically, we have incurred recurring net losses from operations and negative cash flows from operating activities. As of December 31, 2025, we had an accumulated deficit of approximately $35,145 thousand. These factors raise substantial doubt regarding our ability to continue as a going concern within one year of the date these consolidated financial statements were issued.
Our indebtedness could adversely affect our business and growth prospects.
We have existing indebtedness, and we may be able to incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes.
We face intense competition within our industry and are subject to the effects of technological change.
The industry in which we are engaged is subject to rapid and significant technological change. There can be no assurance that our systems can be upgraded to meet future innovations in the industry or that new technologies will not emerge, or existing technologies will not be improved, which would render our offerings obsolete or non-competitive. Many of the companies we compete with enjoy significant competitive advantages over us, including greater name recognition; greater financial, technical and service resources; established networks; additional product offerings; and greater resources for product development and sales and marketing. In addition, there can be no assurance that other established technology companies, any of which would likely have greater resources than Fusemachines, will not enter the market. There can be no assurance that Fusemachines will be able to compete successfully against any of its competitors.
Our proprietary products and services and service delivery may not operate properly, which could damage its reputation, give rise to claims against us, or divert application of its resources from other purposes, any of which could harm its business and operating results.
We may encounter supply chain, human, or technical obstacles that prevent our products and services from operating properly. If our offerings do not function reliably or fail to achieve customer expectations in terms of performance, customers could assert liability claims against us or cancel their contracts with us. This could damage our reputation and impair our ability to attract or maintain customers. We cannot assure you that material performance problems or defects in our products will not arise in the future. Errors may result from receipt and interpretation of customer data or from interface of our services. These defects and errors and any failure by us to identify and address them could result in loss of revenue or market share, liability to customers or others, failure to achieve market acceptance or expansion, diversion of development resources, injury to our reputation, and increased service and maintenance costs. The costs incurred in correcting any defects or errors or in responding to resulting claims or liability may be substantial and could adversely affect our operating results.
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If critical components used in our products become scarce or unavailable, we may incur delays in delivering our products and providing services, which could damage its business. We rely on a sustainable supply chain. Any issues with this supply chain could adversely affect daily business operations and profitability.
We depend on third party providers, suppliers and licensors to supply some of the hardware, software and support necessary to provide some of our products and services. We obtain these materials from a limited number of vendors, some of which do not have a long operating history, or which may not be able to continue to supply the equipment, supplies, and services we desire. If demand exceeds these vendors’ capacity or if these vendors experience operating or financial difficulties or are otherwise unable to provide the equipment or services we need in a timely manner, at our specifications and at reasonable prices, our ability to provide some services might be materially adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability to serve our customers. These events could materially and adversely affect our ability to retain and attract customers, and have a material negative impact on our operations, business, financial results and financial condition.
If our security measures are breached or fail and unauthorized access is obtained to a customer’s data, our service may be perceived as insecure, the attractiveness of our services to current or potential customers may be reduced, and we may incur significant liabilities.
Our services involve the web-based and data storage and transmission of customers’ information. We rely on proprietary and commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing, transmission and storage of such information. Because of the sensitivity of this information and due to requirements under applicable laws and regulations, the effectiveness of our security efforts is very important. If our security measures are breached or fail as a result of third-party action, acts of terror, social unrest, employee error, malfeasance or for any other reasons, someone may be able to obtain unauthorized access to customer data. Improper activities by third-parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our security systems. Our security measures may not be effective in preventing unauthorized access to the customer data stored on our servers. If a breach of our security occurs, we could face damages for contract breach, penalties for violation of applicable laws or regulations, possible lawsuits by individuals affected by the breach and significant remediation costs and efforts to prevent future occurrences. In addition, whether there is an actual or a perceived breach of our security, the market perception of the effectiveness of our security measures could be harmed and we could lose current or potential customers.
We depend on key information systems and third party service providers.
We depend on key information systems to transact our business accurately and efficiently. These systems and services are vulnerable to interruptions or other failures resulting from, among other things, pandemics, epidemics, natural disasters, terrorist attacks, software or equipment failures, processing errors, computer viruses, other security issues or supplier defaults. Security, backup and disaster recovery measures may not be adequate or implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance.
As cybersecurity attacks continue to evolve and increase, our information systems could also be penetrated or compromised by internal and external parties’ intent on extracting confidential information, disrupting business processes or corrupting information. These risks could arise from external parties or from acts or omissions of internal or service provider personnel. Such unauthorized access could disrupt our business and could result in the loss of assets, litigation, remediation costs, damage to our reputation and failure to retain or attract customers following such an event, which could adversely affect our business.
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Cyber-attacks and security vulnerabilities could lead to reduced revenue, increased costs, liability claims, or harm to our competitive position.
Increased sophistication and activities of perpetrators of cyber-attacks have resulted in an increase in information security risks in recent years. Hackers develop and deploy viruses, worms, and other malicious software programs that attack products and services and gain access to networks and data centers. If we experience difficulties maintaining existing systems or implementing new systems, we could incur significant losses due to disruptions in our operations. Additionally, these systems contain valuable proprietary and confidential information and may contain personal data of our customers. A security breach could result in disruptions of our internal systems and business applications, harm to our competitive position from the compromise of confidential business information, or subject us to liability under laws that protect personal data. As cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and/or to investigate and remediate any information security vulnerabilities. Any of these consequences would adversely affect our revenue and margins.
We may not be able to adequately protect or enforce our intellectual property rights or prevent unauthorized parties from copying or reverse engineering our solutions. Our efforts to protect and enforce our intellectual property rights and prevent third parties from violating its rights may be costly.
The success of our services and its business depends, in part, on our ability to obtain patents and other intellectual property rights and maintain adequate legal protection for its products in the United States and other international jurisdictions. We cannot be certain that the steps it has taken will prevent unauthorized use of its technology or the reverse engineering of its technology. Moreover, others may independently develop technologies that are competitive to Fusemachines or infringe our intellectual property.
Protecting against the unauthorized use of our intellectual property, products and other proprietary rights is expensive and can be difficult, particularly with respect to international jurisdictions. Unauthorized parties may attempt to copy or reverse engineer our solutions or certain aspects of our solutions that are considered proprietary. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to prevent unauthorized parties from copying or reverse engineering our solutions, to determine the validity and scope of the proprietary rights of others or to block the importation of infringing products into the U.S. Any such litigation, regardless of merit, could be costly, divert the attention of management and may not ultimately be resolved in our favor.
Effective patent, trademark, service mark, copyright and trade secret protection may not be available or applied for in every country in which our products are available and competitors based in other countries may sell infringing products in one or more markets. An inability to adequately protect and enforce our intellectual property and other proprietary rights or an inability to prevent authorized parties from copying or reverse engineering its technology solutions or certain aspects of its solutions that we considers proprietary could adversely affect its business, operating results, financial condition and prospects.
We rely on unpatented proprietary information, trade secrets, processes and know-how, as well as open source software in certain instances. Our failure to protect our confidential information, trade secrets, processes and know-how, and our reliance on open source solutions, could negatively impact our business and results of operations.
We rely on proprietary information (such as trade secrets, know-how and confidential information) to protect intellectual property that may not be patentable or subject to copyright, trademark, trade dress or service mark protection.
We generally seek to protect this proprietary information by entering into confidentiality agreements, or consulting, services or employment agreements that contain non-disclosure and non-use provisions with its employees, consultants, contractors and third parties. However, we may fail to enter into the necessary agreements and, even if entered into, these agreements may be breached or may otherwise fail to prevent disclosure, third-party infringement or misappropriation of its proprietary information, may be limited as to their term and may not provide an adequate remedy in the event of unauthorized disclosure or use of proprietary information. Fusemachines has limited control over the protection of trade secrets used by its current or future manufacturing partners and suppliers and could lose future trade secret protection if any unauthorized disclosure of such information occurs. In addition, our proprietary information may otherwise become known or be independently developed by its competitors or other third parties. To the extent that its employees, consultants, contractors, advisors and other third parties use intellectual property owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain protection for its proprietary information could adversely affect its competitive business position. Furthermore, laws regarding trade secret rights in certain markets where we operate may afford limited or no protection for its trade secrets.
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We also rely on physical and electronic security measures to protect its proprietary information, but it cannot provide assurance that these security measures will not be breached or that these measures will provide adequate protection. There is a risk that third parties may obtain and improperly utilize our proprietary information to its competitive disadvantage. We may not be able to detect or prevent the unauthorized use of such information or take appropriate and timely steps to enforce our intellectual property rights.
In addition, while the majority of our algorithms utilized for its products are proprietary, including those most critical to the company’s products, certain algorithms which form a part of these products are made available under “open source” licenses. We expect to continue to incorporate open source software in the company’s solutions in the future. Open source software is typically freely available, but is licensed under various requirements that bind the licensee. While the use of open source software may reduce development costs and speed up the development process, it may also present certain risks, that may be greater than those associated with the use of third-party commercial software, including but not limited to potential non-compliance with these licenses. Further, depending on the manner in which such licenses were interpreted and applied to software code that combines proprietary and open source software and source code, companies have in the past faced restrictions on their ability to commercialize certain of our products, and it is possible that we could be subject to similar restrictions in the future.
Algorithms embedded in AI solutions, and AI datasets, often suffer from lack of transparency, bias, and risks of inadvertent disclosure of information, which could subject us to adverse consequences.
AI systems are created with a variety of tools including machine learning, natural language processing, computer vision, and neural networks. AI systems are capable of behaving in ways that mimic human capabilities, and AI therefore refers to the ability of computers to emulate human thought and perform tasks that are usually performed by humans; it refers to the technologies and algorithms that enable systems to identify patterns, make decisions and could learn from data without being explicitly programmed. Challenges related to AI are numerous, and include biases and lack of transparency embedded in AI solutions, and inadvertent disclosure of information.
Many current AI models are closed, meaning it is unclear how they are trained, and even where open-source AI models are used, the risk of bias and inadvertent disclosure of information can remain, depending on the humans developing the models and the way in which these models are used. Use of closed AI models, where such a lack of transparency exists as to sources of data used to train or develop such technologies or how inputs are converted to outputs, may make it difficult to fully validate the process and can raise issues with trust, accountability, and ethics. Whether or not AI systems are closed, or open-source and available to review, the algorithms and models utilized in AI systems may have limitations, including biases, vulnerabilities, errors, or inability to handle certain data types or scenarios. Any deficiencies could, despite our efforts, undermine the decisions, predictions or analysis AI applications produce, or give rise to risks related to harmful content, accuracy, bias, discrimination, toxicity, intellectual property infringement or misappropriation, defamation, data privacy, and cybersecurity, among others. Any cybersecurity incidents related to our use of AI applications to analysis personal data could adversely affect our reputation and results of operations.
Further, AI solutions and models are part of a new and expanding industry, and our use and implementation of such models now and in the future, could subject us to any of the foregoing, or additional risks, which could impact our business, results of operations, or result in brand or reputational harm, competitive harm, or legal liability.
Use of open source software creates inherent risk and could subject us to adverse consequences.
The use of open source software, including algorithms, involves a number of risks, many of which cannot be eliminated and could negatively affect our business. For example:
| ● | The terms of various open source licenses have not been interpreted by United States courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market our platform. By the terms of certain open source licenses, if we combine our proprietary software with open source software in a certain manner, we could be required to release the source code of our proprietary software and to make our proprietary software available under open source licenses. |
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| ● | We may face claims alleging noncompliance with open source license terms or misappropriation or other violation of open source technology. These claims could result in litigation, damage our reputation in the open-source community, or require us to purchase a costly license, devote additional research or development resources to re-engineer our products or services, discontinue the sale of our products if re-engineering could not be accomplished on a timely or cost-effective basis, require us to make the source code of our proprietary code generally available, or result in us being enjoined from the offering of components of our platform that contained the open source software, any of which would have a negative effect on our business and operating results. | |
| ● | We also could be subject to lawsuits from other parties claiming ownership of what we believe to be open source software. Litigation could be costly for us to defend, have a negative effect on our operating results or financial condition, and could require us to devote additional research and development resources to re-engineer our platform. In addition to risks related to license requirements, usage of open source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. |
Claims by others that we infringe upon their intellectual property could force us to incur significant costs or revise the way we conduct our business.
Our competitors protect their proprietary rights by means of patents, trade secrets, copyrights, trademarks and other intellectual property. We have not conducted an independent review of patents and other intellectual property issued to third-parties (often referred to as a freedom to operate search), who may have patents or patent applications relating to our proprietary technology. We may receive letters from third parties alleging, or inquiring about, possible infringement, misappropriation or violation of their intellectual property rights. Any party asserting that we infringe, misappropriate or violate proprietary rights may force us to defend ourselves, and potentially our customers, against the alleged claim. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and/or invalidation of our proprietary rights or interruption or cessation of our operations. Any such claims or lawsuit could:
| ● | be time-consuming and expensive to defend, whether meritorious or not; | |
| ● | require us to stop providing products or services that use the technology that allegedly infringes the other party’s intellectual property; | |
| ● | divert the attention of our technical and managerial resources; | |
| ● | require us to enter into royalty or licensing agreements with third-parties, which may not be available on terms that we deem acceptable; | |
| ● | prevent us from operating all or a portion of our business or force us to redesign our products, services or technology platforms, which could be difficult and expensive and may make the performance or value of our product or service offerings less attractive; | |
| ● | subject us to significant liability for damages or result in significant settlement payments; or | |
| ● | require us to indemnify our customers. |
Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business. Some of our competitors may be able to sustain the costs of intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any litigation could significantly harm our relationships with current and prospective customers. Any of the foregoing could disrupt our business and have a material adverse effect on our business, operating results and financial condition.
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We depend on our management team and other key employees, and the loss of one or more of these employees or an inability to attract and retain highly skilled employees could adversely affect its business.
Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. The loss of the services of any of our key personnel, the inability to attract or retain qualified personnel, or delays in hiring required personnel, particularly in engineering and sales, may seriously and adversely affect our business, financial condition and results of operations. Although we have entered into employment or consulting agreements with our personnel, their employment is generally for no specific duration.
Our future performance also depends on the continued services and continuing contributions of our senior management team, including Sameer Maskey, our Chief Executive Officer, to execute on our business plan and to identify and pursue new opportunities and product innovations. The loss of services of our senior management team, particularly our Chief Executive Officer, could significantly delay or prevent the achievement of our development and strategic objectives, which could adversely affect our business, financial condition and results of operations.
We are subject to evolving laws and regulations that could impose substantial costs, legal prohibitions or unfavorable changes upon our operations or products, and may be a party to material legal proceedings in the future.
We are or will be subject to complex laws and regulations at numerous jurisdictional levels in the U.S., and other locations abroad. New, or changes in such regulations or rules could also lead to increased costs of compliance, including remediations of any discovered issues in our products, and changes to our operations, which may be significant, and any failures to comply could result in significant expenses, delays or fines. In addition, we may become a party to material legal proceedings, or governmental investigations, in the future. If we are unable to successfully defend ourselves in such proceedings or government investigations, it may harm our brand, ability to attract and retain qualified employees, business and financial condition.
Our management team has limited experience managing a public company and regulatory compliance may divert their attention from the day-to-day management of our business.
Our management team has limited experience managing a publicly-traded company and limited experience complying with the increasingly complex laws pertaining to public companies. These obligations typically require substantial attention from our senior management and could divert their attention away from the day-to-day management of our business.
Material adverse developments in domestic and global economic conditions, or the occurrence of other world events, could materially adversely affect our revenue and results of operations.
Various factors contribute to the uncertain economic environment, the occurrence of natural disasters, pandemics, geopolitical tensions (particularly those relating to the People’s Republic of China), military conflicts, the increase in, and volatility of, interest rates, high inflation, an actual recession or fears of a recession, trade policies and tariffs and geopolitical tensions. Our inability to offset price inflation in our materials, components, shipping, or labor through increased prices to customers with long-term fixed contracts and formula-based or long-term fixed price contracts with suppliers could adversely affect our business, financial condition and results of operations. Global supply chain and labor market challenges could also negatively affect our performance as well as the performance of our suppliers. Interest rate increases have also created financial market volatility and could further negatively impact financial markets, lead to an economic downturn or recession or have an adverse effect on our operating results. In addition, geopolitical risks could affect our customers’ budgets and policies. These and other factors may adversely affect customer demand and ability to pay, cause decrease in sales, and negatively impact the realizability of our accounts and notes receivable and contract assets.
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Our business is heavily dependent upon our international operations, particularly in Nepal, and any disruption to those operations would adversely affect us.
Our business and future growth depend largely on continued demand for our services performed from Nepal. Various factors, such as changes in the governments, could trigger significant changes in Nepal’s economic liberalization and deregulation policies and disrupt business and economic conditions in Nepal generally and our business in particular. Our business and our international operations may also be affected by actual or threatened trade war or tariffs or other trade controls. If we are unable to continue to leverage the skills and experience of our international workforce, particularly in Nepal, we may be unable to provide our solutions at an attractive price and our business could be materially and negatively impacted.
We have significant fixed costs related to lease facilities.
We have made and continue to make significant contractual commitments related to our leased facilities. These expenses will have a significant impact on our fixed costs, and if we are unable to grow our business and revenue proportionately, our operating results may be negatively affected.
Our sites operate on leasehold property, and our inability to renew our leases on commercially acceptable terms or at all may adversely affect our results of operations.
Our sites operate on leasehold property. Our leases are subject to renewal and we may be unable to renew such leases on commercially acceptable terms or at all, which may have an adverse impact on our operations. In addition, in the event of non-renewal of our leases, we may be unable to locate suitable replacement properties for our sites or we may experience delays in relocation that could lead to a disruption in our operations.
Catastrophic events, including those which impact third parties on which we materially rely, could materially adversely affect our business, results of operations and/or financial condition.
A disruption or failure of our systems or operations, or the systems or operations of a third party on which we materially rely, such as in the event of a major earthquake, weather event, fire, explosion, failure to contain hazardous materials, industrial accident, utility failure, cyber-attack, IT failure, terrorist attack, public health crisis, pandemic, or other catastrophic event could cause delays in completing sales, providing services, or performing other mission-critical functions. A catastrophic event that results in the destruction or disruption of any of our critical business or information technology systems could harm our ability to conduct normal business operations and our operating results as well as expose us to claims, litigation and governmental investigations and fines.
If our backup and mitigation plans are not sufficient to minimize business disruption, our financial results could be adversely affected. We are continuously monitoring our operations and intend to take appropriate actions to mitigate the risks arising from catastrophic events, but there can be no assurances that we will be successful in doing so.
We have identified material weaknesses and significant deficiencies related in our internal control over financial reporting. If we fail to remediate these material weaknesses, maintain effective internal control over financial reporting or identify additional material weakness or significant deficiency in its internal control over financial reporting, our ability to report our financial condition and results of operations in a timely and accurate manner could be adversely affected, investor confidence in our company could diminish, and the value of our stock may decline.
Preparing our consolidated financial statements involves a number of complex manual and automated processes, which are dependent upon individual data input or review and require significant management judgment. One or more of these processes may result in errors that may not be detected and could result in a material misstatement or other errors of our consolidated financial statements. Such errors may be more likely to occur when implementing new systems and processes, particularly when implementing evolving and complex accounting rules. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) requires, among other things, that as a publicly-traded company we disclose whether our internal control over financial reporting and disclosure controls and procedures are effective. While we continually undertake steps to improve our internal control over financial reporting as our business changes, we may not be successful in making the improvements and changes necessary to be able to identify and remediate control deficiencies or material weaknesses on a timely basis. If we are unable to successfully remediate any current or future material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely affected; our liquidity, access to capital markets and perceptions of our creditworthiness may be adversely affected; we may be unable to maintain compliance with securities laws, stock exchange listing requirements and debt instruments covenants regarding the timely filing of periodic reports; we may be subject to regulatory investigations and penalties; investors may lose confidence in our financial reporting; we may suffer defaults under our debt instruments; and our stock price may decline.
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As a privately-held company, Fusemachines was not required to evaluate its internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404(a) of the Sarbanes-Oxley Act.
In connection with the preparation and audit of our consolidated financial statements as of and for the years ended December 31, 2025 and 2024, material weaknesses were identified in its internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis. The following material weaknesses were identified:
| ● | Fusemachines did not maintain a sufficient complement of personnel with accounting knowledge, experience and training to appropriately analyze, record and disclose accounting matters to provide reasonable assurance of preventing material misstatements. | |
| ● | Fusemachines did not maintain an effective process over the revenue cycle, including not properly maintaining adequate books and records over client projects and billing which ultimately resulted in improper revenue recognition. | |
| ● | Fusemachines did not maintain effective controls over certain information technology (“IT”) general controls for information systems that are relevant to the preparation of its consolidated financial statements. Specifically, Fusemachines currently relies on QuickBooks for its books and records as well as financial reporting needs. Because QuickBooks lacks robust financial reporting capabilities as well as certain controls, the close process was manually intensive. This process resulted in significant delays and errors in the preparation of its consolidated financial statements. In addition, Fusemachines did not design and maintain user access controls to ensure appropriate segregation of duties and restrict user access to its financial applications to appropriate company personnel. |
Management expects to address these deficiencies by implementing remediation measures, including those that have already been taken to date.
We filed a Quarterly Report on Form 10-Q for the period ended September 30, 2025 later than required, and any failure to timely file our periodic reports in the future could adversely affect our compliance with securities laws and exchange listing standards, impair our access to capital, increase regulatory scrutiny and litigation risk, and negatively impact our business and the market price of our securities.
We are required to file periodic reports with the SEC within prescribed deadlines. We did not file our most recent Quarterly Report on Form 10-Q, which included the financial information solely of CSLM, within the required timeframe. Although we ultimately filed the report, our failure to file timely evidences vulnerabilities in our reporting processes and controls and may subject us to additional regulatory and market risks. As a former special purpose acquisition company that recently completed a business combination, our financial reporting environment is undergoing significant changes and integration, which increases the complexity of our reporting obligations and the risk of future delays.
Delayed SEC filings can result in non-compliance with applicable stock exchange listing requirements, and our securities exchange may issue deficiency notices or take other actions, including initiating delisting procedures, if we do not timely cure any reporting delinquency. A late filing can also adversely affect our eligibility to use short-form registration statements on Form S-3, limit our status under shelf registration rules, and restrict our ability to access the capital markets efficiently. In addition, late or incomplete filings can trigger contractual penalties, liquidated damages, or other remedies under registration rights, financing agreements, and other commercial contracts that require us to maintain effective registration statements or timely reports, which could increase our costs or limit our financing flexibility. Delays in reporting may also elevate the risk of restatements, material weaknesses in internal control over financial reporting, and increased audit fees and remediation expenses.
Further, failure to timely file periodic reports may subject us to heightened SEC scrutiny and enforcement risk, harm investor and analyst confidence, and increase the likelihood of stock price volatility, securities class actions, and derivative litigation. The reputational impact of a late filing can be significant, particularly for companies that have recently merged with a SPAC, which commonly face greater market and regulatory attention. If we experience additional delays in future filings, or if our remediation efforts are not effective, we could face additional compliance challenges, suffer reduced liquidity and a higher cost of capital, and our business, financial condition, results of operations, and the market price of our securities could be materially and adversely affected.
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Changes in accounting principles or their application to Fusemachines could result in unfavorable accounting charges or effects, which could adversely affect our results of operations and growth prospects.
We prepare our consolidated financial statements in accordance with GAAP. In particular, we make certain estimates and assumptions related to the adoption and interpretation of these principles including the recognition of our revenue and the accounting for our provision for income taxes. If these assumptions turn out to be incorrect, our financial results and position could materially differ from our expectations and could be materially adversely affected. A change in any of these principles or guidance, or in their interpretations or application to us, may have a significant effect on our reported results, as well as our processes and related controls, and may retroactively affect previously reported results or our forecasts, which may negatively impact our financial statements.
If our judgments or estimates relating to its critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in its stock price.
The preparation of our financial statements in conformity with GAAP requires management to make judgments, estimates, and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” the results of which form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of the combined company’s securities. Significant judgments, estimates, and assumptions used in preparing our consolidated financial statements include, or may in the future include, those related to revenue recognition and income taxes.
Our results of operations could be affected by currency fluctuations.
Our global operations are conducted predominantly in U.S. dollars. While revenue is generated in U.S. dollars, Fusemachines incurs expenses in other currencies, principally, Nepalese rupees and Canadian dollars. The Company’s international operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash flows into U.S. dollars. Accordingly, the results of our operations are subject to currency exchange risks. To date, we have not engaged in any formal hedging program to mitigate these risks. The fluctuations in currency exchange rates may significantly impact our financial position and results of operations in the future.
Fusemachines has limited insurance which may not cover claims by third parties against Fusemachines or its officers and directors.
We have directors’ and officers’ liability insurance and commercial liability insurance policies. Claims, however, by third parties against us may exceed policy amounts and we may not have amounts to cover these claims. Any significant claims would have a material adverse effect on our business, financial condition and results of operations. In addition, our limited directors’ and officers’ liability insurance may affect our ability to attract and retain directors and officers.
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Fusemachines could be subject to additional tax liabilities.
We are subject to federal, state, and local income taxes in the United States and foreign jurisdictions. Determining our provision for income taxes requires significant management judgment, and the ultimate tax outcome may be uncertain. In addition, our provision for income taxes is subject to volatility and could be adversely affected by many factors, including, among other things, changes to our operating or holding structure, changes in the amounts of earnings in jurisdictions with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities, and changes in U.S. and foreign tax laws. Moreover, we are subject to the examination of our income tax returns by tax authorities in the United States and various foreign jurisdictions, which may disagree with our calculation of research and development tax credits, cross-jurisdictional transfer pricing, or other matters and assess additional taxes, interest or penalties. While we regularly assess the likely outcomes of these examinations to determine the adequacy of our provision for income taxes and we believe that our financial statements reflect adequate reserves to cover any such contingencies, there can be no assurance that the outcomes of such examinations will not have a material impact on our results of operations and cash flows. If U.S. or other foreign tax authorities change applicable tax laws, our overall taxes could increase, and our financial condition or results of operations may be adversely impacted.
Provisions enacted by the 2017 Tax Cuts and Jobs Act related to the capitalization for tax purposes of research and experimental (“R&E”) expenditures became effective on January 1, 2022. Beginning January 1, 2022, all U.S. and non-U.S. based R&E expenditures must be capitalized and amortized over five years and 15 years, respectively.
The Company capitalizes certain costs related to internal use software acquired, modified, or developed related to the Company’s services. These capitalized costs are primarily related to salaries and other personnel costs. Costs incurred in the preliminary stages of development are expensed as incurred. Once the application development stage has been reached, internal and external costs, if direct and incremental, are capitalized until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. Maintenance and training costs are expensed as incurred. Capitalized software is amortized on a straight-line basis over its useful life.
Ongoing and escalating political volatility in Nepal may adversely affect our business, financial condition, and results of operations.
Nepal has experienced significant governmental turnover since the 2008 abolition of the country’s monarchy government. Beginning on September 8, 2025, thousands of demonstrators converged on central Kathmandu to protest alleged entrenched corruption, high unemployment, and perceived democratic backsliding. Security forces responded violently. Parallel and subsequent protests, demonstrations, and work stoppages have disrupted transportation and public services nationwide. Should similar or further unrest occur, we could face, among other things: restrictions on the movement of personnel and goods; interruptions to supply chains; delays in permitting or licensing; selective enforcement or abrupt changes in tax, labor, foreign-exchange, or investment regulations; increased security costs; and reputational damage. There can be no assurance that Nepal’s government will stabilize, that further violent protests will not occur, or that new regulations or emergency decrees will not materially impair our operations in the country. Any of the foregoing events, individually or in the aggregate, could have a material adverse effect on our business, financial condition, and results of operations.
Risks Related to Ownership of Our Securities
The price of our Common Stock may be volatile.
The market price of our Common Stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:
| ● | the concentration of the ownership of our shares by a limited number of affiliated stockholders may limit interest in our securities; | |
| ● | limited “public float” with a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for the Common Stock; | |
| ● | additions or departures of key personnel; | |
| ● | loss of a strategic relationship; | |
| ● | variations in operating results from the expectations of securities analysts or investors; |
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| ● | announcements of new products or services by us or our competitors; | |
| ● | reductions in the market share of our products; | |
| ● | announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments; | |
| ● | investor perception of our industry or prospects; | |
| ● | insider selling or buying; | |
| ● | investors entering into short sale contracts; | |
| ● | regulatory developments affecting our industry; | |
| ● | changes in our industry; | |
| ● | competitive pricing pressures; | |
| ● | our ability to obtain working capital financing; | |
| ● | sales of the Common Stock; | |
| ● | our ability to execute our business plan; | |
| ● | operating results that fall below expectations; | |
| ● | revisions in securities analysts’ estimates or reductions in security analysts’ coverage; and | |
| ● | economic and other external factors. |
Many of these factors are beyond our control and may decrease the market price of the Common Stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for the Common Stock will be at any time, including as to whether the Common Stock will sustain current market prices, or as to what effect that the sale of shares or the availability of the Common Stock for sale at any time will have on the prevailing market price.
In addition, the securities markets have from time-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of the Common Stock.
Our executive officers and directors exercise significant control over the company, which may limit your ability to influence corporate matters and could delay or prevent a change in corporate control.
Sameer Maskey, our Chief Executive Officer, beneficially owns approximately 20.36% of the combined voting power for the election of directors to the Company’s board of directors. As a result, this stockholder will be able to influence our management and affairs and control the outcome of matters submitted to our stockholders for approval, including the election of directors and any sale, merger, consolidation, or sale of all or substantially all of our assets.
This stockholder may have interests, with respect to his Common Stock, which are different from those of the public investors and the concentration of voting power among this stockholder may have an adverse effect on the price of the Common Stock.
In addition, this concentration of ownership might adversely affect the market price of the Common Stock by: (1) delaying, deferring or preventing a change of control; (2) impeding a merger, consolidation, takeover or other business combination involving us; or (3) discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.
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The requirements of being a public company may strain the Company’s resources and distract management and we will incur substantial costs as a result of being a public company.
The Company is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the Securities Act. These rules, regulations and requirements are extensive. We will incur significant costs associated with our public company corporate governance and reporting requirements. The Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more corporate employees to comply with these requirements or engage outside consultants, which would increase our costs and expenses. This may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. These applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and it may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on the Company’s board of directors or as executive officers.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.
As a result of disclosure of information in this prospectus and in the filings that we are required to make as a public company, our business, operating results and financial condition have become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If any such claims are successful, our business, operating results and financial condition could be adversely affected, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and adversely affect our business, operating results and financial condition.
Sales of a substantial amount of Common Stock in the public market, particularly sales by our executive officers, directors and significant stockholders, or the perception that these sales could occur, could cause the market price of the Common Stock to decline.
Sales of a substantial number of shares of Common Stock in the public market, particularly sales by our executive officers, directors and principal stockholders, or the perception that these sales might occur, could cause the market price of the Common Stock to decline. Holders of a substantial number of shares of the Common Stock following the Business Combination are subject to lock-up provisions in our bylaws, as amended and restated (the “Bylaws”) in that, for a period of at least one year from the date of closing of the Business Combination, subject to certain exceptions, prohibit them from offering for sale, selling, contracting to sell, granting any option for the sale of, transferring or otherwise disposing of any shares of the Common Stock and of any securities convertible into or exercisable for the Common Stock, unless waived, amended, or repealed by the Company’s board of directors.
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When the applicable lock-up periods expire, our security holders subject to the lock-up provisions will be able to sell shares of Common Stock in the public market. In addition, the Company’s board of directors may, in its discretion, permit our security holders to sell shares prior to the expiration of the restrictive provisions contained in the Bylaws. Pursuant to Section 7.14(d) of the Bylaws, the Company’s board of directors may also waive, amend or repeal the terms of the lock-up provision in the Bylaws for any reason, including in order to meet or maintain the Nasdaq listing requirements, which would allow the holders of any securities held by the parties to such lock-up agreements. to sell our shares without restriction, subject to applicable securities laws. Sales of a substantial number of such shares upon expiration of the lock-up provisions, the perception that such sales may occur or early release of these provisions could cause our market price to fall or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.
In addition, we may file a registration statement to register shares reserved for future issuance under our equity compensation plans. Subject to the satisfaction of applicable vesting requirements and expiration of the lock-up provisions referred to above, the shares issued upon exercise of outstanding stock options would be available for immediate resale in the open market.
A decline in the price of the Common Stock could affect our ability to raise working capital and adversely impact the company’s ability to continue operations.
A prolonged decline in the price of the Common Stock could result in a reduction in the liquidity of the common stock and a reduction in our ability to raise capital. A decline in the price of the Common Stock could be especially detrimental to our liquidity, operations and strategic plans. Such reductions may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations, including our ability to develop new products and services and continue current operations. If the Common Stock’s price declines, we can offer no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
Fusemachines does not intend to pay any cash dividends in the foreseeable future and, therefore, any return on your investment in the company’s capital stock must come from increases in the fair market value and trading price of the capital stock.
We have not paid any cash dividends on the Common Stock and do not intend to pay cash dividends on the Common Stock in the foreseeable future. We intend to retain future earnings, if any, for reinvestment in the development and expansion of our business. Any credit agreements, which we may enter into with institutional lenders, may restrict our ability to pay dividends. Whether we pay cash dividends in the future will be at the discretion of the Company’s board of directors and will be dependent upon our financial condition, results of operations, capital requirements and any other factors that the Company’s board of directors decides is relevant. Therefore, any return on your investment in our capital stock must come from increases in the fair market value and trading price of the capital stock.
If the price of the Common Stock fluctuates, you could lose a significant part of your investment.
The market price of the Common Stock could be subject to wide fluctuations in response to, among other things, the risk factors described herein, and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable to us. Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, such as the occurrence of natural disasters, pandemics, geopolitical tensions (particularly those relating to the People’s Republic of China), military conflicts, recessions, inflation, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock. In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
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The public stockholders will experience immediate dilution as a consequence of future issuances of Common Stock pursuant to the Fusemachines Equity Incentive Plan.
Fusemachines employees and consultants hold, and in the future may be granted, equity awards under equity incentive plans. You will experience additional dilution when those equity awards and purchase rights become vested and settled or exercisable, as applicable, for shares of the Common Stock.
The future exercise of registration rights may adversely affect the market price of the Common Stock.
Pursuant to the Amended and Registration Rights Agreement (as defined below), the Company has agreed to register for resale, pursuant to Rule 415 under the Securities Act, certain shares of Common Stock and other equity securities of the Company that are held by the Selling Stockholder, from time to time.
The registration of these securities will permit the public resale of such securities, subject to any applicable contractual lock-up obligation. The registration and availability of a significant number of securities for trading in the public market may have an adverse effect on the market price of the Common Stock.
The Public Warrants may never be in the money, and they may expire worthless and the terms of the warrants may be amended in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment.
The exercise price for the outstanding Public Warrants is $11.50 per share. There can be no assurance that the Public Warrants will be in the money prior to their expiration and as such, the Public Warrants may expire worthless.
The Public Warrants were issued in registered form under a Warrant Agreement between us and Continental Stock Transfer & Trust Company, as warrant agent, originally executed January 12, 2022 between the warrant agent and CSLM Acquisition, Corp. (CSLM ) (“now known as Fusemachines Inc.”) and amended at Closing (the “Warrant Agreement”). The Warrant Agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least 50% of the then outstanding Public Warrants to make any change that increases the exercise price or shortens the exercise period of the Public Warrants.
Accordingly, we may amend the terms of the Public Warrants in a manner adverse to a holder if holders of at least 50% of the then outstanding Public Warrants approve of such amendment. Although our ability to amend the terms of the Public Warrants with the consent of at least 50% of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares of Common Stock purchasable upon exercise of a warrant.
The Company may redeem your unexpired Public Warrants prior to their exercise at a time that is disadvantageous to you, thereby making your Public Warrants worthless.
We have the ability to redeem outstanding Public Warrants at any time and prior to their expiration, at a price of $0.01 per warrant, provided that the closing price of the Common Stock equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any twenty (20) trading days within a thirty (30) trading-day period ending on the third trading day prior to the date on which we give proper notice of such redemption to the warrants holders and provided certain other conditions are met. We will not redeem the Public Warrants unless an effective registration statement under the Securities Act covering the shares issuable upon exercise of the warrants is effective and a current prospectus relating to those shares is available throughout the thirty (30)-day redemption period, except if we elect to require the warrants to be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding warrants could force you to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants, if you do not otherwise exercise you warrants, as permitted under the Warrant Agreement, before the redemption date. None of the Private Placement Warrants will be redeemable by us so long as they are held by the Sponsor or any of its permitted transferees.
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In addition, we have the ability to redeem the outstanding Public Warrants at any time prior to their expiration, at a price of $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption if the closing price of the Common Stock equals or exceeds $18.00 per share (as adjusted for share sub-divisions, share capitalizations, reorganizations, recapitalizations and the like) for any twenty (20) trading days within a thirty (30) day trading-day period ending on the third day prior to proper notice of such redemption and provided that certain other conditions are met, including that holders will be able to exercise their warrants on a cashless basis prior to redemption for a number of shares of Common Stock determined based on the redemption date and fair market value of the Common Stock. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had been able to exercise their warrants at a later time at which the underlying share price is higher and (2) may not compensate the holders for the value of the warrants. In addition, such redemptions may occur at a time when the Public Warrants are “out-of-the-money,” in which case holders thereof would lose any potential embedded value from a subsequent increase in the value of the Common Stock had such Public Warrants remained outstanding. If the price of the Common Stock is less than $18.00 and we seek redemption of the Public Warrants, we must call the Private Placement Warrants for redemption on the same terms.
In the event that the Company determines to redeem the Public Warrants when the closing price of the shares of Common Stock equals or exceeds $18.00 per share, pursuant to Section 6.2 of the Warrant Agreement, respectively, the Company will fix a date for the redemption. Notice of redemption will be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the redemption date to the registered holders of the Public Warrants to be redeemed at their last addresses as they appear on the registration books. Any notice mailed in the manner herein provided will be conclusively presumed to have been duly given whether or not the registered holder received such notice.
Public Warrant holders will only be able to exercise their Public Warrants on a “cashless basis” under certain circumstances, and if they do so, they will receive fewer shares of Common Stock from such exercise than if such warrants were exercised for cash.
The Public Warrants generally may not be exercised on a “cashless basis”, except as described below. In contrast, the Private Placement Warrants, for so long as they are held by the Sponsor and certain permitted transferees, may be exercised on a “cashless basis”.
The Warrant Agreement provides that in the following circumstances holders of Public Warrants who seek to exercise their Public Warrants will not be permitted to do for cash and will, instead, be required to do so on a cashless basis in accordance with Section 3(a)(9) of the Securities Act: (i) if the Common Stock issuable upon exercise of the warrants are not registered under the Securities Act in accordance with the terms of the Warrant Agreement; (ii) if we have so elected and the Common Stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of “covered securities” under Section 18(b)(1) of the Securities Act; and (iii) if we have so elected and we call the Public Warrants for redemption. If you exercise your Public Warrants on a cashless basis, you would pay the warrant exercise price by surrendering the warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Public Warrants, multiplied by the excess of the “fair market value” of the shares of Common Stock (as defined in the next sentence) over the exercise price of the warrants by (y) the fair market value. The “fair market value” is the average reported closing price of the shares of Common Stock for the ten (10) trading days ending on the third trading day prior to the date on which the notice of exercise is received by the warrant agent or on which the notice of redemption is sent to the holders of warrants, as applicable. As a result, a holder of Public Warrants would receive fewer shares of Common Stock from such exercise than if such warrants were exercised for cash.
The Warrant Agreement will designate the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of the warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes.
The Warrant Agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the Warrant Agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
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Notwithstanding the foregoing, these provisions of the Warrant Agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the Warrant Agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes, which may discourage such lawsuits and result in increased costs to warrant holders to bring a lawsuit. Alternatively, if a court were to find this provision of our Warrant Agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board.
The historical financial results of Legacy Fusemachines may not be indicative of what the Company’s actual financial position or results of operations would have been.
The historical financial results of Legacy Fusemachines included in this prospectus do not reflect the financial condition, results of operations or cash flows they would have achieved as a standalone public company during the periods presented or those the Company will achieve in the future. This is primarily the result of the following factors: (i) the Company will incur additional ongoing costs, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act; and (ii) the Company’s capital structure is different from that reflected in Legacy Fusemachines’ historical financial statements. The Company’s financial condition and future results of operations could be materially different from amounts reflected in its historical financial statements included elsewhere in this prospectus, so it may be difficult for investors to compare the Company’s future results to historical results or to evaluate its relative performance or trends in its business.
We are currently an emerging growth company and a smaller reporting company within the meaning of the Securities Act, and to the extent we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are currently an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. As a result, our shareholders may not have access to certain information they may deem important. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
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Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company, which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used. Once we lose our “emerging growth company” and “smaller reporting company” status, we will no longer be able to take advantage of certain exemptions from reporting, and we will also be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We will incur additional expenses in connection with such compliance and our management will need to devote additional time and effort to implement and comply with such requirements.
We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the prior June 30, or (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the prior June 30.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of CSLM’s IPO, (b) in which we have total annual gross revenue of at least $1.23 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.
We may be subject to the Excise Tax included in the Inflation Reduction Act of 2022 in connection with redemptions of shares of public common stock.
The Inflation Reduction Act of 2022 imposes a 1% U.S. federal excise tax on certain repurchases (including redemptions) of stock by publicly traded U.S. corporations beginning January 1, 2023. Because we are a Delaware corporation and our common stock is publicly traded, we are a “covered corporation” for purposes of the excise tax.
Although redemptions of our common stock that occurred in connection with the business combination closed in October 2025 may be netted against equity issuances occurring during the same taxable year, we could nevertheless incur excise tax liability for the 2025 taxable year. In addition, any future repurchases or redemptions of our common stock, whether conducted through open-market repurchases, tender offers, redemptions, net settlements of equity awards, or other transactions, may also be subject to the excise tax, unless an exemption applies.
The U.S. Department of the Treasury has finalized certain procedural regulations but the substantive rules governing the computation of the tax remain in proposed form and are subject to change. As a result, the application of the excise tax is uncertain and could materially increase the cost of future share repurchases or other capital-allocation strategies.
Delaware law and the Company’s Organizational Documents contain certain provisions, including anti-takeover provisions that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.
The Company’s amended and restated certificate of incorporation, as amended and restated (the “Certificate of Incorporation”) and Bylaws (together, the “Organizational Documents”), and the DGCL, contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, and therefore depress the trading price of the Common Stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the Company’s board of directors or taking other corporate actions, including effecting changes in our management. Among other things, the Organizational Documents include provisions regarding:
| ● | the ability of the Company’s board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; | |
| ● | the Certificate of Incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; | |
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| ● | the limitation of the liability of, and the indemnification of, the Company’s directors and officers; | |
| ● | the ability of the Company’s board of directors to amend the Bylaws, which may allow the Company’s board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the Bylaws to facilitate an unsolicited takeover attempt; and | |
| ● | advance notice procedures with which stockholders must comply to nominate candidates to the Company’s board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in the Company’s board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Company. |
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in the Company’s board of directors or management.
The provisions of the Certificate of Incorporation requiring exclusive forum in the Court of Chancery of the State of Delaware and the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.
The Company’s Certificate of Incorporation provides that, to the fullest extent permitted by law, and unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) will be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on the Company’s behalf, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Company to the Company or the Company’s stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the DGCL or the Organizational Documents (as each may be amended from time to time), (iv) any action, suit or proceeding as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (v) any action, suit or proceeding asserting a claim against the Company or any current or former director, officer or stockholder governed by the internal affairs doctrine.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such Securities Act claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, the Certificate of Incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act; however, there is uncertainty as to whether a court would enforce such provision, and investors cannot waive compliance with federal securities laws and the rules and regulations thereunder. Notwithstanding the foregoing, the Certificate of Incorporation provides that the exclusive forum provision will not apply to suits brought to enforce any cause of action arising under the Securities Act, any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
These provisions may have the effect of discouraging lawsuits against the Company’s directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against the Company, a court could find the choice of forum provisions contained in the Certificate of Incorporation to be inapplicable or unenforceable in such action.
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Risks Related to Being a Public Company
We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business, financial condition, and results of operations.
As a public company, we are and will continue to be subject to the reporting requirements of the Exchange Act, the listing standards of Nasdaq and other applicable securities rules and regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems, and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, financial condition, and results of operations, although we have already hired additional employees to assist us in complying with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
These factors could also make it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee and compensation committee, and qualified executive officers.
As a result of disclosure of information in filings required of a public company, our business and financial condition will become more visible, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business, financial condition, and results of operations.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the applicable listing standards of Nasdaq. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting, which includes hiring additional accounting and financial personnel to implement such processes and controls. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls.
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Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the trading price of our common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on Nasdaq. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K.
Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have an adverse effect on our business and results of operations and could cause a decline in the price of our common stock.
Our business, financial condition, and results of operations may fluctuate on a quarterly and annual basis, which may result in a decline in our stock price if such fluctuations result in a failure to meet the expectations of securities analysts or investors.
Our operating results have in the past and could in the future vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance, our projections or the expectations of securities analysts because of a variety of factors, many of which are outside of our control and, as a result, should not be relied upon as an indicator of future performance. As a result, we may not be able to accurately forecast our operating results and growth rate. Any of these events could cause the market price of our common stock to fluctuate. Factors that may contribute to the variability of our operating results include, but are not limited to: our ability to attract new clients and partners, retain existing clients and partners and maximize engagement and enrollment with existing and future clients; changes in our sales and implementation cycles, especially in the case of our large clients; new solution introductions and expansions, or challenges with such introductions; changes in our pricing or fee policies or those of our competitors; the timing and success of new solution introductions by us or our competitors or announcements by competitors or other third parties of significant new products or acquisitions or entrance into certain markets; any other change in the competitive landscape of our industry, including consolidation among our competitors; increases in operating expenses that we may incur to grow and expand our operations and to remain competitive; our ability to successfully expand our business, whether domestically or internationally; breaches of security or privacy; changes in stock-based compensation expenses; the amount and timing of operating costs and capital expenditures related to the expansion of our business; adverse litigation judgments, settlements, or other litigation-related costs; changes in the legislative or regulatory environment, including with respect to privacy or data protection, or enforcement by government regulators, including fines, orders, or consent decrees; the cost and potential outcomes of ongoing or future regulatory investigations or examinations, or of future litigation; changes in our effective tax rate; our ability to make accurate accounting estimates and appropriately recognize revenue for our solutions for which there are no relevant comparable products; changes in accounting standards, policies, guidance, interpretations, or principles; instability in the financial markets; general economic conditions, both domestic and international; volatility in the global financial markets; political, economic, and social instability, including terrorist activities and health epidemics (including the outbreak of COVID-19), and any disruption these events may cause to the global economy; and changes in business or macroeconomic conditions. The impact of one or more of the foregoing or other factors may cause our operating results to vary significantly.
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Changes in accounting principles may cause previously unanticipated fluctuations in our financial results, and the implementation of such changes may impact our ability to meet our financial reporting obligations.
We prepare our financial statements in accordance with GAAP, which are subject to interpretation or changes by the FASB, the SEC, and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results. Furthermore, any difficulties in implementation of changes in accounting principles, including the ability to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which could result in regulatory discipline and harm investors’ confidence in us.
If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our business, financial condition, and results of operations could be adversely affected.
The preparation of financial statements in conformity with GAAP and our key metrics require management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes and amounts reported in our key metrics. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to allowance for doubtful accounts, assessment of the useful life and recoverability of long-lived assets, fair value of guarantees included in revenue arrangements and fair values of stock-based awards, warrants, contingent consideration, and income taxes. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.
Risks Related to an Investment in Our Securities
There may not be an active trading market for our securities, which may make it difficult to sell shares of our common stock or warrants.
It is possible that an active trading market for our securities will not develop or, if developed, that any market will not be sustained. This would make it difficult for you to sell our securities at an attractive price or at all.
The market price of our securities may be volatile, which could cause the value of your investment to decline.
The price of our securities may fluctuate significantly due general market and economic conditions. An active trading market for our securities may not develop or, if developed, it may not be sustained. In addition, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Even if an active market for our securities develops and continues, the trading price of our securities could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline. Factors affecting the trading price of our securities may include, but are not solely limited to, the risk factors identified herein.
In addition, the stock market in general, and Nasdaq and technology and growth companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our common stock, regardless of its actual operating performance. In the past, securities class action litigation has often been instituted against companies following periods of volatility in the market price of a company’s securities. This type of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.
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There can be no assurance that we will be able to comply with the continued listing standards of Nasdaq.
If Nasdaq delists our securities from trading on its exchange for failure to meet their continued listing standards, the Company and its stockholders could face significant negative consequences including:
| ● | Limited availability of market quotations for the Company securities; | |
| ● | A determination that our common stock is a “penny stock” which will require brokers trading in our securities to adhere to more stringent rules; | |
| ● | Possibly resulting in a reduced level of trading activity in the secondary trading market for shares of our common stock; | |
| ● | A limited amount of analyst coverage; and | |
| ● | A decreased ability to issue additional securities or obtain additional financing in the future. |
Nasdaq may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in its securities and subject us to additional trading restrictions.
Currently, our common stock and public warrants are listed on the Nasdaq Global Market under the symbols “FUSE” and “FUSEW.” In order to continue the list of these securities on the Nasdaq Global Market, we are required to maintain certain financial, distribution and stock price levels. On January 15, 2026, we received a notification letter from the staff of the Listing Qualifications Department of The Nasdaq Stock Market (the “Nasdaq Staff”) indicating that we are not in compliance with the continued listing requirement to maintain a minimum Market Value of Publicly Held Shares of $15,000,000 for the Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(b)(2)(C). In accordance with Nasdaq Listing Rule 5810(c)(3)(D), we have 180 calendar days, or until July 14, 2026, to regain compliance with the MVPHS requirement. If at any time before July 14, 2026, our MVPHS closes at or above $15,000,000 for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation that we have regained compliance. Further, on March 27, 2026, we received a deficiency notice from the Nasdaq Staff notifying us that for the last 30 consecutive business days our securities had not maintained the minimum Market Value of Listed Securities (“MVLS”) of $50,000,000 required by the continued listing requirements of Nasdaq Listing Rule 5450(b)(2)(A). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), we have 180 calendar days, or until September 23, 2026, to regain compliance with the MVLS requirement. If at any time before September 23, 2026, our MVLS closes at or above $50,000,000 for a minimum of 10 consecutive business days, Nasdaq will provide written confirmation that we have regained compliance.
If Nasdaq delists our securities from trading on its exchange and we are not able to list its securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; | |
| ● | reduced liquidity for our securities; | |
| ● | a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; | |
| ● | a limited amount of news and analyst coverage; and | |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Since our common stock and public warrants are listed on the Nasdaq Global Market, they are covered securities. However, if our securities were no longer listed on the Nasdaq Global Market, they would not be covered securities and we would be subject to regulation in each state in which we offer our securities.
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Because we have no current plans to pay cash dividends on our common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.
We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. As a result, you may not receive any return on an investment in our Common Stock unless you sell the Common Stock for a price greater than that which you paid for it.
Sales of a substantial number of shares of our Common Stock in the public market could cause our stock price to fall.
Sales of a substantial number of shares of our Common Stock in the public market or the perception that these sales might occur, could depress the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our Common Stock. Sales of significant number of shares of our Common Stock may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that it deems reasonable or appropriate, and make it more difficult for you to sell shares of our common stock. Certain holders of our securities are entitled to rights with respect to the registration of the shares of our Common Stock under the Securities Act. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our Common Stock.
Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital may be needed in the future to continue our planned operations, commercialization efforts, expanded research and development activities and costs associated with operating as a public company. To raise capital, we may sell Common Stock, convertible securities or other equity securities in one or more transactions at prices and in a manner it determines from time to time. We may also sell our Common Stock as part of entering into strategic alliances, creating joint ventures or collaborations or entering into additional licensing arrangements with third parties that we believe will complement or augment its development and commercialization efforts. If we sell Common Stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our Common Stock.
Our management has limited experience in operating a public company.
Our executive officers have limited experience in the management of a publicly traded company subject to significant regulatory oversight and reporting obligations under federal securities laws. Our management team may not successfully or effectively manage our transition to a public company. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to our management and growth. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. It is possible that will be required to expand its employee base and hire additional employees to support our operations as a public company, which will increase its operating costs in future periods.
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THE COMMITTED EQUITY FACILITY
On April 17, 2026, we entered into the Purchase Agreement and the Registration Rights Agreement with Roth Principal Investments. Upon the terms and subject to the satisfaction of the conditions contained in the Purchase Agreement, from and after the Commencement Date, we will have the right, in our sold discretion, to sell to Roth Principal Investments up to $20,000,000 of shares of our Common Stock, subject to certain limitations set forth in the Purchase Agreement, from time to time after the date of this prospectus and during the term of the Purchase Agreement. Sales of Common Stock by us to Roth Principal Investments under the Purchase Agreement, and the timing of any such sales, are solely at our option, and we are under no obligation to sell any securities to Roth Principal Investments under the Purchase Agreement. In accordance with our obligations under the Registration Rights Agreement, we have filed the registration statement that includes this prospectus with the SEC to register under the Securities Act the resale by Roth Principal Investments of up to 11,363,636 shares of Common Stock, in our sole discretion, direct Roth Principal Investments to purchase from us pursuant to the Purchase Agreement, from time to time after the date of this prospectus and during the term of the Purchase Agreement.
We do not have the right to commence any sales of our Common Stock to Roth Principal Investments under the Purchase Agreement until the Commencement Date, which is the date on which all of the conditions to Roth Principal Investments’ purchase obligation set forth in the Purchase Agreement have initially been satisfied, none of which are in Roth Principal Investments’ control, including that the registration statement that includes this prospectus shall have been declared effective by the SEC and the final form of this prospectus shall have been filed with the SEC. From and after the Commencement Date, we have the right, but not the obligation, from time to time at our sole discretion for a period of up to 36 months, unless the Purchase Agreement is earlier terminated, to direct Roth Principal Investments to purchase up to a specified maximum amount of shares of Common Stock in one or more Market Open Purchases, Intraday Purchases, Pre-Market Purchases and Post-Market Purchases as set forth in the Purchase Agreement, by timely delivering the applicable Purchase Notice for each such Purchase to Roth Principal Investments in accordance with the Purchase Agreement on any trading day we select as the Purchase Date therefor, so long as (i) the closing sale price of our Common Stock on the trading day immediately prior to such Purchase Date is not less than the Threshold Price and (ii) all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
From and after Commencement, the Company will control the timing and amount of any sales of Common Stock to Roth Principal Investments. Actual sales of shares of our Common Stock to Roth Principal Investments under the Purchase Agreement will depend on a variety of factors to be determined by us from time to time, including, among other things, market conditions, the trading price of our Common Stock and determinations by us as to the appropriate sources of funding for our company and its operations.
Under the applicable Nasdaq rules, in no event may we issue to Roth Principal Investments under the Purchase Agreement shares of Common Stock in excess of the Exchange Cap (or 5,750,000 shares of Common Stock, representing 19.99% of the shares of our Common Stock outstanding immediately prior to the execution of the Purchase Agreement), unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Roth Principal Investments for all of the shares of Common Stock that we direct Roth Principal Investments to purchase from us pursuant to the Purchase Agreement, if any, equals or exceeds $1.76 (representing the lower of (a) the official closing price of our Common Stock on Nasdaq immediately preceding the execution of the Purchase Agreement and (b) the average official closing price of our Common Stock on Nasdaq for the five consecutive trading days immediately preceding the execution of the Purchase Agreement, adjusted as required by Nasdaq to take into account, among other things, our payment of the Cash Commitment Fee to Roth Principal Investments), so that the Exchange Cap limitation will not apply to issuances and sales of Common Stock pursuant to the Purchase Agreement.
Moreover, we may not issue or sell any shares of Common Stock to Roth Principal Investments under the Purchase Agreement which, when aggregated with all other shares of Common Stock then beneficially owned by Roth Principal Investments and its affiliates (as calculated pursuant to Section 13(d) of the Exchange Act and Rule 13d-3 thereunder), would result in Roth Principal Investments beneficially owning shares of Common Stock in excess of the 4.99% Beneficial Ownership Limitation.
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The net proceeds to us from sales that we elect to make to Roth Principal Investments under the Purchase Agreement, if any, will depend on the frequency and prices at which we sell shares of our Common Stock to Roth Principal Investments. We expect that any proceeds received by us from such sales to Roth Principal Investments will be used for working capital and general corporate purposes.
Neither we nor Roth Principal Investments may assign or transfer any of our respective rights or obligations under the Purchase Agreement or the Registration Rights Agreement, and no provision of the Purchase Agreement or the Registration Rights Agreement may be modified or waived by us or Roth Principal Investments.
As consideration for Roth Principal Investments’ commitment to purchase shares of Common Stock our direction upon the terms and subject to the conditions set forth in the Purchase Agreement, we (i) paid to Roth Principal Investments a cash “structuring fee” of $20,000, prior to our execution of the Purchase Agreement, and (iii) agreed to pay to Roth Principal Investments the Cash Commitment Fee of $300,000, which is equal to 1.5% of Roth Principal Investments’ $20,000,000 total aggregate dollar amount purchase commitment under the Purchase Agreement. The Cash Commitment Fee shall be payable in cash to Roth Principal Investments out of the first proceeds, following Market Open Purchases or Intraday Purchases, at a 10% participation rate until the entire Commitment Fee has been received by the Roth Principal Investments.
