FUSE

Fusemachines Inc. 10-K Summary (Fiscal Year Ended December 31, 2025)

Business Context and Reporting Period

Fusemachines Inc. (FUSE) is a provider of enterprise AI solutions, including AI Studio, AI Engines, and AI Agents, alongside implementation services. The company operates as a single segment focusing on data engineering, AI consulting, and technical services. This filing covers the fiscal year ended December 31, 2025. A significant corporate event during the period was the consummation of a business combination with CSLM Acquisition Corp. on October 22, 2025, accounted for as a reverse recapitalization. Following the merger, the company's common stock began trading on the Nasdaq Global Market under the symbol "FUSE" on October 23, 2025.

Key Financial Metrics

Debt and Liquidity: As of December 31, 2025, the company had a net working capital deficit of approximately $13.30 million. Substantially all convertible notes were converted to equity in connection with the business combination, leaving only a $300,000 related-party note payable outstanding. The company received approximately $14.0 million in cash proceeds from the merger and a $1.0 million PIPE financing.

Material Changes vs. Prior Period

• Revenue Decline: Revenue decreased by 12% ($1.10 million) primarily due to the termination of 12 customers and reduced contract sizes for 16 others, resulting in a $2.99 million loss. This was partially offset by 11 new customer contracts and expansions with 9 existing customers ($1.91 million gain).
• Improved Net Loss: The net loss improved significantly from $15.38 million in 2024 to $0.93 million in 2025. This improvement was driven largely by a $12.65 million swing in "Gain/(Loss) on change in fair value" related to convertible notes and warrant liabilities, as well as reduced operating expenses.
• Operating Expenses: Total operating expenses decreased by 21% ($2.77 million). General and Administrative expenses dropped by $2.16 million due to lower professional charges, stock-based compensation, and bad debt expenses. Selling and Marketing expenses decreased by $0.60 million.
• Capital Structure: The reverse recapitalization resulted in the conversion of all outstanding convertible preferred stock and most convertible debt into common stock. The company now has 28.94 million shares of common stock outstanding.

Guidance, Outlook, Risks, and Unusual Items

Going Concern: The independent auditor has issued an opinion with an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern. The company has a history of recurring losses, negative operating cash flows, and an accumulated deficit. Management believes current cash and potential equity issuances are inadequate to satisfy requirements for the next 12 months without additional financing.

Unusual Items:

• Forward Purchase Agreement (FPA): The company entered into an FPA with Meteora Capital Partners. A derivative liability of $9.69 million was recorded as of year-end, with a $1.08 million loss recognized on the change in fair value during the year.
• Stock-Based Compensation: Expense decreased significantly to $0.23 million in 2025 from $1.07 million in 2024, largely due to the completion of vesting for previously granted awards.

Key Risks:

• Customer Concentration: Two customers represented 30% of revenue in 2025. Loss of these customers would materially impact results.
• Internal Controls: The company identified material weaknesses in internal control over financial reporting, including insufficient accounting personnel, lack of effective revenue cycle processes, and inadequate IT general controls.
• Listing Compliance: On January 15, 2026, the company received notice from Nasdaq regarding non-compliance with the minimum Market Value of Publicly Held Shares requirement ($15 million). The company has 180 days to regain compliance.
• Geopolitical Risk: Operations are heavily dependent on international facilities, particularly in Nepal, which faces political volatility.

Investor Verification Checklist

• Going Concern Status: Verify the company's progress in securing additional equity or debt financing to sustain operations beyond the next 12 months.
• Nasdaq Compliance: Monitor the company's ability to regain compliance with Nasdaq listing standards regarding the Market Value of Publicly Held Shares by July 14, 2026.
• Internal Control Remediation: Review updates on the remediation of material weaknesses in internal controls over financial reporting.
• Customer Retention: Assess the stability of the top two customers who accounted for 30% of 2025 revenue.
• Forward Purchase Agreement: Evaluate the impact of the $9.69 million derivative liability and the February 2026 amendment to the FPA on future earnings and liquidity.