In addition, we have agreed to reimburse Roth Principal Investments the Initial Legal Fee Reimbursement Amount of $60,000, upon our execution of the Purchase Agreement and the Registration Rights Agreement, for the reasonable legal fees and disbursements of Roth Principal Investments’ legal counsel in connection with the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement. We have also agreed to reimburse Roth Principal Investments the Additional Investor Legal Fee Reimbursement Amount of up to $7,500 per fiscal quarter for the reasonable legal fees and disbursements of Roth Principal Investments’ legal counsel in connection with quarterly and annual bring-down due diligence investigations and related matters as contemplated by the Purchase Agreement.
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties. Copies of the agreements have been filed as exhibits to the registration statement that includes this prospectus and are available electronically on the SEC’s website at www.sec.gov.
Purchases of Common Stock Under the Purchase Agreement
Market Open Purchases
From and after the Commencement Date, we will have the right, but not the obligation, from time to time at our sole discretion for a period of up to 36 months, unless the Purchase Agreement is earlier terminated, beginning on the Commencement Date, to direct Roth Principal Investments to purchase a specified number of shares of Common Stock, not to exceed the applicable Market Open Purchase Maximum Amount, in a Market Open Purchase under the Purchase Agreement, by timely delivering a written Market Open Purchase Notice to Roth Principal Investments, after 7:30 a.m., New York City time and prior to 9:00 a.m., New York City time, on any trading day we select as the Purchase Date for such Market Open Purchase, so long as:
● the closing sale price of our Common Stock on the trading day immediately prior to such Purchase Date is not less than the Threshold Price; and
● all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
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The Purchase Maximum Amount applicable to such Market Open Purchase will be equal to the lesser of:
● 2,000,000 shares of Common Stock; and
● the Market Open Purchase Percentage (not to exceed 25.0%) (as specified in the applicable Market Open Purchase Notice for such Purchase) of the total aggregate number (or volume) of shares of our Common Stock traded on Nasdaq during the applicable Market Open Purchase Valuation Period for such Market Open Purchase.
The actual number of shares of Common Stock that Roth Principal Investments will be required to purchase in a Market Open Purchase, which we refer to as the Market Open Purchase Share Amount, will be equal to the number of shares that we specify in the applicable Market Open Purchase Notice, subject to adjustment to the extent necessary to give effect to the applicable Market Open Purchase Maximum Amount and other applicable limitations set forth in the Purchase Agreement, including the Beneficial Ownership Limitation and, if then applicable, the Exchange Cap.
The per share purchase price that Roth Principal Investments will be required to pay for the Market Open Purchase Share Amount in a Market Open Purchase effected by us pursuant to the Purchase Agreement, if any, will be equal to the VWAP of our Common Stock for the applicable Market Open Purchase Valuation Period on the Purchase Date for such Market Open Purchase, less a fixed 3.0% discount to the VWAP for such Market Open Purchase Valuation Period. The Market Open Purchase Valuation Period for a Market Open Purchase is defined in the Purchase Agreement as the period beginning at the official open (or “commencement”) of the regular trading session on Nasdaq on the applicable Purchase Date for such Market Open Purchase, and ending at the earliest to occur of:
● 3:59 p.m., New York City time, on such Purchase Date or such earlier time publicly announced by the trading market as the official close of the regular trading session on such Purchase Date;
● such time that the total aggregate number (or volume) of shares of Common Stock traded on Nasdaq during such Market Open Purchase Valuation Period reaches the applicable Market Open Purchase Share Volume Maximum for such Market Open Purchase, which will be determined by dividing (a) the applicable Market Open Purchase Share Amount for such Market Open Purchase, by (b) the Market Open Purchase Percentage we specified in the applicable Market Open Purchase Notice for such Market Open Purchase); and
● if we further specify in the applicable Market Open Purchase Notice for such Market Open Purchase that a Limit Order Discontinue Election shall apply to such Market Open Purchase, such time that the trading price of our Common Stock on Nasdaq during such Market Open Purchase Valuation Period (calculated in accordance with the Purchase Agreement) falls below the applicable Minimum Price Threshold.
Under the Purchase Agreement, for purposes of calculating the volume of shares of Common Stock traded during a Market Open Purchase Valuation Period, including for purposes of determining whether the applicable Market Open Purchase Share Volume Maximum for a Market Open Purchase has been reached, for purposes of calculating the VWAP of our Common Stock for the applicable Market Open Purchase Valuation Period, and to the extent that we specify in the applicable Market Open Purchase Notice that the Limit Order Discontinue Election will apply, the following transactions, to the extent they occur during such Market Open Purchase Valuation Period, shall be excluded: (x) the opening or first purchase of Common Stock at or following the official open of the regular trading session on Nasdaq on the applicable Purchase Date for such Market Open Purchase, (y) the last or closing sale of Common Stock at or prior to the official close of the regular trading session on Nasdaq on the applicable Purchase Date for such Market Open Purchase, and (z) if we have specified in the applicable Market Open Purchase Notice for such Market Open Purchase that a Limit Order Continue Election, rather than a Limit Order Discontinue Election, shall apply to such Market Open Purchase, all purchases and sales of Common Stock on Nasdaq during such Market Open Purchase Valuation Period at a price per share that is less than the applicable Minimum Price Threshold for such Market Open Purchase. The Minimum Price Threshold for a Market Open Purchase will be the dollar amount we specify in the applicable Market Open Purchase Notice, or if we do not specify a dollar amount, a price equal to 75.0% of the closing sale price of the Common Stock on the trading day immediately prior to the applicable Purchase Date for such Market Open Purchase.
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Intraday Purchases
In addition to the Market Open Purchases described above, from and after the Commencement Date, we will also have the right, but not the obligation, subject to the continued satisfaction of the conditions set forth in the Purchase Agreement, to direct Roth Principal Investments to make Intraday Purchases (whether or not a Market Open Purchase is effected on such Purchase Date), not to exceed the applicable Intraday Purchase Maximum Amount, in an Intraday Purchase under the Purchase Agreement, by timely delivering a written Intraday Purchase Notice to Roth Principal Investments, after 10:00 a.m., New York City time (and after the Market Open Purchase Valuation Period for any earlier Market Open Purchase and the Intraday Purchase Valuation Period for the most recent prior Intraday Purchase effected on the same Purchase Date if applicable, have ended), and prior to the earlier of (x) 2:00 p.m., New York City time, and (y) such time that is exactly two hours immediately prior to the official close of the primary (or “regular”) trading session on Nasdaq on such Purchase Date, if Nasdaq has publicly announced that the official close on such Purchase Date shall be earlier than 4:00 p.m., New York City time, on such Purchase Date, so long as:
● the closing sale price of our Common Stock on the trading day immediately prior to such Purchase Date is not less than the Threshold Price; and
● all shares of Common Stock subject to all prior Purchases (as applicable) effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date, including all prior purchases effected on the same Purchase Date as such applicable Intraday Purchase, have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
The Intraday Purchase Maximum Amount applicable to such Intraday Purchase will be equal to the lesser of:
● 2,000,000 shares of Common Stock; and
● the Intraday Purchase Percentage (not to exceed 25.0%) (as specified by us in the applicable Intraday Purchase Notice for such Intraday Purchase) of the total aggregate number (or volume) of shares of our Common Stock traded on Nasdaq during the applicable Intraday Purchase Valuation Period for such Intraday Purchase.
The actual number of shares of Common Stock that Roth Principal Investments will be required to purchase in an Intraday Purchase, which we refer to as the Intraday Purchase Share Amount, will be equal to the number of shares that we specify in the applicable Intraday Purchase Notice, subject to adjustment to the extent necessary to give effect to the applicable Intraday Purchase Maximum Amount and other applicable limitations set forth in the Purchase Agreement, including the Beneficial Ownership Limitation and, if then applicable, the Exchange Cap.
The per share purchase price that Roth Principal Investments will be required to pay for the Intraday Purchase Share Amount in an Intraday Purchase effected by us pursuant to the Purchase Agreement, if any, will be calculated in the same manner as in the case of a Market Open Purchase (including the same 3.0% fixed percentage discount to the applicable VWAP used to calculate the per share purchase price for a Market Open Purchase as described above), provided that the VWAP used to determine the purchase price for the Intraday Purchase Share Amount to be purchased in an Intraday Purchase will be equal to the VWAP for the applicable Intraday Purchase Valuation Period on the Purchase Date for such Intraday Purchase. The Intraday Purchase Valuation Period for an Intraday Purchase is defined in the Purchase Agreement as the period during the regular trading session on Nasdaq on such Purchase Date, beginning at the latest to occur of:
● such time of confirmation of Roth Principal Investments’ receipt of the applicable Intraday Purchase Notice;
● such time that the Market Open Purchase Valuation Period for any prior Market Open Purchase effected on the same Purchase Date (if any) has ended; and
● such time that the Intraday Purchase Valuation Period for the most recent prior Intraday Purchase effected on the same Purchase Date (if any) has ended, and ending at the earliest to occur of:
● 3:59 p.m., New York City time, on such Purchase Date or such earlier time publicly announced by the trading market as the official close of the regular trading session on such Purchase Date;
● such time that the total aggregate number (or volume) of shares of Common Stock traded on Nasdaq during such Intraday Purchase Valuation Period reaches the applicable Intraday Purchase Share Volume Maximum for such Intraday Purchase, which will be determined by dividing (a) the applicable Intraday Purchase Share Amount for such Intraday Purchase, by (b) the Purchase Percentage we specified in the applicable Intraday Purchase Notice for determining the applicable Intraday Purchase Share Amount for such Intraday Purchase; and
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● if we further specify Limit Order Discontinue Election in the applicable Intraday Purchase Notice for such Intraday Purchase, such time that the trading price of our Common Stock on Nasdaq during such Intraday Purchase Valuation Period (calculated in accordance with the Purchase Agreement) falls below the applicable Minimum Price Threshold.
As with Market Open Purchases, for purposes of calculating the volume of shares of Common Stock traded during an Intraday Purchase Valuation Period, including for purposes of determining whether the applicable Intraday Purchase Share Volume Maximum for an Intraday Purchase has been reached, for purposes of calculating the VWAP of our Common Stock for the applicable Intraday Purchase Valuation Period, the following transactions, to the extent they occur during such Intraday Purchase Valuation Period, are excluded: (x) the opening or first purchase of Common Stock at or following the official open of the regular trading session on Nasdaq on the applicable Purchase Date for such Intraday Purchase, (y) the last or closing sale of Common Stock at or prior to the official close of the regular trading session on Nasdaq on the applicable Purchase Date for such Intraday Purchase, and (z) if we have specified in the applicable Intraday Purchase Notice for such Intraday Purchase that a Limit Order Continue Election, rather than a Limit Order Discontinue Election, shall apply to such Intraday Purchase, all purchases and sales of Common Stock on Nasdaq during such Intraday Purchase Valuation Period at a price per share that is less than the applicable Minimum Price Threshold for such Intraday Purchase. The Minimum Price Threshold for an Intraday Purchase is determined in the same manner as for a Market Open Purchase, as described above.
We may, in our sole discretion, timely deliver multiple Intraday Purchase Notices to Roth Principal Investments prior to 2:00 p.m., New York City time, on a single Purchase Date to effect multiple Intraday Purchases on such same Purchase Date, provided that the Market Open Purchase Valuation Period for any earlier Market Open Purchase effected on the same Purchase Date (as applicable) and the Intraday Purchase Valuation Period for the most recent prior Intraday Purchase effected on the same Purchase Date have ended prior to 2:00 p.m., New York City time, on such Purchase Date, and so long as all shares of Common Stock subject to all prior Purchases (as applicable) effected by us under the Purchase Agreement, including all prior purchases effected on the same Purchase Date as such applicable Intraday Purchase, have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
The terms and limitations that will apply to each subsequent additional Intraday Purchase effected on the same Purchase Date will be the same as those applicable to any earlier Market Open Purchase (as applicable) and any earlier Intraday Purchase effected on the same Purchase Date as such subsequent additional Intraday Purchase, and the per share purchase price for the shares of Common Stock that we elect to sell to Roth Principal Investments in each subsequent additional Intraday Purchase effected on the same Purchase Date as an earlier Market Open Purchase (as applicable) and/or earlier Intraday Purchase(s) effected on such Purchase Date will be calculated in the same manner as in the case of such earlier Market Open Purchase (as applicable) and such earlier Intraday Purchase(s) effected on the same Purchase Date as such subsequent additional Intraday Purchase, with the exception that the Intraday Purchase Valuation Period for each subsequent additional Intraday Purchase will begin and end at different times (and may vary in duration) during the regular trading session on such Purchase Date, in each case as determined in accordance with the Purchase Agreement.
In the case of Market Open Purchases, Intraday Purchases, Pre-Market Purchases and Post-Market Purchases effected by us under the Purchase Agreement, if any, all share and dollar amounts used in determining the purchase price per share of Common Stock to be purchased by Roth Principal Investments in a Market Open Purchase, an Intraday Purchase, a Pre-Market Purchase or a Post-Market Purchase (as applicable), or in determining the applicable maximum purchase share amounts or applicable volume or minimum price threshold in connection with any such Purchase (as applicable), in each case, will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction occurring during any period used to calculate such per share purchase price, maximum purchase share amounts or applicable volume or minimum price thresholds.
Pre-Market Purchases
In addition to Market Open Purchases and Intraday Purchases described above, from and after the Commencement Date, we will also have the right, but not the obligation, subject to the continued satisfaction of the conditions set forth in the Purchase Agreement, to direct Roth Principal Investments to purchase a specified number of shares of Common Stock (each, a “Pre-Market Purchase”), not to exceed the lesser of (such lesser number of shares, the “Pre-Market Purchase Maximum Amount”): (i) 1,000,000 shares of Common Stock and (ii) up to a certain percentage (not to exceed 20.0%), which we will specify in the applicable Pre-Market Purchase Notice for such Pre-Market Purchase (such specified percentage, the “Pre-Market Purchase Percentage”), of the total aggregate number (or volume) of shares of our Common Stock traded on Nasdaq during the applicable Pre-Market Purchase Valuation Period for such Pre-Market Purchase (such specified number of shares to be purchased by Roth Principal Investments, adjusted to the extent necessary to give effect to the applicable Pre-Market Purchase Maximum Amount as set forth in the Purchase Agreement, the “Pre-Market Purchase Share Amount”), by the delivery to Roth Principal Investments of an irrevocable written purchase notice for such Pre-Market Purchase (each, a “Pre-Market Purchase Notice”), after 7:00 a.m., New York City time, and prior to 8:30 a.m., New York City time, on any trading day we select as the Purchase Date for such Pre-Market Purchase, so long as (i) the closing sale price of the Common Stock on Nasdaq on the trading day immediately prior to such Purchase Date is not less than the Threshold Price and (ii) all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
The actual number of shares of Common Stock that Roth Principal Investments will be required to purchase in a Pre-Market Purchase, which we refer to as the Pre-Market Purchase Share Amount, will be equal to the number of shares that we specify in the applicable Pre-Market Purchase Notice, subject to adjustment to the extent necessary to give effect to the applicable Pre-Market Purchase Maximum Amount and other applicable limitations set forth in the Purchase Agreement, including the Beneficial Ownership Limitation and, if then applicable, the Exchange Cap.
The per share purchase price that Roth Principal Investments will be required to pay for the Pre-Market Purchase Share Amount in a Pre-Market Purchase effected by us pursuant to the Purchase Agreement, if any, will be calculated in a similar manner as in the case of a Market Open Purchase, except that the VWAP will be calculated over the applicable Pre-Market Purchase Valuation Period and will reflect a fixed 5.0% discount to the VWAP for such Pre-Market Purchase Valuation Period (calculated in accordance with the Purchase Agreement). The Pre-Market Purchase Valuation Period for a Pre-Market Purchase is defined in the Purchase Agreement as the period on the applicable Purchase Date for such Pre-Market Purchase, beginning at the time after 7:00 a.m., New York City time, on such Purchase Date that Roth Principal Investments shall have timely received from us a valid Pre-Market Purchase Notice, as acknowledged by email correspondence from Roth Principal Investments confirming the applicable commencement time of the Pre-Market Purchase Valuation Period for such Pre-Market Purchase (the “Pre-Market Purchase Commencement Time”), and ending at the earliest to occur of:
● 9:10 a.m., New York City time, on such Purchase Date;
● such time that the total aggregate number (or volume) of shares of Common Stock traded on Nasdaq during such Pre-Market Purchase Valuation Period reaches the applicable Pre-Market Purchase Share Volume Maximum for such Pre-Market Purchase, which will be determined by dividing (a) the applicable Pre-Market Purchase Share Amount for such Pre-Market Purchase, by (b) the Pre-Market Purchase Percentage we specified in the applicable Pre-Market Purchase Notice for such Pre-Market Purchase; and
● if we further specify in the applicable Pre-Market Purchase Notice for such Pre-Market Purchase that a Limit Order Discontinue Election shall apply to such Pre-Market Purchase, such time that the trading price of our Common Stock on Nasdaq during such Pre-Market Purchase Valuation Period (calculated in accordance with the Purchase Agreement) falls below the applicable Minimum Price Threshold.
For purposes of calculating the volume of shares of Common Stock traded during a Pre-Market Purchase Valuation Period, including for purposes of determining whether the applicable Pre-Market Purchase Share Volume Maximum for a Pre-Market Purchase has been reached, and for purposes of calculating the VWAP of our Common Stock for the applicable Pre-Market Purchase Valuation Period, if we have specified in the applicable Pre-Market Purchase Notice that a Limit Order Continue Election shall apply to such Pre-Market Purchase, all purchases and sales of Common Stock on Nasdaq during such Pre-Market Purchase Valuation Period at a price per share that is less than the applicable Minimum Price Threshold for such Pre-Market Purchase will be excluded from the calculation.The Minimum Price Threshold for a Pre-Market Purchase will be the dollar amount we specify in the applicable Pre-Market Purchase Notice, or if we do not specify a dollar amount, a price equal to 75.0% of the closing sale price of the Common Stock on the trading day immediately prior to the applicable Purchase Date for such Pre-Market Purchase.
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Post-Market Purchases
In addition to Market Open Purchases, Intraday Purchases and Pre-Market Purchases described above, from and after the Commencement Date, we will also have the right, but not the obligation, subject to the continued satisfaction of the conditions set forth in the Purchase Agreement, to direct Roth Principal Investments to purchase a specified number of shares of Common Stock (each, a “Post-Market Purchase”), not to exceed the lesser of (such lesser number of shares, the “Post-Market Purchase Maximum Amount”): (i) 1,000,000 shares of Common Stock and (ii) up to a certain percentage (not to exceed 20.0%), which we will specify in the applicable Post-Market Purchase Notice for such Post-Market Purchase (such specified percentage, the “Post-Market Purchase Percentage”), of the total aggregate number (or volume) of shares of our Common Stock traded on Nasdaq during the applicable Post-Market Purchase Valuation Period for such Post-Market Purchase (such specified number of shares to be purchased by Roth Principal Investments, adjusted to the extent necessary to give effect to the applicable Post-Market Purchase Maximum Amount as set forth in the Purchase Agreement, the “Post-Market Purchase Share Amount”), by the delivery to Roth Principal Investments of an irrevocable written purchase notice for such Post-Market Purchase (each, a “Post-Market Purchase Notice”), after 4:05 p.m., New York City time, and prior to 5:00 p.m., New York City time, on any trading day we select as the Purchase Date for such Post-Market Purchase, so long as (i) the closing sale price of the Common Stock on Nasdaq on such Purchase Date is not less than the Threshold Price and (ii) all shares of Common Stock subject to all prior Purchases effected by us under the Purchase Agreement on or before the trading day immediately preceding such Purchase Date have been timely received by Roth Principal Investments on the applicable Purchase Share Delivery Dates for such prior Purchases in accordance with the Purchase Agreement.
The per share purchase price that Roth Principal Investments will be required to pay for the Post-Market Purchase Share Amount in a Post-Market Purchase effected by us pursuant to the Purchase Agreement, if any, will be calculated in a similar manner as in the case of a Pre-Market Purchase, with a fixed 5.0% discount to the VWAP for the applicable Post-Market Purchase Valuation Period (calculated in accordance with the Purchase Agreement). The Post-Market Purchase Valuation Period for a Post-Market Purchase is defined in the Purchase Agreement as the period on the applicable Purchase Date for such Post-Market Purchase, beginning at the time after 4:05 p.m., New York City time, on such Purchase Date that Roth Principal Investments shall have timely received from us a valid Post-Market Purchase Notice, as acknowledged by email correspondence from Roth Principal Investments confirming the applicable commencement time of the Post-Market Purchase Valuation Period for such Post-Market Purchase (the “Post-Market Purchase Commencement Time”), and ending at the earliest to occur of:
● 6:00 p.m., New York City time, on such Purchase Date;
● such time that the total aggregate number (or volume) of shares of Common Stock traded on Nasdaq during such Post-Market Purchase Valuation Period reaches the applicable Post-Market Purchase Share Volume Maximum for such Post-Market Purchase, which will be determined by dividing (a) the applicable Post-Market Purchase Share Amount for such Post-Market Purchase, by (b) the Post-Market Purchase Percentage we specified in the applicable Post-Market Purchase Notice for such Post-Market Purchase; and
● if we further specify in the applicable Post-Market Purchase Notice for such Post-Market Purchase that a Limit Order Discontinue Election shall apply to such Post-Market Purchase, such time that the trading price of our Common Stock on Nasdaq during such Post-Market Purchase Valuation Period (calculated in accordance with the Purchase Agreement) falls below the applicable Minimum Price Threshold.
For purposes of calculating the volume of shares of Common Stock traded during a Post-Market Purchase Valuation Period, including for purposes of determining whether the applicable Post-Market Purchase Share Volume Maximum for a Post-Market Purchase has been reached, and for purposes of calculating the VWAP of our Common Stock for the applicable Post-Market Purchase Valuation Period, if we have specified in the applicable Post-Market Purchase Notice that a Limit Order Continue Election shall apply to such Post-Market Purchase, all purchases and sales of Common Stock on Nasdaq during such Post-Market Purchase Valuation Period at a price per share that is less than the applicable Minimum Price Threshold for such Post-Market Purchase will be excluded from the calculation. The Minimum Price Threshold for a Post-Market Purchase will be the dollar amount we specify in the applicable Post-Market Purchase Notice, or if we do not specify a dollar amount, a price equal to 75.0% of the closing sale price of the Common Stock on the trading day immediately prior to the applicable Purchase Date for such Post-Market Purchase.
At or prior to 5:30 p.m., New York City time, on the applicable Purchase Date for a Market Open Purchase, Intraday Purchase and/or Pre-Market Purchase and at or prior to 9:30:01 p.m. New York City time on the applicable Purchase Date for a Post-Market Purchase, Roth Principal Investments will provide us with a written confirmation for such Purchase, as applicable, setting forth the applicable purchase price (both on a per share basis and the total aggregate purchase price) to be paid by Roth Principal Investments for the shares of Common Stock purchased by Roth Principal Investments in such Purchase.
The payment for, against delivery of, shares of Common Stock purchased by Roth Principal Investments in any Purchase under the Purchase Agreement will be fully settled on the trading day immediately following the applicable Purchase Date for such Purchase, as set forth in the Purchase Agreement.
Conditions Precedent to Commencement and Each Purchase
Roth Principal Investments’ obligation to accept Purchase Notices that are timely delivered by us under the Purchase Agreement and to purchase shares of our Common Stock in Market Open Purchases, Intraday Purchases, Pre-Market Purchases and Post-Market Purchases under the Purchase Agreement, are subject to (i) the initial satisfaction, at the Commencement, and (ii) the satisfaction, at the applicable “Purchase Condition Satisfaction Time” (as such term is defined in the Purchase Agreement) on the applicable Purchase Date for each Purchase after the Commencement Date, of the conditions precedent thereto set forth in the Purchase Agreement, all of which are entirely outside of Roth Principal Investments’ control, which conditions including the following:
● the accuracy in all material respects of the representations and warranties of the Company included in the Purchase Agreement;
● the Company having performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Purchase Agreement to be performed, satisfied or complied with by the Company;
● the registration statement that includes this prospectus (and any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by the Company to Roth Principal Investments under the Purchase Agreement) having been declared effective under the Securities Act by the SEC, and Roth Principal Investments being able to utilize this prospectus (and the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement) to resell all of the shares of Common Stock included in this prospectus (and included in any such additional prospectuses);
● the SEC shall not have issued any stop order suspending the effectiveness of the registration statement that includes this prospectus (or any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by the Company to Roth Principal Investments under the Purchase Agreement) or prohibiting or suspending the use of this prospectus (or the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement), and the absence of any suspension of qualification or exemption from qualification of the Common Stock for offering or sale in any jurisdiction;
● FINRA shall not have provided an objection to, and shall have confirmed in writing that it has determined not to raise any objections with respect to the fairness and reasonableness of, the terms and arrangements of the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement;
● there shall not have occurred any event and there shall not exist any condition or state of facts, which makes any statement of a material fact made in the registration statement that includes this prospectus (or in any one or more additional registration statements filed with the SEC that include shares of Common Stock that may be issued and sold by the Company to Roth Principal Investments under the Purchase Agreement) untrue or which requires the making of any additions to or changes to the statements contained therein in order to state a material fact required by the Securities Act to be stated therein or necessary in order to make the statements then made therein (in the case of this prospectus or the prospectus included in any one or more additional registration statements filed with the SEC under the Registration Rights Agreement, in the light of the circumstances under which they were made) not misleading;
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● this prospectus, in final form, shall have been filed with the SEC under the Securities Act prior to Commencement, and all reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC pursuant to the reporting requirements of the Exchange Act shall have been filed with the SEC;
● trading in the Common Stock shall not have been suspended by the SEC or Nasdaq, the Company shall not have received any final and non-appealable notice that the listing or quotation of the Common Stock on Nasdaq, shall be terminated on a date certain (unless, prior to such date, the Common Stock is listed or quoted on any other Eligible Market, as such term is defined in the Purchase Agreement), and there shall be no suspension of, or restriction on, accepting additional deposits of the Common Stock, electronic trading or book-entry services by The Depository Trust Company with respect to the Common Stock;
● the Company shall have complied with all applicable federal, state and local governmental laws, rules, regulations and ordinances in connection with the execution, delivery and performance of the Purchase Agreement and the Registration Rights Agreement;
● the absence of any statute, regulation, order, decree, writ, ruling or injunction by any court or governmental authority of competent jurisdiction which prohibits the consummation of or that would materially modify or delay any of the transactions contemplated by the Purchase Agreement or the Registration Rights Agreement;
● the absence of any action, suit or proceeding before any arbitrator or any court or governmental authority seeking to restrain, prevent or change the transactions contemplated by the Purchase Agreement or the Registration Rights Agreement, or seeking material damages in connection with such transactions;
● all of the shares of Common Stock that may be issued pursuant to the Purchase Agreement shall have been approved for listing or quotation on Nasdaq (or if the Common Stock is not then listed on Nasdaq, then on any Eligible Market);
● no condition, occurrence, state of facts or event constituting a Material Adverse Effect (as such term is defined in the Purchase Agreement) shall have occurred and be continuing;
● the absence of any bankruptcy proceeding against the Company commenced by a third party, and the Company shall not have commenced a voluntary bankruptcy proceeding, consented to the entry of an order for relief against it in an involuntary bankruptcy case, consented to the appointment of a custodian of the Company or for all or substantially all of its property in any bankruptcy proceeding, or made a general assignment for the benefit of its creditors; and
● the receipt by Roth Principal Investments of the legal opinions and negative assurances, bring-down legal opinions and negative assurances, and audit comfort letters, in each case as required under the Purchase Agreement.
Termination of the Purchase Agreement
Unless earlier terminated as provided in the Purchase Agreement, the Purchase Agreement will terminate automatically on the earliest to occur of:
● the first day of the month next following the 36-month anniversary of the Commencement Date;
● the date on which Roth Principal Investments shall have purchased shares of Common Stock under the Purchase Agreement for an aggregate gross purchase price equal to $20,000,000;
● the date on which the Common Stock shall have failed to be listed or quoted on Nasdaq or any other Eligible Market for a period of one trading day;
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● the 30th trading day after the date on which a voluntary or involuntary bankruptcy proceeding involving our company has been commenced that is not discharged or dismissed prior to such 30th trading day; and
● the date on which a bankruptcy custodian is appointed for all or substantially all of our property, or we make a general assignment for the benefit of our creditors.
We have the right to terminate the Purchase Agreement at any time after Commencement, at no cost or penalty, upon 5 trading days’ prior written notice to Roth Principal Investments. We and Roth Principal Investments may also terminate the Purchase Agreement at any time by mutual written consent.
Roth Principal Investments also has the right to terminate the Purchase Agreement upon 10 trading days’ prior written notice to us, but only upon the occurrence of certain events, including:
● the occurrence and continuation of a Material Adverse Effect (as such term is defined in the Purchase Agreement);
● the occurrence of a Fundamental Transaction (as such term defined in the Purchase Agreement) involving our company;
● if any registration statement is not filed by the applicable Filing Deadline (as defined in the Registration Rights Agreement) or declared effective by the SEC by the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement), or the Company is otherwise in breach or default in any material respect under any of the other provisions of the Registration Rights Agreement, and, if such failure, breach or default is capable of being cured, such failure, breach or default is not cured within 10 trading days after notice of such failure, breach or default is delivered to us;
● if we are in breach or default in any material respect of any of our covenants and agreements in the Purchase Agreement or in the Registration Rights Agreement, and, if such breach or default is capable of being cured, such breach or default is not cured within 10 trading days after notice of such breach or default is delivered to us;
● the effectiveness of the registration statement that includes this prospectus or any additional registration statement we file with the SEC pursuant to the Registration Rights Agreement lapses for any reason (including the issuance of a stop order by the SEC), or this prospectus or the prospectus included in any additional registration statement we file with the SEC pursuant to the Registration Rights Agreement otherwise becomes unavailable to Roth Principal Investments for the resale of all of the shares of Common Stock included therein, and such lapse or unavailability continues for a period of 20 consecutive trading days or for more than an aggregate of 60 trading days in any 365-day period, other than due to acts of Roth Principal Investments; or
● trading in the Common Stock on Nasdaq (or if the Common Stock is then listed on an Eligible Market, trading in the Common Stock on such Eligible Market) has been suspended for a period of five consecutive trading days.
No termination of the Purchase Agreement by us or by Roth Principal Investments will become effective prior to the fifth trading day immediately following the date on which any pending Purchase has been fully settled in accordance with the terms and conditions of the Purchase Agreement, and no termination will affect any of our respective rights and obligations under the Purchase Agreement with respect to any pending Purchase, and any fees and disbursements of Roth Principal Investments’ legal counsel in connection with the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement. Both we and Roth Principal Investments have agreed to complete our respective obligations with respect to any such pending Purchase under the Purchase Agreement. Furthermore, no termination of the Purchase Agreement will affect the Registration Rights Agreement, which will survive any termination of the Purchase Agreement.
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No Short-Selling or Hedging by Roth Principal Investments
Roth Principal Investments has agreed that none of Roth Principal Investments, any of its officers, or any entity managed or controlled by Roth Principal Investments will engage in or effect, directly or indirectly, for Roth Principal Investments’ own account or for the principal account of any such entity managed or controlled by Roth Principal Investments, any short sales of the Common Stock or hedging transaction that establishes a net short position in the Common Stock during the term of the Purchase Agreement.
Prohibition on Variable Rate Transactions
Subject to specified exceptions included in the Purchase Agreement, we are limited in our ability to enter into specified “Variable Rate Transactions” (as such term is defined in the Purchase Agreement) during the term of the Purchase Agreement. Such transactions include, among others, the issuance of convertible securities with a conversion or exercise price that is based upon or varies with the trading price of our Common Stock after the date of issuance, or our effecting or entering into an agreement to effect an “equity line of credit” or other substantially similar continuous offering with a third party, in which we may offer, issue or sell Common Stock or any securities exercisable, exchangeable or convertible into Common Stock at a future determined price.
Effect of Sales of our Common Stock under the Purchase Agreement on our Stockholders
The Purchase Shares to be issued or sold by us to Roth Principal Investments under the Purchase Agreement that are being registered under the Securities Act for resale by Roth Principal Investments in this offering are expected to be freely tradable. The 11,363,636 Purchase Shares being registered for resale in this offering may be issued and sold by us to Roth Principal Investments from time to time at our discretion over a period of up to 36 months (unless the Purchase Agreement is earlier terminated), beginning on the Commencement Date. The resale by Roth Principal Investments of a significant amount of shares of Common Stock registered for resale in this offering at any given time, or the perception that these sales may occur, could cause the market price of our Common Stock to decline and to be highly volatile. Sales of our Common Stock, if any, to Roth Principal Investments under the Purchase Agreement will depend upon market conditions and other factors to be determined by us. We may ultimately decide to sell to Roth Principal Investments all, some or none of the shares of our Common Stock that may be available for us to sell to Roth Principal Investments pursuant to the Purchase Agreement.
If and when we do elect to sell shares of our Common Stock to Roth Principal Investments pursuant to the Purchase Agreement, after Roth Principal Investments has acquired such shares, Roth Principal Investments may resell all, some or none of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from Roth Principal Investments in this offering at different times will likely pay different prices for those shares, and so may experience different levels of dilution, and in some cases substantial dilution, and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from Roth Principal Investments in this offering as a result of future sales made by us to Roth Principal Investments at prices lower than the prices such investors paid for their shares in this offering. In addition, if we sell a substantial number of shares of our Common Stock to Roth Principal Investments under the Purchase Agreement, or if investors expect that we will do so, the actual sales of shares or the mere existence of our arrangement with Roth Principal Investments may make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect such sales.
Because the per share purchase price that Roth Principal Investments will pay for Purchase Shares in any Market Open Purchase, Intraday Purchase, Pre-Market Purchase or Post-Market Purchase that we may elect to effect pursuant to the Purchase Agreement will be determined by reference to the VWAP during the applicable Purchase Valuation Period on the applicable Purchase Date for such Purchase, as of the date of this prospectus, we cannot determine the actual purchase price per share that Roth Principal Investments will be required to pay for any Purchase Shares that we may elect to sell to Roth Principal Investments under the Purchase Agreement from and after Commencement and, therefore, we cannot be certain how many Purchase Shares, in the aggregate, we may issue and sell to Roth Principal Investments under the Purchase Agreement from and after Commencement. As of April 10, 2026, there were 28,939,240 shares of our Common Stock outstanding, of which 10,518,715 shares were held by non-affiliates of our company. If all of the 11,363,636 shares of Common Stock offered for resale by Roth Principal Investments under this prospectus were issued and outstanding as of the date hereof, such shares would represent approximately 39.3% of the total number of outstanding shares of Common Stock and approximately 108.0% of the total number of outstanding shares of Common Stock held by non-affiliates of our company, in each case as of April 10, 2026. We may not sell more than 5,750,000 shares of Common Stock to Roth Principal Investments without shareholder approval.
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Although the Purchase Agreement provides that we may sell up to $20,000,000 of our Common Stock to Roth Principal Investments, only 11,363,636 Purchase Shares are being registered under the Securities Act for resale by Roth Principal Investments under the registration statement that includes this prospectus. At an assumed purchase price per share of $1.76, representing the closing sale price of our Common Stock on Nasdaq immediately prior to the execution of the Purchase Agreement, the number of Purchase Shares that are being registered under the registration statement that includes this prospectus would not be sufficient to enable us to receive the full $20,000,000 in aggregate gross proceeds from the sale of such Purchase Shares to Roth Principal Investments under the Purchase Agreement. We may need to register under the Securities Act additional shares of our Common Stock for resale by Roth Principal Investments in order for us to receive aggregate proceeds equal to Roth Principal Investments’ $20,000,000 maximum aggregate purchase commitment available to us under the Purchase Agreement.
Moreover, to the extent that the Exchange Cap remains applicable to issuances and sales of our common stock under the Purchase Agreement, if we elect to issue and sell to Roth Principal Investments more shares of Common Stock than the Exchange Cap (or 5,750,000 shares of Common Stock) under the Purchase Agreement, which we have the right, but not the obligation, to do, we must first obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap under the Purchase Agreement in accordance with applicable Nasdaq rules. Any issuance and sale by us under the Purchase Agreement of a substantial amount of shares of Common Stock in addition to the 11,363,636 shares of Common Stock being registered for resale by Roth Principal Investments under the registration statement that includes this prospectus could cause additional substantial dilution to our stockholders.
The number of shares of Common Stock ultimately offered for resale by Roth Principal Investments through this prospectus is dependent upon the number of shares of Common Stock, if any, we elect to sell to Roth Principal Investments under the Purchase Agreement from and after the Commencement Date. The issuance of our Common Stock to Roth Principal Investments pursuant to the Purchase Agreement will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted. Although the number of shares of our Common Stock that our existing stockholders own will not decrease, the shares of our Common Stock owned by our existing stockholders will represent a smaller percentage of our total outstanding shares of our Common Stock after any such issuance.
The following table sets forth the amount of gross proceeds we would receive from Roth Principal Investments from our sale of shares of Common Stock (which are being registered for resale by Roth Principal Investments under the registration statement that includes this prospectus) to Roth Principal Investments as Purchase Shares under the Purchase Agreement at varying purchase prices:
| Assumed Average Purchase Price Per Share | Number of Registered to be Issued if | Percentage of Principal Investments(2) | Gross Proceeds from the Sale of Purchase Shares to Roth Principal Investments Under the Purchase Agreement | |||||||||
| $ | 1.00 | 5,750,000 | 16.57 | % | $ | 5,750,000 | ||||||
| $ | 1.76 | (3) | 5,750,000 | 16.57 | % | $ | 10,120,000 | |||||
| $ | 2.00 | 5,750,000 | 16.57 | % | $ | 11,500,000 | ||||||
| $ | 3.48 | 5,747,126 | 16.47 | % | $ | 19,999,999 | ||||||
| $ | 5.00 | 4,000,000 | 12.14 | % | $ | 20,000,000 | ||||||
(1) We have not and will not receive any cash consideration in exchange for issuing the Commitment Shares to Roth Principal Investments. Although the Purchase Agreement provides that we may sell up to $20,000,000 of our Common Stock to Roth Principal Investments, we are only registering 11,363,636 shares under the registration statement that includes this prospectus, which may or may not cover all of the shares of Common Stock we ultimately sell to Roth Principal Investments under the Purchase Agreement. We will not issue more than an aggregate of 5,750,000 shares of our Common Stock (i.e., the Exchange Cap), unless (i) we obtain stockholder approval to issue shares of Common Stock in excess of the Exchange Cap in accordance with applicable Nasdaq rules, or (ii) the average price per share paid by Roth Principal Investments for all of the shares of Common Stock that we direct Roth Principal Investments to purchase from us pursuant to the Purchase Agreement, if any, equals or exceeds $3.46 per share (in which case the Exchange Cap limitation will not apply to issuances and sales of Common Stock pursuant to the Purchase Agreement). The number of shares to be issued as set forth in this column (i) does not give effect to the Exchange Cap and (ii) is without regard for the Beneficial Ownership Limitation.
(2) The denominator is based on 28,939,240 shares of Common Stock outstanding as of April 10, 2026, adjusted to include the issuance of the number of Purchase Shares set forth in the adjacent column that we would have sold to Roth Principal Investments, assuming the average purchase price in the first column. The numerator is based on the number of Purchase Shares issuable under the Purchase Agreement (which are included in this prospectus) at the corresponding assumed average purchase price set forth in the first column.
(3) The closing sale price of our Common Stock on Nasdaq on April 16, 2026.
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USE OF PROCEEDS
We will not receive any proceeds from the sale of shares of Common Stock by Roth Principal Investments.
We may receive up to $20,000,000 aggregate gross proceeds under the Purchase Agreement from any sales we make to Roth Principal Investments pursuant to the Purchase Agreement. The net proceeds from sales, if any, under the Purchase Agreement, will depend on the frequency and prices at which we sell our Common Stock to Roth Principal Investments after the date of this prospectus. Because we are not obligated to sell any shares of our Common Stock under the Purchase Agreement, the actual total offering amount and proceeds to us, if any, are not determinable at this time. See the section titled “The Committed Equity Facility” in this prospectus for more information.
We expect to use any proceeds that we receive under the Purchase Agreement for working capital and general corporate purposes. As of the date of this prospectus, we cannot specify with certainty all of the particular uses, and the respective amounts we may allocate to those uses, for any net proceeds we receive. Accordingly, we will retain broad discretion over the use of these proceeds. Pending the use of any proceeds we receive from sales of Common Stock to Roth Principal Investments under the Purchase Agreement, we intend to invest such proceeds in investment-grade, interest-bearing instruments.
We have engaged Digital Offering, a registered broker-dealer and FINRA member, to act as a qualified independent underwriter in this offering and, in such capacity, participate in the preparation of the registration statement that includes this prospectus and exercise the usual standards of “due diligence” with respect thereto. We have agreed to pay directly to Digital Offering a cash fee of $50,000, as consideration for its services in connection with acting as the qualified independent underwriter in this offering. Digital Offering will receive no other compensation for acting as the qualified independent underwriter in this offering. See the section titled “Plan of Distribution (Conflict of Interest)” in this prospectus for more information.
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DIVIDEND POLICY
We have not declared any cash dividends since inception and we do not anticipate paying any dividends in the foreseeable future. Instead, we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth and development of our business. The payment of dividends is within the discretion of the Board and will depend on our earnings, capital requirements, financial condition, prospects, applicable Delaware law, which provides that dividends are only payable out of surplus or current net profits, and other factors our Board might deem relevant. There are no restrictions that currently limit our ability to pay dividends on our Common Stock other than those generally imposed by applicable state law.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.
Company Overview
We are a leading provider of agentic AI solutions, offering innovative AI products and services to businesses. With over a decade of experience, we help enterprises seamlessly integrate AI into their operations, enhancing efficiency, reducing costs, and driving innovation. Our products and services are uniquely supported by a global talent pool, primarily sourced from underserved communities, allowing us to deliver high- quality AI solutions at scale while fulfilling our mission of democratizing AI.
Our clients have successfully utilized our AI solutions to solve critical business challenges such as improving sales forecasting accuracy, eliminating manual data entry errors. Our commitment to delivering measurable business value has enabled us to build enduring partnerships with these organizations, positioning Fusemachines as a trusted partner in their AI-driven transformation journeys.
In addition to our agentic AI solutions, we are deeply invested in education and talent development. Our AI training programs, particularly our flagship AI Fellowship Program, are designed to upskill students and professionals, providing them with hands-on experience in real-world AI applications. To date, we have certified hundreds of AI Fellows across the United States, Nepal, and the Dominican Republic. These programs not only empower individuals but also contribute to the global AI talent pool, which is critical given the current shortage of AI professionals.
We were originally incorporated under the name CSLM Acquisition Corp.(“CSLM”), as a Cayman Islands exempted Company, as a special purpose acquisition company (“SPAC”) formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities.
In January 2024, the Company entered into an Agreement and Plan of Merger (as amended in August 2024 and February 2025, the “Business Combination Agreement”) with CSLM Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CSLM (“Merger Sub”), and Fusemachines USA, Inc. (formerly Fusemachines Inc.) (“Legacy Fusemachines”). On October 22, 2025, the Company consummated the business combination whereby (a) CSLM merged with and into CSLM Holdings, Inc., a Delaware corporation and wholly owned subsidiary of CSLM at which time the separate existence of CSLM ceased and CSLM Holdings became the surviving corporation (“Pubco”) in accordance with the Delaware General Corporation Law (“DGCL”), the Cayman Islands Companies Act (As Revised) (the “Companies Act”), the Certificate of Merger, (the “Certificate of Merger”), and the amended and restated memorandum and articles of association of CSLM (the “Domestication”); (b) the merger (the “Merger”) of Merger Sub with and into Legacy Fusemachines, pursuant to which, at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), the separate corporate existence of Merger Sub ceased and Legacy Fusemachines became the surviving corporation and a wholly-owned subsidiary of Pubco, pursuant to the terms of the Business Combination Agreement and in accordance with the laws of the State of Delaware, as more fully described elsewhere in the Proxy Statement/Prospectus; and (c) the other transactions contemplated by the Business Combination Agreement and documents related thereto (such transactions, together with the Domestication and the Merger, the “Business Combination”). In connection with the Business Combination, Pubco was renamed “Fusemachines Inc.” (the “Company”) and Fusemachines Inc. was renamed “Fusemachines USA, Inc.” (“Legacy Fusemachines”).
The common stock of the Company began trading on The Nasdaq Stock Market (Nasdaq Global Market) under the symbol “FUSE”, and the warrants trade under the symbol “FUSEW”, beginning on October 23, 2025.
Throughout the notes to the consolidated financial statements, unless otherwise noted or the context otherwise requires, the term “Company” refers to Legacy Fusemachines and its subsidiaries prior to the consummation of the Business Combination, and to Fusemachines Inc. (the publicly traded parent company) and its subsidiaries after the consummation of the Business Combination.
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Recent Developments
Business Combination
Upon consummation of the transaction on October 22, 2025, Legacy Fusemachines (the “Company”) was determined to be the accounting acquirer, and the transaction was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Accordingly, the historical financial statements of Legacy Fusemachines became the historical financial statements of the registrant.
Accordingly, the following disclosure on “Reverse Recapitalization” is presented to summarize the common stock issued at Closing, the application of the exchange ratio, and the resulting additional paid-in-capital recognized in connection with the recapitalization.
The overall voting interest on closing date is summarized below:
| Particulars | Shares | %Ownership | ||||||
| Shares held by Fusemachines Inc. Stockholders | 14,864,110 | 52 | % | |||||
| Shares held by CSLM public stockholders, Sponsor, and related parties of Sponsor | 12,654,921 | 45 | % | |||||
| Shares held by unrelated third parties | 831,000 | 3 | % | |||||
| Total | 28,350,031 | 100 | % | |||||
On October 22, 2025, all holders of 29,199,809 issued and outstanding Legacy Fusemachines common stock received shares of Fusemachines Inc common stock at a par value $0.0001 per share after giving effect to the exchange ratio of 0.6580 (the “Conversion Ratio”) resulting in 19,214,201 shares of Fusemachines Inc common stock issued and outstanding as of the Closing. The issuance reflects the following events contemplated by the Business Combination Agreement:
(a) 9,043,234 shares of Legacy Fusemachines convertible preferred stock were converted into shares of Legacy Fusemachines common stock in accordance with the applicable conversion terms. Subsequently, in connection with the Business Combination, all such shares of Legacy Fusemachines common stock were exchanged for shares of common stock of Fusemachines Inc. (the “Company” or “PubCo”) based on the exchange ratio specified in the Business Combination Agreement. After giving effect to the exchange ratio, an aggregate of 5,950,673 shares of the Company’s common stock were issued.
(b) The surrender and exchange of all 29,199,809 issued and outstanding shares of Legacy Fusemachines common stock (including shares issued upon conversion of preferred stock) into 19,214,201 shares of Fusemachines Inc. common stock as adjusted by the Exchange Ratio;
(c) The other related events that occurred in connection with the Closing are summarized below:
● Upon the closing date, there is settlement of sponsor convertible note amounting to $3,978 thousand which was effected through a combination of $2,343 thousand in cash and balance through issuance of 408,639 common stock of Fusemachines Inc.
● Public shareholders of CSLM received an aggregate of 901,955 shares of Fusemachines Inc. common stock.
● All public rights were converted into 1,897,486 shares of Fusemachines Inc. common stock.
● 1,184,000 shares of Fusemachines Inc. common stock issued in connection with the PIPE Financing
● Issuance of 4,743,750 shares of Fusemachines Inc common stock upon conversion of non-redeemable CSLM Class A & Class B Ordinary Shares.
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● Fusemachines Inc. received funds from a convertible note with an affiliate of the Sponsor in the principal amount of $2,193 thousand. On the Closing Date, the note was converted into a share of Fusemachines Inc. common stock pursuant to the conversion terms of the convertible note agreement.
● Approximately $11,005 thousand prepayment made by CSLM to the Meteora Parties pursuant to the Forward Purchase Agreement funded from the Trust Account.
● Repayment of approximately $745 thousand (principal and accrued interest) on promissory notes issued to the Chief Executive Officer.
● Each Convertible note of Legacy Fusemachines (including both related party and other convertible notes) outstanding immediately prior to the Closing was converted into shares of Legacy Fusemachines common stock of 8,048,770 shares in accordance with the applicable convertible note agreement and immediately thereafter exchanged into 5,296,271 shares of Fusemachines Inc. common stock in accordance with the Conversion Ratio specified in the Business Combination Agreement, accordingly as a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of December 31, 2025, other than related party note payable related to Dolma Impact Fund I (“Dolma”) amounting $300 thousand.
● Upon the closing of the business combination, the Company settled its obligation under the Second Agreement through the issuance of 29,610 shares of Fusemachines, Inc. common stock, reflecting the application of the 0.6580 conversion ratio to the 45,000 shares of the Company’s common stock, and a partial cash payment of approximately $110 thousand. The remaining $98 thousand obligation is still outstanding and is reflected in accounts payable as of December 31, 2025.
● Upon the conversion of the April 2024, June 2024 and September 2024 Convertible Note to common stock, the Company shall issue the holder a warrant to purchase 7,500 shares of common stock of CSLM with a per share exercise price of $11.50. The warrants issuable upon conversion of the April 2024, June 2024 and September 2024 Convertible Notes are classified as equity instruments.
● The assumption of the public and private warrants, as described in Note 24 Public and private warrants of Consolidated Financial Statements.
● The Company’s amended and restated certificate of incorporation and amended and restated bylaws were adopted.
● The Company adopted the 2025 equity incentive plan.
(d) The reverse recapitalization accounting treatment was primarily determined based on the fact that the stockholders of Legacy Fusemachines held a relative majority of the voting power of Fusemachines Inc. and had the ability to nominate a majority of the members of the Board of Directors. In addition, the senior management of Legacy Fusemachines becomes the senior management of Fusemachines Inc., and the strategy and operations of Legacy Fusemachines prior to the merger represent the ongoing operations of the combined Company.
Accordingly, for accounting purposes, the financial statements of Fusemachines Inc. represent a continuation of the financial statements of Legacy Fusemachines, with the Merger being treated as the equivalent of Legacy Fusemachines issuing shares for the net assets of CSLM, accompanied by a recapitalization. The net assets of CSLM were recognized at their historical carrying amounts as of the Closing date, and no goodwill or other intangible assets were recorded. Operations prior to the Merger are presented as those of Legacy Fusemachines Inc. and the accumulated deficit of Legacy Fusemachines has been carried forward after Closing.
(e) Fusemachines Inc. incurred transaction cost of $1,873 thousands, consisting of deferred transaction cost, banking fees, legal fees, and other professional fees, which has been recorded as a reduction to additional paid-in capital as a direct and incremental cost of the reverse recapitalization.
(f) All periods presented prior to the Merger have been retrospectively adjusted to reflect the Exchange Ratio for the equivalent number of shares of Fusemachines Inc. common stock outstanding immediately after the Closing in order to effect the reverse recapitalization.
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Covenant Fees
Pursuant to the Business Combination Agreement, the Company was covenanted to deliver to CSLM its audited financial statements for the year ended December 31, 2023 and 2022 for inclusion in the registration statement on Form S-4 to be filed by CSLM in connection with the Merger, and that such audited financial statements had been prepared in conformity with GAAP applied on a consistent basis and in accordance with the requirements of the Public Company Accounting Oversight Board for public companies. The Company had covenanted to provide the audited financial statements no later than February 29, 2024, or incur delay fees in the amount equal to $35.0 thousand for the first one-month delay to March 31, 2024 (pro-rated for a partial month), $50.0 thousand for the second one-month delay to April 30, 2024, and thereafter $70.0 thousand for each subsequent one-month delay (pro-rated for any partial month). The Company provided the audited financial statements to CSLM in September 2024. As such, the Company has recorded $505 thousand of deferred transaction costs on the audited consolidated balance sheets as of December 31, 2024. On February 4, 2025, the company entered into a second amendment of the original agreement wherein the above-mentioned delay fee provision is deleted and provides the Company with relief from future penalties related to the delivery of the 2023 financial statements. Accordingly, the company recorded waiver in the year ended December 31, 2025 which have no impact in the consolidated Statements of Operations and Comprehensive Loss as the amount of provision was eliminated from the deferred transaction cost and from the Accounts Payable, Accrued expense and other current liabilities in the consolidated balance sheets.
Amendment of the maturity date and conversion option
Related party convertible notes payable at fair value
On January 31, 2025, the Company entered into an amendment agreement of the convertible note payable to Dolma. Pursuant to the amendment agreement, the maturity date was revised to February 28, 2026. Further, it was agreed that if the Company enters into a SPAC Business Combination Agreement at any time while the Notes are outstanding, any portion of the Aggregate Notes Amount that is not redeemed or repaid in connection or prior to the closing of the SPAC Transaction will convert, without any required action by the Holder, into shares of Common Stock immediately prior to the consummation of the SPAC Transaction contemplated by the SPAC Business Combination Agreement at a conversion rate that is derived from a Company valuation of $85,000 thousand, on a fully-diluted basis (provided that the Notes will be deemed have converted simultaneously with all other convertible notes being converted in connection the SPAC Transaction)
The Company evaluated the above amendment agreement entered on January 31, 2025, under the guidance in ASC 470-50 Debt - Modifications and Extinguishments, and it was determined terms of the amendment were not substantially different than the terms of the convertible notes prior to the Amendment. Accordingly, the aforesaid amendment was accounted for as a debt modification.
2024 Convertible Notes at fair value
On February 4, 2025, the maturity date of January 2024 convertible note was extended to July 12, 2025 pursuant to the second amendment.
The Company evaluated the above amendment agreement entered on February 4, 2025, under the guidance in ASC 470-50 Debt - Modifications and Extinguishments, and it was determined terms of the amendment were not substantially different than the terms of the convertible notes prior to the Amendment. Accordingly, the aforesaid amendment was accounted for as a debt modification.
On July 12, 2025, the maturity date of 2024 Convertible Notes were extended from July 12, 2025 to October 18, 2025, pursuant to the third amendment. The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the difference between the present value of the amended note’s cash flows and the present value of the original remaining cash flow and concluded that the results didn’t exceed the 10% factor, the debt modification is not considered substantially different and therefore did not apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC 470.
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April 2024 Convertible Note
On February 5, 2025, the conversion price of the April 2024 Convertible Promissory Notes with principal amount of $125,000 was amended to $3.15 from the original conversion price of $4.94.
The Company evaluated the conversion feature of April 2024 Convertible Note offering for embedded derivatives in accordance with ASC 815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on our assessment, separate accounting for the conversion feature of this note offering is not required and will be accounted for under the substantial premium model. Under the substantial premium model, the excess above the fair value amounting to $113.0 thousand this note will be recorded as loss on extinguishment of debt in additional paid-in-capital with a corresponding debit in the consolidated statement of profit and loss for the year ended December 31, 2025.
The April 2024 Convertible Notes were once again amended in April 2025 and basis the amendment the maturity date was revised from April 5, 2025, to April 5, 2026, pursuant to the second amendment. The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the difference between the present value of the amended note’s cash flows and the present value of the original remaining cash flow and concluded that the results didn’t exceed the 10% factor, the debt modification is not considered substantially different and therefore did not apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC 470.
June 2024 Convertible Note
On February 5, 2025, the conversion price of the June 2024 Convertible Promissory Note with principal amount of $130,000 was amended to $3.15 from the original conversion price of $4.94.
The Company evaluated the conversion feature of June 2024 Convertible Note offering for embedded derivatives in accordance with ASC 815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on our assessment, separate accounting for the conversion feature of this note offering is not required and will be accounted for under the substantial premium model. Under the substantial premium model, the excess above the fair value amounting to $114.0 thousand this note was recorded as loss on extinguishment of debt in additional paid-in-capital with a corresponding debit in the consolidated statement of profit and loss for the year ended December 31, 2025.
On July 23, 2025, the maturity date of June 2024 Convertible Note was extended from June 17, 2025, to June 17, 2026, pursuant to the amendment.
September 2024 Convertible Note
On February 5, 2025, the conversion price of the two September 2024 Convertible Promissory Notes with principal amount of $100,000 each was amended to $3.15 from the original conversion price of $4.94.
The Company evaluated the conversion feature of September 2024 Convertible Notes offering for embedded derivatives in accordance with ASC 815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on our assessment, separate accounting for the conversion feature of these notes offering is not required and will be accounted for under the substantial premium model. Under the substantial premium model, the excess above the fair value amounting to $164.0 thousand these notes was recorded as loss on extinguishment of debt in additional paid-in-capital with a corresponding debit in the consolidated statement of profit and loss for the year ended December 31, 2025.
February 2025 Convertible Note
On February 24, 2025, the company entered into a convertible promissory note amounting to $180,000 with an interest rate of 4.71% and maturity date of February 19, 2028. Upon closing of the merger, the Note shall automatically convert into the number of shares of Common Stock equal to the then outstanding Obligations under the note divided by the applicable Conversion Price i.e., $3.15.
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The February 2025 Convertible Note has customary events of default, are fully secured by the assets of the Company and because the conversion feature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the February 2025 Convertible Note will be used for working capital purposes.
Related Party loan payable
On February 12, 2025, an amendment to the seven promissory notes was entered into between the company and the CEO, Mr. Sameer Maskey. As per the original agreement, the maturity date was earlier of (1) the occurrence of an Event of Default and (2) December 31, 2024. Pursuant to the amendment agreement, the maturity date was extended to earlier of (1) the occurrence of an Event of Default and (2) December 31, 2025
The Company evaluated the amendment in maturity date under the guidance in ASC 470-50 Debt - Modifications and Extinguishments, and it was determined that there was no gain/loss to be recorded in the consolidated statements of operations and comprehensive loss, for the year ended December 31, 2025.
The Company incurred interest expense on promissory notes held at amortized cost and subsequently the promissory notes principal and accrued and unpaid interest were repaid in cash upon the Closing of merger.
Others- February 2025 Convertible Notes
In connection with the second amendment to the Business Combination Agreement, an entity provided financing to Fusemachines in the amount of $2,160,000, in exchange for a convertible note which note shall convert into shares of common stock of Fusemachines at a price of $0.44 per share (a) automatically at the time of the Business Combination, or (b) on July 12, 2025 at the option of the holder, if not, then payable in cash.
Pursuant to the terms of the Note and related Escrow Agreement, the proceeds are required to be deposited into an escrow account and will be released to the Company only upon the consummation of the Business Combination.
Further, per Section 4.2 of the Escrow Agreement “Upon the Closing, the Company, Investor and Fusemachines shall jointly deliver a Joint Release Notice to the Escrow Agent directing the Escrow Agent to disburse all Funds held in the Escrow Account to the Fusemachines Inc.” Accordingly, the escrowed funds are not freely available to the Company prior to joint instruction by the Investor, Fusemachines and the Company.
On May 22, 2025, the proceeds from Consilium Frontier Equity Fund, LP have been received into an escrow account. Upon closing of the merger, these funds were subsequently released and received in the bank account of Fusemachines Inc.
Impact of reverse capitalization on convertible note
In connection with the consummation of the Business Combination on October 22, 2025, each Legacy Fusemachines convertible note, including both related-party and non-related-party convertible notes, that was issued and outstanding immediately prior to the Closing was converted into an aggregate of 8,048,770 shares of Legacy Fusemachines common stock in accordance with the convertible note agreements.
Convertible notes that are exchanged for equity pursuant to their original contractual terms are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options. Upon conversion, the carrying amount of the convertible debt is reclassified to equity, and no gain or loss is recognized in earnings, as the conversion is executed in accordance with the original terms of the instruments
Immediately following such conversions, all shares of Legacy Fusemachines common stock issued upon conversion were exchanged for shares of Fusemachines Inc. common stock based on the exchange ratio specified in the Business Combination Agreement.
As a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of December 31, 2025, other than related party note payable related to Dolma amounting $300 thousand.
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Litigation
Fusemachines Inc. received a legal notice dated March 27, 2025 requiring payment of $76.3 thousand to KCSA Strategic Communications under a Work Labor & Services agreement due to non-fulfillment of payment obligations. Although there can be no assurance of the outcome of such legal actions, in the opinion of management, the Company does not have a potential liability related to any current legal proceeding or claim that would individually or in aggregate materially affect its results of operations, financial condition or cash flows. The company has already recognized $41.3 thousand liability in its consolidated balance sheet as of December 31, 2025.
Forward purchase agreement
On July 31, 2025, CSLM and Legacy Fusemachines (CSLM prior to the Merger and the Company after the Merger, (the “Counterparty”), entered into an over-the-counter (OTC) equity prepaid forward confirmation (the “Forward Purchase Agreement” or “FPA”) with Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the “Sellers”)
Upon the consummation of the Merger on October 22, 2025, the Sellers (Meteora) delivered a Pricing Date Notice (as defined in the Forward Purchase Agreement). Based on this notice, the applicable Prepayment Amount (as defined in the Forward Purchase Agreement) became determinable and was subsequently funded by the Counterparty from the Trust Account (as defined in the Forward Purchase Agreement) in accordance with the Forward Purchase Agreement.
Under the material terms of the FPA:
| ● | The Sellers committed (in one or more Pricing Date Notices) to provide up to a maximum of 3,000,000 shares of Class A common stock for the Transaction. | |
| ● | The Counterparty agreed to pay the Sellers a Prepayment Amount equal to the Number of Shares (as defined in the Forward Purchase Agreement) specified in each Pricing Date Notice multiplied by the per-share redemption price (the “Initial Price” as defined in the Counterparty’s organizational documents). The Prepayment Amount is payable from the Counterparty’s Trust Account and subject to receipt of a Pricing Date Notice, will be wired no later than the earlier of (a) one Local Business Day after the Closing Date and (b) the date any Trust Account assets are disbursed in connection with the Business Combination. | |
| ● | The Sellers waived any rights to the Trust Account funds in respect of the FPA and agreed not to seek recourse against the Trust Account except as expressly provided in the FPA. | |
| ● | Settlement is by cash settlement at the end of the agreement: on the Valuation Date (generally three years after the Closing Date unless earlier determined under specified events as set forth in the SPA) the Seller will pay the Counterparty a cash amount equal to the Number of Shares as of the Valuation Date multiplied by the VWAP over the Valuation Period; the cash settlement payment date is the tenth local business day following the end of the Valuation Period. | |
| ● | The FPA includes an early termination mechanism: where Sellers sell (terminate) specified shares after closing, Sellers must pay an Early Termination Obligation (as defined in the Forward Purchase Agreement) to Counterparty equal to the number of Terminated Shares (as defined in the Forward Purchase Agreement) multiplied by the Termination Price of $12.00 per share (payable on the first local business day following settlement of the sale). | |
| ● | The Sellers may, at their election, request “Shortfall Warrants” (refer note 22) exercisable for a number of shares of common stock equal to the difference between the Maximum Number of Shares (as defined in the Forward Purchase Agreement) and the number of shares of common stock specified in a Pricing Date Notice; such warrants have exercise terms and an exercise price as set forth in the FPA. | |
| ● | Payment dates for periodic reporting / accounting purposes are the last day of each calendar quarter (or next local business day), until the Valuation Date; the FPA also contains customary provisions addressing indemnities, representations, Calculation Agent rights, and compliance with tender-offer and SEC rules. |
The Forward Purchase Agreement includes escrow arrangements pursuant to which the Prepayment Amount funded from the CSLM trust account is held in escrow for the benefit of the Meteora Parties until settlement or release in accordance with the terms of the Forward Purchase Agreement. The Company does not have unconditional access to the funds held in escrow, and such funds are not available to satisfy the claims of the Company’s creditors.
Accordingly, the Company recorded the prepayment amount $11,005 thousand as a contra-equity share subscription receivable, presented as a reduction of stockholders’ equity (APIC), as the escrowed funds represent conditional consideration receivable from shareholders that is subject to future settlement under the Forward Purchase Agreement. The Prepayment Amount was determined based on 891,930 shares of common stock at a per share price equal to the SPAC per-share redemption price (the “Initial Price”), as defined in the Forward Purchase Agreement
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Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
The Forward Purchase Agreement contains features that meet the definition of a derivative under ASC 815, including an underlying based on the Company’s Class A common stock, a notional amount, payment provisions, and provisions that require or permit net cash settlement. Accordingly, at the Closing, the Company recognized a derivative liability measured at fair value, representing the portion of the escrowed Prepayment Amount that may be payable to the Forward Counterparty based on conditions existing as of the Closing Date.
The share subscription receivable and the derivative liability, when considered together, represent management’s estimate of the portion of the escrowed funds that the Company expects to ultimately retain. Subsequent changes in the fair value of the derivative liability associated with the Forward Purchase Agreement are recognized in earnings at each reporting date.
Upon receipt of consideration related to the sale of any shares sold by Meteora, the Company will record the receipt of funds as an increase to cash and a decrease to the share subscription receivable previously recorded as contra-equity.
The Company incurred no transaction costs that were directly related to issuance of the Forward Purchase Agreement.
Further subsequent to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026 to the Prepaid Forward Purchase Agreement (the “Amendment”) originally entered into on July 31, 2025 with Meteora Capital Partners and affiliates, for detail refer to Note 25 - Subsequent events.
As of December 31, 2025, the value of the Forward purchase derivative liability is $9,692 thousand disclosed as Current Liability in the Consolidated Balance Sheets. Further the derivative liability is measured at fair value on a recurring basis using Level 3 inputs, refer to Note 3 – Fair Value Measurements for further information on the valuation techniques and significant unobservable inputs used in determining the fair value of this instrument.
Further, the derivative liability has been classified as current as the Company does not have an unconditional right to defer settlement beyond twelve months. The Forward Purchase Agreement includes provisions for early termination upon sale of shares by the Sellers, which can result in cash settlement within the next twelve months, as well as periodic settlement features, thereby requiring current classification
Subsequently to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026 to the Prepaid Forward Purchase Agreement (the “Amendment”) originally entered into on July 31, 2025 with Meteora Capital Partners and affiliates. The Amendment replaces the agreement’s previously fixed Termination Price of $12.00 per share with a weekly-reset Termination Price equal to the lower of (a) $12.00 and (b) the volume-weighted average price (VWAP) of the Shares for the immediately preceding week (as reported by Bloomberg L.P.), subject to Reset Price Floors applied on a tranche basis (50% of the Shares: $2.50 floor; 50% of the Shares: $5.00 floor). The Company is currently evaluating the accounting and financial reporting implications of this Amendment, including its impact, if any, on the valuation of the related derivative instrument.
Private Investment in Public Equity (“PIPE”) Financing
On December 23, 2025, Fusemachines Inc. (the “Company”) entered into and consummated a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued and sold shares of its common stock, par value $0.0001 per share, in a private placement transaction (the “PIPE Financing”).
In connection with the PIPE Financing, the Company issued 588,235 shares of its common stock at a purchase price of $1.70 per share, resulting in aggregate gross proceeds of $1,000 thousand. The shares were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act, and/or Regulation D promulgated thereunder.
The proceeds from the PIPE Financing were received in cash at closing. For accounting purposes, the issuance of common stock was recorded within stockholders’ equity as permanent equity.
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Public and private warrants
As of December 31, 2025, there were 3,971,250 Private Warrants and 9,487,500 Public Warrants outstanding. There are no warrants exercised as at December 31, 2025.
Public warrants
Each Public Warrant entitles the holder to purchase one whole share of the Company’s common stock. Public Warrants are exercisable only for whole warrants; no fractional warrants will be issued upon separation of the units, and only whole warrants will trade. The Public Warrants became exercisable 30 days after the completion of the Business Combination.
The Company will not be obligated to deliver Class A common shares upon exercise of a Public Warrant (and will have no obligation to settle a Public Warrant exercise) unless a registration statement under the Securities Act, covering the shares issuable upon exercise, is then effective and a prospectus relating thereto is current, or a valid exemption from registration is available. If the conditions for registered issuance are not satisfied, holders will not be able to exercise those Public Warrants for registered shares until such time as an effective registration statement is available; in such circumstances the Company may permit (or require, as described below) cashless exercise pursuant to Section 3(a)(9) or other available exemption.
Each whole Public Warrant is exercisable for one share of the Company’s Class A common stock at an exercise price of $11.50 per share, subject to the customary anti-dilution and other adjustment provisions set forth in the warrant agreement. The Public Warrants became exercisable 30 days after the completion of an initial Business Combination and expire five years after the completion of an initial Business Combination or earlier upon redemption or liquidation, in each case in accordance with the warrant agreement.
The Public Warrants contain customary terms and features for contracts in the Company’s own equity, including (i) anti-dilution adjustments to the exercise price and the number of shares issuable upon exercise for share capitalizations, sub-divisions, combinations, reclassifications, certain rights offerings and Extraordinary Dividends, as described in Section 4 of the warrant agreement; (ii) the Alternative Issuance provisions in Section 4.5 of the warrant agreement, pursuant to which, upon specified reclassifications, reorganizations, mergers, consolidations, tender offers or similar change-of-control transactions, each Public Warrant becomes exercisable for the same form and amount of cash, securities or other property that a holder would receive as a common shareholder on an as-if-exercised basis immediately prior to the transaction; and (iii) an optional beneficial ownership limitation in Section 3.3.5 of the warrant agreement that permits a holder, at its election, to limit the number of Class A common shares issuable upon exercise of its warrants such that, immediately after giving effect to such exercise, the holder’s beneficial ownership of the Company’s outstanding Class A common shares does not exceed a specified “Maximum Percentage” (initially 9.8% or such other percentage specified by the holder). Public Warrants are issued in registered form, may be held in book-entry form through The Depository Trust Company and are transferable in accordance with the procedures set forth in Section 5 of the warrant agreement, subject to applicable securities law restrictions. The warrant agreement also provides that the Company is not required to net cash settle the Public Warrants and that, other than the fixed cash redemption price described above, settlement of the Public Warrants occurs through the issuance of equity or the delivery of the Alternative Issuance consideration specified in the contract.
The Company may call the Public Warrants for redemption
● in whole and not in part;
● at a price of $0.01 per warrant;
● upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
● if, and only if, the closing price of the Class A ordinary shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
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In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A ordinary shares (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
As of December 31, 2025, if holders elect to exercise Public Warrants for cash, the Company would deliver one Class A common share for each Public Warrant exercised and would receive cash equal to the fixed exercise price per share. The aggregate fair value of the shares issued upon such cash exercise would vary directly with the then-current market price of the Company’s Class A common stock, whereas the per-warrant exercise price and resulting cash proceeds to the Company remain fixed in accordance with the warrant agreement.
When Public Warrants are exercised on a cashless basis in accordance with the warrant agreement, each warrant is settled through the issuance of a reduced number of Class A common shares determined by reference to the then-current “Fair Market Value” of the Class A common stock and the fixed exercise price. As the market price of the Company’s Class A common stock increases above the exercise price, the number of shares issued per Public Warrant and the aggregate fair value of the shares delivered on cashless exercise increase; conversely, as the market price approaches or falls below the exercise price, the number of shares issued per Public Warrant and the aggregate fair value of the shares delivered decrease, and no shares would be delivered if the Public Warrants are out-of-the-money.
If and when the Public Warrants become redeemable and the Company elects to redeem them for cash in accordance with the warrant agreement, the Company would be obligated to pay the fixed contractual redemption price per Public Warrant and the Public Warrants would be cancelled without the issuance of any Class A common shares. Although the fixed redemption price per warrant does not change with the market price of the Company’s Class A common stock, the Company may only exercise this redemption alternative if the Reference Value of the Class A common stock equals or exceeds the specified redemption trigger, which is based on the trading price of the Company’s shares.
In the event of certain reclassifications, reorganizations, mergers, consolidations, tender offers or similar transactions that result in a change of control, the Public Warrants provide for an “Alternative Issuance” under which each Public Warrant becomes exercisable for the cash, securities or other property that the holder would have been entitled to receive if the holder had exercised the Public Warrant and participated in the transaction as a common shareholder immediately prior to its consummation, as described in the warrant agreement. Accordingly, the amount and form of consideration delivered upon settlement under this alternative will generally change in direct proportion to the per-share consideration (whether in cash, stock or other property) payable to the Company’s common shareholders in the underlying transaction, which reflects the then-current fair value of the Company’s equity shares.
Private warrants
The Private Placement Warrants are substantially identical to the Public Warrants, except that (i) the Private Placement Warrants may be exercised for cash or on a cashless basis, at the holder’s option; (ii) the Private Placement Warrants and the Class A common shares issuable upon their exercise are subject to certain transfer restrictions pursuant to the letter agreement between the Company, the Sponsor and other parties thereto, as amended from time to time, including that any permitted transferee must agree to be bound by such transfer restrictions; (iii) the Private Placement Warrants are not redeemable by the Company; and (iv) the holders of the Private Placement Warrants (including the Class A common shares issuable upon exercise thereof) may be entitled to certain registration rights. The Private Placement Warrants will not become Public Warrants upon any transfer and shall remain non-redeemable.
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As of December 31, 2025, if holders elect to exercise the Private Placement Warrants for cash, the Company would deliver one Class A common share for each Private Placement Warrant exercised and would receive cash equal to the fixed exercise price per share. Consistent with the Public Warrants, the aggregate fair value of the shares issued upon such cash exercise of the Private Placement Warrants would vary directly with the then-current market price of the Company’s Class A common stock, while the per-warrant exercise price and resulting cash proceeds to the Company remain fixed in accordance with the warrant agreement.
When Private Placement Warrants are exercised on a cashless basis in accordance with the warrant agreement, each warrant is settled through the issuance of a reduced number of Class A common shares determined by reference to the “Sponsor Exercise Fair Market Value” of the Class A common stock and the fixed exercise price. As the market price of the Company’s Class A common stock increases above the exercise price, the number of shares issued per Private Placement Warrant and the aggregate fair value of the shares delivered on cashless exercise increase; conversely, as the market price approaches or falls below the exercise price, the number of shares issued per Private Placement Warrant and the aggregate fair value of the shares delivered decrease, and no shares would be delivered if the Private Placement Warrants are out-of-the-money.
The Alternative Issuance provisions described above for the Public Warrants also apply to the Private Placement Warrants such that, upon the specified reclassification, reorganization, merger, consolidation, tender offer or similar change-of-control transactions, each Private Placement Warrant becomes exercisable for the same form and amount of cash, securities or other property that would be received by a common shareholder on an as-if-exercised basis immediately prior to the transaction, and the settlement amount therefore varies directly with the per-share consideration payable to the Company’s common shareholders.
Classification and accounting: The Company evaluated the terms of the Public and Private Warrants under the relevant U.S. GAAP guidance for freestanding financial instruments and derivative accounting and concluded that both the Public Warrants and the Private Warrants meet the criteria for equity classification. In connection with the reverse recapitalization transaction, the Public Warrants and Private Warrants that were outstanding immediately prior to the transaction were initially recorded through the reverse recapitalization and are presented within stockholders’ equity on the consolidated balance sheet as part of additional paid-in capital (rather than as a separate warrant liability line item). Because the Public Warrants and Private Warrants are classified in equity, there is no subsequent remeasurement required after initial recognition and changes in the fair value of the Company’s common stock do not give rise to gains or losses in the statement of operations related to these warrants.
Cashless Exercise of Stock Options
In August 2025, certain Fusemachines employees exercised an aggregate of 745,896 options to purchase shares of Fusemachines common stock on a cashless basis via net share settlement resulting in the net share issuance of 666,662 shares of Fusemachines common stock. The transaction has been accounted under the guidance of ASC 718 - Stock Compensation. The cashless exercise mechanism does not change the substantive terms or fair-value-based measure of the awards and therefore does not constitute a modification under ASC 718.
2025 Omnibus Equity Incentive Plan (the “Plan”)
On July 28, 2025, the Board of Directors and shareholders of the Company approved the Fusemachines Inc. 2025 Omnibus Equity Incentive Plan (the “Plan”). The Plan authorizes the Company to issue up to 1,500,000 shares of the Company’s common stock, par value $0.0001 per share, to eligible employees, directors, and consultants in the form of stock options, restricted stock, restricted stock units, or other equity-based awards. Subsequent to December 31, 2025, the Company is in the process of granting awards under the Plan to certain employees. As the awards were not granted and no shares were issued under the Plan as of December 31, 2025, no amounts have been recognized in the accompanying consolidated financial statements.
Shortfall Warrant
In connection with the execution of the Forward Purchase Agreement the Company agreed to issue “Shortfall Warrants” to the Sellers (Meteora) for shares not elected under the Forward Purchase Agreement, representing the difference between the maximum number of shares subject to the FPA and the number of shares ultimately elected by the Forward Counterparty.
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Seller in its sole discretion may request (in one or more requests) warrants of the Counterparty exercisable for Shares in an amount equal to (i) the Maximum Number of Shares less (ii) the Number of Shares specified in the Pricing Date Notice (the “Shortfall Warrants,” and the Shares underlying the Shortfall Warrants, the “Shortfall Warrant Shares”). The Shortfall Warrants shall have an exercise price equal to the termination price which is defined $12 in the forward purchase agreement and is subject to reset in accordance with the pricing provisions of that agreement, and this termination price has subsequently been amended; for further details, refer to Note 25 – Subsequent Events.
The warrants grant the holders the right to purchase a fixed number of shares (2,108,070) at a fixed exercise price/termination price. The Shortfall Warrants are exercisable for shares of common stock and were issued concurrently with the consummation of the Business Combination on October 22, 2025 (the “Initial Exercise Date”) and are exercisable at any time from the Initial Exercise Date until 5:00 p.m. (New York City time) on October 22, 2028 (the “Termination Date”). No shortfall warrants have been exercised as at December 31, 2025.
The Shortfall Warrants contain a beneficial ownership limitation that, subject to certain limited exceptions, restricts a holder from exercising the Shortfall Warrants to the extent that, following such exercise, the holder, together with its affiliates and certain related parties, would beneficially own more than 9.9% of the Company’s outstanding common stock. A holder may increase or decrease this beneficial ownership limitation upon notice to the Company, provided that any increase will not be effective until the 61st day after such notice and in no event may the beneficial ownership limitation exceed 9.9%.
The exercise price and the number of Shortfall Warrant Shares are subject to customary anti-dilution adjustments for stock dividends and other distributions on the Company’s common stock, stock splits, reverse stock splits, reclassifications and certain rights offerings. In addition, subject to any required shareholder approvals and applicable stock exchange rules, the Company may, in its discretion, reduce the exercise price of the Shortfall Warrants for any period of time.
The Shortfall Warrants and the rights thereunder are transferable, in whole or in part, with the prior written consent of the Company and subject to compliance with applicable securities laws and payment of any applicable transfer taxes. The warrants may be divided or combined into new warrants, and, if properly assigned, may be exercised by a permitted transferee without the issuance of a new warrant certificate.
The Company evaluated the Shortfall Warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, including the guidance in ASC 815-40 related to contracts indexed to, and potentially settled in, an entity’s own equity.
In making this assessment, the Company considered, among other factors:
● whether the Shortfall Warrants are freestanding financial instruments,
● whether the warrants are indexed to the Company’s own stock,
● whether settlement is required to be in shares rather than cash, and
● whether any provisions could require net cash settlement under circumstances outside the Company’s control
Accordingly, in connection with the reverse recapitalization, the Company recognized the Shortfall Warrants at their initial fair value of $1,009 thousands, which is included within additional paid-in capital in the stockholders’ equity section of the consolidated balance sheet.
Based on this assessment, the Company concluded that the Shortfall Warrants meet all of the criteria for equity classification under ASC 815-40. Accordingly, the Shortfall Warrants are classified as equity and are not subject to subsequent remeasurement.
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Subsequent to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026, to the Common Stock Purchase Warrant (the “Warrant Amendment”) originally issued on October 22, 2025 in connection with the Business Combination with Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the “Holder”). Pursuant to the Warrant Amendment, the exercise price of the warrant was amended such that the exercise price per share of the Company’s common stock is $10.00, subject to customary adjustments as set forth in the warrant agreement. All other terms and conditions of the warrant remain unchanged and continue in full force and effect. The Company is currently evaluating the accounting and financial reporting implications of the Warrant Amendment, including its impact, if any, on the classification and valuation of the warrant.
Financial Performance
For the year ended December 31, 2025, and December 31, 2024, we generated revenues of $7.71 million and $8.81 million and reported a net loss of $0.93 million and $15.38 million, respectively. Net cash used in operating activities was $5.53 million for the year ended December 31, 2025, and $2.20 million for the year ended December 31, 2024. As noted in our consolidated financial statements, we had an accumulated deficit of $35.15 million as of December 31, 2025, and $34.21 million as of December 2024.
Key Factors and Trends Affecting Results of Operations
We believe the following factors and trends may cause previously reported financial information not to be necessarily indicative of future operating results or future financial conditions:
● Market Competition: The AI industry is highly competitive and is changing rapidly with numerous players vying for market share. We attempt to mitigate this risk by continuously innovating and differentiating our offerings, as we have been delivering AI solutions for well over a decade and have deep institutional capabilities to stand apart in terms of our ability to provide value to our customers and scale. Nevertheless, increasing competition could result in loss of business or pressure on margins for Fusemachines.
● Technological Changes: Rapid technological advancements in AI can impact our offering, dilute our value proposition and require us to pivot in different directions. However, given our broad spectrum of AI solutions, coupled with our ability to produce AI talent, our deep investment in research and development, and a culture of continuous learning, we have been able to navigate these changes effectively.
● Adequate Capital Raise: As of December 31, 2025, we have limited financial resources as our existing cash and cash equivalents provide limited operating runway relative to our current cost structure and planned growth initiatives. Although we raised capital in connection with the consummation of the Business Combination and related PIPE financing during 2025, we expect that additional capital will be required to fund operations, support product development, expand sales and marketing activities, and meet our working capital requirements.
We may seek to raise additional funds through equity offerings, debt financings, strategic investments, or other capital sources. However, there can be no assurance that sufficient funding will be available to us to fund our operating expenses and to further develop our business. Unless we achieve substantial profitability, we anticipate that we will likely need to raise additional capital to fund our operations while we implement and execute our business plan.
● Ability to manage costs and expenses while achieving revenue growth: Our results of operations may fluctuate, in part, because of the intensive nature of our sales efforts and the length and unpredictability of our sales cycle. As part of our sales efforts, we invest considerable time and expense evaluating the specific organizational needs of our potential customers and educating these potential customers about the technical capabilities and value of our platforms and services. As part of our sales efforts, we also provide our platforms to potential customers at no or low cost initially to them for evaluation purposes through short-term pilot deployments of our platforms, and there is no guarantee that we will be able to convert customers from these short-term pilot deployments to full revenue generating contracts.
● Finance costs: Historically, the Company issued certain convertible promissory notes to finance its operations, as further described in Note 10 – Long-Term Debt to the consolidated financial statements. These instruments bore interest and were subject to automatic conversion. In connection with the consummation of the Business Combination during 2025, the outstanding principal and accrued interest under these convertible notes were converted into equity securities in accordance with their contractual terms. As a result, no convertible promissory notes remained outstanding as of December 31, 2025 other than related party note payable related to Dolma Impact Fund I (“Dolma”) amounting $300 thousand. Accordingly, finance costs for the year ended December 31, 2025 primarily reflect interest expense incurred prior to the conversion date. Following the conversion, the Company no longer incurs interest expense related to these instruments, which has reduced ongoing finance costs compared to prior periods.
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Emerging Growth Company and Smaller Reporting Company Status
Section 102(b)(1) of the Jumpstart Our Business Startups Act (“JOBS Act”) exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a Company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Until the Company is considered to be an emerging growth company, the Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
We are also a “smaller reporting company” as defined in the Securities Exchange Act of 1934. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.
Segment Reporting
We operate as one operating segment with a focus on data engineering, artificial intelligence consulting, and technical services. Our Chief Executive Officer (“CEO”), as our chief operating decision maker, manages and allocates resources to the operations of the Company on a consolidated basis. This enables our CEO to assess the overall level of available resources and determine how best to deploy these resources across service lines in line with our long-term company-wide strategic goals.
Results of Operations
The period-to-period comparisons of results of operations have been prepared using the historical periods included in our consolidated financial statements. The following discussion should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus. We have derived this data from our annual consolidated financial statements included elsewhere in this prospectus.
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Year ended December 31, 2025, Compared To Year Ended December 31, 2024
| Year ended December 31, | ||||||||||||||||
| (In thousands) | 2025 | 2024 | $Variance | % Variance | ||||||||||||
| Revenue | $ | 7,714 | $ | 8,811 | $ | (1,097 | ) | (12 | )% | |||||||
| Cost of revenue (1) | (3,407 | ) | (3,976 | ) | 569 | (14 | )% | |||||||||
| Gross profit | 4,307 | 4,835 | (528 | ) | (11 | )% | ||||||||||
| Operating expenses: | ||||||||||||||||
| Selling and marketing (1) | 1,365 | 1,964 | (599 | ) | (30 | )% | ||||||||||
| General and administrative (1) | 8,176 | 10,333 | (2,157 | ) | (21 | )% | ||||||||||
| Research and development (1) | 720 | 732 | (12 | ) | (2 | )% | ||||||||||
| Total operating expenses | 10,261 | 13,029 | (2,768 | ) | (21 | )% | ||||||||||
| Loss from operations | (5,954 | ) | (8,194 | ) | 2,240 | 27 | % | |||||||||
| Other (expense) income: | ||||||||||||||||
| Interest expense | (268 | ) | (234 | ) | (34 | ) | 15 | % | ||||||||
| Loss on extinguishment of convertible notes payable / notes payable | (391 | ) | (601 | ) | 210 | (35 | )% | |||||||||
| Loss on extinguishment of payable | - | (70 | ) | 70 | 100 | % | ||||||||||
| Gain/(Loss) on change in fair value of convertible notes, and warrant liability | 6,544 | (6,104 | ) | 12,648 | (207 | )% | ||||||||||
| Gain/(Loss) on change in fair value of forward purchase derivative liability | (1,076 | ) | - | (1,076 | ) | (100 | )% | |||||||||
| Other (expense) income | 220 | (148 | ) | 368 | (249 | )% | ||||||||||
| Total other expense, net | 5,029 | (7,157 | ) | 12,186 | (170 | )% | ||||||||||
| Loss before income taxes | (925 | ) | (15,351 | ) | 14,426 | (94 | )% | |||||||||
| Provision for income tax | (3 | ) | (31 | ) | 28 | 90 | % | |||||||||
| Equity in earnings of investee, net of income tax position of $0 and $0, respectively | - | (1 | ) | 1 | (100 | )% | ||||||||||
| Net loss | $ | (928 | ) | $ | (15,383 | ) | $ | 14,455 | 94 | % | ||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in foreign currency translation adjustment | $ | 10 | $ | 57 | $ | (47 | ) | (82 | )% | |||||||
| Total comprehensive loss | $ | (918 | ) | $ | (15,326 | ) | $ | 14,408 | (94 | )% | ||||||
| Net loss per share - basic and diluted | $ | (0.08 | ) | $ | (2.21 | ) | $ | 2.13 | 96 | % | ||||||
| Weighted-average common shares outstanding - basic and diluted | 11,525,384 | 6,958,570 | ||||||||||||||
(1) Includes stock-based compensation expense as follows:
| Year ended December 31, | ||||||||||||
| 2025 | 2024 | $Variance | ||||||||||
| General and administrative | $ | 154 | $ | 723 | $ | (569 | ) | |||||
| Cost of revenue | $ | 21 | $ | 44 | $ | (23 | ) | |||||
| Selling and marketing | $ | 38 | $ | 170 | $ | (132 | ) | |||||
| Research and development | $ | 18 | $ | 130 | $ | (112 | ) | |||||
| Total stock-based compensation expense | $ | 231 | $ | 1,067 | $ | (836 | ) | |||||
For Revenue recognition policy refer note details under “Critical accounting policies and estimates” section
We provide services to customers worldwide, with the majority of revenues being derived from contracts with customers located within the United States. The table below presents the breakdown of our revenues, based on the customer’s location (in thousands).
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Customer locations | ||||||||
| United States | $ | 7,342 | $ | 8,544 | ||||
| Rest of the world | $ | 372 | $ | 267 | ||||
| Total revenue | $ | 7,714 | $ | 8,811 | ||||
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The table below presents the breakdown of our revenues, based on the type of services (in thousands).
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Service type | ||||||||
| AI Solutions (Product and Services) * | $ | 7,581 | $ | 8,811 | ||||
| AI Education Services | $ | 133 | - | |||||
| Total revenue | $ | 7,714 | $ | 8,811 | ||||
*AI Solutions (Products and Services) includes both software product revenues and related services. Product revenue represents an insignificant portion of total revenue for the periods presented and, accordingly, has not been separately disclosed.
Revenue for the year ended December 31, 2025, reduced to $7.71 million as compared to $8.81 million for the year ended December 31, 2024, due to AI Solutions (Products and Services). Overall revenue decreased by $1.10 million mainly due to termination of 12 customers and reduction in contract size of 16 customers which resulted in loss of revenue by $2.99 million. This decrease was partially offset by 11 new customer contracts and increase in contract size of 9 customers adding $1.91 million of revenue.
Cost of revenue – Cost of revenue primarily consists of consulting and payroll expenses that are assigned to building AI solutions.
Cost of revenue decreased by $0.57 million to $3.40 million for the year ended December 31, 2025, compared to $3.97 million for the year ended December 31, 2024. The decrease was primarily driven by lower consultancy expenses of $0.22 million and a reduction in payroll expenses of $0.37 million. The decline in consultancy costs was mainly attributable to a decrease in the average cost per consultant which is $50K in year 2024 and $48K in year 2025, in the United States (US) entity, while the average headcount of billable consultants also decreases from 39 in year 2024 to 35 in year 2025. In the Nepal entity, the decrease was due to the offboarding of two consultants who were engaged in client projects during 2024 but not in 2025. The reduction in payroll expenses was driven by a combination of factors. In the US entity, the average cost per employee decreased slightly from $139k in year 2024 to $130k in year 2025, with the average headcount remaining constant at 8. In contrast, in the Nepal entity, the decrease was mainly due to a decline in average headcount from 327 in 2024 to 270 in 2025 as there was reduction in billable resource and employee resignation, even though the average cost per consultant increased in 2025. Additionally, there was a $0.02 million decrease in cost of revenue related to stock-based compensation, primarily due to the completion of vesting for previously granted awards.
Gross profit – Gross profit is calculated as revenue less total cost of revenue. Our gross profit in future periods will depend on a variety of factors, including market conditions that may impact our pricing, sales mix changes among our service agreements, and product mix changes between established services and new services.
Gross profit decreased by $0.53 million to $4.31 million for the year ended December 31, 2025, compared to $4.84 million for the year ended December 31, 2024, as a result of lower sales.
Selling and marketing expenses – Selling and marketing expenses represent spending associated with promoting and selling of our services. These expenses comprise of personnel costs, travel and accommodation expenses, as well as advertising and consulting costs related to such activities.
Selling and marketing expenses decreased by $0.59 million, from $1.96 million for the year ended December 31, 2024, to $1.37 million for the year ended December 31, 2025. The decrease was primarily attributable to lower commission expenses, consulting fees, payroll costs, and stock-based compensation.
Commission expenses decreased by $0.06 million, as only few business deal brought on by sales team in current year 2025, unlike in the prior year. Consulting fees for the selling and marketing team decreased by $0.06 million, mainly because consultants worked fewer hours in 2025 compared to 2024, and one consultant was transitioned to payroll.
Payroll expenses decreased by $0.11 million, primarily due to a reduction in headcount as three employees resigned and one shifted to consultant in, in the United States (US) entity, additionally the average costs has slightly decreased $142 thousand in year 2024 to $131 thousand in year 2025.
In addition, stock-based compensation expenses decreased by $0.13 million, due to the completion of vesting for previously granted awards.
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General and administrative expenses – General and administrative expenses consist of expenses associated with general and administrative functions of the business such as the costs of salaries, IT infrastructure, bad debt, travel, legal and accounting services, insurance, rent, software and tools, meals, other professional services activities, and certain non-income taxes.
General and administrative expenses decreased by $2.15 million, from $10.33 million for the year ended December 31, 2024, to $8.18 million for the year ended December 31, 2025. The decrease was primarily driven by lower professional charges, stock-based compensation, and bad debt expenses, partially offset by higher payroll and consultancy expenses.
Professional charges decreased by approximately $2.5 million compared to the prior year, primarily driven by management’s conscious efforts to optimize and reduce operational costs, resulting in lower professional expenses during the period. Further Stock-based compensation expense declined by $0.57 million, primarily due to the completion of vesting for previously granted awards. Additionally, bad debt expense has been decreased by $0.48 million during the period as allowances were provided for the long outstanding Accounts receivables in previous year. Further, there has been decrease in consultancy expense for approximately $0.30 million as in US entity there has been decrease in headcount from 16 in year 2024 to 10 in year 2025 and there has also been decrease in IT infrastructure expense due to significant decrease of utilization for Amazon Web, Google Suite and termination of Meta Workspace.
These reductions were partially offset by an increase in payroll expenses of $0.49 million and payout of incentive linked to business combination amounting to $1.0 million. The payroll expense has been increasing as in US entity the average head count has increased from 9 in year 2024 to 11 in year 2025 and there is an increment of insurance cost due to increase in premium amount of Director and officer.
Research and development expenses – Research and development expenses include costs associated with software product development, testing, quality assurance, documentation, enhancements and upgrades for existing customers under maintenance.
Research and development expenses for the year ended December 31, 2025, decreased by $0.01 million to $0.72 million as compared to $0.73 million for the year ended December 31, 2024. The decrease was primarily due to stock-based compensation of $0.11 million due to the completion of vesting for previously granted awards. This was partially offset by increases in payroll expenses of $0.08 million as the headcount increased from 36 in year 2024 to 44 in year 2025.
Interest expense – Interest expense represents interest payable on our borrowings including the debt discount that is being amortized, as well as debt financing and equity issuance costs that are amortized to interest expense.
Interest expense increased by $0.03 million to $0.27 million for the year ended December 31, 2025, from $0.23 million for the year ended December 31, 2024. The increase was primarily due to a higher outstanding balance of promissory notes reflecting the issuance of a new promissory notes between the periods. Further Pursuant consummation of the Business Combination on October 22, 2025, substantially all Fusemachines convertible notes that were issued and outstanding immediately prior to the Closing were converted into shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements. As a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of December 31, 2025 other than related party note payable related to Dolma amounting $300 thousand.
Loss on extinguishment of debt – Loss on extinguishment of debt for the year ended December 31, 2025 represents $0.1 million related to April 2024 Convertible Note, $0.1 million related to June 2024 Convertible Note and $0.2 million related to September 2024 Convertible Notes. Loss on extinguishment of debt are related to modification of the aforementioned loans on account of change in conversion price from $4.94 to $3.15 was accounted for under the substantial premium model in accordance with ASC 470, Debt where the excess above the fair value of these notes was recorded as loss on extinguishment of debt.
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Loss on extinguishment of debt for year ended December 31, 2024 represents the repayment of the 2023 Notes Agreement. In August 2023, we entered into a loan and security agreement with a lender (the “2023 Notes Agreement”) that will make available to us the loans in an aggregate principal amount of up to $4.0 million in three separate tranches. In January 2024, we repaid the entire aggregate outstanding principal on the 2023 Notes Payable along with an additional payment for interest, prepayment fees, and lender fees. These payments resulted in a loss, recorded in loss on extinguishment of debt.
Loss on extinguishment of debt for the year ended December 31, 2025, was $0.39 million as compared to $0.60 million for the year ended December 31, 2024.
Loss on change in fair value – Loss on change in value represents the changes in fair value related to our convertible notes, warrant liability and forward purchase derivative liability.
Gain/(Loss) on change in fair value for the year ended December 31, 2025 was a gain of $5.47 million as compared to ($6.10 million) for the year ended December 31, 2024. We qualified for and elected to account for the convertible notes under the fair value option and, in doing so, bypassed the analysis of potential embedded derivative features. As a result, the convertible notes were recorded at fair value upon issuance and recorded as gain and loss on change in fair value in the consolidated statements of operations and comprehensive loss, for the year ended December 31, 2025 and December 31, 2024, respectively.
In connection with the consummation of the Business Combination on October 22, 2025, substantially all outstanding convertible notes were either converted into equity or repaid, and therefore fair value changes were recognized only up to the closing date of the Business Combination. During this period, the Company recorded a net increase of approximately $5.72 million in gains related to changes in the fair value of the convertible notes. The increase in fair value promissory note was primarily driven by a decline in the estimated market price of the Company’s underlying equity, which decreased from approximately $7.48 per share as of December 31, 2024 to approximately $3.40 per share immediately prior to the Business Combination, resulting in a corresponding reduction in the fair value of the convertible instruments.
In addition, the Company recorded an increase of approximately $1.08 million in the fair value of forward purchase derivative liability. This increase was primarily driven by changes in key valuation inputs, including the Company’s relatively low share price of $1.65, elevated equity volatility of 65.0%, and the remaining contractual term of approximately 2.81 years. These factors increased the probability-weighted value of the potential share settlement under the arrangement. Further, the fair value was further impacted by adjustments for counterparty credit risk of 6.3%. The remaining changes in fair value during the period primarily relate to the re-measurement of the warrant liability.
Upon conversion, the carrying amount of the convertible debt is reclassified to equity, and no gain or loss is recognized in earnings, as the conversion is executed in accordance with the original terms of the instruments The Company’s management performed a quantitative assessment of Gain/(Loss) on change in fair value for prior period, and in doing so, considered an independent fair valuation report obtained by management.
Other (expense) income – Other (expense) income consists of our proportional share of earnings and losses related to our equity method investment as well as impairment loss, penalties and settlements, and other miscellaneous expenses.
Other income for the year ended December 31, 2025, was $0.22 million, compared to other expenses of $(0.15) million for the year ended December 31, 2024, representing an improvement of $0.37 million. The improvement was primarily attributable one time impairment loss booked last year amounting $0.12 million and balance pertains to forex exchange gain and other income as compared to last year
Provision for income tax – Provision for income tax is accounted for using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. In addition, deferred tax assets are recorded for all future benefits including, but not limited to, net operating losses, research and development credit carryforwards, and basis differences with certain assets and liabilities.
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Provision for income tax is $0.003 million for the for the year ended December 31, 2025 and $0.03 million for year ended December 31,2024.
Net loss – Net loss for the year ended December 31, 2025, was $0.93 million, compared to a net loss of $15.38 million for December 31, 2024. The change was the result of increase in profit on change in fair value of convertible notes, warrant liability and forward purchase derivative liability, decrease in General and administrative and Selling and Marketing expense and due to decrease in stock-based compensation due to the completion of vesting for previously granted awards, payroll expenses and decrease in Loss on extinguishment of debt.
Non-GAAP Financial Measures
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). We report certain key financial measures that are not required by, or presented in accordance with GAAP, and these non-GAAP financial measures should not be considered as an alternative to the information prepared in accordance with GAAP. In addition, the Company’s management reviews performance by focusing on several key performance indicators not prepared in conformity with GAAP. We believe these non-GAAP financial measures provide a useful measure of our operating results, a meaningful comparison with historical results and with the results of other companies, and insight into our ongoing operating performance. Further, we utilize these measures, in addition to GAAP measures, when evaluating and comparing our operating performance against internal financial forecasts and budgets.
However, there are several limitations related to the use of non-GAAP financial measures because it excludes significant expenses or credits that are required by GAAP to be included in our financial statements. In addition, other companies may calculate non-GAAP measures differently or may use other measures to calculate their financial performance. Therefore, non-GAAP measures may not be directly comparable to similarly titled measures of other companies.
The Company defines adjusted earnings before interest, tax, depreciation and amortization (“EBITDA”) as net loss before interest expense, income tax expense (benefit), depreciation and amortization, as adjusted to exclude stock-based compensation, fair value changes, loss on extinguishment of debt and payable, and aborted IPO costs that consisted of direct and incremental costs, such as accounting, consulting, and legal fees, incurred in connection with the aborted IPO.
Non-GAAP Reconciliations
We use the non-GAAP measures EBITDA and adjusted EBITDA to help us evaluate our business, identify trends affecting our business, formulate business plans and financial projections, and make strategic decisions. Also, we exclude depreciation and amortization, stock-based compensation and fair value changes, which are non-cash expenses, from these non-GAAP financial measures because we believe that excluding these items provides meaningful supplemental information regarding operational performance and provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management team.
Our definitions may differ from the definitions used by other companies and therefore comparability may be limited. In addition, other companies may not publish these or similar metrics. Further, these metrics have certain limitations, as they do not include the impact of certain expenses that are reflected in our consolidated statements of operations and comprehensive loss. Thus, our non-GAAP EBITDA and adjusted EBITDA should be considered in addition to, not as a substitute for, or in isolation from, measures prepared in accordance with GAAP.
We compensate for these limitations by providing reconciliations of these non-GAAP measures to the most comparable GAAP measures. We encourage investors and others to review our business, results of operations, and financial information in its entirety, not to rely on any single financial measure, and to view these non-GAAP measures in conjunction with the most directly comparable GAAP financial measures.
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The reconciliation of our net loss to EBITDA and Adjusted EBITDA for the year ended December 31, 2025, and December 31, 2024, is as follows:
| Year Ended December 31, | ||||||||
| (In thousands) | 2025 | 2024 | ||||||
| Net loss | $ | (928 | ) | $ | (15,383 | ) | ||
| Interest expense | 268 | 234 | ||||||
| Provision for tax | 3 | 31 | ||||||
| Depreciation and amortization | 189 | 179 | ||||||
| EBITDA | $ | (468 | ) | $ | (14,939 | ) | ||
| Stock-based compensation | 231 | 1,067 | ||||||
| Fair value adjustments (1) | (5,468 | ) | 6,104 | |||||
| Extinguishment of payable | - | 70 | ||||||
| Extinguishment of debt | 391 | 601 | ||||||
| Adjusted EBITDA | $ | (5,314 | ) | $ | (7,097 | ) | ||
(1) Represents change in fair value of convertible notes, warrant liability and forward purchase derivative liability.
Liquidity and Capital Resources as of December 31, 2025
Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable and accounts payable and capital expenditure.
We formally evaluated our liquidity and cash position most recently in 2025 when preparing our 2025 consolidated financial statements. As of December 31, 2025, we had cash of approximately $4.22 million and a net working capital deficit of approximately $13.30 million. As of that date, we also had an accumulated deficit of approximately $35.15 million and a net loss of $0.93 million for the year then ended.
As of December 31, 2024, we had cash of approximately $0.50 million and a net working capital deficit of approximately $16.18 million. As of December 31, 2024, we had an accumulated deficit of $34.22 million and a net loss of $15.38 million for the year ended December 31, 2024.
These factors raise substantial doubt regarding the Company’s ability to continue as a going concern within one year of the date these consolidated financial statements were issued. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders and debt holders. Specifically, the Company’s ability to continue operations depends on obtaining additional equity or debt financing and, ultimately, on generating profits from operations and achieving positive operating cash flows — neither of which is assured.
On October 22, 2025, Merger Sub merged with and into Legacy Fusemachines with Legacy Fusemachines continuing as the surviving company and becoming a wholly owned subsidiary of Fusemachines Inc. In connection with the closing, approximately $14.0 million in cash was received for the issuance of shares of Fusemachines Inc. common stock. Substantially all convertible notes were settled through the issuance of Fusemachines Inc. Common Stock, other than related party note payable related to Dolma Impact Fund I (“Dolma”) amounting $300 thousand, and certain promissory notes were repaid in cash upon closing. Following the business combination, the net balance of cash and cash equivalents was approximately $9.4 million. The Company’s trade payables, accrued expenses, and other current liabilities exceed the net cash and cash equivalents balance. Management is evaluating initiatives to streamline operations through reductions in headcount and consultant costs, and continued negotiations with vendors to achieve more favorable terms. In addition, the Company’s business plan anticipates a measured growth trajectory supported by new client acquisitions and expansion of existing customer relationships. While these actions are expected to enhance the Company’s financial position and extend its operational runway once implemented, they remain in the planning and negotiation stages.
As of the date on which these consolidated financial statements were available to be issued, we believe that the cash on hand, and additional investments available through issuance of new Common Stock, will be inadequate to satisfy the Company’s working capital and capital expenditure requirements for at least the next twelve months. The ability of the Company to continue as a going concern is dependent upon management’s plan to raise additional capital from issuance of equity or receive additional borrowings to fund the Company’s operating and investing activities over the next year. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
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Cash flows
Year End Cash Flows
The following table summarizes our cash flows for the periods presented
| Year Ended Dec 31, | ||||||||||||
| (In thousands) | 2025 | 2024 | Variance | |||||||||
| Net cash provided by (used in): | ||||||||||||
| Operating activities | $ | (5,529 | ) | $ | (2,201 | ) | $ | (3,328 | ) | |||
| Investing activities | $ | (165 | ) | $ | (176 | ) | $ | 11 | ||||
| Financing activities | $ | 9,418 | $ | 2,612 | $ | 6,806 | ||||||
| Effect of exchange rate changes on cash | $ | (3 | ) | $ | (1 | ) | $ | (2 | ) | |||
| Net increase (decrease) in cash | $ | 3,721 | $ | 234 | $ | 3,487 | ||||||
Operating Activities
Net cash used in operating activities for the year ended December 31, 2025 increased by $3.32 million to $5.53 million, compared to $2.2 million in the same period in 2024. This increase was primarily driven by a reduction in non-cash gains, as net loss decreased to $0.93 million for the year ended December 31, 2025 from $(15.38) million in 2024, largely due to changes in the fair value of convertible notes, warrant liability and forward purchase derivative liabilities. Additionally, selling and marketing expenses decreased due to lower stock-based compensation following the completion of vesting for previously granted awards. Further, changes in working capital decreased to $0.21 million from $4.39 million in the prior year. The $5.53 million net cash used in operating activities in 2025 was primarily related to (i) a net loss of $(0.93) million, offset by; (ii) depreciation and amortization of $0.19 million; (iii) provision for credit losses of $0.06 million; (iv) stock-based compensation of $0.23 million; (v) amortization of right-of-use assets of $0.09 million; (vi) Loss on extinguishment of debt of $0.39 million; (vii) Changes in fair value of Convertible Notes at Fair Value and Forward Purchase derivative liability of $(6.54) million; (viii) Change in fair value of common stock warrant liability of $1.08 million (ix) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.10 million; (x) Working capital changes of $(0.21) million.
Net cash used in operating activities during the year ended December 31, 2024 was $2.2 million. The $2.2 million net cash used in operating activities in 2024 was primarily related to (i) a net loss of $15.4 million, offset by; (ii) depreciation and amortization of $0.18 million; (iii) provision for credit losses of $0.5 million; (iv) stock-based compensation of $1.1 million; (v) amortization of right-of-use assets of $0.1 million; (vi) changes in fair value of convertible notes and common stock warrant liability totalling $6.1 million ($5.6 million and $0.5 million, respectively); (vii) Accretion of cumulative mandatorily redeemable common and preferred stock liability of $0.1 million; (viii) Loss on extinguishment of debt and payable of $0.7 million ($0.6 million and $0.1 million, respectively) and (ix) Working capital changes of $4.4 million.
Investing Activities
Net cash used in investing activities during the year ended December 31, 2025, was $0.17 million compared to $0.18 million during the year ended December 31, 2024. The $0.17 million net cash used in investing activities in 2025 consisted of $0.11 million in costs capitalized for internally developed software and $0.05 million in purchases of property and equipment.
Net cash used in investing activities for the year ended December 31, 2024 was $0.18 million and consisted of purchases of property and equipment of $0.02 million, costs capitalized for internally developed software of $0.14 million.
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Financing Activities
Net cash provided by financing activities was $9.42 million in the year ended December 31, 2025, compared to $2.61 million in December 2024, representing an increase of $6.81 million over the respective periods. The increase in cash flow from financing activities was primarily due to i) proceeds from reverse capitalization of $9.43 million; (ii) proceeds from Issuance of issuance of shares pursuant to PIPE transaction of $1.00 million; (iii) proceeds from convertible notes payable of $0.18 million (iv) payments of related party notes payable of $(0.70) million. Balance $0.84 million pertains to payment of deferred transaction cost and $0.34 million relates to proceeds received and payments made in connection with directors’ and officers’ insurance during the current period.
Net cash provided by financing activities was $2.6 million in the year ended December 31, 2024. The $2.6 million net cash provided by financing activities in 2024 consisted of (i) proceeds from convertible notes at fair value of $6.5 million; (ii) proceeds from convertible notes payable of $0.5 million; (iii) proceeds from related party loan payable of $0.7 million, offset by (iv) payments on notes payable of $3.0 million; (v) common stock repurchase of $2.0 million; and partially offset by (vi) exercise of stock options and payment of deferred transaction costs
Contractual Obligations and Commitments
Our contractual cash obligations as of December 31, 2025, are summarized in the table below:
| (in thousands) | 2026 | 2027 | 2028 | 2029 | Thereafter | Total | ||||||||||||||||||
| Debt (1) | 300 | - | - | - | - | 300 | ||||||||||||||||||
| Interest | 83 | 5 | - | - | - | 88 | ||||||||||||||||||
| Mandatorily redeemable preferred and ordinary stock | - | 1,433 | - | - | - | 1,433 | ||||||||||||||||||
| Common Stock Contingent Obligation (2) | - | - | - | - | - | - | ||||||||||||||||||
| Operating lease | 167 | 175 | 185 | 193 | 452 | 1,172 | ||||||||||||||||||
| Legal counsel arrangement | 650 | - | - | - | - | 650 | ||||||||||||||||||
| Consulting arrangement | 238 | 159 | - | - | - | 397 | ||||||||||||||||||
| Total | 1,438 | 1,772 | 185 | 193 | 452 | 4,040 | ||||||||||||||||||
(1) As discussed in Note 10, Long-Term Debt, pursuant to business combination substantially all convertible debt and related party debt has been settled either in cash or equity as per the terms of respective debt agreements. Accordingly, no convertible notes or related-party notes payable remained outstanding as of December 31, 2025, other than related party note payable related to Dolma amounting $300 thousand.
(2) Upon the closing of the business combination, the Company settled its obligation under the Second Agreement through the issuance of 29,610 shares of Fusemachines, Inc. common stock, reflecting the application of the 0.6580 conversion ratio to the 45,000 shares of the Company’s common stock, and a partial cash payment of approximately $110 thousand. The remaining $98 thousand obligation is still outstanding and is reflected in accounts payable as of December 31, 2025.
Debt Financing Arrangements
On October 15, 2019, we entered into a convertible promissory note agreement with a lender and issued a convertible promissory note for a principal amount of $2.0 million (the “2019 Convertible Note Agreement”). On September 7, 2021 a second convertible promissory note was issued to the same lender for a principal amount of $0.5 million (the “2021 Convertible Note Agreement”), collectively with the 2019 Convertible Note Agreement referred to as the “Convertible Notes Agreements”. On December 22, 2022, the Convertible Notes Agreements were amended (the “2022 Amended Convertible Notes Agreements”) to extend the maturity date to December 23, 2023, increase the interest rate to 15% for the period from December 22, 2022, to December 22, 2023, adding a prepayment option, amending one of the conversion scenarios, and amending the definition of a next equity financing to require a sale of equity securities to result in gross proceeds of $7.5 million (the “Next Equity Financing”). The 2022 Amended Convertible Notes Agreements also added a partial payment of the interest accrued and outstanding on the note of $0.4 million due no later than March 22, 2023. Failure to pay by the payment deadline obligated the Company to pay interest at a rate of twenty percent (20%) per annum, compounded quarterly, on the outstanding $0.4 million. On December 20, 2023, the 2022 Amended Convertible Notes Agreements were amended again (the “2023 Amended Convertible Notes Agreements”), extending the maturity date of both notes to January 22, 2024. In January 2024, these convertible notes were amended again (the “2024 Amended Convertible Notes Agreements”), extending the maturity date to January 2025. The amendment also added a provision surrounding conversion in the case we complete the business combination mentioned above. On January 31, 2025, the company entered into an amendment agreement of the convertible note payable pursuant to which the maturity date was revised to February 28, 2026. The 2021, 2022, 2023 and 2025 amendments were accounted for as debt modifications, prospectively, with any change in fair value from the new terms incorporated into future valuations. The 2024 amendment is accounted for as an extinguishment of debt.
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On August 24, 2023, we entered into a loan and security agreement with a lender (the “2023 Notes Agreement”) that will make available to us loans in an aggregate principal amount of up to $4.0 million in three separate tranches. On that day, we withdrew $3.0 million (the “First Tranche”). We additionally had the opportunity to request, subject to the terms of the 2023 Notes Agreement, an additional tranche of $0.5 million on or before March 31, 2024 (the “Second Tranche”) and a third tranche of $0.5 million on or before September 30, 2024 (the “Third Tranche”) (the First Tranche, Second Tranche and Third Tranche are collectively referred to as the “2023 Notes”). The 2023 Notes bear interest at a rate of 13.25% per annum, compounded annually, payable at maturity. The 2023 Notes are secured by substantially all of our assets. The 2023 notes mature on August 24, 2027. In January 2024, we repaid the entire aggregate outstanding principal on the 2023 Notes Payable in the amount of $3.0 million along with an additional payment of $0.1 million for interest, prepayment fees, and lender fees. These payments resulted in a 0.6 million loss, recorded in loss on extinguishment of debt, in the consolidated statements of operations and comprehensive loss.
In connection with the 2023 Notes Agreement, we issued to the lender common stock warrants (the “Common Stock Warrants”) to purchase up to 92,211 shares of the Company’s common stock, exercisable immediately, with an exercise price of $0.46 per share with a contractual term of 10 years. As of December 31, 2025, the fair value and carrying amount of the Common Stock Warrant Liability was $0.02 million.
In January 2024, we entered into two convertible promissory note agreements (the “January 2024 Convertible Notes Agreements”) with a lender for the principal amounts of $2.0 million (“January 2024 Convertible Note A”) and $4.5 million (“January 2024 Convertible Note B”), respectively, payable at maturity (the “January 2024 Convertible Notes”). The January 2024 Convertible Notes mature in January 2025.
On February 4, 2025, the maturity date of January 2024 convertible note was extended to July 12, 2025 pursuant to the second amendment.
In April 2024, we entered into a convertible note agreement (the “April 2024 Convertible Note Agreement”) with a lender for the aggregate principal amount of $0.1 million and is convertible to common stock (the “April 2024 Convertible Note”). The April 2024 Convertible Promissory Note matures in April 2025.
Upon the conversion of the April 2024 Convertible Note to common stock, we shall issue the holder a warrant to purchase 7,500 shares of common stock of CSLM with a per share exercise price of $11.50.
On February 5, 2025, the conversion price of the April 2024 Convertible Promissory Notes with principal amount of $125,000 was amended to $3.15 from the original conversion price of $4.94. Further these were once again amended in April 2025 and basis the amendment the maturity date was revised from April 5, 2025 to April 5, 2026 pursuant to the second amendment.
In June 2024, we entered into a convertible note agreement (the “June 2024 Convertible Note Agreement”) with a lender for the principal amount of $0.1 million and is convertible to common stock (the “June 2024 Convertible Note”). The June 2024 Convertible Promissory Note matures in June 2025. Upon the conversion of June 2024 Convertible Note to common stock of CSLM, we shall issue the holder a warrant to purchase 7,500 shares of common stock with a per share exercise price of $11.50.
On February 5, 2025, the conversion price of the June 2024 Convertible Promissory Note with principal amount of $130,000 was amended to $3.15 from the original conversion price of $4.94. Further, these were once again amended in July 2025 and basis the amendment, the maturity date was revised from June 17, 2025, to June 17, 2026, pursuant to the amendment.
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In September 2024, we entered into two convertible note agreements (the “September 2024 Convertible Notes Agreements”) with two lenders, each for the principal amount of $0.1 thousand (the “September 2024 Convertible Notes”). The 2024 September Convertible Notes mature in September 2026. Upon the conversion of the September 2024 Convertible Notes to common stock, we shall issue the holders each a warrant to purchase 7,500 shares of common stock with a per share exercise price of $11.50.
On February 5, 2025, the conversion price of the two September 2024 Convertible Promissory Notes with principal amount of $100,000 each was amended to $3.15 from the original conversion price of $4.94.
During 2024, we have entered into seven separate promissory notes with the Sameer Maskey, the Company CEO for aggregate principal amount of $0.7 million. On February 12, 2025, an amendment to the seven promissory notes was entered into between the company and the CEO, Mr. Sameer Maskey. As per the original agreement, the maturity date was earlier of (1) the occurrence of an Event of Default and (2) December 31, 2024. Pursuant to the amendment agreement, the maturity date was extended to earlier of (1) the occurrence of an Event of Default and (2) December 31, 2025.
On February 24, 2025, the Company entered into a convertible promissory note (“February 2025 Convertible Notes) amounting to $180,000 with an interest rate of 4.71% and maturity date of February 19, 2028. Upon closing of the merger, the Note shall automatically convert into the number of shares of common stock equal to the then outstanding Obligations under the note divided by the applicable Conversion Price i.e., $3.15.
In connection with the consummation of the Business Combination on October 22, 2025, each Legacy Fusemachines convertible note, including both related-party and non-related-party convertible notes, that was issued and outstanding immediately prior to the Closing was converted into an aggregate of 8,048,770 shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements. Immediately following such conversions, all shares of Legacy Fusemachines common stock issued upon conversion were exchanged for shares of Fusemachines common stock based on the exchange ratio specified in the Business Combination Agreement, As a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of December 31, 2025, other than related party note payable related to Dolma amounting $300 thousand. Refer to the section entitled ‘Recent Developments’ for details.
Equity financing, if obtained, could result in dilution to our then-existing stockholders and/or require such stockholders to waive certain rights and preferences. If such financing is not available on satisfactory terms, or is not available at all, we may be required to delay, scale back, or eliminate the development of business opportunities and our operations and financial condition may be materially adversely affected.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements (as that term is defined in Item 303 of Regulation S-K) that are reasonably likely to have a current or future material effect on our financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.
Related Party Transactions
Refer to Note 18, “Related Parties” of the consolidated financial statements contained elsewhere in this prospectus, for disclosure of our related party transactions.
Critical Accounting Policies and Estimates
Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results could differ materially from those estimates due to risks and uncertainties, including uncertainty in the current economic environment. To the extent that there are material differences between these estimates and our actual results, our future consolidated financial statements will be affected.
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The critical accounting estimates, assumptions, and judgments that have the most significant impact on our consolidated financial statements are described below. For further information on significant accounting policies, see “Note 2, Summary of Significant Accounting Policies” of our audited consolidated financial statements included herein.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when (or as) customers obtain control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company applies the provisions of ASC 606 to an arrangement when a substantive contract exists and collectability is probable.
The Company derives the majority of its revenue from AI Solutions (Products and Services) that largely represents the professional services Fusemachines provides to its customers to help them achieve any AI-related goals within their organization. Standard contractual arrangements are governed by Master Services Agreements (“MSAs”), which set out general terms including payment, termination rights, and intellectual property ownership. Detailed scope, pricing, and performance obligations are defined in Statements of Work (“SOWs”), which are executed for each engagement or project phase. The Company’s contracts for AI Services have different terms based on the scope and complexity of engagements; pricing for the majority of contracts are invoiced monthly on a time-and-materials basis. The Company notes that its contracts meet the requirements for over-time revenue recognition, as the customer is simultaneously receiving the benefits and able to consume the benefits of the services being provided. For professional services that are distinct and billed on a time-and-materials basis, revenue is generally recognized as the services are provided, which is reflective of the transfer of the services to the customer. The Company elected the “right to invoice” practical expedient based on the Company’s right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.
The Company also provides AI Education Services which represents a customized curriculum of educational services provided to train the customer’s C-suite on AI for Business. The Company provides AI Education Services over time as the course proceeds and the students retain knowledge over time. Thus, the customer receives and consumes benefits as the Company performs the AI Education Services, and revenue is recognized over time.
Company’s AI Solutions includes product revenues primarily comprising software license fees from sales of term-based license contracts, under which we grant customers the license right to use the software for a specified period (i.e. when the customer can access, use, and benefit from the software license). Term software licenses are satisfied at a point in time and associated revenue is recognized upon the later of 1) delivery of the software, or 2) the beginning of the period in which the customer has received the license right to use the software. For customer contracts that include software license fees, implementation and/or other consulting services, the portion of the transaction price allocated to software licenses is generally recognized when delivered. Implementation, customization, or model tuning services if applicable, when included, are evaluated as separate performance obligations when they are distinct from the software and not highly interdependent. These services are generally satisfied over time as the work progresses. During the year ended December 31, 2025, and December 31, 2024, the product revenues were insignificant.
For most contracts, the Company uses a Master Services Agreements (“MSA”) to govern the overall relevant terms and conditions of the business agreement, and a Statement of Work (“SOW”) to specify the services delivered and the associated prices. Performance obligations specific to each individual contract are defined within the terms of each SOW. Each performance obligation is identified based on the services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which the Company will be entitled and expect to receive in exchange for transferring services to the customer.
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Consideration for some contracts may include variable consideration including volume discounts and rebates. If the consideration promised includes a variable amount, the Company only includes estimated amounts of consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. These estimates require management judgments and estimates. The determination of whether to constrain consideration in the transaction is based on historical, current, and forecasted information that is reasonably available to the Company, taking into consideration the type of customer, the transaction, and specific facts and circumstances of each arrangement. The Company uses judgement to determine if collectability of consideration is uncertain, and accordingly, revenue recognition is deferred until the uncertainty is resolved and cash is collected.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice date. In certain arrangements, the Company will receive payment from a customer either before or after the performance obligation to which the invoice relates has been satisfied. As a practical expedient, the Company does not account for significant financing components if the period between when it transfers the promised good or service to the customer and when the customer pays for the product or service will be one year or less.
For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using other observable inputs. As Fusemachines Inc. is the sole reportable segment, all revenues are attributed to the sole segment.
Income Taxes
The provision for income taxes includes federal, state, local and foreign taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the consolidated financial statements carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be reversed. Changes to enacted tax rates would result in either increases or decreases in the provision for income taxes in the period of changes.
The realizability of deferred tax assets is primarily dependent on future earnings. The Company evaluates the realizability of deferred tax assets and recognizes a valuation allowance when it is more likely than not that all, or a portion of, deferred tax assets will not be realized. A reduction in estimated forecasted results may require that we record valuation allowances against deferred tax assets. Once a valuation allowance has been established, it will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that the deferred tax assets will be realized. A pattern of sustained profitability will generally be considered as sufficient positive evidence to reverse a valuation allowance. If the allowance is reversed in a future period, the income tax provision will be correspondingly reduced. Accordingly, the increase and decrease of valuation allowances could have a significant negative or positive impact on future earnings.
The United States subjects corporations to taxes on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The Company elected to provide for the tax expense related to GILTI in the year the tax is incurred.
Stock-Based Compensation
Stock-based compensation expense attributable to equity awards granted to employees and non-employees is measured at the grant date based on the fair value of the award. For employee awards, the expense is recognized on a straight-line basis over the requisite service period for awards that actually vest, which is generally the period from the grant date to the end of the vesting period. For non-employee awards, the expense for awards that actually vest is recognized based on when the goods or services are provided.
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The Company records stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). This standard requires all equity-based payments to employees and non-employees, including grants of employee stock options and restricted stock awards, to be recognized in the consolidated statements of operations and comprehensive loss based on the grant date fair value of the award. The stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award, which is generally the period from the accounting grant date to the end of the vesting period. The Company elected to account for forfeitures of awards as they occur.
Since the adoption of ASU 2018-07, Improvements to Nonemployee Stock-Based Payment Accounting, the measurement date for non-employee awards is the date of grant, and stock-based compensation costs are recognized in the same period and in the same manner as if the entity had paid cash for the goods or services. Stock-based compensation expense is classified as general and administrative, cost of revenue, selling and marketing and research and development expenses in the consolidated statements of operations and comprehensive loss.
The Company estimates the fair value of stock option awards granted using the Black Scholes Merton option pricing formula (the “Black-Scholes Model”). This model requires various significant judgmental assumptions in order to derive a final fair value determination for each type of award, including the expected term, expected volatility, expected dividend yield, risk-free interest rate and fair value of the Company’s stock on the date of grant. The expected option term for options granted is calculated using the “simplified method”. This election was made based on the lack of sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is based on similar entities whose stock prices are publicly traded. The Company uses the historical volatilities of similar entities due to the lack of sufficient historical data for the Company’s common stock price. The Company estimates volatility based upon the observed historical volatilities of comparable companies over a lookback period commensurate with the estimated holding period, adjusted for relative leverage using the Black-Scholes-Merton formula. Dividend yields are based on the Company’s history and expected future actions. The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero. The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award was granted with a maturity equal to the expected term of the stock option award. All grants of stock options generally have an exercise price equal to or greater than the fair market value of the Company’s common stock on the date of grant.
The fair value of the shares of common stock underlying the stock options has historically been determined by the Company’s Board of directors as there was no public market for the underlying common stock prior to October 22, 2025. In estimating the fair value of its stock, the Company uses a third-party valuation specialist and considers factors it believes are material to the valuation process, including but not limited to, the price at which recent equity was issued by the Company to independent third parties or transacted between third parties, any indications of value from offers to acquire the Company, actual and projected financial results, risks, prospects, economic and market conditions, and estimates of weighted average cost of capital. The Company believes the combination of these factors provides an appropriate estimate of the expected fair value of the Company and reflects the best estimate of the fair value of the Company’s common stock at each grant date.
Recent Accounting Pronouncements
For further information on recent accounting pronouncements, see “Note 2, Summary of Significant Accounting Policies” of our audited consolidated financial statements included herein
Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
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BUSINESS
Fusemachines is a leading provider of enterprise AI solutions, offering AI products including AI Studio, AI Engines, and AI Agents, along with supporting services to organizations across a wide range of industries. With more than a decade of experience, we help enterprises integrate AI into their operations to improve efficiency, reduce costs, and drive innovation. Our products and services are uniquely supported by a global talent pool largely sourced from underserved communities, enabling us to deliver high quality AI solutions at scale while advancing our mission of democratizing access to AI.
Our diverse client base spans industries including consumer brands, healthcare, media, technology, government, and others. These clients use our AI solutions to address critical business challenges such as improving sales forecasting accuracy, eliminating manual data entry errors, automating recruitment processes, and detecting fraud in real time. Our focus on delivering measurable business outcomes has enabled us to build long-term relationships with our clients and position Fusemachines as a partner in their AI driven transformation efforts.
In addition to our enterprise AI solutions, we are committed to education and talent development. Our AI training programs, including our AI Fellowship Program, are designed to upskill students and professionals by providing hands-on experience with real world AI applications. To date, we have certified hundreds of AI Fellows across the United States, Nepal, and the Dominican Republic. These programs help expand the global AI talent pool and address the growing shortage of skilled AI professionals.
AI Solutions
At Fusemachines, we develop industry focused and problem specific AI solutions that combine software products with implementation services to address complex business challenges. Our core platform, AI Studio, enables experimentation, model training, deployment, and lifecycle management of AI systems. Built on top of AI Studio, AI Engines provide specialized AI capabilities for targeted use cases such as fraud detection in food and beverage transactions or information extraction from loan documents. We also offer AI Agents that can assist with or automate operational tasks such as interviewing candidates during the hiring process.
Our services complement these products and include activities such as customizing and fine tuning models, integrating AI systems into existing enterprise workflows, and developing bespoke solutions tailored to specific client needs. Clients can choose to engage with Fusemachines through software, services, or a combination of both depending on their requirements.
Products
Our product suite consists of our platform AI Studio, outcome-specific AI Engines, and advanced interactive AI Agents, designed to help organizations build, deploy, and operationalize AI solutions at scale.
AI Studio
AI Studio is the foundational platform that powers Fusemachines’ AI solutions, enabling organizations to build, deploy, and manage AI applications at scale. By providing a unified environment for data scientists, engineers, and business teams, AI Studio simplifies the process of developing and operationalizing AI solutions.
AI Studio is structured into four integrated layers that enable organizations to operationalize AI solutions efficiently. The Business Layer sits at the top and contains the business applications, workflows, and AI-powered use cases that organizations deploy to support decision-making and operations. Beneath it, the AI Hub provides the environment for developing, integrating, and managing AI models, engines, and agents that power these applications. The Data Layer connects and organizes enterprise data from various sources, enabling AI systems to access and process both structured and unstructured data. Supporting all layers is the Governance Layer, which ensures secure deployment, monitoring, compliance, and lifecycle management of AI systems across the platform.
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AI Engines
AI Engines are specialized AI software solutions built on top of AI Studio that are designed to deliver industry- and pain point–specific outcomes. Each engine focuses on solving targeted business challenges within particular domains by leveraging advanced AI technologies such as large language models (LLMs), computer vision, machine learning, and deep learning. By addressing clearly defined operational problems, AI Engines enable organizations to automate processes, improve efficiency, and generate actionable insights that directly support business objectives. For example, AI Engines can be used to extract information from complex documents, generate accurate answers and summaries from large datasets, or detect suspicious activities and patterns in financial transactions at retail outlets. By combining technologies such as document understanding, Retrieval Augmented Generation (RAG), and predictive analytics, these engines enable organizations to automate workflows, improve operational efficiency, and gain deeper insights from their data.
AI Engines are designed to be highly customizable and adaptable to the needs of different industries such as finance, legal, healthcare, and enterprise operations. They can operate within a customer’s existing infrastructure while maintaining strong data security, governance, and access control.
AI Agents
AI Agents are intelligent systems built on top of AI Engines and AI Studio that automate complex workflows and interact with users or systems to accomplish specific tasks. These agents combine capabilities such as reasoning, retrieval, API execution, data processing, and decision support, enabling organizations to deploy AI systems that actively assist employees and customers in real-time operations.
For instance, an AI Agent designed for recruitment can act as an interview assistant, assisting recruiters by asking role-specific questions and evaluating responses. The agent can analyze candidate answers, generate summaries of strengths and areas for improvement, and produce standardized evaluation reports for hiring teams. By automating parts of the interview and evaluation process, such agents help organizations streamline hiring workflows, improve consistency in candidate assessments, and reduce manual effort for recruiters and hiring managers.
Services
Our services are delivered by Forward Deployed Engineers (FDEs) who work closely with customer teams to design, implement, and operationalize AI solutions built on top of AI Studio. These services provide hands-on support for organizations that require deeper technical collaboration to successfully deploy AI within their environments. Leveraging the capabilities of AI Studio, our teams help customers customize and deploy AI Engines, integrate AI into existing systems, and develop bespoke solutions that address complex challenges across AI, data, and software systems.
Customization, Model Tuning, and Deployment:
We assist clients in customizing our AI Engines or AI Agents to meet their specific needs. This includes fine-tuning models, configuring workflows, and deploying solutions through AI Studio. Our teams also support the integration of these engines and agents into the client’s existing business workflows, data pipelines, and enterprise systems to ensure seamless operation and alignment with business objectives.
Bespoke AI Solutions:
For organizations with specific requirements where existing AI Engines may not fully address their needs, we develop custom AI Engines and AI Agents tailored to their specific business challenges. This may involve designing new models, building specialized AI capabilities, and integrating them with enterprise data systems and workflows to deliver solutions that align closely with the client’s operational requirements.
To manage these engagements at scale, we developed Squadery, an internal platform that supports multiple teams within Fusemachines. Squadery centralizes operational data from various sources including our CRM and HR systems to streamline project management, resource allocation, and delivery coordination across service engagements.
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Intellectual Property
Intellectual property (IP) is a critical asset for Fusemachines, and we take significant measures to protect our innovations. Our IP portfolio includes patents, trademarks, copyrights, and trade secrets, all of which are designed to safeguard our technology and maintain our competitive edge.
| ● | Patent Portfolio: As of December 31, 2025, Fusemachines holds 8 patent applications. These patents cover a range of technologies that are central to our AI solutions, and we continue to pursue additional IP protection as we develop new products and solutions. | |
| ● | IP Strategy: We rely on a combination of IP protection strategies, including license agreements, intellectual property assignment agreements, confidentiality agreements, and non-disclosure agreements. These measures help us secure our intellectual property rights and ensure that they are respected globally. |
For more information, please see “Risk Factors – Risks Related to Business, Industry, and Operations”.
Competition and Market Opportunity
Competition
The AI and digital transformation landscape is highly competitive, with a wide range of players offering various solutions. Fusemachines faces competition from several sources, including:
| ● | Corporate IT organizations that develop internal AI solutions. | |
| ● | Commercial enterprise and point solution software providers that offer specialized AI tools. | |
| ● | Open-source software platforms with data management, machine learning, and analytics capabilities. | |
| ● | Public cloud providers offering discrete tools and microsolutions for AI and analytics. | |
| ● | System integrators that provide custom software solutions tailored to specific business needs. |
Market Opportunity
The global AI market is set for substantial growth, with the global AI market itself is expected to reach nearly $1.4 trillion by 2029, and the AI software segment is anticipated to generate around $791.5 billion in revenue by 2025. However, this expansion is challenged by a global shortage of AI talent, with 63% of businesses citing AI and machine learning as their biggest skills gap.
We believe we are well-positioned to capitalize on this market opportunity. With over a decade of experience in developing AI solutions, we have gained valuable insights into addressing customer challenges. Our solutions, including AI Studio and AI Engines, along with our comprehensive AI services, allow us to provide highly specialized and problem-specific solutions that deliver substantial ROI. Moreover, our AI talent development programs, such as the AI Fellowship program, support our ability to cultivate skilled talent as needed, fueling our growth and helping us capture a significant share of the market in the years ahead.
Our Corporate History
We were originally organized as CSLM Acquisition Corp. (“CSLM”), a Cayman Islands exempted company. CSLM was formed as a special purpose acquisition company for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. CSLM closed its IPO (the “CSLM IPO”) in January 2022, generating gross proceeds of $189,750,000.
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On January 22, 2024, CSLM, entered into a business combination agreement, as amended on August 27, 2024, by and among CSLM, CSLM Merger Sub, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of CSLM (“Merger Sub”), Fusemachines Inc., a Delaware company (“Legacy Fusemachines”), and CSLM Holdings, Inc. (“CSLM Holdings”) (as amended, the “Business Combination Agreement”).
On October 22, 2025, (a) CSLM merged with and into CSLM Holdings, at which time the separate existence of CSLM ceased and CSLM Holdings became the surviving corporation (the “Company” or “Fusemachines”) (such transactions, the “Business Combination”). In connection with the Business Combination, the Company was renamed “Fusemachines Inc.” and Legacy Fusemachines was renamed “Fusemachines USA, Inc.”
Legal Proceedings
While we may become involved in legal proceedings from time to time, such as intellectual property disputes or employment-related matters, we are not currently a party to any actions that would have a major adverse effect on our business, financial condition, or results of operations. We remain vigilant in protecting our business interests and are prepared to address any legal challenges that may arise.
Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We are an “emerging growth company” as defined in the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to take, and intend to take, advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
We will remain an emerging growth company until the earliest of (i) December 31, 2030, (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion, (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the “Exchange Act”), which would occur if the market value of our Common Stock held by non-affiliates was $700.0 million or more as of the last business day of the second fiscal quarter of such year or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of this extended transition period and, as a result, we may adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-public companies instead of the dates required for other public companies.
We are also a “smaller reporting company” as defined in the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting Common Stock held by non-affiliates is $250 million or more measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting Common Stock held by non-affiliates is $700 million or more measured on the last business day of our second fiscal quarter.
Human Capital
As of December 31, 2025, we had more than 270 full-time employees. As of December 31, 2025, none of our employees were represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good. We emphasize several measures and objectives in managing our human capital assets, including, among others, (i) employee safety and wellness, (ii) talent acquisition and retention, (iii) employee engagement, development, and training, (iv) diversity and inclusion and (v) compensation. These targeted ideals may include annual bonuses, stock-based compensation awards, a 401(k) plan., healthcare, and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, family care resources, and/or employee assistance programs. We also provide our employees with access to various innovative, flexible, and convenient health and wellness programs. We designed these programs to support employees’ physical and mental health by providing tools and resources to improve or maintain their health status and encourage engagement in healthy behaviors.
Available Information
Our principal offices are located at 251 West 30th Street, 5th Floor, New York, New York 10001. We also maintain a website at www.fusemachines.com and https://ir.fusemachines.com/, where additional information about our company and solutions can be found. Information contained on or that can be accessed through our website is neither a part of, nor incorporated by reference into, this prospectus, and you should not consider information on our website to be part of this prospectus.
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MANAGEMENT
Executive Officers
The following table sets forth certain information, as of the date of this prospectus, concerning our executive officers:
| Name | Position | |
| Sameer Maskey | Chief Executive Officer, Class III Director | |
| Christine Chambers | Chief Financial Officer | |
| Parag Shrestha | Head of Strategy | |
| Robert Traghetto | Head of AI Services | |
| Anish Joshi | Head of Technology |
The following is a biographical summary of the experience of our named executive officers, and other officers of the Company.
Sameer Maskey is Fusemachines’ Founder and Chief Executive Officer, and has served as a member of the Company’s board of directors since January 2013. Dr. Maskey has over 18 years of experience in artificial intelligence, natural language processing, machine learning, and data science. Since 2019, Dr. Maskey has been an Adjunct Associate Professor at Columbia University, where he teaches several courses in machine learning, programming and natural language processing. In 2008, Dr. Maskey completed his PhD in Computer Science from Columbia University. Prior to obtaining his PhD, Dr. Maskey served as part of the research team at IBM Watson Research Center where he invented various statistical algorithms to improve speech-to-speech translation and question answering systems. Dr. Maskey is an inventor of 15 granted or pending United States patents and has authored over 20 publications. He holds a B.S. in Math and Physics from Bates College. Dr. Maskey is qualified to serve on our board of directors due to the perspective and experience he brings as Chief Executive Officer and from his extensive technology experience.
Christine Chambers has served as Fusemachines’ Chief Financial Officer since August 2025. Ms. Chambers has over 20 years of experience in leading financial operations and developing growth strategies across multiple publicly traded companies, including for Petmed Express Inc. (NASDAQ:PETS) from August 2022 to August 2024, and RealNetworks Inc. (formerly NASDAQ:RNWK) from March 2021 to August 2022. She previously held financial planning and analysis roles with Rosetta Stone, Inc. AstraZeneca plc, and Agilent Technologies, Inc. Ms. Chambers received her MBA from the University of Washington and her B.A. in Finance from Loughborough University.
Parag Shrestha has served as Fusemachines’ Head of Strategy since January 2021, where he leads the company’s distributed team across South Asia. From September 2019 to January 2021, he held roles of increasing seniority with Fusemachines including Business Development Executive & Product Executive, and Enterprise Executive. Prior to joining Fusemachines, Mr. Shrestha held senior engineering and consulting roles with organizations including 360insights, Salesforce, Fidelity National Information Service. Initiate Systems, and Aon Hewitt. Mr. Shrestha holds a B.S. in Computer Science from the University of Windsor.
Robert Traghetto has served as Fusemachines’ Vice President of AI Services since March 2021, where he leads AI Service strategy, talent acquisition, employee development, and service delivery. Mr. Traghetto has over 20 years of experience in software and product engineering. From August April 2018 to March 2021, he held roles of increasing seniority with Fusemachines including Director of Technology, and Senior Architect. Mr. Traghetto was the co-founder of Rake, a talent acquisition and candidate engagement platform, which was acquired by Fusemachines in April 2018. Prior to Fusemachines and Rake, Mr. Traghetto held senior engineering and technology roles with organizations including Yingo Yango, The Institute for Integrative Nutrition, and TMP Worldwide. Mr. Traghetto holds a Bachelor of Technology in Computer Systems from the New York City College of Technology and an M.S. in Computer Science from the City College of New York.
Anish Joshi has served as Fusemachines’ Head of Technology since January 2020, where he managements the company’s engineering team, technology planning and product development. Mr. Joshi has over 16 years of technology and product development experience. He is also responsible for leading the company’s AI Support Services team and motivating them to build innovative solutions. Mr. Joshi joined Fusemachines in January 2013 and held roles of increasing seniority between that time and January 2020, including VP of Technology, Director of Technology, and Sr. Technology Manager. Mr. Joshi holds a Bachelor of Information Management from Prime College.
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Non-Employee Directors
We currently have five members of our board of directors. The following table and summaries set forth certain information, as of the date of this prospectus, concerning our non-employee directors. The biographical information for Sameer Maskey is set forth under the section “Management – Executive Officers.”
| Name | Age | Position | ||
| Bharat Krish | 50 | Class I Director | ||
| Tim Gocher | 54 | Class I Director | ||
| Sanjay Shrestha | 52 | Class II Director | ||
| Salman Alam | 43 | Class I Director |
Bharat Krish was appointed to the Company’s board of directors in January 2025. Mr. Krish is a customer focused business leader, entrepreneur and innovator with over 20 years of experience in product leadership and innovation with top media and retail companies, and in building streaming and AI enterprise SaaS startups from the ground up. Products he has helped build are used by millions of users. Mr. Krish has acted as Chief Product Officer of Newsweek since December 2023, has held leadership positions with Techstars since March 2023, and has been a board advisor of Gaia Ventures, an early stage venture capital firm since January 2023. From May 2020 to December 2022, he held roles with TIME, including President of Digital and Chief Technology Officer. Prior to TIME, he held C-suite positions at various media and retail companies. Mr. Krish received a masters in Technology Management from Columbia University, a masters in Computer Engineering from Syracuse University, and a bachelors in Computer Science and Engineering from Coimbatore Institute of Technology. We believe Mr. Krish’s qualifications to serve on our board of directors include his extensive leadership and advisory experience working with innovative technology companies.
Tim Gocher has served as a member of Fusemachines’ board of directors since 2018. Mr. Gocher founded Dolma Impact Fund, an active private equity fund focused on technology, healthcare, and renewable energy, and has acted as CEO since the fund’s founding in May 2012. Since June 2003, Mr. Gocher has also served as Chairman of Dolma Foundation, a non-profit organization focused on alleviating poverty by investing in sustainable businesses, education, and healthcare. Previously, he served in senior roles with global organizations across Europe and Asia including Living Planit SA, Nettleton Global Asia, Interregnum-Parkmead Group, and E.ON UK. Mr. Gocher holds an MBA from London Business School and an honorary Doctor of Laws from the University of Nottingham. Mr. Gocher is qualified to serve as a member of our Board of Directors based on his executive leadership experience in the technology industry and his senior leadership experience.
Sanjay Shrestha has served as a member of Fusemachines’ board of directors since 2014. Mr. Shrestha has been General Manager of Energy Solutions & Chief Strategy Officer with Plug Power (NASDAQ:PLUG), an American company engaged in the development of hydrogen fuel cell systems, since April 2019. Prior to joining Plug Power, Mr. Shrestha held various executive investing and investment banking roles, including CIO of a solar IPP, President of Sky Capital Americas, head of renewables investment banking effort at FBR Capital Markets, global head of renewables research coverage at Lazard Capital Markets, and head of renewables and industrial research at First Albany Capital. Mr. Shrestha holds a Bachelors of Sciences, and an honorary doctorate from Saint Rose College. Mr. Shrestha is qualified to serve as a member of our board of directors based on his significant technology, investment banking, and public company experience.
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Salman Alam was appointed to the board of directors following in January 2025. Mr. Alam is Vice President, Legal, at Western Digital Corporation, a leading provider of data storage technologies, where he has been responsible for worldwide product development and go-to-market technology legal issues since 2016. With over 15 years of legal experience in the corporate legal sector, he also serves as a principal counsel for the flash technology and consumer products business unit, dealing with emerging product regulatory issues within the data ecosystem in markets across the world, including in artificial intelligence, licensing, and data privacy. He has also served as Board Director for CSLM since 2022. Mr. Alam also previously served in roles of increasing responsibility at Western Digital, including Sr. Director, Assistant General, Director, Associate General Counsel, Director, Senior Legal Counsel, and Senior Counsel. Prior to Western Digital, Mr. Alam has served as a legal executive to technology startups focused on mobile and web business models, as well as a corporate transactional attorney at Newmeyer & Dillion, LLP, where he represented emerging and established companies in corporate transactions, M&A, capital markets, and corporate governance matters. Mr. Alam received a B.A. from the University of California, Berkeley, with two majors in Economics and South &Southeast Asian Studies (high honors), and minors in Business Administration (Haas School of Business) and Philosophy, respectively. He also received a law degree from the University of California, Hastings. He has additionally completed coursework in the executive education program at Columbia Business School. We believe Mr. Alam’s qualifications to serve on our board of directors include his extensive experience in legal and governance matters, particularly with technology companies as part of the broader artificial intelligence ecosystem.
Family Relationships
There are no family relationships among any of our directors or executive officers.
Board of Directors
We currently have five members of our board of directors. Our board of directors is classified board, divided into three classes, designated as Class I, Class II and Class III. Our Class I directors will hold office for a term expiring at the first annual meeting of stockholders following the consummation of the Business Combination; our Class II directors will hold office for a term expiring at the second annual meeting of stockholders following the consummation of the Business Combination; and our Class III directors will hold office for a term expiring at the third annual meeting of stockholders following the consummation of the Business Combination. The Class I directors, whose terms will expire at the annual meeting of stockholders to be held in 2026, are Bharat Krish, Tim Gocher, and Salman Alam, the Class II directors, whose terms will expire at the annual meeting of stockholders to be held in 2027, are Sanjay Shrestha; and the Class III director, whose term will expire at the annual meeting of stockholders to be held in 2028, is Sameer Maskey.
When considering whether directors have the experience, qualifications, attributes or skills, taken as a whole, to enable our board of directors to satisfy its oversight responsibilities effectively in light of our business and structure, the board of directors focuses primarily on each person’s background and experience as reflected in the information discussed in each of the directors’ individual biographies set forth above. We believe that our directors provide an appropriate mix of experience and skills relevant to the size and nature of our business.
Director Independence
The listing rules of Nasdaq require us to maintain a board of directors comprised of a majority of independent directors, as determined affirmatively by our board of directions. In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of our audit, compensation and nominating and corporate governance committees must be independent. Audit committee members and compensation committee members must also satisfy the independence criteria set forth in Rule 10A-3 and Rule 10C-1, respectively, under Exchange Act. Under the Nasdaq listing rules, a director will only qualify as an “independent director” if, in the opinion of our Board, the director does not have a relationship that would interfere with the exercise of independent judgment in carrying out his or her responsibilities.
Our board of directors has undertaken a review of the independence of our directors and considered whether any director has a material relationship with us that could compromise his or her ability to exercise independent judgment in carrying out his or her responsibilities. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that none of our non-employee directors (representing four of our five directors), has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that they each are an “independent director” as that term is defined under the Nasdaq listing rules.
In making these determinations, our board of directors considered the relationships that each nonemployee director has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence, including consulting relationships, family relationships and the beneficial ownership of our capital stock by each non-employee director.
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Role of the Board in Risk Oversight
Our Board extensive involvement in the oversight of risk management related to the Company’s and its business and accomplishes this oversight through the regular reporting to the board by the audit committee. The audit committee represents the board by periodically reviewing the Company’s accounting, reporting and financial practices, including the integrity of its financial statements, the surveillance of administrative and financial controls and its compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal, internal audit and information technology functions, the audit committee reviews and discusses all significant areas of the Company’s business and summarizes for the board all areas of risk and the appropriate mitigating factors. In addition, the board receives periodic detailed operating performance reviews from management.
Committees of our Board of Directors and Meetings
In October 2025, our board of directors established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which operates pursuant to a charter adopted by our board of directors. Our board of directors may also establish other committees from time to time to assist the board of directors. The composition and functioning of all of our committees complies with all applicable requirements of the Sarbanes-Oxley Act, Nasdaq and SEC rules and regulations. Each committee’s charter is available on our website at https://fusemachines.com.
Directors will be expected to attend board meetings, the Annual Meeting of Stockholders and meetings of the committees on which they serve, with the understanding that on occasion a director may be unable to attend a meeting.
Audit Committee
The members of our audit committee consist of Salman Alam, Sanjay Shrestha and Bharat Krish. Salman Alam is the chair of the audit committee. Our board of directors has determined that each member of the audit committee is “independent” as that term is defined in Nasdaq rules and has sufficient knowledge in financial and auditing matters to serve on the audit committee. In addition, our board of directors has determined that each member of the audit committee meets the heightened independence requirements for audit committees required under Section 10A of the Exchange Act and related SEC and Nasdaq rules. Finally, the board of directors has determined that Sanjay Shrestha is be deemed an “audit committee financial expert.”
The purpose of the audit committee is to prepare the audit committee report required by the SEC to be included in Company’s proxy statement and to assist the board in overseeing and monitoring (1) the quality and integrity of the financial statements, (2) compliance with legal and regulatory requirements, (3) the Company’s independent registered public accounting firm’s qualifications and independence, (4) the performance of the Company’s internal audit function and (5) the performance of the Company’s independent registered public accounting firm.
Compensation Committee
The members of our compensation committee consist of Salman Alam, Sanjay Shrestha and Bharat Krish. Sanjay Shrestha is the chair of the compensation committee. Our board of directors has determined that each member of the compensation committee is “independent” as that term is defined in Nasdaq rules and is a “non-employee director” under Rule 16b-3 under the Exchange Act. In addition, our board of directors has determined that each member of the compensation committee meets the heightened independence requirements for compensation committee purposes under Section 10C of the Exchange Act and related SEC and Nasdaq rules.
The purpose of the compensation committee is to assist the board in discharging its responsibilities relating to (1) setting the Company’s compensation program and compensation of its executive officers and directors, (2) monitoring the Company’s incentive and equity-based compensation plans and (3) preparing the compensation committee report required to be included in Company’s proxy statement under the rules and regulations of the SEC.
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Nominating and Corporate Governance Committee
The members of our nominating and corporate governance committee consist of Sanjay Shrestha and Salman Alam. Bharat Krish is the chair of the nominating and corporate governance committee. Our board of directors has determined that each member of the nominating and corporate governance committee is “independent” as defined in Nasdaq rules.
The purpose of the nominating and corporate governance committee is to assist the board in discharging its responsibilities relating to (1) identifying individuals qualified to become board members, consistent with criteria approved by the board of directors, (2) reviewing the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the board selects, the director nominees for the next annual meeting of stockholders, (3) identifying board members qualified to fill vacancies on any Company board committee and recommending that the board appoint the identified member or members to the applicable committee, (4) reviewing and recommending to the board corporate governance principles applicable to the Company, (5) overseeing the evaluation of the board and management and (6) handling such other matters that are specifically delegated to the committee by the board from time to time.
Code of Conduct
In October, 2025, we adopted a written code of business conduct that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. A current copy of the code will be posted on our website at https://fusemachines.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.
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EXECUTIVE COMPENSATION
The following is a discussion and analysis of compensation arrangements of the Company’s named executive officers. This discussion may contain forward-looking statements that are based on the Company’s current plans, considerations, expectations and determinations regarding future compensation programs. The actual compensation programs that the Company adopts may differ materially from the currently planned programs that are summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.
Summary Compensation Table
The following table sets forth information concerning the compensation of our named executive officers for the years ended December 31, 2025 and 2024:
| Name and Principal Position | Year | Salary ($)(1) | Bonus ($)(2) | Option Awards ($)(3) | Total ($) | |||||||||||||||
| Sameer Maskey Chief Executive Officer | 2025 | 418,357 | 1,000,000 | — | 1,418,357 | |||||||||||||||
| 2024 | 400,000 | — | — | 400,000 | ||||||||||||||||
Christine Chambers(4) Chief Financial Officer | 2025 | 132,000 | — | — | 132,000 | |||||||||||||||
| 2024 | — | — | — | — | ||||||||||||||||
| Anish Joshi Head of Technology | 2025 | 250,000 | — | — | 250,000 | |||||||||||||||
| 2024 | 223,750 | 30,188 | 142,879 | 396,817 | ||||||||||||||||
| Parag Shrestha Head of Strategy, MD South Asia | 2025 | 113,787 | — | — | 113,787 | |||||||||||||||
| 2024 | 116,526 | — | 142,879 | 259,405 | ||||||||||||||||
| Robert Traghetto Head of AI Services | 2025 | 200,000 | — | — | 200,000 | |||||||||||||||
| 2024 | 185,833 | 28,999 | 71,439 | 286,271 | ||||||||||||||||
| (1) | The amounts in this column reflect the base salary and the remuneration paid and accrued, to the named executive officers for the financial years ended December 31, 2025 and 2024. |
| (2) | The amounts in this column represent the amount of discretionary bonus payments earned by each named executive officers in respect of the financial year ended December 31, 2025 and 2024. |
| (3) | The amounts in this column represent the aggregate grant date fair value of option awards granted to each named executive officer. These amounts do not include partial recourse promissory notes provided to the named executive officers to exercise these awards. |
| (4) | Ms. Chambers was appointed Chief Financial Officer in 2025 and as such received no compensation in 2024. |
Director Compensation
During the year ended December 31, 2025, none of our directors received compensation for their services as directors. The compensation disclosed in the “Summary Compensation Table” above represents the total compensation received by our officers, and the table below represents the compensation received by our non-employee directors.
| Name | Fees Earned or Paid in Cash $ | Option Awards ($) | All Other Compensation ($) | Total ($) | ||||||||||||
| Sanjay Shrestha | 17,500 | — | — | 17,500 | ||||||||||||
| Tim Gocher | 12,500 | — | — | 12,500 | ||||||||||||
| Bharat Krish | 17,500 | — | — | 17,500 | ||||||||||||
| Salman Alam | 17,500 | — | — | 17,500 | ||||||||||||
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Outstanding Equity Awards as of the Year Ended December 31, 2025
The following table summarizes the number of shares of Fusemachines common stock underlying outstanding equity incentive plan awards for each named executive officer as of December 31, 2025.
| Option Awards | Stock Awards | |||||||||||||||||||||||
| Name | Number of Underlying Unexercised (#) Exercisable | Number of Securities Underlying Unexercised Options(#) Unexerciseable | Option Exercise ($) | Option Expiration | Number of Shares That Have Not Vested (#) | Market Value of Shares That Have Not Vested ($) | ||||||||||||||||||
| Sameer Maskey Chief Executive Officer | — | — | — | — | — | — | ||||||||||||||||||
Christine Chambers Chief Financial Officer(1) | — | — | — | — | — | — | ||||||||||||||||||
| Anish Joshi Head of Technology | 20,563 | 12,339 | 1.95 | 12-19-2033 | — | — | ||||||||||||||||||
20,048 | 12,852 | 6.78 | 01-19-2034 | |||||||||||||||||||||
| Parag Shrestha Head of Strategy, MD South Asia | 20,048 | 12,852 | 6.78 | 01-19-2034 | ||||||||||||||||||||
16,451 | 9,871 | 1.95 | 12-19-2033 | |||||||||||||||||||||
| Robert Traghetto Head of AI Services | 10,024 | 6,426 | 6.78 | 01-19-2034 | — | — | ||||||||||||||||||
Executive Officer Employment Arrangements
CEO Agreement
On the Closing Date, the Company entered into an executive employment agreement (the “CEO Agreement”) with Sameer Maskey, the Company’s Chief Executive Officer (referred to in this section titled CEO Agreement, “Executive”). The CEO Agreement provides, among other things, that Executive shall be entitled to a base salary of $495,000 and shall be eligible for an annual cash bonus equal to up to 100% of his base salary (subject to meeting target performance goals each year). Executive is also eligible to participate in the Company’s equity compensation plans. Upon the Executive’s termination of employment for any reason outside of the Change of Control Period (as defined in the CEO Agreement), the Executive (or his Beneficiary following the Executive’s death) shall receive (i) a lump sum payment on the Date of Termination in an amount equal to the sum of the Executive’s earned but unpaid Base Salary through his Date of Termination plus his accrued but unused vacation days at the Executive’s Base Salary in effect as of his Date of Termination; plus (ii) any other benefits or rights the Executive has accrued or earned through his Date of Termination in accordance with the terms of the applicable fringe or employee benefit plans and programs of the Company’s. In addition to the compensation and benefits payable above, if the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason outside of the Change of Control Period, and the Executive returns an executed Release to the Company, which becomes final, binding and irrevocable within sixty (60) days following the Executive’s Date of Termination, the Executive (or his Beneficiary following the Executive’s death) shall receive: (i) Executive’s accrued but unpaid Annual Bonus, if any, for the fiscal year ended prior to his Date of Termination payable at the same time annual bonuses for such fiscal year are paid to other key Employees of the Company pursuant to the terms of the Bonus Plan, (ii) a severance payment payable in a single lump sum within five (5) business days after the Executive’s Release becomes final, binding and irrevocable, in an amount equal to 12 months of Base Salary, and (iii) reimbursement of the COBRA premiums, if any, paid by the Executive for continuation coverage for the Executive, his spouse and dependents under the Company’s group health, dental and vision plans for a 12 month period from the Date of Termination. Capitalized terms used and not defined herein shall have the meanings ascribed to them in the CEO Agreement. The CEO Agreement includes customary indemnification provisions.
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The foregoing description of the CEO Agreement is not complete, and is qualified in its entirety by reference to the complete CEO Agreement, which is attached hereto as Exhibit 10.3 and incorporated herein by reference.
CFO Agreement
On July 21, 2025, the Company entered into an offer letter agreement (the “CFO Agreement”) with Christine Chambers, the Company’s Chief Financial Officer (referred to in this section titled CFO Agreement, “Executive”). The CFO Agreement provides, among other things, that Executive will receive a base salary equal to $360,000, with a bonus structure to be determined at a later date. Executive is also eligible to participate in the Company’s equity compensation plans, and is entitled to an initial award of 100,000 shares of the Company’s equity units, which shall be stock options or restricted stock units, to be determined at a later date upon mutual agreement of the Company and Executive. The CFO Agreement includes customary indemnification provisions.
The foregoing description of the CFO Agreement is not complete, and is qualified in its entirety by reference to the complete CFO Agreement, which is attached hereto as Exhibit 10.4 and incorporated herein by reference.
2025 Omnibus Equity Incentive Plan
On October 22, 2025, the Company’s board of directors approved the Company 2025 Omnibus Equity Incentive Plan (the “Equity Plan”), and the reservation of 1,500,000 shares of Common Stock thereunder. As a result, the Company’s board of directors is authorized to approve grants of awards under the Equity Plan to eligible participants, subject to various limitations.
The following paragraphs provide a summary of the principal features of the Equity Plan and its operation. However, this summary is not a complete description of all of the provisions of the Equity Plan and is qualified in its entirety by the specific language of the Equity Plan.
Purposes of the Equity Plan
The purposes of the Equity Plan are to advance the interests of the Company’s stockholders by enhancing its ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the company by providing such persons with equity ownership opportunities and thereby better aligning the interests of such persons with those of its stockholders.
Eligibility
The Equity Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to employees of the Company or any of its parent corporations or subsidiary corporations, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, and other stock-based awards to employees, directors and consultants of the Company or any corporation or other entity, including but not limited to partnerships, limited liability companies and joint ventures, with respect to which the Company, directly or indirectly, owns as applicable (a) stock possessing more than fifty percent (50%) of the total combined voting power of all classes of stock entitled to vote, or more than fifty percent (50%) of the total value of all shares of all classes of stock of such corporation, or (b) an aggregate of more than fifty percent (50%) of the profits interest or capital interest of a non-corporate entity.
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Authorized Shares
The maximum number of 1,500,000 shares of Common Stock, will be authorized for issuance pursuant to awards granted under the Equity Plan. As of the date hereof, no shares have been issued or are issuable pursuant to awards that have been previously granted under the Equity Plan.
Generally, if any award expires or lapses or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of common stock subject to such award being repurchased by the Company at or below the original issuance price), the unused common stock covered by such award shall again be available for the grant of awards under the Equity Plan. Further, shares of common stock delivered to the Company by a participant to satisfy the applicable exercise or purchase price of an award and/or to satisfy any applicable tax withholding obligation (including shares retained by the Company from the award being exercised or purchased and/or creating the tax obligation) shall be added to the number of shares of common stock available for the grant of awards under the Equity Plan. However, in the case of incentive stock options (as hereinafter defined), the foregoing provisions shall be subject to any limitations under the Code.
If the Administrator determines that any dividend or other distribution (whether in the form of cash, common stock, other securities, or other property), reorganization, merger, consolidation, combination, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of common stock or other securities of the Company, issuance of warrants or other rights to purchase common stock or other securities of the company, or other similar corporate transaction or event, as determined by the Administrator, affects the common stock such that an adjustment is determined by the Administrator to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Equity Plan or with respect to any Award, the Administrator will adjust the number and class of shares that may be delivered under the Equity Plan and/or the number, class, and price of shares covered by each outstanding award, and the numerical share limits contained in the Equity Plan.
In connection with a merger or consolidation of another entity with or into the Company or a subsidiary of the Company or the acquisition by the Company or a subsidiary of the Company of property or stock of another entity, the Administrator may grant awards in substitution for any options or other stock or stock-based awards granted prior to such merger or consolidation by such other entity or its affiliate. Substitute awards may be granted on such terms as the Administrator deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Equity Plan. Substitute Awards shall not count against the overall share limit described above, except as may be required by reason of Section 422 of the Code or applicable securities exchange rules.
Equity Incentive Plan Administration
The Company’s board of directors or a committee appointed by Company’s board of directors administers the Equity Plan and are referred to as the Administrator. The Administrator may delegate certain duties and authorities of the Administrator to officers of the Company but the full board of directors must approve the grant of any award to a non-employee director. Grants to executive officers of the Company must be approved by the full board of directors or by a committee comprised of “non-employee directors” under Rule 16b-3 of the Securities Exchange Act.
Subject to the terms of the Equity Plan and applicable laws, the Administrator shall have authority to determine which employees, non-employee directors and consultants will receive Awards, to grant Awards and to set all terms and conditions of Awards (including, but not limited to, vesting, exercise and forfeiture provisions). In addition, the Administrator shall have the authority to take all actions and make all determinations contemplated by the Equity Plan and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Equity Plan as it shall deem advisable. The Administrator may correct any defect or ambiguity, supply any omission or reconcile any inconsistency in the Equity Plan or any Award in the manner and to the extent it shall deem necessary or appropriate to carry the Equity Plan and any Awards into effect, as determined by the Administrator. The Administrator shall make all determinations under the Equity Plan in the Administrator’s sole discretion and all such determinations shall be final and binding on all persons having or claiming any interest in the Equity Plan or in any Award.
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No Repricings
The terms of any outstanding option may not be amended to reduce the exercise price of such option or cancel any outstanding option in exchange for other options with an exercise price that is less than the exercise price of the cancelled option or for any cash payment (or shares of common stock with a market value) that exceeds the excess of the market value of the shares underlying such cancelled options over the aggregate exercise price of such options or for any other award, without stockholder approval.
Stock Options
Options to purchase Common Stock may be granted under the Equity Plan. Subject to the provisions of the Equity Plan, the Administrator will determine the terms and conditions of options, including when such options vest and when they become exercisable (and the Administrator will have the discretion to accelerate the time at which such options will vest and/or become exercisable) and the acceptable forms of consideration for exercising an option. The per share exercise price of any option generally must be at least 100% of the fair market value of a share on the date of grant, and the term of an incentive stock option may not be more than 10 years. However, with respect to any incentive stock option granted to an individual who owns 10% of the voting power of all classes of stock of the Company or any of its parent or subsidiary corporations, the term of such option must not exceed 5 years, and the per share exercise price of such incentive stock option must be at least 110% of the fair market value of a share on the grant date.
As required by the Code, the aggregate fair market value (determined at the time an incentive stock option is granted) of company stock with respect to which such employee’s incentive stock options may become exercisable by such employee for the first time during any calendar year under all incentive stock options granted under any incentive stock option plan maintained by the Company or any parent or subsidiary corporation may not exceed $100,000. To the extent that an option designated as an incentive stock option exceeds the $100,000 threshold, it will be treated as a non-qualified stock option.
After a participant’s service terminates, he or she generally may exercise the vested portion of his or her option for the period of time stated in his or her option agreement. In no event may an option be exercised later than the expiration of its term, except in certain circumstances where the expiration occurs during a period where exercise is not permitted under applicable law. An option designated as an incentive stock option will cease to constitute an incentive stock option and will be treated as a non-qualified stock option to the extent that it is exercised more than three months after the employee’s termination of employment (or more than one year in the case of death or disability).
Subject to the provisions of the Equity Plan, the Administrator will determine the other terms of options, including but not limited to the acceptable forms of consideration for exercising an option.
Restricted Stock
Restricted stock may be granted under the Equity Plan. Restricted stock awards are grants of shares of Common Stock that vest in accordance with terms and conditions established by the Administrator. The Administrator will determine the number of shares of restricted stock granted to any employee, director or consultant. The Administrator may impose prior to grant whatever conditions to vesting it determines to be appropriate (for example, the Administrator may set restrictions based on the achievement of specific performance goals or continued service to us or members of the Company Group), and the Administrator will have the discretion to accelerate the time at which any restrictions will lapse or be removed at any time. Recipients of restricted stock awards generally will have voting and have the right to receive dividends with respect to such shares, unless the award agreement provides otherwise. Except as otherwise provided by the Administrator, to the extent that dividends are paid in stock or property other than cash, such non-cash dividends will be subject to the same vesting and forfeiture conditions applicable to the restricted shares and will be delivered no later than the 15th day of the third calendar month following the later of (i) the date the dividends are paid to the Company’s stockholders or (ii) the date such dividends are no longer subject to a substantial risk of forfeiture.
Shares of restricted stock as to which the restrictions have not lapsed upon the recipient’s termination of service or when the Administrator determines that satisfaction of performance-based vesting conditions are no longer possible are subject to our right of repurchase or forfeiture.
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Restricted Stock Units
Restricted stock units may be granted under the Equity Plan pursuant to terms and conditions established by the Administrator. A restricted stock units is a bookkeeping entry representing an amount equal to the fair market value of one share of Common Stock. The Administrator will determine the terms and conditions of restricted stock units including the vesting criteria (which may include accomplishing specified performance criteria or continued service to us or members of the Company Group or both) and the form and timing of payment. The Administrator will have the discretion to accelerate the time at which any restrictions will lapse or be removed and to settle earned restricted stock units in cash, shares, or a combination of both.
The award agreement may provide participants with a right to receive dividend equivalents with respect to their restricted stock units. Such dividend equivalents may be paid in cash or in shares of our common stock may be subject to the same vesting conditions applicable to the restricted stock units.
Other Stock-Based Awards
The Administrator may grant other stock-based awards under the Equity Plan pursuant to terms and conditions established by the Administrator and set forth in the award agreement. The Administrator will have the discretion to settle other stock-based award in the form of cash, shares of Common Stock, or a combination of both.
Non-Transferability of Awards
Unless the Administrator provides otherwise, the Equity Plan generally does not allow awards under the Equity Plan to be sold, transferred, assigned, pledged or otherwise encumbered by the participant either voluntarily or by operation of law, except by will or the laws of descent and distribution. Any unauthorized transfer will be void.
Merger or Change in Control
The Equity Plan provides that if there is a “change in control” (as defined under the Equity Plan) of the Company and the awards under the Equity Plan are not continued, converted, assumed or replaced with substantially similar awards by the Company or the successor entity or its parent and provided that the participant has not terminated service prior to such change in control, then immediately prior to such change in control, such awards shall become fully vested, exercisable and/or payable, as applicable, and forfeiture, repurchase and other restrictions on such awards shall lapse. Each such award shall be cancelled upon the consummation of such change in control each such outstanding award will be cancelled of such change in control in exchange for the change in control consideration payable to other holders of common stock with respect to the shares of common stock underlying such award (net of any applicable exercise price). Such change in control consideration may be payable on the same terms and conditions applicable to other holders of our common stock or on such terms and conditions as the Administrator may provide. To the extent that the award constitutes “non-qualified deferred compensation” for purposes of Section 409A of the Code, the timing of any payment in settlement of such award in connection with such change in control will be governed by the terms of such award to avoid subjecting the participant to penalties under Section 409A. If the amount of the change in control consideration the participant would receive with respect to the shares subject to any outstanding option is less than or equal to the exercise price of such option, such option will be terminated without payment upon consummation of such change in control.
Forfeiture and Clawback
All awards granted under the Equity Plan will be subject to recoupment under any clawback policy that we are required to adopt under applicable law or listing standards. In addition, the Administrator may impose such other clawback, recovery or recoupment provisions in an award agreement as the Administrator determines necessary or appropriate, including without limitation to any reacquisition right regarding previously acquired shares or other cash or property. In addition, the Administrator may provide in an award agreement that the recipient’s rights, payments, and benefits with respect to such award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an award.
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Amendment or Termination
The amendment and restatement of the Equity Plan will become effective upon and subject to the Closing and stockholder approval of the amendment and restatement of the Equity Plan and will continue in effect until the tenth (10th) anniversary of the earlier of the date the amendment and restatement of the Equity Plan was approved by the Board or the date its adoption is approved by the Company’s stockholders. The Company’s board of directors has have the authority to amend, suspend, or terminate the Equity Plan, but such action generally may not materially impair the rights of any participant with respect to any award that is outstanding at the time such amendment, suspension or termination of the Equity Plan is approved by the Board without the participant’s written consent.
Summary of U.S. Federal Income Tax Consequences
The following summary is intended only as a general guide to the U.S. federal income tax consequences of participation in the Equity Plan. The summary is based on existing U.S. laws and regulations as of the date hereof, and there can be no assurance that those laws and regulations will not change in the future. The summary does not purport to be complete and does not discuss the tax consequences upon a participant’s death, or the provisions of the income tax laws of any municipality, state or foreign country in which the participant may reside. As a result, tax consequences for any particular participant may vary based on individual circumstances.
Incentive Stock Options
A participant recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an option that qualifies as incentive stock option under Section 422 of the Code. If a participant exercises the option, holds the stock until the later of second anniversary of the date on which the incentive stock option was granted or the first anniversary of the date such incentive stock option was exercised (the “applicable holding period”) and then later sells or otherwise disposes of the shares acquired upon exercise of the option, the participant will recognize a capital gain or loss equal to the difference between the sale price of the shares and the exercise price, and we will not be entitled to any deduction for federal income tax purposes.
However, if the participant disposes of such shares before the end of the applicable holding period (a “disqualifying disposition”), any gain up to the excess of the fair market value of the shares on the date of exercise (or, if less, the amount received upon sale of such shares) over the exercise price generally will be taxed as ordinary income, unless the shares are disposed of in a transaction in which the participant would not recognize a gain (such as a gift). Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the participant upon the disqualifying disposition of the shares generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.
For purposes of the alternative minimum tax, the difference between the option exercise price and the fair market value of the shares on the exercise date is treated as an adjustment item in computing the participant’s alternative minimum taxable income in the year of exercise. In addition, special alternative minimum tax rules may apply to certain subsequent disqualifying dispositions of the shares or provide certain basis adjustments or tax credits for purposes.
Non-Qualified Stock Options
A participant generally recognizes no taxable income as the result of the grant of such an option. However, upon exercising a non-qualified stock option, the participant normally recognizes ordinary income equal to the amount that the fair market value of the shares on such date exceeds the exercise price. If the participant is an employee, such ordinary income generally is subject to withholding of income and FICA taxes.
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Upon the sale of the shares acquired by the exercise of a non-qualified stock option, any gain or loss (based on the difference between the sale price and the fair market value on the exercise date) will be taxed as capital gain or loss. Any ordinary income recognized by the participant upon exercise of non-qualified option generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code. No tax deduction is available to us with respect to the grant of a non-qualified stock option or the sale of the shares acquired through the exercise of the non-qualified stock option.
Restricted Stock Awards
A participant acquiring shares of restricted stock generally will recognize ordinary income equal to the fair market value of the shares on the vesting date. If the participant is an employee, such ordinary income generally is subject to withholding of income and FICA taxes. The participant may elect, pursuant to Section 83(b) of the Code, to accelerate the ordinary income tax event to the date of acquisition by filing an election with the IRS no later than thirty days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the date the ordinary income tax event occurs, will be taxed as capital gain or loss. Any ordinary income recognized by the participant upon vesting in shares of restricted stock (or upon filing an election under Section 83(b) of the Code) generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.
Restricted Stock Unit Awards or Cash or Shares Issuable upon Settlement of an Other Stock-Based Award
There are no immediate tax consequences of receiving an award of restricted stock units or another stock-based award. A participant who is awarded restricted stock units or another stock-based award generally will be required to recognize ordinary income in an amount equal to the amount of cash and/or the fair market value of shares issued to such participant at the end of the applicable vesting period or, if later, the settlement date elected by the Administrator or a participant in such award agreement. Any additional gain or loss recognized upon any later disposition of any shares received would be capital gain or loss. Any ordinary income recognized by the participant upon the issuance of shares pursuant to a restricted stock unit award or other stock-based award generally should be deductible by us for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the Code.
Section 409A
Section 409A of the Code provides certain requirements for non-qualified deferred compensation arrangements with respect to an individual’s deferral and distribution elections and permissible distribution events. Awards granted under the Equity Plan with a deferral feature will be subject to the requirements of Section 409A of the Code. If an award is subject to and fails to satisfy the requirements of Section 409A of the Code, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Code Section 409A fails to comply with the requirements of Code Section 409A, the participant will incur an additional federal income tax penalty equal to 20 of the compensation recognized as ordinary income, as well as interest on such deferred compensation.
Tax Effect for the Company
The Company generally will be entitled to a tax deduction in connection with an award under the Equity Plan in an amount equal to the ordinary income realized by a participant and at the time the participant recognizes such income (for example, the exercise of a non-qualified stock option) except to the extent such deduction is limited by applicable provisions of the Code. Special rules limit the deductibility of compensation paid to our chief executive officer and certain “covered employees” as determined under Section 162(m) of the Code and applicable guidance. Under Section 162(m) of the Code, the annual compensation paid to any of these specified individuals will be deductible only to the extent that it does not exceed $1,000,000.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF U.S. FEDERAL INCOME TAXATION UPON PARTICIPANTS AND THE COMPANY WITH RESPECT TO AWARDS UNDER THE EQUITY PLAN. IT DOES NOT PURPORT TO BE COMPLETE AND DOES NOT DISCUSS THE IMPACT OF EMPLOYMENT OR OTHER TAX REQUIREMENTS, THE TAX CONSEQUENCES OF A PARTICIPANT’S DEATH, OR THE PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE, OR FOREIGN COUNTRY IN WHICH THE PARTICIPANT MAY RESIDE.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of April 10, 2026 with respect to the holdings of (1) each person who is the beneficial owner of more than 5% of Company voting stock, (2) each of our directors, (3) each executive officer, and (4) all of our current directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or “investment power,” which includes the power to dispose of or to direct the disposition of the security, or has the right to acquire such powers within 60 days.
The beneficial ownership of shares of Common Stock is calculated based on 28,939,240 shares of Common Stock of the Company outstanding as of April 10, 2026.
To the best of our knowledge, except as otherwise indicated, each of the persons named in the table has sole voting and investment power with respect to the shares of our Common Stock beneficially owned by such person, except to the extent such power may be shared with a spouse. To our knowledge, none of the shares listed below are held under a voting trust or similar agreement, except as noted. To our knowledge, there is no arrangement, including any pledge by any person of securities of the Company, the operation of which may at a subsequent date result in a change in control of the Company.
| Beneficial Owner | Number of Shares Beneficially Owned | Percentage of Common Stock Beneficially Owned | ||||||
| Five Percent Stockholders | ||||||||
| Consilium Entities(1) | 11,944,765 | (2) | 37.66 | % | ||||
| Charles Cassel(1) | 13,104,866 | (3) | 40.55 | % | ||||
| Jonathan Binder(1) | 13,104,864 | (4) | 40.55 | % | ||||
| Sameer Maskey | 5,772,780 | (5) | 19.95 | % | ||||
| Tim Gocher | 2,697,032 | (8) | 9.06 | % | ||||
| Executive Officers and Directors | ||||||||
| Sameer Maskey | 5,772,780 | (5) | 19.95 | % | ||||
| Anish Joshi | 223,420 | (6) | * | % | ||||
| Parag Shrestha | 166,152 | (7) | * | % | ||||
| Robert Traghetto | 85,009 | (8) | * | % | ||||
| Bharat Krish | - | * | % | |||||
| Tim Gocher | 2,697,033 | (9) | 9.06 | % | ||||
| Sanjay Shrestha | 275,463 | (10) | * | % | ||||
| Salman Alam | 50,000 | * | % | |||||
| All Fusemachines Pubco directors and executive officers as a group (eight individuals) | 9,269,857 | 31.84 | % | |||||
| * | Less than 1%. |
| (1) | Consilium Extended Opportunities Fund and Consilium Frontier Equity Fund are managed by Mr. Cassel and Mr. Binder (together with their affiliates, the “Consilium Entities”). Therefore Mr. Cassel and Mr. Binder may be deemed to beneficially own the shares held by Sponsor. |
| (2) | Includes (i) 4,072,414 shares of Common Stock held by Consilium Extended Opportunities Fund, (ii) 5,092,476 shares of Common Stock held by Consilium Frontier Equity Fund, and (iii) 2,779,875 shares of Common Stock issuable upon the exercise of private placement warrants held by Consilium Frontier Equity Fund. By virtue of their shared control over the Consilium Entities, Mr. Cassel and Mr. Binder may be deemed to beneficially own the shares held by Consilium Extended Opportunities Fund LP and Consilium Frontier Equity Fund LP. |
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| (3) | Includes (i) 564,413 shares held directly by Mr. Cassel and Mr. Cassel’s spouse, (ii) 595,688 shares of Common Stock issuable upon the exercise of private placement warrants held directly by Mr. Cassel and Mr. Cassel’s spouse, and (iii) the securities held by Consilium Extended Opportunities Fund and Consilium Frontier Equity Fund. By virtue of their shared control over the Consilium Entities, Mr. Cassel and Mr. Binder may be deemed to beneficially own the shares held by Consilium Extended Opportunities Fund LP and Consilium Frontier Equity Fund LP. |
| (4) | Includes (i) 564,412 shares held directly by Mr. Binder, (ii) 595,687 shares of Common Stock issuable upon the exercise of private placement warrants, and (iii) the securities held by Consilium Extended Opportunities Fund and Consilium Frontier Equity Fund. By virtue of their shared control over the Consilium Entities, Mr. Cassel and Mr. Binder may be deemed to beneficially own the shares held by Consilium Extended Opportunities Fund LP and Consilium Frontier Equity Fund LP. |
| (5) | Includes 4,127,708 shares directly held by Sameer Maskey and (i) 329,014 shares held by Sameer Maskey’s spouse and (ii) 658,029 and 658,029 shares are held of record by Maskey Everest Trust and Maskey Annapurna Trust, respectively. Sameer Maskey exercises voting or dispositive control over any of the securities held by Maskey Everest Trust and Maskey Annapurna Trust. As such, Mr. Maskey may be deemed to be the beneficial owner of all shares held by Maskey Everest Trust and Maskey Annapurna Trust. Mr. Maskey disclaims individual ownership of such shares except to his individual pecuniary interest in such trusts. |
| (6) | Includes (i) 177,667 shares of Common Stock owned by Mr. Joshi directly, as well as (ii) vested stock incentive options exercisable for 45,753 shares of Common Stock that Mr. Joshi has the right to acquire within 60 days of April 10, 2026. Mr. Joshi disclaims any beneficial ownership of such shares, except to the extent of any pecuniary interest therein. |
| (7) | Includes (i) 125,025 shares of Common Stock owned by Mr. Shrestha directly, as well as (ii) vested stock incentive options exercisable for 41,127 shares of Common Stock that Mr. Shrestha has the right to acquire within 60 days of April 10, 2026. Mr. Shrestha disclaims any beneficial ownership of such shares, except to the extent of any pecuniary interest therein. |
| (8) | Includes (i) 73,699 shares of Common Stock owned by Mr. Traghetto directly, as well as (ii) vested stock incentive options exercisable for 11,310 shares of Common Stock that Mr. Shrestha has the right to acquire within 60 days of April 10, 2026. Mr. Traghetto disclaims any beneficial ownership of such shares, except to the extent of any pecuniary interest therein. |
| (9) | Includes 2,677,293 shares of Common Stock held directly by Dolma Impact Fund (“Dolma”). Mr. Gocher is the founder and Chief Executive Officer of Dolma, and so may be deemed to have voting and dispositive power over the securities held by Dolma. Also includes vested stock incentive options exercisable for 19,740 shares of Common Stock that Mr. Gocher has the right to acquire within 60 days of April 10, 2026. Mr. Gocher disclaims any beneficial ownership of shares, except to the extent of any pecuniary interest therein. |
| (10) | Includes (i) 235,982 shares of Common Stock owned by Mr. Shrestha directly, as well as (ii) vested stock incentive options exercisable for 39,481 shares of Common Stock that Mr. Shrestha has the right to acquire within 60 days of November 28, 2025. Mr. Shrestha disclaims any beneficial ownership of such shares, except to the extent of any pecuniary interest therein. |
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a summary of transactions or series of transactions since inception, or currently proposed transactions or series of transactions, to which we were, or will be, a party, in which the amount involved exceeded, or will exceed, $120,000, and in which any of our directors, executive officers, or to our knowledge, beneficial owners of 5% or more of our capital stock, or any member of the immediate family of, or entities affiliated with, any of the foregoing persons, had, or will have, a direct or indirect material interest, other than employment agreements and compensation payable to our executive officers and members of the Board. For more information see “Director Compensation” and “Executive Officer Compensation”.
CSLM Acquisition Corp./CSLM Holdings Inc.
Founder Shares
In July 2021, the Sponsor purchased 4,743,750 shares of CSLM’s Class B ordinary shares (the “Founder Shares”) for an aggregate purchase price of $25,000. The Founder Shares included an aggregate of up to 618,750 shares subject to forfeiture by the Sponsor to the extent that the underwriter’s overallotment was not exercised in full or in part, so that the number of Founder Shares collectively represented approximately 20% of CSLM’s issued and outstanding shares after the CSLM IPO. In August 2021, the Sponsor transferred 50,000 Founder Shares to each of CSLM’s independent director nominees. Effective as of July 13, 2023, pursuant to the terms of the CSLM’s then current charter, the Sponsor elected to convert 4,743,749 outstanding Class B ordinary share held by it on a one-for-one basis into Class A ordinary shares of CSLM, with immediate effect.
In connection with the Business Combination, the Sponsor has entered into the Sponsor Support Agreement (the “Sponsor Support Agreement”). Pursuant to the Sponsor Support Agreement, 3,971,250 Private Placement Warrants were forfeited by the Sponsor.
Related Party Loans
In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of CSLM’s officers and directors may, but are not obligated to, loan CSLM any funds as may be required (“Working Capital Loans”). Such Working Capital Loans would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of the notes may be converted upon completion of a Business Combination into private placement-equivalent units at a price of $10.00 per unit. Such units would be identical to the CSLM Private Placement Units.
On February 28, 2023, the Sponsor issued an unsecured promissory note to CSLM (the “Working Capital Note”), pursuant to which CSLM may borrow up to an aggregate principal amount of $1,500,000. The Working Capital Note bears interest at a rate of 4.75% per annum and is payable on the earlier of the date by which CSLM has to complete a business combination or the effective date of a business combination. CSLM drew an aggregate of $2,750,000 and $1,230,000 and has accrued $129,630 and $28,288 of interest on principal amounts outstanding as of December 31, 2024 and 2023, respectively. On January 18, 2024 the Working Capital Note was increased to $2,000,000. On August 18, 2024, the Working Capital Note was amended and restated to increase the amount to $2,750,000.
On February 4, 2025, CSLM issued the 3rd A&R Note to increase the amount the Company may borrow from $2,750,000 to $3,000,000. The 3rd A&R Note bears interest at a rate of 4.75% per annum, and is payable on the earlier to occur of (i) the date by which the Company has to complete a business combination or (ii) the effective date of a business combination. In the event of a Business Combination, the outstanding balance payable may be repaid as follows: $1,491,000 of the Principal and its accrued and unpaid interest shall be converted into CSLM’s Class A ordinary shares at a share price of Four Dollars ($4.00), and the balance shall be payable in cash at the closing of the Business Combination. On May 23, 2025, CSLM amended the 3rd A&R Note solely to increase the amount the Company may borrow from $3,000,000 to $4,000,000.
At the closing, the outstanding working capital notes issued by the Sponsor to CSLM were exchanged for an aggregate of 408,639 newly-issued shares of Common Stock
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Administrative Services Agreement
CSLM entered into an agreement that provides that, commencing on effective date of the Initial Public Offering, CSLM agreed to pay the Sponsor $10,000 per month for office space, utilities, secretarial and administrative support services. CSLM ceased paying these monthly upon the completion of a Business Combination. During the twelve months ended December 31, 2024 and 2023, CSLM recorded $120,000 and $240,000, respectively, of such fees.
Old Fusemachines Inc.
Related Party Convertible Notes
In October 2019 and September 2021, Old Fusemachines entered into two convertible promissory note agreements (the “Related Party Convertible Notes Payable”) with a lender. As of September 30, 2025 and December 31, 2024, the lender was considered a principal owner of the Company because it held greater than 10% of voting common stock of Old Fusemachines. The related party convertible notes payable were $7,530.0 thousand and $6,524.0 thousand, as of September 30, 2025 and December 31, 2024, respectively.
2021 Investment Agreement
In January 2021, Fusemachines Nepal Private Limited entered into an investment agreement with a related party, Gyanu Maskey (“Mrs. Maskey”), an immediate family member of Sameer Maskey (the “January 2021 Related Party Investment Agreement”) and Mrs. Maskey agreed to subscribe to 433,728 shares of Fusemachines Nepal Private Limited ordinary shares (the “January 2021 Subscription Shares”) over a term of three years (the “Completion Date”) and provided an advance amount of $376.4 thousand to Fusemachines Nepal Private Limited during 2021. According to the terms of the January 2021 Related Party Investment Agreement, Old Fusemachines could opt to refund Mrs. Maskey prior to the Completion Date without having to issue the January 2021 Subscription Shares. In 2021, Old Fusemachines opted to refund Mrs. Maskey, not issue the January 2021 Subscription Shares, and agreed to provide a refund in monthly payments. The January 2021 Related Party Investment Agreement was completed in February 2023.
BO2 Purchase Agreement
In July 2021, Fusemachines Nepal Private Limited entered into the BO2 Purchase Agreement with a related party, BO2, and Mr. Maskey. According to the terms of the BO2 Purchase Agreement, BO2 agreed to invest up to $964.2 thousand in Fusemachines Nepal Private Limited to support the development and growth of the business. In addition, the BO2 Purchase Agreement also included terms and conditions of regulating the management and operation of Fusemachines Nepal Private Limited, their relationship with each other, certain aspects of the business and affairs of, and their dealings with, Fusemachines Nepal Private Limited and BO2’s exit from Fusemachines Nepal Private Limited. The BO2 Agreement required Fusemachines Nepal Private Limited to pay BO2 a one-time arrangement fee of 1.5% exclusive of value added tax (“VAT”) of the BO2’s total investment, and an annual monitoring fee.
Repurchase and Repayment of 2023 Promissory Notes
In January 2024, Old Fusemachines repurchased 667,000 shares of its common stock from Mr. Maskey, at a price of $4.352 per share for a total of $2,902.7 thousand. Out of this amount, $902.7 thousand was applied towards repayment of Mr. Maskey’s 2023 Promissory Note including accrued interest and balance of the Repurchase Consideration amounting to $2,000.0 thousand that was paid in cash to Mr. Maskey.
January 2024 Related Party Pledge Agreement
In January 2024, Mr. Maskey entered into a pledge agreement (the “January 2024 Related Party Pledge Agreement”) with Consilium Extended Opportunities Fund, LP (“Consilium”). As per the terms of the January 2024 Related Party Pledge Agreement, Mr. Maskey agreed to assign a security interest to Consilium of 3,600,000 shares of common stock held by Mr. Maskey to fully secure the Company’s obligations under the January 2024 Convertible Notes.
2024 Related Party Promissory Notes
During 2024, Old Fusemachines entered into seven separate promissory notes with Sameer Maskey, the CEO of the Company for aggregate principal amount of $700.0 thousand.
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Fusemachines Inc.
December 2025 Private Placement
On December 23, 2025, the Company entered into a securities purchase agreement with CSLM Fund, whereby the Company issued and sold to CSLM Fund 588,235 shares of common stock at a price of $1.70 per share, for gross proceeds of $1 million (the “December 2025 Offering”). The shares of common stock issued to CSLM Fund in the December 2025 Offering are being registered for resale under this registration statement.
Registration Rights
At the closing of the Business Combination, certain investors, insiders, and other holders of Company capital stock (entered into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”). Pursuant to the terms of the Amended and Restated Registration Rights Agreement, the Company is obligated to file this registration statement pursuant to Rule 415 under the Securities Act to register the resale of certain securities of the Company held by the such holders. The Amended and Restated Registration Rights Agreement also provides such holders with certain “demand” and “piggy-back” registration rights, subject to certain requirements and customary conditions. The Company is filing this registration statement to register the securities held by those holders party to the Amended and Restated Registration Rights Agreement.
Closing of Business Combination
On October 22, 2025, the Business Combination was consummated whereby (a) Merger Sub merged with and into Fusemachines with Old Fusemachines as the surviving corporation and becoming a wholly-owned subsidiary of the Company; (b) the issued and outstanding shares of Old Fusemachines were exchanged for $200,000,000 in the form of newly-issued shares of Common Stock at a price of $10 per share. On the Closing Date, (a) the shareholders of Old Fusemachines were issued an aggregate of 19,214,201 shares of Common Stock, an aggregate of 693,420 shares of Common Stock were reserved for issuance upon the exercise of stock options, and an aggregate of 122,211 shares of Common Stock were reserved for issuance upon the exercise of common stock warrants; (b) the public shareholders of CSLM received an aggregate of 901,955 shares of Common Stock, (c) all public rights were converted into 1,897,500 shares of Common Stock; (d) the Company issued an aggregate of 4,743,750 shares of Common Stock to private placement investors; (e) the Company issued an aggregate of 1,184,000 shares of Common Stock, in connection with the PIPE financing; and (f) the outstanding working capital notes issued by the Sponsor to CSLM were exchanged for an aggregate of 408,639 newly-issued shares of Common Stock.
Indemnification Agreements
We have entered into agreements to indemnify our directors and executive officers. These agreements, among other things, require us to indemnify these individuals for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts reasonably incurred by such person in any action or proceeding, including any action by or in our right, on account of any services undertaken by such person on behalf of our company or that person’s status as a member of our board of directors to the maximum extent allowed under Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to provisions of the State of Delaware, the Company has been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable.
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Related Party Transactions Policy
The Company has adopted a written Related Party Transaction Policy that set forth its policies and procedures for the review and approval or ratification of related person transactions. A related person includes directors, executive officers, beneficial owners of 5% or more of any class of the Company’s voting securities, and immediate family members of any of the foregoing persons. Under the Related Party Transaction Policy, if a transaction involving an amount in excess of $120,000 has been identified as a related person transaction, including any transaction that was not a related person transaction when originally consummated or any transaction that was not initially identified as a related person transaction prior to consummation, information regarding the related person transaction must be reviewed and approved by the Company’s audit committee.
In considering related person transactions, the Company’s audit committee will take into account the relevant available facts and circumstances including, but not limited to:
| ● | the related person’s interest in the related person transaction; | |
| ● | the approximate dollar value of the amount involved in the related person transaction; | |
| ● | the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss; | |
| ● | whether the transaction was undertaken in the ordinary course of business of the Company; | |
| ● | whether the transaction with the related person is proposed to be, or was, entered into on terms no less favorable to the Company than terms that could have been reached with an unrelated third party; | |
| ● | the purpose of, and the potential benefits to the Company of, the transaction; and | |
| ● | any other information regarding the related person transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction. |
The Related Party Transaction Policy requires that, in determining whether to approve, ratify or reject a related person transaction, the audit committee must review all relevant information available to it about such transaction, and that it may approve or ratify the related person transaction only if it determines that, under all of the circumstances, the transaction is in, or is not inconsistent with, the best interests of the Company.
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DESCRIPTION OF SECURITIES
Authorized and Outstanding Stock
The Company’s Certificate of Incorporation authorizes the issuance of 505,000,000 shares, consisting of:
| ● | 500,000,000 shares of Common Stock; and | |
| ● | 5,000,000 shares of preferred stock, par value $0.0001 per share (“Preferred Stock”). |
Common Stock
As of December 19, 2025, there were 28,350,031 shares of Common Stock issued and outstanding. and no shares of Preferred Stock issued and outstanding. As of December 19, 2025, the Company has not designated any series of preferred stock
Voting rights. Each holder of Common Stock is entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote. The holders of Common Stock do not have cumulative voting rights in the election of directors. Generally, all matters to be voted on by stockholders must be approved by a majority (or, in the case of election of directors, by a plurality) of the votes entitled to be cast by all stockholders present in person or represented by proxy, voting together as a single class.
Dividend Rights. Subject to preferences that may be applicable to any outstanding Preferred Stock, the holders of shares of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Company’s board of directors, out of funds legally available for such purposes.
Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company’s affairs, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of the Company’s debts and other liabilities, subject to prior distribution rights of the Preferred Stock or any class or series of stock having a preference over the Common Stock, then outstanding, if any.
Other rights. The holders of Common Stock have no pre-emptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of holders of the Common Stock are subject to those of the holders of any shares of the Preferred Stock that the Company may issue in the future.
Preferred Stock
The Certificate of Incorporation authorizes the Company’s board of directors to establish one or more series of Preferred Stock. Unless required by law or any stock exchange, the authorized shares of Preferred Stock will be available for issuance without further action by the holders of Common Stock. The Company’s board of directors has the discretion to determine the powers, preferences and relative, participating, optional and other special rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of Preferred Stock. The issuance of Preferred Stock may have the effect of delaying, deferring or preventing a change in control of the Company without further action by the stockholders. Additionally, the issuance of Preferred Stock may adversely affect the holders of Common Stock by restricting dividends on the Common Stock, diluting the voting power of the Common Stock or subordinating the liquidation rights of the Common Stock. As a result of these or other factors, the issuance of Preferred Stock could have an adverse impact on the market price of the Common Stock, restricting dividends on the Company’s capital stock, diluting the voting power of the Common Stock, impairing the liquidation rights of the Company’s capital stock, or delaying or preventing a change in control of the Company. At present, there are no plans to issue any Preferred Stock.
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Warrants
Public Warrants
Each whole Public Warrant will entitle the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as discussed below, at any time commencing 30 days after the Closing, provided that the Company has an effective registration statement under the Securities Act covering the shares of Common Stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis under the circumstances specified in the Warrant Agreement) and such shares of Common Stock are registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder. Pursuant to the Warrant Agreement, a warrant holder may exercise its Public Warrants only for a whole number of shares of Common Stock. This means only a whole Public Warrants may be exercised at a given time by a warrant holder. The Public Warrants will expire five years after the Closing, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
The Company will not be obligated to deliver any shares of Common Stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares of Common Stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to our satisfying our obligations described below with respect to registration. No Public Warrants will be exercisable and the Company will not be obligated to issue a share of Common Stock upon exercise of an Public Warrant unless the Common Stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In the event that the conditions in the two immediately preceding sentences are not satisfied with respect to a Public Warrant, the holder of such Public Warrant will not be entitled to exercise such Public Warrant and such Public Warrant may have no value and expire worthless. In no event will the Company be required to net cash settle any Public Warrant.
The Public Warrants became exercisable 30 days after the Closing. However, because the Public Warrants will be exercisable until their expiration date of up to five years after the Closing, in order to comply with the requirements of Section 10(a)(3) of the Securities Act following the Closing, under the terms of the Warrant Agreement, the Company has agreed that the Company will use its best efforts to file this registration statement to register the Common Stock issuable upon exercise of the Public Warrants and thereafter the Company will use its best efforts to cause the same to become effective and to maintain the effectiveness of such post-effective amendment or registration statement, and a current prospectus relating thereto, until the expiration or redemption of the Public Warrants in accordance with the provisions of the Warrant Agreement. If such post-effective amendment or registration statement covering the Common Stock issuable upon exercise of the Public Warrants is not effective by the sixtieth (60th) business day after the Closing, warrant holders may, until such time as there is an effective post-effective amendment or registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise Public Warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Common Stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, the Company will use its best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of Common Stock equal to the lesser of (A) the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Public Warrants, multiplied by the excess of the “fair market value” (as defined below) over the exercise price of the Public Warrants by (y) the fair market value and (B) 0.361. The “fair market value” as used in this paragraph shall mean the average reported closing price of the Common Stock for the 10 trading days ending on the trading day prior to the date on which the notice of exercise is received by the warrant agent.
Redemption of Public Warrants when the price per share of the Common Stock equals or exceeds $18.00.
Once the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants:
| ● | in whole and not in part; | |
| ● | at a price of $0.01 per warrant; |
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| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and | |
| ● | if, and only if, the closing price of the shares of Common Stock equals or exceeds $18.00 per share (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of a Public Warrant as described under the heading “— Warrants — Public Warrants — Anti-Dilution Adjustments”) for any 20 trading days within a 30-trading day period ending three business days before we send to the notice of redemption to the warrant holders (which we refer to as the “Reference Value”). |
The Company will not redeem the Public Warrants as described above unless a registration statement under the Securities Act covering the issuance of the Common Stock issuable upon exercise of the Public Warrants is then effective and a current prospectus relating to those shares of Common Stock is available throughout the 30-day redemption period. If and when the Public Warrants become redeemable, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
We have established the last of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the Public Warrants, each warrant holder will be entitled to exercise his, her or its Public Warrant prior to the scheduled redemption date. However, the price of the Common Stock may fall below the $18.00 redemption trigger price (as adjusted for adjustments to the number of shares issuable upon exercise or the exercise price of an Public Warrant described under the heading “— Anti-dilution Adjustments”) as well as the $11.50 warrant exercise price after the redemption notice is issued.
Redemption of Public Warrants when the price per share of the Common Stock equals or exceeds $10.00
Once the Public Warrants become exercisable, the Company may redeem the outstanding warrants:
| ● | in whole and not in part; | |
| ● | at a price of $0.10 per warrant; | |
| ● | upon not less than 30 days’ prior written notice of redemption, provided that holders will be able to exercise their Public Warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” (as defined below) of Common Stock except as otherwise described below; | |
| ● | if, and only if, the Reference Value equals or exceeds $10.00 per share of Common Stock (as adjusted for adjustments to the number of shares issuable upon exercise) or the exercise price of a warrant as described under the heading “— Anti-dilution Adjustments”; and | |
| ● | if the Reference Value is less than $18.00 per share, the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above. |
Beginning on the date the notice of redemption is given until the Public Warrants are redeemed or exercised, holders may elect to exercise their Public Warrants on a cashless basis. The numbers in the table below represent the number of shares of Common Stock that a warrant holder will receive upon such cashless exercise in connection with a redemption by us pursuant to this redemption feature, based on the “fair market value” of Common Stock on the corresponding redemption date (assuming holders elect to exercise their Public Warrants and such warrants are not redeemed for $0.10 per warrant), determined for these purposes based on the volume weighted average price of the Common Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of warrants, and the number of months that the corresponding redemption date precedes the expiration date of the warrants, each as set forth in the table below. The Company will provide warrant holders with the final fair market value no later than one business day after the 10-trading day period described above ends.
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The share prices set forth in the column headings of the table below will be adjusted as of any date on which the number of shares issuable upon exercise of a Public Warrant or the exercise price of a Public Warrant is adjusted as set forth under the heading “— Anti-dilution Adjustments” below. If the number of shares issuable upon exercise of Public Warrants is adjusted, the adjusted share prices in the column headings will equal the share prices immediately prior to such adjustment, multiplied by a fraction, the numerator of which is the number of shares deliverable upon exercise of an Public Warrant immediately prior to such adjustment and the denominator of which is the number of shares deliverable upon exercise of a Public Warrant as so adjusted. The number of shares in the table below shall be adjusted in the same manner and at the same time as the number of shares issuable upon exercise of a Public Warrant. If the exercise price of a warrant is adjusted, (a) in the case of an adjustment pursuant to the fifth paragraph under the heading “— Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price multiplied by a fraction, the numerator of which is the higher of the Market Value and the Newly Issued Price as set forth under the heading “— Anti-dilution Adjustments” and the denominator of which is $10.00 and (b) in the case of an adjustment pursuant to the second paragraph under the heading “— Anti-dilution Adjustments” below, the adjusted share prices in the column headings will equal the unadjusted share price less the decrease in the exercise price of a warrant pursuant to such exercise price adjustment.
| Redemption Date (period to | Fair Market Value of Common Stock | |||||||||||||||||||||||||||||||||||
| expiration of warrants) | ≤10.00 | 11.00 | 12.00 | 13.00 | 14.00 | 15.00 | 16.00 | 17.00 | ≥18.00 | |||||||||||||||||||||||||||
| 60 months | 0.261 | 0.281 | 0.297 | 0.311 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
| 57 months | 0.257 | 0.277 | 0.294 | 0.310 | 0.324 | 0.337 | 0.348 | 0.358 | 0.361 | |||||||||||||||||||||||||||
| 54 months | 0.252 | 0.272 | 0.291 | 0.307 | 0.322 | 0.335 | 0.347 | 0.357 | 0.361 | |||||||||||||||||||||||||||
| 51 months | 0.246 | 0.268 | 0.287 | 0.304 | 0.320 | 0.333 | 0.346 | 0.357 | 0.361 | |||||||||||||||||||||||||||
| 48 months | 0.241 | 0.263 | 0.283 | 0.301 | 0.317 | 0.332 | 0.344 | 0.356 | 0.361 | |||||||||||||||||||||||||||
| 45 months | 0.235 | 0.258 | 0.279 | 0.298 | 0.315 | 0.330 | 0.343 | 0.356 | 0.361 | |||||||||||||||||||||||||||
| 42 months | 0.228 | 0.252 | 0.274 | 0.294 | 0.312 | 0.328 | 0.342 | 0.355 | 0.361 | |||||||||||||||||||||||||||
| 39 months | 0.221 | 0.246 | 0.269 | 0.290 | 0.309 | 0.325 | 0.340 | 0.354 | 0.361 | |||||||||||||||||||||||||||
| 36 months | 0.213 | 0.239 | 0.263 | 0.285 | 0.305 | 0.323 | 0.339 | 0.353 | 0.361 | |||||||||||||||||||||||||||
| 33 months | 0.205 | 0.232 | 0.257 | 0.280 | 0.301 | 0.320 | 0.337 | 0.352 | 0.361 | |||||||||||||||||||||||||||
| 30 months | 0.196 | 0.224 | 0.250 | 0.274 | 0.297 | 0.316 | 0.335 | 0.351 | 0.361 | |||||||||||||||||||||||||||
| 27 months | 0.185 | 0.214 | 0.242 | 0.268 | 0.291 | 0.313 | 0.332 | 0.350 | 0.361 | |||||||||||||||||||||||||||
| 24 months | 0.173 | 0.204 | 0.233 | 0.260 | 0.285 | 0.308 | 0.329 | 0.348 | 0.361 | |||||||||||||||||||||||||||
| 21 months | 0.161 | 0.193 | 0.223 | 0.252 | 0.279 | 0.304 | 0.326 | 0.347 | 0.361 | |||||||||||||||||||||||||||
| 18 months | 0.146 | 0.179 | 0.211 | 0.242 | 0.271 | 0.298 | 0.322 | 0.345 | 0.361 | |||||||||||||||||||||||||||
| 15 months | 0.130 | 0.164 | 0.197 | 0.230 | 0.262 | 0.291 | 0.317 | 0.342 | 0.361 | |||||||||||||||||||||||||||
| 12 months | 0.111 | 0.146 | 0.181 | 0.216 | 0.250 | 0.282 | 0.312 | 0.339 | 0.361 | |||||||||||||||||||||||||||
| 9 months | 0.090 | 0.125 | 0.162 | 0.199 | 0.237 | 0.272 | 0.305 | 0.336 | 0.361 | |||||||||||||||||||||||||||
| 6 months | 0.065 | 0.099 | 0.137 | 0.178 | 0.219 | 0.259 | 0.296 | 0.331 | 0.361 | |||||||||||||||||||||||||||
| 3 months | 0.034 | 0.065 | 0.104 | 0.150 | 0.197 | 0.243 | 0.286 | 0.326 | 0.361 | |||||||||||||||||||||||||||
| 0 months | — | — | 0.042 | 0.115 | 0.179 | 0.233 | 0.281 | 0.323 | 0.361 | |||||||||||||||||||||||||||
The exact fair market value and redemption date may not be set forth in the table above, in which case, if the fair market value is between two values in the table or the redemption date is between two redemption dates in the table, the number of shares of Common Stock to be issued for each Public Warrant exercised will be determined by a straight-line interpolation between the number of shares set forth for the higher and lower fair market values and the earlier and later redemption dates, as applicable, based on a 365 or 366-day year, as applicable. For example, if the volume weighted average price of Common Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants is $11.00 per share, and at such time there are 57 months until the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.277 shares of Common Stock for each whole warrant. For an example where the exact fair market value and redemption date are not as set forth in the table above, if the volume weighted average price of Common Stock during the 10 trading days immediately following the date on which the notice of redemption is sent to the holders of the warrants is $13.50 per share, and at such time there are 38 months until the expiration of the warrants, holders may choose to, in connection with this redemption feature, exercise their warrants for 0.298 shares of Common Stock for each whole warrant. In no event will the Public Warrants be exercisable on a cashless basis in connection with this redemption feature for more than 0.361 shares of Common Stock per warrant (subject to adjustment). Finally, as reflected in the table above, if the Public Warrants are out of the money and about to expire, they cannot be exercised on a cashless basis in connection with a redemption by us pursuant to this redemption feature, since they will not be exercisable for any shares of Common Stock.
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This redemption feature is structured to allow for all of the outstanding Public Warrants to be redeemed when the Common Stock is trading at or above $10.00 per share, which may be at a time when the trading price of the Common Stock is below the exercise price of the Public Warrants. We have established this redemption feature to provide us with the flexibility to redeem the Public Warrants without the Public Warrants having to reach the $18.00 per share threshold set forth above under “— Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $18.00.” Holders choosing to exercise their Public Warrants in connection with a redemption pursuant to this feature will, in effect, receive a number of shares for their warrants based on an option pricing model with a fixed volatility input as of the date of the prospectus. This redemption right provides us with an additional mechanism by which to redeem all of the outstanding warrants, and therefore have certainty as to our capital structure as the warrants would no longer be outstanding and would have been exercised or redeemed and we will be required to pay the applicable redemption price to warrant holders if we choose to exercise this redemption right and it will allow us to quickly proceed with a redemption of the Public Warrants if we determine it is in our best interest to do so. As such, we would redeem the Public Warrants in this manner when we believe it is in our best interest to update our capital structure to remove the warrants and pay the applicable redemption price to the warrant holders.
As stated above, we can redeem the Public Warrants when the Common Stock is trading at a price starting at $10.00, which is below the exercise price of $11.50, because it will provide certainty with respect to our capital structure and cash position while providing warrant holders with the opportunity to exercise their Public Warrants on a cashless basis for the applicable number of shares. If we choose to redeem the Public Warrants when the Common Stock is trading at a price below the exercise price of the Public Warrants, this could result in the warrant holders receiving fewer shares than they would have received if they had chosen to wait to exercise their warrants for shares of Common Stock if and when the Common Stock was trading at a price higher than the exercise price of $11.50.
No fractional shares of Common Stock will be issued upon exercise. If, upon exercise, a holder would be entitled to receive a fractional interest in a share, we will round down to the nearest whole number of the number of shares to be issued to the holder. If, at the time of redemption, the Public Warrants are exercisable for a security other than shares of Common Stock pursuant to the Warrant Agreement, the Public Warrants may be exercised for such security. At such time as the Public Warrants become exercisable for a security other than Common Stock, the Company will use its commercially reasonable efforts to register under the Securities Act the security issuable upon exercise of the warrants.
Redemption Procedures
In the event that the Company determines to redeem the Public Warrants when the closing price of the shares of Common Stock equals or exceeds $18.00 per share or $10.00 per share, pursuant to Section 6.1 or Section 6.2 of the Warrant Agreement, respectively, the Company will fix a date for the redemption. Notice of redemption will be mailed by first class mail, postage prepaid, by the Company not less than thirty (30) days prior to the redemption date to the registered holders of the Public Warrants to be redeemed at their last addresses as they appear on the registration books. Any notice mailed in the manner herein provided will be conclusively presumed to have been duly given whether or not the registered holder received such notice.
Beneficial Ownership Limitations
A holder of a Public Warrant may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such warrant, to the extent that after giving effect to such exercise, such person (together with such person’s affiliates), to the warrant agent’s actual knowledge, would beneficially own in excess of 4.9% or 9.9% (as specified by the holder) of the Common Stock outstanding immediately after giving effect to such exercise.
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Anti-dilution Adjustments.
If the number of outstanding shares of Common Stock is increased by a share capitalization payable in shares of Common Stock, or by a sub-division of shares or other similar event, then, on the effective date of such share capitalization, sub-division or similar event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be increased in proportion to such increase in the outstanding shares. A rights offering made to all or substantially all holders of securities entitling holders to purchase shares of Common Stock at a price less than the fair market value will be deemed a share capitalization of a number of shares equal to the product of (i) the number of shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering that are convertible into or exercisable for Common Stock) and (ii) the quotient of (x) the price per share of Common Stock paid in such rights offering and (y) the fair market value. For these purposes (i) if the rights offering is for securities convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there will be taken into account any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market value means the volume weighted average price of Common Stock as reported during the ten (10) trading day period ending on the trading day prior to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without the right to receive such rights.
In addition, if the Company, at any time while the Public Warrants are outstanding and unexpired, pay a dividend or make a distribution in cash, securities or other assets to all or substantially all of the holders of the Common Stock on account of such Common Stock (or other securities into which the Public Warrants are convertible), other than (a) as described above or (b) any cash dividends or cash distributions which, when combined on a per share basis with all other cash dividends and cash distributions paid on the Common Stock during the 365-day period ending on the date of declaration of such dividend or distribution does not exceed $0.50 (as adjusted to appropriately reflect any other adjustments and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price or to the number of shares of Common Stock issuable on exercise of each warrant) but only with respect to the amount of the aggregate cash dividends or cash distributions equal to or less than $0.50 per share, then the warrant exercise price will be decreased, effective immediately after the effective date of such event, by the amount of cash and/or the fair market value of any securities or other assets paid on each share of Common Stock in respect of such event.
If the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse share sub-division or reclassification of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse share sub-division, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be decreased in proportion to such decrease in outstanding shares of Common Stock.
Whenever the number of shares of Common Stock purchasable upon the exercise of the Public Warrants is adjusted, as described above, the warrant exercise price will be adjusted by multiplying the warrant exercise price immediately prior to such adjustment by a fraction (x) the numerator of which will be the number of shares purchasable upon the exercise of the warrants immediately prior to such adjustment, and (y) the denominator of which will be the number of shares so purchasable immediately thereafter.
In case of any reclassification or reorganization of the outstanding shares of Common Stock (other than those described above or that solely affects the par value of such shares), or in the case of any merger or consolidation of us with or into another corporation (other than a consolidation or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our issued and outstanding shares of Common Stock), or in the case of any sale or conveyance to another corporation or entity of the assets or other property of us as an entirety or substantially as an entirety in connection with which we are dissolved, the holders of the Public Warrants will thereafter have the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Public Warrants and in lieu of the Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount of shares or other securities or property (including cash) receivable upon such reclassification, reorganization, merger or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Public Warrants would have received if such holder had exercised their Public Warrants immediately prior to such event. However, if such holders were entitled to exercise a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the kind and amount of securities, cash or other assets for which each Public Warrant will become exercisable will be deemed to be the weighted average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election, and if a tender, exchange or redemption offer has been made to and accepted by such holders under circumstances in which, upon completion of such tender or exchange offer, the maker thereof, together with members of any group (within the meaning of Rule 13d-5(b)(1) under the Exchange Act) of which such maker is a part, and together with any affiliate or associate of such maker (within the meaning of Rule 12b-2 under the Exchange Act) and any members of any such group of which any such affiliate or associate is a part, own beneficially (within the meaning of Rule 13d-3 under the Exchange Act) more than 50% of the issued and outstanding Common Stock, the holder of an Public Warrant will be entitled to receive the highest amount of cash, securities or other property to which such holder would actually have been entitled as a shareholder if such warrant holder had exercised the Public Warrant prior to the expiration of such tender or exchange offer, accepted such offer and all of the Common Stock held by such holder had been purchased pursuant to such tender or exchange offer, subject to adjustment (from and after the consummation of such tender or exchange offer) as nearly equivalent as possible to the adjustments provided for in the Warrant Agreement. If less than 70% of the consideration receivable by the holders of Common Stock in such a transaction is payable in the form of shares in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the warrant properly exercises the warrant within thirty days following public disclosure of such transaction, the warrant exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes Warrant Value (as defined in the warrant agreement) of the warrant. The purpose of such exercise price reduction is to provide additional value to holders of the Public Warrants when an extraordinary transaction occurs during the exercise period of the Public Warrants pursuant to which the holders of the warrants otherwise do not receive the full potential value of the Public Warrants.
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The Public Warrants are issued in registered form under a Warrant Agreement between Continental Stock Transfer & Trust Company, as warrant agent, and CSLM. The Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or to correct any defective provision or mistake, including to conform the provisions of the Warrant Agreement to the description of the terms of the Public Warrants and the Warrant Agreement, (ii) adjusting the provisions relating to cash dividends on shares as contemplated by and in accordance with the Warrant Agreement or (iii) adding or changing any provisions with respect to matters or questions arising under the Warrant Agreement as the parties to the Warrant Agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the Public Warrants, provided that the approval by the holders of at least 50% of the then-outstanding Public Warrants is required to make any change that adversely affects the interests of the registered holders of Public Warrants, and, solely with respect to any amendment to the terms of the Private Placement Warrants, 50% of the then outstanding Private Placement Warrants. You should review a copy of the Warrant Agreement, which is filed as an exhibit to the registration statement of which this prospectus is a part, for a complete description of the terms and conditions applicable to the Public Warrants.
The Public Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price (or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of shares of Common Stock and any voting rights until they exercise their warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Public Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by shareholders.
No fractional shares will be issued upon exercise of the Public Warrants. If, upon exercise of the Public Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number the number of shares of Common Stock to be issued to the warrant holder.
Exclusive Forum
The Warrant Agreement provides that, subject to applicable law, (i) any action, proceeding or claim against us arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
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Notwithstanding the foregoing, these provisions of the Warrant Agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the Warrant Agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.
This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes, which may discourage such lawsuits and result in increased costs to warrant holders to bring a lawsuit. Alternatively, if a court were to find this provision of our Warrant Agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board.
Private Placement Warrants
The Private Placement Warrants (including shares of Common Stock issuable upon exercise of such warrants) will not be transferable, assignable or salable until 30 days after the Closing (except, among other limited exceptions, to CSLM’s officers and directors and other persons or entities affiliated with the Sponsor) and they will not be redeemable by the Company so long as they are held by the Sponsor, members of the Sponsor or their permitted transferees (except as set forth under “— Warrants — Public Warrants — Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $10.00”). The Sponsor or its permitted transferees have the option to exercise the Private Placement Warrants on a cashless basis. Except as described below, the Private Placement Warrants have terms and provisions that are identical to those of the warrants sold as part of the Units in CSLM’s IPO. If the Private Placement Warrants are held by holders other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by the holders on the same basis as the warrants included in the Units sold in CSLM’s IPO.
Except as described above under “— Public Warrants — Redemption of Public Warrants when the price per share of Common Stock equals or exceeds $10.00,” if holders of the Private Placement Warrants elect to exercise them on a cashless basis, they would pay the exercise price by surrendering his, her or its warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares underlying the Public Warrants, multiplied by the excess of the “fair market value” of the Common Stock (as defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market value” means the average reported closing price of the Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of warrant exercise is sent to the warrant agent. The reason that we have agreed that these warrants will be exercisable on a cashless basis so long as they are held by the Sponsor or its permitted transferees is because it was not known at the time of CSLM’s IPO whether the Sponsor would be affiliated with us following a business combination. If the Sponsor remains affiliated with the Company, its ability to sell Company securities in the open market will be significantly limited. The Company has policies in place that prohibit insiders from selling securities except during specific periods of time. Even during such periods of time when insiders will be permitted to sell Company securities, an insider cannot trade in Company securities if he or she is in possession of material non-public information. Accordingly, unlike public stockholders who could exercise their Public Warrants and sell the shares received upon such exercise freely in the open market in order to recoup the cost of such exercise, the insiders could be significantly restricted from selling such securities.
Dividends
The Company does not intend to pay cash dividends after the completion of the Business Combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of the Business Combination. The payment of any cash dividends subsequent to the Business Combination will be within the discretion of the Company’s board of directors at such time. If we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
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Our Transfer Agent and Warrant Agent
The transfer agent for the Common Stock and warrant agent for the Public Warrants is Continental Stock Transfer & Trust Company. We have agreed to indemnify Continental Stock Transfer & Trust Company in its roles as transfer agent and warrant agent, its agents and each of its shareholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted for its activities in that capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity. Continental Stock Transfer & Trust Company has agreed that it has no right of set-off or any right, title, interest or claim of any kind to, or to any monies in, the Trust Account, and has irrevocably waived any right, title, interest or claim of any kind to, or to any monies in, the Trust Account that it may have now or in the future. Accordingly, any indemnification provided will only be able to be satisfied, or a claim will only be able to be pursued, solely against us and our assets outside the Trust Account and not against the any monies in the Trust Account or interest earned thereon.
Certain Anti-Takeover Provisions of the Certificate of Incorporation, the Bylaws and Certain Provisions of Delaware Law
The Organizational Documents and the DGCL contain provisions, which are summarized in the following paragraphs, which are intended to enhance the likelihood of continuity and stability in the composition of the Company’s board of directors and to discourage certain types of transactions that may involve an actual or threatened acquisition of the Company. These provisions are intended to avoid costly takeover battles, reduce the Company’s vulnerability to a hostile change of control or other unsolicited acquisition proposal, and enhance the ability of the Company’s board of directors to maximize stockholder value in connection with any unsolicited offer to acquire the Company. However, these provisions may have the effect of delaying, deterring or preventing a merger or acquisition of the Company by means of a tender offer, a proxy contest or other takeover attempt that a stockholder might consider in its best interest, including attempts that might result in a premium over the prevailing market price for the shares of Common Stock. The Certificate of Incorporation provides that any action required or permitted to be taken by the Company’s stockholders must be effected at a duly called annual or extraordinary general meeting of stockholders and may not be effected by any consent in writing by such holders, except that any action required or permitted to be taken by holders of any series of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly permitted to do so by the certificate of designation relating to one or more series of Preferred Stock, if a consent or consents, setting forth the action so taken, are signed by the holders of outstanding shares of the relevant class or series having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and are delivered to the Company in accordance with the applicable provisions of the DGCL.
Authorized but Unissued Capital Stock
Delaware law does not require stockholder approval for any issuance of authorized shares. However, the listing requirements of Nasdaq, which would apply if and so long as the Common Stock remains listed on Nasdaq, require stockholder approval of certain issuances equal to or exceeding 20% of the then outstanding voting power or then outstanding number of shares of Common Stock. Additional shares that may be issued in the future may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate acquisitions. One of the effects of the existence of unissued and unreserved Company capital stock may be to enable the Company’s board of directors to issue shares to persons friendly to current management, which issuance could render more difficult or discourage an attempt to obtain control of the Company by means of a merger, tender offer, proxy contest or otherwise and thereby protect the continuity of management and possibly deprive stockholders of opportunities to sell their shares of Common Stock at prices higher than prevailing market prices.
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Election of Directors and Vacancies
The Certificate of Incorporation provides that the Company’s board of directors will determine the number of directors who will serve on the board. Subject to the Merger Agreement, the exact number of directors will be fixed from time to time by a majority of the Company’s board of directors. We currently have five members of our board of directors. Our board of directors is classified board, divided into three classes, designated as Class I, Class II and Class III. Our Class I directors will hold office for a term expiring at the first annual meeting of stockholders following the consummation of the Business Combination; our Class II directors will hold office for a term expiring at the second annual meeting of stockholders following the consummation of the Business Combination; and our Class III directors will hold office for a term expiring at the third annual meeting of stockholders following the consummation of the Business Combination. The Class I directors, whose terms will expire at the annual meeting of stockholders to be held in 2026, are Bharat Krish, Tim Gocher, and Salman Alam, the Class II directors, whose terms will expire at the annual meeting of stockholders to be held in 2027, are Sanjay Shrestha; and the Class III director, whose term will expire at the annual meeting of stockholders to be held in 2028, is Sameer Maskey. There will be no limit on the number of terms a director may serve on the Company’s board of directors.
In addition, the Certificate of Incorporation provides that any vacancy on the Company’s board of directors, including a vacancy that results from an increase in the number of directors or a vacancy that results from the removal of a director with cause, may be filled only by a majority of the directors then in office, subject to any rights of the holders of Preferred Stock.
Quorum
The Bylaws provide that at any meeting of the Company’s board of directors, a majority of the total number of directors then in office constitutes a quorum for the transaction of business.
No Cumulative Voting
Under Delaware law, the right to vote cumulatively does not exist unless the certificate of incorporation expressly authorizes cumulative voting. The Certificate of Incorporation does not authorize cumulative voting.
Special Meetings of Stockholders
The Certificate of Incorporation provides that special meetings of stockholders may be called only by or at the direction of the Company’s board of directors, the Chairperson of Company’s board of directors, the Chief Executive Officer or President, in each case, in accordance with the Bylaws.
Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
The Bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the Company’s board of directors or a committee of the Company’s board of directors. For any matter to be “properly brought” before a meeting, a stockholder will have to comply with advance notice requirements and provide the Company with certain information. Generally, to be timely, a stockholder’s notice must be received at the Company’s principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the immediately preceding annual meeting of stockholders (for the purposes of the first annual meeting of the stockholders of the Company following the adoption of the Bylaws, the date of the preceding annual meeting will be deemed to be in 2026). The Bylaws allow the Company’s board of directors to adopt rules and regulations for the conduct of a meeting of the stockholders as it deems appropriate, which may have the effect of precluding the conduct of certain business at a meeting if the rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to influence or obtain control of the Company.
Supermajority Provisions
The Organizational Documents provide that the Company’s board of directors is expressly authorized to adopt, amend or repeal, in whole or in part, the Bylaws without a stockholder vote in any matter not inconsistent with the laws of the State of Delaware or the Certificate of Incorporation. The stockholders of the Company also will have the power to adopt, amend or repeal the Bylaws by the affirmative vote of the holders of at least a majority of the voting power of all of the then outstanding shares of stock of the Company entitled to vote generally in an election of directors, voting together as a single class, subject to any vote of the holders of any class or series of stock of the Company required by applicable law or by the Certificate of Incorporation (including any certificate of designation in respect of any series of Preferred Stock) or the Bylaws.
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The DGCL provides generally that the affirmative vote of a majority of the outstanding shares entitled to vote thereon, voting together as a single class, is required to amend a corporation’s certificate of incorporation, unless the certificate of incorporation requires a greater percentage. The Certificate of Incorporation provides that the following provisions therein may be amended, altered, repealed or rescinded only by the affirmative vote of the holders of at least 66 and 2/3% in voting power all the then outstanding shares of Company’s stock entitled to vote thereon, voting together as a single class:
| ● | the provision regarding the Company’s board of directors being authorized to establish one or more series of Preferred Stock with such powers, preferences and relative, participating, optional and other special rights, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences as the Company’s board of directors may determine; | |
| ● | the provisions regarding removal of directors; | |
| ● | the provisions regarding filling vacancies on the Company’s board of directors and newly created directorships; | |
| ● | the provision regarding the Company’s board of directors being authorized to amend the Bylaws without a stockholder vote; | |
| ● | the provisions regarding stockholder action by written consent; | |
| ● | the provisions regarding calling special meetings of stockholders; | |
| ● | the provisions regarding stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders; | |
| ● | the provisions regarding limitation on liability and indemnification of the Company’s directors and officers; | |
| ● | the provisions regarding the Company electing not to be governed by Section 203 of the DGCL; | |
| ● | the provisions adopting Delaware as the exclusive forum for certain stockholder litigation and adopting the federal district courts of the United States as the exclusive forum for resolving complaints asserting a cause of action under the Securities Act; | |
| ● | the provisions regarding the Company renouncing its interest or expectancy in any corporate opportunity offered to any of its non-employee directors or principal stockholders and their affiliates; and | |
| ● | the amendment provision requiring that the above provisions be amended only with a 66 and 2/3% supermajority vote. |
These provisions may have the effect of deterring hostile takeovers or delaying or preventing changes in control of the Company or its management, such as a merger, reorganization or tender offer. These provisions are intended to enhance the likelihood of continued stability in the composition of the Company’s board of directors and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of the Company. These provisions are designed to reduce the Company’s vulnerability to an unsolicited acquisition proposal. The provisions are also intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for Common Stock and, as a consequence, may inhibit fluctuations in the market price of Common Stock that could result from actual or rumored takeover attempts. Such provisions may also have the effect of preventing changes in management.
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Exclusive Forum
The Certificate of Incorporation provides that, unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if and only if the Court of Chancery lacks subject matter jurisdiction, any state court located within the State of Delaware or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate court thereof shall, to the fullest extent permitted by law, be the sole and exclusive forum for the following claims or causes of action under the Delaware statutory or common law: (i) any derivative action, suit or proceeding brought on behalf of the Company, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any current or former director, officer or other employee of the Company to the Company or the Company stockholders, (iii) any action, suit or proceeding against the Company or any current or former director, officer or other employee of the Company arising pursuant to any provision of the DGCL or the Certificate of Incorporation or the Bylaws (as each may be amended from time to time), (iv) any claim or cause of action seeking to interpret, apply, enforce or determine the validity of the Certificate of Incorporation or the Bylaws (as each may be amended from time to time, including any right, obligation, or remedy thereunder), (v) any action, suit or proceeding as to which the DGCL confers jurisdiction on the Chancery Court, or (vi) any action, suit or proceeding asserting a claim against the Company or any current or former director, officer or other employee of the Company governed by the internal affairs doctrine or otherwise related to the Company’s internal affairs, in all cases to the fullest extent permitted by law and subject to the court having personal jurisdiction over the indispensable parties named as defendants. To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company will be deemed to have notice of and consented to the forum provisions in the Certificate of Incorporation. The Certificate of Incorporation further provides that unless the Company consents in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum for the resolutions of any complaint asserting a cause of action arising under the Securities Act. This provision in the Certificate of Incorporation does not apply to any claim or action arising under the Exchange Act or any other claim for which the federal courts of the United States have exclusive jurisdiction; however, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. However, it is possible that a court could find the Company’s forum selection provisions to be inapplicable or unenforceable. The provision may have the effect of discouraging lawsuits against the Company’s directors and officers.
Conflicts of Interest
Delaware law permits corporations to adopt provisions renouncing any interest or expectancy in certain opportunities that are presented to the corporation or its officers, directors or stockholders. The Certificate of Incorporation, to the maximum extent permitted from time to time by Delaware law, renounces any interest or expectancy that the Company has in, or right to be offered an opportunity to participate in, specified business opportunities that are from time to time presented to a member of the Company’s board of directors who is not an employee of the Company or its subsidiaries, or the principal stockholders of the Company and their affiliates. The Certificate of Incorporation does not renounce the Company’s interest in any business opportunity that is expressly offered to a non-employee director solely in his or her capacity as a director or officer of the Company.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties, subject to certain exceptions.
The Certificate of Incorporation includes a provision that eliminates the personal liability of directors and officers for monetary damages for any breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. The effect of these provisions is to eliminate the rights of the Company and its stockholders, through stockholders’ derivative suits on the Company’s behalf, to recover monetary damages from a director or officer for breach of fiduciary duty as a director or officer, including breaches resulting from grossly negligent behavior. However, exculpation does not apply to any director or officer if the director or officer has acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper benefit from his or her actions as a director or officer.
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The limitation of liability provision in the Certificate of Incorporation and the Bylaws may discourage stockholders from bringing a lawsuit against directors or officers for breach of their fiduciary duty. These provisions also may have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit the Company and its stockholders. In addition, your investment may be adversely affected to the extent the Company pays the costs of settlement and damage awards against directors and officers pursuant to any indemnity agreements that may be entered into.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Company’s directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
There is currently no pending material litigation or proceeding involving any of the Company’s directors, officers or employees for which indemnification is sought.
Listing
Our Common Stock and Public Warrants are listed on the Nasdaq Global Market under the symbols “FUSE” and “FUSEW”, respectively.
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SELLING STOCKHOLDER
This prospectus relates to the offer and sale by Roth Principal Investments of up to 5,750,000 shares of our Common Stock that have been or may be issued by us to Roth Principal Investments under the Purchase Agreement. For additional information regarding the shares of our Common Stock included in this prospectus, see the section titled “The Committed Equity Facility” above. We are registering the shares of our Common Stock included in this prospectus pursuant to the provisions of the Registration Rights Agreement we entered into with Roth Principal Investments on April 17, 2026 in order to permit the Selling Stockholder to offer the shares of Common Stock included in this prospectus for resale from time to time. Except for the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement and as set forth in the section titled “Plan of Distribution (Conflict of Interest)” in this prospectus, Roth Principal Investments has not had any material relationship with us within the past three years. As used in this prospectus, the term “Selling Stockholder” means Roth Principal Investments, LLC.
The table below presents information regarding the Selling Stockholder and the shares of our Common Stock that may be resold by the Selling Stockholder from time to time under this prospectus. This table is prepared based on information supplied to us by the Selling Stockholder, and reflects holdings as of April 10, 2026. The number of shares in the column “Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus” represents all of the shares of our Common Stock being offered for resale by the Selling Stockholder under this prospectus. The Selling Stockholder may sell some, all or none of the shares of Common Stock being offered for resale in this offering. We do not know how long the Selling Stockholder will hold the shares before selling them and, except as set forth in the section titled “Plan of Distribution (Conflict of Interest)” in this prospectus, we are not aware of any existing arrangements between the Selling Stockholder and any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares of our Common Stock being offered for resale by this prospectus.
Beneficial ownership is determined in accordance with Rule 13d-3(d) promulgated by the SEC under the Exchange Act, and includes shares of our Common Stock with respect to which the Selling Stockholder has sole or shared voting and investment power. Because the Purchase Price to be paid by the Selling Stockholder for shares of our Common Stock, if any, that we may elect to sell to the Selling Stockholder in one or more Purchases from time to time under the Purchase Agreement will be determined on the applicable Purchase Dates therefor, the actual number of shares of our Common Stock that we may sell to the Selling Stockholder under the Purchase Agreement may be fewer than the number of shares being offered for resale under this prospectus. The fourth column assumes the resale by the Selling Stockholder of all of the shares of our Common Stock being offered for resale pursuant to this prospectus.
| Name of Selling Stockholder | Number of Shares of Common Stock Beneficially Owned Prior to Offering | Maximum Number of Shares of Common Stock to be Offered Pursuant to this Prospectus(3) | Number of Shares of Common Stock Beneficially Owned After Offering | |||||||||||||||||
| Number(1) | Percent(2) | Number(4) | Percent(2) | |||||||||||||||||
| Roth Principal Investments, LLC(5) | 0 | - | 5,750,000 | 0 | – | |||||||||||||||
| (1) | In accordance with Rule 13d-3(d) under the Exchange Act, we have excluded from the number of shares beneficially owned prior to the offering all of the shares that Roth Principal Investments may be required to purchase under the Purchase Agreement, because the issuance of such shares is solely at our discretion and is subject to conditions contained in the Purchase Agreement, the satisfaction of which are entirely outside of Roth Principal Investments’ control, including the registration statement that includes this prospectus becoming and remaining effective. Furthermore, the Purchases of our Common Stock under the Purchase Agreement are subject to certain agreed upon maximum amount limitations set forth in the Purchase Agreement. Also, the Purchase Agreement prohibits us from issuing and selling any shares of our Common Stock to Roth Principal Investments to the extent such shares, when aggregated with all other shares of our Common Stock then beneficially owned by Roth Principal Investments, would cause Roth Principal Investments’ beneficial ownership of our Common Stock to exceed the 4.99% Beneficial Ownership Limitation. The Purchase Agreement also prohibits us from issuing or selling shares of our common stock under the Purchase Agreement in excess of the 19.99% Exchange Cap, unless we obtain stockholder approval to do so, or unless the average price for all shares of our common stock purchased by Roth Principal Investments under the Purchase Agreement equals or exceeds $3.46 per share, such that the Exchange Cap limitation would not apply under applicable Nasdaq rules. Neither the Beneficial Ownership Limitation nor the Exchange Cap (to the extent applicable under Nasdaq) may be amended or waived under the Purchase Agreement. |
| (2) | Applicable percentage ownership is based on 28,939,240 shares of Common Stock (excluding the Commitment Shares) outstanding as of April 10, 2026. |
| (3) | Assumes the sale of all shares of Common Stock being offered pursuant to this prospectus. |
| (4) | The business address of Roth Principal Investments, LLC (“Roth Principal Investments”) is 2340 Collins Avenue, Suite 402, Miami Beach, Florida 33139. The principal business of Roth Principal Investments is that of a private investor. Roth Principal Investments is a wholly owned subsidiary of CR Financial Holdings, Inc. (“CRFH”). CRFH expressly disclaims beneficial ownership of securities held of record by Roth Principal Investments, except to the extent of its pecuniary interest therein. All voting and investment decisions with respect to securities held of record by Roth Principal Investments are made by majority vote of an investment policy committee of Roth Principal Investments composed of five individuals, each of whom is not involved in the management of CRFH and at least three of whom are not affiliates or associated persons of Roth Capital Partners, LLC (“RCP”), a registered broker-dealer and member of the Financial Industry Regulatory Authority, Inc. (“FINRA”), and a wholly owned subsidiary of CRFH. We have been advised that neither CRFH nor Roth Principal Investments is a FINRA member or an independent broker-dealer. Because each of Roth Principal Investments and RCP is a wholly owned subsidiary of CRFH, Roth Principal Investments is deemed to be an affiliate of RCP. RCP will act as an executing broker that will effectuate resales of our Common Stock that may be acquired by Roth Principal Investments from us pursuant to the Purchase Agreement to the public in this offering. See “Plan of Distribution (Conflict of Interest)” for more information about the relationship between Roth Principal Investments and RCP. |
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PLAN OF DISTRIBUTION (CONFLICT OF INTEREST)
The shares of our Common Stock offered by this prospectus are being offered by the Selling Stockholder, Roth Principal Investments, LLC. The shares may be sold or distributed from time to time by the Selling Stockholder directly to one or more purchasers or through brokers, dealers, or underwriters who may act solely as agents at market prices prevailing at the time of sale, at prices related to the prevailing market prices, at negotiated prices, or at fixed prices, which may be changed. The sale of the shares of our Common Stock offered by this prospectus could be effected in one or more of the following methods:
| ● | ordinary brokers’ transactions; | |
| ● | transactions involving cross or block trades; | |
| ● | through brokers, dealers, or underwriters who may act solely as agents; | |
| ● | “at the market” into an existing market for our Common Stock; | |
| ● | in other ways not involving market makers or established business markets, including direct sales to purchasers or sales effected through agents; | |
| ● | in privately negotiated transactions; or | |
| ● | any combination of the foregoing. |
In order to comply with the securities laws of certain states, if applicable, the shares may be sold only through registered or licensed brokers or dealers. In addition, in certain states, the shares may not be sold unless they have been registered or qualified for sale in the state or an exemption from the state’s registration or qualification requirement is available and complied with.
Roth Principal Investments is an “underwriter” within the meaning of Section 2(a)(11) of the Securities Act.
Roth Principal Investments has informed us that it presently anticipates using, but is not required to use, Roth Capital Partners, LLC (“RCP”), a registered broker-dealer and FINRA member and an affiliate of Roth Principal Investments, as a broker to effectuate resales, if any, of our Common Stock that it may acquire from us pursuant to the Purchase Agreement, and that it may also engage one or more other registered broker-dealers to effectuate resales, if any, of such Common Stock that it may acquire from us, although, as of the date of this prospectus, it does not anticipate engaging any such other registered broker-dealers. Such resales will be made at prices and at terms then prevailing or at prices related to the then current market price. Each such registered broker-dealer, including RCP, will be an underwriter within the meaning of Section 2(a)(11) of the Securities Act. Roth Principal Investments has informed us that RCP, and any other broker-dealer it may engage to effectuate resales of our Common Stock on its behalf (as the case may be), may receive commissions from Roth Principal Investments for executing such resales for Roth Principal Investments and, if so, such commissions will not exceed customary brokerage commissions.
Roth Principal Investments is an affiliate of RCP, a registered broker-dealer and FINRA member, which will act as an executing broker that will effectuate resales of our Common Stock that may be acquired by Roth Principal Investments from us pursuant to the Purchase Agreement to the public in this offering. Because Roth Principal Investments will receive all the net proceeds from such resales of our Common Stock made to the public through RCP, RCP is deemed to have a “conflict of interest” within the meaning of FINRA Rule 5121. Consequently, this offering will be conducted in compliance with the provisions of FINRA Rule 5121, which requires that a “qualified independent underwriter,” as defined in FINRA Rule 5121, participate in the preparation of the registration statement that includes this prospectus and exercise the usual standards of “due diligence” with respect thereto. Accordingly, we have engaged Digital Offering, LLC, a registered broker-dealer and FINRA member (“Digital Offering”), to be the qualified independent underwriter in this offering and, in such capacity, participate in the preparation of the registration statement that includes this prospectus and exercise the usual standards of “due diligence” with respect thereto. We have agreed to pay directly to Digital Offering an aggregate cash fee of $50,000, as consideration for its services in connection with acting as the qualified independent underwriter in this offering. Digital Offering will receive no other compensation for acting as the qualified independent underwriter in this offering. In accordance with FINRA Rule 5110, such cash fee to be paid to Digital Offering for acting as the qualified independent underwriter in this offering, is deemed to be underwriting compensation in connection with sales of our Common Stock by Roth Principal Investments to the public. In accordance with FINRA Rule 5121, RCP is not permitted to sell shares of our Common Stock in this offering to an account over which it exercises discretionary authority without the prior specific written approval of the account holder.
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Except as set forth above, we know of no existing arrangements between the Selling Stockholder and any other stockholder, broker, dealer, underwriter or agent relating to the sale or distribution of the shares of our Common Stock offered by this prospectus.
Brokers, dealers, underwriters or agents participating in the distribution of the shares of our Common Stock offered by this prospectus may receive compensation in the form of commissions, discounts, or concessions from the purchasers, for whom the broker-dealers may act as agent, of the shares sold by the Selling Stockholder through this prospectus. The compensation paid to any such particular broker-dealer by any such purchasers of shares of our Common Stock sold by the Selling Stockholder may be less than or in excess of customary commissions. Neither we nor the Selling Stockholder can presently estimate the amount of compensation that any agent will receive from any purchasers of shares of our Common Stock sold by the Selling Stockholder.
We may from time to time file with the SEC one or more supplements to this prospectus or amendments to the registration statement of which this prospectus forms a part to amend, supplement or update information contained in this prospectus, including, if and when required under the Securities Act, to disclose certain information relating to a particular sale of shares offered by this prospectus by the Selling Stockholder, including with respect to any compensation paid or payable by the Selling Stockholder to any brokers, dealers, underwriters or agents that participate in the distribution of such shares by the Selling Stockholder, and any other related information required to be disclosed under the Securities Act.
We will pay the expenses incident to the registration under the Securities Act of the offer and sale of the shares of our Common Stock by the Selling Stockholder covered by this prospectus. We estimate that the total expenses for the offering will be approximately $252,600, assuming the facility is not terminated prior to the three-year life of the facility.
As consideration for its irrevocable commitment to purchase our Common Stock at our direction under the Purchase Agreement, we agreed to (i) pay to Roth Principal Investments a cash “structuring fee” of $20,000, at or prior to the execution of the Purchase Agreement and the Registration Rights Agreement, and (ii) pay to Roth Principal Investments a cash commitment fee in the amount of $300,000, which is equal to 1.5% of Roth Principal Investments’ $20,000,000 total dollar amount purchase commitment under the Purchase Agreement. The $300,000 cash commitment fee will be paid over time by Roth Principal Investments withholding cash amounts equal to 10% of the total aggregate Purchase Price payable by Roth Principal Investments to us in connection with each Purchase of shares of our Common Stock effected under the Purchase Agreement, until such time as Roth Principal Investments shall have received from such cash withholdings a total aggregate amount in cash equal to $300,000, representing the entire cash commitment fee payable to Roth Principal Investments pursuant to this Agreement. In accordance with FINRA Rule 5110, the $20,000 cash “structuring fee” we paid to Roth Principal Investments at or prior to our execution of the Purchase Agreement and Registration Rights Agreement and the $300,000 cash commitment fee are deemed to be underwriting compensation in connection with sales of our Common Stock by Roth Principal Investments to the public.
In addition, we have agreed to reimburse Roth Principal Investments the Initial Legal Fee Reimbursement Amount of $60,000 upon our execution of the Purchase Agreement and Registration Rights Agreement and the Additional Investor Legal Fee Reimbursement Amount of up to $7,500 per fiscal quarter, in each case in connection with the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement. In accordance with FINRA Rule 5110, these reimbursed fees and expenses are deemed to be underwriting compensation in connection with sales of our Common Stock by Roth Principal Investments to the public. Moreover, in accordance with FINRA Rule 5110, the 3.0% fixed discount to current market prices of our Common Stock reflected in the purchase prices payable by Roth Principal Investments for our Common Stock that we may require it to purchase from us from time to time in one or more Market Open Purchases and/or one or more Intraday Purchases under the Purchase Agreement, and the 5.0% fixed discount to current market prices of our Common Stock reflected in the purchase prices payable by Roth Principal Investments for our Common Stock that we may require it to purchase from us from time to time in one or more Pre-Market Purchases and/or one or more Post-Market Purchases under the Purchase Agreement, in each case are deemed to be underwriting compensation in connection with sales of our Common Stock by Roth Principal Investments to the public.
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We also have agreed to indemnify Roth Principal Investments and certain other persons against certain liabilities in connection with the offering of shares of our Common Stock offered hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Roth Principal Investments has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by Roth Principal Investments specifically for use in this prospectus or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and controlling persons, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.
Roth Principal Investments has represented to us that at no time prior to the date of the Purchase Agreement has Roth Principal Investments, any of its officers, or any entity managed or controlled by Roth Principal Investments, engaged in or effected, in any manner whatsoever, directly or indirectly, for Roth Principal Investments’ own principal account or for the principal account of any such entity managed or controlled by Roth Principal Investments, any short sale (as such term is defined in Rule 200 of Regulation SHO of the Exchange Act) of our Common Stock or any hedging transaction, which establishes a net short position with respect to our Common Stock that remained in effect as of the date of the Purchase Agreement. Roth Principal Investments has agreed that during the term of the Purchase Agreement, none of Roth Principal Investments, any of its officers, or any entity managed or controlled by Roth Principal Investments, will enter into or effect, directly or indirectly, any of the foregoing transactions either for Roth Principal Investments’ own principal account or for the principal account of any such entity managed or controlled by Roth Principal Investments.
We have advised the Selling Stockholder that it is required to comply with Regulation M promulgated under the Exchange Act. With certain exceptions, Regulation M precludes the Selling Stockholder, any affiliated purchasers, and any broker-dealer or other person who participates in the distribution from bidding for or purchasing or attempting to induce any person to bid for or purchase any security which is the subject of the distribution until the entire distribution is complete. Regulation M also prohibits any bids or purchases made in order to stabilize the price of a security in connection with the distribution of that security. All of the foregoing may affect the marketability of the securities offered by this prospectus.
This offering will terminate on the date that all shares of our Common Stock offered by this prospectus have been sold by the Selling Stockholder.
Our Common Stock is currently listed on Nasdaq under the symbol “FUSE”.
RCP, an affiliate of Roth Principal Investments, has provided, currently provides and/or from time to time in the future may provide various investment banking and other financial services for us and/or one or more of our affiliates that are unrelated to the transactions contemplated by the Purchase Agreement and Registration Rights Agreement and the offering of shares for resale by Roth Principal Investments to which this prospectus relates, for which investment banking and other financial services RCP has received and may continue to receive customary fees, commissions and other compensation from us, aside from any discounts, fees and other compensation that Roth Principal Investments and RCP have received and may receive in connection with the transactions contemplated by the Purchase Agreement, including (i) the $20,000 cash “structuring fee” we paid to Roth Principal Investments and the $300,000 cash commitment fee we have agreed to pay or cause to be paid to Roth Principal Investments, in each case as consideration for its irrevocable commitment to purchase shares of our Common Stock from us at our direction under the Purchase Agreement, (ii) the 3.0% fixed discount to current market prices of our Common Stock reflected in the purchase prices payable by Roth Principal Investments for our Common Stock that we may require it to purchase from us from time to time in one or more Market Open Purchases and/or one or more Intraday Purchases under the Purchase Agreement, (iii) the 5.0% fixed discount to current market prices of our Common Stock reflected in the purchase prices payable by Roth Principal Investments for our Common Stock that we may require it to purchase from us from time to time in one or more Pre-Market Purchases and/or one or more Post-Market Purchases under the Purchase Agreement, (iv) our reimbursement of Roth Principal Investments’ legal fees up to $150,000 in the aggregate ($60,000 upon execution of the Purchase Agreement and $7,500 per fiscal quarter for the maximum three-year term of the Purchase Agreement) in connection with the transactions contemplated by the Purchase Agreement and the Registration Rights Agreement, and (iv) any customary brokerage commissions that may be received by RCP from Roth Principal Investments for executing resales of our Common Stock purchased or acquired by Roth Principal Investments from us pursuant to the Purchase Agreement to the public in this offering.
The total underwriting compensation to be received by all participating FINRA members, in the aggregate, in connection with this offering, as determined under FINRA Rule 5110, will not exceed 8.0% of the maximum aggregate offering price of all shares of our Common Stock that may be resold by Roth Principal Investments to the public through this prospectus. Accordingly, the total amount of any specific item of underwriting compensation described herein that may be received by any participating FINRA member in connection with this offering shall, in each case, be subject to the limitation on the total underwriting compensation to be received by all participating FINRA members, in the aggregate, in connection with this offering, as determined under FINRA Rule 5110, described in the immediately preceding sentence.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material U.S. federal income tax considerations of the acquisition, ownership, and disposition of our Common Stock and Warrants acquired in this offering, but does not purport to be a complete analysis of all the potential tax considerations relating thereto. This summary is based upon the provisions of the U.S. Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, administrative rulings, and judicial decisions, all as of the date hereof. These authorities may be changed, possibly retroactively, so as to result in U.S. federal income tax consequences different from those set forth below. We have not sought, and do not intend to seek, any ruling from the U.S. Internal Revenue Service, or IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions.
This summary also does not address the tax considerations arising under the laws of any non-U.S., state, or local jurisdiction, under U.S. federal gift and estate tax rules, or under any applicable tax treaty. In addition, this discussion does not address tax considerations applicable to an investor’s particular circumstances or to investors that may be subject to special tax rules, including, without limitation:
| ● | banks, insurance companies, or other financial institutions; | |
| ● | regulated investment companies or real estate investment trusts; | |
| ● | persons subject to the alternative minimum tax or the Medicare contribution tax on net investment income; | |
| ● | tax-exempt accounts, organizations, or governmental organizations; | |
| ● | pension plans and tax-qualified retirement plans; | |
| ● | controlled foreign corporations, passive foreign investment companies, and corporations that accumulate earnings to avoid U.S. federal income tax; | |
| ● | brokers or dealers in securities or currencies; | |
| ● | traders in securities that elect to use a mark-to-market method of accounting for their securities holdings; | |
| ● | persons that own, or are deemed to own, more than 5% (by vote or value) of our Common Stock or Warrants (except to the extent specifically set forth below); | |
| ● | certain former citizens or long-term residents of the United States; | |
| ● | partnerships (or entities or arrangements classified as such for U.S. federal income tax purposes), other pass-through entities, and investors therein; | |
| ● | persons who hold our Common Stock or Warrants as a position in a hedging transaction, “straddle,” “conversion transaction,” or other risk reduction transaction; | |
| ● | persons who hold or receive our Common Stock or Warrants pursuant to the exercise of any option or otherwise as compensation; | |
| ● | persons subject to special tax accounting rules as a result of any item of gross income with respect to our Common Stock or Warrants being taken into account in an “applicable financial statement” as defined in Section 451(b) of the Code; | |
| ● | persons who hold our Common Stock or Warrants not as a capital asset within the meaning of Section 1221 of the Code (generally, as property held for investment); or | |
| ● | persons deemed to sell our Common Stock or Warrants under the constructive sale provisions of the Code. |
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In addition, if a partnership (or other entity or arrangement classified as a partnership for U.S. federal income tax purposes) or other flow-through entity holds our Common Stock or Warrants, the tax treatment of a partner in the partnership or owner of other such entity generally will depend on the status of the partner or owner and upon the activities of the partnership or other such entity. A partner in a partnership, or owner of other such entity, that will hold our Common Stock or Warrants should consult his, her, or its own tax advisor regarding the tax consequences of the ownership and disposition of our Common Stock or Warrants through the partnership or other such entity, as applicable.
You are urged to consult your tax advisor with respect to the application of the U.S. federal income tax laws to your particular situation, as well as any tax consequences of the purchase, ownership, and disposition of our Common Stock or Warrants arising under the U.S. federal gift or estate tax rules or under the laws of any state, local, non-U.S., or other taxing jurisdiction or under any applicable tax treaty.
For purposes of this discussion, you are a “U.S. holder” if you are a beneficial owner of our Common Stock or Warrants that, for U.S. federal income tax purposes, is not a partnership (including any entity or arrangement treated as a partnership and the equity holders therein) and is:
| ● | an individual who is a citizen or resident of the United States; | |
| ● | a corporation or other entity taxable as a corporation created or organized in the United States or under the laws of the United States or any political subdivision thereof, or otherwise treated as such for U.S. federal income tax purposes; | |
| ● | an estate whose income is subject to U.S. federal income tax regardless of its source; or | |
| ● | a trust (1) whose administration is subject to the primary supervision of a U.S. court and that has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (2) that has made a valid election under applicable Treasury Regulations to be treated as a “United States person” within the meaning of the Code. |
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of our securities that is neither a U.S. holder nor a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) for U.S. federal income tax purposes.
Tax Considerations Applicable to U.S. Holders
Distributions
If we make distributions on our Common Stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return of capital and will first reduce your basis in our Common Stock (determined separately with respect to each share of our Common Stock), but not below zero, and then will be treated as gain from the sale of stock as described below in “—Tax Considerations Applicable to U.S. Holders—Gain on Disposition of Common Stock.”
Dividends we pay to a U.S. Holder that is a corporation or other entity taxable as a corporation generally will qualify for the dividends received deduction if the requisite holding period is satisfied. With certain exceptions (including dividends treated as investment income for purposes of investment interest deduction limitations), and provided certain holding period requirements are met, dividends we pay to a non-corporate U.S. holder generally will constitute “qualified dividends” that under current law will be subject to tax at long-term capital gains rates. If the holding period requirements are not satisfied, a corporation may not be able to qualify for the dividends received deduction and would have taxable income equal to the entire dividend amount, and non-corporate holders may be subject to tax on such dividend at ordinary income tax rates instead of the preferential rates that apply to qualified dividend income.
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Gain on Disposition of Common Stock
You generally will recognize gain or loss on the sale, exchange or other taxable disposition of our Common Stock. Any such gain or loss will be capital gain or loss and will be long-term capital gain or loss if your holding period for the Common Stock so disposed of exceeds one year. The amount of gain or loss recognized generally will be equal to the difference between (1) the sum of the amount of cash and the fair market value of any property received in such disposition and (2) your adjusted tax basis in its Common Stock so disposed of. Your adjusted tax basis in its Common Stock generally will equal your acquisition cost for such Common Stock (or, in the case of Common Stock received upon exercise of a Warrant, your initial basis for such Common Stock, as discussed below), less any prior distributions treated as a return of capital. Long-term capital gains recognized by non-corporate U.S. holders generally are eligible under current law for reduced rates of tax. If your holding period for the Common Stock so disposed of is one year or less, any gain on a sale or other taxable disposition of the shares would be subject to short-term capital gain treatment and would be taxed at ordinary income tax rates. The deductibility of capital losses is subject to limitations.
Exercise of a Warrant
Except as discussed below with respect to the cashless exercise of a Warrant, you generally will not recognize taxable gain or loss upon the exercise of a Warrant for cash. Your initial tax basis in the share of our Common Stock received upon exercise of the Warrant generally will be an amount equal to the sum of your acquisition cost of the Warrant and the exercise price of such Warrant. It is unclear whether your holding period for the Common Stock received upon exercise of the Warrant would commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant; however, in either case, the holding period will not include the period during which you held the Warrants.
In certain circumstances, the Warrants may be exercised on a cashless basis. The U.S. federal income tax treatment of an exercise of a Warrant on a cashless basis is not clear and could differ from the consequences described above. It is possible that a cashless exercise could be a taxable event, a non-realization event, or a tax-free recapitalization within the meaning of Section 368(a)(1)(E) of the Code. If a cashless exercise is not treated as a realization event, it is unclear whether a U.S. holder’s holding period for Common Stock would commence on the date of exercise of the Warrant or the following day. If, however, a cashless exercise is treated as a recapitalization, the holding period of Common Stock would include the holding period of the Warrant.
If a cashless exercise were treated as a taxable exchange, a U.S. holder could be deemed to have surrendered a number of Warrants having an aggregate fair market value equal to the aggregate exercise price of the total number of Warrants being exercised. The U.S. holder would recognize capital gain or loss in an amount equal to the difference between the fair market value of the Warrants deemed surrendered and the U.S. holder’s tax basis in such Warrants. Such gain or loss would be long-term or short-term depending on the U.S. holder’s holding period in the Warrants deemed surrendered. In this case, a U.S. holder’s tax basis in Common Stock received would equal the sum of the U.S. holder’s initial investment in the Warrants exercised, the amount of any constructive distributions included in income by such U.S. holder (as described below under “Possible Constructive Distributions”) and the exercise price of such Warrants. It is unclear whether a U.S. holder’s holding period for Common Stock would commence on the date of exercise of the Warrant or the day following the date of exercise of the Warrant.
Because of the absence of authority on the U.S. federal income tax treatment of a cashless exercise, you are urged to consult your tax advisors as to the consequences of an exercise of a Warrant on a cashless basis, including with respect to your holding period and tax basis in the Common Stock received upon exercise of the Warrant.
Sale or other Disposition of a Warrant
Upon a sale, exchange (other than by exercise), redemption, or expiration of a Warrant, you will recognize taxable gain or loss in an amount equal to the difference between (1) the amount realized upon such disposition or expiration and (2) your adjusted tax basis in the Warrant. Your adjusted tax basis in its Warrants generally will equal your acquisition cost of the Warrant, increased by the amount of any constructive distributions included in income by you (as described below under “Tax Considerations Applicable to U.S. Holders—Possible Constructive Distributions”). Such gain or loss generally will be treated as long-term capital gain or loss if the Warrant is held by the U.S. holder for more than one year at the time of such disposition or expiration.
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If a Warrant is allowed to lapse unexercised, you generally will recognize a capital loss equal to your adjusted tax basis in the Warrant. Any such loss generally will be a capital loss and will be long-term capital loss if the Warrant is held for more than one year. The deductibility of capital losses is subject to certain limitations.
Possible Constructive Distributions
The terms of each Warrant provide for an adjustment to the number of shares of Common Stock for which the Warrant may be exercised or to the exercise price of the Warrant in certain events, as discussed in the section of this prospectus captioned “Description of Capital Stock—Warrants.” An adjustment which has the effect of preventing dilution generally should not be a taxable event. Nevertheless, a U.S. holder of Warrants would be treated as receiving a constructive distribution from us if, for example, the adjustment increases the holder’s proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Common Stock that would be obtained upon exercise or an adjustment to the exercise price of the Warrant) as a result of a distribution of cash to the holders of shares of our Common Stock that is taxable to such holders as a distribution. Such constructive distribution would be subject to tax as described above under “Tax Considerations Applicable to U.S. Holders—Distributions” in the same manner as if such U.S. holder received a cash distribution from us on Common Stock equal to the fair market value of such increased interest.
Tax Considerations Applicable to Non-U.S. Holders
Distributions
If we make distributions on our Common Stock, those payments will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those distributions exceed both our current and our accumulated earnings and profits, the excess will constitute a return of capital and will first reduce your basis in our Common Stock (determined separately with respect to each share of our Common Stock), but not below zero, and then will be treated as gain from the sale of stock as described below in “—Tax Considerations Applicable to Non-U.S. Holders—Gain on Disposition of Common Stock and Warrants.”
Subject to the discussions below on effectively connected income and in “—Backup Withholding and Information Reporting” and “—Tax Considerations Applicable to Non-U.S. Holders-Foreign Account Tax Compliance Act (FATCA),” any dividend paid to you generally will be subject to U.S. federal withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty between the United States and your country of residence. Under applicable Treasury Regulations, the applicable withholding agent may withhold up to 30% of the gross amount of the entire distribution even if the amount constituting a dividend, as described above, is less than the gross amount. In order to receive a reduced treaty rate, you must provide the applicable withholding agent with a properly executed IRS Form W-8BEN or W-8BEN-E or other appropriate version of IRS Form W-8 certifying qualification for the reduced rate. If you hold our Common Stock through a financial institution or other agent acting on your behalf, you generally will be required to provide appropriate documentation to the agent, which then may be required to provide certification to us or our paying agent, either directly or through other intermediaries. If you are eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty, you may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. You should consult your tax advisor regarding your entitlement to benefits under any applicable tax treaty.
Dividends received by you that are treated as effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by you in the United States) are generally exempt from the 30% U.S. federal withholding tax, subject to the discussions below in “—Backup Withholding and Information Reporting” and “—Tax Considerations Applicable to Non-U.S. Holders-Foreign Account Tax Compliance Act (FATCA).” In order to obtain this exemption, you must provide the applicable withholding agent with a properly executed IRS Form W-8ECI or other applicable IRS Form W-8 properly certifying such exemption. Such effectively connected dividends, although not subject to U.S. federal withholding tax, are taxed at the same rates applicable to U.S. persons, net of certain deductions and credits and subject to an applicable income tax treaty providing otherwise. In addition, if you are a corporate non-U.S. holder, dividends you receive that are effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by you in the United States) may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty between the United States and your country of residence. You should consult your tax advisor regarding any applicable tax treaties that may provide for different rules.
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Exercise of a Warrant
The U.S. federal income tax treatment of your exercise of a Warrant generally will correspond to the U.S. federal income tax treatment of the exercise of a Warrant by a U.S. holder, as described under “—Tax Considerations Applicable to U.S. Holders—Exercise of a Warrant” above, although to the extent a cashless exercise results in a taxable exchange, the tax consequences to you would be the same as those described below in “—Tax Considerations Applicable to Non-U.S. Holders-Gain on Disposition of Common Stock and Warrants.”
Gain on Disposition of Common Stock and Warrants
Subject to the discussions in “—Backup Withholding and Information Reporting” and “—Tax Considerations Applicable to U.S. Holders—Foreign Account Tax Compliance Act (FATCA),” you generally will not be required to pay U.S. federal income tax on any gain realized upon the sale or other disposition of our Common Stock or Warrants unless:
| ● | the gain is effectively connected with your conduct of a U.S. trade or business (and, if required by an applicable income tax treaty, the gain is attributable to a permanent establishment or fixed base maintained by you in the United States); | |
| ● | you are an individual who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or | |
| ● | our Common Stock constitutes a United States real property interest by reason of our status as a “United States real property holding corporation,” or USRPHC, for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding your disposition of our Common Stock or Warrants or your holding period for our Common Stock or Warrants, or the applicable testing period. |
If you are a non-U.S. holder described in the first bullet above, you will be required to pay tax on the gain derived from the sale or other disposition of our Common Stock or Warrants (net of certain deductions and credits) under regular U.S. federal income tax rates, and a corporate non-U.S. holder described in the first bullet above also may be subject to the branch profits tax at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty. If you are an individual non-U.S. holder described in the second bullet above, you will be subject to tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale or other disposition of our Common Stock or Warrants, which gain may be offset by U.S. source capital losses for the year, provided you have timely filed U.S. federal income tax returns with respect to such losses. You should consult your tax advisor regarding any applicable income tax or other treaties that may provide for different rules.
We believe that we are not currently and will not become a USRPHC for U.S. federal income tax purposes, and the remainder of this discussion so assumes. However, because the determination of whether we are a USRPHC depends on the fair market value of our U.S. real property interests relative to the fair market value of our U.S. and worldwide real property interests plus our other business assets, there can be no assurance that we will not become a USRPHC in the future. However, even if we are or become a USRPHC, our Common Stock and Warrants will not constitute a United States real property interest if (i) our Common Stock is regularly traded on an established securities market and you hold no more than 5% of our outstanding Common Stock, directly, indirectly, or constructively, at all times during the applicable testing period or (ii) provided that our Warrants are regularly traded on an established securities market, you have not owned, actually or constructively, more than 5% of our Warrants at any time within the relevant period. It is unclear how your ownership of Warrants will affect the determination of whether you own more than 5% of our Common Stock. In addition, special rules may apply in the case of a disposition of Warrants if our Common Stock is considered to be regularly traded but our Warrants are not considered to be publicly traded. If we are a USRPHC at any time within the applicable testing period and either our Common Stock and/or Warrants are not regularly traded on an established securities market or you hold more than 5% of our outstanding Common Stock and/or Warrants, directly, indirectly, or constructively, at any time during the applicable testing period, you will generally be taxed on any gain realized upon the sale or other disposition of our Common Stock and/or Warrants in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply. If we are a USRPHC at any time within the applicable testing period and our Common Stock and/or Warrants are not regularly traded on an established securities market, your proceeds received on the disposition of shares will also generally be subject to withholding at a rate of 15%. You are encouraged to consult your own tax advisors regarding the possible consequences to you if we are, or were to become, a URSPHC.
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Possible Constructive Distributions
The terms of each Warrant provide for an adjustment to the number of shares of Common Stock for which the Warrant may be exercised or to the exercise price of the Warrant in certain events, as discussed in the section of this prospectus captioned “Description of Capital Stock—Warrants.” An adjustment that has the effect of preventing dilution generally should not be a taxable event. Nevertheless, you would be treated as receiving a constructive distribution from us if, for example, the adjustment increases your proportionate interest in our assets or earnings and profits (e.g., through an increase in the number of shares of Common Stock that would be obtained upon exercise or an adjustment to the exercise price of the Warrant) as a result of a distribution of cash to the holders of shares of our Common Stock that is taxable to such holders as a distribution. You would be subject to U.S. federal income tax withholding as described above under “Tax Considerations Applicable to Non-U.S. Holders—Distributions” under that section in the same manner as if you received a cash distribution from us on Common Stock equal to the fair market value of such increased interest.
Foreign Account Tax Compliance Act (FATCA)
Subject to the following paragraph, the Foreign Account Tax Compliance Act, Treasury Regulations issued thereunder and official IRS guidance with respect thereto, or, collectively, FATCA, generally impose a U.S. federal withholding tax of 30% on dividends on and the gross proceeds from a sale or other disposition of our Common Stock or Warrants paid to a “foreign financial institution” (as specially defined under these rules), unless otherwise provided by the Treasury Secretary or such institution (i) enters into an agreement with the U.S. government to, among other things, withhold on certain payments and to collect and provide to the U.S. tax authorities substantial information regarding certain U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or (ii) otherwise establishes an exemption. Subject to the following paragraph, FATCA also generally imposes a U.S. federal withholding tax of 30% on dividends on and the gross proceeds from a sale or other disposition of our Common Stock or Warrants paid to a “non-financial foreign entity” (as specially defined under these rules), unless otherwise provided by the Treasury Secretary or such entity provides the withholding agent with a certification identifying the substantial direct and indirect U.S. owners of the entity, certifies that it does not have any substantial U.S. owners, or otherwise establishes an exemption. The withholding tax will apply regardless of whether the payment otherwise would be exempt from U.S. nonresident and backup withholding tax, including under the other exemptions described above. Under certain circumstances, a non-U.S. holder might be eligible for refunds or credits of such taxes. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this section. Prospective investors should consult with their own tax advisors regarding the application of FATCA withholding to their investment in, and ownership and disposition of, our Common Stock or Warrants.
The U.S. Treasury Department has issued proposed Treasury Regulations that, if finalized in their present form, would eliminate withholding under FATCA with respect to payments of gross proceeds from a sale or other disposition of our Common Stock or Warrants. In the preamble to such proposed Treasury Regulations, the Treasury Secretary stated that taxpayers may generally rely on the proposed Treasury Regulations until final regulations are issued.
Backup Withholding and Information Reporting
Generally, we or the applicable agent must report annually to the IRS the amount of dividends paid to you, your name, your address and the amount of tax withheld, if any. A similar report will be sent to you. Pursuant to applicable income tax treaties or other agreements, the IRS may make these reports available to tax authorities in your country of residence.
Payments of dividends on or of proceeds from the disposition of our Common Stock or Warrants made to you may also be subject to backup withholding (currently at a rate of 24% and additional information reporting unless you establish an exemption, for example, by providing a properly completed IRS Form W-9 certifying your exemption from backup withholding or by certifying your non-U.S. status on a properly completed IRS Form W-8BEN or Form W-8BEN-E or another appropriate version of IRS Form W-8.
Backup withholding is not an additional tax; rather, the U.S. federal income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund or credit may generally be obtained from the IRS, provided that the required information is furnished to the IRS in a timely manner.
The preceding discussion of U.S. federal tax considerations is for general information only. It is not tax advice to investors in their particular circumstances. Each prospective investor should consult its own tax advisor regarding the particular U.S. federal, state and local, and non-U.S. tax considerations of purchasing, holding, and disposing of our Common Stock or Warrants, including the consequences of any proposed change in applicable laws.
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EXPERTS
The consolidated financial statements of Fusemachines Inc. as of December 31, 2025 and 2024, and for each of the two years in the period ended December 31, 2025, included in this prospectus, have been included in reliance on the report of KNAV CPA LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities being offered by this prospectus will be passed upon by Dentons US LLP, New York, New York.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1/A under the Securities Act with respect to the securities offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement, some of which is contained in exhibits to the registration statement as permitted by the rules and regulations of the SEC. For further information with respect to us and our securities, we refer you to the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus concerning the contents of any contract or any other document is not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit. The SEC maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is www.sec.gov.
We are subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, are required to file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information are available at the website of the SEC referred to above. We also maintain a website at https://fusemachines.com. You may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
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FUSEMACHINES INC.
INDEX TO FINANCIAL STATEMENTS
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Fusemachines Inc. and its subsidiaries
Opinion on the consolidated financial statements
We have audited the accompanying consolidated balance sheets of Fusemachines Inc. and its subsidiaries (the Company) as of December 31, 2025 and December 31, 2024 and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit and cash flows for each of the years in the two-year period ended December 31, 2025 and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and December 31, 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Substantial doubt about the Company’s ability to continue as a going concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has suffered recurring losses, has an accumulated deficit and stockholders’ deficit. The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders and debt holders including management’s plan to raise additional capital from issuance of equity or receive additional borrowings to fund the Company’s operating and investing activities over the next year. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Basis for opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ KNAV CPA LLP
KNAV CPA LLP
We have served as the Company’s auditor since 2023.
Atlanta, Georgia
March 27, 2026
PCAOB ID – 2983
| F-1 |
Fusemachines Inc. and Subsidiaries
Consolidated Balance Sheets
(all amounts in USD, in thousands, except number of shares and per share data)
| December 31, 2025 | December 31, 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | ||||||||
| Accounts receivable, current, net | ||||||||
| Unbilled revenue | ||||||||
| Deferred transaction costs | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Accounts receivable, net | ||||||||
| Deferred tax asset | ||||||||
| Operating lease right-of-use assets | ||||||||
| Other assets | ||||||||
| Total assets | ||||||||
| Liabilities and stockholders’ deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Convertible notes payable, at fair value, current | ||||||||
| Convertible notes payable, current | ||||||||
| Related party loan payable, current | ||||||||
| Operating lease liability, current | ||||||||
| Forward purchase derivative liability | ||||||||
| Short term debt | ||||||||
| Total current liabilities | ||||||||
| Accounts payable non-current | ||||||||
| Related party convertible notes payable, at fair value | ||||||||
| Convertible notes payable | ||||||||
| Warrant liability | ||||||||
| Cumulative mandatorily redeemable common and preferred stock liability | ||||||||
| Operating lease liability | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies (Note 17) | ||||||||
| Stockholder’s deficit: | ||||||||
| Convertible preferred stock ($ par value, and shares authorized as of December 31,2025 and December 31, 2024, respectively; and shares issued as of December 31, 2025 and December 31, 2024, respectively; and shares outstanding as of December 31, 2025 and December 31, 2024) | ||||||||
| Common stock ($ par value, shares and shares authorized as of December 31,2025 and December 31, 2024; and shares issued as of December 31,2025 and December 31,2024 respectively; shares and shares outstanding as of December 31,2025 and December 31, 2024, respectively) | ||||||||
| Additional paid in capital | ||||||||
| Treasury stock, at cost ( and as of December 31,2025 and December 31, 2024, respectively) | ( | ) | ||||||
| Share subscription receivable | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
Fusemachines Inc. and Subsidiaries
Consolidated Statements of Operations and Comprehensive Loss
(all amounts in USD, in thousands, except number of shares and per share data)
| Year
ended December 31, 2025 | Year ended December 31, 2024 | |||||||
| Revenue | ||||||||
| Cost of revenue | ( | ) | ( | ) | ||||
| Gross Profit | ||||||||
| Operating expenses: | ||||||||
| Selling and marketing | ||||||||
| General and administrative | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other (expense) income: | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Loss on extinguishment of convertible notes payable | ( | ) | ||||||
| Loss on extinguishment of notes payable | ( | ) | ||||||
| Loss on extinguishment of payable | ( | ) | ||||||
| Gain/(Loss) on change in fair value of convertible notes and warranty liability | ( | ) | ||||||
Gain/(Loss) on change in fair value of forward purchase derivative liability | ( | ) | ||||||
| Other (expense) income | ( | ) | ||||||
| Total other expense/(income), net | ( | ) | ||||||
| Loss before income taxes and equity in earnings of investee | ( | ) | ( | ) | ||||
| Provision for income tax | ( | ) | ( | ) | ||||
| Equity in earnings of investee,
net of income tax provision of $ | ( | ) | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Other comprehensive income (loss) | ||||||||
| Change in foreign currency translation adjustment | ||||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||
| Net loss per share - basic and diluted | ) | ) | ||||||
| Weighted-average common shares outstanding - basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
Fusemachines Inc. and Subsidiaries
Consolidated Statements of Stockholders Deficit
(all amounts in USD, in thousands, except number of shares and per share data)
Convertible Preferred Stock* | Common stock* | Additional paid-in capital | Treasury stock* | Share Subscription Receivable | Accumulated deficit | Accumulated other comprehensive Income |
Total stockholders’ deficit | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Amount | Shares | Amount | Amount | Amount | Amount | Amount | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | | $ | $ | ( | ) | $ | ( | ) | $ | | $ | ( | ) | |||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Issuance of shares upon repayment and forgiveness of 2023 Promissory Notes | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon cashless exercise of stock option | - | |||||||||||||||||||||||||||||||||||||||||||
| Shares withheld related to cashless exercise of stock option | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock upon the reverse recapitalization, net of issuance costs (refer note 20) | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of shares as a result of Conversion of convertible notes | - | |||||||||||||||||||||||||||||||||||||||||||
| Shares issued to a vendor of Legacy Fusemachines to settle outstanding invoices. | - | |||||||||||||||||||||||||||||||||||||||||||
Transfer of Fusemachines Inc. common stock to a third party vendor | ||||||||||||||||||||||||||||||||||||||||||||
| Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Treasury stock cancellation upon reverse recapitalization | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Prepaid forward purchase agreement | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Issuance of shares pursuant to PIPE transaction (refer note 23) | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of warrants related to forward purchase agreement and convertible note agreement (refer note 10 &22 ) | - | |||||||||||||||||||||||||||||||||||||||||||
| Loss for extinguishment of convertible notes payable | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
| F-4 |
Fusemachines Inc. and Subsidiaries
Consolidated Statements of Stockholders Deficit
(all amounts in USD, in thousands, except number of shares and per share data)
Convertible preferred stock* | Common stock* | Additional paid-in capital | Treasury stock* | Share Subscription Receivable | Accumulated deficit | Accumulated other comprehensive income | Total stockholders’ deficit | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Amount | Shares | Amount | Amount | Amount | Amount | Amount | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | | $ | $ | $ | ( | ) | $ | | $ | ( | ) | |||||||||||||||||||||||||||||||
| Retroactive application of recapitalization | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Common stock repurchase | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Exercise of stock options | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Gain on extinguishment recorded as a capital transaction | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Issuance of shares upon repayment of 2023 Promissory Notes | - | - | ||||||||||||||||||||||||||||||||||||||||||
| Premium from extinguishment of payable | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||
| * | |
| * |
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
Fusemachines Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(all amounts in USD, in thousands)
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net Loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | ||||||||
| Amortization of intangible asset | ||||||||
| Provision for credit losses | ||||||||
| Stock-based compensation | ||||||||
| Amortization of right-of-use assets | ||||||||
| Changes in fair value of convertible notes at fair value, warranty liability and forward purchase agreement liability | ( | ) | ||||||
Change in fair value of forward purchase derivative liability | ||||||||
| Accretion of cumulative mandatorily redeemable common and preferred stock liability | ||||||||
| Equity method investment obtained in exchange for services | ( | ) | ||||||
| Impairment of Equity investments | ||||||||
| Equity in earnings of investee | ||||||||
| Loss on extinguishment of convertible notes payable | ||||||||
| Loss on extinguishment of payable | ||||||||
| Unrealized foreign exchange gain/(loss) | ||||||||
| Deferred income taxes | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, current, net | ( | ) | ||||||
| Unbilled revenue | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts receivable, net | ||||||||
| Other assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Costs capitalized for internally developed software | ( | ) | ( | ) | ||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Payment made to Capital Creditors | ( | ) | ||||||
| Disposal of property and equipment | ||||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from convertible notes payable | ||||||||
| (Repayment)/ Proceeds from related party loan payable | ( | ) | ||||||
| Proceeds from convertible note payable, at fair value | ||||||||
| Payments on notes payable, net of penalty and lender fees | ( | ) | ||||||
| Payment of deferred transaction costs | ( | ) | ( | ) | ||||
| Common stock repurchase | ( | ) | ||||||
| Proceeds from reverse recapitalization | ||||||||
| Proceeds from issuance of shares pursuant to PIPE transaction | ||||||||
| Debt Extinguishment cost paid | ( | ) | ||||||
| Exercise of stock options | ||||||||
| Proceeds from director and officer insurance funding (short term debt) | ||||||||
Payment of director and officer insurance funding (short term debt) |
( |
) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | ( | ) | ||||
| Net change in cash and cash equivalents | ||||||||
| Cash and cash equivalents at beginning of the period | ||||||||
| Cash and cash equivalents at end of the period | ||||||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid for interest | ||||||||
| Cash paid for income taxes | ||||||||
| Non-cash investing and financing activities: | ||||||||
| Purchase of property and equipment through capital advances | ||||||||
| Common Stock issued upon cashless exercise of stock options | ||||||||
| Unpaid deferred transaction costs as of the end of the period | ||||||||
| Waiver of deferred transaction costs as of the end of the period | ||||||||
| Issuance of shares vested upon repayment and forgiveness of 2023 Promissory Notes | ||||||||
| Issuance of subscription receivable | ( | ) | ||||||
| Settlement of non-recourse 2023 promissory note in exchange for common stock repurchase consideration | ||||||||
| Issuance of shares as a result of conversion of related party convertible notes at fair value | ||||||||
Issuance of shares as a result of conversion of convertible notes at fair value | ||||||||
Issuance of shares as a result of conversion of convertible notes | ||||||||
| Conversion of convertible preferred stock into common stock in connection with the reverse recapitalization | ||||||||
| Treasury stock repurchase cancellation upon reverse recapitalization | ( | ) | ||||||
| Shares issued to a vendor of Legacy Fusemachines to settle outstanding invoices. | ||||||||
| (Loss)/Gain on extinguishment of debt (Refer Note no. 10 - Long Term Debt) | ( | ) | ||||||
| Extinguishment of debt (Refer Note no. 10 - Long Term Debt and Note no.17 - Commitments and Contingencies) | ||||||||
Settlement of vendor payable by SPAC sponsor accounted as a capital contribution | ||||||||
Issuance of warrants related to forward purchase agreement and convertible note agreement(refer note 10 &22) | ||||||||
| Recognition of debt at fair value (Refer Note no. 10 - Long Term Debt and Note no.17 - Commitments and Contingencies) | ||||||||
| Investment in Equity securities | ||||||||
| Transfer of Fusemachines Inc. common stock to third party purchaser | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 1. Organization
Fusemachines Inc. (“Company” or “Pubco”) provide enterprise artificial intelligence solutions and services across North America, Latin America and Asia. The Company was originally incorporated on April 13, 2021 under the name CSLM Acquisition, Corp. (“CSLM”), as a Cayman Islands exempted Company, a special purpose acquisition company (“SPAC”) formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. Upon consummation of the Business Combination, Fusemachines USA, Inc. (“Legacy Fusemachines”) became the surviving corporation and a wholly-owned subsidiary of the Company. The Company operated through the following legal entities and branch:
| ● | Fusemachines USA, Inc (Wholly Owned Subsidiary) | |
| ● | Fusemachines Nepal Inc. (Wholly Owned Holding Company) | |
| ● | Fusemachines Nepal Private Ltd. (Majority Owned Subsidiary) | |
| ● | Fusemachines Canada Inc (Wholly Owned Subsidiary) | |
| ● | Fusemachines India Inc. (Dormant Holding Company) | |
| ● | Fusemachine Inc. Dominican Republic (Wholly Owned Branch) |
Business Oxygen Private Limited (“BO2”), a company domiciled in Nepal, holds certain redeemable common and preferred stock of Fusemachines Nepal Private Ltd. (see Note 8 — Cumulative Mandatorily Redeemable Financial Instruments).
Merger Agreement and Business Combination
On January 2024, the Company entered into an Agreement and Plan of Merger (as amended in August 2024 and February 2025, the “Business Combination Agreement”) with CSLM Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of CSLM (“Merger Sub”), and Fusemachines USA, Inc. (formerly Fusemachines Inc.) (“Legacy Fusemachines”). On October 22, 2025, the Company consummated the business combination whereby (a) CSLM merged with and into CSLM Holdings, Inc., a Delaware corporation and wholly owned subsidiary of CSLM at which time the separate existence of CSLM ceased and CSLM Holdings became the surviving corporation (“Pubco”) in accordance with the Delaware General Corporation Law (“DGCL”), the Cayman Islands Companies Act (As Revised) (the “Companies Act”), the Certificate of Merger, (the “Certificate of Merger”), and the amended and restated memorandum and articles of association of CSLM (the “Domestication”); (b) the merger (the “Merger”) of Merger Sub with and into Legacy Fusemachines, pursuant to which, at the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”), the separate corporate existence of Merger Sub ceased and Legacy Fusemachines became the surviving corporation and a wholly-owned subsidiary of Pubco, pursuant to the terms of the Business Combination Agreement and in accordance with the laws of the State of Delaware, as more fully described elsewhere in the Proxy Statement/Prospectus; and (c) the other transactions contemplated by the Business Combination Agreement and documents related thereto (such transactions, together with the Domestication and the Merger, the “Business Combination”). In connection with the Business Combination, Pubco was renamed “Fusemachines Inc.” (the “Company”) and Fusemachines Inc. was renamed “Fusemachines USA, Inc.” (“Legacy Fusemachines”).
The common stock of the Company began trading on The Nasdaq Stock Market (Nasdaq Global Market) under the symbol “FUSE”, and the warrants trade under the symbol “FUSEW”, beginning on October 23, 2025. The Merger between CSLM and Legacy Fusemachines was accounted for as a reverse recapitalization. See Note 20 - Reverse Recapitalization for more information.
Throughout the notes to the consolidated financial statements, unless otherwise noted or the context otherwise requires, the term “Company” refers to Legacy Fusemachines and its subsidiaries prior to the consummation of the Business Combination, and to Fusemachines Inc. (the publicly traded parent company) and its subsidiaries after the consummation of the Business Combination.
| F-7 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Covenant Fees
Pursuant
to the Business Combination Agreement, the Company was covenanted to deliver to CSLM its audited financial statements for the year ended December 31,
2023 and 2022 for inclusion in the registration statement on Form S-4 to be filed by CSLM in connection with the Merger, and that such
audited financial statements had been prepared in conformity with GAAP applied on a consistent basis and in accordance with the requirements
of the Public Company Accounting Oversight Board for public companies. The Company had covenanted to provide the audited financial statements
no later than February 29, 2024, or incur delay fees in the amount equal to $
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The Company prepares its consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP” or “GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding financial reporting. The consolidated financial statements include the financial statements of Fusemachines Inc. and its subsidiaries. Investments in entities where we hold at least a 20% ownership interest and have the ability to exercise significant influence, but not control, over the investee are accounted for using the equity method of accounting. All intercompany balances and transactions have been eliminated. These consolidated financial statements are presented in United States Dollars (“USD” or $), which is the functional currency of the Parent Company. The consolidated financial statements as of and for the year ended December 31, 2024, included herein was derived from the audited consolidated financial statements of Legacy Fusemachines (now known as Fusemachines USA, Inc.).
Prior Period Reclassifications
Certain amounts in prior periods have been reclassified to conform with current period presentation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as revenues and expenses during the reporting period. On an ongoing basis, the Company evaluates its estimates and assumptions, including those related to the valuation of operating lease right-of-use assets, convertible notes, cumulative mandatorily redeemable common and preferred stock liability, common stock warrants, common and convertible preferred stock, current expected credit losses (“CECL”), stock-based compensation, useful lives of property and equipment and intangible assets, impairment of long-lived assets, capitalization of software development costs, forward purchase derivative liability, equity method investments and income taxes.
The Company bases its estimates and judgments on historical experience, knowledge of current conditions and its beliefs of what could occur in the future, given available information. Actual results could differ from those estimates, and such differences may be material to the consolidated financial statements. Changes in facts and circumstances may cause the Company to revise its estimates.
Cash & cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value.
| F-8 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Accounts Receivable and Related Allowance for Expected Credit Losses
The Company classifies its right to consideration in exchange for deliverables as an accounts receivable. A receivable is a right to consideration that is unconditional (i.e., only the passage of time is required before payment is due) regardless of whether the amounts have been billed. Accounts receivable represents amounts due from the Company’s customers for AI solutions (products and services). The Company receives payments from customers based upon agreed-upon contractual terms. The timing of revenue recognition may differ from the timing of invoicing to customers.
Account receivables are stated net of allowance for expected credit losses. Outstanding receivables are reviewed periodically, and allowances are provided for the estimated amount of receivables that may not be collected. The allowance for expected credit loss is based on the probability of future collection determined by applying a loss-rate method using the Company’s historical loss experience. The Company also considers reasonable and supportable current and future conditions in determining its estimated loss rates, such as external forecasts, macroeconomic trends or other factors including customer specific credit risk characteristics. The adequacy of the allowance is evaluated on a regular basis. Account balances are written off after all means of collection are exhausted and the balance is deemed uncollectible, which occurs when balances reach 365 days past due. Subsequent recoveries are credited to the allowance. Changes in the allowance are recorded as adjustments to bad debt expense in the period incurred.
Bad debt expense is included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.
Property and Equipment, net
Property and equipment acquired in the ordinary course of the Company’s operations are stated at cost, net of accumulated depreciation. Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Maintenance and repairs are expensed as incurred
Depreciation expense is included in general and administrative expenses in the consolidated statements of operations and comprehensive loss.
Depreciable lives by major classification generally are as follows:
| Useful life | |||
| Computers and other hardware | |||
| Vehicles and other fixed assets (excluding computers) | |||
| Office, furniture, and equipment | |||
| Leasehold improvements - shorter of lease term of estimated useful life |
Intangible assets, net
Intangible assets consists of internally developed capitalized software, which will help in the management of the AI solutions business and will be sold on a license basis.
Internal use software
The Company capitalizes certain costs related to internal use software acquired, modified, or developed related to the Company’s services in accordance with ASC 350, Internal use software. These capitalized costs are primarily related to salaries and other personnel costs. Costs incurred in the preliminary stages of development and the post implementation phase are expensed as incurred. The company adopts agile method of software development which is generally characterized as an iterative and more dynamic process where the planning, design and coding are less distinct and performed in short sprints. The Company analyses the nature of the development and implementation activities - i.e. whether Subtopic 350-40 characterizes them as capitalizable application development stage activities - when deciding whether the costs of those activities should be capitalized or expensed as incurred. Maintenance and training costs are expensed as incurred. The amortization expense is recorded in “General and administration” on the consolidated statements of operations and comprehensive loss.
Software costs that are expensed are recorded in “Research and Development” on the consolidated statements of operations and comprehensive loss.
| F-9 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Software developed for sale
The costs incurred for the development of computer software to be sold, leased or otherwise marketed are capitalized in accordance with ASC 985, Costs of Software to be sold, leased or marketed, when technological feasibility has been established. Technological feasibility generally occurs when all planning, designing, coding and testing activities are completed that are necessary to establish that the product can be produced to meet its design specifications, including functions, features, and technical performance requirements. These capitalized costs are primarily related to salaries and other personnel costs.
| Useful life | |||
| Internally developed software |
Segment reporting
Under Topic 280, an operating segment is defined as a component of a public entity that engages in business activities from which it may recognize revenues and incur expenses, has operating results that are regularly reviewed by the CODM to make decisions about resources to be allocated to the segment and assess its performance, and has discrete financial information available.
The
Company operates as
The CODM considers the Company’s net income/(loss), expenses and the components of total assets to assess the segment’s performance and make resource allocation decisions for the Company’s single segment which is consistent with that presented within these financial statements.
As the Company’s operations are comprised of a single reporting segment, the Company’s segment assets are reflected on the accompanying consolidated balance sheet as “total assets” and its significant segment expenses and net loss are listed on the accompanying Consolidated Statements of Operations and Comprehensive loss.
Impairment of Long-Lived Assets
Long-lived assets, such as property and equipment and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses the straight-line method of depreciation and amortization. When the carrying value of an asset is more than the sum of the undiscounted expected future cash flows, an impairment is recognized. An impairment loss is measured as the excess of the asset’s carrying amount over its fair value. Intangible assets that have finite useful lives are amortized over their estimated useful lives on a straight-line basis. Factors that would necessitate an impairment assessment include a significant adverse change in the extent or manner in which an asset is used, a significant adverse change in legal factors or the business climate that could affect the value of the asset, or a significant decline in the observable market value of an asset, among others.
The Company holds long-lived assets in two countries worldwide. The table below presents the breakdown of the Company’s long-lived assets, based on geographic region (in thousands).
| Long lived assets as of | ||||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Nepal | $ | $ | ||||||
| United States | ||||||||
| Total long-lived assets | $ | $ | ||||||
| F-10 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Fair Value Option (“FVO”) Election
The Company entered into related party convertible notes payable, at fair value in October 2019, September 2021, and Convertible Notes payable at fair value in January 2024, (the “Convertible Notes at Fair Value”). (Refer to “Note 10 – Long-Term Debt”). As permitted under ASC 825, Financial Instruments (“ASC 825”), the Company elected the FVO to account for the Convertible Notes at Fair Value and Related Party Convertible notes at Fair Value. In accordance with ASC 825, the Company recorded them at fair value. The FVO may be applied instrument by instrument, but it is irrevocable. Subsequent changes in fair value would be recorded as a separate line in the consolidated statements of operations and comprehensive loss. As a result of applying the FVO, direct costs and fees related to the Convertible Notes at Fair Value and Related Party Convertible notes at Fair Value were expensed as incurred. The Company concluded it was appropriate to apply the FVO to Convertible Notes at Fair Value and Related Party Convertible notes at Fair Value because they are liabilities that are not, in whole or in part, classified as a component of stockholders’ equity. In addition, the Convertible Notes at Fair Value and Related Party Convertible notes at Fair Value met other applicable criteria for electing the FVO under ASC 825.
Accumulated Other Comprehensive Income
Accumulated other comprehensive income consists of changes in the cumulative foreign currency translation adjustments.
Revenue Recognition
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the Company recognizes revenue when (or as) customers obtain control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company applies the provisions of ASC 606 to an arrangement when a substantive contract exists and collectability is probable.
The Company derives the majority of its revenue from AI Solutions (Products and Services) that largely represents professional services the Company provides to its customers to help them achieve any AI-related goals within their organization. Standard contractual arrangements are governed by Master Services Agreements (“MSAs”), which set out general terms including payment, termination rights, and intellectual property ownership. Detailed scope, pricing, and performance obligations are defined in Statements of Work (“SOWs”), which are executed for each engagement or project phase. The Company’s contracts for AI Services have different terms based on the scope and complexity of engagements; pricing for the majority of contracts are invoiced monthly on a time-and-materials basis. The Company notes that its contracts meet the requirements for over-time revenue recognition, as the customer is simultaneously receiving the benefits and able to consume the benefits of the services being provided. For professional services that are distinct and billed on a time-and-materials basis, revenue is generally recognized as the services are provided, which is reflective of the transfer of the services to the customer. The Company elected the “right to invoice” practical expedient based on the Company’s right to invoice a customer at an amount that approximates the value to the customer and the performance completed to date.
The Company also provides AI Education Services which represents a customized curriculum of educational services provided to train the customer’s C-suite on AI for Business. The Company provides AI Education Services over time as the course proceeds and the students retain knowledge over time. Thus, the customer receives and consumes benefits as the Company performs the AI Education Services, and revenue is recognized overtime.
Company’s AI Solutions includes product revenues primarily comprising of software license fees from sales of term-based license contracts, under which we grant customers the license right to use the software for a specified period (i.e. when the customer can access, use, and benefit from the software license). Term software licenses are satisfied at a point in time and associated revenue is recognized upon the later of 1) delivery of the software, or 2) the beginning of the period in which the customer has received the license right to use the software. For customer contracts that include software license fees, implementation and/or other consulting services, the portion of the transaction price allocated to software licenses is generally recognized when delivered. Implementation, customization, or model tuning services if applicable, when included, are evaluated as separate performance obligations when they are distinct from the software and not highly interdependent. These services are generally satisfied over time as the work progresses. During the year ended December 31, 2025 and December 31, 2024, the product revenues were insignificant.
| F-11 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
For most contracts, the Company uses a Master Service Agreements (“MSA”) to govern the overall relevant terms and conditions of the business agreement, and a Statement of Work (“SOW”) to specify the services delivered and the associated prices. Performance obligations specific to each individual contract are defined within the terms of each SOW. Each performance obligation is identified based on the services that will be transferred to our customer that are both capable of being distinct and are distinct within the context of the contract. The transaction price is determined based on the consideration to which the Company will be entitled and expect to receive in exchange for transferring services to the customer.
Consideration for some contracts may include variable consideration including volume discounts and rebates. If the consideration promised includes a variable amount, the Company only includes estimated amounts of consideration in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. These estimates require management judgments and estimates. The determination of whether to constrain consideration in the transaction is based on historical, current, and forecasted information that is reasonably available to the Company, taking into consideration the type of customer, the transaction, and specific facts and circumstances of each arrangement. The Company uses judgement to determine if collectability of consideration is uncertain, and accordingly, revenue recognition is deferred until the uncertainty is resolved and cash is collected.
Payment terms and conditions vary by contract type, although terms generally include a requirement of payment within 30 to 60 days of the invoice date. In certain arrangements, the Company will receive payment from a customer either before or after the performance obligation to which the invoice relates has been satisfied. As a practical expedient, the Company does not account for significant financing components if the period between when it transfers the promised good or service to the customer and when the customer pays for the product or service will be one year or less.
For contracts with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation based on its relative standalone selling price. The stand-alone selling prices are determined based on the prices at which the Company separately sells these products. For items that are not sold separately, the Company estimates the stand-alone selling prices using other observable inputs. As Fusemachines Inc. is the sole reportable segment, all revenues are attributed to the sole segment.
Contract Balances
Differences in timing between revenue recognition and cash collection result in contract assets and contract liabilities. The Company classifies these assets as unbilled revenue; the liabilities are classified as deferred revenue.
Deferred revenue represents the amounts billed or cash payments received in advance of revenue recognition at the end of the reporting period. These amounts are recorded in deferred revenue until revenue is recognized through delivery of service or upon meeting the performance obligation. The Company’s deferred revenue represents contract liabilities. Generally, when billing occurs subsequent to revenue recognition, the Company reports unbilled revenue on the consolidated balance sheets.
Cost of Revenue
Consists principally of consulting and payroll expenses as well as stock-based compensation expense that are assigned to customer projects.
Selling and Marketing Expenses
Selling and marketing expenses represent costs incurred to promote the Company’s services offered, including salaries, benefits and related costs of our sales and marketing personnel, and represent costs of advertising and other selling and marketing expenses. All sales and marketing costs are expensed as incurred.
General and Administrative Expenses
Consists of expenses associated with general and administrative functions of the business such as the costs of salaries, stock-based compensation expense, Information Technology (“IT”) infrastructure, allowance for expected credit losses, travel, legal and accounting services, insurance, rent, software and tools, meals, other professional services activities, and certain non-income taxes.
Defined Contribution Plan
Contributions to defined contribution plans are expensed in the period in which services are rendered by the covered employees. The Company recognizes its liabilities for compensated absences dependent on whether the obligation is attributable to employee services already rendered, relates to rights that vest or accumulate and payment is probable and estimable.
| F-12 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Stock-Based Compensation
Stock-based compensation expense attributable to equity awards granted to employees and non-employees is measured at the grant date based on the fair value of the award. For employee awards, the expense is recognized on a straight-line basis over the requisite service period for awards that actually vest, which is generally the period from the grant date to the end of the vesting period. For non-employee awards, the expense for awards that actually vest is recognized based on when the goods or services are provided.
The Company records stock-based compensation in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). This standard requires all equity-based payments to employees and non-employees, including grants of employee stock options and restricted stock awards, to be recognized in the consolidated statements of operations and comprehensive loss based on the grant date fair value of the award. The stock-based compensation expense is recognized on a straight-line basis over the requisite service period of the award, which is generally the period from the accounting grant date to the end of the vesting period. The Company elected to account for forfeitures of awards as they occur.
Since the adoption of ASU 2018-07, Improvements to Nonemployee Stock-Based Payment Accounting, the measurement date for non-employee awards is the date of grant, and stock-based compensation costs are recognized in the same period and in the same manner as if the entity had paid cash for the goods or services. Stock-based compensation expense is classified as general and administrative, cost of revenue, selling and marketing and research and development expenses in the consolidated statements of operations and comprehensive loss.
The Company estimates the fair value of stock option awards granted using the Black Scholes Merton option pricing formula (the “Black-Scholes Model”). This model requires various significant judgmental assumptions in order to derive a final fair value determination for each type of award, including the expected term, expected volatility, expected dividend yield, risk-free interest rate and fair value of the Company’s stock on the date of grant. The expected option term for options granted is calculated using the “simplified method”. This election was made based on the lack of sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. The simplified method defines the expected term as the average of the contractual term and the vesting period. Estimated volatility is based on similar entities whose stock prices are publicly traded. The Company uses the historical volatilities of similar entities due to the lack of sufficient historical data for the Company’s common stock price. The Company estimates volatility based upon the observed historical volatilities of comparable companies over a lookback period commensurate with the estimated holding period, adjusted for relative leverage using the Black-Scholes-Merton formula. Dividend yields are based on the Company’s history and expected future actions. The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero. The risk-free interest rate is based on the yield curve of a zero-coupon U.S. Treasury bond on the date the stock option award was granted with a maturity equal to the expected term of the stock option award. All grants of stock options generally have an exercise price equal to or greater than the fair market value of the Company’s common stock on the date of grant.
The fair value of the shares of common stock underlying the stock options has historically been determined by the Company’s Board of directors as there was no public market for the underlying common stock prior to October 22, 2025. In estimating the fair value of its stock, the Company uses a third-party valuation specialist and considers factors it believes are material to the valuation process, including but not limited to, the price at which recent equity was issued by the Company to independent third parties or transacted between third parties, any indications of value from offers to acquire the Company, actual and projected financial results, risks, prospects, economic and market conditions, and estimates of weighted average cost of capital. The Company believes the combination of these factors provides an appropriate estimate of the expected fair value of the Company and reflects the best estimate of the fair value of the Company’s common stock at each grant date.
Notes Receivable from Stockholders
From time to time the Company has entered into promissory note agreements with certain employees for the purpose of financing the early exercise of the Company’s stock options. Although the shares of common stock purchased by the employees in exchange for the promissory notes are considered legally issued, the Company does not consider them outstanding for accounting purposes. Instead, the Company treats them as restricted until the options are fully vested and the outstanding principal and accrued interest on the notes are repaid in full. Unvested shares for which the promissory notes are fully satisfied are recorded as a share repurchase liability and as shares vest are recognized to additional paid-in capital in the Consolidated Balance Sheets.
Advertising Cost
Advertising
costs are expensed as incurred. Advertising costs were $
| F-13 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Income Taxes
The provision for income taxes includes federal, state, local and foreign taxes. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the consolidated financial statements carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be reversed. Changes to enacted tax rates would result in either increases or decreases in the provision for income taxes in the period of changes
The realizability of deferred tax assets is primarily dependent on future earnings. The Company evaluates the realizability of deferred tax assets and recognizes a valuation allowance when it is more likely than not that all, or a portion of, deferred tax assets will not be realized. A reduction in estimated forecasted results may require that we record valuation allowances against deferred tax assets. Once a valuation allowance has been established, it will be maintained until there is sufficient positive evidence to conclude that it is more likely than not that the deferred tax assets will be realized. A pattern of sustained profitability will generally be considered as sufficient positive evidence to reverse a valuation allowance. If the allowance is reversed in a future period, the income tax provision will be correspondingly reduced.
Accordingly, the increase and decrease of valuation allowances could have a significant negative or positive impact on future earnings
The United States subjects corporations to taxes on Global Intangible Low-Taxed Income (“GILTI”) earned by certain foreign subsidiaries. The Company elected to provide for the tax expense related to GILTI in the year the tax is incurred.
Deferred Transaction Costs
The
Company records deferred transaction costs, which consist of legal, accounting, and other fees related to the preparation of the Merger.
(Refer to “Note 1 – Organization”). The deferred transaction costs will be offset against proceeds from the transaction
upon the effectiveness of the Business Combination. Fusemachines Inc. incurred transaction cost of $
Convertible Preferred Stock
The Company applies the guidance enumerated in ASC Subtopic 480-10,
Distinguishing Liabilities from Equity-Overall (“ASC 480-10”), when determining the classification and measurement of convertible preferred stock. Convertible preferred stock subject to mandatory redemption are classified as liability instruments and are initially measured at fair value in accordance with ASC 480-10 and accreted to their redemption value under the effective interest method. All other issuances of convertible preferred stock are subject to the classification and measurement principles of ASC 480-10. Accordingly, the Company classifies conditionally redeemable preferred stock (if any), which includes preferred stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control, as temporary equity. At all other times, the Company classifies its convertible preferred stock in stockholder’s deficit.
Research and Development Costs
The Company accounts for research and development costs in accordance with the ASC 730, Research and Development. Under ASC 730, all research and development costs are expensed as incurred, with the exception of certain software development costs discussed above. Our research and development costs consist primarily of payroll costs associated with software product development, testing, quality assurance, documentation, enhancements and upgrades for existing customers under maintenance.
Research and Development costs were $
The Company applies the two-class method to compute basic and diluted net loss per share attributable to common shareholders, when shares meet the definition of participating securities. The two-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income (loss) available to common shareholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all income (loss) for the period had been distributed. The Company reported a net loss attributable to common shareholders for the year ended December 31, 2025 and 2024.
Basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average number of shares of common stock outstanding during the year. Diluted net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted average number of shares outstanding, plus the impact of potential common shares, if dilutive, resulting from the potential exercise of warrants or options, and the potential conversion of preferred stock or convertible notes, into common stock, under the if-converted method. Due to the net losses for the year ended December 31, 2025 and 2024, basic and dilutive net loss per share were the same, as the effect of potentially dilutive securities would have been anti-dilutive
| F-14 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the instruments in accordance with FASB ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”) and FASB ASC Topic 815, Derivatives and Hedging (“ASC 815”).
Shortfall warrants, public and private warrants, and warrants issued in connection with convertible notes were evaluated under ASC 480 and ASC 815-40 and determined not to meet the criteria for liability classification. These warrants are indexed to the Company’s own stock and meet the requirements for equity classification. Accordingly, such warrants are recorded within stockholders’ equity and are not subsequently remeasured.
All other warrants that do not meet the criteria for equity classification are accounted for as liabilities and measured at fair value, with changes in fair value recognized in the consolidated statement of operations and comprehensive loss in each reporting period.
Commitments
and Contingencies
The Company may at times be involved in litigation in the ordinary course of business. The Company will, from time to time, when appropriate in management’s estimation, record adequate reserves in the Company’s consolidated financial statements for pending litigation. Currently there are no material pending or threatened litigation matters that management believes require accrual or disclosure in addition to those presented in the Note on Litigation (refer Note 17 – Commitments and Contingencies).
Foreign Currency Translation and Remeasurement
Assets and liabilities of consolidated foreign subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. dollars at period-end exchange rates and revenues and expenses are translated into U.S. dollars using average exchange rates during the year. Equity transactions are translated using historical exchange rates. The adjustment resulting from translating the consolidated financial statements of such foreign subsidiaries into U.S. dollars is reflected as a cumulative translation adjustment and reported as a component of Accumulated other comprehensive loss.
Risks and Uncertainties
As a result of its global operations, the Company may be subject to certain inherent risks.
Concentration of Credit - Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and cash equivalents, and accounts receivable. The Company maintains cash and cash equivalents with financial institutions. The Company believes its credit policies reflect normal industry terms and business risk and there is no expectation of non-performance by the counterparties. Accounts receivables are generally dispersed across many customers operating in different industries; therefore, concentration of credit risk is limited. If any of the Company’s customers enter bankruptcy protection or otherwise take steps to alleviate their financial distress, the Company’s credit losses and write-offs of receivables could increase, which would negatively impact its results of operations.
Significant
Customers and Suppliers — The concentration of credit risk with respect to accounts receivable is primarily limited to certain
customers to which the Company makes substantial sales. To minimize credit risk related to accounts receivable, the Company maintains
allowances for potential credit losses based on historical loss patterns as well as future expectations. As of December 31, 2025 and
December 31, 2024, the Company had three and four customers whose accounts receivable balance accounted for at least 10% of the Company’s
consolidated accounts receivables, respectively. These customers accounted for approximately
The
Company pays its suppliers on normal commercial terms and does not believe that there is any significant supply risk from its suppliers.
As of December 31, 2025, and December 31, 2024, the Company had three and three suppliers whose account payable accounted for at least
10% of the Company’s consolidated account payables, respectively. These suppliers accounted for approximately
Foreign currency risk - The Company’s global operations are conducted predominantly in U.S. dollars. While revenue is generated in U.S. dollars, the Company incurs expenses in other currencies, principally, Nepalese rupees and Canadian dollars. The Company’s international operations expose it to risk of adverse fluctuations in foreign currency exchange rates through the remeasurement of foreign currency denominated assets and liabilities (both third-party and intercompany) and translation of earnings and cash flows into U.S. dollars.
Interest rate risk - The Company is exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from variable rates related to cash, short-term investments, and the Company’s borrowings. The Company does not believe it is exposed to material direct risks associated with changes in interest rates related to these deposits, investments and borrowings.
Geopolitical risks - As a result of its global operations, the Company is exposed to geopolitical risks, including ongoing and potential wars, terrorism, sanctions and trade disputes. These developments may disrupt supply chains and data flows, restrict access to critical technology and infrastructure (including AI-enabling hardware and cloud services), and increase cybersecurity and compliance risks. As a result of its global operations, the Company may be subject to certain inherent risks.
| F-15 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Leases
The Company’s lease portfolio includes one real estate leases under operating lease agreements. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on whether: (i) the contract involves the use of a distinct identified asset, (ii) the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term of the contract, and (iii) the Company has the right to direct the use of the asset.
Upon the adoption of ASC 842, the Company elected the package of practical expedients to not (i) reassess whether any expired or existing contracts are or contain a lease, (ii) reassess historical lease classifications for existing leases, and (iii) reassess initial direct costs for existing leases. The Company also elected the practical expedient to account for lease and non-lease components as a single lease component. Accordingly, the Company shall include non-lease components with lease payments for the purpose of calculating lease assets and liabilities to the extent that they are fixed. Non-lease components that are not fixed are expensed as incurred as variable lease payments
The Company exempts leases with an initial term of 12 months or less from balance sheet recognition and, for all classes of assets, combines non-lease components with lease components. Lease assets are tested for impairment in the same manner as long-lived assets used in operations.
The Company evaluates the classification of its leases as either finance leases or operating leases. A lease is classified as a finance lease if any one of the following criteria are met: (i) the lease transfers ownership of the asset by the end of the lease term, (ii) the lease contains an option to purchase the asset that is reasonably certain to be exercised, (iii) the lease term is for a major part of the remaining useful life of the asset, (iv) the present value of the lease payments equals or exceeds substantially all of the fair value of the asset, or (v) the leased asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. A lease is classified as an operating lease if it does not meet any of these criteria.
The Company recognizes right-of-use assets and lease liabilities based on the present value of lease payments over the lease term at the commencement date of the lease (or January 1, 2022, for existing leases upon the adoption of Topic 842). The discount rate implicit within the Company’s leases is generally not determinable; therefore, the Company determines the discount rate using its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.
The Company records rent expense for short-term leases and operating leases, some of which have escalating rent payments, on a straight-line basis over the lease term
For additional information regarding the Company’s lease arrangements, refer to “Note 18 - Leases”
Related Parties
Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related party also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal with if one party control or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all significant related party transactions.
| F-16 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Going Concern
The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.
As
of December 31, 2025, the Company had cash of approximately $
The continuation of the Company as a going concern is dependent upon the continued financial support from its stockholders and debt holders. Specifically, continuation is contingent on the Company’s ability to obtain necessary equity to continue operations, and ultimately the Company’s ability to generate profit from sales and positive operating cash flows, which is not assured.
On
October 22, 2025, Merger Sub merged with and into Legacy Fusemachines, with Legacy Fusemachines continuing as the surviving company and
becoming a wholly owned subsidiary of Fusemachines Inc. In connection with the closing, approximately $
As of the date on which these consolidated financial statements were available to be issued, we believe that the cash on hand, and additional investments available through issuance of new common stock, will be inadequate to satisfy the Company’s working capital and capital expenditure requirements for at least the next twelve months. The ability of the Company to continue as a going concern is dependent upon management’s plan to raise additional capital from issuance of equity or receive additional borrowings to fund the Company’s operating and investing activities over the next year. These consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Investment in Equity Securities
The Company’s equity investment comprises of investments in equity securities of private Companies. These equity investments are accounted for under the equity method, and initially recorded at estimated fair value, less any impairment. The Company’s share of gains and losses if any from these equity method investments are included in the consolidated statements of operations and comprehensive loss, net of income tax provision. Equity investments are reviewed regularly to determine whether there is a decline in estimated fair value below the carrying amount. If there is a decline that is other-than-temporary, the investment is written down to estimated fair value. When evaluating the equity investment for impairment, the Company performs a qualitative and quantitative assessment to evaluate whether a decline in estimated fair value below the carrying amount is other-than- temporary. The qualitative assessment includes a review of macroeconomic conditions, industry and market considerations, the investee’s recent operating results and trends, recent acquisitions and sales of the investee securities, and other publicly available data, among other factors. If the Company determines that the decline is other-than-temporary, the Company records an impairment loss to write the equity investment to the estimated fair value.
Treasury Stock
The Company records treasury stock activities under the cost method whereby the cost of the acquired stock is recorded as treasury stock. The Company’s accounting policy upon the formal retirement of treasury stock is to deduct the par value from the Company’s common stock and to reflect any excess cost over par value as a reduction to additional paid-in capital (to the extent created by previous issuances of the shares) and then retained earnings.
In
connection with the consummation of the Business Combination on October 22, 2025, treasury shares previously held by the Company totaling
shares, with an aggregate carrying value of approximately $
| F-17 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Emerging Growth Company (EGC)
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s consolidated financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Embedded Derivatives
ASC 815 requires companies to bifurcate certain features from their host instruments and account for them as free-standing derivative financial instruments should certain criteria be met. We evaluate our financial instruments to determine whether such instruments are derivatives or contain features that qualify as embedded derivatives. Embedded derivatives must be separately measured from the host contract if all the requirements for bifurcation are met. The assessment of the conditions surrounding the bifurcation of embedded derivatives depends on the nature of the host contract and the features of the derivatives. Bifurcated embedded derivatives are recognized at fair value, with changes in fair value recognized in the consolidated statements of operations each period. Bifurcated embedded derivatives are classified with the related host contract in our consolidated balance sheets. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity is re-assessed at the end of each reporting period.
| F-18 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Recent Accounting Pronouncements
New Accounting Pronouncements Not Yet Adopted
The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board. Management periodically reviews newly issued accounting standards to determine their potential impact on the Company’s consolidated financial statements and related disclosures.
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures- In December 2023, the FASB issued this ASU to update income tax disclosure requirements, primarily related to the income tax rate reconciliation and income taxes paid information. This update is effective on a prospective basis for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this standard will have on its consolidated financial statements.
In March 2024, the SEC issued its final climate disclosure rules (Rule 1), which require the disclosure of climate-related information in annual reports and registration statements, beginning with annual reports for the year ending December 31, 2025. The rules require disclosure in the audited financial statements of certain effects of severe weather events and other natural conditions above certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates, if material. We are currently evaluating the impact of the new rules and continue to monitor the status of the related legal challenges.
ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. In November 2024, the FASB issued this ASU that requires more detailed disclosure about certain costs and expenses presented in the income statement, including inventory purchases, employee compensation, selling expense and depreciation expense. The new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The guidance does not affect recognition or measurement in our consolidated financial statements.
ASU 2024-04 Debt - Debt with Conversion and Other Options - Induced Conversions of Convertible Debt Instruments. In November 2024, the FASB issued this ASU which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions or extinguishments. The amendments in this update are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted for all entities that have adopted the amendments in Update 2020-06. We are currently evaluating the impact this guidance will have on our consolidated financial statements.
In May 2025, the FASB issued Accounting Standards Update No. 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts With Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer (“ASU 2025-04”). ASU 2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and clarifies that the variable consideration constraint in Topic 606 does not apply to share-based consideration payable to customers. The new guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting conditions and ensuring alignment with Topic 606 and Topic 718. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its financial statements and related disclosures.
In September 2025, the FASB issued ASU 2025-06- Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06), which is intended to simplify the capitalization guidance for internal-use software by removing references to project stages and clarifying when the capitalizing of eligible costs is required. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its disclosures.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have had a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2025-11.
The Company does not believe any other new accounting pronouncements issued by the FASB that have not become effective will have a material impact on its consolidated financial statements.
New Accounting Pronouncements Adopted
In May 2025, the FASB issued Accounting Standards Update No. 2025-03, Business Combinations (Topic 805) and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU 2025-03”). ASU 2025-03 changes how companies determine the accounting acquirer in certain business combinations involving variable interest entities. The new guidance requires considering the factors used for other acquisition transactions to assess which party is the accounting acquirer. ASU 2025-03 is effective for the Company’s annual reporting periods beginning on January 1, 2027. The Company has early adopted ASU 2025-03. Accordingly, even if the acquired entity meets the definition of a VIE under ASC 810, the determination of the accounting acquirer is based on an evaluation in accordance with ASC 805-10 and ASC 805-50. The adoption of this guidance did not have a material impact on the Company’s financial statements. Further, the adoption did not change the Company’s overall accounting conclusions with respect to the identification of the accounting acquirer.
| F-19 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 3. Fair Value Measurements
The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:
Level 1 - Quoted prices for identical assets or liabilities in active markets.
Level 2 - Inputs other than quoted prices within Level 1 that are observable either directly or indirectly, including quoted prices in markets that are not active, quoted prices in active markets for similar assets or liabilities, and observable inputs other than quoted prices such as interest rates or yield curves.
Level 3 - Unobservable inputs reflecting management’s view about the assumptions that market participants would use in pricing the asset or liability.
Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability.
The carrying values of the Company’s accounts receivable, unbilled revenue, prepaid expenses and other current assets, other assets, accounts payable, transaction costs, accrued expenses and other current liabilities and cumulative mandatorily redeemable common and preferred stock liability approximate their fair values based on the instrument’s relative short-term nature.
As of
December 31, 2025, the Company does not have any outstanding convertible notes payable or related party loan payable, as these
instruments were either converted or settled during the year other than related party note payable related to Dolma Impact Fund
I (“Dolma”) amounting $
Financial Instruments Recorded at Fair Value
The following tables present the Company’s fair value hierarchy for its financial liabilities that are measured at fair value on a recurring basis and indicate the level within the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value (in thousands):
| Fair Value Measurements at December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Warrant liability | $ | $ | ||||||||||||||
| Forward Purchase derivative liability (Refer Note 21. Forward Purchase agreement) | $ | $ | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| Fair Value Measurements at December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Related Party convertible Notes Payable, at fair value (Refer Note 10. Long-Term Debt) | $ | $ | $ | $ | ||||||||||||
| Convertible Notes at Fair Value (Refer Note 10. Long-Term Debt) | $ | $ | ||||||||||||||
| Warrant liability | $ | $ | ||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| F-20 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Warrant Liabilities
The following table shows the change in the fair value of the warrant liability (in thousands):
| Amount | ||||
| Balance as of December 31, 2023 | $ | |||
| Change in fair value of warrant liabilities | ||||
| Balance as of December 31, 2024 | $ | |||
| Amount | ||||
| Balance as of December 31, 2024 | $ | |||
| Change in fair value of warrant liabilities | $ | ( | ) | |
| Balance as of December 31, 2025 | $ | |||
Forward Purchase Derivative Liability
The
forward purchase derivative liability was recognized at Closing on October 22, 2025. The fair value as of December 31, 2025, was $
| Amount | ||||
| Balance as of December 31, 2024 | ||||
| Forward purchase derivative recognized in connection with the merger on October 22, 2025 | ||||
| Change in fair value of forward purchase derivative liabilities | ||||
| Balance as of December 31, 2025 | ||||
The
fair value of the forward purchase derivative liability was estimated using a Monte Carlo simulation approach. The key assumptions used
in valuation as of December 31, 2025: a risk-free rate of
The following unobservable assumptions were used in determining the fair value of the forward purchase derivative liability at Closing
| Equity volatility | % |
Convertible notes payable and forward purchase derivative liability
The following table shows the change in the fair value of the Convertible Notes measured at Fair Value and forward purchase derivative liability (in thousands):
| Related party Convertible Note payable at fair value | January 2024 Convertible Notes | Forward Purchase Derivative Liability | ||||||||||
| Balance as of December 31, 2023 | $ | $ | ||||||||||
| Issuance of convertible notes at fair value | $ | |||||||||||
| Gain on extinguishment of debt recorded as a capital transaction | ( | ) | ||||||||||
| Change in fair value of related party note and convertible notes at fair value | ||||||||||||
| Balance as of December 31, 2024 | $ | $ | ||||||||||
| Balance as of December 31, 2024 | $ | $ | ||||||||||
| Forward purchase derivative recognized in connection with the merger on October 22, 2025 | ||||||||||||
| Change in fair value of Related Party Convertible note, Convertible Notes at Fair Value and Forward Purchase derivative liability | ( | ) | ( | ) | ||||||||
| Conversion into Fusemachines Inc. common stock to give effect of reverse capitalization of the merger (Refer Note 20) | ( | ) | ( | ) | ||||||||
Reclassification from convertible note payable* | ( | ) | ||||||||||
| Balance as of December 31, 2025 | $ | $ | $ | |||||||||
| * |
Common Stock Warrant Liability
The Company estimates the fair value of the common stock warrant liability (refer to “Note 10 – Long-term Debt”) using an option pricing model and assumptions that are based on the individual characteristics of the warrants on the valuation date, as well as assumptions for fair value of the underlying common stock expected volatility, expected life, dividends, and risk-free interest rate.
The
warrant liability is classified as Level 3 as there were no quotable prices for identical assets or quoted prices for similar. The warrant
liabilities are measured using a Black-Scholes Model. The fair value of the warrant liability as of December 31, 2025 was determined
using the following assumptions: a dividend yield of
| F-21 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Related Party Note payable at Fair Value and Convertible Notes at Fair Value
The Company accounts for certain long-term debt (also refer to “Note 10 - Long-term Debt”) under the fair value option. At the issuance date of the Convertible Notes at Fair Value, the Company determined that the fair value approximated the principal amount.
The measurement of fair value of the Convertible Notes at Fair Value as of December 31,2024 was estimated based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company used a scenario-based analysis to incorporate estimates and assumptions concerning the Company’s prospects and market indications into a model to estimate the value of the Convertible Notes at Fair Value. The most significant estimates and assumptions used as inputs are those concerning timing, probability of possible scenarios for conversion or settlement of the Convertible Notes at Fair Value. The Convertible Notes at Fair Value are classified as Level 3 as there were no quotable prices for identical assets or quoted prices for similar
In
connection with the consummation of the business combination on October 22, 2025, which was accounted for as a reverse
recapitalization, each convertible note of Legacy Fusemachines, including both related party and other convertible notes, that was
issued and outstanding immediately prior to the closing was converted into an aggregate of
shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements. Immediately following such
conversion, all such shares of Legacy Fusemachines common stock were exchanged for shares of Fusemachines Inc. common stock based on
the Exchange Ratio specified in the Merger Agreement. As a result of the foregoing, no convertible notes or related party notes
payable remained outstanding as of December 31, 2025 other than related party note payable related to Dolma Impact Fund I
(“Dolma”) amounting $
The Company has certain non-financial assets that are measured at fair value on a non-recurring basis when there is an indicator of impairment, and they are recorded at fair value only when an impairment is recognized. These assets include property and equipment and amortizable intangible assets.
The following table sets forth the significant inputs to the probability-weighted valuation model used to value the Convertible Notes at Fair Value as of December 31, 2024:
2019 and 2021 Convertible Notes
| Type of Events | Expected Date | Probability of Event | Discount rate | |||||||
| SPAC transaction | % | % | ||||||||
| Maturity | % | % | ||||||||
| Default feature | NA | % | % | |||||||
January 2024 Convertible Notes
| Type of Events | Expected Date | Probability of Event | Discount rate | |||||||
| SPAC transaction | % | % | ||||||||
| Maturity | % | % | ||||||||
| Default feature | % | % | ||||||||
| F-22 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 4 Accounts receivable, net
Accounts receivable, net consisted of the following (in thousands):
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Accounts receivable, current | $ | $ | ||||||
| Accounts receivable | ||||||||
| Total accounts receivable | $ | $ | ||||||
| Less: Allowance for credit losses | $ | ( | ) | $ | ( | ) | ||
| Total accounts receivable, net | $ | $ | ||||||
In
some contracts with customers, the Company agreed to instalment payments exceeding 12 months. The present value of these contracts is
recorded as a receivable as the revenue is recognized in accordance with GAAP, and profit is recognized to the extent the present value
is in excess of cost. The present value of long-term receivables is , and the face value is as of December 31, 2025. The present
value of long-term receivables is $
The following table sets forth the activity in the Company’s allowance for credit losses (in thousands):
December 31, 2025 | December 31, 2024 | |||||||
| Beginning balance | $ | $ | ||||||
| Provision for credit losses | ||||||||
| Write-offs | ( | ) | ( | ) | ||||
| Ending balance | $ | $ | ||||||
Unbilled
revenue for the year ended December 31, 2025 was $
Note 5 Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Value added tax receivable | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Advance to vendors | ||||||||
| Contract asset, current | ||||||||
| Other current assets | ||||||||
| Total prepaid expenses and other current assets | $ | $ | ||||||
| F-23 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 6(A). Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Computers and other hardware | $ | $ | ||||||
| Office, furniture, and equipment | ||||||||
| Leasehold improvements | ||||||||
| Vehicles and other fixed assets (excluding computers) | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
The
Company recognized depreciation expense related to property and equipment in the consolidated statements of operations and comprehensive
loss of $
Note 6(B). Intangible Assets, net
Intangible assets subject to amortization consisted of the following (in thousands):
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Internally developed capitalized software | $ | $ | ||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||
| Total intangible assets, net | $ | $ | ||||||
The
Company recognized amortization expense related to capitalized software in the consolidated statements of operations and comprehensive
loss of $
| F-24 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 7. Investment in Equity Securities
In January 2024, the Company reached an agreement
with one of its customers, Campaign Brain, Inc. (“Campaign Brain”), to provide AI Solutions. The total amount owed to the
Company is to be satisfied through the issuance of shares of Campaign Brain’s restricted stock to the Company with a determinable
estimated fair value of $ per share as of the issuance date. Of the shares issuable, shares of Campaign Brain’s
restricted stock were vested on January 17, 2024, and shares of Campaign Brain’s restricted stock are to be vested each month
from February 15,2024 to December 15, 2024. The Company had approximately
The transaction represents an equity investment in
a private company for which the Company has the ability to exercise significant influence. Since the equity investment is accounted for
under the equity method and does not qualify for the net asset value practical expedient, the Company measured the estimated fair value
of the equity instrument received at contract inception, minus impairment, if any, with equity method investment gains and losses included
in other (expense) income, net on the consolidated statements of operations and comprehensive loss. For the year ended December 31, 2024,
the financial figures related to Campaign Brain including revenue, operating expenses and income tax provision were insignificant. The
Company’s equity method investment losses derived from the vested portion of the investment were $
In the previous year ended December 31, 2024, the
Company recognized an impairment loss of $
As of December 31, 2024, the fair value of the investment in Campaign Brain Inc. has been assessed to be . This assessment is based on the deteriorating financial performance of the entity, including minimal revenue during the year, negative net worth, low bank balance as of December 31, 2024, negative cashflows and lack of future projections. Additionally, the entity has no current or foreseeable plans to generate future revenue, which further supports the conclusion that the fair value is nil. Consequently, no value has been assigned to this investment in the financial statements. Since the investment had already been fully written down to as of December 31, 2024, there was no financial impact recognized in the consolidated financial statements for the year ended December 31, 2025 related to this investment.
Note 8. Cumulative Mandatorily Redeemable Financial Instruments
In July 2021, Fusemachines Nepal Private Ltd entered into a Share Purchase Agreement between Fusemachines Nepal Inc., and BO2 (the “BO2 Purchase Agreement”) in which BO2 agreed to invest $ thousand in Fusemachines Nepal Private Ltd. Fusemachines Nepal Private Ltd issued Ordinary Shares with a par value of Nepalese rupees and also issued cumulative and compulsory redeemable Preference Shares with a par value of Nepalese rupees. The Preference Shares contain an annual coupon rate of % with the option to convert the Preference Shares into Ordinary Shares. The Preference Shares and Ordinary Shares are mandatorily redeemable five years from the date of issuance at a redemption price equal to % of the purchase price. Any dividends paid on these shares will reduce the ultimate redemption price. Management determined that these shares represent mandatorily redeemable financial instruments under ASC 480 and thus are liability-classified. These liabilities are recorded in cumulative mandatorily redeemable common and preferred stock liability within the consolidated balance sheets, and accretions to the redemption value are recorded within interest expense in the consolidated statements of operations and comprehensive loss. The effective interest rate is %, the accrued interest was $ thousand and $ thousand at December 31, 2025 and December 31, 2024 respectively, and is recorded in accrued expenses and other current liabilities in the consolidated balance sheets, and the issuance cost incurred was $ thousand.
The
outstanding balance of the Cumulative Mandatorily Redeemable Financial instruments were $
The following summarizes the key terms and provisions of the Preference Shares and Ordinary Shares:
Preference Shares
Rights
and privileges -
Redemption - In terms of return, no Preference Share can be redeemed until the price of the issued Preference Share is fully paid. The amount of Preference Shares cannot be returned from any amount other than the amount of profit that can be distributed as dividends or the amount received from the new shares issued by the Company for the purpose of returning the shares.
The rate per share for redeeming Preference Shares shall be as per share purchase and sale agreement or shareholder agreement and shall be redeemed at the same rate. In case any Preference Shares issued for return are to be returned along with the premium, a separate fund of appropriate amount shall be arranged from the Company’s profit or the Company’s share premium account for that purpose. In this way, except in the case where the amount of the Preference Shares is returned from the amount received by issuing new shares, in accordance with the law, when the amount of the Preference Shares is returned, an amount equal to the face value of the returned shares from the amount that can be received to distribute dividends from the Company’s profits shall be deposited in a separate account. Any preference share returned in accordance with this regulation shall be deemed to have been automatically forfeited after the completion of the return process. If the Company redeems or proposes to redeem any Preference Shares, it may issue new shares equal to the face value of the shares so redeemed or to be redeemed.
Ordinary Shares
Rights and privileges - The shareholders of this category will have voting rights and other rights according to the prevailing law.
Redemption - The Ordinary Shares will be redeemed if the Company fails to withdraw the Preference Shares issued by the Company to be redeemed. If the Preference Shares have to be converted into ordinary shares, it shall be done according to the decision of the general meeting of the Company.
Additional provisions related to Preference Shares shall be in accordance with the shareholders’ agreement between them.
| F-25 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 9. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Wages payable | $ | $ | ||||||
| Covenant fees | ||||||||
| Interest payable (Note 8) | ||||||||
| Legal expenses | ||||||||
| Deposit liability for early exercised options | ||||||||
| Accrued expenses | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
Note 10. Long-Term Debt
Long-term debt consists of the following (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||
| Current | Noncurrent | Total | Current | Noncurrent | Total | |||||||||||||||||||
| 2024 Convertible Notes | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| 2024 Convertible Notes at fair value | ||||||||||||||||||||||||
| Related party convertible notes payable at fair value | ||||||||||||||||||||||||
| Related party loan payable | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| F-26 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Convertible Notes at Fair Value
Related party convertible notes payable at fair value
In
October 2019, the Company entered into a convertible promissory note agreement (the “2019 Convertible Note Agreement”) with
a lender and issued a convertible promissory note for the principal amount of $
In
September 2021, the Company entered into a second convertible promissory note agreement (the “2021 Convertible Note Agreement”)
(the 2019 Convertible Note Agreement and the 2021 Convertible Note Agreement collectively referred to as the “2019 and 2021 Convertible
Notes Agreements”) with the same lender and issued a convertible promissory note for the principal amount of $
Effective
December 2022, the 2019 and 2021 Convertible Notes Agreements were amended (the “2022 Amended Convertible Notes Agreements”)
to extend the maturity date for the 2019 and 2021 Convertible Notes to December 2023, increase the interest rate to
In December 2023, the 2022 Amended Convertible Notes Agreements were amended again (the “2023 Amended Convertible Notes Agreements”), extending the maturity date of the 2019 and 2021 Convertible Notes to January 2024.
In January 2024, the 2023 Amended Convertible Notes Agreements were amended again (the “2024 Amended Convertible Notes Agreements”), extending the maturity date to January 2025. The amendment also added a provision surrounding conversion in the case the Company completes the merger (see “SPAC PIPE financing” below) (also see “Note 1 –Organization”), an additional table depicting principal and interest on the 2019 and 2021 Convertible Notes to be redeemed in connection with the merger, and additional definitions related to the merger
The
2021, 2022 and 2023 amendments were accounted for as debt modifications, prospectively, with any change in fair value from the new terms
incorporated into future valuations. The 2024 amendment was deemed as capital transaction as per ASC 470-50-40-2 and is accounted for
as an extinguishment of debt, with a gain on extinguishment of debt of $
On
January 31, 2025, the Company entered into an amendment agreement of the convertible note payable to Dolma. Pursuant to the amendment
agreement, the maturity date was revised to
The Company evaluated the above amendment agreement entered on January 31, 2025, under the guidance in ASC 470-50 Debt - Modifications and Extinguishments, and it was determined terms of the amendment were not substantially different than the terms of the convertible notes prior to the Amendment. Accordingly, the aforesaid amendment was accounted for as a debt modification.
The 2019 and 2021 Convertible Notes, contain the following conversion features:
Conversion upon next equity financing – The conversion balance will be automatically converted into shares of the Company’s Convertible Preferred Stock upon the closing of the Next Equity Financing. The number of Convertible Preferred Stock to be issued upon the conversion will be equal to the quotient of the outstanding principal and, if so elected by the Company, any accrued and unpaid interest on the date of the conversion, divided by the conversion price calculated as the product of (a) 100% minus the discount rate, times (b) the price paid per share for equity securities by the investor in the Next Equity Financing. The aggregate liquidation preference of the Convertible Preferred Stock issued upon conversion shall be equal to the aggregate conversion balance
| F-27 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Maturity – If the Next Equity Financing or a corporate transaction (as defined below) has not occurred on or before the Maturity Date, and if the outstanding balance is not repaid by the Company in full on the Maturity Date, then the conversion balance shall automatically be converted into (i) the conversion balance on the Maturity Date, divided by (ii) $ price per share.
Corporate transaction – In the event of a (i) closing of the sale, transfer or other disposition of all or substantially all of the Company’s assets, (ii) the consummation of the merger or consolidation of the Company with or into another entity, (iii) the closing of the transfer (whether by merger, consolidation or otherwise), in one transaction or a series of related transactions, to a person or group of affiliated persons (other than an underwriter of the Company’s securities), of the Company’s securities if, after such closing, such person or group of affiliated persons would hold at least a majority of the outstanding voting stock of the Company (or the surviving or acquiring entity) (the “Corporate Transaction”), or (iv) a liquidation, dissolution or winding up of the Company prior to full payment of either of the Convertible Notes or prior to the time when either of the Convertible Notes are converted as provided in a Next Equity Financing or a Maturity Conversion, then the conversion balance shall automatically be converted into that number of conversion shares immediately prior to the closing of such Corporate Transaction obtained by dividing the conversion balance by 75% of the price per share of the corporate transaction.
SPAC
PIPE Financing – Aggregate redemption amount of the 2019 and 2021 Convertible Notes will be redeemed in connection with the
consummation of a SPAC transaction to be issued by the SPAC (a “SPAC PIPE Financing”). The aggregate redemption amount ranges
from $
If
the Company enters into a SPAC business combination agreement at any time while the 2019 and 2021 Convertible Notes are outstanding,
then any portion of the aggregate outstanding amounts that are not redeemed or repaid in connection with the closing of a SPAC
transaction will convert into shares of the Company’s common stock at a conversion valuation of $
The Company qualified for and elected to account for the 2019 and 2021 Convertible Notes under the fair value option and, in doing so, bypassed the analysis of potential embedded derivative features. The Company believes that the fair value option better reflects the underlying economics of the 2019 and 2021 Convertible Notes. As a result, the 2019 and 2021 Convertible Notes were recorded at fair value upon issuance
The
Company recorded a gain/charge of $
As of December 31, 2024, the lender of the 2019 and 2021 Convertible Notes was considered a principal owner of the Company, because it held greater than 10% of voting common stock of the Company (also see “Note 19 - Related Parties).
2024 Convertible Notes at fair value
In
January 2024, the Company entered into two convertible promissory note agreements (the “January 2024 Convertible Notes Agreements”)
with a lender for the principal amounts of $
On February 4, 2025, the maturity date of January 2024 convertible note was extended to July 12, 2025 pursuant to the second amendment
The January 2024 Convertible Notes contain the following conversion features:
Optional
conversion upon a qualifying financing – Before the maturity date in January 2025, if the company plans to go through a significant
funding round of the issuance of preferred stock resulting in gross proceeds of at least $
| F-28 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Automatic conversion into common stock - If the company completes the plan of merger as per the Merger Agreement (as defined in “Note 1 - Organization) before the January 2024 Convertible Notes maturity date in January 2025, the Company must notify the lender at least 5 days before the merger is finalized. Immediately preceding the merger, any outstanding amounts the Company owes under the January 2024 Convertible Notes will automatically turn into shares of the Company’s common stock. The number of shares converted is based on the Conversion Amount, divided by the Conversion Price, which will be capped at a maximum value (the share price cap as discussed below).
Optional conversion into preferred stock or common stock – After the maturity date of this note in January 2025, the holder can choose to turn the Conversion Amount into shares. There are two scenarios: (i) if converted in conjunction with the January 2024 Convertible Notes Qualifying Financing after the maturity date of January 2025, the conversion will be to preferred stock. The number of shares will be the Conversion Amount divided by the Conversion Price, or (ii) if converted at any other time that is not tied to a Qualifying Financing after the maturity date of January 2025, the conversion will be to common stock. The number of shares will be based on the Conversion Amount, divided by the maximum share price (the share price cap as discussed below).
Optional conversion upon a liquidation event – Before the maturity date in January 2025, or before the January 2024 Convertible Notes convert into shares according to the optional conversion upon a qualifying financing, automatic conversion into common stock, or optional conversion into preferred or common stock as discussed above, if the Company plans to sell off its assets or dissolve (when not part of a merger, a “Liquidation Event”), the holder can: (i) choose to convert any Conversion Amount into common stock immediately prior to the Liquidation Event. The number of shares to be calculated as the Conversion Amount, divided by a set price per share (the share price cap as discussed below), or (ii) alternatively, choose to be paid in cash, which would be the Conversion Amount, payable prior to the Liquidation Event. The Company must notify the holder at least 10 days before the Liquidation Event is expected to occur.
Liquidation Preference Upon Conversion – If the January 2024 Convertible Notes convert in the January 2024 Notes Qualifying Financing, they will be converted into preferred stock such that the liquidation preference shall equal the Conversion Price.
January 2024 Convertible Note A specific terms – Upon the occurrence of a default (as defined in the January 2024 Notes Agreement and discussed below), the holder can declare all amounts due and outstanding to be paid immediately. The proceeds received under the January 2024 Convertible Note A are to be used to repurchase shares of common stock held by Sameer Maskey, CEO of the Company. The share price cap is $ per share.
January
2024 Convertible Note B specific terms – Upon the occurrence of a default (as defined in the January 2024 Notes Agreement and
discussed below), the holder can declare all amounts due and outstanding be paid immediately, including a termination fee of $
The January 2024 Convertible Notes will default if the Merger Agreement (as defined in “Note 1 – Organization”) is terminated and also has other customary events of default. The January 2024 Convertible Notes are fully secured by shares of common stock held by Sameer Maskey, the CEO of the Company (refer to “Note 19 – Related Parties”).
The Company qualified for and elected to account for the January 2024 Convertible Notes under the fair value option and, in doing so, bypassed the analysis of potential embedded derivative features. The Company believes that the fair value option better reflects the underlying economics of the January 2024 Convertible Notes. As a result, the January 2024 Convertible Notes were recorded at fair value upon issuance
The Company evaluated the amendment agreement entered on February 4, 2025, under the guidance in ASC 470-50 Debt - Modifications and Extinguishments, and it was determined terms of the amendment were not substantially different than the terms of the convertible notes prior to the Amendment. Accordingly, the aforesaid amendment was accounted for as a debt modification.
The
Company recorded a gain and charge of $
The January 2024 Convertible Notes were once again amended in July 2025 and basis the amendment the maturity date was revised from July 12, 2025, to October 18, 2025, pursuant to the third amendment. The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the difference between the present value of the amended note’s cash flows and the present value of the original remaining cash flow and concluded that the results didn’t exceed the 10% factor, the debt modification is not considered substantially different and therefore did not apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC 470.
| F-29 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
2023 Notes Payable
In
August 2023, the Company entered into a loan and security agreement with a lender (the “2023 Notes Agreement”) that will
make available to the Company loans in an aggregate principal amount of up to $
In
January 2024, the Company repaid the entire aggregate outstanding principal on the 2023 Notes Payable in the amount of $
Common Stock warrant
In
connection with the 2023 Notes Agreement, the Company issued to the lender common stock warrants (the “Common Stock Warrants”)
to purchase up to shares of the Company’s common stock, exercisable immediately, with an exercise price of $
The
Company recorded a gain of $
April 2024 Convertible Note
In
April 2024, the Company entered into a convertible note agreement (the “April 2024 Convertible Note Agreement”) with a lender
for the aggregate principal amount of $
Automatic
conversion into common stock – If on or before the maturity date in April 2025, the Company closes the plan of merger as described
in the Merger Agreement (as defined in “Note 1 – Organization”), the Company will notify the holder of the April 2024
Convertible Note five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding obligations
of the April 2024 Convertible Note will automatically convert into the number of common shares equal to the outstanding amount divided
by $
Warrant
issuance – Upon the conversion of the April 2024 Convertible Note to common stock, the Company shall issue the holder a warrant
to purchase shares of common stock of CSLM with a per share exercise price of $
Subordination – Upon the occurrence of any event of default (as described in the April 2024 Convertible Note Agreement and discussed below), the April 2024 Convertible Note shall become junior and subordinate to the January 2024 Convertible Notes.
The April 2024 Convertible Note has customary events of default, are fully secured by the assets of the Company and because the conversion feature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the April 2024 Convertible Note will be used for working capital purposes.
On
February 5, 2025, the conversion price of the April 2024 Convertible Promissory Notes with principal amount of $
The
Company evaluated the conversion feature of April 2024 Convertible Note offering for embedded derivatives in accordance with ASC
815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on this assessment, separate
accounting for the conversion feature was not required and the instrument was accounted for under the substantial
premium model. Accordingly, the excess of the consideration over the fair value amounting to $
| F-30 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
The April 2024 Convertible Notes were once again amended in April 2025 and basis the amendment the maturity date was revised from April 5, 2025 to April 5, 2026 pursuant to the second amendment. The Company applied the 10% cash flow test pursuant to ASC 470 to calculate the difference between the present value of the amended note’s cash flows and the present value of the original remaining cash flow and concluded that the results didn’t exceed the 10% factor, the debt modification is not considered substantially different and therefore did not apply extinguishment accounting, rather it accounted for the modification on a prospective basis pursuant to ASC 470.
June 2024 Convertible Note
In
June 2024, the Company entered into a convertible note agreement (the “June 2024 Convertible Note Agreement”) with a lender
for the principal amount of $
Automatic
conversion into common stock – If on or before the maturity date in June 2025, the Company closes the plan of merger as described
in the Merger Agreement (as defined in “Note 1 – Organization”), the Company will notify the holder of the June 2024
Convertible Note five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding obligations
of the June 2024 Convertible Note will automatically convert into the number of common shares equal to the outstanding amount divided
by $
Warrant
issuance – Upon the conversion of the June 2024 Convertible Note to common stock, the Company shall issue the holder a warrant
to purchase shares of common stock of CSLM with a per share exercise price of $
Subordination – Upon the occurrence of any event of default (as described in the June 2024 Convertible Note Agreement and discussed below), the June 2024 Convertible Note shall become junior and subordinate to the January 2024 Convertible Notes.
The June 2024 Convertible Note has customary events of default, are fully secured by the assets of the Company and because the conversion feature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the June 2024 Convertible Note will be used for working capital purposes.
On
February 5, 2025, the conversion price of the June 2024 Convertible Promissory Note with principal amount of $
The
Company evaluated the conversion feature of June 2024 Convertible Note offering for embedded derivatives in accordance with ASC 815,
Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on the assessment, separate accounting
for the conversion feature was not required, and the instrument was accounted for under
the substantial premium model. Accordingly, the excess of the consideration over the fair value amounting to $
The
June 2024 Convertible Note were once again amended in July 2025 and basis the amendment, the maturity date was revised from June 17, 2025,
to
| F-31 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
September 2024 Convertible Notes
In
September 2024, the Company entered into two convertible note agreements (the “September 2024 Convertible Notes Agreements”)
with two lenders, each for the principal amount of $
Automatic
conversion into common stock – If on or before the maturity date in September 2026, the Company closes the plan of merger as
described in the Business Combination Agreement (as defined in “Note 1 – Organization”), the Company will notify the holders of the
September 2024 Convertible Notes five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding
obligations of the September 2024 Convertible Notes will automatically convert into the number of common shares equal to the outstanding
amount divided by $
Warrant
issuance – Upon the conversion of the September 2024 Convertible Note to common stock, the Company shall issue the holder a
warrant to purchase shares of common stock of CSLM with a per share exercise price of $
Subordination – Upon the occurrence of any event of default (as described in the September 2024 Convertible Notes Agreements and discussed below), the September 2024 Convertible Notes shall become junior and subordinate to the January 2024 Convertible Notes.
The September 2024 Convertible Notes have customary events of default, are fully secured by the assets of the Company and because the conversion feature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the September 2024 Convertible Notes will be used for working capital purposes.
On
February 5, 2025, the conversion price of the two September 2024 Convertible Promissory Notes with principal amount of $
The
Company evaluated the conversion feature of September 2024 Convertible Notes offering for embedded derivatives in accordance with
ASC 815, Derivatives and Hedging, and the substantial premium model in accordance with ASC 470, Debt. Based on the assessment,
separate accounting for the conversion feature was not required, and the instrument was accounted for under the substantial premium
model. Accordingly, the excess of the consideration over fair value amounting to $
February 2025 Convertible Notes
On
February 24, 2025, the Company entered into a convertible promissory note amounting to $
Automatic
conversion into common stock – If on or before the maturity date in February 2028, the Company closes the plan of merger as
described in the Business Combination Agreement (as defined in “Note 1 – Organization”), the Company will notify the holders of the
February 2025 Convertible Notes five days prior to the merger. Immediately prior to the closing of the merger, all of the then outstanding
obligations of the September 2024 Convertible Notes will automatically convert into the number of common shares equal to the outstanding
amount divided by $
Subordination – Upon the occurrence of any event of default (as described in the February 2025 Convertible Notes Agreements and discussed below), the February 2025 Convertible Notes shall become junior and subordinate to the January 2024 Convertible Notes.
The February 2025 Convertible Note has customary events of default, are fully secured by the assets of the Company and because the conversion feature does not meet the definition of a derivative are being accounted for at amortized cost. The proceeds of the February 2025 Convertible Note will be used for working capital purposes.
Related Party loan payable
During
the previous year ended December 31, 2024, the Company entered into seven separate promissory notes with Mr. Maskey for an aggregate
principal amount of $
On February 12, 2025, an amendment to the seven promissory notes was entered into between the company and the CEO, Mr. Sameer Maskey. As per the original agreement, the maturity date was earlier of (1) the occurrence of an Event of Default and (2) December 31, 2024. Pursuant to the amendment agreement, the maturity date was extended to earlier of (1) the occurrence of an Event of Default and (2) December 31, 2025.
The Company evaluated the amendment in maturity date under the guidance in ASC 470-50 Debt - Modifications and Extinguishments, and it was determined that there was no gain/loss to be recorded in the consolidated statements of operations and comprehensive loss, for the year ended December 31, 2025.
The Company incurred interest expense on promissory notes held at amortized cost and subsequently the promissory notes principal and accrued and unpaid interest were repaid in cash upon the Closing of merger.
| F-32 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Others- February 2025 Convertible Notes
In
connection with the second amendment to the Business Combination Agreement, Consilium Frontier Equity Fund, LP provided financing to Fusemachines Inc.
in the amount of $
Pursuant to the terms of the Note and related Escrow Agreement, the proceeds are required to be deposited into an escrow account and will be released to the Company only upon the consummation of the Business Combination.
Further, per Section 4.2 of the Escrow Agreement “Upon the Closing, the Company, Investor and Fusemachines shall jointly deliver a Joint Release Notice to the Escrow Agent directing the Escrow Agent to disburse all Funds held in the Escrow Account to the Fusemachines Inc.” Accordingly, the escrowed funds are not freely available to the Company prior to joint instruction by the Investor, Fusemachines and the Company.
On May 22, 2025, the proceeds from Consilium Frontier Equity Fund, LP have been received into an escrow account. Upon closing of the merger, these funds were subsequently released and received in the bank account of Fusemachines Inc.
Impact of reverse capitalization on convertible note
In connection with the consummation of the Business Combination on October 22, 2025, each Legacy Fusemachines convertible note, including both related-party and non-related-party convertible notes, that was issued and outstanding immediately prior to the Closing was converted into an aggregate of shares of Legacy Fusemachines common stock in accordance with the respective convertible note agreements.
Convertible notes that are exchanged for equity pursuant to their original contractual terms are accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options. Upon conversion, the carrying amount of the convertible debt is reclassified to equity, and no gain or loss is recognized in earnings, as the conversion is executed in accordance with the original terms of the instruments.
Immediately following such conversions, all shares of Legacy Fusemachines common stock issued upon conversion were exchanged for shares of Fusemachines Inc. common stock based on the exchange ratio specified in the Business Combination Agreement.
As
a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of December 31,
2025, other than related party note payable related to Dolma amounting $
Accounting of warrants issuance pursuant to conversion of convertible note.
The
warrants issuable upon conversion of the April 2024, June 2024, September 2024 Convertible Note are classified as equity warrants,
based on an assessment of the instruments’ specific terms and applicable authoritative guidance in FASB ASC Topic 480, “Distinguishing
Liabilities from Equity” (“ASC 480”) and FASB ASC Topic 815, “Derivatives and Hedging” (“ASC 815”).
These warrants are measured at fair value on the issuance date (Day 1), which is the merger closing date of October 22, 2025, and
should not be subsequently remeasured, with no recurring fair value adjustments recognized in earnings. The Company recorded a loss of
$
| F-33 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 11. Convertible Preferred Stock
Effective February 2023, the Company amended the Third Amended and Restated Certificate of Incorporation of Fusemachines Inc. (the “Restated Certificate”) to increase the number of shares of series seed preferred stock (“Convertible Preferred Stock”) that the Company is authorized to issue from to (including authorized shares of preferred stock not assigned to a particular series) and increase the authorized shares of series seed-2 preferred stock (“Series Seed-2 Convertible Preferred Stock”).
On October 22, 2025, upon the consummation of the business combination, which was accounted for as a reverse recapitalization, shares of Legacy Fusemachines convertible preferred stock were converted into Legacy Fusemachines common stock in accordance with the applicable conversion terms. Subsequently, in connection with the Business Combination, all such Legacy Fusemachines common shares were exchanged for shares of common stock of Fusemachines Inc. (the “Company” or “PubCo”) based on the exchange ratio specified in the Business Combination Agreement. After giving effect to the exchange ratio, an aggregate of shares of the Company’s common stock were issued.
As a result of these transactions, no shares of Convertible Preferred Stock remained outstanding as of December 31, 2025.
The authorized, issued and outstanding shares of Convertible Preferred Stock, along with the related liquidation preferences and carrying values, after giving effect to the conversion ratio applied in connection with the merger (reverse capitalization), as of December 31, 2024, were as follows (in thousands, except share numbers)
| As of December 31, 2024 | ||||||||||||||||
| Series | Authorized Shares | Issued and Outstanding Shares | Liquidation Preferences | Carrying Value | ||||||||||||
| Seed-1 | $ | $ | ||||||||||||||
| Seed-2 | $ | |||||||||||||||
| Seed-3 | $ | |||||||||||||||
| Seed-4 | $ | |||||||||||||||
| Total | $ | |||||||||||||||
Rights, preferences and privileges of the Convertible Preferred Stock (Historical)
The following summarizes the rights, preferences, and privileges of the Convertible Preferred Stock prior to its conversion at Closing
Dividends. The Company may not pay dividends on other classes or series of stock (excluding dividends in common stock) before unless the holders of the Company’s Convertible Preferred Stock receive, at the same time or before, a dividend on each of their shares. Upon the declaration of a dividend for another class or series of stock (excluding common stock), the holders of the Convertible Preferred Stock are entitled to receive dividends based on the equivalent amount if the other stocks were converted into common stock, times the number of common stock shares that each Convertible Preferred Stock share could be converted into (as adjusted for stock splits, combinations and reorganizations). No dividends have been declared to date.
Conversion. The series seed preferred stock is convertible, at the option of the holder, at any time and from time to time, into such number of fully paid and nonassessable shares of common stock as is determined by dividing the series seed original issue price by the series seed conversion price in effect at the time of conversion.
Voting rights. The holders of Convertible Preferred Stock are entitled to that number of votes on all matters presented to stockholders equal to the number of shares of common stock then issuable upon conversion of such preferred stock. The holders of Convertible Preferred Stock are entitled to elect one director of the Company.
Liquidation.
In the event of any sale of substantially all of the assets, a merger, or liquidation, dissolution or winding up of the Company, the
holders of series seed-4 Convertible Preferred Stock then outstanding will be entitled to receive, in preference to the holders of all
other series of Convertible Preferred Stock and common stock, an amount equal to or greater than (a) $
| F-34 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
After
the payment of all preferential amounts required to the paid to the holders of shares of series seed-4 Convertible Preferred Stock, the
holders of series seed 3, 2, and 1 Convertible Preferred Stock will be entitled to receive, on a pari passu basis and in preference to
the holders of common stock, $
Note 12. Stockholder’s Deficit
Common Stock
In connection with the Restated Certificate, the number of shares of Fusemachine Inc. common stock that the Company is authorized to issue is shares and shares as of December 31, 2025 and December 31, 2024 respectively.
| As of December 31, 2025 | As of December 31, 2024 | |||||||
| Convertible preferred stock (as converted to common stock) | ||||||||
| Common stock warrants | ||||||||
| Common stock contingent obligation | ||||||||
| Stock options | ||||||||
| Equity shares warrant (refer note 22) | ||||||||
| SPAC public and private placement warrants (refer note 24) | ||||||||
| Issuance of warrants pursuant to conversion of convertible note.(refer note 10) | ||||||||
| (1) | ||||||||
| (1) |
Convertible Preferred Stock
In connection with the Restated Certificate, the number of shares of Convertible Preferred Stock that the Company is authorized to issue is as at December 31, 2025 (Refer to “Note 11 - Convertible Preferred Stock “).
Warrants
As
of December 31, 2025 and December 31, 2024 the Company had Common Stock Warrants outstanding to purchase up to
shares of the Company’s common stock at an exercise price
of $
Common Stock Contingent Obligation
As of December 31, 2025, the Company had a contingent obligation upon closing of the Merger Shares issued to Legacy Fusemachines vendor for settlement of outstanding vendor invoices.
| F-35 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 13. Revenue
Under ASC 606, revenue is recognized throughout the life of the executed agreement. The Company measures revenue based on consideration specified in a contract with a customer. Furthermore, the majority of the Company’s revenues are recognized over time as services are performed. The Company recognizes revenue when a performance obligation is satisfied by transferring control of the product or service to the customer
The Company provides services to customers worldwide, with the majority of revenues being derived from contracts with customers located within the United States. The table below presents the breakdown of the Company’s revenues, based on the customer’s location (in thousands).
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Customer locations | ||||||||
| United States | ||||||||
| Rest of the world | ||||||||
| Total revenue | ||||||||
The table below presents the breakdown of the Company’s revenues, based on the customer’s service type (in thousands).
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Service type | ||||||||
| AI Solutions (Products and Services)* | ||||||||
| AI Education Services | ||||||||
| Total revenue | ||||||||
| * |
| F-36 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Service Type
During
the year ended December 31, 2025 and 2024, the Company had one significant service type, AI Solutions (products and services). For the
year ended December 31, 2025 and 2024, there were $
Deferred Revenue
During
the year ended December 31, 2025, the Company recognized revenue of $
Contract Costs
The
Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets
that the Company otherwise would have recognized is one year or less. Management expects that commission fees paid to sales representatives
as a result of obtaining service contracts and contract renewals, are recoverable and therefore the Company’s consolidated balance
sheets included capitalized balances in the amount of $
Transaction price allocated to remaining performance obligations
The Company elected to apply the practical expedient for the right to invoice and does not disclose performance obligations that have original expected durations of one year or less.
The opening and closing balances of contract assets, deferred revenue and unbilled revenue are as follows (in thousands):
| Contract Assets | Deferred revenue | Unbilled Revenue | ||||||||||
| Ending balance as of December 31, 2023 | $ | $ | $ | |||||||||
| Increase/(decrease), net | ||||||||||||
| Ending balance as of December 31, 2024 | ||||||||||||
| Increase/(decrease), net | ( | ) | ( | ) | ( | ) | ||||||
| Ending balance as of December 31, 2025 | $ | $ | ||||||||||
| F-37 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Effective June 2014, the Company adopted an equity-based compensation plan, the 2014 Equity Incentive Plan (the “2014 Plan”), which allows for the grant of stock options, stock issuances and other equity interests in the Company to the Company’s officers, directors, employees and consultants. The 2014 Plan is administrated by the Company’s Board of Directors, or a committee appointed by the Board. In February 2023, the Company’s board of directors and stockholders adopted the 2023 Equity Incentive Plan (the “2023 Plan”), which provides for the grant of incentive stock options, restricted stock awards and restricted stock units (“RSUs”) to eligible employees, directors and consultants of the Company. With the introduction of the 2023 Plan, shares are no longer available for future grants under the 2014 Plan. Awards outstanding under the 2014 Plan will be governed by the 2023 Plan. shares of Common Stock were authorized for issuance under the 2023 Plan to officers, directors, employees and consultants of the Company.
The 2023 Plan was amended and approved by the stockholders of the Company in December 2023 to increase the number of shares of the Company’s Common Stock reserved for issuance under the Fusemachines Inc. 2023 Amended and Restated Equity Plan (the “2023 Equity Incentive Plan”) by to shares of common stock.
In connection with the Business Combination, which was accounted for as a reverse recapitalization, the number of shares under the 2023 Equity Incentive Plan was adjusted to reflect the exchange ratio established in the business combination agreement. Accordingly, all share and per share amounts under the plan have been retrospectively adjusted to reflect the conversion of Legacy Fusemachines equity into the Company’s common stock
As of December 31, 2025, shares of Common Stock were available for future grant under the 2023 Plan, as the 2023 Plan was replaced in its entirety by the 2025 Plan which was adopted in connection with the Business Combination.
| Year ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| General and administrative | $ | $ | ||||||
| Cost of revenue | ||||||||
| Selling and marketing | ||||||||
| Research and development | ||||||||
| Total stock-based compensation expense | $ | $ | ||||||
Stock Options
The Company’s stock options outstanding consist primarily of time-based options to purchase common stock, the majority of which vest over a two-to-four- year period and have a ten-year contractual term. These awards are subject to the risk of forfeiture until vested by virtue of continued employment or service to the Company.
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate | |||||||||||||
| Outstanding balance as of December 31, 2024 | $ | |||||||||||||||
| Granted | - | - | ||||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Forfeited | ( | ) | - | - | ||||||||||||
| Cashless exercise (1) | ( | ) | - | - | ||||||||||||
| Expired | ( | ) | - | - | ||||||||||||
| Outstanding balance as of December 31, 2025 | $ | |||||||||||||||
| Options vested and exercisable as of December 31, 2025 | ||||||||||||||||
| (1) |
| F-38 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
During the year ended December 31, 2025 and 2024, the Company recorded stock-based compensation expense of $ thousand and $ thousand, respectively. As of December 31, 2025, total stock-based compensation expense not yet recognized related to unvested stock options was $ thousand, which is expected to be recognized over a weighted-average period of years.
The total intrinsic value of options exercised was $ thousand and $ thousand during the year ended December 31, 2025 and year ended December 31, 2024, respectively.
The weighted average grant-date fair value per share of stock options granted during the year ended December 31, 2025 and year ended December 31, 2024 was and $, respectively The Company estimated the fair value of stock options using the Black-Scholes Model on the date of grant. The assumptions used in the Black-Scholes Model were as follows:
| December 31, | ||||||||
| 2025 (1) | 2024 | |||||||
| Weighted average expected term (years) | ||||||||
| Weighted average expected volatility | % | |||||||
| Risk-free interest rate | %- | % | ||||||
| Dividend yield | ||||||||
| (1) |
Cashless Exercise of Stock Options
In August 2025, certain Fusemachines employees exercised options to purchase Fusemachines Inc. Common Stock. The exercise prices for the options were paid on a cashless basis via net share settlement resulting in the net share issuance of shares of Fusemachines Inc. Common Stock. The transaction has been accounted under the guidance of ASC 718 - Stock Compensation. The cashless exercise mechanism does not change the substantive terms or fair-value-based measure of the awards and therefore does not constitute a modification under ASC 718.
The Promissory Notes Transaction
Early Exercise of Stock Options
The
Company permits certain employees and directors to exercise stock options granted under the 2023 Plan prior to vesting. In February 2023,
the Company’s Chief Executive Officer, Mr. Maskey and other three executives early exercised a total of stock options
prior to vesting (The February Options Awards); however, in lieu of the cash consideration required to exercise the stock options,
these individuals each provided a
The nonrecourse nature of the loan secured by the shares pledged as collateral essentially provides the employee with rights like that of an option and thus no receivable for amounts due under the 2023 Promissory Notes was recorded on the Company consolidated balance sheets. While the shares of common stock purchased by the employees in exchange for the 2023 Promissory Notes are considered legally issued, the shares are not deemed, for accounting purposes, outstanding and are considered restricted until all of the options are fully vested and the outstanding principal and accrued interest due on the note is repaid in full.
The issuance of the 2023 Promissory Notes resulted in an additional stock-based compensation expense of and $ thousand for the year ended December 31, 2025 and 2024, respectively, based on the grant-date fair value of the Promissory Notes, which was determined using the Black-Scholes Model.
The assumptions used in deriving the grant-date fair value of the 2023 Promissory Notes via the Black-Scholes Model were as follows: (i) a stock price of $ per share, (ii) an exercise price of $ per share, (iii) an estimated risk-free interest rate of %, (iv) an expected term of years, (v) volatility of %, and (vi) a dividend yield of %. These assumptions resulted in a grant-date fair value of approximately $ per option.
| F-39 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
The Company continues to recognize expenses for the original option award of shares granted in February 2023 (the “February Option Awards”), which were early exercised in exchange for Promissory Notes. The early exercise is not considered substantive for accounting purposes until the vesting requirements are met through continued employment and service to the Company. As of December 31, 2025 and 2024, the Company recognized and $thousand, respectively, in stock-based compensation expense related to the February Option Awards. The unrecognized stock-based compensation expense related to the February Option Awards was . The weighted-average grant-date fair value per share of the February Option Awards was $.
Repayment of the Promissory Notes
In
January 2024, the Company repurchased shares of common stock from Sameer Maskey, the CEO, at a price of $ per share, totalling
$
Forgiveness of Promissory Notes
In
August 2024, the Company’s board of directors approved the forgiveness of the 2023 Promissory Notes totaling $
In accordance with ASC 718, the incremental value of the modification was calculated as the difference between the fair value of the modified award and the fair value of the original award immediately before the modification. As of December 31, 2024, the Company recognized $ thousand in stock based compensation expense related to this modification.
Adoption of 2025 Omnibus Equity Incentive Plan
On October 22, 2025, the Board of Directors of the Company approved the 2025 Omnibus Equity Incentive Plan (the “2025 Plan”). The 2025 Plan provides for the grant of equity-based awards to employees, directors, officers, and other eligible service providers of the Company and its subsidiaries.
In connection with the adoption of the 2025 Plan, an aggregate of shares of the Company’s Common Stock were reserved for issuance pursuant to awards granted under the 2025 Plan. The types of awards that may be granted under the 2025 Plan include, but are not limited to, stock options, restricted stock, restricted stock units, stock appreciation rights, performance-based awards, and other stock-based awards, as determined by the Board of Directors or a designated committee thereof.
No awards had been granted under the 2025 Plan as of period ended December 31, 2025. Accordingly, the adoption of the 2025 Plan did not have any impact on the Company’s consolidated financial statements as of that date.
| F-40 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
| Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Numerator: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Denominator: | ||||||||
| Weighted-average common shares outstanding - basic and diluted | ||||||||
| Net loss per share attributable to Fusemachines Inc. common stockholders - basic and diluted | ) | ) | ||||||
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Convertible Preferred Stock (as converted to common stock) | ||||||||
| Common Stock Warrants | ||||||||
| Stock options (1) | ||||||||
| SPAC public and private placement warrants (2) (refer note 24) | ||||||||
| Equity Share warrant (refer note 22) | ||||||||
| Issuance of warrants pursuant to conversion of convertible note (refer note 10) | ||||||||
| (1) |
| (2) |
The Convertible Notes were also outstanding as of December 31, 2024, which could obligate the Company to issue preferred shares upon the occurrence of various future events at prices and in amounts that are not determinable until the occurrence of those future events. Because the necessary conditions for the conversion of the Convertible Notes have not been satisfied as of December 31, 2024, the Company has excluded the Convertible Notes from the table above and the calculation of diluted net loss per share. (Refer to “Note 10 - Long-Term Debt “)
The
Company has also entered into a contingent obligation to issue
shares of its common stock to a certain vendor in connection
with an outstanding accounts payable balance as part of a settlement agreement (refer to “Note 17 - Commitment and Contingencies”).
The issuance of common stock is contingent upon the completion the Merger (refer to “Note 1 - Organization”). As the Merger
had not taken place as of December 31, 2024, the conditions for the issuance of common stock have not been satisfied. Accordingly, the
Company has excluded the common stock shares arising from this contingent obligation from the table above and the calculation of diluted
net loss per share. Upon the closing of the business combination, the Company settled its obligation under the Second Agreement through
the issuance of shares of Fusemachines, Inc. common stock, reflecting the application of the
| F-41 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 16. Income Taxes
The provision for income taxes consists of the following (in thousand):
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Current provision: | ||||||||
| Federal | ||||||||
| State | ||||||||
| Foreign | ( | ) | ( | ) | ||||
| Total current provision | ( | ) | ||||||
| Deferred: | ||||||||
| Federal | ||||||||
| State | ||||||||
| Foreign | ||||||||
| Total deferred provision | ||||||||
| Total provision for income taxes | ( | ) | $ | ( | ) | |||
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below (in thousands):
| 2025 | 2024 | |||||||
| Deferred tax assets: | ||||||||
| U.S. federal and state net operating loss carry forwards | ||||||||
| Research and development Tax Credits | ||||||||
| Allowance for credit losses | ||||||||
| Research and development | ||||||||
| Amortization | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Stock-based compensation | ||||||||
| Operating lease liability | ||||||||
| Total deferred tax assets | ||||||||
| Deferred tax liabilities: | ||||||||
| Amortization | ( | ) | ( | ) | ||||
| Property and equipment, net | ( | ) | ( | ) | ||||
| Uncertain Tax Positions | ||||||||
| Operating lease right-of-use assets | ( | ) | ( | ) | ||||
| Total deferred tax liabilities | ( | ) | ( | ) | ||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax assets after valuation allowance | ||||||||
| F-42 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures the reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 was as follows (in thousands, except for percentages):
| 2025 | ||||||||
| Amount | Percentage | |||||||
| U.S. federal statutory tax rate | ( | ) | % | |||||
| Foreign tax effects | ||||||||
| Nepal | ||||||||
| Statutory tax rate difference between Nepal and United states | ( | ) | % | |||||
| Other | ( | )% | ||||||
| Canada | ||||||||
| Statutory tax rate difference between Canada and United States | ( | )% | ||||||
| Changes in valuation allowances | ( | )% | ||||||
| Tax credits | ( | ) | % | |||||
| Changes in valuation allowances | ( | %) | ||||||
| Nontaxable or nondeductible items | ||||||||
| Change in fair value | ( | ) | % | |||||
| Stock-based compensation | ( | ) | % | |||||
| Loss on extinguishment of debt | ( | )% | ||||||
| 162(m) Limitation | ( | )% | ||||||
| Other | ( | )% | ||||||
| Changes in unrecognized tax benefits | ( | )% | ||||||
| Other adjustments | ||||||||
| Stock-based compensation–related deferred tax asset adjustments | ( | )% | ||||||
| Prior year true ups | ( | )% | ||||||
| Provision for Income tax | ( | )% | ||||||
The reconciliation of taxes at the federal statutory rate to the provision for (benefit from) income taxes for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows (in thousands):
| 2024 | ||||||||
| Amount | Percentage | |||||||
| Loss before income taxes | ( | ) | ||||||
| Federal tax at statutory rate | ( | ) | % | |||||
| Foreign rate differential | ( | )% | ||||||
| State taxes, net of federal benefit | ( | ) | % | |||||
| Permanent differences | ( | )% | ||||||
| Change in fair value | ( | )% | ||||||
Stock based compensation | ( | ) | ||||||
| Tax Credits | ( | ) | % | |||||
| Others | ( | ) | % | |||||
| Change in valuation allowance | ( | ) | ||||||
| Provision for Income Tax | ( | ) | ||||||
The utilization of the Company’s net operating loss carryforwards and research tax credit carryovers could be subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), due to ownership change limitations that may have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383 of the Code, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has not completed an analysis of an ownership change under Section 382 of the Code. To the extent that a study is completed and an ownership change is deemed to occur, the Company’s net operating losses and tax credits could be limited.
The
ultimate realization of deferred tax assets is dependent upon the generation of sufficient future taxable income during the periods in
which those temporary differences become deductible. Management has considered all positive and negative evidence in connection with
the realization of the deferred tax assets based on projected future taxable income and tax planning strategies. Based upon the level
of projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is
more likely than not the Company will not realize the benefits of these deductible differences. Therefore, the Company continues to record
a
The
valuation allowance for the year ending December 31, 2025 increased by $
As
of December 31, 2025,
ASC 740-10 prescribes a comprehensive model for the
recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected
to be taken on a tax return. As of December 31, 2025 and 2024, the Company had unrecognized tax benefits (“UTBs”) of approximately
$
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Beginning Balance | $ | | $ | | ||||
| Change related to prior year provisions | ( | ) | ||||||
| Change related to current year provisions | ||||||||
| Ending balance | $ | $ | ||||||
| F-43 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Income tax returns are filed in the United States and various state jurisdictions. The Company is not currently under examination by income tax authorities in US federal or state jurisdictions. Fusemachines Nepal Private Limited is currently under examination by local Nepal tax authorities for FY 2023-24.
Due to net operating loss carryforward, the Company’s returns remain open for all prior years.
Note 17. Commitment and Contingencies
Consulting Agreement
In
December 2020, the Company entered into a consulting agreement with a certain vendor, whereby they agreed to help develop and implement
sales strategies for the Company for $
In
August 2024, the Company entered into a second agreement (the “Second Agreement”) with the same vendor mentioned above whereby
the Company and vendor acknowledged an outstanding accounts payable balance of $
The Company evaluated the feature in the Second Agreement whereby the closing of the Merger triggers the obligation to issue shares of the Company’s common stock (the “Conversion Feature”) to determine whether the feature should be considered a freestanding financial instrument (as defined in ASC 480-10-20) or whether it should be considered embedded. The Company determined that the Conversion Feature should be considered embedded because it did not meet the definition of a freestanding financial instrument because it was neither i) entered into separately and apart from any of the entity’s other financial instruments, nor was it ii) separately exercisable.
After determining that the Conversion Feature should be considered embedded, the Company determined that it did not require bifurcation as an embedded derivative under ASC 815-15 because it did not meet the net settlement criterion to be considered a derivative.
Subsequent
to determining that derivative bifurcation for the Conversion Feature was not required, the Company evaluated its obligations to the
vendor under the Second Agreement to determine whether the Second Agreement should be accounted for as an extinguishment (in accordance
with ASC 470-50) of the Company’s initial obligations (those obligations prior to the Second Agreement under the initial consulting
agreement) and an immediate recognition of the new obligations specified in the Second Agreement. The Company determined that the Second
Agreement should be accounted for as an extinguishment because the Conversion Feature represented the addition of a substantive conversion
option, as that term is used in ASC 470-50-50-10 (and as it is defined in ASC 470-20-40-7). As the Company determined that the Second
Agreement should be accounted for as an extinguishment, it calculated a loss on extinguishment (in accordance with ASC 470-50-40-4) equal
to the reacquisition price of the new obligations under the Second Agreement less the net carrying amount of the initial obligation under
the initial consulting agreement. The reacquisition price was equal to the fair value of the new obligations on the effective date of
the Second Agreement, which was determined to be $
The fair value of the new obligations used to determine the loss on extinguishment was determined using a probability-weighted expected return method/scenario-based method. The significant inputs to the valuation method were an estimate of the probability of the Merger closing, an estimate of the date the Merger will close, an estimate of the fair value of the Fusemachines shares (estimate based on an income approach and market approach in accordance with Internal Revenue Service Ruling 59-60 for compliance with Internal Revenue Code Section 409A) to be issued upon the closing of the Merger, and an estimated discount rate. As the method for estimating the fair value of the new obligations used significant unobservable inputs, it was determined to represent a Level 3 fair value measurement.
Upon
the closing of the business combination, the Company settled its obligation under the Second Agreement through the issuance of
shares of Fusemachines, Inc. common stock, reflecting the application of the
Legal counsel fee arrangement
In connection with the Business Combination, the Company
incurred legal fees payable to its external legal counsel, totaling $
| F-44 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Consulting arrangements
In
December 2025, the Company entered into a Payment Plan Agreement with a service provider to settle outstanding
obligations of $
The Company made an initial payment of $
As of December 31, 2025, the current portion of the settlement obligation (amounts due within twelve months) is classified within accounts payable under current liabilities, with the remaining balance classified as non-current within accounts payable in the balance sheet
Guarantees and Indemnifications
In the normal course of business, the Company enters into agreements that contain a variety of representations and provide for general indemnification. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future. To date, the Company has not paid any claims or has been required to defend any action related to its indemnification obligations. As of December 31, 2025 and December 31, 2024, the Company does not have any material indemnification claims that were probable or reasonably possible and consequently has not recorded related liabilities.
Litigation
Legacy
Fusemachines received a legal notice dated March 27, 2025, requiring payment of $
Lease obligations
Refer to “Note 18 – Leases” for a description of the Company’s lease obligations as of December 31, 2025 and December 31, 2024.
| F-45 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 18. Leases
The
Company has operating leases for office space.
There are no material residual guarantees associated with any of the Company’s leases, and there are no significant restrictions or covenants included in the Company’s lease agreements. Certain leases include variable payments related to common area maintenance and property taxes, which are billed by the landlord, as is customary with these types of charges for office space.
There
was
The table below presents certain information related to the Company’s lease costs for the period ended (in thousands):
For the Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Operating lease expense | $ | $ | ||||||
| Short-term lease cost | ||||||||
| Variable lease cost | ||||||||
| Total lease cost | $ | $ | ||||||
Lease Position
Operating lease right-of-use assets and operating lease liabilities were recorded in the consolidated balance sheets as follows (in thousands):
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Assets | ||||||||
| Operating lease right-of-use assets | $ | | $ | | ||||
| Liabilities | ||||||||
| Current liabilities: | ||||||||
| Operating lease liability, current | ||||||||
| Noncurrent liabilities: | ||||||||
| Operating lease liability | ||||||||
| Total operating lease liability | $ | $ | ||||||
The table below presents certain information related to the weighted-average remaining lease term and the weighted-average discount rate for the Company’s operating leases:
| December 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Weighted average remaining lease term (in years) - operating leases | ||||||||
| Weighted average discount rate - operating leases | % | % | ||||||
Cash Flows
The table below presents certain information related to the cash flows for the Company’s operating leases for the period ended (in thousands):
For the Year Ended December 31, | ||||||||
| 2025 | 2024 | |||||||
| Amortization of right-of-use assets | $ | $ | ||||||
| Change in operating lease liability | $ | ( | ) | $ | ( | ) | ||
Future minimum lease payments required under operating leases are as follows (in thousands):
| Period Ended December 31, | Future Minimum Rents | |||
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 and thereafter | ||||
| Total minimum lease payments | ||||
| Less: effects of discounting | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
| F-46 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 19. Related Parties
Related Party Convertible Notes
In October 2019 and September 2021, the Company entered
into two convertible promissory note agreements with a lender (the “Convertible Notes Payable”). As of December 31, 2024,
the lender was considered a principal owner of the Company because it held greater than 10% of the voting common stock. The convertible
notes payable, recorded in “Convertible Notes Payable, at Fair Value” in the consolidated balance sheet, amounted to $
As of December 31, 2025, the obligation under these
notes was classified as a related party payable, with a balance of $
BO2 Purchase Agreement
In
July 2021, Fusemachines Nepal Private Limited entered into the BO2 Purchase Agreement with a related party, BO2, and Mr. Maskey. According
to the terms of the BO2 Purchase Agreement, BO2 agreed to invest up to $
Repurchase and Repayment of 2023 Promissory Notes
In
January 2024, the Company repurchased shares of its common stock from Mr. Maskey, at a price of $ per share for a total
of $
January 2024 Related Party Pledge Agreement
In
January 2024, Mr. Maskey entered into a pledge agreement (the “January 2024 Related Party Pledge Agreement”) with Consilium
Extended Opportunities Fund, LP (“Consilium”). As per the terms of the January 2024 Related Party Pledge Agreement, Mr. Maskey
agreed to assign a security interest to Consilium of
2024 Related Party Promissory Notes
During
2024, the Company entered into seven separate promissory notes with Sameer Maskey, the CEO of the Company for aggregate principal amount
of $
Dolma Impact Fund I
In January 2025, the Company amended the convertible
note payable to Dolma Impact Fund I (“Dolma”). Pursuant to the amended terms, the maturity date was extended to February 28,
2026. As of December 31, 2025, the related party note payable to Dolma remained outstanding in the amount of $
| F-47 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Private Investment in Public Equity (“PIPE”) Financing
On December 23, 2025, Fusemachines Inc. (the “Company”)
entered into a Securities Purchase Agreement with Consilium Frontier Equity Fund LP, a related party, pursuant to which the Company issued
and sold shares of its common stock, par value $ per share, at a purchase price of $ per share in a private placement
transaction (the “PIPE Financing”), resulting in aggregate gross proceeds of $
The proceeds were received in cash at closing and the issuance was recorded within stockholders’ equity as permanent equity (refer Note 23 Private Investment in Public Equity (“PIPE”) Financing).
Note 20. Reverse Recapitalization
Upon consummation of the transaction on October 22, 2025, Fusemachines Inc. (the “Company”) was determined to be the accounting acquirer, and the transaction was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Accordingly, the historical financial statements of Legacy Fusemachines became the historical financial statements of the registrant.
Accordingly, the following disclosure on “Reverse Recapitalization” is presented to summarize the common stock issued at Closing, the application of the exchange ratio, and the resulting additional paid-in-capital recognized in connection with the recapitalization.
The overall voting interest on closing date is summarized below:
| Particulars | Shares | %Ownership | ||||||
| Shares held by Fusemachines Inc. Stockholders | % | |||||||
| Shares held by CSLM public stockholders, Sponsor, and related parties of Sponsor | % | |||||||
| Shares held by unrelated third parties | % | |||||||
| Total | % | |||||||
On
October 22, 2025, all holders of issued and outstanding Legacy Fusemachines common stock received shares of Fusemachines Inc
common stock at a par value $ per share after giving effect to the exchange ratio of
(a) shares of Legacy Fusemachines convertible preferred stock were converted into shares of Legacy Fusemachines common stock in accordance with the applicable conversion terms. Subsequently, in connection with the Business Combination, all such shares of Legacy Fusemachines common stock were exchanged for shares of common stock of Fusemachines Inc. (the “Company” or “PubCo”) based on the exchange ratio specified in the Business Combination Agreement. After giving effect to the exchange ratio, an aggregate of shares of the Company’s common stock were issued.
(b) The surrender and exchange of all issued and outstanding shares of Legacy Fusemachines common stock (including shares issued upon conversion of preferred stock) into shares of Fusemachines Inc. common stock as adjusted by the Exchange Ratio;
(c) The other related events that occurred in connection with the Closing are summarized below:
| ● | Upon the closing date, there is settlement of sponsor convertible note amounting to $3,978 thousand which was effected through a combination of $2,343 thousand in cash and balance through issuance of common stock of Fusemachines Inc. | |
| ● | Public shareholders of CSLM received an aggregate of shares of Fusemachines Inc. common stock. | |
| ● | All public rights were converted into shares of Fusemachines Inc. common stock. | |
| ● | shares of Fusemachines Inc. common stock issued in connection with the PIPE Financing. | |
| ● | Issuance of shares of Fusemachines Inc common stock upon conversion of non-redeemable CSLM Class A & Class B Ordinary Shares. | |
| ● | Fusemachines
Inc. received funds from a convertible note with an affiliate of the Sponsor in the principal amount of $ | |
| ● | Approximately
$ | |
| ● | Repayment
of approximately $ | |
| ● | Each
Convertible note of Legacy Fusemachines (including both related party and other convertible notes) outstanding immediately prior to
the Closing was converted into shares of Legacy Fusemachines common stock of
shares in accordance with the applicable convertible note agreement and immediately thereafter exchanged into shares of
Fusemachines Inc. common stock in accordance with the Conversion Ratio specified in the Business Combination Agreement accordingly
as a result of the conversions and exchanges, no convertible notes or related-party notes payable remained outstanding as of
December 31, 2025, other than related party note payable related to Dolma amounting $ | |
| ● |
Upon the closing of the business combination, the
Company settled its obligation under the Second Agreement through the issuance of shares of Fusemachines, Inc. common stock, reflecting
the application of the | |
| ● | Upon
the conversion of the April 2024, June 2024 and September 2024 Convertible Note to common stock, the Company shall issue the holder
a warrant to purchase |
| ● | The assumption of the public and private warrants, as described in Note 24 “Public and private warrants”. | |
| ● | The Company’s amended and restated certificate of incorporation and amended and restated bylaws were adopted. | |
| ● | The Company adopted the 2025 equity incentive plan. |
| F-48 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
| Particulars | Shares | |||
| Partial conversion of the 3rd Amended and Restated Promissory Note into Fusemachines Inc. common stock on the Closing Date | ||||
| CSLM Class A ordinary Shares not redeemed for cash and converted into Fusemachines Inc. common stock | ||||
| Automatic exercise of the rights related to units issued in CSLM’s Initial Public Offering | ||||
| Shares issued in connection with the PIPE Financing | ||||
| Conversion of non-redeemable CSLM Class A & Class B Ordinary Shares into Fusemachines Inc. common stock | ||||
| Share issued to Consilium Frontier Equity Fund in connection with conversion of convertible note on the closing date | ||||
| Total shares of Fusemachines Inc. common stock issued to CSLM security holders | ||||
| Conversion of Legacy Fusemachines convertible notes (as adjusted by the Exchange Ratio) | ||||
| Conversion of Legacy Fusemachines convertible preferred stock into common stock in connection with the reverse Recapitalization (as adjusted by the Exchange Ratio) | ||||
| Shares issued to Legacy Fusemachines stockholders (as adjusted by the Exchange Ratio) | ||||
| Total shares of Fusemachines Inc. common stock outstanding immediately after the Merger | ||||
Below table presents the Fund flow reconciliation (in thousands):
Particulars | (Amount In Thousands) | |||
| Trust balance as of Closing date | ||||
| Proceeds from CSLM loan | ||||
| PIPE Proceeds | ||||
| Transfer of cash & cash equivalent of CSLM | ||||
| Total Available Cash (A) | ||||
| CSLM transaction costs | ( | ) | ||
| Payment of Director & Officer insurance premium | ( | ) | ||
| Prepayment under Forward Purchase Agreement | ( | ) | ||
| Settlement of sponsor convertible note of CSLM | ( | ) | ||
| Total Payments as of the closing date (B) | ( | ) | ||
| Funds going to Fusemachines Inc. (classified under financing activities under Consolidated Statements of Cash Flows) (A+B) | ||||
| Operating assets assumed | ||||
| Operating liabilities assumed | ( | ) | ||
| Initial fair value of forward purchase derivative liability | (8,616 | ) | ||
| Issuance of share subscription receivable | ||||
| Initial fair value of equity classified warrant | ( | ) | ||
| Legacy Fusemachines transaction cost | ( | ) | ||
| Others | ||||
| Net equity impact of reverse recapitalization | ||||
The reverse recapitalization accounting treatment was primarily determined based on the fact that the stockholders of Legacy Fusemachines held a relative majority of the voting power of Fusemachines and had the ability to nominate a majority of the members of the Board of Directors. In addition, the senior management of Legacy Fusemachines becomes the senior management of Fusemachines, and the strategy and operations of Legacy Fusemachines prior to the merger represent the ongoing operations of the combined Company.
Accordingly, for accounting purposes, the financial statements of Fusemachines represent a continuation of the financial statements of Legacy Fusemachines, with the Merger being treated as the equivalent of Legacy Fusemachines issuing shares for the net assets of CSLM, accompanied by a recapitalization. The net assets of CSLM were recognized at their historical carrying amounts as of the Closing date, and no goodwill or other intangible assets were recorded. Operations prior to the Merger are presented as those of Legacy Fusemachines and the accumulated deficit of Legacy Fusemachines has been carried forward after Closing.
Fusemachines Inc. incurred transaction costs of $
All periods presented prior to the Merger have been retrospectively adjusted to reflect the Exchange Ratio for the equivalent number of shares of Fusemachines Inc. common stock outstanding immediately after the Closing in order to effect the reverse recapitalization.
| F-49 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 21. Forward Purchase agreement
On July 31, 2025, CSLM and Legacy Fusemachines (CSLM prior to the Merger and the Company after the Merger, (the “Counterparty”), entered into an over-the-counter (OTC) equity prepaid forward confirmation (the “Forward Purchase Agreement” or “FPA”) with Meteora Capital Partners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the “Sellers”)
Upon the consummation of the Merger on October 22, 2025, the Sellers (Meteora) delivered a Pricing Date Notice (as defined in the Forward Purchase Agreement). Based on this notice, the applicable Prepayment Amount (as defined in the Forward Purchase Agreement) became determinable and was subsequently funded by the Counterparty from the Trust Account (as defined in the Forward Purchase Agreement) in accordance with the Forward Purchase Agreement.
Under the material terms of the FPA:
| ● | The Sellers committed (in one or more Pricing Date Notices) to provide up to a maximum of shares of Class A common stock for the Transaction. | |
| ● | The Counterparty agreed to pay the Sellers a Prepayment Amount equal to the Number of Shares (as defined in the Forward Purchase Agreement) specified in each Pricing Date Notice multiplied by the per-share redemption price (the “Initial Price” as defined in the Counterparty’s organizational documents). The Prepayment Amount is payable from the Counterparty’s Trust Account and subject to receipt of a Pricing Date Notice, will be wired no later than the earlier of (a) one Local Business Day after the Closing Date and (b) the date any Trust Account assets are disbursed in connection with the Business Combination. | |
| ● | The Sellers waived any rights to the Trust Account funds in respect of the FPA and agreed not to seek recourse against the Trust Account except as expressly provided in the FPA. | |
| ● | Settlement is by cash settlement at the end of the agreement: on the Valuation Date (generally three years after the Closing Date unless earlier determined under specified events as set forth in the SPA) the Seller will pay the Counterparty a cash amount equal to the Number of Shares as of the Valuation Date multiplied by the VWAP over the Valuation Period; the cash settlement payment date is the tenth local business day following the end of the Valuation Period. | |
| ● | The
FPA includes an early termination mechanism: where Sellers sell (terminate) specified shares after closing, Sellers must pay an
Early Termination Obligation (as defined in the Forward Purchase Agreement) to Counterparty equal to the number of Terminated Shares
(as defined in the Forward Purchase Agreement) multiplied by the Termination Price of $ | |
| ● | The Sellers may, at their election, request “Shortfall Warrants” (refer note 22) exercisable for a number of shares of common stock equal to the difference between the Maximum Number of Shares (as defined in the Forward Purchase Agreement) and the number of shares of common stock specified in a Pricing Date Notice; such warrants have exercise terms and an exercise price as set forth in the FPA. | |
| ● | Payment dates for periodic reporting / accounting purposes are the last day of each calendar quarter (or next local business day), until the Valuation Date; the FPA also contains customary provisions addressing indemnities, representations, Calculation Agent rights, and compliance with tender-offer and SEC rules. |
The Forward Purchase Agreement includes escrow arrangements pursuant to which the Prepayment Amount funded from the CSLM trust account is held in escrow for the benefit of the Meteora Parties until settlement or release in accordance with the terms of the Forward Purchase Agreement. The Company does not have unconditional access to the funds held in escrow, and such funds are not available to satisfy the claims of the Company’s creditors.
Accordingly, the Company recorded the prepayment amount $ thousand as a contra-equity share subscription receivable, presented as a reduction of stockholders’ equity (APIC), as the escrowed funds represent conditional consideration receivable from shareholders that is subject to future settlement under the Forward Purchase Agreement. The Prepayment Amount was determined based on shares of common stock at a per share price equal to the SPAC per-share redemption price (the “Initial Price”), as defined in the Forward Purchase Agreement
| F-50 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
The Forward Purchase Agreement contains features that meet the definition of a derivative under ASC 815, including an underlying based on the Company’s Class A common stock, a notional amount, payment provisions, and provisions that require or permit net cash settlement. Accordingly, at the Closing, the Company recognized a derivative liability measured at fair value, representing the portion of the escrowed Prepayment Amount that may be payable to the Forward Counterparty based on conditions existing as of the Closing Date.
The share subscription receivable and the derivative liability, when considered together, represent management’s estimate of the portion of the escrowed funds that the Company expects to ultimately retain. Subsequent changes in the fair value of the derivative liability associated with the Forward Purchase Agreement are recognized in earnings at each reporting date.
Upon receipt of consideration related to the sale of any shares sold by Meteora, the Company will record the receipt of funds as an increase to cash and a decrease to the share subscription receivable previously recorded as contra-equity.
The Company incurred no transaction costs that were directly related to issuance of the Forward Purchase Agreement.
Further subsequent to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026 to the Prepaid Forward Purchase Agreement (the “Amendment”) originally entered into on July 31, 2025 with Meteora Capital Partners and affiliates, for detail refer to Note 25 - Subsequent events.
As
of December 31, 2025, the value of the Forward purchase derivative liability is $
Further, the derivative liability has been classified as current as the Company does not have an unconditional right to defer settlement beyond twelve months. The Forward Purchase Agreement includes provisions for early termination upon sale of shares by the Sellers, which can result in cash settlement within the next twelve months, as well as periodic settlement features, thereby requiring current classification
Note 22. Shortfall warrants
In connection with the execution of the Forward Purchase Agreement the Company agreed to issue “Shortfall Warrants” to the Sellers (Meteora) for shares not elected under the Forward Purchase Agreement, representing the difference between the maximum number of shares subject to the FPA and the number of shares ultimately elected by the Forward Counterparty.
Seller
in its sole discretion may request (in one or more requests) warrants of the Counterparty exercisable for Shares in an amount equal to
(i) the Maximum Number of Shares less (ii) the Number of Shares specified in the Pricing Date Notice (the “Shortfall Warrants,”
and the Shares underlying the Shortfall Warrants, the “Shortfall Warrant Shares”). The Shortfall Warrants shall have an exercise
price equal to the termination price which is defined $
The
warrants grant the holders the right to purchase a fixed number of shares (
The Shortfall Warrants contain a beneficial ownership
limitation that, subject to certain limited exceptions, restricts a holder from exercising the Shortfall Warrants to the extent that,
following such exercise, the holder, together with its affiliates and certain related parties, would beneficially own more than
The exercise price and the number of Shortfall Warrant Shares are subject to customary anti-dilution adjustments for stock dividends and other distributions on the Company’s common stock, stock splits, reverse stock splits, reclassifications and certain rights offerings. In addition, subject to any required shareholder approvals and applicable stock exchange rules, the Company may, in its discretion, reduce the exercise price of the Shortfall Warrants for any period of time.
The Shortfall Warrants and the rights thereunder are transferable, in whole or in part, with the prior written consent of the Company and subject to compliance with applicable securities laws and payment of any applicable transfer taxes. The warrants may be divided or combined into new warrants, and, if properly assigned, may be exercised by a permitted transferee without the issuance of a new warrant certificate.
The Company evaluated the Shortfall Warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging, including the guidance in ASC 815-40 related to contracts indexed to, and potentially settled in, an entity’s own equity.
In making this assessment, the Company considered, among other factors:
| ● | whether the Shortfall Warrants are freestanding financial instruments, | |
| ● | whether the warrants are indexed to the Company’s own stock, | |
| ● | whether settlement is required to be in shares rather than cash, and | |
| ● | whether any provisions could require net cash settlement under circumstances outside the Company’s control. |
Accordingly, in connection with the reverse recapitalization,
the Company recognized the Shortfall Warrants at their initial fair value of $
Based on this assessment, the Company concluded that the Shortfall Warrants meet all of the criteria for equity classification under ASC 815-40. Accordingly, the Shortfall Warrants are classified as equity and are not subject to subsequent remeasurement.
Note 23. Private Investment in Public Equity (“PIPE”) Financing
On December 23, 2025, Fusemachines Inc. (the “Company”) entered into and consummated a Securities Purchase Agreement with an accredited investor pursuant to which the Company issued and sold shares of its common stock, par value $ per share, in a private placement transaction (the “PIPE Financing”).
In
connection with the PIPE Financing, the Company issued
shares of its common
stock at a purchase price of $
per share, resulting
in aggregate gross proceeds of $
The proceeds from the PIPE Financing were received in cash at closing. For accounting purposes, the issuance of common stock was recorded within stockholders’ equity as permanent equity.
| F-51 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
Note 24. Public and private warrants
As
of December 31, 2025, there were
Public warrants
Each Public Warrant entitles the holder to purchase one whole share of the Company’s common stock. Public Warrants are exercisable only for whole warrants; no fractional warrants will be issued upon separation of the units, and only whole warrants will trade. The Public Warrants became 30 days after the completion of the Business Combination.
The Company will not be obligated to deliver Class A common shares upon exercise of a Public Warrant (and will have no obligation to settle a Public Warrant exercise) unless a registration statement under the Securities Act, covering the shares issuable upon exercise, is then effective and a prospectus relating thereto is current, or a valid exemption from registration is available. If the conditions for registered issuance are not satisfied, holders will not be able to exercise those Public Warrants for registered shares until such time as an effective registration statement is available; in such circumstances the Company may permit (or require, as described below) cashless exercise pursuant to Section 3(a)(9) or other available exemption
Each whole Public Warrant is
exercisable for one share of the Company’s Class A common stock at an exercise price of $
The Public Warrants contain customary terms and features for contracts in the Company’s own equity, including (i) anti-dilution adjustments to the exercise price and the number of shares issuable upon exercise for share capitalizations, sub-divisions, combinations, reclassifications, certain rights offerings and Extraordinary Dividends, as described in Section 4 of the warrant agreement; (ii) the Alternative Issuance provisions in Section 4.5 of the warrant agreement, pursuant to which, upon specified reclassifications, reorganizations, mergers, consolidations, tender offers or similar change-of-control transactions, each Public Warrant becomes exercisable for the same form and amount of cash, securities or other property that a holder would receive as a common shareholder on an as-if-exercised basis immediately prior to the transaction; and (iii) an optional beneficial ownership limitation in Section 3.3.5 of the warrant agreement that permits a holder, at its election, to limit the number of Class A common shares issuable upon exercise of its warrants such that, immediately after giving effect to such exercise, the holder’s beneficial ownership of the Company’s outstanding Class A common shares does not exceed a specified “Maximum Percentage” (initially 9.8% or such other percentage specified by the holder). Public Warrants are issued in registered form, may be held in book-entry form through The Depository Trust Company and are transferable in accordance with the procedures set forth in Section 5 of the warrant agreement, subject to applicable securities law restrictions. The warrant agreement also provides that the Company is not required to net cash settle the Public Warrants and that, other than the fixed cash redemption price described above, settlement of the Public Warrants occurs through the issuance of equity or the delivery of the Alternative Issuance consideration specified in the contract.
The Company may call the Public Warrants for redemption
| ● | in whole and not in part; | |
| ● | at a price of $ per warrant; | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder; and | |
| ● | if, and only if, the closing price of the Class A ordinary shares equals or exceeds $ per share for any 20 trading days within a 30-trading day period ending three trading days before the Company sends the notice of redemption to the warrant holders |
If and when the Public Warrants become redeemable by the Company, it may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $ per share of Class A ordinary shares (with such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of a Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A ordinary shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination (such price, the “Market Value”) is below $ per share, then the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $ per share redemption trigger price will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
As of December 31, 2025, if holders elect to exercise Public Warrants for cash, the Company would deliver one Class A common share for each Public Warrant exercised and would receive cash equal to the fixed exercise price per share. The aggregate fair value of the shares issued upon such cash exercise would vary directly with the then-current market price of the Company’s Class A common stock, whereas the per-warrant exercise price and resulting cash proceeds to the Company remain fixed in accordance with the warrant agreement.
When Public Warrants are exercised on a cashless basis in accordance with the warrant agreement, each warrant is settled through the issuance of a reduced number of Class A common shares determined by reference to the then-current “Fair Market Value” of the Class A common stock and the fixed exercise price. As the market price of the Company’s Class A common stock increases above the exercise price, the number of shares issued per Public Warrant and the aggregate fair value of the shares delivered on cashless exercise increase; conversely, as the market price approaches or falls below the exercise price, the number of shares issued per Public Warrant and the aggregate fair value of the shares delivered decrease, and no shares would be delivered if the Public Warrants are out-of-the-money.
If and when the Public Warrants become redeemable and the Company elects to redeem them for cash in accordance with the warrant agreement, the Company would be obligated to pay the fixed contractual redemption price per Public Warrant and the Public Warrants would be cancelled without the issuance of any Class A common shares. Although the fixed redemption price per warrant does not change with the market price of the Company’s Class A common stock, the Company may only exercise this redemption alternative if the Reference Value of the Class A common stock equals or exceeds the specified redemption trigger, which is based on the trading price of the Company’s shares.
| F-52 |
Fusemachines Inc. and Subsidiaries Notes to the Consolidated Financial Statements
In the event of certain reclassifications, reorganizations, mergers, consolidations, tender offers or similar transactions that result in a change of control, the Public Warrants provide for an “Alternative Issuance” under which each Public Warrant becomes exercisable for the cash, securities or other property that the holder would have been entitled to receive if the holder had exercised the Public Warrant and participated in the transaction as a common shareholder immediately prior to its consummation, as described in the warrant agreement. Accordingly, the amount and form of consideration delivered upon settlement under this alternative will generally change in direct proportion to the per-share consideration (whether in cash, stock or other property) payable to the Company’s common shareholders in the underlying transaction, which reflects the then-current fair value of the Company’s equity shares.
Private warrants
The Private Placement Warrants are substantially identical to the Public Warrants, except that (i) the Private Placement Warrants may be exercised for cash or on a cashless basis, at the holder’s option; (ii) the Private Placement Warrants and the Class A common shares issuable upon their exercise are subject to certain transfer restrictions pursuant to the letter agreement between the Company, the Sponsor and other parties thereto, as amended from time to time, including that any permitted transferee must agree to be bound by such transfer restrictions; (iii) the Private Placement Warrants are not redeemable by the Company; and (iv) the holders of the Private Placement Warrants (including the Class A common shares issuable upon exercise thereof) may be entitled to certain registration rights. The Private Placement Warrants will not become Public Warrants upon any transfer and shall remain non-redeemable.
As of December 31, 2025, if holders elect to exercise the Private Placement Warrants for cash, the Company would deliver one Class A common share for each Private Placement Warrant exercised and would receive cash equal to the fixed exercise price per share. Consistent with the Public Warrants, the aggregate fair value of the shares issued upon such cash exercise of the Private Placement Warrants would vary directly with the then-current market price of the Company’s Class A common stock, while the per-warrant exercise price and resulting cash proceeds to the Company remain fixed in accordance with the warrant agreement.
When Private Placement Warrants are exercised on a cashless basis in accordance with the warrant agreement, each warrant is settled through the issuance of a reduced number of Class A common shares determined by reference to the “Sponsor Exercise Fair Market Value” of the Class A common stock and the fixed exercise price. As the market price of the Company’s Class A common stock increases above the exercise price, the number of shares issued per Private Placement Warrant and the aggregate fair value of the shares delivered on cashless exercise increase; conversely, as the market price approaches or falls below the exercise price, the number of shares issued per Private Placement Warrant and the aggregate fair value of the shares delivered decrease, and no shares would be delivered if the Private Placement Warrants are out-of-the-money.
The Alternative Issuance provisions described above for the Public Warrants also apply to the Private Placement Warrants such that, upon the specified reclassification, reorganization, merger, consolidation, tender offer or similar change-of-control transactions, each Private Placement Warrant becomes exercisable for the same form and amount of cash, securities or other property that would be received by a common shareholder on an as-if-exercised basis immediately prior to the transaction, and the settlement amount therefore varies directly with the per-share consideration payable to the Company’s common shareholders.
Classification and accounting: The Company evaluated the terms of the Public and Private Warrants under the relevant U.S. GAAP guidance for freestanding financial instruments and derivative accounting and concluded that both the Public Warrants and the Private Warrants meet the criteria for equity classification. In connection with the reverse recapitalization transaction, the Public Warrants and Private Warrants that were outstanding immediately prior to the transaction were initially recorded through the reverse recapitalization and are presented within stockholders’ equity on the consolidated balance sheet as part of additional paid-in capital (rather than as a separate warrant liability line item). Because the Public Warrants and Private Warrants are classified in equity, there is no subsequent remeasurement required after initial recognition and changes in the fair value of the Company’s common stock do not give rise to gains or losses in the statement of operations related to these warrants.
Note 25. Subsequent Events
| ● | Subsequently
to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026 to the Prepaid Forward Purchase Agreement
(the “Amendment”) originally entered into on July 31, 2025 with Meteora Capital Partners and affiliates. The Amendment
replaces the agreement’s previously fixed Termination Price of $ |
| ● | Subsequent
to year ended December 31, 2025, the Company entered into an amendment on February 3, 2026, to the Common Stock Purchase Warrant
(the “Warrant Amendment”) originally issued on October 22, 2025 in connection with the Business Combination with Meteora
Capital Partners, LP, Meteora Select Trading Opportunities Master, LP and Meteora Strategic Capital, LLC (collectively, the
“Holder”). Pursuant to the Warrant Amendment, the exercise price of the warrant was amended such that the exercise price
per share of the Company’s common stock is $ | |
| ● | On July 28, 2025, the Board of Directors and shareholders of the Company approved the Fusemachines Inc. 2025 Omnibus Equity Incentive Plan (the “Plan”). The Plan authorizes the Company to issue up to shares of the Company’s common stock, par value $ per share, to eligible employees, directors, and consultants in the form of stock options, restricted stock, restricted stock units, or other equity-based awards. Subsequent to December 31, 2025, the Company is in the process of granting awards under the Plan to certain employees. As the awards were not granted and no shares were issued under the Plan as of December 31, 2025, no amounts have been recognized in the accompanying consolidated financial statements. |
| ● | Further the Company has evaluated any other subsequent events through the date of issuance of these consolidated financial statements and determined that there have been no events that have occurred that would require adjustments to disclosures in the consolidated financial statements. |
| F-53 |
Up to 11,363,636 Shares of Common Stock
Fusemachines Inc.
Prospectus
, 2026
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the fees and expenses in connection with the issuance and distribution of the securities being registered (excluding the underwriting discount and management fee). Except for the SEC registration fee, all amounts are estimates.
| SEC registration fee | $ | 2,200 | ||
| Legal fees and expenses | $ | 210,000 | ||
| Accounting fees and expenses | $ | 40,000 | ||
| Total | $ | 252,600 |
Item 14. Indemnification of Directors and Officers.
We are incorporated under the laws of the State of Delaware. Section 145 of the DGCL provides that a Delaware corporation may indemnify any person who was or is, or is threatened to be made, a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.
Section 145 of the DGCL also provides that Delaware corporation may indemnify any person who was or is, or is threatened to be made, a party to any threatened, pending, or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification of any claim, issue or matter is permitted without judicial approval if such person is adjudged to be liable to the corporation.
Under the DGCL, where a present or former officer or director is successful on the merits or otherwise in the defense of any action referred to above, or in defense of any claim, issue or matter therein, the corporation must indemnify such present or former officer or director against the expenses (including attorney’s fees) which such present or former officer or director actually and reasonably incurred in connection with such action (or claim, issue or matter therein).
Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
| ● | breach of a director’s duty of loyalty to the corporation or its stockholders; | |
| ● | act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; | |
| ● | unlawful payment of dividends or unlawful stock purchase or redemption; or | |
| ● | transaction from which the director derived an improper personal benefit. |
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Our amended and restated certificate of incorporation contains a provision that precludes any director of ours from being personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director, except for the aforementioned liabilities which we are not permitted to eliminate or limit under Section 107(b)(7) of the DGCL.
In addition, our amended and restated certificate of incorporation and bylaws, in each case, require us to indemnify, and advance expenses to, to the fullest extent permitted by law, any person who was or is, or is threatened to be made, a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that the person is or was our director, officer, employee or agent, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise.
Our amended and restated bylaws further authorize us to purchase and maintain insurance on behalf of any person who is or was our director, officer, employee or agent, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or nonprofit entity against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not we would have the power to indemnify such person against such liability under the provisions of the DGCL.
We have purchased an insurance policy covering our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act, or otherwise. In addition, we have entered into separate indemnification agreements with each of our directors and executive officers.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
The exhibits listed below are filed as part of this registration statement.
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EXHIBIT INDEX
* Filed herewith
**Previously filed
+ Schedules and exhibits to this Exhibit omitted pursuant to Regulation S-K Item 601(a)(5). The Registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
¥ Indicates a management contract or compensatory plan, contract or arrangement.
| II-3 |
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in the volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.
provided, however, that paragraphs (1)(i), (1)(ii) and (1)(iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Exchange Act, that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.
(2) That, for the purposes of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
| II-4 |
(5) That, for purposes of determining any liability under the Securities Act:
(i) the information omitted from the form of prospectus filed as part of the registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of the registration statement as of the time it was declared effective; and
(ii) each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the indemnification provisions described herein, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
| II-5 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of New York, state of New York on April 27, 2026.
| Fusemachines, Inc. | ||
| By: | /s/ Sameer Maskey | |
| Sameer Maskey | ||
| Chief Executive Officer | ||
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Sameer Maskey | Chief Executive Officer | April 27, 2026 | ||
| Sameer Maskey | (Principal Executive Officer) | |||
| /s/ Christine Chambers | Chief Financial Officer | April 27, 2026 | ||
| Christine Chambers | (Principal Financial Officer and Principal Accounting Officer) | |||
* |
Director | April 27, 2026 | ||
| Bharat Krish | ||||
* |
Director | April 27, 2026 | ||
| Tim Gocher | ||||
* |
Director | April 27, 2026 | ||
| Sanjay Shrestha | ||||
* |
Director | April 27, 2026 | ||
| Salman Alam |
| * By: | /s/ Sameer Maskey | |
| Sameer Maskey, Attorney in Fact | ||
| II-6 |